Taboola.com Ltd. (TBLA) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call indicates a positive sentiment with a focus on ex-TAC revenue growth, strategic investments in AI, and a strong market opportunity. The company maintains a conservative guidance, yet highlights growth potential through initiatives like Realize and partnerships. Despite some uncertainties, the strategic focus and positive guidance suggest a positive stock price movement, especially given the company's small market cap.
Key Financial Performance
Ex-TAC Gross Profit $714 million, up 7% year-over-year. The increase was driven by the scaling of Realize, which drove growth in advertiser spend, as well as continued strong performance from Taboola News.
Adjusted EBITDA $216 million, up 7% year-over-year. This reflects continued discipline in expense management while maintaining targeted investments to support long-term growth.
Free Cash Flow $163 million, up 10% year-over-year, representing approximately 76% conversion from adjusted EBITDA. This was supported by strong cash generation and disciplined capital allocation.
Revenues $1.91 billion, up 8% year-over-year. Growth was attributed to the expansion of advertiser budgets and the rollout of Realize, the performance advertising platform.
Scaled Advertisers Grew 6% year-over-year, with an average revenue per scaled advertiser up 2%. This growth was driven by improved retention and increased ad spend among existing advertisers.
Net Income $42.3 million for the full year, with non-GAAP net income at $168.6 million. This was supported by lower depreciation expenses and tax efficiencies, offsetting higher hosting and data costs.
Share Repurchases 76.9 million shares repurchased for $254 million, reducing the share count by roughly 18%. This reflects the company's focus on returning capital to shareholders.
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Operating Highlights
Realize Advertising Platform: The platform helped increase the number of scaled advertisers by 6% and grow their budgets. It introduced features like predictive audiences and format diversification, leading to meaningful growth for advertisers like NerdWallet, Motley Fool, and QuinStreet.
Personal Finance Revenue: Generated $120 million in revenue within a $15 billion U.S. market, capturing only 1% to 10% of advertisers' total spend, indicating significant growth potential.
Share Repurchase: Repurchased 77 million shares for $254 million, reducing share count by 18%.
Free Cash Flow: Generated $163 million in free cash flow, up 10% year-over-year, with a 76% conversion from adjusted EBITDA.
Ex-TAC Gross Profit: Achieved $714 million, up 7% year-over-year, with adjusted EBITDA growing 7% to $216 million.
AI and Proprietary Data: Focused on leveraging proprietary intent data and AI-driven optimization to enhance advertiser outcomes and platform intelligence.
Sales Organization Restructuring: Reorganized sales around ideal customer profiles, improving retention and spend growth.
Brand Perception: Improved advertiser trust and positioned Taboola as a platform to scale beyond search and social.
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Risk or Challenges
Foreign Exchange Headwinds: The company faced a significant foreign exchange headwind, particularly due to the strength of the Israeli shekel, which impacted operating expenses and adjusted EBITDA by approximately $11 million for the full year.
Scaling of Realize Platform: While the Realize platform has shown growth, there is still significant work required to improve retention rates, increase advertiser spend, and scale new advertisers effectively.
High R&D Investments: The company is heavily investing in R&D for Realize, publisher-focused product capabilities, and e-commerce platforms, which could strain financial resources if not managed effectively.
Market Penetration Challenges: Despite growth in personal finance revenue, the company captures only 1% to 10% of advertisers' total spend in this $15 billion U.S. market, indicating significant untapped potential but also challenges in scaling market share.
Dependence on Proprietary Data: The company's reliance on proprietary data and distribution for AI-driven advertising poses a risk if competitors develop similar capabilities or if data access is restricted.
Economic and Market Conditions: The company operates in a competitive advertising market, and economic uncertainties could impact advertiser budgets and overall revenue growth.
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Guidance & Outlook
Ex-TAC Gross Profit Growth: The company expects 7% ex-TAC gross profit growth for 2026.
Adjusted EBITDA Margins: Projected to be 30% for 2026, with a potential increase to over 31% without foreign exchange headwinds.
Revenue Guidance for Q1 2026: Expected to range between $444 million and $462 million.
Revenue Guidance for Full Year 2026: Expected to range between $1.99 billion and $2.05 billion.
Gross Profit Guidance for Full Year 2026: Expected to range between $601 million and $621 million.
Adjusted EBITDA for Full Year 2026: Expected to range between $222 million and $236 million.
Non-GAAP Net Income for Full Year 2026: Expected to range between $165 million and $191 million.
Capital Expenditures: Strategic investments in Realize, publisher-focused product capabilities, and e-commerce platform development will continue into 2026.
Share Repurchase Program: The company plans to continue using a majority of its free cash flow to repurchase shares, with $180 million remaining in authorization.
Foreign Exchange Impact: Forecasted headwind of approximately $11 million in operating expenses for 2026, partially offset by ex-TAC tailwinds.
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Shareholder Return Plan
Share Repurchase Program: In 2025, Taboola repurchased 77 million shares for a total of $254 million, reducing the share count by approximately 18%. The company plans to continue using the majority of its free cash flow for aggressive share repurchases. Since the inception of the share repurchase program in 2023, Taboola has repurchased a total of 110.4 million shares at an average price of $3.49, amounting to $383.5 million. As of the end of 2025, $180 million remains in the authorization for further repurchases.
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Key Q&A
Q:What caused the substantial variance in revenues versus guidance for the quarter?
A:The variance was due to a mix of business, with more revenue coming from higher-margin parts of the business and less from lower-margin areas. Gross revenue is not the key metric for the company; ex-TAC (revenue after paying publishers) is the focus, and the company was happy with the beat on ex-TAC.
Q:Why does the guidance suggest a steady revenue trajectory despite growth in non-scaled advertisers?
A:The company maintains a conservative guidance philosophy. The guidance reflects current observations from Realize, which showed progress from 2% to 7% growth over the past year. Future initiatives to drive growth are not yet factored into the guidance.
Q:What are the key initiatives to drive growth for Realize?
A:The initiatives include improving technology for better advertiser retention and spend growth, focusing sales efforts on ideal customer profiles (e.g., financial advertisers), and investing in brand perception to attract new advertisers.
Q:What incremental investments are being made in Realize, and what should be expected from a product perspective in 2026?
A:The company is focusing on making the platform more automatic and simpler for advertisers to succeed. They aim to leverage AI and unique intent data to ensure advertisers who should succeed with Taboola will do so. Growth is expected from both new advertisers and increased revenue from existing ones.
Q:How does the company view the impact of generative AI on the open web and its business?
A:The company believes the open web will remain important due to trusted publishers and local news. Generative AI engines rely on recent news content, which benefits the open web. The company is also introducing AI tools like DeeperDive to help publishers increase revenue and engagement.
Q:Is Realize attracting new types of advertising beyond native advertising?
A:Currently, the focus is on attracting more advertisers similar to existing ones (e.g., finance, travel, auto, e-commerce). Over time, as brand perception shifts and technology improves, the company expects to attract different types of advertisers.
Q:Are major events like the Olympics and World Cup factored into the 2026 guidance?
A:Yes, these events are factored in as traffic drivers rather than direct advertising revenue drivers. The company expects increased impressions and opportunities for revenue but not significant incremental revenue from event-driven advertisers.
Q:Why was scaled advertiser growth up year-over-year but down sequentially?
A:The company focuses on year-over-year metrics due to seasonality and variability in quarterly numbers. Sequential declines can occur due to larger advertisers outbidding smaller ones, but year-over-year trends are more stable.
Q:What is driving the 1Q ex-TAC margin guidance expansion?
A:The expansion is driven by a mix shift towards higher-margin areas, including Connexity (100% ex-TAC) and higher-margin regions and publishers. Yield improvements are not a significant factor yet.
Q:What is contributing to the growth in the rest of the world segment?
A:Growth is driven by less mature markets where the company has more opportunities. These markets also tend to have higher margins, contributing to overall ex-TAC margin improvement.
Q:What is the significance of non-scaled advertisers contributing to growth in Q4?
A:Non-scaled advertisers contributed 1% to growth in Q4 due to testing budgets. This is seen as encouraging, as it indicates potential for future revenue growth from these advertisers.
Q:Why is adjusted EBITDA expected to shift more towards the second half of the year?
A:The shift is due to foreign exchange headwinds, upfront marketing expenses in Q1 and Q2, and expected efficiency improvements in the second half of the year.
Q:What is the outlook for the digital ad market and advertiser budget growth?
A:The company sees a trend towards performance advertising and believes it is well-positioned as a monetization layer for the open web. Partnerships with companies like Paramount and LG highlight opportunities to capture TV advertising budgets.
Q:What is the ARPU opportunity for publishers adopting AI on their sites?
A:AI adoption on publisher sites can significantly increase ARPU by engaging consumers more deeply and driving higher CPMs for advertisers. The company is in early stages but sees strong potential.
Q:How does the company plan to balance investments with returns to shareholders?
A:The company plans to use the majority of its free cash flow for share repurchases while considering small tuck-in acquisitions. Connexity, a strong-performing segment, is expected to grow in line with the rest of the business.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the exact mix of growth between new and existing advertisers for Realize, stating it is hard to predict. They also did not provide detailed data on the ARPU impact of AI adoption on publisher sites, mentioning that more information would be shared later in the year.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI Taboola
AI commodity
AI feature
AI optimization
AI world
Advertisers NerdWallet
Chief Officer
ESPN Yahoo
Examples priority
Fool QuinStreet
Full Conference
Hundreds million
Independent others
Knicks vacation
Llama AI
Meta intent
NerdWallet Motley
RD
Taboola Full
acceleration
advertiser Taboola
advertiser outcome
advertiser result
advertiser scale
advertiser success
advertising platform
advertising search
community
customer profile
distribution
example finance
friend
progress
relationship
result advertiser
retention
signal advertiser
trust
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TBLA Slides
Taboola Q4 2025 slides: profitability beats offset revenue miss2026-02-25
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Taboola Q2 2025 slides: Revenue jumps 9% YoY, exceeding guidance across all metrics2025-08-06
Taboola Q1 2025 slides: Revenue beats guidance, adjusted EBITDA surges 53%2025-05-07
TBLA Report
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