Taboola.com Ltd.

Good day, and thank you for standing by. Welcome to the Taboola Second Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during this session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star then 0. I would now like to hand the conference over to Jennifer Horsley, Head of Investor Relations. Please go ahead.

Thank you and good morning everyone. And welcome to Tabula's second quarter earnings conference call. I'm here with Adam Singolda, our founder and CEO, and Steve Walker, our CFO. We issued our Q2 earnings press release yesterday after market and it is available along with our Q2 shareholder letter in the investor section of our website. Now I'll quickly cover the safe harbor. Certain statements today, including our expectations for future periods, are forward-looking statements. They are not facts and are subject to material risks and uncertainties described in our SEC filings. These statements are based on currently available information and we undertake no duty to update them except as required 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. During this call, we'll 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.

Thank you, Jen, and good morning, everyone, and thank you all for joining us today. This is our very first earnings call after going public, and we're excited to share our results with you and update you on our business. Before I get to our second quarter, I want to take a moment to remind you and everyone why Taboola exists, our vision, and where we fit. Taboola power recommendations for the open web, helping people discover things they may love but never knew existed. You've all seen us before. If you've visited sites you love, like CNBC, NBC News, The Independent in the UK, or Sunkei in Japan, you will discover things you might like to read powered by Taboola. The open web, as many of you know, is the term for all of the websites and publishers out there that are not Facebook, Amazon, Google, Apple, or the like. The open web is really important, even essential, because it's free and diverse, and it doesn't belong to any one giant company. It belongs to all of us, everyone. Think about every website you love, every game, app on a mobile device, or app on your connected TV that lives outside of the walled garden. That's where Taboola fits. Taboola has established long-term partnerships with some of the top publishers and digital properties in the world. We have a proprietary deep learning recommendation engine that is able to infer what a user might be interested in based on context and not third-party cookie, and knowledge of what other users have liked in a similar situation. Through our publisher partners, we reach half a billion people every single day, and we invest $100 million a year in R&D to provide our partners with the platform and technology they need to drive revenue engagement and audience. The strength of our platform also has attracted more than 13,000 advertisers who work directly with Taboola to reach consumers in a brand-safe environment. Our size matters, as in our business, the more scale you have, the yield gets better, which gives you advantages in the marketplace, creating more predictable and profitable growth that allows us to invest even more in our core and outside of core. Turning now to the quarter, these last 90 days have been very eventful and in some ways monumental. Just before going public, we shared with the investment community that we beat our first quarter expectation and we raised our guidance for the rest of the year. On June 30th, we went public as TBLA on NASDAQ. And today we share that we delivered strong second quarter results that again exceeded our guidance across the board And several weeks ago, we announced our most significant acquisition to date in our agreement to acquire Connexity for $800 million, bringing e-commerce to the open web in a big, big way. I'm really excited about this acquisition. The market is excited. Following the announcement, I've received many messages from the publisher community expressing interest in expanding their work with us to launch shopping areas on their site and to bring e-commerce to their editorial pages. I will share a lot more of this later. But first, let me start with our listing milestone. It was June 30th, Taboola went public. What a moment in time it was for all of us, 1,400 Taboolas all around the world. Taboola is now a public company, and we're honored to have great conversations and the support of so many new investors, large and small. As we embark on our public journey, I can assure you that we're focused on executing on our strategy, winning the marketplace, and most importantly, delivering on both short-term and long-term commitments for the benefits of not only ourselves, but now also for our public new investors who chose Taboola and believe what we believe. I enjoy being a public company. I love the transparency it carries with it, the conversations, and I enjoy building the trust with our new investors who join our journey. You see, I always believed in transparency, diversity, and good quality conversations. Nobody cares about who does what first, but rather only who does it best. And we want to be always the best. We want to have great conversations about the business, and we believe that's going to make us better internally and with the investment community. And this is why I hope the letter I write quarterly is helpful in giving you more access to our vision, strategy, execution, and creating that bridge to what Tabula's leadership is thinking. With that in mind, I would like to share with you the progress we've made in the second quarter. We're winning in the market, and we're seeing great results, with revenue growth of 23% over the same quarter last year, ex-tax gross profit growth of 18%, and importantly, with strong adjusted EBITDA of nearly $41 million. All of those results exceeded our guidance, and Steve Walker, our CFO, will take you through the financial drivers in more details in a bit while I'm going to talk to you about the business. I speak frequently about how Taboola is growing across three multi-billion dollar opportunities areas. Our core, recommend anywhere, and recommend anything. Starting with the core, we have a strong core business where we participate in 60 billion plus open web markets, and this is our foundation, a business with a moat built on 14 years of technology and algorithm innovation, direct publisher, and direct advertiser partnerships. We are a business that is not reliant on third-party cookies and which instead leverages contextual signals to deliver relevant recommendations. a business where we interact with half a billion people a day, which is more than Twitter and Snap combined. And this provides us tremendous scale and feeds our flywheel, resulting in us winning more publisher partners. You see, when we launch a new publisher, we reach more people, we get more data, more advertisers participate in our marketplace, which help us drive our yield up. And when our yield gets better, we become more competitive, which means more predictable growth ahead of us. It also helps that our gross revenue is over a billion dollars because scale is really important in our business and industry, driving further that competitive advantage I'm speaking about. To demonstrate some of that momentum, during the second quarter, within our core business, we won new partnerships with publishers such as the BBC, Hearst, SheMedia, and others. For example, as part of our new partnership with the BBC Global, we became their exclusive content recommendation providers for years to come. This is a competitive win where we were able to demonstrate a comprehensive understanding of BBC requirements, driving growth to the three KPIs they care about the most, revenue, engagement, and audience. This is a true royal win for Taboola. We're doing all of this while keeping users at the heart of what we do, focusing on our user experience, integrity, and quality. It makes me proud that companies like the BBC choose Taboola, and it justifies all the investment we're making in AI, technology, and always be more than just money to our publisher partners, as well as investing so much in policies around areas like privacy, preventing misinformation. Taboola keeps the open web safe for all of us. We're also growing our teams fast, and we're building an inclusive and diverse workplace. It isn't just the right thing to do as a society. We believe that multiple voices can drive better results. Like I said earlier, our culture is about transparency and collaboration. And with more diversity, we believe we can execute even better. As we look into the third quarter and the rest of 2021, our DEI projects are a focus. We have allocated $1.5 million for DEI activities for 2021. We have $3 million already implemented in the first quarter Recommend Her campaign, which provides free advertising for women-owned businesses. So as you can see all around, we're seeing good momentum winning in our core business. And this is important as our core business provides the scale, capabilities, and permission to pursue our Anywhere and Anything growth initiatives. With our second growth area, Recommend Anywhere strategy, we're continuing our expansion to recommend wherever people might be. Over time, we will consider becoming the recommendation engine on devices like connected TV or automobile, and in the meantime, we're seeing good progress integrating our recommendations on Android devices, for example, Taboola News or Apple-like products, as we continue to scale with two major partnerships. A long-term partnership with Slide, a leading mobile platform that drives engagement and monetization for mobile carriers, OEMs, and publishers. Or Samsung in Brazil selected Taboola News as their partner to integrate relevant content from Taboola's premium publishers on mobile phone and other user touchpoints. Over time, I envision Tabula recommending things to people wherever they may be. We only have 24 hours a day, and that will never change. Human beings will be making some of the most important decisions in life using personal recommendation engines, and that's where we fit. Now moving to our third growth engine, recommending anything strategy, is a way for us to diversify what is it that Tabula recommends. In this area, we've seen great growth in the second quarter, where we're winning premium demand on premium new placements. We launched new placements for our recommendations in the middle of the page, as well as homepages and section fronts. And brands and agencies really like it because it gives them bigger, more visible, and premium placements they can participate in. We have a significant advantage here as we already power both editorial and paid recommendations for so many of the most amazing publishers in the world. This allows us to suggest expanding our recommendations in other places and replace traditional advertising units with a higher user value and higher revenue opportunities. A true one plus one equals three. Our biggest step forward in our strategy of recommending anything is by far our pending acquisition of Connexity, focusing on bringing product and e-commerce recommendations to the open web. I'm so proud of that moment right now, bringing together Connexity and Taboola. Many of you have heard me already speaking about e-commerce as the future of the open web, the future of the Internet, the future of Taboola. But I would like to spend some time sharing with you more about the Connexity business and why this is such a great fit and strong strategic opportunity for Taboola. Connexity is already one of the largest e-commerce media platforms on the open web, with over a million monthly transactions, supported by direct relationships with over 1,600 merchants such as Walmart, Wayfair, Skechers, Macy's, eBay, and Otto. Connexity reaches more than 100 million unique shoppers per month via direct relationships with premium publishers such as Condé Nast, Dot Dash, Hearst, Vox Media, Meredith, and News Corp Australia. A bit about Connexity's business. Connexity is a B2B company serving merchants as advertisers on one side and enabling publishers as partners on the other. 90% of their revenue comes from merchants they have direct relationship with. Most of it is paid through CPC and some of it is paid through CPA. They don't rely on third-party cookies. And this is really incredible. Their business is very aligned with Taboola's strategy, which is about working directly with both advertisers and publishers, serving high-quality advertising experiences that do not depend on cookies. Connexity supports publishers in two ways. First, they're offering help to bring product recommendations to sites we all love in a familiar native format where product listings are seamlessly embedded alongside the publisher's editorial content. Second, Connexity is enabling clients to launch their own shopping sections. Think better home and garden shopping site offered by Meredith, or how much you trust products recommended when Wired recommends them. Connexity has also successfully built a way to enable advertisers to extend their reach beyond their publisher partners. similar to Facebook audience network fan, but powered by Connexity and in the e-commerce category. For example, a merchant working with Connexity might be recommended on Meredith or Hearst, but might also be serviced on Bing, Yahoo, Google, or even Instagram where influencers create content. This makes up approximately 25% of Connexity's business, and it provides a great opportunity for Connexity and its merchants to find users wherever they may be. Connect City is a great fit for our business. We believe that the future of the open web is e-commerce, bringing merchants together with trusted publishers, connecting customers with products they may like, powered by Taboola. By combining our organizations, cultures, massive data, reach of 500 million daily active users, and direct access to publishers, advertisers, and merchants, we're taking a huge step forward to our vision as well as expanding our market opportunity. We're excited to have Connect City join us and expand our TAM, where e-commerce is already $35 billion in the U.S. alone, as well as expanding internationally where Taboola operates. After this acquisition, Taboola will now be powering millions of e-commerce recommendations to millions of people across the open web every single day. I'm convinced we can bring the power of commerce to every site or app on the free Internet. Imagine reading an article about Star Wars Lego, and instead of having to start search or buy for that set, products like Lego Millennium Falcon, Yoda, or R2-D2 will be surfaced alongside that piece of content for users to consider buying. We can't wait to call our partners and clients and bring e-commerce to them. The synergies are very clear and include, one, driving yield growth by bringing Connexity merchants to Taboola's existing relationships with publishers. This means our publishers will make more and we will become even more competitive. The second synergy is selling to 9,000 publishers of Taboola the existing Connexity publisher products, such as shopping sections and products alongside editorial content. Connexity is also heavily weighted in the U.S., and we see great opportunity bringing Connexity global by leveraging Taboola's worldwide presence. And lastly, to create a super data set to drive further build growth to both Connexity and Taboola's partners. In Taboola's execution-obsessed fashion, we have teams in place building out the plans on all of these fronts so that we can hit the ground running once the acquisition closes, which we expect will happen by the end of the third quarter. As I finish my opening remarks, let me summarize saying we're very excited to be a public company and speaking to all of you. We beat our expectation in Q2 and we're raising our guidance this year. This also gives us confidence in raising our expectation for our growth in 2022. We expect to grow over 30% on a non-performer basis. Additionally, we previously told you that we expected the Taboola standalone AgStack profit will grow 16% in 2022. With the completion of the Connexity acquisition, we're raising our expectation for next year, projecting that we will grow AgTech gross profit faster at 17% on a non-performer basis, despite being a much larger base. Beyond it all, I can tell you that together with Connexity, we'll be at the forefront of power recommendations for the open web, as well as e-commerce in the open web, as an alternative to walled gardens. Amazon is millions of merchants, but merchants mainly have Amazon. That changes now. I would now like to pass it over to Steve to take you through in more details our financial performance and guidance.