Good day and thank you for standing by. Welcome to the Taboola Quarter One 2023 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. Please note that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Rick Hoss, Head of Investor Relations of Taboola. Please go ahead.

Thank you, and good morning, everyone. And welcome to Taboola's first quarter 2023 earnings conference call. I'm here with Adam Singolda, our Founder and CEO; and Steve Walker, our CFO. We issued our earnings materials today before the market and they are available 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, Rick. Good morning, everyone, and thank you all for joining us for our first quarter call. We had strong performance in Q1, beating the high end of our guidance across all metrics. We achieved $116 million in ex-TAC gross profit, $10 million in adjusted EBITDA, and $11 million in free cash flow. We’re also excited to raise the midpoint of our full year 2023 guidance. Now, while we are not fully guiding for 2024, we expect a step change in our financial performance, with over $200 million in adjusted EBITDA and over $100 million in free cash flow. I have said in the past that it is rare for a company to have this level of clarity and confidence a full year in advance. We have such confidence in those numbers that today we announced a share buyback program of up to $40 million in 2023, and also our intention to continue paying down debt up to $50 million this year. Our strong performance in Q1 was driven by a few things. In our core business, we keep seeing meaningful publisher wins such as Conde Nast, Univision, The Blaze, and Kicker in Germany. I’m spending a lot of time with publishers, both existing and those who are yet to work with us, and it’s incredible to see the quality of the conversation around how Taboola can empower the editorial teams, how we can help publishers diversify their revenue, and how we can help publishers drive new audiences through Taboola News. Additional drivers for our Q1 strong performance were the eCommerce business and Taboola News, both of which performed better than expected in the first quarter. While we don’t plan on reporting this quarterly, our revenue in 2022 was diverse; about 15% of our ex-TAC was eCommerce, approximately 10% was video, and roughly 5% was Taboola News. The remaining 70% of our business was core native advertising. Taboola’s vision is to be the recommendation engine for the Open Web. Think of Amazon, Instagram, and TikTok; they are AI-driven recommendation engines, making money from native advertising. Taboola's mission is to bring the best of the walled gardens, such as user experience, data, AI, and advertisers to the brand-safe environment of the Open Web. Our business is predictable because 90% of our revenue comes from advertisers working with us directly rather than through ad exchanges. Our partnerships with publishers are exclusive and long-term, with most publishers signing three to 10-year partnerships with Taboola, and we have recently signed a 30-year partnership. We have significant scale, reaching about 600 million active users a day. As a reminder, we measure our business on ex-TAC gross profit, adjusted EBITDA, and free cash flow. Over the last three years, our business has grown more than 20% year-over-year on an ex-TAC basis, generated about a 30% adjusted EBITDA margin, and converted about 50% of adjusted EBITDA to free cash flow after adjustments for interest payments and prepayments to publishers, which we consider to be an investment. Over time, we expect these two payments to go to zero. Our core business is strong. We are the partner of choice for over 8,000 publishers. We developed unique technology that optimizes for lifetime value, empowering publishers to diversify their revenue streams such as eCommerce, subscription, native, header bidding, and video. Publishers deploy our AI on their homepage, use our editorial tools to make decisions, and build eCommerce sections that dynamically match content and ads that are relevant; often, Taboola is a top three revenue source for our publishers. Back in the day, people used to say nobody got fired for buying IBM, and the same can be said about Taboola these days; it’s a safe bet to choose Taboola. More than 8,000 publishers grow revenue, engagement, and audience, and around 18,000 advertisers use Taboola to grow their businesses. Before updating you about our core business and four priorities, I wanted to share a recent experience. I am a strong believer in making things personal. We encourage everyone at Taboola to get closer to our clients and to each other. 'Zero distance' is our theme this year. In that spirit, once a year, I fly to Israel and spend an entire month with our engineering and product management teams. I get direct access to our teams, joining tech working sessions every day, and they get my global view of the business. Let me tell you, it was incredible! The culture, the energy, the hard work, and focus on our top four priorities was never so high. We are in a rare position as a company where the future is in our hands; we don’t need to enter new markets, we don’t need to make big moves, we mainly need to execute, and we have the best talented people in the world to do that. One of the things that came up again and again in that visit is how our engineering teams and product managers are no longer thinking about development just in terms of how good the code is, but mainly in terms of client adoption and impact. We have 600 people in Israel, and there is a growing obsession to know how the things we build and deliver are affecting our clients. Switching gears, let’s talk about our core business, which we’ve been operating for more than a decade. We have publishers working with us globally, exclusively, and for three to 10 years as their native advertising partner, using our Lifetime Value platform to help them reach their broad objectives. We generate revenue from advertisers working with us to drive sales by appearing on our publishers' sites. You’ve all seen us before; if you’ve ever visited CNBC, Time.com, or the BBC, you’ve discovered news, products, and paid offerings by advertisers from the Open Web. This market is estimated to be $70 billion, and we think we have a meaningful competitive advantage in it. I started Taboola 15 years ago, and though we were not first to this market, we became the partner of choice across the board. Our growth has been driven by our client obsession, execution, and technological advantage. In our core, we monitor our momentum based on new and renewed publisher partnerships and usage of our technology, optimizing for Lifetime Value. This includes offerings such as Newsroom, which is now used by 3,500 editors and writers, as well as homepage personalization, which we call Homepage For You, and more. We look at ex-TAC margin as a proxy for our advantage over other advertising companies in the Open Web. Our publisher momentum remains uniquely strong. In the past quarter, we won publisher partnerships all across the globe. Some key new wins include some of the world’s largest names like Univision, Conde Nast, L'Express, Kicker, Funke, and Dumont. We renewed relationships with well-known publishers including Sinclair, Advance Local, Seven West Media, and more. Now, let’s move into our key priorities as a company. We are laser-focused on four growth engines and key priorities, each representing a $1 billion opportunity for Taboola. I will now discuss each one of them. Starting with performance advertising. As a reminder, the vast majority of Taboola’s revenue comes from advertisers who buy from Taboola directly, using our own AI. About 10% of our revenue comes from programmatic partners such as Google, The Trade Desk, Amazon, and others. Our two objectives are to get new advertisers to be successful when they try Taboola and to get existing advertisers to stay with us and spend more, measured by net dollar retention, or NDR. The market is massive, with millions of advertisers buying on Google and Meta and hundreds of thousands buying on companies like Snap. Taboola has around 18,000 advertisers, so we have a lot of room to grow. Our main focus is on improving AI and workflows to make it easier for advertisers to work and succeed with Taboola. Early this year, we launched target CPA for advertisers, and I’m excited about rolling out maximize conversions later this year. These are all part of our SmartBid technology, giving our advertisers a variety of bidding strategies they can use to be successful with Taboola. It should be as easy to work with us and to find success as it is with Meta or Google. When advertisers succeed with us, our yield on publishers gets higher, which not only improves our financial metrics, it also bolsters our moat as we become even more competitive as a company. About two quarters ago, we grew our engineering resources working on performance advertising from 50 to 200 engineers, given the upside we believe exists here for us. Part of our investment here is also on the creative front. We are investing in Generative AI, focusing on helping advertisers to easily get titles, thumbnails, and landing pages that can work for them. Being bigger gives us an advantage because we can leverage our historic data to produce exceptional results. Hundreds of advertisers are adopting our Generative AI beta offering, which lives in Taboola Ads. We just completed a hackathon focused on Generative AI and are working on more things we can offer advertisers, so stay tuned for more to come. Moving on to our second growth engine, bidding. We estimate that the 8,000 publishers we work with in our core business generate display revenue of roughly $20 billion a year. We think we can access our publishers' display inventory with our header bidding solution and win about 5% to 10% of the auction given our advantages in AI, first-party data, and direct advertiser relationships. This will make us even more valuable partners for our publishers, increasing our payments to them as well as our share of wallet while providing our advertisers with even more scale. We have three areas where we are already bidding. The first is Microsoft, which launched in April of last year. The second are publisher partners where we have first-party advantages, and the third are publishers not yet using our solutions. We believe that as Yahoo launches, we’ll be able to partner with Yahoo on bidding on their display inventory as well. Today, we generate hundreds of millions of dollars from bidding, but it’s still very much a startup within Taboola, and we think we can grow that meaningfully. The reason to get excited here is mainly because as the world moves to a much more privacy-driven environment with no cookies and IDFA, we have a meaningful advantage by being hardcoded on the page, as we know people when they return to our publishers' sites, while SSPs and DSPs don’t. We’re laser-focused on the 50-plus publishers we’re testing with before rolling it out to the rest of our network. I’m optimistic about what we’re seeing. eCommerce is our third growth engine. I’m happy to share that eCommerce is beating our expectations this quarter, and it’s impressive to see its strength. As a reminder, eCommerce is where we offer retailers the opportunity to find clients on the Open Web on publishers’ sites. This represents a big upside for both retailers and publishers, as users trust their local and national sites a lot, and if those reviews a product or offer financial services, travel, or education, people trust those. There is an opportunity to make a positive impact for people as they make decisions they truly care about. There are three pillars to eCommerce we focus on; content creation, driving traffic, and monetization. Over the last six months, we launched eCommerce in a box with the launch of Taboola Turnkey Commerce. Every publisher that wants to get into eCommerce but has little or no attractive content to retailers can now do it with Taboola. We do all of the work for the publishers, from using our data to know which content makes sense for us to write on behalf of the publisher, to driving traffic to it, and, of course, monetizing it with relationships with merchants and service providers. Last quarter, we announced our first two publisher partners for this initiative; Time and Advance Local. While early, both launches are off to a good start. Traffic to the Taboola Turnkey Commerce sections of both sites is already growing fast, and monetization has begun. Finally, to our fourth growth engine, Yahoo. At our information session that we held in March of this year, we explained the process of integrating Yahoo into the Taboola network in four specific phases. Since the event, we have transitioned into phase one from phase zero, which means we are developing the technical infrastructure to allow Gemini ad spend through Taboola’s platform and test on single-digit percentages of demand. We expect to go into phase two, which is gradually transitioning ad spend and supply from Gemini to Taboola in the second half of this year. The Taboola team is interacting daily with Yahoo to migrate advertisers into the Taboola platform, focusing on advertisers’ performance and spend. I can share that Yahoo and Taboola teams are working on accelerating our rollout so we can capture revenue faster. In closing, I’m energized about our position in the market. I think we have an opportunity to build the first large-scale, must-buy Open Web company that publishers and advertisers can rely on. Google for search, Meta for social, and Taboola for the Open Web. We are focused. We have our four key company priorities. We are lean and executing on our plans. While Taboola is among the largest in our space, we’re still small relative to the $70 billion Open Web market, so there is a lot of growth for us to capture. What I tell myself and Taboola employees is that we have all we need to execute on our strategy and dreams. These are times to lay low, execute, and that’s all we care about. Thanks for joining us, and I will now pass it over to Steve, our CFO, to talk more about our financials.

Thanks, Adam, and good morning, everyone. As Adam noted, our Q1 results beat the high end of our guidance on all metrics. We are also raising the midpoint of our full year 2023 guidance and reiterating our 2024 expectations of over $200 million in adjusted EBITDA and over $100 million in free cash flow. As Adam explained, we are very confident in those forecasts and therefore announced today both a share buyback program of up to $40 million in 2023 and our intention to continue to pay down our long-term debt. We repaid $30 million of our long-term debt in April, which means that we have repaid a total of $91 million since Q4 2022, and we intend to repay up to another $50 million this year, likely in the third quarter after certain cash balances become available. Let me talk now about our Q1 results, which exceeded the high end of our guidance on all metrics. For Q1, revenues were $327.7 million versus the midpoint of our guidance of $312 million; gross profit of $89.6 million versus the midpoint of $82 million; ex-TAC gross profit of $115.7 million versus the midpoint of $109 million; adjusted EBITDA of $10.1 million versus the midpoint of zero or breakeven; and non-GAAP net income of negative $4.1 million versus the midpoint of negative $17 million. We generated positive free cash flow of $11.2 million. I will note that Q1 and Q2 growth rates suffer from difficult comparables in 2022 before the digital advertising market weakness. We expect to return to positive growth in the second half of 2023. Relative to our guidance, we saw overperformance particularly in the U.S. and LATAM. eCommerce continues to impress, taking the momentum from the last several quarters of 2022 into this year. We’re seeing strong spending from some of our key partners, such as Walmart, Wayfair, and Macy’s, as advertisers increase their focus on immediate returns on their advertising spend. This benefits bottom-of-funnel channels, which for Taboola means our eCommerce offerings. Our teams have achieved this revenue performance while improving cost efficiency, indicated by adjusted EBITDA and non-GAAP net income overperformance outpacing revenues and ex-TAC gross profit. Operating expenses were $118.4 million in the quarter, down $1.3 million year-over-year. This decrease was primarily the result of our focus on cost reductions that we announced in Q3 of last year. We expect to show lower expenses as a percentage of revenue on a full-year-over-year basis for 2023. Our headcount is down approximately 8% from its peak in July of 2022 and currently stands at approximately 1,730 full-time employees. GAAP net loss for the quarter was $31.3 million, which included amortization of intangibles of $16 million, share-based compensation expenses of $13.5 million, and holdback compensation expenses related to the Connexity acquisition of $2.6 million, which were excluded from non-GAAP net income. Our non-GAAP net loss of approximately $4.1 million was above the high end of our guidance range. In terms of cash generation, we had approximately $17.5 million in operating cash flow in Q1 with free cash flow of around $11.2 million. If you excluded the impact of net publisher prepayments, which were a source of cash this quarter of $3.9 million and interest payments on our long-term debt, which were a use of cash of $5.1 million, our cash flow would have been $12.3 million. It is interesting to note that net publisher prepayments were a source of cash this quarter. This was due to the fact that new prepayments were lower than the quarterly amortization of historical prepayments. While we still expect net publisher prepayments to be a use of cash in 2023, it does show how they can become neutral or even a source of cash in the future. Let’s turn to the balance sheet. Cash and cash equivalents plus our short-term investments increased from $262.8 million at the end of 2022 to $274.4 million at the end of Q1 2023. Historically, Q1 tends to be a positive cash flow quarter for us as we collect on the higher revenues from Q4. I would also like to note that with the current instability in the banking industry, we continue to evaluate our banking relationships and have minimized our exposure to regional banks in the U.S. and less stable banks internationally. This is obviously a developing situation that we will continue to monitor and adjust as necessary. Now let me shift to our forward-looking guidance. For the full year 2023, we are raising the midpoint of our guidance by increasing the lower bound while keeping the upper bound steady. We expect revenues of $1.427 billion to $1.469 billion; gross profit of $418 million to $436 million; ex-TAC gross profit of $529 million to $546 million; adjusted EBITDA of $65 million to $80 million; and non-GAAP net income of negative $5 million to positive $10 million. For the full year, we assume that we will invest in our Yahoo partnership, but to be conservative, we are still not factoring in the associated revenues that could be generated in 2023. We will update this in future quarters. This guidance also assumes continued investment in our other key company priorities of performance advertising, bidding, and eCommerce. Despite being a year of strategic investment, we expect to generate positive free cash flow in 2023 for the full year. We anticipate free cash flow to turn negative in Q2 and Q3, with significantly positive cash generation in Q4, all due to normal seasonality. Finally, we are issuing Q2 guidance. For Q2 2023, we expect revenues to be between $296 million and $322 million; gross profit between $78 million and $88 million; ex-TAC gross profit of $105 million to $115 million; and adjusted EBITDA between negative $4 million and positive $6 million; non-GAAP net income of negative $26 million to negative $16 million. Let me finish by saying that we are happy with our first quarter performance and to be able to raise the midpoint of our guidance for the full year. We are also excited about our adjusted EBITDA and free cash flow targets for 2024. The future looks very bright from our vantage point, which is why we are confident in announcing our intention to both buy back shares and continue to pay down our debt. If you want to hear more about our story, we will be attending the Oppenheimer, Needham, and TD Cowen investor events this quarter, so we hope to see many of you at those events. With that, let’s open it up to questions.

Thank you. At this time, we will conduct the question-and-answer session. Our first question comes from Jason Helfstein of Oppenheimer. Your line is now open.

Hey, thanks. Hi, everybody. Two questions. First, has the pace of the Yahoo integration changed since the Analyst Day? Any color there? And then number two, on the buyback, just want to know why now. Is there a formula investors should think about in terms of repurchasing a certain amount of free cash over EBITDA on a go-forward basis? Or is this more just being opportunistic? Thanks.

Hey, Jason. Good morning. So, on the Yahoo front, since the event we have transitioned into phase one. Back then it was phase zero, which means that we're building the functionality to start moving revenue into our systems. We still expect phase two to end in the back half of this year and gradually start growing revenue. What I will share, that's another piece of information that's seen, is that our teams are having great momentum and spending a lot of time together. But we're also trying to form an accelerated plan to capture revenue even faster. So on that one, we'll keep updating, but overall good momentum. We're trying to see if we can get this moving even faster.

Hey, Jason. So to your second question about the share buyback. First of all, I think in terms of why now, we feel very good about our Q1 numbers, especially about our 2024 projections of $200 million plus of EBITDA and $100 million plus of free cash flow. So that gives us good confidence to do a share buyback at this time. I'll note that our core is strong. We've got good publisher wins. Our investment in performance advertising is looking promising. And our growth engines are strong. eCommerce is particularly strong right now. Taboola News is exceeding our projections. And as Adam just mentioned, we feel good about Yahoo and where we're at with that. So that's the reason for now. In terms of how to think about what we're doing and how investors should approach it: we want shareholders to focus on free cash flow per share, particularly free cash flow per share in 2024, because that's what we're focused on. So the goal of buying back shares is to offset dilution from employee shares so that investors can maintain their current shares outstanding levels. That's the expectation that should be set, is that we'll maintain our current share levels. Obviously, things happen, and we aren't always able to achieve that, but that's the goal — stable share count. Another reason for why now is based on our share price and the cost of debt; we believe it's a good ROI for shareholders to both buy back shares and pay back debt at this point.

Yep.

I think we're ready for the next question.

Thank you. One moment, please. Our next question comes from the line of James Kopelman of TD Cowen. Your line is now open.

Good morning, and thanks for taking the question. First for Adam, what do you view as the differentiating factors that are continuing to attract all these 8,000 publishers? Can you remind us roughly what the prepayment trend is for the remainder of the year relative to last year? I think after having one of your best years for publisher wins, and then I have a quick follow-up for Steve.

Sure. I can start. Our core is very strong, and you can see that both in terms of publisher wins and advertisers working with us directly. We have 18,000 advertisers and 8,000 publishers. Regarding publisher relationships, I have personally had really incredible conversations with existing publishers and those who are yet to work with us. The quality of the conversation now centers around our full platform offering related to homepage personalization. We call that 'Homepage For You' and the Newsroom for editors. We now have 3,500 writers and editors using our Newsroom product, and that's extremely valuable. It means when publishers work with Taboola, think of the workflows and how many people in the organization are using Taboola to make decisions about which content they should write, how they help drive subscriptions, and how they manage their traffic efficiently. Then we also have eCommerce and Turnkey, and recently Time.com launched, while nj.com launched earlier this year. Taboola News assists them in driving more traffic to their sites. Given the current landscape, publishers want to have fewer vendors and more partners, seeking partners able to do various things for them. Over time, I believe more publishers will choose to work with fewer companies but deepen the integration and lengthen partnerships, allowing for more quality conversations. I jokingly noted that when I was younger, people used to say nobody gets fired for not buying IBM, and I feel that more and more publishers consider Taboola a safe choice at all levels.

To your second part of that question about prepayment expectations: I mentioned in my prepared remarks that first quarter publisher prepayments were actually a source of cash. Prepayments in this quarter were lower than the amortization of previous prepayments. We do expect them to be a use of cash for the full year, but probably around sub-$10 million. So we believe it will decrease from last year and move toward zero. As Adam has suggested, these payments will eventually go to zero over time. I would caveat that by saying if the right publisher deal emerged, we would use that as a tool to win the right publishers; but currently, our expectation is that it will be under $10 million in terms of the use of cash for the year.

Great. And then a quick follow-up for Steve. How should we think about ex-TAC seasonality for the 2023 quarters? I know we sometimes perceive Q2 and Q3 as being similar in terms of the percentage of the full year's ex-TAC, and then Q4 is higher. Is that how we should think about 2023? Are there any additional seasonality factors you'd like to highlight to assist us with modeling this year? Thank you.

Sure. We expect right now Q2 to be similar on an ex-TAC basis to Q1. The seasonality over the past several years has shifted a bit; historically, you see an upward trend as you progress through the year. However, we expect Q2 to be similar to Q1, followed by an upward trajectory in the second half, especially on a year-over-year basis. I mentioned this in my remarks. Q1 and Q2 are challenging comps; Q3 and Q4 will become easier comps. We also expect that at some point we will start seeing Yahoo revenue contribute, which will further enhance the back half of the year. Our expectation is that Q2 will mirror Q1, followed by growth thereafter.

Great. Thank you very much.

Thank you. One moment, please. Our next question comes from the line of Andrew Boone with JMP Securities. Your line is now open.

Good morning, and thanks for taking my questions. I wanted to go to two more product-oriented questions. Adam, can you talk a little bit about performance advertising and your learnings as you spent more time in Israel with the engineers? Talk about the product roadmap there, and what are the key drivers for yield today and the rest of 2023? And then on header bidding, your publisher display integrations, can you explain what needs to happen for that to become the next billion-dollar business? Where do you stand in testing, and what are publishers telling you? Thanks so much.

Sure. Thanks for your question. I spent a month in Israel, where I participated in different tracks with our engineers and product managers, which was energizing. Our focus is mainly on two buckets regarding engineering: improving the experiences for new advertisers who join Taboola and ensuring the success of existing advertisers. For new advertisers, we work on metrics that can directly indicate success and motivate them to stay and grow with Taboola. For existing advertisers, our priority is predictability—how they can trust us and increase their spending while maintaining or even improving their performance. So within those two buckets, we explore three major areas: measurement, matching advertisers with relevant content and consumers, and optimizations regarding bidding strategies. We’ve launched target CPA in beta recently, with hundreds of advertisers using it. We're moving to general availability soon, followed closely by the launch of max conversions. In simpler terms, if an advertiser knows how much they want to pay for new customers, they'll be able to set that with Taboola, just as they do with platforms like Google. Regarding header bidding, we have good momentum on that front. Microsoft is performing well; I believe there is an opportunity similar to what we saw with Omega in terms of our bidding on the display front regarding Yahoo. We have about 50 to 60 publishers actively collaborating with us, testing the system and moving toward general availability. I feel positive about our potential to generate hundreds of millions in this sector between now and the next phase of publisher onboarding.

Thank you.

One moment, please. Our next call comes from the line of Laura Martin from Needham. Your line is now open.

Hey, there. Let's just follow up on that answer right there. So Adam, how do you allocate engineering resources between improving performance advertising compared to onboarding Yahoo? How do you figure out how to allocate resources to those two enormous tasks?

So first of all, we allocate resources mainly to the top four priorities. There are many activities Taboola pursues. But we focus management energy and resources on four key priorities: performance advertising, Yahoo, eCommerce, and bidding. Within these, we prioritize Yahoo and performance advertising due to the significant short-term, mid-term, and long-term upside for us. We believe it's right to invest in these areas; resources will adapt as needed once Yahoo is live.

I would like to add that as we discussed during our cost-cutting efforts last year, we are particularly focused on initiatives with sub-two-year payback periods. Previously, some longer-term projects were temporarily halted. We aim to concentrate our priorities on shorter-term opportunities, as we believe they will provide maximum leverage for our business.

Super helpful. Adam, could you discuss the potential for Generative AI over the next three years? I know you talked about content creation in the past, but how do you see Generative AI incorporating into your models?

Absolutely. I won't discuss productivity settings since they are common knowledge now. What I find fascinating is that we are already seeing Generative AI functioning in our Taboola ads console. Advertisers can receive suggested titles and thumbnails based on their capacity for specificity by leveraging data from Taboola's historical success in these areas. The quality of this data enables Generative AI to provide tailored recommendations. Moreover, I foresee potential in generating landing pages as well; advertisers currently struggle with how to optimize landing pages, and it would be revolutionary to see those created and defined by Generative AI in the future.

We're optimistic about these opportunities because having vast amounts of data will help refine the AI models, translating to greater precision and better-performing creatives for advertisers. Taboola is already using our large-scale data advantage to cater to advertisers, which helps solidify our role in the market.

Thank you. This is Sergio Segura on behalf of Justin. We have two questions. How should we think about the pipeline of publisher additions for the rest of the year? And on Generative AI, how should we think about the cost implications from these investments? Thank you.

Certainly. Regarding publisher additions and new publisher revenue, we are on track and ahead of our plans for this year. Our momentum in signing up new publishers looks strong; we have secured notable contracts recently. The pipeline remains promising, so we suspect this will be a fruitful year for onboarding new publishers. Keep in mind that new publisher acquisitions might initially yield lower margins but typically see margin growth over time. Coupling this with an expanding mix of higher-margin revenue should yield beneficial long-term growth. Regarding the cost implications of Generative AI investment, we anticipate an enhancement in productivity, particularly among account managers on the advertising side. Automating the creation of headlines and creatives means faster turnaround times and allows for higher focus on account management. Generative AI will also assist in ensuring greater advertiser success. Its strength lies in targeting and testing—crucial elements of effective advertising. As we progress, utilizing Generative AI will be integral to improving overall advertiser performance and expanding our base while producing a positive ROI.

Thank you, Steve.

Thank you. At this time, that concludes our Q&A session for today. I'll now turn it back to management for closing remarks.

Thank you, everyone, for joining us today. As you can tell from our remarks and the questions, we're excited to be where we are. I personally feel energized about our position in the market. We have an opportunity to build the first large-scale, must-buy Open Web company that both publishers and advertisers can rely on, side by side with Google for search and Meta and other social companies. Taboola can be the gateway to the Open Web—two sides of the marketplace optimizing user experience, AI, data, and everything advertisers and publishers desire. We're fully focused on our four key priorities: performance advertising, bidding, eCommerce, and Yahoo. We remain lean and execute on our plans. Once Yahoo is launched, we expect to be at a $2.5 billion run rate, which fits within a $70 billion Open Web market. We may be bigger now, but we still capture only a fraction of that massive market; therefore, tremendous growth lies ahead. I remind myself and all Taboola employees that we have everything necessary to execute and reach our financial goals and dreams. These are times to focus, take action, and execute. That’s our priority. We look forward to interacting with many of you. Thank you for joining us today, and may you all discover things you love and never knew existed.

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