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United States securities and exchange commission logo
May 18, 2021
Veronica Gonzalez
General Counsel
Outbrain Inc.
222 Broadway, 19th Floor
New York, NY 10038
Re: Outbrain Inc.
Draft Registration
Statement on Form S-1
Submitted April 21,
2021
CIK No. 0001454938
Dear Ms. Gonzalez:
We have reviewed your draft registration statement and have the
following comments. In
some of our comments, we may ask you to provide us with information so
we may better
understand your disclosure.
Please respond to this letter by providing the requested
information and either submitting
an amended draft registration statement or publicly filing your
registration statement on
EDGAR. If you do not believe our comments apply to your facts and
circumstances or do not
believe an amendment is appropriate, please tell us why in your
response.
After reviewing the information you provide in response to these
comments and your
amended draft registration statement or filed registration statement, we
may have additional
comments.
Draft Registration Statement on Form S-1 submitted April 21, 2021
Summary, page 1
1. Please revise the
titles in this section and throughout your filing of Revenue Ex-TAC
and Adjusted EBITDA
as % of Revenue Ex-TAC to reflect their nature as being more
akin to gross profit.
2. You highlight some of
your key media partners including Asahi Shimbun, CNN, Der
Spiegel, Le Monde, MSN,
Sky News and Sky Sports, and The Washington Post. Please
explain the
significance of these customers by clarifying the amount of revenue accounted
for by these media
partners. We note that two of your largest media partners
each accounted for
approximately 10% of your revenues in 2019 and 2020.
Veronica Gonzalez
FirstName LastNameVeronica Gonzalez
Outbrain Inc.
Comapany
May NameOutbrain Inc.
18, 2021
May 18,
Page 2 2021 Page 2
FirstName LastName
Industry Data, page 6
3. We note that certain disclosures are attributed to third-party
sources, such as eMarketer
and IAB. Please tell us whether you commissioned any third party
research for use in
connection with this offering. If so, please tell us what
consideration you gave to filing the
third party's consent as an exhibit to the registration statement as
required by Section 7 of
the Securities Act and Securities Act Rule 436.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Overview, page 48
4. You state that in 2020, you provided personalized content feeds and
ads to approximately
1 billion monthly unique users, delivering on average over 10 billion
recommendations
per day, with over 20,000 advertisers using your platform. You further
state that in the
fourth quarter of 2020, your platform powered an average of over
100,000 ad campaigns
per day and generated an average of $2.7 million in daily ad spend.
Please tell us whether
you consider monthly unique users, the number of recommendations per
day, advertisers
using your platform, the number of ad campaigns per day and the
average daily ad spend
to be key business metrics that management uses to manage the
business. We refer you to
Section III.B of SEC Release 33-8350.
Results of Operations, page 54
5. We note that for advertising campaigns priced on a cost-per-click
basis, you bill your
marketers and recognize revenue when a user clicks on an advertisement
you deliver, and
for campaigns priced on a cost-per-impression basis, you bill your
marketers and
recognize revenue based on the number of times an advertisement is
displayed to a user.
Please tell us your consideration of disclosing the number of clicks
or impressions and the
cost-per click or cost-per-impression for each period presented. Price
and volume
disclosures such as the number of clicks or impressions and revenue
per-click or per
impression including an analysis of any trends or uncertainties
appears to be important
information necessary to understanding your results of operations. We
refer you to Item
303(a) of Regulation S-K and Section III.B of SEC Release 33-8350.
6. Please quantify the impact on revenues attributable to existing
advertisers and new
advertisers for each period presented, or explain why you do not
believe this information
is important to investors. Additionally, in the business section,
please discuss the material
terms of your agreement with advertisers to the extent material.
Critical Accounting Policies and Estimates, page 61
7. Please revise your disclosures in this section to explain the methods
that management
uses to determine the fair value of the common stock and the nature of
the material
assumptions involved. Your revised disclosure should explain the
extent to which the
estimates are considered highly complex and subjective. In addition,
revise to disclose
Veronica Gonzalez
FirstName LastNameVeronica Gonzalez
Outbrain Inc.
Comapany
May NameOutbrain Inc.
18, 2021
May 18,
Page 3 2021 Page 3
FirstName LastName
that the estimates will not be necessary to determine the fair value
of new awards once the
underlying shares begin trading.
8. Please provide us with a breakdown of all equity awards granted to
date in fiscal 2020 and
leading up to the initial public offering including the fair value of
the underlying common
stock used to value such awards as determined by your board of
directors. To the extent
there were any significant fluctuations in the fair values from
period-to-period, please
describe for us the factors that contributed to these fluctuations,
including any intervening
events within the Company or changes in your valuation assumptions or
methodology.
Business, page 64
9. You state that, in 2020 and 2019, each of your two largest media
partners accounted for
approximately 10% of your revenues. Please disclose the material terms
of your
agreements with these media partners, including, but not limited to,
the identify of the
media partners, terms and termination provisions, and any minimum
payments. We note
that you offer media partner contracts with guaranteed minimum rates
of payments. To
the extent the guarantees have materially impacted your revenue or
Revenue ex-TAC in
the reported periods, please revise to quantify such impact. In
addition, ensure you
identify, quantify and analyze known trends, demands, commitments,
events and
uncertainties related to media partners or media owners, whether
affiliated or unaffiliated,
that are reasonably likely to have a material impact on your financial
results.
Certain Relationships and Related Party Transactions
Transactions with Our Directors, Executive Officers and 5% Holders
Other, page 99
10. Please file the transition services agreement as an exhibit to the
registration statement or
tell us why it is not required. Refer to Item 601(b)(10) of Regulation
S-K.
Principal Stockholders, page 101
11. Please disclose the natural person or persons who exercise the voting
and/or
dispositive powers with respect to the securities owned by Gruner +
Jahr GmbH.
Description of Capital Stock
Forum Selection Clause, page 106
12. Please revise to clarify whether this forum selection provision
applies to actions arising
under the Securities Act or Exchange Act. If the provision applies to
Securities Act
claims, please also revise your prospectus in this section and in the
risk factor section to
state that there is uncertainty as to whether a court would enforce
such provision and that
investors cannot waive compliance with the federal securities laws and
the rules and
regulations thereunder. If this provision does not apply to actions
arising under the
Securities Act or Exchange Act, please also ensure that the exclusive
forum provision in
the governing documents states this clearly.
Veronica Gonzalez
FirstName LastNameVeronica Gonzalez
Outbrain Inc.
Comapany
May NameOutbrain Inc.
18, 2021
May 18,
Page 4 2021 Page 4
FirstName LastName
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
Note 1. Organization, Description of Business and Summary of Significant
Accounting Policies
Revenue Recognition, page F-11
13. You disclose that in general, you act as a principal on behalf of your
marketers and
revenue is recognized gross of any distribution costs that you remit
to the media owners.
In these cases, explain why you control the advertising inventory and
how you determined
that you have the ability to monetize and direct the use of the
advertising inventory before
it is transferred to marketers. In this respect, please provide us
with your analysis of the
principal versus agent considerations. We refer you to ASC
606-10-55-36 through 55-40.
14. We note that revenue is recognized on gross basis in certain
arrangements and on a net
basis in other revenue arrangements where you are the agent and do not
control the
advertising inventory before it is transferred to your marketers.
Please help us better
understand the differences in those arrangements that are recognized
on a gross and net
basis. Tell us the amount of revenues recognized on a gross and net
basis.
15. We note that advertisers can choose to buy directly from Outbrain
Amplify or
programmatically via the DSP of their choice. We also note that you
generated over 66%
of your revenue on mobile platforms in 2020. Please tell us your
consideration of
disaggregating your revenue by sales channel. We refer you to ASC
606-10-55-91. In
addition, tell us your consideration of separately discussing and
analyzing the underlying
trends by sales channel within your MD&A discussions.
Cost of Revenue, page F-12
16. Please explain how you account the guaranteed minimum rate of payment
from you in
exchange for guaranteed placement of your promoted recommendations on
specified
portions of the media owners online properties.
17. Explain whether your revenue generated from mobile platforms has a
different gross
margin from revenue generated on other platforms such as desktops and
laptops. Tell us
whether the cost-per-click or cost per impression depends of the
device mix.
18. Please clarify your disclosures that indicate traffic acquisition
costs also include amounts
payable to other third-party media owners outside of Outbrain s
network.
Note 11. Income(Loss) per Share, page F-28
19. You disclose that as of December 31, 2020 and 2019, you have not
recorded any stock-
based compensation related to your stock option awards, RSAs, RSUs and
SARs that vest
upon the satisfaction of a performance condition because the
performance condition is not
probable of occurring until a qualifying liquidity event (qualified
IPO or change of
control) has occurred. We further note that you issued warrants and
the exercise period of
the warrants is until the earlier of the closing of an IPO, the
closing of a deemed
Veronica Gonzalez
Outbrain Inc.
May 18, 2021
Page 5
liquidation event or the end of the warrant term. Please tell us your
consideration of
including the impact of such awards in your pro forma earnings per share
computations.
General
20. Please supplementally provide us with copies of all written
communications, as defined
in Rule 405 under the Securities Act, that you, or anyone authorized to
do so on your
behalf, present to potential investors in reliance on Section 5(d) of the
Securities Act,
whether or not they retain copies of the communications.
You may contact Morgan Youngwood, Senior Staff Accountant, at
202-551-3479 or
Stephen Krikorian, Accounting Branch Chief, at 202-551-3488 if you have
questions regarding
comments on the financial statements and related matters. Please contact Folake
Ayoola, Senior
Counsel, at 202-551-3673 or Jan Woo, Legal Branch Chief, at 202-551-3453 with
any other
questions.
Sincerely,
FirstName LastNameVeronica Gonzalez
Division of
Corporation Finance
Comapany NameOutbrain Inc.
Office of
Technology
May 18, 2021 Page 5
cc: Anna Pinedo
FirstName LastName