Taboola’s Earnings Call: Strong Growth Amid Challenges

Taboola.Com Ltd. ((TBLA)) has held its Q3 earnings call. Read on for the main highlights of the call.

Taboola’s recent earnings call paints a largely positive picture for the company, showcasing robust financial performance and growth in key areas. The sentiment during the call was optimistic, driven by strong results and the successful adoption of the Realize platform. Despite some challenges, such as margin declines and issues with Chinese advertisers, the overall outlook remains favorable.

Strong Financial Performance

Taboola reported impressive financial results, with revenue hitting $497 million and an ex-TAC gross profit of $177 million. The company exceeded the high end of its guidance with an adjusted EBITDA of $48 million, reflecting an EBITDA margin of over 27%. Additionally, Taboola generated $46 million in free cash flow this quarter, contributing to a year-to-date total of $117 million.

Growth in Scaled Advertisers

The company saw a 4% increase in the number of scaled advertisers, reaching 2,064. The average revenue per scaled advertiser also rose by 11%, indicating the successful adoption of the Realize platform and its effectiveness in driving advertiser performance.

Share Repurchase Program

Taboola has been actively repurchasing shares, buying back approximately 10 million shares during the quarter for $34.4 million. Year-to-date, the company has repurchased $184 million worth of shares, representing 14% of the company, demonstrating confidence in its future prospects.

Positive Outlook for Realize Platform

The Realize platform continues to gain traction, with advertisers experiencing strong performance metrics. A notable example is a major online travel company that achieved 67% lower CPCs compared to Meta and increased site traffic by 48% using Realize’s advanced targeting capabilities.

Strong Cash Position

Taboola ended the third quarter with a solid net cash balance of $41.5 million and cash and cash equivalents totaling $115.5 million. This strong cash position more than offsets the company’s long-term debt of $74 million, providing financial stability.

Year-Over-Year Margin Decline

The company experienced a decline in ex-TAC gross profit margins year-over-year, primarily due to the impact of last year’s Yahoo testing. This has negatively affected margins, highlighting a challenge that Taboola needs to address.

Challenges with Chinese Advertisers

Taboola faced challenges with Chinese advertisers, as the strong demand seen in Q4 last year has not returned to previous levels. This is partly due to tariffs and other market conditions impacting the advertising landscape.

Foreign Exchange Rate Impact

Foreign exchange rates posed a $2 million headwind to Taboola’s adjusted EBITDA in Q3, with an anticipated $5 million impact in Q4 due to operating expenses. This remains a factor to watch in the company’s financial performance.

Forward-Looking Guidance

Looking ahead, Taboola has set ambitious targets, anticipating nearly $2 billion in gross revenue and over $700 million in ex-TAC gross profit for 2025. The company projects over $200 million in adjusted EBITDA with a 30% margin. With a focus on expanding its market presence, Taboola aims to capitalize on opportunities in the $55 billion performance advertising market, positioning itself as a leading platform outside of search and social.

In summary, Taboola’s earnings call highlighted a positive trajectory for the company, with strong financial performance and growth in key areas. Despite some challenges, the overall sentiment remains optimistic, driven by the successful adoption of the Realize platform and strategic initiatives like the share repurchase program. Investors and market watchers will be keen to see how Taboola navigates its challenges and capitalizes on its growth opportunities in the coming quarters.