Teads Holding Co. (NASDAQ:TEAD) Q3 2025 Earnings Call Transcript

Teads Holding Co. (NASDAQ:TEAD) Q3 2025 Earnings Call Transcript November 6, 2025

Teads Holding Co. misses on earnings expectations. Reported EPS is $-0.17 EPS, expectations were $-0.15.

Operator: Good day. Welcome to Teads Third Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the call over to Teads Investor Relations. Please go ahead.

Unknown Executive: Good morning, and thank you for joining us on today’s conference call to discuss Teads Third Quarter 2025 Results. Joining me on the call today, we have David Kostman and Jason Kiviat, the CEO and CFO of Teads. During this conference call, management will make forward-looking statements based on current expectations and assumptions, including statements regarding our business outlook and prospects. These 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 Form 10-K filed for the year December 31, 2024, 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, and we do not undertake any duty to update any such statements. Today’s presentation also includes references to non-GAAP financial measures. You should refer to the information contained in the company’s third quarter earnings release for additional information and reconciliations of non-GAAP measures to the comparable GAAP financial measures. Our earnings release can be found on the IR website, investors.teads.com, under News and Events. With that, let me turn the call over to David.

David Kostman: Thank you, Josh. Good morning, and thank you for joining us. Before diving into the details of the quarter, I’d like to start with an update on the merger, our turnaround actions and how we’re positioning Teads for renewed growth and sustained profitability. While this quarter presented challenges and our results fell short of expectations, we are taking decisive actions to drive a stronger performance moving forward. The integration of our 2 scaled organizations is complex with a strategic effort, and we are actively addressing the challenges we encountered. In addition to the merger complexities, we continue to navigate a dynamic and fast-evolving ecosystem marked by shifting traffic patterns across the open Internet and increasing competition on the demand side.

Macro volatility in certain geographies and verticals and shorter planning cycles continue to affect pacing. At the same time, we remain confident in the strategic thesis behind our merger and are excited about the long-term opportunity. We believe that the combination of our technology, data capabilities and deep relationships with enterprise, brands and agencies places Teads in a uniquely strong position to be a strategic partner at a global scale for brands and their agencies. And our cross-screen, outcome-driven ad platform led by our fast-growing connected TV business is resonating with customers and partners. I’ve just returned from our strategic product offsite, and I can tell you that the innovation, creativity and energy of our teams are truly inspiring.

This reinforces our confidence in Teads’ future and our ability to lead the industry forward. With this backdrop, we decided to take decisive actions in effort to turn the business around, restore growth and improve profitability. Over the past 2 quarters, we’ve made meaningful progress on the integration and realization of synergies. Operationally, during Q3, we restructured the leadership of our regions and improved our sales team’s coverage structure and sales processes. These measures are already yielding some improvements in key leading indicators, though the revenue impact is still in its early stages. In parallel, after working as 1 merged team for 2 quarters, we also decided to conduct a comprehensive business review to identify additional opportunities to restore growth, enhance profitability and generate positive cash flow while building a great company.

The plan we developed focuses on 3 main dimensions: First, portfolio optimization to product, geography and customer segment evaluation, prioritizing investments in innovation and high-growth opportunities while taking steps to improve the profitability of the other parts of the business. Second, operational efficiency, refining our organizational structure and processes to enhance agility and accountability. And third, cost optimization, identifying further efficiencies to improve our financial profile and long-term cost structure. We are rapidly moving into execution of these plans with implementation beginning in the coming weeks with the objective of driving immediate impact. These plans should allow us to continue investing in strategic growth while delivering meaningful incremental EBITDA.

We are focused on operating as a positive cash flow business. So far year-to-date, we have generated positive adjusted free cash flow, and our objective is to focus on improving our cost structure and efficiencies to finish the year positive as well. As you may have seen in our separate press release this morning, I’m very excited to welcome on board Mollie Spilman as our new Chief Commercial Officer. Mollie brings a wealth of experience on the sales and operations side at scale. She served as Chief Revenue Officer and then Chief Operating Officer at Criteo for 5 years when the company grew revenues from $600 million to over $2 billion. Most recently, Mollie was the Chief Revenue Officer at Oracle Advertising, where she helped clients realize value through the activation of third-party audiences and contextual targeting.

Prior to that, she held senior leadership roles at Millennial Media and Yahoo!. I’m truly excited to welcome Mollie to our leadership team. She brings exceptional experience, fresh perspective and a proven ability to lead through transformation. Her insight and commitment to excellence will not only strengthen our leadership team, but also inspire our entire organization as we move forward towards a stronger future. Now, I will turn to some highlights from the quarter. Connected TV remains our most important growth area. In Q3, we saw continued growth of approximately 40% year-over-year. On a stand-alone basis, assuming continuation of recent trends, our CTV business is expected to hit the $100 million mark by end of year. As a reminder, our CTV business focuses on 3 key pillars: on screen, the innovative CTV placement where we continue to be a global leader, other proprietary formats such as POS ads and in-play and cross-screen, which facilitates full-funnel activation.

Our connected TV home screen product continues to gain traction, establishing Teads as a leader in this market. We’ve executed over 2,500 home screen campaigns since launch and expanded partnerships with major CTV players, including TCL and Google TV, alongside existing relationships, some of which are exclusive, including LG, Samsung and Hisense, giving us access to over 500 million addressable TVs globally. We believe that new research from the [ Media Mentor Institute ] demonstrate the power of our CTV home screen, which based on early results, achieved a 48% attention rate and delivered a 16% attention premium over YouTube skippable ads. Cross-screen adoption is strong with over 10% of our branding advertisers now active across both CTV and web.

During Q3, we launched CTV Performance, which is designed to enable brands to bridge awareness and performance goals across premium streaming and video environments. For example, in a recent campaign with Men’s Wearhouse, Teads generated over 41,000 site visits and more than 50,000 incremental store visits, which we believe demonstrate that CTV can now drive measurable outcomes across the funnel. While CTV continues to grow quickly, we continue to experience declining pay views on premium publishers, partly due to increased adoption of AI summaries and volatility in our programmatic supply. However, this has been partially offset by ongoing RPM improvements and by actions taken by publishers to increase engagement of their audiences, particularly on their applications.

On the cross-sell front, i.e., selling performance solutions to legacy Teads clients, clients such as Homes.com, Lavazza and Nissan are successfully combining branding and performance campaigns, driving measurable full-funnel results. Encouragingly, we’re seeing improvements in new business opportunities and a notable inflection in cross-sell revenue, albeit from a small base, with October revenue and bookings growing by more than 55% month-over-month in cross-sell. It is important to remember the open Internet remains a vital channel for advertisers seeking incremental reach and unique audience engagement. For example, a recent case study with a major U.S. CPG brand demonstrated over 90% incremental reach when extending campaigns beyond social into the open Internet, which we believe is a powerful example of Teads’ ability to connect brands with new audiences beyond walled gardens.

In addition to our CTV expansion, diversifying beyond traditional publishers into potential high-growth, high-value media environments, our retail media innovation continues to advance with more updates and partnerships being announced soon, providing enterprise brands with simplified access to multiple retail media networks through Teads Ad Manager. Moving to AI and algorithmic breakthroughs. The acceleration of our AI and algorithmic capabilities stands as one of the most exciting and impactful outcomes of the merger, already yielding tangible improvements and establishing a highly promising trajectory for 2026. First, the combination of the 2 companies’ data science teams, data sets and know-how is resulting in real benefits for both brand and performance campaigns with improved conversion rates, click-through rates, auction level bids and AI-based campaign pacing.

After a testing period, we are in the process of rolling out some of these benefits to the entire network. Second, the adoption of large language foundational models for advertising. Our next-generation approach trains a single unified advertising foundational model that learns from all available data, user actions, publisher signals and advertiser goals to deliver exceptional predictive power across the entire advertising life cycle. This shift represents a transformative step in ad selection and personalization, unlocking performance improvements across every stage of the funnel. We believe the improvements to our platform driven by this foundational model could be one of the most significant drivers of performance going forward. To sum it up, we fully acknowledge that our integration journey has come with challenges and the progress has not been linear.

However, we remain confident in the strength of our vision, the resilience of our teams and what we believe is the unique value proposition of our integrated platform. We are enhancing our leadership team, sharpening our execution, focusing resources in the areas of greatest opportunity and taking decisive steps to build a more efficient, innovative and profitable business. Looking ahead to 2026, our growth and profitability strategy will center on 5 key pillars: First, connected TV growth through home screen formats and cross-screen activations; second, deepened strategic relationships with agencies and enterprise brands; third, expansion of performance campaigns with enterprise clients; fourth, algorithmic and AI advancements driving nonlinear improvements in results; and fifth, enhanced profitability in our direct response business.

We plan to share a detailed 3-year outlook and road map at an upcoming Investor Day in March, and we look forward to discussing our progress and vision in more depth at that time. With that, let me now turn it over to Jason to walk through the financials.

Jason Kiviat: Thanks, David. I want to start by saying I’m disappointed by our results, landing slightly below our Q3 guidance for Ex-TAC gross profit and adjusted EBITDA. We experienced volatility in our top line and expect a continuation of this in the short-term, but are committed to taking steps to protect our cash flow as we focus on realizing our long-term vision. Revenue in Q3 was approximately $319 million, reflecting an increase of 42% year-over-year on an as-reported basis, driven primarily by the impact of the acquisition. On a pro forma basis, we saw a year-over-year decline of 15% in Q3. I’ll touch a little more on the headwinds David mentioned and we spoke about last quarter. While the operational changes we made in U.S. and Europe are showing a measurable improvement in terms of building a stronger sales pipeline that gives us confidence in the longer-term improvement, we continue to see a lower rate of sales in key countries, namely U.S., U.K. and France.

As noted last quarter, these 3 regions, which represent about 50% of revenue, are effectively driving all of the headwind on the legacy Teads business with many other countries neutral or growing, including the DACH region, which is our second largest. The impact of the operational changes is encouraging, but it’s clear that the time line to see the real fruits of these changes is longer than we anticipated. The pipeline is growing, and we’re focusing our resources and efforts in the coming quarters on driving long-term and sustainable value propositions for enterprise advertisers. On the legacy Outbrain business, we see a couple of drivers. One, we continue to see lower page views year-over-year. The residual impact from our cleanup of underperforming supply partners remains a headwind of about $10 million year-over-year in the quarter.

And generally speaking, we continue to see lower page views on our partner sites, continuing the trend from prior quarters. While we also continue to see growth in RPM that partially offsets this, it has been less of an offset in the last couple of months, causing the page view decline to have a larger negative impact on revenues in the quarter. Following the merger, we made several strategic decisions around components of the legacy Outbrain business that we wanted to deemphasize and potentially decommission. These decisions are centered around quality and focus on our long-term vision. Examples of these actions include the supply cleanup we talked about as well as additional changes we have made around content restrictions for certain segments of demand and the deemphasis of our DSP business and DIY platform.

The revenue impact of these factors has been larger than expected, most meaningfully in our DSP business, where a few large clients lowered their scale meaningfully across our platform, driving a decline in Ex-TAC year-over-year of $5 million in Q3. On the positive side, CTV revenue continues to be a growth driver, growing around 40% in the quarter and projected to $100 million for the year. And this is an area where we still see ourselves in the early innings, representing about 6% of our total ad spend with a margin that has expanded year-over-year as we scale it and further differentiate our offering. Ex-TAC gross profit in the quarter was $131 million, an increase of 119% year-over-year on an as-reported basis. Note that Ex-TAC gross profit growth is outpacing revenue growth, which is driven primarily by a net favorable change in our revenue mix resulting from the acquisition, but additionally aided by the continuation of improvements to revenue mix and RPM growth from the legacy Outbrain business.

Other cost of sales and operating expenses increased year-over-year, predominantly driven by the impact of the acquisition. Note, in the quarter, we recognized $4 million of acquisition and integration-related costs as well as $1 million of restructuring charges. Also note that we recorded a benefit from deal-related cost synergies in Q3 of approximately $14 million, approaching the $60 million annual run rate for 2026 that we had guided previously. This was always an initial milestone in our view, and we feel there is more opportunity ahead. Adjusted EBITDA for Q3 was $19 million. And adjusted free cash flow, which, as a reminder, we define as cash from operating activities less CapEx and capitalized software costs as well as direct transaction costs was a use of cash of $24 million in the quarter, driven largely by the $32 million semiannual interest payment made in August.

Year-to-date, we have generated adjusted free cash flow of $3 million. As a result, we ended the quarter with $138 million of cash, cash equivalents and investments in marketable securities on the balance sheet and continue to have EUR 15 million or about $17.5 million in overdraft borrowings classified on our balance sheet as short-term debt. And we have $628 million in principal amount of long-term debt at a 10% coupon due in 2030. We generated positive adjusted free cash flow year-to-date and are focused on improving our cost structure and operating as a cash flow generating business. As David mentioned, we are working intently on ways to drive better profitability and growth as a combined company, which involves a deep analysis of our operating model and opportunities for efficiencies.

As we move into the implementation of these plans in coming weeks, we expect a benefit to adjusted EBITDA of at least $35 million on an annualized basis and to start seeing a small impact of that in Q4. And as we look towards Q4, our visibility, like others in the space, remains challenged by the shorter planning cycles from advertisers. Given this and the seasonality of the business, we exercised an increased level of caution in our guidance. And with that context, we provided the following guidance. For Q4, we expect Ex-TAC gross profit of $142 million to $152 million, and we expect adjusted EBITDA of $26 million to $36 million. Now I’ll turn it back to the operator for Q&A.

Q&A Session

Operator: [Operator Instructions] Our first question is from Matt Condon with Citizens.

Matthew Condon: My first one is, just can we just unpack the headwinds in the quarter there were multiple things. Is it just mainly the continuation of the things that you saw last quarter? How much of it was the degradation in search traffic? And then also, I think you called out some macro headwinds as well. Could you just parse through those and just talk about the different components?

David Kostman: Let me just maybe at the high level, I think overall, you see a combination of factors. We don’t believe there’s anything structural. It’s — a lot of it relates to distractions from the merger and the execution challenges that we highlight that are taking longer than we had anticipated, and we needed to take deeper actions that Jason highlighted. There is some weakness in certain geographies and verticals, but we believe that we — with the actions we’re taking, we can turn the business around. Jason, do you want to give more details?

Jason Kiviat: Sure. Yes. I mean just breaking it down a little bit as far as what was maybe disappointing to us in Q3 versus what we expected a few months ago. Certainly, just an increased level of demand volatility and kind of drove drivers on both sides of the business. On the Teads side, we talked about the operational changes we made early in the quarter in response to the slowdown that we started to see at the end of Q2. And effectively, what we’ve seen is just a slower-than-anticipated impact from those changes, and it’s really impacting the same key countries that we talked about last quarter in U.S., U.K. and France. Typically, Q3 builds towards September being easily the strongest month of the quarter, and it still was, but not to the level that we would typically see historically, which was a little bit of a negative surprise for us.

Visibility does remain challenged with advertisers. They still have shorter planning cycles. We’ve been talking about since really the beginning of this year with the tariff announcements and other things kind of impacting that. On the positive side, we did see, I said, growth in some regions. We did — we do see just kind of health and the impact of the changes that we made. The pipeline as we measure it, is growing. We see that starting to pay off a little bit in October here, but it’s still early days, and we think it will take longer. We also see stronger cross-sell. We see stronger CTV, which are really 2 of our very main focus areas, as David said. So some optimism there. On the Outbrain side, I think you asked about the impact of the page views.

They did tick a little bit lower in Q3 than what we saw in Q2. And we also saw RPM continues to grow and be an offset against that, but there was a little bit less of an offset in Q3 as the quarter went on, and that drove it a little bit of the softness as well as, as I said on the call, the strategic decisions we made around quality, the supply cleanup in H1, demand content restrictions that we’ve employed having a bigger impact than what we expected.

Matthew Condon: And then just as a follow-up, just what is your willingness to — if things don’t materialize, just to take the right steps to protect free cash flow here as you look out into the rest of this year and into 2026?

David Kostman: I think we said it on the call, I think we are committed to it. We generated positive free cash flow year-to-date adjusted positive free cash flow, and we’re taking all the steps to continue to do that. We talked about the plan that is really a transformational plan around deciding on which areas to focus and invest. So we’re still in investment only in certain growth areas, but I think we’re looking at business components in a smarter way. We did this exercise in the last 8 weeks to really analyze in-depth the business, decided on the focus areas. And part of that, we will be generating a minimum of $35 million of incremental EBITDA, that’s a combination of this transformation and cost efficiencies. So we’re definitely committed to that.

Operator: Our next question is from Ygal Arounian with Citigroup.

Ygal Arounian: So I know you’re not going to want to give a 2026 outlook here, but just given how 2025 has trended and the work on the integration, maybe if you could just — I know investors are going to want to look into 2026 and get a better sense of the confidence level on initially some of the sales execution. Now we’re changing some of the product, $35 million of savings you’re calling out. Any help for investors to kind of think through the pace of this and the level of confidence that this stuff really finally starts to come through and kind of think about next year?

David Kostman: I think we’re not giving specific — Ygal, thanks. We’re not giving specific guidance to 2026. What we see is some positive indicators month-over-month in growth in CTV, growth in cross-sell, and we decided on focus areas of innovation, they’re going to be focused around the agency side, the CTV side. We believe that, that with a combination of sort of the plans we have around the sort of EBITDA improvement will get us to — we expect to get to single-digit growth in certain areas of the business and run certain areas of the business for profitability. Once we finalize these plans, we will be communicating in more detail.

Jason Kiviat: Maybe what I could add to that, Ygal, this is Jason, just to give a little bit more color. We definitely see an impact of the changes that we’ve made kind of confirming the operational drivers that we talked about last quarter. And what I mean by that is, for example, we made the changes with the structure in the U.S., which has been our underperforming region. We made the change in July. We immediately saw more meetings, more RFPs a bigger, healthier pipeline being built, equity being built with the brands and agencies that we’ve worked with historically. And we are starting to see early returns. I mean, in October, early kind of results from that impact, it’s still down, but it’s down less by close to 10 points on a year-over-year basis, right?

And so, it’s nominal. It’s early, but we do think this is the kind of thing that pays off more over time and that it’s not as quick of a turnaround as we had hoped for. We’ve spent a lot more time with clients ourselves, understand a little bit more about some of the challenges and starting to address them and how we win, and that’s prioritization of product, just strategic relationship building, commercial terms. And these are things that are not as we had hoped, a 90-day sales cycle turnaround, but rather things that probably take a few quarters, right? And so, we feel good. We feel obviously a lot smarter. We think we need to make changes, and we’ve talked about what we’re doing there. But we feel good about the areas that we’re focused on for sure.

Ygal Arounian: Okay. So just — is it fair to say that you’re starting to see some early benefits from the sales reorganization still down, still taking time, but starting to see improvements and then the kind of structural changes you’re talking about all that’s pretty new and starts to come through more next year, or I guess, in 4Q and into next year?

David Kostman: I think that, Ygal, that’s very fair. And as Jason said, we already see signs, again, they are leading indicators in terms of RFP sizes of those opportunities, more opportunities are opening, more active meetings that are leading to generating pipeline. Again, October was less of a decline than in September. We see good data points in the U.S., which is the main market we address. I think in the U.K., we’re also starting to see some impact of the changes. I’m very excited to have Mollie on board. I mean she brings a tremendous experience. I mean she’s sort of led. She was the CRO and COO of Criteo in years where they grew from $0.5 billion to $2 billion. She is a very experienced sales leader, operational leader. I think it’s — we spent a lot of time in the last few weeks looking at this. She believes, obviously, there’s a huge opportunity here, and it’s sort of in our control to fix.

Operator: Our next question is from Laura Martin with Needham & Company.

Laura Martin: So let’s start. Jason, one of the things you said is you lost several big clients and about $5 million of revenue from them. Can you go into the background of why they turned away from your DSP? Like what — is it just that we’re getting winners and losers and they’re pulling money? Is it stuff Trade Desk is doing that’s out of your control? I assume there’s nothing you did in a single quarter that — so it’s something somebody else is doing like Amazon or Trade Desk or taking share from you. But can you talk about that and why that isn’t structural because it sort of sounds structural to me. Let’s start with that one.

Jason Kiviat: Sure. Yes. So to maybe give a little more color on the — yes, it’s a small number of customers that I was referring to buying on our Outbrain DSP business. It made up the majority. It made up about 2/3 of our DSP business coming from this kind of small group and segment of customers spending on it. And I kind of quoted the impact there of $5 million Ex-TAC impact year-over-year. We’ve made changes around supply. As I said in the first half of the year, we’ve also been making changes. And this part is not really anything new for us, but we continuously do this of content rules and content restrictions to make sure that things are up to our quality and what we want to allow out there. And some of these changes made by us and also changes that just impact the customers from their own business models and how they’re able to use the platform to run their own business models caused them to reduce their spend dramatically.

And we did expect an impact. We didn’t expect it to be so binary is maybe how I would put it. But we saw the spend leave, and it’s not that it went somewhere else as far as we know. I think it’s just impacts their model and their ability to spend in general. And as I said, we don’t expect this to come back online certainly in Q4. And this was like 2/3 of the DSP business and the rest of the business is really fundamentally different. I don’t see a similar risk with the remaining portion, but I hope that is helpful.

David Kostman: Maybe just, Laura, to clarify on that. I mean the whole move to a more premium network is a big move. I mean it’s something that takes time. We can’t always assess the whole impact. I mean we talked about $10 million in revenue impact from removing supply sources, deemphasizing the DSP. These are legacy Outbrain, I would say, hardcore performance. Other people are taking some of this business. We — as we move forward with the more premium placements that we need to offer the guarantee of quality to the enterprise clients, I mean these are certain steps that are hurting more than we had anticipated, but I think it’s going to be something that, again, we’re not — as Jason said, we don’t expect it to come back.

I mean it’s something that sort of we deliberately are doing. And right now, obviously, feeling the pain of it. But I think when we’re looking at the strategic direction of the company, these are some of the right moves and some of this happening faster than we thought.

Laura Martin: Okay. Yes, that makes sense. And that’s helpful because it limits the downside to the DSP segment. Okay. And then, David, one of the things you said at the top of your comments was that you are seeing — you’re the first actually ad tech company that’s reported that says they’re seeing a diminution in traffic. Magnite said they’re hitting record traffic levels even excluding bots. So I’m curious about that. Do you think that’s because your content is primarily news and that also sounds structural. So can you talk about this — the traffic demise that you’re seeing that at least other CEOs are not admitting to. So I’m interested in what you’re seeing on the traffic side.

David Kostman: So I would just not use the word demise. What we have seen and we analyze this obviously daily basis, when we look at the — so our business is growing very fast on CTV, we’re expanding beyond the traditional publisher world in a very aggressive way, and this is — I talked about the focus areas. On the traditional publisher side, when we look at the sort of list of premium publishers, we saw around between 10% and 15% decline in paid views. I mean these are the numbers we are seeing. I think it’s very consistent with everything you’re reading out there. So if everyone is saying that there’s no decline in publisher page views, I suggest you do a ChatGPT and you’ll see those numbers. What we see, I think it’s a little bit softer on in-app traffic.

In-app traffic is about 30% of those publishers traffic. And there, we see still some decline in the page views lower than that. So single-digit on the in-app and on the web, around 10% to 15%. That’s what we see on a certain segment of publishers that I believe is representative.

Operator: Our next question is from Zach Cummins with RBC — sorry, B. Riley Securities.

Ethan Widell: This is Ethan Widell calling in for Zach Cummins. I guess just piggybacking on that conversation about page views. How much of that do you suspect is coming from disruption from GenAI search? And otherwise, what would you attribute the decline to?

David Kostman: It’s difficult to put a specific number of it. I would say that it is — the decline is accelerating because of AI summaries and the changes in discovery. So I think it is impacting the traffic to those websites.

Ethan Widell: Understood. And then regarding free cash flow going forward, maybe what are your expectations in terms of free cash flow positivity or maybe what the time line to sustainable free cash flow looks like?

David Kostman: Just one comment on the page views still. I mean, what we didn’t mention, but we’re seeing — we continuously see improvements in RPM. So we’re offsetting some of that decline. I mean we had 8 consecutive quarters in growth on revenue per pages, RPM. We’re diversifying the business. We’re working with those publishers with POCs around how to monetize LLM sort of inputs and platforms that they are using. So there’s a lot that’s being done. It’s not that I think publishers are sitting there and not doing — taking actions. We are partnering with many of them to increase the engagement of users. We are continuously improving RPM. I mentioned on my prepared remarks, I think one of the exciting things is the algorithmic improvement that we see out of the merger. And we think that is only the beginning, and we into 2026, see a really great trajectory of continued significant improvements on those RPMs. So that’s on that front. Sorry, Jason.

Jason Kiviat: Yes. So your question, Ethan, about cash flow. So cash flow is something that we take very seriously, of course. Year-to-date, our adjusted free cash flow is positive at a few million dollars. We do expect the year to be around breakeven, depending on just timing of working capital around period end, et cetera. We are seeing, of course, lower Ex-TAC. It’s resulting in lower EBITDA, lower cash flow, which has brought down our — versus our expectations from earlier in the year. But we also do expect lower cash taxes, lower CapEx, lower restructuring costs and things that do partially offset that. So we do think we’re in okay shape for this year. And obviously, as I say, we take it very seriously in a lot of our look at the project that we’re moving to the implementation phase on now in our analysis, cash flow guides a lot of that as well.

And as I said, we do expect to take that $35 million of improvement to EBITDA on a run rate basis, starting here with some impact in Q4. So we do think there will be a sizable impact on 2026. And continue to obviously work also on other cash taxes optimization and those things as well are areas that we still are less than a year from merging and still optimizing at this point. So we do aim to generate cash. It’s important for us to do so. I’m not guiding obviously anything for 2026 at this point, but I want to make sure you take away from here how serious we view it and how important it is to us.

Operator: [Operator Instructions] Our next question is from James Heaney with Jefferies.

James Heaney: Yes. It would be great just to hear a little bit more about some of the puts and takes for the Q4 Ex-TAC gross profit guide and what you’re assuming for that.

Jason Kiviat: Sure. So maybe I’ll start here, David, anything you want to add, please do. Our giving guidance here, obviously, we’ve got a lot to consider. So the visibility is still a little bit challenged by the volatility we’ve seen. Advertisers continue to have much shorter planning cycles than we historically are used to. And obviously, based on how Q3 played out, where the end of the quarter spike was much more muted than we historically have seen, it certainly gives us a little bit of pause, and we want to exercise additional caution when we’re giving guidance. So all that said, we think it’s prudent to be conservative and set ourselves up here. Maybe just some of the facts that we’re seeing so far into Q4 that might be helpful beyond that.

October is performing on the legacy Teads side, October is performing a little bit better than what we saw in Q3. October is typically about 30% of the quarter. So we’re still dealing with the bulk of it ahead of us, and there still is volatility in the pipeline. And our guidance, based on what I’m telling you, our guidance for the balance of the quarter is implying a lower performance than what we saw in October. Again, kind of take from that based on my remarks on the things that we’re considering in here. On the Outbrain side, we do assume the headwinds that impacted Q3 will impact Q4 even more so within the DSP business, as we said, certain segments of demand, and that drives a deceleration of the performance relative to Q3. Smaller, but on the positive is, we do see October growth in CTV.

We do see October acceleration in cross-selling. And these are off a small base, but meaningful accelerations in our focus areas, right? So it gives us some optimism there. But obviously, weighing the collective here, we think it’s prudent to guide the way that we are. And I will say that we do expect our cash flow for the year to be around breakeven.

Operator: We have reached the end of our question-and-answer session. I would like to turn the conference back over to David for closing remarks.

David Kostman: Thank you. Thank you for joining. As you can see, we are very focused on execution, financial discipline. We are investing in growth areas still. We have a clear plan of how to extract more EBITDA into next year and look forward to keeping you updated on the progress. Thank you.

Operator: Thank you. This will conclude today’s conference. You may disconnect your lines at this time, and thank you for your participation.