Taboola (TBLA) Q3 2025 Earnings Call Transcript

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Date

Wednesday, Nov. 5, 2025 at 8:30 a.m. ET

Call participants

• Chief Executive Officer — Adam Singolda
• Chief Financial Officer — Steve Walker

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Takeaways

• Revenue -- $496.8 million for Q3 2025, up 15% year over year, with growth attributed to increased advertiser traction on the Realize platform.
• Ex-TAC Gross Profit -- Ex-TAC gross profit was $176.8 million for Q3 2025, up 6.3% year over year; growth was driven by Realize and higher advertising spend from scaled advertisers.
• Adjusted EBITDA -- Adjusted EBITDA was $48.2 million for Q3 2025, with a 27.3% margin; reflects company focus on cost discipline and strategic investments to support expansion.
• Free Cash Flow -- Free cash flow was $46.3 million for Q3 2025, representing a 96% conversion from adjusted EBITDA, driven by high margins and working capital efficiency.
• Share Repurchases -- Nearly 14% of outstanding shares bought back year to date ($184 million) as of Q3 2025, reducing share count from approximately 337 million at the end of 2024 to about 291 million at the end of 2025.
• Scaled Advertisers -- 2,064 scaled advertisers in Q3 2025, up 4.4% year over year; average revenue per scaled advertiser grew 10.9% year over year, benefiting from product improvements and easier comparison with last year.
• Net Income -- $5.2 million net income for Q3 2025; non-GAAP net income was $34.3 million for Q3 2025.
• App Traffic -- Now represents about one-third of total supply, driven by growth with publisher and OEM partners, and showing double-digit increases.
• Foreign Exchange Impact -- $2 million headwind on expenses versus Q3 2024, linked mainly to the Israeli shekel; partially offset by positive ex-TAC effects.
• Credit Facility -- New $270 million revolving credit line secured, lowering interest expenses by $1.6 million and increasing available liquidity to approximately $196 million as of September 30.
• Q4 2025 Guidance -- Revenue of $532 million-$542 million for Q4 2025, ex-TAC gross profit of $204 million-$210 million, adjusted EBITDA of $83 million-$85 million, and non-GAAP net income of $52 million-$56 million.
• Full-Year 2025 Guidance -- Revenue of $1.91 billion-$1.93 billion for full year 2025, ex-TAC gross profit of $700 million-$710 million, adjusted EBITDA of $209 million-$214 million, and non-GAAP net income of $139 million-$144 million.
• Realize Platform Highlight -- Management reported "an inflection point in the business with Realize" and reiterated expectations.
• Taboola News -- Outpaced company growth rates, with app-based and OEM supply cited as key drivers and described as "completely immune to LLM disintermediation" according to Adam Singolda.
• Paramount Partnership -- Newly announced collaboration extends Realize’s demand-generation capabilities to CTV environments, enabling advertisers to measure cross-channel outcomes.

Summary

Taboola.com (NASDAQ:TBLA) delivered revenue above its high-end guidance for Q3 2025, fueled by expanding adoption and higher spend among scaled advertisers on its Realize platform. Ex-TAC gross profit and adjusted EBITDA also increased, though ex-TAC margins were down year over year due to last year’s Yahoo-related test impacts. Share repurchases reduced the share count by almost 14% year to date as of the end of 2025. The company highlighted strong cash generation, high free cash flow conversion rates, and robust liquidity enhanced by a new credit facility. Management raised guidance for both Q4 and full-year 2025, supported by a "an inflection point" in advertiser engagement and platform momentum.

• CFO Walker said, Ex-TAC gross profit margins were down year over year primarily due to the one-time testing we were doing with Yahoo in Q3 2024. warning of headwinds that distort comparability across periods.
• Management reported that free cash flow conversion from adjusted EBITDA has consistently exceeded 70% over the last four and eight quarters.
• Investments increased in marketing and growth initiatives for Realize, with particular success in U.S. markets and among ideal customer verticals, including finance, auto, health, and direct-to-consumer products.
• App-based traffic growth, driven by partnerships and OEM integrations, now constitutes a significant and increasing portion of Taboola's ad inventory, contributing favorably to engagement and monetization.
• Walker indicated, "we are no longer required to purchase shares from Yahoo for the remainder of 2025," granting the company greater flexibility for market repurchases.
• LLM-based AI productivity and campaign optimization tools such as "Abby" have begun to impact advertiser success rates and internal sales operations, but management characterized these initiatives as early-stage for measurable impact outside core platform yield improvement.

Industry glossary

• Ex-TAC Gross Profit: Revenue remaining after deducting traffic acquisition costs (payments to publishers and partners for ad inventory), representing the company's retained gross profit before operating expenses.
• Scaled Advertiser: An advertiser spending at least $100,000 per year on Taboola’s platform, considered a key growth and retention metric.
• OEM: Original Equipment Manufacturer; refers to device makers (such as Apple and Samsung) partnering with Taboola to pre-install or integrate its content and ad recommendations.
• LLM: Large Language Model; advanced artificial intelligence model used for tasks like content creation, campaign optimization, and productivity enhancements.
• CTV: Connected TV; digital television viewed via internet-connected devices, offering advertising formats measurable in both TV and online channels.
• Adjusted EBITDA: Earnings before interest, taxes, depreciation, amortization, and other excluded items, serving as a normalized profitability measure favored by management.

Full Conference Call Transcript

Adam Singolda: Thanks, Jessica. Good morning, everyone, and thank you all for joining us today. We're pleased to report another strong quarter, our third consecutive quarter in 2025, exceeding the high end of our guidance. Our new performance platform, Realize, is beginning to work for both advertisers and publishers. We're seeing an inflection point in our business and have greater confidence than we did even ninety days ago that we will get back to double-digit growth over time. This momentum gives us the confidence to once again raise our full-year outlook. We've bought back 14% of the company year to date, and we're continuing to buy back shares aggressively.

As a reminder, Taboola.com Ltd. is one of the largest performance advertising platforms outside of search and social. Our platform, Realize, helps businesses get leads and grow sales. It operates similar to Google Ads or Meta Ads, offering a simple-to-use platform powered by AI. The key difference is that while Google reaches users in search, and Meta in social, Realize engages 600 million people every day across the open web. On partners like Yahoo, NBC, ESPN, USA Today, Apple News, Samsung, and Xiaomi, driving those people to action.

Our competitive advantage lies in our AI and first-party data, drawn from what people actually read about versus what people idealize themselves on social media, giving advertisers authentic insights into users' intent and high-performing outcomes. In 2025, we expect nearly $2 billion in gross revenue and more than $700 million in ex-TAC gross profit, which is what we keep after we pay our publisher partners who show our ads to their users. We expect to generate over $200 million in adjusted EBITDA at a 30% margin, with strong free cash flow. As advertisers see diminishing returns on search and social, they look for scalable, performance-driven alternatives like Realize.

Taboola.com Ltd. is uniquely positioned to take share in what we estimate is a $55 billion opportunity. Now let's turn to our Q3 results, which came in ahead of the high end of our guidance across the board. We delivered revenue of $497 million, ex-TAC gross profit of $177 million, and adjusted EBITDA of $48 million, representing a strong EBITDA margin of over 27%. We also generated $46 million in free cash flow this quarter and $117 million year to date, which amounts to a 96% conversion of our adjusted EBITDA in Q3. This strong cash generation allowed us to repurchase approximately 10 million shares during the quarter for a total consideration of $34.4 million.

Year to date, we've bought back approximately $184 million worth of shares, representing 14% of the company. Driving ex-TAC gross profit growth is our North Star. It indicates that we're providing increased value to our customers and fuels our profitability and cash generation. In the third quarter, ex-TAC gross profit grew 6% year over year. The vast majority of our revenue is driven by scaled advertisers, those who spend $100,000 or more annually. As such, we guide investors to track two main metrics that affect our ex-TAC gross profit growth. The first is growing the number of scaled advertisers. The second is increasing average revenue per scaled advertiser.

In the third quarter, we grew the number of scaled advertisers by 4% to 2,064. Our average revenue per scaled advertiser grew 11%, reflecting meaningful progress in driving advertiser success with Realize. Realize's expanded capabilities and strong performance technology are driving these improved results. One example can be found with a major online travel company that was interested in growing their cruise business. While using Realize's advanced targeting and bidding technologies, they were able to achieve 67% lower CPCs versus Meta while driving a 48% increase in traffic to their site. This performance was so strong, this travel company increased their initial investment 10x and has now become a scaled advertiser on our platform.

Last quarter, we shared more about how our supply is differentiated. Overall, our exposure to source traffic globally remains in the single digits. And even as search traffic across the web declines, our total company traffic in Q3 grew year over year. This growth was fueled by strong double-digit increases in app traffic, now accounting for roughly one-third of our global supply, along with successful new publisher onboarding. We continue to monitor our traffic patterns, but at this time, it is a relatively small level of exposure. In summary, we're very happy with how the year is progressing.

We think Realize can make us the leading performance advertising platform outside of Google, Meta, and Amazon across mobile, desktop, OEMs, messaging apps, and more. It is a big ambition, and the numbers make it clear that we're not there yet. That said, we've seen an inflection point in the business with Realize. And if you know this team as well as I do, you'd know we're motivated by big challenges. It is probably one of the reasons we were voted one of Fortune's best places to work. We're taking on one of the toughest competitive landscapes in the world, in an enormous addressable market.

We're hard at work, and we bought approximately $184 million worth of shares as we see the opportunity ahead of us. Before I hand it over to Steve, on a personal note, I want to say that over the past months, our teams and partners in Israel have shown incredible strength, resilience, and unity. Seeing things begin to calm and people returning home safely fills me with gratitude and hope. With that, I'll hand it over to Steve.

Steve Walker: Thanks, Adam, and good morning, everyone. As Adam mentioned, we've had a strong year so far. In the third quarter, we continued that momentum, delivering results that exceeded the high end of our guidance across all metrics. In the third quarter, revenues reached $496.8 million, up 15% year over year. We believe this growth reflects an inflection point in Realize's traction in the market. I have spoken about the fact that we have a large amount of very high-quality supply. So what we need to grow our business going forward is primarily to earn new advertisers' budget.

We started to see traction in that area during Q3 as our new ad platform is helping advertisers succeed and helping us win additional budgets. This showed up in our scaled advertiser metrics, evidenced by a 4.4% increase in the number of scaled advertisers and a 10.9% increase in average revenue per scaled advertiser, both of which primarily benefited from Realize improving retention and growing ad spending levels with existing advertisers when compared to the same period last year. As I have said in prior quarters, we are particularly pleased to see the number of scaled advertisers growing as they tend to be the fuel for future growth.

I should note that the growth in average revenue per scaled advertiser also benefited from an easier comparison with Q3 2024 because during that period, we were testing ad formats with Yahoo, and revenue from that test was recognized as an offset to traffic acquisition costs rather than as revenue. Normalizing for that one-time test, growth in this metric was more in the mid to high single digits range, and taken together with our growth in scaled advertisers, positively contributed to our revenue and ex-TAC performance. Ex-TAC gross profit for the third quarter came in at $176.8 million, up 6.3% year over year, including a 55 basis point tailwind from foreign exchange rates.

Ex-TAC gross profit growth was primarily driven by strong growth in advertising spend, thanks to the success we are seeing with Realize, and includes strong performance from Taboola News and bidded supply. Ex-TAC gross profit margins were down year over year primarily due to the one-time testing we were doing with Yahoo last year. Notwithstanding, overall ex-TAC gross profit dollars grew year over year, and as I have said previously, I focus more on growth of ex-TAC gross profit dollars rather than the margin percentage. Gross profit for the quarter was $139 million, primarily benefiting from strong ex-TAC gross profit growth.

As mentioned in prior quarters, gross profit also benefited from reductions in our other cost of revenues, driven by lower server and network infrastructure costs, some of which came from a reduction in depreciation and expenses related to our servers due to a reassessment of their useful lives. Our net income was $5.2 million, with non-GAAP net income coming in at $34.3 million. Adjusted EBITDA for the quarter was $48.2 million, reflecting an adjusted EBITDA margin of 27.3%. We continue to focus on cost discipline across the business while strategically investing in areas that support growth.

This quarter, we had a $2 million headwind for foreign exchange rates versus Q3 2024, $3 million higher operating expenses partially offset by approximately $1 million in ex-TAC tailwinds. The impact on operating expenses was primarily from the Israeli shekel, where we have a large employee and expense base. Without this headwind, our adjusted EBITDA margin would have been the same as Q3 2024. We also had higher than planned hosting costs related to certain growth initiatives, and we decided this quarter to further increase our marketing spend for Realize based on the traction we are seeing.

In terms of cash generation, we had $53.2 million in operating cash flow in the third quarter, and free cash flow of $46.3 million, representing 96% conversion from adjusted EBITDA in the quarter. Our free cash flow benefited significantly from a couple of factors, primarily high adjusted EBITDA margins and strong management of our working capital. Our free cash flow conversion from adjusted EBITDA continues to be over 70% over the last four and the last eight quarters.

Given our experience over the last couple of years, we think it is safe for investors to assume that we will convert free cash flow at a 60% to 70% rate over the longer term, which is above our prior 50% to 60% target conversion of free cash flow from adjusted EBITDA. For the full year 2025, I expect to do even better than the high end of that range. Turning to the balance sheet, we remain in a strong financial position. We ended the third quarter with a net cash balance of $41.5 million. Cash and cash equivalents totaled $115.5 million, which more than offset our long-term debt of $74 million.

As a reminder, earlier this year, we secured a new $270 million revolving credit facility, allowing us to fully repay our previous long-term debt loan while maintaining approximately $196 million in available capacity as of September 30. This facility also allowed us to reduce our interest expense by $1.6 million in the third quarter. With this facility, we can operate with a lower cash balance while preserving access to significant liquidity. We continue to believe share repurchases are one of the most compelling uses of capital. In the third quarter, we repurchased approximately 10 million shares at an average price of $3.43 for a total consideration of $34.4 million.

Year to date, we have bought back nearly 14% of our outstanding shares, reducing our total share count from approximately 337 million at the end of 2024 to about 291 million at the end of 2025. As an update to our share repurchases from Yahoo, we are no longer required to purchase shares from Yahoo for the remainder of 2025 due to meeting certain Israeli regulatory conditions. This means we have the ability to buy more shares in the open market.

Moving to guidance for the fourth quarter 2025, we expect revenues to be between $532 million and $542 million, gross profit to be between $166 million and $171 million, ex-TAC gross profit to be $204 million to $210 million, adjusted EBITDA to range from $83 million to $85 million, and non-GAAP net income to be $52 million to $56 million. For the full year, we are raising our guidance across the board.

We now expect revenues to be between $1.91 billion and $1.93 billion, gross profit to be between $550 million and $564 million, ex-TAC gross profit to be $700 million to $710 million, adjusted EBITDA to be $209 million to $214 million, and non-GAAP net income to be $139 million to $144 million. This guidance reflects continued momentum across our business. I would note that in Q4, the adjusted EBITDA guidance reflects a forecasted headwind from foreign exchange rates of over $5 million on operating expenses, partially offset by ex-TAC tailwinds, which reduces our adjusted EBITDA by approximately $1.5 million and reduces the adjusted EBITDA margin by over 140 basis points.

Also, a reminder, when you are comparing each of the quarters this year to the same quarter last year, you must keep in mind the onboarding of Yahoo, which impacts quarterly comparisons this year. As a result, we believe the full-year projected growth rate of 6% at the midpoint of our new range normalizes for these dynamics and is the best representation of the true growth of our core business in 2025. In summary, we're very pleased with our Q3 performance and the strong momentum we've built so far this year. We're seeing an inflection point with Realize and remain focused on delivering against the goals we set at the beginning of the year.

There's still work ahead, but we believe we're on the right path toward achieving double-digit growth over time. With that, let's move to Q&A. Operator, can you please open the lines for questions?

Operator: Yes. Thank you. At this time, we'll conduct the question and answer session. As a reminder, to ask a question, you'll need to press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. One moment, and we will compile our Q&A roster. Your first question comes from the line of Zachary Cummins with B. Riley Securities. Your line is now open.

Zachary Cummins: Hi, good morning. Thanks for taking my questions and congrats on strong results here in Q3. So just starting off with the Realize platform, nice to see that incremental traction that we're seeing on that front. Just curious, in terms of taking it to the next level of capturing more of these advertiser budgets, is it more just proving it out and testing it in the market, or what are kind of the next steps in terms of taking this from strong traction to meaningful contribution to the overall P&L?

Adam Singolda: Yes. So I think overall, we're seeing good momentum, which is encouraging for us to see. And if you look at what we said when we launched it, taking a step back, there are really three things that moved the needle financially. The first one is just going from native advertising to performance, and that takes time, you know, to shift kind of perception in the market, and getting more advertisers to be aware of Taboola.com Ltd. as a place. Can spend money beyond search and social. So that's one. The second thing is our focus on the sales side and ICPs.

And that's important because when we sell to the right clients, we tend to see higher retentions and more spend. And the third one is keep iterating on the tech front. So audiences, new formats, new placements. So those three things, keep iterating on those we believe will make a positive impact.

Zachary Cummins: Understood. My one follow-up question is just building on Realize. Interesting partnership that you announced with Paramount. So can you talk about the Performance Multiplayer product and how maybe Taboola.com Ltd. could have more of a presence in CTV over time?

Adam Singolda: Yeah. So, one, let me just, you know, say about it. It's financially, you know, small, as of now, but very exciting. So what we've announced is essentially a demand generation opportunity for Taboola.com Ltd. through Realize. We're tracking essentially the industry overall going more and more into outcome and measurement and performance-driven market. And even in television, which is about $100 billion market in the U.S., we're seeing these dynamics. Advertisers are expecting to not only enjoy the benefit of a large screen when they get consumers exposed to an ad, but also track and be able to drive conversions through that campaign.

We're seeing this with Amazon obviously telling advertisers if you buy Prime, we can show ads also on amazon.com and show you that someone ended up buying the product. It's a very powerful pitch to advertisers. So what we've announced with Paramount is a great part of ours on the CBSI front for a very long time and now on the CTV front is to bring that the combined power of TV and performance advertising into one home, if you will.

So if you're buying an ad and that ad is shown on Yellowstone as an example, and you see that ad in your living room, you as a consumer and people like you may be through a matching integration with Paramount, maybe seeing relevant ads on the open web, through Realize. And the point here is that we're able to expand the audience. So even if one person saw an ad on TV, we're able to show maybe 10 other people as that are relevant to the same advertiser and then report back, and this is the exciting part, reports back to the advertiser how many clicks have occurred, impressions, conversions, price per acquisition.

So this is you're buying TV and you feel like you're buying Meta. I'm excited about it, and I hope we'll continue to see traction, but it's like a retail media for TV if you will. It's still early days.

Zachary Cummins: Understood. Well, thanks for taking my questions, and best of luck with the rest of the quarter. Thank you.

Adam Singolda: Thanks, Zach.

Operator: Thank you. Your next question comes from the line of Laura Anne Martin with Needham. Your line is now open.

Laura Anne Martin: Good morning. Great numbers, you guys. I have a couple. Can you talk about what's going on with traffic? And if you're not seeing any degradation in traffic, I'm very interested in the quality because these LLMs are searching sort of anywhere between eight and eight thousand pages per query to get an answer. So my first question is on traffic, both volume and quality. Is human traffic declining even if total traffic to your site is not? And then my second question is, you guys were really early adopters of using AI to improve your yields and conversion rates.

I'm interested in an update on actual metrics of where you've seen improvements either in costs or in revenue or in yield from your updated AI implementations, please?

Adam Singolda: Sure. Good morning, Laura. Thanks for the question. Hi. So I can start, and we can bounce off of this. So the first thing we're seeing, we're seeing actually a surge in traffic overall. Which is interesting, obviously, as you say, times of search traffic declining because of LLM engine. The main two reasons we're seeing traffic going up is, I would say one, we're seeing an increase in direct traffic actually specifically through apps. So many of our partners have a very strong brand name. So if you think about the ESPN's of the world, the CNBC's, Yahoo!

And OEM partners such as Apple and Samsung and others, many of them have a very strong brand and recognizable by consumers. And while search traffic is going up, down, we're seeing their app direct traffic going up. And that affects our overall traffic mix. So that's something that's really helpful. And the second thing is we're doing a good job onboarding new partners. So think of new publishers and new devices, adding new partners. So for those two reasons, overall company-wise, Taboola News, we've seen positive trends of we are seeing growth in traffic. And about the so that's about that. Human traffic we're not seeing any material change that I'm aware of.

In general, the way we're doing it today, we have this index that actually allows us to constantly make sure that our supply has high quality for advertisers. When we onboard a new partner or as things change, we're able to see if the conversion rate from a certain publisher or the conversion rate from a certain page changed. And if it's within a, you know, a certain range of what we expect, we call that human and good. And if it's too far down, we actually part ways with that partner. We're not sustaining partners on our network that do not perform to advertisers. So we've been doing this for a long time.

And I think advertisers really appreciate that because they know they can always rely on our traffic being high quality. Steve?

Steve Walker: Yeah. And then in terms of your question about AI and where are we seeing impact from that. So just to take a step back real quick, we use AI across our business. We've been a deep learning-based business for better than a decade now. And that is what the technology that basically drives how we decide which ads or which pieces of content to show to which users at which in which particular context at any given time. So that is a key part of our business and has been for a decade. LLM-based AI is where we've started using obviously more recently as they become more advanced. We use those primarily in two areas of our business.

So one is we announced, obviously, Laura, you remember we demoed Abby with you where we showed an LLM-based for advertisers that helps them to get up and running on our platform. And now over time is even helping them to optimize campaigns and to do more with the platform. So we use it there. And then internally, we're using LLM-based technology with a lot more productivity reasons. So, you know, a great demo I saw the other day was showing our sales team where they can say, hey, I'm about to go into a meeting with Nestle with this person, and an LLM-based tool will actually prep a whole kind of package of information that they should know.

What has Nestle been saying about their goals as a business? What does this person do? It's kind of amazing how much information they get going into the meetings that they come in prepped. So we're using it as a productivity tool in that way. In general, what I would say is where we will always see the biggest impact on our business with AI is anything that drives higher yields and higher success rates for our advertisers. And that's true.

I mean, that's so when we talk about seeing an inflection with Realize, frankly, a lot of that is coming on the back of, you know, better algo, you know, things like predictive audience is an AI-based prediction tool of could you get more conversions on our network and what do you have to do to get those. So that's the probably impact number one. Abby is definitely having an impact on our advertisers. So we're seeing, you know, more success thanks to that. And then I'd say we are seeing productivity, but we're probably earliest in that area. In terms of where we're seeing impact.

And lastly, Laura, just to add one more note is that we also launched Deeper Dive a few months back, which is our kind of for the open web driven by advertising as a revenue source, still early days. But that's another thing that can generate a surge in quality traffic. Definitely human traffic, because people have to type and engage with it. So that's another investment we're making to try to create more quality supply for advertisers in the form of LLM. And support publishers in growing and getting into the AI era as we know it.

Laura Anne Martin: Thank you very much.

Adam Singolda: Thanks, Laura.

Laura Anne Martin: Thank you.

Operator: Your next question comes from the line of Jason Helfstein with Oppenheimer. Your line is now open.

Jason Helfstein: Hey. Hey. Thanks. And I was on a few calls, so apologize if this was already covered. But I'm struggling to understand kind of, again, why Revenue ex-TAC on a year-over-year basis will decelerate call it, you know, seven points, and then why the other cost of goods, you know, the non-TAC COGS is gonna be up $5 million sequentially. So can you can you unpack that? And I've just got a question about next year. Thanks. Yeah. When you when you talked about the non-TAC COGS, are you talking about the other cost of revenue?

Steve Walker: Correct. Yeah. Yeah. Okay. Yeah. So I guess, I'll start with kinda the general discussion of ex-TAC and where we are with ex-TAC. So first of all, you know, I think margins were down year when you look at ex-TAC margin, they were down year over year primarily due to the Yahoo test last year. So remember last year, we had a format testing with Yahoo where it was recognized on a net basis. Basically, it was a TAC offset. And that distorted our margins year over year. So I think if you're talking about a margin in Q3, was down because of that.

If you're looking at ex-TAC dollars, they were up 6% year over year in Q3, and that's kinda what we focus on more is the dollars. Q4 is gonna be down year over year. That's mostly due to two factors. One is there was a for the Yahoo onboarding last year, basically, caused some distortion between quarters. So that's part of it. And then we also had particularly strong demand from Chinese advertisers in Q4 last year that frankly was unusual. And with the tariffs this year, they did drop. We talked about that in Q1, and they have not gotten back to the same rates yet.

In terms of the in terms of the other cost of revenue in changes there, so first of all, we've changed the accounting on our servers. That actually has brought down other costs of revenue, but we have also written off, or not written off. We've changed the way we're accounting for some of our capitalized projects. I believe that's a big part of the remainder of it.

Jason Helfstein: Okay. And then could just philosophically, I think we were previously thinking next year would grow low single digit. I mean, obviously, coming off of this again, for revenue ex-TAC, with this minus 2% guide for the fourth quarter, is it still fair to assume that you think the company could generate positive growth in revenue ex-TAC for next year? Yeah. So yeah. Yes.

Steve Walker: And I think that, generally, the way I think about it is, first of all, we're seeing good momentum with the business. Like, I think we're happy with what we're seeing. I think I wouldn't look at quarters when you're thinking about the growth rate. And while we'll, you know, we'll give you guidance obviously for 2026 in February, what I would look at now is our full-year growth rate for 2025 is a good proxy for I think, where you can start with thinking about 2026.

Jason Helfstein: Okay. That's helpful. Thank you.

Adam Singolda: Thank you.

Operator: Your next question comes from the line of Mark Zgutowicz with The Benchmark Company. Your line is now open.

Mark Zgutowicz: Thank you. Good morning, guys. Steve, you talked a little bit about marketing spend. I'm just curious if you think about realized marketing spend returns, what adjustments have you made since launching Realize? Maybe you can talk about what's worked, what hasn't. And perhaps how your sales capacity is there relative to where you'd like it or if it's where you are comfortable with. And then in terms of margins, if you look at the fourth quarter adjusted EBITDA margin guidance, is that a good proxy to for us to think about in terms of 2026? Excluding any potential RovEx tech acceleration? And then maybe a last one. For Adam, if I could.

If you think about opportunities for investment, alongside realized incrementality, can you maybe prioritize AgenTic, MCP, ADCP, or any other areas? Thanks so much.

Steve Walker: Sure. Thanks, Mark. So I'll answer the first two. So first of all, in terms of the marketing spend, yeah. So I mentioned, obviously, in my prepared remarks that we've increased marketing spend intentionally over the last two quarters, Q3 and now heading into Q4. The reason we did that is we're seeing, and again, it has to do with the inflection we're seeing with Realize, we're seeing that advertisers are more likely to be successful coming on our network now with the launch of Realize and a lot of the new product features that are baked into Realize, they're more likely to be successful.

So obviously, what that means is if I previously was spending and I'm making up numbers here, so don't take these don't build these into a model. But if I was previously spending a thousand dollars to get an advertiser onboarded in the U.S. through, you know, in terms of marketing spend, and they were, you know, had an x percent likelihood of being successful and then eventually having a certain lifetime value, that x percent likelihood of success has gone up, which means the lifetime value is still similar, maybe even improved a bit. Means I can spend more on marketing and I can basically still have a good positive ROI on it.

So as we've seen that, we've started increasing our marketing spend, which has a smaller effect on the immediate term, but again brings on more advertisers, which should help us grow faster in the future. So that's kind of what's going on with the marketing spend. In terms of the specific areas that we're seeing that, geographically, it's been pretty broadly diverse, so globally. Although we are seeing particular momentum in the U.S. in that regard. And then in terms of the types of advertisers, it's really those we talked about ICPs or ideal customer profiles when we talked about the launch of Realize. It is, you know, it's those verticals. It's finance. It's auto. It's health. It's direct-to-consumer products.

It's those verticals that we're seeing the best traction. In terms of your second question about expectations for adjusted EBITDA, and kind of where what you should think in terms of that going forward. I think so Q4 is a seasonally strong quarter from an adjusted EBITDA margin perspective. So don't look at Q4. But I think what we've said repeatedly in the past and I think is still true today, we use 30% adjusted EBITDA margins as kind of a guardrail for ourselves. To think about what we should how much we should invest in growth versus how much profitability we want.

And I think that's a good starting point for how to think about our margins and our OpEx for next year.

Adam Singolda: I can take the AI one. So, Sunny, one, on the first part of your question, I think all of what we do is investing in AI in terms of driving primarily advertisers' success. Realize drives most of our revenue as a company now. And making advertisers successful through Realize will be the main way we will go back to double-digit growth as a company. So and then Realize is, you know, we're tracking Realize as you know, with scaled advertiser, how many of them do we have. And then how much they're spending in average.

The reason that's important is because if you do a good job making advertisers successful with unique data, a lot of distribution and advanced investments, then you should see more scaled advertisers and you should see them able to spend more. Because it means you have higher retention rates, people try you, they churn less, which means they get retained. And then once they're in, they're spending more and more over time. That's what you wanna see. As you saw in my remarks, we're seeing a 4% increase in scaled advertisers, and 11% growth in average spend.

So I think for us, it's laser-focused on how do you get return on ad spend as fast as you can for advertisers so they don't churn. And then what technologies such as predictive audiences and other new formats and new supply you can provide them as part of our technology so they can spend more and more over time. And that's these are the two areas of focus for us. When I think about Taboola.com Ltd. and its position in the marketplace, you asked about MCP. I think we're well-positioned because the vast majority of our revenue comes from advertisers who buy from us directly.

That means that we're able to share more with publishers and keep a very healthy margin for us as a business. And that's not the traditional ethic usually diagram where you have companies that are doing one side of the marketplace and a lot of money gets lost along the way. So I think for us, it's important to track MCP in this industry, companies such as Taboola.com Ltd., which is a two-sided marketplace. Publishers who work with us work with us directly. Advertisers who buy from us buy from us directly. This is similar to almost a consumer company, for us, we don't have our own Instagram. We have reach to consumers through publisher relationships.

So I think we're well-positioned and you can see that in our performance.

Mark Zgutowicz: Thanks, guys. Very clear. Appreciate it.

Operator: Thank you. Your next question comes from the line of James Kopelman with TD Cowen. Your line is now open.

James Kopelman: Good morning, and thanks for taking the questions. The first one is for Adam. Just following up on Laura's question on traffic. You mentioned that app traffic is now one-third of supply. Do you see that trending over time? Do you think that could hit 50% or higher of supply? And do you expect double-digit app traffic increases in the fourth quarter as well? Then I have a follow-up question for Steve.

Adam Singolda: Yes. I mean, it's encouraging to see that traffic being already a third, almost a third. And because that's a good stable base that is not affected by search as much. Or at all. And so I think that's already encouraging from our perspective as I look into the future. I think it has a chance of going up faster because one, it's a much more engaged audience tends to be. So if you talk to publishers, they'll usually tell you and we see it, that an app user is a significantly more engaged consumer. They spend more time, they read more, they generate a lot of revenue. Publishers are always motivated to move people into app.

And again, the risk of LLM, I think I'm betting we'll see more dynamics of publishers trying to get consumers to download the app and using that. So I think that's going to be a positive trend. And two, we're seeing a lot of growth coming from Taboola News and in-app monetization. Is through, you know, partners like, you know, Apple News is obviously an incredible one, and Samsung. And we spoke earlier this year about LINE, which is a messaging app. So I think for us, we have aspiration as a company to keep working wherever consumers spend real time. So that over time, we have aspiration to be on every device.

Every lock screen, every swipe you may have, provide news if relevant part of your utility app. So that's something that we invest in as a company, and I think there's a good product market fit with what we can provide, which is content, data, and revenue to what the market wants. So I do suspect this will have a positive trend.

James Kopelman: And then for Steve, in the third quarter, you were able to keep OpEx expense growth at a moderate level even as you accelerated growth in the business. Are your thoughts on investments and how we should think about headcount and growth over the next couple of quarters into 2026 as well, particularly as it relates to operating margin in the business?

Steve Walker: Yes. No, good question, James. So I think, generally speaking, the way we've always looked at our business is that we should invest in growth. Obviously, where we think we have a positive ROI, but limit ourselves by saying that we'd like to always maintain a 30% plus EBITDA margin. So I think that's the way we'll still think about things going forward. And that's the way we'll probably plan 2026 as well. I think in terms of, to how to think about like, what where do we invest and what are we gonna spend our money on, I think it's, it's really Realize is gonna be the primary area of investment for us going forward.

Obviously, we always have, Adam used to call them speedboat type of initiatives. But we have things like Deeper Dive where we're investing a small amount of money just to see what we can learn and figure out. But the big investment is gonna be Realize going forward just as it has been. But I think you can expect the operating expenses to grow a lot in line with growth and for us to maintain 30% plus type of EBITDA margins.

James Kopelman: Sure.

Operator: Thank you. Your next question comes from the line of Matthew Condon with Citizens. Thank you so much for taking my questions. My first one, maybe just shifting gears here a little bit. Can you just talk about Taboola News? It looks like it was another strong quarter. Just what's the sustainability of growth there? And how should we think about that contributing in 2026? My second is also just on your partnerships with some of the OEM partners. Just how are these progressing, and scaling up here? And, you know, should we expect these also to be key contributors in '26? Thank you so much.

Adam Singolda: So I can take a first pass to that. So first of all, yeah, Q3 was good for Taboola News, which Taboola News is growing faster than the rest of the company, which is nice for a growth initiative like that. It's also I think the important part of Taboola News is it's part of our unique supply strategy. So it is a very unique type of supply that, by the way, obviously completely immune to LLM disintermediation. And that type of issue. So that's great. It also is fresh users good data. So it's, you know, it's when you're on the cell phone device natively, you know a bit more about what's going on than other times.

So it's all part of that getting unique supply and advertisers really like it. You know, it's before a user gets to their social network. It's before they start browsing the Internet. It's a very unique time to meet the user. So I think it's, it's also great for advertisers. And so, you know, with everyone wanting advertising including cell phone manufacturers and OEMs, I think there's big upside to this. Where it goes, you know, we obviously haven't spoken specifically about guiding to that and we don't break it out, but I think we see a lot of upside potential of this over time. Sorry. Operator, are we on still?

Operator: Yes. Yes. I didn't know if there was going to be another question. So at this point, there are no further questions, and I'll turn it back to Adam Singolda for closing remarks.

Adam Singolda: Thank you. Thanks, everyone, for being with us this morning. If you take three things from the quarter that matter, number one, we've hit an inflection point with Realize, which is our biggest investment. Customers are giving us good feedback, and our product is driving good results. It shows in our scaled advertiser numbers, a 4% increase in the amount of scaled advertisers. That's obviously a good thing. And we're seeing 11% higher average spend. And we track those two numbers as a proxy for Realize's success, and Realize is most of our revenue, so that is our main way to grow in the future. Number two, we're feeling better about our financial performance. We like the direction we're heading.

And as such, we bought 14% of the company year to date and intend to continue to buy aggressively. And number three, I'm proud of the team. You know, we're taking upon ourselves a big challenge. We're hard at work, and I believe we can do this. So I'm looking forward to interacting with many of you over the next few weeks, and thanks for joining us today.

Operator: Yes. Thank you for your participation in today's conference. This does conclude the program, and you may now disconnect.

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