Taboola.com Ltd (TBLA) 2025 Q3 法說會逐字稿

Good day and thank you for standing by. Welcome to Taboola's third quarter 2025 earnings conference call. (Operator Instructions) I would now like to hand the conference over to your first speaker today, Jessica Kakas, Head of Investor group.

Thank you and good morning, everyone, and welcome to Taboola's third quarter 2025 earnings conference call. I'm here with Adam Singolda, Taboola's founder and CEO, and Steve Walker, Tubula's CFO. The company issued earnings materials today before the market, and they are available in the investor section of Tubula's website. Now, I'll 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 the 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 release posted on our website. With that, I'll turn the call over to Adam.

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 90 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 is one of the largest performance advertising platforms outside of search and social. Our platform Real helps businesses get leads and grow sales.

It operates similar to Google Ads or MetaAds, 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 exec gross profit, which is what we keep after we pay our publisher partners who show 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 realite.

Cebula is uniquely positioned to take a 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 agtech gross profit of $177 million. An 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 Extech 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, Axtech 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 exact 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 real life. Realizes 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 skilled advertiser on our platform.

Last quarter we shared more about how our supplies differentiated. Overall, our exposure to search traffic globally remained 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 1/3 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're seeing an inflection point in the business we've realized, 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 come and people returning home safely fills me with gratitude and hope. With that, I'll hand it over to Steve.

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 and realizes 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 advertiser budgets. 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 realized improving retention and growing ad spending levels with existing advertisers when compared to the same period last year.

As I've 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 XTA performance.

Exact 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. Extac 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 Tubula News and bidded supply.

XTAC gross profit margins were down year over year, primarily due to the one-time testing we were doing with Yahoo last year. Notwithstanding, overall XTC gross profit dollars grew year over year, and as I have said previously, I focused more on growth of XTAC gross profit dollars rather than the margin percentage.

Gross profit for the quarter was $139 million primarily benefiting from strong extact 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 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 exTAC 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 roughly 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 Real 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 Adjust EBITDA continues to be over 70% over the last 4 and the last 8 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.

For the full year 2025, I expect to do even better than the high end of that range. Turning to the balance sheet, we remained 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 Q3 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. HexA 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 and $1.93 billion. Gross profit to be between $550 million and $564 million. ExTAC gross profit to be $700 to $710 million. Adjusted EBITDA to be $209 million to $214 million and non-GAAP net income to be $139 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 XTA tailwinds, which reduces our adjusted bida by approximately $1.5 million and reduces the adjusted EBITDA margin by over 140 basis points.

Also, as a reminder, when you're 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 real eyes 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? Yes.

Thank you. At this time, we'll conduct the question-and-answer session (Operator Instructions)

Zachary Cummins, B. Riley Securities.

Hi, good morning, thanks for taking my questions and congrats on strong results here in Q3. So just starting off with Real 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&O?

Yeah, so good morning everyone. 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 3 things that, moved Dail financially. The first one is just going from native advertising to performance, and that takes time, to shift kind of perception in the market, and getting more advertisers to be aware of Tabula as a place they 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 and more spend.

And the 3rd 1 is keep iterating on the tech front, so, predictive audiences, new formats, new placements, so those 3 things, keep iterating on those, we believe will make a positive impact.

Understood. And my one follow-up question is just, building on realize.

Interesting partnership that you announced with with Paramount. So can you talk about the performance multiplier product and and how maybe Tua could have more of a presence in in CTV over time.

Yeah, so let me just, say about it it's financially, small as of now, but very exciting. So what we've announced, which is essentially a demand generation opportunity for Tabula 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 US, we're seeing these dynamics. Advertisers are expecting to. Only enjoy the benefit of a large screen when they get consumers exposed to ads, 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, which is a great partner 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 maybe through a matching integration with Paramount may be seeing relevant ads on the open web through real, 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 that are relevant to the same advertiser and then report back and this is the exciting part, report 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.

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

Thanks Zach.

Thank you. Laura Martin, Needham.

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 8 and 8,000 pages per query to get an answer. So my first question is on traffic, both volume and quality of 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.

Sure, good morning, Laura. Thanks for the question. So I can, I can start and we can, we can bounce off of this. So the first thing we're seeing actually surge in traffic overall, which is interesting, obviously, as you say, in times of surge traffic declining, because of LLM engines. 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 of its consumers. And while search traffic is going down, we're seeing their app direct traffic going up, and that affects our overall traffic mix. So that's something that's been helpful. And the second thing is we're doing a good job on boarding new partners. So think of new publishers and new devices through Taboola News.

We've seen positive trends of adding new partners. So for those two reasons, overall company-wise, we are seeing growth in traffic and about the, so that's about that human traffic. You know 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 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, 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.

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 quickly, 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 AIs 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 assistant 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 techno technology with a lot more for productivity reasons. So 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 LLM based tool will actually prep a. A whole kind of a 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. When we talk about seeing an inflection with realized, frankly a lot of that is coming on the back of, better I'll go, things like predictive audience is an AI based prediction tool of where could you get more conversions on our network and what do you have to do to get those. So that's probably impact number one.

Abby is definitely having an impact on our advertisers, so we're seeing, more success thanks to that. And then I'd say that, 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 chat GPT for the open web driven by advertising as a revenue source, still early days, but that's another thing that, can generate 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. Thank you very much.

Thanks, Laura.

Thank you. Jason Helfstein, Oppenheimer.

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 x tax on a year to year basis will be, will decelerate, call it, 7 points, and then why the other costs of goods.

The non-tax COG is going to be up $5 million sequentially. So can you unpack that and then I just got a question about next year. Thanks.

Yeah, when you talked about the non-tax COGS, are you talking about the other cost of revenue?

Correct, yeah.

Yeah, okay, yeah, so I guess, I'll start with kind of the general, discussion of XTC and where we are with XTC. So first of all, I think, margins were down year when you look at Xt margin, they were down year over year primarily due to the Yahoo testing last year. So remember last year we had a. Format testing with Yahoo where it was recognized on a net basis. Basically, it was attack offset and that distorted our margins year over year.

So I think if you, if you're talking about a margin in Q3, it was down because of that. If you're looking at XA dollars, they were up 6% year over year in Q3, and that's kind of what we focus on more is the dollars. Q4, it's going to be down. Year over year that's mostly due to two factors. One is there is a, there was a the Yahoo onboarding last year basically caused some distortion between quarters.

So that's part of it. And then we also had particular, 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.

So those are the primary two factors for Q4, in terms of the other costs of revenue and, changes there, so first of all, that 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.

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 x pack with this minus kind of 2% guide for the fourth quarter, is it still fair to assume that you think the company could generate positive growth in revenue x pack for next year?

Yeah, so, yeah, yes, 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 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.

Okay, that's helpful. Thank you.

Thank you.

Mark Zgutowicz, The Benchmark Company.

Thank you. Good morning, guys. Steve, you talked a little bit about marketing spend. I'm just curious if you think about realize 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 you'd like it or if it's 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 rev x tech acceleration.

And then maybe a last one, for Adam if I could, if you think about opportunities for investment. Alongside realizing incrementality, can you maybe prioritize agentic MCP, A CP, or any other areas? Thanks much.

Sure, thanks Mark. So I'll go, 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 onto 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 $1000 to get an advertiser, onboarded in the US through, in terms of marketing spend, and they were, had a 1% likelihood of being successful, and then eventually having a certain lifetime value. That 1% likelihood of success has gone up, which means and the lifetime value is still similar, maybe even improved a bit, means I can spend more on marketing, and I can 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 specific areas that we're seeing that, geographically it's been pretty broadly diverse, so globally, although we are seeing particular momentum in the US 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 Real it is, 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 adjust the Bada 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 adjust the Badda margin perspective, so don't look at Q4, but I think what we've said repeatedly in the past and I think it's still true today, we use 30% of Just 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.

I can take the AI one. So, Sonny, Juan, on the first part of your question, I think, all of what we do is investing in AI in terms of driving primarily advertiser success. Realize is 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, we're tracking, realize, as with scaled advertisers, how many of them do we have and then how much they're spending on 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 investment, then you should see more skilled 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 want to see. And as you saw in my remarks, we're seeing a 4% increase in skilled advertisers and 11% growth in average spend. So I think for us it's 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 and new formats and new supply you can provide them as part of our technology so they can spend more and more over time and and that's that's these are the two areas of focus for us when I think about Tabula 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 and companies such as Tabula, 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 only for us we don't have our own Instagram. We have reached to consumers through publisher publisher relationship.

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

Thanks guys, very clear, appreciate it.

Thank you. James Kopelman, TD Cowen.

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. Where 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 4th quarter as well? And then I have a follow-up question for Steve.

Yeah, I mean, it's encouraging to see that traffic being already 1/3, almost 1/3, and because that's a good stable base that is not affected by searches much or at all, and so I think that's that's already encouraging from my 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, so publishers are always motivated to move people into the app.

And with again with 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 2, we're seeing a lot of growth coming from ebulo news and in-app monetization.

It's through partners like 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 an aspiration as a company to keep working wherever consumers spend real time so that over time you know we have an aspiration to be on every device.

Lo screen, every swipe you may have, provide news if relevant as 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.

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

Yeah, 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 going to spend our money on. I think it's really realized it's going to 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's going to be realized going forward just as it has been. But I think you can expect the operating expenses to grow in line with growth and for us to maintain 30% plus type of EBITDA margins.

Great thanks a lot guys.

I appreciate the color.

Sure.

Thank you. Tyler De Matteo, BTIG.

Good morning. Thanks for taking the question, guys. Really appreciate it. Adam, I wanted to come back to some of your comments at the beginning of your, the Q&A on kind of the sales approach. What, what's the biggest opportunity, on the sales side of things to improve the brand perception and ultimately kind of realize adoption there? Like, what are some of the learnings that you've seen where you can see an incremental improvement on the sales side and that opportunity? And then my second question is on the. Comments about the inflection point in realize what are some of the underlying assumptions baked into that? Is that the number of advertisers? Is that the propensity to spend that the dollar value of spend? I, I'm just curious, like what's the underlying, assumptions there.

Thank you.

Yeah, so onean, I think that's a great question. I think onean, we're investing overall from a perception perspective, we have, we're putting our people to work in important events and things to interact with the market, and put realize in the front as a way to attract performance advertising, in the world that goes to wants to go beyond search and social, so I do think that's a real need. And we have a shot at doing this, in the market. So one, we're investing in being out there, and telling our story. Two, show me who you work with and I'll tell you who you are, type of thing. So if you're able through your technology and you know your investment to get good advertisers to be successful with you, to tell the story for you, I think that affects your story the most, your brand is what people say about you when you're not in the room.

So for me, that to see, advertisers like the ones we mentioned, working with us, excited to tell the story, is a great sign. And then, taking a high level view to have to look at, the number of skilled advertisers and the effort spent going out, these are the right metrics.

So all of these are, good initiatives. And like I mentioned, also our sales team now knows and sales people go where they see money, they know that if they sell into the right segments in the market, to the right advertisers, tend to be those that have high consideration stage like travel, healthcare, auto, commerce.

We tend to be financial services, we tend to be really good. I mean, I always joke that it. If you, if you're, if you run a business, a mortgage business or financial services business in America, and you're not banned from Taboola, it is irresponsible. You have to try because we're very good at this and our sellers know that too.

So by focusing on ICPs and going, strong on those, we tend to be to see better results. So all of those, initiatives are the are the right ones to eventually, I think, also affect the brand and the perception, but that takes time. There are no shortcuts. We spent a decade being the native advertising company, and when we're going to spend the next decade hopefully building, the largest performance advertising company outside of search and social.

And in terms of your second question about like what are the underlying assumptions around the realized inflection point, I think the way to think about it is.

From realize, I mentioned earlier that we're starting to see advertisers have a greater likelihood of succeeding with us, greater likelihood of being able to scale with us, greater likelihood of being able to meet their goals, and I think what that means is what I want to see is that, I've said this in the past, I want to see our number of scaled advertisers growing year over year, consistently.

That is the best metric that indicates that we're having success. We obviously also would like to see the average revenue per scaled advertiser grow over time, but generally, as I've said in the past, the number of scaled advertisers is what is the fuel for future growth. So that's the metric we focus on the most.

Thanks guys. Appreciate the time.

Thank you.

Matthew Condon, 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 the bullet news? It looked like it was another strong quarter. Just what, what's the sustainability of growth there and how should we think about that contributing in 2026?

And my second one's also just on your partnerships with some of the OEM partners. Just how are these progressing? And scaling up here and, should we expect these also to be to be key contributors in 26.

Thank you so much.

So I can take the first pass of that. So first of all, yeah, Q3 was good for Tubula News, which, the Tubula 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 Tubula 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 to meet the user so I think it's it's also great for advertisers. And so, with everyone wanting advertising, including cell phone manufacturers and OEMs, I think there's a big upside to this, where it goes, we obviously haven't spoken specifically about guiding that and we don't break it out, but I think we see a lot of upside potential of this over time.

So at this point there are no further questions, and I'll turn it back to Adam Sangolda for closing remarks.

Thank you and thanks everyone for being with us this morning. If you take 3 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 realized success and realizes 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 3, I'm proud of the team. We're taking upon ourselves, a big challenge, we're harder to 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.

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