Taboola Beats Q2 Guidance, Raises Expectations for Rest Of The Year and 2022

Increases full year guidance across all measures, now expects to grow Gross Profit and ex-TAC Gross Profit 22 to 24% and 22 to 23%, respectively, for the year.

NEW YORK, Aug. 10, 2021 (GLOBE NEWSWIRE) -- Taboola (Nasdaq: TBLA), a global leader in powering recommendations for the open web, helping people discover things they may like, today announced its results for the quarter ended June 30, 2021.

“We went public over one month ago, and we recently announced that we are acquiring Connexity for $800M to bring e-Commerce to the open web in a big way, and we had strong momentum in Q2,” said Adam Singolda, Founder & CEO, Taboola. “I’m pleased to share that our Q2 results included growth and profits above our expectations as we continue to grow our publisher partners, with new partnerships with publications such as BBC, Hearst, SheMedia and others. We’re also seeing growth of premium demand coming from agencies and brands such as video and native branding on premium supply, including placements like middle of article, homepages and section fronts. We are focused on executing on our plans and delivering on our commitments, and these results give us confidence to increase our 2021 guidance across all measures, including growing ex-TAC Gross Profit 22 to 23% for the year. With Connexity, we are positioning ourselves for an even stronger future by expanding our addressable market, scaling our offering to align with the direction of the open web, and hiring incredible talent. Amazon has millions of merchants, but merchants mainly have Amazon. That changes now.”

For more commentary on the quarter, please refer to Taboola’s Q2 2021 Shareholder Letter, which was furnished to the SEC and also posted on Taboola’s website today at https://investors.taboola.com.

Second Quarter 2021 Results Summary (unaudited)

 Three Months Ended
 June 30,
(dollars in thousands)2021 2020 
  
Revenues$329,072 $267,668 
        
Gross Profit$100,245 $84,104 
        
Net Income (loss)1$(61,416)$12,905 
        
Ratio of Net income (loss) to Gross profit (61.3)%  15.30%
        
Cash Flow from Operations$23,083  $36,834 
        
Cash, cash equivalents and short-term deposits$585,243  $152,740 
    
Non-GAAP Financial Data*   
        
ex-TAC Gross Profit$116,870 $98,885 
        
Adjusted EBITDA$40,802 $34,865 
        
Ratio of Adjusted EBITDA to ex-TAC Gross Profit 34.9%  35.3%
        
Free Cash Flow$6,945 $33,177 

 

1For the 2021 periods, a substantial majority is Share-based compensation expenses related to going public.


Second Quarter Financial Highlights

  • Q2 results exceeded guidance across all measures
    • Revenues of $329 million versus guidance of $315 to $320 million.
    • Gross Profit of $100 million versus guidance of $88 to $95 million.
    • ex-TAC Gross Profit of $117 million versus guidance of $108 to $113 million.
    • Adjusted EBITDA of $41 million versus guidance of $34 to $36 million.
  • Revenue grew $61 million or 22.9% year-over-year.
    • New digital property partners1 drove $23 million of growth
    • Existing digital property partners2 grew $38 million which translates to net dollar retention3 (NDR) of 114% and reflects strong improvement in yield as well as lower demand in the prior year due to COVID.
  • Gross Profit grew $16.1 million or 19.2% year-over-year and ex-TAC Gross Profit grew $18 million or 18.2% year-over-year. 
    • In each case, the increase in gross profit was driven primarily by growth from new digital property partners,1 and growth from existing digital property partners that was driven by strong improvements in yield. These gains year over year were partially offset by the withholding in the prior year of $10 million in guarantee TAC payments to publishers that we subsequently volunteered to pay in the fourth quarter of 2020.
  • Operating expenses grew $87.8 million or 133.2% year-over-year.  Excluding higher share based compensation of $76.0 million year over year, mostly triggered from going public, operating expenses grew $11.8 million or 18.5% year-over-year.  This increase was driven by:
    • An $0.2M increase in research and development as increases in headcount were partially offset by lower depreciation related to timing of new server investments.  We continue to invest in our proprietary, deep learning data engine as well as new products and tools to support our publishers and advertisers.
    • An $3.6M increase in sales and marketing expenses to support our business growth.
    • An $8.0M increase in general and administrative expenses related to public company investments and a partial return to more normal operations following the COVID pandemic.
  • Net loss of $61.4 million was $74.3 million lower year over year primarily driven by the higher share based compensation. Adjusted EBITDA of $40.8 million increased by $5.9 million year over year driven by the higher revenue.
    • Net income (loss) to Gross profit Margin was (61.3)% and the Ratio of Adjusted EBITDA to ex-TAC Gross Profit was 34.9%.
  • GAAP EPS was $(1.39) in Q2. The EPS was based on GAAP shares outstanding of 48.5 million.
  • Our fully diluted shares outstanding to start Q3 2021 is estimated to be approximately 256 million.
  • Cash Flow from Operations of $23.1 million and Free Cash Flow of $6.9 million declined year over year driven by higher purchases of property and equipment and changes in working capital.

1New digital property partners within the first 12 months that were live on our network

2Net growth of existing digital property partners, including the growth of new digital property partners (beyond the revenue contribution determined based on the run-rate revenue generated by them when they are first on-boarded)

3Net Dollar Retention is the net growth of existing digital property partners for the given period divided by the revenues from the same period in the prior-year.

Third Quarter 2021 and Full Year 2021 Guidance

The Company’s strong Second Quarter results provide us confidence to raise our Third Quarter and Full Year 2021 guidance above our previous projections and guidance. Our guidance does not incorporate our pending acquisition of Connexity which is expected to close in the third quarter. Including Connexity, we expect in 2022 to grow ex-TAC Gross Profit over 30% on a reported, non-pro forma basis and 17%+ on a pro forma basis, above our previous standalone expectation to grow ex-TAC Gross Profit 16% in 2022. For Taboola as a standalone company, we expect the following.

For the Third Quarter 2021, the Company currently expects:

  • Revenues of $325 to $328 million
  • Gross Profit of $95 to $98 million
  • ex-TAC Gross Profit of $115 to $117 million
  • Adjusted EBITDA of $33 to $34 million

For the Full Year 2021, the Company currently expects:

 

(dollars in millions)

Increased Guidance
(as of 8/10/21)

Year over Year
Growth

Previous Guidance
(as of 5/17/21)

Revenues

​$1,316 to $1,323

~11%

​$1,298 to $1,308

Gross Profit

$390 to $396

​22% to 24%

​$374 to $386

ex-TAC Gross Profit

​$468 to $472

​22% to 23%

​$456 to $466

Adjusted EBITDA

​$150 to $153

41% to 44%​

​$140 to $150

Although we provide guidance for Adjusted EBITDA, we are not able to provide guidance for projected Net income (loss), the most directly comparable GAAP measures. Certain elements of Net income (loss), including share-based compensation expenses, are not predictable due to the high variability and difficulty of making accurate forecasts. As a result, it is impractical for us to provide guidance on Net Income (loss) or to reconcile our Adjusted EBITDA guidance without unreasonable efforts. Consequently, no disclosure of projected Net income (loss) is included. For the same reasons, we are unable to address the probable significance of the unavailable information.

Our guidance assumes that the global economy continues to recover, with no major COVID-19 related setbacks that may cause economic conditions to deteriorate or significantly reduce advertiser demand.

Webcast Details

Taboola's senior management team will discuss the Company's earnings on a call that will take place tomorrow, August 11, 2021, at 8:30 AM ET. The call can be accessed via webcast at https://investors.taboola.com, or by conference call by dialing (877) 312-1874, or (470) 495-9527 for international callers, and entering the conference ID 7791954. The webcast will be available for replay for one year, through the close of business on August 11, 2022.

*About Non-GAAP Financial Information

This press release includes ex-TAC Gross Profit, Adjusted EBITDA, Ratio of Adjusted EBITDA to ex-TAC Gross Profit and Free Cash Flow, which are non-GAAP financial measures. These non-GAAP financial measures are not measures of financial performance in accordance with GAAP and may exclude items that are significant in understanding and assessing the Company’s financial results. Therefore, these measures should not be considered in isolation or as an alternative to revenues, gross profit, net income, cash flows from operations or other measures of profitability, liquidity or performance under GAAP. You should be aware that the Company’s presentation of these measures may not be comparable to similarly-titled measures used by other companies.

The Company believes non-GAAP financial measures provide useful information to management and investors regarding future financial and business trends relating to the Company. The Company believes that the use of these measures provides an additional tool for investors to use in evaluating operating results and trends and in comparing the Company’s financial measures with other similar companies, many of which present similar non-GAAP financial measures to investors. Non-GAAP financial measures are subject to inherent limitations because they reflect the exercise of judgments by management about which items are excluded or included in calculating them. Please refer to the appendix at the end of this press release for reconciliations to the most directly comparable measures in accordance with GAAP.

Note Regarding Forward-Looking Statements

Certain statements in this press release are forward-looking statements. Forward-looking statements generally relate to future events including future financial or operating performance of Taboola.com Ltd. (the “Company”). For example, the expected timing and completion of the pending acquisition of Connexity and guidance for the third quarter of and Full Year 2021, are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expect”, “intend”, “will”, “estimate”, “anticipate”, “believe”, “predict”, “potential” or “continue”, or the negatives of these terms or variations of them or similar terminology. Such forward-looking statements are subject to risks, uncertainties, and other factors which could cause actual results to differ materially from those expressed or implied by such forward looking statements.

These forward-looking statements are based upon estimates and assumptions that, while considered reasonable by the Company and its management, are inherently uncertain. Uncertainties and risk factors that could affect the Company’s future performance and cause results to differ from the forward-looking statements in this presentation include, but are not limited to: the ability to recognize the anticipated benefits of the recent transaction between the Company and ION Acquisitions Corp. 1 Ltd. (the “Business Combination”), which may be affected by, among other things, competition, the ability of the combined company to grow and manage growth profitably, maintain relationships with customers and retain its management and key employees; costs related to the Business Combination; changes in applicable laws or regulations; the Company’s estimates of expenses and profitability and underlying assumptions with respect to shareholder redemptions and purchase price and other adjustments; ability to attract new digital properties and advertisers; ability to meet minimum guarantee requirements in contracts with digital properties; intense competition in the digital advertising space, including with competitors who have significantly more resources; ability to grow and scale the Company’s ad and content platform through new relationships with advertisers and digital properties; ability to secure high quality content from digital properties; ability to maintain relationships with current advertiser and digital property partners; ability to make continued investments in the Company’s AI-powered technology platform; the need to attract, train and retain highly-skilled technical workforce; changes in the regulation of, or market practice with respect to, “third party cookies” and its impact on digital advertising; continued engagement by users who interact with the Company’s platform on various digital properties; the impact of the ongoing COVID-19 pandemic; reliance on a limited number of partners for a significant portion of the Company’s revenue; changes in laws and regulations related to privacy, data protection, advertising regulation, competition and other areas related to digital advertising; ability to enforce, protect and maintain intellectual property rights; and risks related to the fact that we are incorporated in Israel and governed by Israeli law; and other risks and uncertainties set forth in the section entitled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” in the Company’s registration statement on Form F-4 relating to the Business Combination filed on April 30, 2021, and in subsequent filings with the Securities and Exchange Commission (“SEC”), including the final prospectus/proxy statement relating to the Business Combination.

Nothing in this press release should be regarded as a representation by any person that the forward-looking statements set forth herein will be achieved or that any of the contemplated results of such forward-looking statements will be achieved. You should not place undue reliance on these forward-looking statements, which speak only as of the date they were made. The Company undertakes no duty to update these forward-looking statements except as may be required by law.

About Taboola

Taboola powers recommendations for the open web, helping people discover things they may like. The company's platform, powered by artificial intelligence, is used by digital properties, including websites, devices and mobile apps, to drive monetization and user engagement. Taboola has long-term partnerships with some of the top digital properties in the world, including CNBC, NBC News, Business Insider, The Independent and El Mundo. More than 13,000 advertisers use Taboola to reach over 500 million daily active users in a brand-safe environment. The company has offices in 15 cities worldwide, including New York and Tel Aviv.

Learn more at www.taboola.com and follow @taboola on Twitter.

Investor Contact:

Press Contact:

Jennifer Horsley

Ran Gishri

investors@taboola.com

press@taboola.com


CONSOLIDATED BALANCE SHEETS

U.S. dollars in thousands, except share and per share data    
 



June 30,


December 31,

 

 

 

2021

 

 

 

2020

 

 

 

Unaudited

 

Audited

 

 

 

 

 

ASSETS

 

 

 

 

CURRENT ASSETS

 

 

 

 

Cash and cash equivalents

 

$

           585,243

 

 

$

           242,811

 

Restricted deposits

 

 

1,061

 

 

 

3,664

 

Trade receivables

 

 

139,019

 

 

 

158,050

 

Prepaid expenses and other current assets

 

 

37,636

 

 

 

21,609

 

Total current assets

 

 

762,959

 

 

 

426,134

 

NON-CURRENT ASSETS 

 

 

 

 

Long-term prepaid expenses

 

 

20,923

 

 

 

5,289

 

Restricted deposits

 

 

3,367

 

 

 

3,300

 

Deferred tax assets

 

 

2,281

 

 

 

1,382

 

Right of use assets

 

 

58,385

 

 

 

68,058

 

Property and equipment, net

 

 

58,310

 

 

 

52,894

 

Intangible assets, net

 

 

2,627

 

 

 

3,905

 

Goodwill

 

 

19,206

 

 

 

19,206

 

 

 

 

165,099

 

 

 

154,034

 

Total assets

 

 

928,058

 

 

 

580,168

 

 

 

 

 

 

 

 

 

 

 

CONSOLIDATED BALANCE SHEETS (continued)

U.S. dollars in thousands, except share and per share data 
 

 

 

June 30,

 

December 31,

 

 

 

2021

 

 

 

2020

 

 

 

Unaudited

 

Audited

 

 

 

 

 

LIABILITIES, CONVERTIBLE PREFERRED SHARES AND SHAREHOLDERS' EQUITY

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

Trade payable

 

$

           157,658

 

 

$

           189,352

 

Lease liability

 

 

15,287

 

 

 

15,746

 

Accrued expenses and other current liabilities

 

 

101,029

 

 

 

95,135

 

Total current liabilities

 

 

273,974

 

 

 

300,233

 

 

 

 

 

 

LONG TERM LIABILITIES

 

 

 

 

   Deferred tax liabilities

 

 

27

 

 

 

45

 

Warrant liability

 

 

54,155

 

 

 

-        

 

   Lease liability

 

 

52,564

 

 

 

63,044

 

Total long-term liabilities

 

 

106,746

 

 

 

63,089

 

 

 

 

 

 

CONVERTIBLE PREFERRED SHARES

 

 

 

 

Preferred A, B, B-1, B-2, C, D and E shares with no par value - Authorized: 123,389,750 shares at December 31, 2020; Issued and outstanding: 121,472,152 shares at December 31, 2020: Aggregate liquidation preference of 308,765 as of December 31, 2020.

 

 

-         

 

 

 

170,206

 

 

 

 

 

 

SHAREHOLDERS' EQUITY

 

 

 

 

Ordinary shares with no par value- Authorized: 700,000,000 and 176,535,661 shares as of June 30 , 2021 and December 31, 2020 respectively; 211,198,259 and 41,357,049 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively.

 

 

-

 

 

 

-

 

Additional paid-in capital

 

 

621,664

 

 

 

78,137

 

Accumulated deficit

 

 

(74,326

)

 

 

(31,497

)

Total shareholders' equity

 

 

547,338

 

 

 

46,640

 

Total liabilities, convertible preferred shares, and shareholders' equity

 

$

           928,058

 

 

$

  580,168

 


CONSOLIDATED STATEMENTS OF INCOME (LOSS)
U.S. dollars in thousands, except share and per share data
 

 

 

Three months ended

June 30,

 

Six months ended

June 30,

 

 

 

2021

 

 

 

2020

 

 

 

2021

 

 

 

2020

 

 

 

Unaudited

 

Unaudited

 

 

 

 

 

 

 

 

 

Revenues

 

$

    329,072

 

  

$

   267,668

 

 

$

    632,022

 

  

$

       547,014

 

Cost of revenues:

 

 

 

 

 

 

 

 

Traffic acquisition cost

 

 

212,202

 

 

 

168,783

 

 

 

409,238

 

 

 

379,161

 

Other cost of revenues

 

 

16,625

 

 

 

14,781

 

 

 

33,040

 

 

 

30,973

 

Total cost of revenues

 

 

228,827

 

 

 

183,564

 

 

 

442,278

 

 

 

410,134

 

Gross profit

 

 

100,245

 

 

 

84,104

 

 

 

189,744

 

 

 

136,880

 

Operating expenses:

 

 

 

 

 

 

 

 

Research and development expenses

 

 

30,050

 

 

 

21,908

 

 

 

53,943

 

 

 

43,907

 

Sales and marketing expenses

 

 

69,136

 

 

 

31,396

 

 

 

103,444

 

 

 

66,832

 

General and administrative expenses

 

 

54,468

 

 

 

12,576

 

 

 

64,144

 

 

 

27,755

 

Total operating expenses

 

 

153,654

 

 

 

65,880

 

 

 

221,531

 

 

 

138,494

 

Operating income (loss) before finance expenses

 

 

(53,409

)

  

18,224

 

 

 

(31,787

)

  

(1,614

)

Finance expenses, net

 

 

(85

)

 

 

(654

)

 

 

(883

)

 

 

(206

)

Income (loss) before income taxes

 

 

(53,494

)

 

 

17,570

 

 

 

(32,670

)

 

 

(1,820

)

Provision for income taxes

 

 

(7,922

)

 

 

(4,665

)

 

 

(10,159

)

 

 

(9,128

)

Net income (loss)

 

$

   (61,416

)

 

$

       12,905

 

 

$

    (42,829

)

 

$

       (10,948

)

Less: Undistributed earnings allocated to participating securities

 

 

(6,029

)

 

 

(5,646

)

 

 

(11,944

)

 

 

(11,228

)

Net Income (loss) attributable to ordinary shares – basic and diluted

 

 

(67,445

)

 

 

7,259

 

 

 

(54,773

)

 

 

(22,176

)

Net income (loss) per share attributable to ordinary shareholders, basic

 

$

       (1.39

)

 

$

  0.19

 

 

$

      (1.18

)

 

$

  (0.54

)

Weighted-average shares used in computing net income (loss) per share attributable to ordinary shareholders, basic

 

 

48,518,124

 

 

 

37,895,239

 

 

 

46,351,830

 

 

 

41,217,908

 

Net income (loss) per share attributable to ordinary shareholders, diluted

 

$

       (1.39

)

 

$

           0.12

 

 

$

       (1.18

)

 

$

(0.54

)

Weighted-average shares used in computing net income (loss) per share attributable to ordinary shareholders, diluted

 

 

48,518,124

 

 

 

60,096,610

 

 

 

46,351,830

 

 

 

41,217,908

 


SHARE BASED COMPENSATION BREAK-DOWN BY EXPENSE LINE

U.S. dollars in thousands
 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

2021

2020

 

2021

2020

 

(unaudited)

 

(unaudited)

Cost of revenues

455

 

111

 

580

 

252

Research and development

8,947

 

1,037

 

12,385

 

2,051

Sales and marketing

35,040

 

919

 

36,171

 

1,897

General and administrative

34,081

 

156

 

34,518

 

293

Total share-based compensation expense

78,523

 

2,223

 

83,654

 

4,493


CONSOLIDATED STATEMENTS OF CASH FLOWS

U.S. dollars in thousands, except share and per share data
 

 

 

Three months ended
June 30,

 

Six months ended
June 30,

 

 

 

2021

 

 

 

2020

 

 

 

2021

 

 

 

2020

 

 

 

Unaudited

 

Unaudited

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

    (61,416

)

 

$

  12,905

 

 

$

    (42,829

)

 

$

(10,948

)

Adjustments to reconcile net income (loss) to net cash flows provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

8,646

 

 

 

9,076

 

 

 

16,890

 

 

 

18,827

 

Share based compensation expenses

 

 

78,523

 

 

 

2,223

 

 

 

83,654

 

 

 

4,493

 

Net loss (gain) from financing expenses

 

 

(2,970

)

 

 

(517

)

 

 

(1,357

)

 

 

824

 

Increase in deferred taxes, net

 

 

(1,693

)

 

 

(890

)

 

 

(917

)

 

 

(1,456

)

Revaluation of the warrant liability

 

 

272

 

 

 

 

 

272

 

 

 

Accrued interest, net

 

 

-

 

 

 

155

 

 

 

-

 

 

 

332

 

 

 

 

 

 

 

 

 

 

Change in operating assets and liabilities:

 

 

 

 

 

 

 

 

Decrease (increase) in trade receivables

 

 

(13,410

)

 

 

18,248

 

 

 

19,031

 

 

 

43,296

 

Decrease (increase) in prepaid expenses and other current assets and long-term prepaid expenses

 

 

(16,998

)

 

 

9,069

 

 

 

(33,757

)

 

 

14,985

 

Increase (decrease) in trade payable

 

 

16,497

 

 

 

(30,722

)

 

 

(31,025

)

 

 

(35,535

)

Increase in accrued expenses and other current liabilities

 

 

15,671

   

16,578

 

 

 

5,284

   

14,333

 

Change in operating lease Right of use assets

 

 

3,659

 

 

 

3,343

 

 

 

7,291

 

 

 

6,639

 

Change in operating Lease liabilities

 

 

(3,698

)

 

 

(2,634

)

 

 

(8,557

)

 

 

(7,948

)

Net cash provided by operating activities

 

 

23,083

 

 

 

36,834

 

 

 

13,980

 

 

 

47,842

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

Purchase of property and equipment, including capitalized platform costs

 

 

(16,138

)

 

 

(3,657

)

 

 

(21,675

)

 

 

(10,634

)

Cash paid in connection with acquisitions

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(202

)

Decrease (increase) in restricted deposits

 

 

(118

)

 

 

(12,965

)

 

 

2,536

 

 

 

(2

)

Decrease in short-term deposits

 

 

-

 

 

 

24,968

 

 

 

-

 

 

 

24,964

 

Net cash provided by (used in) investing activities

 

 

(16,256

)

 

 

8,346

 

 

 

(19,139

)

 

 

14,126

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

Exercise of options

 

 

1,368

 

 

 

400

 

 

 

4,919

 

 

 

677

 

Issuance of share, net of offering costs

 

 

290,908

 

 

 

-

 

 

 

287,432

 

 

 

-

 

Issuance of warrant

 

 

53,883

 

 

 

 

 

53,883

 

 

 

Net cash provided by financing activities

 

 

346,159

 

 

 

400

 

 

 

346,234

 

 

 

677

 

Exchange differences on balances of cash, cash equivalents

 

 

2,970

 

 

 

517

 

 

 

1,357

 

 

 

(824

)