Taboola.com Ltd.

Good day and thank you for standing by. Welcome to the Taboola second quarter earnings 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 the session you will need to press star 1 1 on your telephone and you will 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 Karakis, Head of Investor Relations.

Please go ahead. Thank you and good morning, everyone, and welcome to Taboola's second quarter 2024 earnings conference call. I'm here with Adam Singolda, Taboola's founder and CEO, and Steve Walker, Taboola's CFO. The company issued earnings materials today before the market, and they are available in the investor section of Tabula'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. 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.

Thanks, Jessica. Good morning, everyone, and thank you all for joining us. Q2 was another strong quarter, beating guidance on both XTAC and adjusted EBITDA, and with a meaningful cash flow conversion. We saw XTAC grow 21% versus last year to $150 million, adjusted EBITDA of $37 million growing 138%, and free cash flow was over $26 million in Q2, growing 237% and demonstrating 70% conversion from adjusted EBITDA. Not only does this year represent meaningful growth versus last year, it shows our growth rates are accelerating, which is great to see. This is a clear result of our investment in AI, the unique data we have access to, and the laser focus we have on our strategy and execution. Similar to last quarter, over 100% of our free cash flow was spent on share buybacks, representing our continued commitment to shareholder returns and confidence in our long-term strategy. With a strong first half of the year, 2024 is shaping up to be a transformational year for Taboola. As a result, we are reiterating our 2024 guidance for extra adjusted EBITDA and free cash flow, which continues to project meaningful accelerated growth in 2024 versus last year. And to put things in perspective, XTAC is growing 25% versus last year to $667 million. Adjusted EBITDA of over $200 million growing approximately 2x 2023 and over $100 million of free cash flow, which is also 2x 2023 levels. 2024 continues to be an important year for us as we progress towards building one of the most scalable companies in the open web. It's also setting a strong foundation for 2025 and onwards. When looking at our core business, we have two main focus areas for the remainder of 2024. One, ramping ad budgets. Now that Apple and Taboola Select are launched, and Yahoo's advertiser migration is complete. The second priority is making advertisers successful by improving retention rates and growing NDR spend, which in return, help us grow our yield. Last quarter, I talked about our focus on driving performance advertising, and we've had clear momentum here, which is reflected in our results and guidance with XTAC growth rates improving in Q2 and in Q3. This growth is driven by our focus on premium advertising as a company while driving results. With the rollout of Taboola Select across our top publishers, Apple now launched and optimizing our performance on Yahoo, we see a big opportunity focusing on quality moving forward and bringing those budgets into the open web at scale. Our initiatives to attract tier one brands and agencies showed strong growth year over year and accounted for 25% of revenue in Q2. Just this past quarter, we secured commitments from major advertisers in financial services, health, and wellness, as well as online publishers, which represent multi-millions in ad spend. Additionally, our demand out of China has more than doubled versus prior year and shows great traction in the region. Our investments in AI to drive advertiser success are a big part of our momentum. Maximized conversions, our first AI-powered bidding technology continues to make significant strides, with adoption now approaching 70% of our revenue, up approximately 10 points from what it was in Q1. Thousands of advertisers are using Max Convergence today, and we saw a massive sequential increase of over 100% in the number of advertiser campaigns using this technology. Our efforts are concentrated on enhancing retention rates and increasing budget allocations, also known as NDR. we continue to see promising results from advertisers transitioning to max conversions with double-digit NDR growth reported for those who have adopted the platform compared to those who have not. It's exciting to see more and more advertisers adopting our AI as most of our revenue is performance-driven, which means we do not need to wine and dine people to use our technology. They try it out. If it works, they stick around, and if not, they stop using it. Looking ahead, we continue to focus on advancing our AI models, leveraging our unique data to identify and match users with advertisers, driving results at scale. This type of performance we're seeing with our advertisers is exactly what the industry needs. You see, in the open web, there is no scalable bridge for advertisers to reach the open web with a focus on performance, and we are hard at work making it happen. More about AI. And without saying too much, I can tell you that we have a new generative AI offering coming to market soon. We call her Abby. This product is very impressive. Abby is laser focused on driving advertiser success and addressing a key friction point for advertisers. We plan to officially introduce Abby in the third quarter, and I suspect you will be amazed by what you'll see. Stay tuned for updates on this one. Now I know all of you are thinking about Yahoo, so let me give you an update. I'm happy to say we're done migrating Yahoo's advertisers and we're hard at work growing budgets into the second half of the year. We keep seeing good performance from advertisers who have migrated as demonstrated in one case study featured in our shareholder letter where a leading hotel group took advantage of Taboola on Yahoo and saw 77% lower CPA than their target goal and 36% lower CPA than the next best performing channel. Another great example of our performance on Yahoo is evident in our work with a global technology company that achieved a 130% increase in impressions at a 28% lower CPM year over year when compared to similar campaigns. As we increasingly improve our performance with Tier 1 brands and agencies, invest in premium experiences for advertisers with the addition of Apple, Taboola Select, Yahoo, and more, it allows us as a company to grow ad budgets across the Taboola network overall. As a reminder, advertiser success drives yield growth, which bolsters our competitive advantage as well as our profitability. Turning now to our growth engines. Tabula News, e-commerce, and our bidder. Our product innovation and commercial wins continue to drive good momentum, and it shows in our financial results. In Q2, we signed a significant, exclusive, and global Tabula News OEM partnership. This new deal will expand our reach into all global markets, featuring multiple touchpoints for users to discover news they may like. Our product team is focused on testing new video experiences as well as various new utilities such as weather, sports, and others. These enhancements resulted in over 20% increase in time spent on the Taboola News platform compared to Q1 2024. Moving to e-commerce, we delivered another strong quarter. This success is driven by outstanding advertiser revenue retention our corn markets and the expansion into new high growth advertising channels and international markets we're now also seeing growth with creators across various social platforms coming to us with a desire to review products are passionate about and drive performance to our merchants we call that shop your likes it is showing amazing potential and it is already contributing to our growth This early success positions us well to keep growing e-commerce in the years ahead. Moving to our bidding product, which is where we use our unique data, AI, and direct advertiser relationships to build a supply that is not exclusively ours. We had a number of exciting developments in Q2. After successfully collaborating with Microsoft for several years now, I'm happy to say that we renewed our partnership and are excited to expand our bidder technology to capitalize on emerging supply opportunities. Our efforts are now focused on integrating with high traffic platforms such as Outlook, Casual Games, and Microsoft 365. By extending our technology to these new areas, we aim to enhance our advertising capabilities and deliver even more targeted and effective campaigns across Microsoft's diverse ecosystem. In summary, 2024 is shaping up to be a transformational year for Taboola, with a strong Q2 bidding guidance on both XTAC and adjusted EBITDA, reiterating our 2024 guidance for XTAC, adjusted EBITDA, and free cash flow, and accelerating growth metrics in Q2 and for the year. There is a lot of good momentum in the advertising industry. I believe this market will reach a trillion dollars in years to come with more and more companies around the world looking to tap into advertising in a big way, utility apps, streamers, OEM, and more. While many companies would want to sell to top brands, it's not easy, and many would want a friend like Taboola to access tens of thousands of advertisers, drive performance to them, and build a meaningful advertising business. We have the size, the tech, the sales force, and the experience to support many, many of them. I often think of this like advertising in a box or advertising as a service, which we can do a lot more over the next five to 10 years as we partner with many great companies. There's a lot of good work ahead of us. It's a big step up financially and strategically for us, and we are ready. With that, let me pass the call to Steve to review our financials and outlook in more detail.