Good morning, and welcome to Outbrain's Fourth Quarter and Full Year 2021 Earnings Conference Call. Today's call is being recorded, and we have allocated 1 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 fourth quarter and full year 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 current expectations and assumptions. These statements are subject to risks and uncertainties that may cause actual results to differ materially from our forward-looking statements.

These risk factors are discussed in detail in our Form 10-Q for the quarter ended September 30, 2021, filed with the Securities and Exchange Commission as updated in our subsequent reports filed with the commission. 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 fourth quarter earnings release for definitional information and reconciliations of non-GAAP measures to the comparable GAAP financial measures.

Our earnings release can be found on our IR website, investors.outbrain.com under News and Events. With that, let me turn the call over to David..

Thanks, Jason, and thank you all for joining us. I'm pleased to report that, as we expected, Outbrain closed a record year of financial and business performance with a strong fourth quarter.

Our Ex-TAC gross profit was up 17% from Q4 2020 to $76.7 million, and our adjusted EBITDA grew 13% to $23.9 million, exceeding the guidance we provided last quarter. For the full year 2021, our gross revenue exceeded $1 billion and our Ex-TAC gross profit was up by 40% year-over-year.

As a result, our adjusted EBITDA more than doubled to nearly $89 million. Our business continued to grow as we work with more media partners and advertisers than ever before.

We continued our growth by focusing on providing open web media platforms with stronger monetization, higher engagement and better quality leveraging our unique platform capabilities, like Smartlogic for media owners and Conversion Bids Strategy and Real Rime Bidding for advertisers. Let's start with the supply side.

We continue to deepen the relationships with our existing premium media partners, extending our long-term deals among others, with CNN, Sky News, BuzzFeed Japan, Scripps, Orange, Liquide for an average of more than 3 years.

While at the same time growing our market share with new material partnerships and competitive wins such as 1XL, U.K.'s largest group of local publishers, Olympia Verlag in Germany and Heute in Austria. The momentum of win continues into 2022, and we anticipate some significant wins in the coming weeks.

Let's talk for a minute about some of the ground-breaking proprietary technology that is helping us win in the market, Smartlogic. This solution changes the game of feed personalization, taking publishers from the old world of serving a predefined user experience to everyone to a new world of tailoring the feed experience to the taste of every user.

We have deployed Smartlogic on about 70% of our mobile web feeds to date and are beginning our desktop deployment. Our media partners see significant value in this offering as it is driving double-digit yield lift on average.

It has been a deciding factor in how we continue to extend our deals with existing partners and win more market share as publishers are looking to offer the audiences, particularly younger audiences, personalized experiences.

As an example, the Head of Ad Technology and Monetization at FUNKE Media in Germany worked with us to implement Smartlogic and noted they have seen a 61% increase in mobile page monetization as a result. He cited the higher customization to the preferences of FUNKE’s users is driving increased engagement and optimize monetization.

You can see this in many more case studies on our website. In addition, we are growing our business with our partners by expanding to more real estate on their properties. We launched a native Header Bidding solution, building on the strong foundation of our superior native programmatic bidding technology from Zemanta.

This solution allows us to expand our supply relationships with our media partners by gaining incremental access to high-yielding inventory, such as in-market replacement. Our unique angle here is the ability to leverage data from our [code] on page on many of this publishers to improve our bidder win rates.

It is important to mention that the optimization of these bidders takes a long time. We have years of experience accessing supply to programmatic pipes. In fact, MSN, one of our top supply partners, has grown over the last couple of years to a programmatic relationship on the Microsoft Open Exchange.

In addition, we've seen significant growth in the Outbrain extended network, which enables Outbrain advertisers to reach and optimize access to third-party supply via integrations with dozens of SSPs on different media platforms.

We recently integrated Amazon Publisher Services and Google Open Bidding that will give us access to exciting and diverse new supply environment such as new news aggregator apps. In Q4, we also continue to grow our supply in new environments beyond traditional publishers.

We signed partners such as Vivo and Huawei in Q4, and these partnerships are expected to connect Outbrain's advertisers with millions of new users. Revenue from these types of partners doubled year-over-year and drove more than 10% of our top line revenue. Let's switch to the demand side.

Our demand continues to grow and benefits from positive market momentum. In Q4, we had a record number of advertisers directly running their ad campaigns on our platform and our highest average spend per advertisers.

Advertisers using Outbrain increasingly realize the opportunities to grow the business and reach more customers on the open web in contrast to some of the limitations they are experiencing on walled-gardens. We see an increasing number of high-end brand shipping budgets to outcome-based campaign goals.

More than 40% of our business comes from brand and agencies. For example, we grew our business with Disney+ supporting the growth of subscribers for the streaming service across Europe. Amazon also increased their budget with us, promoting Amazon Prime by leveraging our native video formats. These are just 2 examples.

More and more businesses are embracing digital customer experiences and sell direct to consumer as well as increasing their digital budget.

Further, in a consumer survey conducted by a third-party market research company, it was found that consumers trust the content and recommendations they find on news, special interest in herbicides significantly more than those found on social media.

The same survey reported that over 20% of consumers plan to spend less time on social media in the next 6 months. This reinforces our optimism in the opportunity to continue to grow our recommendations on the open web. We are investing in building the operational infrastructure to support our growth.

We grew our team by nearly 200 people in 2021, and Israel and Slovenia, where we have our R&D hubs were our highest growth regions. We are very pleased with the strategic investment to accelerate our video offering through the acquisition of premium contextual video solution, video intelligence or vi in short.

We are already seeing some of the benefits of the synergy having launched the offering on several of our publishers in Q1. With vi, we are able to accelerate our growth in the large market of in-stream video, which is very desirable for advertisers, particularly brands. It also gives us an entry point to CTV.

We plan to accelerate vi's growth by leveraging Outbrain’s global footprint and deep publisher relationships. To sum up, the 40% growth year-over-year in Ex-TAC gross profit for 2021 came in large part because we are realizing the value of the investments we have made in our business over the last few years.

We will continue to invest in technology, specifically in our core engine which uses deep machine learning and AI to personalize recommended content and ads to over 1 billion users around the world. Elise will provide more details on our guidance.

You will see softer growth rate for Q1 driven by lapping a very strong Q1 in 2021, heavy with political and pandemic news consumption as well as an impact on some timing factors on optimization, and expansion opportunities. We expect to see an acceleration of Ex-TAC growth over the remainder of the year. We anticipate a lot of headroom to grow.

So overall, I'm very optimistic about the future of our business and the role we play in supporting journalism and a free and open Internet. Now I'll hand it over to Yaron..

between our media partners and our advertisers, there's only 1 company, Outbrain. For the vast majority of our business, we work with both sides of our marketplace directly.

This insurer is not only full transparency for our partners, but also that the advertisers dollar is used to maximize its return on ad spend and that about $0.70 of each advertiser dollar ends up in our partners' pocket. For about 85% of our business, we don't rely on any SSPs or DSPs or other links in this daily changes.

There are several other areas of big change currently happening, which we are investing in and expect to leverage over time. For example, the shift to registered or known users on many publishers or the rise of reader revenue in the form of subscriptions and e-commerce-related revenue, which many publishers are keen to capitalize on.

As with our market-leading innovations on EBS and the acquisition of vi, we are looking at these big market trends as tremendous innovation opportunities for Outbrain and for our partners who rely on Outbrain's technologies. I'm looking forward to sharing more about our innovations we're working on in future quarters.

And with that, I'll hand it over to Elise to talk about our financial results in more detail..

Great. Thanks, Yaron. We delivered another quarter of strong financial performance, beating both our Ex-TAC gross profit and EBITDA guidance for Q4. We also again saw very healthy adjusted EBITDA margins despite our continued investment in our people and products to drive continued innovation and market leadership.

For the quarter, revenue grew 18% or $44 million year-over-year to approximately $290 million. $26 million or 10 points of growth came from net revenue retention of our existing supply base, which, as a reminder, is equivalent to a same-store sales metric.

This growth came from generating higher yields despite lapping a very strong Q4 2020, which saw a steep COVID recovery and volume benefits from the U.S. elections cycle. On a 2-year stack basis, Q4 grew 53% versus Q4 2019, the highest 2-year growth quarter of 2021.

In addition to retention growth, we also grew by approximately 7 points or $18 million as compared to Q4 2020 from the addition of new supply partners. This has been a steady source of revenue growth for us over the past 2 years. Mobile devices exceeded 70% of our total revenues in the fourth quarter.

Ex-TAC gross profit in Q4, which is the revenue we keep after paying traffic acquisition cost to our media partners, increased $11 million or 17% year-over-year to $77 million. Moving to operating expenses. We saw an increase of $16 million to $58 million in the fourth quarter.

Approximately $9 million was from higher personnel-related costs, reflecting continued investment in our global teams, adding nearly 200 people in 2021. In addition, this quarter, we have higher costs associated with being public and are seeing higher marketing, T&E and facility expenses as activity gradually comes back to more normal operations.

Adjusted EBITDA, our primary measure of profitability increased 13% year-over-year to $23.9 million in Q4, which is over 30% of our Ex-TAC gross profit in the period despite approximately $1.5 million or 6 points of unfavorable foreign currency headwinds on EBITDA. Now, just a final comment on the P&L.

In the fourth quarter, we recorded a onetime tax benefit of $31.8 million through income tax expense related to the release of a valuation allowance on our U.S. deferred tax assets. This valuation release is triggered by our conclusion that it is now more likely than not that we will realize the majority of our deferred tax assets in the U.S.

as a result of our ongoing profitability. You can see this impact as well on our balance sheet through an increase in other assets. Now moving to liquidity. Free cash flow, which we define as cash provided from operating activities less CapEx and cap software, was a net use of cash in the period of $13 million.

The use of cash was a result of business mix and the timing of cash flows as well as a jump in CapEx versus earlier in the year due to the timing of server deliveries. For the year 2021, free cash flow was positive $37 million and approximately $50 million, consistent with our plan when adjusting for onetime IPO, M&A and other nonrecurring matters.

We ended the year with $455 million of cash and cash equivalents on the balance sheet and $236 million of convertible debt at December 31. Of note, we closed the vi acquisition in January, and so the impact of that is not included in the year-end balances, but will be seen in 2022.

In light of our healthy balance sheet and expected continued cash generation, our Board authorized a $30 million share repurchase program on February 28.

The program allows us to repurchase our shares at our discretion and reflects the Board's confidence in Outbrain’s strategy and long-term growth prospects while showcasing management's ability to be strong stewards of capital.

We believe there is meaningful misalignment between our value and our stock price and thus believe this buyback program provides an opportunity to drive value back to our shareholders while continuing to invest in growth.

The timing and amount of any repurchases will, of course, depend on market conditions, share price, applicable legal requirements and other factors. ‘ Last turning to our guidance.

We're introducing full year 2022 expectations for Ex-TAC gross profit of $324 million to $332 million or approximately 21% growth year-over-year at the midpoint and adjusted EBITDA of $94 million to $103 million or approximately 11% growth year-over-year at the midpoint, representing a healthy 30% EBITDA to Ex-TAC margins.

We are confident in our growth for 2022. A few factors of note. We have strong visibility into expected sizable new supply for Q2 and into the second half of the year, including an expected top 10 site publisher win. And we have the planned expansions in article placements through Header Bidding, which will continue to scale over the course of '22.

We also expect to drive yield through the continued adoption of Smartlogic and ongoing tech and algo advancements. And last, of course, and importantly for us, is our acquisition and investment in vi. As a reminder, with vi, we gained immediate access to the in-stream video market, significantly increasing our video TAM.

Integration is underway and we are very encouraged by the initial receptivity from our publishers and expect to invest and drive scaling throughout 2022. So overall, our expectation for the Ex-TAC spread over the year is that half 1 share of Ex-TAC will be in the low 40s percent contribution-wise and half 2 in the high 50s percent contribution-wise.

For the first quarter, we expect Ex-TAC gross profit of $63.5 million to $64.5 million or approximately 6% growth year-over-year at the midpoint. And adjusted EBITDA of $8 million to $9 million, which is lower year-over-year given our Ex-TAC expectations and with respect to our investment in growth and the cost of becoming public.

For Q1, we are lapping a very strong comp versus last year. Recall, Q1 '21 had a very strong news cycle due to COVID vaccines and political events, which drove higher pages for our partners. In addition, we're facing a few additional headwinds in the quarter.

First, the unfavorable impact of timing of certain optimizations and expansion opportunities on existing publishers, as well, we're experiencing an unfavorable revenue mix from media partners in the period. And last, we have notable headwinds on growth from moves in foreign currency.

As a data point in January, we saw 3 points of headwind on Ex-TAC and over 10 points on EBITDA growth. And an early review of FX movements in February suggest continued headwinds for the quarter. We saw some of this in Q4, as I mentioned earlier.

So in summary, even with this lower growth in Q1, we're confident in our expectations for the year as outlined and we'll continue to invest in the many areas of opportunity both David and Yaron touched upon today. Now I'll turn it back to the operator for Q&A..

[Operator Instructions] Our first question comes from the line of Andrew Boone with JMP Securities..

The first is just on Microsoft. So Taboola updated their agreement with Microsoft and talked about kind of a change in the bidding strategy.

Can you guys help us unpack that? And what does that mean for Outbrain? And then secondly, going back to kind of a longer-term initiative just on the quality score, I think you guys began testing last year and now in 2022. Can you talk about where you are and share any early results..

It's David. Thanks. I'll take the Microsoft question. So on Microsoft, we've been working with Microsoft for over 10 years now. And for the last couple of years already we have worked with them very closely in the programmatic environment. So the strategic relationship we have with Microsoft goes way beyond MSN.

And we, over the last couple of years, collaborated very closely in similar areas and specifically on the announcement that you've heard on Microsoft Open Exchange. So we've been scaling our revenue on that exchange for the last couple of years.

And it's really leveraging the deep expertise in bidding and third-party supply and we work very closely with them to continuously improve our bidder capabilities. This is a continuous long-term effort.

In terms of the change that was announced, we were obviously very pleased with it -- with the change out at the end of the last year, could it basically eliminated certain advantages that other players have in the auction. And this will lead to significant new inventory available on the open exchange in 2022.

And so that's -- and we believe that we have a good chance of winning share of these impressions since we've been bidding in this environment for years. And developing a bidder and improving it, it takes -- it's a long time.

So very excited about this, and we think that this will lead to further growth with Microsoft, which is a strategic partner for us.

Yaron, do you want to take the second question?.

Yes. Thanks, Andrew. Yaron here. So in regards to quality rating, as we've said in the past, this will be a multi-quarter effort. It touches a lot of parts of our product and algorithms. So there's a lot of work going on under the hood. Last quarter, we shared that we were working with 2 major U.S.

publishers on the first phase of quality rating, which is the enabling the data signals on those publishers. We're currently up to 12 publishers in the U.S. that have enabled the data signals required for quality rating. And so we continue to roll this out and work on it.

There's a lot more progress to be done, and we'll keep updating in future quarters as we go..

Our next question comes from the line of Shweta Khajuria with Evercore..

Okay. Let me try 2, please. One is, could you please talk about growth in supply and your strategy going forward in terms of driving growth from perhaps long-tail media partners? And then the second question is help us with the Q1 guide and full year guide for both top line and EBITDA.

I guess, I understand there are some headwinds that you pointed to, but is there anything else in addition to that, perhaps certain verticals that you saw headwinds from and why the EBITDA margin contraction for full year '22?.

Shweta, it's David. I'll take the first one, and then I'll turn to Elise. So regarding the supply expansion, so first, we've highlighted also in this quarter, we have a very strong momentum on the premium supply. We normally announce material relationships, I refer to some of them here, and we have a few in the pipeline that Elise referred to.

So we feel very good about market share gaining and obviously deepening and extending relationships with existing premium publishers. In terms of mid and long tail, what we did, we, in the last year, have affected the hubbing of those. So we have a much more effective operation. We generate leads for those. We have an automated way of onboarding them.

So this is again, a big growth vector for us. And on top of that, the new environment that we talk about, like lock screens, mobile carriers, we signed in Q4, Huawei, which is a big one; and Vivo and a few others. So we see good growth on -- generally on supply. And within existing partners, we talked about Header Bidding.

I mean we had tens of partners already adopting our Header Bidding platform that we announced.So we're very comfortable in terms of the growth with supply new and existing, and you see this in the annual guidance that we gave above 20%..

Great. And Shweta, I'll pick up on the balance of the question.

So just generally sticking at the year and some of the drivers that David just mentioned, we do expect a higher ramp up as the year progresses based on the visibility and high confidence in new supply, the timing of the scaling of some product and optimization and, of course, the scaling of our vi acquisition.

In terms of how the year pans out, we did share in the prepared remarks, but I think worthy of repeating here is that for Ex-TAC, we expect the spread over the year in half 1 will be in the low 40% contribution-wise and have 2 in the high 50% contribution wise. Now for the year, we have an expected 30% so still healthy EBITDA margin.

But Q1 is under pressure because of the factors we spoke about on the Q1 top line. But also important to remember that we've made this investment in CapEx, right, people plus public company costs, plus the return of some COVID expenses. None of these are new.

We've been talking about them for a few quarters, but they are steadily in the Q1 expenses and lapping a period last year where they weren't. This, combined with the FX headwinds that I outlined, are converging unfavorably on the quarter. So again, I think you'll see EBITDA ramping probably more steeply than Ex-TAC.

But again, we do believe and embedded in our forecast it to be at 30% EBITDA margins for the year..

Okay. If I can quickly follow up on that, help us with your confidence level in accelerating growth through the year. You talked a little bit about visibility.

Give us some sense of what gives you confidence with the guide?.

Okay. I'll maybe take that.

Sorry, Elise, you want to take it?.

Go ahead, and I can top off on any --.

So we have strong -- I mean we see -- we have visibility into a sizable new supply that's coming in, in Q2 with some wins. We are seeing a very good trajectory of expansion of in-article placements. We're seeing -- I mean, we have -- we talked about the adoption of Smartlogic again, continues to be a game changer.

We see an increasing adoption in mobile, and we just started this year to deploy it also in the desktop environment. So we see those advancements. And then with vi, I mean, we just closed the deal in January of this year, and it gives us access to in-stream video. We're starting the integration.

We have already more than a handful of partners from our publishers that are deploying. We are so very excited about that. So these are really I think, the main factors that give us good confidence..

Our next question comes from the line of Ross Sandler with Barclays..

A question for you, Yaron. We've seen some headlines recently that a lot of Tier 1 publishers are ditching Google's AMP. I think you guys even may work with some of these folks. So just how do you view -- that was good color on the third-party cookies earlier.

But how do you view this potential change going on on the publisher landscape as an opportunity to pick up additional inventory in '22? And do you think given some of the hot water Google has gotten into as far as their display exchange business, any thoughts on picking up share as folks move away from those services?.

Thanks, Ross. So that's the first question, the Google AMP. We've been an early Google AMP partner. We were one of the first to launch there. And so we support that format, and we do for publishers that work with Outbrain. We typically are powering the recommendations on every media they have, and that does include Google AMP.

I think the opportunity with some of those publishers, as you mentioned, starting to ditch Google AMP is that they kind of take back their sovereignty over the user interface, the amount of recommendations they want to place on there.

The split between content and ads, all those things are now going to be back in the publisher's control, and they're not going to just be tied to the prescribed template by Google.

So I think that is an opportunity to pick up more inventory in a way to grow those mobile ads that we serve with our partners on the -- in the Google environment, so definitely that. In regards to the second Google question and the regulatory scrutiny they're undergoing, I think some of the revelations there were quite surprising.

And I think many publishers found out that the amount that they're getting from that -- from the Google ecosystem is not necessarily what the advertisers are paying. There's kind of different prices on different sides of the Google auction. And I think that just goes back to the comments I made before.

We are an end-to-end marketplace with only a single player between us and the advertiser and the media owner or the publisher that provides our partners with great transparency. So they know exactly what the advertisers are paying and they get their cut.

And that's why also I think when we compare to the broader ad tech system on a percentage basis, our partners make a lot more. They make about 70% of every dollar of the advertiser spends while an ad tech generally assume that it's about 40%.

And so I think that, too, is a new revelation, which have been even more comfort in running more real estate with Outbrain..

Our next question comes from the line of Laura Martin with Needham..

Great numbers guys. Congratulations. Yaron, I would love for you to give us a little more on this big trend that you talked about in your comments, the rise of reader revenue, subscription and e-commerce revenues, is it a big market trend.

Could you -- I would love to hear you talk more about that and how you see that shift affecting the Outbrain business, if it is a big trend that you see? Let's start there..

their own videos, their articles, their e-commerce software, whatever it may be. And the core of that is our sort of operating system for managing the feed of recommendations. So we see that as a great opportunity to kind of really sign beyond just the ad real estate that we take. And we're investing a lot in the R&D.

Again, too early to share here, but in future quarters, I'll talk about this more, about how we're going to leverage these trends in the market..

May be I'll add. Laura, it's David. Just on e-commerce, I mean, specifically on e-commerce. So we currently have a very strong e-commerce demand in LC than different places placements on publisher pages. So -- and we're adding features that are more friendly, allowing better capabilities for e-commerce buyers.

I mean one of the biggest growth categories of demand, we don't break it out, but is the direct-to-consumer brand. So we are big believers that we want to ensure quality. So direct relationship directly with the advertisers is important for us, and we heard it also actually from publishers.

I mean, publishers when they look at those, they prefer to have the direct relationship. And by the way, they also try and go directly to large retailers and others that use other platforms and build direct relationships with them.

So we believe that, again, like we generate all types of demands, we don't necessarily need to own a demand channel of a kind, and we have a very strong sort of e-commerce offering.

And we're focusing also on business a little bit more in the future, but integrating more intent data to drive better performance for them, but that's on the e-commerce front..

Super helpful. That's great. My second question and my final question is I'm very excited about vi, which you just closed in January.

My question is this, if you -- perfect situation, clean piece of paper, what do you want to accomplish with vi by year-end 2022? And is the growth -- I understand the big picture idea that it's TAM growth, right? But I'm very interested in how you think it drives the revenue line in 2022? And is that because it integrates into your old products? Or is it essentially a stand-alone new product that is the primary growth driver..

I'll take that. So we are very excited about that. Again, we closed early January. We're seeing already the fruits of the potential synergy with us. So it's actually, it's on all the fronts that you mentioned. So first, we are integrating it into our feed as another card, another offering of the contextual relevant video.

We see good monetization opportunities. Then it's growing their in-article top of stage, contextually-relevant video content into our publishers. It's really leveraging the global footprint, the relationships we have with publishers to bring them -- to bring them there. And then they have a foothold in CTV.

The team is very experienced around CTV and we are investing right now a lot of resources more than they could have done themselves into leveraging their platform to offer what we call a cross-channel alternative for brand buyers, both digital and connected TV. So we're very excited about it.

We think it's, again, expansion of the TAM, leveraging our current global presence and relationships, entrance into CTV. In terms of the contribution, I mean we didn't disclose the numbers, but I can tell you that our guidance, it's very low, sort of in the low single digits that we expect this year.

But we're very excited about the strategic value and the growth it will provide in years to come..

Okay. And CTV as defined by the IAB is over 50-inch screens.

I assume that is not what you mean by CTV when you use the word, right?.

I mean by CTV sort of they are selling into Samsung TV Plus, Google TV applications that are on display on connected TVs and they're using contextually relevant technology to place contextually relevant ads there. I hope this answers your question..

Yes, yes, yes..

Our next question comes from the line of Brent Thill with Jefferies..

This is James on for Brent. What impact, if any, did you see from Omicron hitting at the end of December and into January, Were there any ad verticals that slowed down materially? And is that slowdown impacting your Q1 guide at all? That's my first question.

And my second one is how should investors be thinking about your uses of cash over the next few years? You've announced the repurchase and done some M&A.

But can you just remind us again of your big strategic plans that you're prioritizing in the short to medium term?.

James, it's David. I'll take the first one. On the vertical impact, I mean, we've seen and we said it in the last quarter, we have a very good mix of advertisers. It's very balanced. Even if we see an impact in certain verticals, it doesn't really impact us in the overall network.

We've seen some slowdown in the auto category, and auto categories is a good 1 for us. I mean, we generate a lot of leads for top brands in the world, people who want to come in and visit the dealership. I mean there's been less cars. So less money spent on trying to create leads to visit dealerships, but it really did not have any impact on us.

We are following these trends around verticals but we are very diversified. We're very strong in financial health, entertainment and others. And so it really did not have any impact.

Elise, you want to take the cash?.

Sure. James. So -- right, on the cash, a few things. One, we did share with you details in and around our buyback program. It's $30 million program. We think with our healthy balance sheet and expected continued cash generation, this is fairly modest and of course, doesn't impact any growth initiatives for us.

But we think it's a prudent use of capital at this time. Beyond that, we're being very thoughtful on the M&A front. I mean you saw the recent vi acquisition. And we'll continue to manage and assess that pipeline.

I mean we're very keen, just like we said over the past few quarters, drive -- how do we drive shareholder value, looking at accelerating growth through visits and technology and product as well. We think M&A is a strength of ours. We're an attractive strategic partner for many of the opportunities we see.

So we'll continue to be active on that front, but nothing at this stage to announce..

There are no further questions in the queue. I'd like to hand the call back to management for closing remarks..

Sure. And operator, we just want to maybe make 1 clarifying point on some of the Q1 drivers, specifically with respect to FX. We had some investor inquiry offline, and we thought it would be beneficial to share with this group. So in addressing the Q1 guidance, we talked about headwinds from foreign currency.

So the way to think about that, we're seeing on ex-TAC and we're seeing it on EBITDA. So when we look at in Q1 results, and we're comparing them to Q1 2020, it's very common to look at things on a constant currency basis.

And so when we look at Ex-TAC gross profit, constant currency Q1 2021 to this quarter, we see about 3 percentage points of growth headwind. If I translate that to dollars, last year, we had $60 million of Ex-TAC. If we reported this year, it would be $2 million less, okay? Just FX moves along. So that's a headwind without anything being different.

And on EBITDA, same thing, but more pronounced. Last year, we had $20 million of EBITDA. This year, if we reported, it would be $18 million on a constant currency basis. So $2 million less or 10 points of growth headwinds. So it is putting a headwind on our business. We are global. We operate in multiple currencies. And so these things happen often.

There's puts and takes all the time. The way it's converging this quarter, mainly on the euro and the shekel is producing notable pressure on the year-over-year comps. So we hope that additional color helps. If not, of course, we're available for any follow-up questions for the group. With that, I'll put it to Yaron for some closing remarks..

Thanks, Elyse. Thanks. So we want to thank you all for the time today. We're excited with our Q4 and the full year 2021 record-breaking results.

We're really looking forward to sharing with you over the next months, the progress we're making on our innovative breakthrough products, such as Smartlogic, CBS, EBS, Header Bidding as well as our vi integration and new partnerships. Thank you, everyone..

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day..