Taboola.com, Ltd. Q1 FY2025 earnings call

Market Opportunity

• Advertising is shifting towards performance to drive growth, with an estimated $55 billion opportunity in the open web outside of search and social. Taboola is a global leader in performance advertising, connecting advertisers to 600 million daily users via premium publishers, device manufacturers, and utility apps.

Q1 Highlights

• First quarter results exceeded the high end of guidance, with revenues, ex-TAC gross profit, adjusted EBITDA, and free cash flow all strong. The China business was impacted by about 1% decrease in advertising spend related to tariffs.

Realize Platform Progress

• Officially launched Realize in Q1, offering new ad formats like vertical videos, social creatives, and display with a CPC pricing model. Introduced predictive audiences solution and improved user interface with AI assistant Abby. Scaled advertisers grew by 9% to 1,996 in Q1.

Investor Day

• Hosted in March, where management and partners discussed the $55 billion market opportunity and Taboola's positioning to capture share in performance advertising. Partners validated Taboola's technology, data, and strategic direction.

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 than last year with margins expanding significantly. Free cash flow was $36 million, growing 35% year-over-year. The China business was around 5% of total Q2 revenue as of now.

Second Quarter 2025

• Expected revenues between $438 million and $458 million, gross profit between $124 million to $134 million, ex-TAC gross profit between $156 million to $166 million, adjusted EBITDA between $38 million to $44 million, and non-GAAP net income between $26 million to $32 million.

Full Year 2025

• Reiterated guidance with revenues between $1.84 billion to $1.89 billion, gross profit between $536 million to $552 million, ex-TAC gross profit between $674 million to $690 million, adjusted EBITDA between $201 million to $209 million, and non-GAAP net income between $122 million to $128 million. Cautious about raising guidance due to macro uncertainty, but confident in business strength.

• Macro environment tracking closely with potential material impact on business. About 1% decrease in advertising spend related to tariffs, mainly affecting China business. Concerns about macro uncertainty impacting performance advertising spend.

Q: Progress in verticalizing salesforce and scaled advertiser growth?

A: Verticalizing salesforce restructuring was done tail end of last year/early this year, early signs positive. Scaled advertisers grew 9% to 1,996, average revenue per scaled advertiser down 3% but still at historical high.

Q: Impact of Google remedies on Taboola?

A: Cautiously optimistic, companies with first-party data and scale may benefit, advertisers may look for alternatives. Cookie news and privacy focus could be an opportunity.

Q: Weakness in verticals since April 2nd tariff issues?

A: About 1% impact, mainly Chinese advertisers and those relying on Chinese manufacturing. Impact is not material.

Q: Realize becoming meaningful revenue driver?

A: Early stages, seeing positive feedback from advertisers, high dozens of clients could be new, injecting energy into sales team.

Q: Headcount trends and hiring for Realize?

A: Heavily focused on AI to improve productivity. Ramping R&D for Realize platform, relatively prudent on cost with focus on productivity.