Outbrain : 2023 Annual Report

2023

Annual Report

Dear Shareholders,

As we reflect on the past year, I would like to express my deepest appreciation to our dedicated employees, whose talent, commitment and hard work are the bedrock of our success. We are immensely grateful for their tireless efforts, especially in the face of the unprecedented challenges posed by geopolitical events. Our thoughts are with all those affected by these circumstances, including our many valued colleagues based in Israel. We stand in solidarity with them and remain committed to supporting the amazing teams who drive our business forward.

In the face of such turbulence, the importance of the Open Internet - where independent media owners provide free, human-reported journalism - cannot be overstated. As the world grapples with complex issues, access to professionally created content becomes increasingly crucial. Outbrain remains dedicated to supporting independent media owners by providing critical technology and platform services designed to help them thrive. We believe that the key to the future of publishing is the ability to engage audiences at scale, which is the underpinning function of our publisher platform.

With that said, we are more focused than ever on providing advertisers with compelling tools to drive business results from Open Internet audiences. Leveraging our prediction technology and strategic media owner relationships allows us to provide differentiated benefits for advertisers across the entire marketing funnel. Our objective is to provide new ways for advertisers of all sizes to drive business value from the unique moments found on the Open Internet.

We are encouraged by the direction the advertising industry is moving, which we believe aligns favorably with our strengths. From enterprise brands to performance advertisers, we are seeing modern advertisers make budget decisions based on measurable outcomes. At Outbrain, we're supporting this focus on outcomes by leveraging user attention, engagement, and contextual signals to drive concrete results.

Outbrain's core intelligence is built on billions of context and engagement signals. Our unique advantage lies in how our core prediction technology leverages those signals: analyzing and understanding the interests of the one billion people we reach each month. Through the feeds we power exclusively across the world's top publishers, our engine understands which links and ads are likely to be the most engaging to each individual user. With this knowledge, we can predict, on a page and session level, which specific ads will generate attention, and how to compound that attention to drive advertiser value. We believe the biggest winners in this space won't be those who make binary decisions on a placement level, but those who can make granular predictions as to which brand experiences will generate the highest levels of attention and corresponding sales results.

Our vision is to become the largest gateway to the Open Internet for advertisers, offering a cross-funnel platform that enables advertisers to build their brands, drive consideration, and boost conversion from incremental audiences, across highly-relevant vertical content. The Open Internet is estimated to provide a potential $100 billion market opportunity. We believe we have an excellent starting point due to our foundational

assets: our core prediction technology developed over 17 years, our exclusive code-on-page inventory across some 8,000 publishers, and the fact that we operate a true end-to-end supply chain that is supply path optimized at its core.

In 2023 and going into 2024, we made investments in those areas which we believe will significantly impact our ability to realize the vision outlined above:

• The launch of Onyx by Outbrain in June 2023 introduced a brand building and unique cross-funnel opportunity for advertisers on a global scale, expanding our addressable market.
• Our investment in our two proprietary buying platforms - our Native Ad Manager, Amplify, and our DSP, Zemanta - enables us to expand the diversity of customers and use cases we service. In particular, our DSP's bespoke service offerings and advanced controls are enabling large-scale performance advertisers to drive ROAS (rather than impressions alone) across the entirety of the Open Internet.
• The continued investment in engagement-based bidding capabilities on our DSP is expected to drive differentiated performance across new and emerging supply types, including new publishers, mobile apps, OEMs, and platforms.
• On the publisher side, our Keystone platform continues to evolve and provide stronger business outcomes for publishers, enabling them to diversify their revenue streams and maximize their audience engagement.

As we continue to invest in our robust prediction technology, we are exploring new applications of that technology to power a new frontier of Open Internet media exploration. In 2024, we plan to build on the core strength we were founded on: enabling people to discover content that's interesting to them. As audiences' preferred method of consumption continues to trend toward mobile, vertical, visual experiences, we aim to leverage our prediction technology to help audiences explore editorial content with engaging video mediums.

In closing, we expect 2024 to be an exciting year of investment across new areas, designed to drive strong value for advertisers and publishers - as well as long-term growth and shareholder value.

Thank you for your continued trust and support.

David Kostman

CEO of Outbrain Inc.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the federal securities laws, which statements involve substantial risks and uncertainties. Forward-looking may include, without limitation, statements generally relate to possible or assumed future results of our business, financial condition, results of operations, liquidity, plans and objectives. You can generally identify forward-looking statements because they contain words such as "may," "will," "should," "expects," "plans," "anticipates," "could," "intends," "guidance," "outlook," "target," "projects," "contemplates," "believes," "estimates," "predicts," "foresee," "potential" or "continue" or the negative of these terms or other similar expressions that concern our expectations, strategy, plans or intentions or at not statements of historical fact. We have based these forward-looking statements largely on our expectations and projections regarding future events and trends that we believe may affect our business, financial condition and results of operations. The outcome of the events described in these forward- looking statements is subject to risks, uncertainties and other factors, including but not limited to: overall advertising demand and traffic generated by our media partners; factors that affect advertising demand and spending, such as the continuation or worsening of unfavorable economic or business conditions or downturns, instability or volatility in financial markets, and other events or factors outside of our control, such as U.S. and global recession concerns, geopolitical concerns, including the ongoing wars between Ukraine-Russia and Israel-Hamas, supply chain issues, inflationary pressures, labor market volatility, bank closures or disruptions, the pace of recovery or any resurgences of the COVID-19 pandemic and the impact of challenging economic conditions and other factors that have and may further impact advertisers' ability to pay; our ability to continue to innovate, and adoption by our advertisers and media partners of our expanding solutions; the success of our sales and marketing investments, which may require significant investments and may involve long sales cycles; our ability to grow our business and manage growth effectively; our ability to compete effectively against current and future competitors; the loss of one or more of our large media partners, and our ability to expand our advertiser and media partner relationships; conditions in Israel, including the ongoing war between Israel and Hamas and other terrorist organizations, may limit our ability to market, support and innovate on our products due to the impact on our employees as well as our advertisers and their advertising markets; our ability to maintain our revenues or profitability despite quarterly fluctuations in our results, whether due to seasonality, large cyclical events, or other causes; the risk that our research and development efforts may not meet the demands of a rapidly evolving technology market; any failure of our recommendation engine to accurately predict attention or engagement, any deterioration in the quality of our recommendations or failure to present interesting content to users or other factors which may cause us to experience a decline in user engagement or loss of media partners; limits on our ability to collect, use and disclose data to deliver advertisements; our ability to extend our reach into evolving digital media platforms; our ability to maintain and scale our technology platform; our ability to meet demands on our infrastructure and resources due to future growth or otherwise; our failure or the failure of third parties to protect our sites, networks and systems against security breaches,

or otherwise to protect the confidential information of us or our partners; outages or disruptions that impact us or our service providers, resulting from cyber incidents, or failures or loss of our infrastructure; significant fluctuations in currency exchange rates; political and regulatory risks in the various markets in which we operate; the challenges of compliance with differing and changing regulatory requirements; the timing and execution of any cost-saving measures and the impact on our business or strategy; and the risks described in the section entitled "Risk Factors" and elsewhere in the Annual Report on Form 10-K filed for the year ended

December 31, 2023 and in subsequent reports filed with the SEC. Accordingly, you should not rely upon forward-looking statements as indication of future performance. We cannot assure you that the results, events and circumstances reflected in the forward-looking statements will be achieved or will occur, and actual results, events or circumstances could differ materially from those projected in the forward-looking statements. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. We undertake no obligation and do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or circumstances after the date on which the statements are made or to reflect the occurrence of unanticipated events or otherwise, except as required by law.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________________

FORM 10-K

______________________________

(Mark One)

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

For the fiscal year ended December 31, 2023

OR

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

For the transition period from ____ to _______

Commission file number 001-40643

______________________________

OUTBRAIN INC.

______________________________

(Exact name of registrant as specified in its charter)

Delaware	20-5391629
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
111 West 19th Street
New York, NY	10011

[phone]

(Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)

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

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common stock, par value $0.001 per share		OB		The Nasdaq Stock Market LLC
Securities registered pursuant to section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐	No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐	No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),

and (2) has been subject to such filing requirements for the past 90 days.Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the

registrant was required to submit such files).

Yes ☒ No ☐

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

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for

complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered

public accounting firm that prepared or issued its audit report.☐ If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the

registrant included in the filing reflect the correction of an error to previously issued financial statements.

☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b).☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes ☐ No ☒

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the closing price of the shares of the registrant's common stock on the Nasdaq Global Select Market on June 30, 2023, the last business day of the registrant's most recently completed second fiscal quarter, was approximately $201.3 million.

As of February 29, 2023, Outbrain Inc. had 49,054,785 shares of common stock outstanding, $0.001 par value per share.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant's proxy statement for its 2024 annual meeting of stockholders are incorporated herein by reference in Part III of this Annual Report on Form 10-K to the extent stated herein. Such proxy statement will be filed with the Securities and Exchange Commission within 120 days of the registrant's fiscal year ended December 31, 2023.

	TABLE OF CONTENTS
		Page
PART I
Item 1.	Business	5
Item 1A.	Risk Factors	20
Item 1B.	Unresolved Staff Comments	43
Item 1C.	Cybersecurity Risk Management and Strategy	43
Item 2.	Properties	44
Item 3.	Legal Proceedings	44
Item 4.	Mine Safety Disclosures	44
PART II
Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity	45
	Securities
Item 6.	[Reserved]	46
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	47
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	65
Item 8.	Financial Statements and Supplementary Data	66
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosures	100
Item 9A.	Controls and Procedures	100
Item 9B.	Other Information	101
Item 9C.	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	101
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	102
Item 11.	Executive Compensation	102
Item 12.	Security Ownership of Certain Beneficial Owner and Management and Related Stockholder Matters	102
Item 13.	Certain Relationships and Related Transactions, and Director Independence	102
Item 14.	Principal Accountant Fees and Services	102
PART IV
Item 15.	Exhibit and Financial Statement Schedules	103
Item 16.	Form 10-K Summary	105
Signatures		106

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Note About Forward-Looking Statements

This Annual Report on Form 10-K (this "Report") contains forward-looking statements within the meaning of the federal securities laws, which statements involve substantial risks and uncertainties. Forward-looking statements may include, without limitation, statements generally relating to possible or assumed future results of our business, financial condition, results of operations, liquidity, plans and objectives. You can generally identify forward-looking statements because they contain words such as "may," "will," "should," "expects," "plans," "anticipates," "could," "intends," "target," "projects," "contemplates," "believes," "estimates," "predicts," "foresee," "potential" or "continue" or the negative of these terms or other similar expressions that concern our expectations, strategy, plans or intentions or are not statements of historical fact. We have based

these forward-looking statements largely on our expectations and projections regarding future events and trends that we believe may affect our business, financial condition and results of operations. The outcome of the events described in these forward- looking statements is subject to risks, uncertainties and other factors including, but not limited to:

• overall advertising demand and traffic generated by our media partners;
• factors that affect advertising demand and spending, such as the continuation or worsening of unfavorable economic or business conditions or downturns, instability or volatility in financial markets, and other events or factors outside of our control, such as U.S. and global recession concerns, geopolitical concerns, including the ongoing wars between Ukraine-Russia and Israel-Hamas, supply chain issues, inflationary pressures, labor market volatility, bank closures or disruptions, the pace of recovery or any resurgences of the COVID-19 pandemic, and the impact of challenging economic conditions and other factors that have and may further impact advertisers' ability to pay;
• our ability to continue to innovate, and adoption by our advertisers and media partners of our expanding solutions;
• the success of our sales and marketing investments, which may require significant investments and may involve long sales cycles;
• our ability to grow our business and manage growth effectively;
• our ability to compete effectively against current and future competitors;
• the loss of one or more of our large media partners, and our ability to expand our advertiser and media partner relationships;
• conditions in Israel, including the ongoing war between Israel and Hamas and other terrorist organizations, may limit our ability to market, support and innovate on our products due to the impact on our employees as well as our advertisers and their advertising markets;
• our ability to maintain our revenues or profitability despite quarterly fluctuations in our results, whether due to seasonality, large cyclical events, or other causes;
• the risk that our research and development efforts may not meet the demands of a rapidly evolving technology market;
• any failure of our recommendation engine to accurately predict attention or engagement, any deterioration in the quality of our recommendations or failure to present interesting content to users or other factors which may cause us to experience a decline in user engagement or loss of media partners;
• limits on our ability to collect, use and disclose data to deliver advertisements;
• our ability to extend our reach into evolving digital media platforms;
• our ability to maintain and scale our technology platform;
• our ability to meet demands on our infrastructure and resources due to future growth or otherwise;
• our failure or the failure of third parties to protect our sites, networks and systems against security breaches, or otherwise to protect the confidential information of us or our partners;

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• outages or disruptions that impact us or our service providers, resulting from cyber incidents, or failures or loss of our infrastructure;
• significant fluctuations in currency exchange rates;
• political and regulatory risks in the various markets in which we operate;
• the challenges of compliance with differing and changing regulatory requirements;
• the timing and execution of cost-saving measures and the impact on our business or strategy; and
• the risks described in the section entitled "Risk Factors" and elsewhere in this Report.

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

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