Teads Holding Co. Q2 FY2024 earnings call

• Announced definitive agreement to acquire Teads, a transformative merger positioning as a large Open Internet advertising platform. - Q2 results: delivered extra gross profit of $56 million towards high end of guidance, exceeded adjusted EBITDA guidance with $7.4 million, and positive free cash flow for fourth consecutive quarter. - Growth drivers: Onyx direct sales growth with new clients/markets/rebookings; DSP Zemanta advertiser spend up ~50% H1 2024; non-traditional feed revenues at 27% of Q2 2024 revenue; deepened partnerships with premium media owners. - Product innovations: launched predictive demographics AI-driven targeting solution with 2.7x higher click-through rate for a client; click-through rate saw double-digit growth H1 2024; third consecutive quarter of year-over-year RPM growth.

Revenue in Q2 was approximately $214 million, a decrease of 5% year-over-year. New media partners contributed ~$14 million to revenue growth. Ex-TAC gross profit was $50 million, an increase of 3% year-over-year, outpacing revenue for the fifth quarter in a row. Non-traditional feed revenues represented approximately 27% of revenue in Q2 2024 versus 24% in Q2 2023. Adjusted EBITDA doubled year-over-year to $7.4 million in Q2.

• Q3 ex-TAC gross profit guidance: $58 million to $62 million; adjusted EBITDA guidance: $8 million to $10.5 million. - Full year 2024 ex-TAC gross profit guidance: $238 million to $248 million; adjusted EBITDA guidance increased to $31.5 million to $36 million. - Assumes regular seasonality and execution of growth drivers, with Teads acquisition not closing before year-end.

• Regulatory approval needed for Teads merger, including shareholder vote and other closing conditions. - Volatility from key partner transitioning to new bidding technology impacted ex-TAC gross profit in Q2. - Market demand volatility and potential impact on advertising spend.

Q: Can you talk about the drivers of RPMs and confidence in continuation?

A: RPMs driven by click-through rate growth (double-digit in H1 2024), improvement in CPCs narrowing year-over-year headwind; confident in acceleration in Q3 vs Q2 and Q4 vs Q3 with favorable comps and growth drivers.

Q: What's the reception to Teads acquisition?

A: Overwhelmingly positive feedback from advertisers and media owners, viewing it as a huge opportunity for full funnel solution on Open Internet.

Q: Thoughts on Zemanta growth and Teads combination?

A: Zemanta saw 50% spend growth H1 2024; combination with Teads has potential on both sides with Teads focusing on mid-funnel for brand buyers and Outbrain's prediction tech enhancing conversions; revenue synergies on both performance and upper funnel sides.

Q: Where are cost savings and balanced growth/profitability?

A: Focus on changing revenue mix to higher margin areas, operating efficiently, scrutinizing spend; expect step up in H2 costs but setup for higher EBITDA.