Good day, and thank you for standing by. Welcome to the Taboola Second Quarter 2025 Earnings Call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Jessica Kourakos, Head of Investor Relations. Please go ahead.

Thank you, and good morning, everyone, and welcome to Taboola's Second Quarter 2025 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 today. Let me start by saying that I'm happy with our Q2 performance and the momentum we're seeing since exiting the quarter. We delivered a strong second quarter, beating the high end of our guidance across all key metrics, buying back about 12% of the company in just the first half of the year, reflecting our confidence in the business and our long-term vision. As a result, we're raising full-year guidance across the board and are continuing to aggressively buy back shares. We're also seeing exciting early traction with Realize, our new performance advertising platform, and we truly believe we're just getting started. Before we go deeper on the quarter and our outlook, I want to quickly remind everyone who we are, the opportunity we're going after, and why we believe we can win. Taboola is one of the largest performance advertising platforms on the OpenWeb. Our platform, Realize, helps businesses of all sizes get leads and grow sales. It operates similarly to Google Ads or Meta ads, offering a simple-to-use platform powered by AI. The key difference is that while Google reaches users in search and Meta in social, Realize engages 600 million people every day across the OpenWeb on publisher sites like Yahoo, NBC, ESPN, USA Today, Apple News, Samsung, and others, driving those people to action. Our competitive advantage lies in our AI and first-party data drawn from what people actually read versus what people idealize of themselves in social media, giving advertisers authentic insights into user intent and high-performing outcomes. In 2025, we expect nearly $2 billion in gross revenue and approximately $700 million in ex-TAC gross profit, which is what we keep after we pay our partners and a key metric for our business. We expect to generate over $200 million in adjusted EBITDA at a 30% margin with strong free cash flow. As search and social advertisers are maxing out and can't get more growth, advertisers are looking for scalable, performance-driven alternatives. Taboola is uniquely positioned to take a share in what we estimate is a $55 billion opportunity and lead that shift across the OpenWeb. With that, we can turn to our second-quarter results. Our second-quarter revenues, ex-TAC gross profit, and adjusted EBITDA all came in above the high end of our guidance range. With the second quarter, we reported revenues of $465 million, representing growth of 9% year-over-year. Ex-TAC gross profit of $172 million, 15% higher than last year; adjusted EBITDA of $45 million, 21% higher than last year, with margin expanding significantly. And finally, free cash flow of $34 million grew 31% year-over-year, allowing us to buy back about $100 million worth of stock in the quarter. In addition, we're pleased to announce that our Board has approved an incremental $200 million to our share repurchase program, reflecting our confidence in the long-term value of the business. Moving to our quarterly highlights. As we discussed at our Investor Day, accelerating ex-TAC gross profit is our North Star because it ultimately fuels our strong profitability and free cash flow generation. When you look at the 15% growth we saw in ex-TAC this quarter, it was primarily driven by three things. First, we saw nearly 9% growth in the number of scaled advertisers, which are those spending over $100,000 in the last 12 months. This means they see a good return with Taboola and are likely to stick around. Revenue from scaled advertisers represents the vast majority of our revenue. Second, the average revenue per scaled advertiser rose about 2% versus last year. The third was an easier comparison in the first half given Yahoo was fully ramped by the end of the second quarter. As we shared last quarter, our top priority for accelerating growth is the success of Realize, our new performance ad platform. Realize expands our reach beyond native advertising into the broader performance market across display and social, unlocking new opportunities for growth. This expansion is important as it not only allows us to capture larger budgets from existing advertisers, but also to work with new advertisers and agencies who have never bought native before. While it's still early days and not yet material financially, we're encouraged by the momentum we're seeing as 650 advertisers have already tested our new display and social capabilities since the February launch. Let me share a few Q2 examples that showcase the kind of performance advertisers are already seeing with Realize. One good example is a company in the aviation space that never worked with us before. With Realize, they tried our new display capability, which means they could import their display creative into Realize; they shared their performance objective, and we were able to beat their performance goal by 34% and maximize travel bookings on their platform. This success led to increased spending with us, which is exactly what you want to see in this type of case. Another example I like is in the real estate space. One of our existing advertisers, who has bought native advertising from us for two years now, was interested in finding new ways to grow. Their goal is to drive more local awareness to their modular homes in specific locations around the country. While their net spend was growing, by utilizing our new capabilities and importing their vertical display campaigns, they were able to see stronger overall conversion rates. This improved their return on ad spend, and as a result, they grew their display budget by 65% and are still growing. These are just a few examples, but they are consistent with what we're seeing more broadly in our early tests with customers. Realize is helping advertisers drive better performance outcomes at scale on the OpenWeb, which we believe will translate into incremental dollars being spent on our network, and we're just getting started. Now moving to our unique supply initiative. While attracting more ad spend for Taboola and our existing publisher partners is our main priority, we're also hard at work adding incredible new OpenWeb partners who have unique supply and data that performance advertisers really want. Taboola News is a great example of unique supply and is seeing double-digit growth. Advertisers love Taboola News because it gives them a way to reach consumers before they enter social media, before they open and browse the web at a high intent, high-impact moment, and it delivers strong performance in return. Another point of strength that is worth noting is the minimal effect we're experiencing from LLM-driven changes in search dynamics. There are two key factors that help minimize the impact on Taboola as well as our publisher partners. First, we're fortunate that the vast majority of our publisher partners are top-tier enterprises, including names like ESPN, USA TODAY, CNBC, and Nexstar, who benefit from strong brand recognition and loyal audiences. As a result, they enjoy substantial direct traffic, with search traffic typically accounting for just about 30% to 40% of their total. Second, a significant portion of our revenue comes from OpenWeb platform partnerships such as Yahoo!, Microsoft, Apple, Samsung, and others, which received little to no search traffic to begin with. These two pillars of our supply base have helped our publishers stay strong as well as us, maintaining a blended search traffic share of around 5%. To date, we have not seen material impact from recent changes in the search market driven by LLM. Performance remains stable with year-to-date effects limited to the mid-single digits. In summary, when I look at the OpenWeb, I see a major opportunity for the market and for us. Advertisers need alternatives to search and social in all parts of the OpenWeb. Companies like the Trade Desk have done a great job capturing top-of-the-funnel video and CTV campaigns, and app-loving has excelled in the app ecosystem. And there is a massive opportunity to become the performance advertising company for everything else: mobile, desktop, OEM, messaging apps, and more. And that's exactly what we're focused on, and Realize is the key to unlocking our true potential in this market. I'm so proud of our team for the way we're executing in the first half for launching Realize and getting existing and new clients, hundreds of them, to try it out. As we're getting more budgets, it means we're able to generate even more revenue for our partners, making our share of wallet greater. There is a lot of momentum we're seeing. We beat our Q2 guidance. We're raising our full-year guidance. We're generating meaningful cash flow, which allows us to invest in the business and repurchase shares back. With that, I'll hand it over to Steve to walk you through our Q2 results and outlook in more detail.

Thanks, Adam, and good morning, everyone. As Adam mentioned, we had a strong first half of the year. In the second quarter, we reported results above the high end of our guidance across all key metrics. Second-quarter revenues reached $465.5 million, representing an 8.7% year-over-year growth. Our revenue growth this quarter was driven by an 8.5% year-over-year increase in the number of scaled advertisers, coupled with a 1.8% year-over-year increase in average revenue per scaled advertiser. This reflects strong execution on both acquiring new advertisers and deepening relationships with existing ones. While these two metrics can sometimes move in opposite directions, as newer advertisers typically start at lower spend levels, this quarter saw broad-based strength across both, which is a positive signal for the health and momentum of our business. As I have said in the past, I'm particularly encouraged by the growth in the number of advertisers because they are essentially the fuel for our future growth. Ex-TAC gross profit reached $172.1 million, representing 15.1% year-over-year growth. This included a 45-basis-point tailwind from foreign exchange rates. Growth was primarily driven by higher advertising spend, margin expansion on certain digital publishers, and strong contributions from Taboola News and Bidded Supply. The growth rate also benefited from a favorable comparison to last year due to the onboarding of Yahoo advertisers. Gross profit for the quarter was $135.6 million, primarily benefiting from strong ex-TAC gross profit growth. As mentioned last quarter, gross profit also benefited from reductions in our other cost of revenues, driven by lower server and network infrastructure costs, some of which came from a reduction in depreciation expenses related to our servers due to a reassessment of their useful life. Our net loss was $4.3 million, with non-GAAP net income coming in positive at $30.2 million. Adjusted EBITDA for the quarter was $45.2 million, reflecting 21.3% year-over-year growth. Our adjusted EBITDA margin was 26.2%, which improved by 130 basis points versus Q2 2024. This improvement reflects our healthy year-over-year ex-TAC growth, along with strong cost discipline that we exercised in 2024 and the first half of 2025. In terms of cash generation, we had $47.4 million in operating cash flow in the second quarter and free cash flow of $34.2 million, which is over 30% higher than the same quarter last year. Our free cash flow benefited significantly from a couple of factors, primarily higher adjusted EBITDA margins and strong management of our working capital. Our free cash flow conversion from adjusted EBITDA has been over 70% over the last four and the last eight quarters, which we are very happy about. Looking forward, while we continue to expect to convert free cash flow from adjusted EBITDA at a 50% to 60% rate over any typical trailing eight-quarter period, I would expect to remain at the higher end of that range. Turning to the balance sheet, we remain in a strong financial position. We ended the second quarter with a net cash balance of $27.2 million. Cash and cash equivalents totaled $115.2 million, which more than offset our long-term debt of $88 million. As a reminder, earlier this year, we secured a new $270 million revolving credit facility, allowing us to fully repay our prior long-term loan while maintaining over $180 million in available capacity as of June 30. This facility also allowed us to reduce our interest expense by $1.2 million in the second quarter. With this facility, we can operate with a lower cash balance while preserving access to significant liquidity. Regarding share repurchases, we continue to believe share repurchases are one of the most compelling uses of capital. In the second quarter, we repurchased approximately 32 million shares at an average price of $3.13 for a total consideration of $100.1 million. Through July, we've repurchased an additional 3.1 million shares at an average price of $3.59 for a total of $11 million. In July, our Board authorized an incremental $200 million, bringing our total authorization as of August 1 to approximately $285 million. During the first half of the year, as Adam stated, we bought back nearly 12% of our total shares outstanding, shrinking our shares outstanding from about 337 million at the end of 2024 to about 297 million at the end of Q2 2025. Moving to guidance. For the third quarter of 2025, we are raising our guidance and expect revenues to be between $461 million and $469 million, gross profit to be between $127 million and $133 million, ex-TAC gross profit to be $166 million to $172 million, adjusted EBITDA to range from $43 million to $48 million, and non-GAAP net income to be $29 million to $34 million. For the full year, we are raising our guidance across the board. We now expect revenues to be between $1.86 billion and $1.89 billion, gross profit to be between $541 million and $555 million, ex-TAC gross profit to be $689 million to $703 million, adjusted EBITDA to be $208 million to $214 million, and non-GAAP net income to be $138 million to $144 million. This guidance reflects a strong first half of the year and continued momentum across our business entering the second half. When you are comparing each of the quarters this year to the same quarter last year, you must keep in mind the onboarding of Yahoo, which ramped in the first half of 2024 and impacted quarterly comparisons. As a result, we believe the full-year projected growth rate of 3% to 5%, which normalizes for these dynamics, is the best representation of the true growth of our core business. Investors should anticipate growth rates similar to this year for the time being as we focus on returning to consistent double-digit growth. In summary, we're pleased to report a strong first half of the year with results exceeding the high end of our guidance and giving us the confidence to raise our full-year outlook. With clear momentum across the growth initiatives we outlined at Investor Day and a significant runway ahead, we believe we are well-positioned to continue delivering meaningful value for our shareholders over the long term. And with that, let's move to Q&A. Operator, can you please open the lines for questions?

First question comes from the line of Jason Helfstein with Oppenheimer.

So I guess, literally, just right kind of going on to what you just talked about. So what's the roadmap from here to get back to double digits from the current 3% to 5%? How much of that is investing more in sales, better sales, AdTech? Just take us through how do you get back to double digits.

Thanks, Jason. So I think in terms of looking at how do we get back to double-digit growth, I think, first of all, let me talk about how to think about our business right now. So we obviously don't want to guide to next year or anything like that. But having said that, the best way to look at our forward-looking growth rates is to look at our full-year guide now, which is 3% to 5%. That guide doesn't include Realize. And obviously, the path back to double-digit growth is for Realize to start to allow us to win more budgets from social, win more budgets from display, basically to expand into that much larger TAM that we talked about at our Investor Day. That is the primary thing that needs to happen to get back to double-digit growth. For now, we're not baking it into our guide for the rest of this year. And I think the way to think about our business is that 3% to 5% growth, but we think Realize can get us back to double-digit growth.

And then just a quick follow-up. So obviously, performance marketing has gotten increasingly competitive just for a lot of reasons. Just maybe talk about why you think the product fits the need of marketers right now.

Yes, I can address this. Overall, we have made it significantly easier for advertisers of all sizes to partner with us. We no longer require a specialized workflow from them, allowing them to import their social and display formats. They simply provide us with their goals, and we use AI to advise them on the appropriate budget. From there, we handle everything across our various supply types. Taboola's extensive distribution, through major partners like Yahoo!, Apple, Microsoft, Disney, NBC, USA Today, as well as local and sports sites, gives us broad access to consumers. As a result, outside of Google and Meta, we consistently reach more users than nearly anyone on the OpenWeb. With our substantial investment in AI, we excel at quickly identifying conversions for advertisers and subsequently increasing their budgets. I previously mentioned a few case studies out of the hundreds of advertisers testing Realize, which showcase the positive dynamics we aim for. Firstly, we are engaging new advertisers who hadn't previously worked with Taboola due to our focus on native advertising. As we simplify the onboarding process, these new advertisers are successfully trying Realize. Secondly, we are witnessing an increase in advertising budgets. As Stephen pointed out, our primary goal is to attract more advertisers and encourage budget growth. We believe we are well-positioned, apart from Meta and Google, to find conversions for advertisers due to our ease of use, distribution capabilities, data insights, and advanced AI tools.

The next question comes from the line of Laura Martin with Needham & Company.

And I want to follow up on this answer you just gave to Jason's question. I would have said that this 2% increase in budget is disappointing because I agree with what you just said, that increasing budgets from existing clients is the whole purpose behind Realize to try to get some of those native clients display budgets. So while the 9% increase in scaled clients is really impressive, the 2% is really disappointing, and I do think that's our primary focus. So why isn't that growth higher for existing clients, do you think?

Yes, Laura, that's a great question, and it's important for us to address it. I believe we have an informative slide in our backup deck available at investors.taboola.com for you to review. What you'll notice is that the number of scaled advertisers is consistently increasing, showing a positive trend. The average revenue per scaled advertiser has remained fairly stable over the past 7 or 8 quarters. This stability is primarily due to the existing advertisers in the scaled category, who are experiencing year-over-year growth. New advertisers typically start at the lower end of the revenue range and grow over time, which affects the overall average. In essence, the growth in the number of scaled advertisers contributes to a lower average revenue figure.

So this isn't a same-store number. You're not looking at the prior year scaled advertiser holding it constant and looking at theirs; you're allowing the new ones to lower the average.

That's correct. So it's not a same-store. But by the way, that is a very interesting observation and maybe something that we'll look at in the future, giving some indication of more same-store.

Yes, I think it would be more interesting if the number is growing faster than 2% because focusing solely on 2% doesn't seem very impressive. Adam, regarding OpenWeb, more people are claiming that OpenWeb is no longer relevant, partly because Google Search is shifting towards Google Answers and ChatGPT for answering questions instead of providing links. This shift poses a significant threat to OpenWeb as a whole. I understand you work with top brand clients, but even if a major client gets 30% of its traffic from search, that could potentially drop to zero in the next five years, which doesn't suggest they are very protected. More importantly, I would like you to address whether the open Internet can withstand the changes brought on by generative AI search behavior.

That's a great question. Let me start with some statistics and then share my perspective on the future. As a company, we've experienced a minimal impact from LLM-driven search changes so far. Currently, about 5% of our U.S. traffic comes from search, mainly because we work with large publishers who have significant direct traffic, where search contributes 30% to 40%. On the other hand, big platforms like Microsoft, Yahoo, and Apple see little to no search traffic. Therefore, our search revenue, specifically from Google Search, stands at around 5%, with a decline in the mid-single digits, which isn't material at this point. I find the future prospects exciting. While search traffic might decrease and lead to fewer page views for publishers, there's an emerging opportunity for LLM traffic on publisher sites. We've recently announced deeper integration in this area. Publishers who have built trust with consumers can leverage LLM to create new interactions that could be more valuable than the search traffic they might lose. For instance, if I am in the financial or travel publishing sector, having discussions on my site about travel plans or mortgage options using LLM will hold significant value. Personally, I booked a family trip recently and began my research on ChatGPT, but then spent a lot of time browsing the web for reviews and images to ensure a great experience for my family. This shows a consumer behavior where people start with certain tools but then invest time in exploration and education before making decisions, which is where OpenWeb excels. I believe there's a tremendous opportunity for LLM to thrive on the OpenWeb in ways we haven't yet fully realized.

My final question is, can you explain why you are investing $100 million in buying back shares instead of addressing the $88 million in debt, especially since there aren't many AdTech companies like yours that utilize financial leverage?

Yes, that's a great question, Laura. Currently, we are utilizing our revolving credit facility as a buffer to maintain a relatively neutral cash position. At the end of last quarter, we noted approximately $27 million in net cash. However, during the quarter, our net cash balance can range from around a negative $30 million to $40 million to a positive balance of approximately $50 million to $60 million. We rely on the revolver to manage these fluctuations. We aim to keep an average cash-neutral position throughout the quarter and use any excess cash flow to repurchase shares. We believe this approach is prudent because it carries low risk; we typically have sufficient cash to pay off the revolver at any time. Additionally, it's capital efficient as it allows us to temporarily operate in a negative cash position while continuing our aggressive share buybacks. From a capital structure perspective, we believe that repurchasing shares is warranted, especially as our share price increases, making it a valuable use of our cash.

The next question comes from the line of Matt Condon with Citizens.

My first one is just on Realize. Can you just walk through again what are the potential gating factors as far as that ramping here at the end of '25, maybe into '26? Is it a function of just getting into annual budgeting and breaking in there? Can you just talk about just how we should think about the ramp into 2026?

Yes, I can start. So the biggest thing is, as you know, from Realize, the biggest opportunity for us is that we're tapping into a much bigger market of essentially performance budgets. So if you think about advertisers the way they think about performance advertising, this area is becoming key for advertisers to ensure they're good at and diversify outside of search and social. In a world that's a bit volatile and things are changing, the first thing advertisers talk about is brand dollars, and the last thing they're stopping is their performance advertising budget. And with Realize, we're tapping into two types of parts of that market. The first one is display advertising budget, which is highly fragmented. So here, Realize needs to essentially be better than alternative ad tech platforms that are coalescing around this market which is, we estimate, more than $10 billion a year. Many small companies are getting a piece of that pie, and we think Taboola has a significant advantage because of our first-party data, our AI, and distribution to allow us to take a piece of that $10 billion display budget. That's part of it. The second thing is that advertisers tell us that when they spend money on social at large, they're seeing some diminishing returns at the tail of their spend. So if you look at their conversion rates over time, it starts well on social platforms, and then they get to a bigger goal. At the end of that campaign, a lot of times, it's too expensive. So they would love to give us 10% to 50% of their social spend and see if we can drive similar performance. So with Realize, we're hard at work going after those two buckets. I think the first one, the display one, we're seeing a lot of traction because, again, it's highly fragmented. And I think we have an advantage there, and social will be longer-term for us. But that's how I see us doubling and tripling Taboola's revenue in years to come, taking advantage of our first-party data and technology. And I'm happy that we were conservative in the way we think about the business to give our team an opportunity to work hard to keep innovating, learning from the market, and essentially see budget growth, which will drive the company's growth over time.

And then my second one is just on the growth of scaled advertisers. Can you just talk about what were the drivers there? Was it just better budgets out of existing clients because of the improved macro environment or new customer acquisitions? Can you just talk about the driver there?

Yes. So I think if you look at the two numbers, the number of scaled advertisers grew about 9% and the average revenue per scaled advertiser grew about 2%. The number of scaled advertisers has been consistently growing for us over the last few years. And that, frankly, is just good sales effort from our sales teams, bringing on new customers and then working to grow them over time. I think it kind of speaks to our advantage as a performance advertising platform, the fact that we are able to show that performance to the advertisers and get them to scale with us. That's why we've been able to grow the number of scaled advertisers over time. And as I said to Laura earlier, generally, what I want to see for now is that the average revenue per scaled advertiser kind of stays in that relative range that it's been right now and doesn't shrink per se. But as long as it's staying in that range, I think being able to grow the number of scaled advertisers is really important because that, as I've said in my prepared remarks and in past quarters, that's the fuel for future growth because now we can work to grow those advertisers even more over time.

Next question comes from the line of Zach Cummins with B. Riley Securities.

Congrats on the solid quarter. First question, can you give us an update in terms of just the overall tariff environment? I know during your last earnings call, you mentioned kind of a modest headwind out of China with some of your customers and impacts on the advertising spend there. So any sort of update you can give on that front, and kind of the assumptions that you're making for the second half of this year?

The simple answer regarding our assumptions for the second half of the year is that we expect more of the same. As mentioned last quarter, we did see a slight decrease in our revenue from China, but it was minimal, around 1%. Currently, China contributes about 5% to our total revenue, so the impact has not been significant. We do not anticipate a return to previous levels for the remainder of the year. In fact, last year in Q4, China was a strong area for us, which we are not including in our guidance for the rest of the year. We have considered the current situation, assuming it will be more akin to what we are seeing now. We have observed a very slight recovery in China revenue, but it is not substantial, which is why we are not incorporating any recovery into our guidance.

And nice to see the continued expansion of the share repurchase program. Steve, any sort of update you can give around kind of approval from Israeli authorities in terms of the 25% holder? Just curious on that front or just maintaining the existing structure that you have in place right now. Yes.

No, good question. First of all, let me clarify what you mentioned about the buyback. We've received an additional $200 million authorization for our buyback, bringing the total to about $285 million. We decided to proceed with this during the quarter to be proactive, as there are regulations in Israel that require us to go through certain processes to obtain the necessary approvals for buybacks, which can take some time. We wanted to set this up mid-quarter. Regarding the approval related to not needing to buy back shares from Yahoo! and the exemption from the 25% rule, I currently have no specific updates. We're actively working on it and will inform you when we have significant information to share, but I don’t have a timeline at this moment.

The last question comes from James Kopelman with TD Cowen.

Congrats on the quarter. I have a couple. First, for Adam, I think you mentioned Taboola News growing double digits. Maybe any additional or updated color on how big you see the opportunity at Taboola News over time, compared to what I think at one point was a historical run rate of around $100 million in revenue. What do you see as the near-term opportunities for Taboola News? Should we expect to see a broader rollout of countries and device OEMs? Or is future growth being driven primarily by some of the prior metrics, higher engagement yield, et cetera? And then I have one or two follow-ups.

Sure. Thanks for the question. So a few things about Taboola News. One, I'll just say I like this business a lot. It follows really great within the Realize strategy of having supply that is unique, that converts and advertisers like. So in this case, just as a reminder for people, this is where Taboola is the news experience on devices such as Xiaomi and Samsung and others that where they see either on the live screen or they have to swipe right to see the news feed from all of our publishers; they click on that, and then we're the first thing they do before they open a browser, before they open a social network. Taboola is the first experience they have on their device. So it's a very special moment on the consumer journey. So the second quarter was good. It's growing faster than growth in devices and performance, and new touch points that we're testing with. Without getting into too much kind of guidance on this, I'll just say we're having good momentum, and we'll continue to invest in this. And again, the main thing we are trying to do is get more devices, more partners around the world that are good for our advertisers and can give us more kind of unique supply that we want to get for Realize. So overall, I like the business; it's growing faster, and it's something that is relevant to Realize strategy.

And then just a quick follow-up, I guess, either for Adam or for Steve. Just given the ongoing macro uncertainty, what's your sense of conditions in the digital ad market as we head into late summer? What are you hearing from your conversations with clients with regards to ad budgets in the second half of the year? And maybe just remind us again, what's the geographic split of your business, North America versus Europe versus other regions?

Yes. Good questions. So first of all, on the macro side of things, we're seeing basically continued stability. So I think we've talked about in the past that the way our advertiser partners talk about their view of things is that they're keeping a close eye on things. Obviously, the tariffs and everything that's going on with the tariffs are concerning to them, but they're not cutting spend. They're just keeping an eye on it. So that's kind of what we're still hearing from our advertiser partners. So generally speaking, that has continued. And I think that's what we built into our guide, as I mentioned earlier, is basically that we expect kind of continued stability in the ad markets. In terms of our geographic split, we're fairly diversified. With bringing on Yahoo!, we're about 50% U.S. plus, but we are pretty well diversified outside the U.S. as well. And even where we have revenue inside the U.S., in many cases, there are the advertisers spending globally with us. So it's about 50% U.S., but very well globally diversified.

Last quick one for Steve. I think sales and marketing G&A might have been just a touch higher than what we were modeling heading in. Anything to call out to drive the slight increase there? And then how should we think about modeling, I guess, expenses in the second half, or any commentary on headcount?

Yes. So the first quarter and second quarter had a couple of unusual timing items between the two. So if you look at our first quarter expenses and then our second quarter, first quarter was lower, and second quarter ticked up quite a bit. I would look at the average of those two quarters to give you a good sense of what the third quarter and fourth quarter will be. So second quarter was actually higher than it should have been because of the timing issues with Q1. So think of the average of those two quarters going forward. I think that's the best way to look at it, frankly.

This concludes the question-and-answer session. I would now like to turn it back to Adam Singolda, CEO, for closing remarks.

Thank you, everyone, for joining us this morning. As you see, we've had a strong second quarter and ready to build on this momentum throughout the year. Realize, which is our main focus as a company to grow spend from advertisers and grow Taboola, it's early days, but we like what we're seeing, and we're just getting started. We're laser-focused on going after the performance advertising market, giving advertisers choice beyond Google and Meta. Thanks again, everyone, for your continued support. We're looking forward to talking to all of you in the weeks to come.

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