Taboola at 20th Annual Needham Conference: Strategic Shift with Realize

On Tuesday, 13 May 2025, Taboola (NASDAQ:TBLA) participated in the 20th Annual Needham Technology, Media & Consumer 1x1 Conference. During the event, CFO Steve Walker outlined the company’s strategic shift with its new Realize platform, aiming to capture a larger market share in digital advertising. While the company projects significant revenue growth, it also faces challenges in proving the traction of its new initiatives to regain investor confidence.

Key Takeaways

• Taboola projects $1.9 billion in revenue for 2025 with a 30% adjusted EBITDA margin.
• The Realize platform marks a strategic expansion beyond native advertising into display and video formats.
• The company leverages generative AI to enhance productivity and advertising capabilities.
• Taboola’s partnerships with Yahoo, Apple, and LINE aim to boost advertising demand.
• The company is focused on maintaining profitability and converting 50% to 60% of adjusted EBITDA to free cash flow.

Financial Results

• Revenue target for 2025: Approximately $1.9 billion
• Adjusted EBITDA margin target: 30%, equating to $211 million to $212 million
• Free cash flow conversion target: 50% to 60% of adjusted EBITDA, with expectations closer to 60%
• Capital Expenditure: $40 million to $45 million
• Share Repurchases: $90 million invested in the first quarter and a half of the year
• Debt: $270 million revolver

Operational Updates

• Realize Platform Launch: Transitioned over a weekend, expanding into display and video ad formats.
• Supply Partnerships: Includes Yahoo, Apple, and LINE, with brand-name advertisers like Hulu and Samsung.
• AI Initiatives: Utilizes generative AI for productivity and campaign optimization, featuring an AI assistant named Abby.
• Verticalization: Sales team focused on industries such as finance, health, and e-commerce.

Future Outlook

• Strategic Growth: Focus on new demand forms, verticalizing sales, and securing unique supply partnerships.
• Realize Platform Expansion: Aims to support various ad formats, including display and vertical video ads.
• AI Integration: Plans to automate tasks and optimize campaigns to enhance user experience and reduce costs.

Q&A Highlights

• CTV Strategy: Opportunity to connect CTV ads with down-funnel conversions using Taboola’s data.
• Data Monetization: No plans to sell unique data to LLMs, keeping it proprietary for advertisers.
• Yahoo Partnership: Successful financially, with plans to expand advertising across Taboola’s network.
• Capital Allocation: Prioritizes share buybacks, followed by tuck-in M&A and debt repayment.
• Wall Street Perception: Investors await traction from new initiatives, particularly Realize, for full stock valuation.

Readers are encouraged to refer to the full transcript for more detailed insights.

Full transcript - 20th Annual Needham Technology, Media & Consumer 1x1 Conference:

Laura Martin, Senior Media Analyst, Needham and Company: The senior media analyst and analyst at Needham and Company, and I’m here to welcome Steve Walker. I think this is the first time. Isn’t this the first time I’ve ever interviewed you alone on stage?

Steve Walker, Chief Financial Officer, Tabula: That is correct. Yes.

Laura Martin, Senior Media Analyst, Needham and Company: Yes. Thanks for

Steve Walker, Chief Financial Officer, Tabula: having me.

Laura Martin, Senior Media Analyst, Needham and Company: Yeah. Thank you.

Steve Walker, Chief Financial Officer, Tabula: Be gentle.

Laura Martin, Senior Media Analyst, Needham and Company: Okay. No. That’s not a thing. That’s not a request I’m willing to abide. Nice to be asked.

How’s your one on one so far?

Steve Walker, Chief Financial Officer, Tabula: Very good. Yeah, it’s been a good conference.

Laura Martin, Senior Media Analyst, Needham and Company: Oh, fantastic. Great. Well, thank you for being here. I think maybe to level set between the people on the livestream and in the room, why don’t we start with what Tabula does? And you’re the chief financial officer, so why don’t at the end of that, you give us what your ’25 projections are, growth rates, margins, stuff like that.

Steve Walker, Chief Financial Officer, Tabula: Okay. Sounds good. No problem. So in terms of what Tabula does, so we’re a leading global performance advertising platform. What that means is we help businesses, grow by basically helping them, place their ads, performance ads, across the open Internet.

And that includes thousands of websites that we work with, OEM phone manufacturers, apps, so high quality supply. And we help basically the performance advertisers to achieve very specific goals, cost per acquisition, cost per lead. And we do do it for them. So our advantage is that we have very unique data. We see 600,000,000 people a day, every day.

And from that, we learn what they’re clicking on, what they’re reading, what they’re doing. And we’re able to use that data with our deep learning AI engine to basically target ads to them that will convert and help those advertisers achieve their goals. And then for the publishers, we help them with revenue and growing their business as well. So that’s Taboola in a very simple nutshell. In terms of 2025, so this year is going to be a strong year for us.

So we expect to achieve about $1,900,000,000 of revenue. We will, as usual, our kind of mantra is that we want to achieve 30% EBITDA margins, and that’s our target this year, about $211,000,002 $12,000,000 of adjusted EBITDA. From that, we want to convert 50% to 60% of it to free cash flow. We’ve said that we expect to be at the high end of that, so you can expect us to be closer to the 60% end of it. And that’s kind of our goal this year.

One other big thing that I’ll talk about since I’m sure you’re going to ask me about it next anyway is so we just announced a new platform called Realize. This is our new advertising platform, which basically takes us from being a native advertising business into being able to work with performance advertisers across all types of media, all types of formats, all placements on the page. They don’t have to be native placements. They can be display placements. It doesn’t have to be native ads.

It can be display ads or vertical video ads. Whatever they want to work with, we’ll work with them on it, applying that same kind of unique data and same unique deep learning engine to target the ads effectively and help them achieve their performance goals.

Laura Martin, Senior Media Analyst, Needham and Company: One of the things I run into with Tabula is that you guys are talking about this. You’ve sort of saturated the native market. So now the total addressable market is larger because you’re going after display ads, which are like a three times larger ad spending part of the budget. Why don’t you explain to the audience, what is a native ad? How is it different from a display ad?

Steve Walker, Chief Financial Officer, Tabula: Sure. So and and you know, the format is one thing, but it’s also the objective of the advertiser. So native advertising has grown up to be performance oriented. And again, performance ads means you’ve got a very specific cost per acquisition or cost per lead or some numeric goal in mind. You know what that goal is, and you know how to measure it.

That’s as opposed to, say, branding advertising, where you’re just trying to get your you know, you may have goals, but your your basic goal is to get your brand known by people. You’re not trying to get somebody to give you their email address or to sell a product right then. So performance is very specific to very specific goals. And basically, difference so native has grown up as a performance advertising. Display has actually grown up to be more of a branding business historically.

So a majority of display ads historically were to build a brand, to get awareness, to get your name known. Now it has moved over time to be more performance, but we see a big gap in the market. And that gap is that there’s not really a player out there who will help you to achieve whatever your goal is CPA, CPL, whatever your specific goal is in a very automated way with unique data and unique assets to help you to do that. So for instance, if you go to your standard DSP, for instance, and you say, I’m going to try and buy ads on the open internet. I’m going to try and achieve a performance goal, a CPL or a CPA, it’s kind of up to you to do it.

So DSPs are great software platforms. They let you bring in different data, connect it. It lets you target your ads in different areas. But really, it’s up to you, the advertiser, to figure out what works and what doesn’t. What’s different about Taboola is you come to us, you give us those same creatives, the same formats, whether it’s native or a display ad, which is more of a graphical ad or a vertical video ad like you see on Facebook all the time, and it’s our job to figure out where to place those ads to achieve your goal.

You don’t have to like be turning the knobs and flipping the switches to figure out what works and what doesn’t, that’s our job. So we think the gap in the market is that there’s a need for somebody who is going to just help a performance advertiser to succeed in the open internet, the same way they do when they go to Facebook or Google. So if you go to Facebook, Facebook doesn’t say, hey, which users do you want to target this ad and what traffic sources are you willing to take and things like that. They just say, give us your creatives, and we’ll help you achieve a goal. Same with Google.

Give us your creatives. We’ll help you achieve a goal. So we want to be that for the open internet.

Laura Martin, Senior Media Analyst, Needham and Company: So one of the learnings that’s been on the stage today is I would say three out of the I think you’re my eighth. You might be my seventh. Are guys introducing products that cross from the open Internet to walled gardens. And their big thesis is increasingly CMOs wanna optimize their spend across all of digital advertising. And their complaint about the walled gardens, even though they have best in class, like, feedback loops, is I they, meaning the CEO’s chief marketing officer, can’t control or can’t compare Google’s to Amazon’s to Metas.

So CEOs in the open Internet that have products that cross into the walled gardens, they’re finding it easier to bring in business because they can con they can compare their open Internet metrics against, not only just against each of the walled gardens, but across the walled gardens themselves, which gives a common metric, which super valuable to advertisers even if they’re not really using it for the open Internet guy. They’re using it to compare the effectiveness of their ad from Google to Meta

Steve Walker, Chief Financial Officer, Tabula: Yeah.

Laura Martin, Senior Media Analyst, Needham and Company: To TikTok. So talk to me about that because you basically just laid out a product vision that stays squarely in the open Internet.

Steve Walker, Chief Financial Officer, Tabula: Yeah. And it’s interesting because I think, by the way, that’s a great you know, I think that’s really smart of these companies who are doing that because I think that is if you’re a performance advertiser, at the end of the day, what is it about? It’s about achieving a very specific goal And knowing how you’re doing on that goal on Facebook versus Google versus the open Internet is very important for sure. I think for us, and by the way, maybe we get there at some point. For us, I think our thesis is that the gap that we’re trying to address is the fact that even just on the open internet, it’s really hard to figure out how you’re doing against that goal.

And it’s even harder to get to that goal because, like I said, standard DSPs provide tools, but they don’t provide a platform that does it for you.

Laura Martin, Senior Media Analyst, Needham and Company: So mean, one of the benefits you guys have, Steve, is you have the of the open sorry, you have the best of walled gardens because you are a DSP and an SSP. So you sort of have that wonderful feedback loop that the walled gardens have, but you have it in the space called the open Internet, which is incremental reach to any of the any of the individual walled gardens. I guess my question is, when you think about this there’s something going on in the open Internet for independence where there’s DSPs, is we’re moving data to the SSP level, which feels like it’s moving power away from DSPs towards SSPs. My question is, does that what’s happening at the trade desk magnite level, which are independents, they only used to have one side and they’re now sort of entering the middle, does that affect you guys at all as an end to end open Internet platform or not really?

Steve Walker, Chief Financial Officer, Tabula: Well, I mean, at the end of the day, we’re all competing for ad budgets. So it affects us in that way because we have to show why our solution is superior to the solution that they can get from those platforms as well. So for sure, it affects us in that way. I think, as you said, we have a couple of advantages. One is we’re already end to end.

So 90% of our revenue or more is with advertisers we have direct relationships with. And 100% of our supply well, not 100%, ninety % of our supply is also kind of locked in with publishers that we have long term agreements with. So generally speaking, we’re already end to end. So we’re ahead of a lot of those players who are trying to get there. And the second thing is I think we have a very unique set of data because we’re hard coded on the publisher pages.

Or in the case of working with an OEM, the OEM manufacturer gives us information, data that we can use to target users. So we have a very unique data advantage that I think a lot of those players are still trying to build. I mean, again, it affects us because we need to keep an eye on it and make sure we keep our lead. But I think we’re ahead of them in terms of both already being fully end to end and already having a data advantage that’s gonna be hard for them to replicate quickly. Okay.

Laura Martin, Senior Media Analyst, Needham and Company: So can you you have a unique data advantage. Do you have any ability to sell the data, the unique data advantage you have as a new revenue stream to LLMs on an aggregated basis where you don’t break it out publisher by publisher?

Steve Walker, Chief Financial Officer, Tabula: So, yeah, without getting into contract specifics, we have the right to use the data to provide our services. Could you interpret that as we sell it to an LLM? Maybe. Would we ever do it? No.

Because at the end of the day, that is our unique special sauce. If we give that data to somebody else, then the advertiser doesn’t have to come to us to get it. So I think as of now, we want that. Like you said, we’re a little walled garden like that. Like we want our data to be our data.

Let the advertisers come to us to get it. And by the way, with Realize, one of the things about Realize is we’re not just bottom of article native anymore. We’re going be in display spots. We’re going to be bidding on spots in apps. We’re going to be bidding on spots across the open internet.

So we want that data to be proprietary to us across that whole spectrum. If we give it away, then they don’t have to come to us for it.

Laura Martin, Senior Media Analyst, Needham and Company: Well, you would charge for it.

Steve Walker, Chief Financial Officer, Tabula: Of course, yeah. He wouldn’t

Laura Martin, Senior Media Analyst, Needham and Company: do it. Okay. CTV? Mhmm. Let’s talk about the future of CTV at Tabula.

Steve Walker, Chief Financial Officer, Tabula: Okay, so, you know, this is where Adam needs to be here, right? So CTV is interesting. So CTV today is primarily branding. Now, I know there’s a lot of companies out there, including one who I think is trying to get public, are pushing performance through CTV. Generally speaking, my understanding is the way they’re doing that is they’re connecting CTV ads to something else off either a user that they can then say, hey, that user bought this product later on and try and connect it in a performance way.

Very hard to do. We do think there’s an opportunity for us at some point to do that connection. So if a company is getting video ads and they want to then drive down funnel and get a lead or get a conversion from it, we think there’s ways that we can connect our data with that company and help them go down funnel. So, you know, use the CTV for what it’s good for to get the awareness, and then we’ll help you go down funnel from there and get a lead or get a conversion or get a purchase.

Laura Martin, Senior Media Analyst, Needham and Company: Selling your data off your platform then? I just asked about selling to LLM. You said, no. We wanna keep it proprietary. But wouldn’t this answer you’ve just given me be using data to to monetize the data in a different way off off your butt?

Steve Walker, Chief Financial Officer, Tabula: Well, we would still want them to come through our platform to do it. So we wouldn’t be giving the data away. We’d want them to spend the advertising dollars with us to help go down funnel. Funnel. For the With

Laura Martin, Senior Media Analyst, Needham and Company: our supply

Steve Walker, Chief Financial Officer, Tabula: and demand. With our supply and our demand. But with the well, actually, would be our demand and or the so if we’re working with a broadcast company, for instance.

Laura Martin, Senior Media Analyst, Needham and Company: Okay.

Steve Walker, Chief Financial Officer, Tabula: The broadcast company could say, we will get our advertisers to work with you too, and then you help them get down funnel to leads and conversions.

Laura Martin, Senior Media Analyst, Needham and Company: Okay. Okay. Okay. I mean, I guess I’m just trying to think of new revenue streams that don’t involve your DSP and SSP that opens you up to revenue from off platform Yeah. Which is a lot bigger TAM than your platform.

You know, that’s all. And actually, somebody was on my stage and I’m forgetting who, but was saying that for for like Outbrain or something, they have unique supply like you do, but they don’t have enough demand, which a lot of these guys say. And you guys are saying this too. You want more demand. And so in order to generate more demand, they’ve gone to, maybe it was Trade Desk that was staying there.

I’m trying to think if there was another DSP. And they’ve said, Trade Desk, why don’t you bring an incremental demand to our supply?

Steve Walker, Chief Financial Officer, Tabula: Have

Laura Martin, Senior Media Analyst, Needham and Company: you guys done that yet?

Steve Walker, Chief Financial Officer, Tabula: So we don’t

Laura Martin, Senior Media Analyst, Needham and Company: know who’s done this too.

Steve Walker, Chief Financial Officer, Tabula: Yeah, we allow programmatic bidding into our platform. And in fact, programmatic bidders win about 10% of the time on our platform.

Laura Martin, Senior Media Analyst, Needham and Company: Over your

Steve Walker, Chief Financial Officer, Tabula: Over our own bids. But that’s, I mean, it kind of shows the value of our data though, because these are some very sophisticated advertisers that are winning about 10% of the time. And the rest of the time, you need our data to win on our platform. But I think in terms of getting incremental demand, our focus we talked about this at our Investor Day. We think there’s three ways we grow the business from here.

So one is we will bring in other forms of demand. So for instance, we have a import your social campaigns button on our platform now. And we think that we can show advertisers that the diminishing returns they’re getting from Facebook, we can help them achieve better performance, at least for the end, the tail end of their budgets. So that’s one thing is new formats, new types of demand that we’ll bring on. Second thing is we also are we’re big enough now that we’ve been able to verticalize our sales team and really focus on kind of an optimized go to market.

We think that also will help us differentiate from smaller players who may not be able to be experts in the health industry or experts in certain verticals. And then third, I think we continue you saw us after we signed Yahoo two years ago and then launched it last year, we signed Apple after that. We just announced a partnership with a company called LINE, which is basically WhatsApp for Asia Pacific. I think our other kind of focus now is let’s go get forms of supply that is, again, unique to us, that comes with unique sets of data that will help attract that advertising demand. Because at the end of the day, the ad dollars follow the supply, and they want to be on high quality supply.

We’re the only company who can say, you can be native on the Apple iPhone, other than going to Apple directly. So it’s things like that that I think will help us also get that next level of growth and bring in more demand.

Laura Martin, Senior Media Analyst, Needham and Company: All of your supply is unique to you because you’re code on page.

Steve Walker, Chief Financial Officer, Tabula: Yep.

Laura Martin, Senior Media Analyst, Needham and Company: So what happened? Like, we had all this unique supply, but it turns out it’s not as valuable as we thought, so we’re going out and getting different forms of supply?

Steve Walker, Chief Financial Officer, Tabula: No, it’s very valuable. But I think what we found is that the bottom up article native is fairly saturated. So it’s hard to find a publisher website who doesn’t have some form of native advertising at the bottom of their page. So therefore, there wasn’t supply expansion. We are continuing to grow kind of our revenue per ad spot, but that that’s dependent upon the ad budgets.

And then what we found is, and this actually was a big learning that came from, Yahoo. We found two things. One is there are a certain set of advertisers, like the ones we brought over from Yahoo, like Intuit and Hulu and others, who we thought, okay, we’re showing great performance on Yahoo supply. You should advertise on the rest of our bottom of our article native. And what they said is, no, thank you, because we like even though we’re a performance advertiser, we like 100% share of voice.

So we don’t like to be in that stream of other stuff around us and ads and things So we said, Okay. And then the second thing that we learned is that there’s another set of advertisers. So if we have Hulu, we went and talked to Netflix. We said, look at the great performance that Hulu is getting.

I’m making up Netflix, but it’s an example. But Netflix, they said, yeah, but I just don’t want to learn how to do native. That’s not something I do. It’s not part of my skill set. So it was interesting to us.

We learned that we actually had to be a bit different in order to get those big brand advertisers to work with us in some cases. And that’s part of the core strategy of Realize. Realize is going to open us up to different forms of supply. So we’ll bid on display spots, which are 100% share of voice. We brought in Apple, which is 100% share of voice.

Actually, Yahoo’s good because it’s 100% share of voice. So we’re bringing in different types of supply that now appeals to those advertisers. And we’re not requiring them to learn native. We’ll tell them, Okay, you’ve got social campaigns that work? Great, give us those.

You’ve got display ad campaigns that work? Great, give us those. So what we realized is we needed to kind of break out of this bottom of article native in order to really bring in those incremental budgets that we need to continue to grow at the pace we want to.

Laura Martin, Senior Media Analyst, Needham and Company: Okay. Alright. Okay. That makes sense to me. Okay.

So then when we think about the new Realize, one of the things I just need to tell the audience is the best thing about Realize, it’s a new platform. It’s a brand new platform, and you guys changed it over weekend. So, like, over at Trade Desk, they’re trying to get people, like, the people who use their platform off of Solomar onto their new platform that’s already been out for, like, maybe eighteen months called Kokai, and it’s really given them a lot of trouble. So they won’t be able to get that done till the end of the year this year. So it’s gonna have been, I don’t twenty two months or twenty four months.

And you guys did it on a weekend, and you shut down the old platform. So the cost savings of that are meaningful if you can just transfer everybody over on a weekend. Does that mean the changes you’re making are less dramatic?

Steve Walker, Chief Financial Officer, Tabula: So first of I don’t know exactly what the trade desk is, so I won’t compare to them. But I think the changes were fairly substantial. You know, we’re we basically took a platform which was all geared towards native ads. Give us a thumbnail, give us a title, give us attribution text, and was geared towards you’re going to show up in this feed at the bottom of the article. And we turned it into a give us whatever format you want, and oh, by the way, we’re going to put it in a bunch of different spots.

So I think it was a pretty dramatic change, and it was risky. I mean, let’s not it was was a risk we took, saying we thought it was better to do a full conversion flip over rather than try and do two platforms and migrate. And so it was risky. But at the end of the day, we think it worked out well. And we do have our native advertisers have stayed with us.

And now we have the ability to upsell them on other formats and other placements. And we’re now open for business for those people who said, don’t want to do native. So it’s risky, but I think it worked out well.

Laura Martin, Senior Media Analyst, Needham and Company: So did you just create tabs? So when they go into the native tab, it looks like what they did on Friday, but they have to go there’s just a home page that now gives them other offerings. So, like, you can have you can watch sports or you can watch horror or you can watch like Roku does where they have these tabs?

Steve Walker, Chief Financial Officer, Tabula: Kind of. I mean, it’s not really a tab format, but yes. We tried it for the native advertiser who were used to the platform, we tried to make it look and feel as much like they were used to as possible while still having this extra functionality built on it. But we did completely rebuild the platform. Like, the interface is different.

It’s much more modular. It’s something that we now feel like we can really build upon as opposed to this kind of legacy native advertising platform, which would have been harder to keep building features onto.

Laura Martin, Senior Media Analyst, Needham and Company: So one of the things where Meta tells us they’re going, and I’m curious as to whether since you guys want to be sort of the open internet walled garden equivalent, so is this where you’re going? Meta’s saying, look, we want a performance advertiser, and they are really 2,000,000 advertisers. They are small and medium business. They want to put in a budget and then Meta will the Gen AI will go find all their assets that are IP protected. They will make the content.

They will then, let me call it, customize the content. They’ll go out. They’ll put the ad anywhere that Meta goes, and then they’ll get that return. Let’s say you say and then all they want is budget. You give us the budget, and I don’t even think they really want budget, but but, you know, do you give us a minimum return, so $4 for everyone you spend on Meta, and then let’s say you do a maximum $1,000,000 budget, you hit go.

They do everything else. They make the ad. They deliver the ad. And all they do is then give you the feedback loops with attribution that’s only creating their own homework, but only on them. Is that where you guys are going to end up going as the walled garden of the open Internet?

Steve Walker, Chief Financial Officer, Tabula: You know, I think, well, we certainly followed Meta and Google in terms of how they do things. And, you know, a lot of this is give us a budget and we’ll figure it out for you. So I think we’ll end up somewhere close to that probably over time. I mean, you’ve seen some of the advances that we’ve made. So we have a tool called Abi Yeah, self-service.

Self-service. So basically it helps advertisers come in and just get set up. It’s a generative AI assistant who talks to you and says, what’s your goal? What do you want to do? And then we do have an ad maker, which will actually make the ad for you for native today, not for display yet, but I’m sure that’ll be coming.

So yeah, I mean, we’re headed that way. I think we’ll end up in a similar spot over time probably. Certainly, we want to make it as frictionless and easy as possible just like Meta does.

Laura Martin, Senior Media Analyst, Needham and Company: I mean, historically, your captive advertisers, which you say is 90% of demand, have been very large companies, not Meta type advertisers. Much larger companies. Correct. Which is why we thought Abby, which is your self serve Gen AI product, which in three steps launches an ad campaign, which is very close to what Meta does for a living. We really thought it would open TAM, but it’s just been hard to get awareness and drive adoption.

Steve Walker, Chief Financial Officer, Tabula: We’re working on it. So we’re seeing some progress. We actually have a team now who is historically, just said self serve is not for us, because before generative AI, the idea of the complexity of getting an advertiser up and running was just too much. With generative AI, we now see a path. So with Abby, I think we can see ourselves getting there.

So we put a team behind it. They’re starting to work. We haven’t disclosed any numbers yet, but we’re starting to see some traction there. We’re starting to see some growth. We’re even putting some of the advertisers who are at the smallest side for our, what we call our growth team, which is our smaller advertiser team, into self serve because we think Abby’s good enough that Abby can help.

So I think we’re getting there. Abby needs to get better at not just launching, but also helping to optimize and up sell and things like that before we’ll be ready to kind of really turn it up. But we’re getting there.

Laura Martin, Senior Media Analyst, Needham and Company: Okay. That’s interesting. So basically, I can follow Met. I can listen to Metta, and that’s where you’re going. Three year, two or three

Steve Walker, Chief Financial Officer, Tabula: years before. We don’t just copy, but yes.

Laura Martin, Senior Media Analyst, Needham and Company: Okay, fair enough. Fair enough. Let’s talk about costs. You guys have guided to long term adjusted EBITDA margin expansion. What are your biggest levers to improve profitability?

Is it Gen AI, tech efficiency, OpEx rationalization, publisher terms, revenue mix shift? And is it a cost advantage over your ad tech competitors that so many of your engineers are sitting in

Steve Walker, Chief Financial Officer, Tabula: Tel Aviv.

Laura Martin, Senior Media Analyst, Needham and Company: Yeah, in Israel.

Steve Walker, Chief Financial Officer, Tabula: So that’s a lot of questions all in one. First of all, the biggest thing we can do for margin expansion, frankly, is more advertising budget Because it is really about, if we get more advertising budgets, our XTAC margins, so kind of our top line margins, will expand. And that’s like free money for us, because you don’t have to do anything to support additional XTAC necessarily. There’s small things. So that’s the biggest thing is more advertising budgets will expand margins at the top, and that’ll expand margins at the bottom.

But beyond that, we are focused on our president and COO, Eldad, who you’ve met at some of our investor days and the like. He is laser focused on using generative AI throughout the organization and really trying to get our teams to embrace it, use it. You know, when somebody asked him for incremental headcount, he says, but are you using generative AI? What could generative AI do that for you? And, you know, and it’s funny, he pushed me on it for our FP and A team, and as I started thinking about it, I’m like, wow, you know, you’re right because, like, Google notebook ln, it’s like, it’s amazing.

You put a bunch of documents in it, including like spreadsheets and stuff, and then I can just go to it and say, hey, how did Tabula News grow over the past five years? And it’ll give it to me. What

Laura Martin, Senior Media Analyst, Needham and Company: a chart or on

Steve Walker, Chief Financial Officer, Tabula: a table? It’ll do it however you can tell, put it in a table, it’s amazing what

Laura Martin, Senior Media Analyst, Needham and Company: Do you talk or do have to type?

Steve Walker, Chief Financial Officer, Tabula: Yeah, you type. Okay. But but yeah, it’s and then it’ll, you know, you can even say, oh, but actually I wanted that quarterly. Oh, but give me the, you know, year over year quarterly growth rate.

Laura Martin, Senior Media Analyst, Needham and Company: And that’s using Gemini?

Steve Walker, Chief Financial Officer, Tabula: It’s using Google Store. It’s using Gemini, yeah. So it’s a Google product. But it’s like, it just shows like, and I told our our FP and A team, I’m like, look, I know you say you’re overwhelmed, you’ve got a lot going on, but you could stop having questions from me if you just get all the data into the right place, and I can do it myself. It’s eye opening how you can do that.

And that’s like an admin function. Now if you talk about the R and D function, like if they’re not having an AI code for them, they’re doing it wrong. Totally. Right? So there’s just amazing levels of productivity that’s available.

So we will, we think, be able to kind of at least hold costs and, you know, kind of keep costs lower over time, thanks to AI. And then beyond that, obviously, you know, we’ve always talked about the fact that we’ll continue to get more leverage out of G and A. I think even our sales teams, we think, can become more productive with generative AI and also with self serve and other things can can have some effect there. So I think we’ll we’ll see productivity gains across the board. I think, actually, it’s kind of an exciting time because I think the economy in general should see productivity gains that people really embrace generative AI.

We won’t have enough power to run it all, but we are, you know, it’s going be amazing.

Laura Martin, Senior Media Analyst, Needham and Company: Meltdown The US. Well, Mark Zuckerberg is saying that by the middle of next year, he expects the coding excellence of Lama four, which is his open AI model, to replace mid level software engineers. And they’re on the cutting edge of innovation. So if they can replace mid level coding engineers, like everybody else can, like, replace their frontline most innovative.

Steve Walker, Chief Financial Officer, Tabula: Yeah.

Laura Martin, Senior Media Analyst, Needham and Company: I mean, that’s amazing. Replace and that’s in a software first business.

Steve Walker, Chief Financial Officer, Tabula: I know if

Laura Martin, Senior Media Analyst, Needham and Company: you guys think of yourself as software first, probably.

Steve Walker, Chief Financial Officer, Tabula: Yeah. I mean, that’s basically the way we think about ourselves.

Laura Martin, Senior Media Analyst, Needham and Company: Really interesting. Yeah. Jenny, changed everything. Free cash flow. How should investors track the bridge from EBITDA improvement to free cash flow growth?

Are there timing or structural differences investors should be aware of, working capital needs, CapEx, earn outs, etcetera?

Steve Walker, Chief Financial Officer, Tabula: Yeah. So we’ve said fairly consistently that we think that our adjusted EBITDA should convert into free cash flow at about 50% to 60% rate. We continue to say that, in fact actually this year we’re saying we should be at the high end of that. In fact, over the last eight quarters we’ve actually converted at about a 74% rate, so we’ve been doing a fairly good job of that. This year, we have a little bit more CapEx because we’re pushing to be back in office more.

So we’re doing some office upgrades. So it’ll probably be 40,000,000 to $45,000,000 instead of $35,000,000 last year. But we actually think we can offset that with some other working capital gains. So net net, I think we’re at 50% to 60% plus. And hopefully, over time, we can kind of continue to push that higher.

Laura Martin, Senior Media Analyst, Needham and Company: Okay. Cool. Yahoo. What has surprised you most about Yahoo? It feels to me like you ended up being a big supply integration, but now demand sources, you know, demand sources that we hope would come from Yahoo haven’t materialized, which has lowered your overall auction prices.

And you gave up 25% of Tabula shares to Apollo to get the deal done. What’s gone right and wrong over the past two years related to the Yahoo deal?

Steve Walker, Chief Financial Officer, Tabula: So first of we’re very happy with the deal. I mean, at the end of the day, we went from you know, we more than doubled our adjusted EBITDA. We more than doubled our free cash flow last year as we launched Yahoo. So Yahoo had a very profound effect on the financials of our business, and we’re very happy with the deal. Having said that, nothing ever goes exactly as planned.

As Mike Tyson likes to say, everyone has a plan until they get punched in the face. So what went well with Yahoo was, you know, we transitioned all the supply over, and we as we expected, our advertisers love the supply. Like, it’s amazing, unique supply. The way they’ve laid out their websites and everything is very attractive to advertisers. And it comes with very unique data.

Like, their users are heavy users. Like, they’re back all the time, which gives really unique data insights into their users. So the supply is unique. It performs really well on our platform. So the supply has has gone really well.

And we’ve you know, we have transitioned a lot of very big brand name advertisers that frankly are of the type that historically we didn’t have. So like the Hulu, Samsung’s Intuit’s of the world, those are advertisers that just hadn’t worked with us historically.

Laura Martin, Senior Media Analyst, Needham and Company: I thought you said they didn’t come because they wanted different things. They wanted just one

Steve Walker, Chief Financial Officer, Tabula: No. Those they did, but they’re only spending on Yahoo. So and so they continue and they were previous customers of Yahoo for Yahoo supply. What surprised us, and that’s actually what hasn’t gone as as well as planned, was that one, some of those that we thought would know, why wouldn’t Intuit then advertise on the rest of our network? Well, they didn’t want to be in the feed.

And then the second thing that didn’t go as well as we thought is we thought once we had the Yahoo supply and we had the, you know, proof that it worked for these other big brand name advertisers that we could get people like Netflix and others to come along. And again, that hasn’t happened as quickly because they don’t like native. So that’s where we talked about earlier, that’s what Realize is about is solving those things. The one other thing I would say that’s gone well with Yahoo is it’s really been kind of a flagstone deal for us or

Laura Martin, Senior Media Analyst, Needham and Company: Flagship deal. Cornerstone deal.

Steve Walker, Chief Financial Officer, Tabula: Cornerstone, flagship, yeah. I’m going to mix those two. I’m going to call it a flagstone. I like it. But yeah, it’s been a cornerstone deal.

You know, we probably wouldn’t have gotten Apple if it weren’t for the fact that they saw us doing Yahoo. So, and it’s leading to, know, LINE also took notice, that’s the Asia Pacific version of WhatsApp. Like, companies took notice and I think it’s really opening up doors for us that probably wouldn’t have been open without that deal.

Laura Martin, Senior Media Analyst, Needham and Company: So like the brand had glitter values.

Steve Walker, Chief Financial Officer, Tabula: Yeah. It’s basically, I think a lot of companies kind of went, oh wow, if if Yahoo is gonna outsource that whole native business to you, maybe Taboola kind of knows what they’re doing, maybe we should talk to them too. Remember, Adam would like to call it advertising in a box, we now have, for any company who wants to get into advertising, we’ll help you on the performance side in particular.

Laura Martin, Senior Media Analyst, Needham and Company: Okay, cool. Even your display is going to be tied to performance.

Steve Walker, Chief Financial Officer, Tabula: Yep. Our our display. Now, like, with Apple, for instance, they sell their own display when it’s branding, and if it’s performance, they send them to us.

Laura Martin, Senior Media Analyst, Needham and Company: Okay. Gotcha. Okay. Let’s talk about capital allocation. Do you think about capital allocation, like debt repayment versus M and A versus share repurchases for investment and growth?

And how’s this been changing over time?

Steve Walker, Chief Financial Officer, Tabula: So we’re, you know, fortunately, we’re in a position where we generate enough cash flow that we can fund kind of the investments we want to make in our business from our operating cash flow and still generate, last year, almost $150,000,000 of free cash flow. So we don’t need money to do what we want to do in terms of investing in our business. So then what do we do with that excess cash flow? Right now, it’s pretty clear our number one priority is to buy back shares, and we’ve been doing that very aggressively. We bought back over $90,000,000 of shares in the first quarter and a half of the year, So and we’re gonna continue to do that.

So that’s our number one priority. We will look at m and a, but probably more tuck in type of m and a. You know, we’re not in the market for anything big. Of course, never say never. If the right thing came along at the right value, you gotta look at it.

But I think, you know, for now we’re thinking it’s probably more tuck in. And then historically, I would have said and we’ll look to pay down debt over time, but we actually just got done with a debt refinancing where we took on a $270,000,000 revolver, paid off our fixed term debt, and this revolver is at much better terms from an interest rate perspective. And it allows us to take advantage of our working capital swings so that our average debt balance will be lower. So I’m not at this point in any hurry to take our debt balance down. We think buying back shares should be the priority.

Laura Martin, Senior Media Analyst, Needham and Company: Okay. So do you feel that after stock option exercise, you are actually buying more shares than account for the stock option exercise? So you’re actually shrinking capital base.

Steve Walker, Chief Financial Officer, Tabula: Yeah. So we’re actually down, from something like 340 something million shares to 336.

Laura Martin, Senior Media Analyst, Needham and Company: Well, this morning, had breakfast with Roku, they asked for the meeting, and their entire thing was, Laura, you’re measuring productivity wrong, And here’s how you need to measure it. So next quarter, I will not be using revenue per FTE, which is what I’ve used for two years now. I’m gonna try theirs, which they believe will capture, you know, this issue of FTE productivity and also the share dilution. Because so many companies like Google and Facebook are constantly moving their share bases and revenue per FTE doesn’t really capture the share dilution from stock based comp.

Steve Walker, Chief Financial Officer, Tabula: That’s interesting, yeah.

Laura Martin, Senior Media Analyst, Needham and Company: So we’ll see how it turns out. I have no idea. You’ll see it in print when it shows up whenever I get to it.

Steve Walker, Chief Financial Officer, Tabula: Great.

Laura Martin, Senior Media Analyst, Needham and Company: Anyway, let’s talk about Gen AI because I’m you know, I think everybody in this space being ad tech let me go to questions. Any questions from the audience? Okay. Let’s go to I mean, these are ad tech. Tech is in the name.

How are you guys using I know you’re using a lot of GenAI and a lot of it if you’re really moving towards this meta model where it’s more and more is gonna be automated, that’s all GenAI. But I gotta tell you, the most interesting meeting I had with Taboola in Israel was the GenAI guy that came in because, like, there’s a specialist you have at GenAI. And like he’s talking about a world view that like I never even visit.

Steve Walker, Chief Financial Officer, Tabula: Yep.

Laura Martin, Senior Media Analyst, Needham and Company: You know, because you and I think of you think you you and I think of quarters, years, maybe multiple years, quarter. But he’s like thinking anyway, so tell me what you’re doing in Gen AI and what the path is and how to integrate it into driving revenue or cost savings.

Steve Walker, Chief Financial Officer, Tabula: Got it. So actually, I’m gonna speak more broadly about AI holistically because I think it’s also the the biggest impact we have can have on our business is continuing to develop our deep learning AI, which is how we take the unique data we have and target ads to consumers. So I think that is actually something that we continue to invest a lot in. Know, max conversions, bidding algorithm that we released last year was an advancement on that. Yeah.

We have another

Laura Martin, Senior Media Analyst, Needham and Company: Which is automated.

Steve Walker, Chief Financial Officer, Tabula: Which is automated, exactly. We have another iteration called max revenue coming out and we’ll continue to iterate on those because frankly, that is the number one leverage point for our business we can get yield, basically. We can get more revenue per ad spot and have the advertiser happy, that’s money in the bank for us.

Laura Martin, Senior Media Analyst, Needham and Company: And how about Gen AI?

Steve Walker, Chief Financial Officer, Tabula: That is, well Gen AI, it’s AI. It’s deep learning AI, it’s distinction, know, Adam will talk to you about it. But it’s, it is AI. And then on the Gen AI front, you know, we’ve got two opportunities. One is make the world dramatically easier for our customers.

Laura Martin, Senior Media Analyst, Needham and Company: Right.

Steve Walker, Chief Financial Officer, Tabula: That’s where Abby comes in, that’s where the ad generator comes in, or ad maker, you know, that’s where, Meta’s vision, right? It’s like, just do it for them. Don’t like make people think, do it for them. So we are working on a bunch of initiatives in that area to make it dramatically easy to use our platform. And then the second one, we talked a little bit about earlier, is internal productivity.

Like we do think that this is something that you can use to really dramatically change the cost structure of your business over time. Or, you know, increase the productivity, which ultimately means margin. So ultimately, we think there’s a lot of opportunities in that front that we talked about earlier.

Laura Martin, Senior Media Analyst, Needham and Company: Okay. Great. So we’re using AI, these deep learning AI, which sounds like it’s a midpoint between old AI and generative AI, because generative AI has to sort of make new things. Old AI just took a bunch of data, but didn’t I don’t know what it did with it. And deep learning AI makes better algorithms which makes better recommendations or better targeting.

Steve Walker, Chief Financial Officer, Tabula: Right.

Laura Martin, Senior Media Analyst, Needham and Company: Okay. Got it. Okay. Your probably is no. So one of the things Wall Street believes is that everything’s gonna be tied to purchase, not just outcomes.

Is that too simplistic? Is that not a trend you’re seeing? You think performance advertisers are staying at other metrics other than purchases?

Steve Walker, Chief Financial Officer, Tabula: So I think they’re onto something in that I think everything is moving down funnel and I think everything needs to be, that’s why people are talking about CTV for performance, Because it’s everything needs to get tied to that end result, which is somebody buys a product or a service or does something that makes a business money. But you can’t skip directly to it. And that’s the challenge. And so like a big part of our business is cost per lead. So it’s Wayfair trying to build up their email list for their home furnishings newsletter.

And you know, they pay us to help them get email leads. Well, that is their first step towards then getting somebody to buy because if they, it takes consumers a while to get educated and to like learn what they want and so if you get them on a newsletter and you start telling them about why the outdoor fire pit thing is the best thing since sliced bread, then you can get them to buy it. If you just drop an ad on them and say buy this, it’s kind of like, I don’t know why I need that. So I think there a journey for most consumers, so I don’t think you can skip to the bottom, but I do think the end result needs to be the bottom at some point, so. Okay.

And by the way, I think that’s where we’re somewhat uniquely positioned because we can go from that mid funnel helping to get the leads, helping to get awareness, know, and we’re very, you know, historically we were called content discovery because what we did is we helped consumers read content about products and services, which helped educate them, which helped them on that journey to the bottom of the funnel. Now we also have, we bought Connectivity, which allows us to now get all the way to the bottom of the funnel and get actual sales for the retailers who want to sell the products and services.

Laura Martin, Senior Media Analyst, Needham and Company: I would say that’s been my biggest surprise. Any questions from the audience? Okay. I was Connectivity. So much silence around Connectivity on the last couple calls.

What the heck is going on with Connectivity?

Steve Walker, Chief Financial Officer, Tabula: You know, it’s funny because the reason for that is because we’re now, you know, we verticalized our Salesforce, so we now have a finance vertical, we have a health vertical, we have an auto vertical, we have a travel vertical, and frankly what we’ve decided is that really e commerce is just a vertical. It’s a unique set of advertisers, which happens to be retailers, who need a specific type of targeting to achieve their goals, and the goal in this case is a CPA, it’s a cost per action or yeah, exactly, or acquisition, exactly. So ultimately, we’ve and so we’ve started thinking about it that way internally. So I think that’s why you’re not hearing us talk about it as much. We will talk about it as one of our verticals and how it’s doing, but not as a standalone business per se.

Laura Martin, Senior Media Analyst, Needham and Company: So I would have guessed it actually had applicability to finance, health, travel and autos, but you’re saying it doesn’t, it really only focuses on retail.

Steve Walker, Chief Financial Officer, Tabula: No, because the whole Connectivity business was retailers. Walmart, Target, Wayfair and others, but it really was helping them sell product at the end of the day. So it wasn’t helping Citibank sell credit cards for instance.

Laura Martin, Senior Media Analyst, Needham and Company: But that’s what I’m saying, it seems like it would have had applicability to these other

Steve Walker, Chief Financial Officer, Tabula: We’ve certainly learned from how they did business to be better at it ourselves. And I think as we verticalize, they are a very mature and well established vertical that the other verticals can learn from.

Laura Martin, Senior Media Analyst, Needham and Company: Okay. And when you look at that e commerce, let me just call it Connexity even though it’s like a vertical.

Steve Walker, Chief Financial Officer, Tabula: Yep.

Laura Martin, Senior Media Analyst, Needham and Company: What percent of your total ad budgets are that? Like, you think of finance, health, travel, autos, you think about all the money that’s spent, how big is e commerce as a percent of that on your platform? Is it 10% or 2%?

Steve Walker, Chief Financial Officer, Tabula: No, it’s roughly 20 ish. Yeah. It’s a big vertical.

Laura Martin, Senior Media Analyst, Needham and Company: Something has to be smaller. If it’s 20, what’s

Steve Walker, Chief Financial Officer, Tabula: So not all of those are 20. Mean, and I don’t have the numbers in front of me, I believe that finance is probably close to that.

Laura Martin, Senior Media Analyst, Needham and Company: Okay.

Steve Walker, Chief Financial Officer, Tabula: And then the others are probably a bit smaller, but I, you know, again, I don’t have the numbers in front of me.

Laura Martin, Senior Media Analyst, Needham and Company: And that’s because finance and health, I totally understand finance and health because they have so much regulation that they’re really high value added silos. I don’t understand travel in autos. Is autos just because it’s so big?

Steve Walker, Chief Financial Officer, Tabula: Yeah. I mean, so the way basically, if you were to go back to the early Google days and look at the search and where did they get the highest, you know, revenue per search

Laura Martin, Senior Media Analyst, Needham and Company: Yeah.

Steve Walker, Chief Financial Officer, Tabula: It’s those same verticals. And the reason for it is because if you get a new customer for a credit product, it’s high value. If you get a new product, a customer for a travel plan, it’s high value. If you get a new customer to come buy a bag of potato chips, it’s not as high value. It’s really about the So they’re a

Laura Martin, Senior Media Analyst, Needham and Company: lot of them, that’s why

Steve Walker, Chief Financial Officer, Tabula: they’re 20%. Exactly. Yep.

Laura Martin, Senior Media Analyst, Needham and Company: Whereas the other ones might be, you know, five times the CPA or CPO because the leads are so valuable.

Steve Walker, Chief Financial Officer, Tabula: Exactly. Yep. Okay.

Laura Martin, Senior Media Analyst, Needham and Company: Let me see how we do it on time. Oh, yeah. We’re right on time. Okay. And the only one we didn’t do is what’s Wall Street missing.

So three key takeaways you would like Wall Street to take away from this fireside chat about why the stock’s undervalued.

Steve Walker, Chief Financial Officer, Tabula: Yeah. So so, you know, hard for me to say what Wall Street broadly is missing or not missing. I think our sense though from talking to investors and, you know, kind of getting, listening to their questions closely and trying to get a sense of what they’re thinking is, we’re in a transition right now. You know, we’ve admitted that the native business was growing too slowly and we can’t just be a native business. So we launched Realize.

We’re expanding our TAM, we’re going into new markets. I think we’re now a prove it story to a lot of investors where they want to see the traction in that before they’re going to jump in. And I think if we can show them that, and we can show them that the growth is there, then I think we’ll get the valuation that we deserve. But we’ve got to prove it, I think, at this point.

Laura Martin, Senior Media Analyst, Needham and Company: Okay, great. I will call it there. Thank you so much, Steve.

Steve Walker, Chief Financial Officer, Tabula: Thank you.

Laura Martin, Senior Media Analyst, Needham and Company: Thanks for your time.

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