Taboola.com Ltd. (TBLA) Q3 2026 Earnings Call Transcript

Operator: Good day, and thank you for standing by. Welcome to the Taboola third quarter 2026 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 the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one 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, Aadam Anwar, Head of Investor Relations. Please go ahead.

Aadam Anwar: Thank you, and good morning, everyone. Welcome to Taboola's third quarter 2026 earnings conference call. I am here with Adam Singolda, Taboola's Founder and CEO, and Steve Walker, Taboola's CFO. The company issued earnings materials today before market open, and they are available in the investors section of Taboola's website. Now, I will 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 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 press release posted on our website. With that, I will turn the call over to Adam.

Adam Singolda: Thanks, Adam. Good morning, everyone, and thank you for joining us today. In the third quarter, we delivered $189 million in ex-TAC, growing 7% year-over-year, and $56 million in adjusted EBITDA, growing 16%. The environment in which we operate is changing. We are seeing shifts in how consumers discover and engage with content across the open web, including the growing influence of AI summaries and LLM. While page views across our publisher base remain relatively steady, we are seeing advertising impressions decline as consumer behavior changes. We believe our publishers have meaningful opportunities to use our products to improve engagement and grow revenue, and I will discuss those opportunities in more detail later. In the near term, however, we are incorporating these trends into our outlook and lowering our full-year ex-TAC guidance to $758 million, representing 6% growth. To address these dynamics, we're doing three things as part of our Realize strategy, which is centered around helping advertisers find outcomes at scale beyond search and social. First, we're focused on winning new publisher partnerships. This is evidenced by our recent signing of Fox News, Fox Local, Fox Sports, and Fox Weather, which are premium properties that advertisers love. We have a strong pipeline of additional publishers around the world that we hope to bring onto our platform, creating more opportunities to drive engagement for publishers, revenue for our partners, and performance for advertisers. Second, we're focused on growing the revenue we generate with each publisher. Historically, we've monetized mainly through native placements. However, with products like Full Page Monetization, we monetize the entire ad inventory of a publisher, including display, vertical formats, native, and more. We believe we can increase that monetization two to three times per publisher, so this is something we're leaning into with our teams and our top publishers. As an update on Full Page Monetization, last quarter, we announced NBCUniversal as our first Full Page Monetization partner. We're now live across 100% of the advertising inventory on NBC News and TODAY.com, and the performance we're seeing is on par with what NBC and us expected, which is encouraging. For publishers, this creates an opportunity to grow revenue while working with fewer partners, reducing operational complexity, and improving efficiency. For Taboola, it means growing our share of wallet with existing publishers while giving advertisers access to even more premium inventory. Another way we're growing revenue for existing publishers is through DeeperDive, our AI answer engine, which is now being used by nearly 14 million people across publishers and OEM, which gives publishers valuable insight into what their audiences care about. As consumers increasingly turn into AI to discover information, DeeperDive positions Taboola to help publishers adapt while creating another way to grow revenue from our existing relationships. We're also expanding our publishers' relationships and the revenue we can generate with them through our proposed acquisition of Dianomi. This is an opportunity to broaden our publisher base and further strengthen our position in business, finance, and lifestyle verticals, areas where we already have strong presence and where advertisers value access to high-intent audiences. Dianomi brings a highly specialized network of hundreds of premium publishers, including Reuters, CNN Business, and The Wall Street Journal, alongside blue-chip financial advertisers. By combining our companies, we believe there's a monetization growth opportunity across Dianomi premium publishers driven by Realize AI and advertisers, as well as Taboola, given Dianomi expertise in high-intent verticals and premium advertisers. We expect to complete the acquisition before the end of 2026, and we will continue to provide updates. These are all examples of ways we're doing more with our existing publishers to grow revenue. Thirdly, we're investing in diversified areas of our business that are growing and not impacted by AI, such as Taboola News, apps, and social commerce. These markets give us access to new audiences while allowing us to leverage the assets we've built over the last decade, including our technology, unique first-party data, publishers relationships, and global distribution. Our goal is to build multiple growth engines that complement our core business and increase Taboola's competitive advantage across the broader digital ecosystem. In times of change, I am convinced that publishers and advertisers, now more than ever before, would want to innovate, move even faster, and look for revenue-generating opportunities. Much like in social and search, the open web has the opportunity to have one company that can be the monetization infrastructure for everything, and I believe it can be Taboola. To wrap up, our focus is on our partners and clients, working with them closely on using our wide array of products offering to grow revenue, especially during times of change in our industry. We were never more aligned than we are now. With that, I will hand it over to Steve.

Steve Walker: Thanks, Adam, and good morning, everyone. Q3 results were in line with our guidance. As Adam mentioned, the environment in which we operate continues to change, and the way consumers interact with our partners' web properties is being affected by the influence of AI and LLMs. While page views remain relatively steady, what we have seen has been a reduction in the number of impressions available for our advertisers and a headwind on revenue. As a result, we are adjusting our Q4 guidance, which I will share in more detail shortly. First, let me talk about our Q3 results. In the third quarter, revenues were $462.3 million. Our revenue was primarily impacted by the impression volume headwinds and by a slower-than-expected rollout of Next Engage, which is the product we introduced to replace Explore More. When looking at these numbers on a year-over-year basis, revenue was down 7%. Last quarter, we discussed our efforts to optimize the quality of our supply and the deprecation of the Explore More product. These factors, along with some headwinds from the decline in impressions due to consumer behavior changes, drove the decline. In Q3, the number of scaled advertisers declined 4% year-over-year, and average revenue per scaled advertiser declined 5%. Scaled advertisers represent approximately 85% of revenues, so when we see declining revenue as we did this quarter, we would expect to see a decline in these metrics. ex-TAC gross profit increased 7% year-over-year to $188.8 million, and gross profit for the quarter was $152.3 million, up 10% year-over-year. ex-TAC gross profit benefited from a couple of factors. First, as the volume of our supply declines, we see higher ad rates on our network because a similar amount of demand is spread over less supply. Higher ad rates drive higher ex-TAC margins. Second, we saw strong growth in Taboola News, which contributed to the growth in ex-TAC. Net income for the quarter was $18.4 million, with non-GAAP net income coming in at $39.9 million. Adjusted EBITDA for the quarter was $56 million, which represented a margin of 29.7%. This reflects our ongoing discipline in expense management, as operating cash expenses remain broadly stable, excluding foreign exchange impacts. Foreign exchange continues to be a headwind in 2026 on a year-over-year basis. On a constant currency basis, FX represented a $3.4 million headwind to third quarter adjusted EBITDA. Excluding this impact, adjusted EBITDA would have been approximately $59.8 million, which would have represented an adjusted EBITDA margin of 31.6%. We expect FX to remain the headwind in Q4. In terms of cash generation, we had $35.6 million in operating cash flow in the third quarter and free cash flow of $20.4 million. We expect our free cash flow to convert from adjusted EBITDA at a 60%-70% rate this year. Turning to the balance sheet, we remain in a strong financial position. We ended the third quarter with a net cash balance of $50.2 million. Cash and cash equivalents totaled $128.7 million, which more than offset our long-term debt of $78.5 million. As of September 30th, we had approximately $191 million of available liquidity under our $270 million revolving credit facility. In the third quarter, we repurchased approximately 7 million shares at an average price of $4.37 for a total consideration of $30.3 million. We have approximately $90 million remaining under our authorization. We also received an additional $200 million in authorization for share repurchases. This provides us with flexibility to return capital to shareholders when we believe it is appropriate. As you've seen this quarter, we continuously evaluate capital allocation opportunities, including share repurchases, investments in our business, and strategic acquisitions such as Dianomi, with the goal of allocating capital where we believe it can generate the greatest long-term value. Moving to guidance, for the fourth quarter, we expect revenues to be between $477 million and $493 million, gross profit to be between $174 million and $183 million. Ex-TAC gross profit to be $204.5 million-$213.5 million. Adjusted EBITDA to range from $73.5 million-$82.5 million. Non-GAAP net income to be $53 million-$62 million. For the full-year, we are updating our guidance as well. We now expect revenues to be between $1.88 billion and $1.9 billion. Gross profit to be between $595.5 million and $604.5 million. Ex-TAC gross profit to be $754 million-$763 million. Adjusted EBITDA to range from $212 million-$221 million. Non-GAAP net income to be $151.5 million-$160.5 million. In summary, we're seeing changes in consumer behavior, but are working to offset these changes by bringing on new publishers organically, such as with Fox News, and via acquisition, such as through the proposed acquisition of Dianomi, and by doing more with our existing publishers through Full Page Monetization. While we're still in the early stages of many of these initiatives, we're focused on executing, building on our competitive advantages, and delivering long-term growth and value for our shareholders. With that, let's move to Q&A. Operator, can you please open the line for questions?

Operator: Thank you. At this time, we will conduct the question-and-answer session. As a reminder, to ask a question, you will need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. Our first question comes from Naved Khan at B. Riley Securities.

Naved Khan: Great. Thanks so much. Just a couple of questions from me. Maybe first on the dynamics you just described, Adam, about page views being stable but impressions being lower. Is it just a factor of visitors to the site scrolling less and looking more at summaries, or is there something deeper than that that's going on? That's part one of my question. The second part is about DeeperDive. Are you seeing more distribution across more publishers for this offering? Just talk about that and also how the monetization is progressing on DeeperDive.

Adam Singolda: Yeah. Steve, do you want to take the page view?

Steve Walker: Sure. Yeah, I can start with what Adam was talking about on the page view and impression side of things. What we're seeing is basically what we think is a shift in consumer behavior. It created a headwind on our impression volume. While page views are relatively stable, we're seeing a decline in or fewer impressions per page view. We think this probably has to do with consumer behavior, maybe not scrolling as much or something along those lines. Generally speaking, for us, the important thing is that it's fewer impressions, fewer ad impressions that we have to fill. That's why we're now focused on, as we've talked about in the past and what Adam talked about, winning more new publishers organically and through acquisition, like with Dianomi, doing more with our pubs. Explore More or sorry, Full Page Monetization, DeeperDive, that all gives us more impressions. Then also investing in areas that are less impacted by those consumer shifts. For instance, Taboola News and social commerce are two areas we're leaning into.

Adam Singolda: Right.

Steve Walker: Generally speaking, that is what we are seeing and kind of what we are doing about it.

Adam Singolda: Right. On the second question on DeeperDive, if this was a startup, it would be a very, very fast-growing startup. It is still early in terms of revenue impact for Taboola, given our size. What we are seeing is essentially a very accelerated growth of publishers integrating DeeperDive. It has been around for about a year now or so, and we just crossed a few interesting milestones. More than 100 sites are using DeeperDive. More than 14 million people are interacting with DeeperDive, which is fast growing. I have no doubt that as I look into the future, any company, even right now, Motorola, which we announced a few weeks ago, which is a device manufacturer, a big one, has integrated DeeperDive. What you are seeing is that publishers, device manufacturers, I think over time, apps, even TV, I suspect any kind of digital canvas will offer a conversational layer. There is opportunity for us here to bring our AI expertise, first-party data, and experience with DeeperDive to all of those touchpoints. I just think that is going to be a growing trend over the next two, three years, that consumers will expect it. That is also going to help alleviate some of the, I think, the ad impression pressure that we are seeing with more touchpoints with consumers. The answer is that we are seeing good growth, a very fast one. If this was a startup, it would be one of the fastest-growing startups.

Naved Khan: Okay. Thank you.

Operator: Our next question comes from Laura Martin at Needham.

Laura Martin: Good morning. Let's start with traffic. The guidance you gave for fourth quarter is coming down a lot from our prior estimates. Reddit had said on their call that Google had made another change in its search algorithms and that traffic had gotten much worse in October. Is that the cause of bringing the guidance down in the fourth quarter for you guys as well as Google search monetization and referral traffic shifts? My other question, Adam, is could you give us an update on how you guys are using AI in the business to drive business results? I know you had done an agentic tie-in with Anthropic, and I'm interested in what's happening with some of your AI products and what kind of luck you've had in driving monetization upside from AI. Thanks.

Steve Walker: Thanks, Laura. I'll answer the first one. The simple answer to your question is no, it's not less referral traffic from Google that we're seeing. It's really about the fewer impressions per page view. It's really something about consumer behavior when they're on our pages. It's not fewer page views, it's less engagement once they're on the page, or at least seeing fewer of our ads.

Adam Singolda: Yeah. Hey, Laura. Good morning. Two things. There's a lot at Taboola that we're focusing on as it relates to AI. Internally, our President, Silo, is leading a big project of how to empower our people to do even more as it relates to our clients and internally, and drive productivity and revenue through that. That's a big one for us. Externally, DeeperDive obviously is a big AI initiative for us. I think we're one of the only companies that I'm aware of that actually is showing ads in an LLM conversational layer, and we did mention that we're seeing very good results from those ads. We announced a quarter plus ago our integration with Claude, which essentially allows, through an MCP with Claude, any company, anyone, to use their own Claude on their computer and launch a campaign with Taboola. I just published a video that I am interviewing one of our VPs about that. I think, to me, the biggest area where I see kind of revenue opportunity about that, Laura, is with agencies. I think agencies, the big holdcos, are spending a lot of time with us at a very senior kind of level, imagining a new version of themselves whereby they don't have to go through the traditional ad tech. With us, they can build agents, agentic agents that can reach out directly to Taboola and negotiate directly with us and our publishers and distribution based on whatever the client needs. I do think that the way it's going is that big clients will basically have agents that will negotiate with suppliers directly as it relates to their own goal, whether that's subscription or purchases or whatever they may need. By doing so, will bypass the whole kind of ecosystem. That's maybe where the biggest kind of upside from a revenue perspective, and it takes good attention from me, Krishan, our Chief Business Officer, and the team, as we're looking into the future with kind of advertisers.

Laura Martin: Thank you.

Operator: Our next question comes from Tyler DiMatteo at BTIG.

Tyler DiMatteo: Hey, guys. Morning. Thanks for taking the question. Wanted to come back onto the impressions and the page views here. Understand page views have been steady, but I guess at the highest level, guys, when did you start to see those impressions come down? I guess, what's the visibility into that? Has that accelerated? Obviously, you're reflecting it in the Q4 guide, but I'm just curious, we're sitting here in November, what does that look like, and when did you start to see those impressions go down? Secondarily, my next question here, operationally, when you just kind of take a step back here and you're looking at all these different products and things that you could do in adding incremental premium publishers, what do you feel you have the most control of now in this environment?

Steve Walker: Yeah. Let me, I'll start with the first part of your question. I think in terms of timing of this, we saw signs of it earlier this year, but it was frankly overshadowed by the Explore More deprecation and some of the network cleanup that we were doing. It wasn't as noticeable, and frankly, it was being offset mostly by higher ad rates that we were able to achieve. So it didn't impact revenue as much. It became pretty clear in Q3, which is obviously why we're talking about it now, because we had a relatively clean quarter. Explore More obviously was in our past, and so we were able to see this much more clearly. While we saw indications earlier, Q3 is when we really saw it. In terms of thinking about going forward on this, it's obviously baked into our Q4 guide. We've seen it, we recognize it, we've baked it in. I think though, looking to next year, we'll obviously talk about that when we get to February and going forward. I think, to your second part of your question about what do we really have control of, I think Adam Singolda talked about this in his prepared remarks. We have control of winning new publishers, so we're out working on controlling or winning new publishers. We're also obviously acquiring a really good high-quality publisher base by acquiring Dianomi. We also can control doing more with new publishers, so that's why we're out there selling Full Page Monetization and working with more publishers on expanding what we do, selling them DeeperDive and doing more there. We can obviously also control investment areas in areas that are less impacted by AI, so Taboola News, social commerce. I think those are the things that we feel are in our control. We obviously can't control what consumers are going to do day-to-day, but we still can grow our supply by leaning into all those other things.

Adam Singolda: Right. I do think that now more than ever, when you talk to publishers and spend time with them, as well as advertisers, everyone is looking for revenue growth. These times of change are also the, as I've seen this in the past also with Taboola, it's always the biggest opportunity to talk to your partners, deepen the relationship, spend time about the future, and to be able to be in a position where publishers can hand to Taboola the entire ad inventory with Full Page Monetization as an example is a big deal. We'll continue to update. I'm personally involved with many of our bigger publishers kind of talking to us about it into the future, and it's quite exciting. We'll see how that progresses. Again, I look at this period as a period of people want to do a lot more with the partners they trust and have a relationship with.

Operator: Our next question comes from Barton Crockett at Rosenblatt.

Barton Crockett: Okay. Thanks for taking the question. I wanted to maybe see if you could explain why we have this change. So I understand that people are apparently seeing fewer impressions, which I guess suggests they're not spending as much time browsing or reading the open web. But why? Why would that be happening? I think, is this in any way tied to AI Overviews? Because I know you guys have said in the past your AI Overview exposure is single digits. So some clarity would be great.

Adam Singolda: Yeah. It's a good question, and we're very fortunate that most of our publishers are big, which means they have a lot of direct traffic, and our search exposure is fairly small. That's why the page view kind of change is fairly small. It's fairly steady. I do think, though, that consumers now that come to our publisher sites behave differently. They expect things to be at the top, maybe a summary in the article or on the homepage. It's hard to really narrow down and reverse engineer exactly why they do that, but I think the traffic that comes to the publishers versus the traffic that stays on Google when they see the summary is affecting kind of the type of ad impressions that we're seeing. I think it's a variety of scrolling, it's a variety of the type of articles they come to read versus stay on Google, things of that nature. I also suspect this will plateau at some point because it's going to be mature enough at some point. But right now, we have seen this change, and that's why we wanted to put this in the guidance for Q4. But I do think, to your question, it's a combination of the type of articles people do read versus stay on the search page, as well as kind of expectation to get things to the top of the page versus scrolling to the bottom. That's also why DeeperDive, which is the top of the page as well as Full Page Monetization, which is all inventory, matters to us because we just basically want to see consumers wherever they may be on our publisher site. Like I said, I am encouraged by the fact that people really want to be in relationship with the big publishers that we work with, and that's why the pages are steady. But there is a change in behavior.

Barton Crockett: Could you talk a little bit about the breadth? I mean, is this just a few particular publishers of a particular kind of nature, or is it everyone? Are you seeing it on Taboola clients and people who aren't Taboola clients? Do you have any documentation to kind of support your view of the breadth of this?

Adam Singolda: First of all, it is kind of across the board. I think some a bit more, some a bit less. Again, most of our publishers are similar in the sense that their search traffic is fairly small and their direct traffic is fairly high. We do not have a lot of kind of very high search traffic sites that probably would have seen different behavior. It kind of impacts everyone to some degree, some a bit less, some a bit more. I do not know if we have something that we publish. Also, we want to be kind of sensitive to our partners and not share things they would not want to share. But we can look into see if there is any insights we can share on this.

Steve Walker: Maybe we can do a blog post or something.

Adam Singolda: Yeah

Steve Walker: And share what we are seeing.

Barton Crockett: Okay. If I could just ask one other thing, just to clarify. The implied kind of year-over-year trajectory in the fourth quarter guide, is there any reason why we should not presume that that is a base case for 2027?

Steve Walker: Yeah. We do not want to obviously guide for 2027 right now, but I think obviously we updated our Q4 guide to reflect what we are seeing, so I think you can use it as an indication. We will obviously provide more guidance in February. In the meantime, I think our ambition as a management team is to get back to double-digit growth, and that is where our focus is.

Barton Crockett: Okay. Right. Thank you very much.

Operator: Our next question comes from Alex Lavigne at StoneX.

Alex Lavigne: Hey, guys. Thanks for taking the questions. Just on Realize+, I am curious what percentage of advertiser spend is leveraging Realize+ today and what the incremental ROAS compared to legacy campaigns has been. And then related, how meaningful is the spend coming through the Claude/MCP integration, and is this largely new budget or existing? Acknowledging you mentioned holdcos as an opportunity. Thank you.

Steve Walker: Yeah. On the Realize+, I do not have those figures in front of me, to be honest with you. I know that the adoption rate on Realize+ has been significant, and it was one of our fastest adopted products in our release history. I know it was being adopted by a significant number. I do not have the exact number in front of me. I think we talked last quarter about it being over 1,000 advertisers utilizing it, but I do not have an updated number on that. You want to talk about the MCP?

Adam Singolda: Yeah, the MCP is still, it is millions of dollars, but so fairly small. I would say with zero investment or any promotion of that, this is money that is just coming our way. People experiment with it. I think the biggest growth on that one, my suspicion would be from agencies and very large clients who will see an opportunity to collapse ad tech and buy directly through an agent from suppliers. Not only Taboola, by the way. I expect this will be the behavior across the board. They will build agents that will negotiate with big suppliers on search, social, and beyond search and social, where Taboola is obviously big, so we are worth negotiating with. That is the biggest upside from that kind of initiative I am seeing with Claude, at least in my opinion.

Alex Lavigne: Got it. Thanks, guys. That is helpful.

Operator: This concludes the question-and-answer session. I would now like to turn it back to Adam Singolda for closing remarks.

Adam Singolda: Thanks, everyone, for joining us this morning. As I said, as AI and LLMs reshape how consumers discover content, we are focused on three main priorities. The first one is expanding our publisher base. You have seen wins like Fox News, and there is a very strong pipeline ahead of us, and we will continue to update, and that is going to help us grow more supply and more impressions, which is the focus of us. The second one is deepening our relationship with existing publishers through initiatives like Full Page Monetization, DeeperDive, Newsroom, and many other things that can grow engagement and increase the supply we have on our existing publishers. And the third one is investing in diversified areas of our business, where AI is not impacting those. Things like Taboola News and e-commerce, where we are seeing faster growth than the rest of the business. I am convinced that now more than ever, the open web and everything outside of search and social deserves a platform that can drive revenue through advertising and through AI initiatives, and Taboola can be that company. Thank you for the support, and we look forward to speaking with all of you over the next few weeks.

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