Taboola.com, Ltd. Q4 FY2024 earnings call

• 2024 was a record year with nearly 50% more free cash flow than planned and a $200 million expansion to the buyback.
• 2025 guidance is single-digit growth, but they plan to launch Realize, a new performance advertising platform to expand into the $55 billion performance advertising market.
• 2024 saw integration of partners like Yahoo and Apple, and onboarding of enterprise advertisers. They no longer issue a shareholder letter and provide quarterly updates in SEC filings, etc.
• Reason for slower growth: native advertising alone not big enough; advertisers prefer standard display ads. Need to expand beyond native to capture full performance market opportunity.
• Realize platform details: expands supply, allows easy upload of display creatives, has AI training with first-party data, new targeting methods.

For the full year 2024, Taboola.com Ltd. achieved ex-TAC gross profit of $667 million, representing a 25% growth versus the prior year. Adjusted EBITDA was $201 million, more than doubling the previous year's result. Free cash flow was $149 million, exceeding the original target by 49% and nearly tripling the prior year's free cash flow. In the fourth quarter, revenues reached $491 million. Ex-TAC gross profit in the fourth quarter was $212.7 million, growing 26% year over year. Fourth quarter adjusted EBITDA was $92.3 million, growing 84% year over year. For the full year, adjusted EBITDA grew 104% to $200.9 million with a 30.1% adjusted EBITDA margin. Operating cash flow for Q4 amounted to $61.9 million, with free cash flow reaching $51.9 million. For the full year, operating cash flow was $184.3 million, and free cash flow was $149.2 million.

• 2025 guidance: 2% ex-TAC gross profit and 2% adjusted EBITDA growth, maintaining a 30% EBITDA margin.
• First quarter 2025: revenues expected between $407 million to $427 million, gross profit from $109 million to $115 million, ex-TAC gross profit from $142 million to $148 million, adjusted EBITDA from $22 million to $26 million, and non-GAAP net income from $2 million to $6 million.
• Full year 2025: revenues expected between $1.84 billion to $1.89 billion, gross profit from $536 million to $552 million, ex-TAC gross profit from $674 million to $690 million, adjusted EBITDA from $201 million to $209 million, and non-GAAP net income from $122 million to $120 million.
• Introduces new metrics: scaled advertisers (spent over $100,000 on network in trailing year) and average revenue per scaled advertiser.

• Near-term growth limited by difficulty in scaling native advertising demand quickly enough.
• Advertisers see native as too niche, prefer standard display ads.
• Media speed pivot to CTV prioritizing branding over performance, EdTech fragmentation, and social platforms having diminishing returns pose challenges.

Q: Laura Martin asked if Amazon's new move is a threat to Taboola's connectivity business.

A: Adam Singolda said in general, the open web and providing growth engines to others is their opportunity, and retailers looking to grow revenue and diversify reach is an opportunity for them outside walled gardens.

Q: Andrew Boone asked about Realize's product changes and Q1 2025 quota.

A: Adam Singolda said Realize expands supply, allows easy upload of display creatives, has AI training and new targeting; Steve Walker said guidance de-risked to give Realize time to gain traction.

Q: Jason Helfstein asked about Yahoo's impact and cost base.

A: Steve Walker said Yahoo is a great deal but some growth expectations not met, they're optimistic Realize will unlock growth and will evaluate cost structure if needed.

Q: Mark Mijatovic asked about Realize development timeline and Yahoo testing.

A: Adam Singolda said Realize was developed over a year, will track retention and spend growth; Steve Walker said they aim for 30% plus EBITDA margin, R&D up slightly, sales and marketing in line, Yahoo test unwound.

Q: Zach Cummins asked about Realize traction and share buybacks.

A: Steve Walker said excited about Realize potential but timeline unknown, and they think share buybacks are best use of capital.

Q: James Kopelman asked about advertisers' interest in Realize and AI investment.

A: Adam Singolda said advertisers like Realize, it's not a pivot but adjacent expansion, and they'll continue to invest in AI using first-party data and distribution.