Form 424B3 Taboola.com Ltd.
PROSPECTUS SUPPLEMENT
|
Filed pursuant to Rule
|
(To Prospectus dated October 6, 2021)
|
424(b)(3) of the Rules and
|
Regulations Under the
|
|
Securities Act of 1933
|
|
Registration Statement No. 333-257879
|
TABOOLA.COM LTD.
Ordinary Shares
Warrants to Purchase Ordinary Shares
Recent Developments
This prospectus supplement, together with the prospectus, is to be used by the selling shareholders listed in the
prospectus in connection with offers and sales from time to time of the ordinary shares and warrants to purchase
ordinary shares of Taboola.com Ltd.
November 10, 2021
Third Quarter 2021 Results Summary (unaudited)
Three Months Ended
September 30,
|
|||||||||
(dollars in thousands)
|
2021
|
|
2020
|
||||||
Revenues
|
$
|
338,768
|
$
|
290,585
|
|||||
Gross Profit
|
$
|
107,685
|
$ |
89,596
|
|||||
Net Income
|
$
|
17,296
|
$
|
16,688
|
|||||
Ratio of Net Income to Gross profit
|
16.1
|
%
|
18.6
|
%
|
|||||
Cash Flow from Operations
|
$
|
26,573
|
$
|
33,776
|
|||||
Cash, cash equivalents and short-term deposits
|
$
|
311,768
|
$ |
185,673
|
Non-GAAP Financial Data*
|
|||||||||
ex-TAC Gross Profit
|
$
|
126,869
|
$ |
104,297
|
|||||
Adjusted EBITDA
|
$
|
39,734
|
$ |
40,055
|
|||||
Ratio of Adjusted EBITDA to ex-TAC Gross Profit
|
31.3
|
%
|
38.4
|
%
|
|||||
Free Cash Flow
|
$
|
19,474
|
$ | 30,730 |
Third Quarter Financial Highlights
○ |
Q3 results exceeded guidance across all financial measures
|
● |
Revenues of $339 million versus adjusted guidance of $331 to $335 million (note that our previous guidance was $338 to $342 million, which was reduced by $7 million to reflect the adoption of net revenue accounting for Connexity - see
Appendix B).
|
● |
Gross Profit of $108 million versus guidance of $101 to $103 million.
|
● |
ex-TAC Gross Profit of $127 million versus guidance of $122 to $124 million.
|
● |
Net Income (Loss) of $17 million versus guidance of $(7) to $(5) million, $17 million of which was due to a reduction in warrant liability.
|
● |
Adjusted EBITDA of $40 million versus guidance of $36 to $37 million.
|
○ |
Revenue grew $48 million or 16.6% year-over-year.
|
● |
New digital property partners1 drove $23 million of growth.
|
● |
Existing digital property partners2 grew $25 million which translates to net dollar retention3 (NDR) of 109% driven by improvement in yield.
|
○ |
Gross Profit grew $18 million or 20.2% year-over-year and ex-TAC Gross Profit grew $23 million or 21.6% year-over-year.
|
● |
As with the growth in Revenues, the increase in Gross Profit and ex-TAC Gross Profit was also driven by a combination of growth from new digital property partners3 and existing digital property partners. The growth from existing was driven by strong improvements in yield as well as from one month of Connexity in our Q3 2021 results.
|
● |
These gains year-over-year were partially offset by the withholding in the prior year of $7 million in guaranteed TAC payments to publishers that we subsequently volunteered to pay in the fourth quarter of 2020.
|
○ |
Operating expenses grew $40 million or 58% year-over-year. Excluding higher share based compensation following becoming a public company and holdback compensation related to the Connexity acquisition that combined for a $14 million
year-over-year increase, operating expenses grew $26 million or 41.4% year-over-year. This increase was driven partly from having one month of Connexity in operating expenses. In addition, other drivers by expense category include:
|
● |
Within research and development, increases in headcount were partially offset by lower depreciation related to timing of new server investments. We continue to invest in our proprietary, deep learning data engine as well as new
products and tools to support our publishers and advertisers.
|
● |
Within sales and marketing, expenses increased to support our business growth and to reflect higher D&A related to intangibles from the Connexity acquisition.
|
● |
Within general and administrative expenses, expenses increased from higher professional fees and legal expenses related to M&A transactions and regulatory matters. Also, contributing to the increase were public company expenses and
a partial return to more normal operations following the COVID pandemic.
|
○ |
Net Income of $17.3 million was $0.6 million higher year-over-year primarily driven by a $17 million reduction in warrant liability, lower income taxes of $7.5 million and higher gross profit that more than offset higher operating
expenses. Adjusted EBITDA of $39.7 million decreased by $0.3 million year-over-year as higher operating expenses offset the higher gross profit.
|
○ |
EPS was $0.07 per diluted share in the third quarter. The EPS was based on fully-diluted shares outstanding of 259.3 million.
|
○ |
Our fully-diluted shares outstanding to start Q4 2021 is estimated to be approximately 272 million.
|
1New digital property partners within the first 12 months that were live on our network.
2Net growth of existing digital property partners, including the growth of new digital property partners (beyond the revenue contribution determined based on the
run-rate revenue generated by them when they are first on-boarded).
3Net Dollar Retention is the net growth of existing digital property partners for the given period divided by the revenues from the same period in the prior-year.
*About Non-GAAP
Financial Information
This press release includes ex-TAC Gross Profit, Adjusted EBITDA, Ratio of Adjusted EBITDA to ex-TAC Gross Profit and Free Cash Flow, 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, 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 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. Please refer to the appendix at the end of this press release
for reconciliations to the most directly comparable measures in accordance with GAAP.
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”, “intend”, “will”, “estimate”, “anticipate”, “believe”, “predict”, “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 ability to recognize the anticipated benefits of the recent acquisition of Connexity and the business
combination between the Company and ION Acquisition Corp. 1 Ltd. (together, the “Business Combinations”), which may be affected by, among other things, competition, the ability of the Company 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; costs related to the Business Combinations; 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; 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
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; the impact of the ongoing COVID-19 pandemic; 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; and other risks and uncertainties set forth in the section entitled “Risk Factors” and “Cautionary Note Regarding Forward-Looking
Statements” in the Company’s registration statements on Form F-1 as amended and filed on September 30, 2021 and on Form F-4 filed on April 30, 2021, and in subsequent filings with the Securities and Exchange Commission (“SEC”).
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.
CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands, except share and per share data
September 30,
|
December 31,
|
|||||||
2021
|
2020
|
|||||||
Unaudited
|
Audited
|
|||||||
ASSETS
|
||||||||
CURRENT ASSETS
|
||||||||
Cash and cash equivalents
|
$
|
311,768
|
$
|
242,811
|
||||
Restricted deposits
|
1,065
|
3,664
|
||||||
Trade receivables
|
190,667
|
158,050
|
||||||
Prepaid expenses and other current assets
|
47,324
|
21,609
|
||||||
Total current assets
|
550,824
|
426,134
|
||||||
NON-CURRENT ASSETS
|
||||||||
Long-term prepaid expenses
|
19,533
|
5,289
|
||||||
Restricted deposits
|
3,574
|
3,300
|
||||||
Deferred tax assets
|
1,955
|
1,382
|
||||||
Right of use assets
|
56,792
|
68,058
|
||||||
Property and equipment, net
|
60,201
|
52,894
|
||||||
Intangible assets, net
|
259,042
|
3,905
|
||||||
Goodwill
|
553,845
|
19,206
|
||||||
TOTAL LONG-TERM ASSETS |
954,942
|
154,034
|
||||||
Total assets
|
$
|
1,505,766
|
$
|
580,168
|
September 30,
|
December 31,
|
|||||||
2021
|
2020
|
|||||||
Unaudited
|
Audited
|
|||||||
LIABILITIES, CONVERTIBLE PREFERRED SHARES AND SHAREHOLDERS' EQUITY
|
||||||||
CURRENT LIABILITIES
|
||||||||
Trade payable
|
$
|
210,112
|
$
|
189,352
|
||||
Lease liability
|
16,531
|
15,746
|
||||||
Accrued expenses and other current liabilities
|
108,785
|
95,135
|
||||||
Taboola loan
|
3,000
|
-
|
||||||
Total current liabilities
|
338,428
|
300,233
|
LONG TERM LIABILITIES
|
||||||||
Deferred tax liabilities
|
50,432
|
45
|
||||||
Warrant liability
|
36,792
|
|||||||
Taboola Loan
|
285,869
|
|||||||
Lease liability
|
49,287
|
63,044
|
||||||
Total long-term liabilities
|
422,380
|
63,089
|
CONVERTIBLE PREFERRED SHARES
|
||||||||
Preferred A, B, B-1, B-2, C, D and E shares with no par value - Authorized: 0 and 123,389,750 shares at September 30, 2021 and at December 31, 2020 respectively; Issued and outstanding: 0 and 121,472,152 shares at September 30,2021 and
December 31, 2020 respectively.
|
-
|
170,206
|
SHAREHOLDERS' EQUITY
|
||||||||
Ordinary shares with no par value- Authorized: 700,000,000 and 176,535,661 shares as of September 30 , 2021 and December 31, 2020 respectively; 231,640,546 and 41,357,049 shares issued and outstanding as of September 30, 2021 and
December 31, 2020, respectively.
|
-
|
-
|
||||||
Additional paid-in capital
|
801,988
|
78,137
|
||||||
Accumulated deficit
|
(57,030
|
)
|
(31,497
|
)
|
||||
Total shareholders' equity
|
744,958
|
46,640
|
||||||
Total liabilities, convertible preferred shares, and shareholders' equity
|
$
|
1,505,766
|
$
|
580,168
|
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
U.S. dollars in thousands, except share and per share data
Three months ended
September 30,
|
Nine months ended
September 30,
|
|||||||||||||||
2021
|
2020
|
2021
|
2020
|
|||||||||||||
Unaudited
|
Unaudited
|
|||||||||||||||
Revenues
|
$
|
338,768
|
$
|
290,585
|
$
|
970,790
|
$
|
837,599
|
||||||||
Cost of revenues:
|
||||||||||||||||
Traffic acquisition cost
|
211,899
|
186,288
|
621,137
|
565,449
|
||||||||||||
Other cost of revenues
|
19,184
|
14,701
|
52,224
|
45,674
|
||||||||||||
Total cost of revenues
|
231,083
|
200,989
|
673,361
|
611,123
|
||||||||||||
Gross profit
|
107,685
|
89,596
|
297,429
|
226,476
|
||||||||||||
Operating expenses:
|
||||||||||||||||
Research and development expenses
|
29,946
|
21,485
|
83,889
|
65,392
|
||||||||||||
Sales and marketing expenses
|
43,518
|
32,663
|
146,962
|
99,495
|
||||||||||||
General and administrative expenses
|
34,345
|
13,907
|
98,489
|
41,662
|
||||||||||||
Total operating expenses
|
107,809
|
68,055
|
329,340
|
206,549
|
||||||||||||
Operating income (loss) before finance expenses
|
(124
|
)
|
21,541
|
(31,911
|
)
|
19,927
|
||||||||||
Finance income (expenses), net
|
13,960
|
(844
|
)
|
13,077
|
(1,050
|
)
|
||||||||||
Income (loss) before income taxes
|
13,836
|
20,697
|
(18,834
|
)
|
18,877
|
|||||||||||
Provision for income taxes
|
3,460
|
(4,009
|
)
|
(6,699
|
)
|
(13,137
|
)
|
|||||||||
Net income (loss)
|
$
|
17,296
|
$
|
16,688
|
$
|
(25,533
|
)
|
$
|
5,740
|
|||||||
Less: Undistributed earnings allocated to participating securities
|
–
|
(5,819
|
)
|
(11,944
|
)
|
(17,046
|
)
|
|||||||||
Net Income (loss) attributable to ordinary shares – basic and diluted
|
$
|
17,296
|
$
|
10,869
|
$
|
(37,477
|
)
|
$
|
(11,306
|
)
|
||||||
Net income (loss) per share attributable to ordinary shareholders, basic
|
$
|
0.08
|
$
|
0.29
|
$
|
(0.35
|
)
|
$
|
(0.28
|
)
|
||||||
Weighted-average shares used in computing net income (loss) per share attributable to ordinary shareholders, basic
|
229,024,803
|
38,101,268
|
107,884,927
|
40,144,245
|
||||||||||||
Net income (loss) per share attributable to ordinary shareholders, diluted
|
$
|
0.07
|
$
|
0.18
|
$
|
(0.35
|
)
|
$
|
(0.28
|
)
|
||||||
Weighted-average shares used in computing net income (loss) per share attributable to ordinary shareholders, diluted
|
259,262,529
|
60,221,497
|
107,884,927
|
40,144,245
|
SHARE BASED COMPENSATION BREAK-DOWN BY EXPENSE LINE
U.S. dollars in thousands
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
|||||||||||||||||
2021
|
|
2020
|
2021
|
|
2020
|
|||||||||||||
(unaudited)
|
(unaudited)
|
|||||||||||||||||
Cost of revenues
|
$ |
443
|
$ |
327
|
$ |
1,023
|
$ |
579
|
||||||||||
Research and development
|
7,749
|
2,292
|
20,134
|
4,343
|
||||||||||||||
Sales and marketing
|
3,997
|
2,505
|
40,168
|
4,402
|
||||||||||||||
General and administrative
|
7,751
|
1,396
|
42,269
|
1,689
|
||||||||||||||
Total share-based compensation expense
|
$
|
19,940
|
$
|
6,520
|
$
|
103,594
|
$
|
11,013
|
DEPRECIATION AND AMORTIZATION BREAK-DOWN BY EXPENSE LINE
U.S. dollars in thousands
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
|||||||||||||||||
2021
|
|
2020
|
2021
|
|
2020
|
|||||||||||||
(unaudited)
|
(unaudited)
|
|||||||||||||||||
Cost of revenues
|
$
|
6,775
|
$
|
5,206
|
$
|
18,826
|
$
|
16,771
|
||||||||||
Research and development
|
708
|
1,859
|
2,870
|
6,104
|
||||||||||||||
Sales and marketing
|
5,440
|
1,138
|
7,558
|
3,223
|
||||||||||||||
General and administrative
|
237
|
(182
|
)
|
796
|
750
|
|||||||||||||
Total depreciation and amortization expense
|
$
|
13,160
|
$
|
8,021
|
$
|
30,050
|
$
|
26,848
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands, except share and per share data
Three months ended
September 30,
|
Nine months ended
September 30,
|
|||||||||||||||
2021
|
2020
|
2021
|
2020
|
|||||||||||||
Unaudited
|
Unaudited
|
|||||||||||||||
Cash flows from operating activities:
|
||||||||||||||||
Net income (loss)
|
$
|
17,296
|
$
|
16,688
|
$
|
(25,533
|
)
|
$
|
5,740
|
|||||||
Adjustments to reconcile net income (loss) to net cash flows provided by operating activities:
|
||||||||||||||||
Depreciation and amortization
|
13,160
|
8,021
|
30,050
|
26,848
|
||||||||||||
Share based compensation expenses
|
19,940
|
6,520
|
103,594
|
11,013
|
||||||||||||
Net loss (gain) from financing expenses
|
(500
|
)
|
(1,761
|
)
|
(1,857
|
)
|
(937
|
)
|
||||||||
Increase (decrease) in deferred taxes, net
|
3,633
|
(179
|
)
|
2,716
|
(1,635
|
)
|
||||||||||
Revaluation of the warrant liability
|
(17,363
|
)
|
0
|
(17,091
|
)
|
0
|
||||||||||
Accrued interest, net
|
119
|
187
|
119
|
519
|
||||||||||||
Change in operating assets and liabilities:
|
||||||||||||||||
Decrease (increase) in trade receivables
|
(4,487
|
)
|
(5,454
|
)
|
14,544
|
37,842
|
||||||||||
Decrease (increase) in prepaid expenses and other current assets and long-term prepaid expenses
|
(4,622
|
)
|
(154
|
)
|
(38,379
|
)
|
14,831
|
|||||||||
Increase (decrease) in trade payable
|
3,840
|
8,139
|
(27,185
|
)
|
(27,396
|
)
|
||||||||||
Increase (decrease) in accrued expenses and other current liabilities
|
(3,904
|
)
|
1,124
|
1,380
|
15,457
|
|||||||||||
Change in operating lease Right of use assets
|
3,587
|
18,091
|
10,878
|
10,143
|
||||||||||||
Change in operating Lease liabilities
|
(4,126
|
)
|
(17,446
|
)
|
(12,683
|
)
|
(10,807
|
)
|
||||||||
Net cash provided by operating activities
|
26,573
|
33,776
|
40,553
|
81,618
|
||||||||||||
Cash flows from investing activities
|
||||||||||||||||
Purchase of property and equipment, including capitalized platform costs
|
(7,099
|
)
|
(3,046
|
)
|
(28,774
|
)
|
(13,680
|
)
|
||||||||
Cash paid in connection with acquisitions, net of cash acquired
|
(583,286
|
)
|
0
|
(583,286
|
)
|
(202
|
)
|
|||||||||
Decrease (increase) in restricted deposits
|
(211
|
)
|
70
|
2,325
|
68
|
|||||||||||
Decrease in short-term deposits
|
-
|
3,999
|
-
|
28,963
|
||||||||||||
Net cash provided by (used in) investing activities
|
(590,596
|
)
|
1,023
|
(609,735
|
)
|
15,149
|
||||||||||
Cash flows from financing activities
|
||||||||||||||||
Exercise of options
|
2,560
|
372
|
7,479
|
1,049
|
||||||||||||
Issuance of share, net of offering costs
|
(1,262
|
)
|
0
|
286,170
|
0
|
|||||||||||
Issuance of warrant
|
0
|
0
|
53,883
|
0
|
||||||||||||
Taboola loan
|
288,750
|
0
|
288,750
|
0
|
||||||||||||
Net cash provided by financing activities
|
290,048
|
372
|
636,282
|
1,049
|
||||||||||||
Exchange differences on balances of cash, cash equivalents
|
500
|
1,761
|
1,857
|
937
|
||||||||||||
Increase (decrease) in cash, cash equivalents
|
(273,475
|
)
|
36,932
|
68,957
|
98,753
|
|||||||||||
Cash, cash equivalents - at the beginning of the period
|
585,243
|
148,741
|
242,811
|
86,920
|
||||||||||||
Cash, cash equivalents - at end of the period
|
$
|
311,768
|
$
|
185,673
|
$
|
311,768
|
$
|
185,673
|
Three months ended
September 30,
|
Nine months ended
September 30,
|
|||||||||||||||
2021
|
2020
|
2021
|
2020
|
|||||||||||||
(unaudited)
|
(unaudited)
|
|||||||||||||||
Supplemental disclosures of cash flow information:
|
||||||||||||||||
Cash paid during the year for:
|
||||||||||||||||
Income taxes
|
$ |
3,145
|
$ |
8,520
|
$ |
7,647
|
$ |
9,483
|
||||||||
Interest
|
$ |
(1,165
|
) |
$ |
82
|
$ |
(1,000
|
) |
$ |
586
|
||||||
Non-cash investing and financing activities:
|
||||||||||||||||
Purchase of property, plant and equipment and intangible assets
|
$ |
1,500
|
$ |
440
|
$ |
1,500
|
$ |
1,403
|
||||||||
Creation of operating lease right-of-use assets
|
$ |
0
|
$ |
4,627
|
$ |
2,382
|
$ |
11,195
|
||||||||
Unpaid offering cost
|
$ |
1,688
|
$ |
0
|
$ |
1,688
|
$ |
0
|
APPENDIX A: Non-GAAP Reconciliation
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES FOR Q3 2021
(Unaudited)
The following table provides a reconciliation of Revenues to ex-TAC Gross Profit.
Three Months
Ended September 30,
|
Nine Months
Ended September 30,
|
|||||||||||||||||
2021
|
|
2020
|
2021
|
|
2020
|
|||||||||||||
(unaudited)
|
(unaudited)
|
|||||||||||||||||
(dollars in thousands)
|
(dollars in thousands)
|
|||||||||||||||||
Revenues
|
$
|
338,768
|
|
$
|
290,585
|
$
|
970,790
|
|
$
|
837,599
|
||||||||
Traffic acquisition cost
|
211,899
|
186,288
|
621,137
|
565,449
|
||||||||||||||
Other cost of revenues
|
19,184
|
14,701
|
52,224
|
45,674
|
||||||||||||||
Gross Profit
|
$
|
107,685
|
$
|
89,596
|
$
|
297,429
|
$
|
226,476
|
||||||||||
Add back: Other cost of revenues
|
19,184
|
|
14,701
|
52,224
|
|
45,674
|
||||||||||||
ex-TAC Gross Profit
|
$
|
126,869
|
|
$
|
104,297
|
$
|
349,653
|
|
$
|
272,150
|
The following table provides a reconciliation of Net income (loss) to Adjusted EBITDA.
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
|||||||||||||||||
2021
|
|
2020
|
2021
|
|
2020
|
|||||||||||||
(unaudited)
|
(unaudited)
|
|||||||||||||||||
(dollars in thousands)
|
(dollars in thousands)
|
|||||||||||||||||
Net income (loss)
|
$
|
17,296
|
|
$
|
16,688
|
$
|
(25,533
|
)
|
$
|
5,740
|
||||||||
Adjusted to exclude the following:
|
|
|
|
|||||||||||||||
Financial expenses, net
|
(13,960
|
)
|
|
844
|
(13,077
|
)
|
1,050
|
|||||||||||
Tax expenses
|
(3,460
|
)
|
|
4,009
|
6,699
|
13,137
|
||||||||||||
Depreciation and amortization
|
13,160
|
|
8,021
|
30,050
|
26,848
|
|||||||||||||
Share-based compensation expenses(1)
|
19,940
|
|
6,520
|
103,594
|
11,013
|
|||||||||||||
M&A costs(2)
|
5,918
|
|
3,973
|
11,507
|
15,412
|
|||||||||||||
Holdback compensation expenses
|
840
|
-
|
840
|
-
|
||||||||||||||
Adjusted EBITDA
|
$
|
39,734
|
|
$
|
40,055
|
$
|
114,080
|
$
|
73,200
|
1For the 2021 periods, a substantial majority is Share-based compensation expenses related to going public.
2 For 2020 periods, represents costs associated with the proposed strategic transaction with Outbrain Inc.which we elected not to consummate, and for 2021 periods,
relates to the acquisition of ION Acquisition Corp. 1 Ltd., the acquisition of Connexity and going public.
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,
|
|||||||||||||||||
2021
|
|
2020
|
2021
|
|
2020
|
|||||||||||||
(unaudited)
|
(unaudited)
|
|||||||||||||||||
(dollars in thousands)
|
(dollars in thousands)
|
|||||||||||||||||
Gross profit
|
$
|
107,685
|
|
$
|
89,596
|
$
|
297,429
|
$
|
226,476
|
|||||||||
Net income (loss)
|
$
|
17,296
|
|
$
|
16,688
|
$
|
(25,533
|
)
|
$
|
5,740
|
||||||||
Ratio of Net income (loss) to Gross profit
|
16.1
|
%
|
|
18.6
|
%
|
-8.6
|
%
|
2.5
|
%
|
|||||||||
ex-TAC Gross Profit
|
$
|
126,869
|
|
$
|
104,297
|
$
|
349,653
|
$
|
272,150
|
|||||||||
Adjusted EBITDA
|
$
|
39,734
|
|
$
|
40,055
|
$
|
114,080
|
$
|
73,200
|
|||||||||
Ratio of Adjusted EBITDA Margin to ex-TAC Gross Profit
|
31.3
|
%
|
|
38.4
|
%
|
32.6
|
%
|
26.9
|
%
|
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,
|
|||||||||||||||||
2021
|
|
2020
|
2021
|
|
2020
|
|||||||||||||
(unaudited)
|
(unaudited)
|
|||||||||||||||||
(dollars in thousands)
|
(dollars in thousands)
|
|||||||||||||||||
Net cash provided by operating activities
|
$
|
26,573
|
|
$
|
33,776
|
$
|
40,553
|
$
|
81,618
|
|||||||||
Purchases of property and equipment, including capitalized platform costs
|
(7,099
|
)
|
|
(3,046
|
)
|
(28,774
|
)
|
(13,680
|
)
|
|||||||||
Free Cash Flow
|
$
|
19,474
|
|
$
|
30,730
|
$
|
11,779
|
$
|
67,938
|
APPENDIX B: Adoption of Net Revenue Accounting for Connexity
Prior to our acquisition of Connexity in September 2021, Connexity recorded a portion of its revenues on a gross basis, before traffic acquisition costs, and a portion on a net basis, after traffic acquisition costs. After we acquired
Connexity, we determined that we will account for Connexity’s revenues on a net basis beginning on the September 1, 2021 acquisition date. This change has no impact on Connexity’s gross profit, ex-TAC Gross Profit, net income (loss) or Adjusted
EBITDA but results in lower revenues compared to Connexity’s pre-acquisition accounting presentation. This change is reflected in our Q3 2021 actual results and in our guidance presented today for Q3, Q4 and full year 2021, all of which have
been adjusted for the adoption of net revenue accounting compared to the corresponding prior guidance.
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