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What changed in Teads Holding Co.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Teads Holding Co.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+592 added−624 removedSource: 10-K (2024-03-08) vs 10-K (2023-03-15)

Top changes in Teads Holding Co.'s 2023 10-K

592 paragraphs added · 624 removed · 350 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

73 edited+107 added−101 removed31 unchanged
Biggest changeOur media partners include both traditional publishers and companies in new and rapidly evolving categories such as mobile device manufacturers and web browsers. Advertisers. We offer a unique advertising solution across the entire advertising funnel, serving tens of thousands of advertisers and brands - from small businesses to large, Fortune 500 enterprise brands and the agencies that support them.
Biggest changeWe are committed to supporting the long-term success of our media partners. We strive to develop multi-year contracts with media partners, with the objective of delivering long-term revenue and deeper audience engagement. Our media partners include both traditional publishers and companies in new and rapidly evolving categories, such as mobile device manufacturers. • Advertisers.
In addition, the United Kingdom, Brazil, Japan and Singapore and other countries have enacted similar data protection regulations imposing data privacy-related requirements on products and services offered to users in their respective jurisdictions that could increase the cost and complexity of delivering our services, cause us to cease the offering of our products and services in certain countries, or result in fines or other penalties.
In addition, the United Kingdom, Brazil, Japan, Singapore and other countries have enacted similar data protection regulations imposing data privacy-related requirements on products and services offered to users in their respective jurisdictions that could increase the cost and complexity of delivering our services, cause us to cease the offering of our products and services in certain countries, or result in fines or other penalties.
In 2022, we also started serving recommendations from a public cloud based in the Netherlands to countries in Europe. We use similar architecture as our primary third-party data centers and deploy over two availability zones for high availability. Our infrastructure is designed such that we do not have any known single point of failure at any level.
In 2022, we also started serving recommendations from a public cloud based in the Netherlands to several countries in Europe. We use architecture similar to our primary third-party data centers and deploy over two availability zones for high availability. Our infrastructure is designed such that we do not have any known single point of failure at any level.
While all three data centers actively serve recommendations to users, we are able to serve all of our traffic from two of the three data centers if needed. We utilize a global content delivery network (CDN), and dynamic acceleration, for additional performance optimization and redundancy.
While all three data centers actively serve recommendations to consumers, we are able to serve all of our traffic from two of the three data centers if needed. We utilize a global content delivery network (CDN), and dynamic acceleration, for additional performance optimization and redundancy.
Our team consists of people from many different nationalities and cultures with different perspectives, opinions and ideas which we believe is undeniably powerful and ultimately drives shareholder value. We support employee-led employee resource groups ("ERGs"), which foster a diverse and inclusive workplace.
Our team consists of people from many different nationalities and cultures with different perspectives, opinions and ideas which we believe is undeniably powerful and ultimately drives shareholder value. We support employee-led employee resource groups (“ERGs”), which foster a diverse and inclusive workplace.
Additionally, some of these bodies might refer violations of their requirements to the Federal Trade Commission or other regulators. 17 Table of Contents For additional information regarding the current regulatory environment and how it may impact us, see Item 1A. “Risk Factors” under “Risks Relating to Legal or Regulatory Matters” included in this Report.
Additionally, some of these bodies might refer violations of their requirements to the Federal Trade Commission or other regulators. For additional information regarding the current regulatory environment and how it may impact us, see Item 1A. “Risk Factors” under “Risks Relating to Legal or Regulatory Matters” included in this Report.
One of the key benefits of our platform is the management, analysis, and structuring of valuable user engagement and advertising data. ◦ Our data scale: We gather billions of data events per minute delivering nearly 12 billion recommendations per day.
One of the key benefits of our platform is the management, analysis, and structuring of valuable user engagement and advertising data. ◦ Our data scale: We gather billions of data events per minute delivering over 12 billion recommendations per day.
As we continue growing our team, and become more diverse culturally and geographically, we want to make sure we retain a shared mission among the people that become part of our company. In particular, there are certain characteristics that we seek out in our employees: 15 Table of Contents • Intelligent and productive.
As we continue growing our team, and become more diverse culturally and geographically, we want to make sure we retain a shared mission among the people that become part of our Company. In particular, there are certain characteristics that we seek out in our employees: • Intelligent and productive.
These laws and regulations involve matters including privacy, data use, data protection and personal information, content, intellectual property, advertising, marketing, distribution, data security, data retention and deletion, data localization and storage, data disclosure, competition, protection of minors, consumer protection, accessibility, taxation, and economic or other trade controls including sanctions, and securities law compliance.
These laws and regulations involve matters including privacy, use of artificial intelligence, data use, data protection and personal information, content, intellectual property, advertising, marketing, distribution, data security, data retention and deletion, data localization and storage, data disclosure, competition, protection of minors, consumer protection, accessibility, taxation, environmental reporting and economic or other trade controls including sanctions, and securities law compliance.
A self-described “Superstar” or “Ninja” focused on personal status is not likely to fit our team, even if they might be very good at their profession. • Passionate. People who have a passion for something typically have that spark in their eyes when they engage in the work they love.
A self-described “Superstar” focused on personal status is not likely to fit our team, even if they are very good at their profession. • Passionate. People who have a passion for something typically have that spark in their eyes when they engage in the work they love.
Outbrain’s technology is deployed on the mobile apps and mobile websites of most of our media partners, generating 72% of our revenue in 2022. Outbrain operates a two-sided marketplace, which means we usually have exclusive control over all aspects of the user experience, allowing us to quickly test and deploy new formats for our advertisers and media owners.
Outbrain’s technology is deployed on the mobile apps and websites of most of our media partners, generating 73% of our revenue in 2023. Outbrain operates a two-sided marketplace, which means we usually have exclusive control over all aspects of the consumer experience, allowing us to quickly test and deploy new formats for our advertisers and media owners.
We currently have four ERGs: OB Good, OB Green, OB WE and OB-4-Equality, focusing on social responsibility, environmental sustainability, women's empowerment, and diversity equity and inclusion, respectively, all of which are open to people of all backgrounds. As of December 31, 2022, we had 1,076 employees and contractors.
We currently have four ERGs: OB Good, OB Green, OB WE and OB-4-Equality, focusing on social responsibility, environmental sustainability, women’s empowerment, and diversity equity and inclusion, respectively, all of which are open to people of all backgrounds. As of December 31, 2023, we had 942 employees and contractors.
In 2022 our top twenty digital media partners accounted for approximately 50% of our revenue, with the largest accounting for 10% of our revenue. During the same year, our top twenty advertisers accounted for approximately 20% of our revenue, with the largest accounting for approximately 2% of our revenue. • Team and culture.
In 2023 our top twenty digital media partners accounted for approximately 50% of our revenue, with the largest accounting for 10% of our revenue. During the same year, our top twenty advertisers accounted for approximately 24% of our revenue, with the largest accounting for approximately 2% of our revenue. • Team and culture.
We also use multiple layered security controls to protect our recommendation engine and our data assets, including software-based access controls for our source code and production systems, segregated networks for different components of our production systems and centralized production systems management.
We also use multiple layered security controls to protect our recommendation engine and our data assets, including software-based access controls for our source code and production systems and centralized production systems management.
Providing a clean, non-fraudulent premium network for publishers, advertisers and consumers is a top priority at Outbrain. Our dedicated anti-fraud team monitors our platform to identify and investigate unusual web traffic patterns. We detect, block and prevent fraudulent web traffic by using both internal and external third-party TAG Anti-Fraud certified solutions. We have been a TAG-verified member since 2018.
Providing a clean, non-fraudulent premium network for media owners, advertisers and consumers is a top priority at Outbrain. Our dedicated anti-fraud team monitors our platform to identify and investigate unusual web traffic patterns. We detect, block and prevent fraudulent web traffic by using both internal and external third-party TAG Anti-Fraud certified solutions.
We are members in good standing of the Network Advertising Initiative (NAI), an association dedicated to responsible data collection and its use for digital advertising. We adhere to the NAI Code of Conduct, along with the IAB Self-Regulatory Principles for Online Behavioral Advertising, and the IAB Europe OBA Framework. We are also Trustworthy Accountability Group (TAG) Brand Safety Certified.
We are members in good standing of the Network Advertising Initiative (NAI), an association dedicated to responsible data collection and its use for digital advertising. We adhere to the NAI Code of Conduct, along with the IAB Self-Regulatory Principles for Online Behavioral Advertising, and the IAB Europe OBA Framework.
Our products are designed with security and privacy at the forefront. We maintain tight controls over the personal data we collect, encrypting it where necessary, and retaining it in our databases with strictly limited and controlled access rights, to ensure it is secure while utilizing advanced monitoring over our environment.
We maintain tight controls over the personal data we collect, encrypting it where necessary, and retaining it in our databases with strictly limited and controlled access rights, to ensure it is secure while utilizing advanced monitoring over our environment.
Our direct integrations across our partners’ properties provide us with a large volume of proprietary first-party engagement data, including context, user interest and behavioral signals. Leveraging our data, we continuously optimize our algorithms to improve user engagement and advertiser ROAS.
Our direct integrations across our media partners’ properties provide us with a large volume of proprietary first-party engagement data, including context, consumer interest and behavioral signals. Leveraging our data and AI capabilities, we continuously optimize our prediction engine to improve consumer engagement and advertiser ROAS.
On July 27, 2021, we closed our IPO and issued 8,000,000 shares of our common stock at an initial offering price of $20.00 per share, receiving aggregate net proceeds of $145.1 million, after deducting underwriting discounts, commissions and other offering costs. Our mission is to help people discover content, products and services.
On July 27, 2021, we closed our IPO and issued 8,000,000 shares of our common stock at an initial offering price of $20.00 per share, receiving aggregate net proceeds of $145.1 million, after deducting underwriting discounts, commissions and other offering costs. Our mission is to connect businesses with engaged audiences.
If we are unable to collect data and/or transfer data between and among countries and regions in which we operate, it could affect our ability to provide our services, the manner in which we provide our services or our ability to target ads, which could adversely affect our financial results.
If we are unable to collect data and/or transfer data between and among countries and regions in which we operate, it could affect our ability to provide our services or our ability to target ads, which could adversely affect our financial results. For example, in July 2023 the E.U.-U.S.
We believe that the failure of any individual component will not affect the overall availability of our platform, having maintained an uptime of 99.9% from 2018 to 2022. • Data.
We believe that the failure of any individual component will not affect the overall availability of our platform, having maintained an uptime of 99.9% from 2018 to 2023. 15 Table o f Contents • Data.
Our proprietary infrastructure includes over 7,000 servers, with storage capacity exceeding several petabytes. Our servers are primarily located in three third-party data centers, on a co-location basis, in Secaucus, NJ, Sacramento, CA, and Chicago, IL. Each of our data centers is operated by a different vendor, in order to minimize the impact of any outage on our platform.
Our servers are primarily located in three third-party data centers, on a co-location basis, in Secaucus, NJ, Sacramento, CA, and Chicago, IL. Each of our data centers is operated by a different vendor, in order to minimize the impact of any outage on our platform.
We have an extensive history of growing ad inventory by expanding our media partnerships and forming new ones with an emphasis on premium, top 20 media owners in the markets where we operate. Existing partners.
We have an extensive history of growing ad inventory by expanding our media partnerships and forming new ones with an emphasis on premium media owners in the markets where we operate. Existing partners. We have a strong track record of growth through the continuous expansion of existing media partnerships.
Based on where data is available, approximately 51% were male and approximately 47% were female. Approximately 41% of our workforce is located in Israel, 13% is located in the United States, 11% is located in Slovenia, and the remaining 35% is located in our other global offices.
Based on where data is available, 49% were male, 47% were female and 4% undisclosed. Approximately 40% of our workforce is located in Israel, 13% is located in the United States, 13% is located in Slovenia, and the remaining 34% is located across our other global offices.
Our automated index deconstructs content into base elements including titles, images and topics in order to recombine the elements into targeting data and formatted recommendations and ads. • Artificial Intelligence and Machine Learning.
We index content through RSS feeds and JavaScript triggers to continuously identify new content and changes to existing content. Our automated index deconstructs content into base elements including titles, images and topics in order to recombine the elements into targeting data and formatted recommendations and ads. • Artificial Intelligence and Machine Learning.
Human Capital Resources Much of our success can be directly attributed to our global team of technology, business, and data science experts who work out of our 17 locations worldwide. Outbrain comprises a diverse, intelligent and driven group of individuals who are passionate and excited to be leading the way in which users discover things online.
Human Capital Resources Much of our success can be directly attributed to our global team of technology, business, and data science experts who work out of our 15 locations worldwide. Outbrain is comprised of a diverse, intelligent and driven group of individuals who are passionate and excited to be leading continued innovation in Open Internet technology and advertising.
Since inception, we have been guided by the same core principles pertaining to our three constituents: users, media partners, and advertisers . Users.
Since inception, we have been guided by the same core principles pertaining to our three constituents: consumers, media partners, and advertisers. • Consumers. Our platform is centered on predicting consumer attention and engagement.
In addition, certain media partner arrangements include additional commercial terms such as variable revenue percentages based on page view volume or revenue, or a guaranteed minimum rate of payment if the media partner meets certain additional criteria, including the implementation of advertisement spaces in defined placements across the media partner sites.
The hyperlinked standard partner distribution terms include terms related to the license and use of the platform and technology, limitations on use of similar technologies, and customary terms and conditions. 9 Table o f Contents In addition, certain media partner arrangements include additional commercial terms such as variable revenue percentages based on page view volume or revenue, or a guaranteed minimum rate of payment if the media partner meets certain additional criteria, including the implementation of advertisement spaces in defined placements across the media partner sites.
The type of commercial terms, such as revenue percentages, tiering of such percentages, guaranteed minimum rates of payment or programmatic are all factors, among others such as geography and size of the media partners, that contribute to our revenue mix. Our Offering for Advertisers Our platform enables advertisers to have one-on-one interactions with consumers, at scale.
The commercial terms of these arrangements, such as revenue percentages, tiering of such percentages, guaranteed minimum rates of payment or programmatic are all factors, among others such as geography and size of the media partners, that contribute to our revenue mix.
Our proprietary artificial intelligence and machine learning capabilities enable us to harness the vast volume of data we collect in order to effectively match users to relevant content and ads based on our content index.
Our proprietary artificial intelligence and machine learning capabilities enable us to harness the vast volume of data we collect in order to effectively match consumers to relevant content and ads based on our content index. AI is at the heart of our key prediction engine, which backs all of our advertiser and media owner offerings.
We partner with thousands of the world’s most trusted digital media owners for which we believe we are an important technology and monetization partner. Some key media partners with which we have long-standing relationships across our various regions include Asahi Shimbun, CNN, Der Spiegel, Le Monde, MSN, Sky News and Sky Sports, and The Washington Post.
Some key partners with which we have long-standing relationships across our various regions include Asahi Shimbun, CNN, Der Spiegel, Le Monde, MSN, New York Post, Sky News and Sky Sports, and The Washington Post.
Our Technology We have designed our platform to process real-time content and advertising transactions quickly and efficiently at a massive scale. Our platform delivers on average nearly 12 billion recommendations daily, in 20 languages.
Our Technology We have designed our platform to process real-time content and advertising transactions quickly and efficiently at a massive scale. Our platform delivers on average over 12 billion recommendations daily, in 20 languages. We designed our platform using a microservices-based architecture, which enables the rapid deployment of new features with high availability, reliability, and redundancy.
Outbrain has built an extensive intellectual property portfolio to date. This portfolio includes 18 granted U.S. utility patents, 35 granted U.S. design patents and 15 European registered community designs.
This portfolio includes 18 granted U.S. utility patents, 35 granted U.S. design patents, 15 European registered community designs and 14 UK registered designs.
Our Culture Manifesto, available publicly on the Outbrain website, is one of many important expressions of the values and principles that reflect how we behave, collectively and individually. Our people strategy revolves around creating employee experiences. We strive to foster deep employee engagement built upon personal development and achievement that is supported by continuous feedback, learning, and team building.
Our people strategy revolves around creating employee experiences. We strive to foster deep employee engagement built upon personal development and achievement that is supported by continuous feedback, learning, and team building.
We employ in-market sales teams across our markets, helping us attract premium digital media owners and advertisers to our platform. In addition, we have developed and currently utilize online acquisition channels to attract new advertisers, who we are able to onboard and serve in an automated manner, using self-serve tools and technologies.
In addition, we have developed and currently utilize online acquisition channels to attract new advertisers, who we are able to onboard and serve in an automated manner, using self-serve tools and technologies. 16 Table o f Contents Our sales teams educate prospective media owners, partners, and advertisers on the use, technical capabilities, and benefits of our platform.
Advances in AI models, software and hardware, along with the growing use of the Internet have made it possible to collect and rapidly process massive amounts of real-time data signals related to content, context and performance, and incorporate those signals into prediction algorithms like ours.
AI models have become increasingly user-friendly and directly applicable to a wide range of industries and use cases. AI has made it possible to collect and rapidly process massive amounts of real-time data signals related to content, context and performance, and incorporate those signals into prediction algorithms like ours.
We are also subject to evolving laws and regulations that dictate whether, how, and under what circumstances we can transfer, process and/or receive certain data that is critical to our operations, including the collection of data and the data shared between countries or regions in which we operate.
Changes to our products or business practices as a result of these or similar developments have in the past adversely affected, and may in the future adversely affect, our business and adds complexity to our and our partner’s compliance programs. 18 Table o f Contents We are also subject to evolving laws and regulations that dictate whether, how, and under what circumstances we can transfer, process and/or receive certain data that is critical to our operations, including the collection of data and the data shared between countries or regions in which we operate.
As tools for targeting and tracking become more sophisticated and effective, advertisers are increasingly relying on performance centric pricing models to drive more measurable ROAS, for example, paying for a click (cost-per-click), lead, acquisition, download, install, or sale, instead of paying to simply display an ad which may or may not create value.
As tools for targeting and tracking become more sophisticated and effective, advertisers are increasingly relying on performance centric pricing models to drive more measurable ROAS, for example, paying for a click (cost-per-click), lead, acquisition, download, install, or sale. Similarly, advertisers are now defining and tracking more accountable metrics for branding and awareness campaigns, rather than measuring views and impressions alone.
We engage advertisers and their agencies in order to educate them on how to increase reach and ROAS using our solutions. Our marketing team is focused on delivering strategies that drive efficient new partner and advertiser acquisition, enhancing our position as key industry thought leaders, supporting our sales teams, and increasing awareness of our brand.
Our marketing team is focused on delivering strategies that drive efficient new media partner and advertiser acquisition, increasing awareness of our brand and our evolving solutions, and educating the market in order to enhance our position as key industry thought leaders.
As a result, we believe that personalized and engaging digital content experiences, supported by non-intrusive ads, have become the expectation of media owners, rather than a consumer luxury. Trusted editorial content is becoming increasingly important.
As a result, we believe that personalized and engaging digital content experiences, supported by non-intrusive ads, have become the expectation of media owners, rather than a consumer luxury. Advertising spend follows time spent and engagement, and as such mobile ad spend is expected to increase at a faster pace than digital ad spend in total.
In the past, improvements to our advertiser solutions have been a meaningful driver of growth for our business.
In the past, improvements to our advertiser solutions have been a meaningful driver of growth for our business. With the release of Onyx by Outbrain, we increased our ability to access branding and video budgets.
In January 2022, we acquired video intelligence AG, providing us with an expanded video offering for advertisers and media owners. We intend to continue pursuing partnership and acquisition opportunities that will enhance our technology or market presence and deliver more value to our partners and advertisers. Our Competition The digital advertising industry is highly competitive and fragmented.
We intend to continue to opportunistically pursue partnership and acquisition opportunities that will enhance our technology or market presence and deliver more value to our partners and advertisers. 14 Table o f Contents Our Competition The digital advertising industry is highly competitive and fragmented.
In addition, we plan to expand our partnerships with original equipment manufacturers (OEMs), enabling us to offer personalized content feeds and advertising solutions for different platforms such as browsers and mobile operating systems. New partners.
We plan to expand our partnerships with original equipment manufacturers (OEMs), news aggregators, browsers, operating systems and other platforms enabling us to offer dynamic content feeds and advertising solutions for different platforms. 13 Table o f Contents • Grow budgets from new and existing advertisers.
We believe that by focusing on improving the user experience and ad format innovation, we are able to cultivate user behavior patterns that compound engagement over time, delivering superior long-term monetization for ourselves and for our media partners, as well as better return on ad spend for our advertisers. Media Partners.
We believe that by focusing our algorithm on optimizing toward these consumer-centric factors, we are able to cultivate user behavior patterns that compound over time, delivering greater effectiveness and efficiency for our advertisers, superior long-term monetization for our media partners, as well as increased value for Outbrain. • Media Partners.
Consumers have grown accustomed to consuming engaging content that is personalized and curated across multiple digital formats, including social, entertainment, gaming and audio. In mobile environments, consumers habitually scroll through apps, mobile browsers and news feeds, such as those found on social media, providing continuous opportunities to deliver personalized advertising experiences.
As mentioned above, the consumption of content continues to shift to mobile devices. In mobile environments, consumers habitually scroll through apps, mobile browsers and news feeds, such as those found on social media, providing continuous opportunities to deliver personalized advertising experiences.
The massive scale of content creation and distribution across social media has made it difficult to curb the creation and proliferation of factually inaccurate news and misinformation, leading to a growing distrust of user-generated social media content.
The massive scale of content creation and distribution across social media has made it difficult to curb the creation and proliferation of factually inaccurate news and misinformation. Social media has become the preferred method of news consumption for Americans, despite it being the least trusted category of media, according to a 2023 Statista report.
In addition to our intellectual property rights, we also consider the skills and ingenuity of our employees and the functionality and frequent enhancements to our solutions to be contributors to our success. We believe our platform would be difficult, time consuming, and costly to replicate. We protect our competitive technology position through innovation and by continually developing new intellectual property.
We believe our platform would be difficult, time consuming, and costly to replicate. We protect our competitive technology position through innovation and by continually developing new intellectual property. Outbrain has built an extensive intellectual property portfolio to date.
More generally, the application, interpretation, and enforcement of applicable laws and regulations are often uncertain, particularly in the new and rapidly evolving industry in which we operate, and may be interpreted and applied inconsistently from jurisdiction to jurisdiction and inconsistently with our current policies and practices. 16 Table of Contents Orders issued by, or inquiries or enforcement actions initiated by, government or regulatory authorities have caused us, and in the future will continue to cause us, to incur substantial costs and expose us to civil and criminal liability (including liability for our personnel) or penalties (including substantial monetary remedies).
Orders issued by, or inquiries or enforcement actions initiated by, government or regulatory authorities have caused us, and in the future will likely continue to cause us, to incur substantial costs and expose us to civil and criminal liability (including liability for our personnel) or penalties (including substantial monetary remedies).
Consumption of content continues to shift online, with over five billion consumers accessing the Internet, primarily through mobile devices, where scrolling through a feed experience is habitually expected by consumers on every page.
According to Statista, consumption of content continues to shift online, with over 5 billion consumers accessing the Internet, primarily through mobile devices, where the ability to scroll through a feed has come to be expected by consumers on every page. This means the method in which audiences discover and engage with editorial content must evolve.
Our technology automatically classifies and analyzes content at a rate of over 1.5 million pages a day in 20 different languages. We index content through RSS feeds and JavaScript triggers to continuously identify new content and changes to existing content.
We leverage our data to improve our algorithms and prediction capabilities. ◦ Our automated content index: To operate our platform, we have created our automated content index, comprising over 5 billion content elements. Our technology automatically classifies and analyzes content at a rate of over 1 million pages a day in 20 different languages.
Through our direct, usually exclusive integrations with media partners, we have become one of the largest online advertising platforms on the open web. In 2022, we provided personalized recommendations and ads to over a billion monthly unique users, delivering on average nearly 12 billion recommendations to content, services and products per day, with over 30,000 advertisers directly using our platform.
In 2023, we provided personalized ads to over a billion monthly unique consumers, delivering on average over 12 billion experiences promoting content, services, and products per day, with tens of thousands of advertisers directly using our platform.
We believe this means discovering content on article pages, on which we deliver user experiences, is more important than ever to help users navigate what to read, watch, or buy next. Our platform is built for user engagement and, as a mobile-first company, is designed to be highly effective on mobile devices.
Our media partners are media owners that use Outbrain’s technology to help their audiences navigate what to read, watch, consider, and buy next. Our platform is built for user engagement and, as a mobile-first company, is designed to be highly effective on mobile devices.
We believe this represents an opportunity as the broader ecosystem of retailers seek advertising and technology partners to support their continued online growth.
We believe this represents an opportunity as the broader ecosystem of advertisers seek partners to support continued growth of editorial and journalistic content. Accordingly, we are executing on strategies to draw both consumers and advertisers to the Open Internet.
We work with established media partners, employing rigorous selection criteria, onboarding standards, controls, processes, and ongoing monitoring.
This enables advertisers to benefit from greater supply-path optimization, efficiency, and transparency — and enables a more sustainable advertising ecosystem. • Quality. We work with established media partners, employing rigorous selection criteria, onboarding standards, controls, processes, and ongoing monitoring.
Throughout the process, our teams provide guidance as to how our platform can optimize the value of a media partner’s audience or how an advertiser can reach relevant users. Additionally, following contract execution and implementation, our account management teams guide media partners on how additional platform deployment and optimizations can deliver incremental monetization.
Our dedicated teams work with potential customers through the entire sale cycle, from initial contact to contract execution and implementation. Throughout the process, our teams provide guidance as to how our platform can optimize the value of a media owner’s audience or how an advertiser can reach relevant consumers.
We seek to control access to our proprietary technology by entering into non-disclosure agreements with third parties and disclosure and invention assignment agreements with our employees and contractors. We consider our trademarks, patents, copyrights, trade secrets, and other intellectual property rights to be, in the aggregate, material to our business.
We protect our intellectual property rights by relying on federal and state statutory and common law rights, foreign laws where applicable, and contractual restrictions. We seek to control access to our proprietary technology by entering into non-disclosure agreements with third parties and disclosure and invention assignment agreements with our employees and contractors.
We have a track record of successfully executing a number of acquisitions and partnerships, helping us efficiently expand our offerings, grow our business and grow our talent. In 2017, we acquired Zemanta, providing us with advanced programmatic capabilities. In 2018, we acquired AdNgin, an advanced user interface optimization platform. In 2019, we acquired Ligatus, a German-based native advertising company.
We have a track record of successfully executing a number of acquisitions and partnerships, helping us efficiently expand our offerings, grow our business and grow our talent.
We designed our platform using a microservices-based architecture, which enables the rapid deployment of new features with high availability, reliability, and redundancy. 13 Table of Contents Our platform consists of the following key technology components: • Infrastructure. To support our business needs, we operate our own proprietary cloud infrastructure, and also utilize other public clouds.
Our platform consists of the following key technology components: • Infrastructure. To support our business needs, we operate our own proprietary cloud infrastructure, and also utilize other public clouds. Our proprietary infrastructure includes over 7,000 servers, with storage capacity exceeding several petabytes.
We are also adopting the Media Rating Council Invalid Traffic Detection and Filtration Standards in our internal fraud detection technological ecosystem. 18 Table of Contents
We have been a Trustworthy Accountability Group (TAG) Brand Safety Certified member since 2018. We also implement certain Media Rating Council Invalid Traffic Detection and Filtration Standards in our internal fraud detection technological ecosystem. 19 Table o f Contents
In addition to investments in our advertiser product and technology, we plan to invest in sales and marketing initiatives aimed at attracting new types of advertisers to our platform. Our focus on premium media partnerships and display and video formats enable us to form new business relationships with advertisers who traditionally have not spent with Outbrain.
Our focus on premium media partnerships and high-impact and video formats enable us to form new business relationships with advertisers who traditionally have not spent with Outbrain. ◦ Deepen strategic value to media partners. The expansion of our demand business to service new objectives greatly increases the opportunity for our media partners.
Furthermore, the ability to target advertising based on specific user interests and context, in real-time, has become increasingly important to advertisers, as it contributes to more efficient campaigns and improved ROAS. This creates demand for solutions that can adjust in real-time while measuring and optimizing for specific price and performance thresholds.
Performance and return-on-ad-spend (“ROAS”) are important to advertisers. As advertising spend becomes more accountable to key business metrics, technology platforms that deliver on concrete engagement and performance are more relevant than ever. This creates demand for solutions that can adjust in real-time while measuring and optimizing for specific price and performance thresholds.
According to eMarketer, in 2022 global digital ad spend grew to $567 billion, an 8.6% year over year increase, and mobile ad spend grew to approximately $424 billion, a 12.1% year over year increase.
According to Insider Intelligence, in 2023 global digital ad spend grew to $610 billion, a 10.7% year over year increase, and mobile ad spend grew to approximately $450 billion, an 11.9% year over year increase. Trusted editorial content is becoming increasingly important.
By delivering better results to advertisers, we are able to grow our business and our platform, which, in turn, helps us collect more data and further enhance our algorithms, driving better results for our partners, helping us further grow our platform and our business. • Well positioned for a privacy-centric world.
By delivering better results to advertisers, we are able to continually enhance our platform performance and value for media owners. • Well positioned for a privacy-centric world. By integrating directly with our media partners’ properties, we generate proprietary first-party data and are able to collect and infer valuable data and insights, while respecting privacy regulations.
Our culture and team are the most important assets in building and expanding our business. Our team identifies new problems to solve, builds solutions, optimizes and extends our infrastructure, and acquires and serves customers. We believe that strong and diverse teams deepen customer relationships, promote innovation, and increase productivity.
Our culture and team are a critical asset in building and expanding our business. We believe that our strong and diverse teams deepen customer relationships, promote innovation, and increase productivity. Our Culture Manifesto, available publicly on the Outbrain website, is one of many important expressions of the values and principles that reflect how we behave, collectively and individually.
To ensure seamless product innovation we operate as a continuous deployment engineering organization, releasing an average of over 300 c ode deployments daily. We plan to continue investing in our technology stack, platform and its capabilities. • Scaled, profitable and diversified business.
To ensure continued product innovation, we operate as a continuous deployment engineering organization, releasing hundreds of code deployments daily. • Scaled, profitable and diversified business. We have grown our business while achieving profitability. This demonstrates the scalability of our technology to new use cases, and the strength of our long-standing client relationships.
We compete for advertising dollars and media owner partnerships with advertising technology platforms such as Criteo, Magnite, PubMatic, RevContent, Taboola, Teads, The Trade Desk, and others, as well as large consumer-facing digital platforms with advertising technology capabilities, such as Amazon, Facebook, Instagram, Google and Twitter.
We compete for advertising dollars and media owner partnerships with advertising technology platforms who have traditionally been performance focused, such as Criteo, Taboola, and RevContent. With the creation of our branding platform, Onyx and our programmatic tech stack, we also compete with companies such as Magnite, PubMatic, Teads, and TripleLift.
Our algorithms make over 1,000 click and conversion rate predictions, on average, before selecting which recommendations to present on each page view. 14 Table of Contents Our Data Flywheel Sales and Marketing We focus our sales and marketing efforts on supporting, advising, and training our partners and advertisers, helping them optimize their use of our platform.
Leveraging AI to ingest and analyze the billions of data points we access daily, and effectively utilizing them to make predictions that deliver better business outcomes, is a key tenet of our business. Our algorithms make over 1,000 click and conversion rate predictions per second, on average, before selecting which recommendations to present on each page view.
Improving the quality of our recommendation engine has been an important driver of past growth and we expect it to remain a key driver of future growth. We believe that a great user experience drives engagement that compounds over time.
Improving the abilities of our prediction engine has been an important driver of past growth and we expect it to remain a key driver of future growth. Continued investment in our technology, artificial intelligence and machine learning capabilities enable us to power consumer engagement for media owners in new ways, as consumer habits change.
By integrating directly with our media partners’ properties, we generate proprietary first-party data and are able to collect and infer valuable user related data and insights. With the upcoming discontinuation of third-party cookies and confusion about the efficacy of any new approaches, marketers are looking for more enduring ways to understand their customers.
With the upcoming discontinuation of third-party cookies and confusion about the efficacy of any new 12 Table o f Contents approaches, marketers are looking for more enduring ways to understand their customers. Our ability to extract and leverage contextual signals enables us to deliver tailored advertising without relying on cookie-based targeting. • History of successful innovation.
We process billions of data signals per minute, powering more than 500 million Click Through Rate (“CTR”) predictions and over 100,000 recommendations per second. This drives our ability to deliver more than 40 million engagements per day.
Our AI prediction engine is fundamental to how we optimize experiences and outcomes for consumers, media owners, and advertisers. We process billions of data signals per minute, powering more than one billion predictions and over 100,000 experiences per second.
As a result, our platform provides predominantly exclusive access to engaged users in high quality content environments across many of the world’s most trusted media properties. 10 Table of Contents Our Personalized Experience for Users Our Smartlogic product dynamically adjusts both the arrangement and the formats of content delivered to a user, depending on the user’s preferences and our media partner’s KPIs, ensuring a more personalized and engaging experience while providing a balance of editorial engagement and monetization.
As a result, our platform provides predominantly exclusive access to engaged consumers in high quality content environments across many of the world’s most trusted media properties. Advertiser Results Driven by Tailored Consumer Experience Our relationships with media owners notably differentiate our offering for advertisers.
For tens of thousands of advertisers around the world, Outbrain helps attract new customers and grow their businesses, driving measurable results and return on investment. Over the past decade, consumers have become increasingly accustomed to seeing highly curated digital content and ads that align with their unique interests.
Over the past decade, consumers have become increasingly accustomed to seeing highly curated content that aligns with their unique interests. Social media and search have simplified discovery by leveraging billions of data points to offer personalized experiences.
From 2018 to 2022, we grew video revenues from approximately 2% to approximately 10% of our annual revenue, with significant remaining headroom for growth into a higher yielding business.
The addition of video experiences (including pre-roll, and outstream) to our platform presents a significant growth opportunity in video, which has not exceeded 10% of our revenue mix, with significant remaining headroom for growth into a higher yielding business. ◦ Attract new types of advertisers.
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Outbrain is a leading recommendation platform for advertisers and digital media owners, reaching over a billion unique users around the world. Outbrain’s technology provides personalization, engagement and monetization solutions to thousands of digital media properties, including many of the world’s most prestigious publishers.
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Outbrain is a leading technology platform that drives business results by connecting media owners and advertisers with engaged audiences to drive business outcomes, reaching over a billion unique consumers around the world. Outbrain’s artificial intelligence (“AI”) prediction engine powers a two-sided platform for advertisers and media owners that delivers concrete business outcomes.
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Similar to the way in which social media and search have simplified discovery by synthesizing billions of consumer data points to offer personalized experiences, we provide digital media owners with a platform that encompasses data at scale as well as prediction and recommendation capabilities, helping them deliver both editorial content and paid advertising based on context and each user’s interests and preferences.
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Our platform enables thousands of digital media owners to provide tailored experiences to their audiences, delivering audience engagement and monetization. For tens of thousands of advertisers, from enterprise brands to performance marketers, our platform optimizes audience attention and engagement to deliver greater return on investment at each step of the marketing funnel.
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Additionally, as a result of increased regulatory scrutiny and consumer privacy advocacy, technologies such as ours, that rely primarily on context and first party data, have a unique advantage in building the future of online advertising.
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In a similar fashion, our prediction engine ingests billions of data points each minute to provide digital media owners with a platform to deliver curated editorial and advertiser experiences to their audiences. We have been leveraging AI to enhance our ingestion of data and the performance of our prediction engine since our inception.
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According to the 2022 Digital News Report by Reuters Institute for the Study of Journalism at Oxford University, 77% of people access news through side-doors, not through the homepages of publications.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeRisk Factor Summary The following is a summary of some of the principal risks we face: • Our revenue and results of operations are highly dependent on overall advertising demand and spending and traffic generated by our media partners; • The impact on advertising demand and spend of factors such as the continuation or worsening of unfavorable economic or business conditions or downturns and instability in the financial markets; • A failure to grow or to manage growth effectively may cause the quality of our platform and solutions to suffer, and may adversely affect our business, results of operations, and financial condition; • Our sales and marketing efforts may require significant investments and, in certain cases, involve long sales cycles; • Our research and development efforts may not meet the demands of a rapidly evolving technology market; • The digital advertising industry is intensely competitive, and if we do not effectively compete against current and future competitors, our business, results of operations, and financial condition could be adversely affected; • Loss of media partners could have a significant impact on our revenue and results of operations; • Growth in our business may place demands on our infrastructure and resources; • The failure of our recommendation engine to accurately predict user engagement may adversely affect our business, results of operations, and financial condition; • If the quality of our recommendations deteriorates, or if we fail to present interesting content to our users, we may experience a decline in user engagement, which could result in the loss of media partners; • Limitations on our ability to collect, use, and disclose data to deliver advertisements; • Outages or disruptions that impact us or our service providers, resulting from cyber incidents, or failures or loss of our infrastructure, could adversely affect our business; and • Political and regulatory risks in the various markets in which we operate and the challenges of compliance with differing and changing regulatory requirements.
Biggest changeRisk Factor Summary The following is a summary of some of the principal risks we face: • Our revenue and results of operations are highly dependent on overall advertising demand and spending and traffic generated by our media partners; • The impact on advertising demand and spend of factors such as the continuation or worsening of unfavorable economic or business conditions or downturns and instability in the financial markets; • A failure to grow or to manage growth effectively may cause the quality of our platform and solutions to suffer; • Our sales and marketing efforts may require significant investments and, in certain cases, involve long sales cycles; • Our research and development efforts may not meet the demands of a rapidly evolving technology market; • The digital advertising industry is intensely competitive and we must effectively compete against current and future competitors; • Loss of media partners could have a significant impact on our revenue and results of operations; • Growth in our business may place demands on our infrastructure and resources; • The failure of our recommendation engine to accurately predict user engagement; • If the quality of our recommendations deteriorates, or if we fail to present interesting content to our users, we may experience a decline in user engagement, which could result in the loss of media partners; • Limitations on our ability to collect, use, and disclose data to deliver advertisements; • 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; • Outages or disruptions that impact us or our service providers, resulting from cyber incidents, or failures or loss of our infrastructure; and • Political and regulatory risks in the various markets in which we operate and the challenges of compliance with differing and changing regulatory requirements.
While the text of the ePrivacy Regulation is still under development, the CJEU Fashion ID, Planet 49 and Wirtschaftsakademie cases are driving increased attention to cookies and tracking technologies and impacting compliance requirements across the ecosystem.
While the text of the ePrivacy Regulation is still under development, the CJEU Fashion ID, Planet 49, Wirtschaftsakademie cases are driving increased attention to cookies and tracking technologies and impacting compliance requirements across the ecosystem.
If media partners, advertisers, or data providers do not follow the process (and in any event as the legal requirements in this area continue to evolve and develop), we could be subject to fines and liability. We may not have adequate insurance or contractual indemnity arrangements to protect us against any such claims and losses.
If media partners, advertisers, or data providers do not follow the process (and in any event as the legal requirements in this area continue to evolve and develop), we could be subject to fines and liability. We may not have adequate insurance or contractual indemnity arrangements to protect us against any such claims or losses.
In the European Union/United Kingdom a data breach involving personal data will generally require notification of the relevant Supervisory Authority(ies) and, where the risk to individuals is high, notification of the affected individuals themselves. In the European Union/United Kingdom there is a possibility of significant fines being imposed in the event of a security breach.
In the European Union and United Kingdom a data breach involving personal data will generally require notification of the relevant Supervisory Authority(ies) and, where the risk to individuals is high, notification of the affected individuals themselves. In the European Union and United Kingdom there is a possibility of significant fines being imposed in the event of a security breach.
Among other things, this will require us at various times to: • strategically invest in the development and enhancement of our platform and data center infrastructure; • manage multiple relationships with various media partners, advertisers, and other third parties; • extend our operating, administrative, legal, financial, and accounting systems and controls; • increase coordination among our engineering, product, operations, go-to-market and other support organizations; and • recruit, hire, train, and retain personnel.
Among other things, this will require us at various times to: • strategically invest in the development and enhancement of our platform and data center infrastructure; • manage multiple relationships with various media partners, advertisers, and other third parties; • extend our operating, administrative, legal, financial, and accounting systems and controls; • increase coordination among our engineering, product, operations, go-to-market and other support organizations; and • recruit, hire, train, and retain experienced personnel.
Our revenue growth and future prospects will be adversely affected if we fail to expand our advertiser relationships. Our revenue growth depends on our success in expanding and deepening our relationships with existing advertisers. Our growth strategy is premised in part on increasing spend from existing advertisers.
Our revenue growth and future prospects will be adversely affected if we fail to expand our advertiser and agency relationships. Our revenue growth depends on our success in expanding and deepening our relationships with existing advertisers. Our growth strategy is premised in part on increasing spend from existing advertisers.
In addition, some jurisdictions have enacted laws requiring companies to notify individuals of data security breaches involving certain types of personal data, and our agreements with certain partners require us to notify them in the event of a security incident.
In addition, some jurisdictions have enacted laws requiring companies to notify individuals of data security breaches involving certain types of personal data, and our agreements with certain partners may require us to notify them in the event of a security incident.
As a public company, it is more expensive for us to maintain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to maintain coverage.
As a public company, it is also more expensive for us to maintain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to maintain coverage.
Factors that can cause our results of operations to fluctuate include: • changes in demand and competition for ad inventory sold on our platform; • changes in our access to valuable ad inventory of media partners; • the addition or loss of media partners on our platform, an d/or loss of ad inventory from a media partner; • costs associated with adding or attempting to retain media partners; • the continuation or worsening of unfavorable economic or business conditions or downturns or instability in financial markets; • seasonality of our business; • changes in consumer usage of devices and channels to access media and digital content; • changes in the structure of the buying and selling of digital ad inventory; • changes in the pricing policies of media partners and competitors; • changes in third-party service costs; • changes and uncertainty in our legislative, regulatory, and industry environment, particularly in the areas of data protection and consumer privacy; • introduction of new technologies or solutions; • unilateral actions taken by demand side platforms, agencies, advertisers, media partners, and supply side platforms; 24 Table of Contents • changes in our capital expenditures as we acquire hardware, technologies, and other assets for our business; and • changes to the cost of retaining and adding highly specialized personnel.
Factors that can cause our results of operations to fluctuate include: • changes in demand and competition for ad inventory sold on our platform; • changes in our access to valuable ad inventory of media partners; • the addition or loss of media partners on our platform, an d/or loss of ad inventory from a media partner; • costs associated with adding or attempting to retain media partners; • the continuation or worsening of unfavorable economic or business conditions or downturns or instability in financial markets; • seasonality of our business; • changes in consumer usage of devices and channels to access media and digital content; • changes in the structure of the buying and selling of digital ad inventory; 26 Table o f Contents • changes in the pricing policies of media partners and competitors; • changes in third-party service costs; • changes and uncertainty in our legislative, regulatory, and industry environment, particularly in the areas of data protection and consumer privacy; • introduction of new technologies or solutions; • unilateral actions taken by demand side platforms, agencies, advertisers, media partners, and supply side platforms; • changes in our capital expenditures as we acquire hardware, technologies, and other assets for our business; and • changes to the cost of retaining and adding highly specialized personnel.
Over time, factors such as expansion and remote operations may also decrease the cohesiveness of our teams, which is critical to our corporate culture.
Over time, factors such as expansion, dispersal and remote operations may also decrease the cohesiveness of our teams, which is critical to our corporate culture.
The DSA also imposes stricter obligations on curbing harmful or unlawful content, such as implementing tools to automatically monitor, detect and take down illegal online content; implementing a mechanism for Users to easily flag content and to cooperate with ‘trusted flaggers' (such as NGOs); reinforcing traceability of our customers; implementing a mechanism for the public and businesses to challenge content moderation decisions and seek redress; providing access to vetted researchers to the key data and provision of access to NGOs to public data; increased transparency on the algorithms used for recommending content to users; implementing risk-based controls to prevent the misuse of our tools and independent audits of our risk management systems; implementing mechanisms to adapt swiftly and efficiently in reaction to crises affecting public security or public health; preventing children targeting and the use of sensitive personal data for targeted advertising (e.g. health).
The DSA imposes stricter obligations on curbing harmful or unlawful content, such as implementing tools to automatically monitor, detect and take down illegal online content; implementing a mechanism for users to easily flag content and to cooperate with “trusted flaggers” (such as NGOs); reinforcing traceability of our customers; implementing a mechanism for the public and businesses to challenge content moderation decisions and seek redress; providing access to vetted researchers to the key data and provision of access to NGOs to public data; increased transparency on the algorithms used for recommending content to users; implementing risk-based controls to prevent the misuse of our tools and independent audits of our risk management systems; implementing mechanisms to adapt swiftly and efficiently in reaction to crises affecting public security or public health; preventing the use of targeted advertising with respect to children targeting and sensitive personal data.
Factors that could cause fluctuations in the trading price of our common stock include the following: • significant volatility in the market price and trading volume of technology companies in general and of companies in the digital advertising industry in particular; • announcements of new solutions or technologies, commercial relationships, acquisitions, or other events by us or our competitors; • price and volume fluctuations in the overall stock market from time to time; • changes in how advertisers perceive the benefits of our platform and future offerings; • the public’s reaction to our press releases, other public announcements, and filings with the SEC; • the trading of or conversion of our Convertible Notes; • fluctuations in the trading volume of our shares or the size of our public float; • sales of large blocks of our common stock; • actual or anticipated changes or fluctuations in our results of operations; • changes in actual or future expectations of investors or securities analysts; • litigation involving us, our industry, or both; • governmental or regulatory actions or audits; • regulatory developments applicable to our business, including those related to privacy in the United States or globally; • general economic conditions and trends; • major catastrophic events in our domestic and foreign markets; and • departures of key employees.
Factors that could cause fluctuations in the trading price of our common stock include the following: • significant volatility in the market price and trading volume of technology companies in general and of companies in the digital advertising industry in particular; • announcements of new solutions or technologies, commercial relationships, acquisitions, or other events by us or our competitors; • price and volume fluctuations in the overall stock market from time to time; • changes in how advertisers perceive the benefits of our platform and future offerings; • the public’s reaction to our press releases, other public announcements, and filings with the SEC; • the trading of or conversion of our Convertible Notes; • fluctuations in the trading volume of our shares or the size of our public float; • sales of large blocks of our common stock; • actual or anticipated changes or fluctuations in our results of operations; • changes in actual or future expectations of investors or securities analysts; • litigation involving us, our industry, or both; • governmental or regulatory actions or audits; 39 Table o f Contents • regulatory developments applicable to our business, including those related to privacy in the United States or globally; • general economic conditions and trends; • major catastrophic events in our domestic and foreign markets; and • departures of key employees.
User growth and engagement depends upon effective interoperation with devices, platforms and standards set by third parties that we do not control. Our recommendations are currently accessed through desktops, laptops and mobile devices, and are adaptable across many digital environments, including web pages, mobile applications, email and video players.
User growth and engagement depends upon effective interoperation with devices, platforms and standards set by third parties that we do not control. Our advertisements are currently accessed through desktops, laptops and mobile devices, and are adaptable across many digital environments, including web pages, mobile applications, email and video players.
The content of advertisements could damage our reputation and brand, or harm our ability to expand our base of users, advertisers and media partners, and negatively impact our business, results of operations, and financial condition. Our reputation and brand may be negatively affected by ads that are deemed to be hostile, infringing, offensive or inappropriate by users and media partners.
The content of advertisements could damage our reputation and brand, or harm our ability to expand our base of consumers, advertisers and media partners, and negatively impact our business, results of operations, and financial condition. Our reputation and brand may be negatively affected by ads that are deemed to be hostile, infringing, offensive or inappropriate by consumers and media partners.
Programmatic partners tend to have a longer sales cycle with distinct technical and integration requirements, as well as a separate ongoing partner management process. If we are unsuccessful in our sales and marketing efforts, our results of operations and prospects will be adversely affected.
Programmatic partners tend to have a long sales cycle with distinct technical and integration requirements, as well as a separate ongoing partner management process. If we are unsuccessful in our sales and marketing efforts, our results of operations and prospects will be adversely affected.
Our research and development efforts may not meet the demands of a rapidly evolving technology market resulting in a loss of customers, revenue, and/or market share. We expect to continue to dedicate significant financial and other resources to our research and development efforts in order to maintain or improve our competitive position.
Our research and development efforts may not meet the demands of a rapidly evolving technology market resulting in a loss of customers, revenue, and/or market share. We expect to continue to dedicate considerable financial and other resources to our research and development efforts in order to maintain or improve our competitive position.
If the level of user engagement on a media partner property or overall advertiser demand falls, the payments to our media partners with guaranteed minimum rates of payment may adversely impact our Ex-TAC Gross Profit and our margins.
If the level of consumer engagement on a media partner property or overall advertiser demand falls, the payments to our media partners with guaranteed minimum rates of payment may adversely impact our Ex-TAC Gross Profit and our margins.
If we are unable to compete effectively for media partners’ inventory and/or advertisers’ advertising spend, we may experience less demand, which could adversely affect our business, results of operations, and financial condition.
If we are unable to compete effectively for media owners’ inventory and/or advertisers’ advertising spend, we may experience less demand, which could adversely affect our business, results of operations, and financial condition.
If we experience a decline in users or user engagement, for example, because users begin to ignore our platform or direct their attention to other elements on the online properties of our media partners, our media partners and advertisers may in turn not view our solutions as attractive, which could harm our business, results of operations, and financial condition.
If we experience a decline in consumers or their engagement, for example, because consumers begin to ignore our platform or direct their attention to other elements on the online properties of our media partners, our media partners and advertisers may in turn not view our solutions as attractive, which could harm our business, results of operations, and financial condition.
In the future, our recommendations may be accessed through other new devices and media platforms. As a result, we depend on the interoperability of our solutions with popular devices, platforms and standards that we do not control.
In the future, our advertisements may be accessed through other new devices and media platforms. As a result, we depend on the interoperability of our solutions with popular devices, platforms and standards that we do not control.
In order to secure favorable terms, such as exclusivity and longer-term agreements, we may offer media partners contracts with guaranteed minimum rates of payments. These guarantees require us to pay the media owner for the ad impressions we receive, regardless of whether the consumer engages with the ad or we are paid by the advertiser.
In order to secure favorable terms, such as exclusivity and longer-term agreements, we may offer media partners contracts with guaranteed minimum rates of payments. These guarantees require us to pay our media partner for the ad impressions we receive, regardless of whether the consumer engages with the ad or we are paid by the advertiser.
Though we developed technical solutions to comply with such cookie limitations, evolving interpretations of required limitations may result in unintended consequences with respect to our operations, such as fraud identification or user experience.
Although we developed technical solutions to comply with such cookie limitations, evolving interpretations of required limitations may result in unintended consequences with respect to our operations, such as fraud identification or user experience.
Acquisitions and investments carry with them a number of risks, including the following: • diversion of management time and focus from operating our business; • implementation or remediation of controls, procedures and policies of the acquired company; • integration of financial systems; • coordination of product, engineering and selling and marketing functions; • retention of employees from the acquired company; • unforeseen liabilities; • litigation or other claims arising in connection with the acquired company; and • in the case of foreign acquisitions, the need to integrate operations across different cultures and languages and to address the particular economic, currency, political and regulatory risks associated with specific countries.
Acquisitions and investments carry with them a number of risks, including the following: • diversion of management time and focus from operating our business; • implementation or remediation of controls, procedures and policies of the acquired company; 31 Table o f Contents • integration of financial systems; • coordination of product, engineering and selling and marketing functions; • retention of employees from the acquired company; • unforeseen liabilities; • litigation or other claims arising in connection with the acquired company; and • in the case of foreign acquisitions, the need to integrate operations across different cultures and languages and to address the particular economic, currency, political and regulatory risks associated with specific countries.
If we are not able to innovate and grow successfully, our business, results of operations, financial condition and the value of our company may be adversely affected. 20 Table of Contents Growth in our business may place demands on our infrastructure and our operational, managerial, administrative, and financial resources. Our success will depend on our ability to manage growth effectively.
If we are not able to innovate and grow successfully, our business, results of operations, financial condition and the value of our company may be adversely affected. Growth in our business may place demands on our infrastructure and our operational, managerial, administrative, and financial resources. Our success will depend on our ability to manage growth effectively.
As a consequence of these upcoming changes, fewer of our cookies or media partners’ cookies may be set in browsers or be accessible in mobile devices, which adversely affects our business. 26 Table of Contents As companies replace cookies, it is possible that such companies may rely on proprietary algorithms or statistical methods to track users without cookies, or may utilize log-in credentials entered by users into other web properties owned by these companies, such as their email services, to track web usage, including usage across multiple devices.
As a consequence of these changes, fewer of our cookies or media partners’ cookies may be set in browsers or be accessible in mobile devices, which adversely affects our business. 28 Table o f Contents As companies replace cookies, it is possible that such companies may rely on proprietary algorithms or statistical methods to track users without cookies, or may utilize log-in credentials entered by users into other web properties owned by these companies, such as their email services, to track web usage, including usage across multiple devices.
Failure to comply with GDPR, or its implementation in the United Kingdom through the Data Protection Act 2018 (“UK GDPR”), may result in significant penalties for non-compliance ranging from €10 million to €20 million or 2% to 4% of an enterprise’s global annual revenue, whichever is greater in the case of the GDPR or the greater of £17.5 million or 4% of the total worldwide turnover in the preceding financial year in the case of the United Kingdom.
Failure to comply with GDPR, or its implementation in the United Kingdom through the Data Protection Act 2018 (“UK GDPR”), may result in significant penalties for non-compliance, in the United Kingdom, the greater of £17.5 million or 4% of the total worldwide turnover in the preceding financial year or, in the case of the GDPR, whichever is greater €20 million or 4% of an enterprise’s global annual revenue.
An inability to implement such policies, practices, and internal controls and maintain compliance with laws and regulations, or a perception among stakeholders that our ESG disclosures and sustainability goals are insufficient or our goals are unattainable, could harm our reputation and have an adverse impact on our business, financial condition or results of operations.
An inability to implement such policies, practices, and internal controls and maintain compliance with laws and regulations, or a perception among stakeholders that our ESG disclosures and sustainability goals are insufficient, our goals are unattainable or are not an appropriate area of focus could harm our reputation and have an adverse impact on our business, financial condition or results of operations.
There can be no assurance that we or our third-party providers will be successful in preventing security breaches, including as a result of cyber attacks, or successfully mitigating their effects. Further, our servers and data centers are vulnerable to damage or interruption from fires, natural disasters, terrorist attacks, power loss, telecommunications failures or similar catastrophic events.
There can be no assurance that we or our third-party providers will be successful in preventing security breaches, including as a result of cyber attacks, or successfully mitigating their effects. 30 Table o f Contents Further, our servers and data centers are vulnerable to damage or interruption from fires, natural disasters, terrorist attacks, power loss, telecommunications failures or similar catastrophic events.
Factors that affect the amount of advertising spending, such as economic downturns and unexpected events, can make it difficult to predict our revenue and could adversely affect our business, results of operations, and financial condition.
Factors that affect the amount of advertising spending, such as economic downturns, unexpected events or events outside of our control, can make it difficult to predict our revenue and could adversely affect our business, results of operations, and financial condition.
In addition, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors, which is responsible for appointing the members of our management. 41 Table of Contents Item 1B. Unresolved Staff Comments None.
In addition, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors, which is responsible for appointing the members of our management. 42 Table o f Contents Item 1B. Unresolved Staff Comments None.
Our platform is designed with degradation features that enable us to turn off our recommendations and ads without producing white space on the media partner’s properties for the vast majority of our media partners.
Our platform is designed with degradation features that enable us to turn off our organic experiences and ads without producing white space on the media partner’s properties for the vast majority of our media partners.
If our media partners or advertisers were to breach their contractual or other requirements in this regard, or a court or governmental agency were to determine that we, our media partners and/or our advertisers failed to comply with any applicable law, then we may be subject to potentially adverse publicity, damages and related possible investigation, litigation or other regulatory activity.
If our media partners or advertisers were to breach their contractual or other requirements in this regard, or a court or governmental agency 35 Table o f Contents were to determine that we, our media partners and/or our advertisers failed to comply with any applicable law, then we may be subject to potentially adverse publicity, damages and related possible investigation, litigation or other regulatory activity.
Moreover, additional or different disclosures may lead to a reduction in user engagement, which could have an adverse effect on our business, results of operations, and financial condition. Environmental, social and governance (“ESG”) risks could adversely affect the Company's reputation, business and performance and the trading price of its common stock.
Moreover, additional or different disclosures may lead to a reduction in user engagement, which could have an adverse effect on our business, results of operations, and financial condition. 37 Table o f Contents Environmental, social and governance (“ESG”) risks could adversely affect the Company's reputation, business and performance and the trading price of its common stock.
Further, in the European Union, current national laws that implement the ePrivacy Directive (2002/58/EC) will be replaced by an EU Regulation, known as the ePrivacy Regulation, which will significantly increase fines for non-compliance and impose burdensome requirements around placing cookies.
Further, in the European Union, current national laws that implement the ePrivacy Directive (2002/58/EC) will be replaced by the ePrivacy Regulation, which will significantly increase fines for non-compliance and impose burdensome requirements around placing cookies.
As a newly public company, we are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the listing requirements of Nasdaq and other applicable securities rules and regulations.
As a public company, we are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the listing requirements of Nasdaq and other applicable securities rules and regulations.
If any of this occurs, it may have a material adverse effect on our reputation, business operations, financial position, competitive position and prospects. 34 Table of Contents We may be unable to obtain, maintain and protect our intellectual property rights and proprietary information or prevent third parties from making unauthorized use of our intellectual property.
If any of this occurs, it may have a material adverse effect on our reputation, business operations, financial position, competitive position and prospects. We may be unable to obtain, maintain and protect our intellectual property rights and proprietary information or prevent third parties from making unauthorized use of our intellectual property. Our intellectual property rights are important to our business.
In the event that use of the SCCs or relying on the UK adequacy decision are invalidated as a solution for data transfers to the United States, or there are additional changes to the data protection regime in the EEA/UK resulting in any inability to transfer personal data from the EEA/UK to the United States in compliance with data protection laws, European media partners and advertisers may be more inclined to work with businesses that do not rely on such compliance mechanisms to ensure legal and regulatory compliance, such as EEA/UK-based companies or other competitors that do not need to transfer personal data to the United States in order to avoid the above-identified risks and legal issues.
In the event that use of the DFP, the SCCs or relying on the UK adequacy decision are invalidated as solutions for data transfers to the U.S., or there are additional changes to the data protection regime in the EEA/UK resulting in any inability to transfer personal data from the EEA/UK to the U.S. in compliance with data protection laws, European media partners and advertisers may be more inclined to work with businesses that do not rely on such compliance mechanisms to ensure legal and regulatory compliance, such as EEA/UK-based companies or other competitors that do not need to transfer personal data to the U.S. in order to avoid the above-identified risks and legal issues.
Any of these events could adversely affect our business, results of operations, and financial condition. 35 Table of Contents Our platform relies on third-party open source software components.
Any of these events could adversely affect our business, results of operations, and financial condition. Our platform relies on third-party open source software components.
Sanctions under the DSA include fines of up to 6% of global turnover in the event of non-compliance and can lead to a 32 Table of Contents ban on operating in the EU in case of repeated serious breaches. A similar piece of legislation, the Online Safety Bill, is currently being discussed in the UK.
Sanctions under the DSA include fines of up to 6% of global turnover in the event of non-compliance and can lead to a ban on operating in the EU in cases of repeated serious breaches. A similar piece of legislation, the Online Safety Bill, is currently being discussed in the UK.
Compliance with these rules and regulations will increase our legal and financial compliance costs, make some activities more difficult, time-consuming or costly and increase demand on our systems and resources, particularly after we are no longer an “emerging growth company.” The Exchange Act requires, among other things, that we file annual, quarterly and current reports with respect to our business and results of operations.
Compliance with these rules and regulations has increased our legal and financial compliance costs, has made some activities more difficult, time-consuming or costly and has increased demand on our systems and resources, and this will continue particularly after we are no longer an “emerging growth company.” The Exchange Act requires, among other things, that we file annual, quarterly and current reports with respect to our business and results of operations.
The occurrence of unforeseen events, like the COVID-19 pandemic, the Russia-Ukraine conflict and other macroeconomic factors that affect advertising demand may have a disproportionate impact on our revenues and profitability in certain periods and could adversely affect our business, results of operations, and financial condition.
The occurrence of unforeseen events, like the COVID-19 pandemic, conflicts and wars, and other macroeconomic factors that affect advertising demand may have a disproportionate impact on our revenues and profitability in certain periods and could adversely affect our business, results of operations, and financial condition.
Our sales and marketing teams educate prospective media partners and advertisers about the use, technical capabilities, and benefits of our platform. Our sales cycle (with both media partners as well as with certain advertisers and agencies) can take significant time from initial contact to contract execution and implementation.
Our sales and marketing teams educate prospective media partners and advertisers about the use, technical capabilities, and benefits of our platform. Our sales cycle (with both media partners as well as with certain advertisers and agencies) can take 21 Table o f Contents significant time from initial contact to contract execution and implementation.
Our intellectual property rights are important to our business. We rely on a combination of confidentiality clauses, trade secrets, copyrights, patents and trademarks to protect our intellectual property and know-how. However, the steps we take to protect our intellectual property may be inadequate.
We rely on a combination of confidentiality clauses, trade secrets, copyrights, patents and trademarks to protect our intellectual property and know-how. However, the steps we take to protect our intellectual property may be inadequate.
Real or perceived errors, disruptions or outages in our platform, including due to cyberattacks or our failure to maintain adequate security and supporting infrastructure, could adversely affect our operating results and growth prospects.
Real or perceived errors, disruptions or outages in our platform, including due to the possible cyberattacks discussed above or our failure to maintain adequate security and supporting infrastructure, could adversely affect our operating results and growth prospects.
In response to the foregoing developments, individuals, organizations and institutions, both within and outside of Israel, have voiced concerns that the proposed changes may negatively impact the business environment in Israel including due to reluctance of foreign investors to invest or transact business in Israel, as well as to increased currency fluctuations, downgrades in credit rating, increased interest rates, increased volatility in security markets, and other changes in macroeconomic conditions.
In response to such initiative, many individuals, organizations and institutions, both within and outside of Israel, have voiced concerns that the proposed changes may negatively impact the business environment in Israel including due to reluctance of foreign investors to invest or transact business in Israel, as well as to increased currency fluctuations, downgrades in credit ratings, increased interest rates, increased volatility in security markets, and other changes in macroeconomic conditions.
We may also face civil claims including representative actions and other class action type litigation (where individuals have suffered harm), potentially amounting to significant compensation or damages liabilities, as well as associated costs, diversion of internal resources, and reputational harm. In some instances, we may be required to indemnify media partners against such claims with respect to our advertisers.
We may also face civil claims including representative actions and other class action type litigation (where individuals have suffered harm), potentially amounting to significant compensation or damages liabilities, as well as associated costs, diversion of internal resources, and reputational harm. In addition, we may be required to indemnify media partners against claims with respect to our advertising content.
These mandatory disclosures regarding a security breach, sometimes lead to negative publicity and may cause our users, media partners or advertisers to lose confidence in the effectiveness of our data security measures.
These mandatory disclosures may lead to negative publicity and may cause our users, media partners or advertisers to lose confidence in the effectiveness of our data security measures.
Global Privacy Platform and Multi-State Privacy Agreement. We are members of self-regulatory bodies that impose additional requirements related to the collection, use, and disclosure of consumer data, such as the right to opt out of the sharing or the sale of their personal information for interest-based advertising purposes.
We are members of self-regulatory bodies that impose additional requirements related to the collection, use, and disclosure of consumer data, such as the right to opt out of the sharing or the sale of their personal information for interest-based advertising purposes.
If the quality of our recommendations suffers, whether due to our actions or decisions made by our media partners, or we are otherwise unable to provide users with valuable and relevant recommendations, user engagement may decline or perceptions of our recommendations may be adversely impacted.
If the quality of our recommendations suffers, whether due to our actions or decisions made by our media partners, the types of advertisers interested in utilizing our platform, or we are otherwise unable to provide users with valuable and relevant recommendations, user engagement may decline or perceptions of our recommendations may be adversely impacted.
Foreign Corrupt Practices Act and the UK Bribery Act; • compliance with data protection and privacy law regimes of various countries, especially as our business relates to consumer online privacy and interested-based advertising; • heightened risk of unfair or corrupt business practices in certain geographies and of improper or fraudulent sales arrangements that may impact financial results and result in restatements of, or irregularities in, financial statements; • the uncertainty of protection for intellectual property rights in some countries; • general economic and political conditions in these foreign markets, including political and economic instability in some countries; • the potential for heightened regulation relating to content curation or discovery as a result of concerns relating to the spread of disinformation through technology platforms; and • double taxation of our international earnings and potentially adverse tax consequences due to changes in the tax laws of the United States or the foreign jurisdictions in which we operate.
Foreign Corrupt Practices Act and the UK Bribery Act; • compliance with data protection and privacy law regimes of various countries, especially as our business relates to consumer online privacy and interested-based advertising; • heightened risk of unfair or corrupt business practices in certain geographies and of improper or fraudulent sales arrangements that may impact financial results and result in restatements of, or irregularities in, financial statements; • the uncertainty of protection for intellectual property rights in some countries; • general economic and political conditions in these foreign markets, including political and economic instability in some countries; • the potential for heightened regulation relating to content curation or discovery as a result of concerns relating to the spread of disinformation through technology platforms; and • double taxation of our international earnings and potentially adverse tax consequences due to changes in the tax laws of the United States or the foreign jurisdictions in which we operate. 32 Table o f Contents We are subject to laws and regulations related to online privacy, data protection, information security, content and consumer protection across different markets where we conduct our business, including in the United States and Europe.
As we expand and change, in particular across multiple geographies, following acquisitions, or in a more remote environment, it may be difficult to preserve our corporate culture, which could reduce our ability to innovate, create, and operate effectively.
As we expand and change, in particular across multiple geographies, following acquisitions, in more remote environments or in global talent centers, it may be difficult to preserve our corporate culture, which could reduce our ability to innovate, create, and operate effectively.
The trading market for our common stock depends, to some extent, on the research and reports that securities or industry analysts publish about us or our business. We do not have any control over these analysts.
If securities or industry analysts do not publish research or publish unfavorable research about our business, our stock price and trading volume could decline. The trading market for our common stock depends, to some extent, on the research and reports that securities or industry analysts publish about us or our business. We do not have any control over these analysts.
In order to do so, we must be able to demonstrate better results for our advertisers with increased user engagement and ROAS, among other things. We do not have long-term commitments from our advertisers. We seek to increase the number of advertisers and to reach new advertisers.
In order to do so, we must be able to demonstrate better results for our advertisers with increased user engagement and ROAS, among other things. We do not have long-term commitments from our advertisers. We also seek to increase the number of advertisers and to reach new advertisers, both directly and through their media agencies.
The ability of our media partners to maintain or grow their digital properties is often outside of our control and may result in stagnant or declining ad inventory availability, which could negatively impact our results of operations and prospects.
The ability of our media partners to maintain or grow their digital properties is often outside of our control, may be significantly impacted by broader media consumption trends, and may result in stagnant or declining ad inventory availability, which could negatively impact our results of operations and prospects.
From time to time, we may be subject to litigation claims, whether arising in connection with employment or commercial matters, including certain terms in our commercial agreements. We also may be exposed to potential claims brought by third parties against us, our media partners or our advertisers.
From time to time, we have been subject to litigation claims, whether arising in connection with employment, competition, or commercial matters. We also may be exposed to potential claims brought by third parties against us, our media partners or our advertisers.
In addition, the UK Information Commissioner’s Office, the Irish Data Protection Commission and the French Commission Nationale de l”Informatique et de Libertés (“CNIL”) are investigating the ad tech industry and the use of cookies.
In addition, the UK Information Commissioner’s Office (“ICO”), the Irish Data Protection Commission and the French Commission Nationale de l’Informatique et de Libertés (“CNIL”) continue to investigate the ad tech industry and the use of cookies.
Investors, investor advocacy groups and investment funds are also increasingly focused on these practices, especially as they relate to the environment, climate change, diversity and inclusion, workplace conduct and human capital management.
Investors, investor advocacy groups and investment funds may focus on these practices, especially as they relate to the environment, climate change, diversity and inclusion, workplace conduct and human capital management.
There is a risk that our business, platform, and services may infringe or be alleged to infringe the trademarks, copyrights, patents, and other intellectual property rights of third parties, including patents held by our competitors or by non-practicing entities.
We operate in an industry with extensive intellectual property litigation. There is a risk that our business, platform, and services may infringe or be alleged to infringe the trademarks, copyrights, patents, and other intellectual property rights of third parties, including patents held by our competitors or by non-practicing entities.
Under Section 382 of the Internal Revenue Code of 1986, as amended, if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change NOL carryforwards to offset its post-change income may be limited.
The ability to fully utilize our NOL and tax credit carryforwards to offset future taxable income may be limited. Under Section 382 of the Internal Revenue Code of 1986, as amended, if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change NOL carryforwards to offset its post-change income may be limited.
If the quality of our recommendations deteriorates, or if we fail to present interesting content to our users, we may experience a decline in user engagement, which could result in the loss of media partners. Our technology selects the recommendations that are displayed to users on the online properties of our media partners.
If the quality of our advertisements deteriorates, or if we fail to present interesting content to consumers, we may experience a decline in user engagement, which could result in the loss of media partners. Our technology selects what is displayed to consumers on the online properties of our media partners.
Pursuant to GDPR, the UK GDPR and related ePrivacy laws, media partners and any downstream partners are required to obtain unambiguous consent from EEA data subjects to process their personal data, which the industry has addressed through the release and widespread adoption of the IAB TCF in April 2018 and subsequent 2.0 update in August 2020.
Pursuant to GDPR, the UK GDPR and related ePrivacy laws, media partners and any downstream partners are required to obtain unambiguous consent from EEA data subjects to process their personal data, which the industry has addressed through the release and widespread adoption of the IAB TCF.
The U.S. federal and various state and foreign governments have adopted or proposed limitations on the collection, distribution, use, and storage of data relating to individuals, including the use of contact information and online identifiers, advertising and other communications with individuals and businesses.
Our data handling is also subject to contractual obligations and industry standards. The U.S. federal and various state and foreign governments have adopted or proposed limitations on the collection, distribution, use, and storage of data relating to individuals, including the use of contact information and online identifiers, advertising and other communications with individuals and businesses.
These conditions have adversely impacted us and could, if they continue or worsen, adversely impact us in the future, including if our advertisers were to reduce or further reduce their advertising spending as a result of any of these factors. We continue to monitor our operations, and the operations of those in our ecosystem (including media partners, advertisers and agencies).
These conditions have in turn adversely impacted us and could, if they continue or worsen, adversely impact us in the future, including if our advertisers were to reduce or further reduce their advertising spending as a result of any of these factors.
Our success depends on our ability to make valuable recommendations, which, in turn, depends on the quality of recommendations in our index and our ability to predict engagement by an individual user within a specific context. We believe that one of our key competitive advantages is our recommendation technology.
Our success depends on our ability to make valuable recommendations to organic experiences and ads, which, in turn, depends on the quality of our index and our ability to predict engagement by an individual consumer within a specific context. We believe that one of our key competitive advantages is our AI prediction engine.
In the United States, various laws and regulations apply to the collection, processing, disclosure, and security of certain types of data. Additionally, the Federal Trade Commission and many state attorneys general are interpreting federal and state consumer protection laws as imposing standards for the online collection, use, dissemination, and security of data and issuing separate guidance in this area.
Additionally, the Federal Trade Commission and many state attorneys general are interpreting federal and state consumer protection laws as imposing standards for the online collection, use, dissemination, and security of data and issuing separate guidance in this area.
This could damage our brand and lead to a financial loss or to a loss of advertisers which would adversely affect our business, results of operations, and financial condition. Our business depends on our ability to maintain and scale our technology platform.
This could damage our brand and lead to a financial loss or to a loss of advertisers which would adversely affect our business, results of operations, and financial condition.
Any changes in, or restrictions imposed by, such devices, platforms or standards that impair the functionality of our current or proposed solutions or give preferential treatment to competitive products or services could adversely affect usage of our platform.
Any changes in, or restrictions imposed by, such devices, platforms or standards that impair the functionality of our current or proposed solutions, limit what our media partners may or may not display, how they acquire audiences, or give preferential treatment to competitive products or services could adversely affect usage of our platform.
We do not intend to pay dividends on our common stock, so any returns will be limited to the value of our common stock. We have never declared or paid cash dividends on our common stock and do not expect to pay any dividends in the foreseeable future.
We have never declared or paid cash dividends on our common stock and do not expect to pay any dividends in the foreseeable future.
At such time, our independent registered public accounting firm may issue a report that is adverse if it is not satisfied with the level at which our controls are documented, designed or operating. As a newly public company, we have undertaken and continue to undertake a range of actions to augment our internal control over financial reporting.
At such time, our independent registered public accounting firm may issue a report that is adverse if it is not satisfied with the level at which our controls are documented, designed or operating. 40 Table o f Contents We continue to augment our internal control over financial reporting and internal controls.
It remains unclear whether supplemental measures for the transfer of data outside of the UK and EEA will be deemed sufficient by media partners, regulatory bodies and courts. If such supplementary measures are found to be inadequate, this may adversely affect our business, results of operations and financial condition.
Despite such decision, rulings in 2022 from the Austrian Datenschutzbehörde bring into question whether supplemental measures for the transfer of data outside of the UK and EEA will be deemed sufficient by media partners, regulatory bodies and courts. If such supplementary measures are found to be inadequate, this may adversely affect our business, results of operations and financial condition.
We use “cookies,” or small text files placed on consumer devices when an Internet browser is used, as well as mobile device identifiers, to gather data that enables our platform to be more effective.
Any limitation imposed on our collection, use or disclosure of this data could significantly diminish the value of our solution. We use “cookies,” or small text files placed on consumer devices when an Internet browser is used, as well as mobile device identifiers, to gather data that enables our platform to be more effective.
The following are some of the political and regulatory risks and challenges we face across jurisdictions: • greater difficulty in enforcing contracts; • higher costs of doing business internationally, including costs incurred in establishing and maintaining office space and equipment for our international operations; • risks associated with trade restrictions and foreign legal requirements, including any certification and localization of our platform that may be required in foreign countries; • greater risk of unexpected changes in regulatory practices, tariffs, and tax laws and treaties; • compliance with anti-bribery laws, including, without limitation, compliance with the U.S.
The following are some of the political and regulatory risks and challenges we face across jurisdictions: • greater difficulty in enforcing contracts; • higher costs of doing business internationally, including costs incurred in establishing and maintaining office space and equipment for our international operations; • risks associated with trade restrictions and foreign legal requirements, including any certification and localization of our platform that may be required in foreign countries; • organizing or similar activity by workers, local unions, work councils, or other labor organizations; • our ability to respond to competitive developments and other market and technological dynamics, such as the emergence of generative AI; • greater risk of unexpected changes in regulatory practices, tariffs, and tax laws and treaties; • compliance with anti-bribery laws, including, without limitation, compliance with the U.S.
Furthermore, if we are unable to conclude that our internal control over financial reporting is effective at the time that we are required to make such assessment, we could lose investor confidence in the accuracy and completeness of our financial reports, which would cause the price of our common stock to decline, and we may be subject to investigation or sanctions by the SEC. 39 Table of Contents We are an emerging growth company subject to reduced disclosure requirements, and there is a risk that availing ourselves of such reduced disclosure requirements will make our common stock less attractive to investors.
Furthermore, if we are unable to conclude that our internal control over financial reporting is effective at the time that we are required to make such assessment, we could lose investor confidence in the accuracy and completeness of our financial reports, which would cause the price of our common stock to decline, and we may be subject to investigation or sanctions by the SEC.
Our largest media partner accounted for approximately 10% and 11% of our revenues in 2022 and 2021, respectively, and two of our largest media partners each accounted for approximately 10% of our revenues in 2020.
Our largest media partner accounted for approximately 10% of our revenues in 2023 and 2022 and 11% of our revenues in 2021.
Further, while we have no current intention to do so in the foreseeable future, should we change our assertion regarding the permanent reinvestment of the undistributed earnings of certain of our foreign subsidiaries, a deferred tax liability may need to be established. 37 Table of Contents The ability to fully utilize our NOL and tax credit carryforwards to offset future taxable income may be limited.
Further, while we have no current intention to do so in the foreseeable future, should we change our assertion regarding the permanent reinvestment of the undistributed earnings of certain of our foreign subsidiaries, a deferred tax liability may need to be established.
It is possible that CCPA (and other U.S. privacy laws), GDPR, UK GDPR and the ePrivacy Regulation in Europe and related standards may be interpreted and applied in manners that are, or are asserted to be, inconsistent with our data management practices or the technological features of our solutions.
It is possible that CCPA (and other U.S. privacy laws), GDPR, UK GDPR and the ePrivacy Regulation in Europe and related standards may be interpreted and applied in manners that are, or are asserted to be, inconsistent with our data management practices or the technological features of our solutions, and any failure to achieve required data protection standards may result in lawsuits, regulatory fines, or other actions or liability, all of which may harm our results of operations.
If we fail to comply with any such laws or regulations, we may be subject to enforcement actions that may not only expose us to litigation, fines, and civil and/or criminal penalties, but also require us to change our business practices as well as have an adverse effect on our business, results of operations, and financial condition. 30 Table of Contents The regulatory framework for online privacy issues worldwide is continuously evolving and is likely to receive scrutiny for the foreseeable future.
If we fail to comply with any such laws or regulations, we may be subject to enforcement actions that may not only expose us to litigation, fines, and civil and/or criminal penalties, but also require us to change our business practices as well as have an adverse effect on our business, results of operations, and financial condition.
We collect this data through various means, including code that media partners and advertisers implement on their pages, software development kits installed in mobile applications, our own cookies, and other tracking technologies.
We collect this data through various means, including code that media partners and advertisers implement on their pages, software development kits installed in mobile applications, our own cookies, and other tracking technologies. Our advertisers, directly or through third-party data providers, may choose to further target their campaigns within our platform.
Macroeconomic factors in the U.S. and foreign markets, including instability in political or market conditions, as well as adverse economic conditions and general uncertainty about economic recovery or growth, particularly in North America, EMEA (Europe, Middle East and Africa), and Asia, where we conduct most of our business, could result in, and have resulted in, conservative approaches by advertisers and media owners when allocating budgets and ad inventory, respectively, and reductions in advertising demand and spend. 19 Table of Contents The current volatile macro environment, with variables such as the impact of the closure of SVB and other banks, global supply chain disruptions, labor shortages and stoppages, inflation and rising U.S. interest rates resulting from the pandemic and now events such as the Russia-Ukraine conflict, has impacted certain categories of our advertisers.
Macroeconomic factors in the U.S. and foreign markets, including instability in political or market conditions, as well as adverse economic conditions and general uncertainty about economic recovery or growth, particularly in North America, EMEA (Europe, Middle East and Africa), and Asia, where we conduct most of our business, could result in, and have resulted in, conservative approaches by advertisers and media owners when allocating budgets and ad inventory, respectively, and reductions in advertising demand and spend. 20 Table o f Contents The continued volatile macroeconomic environment, with variables such as the Russia-Ukraine and Israel-Hamas wars, general unrest in Europe and the Middle East, bank failures, inflation, and U.S. interest rates, has impacted certain categories of our advertisers.
Our business may suffer to the extent that media partners and advertisers sell and purchase advertising inventory directly from one another or through intermediaries other than us, reducing the amount of advertising spend on our platform.
Media owners are investing in capabilities that enable them to connect more effectively and directly with advertisers, or to partner with fewer vendors. Our business may suffer to the extent that our media partners and advertisers sell and purchase advertising inventory directly from one another or through intermediaries other than us, reducing the amount of advertising spend on our platform.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe maintain a regional office in London for general administration and sales and marketing. We also have sales and operations offices in a number of locations around the world, including Amsterdam, Brussels, Chicago, Cologne, Ljubljana, Madrid, Milan, Mumbai, Munich, Paris, Sao Paolo, Singapore, Sydney, Timişoara and Tokyo.
Biggest changeWe also have sales and operations offices in a number of locations around the world, including Cologne, Germany; Gurugram, India; Madrid, Spain; Milan, Italy; Munich, Germany; Paris, France; São Paolo, Brazil; Singapore; Sydney, Australia; Timişoara, Romania; and Tokyo, Japan.
Item 2. Properties Our corporate headquarters are located in New York, NY, where we occupy office space consisting of approximately 23,000 square feet pursuant to a lease agreement executed in July 2021 and expiring in October 2027.
Item 2. Properties Our corporate headquarters are located in New York, NY, U.S., where we occupy office space consisting of approximately 23,000 square feet pursuant to a lease agreement executed in July 2021 and expiring in October 2027.
Since 2007, we have maintained a presence in Netanya, Israel, which is overseen by one of our founders, where we occupy space consisting of approximately 47,000 square feet under a lease that expires in 2026. We use this facility primarily for technology and development, and, to a lesser extent, for general administration and sales and marketing.
Since 2007, we have maintained a presence in Netanya, Israel, which is overseen by one of our founders, where we occupy space consisting of approximately 47,000 square feet under a lease that expires in 2026. In January 2023, we also entered into a new lease in Ljubljana, Slovenia, which is approximately 16,000 square feet and expires in 2032.
Added
We use these facilities primarily for technology and development, and, to a lesser extent, for general administration and sales and marketing. We maintain a regional office in London, England for general administration and sales and marketing.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeMine Safety Disclosures Not applicable. 42 Table of Contents PART II
Biggest changeMine Safety Disclosures Not applicable. 44 Table o f Contents PART II
Item 3. Legal Proceedings Information with respect to this item may be found in Note 9 in the accompanying notes to the audited consolidated financial statements included in Part II, Item 8 “Financial Statements and Supplementary Data” of this Report, under “Legal Proceedings and other Matters,” which is incorporated herein by reference. Item 4.
Item 3. Legal Proceedings Information with respect to this item may be found in Note 11 in the accompanying notes to the audited consolidated financial statements included in Part II, Item 8 “Financial Statements and Supplementary Data” of this Report, under “Legal Proceedings and other Matters,” which is incorporated herein by reference. Item 4.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeIn addition, we may from time to time withhold shares in connection with tax obligations related to vesting of restricted stock units in accordance with the terms of our equity incentive plans and the underlying award agreements. 43 Table of Contents The below table sets forth the repurchases of our common stock for the three months ended December 31, 2022: Period (a) Total number of shares (or units) purchased (1) (b) Average price paid per share (or unit) (2) (c) Total number of shares (or units) purchased as part of publicly announced plans or programs (d) Maximum number (or approximate dollar value) of shares (or units) that may yet be purchased under the plans or programs (in thousands) October 2022 1,065,335 $4.08 1,040,772 $2,350 November 2022 570,883 $4.18 565,714 $— December 2022 11,665 $3.55 — $30,000 TOTAL 1,647,883 $4.11 1,606,486 _________________ (1) Total number of shares purchased includes shares repurchased under our $30 million share repurchase program, as well as shares withheld to satisfy employee tax withholding obligations arising in connection with the vesting and settlement of restricted stock units under our 2007 Omnibus Securities and Incentive Plan.
Biggest changeThe below table sets forth the repurchases of our common stock for the three months ended December 31, 2023: Period (a) Total number of shares (or units) purchased (1) (b) Average price paid per share (or unit) (2) (c) Total number of shares purchased as part of publicly announced plans or programs (d) Approximate dollar value of shares that may yet be purchased under the plans or programs (in thousands) (2) October 2023 458,348 $4.71 440,000 $15,421 November 2023 338,377 $3.86 336,600 $14,128 December 2023 423,786 $4.14 408,689 $12,436 TOTAL 1,220,511 $4.28 1,185,289 _________________ (1) Total number of shares purchased includes shares repurchased under our $30 million share repurchase program, as well as shares withheld to satisfy employee tax withholding obligations arising in connection with the vesting and settlement of restricted stock units under our 2007 Omnibus Securities and Incentive Plan and our 2021 Long-Term Incentive Plan.
The graph is not deemed “filed” with the SEC and shall not be deemed incorporated by reference into any of our prior or future filings made with the SEC. Item 6. [Reserved] 44 Table of Contents
The graph is not deemed “filed” with the SEC and shall not be deemed incorporated by reference into any of our prior or future filings made with the SEC. Item 6. [Reserved] 46 Table o f Contents
Holders of Record As of February 28, 2023, there were a pproximately 163 holders of record of our common stock. The actual number of the Company’s stockholders is greater than this number of record holders, which does not include stockholders who are the beneficial owners of shares that are held of record by brokers and other nominee holders.
Holders of Record As of February 29, 2024, there were a pproximately 142 holders of record of our common stock. The actual number of the Company’s stockholders is greater than this number of record holders, which does not include stockholders who are the beneficial owners of shares that are held of record by brokers and other nominee holders.
Any future determination to declare dividends will be made at the discretion of our Board of Directors (“Board”) and will depend on our financial condition, operating results, capital requirements, general business conditions, and other factors that our board may deem relevant. Unregistered Sales of Equity Securities (a) Recent Sales of Unregistered Equity Securities None.
Any future determination to declare dividends will be made at the discretion of our Board of Directors (“Board”) and will depend on our financial condition, operating results, capital requirements, general business conditions, and other factors that our board may deem relevant.
On December 14, 2022, our Board approved a new share repurchase program, authorizing us to repurchase up to $30 million of our common stock, par value $0.001 per share, with no requirement to purchase any minimum number of shares.
Purchases of Equity Securities by the Issuer On December 14, 2022, our Board approved a share repurchase program authorizing us to repurchase up to $30 million of our common stock, with no requirement to purchase any minimum number of shares.
Stock Performance Graph The following graph compares the cumulative total stockholder return on an initial investment of $100 in our common stock between July 23, 2021 (our initial trading day) and December 31, 2022, with the comparative cumulative total return of an investment of such amount in (i) the NASDAQ Composite Index (IXIC), (ii) the NASDAQ Internet Index, and (iii) the Russell 2000 Index (RUT) over the same period.
Commission costs associated with share repurchases and excise taxes do not reduce the remaining authorized amount under our repurchase programs. 45 Table o f Contents Stock Performance Graph The following graph compares the cumulative total stockholder return on an initial investment of $100 in our common stock between July 23, 2021 (our initial trading day) and December 31, 2023, with the comparative cumulative total return of an investment of such amount in (i) the NASDAQ Composite Index (IXIC), (ii) the NASDAQ Internet Index, and (iii) the Russell 2000 Index (RUT) over the same period.
The manner, timing, and actual number of shares repurchased under the program will depend on a variety of factors, including price, general business and market conditions, and other investment opportunities. Shares may be repurchased through privately negotiated transactions or open market purchases, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Exchange Act.
The manner, timing, and actual number of shares repurchased under the program will depend on a variety of factors, including price, general business and market conditions, and other investment opportunities.
Removed
(b) Use of Proceeds On July 27, 2021, we sold 8,000,000 shares of our common stock in connection with our IPO, at a public offering price of $20.00 per share for an aggregate offering price of $160.0 million. The proceeds from the sale were $145.1 million, after deducting underwriting discounts and commissions and offering expenses payable by us.
Added
Shares may be repurchased through privately negotiated transactions or open market purchases, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The repurchase program may be commenced, suspended, or terminated at any time at our discretion without prior notice.
Removed
The offer and sale of all of the shares in our IPO were registered under the Securities Act pursuant to a registration statement on Form S-1 (File No. 333-257525), which was declared effective by the SEC on July 22, 2021. A portion of the net proceeds from our IPO has been used for working capital and general corporate purposes.
Added
In addition, we may from time to time withhold shares in connection with tax obligations related to vesting of restricted stock units in accordance with the terms of our equity incentive plans and the underlying award agreements.
Removed
In addition, the net proceeds from our IPO was used to fund the purchase price to acquire video intelligence AG. There has been no material change in the planned use of proceeds from our IPO as described in our Prospectus filed with the SEC pursuant to Rule 424(b) under the Securities Act.
Added
(2) The average price paid per share under the share repurchase program includes commissions, but excludes the 1% excise tax accrued on our share repurchases as a result of the Inflation Reduction Act of 2022.
Removed
Purchases of Equity Securities by the Issuer On February 28, 2022, our Board approved a share repurchase program under which we were authorized to purchase up to $30 million of our common stock, par value $0.001 per share, with no requirement to purchase any minimum number of shares. We completed repurchases under this share repurchase program in November 2022.
Removed
The repurchase program may be commenced, suspended or terminated at any time by our Company at its discretion without prior notice.
Removed
(2) The average price paid per share under the share repurchase program includes commissions, which do not reduce the remaining authorized amount under the repurchase programs.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe components of operating expenses are discussed below: • Research and development expenses — increased $10.2 million, primarily attributable to increased personnel-related costs to invest in the growth of our platform, including $1.2 million of one-time incremental cumulative stock-based compensation expense related to awards with a performance condition that was satisfied upon our IPO. • Sales and marketing expenses — increased $18.2 million, primarily due to higher personnel-related costs of $14.3 million, including $4.2 million of one-time incremental cumulative stock-based compensation expense for awards with a performance condition that was satisfied upon our IPO, as well as higher marketing costs of $3.6 million. • General and administrative expenses — increased $22.4 million, largely due to higher personnel-related costs of $18.3 million, including $11.1 million of one-time incremental cumulative stock-based compensation expense for awards with a performance condition that was satisfied upon our IPO, and higher professional fees of $10.5 million, which included regulatory matter costs of $6.4 million in 2021.
Biggest changeThe components of operating expenses are discussed below: • Research and development expenses — decreased $3.9 million, primarily due to lower personnel-related costs. • Sales and marketing expenses — decreased $10.5 million, primarily due to a $7.0 million decrease in personnel-related costs (net of increased severance and related costs of $1.9 million), lower expense of $2.2 million related to fully amortized intangible assets, and lower marketing costs. • General and administrative expenses — increased $1.6 million, primarily due to a $4.7 million increase in the provision for credit losses and a $2.6 million increase in regulatory fees, largely due to a partial insurance recovery in the prior year period.
Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Report, particularly under Item 1A, “Risk Factors” and “Note About Forward-Looking Statements.” The purpose of this Management's Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) discussion is to provide the readers of our financial statements with narrative information from our management, which is necessary to understand our business, financial condition, and results of operations.
Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Report, particularly under Item 1A, “Risk Factors” and “Note About Forward-Looking Statements.” The purpose of this Management's Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is to provide the readers of our financial statements with narrative information from our management, which is necessary to understand our business, financial condition, and results of operations.
These measures are supplemental and are not an alternative to our financial statements prepared in accordance with U.S. GAAP. See “Non-GAAP Reconciliations” in this Report for the definitions and limitations of these measures, and reconciliations to the most comparable GAAP financial measures. Business Overview Outbrain Inc.
These measures are supplemental and are not an alternative to our financial statements prepared in accordance with U.S. GAAP. See “Non-GAAP Reconciliations” in this Report for the definitions and limitations of these measures, and reconciliations to the most comparable U.S. GAAP financial measures. Business Overview Outbrain Inc.
We present Ex-TAC Gross Profit, Adjusted EBITD A, Adjusted EBITDA as a percentage of Ex-TAC Gross Profit, and Free Cash Flow because they are key profitability measures used by our management and the Board to understand and evaluate our operating performance and trends, develop short-term and long-term operational plans and make strategic decisions regarding the allocation of capital.
We present Ex-TAC Gross Profit, Adjusted EBITDA, Adjusted EBITDA as a percentage of Ex-TAC Gross Profit, and Free Cash Flow because they are key profitability measures used by our management and the Board to understand and evaluate our operating performance and trends, develop short-term and long-term operational plans, and make strategic decisions regarding the allocation of capital.
The preparation of these audited consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances.
GAAP. The preparation of these audited consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances.
We believe that our cash and cash equivalents and investments will be sufficient to fund our anticipated operating expenses, capital expenditures, interest payments on our long-term debt, and planned share repurchases for at least the next 12 months and the foreseeable future.
We believe that our operating cash flow, cash and cash equivalents and investments will be sufficient to fund our anticipated operating expenses, capital expenditures, interest payments on our long-term debt, and planned share repurchases for at least the next 12 months and the foreseeable future.
For any given marketing campaign, the advertiser has the ability to adjust its price in real time and set a maximum daily spend. This allows advertisers to adjust the estimated ad spend attributable to the particular campaign.
For any given marketing campaign, the advertiser has the ability to adjust its price in real time and set a maximum spend. This allows advertisers to adjust the estimated ad spend attributable to the particular campaign.
Industry participants have recently been, and likely will continue to be, impacted by changes implemented by platform leaders such as Apple’s change to its Identifier for Advertisers policy and Google’s evolving roadmap pertaining to the use of cookies within its Chrome web browser.
Industry participants have recently been, and likely will continue to be, impacted by changes implemented by platform leaders, such as Apple’s change to its Identifier for Advertisers policy and Google’s evolving roadmap pertaining to the use of third-party cookies within its Chrome web browser.
Additionally, our future effective tax rate may be affected by our ongoing assessment of the need for a valuation allowance on our deferred tax assets or liabilities, or changes in tax laws, regulations, or accounting principles, as well as certain discrete items.
Additionally, our future effective tax rate may be affected by our ongoing assessment of the need for a valuation allowance on our deferred tax assets or liabilities, or changes in tax laws, regulations, or accounting principles, tax planning initiatives, as well as certain discrete items.
The current macroeconomic environment, with variables such as inflation, increased interest rates, recessionary concerns, currency exchange rate fluctuations, global supply chain disruptions, and labor market volatility, has negatively impacted our advertisers.
The current macroeconomic environment, with variables such as inflation, increased interest rates, bank disruptions, recessionary concerns, bankruptcies, currency exchange rate fluctuations, global supply chain disruptions, and labor market volatility, has negatively impacted our advertisers.
As a result, our audited consolidated financial statements may not be comparable to companies that have adopted new or revised accounting pronouncements as of public company effective dates. 64 Table of Contents
As a result, our audited consolidated financial statements may not be comparable to companies that have adopted new or revised accounting pronouncements as of public company effective dates. 64 Table o f Contents
Interest income and other (expense) income, net primarily consists of interest earned on our cash and cash equivalents and investments in marketable securities, discount amortization relating to our investments in marketable securities, and foreign currency exchange gains and losses.
Interest income and other income (expense), net primarily consists of interest earned on our cash, cash equivalents and investments in marketable securities, discount amortization on our investments in marketable securities, and foreign currency exchange gains and losses.
In considering the need for a valuation allowance, we consider our historical and future projected taxable income, as well as other objectively verifiable evidence, including our realization of tax attributes, assessment of tax credits and utilization of net operating loss carryforwards. 51 Table of Contents Results of Operations We have one operating segment, which is also our reportable segment.
In considering the need for a valuation allowance, we consider our historical and future projected taxable income, as well as other objectively verifiable evidence, including our realization of tax attributes, assessment of tax credits and utilization of net operating loss carryforwards. 54 Table o f Contents Results of Operations We have one operating segment, which is also our reportable segment.
Additionally, the 2021 Revolving Credit Facility includes events of default and customary affirmative and negative covenants applicable to us and our subsidiaries, including, without limitation, restrictions on liens, indebtedness, investments, fundamental changes, dispositions, restricted payments and prepayment of the Convertible Notes and of junior indebtedness.
Additionally, the Facility includes events of default and customary affirmative and negative covenants applicable to us and our subsidiaries, including, without limitation, restrictions on liens, indebtedness, investments, fundamental changes, dispositions, restricted payments, and prepayment of the Convertible Notes and of junior indebtedness.
In addition, we periodically withhold shares to satisfy employee tax withholding obligations arising in connection with the vesting of restricted stock units and exercise of options and warrants in accordance with the terms of our equity incentive plans and the underlying award agreements.
In addition to our publicly announced programs, we periodically withhold shares to satisfy employee tax withholding obligations arising in connection with the vesting of restricted stock units and exercise of options and warrants in accordance with the terms of our equity incentive plans and the underlying award agreements.
See Item 1A, “Risk Factors” in this Report for additional information regarding changing industry dynamics with respect to industry participants and the regulatory environment.
See Item 1A, “Risk Factors'' in this Report for additional information regarding changing industry dynamics with respect to industry participants and the regulatory environment.
Industry Dynamics Our business depends on the overall demand for digital advertising, on the continuous success of our current and prospective media partners, and on general market conditions. Digital advertising is a rapidly evolving and growing industry, with growth that has outpaced the growth of the broader advertising industry.
Industry Dynamics Our business depends on the overall demand for digital advertising, on the continuous success of our current and prospective media partners, and on general market conditions. Digital advertising is a rapidly growing industry, with growth that has outpaced the growth of the broad advertising industry.
The 2021 Revolving Credit Facility contains representations and warranties, including, without limitation, with respect to collateral; accounts receivable; financials; litigation, indictment and compliance with laws; disclosure and no material adverse effect, each of which is a condition to funding.
The Facility contains representations and warranties, including, without limitation, with respect to collateral; accounts receivable; financials; litigation, indictment and compliance with laws; disclosure and no material adverse effect, each of which is a condition to funding.
Given our focus on innovation, the depth and length of our media partner relationships and our scale, we believe that we are well positioned in the long-term to address and potentially benefit from many of these industry dynamics.
Given our focus on context and engagement, the depth and length of our media partner relationships, and our scale, we believe that we are well positioned in the long-term to address and potentially benefit from many of these industry dynamics.
However, Adjusted EBITDA is a non-GAAP financial measure and how we calculate Adjusted EBITDA is not necessarily comparable to non-GAAP information of other companies. Adjusted EBITDA should be considered as a supplemental measure and should not be considered in isolation or as a substitute for any measures of our financial performance that are calculated and reported in accordance with U.S.
However, our calculation of Adjusted EBITDA is not necessarily comparable to non-GAAP information of other companies. Adjusted EBITDA should be considered as a supplemental measure and should not be considered in isolation or as a substitute for any measures of our financial performance that are calculated and reported in accordance with U.S.
We believe that we have a significant opportunity to further grow user engagement, and thus our business, as today CTR for ads on our platform is less than 1% of recommendations served.
We believe that we have a significant opportunity to further grow consumer engagement, and thus our business, as today CTR for ads on our platform is less than 1% of ads served.
Provision (Benefit) for Income Taxes Provision (benefit) for income taxes consists of federal and state income taxes in the United States (“U.S.”) and income taxes in certain foreign jurisdictions, as well as deferred income taxes and changes in valuation allowance, reflecting the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
Provision for Income Taxes Provision for income taxes consists of federal and state income taxes in the United States and income taxes in certain foreign jurisdictions, as well as deferred income taxes and changes in valuation allowance, reflecting the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
(5) Other commitments include data service contracts and other hosting agreements, network services, and other costs to maintain our platform.
(4) Other commitments include data service contracts and other hosting agreements, network services, and other costs to maintain our platform.
The 2021 Revolving Credit Facility contains a financial covenant that requires, in the event that credit extensions under the Facility equal or exceed 85% of the lesser of the 59 Table of Contents available commitments under the Facility or upon the occurrence of an event of defaults, our Company to maintain a minimum consolidated monthly fixed charge coverage ratio of 1.00.
The Facility contains a financial covenant that requires, in the event that credit extensions under the Facility equal or exceed 85% of the lesser of the available commitments under the Facility or upon the occurrence of an event of defaults, our Company to maintain a minimum consolidated monthly fixed charge coverage ratio of 1.00.
The facility will terminate on the earlier of (i) November 2, 2026 or (ii) 120 days prior to the maturity date of our 2.95% Convertible Senior Notes due 2026, unless the convertible notes have been converted to common equity securities of the Company.
The Facility will terminate on the earlier of (i) November 2, 2026 or (ii) 120 days prior to the maturity date of the Convertible Notes, unless the Convertible Notes have been converted to our common equity securities.
These conditions make it difficult for us, our media partners, advertisers and agencies to accurately forecast and plan future business activities and could cause a further reduction or delay in overall advertising demand and spending, which would harm our business, financial condition and results of operations.
These conditions make it difficult for us, our media partners, advertisers, and agencies to accurately forecast and plan future business activities and could cause a further reduction or delay in overall advertising demand and spending or impact our advertisers’ ability to pay, which would negatively impact our business, financial condition, and results of operations.
Accordingly, these conditions have adversely impacted our business during the year ended December 31, 2022, and could, if they continue or worsen, adversely impact us in the future, including if our advertisers were to reduce or further reduce their advertising spending as a result of any of these factors.
Accordingly, these conditions have adversely impacted our business and could, if they continue or worsen, adversely impact us in the future, including if our advertisers were to reduce or further reduce their advertising spending as a result of any of these factors.
Operating Expenses Our operating expenses consist of research and development, sales and marketing and general and administrative expenses. The largest component of our operating expenses is personnel costs. Personnel costs consist of wages, benefits, bonuses, stock-based compensation and, with respect to sales and marketing expenses, sales commissions. Research and Development.
Operating Expenses Our operating expenses consist of research and development, sales and marketing and general and administrative expenses. The largest component of our operating expenses is personnel costs. Personnel costs consist of wages, benefits, bonuses, stock-based compensation and, with respect to sales and marketing expenses, sales commissions. 53 Table o f Contents Research and Development.
Traffic acquisition costs are based on the media partners’ revenue share or, in some circumstances, based on a guaranteed minimum rate of payment from us in exchange for guaranteed placement of our ads on specified portions of the media partner’s digital properties.
We incur traffic acquisition costs in the period in which the revenue is recognized. Traffic acquisition costs are based on the media partners’ revenue share or, in some circumstances, based on a guaranteed minimum rate of payment from us in exchange for guaranteed placement of our ads on specified portions of the media partner’s digital properties.
(6) We are unable to reliably estimate the timing of future payments related to uncertain tax positions; therefore, we have excluded $7.4 million from the preceding table related to uncertain tax positions, including accrued interest and penalties as of December 31, 2022.
(5) We are unable to reliably estimate the timing of future payments related to uncertain tax positions; therefore, we have excluded $8.4 million from the preceding table related to uncertain tax positions, including accrued interest and penalties as of December 31, 2023.
The amount of revenue that we generate depends on the level of demand from advertisers to promote their content to users across our media partners’ properties. We generate higher revenue at times of high demand, which is also impacted by seasonal factors.
We recognize revenue in the period in which the click or impression occurs. The amount of revenue that we generate depends on the level of demand from advertisers to promote their content to users across our media partners’ properties. We generate higher revenue at times of high demand, which is also impacted by seasonal factors.
GAAP. 57 Table of Contents The following table presents the reconciliation of Adjusted EBITDA to net (loss) income, the most directly comparable U.S.
GAAP. 58 Table o f Contents The following table presents the reconciliation of Adjusted EBITDA to net income (loss), the most directly comparable U.S.
See Note 5 to the accompanying financial statements for additional information relating to our leases. (3) Capital lease and other obligations relate to prior leases for certain servers and related equipment. For the year ended December 31, 2022, we made regular payments totaling $3.2 million on our finance lease obligations.
(3) Capital lease and other obligations relate to prior leases for certain servers and related equipment. For the year ended December 31, 2023, we made regular payments totaling $1.8 million on our finance lease obligations. See Note 8 to the accompanying audited consolidated financial statements for additional information relating to our leases.
In addition, we do not have any interest in entities referred to as variable interest entities, which includes special purpose entities and other structured finance entities. JOBS Act Transition Period We are an emerging growth company as defined in the JOBS Act.
Off-Balance Sheet Arrangements We do not currently engage in off-balance sheet financing arrangements. In addition, we do not have any interest in entities referred to as variable interest entities, which includes special purpose entities and other structured finance entities. JOBS Act Transition Period We are an emerging growth company as defined in the JOBS Act.
We were in compliance with all of the financial covenants under the 2021 Revolving Credit Facility as of December 31, 2022 and December 31, 2021. See Notes 7 and 14 to the accompanying audited financial statements for additional information relating to our 2021 Revolving Credit Facility.
We were in compliance with all of the financial covenants under the 2021 Revolving Credit Facility as of December 31, 2023 and December 31, 2022. See Note 9 to the accompanying audited financial statements for additional information relating to the Facility.
See Note 7 to the accompanying financial statements for additional information, including conditions for early redemption. (2) Operating lease agreements primarily relate to leases for certain office facilities and managed data center facilities, including one new operating lease agreement that has not yet commenced with future lease payments of approximately $2.4 million.
(2) Operating lease agreements primarily relate to leases for certain office facilities and managed data center facilities, including one new operating lease agreement that has not yet commenced with future lease payments of approximately $0.6 million. See Note 8 to the accompanying financial statements for additional information relating to our leases.
Ex-TAC Gross Profit may fluctuate in the future due to various factors, including, but not limited to, seasonality and changes in the number of media partners and advertisers, advertiser demand or user engagements.
GAAP measure. In calculating Ex-TAC Gross Profit, we add back other cost of revenue to gross profit. Ex-TAC Gross Profit may fluctuate in the future due to various factors, including, but not limited to, seasonality and changes in the number of media partners and advertisers, advertiser demand or user engagements.
Accordingly, we believe that these measures provide information to investors and the market in understanding and evaluating our operating results in the same manner as our management and the Board. These non-GAAP financial measures are defined and reconciled to the corresponding U.S. GAAP measures below. These non-GAAP financial measures are subject to significant limitations, including those identified below.
Accordingly, we believe that these measures provide information to investors and the market in understanding and evaluating our operating results in the same manner as our management and the Board. 57 Table o f Contents These non-GAAP financial measures are defined and reconciled to the corresponding U.S. GAAP measures below.
Gross profit for 2022 included net unfavorable foreign currency effects of approximately $6.6 million, and decreased $41.0 million, or 17.0%, on a constant currency basis, compared to the prior year period. Ex-TAC Gross Profit Our Ex-TAC Gross Profit decreased $37.3 million, or 13.7%, to $234.8 million in 2022, from $272.1 million in 2021.
Gross profit for 2023 included net favorable foreign currency effects of approximately $1.0 million, and decreased $8.9 million, or 4.6%, on a constant currency basis, compared to the prior year period. Ex-TAC Gross Profit Our Ex-TAC Gross Profit decreased $7.4 million, or 3.1%, to $227.4 million in 2023, from $234.8 million in 2022.
Factors Affecting Our Business Retention and Growth of Relationships with Media Partners We rely on relationships with our media partners for a significant portion of our advertising inventory and for our ability to increase revenue through expanding their use of our platform.
Factors Affecting Our Business Retention and Growth of Relationships with Media Partners We rely on relationships with our media partners for a significant portion of our advertising inventory and our corresponding ability to drive advertising revenue.
See “Non-GAAP Reconciliations” in this Report for the definitions and limitations of these measures, and reconciliations to the most comparable GAAP financial measures. Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 Revenue Revenue decreased by $23.5 million, or 2.3%, to $992.1 million in 2022 from $1,015.6 million in 2021.
See “Non-GAAP Reconciliations” in this Report for the definitions and limitations of these measures, and reconciliations to the most comparable U.S. GAAP financial measures. Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 Revenue Revenue decreased by $56.3 million, or 5.7%, to $935.8 million in 2023 from $992.1 million in 2022.
(See Note 8 to the accompanying audited consolidated financial statements for additional information.) A provision enacted as part of the 2017 Tax Cuts & Jobs Act requires companies to capitalize certain research and experimental expenditures for tax purposes in tax years beginning after December 31, 2021.
A provision enacted as part of the 2017 Tax Cuts & Jobs Act requires companies to capitalize certain research and experimental expenditures for tax purposes in tax years beginning after December 31, 2021.
During 2022, after weighing all of the evidence, we determined that the positive evidence, particularly the evidence that was objectively verifiable, continued to outweigh the negative evidence.
As a result of our analysis, during 2023 and 2022, after weighing all of the evidence, we determined that the positive evidence, particularly the evidence that was objectively verifiable, continued to outweigh the negative evidence.
Ex-TAC Gross Profit for 2022 included net unfavorable foreign currency effects of approximately $6.6 million, and decreased $30.7 million, or 11.3%, on a constant currency basis, compared to the prior year period. The decrease in Ex-TAC Gross Profit was primarily driven by lower revenue, as well as unfavorable revenue mix and lower performance from certain deals.
Ex-TAC Gross Profit for 2023 included net favorable foreign currency effects of approximately $1.1 million, and decreased $8.5 million, or 3.6%, on a constant currency basis, compared to the prior year period. The decrease in Ex-TAC Gross Profit was primarily driven by lower revenue and a net unfavorable change in revenue mix, partially offset by improved performance from certain deals.
Significant judgment is required in determining our provision for income taxes and income tax assets and liabilities, including evaluating uncertainties in the application of accounting principles and complex tax laws.
Income Taxes We are subject to income taxes in the United States and numerous foreign jurisdictions. Significant judgment is required in determining our provision for income taxes and income tax assets and liabilities, including evaluating uncertainties in the application of accounting principles and complex tax laws.
Our reported revenue decreased approximately $146.6 million due to net revenue retention of 86% on existing media partners, as we have experienced lower yields mainly due to weaker demand on our platform, primarily as a result of the current macroeconomic conditions and the related impact on advertising spend, as well as due to unfavorable foreign currency effects.
Our reported revenue decreased approximately $140.1 million due to net revenue retention of 86% on existing media partners, as we have experienced lower yields mainly due to weaker demand on our platform, reflecting the current macroeconomic conditions and the related impact on advertising spend.
Additionally, we believe that our strength in delivering engagement and clear outcomes for advertisers aligns well with the ongoing market shift towards increased accountability and expectations of ROAS from digital advertising spend generally. Seasonality The global advertising industry experiences seasonal trends that affect most participants in the digital advertising ecosystem.
Additionally, we are confident that our strength in delivering engagement and clear outcomes for advertisers, built on our proprietary AI prediction engine, aligns well with the ongoing market shift towards increased accountability and expectations of ROAS from digital advertising spend. 52 Table o f Contents Seasonality The global advertising industry experiences seasonal trends that affect most participants in the digital advertising ecosystem.
Adjusted EBITDA (1) was 11.2%, 32.7% and 21.2% of Ex-TAC Gross Profit (1) in 2022, 2021 and 2020, respectively. ______________________ (1) Ex-TAC Gross Profit and Adjusted EBITDA are non-GAAP financial measures. See “Non-GAAP Reconciliations” in this Report for the definitions and limitations of these measures, and reconciliations to the most comparable GAAP financial measures.
Adjusted EBITDA (1) was 12.5% and 11.2% of Ex-TAC Gross Profit (1) in 2023 and 2022, respectively. ______________________ (1) Ex-TAC Gross Profit, Adjusted EBITDA and constant currency measures are non-GAAP financial measures. See “Non-GAAP Reconciliations” in this Report for definitions and limitations of these measures, and reconciliations to the comparable U.S. GAAP financial measures.
Free cash flow is a supplementary measure used by our management and the Board to evaluate our ability to generate cash and we believe it allows for a more complete analysis of our available cash flows.
Free Cash Flow Free cash flow is defined as cash flow provided by operating activities, less capital expenditures and capitalized software development costs. Free cash flow is a supplementary measure used by our management and the Board to evaluate our ability to generate cash and we believe it allows for a more complete analysis of our available cash flows.
During 2022, we initiated a new investment program, which is focused on achieving maximum returns within our investment policy parameters, while preserving capital and maintaining sufficient liquidity.
Our current investment program is focused on achieving maximum returns within our investment policy parameters, while preserving capital and maintaining sufficient liquidity.
Operating expenses for 2022 included net favorable foreign currency effects of approximately $10.7 million, and increased $11.2 million, or 5.4%, on a constant currency basis, compared to the prior year period.
Operating expenses for 2023 included net favorable foreign currency effects of approximately $4.9 million, and decreased $7.9 million, or 3.8%, on a constant currency basis, compared to the prior year period.
The 2021 Revolving Credit Facility provides, subject to borrowing availability and certain other conditions, for revolving loans in an aggregate principal amount of up to $75.0 million (the “Facility”), with a $15.0 million sub-facility for letters of credit.
(2) On November 2, 2021, the Company entered into the Second Amended and Restated Loan and Security Agreement with SVB, which provides, subject to borrowing availability and certain other conditions, for revolving loans in an aggregate principal amount of up to $75.0 million (the “Facility”), with a $15.0 million sub-facility for letters of credit.
During 2022, 2021 and 2020, we withheld 245,465 shares, 1,032,995 shares and 27,769 shares, respectively, with a fair value of $2.5 million, $14.2 million and $0.3 million, respectively, to satisfy the minimum employee tax withholding obligations. Capital Expenditures Our cash flow used in investing activities primarily consists of capital expenditures and capitalized software development costs.
During 2023 and 2022, we withheld 163,265 shares and 245,465 shares, respectively, with a fair value of $0.8 million and $2.5 million, respectively, to satisfy the minimum employee tax withholding obligations. 61 Table o f Contents Capital Expenditures Our cash flow used in investing activities primarily consists of capital expenditures and capitalized software development costs.
While in 2021, average prices on an annual basis were up relative to prior year, we have experienced a downward trend resulting in lower average prices in 2022, compared to 2021 levels, reflecting the unfavorable macroeconomic conditions impacting our industry. Movements in average prices do not necessarily correlate to our revenue or Ex-TAC Gross Profit trends.
We have experienced a downward trend resulting in lower average prices in 2023 and 2022, compared to normal levels, reflecting unfavorable macroeconomic conditions impacting our industry. Movements in average prices do not necessarily correlate to our revenue or Ex-TAC Gross Profit trends.
Revenue for 2022 included net unfavorable foreign currency effects of approximately $42.7 million, and increased $19.2 million, or 1.9% on a constant currency basis. • Our gross profit was $192.7 million and our gross margin was 19.4% in 2022, compared to gross profit of $240.3 million and gross margin of 23.7% in 2021, and gross profit of $165.1 million and gross margin of 21.5% in 2020. • Our Ex-TAC Gross Profit (1) was $234.8 million in 2022, compared to $272.1 million in 2021 and $194.3 million in 2020. • Our net loss was $24.6 million, or (12.8)% of gross profit in 2022, compared to net income of $11.0 million, or 4.6% of gross profit in 2021, and a net loss of $4.4 million, or 2.6% of gross profit, in 2020.
Revenue for 2023 included net favorable foreign currency effects of approximately $5.0 million, and decreased $61.3 million, or 6.2% on a constant currency basis. • Our gross profit was $184.8 million and our gross margin was 19.7% in 2023, compared to gross profit of $192.7 million and gross margin of 19.4% in 2022. • Our Ex-TAC Gross Profit(1) was $227.4 million in 2023, compared to $234.8 million in 2022. • Our net income was $10.2 million, or 5.5% of gross profit in 2023, compared to net loss of $24.6 million, or (12.8)% of gross profit in 2022.
We generally expect these seasonal trends to continue, though historical seasonality may not be predictive of future results given the potential for changes in advertising buying patterns and macroeconomic conditions.
We generally expect these seasonal trends to continue, though historical seasonality may not be predictive of future results given the potential for changes in advertising buying patterns and macroeconomic conditions. These trends will affect our operating results and we expect our revenue to continue to fluctuate based on seasonal factors that affect the advertising industry as a whole.
Our free cash flow for 2022 was use of cash of $22.1 million, as compared to free cash flow of $36.7 million in 2021 and $42.5 million in 2020, reflecting lower operating cash flow and higher capital expenditures in 2022. Free cash flow is a supplemental non-GAAP financial measure.
Our free cash flow for 2023 improved to a use of cash of $6.5 million, as compared to a use of cash of $22.1 million in 2022, primarily reflecting higher net cash provided by operating activities and lower capital expenditures in 2023. Free cash flow is a supplemental non-GAAP financial measure.
Year Ended December 31, 2022 2021 2020 (In thousands) Net cash provided by operating activities $ 3,813 $ 56,762 $ 52,986 Purchases of property and equipment (13,375) (9,743) (1,511) Capitalized software development costs (12,569) (10,311) (8,990) Free cash flow $ (22,131) $ 36,708 $ 42,485 58 Table of Contents LIQUIDITY AND CAPITAL RESOURCES We regularly evaluate the cash requirements for our operations, commitments, development activities and capital expenditures and manage our liquidity risk in a manner consistent with our corporate priorities.
Year Ended December 31, 2023 2022 (In thousands) Net cash provided by operating activities $ 13,746 $ 3,813 Purchases of property and equipment (10,127) (13,375) Capitalized software development costs (10,107) (12,569) Free cash flow $ (6,488) $ (22,131) LIQUIDITY AND CAPITAL RESOURCES We regularly evaluate the cash requirements for our operations, commitments, development activities and capital expenditures and manage our liquidity risk in a manner consistent with our corporate priorities.
In addition to historical financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, beliefs and expectations, and involve risks and uncertainties.
In addition to historical financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, beliefs, and expectations, and involve risks and uncertainties that could cause actual results, events, or circumstances to differ materially from those projected in the forward-looking statements.
Other cost of revenue increased $10.3 million, or 32.5%, to $42.1 million in 2022, compared to $31.8 million in the prior year period, primarily due to increased depreciation expense on server equipment, higher hosting fees due to continued platform improvements, including increased data processing capacity, and higher network security related costs.
Other cost of revenue increased $0.5 million, or 1.1%, to $42.6 million in 2023, compared to $42.1 million in the prior year period, primarily due to higher hosting fees due to continued platform improvements, including increased data processing capacity, partially offset by lower depreciation expense on server equipment.
See “Non-GAAP Reconciliations” for the related definition and reconciliations to our gross profit. Operating Expenses Operating expenses increased by $0.5 million, or 0.2%, to $206.2 million in 2022, from $205.7 million in 2021.
See “Non-GAAP Reconciliations” for the related definition and reconciliations to our gross profit. Operating Expenses Operating expenses decreased by $12.8 million, or 6.2%, to $193.4 million in 2023, from $206.2 million in 2022.
As of December 31, 2022, in addition to cash flow from our operations, our available liquidity was follows: December 31, 2022 (In thousands) Cash and cash equivalents (1) $ 105,580 Short-term investments 166,905 Long-term investments 78,761 Revolving Credit Facility (2) 70,683 Total $ 421,929 __________________________ (1) As of December 31, 2022 , approximately $42.6 million of our cash and cash equivalents was held outside of the United States by our non-U.S. subsidiaries.
As of December 31, 2023, in addition to cash flow from our operations, our available liquidity was follows: December 31, 2023 (In thousands) Cash and cash equivalents (1) $ 70,889 Short-term investments 94,313 Long-term investments 65,767 Revolving Credit Facility (2) 75,000 Total $ 305,969 __________________________ (1) As of December 31, 2023, approximately $32.1 million of our cash and cash equivalents was held outside of the United States by our non-U.S. subsidiaries.
(together with our subsidiaries, “Outbrain,” the “Company,” “we,” “our” or “us”) was incorporated in August 2006 in Delaware. The Company is headquartered in New York, New York with various wholly-owned subsidiaries, including in Israel, Europe and Asia. Outbrain is a leading recommendation platform for advertisers and digital media owners, reaching over a billion unique users around the world.
(together with our subsidiaries, “Outbrain,” the “Company,” “we,” “our” or “us”) was incorporated in August 2006 in Delaware. The Company is headquartered in New York, New York with various wholly-owned subsidiaries, including in Israel, Europe and Asia.
GAAP measure, for the periods presented: Year Ended December 31, 2022 2021 2020 (In thousands) Revenue $ 992,082 $ 1,015,630 $ 767,142 Traffic acquisition costs (757,321) (743,579) (572,802) Other cost of revenue (42,108) (31,791) (29,278) Gross profit 192,653 240,260 165,062 Other cost of revenue 42,108 31,791 29,278 Ex-TAC Gross Profit $ 234,761 $ 272,051 $ 194,340 Adjusted EBITDA We define Adjusted EBITDA as net (loss) income before charges related to the exchange of senior notes upon IPO; interest expense; interest income and other (expense) income, net; provision (benefit) for income taxes; depreciation and amortization; stock-based compensation, and other income or expenses that we do not consider indicative of our core operating performance, including, but not limited to, IPO and public company implementation costs, merger and acquisition costs, regulatory matter costs, and severance costs related to our cost saving initiatives.
GAAP measure, for the periods presented: Year Ended December 31, 2023 2022 (In thousands) Revenue $ 935,818 $ 992,082 Traffic acquisition costs (708,449) (757,321) Other cost of revenue (42,571) (42,108) Gross profit 184,798 192,653 Other cost of revenue 42,571 42,108 Ex-TAC Gross Profit $ 227,369 $ 234,761 Adjusted EBITDA We define Adjusted EBITDA as net income (loss) before gain related to convertible debt; interest expense; interest income and other (expense) income, net; provision for income taxes; depreciation and amortization; stock-based compensation, and other income or expenses that we do not consider indicative of our core operating performance, including, but not limited to merger and acquisition costs, certain public company implementation related costs, regulatory matter costs, and severance costs related to our cost saving initiatives.
However, there are multiple factors that could impact our future liquidity, including our business performance, our ability to collect payments from our advertisers, having to pay our media partners even if our advertisers default on their payments, or other factors described under Item 1A “Risk Factors” included in this Report.
However, there are multiple factors that could impact our future liquidity, including our business performance, our ability to collect payments from our advertisers, having to pay our media partners even if our advertisers default on their payments, or other factors described under Item 1A “Risk Factors” included in this Report. 59 Table o f Contents Sources of Liquidity Our primary sources of liquidity are cash receipts from our advertisers, our cash and cash equivalents, investments in marketable securities, and the available capacity under our revolving credit facility discussed below.
Adjusted EBITDA Our Adjusted EBITDA decreased $62.6 million to $26.3 million in 2022 from $88.9 million in 2021, due to lower Ex-TAC Gross Profit and increased operating expenses and other costs of revenue, as previously described. Our Adjusted EBITDA for 2022 included net favorable foreign currency effects of approximately $3.4 million.
Adjusted EBITDA Our Adjusted EBITDA increased $2.2 million to $28.5 million in 2023 from $26.3 million in 2022, primarily due to lower operating expenses, partially offset by lower Ex-TAC Gross Profit, as previously described. Our Adjusted EBITDA for 2023 included net favorable foreign currency effects of approximately $5.9 million.
Treasury Share Repurchases In February 28, 2022, our Board of Directors (the “Board”) approved a share repurchase program under which we are authorized to purchase up to $30 million of our common stock, par value $0.001 per share, with no requirement to purchase any minimum number of shares.
Treasury Share Repurchases On December 14, 2022, our Board approved a new stock repurchase program, authorizing us to repurchase up to $30 million of our common stock, par value $0.001 per share, with no requirement to purchase any minimum number of shares.
In order to grow our revenue and Ex-TAC Gross Profit and maximize value for our advertisers and media partners, our focus as a business is on driving user engagement and ROAS for advertisers, not on optimizing for price. For the year ended December 31, 2022, over 30,000 unique advertisers were active on our platform.
In order to grow our revenue and Ex-TAC Gross Profit and maximize value for our advertisers and media partners, our focus as a business is on driving business outcomes and ROAS for advertisers, not on optimizing for price.
All constant currency financial information being presented is non-GAAP and should be used as a supplement to our reported operating results. We believe that this information is helpful to our management and investors to assess our operating performance on a comparable basis. However, these measures are not intended to replace amounts presented in accordance with U.S.
We believe that this information is helpful to our management and investors to assess our operating performance on a comparable basis. However, these measures are not intended to replace amounts presented in accordance with U.S. GAAP and may be different from similar measures calculated by other companies.
Our Smartlogic product dynamically adjusts both the arrangement and the formats of content delivered to a user, depending on the user’s preferences and our media partner’s key performance indicators (“KPIs”), designed to provide a more personalized and engaging feed experience.
Our Smartlogic product dynamically adjusts both the arrangement and the formats of content delivered to a user, depending on the user’s preferences and our media partner’s key performance indicators (“KPIs”), designed to provide a tailored and engaging feed experience. We continue to invest in media partner and advertiser focused tools, technology, and products as well as privacy-centric solutions.
To further strengthen these relationships, we continuously invest in our technology and product functionality to drive user engagement and monetization by (i) improving our algorithms; (ii) effectively managing our supply and demand; and (iii) expanding the adoption of our enhanced products by media partners. Our relationships with media partners are typically long-term, exclusive and strategic in nature.
To further strengthen these relationships, we continuously invest in our technology and product functionality to drive user engagement and monetization by (i) improving our algorithms, referred to as our AI prediction engine; (ii) effectively managing supply and demand; (iii) expanding the adoption of our enhanced products by media partners; and (iv) expanding our demand capabilities to new formats and business lines such as Onyx.
We believe that our proprietary micro-services, API-based cloud infrastructure provides us with a strategic competitive advantage as we are able to deploy code an average of 300 times per day and grow in a scalable and highly cost-effective manner.
For example, Keystone by Outbrain™ enables a more holistic management of overall revenue for media owners increasingly focused on revenue diversification. We believe that our proprietary micro-services, API-based cloud infrastructure provides us with a strategic competitive advantage, as we are able to deploy code hundreds of times per day and grow in a scalable and highly cost-effective manner.
Interest expense consists of interest expense on our 2.95% Convertible Senior Notes due 2026 (the “Convertible Notes”), our revolving credit facility and capital leases. Interest expense may increase if we incur borrowings periodically under our revolving credit facility or if we enter into new debt facilities or capital leasing arrangements. Interest Income and Other (Expense) Income, net.
Interest expense may increase if we incur any borrowings under our revolving credit facility or if we enter into new debt facilities or capital leasing arrangements. Interest Income and Other Income (Expense), net.
Material Cash Requirements Our primary uses of liquidity are payments to our publishers, our operating expenses, capital expenditures, our long-term debt and the related interest payments, and repurchases under our $30 million share repurchase program. W e may also use our available cash to make acquisitions or investments in complementary companies or technologie s.
Material Cash Requirements Our primary uses of liquidity are payments to our media partners, our operating expenses, capital expenditures, our long-term debt and the related interest payments, and repurchases under our $30 million share repurchase program.
Our professional service fees consist primarily of accounting, audit, tax, legal, information technology and other consulting costs, including our implementation of the Sarbanes-Oxley Act requirements. 50 Table of Contents Other Expense, Net Other expense, net is comprised of charges related to exchange of senior notes upon IPO, interest expense and other expense, net, and interest income.
Our professional service fees consist primarily of accounting, audit, tax, legal, information technology and other consulting costs, including our implementation of and compliance with Sarbanes-Oxley Act requirements. Other Income (Expense), Net Other income (expense), net is comprised of gain (loss) on convertible debt, interest expense and interest income and other income (expense). Gain on convertible debt.
For example, improvements to our algorithms help us deliver more relevant ads, driving higher user engagement, thereby improving ROAS for advertisers and increasing monetization for our media partners.
We plan to continue our investments in our people and our technology in order to retain and enhance our competitive position. For example, improvements to our AI prediction engine help us deliver more relevant ads, driving higher user engagement, thereby improving ROAS for advertisers and increasing monetization for our media partners.
We spent $13.4 million in capital expenditures in 2022, p rimarily relating to expenditures for servers and related equipment, leasehold improvements, and office equipment. We currently anticipate that our capital expenditures will be between $11 million and $14 million in 2023, primarily relating to expenditures for servers and related equipment, leasehold improvements, and other equipment.
We spent $10.1 million in capital expenditures in 2023, primarily relating to expenditures for servers and related equipment, leasehold improvements, and office equipment. We currently anticipate that our capital expenditures will be between $9 million and $11 million in 2024, primarily relating to expenditures for servers and related equipment and other equipment. However, actual amounts may vary from these estimates.
Non-GAAP Reconciliations Because we are a global company, the comparability of our operating results is affected by foreign exchange fluctuations. We calculate certain constant currency measures and foreign currency impacts by translating the current year’s reported amounts into comparable amounts using prior year’s exchange rates.
We calculate certain constant currency measures and foreign currency impacts by translating the current year’s reported amounts into comparable amounts using the prior year’s exchange rates. All constant currency financial information being presented is non-GAAP and should be used as a supplement to our reported operating results.
Revenue for 2022 included net unfavorable foreign currency effects of approximately $42.7 million, and increased $19.2 million, or 1.9%, on a constant currency basis, compared to the prior year period.
Revenue for 2023 included net favorable foreign currency effects of approximately $5.0 million, and decreased $61.3 million, or 6.2%, on a constant currency basis, compared to the prior year period.
GAAP measure, for the periods presented: Year Ended December 31, 2022 2021 2020 (In thousands) Net (loss) income $ (24,581) $ 10,995 $ 4,357 Interest expense 7,625 3,964 832 Interest income and other (expense) income, net (2,600) 3,078 1,695 Charges related to exchange of senior notes upon IPO — 42,049 — Provision (benefit) for income taxes 6,008 (25,530) 3,293 Depreciation and amortization 26,919 19,470 18,509 Stock-based compensation 11,660 26,307 3,588 Regulatory matter costs, net of insurance proceeds (1,875) 6,361 — Merger and acquisition costs, public company implementation costs (1) 2,515 2,190 11,168 Severance costs 603 — — Tax contingency (2) — — (2,297) Adjusted EBITDA $ 26,274 $ 88,884 $ 41,145 Net Income as % of Gross Profit (12.8) % 4.6 % 2.6 % Adjusted EBITDA as % of Ex-TAC Gross Profit 11.2 % 32.7 % 21.2 % _________________________ (1) Primarily includes costs related to our initial public offering, public company implementation costs and costs related to our acquisition of vi in January 2022.
GAAP measure, for the periods presented: Year Ended December 31, 2023 2022 (In thousands) Net income (loss) $ 10,242 $ (24,581) Interest expense 5,393 7,625 Interest income and other income (expense), net (7,793) (2,600) Gain related to convertible debt (22,594) — Provision for income taxes 6,113 6,008 Depreciation and amortization 20,702 26,919 Stock-based compensation 12,141 11,660 Regulatory matter costs, net of insurance proceeds 742 (1,875) Merger and acquisition costs, public company implementation costs (1) — 2,515 Severance costs 3,509 603 Adjusted EBITDA $ 28,455 $ 26,274 Net income (loss) as % of gross profit 5.5 % (12.8) % Adjusted EBITDA as % of Ex-TAC Gross Profit 12.5 % 11.2 % _________________________ (1) Primarily includes costs related to our acquisition of vi in January 2022, costs related to our initial public offering and public company implementation costs.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeAs part of our ongoing procedures, we monitor the credit levels and the financial condition of our customers in order to minimize our credit risk. We do not factor our accounts receivables, nor do we maintain credit insurance to manage the risk of credit loss.
Biggest changeAs part of our ongoing procedures, we monitor the credit levels and the financial condition of our customers in order to minimize our credit risk and require certain customers with higher potential credit risk to prepay for their campaigns.
We are also exposed to a risk that the counterparty to our foreign currency forward exchange contracts will fail to meet its contractual obligations. In order to mitigate this risk, we perform an evaluation of our counterparty credit risk and our forward contracts have a term of no more than 12 months. 65 Table of Contents
We are also exposed to a risk that the counterparty to our foreign currency forward exchange contracts will fail to meet its contractual obligations. In order to mitigate this risk, we perform an evaluation of our counterparty credit risk and our forward contracts have a term of no more than 12 months. 65 Table o f Contents
Interest Rate Risk Our exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of the interest rates in the United States. Our exposure to market risk for changes in interest rates relates primarily to our cash and cash equivalents, investments and any future borrowings under our 2021 Revolving Credit Facility.
Interest Rate Risk Our exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of the interest rates in the United States. Our exposure to market risk for changes in interest rates relates primarily to our cash and cash equivalents, investments and any future borrowings under the Facility.
We plan to actively monitor our exposure to the fair value of our investment portfolio in accordance with our policies and procedures, which include monitoring market conditions, to minimize investment risk. A 100 basis point change in interest rates as of December 31, 2022 would change the fair value of investment portfolio by approximately $1.9 million.
We plan to actively monitor our exposure to the fair value of our investment portfolio in accordance with our policies and procedures, which include monitoring market conditions, to minimize investment risk. A 100 basis point change in interest rates as of December 31, 2023 would change the fair value of investment portfolio by approximately $1.3 million.
We evaluate periodically the various currencies to which we are exposed and, from time to time, may enter into foreign currency forward exchange contracts to manage our foreign currency risk and reduce the potential adverse impact from the appreciation or the depreciation of our non-U.S. dollar-denominated operations, as appropriate. During 2022 , the U.S.
We evaluate periodically the various currencies to which we are exposed and, from time to time, may enter into foreign currency forward exchange contracts to manage our foreign currency risk and reduce the potential adverse impact from the appreciation or the depreciation of our non-U.S. dollar-denominated operations, as appropriate. Changes in the U.S.
There have been no amounts outstanding under our revolving credit facility since we amended and restated our loan agreement in November 2021. Long-term debt recorded on our audited consolidated balance sheets as of December 31, 2022 and December 31, 2021 was $236.0 million and bears a fixed rate of interest.
There have been no amounts outstanding under the Facility since we amended and restated our loan agreement in November 2021. Long-term debt recorded on our audited consolidated balance sheets as of December 31, 2023 and December 31, 2022 was $118.0 million and $236.0 million, respectively, and bears a fixed rate of interest.
Dollar strengthened against most of the currencies of the countries in which we operate, which had an impact on our operating results, as further described in Item 7, “Results of Operations.” The effect of a hypothetical 10% increase or decrease in our weighted-average exchange rates on our revenue, cost of revenue and operating expenses denominated in foreign currencies would result in a $8.3 million unfavorable or favorable change to our operating loss for the year ended December 31, 2022.
Dollar against the currencies of the countries in which we operate impact our operating results, as further described in Item 7, “Results of Operations.” The effect of a hypothetical 10% increase or decrease in our weighted-average exchange rates on our revenue, cost of revenue and operating expenses denominated in foreign currencies would result in a $7.2 million unfavorable or favorable change to our operating loss for the year ended December 31, 2023.
As of December 31, 2022, our exposure to market risk for changes in interest rates relates primarily to our cash and cash equivalents of $105.6 million and our investments in marketable securities of $245.7 million under our new investments program initiated during the third quarter of 2022, which consist of U.S.
As of December 31, 2023, our exposure to market risk for changes in interest rates relates primarily to our cash and cash equivalents of $70.9 million and our investments in marketable securities of $160.1 million under our investments program initiated during the third quarter of 2022, which consist of U.S.
Added
See Item 1A, “Risk Factors” under “ We are subject to payment-related risks that may adversely affect our business, working capital, financial condition and results of operations.” We do not factor our accounts receivables, nor do we maintain credit insurance to manage the risk of credit loss.

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