Q3 2022 Taboola.com Ltd Earnings Call

November 9, 2022

The conference will begin shortly to raise your hand during Q&A you can dial star one one.

[music].

The conference will begin shortly to raise your hand during Q&A you can dial star one one.

[music].

Yeah.

Good day, and thank you for standing by and welcome to third quarter 2022 earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question. During the session you will need to press star one one.

Telephone you will then hear an automated message advised in your hand. It's race. Please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today.

Friendly Johnson with Investor Relations. Please.

Please go ahead.

Thank you and good morning, everyone and welcome to the third quarter 2022 earnings Conference call I'm here with I don't think alter our founder and CEO and Steve Walker our CFO .

We issued our earnings press release, the day before market and it is available along with our Q3 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, we undertake no duty to update them, except as required by law. Today's discussion is also subject to the forward looking statement limitations in the earnings.

Future events could differ materially and adversely from those anticipated during the call. We get terms defined in the earnings release and refer to non-GAAP financial measures definitions and reconciliations to GAAP. Please refer to the non-GAAP tables in the earnings release posted on our website and with that I'll turn the call over to Adam.

Thanks, Brent good morning, everyone and thank you all for joining us for our third quarter call Q3 was a good quarter. We beat our came in near the high end of our guidance on all metrics delivering $129 million of ex Tac and $24 million of adjusted EBITDA.

Holding our annual adjusted EBITDA guidance for 2022 at $152 million to $160 million, while generating strong cash flow.

Lastly, due to continued softness in the advertising market and to be cautious, we decided to lower 2022 revenue guidance by 4% and ex Tac guidance by 6%.

We adjusted our cost structure, a few months back and I can tell you we're committed to executing our strategy of profitable growth company.

Our track record demonstrates our ability to succeed in that strategy and despite everything thats going on in the world, We're not anticipating a decline in <unk> this year versus last.

Q4 is historically, a high performing quarter, especially for E. Commerce. Additionally, this year. We also have the potential positive effect of the World Cup, but we're not counting on it in our forecast given uncertainties in the market more than ever our ability to generate cash matters and are proud of where we are.

For 2022, we expect $17 million to $25 million of free cash flow. We also expect $58 million to $66 million of cash generated before $21 million of net prepayments to publishers and $20 million of cash interest payments, which is another way we look at this internally.

We add back publisher prepayments and cash interest payments because publisher prepayments on investments in our business that we consistently earn back and over time it will become insignificant portion of our business to none and cash interest payments are a capital structure decision.

Taking a step back I look at times like this as an opportunity for good companies to become even stronger we have a strong EBITDA, we're generating cash we know what we need to do we have the right priorities and the best team in the world to do so now.

If it wasn't for the macroeconomics 2022 would have been one of the best years, we've ever had more publishers wins than we anticipated lower churn and remember this business in a normal time grows 20% year over year ex Tac converts, 30% to adjusted EBITDA and 50% or so of that to free cash flow. This is.

Before investment in our growth initiatives, which have the ability to supercharge our growth, including performance advertising e-commerce header bidding into display and cable news.

Each one of these could generate hundreds of millions of dollars for Ebola in years to come on top of our core growth as I mentioned before.

We're about $1 $4 billion out of $64 billion open web advertising market and all of our scaled player in our space, which help us to get network effect benefits. There's still so much more growth ahead of us between our core and growth initiatives.

On the business front, we are winning a lot more than we're losing and it's very expensive for competitors to take our business, we signed new partnership with Buzzfeed Huffingtonpost time out all the massive and very well known publishers that latest switch to table two power accommodations for their audiences.

We signed new partnerships with local which is a Hamburg publisher, one of Germany, leading news portals and speeds part of <unk> group in Italy.

So many of our innovations to boiler feed newsroom for editors homepage for you, which personalizes. The homepage. These are great competitive win for us in the market and a validation of publishers chosen tabbouleh not only because we generate more revenue, but also because they can empower the entire organization with our technologies.

We're also seeing great renewals, we renewed long term publisher relationships with <unk> media, which is big here in the U S and.

<unk> I wanted to in Japan top publisher publishers, bringing us to 10 years in partnership with each this is in addition to renewals with long term publishers partners all over the world like fast and factory foreign Duck and seminar in Latin America.

This partnership has happened because of our technology investment we've spent more than a decade building a core product for publishers that go beyond revenue, which publishers depreciate because it provides value to the entire organization editorial audience teams in revenue.

Especially as publishers are considering who to partner with for the next 345 years, sometimes even more these investments matter in a meaningful way.

Advertisers like us because of our tech, which works for them, but also because they are looking at us as a way to diversify outside of the walled garden, especially now under so many changes around privacy, while the open web and tableau is a contextual powerhouse I think over time millions of advertisers, we look for an alternative to the walled gardens and Thats a huge opportunity.

<unk> for US we've talked about our core business and I'm, not happy with us getting down 4% revenue and 6% ex Tac, but im encouraged with us reaffirming our adjusted EBITDA and generating positive cash flow. We're accomplishing all of this while investing in four exciting things that are truly think can help us re imagined the open web as we know it and the growth our partners can.

With us outside of the walled gardens.

We mentioned in our Investor day that our next big milestone is $1 billion in ex Tac, which implies $300 million of adjusted EBITDA with roughly $150 million of free cash flow and Thats were investing in recommending anything in anywhere let's break it down recommend anything means answering the question what other types of advertisers capable of.

And to make our engine, even more relevant and drive yield growth.

Here, we have two main initiatives.

One our focus on performance advertising, which helped us make different types of advertisers successful with tableau, we're investing heavily here, we've quadrupled our engineering working on this and the upside here is meaningful for our advertisers publishers and us as well we already reach has 1 billion people a day and by making it even more advertisers successful.

We can make a meaningful impact on our yields altogether, how much we're able to pay our publishers and even more advertisers can rely on us.

Number two same category of recommending anything is E. Commerce, we intend to scale e-commerce to become one third of our business over time as well as our publishers revenue E. Commerce for publishers is a good business and retailers want to be on trusted publisher sites all day long, but it takes time to create the content built in audience and message.

<unk> with the right e-commerce demand with once publishers get it up and running they never want to give it up we believe a third of all of our publishers revenue will become e-commerce driven.

I mentioned that in our shareholder letter, but one of the exciting synergies. We're seeing right now around E. Commerce is called Desio, which central dynamic creative optimization, essentially it's connectivity as retailers starting to get scale onto broiler supply. This year is one of the biggest growth engines for social companies and it can be for US first of all as well.

Which leads us to recommending anywhere and this is essentially a <unk> capable of b beyond the bottom of article homepage and our traditional placements here. We have two more main initiatives header bidding, which allows us to tap into the multibillion dollar display market, we have momentum and we're live in 50, plus websites, we estimate that our existing.

9000 publishers are generating between $20 billion to $30 billion and display revenue a year and there's a high demand from publishers to join our header bidding data I mean really high demand for this product while we're still in early stages, we're seeing strong results anywhere from 5% to 10% win rates and a scale. This will allow us to.

<unk> supports our publishers, making no display revenue grow and this will grow our share of wallet to make our advertisers more successful and potentially generate hundreds of millions of dollars using our unique first party data and AI.

The last investment is stable and use this is where we're integrating our recommendation engine into Android devices. These days and over time, we intend to be part of audio devices automobile as an even more.

Think about the future I think everyone, we'll be filing for users' attention and time and I am convinced that trusted news will be everywhere people spend their time, how our kids will discover information. This is already tracking for over $50 million a year for <unk> growing triple digits.

Moreover, the more of this business grows the more competitive we become as a publisher can start relying on traffic we send them at no cost much like Google does with SCO as I finish my part there is no doubt the world is going through a lot. These days and hesitant effect on our business as much as anyone and that's no fun, saying that I personally feel more folks.

And ever and energized about the bullets future to become the leading recommendation engine for the open web we have the ability to change the way consumers discover information outside of the walled gardens anywhere they may be our fundamentals the metrics. Our management team is tracking every single day, our strong perhaps the strongest they've ever been our culture is strong we are.

Strong adjusted EBITDA, we generate cash and we have growth engines that can double double and triple tabbouleh ecommerce header bidding performance advertising integral and use I'm looking forward to our upcoming earnings call and engaging with investors in the upcoming months, while if you do the best to answer any question you may have I'll now pass it over to Steve our CFO to talk more about.

Our financials.

Thanks, Adam and good morning, everyone as Adam shared we had a solid third quarter, we met or exceeded our Q3 guidance on all measures despite macro headwinds.

Revenue in Q3 was $332 $5 million ex Tac gross profit was $129 $3 million and adjusted EBITDA was $24 2 million.

This represented ex Tac growth of one 9% year over year or five 7% on a constant currency basis.

Pro forma with connectivity ex Tac would have declined 5% year over year on a constant currency basis.

Our adjusted EBITDA margin or the ratio of adjusted EBITDA to ex Tac gross profit was 18, 7% Q3 revenues decline of $6 million was driven by decreased revenue from our existing digital property partners a $29 million.

Weak macroeconomic situation that started in Europe in Q1 spread to the U S and much of the rest of the world around the Middle of June continued into Q3, which translated to a pullback by advertisers and resulted in weaker yields and a decline in revenue our ex Tac net dollar retention for.

Our existing publishers was 86% for <unk> on a standalone basis, which is an extremely unusual event in our business to have an MTR below a 100%.

On the positive side, new digital property partners drove $22 million in growth in our gross revenue.

As we have said previously 2022 will be one of our best years on record in terms of the addition of new supply. We also saw growth in our revenues and ex Tac gross profit from the addition of connectivity to our business as well as growth into Beula news looking at operating expenses, they were up $16 3 million.

Year over year, the increase was driven by $12 million of higher employee related costs, which was largely driven by a competitive labor market entering 2022, and approximately $3 $4 million of restructuring costs. A majority of the remainder came from the inclusion of connectivity, which we.

<unk> on September one 2021, we generated.

Adjusted EBITDA of $24 $2 million, which was above our guidance of 11% to $17 million, but was down year over year. Adjusted EBITDA margin of 18, 7% was lower year over year, but in line with expectations.

GAAP net loss of $26 million included intangibles amortization of $16 million share based.

Compensation expenses, excluding the hold back related to the connectivity acquisition of $15 $9 million and restructuring charges of $3 4 million, which were excluded from non-GAAP net income.

Our non-GAAP net income of $10 $2 million was above our guidance of non-GAAP net loss of $2 million to $8 million.

In terms of cash generation in Q3, we had $23 million in operating cash flow with free cash flow of $11 million. Starting this quarter, we are going to start providing some supplemental information on our cash flow when we analyze our cash flow internally. There are two items that we add back to free cash.

Flow to provide another way of evaluating the cash generated by our business first back the cash interest paid on our long term debt to get to our Unlevered free cash flow because that is related to capital structuring decision we have made.

Second we add back net prepayments that we make to publishers. The reason we add these prepayments back is because we consider them an investment in our business. They are used to secure long term exclusive supply with our publishers and we get these prepayments back over the life of the contract with the publisher we can control how.

We invest in prepayments I would note that in 2020. These net prepayments were actually a source of cash rather than a use of cash and we only use prepayments with publishers that we consider strategic and that have strong credit ratings.

For the full year of 2022, we expect to generate 17% to $25 million of free cash flow. If you add back $20 million of cash interest expense on our long term debt and $21 million of net publisher prepayments, we expect to generate $58 million to $66 million of cash before.

For those items.

We ended Q3 with a strong balance sheet position and positive net cash our cash and short term investments balance of $308 $3 million remains above our debt balance of $287 3 million.

Regarding our expectations for Q4, and the rest of 2022 I won't go through all the numbers as they are outlined in detail in our press press release, while we performed well against our Q3 metrics due to the continued softness in the advertiser market, we are opting to lower our full year 2022 revenues.

And ex Tac guidance by 4% and 6%, respectively, having said that we are reaffirming our adjusted EBITDA guidance.

$152 million to $160 million for full year 2022, we are comfortable reaffirming this guidance. Despite the weakening macro economy. Thanks to cost cutting actions that we first initiated in Q2 of this year. We further reduced our forward looking expense base, when we announced our cost.

Sharing program in September this will have some impact on 2022 expenses, but more importantly positions us well heading into 2023.

I should note that our guidance assumes continued weakness in the macro.

<unk> at current levels, but not a significant worsening of the macro environment.

While we are disappointed to have to reduce our revenue guidance for the year overall the fundamentals of our business remain strong as noted we continue to expect over $150 million of adjusted EBITDA for the year and healthy free cash flow, even in a particularly soft quarter like Q3, we generated over 10 million.

A free cash flow and over $25 million. If you factor out interest paid on our long term debt and net prepayments to publishers.

We are seeing near record growth from new publisher partners chips and continued strong growth from Tabbouleh news, we will continue to be judicious in our investments and to manage our expenses tightly while still investing in the key priorities that will drive future growth. We believe all of this will position us for accelerated growth as we can.

Come out of this period of economic weakness.

And with that let's open it up to questions.

Thank you.

As a reminder to ask a question you will need to press star one on your telephone. Please wait for your name to be announced please standby will be compile the Q&A roster.

One moment for our first question.

Okay.

Our first question comes from Andrew Boone with JMP Securities. Your line is now open.

Hi, guys. Thanks for taking my questions.

You highlighted the $21 million of publisher.

On the call given the macro environment towards the smaller players like Rob content, Jim and I.

Kind of four.

Five to six point or maybe out there may pulled back can you just talk about your appetite.

2023 to either invest more on publisher with prepayments and trying to take more share or how do we think about that and then Adam you quadruple juror engineers focused on performance advertising can you just talk about where you're pointing them and theyre low hanging fruit that you see out there on the product front.

What are you guys thinking about in terms of improving the performance advertising tools for advertisers. Thanks, so much.

Thanks, Andrew good questions. So first I'll take the question about the publisher prepayments.

The way we view this as well.

We generated we expect to generate over $60 million of cash this year before.

$21 million of net publisher prepayments at about $20 million.

Interest expenses cash interest expenses, so we feel like Thats, a healthy level of cash flow.

Those publisher prepayments, we look at those as an investment in our business because it's an investment in locking in long term exclusive supply with publishers. So it helps US do two things one is it helps us get new publishers to come to us because it's one way that we put our money where our mouth is and really guarantee them that they're going to make the money.

They expect and two is it helps us lock in longer term contracts. So if you are talking to a publisher about.

A three to five year contract you can get them to move towards five years by upping the amount of cash they get upfront. So that helps us also locked in longer term agreements. We think these are actually one of the best investments we can make in our business. So we do.

Back to continue to use these as a tool both to win new publishers and to lock in longer term publisher agreements. So we will continue to use those we do expect to continue to use them into 2023 and beyond having said that.

The way we look at it is we set a budget for ourself on those we look at using that for publishers that we consider strategic so we try and use these where we think we're going to win a publisher that is particularly impactful to our business and we also make sure that we use this on publishers that have very good.

Ratings so.

We basically are very rarely ever lost any of this money that we've used so its something that we look at as kind of a credit risk. So generally speaking we have an appetite to continue using those I think we will be judicious about it though and we will always make sure that we generate positive free cash flow even after we use.

That is a tool so as we head into 2023, when we budget for these we will make sure that we are still generating positive free cash flow, even before them, but at the end of the day, it's a great use of cash because it's an investment in our business and getting that long term exclusive supply, though we find so valuable and that helps us when advertisers.

Grow our business over time.

And then just add Andrew and good morning.

In addition to that overtime and I mentioned that in the letter the more we invest in helping publishers drive audience from tubular news and things of that nature homepage for you on the engagement front.

E Commerce to drive more revenue so.

The more we invest in technology and diversify our business publishes will have more reasons to work with Ebola beyond just.

Traditional revenue and that will help us win more publishers and over time I suspect that the prepayment will become insignificant to potentially nothing so thats something that I mentioned in my letter. So right now it's a great investment over time as we continue to be bigger in investment technology I suspect. This will go to become insignificant or nothing.

Nothing yet.

That's a good point and I'll just add one other thing which is if we released some numbers in Adams shareholder letter. If you look at 2020, when we are in the pandemic, we decided to cut back on those publisher prepayments and they were actually the net of them were a source of cash in 2020. So theyre also controllable. So there is something that we can control.

When we want to.

So that's on that and then on the performance advertising, it's our number one as a reminder, and again it's in my letter, but there are four things we're investing in right now as a company performance advertising, which will help us drive <unk> and revenue from our existing publisher base and Thats, a huge upside because people already reaches half a billion people a day. So so.

That's big we had 15000 advertisers, Google and Facebook each has $10 million. So there is such a huge opportunity there and the second one is header bidding of display advertising. The third one is e-commerce, and our 401, enabling us specifically about performance advertising and smart beds. There are few things that I can mention specifically right now.

In the context of your question about what's low hanging fruit.

First one is <unk>.

We are seeing smart bed is able to look at connectivity. This is one of the synergies that we're most excited about smartphones is able to look at connect to these data and retail advertisers and automatically.

Find supply and our publishers now that it makes sense to put those retailers and automatically.

Range of creative of the retailer on the publisher side that is now about 4% of connectivity revenue. So this is this is pretty big.

If you remember when we talked about the synergies of E Commerce and connectivity. We said the largest one will be to bring e-commerce advertisers in our existing supply globally.

Globally and that would be probably the top synergy so thats getting traction.

I would say 50 out of the top 100 connected retailers are on <unk> now as part of smart availability to do that so thats, one thing thats gearing up and getting a lot of momentum and growing very fast.

And if you remember by the way if you go back to snap Instagram.

That was one of the top.

Way day made performance advertisers successful so thats one the second thing Thats low hanging fruit is that this quarter and it's still a Q4 initiatives, we're able to use AI to basically predict when the users tend to click.

By mistake without any intention to convert to do something on the advertiser side and thats, either because of speed of clicks or source of traffic or different placements.

In smartphones and tables to automatically lowered the bid for those situations, which makes advertisers more successful and again, that's a low hanging fruit thats and something we're working on right now.

We're seeing good results and they are probably going to continue to work on that in Q4, and then there are more things I mean, the short term and midterm roadmap is very very real I mean, we have target CPA and rollouts and other things. So theres a lot of a lot of.

Short midterm I would say long term the biggest reason we invest so much in performance advertising is because the biggest opportunity. We have is to make basically anyone successfully with Ebola, which is something that only walled gardens to date, we're able to do so that's the biggest ambition we have that will take time.

Thanks, so much.

Thank you.

One moment for our next question please.

And our next question comes from Laura Martin with Needham <unk> Company. Your line is now open.

Hi, guys can you hear me okay.

Of course.

So just following up just building on that last question, where we're going in these very uncertain times in a lot of guys are taking down sort of <unk> and next year does that affect the cost of your guarantees like youll get better deals in environments like this because youre willing to give them guarantees in an environment, where there's so much uncertainty.

Building on that last question and then my second question and lab is.

You guys really cut.

Cut down on your employees got the free cash flow, but I'm just wondering.

We have laid off half of its workforce yesterday. This morning, and now 13% lab does it help you to buy this really great engineering talent, that's coming available right now that we couldn't have known when you. When you were sort of tightening your belt a couple quarters ago does it help you to try to come into market and buy some of these talented.

Generics that are getting laid off indiscriminately right now.

Yes.

Thanks, Laura so good questions again.

Start with the cost of the guarantees one so I think yes.

These kind of tougher economic times like right now with the macro effect our guarantees in two ways. So on the one hand, our yields are a bit lower and therefore, we come up closer against those guarantees. The good news is that our guarantees are not a hugely significant part of our business. So we've been around 10.

10%.

In terms of our tax paid out under guarantees this past quarter. We were at 12%. So we are still on basically the same range and it has not had a significantly material impact in that regard the other effect, which I think is what you're getting at is can we sign up publisher deals at better margins, given given the macro and given.

Kind of potential weakness among our competitors.

It's hard to say exactly because every deal is a competitive bidding situation unto itself, but what I will say is we are having a record year in terms of signing new publishers as Adam mentioned.

And it's basically some of that probably has to do with what youre talking about there.

While we are seeing yield softness I think it's affecting some of our competitors even more so yes, I do think it helps us to sign up more publishers more profitably and we are seeing a record year in that regard. We're also seeing by the way one of the lowest years, we've had on record in terms of our churn rate of our publishers as well.

So we're signing more we're losing less and we have said before but we think that coming out of this when the demand recovers, we're positioning ourselves from a supply perspective to be to have a really nice growth path coming out of this because supply side is growing really really well the only thing that is holding us back.

A bit right now is the demand weakness so we're positioning ourselves well coming out of this so I do think it.

The weak macro is helping in some ways. Yes, I also think in jumping on that to follow up I think <unk> well invested in a variety of services and technologies publishers want is a big deal if you're a publisher now and you are about to sign a three year four year five year partnership one table that is very diversified with E. Commerce revenue I, just mentioned desio being.

4% of connectivity and 50 of the top 100 clients are using desio.

Video is growing for US you have to build a news on the audience front with integration with.

Top Oems, so publishers, especially right now theyre looking for partners that can do more than just revenue. So one <unk> revenue is further diversified and stronger than others were also among the largest players in the space, but also they have a lot of technologies that can use at no cost, which help them recover their own business and drive growth. So all of those things.

I mean really contribute to some of the most amazing publishers, who chose to will adjust in the last 90 days I mean, buzzfeed and Huffingtonpost multiple in Germany, and Brazil <unk> in Japan. I mean these are these are incredible partners that choose to go and I think now more than ever we're getting that level of momentum and that also helps us to reaffirm.

$152 million EBITDA this year.

Which I'm very proud of I think which leads to your second question. We're trying to run a business that not only is a great business now, but can be even stronger on the other side of it and especially.

To generate strong EBITDA and strong cash flow I think will have many many opportunities other companies might not project in 2008. It was one of the best years for Google's attracting talent. So we're hard at work looking for great people at the management level, we're seeing and what companies do.

What type of changes, we already have relationship with different engineers that work in other companies. So my hope is that.

We will be able to have opportunities with talent, but not Tony I mean, we might have other things that will come our way smaller M&A opportunities.

And different things, so having cash flow and EBITDA in terms of <unk>.

Uncertainty is a huge source of strength.

Thank you Dan.

Thanks, Laura.

Thank you one moment for our next question.

And our next question comes from James Kopelman with Cowen. Your line is now open.

Good morning, the first is for Adam It certainly looks like Youre seeing a lot of strength with new publisher wins can you talk about the biggest factors that are attracting these publishers overdue tabbouleh and then as you look out maybe a year or two ahead what are the key areas of focus and investment that will help you to continue to improve the value added service.

That you offer the publishers and then I have a follow up for Steve.

So.

Three reasons now why we win and I can tell you where I think it is going to three years from now so right now if you look at Watkins publishers do most companies in our space invest millions of dollars to maybe low tens of millions of dollars in R&D, and we invest close to $100 million of around $1 million a year.

For a bunch of times. So if you look at just to build on yields as an example, we've been working on this for five years. If you are a publisher working which will allow some of our larger publishers to get 5% to 10% of traffic from tables on US now to give you an example.

If you were to buy traffic at that level from anyone it could cost you millions of dollars, but working with us to get that traffic for fleet now we all know that Google became very important piece of the open web because they were able to drive SCO traffic. So those who control traffic and are able to help people discover things in.

And get to publisher websites, it's as important if not more than revenue. That's 50 plus million dollars of revenue for <unk>. This year and I already mentioned last earnings.

We will spend about <unk> 1 billion clicks to publishers in 2020 to pass $1 billion, you can only imagine what happens to us when we're going to grow that business to billions of clicks a year. So audience is one of them the <unk>.

The thing is that when you think about revenue.

Because we are diversified because we are able to bring different types of advertisers because we invest in AI. So much I believe our revenue is between 30% to 50% higher than any other companies in our space. So that's when you work with us by just getting a revenue share you make more money and Youll notice if you choose someone else either they lose money by <unk>.

Working with you or Joe you'll have a very tense relationship with them because they are always try to improve the terms they had with us working with US and you saw on the blog posted a road. We have many publishers that are 10 plus years with US you know money is coming in Norway. You'll know it is going to grow every month and every quarter because of our investment in technology. So.

We have sort of a buying power in that way because our 60% of revenue a lot of times its a 100% of other companies' revenue. So that's the second reason and the third one is that you don't want to just get money you want to Empire editorial team Youre subscription team your product team and by working with US I can tell you.

Two weeks from now.

One of our largest publishers, they're coming in with almost 10 people head of audience at a product and a subscription the chief editor firsthand none of them is even in the revenue team and they're all coming to see what can we do together to help drive engagement. That's a third reason so by working with US we can make every person visiting your website too.

The more engaged consumer content and come back. So those are the three reasons people choose us now and Thats why you see this rocket ship momentum even in a time of recession, maybe especially in times of recession over the next two or three years I can tell you where I think it's going it's more of a lifetime value type of.

Broach, so different people have different things I wanted to do in different times.

But we wanted to do over time is to be able to say well. This person right now on this article page on the homepage might want to subscribe, but maybe in an hour they want to click on a video and maybe when they are in a mobile phone they want to watch a gallery ordinarily can send them up to a newsletter. So we're going to take more of them think of Amazon and how they think about lifetime value of a buyer.

Over the next year as they interact with Amazon.

We kind of want to bring this retail approach of lifetime value to the open web.

And help our publishers think about revenue per user for the time, they interact with that person versus just for that immediate session. So thats, where I think it is going over the next two to three years.

Great. Thanks, and then just a quick follow up for Steve Steve as we think about the broader macro into October now into November can you provide any color on what youre seeing in terms of what may be driving additional softness in AD demand or what you think might have changed from an advertiser spend perspective any color there would be helpful, especially if you could.

All out any AD verticals or maybe regions that are seeing.

Potentially additional deterioration relative to the third quarter.

Sure.

First of all we're seeing relatively normal Q4 seasonality at this point so we're not seeing.

Anything thats kind of out of the normal for Q4, knowing that we entered the quarter kind of weaker so.

So we're seeing kind of a little bit more stability there in terms of verticals and the like we're pretty well diversified so it.

We're fairly well shielded from any single vertical we.

We've seen things come and go over the course of the year cars at one point were really weak or the auto vertical is very weak and now it's a bit stronger again.

Travel obviously at one point was much weaker now its much stronger again.

There are ups and downs in various verticals, but it kind of gets balanced out in our business and we don't see any particular area that stands out.

I think the way we're looking at things right now is.

We can't really predict the macro but the fundamentals the underlying fundamentals of our business are very strong. So we've mentioned a few times that we continue to add new supply like Buzzfeed, which just launched with us and all of that is very strong and we feel like there will obviously at some point demand will be coming back and thats.

Going to really give us a good growth path from there.

I think in general what we're seeing on the demand side is we're keeping our advertisers, they're just spending less with us and so at some point, we think those budgets all of them back up but in general fundamentals are still strong.

And it's not like there is a particular vertical or anything like that that's driving softness it's Jeff advertisers have reduced budgets a bit right now.

Great. Thanks, guys.

Thank you.

As a reminder, ladies and gentlemen that star one wanted to ask a question.

One moment.

Our final question comes from Stephen Ju with Credit Suisse. Your line is open.

Great. Thank you so Adam.

So given what youre talking about in terms of the potential for higher yield or your.

Publisher partners in the event that you do existing partners or move that RFP process.

What is the reason business may be heading to some of the competitors if at all thanks.

Yes.

Morning, Steven So one let me just say we we.

When a lot more than we lose and that's not an event, we see a lot of times.

But when we do lose usually someone else was able to.

Wanted to commit for a level of revenue, we thought would be not responsible and that's something that would be a good partnership for a long time. So I would say one reason would be some revenue commitment that we would model as bad partnership and from our experience we have T shirts. Many of our employees you have it's called the always.

Back they always come back and what happens when you sign the best partnership.

In the moment you might find it to be satisfying because you won but overtime tension has been built youre not able to generate that revenue youre not able to pay that revenue and those companies tend to eventually break the relationship in those publishers a lot of times come back and we have many of those cases and that's why we have the T shirt. They always come back. So so one reason is revenue.

The second thing is it could be a relationship we're still a small company only $1 $4 billion out of 64 billion. So a lot of times there may be a publisher that forced with someone else for the last 10 years, and our strong relationships and at times those relationships matter and and we appreciate that so that could be another reason why why we lose.

So I would say mainly when we do not win it's either some revenue irrational decision by someone else, which can happen too many times, but when it happens that's the reason.

We can lose and second thing is relationship which over time, we hope to build that relationship ourselves and win the deal.

Thank you.

At this time I would like to hand, the conference back over to Mr. Adam Sun holder for them.

Closing remarks.

Thank you. So I wanted to just say thanks, everyone for joining today Theres, obviously, a lot going on.

I will say a few things that I mentioned on my letter one personally I feel more focused than ever.

I just talked to.

This morning, I would like to realize a 30 people startup and how energized as focus people are.

Our people are strong.

And I'm energetic about the future of tableau to become the leading recommendation engine for the open web and our ability to change the way consumers discover information outside of the walled garden, especially during these days with the privacy and all this madness that we're seeing and soft domestic about trusted source of information and how consumers will discover news our fundamentals.

The metrics that our management team is tracking every single day, we get them daily email with those things those.

Those are strong perhaps the strongest they've ever been our culture is strong with a strong EBITDA, we generate cash and we have growth engines that can double and triple Tabbouleh e-commerce head of eating into display advertising inventory performance advertising and tubular news. So when I look at all those things I know those times are crazy, but.

We're focused I'm excited about the future and I look forward to talking to many of you and thanks for joining today.

This concludes today's conference call. Thank you for your participation you may now disconnect everyone have a wonderful day.

The conference.

Vince will begin shortly to raise your hand during Q&A you can dial one one.

Okay.

Hmm.

Sure.

Okay.

Yes.

Yeah.

Okay.

[music].

Yes.

Sure.

Okay.

Yes.

Okay.

Yes.

Okay.

Yes.

Okay.

Yes.

Okay.

[music].

Yes.

Okay.

Yes.

Okay.

Yes.

Okay.

Sure.

Yes.

[music].

Okay.

Yes.

Sure.

Yes.

<unk>.

Okay.

Yes.

Okay.

Sure.

Yeah.

Thanks.

Yes.

Okay.

Yes.

Okay.

Yes.

Okay.

Yes.

Sure.

Yes.

Okay.

Yes.

Okay.

Sure.

Yes.

Sure.

Yes.

Sure.

Yes.

Okay.

Yes.

Sure.

Yeah.

Okay.

Yes.

Okay.

Yes.

Okay.

Yes.

Sure.

Okay.

Yes.

[music].

Yes.

[music].

Yes.

Okay.

Yes.

Okay.

Sure.

Okay.

Yes.

Okay.

Yes.

Okay.

Yes.

Okay.

Yes.

Okay.

Yes.

Sure.

Yes.

Okay.

Yes.

Sure.

Okay.

Yes.

Okay.

Yes.

Okay.

Yes.

Sure.

Yes.

Okay.

Yes.

Okay.

Yes.

Okay.

Yes.

<unk>.

Yes.

Okay.

Yes.

[music].

<unk>.

Thanks.

Sure.

Yes.

Okay.

Yes.

Sure.

Okay.

Thank you.

Okay.

Thank you.

Yes.

Okay.

Yeah.

Yes.

Okay.

Yes.

Sure.

Yes.

Okay.

Yes.

Okay.

<unk>.

Okay.

Yes.

Okay.

Yes.

Okay.

Yes.

Sure.

Okay.

Yes.

Okay.

Yes.

Okay.

Sure.

Yes.

Okay.

Yes.

Sure.

Yes.

Okay.

Thank you.

Yes.

Sure.

Okay.

Yes.

Sure.

Yes.

Okay.

Yes.

[music].

Okay.

Thanks.

Okay.

Yes.

Q3 2022 Taboola.com Ltd Earnings Call

Request a DemoDemo

TBLA

Taboola

Earnings