Teads Q2 2026 Earnings Call Transcript

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August 6, 2026

Key Takeaways

  • Positive Sentiment: Enterprise and CTV momentum strengthened. Enterprise Ex-TAC gross profit was $89 million, advertiser spend stabilized in Q2, and management expects mid-single-digit Ex-TAC growth in the second half; CTV revenue rose 67% year over year to approximately $40 million.
  • Positive Sentiment: Teads expanded its connected-TV reach through renewed and new partnerships with LG, TiVo Ads, and ViiA Japan, while omni-channel branding adoption increased to 16% of branding revenue from 9% a year earlier.
  • Negative Sentiment: The direct-response and SME business remained a significant drag, with Ex-TAC gross profit declining 30% year over year to $34 million. Management cited AI-driven changes in search traffic, publisher page-view declines, walled-garden competition, and deliberate quality-related account and supply reductions.
  • Negative Sentiment: Adjusted EBITDA was only $7 million, below the company’s expected range, due to expense timing, cloud migration costs, foreign-exchange pressure, elevated bad debt, and continued enterprise investment. Teads suspended its financial guidance, including its previously issued full-year 2026 EBITDA outlook.
  • Neutral Sentiment: Teads launched its AI-powered Engage Operating System and is testing it with premium publishers, while also pursuing new programmatic and emerging AI/LLM supply channels. The company ended the quarter with $91 million in cash and marketable securities plus access to a $40 million revolving credit facility, and is evaluating ways to strengthen its balance sheet.
AI Generated. May Contain Errors.
Earnings Conference Call
Teads Q2 2026
00:00 / 00:00

Transcript Sections

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Operator

Good day. Welcome to Teads second quarter 2026 earnings conference call. At this time, all participants are in listen-only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would like to turn the call over to Teads Investor Relations. Please go ahead.

Company Representative at Teads

Good morning. Thank you for joining us on today's conference call to discuss Teads second quarter results. Joining me on the call today, we have David Kostman and Jason Kiviat, the CEO and CFO of Teads. During this conference call, managers will make forward-looking statements based on current expectations and assumptions, including statements regarding our business outlook and prospects. The statements are subject to risks and uncertainties that may cause actual results to differ materially from our forward-looking statements. These risk factors are discussed in detail in our annual report on Form 10-K for the year ended December 31st, 2025. As updated in our subsequent reports filed with the Securities and Exchange Commission, forward-looking statements speak only as of the call's original date. We do not undertake any duty to update any such statements. Today's presentation also includes references to the non-GAAP financial measures.

Company Representative at Teads

You should refer to the information contained in the company's second quarter results announcements for definitional information and reconciliations of non-GAAP measurements to the comparable GAAP financial measures. Our earnings release can be found on our IR website, investors.teads.com, under News and Events. With that, let me turn the call over to David.

David Kostman
David Kostman
CEO at Teads

Thank you, May. Good morning, everyone. For the second quarter, Ex-TAC gross profit reached $123 million. Adjusted EBITDA was $7 million. Our cash generation remained positive with $3 million in free cash flow. Our results this quarter highlight two distinctly different trajectories across our business. To provide clear visibility into the two sides of our business, our enterprise brand and agencies business, and our direct response and small-medium enterprises business, which is closely aligned with our legacy Outbrain business, we are explicitly breaking out the Ex-TAC gross profit of each. We will discuss where our strategic momentum lies, where we are directing capital, and what we see as the drivers of our long-term growth. Our enterprise business, powered by connected TV growth and omni-channel outcome solutions for global brand and agencies, is our primary growth engine.

David Kostman
David Kostman
CEO at Teads

Following investments in our product architecture and go-to-market teams, we believe this business is positioned to capture market share, increase growth, and expand margins. Enterprise delivered $89 million in Ex-TAC gross profit in Q2, in line with our plan. Advertiser spend stabilized from our prior headwinds in 2025 to be flat year-over-year in Q2, and we expect mid-single-digit Ex-TAC growth in H2. As Connected TV continues to expand as a proportion of our mix, we expect growth to accelerate into 2027, unlocking natural operating leverage. Key drivers of this strategic momentum include the further strengthening of CTV, which saw top-line revenue growth of 67% year-over-year in Q2 to approximately $40 million. CTV accounted for 13% of our Q2 revenue, compared to 7% in Q2 2025.

David Kostman
David Kostman
CEO at Teads

Growth is driven by a global home screen leadership position, reaching over 500 million home screens globally, and the rollout of Teads CTV Ensemble, our unified full-funnel branding and performance suite. We're excited about the momentum in home screen and believe this is a significant differentiator. We also expanded our supply and reach. We renewed our exclusive home screen partnership with LG across Europe and APAC with expansion into new markets, partnered with TiVo Ads across 5.3 million households in North America and the U.K., and integrated with VIDAA Japan, unlocking 2.3 million devices as of July 1st. Another driver is omni-channel adoption. Home screen growth is actively reinforcing our broader omni-channel packages. Branding customers utilizing omni-channel campaigns represented 16% of Q2 branding revenue, up from 9% in Q2 2025 and approaching our 18% full-year target.

David Kostman
David Kostman
CEO at Teads

On the traditional publisher side, we remain focused on higher margin mid-article placements within our premium publisher base, which we monetize with video and high-impact display for our brand advertisers and which form part of our omni-channel offerings. On the strategic brand and agency partnerships, we secured and renewed major global joint business partnerships with premier enterprise brands including Stellantis, Louis Vuitton, Warner Bros., and Dyson. Concurrently, active dialogues and early-stage implementations around AI and data collaborations with major agency holding companies position us well heading into Q4 in 2027. Despite potential EBITDA trade-offs, we are making the deliberate choice to continue investing in the enterprise business to capture market share and maximize long-term enterprise value. Moving to our direct response and SME business.

David Kostman
David Kostman
CEO at Teads

In contrast, this business, which covers affiliate search, performance buyers, and small-medium enterprises direct-to-consumer brands on our Amplify platform, delivered $34 million in Ex-TAC gross profit, representing a 30% year-over-year decline. This business is currently navigating significant strategic and operational headwinds as it is in transition. On the macro front, we continue to monitor the changing dynamics in search and open web traffic that are impacting the native advertising industry. The broader adoption of AI summaries is shifting traditional organic referral patterns industry-wide, resulting in drops in publisher impressions. Additionally, we are seeing closed ecosystems like the walled gardens leverage their own AI and automation to strengthen their positions alongside ongoing platform policy updates, making it more challenging for publishers to monetize through native.

David Kostman
David Kostman
CEO at Teads

As we discussed over the last few quarters, we also implemented a deliberate quality reset such that a portion of our revenue decline was self-directed. We exited certain low-margin direct response accounts and pruned lower-quality open web supply to enforce brand safety and elevate supply standards for strategic brand partners. Most of these actions, as we reported in the past, were taken throughout 2025. To address these shifts, we are executing a plan focused on client outcomes, new supply, and operational efficiency. In Q2, we launched Teads EngageOS, an AI-powered publisher operating system designed to unify content and ad inventory to monetize complete reader sessions rather than relying on volatile search-driven page views. This is a strategic product launch that aims to change the dynamics of the business, resulting in higher margins for us and better engagement and yield for our partners.

David Kostman
David Kostman
CEO at Teads

Some of our premium publishers, including Penske Media, The Arena Group, Scripps, New Post, and others, are in different stages of testing, and we have seen significant lifts in yield. In addition, we are entering new supply channels. We are opening higher-margin programmatic environments, including active dialogues with leading AI players to leverage our global scale and data across emerging LLM channels. We are making targeted enhancements within our Amplify platform to optimize advertiser targeting and campaign efficiency and launching new formats like vertical video with the aim of helping our direct response clients achieve stronger ROAS outcomes. Lastly, we are reorganizing our internal structure, centralizing teams, and embedding AI tools to streamline processes, thereby reducing the cost base of this business.

David Kostman
David Kostman
CEO at Teads

To sum up, we're actively addressing near-term headwinds in our direct response and SME, resolving the temporary cost pressures from Q2, and capturing meaningful efficiencies across our operations to plan AI. Most importantly, our core strategy remains on track. CTV is accelerating, our enterprise business is executing according to plan, and we plan to continue investing in our highest margin platform to drive long-term growth and expand operating leverage across Teads. I will now turn the call over to Jason for a detailed review of our financials.

Jason Kiviat
Jason Kiviat
CFO at Teads

Thanks, David. We met our Q2 guidance for Ex-TAC gross profit, and due to a confluence of factors, our adjusted EBITDA came below our expected range. I'll touch more on this and the steps we're taking in a moment. Revenue in Q2 was approximately $285 million, reflecting a 17% decline year-over-year. What we're seeing in the latter part of Q2 and into Q3 is diverging trends across our enterprise customers versus our direct response and SME customers. CTV continues its impressive growth and even accelerated as compared with the last few quarters. Our focus on omnichannel also continues to bear fruit, with enterprise customers showing momentum in our results. We exited Q2 with May and June both showing positive year-over-year growth in advertiser spend from enterprise customers.

Jason Kiviat
Jason Kiviat
CFO at Teads

This is an important milestone for us as, one, it aligns with our budget plan of returning this business to growth this year, and two, we believe we've seen the low point, and it's behind us now. We see the momentum continuing into Q3, where we forecast an H2 return to year-over-year growth of Ex-TAC from this side of the business. On the other end of the spectrum, our direct response and SME customers have seen a downward trend that accelerated in Q2 and into Q3. David spoke about the factors influencing this and the steps we're taking in our product and organization to adjust for the evolution of the landscape. Ex-TAC gross profit in the quarter was $123 million, a decrease of 14% year-over-year. It's important to note the divergence in trends we're seeing between customer types.

Jason Kiviat
Jason Kiviat
CFO at Teads

We see improvement in revenue from enterprise customers, where we drive substantially higher Ex-TAC margins as compared with the direct response in SME customers, where we continue to encounter headwinds. Therefore, we are seeing overall higher margins year-over-year, driven by this mix improvement, as well as through the benefits of further scaling our CTV and in particular, CTV home screen business. Other cost of sales and operating expenses decreased year-over-year through synergies and operating efficiencies. We did see a spike in expenses in the back half of the quarter that unfortunately contributed to our adjusted EBITDA being below our guidance range in the quarter. There were several factors that drove the higher expenses. Timing and cutoff of expenses drove approximately half of the variance versus our expectations.

Jason Kiviat
Jason Kiviat
CFO at Teads

This is across areas that are largely discretionary, such as T&E and marketing, as well as temporary transitionary costs as we migrated cloud platform onto a new provider. FX fluctuations continued to be a headwind on costs, largely attributed to the fluctuations in the Israeli shekel, and bad debts continued to be elevated, related primarily to prior customers whose business with us was impacted by quality initiatives implemented last year. As David mentioned, we've made continued investments in the acceleration of our enterprise customers and are starting to see the benefits of that. While much of the higher expenses impacting the quarter are temporary and timing related, as we expect a step down in cost in Q3, we're scrutinizing the cost structure in lower profit and more scalable areas in an effort to drive investments in our enterprise business aimed at acceleration of growth.

Jason Kiviat
Jason Kiviat
CFO at Teads

Adjusted EBITDA for Q2 was approximately $7 million. We generated $3 million of free cash flow in the quarter. As a result, we ended the quarter with $91 million of cash equivalents, and investments in marketable securities on the balance sheet and have access to $40 million via our revolving credit facility. Also, we continue to evaluate our cost and capital structure for opportunities to improve our financial profile and opportunistic alternatives to strengthen our balance sheet. Summarizing, we feel good about the progress we're seeing on the enterprise business and are taking steps through product strategy and cost structure to adapt to the secular challenges of the DR and SME business. Given the volatility of the DR and SME business, as we execute on our strategic initiatives, we are suspending guidance, including with respect to our previously provided full year 2026 EBITDA guidance.

Jason Kiviat
Jason Kiviat
CFO at Teads

Now I'll turn it back to the operator for Q&A.

Operator

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star one on your touch-tone phone. If you wish to decline from the polling process, please press star followed by two. If you are using a speakerphone, please lift the handset before pressing any keys. First question from Brianna Diaz with Citizens. Please go ahead.

Brianna Diaz
Brianna Diaz
Analyst at Citizens

Great. Thank you so much for taking my questions. Last quarter, you referenced evaluating potential transactions. Can you update us on that process? I noticed that wasn't included in the prepared remarks. Understood if there's not much to share, but just wondering if that's still on the table. You highlighted the deliberate decision to continue to invest in the enterprise business. Even a trade-off, how are you balancing those investments against the profitability profile and the overall liquidity position and how you think about the returns on those investments and underwriting that? Thanks so much.

David Kostman
David Kostman
CEO at Teads

Yeah, I'll take it. Thanks, Brianna. On the first question, I think we did say also in the prepared remarks, we're continuing to evaluate opportunities to strengthen our balance sheet. I think there are opportunities ahead of us that are coming out of the situation, and if there's anything specific to update, we will report. At the same time, on the cost structure, we're obviously continuing to look at efficiencies and how we can drive better results, more efficiency, particularly through implementation of AI and other organizational measures. On your second question, it's really about focusing on the growth drivers. We have tremendous momentum around CTV, omni-channel, the brand and enterprise business, AI integrations with MCPs or agencies, and we want to invest in this part of the business. As Jason said, we expect to return it to growth.

David Kostman
David Kostman
CEO at Teads

We see tremendous opportunities there to differentiate, we plan to continue to invest in that business. We see great return there. It's a much higher margin part of our business, sort of the more legacy-related Outbrain business is a business we're running for profitability, we're going to do sort of the best we can in order to really increase the margins of the business and through that, also have much better operating leverage.

Brianna Diaz
Brianna Diaz
Analyst at Citizens

Great. Thank you. It's helpful.

Operator

Thank you. Next question comes from Laura Martin with Needham. Please go ahead.

Laura Martin
Laura Martin
Analyst at Needham

Good morning. Starting with direct response and SME business, the decline of 30%. How much of that, David, would you say was traffic related to this shift from Google getting rid of blue links and moving action to AI answers? How much was the context, how much was actually something other than that? Does that decline then hurt your ability to sell omni-channel? Does it hurt the other side of the business because it's been harder to sell the omni-channel products on the CTV side? I wanted to start with that question.

David Kostman
David Kostman
CEO at Teads

Hey, Laura. On the first part-

Laura Martin
Laura Martin
Analyst at Needham

Hi

David Kostman
David Kostman
CEO at Teads

I mean, we are seeing page view declines. I mean, we've talked about it for few quarters, and it's anywhere for some publishers, it's 10%, 15%. Some of them see higher percentages. Overall, on the premium side of our publishers, it varies by country, but I would say it's in the 15%-25% of page view decline. That is impacting it. The other things we saw are just impacts on the ability to monetize some of these pages, which also have impacted that business. I think it's important generally, when you look at our business today, the focus and the growth is on the brand and enterprise segment of the clients, which is higher margin. We are shifting a lot of our investments and focus there. There's no real impact on the ability to sell omnichannel.

David Kostman
David Kostman
CEO at Teads

Most of the omnichannel is going into the in-feed placement. If you look at the traditional publisher space, the in-feed is the one that's sort of after the first or second paragraph. It's not really impacted by any of these other trends we see. There's some opportunities that we see for brands in the end of the article. There we launched EngageOS, you saw that, which I think is really changing the dynamic also of how the end of article is treated.

Laura Martin
Laura Martin
Analyst at Needham

Okay. Great. Super helpful. I know, when we met in Cannes, you were saying you're really focusing a lot on the ad agencies, and it sounded like your prepared remarks, that you're getting some traction there. Could you update us on what's going on with the large ad agencies and where you're seeing traction on getting products placed and tried at the ad agencies?

David Kostman
David Kostman
CEO at Teads

Sure. If you look at the billings of the enterprise side of the business, it's about 90%+ is billed to the big agencies. What we are seeing is to the investments that we did in the Teads Ad Manager platform, increasing traction around integrations at the AI level on activation and planning with agencies. This is true, I think, across the board. There's some of these holdco agencies where we're getting more traction than others. I don't want to go into specific customers, but overall, I think, the efforts and the investments we're making in the platform and the offering are very well received. That's why I think we're confident to talk about growth in the second half of the year. We're talking about potential acceleration to these dialogues into 2027.

David Kostman
David Kostman
CEO at Teads

I think this world, where we are pretty uniquely positioned in terms of the ability to deliver branding and performance, ability to deliver CTV, online video, provide measurements, provide attribution. We have exclusive inventory on the home screen of CTV, which is a huge advantage. I think we're very well positioned in that market today.

Laura Martin
Laura Martin
Analyst at Needham

Thank you.

Operator

Thank you. There are no further questions. I will turn the call back over to David Kostman for closing remarks.

David Kostman
David Kostman
CEO at Teads

Thank you all for joining us, we do look forward to updating you on our progress. Thank you.

Operator

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating, we ask that you please disconnect your lines.

Executives
    • Company Representative
    • David Kostman
      David Kostman
      CEO
    • Jason Kiviat
      Jason Kiviat
      CFO
Analysts
    • Brianna Diaz
      Analyst at Citizens
    • Laura Martin
      Analyst at Needham
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