Outbrain announces $200 million investment from The Baupost Group

The announcement by the Israeli company came just one week after Outbrain's prospectus for its first Nasdaq offering was published by the SEC

Internet recommendation company Outbrain announced on Tuesday that it has secured $200 million in funding from Boston-based investment manager The Baupost Group. The announcement came just one week after Outbrain's prospectus for its first Nasdaq offering was published by the SEC.

 

“We are excited to announce this investment from The Baupost Group, who share our vision and commitment for our business, our team and our future prospects,” said David Kostman, Co-CEO of Outbrain.

 

“We proudly lead the recommendation space we created. We have bold plans for the future to continue delivering critical innovation to our premium media partners worldwide and expanding our powerful open web global advertising platform,” added Yaron Galai, Co-Founder and Co-CEO of Outbrain.

 

David Kostman, Co-CEO of Outbrain. Photo: Amit Shaal

 

Jefferies and Citigroup served as placement agents to Outbrain. Mayer Brown LLP served as legal counsel to Outbrain. Ropes & Gray LLP served as legal counsel to Baupost.

 

The Baupost Group is a Boston-based investment manager which manages roughly $31 billion, investing in a wide range of asset classes, including significant holdings in publicly traded debt and equity securities, private debt, real estate, and private equity. CEO and Portfolio Manager Seth Klarman has overseen Baupost’s investments from the company’s inception in 1982.

 

Outbrain’s prospectus from last week didn't reveal the fundraising scope or the company’s valuation, but it did shed light on the company's performance. Outbrain grew at a rate of 29% in the first quarter of 2021 and posted revenue of $228 million.

 

Unlike most Israeli companies currently traded in New York, Outbrain posted a bottom-line profit of $10.7 million in 2021’s first quarter. In the same quarter in 2020, Outbrain posted revenue of $177.3 million and lost $9.5 million. The company showed cash balances of $95 million as of the end of the first quarter of 2021.

 

Outbrain ended 2020 with revenue of $767.1 million, and a relatively moderate growth rate of 11% as a result of the slowdown in the first half of the year due to the coronavirus outbreak. However, it showed an operating profit of $10 million for the first time, compared to a loss of $4.5 million in 2019. Ultimately, Outbrain posted a net profit of $4.4 million compared to a loss of $20.5 million the previous year.

 

Outbrain was founded by brothers Yaron and Eytan Galai. Yaron Galai serves as co-CEO with David Kostman (who is also NICE chairman - SSH). Before the IPO, he was appointed chairman of the company. Ori Lahav serves as VP of technology.

 

Outbrain currently employs about 1,000 people and among its major shareholders are VC funds Viola with 14% of the shares, Lightspeed with 13.9% and Gemini with 10.8%. Yaron Galai holds 7.8% of the shares, while Lahav has a 1.9% holding. Outbrain's offering is led by investment banks Citi, Jeffries, Barclays, and Evercore. The stock will be traded under the symbol OB.