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Taboola Beats High End of Guidance in Q3 On All Metrics, Raises Adj. EBITDA and Non-GAAP Net Income Guidance for 2023

  • Exceeded high end of guidance on all metrics - Q3 2023 Revenues of $360.2M, Gross Profit of $100.7M, ex-TAC Gross Profit of $128.4M, Net loss of $23.1M, Non-GAAP Net Income of $6.7M and Adjusted EBITDA of $22.8M.
  • Net cash provided by operating activities of $32.5M and Free Cash Flow in Q3 2023 of $22.8M.
  • eCommerce double-digit growth in Q3, on track to reach nearly 20% of ex-TAC in 2023.
  • Taboola News, distributing content to Android OEMs continues strong momentum in Q3; on track to grow from $50M in 2022 to almost $100M in 2023.
  • Q3 share buyback of $18.6M brings total buyback to $23.0M through Sept 30, 2023. Announcing additional share repurchase authority of up to $40M and debt repayment of up to $30M.
  • Significant progress on Yahoo partnership with 100% of Yahoo’s global supply now available through Taboola.
  • Raising 2023 Adjusted EBITDA range to $75M - $82M and Non-GAAP Net Income range to $7M - $12M. Continue to expect positive Free Cash Flow.
  • Reiterating 2024 guidance of $200M+ Adjusted EBITDA, $100M+ Free Cash Flow.

NEW YORK, Nov. 08, 2023 (GLOBE NEWSWIRE) -- Taboola (Nasdaq: TBLA), a global leader in powering recommendations for the open web, helping people discover things they may like, today announced its results for the quarter ended September 30, 2023.

“We had strong performance in Q3, beating the high end of our guidance across all metrics and achieved $128.4M in ex-TAC Gross Profit, $22.8M in Adjusted EBITDA and $22.8M in Free Cash Flow,” said Adam Singolda, CEO of Taboola. “Our overperformance in the quarter was due to the momentum in our core business working with publishers and performance advertisers, as well as Taboola growth engines, namely eCommerce and Taboola News, as well as our AI-powered bidding technology which was responsible for a 2x lift in revenue from Microsoft vs the prior year. In addition, we made significant progress with Yahoo in Q3, with Taboola now able to offer exclusive access to Yahoo’s global supply. Together with Yahoo, we are incredibly excited for Taboola becoming the first ever “must buy” ad-platform in the Open Web.”

For more commentary on the quarter, please refer to Taboola’s Q3 2023 Shareholder Letter, which was furnished to the SEC and also posted on Taboola’s website today at https://investors.taboola.com.

Third Quarter Results Summary

(dollars in millions, except per share data) Three months ended
September 30,
     
  2023   2022      
  Unaudited
  % change
YoY
  Guidance
 
Revenues $ 360.2  $ 332.5  8.3%  $331- $357  
Gross profit $ 100.7  $ 102.7  (2.0%) $83 - $95  
Net loss $ (23.1) $ (26.0) (11.1%)    
EPS diluted (1)$ (0.07) $ (0.10) (35.7%)    
Ratio of net loss to gross profit(23.0%) (25.3%)      
Cash flow provided by operating activities$ 32.5  $ 23.2  39.8%     
Cash, cash equivalents, short-term deposits and
investments
$ 250.7  $ 308.3  (18.7%)    
             
Non-GAAP Financial Data *            
ex-TAC Gross Profit$ 128.4  $ 129.3  (0.7%) $112 - $124  
Adjusted EBITDA$ 22.8  $ 24.2  (5.5%) ($2) - $10  
Non-GAAP Net Income (Loss)$ 6.7  $ 10.2  (34.4%) ($20) - ($8) 
Ratio of Adjusted EBITDA to ex-TAC Gross Profit17.8%  18.7%       
Free Cash Flow$ 22.8  $ 11.0  107.3%     
 
1  The weighted-average shares used in the computation of the diluted EPS for the three months ended September 30, 2023
and 2022 are 352,591,043 and 255,160,597, respectively. The weighted-average shares for the three months ended
September 30, 2023 include 45,198,702 Non-Voting Ordinary shares.
 

Business Highlights for Q3 2023

  • Revenue from new publisher partners continues to be an area of strength - Publisher wins that were new and from competitors included Nexstar, Adversports, Absolute Sports, Portal da Torcida, Nate, Excite Japan.
  • Renewed relationships with many well-known publishers including Gannett, Cox Media Group, Sport 1, NDTV, India Today, El Financiero, Internet Group.
  • Rolled out a new Taboola News partnership with realme, the world’s fastest-growing smartphone brand, powering recommendations on mobile devices for audiences in Europe, Southeast Asia and beyond, representing more than 6M devices.
  • New features and momentum for our Generative AI technology, including the introduction of Taboola Generative AI Admaker, which allows advertisers to edit existing creative automatically, instead of just creating images from scratch. For self service advertisers, every 4th new creative generated in our system is based on Generative AI tools we have released.

Fourth Quarter and Full Year 2023 Guidance

For the Fourth Quarter and Full Year 2023, the Company currently expects:

 Q4 2023
Guidance
 FY 2023
Guidance
 
 Unaudited
 
 (dollars in millions) 
Revenues$418 - $449 $1,438 - $1,469 
Gross profit$132 - $148 $420 - $436 
ex-TAC Gross Profit*$164 - $179 $531 - $546 
Adjusted EBITDA*$26 - $33 $75 - $82 
Non-GAAP Net Income (Loss)*($3) - $2 $7 - $12 
 

Although we provide guidance for Adjusted EBITDA and Non-GAAP Net Income (Loss), we are not able to provide guidance for projected net income (loss), the most directly comparable GAAP measure. Certain elements of net income (loss), including share-based compensation expenses and warrant valuations, are not predictable due to the high variability and difficulty of making accurate forecasts. As a result, it is impractical for us to provide guidance on net income (loss) or to reconcile our Adjusted EBITDA and Non-GAAP Net Income (Loss) guidance without unreasonable efforts. Consequently, no disclosure of projected net income (loss) is included. For the same reasons, we are unable to address the probable significance of the unavailable information.

Webcast Details

Taboola's senior management team will discuss the Company's earnings on a call that will take place on November 8, 2023, at 8:30 AM ET. The call can be accessed via webcast at https://investors.taboola.com. To access the call by phone, please go to this link to register https://register.vevent.com/register/BIde7d71bf81ff40529269fd4f8823c5b9 and you will be provided with dial in details. The webcast will be available for replay for one year, through the close of business on November 8, 2024.

*About Non-GAAP Financial Information

This press release includes ex-TAC Gross Profit, Adjusted EBITDA, Ratio of Adjusted EBITDA to ex-TAC Gross Profit, Free Cash Flow, Non-GAAP Net Income (Loss), which are non-GAAP financial measures. These non-GAAP financial measures are not measures of financial performance in accordance with GAAP and may exclude items that are significant in understanding and assessing the Company’s financial results. Therefore, these measures should not be considered in isolation or as an alternative to revenues, gross profit, net income (loss), cash flows from operations or other measures of profitability, liquidity or performance under GAAP. You should be aware that the Company’s presentation of these measures may not be comparable to similarly-titled measures used by other companies.

The Company believes non-GAAP financial measures provide useful supplemental information to management and investors regarding future financial and business trends relating to the Company. The Company believes that the use of these measures provides an additional tool for investors to use in evaluating operating results and trends and in comparing the Company’s financial measures with other similar companies, many of which present similar non-GAAP financial measures to investors. Non-GAAP financial measures are subject to inherent limitations because they reflect the exercise of judgments by management about which items are excluded or included in calculating them, which may vary from period to period. Please refer to the appendix at the end of this press release for reconciliations to the most directly comparable measures in accordance with GAAP.

**About Cash Investment in Publisher Prepayments (Net)

We calculate cash investment in publisher prepayments (net) for a specific measurement period as the gross amount of cash publisher prepayments we made in that measurement period minus the amortization of publisher prepayments that were included in traffic acquisition cost during that measurement period, which were the result of cash publisher prepayments made in that measurement period and previous periods.

Note Regarding Forward-Looking Statements

Certain statements in this press release are forward-looking statements. Forward-looking statements generally relate to future events including future financial or operating performance of Taboola.com Ltd. (the “Company”). In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expect”, “guidance”, “intend”, “will”, “estimate”, “anticipate”, “believe”, “predict”, “target”, “potential” or “continue”, or the negatives of these terms or variations of them or similar terminology. Such forward-looking statements are subject to risks, uncertainties, and other factors which could cause actual results to differ materially from those expressed or implied by such forward looking statements.

These forward-looking statements are based upon estimates and assumptions that, while considered reasonable by the Company and its management, are inherently uncertain. Uncertainties and risk factors that could affect the Company’s future performance and cause results to differ from the forward-looking statements in this press release include, but are not limited to: the Company’s ability to grow and manage growth profitably, maintain relationships with customers and retain its management and key employees; the Company’s ability to successfully integrate the Connexity acquisition; changes in applicable laws or regulations; the Company’s estimates of expenses and profitability and underlying assumptions with respect to accounting presentations and purchase price and other adjustments; the extent to which we will voluntarily prepay additional long-term debt or buyback any of our Ordinary shares pursuant to authority granted by the Company’s Board of Directors, which may depend upon market and economic conditions; other business opportunities and priorities; and, with respect to the buyback of our Ordinary shares, the availability of sufficient continuing authority being approved and re-approved as necessary by the Tel Aviv District Court Economic Department to permit share buybacks (and our continued use of a net issuance mechanism to satisfy tax withholding obligations related to equity-based compensation on behalf of our directors, officers and other employees) or other factors; the Company’s ability to transition to and fully launch the native advertising service for Yahoo on the currently anticipated schedule or at all; the ability to generate or achieve the increase in Adjusted EBITDA and Free Cash Flow in 2024 or our expected revenue run-rate once Yahoo integration is live, in each case to the levels assumed in this press release or at all; ability to attract new digital properties and advertisers; ability to meet minimum guarantee requirements in contracts with digital properties; intense competition in the digital advertising space, including with competitors who have significantly more resources; ability to grow and scale the Company’s ad and content platform through new relationships with advertisers and digital properties; ability to secure high quality content from digital properties; ability to maintain relationships with current advertiser and digital property partners; ability to prioritize investments to improve profitability and free cash flow; ability to make continued investments in the Company’s AI-powered technology platform; the need to attract, train and retain highly-skilled technical workforce; changes in the regulation of, or market practice with respect to, “third party cookies” and its impact on digital advertising; continued engagement by users who interact with the Company’s platform on various digital properties; reliance on a limited number of partners for a significant portion of the Company’s revenue; changes in laws and regulations related to privacy, data protection, advertising regulation, competition and other areas related to digital advertising; ability to enforce, protect and maintain intellectual property rights; and risks related to the fact that we are incorporated in Israel and governed by Israeli law; the potential impacts of the war in Israel to the Company’s operations; the Company’s ability to receive the requisite Israeli court approvals to conduct current or future share repurchases; and other risks and uncertainties set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 under Part 1, Item 1A “Risk Factors” and in the Company’s subsequent filings with the Securities and Exchange Commission.

Nothing in this press release should be regarded as a representation by any person that the forward-looking statements set forth herein will be achieved or that any of the contemplated results of such forward-looking statements will be achieved. You should not place undue reliance on these forward-looking statements, which speak only as of the date they were made. The Company undertakes no duty to update these forward-looking statements except as may be required by law.

About Taboola
Taboola powers recommendations for the open web, helping people discover things they may like.

The Company’s platform, powered by artificial intelligence, is used by digital properties, including websites, devices and mobile apps, to drive monetization and user engagement. Taboola has long-term partnerships with some of the top digital properties in the world, including CNBC, BBC, NBC News, Business Insider, The Independent and El Mundo.

Approximately 18,000 advertisers use Taboola to reach nearly 600 million daily active users in a brand-safe environment. Following the acquisition of Connexity in 2021, Taboola is a leader in powering e-commerce recommendations, driving more than 1 million monthly transactions each month. Leading brands, including Walmart, Macy’s, Wayfair, Skechers and eBay are among key customers.

Learn more at www.taboola.com and follow @taboola on Twitter.

Investor Contact:Press Contact:
Jessica KourakosDave Struzzi
investors@taboola.compress@taboola.com
 


CONSOLIDATED BALANCE SHEETS
 
U.S. dollars in thousands, except share and per share data
 
 
 September 30,
2023
 December 31,
2022

 
 Unaudited   
ASSETS      
CURRENT ASSETS      
Cash and cash equivalents$238,259 $165,893 
Short-term investments 12,467  96,914 
Restricted deposits 1,487  750 
Trade receivables (net of allowance for credit losses of
$10,794 and $6,748 as of September 30, 2023 and
December 31, 2022, respectively)
 232,118  256,708 
Prepaid expenses and other current assets 71,549  73,643 
Total current assets 555,880  593,908 
NON-CURRENT ASSETS   
Long-term prepaid expenses 40,854  42,945 
Commercial agreement asset 289,451   
Restricted deposits 4,111  4,059 
Deferred tax assets, net 3,467  3,821 
Operating lease right of use assets 65,003  66,846 
Property and equipment, net 75,792  73,019 
Intangible assets, net 141,235  189,156 
Goodwill 555,931  555,869 
Total non-current assets 1,175,844  935,715 
Total assets$ 1,731,724 $ 1,529,623 
 


CONSOLIDATED BALANCE SHEETS
 
U.S. dollars in thousands, except share and per share data
 
 
 September 30,
2023
 December 31,
2022

 
 Unaudited     
LIABILITIES AND SHAREHOLDERS' EQUITY        
CURRENT LIABILITIES        
Trade payables$252,727  $247,504  
Short-term operating lease liabilities 19,015   14,753  
Accrued expenses and other current liabilities 108,229   102,965  
Current maturities of long-term loan 53,000   3,000  
Total current liabilities 432,971   368,222  
LONG-TERM LIABILITIES        
Long-term loan, net of current maturities 141,829   223,049  
Long-term operating lease liabilities 52,232   57,928  
Warrants liability 6,023   6,756  
Deferred tax liabilities, net 25,560   34,133  
Other long-term liabilities 6,000   5,000  
Total long-term liabilities 231,644   326,866  
SHAREHOLDERS' EQUITY        
Ordinary shares with no par value- Authorized: 700,000,000
as of September 30, 2023 and December 31, 2022;
300,692,928 and 254,133,863 shares issued and outstanding
as of September 30, 2023 and December 31, 2022,
respectively
      
Non-voting Ordinary shares with no par value- Authorized:
46,000,000 as of September 30, 2023 and December 31,
2022; 45,198,702 and 0 shares issued and outstanding as of
September 30, 2023 and December 31, 2022, respectively
      
Treasury Ordinary shares, at cost - 6,672,915 and 0 shares
as of September 30, 2023 and December 31, 2022,
respectively
 (23,157)    
Additional paid-in capital 1,244,667   903,789  
Accumulated other comprehensive loss (218)  (834) 
Accumulated deficit (154,183)  (68,420) 
Total shareholders' equity 1,067,109   834,535  
Total liabilities and shareholders' equity$ 1,731,724  $ 1,529,623  
 


CONSOLIDATED STATEMENTS OF LOSS
 
U.S. dollars in thousands, except share and per share data
 
 
 Three months ended
September 30,
 Nine months ended
September 30,
 
 2023 2022 2023 2022
 
 Unaudited
 
Revenues$ 360,221  $ 332,462  $ 1,019,911  $ 1,029,883  
Cost of revenues:                
Traffic acquisition cost 231,786   203,125   652,602   619,109  
Other cost of revenues 27,776   26,649   80,001   79,695  
Total cost of revenues 259,562   229,774   732,603   698,804  
Gross profit 100,659   102,688   287,308   331,079  
Operating expenses:                
Research and development 35,890   36,237   101,876   100,728  
Sales and marketing 59,664   63,216   181,431   190,989  
General and administrative 23,839   24,685   76,533   78,062  
Total operating expenses 119,393   124,138   359,840   369,779  
Operating loss (18,734)  (21,450)  (72,532)  (38,700) 
Finance income (expenses), net (4,402)  (3,570)  (11,383)  12,389  
Loss before income taxes expenses (23,136)  (25,020)  (83,915)  (26,311) 
Income tax expenses    (1,006)  (1,848)  (848) 
Net loss$ (23,136) $ (26,026) $ (85,763) $ (27,159) 
                 
Net loss per share attributable to Ordinary and
Non-voting Ordinary shareholders, basic and
diluted
$(0.07) $(0.10) $(0.25) $(0.11) 
Weighted-average shares used in computing net
loss per share, basic and diluted
 352,591,043   255,160,597   345,631,022   251,865,831  
 
1  The weighted-average shares used in the computation of the basic and diluted net loss per share the three months ended September 30,
2023 and 2022 are 352,591,043 and 255,160,597, respectively, and for the nine months ended September 30, 2023 and 2022 are
345,631,022 and 251,865,831, respectively. The weighted-average shares for the three and nine months ended September 30, 2023 include
45,198,702 Non-Voting Ordinary shares.
 


CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
 
U.S. dollars in thousands
 
 
 Three months ended
September 30,
 Nine months ended
September 30,
 
 2023 2022 2023 2022 
 Unaudited
 
Net loss$ (23,136) $ (26,026) $ (85,763) $ (27,159) 
Other comprehensive income (loss):                
Unrealized gains (losses) on available-for-sale
marketable securities
 46   (445)  503   (704) 
Unrealized gains (losses) on derivative
instruments, net
 570   1,504   113   (2,020) 
Other comprehensive income (loss) 616   1,059   616   (2,724) 
Comprehensive loss$ (22,520) $ (24,967) $ (85,147) $ (29,883) 
 


SHARE-BASED COMPENSATION BREAK-DOWN BY EXPENSE LINE
 
U.S. dollars in thousands
 
 
 Three months ended
September 30,
 Nine months ended
September 30,
 
 2023 2022 2023 2022 
 Unaudited
 
Cost of revenues$999 $673 $3,082 $2,227 
Research and development 6,256  7,343  18,281  20,888 
Sales and marketing 4,127  5,654  12,813  18,351 
General and administrative 4,869  5,040  14,692  17,505 
Total share-based compensation expenses$ 16,251 $ 18,710 $ 48,868 $ 58,971 
 


DEPRECIATION AND AMORTIZATION BREAK-DOWN BY EXPENSE LINE
 
U.S. dollars in thousands
 
 
 Three months ended
September 30,
 Nine months ended
September 30,
 
 2023 2022 2023 2022 
 Unaudited
 
Cost of revenues$11,006 $8,669 $27,764 $25,189 
Research and development 564  654  1,758  1,994 
Sales and marketing 13,531  13,692  40,566  40,917 
General and administrative 215  207  621  611 
Total depreciation and amortization expense$ 25,316 $ 23,222 $ 70,709 $ 68,711 
 


CONSOLIDATED STATEMENTS OF CASH FLOWS
 
U.S. dollars in thousands
 
 
 Three months ended
September 30,
 Nine months ended
September 30,
 
 2023 2022 2023 2022 
 Unaudited
 
Cash flows from operating activities                
Net loss$(23,136) $(26,026) $(85,763) $(27,159) 
Adjustments to reconcile net loss to net cash flows
provided by operating activities:
                
Depreciation and amortization 25,316   23,222   70,709   68,711  
Share-based compensation expenses 16,251   18,710   48,868   58,971  
Net loss from financing expenses 1,033   3,417   1,269   7,733  
Revaluation of the Warrants liability 241   (988)  (733)  (26,988) 
Amortization of loan and credit facility issuance
costs
 329   291   1,220   1,006  
Amortization of premium and accretion of
discount on short-term investments, net
 (393)  (185)  (923)  (322) 
Change in operating assets and liabilities:                
Decrease (increase) in trade receivables, net (14,681)  15,056   24,590   60,672  
Decrease (increase) in prepaid expenses and
other current assets and long-term prepaid
expenses
 (6,088)  (7,571)  2,554   (13,921) 
Increase (decrease) in trade payables 31,952   (2,134)  2,222   (54,659) 
Increase (decrease) in accrued expenses and
other current liabilities and other long-term
liabilities
 3,565   (2,570)  5,377   (25,516) 
Increase (decrease) in deferred taxes, net (1,724)  2,800   (8,218)  (9,676) 
Change in operating lease right of use assets 4,372   3,897   12,447   11,536  
Change in operating lease liabilities (4,578)  (4,700)  (12,038)  (16,962) 
Net cash provided by operating activities 32,459   23,219   61,581   33,426  
Cash flows from investing activities                
Purchase of property and equipment, including
capitalized internal-use software
 (9,661)  (12,224)  (19,839)  (28,476) 
Cash paid in connection with acquisitions, net of
cash acquired
    (7,361)     (7,981) 
Proceeds from (investment in) restricted
deposits
 (253)  88   (594)  98  
Proceeds from sales and maturities of short-
term investments
 30,033   6,160   107,669   6,160  
Purchase of short-term investments    (51,527)  (21,991)  (126,382) 
Release of escrow funds in connection with
acquisition of subsidiary
    2,100        
Net cash provided by (used in) investing
activities
 20,119   (62,764)  65,245   (156,581) 
Cash flows from financing activities                
Exercise of options and vested RSUs 2,973   1,435   5,429   7,467  
Payment of tax withholding for share-based
compensation expenses
 (1,305)  (1,925)  (3,213)  (4,110) 
Repurchase of Ordinary shares (18,799)     (23,157)    
Repayment of long-term loan (750)  (750)  (32,250)  (2,250) 
Costs associated with entering into a revolving
credit facility
    (1,061)     (1,061) 
Net cash provided by (used in) financing
activities
 (17,881)  (2,301)  (53,191)  46  
Exchange rate differences on balances of cash
and cash equivalents
 (1,033)  (3,417)  (1,269)  (7,733) 
Increase (decrease) in cash and cash equivalents 33,664   (45,263)  72,366   (130,842) 
Cash and cash equivalents - at the beginning of
the period
 204,595   233,740   165,893   319,319  
Cash and cash equivalents - at end of the
period
$ 238,259  $ 188,477  $ 238,259  $ 188,477  
 


 Three months ended
September 30,
 Nine months ended
September 30,
 
 2023 2022 2023 2022 
 Unaudited
 
Supplemental disclosures of cash flow information:            
Cash paid during the year for:            
Income taxes$3,102 $6,437 $9,935 $22,599 
Interest$4,813 $4,721 $14,580 $15,094 
Non-cash investing and financing activities:            
Purchase of property and equipment, including
capitalized internal-use software
$5,694 $2,764 $5,694 $2,764 
Share-based compensation included in capitalized
internal-use software
$399 $440 $1,731 $1,460 
Creation of operating lease right-of-use assets$5,011 $8,541 $10,604 $11,648 
 

APPENDIX: Non-GAAP Reconciliation

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022 (Unaudited)

The following table provides a reconciliation of revenues to ex-TAC Gross Profit.

 Three months ended
September 30,
 Nine months ended
September 30,
 
 2023 2022 2023 2022 
 (dollars in thousands) 
Revenues$ 360,221 $ 332,462 $ 1,019,911 $ 1,029,883 
Traffic acquisition cost 231,786  203,125  652,602  619,109 
Other cost of revenues 27,776  26,649  80,001  79,695 
Gross profit$100,659 $102,688 $287,308 $331,079 
Add back: Other cost of revenues 27,776  26,649  80,001  79,695 
ex-TAC Gross Profit$ 128,435 $ 129,337 $ 367,309 $ 410,774 
 

The following table provides a reconciliation of net income (loss) to Adjusted EBITDA.

 Three months ended
September 30,
 Nine months ended
September 30,
 
  2023   2022   2023   2022  
 (dollars in thousands) 
Net loss$ (23,136) $ (26,026) $ (85,763) $ (27,159) 
Adjusted to exclude the following:                
Finance (income) expenses, net 4,402   3,570   11,383   (12,389) 
Income tax expenses    1,006   1,848   848  
Depreciation and amortization 25,316   23,222   70,709   68,711  
Share-based compensation expenses 13,605   15,937   41,022   50,616  
Restructuring expenses (1)    3,383      3,383  
Holdback compensation expenses (2) 2,646   2,773   7,846   8,355  
M&A and other costs (3)    292   1,571   816  
Adjusted EBITDA$ 22,833  $ 24,157  $ 48,616  $ 93,181  
 
Costs associated with the Company’s cost restructuring program implemented in September 2022.
2  Represents share-based compensation due to holdback of Taboola Ordinary shares issuable under compensatory
arrangements relating to Connexity acquisition.
3  Includes one-time costs related to the Commercial agreement.
 

We calculate Ratio of net income (loss) to gross profit as net income (loss) divided by gross profit. We calculate Ratio of Adjusted EBITDA to ex-TAC Gross Profit, a non-GAAP measure, as Adjusted EBITDA divided by ex-TAC Gross Profit. We believe that the Ratio of Adjusted EBITDA to ex-TAC Gross Profit is useful because TAC is what we must pay digital properties to obtain the right to place advertising on their websites, and we believe focusing on ex-TAC Gross Profit better reflects the profitability of our business. The following table reconciles Ratio of net income (loss) to gross profit and Ratio of Adjusted EBITDA to ex-TAC Gross Profit for the period shown.

 Three months ended
September 30,
 Nine months ended
September 30,
 
 2023 2022 2023 2022 
 (dollars in thousands) 
Gross profit$100,659  $102,688  $287,308  $331,079  
Net loss$(23,136) $(26,026) $(85,763) $(27,159) 
Ratio of net loss to gross profit (23.0%)  (25.3%)  (29.9%)  (8.2%) 
                 
ex-TAC Gross Profit$128,435  $129,337  $367,309  $410,774  
Adjusted EBITDA$22,833  $24,157  $48,616  $93,181  
Ratio of Adjusted EBITDA margin to ex-TAC
Gross Profit
 17.8%   18.7%   13.2%   22.7%  
 

The following table provides a reconciliation of net income (loss) to Non-GAAP Net Income.

 Three months ended
September 30,
 Nine months ended
September 30,
 
 2023 2022 2023 2022 
 (dollars in thousands) 
Net loss$ (23,136) $ (26,026) $ (85,763) $ (27,159) 
Amortization of acquired intangibles 15,980   15,983   47,911   47,591  
Share-based compensation expenses 13,605   15,937   41,022   50,616  
Restructuring expenses (1)    3,383      3,383  
Holdback compensation expenses (2) 2,646   2,773   7,846   8,355  
M&A and other costs (3)    292   1,571   816  
Revaluation of Warrants 241   (988)  (733)  (26,988) 
Foreign currency exchange rate losses (4) 859   347   625   3,053  
Income tax effects (3,491)  (1,486)  (11,282)  (11,563) 
Non-GAAP Net Income$ 6,704  $ 10,215  $ 1,197  $ 48,104  
 
1  Costs associated with the Company’s cost restructuring program implemented in September 2022.
2  Represents share-based compensation due to holdback of Taboola Ordinary shares issuable under compensatory
arrangements relating to Connexity acquisition.
3  Includes one-time costs related to the Commercial agreement.
4  Represents income or loss related to the remeasurement of monetary assets and liabilities to the Company's functional
currency using exchange rates in effect at the end of the reporting period.
 

The following table provides a reconciliation of net cash provided by operating activities to Free Cash Flow.

 Three months ended
September 30,
 Nine months ended
September 30,
 
 2023 2022 2023 2022 
 (dollars in thousands) 
Net cash provided by operating activities$ 32,459  $ 23,219  $ 61,581  $ 33,426  
Purchases of property and equipment, including
capitalized internal-use software
 (9,661)  (12,224)  (19,839)  (28,476) 
Free Cash Flow$ 22,798  $ 10,995  $ 41,742  $ 4,950  
 

APPENDIX: Non-GAAP Guidance Reconciliation

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES FOR Q4 2023 AND FULL YEAR 2023 GUIDANCE

(Unaudited)

The following table provides a reconciliation of projected gross profit to ex-TAC Gross Profit.

 Q4 2023
Guidance
 FY 2023
Guidance
 
 Unaudited
 
 (dollars in millions) 
Revenues$418 - $449 $1,438 - $1,469 
Traffic acquisition cost($255) - ($270) $907 - $923 
Other cost of revenues($31) - ($30) ($111) - ($110) 
Gross profit$132 - $148 $420 - $436 
Add back: Other cost of revenues($31) - ($30) ($111) - ($110) 
ex-TAC Gross Profit$164 - $179 $531 - $546 
 

Although we provide a projection for Free Cash Flow, we are not able to provide a projection for net cash provided by operating activities, the most directly comparable GAAP measure. Certain elements of net cash provided by operating activities, including taxes and timing of collections and payments, are not predictable therefore projecting an accurate forecast is difficult. As a result, it is impractical for us to provide projections on net cash provided by operating activities or to reconcile our Free Cash Flow projections without unreasonable efforts. Consequently, no disclosure of projected net cash provided by operating activities is included. For the same reasons, we are unable to address the probable significance of the unavailable information.


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