Summary of Taboola.com (TBLA) FY Conference Call - August 12, 2025 Company Overview - **Company**: Taboola.com (TBLA) - **Industry**: Performance Advertising in the Open Web - **Market Opportunity**: $55 billion market opportunity in performance advertising [4][5] Core Business Model - **Unique Offering**: Taboola is a leading performance advertising platform that complements search and social advertising by providing targeted ads based on first-party data [3][4] - **Daily Reach**: The company reaches approximately 600 million people daily through partnerships with major publishers like Yahoo, Apple News, Disney, and NBC [4] - **Revenue Goals**: Targeting $2 billion in revenue from a $55.7 billion market, with over $200 million in adjusted EBITDA, representing a margin of over 30% [5] Financial Performance - **EBITDA Margin**: The company maintains a strong EBITDA margin of over 30% and a free cash flow of 70% of EBITDA, which is being used for share buybacks [5][67] - **Share Buybacks**: Taboola has repurchased 12% of its shares in the first half of the year and plans to continue aggressive buybacks [5][69] Market Position and Strategy - **Two-Sided Marketplace**: Taboola operates a two-sided marketplace with exclusive long-term relationships with 11,000 publishers, providing predictable inventory and access to consumer data [6][7] - **Shift to Performance Marketing**: The introduction of the Realize product marks a pivot towards broader performance marketing, allowing advertisers to use various ad formats beyond native advertising [12][14] - **Display Advertising Market**: Taboola estimates a $10 billion display ad market among its publishers, aiming to capture 30% market share [18] Growth and Future Outlook - **Growth Strategy**: The company aims to double its revenue from $2 billion to $4 billion primarily through increased demand and spending from advertisers [15][25] - **Realize Product Adoption**: Early signs of success with Realize include 650 advertisers trying the product, with existing advertisers increasing their spending [27][28] - **Focus on Performance Advertising**: Taboola is committed to performance advertising, avoiding branding-focused areas like CTV, which is seen as a competitive and less favorable market [36][39] Challenges and Market Dynamics - **Native Advertising Growth**: The native advertising space is not growing as expected, prompting the shift to a broader performance advertising strategy [22][23] - **Impact of Search Traffic**: Currently, only 5% of Taboola's traffic is driven by search, and the company has not seen significant impacts from changes in search dynamics [48][49] Technology and Innovation - **Use of AI and LLMs**: Taboola is leveraging machine learning and large language models (LLMs) across various departments to enhance productivity and create value [65][66] - **Predictive Audiences**: The company is developing features like predictive audiences to help advertisers optimize their campaigns [64] Conclusion - **Investment Philosophy**: Taboola prioritizes growth while maintaining profitability, with a focus on responsible business practices and maximizing shareholder value through buybacks and strategic investments [56][68] - **Future Expectations**: The company is optimistic about returning to double-digit growth through the successful adoption of Realize and continued investment in technology and partnerships [25][60]

Financial Data and Key Metrics Changes - The company reported Q2 revenues of $465 million, representing a 9% year-over-year growth [9] - Gross profit was $172 million, a 15% increase compared to the previous year [10] - Adjusted EBITDA reached $45 million, reflecting a 21% year-over-year growth with a significant margin expansion [10][26] - Free cash flow grew by 31% year-over-year to $34 million, enabling the company to repurchase approximately $100 million worth of stock in the quarter [10][26] Business Line Data and Key Metrics Changes - The number of scaled advertisers increased by nearly 9%, indicating strong retention and growth among existing clients [11] - Average revenue per scaled advertiser rose by about 2% year-over-year [22] - The growth in gross profit was driven by higher advertising spend and margin expansion on certain digital publishers [23] Market Data and Key Metrics Changes - The company expects nearly $2 billion in gross revenue for 2025, with approximately $700 million in gross profit [7] - The performance advertising market is estimated to be a $55 billion opportunity, with the company positioned to capture a significant share [8] Company Strategy and Development Direction - The company is focusing on its new performance advertising platform, Realize, which aims to expand its reach beyond native advertising into display and social [12] - The strategy includes attracting new advertisers and increasing budgets from existing clients, particularly in the performance advertising segment [19] - The company is also working on adding new open web partners to enhance its supply and data offerings [15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the business's momentum and raised full-year guidance across all key metrics [5][30] - The company noted minimal impact from recent changes in search dynamics driven by LLM, maintaining stable performance [16][18] - Management highlighted the potential for growth in the open web, particularly as advertisers seek alternatives to search and social platforms [19] Other Important Information - The board approved an additional $200 million for the share repurchase program, reflecting confidence in the long-term value of the business [10][29] - The company ended Q2 with a net cash balance of $27.2 million and cash equivalents totaling $115.2 million [28] Q&A Session Summary Question: What is the roadmap to return to double-digit growth? - Management indicated that the path to double-digit growth relies on the success of Realize in capturing more budgets from social and display advertising [34][35] Question: Why is the average revenue per scaled advertiser only increasing by 2%? - Management explained that while the number of scaled advertisers is growing, new advertisers typically start at lower spend levels, which affects the average revenue [46][47] Question: How does the company view the impact of generative AI on the open web? - Management noted minimal impact from LLM-driven changes and highlighted the potential for new traffic opportunities on publisher sites [54][56][59] Question: What is the current state of the tariff environment and its impact on advertising spend? - Management stated that the impact from China is not material, accounting for less than 1% of revenue, and they do not expect significant recovery in the second half of the year [77][78] Question: What is the geographic split of the company's business? - The company is approximately 50% U.S. based but is well diversified globally, with many advertisers spending across multiple regions [95] Question: Why prioritize share buybacks over paying down debt? - Management explained that they are using the revolving credit facility to maintain cash neutrality while aggressively repurchasing shares, which they believe is a capital-efficient strategy [60][62]