Content recommendation company Outbrain: Adjusted loss of $5.5 million compared with profit of $6.6 million

Content recommendation company Outbrain published improved forecasts but reported an adjusted loss per share in the third quarter that was 50% lower than analysts' expectations: 10 cents versus 15 cents. In total, the company posted an adjusted loss of $5.5 million, compared to an adjusted profit of $6.6 million in the corresponding quarter last year. The accounting loss (GAAP) was reduced from $54 million in the corresponding quarter to $4.6 million - but in the corresponding period it was affected by one-time costs amounting to $42 million, which were attributed to convertible bonds.
The company has purchased about 6 million of its shares since the buyback plan was announced at the end of February, the purpose of which is to improve the loss per share - since the loss is distributed over fewer shares. On the top line, the company presented a 9% decrease in revenues compared to the corresponding quarter, to the amount of 229 million dollars - higher than the market estimates, which expected a figure of 208.8 million dollars.
Three months ago, Outbrain provided a forecast for an adjusted EBITDA of at least 18 million dollars in 2022 (the company only charged a minimal amount at the time), with a margin of 7.9% from gross profit Ex-TAC ​​(after sharing with the content sites, which are the company's clients) in the amount 228 million dollars. The company now forecasts an adjusted EBITDA of $23.2 million, with a margin of about 10%, and an Ex-TAC ​​gross margin of $232.5 million.
Ex-TAC ​​gross profit decreased by 22.6% to 52.7 million dollars. The adjusted EBITDA decreased at a sharper rate, of 91%, from 19.8 million dollars to 1.7 million dollars. This is a share of only 3.2% of the gross profit Ex–TAC, compared to a share of 29.2% in the corresponding quarter last year.
The trend of customer abandonment continues, and the rate of retention and expansion of engagement with existing customers (Net Dollar Retention) was 81% of the amount of engagement with them a year ago. In the second quarter, the rate was 91%. In contrast, the company recorded revenues of $27.6 million from new customers, 11% higher than the revenues in this category in the corresponding quarter.
In the current quarter, the fourth of this year, the company expects a gross profit Ex-TAC ​​of 57-60 million dollars, and an adjusted EBITDA of 4-6 million dollars, which is 8.5% of the gross profit Ex-TAC.
Outbrain, which was issued in the summer of 2021 at a value of $1.1 billion, is now trading at a value of $209 million, after a 73% drop since the beginning of the year.