Teads Holding Co.

Ladies and gentlemen, and welcome to TEAD's second quarter 2025 earnings conference call. At this time, all participants are in the listen-only mode. Question and answer sessions follow the formal presentation. As a reminder, this conference is being recorded. I would like to turn the call over to TEAD's investor relations. Please go ahead.

Good morning, and thank you for joining us on today's conference call to discuss TEAD's second quarter 2025 results. Joining me on the call today, we have David Kostman and Jason Kiliat, the CEO and CFO of Teads. During this conference call, management will make forward-looking statements based on current expectations and assumptions, including statements regarding our business outlook and prospects. These statements are subject to risks and uncertainties that may cause actual results to differ materially from our forward-looking statements. These risk factors are discussed in detail in our Form 10-K, filed for the year ended December 31st, 2024, as updated in our subsequent reports filed with the Securities and Exchange Commission. Forward-looking statements speak only as of the call's original date, and we do not undertake any duty to update any such statements. Today's presentation also includes references to non-GAAP financial measures. you should refer to the information contained in the company's order earnings release for definitional information and reconciliations of non-GAAP measures for the comparable GAAP financial measures. Our earnings release can be found on our IR website, investors.peace.com, under News and Events. With that, let me turn the call over to David.

Thank you, Maria. Good morning, everyone. Thank you for joining us as we report on our first full quarter as a combined company. Before diving into the details, I want to make a few points. We have continued to see excellent customer response from advertisers, agencies, and media owners globally to the new Teams value proposition, a true end-to-end platform delivering outcomes across branding and performance. In Q2, we grew EBITDA sequentially in a meaningful way, generating strong cash flow. At the same time, we are experiencing a slower pace in the return to growth than we had anticipated post-merger, mostly attributed to organizational issues we identified during the quarter. We are executing on the integration decisively, making critical organizational changes that we believe positions us for success in the second half of the year and beyond. I will elaborate on each of these points. Turning to the quarter. On the financial front, we delivered results within our guidance for positive sequential progress and a deceleration in the year-over-year decline rates. As it relates to the post-merger integration, we successfully launched a new case grant and value proposition globally. Organizationally, our initial focus was on allowing the merge teams to settle in, creating alignment and clarity on roles and responsibilities. However, several learnings from the first few months resulted in us identifying necessary structural changes to improve the effectiveness of the sales organization. We've taken those lessons, which are not uncommon when you merge companies of similar size, responded quickly, and accelerated some key changes. In early July, we consolidated our European business under new managing director, Alex Stavitsch, who ran the legacy teams, Central European and Latam businesses, to drive better operations and effectiveness in our key markets. We structured the USAID leadership, ensuring a focused mandate for the US team, our largest market, removing decision-making bottlenecks, enabling the team to focus on the customers, and instilling a stronger operational rigor and focus on business KPIs. We created a global CRO forum, led by me, that includes all our regional leads, our strategic account group, global agencies, and our brand direct response. Jeremy Arbiti, our co-president, continues to steer global strategy agencies, partnerships, and corporate development, while Detran Quesada, our co-president, drives regional leadership across Europe and JPEG. We also refined our go-to-market sales approach, including changes in packaging and pricing, and in our cross-sell strategy. simplifying the narrative and pitch of our sales team. We expect that a combination of these changes will lead to improved execution in the second half of the year and into 2026. We are equally focused on maintaining financial discipline. On cost synergies, we remain on track to deliver $40 million in cost savings for 2025, with a full-year runway savings of $60 million expected in 2026. We remain confident in our ability to deliver positive free cash flow for the full year and recently took the step of repurchasing the portion of our outstanding debt, reinforcing our commitment to efficient capital allocation. Let me turn to the business, starting with the demand side. The U.S. market continues to be the main headwind on our business, with a year-over-year decline of more than 70%. We are now seeing early signs of positive impact from some of the changes I highlighted. We continue to see strong growth in our CTV business, with 80% year-over-year growth in Q2 on a performer basis. We believe that the completion of the integration of our combined home screen offerings across OEMs into Teams as manager, allowing for a much more efficient workflow for our customers, will further support growth in this business. We are also continuing to grow our CTV inventory, especially across the home screen of premium OEMs like Samsung, LG, and Hisense, which we believe is a reflection of our trusted brand relationships and creative capabilities. We are also growing with other premium supply partners, including HBO Max, Paramount, and others. In addition, we are continuing to further diversify our supply as part of our omni-channel strategy. On the retail media front, we announced our first partnership to activate performance campaigns on retail sites through PentaLeap. We aim to grow our presence in retail media and leveraging brand-advertiser relationships into performance use cases, specifically product sales. On the strategic account front, we signed new joint business partnerships with several top global brands, including Kia and Zalando, underscoring confidence in our integrated offering. We're seeing initial success in cross-selling performance products to legacy clients. Examples include Lowe's, Citroën, A.D. InBev, Nestle, and others. And in our outgoing direct response business, which is focused on affiliates and other pure performance advertiser categories, we launched our Amplify AI-based MCP server that allows AI agents to connect natively to the Amplify platform. This innovation streamlines integration and workflows for performance marketers, allowing us to deliver greater efficiency and measurable results. An early adopter has called the product a revolution of campaign management and a mandatory tool for anyone serious about managed performance advertising. Also, as has been the case for several years, legacy outbrain supply outside of our traditional feed continues to grow to over 34% in Q2. enabling performance advertisers to reach consumers with a range of placements across the entirety of the open Internet, including display placements, banners, and others. We continue to expand this type of supply specifically for direct response performance buyers. On the supply side, we saw some decline in our traffic volume, driven by two main factors. We made a deliberate and aggressive reduction in publishers and properties that don't meet our elevated quality standards post-merger, removing over 200 publishers in the last few months. This scheme has led to a roughly 5% year-over-year reduction of legacy outbrain revenues. And while it creates new professional revenues, we believe it strengthens our marketplace long-term by ensuring our supply drives positive outcomes for advertisers on quality placements. Second, we saw a modest decline in traffic from premium publishers, largely due to reductions in search-driven visits. As this is an area that's generating many questions, let me clarify. Notably, even with some pressure on page views, we saw a seventh consecutive quarter of RPM growth on the Albrain Legacy platform. which largely offset the decline in page views and is a testament to our improving monetization per page and per session. It is important to note that search traffic accounts for around 70% of legacy outbound page views and is in a much smaller portion across our full network when you take into account legacy keys and CPD impressions. Another point is that the impact of AI overviews or AI summarizations is more pronounced by a factor of 2x on evergreen content than on current events content, such as news, sports, entertainment, and finance, where our inventory is the strongest. Also, AI prompts such as chat, GPT are a growing traffic source and drive a higher rate of page views than before based on users clicking on the disclosure of sources for topics they are most interested in. We are in active discussions with companies in the ecosystem about opportunities to monetize such AI-based results. Moving to the product and technology side. We are accelerating investment in our next-generation advertising platform, Team Ad Manager. We expect that the next generation of our platform will be built leveraging agentic AI modules, delivering increased efficiencies for agencies and effectiveness for advertisers, with a focus on providing control, transparency, and modularity. We expect to launch this new platform in H1 2026. More on that in our upcoming quarters. In Q2, we launched new offerings that align with our core differentiation. We introduced connected ads in beta, a distinctive format that allows a single brand to occupy both mid-article and end-of-article placement, demonstrating the potential of brand formants. Early interest signals real potential for scale, and we are already testing it with several advertisers. We've seen overall growth in our vertical experiences across publishers. our vertical video solutions which includes immersive feeds the legacy moments product is in fraction with both advertisers and publishers and is live on over 73 new publishers with early adoption by brands including luxotica james smucker company and others on the ctb front we also launch new non-standard formats for in-play advertising these include l-shape pose ads and others We're also in the initial stages of driving performance campaigns on CTB, with the initial focus being on delivering incremental traffic to advertiser properties by retargeting web users on the CTB screens, leveraging the seed omni-channel household graph. In closing, We remain confident in the strategic rationale behind this merger, to build the go-to platform for advertisers seeking scaled, high-quality performance on the open Internet for all their campaign objectives. We are continuing to invest in growth areas. We are not fully satisfied with our financial performance in Q2 and how we are guiding for Q3. But when we look at the medium term, we believe that we will continue to provide incremental value to advertisers, leveraging AI, our unique product capabilities, and access to the most premium media of the world through an end-to-end platform. We have made some organizational decisions that we expect to lead to market share gains, growth, and stronger yields and profitability. While Q3 may still reflect some of the traditional effects of the merger, including our reorg and realignment, we expect to see clear momentum building into Q4. I am tracking the leading indicators closely and look forward to updating you on our progress on our next call. Now I send over to Jason for a more detailed financial update.