10-Q 1 ef20030068_10q.htm 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q


☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 2024

☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ___________

Commission File Number: 001-40566

TABOOLA.COM LTD.
(Exact name of registrant as specified in its charter)


Israel
(State or other jurisdiction of
incorporation or organization)
Not Applicable
(I.R.S. Employer
Identification No.)
 
16 Madison Square West
7th Floor
New York, NY
(Address of principal executive offices)
10010
(Zip code)
 
212-206-7633
(Registrant’s telephone number, including area code)


Securities registered pursuant to Section 12(b) of the Act:
 
 
 
 
 
Title of each class
 
Trading
Symbol(s)
 
Name of each exchange on which registered
Ordinary shares, no par value
 
TBLA
 
The Nasdaq Global Market
Warrants to purchase Ordinary shares
 
TBLAW
 
The Nasdaq Global Market

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer
☐
 
Accelerated filer
☒
Non-accelerated filer
☐
 
Smaller reporting company
☐
 
  
 
Emerging growth company
☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
 ☐ Yes ☒ No

As of July 31, 2024 the Registrant had a total of 335,676,527 outstanding shares, which includes 291,466,121 Ordinary shares and 44,210,406 Non-voting Ordinary shares.

Taboola.com Ltd.
Quarterly Report on Form 10-Q
Table of Contents

         
Page No.
 
PART I.
    
4
 
Item 1.
     4
       
4
        5
        6
        7
        9
        11
 
Item 2.
     25
 
Item 3.
    
42
 
Item 4.
     44
 
PART II.
     45
 
Item 1.
     45
 
Item 1A.
    
45
 
Item 2.
     45
 
Item 3.
     46
 
Item 4.
     46
 
Item 5.
     46
 
Item 6.
     47
        48

- 2 -
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements. All statements contained in this Quarterly Report on Form 10-Q other than statements of historical fact, including statements regarding our future results of operations and financial position, our business strategy and plans, and our objectives for future operations, are forward-looking statements. The words "believe," "may," "will," "estimate," "continue," "anticipate," "intend," "expect," and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in Part I, Item 1A, "Risk Factors" in our Annual Report on Form 10-K. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the future events and trends discussed in this Quarterly Report on Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.
Unless otherwise stated or unless the context otherwise requires, the terms “Company,” “the registrant,” “our company,” “the company,” “we,” “us,” “our,” “ours,” and “Taboola” refer to Taboola.com Ltd., a company organized under the laws of the State of Israel, and its consolidated subsidiaries.
 
PART I – FINANCIAL INFORMATION

Item 1.
Financial Statements

CONSOLIDATED INTERIM BALANCE SHEETS
U.S. dollars in thousands, except share and per share data

   
June 30,
    
December 31,
  
   
2024
    
2023
  
   
Unaudited
        
ASSETS
            
CURRENT ASSETS
            
Cash and cash equivalents
  
$
182,198
    
$
176,108
  
Short-term investments
    
—
      
5,725
  
Restricted deposits
    
1,334
      
1,407
  
Trade receivables (net of allowance for credit losses of $7,416 and $10,207 as of June 30, 2024 and December 31, 2023, respectively) (1)
   
281,674
      
306,307
  
Prepaid expenses and other current assets
    
69,598
      
69,865
  
Total current assets
    
534,804
      
559,412
  
NON-CURRENT ASSETS
                
Long-term prepaid expenses
    
25,584
      
39,602
  
Commercial agreement asset
    
289,451
      
289,451
  
Restricted deposits
    
4,203
      
4,247
  
Operating lease right of use assets
    
56,138
      
61,746
  
Property and equipment, net
    
71,846
      
72,155
  
Intangible assets, net
    
93,565
      
125,258
  
Goodwill
    
555,931
      
555,931
  
Total non-current assets
    
1,096,718
      
1,148,390
  
Total assets
  
$
1,631,522
    
$
1,707,802
  
             
LIABILITIES AND SHAREHOLDERS’ EQUITY
            
CURRENT LIABILITIES
            
Trade payables (2)
  
$
270,406
    
$
282,012
  
Short-term operating lease liabilities
    
19,463
      
20,264
  
Accrued expenses and other current liabilities
    
118,664
      
118,689
  
Current maturities of long-term loan
    
—
      
3,000
  
Total current liabilities
    
408,533
      
423,965
  
LONG-TERM LIABILITIES
                
Long-term loan, net of current maturities
    
145,778
      
142,164
  
Long-term operating lease liabilities
    
42,721
      
49,450
  
Warrants liability
    
2,242
      
6,129
  
Deferred tax liabilities, net
    
6,914
      
14,815
  
Other long-term liabilities
    
15,101
      
14,217
  
Total long-term liabilities
    
212,756
      
226,775
  
COMMITMENTS AND CONTINGENCIES (Note 11)
            
SHAREHOLDERS’ EQUITY
                
Ordinary shares with no par value- Authorized: 700,000,000 as of June 30, 2024 and December 31, 2023; 291,715,209 and 295,670,620 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively
    
—
      
—
  
Non-voting Ordinary shares with no par value- Authorized: 46,000,000 as of June 30, 2024 and December 31, 2023; 44,210,406 and  45,198,702 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively
    
—
      
—
  
Treasury Ordinary shares, at cost - 27,775,351 (26,787,055 Ordinary shares and 988,296 Non-voting Ordinary shares) and 15,240,471 Ordinary shares as of June 30, 2024 and December 31, 2023, respectively
    (109,978 )     (55,513 )
Additional paid-in capital
    
1,301,159
      
1,262,093
  
Accumulated other comprehensive income (loss)
    
(39
)
    
942
  
Accumulated deficit
    
(180,909
)
    
(150,460
)
Total shareholders’ equity
    
1,010,233
      
1,057,062
  
Total liabilities and shareholders’ equity
  
$
1,631,522
    
$
1,707,802
  

 
(1) Includes related party trade receivables of $43,232 and $12,297, as of June 30, 2024 and December 31, 2023, respectively.
(2) Includes related party trade payables of $59,194 and $38,657, as of June 30, 2024 and December 31, 2023, respectively.

The accompanying notes are an integral part of these unaudited consolidated interim financial statements.

- 4 -

CONSOLIDATED INTERIM STATEMENTS OF LOSS
U.S. dollars in thousands, except share and per share data

   
Three months ended
June 30,
    
Six months ended
June 30,
  
    2024
    2023
     2024     2023
  
    Unaudited
 
Revenues (1)
  
$
428,160
    
$
332,004
     $ 842,168     $ 659,690  
                                 
Cost of revenues:
                                
Traffic acquisition cost (2)
    
278,620
      
208,870
       553,740       420,816  
Other cost of revenues
    
34,762
      
26,077
       64,697       52,225  
Total cost of revenues
    
313,382
      
234,947
       618,437
       473,041  
                                 
Gross profit
    
114,778
      
97,057
       223,731       186,649  
                                 
Operating expenses:
                                
Research and development
    
33,288
      
34,001
       69,537       65,986  
Sales and marketing
    
64,837
      
61,198
       132,445       121,767  
General and administrative
    
24,284
      
26,858
       47,613       52,694  
Total operating expenses
    
122,409
      
122,057
       249,595       240,447  
                                 
Operating loss
    
(7,631
)
    
(25,000
)
     (25,864 )     (53,798 )
Finance income (expenses), net
    
1,004
      
(3,827
)
     (2,634 )     (6,981 )
                                 
Loss before income taxes
    
(6,627
)
    
(28,827
)
     (28,498 )     (60,779 )
Income tax benefit (expenses)
    
2,336
      
(2,487
)
     (1,951 )     (1,848 )
Net loss
  
$
(4,291
)
  
$
(31,314
)
   $ (30,449 )   $ (62,627 )
                                 
Net loss per share attributable to Ordinary and Non-voting Ordinary shareholders, basic and diluted
  
$
(0.01
)
  
$
(0.09
)
   $ (0.09 )   $ (0.18 )
Weighted-average shares used in computing net loss per share attributable to Ordinary and Non-voting Ordinary shareholders, basic and diluted
     342,566,112       351,585,059
       344,003,462
       342,491,457
  

 
(1) Includes revenues from related party of $60,302 and $7,190, for the three months ended June 30, 2024 and 2023, respectively, and $112,426 and $14,304, for the six months ended June 30, 2024 and 2023, respectively.
(2) Includes traffic acquisition cost to related party of $78,433 and $0, for the three months ended June 30, 2024 and 2023, respectively, and $152,044 and $0, for the six months ended June 30, 2024 and 2023, respectively.

The accompanying notes are an integral part of these unaudited consolidated interim financial statements.

- 5 -

CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE LOSS
U.S. dollars in thousands

   
Three months ended
June 30,
    
Six months ended
June 30,
  
   
2024
    
2023
     2024
     2023
  
   
Unaudited
  
Net loss
  
$
(4,291
)
  
$
(31,314
)
   $ (30,449 )   $ (62,627 )
Other comprehensive loss:
                                
Unrealized and realized gains on available-for-sale marketable securities, net
    
7
      
130
       6       457  
Unrealized gains (losses) on derivative instruments, net
    
(211
)
    
199
       (987 )     (457 )
Other comprehensive income (loss)
    
(204
)
    
329
       (981 )     —  
Comprehensive loss
  
$
(4,495
)
  
$
(30,985
)
   $ (31,430 )   $ (62,627 )

The accompanying notes are an integral part of these unaudited consolidated interim financial statements.

- 6 -
TABOOLA.COM LTD.

CONSOLIDATED INTERIM STATEMENTS OF SHAREHOLDERS’ EQUITY
U.S. dollars in thousands, except share and per share data

   
Non-voting
Ordinary shares
    Ordinary shares    
Treasury
Ordinary
shares
    
Additional
paid-in
capital
    
Accumulated
deficit
    

Accumulated
other
comprehensive
income (loss)
    
Total
shareholders’
equity
  
   
Number     Amount Number     Amount
                                                       
Balance as of April 1, 2024 (unaudited)
    
45,198,702
    
$
—
      
293,413,305
    
$
—
     $ (83,271 )  
$
1,280,715
    
$
(176,618
)
  
$
165
    
$
1,020,991
  
Share-based compensation expenses
    
—
      
—
      
—
      
—
       —      
19,005
      
—
      
—
      
19,005
  
Repurchase of Ordinary shares
     (988,296 )     —       (5,323,413 )     —       (26,707 )     —       —       —       (26,707 )
Exercise of options and vested RSUs
    
—
      
—
      
3,625,317
      
—
       —      
2,417
      
—
      
—
      
2,417
  
Payments of tax withholding for share-based compensation
    
—
      
—
      
—
      
—
       —      
(978
)
    
—
      
—
      
(978
)
Other comprehensive loss
    
—
      
—
      
—
      
—
       —      
—
      
—
      
(204
)
    
(204
)
Net loss
    
—
      
—
      
—
      
—
       —      
—
      
(4,291
)
    
—
      
(4,291
)
Balance as of June 30, 2024 (unaudited)
    
44,210,406
    
$
—
      
291,715,209
    
$
—
     $ (109,978 )  
$
1,301,159
    
$
(180,909
)
  
$
(39
)
  
$
1,010,233
  



   
Non-voting
Ordinary shares
    Ordinary shares    
Treasury
Ordinary
shares
    
Additional
paid-in
capital
    
Accumulated
deficit
    
Accumulated
other
comprehensive
income (loss)
    
Total
shareholders’
equity
  

 
Number
    Amount
Number     Amount
                                                       
Balance as of April 1, 2023 (unaudited)
    
45,198,702
    
$
—
      
297,822,375
    
$
—
     $ —    
$
1,209,559
    
$
(99,733
)
  
$
(1,163
)
  
$
1,108,663
  
Share-based compensation expenses
    
—
      
—
      
—
      
—
       —      
17,215
      
—
      
—
      
17,215
  
Repurchase of Ordinary shares
     —       —       (1,442,000 )     —       (4,358 )     —       —       —       (4,358 )
Exercise of options and vested RSUs
    
—
      
—
      
4,256,660
      
—
       —      
915
      
—
      
—
      
915
  
Payments of tax withholding for share-based compensation
    
—
      
—
      
—
      
—
       —      
(1,117
)
    
—
      
—
      
(1,117
)
Other comprehensive income
    
—
      
—
      
—
      
—
       —      
—
      
—
      
329
      
329
  
Net loss
    
—
      
—
      
—
      
—
       —      
—
      
(31,314
)
    
—
      
(31,314
)
Balance as of June 30, 2023 (unaudited)
    
45,198,702
    
$
—
      
300,637,035
    
$
—
     $ (4,358 )  
$
1,226,572
    
$
(131,047
)
  
$
(834
)
  
$
1,090,333
  

The accompanying notes are an integral part of these unaudited consolidated interim financial statements.
 
- 7 -
CONSOLIDATED INTERIM STATEMENTS OF SHAREHOLDERS’ EQUITY
U.S. dollars in thousands, except share and per share data

   
Non-voting
Ordinary shares
     Ordinary shares    
Treasury
Ordinary
shares
   
Additional
paid-in
capital
    
Accumulated
deficit
    
Accumulated
other
comprehensive
income (loss)
    
Total
shareholders’
equity
  

 
Number     Amount Number     Amount
                                                       
Balance as of January 1, 2024
    
45,198,702
    
$
—
      
295,670,620
    
$
—
     $ (55,513 )  
$
1,262,093
    
$
(150,460
)
  
$
942
    
$
1,057,062
  
Share-based compensation expenses
    
—
      
—
      
—
      
—
       —      
36,012
      
—
      
—
      
36,012
  
Repurchase of Ordinary shares
     (988,296 )     —       (11,546,584 )     —       (54,465 )     —       —       —       (54,465 )
Exercise of options and vested RSUs
    
—
      
—
      
7,009,773
      
—
       —      
4,741
      
—
      
—
      
4,741
  
Connexity issuance of Holdback 
    —       —       581,400       —       —       —       —       —       —  
Payments of tax withholding for share-based compensation
    
—
      
—
      
—
      
—
       —      
(1,687
)
    
—
      
—
      
(1,687
)
Other comprehensive loss
    
—
      
—
      
—
      
—
       —      
—
      
—
      
(981
)
    
(981
)
Net loss
    
—
      
—
      
—
      
—
       —      
—
      
(30,449
)
    
—
      
(30,449
)
Balance as of June 30, 2024 (unaudited)
    
44,210,406
    
$
—
      
291,715,209
    
$
—
     $ (109,978 )  
$
1,301,159
    
$
(180,909
)
  
$
(39
)
  
$
1,010,233
  



   
Non-voting
Ordinary shares
     Ordinary shares    
Treasury
Ordinary
shares
   
Additional
paid-in
capital
    
Accumulated
deficit
    
Accumulated
other
comprehensive
  loss
    
Total
shareholders’
equity
  
   
Number     Amount Number     Amount
                                                       
Balance as of January 1, 2023
    
—
    
$
—
      
254,133,863
    
$
—
     $ —    
$
903,789
    
$
(68,420
)
  
$
(834
)
  
$
834,535
  
Share-based compensation expenses
    
—
      
—
      
—
      
—
       —      
33,949
      
—
      
—
      
33,949
  
Repurchase of Ordinary shares
     —       —       (1,442,000 )     —       (4,358 )     —       —       —       (4,358 )
Exercise of options and vested RSUs
    
—
      
—
      
7,838,081
      
—
       —      
2,679
      
—
      
—
      
2,679
  
Connexity issuance of Holdback 
    —       —       581,400       —       —       —       —       —       —  
Issuance of Ordinary shares and Non-voting Ordinary shares related to Commercial agreement
    
45,198,702
      
—
      
39,525,691
      
—
       —      
288,063
      
—
      
—
      
288,063
  
Payments of tax withholding for share-based compensation
    
—
      
—
      
—
      
—
       —      
(1,908
)
    
—
      
—
      
(1,908
)
Net loss
    
—
      
—
      
—
      
—
       —      
—
      
(62,627
)
    
—
      
(62,627
)
Balance as of June 30, 2023 (unaudited)
    
45,198,702
    
$
—
     $
300,637,035
    
$
—
     $ (4,358 )  
$
1,226,572
    
$
(131,047
)
  
$
(834
)
  
$
1,090,333
  

The accompanying notes are an integral part of these unaudited consolidated interim financial statements.

- 8 -
TABOOLA.COM LTD.

CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS
U.S. dollars in thousands

   
Six months ended
June 30,
  
   
2024
    
2023
  
   
Unaudited
  
Cash flows from operating activities
            
Net loss
  
$
(30,449
)
  
$
(62,627
)
                 
Adjustments to reconcile net loss to net cash flows provided by operating activities:
                
Depreciation and amortization
    
51,183
      
45,393
  
Share-based compensation expenses
    
34,706
      
32,617
  
Net loss from financing expenses
    
778
      
236
  
Revaluation of the Warrants liability
    
(3,887
)
    
(974
)
Amortization of loan and credit facility issuance costs
    
729
      
891
  
Amortization of premium and accretion of discount on short-term investments, net
    
83
      
(530
)
Change in operating assets and liabilities:
                
Decrease in trade receivables, net (1)
    
24,633
      
39,271
  
Decrease in prepaid expenses and other current assets and long-term prepaid expenses
    
14,990
      
8,642
  
Decrease in trade payables (2)
    
(11,897
)
    
(29,730
)
Increase in accrued expenses and other current liabilities and other long-term liabilities
    
1,578
      
1,812
  
Decrease in deferred taxes, net
    
(7,901
)
    
(6,494
)
Change in operating lease right of use assets
    
9,284
      
8,075
  
Change in operating lease liabilities
    
(11,206
)
    
(7,460
)
Net cash provided by operating activities
    
72,624
      
29,122
  
                 
Cash flows from investing activities
                
Purchase of property and equipment, including capitalized internal-use software
    
(18,222
)
    
(10,178
)
Business acquisition deferred payment
    
(719
)
    
—
  
Investments in restricted deposits
    
—
      
(341
)
Proceeds from maturities of short-term investments
    
5,765
      
77,636
  
Purchase of short-term investments
     —       (21,991 )
Net cash provided by (used in) investing activities
    
(13,176
)
    
45,126
  
                 
Cash flows from financing activities
                
Issuance costs
     (695 )     —  
Exercise of options and vested RSUs
    
4,741
      
2,456
  
Payment of tax withholding for share-based compensation expenses
    
(1,687
)
    
(1,908
)
Repurchase of Ordinary shares
     (54,465 )     (4,358 )
Payments on account of repurchase of Ordinary shares
     (474 )     —  
Repayment of long-term loan
    
—
      
(31,500
)
Net cash used in financing activities
    
(52,580
)
    
(35,310
)
                 
Exchange rate differences on balances of cash and cash equivalents
    
(778
)
    
(236
)
Increase in cash and cash equivalents
    
6,090
      
38,702
  
Cash and cash equivalents - at the beginning of the period
    
176,108
      
165,893
  
Cash and cash equivalents - at end of the period
  
$
182,198
    
$
204,595
  

 
(1) Includes an increase in related party trade receivables of $30,935 and $421, for the six months ended June 30, 2024 and 2023, respectively.
(2) Includes an increase (decrease) in related party trade payables of $20,537 and ($4,920), for the six months ended June 30, 2024 and 2023, respectively.

The accompanying notes are an integral part of these unaudited consolidated interim financial statements.

- 9 -
TABOOLA.COM LTD.

CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS
U.S. dollars in thousands

   
Six months ended
June 30,
  
   
2024
    
2023
  
   
Unaudited
  
Supplemental disclosures of cash flow information:
  
Cash paid during the year for:
            
Income taxes
  
$
9,600
    
$
6,833
  
Interest
  
$
7,294
    
$
9,767
  
Non-cash investing and financing activities:
                
Purchase of property and equipment, including capitalized internal-use software
  
$
292
    
$
1,705
  
Share-based compensation included in capitalized internal-use software
  
$
1,306
    
$
1,332
  
Creation of operating lease right-of-use assets
  
$
3,676
    
$
5,593
  

The accompanying notes are an integral part of these unaudited consolidated interim financial statements.

- 10 -
TABOOLA.COM LTD.

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data

NOTE 1:-
GENERAL

a.
Taboola.com Ltd. (together with its subsidiaries, the “Company” or “Taboola”) was incorporated under the laws of the state of Israel on September 3, 2006.
Taboola is a technology company that powers recommendations across the Open Web with an artificial intelligence-based, algorithmic engine developed since the Company began operations in 2007. Taboola partners with websites, devices, and mobile apps (collectively referred to as “digital properties”), to recommend editorial content and advertisements on the Open Web. Digital properties use Taboola’s technology platforms to achieve their business goals, such as driving new audiences to their sites and apps or increasing engagement with existing audiences. Taboola also provides monetization opportunities to digital properties by surfacing paid recommendations by advertisers. Taboola is a business-to-business company with no competing consumer interests. Taboola empowers advertisers to leverage its proprietary AI-powered recommendation platform to reach targeted audiences utilizing effective, native ad-formats across digital properties. As part of the Company e-Commerce offerings, it also syndicates its retailer advertisers’ monetized product listings and links (clickable advertisements) into commerce content-oriented consumer experiences on both the Open Web and within the dominant traditional ad platforms. Taboola generates revenues when people (consumers) click on, purchase from or, in some cases, view the ads that appear within its recommendation platform. The Company’s customers are the advertisers, merchants and affiliate networks that advertise on the Company’s platform (“Advertisers”). Advertisers pay Taboola for those clicks, purchases or impressions, and Taboola shares a portion of the resulting revenue with the digital properties who display those ads.

b.
In November 2022, the Company announced it entered into a 30-year exclusive commercial agreement (the “Commercial agreement”) with Yahoo Inc. and affiliated entities (“Yahoo”), under which Taboola will power native advertising across all of Yahoo’s digital properties, expanding the Company’s native advertising offering. In connection with this transaction, and following approval by the Company’s shareholders on December 30, 2022, the articles of association of the Company were amended and restated (the “Articles”) in their entirety to include a Non-voting Ordinary share class with an authorized share capital of 46,000,000. On January 17, 2023 (the “Transaction closing date”), the Company closed the transaction related agreements, including the issuance of 39,525,691 Ordinary shares and 45,198,702 Non-voting Ordinary shares to Yahoo. Based on the closing share price, on January 17, 2023, of $3.40 per share, the aggregate fair value of the issued shares amounted to $288,063. As part of the Ordinary shares and Non-voting Ordinary shares issuance, the Company incurred $1,388 of issuance expenses.
The Non-voting Ordinary shares are not entitled to vote on or receive notices with respect to any matter pursuant to our Articles and are not entitled to vote or to be counted for purposes of determining whether any vote required under the Articles has been approved by the requisite percentage of voting securities or to be counted towards any quorum required pursuant to the Articles. Except with respect to the voting rights and to the rights to receive notice of meetings of the shareholders, the Non-voting Ordinary shares have rights identical to the rights of Ordinary shares. In connection with the transaction, the Company and Yahoo entered into an Investor Rights Agreement, under which, inter alia, Yahoo is entitled, in certain circumstances, to cause the Company to register the Ordinary shares issued to Yahoo for resale under the Securities Act of 1933, as amended.

The Company accounts for the consideration paid to Yahoo (the “Commercial agreement asset”) as an up-front payment for traffic acquisition costs paid to the digital property partner, which is amortized over the shorter of respective contractual terms and the economic benefit period of the digital property arrangement.

- 11 -
TABOOLA.COM LTD.

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
NOTE 1:-
GENRAL (Cont.)

The Company and Yahoo are still in the Commercial agreement transition period (as defined in the Commercial agreement), consequently, the exclusivity period has not begun. For the three and six months ended June 30, 2024 and 2023, the Company did not record amortization expenses of the Commercial agreement asset.

NOTE 2:-
SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited consolidated interim financial statements have been prepared in accordance with Generally Accepted Accounting Principles in the United States (“GAAP”), and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting and include the accounts of Taboola.com Ltd. and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

The consolidated balance sheet as of December 31, 2023, included herein, was derived from the audited consolidated financial statements as of that date, but does not include all of the disclosures, including certain notes required by GAAP on an annual reporting basis. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations.

Therefore, these unaudited consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements and the related notes thereto included in the Company’s Annual Report on Form 10-K as of and for the year ended December 31, 2023, filed with the SEC on February 28, 2024.

In the opinion of the Company’s management, the unaudited consolidated interim financial statements have been prepared on a basis consistent with the annual consolidated financial statements and reflect all adjustments, which include only normal recurring adjustments necessary for the fair presentation of the Company’s unaudited interim consolidated financial statements. The results of operations for the three and six months ended June 30, 2024, are not necessarily indicative of the results to be expected for the full year ending December 31, 2024, or any other future interim or annual period.

Use of Estimates

The preparation of the interim consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the interim consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period and accompanying notes. Actual results could differ from those estimates.

The Company’s management regularly evaluates its estimates, primarily those related to: (1) revenue recognition criteria, including the determination of revenue reporting as gross versus net in the Company’s revenue arrangements, (2) allowances for credit losses, (3) operating lease assets and liabilities, including the incremental borrowing rate and terms and provisions of each lease (4) the useful lives of its Commercial agreement asset, property and equipment and capitalized software development costs, (5) income taxes, (6) assumptions used in the option pricing models to determine the fair value of share-based compensation (7) the fair value of financial assets and liabilities, including the fair value of marketable securities, Private Warrants and derivative instruments (8) the fair value of acquired intangible assets and goodwill annual impairment test, and (9) the recognition and disclosure of contingent liabilities.

- 12 -
TABOOLA.COM LTD.

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
NOTE 2:-
SIGNIFICANT ACCOUNTING POLICIES (Cont.)

These estimates are based on historical data and experience, as well as various other factors that management believes to be reasonable under the circumstances; the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.

As of June 30, 2024, the impacts to the Company’s business due to geopolitical developments, such as the wars in Israel and Ukraine and other active or possible hostilities, and macroeconomic factors, such as rising interest rates, inflation and changes in foreign currency exchange rates, continue to evolve. As events continue to evolve and additional information becomes available, the Company’s estimates may change materially in future periods.

Concentrations of Credit Risk
 
The Company’s trade receivables are geographically diversified and derived mainly from sales in the United States, Israel, Germany and United Kingdom. Concentration of credit risk with respect to trade receivables is limited by credit limits, ongoing credit evaluation and account monitoring procedures. The Company performs ongoing credit evaluations of its accounts receivables and establishes an allowance for expected losses as necessary.
 
As of June 30, 2024, the Company had a single customer representing 15.3% of the trade receivables balance. For the three and six months ended June 30, 2024, the same customer accounted for 14.1% and 13.3% of total revenues, respectively (see Note 12).
 
As of December 31, 2023, no single customer represented 10% or more of trade receivables. No single customer accounted for more than 10% of total revenue for the three and six months ended June 30, 2023.

Significant Accounting Policies

The Company’s significant accounting policies are discussed in Note 2, Summary of Significant Accounting Policies, in the Company’s Annual Report on Form 10-K as of and for the year ended December 31, 2023, as filed with the SEC on February 28, 2024. There have been no significant changes to these policies during the six months ended June 30, 2024.

Reclassification

Certain amounts in the corresponding prior periods have been reclassified to conform with the current period presentation. Such reclassifications did not affect net loss, changes in the shareholders’ equity or cash flows.

Recently Issued Accounting Pronouncements

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topics 740): Improvements to Income Tax Disclosures, which expands the disclosure requirements for income taxes, primarily related to the rate reconciliation and income taxes paid. This ASU is effective for the fiscal years beginning after December 15, 2024. Early adoption permitted. The Company does not expect the adoption of this guidance will have a significant impact on its consolidated financial statement and related disclosures and will adopt the guidance effective January 1, 2025.


- 13 -
TABOOLA.COM LTD.

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
NOTE 2:-
SIGNIFICANT ACCOUNTING POLICIES (Cont.)

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which expands the annual and interim disclosure requirements for public company reportable segments, primarily through enhanced information about the significant expenses. This ASU is effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024. Early adoption permitted. The Company is currently evaluating the impact of this guidance on its consolidated financial statements and related disclosures.

NOTE 3:-
CASH AND CASH EQUIVALENTS
The following table presents for each reported period, the breakdown of cash and cash equivalents:

   
June 30,
    
December 31,
  
   
2024
    
2023
  
   
Unaudited
        
Cash
  
$
112,764
    
$
99,811
  
Money market funds
    
68,972
      
72,510
  
Time deposits
    
462
      
3,787
  
Total cash and cash equivalents
  
$
182,198
    
$
176,108
  

NOTE 4:-
FAIR VALUE MEASUREMENTS

The Company evaluates assets and liabilities subject to fair value measurements on a recurring basis to determine the appropriate level to classify them for each reporting period. The Company did not have any transfers between fair value measurements levels during the six months ended June 30, 2024.

The following table sets forth the Company’s assets and liabilities that were measured at fair value as of June 30, 2024 and December 31, 2023, by level within the fair value hierarchy:

          
Fair value measurements
as of
  
Description
  
Fair Value
Hierarchy
  
June 30,
2024
    
December 31,
2023
  
 
         
Unaudited
        
Assets:
                
Cash equivalents:
                
Money market funds
  
Level 1
  
$
68,972
    
$
72,510
  
Short-term investments:
                    
Corporate debt securities
  
Level 2
  
$
—
    
$
3,651
  
Commercial paper
  
Level 2
  
$
—
    
$
2,074
  
Derivative instruments asset:                    
Derivative instruments designated as cash flow hedging instruments
   Level 2   $ —     $ 948  
                     
Liabilities:
                    
Warrants liability:
                    
Public Warrants
  
Level 1
  
$
(1,496
)
  
$
(4,253
)
Private Warrants
  
Level 3
  
$
(746
)
  
$
(1,876
)
Derivative instruments liability:
                    
Derivative instruments designated as cash flow hedging instruments
  
Level 2
   $
(39 )   $
—  

- 14 -
TABOOLA.COM LTD.

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
NOTE 4:- FAIR VALUE MEASUREMENTS (Cont.)

The Company classifies its money market funds as Level 1 based on quoted market prices in active markets.

The Company classifies its short-term investments and derivative instruments within Level 2 as they are valued using inputs other than quoted prices which are directly or indirectly observable in the market, including readily-available pricing sources for the identical underlying security which may not be actively traded.

The Company measures the fair value for Warrants by using a quoted price for the Public Warrants, which are classified as Level 1, and a Black-Scholes simulation model for the Private Warrants, which are classified as Level 3, due to the use of unobservable inputs.


The key inputs into the Black-Scholes model for the Private Warrants were as follows:

Input
  
June 30,
2024
    
December 31,
2023
  
    Unaudited
         
Risk-free interest rate
    
4.60% - 4.87
%
    
4.04% - 4.28
%
Expected term (years)
    
1.25 - 2.00
      
1.75 - 2.50
  
Expected volatility
    
53.7% - 64.8
%
    
61.1% - 63.9
%
Exercise price
  
$
11.50
    
$
11.50
  
Underlying share price
  
$
3.44
    
$
4.33
  

The Company’s use of a Black-Scholes model required the use of subjective assumptions:

●
The risk-free interest rate assumption was interpolated based on constant maturity U.S. Treasury rates over a term commensurate with the expected term of the Private Warrants.

●
The expected term was based on the maturity of the Private Warrants of five years following June 29, 2021, the Business Combination date, and for certain Private Warrants the maturity was determined to be five years from the date of the October 1, 2020, ION initial public offering effective date.

●
The expected volatility is based on the Company’s share price volatility. For periods prior January 1, 2024, the expected share volatility assumption was based on the implied volatility from a set of comparable publicly-traded companies as determined based on size and proximity, as the Company did not have sufficient trading history

The following table presents the changes in the fair value of Warrants liability:

   
Private
    
Public
    
Total
  
Input
  
Warrants
    
Warrants
    
Warrants
  
Fair value as of December 31, 2023
  
$
1,876
    
$
4,253
    
$
6,129
  
Change from private to public holdings     (77 )     77       —  
Change in fair value
    
(1,053
)
    
(2,834
)
    
(3,887
)
Fair value as of June 30, 2024 (unaudited)
  
$
746
    
$
1,496
    
$
2,242
  

- 15 -
TABOOLA.COM LTD.

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
NOTE 5:-
SHORT-TERM INVESTMENTS

As of June 30, 2024, the Company did not hold available-for-sale marketable securities.

The following is a summary of available-for-sale marketable securities as of December 31, 2023:

   
Amortized
Cost
    
Gross
Unrealized
Gains
    
Gross
Unrealized
Losses
    
Fair
Value
  
Corporate debt securities
   $
3,654
     $
—
     $
(3
)
   $
 3,651  
Commercial paper
    
2,077
      
—
      
(3
)
     2,074  
Total
  
$
5,731
    
$
—
    
$
(6
)
   $
5,725  

NOTE 6:-
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

The Company enters into foreign currency forward contracts and put and call options with financial institutions to protect itself against the foreign exchange risks, mainly exposure to changes in the exchange rate of the New Israeli Shekel (“NIS”) against the U.S dollar that are associated with forecasted future cash flows for up to twelve months. The Company’s risk management strategy includes the use of derivative financial instruments to reduce the volatility of earnings and cash flows associated with changes in foreign currency exchange rates; these derivative instruments are designated as cash flow hedges. The Company does not enter into derivative transactions for trading or speculative purposes.

As of June 30, 2024 and December 31, 2023, the notional amounts of the Company’s derivative instruments designated as cash flow hedging instruments outstanding in U.S. dollars amounted to $19,154 and $39,347, respectively.

Gross notional amounts do not quantify risk or represent assets or liabilities of the Company but are used in the calculation of settlements under the contracts.

The Company records all cash flow hedging instruments on the consolidated balance sheets at fair value.

The fair values of outstanding derivative instruments designated as cash flow hedging instruments were as follows:


 
June 30,
2024
    
December 31,
2023
  
    Unaudited
          
Prepaid expenses and other current assets
  
$
—
    
$
948
  
Accrued expenses and other current liabilities
  
$
39
    
$
—
  

The gains (losses) related to cash flow hedging instruments, recorded in the consolidated interim statements of loss, for the three and six months ended June 30, 2024 and 2023, were as follows:

   
Three months ended
June 30,
    
Six months ended
June 30,
  
 
  
2024
    
2023
     2024     2023