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01/11 11:29
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call summary and Q&A indicate a positive outlook. Revenue and profit metrics showed significant growth, with optimistic guidance for the second half of 2025. The Realize platform and strategic partnerships are expected to drive future growth. Despite some concerns about growth rates for existing clients and debt management, the share repurchase program signals confidence in the company's valuation. Considering the company's small market cap, the positive financial performance and strategic initiatives are likely to result in a stock price increase of 2% to 8%.
Revenue $465 million, representing growth of 9% year-over-year. The growth was driven by an 8.5% year-over-year increase in the number of scaled advertisers and a 1.8% year-over-year increase in average revenue per scaled advertiser.
Ex-TAC Gross Profit $172 million, 15% higher than last year. This growth was driven by higher advertising spend, margin expansion on certain digital publishers, and strong contributions from Taboola News and Bidded Supply. It also benefited from a favorable comparison to last year due to the onboarding of Yahoo advertisers.
Adjusted EBITDA $45 million, 21% higher than last year, with margin expanding significantly. This improvement reflects healthy year-over-year ex-TAC growth and strong cost discipline.
Free Cash Flow $34 million, grew 31% year-over-year. This was primarily due to higher adjusted EBITDA margins and strong management of working capital.
Net Loss $4.3 million, with non-GAAP net income coming in positive at $30.2 million. The improvement was supported by reductions in other cost of revenues, driven by lower server and network infrastructure costs.
Share Repurchases Approximately 32 million shares repurchased at an average price of $3.13 for a total consideration of $100.1 million. This reflects confidence in the long-term value of the business.
Realize platform: Early traction with Realize, a new performance advertising platform, is noted. It operates like Google Ads or Meta ads but focuses on the OpenWeb, engaging 600 million people daily. It has attracted 650 advertisers since its February launch, with examples of success in aviation and real estate sectors.
Market opportunity: Taboola is targeting a $55 billion market opportunity in performance advertising on the OpenWeb, offering alternatives to search and social advertising.
Financial performance: Q2 revenues reached $465 million, a 9% year-over-year growth. Ex-TAC gross profit grew 15% to $172 million, and adjusted EBITDA increased 21% to $45 million. Free cash flow rose 31% to $34 million.
Share repurchase: The company repurchased $100 million worth of stock in Q2 and authorized an additional $200 million for share repurchases.
Expansion beyond native advertising: Realize platform expands Taboola's reach into broader performance advertising markets, including display and social, unlocking new growth opportunities.
Publisher partnerships: Taboola is adding new OpenWeb partners and leveraging unique supply initiatives like Taboola News, which is experiencing double-digit growth.
Search Market Changes: Minimal effect from LLM-driven changes in search dynamics, but performance remains stable with year-to-date effects limited to mid-single digits. However, this could pose a risk if search market dynamics shift further.
Revenue Dependency: A significant portion of revenue comes from OpenWeb platform partnerships such as Yahoo!, Microsoft, Apple, and Samsung. Any disruption in these partnerships could adversely impact revenue.
New Product Adoption: Realize, the new performance ad platform, is still in early stages and not yet material financially. Its success is critical for future growth, posing a risk if adoption does not meet expectations.
Economic Uncertainty: While not explicitly mentioned, broader economic conditions could impact advertiser budgets and spending, indirectly affecting revenue growth.
Competitive Pressures: Taboola faces competition from established players like Google Ads and Meta Ads. Failure to differentiate effectively could limit market share growth.
Supply Chain and Publisher Partnerships: Reliance on top-tier publishers and OpenWeb partnerships means any disruption in these relationships could impact operations and revenue.
Financial Leverage: The company has a net cash balance of $27.2 million and long-term debt of $88 million. While manageable, financial leverage could become a concern if cash flow generation weakens.
Full-Year Guidance: The company has raised its full-year guidance across all metrics. Expected revenues are between $1.86 billion and $1.89 billion, gross profit between $541 million and $555 million, ex-TAC gross profit between $689 million and $703 million, adjusted EBITDA between $208 million and $214 million, and non-GAAP net income between $138 million and $144 million.
Third Quarter 2025 Guidance: Revenues are expected to be between $461 million and $469 million, gross profit between $127 million and $133 million, ex-TAC gross profit between $166 million and $172 million, adjusted EBITDA between $43 million and $48 million, and non-GAAP net income between $29 million and $34 million.
Growth Expectations: The company anticipates a full-year projected growth rate of 3% to 5%, normalizing for the onboarding of Yahoo in 2024. Similar growth rates are expected for the near term, with a focus on returning to consistent double-digit growth.
Realize Platform: The new performance advertising platform, Realize, is expected to unlock new growth opportunities by expanding beyond native advertising into broader performance markets like display and social. Early traction has been observed with 650 advertisers testing the platform since its February launch.
Market Opportunity: Taboola is targeting a $55 billion market opportunity in performance advertising across the OpenWeb, positioning itself as an alternative to search and social advertising.
Share Repurchase Program: The company has been actively buying back shares, repurchasing approximately 32 million shares in Q2 2025 at an average price of $3.13, totaling $100.1 million. Additionally, through July, they repurchased an extra 3.1 million shares at an average price of $3.59, amounting to $11 million. The Board has approved an incremental $200 million for the share repurchase program, bringing the total authorization to approximately $285 million as of August 1, 2025. In the first half of 2025, the company bought back nearly 12% of its total shares outstanding, reducing the shares from about 337 million at the end of 2024 to about 297 million at the end of Q2 2025.
The earnings call reveals strong financial performance with increased ex-TAC gross profit and adjusted EBITDA margins. The Realize platform shows promising growth, and strategic partnerships like Paramount enhance future prospects. Share repurchases and raised full-year guidance further boost investor confidence. Although some concerns exist, such as revenue ex-TAC deceleration and non-TAC COGS increase, the overall sentiment remains positive, especially given the company's small-cap nature, which tends to react strongly to favorable news.
The earnings call summary and Q&A indicate a positive outlook. Revenue and profit metrics showed significant growth, with optimistic guidance for the second half of 2025. The Realize platform and strategic partnerships are expected to drive future growth. Despite some concerns about growth rates for existing clients and debt management, the share repurchase program signals confidence in the company's valuation. Considering the company's small market cap, the positive financial performance and strategic initiatives are likely to result in a stock price increase of 2% to 8%.
Taboola's earnings call reveals strong financial performance with revenue growth, improved EBITDA, and a reduced net loss. The share buyback program and positive reception of the Realize platform add to the positive sentiment. While there are some uncertainties regarding the impact of Google's AI rollout, overall guidance remains optimistic. The market cap of approximately $1.15 billion suggests a moderate reaction, leading to a predicted stock price increase of 2% to 8% over the next two weeks.
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