Taboola.com Ltd. Q1 FY2025 earnings call

• Market Shift: Advertising is shifting towards performance-driven, with an estimated $55 billion opportunity in the open web outside search and social. Taboola is a global leader in performance advertising, leveraging its Realize platform to connect advertisers to users via premium publishers, device manufacturers, and utility apps.
• Q1 Results: Strong first quarter with revenues, ex-TAC gross profit, adjusted EBITDA, and free cash flow all exceeding guidance ranges. Revenue grew 3% YOY, ex-TAC gross profit 9% YOY, adjusted EBITDA 53% YOY, and free cash flow 35% YOY.
• Investor Day: Focused on the $55 billion market opportunity, showcasing Realize platform with new ad formats (vertical videos, social creatives, display), a new CPC pricing model, predictive audiences, and expansion of supply partners like Microsoft and LINE.
• Scaled Advertisers: Number of scaled advertisers (spending over $100,000 annually) grew 9% in Q1 to 1,996.
• Realize Launch: Q1 launch of Realize with new capabilities, including import of social/display creatives, expanded display supply, and an AI assistant (Abby) embedded in the dashboard.

In the first quarter, Taboola reported revenues of $427 million, representing 3% year-over-year growth. Ex-TAC gross profit was $152 million, 9% higher than the previous year. Adjusted EBITDA was $36 million, 53% higher year-over-year, and free cash flow was $36 million, growing 35% year-over-year. The company's product segments are primarily focused on performance advertising, with no specific breakdown of revenue contribution by individual product segments provided in detail.

• Q2 2025 Guidance: Revenues expected to be between $438 million and $458 million; gross profit between $124 million and $134 million; ex-TAC gross profit between $156 million and $166 million; adjusted EBITDA between $38 million and $44 million; non-GAAP net income between $26 million and $32 million.
• Full Year 2025 Guidance: Reiterated with revenues between $1.84 billion and $1.89 billion; gross profit between $536 million and $552 million; ex-TAC gross profit between $674 million and $690 million; adjusted EBITDA between $201 million and $209 million; non-GAAP net income between $122 million and $128 million. Guidance maintained due to macro uncertainty, with second half revenue growth expected to be stronger than the first half.

• Tariff Impact: Approximately 1% decrease in advertising spend related to tariffs, mainly affecting China, with China business accounting for ~5% of Q2 revenue.
• Macro Environment: Uncertainty in advertising spend due to macroeconomic conditions, which could impact business performance.

Q: Progress on verticalizing salesforce and scaled advertiser growth A: Steve Walker stated verticalizing salesforce restructuring was done end of last year/early this year, early stages with positive early signs but too early to quantify metrics. On scaled advertisers, 9% growth in number of scaled advertisers, average revenue per scaled advertiser down 3% but still at historically strong point Q: Impact of Google remedies and tariff on business A: Adam Singolda mentioned privacy focus and cookies, expecting companies to adapt to privacy-focused industry. Steve Walker noted ~1% impact from tariffs, mainly affecting Chinese advertisers, but not material to the business Q: When will Realize become a meaningful revenue driver A: Steve Walker said Realize is in early stages with positive indicators but not factored into 2025 guidance yet, expecting impact later in 2025 and beyond Q: Resilience of business segments in macro uncertainty A: Adam Singolda stated performance advertising is less exposed to macro uncertainty compared to branding, with diversified demand and focus on outcomes making the business resilient Q: Share repurchase authorization remaining A: Steve Walker said about $190 million left on the current share repurchase authorization