Good day, and thank you for standing by. Welcome to the Taboola Fourth Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to turn the conference over to your speaker for today, Jessica Kourakos. Please begin.

Thank you, and good morning everyone, and welcome to Taboola's fourth quarter and fiscal 2023 earnings conference call. I'm here with Adam Singolda, Taboola's Founder and CEO, and Steve Walker, Taboola's CFO. The company issued earnings materials today before the market and they are available in the Investors section of Taboola's 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, Jessica. Good morning, everyone, and thank you all for joining us. And before we talk about the business, I want to start with a word about our people. I've always said that a company's true innovation is its culture and people. And I'm so proud of the tremendous resilience displayed by our nearly 2,000 Taboolars during the war in Israel. Their resilience is what's driving our progress in reaching new users, delivering engaging experiences on the open web, improving our effectiveness at monetization, and driving yield. We have real momentum coming into this year, and it shows in our Q4 results and strong 2024 financial guidance. Turning first to our quarterly results, we had a strong end to 2023; Q4 ex-TAC of $168.5 million, growing 6% compared to 2023 Q4. Q4 adjusted EBITDA of $50.1 million, a significant beat to the high end of our guidance by $18 million, representing over 30% adjusted EBITDA margin. Free cash flow in Q4 was $10.5 million, bringing our 2023 free cash flow to $52.2 million, representing three times growth over 2022, as well as 50% conversion to EBITDA, which is our desired stated goal. 2024 is set to be a record year for Taboola across all key measures: revenue, ex-TAC gross profit, adjusted EBITDA, and free cash flow. On the revenue front, we're back to fast growth. Revenue is growing 33% to nearly $2 billion this year. Ex-TAC is growing 25% to $670 million. We are reiterating our adjusted EBITDA guidance of over $200 million, which is double that of 2023. And we are reiterating our free cash flow guidance of over $100 million, also nearly double that of 2023. On the business front, there is a lot of good momentum. 2024 is benefiting from fast adoption of our AI offerings, and we assume yield expansion this year after two years of softness. Yahoo is ramping up, already crossing the $100 million mark in Q1, with the great trust and collaboration between our teams. Now, and since we've signed the partnership with Yahoo, many investors have asked us what is next; what will be the next Yahoo-style partnership? I'm very happy to share that another iconic consumer brand has just chosen Taboola as its partner of choice to help them grow their advertising business. I hope to share more about this very soon. On the back of our business momentum, strong balance sheet, and commitment to shareholder returns, we're announcing a new share buyback authorization of $100 million, which represents approximately 6% of our current market cap. 2023 was going to be an investment year for growth. We're investing more than $100 million a year in R&D and AI to bring users and advertisers the same amazing experience they have when they interact with search and social platforms. Every day, we're getting closer to the size of X, Pinterest, Snap, and others in revenue and ad spend, and we're paving our way to becoming the very first must-buy platform for the open web. As I reflect on our journey, 10 years ago, we generated just over $200 million in revenue. I remember it like it was yesterday. And this year, 10 years later, we're approaching $2 billion. Now, looking ahead, I see two key themes that will allow us to achieve our financial transformation in 2024. The first one is reaching and engaging users on the open web. With the addition of Yahoo, and now another iconic consumer brand, there's a lot of momentum here. The second one is how well we can monetize our time with consumers, specifically growth in performance advertising and AI to drive yield. Now, let's expand into both of these areas. Starting with how we reach users on the open web. We're seeing great momentum from publishers choosing Taboola on the back of our technology investments. We're so much more than just a publisher as we empower the entire publisher organization: the editorial team, subscription team, audience team, monetization team, and more. Publisher win rates continue to improve with terrific new publisher partners joining the Taboola family from all around the globe, including A360 Media, Postmedia, Times Internet, Nine Entertainment, and more. We renewed and expanded our scope with existing publishers, including NBC News, McClatchy, Editora Globo, Prisa, Ynet, and more. In the industry, we're seeing a shift of great consumer companies getting into advertising in a bigger way. This includes Disney, Amazon, Netflix, DoorDash, Uber, Walmart, and more, where for some, advertising is already one of the most profitable lines of business they have. I expect that Fortune 500 CEOs will increasingly be asked to present their advertising strategy. And that the advertising industry will become a $1 trillion market in years to come. This is just the beginning. Now, while I believe many of these companies would try to sell directly to big brands, many would consider partnering with a technology company like Taboola to reach tens of thousands or hundreds of thousands of mid-funnel performance advertisers. We have an opportunity to become the advertising engine of choice on the open web. We call it advertising in a box. Signing strategic partnerships with publishers and big consumer platforms gives Taboola another way to reach users and access new premium advertisers. And we've seen it already with Yahoo, as incredible brands are starting to spend. And these are the best of the best out there, names like Samsung, Verizon, Hulu, Hilton Hotels, Southwest Airlines, Citibank, and many others. On the Yahoo front, I can tell you we just had an executive off-site for the Yahoo leadership, and we're focused on executing our plans this year and into 2025. Our biggest priority is demand migration of Yahoo omnichannel advertisers. I'm happy to report we are seeing good results. We recently shared the case study of large advertisers seeing 3x in leads volume at 24% lower cost. To share some of Yahoo's good progress, we expect Q1 revenue to cross the $100 million mark, which is fast ramping. Beyond working with publishers, we also reach users as part of Taboola News as we bring our publishers' content to Android devices. Taboola News had a spectacular year in 2023, with revenue growing to over $100 million. It is still in early stages, with a lot of work ahead of us, yet we expect another strong year for Taboola News in 2024. This is because device manufacturers all around the world continue to seek differentiated offerings that delight users with personalized experiences. Beyond publishers and Taboola News, we're also reaching users with our Header Bidder. We're continuing to take advantage of our direct demand, unique data, and AI to bid on inventory that is not exclusively ours. Microsoft continues to be our largest bidder partner, and we expect to expand our scope across a network of publishers in 2024. Microsoft made some changes to its Epic platform in Q4 that impacted all Epic partners they work with, including us. This had a single-digit million dollars impact in Q4, and a small impact to 2024, which is already included in our guidance. Now, switching to the second driver of revenue growth, how we monetize time with consumers, essentially how we grow yield. Yield represents the revenue we can generate per user. For comparison, we estimate Meta makes $200 of revenue per user a year in the U.S. Snap makes $33, and we make about $3.00 to $4.00 per user a year. While I think Taboola is among the best in the open web when it comes to monetizing user attention, you can imagine how much runway we have to improve, and how much better the open web can do. When we win, the open web wins. Now, the open web is about an $80 billion market because it uses low yield monetization capabilities invented 30 years ago, such as display banners, text ads, interstitials, and more. And on top of that, only in the open web are advertisers asked to bid using CPC or CPM, which companies like Google or Meta do not require. Now, there are three ways Taboola will grow yield. The first one is data. This is where code on page being bigger and attracting a large volume of clicks from the network makes us better at driving conversions to advertisers faster. The second is AI. Deep learning is really challenging to accomplish. We've been at it for years. And this is a key element as it relates to matchmaking between users and information. The third is advertisers. We've 15,000 to 20,000 advertisers as of now while Google and Meta have 10 million advertisers each. Bringing more advertisers means better diversity and personalization to offer users the ads they may like. We're seeing great momentum from Maximize Conversions, our advanced AI bidding technology. Advertisers are seeing up to 50% boost in conversions while maintaining their cost per acquisition or CPA. Some advertisers are seeing reduced CPA by nearly 20%. Let's give an example. If you sold 10 flower bouquets with Taboola and it cost you $30 to get a single customer, you can now sell the same 10 bouquets at the cost of $24 per customer or sell up to 15 bouquets at the same $30 cost to acquire that customer. Now that's selling a lot more flowers and saving more, which is great. As more advertisers adopt our AI and Maximize Conversion, we expect improved retention, essentially lower churn, as well as an increase in net dollar retention (NDRs), which means advertisers are able to spend more with us over time. In Q4, we launched our Generative AI ad maker, helping advertisers kick off a campaign faster. For self-service advertisers, one in four new creative pieces are being generated using our new Generative AI. In 2024, we are focused on enhancing our data integration with Yahoo, continuing adoption, and improvement to maximize conversions, as well as launching a new maximized optimization product called Maximize Revenue. Maximize Revenue is the way for advertisers that have direct value associated with conversions, like in the e-commerce space, to optimize their desired return on investment. I am happy to say that with this momentum, we have already reached a point where 50% of our revenue is driven by advertisers who adopted Max Conversion, and we are back to yield growth this year. Another segment of advertisers helping us drive yield growth and seeing momentum is e-commerce. In 2023, we've benefited from the combined firepower of Connexity, Skimlinks, and Taboola. We launched Turnkey Commerce, where we partner with publishers to establish or expand their commerce business. This is in high demand; we essentially create commerce content, drive traffic to it, and monetize it—all powered by Taboola. I am very happy to say that at the end of 2023, we signed an agreement with the Associated Press, one of the largest and most trusted news publishers in the world, to power its new e-commerce destination using Taboola Turnkey Commerce. E-commerce represents approximately 20% of ex-TAC. It's premium revenue, and we continue to see it as an important growth driver for Taboola in years to come. Now, as I am wrapping up my part, I would be remiss not to acknowledge that our industry is facing tectonic changes this year like cookie deprecation, generative AI, and the need for performance advertising in times of recession and market softness. And we are so ready. We have more code on page than anyone. We understand intent with users clicking on Taboola tens of billions of times a year. If history is a proxy for the future, we did well when Apple deprecated cookies. In summary, we are coming in strong into 2024 with stunning partnerships, fresh revenue growth, and a strong EBITDA and free cash flow profile. We're announcing a new $100 million buyback authorization. After two years of yield softness, we are back to growth as our clients adopt AI faster than any product developed since I started Taboola. With that, let me pass the call over to Steve to review our financials and outlook in more detail.

Thanks, Adam, and good morning, everyone. As Adam mentioned, we had a strong end to 2023. Our Q4 revenues were approximately $420 million and grew 13% year over year, accelerating from Q3 levels. Ex-TAC's gross profit was $169 million, which represented growth of 6% year over year. Ex-TAC growth was driven by double-digit growth in advertising spend and included a small contribution from Yahoo in the quarter. These positive factors were partially offset by margin compression due to the ad rate declines in 2022, which have since stabilized in 2023. Net income was $3.7 million, and non-GAAP net income was $31.4 million. Adjusted EBITDA was $50.1 million, representing a 30% adjusted EBITDA margin. Year-over-year, adjusted EBITDA was down, which was due primarily to higher expenses related to the onboarding of Yahoo's supply that were not in the year-ago period. Operating expenses excluding Yahoo would have been relatively flat year-over-year, reflecting strong cost discipline in 2023, which we plan to continue into 2024. For the full year of 2023, we finished with over $1.4 billion in revenue, $536 million in ex-TAC gross profit, and $99 million in adjusted EBITDA. We had a net loss of $82 million and non-GAAP net income of $33 million. We also generated $52 million of free cash flow in 2023, which was up 181% versus 2022. Free cash flow benefited from the stronger than forecasted adjusted EBITDA, which reflects the cost controls mentioned previously, partially offset by the expenses related to the onboarding of Yahoo inventory in the period. Free cash flow in Q4 would have been even stronger if not for the timing of some payables and capital expenditures that we mentioned were delayed last quarter. As Adam said, our strong revenue and ex-TAC gross profit performance was driven by strength in our e-commerce, bidding, and Taboola News businesses, as well as initial contributions from Yahoo and relatively stable yields in our core business. E-commerce had double-digit growth in 2023, driven by strong growth in advertising budgets from some of our largest retail advertisers, as well as strong momentum in Europe. Additionally, we are seeing great success ramping Taboola's feeds and now Yahoo as supply sources for our retail advertisers. In fact, Taboola's feed supply has become a top ten traffic source globally for these advertisers. As we have stated previously, Taboola News grew very quickly and exceeded $100 million in revenues in 2023. In total, e-commerce, Taboola News, and Header Bidding now represent approximately 30% of our ex-TAC gross profit. This is exciting because each represents very valuable forms of supply that are valued by high-quality advertisers. Our teams have achieved accelerating revenue and ex-TAC performance while improving cost efficiency, indicated by our strong adjusted EBITDA margin exiting 2023. Operating expenses were $489 million in 2023, up $11 million year-over-year as a result of the cost incurred to onboard the significant inventory we are gaining with the addition of Yahoo. Excluding Yahoo, as I mentioned earlier, operating expenses were essentially flat compared to the prior year. Our headcount is down approximately 2.5% from its peak in July of 2022. With our ongoing expense discipline and our strong growth expectations, we expect that in 2024 we will approach our long-term adjusted EBITDA margin target of 30%. GAAP net loss for 2023 of $82 million included amortization of intangibles of $63.9 million, share-based compensation expenses of $53.7 million, and holdback compensation expenses related to the acquisition of $10.6 million, all of which were excluded from non-GAAP net income. Our non-GAAP net income of $32.6 million was above the high end of our guidance range. In terms of cash generation, we had approximately $84.4 million in operating cash flow in 2023 and free cash flow of $52.2 million. This includes net publisher prepayments, which were a source of cash of $19.7 million, and interest payments on our long-term debt, which were a use of cash of $18.5 million. As I have highlighted in previous quarters, I would note that net publisher prepayments were a source of cash for the full year due to the fact that new prepayments were lower than the amortization of historical prepayments. Let's turn to the balance sheet. You can see that our net cash balance remains healthy. Our net cash position of $36.2 million remained positive at the end of Q4, even after share repurchases. Cash and cash equivalents, plus our short-term investments decreased from $250.7 million at the end of Q3 to $181.8 million at the end of Q4. This reflected a $50 million prepayment of our debt and $32 million used for share buyback activity in Q4. Cash and cash equivalents and short-term investments remained above our debt principal balance of $142.2 million. Speaking of our share repurchases, I would also like to provide an update on our share buyback and debt repayment programs. The share buyback program was initiated on June 1, and as of December 30, we had repurchased over 15 million shares at an average price of $3.62 for total repurchases of $55.1 million. The average repurchase price of $3.62 represented a return of approximately 30% based on our closing price on Monday. Today, we are also announcing a new share buyback authorization of $100 million that replaces our former buyback plan, which was largely exhausted. We are fortunate enough to be able to fund our organic growth investments from our operating cash flow. Given that, we believe that at current valuations the best use of our free cash flow is to buy back shares. To the extent that we have additional cash to deploy, we intend to pay down our long-term debt. We did this in October of 2023, in fact when we voluntarily prepaid another $50 million of our long-term debt, bringing the total debt that we have voluntarily prepaid to $141 million. As always, both the share repurchase program and the debt pay-down are contingent upon the availability of sufficient working capital. As an Israeli company, we are also required to obtain Israeli court approval for share repurchases. Also of note, we will be filing a general purpose shelf in the coming days. We consider it good corporate hygiene for a company at our stage to have a general purpose shelf on file. Given we believe our stock is a great value at current levels and have announced a new buyback authorization today, we obviously do not intend to issue new shares at this time. I just wanted to make sure that was clear. Now let me shift to our forward-looking guidance. As Adam mentioned earlier, in the last 12 months, we invested in technology that advanced our e-commerce and Taboola News offerings, successfully launched maximized conversions, and onboarded all of Yahoo's global native supply onto the Taboola network. 2023 was a year in which we invested heavily in these initiatives, sometimes in advance of revenue. As we look ahead, we see the following tailwinds driving outsized growth in our business through 2025. First, we expect the Yahoo Advertiser migration to be materially complete by Q3 2024 and to continue ramping into 2025. Second, we expect yield growth to turn positive in 2024. Third, we expect a phased onboarding of the supply from our new iconic consumer brand partner in 2024 and 2025. Finally, we expect further yield gains over time as the volume of our contextual data increases with the addition of Yahoo and other supply to our network, which will further enhance yield. As a result, we are initiating guidance for 2024 that includes strong top line growth and improving profitability. We expect revenue of $1.89 billion to $1.94 billion, which represents growth of 33% at the midpoint. We expect gross profit of $535 million to $555 million and ex-TAC gross profit of $656 million to $679 million. That ex-TAC is up roughly 25% year-over-year at the midpoint. We are reiterating our 2024 adjusted EBITDA guidance of over $200 million and free cash flow expectation of over $100 million. I will note that the adjusted EBITDA guidance represents a doubling of that metric versus 2023. Finally, we are expecting non-GAAP net income of $84 million to $104 million in 2024. We continue to be very excited by the addition of Yahoo to our business. Adam mentioned earlier we feel good about the progress with Yahoo, and we expect revenue on Yahoo to exceed $100 million in Q1. For competitive purposes and due to the fact that Yahoo's supply has been fully integrated into our broader publisher network, we will treat disclosures around Yahoo similarly to how we treat other major publishers on our network on a going-forward basis. Finally, we are introducing Q1 2024 guidance. This quarter, we expect revenues of $387 million to $413 million, gross profit of $94 million to $106 million, ex-TAC gross profit of $123 million to $135 million, adjusted EBITDA of $10 million to $17 million, and non-GAAP net income of negative $15 million to negative $3 million. Let me finish by saying that we are happy with our fourth quarter performance and excited about the step-change growth that we are expecting in our business in 2024. The growth investments we have made in 2023, the additional scale that Yahoo is bringing, and the additional supply we will be onboarding as part of a new partnership with an iconic consumer brand are accelerating our journey towards becoming a must-buy for advertisers looking to reach consumers on the open web. With that, let me pass it back to Adam for some closing remarks.

Thanks, Steve. I've never been more bullish about Taboola, and I'm so proud of our Taboolars' dedication and passion, making us the high-performing company through the most difficult of times. We're coming in strong into 2024, making it a record year for us. Revenue is growing 33% to $2 billion, ex-TAC is growing 25% to nearly $670 million, EBITDA is doubling to over $200 million, free cash flow is nearly doubling to over $100 million. And on the back of these numbers, we're now seeing an authorization of $100 million for buybacks, essentially looking to buy 6% of our company. As I mentioned, our industry is changing. With companies like Netflix, Disney, Uber, DoorDash, Amazon, and more expending through advertising initiatives, I suspect we're in the beginning of an exciting advertising mania. Taboola has a chance of becoming the partner of choice to many of them. In addition to Yahoo, I'm incredibly excited to have just signed another iconic consumer brand that validates Taboola's advertising-in-a-box value proposition. Our vision is to become the recommendation engine for the open web and build the very first multibillion-dollar gateway for advertisers to reach publishers, OEMs, and apps outside of walled gardens. Today is a good day for us. I'm excited to get 2024 started. To everyone, thank you for being part of our journey. And with that, let's open it up to questions.

Thank you. Our first question today will be coming from Andrew Boone of JMP Securities. Your line is open.

Great, thanks so much for taking my questions. Adam, as we think about yield improvements in 2024 and the inflection that you guys are expecting, can you just help us understand what the key drivers as well as what products are your key priorities in terms of improving yield over the next year? And then I want to step back and talk about a big-picture question for Yahoo and Taboola. If I go back and I think about 2022 pro forma revenue of that $2.5 billion of gross revenue, is that still on the table? Is that still the roadmap as we think about maybe 2025 or what are the puts and takes as we think about that benchmark? Thanks so much, guys.

Thank you for the question. Good morning, everyone. Regarding Yahoo, there are many developments. As you know, it’s our top investment as a company because we believe it provides significant value to our clients, partners, and to Taboola as we transition to a new business model. We're starting 2024 on a strong note, having already achieved over 60% adoption with conversions. Just to remind you, Max Conversions is our AI feature that enables clients and advertisers to collaborate with us just like they do with Google and Facebook. They don’t need to specify the CPC or CPM they want; they simply provide their budgets, and in some cases, their target client value, and we handle the rest. This has quickly become our fastest adopted product since my arrival at Taboola, and it’s impressive. We are seeing excellent case studies not only from Taboola’s advertisers but also from Yahoo advertisers who are now using Taboola’s technology. We are publishing these case studies because they demonstrate that advertisers are either increasing their spending or experiencing less turnover. This is a valuable metric for us. To illustrate, we are observing up to a 50% increase in conversions at the same price in some cases. In other cases, the number of conversions remains the same, but the cost decreases by 20%. These numbers are significant. From the client’s perspective, their experience with us is much more straightforward and efficient compared to what they have encountered in the past in the industry. By the end of this year, I want the vast majority of Taboola's business, nearly $2 billion in revenue, to be leveraging AI, making CPC and CPM an aspect of the past. Next, we are set to launch Max Revenue, another advanced AI-driven strategy that allows clients who know the price connected to a purchase to provide their margins and revenue growth, which we will optimize for. This will launch in the latter half of the year, complementing Max Conversions. Generative AI is also gaining traction within our self-service offerings, with many smaller clients potentially becoming major ones. Currently, one in every four creative titles and thumbnails is being generated through our new Generative AI. E-commerce will further boost our revenue in 2024. We shared in our letter that the Associated Press has chosen Taboola to initiate its e-commerce business. Additionally, Times.com is collaborating with us in e-commerce using turnkey services, which will help us attract new retailers and enhance our overall yield across the network. In terms of data integration, we plan to expand our contextual data segments with Yahoo, particularly in light of the current cookie deprecation, which will enhance our capacity to drive yield. Furthermore, more advertisers are transitioning from Yahoo, and we anticipate this process will be finished by Q3. These advertisers include top names like Samsung, Citi, and Verizon. All these technological advancements, both on the data side and in client interactions, will contribute to our yield growth. We are returning to yield growth in 2024 based on our guidance. Regarding your second question about the $2 billion opportunity with Yahoo, yes, we still believe there is over $1 billion value in that partnership. We anticipate generating $100 million in revenue from this supply in Q1, which is a positive indicator. Advertisers will be fully migrated by Q3, which is crucial for realizing the complete value of this partnership. Revenue will keep increasing as we realize synergies to reach the full billion-dollar value, and we are confident this will happen over time.

And then to your second question about the $100 million in Yahoo, that's not cumulative, there's no revenue backlog—this is just for Q1, correct?

Hey everybody. Just some clarification and then a question, so to be clear, the $100 million in Yahoo, that's not cumulative, that's like for first quarter, correct?

Correct, that's $100 million on Yahoo supply in Q1.

And then you said the fourth quarter was like meaningfully below that. You're not giving the number, but we have to guess. Just repeat the language you said, how much it was like the way you described in the fourth quarter?

We said low tens of millions.

Okay. So, I mean like so kind of hit the elephant in the room here. I mean, if you play around with the math, that means that like the kind of ex-Yahoo, the business is decelerating, but like that's not really fair, right? Because at the end of the day you have a certain amount of advertiser demand, there's different publishing sources, different yields you're trying to get. So, just how should we all look? We're going to all kind of play with math for the next year to look at the kind of the with and without Yahoo impact. How are you thinking about that? Because I don't think you're describing the business is like slowing down. So, just how do you think about the puts and takes around bringing that inventory in kind of like the yields you get out of that versus other inventory, and like should we be doing that math on the growth ex-Yahoo and then just one quick follow-up on identity and cookies?

Okay. So, I'll take that first question, and it's a good question. First of all, we're growing nearly $500 million in top line revenue this year, so 33% year-over-year, so obviously, strong growth. A good chunk of it is Yahoo, but not all of it. As you observed, the complexity of that is that Yahoo comes with both supply and advertiser demand. In the $100 million that we just talked about, that is Q1 and that's revenue on the Yahoo Supply, and it's a mix of Taboola advertisers and Yahoo Advertisers. The top line growth comes from over time migrating the Yahoo advertisers and growing our overall advertiser base, thanks to this really great high-quality supply we have. In order to get full growth, we need to go there. That's Wave 1, and we expect to have the advertisers migrated by Q3. And then, as I mentioned before in response to Andrew's question, then Wave 2 is to start to grow the synergies to get to the full $1 billion of value. You are correct that it's not as simple as just bringing over the supply and being done. We need to bring over the advertisers. It's more complex. So, that's kind of the way to think about it. Our core business is still growing. It's just that Yahoo will take time to get to the full ramp.

And then just on Identity, you've talked in the past that you're not dependent on cookies. So folks should be less concerned about where we go from here. However, there are going to be more identity metrics that obviously will be adopted and coming to the market. Can you use those metrics to drive kind of even more yield even though you don't need to use identity? Thanks.

Yes. I think we will take the right approach. From a downside protection in terms of risk that companies might have, we believe the risk is mitigated for two reasons. One, we have the past with Apple deprecated cookies in 2020 and we did well. In fact, we accelerated yield, so that's good. And the second thing is that we have a large amount of first-party cookies today as we reach 600 million people daily, and people click on Taboola tens of billions of times a year. We think we have a good setup for cookie deprecation. We can do well and potentially even grow because in the past, other demand came to us when it couldn't find other channels, and we were a good channel for advertising. If there's anything in the market that can accelerate that even further, we'll take it. I just personally feel comfortable because we don't need any new solution to do well. I think we have what we need to cross that bridge successfully to our publishers and advertisers. The vast majority, about 90% of our revenue, comes from clients who buy from Taboola Direct—no programmatic, no agencies—which means that we have pixels on their pages. So when someone moves from our publishers to their pages, we know we drove that conversion, which is why we don't need third-party cookies to demonstrate value to clients as they buy from us. This is a fundamental point. I feel there might be even further upside to yield, but the downside is mitigated.

Thank you.

Thank you. One moment for the next question. Our next question will be coming from Laura Martin of Needham & Company. Your line is open.

Good morning, you guys. My first one is on political. So, globally, there's a really strong election cycle going on in 2024. Can you remind us how that impacts your impression growth and your readership and how that flows through to revenue in a political year, please? And then I'll ask my second question after that.

Good morning, Laura. Thanks for the question. The way we think about historically, we did see some bump in kind of demand coming on political seasons, but especially from video with some more kind of increase in video demand in our guidance. We don't assume that as a material financial benefit to us. Historically, we did see some nice bumps, but not something too significant that we would like to embed in our planning.

Okay. So, that's an upside driver because it's not in the numbers, super helpful. By the way, they're talking about $17 billion of spending in the U.S. alone. So, I think it might be a bigger political year than people than your historical lift. The second question I had for you, Adam is I'm really curious as you bring over these new types of advertisers that Taboola has never had with Yahoo like Verizon and Citi and these big enterprise, high-quality branding customers. Is that, A, I'm really interested in what kinds of challenges or what kinds of things they need that your historical advertisers have not? And secondly, does it give you new product ideas when you think about the product roadmap? Are there things these types of advertisers are asking for that could sort of, if you develop them could really accelerate the trajectory of revenue growth of Taboola in the long term? What's your point of view on that?

Yes, this is such a good question, because this is a very new type of segment of clients that are being introduced to Taboola. Most of it right now is on the Yahoo side, right, like we're filling that incredible publisher with a mix of Taboola and Yahoo advertisers. What we're seeing is that they really appreciate the technology we can bring to the table. They are adopting Max Conversions, and our pixels are new things to them, allowing our account managers to see great trends regarding increase of budgets and performance relating to conversion rates and CPA. It's early days. It's still only $100 million. But I'm seeing really good things, and they are very satisfied. Clients want to spend time with us and the Yahoo team, which is good. This could allow us to develop new formats and kind of new experiences that those clients are used to getting either historically from Yahoo or on other channels. I think that might open up a whole new way users would experience sponsored content and ads on its own network, and over time in Yahoo as well. Stay tuned for potential UX innovation and formats that these brand advertisers are looking for that we are yet to offer. So, I believe they might enhance us greatly. We're learning and asking questions, spending time with them. But I'm excited mainly by the performance—that's the most important thing. I'm sensing they would like us to further develop the way we present ads on the open web, and that might affect not only our relationship with Yahoo, but also how we render ads across our entire network, Disney and NBC and the rest of our great partners.

Thank you. One moment for the next question. Our next question will be coming from James Kopelman of TD Cowen. Your line is open.

Good morning. Thanks for taking the question. The first one is for Adam. In the letter you referenced the amount of contextual data that Taboola has for AI and deep learning. Can you talk about how you view Taboola's growing data set as a differentiator when it comes to training AI and leveraging generative AI over time? And then I have a follow-up for Steve.

Yes, sure. As it relates to just the amount of data we have, I think the most important thing and I speak a lot about becoming the must-buy for the open web. What I mean by that is, it's a matter of how big is your actual gross revenue and your spend, because this is a good proxy for how reliant advertisers become on you, because you're big enough that it's worth their time to work with you. The ad tech industry is a bit too fragmented for advertisers to rely on us. I'm looking at companies like Snapchat, Pinterest, and X, in the $2 billion to $4 billion range, and now we're getting into that range. The most important thing to become a must-buy is to grow revenue and get that flywheel going, so advertisers want to work with you and it's worth their time. The footprint we have and the code on the page Taboola has is probably the largest in the open web or the world. I don't know of any company that has a first-party relationship with publishers like Taboola at our scale, which gives us first-party access to everything that takes place on the page, from context to scrolling to clicks to purchases and beyond. This is growing exponentially, obviously, with Yahoo. This is one of the most important assets our company has, which is code on page exclusively for the long term. This also gives us predictability as a business to know that we don't expect any big shift one way or the other. As we look into Gen AI, it's important to reference what exactly Gen AI can do to the market. Gen AI is a technology that will be available to everyone. What's going to differentiate one company from another is the amount of data and the type of data you can prompt into the engine to get better outcomes. For instance, when an advertiser comes to Taboola and suggests thumbnails and titles, we can say: we've seen, let's take an example, an insurance client comes to Taboola, we've seen a billion dollars of insurance spent over the last few years, and we can prompt that into the engine, obtaining really great, authentic, and original titles and thumbnails to suggest to the client. I think what makes us special here is the amount of data we have and our size, which is why I'm so excited about the Yahoo partnership and the additional iconic consumer brand that will be signed and starting to roll with us. All of this will provide us with more data for prompting into Gen AI. We have a senior individual leading Gen AI, Taboola now. I can tell you we're working on very exciting things because I believe that the biggest opportunity Gen AI has for the advertising industry is to simplify the experience of buying ads. Today it's very complicated to succeed. Gen AI can make it really simple. Our unique data into Gen AI will produce special creatives that others don't have.

And then for Steve, at a high level, how should we think about the seasonality of both gross revenue and Ex-TAC in 2024, given the various moving parts around Yahoo, the new unnamed publishing partner, and your typical historical seasonality? And then finally, I just want to ask about OpEx efficiencies. What are some of the ways that you're able to limit headcount increases this year, even as you scale? Thank you.

So, in terms of the seasonality, Yahoo is like a very large publisher in our traditional core business. Their seasonality is very similar to our historical pre-Connect seasonality. As a company, we've become more fourth-quarter-dominated due to our e-commerce business. This year, with the addition of Yahoo, we'll be more back-half-loaded than usual. The way to think of seasonality with Yahoo is like a large publisher; they have similar seasonality to other large publishers, number one or number two in news, sports, finance, and that's pretty much the core of our base. In terms of OpEx and how we control headcount here, we've shown pretty good cost discipline over the course of the last year. I mentioned in my prepared remarks that our OpEx for Q4 and for all of 2023 would have been flat year-over-year except for the hiring that we did for Yahoo. I would expect our fourth-quarter OpEx space to be similar to the rest of this year. There may be a slight increase due to some additional hiring we have to do for Yahoo, but we're really maintaining a lid on costs. We find efficiencies and leverage the people we have to do more. Frankly, we're using generative AI and other AI tools internally now to generate productivity and improve things. A great example is what Adam talked about. Historically, our account managers who support advertisers used to spend a lot of time helping the advertiser figure out good headlines, good creatives or images for this ad. Now, we have generative AI tools that can generate a dozen of them instantly, whereas it used to require considerable thought and time to come up with that dozen. It's about productivity and finding ways to leverage your people across more accounts, and I think we're doing well in that regard.

Yes, morning guys, and thanks for taking the questions. So this iconic consumer brand that you've mentioned here, possible to say whether it's a traditional open web publisher that you typically partner with, but maybe on a bigger scale. So you feel like it's worth specifically calling out or maybe like a new type of partner. I'm thinking something like a retail media network or a company maybe new to the advertising business or something along those lines. And then, if there's any prepayment or anything else that could impact cash flow associated with this publisher.

Yes, we can't say the name. It's not a traditional publisher. It's an iconic brand that signed and rolling out with us. I don't think we can mention the name, but I hope we can mention that soon.

Okay, great. So, question, it seems like every week, since you last reported, we're hearing about layoffs at open web publishers, how much this industry is really struggling for a lot of them, especially as they're struggling to generate traffic off search and social and anywhere near the levels they have in the past. Given you're in part dependent on them generating traffic to their properties, how do you think about that as either a headwind, an opportunity for you to help them through these struggles?

Overall, on our network, we're not seeing any material impact to date. Many of our publishers are enterprise-level big publishers that have a lot of direct traffic. So to date, we haven't seen any material impact. I think this presents an opportunity for us because we approach working with publishers at the most strategic level, whereby they can use our homepage for driving homepage personalization. They're able to utilize our e-commerce business to drive diversification of revenue, subscription. We also mentioned AI to help them personalize pages once users land on it. If you speak with a senior person on the publisher side, you'd want to work with companies that can drive audience growth because you're concerned about that going down. You want to collaborate with companies that can increase engagement with consumers and boost your ARPU or lifetime value. This is a significant differentiation we have.

So, Daniel, back to your first question about the iconic consumer brand, I checked with our PR folks, and what we're allowed to say is we were selected by Apple as an official advertising partner for Canada and Australia at this point. So, I think that's what we are allowed to say.

Okay, awesome.

Great. Thanks for the question. I just want to up-level the conversation a little bit around these bigger brands that are opening up like Yahoo originally and now Apple in there. It seems like this is just a new opportunity for Taboola to power a lot more of these bigger brands. I guess, one, just what's really changed around that? Was it just Yahoo that opened this door over the past year? And then two, as you've gone through Yahoo, how should we think about just the incremental investment to support more of these brands to win more business and scale up over time? Thank you.

I will start, Justin, because I can't believe the CFO was able to break about Apple. Now, Steve, we are going to have to talk about this afterward. We're very excited about Apple choosing to invest in this exciting market. To your question, I think what's fascinating is that you can already see companies like Amazon and others talking about advertising being the second or EBITDA they have. So, the trend is that advertising will become a trillion-dollar market. I believe board members of all Fortune 500 companies will start asking their CEOs about their advertising strategy because it's too big to ignore. It can be a fantastic and lucrative growth engine for Fortune 500 companies globally. The way this will pan out is that many of these companies will want to sell directly to the top of the market. We would like to build relationships with enterprise accounts. However, they are unlikely to sell to tens of thousands or hundreds of thousands of performance-minded advertisers. It's also unlikely they will develop a technology that uses AI and data to match make between users and ads in a way that works for advertisers to continue buying. This is where Taboola has an opportunity, which I am very excited about. I never thought a few years ago we'd be in a position to announce a billion-dollar partnership with a great company like Yahoo. Now, we find ourselves in an exciting moment where Apple has chosen Taboola. This can become a significant opportunity for the company to be this ad engine or advertiser in a box for companies looking to unlock more advertising revenue. I'm excited about the partnerships, for example, with Pinterest, Yahoo, Netflix, and Microsoft. This is truly a new beginning in my opinion. I hope we can play a significant part in it.