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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good day, and thank you for standing by. Welcome to the Taboola Q2 2023 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.
I would now like to turn the conference over to [ Brent Lee Johnson ], Investor Relations. Please go ahead.
Thank you, and good morning, everyone, and welcome to Taboola's Second Quarter 2023 Earnings Conference Call. I'm here with Adam Singolda, Taboola's Founder and CEO; and Steve Walker, Taboola's CFO. The company issued earnings material today before the market, and they are available in the Investors section of Taboola's website. Now quickly cover the safe harbor.
Certain statements today, including our expectations for future periods, are forward-looking statements. They are not facts and are subject to material risks and uncertainties described in our SEC filings. These statements are based on currently available information, and we undertake no duty to update them except as required by law. Today's discussion is also subject to the forward-looking statement limitations in the earnings press release. Future events could differ materially and adversely from those anticipated.
During this call, we will use terms defined in the earnings release and refer to non-GAAP financial measures. For the definition and reconciliation to GAAP, please refer to the non-GAAP tables in the earnings press release posted on our website. And with that, I'll turn the call over to Adam.
Thanks, [ Brent Lee ]. Good morning, everyone, and thank you all for joining us for our second quarter call. We had a strong performance in Q2, beating the high end of our guidance across all metrics. We achieved $123 million in ex-TAC gross profit, $16 million in adjusted EBITDA, and $8 million in free cash flow. We're also excited to raise the midpoint of our full-year 2023 guidance. As we're getting closer to 2024, we're bullish on our future. We expect a step change in our financial performance, and we're reiterating our guidance for 2024 of over $200 million in adjusted EBITDA and over $100 million in free cash flow.
Our performance in Q2 was driven by a few things. In our core business, publishers all over the world continue to trust us and sign long-term partnerships, which we saw with new and competitive wins this quarter from Nexstar Media, Barstool Sports, Futura, and more. This is on top of key partners like Time, Disney, Unidad Editorial, BBC, One India, The Print, Bangkok Post renewing their long-term relationship with us. Publishers are demanding less vendors and more true partners as they chart their growth, diversify their revenue, empower their editorial teams, and battle the never-ending changes being thrown at them by the walled garden platform.
You see, being an ad provider is just not good enough, and this is where Taboola is unique, addressing all of those objectives in a win-win manner with our publishers. Let me share more about our momentum in Q2. We're outpacing our expectations on e-commerce, which now represents nearly 20% of ex-TAC up from 15% last quarter. I believe e-commerce will continue to be a key part of our business as users are looking to make decisions that matter to them based on information from publishers they trust.
There's a lot of growth for us here to capture between publishers looking to launch an e-commerce business, retailers looking for profitable channels, and retail media dollars growing fast, where brands are looking for places to spend and bring clients back to their site. This is not all. We're also outpacing expectations which will use. This is our version of Apple News, which is integrated into Android devices from Samsung, Xiaomi and others. It continues to experience rocket-ship growth and will approach $100 million in revenue this year from over $50 million in 2022. I love that business because first, we built it organically, and it shows that Taboola continues to be a start-up of startup waiting to fund our dreams. And second, this has a high synergy to our core business, as publishers are getting a growing volume of traffic from us at a time when Generative AI is threatening to limit search traffic for publishers.
As I look into the rest of 2023, our focus continues to be making our 4 company priorities successful: Yahoo!, performance advertising, e-commerce, and bidding, each representing billions of dollars opportunity for us. Let's take a closer look at how each is progressing. First, let's talk about Yahoo. As a reminder, we're well underway on executing on our 30-year partnership with Yahoo!, which will see us power recommendations under massive footprint of some of the most iconic publishers in the world as well as integrating our data to come up with contextual segments advertisers can use and migrating native advertisers to Taboola technology.
We've been developing the technical infrastructure to allow Yahoo!-native advertisers through the Taboola platform as well as tables advertisers on Yahoo!. You will hear me talk a lot about advertisers migration, which is an area we're spending a lot of energy on. There is a huge opportunity for both Yahoo! and Taboola here to bring both companies' advertisers into the mix, make them even more successful and drive yield expansion over time. Some Yahoo! international markets are now live with Taboola. This is part of us testing and evaluating advertisers' performance in preparation for the U.S. market ramping up in 2024.
We expect to go into the next phase with Yahoo!, gradually transitioning ad spend and supply to Taboola in the second half of 2023. Let's get into our second priority of the company, performance advertising. One of the things that is special about Taboola, which is similar to Meta and Google, is that the vast majority of our revenue comes from advertisers who buy from Taboola directly using our own AI cold Smart bid. About 10% of our revenues come from programmatic partners such as Google, the Trade Desk, Criteo, Amazon, and others.
Our 2 main objectives are to get new advertisers to be successful when they try Taboola and get existing advertisers to stay with us and spend more as measured by net dollar retention. Nearly half of our R&D is working on making advertisers successful. We think there's a huge upside for us and the industry by building the very first must-buy company, enabling advertisers to scale in the open web with Taboola, like they do with Google on Search and Meta for social.
Our engineering team is focused on the tech behind our bidding strategies, which is how we can better help new and existing advertisers succeed even more with us using automated algorithmic-based buying methods. I talked in the previous quarter about target CPA, which allows advertisers to set a goal for how much a conversion such as a lead, a purchase, an app install is worse to them and how Taboola would look for users who meet that threshold. We're progressing further here with a new bidding strategy called maximize conversion. It's the default bidding strategy for companies like Google or Meta, and it allows an advertiser to evolve from placing a CPC price per click and sharing their acquisition goal. Put simply, an advertiser can give Taboola a budget and let us try to get as many consumers as we can to convert at the most affordable acquisition price. Then once the advertiser sees how many conversions we can get and at what price, they can establish a target CPA and scale as much as possible with us.
This was tested by dozens of advertisers during the second quarter. We've seen encouraging results, and I'm excited to share that NAX conversion as well as target CPA went to general availability this week. I anticipate that more than 50% of our revenue in 2024 will be using maximize conversion, and target CPA as a bidding strategy. Imagine a future where advertisers buying from Taboola don't need to guess a CPC but rather just share their goal, and our AI will do the rest. We're not stopping here. Early 2024, we aim to bring to market the target roast and next revenue bidding strategies. That will take into consideration not only the likelihood for a conversion but also the expected ROI for the advertiser.
And lastly, on performance advertising, I'm very excited about our investment in Generative AI. I think it will impact many industries, and we're deeply investing into how it can affect advertisers' success. Brands all over the world have used our technology to generate content and copy for ad creatives such as titles and images. Now the biggest benefits for them have been reducing their time spent on generating ad creative and producing high-performing creative assets for their campaigns.
Of the brands using Generative AI technology, 80% run multiple campaigns, and we're seeing brands doubling the click per rate when measured against evergreen campaigns. Now let's go into our third priority, e-commerce. Our investments into growing our e-commerce offerings via technology and through connected and Skimlinks are paying off. I'm happy to report that e-commerce is now nearly 20% of our ex-TAC, and we beat our budget again in the second quarter as we did in Q1. We see outstanding merchant retention and increasing budgets, validating the value clients get when buying from Taboola.
Connected is also starting to pick up momentum in Europe, which we're very encouraged by. We previously announced the introduction of Taboola Turnkey Commerce and e-commerce in-a-box solution for publishers, and we've already seen great partners like time and advanced local media adopted. Taboola is doing all of the work for the publishers here. We're using our data to know which content makes sense for us to write on behalf of the publisher. We're driving traffic to those articles. And of course, we're monetizing it with relationships with merchants and service providers. Taboola Turnkey Commerce is meant to connect publishers expertise with consumers to drive monetization, and we're seeing clear signs that it's working. A simple Google search for best checking accounts in 2023 leads consumers directly to Taboola's Turnkey Commerce activation on time.com. It's the first organic result.
Consumers in search for this phrase are clearly invested in opening a checking account. And when they arrive at time.com page, they can compare options and make a decision. If and when they click on one of the Times editorial suggestions, both Time and Taboola benefit. Our revenue model here is the same as the rest of our business. Every time revenue is being made, we share it with the publisher. Finally, let's review where we are with our bidder. We estimate that the 8,000-plus publishers in our core business generate display revenue of $20 billion, $25 billion a year. We think we can access our publishers' display inventory with our header bidder solution and win about 5% to 10% of the auction, given our advantage in our AI, first-party data, and technology. This will make us even more valuable partners for our publishers, increasing our share of wallets while providing our advertisers with even more scale.
Our strategy here is especially effective as cookies and Chrome are about to be deprecated. And based on our experience with Apple ICP, we anticipate this will be a source of strength for our bidder, given our hard-coated integration on the publisher sites and access to first-party data. We have mainly 2 areas where we bid these days. Microsoft MSN, which launched in April of last year, and our publishers, where we have the first part of data advantage. We believe that as Yalo launches, we'll be able to also partner with them on bidding strategy as well. We're seeing encouraging signs here as well. Microsoft's Q2 of 2023 was higher than Q2 of 2022, and we expect Microsoft's Q3 to be meaningfully bigger than Q3 of 2022.
As we said in April last year, we expect it's moving to bidding with Microsoft, who helps us design this product initially, will make our partnership a growing one, and it's happening. In Q2, we doubled down on our efforts and are now live on over 100 sites across our global network of publisher partners. As we continue to scale, we are laser-focused on fine-tuning our technology and algorithms, leveraging our ongoing investment in R&D and operations of our bidder platform.
Now as I rest my part, I'm bullish about our future and our position in the industry. We're focused on the right tech investments that will continue to fuel our profitable growth as a company and position us as the very first must-buy company in the Open Web for advertisers and partner of choice for publishers for the next many, many decades to drive revenue, engagement, and audience.
Personally, I also think Taboola is on the right side of history, driving growth to the Open Web and journalism in a time where advertisers don't have a lot of options outside of search and social. And none of us want their kids to discover things that matter like science or health care or politics on TikTok. The open way is critical. We know what we need to do, and we're executing on it. Thank you all for joining us today. We look forward to interacting with many of you over the next few weeks.
I will now pass it over to Steve, our CFO, to talk more about our financials.
Thanks, Adam, and good morning, everyone. As Adam noted, our Q2 results beat the high end of our guidance on all metrics. We are also raising the midpoint of our full-year 2023 guidance and reiterating our 2024 expectations of over $200 million in adjusted EBITDA and over $100 million of free cash flow. Let me now talk about our Q2 results, which exceeded the high end of our guidance on all metrics.
For Q2, revenues were $332 million versus the midpoint of our guidance of $309 million, gross profit of $97.1 million versus the midpoint of $83 million, ex-TAC gross profit of $123.1 million versus the midpoint of $110 million, adjusted EBITDA of $15.7 million versus the midpoint of $1 million and non-GAAP net loss of $6.4 million versus the midpoint of a loss of $21 million. We generated a positive free cash flow of $7.8 million. I will note that Q1 and Q2 growth rates suffered from difficult comparables in 2022 before the digital advertising market weakness. We expect to return to positive revenue growth in the second half of 2023. Relative to our guidance, we saw overperformance in e-commerce, Taboola News, and in our bidding offerings. E-commerce continues to impress, taking the momentum of the back half of 2022 through the first half of the year. The U.S. business has had strong retention and increasing budgets from advertisers or merchants as we tend to call e-commerce advertisers. In addition, the merchants or advertiser business in Europe has momentum due to our Google PLA campaign management, and there are positive supply-side drivers with new partnerships in the Buy Now Pay Later space. Taboola News will approach $100 million in revenues this year versus over $50 million in revenues in 2022.
Finally, our bidding offerings continue to gain momentum. Microsoft is expected to have strong double-digit ex-TAC growth in the second half of 2023, and we have more than doubled the number of other publishers on which we are now bidding. Our teams have achieved this strong revenue and ex-TAC performance while improving cost efficiencies, indicated by our adjusted EBITDA margin in Q2, exceeding the margin that was implied by the midpoint of our Q2 guidance.
Operating expenses were $122.1 million in the quarter, down $3.9 million year-over-year. This decrease was primarily the result of our focus on cost reductions that we announced in Q3 of last year. For the full year, we expect to show lower expenses as a percentage of revenue year-over-year in 2023. Our headcount is down approximately 8% from its peak in July of 2022. Our GAAP net loss for the quarter of $31.3 million included amortization of intangibles of $16 million, share-based compensation expenses of $13.9 million, and hold-back compensation expenses related to the Connect acquisition of $2.6 million, which were excluded from non-GAAP net income.
Our non-GAAP net loss of approximately $1.4 million was above the high end of our guidance range. In terms of cash generation, we had approximately $11.6 million in operating cash flow in Q2 with free cash flow of around $7.8 million. If you remove the impact of net publisher prepayments, which were a source of cash this quarter of $6.9 million, and interest payments on our long-term debt, which were a use of cash of $4.7 million, our free cash flow would have been $5.6 million. It is interesting to note that net publisher prepayments were a source of cash this quarter. This was due to the fact that new prepayments were lower than the quarterly amortization of historical prepayments. While we still expect net publisher prepayments to be a use of cash in 2023, it does show how they can become neutral to a source of cash in the future.
Q2 has historically been a soft quarter in terms of free cash flow. But in Q2 2023, we benefited from our stronger-than-projected operating performance as well as from a net cash benefit from publisher prepayments and some capital expenditures that were deferred from Q2 to Q3.
Let's turn to the balance sheet. Cash and cash equivalents plus our short-term investments decreased from $274.4 million at the end of Q1 to $246.9 million at the end of Q2 2023 and remain above our debt principal balance of $203.5 million. The decrease in our cash and cash equivalents balance was driven by the repayment of $30 million of our long-term debt in April. You can see that our net cash balance remains healthy. I also want to update on both the share buyback and debt repayment programs that we announced last quarter. As you probably recall, we announced that we would buy back up to $40 million of shares in 2023 and that we intended to repay up to an additional $50 million of our long-term debt in the second half of the year.
The share buyback program was initiated on June 1, and we repurchased a total of approximately 1.4 million shares in the month of June at an average price of $3.02. We continued to repurchase shares in Q3. And as of Friday, August 4, we had repurchased a total of approximately 2.9 million shares at an average share price of $3.17. Note that this includes the shares that we repurchased in June. In addition to the $30 million of our long-term debt that we repaid in Q2, our intention remains to repay up to another $50 million of our long-term debt in 2023, assuming the availability of sufficient working capital.
In terms of timing, we expect that this will not occur until Q4 due to the need to access certain cash balances in a tax-efficient manner. Now let me shift to our forward-looking guidance. For the full year 2023, we are raising the midpoint of our guidance. We expect revenues of $1.438 billion to $1.469 billion, gross profit of $420 million to $436 million ex-TAC gross profit of $531 million to $546 million, adjusted EBITDA of $73 million to $80 million, and non-GAAP net income of $5 million to $10 million. Adam mentioned earlier that we are now live in some smaller markets with Yahoo!.
Our full-year guidance factors in a small amount of revenue from Yahoo! in those markets. It also factors in the cost of investing in the partnership, so we can capture the full revenue from the partnership. We still expect the revenue to start ramping in the second half of 2023 and to reach full run rate by the middle of 2024. Despite being a year of strategic investment in Yahoo! and in our growth initiatives, we expect to generate positive free cash flow in 2023 for the full year. we anticipate free cash flow to turn negative in Q3 due to investments related to the Yahoo! partnership with significantly positive cash generation in Q4 due to normal seasonality.
Finally, we are issuing Q3 guidance. For Q3 2023, we expect revenues to be between $331 million and $357 million, gross profit between $83 million and $95 million, ex-TAC gross profit of $112 million to $124 million, adjusted EBITDA between negative $2 million and positive $10 million and non-GAAP net income of negative $20 million to negative $8 million. Let me finish by saying that we are happy with our second quarter performance and to be able to raise the midpoint of our guidance for the full year.
We are also excited about the step change we are expecting in our business, as reflected by our 2024 targets of at least $200 million of adjusted EBITDA and at least $100 million of free cash flow. Perhaps most importantly, though, we are excited about the momentum we are building in our business, especially the additional scale that Yahoo will bring and the progress we are making toward becoming a must-buy for advertisers looking to reach consumers in the open web.
With that, let's open it up to questions.
[Operator Instructions] The first question comes from Andrew Boone from JMP Securities.
I wanted to go to the '23 guide. You guys beat 2Q gross profit ex-TAC by $13 million, but are raising the midpoint of 2023 guidance by $6 million. So I guess the question is, is there some incremental weakness or something else you guys are seeing as we're entering 3Q? Or is that just conservatism? And then Adam, great to see the progress in terms of improving yield via tools. Can you talk about MAX conversion and target CPA benefits? And what is that helping to unlock in terms of budgets?
Thanks, Andrew. Good to hear from you. So I'll address the first one. So in terms of the full-year guide, we obviously had a big beat in Q2, but we beat the high end of our guidance by $8 million on ex-TAC and almost $10 million on adjusted EBITDA. We want to be conservative, though. So we don't want to count on that level of outperformance kind of continuing throughout the year in Q3 and Q4. Hence, the fact that we kept the high end of our guidance the same while raising obviously, the bottom end lower expectations are off the table at this point. So we raised the lower end. So it's really, as you said, it's conservatism. It's wanting to not count on that level of overperformance throughout the year, even though we're obviously very happy that we did have that level of beat in Q2.
So based on the bidding strategy, so just to level set, we -- about half to bus R&D is working on performance advertising. And the reason is that we think there's a huge upside for Taboola to basically make advertisers successful, especially if we want to become the must-buy Open Web company. We now have about 18,000 advertisers. Google has 10 million. So there's a huge range of how much we can capture more advertisers, big and small. But to do that, you have to make it easier for advertisers to be successful when they try to work with you. And then once they're successful, you want to help them spend more and that's more of an MDR kind of dimension.
If you look at Taboola over the last many years, we built an amazing business where advertisers bid on Taboola using CPC. So they had to guess what is a click is worth, where by the way they think about their business is how much does the client worth. So if you're -- my wife is a flower shop, so she knows how much a client is worth to her as a business. But if she was to work with the bullish, you would have to guess a CPC. Right now, all she has to do is to say, well, this is how much a client is worth, or here's a $5,000 budget with MAX conversion.
You go to Taboola, help me get as many clients as I want, and tell me what is the most affordable price a client could work as it comes from Taboola. This is a beginning of a revolution from my perspective because that means that we can migrate tens of thousands of advertisers over time to work with Taboola, and only focus on their own business objectives, their client acquisition cost, their budget. And so I'm happy to say that we all raised the test at Taboola this week because MAX conversion and target TPA is now general availability.
So it's not available to any advertiser, self-service, or enterprise accounts. I suspect Net '24, more than 50% of our revenue, and that's going to be a fairly large amount, especially as [ Yala ] is ramping up. We'll be using advanced bidding strategies in AI, such as MAX conversion. The next in line, by the way, after that is MAX revenue and [ Nextros ] where advertisers could basically advertisers could tell us. We have more than one product we're selling through Taboola. Here is the price of each one and maximize now turning to conversions, but just make us more money. That is the next in line from a product roadmap. So over time, CPCs will be completely part of our past. So I'm very excited about it, and we're putting half of our tech energy on that.
Our next question comes from James Kopelman from TD Cowen.
With e-commerce outperforming, does this change at all your view of how big a percentage of the overall business e-comm will be once we get past the near-term macro that's created these unusual comps for coordinative advertising? In other words, how should we think about the mix of e-commerce versus core going forward? And is there anything, in particular, you would call out in the second quarter or the third quarter as being kind of the key 1 or 2 drivers of e-commerce growth? And then I have a follow-up for Steve.
I can start. Feel free to jump in. James, so one, it's really exciting to see e-commerce, something we got into about 2 years ago with the acquisition of Connexity really paying off as it relates to the synergy with our business. We're seeing, on the one side, just great market fit. Advertisers buying from Connected and Skimlinks are getting amazing value. And especially now, when advertisers want to be close to the acquisition, they want distribution to be simple. They want to know that they're putting $1 innate can make more than they spend. This is just a very profitable channel for them. It works. And the more we're adding new advertisers with the bullet sales team, the more we see this business growing. So that's just the fundamental part of that business.
On top of that, if you add turnkey, which you may have seen in my letter, I thought a screenshot, we're seeing phenomenal growth essentially -- this is a great one of those, there's more demand and supply. There are more publishers who want Taboola's Turnkey, which means for us to write the e-commerce content for them using our data and then to drive traffic to it, and then monetize it. If you go to time.com stamped, which is the e-commerce website that Taboola and time.com partnered on, it's beautiful. It's ranked at the top of Google search.
If you're searching for things like which checking accounts would they open or best smartphones of 2023, we are the top result on search engine, the page, it looks beautiful, and it drives very high yield. To the point that I think over time, this might be even bigger than our core business for publishers as some of them. So this is a great momentum. We're still early on Turnkey, but I think this has a big potential of becoming a big portion of our business over time. I think publishers of e-commerce all want it, and I think it might be 1/3 of your business over time. So the way I think about it is if you're not offering e-commerce to publishers, you may have nothing to offer over time because that's going to be a big portion of what they see as a growth engine.
Great. And then a quick follow-up for Steve. We've been hearing other companies describe somewhat of a stabilization in the digital ad environment over the last couple of months. How would you guys characterize what you're hearing in conversations with advertisers, both in the U.S. and internationally? For example, have you seen any change in video advertising trends, which I think were somewhat soft earlier in the year?
Yes. So thanks for the questions, James. So yes, we would say that what we're seeing in the digital advertising environment right now is stability. So in fact, ever since about Q3 last year, we've seen relative stability compared to, obviously, the first -- or the second and third quarter of last year. So we see relatively normal seasonality. We're seeing relative stability of budgets, et cetera. And I think most advertisers that we talk to, what they're basically saying is they're still watching the macro a bit. They're probably getting a bit more bullish, like a lot of people are about the potential for a soft landing and not a recession. But I think they're still cautious but stable. Their spend is stable. They're still spending kind of as they were.
Now we are seeing ups and downs in different portions of our business. For instance, e-commerce has been particularly strong, bottom of the funnel, things where you're helping to convert directly into revenue have been particularly strong. Top-of-funnel video still remains soft relative to historical norms. So we haven't seen a further softening of it, but it's definitely soft relative to history. And I think that's consistent with what we've said in the past, which is the further down the funnel you go, the more stability you get and the more strength you get, and the further towards the top of the funnel you are, the softer things are. So generally, that's consistent with what we're seeing. So we've seen pretty much relative stability since the end of Q3 of last year, and nothing has changed dramatically on that.
Our next question comes from Laura Martin from Needham.
Staying on the e-commerce spend, Adam, I'm interested in whether you have channel conflict because with the new companies where you're doing content, doesn't that threaten the actual companies that are in your core business where their core business is doing content? Why is this a channel conflict for you guys?
So it's one we're working together. So the editorial team of the publisher works very closely with the editorial team that we've built to create that content. So this is not sort of like a vendorship type of relationship. It's very much a partnership that is deep. And in fact, what I like about it is that I think publishers, in general, want to work with companies that are more partner-type, CPM, and being tech is just part of the path. It's not good enough.
So you need to be able to build a relationship that is driven by trust with the editorial team, the subscription team, the audience team, the commerce team. So all of those people on the publisher side take part in deciding who they're going to work with side-by-side to the revenue person. So one, is this is very much a trust-oriented relationship. And two, it's a very different type of riding, right? So when you cover the news or entertainment or things of that nature, it's very different than covering things like products or covering things such as financial services.
And also there's a data element of what do users want to read to begin with. So we've been doing this with time.com as an example for almost 6 months now, and it's a huge success. I mean we'll keep expanding how we're promoting that content and the homepage of time.com. Our teams are spending so much time together, I just hope we can do 100x more time.com from my perspective because it's really encouraging beginning.
Great. And then my second one was in your press release. You said that you started to roll out some of the Yahoo inventory offshore, where there's a fewer number of advertisers. Could you talk about -- what -- how is the inventory different in Yahoo? And what are you seeing? What are your early takes on the bigger Yahoo! integration that you've learned for actually rolling out some of these offshore markets so far?
Sure. If you remember, when we announced the Yahoo! 30-year strategic partnership, one of the things that I said is that -- and this was as an out salary because we were not on you at the time, I said, from what we know and what we're talking to an industry executive, working with as an advertiser, it's a huge opportunity because the users are very engaged. It's almost 900 million people a month who love Yahoo, the iconic brand that have been around for 30 years. So between the mail, Yahoo Finance, Sports, News, users are super engaged and advertisers are capturing this engagement in the form of conversions and growth to them. So it's a very loyal advertiser base that love Yahoo, as much as consumers love them. This was then when I talked about it, just by talking to people in the industry and, of course, talking to Yahoo. Now we're live on the international markets. This is a smaller portion of Yahoo, obviously, the U.S. is the bigger portion. But what's really encouraging me and us is that now that we're able to bring some Taboola advertisers onto Yahoo international markets, we've kind of validated this very important assumption that Yahoo is awesome. That is an advertiser spending on Yahoo! is able to get great conversions.
And what we hope is that as we're now moving to the next stage, really, the rest of the year, migrating advertisers on both sides and bringing that into one holistic mix, this will be a great opportunity for advertisers on both sides, and we can continue to improve advertiser success, as you know, is our #1 priority as a company. So what we know now is that it's awesome. It's small, but we're very excited to kind of continue to the next stage into the U.S. and ramping that up in 2024.
[Operator Instructions] Our next question comes from Dan Day from B. Riley Securities.
So just first one for Steve. Just looking at the guidance and backing into the cash operating costs, and I'm thinking about that really is the delta between gross profit and adjusted EBITDA. I think the back half implies around $65 million or so per quarter. That had been more like $55 million a quarter. I understand that's mostly due to the Yahoo! -- integration expenses really starting to hit the income statement. But can you just talk about how much of that incremental OpEx in the next couple of quarters is kind of stickier in nature? And how much of it is sort of onetime in nature.
Good to hear from you, Dan. So you're correct. Almost all of that uptick in the second half comes from 2 areas. One is investment in Yahoo!. So we will be doing the incremental hiring to basically support the ramping of Yahoo! that will, as Adam said, start in the second half and then continue through the middle of next year. Those costs -- so there's 2 types of costs within that. So one is their salespeople and account managers to manage the revenue. Those are permanent. So we will always need those people to manage the revenue coming from the relationship. And in fact, we think we'll be able to grow the relationship over time. So we may even grow the number of headcount that's supporting that as the revenue growth because we typically see that our sales and account management headcount tends to grow roughly in line with revenue.
We gained some efficiencies over time, but it grows roughly in line with revenue. So those will be permanent. The tech resources that we'll be bringing on to help with the transition, those will be able to cycle off of the project once we get fully ramped for the most part. There's really nothing that is dramatically special about the Yahoo! setup that will require permanent people on that. So we'll be able to cycle them off. So we'll probably move them to other projects at the end of the ramp, so by the middle of next year. So that gives you an idea on the Yahoo!.
The second area that we will be doing some incremental hiring here is actually in e-commerce since it's growing so well. We've identified a number of growth initiatives with e-commerce that we think would benefit from the incremental hiring that would help us grow those faster. So we will be doing some incremental hiring there. I think we have enough initiatives there that those are effectively permanent. I mean we're going to keep them on, they'll start doing new initiatives over time, but they'll be effectively permanent, but they'll obviously come with a step-up in our revenue there. So I hope that helps in terms of understanding kind of the cost base.
Yes. That was great, Steve. Follow-up probably for Adam, you talked about in response to the last question, when can you 100 of these time stamps like deals with Turnkey Commerce. Just maybe talk about the pipeline to get new publishers up and running there. How hard is that like to get this started with new publisher partners? Just generally where you stand in terms of bringing on more partners for the Turnkey Commerce initiative.
Sure. And thanks for the question. So let me start with the demand for the product. So I can tell you, we have a lot of publishers who want to launch it. In fact, there are some publishers who will offer to pay for the service because this is a rev share as a reminder, but just is there any way to get priority to get on the platform, given the success and how -- and people can check it out on their own.
They don't even need to ask costs, you just search things, and you see that the results are coming up high. So the demand for the product is -- it's great. It feels like a new iPhone, and everybody wants it, and there's a long line. Where we are in terms of providing that to many, many publishers, we're still -- we want to make sure that we're doing a good job.
So we're very focused on our existing partners, Advanced Media, and time.com. There's another big one that we will hopefully be able to share over the next quarter. And we're probably going to focus on those 3 for the rest of 2023, and then 2024, we'll figure out how much we want to expand that. So the good news is that you always want to be in a position where you have more people who want it, then you can give it. And what we're trying to do -- right now is focus on our early adopters. I want to make sure that they're very happy and we're seeing success because that's a priority for us. They took a chance on us, so we want to focus. But we're hopefully moving to more of a scale approach in 2024.
Our next question comes from Stephen Ju from Credit Suisse.
So you've announced some nice publisher wins this quarter. Now understandably, Yahoo! is the one that everybody is focused on right now, but can you talk about what you're hearing from everybody else and when potentially some of the larger publishers may be coming up for RFP?
Sure, Steve. So we -- and I mentioned it a little bit also on my letter. We're investing a lot in technology to make sure that when publishers either think about who to work with or to renew, they get to really take a holistic view about who can help them drive audience growth, engagement growth, and revenue diversification. And it's so great to see that our investments are panning out. So I'll give you one example, homepage for you, which is a way to render, using AI, the entire homepage to personalize it completely to consumers. It's like one homepage turns into 1,000 homepages.
And that gets a lot of adoption. It's now -- we have self-service options for networks of sites, and you'll hear a lot more publishers adopting it. So this is -- it's in GA, and it's wildly required by publishers. And this is something that we've been working on alongside Newsroom for 7 years or so. So it's a huge investment. It's a company on its own, and it's something publishers want as well as helping them get subscription and audience distribution with table news.
If you think about generative and the risk of search traffic going down, publishers are asking themselves which partner is going to help me get to more audience. So Taboola is now approaching $100 million in revenue this year. It means that we're just going to continue to spend more and more people to high-quality journalism in the open web. So not only Taboola is the highest or among the highest revenue source, not only we're getting publishers to e-commerce. We're empowering hundreds of editorial staff with homepage personalization.
We help them diversify their revenue with subscriptions. All those things in a time of them wanting deep partners. So you're seeing great names like Barstool and Nexstar, which is -- these are huge wins, Geon Media, Express, and more and the same dynamics all over the world. This is a global phenomenon of publishers looking for tech providers that can do those things. Taboola is very special. We invest more in technology than others. So hopefully, we're right that this is where the industry is going. We think we're right. And in terms of others that are in the pipeline, there are great names that are out there that are thinking about who to work with, and I hope to win them all.
[Operator Instructions] I am showing no further questions at this time. I would like to turn the conference back over to Adam Singolda for closing remarks.
Thanks, everyone. For joining us today, I'm very excited, as you can tell, about where we are and the momentum we see in our business. We're winning publishers in our core market, thanks to our technology investments, empowering editorial teams, helping publishers get subscribers, launching their e-commerce business, and a lot more. I think publishers want less and less vendors and more strategic partners for 5, for 10, for 30 years. Publishers want companies who invest in technology and can do more than just paying CPM. We're also building our expectations on e-commerce, which is nearly 20% of our ex-TAC, and I believe e-commerce will be a big part of Publishers' revenue in the Open Web.
We're building our expectation also on Taboola news, which is our version of Apple News for Android devices with partners like Samsung and Xiaomi, and this business is approaching $100 million in revenue this year from $50 million last year. Yahoo is now live on international markets, and we validated it's an amazing place for advertisers to be. Our relationship with Yahoo! leadership is just stronger than ever. And lastly, we expect to grow more than 10% in revenue in the second half of 2023. And in Q4, I expect us to grow more than 20% versus last quarter last year.
These are exciting times for us at Taboola and also for the industry. I'm convinced there needs to be a Google-type company dedicated to the open web and journalism that can be a must-buy so advertisers can, for the first time ever rely on that company, and we have a real shot at the bema one. Thanks again, everyone, for joining us today, and we look forward to talking to many of you over the next few weeks.
This concludes today's conference call. Thank you for participating. You may now disconnect.