Q3 2025 Taboola.com Ltd Earnings Call

Operator: Good day, and thank you for standing by. Welcome to Taboola's Q3 2025 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. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Jessica Kourakos, Head of Investor Relations.

Thank you for standing by. Welcome to tibula third quarter 2025 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'll need to press star 1, 1 on your telephone. You'll then hear an automated message advising. Your hand is raised.

To withdraw your question. Please press star 1 1 again.

Please be advised that today's conference is being recorded, I would now like to hand the conference over to your first Speaker today, Jessica Caracas head of investor.

Jessica Kourakos: Thank you and good morning, everyone, and welcome to Taboola's Q3 2025 Earnings Conference Call. I'm here with Adam Singolda, Taboola's founder and CEO, and Stephen Walker, Taboola's CFO. The company issued earnings materials today before the market, and they are available in the investor section of Taboola's 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 by law. Today's 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.

Thank you and good morning everyone and welcome to tabul third quarter 2025 earnings conference call. I'm here with Adamson Golda to Bullis, founder and CEO, and Steve Walker to Bullis CFO. The company, issued earnings materials today before the market, and they are available in the investor section of tabula website.

Now, I'll quickly cover the Safe Harbor.

Certain statements today including our expectations for future periods. Our forward-looking statements, they are not backs 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 by law.

Jessica Kourakos: During this call, we 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.

Today's 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, we will use terms defined in the earnings release and refer to non-gaap financial measures for definitions and reconciliations to Gap. Please refer to the non-gaap tables in the earnings release posted on our website.

Adam Singolda: Thanks, Jessica. Good morning, everyone. Thank you all for joining us today. We're pleased to report another strong quarter, our third consecutive quarter in 2025 exceeding the high end of our guidance. Our new performance platform, Realize, is beginning to work for both advertisers and publishers. We're seeing an inflection point in our business and have greater confidence than we did even 90 days ago that we will get back to double-digit growth over time. This momentum gives us the confidence to once again raise our full-year outlook. We've bought back 14% of the company year to date. We're continuing to buy back shares aggressively. As a reminder, Taboola is one of the largest performance advertising platforms outside of search and social. Our platform, Realize, helps businesses get leads and grow sales.

With that, I'll turn the call over to Adam.

Thanks Jessica. Good morning everyone and thank you all for joining us today.

We're pleased to report another strong quarter, our third consecutive quarter in 2025 exceeding, the high end of our guidance.

Our new performance platform realized is beginning to work for both advertisers and publishers.

We're seeing an infection point in our business and have greater confidence than we did even 90 days ago that we will get back to double digit growth over time.

This momentum gives us the confidence to once again raise our full year outlook.

We've bought back 14% of the company year to date and we're continuing to buy back shares aggressively.

Adam Singolda: It operates similar to Google Ads or Meta Ads, offering a simple-to-use platform powered by AI. The key difference is that while Google reaches users in search and Meta in social, Realize engages 600 million people every day across the open web on partners like Yahoo, NBC, ESPN, USA Today, Apple News, Samsung, and Xiaomi, driving those people to action. Our competitive advantage lies in our AI and first-party data drawn from what people actually read about versus what people idealize themselves on social media, giving advertisers authentic insights into users' intent and high-performing outcomes. In 2025, we expect nearly $2 billion in gross revenue and more than $700 million in ex-TAC gross profit, which is what we keep after we pay our publisher partners who show our ads to their users.

As a reminder, to people is 1 of the largest performance advertising platforms outside of search and social, our platform realized helps businesses yet lead and grow sales.

It operates similar to Google ads or meta ads offering a simpler to use platform powered by AI.

The key difference is that, while Google reaches users in Search and meta in Social, realize engages, 600 million people every day across the open web on Partners. Like Yahoo NBC, ESPN, USA. Today, Apple news, Samsung and shy driving. Those people to action.

Our competitive Advantage lies in our Ai and first-party data drawn from what people actually read about versus what people idealize themselves on social media giving advertisers authentic insights into users intent and high performing outcomes.

Adam Singolda: We expect to generate over $200 million in Adjusted EBITDA at a 30% margin with strong free cash flow. As advertisers see diminishing returns on search and social, they look for scalable, performance-driven alternatives like Realize. Taboola is uniquely positioned to take share in what we estimate is a $55 billion opportunity. Let's turn to our Q3 results, which came in ahead of the high end of our guidance across the board. We delivered revenue of $497 million, ex-TAC gross profit of $177 million, and Adjusted EBITDA of $48 million, representing a strong EBITDA margin of over 27%. We also generated $46 million in free cash flow this quarter and $117 million year to date, which amounts to a 96% conversion of our Adjusted EBITDA in Q3.

In 2025, we expect nearly 2 billion dollars in gross revenue, and more than 700 million dollars in x-tech gross profit, which is what we keep after. We pay our publisher Partners who show our ads to their users,

We expect to generate over million dollars in adjusted. Evidam at a 30% margin with strong free cash flow.

As advertisers see, diminishing returns on search and social, they look for scalable performance-driven, Alternatives like real life.

Is uniquely positioned to take, share in what we estimate is a 55 billion dollars opportunity.

Now, let's start to our Q3 results which came in ahead of the high end of our guidance across the board.

We delivered revenue of 497 million.

XC gross profit of 177 million and adjusted ibida of 48. Million representing a strong ibida margin of over 27%.

Adam Singolda: This strong cash generation allowed us to repurchase approximately 10 million shares during the quarter for a total consideration of $34.4 million. Year to date, we've bought back approximately $184 million worth of shares, representing 14% of the company. Driving ex-TAC gross profit growth is our North Star. It indicates that we're providing increased value to our customers and fuels our profitability and cash generation. In Q3, ex-TAC gross profit grew 6% year-over-year. The vast majority of our revenue is driven by scaled advertisers, those who spend $100,000 or more annually. As such, we guide investors to track 2 main metrics that affect our ex-TAC gross profit growth. The first is growing the number of scaled advertisers. The second is increasing average revenue per scaled advertiser.

We also generated 46 million dollars in free cash flow. This quarter and 117 million year to date which amounts to a 96% conversion of our adjusted ibida in Q3.

Like, total consideration of 34.4 million.

Year to date, we brought back approximately 184 Million worth of shares representing 14% of the company.

Driving X Tech gross profit growth is our North Star. It indicates that we've providing increased value to our customers and fuels our profitability and cash generation.

In the third quarter aec, gross profits, grew 6% year-over-year.

In the vast, majority of our revenue is driven by scaled advertisers. Those who spend $100,000 or more annually,

As such we guide investors to track 2. Main metrics that affect our extract gross profit growth. The first is growing the number of scaled advertisers

Adam Singolda: In Q3, we grew the number of scaled advertisers by 4% to 2,064. Our average revenue per scaled advertiser grew 11%, reflecting meaningful progress in driving advertiser success with Realize. Realize's expanded capabilities and strong performance technology are driving these improved results. One example can be found with a major online travel company that was interested in growing their cruise business. While using Realize's advanced targeting and bidding technologies, they were able to achieve 67% lower CPCs versus Meta, while driving a 48% increase in traffic to their site. This performance was so strong, this travel company increased their initial investment 10x and has now become a scaled advertiser on our platform. Last quarter, we shared more about how our supply is differentiated. Overall, our exposure to search traffic globally remains in the single digits.

The second is increasing average revenue per scaled Advertiser.

In the third quarter, we grew the number of scaled advertisers by 4% to 2,064.

Our average revenue per scaled, Advertiser grew 11% reflecting meaningful progress, in driving, Advertiser success. With real life.

Realize is expanded capabilities and strong performance. Technology are driving these improved results.

1 example can be found with a major online travel company that was interested in growing their Cruise business.

While using real life as advanced targeting and bidding Technologies, they were able to achieve 67% lower cpcs versus meta while driving a 48% increase in traffic to their site.

This performance was so strong. This travel company increased, their initial investment 10x and has now become a scaled Advertiser on our platform.

Adam Singolda: Even as search traffic across the web declines, our total company traffic in Q3 grew year over year. This growth was fueled by strong double-digit increases in app traffic, now accounting for roughly one-third of our global supply, along with successful new publisher onboarding. We continue to monitor our traffic patterns, at this time it is a relatively small level of exposure. In summary, we're very happy with how the year is progressing. We think Realize can make us the leading performance advertising platform outside of Google, Meta, and Amazon across mobile, desktop, OEMs, messaging apps, and more. It is a big ambition, the numbers make it clear that we're not there yet. That said, we see an inflection point in the business with Realize, if you know this team as well as I do, you'd know we're motivated by big challenges.

Last quarter we shared more about how our supplies do differentiated. Overall our exposure to Source traffic globally, remained in the single digits,

And even a search traffic across the web declines. Our total company traffic in Q3 grew year-over-year.

Growth was fueled by strong double digit increases in app traffic. Now, accounting for roughly 1/3 of our Global Supply along with successful, new publisher on boarding.

We continue to monitor our traffic patterns, but at this time it is a relatively small level of exposure.

In summary, we're very happy with how the year is progressing. We believe Taboola can make us the leading performance advertising platform outside of Google, Meta, and Amazon across mobile, desktop, OEMs, messaging apps, and more.

It is a big ambition and the numbers. Make it clear that we're not there yet.

Adam Singolda: It is probably one of the reasons we were voted one of Fortune's best places to work. We're taking on one of the toughest competitive landscapes in the world in an enormous addressable market. We're hard at work, and we bought approximately $184 million worth of shares as we see the opportunity ahead of us. Before I hand it over to Stephen Walker, on a personal note, I want to say that over the past months, our teams and partners in Israel have shown incredible strength, resilience, and unity. Seeing things begin to calm and people returning home safely fills me with gratitude and hope. With that, I'll hand it over to Stephen Walker.

That said we've seen inflection point in the business with realized and if you notice team as well as I do you'd know, we're motivated by big challenges. It is probably 1 of the reasons we were voted 1 of Fortune's. Best places to work.

We're taking on 1 of the toughest competitive landscapes in the world in an enormous addressable Market, we're hard at work and we bought approximately 184 million dollars worth of shares. As we see the opportunity ahead of us.

Before I hand it over to Steve on a personal note. I want to say that over the past months, our teams and partners in Israel have shown Incredible strength, resilience and unity.

Stephen Walker: Thanks, Adam, and good morning, everyone. As Adam mentioned, we've had a strong year so far. In Q3, we continued that momentum, delivering results that exceeded the high end of our guidance across all metrics. In Q3, revenues reached $496.8 million, up 15% year over year. We believe this growth reflects an inflection point in Realize's traction in the market. I have spoken about the fact that we have a large amount of very high-quality supply, so what we need to grow our business going forward is primarily to earn new advertiser budgets. We started to see traction in that area during Q3 as our new ad platform is helping advertisers succeed and helping us win additional budgets.

Same things begin to come and people returning. Home safely fills me with gratitude and hope with that. I'll hand it over to Steve.

Thanks, Adam, and good morning, everyone. As Adam mentioned, we've had a strong year so far in Q3. We continued that momentum, delivering results that exceeded the high end of our guidance across all metrics.

In the third quarter revenues reached 496.8 million up 15% year-over-year. We believe this growth reflects an inflection point in realizes Traction in the market, I have spoken about the fact that we have a large amount of very high quality Supply. So what we need to grow our business going forward is primarily to earn new Advertiser budgets.

Stephen Walker: This showed up in our scaled advertiser metrics, evidenced by a 4.4% increase in the number of scaled advertisers and a 10.9% increase in average revenue per scaled advertiser. Both of which primarily benefited from Realize improving retention and growing ad spending levels with existing advertisers when compared to the same period last year. As I have said in prior quarters, we are particularly pleased to see the number of scaled advertisers growing as they tend to be the fuel for future growth. I should note that the growth in average revenue per scaled advertiser also benefited from an easier comparison with Q3 2024 because during that period, we were testing ad formats with Yahoo, and revenue from that test was recognized as an offset to traffic acquisition costs rather than as revenue.

We started to see Traction in that area during Q3, as our new ad platform is helping advertisers succeed and helping us win additional budgets.

And growing ad spending levels with existing advertisers when compared to the same period last year.

As I have said in Prior quarters, we are particularly pleased to see the number of scaled advertisers growing as they tend to be the fuel for future growth.

Stephen Walker: Normalizing for that one-time test, growth in this metric was more in the mid to high single digits range, and taken together with our growth in scaled advertisers, positively contributed to our revenue and ex-TAC performance. Ex-TAC gross profit for Q3 came in at $176.8 million, up 6.3% year-over-year, including a 55 basis point tailwind from foreign exchange rates. Ex-TAC gross profit growth was primarily driven by strong growth in advertising spend, thanks to the success we are seeing with Realize and includes strong performance from Taboola News and bidded supply. Ex-TAC gross profit margins were down year-over-year, primarily due to the one-time testing we were doing with Yahoo last year.

I should note that the growth in average revenue per scaled. Advertiser also benefited from an easier comparison with Q3 2024. Because during that period, we were testing ad formats with Yahoo and revenue from that test was recognized as an offset to traffic acquisition costs rather than as Revenue.

Normalizing for that 1 time test growth in this metric, was more in the mid to high single digits range. And taken together with our growth in scaled advertisers, positively contributed to our revenue and xstack performance.

xstack gross profit for the third quarter came in at 176.88% year-over-year, including a 55 basis point Tailwind from foreign exchange rates

etac growth. Profit growth was primarily driven by strong growth in advertising. Spend thanks to the success. We are seeing with real lives and includes strong performance from taboola news and bidded supply.

Stephen Walker: Notwithstanding, overall ex-TAC gross profit dollars grew year over year, and as I have said previously, I focus more on growth of ex-TAC gross profit dollars rather than the margin percentage. Gross profit for the quarter was $139 million, primarily benefiting from strong ex-TAC gross profit growth. As mentioned in prior quarters, gross profit also benefited from reductions in our other cost of revenues driven by lower server and network infrastructure costs, some of which came from a reduction in depreciation expenses related to our servers due to a reassessment of their useful lives. Our net income was $5.2 million with non-GAAP net income coming in at $34.3 million. Adjusted EBITDA for the quarter was $48.2 million, reflecting an Adjusted EBITDA margin of 27.3%.

Xstack gross profit margins were down year-over-year. Primarily due to the 1-time testing we were doing with Yahoo last year.

Notwithstanding overall, x-tac gross, profit dollars, grew year-over-year. And as I have said, previously, I focused more on growth of xstack gross profit dollars rather than the margin percentage.

Gross profit for the quarter was 139 million. Primarily benefiting from strong, x-tac gross profit growth.

As mentioned in Prior quarters gross profit also benefited from reductions in our other costs of revenues driven by lower server and network infrastructure costs. Some of which came from a reduction in depreciation expenses related to our servers, due to a reassessment of their useful lives.

Stephen Walker: We continue to focus on cost discipline across the business while strategically investing in areas that support growth. This quarter, we had a $2 million headwind for foreign exchange rates versus Q3 2024, $3 million higher operating expenses, partially offset by approximately $1 million in ex-TAC tailwinds. The impact on operating expenses was primarily from the Israeli shekel, where we have a large employee and expense base. Without this headwind, our Adjusted EBITDA margin would have been roughly the same as Q3 2024. We also had higher than planned hosting costs related to certain growth initiatives, and we decided this quarter to further increase our marketing spend for Realize based on the traction we are seeing.

Our net income was 5.2 million with non-gaap net. Income coming in at 344.34% reflecting in the adjusted. Avadim margin of 27.3%, we continue to focus on cost discipline across the business while strategically investing in areas that support growth this quarter. We had a million dollar headwind for foreign exchange rates versus Q3 2024. 3 million higher operating expenses partially offset by approximately 1 million dollars in x-tac Tailwind.

The impact on operating expenses was primarily from the Israeli shekel, where we have a large employee and expense base.

Without this headwind, our agency badam, margin would have been roughly the same as Q3 2024.

We also had higher-than-planned hosting costs related to certain growth initiatives, and we decided this quarter to further increase our marketing spend for realized. Based on the traction we are seeing.

Stephen Walker: In terms of cash generation, we had $53.2 million in operating cash flow in Q3 and free cash flow of $46.3 million, representing 96% conversion from Adjusted EBITDA in the quarter. Our free cash flow benefited significantly from a couple of factors, primarily high Adjusted EBITDA margins and strong management of our working capital. Our free cash flow conversion from Adjusted EBITDA continues to be over 70% over the last 4 and the last 8 quarters. Given our experience over the last couple of years, we think it is safe for investors to assume that we will convert free cash flow at a 60% to 70% rate over the longer term, which is above our prior 50% to 60% target conversion of free cash flow from Adjusted EBITDA.

In terms of cash generation, we had 503.2 million in operating cash flow in the third quarter and free cash flow of 46.3 million representing 96% conversion from adjusted, EBA in the quarter.

our free cash flow benefited significantly from a couple of factors, primarily High adjusted, but down margins and strong management of our working capital

Our free cash flow conversion from adjusting. The dock continues to be over 70% over the last 4 and the last 8 quarters.

Stephen Walker: For the full year 2025, I expect to do even better than the high end of that range. Turning to the balance sheet, we remain in a strong financial position. We ended Q3 with a net cash balance of $41.5 million. Cash and cash equivalents totaled $115.5 million, which more than offset our long-term debt of $74 million. As a reminder, earlier this year, we secured a new $270 million revolving credit facility, allowing us to fully repay our previous long-term debt loan while maintaining approximately $196 million in available capacity as of 30 September. This facility also allowed us to reduce our interest expense by $1.6 million in Q3.

Given our experience over the last couple of years, we think it is safe for investors to assume that we will convert free cash flow at a 60 to 70% rate over the longer term which is above our prior. 50, to 60% Target conversion of free cash flow from adjusted VA.

For the full year 2025, I expect to do even better than the high end of that range.

Turning to the balance sheet, we remain in the strong financial position. We ended the third quarter with a net cash balance of 41.5 million.

Cash and cash equivalents totaled 115.5 million which more than offset. Our long-term debt of 74 million.

September 30th.

Stephen Walker: With this facility, we can operate with a lower cash balance while preserving access to significant liquidity. We continue to believe share repurchases are one of the most compelling uses of capital. In Q3, we repurchased approximately 10 million shares at an average price of $3.43 for a total consideration of $34.4 million. Year to date, we have bought back nearly 14% of our outstanding shares, reducing our total share count from approximately 337 million at the end of 2024 to about 291 million at the end of Q3 2025. As an update to our share repurchases from Yahoo, we are no longer required to purchase shares from Yahoo for the remainder of 2025 due to meeting certain Israeli regulatory conditions.

This facility also allowed us to reduce our interest expense by 1.6 million in the third quarter.

With this facility, we can operate with a lower cash balance while preserving access to significant liquidity.

We continue to believe, share repurchases are 1 of the most compelling uses of capital in the third quarter. We repurchased approximately 10 million shares at an average price of $3.43 for a total consideration of 34.4 million.

Year to date, we have bought back nearly 14% of our outstanding shares, reducing our total share count from approximately 337 million at the end of 2024 to about 291 million at the end of Q3 2025.

Stephen Walker: This means we have the ability to buy more shares in the open market. Moving to guidance for Q4 2025, we expect revenues to be between $532 and 542 million, gross profit to be between $166 and 171 million, ex tax gross profit to be $204 to 210 million, Adjusted EBITDA to range from $83 to 85 million, and non-GAAP net income to be $52 to 56 million. For the full year, we are raising our guidance across the board.

As an update to our share repurchases from Yahoo, we are no longer required to purchase shares from Yahoo for the remainder of 2025 due to meeting certain Israeli regulatory conditions. This means we have the ability to buy more shares in the open markets.

Moving the guidance for the fourth quarter of 2025, we expect Revenue to be between, 532 and 542 million, gross profit to be between 166 and 171 million, x-tac gross profits, to be 2004 to 210 million.

Adjusted the bedat to range from 83 to 85 million and non-gaap net income to be 52 to 56 million.

Stephen Walker: We now expect revenues to be between $1.91 and $1.93 billion, gross profit to be between $550 and $564 million, ex-TAC gross profit to be $700 to $710 million, Adjusted EBITDA to be $209 to $214 million, and non-GAAP net income to be $139 to $144 million. This guidance reflects continued momentum across our business. I would note that in Q4, the Adjusted EBITDA guidance reflects a forecasted headwind from foreign exchange rates of over $5 million on operating expenses, partially offset by ex-TAC tailwinds, which reduces our Adjusted EBITDA by approximately $1.5 million and reduces the Adjusted EBITDA margin by over 140 basis points.

For the full year, we are raised in our guidance across the board. We now expect revenues to be between 1.91 and 1.93 billion. Gross profit, to be between 550 and 564 million, x-tac grows profit, to be 700 to 710 million adjust, the BEDA to be, 209 to 214 million, and non-gaap net income, to be 139 to 144 million.

Stephen Walker: Also, as a reminder, when you are comparing each of the quarters this year to the same quarter last year, you must keep in mind the onboarding of Yahoo, which impacts quarterly comparisons this year. As a result, we believe the full-year projected growth rate of 6% at the midpoint of our new range normalizes for these dynamics and is the best representation of the true growth of our core business in 2025. In summary, we're very pleased with our Q3 performance and the strong momentum we've built so far this year. We're seeing an inflection point with Realize and remain focused on delivering against the goals we set at the beginning of the year. There's still work ahead, but we believe we're on the right path toward achieving double-digit growth over time. With that, let's move to Q&A. Operator, can you please open the lines for questions?

This guidance reflects continued momentum across our business. I would note that in Q4 the adjustability of a dog guidance, reflects a forecasted headwind from foreign exchange rates of over 5 million dollars on operating expenses. Partially offset by xstack Tailwind, which reduces our adjust the ba by approximately 1.5 million and reduces the adjusted beta margin by over 140 basis points.

Also, as a reminder, when you are comparing each of the quarters this year, to the same quarter last year, you must keep in mind, the onboarding of Yahoo which impacts quarterly comparisons this year. As a result, We Believe the full year of projected growth rate of 6% at the midpoint of our new range normalizes for these Dynamics and is the best representation of the true growth of our Core Business in 2025.

In summary, we're very pleased with our Q3 performance and the strong momentum. We've built so far this year, we're seeing an inflection point with realize and remain focused on delivering against the goals. We set at the beginning of the year, there's still work ahead but we believe we're on the right path toward achieving double digit growth over time.

Operator: Yes. Thank you. At this time, we'll conduct the question-and-answer session. As a reminder, to ask a question, you'll need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. One moment, and we will compile our Q&A roster. Your first question comes from the line of Zach Cummins with B. Riley Securities. Your line is now open.

With that, let's move to Q&A. Operator, can you please open the lines for questions? Yes, thank you at this time. We'll conduct the question and answer session. As a reminder, to ask a question. You'll need to press star 1, 1 on your telephone and wait for your name to be announced to withdraw your question. Please press star 1 1 1 again.

1 moment, and we will compile our Q&A roster.

Zach Cummins: Hi. Good morning. Thanks for taking my questions and congrats on strong results here in Q3. Just starting off with Realize platform. Nice to see the incremental traction as we're seeing on that front. Just curious, in terms of taking it to the next level of capturing more of these advertiser budgets, is it more just proving it out and testing it in the market? What are kind of the next steps in terms of taking this from strong traction to meaningful contribution to the overall P&L?

Your first question comes from the line of Zach Cummins with B Riley Securities. Your line is now, open,

Hi, good morning. Thanks for taking my questions and congrats on on strong results here in Q3. So just starting off with with realized platform, nice to see that incremental traction that we're seeing on that front.

Adam Singolda: Yeah. Good morning, everyone. I think overall, we're seeing good momentum, which is encouraging for us to see. If, you know, if you look at what we said when we launched it, taking a step back, there are really three things that moved the needle financially. The first one is just going from native advertising to performance, and that takes time, you know, to shift kind of perception in the market, and getting more advertisers to be aware of Taboola as a place they can spend money beyond search and social. That's one. The second thing is our focus on the sales side on ICPs. That's important because when we sell to the right clients, we tend to see higher retention and more spend.

Just curious in terms of taking it to the next level of capturing more of these advertisers budgets, is it more just proving it out and testing it in the market or or what are kind of the next steps in terms of taking this from strong traction to, to meaningful contribution to the overall p&l?

Yeah, so good morning everyone. So I think overall we're seeing good momentum which is uh which is an encouraging for us to see. You know if if you look at what we said, when we launched it, they can step back. So really 3 things that uh moved the new financially.

Advertised to be aware of tool as a place, they can spend money Beyond search and social. So that's 1.

Adam Singolda: The third one is, keep iterating on the tech front. You know, Predictive Audiences, new formats, new placements. Those three things, you know, keep iterating on those, we believe will make a positive impact.

The second thing is is our focus on the sales side and icps. And that's, that's important because when we sell to, the right clients, we tend to see um, higher retention and and more spend

And the third, the third 1 is, um, keep iterating on the tech on the tech front. So um, you know, predictive audiences new formats, uh, new new placements. So those 3 things, you know, keep iterating on those We Believe will make, um, a positive impact.

Zach Cummins: Understood. My one follow-up question is just building on Realize, interesting partnership that you announced with Paramount. Can you talk about the Performance Multiplier product and how maybe Taboola could have more of a presence in CTV over time?

understood and and my 1 follow up question is just uh, building on Realize

Adam Singolda: Yeah. One, let me just, you know, say, but it's financially, you know, small as of now, but very exciting. What we've announced, which is essentially a demand generation opportunity for Taboola through Realize, we're tracking essentially the industry overall going more and more into, you know, outcome and measurement and performance-driven markets. Even in television, which is about a $100 billion market in the US, we're seeing these dynamics. Advertisers are expecting to not only enjoy the benefit of a large screen when they get consumers exposed to ads, but to also track and be able to drive conversions through that campaign. We're seeing this with Amazon, obviously, you know, telling advertisers if you buy Prime, we can show ads also on Amazon.com and show you that someone ended up buying the product.

Interesting partnership that you announced with, with Paramount. Um, so can you talk about the performance multiplayer product in in how maybe to look at, have more of a presence in in CTV over time?

Yeah, so 1, let's just, you know, say but it's financially, um, you know, small um, as of now, but but very exciting. So what we've announced, which is essentially a demand generation opportunity for tabula through realize, um, we're we're tracking essentially the industry overall going more and more into, you know, outcome and measurement and performance driven, uh, market and even in television, which is about 100 billion dollars, uh, Market in the US, we're seeing these Dynamics, advertisers are expecting to not only enjoy the benefit of a large screen when they get consumers exposed to ads. But but also track and be able to drive conversions through that campaign we're seeing this, with Amazon,

Adam Singolda: It's a very powerful pitch to advertisers. What we've announced with Paramount, which is a great partner of ours, on the CBSI front for a very long time and now on the CTV front, is to bring that, you know, the combined power of TV and performance advertising into one home, if you will. If you're buying an ad and that ad is shown on Yellowstone, as an example, and you see that ad in your living room, you as a consumer and people like you, maybe through a matching integration with Paramount, may be seeing relevant ads on the open web through Realize. The point here is that we're able to expand the audience.

Obviously, you know, telling you advertisers, if you buy a prime, we can show ads, also on amazon.com and show you that someone ended up buying the product. It's a very, it's a very powerful, uh, pitch to advertisers. So what we, what we've announced with Paramount, which is a great partner of ours, um, on the cbsi front for a very long time and now, on the CTV from is to is to bring that, you know, the combined power of TV and performance advertising into 1 home if you will. So if you're buying an ad and that ad is shown on Yellowstone is an example and you see that ad in your living room,

Adam Singolda: Even if one person saw an ad on TV, we're able to show maybe 10 other people ads that are relevant to the same advertiser and then report back, and this is the exciting part, report back to the advertiser how many clicks have occurred, impressions, conversions, and price per acquisition. This is, you know, you're buying TV, and you feel like you're buying Meta. I'm excited about it, and I hope we'll continue to see traction. It's like a retail media for TV, if you will. It's still early days.

Use a consumer and people like you maybe through a matching integration, with Paramount, maybe, um, seeing relevant ads on the open web through real life. And the point here is that, um, we're able to expand the audience. So even if 1 person saw an ad on TV, we're able to show maybe 10, other people as that are relevant to the same Advertiser, and then report back and this is the exciting part reports back to the advertiser, how many clicks have occurred Impressions, conversions, price per acquisition. So this is, you know, you're buying TV and you feel like you're buying meta. Um, I'm excited about it and I hope I will continue to see traction but it's like a retail media for TV if you will um, and still early days.

Zach Cummins: Understood. Well, thanks for taking my questions, and best of luck with the rest of the quarter.

Adam Singolda: Thank you.

Stephen Walker: Thanks, Zach.

Understood. Well, thanks for taking my questions, and best of luck with the rest of the quarter.

Operator: Thank you. Your next question comes to the line of Laura Martin with Needham.

Thank you. Thanks Zach.

Thank you.

Laura Martin: Good morning. Great numbers, you guys. I have a couple. Can you talk about what's going on with traffic? If you're not seeing any degradation in traffic, I'm very interested in the quality because these LLMs are searching sort of anywhere between 8 and 8,000 pages per query to give an answer. My first question is on traffic, both volume and quality of is human traffic declining even if total traffic to your site is not? My second question is, you guys were really early adopters of using AI to improve your yields and conversion rates. I'm interested in an update on actual metrics of where you've seen improvements either in costs or in revenue or in yield from your updated AI implementations, please.

Your next question comes to the line of Laura Martin with nem, your line is now open.

Adam Singolda: Sure. Good morning, Laura, and thanks for the question.

Um, good morning, great numbers. You guys, I have a couple. Um, can you talk about what's going on with traffic? And if you're not seeing any degradation in traffic, I'm very interested in the quality because these llms are searching sort of anywhere between 8 and 8000 pages per query to get an answer. So my first question is on traffic, both volume and quality of is human traffic declining. Even if total traffic to your site is not and then, my second question is, you guys were really early adopters of using AI to improve your yields and conversion rates. I'm interested in an update on actual metrics of where you've seen improvements either in costs or in revenue, or in yield from your updated. Um, AI. Um, implementations please,

Laura Martin: Hi.

Adam Singolda: I can start, and we can bounce off of this. The first thing we're seeing actually surge in traffic overall, which is interesting, obviously, as you say, in times of search traffic declining, because of LLM engines. The main two reasons we're seeing traffic going up, is I would say, one, we're seeing increase in direct traffic, actually specifically through apps. You know, many of our partners have a very strong brand name. If you think about, you know, the ESPNs of the world, the CNBCs, Yahoo, and OEM, you know, partners such as Apple and Samsung and others, many of them have a very strong brand and recognizable with consumers.

Adam Singolda: While search traffic is going down, we're seeing their app direct traffic going up. That affects our overall traffic mix. That's something that's been helpful. The second thing is we're doing a good job onboarding new partners. Think of new publishers and new devices. Through Taboola News, we've seen positive trends of adding new partners. For those two reasons, overall, company-wise, we are seeing growth in traffic. That's about that. Human traffic, you know, we're not seeing any material change that I'm aware of. In general, the way we're doing it today, we have this index that actually allows us to constantly make sure that our supply has high quality for advertisers.

Adam Singolda: When we onboard a new partner or as things change, we're able to see if the conversion rate from a certain publisher or the conversion rate from a certain page changed. If it's within a you know, a certain range of what we expect, we call that human and good. If it's too far down, we actually part ways with that partner. We're not sustaining partners on our network that do not perform to advertisers. We've been doing this for a long time, and I think advertisers really appreciate that because they know they can always rely on our traffic being high quality. Stephen?

Stephen Walker: Yeah. In terms of your question about AI and where are we seeing impact from that. Just to take a step back real quickly, we use AI, you know, across our business. We've been a deep learning-based business for better than a decade now. That is what the technology that basically drives how we decide which ads or which pieces of content to show to which users at which particular context at any given time. That is a key part of our business and has been for a decade. LLM-based AIs we've started using obviously more recently as they become more advanced. We use those primarily in two areas of our business.

Says, for example, the news we've seen, um, positive trends of adding new partners. So for those 2 Reasons, overall company wise we are seeing growth in traffic and about the SEC. So that's about that human traffic, you know, we're we're not seeing any any material change, and I'm aware of in general. The way we, we're doing it today. We have this index that actually, um, allows us to constantly, um, make sure that our supply has high quality for advertisers. When we on board the new partner, or as things change, we're able to see if the conversion rate from a certain publisher or the conversion rate from a certain page changed. And if it's within, you know, a certain range of what we expect, we call that human and good. And if it's too far down, we actually part ways with that partner. We, we're not sustaining Partners on our Network that are do not perform to advertisers. So, we've been doing this for a long time and I think advertisers really appreciate that because they know they can always rely on our traffic being high quality Steve. Yeah. And then in terms of,

In terms of your question about, uh, Ai. And where are we? Seeing impact from that? So, uh, just to take a step back real quickly, we use AI, you know, across our business, we've been, uh, a deep learning based, uh, business for better than a decade now, uh, and that is what the technology that basically drives how we decide which ads, or which pieces of content to show to which users at which, uh, in which particular context at any given time. So that is, that is a

Stephen Walker: One is, we announced obviously, Laura, you remember we demoed Abby with you, where we showed a LLM-based assistant for advertisers that helps them to get up and running on our platform. Now over time is even helping them to optimize campaigns and to do more with the platform. We use it there. Then internally, we're using LLM-based technology a lot more for productivity reasons. You know, a great demo I saw the other day was, showing our sales team where they can say, Hey, I'm about to go into a meeting with Nestlé, with this person, and a LLM-based tool will actually prep a whole kind of package of information that they should know. What has Nestlé been saying about their goals as a business? What does this person do?

Key part of our business and has been for a decade, uh, llm based AIS where we've started using, obviously, more recently, as they become more advanced, we use those primarily in in 2 areas of our business. So 1 is, uh, we announced obviously Laura. You remember, we demoed Abbey with you, where we showed a llm based, uh, assistant for advertisers, that helps them to get up and running on our platform. And now, over time is even helping them to optimize campaigns, and to do more with the platform. So, we use it there and then internally, we're using, uh, llm based Technologies. A lot more for productivity reasons. So, you know, uh, great demo. I saw the other day was, uh, showing our sales team where they can say, hey, I'm about to go into a meeting with Nestle with this person and, uh, llm based tool will actually prep a, uh, a whole kind of, uh, package of information that they should know.

Stephen Walker: It's kind of amazing how much information they get going into the meetings, that they come in prepped. We're using it as a productivity tool in that way. In general, what I would say is where we will always see the biggest impact on our business with AI is anything that drives higher yields and higher success rates for our advertisers. That's true. I mean, so when we talk about seeing an inflection with Realize, frankly, a lot of that is coming on the back of, you know, better algo. You know, things like Predictive Audiences is an AI-based prediction tool of where could you get more conversions on our network and what do you have to do to get those. That's the probably impact number one.

What is Nestle been saying about their goals as a business? What is this person do? It's, it's kind of amazing how much information they get going into the meeting and said they come in prepped. So we're using it as a productivity tool in that way.

Stephen Walker: Abby is definitely having an impact on our advertisers, so we're seeing, you know, more success thanks to that. I'd say the, you know, we are seeing productivity, but we're probably earliest in that area in terms of where we're seeing impact.

Adam Singolda: Lastly, Laura, just to add one more note is that we also launched DeeperDive a few months back, which is our kind of, you know, ChatGPT for the open web, driven by advertising as a revenue source. Still early days, but that's another thing that, you know, can generate surge in quality traffic. Definitely human traffic, because people have to type and engage with it. That's another investment we're making to try to, you know, create more quality supply for advertisers in the form of LLM and supports publishers in growing and getting into the AI era as we know it.

In general, what I would say is where we will always see the biggest impact on our business with AI is anything that drives higher yields and higher, uh, success rates for our advertisers. And that's true. I mean, that's so when we talk about seeing an inflection with realized frankly, a lot of that is coming on the back of, uh, you know, better algo, you know, things like predictive audiences and AI based, uh, prediction tool of. Where could you get more conversions on our Network and, and what do you have to do to get those? So that's probably impact number 1. Uh, Abby is definitely having an impact on our advertisers so we're seeing you know, more success. Thanks to that. Uh and then I'd say the, you know, we we are seeing productivity but we're probably earliest in that area in terms of where we're seeing impact and Leslie. Laura just to add 1 more note is that we also launched deeper dive, um a few months back which is our kind of, you know, check it with you for the open web driven by

advertising as a revenue Source, still early days, but that's another thing that, you know, can generate

Surge in quality traffic, definitely the human traffic, which people have to type and engage with it. So, that's another investment for making to try to, um, you know, create more quality supply for advertisers in the form of LM, and supports Publishers in growing and getting into the AI era. Um, as we know it,

Laura Martin: Thank you very much.

Stephen Walker: Thanks, Laura.

Thank you very much.

Thanks Laura.

Operator: Thank you. Your next question comes to the line of Jason Helfstein with Oppenheimer. Your line is now open.

Thank you.

Your next question comes to a line of Jason Hinn with oppenheim.

Jason Helfstein: Thanks. I was on a few calls, so apologize if this was already covered, but I'm struggling to understand, kind of again, why revenue ex-TAC on a year-over-year basis will decelerate, call it, you know, 7 points? Then why the other cost of goods, you know, the non-TAC COGS is going to be up $5 million sequentially? Can you unpack that? Then I've just got a question about next year. Thanks.

Your line is now open. Hey hey thanks. Um, and I was on a few calls, so apologize if this was already covered but I'm struggling to understand.

Um, kind of again why revenue x-tac on a year-to-year basis.

Will be will decelerate call it, you know, 7 points. And then

Why the the other costs of of goods? Um,

Stephen Walker: Yeah. When you talked about the non-TAC COGS, are you talking about the other cost of revenue?

Can you unpack that? And then I've just got a question about next year. I think

Jason Helfstein: Correct. Yeah. Yeah.

Stephen Walker: Yeah. Okay. Yeah. I guess, I'll start with kind of the general discussion of ex-TAC and where we are with ex-TAC. First of all, you know, I think margins were down when you look at ex-TAC margin, they were down year over year, primarily due to the Yahoo testing last year. Remember last year, we had a format testing with Yahoo, where it was recognized on a net basis. Basically, it was a TAC offset, and that distorted our margins year over year. I think if you, if you're talking about a margin in Q3, it was down because of that. If you're looking at ex-TAC dollars, they were up 6% year over year in Q3, and that's kinda what we focus on more is the dollars.

Yeah, when you when you talked about the non-ac cogs, are you talking about the other cost of Revenue, correct? Yeah, yeah.

Okay. Yeah.

Stephen Walker: Q4 is going to be down year-over-year. That's mostly due to 2 factors. One is, there was a, the Yahoo onboarding last year basically caused some distortion between quarters, so that's part of it. We also had particularly strong demand from Chinese advertisers in Q4 last year that frankly was unusual. You know, with the tariffs this year, they did drop. We talked about that in Q1, they have not gotten back to the same rates yet. Those are the primary 2 factors for Q4. In terms of the, in terms of the other costs of revenue and changes there, first of all, we've changed the accounting on our servers. That actually has brought down other costs of revenue.

So so I guess uh I'll start with kind of the general uh discussion of xstack and and where we are with xstack. So first of all, you know, I think, uh, margins were down year. When you look at xstack margin, they were down year-over-year primarily due to the Yahoo testing last year. So remember, last year, we had a, uh, format testing with Yahoo where it was recognized on a net basis. Basically, it was, uh, attack offset and that distorted our margins year over year. So I think, if you, if you're talking about a margin, uh, in Q3, it was down because of that, if you're looking at xstack dollars, they were up 6% year-over-year in Q3. And that's kind of what we focus on more is the dollars. Um, Q4 is going to be down. Uh, year-over-year, that's mostly due to the 2 factors. 1 is uh, there is a, um, there was a, uh, the Yahoo onboarding last year basically caught some

Distortion between quarters. So that's part of it. And then, we also had particular, uh, particularly strong demand from Chinese advertisers in Q4 last year, that frankly was unusual. Uh, and, you know, with the tariffs this year, they did drop. We talked about that in q1, uh, and they have not gotten back to the same rates yet. So, those are the primary 2 factors for Q4.

Stephen Walker: We have also written off, or not written off, we've changed the way we're accounting for some of our capitalized projects. I believe that's a big part of the remainder of it.

Jason Helfstein: Okay. Then just philosophically, I think we were previously thinking next year would grow low single digit. I mean, obviously coming off of this again, for revenue ex-TAC with this minus 2% guide for Q4, is it still fair to assume that you think the company could generate positive growth in revenue ex-TAC for next year?

Uh, in terms of the, in terms of the other costs of Revenue in uh, changes there. Um, so first of all, the we've changed the accounting on our servers that actually is brought down other costs of Revenue, uh, but we have also written off, uh, or not written off. We've changed the way we're accounting for some of our, uh, capitalized projects, I believe that's a big part of the remainder of it.

Stephen Walker: Yeah. Yeah. Yes, I think that generally the way I think about it is, first of all, we're seeing good momentum with the business. Like, I think we're happy with what we're seeing. I think I wouldn't look at quarters when you're thinking about the growth rate. While we'll, you know, we'll give you guidance obviously for 2026 in February, what I would look at now is our full year growth rate for 2025 is a good proxy for, I think, where you can start with thinking about 2026.

Okay. And then can you just philosophically? I think we were previously thinking next year would grow low single digit. Um, I mean obviously coming off as much again for Revenue x-tac with this minus kind of 2% guide for the fourth quarter. Um, is it still fair to assume that you think the company could generate positive growth in Revenue by tax for next year?

Jason Helfstein: Okay. That's helpful. Thank you.

Yeah, so yeah. Uh, yes, and I think that generally, the way I think about it is first of all, we're seeing good momentum with the business. Like, I think we're happy with what we're seeing, I think, uh, I wouldn't look at quarters when you're thinking about the uh, the the, uh growth rate. Um, and while we'll, you know, we'll give you guidance obviously for 2026 in February. What I would look at now is our full year. Growth rate. For 2025 is a good proxy for. I think, uh, where you can start with thinking about 2026,

Helpful. Thank you.

Operator: Thank you. Your next question comes on the line of Mark Zgutowicz with The Benchmark Company. Your line is now open.

Thank you.

Your next question comes from the line of Mark. Is it good to wager with the Benchmark company? Your line is now open.

Mark Zgutowicz: Thank you. Good morning, guys. Stephen Walker, you talked a little bit about marketing spend. I'm just curious if you think about Realize marketing spend returns, what adjustments have you made since launching Realize? Maybe you can talk about what's worked, what hasn't, perhaps how your sales capacity is there relative to where you'd like it or if it's where you are comfortable with. In terms of margins, if we look at the Q4 Adjusted EBITDA margin guidance, is that a good proxy for us to think about in terms of 2026, excluding any potential ex-TAC acceleration? Then maybe a last one for Adam Singolda, if I could.

Thank you. Good morning guys. Uh, Steve, you, you talked a little bit about marketing spend. I'm just curious if you think about realize marketing spend returns,

What adjustments have you made since launching realize?

Maybe you can talk about. What's, what's worked, what hasn't and uh, perhaps how your sales capacity is there relative to where you? You'd like it? Or if it's if it's where you, um, are comfortable with and then, um, in terms of um,

Margins, if if you're looking at the fourth quarter, adjusted IBA margin guidance. Is that a good proxy to for us to think about, in terms of 2026, excluding any potential revx Tech acceleration?

Mark Zgutowicz: If you think about opportunities for investment, alongside Realize incrementality, can you maybe prioritize agentic MCP, ad CP, or any other areas? Thanks much.

Stephen Walker: Sure. Thanks, Mark. I'll go, I'll answer the first two. First of all, in terms of the marketing spend, I mentioned obviously in my prepared remarks that we've increased marketing spend intentionally over the last two quarters, Q3 and now heading into Q4. The reason we did that is we're seeing, and again, it has to do with the inflection we're seeing with Realize. We're seeing that advertisers are more likely to be successful coming onto our network now with the launch of Realize and a lot of the new product features that are baked into Realize, they're more likely to be successful. Obviously, what that means is if I previously was spending, you know, and I'm making up numbers here, don't take these, don't build these into a model.

Um and then give me a last 1 um for Adam if I could, if, if you think about opportunities for investment um alongside realizing incrementality, can you maybe prioritize a gentic mCP, add CP, or any other areas? Thanks much.

Stephen Walker: If I was previously spending $1,000 to get an advertiser, onboarded in the US through, you know, in terms of marketing spend, and they were, you know, had a X% likelihood of being successful and then eventually having a certain lifetime value, that X% likelihood of success has gone up, which means, and the lifetime value is still similar, maybe even improved a bit, means I can spend more on marketing, and I can basically still have a good positive ROI on it. As we've seen that, we've started increasing our marketing spend, which has a smaller effect on the immediate term, but again brings on more advertisers, which should help us grow faster in the future. That's kinda what's going on with the marketing spend.

Stephen Walker: In terms of specific areas that we're seeing that, geographically, it's been pretty broadly diverse, so globally, although we are seeing particular momentum in the US in that regard. Then in terms of the types of advertisers, it's really those, we talked about ICPs or ideal customer profiles when we talked about the launch of Realize. It is, it's those verticals. It's finance, it's auto, it's health, it's direct to consumer products. It's those verticals that we're seeing the best traction. In terms of your second question about expectations for Adjusted EBITDA and what you should think in terms of that going forward, Q4 is a seasonally strong quarter from an Adjusted EBITDA margin perspective, so don't look at Q4.

To be successful. So obviously, what that means is, if I previously was spending, you know, and I'm making up numbers here. So, don't take these, don't build these into a model. But if I was previously spending 000 to get an Advertiser, uh, onboarded in the US through, you know, in terms of marketing to spend, and they were, uh, you know, had a x percent likelihood of being successful. And then, eventually, having a certain lifetime value that X percent likelihood of success has gone up, which means? And the lifetime value is still similar, maybe even improved a bit means. I can I can spend more on marketing and I can, I can basically still have a good positive Roi on it. So as we've seen that, we've started increasing our marketing spend, which has a a smaller effect on the immediate term. But again, brings on more advertisers which should help us grow faster in the future. So that's kind of what's going on with the marketing spend. Um, in terms of the specific areas,

That we're seeing that uh, you know, a geographically. It's been pretty broadly diverse. So, you know globally, although we are seeing particular momentum in the US in that regard. And then in terms of the types of advertisers, it's really those, uh, we talked about I icps or ideal customer profiles when we uh, talked about the launch of real life. It is, you know, it's those verticals, it's financed, its Auto its Health, it's um, direct to Consumer products. It's

those verticals that we're seeing the best traction,

Stephen Walker: I think what we've said repeatedly in the past, and I think is still true today, we use 30% Adjusted EBITDA margins as kind of a guardrail for ourselves to think about how much we should invest in growth versus how much profitability we want. I think that's a good starting point for how to think about our margins and our OpEx for next year.

Adam Singolda: I can take the AI one. One, on the first part of your question, I think, you know, all of what we do is investing in AI in terms of driving primarily advertiser success. Realize drives most of our revenue as a company now, and making advertisers successful through Realize will be the main way we will go back to double-digit growth as a company. Realize is, you know, we're tracking Realize, as you know, with scaled advertisers, how many of them do we have, and then how much they're spending in average.

Um, in terms of your second question about, uh, expectations for adjust Thea and kind of where what you should think in, in terms of that going forward, I think, uh, so Q4 is a seasonally strong quarter from an adjust vaombe margin perspective. So don't look at Q4, but I think what we've said uh, repeatedly in the past and I think is still true today, we use 30% adjustment, Dom margin, this kind of a guardrail for ourselves to uh to think about uh what we should. How much we should invest in growth versus how much profitability we want. And I think that's a good starting point for how to think about our margins and our Opex for next year.

Adam Singolda: The reason that's important is because if you do a good job making advertisers successful with unique data, a lot of distribution and advanced AI investment, then you should see more scaled advertisers, and you should see them able to spend more because it means you have higher retention rates. People try you, they churn less, which means they get retained. Then once they're in, they're spending more and more over time. That's what you wanna see. As you saw in my remarks, we're seeing 4% increase in scaled advertisers and 11% growth in advert spend. I think for us it's laser focused on how do you get return on ad spend as fast as you can for advertisers so they don't churn.

I can take the AI 1. So funny, 1 on the first, on the first part of your question. I think, you know, all all of what we do is investing in AI in, in terms of driving primarily advertising success realize is drives most of our revenue. And as a company now and making advertisers successful through, realize will be the main way. We will go back to double digit growth uh, as a company. So so and and then realize is is, you know, we're tracking realized. As you know, with scale, Advertiser. How many of them do we have? And then how much they're spending in average, the reason that's important and is because if you do a good job, making advertising successful with unique data, a lot of distribution and events, uh, Investments, then you should see more skilled advertisers and you should see that.

Adam Singolda: What technologies such as Predictive Audiences and other and, you know, new formats and new supply you can provide them as part of our technology so they can spend more and more over time. That's these are the two areas of focus for us. When I think about Taboola and its position in the marketplace, you asked about MCP. I think we're well-positioned because the vast majority of our revenue comes from advertisers who buy from us directly. That means that we're able to share more with publishers and keep a very healthy margin for us as a business. That's not the traditional ad tech usually diagram, where you have companies that are doing one side of the marketplace and a lot of money gets lost along the way.

I'm able to spend more because it means you have higher retention rates. People try you, they churn less which means they get retained. And then once they're in, they're spending more and more over time. That's what you want to see. And as you saw in my remarks, we're seeing 4% increase in scale, advertisers and 11%, um, growth in Everett spend. So I think for us it's it's laser focused on. How do you get um, return on ad spend as fast as you can for advertisers, so they don't turn.

Adam Singolda: I think for us, you know, it's important to track MCP in this industry and companies such as Taboola, which is a two-sided marketplace. Publishers who work with us, work with us directly. Advertisers who buy from us, buy from us directly. This is similar to almost a consumer company, only for us we don't have our own Instagram. We have reach to consumers through publisher relationship. I think we're well-positioned and you can see that in our performance.

And then what the technology is such as predictive audiences and other and you know new formats and new Supply you can provide them as part of our technology so they can spend more and more over time. And and that's that's these are the 2 areas of focus for us when I think about taboola and its position in the marketplace. You that's what um mCP. Um I think we're well positioned because the vast majority of our Revenue comes from advertisers who buy from us directly that means that we're able to um, share more with Publishers and keep a very healthy margin for us as a business. And that's not the traditional ethic usually diagram, where you have companies that are doing 1 side of the marketplace and there are a lot of money gets lost along the way. So I think for us, you know, it's important to track mCP, um, in this industry and companies such as tabula, which is a 2-sided Marketplace, Publishers work with us, work with us directly advertisers to buy from us. Buy from us directly, this is, uh, similar to almost a consumer company only price. We don't have our own in

Instagram, we have reached the consumers, through publisher relationship. So um, I think we're all positioned. Um, and you can see that in our performance

Mark Zgutowicz: Thanks, guys. Very clear. Appreciate it.

Thanks guys, very clear. Appreciate it.

Operator: Thank you. Your next question comes to the line of James Kopelman with TD Cowen. Your line is now open.

Thank you.

James Kopelman: Good morning, and thanks for taking the questions. The first one is for Adam. Just following up on Laura's question on traffic. You mentioned that app traffic is now one-third of supply. Where do you see that trending over time? Do you think that could hit 50% or higher of supply? Do you expect double-digit app traffic increases in Q4 as well? I have a follow-up question for Steve.

Your next question comes to the line of James coppelman, with TD Cowen, your line is now open

On Laura's question on traffic.

Adam Singolda: Yeah, I mean, it's encouraging to see that traffic being already a third, almost a third, because that's a good stable base that is not affected by search as much or at all. I think that's already encouraging from our perspective as I look into the future. I think it has a chance of going up faster because, one, it's a much more engaged audience tends to be. If you talk to publishers, they'll usually tell you, and we see it, that an app user is a significantly more engaged consumer. They spend more time, they read more, they generate a lot of revenue. Publishers are always motivated to move people into app.

You mentioned that app traffic is now 1-3 of supply. Where do you see that trending over time? Do you think that could hit 50% or higher of supply? And do you expect double-digit app traffic increases in the fourth quarter as well? And then I have a follow-up question for Steve.

Third.

Adam Singolda: With, again, with the risk of LLM, I think I'm betting we'll see more dynamics of publishers trying to get consumers to download the app and using that. Two, we're seeing a lot of, you know, growth coming from Taboola News and in-app monetization is through, you know, partners like, you know, Apple News is obviously an incredible one, and Samsung. We spoke earlier this year about LINE, which is a messaging app. I think for us, we have aspiration as a company to keep working wherever consumers spend real time, so that over time, you know, we have aspiration to be on every device, every lock screen, every swipe you may have, provide news if relevant as part of your utility app.

And because that's a good stable base that is not uh affected by searches much uh or at all. And so I think that's that's already encouraging from my perspective. As I look into the future, I think it has a chance of going up faster because 1 it's much more engaged audience tends to be. So if you talk to Publishers they'll usually tell you and we see it that an app user is a significantly more engaged consumer. They spend more time they read more. They generate a lot of Revenue, so Publishers are always motivated to move people into app. And with again, with the risk of llm. I think I I'm betting, we'll see more dynamics of Publishers, um, trying to get consumers to download the app and, and using that. So I think that's going to be a positive trend and 2. Um, we're seeing a lot of, you know, growth coming from taboola news and in-app monetization. Um, it's through, you know, Partners. Like, you know, Apple news is obviously an Incredible 1 in Samsung and we spoke earlier this year about line, which is a messaging app. So I I think for us, we have aspirations as a company to keep working.

Adam Singolda: That's something that we invest in as a company, and I think there's a good product market fit with what we can provide, which is content, data, and revenue to what the market wants. I do suspect this will have a positive trend.

Forever, consumers, spend, um, real time. So that over time, you know, we have expiration to be on every device, every lock screen. Every swipe you may have, um, provide news the relevant as part of your utility app. So that's something that we invest in as a company and I think there's a good product Market fit with what we can provide, which is content data and revenue to what the market wants. So I do suspect, this will have a, a positive trend

James Kopelman: For Steve, in Q3, you were able to keep OpEx expense growth at a moderate level even as you accelerated growth in the business. What are your thoughts on investments and how we should think about headcount and expense growth over the next couple quarters into 2026 as well, particularly as it relates to operating margin in the business?

Stephen Walker: No, good question, James. I think, generally speaking, the way we have always looked at our business is that we should invest in growth, obviously, where we think we have a positive ROI, but limit ourselves by saying that we would like to always maintain a 30% plus EBITDA margin. I think that is the way we will still think about things going forward. That is the way we will probably plan 2026 as well. I think in terms of how to think about like where do we invest and what are we going to spend our money on? You know, I think it is really Realize is going to be the primary area of investment for us going forward.

And then for Steve in a third quarter, you were able to keep Opex expense growth and moderate level. Even as you accelerated growth in the business, what are your thoughts on investments? And how we should think about headcount and expense growth over the next couple quarters in the 2026 as well, particularly as it relates to operating margin in the business.

Yeah, no good. Good question James. So I think, uh, generally speaking the way we've always looked at our business is that we should uh, invest in growth obviously where we think we have a positive Roi but limit ourselves by saying that we'd like to always maintain a 30% plus EBA margin. So I think that's the way. We'll still think about things going forward, uh, and that's the way we'll probably plan uh, 2026 as well. Um, I think in terms of, uh, to how to think about, uh,

Stephen Walker: Obviously, we always have, Adam used to call them speedboat type of initiatives, but we have things like DeeperDive where we're investing a small amount of money just to see what we can learn and figure out. The big investment is gonna be Realize going forward just as it has been. I think you can expect the operating expenses to grow along in line with growth and for us to maintain 30% plus type of EBITDA margins. Great. Thanks a lot, guys. Appreciate the color.

Like what, where do we invest? And, and what are we going to spend our money on? You know, I think it's, uh, it's really realized is going to be the primary area of investment for us going forward. Obviously, we always have Adam used to call them speedboat type of initiatives. Uh, but we have things like deeper dive where we're investing. A small amount of money just to see what we can learn and figure out. But the big investment is going to be realized uh going forward just as it has been. Uh but I think you can expect the operating expenses to to grow along in line with growth and for us to maintain 30% plus type of Eva down margins.

Adam Singolda: Sure.

Great. Thanks a lot guys. Appreciate the color.

Sure.

Operator: Thank you. Your next question comes to the line of Tyler D. Mateo with BTIG. Your line is now open.

Tyler D. Mateo: Good morning. Thanks for taking the question, guys. Really appreciate it. Adam Singolda, I wanted to come back to some of your comments at the beginning of your the Q&A on kind of the sales approach. What's the biggest opportunity on the sales side of things to improve the brand perception and ultimately kinda realize adoption there? Like, what are some of the learnings that you've seen where you can see an incremental improvement on the sales side and that opportunity? Then my second question is on the comments about the inflection point in Realize, what are some of the underlying assumptions baked into that? Is that the number of advertisers? Is that the propensity to spend? The dollar value of spend? I'm just curious, like, what's the underlying assumptions there? Thank you.

Thank you. Your next question comes to the line of Tyler. Dave, Matteo with btig, your line is now open.

Good morning. Thanks for taking the question, guys, really appreciate it. Um, Adam, I wanted to come back to some of your comments at the beginning of your, uh, the Q&A on kind of the sales approach, what's the biggest opportunity, um, on the sales side of things to improve the brand perception and ultimately kind of realize that option there. Like, like what are some of the learnings that you've seen? Where you can see an incremental Improvement on the sales side, and that opportunity? And then my second question is on the comments about the inflection point in real life. What are some of the the underlying assumptions baked into that?

Adam Singolda: One, I think that's a great question. I think, one, we're investing overall from a perception perspective. We put our people to work in important events and things to interact with the market, and put Realize in the front as a way to attract performance advertising in the world that wants to go beyond search and social. I do think that's a real need, and we have a shot at doing this in the market. One, we're investing in being out there, and telling our story. Two, show me who you work with, and I'll tell you who you are type of thing.

Adam Singolda: If you're able through your technology and, you know, your investment to get good advertisers to be successful with you, to tell the story for you, I think that affects your story the most. You know, your brand is what people say about you when you're not in the room. For me, you know, to see, you know, advertisers, like the ones we mentioned, you know, working with us, excited to tell the story, is a great sign. Then, you know, taking a high-level view to have to look at, you know, the number of scaled advertisers and the advert spend going out, these are the right metrics. All of these are, you know, good initiatives. Like I mentioned also, our sales team now knows, and sales people go where they see money.

Adam Singolda: They know that if they sell into the right segments in the market, to the right advertisers, you know, tend to be those that have high consideration stage, like travel, healthcare, auto, commerce. We tend to be financial services. We tend to be really, really good. I mean, I always joke that if you're, if you're, if you run a business, a mortgage business or financial services business in America and you're not buying from Taboola, it is irresponsible. You have to try because we're very good at this, and our sellers know that too. By focusing on ICPs, and going you know, strong on those, we tend to be to see better results.

And I'll tell you who you are type of thing. So if you're able for your technology and you know, your investment to get good advertisers to be successful with you to tell the story for you. I think that affects your story, the most, you know, your brand is what people tell say about you when you're not in the room. So for me, you know, that to see, you know, advertisers, um, like the ones we mentioned, you know, working with us, excited to tell the story, um, is a great sign and, and then, you know, taking a high level view to have to look at, you know, the the number of scale that advertisers and the ever expand going out. These are the right metrics. So, so all of these are, you know, good initiatives. And like I mentioned also our sales team now, knows and sales people go where they see money. They know that if they sell into the right segments in the market, um, to the right advertisers, you know, tend to be those that have high consideration stage like travel Healthcare Auto uh Commerce we tend to be re Financial Services, we tend to be really really good. I mean I always joke that it

Adam Singolda: All of those, you know, initiatives are the right ones to eventually, I think, also affect the brand and the perception, but that takes time. There are no shortcuts. You know, we spent a decade being the native advertising company, and we're gonna spend the next decade, hopefully building, you know, the largest performance advertising company outside of search and social.

If you, if you're, uh, if you run a business, a mortgage business, or financial services business in America, and you're not buying from taboola, it is irresponsible, you have to try because we're very good at this and our sellers know that too. So, by focusing on icps, uh, and going, how, you know, strong on those. We tend to be to see better results. So all of those, you know, initiatives, um, are the right, are the right ones to eventually. I think also affect, um, the brand and the perception, but that takes time. There are no shortcuts. You know, we spent a decade being the native advocate

Stephen Walker: In terms of your second question about what are the underlying assumptions around the Realize inflection point, I think the way to think about it is from Realize. I mentioned earlier that, you know, we're starting to see advertisers have a greater likelihood of succeeding with us, greater likelihood of being able to scale with us, greater likelihood of being able to meet their goals. I think what that means is what I wanna see is that I've said this in the past, I wanna see our number of scaled advertisers growing year over year, you know, consistently. That is the best metric that indicates that we're having success. We obviously also would like to see the average revenue per scaled advertiser grow over time.

President company and 1 of their spend the next decade. Uh, hopefully building, you know, the largest performance advertising company outside of search and social

Stephen Walker: Generally, as I've said in the past, the number of scaled advertisers is what is the fuel for future growth. That's the metric we focus on the most.

And in terms of your second question about like what are the underlying assumptions around the realized inflection point? Um, I think the way to think about it is from realize I mentioned earlier that, you know, we're starting to see advertisers have a, a greater likelihood of succeeding with us, greater likelihood of being able to scale with us. Uh greater likelihood of being able to meet their goals. And I think what that means is what I want to see is that our I've said this in the past I want to see our number of scaled advertisers growing year-over-year. Uh, you know, consistently that is the the best metric that indicates with that. We're having success. We obviously also would like to see the average revenue per scaled Advertiser grow over time, but generally, as I've said, in the past, the number of scaled advertisers is, what is the fuel for f future growth? So that's the metric, we focus on the most.

Tyler D. Mateo: Thanks, guys. Appreciate the time.

Thanks guys. Appreciate the time.

Operator: Thank you. Your last question comes in the line of Matthew Condon with Citizens. Your line is now open.

Thank you.

Matthew Condon: Thank you so much for taking my questions. My first one, maybe just shifting gears here a little bit. Can you just talk about Taboola News? It looked like it was another strong quarter. What's the sustainability of growth there, and how should we think about that contributing in 2026? My second one's also just on your partnerships with some of the OEM partners. Just how are these progressing, and scaling up here and, you know, should we expect these also to be key contributors in 2026? Thank you so much.

Your last question comes to the line of Matthew Condon with citizens. Your line is now open.

Thank you so much for taking my questions. My first 1 maybe just shifting gears share a little bit. Uh, if you can just talk about the bullet news, it looks like there's another strong quarter, just what's the sustainability of growth there. And how should we think about that contributing 2026? And my second 1 is also just on your Partnerships with some of the OEM Partners. Just how are these progressing? Uh, and scaling up here and, uh, you know, should we expect these also to be to be a key contributors in 26. Thank you so much.

Stephen Walker: I can take a first pass at that. First of all, Q3 was good for Taboola News, which the Taboola News is growing faster than the rest of the company, which is nice for a growth initiative like that. You know, I think the important part of Taboola News is it's part of our unique supply strategy. It is a very unique type of supply that, by the way, obviously completely immune to LLM disintermediation and that type of issue. That's great. It also is fresh users, good data. It's, you know, it's when you're on the cell phone device natively, you know a bit more about what's going on than other times. It's all part of that getting unique supply, and advertisers really like it.

Stephen Walker: You know, it's before a user gets to their social network. It's before they start browsing the Internet. It's a very unique time to meet the user. I think it's also great for advertisers. You know, with everyone wanting advertising, including cell phone manufacturers and OEMs, I think there's big upside to this.

So I I can take a first pass of that. So, um, so so first of all, yeah, Q3 was good for to build a news which, uh, the toilet news is growing faster than the rest of the company, which is, uh, nice for a growth initiative like that. Uh, it's also, you know, I think the important part of tuba news is it's part of our unique Supply strategy. So it is a very unique type of Supply that, uh, by the way, uh, obviously completely immune to llm, uh, disintermediation and that type of issue, so that's great. It also is fresh users, uh, good data. So it's, uh, you know, it's when you're on the cell phone device natively, you know, a bit more about what's going on than other times. So it's all part of that getting unique Supply and advertisers really liked it. Uh, you know, it's before a user gets to their social network. It's before they start browsing the internet. It's a very unique time to to meet the user. So I think it's uh it's also great for advertisers

Adam Singolda: Where it goes, you know, we obviously haven't spoken specifically about guiding that, and we don't break it out, but I think we see a lot of upside potential to this over time. Good. Sorry, operator, are we on still?

Um and so you know with with uh with everyone wanting advertising uh including cell phone manufacturers, and oems I think there's big upsides to this where where it goes. You know, we obviously haven't spoken specifically about guiding that and we don't break it out, but I think we see a lot of upside potential of this over time.

Okay. Sorry. Operator. Are we uh on still?

Operator: Yes. Yes. I didn't know if there was going to be another question.

Yes, yes.

Adam Singolda: Okay.

Operator: At this point there are no further questions, and I'll turn it back to Adam Singolda for closing remarks.

Adam Singolda: Thank you. Thanks everyone for being with us this morning. If you take three things from the quarter that matter, Number 1, we've hit an inflection point with Realize, which is our biggest investment. Customers are giving us good feedback, and our product is driving good results. It shows in our scaled advertiser numbers, a 4% increase in the amount of scaled advertisers. That's obviously a good thing. We're seeing 11% higher average spend. We track those 2 numbers as a proxy for Realize success, and Realize is most of our revenue, so that is our main way to grow in the future. Number 2, we're feeling better about our financial performance.

Another question. So at this point there are no further questions and I'll turn it back to Adam sangolda for closing remarks.

Thank you. Uh thanks everyone for being with us this morning. Um, if you take 3 things,

From the quarter that matter.

Adam Singolda: We like the direction, you know, we're heading, and as such, we bought 14% of the company year to date and intend to continue to buy aggressively. Number three, I'm proud of the team. You know, we're taking upon ourselves, a big challenge, you know, we're harder to work, and I believe we can do this. I'm looking forward to interacting with many of you over the next few weeks, and thanks for joining us today.

Um, number 1, we've hit an inflection point with realize, which is our biggest investment. Customers are giving us good feedback and our product, uh, is driving good results. It shows in our scaled Advertiser numbers, uh, 4% increase in the amount of scaled advertisers. That's obviously a good thing and we're seeing 11% higher average spend. Um, and we track those 2 numbers as a proxy for realize success and realize that most of our Revenue. So that is um, our main way to to grow in the future. Number 2, we're feeling better about our financial performance. We like the direction. You know, we're heading and as such we bought 14% of the company year to date and intend to continue to buy aggressively

And number 3, I'm proud of the team, you know, we're taking upon ourselves uh, a big challenge. You know, we're hard at work and I believe we can do this.

So I'm looking forward to interacting with many of you over the next few few weeks and thanks for joining us today.

Operator: Yes. Thank you for your participation in today's conference. This does conclude the program, and you may now disconnect.

Yes, thank you for your participation. In today's conference, this does conclude the program and you may now disconnect