UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of August 2022
Commission File Number: 001-40566
TABOOLA.COM LTD.
(Exact name of registrant as specified in its charter)
16 Madison Square West 7th Floor
New York, NY 10010
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
|
Form 20-F
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☒
|
Form 40-F
|
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):
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Yes
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No
|
☒
|
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):
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Yes
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No
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☒
|
EXPLANATORY NOTE
The information in the attached Exhibits 99.1, 99.2 and 99.3 is being furnished and shall not be deemed “filed” for the purposes of Section 18 of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section, nor shall it be deemed incorporated by reference in any filing made by the Company under the Securities Act of 1933, as
amended, or the Exchange Act, except as otherwise set forth herein or as shall be expressly set forth by specific reference in such a filing.
TABLE OF CONTENTS
ITEM
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Press Release dated August 9, 2022
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|||
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Letter to Shareholders dated August 9, 2022
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|||
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Investor presentation dated August 9, 2022
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
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TABOOLA.COM LTD.
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|||
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By:
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/s/ Stephen Walker
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||
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Name:
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Stephen Walker
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||
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Title:
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Chief Financial Officer
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||
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Date: August 9, 2022
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|||
| - |
Beat Q2 across all metrics.
|
| - |
Gross Profit of $116.4M grew 16.1% and ex-TAC Gross Profit of $143.2M grew 22.5% over Q2 2021 (25.4% on a constant currency basis*) and 4.7% pro forma with Connexity** (7.1% on a constant currency basis*).
|
| - |
GAAP Net Loss of $5.0M, Non-GAAP Net Income of $15.8M and Adjusted EBITDA of $34.2M.
|
| - |
Maintaining full year guidance for ex-TAC Gross Profit, Gross Profit, Adjusted EBITDA and Non-GAAP Net Income.
|
New York, NY, August 09, 2022 -- 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, 2022.
“Our second quarter performance exceeded our high end of guidance and included ex-TAC gross profit growth of 22.5%. These impressive results, in a challenging macro environment, reinforce the strength of our model
that is centered on long-term exclusive publisher partnerships and performance advertiser success. We are holding our full year 2022 guidance and prioritizing investments and taking actions to ensure solid profitability and free cash flow,” said
Adam Singolda, Founder and CEO, Taboola.
“This year we are seeing near record level new publisher signings, including a large number of competitive wins all around the world, exponential growth in Taboola News and the launch of exciting new products like
Homepage For You and our new bidder. Our progress in 2022 will drive strong positive momentum into 2023 and beyond as we strive to place Taboola in the same league as successful walled garden companies such as Google, Amazon and Facebook. Our
biggest focus areas that will ensure we succeed are in e-commerce, performance advertising and optimizing our bidder,” continued Singolda.
For more commentary on the quarter, please refer to Taboola’s Q2 2022 Shareholder Letter, which was furnished to the SEC and also posted on Taboola’s website today at https://investors.taboola.com.
1
Second Quarter 2022 Results Summary (unaudited)
|
Three Months Ended
June 30,
|
||||||||||||||||
|
(dollars in millions, except per share data)
|
2022
|
2021
|
% change
YoY
|
Q2 Guidance
|
||||||||||||
|
Unaudited
|
||||||||||||||||
|
Revenues
|
$
|
342.7
|
$
|
329.1
|
4.1
|
%
|
$
|
325 to $345
|
||||||||
|
Gross profit
|
$
|
116.4
|
$
|
100.2
|
16.1
|
%
|
$
|
104 to $114
|
||||||||
|
Net loss
|
$
|
(5.0
|
)
|
$
|
(61.4
|
)
|
91.8
|
%
|
||||||||
|
EPS diluted (1)
|
$
|
(0.02
|
)
|
$
|
(1.39
|
)
|
98.6
|
%
|
||||||||
|
Ratio of net loss to gross profit
|
(4.3
|
%)
|
(61.3
|
%)
|
93.0
|
%
|
||||||||||
|
Cash flow provided by operating activities
|
$
|
2.1
|
$
|
23.1
|
-91.0
|
%
|
||||||||||
|
Cash, cash equivalents and short-term investments
|
$
|
308.5
|
$
|
585.2
|
-47.3
|
%
|
||||||||||
|
Non-GAAP Financial Data *
|
||||||||||||||||
|
ex-TAC Gross Profit
|
$
|
143.2
|
$
|
116.9
|
22.5
|
%
|
$
|
132 to $142
|
||||||||
|
Adjusted EBITDA
|
$
|
34.2
|
$
|
40.8
|
-16.3
|
%
|
$
|
23 to $28
|
||||||||
|
Non-GAAP Net Income
|
$
|
15.8
|
$
|
23.0
|
-31.2
|
%
|
$
|
6 to $11
|
||||||||
|
IPO Pro forma Non-GAAP EPS diluted (2)
|
$
|
0.062
|
$
|
0.090
|
-31.1
|
%
|
||||||||||
|
Ratio of Adjusted EBITDA to ex-TAC Gross Profit
|
23.9
|
%
|
34.9
|
%
|
-31.7
|
%
|
||||||||||
|
Free Cash Flow
|
$
|
(7.3
|
)
|
$
|
6.9
|
-204.6
|
%
|
|||||||||
1 The weighted-average shares used in this computation for the three months ended June 30, 2022 and 2021 are 250,777,915 and 48,518,124, respectively. Outstanding shares increased significantly
year-over-year as a result of the Company going public.
2 See Appendix for a description and calculation of IPO Pro forma Non-GAAP EPS basic and diluted.
2
Business Highlights
| ○ |
Announced new digital property partner agreements, including competitive wins with Gray Television, Media News Group, Jagran and Prensa Ibérica.
|
| ○ |
Signed key renewals, including with Cox Media Group bringing us to 10 years together and with ABP Network, one of India's largest multi-language websites who signed on for another 5 years.
|
| ○ |
New digital property partners1 drove $21.8 million and existing digital property partners2 decreased by $8.2 million of revenue.
|
| ○ |
Taboola News’ growth rate is triple digits and on track to exceed $50 million in revenues this year.
|
| ○ |
Received recognition from Kantar, a well-known industry research group, via a commissioned piece of research which looked at video campaigns on our network, and found that native video ads in the open web have a stronger impact on
brand favorability and consideration than social or video platforms.
|
| ○ |
Announced acquisition of Gravity R&D, a leading personalization technology company, for approximately $7 million.
|
| ○ |
Entered into a $90 million five-year senior secured revolving credit facility, with Citibank, N.A., London Branch, as lead arranger and JPMorgan Chase Bank, N.A., as administrative agent.
|
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).
Third Quarter and Full Year 2022 Guidance
For the Third Quarter 2022, the Company currently expects:
| ○ |
Revenues of $311 to $331 million
|
| ○ |
Gross Profit of $91 to $101 million
|
| ○ |
ex-TAC Gross Profit of $120 to $130 million
|
| ○ |
Adjusted EBITDA of $11 to $17 million
|
| ○ |
Non-GAAP Net Income (loss) of ($8) to ($2) million
|
3
For the Full Year 2022, the Company currently expects:
|
(dollars in millions)
|
Guidance
(as of 08/09/22)
|
Guidance
(as of 05/12/22)
|
||||||
|
Revenues
|
$
|
1,434 -$1,474
|
$
|
1,499 -$1,539
|
||||
|
Gross profit
|
$
|
485 - $505
|
$
|
485 - $505
|
||||
|
ex-TAC Gross Profit
|
$
|
595 - $615
|
$
|
595 - $615
|
||||
|
Adjusted EBITDA
|
$
|
152 - $160
|
$
|
152 - $160
|
||||
|
Non-GAAP Net Income
|
$
|
83 - $91
|
$
|
83 - $91
|
||||
Although we provide guidance for Adjusted EBITDA and Non-GAAP Net Income, we are not able to provide guidance for projected net income (loss), the most directly comparable GAAP measure. Certain elements of net
income (loss), including share-based compensation expenses and warrant valuations, 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 and Non-GAAP Net Income 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 continuing headwinds from the war in Ukraine, inflation, currency exchange rates and overall macroeconomic weakness, which lead us to adopt a conservative stance on guidance. Our guidance
assumes that these headwinds do not worsen and cause economic conditions to deteriorate or otherwise 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 10, 2022, at 8:30 AM ET. The call can be accessed via webcast at https://investors.taboola.com.
To access the call by phone, please go to this link to register https://register.vevent.com/register/BIfbbc0f5c3a7b404291b567b48574b48b, and you will be provided with dial in details. The webcast will be available for replay for one year, through
the close of business on August 10, 2023.
*About Non-GAAP Financial Information
This press release includes ex-TAC Gross Profit, ex-TAC Gross Profit growth on a constant currency basis, Adjusted EBITDA, Ratio of Adjusted EBITDA to ex-TAC Gross Profit, Free Cash Flow, Non-GAAP Net Income,
Non-GAAP EPS basic and diluted and IPO Pro forma Non-GAAP EPS basic and diluted, 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 loss, 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.
This quarter the Company is introducing certain constant currency information, which is a non-GAAP metric. The Company believes the inclusion of constant currency information is useful because it permits investors
to better understand Taboola’s underlying performance without the effects of currency exchange rate fluctuations. The Company calculates constant currency by using the prior period’s currency exchange rates and applying them to current period
results.
4
The Company believes non-GAAP financial measures provide useful supplemental 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, which may vary from period to
period. Please refer to the appendix at the end of this press release for reconciliations to the most directly comparable measures in accordance with GAAP.
**About Pro Forma With Connexity Information
This press release includes historical and projected pro forma information for ex-TAC Gross Profit. The pro forma information presents the pro forma effect of the Connexity acquisition as if it had been completed
on January 1, 2021. The pro forma information is unaudited, is provided as supplemental information only and is subject to the limitations contained under the heading “Unaudited Pro Forma Condensed Combined Financial Information” in our
Prospectus forming part of our Registration Statement on Form F-1/A filed on April 13, 2022, as it may be amended from time to time, filed with the Securities and Exchange Commission.
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”). In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expect”, “guidance”, “intend”, “will”, “estimate”, “anticipate”, “believe”, “predict”, “target”, “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 press release include, but are not limited to: the ability to recognize the anticipated benefits of the recent acquisition of
Connexity and the business combination between the Company and ION Acquisition Corp. 1 Ltd. (together, the “Business Combinations”), which may be affected by, among other things, competition, the ability of the Company to grow and manage growth
profitably, maintain relationships with customers and retain its management and key employees; the Company’s ability to successfully integrate the Connexity acquisition; costs related to the Business Combinations; changes in applicable laws or
regulations; the Company’s estimates of expenses and profitability and underlying assumptions with respect to accounting presentations 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 prioritize investments to improve profitability and free cash flow; 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 Company’s
Annual Report on Form 20-F for the year ended December 31, 2021 under Item 3.D. “Information About the Company - Risk Factors,” the Company’s Registration Statement on Form F-1/A filed on April 13, 2022, as it may be amended or supplemented from
time to time, under the sections entitled “Cautionary Note Regarding Forward-looking Statements” and “Risk Factors,” and in the Company’s subsequent filings with the Securities and Exchange Commission.
5
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, BBC, NBC News, Business Insider, The Independent and El Mundo.
More than 15,000 advertisers use Taboola to reach over 500 million daily active users in a brand-safe environment. Following the acquisition of Connexity in 2021, Taboola is a leader in powering e-commerce
recommendations, driving more than 1 million monthly transactions each month. Leading brands, including Walmart, Macy’s, Wayfair, Skechers and eBay are among key customers.
Learn more at www.taboola.com and follow @taboola on Twitter.
|
Investor Contact:
|
Press Contact:
|
|
Jennifer Horsley
|
Dave Struzzi
|
|
investors@taboola.com
|
press@taboola.com
|
6
CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands, except share and per share data
|
June 30,
2022 |
December 31,
2021 |
|||||||
|
Unaudited
|
||||||||
|
ASSETS
|
||||||||
|
CURRENT ASSETS
|
||||||||
|
Cash and cash equivalents
|
$
|
233,740
|
$
|
319,319
|
||||
|
Short-term investments
|
74,733
|
—
|
||||||
|
Restricted deposits
|
750
|
1,000
|
||||||
|
Trade receivables (net of allowance for credit losses of $4,074 and $3,895 as of June 30, 2022, and December 31, 2021, respectively)
|
199,619
|
245,235
|
||||||
|
Prepaid expenses and other current assets
|
75,105
|
63,394
|
||||||
|
Total current assets
|
583,947
|
628,948
|
||||||
|
NON-CURRENT ASSETS
|
||||||||
|
Long-term prepaid expenses
|
30,154
|
32,926
|
||||||
|
Restricted deposits
|
4,137
|
3,897
|
||||||
|
Deferred tax assets
|
1,455
|
1,876
|
||||||
|
Operating lease right of use assets
|
60,573
|
65,105
|
||||||
|
Property and equipment, net
|
72,883
|
63,259
|
||||||
|
Intangible assets, net
|
219,315
|
250,923
|
||||||
|
Goodwill
|
550,568
|
550,380
|
||||||
|
Total non-current assets
|
939,085
|
968,366
|
||||||
|
Total assets
|
$
|
1,523,032
|
$
|
1,597,314
|
||||
7
CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands, except share and per share data
|
June 30,
2022 |
December 31,
2021 |
|||||||
|
Unaudited
|
||||||||
|
LIABILITIES AND SHAREHOLDERS' EQUITY
|
||||||||
|
CURRENT LIABILITIES
|
||||||||
|
Trade payables
|
$
|
214,487
|
$
|
259,941
|
||||
|
Short-term operating lease liabilities
|
14,351
|
12,958
|
||||||
|
Accrued expenses and other current liabilities
|
104,402
|
124,662
|
||||||
|
Current portion of long-term loan
|
3,000
|
3,000
|
||||||
|
Total current liabilities
|
336,240
|
400,561
|
||||||
|
LONG-TERM LIABILITIES
|
||||||||
|
Deferred tax liabilities
|
38,130
|
51,027
|
||||||
|
Warrants liability
|
5,227
|
31,227
|
||||||
|
Long-term loan, net of current portion
|
284,617
|
285,402
|
||||||
|
Long-term operating lease liabilities
|
50,978
|
61,526
|
||||||
|
Total long-term liabilities
|
378,952
|
429,182
|
||||||
|
SHAREHOLDERS' EQUITY
|
||||||||
|
Ordinary shares with no par value- Authorized: 700,000,000 as of June 30, 2022 and December 31, 2021; 240,679,908 and 234,031,749 shares issued and outstanding as of June 30, 2022 and December
31, 2021, respectively.
|
—
|
—
|
||||||
|
Additional paid-in capital
|
869,201
|
824,016
|
||||||
|
Accumulated other comprehensive loss
|
(3,783
|
)
|
—
|
|||||
|
Accumulated deficit
|
(57,578
|
)
|
(56,445
|
)
|
||||
|
Total shareholders' equity
|
807,840
|
767,571
|
||||||
|
Total liabilities and shareholders' equity
|
$
|
1,523,032
|
$
|
1,597,314
|
||||
U.S. dollars in thousands, except share and per share data
|
Three months ended
June 30,
|
Six months ended
June 30,
|
|||||||||||||||
|
2022
|
2021
|
2022
|
2021
|
|||||||||||||
|
Unaudited
|
||||||||||||||||
|
Revenues
|
$
|
342,695
|
$
|
329,072
|
$
|
697,421
|
$
|
632,022
|
||||||||
|
Cost of revenues:
|
||||||||||||||||
|
Traffic acquisition cost
|
199,486
|
212,202
|
415,984
|
409,238
|
||||||||||||
|
Other cost of revenues
|
26,848
|
16,625
|
53,046
|
33,040
|
||||||||||||
|
Total cost of revenues
|
226,334
|
228,827
|
469,030
|
442,278
|
||||||||||||
|
Gross profit
|
116,361
|
100,245
|
228,391
|
189,744
|
||||||||||||
|
Operating expenses:
|
||||||||||||||||
|
Research and development
|
34,079
|
30,050
|
64,491
|
53,943
|
||||||||||||
|
Sales and marketing
|
66,405
|
69,136
|
127,773
|
103,444
|
||||||||||||
|
General and administrative
|
25,428
|
54,468
|
53,377
|
64,144
|
||||||||||||
|
Total operating expenses
|
125,912
|
153,654
|
245,641
|
221,531
|
||||||||||||
|
Operating loss
|
(9,551
|
)
|
(53,409
|
)
|
(17,250
|
)
|
(31,787
|
)
|
||||||||
|
Finance income (expenses), net
|
4,764
|
(85
|
)
|
15,959
|
(883
|
)
|
||||||||||
|
Loss before income taxes
|
(4,787
|
)
|
(53,494
|
)
|
(1,291
|
)
|
(32,670
|
)
|
||||||||
|
Benefit (provision) for income taxes
|
(234
|
)
|
(7,922
|
)
|
158
|
(10,159
|
)
|
|||||||||
|
Net loss
|
$
|
(5,021
|
)
|
$
|
(61,416
|
)
|
$
|
(1,133
|
)
|
$
|
(42,829
|
)
|
||||
|
Less: Undistributed earnings allocated to participating securities
|
—
|
(6,029
|
)
|
—
|
(11,944
|
)
|
||||||||||
|
Net loss attributable to ordinary shares – basic and diluted
|
(5,021
|
)
|
(67,445
|
)
|
(1,133
|
)
|
(54,773
|
)
|
||||||||
|
Net loss per share attributable to ordinary shareholders, basic
|
$
|
(0.02
|
)
|
$
|
(1.39
|
)
|
$
|
(0.00
|
)
|
$
|
(1.18
|
)
|
||||
|
Weighted-average shares used in computing net loss per share attributable to ordinary shareholders, basic
|
250,777,915
|
48,518,124
|
249,095,931
|
46,351,830
|
||||||||||||
|
Net loss per share attributable to ordinary shareholders, diluted
|
$
|
(0.02
|
)
|
$
|
(1.39
|
)
|
$
|
(0.00
|
)
|
$
|
(1.18
|
)
|
||||
|
Weighted-average shares used in computing net loss per share attributable to ordinary shareholders, diluted
|
250,777,915
|
48,518,124
|
249,095,931
|
46,351,830
|
||||||||||||
9
U.S. dollars in thousands
|
Three months ended
June 30,
|
Six months ended
June 30,
|
|||||||||||||||
|
2022
|
2021
|
2022
|
2021
|
|||||||||||||
|
Unaudited
|
||||||||||||||||
|
Net loss
|
$
|
(5,021
|
)
|
$
|
(61,416
|
)
|
$
|
(1,133
|
)
|
$
|
(42,829
|
)
|
||||
|
Other comprehensive loss:
|
||||||||||||||||
|
Unrealized losses on available-for-sale marketable securities
|
(259
|
)
|
—
|
(259
|
)
|
—
|
||||||||||
|
Unrealized losses on derivative instruments
|
(3,294
|
)
|
—
|
(3,524
|
)
|
—
|
||||||||||
|
Other comprehensive loss
|
(3,553
|
)
|
—
|
(3,783
|
)
|
—
|
||||||||||
|
Comprehensive loss
|
$
|
(8,574
|
)
|
$
|
(61,416
|
)
|
$
|
(4,916
|
)
|
$
|
(42,829
|
)
|
||||
10
SHARE BASED COMPENSATION BREAK-DOWN BY EXPENSE LINE
U.S. dollars in thousands
|
Three months ended
June 30,
|
Six months ended
June 30,
|
|||||||||||||||
|
2022
|
2021
|
2022
|
2021
|
|||||||||||||
|
Unaudited
|
||||||||||||||||
|
Cost of revenues
|
$
|
851
|
$
|
455
|
$
|
1,554
|
$
|
580
|
||||||||
|
Research and development
|
7,443
|
8,947
|
13,545
|
12,385
|
||||||||||||
|
Sales and marketing
|
7,397
|
35,040
|
12,697
|
36,171
|
||||||||||||
|
General and administrative
|
4,741
|
34,081
|
12,465
|
34,518
|
||||||||||||
|
Total share-based compensation expenses
|
$
|
20,432
|
$
|
78,523
|
$
|
40,261
|
$
|
83,654
|
||||||||
DEPRECIATION AND AMORTIZATION BREAK-DOWN BY EXPENSE LINE
U.S. dollars in thousands
|
Three months ended
June 30,
|
Six months ended
June 30,
|
|||||||||||||||
|
2022
|
2021
|
2022
|
2021
|
|||||||||||||
|
Unaudited
|
||||||||||||||||
|
Cost of revenues
|
$
|
8,419
|
$
|
6,075
|
$
|
16,520
|
$
|
12,051
|
||||||||
|
Research and development
|
695
|
1,179
|
1,340
|
2,162
|
||||||||||||
|
Sales and marketing
|
13,722
|
1,124
|
27,225
|
2,118
|
||||||||||||
|
General and administrative
|
(23
|
)
|
268
|
404
|
559
|
|||||||||||
|
Total depreciation and amortization expense
|
$
|
22,813
|
$
|
8,646
|
$
|
45,489
|
$
|
16,890
|
||||||||
11
U.S. dollars in thousands
|
Three months ended
June 30,
|
Six months ended
June 30,
|
|||||||||||||||
|
2022
|
2021
|
2022
|
2021
|
|||||||||||||
|
Unaudited
|
||||||||||||||||
|
Cash flows from operating activities
|
||||||||||||||||
|
Net loss
|
$
|
(5,021
|
)
|
$
|
(61,416
|
)
|
$
|
(1,133
|
)
|
$
|
(42,829
|
)
|
||||
|
Adjustments to reconcile net loss to net cash flows provided by operating activities:
|
||||||||||||||||
|
Depreciation and amortization
|
22,813
|
8,646
|
45,489
|
16,890
|
||||||||||||
|
Share-based compensation expenses
|
20,432
|
78,523
|
40,261
|
83,654
|
||||||||||||
|
Net loss (gain) from financing expenses
|
3,645
|
(2,970
|
)
|
4,316
|
(1,357
|
)
|
||||||||||
|
Revaluation of the warrants liability
|
(11,958
|
)
|
272
|
(26,000
|
)
|
272
|
||||||||||
|
Amortization of loan issuance cost
|
357
|
—
|
715
|
—
|
||||||||||||
|
Accrued interest, net
|
(137
|
)
|
—
|
(137
|
)
|
—
|
||||||||||
|
Change in operating assets and liabilities:
|
||||||||||||||||
|
Decrease (increase) in trade receivables
|
(319
|
)
|
(13,410
|
)
|
45,616
|
19,031
|
||||||||||
|
Increase in prepaid expenses and other current assets and long-term prepaid expenses
|
(3,033
|
)
|
(16,998
|
)
|
(6,350
|
)
|
(33,757
|
)
|
||||||||
|
Increase (decrease) in trade payables
|
(6,661
|
)
|
16,497
|
(52,525
|
)
|
(31,025
|
)
|
|||||||||
|
Increase (decrease) in accrued expenses and other current liabilities
|
(6,402
|
)
|
15,671
|
(22,946
|
)
|
5,284
|
||||||||||
|
Decrease in deferred taxes, net
|
(8,390
|
)
|
(1,693
|
)
|
(12,476
|
)
|
(917
|
)
|
||||||||
|
Change in operating lease right of use assets
|
4,744
|
3,659
|
7,639
|
7,291
|
||||||||||||
|
Change in operating lease liabilities
|
(7,986
|
)
|
(3,698
|
)
|
(12,262
|
)
|
(8,557
|
)
|
||||||||
|
Net cash provided by operating activities
|
2,084
|
23,083
|
10,207
|
13,980
|
||||||||||||
|
Cash flows from investing activities
|
||||||||||||||||
|
Purchase of property and equipment, including capitalized internal-use software
|
(9,350
|
)
|
(16,138
|
)
|
(16,252
|
)
|
(21,675
|
)
|
||||||||
|
Cash paid in connection with acquisitions
|
—
|
—
|
(620
|
)
|
—
|
|||||||||||
|
Proceeds from (investments in) restricted deposits
|
10
|
(118
|
)
|
10
|
2,536
|
|||||||||||
|
Proceeds from short-term deposits
|
40,026
|
—
|
—
|
—
|
||||||||||||
|
Payments of cash in escrow for acquisition of a subsidiary
|
—
|
—
|
(2,100
|
)
|
—
|
|||||||||||
|
Purchase of short-term investments
|
(74,855
|
)
|
—
|
(74,855
|
)
|
—
|
||||||||||
|
Net cash used in investing activities
|
(44,169
|
)
|
(16,256
|
)
|
(93,817
|
)
|
(19,139
|
)
|
||||||||
|
Cash flows from financing activities
|
||||||||||||||||
|
Exercise of options and vested RSUs
|
2,633
|
1,368
|
6,032
|
4,919
|
||||||||||||
|
Issuance of ordinary shares, net of offering costs
|
—
|
290,908
|
—
|
287,432
|
||||||||||||
|
Payment of tax withholding for share-based compensation expenses
|
(340
|
)
|
—
|
(2,185
|
)
|
—
|
||||||||||
|
Repayment of current portion of long-term loan
|
(750
|
)
|
—
|
(1,500
|
)
|
—
|
||||||||||
|
Issuance of Warrants
|
—
|
53,883
|
—
|
53,883
|
||||||||||||
|
Net cash provided by financing activities
|
1,543
|
346,159
|
2,347
|
346,234
|
||||||||||||
|
Exchange differences on balances of cash and cash equivalents
|
(3,645
|
)
|
2,970
|
(4,316
|
)
|
1,357
|
||||||||||
|
Increase (decrease) in cash and cash equivalents
|
(44,187
|
)
|
355,956
|
(85,579
|
)
|
342,432
|
||||||||||
|
Cash and cash equivalents - at the beginning of the period
|
277,927
|
229,287
|
319,319
|
242,811
|
||||||||||||
|
Cash and cash equivalents - at end of the period
|
$
|
233,740
|
$
|
585,243
|
$
|
233,740
|
$
|
585,243
|
||||||||
12
|
Three months ended
June 30,
|
Six months ended
June 30,
|
|||||||||||||||
|
2022
|
2021
|
2022
|
2021
|
|||||||||||||
|
Unaudited
|
||||||||||||||||
|
Supplemental disclosures of cash flow information:
|
||||||||||||||||
|
Cash paid during the year for:
|
||||||||||||||||
|
Income taxes
|
$
|
13,744
|
$
|
4,502
|
$
|
16,162
|
$
|
5,831
|
||||||||
|
Interest
|
$
|
6,803
|
$
|
—
|
$
|
10,373
|
$
|
—
|
||||||||
|
Non-cash investing and financing activities:
|
||||||||||||||||
|
Purchase of property, plant and equipment
|
$
|
7,353 |
$
|
966
|
$
|
7,353
|
$
|
966
|
||||||||
|
Share-based compensation included in capitalized internal-use software
|
$
|
503
|
$
|
143
|
$
|
1,020
|
$
|
265
|
||||||||
|
Deferred offering costs incurred during the period included in long-term prepaid expenses
|
$
|
—
|
$
|
2,950
|
$
|
—
|
$
|
2,950
|
||||||||
|
Creation of operating lease right-of-use assets
|
$
|
3,107
|
$
|
—
|
$
|
3,107
|
$
|
—
|
||||||||
13
APPENDIX A: Non-GAAP Reconciliation
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021
(Unaudited)
The following table provides a reconciliation of revenues to ex-TAC Gross profit.
|
Three months ended
June 30,
|
Six months ended
June 30,
|
|||||||||||||||
|
2022
|
2021
|
2022
|
2021
|
|||||||||||||
|
Unaudited
|
||||||||||||||||
|
(dollars in thousands)
|
||||||||||||||||
|
Revenues
|
$
|
342,695
|
$
|
329,072
|
$
|
697,421
|
$
|
632,022
|
||||||||
|
Traffic acquisition cost
|
199,486
|
212,202
|
415,984
|
409,238
|
||||||||||||
|
Other cost of revenues
|
26,848
|
16,625
|
53,046
|
33,040
|
||||||||||||
|
Gross profit
|
$
|
116,361
|
$
|
100,245
|
$
|
228,391
|
$
|
189,744
|
||||||||
|
Add back: Other cost of revenues
|
26,848
|
16,625
|
53,046
|
33,040
|
||||||||||||
|
ex-TAC Gross Profit
|
$
|
143,209
|
$
|
116,870
|
$
|
281,437
|
$
|
222,784
|
||||||||
The following table provides a reconciliation of net loss to Adjusted EBITDA.
|
Three months ended
June 30,
|
Six months ended
June 30,
|
|||||||||||||||
|
2022
|
2021
|
2022
|
2021
|
|||||||||||||
|
Unaudited
|
||||||||||||||||
|
(dollars in thousands)
|
||||||||||||||||
|
Net loss
|
$
|
(5,021
|
)
|
$
|
(61,416
|
)
|
$
|
(1,133
|
)
|
$
|
(42,829
|
)
|
||||
|
Adjusted to exclude the following:
|
|
|
|
|
||||||||||||
|
Finance income (expenses), net
|
(4,764
|
)
|
85
|
(15,959
|
)
|
883
|
||||||||||
|
Tax expenses (income)
|
234
|
7,922
|
(158
|
)
|
10,159
|
|||||||||||
|
Depreciation and amortization
|
22,813
|
8,646
|
45,489
|
16,890
|
||||||||||||
|
Share-based compensation expenses (1)
|
17,640
|
78,523
|
34,679
|
83,654
|
||||||||||||
|
M&A costs
|
474
|
7,042
|
524
|
5,588
|
||||||||||||
|
Holdback compensation expenses (2)
|
2,792
|
—
|
5,582
|
—
|
||||||||||||
|
Adjusted EBITDA
|
$
|
34,168
|
$
|
40,802
|
$
|
69,024
|
$
|
74,345
|
||||||||
1 For the Q2 2021 period, a substantial majority is share-based compensation expenses related to going public.
2 Represents share based compensation due to holdback of Taboola ordinary shares issuable under compensatory arrangements relating to Connexity acquisition.
14
We calculate Ratio of net loss to gross profit as net loss divided by gross profit. We calculate the Ratio of Adjusted EBITDA to ex-TAC Gross Profit, a non-GAAP measure, as Adjusted EBITDA divided by ex-TAC Gross
Profit. We believe that the Ratio of Adjusted EBITDA to ex-TAC Gross Profit is useful because TAC is what we must pay digital properties to obtain the right to place advertising on their websites, and we believe focusing on ex-TAC Gross Profit
better reflects the profitability of our business. The following table reconciles Ratio of net loss to gross profit and Ratio of Adjusted EBITDA to ex-TAC Gross Profit for the period shown.
|
Three months ended
June 30,
|
Six months ended
June 30,
|
|||||||||||||||
|
2022
|
2021
|
2022
|
2021
|
|||||||||||||
|
Unaudited
|
||||||||||||||||
|
(dollars in thousands)
|
||||||||||||||||
|
Gross profit
|
$
|
116,361
|
$
|
100,245
|
$
|
228,391
|
$
|
189,744
|
||||||||
|
Net loss
|
$
|
(5,021
|
)
|
$
|
(61,416
|
)
|
$
|
(1,133
|
)
|
$
|
(42,829
|
)
|
||||
|
Ratio of net loss to gross profit
|
(4.3
|
%)
|
(61.3
|
%)
|
(0.5
|
%)
|
(22.6
|
%)
|
||||||||
|
ex-TAC Gross Profit
|
$
|
143,209
|
$
|
116,870
|
$
|
281,437
|
$
|
222,784
|
||||||||
|
Adjusted EBITDA
|
$
|
34,168
|
$
|
40,802
|
$
|
69,024
|
$
|
74,345
|
||||||||
|
Ratio of Adjusted EBITDA margin to ex-TAC Gross Profit
|
23.9
|
%
|
34.9
|
%
|
24.5
|
%
|
33.4
|
%
|
||||||||
15
The following table provides a reconciliation of net loss to Non-GAAP Net Income.
|
Three months ended
June 30,
|
Six months ended
June 30,
|
|||||||||||||||
|
2022
|
2021
|
2022
|
2021
|
|||||||||||||
|
Unaudited
|
||||||||||||||||
|
(dollars in thousands)
|
||||||||||||||||
|
Net loss
|
$
|
(5,021
|
)
|
$
|
(61,416
|
)
|
$
|
(1,133
|
)
|
$
|
(42,829
|
)
|
||||
|
Amortization of acquired intangibles
|
15,828
|
639
|
31,608
|
1,278
|
||||||||||||
|
Share-based compensation expenses (1)
|
17,640
|
78,523
|
34,679
|
83,654
|
||||||||||||
|
M&A costs
|
474
|
7,042
|
524
|
5,588
|
||||||||||||
|
Holdback compensation expenses (2)
|
2,792
|
—
|
5,582
|
—
|
||||||||||||
|
Revaluation of Warrants
|
(11,958
|
)
|
—
|
(26,000
|
)
|
—
|
||||||||||
|
Exchange rate loss (income), net (3)
|
2,490
|
(393
|
)
|
2,706
|
1,545
|
|||||||||||
|
Income tax effects
|
(6,451
|
)
|
(1,444
|
)
|
(10,077
|
)
|
(1,545
|
)
|
||||||||
|
Non-GAAP Net Income
|
$
|
15,794
|
$
|
22,951
|
$
|
37,889
|
$
|
47,691
|
||||||||
|
Non-GAAP EPS basic
|
$
|
0.063
|
$
|
0.473
|
$
|
0.152
|
$
|
1.029
|
||||||||
|
Non-GAAP EPS diluted
|
$
|
0.063
|
$
|
0.090
|
$
|
0.151
|
$
|
0.187
|
||||||||
1 For the Q2 2021 period, a substantial majority is share-based compensation expenses related to going public.
2 Represents share based compensation due to holdback of Taboola ordinary shares issuable under compensatory arrangements relating to Connexity acquisition.
3 Represents income or loss related to the remeasurement of monetary assets and liabilities to the Company's functional currency using exchange rates in effect at the end of the reporting period.
16
The following table provides a reconciliation of the number of shares used to calculate GAAP EPS to IPO Pro forma Non-GAAP EPS basic and diluted.
|
Three months ended
June 30,
|
Six months ended
June 30,
|
|||||||||||||||
|
2022
|
2021
|
2022
|
2021
|
|||||||||||||
|
Unaudited
|
||||||||||||||||
|
GAAP weighted-average shares used to compute net loss per share, basic
|
250,777,915
|
48,518,124
|
249,095,931
|
46,351,830
|
||||||||||||
|
Add: Non-GAAP adjustment for ordinary shares issued in connection with going public
|
—
|
172,271,362
|
—
|
172,992,588
|
||||||||||||
|
IPO Pro forma Non-GAAP weighted-average shares used to compute net income per share, basic
|
250,777,915
|
220,789,486
|
249,095,931
|
219,344,418
|
||||||||||||
|
GAAP weighted-average shares used to compute net loss per share, diluted
|
250,777,915
|
48,518,124
|
249,095,931
|
46,351,830
|
||||||||||||
|
Add: Non-GAAP adjustment for ordinary shares issued in connection with going public
|
—
|
172,271,362
|
—
|
172,992,588
|
||||||||||||
|
Add: Dilutive ordinary share equivalents
|
443,063
|
35,592,019
|
1,562,609
|
35,562,170
|
||||||||||||
|
IPO Pro forma Non-GAAP weighted-average shares used to compute net income per share, diluted
|
251,220,978
|
256,381,505
|
250,658,540
|
254,906,588
|
||||||||||||
|
IPO Pro forma Non-GAAP EPS, basic (1)(2)
|
$
|
0.063
|
$
|
0.104
|
$
|
0.152
|
$
|
0.217
|
||||||||
|
IPO Pro forma Non-GAAP EPS, diluted (1)(2)
|
$
|
0.063
|
$
|
0.090
|
$
|
0.151
|
$
|
0.187
|
||||||||
1 IPO Pro forma net income for the three and six months ended June 30, 2021, includes an adjustment to add $6,029 and $11,944, respectively, of undistributed earnings previously allocated to participating
securities, assuming these securities converted to ordinary shares, in each case, as of January 1, 2021.
2 IPO Pro forma Non-GAAP EPS basic and diluted is presented only for the three and six months ended June 30, 2021 assuming Taboola went public and consummated the related transactions, in each case, as of
January 1, 2021.
17
The following table provides a reconciliation of net cash provided by operating activities to Free Cash Flow.
|
Three months ended
June 30,
|
Six months ended
June 30,
|
|||||||||||||||
|
2022
|
2021
|
2022
|
2021
|
|||||||||||||
|
Unaudited
|
||||||||||||||||
|
(dollars in thousands)
|
||||||||||||||||
|
Net cash provided by operating activities
|
$
|
2,084
|
$
|
23,083
|
$
|
10,207
|
$
|
13,980
|
||||||||
|
Purchases of property and equipment, including capitalized internal-use software
|
(9,350
|
)
|
(16,138
|
)
|
(16,252
|
)
|
(21,675
|
)
|
||||||||
|
Free Cash Flow
|
$
|
(7,266
|
)
|
$
|
6,945
|
$
|
(6,045
|
)
|
$
|
(7,695
|
)
|
|||||
APPENDIX A: Non-GAAP Reconciliation
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES FOR Q3 2022 AND FULL YEAR 2022 GUIDANCE
(Unaudited)
The following table provides a reconciliation of gross profit to ex-TAC Gross Profit guidance.
|
Q3 2022
|
FY 2022
|
|||||||
|
Unaudited
|
||||||||
|
(dollars in millions)
|
||||||||
|
Revenues
|
$
|
311 - $331
|
$
|
1,434 - $1,474
|
||||
|
Traffic acquisition cost
|
$
|
(191 - $201
|
)
|
$
|
(839 - $859
|
)
|
||
|
Other cost of revenues
|
$
|
(29 - $31
|
)
|
$
|
(110 - $116
|
)
|
||
|
Gross profit
|
$
|
91 - $101
|
$
|
485 - $505
|
||||
|
Add back: Other cost of revenues
|
$
|
29 - $31
|
$
|
110 - $116
|
||||
|
ex-TAC Gross Profit
|
$
|
120 - $130
|
$
|
595 - $615
|
||||
18
Exhibit 99.2
Dear Shareholder,
On June 30th, we reached our one year anniversary as a public company. It’s been a year of significant achievement: we won numerous new, and renewed large, partnerships with publishers; we acquired Connexity to
uniquely position us in e-Commerce; we launched new products like Homepage For You, Smartbid Dimensions and the bidder on Microsoft; and we realized hyper growth in our Taboola News offering. I feel good about our progress as it relates to our
strategy.
Our financial performance has been solid. Q2 results were strong, we beat the high end of our guidance for ex-TAC and Adjusted EBITDA. We’re reiterating our 2022 full year guidance. While we have seen softness in
advertising in the U.S. since last quarter, at the same time we are benefiting from the diversity of our business and are seeing strength in our e-Commerce business, more than expected, as well as Taboola News. Looking at the back half of the year,
we feel optimistic about some of the tailwinds in the business, including that this is an election year in the U.S. and the World Cup, which have historically driven good advertising budgets as well as traffic surges.
Given the challenging macro environment, we’re taking measures to lower our operating expenses, prioritizing things that are key, and spending less on others. Our financials, cash flow generation, and culture allow
us to keep working hard on our growth engines while also coming out stronger on the other side of this. As a result, adjusted EBITDA exceeded our guidance.
Second quarter financial highlights included:
| ● |
Ex-TAC Gross Profit of $143.2M exceeded our guidance range of $132 to $142M, grew 22.5% over Q2 2021 (25.4% on a constant currency basis*) and 4.7% pro forma with Connexity** (7.1% on a constant currency basis*).
|
| ● |
Adjusted EBITDA of $34.2M exceeded our guidance range of $23 to $28M.
|
| ● |
Q2 Revenues were $342.7M, at the higher end of our guidance range of $325 to $345M
|
| ● |
Non-GAAP Net Income was $15.8M, and exceeded our guidance range of $6 to $11M (we reported a GAAP net loss of $5.0M)
|
On the business front, we’re seeing good momentum.
Publisher momentum is strong: our publisher share gains and pipelines are the strongest they have been in some time. We recently won incredible
partnerships like PMC, Gray, Fox Sports, Time.com, and others. Looking at the sports vertical as an example, we now work with ESPN, Fox Sports, NBC Sports, CBS Sports, USAToday Sports and others, which give our advertisers great verticalized
reach and value when choosing to work with Taboola.
Taboola News to cross $50M run rate and is growing: As a reminder, this is our “Apple News” product but for Android devices. We work with incredible
partners such as Samsung and Xiaomi. We’re integrated on iPads across airports in the US surfacing news, and one day I believe we’ll be integrated with cars, audio devices and more. We’re seeing financially meaningful three-digit growth, and it
will cross $50M in revenues this year for the first time. It’s also worth mentioning that beyond the financials, we expect publishers to deepen their relationship with us, as we’ll be able to send them more meaningful traffic from our OEM
partners.
e-Commerce Advertiser success is on the rise: the core business of Connexity, helping e-Commerce advertisers get scale on the open web, is an area of
strength. We’re hard at work on our synergies, with the biggest one being running Connexity merchant campaigns on Taboola’s massive supply, which is in early testing.
There are many things that will drive growth for Taboola, but there are three we’ve identified that can supercharge our growth, as well as our competitive advantage:
| ● |
Performance advertiser success: Our core advertiser base is performance advertisers and with SmartBid we took a step forward with them. We
think there is a significant opportunity to dramatically improve our advertiser business by being able to consistently deliver return on ad spend at scale. We have a detailed product roadmap that will deliver on this goal, and allow us to
get into new advertiser verticals with big ROI.
|
| ● |
Bidder/header-bidder technology, going after display inventory: After we launched last quarter on Microsoft, we’ve been testing the bidder
on numerous publishers in Q2, and have seen encouraging results. We’re still early, but with our first-party data and direct relationships with publishers and advertisers we should have a meaningful advantage in that space, which is
estimated to be tens of billions of dollars in TAM.
|
| ● |
E-commerce penetration: Despite the macro back-drop, our e-commerce offerings continue to deliver good results. I’ll expand on this in our
business highlights.
|
We are seeing great success on our publisher pipeline this year, second only to 2019. The chart below shows recent history along with 2022’s monthly new revenue supply projection.
Many of our new publisher wins this year have been in a competitive scenario, which validates that publishers appreciate Taboola’s investment in R&D, driving value for the entire publisher organization going far
beyond “revenue.” Some wins include Gray Television, Penske Media, Time.com, FoxSports, Metropoles, Prensa Ibérica, AFPBB, Jagran, Thairath, Tenki and others.
 |
 |
 |
 |
We’ve also seen many of our existing incredible partners re-choosing Taboola and renewing with us, for example, Cox Media Group, Insider Media News Group, Ströer Content Group and others.
When looking at how fast we grew monthly average new revenue in 2022, it’s roughly twice as much, versus how much we’ve grown on average over the last two years. Our churn is also running better than expected.
You’ve all used Connexity before. If you ever thought about what to buy for your kitchen, or a product you were debating buying for your kids, chances are you read about those products on a publisher using Connexity,
and you bought it from a retailer buying from Connexity.
Our e-commerce business is essentially one hundred percent performance based. Our advertisers measure exactly what happens after someone clicks
through and goes to a retailer’s website. We run a two-sided marketplace where we have both technology and relationships on both sides: with publisher and retail advertisers. This example shows articles that speak to products people consider
buying, and Connexity surfaces links to buy those products.
We provide a turnkey way for publishers to engage their consumers in a shopping experience. It could be commerce-oriented editorial content, top 10 list articles with product reviews, or it could be a shopping
marketplace that they’ve created. We’re integrated with them so that we can track performance down to a very granular level and therefore optimize.
On the advertiser (retailer) side, our solution is a cost-effective way to reach and convert new customers and drive sales at scale. We’re also directly integrated into retailer systems, so we can see and provide a
feedback loop on exactly what happened. That’s why retail companies like Wayfair, Walmart and eBay work with us. We work with the big retailers, and we also have awesome smaller ones — our system supports the full range. We bring scale, and our
tech is designed to hit their performance goals, like return on ad spend, cost of sale or any other ROI target, in a way that doesn’t require a lot of work for them. We call it an automated managed service. They give us their budget for the month
or the quarter (roughly 50% of which is uncapped), they tell us their ROI goals, they give us a product feed, and then we go do the work. We’re on track to drive over $5 billion in gross merchandise sales for our retailer partners this year.
We believe e-Commerce will be a third of advertising revenue of the Open Web, think of the electric car industry, eCommerce is the battery. And this trend is shown in our numbers, during these challenging times,
we’re seeing Connexity beating our expectations and being resilient to the recession. People might not buy a home because of a high mortgage rate, or decide not to buy a new car, those are big ticket items. We have readership data that shows people
still want to buy products, purchase new experiences, and have fun.
Consumers have become better online shoppers through the pandemic and those new behaviors aren’t going to change. In fact, in this environment they are more focused than ever on finding the best product to fit their
needs and the best value in their purchases.
Bidder technology new supply opportunity - $1B+ opportunity
When we don’t replace banners with a Taboola recommendation unit, thanks to our partnership with Microsoft, we can now bid into display inventory and win a portion of that inventory. There are many bidders out there
we compete with, good ones. Our advantage is three-fold:
| 1. |
Unique CPC advertiser demand: 90% of our revenue is from our own advertisers
|
| 2. |
Unique first-party data: We might see a user interact with us in a bottom of the article unit, see what they read and click on, and then bid
on them on a banner placement on the homepage
|
| 3. |
Unique AI tech: We’re using years of deep learning investment, and now we have a team focused exclusively on bidding in the open web,
perfecting our performance.
|
We’ve begun piloting the bidder outside Microsoft in Q2, and seeing encouraging results. On a handful of publishers we’re trending to generate a few millions of dollars this year, and as a reminder, we work with
about 9,000 publishers.
I like this opportunity because not only is this a meaningful financial opportunity for us, it makes Taboola a bigger share of wallet for our publishers, and more strategic to our partners.
Financial Performance
I’ll close by talking about our Q2 2022 financials. Ex-TAC Gross Profit grew 22.5% versus Q2 2021 and our Ratio of Adjusted EBITDA to ex-TAC Gross Profit was 23.9%. On a pro forma basis, which assumes we had
Connexity’s results in Q2 2021, our ex-TAC Gross Profit grew 4.7% or 7.1% at constant currency.
Below are the results of Q2 versus our guidance.
|
(dollars in millions)
|
Q2 2022 Actuals
|
Year-over-Year
Growth
|
Q2 2022 Guidance
|
|||||||||
|
Revenues
|
$
|
342.7
|
4.1
|
%
|
$
|
325 to $345
|
||||||
|
Gross profit
|
$
|
116.4
|
16.1 |
%
|
$ |
104 to $114
|
||||||
|
ex-TAC Gross Profit*
|
$
|
143.2
|
22.5
|
%
|
$
|
132 to $142
|
||||||
|
Adjusted EBITDA*
|
$
|
34.2
|
-16.3
|
%
|
$ |
23 to $28
|
||||||
|
Non-GAAP Net Income*
|
$
|
15.8
|
-31.2
|
%
|
$
|
6 to $11
|
||||||
New business contributed 7% while existing business had a (2%) impact on growth in Revenues. New business and the inclusion of Connexity drove much of the growth. Existing business was lower as yield in the quarter
was pressured by advertising demand softness. Adjusted EBITDA exceeded our guidance as we favorably balanced managing costs more tightly while also making long-term value driving investments in the business.
|
Full Year 2022
(dollars in millions)
|
Guidance
(as of 08/09/22)
|
Guidance
(as of 05/12/22)
|
||||||
|
Revenues
|
$
|
1,434 -$1,474
|
$
|
1,499 -$1,539
|
||||
|
Gross profit
|
$
|
485 - $505
|
$
|
485 - $505
|
||||
|
ex-TAC Gross Profit*
|
$
|
595 - $615
|
$
|
595 - $615
|
||||
|
Adjusted EBITDA*
|
$
|
152 - $160
|
$
|
152 - $160
|
||||
|
Non-GAAP Net Income*
|
$
|
83 - $91
|
$
|
83 - $91
|
||||
We feel good about holding our guidance for the year on ex-TAC, and Adjusted EBITDA which are the main metrics we focus on. Our guidance assumes continued weakness in the macro environment and the related lower
advertising demand we experienced throughout the second quarter at current levels. Our guidance does not assume a further weakening of demand or a departure from our normal fourth quarter seasonality, which we anticipate to be bolstered by
elections in the U.S., the World Cup and stronger e-commerce.
For more information on our Q2 results, our updated full year and Q3 2022 guidance, please see our Q2 2022 earnings press release, which was furnished to the SEC and also posted on Taboola’s website today at https://investors.taboola.com.
* * *
Despite some challenging macro economic factors that are having an impact on our business, I am happy that our fundamentals are strong, we’re on track to meet our full year ex-TAC revenue and Adjusted EBITDA
expectations, our tech investment is helping us win new publisher partnerships at record rates, and the team is energized to fulfill our mission to build the largest open web company in the world, side by side with Google (search), Meta (social),
Amazon (commerce).
I’m looking forward to our upcoming earnings call and engaging with investors in the coming months, where I’ll do my best to answer any questions you may have.
Kind regards,
-- Adam Singolda
Founder & CEO Taboola
*About Non-GAAP Financial Information
This letter includes ex-TAC Gross Profit, ex-TAC Gross Profit growth on a constant currency basis, Adjusted EBITDA, Ratio of Adjusted EBITDA to ex-TAC Gross Profit, Free Cash Flow, Non-GAAP Net Income, Non-GAAP EPS
basic and diluted and IPO Pro forma Non-GAAP EPS basic and diluted, 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 loss, 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.
This quarter the Company is introducing certain constant currency information, which is a non-GAAP metric.The Company believes the inclusion of constant currency information is useful because it permits investors
to better understand Taboola’s underlying performance without the effects of currency exchange rate fluctuations. The Company calculates constant currency by using the prior period’s currency exchange rates and applying them to current period
results.
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 letter for reconciliations to the most directly comparable measures in accordance with GAAP.
**About Pro Forma With Connexity Information
This letter includes historical and projected pro forma information for ex-TAC Gross Profit. The pro forma information presents the pro forma effect of the Connexity acquisition as if it had been completed on
January 1, 2020. The pro forma information is unaudited, is provided as supplemental information only and is subject to the limitations contained under the heading “Unaudited Pro Forma Condensed Combined Financial Information” in our Prospectus
dated September 2, 2021, as amended, forming part of our Registration Statement on Form F-1 filed with the Securities and Exchange Commission.
Note Regarding Forward-Looking Statements
Certain statements in this letter are forward-looking statements. Forward-looking statements generally relate to future events including future financial or operating performance of Taboola.com Ltd. (the
“Company”). In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expect”, “guidance”, “intend”, “will”, “estimate”, “anticipate”, “believe”, “predict”, “target”, “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 letter include, but are not limited to: the ability to recognize the anticipated benefits of the recent acquisition of Connexity and
the business combination between the Company and ION Acquisition Corp. 1 Ltd. (together, the “Business Combinations”), which may be affected by, among other things, competition, the ability of the Company to grow and manage growth profitably,
maintain relationships with customers and retain its management and key employees; the Company’s ability to successfully integrate the Connexity acquisition; costs related to the Business Combinations; changes in applicable laws or regulations;
the Company’s estimates of expenses and profitability and underlying assumptions with respect to accounting presentations 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 Company’s Annual Report on Form 20-F for the year ended December 31, 2021 under Item 3.D. “Information
About the Company - Risk Factors,” the Company’s Registration Statement on Form F-1/A filed on April 13, 2022, as it may be amended or supplemented from time to time, under the sections entitled “Cautionary Note Regarding Forward-looking
Statements” and “Risk Factors,” and in the Company’s subsequent filings with the Securities and Exchange Commission.
Nothing in this letter 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.
APPENDIX: Non-GAAP Reconciliation
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021
(Unaudited)
The following table provides a reconciliation of revenues to ex-TAC Gross Profit.
|
Three months ended
June 30,
|
Six months ended
June 30,
|
|||||||||||||||
|
2022
|
2021
|
2022
|
2021
|
|||||||||||||
|
Unaudited
|
||||||||||||||||
|
(dollars in thousands)
|
||||||||||||||||
|
Revenues
|
$
|
342,695
|
$
|
329,072
|
$
|
697,421
|
$
|
632,022
|
||||||||
|
Traffic acquisition cost
|
199,486
|
212,202
|
415,984
|
409,238
|
||||||||||||
|
Other cost of revenues
|
26,848
|
16,625
|
53,046
|
33,040
|
||||||||||||
|
Gross profit
|
$
|
116,361
|
$
|
100,245
|
$
|
228,391
|
$
|
189,744
|
||||||||
|
Add back: Other cost of revenues
|
26,848
|
16,625
|
53,046
|
33,040
|
||||||||||||
|
ex-TAC Gross Profit
|
$
|
143,209
|
$
|
116,870
|
$
|
281,437
|
$
|
222,784
|
||||||||
The following table provides a reconciliation of net loss to Adjusted EBITDA.
|
Three months ended
June 30,
|
Six months ended
June 30,
|
|||||||||||||||
|
2022
|
2021
|
2022
|
2021
|
|||||||||||||
|
Unaudited
|
||||||||||||||||
|
(dollars in thousands)
|
||||||||||||||||
|
Net loss
|
$
|
(5,021
|
)
|
$
|
(61,416
|
)
|
$
|
(1,133
|
)
|
$
|
(42,829
|
)
|
||||
|
Adjusted to exclude the following:
|
|
|
|
|
||||||||||||
|
Finance income (expenses), net
|
(4,764
|
)
|
85
|
(15,959
|
)
|
883
|
||||||||||
|
Tax expenses (income)
|
234
|
7,922
|
(158
|
)
|
10,159
|
|||||||||||
|
Depreciation and amortization
|
22,813
|
8,646
|
45,489
|
16,890
|
||||||||||||
|
Share-based compensation expenses (1)
|
17,640
|
78,523
|
34,679
|
83,654
|
||||||||||||
|
M&A costs
|
474
|
7,042
|
524
|
5,588
|
||||||||||||
|
Holdback compensation expenses (2)
|
2,792
|
—
|
5,582
|
—
|
||||||||||||
|
Adjusted EBITDA
|
$
|
34,168
|
$
|
40,802
|
$
|
69,024
|
$
|
74,345
|
||||||||
1 For the Q2 2021 period, a substantial majority is share-based compensation expenses related to going public.
2 Represents share based compensation due to holdback of Taboola ordinary shares issuable under compensatory arrangements relating to Connexity acquisition.
We calculate Ratio of net loss to gross profit as net loss divided by gross profit. We calculate Ratio of Adjusted EBITDA to ex-TAC Gross Profit, a non-GAAP measure, as Adjusted EBITDA divided by ex-TAC Gross Profit.
We believe that the Ratio of Adjusted EBITDA to ex-TAC Gross Profit is useful because TAC is what we must pay digital properties to obtain the right to place advertising on their websites, and we believe focusing on ex-TAC Gross Profit better
reflects the profitability of our business. The following table reconciles Ratio of net loss to gross profit and Ratio of Adjusted EBITDA to ex-TAC Gross Profit for the period shown.
|
Three months ended
June 30,
|
Six months ended
June 30,
|
|||||||||||||||
|
2022
|
2021
|
2022
|
2021
|
|||||||||||||
|
Unaudited
|
||||||||||||||||
|
(dollars in thousands)
|
||||||||||||||||
|
Gross profit
|
$
|
116,361
|
$
|
100,245
|
$
|
228,391
|
$
|
189,744
|
||||||||
|
Net loss
|
$
|
(5,021
|
)
|
$
|
(61,416
|
)
|
$
|
(1,133
|
)
|
$
|
(42,829
|
)
|
||||
|
Ratio of net loss to gross profit
|
(4.3
|
%)
|
(61.3
|
%)
|
(0.5
|
%)
|
(22.6
|
%)
|
||||||||
|
ex-TAC Gross Profit
|
$
|
143,209
|
$
|
116,870
|
$
|
281,437
|
$
|
222,784
|
||||||||
|
Adjusted EBITDA
|
$
|
34,168
|
$
|
40,802
|
$
|
69,024
|
$
|
74,345
|
||||||||
|
Ratio of Adjusted EBITDA margin to ex-TAC Gross Profit
|
23.9
|
%
|
34.9
|
%
|
24.5
|
%
|
33.4
|
%
|
||||||||
The following table provides a reconciliation of net loss to Non-GAAP Net Income.
|
Three months ended
June 30,
|
Six months ended
June 30,
|
|||||||||||||||
|
2022
|
2021
|
2022
|
2021
|
|||||||||||||
|
Unaudited
|
||||||||||||||||
|
(dollars in thousands)
|
||||||||||||||||
|
Net loss
|
$
|
(5,021
|
)
|
$
|
(61,416
|
)
|
$
|
(1,133
|
)
|
$
|
(42,829
|
)
|
||||
|
Amortization of acquired intangibles
|
15,828
|
639
|
31,608
|
1,278
|
||||||||||||
|
Share-based compensation expenses (1)
|
17,640
|
78,523
|
34,679
|
83,654
|
||||||||||||
|
M&A costs
|
474
|
7,042
|
524
|
5,588
|
||||||||||||
|
Holdback compensation expenses (2)
|
2,792
|
—
|
5,582
|
—
|
||||||||||||
|
Revaluation of Warrants
|
(11,958
|
)
|
—
|
(26,000
|
)
|
—
|
||||||||||
|
Exchange rate loss (income), net (3)
|
2,490
|
(393
|
)
|
2,706
|
1,545
|
|||||||||||
|
Income tax effects
|
(6,451
|
)
|
(1,444
|
)
|
(10,077
|
)
|
(1,545
|
)
|
||||||||
|
Non-GAAP Net Income
|
$
|
15,794
|
$
|
22,951
|
$
|
37,889
|
$
|
47,691
|
||||||||
|
Non-GAAP EPS basic
|
$
|
0.063
|
$
|
0.473
|
$
|
0.152
|
$
|
1.029
|
||||||||
|
Non-GAAP EPS diluted
|
$
|
0.063
|
$
|
0.090
|
$
|
0.151
|
$
|
0.187
|
||||||||
1 For the Q2 2021 period, a substantial majority is share-based compensation expenses related to going public.
2 Represents share based compensation due to holdback of Taboola ordinary shares issuable under compensatory arrangements relating to Connexity acquisition.
3 Represents income or loss related to the remeasurement of monetary assets and liabilities to the Company's functional currency using exchange rates in effect at the end of the reporting period.
The following table provides a reconciliation of the number of shares used to calculate GAAP EPS to IPO Pro forma Non-GAAP EPS basic and diluted.
|
Three months ended
June 30,
|
Six months ended
June 30,
|
|||||||||||||||
|
2022
|
2021
|
2022
|
2021
|
|||||||||||||
|
Unaudited
|
||||||||||||||||
|
GAAP weighted-average shares used to compute net loss per share, basic
|
250,777,915
|
48,518,124
|
249,095,931
|
46,351,830
|
||||||||||||
|
Add: Non-GAAP adjustment for ordinary shares issued in connection with going public
|
—
|
172,271,362
|
—
|
172,992,588
|
||||||||||||
|
IPO Pro forma Non-GAAP weighted-average shares used to compute net income per share, basic
|
250,777,915
|
220,789,486
|
249,095,931
|
219,344,418
|
||||||||||||
|
GAAP weighted-average shares used to compute net loss per share, diluted
|
250,777,915
|
48,518,124
|
249,095,931
|
46,351,830
|
||||||||||||
|
Add: Non-GAAP adjustment for ordinary shares issued in connection with going public
|
—
|
172,271,362
|
—
|
172,992,588
|
||||||||||||
|
Add: Dilutive ordinary share equivalents
|
443,063
|
35,592,019
|
1,562,609
|
35,562,170
|
||||||||||||
|
IPO Pro forma Non-GAAP weighted-average shares used to compute net income per share, diluted
|
251,220,978
|
256,381,505
|
250,658,540
|
254,906,588
|
||||||||||||
|
IPO Pro forma Non-GAAP EPS, basic (1)(2)
|
$
|
0.063
|
$
|
0.104
|
$
|
0.152
|
$
|
0.217
|
||||||||
|
IPO Pro forma Non-GAAP EPS, diluted (1)(2)
|
$
|
0.063
|
$
|
0.090
|
$
|
0.151
|
$
|
0.187
|
||||||||
1 IPO Pro forma net income for the three and six months ended June 30, 2021, includes an adjustment to add $6,029 and $11,944, respectively, of undistributed earnings previously allocated to participating
securities, assuming these securities converted to ordinary shares, in each case, as of January 1, 2021.
2 IPO Pro Forma Non-GAAP EPS basic and diluted is presented only for the three and six months ended June 30, 2021 assuming Taboola went public and consummated the related transactions, in each case, as of
January 1, 2021.
The following table provides a reconciliation of net cash provided by operating activities to Free Cash Flow.
|
Three months ended
June 30,
|
Six months ended
June 30,
|
|||||||||||||||
|
2022
|
2021
|
2022
|
2021
|
|||||||||||||
|
Unaudited
|
||||||||||||||||
|
(dollars in thousands)
|
||||||||||||||||
|
Net cash provided by operating activities
|
$
|
2,084
|
$
|
23,083
|
$
|
10,207
|
$
|
13,980
|
||||||||
|
Purchases of property and equipment, including capitalized internal-use software
|
(9,350
|
)
|
(16,138
|
)
|
(16,252
|
)
|
(21,675
|
)
|
||||||||
|
Free Cash Flow
|
$
|
(7,266
|
)
|
$
|
6,945
|
$
|
(6,045
|
)
|
$
|
(7,695
|
)
|
|||||
APPENDIX: Non-GAAP Reconciliation
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES FOR Q3 2022 AND FULL YEAR 2022 GUIDANCE
(Unaudited)
The following table provides a reconciliation of gross profit to ex-TAC Gross Profit.
|
Q3 2022
|
FY 2022
|
|||||||
|
Unaudited
|
||||||||
|
(dollars in millions)
|
||||||||
|
Revenues
|
$
|
311 - $331
|
$
|
1,434 - $1,474
|
||||
|
Traffic acquisition cost
|
$
|
(191 - $201
|
)
|
$
|
(839 - $859
|
)
|
||
|
Other cost of revenues
|
$
|
(29 - $31
|
)
|
$
|
(110 - $116
|
)
|
||
|
Gross profit
|
$
|
91 - $101
|
$
|
485 - $505
|
||||
|
Add back: Other cost of revenues
|
$
|
29 - $31
|
$
|
110 - $116
|
||||
|
ex-TAC Gross Profit
|
$
|
120 - $130
|
$
|
595 - $615
|
||||
Exhibit 99.3
INVESTOR PRESENTATION
‹#› Certain statements in this presentation are forward-looking statements, including our Q3 and
full-year 2022 guidance. Forward-looking statements generally relate to future events including future financial or operating performance of Taboola.com Ltd. (the “Company”). In some cases, you can identify forward-looking statements by
terminology such as “may”, “should”, “expect”,”guidance”, “intend”, “will”, “estimate”, “anticipate”, “believe”, “predict”,”target”, “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 press release include, but are not limited to: the ability to recognize the anticipated benefits of the recent acquisition of Connexity and the business combination between the
Company and ION Acquisition Corp. 1 Ltd. (together, the “Business Combinations”), which may be affected by, among other things, competition, the ability of the Company to grow and manage growth profitably, maintain relationships with
customers and retain its management and key employees; the Company’s ability to successfully integrate the Connexity acquisition; costs related to the Business Combinations; changes in applicable laws or regulations; the Company’s estimates
of expenses and profitability and underlying assumptions with respect to accounting presentations 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 Company’s Annual Report on Form 20-F for the year ended December 31, 2021
under Item 3.D. “Information About the Company - Risk Factors,” the Company’s Registration Statement on Form F-1/A filed on April 13, 2022, as it may be amended or supplemented from time to time, under the sections entitled “Cautionary Note
Regarding Forward-looking Statements” and “Risk Factors,” and in the Company’s subsequent filings with the Securities and Exchange Commission (“SEC”). Nothing in this presentation 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. Forward-Looking Statements - Disclaimer Non-GAAP Financial Measures This Presentation
includes ex-TAC Gross Profit, Adjusted EBITDA, Ratio of Adjusted EBITDA to ex-TAC Gross Profit, Free Cash Flow, Non-GAAP Net Income and Non-GAAP EPS Diluted, 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 presentation for reconciliations to the most directly comparable measures in accordance with GAAP. Industry and Market Data In this presentation, the Company relies on and
refer to c