Good afternoon, everyone, and thank you for joining us for a fireside chat with Taboola. I'm Jason Helfstein, Head of Internet Research at Oppenheimer. I'm very excited to have CEO, Adam Singolda with me here today. The format of the fireside chat, if you do want to participate and have some questions, you can use the link just down below the webcast, or you can email me at jason.helfstein@opco.com, and I will try to ask your question. Adam, thank you for joining. Let's just start off. For those not familiar with the company, describe what Taboola does and what's unique about the company's offering? Sure. Thanks, Raymond. Adam, me, Jason, and Oppenheimer. Taboola is the leading performance advertising platform in the open web. If you think about the advertiser experience, they always buy search and social if they want to drive leads and growth for their business. Taboola is the third, a lot of times, company they go to for the same value, just outside of search and social. We reach about 600 million people every single day across incredible partners, such as Yahoo, Apple News, Disney, NBC News, USA Today, and many others. Our advantage in this market, and the reason we're doing a good job for advertisers, is because of that distribution I mentioned, as well as we have a huge amount of first-party data, which helps us to know that Jason might be in market to buy a drone, and Adam might be in market to go to the Knicks game. Those signals that come from things people read across the open web help us kind of show ads that we think you might like and participate in. The market is big. It's a $55 billion market opportunity that we're going after. Our 2025, roughly, our goals are $2 billion of revenue from that $55 billion, $700 million of ex-TAC, which is what we keep after we share with publishers. That's the main metric our management kind of is tracking that we're trying to grow every year. Of that, we generate over $200 million of adjusted EBITDA, which is a 30%+ margin. We have a strong free cash flow of 60% - 70% of EBITDA, which we're using aggressively to buy our shares. As we think that's a good investment, we bought 12% of the company just in the first half of the year, and we intend to continue to aggressively buy shares. Within advertising technology, you have players who focus on the demand side, represent the buyers. You have folks who focus on the supply side. They represent the publishers. You have a two-sided marketplace. In many cases, you have exclusive long-term relationships with publishers. You then go out, and you have a sales force. You market directly to advertisers, to agencies. Just talk about the uniqueness of being a two-sided marketplace and the advantages it gives you? Yeah, so outside of the financial advantage, which is we do have 35% - 40% margin, ex-TAC margin, which is a healthy margin in general, if you think about the advertising space. Putting that aside, it gives us an advantage in that Taboola, while we're a B2B company, we don't have a consumer business. In many ways, we're like a consumer business because we have 11,000 publishers who work with us exclusively for a long time. Three, five, ten, Yahoo is 30 years, which means that inventory, that access to consumer, is a highly predictable inventory. It means if we see me on ESPN today and I go tomorrow, Taboola knows I just was here yesterday. That gives us this predictable kind of supply access, which allows us to also innovate on the user experience and try new things, which is a lot of times the strength of consumer businesses versus AdT ech, which a lot of times is a bit more volatile. You may win some auction today. You may not win some auction tomorrow. We don't have those dynamics in our business. The vast majority of our publishers just have code on page. It's us. It gives us very strong signals. On the advertising side here as well, a lot of times you'll hear companies speak about programmatic revenue and pipes and things. With us, much like Meta, 90% of the revenue of the $2 billion I mentioned, that's driven by our clients. They buy from Realize, from our technology, using our AI, our first-party data. We're in a place where our publishers and advertisers are both direct, which allows us to invest in technology and keep improving our performance to both publishers and advertisers. I think, especially in a world like today, when performance advertising is so important and clients want to see outcomes and measurement, to be able to be so close to the publisher and so close to the advertiser gives us an advantage. The fact that, you know, we'll get to that. We'll get to one of the points, but I want to segue to Realize. You made a decision, I don't know, maybe it's probably what, 18 months or so ago to pivot more to the direction of performance marketing through your product brand at Realize. Talk about why you made that decision and kind of like where are we in the deployment of that product? I mean, look, we were always kind of mostly performance advertising. What's unique with Realize, which was officially this year, but obviously we're always working on these things as we go. The biggest difference is that for the last decade plus, we've grown what's referred to as the native advertising part of performance advertising in the open web. If you think about the open web, the types of ads you can show on a website, it can be at the bottom of the article, which is what we did. That's referred to as native advertising. Actually, most of it, the rest of it is display advertising. That is something that we never did up until now. With Realize, what happened was we noticed that the native advertising space is not as big as we want it to be. Two, many of our advertisers and advertisers we met told us they want to get performance, but they're not going to get educated on native advertising bottom of article and said, look, we already work with Google. We have display ads. We work with Meta. We have social creatives. Can you take it and use it anywhere you want and show us that you can be good at driving performance? That is what Realize made. It was a shift from native advertising to all of performance advertising market, making it easier for advertisers to work with us using whichever creative they have, whichever goal they have. On our side, we now have access to all of the supply on the publisher side. We can place an ad on the homepage, in the middle of the page, on the right side, at the bottom of the article, wherever we think value will be created to the advertiser, we can now have access to that. That was a big shift. We're exclusively laser-focused on growing demand and spend. We think that our path from $2 billion to $4 billion revenue is primarily driven by getting more demand, getting more spend from advertising, getting more skilled advertisers to work with the company. Okay. Did you have to redo your publisher deals to get inventory higher up on the page, given your original deals were structured as kind of the native deals? It's not an agreement change. It's more of a process of asking publishers to be connected to the entire inventory they have, which is a process. It's not a difficult process because they're motivated to have Taboola try to provide more demand into that auction. They're motivated to do it with us. We do have to ask them to integrate us into that inventory that lives outside of the bottom of article, which we now still do across our 11,000 publishers. There's a process of asking, integrating, launching. Right. The inventory on the bottom of the native, that's still exclusive, but then the other inventory might be non-exclusive? It is not exclusive. That's actually the advantage we have in that market, which is, again, big. We estimate, just to give you some context, that there's about $10 billion of display ads on our publishers generated by smaller AdT ech companies in a fairly fragmented space. We do think that at least from the $10 billion of display spend, we should be able to take 20%, 30%, or some good market share from that part of the market. When we bid on those display spots on our publishers, and we only do it on our publishers, we use our first-party data advantage from the bottom of article, which is interesting to see how that asset fuels our next wave of growth as we're bidding on supply that we know Adam read this, clicked on that ad, maybe even bought something, and now I have first-party data advantage. You have to understand that these spots on the publisher side that have DSPs and SSPs trying to currently monetize it are all third-party. None of them, not even one to my knowledge, outside of maybe Google, which owns the browser as well, has a first-party cookie, which means they're always seeing you for the first time. We're very unique thanks to the bottom of article asset we've built over the last decade to go in and win some of that auction. To the extent that if there was cookie deprecation, which nobody knows where we are now, and who knows what Google will be doing with a third-party business in the future, any changes to that would be to the benefit of Taboola? Historically, it was. Historically, when Apple deprecated third-party cookies on Safari, it made it harder for other companies to drive a similar outcome to the advertisers, which made advertisers try new channels, including Taboola. Historically, it was a source of growth for us. Who knows what's going to happen. Even today, without third-party cookies going away, that is still very valuable to know that you're here again and again. You kind of lose the fact that the goal is to double kind of gross revenue over a period of time. Yet we've entered a period where I think you're forecasting kind of revenue ex-TAC growth at about 3% to 4% and kind of intimated in the short term that's probably the growth for the near term next few quarters. What do you need to do to kind of re-accelerate that to obviously get back to some kind of double-digit growth if you're going to double the gross revenue over an extended period of time? Yeah, you know, as we enter this year and we start feeling last year that the native advertising space would not be big enough, not grow big enough to kind of justify the double-digit growth we've always had. You can see we're growing kind of like with the market. This last quarter, we grew faster, 15%. In general, the guidance we've given this year represents kind of like growing with the native advertising space, which we estimate is a single-digit growth rate. We wanted to give the engineers and the sales team and the marketing team an opportunity to really go out, learn from the market, see what advertisers need, and give the team a chance to really do the work as we go back to double-digit. We believe that Realize is the main way to go to double-digit. There are many good things about the company that's going on. Taboola News is doing well. Commerce is doing well. Social commerce is doing well. There's a lot of good things, but Realize is the main highway to capture hundreds of millions of dollars of net new kind of growth spend every year and go back to double-digit. The main metric I encourage you guys to, investors, to track is skilled advertisers. That represents kind of a good proxy for stable revenue. We want to, you know, if we double that number, which I hope to do, that means at least doubling the revenue of the business of Taboola. That is one metric that we are sharing with investors because we think that represents stable revenue of performance advertisers that believe Taboola is a sustainable channel. We're seeing good early signs from Realize. I mentioned on earnings, and Jason, you and I talked about it last week, we have 650 advertisers kind of already trying the product. We're seeing good early signs of success. Usually, we either want to see new advertisers that did not work with us before, but now can, or existing advertisers spending more because now they can start a new campaign, like a display campaign, on top of their native campaign and just see if it can drive incremental conversions. We're seeing early signs that represent those two. I would say we're seeing more of the latter one, so more existing advertisers just spending a bit more. As we see more traction of advertisers trying it and growing, that will help us get the conviction that we can go back to double-digit growth. The process is your existing sales force, perhaps you are more sales force, and then basically getting clients to either do A/B testing or onboarding new advertisers and have them testing the new product. Yeah, they don't do A/B testing because they're happy with it. Let's say I spend $100,000 on native now. I actually don't want this to go away. I rely on that spend for the growth of my business. If I'm selling e-products and I have sustainable spend with Taboola at a scale of $100,000 a year, that spend is very important to me. I don't want it to go away. What I usually do is I will start a new campaign using social and display creative and say, can I now grow my spend at a similar cost per acquisition? If I can do that, that is incremental to them, which is good for us and them. It's less about the A/B test. They don't need to test the existing spend. They just want to see they test if they can grow that spend at the same cost per client. That's what they want. Net new, I mean, new advertisers are obviously incremental because they're new. How does Taboola News play into the strategy? Taboola News, and if you recall when we talked at NASDAQ earlier this year, we said Realize has the supply strategy of Realize is looking for places where we have very good data or consumers really convert well for advertisers. We want to work with partners that advertisers drool, just imagining their ads being on that place. Taboola News is one of those types of partners. It's a significant business, growing faster than the rest. For those who may not know, Taboola News is where we aggregate content, and we integrate that on devices like Samsung in Europe and some markets, Xiaomi, and others. We are the news feed for them. The OEM can send a notification with a piece of content, or they can swipe right and see the news. We monetize that with Realize. It tends to be a very good conversion area to advertisers, much like Yahoo is amazing, much like Apple News is great. Those great partners a lot of times are just great for advertisers. Taboola News plays into that supply strategy. One of the things that it's notable that you do not talk much about CTV or video. Yet if I looked at the most conference calls, the amount of keywords you'd say. I think you've actively chosen not to do that. Maybe talk about why you think you've chosen not to kind of focus on those areas? I think you use the word focus. I think the word focus for any company, either big or small, is the hardest thing to do and the most important thing to do. It's only when you start to believe or tell yourself you can do a lot of a bit of everything is when I think you start risking the company. Focus and focus on the right strategy is the most important thing for companies and management teams and everyone. As I look at the market broadly, first of all, I think performance advertising is big now and becoming bigger. Search and Meta and Google are primarily performance advertising, and they're the best companies in the space. We are plugging in performance advertising in games. They're amazing. You're seeing more, and you're seeing agencies, you know, Publicis Epsilon, and you're just seeing everyone talking about outcome and measurement. First of all, I think we're on the right side of the industry, which that's about strategy. I think it's the right strategy. I would not want to be in the top of the funnel branding space today when the first thing a CMO stops, when the economy is unclear, is you. You're the first called, and it's the wrong call you want to get. To the extent, even CTV, which is historically a branding play, now has companies like Amazon saying, no, not good enough. Even TV should be performance. They're coming in hot, saying those dollars should come to us because we can show you outcomes and measurement, connecting TV to Amazon. I think for us, we want to be in performance. I think CTV is a fairly, you know, concentrated, competitive space that still most of it is branding. The part that's not branding is Amazon. I'm happy to be in a different place. For those reasons, that's not an area of focus for us. If we ever go into CTV, I can tell you it's going to be finding ways to help advertisers get performance. If we ever go there, that will be our step in. By no means do I care about running a TV video ad with the hope at measuring things like viewability or completion rate. Could not care less. To be clear, like where you're at right now, you have enough publishers, correct? Like adding publisher partners is not a focus of the business anymore. Oh, I mean, don't get me wrong. I mean, I'd love to get as many publishers as we can. If they're good for advertisers, I want them all. Do I have enough supply and publishers to double the business by just getting more demand? Yes. Do we need more publishers to double the company? We don't. We still work very hard to get more OEMs, great platforms like the ones we have, more publishers that are incredible, that I always wanted to work with. Yes, all day long, all the time, globally. We would do it only if it was financially beneficial to everyone. We would do it primarily if it was beneficial to advertisers. How often do you call publishers, like remove publishers that either, you know, maybe that for whatever reason, it's not a right fit or you can't send them enough traffic because there's more efficient publishers to use? You're saying what's the question? How often do we? How often do you call publishers to say, you know what, we don't want to work with you anymore? Oh, as in part ways with publishers? Yes. Oh, that happens all the time. I mean, if we work with publishers, generally, you know, smaller ones, we don't have long tail. It can happen from time to time that someone doesn't convert for adverts. We have this index that shows how is your audience converting for advertisers, performance advertising. Again, we're very data-driven. We know what works. We know what's not. If your traffic on your site for some reason is below the index to a certain degree, we ask you to try to fix it. If you can't fix it, it's not good for any one of us because advertisers don't want to be on your site, and you don't want to work with us if you can't monetize your traffic. We kind of part ways, and that happens. So, maybe it's that way, search represents something between 30% - 40% of traffic for most large publishers as we're kind of moving into this kind of agentic search world where you can get the answer without leaving the search engine. How did that kind of second-order effect impact Taboola? To date, we have not seen any material impact. We did share a number that as a company, when you look at the US traffic, the US business, which is about half, roughly 5% of traffic is driven by search. The reason it's a fairly small number is because we have big partners such as Yahoo, Microsoft, Apple News, and others that just have either no search traffic or a little bit of search traffic. They are completely immune from all of this. The rest of our publisher base is mainly driven by big names that we all know and love forever. Those tend to have lower search traffic percentage. They have more direct traffic. Because of that, the blend is small. When we look at the impact of that search traffic, which is the only traffic that is at risk, I don't think there's a risk of someone stopping loving a publisher they go to every day. I don't think that's changing. Search traffic is at risk. It's 5% of our business now. We've seen a single-digit change to that 5%. The impact to date has not been big. I'm fairly excited about actually the opportunity it creates for publishers because when Google and Gemini figure out how to monetize an LLM conversation, and when I think about the publisher's value, which is primarily around decisions that matter, when you buy something or when you travel somewhere or when you have a concern about health care, ChatGPT is never enough. We would never, ever, no one on this call or that will listen to this afterwards has ever been on a ChatGPT for 30 seconds asking a question about travel with their family and then clicking and booking that trip. That has never happened and will never happen because you will always need, before you take your kids and you schlep everyone for the vacation, you're always going to spend time watching videos, getting reviews, want some trusted raw data about that trip, and how many times did we, it looked nice at the beginning and then we didn't do it because the reviews were horrible or the experience for some people was not good. That's where the open web wins big time. I think if we can have those LLM conversations on the open web, and we've launched a product called DeeperDive, early stage that is trying to go after that, I think there's a huge opportunity for the open web to grow revenue in ways we have not seen before. Look at companies like Perplexity, which we just joked that, you know, they want to buy Chrome for $35 billion. It's probably worth 10x that. That was a good PR stunt. Nevertheless, Perplexity is 1.5 million people a day using their service. That's it. It's a small company. If you look at the open web, billions of people are traveling the open web looking for information that matters. The opportunity for the investment community and for technology and publishers for that piece, I think, is significant. I'm excited about it. Early days, we'll see what happens. I think Gemini and Google have a huge upside because of that. Less search traffic, much more monetization. The same will travel into the publishers on their own sites. I'm very long on publishers and join LLM as well as Gemini. We'll see how that evolves. If we think about the revenue, ex-TAC margins have been 30% last year. I think we're estimating like 30% this year. If you broke it down, you'd say it's like a 20% DSP fee, a 10% SSP. That's a healthy rate if you were kind of comparing to independent companies. Are you charging too much? If you charge less, could you grow faster? I mean, we, first of all, we optimize for growth. We always want to grow ex-TAC the fastest while being profitable. For us, our margin philosophy is we want to add about 35%, 40%. We think that's a good place for an ex-TAC margin. We want to grow that as much as we can, dollar amount. The dollar amount, we want to grow as much as we can. Our EBITDA margin, we want to be 30% +. We're not optimizing for, you know, we're optimizing for ex-TAC growth rates first. We want to do it in a profitable, responsible way. I feel very fortunate that in times like this, not only are we able to invest in Realize, launch Deeper Dive, a new set today at the Independent, have an e-commerce business that's growing, Taboola News business that's growing while buying 12% of the company in H1. I think these are times to not only grow fast, but also grow fast, responsibly, and give yourself optionality with, you know, free cash flow you generate. If we can grow faster, we'll look for ways to grow it, but not at the expense of doing bad business. Yeah, to that point, do you think about looking out, how should we think about, you know, kind of like overall, I guess you could break it down, overall operating expenses. You have growth spend and non-growth spend. If you were to put it into two buckets, how would you think about, you know, kind of like, and then you want to talk about headcount as well. I mean, most of our engineering resources are working on Realize. Realize is our biggest growth engine. If you look at Kellogg and you look at R&D as an investment, we think of engineers as our best investment we can make because that will drive the growth and profitable growth we aspire to have. I look at the allocation of those engineers. It's mostly going to Realize, which is our biggest bet on doubling the company years to come and going back to double digit. I think we're investing in the place we think can grow the company the fastest. To that point, right, when you did the deal with Yahoo, you ramped up expenses to do the integration? Those expenses were expected to come out. They didn't really come out because you then reallocated into Realize. There's already been like a step function. The point is from here, there really shouldn't be meaningful growth in the underlying expense base unless you're spending on like sales. Right. Yeah, we don't expect any significant change in our cost structure. We think we have what we need for the most part. If at any point we see an opportunity to grow even faster while investing in marketing and sales, we might consider that. As of now, we think we have what we need to get to that moment of going back to double digits. With our numbers, I think that can be very exciting. There's a question online. What are the main hurdles for Realize adoption? One, look, it's early stages still. We want to learn fast, fail fast, and primarily, getting what I said earlier, like the three things we're looking for are, I want us to see more new advertisers that did not work with us before. We tried and they just didn't do it. I want to see existing advertisers grow their spend, you know, tens of percent or more. I want to see more utilization of our Realize platform in general. We have a lot of features that help advertisers be successful, such as predictive audiences, as an example, which is like a lookalike for conversions. You sold 30 pizza ovens with us, and now we're predicting that if you give us $20,000 we can get you 30 more. You say, do it, and that grows the spend. We have a lot of new capabilities as part of our ad platform, Realize, that are helping us be successful beyond just the formats and tapping into display and social. It's fail fast, learn fast, get more new clients, existing clients, until we get to the point that we think this is it. You've always used machine learning. Algorithms have always been part of the business. With the adoption of these LLMs and how much the cost has come down, how are you using LLMs in the business, either from a growth standpoint or a cost efficiency standpoint? Across the entire company, actually, we're going through this exercise of each leader at Taboola is presenting already the things they're working on internally in their kind of universe, as well as the roadmap and ideas they have moving forward. Literally, every person in this company either is already using large language models or a bunch of large language model tools or is about to as part of that department kind of roadmap. Our engineers are using, I mean, a significant amount of tools to generate code, to QA things. Just so much is going on. We're on Steve, our CFO, is taking advantage of large language models for FP&A purposes and other things. We're just trying to ask ourselves, it's less about, it's just about one, can we be more productive and use our great people to do even more things they don't get to do right now? Two, can we help us create value in areas that we're just not getting into? That's our mindset. You know, can we get productivity across the entire company? Literally, every kind of department head is going through this exercise because we think that we have a lot of amazing people around the company. If we can get them more productive and give them more time back, they can be with clients, they can be creative, they can help each other, they can work on issues we didn't get to yet, as well as create values and opportunities we just never got to. We're only getting started. I think Taboola, I want to be open-minded to any, you know, any company out there hearing me say that if you think you can give us ideas, give us ideas. We in general, we're open-minded to trying things. To the point of buybacks you made, you purchased $101 million worth in the second quarter. You increased your authorization by $200 million. Now there's $285 million of authorization against $115 million in cash and $88 million in debt. I mean, are you willing to, if the stock kind of stays at these valuation levels, are you supportive of using leverage to continue the buybacks? No, we really would like to stay net cash neutral. It's important to us. Every spare dollar that we have, we think it's the best investment we can make. We believe buyback is the best use of free cash flow. We intend to continue to grow this business on an exact basis. At our scale, if we can go back to double digits and continue to grow, that's a lot of cash flow that can be available for us to do that. I'm very happy as a shareholder to buy 12% of the company in six months, and I intend to continue to do that. I think that there's a lot of value creation because when the company does go to double digit growth at our volumes and size, the opportunity for me as a shareholder and investor is just significant. None of us at Taboola is here for a 5%, 10% growth company. We're all here because we believe there's going to be moments that it's going to start to go back to how we always have been. At that point, we'll own more of the company and we'll have a lot of growth, hopefully, for the stock and the business. We do want to stay net cash neutral, but I'm excited about continuing to buy back shares, improving free cash flow per share, until we get to that moment for investors to see the company kind of exploding back to double digit. Yeah, basically, investors should assume that further buyback from here, you'll use some portion of the cash, and then otherwise, it'll largely be out of the free cash flow from the business. Yeah. Another question online, I guess it was around, do you need to make additional investments into Realize or are all the pieces in place? In other words, is Realize going to be an incremental margin drag from here? No, I mean, we don't think we need to increase the cost base for Realize if that's the question from an engineer perspective or something like that. I think there's a lot for us to continue to learn from advertisers and agencies, absolutely. If there's a big opportunity for us to work with an agency and it would require some features and things or pure, you know, reprioritization, look, we have 500 engineers. If I need to reprioritize something and things like that, we'd love to learn fast from the market if there's such an opportunity. Outside of that, of learning fast, failing fast, and keep growing, there is no expected increase in cost base to support the guidance we've given. I'll remind you that the upside from Realize is not embedded in the guidance. If this thing starts to work, there's an upside here. Got it. OK, I think we're going to leave it at that. Adam, thank you very much for your time. Thank you. Thanks, everyone, for joining us. If you have any more questions for the company, feel free to reach out to me and we can connect you. Have a great day, everybody.