Outbrain Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
November 7, 2023

There are 9 speakers on the call.

Operator

Good day, and welcome to Outbrain Incorporated Third Quarter 2023 Earnings Conference Call. This time, all participants are in listen only mode. As a reminder, this conference is being recorded. Now I'd like to turn the call over to Al Behn, Investor Relations, please go ahead.

Speaker 1

Good morning, and thank you for joining us on today's conference call to discuss Outbrain's Q3 2023 results. Joining me on the call today, we have Outbrain's Co Founder and Co CEO, Yaron Ghislai Co CEO, David Kossman And CFO, Jason Kiviat. During this conference call, management will make forward looking statements based on current expectations and assumptions. These statements are subject to risks and uncertainties that may cause Truly vote to differ materially from our forward looking statements. These risk factors are discussed in detail in our Form 10 ks Filed for the year ended December 31, 2022, as updated in our Form 10 Q and in subsequent reports filed with the Securities and James, Commission.

Speaker 1

Forward looking statements speak only as of the call's original date, and we do not undertake any duty to update any such statements. Today's presentation also includes references to non GAAP financial measures. You should refer to the information Contained in the company's Q3 earnings release for our definitional information and reconciliations of non GAAP measures to the comparable GAAP financial measures. Our earnings release can be found on our Investor Relations website, investors. Outbrain.com, Under News and Events.

Speaker 1

With that, let me turn the call over to David.

Speaker 2

Thank you, Randy. First, I want to touch on the situation in the Middle East. At Outbrain, we stand with the people of Israel who have been affected by the recent events. Our hearts go to all the people that are impacted by the horrific situation. We all know people that had suffered And we pray and hope for better peaceful days in the region.

Speaker 2

I want to take this opportunity to thank so many of you. 1st and foremost, our employees in Israel and around the globe for your unwavering commitment, our business partners and our investors and analysts For the outstanding expressions of support, this means a lot to us. From an operational perspective, We have approximately 380 employees in Israel. About 30 have been called to reserve duty. Our offices are located in Natania, north of Tel Aviv in the center of Israel.

Speaker 2

The safety and well-being of our Louise and their families with our top priority. Since October 7, we have continued to execute on our business priorities and deliver on our commitments to our customers. We do have business continuity plans in place should the situation further escalate. Now I will turn to our financial results and business trends. We are pleased with the resumption of year over year growth in Q3.

Speaker 2

We grew ex TAC gross profit by 8% to $56,800,000 within the range of our guidance. Our adjusted EBITDA of $10,300,000 exceeded significantly the high end of our guidance and can be attributed To the top line growth and to our cost discipline, we also saw improvements in our ex stock margin. In terms of current trends, the macro environment, which remains volatile, combined with the ongoing situation in the Middle East, Leads us to a more cautious outlook for revenues and ex TAC gross profit in Q4 as you will hear from Jason. Since early October, we've seen a spike in war related news pages, which are generally more difficult to monetize as Certain brands have brand safety concerns around this type of pages. We have also experienced some brand budget cuts and delays Launching campaign resulting in slower than normal seasonal Q4 uptick.

Speaker 2

Despite these near term headwinds, going into 2024, we are excited with our differentiated position in the market, It's focused on the premium side of publishers and advertisers. Our platform offers full funnel results for advertisers at scale on the open web And enables total publisher revenue and audience growth, all leveraging our AI driven prediction engine. We believe this provides us with a strong foundation for further growth in 2024 and beyond. Let me turn to the advertiser side of our business. Outbrain has traditionally been and continues to be a cost per click native advertising customer acquisition platform that uses AI to deliver strong performance on CPA goals across the open web.

Speaker 2

Yaron will touch on Q3 notable investment in AI and automation capabilities in our core buying platforms,

Speaker 3

Such as

Speaker 2

the growth in our cordless conversions feature, both helps serve advertiser base. We continue to innovate to drive return on net spend and scale for diverse set of performance advertisers. We are seeing growing adoption of our performance DSPs, Samantha, with traditional Amplify clients moving budgets to buy more effectively Cross open web FSPs and not only on the outgoing marketplace. As a reminder, ZEMENTA operates on a percent of spend to the platform And we have seen record levels of spend growth on ZEMENTA in 2023. On the branding and awareness front, At the start of Q3, we launched Onyx, our new brand building platform that runs video, high impact display and rich Media ad leveraging our brand AI to maximize user retention.

Speaker 2

Since the launch, We have worked with more than 100 brand advertisers. These advertisers include Sephora, Paramount, L'Oreal, Lancome, Nestle and many others. For many of these advertisers, we are demonstrating that we can outperform incumbent vendors Through a unique combination of better creative running on high attention placements and utilizing smarter technology to drive attention. We continue to consistently deliver above benchmark results in terms of attention. For example, With our high impact display ads on mobile, we see an average 58% higher retention rate versus the Adelite benchmark.

Speaker 2

Also in our video business, which is a core component of our Onyx offering, we switched our focus from outstream video to in stream free roll, Leveraging our Vidyo Intelligent acquisition, this shift is starting to pay off with higher margins for the Vidyo segment. We expect video to be even more strategic for our future growth. Another differentiated element of our offering It's the ability to drive both performance and awareness for brands. This makes us one of the very few companies beyond The Wall Garden It can deliver advertiser objectives across the full funnel consumer journey. As an example, For many years, AARP has been leveraging our Amplify performance platform to drive objective black audience development.

Speaker 2

Now we have expanded the relationship to encompass branding objectives where Onex will help them build brand awareness with potential new members. These types of engagements with advertisers get us excited about our Strategy to address a larger segment of advertising budget from both new and existing clients. Despite some of the slowdown in brand advertiser business that I referred to, we still expect to close the year, as we said before, With $10,000,000 to $20,000,000 of Onex business. Moving to the publisher side. We continue to focus on improving the performance of our Premium publisher wins over the last 12 to 18 months.

Speaker 2

Among our renewals of long term partnerships in Q3, I want to highlight L'Equipe in France, Berliner, Salag and Zeitz in Germany, as well as VOXX in the U. S, The partner we have been working with exclusively for close to a decade. We are currently engaged in several discussions with large Publishers globally and feel strong momentum driven by several elements of differentiation. One, our focus on having a balanced portfolio of premium global publishers with no single publishers taking up outsized demand. 2nd, the Onyx premium demand and 3rd, Keystone capabilities and product vision.

Speaker 2

To sum it up, Considering the current macro environment and the situation in the Middle East, we are more cautious about our short term revenue outlook, We continue to leverage our cost discipline to drive profitability and cash flow generation. We are Pleased with the resumption of year over year growth in Q3 and expect further acceleration in 2024, Leveraging our strategic investments. With that, I will turn it over to Yaron.

Speaker 3

Thanks, David. Want to join David's comments and clearly say we stand with the people of Israel and together with our colleagues there, we are committed to overcoming To continuing the great level of service and product that all our brand customers and partners have come to respect. Since our last call, we've added several new Keystone partners, New York Post, The New Republic, Entrepreneur Magazine, Publisher's Desk and others. During this last We started experimenting with an added business model for Keystone, where its cost is covered through revenue sharing on publishers' ad slots.

Speaker 2

We believe that this addition will help us

Speaker 3

further accelerate Keystone with more publishers. 2 updates on the AI front, 1 algorithmic AI and 1 generative AI. First, one of our core AI algorithms has been conversion bid strategy or CBS, which automates for advertisers the optimization of their ad campaign. When using our print CVS, an advertiser can automatically maximize They are conversing toward the return on ad spend, which is also known as ROAS. And CBS is based on our homegrown hi, Alfred.

Speaker 3

And the majority of our current advertiser campaigns are running on CBS technology. This last quarter, we've deployed a new technology Upgrade CPS with codeless capability. Using this codeless layer, marketers on our brand can now significantly accelerate pace is deploying new conversion events and further improve their ROAD. This technology marks a significant stride in our dedication to marketing automation Combined with self serve functionality and it will be a foundational layer for more automation capabilities we're planning to build upon this new layer in coming months. 2nd, on generative AI.

Speaker 3

One of the most exciting frontiers for us with generative AI is the automation of ad variety. Ad variety is like algorithm food and the more variety we have in our ad index, the better Higher click to rates also known as CPRs and higher RPM. One of the earliest AI capabilities we built almost 2 years ago It's for automated image cropping in our ad. So for example, our technology will auto crop an image to better focus on faces or the areas of interest of an image. This has been a CTR driver for us for many years.

Speaker 3

Now we're experimenting in the lab with Another generative AI capability we're experimenting with in the R and D lab is the automatic creation of face variation. An African advertiser might upload an ad with a photo of 1 model and then our technology can automatically offer the identical product image with a variety of say Both these capabilities are still in R and D lab mode with early testers. We expect these types of capabilities to significantly boost our ad variety, which will improve the appeal of App Rain's ads to more people and ultimately help continue driving our Anecdotally, following all of our recent investments in algorithmic and generative AI, our advertising CPRs these past Couple of months have been among 3 year record highs. This is especially encouraging in light of the weaker demand environment. As a reminder, our yield is a result of ad pricing times, click through rates.

Speaker 3

And with that, I'll hand it over to Jason for our financial results.

Speaker 4

Thanks, Yaron. As David mentioned, based on our growth and cost discipline, we exceeded our Q3 guidance for adjusted EBITDA and achieved our ex pat gross profit guidance. From a demand perspective, the quarter started off relatively strong in July with year over year growth, followed by weakening demand trends in August before a partial recovery in the last weeks of the quarter. The early portion of Q4 has shown a flatter pattern And the seasonal lift we historically see this time of year, which is driven largely by softer demand to start the quarter and geopolitical uncertainties weigh on ad budgets as well as the impact of the news cycle on certain advertisers' budget usage, as David mentioned. Revenue in Q3 was approximately $230,000,000 suffering a slight increase year on year.

Speaker 4

New media partners in the quarter 5 percentage points or approximately $11,000,000 of revenue growth year over year. Net revenue retention of our publishers was 95 Which, all up meaningfully from the last several quarters, reflects a continued headwind from the impact of the demand environment on pricing and yields, which is the primary factor driving retention to be below 100%. As noted in the last few quarters, churn has remained low by our standards, It's logo retention of 96% for all partners that generated at least $10,000 and our 5 largest churns amounted to only 3 combined points of year over year headwinds in Q3. Ex tech gross profit was $56,800,000 an increase of 8% year over year, Outpacing revenue growth, driven primarily by improved deal performance on certain media partners and the net impact of revenue mix. As noted, our ongoing focus will continue to be on optimizing deal performance.

Speaker 2

Moving to expenses.

Speaker 4

Operating expenses decreased approximately 11% year over year to $43,800,000 in the quarter as we continue to exercise discipline around spending. The largest component of this is compensation related expenses, which were down approximately $5,000,000 or 14% year over year as we have focused on driving efficiencies in our operations. Non comp expenses were down slightly year over year as we continue to exercise prudence. Notably, bad debt expense, though down from H1, remains at elevated levels as compared with our history as the higher number of customers are facing cash flow pressures in this environment. As a result of our cost management and growth of ex pat gross profit, displaying the leverage in our model, adjusted EBITDA was approximately $10,300,000 in Q3, Growing meaningfully year over year and exceeding the high end of the guidance range.

Speaker 4

We believe there continues to be meaningful room for operating leverage in the future, particularly as we drive more and higher yielding demand through new products like Onyx and our expansion of video, assuming a return to more favorable macro environment in the future. Moving to liquidity. Free cash flow, which as a reminder, we define as cash from operating activities less CapEx and capitalized software costs Approximately $2,000,000 in the quarter. While we are pleased to return to positive free cash flow in the quarter, we still see pressures on working capital, particularly around collections with elevated DSO levels remaining from Q2 into Q3. As a result, we ended the quarter $214,000,000 of cash, cash equivalents and investment in marketable securities on the balance sheet and $118,000,000 of long term convertible debt.

Speaker 4

In December, the company's Board of Directors authorized a $30,000,000 share repurchase program, incremental to the $30,000,000 program fully executed in 2022. Year to date through September 30, we have purchased approximately 2,500,000 shares for $12,700,000 We We believe it's an attractive way to enhance shareholder value under current market conditions. Now turning to our outlook. Uncertainty from macro and geopolitical events and the typical back half weighted nature of Q4 seasonal uplift Our considerations and our decision to present a wider than typical range of guidance for the quarter. In our guidance, We assume the continuation of the softer demand trends we have seen in the 1st weeks of Q4 and assume that seasonal increases in ad spend will We expect expec gross profit of $59,000,000 to $64,000,000 and we expect adjusted EBITDA of $13,000,000 to $17,000,000 Now, I'll turn it back to the operator for Q and A.

Operator

Thank you. We'll now begin the question and answer session. First question will be from Sweta Gandjari of Evercore ISI. Please go ahead.

Speaker 5

You for taking my questions. Jason, I have a couple for you, please. On the last point that you talked about on the outlook, For the Q4, could you please provide a little bit more color on the on quantifying the magnitude of the headwind that you are Baking in the guidance from macro in Israel. And then if you are also I believe David said you're Also accounts still expecting $10,000,000 to $20,000,000 from Onex. So how should we think about the tailwinds and headwinds that are accounted for in the Q4 guidance?

Speaker 5

And then for 2024, without any official guidance, how should we, at a high level, think about acceleration in growth rate for 2024 Given the exit rate? Thank you.

Speaker 4

Hey, Shweta, it's Jason. Thanks for the question.

Speaker 2

So yes, so maybe I'll just give you a

Speaker 4

little more color on the guidance and what's driving it. So we're using our normal forecasting process, which is a seasonality Based model and it takes down to date trends, what we're seeing in RPMs and page views and running it out. Supply for us is fairly straightforward. It's It's long term, not very many meaningful changes. Demand remains the harder thing to forecast, especially now as advertisers Maybe reacting to the macro and geopolitical uncertainties still.

Speaker 4

So we're considering the trends that we've seen in the 1st part of Q4, Where we saw an impactful step down in demand and applying that forward, we project a softer than typical seasonal lifts in Q4. And that does also have an impact on Extech margins. So maybe just to give you color to kind of what we saw. We did see last time we spoke here 3 months ago, we saw positive demand trends a couple of months in around June July, building strength of demand and yields, Which along with a typical Q4 seasonal uplift was the basis of our prior forecast and guidance provided last time. Obviously, we've now factored in what we've seen in October, which is first we saw softening of demand trends in August versus the July levels With some recovery in September, but then October started off weaker than expected from a demand perspective relative to what we expected coming out of September.

Speaker 4

We saw that softness increase over the course of the month really correlating with the onset of the war. Maybe a data point that would help would be we saw October revenue grow 1% sequentially from September, which is very low. We typically see 6% or more The last many years, 6% I think, the last 2 years and more even before that based on our history. So several drivers, hard to attribute specific amounts to specific things, but maybe just we do see Certain budgets pause or delays due to the macro and geopolitical uncertainties. It's hard to know if that slow start we saw even before October 7 And the attacks was just delays in advertiser setting budgets, which is something we did see a lot of months this year Was that the 1st week might have been slow, but then the month kind of comes together or if it was the macro pressures reducing budgets, right?

Speaker 4

So hard to know exactly. We also see just headwinds from demand mix as a negative driver. So some of the Higher yielding segments are being more impacted. Examples, affiliates, Outstream Video For us, a couple of our 2 largest geographies are seem to be taking a softer trend in U. S.

Speaker 4

And Germany than some of the other ones. And as David mentioned, certain brands blocking pages with content related to the war out of brand safety concerns, It is meaningful as it's a significant percentage of our really of our most valuable pages this last month or so. And maybe just a stat on that would be, if you look at our top 20 publishers, 25% of their page use related to war related content following the attacks It remains around 15% still. These are not we're talking about U. S.

Speaker 4

And European based typically higher yielding pages. So not all of our supply is news based, but it is a meaningful portion. And obviously, the lower RPMs do affect take rates as well. So hopefully that gives you a little bit more color. And then I think you also asked about the Onyx.

Speaker 4

We do still expect Sure.

Speaker 2

I'll take on next. So I think you heard from Jitra, I think it's I could tell you from looking at my career, I mean, it's a Huge level of volatility and uncertainty, Linda, I haven't seen before, just generally, which is impacting what Jason said. On Onyx specifically, we had we launched it in Cannes. We had great feedback. We launched more than 100 campaigns at this point.

Speaker 2

Seeing both new advertisers advertising, we see cross sell to existing performance markets that are leveraging Onyx To also drive awareness, so we're very excited about it. We see the numbers growing significantly month over month. I mean, we talked about relatively small numbers. So it's exciting. So we stand behind and are leaving for this year.

Speaker 2

And looking into 2024, generally, We see Onex and Vidyo as significant growth drivers for us as a company to move to become a full funnel partner on the open web It's been a big move this year, so we see the fruits of that effort. These efforts will bear fruit And result in growth next year. AI that Erwan mentioned also, we see significant potential from that. On our Performance business, the growth of share of wallet that we see through moving some of our segments and large Customers to ZEMENTA is also an important growth driver for next year. And just growing our publisher relationships with Innovation, broadening the strategic value with Keystone.

Speaker 2

So these are the growth drivers. We haven't given any guidance for 2024, but Overall, when we look at all the reports out there, I think the general sort of growth and sort of EBITDA margin Levels that we've seen, I think we still believe that we can achieve those. Jason, anything to help? No. Okay.

Speaker 1

Thank you. Thank you, David. Thanks, Jason.

Operator

Thank you. Our next question will be from Ran Trwoom, JMP Securities. Please go ahead.

Speaker 6

Thanks so much for taking my questions. I wanted to touch on new publisher revenue. It slowed to $11,000,000 I think that's the lowest number you guys have reported as a public company. How are you guys approaching new publisher deals going forward? And how do we think about that, the process of adding more content?

Speaker 4

Sure. I could start. So obviously, we had pretty big numbers for the last 4 or 5 quarters in double digits and was 12% growth from new publishers last quarter. There were a lot of large wins. We talked about them last year in 22, we're obviously focused on the premium side of the market, premium publishers and full funnel advertisers.

Speaker 4

Before that 12% and so on for a few quarters, 7% was really our average for a long time. It's not a linear thing now. Obviously, some partners are larger than others and it's really not something we expected To stay at that level going into H2 as we really focus on calibrating supply and demand, improving the performance On current deals in this demand environment? I think 7% is probably a good average over time So continue to think about that, Andrew.

Speaker 2

Andrew, we feel pretty good about sort of competitive position there. I mean, also these deals, they're not Sometimes in certain quarters, we have many of these potential new deals. I mentioned in my prepared remarks, we're excited about what In the pipeline, I think the differentiators are focusing on the premium side of the market are helping us. Onyx is exciting for publishers, Keystone, the vision and the value that it brings also. So we feel good about that.

Speaker 2

And I think that number will continue to fluctuate also depending on market situation. We look at when we look at New deals, we look at sort of the total economics of the deal, the impact to advertisers, the margin and but also the total dollar value that we can generate. We feel good about competitive position and outlook for new business, but it will fluctuate.

Speaker 6

I also wanted to ask about MFAs. There's just new concern in the industry that feels like it came up this last quarter in terms of made for advertising sites. Is there any impact that you guys are seeing? Or how does that relate back to Outbrain? Thanks so much.

Speaker 2

So I'll take that. So there's been a lot of coverage around this topic. I think the topic has been further clarified. First, just on the general statement, it's very difficult to classify what is an MFA. Many publishers sort of their objective Is to drive advertising.

Speaker 2

I think it's difficult to put all of them in one bucket. The different types of MFA, MFAs, I think many of them Generate real value for advertisers, having real people go to content and advertisers reach audiences that they want to reach at an effective cost. So that's generally for us specifically. We said previously it's less than 5% of our ex TAC revenues. So it's not that significant in terms of driving traffic to MFAs.

Speaker 2

I think you probably saw the Jounce report. 80% to 90% of the traffic that's driven to them is generated by social and search. So Again, we as long as they meet our strict content guidelines And all the other requests that came to the security and fraud, etcetera, I think it's a great Category of advertisers that we have, generally, our focus as a company has been also on helping and supporting Quality journalism, premium journalism around the world. So we provide vital revenue to them. So it's again part of our overall business and

Operator

Thank you. And the next question will be from Dan Day, B. Riley FBR. Please go ahead.

Speaker 7

Hey, good morning guys. Thanks for taking the question. So, appreciate the update on the algorithm AI Bidding strategies there. Just maybe if you have any data points or anything you could share just on the subset of advertisers that you think are using these kind of AI tools Better than others and whether there's been an uplift in spending performance for them and then what you need to do to get those that aren't using them to kind of start using AI tools and maybe that helps increase spend per advertiser for those. Any thoughts there would be great.

Speaker 7

Thanks.

Speaker 3

Thanks, Daniel. Everyone here. So AI, first, as I mentioned in the comments, splits for us into 2 big buckets. 1 is the algorithmic AI, which we've been building in house for almost a decade now, and the other is the generative AI. The algorithmic AI are technologies that we deploy across the board.

Speaker 3

So they apply to all publishers, all advertisers within our system. We don't update on the results there all the time, but we did mention last Quarter that for the first half, I think we've seen an increase through those algorithmic AI changes of potential click through rate of 4%. And I did mention in this call that we've seen in the past couple of months that have been among the 3 year record highs in terms of the CTRs. And that again is attributed a lot to all these AI changes or Technologies that we've deployed. On the couple that I mentioned on the call, those are in lab R and D mode.

Speaker 3

As I said, we are live with them on Few advertisers, what we're doing with generative AI is really trying to attack ad variety from all directions. So I mentioned this in a previous call, An advertiser might upload a campaign or even one ad and through generative AI through our chat GPT integrations, we'll Expand that and offer them 200 other variations, which they can decide whether they accept and add to the campaign automatically or not. So those tools were Embedding into the product itself, they are available to ultimately to all advertisers, but it's really up to them to Choose which ad varieties they want to implement and choose. Many of them have been doing it, especially as it relates to creative And headlines, the newer stuff of image upsizing and all that, that is still available to a limited number of testers.

Speaker 7

Okay, great. Thanks. Just to turn it quickly to gross revenue and take rates. If we look beyond 2023, like I know there were some pressures from minimum guarantee deals that you did on sort of the take rate year over year in 2023. As we look to 'twenty four and put our model together, like just to make it easy, if we were to assume gross revenue is Flat.

Speaker 7

Is there any reason we'd think that take rate would expand just from whether it's minimum guarantees rolling off or anything other Puts and takes there on take rate for 2024 relative to 23?

Speaker 4

Yes. So, Don't have a specific number for you or anything like that. Obviously, kind of always when the take rates come up, I mentioned that we focus on ex tech dollars and not really the take rate percentage, especially of the total portfolio. But there's certainly, obviously, as the rates kind of come up these last couple of quarters, we've been focused on some of the things we Actually when it was coming down in the quarters before that, which are optimizing deal performance Scaling some of our new supply and existing supply to drive higher rates and we've had some success there. We continue to focus on that.

Speaker 4

It's one of the main things we do, both manually optimizing and our AI Learning the audience of our partners and serving them better. So the kind of thing that we do feel gets better in time and it Typically takes several quarters, but mix is always a factor as well. It could be a positive or negative factor to even a point in a given quarter. So it's hard to say, obviously, it depends also on the demand environment And some of the things that we're doing with On X and the expansion of video we see as margin lifters going forward as well. So Obviously, our goal is to drive it back up.

Speaker 3

Understood. Thanks, guys.

Operator

Thank you.

Speaker 2

Our next question will

Operator

be from Miguel of Aryan of Citigroup. Please go ahead.

Speaker 8

Hey, good morning, guys.

Speaker 2

Hope you're

Speaker 8

all doing well. And some families and employees back in Israel as well. Just maybe on Onex, if you could expand on that a little bit. It looks to be ramping well. And I know that one specifically is geared more towards brand budgets and With the impact you're seeing on brand, feels like maybe you're not seeing it on On X, but maybe it's

Speaker 2

doing better than expected. Just some

Speaker 8

of the puts and takes around As that launches in the current macro, it

Operator

will be helpful to understand.

Speaker 2

Hey, Gal. Thanks for your kind words. It's David. So Onyx launched in China, as I said, it's been a successful launch. It helped us position the company Outbringing dialogues with the big fixed hold companies in a very different way where we can broaden the value proposition And we offer a full funnel offering that we think is quite unique in the open web.

Speaker 2

So we work with brands from Performance up to consideration and awareness. The formats are different than our traditional native formats. So it's really focused on Primarily video and it ties to the acquisition of Video Intelligence and pushing us more into in stream video that is more relevant for Onyx type Campaigns, we have high impact display that relies a lot on our brand studio where we take existing creatives and help the brands work on them to create to generate better levels of attention and impact from those ads. Number wise, we mentioned Q4. When we launched in Q3, I mean, these budgets are normally determined sort of ahead of time.

Speaker 2

So we were Relatively what we think conservative in our assumptions of the $10,000,000 to $20,000,000 was a broad range. We still stand behind that. Feel very comfortable about what we're tracking is pipeline month over month growth. It's very strong. Current environment is not Very helpful.

Speaker 2

As Jason mentioned, part of the impact we see generally on the on Q4 is brand budgets Pulling back from, for example, news related pages and general macro environment is very volatile. So We're taking that into account when we're talking about the guidance for Q4, but we're very excited about it. When we look at it strategically, it really Changes the whole value proposition for us to our advertisers, our positioning in the market and it's for us a Significant growth driver on XPDU and that sort of go together in 2024.

Speaker 8

Thanks, David. That's helpful. And for Jason, Given the challenges in the macro, the outlook in terms of EBITDA and profitability essentially unchanged from

Operator

what it was last quarter. So It

Speaker 8

feels like you're maybe tracking ahead there, making a little bit more progress. Can you just give us an update on your thoughts around EBITDA and free cash flow as we kind of work our way through the rest of this year, how you're expecting or even cost management for 2024? Thank you.

Speaker 4

Yes. No, obviously, we've been very focused this year on a lot of what we can control, Which is operating more efficiently, more effectively, hubbing of teams and just more automation and all of that. And We've been improving over the course of the year, even our outlook and actuals on the expenses with driving Driving to positive cash even in this environment as the goal. We did return to positive cash flow in the quarter and Expect to stay positive and grow on it in Q4. Obviously, the headwinds on top line are limiting to what's going to happen in the short term there, but we do expect to generate positive cash flow in Q4.

Speaker 4

And obviously, as we get to 2024, nothing to share now, but that's still The mentality we have as we make our plans for next year, which is generating cash and Obviously, continuing to run as efficient and effectively as we can.

Speaker 2

Great. Thanks a lot guys.

Operator

Thank you. This concludes our question and answer Session, I'd like to turn the call back over to management for closing remarks.

Speaker 3

Thanks, operator. We appreciate your time with us today, and we look forward to And peace to all people in the region. Thank you.

Operator

Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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