Q4 2021 Taboola.com Ltd Earnings Call

February 23, 2022

Ladies and gentlemen, please standby your conference call will begin momentarily once again, ladies and gentlemen, thank you for calling please remain on your lines. Your conference call will begin momentarily. Thank you for your patience.

[music].

Good day, ladies and gentlemen, and thank you for standing by welcome to the Tabbouleh fourth quarter 2021 earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During this session you will need to press Star then one on your telephone keypad.

If you have any further questions. Please press Star then zero at this time I would like to turn to broadcast over to MS. Jennifer Horsley.

You may begin.

Thank you good morning, everyone and welcome to <unk> fourth quarter and full year 2021 earnings conference call I'm here with Adam Embolden, our founder and CEO and Steve Walker.

Our CFO .

Our earnings press release yesterday after market.

Available along with our Q4 shareholder letter in the investors section of our website.

These statements are based on currently available information and we undertake no duty to update them, except as required by law.

Dave discussion is also subject to the forward looking statement limitations in the earnings press release.

Future events could differ materially and adversely from those anticipated.

During this call will use terms defined in the earnings release and refer to non-GAAP financial measures.

For definitions and reconciliations to GAAP. Please refer to the non-GAAP tables in the earnings release posted on our website with that I'll turn the call over to Adam.

Thanks, Jay and good morning, everyone and thank you for joining us for our fourth quarter call I'm excited to say, we finished the year with a record Q4 and a record 2021.

But that is growing fast our EBITDA margin is over 30% and we're generating cash and there have been many from momentum in the market, Let me share some of our 2021 numbers.

Q4 revenues were $408 million ex tax gross profit, which is whats left for us after we share revenue with our publishers. The main metric, we measure management was $169 million.

Which represents 54% growth rates over Q4 of 2020 on a reported basis. This excellent growth rate in Q4 on a pro forma basis, which means if we had owned connectivity in Q4 of 2020 than our Q4 growth rates in 2021 versus 2020 would have been 22%. We also generated adjusted EBITDA.

<unk> of $65 million in Q4 at an adjusted EBITDA margin of 38, 6% when looking at 2021, we exceeded our full year guidance growing expect gross profit to $519 million growth rates of 36% over 2020 on a reported basis with connectivity pro forma our ex Tac growth rates.

In 2021 was 25% to put this in perspective, when going public in 2021, we guided for 16% ex Tac growth over 2020.

We also delivered strong adjusted EBITDA of $179 million in 2021, and a margin of 34, 6%.

As you can see 2021 was a strong year financially for us, but it was really a milestone year for us in many ways. We went public in June 30th completed our largest acquisition in our history connectivity, making us a leader in e-commerce brought new products into the market and one meaningful partnerships all around the world with demonstrated.

Differentiation why do we win as well as established a predictability of the business with long term exclusive publisher partnerships all of this while delivering beaten raised each quarter.

I'm very proud of the team for all of that we've accomplished in 2021 and these results providing us confidence to increase our guidance for 2022, Steve will share more details, but I would like to provide some highlights.

We expect revenues of $1 67 billion expected gross profit of $665 million and adjusted EBITDA of $204 million each at the midpoint of our guidance. This guidance represents a <unk> growth rate of 28% over last year and 16% on a pro forma basis with 30% to 32.

Percent adjusted EBITDA margin I cannot be more excited about our future and I feel we're exactly where we need to be there are only 24 hours in a day and the average person makes north of 30000 decisions a day and recommendation engines flexible are needed to help people make decisions that can impact our lives what to read what to listen to what to buy.

Our mission is to power recommendations for the open web anywhere outside of do Olive garden over time, we aim to ensure anything and everything will be personalized powered by tubular think Amazon is people who buy this also by part by tubular for content products and services and everywhere in the open web outside of the walled garden the open web as a <unk>.

$64 billion market, and we have differentiated offerings that help us to win business fast and profitably.

You've all have used us before if you've ever been on a website or an app that you love vaccine or ESPN or BBC or independent oil window to below recommends more content from the sites youre already on as well as from elsewhere around the web.

People are <unk> 30 billion times, a year half of it just to read and watch more editorial content and the other half with sponsored by advertisers now more than 15000 advertisers work with to go a lot already to reach users in the open web in the right context, when they're reading about something they care about we reached about 1 billion people.

Everyday it seems.

Have to advertise with us and we're affected following the acquisition of connectivity. We're also a leader in powering e-commerce recommendation driving more than 1 million monthly transactions, leading brands, including Walmart Macy's wafer Skechers and ebay are amongst some of our key customers.

This is a good time to also update about where we are in connectivity and our integration. We made progress on all three fronts that I talked about in the past people.

There's a lot of excitement and good energy, where emerging ourselves in comm systems and it's starting to feel like we're one my goal here is that soon enough people are joining Ebola will not know who came from tubular or connectivity.

On the advertising front theres a good momentum in some of the connectivity bite the bullet sales team starting in China and soon in the U S.

On the publisher front, we're cross selling connectivity offering to tabulate publishers in EMEA and APAC and we're getting good demand flight from all of our partners. You may have seen us highlight connectivity as part of our solution in recent press releases and win announcements. So you already know that the market cares about it.

Taking a step back over the past year to open web has begun to transition from its addiction to tracking user data and shifting to contextual targeting I'm encouraged by where the industry is going it's safer for users and contextual advertising is the source of stabilized strengths.

Advertisers can reach users in tabular based on their reading preferences, what makes I'm curious what's interesting what they are watched in red not just what they told social network about themselves. This is the future of our industry, especially in the back all of the changes, we're seeing with Apple Google and more.

As I reflect on 2021, there are three important things on my mind as it relates to our business I'll share highlights of each our differentiation and how that mix of swim are significant growth opportunities in our $64 billion market and a strong predictable financial model, we win business because we are differentiated in the marketplace. Many.

Companies and advertising space offer as to publishers, but the truth is that nobody is looking forward to seeing that add to bullet, though it doesn't just offer at publishers working with us gets more than just revenue chief editors choose to pull on product leadership chooses to golar audience development team choose the boiler and now e-commerce people choose to pull them in.

Thanks to that we are able to win long term exclusive partnerships with some of the most amazing publishers in the world.

This is what comes from having a product led approach and investing $100 million a year and a unique platform offering that differentiate us here are a few of those investments that took place in 2021, and how our clients and partners chose to golar. Thanks to them advertisers chose to build up because our technology and AI works smart buildings are.

AI that helps advertisers succeed with Ebola.

Similar to how if youre buying an AD from Google or Amazon the technologists optimizing on your behalf at double that Scott's marketed.

In Q3, we announced smart beds newest innovation. They have mentioned it factors in 40 different signals order I mentioned as we call them at scale to drive strong campaign performance. Most companies will provide advertising solution to publisher without a programmatic channels to bring dollars and they are trying to be less dependent on it they call it supply path.

Foundation, and it means that they want less companies between them and the advertiser or a client. It means they are not the ones optimizing for the advertisers and they're not sure if the advertiser will keep buying from them.

We have to pull on the other hand, we behave a lot more like Google Amazon or meta where the vast majority of our revenue, but 90% of it comes from advertisers who work with us directly those advertisers use smart AI to optimize our campaigns do use our self service tools best practices, New AD format data to succeed.

And we know who they are we on board them, we grow their business. It just works on the supply side when you compared to both the companies there are mainly demand oriented and a programmatic. Our main advantage is that we don't buy inventory and hope that the inventory we have now will be here tomorrow.

Work with publishers exclusively and long term.

And that means that as an advertiser working with Ebola Youre, one step away from the publisher.

<unk> and the people you get to reach and in many ways to pull out to the advertiser community is much more like a consumer company. You think you can think about it as one big global publisher, we have guaranteed supply and rich has 1 billion people every single day all of those dynamics helped advertisers succeed with us repeatedly.

We also invested in 2021 high impact placements product launch to capture new mid article inventory to drive greater brand and agencies growth partners like NBC sports future reached Sinclair are choosing us for those reasons and brands love. It in further support of our brands and Agency Awards.

We still maintain a 2021 important relationships with brand protection groups like that will verify Oracle note and others and there are a significant differentiator for us our editorial products like newsroom and newly launched homepage for you we've been investing in this for the past five years and it's paying off AI technology that.

Empowers editors to get unique insights about their decisions and as for last month and homepage for you, making homepage, it's personalized and engaging as world top social apps.

These new offerings hasnt been showing us that we can drive over 30% increase in fixed rates on the homepage and thats been adopted already by leading publisher.

Our competitors don't offer products like this and they miss an opportunity to engage one of the most important audience on the published on the publisher side the editors.

And then a decision point in Q4 wins like Mcclatchy and Disabuse valued it so much they signed a 10 year partnership with US 10 years, another start with integral stable and you'd think Apple news, but for Android devices in 2021 withstand groundbreaking partnership with Samsung, Brazil, Xiaomi all around the world two of the largest Android OEM manufacturer.

In the world to integrate a speed of news under devices to prevent news is getting scale and now drives an average of more than 400 million monthly engagements and editorial content to mobile devices and OEM OEM partnerships.

This represents an increase of more than 125% year over year.

And last but not least our leadership and content moderation, we want to make sure. The open web stay safe and I'm convinced that our processes policies and approach or some of the best in our space. We have dedicated moderation team have 50 employees that review every new advertisement.

We were first to moderate COVID-19, when it happened to make sure people are safe and we don't recommend things that can hurt people.

Our policies are public anyone can read them local and relevant to the market the enforced and we interact with local reporters and authorities to constantly learn and improve and our clients and partners I appreciate all of those efforts.

Our product set approach and providing more than just revenue as well as investing in policies and safe open web help us win publishers and advertisers as they look at the last year, we've had tremendous amount of momentum when we didnt partnerships like BBC Hurst Penske media aligned today.

The Figaro, we've also announced exciting new that we signed the new limits with Microsoft lasting through July 2024, allowing both Microsoft and enable us to look for even faster growth as part of our new <unk> technology, which Microsoft has supported us in the design.

As I finish my remarks, I want to spend a few moments on our significant growth opportunities I think of it in three phases. The first one is how we win within the open web $64 billion core market.

The second one is how do we expand to recommend even more things. So our platform is more valuable to users our clients and our yield goes up we're making good progress here E. Commerce is already 50% of our business and brands and agency it gets already 50% of our business as well.

And lastly, the third one how can we bring our partners clients and technology to commend, Andy where people spend their time in our core markets. The open web is still monetize using traditional ads, which provide limited value to users nobody opens or browse or looking for a great battery just never going to happen where people do actually interact with Google ads or Amazon ads, which.

Do a great job honestly to recommend wherever people want.

On Amazon and some of the product recommendations organic and some are sponsor, but they're all relevant.

Advertising experience are very similar to Amazon or Google in the sense that they offer both a ditto recommendation as well as paid advertising.

I think a lot of the $64 billion market should look like Amazon and Tabouleh, we can power it.

<unk> offers more than just traditional advertising products, we offer users the mix of it it's all recommendations bundled with Pedro commendations, all natively vendor.

When you go to a search and Google some of the results organic and some are paid but they're all related to what you wanted to do next.

We're not stopping here over the next 10 to 20 years to board will recommend anything it would be anywhere.

Our aspirations are to be on every connected TV every mobile device in every car.

Much like our some cars now arrived with Spotify for music in them cars should be shipped with Ebola inside for local and National news offer podcast recommendations, which are tremendous opportunities to grow in new ways to take our contextual signals, our AI and our data superpower to new places to disrupt the traditional.

Advertising ecosystem and capture a larger share of the 64 billion plus ultimately end market.

Do you think about the future beyond the core we want to keep diversifying what do you recommend as well as to make sure. We're integrated anywhere people spend their time. This is the foundation of our recommend anything and recommend anywhere strategy.

And then before I pass it to Steve Our CFO , Let me just say what a good time it needs to be in our space and Tabouleh. We're kicking off 2022 on the back of a very strong 2021, we're executing we're energized to keep innovating on the product front and we're excited to work with incredible partners all over the world, we are growing fast with generate over 30% EBITDA.

Margin, we generate cash which allows us to invest in recruiting and M&A and other things and in 2022, we intend to grow over 20% our employee base around the world.

Have the liberty to keep innovating and redefine our dreams lastly, when you look at where we sit in the broader market, we're driven by contextual signals, which help us navigate well the privacy dynamics and were among the biggest companies in the open web e-commerce already and on the back of a pandemic, we're all buying more things online and we will never go back to how we used to be in.

2019, we are already in the future and tubular is ready for it.

Now hand, it over to Steve who will dive into deeper details on our financial performance and guidance. Thank you.

Thanks, Adam and good morning, everyone as Adam shared we had a strong fourth quarter to end 2021 as Youll see in our earnings release, we beat our Q4 guidance on all measures and as Adam referenced we're raising 2022.

Since we are still relatively newly public I will remind everyone of how we look at and measure our business.

Focused on achieving profitable growth, we measure our performance against this goal by looking at two measures to measure growth. We look at ex Tac gross profit growth rates ex Tac as what we keep from our revenues. After we pay our publisher partners to measure profitability, we look at our adjusted EBITDA margin adjusted.

EBITDA margin is our adjusted EBITDA divided by our ex Tac gross profit similar to how SaaS businesses have a rule of 40, where they always want growth rate plus their profit margin to exceed 40%. We want the sum of our ex Tac growth rate and our adjusted EBITDA margin to exceed 40%.

So now onto our Q4 and full year 2021 results.

Revenue in Q4 was $408 million ex Tac gross profit was $169 million and adjusted EBITDA was 65 million. This represented ex Tac growth of 54% year over year or 22% on a pro forma basis with connectivity and a 38, 6%.

<unk> of adjusted EBITDA to ex Tac gross profit or what we often refer to as adjusted EBITDA margin.

All of the measures I highlighted are record levels. This performance propelled us to full year of 2021 revenue of $1 4 billion ex Tac gross profit of $519 million and adjusted EBITDA of 179 million. This represented ex Tac growth of 36% year over year on a reported.

Basis, and 25% on a pro forma basis, and an adjusted EBITDA margin of 34, 6%.

25% pro forma growth rate and over 34% margin puts us well above our rule of 40 company target I'll also note that our 25% pro forma growth rate is significantly better than our original 2021 pipe deck projections, which would have had us growing ex tac at around.

16% in 2021.

The same goes for our adjusted EBITDA margin of 34, 6%, which was well above our pipe deck projection of 28, 6%.

As Adam has shared we are seeing continued good progress in the business, winning new customers growing our existing customer relationships at a good pace, primarily by growing yield and executing on our recommend anything and recommend anywhere growth initiatives.

Of the Q4 gross revenue growth of 56 million $21 million came from new digital property partners.

And $35 billion came from growth of our existing digital property partners.

Our Q4 ex Tac gross profit was $169 million and was up $59 million or 54% year over year. This growth came from three sources. The addition of new digital property partners to our network growth of our existing digital property partners and the addition of connectivity.

Our business.

The 54% growth rate also benefited from a soft comparable quarter due to $17 million in guaranteed Tac payments withheld in Q2, and Q3 of 2020 and repaid in Q4 of 2020.

As I have mentioned on multiple occasions looking at our single quarter growth rates is somewhat deceiving in 2021 because of the withholding of the guarantees in Q2 and Q3 of 2020 and subsequent repayment in Q4 to better understand our growth rate I've consistently pointed to the full year ex Tac growth, which was 30.

86% reported and 25% on a pro forma basis.

For the full year, our ex Tac net dollar retention for our publishers was extremely strong at 116% per Boe on a standalone basis.

Looking now at operating expenses, they were up $38 million year over year, driven by growth in our growth and investments in our business the inclusion of connectivity higher depreciation and amortization from intangibles coming from the connects via acquisition and expenses related to being a public company.

<unk>.

We generated adjusted EBITDA of $65 million in Q4, an increase of.

$32 million year over year margins remained very strong as our adjusted EBITDA margin was 38, 6% in Q4, which exceeded guidance.

Fourth quarter is our seasonally highest margin quarter, given the higher revenues, which is why it's good to also look at the full year from a margin standpoint, where adjusted EBITDA margin was 34, 6% above our long term target of 30% and also an increase from 2020, which was 2000.

Seven 8%.

It is worth noting that we had net income of $600000 in Q4, which compared to net income of $2 8 million in 2020.

You can look at the net income to adjusted EBITDA reconciliation to see that the two biggest factors year over year.

That contributed to offsetting the profit growth were higher depreciation and amortization of $15 $9 million driven by the intangibles from the connectivity acquisition and higher tax expense of $15 $4 million in 2021, due primarily to the fact, we exhausted certain tax.

Credits.

In terms of cash generation, we have been consistent in saying that we expect our ratio of free cash flow to adjusted EBITDA to be around 60% over any reasonably long period of time in 2021, we generated $24 million of free cash flow. If you look back at the last 24 months.

Our free cash flow was $146 million or 51% of our adjusted EBITDA over that period.

Excluding M&A costs, and one time cost of going public that ratio would've been 61%.

In line with our expectations, we continue to expect free cash flow to be approximately 60% of our adjusted EBITDA over any reasonably long period of time.

We ended 2021 with a strong balance sheet position with a positive net cash position, our cash balance of $319 million was above our debt balance of $285 million. So good position that provides us ample financial flexibility.

Following our strong Q4 in 2021, we are raising our expectations for 2022 as highlighted earlier I won't go through the Q1 guidance, which we are issuing for the first time. So I will note that Q1 is seasonally the lowest revenue quarter for US. In addition, Q Q1 2022.

Two is a challenging comparable quarter, because ex Tac gross profit grew 54% year over year in Q1, 2021, which was an exceptionally strong performance. However, as you can see from our guidance, we still expect strong growth for 2022 on the whole.

I also wanted to provide a rough breakdown for seasonality given we are still new to some investors and now have connectivity in our results, which will change our seasonality profile.

We expect ex Tac for the year to breakdown approximately as follows 20% in Q1, 23% in Q2, 25% in Q3 and 32% in Q4.

Adjusted EBITDA breakdown, we expect to be approximately 16% in Q1, 20% in Q2, 22% in Q3 and 42% in Q4.

Note that there is a higher seasonality for adjusted EBITDA given that costs are relatively stable, but revenue ex Tac increases considerably in Q4.

For the full year of 2022, we are now projecting ex Tac gross profit will be $661 million to $669 million, which represents growth of 27% to 29% versus 2021 or 15% to 17% on a pro forma basis.

That is an increase from our previous guidance of $645 million to $665 million.

We're expecting 2022 full year adjusted EBITDA to be $195 million to $213 million. This demonstrates a very healthy adjusted EBITDA margin, meaning adjusted EBITDA divided by ex Tac gross profit of over 30% as.

As I stated previously we expect margin to be closer to our model target of 30% as we ramp up investments in our core business as well as our growth initiatives.

We're planning on growing head count, 23% over the course of the year with a heavy emphasis on increasing our R&D capacity.

2022 operating expenses are also proportionately higher than 2021, as we factor in a full year of public company costs and a return to more normal operating expenses post COVID-19 .

We are also introducing beginning with Q1 2022 earnings a non-GAAP net income reporting metric. We believe this can be helpful. In modeling our business as well as for providing comparability to peers.

As you can see in our release, we are guiding that 2022, non-GAAP net income will be between 111 and $129 million.

We will be filing with our 20-F annual report historical results for this new measure.

To wrap up we are focused on continuing to execute and to build on the significant progress we made in 2021.

We see tremendous opportunities to grow our core business by bringing on more digital properties and by growing the revenue from our existing partners both by continuing to grow our yield and by continuing to offer additional products and services.

And we have a strong foundation for new growth from our recommend anywhere and recommend anything growth strategies ecommerce now makes up over 15% of our ex Tac gross profit brands and agencies are also over 15% and Tabouleh news is gaining scale.

With that let's open it up for questions.

Ladies and gentlemen, if you have a question or comment at this time. Please press Star then one on your telephone keypad. If your question has been answered or you wish to remove yourself from the queue simply press the pound key.

Again, if you have a question or comment at this time. Please press Star then one on your telephone keypad.

Our first question or comment comes from the line of Justin Patterson from Keybanc. Your line is open.

Great. Thank you very much two if I can Adam you made a lot of progress up couple of news. This past year. What are the next big initiatives to expand reach and what are the factors you're looking at to determine the right monetization model and then for Steve Good progress of high value segments about 30% of ex Tac gross profit grow.

<unk>.

<unk> profit as we look towards 2022, how are you ramping up these segments and how that how is that contemplated in guidance. Thank you.

Hey, Justin good morning.

Everyone and thanks for the question and thanks for joining us so so we're seeing.

<unk> seen a lot of good momentum you've seen some of the announcements last year with.

Samsung in Brazil, and Xiaomi all around the world.

And we've also in my letter I wrote about our monthly engagement.

That is growing at 145% year over year, So we're seeing consumers interacting with people and use.

In a growing way, which is exciting the reason by the way it is important to us not only because it can be a revenue generator, which I'll speak about in a second but also the core strategically every time, a consumer opens or Samsung and clicks on a piece of content. We opened a browser and we send that person straight to the publisher, which is a different experience and Apple news, which keeps you within the app.

The ecosystem and that means that we are slowly becoming a more significant source of traffic to publishers and open web which is very powerful if you compare us to SCO, our social traffic that's something publishers are.

Perceive is very important in terms of the grunder monthly leadership, so that's why.

It is not only financially exciting, but also strategically important for US now what's interesting is that.

So pulling us.

<unk> startups, so to start with integral but it's trying to be also financially interesting front in fact, some of what we're seeing in 2022.

Model is actually including some gross engines.

We're seeing it already in the millions of dollars to below news and I expect this to continue to grow the way we generate revenue from <unk> in one of two ways. One at times when you swipe right to see a feat of news much like.

When you have on Twitter or other social networks that feed incorporates page advertising from from our advertising community. So you might see three or four recommendations from news that you like and then the first one will be paid if you click on that as we generate revenue and we said that revenue when the OEM. That's one way we generate revenue.

And the second one is every time you click on a piece of content you land on an article or a video of it has to go to feed on it which we monetize very well as you know thats our core business. So those two ways generates revenue first of all on which we share in this case with the OEM that is our partner.

And then.

In terms of the high value segments that you asked about so I think.

First of all we're very excited about the progress that we've made there. So you noted just in that each of those is now over 15% of our ex Tac, which is great to see.

In terms of going forward. So we're.

Connectivity or the e-commerce portion of our business is over 15% already and.

We're excited about where we're going with that so we're seeing good progress in terms of capitalizing on the synergies.

And that's one area that youre going to see that in our forward looking guidance as we obviously projected about $6 million of synergies from connectivity. This year and we expect to continue to grow those over time, we've said that we think that can be $100 million of ex Tac in four years. So that's that's the biggest impact that youre going to see on the E com.

Versus side for brands and agencies, you've seen a lot of announcements from us recently about becoming certified.

As a brand safe channel for brands and agencies I think you'll see more announcements in the near future about partnerships that we're building with agencies and with brands to bring them on and I think we're both connectivity e-commerce and the brands and agencies kind of impact our business in terms of our guidance.

In terms of growing our existing base, so they're great up sell opportunities with our existing base for high impact placements for homepage for you, which also gives us high impact placements and will help us work with brands and agencies. So its a upsell opportunity youll see it in that 60% of our growth that we <unk>.

Expect to come from growing our existing base.

And like I said can actually Youll also see in terms of as we ramp up the synergies there that will impact our financials as well also kind of mentioned one other thing which is that we're also excited by tabbouleh news or other growth initiatives to build a recommending anywhere so Adam just talked a little bit about that but I think the.

We're very excited that that's actually we're seeing it in our financials now so it was part of our beat in Q4.

And we're seeing that it's going to become a more material part of our business over time.

Great. Thank you.

Thanks for the questions Operator next question.

Thank you. Our next question comes from the line of Andrew Bone from JMP Securities. Your line is open.

Hi, guys. Good morning, and thanks for taking my questions.

Two please the first on dimensions can you talk about any early results there that youre seeing from advertisers and just how is the conversation going as advertisers are adopting the product and then secondly going back to connectivity.

Thank you talked about the sales that are in EMEA and APAC.

I believe that there were just two U S salespeople.

It connects they have in the U S. Can you just talk about the domestic kind of go to market and where you guys are in terms of integrating your own sales force and connectivity products. Thanks, so much.

Yeah, Andrew good morning.

Smart bed, so let's start with that so what you've seen in Q4, if you remember we announced I mentioned I know you'll know it.

And what was interesting if you recall quickly as a reminder for everyone as I mentioned basically allowed smart to bid.

More granular way when it when you thought that it made sense. So as an example, if before smart bid and entertainment website would not get insurance adds or high intense ads, because we think that it doesn't make sense to bid in that environment.

From Diamond once they mentioned was introduced.

We're looking at a more granular way and even one article on entertainment website that spoke about insurance suddenly would receive high bids from those types of advertisers. So that was that's what's new what happened is that and that's the power of AI and deep learning.

We started to receive new types of conversions from those environments on a more granular way and smart essentially start teaching itself something new which is again the beautiful part about AI and we saw that in Q4, especially smartly to start collecting new types of conversions that we never got before.

And so we're able to correlate short term intent. So it starts smartly start seeing that because of those conversions people that read about a certain type of things.

Tend to buy something in a short term, it's kind of almost like a semi retargeting, but using what I read and that was something that smart bids with teaching itself, which is a very powerful we're starting early.

Performance of advertisers that are doing really well.

We have some numbers, but we haven't released them yet, but we're seeing good results with advertisers that our conversion rates.

<unk>.

Better way in terms of CPA cost per acquisition and that's.

That's something that will scale in 2022, I expect but what's interesting is that.

Smart beta is kitchen itself things Bay.

Based on new type of dividends collecting which is really the power of our investment in AI.

And again, we are seeing yield improvement. So as you saw we beat our yield in Q4 and some of that was thanks to that I mentioned and I'm very excited to see how we can scale that learning of this semi re targeting using the context of the page, which is especially relevant in a cookie less world. So smart smart video stitching itself.

Baring itself I guess for a.

<unk> future. So thats about smart, but then you should stay tuned for few things one a blog post about it too. If you can you should join our Investor day, our head of AI has been <unk> join us on stage, whether it can be there in person on zoom, we're going to show some of this example.

It's really fun, because it's almost like a smart beta up until now spoke English teaching.

Kitchen itself to speak Spanish using those conversions, so it's really cool and you'll see some examples in a blog posted in Investor day, So that was about smart grid.

He can actually we started indeed in China, EMEA and APAC in general in terms of the synergies and then soon where we intend to.

Get on the advertiser side in terms of the AD sales people you mentioned just start in the U S. So stay tuned for that but that's that's coming up soon and we did start starting internationally, where we saw.

Is there a way to to begin by the way on the international piece, we've actually had multiple wins now in China for instance that was the synergy that we highlighted last quarter that we didn't actually expect but we've had multiple merchants now sign up for E Commerce services through connectivity in China. So we're seeing progress.

On that.

Thanks, Andrew.

Later next question. Thank you guys.

Thank you. Our next question or comment comes from the line of John Blackledge from Cowen. Your line is open.

Great. Thanks, two questions could you discuss the publisher extensions like the new Microsoft deal and any other new publishers added in the quarter and then are there any big publisher deals up for renewal. This year and then on the iOS changes any any shift has been towards <unk> or <unk>.

Sure.

Open platforms given the recent <unk> changes thank you.

Yes, hi, good morning, Thanks for the question.

Microsoft.

We are still aiming to just sign on announcements we're excited about the BDO technology, that's where working with Microsoft.

In support in designing that to launch a Microsoft by the end of the quarter, which we're excited about because we believe that is going to enable growth avenues for both of us and as it relates to sources of inventory, we did not get exposed to beforehand. So that is exciting we have great momentum in partnership with Microsoft.

Which have been our friend since 2015, or so so I'm excited about that and still on track to launch by the end of the quarter and.

I'm excited about what's to come on the other side in years to come we've extended that relationship to 2024. So we have a lot of time to keep working together on growing.

That's on that front, then just as a reminder, much like Google did with GDN.

As an extension of their network my expectation is that this will not only be an opportunity with Microsoft but also we could take that into other sources of inventory that historically, we did not tapped into social networks display inventory and other things.

So we do have.

As you know 90% of our revenue comes from advertisers, who work with US direct so we have a huge advantage in the sense that we're not just programmatic in a sense that we hope for the best that advertisers will come away. We control are faced by having advertisers working with us directly which will enable us to extend our reach to other sources of inventory so that just under.

On the below one and we are seeing.

And our early signs I think.

Updated the amount of advertisers now working with us and.

And that's growing nicely and a lot of that is performance advertisers, which means that they find to bullet to be a successful channel that is repeatedly driving the cost per acquisition. They are looking to achieve and then on the smart be dimension a lot of it is autonomous so they just need to come to us and ups.

Upload their creative and our goals and we did the work for them. So we do see early signs of advertisers that's exceed with us.

Expectation is that we're just at the beginning of what's to come in terms of the future that is mainly contextual such a good time to be.

Contextual company a company that is not driven by you.

User addicted tracking and all those things.

From our perspective and in fact, we drive growth based on what people are reading not based on what they say about themselves.

Such a beautiful place to be and we're we're excited about it. So we are seeing good signs from advertisers smart beta is working really well our yoga spinning or what you thought was going to do in Q4 and you saw that we're raising our guidance for 2022. So all of those are good signs.

Okay. Thank you.

Operator next question.

Thank you. Our next question or comment comes from the line of Laura Martin from Needham. Your line is open.

Good morning can you hear me okay.

Of course, how are you good morning.

Hi, great numbers congratulations thank.

Thank you.

My first question is on open path. So trade desk said, they're integrating this new product open path, which is designed to get rid of some of the bad players in the middle of the AD Tech ecosystem and could you remind us how much of your demand I know you are two sided platform, but how much of your demand comes from third party like the trade desk and other data.

And is this bad for you. This open paths, where they are going directly to publishers or is it somehow.

That's my first one.

Okay. Let me start with this one in general and I wrote about that in the letter I think it's great to see that supply side companies are talking about supply path optimization, which means that they want to have more direct.

Our relationship with advertisers so that most of the revenue is direct versus programmatic and now we're seeing demand side companies, hoping to work with publishers direct so what we're seeing is that supply side companies want to be comfortable and demand side companies want to be comfortable and because right now.

All of our publishers are direct exclusive and long term and 90% of our revenues fell by 10% as programmatic and started plenty of companies who buy to boot.

That's where you in about 90% is direct which means they use <unk> to optimize on it to build a network, which makes us much more like a <unk>.

<unk> or in Amazon in the sense that we're almost like a big consumer company right. We haven't under one side, we have publishers direct with us and that's a long term agreement. So we see people today, we'll see them tomorrow and on the advertiser side, 90% of direct so I wanted to think these are good dynamics because it shows that other companies appreciate <unk> current configuration.

And I think driving towards the same future which is.

Publishers direct advertisers direct with some programmatic and so is it the trade desk through a friend and a partner.

We worked with them and work with Google to work with many great demand side companies and that mainly is good for us because they can participate in our auction and can drive better yield when that happens in terms of that specific strategy I don't think specifically.

It was his short term it affects us because I'm not sure they haven't disclosed what type of inventory exactly they're going to go after so I don't really know.

What is their strategy, but overall I think that based on what we now do with the trade desk I think one more.

Friends and it can drive growth for publishers.

As of now.

Okay Perfect and then my second one is on China.

I thought it was interesting in your note that when you were talking about connectivity and you said that momentum of selling connectivity integral of by starting in China and soon in the U S.

I was curious do you now have 15% of your revenue from connectivity how much of that is sitting in China and do you feel any qualms about the rising geopolitical tensions between the us and China.

Yes, so right now a very small percentage of our revenue from <unk> in China, where we are in the early stages of selling.

To the Chinese market to basically the Chinese merchants as as we call. The E Commerce advertisers. So we have we've won a few deals but were very early so I would say, it's a de minimis part of their revenue today, we do think it can be substantial in the future.

I guess in terms of the rising geopolitical.

Challenges.

Think we're obviously going to watch it closely and make sure that nothing comes up but I think as of now our perception is that China is such an important part of kind of our overall economics.

Our system in the U S that I don't see I don't foresee a time when.

A good Chinese merchant, who happens to sell into the U S is going to be blackballed because of that.

Attentions.

Not sure that it we see a short term impact, but we obviously have to watch that closely is as we go forward.

Okay. Thanks, guys.

Yes.

Thank you.

Thank you. Our next question or comment comes from the line of Jason <unk> from Oppenheimer. Your line is open.

Hey, Thanks, just trying to think about how we all think about our multi year growth story here.

Whether it's thinking about number of advertisers number of publishers.

In the release, you talked about new digital revenue partners were $21 million of growth in existing within five and so should we think about maybe trying to model like the existing property partners and just thinking about our retention rate you said was 110 in the quarter.

I don't know its kind of how youre thinking about for the year, but if that's the right way to kind of do more.

A year model to get to the long term targets that you guys have discussed and then the second.

The.

Will you be providing kind of the historical pro forma with connectivity for all of 2021. So we can think about 'twenty two quarters organic versus pro forma growth.

Yes.

So in terms of the multiyear model I think the way we've spoken about this in the way. We think about this is that we expect about 40% of our growth coming going forward to come from new publishers that we bring on our new digital property partners and about 60% to come from growing the existing partners.

So when when we model our business internally the way we do it is we basically look at it as a run rate business, where next quarter equals this quarter plus new revenue, we bring on plus kind of our LDR from our existing publisher base, So and that obviously takes into account any sort of churn.

And basically since we're saying 40% of it comes from new publisher partners in 60% of it comes from the growth of existing you can kind of back into what the what those numbers look like but that's the way we model our business and Thats. The way, we think about our business you bring on new supply, but you also grow your.

<unk> supply and.

And I think the only other factor to factor into that as seasonality.

Which is obviously something that has changed a bit with with acquiring connectivity, which is a more heavily fourth quarter oriented business than to boiler although tubular.

It's also weighted to Q4, so thats the only other thing you have to take into account when you model. The business is when Youre doing sequential quarters, you have to think in terms of what's the seasonality impact, but generally speaking that's the way we model the business in terms of pro forma.

For now what we what we will definitely commit to us each quarter will tell you what the pro forma growth rate was we focus on ex Tac because connectivity will be reported on is there going to be using net revenue or will be using net revenue accounting for them. So gross revenue doesn't mean anything for them. So we will give you the pro forma.

Growth rates on ex Tac every quarter. So you can understand how much of the growth.

Came from.

Tabbouleh versus connectivity just by looking at the pro forma so we'll provide that we will consider doing full pro forma financials quarterly for 2021 at some point, but the challenge with it just to be blunt about it is they're not audited and so we have to understand what we're allowed to do given that it's not they haven't done it.

Full audited on a quarterly basis for them. So that's the only challenge there but in the meantime, we will give you the pro forma growth rate. So you can at least see.

What's the what's organic and what's from the acquisition in terms of our growth.

And then just a follow up I think when everyone was thinking through the impact from the FAA I think there was a pretty minimal impact on tubular and maybe even positive from benefiting from the inflation in Android pricing now that Google is committed to doing something comparable but probably more palatable and that theres still go along.

<unk>.

Some forms of measurement and <unk>.

Targeting but with new rules.

Granted it is two years away, but just how are you thinking about that and the impact on tubular.

I can take this one I overall I mean, if I look at <unk>.

Apple blocking cookies, and then with idea phase starting from I think 2017, our yield going up specifically for Safari.

In Q1, we beat our yield we beat our yield expectation and we feel comfortable raising our guidance all of those.

Patients and results are based on the fact that 190% of our revenue comes from advertisers who buy from us direct so they don't use.

Tracking that is being deprecated and things of that nature of the use of our own data and our own AI. So that's that's a large portion of our revenue and then specifically with smart be dimension, we're able to imitate with targeting and things that are sort of intent.

Look alikes, using what I read and people like me that similar things so.

So all of those dynamics are good for us and I think that the more the future is.

Privacy, driven and context, driven especially with connectivity.

Tend to rise on the back of those dynamics out for me and for US Google changes are good for the industry good for consumers and they're good for tubular.

Thanks, Jason.

Thank you.

Thank you. Our next question or comment comes from the line of Stephen Ju from Credit Suisse. Your line is open.

Okay. Thank you so Adam.

But some more time with connectivity.

Talk about the typical sales cycle there versus <unk>.

<unk>.

As you talk to advertisers typically how long do you think it'll take for an average advertisers to test and refine and get comfortable with connectivity and before you start seeing sort of major project shifts going into that direction.

Steve you've been doing this before.

But I think you're still one of the few cfos out there offering a full year outlook touched on this with a longer term but.

Can you talk about the various inputs that are informing the projection for 2022.

Hey, good morning, Thanks for joining.

So with regards to connectivity similar to Chipotle is a two sided marketplace. When you think about publishers and advertisers I'll start with the publishers.

There is a there is a short term and long term wait it's pacing in the short term is whenever content already exist on the publisher side connectivity is able to the publisher solution is able to tap into those high intent signal is in those articles that have high intent and monetize does quite immediately and then the midterm and long term on the public.

Your side is how do you expand and we spoke about that.

<unk> Investor day, how do you expand the amount of content publisher may have.

<unk> dot economy, as a whole world of e-commerce content and heightened content, which they worked on for years, creating same goes for Meredith and Hearst and content other grades publishers.

But that's a smaller subset of the universal publishers. So what I'm seeing is there's a short term gains and which just whenever people already have written that has high intent and then over time, they're going to use connectivity publisher solutions to our <unk>.

Data to know what's right about it makes sense for them and how they and how to monetize that with us. So thats on the publisher side. So there is a short term long term and then you have our synergies so all of what I am saying can be.

Digested that included into our synergies forecast that you have on the advertiser side. It is a it is a slow ramp.

No.

Two thirds or so of the business, it's CPC and those big retailers try for awhile preceded it works for them and then I can tell you is looking at the past of connectivity once someone.

Find success with connectivity they tend to stay for a very long time I think the tenure average tenure is over 10 years for those retailers and they have some of the best ones. So it is a slow ramp.

And they took their time they are paying very high <unk>, but once you towards that it sticks for over a decade.

So we're still new with this in terms of seeing new sales cycles.

But thats the dynamics I expect to see based on the past.

And then in terms of your second question, Stephen about kind of how we how we project growth and give guidance going forward. So I think one of the things that we really love about our business is that it's very predictable, especially relative to other advertising based businesses and that's because we've got committed supply.

So we have long term agreements average tenure of our contracts is over three years in terms of on a revenue weighted basis. So we have committed supply and then we've got demand that basically scales with us. So it's all performance oriented as long as we're performing for these advertisers they continue advertising with us what.

That does is it makes our model very predictable.

And so we've as you mentioned and kind of related to what we were talking about with Jason just a moment ago. It's.

It gives us the ability to forecast our business on a sequential basis as we go forward and the way to think about our business is as a run rate. So next quarter again equals last quarter, plus the new business will bring on plus.

Plus the change in the existing business and generally speaking that's all very predictable. So if you look back at our historical sequential quarterly.

Right.

Actually you can see that it's fairly consistent so you would typically expect about a 16% decline in Q1 because of seasonality you would expect some slight growth in Q2 and Q3, you expect a big bump in Q4 like if you just look at those historical numbers, it's very predictable and we feel very comfortable.

Because of that history being able to predict what our future quarters will look like whats interesting by the way is if you do that math and you look back at historical quarters, Theres, one quarter, historically that really stands out sequentially in its Q1 2020.

So Q1 2020, sorry.

Sorry, Q1, 2021 actually had.

Much lower decline from Q4 2020 than you would expect it was only down about 4%, which is why it was just a historically very strong quarter and a bit of a tough comparison for us this year, but generally speaking we feel very good about being able to predict our business because of the fact that we have that.

History, we understand where the growth comes from and we've got committed supply and demand that scales with us so.

It's a very predictable model and we feel good about being able to project that out.

Okay.

Operator.

One last question.

Our final question or comment comes from the line of Shyam Patil from Sig. Your line is open.

Hi, guys. This is Jared on for Sean. Thank you for taking the question.

One for you just on the seasonality that you touched on a little bit there as well as provided earlier in the call.

Yeah.

You are looking into the second half acceleration that youre seeing there. This is definitely more material than especially pre pandemic is that change entirely due to connectivity or are there. Other tailwind that you are anticipating as you look out to the second half.

So I think if you as I just mentioned if you look at our historical quarters.

The acceleration as you were talking about it in the second half is really not an acceleration in the second half. The only change is that Q1 2021 was exceptionally strong the dip from Q4 2020 to Q1 2021 was only 4% historically, our dip from Q4 to Q1.

Is around 17%. So it's not really an acceleration of growth as you go throughout the year, It's really just a an unusual comparison quarter last year so weak.

We can share more numbers on that but thats. If you look at the sequential growth rates historically, it's really not a an.

An acceleration of growth throughout the year, it's kind of our normal pattern.

There is about a few percentage point changes as to what we have shared if you listen to.

My opening remarks, I gave quarterly splits for what we expect this year on ex Tac quarter by quarter. If you do the math on that you'll see that that.

Those quarterly splits align fairly closely with our historical average with a slight and by slight I mean.

Five or 6% shift towards Q4 and that is basically that's the connectivity effect. So connectivity is a more heavily Q4 seasonal seasonal business than ours. So there is a slight shift there, but mostly the numbers are consistent with our history.

Great. Thanks.

Thanks Terry.

That wraps.

Wrap it up.

Yeah. Thanks, Thanks, everyone again for joining us and I hope to see many of you on our Investor day.

Im really excited about our vision and mission to help people discover things. They may lie can never knew existed I'm convinced we have an opportunity to over time become a personalization engine used by billions of people and being integrated wherever people spend our time every phone every TV.

Audio device simply car.

Being a public company only for a few quarters, we had a record quarter to a record 2021, we grew 36% or <unk> 2021, and 25% pro forma our EBITDA margins are north of 30% and it gives me and us confidence to raise our guidance in 2022, which is such a good start for us as a new public company.

Also I think the world is getting tired from user tracking dynamics and again, it's a great time to be a company that is driven by contextual signals. There are safe for people and it works for Advertiser, we're exactly where we need to be so im looking forward to our meeting and engaging with many of you over the next few weeks and don't forget to tune into our Investor day on March 29th Theyre going to have a management.

Team clients partners, it's going to be awesome. Thanks, everyone.

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program you may now disconnect everyone have a wonderful day.

Sure.

Okay.

Hum.

[music].

Okay.

Yes.

[music].

Good day, ladies and gentlemen, and thank you for standing by welcome to the to below fourth quarter 2021 earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During this session you will need to press Star then one on your telephone keypad.

If you have any further questions. Please press Star then zero at this time I would like to turn to broadcast over to MS. Jennifer Horsley.

You may begin.

Thank you good morning, everyone and welcome to <unk> fourth quarter and full year 2021 earnings conference call I'm here without them Cymbalta, our founder and CEO and Steve Walker.

Our CFO , we issued our earnings press release yesterday after market and he's available along with our Q4 shareholder letter in the investors section of our website.

Now I'll quickly cover the safe harbor certain statements today, including our expectations for future periods are forward looking statements. They are not facts and are subject to material risks and uncertainties described in our SEC filings. These statements are based on currently available information and we undertake no duty to update them except as required.

Feared by law.

Dave discussion is also subject to the forward looking statement limitations in the earnings press release.

Future events could differ materially and adversely from those anticipated.

During this call will use terms defined in the earnings release and refer to non-GAAP financial measures.

For definitions and reconciliations to GAAP. Please refer to the non-GAAP tables in the earnings release posted on our website with that I'll turn the call over to Adam.

Thanks, John and good morning, everyone and thank you for joining us for our fourth quarter call I'm excited to say, we finished the year with a record Q4 and a record 2021.

But it is growing fast our EBITDA margin is over 30% and we're generating cash and there are many from momentum in the market. Let me share. Some of our 2021 numbers Q4 revenues were $408 million ex taxi gross profit, which is what's left Ross after we share revenue with our publishers. The main metric. We measure is the management was 100.

$69 million.

<unk> of $65 million in Q4 at an adjusted EBITDA margin of 38, 6% when looking at 2021, we exceeded our full year guidance going expect gross profit to $519 million growth rates of 36% over 2020 on a reported basis with connected any pro forma or ex that the growth rates.

In 2021 was 25% to put this in perspective, when going public in 2021, we've guided for 16% ex Tac growth over 2020.

We also delivered strong adjusted EBITDA of $179 million in 2021 at a margin of 34, 6%.

Differentiation why do we win as well as established a predictability of the business with long term exclusive publisher partnerships all of this while delivering beacon raised each quarter.

We expect revenues of $1 67 billion expected gross profit of $665 million and adjusted EBITDA of $204 million each at the midpoint of our guidance. This guidance represents an <unk> growth rate of 28% over last year and 16% on a pro forma basis with 30 to 32.

Our mission is to power recommendations for the open web anywhere outside of do Olive garden over time, we aim to ensure anything and everything will be personalized powered bipolar I think Amazon is people who buy this also buy back part back to Golar for content products and services and everywhere in the open web outside of the walled gardens. The open web as a <unk>.

$64 billion market, and we have differentiated offerings that help us win business fast and profitably.

You've all used us before if you've ever been on a website or an app that you love vaccine to see or ESPN or BBC or independent oil window. So Paulo recommends more content from the sites youre already on as well as from elsewhere around the web.

People click on tubular 30 billion times, a year half of that just to read and watch more editorial content and the other half is sponsored by advertisers now more than 15000 advertisers work with people like already to reach users in the open web in the right context, when they're reading about something they care about we reached about 1 billion people.

Every day, it's safe to advertise with us and we're affected following the acquisition of connectivity. We're also a leader in powering e-commerce recommendation driving more than 1 million monthly transaction.

Leading brands, including Walmart Macy's wafer Skechers and ebay are amongst some of our key customers.

This is a good time to also update about where we are in connectivity and our integration. We made progress on all three fronts that I talked about in the past people.

There's a lot of excitement and good energy, where emerging ourselves in comm systems and it's starting to feel like we're one my goal here is that soon enough people are giant Ebola will not know who came from tubular or connectivity.

On the advertising front there is a good momentum in southern connectivity bite the bullet sales team starting in China and soon in the U S.

On the publisher front, we're cross selling connectivity offerings suitable publishers in EMEA and APAC and we're getting good demand flight from all of our partners. You may have seen us highlight connectivity as part of our solution in recent press releases and win announcements. So you already know that the market cares about it.

Taking a step back over the past year to open web has began to transition from its addiction to tracking user data and it's shifting to contextual targeting I'm encouraged by where the industry is going it's safer for users and contextual advertising is the source of stabilized strengths.

Advertisers can reach users onto all of them based on their reading preferences, what makes I'm curious what interests them. While they are watched in red not just what they told social network about themselves. This is the future of our industry, especially in the back all of the changes, we're seeing with Apple Google and more.

As I reflect on 2021, there are three important things on my mind as it relates to our business I will share highlights of each of our differentiation and how that mix of swim are significant growth opportunities in our $64 billion market and a strong predictable financial model.

We will business because we are differentiated in the marketplace. Many companies in the advertising space offer as to publishers, but the truth is that nobody is looking forward to seeing that at <unk>.

Although it doesn't just offer at publishers working with us get more than just revenue chief editors choose to pull on product leadership to the tubular audience development team chose the boiler and now e-commerce people choose to pull them and thanks to that we're able to win long term exclusive partnerships with some of the most amazing publishers in the world.

This is what the comments from having a product led approach and investing $100 million a year and a unique platform offering that differentiate us here are a few of those investments that took place in 2021, and how our clients and partners chose to golar thanks to them.

I just chose to go there because our technology and AI works Smart beta is our AI. It helps advertisers succeed with Ebola.

Similar to how if you are buying an AD from Google or Amazon or technologist optimizing on your behalf.

Coke's market in Q3, we announced smart beds newest innovation. They have mentioned the tech stores in 40 different signals or dimension as we call them at scale to drive strong campaign performance. Most companies will provide advertising solution to publisher without a programmatic channels to bring dollars and are trying to be less dependent on it.

They call it supply path optimization and it means that they want less companies between them and the advertiser or a client. It means they are not the ones optimizing for the advertisers and they're not sure if the advertiser will keep buying from them.

On the other hand, we behave a lot more like a Google Amazon or meta where the vast majority of our revenue, but 90% of it comes from advertisers who work with us directly those advertisers use smart build AI to optimize our campaigns do use our self service tools best practices, New AD formats data to succeed and.

We know who they are we onboard them we grow their business. It just works.

On the supply side, when you compared to both the company there are mainly demand oriented and a programmatic. Our main advantage is that we don't buy inventory and hope that the inventory. We have now will be here tomorrow, we worked with publishers exclusively and long term.

And that means that there is an advertiser working with Ebola Youre, one step away from the publisher and there is consistency in the people you get to reach and in many ways to pull out to the advertiser community is much more like a consumer company you think.

You can think of us as one big global publisher, we have guaranteed supply and rich has 1 billion people every single day all of those dynamics helped advertisers succeed with us repeatedly.

We also invested in 2021 and are hiring impact placements product launch to capture new mid article inventory to drive greater brand and agencies growth partners like NBC sports future reached Sinclair are choosing us for those reasons and brands love It.

Further support of our brands and agency award with cement and you're trying to any one important relationships with brand protection groups like that will verify oracle and others and other significant differentiator for us our editorial products like newsroom and newly launched homepage for you we've been investing in this for the past five years and it.

Is paying off.

Technology that empowers editors to get unique insights about their decisions and as for last month with the homepage for you, making homepage, it's personalized and engaging as well top social apps.

These new offerings hasnt been showing us that we can drive over 30% increase in fixed rates on the homepage and thats been adopted already by leading publishers.

Our competitors don't offer products like this and they miss an opportunity to engage one of the most important audience on the publisher on the publisher side the editors.

It's been a decision point in Q4 wins like Mcclatchy and ease of use validated so much they signed a 10 year partnership with US 10 years, another startup with integral that stable and you'd think Apple news, but for Android devices in 2021 withstand groundbreaking partnerships with Samsung, Brazil, Xiaomi all around the world two of the largest Android OEM and in fact.

<unk> in the world to integrate a speed of news under devices to prevent users getting scale and now drives an average of more than 400 million monthly engagements and editorial content through mobile devices and OEM OEM partnerships.

It presents an increase of more than 125% year over year.

We were first the moderates Covent 18, when it happened to make sure people are safe and we don't recommend things that can hurt people.

Our policies are public anyone can read them they are local and relevant to the market the enforced and we interact with local reporters and authorities to constantly learn and improve and our clients and partners I appreciate all of those efforts.

Our product set approach and providing more than just revenue as well as investing in policies in states open web help us win publishers and advertisers as they look at the last year, we've had tremendous amount of momentum when we didnt partnerships like PBC Hurst Penske media line today.

Let's figure out we've also announced exciting year that we signed a new agreement with Microsoft lasting through July 2024, 11, both Microsoft and people like to look for even faster growth as part of our new <unk> technology, which Microsoft has supported us in the lineup.

As I finish my remarks, I want to spend a few moments on our significant growth opportunities in three phases. The first one is how we win within the open web $64 billion core market.

Second one is how do we expand to recommend even more things. So our platform is more valuable to users our clients and our yield goes up.

Good progress here E Commerce is already 50% of our business and brands and agency. It gives already 50% of our business as well.

And lastly, the third one how can we bring our partners clients and technology drove commend annual where people spend their time in our core markets. The open web is still to monetize using traditional ads, which provides limited value to users nobody opens or browse or looking for a great battery just never going to happen where people do actually interact with Google ads or Amazon, which.

You do a great job honestly to recommend wherever people want.

On Amazon and some of the product recommendations organic and some are sponsor, but they're all relevant.

Advertising experiences are very similar to Amazon or Google in the sense that they offer both a toller commendation as well as paid advertising.

I think a lot of the $64 billion market should look like Amazon and Tabouleh, we can power it.

<unk> offers more than just traditional advertising products, we offer users the mix of it it's all recommendations bundled with Pedro commendations, all natively vendor.

When you go to a search and Google some of the results organic and some are paid but they're all related to what you wanted to do next.

We're not stopping here over the next 10 to 20 years to board will recommend anything and be anywhere.

Our aspirations are to be on every connected TV every mobile device in every car.

Much like our some cars now arrived with Spotify for music in them cars should be shipped with Ebola inside for local and National news or for podcast recommendations, which are tremendous opportunities to grow in new ways to take our contextual signals, our AI and our data superpower to new places to disrupt the traditional.

The advertising ecosystem and capture a larger share of the $64 billion plus open web market.

Do you think about the future beyond the core we want to keep diversifying what you recommend as well as make sure. We're integrated anywhere people spend their time. This is the foundation of our recommend anything and recommend anywhere strategy.

And then before I pass it to Steve Our CFO , Let me just say what a good time it needs to be in our space and tubular we're kicking off 2022 on the back of a very strong 2021, we're executing we're energized to keep innovating on the product front and we're excited to work with incredible partners all over the world, we're growing fast we generate over 30% EBITDA.

Margin, we generate cash which allowed us to invest in recruiting and M&A and other things and in 2022, we intend to grow over 20% our employee base around the world. We have the liberty to keep innovating and redefine our dreams.

Lastly, when you look at where we fit in the broader market, we're driven by protection signals, which help us navigate well the privacy dynamics and were among the biggest company in open web and e-commerce already and on the back of a pandemic. We're all buying more things online and will never go back to how we used to be in 2019, we are already in the future and tubular is ready for.

I will now hand, it over to Steve who will dive into deeper details on our financial performance and guidance. Thank you.

Thanks, Adam and good morning, everyone as Adam shared we had a strong fourth quarter to end 2021.

As Youll see in our earnings release, we beat our Q4 guidance on all measures and as Adam referenced we're raising 2022.

Since we are still relatively newly public I will remind everyone of how we look at and measure our business.

Focus on achieving profitable growth, we measure our performance against this goal by looking at two measures to measure growth. We look at ex Tac gross profit growth rates ex Tac as what we keep from our revenues. After we pay our publisher partners to measure profitability, we look at our adjusted EBITDA margin adjusted.

So now onto our Q4 and full year 2021 results.

Revenue in Q4 was $408 million ex Tac gross profit was $169 million and adjusted EBITDA was 65 billion. This represented ex Tac growth of 54% year over year or 22% on a pro forma basis with connectivity and a 38, 6%.

<unk> adjusted EBITDA to ex Tac gross profit or what we often refer to as adjusted EBITDA margin.

Basis, and 25% on a pro forma basis, and an adjusted EBITDA margin of 34, 6%.

95% pro forma growth rate and over 34% margin puts us well above our rule of 40 company target I'll also note that our 25% pro forma growth rate is significantly better than our original 2021 pipe deck projections, which would've had us growing ex Tac at around.

16% in 2021.

The same goes for our adjusted EBITDA margin of 34, 6%, which was well above our pipe deck projection of 28, 6%.

As Adam a shared we're seeing continued good progress in the business, winning new customers growing our existing customer relationships at a good pace, primarily by growing yield and executing on our recommend anything and recommend anywhere growth initiatives.

Of the Q4 gross revenue growth of $56 million $21 million came from new digital property partners.

And 35 billion came from growth of our existing digital property partners.

Our business.

The 54% growth rate also benefited from a soft comparable quarter due to $17 million in guaranteed Tac payments withheld in Q2, and Q3 of 2020 and repaid in Q4 of 2020.

As I have mentioned on multiple occasions looking at our single quarter growth rates and somewhat the season in 2021 because of the withholding of the guarantees in Q2 and Q3 of 2020 and subsequent repayment in Q4 to better understand.

<unk> our growth rate I've consistently pointed to the full year ex Tac growth, which was 36% reported and 25% on a pro forma basis.

For the full year, our ex Tac net dollar retention for our publishers was extremely strong at 116% per Boe on a standalone basis.

<unk>.

We generated adjusted EBITDA of $65 million in Q4, an increase of $32 million year over year margins remained very strong as our adjusted EBITDA margin was 38, 6% in Q4, which exceeded guidance.

Fourth quarter is our seasonally highest margin quarter, given the higher revenues, which is why it's good to also look at the full year from a margin standpoint, where our adjusted EBITDA margin was 34, 6% above our long term target of 30% and also an increase from 2020, which was 2000.

Seven 8%.

It is worth noting that we had net income of $600000 in Q4, which compared to net income of $2 $8 million in 2020.

You can look at the net income to adjusted EBITDA reconciliation to see that the two biggest factors year over year.

That contributed to offsetting the profit growth were higher depreciation and amortization of $15 $9 million driven by the intangibles from the connectivity acquisition and higher tax expense of $15 4 million in 2021, due primarily to the fact, we exhausted certain tax.

Credits.

Our free cash flow was $146 million or 51% of our adjusted EBITDA over that period.

Excluding M&A costs at one time costs of going public that ratio would've been 61%.

In line with our expectations, we continue to expect free cash flow to be approximately 60% of our adjusted EBITDA over any reasonably long period of time.

I also wanted to provide a rough breakdown for seasonality given we are still new to some investors and now have connectivity in our results, which will change our seasonality profile.

We expect ex Tac for the year to break down approximately as follows 20% in Q1, 23% in Q2, 25% in Q3 and 32% in Q4.

Adjusted EBITDA breakdown, we expect to be approximately 16% in Q1, 20% in Q2, 22% in Q3 and 42% in Q4.

Note that there is a higher seasonality for adjusted EBITDA given that costs are relatively stable, but revenue ex Tac increases considerably in Q4.

For the full year of 2022, we are now projecting ex Tac gross profit will be $661 million to $669 million, which represents growth of 27% to 29% versus 2021 or 15% to 17% on a pro forma basis.

That is an increase from our previous guidance of $645 million to $665 million.

As I stated previously we expect margin to be closer to our model target of 30% as we ramp up investments in our core business as well as our growth initiatives.

We are planning on growing head count at 23% over the course of the year with a heavy emphasis on increasing our R&D capacity.

2022 operating expenses are also proportionately higher than 2021, as we factor in a full year of public company costs and a return to more normal operating expenses post COVID-19 .

As you can see in our release, we are guiding that 2022, non-GAAP net income will be between 111 and $129 million.

We will be filing with our 20-F annual report historical results for this new measure.

To wrap up we are focused on continuing to execute and to build on the significant progress. We made in 2021, we see tremendous opportunities to grow our core business by bringing on more digital properties and by growing the revenue from our existing partners, both by continuing to grow our yield and by continuing to offer additional.

Products and services.

And we have a strong foundation for new growth from our recommend anywhere and recommend anything growth strategies ecommerce now makes up over 15% of our ex Tac gross profit.

And agencies are also over 15% and Tabouleh news is gaining scale.

With that let's open it up for questions.

Okay.

Again, if you have a question or comment at this time. Please press Star then one on your telephone keypad.

Our first question or comment comes from the line of Justin Patterson from Keybanc. Your line is open.

Great. Thank you very much two if I can Adam you made a lot of progress up to provide news. This past year. What are the next big initiatives to expand reach and what are the factors you're looking at to determine the right monetization model and then for Steve Good progress of high value segments about 30% of ex Tac gross profit grow.

<unk>.

Gross profit as we look towards 2022, how are you ramping up these segments and how that how is that contemplated in guidance. Thank you.

Hey, Justin good morning.

Good morning, Thanks for the question and thanks for joining us so so we're seeing.

You've seen a lot of good momentum you've seen some of the announcements last year with.

Samsung in Brazil, and Xiaomi all around the world.

And we've also in my letter I wrote about our monthly engagement.

That it's growing at 125% year over year, So we're seeing consumers interacting with people and use.

In a growing way, which is exciting the reason by the way it's important to us not only because it can be a revenue generator, which I'll speak about in a second but also because strategically every time, a consumer opens or Samsung and clicks on a piece of content. We opened a browser and we send that person straight to the publisher, which is a different experience and Apple news, which keeps you within the app.

Apple ecosystem and that means that we are slowly becoming a more significant source of traffic to publishers and open web which is very powerful if you compare us to <unk> or social traffic that's something publishers are.

Perceive is very important in terms of the grunder monthly leadership, so that's why.

That is not only financially exciting, but also strategically important for US now what's interesting is that stable.

So pulling us.

Dr Startups, so to start with integral but it's trying to be also financially interesting for us in fact, some of what we're seeing in 2020 to.

Our model is actually including some gross engines.

We're seeing it already in the millions of dollars to revenues and I expect this to continue to grow the way we generate revenue from timberland here in one of two ways. One at times when you swipe right to see a feat of news much like.

When you have on Twitter or other social networks that feed incorporate page advertising from from our advertising community. So you might see three or four recommendations from news that you like and then the first one will be paid if you click on that as we generate revenue and we share that revenue with the OEM. That's one way we generate revenue.

And the second one is every time you click on a piece of content you land on an article or video that has two boiler feed on it which we monetize very well as you know thats our core business. So those two ways generates revenue first of all on which we share in this case with the OEM that is our partner.

Yes.

And then.

In terms of the high value segments that you asked about so I think for.

First of all we're very excited about the progress that we've made there.

You noted just in that each of those is now over 15% of our ex Tac, which is great to see.

In terms of going forward. So we're.

Connectivity or the e-commerce portion of our business is over 15% already.

We're excited about where we're going with that so we're seeing good progress in terms of capitalizing on the synergies.

Syed for brands and agencies, you've seen a lot of announcements from us recently about becoming certified.

In terms of growing our existing base, so they're great up sell opportunities with our existing base for high impact placements for.

Or homepage for you, which also gives us high impact placements and will help us work with brands and agencies. So its a upsell opportunity youll see it in that 60% of our growth that we expect to come from growing our existing base.

I guess I can actually Youll also see in terms of as we ramp up the synergies there that will impact our financials as well also kind of mentioned one other thing which is that we're also excited by tabbouleh news or other growth initiative with tubular recommending anywhere so Adam just talked a little bit about that but I think the.

We're very excited that that's actually we're seeing it in our financials now so it was part of our beat in Q4.

And we're seeing that it's going to become a more material part of our business over time.

Great. Thank you.

Thanks for the questions Operator next question.

Thank you. Our next question comes from the line of Andrew Bone from JMP Securities. Your line is open.

Hi, guys. Good morning, and thanks for taking my questions.

Thank you talked about the sales that are in EMEA and APAC.

I believe that there were just two U S salespeople.

Can actually had in the U S. Can you just talk about the domestic kind of go to market and where you guys are in terms of integrating your own sales force and connectivity products. Thanks, so much.

Yeah, Andrew good morning.

<unk> smart beds, so let's start with that so what you've seen in Q4. If you remember we announced I mentioned I know you know.

And what was interesting if you recall quickly as a reminder for everyone that mentioned basically allowed smart to bid.

More granular way when it when he thought that it made sense. So as an example, if before smart beds and entertainment website would not get insurance adds or high intense adds because you would think that it doesn't make sense to bid in that environment.

From Diamond once they mentioned was introduced.

We're looking at a more granular way and even one article on entertainment website that spoke about insurance suddenly would receive high bids from those types of advertisers and that was that's what is new what happened is that and that's the power of AI and deep learning.

Electing new types of conversions that we never got before.

And so they're able to correlate short term intent so it smartly to start seeing that because of those conversions people that are worried about a certain type of things.

Tend to buy something in a short term, it's kind of almost like a semi retargeting, but using what I read and that was something that smart bids. We're stitching itself, which is a very powerful we're starting early.

Performance of advertisers that are doing really well.

We have some numbers, but they haven't released them yet, but we're seeing good results with advertisers that our conversion rates are at a much.

Better way in terms of CPA cost per acquisition and that's.

Is that something that will scale in 2022, I expect but what's interesting is that.

Smart beta is ditching itself things <unk>.

Based on new type of delegates collecting which is really the power of our investment in AI.

Baring itself I guess for a coupla future. So thats about smart, but then you should stay tuned for few things one a blog post about it too.

Can you should join our Investor day, our head of AI is going to join us on stage, whether it can be there in person on zoom, we're going to show some of this example.

It's really fun, because it's almost like a smart been up until now spoke English now it's teaching itself to speak Spanish using those conversions. So it's really a call and you'll see some examples in a blog post on the Investor day. So that's was about smart grid.

E connectivity.

We started indeed.

In China, EMEA and APAC in general in terms of the synergies and then.

Soon where we intend to.

On the advertiser side in terms of just people you mentioned to start in the U S. So stay tuned for that but that's that's coming up soon and we did start start internationally, where we saw.

Is there a way to begin by the way on the international piece, we've actually had multiple wins now in China for instance that was a synergy that we highlighted last quarter that we did not actually expect but we've had multiple merchants now sign up for E Commerce services through connectivity in China. So it's we're seeing progress.

On that.

Thanks, Andrew.

Our next question. Thank you guys.

Yes.

Thank you. Our next question or comment comes from the line of John Blackledge from Cowen. Your line is open.

Open platforms given the recent <unk> changes thank you.

Yes, hi, good morning, Thanks for the question.

So Microsoft we're we're still aiming to as you saw in our announcement. We are excited about the beat our technology, that's where working with Microsoft.

In support in designing that to launch a Microsoft by the end of the quarter, which we're excited about because we believe that is going to enable growth.

<unk> for both of US as it relates to sources of inventory, we did not get exposed to beforehand. So that is exciting we have great momentum in partnership with Microsoft.

That was.

Our fans since 2015 or so so I'm excited about that and still on track to launch by the end of the quarter and and I'm excited about what's to come in now decided in years to come we've extended that relationship to 2024. So we have a lot of time to keep working together on growing so that's on that front and just as a reminder, much like Google did with GDN.

As an extension of their networks my expectation is that this will not only be an opportunity with Microsoft but also we could take that into other sources of inventory. That's historically, we did not tapped into social networks display inventory and other things.

So we do have.

As you know 90% of our revenue comes from advertisers, who work with US direct so we have a huge advantage in the sense that we're not just programmatic and essentially we hope for the best that advertisers will come our way we control our space by having advertisers working with us directly which will enable us to extend our reach to other sources such as the inventory so that just under.

On the below one and we are seeing.

And our early signs I think.

Updated the amount of advertisers now working with us.

And that's growing nicely and a lot of that is performance advertisers, which means that they find to be willing to be a successful channel that is repeatedly driving the cost per acquisition. They are looking to achieve and then on the smart be dimension a lot of it is autonomous so they just need to come to us.

Upload their creative and their goals and we did the work for them. So we do see early signs of advertisers that's exceeded with us and expectation is that we're just at the beginning of what's to come in terms of a future that is mainly contextual such a good time to be.

Contextual company a company that is not driven by user addicted tracking and all those things from our perspective and in fact, we drive growth based on what people are reading not based on what they say about themselves.

Such a beautiful place to be and we're we're excited about it. So we are seeing good signs from advertisers smart beta is working really well our yoga spinning or once you start it's going to do in Q4 and you saw that we're raising our guidance for 2022. So all of those are good signs.

Okay. Thank you.

Operator next question.

Thank you. Our next question or comment comes from the line of Laura Martin from Needham. Your line is open.

Yes.

Good morning can you hear me okay.

Of course, how are you good morning.

Hi, great numbers congratulations.

My first question is on open past so trade just said there.

Great and this new product open path, which is designed to get rid of some of the bad players in the middle of the AD Tech ecosystem and could you remind us how much of your demand I know youre, a two sided platform, but how much of your demand comes from third party like the trade desk and other DSP.

And is this bad for you. This open paths, where they are going directly to publishers or is it good for you somehow.

My first one.

Let me start with this one in general and I wrote about that in the letter I think it's great to see that supply side companies are talking about supply path optimization, which means that they want to have more direct.

Our relationship with advertisers so that most of the revenue is direct versus programmatic and now we're seeing demand side companies, hoping to work with publishers direct so what we're seeing is that supply side companies wanted to be comfortable and demand side companies want to be comfortable and because right now.

All of our publishers are direct exclusive and long term and 90% of our revenue. So about 10% is programmatic and third party companies, who bite the bullet.

In that way and about 90% is direct which means they use smart bed to optimize <unk> network, which makes us much more like a.

A Google or an Amazon in the sense that we're almost like a big consumer company right. We haven't under one side, we have publishers direct with us.

That's a long term agreement so we see people today, we'll see them tomorrow and on the advertiser side, 90% of direct so I wanted to think these are good dynamics because it shows that other companies appreciate two bullets current configuration and and things driving towards the same future which is.

Publishers direct advertiser direct with some programmatic and so does the trade desk or a friend and a partner.

It was his short term it affects us because I'm not sure. If you haven't disclosed what type of inventory exactly they're going to go after so I don't really know.

What is their strategy, but overall I think that based on what we now do with the trade desk I think one more.

Trends and it can drive growth for publishers, the way I see it as of now.

Okay Perfect and then my second one is on China.

Thought it was interesting in your note that when you were talking about connectivity and you said, there's no mention of selling connectivity into below by starting in China and soon in the U S.

I was curious do you now have 15% of your revenue from connectivity.

Or that is sitting in China, and do you feel any qualms about the rising geopolitical tensions between us and China.

Yes, so right now a very small percentage of our revenue from <unk> in China, where we are in the early stages of selling.

I guess in terms of the rising geopolitical.

Challenges.

Think we're obviously going to watch it closely and make sure that nothing comes up but I think as of now our perception is that China is such an important part of kind of our overall economics.

System in the U S that I don't see I don't foresee a time when.

A good Chinese merchant, who happens to sell into the U S is going to be blackballed because of that.

Attentions.

Not sure that we see a short term impact, but we obviously have to watch that closely is as we go forward.

Okay. Thanks, guys.

Yes.

Thank you.

Thank you. Our next question or comment comes from the line of Jason <unk> from Oppenheimer. Your line is open.

Hey, Thanks, just trying to think about how we all think about our multi year growth story here.

Whether it's thinking about number of advertisers number of publishers.

In the release, you talked about new digital revenue partners were $21 million of growth in existing with 35, and so should we think about maybe trying to model like the existing property partners and just thinking about our retention rate you said was 110 in the quarter.

I don't know its kind of how youre thinking about for the year, but if that's the right way to kind of do more.

A year model to get to the long term targets that you guys have discussed and then the second.

The.

Will you be providing kind of the historical pro forma with connectivity for all of 2021. So we can think about 'twenty two quarters organic versus pro forma growth.

Yes.

So when we model our business internally the way we do it is we basically look at it as a run rate business, where next quarter equals this quarter plus new revenue, we bring on plus kind of our LDR from our existing publisher base, So and that obviously takes into account any sort of churn.

<unk> supply and.

And I think the only other factor to factor into that as seasonality.

Which is obviously something that has changed a bit with with acquiring the connectivity, which is a more heavily fourth quarter oriented business, then tabbouleh, although it.

For now what we what we will definitely commit to us each quarter. We will tell you what the pro forma growth rate was we focus on ex Tac because connects there'll be reported on and theyre going to be using net revenue or will be using net revenue accounting for them. So gross revenue doesn't mean anything for them. So we will give you the pro forma.

Growth rates on ex Tac every quarter. So you can understand how much of the growth.

Came from.

Tabbouleh versus connectivity just by looking at the pro forma so we'll provide that we will consider doing full pro forma financials quarterly for 2021 at some point, but the challenge with it just to be blunt about it is they are not audited and so we have to understand what we're allowed to do given that it's not they haven't done it.

Full audit on a quarterly basis for them. So that's the only challenge there but in the meantime, we will give you the pro forma growth rate. So you can at least see.

What's the what's organic and what's from the acquisition in terms of our growth.

<unk>.

Some forms of measurement.

Targeting but with new rules.

Granted it is two years away, but just how are you thinking about that and the impact on <unk>.

I can take this one I overall I mean, if I look at.

Paul blocking cookies, and then with idea phase starting from I think 2017, our yield going up specifically for Safari.

And in Q1, we beat our yield we beat our yield expectation and we feel comfortable raising our guidance all of those.

Patients and results are based on the fact that 190% of our revenue comes from advertisers who buy from us direct so they don't use.

Tracking that has been deprecated and things of that nature of the use of our own data and our own AI. So that's that's a large portion of our revenue and then specifically with smart be dimension, we're able to imitate re targeting and things that are sort of intent.

Look alikes, using what I read and people like me that reached similar things. So all of those dynamics are good for us and I think that the more the future is.

Privacy, driven in context, driven especially with connectivity.

Tend to rise on the back of those dynamics out for me and for US Google changes are good for the industry good for consumers and Theyre good for tubular.

Okay.

Thank you.

Thank you. Our next question or comment comes from the line of Stephen Ju from Credit Suisse. Your line is open.

Okay. Thank you so Adam.

But some more time with connectivity.

Talk about the typical sales cycle there versus <unk>.

<unk>.

Steve you've been doing this before.

But I think you're still one of you CFO who's out there offering a full year outlook and you touched on this with a longer term but.

Can you talk about the various inputs that are informing the projection for 2022.

Hey, good morning, Thanks for joining.

So with regards to connectivity similar to nibble at the two sides of the marketplace. When you think about publishers and advertisers are sorry for the publishers.

There is a there is a short term and long term weight. It's pacing in the short term is whatever content already exist on the publisher side connectivity is able to the publisher solution is able to tap into those high end test.

And those articles that have high intent and monetize those quite immediately and then the midterm and long term on the publisher side is how do you expand and we spoke about that.

<unk> Investor day, how do you expand the amount of content publisher may have.

So that that is relevant to them so that a bigger portion of their site as high intent and as such high or a portion of E. Commerce revenue. So if you look at your website like USA today with review of the Dot Com <unk> Dot com is a whole world of E Commerce content and high instance content, which they worked on for years, creating same goes it goes from there.

And Hearst and content other grades publishers.

But that's really a smaller subset of the universal publishers. So what I'm seeing is there's a short term gains and which just whatever people already have written that has high intent and then over time, they're going to use connectivity publisher solutions to our <unk>.

Digested that included into our synergies forecast that you have on the advertiser side. It is a it is a slow ramp.

No.

Two stars or so of the business as CPC and those big retailers try for a while just because it works for them and then I can tell you is looking at the past of connectivity once someone.

Find success with connectivity they tend to stay for a very long time I think the tenure average tenure is over 10 years for those retailers and they have some of the best ones. So it is a slow ramp.

And they take their time, they're paying very high <unk>, but once you towards that it sticks for over a decade.

So we're still new with this in terms of seeing new sales cycles.

But thats the dynamics I expect to see based on the past.

That does is it makes our model very predictable.

And so we've as you mentioned and kind of related to what we were talking about with Jason just a moment ago, yes. It gives us the ability to forecast our business on a sequential basis as we go forward and the way to think about our business is as a run rate. So next quarter again equals last quarter, plus the new business will bring.

<unk>.

Plus the change in the existing business and generally speaking that's all very predictable. So if you look back at our historical sequential quarterly.

Right.

So Q1 2020.

Sorry, Q1, 2021 actually had a much lower decline from Q4 2020 than you would expect it was only down about 4%, which is why it was just a historically.

Strong quarter and a bit of a tough comparison for us this year, but generally speaking we feel very good about being able to predict our business because of the fact that we have that history, we understand where the growth comes from and we've got committed supply and demand that scales with us so.

It's a very predictable model and we feel good about being able to project that out.

Okay.

Operator.

Thank you our final question or comment comes from the line of Shyam Patil from Sig. Your line is open.

Hi, guys. This is Jared on for Sean. Thank you for taking the question.

One for you just on the seasonality that you touched on a little bit there as well as provided earlier in the call.

Youre looking into the second half acceleration that youre seeing there. This is definitely more material than especially pre pandemic is that change entirely due to connectivity or are there. Other tailwind that you are anticipating as you look out to the second half.

So I think if you as I just mentioned if you look at our historical quarters.

Around 17%, so it's not really an acceleration of growth as you go throughout the year, It's really just a an unusual comparison quarter last year. So.

We can share more numbers on that but thats. If you look at the sequential growth rates historically, it's really not a an.

An acceleration of growth throughout the year, it's kind of our normal pattern.

There is about a few percentage point changes as to what we have shared if you listen to.

My opening remarks, I gave quarterly splits for what we expect this year on ex Tac quarter by quarter. If you do the math on that you'll see that that.

Those quarterly splits align fairly closely with our historical average with a slight and by slight I mean.

Great. Thanks.

Thanks Terry.

Got it.

Wrapped it up.

Yeah. Thanks, Thanks, everyone again for joining us and I hope to see many of you on our Investor day.

I'm really excited about our vision and mission to help people discover things. They may like can never knew existed I'm convinced we have an opportunity to over time become a personalization engine used by billions of people and being integrated wherever people spend our time every phone every teevee.

Audio device every car and being a public company only for a few quarters, we had a record quarter. A record 2021, we grew 36% or <unk> in 2021, and 25% pro forma our EBITDA margins are north of 30% and it gives me and us confidence to raise our guidance in 2022, which is such a good start for us as a new public company.

Any.

Also I think the world is getting tired from user tracking dynamics and again, it's a great time to be a company that is driven by contextual signals.

For people and it works for Advertiser, we're exactly where we need to be so im looking forward to our meeting and engaging with many of you over the next few weeks and don't forget to tune into our Investor day on March 29th Theyre going to have a management team clients partners, it's going to be awesome. Thanks, everyone.

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program you may now disconnect everyone have a wonderful day.

Q4 2021 Taboola.com Ltd Earnings Call

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