Taboola.com Ltd. Q2 FY2024 earnings call

• Q2 was a strong quarter with ex-TAC growing 21% to $150 million, adjusted EBITDA $37 million (up 138%), and free cash flow over $26 million. Growth rates are accelerating due to AI investment, unique data, and strategic execution.
• Focus on AI: Max Conversions, an AI-powered bidding technology, has adoption approaching 70% of revenue, up ~10 points from Q1, with over 100% sequential increase in advertiser campaigns using it. Abby, a new generative AI offering, to be introduced in Q3.
• Yahoo: Advertiser migration is complete, and efforts are focused on growing budgets in H2. Positive results seen with leading hotel and technology companies.
• Product innovation: Taboola News signed a significant global OEM partnership, expanding reach; eCommerce had strong quarter with growth from creators via ShopYourLikes; renewed partnership with Microsoft to expand bidder technology to new platforms like Outlook, Casual Games, and Microsoft 365.

In Q2 2024, Taboola's revenue was $428.2 million, growing 29% year-over-year. Ex-TAC (excluding traffic acquisition costs) grew 21% versus the prior year to $150 million. Adjusted EBITDA was $37 million, growing 138%, and free cash flow was over $26 million, growing 237%. For 2024, ex-TAC is projected to be $667 million, representing a 25% year-over-year growth. Adjusted EBITDA is over $200 million, doubling from 2023, and free cash flow is expected to be over $100 million, also doubling from 2023.

• Reiterated 2024 guidance for ex-TAC, adjusted EBITDA, and free cash flow. Projected ex-TAC $667 million (25% growth y-o-y), adjusted EBITDA over $200 million (doubling 2023), free cash flow over $100 million (doubling 2023).
• Q3 guidance: Revenues between $416 million and $446 million, gross profit $129 million to $139 million, ex-TAC gross profit $159 million to $169 million, adjusted EBITDA $42 million to $52 million, non-GAAP net income $20 million to $30 million.
• Yahoo test: Testing new ad formats on Yahoo inventory, with revenue recognized as TAC offset rather than revenue, but ex-TAC remains unchanged.

Q: Can you provide the Yahoo contribution in the quarter and any change in full-year view?

A: Yahoo partnership is part of core, not breaking out specific numbers. Growth drivers include eCommerce, premium demand, and geographies like China.

Q: What are the next key product priority areas for Max Conversions?

A: Focus on retention rates and NDR (new budget allocations). Abby, a generative AI offering, to be launched in Q3, and later Max Revenue to maximize revenue across products.

Q: Explain the dynamics of lowering gross revenue outlook due to Yahoo test?

A: It's a short-term test of new ad formats on Yahoo inventory, recognizing revenue as TAC offset, which affects gross revenue but not ex-TAC, adjusted EBITDA, or other key metrics. The test should revert back early next year.

Q: Any incremental learnings from Yahoo advertiser migration completion?

A: Advertisers focus on performance, new formats and placements in Yahoo create new opportunities, and premium, unique supply with performance is key.