Teads Holding Co (TEAD) 2021 Q2 法說會逐字稿

Good morning and welcome to Outbrain's second-quarter 2021 earnings conference call. Today's call is being recorded and we have allocated one hour for prepared remarks and Q&A. At this time I'd like to turn the conference over to Jason Kiviat. Thank you. Please go ahead.

Good morning and thank you for joining us on today's conference call to discuss Outbrain's second-quarter 2021 results. Joining me on the call today we have Outbrain's Co-Founder and Co-CEO, Yaron Galai; Co-CEO, David Kostman; and CFO, Elise Garofalo. During this conference call management will make forward-looking statements based on the current expectations and assumptions which are subject to risks and uncertainties.

Actual results could differ materially from our forward-looking statements if any of our key assumptions are incorrect because of other factors discussed in today's earnings press release and the comments made during this conference call, or in our latest reports and filings with the Securities and Exchange Commission, each of which can be found on our IR website, investors.outbrain.com. We do not undertake any duty to update any forward-looking statements.

Today's presentation also includes references to non-GAAP financial measures. You should refer to the information contained in the Company's second-quarter press release for definitional information and reconciliations of non-GAAP measures to the comparable GAAP financial measures. With that let me turn the call over to Yaron.

Thank you, Jason. Good morning, everyone, and thank you for joining us today. As we've just completed our initial public offering, I want to acknowledge and thank everyone who has helped us reach this exciting milestone for our Company. Employees, past and present partners, customers and investors old and new, thank you for being part of this journey. We are very excited for what is next.

Since this is our first earnings call as a public company, I will take the opportunity to provide some highlights about Outbrain's founding story. Ori Lahav and I founded Outbrain about 15 years ago and we pioneered the space of recommendations on the open web. We tried to solve two things. First, enable consumers to more easily discover content from publishers and media owners. Second, to create a sustainable, scalable business model for those media owners.

At the time, the prevailing model for the entire online industry -- advertising industry was focused on extracting higher prices from advertisers. But as consumers, we didn't feel like the ad prices mattered to us at all. And yet even today, most of the advertising industry optimizes primarily for extracting higher ad prices regardless of the impact on the user's experience.

We founded Outbrain to be a leader in recommendations and content discovery, focusing on users' engagement first. We believe that this is the key to maximizing long-term yields for both our partners and for ourselves, because user engagement has a compounding effect.

I wrote in more detail about this compounding effect in the founder's letter in the S1, and I encourage you to read it if you'd like to better understand Outbrain's differentiation and long-term focus. The founder's letter is also posted on the Investors section of our website.

Why does this matter? Let's discuss how our recommendation engine creates user engagement, which in turn creates value for our three constituencies. First, for us the consumers, recommendations drive value by being more personalized and, therefore, more interesting and engaging.

Second are our advertisers. A powerful recommendation technology engages the right users at the right time. Advertisers pay us primarily for actual user engagement or cost per click. They love this because it drives measurable results with superior ROAS, or return on ad spend.

The third constituency are our media owner and publisher partners. For them the recommendations are the driver of LTV, or lifetime value. In the immediate term, those operating ad recommendations drive tremendous revenue for our partner. We've generated over $3 billion of revenue from our ads for our partners to date.

In addition, our focus on user engagement, when providing what's typically called organic recommendations for media partners, drives them more engagement and user loyalty, which translates for them into more revenue in the future. We believe that this is what drives the scale and accelerating growth that you can see in our results.

We reach about 1 billion people per month through partnerships with more than 7,000 media properties, including many of the world's best media owners, companies such as Sky News, CNN, MSN, Der Spiegel, Washington Post, Sankei, New York Post, LeMonde and many, many others. Nearly all of these partnerships are exclusive with Outbrain.

More recently we have been growing our recommendations on new media environments such as mobile device manufacturers, push notifications and web browsers, which is a good indication of how Outbrain will be able to power recommendations wherever content is consumed in the years to come.

Switching gears, I want to briefly touch on the topic of cookies. All companies in our space use third-party cookies, but for us they are just one of a variety of solutions that we use. Two other technologies that we've built and used for over a decade are much more important for us.

First, since we power the entire feed experience on many of the world's most premium publishers, we have a tremendous amount of first party data, which is immune to all the changes you're hearing about these days.

Second, at my previous company, Quigo, the team and I pioneered the space of contextual advertising on the Internet. That core team of contextual experts continued with me to Outbrain, and we built it with contextual algorithms at the core from day one. We've been pioneering and innovating on contextual technologies which don't need any cookies for two decades now.

Before I hand the call over to my partners, I would like to note an exciting addition we announced at the Board level last week. We are thrilled to have recently added a new Board member, Kate Jhaveri. Kate is currently the Chief Marketing Officer of the NBA, continuing an impressive career of executive and senior positions at Amazon's Twitch Interactive, at Facebook, Twitter and Microsoft. She brings a wealth of experience in public and growth companies with focus on the consumer and on brand advertisers. Welcome aboard, Kate.

I will now turn the call over to David who will preview the exciting momentum in our results, highlight our competitive advantage in the market, and the opportunity for Outbrain going forward with our differentiated offering. David?

Thank you, Yaron. We are excited to host you all on our first earnings call as a public company. Q2 2021 was yet another record quarter for us in revenue, ex-TAC gross profit and profitability. Revenue grew 57% year-over-year to $247 million. Ex-TAC gross profit increased 68% year-over-year to $67 million. Our year-over-year growth rate outpaced the general growth we see in our category.

We continued to demonstrate strong operating leverage, delivering adjusted EBITDA of $25 million in the quarter. Our media partner net revenue retention was 150% and our free cash flow conversion was 67% of adjusted EBITDA.

Outbrain continues to emerge as a driving force of the open web. For publishers and media owners who need to compete with Google and Facebook for user attention, we provide a state-of-the-art AI-based recommendation technology making every page smarter, more personalized and more engaging. Our relationships with media owners are typically exclusive, which means we have full control of our inventory.

Looking at our top 20 partners based on 2020 revenues, they have an average tenure of seven years on our platform. These partnerships are commonly renewed for two to three years at a time. For marketers who increasingly seek outcome based advertising solutions, and allocate more dollars to performance buying, we deliver an end-to-end solution, an easy to use platform with scale, reach and performance.

You can think of us as an exclusive SSP on one side and a proprietary advanced ESP on the other side. So, we are enjoying similar market trends, but our end-to-end and exclusive supply relationships create a highly differentiated and sustainable model.

For users navigating an ever-growing universe of articles, videos and podcasts created every day, we provide a simpler, better online experience by showing personalized recommendations that meet you wherever you are online.

I want to spend some time explaining the key organic growth drivers of our platform and how they fueled our Q2 results. Underpinning our growth is our dedication to technology and innovation. Our proprietary technology, private cloud infrastructure and vast amounts of first party contextual data create a strong competitive advantage and barrier to entry.

Our micro services architecture allows us to innovate faster as we leverage our massive data set through machine learning and AI to continuously improve the performance of our recommendations. And thanks to the architecture and efficiency of our system, we do this in a highly scalable and cost effective way, supporting our high free cash flow conversion rate.

Built on top of this technology and data infrastructure, I want to call out four strong market tailwinds. Two relate to how we grow our recommendation market share on the supply side, and two relate to how we grow our advertiser market share. Let's start with our recommendation market.

The explosion in digital media consumption means we reach and engage more connected users than ever before. The technology and innovation strides we've made in personalization, feed experiences and interest prediction make our recommendations a great deal more relevant and engaging, resulting in higher participation rates.

On the advertising side we continue to see a massive shift to digital advertising with a strong focus on e-commerce and direct-to-consumer models. These advertisers are used to working on a cost per click basis with platforms like Google and Facebook, and they turn to us to find customers and drive sales, especially in a post-pandemic landscape.

Companies now look to their CMO to not only build a brand, but also to drive online sales, grow subscriptions or bring new deals. Organizations rely on digital channels for direct response and customer activation. We see a strong trend towards outcome based marketing and CPC media buying.

Second on the advertiser side, we continue to improve ROAS performance by investing heavily into our proprietary AI driven performance engine and in new and innovative ad experiences that leverage video and social creatives. We play an important role in complementing the spend of advertisers on the walled gardens which spend on the open web.

So, when you put these four tracks together and you get these powerful trends, more users with high engagement rates and more advertisers seeing better performance. Let's dive deeper into some of the product and business activities we have undertaken, first on the media owner side.

A smart logic engine released in Q4 2020 on top of our Smartfeed technology has AI powering not just what gets recommended in the feed but also what the feed composition looks like, the frequency of experiences we refer to as [card], and the composition of the different experiences.

From dynamically optimizing the feed ad load to managing the UI of every feed placement, we have seen that smart logic delivers higher user engagement and close to 30% estimated revenue lift. We are accelerating smart logic deployment and, by the end of Q2, more than 20% of our mobile feeds adopted our superior smart logic technology.

In Q2, we also have won new relationships such as Sports Illustrated, The Street, Dailymotion and more than 100 new media properties. Additionally, as we typically do throughout the year, also in Q2 we renewed and extended several of our long-standing strategic partnerships with premium publishers.

As we all know, the open Internet these days is much more than websites. About 18 months ago, we kicked off a strategic initiative designed to power recommendations on new media environments. We have seen tremendous appetite from device manufacturers, mobile carriers and software companies to leverage our recommendation platform to showcase high quality personalized content recommendations and to monetize their user base.

These media partners now represent more than 10% of our revenue and are growing at more than 100% year-over-year. This is an exciting space representing another growth frontier and an important step towards the goal of powering recommendations wherever content is consumed.

Moving to the advertising side of the business, we saw year-over-year growth in the number of advertisers. To provide some context, in 2020 more than 20,000 advertisers used our platform to establish their brand, build consideration and drive sales. The increase of advertisers using our brand would not translate to growth without our ability to drive the best results for them.

We are now realizing the investment made over the past 24 months in building conversion bid strategy, an AI based conversion optimization engine that is optimizing towards on-site conversion, CPA goal, purchase value, all lifetime value and not just CTR.

We see higher performance for advertisers when we move their campaigns to CBS that automatically optimizes in real time every ad, every bid, every placement and every user to maximize sales, leads or conversions. We've seen great momentum with conversion bit strategy leading to increased budget spend on our platform.

Video continues to be a strong growth driver. Our video revenues increased by more than 100% year-over-year in Q2, accounting for approximately 8% of our revenues. One product we released in Q2 that we are very excited about is Clip, a video performance solution designed to help e-commerce and direct-to-consumer players drive sales, app downloads and registration. We had more than 500 advertisers use this new format in Q2.

Before I conclude I want to say once again just how excited we are to start this new chapter as a public company. The investments made into the business are used to accelerate our growth and provide long-term value to our media owner and advertiser partners, our users and to our shareholders. Looking forward we continue to see a positive macroenvironment in our industry driving momentum in our business.

The premium nature and superior quality of our network paired with the recognition that we are the trusted and transparent partner of choice continues to be a key differentiator. This combination supports our continued positive outlook for the year, as you will see in our guidance. Now I turn the call over to our CFO, Elise.

Great, thanks, David. And again, welcome, everyone. As you can see from our numbers, we have been delivering very strong performance both year-over-year and sequentially. We are benefiting from the strength in digital advertising broadly, but also we are outpacing that growth on the top and the bottom line as we deliver strong execution against our growth plans.

Before we cover the results, I wanted to share a few aspects of our business model that are important attributes for creating long-term value. First we have multiple growth levers in the business and, within each of those areas, there's meaningful headroom for expansion. There is a high degree of interconnectivity of supply/demand and technology growth drivers across our marketplace whereby improvements in one area drive improvements in another, demonstrating the compounding benefits of our platform.

Second, we have a huge distribution asset in our media owner portfolio and we are obsessed with landing and expanding. Third, we have meaningful operating leverage in the business with high margins and the opportunity to continue to drive scale through technology and organizational efficiencies. And last, our technology base is efficient and ready for scale at very competitive and low CapEx levels. Together we believe these attributes make our business model highly attractive for continued growth and profitability.

Now turning to our results, we delivered strong financial performance in the second quarter ending June 30, 2021. Revenue grew by $89.3 million to $247.2 million, representing 57% growth compared to the second quarter of 2020. Net revenue retention of our existing supply base, which is the equivalent to a same-store sales metric, grew approximately $79 million or 50%.

Growth from existing supply was driven by higher yields on the platform supported by both increases in demand and by ongoing improvements in click through rate or the rate of engagement on our platform. We also grew from the addition of new supply in the quarter, which delivered approximately $12 million or 7 points of growth. Approximately half of this growth was driven by growth of new media environments that David referred to earlier.

Across all revenue we saw continued strength in mobile, which represented approximately 68% of total revenues in the second quarter. And geographically we continue to see strength globally. As a reminder, over 60% of our revenue is outside of the US.

Next, ex-TAC gross profit, which is the revenue we keep after paying traffic acquisition costs to our media partners, increased $27.1 million or 68% year-over-year to $66.8 million. Ex-TAC gross profit outpaced revenue growth for two reasons.

First, we had the impact of favorable revenue mix from higher-margin media partners in the period. And second, higher yields on the platform drove improved performance on our media partners with guarantee arrangements. In addition to the year-over-year comparison, ex-TAC gross profit grew 11% sequentially speaking to continued overall strength in the business.

Moving to operating expenses, we saw an increase of 32% or approximately $10 million to $41.9 million in the second quarter of 2021 as we continued to invest in growth. Approximately half of the $10.1 million increase relates to higher compensation costs driven by both increased headcount and higher incentive compensation related to our strong financial performance.

We also had the impact of unfavorable effects of foreign currency of an estimated $2 million in the period. The remainder of the increase was driven primarily by higher professional fees and increased marketing and other costs as we gradually come back to more normal operations following the pandemic.

Adjusted EBITDA increased over four times from $5.2 million in last year's second quarter to $24.6 million in the second quarter of 2021 as ex-TAC gross profit growth exceeded expense growth meaningfully. The yield improvements that we delivered on our platform, which primarily drove our ex-TAC performance, dropped to the bottom line even with our continued investment in the business. Our adjusted EBITDA to ex-TAC gross profit margin was 36.8%.

Free cash flow, which we define as cash provided by operating activities less CapEx and less capitalized software costs, was $16.5 million in the quarter. Our cash conversion was a strong 67%. This is the ratio of free cash flow divided by adjusted EBITDA.

We ended the quarter with $111 million of cash and cash equivalents. And pro forma for the $360 million of capital we raised in July, following the end of the quarter, our cash and cash equivalent balance was approximately $450 million after adjusting for estimated expenses. The gross proceeds we raised of $360 million came from our IPO, which raised $160 million, and the sale of our now public convertible note to the Baupost Group which raised $200 million.

Last, turning to our guidance. For the third quarter ending September 30, 2021 we expect ex-TAC gross profit of $64.5 million to $66 million, or approximately 34% growth year-over-year at the midpoint of the range, and adjusted EBITDA of $15.5 million to $16.5 million, or approximately 26% growth year-over-year at the midpoint of the range.

And for the full year ended December 31, 2021, we expect ex-TAC gross profit of $266 million to $270 million or approximately 38% growth year-over-year at the midpoint. And we expect adjusted EBITDA of $80.5 million to $82.5 million or nearly doubling EBITDA year-over-year at the midpoint.

This outlook includes continued investment in growth as well as the absorption of an increase in ongoing costs associated with the post-COVID return to normal and costs of becoming public while still delivering very strong operating margins of 30% plus.

In summary, we are very pleased with our results this year and to be able to provide an outlook that continues to exceed our internal plan. We are even more excited about the opportunities ahead of us. I will now turn the call back to Yaron for closing remarks.

Thanks, Elise. So, as you can see in our recent results, as well as our Q3 expectations, we are benefiting from positive industry trends in our space while, at the same time, accelerating growth on top of that through our superior technology and positioning.

While we are very pleased with our Company's recent performance, we believe that the opportunity for continued growth is significant. Our technological advantages and business model have poised our Company to capture market share and create value for our shareholders. Our goal is to maintain a high level of visibility and clarity with the investment community and we look forward to keeping you up to speed as our business grows.

I want to thank you all for spending your time with us this morning. And with that I will turn the call back over to the moderator for questions and answers.

(Operator Instructions). Nick Jones, Citi.

Great, thanks for taking the questions. First, could you expand a little bit just on the impact of IDFA, looming third-party cookie deprecation and how Outbrain is positioned amid these changes. Is this potentially a benefit as contextual advertising becomes more popular? And then a follow-up. Thanks.

Sure, hi. This is Yaron. Thanks, Nick. So, in terms of being able to personalize the experience and serve relevant recommendations, as I said in the opening piece, there are two areas that are really areas of strength and relative strength compared to the online advertising industry.

The first one, as I mentioned, we invented -- we, I mean myself and a bunch of our core team at my previous company, Quigo -- we invented the space of contextual advertising, or co-pioneered it I would say. And so, we've been building and using contextual targeting technologies for about two decades now. It's not something we added or slapped a 2021 contextual slogan on what we do, but rather have been doing this for over a decade at Outbrain and two decades including my previous company.

Contextual is -- works regardless of any cookies. It doesn't use any cookies at all. And so, we think that's a very important strength for us going forward and it's certainly, as you are seeing in the industry, something many companies are excited about.

The second is it's important to understand Outbrain powers the entirety of the user experience on those media owners that we partner with. We do that usually exclusively. That means we power both the advertising in the feed and the recommendations themselves, the organic recommendations, be it articles and videos, the ones on the same properties.

That gives us a tremendous amount of first party data, which, again, is immune to everything you're hearing about with third-party cookies. That first party data we can use as we see fit going forward and it's a big part of how we've been recommending for a good chunk of time.

Great, thanks. And then maybe a separate question. As COVID restrictions loosen and maybe the traffic volumes change at your publishers, can you talk about the impact of that? Is it kind of improvement in click through rate potentially offsetting lower traffic volumes? Or are there any trends that you're seeing as COVID restrictions loosen? Thanks.

Nick, it's David, I'll take that one. So, we haven't seen any meaningful impact on the supply side of the business in terms of traffic. There is some seasonality now in the summer. And we are capturing increased user engagement, better CTR, better technology to compensate for any potential decline. So, you see that our business is driven primarily by increasing the yield to technology and product.

Great, thanks for the questions.

Shweta Khajuria, Evercore ISI.

Okay, thank you. A couple questions from me, please. One is could you remind us about the CBS product? What percentage of gross spend is touched by that? And any other metrics you could provide in terms of how impactful advertisers have found that product to be?

And then the second question is on the new media environment. How big of a tailwind do you think that can be? Is this in the early innings? What kind of other media formats do you think you could innovate on? And any contacts there, that would be great. Thanks.

I'll take the first one, Yaron will take the second. In terms of CBS, we don't give specific numbers, but we have -- more than half of our network right now is using CBS. CBS is a continuous improvement and CBS gets improved on a daily basis with more algorithmic capabilities, better bidding.

So, right now we see more than 50% of the spend is already using it. We will see acceleration both in terms of the percentage of the revenue that's generated through CBS, but also through significant improvements that we see in CBS delivering better results for advertisers in terms of ROAS.

Thanks, David. And on the second question, please?

Yes, sorry. So, in terms of new environments, we think there's a tremendous opportunity of growth in new environments. And it all starts from the consumer, where people are actually discovering content and consuming those feeds. A good example from the broader world is, a couple years ago Apple was not in the news or content business at all. And now when you swipe left, or your lock screen in all kinds of places, there's suddenly new places where you see a feed of content.

That means that a lot of other media owners, other handset manufacturers are -- lock screens or notifications, they are all looking at opportunities to provide users with news feeds. And many of those come to us asking for those technologies.

Those are not easy to develop. So, this is an area that's -- again, it is not big for us but there are strong tailwinds. It's tens of millions of dollars already, so it's something we know how to do. And we think there's just more and more of these screens and [canvasses] coming online that will need a feed at their core.

Brent Thill, Jefferies.

Great this is James on for Brent. Thanks for taking my questions. Could you just talk about the investments you plan to make with the $450 million that you are going to have in cash? Is it primarily headcount or are there other areas where you're thinking about making big investments, whether that is M&A or elsewhere?

And then my second question for Elise would just be around the guide. It seems to imply a decent amount of deceleration on a two-year stack basis. So, wondering if you could comment on what's driving that decel. Is there just some conservatism or any other reasons that you are being cautious? Thanks.

Hi, James, this is David. I'll take the first one. So, in terms of the cash that we have on balance sheet right now, we will continue to invest in the business and primarily in hiring. Now what you see in our plans that the guidance -- I mean it (inaudible) the additional investments, we see tremendous opportunities. We're trying to accelerate hiring and we're looking at many projects that are positive that would be accretive to our current plan.

We're also looking at the M&A front. We do not feel that we need M&A to deliver on any of our growth objectives, so we are looking at it very strategically in terms of potentially accelerating go-to-market for certain areas or entering potentially some adjacent areas. And we are very actively looking at things, but nothing is right now specifically that we can update on.

Okay, hi, James. Thanks for the question. Two parts really. I think on the two-year stack, as we look at Q3 there actually isn't a deceleration. So, if we looked at the Q3 -- call it the midpoint at the ex-TAC guidance, it is around 55% growth, which is consistent with two-year stack comparables of the first and second quarter of the year.

On the EBITDA front, certainly EBITDA is multiplying on a two-year stack basis and even year-over-year. But what you are probably observing is expenses will be growing about $6 million from Q2 to Q3, and that's primarily a function of two things. One is the introduction of public company costs.

So, D&O insurance, people, processes, those types of things make their first step change. And then second is the return to normal costs as we slowly and gradually come out of the main hits from COVID, so you are seeing some of that.

So those two combined are the bulk of the cost acceleration there. And so, we will expect some softer EBITDA margin. But still for the year we expect 30% plus EBITDA to grow ex-TAC gross profit margins.

One other comment maybe I'll make just on the sequential performance Q2 to Q3, typical progression -- I think what you see in our guidance is typical progression Q2 to Q3 and nothing extraordinary there. And then last, of course, it's our first few quarters out of the box as a public company, so we're taking that into consideration as well.

(Operator Instructions). Ron Josey, JMP Securities.

Great, thanks for taking the questions. Maybe two please, one on just product improvements. Yaron, David, you talked quite a bit about the investments in tech and product from app install launched a year ago to conversion bid strategy and Clip. And just talk about maybe Outbrain's tech development lifecycle and the improvements you're seeing in the click through rates as a result. And maybe bigger picture, how these products are tracking newer advertisers.

So, that's question number one just on product improvements and how that's improving click through rates. And then second question, Yaron, you spoke quite a bit upfront about Outbrain's quality score initiative. So, maybe help us understand bigger picture just how you envision this playing out, the implementation, timelines, things along those lines, thank you.

So, in terms of the development lifecycle, we have -- in our two R&D centers in Israel and Slovenia we have about 300 -- over 300 people. And technology is at the core of everything we do since the first day of the offering.

In terms of technological improvements on algorithms, which is a big area of focus for us, those are obviously long life cycles of investing in research and development and bringing technologies to market. Sometimes they succeed, sometimes they don't. That's the nature of research and development. Sometimes they are shorter cycles and sometimes longer.

Quality rating is a great example of that. That's a new set of algorithms that we announced a few months ago starting to roll out. And we are doing gradual rollouts, learning from some of the criticism publishers and advertisers had of the tech giants rolling out abrupt algorithm changes. So, we are doing this gradually over the next few months, working with media owners and advertisers to make sure they can adjust to quality rating algorithms.

For us it's one of the biggest algorithm changes or introductions we are doing in recent years. And what quality rating is all about is, as the name implies, understanding the quality of ads and recommendations before they go live into the feed so that we can, obviously, improve the quality and personalization based on that.

More specifically, a lot of the signals we've used historically in the variety of algorithms that we use are focused on the actual -- the engaged users, the ones that are actually clicking and engaging with the recommendations. And that fidelity of data or signals is very high and enables us to create more engaging recommendations.

What we are focused on with quality rating is on a different cohort of users, which is the folks that are not engaging, those are the majority of the users we reach. They are not currently engaging with our recommendations. And we think there's huge opportunity in engaging more people. So, historic algorithms were more focused on higher engagement, quality rating is focused on engaging more users.

As I said, it will take a few more months of the rollout of this algorithm. We are starting to work with the advertisers and media owners, but we think that for many years to come we're going to have some big benefits in terms of quality and engaging more users that we reach.

Ross Sandler, Barclays.

Two questions, just a follow-up on the CBS topic. So, how much does the average account increase their spend with you guys when they go from not using CBS to picking that up? And then your ex-TAC gross margin percentage, your take rate, is a little bit lower than Taboola. I assume that's from mix. But just any comment on that. Is that an opportunity for Outbrain as you look forward? Thanks a lot.

On CBS, as we said, we have more than 50% of the revenue right now is being spent to that. And what it basically delivers is increased budget spend. And many of our budgets are basically continuing to spend with us as long as we achieve their return on ad spend objective, so they're not an IO that starts and ends.

So, as long as we can continue and improve the performance of those dollars they will continue to spend with us. And what we've seen is increased budget spend. So, on a daily basis and then they continue to replenish further to CBS in a very significant way. Elise, do you want to take the margin question?

Sure. Listen, I think we focus on ex-TAC gross profit in absolute dollar terms. So, we're very focused on growing the total pie, both our share and that of which we share with our media owner partners. We also think that mix is a factor, as you alluded to, Ross.

But as long as we continue to grow the absolute dollars, we continue to generate and grow profitability on the bottom line, that's the primary focus. And we said this, we said it on the roadshow, we said it in many of our discussions, we'll take the absolute dollars over a point of margin.

(Operator Instructions). We're showing no additional questions in queue. I would like to turn the floor back over to management for closing comments.

We want to thank you all for attending our first call as a public company. We're very excited about what we delivered in Q2. Very confident about the future, as you can see in our guidance, based both on market trends and what we're delivering internally in terms of technology and innovation. And look forward to seeing you soon in the next quarterly call. Thank you all.

Ladies and gentlemen, thank you for your participation and interest in Outbrain. This does conclude today's event. You may disconnect your lines or log off the webcast at this time and have a wonderful day.