Taboola.com Ltd. Q2 FY2022 Earnings Call

Good day and thank you for standing by. Welcome to the Taboola Second Quarter 2022 Earnings Conference Call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Jennifer Horsley. Please go ahead. Thank you and good morning, everyone and welcome to Taboola's second quarter 2022 earnings conference call. I'm here with Adam Singolda, our Founder and CEO; and Steve Walker, our CFO. We issued our earnings press release yesterday after market and it is available along with our Q2 shareholder letter in the Investors section of our website. Now, I'll quickly cover the Safe Harbor. Certain statements today, including our expectations for future periods are forward-looking statements. They are not facts and are subject to material risks and uncertainties described in our SEC filings. These statements are based on currently available information and we undertake no duty to update them, except as required by law. Today's discussion is also subject to the forward-looking statement limitations in the earnings press release. Future events could differ materially and adversely from those anticipated. During this call, we will use terms defined in the earnings release and refer to non-GAAP financial measures. For definitions and reconciliations to GAAP, please refer to the non-GAAP tables in the earnings release posted on our website. With that, I’ll turn the call over to Adam.

Thanks, Jen. Good morning, everyone and thank you all for joining us for our second quarter call. Q2 was another good quarter. We delivered $143 million of ex-TAC, a growth of 22.5% and adjusted EBITDA of $34 million. Both beat the high end of our guidance which gives us confidence to hold our 2022 full year guidance. While we have seen softness in advertising in the U.S. since the last quarter, over the last few weeks, the effects of the war in Europe as well as the softness in the U.S. has been stabilizing. We're also seeing the benefit from diversity in our business. For instance, we're seeing strength in our e-commerce business a bit better than we expected, as well as we continue to see exponential growth in Taboola News which for the first time, we're showing the run rate to generate north of $50 million in revenue this year. At the same time, given the challenging macro environment, we're taking measures to control our operating expenses, prioritizing things that are key and spending less than others. On the business front, we're seeing good momentum. We've spoken this year about the strength of our publisher pipeline and that is translating into many new publisher partnerships. In fact, we forecast that in 2022, we will sign almost as much new business as we did in a record-setting year in 2019. For context, that equates to nearly double the monthly new business we signed in 2021. So this is a big year for us. This summer has been busy and we recently won incredible partnerships such as PMC, Gray, Fox Sports, Time.com and many others. Gray, the largest owner of top-rated local television stations and digital assets in the U.S., was a competitive win, a new 5-year partnership that includes Taboola Feed across all of its digital properties as well as homepage integrations on more than 100 websites. They also will test additional Taboola offerings, including Taboola Newsroom, our technology offerings that provide important leadership insights to publishers by using advanced AI and signals for more than 500 million daily active users on the Taboola network. Fox Sports is another new win. It's a 3-year partnership that includes Taboola Feed as well as our high-impact mid-article recommendation reel. We're very excited about this partnership and it's proof of our strength in the sports vertical. We work with many of the major sports networks in the U.S., including ESPN, NBC Sports, CBS Sports, USAToday Sports, and now Fox Sports and many, many others which give our advertisers great, verticalized reach and value when choosing to work with Taboola. We've also seen many of our existing credible partners re-choose Taboola and renew with us. For example, Cox Media Group, Silo Media News Group, StrOEr content group, and many, many others. When taking a data-driven view of our publisher momentum, not only are we adding a new record amount of publishers every single month, our churn is also trending under expectation, meaning we're keeping more partners than what is in our plan. Another highlight that we've spoken about all over the year is Taboola News, our Apple news product for Android devices which I'm so excited about. I always say that Taboola is a startup of startups and Taboola News is turning into a blueprint for how we can scale a new business under the Taboola infrastructure. We continue to expand the work we are doing with mobile devices and OEMs, adding new partners, growing in new geographies, expanding how we can recommend personalized news on many screens we're on, think device homepage, wake screen, and so forth. Taboola News is growing triple digits, as I indicated on our last call and we expect it to reach close to $50 million annual run rate by the end of the year, so becoming a meaningful contributor to our financials. What makes this so exciting is how synergistic it is to the rest of our business by bringing more viewers to our publisher sites. This is huge for them in a time when capturing audience attention can be challenging with TikTok and other social networks, and it is huge for us as well because it results in a publisher deepening their relationship with us. Over time, you'll see the publishers choose Taboola not only for generating the highest revenue they can generate, not only for utilizing the editorial technology but also to drive new audience growth to their site. In some countries, publishers have started proactively reaching out to us to seek partnerships mainly because of traffic they see going to other publishers in their market. That's a good sign. Another new offering area where we're making progress is with our bidder which we first launched last quarter on Microsoft. We have numerous strategies to increase our share of the $64 billion open web market. And while most of those involve converting banners to more native advertising formats, our new bidder will allow us to bid into display inventory and win a portion of that inventory. We think our bidding advantage is threefold. First, we have unique CPC advertiser demand. 90% of our revenue is from our own advertisers. Second, we have unique first-party data. We might see a user interact with us in the bottom of the article unit, see what they read and click on, and then bid on them on a better placement on the homepage and such. Third, we have unique AI technology. We have years of deep learning investment and now we have a team focused exclusively on bidding in the open web, perfecting our performance which is what a Microsoft contract is allowing us to do. We're early days. However, we have begun piloting the bidder technology outside of Microsoft in the second quarter and we're seeing encouraging results on a handful of publishers. We're trending to generate a few million dollars this year. The longer-term opportunity is significant when you consider Taboola is working with about 9,000 publishers and how this can increase our share of wallet within our publisher partnership. Lastly, I'm also happy to report that we're seeing good results in our e-commerce business despite the macro pressure. Because our solutions in e-commerce are 100% performance-based, we're either paid a commission on sale or able to virtually guarantee that the advertiser CPC ad spend will back out to their ROI goals effectively the same as commission, we have seen little to no pullback in this type of ad spend. Historically, these types of budgets continue to exist even in a recession. In fact, in some cases, we're seeing clients ask us if we can find more opportunities to help them spend as organic traffic has slowed down. I believe consumers are becoming better online shoppers through the pandemic and those new behaviors are not going to go back. Coming off of a good second quarter and looking at the back half of the year, while there's a lot going on with the recession and advertising softness, we have the right priorities as a company, the right team that has been executing together for the past decade. The market is big and we feel optimistic about the tailwinds in business that I mentioned earlier. This is also an election year in the U.S. and a World Cup year which have historically driven good advertising budgets as well as traffic surges, all of which are giving us confidence to reiterate our full year guidance. As I finish, I want to tell you, I strongly believe this is a good time for a company to focus on its fundamentals, its competitive advantage to do the work and caring more now than ever about adjusted EBITDA and free cash flow. We always cared about profitable growth. But now more than ever, it is important so we come out even stronger on the other side of this, whenever this ends. I'm proud of Taboola's north of $150 million in adjusted EBITDA this year, along with our strong cash flow profile. And at the leadership and Board level, we're already thinking about 2023 and beyond. I'm energized as well as my team. And now I'll pass it over to Steve to talk more about our financials.

Thanks, Adam and good morning, everyone. As Adam shared, we had a solid second quarter. We met or exceeded our Q2 guidance on all measures despite some macro headwinds. Revenue in Q2 was $342.7 million, ex-TAC gross profit was $143.2 million and adjusted EBITDA was $34.2 million. This represented ex-TAC growth of 22.5% year-over-year or 4.7% on a pro forma basis with Connexity. On a constant currency basis, the pro forma growth would have been 7.1%. Our adjusted EBITDA margin or the ratio of adjusted EBITDA to ex-TAC gross profit was 23.9%. In terms of the Q2 gross revenue growth of $14 million, $22 million came from new digital properties, while existing digital property partners decreased $8 million. This is obviously a very unusual event to see our existing partners shrink year-over-year. This was driven by the weak macroeconomic situation that started in Europe in Q1 and spread to the U.S. and much of the rest of the world around the middle of June. In our business, this translated to a pullback by advertisers which resulted in weaker yields and a decline in revenue from those existing property partners. Our Q2 ex-TAC gross profit was $143.2 million and was up $26.3 million or 22.5% year-over-year. Adding Connexity to our business obviously had a positive impact but we are also seeing the benefits from our diverse revenue base as our growth came from three sources. The addition of new digital property partners to our network, growth from new offerings such as Taboola News, and the growth from Connexity. This growth more than offset the impact of the lower yield as well as the anticipated declines in our Microsoft contract as we transition to the new bidder. Our ex-TAC net dollar retention for our publishers was 99% for Taboola on a stand-alone basis, just under 100% driven by the weaker yield I highlighted earlier. Looking at operating expenses, they were down $28 million year-over-year. The decline was driven by $58 million of lower share-based compensation expenses as the prior year was unusually high as a result of going public. Excluding stock-based compensation, operating expenses were higher by $30 million, with slightly less than half of that coming from higher depreciation and amortization from intangibles driven by the Connexity acquisition. The remaining increase came mainly from investments we made in the business, including higher labor expenses reflecting the inflationary environment and tight job market as well as from the inclusion of Connexity which we did not close on until September 1, 2021. As Adam mentioned, given the macro pressures, we are taking actions to reduce operating expenses going forward, including reducing discretionary spend and decreasing our rate of hiring. We generated adjusted EBITDA of $34.2 million which was above our guidance of $23 million to $28 million, a decrease year-over-year driven by our investments in the business. Adjusted EBITDA margin of 23.9% was lower year-over-year but in line with our expectations. GAAP net loss of $5 million included warrant liability revaluation benefit of $12 million, share-based compensation expenses of $20 million and intangible amortization of $16 million, all of which were excluded from non-GAAP net income of $15.8 million which was above our guidance of $6 million to $11 million. In terms of cash generation, in Q2, we had $2 million in operating cash flow while free cash flow was negative $7 million. Cash flow in the quarter was negatively impacted by approximately $22 million from a combination of one-time tax payments and publisher pre-payments. We ended Q2 with a strong balance sheet and positive net cash. Our cash and short-term investments balance of $308.5 million remains above our debt balance of $288 million. We also recently entered into a $90 million 5-year senior secured revolving credit facility which further improves our liquidity position. Shifting now to our expectations for Q3 and the rest of 2022. I won't go through all the numbers as they are outlined in detail in our press release. Overall, our overachievement in Q2 provides us confidence to reiterate our 2022 guidance on ex-TAC and adjusted EBITDA, which are the main metrics we focus on. We are lowering expectations for revenue, mostly due to our mix of business. More revenue is coming from areas with higher ex-TAC margins such as Connexity, Taboola News, and certain high-margin core regions and less is coming from areas with lower ex-TAC margins. We also anticipate some tailwinds in Q4 from the U.S. elections, the World Cup, and strong performance from Connexity which is a Q4 driven business. I should note that our guidance assumes continued weakness in the macroeconomic environment at current levels. This weakness has translated into the lower advertising demand we experienced throughout the second quarter. Our guidance does not assume a further weakening of demand or a departure from our normal fourth quarter seasonality. Overall, the fundamentals of our business are strong. We expect over $150 million of adjusted EBITDA for the year and healthy free cash flow. We are seeing near-record new publisher partnership growth, exponential growth in Taboola News, and strength in e-commerce. We are being judicious in our investments and managing costs closely while still investing in areas that are important to our strategy and growth. We believe all of this will position us for accelerated growth as we come out of this period of economic weakness. With that, let's open it up to questions.

Our first question comes from the line of James Kopelman from Cowen.

First one for Adam. On Taboola News, congrats on hitting the $50 million run rate. Given the rapid growth, if we look out maybe one to two years, how should we frame the size of the opportunity there versus the overall Taboola business? And in terms of growth drivers at Taboola News, is it largely adding more device manufacturers and more regions? Or are you focused on scaling user penetration and engagement in your existing footprint? And then I have a follow-up for Steve.

Taboola News is exciting because it demonstrates our ability to organically develop substantial businesses that contribute financially to both our current and future operations at Taboola. I'm thrilled about this organic initiative, as it highlights our culture and infrastructure's capacity to create successful, diverse businesses within the Taboola framework. Currently, Taboola News is projected to exceed $50 million this year for the first time we're disclosing that number. It has around 200 million active users each month and now accounts for about 30% of our total clicks, which numbers approximately 30 billion annually. This indicates a strong level of engagement. Additionally, during our Investors' Day, we discussed strategies for increasing consumer interaction and engagement, and Taboola News is a vital tool for enhancing our value to users across the open web. All of these trends are encouraging. To expand the financial success of this business, we plan to increase touchpoints. Presently, OEMs integrate us into their wake screens, allowing users—who check their screens about 80 to 100 times per day—to swipe right for a curated feed of news and recipes tailored by our data and AI. Xiamoi is a prime example of utilizing this feature extensively. Another touchpoint is the "minus one" screen, predominantly used by Samsung and others, similar to traditional Apple news. Some OEMs are also exploring other touchpoints, such as notifications and integrating news into various widgets on their devices. All these initiatives are aimed at increasing revenue per user. We are also focused on upselling and upgrading OEMs to incorporate more touchpoints to boost our revenue. Additionally, expanding our reach to different devices is crucial. Long-term, we're concentrating on high-potential geographies like the U.S., U.K., and Japan, where advertising has a more significant impact. Overall, I anticipate that Taboola News will generate hundreds of millions of dollars in revenue and become a significant part of our business moving forward.

And then a quick follow-up for Steve. Just in terms of ad verticals, we’ve heard from other companies reporting that the U.S. consumer remains relatively strong, while there’s been more of an ad spend pullback or perhaps just caution on the enterprise side. Is that aligned with what you’re seeing among your advertiser clients? Any color there would be helpful.

Yes. So that's roughly consistent with what we're seeing. So generally speaking, what you're seeing is that from an advertiser perspective, the pullback has been more on branding advertising and things that they can't measure the ROI on as easily. So the further up the funnel you go, the more we're seeing kind of conservatism from our advertisers. Lower funnel performance has been more robust. So that's one reason that Connexity has been an area of strength for us because they're at the very bottom of the funnel, their Google equivalent at the bottom of the funnel. So we're seeing kind of more from an advertiser perspective, you're seeing more conservatism the further up you go from the funnel. But as you pointed out, I think also the consumer has been fairly strong, so our advertisers that are more directed towards consumer tend to hold up a bit better. Anything that's more directed towards enterprise is a little bit softer. For us, though, our enterprise business is fairly small. So most of what we do is kind of targeted to consumers. So that's another reason we've probably held up a little bit better in some ways.

Thanks, James. Operator next question. Our next question will come from the line of Andrew Boone from JMP Securities.

Matt on for Andrew. So my first one is just you mentioned publisher or performance advertisers' success is a key priority in the letter. Can you just help me understand the key drivers of improving ROI there? And anything that you’re excited about on the road map? And then two, just on new publisher share gains, they seem pretty significant. How should we think about this impacting 2022? And is there potential tailwind in 2023 as your publishers mature?

Thank you for the question. In terms of performance advertising, it's our largest investment and serves as our primary focus for driving Taboola's long-term success. We have around 15,000 direct advertisers working with us, and interestingly, even during economic downturns, these performance advertisers tend not to leave. They may reduce their budgets, but they remain committed, which shows the resilience of companies that maintain direct relationships with them. We are dedicating significant resources to various aspects of smart bidding and performance advertising. One important improvement is in multi-touchpoint optimization. Previously, smart bid optimized for a single conversion—be it a click, a subscription, or time spent on the site. Now, we are enhancing our efforts to capture multiple touchpoints and optimize across all of them, making it easier for advertisers to achieve quicker and multiple conversions with us. A significant focus over the last quarter has also been on header bidding, which is integrated into the smart bid technology. We have seen promising results; for instance, the successful launch with Microsoft, where one publisher used our bidder technology, achieving remarkable growth. In the past 90 days, we've rolled out the same header bidding technology with several other publishers, generating millions in incremental revenue. With our network of 9,000 publishers, this technology ensures advertisers reach the right audience at a lower cost per acquisition. To illustrate, if we see a user on CNBC reading about furniture, and later that user visits a homepage with display inventory, the header bidder can still target them with a furniture ad, even if we don't have direct access to that page. This capability allows us to engage with users multiple times, giving advertisers more opportunities for conversions while reducing their costs to Taboola based on CPA. These initiatives have kept us very busy over the last quarter and represent our primary efforts in performance advertising.

In response to your second question about new publisher gains and their implications for 2022 and 2023, I want to express our excitement. This year marks our second-best performance on record for new publisher business, which is remarkable and represents double the monthly growth compared to last year. Regarding its future impact, it's important to understand how publishers typically ramp up with us. We usually start with smaller engagements, and over the next couple of quarters, we gradually increase our collaboration as we launch more properties and positions, which leads to improved profitability over time. Initially, our margins may be lower, but they grow as we align the right demand with those publishers. Many of these partnerships were initiated in the last quarter or two, with some even launching in the third quarter. Therefore, I expect improved performance and revenue gains from these new publishers in the fourth quarter, contributing significantly to our 2023 outlook as they reach their full potential and sustainable margin levels. It's also important to note that we are in a strong overall business position. While the new publisher business is a significant factor, Adam also mentioned the positive momentum of Taboola News. In certain markets, publishers are reaching out to us for partnerships because they see the traffic generated by Taboola News going to other sites, and they want to be involved. This will benefit our business in various ways. With the strength from Connexity and the new publisher acquisitions, we are confident about our positioning once ad rates recover and we move past this phase of macroeconomic challenges.

Thanks, Matt. Operator, next question. Our next question comes from Laura Martin from Needham.

Good numbers, guys. So let’s step up a couple of levels. And at the 30,000-foot level, I have two questions but let’s do one at a time, Microsoft first. So Microsoft now has Xandr’s on the Netflix business. I’m interested in your point of view about whether you think that after they get Netflix sorted out on the CTV market, they become a new competitor in the open Internet, thereby sort of disadvantaging incumbents over the next three years. Do you have a point of view on that, Adam?

I'm pleased for them, as the deal with Netflix is quite exciting. There's a lot happening, and it's difficult for me to predict their future actions. They might leverage the demand they create for Netflix in other channels, which seems like a promising opportunity. However, I can't be sure what their plans are. This might be more applicable to demand-side platforms and companies like The Trade Desk that channel demand into other areas. They could potentially expand into that area. Regarding OpenLab and Open Internet, if the goal is to establish a network of publishers and advertisers while executing our operations, that requires considerable effort that goes beyond just generating revenue. Publishers signing on for three to five years now expect more than just cost-per-thousand impressions. They want assistance in engaging consumers, attracting new audiences, acquiring subscriptions, and receiving analytics. Building all that takes about a decade and a significant investment in research and development to stand out in the market and maintain strong relationships with valued publishers. It's hard to predict their long-term actions, but I believe that to create a publisher-centered open web company will take time. However, pursuing demand in other channels could be a sound strategy if that's their intended direction.

Okay. My second macro question is regarding your reported pro forma growth of 5% compared to Innoven's 17%, attributed to the rapid growth of CTV. Do you believe that the mobile internet, particularly with Meta's recent revenue decline year-over-year for the first time in history, is losing market share to connected television? Do you think that connected television will become the main growth driver over the next three years and take share from the mobile digital ad market? Could you share your thoughts on this?

Yes. I think there are different segments. CTV primarily competes with linear TV, and the question is where the $100 billion budget for TV in the U.S. is shifting. There's a lot to consider regarding how traditional linear video ads, shown before, during, and after shows, are transitioning into a digital measurable environment, which is essentially what CTV represents. Additionally, there is the dynamic between streamers and non-streamers and how that will evolve. Looking at the Open Web, companies like Google, Facebook, and Taboola represent a market worth hundreds of billions of dollars focused largely on performance advertising. Most of Google's, Facebook's, Amazon's, and Taboola's revenues come from performance-driven budgets, which are the backbone of the advertising industry. However, I don't think these budgets easily convert into the TV space. Converting to product purchases, subscriptions, affiliate marketing, and e-commerce is much more effective in a more engaged, user-driven environment like computers or mobile apps. Both markets are significant, but currently, we're experiencing some challenges due to the recession and the conflict in Europe. Despite this, performance advertising remains a robust market, and I’m optimistic about its future. We just have to endure the current difficulties, but I believe these markets are distinct and hold potential for growth ahead.

Thank you, Laura. Operator, next question. Our next question comes from the line of Jason Helfstein from Oppenheimer.

It's Rizwan on for Jason. So just two quick questions. Building off of the bidder questions from earlier, when do you fully expect the bidder product to be incremental to revenue? What are your like long-term expectations for, let's say, 2023 and 2024? And the second question is, how are you planning to like restrain operating expenses in the back half of this year? And can we give some additional color on each segment?

Sure. So with regards to header bidding, we haven't given guidance. I can tell you, one is a proxy. We did share publicly on my letter that a handful of publishers generate millions of dollars and we have 9,000 publishers. So again, I'm not suggesting you should multiply the number I just gave you by 1,000. But I will tell you for Taboola’s top 3 priorities, I mentioned that last quarter and I mentioned it again, the number one is performance advertising. The second thing is header bidding which is taking advantage of our CPC budget, first-party data across the inventory of display in the Open Web and the third one is e-commerce. Those are the three things that are a must-win biggest investment sources for Taboola and I think they will drive the most amount of competitive advantage. So one, we mean it and we're staffing to be very successful in that world. And I think we have a differentiated offering in the header bidding space because no one has so much first-party data like we do because of our recommendation widgets that are hard-coded on the page and no one has so many direct CPC advertisers like we do. So we're going to enter the display inventory but which I expect will happen. We're able to win enough inventory that is not brand and advertising and it's not search advertising. There's an area there that is just for us to grab. So, I do think this will become hundreds of millions of dollars for the company. I’m not giving you a timeline because we’re not ready to do that. But I’m very encouraged by 90 days into Microsoft launching, us generating millions of dollars from just a test on a bunch of small publishers. That to me is a good sign and I intend to continue to invest in that. And the second thing I would tell you is that every publisher that’s launching header bidding by Taboola means that our share of wallet goes up. So if you’re a publisher working with us and you’re generating $20 million a year and with header bidding you’re generating $20-something million a year, it’s just a little bit harder to replace Taboola now because we’re just a bigger portion of your overall revenue which is another level of note as we’re thinking about protecting our Open Web and publisher relationships. So again, it’s very synergistic. And I think it’s very incremental to our finance. It will be hundreds of millions of dollars, I believe, over the midterm, long term but we’re not ready to give a specific timeline.

In terms of the operating expense question, I think that's a very good question and we are definitely taking actions right now to bring our operating expenses more in line with where revenues are right now given the macroeconomic weakness. So we've already taken some actions. We've already reduced dramatically our hiring plans. We've looked at all of our discretionary expense spending and we've already cut budgets on that. We're taking an ongoing look at that and we'll probably take additional actions. I will say most of those will probably impact Q4 more than they'll impact Q3. Things like hiring plans, obviously, that impacts outer quarters more than they impact the near quarters. So generally speaking, we've already taken actions we're bringing our operating expenses down and we expect to see that impact in Q4. We'll also see bottom line margin improvements in Q4 as we ramp up those new publishers that I talked about and their margins improve, and we expect to see that in Q4. We also think that Q4 revenue will be a bit stronger than Q3 with some of the tailwinds there in terms of U.S. elections and World Cup. So we think that will help improve bottom line margins as well. But we're very conscious of our operating expenses and we are bringing those more in line. As Adam mentioned at the beginning, we in times like this, cash flow matters more than anything else. So we are working to make sure that we maximize that for this year.

Thank you, Rizwan. Operator, next question.

Adam, as you interact with more of the Connexity advertisers, have you received any feedback on how the ROI compares to other channels they might be using to purchase traffic? So far, it appears that it should be providing highly qualified, higher-intent traffic, which suggests the ROI should be better than most other channels. Please, go ahead.

Yes. No, go ahead. What's the second question?

Second question, I mean you talked about dropping revenue yield for all the obvious reasons, macro, et cetera. What are you hearing from your publisher partners as their revenue generation drops? And I suppose they probably will not be doing any better with somebody else, and it seems like Taboola continues to win new partners regardless. And theoretically, as your revenue yields hold up better versus the next guy, are you receiving any new inquiries from folks who are currently not partners?

Sure, Stephen. Over the last quarter, there have been several noteworthy developments. As mentioned in my letter, our business showed resilience in a softer U.S. macroeconomic environment, which has since stabilized as we entered Q3. However, this context influenced our outlook for the remainder of the year, even as we maintained our forecasts. Retailers informed us that they experienced a decline in organic traffic to their sites and turned to us for connected solutions to fill that gap, as they sought guaranteed returns on investment. They understand that Connected serves as a performance advertising channel, allowing them to predictably gauge the ROI, which led them to increase their budgets with Connexity in response to the dip in organic traffic. Interestingly, they typically purchase on a cost-per-click or commission basis, which assures them of returns. Particularly during downturns, channels like Connexity become increasingly valuable due to their position at the bottom of the sales funnel, ensuring consumer engagement and delivering consistent value for the price they pay. Although we don’t receive direct comparisons with competitors, the fact that advertisers are increasing their spend with us signals that we meet their margin expectations. Conversations with our sales team suggest that there is keen interest in understanding how we stack up against companies like Google and Facebook, but client retention and spending growth serve as the best indicators of our performance. Connexity has proven to be a strong channel for advertisers, and we've observed an uptick in activity over the past 90 days, largely attributed to the decrease in organic traffic. Additionally, I’m excited about the positive signs of ROI and scalability for Connexity advertisers on the Taboola network. This aspect represents a significant potential synergy, as Taboola reaches 0.5 billion users daily. Expanding e-commerce advertisers within Taboola's publisher network could yield substantial results, and we are already witnessing promising developments in that area. Regarding our publishers, I've been communicating with them, and the feedback has been largely positive, reflecting a strong performance across various segments. Our diverse offerings, including commerce, performance, video, and header bidding, have played a crucial role in maintaining our publishers’ strength, particularly during uncertain times like the pandemic. This environment fosters closer partnerships, which we've seen in our robust publisher engagement. We have introduced what we refer to as a "recession package" that aims to strengthen collaboration during this time of uncertainty. This approach allows us to explore more placements, enhanced testing opportunities, and integrative strategies that we hadn't pursued earlier. Bill, the CEO of Connexity, mentioned an increase in publisher interest in high-intent content for e-commerce, indicating rising engagement. Our pipeline currently shows unprecedented strength, with growth metrics doubling compared to last year, and last year was already strong. I'm feeling optimistic about our publisher relationships as this period is particularly favorable for us to deepen partnerships and enhance collaboration.

Steven, do you have another question? Thanks, operator. Do we have any other questions in the queue? No, you can now wrap up the call.

Thank you all for joining us. I'm pleased to say, as mentioned in my letter, that we feel positive about our strong fundamentals. Despite some challenging macroeconomic conditions, we exceeded our expectations for the second quarter, maintaining our targets for 2022. We're producing over $150 million in adjusted EBITDA and have a strong cash flow for the year. Importantly, I sense a unique momentum in our business. The pipeline of our publishers is the most robust we've seen in a long time. We have secured valuable partnerships with Fox Sports, Gray, PMC, and others, which will last for the next several years and hopefully beyond. The growth in our supply has doubled, which is significant. I'm thrilled with Connexity being part of our family, especially as we're witnessing the benefits of having a diversified business across various advertising budgets. This has been a key strength in 2022. Additionally, Taboola News, which I founded, has successfully grown to over $50 million in organic business, demonstrating our strong culture of self-investment and organic growth. Most importantly, our team is energized and dedicated. This is an ideal time for us to focus on our efforts, and we are well-positioned for the remainder of 2022 and beyond. Thank you, everyone. We look forward to engaging with you later today and this week.

This concludes today's conference call. Thank you for participating. You may now disconnect. Everyone, have a great day.