Outbrain Reports Strong Q3 Profits Following Cost-Cutting Measures

In a surprising turnaround, Israeli content recommendation company Outbrain has reported an accounting profit (GAAP) two years and four months after its IPO on Wall Street. The company's Q3 earnings for this year reached approximately half a million dollars, in stark contrast to the corresponding quarter last year when it faced a loss of $4.5 million.

This impressive $5 million swing in performance can be attributed, in part, to the significant reduction of $5 million in sales and marketing expenses. Outbrain underwent two rounds of layoffs between the summer of 2022 and this year, resulting in the termination of over 100 employees, which constituted more than 10% of its workforce.

During the third quarter, Outbrain posted an adjusted profit (Non-GAAP) of $270,000, equating to an adjusted profit of one cent per fully diluted share. This stands in stark contrast to an adjusted loss of $5.5 million during the same period the previous year. The company's performance exceeded analysts' expectations, who had anticipated a continued adjusted loss at the level of 2 cents per share.

Notably, the company also reported a positive cash flow from its current operations, amounting to $7 million, a remarkable improvement from the negative figure of $12 million during the corresponding period. Outbrain's efforts to purchase $12.7 million worth of its own shares since December of the previous year significantly contributed to the calculation of earnings per share. These repurchased shares were deducted from the company's stock, resulting in an increase in profit per share.

On the downside, the company's revenues fell short of market expectations by approximately $10 million, reaching 230 million shekels. This figure is largely unchanged compared to the revenues of $229 million in the corresponding period last year. As a result of this news, the company's stock experienced a 4% decline in early trading on Wall Street.

While Outbrain's existing customers reduced their engagement with the company by 5%, this gap was successfully compensated by engagements with new customers. The company's management updated stakeholders on the progress in the adoption of its system, Keystone, launched last year. Keystone enables content sites to manage various income sources in an organized manner, including subscription revenue, advertising revenue, and online relay.

Outbrain initially went public in July 2021 at a valuation of $1.1 billion. Following a challenging year in the stock market, the company's current valuation is $213 million, marking a 15% increase in its value since the beginning of 2023.