Teads Holding Co.
11/09/2026 | Press release | Distributed by Public on 11/09/2026 16:27
Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis of our financial condition and results of operations together with our condensed consolidated financial statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q (this "Report") and in our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the Securities and Exchange Commission ("SEC") on March 16, 2026 ("2025 Form 10-K"). In addition to historical financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, beliefs, and expectations, and involve risks and uncertainties that could cause actual results, events, or circumstances to differ materially from those projected in the forward-looking statements. Factors that could cause or contribute to these differences include those set forth in Part I, Item 1A of our 2025 Form 10-K, which is incorporated by reference in this Report, and Part II, Item 1A of this Report, as such factors may be revised or supplemented in subsequent filings with the SEC, as well as those discussed below and elsewhere in this Report, including under the caption "Note About Forward-Looking Statements."
The purpose of this Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is to provide information that management believes is necessary to understand our business, financial condition, and results of operations. The MD&A should be read in conjunction with our condensed consolidated financial statements and notes thereto. In addition to the condensed consolidated financial statements prepared in accordance with generally accepted accounting principles in the United States ("GAAP"), we use certain non-GAAP financial measures throughout this discussion to provide investors with supplemental metrics used by our management for financial and operational decision making. These measures are supplemental and are not an alternative to our financial statements prepared in accordance with GAAP. See "Non-GAAP Reconciliations" in this Report for the definitions and limitations of these measures, and reconciliations to the most directly comparable GAAP financial measures.
Business Overview
Teads Holding Co. (together with its consolidated subsidiaries, "Teads," the "Company," "we," "our," or "us") is a leading omnichannel advertising platform focused on driving outcomes for brand and performance advertisers across the digital ecosystem. We connect global advertisers with an expansive network of media owners across the open web, connected TV ("CTV"), and in-app environments. The Company is headquartered in New York, New York, with additional operations throughout North America, Europe, the Middle East, and Asia.
We operate a two-sided marketplace that provides a scaled, end-to-end advertising solution by maintaining direct relationships with global advertisers, including Fortune 500 brands and agency holding companies, as well as media owners spanning premium publishers to CTV, application developers, and other existing and emerging content platforms. We generate revenue primarily from advertisers purchasing media owner inventory through our platform.
As a result of Outbrain Inc.'s acquisition (the "Acquisition") of TEADS, a private limited liability company (société à responsabilité limitée) incorporated and existing under the laws of the Grand Duchy of Luxembourg ("Legacy Teads"), which closed on February 3, 2025, the accompanying condensed consolidated financial statements include the results of Legacy Teads' operations from February 3, 2025. Our current results therefore reflect the fully consolidated operations of the combined company, and each of the three-month periods ended September 30, 2026 and 2025 reflects a full three months of consolidated operations following the Acquisition. However, the financial information presented for the nine months ended September 30, 2026 is not directly comparable to the financial information presented for the corresponding prior year period, which reflects the operations of Legacy Teads only from the Acquisition date. This overview highlights material developments in our business and should be read in conjunction with the more comprehensive business and industry discussion included in the 2025 Form 10-K.
Our platform is designed to enable advertisers to reach their audiences across the digital advertising ecosystem and drive desired outcomes from those audiences at each step of the marketing funnel. We continue to focus on providing efficient, high-impact supply chains for advertisers and sustainable advertising revenue for media owners as the digital advertising ecosystem evolves.
Recent Developments
A/R Facility
On September 30, 2026, certain of our subsidiaries entered into a four-year $125.0 million non-recourse accounts receivable financing facility (the "A/R Facility"), scheduled to terminate on September 30, 2030, subject to earlier termination in certain circumstances. As of September 30, 2026, $30.9 million of borrowings were outstanding under the A/R Facility. For additional information, see "-Liquidity and Capital Resources" below and Note 8, Debt Obligations, to the accompanying condensed consolidated financial statements.
Goodwill Impairment
During the third quarter of 2026, continued weakness primarily due to changing search and open-web traffic dynamics, including lower publisher traffic and available advertising impressions, led us to reduce projected revenue and profitability and extend the anticipated recovery period. These developments constituted a triggering event, prompting an interim goodwill impairment assessment as of September 30, 2026. As a result, we recorded a non-cash goodwill impairment charge of $272.4 million during the three and nine months ended September 30, 2026, representing a full impairment of our remaining goodwill balance. Following the recording of this charge, the carrying value of our goodwill is zero. This non-cash impairment charge does not affect our cash flows, liquidity, or compliance with debt covenants, nor does it impact our ongoing operations. For additional information, see Note 4, Goodwill and Intangible Assets, to the accompanying condensed consolidated financial statements.
Recent Trends, Risks and Uncertainties
Together with the risk factors identified in our 2025 Form 10-K, we have identified the following developments that may impact our future financial performance or condition:
Trends in Our Business - Enterprise and Direct Response & Small Medium Enterprise ("SME")
We are a leading omnichannel advertising platform focused on driving outcomes for brand and performance advertisers across the digital ecosystem.
For the three months ended September 30, 2026, consolidated gross profit was $60.9 million and consolidated Ex-TAC Gross Profit was $93.5 million, compared to $105.7 million and $130.5 million, respectively, for the three months ended September 30, 2025. Our recent results reflect declines in both of our businesses, Enterprise and Direct Response & SME, primarily as a result of lower traffic to our media partners on the Open Internet, which reduces the advertising inventory available for us to monetize, with a more pronounced decline in Direct Response & SME. See "-Generative AI and Publisher Traffic Trends" below.
Our Enterprise business, focused largely on branding dollars, consists of global brand and agency partnerships utilizing our omnichannel supply inclusive of CTV and is our strategic priority. Enterprise delivered approximately $75 million in Ex-TAC Gross Profit in the three months ended September 30, 2026, compared to approximately $87 million in the three months ended September 30, 2025. The decrease primarily reflected lower traffic to our media partners on the Open Internet, partially offset by growth in CTV in certain geographies, as well as softer brand advertising demand amid the macroeconomic conditions described under "-Macroeconomic Environment" below and competitive pressures.
Our Direct Response & SME business, focused on performance dollars, includes affiliates, search and performance buyers. Direct Response & SME delivered approximately $20 million in Ex-TAC Gross Profit in the three months ended September 30, 2026, compared to approximately $38 million in the three months ended September 30, 2025. The decrease primarily reflected lower traffic to our media partners on the Open Internet, as well as changes in our supply portfolio and the buying patterns of certain large buyers.
Generative AI and Publisher Traffic Trends
The digital advertising ecosystem continues to be impacted by structural shifts and evolving user behaviors, evidenced most prominently by declining traffic trends on the traditional publisher side of the Open Internet. These developments are significantly influenced by the integration of generative artificial intelligence ("AI") into major search engines and web browsers, which provides direct answers and summaries that are increasingly causing users to bypass the publisher pages. Additionally, other changes in policies and practices by third parties we do not control, most recently by Google, have challenged Open Internet publishers' ability to drive pageviews and monetize effectively, which has in turn impacted our monetization.
We have observed these combined factors contribute to an ongoing decline in page view volume for our publisher partners, thereby reducing the advertising inventory available for monetization on our platform. This decline disproportionately impacts our Direct Response & SME advertisers, which are most closely tied to open-web performance, and specifically our publisher feed inventory. The decline in page views has resulted in reductions in the buying patterns of Direct Response & SME advertisers. For our premium publisher partners, we estimate that page views declined by approximately 18% and approximately 17% for the three and nine months ended September 30, 2026, respectively, compared to the corresponding prior year periods.
While this broader evolution presents challenges to traditional publisher traffic patterns, it also creates opportunities for platform innovation and engagement. Our strategy is intended to address these shifts in several respects. We launched Teads EngageOS, an AI-powered operating system for publishers that unifies editorial content and ad inventory, with the objective of
optimizing total publisher revenue across a reader session - designed to protect audience engagement while delivering higher yield. In addition, we are opening additional programmatic buying channels at higher margins, including AI-native supply channels in emerging environments such as large language model interfaces, and launched a vertical video format that enables advertisers to use creative assets developed for other platforms. See "-Expansion Into New Environments, New Experiences and New Ad Formats" below.
Macroeconomic Environment
General worldwide economic conditions continue to experience instability, as well as volatility and disruption in the financial markets. These conditions result from factors including geopolitical tensions, including the effects of the Israel-Hamas conflict and the uncertainty regarding the sustainability of the related cease-fire and the conflict involving the U.S., Iran, Israel and surrounding nations, as well as other geopolitical tensions and uncertainties, global supply chain disruptions, labor market volatility, tariffs and trade wars, general economic uncertainty, inflation, fluctuations in U.S. and global interest rates, and currency exchange rate fluctuations. The global economy is also experiencing heightened uncertainty due to market reactions to changes in international trade and tariff policies, recessionary concerns, corporate bankruptcies, and the impact of actual or potential U.S. government shutdowns, which have the potential to further exacerbate inflationary pressures.
These conditions have negatively impacted our advertisers and, as a result, our business has been impacted and could be adversely impacted in the future if these conditions continue or worsen, including if our advertisers were to reduce or further reduce their advertising spending. We continue to monitor our operations, and the operations of those in our ecosystem (including media partners, advertisers, and agencies), but these conditions make it difficult to accurately forecast and plan future business activities. Such volatility could cause a further reduction or delay in overall advertising demand and spending, or further affect our advertisers' ability to pay, each of which has negatively impacted, and may continue to negatively impact, our business, financial condition, and results of operations.
For additional information regarding the potential impact of macroeconomic factors on our business, see Item 1A, "Risk Factors" in our 2025 Form 10-K.
Conditions in Israel
Many of our employees, including certain members of our management team and board of directors ("Board"), operate from our offices in Israel. Accordingly, political, economic and military conditions in Israel and the surrounding region directly affect our business and operations. Following the October 7, 2023 attacks by Hamas terrorists on Israel's southern border, Israel declared war against Hamas and since then, Israel has been involved in military conflicts with Hamas, Hezbollah (a terrorist organization based in Lebanon), Syria and Iran, both directly and through proxies. Although a ceasefire between Israel and Hamas took effect on October 10, 2025, there is no assurance that this agreement will continue to be upheld. On February 28, 2026, the U.S. and Israel initiated air strikes against Iranian military targets and leadership. Since then, retaliation by Iran against U.S. and Israeli interests in the Middle East has been widespread. As of the date of the filing of this Report, significant volatility and uncertainty persist throughout the Middle East region, with the potential for continued escalation into a broader and more sustained regional conflict.
The draft of Israeli military reservists, as well as the evacuation of Israeli citizens from areas near conflict zones have adversely affected, and continue to adversely affect, our employees impacted by such actions. In addition, government-imposed restrictions and precautions in response to such conflicts may negatively impact our employees, management and directors by interrupting their ability to effectively perform their roles and responsibilities. In addition, further hostilities involving Israel could lead to damage to facilities and infrastructure, increased cyber attacks, the interruption or curtailment of trade between Israel and its trading partners, and/or the willingness to do business with companies with operations in Israel. Furthermore, macroeconomic indications of the deterioration of Israel's economic standing as reflected in the downgrading of Israel's credit rating by rating agencies (such as Moody's and S&P Global) could adversely affect our business, financial condition and results of operations and could make it more difficult for us to raise capital.
The intensity and duration of these conflicts are difficult to predict and we are continuing to monitor these events and assessing their current and potential impacts on our business. We cannot attribute the impact of the current trends in advertising demand to any particular factor, including conditions in Israel, and cannot predict the impact if these conflicts continue or escalate further. See Item 1A, "Risk Factors" included in our 2025 Form 10-K for more information regarding certain risks associated with the conditions in Israel.
Factors Affecting Our Business
Advertiser Retention and Growth
Our growth is partially driven by retaining and expanding the amount of spend by advertisers on our platform and by acquiring new advertisers. Our total addressable market includes top, middle, and bottom of the marketing funnel, which allows us to attract diverse, premium demand. We view our full-funnel offering of both branding and performance capabilities as an opportunity to increase advertiser and agency spend on our platform. We invest in our relationships with agencies, both on a local and global basis, aligning on mutually beneficial service level agreements, and building products that help to solve their goals and streamline their operations. In addition, our joint business partnerships ("JBPs") with large enterprise brands represent a significant overall portion of our revenue and are strategic for driving advertiser retention and growth.
We continually invest in enhancements to our platform that allow advertisers to drive concrete business outcomes and return on advertiser spend ("ROAS"). In particular, we are expanding our use of AI to automate manual tasks in campaign setup and optimization, while enhancing advertiser creative and overall performance. We also support advertisers with developing creative ads across formats, as a value added service to our advertisers.
Advertiser budgets and pricing on our platform fluctuate from period to period for a variety of reasons, including advertiser-specific cycles and preferences, competition, quality of performance and ROAS, supply and demand balance, macroeconomic conditions, and seasonality. In order to grow our revenue and Ex-TAC Gross Profit and maximize value for our advertisers and media partners, our focus as a business is on driving business outcomes and ROAS for advertisers.
For the three and nine months ended September 30, 2026, thousands of unique advertisers were active on our owned and operated platforms, in addition to the thousands of advertisers who access the platform through programmatic partnerships.
Retention and Growth of Relationships with Media Partners
We rely on our relationships with our media partners for our advertising inventory and our corresponding ability to drive advertising revenue. To further strengthen these relationships, we continuously invest in our technology and product functionality to drive user engagement and monetization by taking steps designed to (i) improve our algorithms, referred to as our AI prediction engine; (ii) attract and procure relevant demand; (iii) expand the adoption of our enhanced products by media partners; and (iv) expand our demand capabilities to new formats.
Our relationships with our media partners are typically long-term and strategic in nature, providing us with valuable ad inventory, often on an exclusive basis. Our top 20 media partners leveraged our platform for an average of 7 years (based on 2025 revenue).
Our growth depends on media partners' ability to drive traffic to their sites, apps or other properties. The proliferation of social media properties, streaming services and other platforms, as well as the adoption of AI, have negatively impacted, and may continue to negatively impact, the growth of key segments of our media partners, namely digital publishers. These dynamics have contributed to a decline in page view volume across our publisher partners, thereby reducing the advertising inventory available for monetization on our platform, as described under "-Generative AI and Publisher Traffic Trends" above. At the same time, the trends in user engagement underscore the media partner need for our solutions to engage users and enhance overall monetization.
Expansion Into New Environments, New Experiences and New Ad Formats
The available mediums and formats for consumers to engage with media have greatly expanded over the last several years. As this evolution in media consumption and consumer behavior continues, we are focused on utilizing our AI prediction technology to bring curated, relevant consumer experiences to these new devices, experiences and formats.
Fundamentally, we plan to continue to make our platform available for media partners on all types of devices and platforms and evolve our business to apply our technology to the most popular methods of media consumption, such as CTV environments including HomeScreen advertising placements.
Examples of environments in which content consumption is growing include CTV, online video, mobile in-app environments, and within Large Language Models ("LLMs") interfaces. Our omnichannel outcomes platform enables advertisers to not only reach their audiences across the broad digital advertising ecosystem - from web, to CTV, to app environments - but to drive outcomes from those audiences at each step of the marketing funnel.
The development and deployment of new ad formats and further penetrating new and growing environments allow us to better serve advertisers who seek to target and engage consumers at scale. We believe this remains an opportunity to open and grow
advertiser demand, while ensuring the relevance of the environments in which we operate.
User Engagement and Driving Desired Outcomes
Driving outcomes is a key pillar of our platform that drives value for media partners and advertisers. Our AI prediction engine manages this dynamic, matching consumers with editorial and advertiser experiences that will deliver desired outcomes across the digital advertising ecosystem.
The ability to deliver on outcomes for our media partners and advertisers is driven by several factors, including enhancements to our AI prediction engine, growth in the breadth and depth of our data assets, the size and quality of our content and advertising index, user engagement, new media partners, expansion on existing media partners and expansion to new media environments and formats. As we expand and invest, we are able to further maximize our efficacy across different screens and devices, support brands effectively across the lifecycle of their needs, and collect and connect more data and, as a result, continually improve our prediction engines, which drives better results for our advertiser and media owner partners.
Investment in Our Technology and Infrastructure
Innovation is a core tenet of our Company and our industry. The dynamic and continuously evolving nature of the digital advertising ecosystem will be significantly impacted by the use of AI in further driving innovative new technologies and solutions. We plan to continue our investments in our people's use of AI in order to retain and enhance our competitive position. For example, improvements to our AI prediction engine, or use of additional data signals, help us deliver more relevant ads, driving higher user engagement, thereby improving ROAS or other desired outcomes for advertisers and increasing monetization for our media partners.
We believe in the transformative power of AI in shaping the future of sustainable media, and we are powered by our deep expertise in using predictive AI technology for years to empower both media owners and advertisers in their businesses. We leverage predictive AI in a manner designed to enable media owners to increase their revenues and connect with audiences on their own platforms. We use machine learning to predict consumer interest and propensity to convert ads to sales. Our technology has developed into a robust AI machine learning system and is largely homegrown by our Research and Development team. One of the strongest long-term levers in our business is the continuous improvement of our algorithms and the data sets our algorithms learn from. Our direct integrations across our media partners' properties provide us with a large volume of proprietary first-party data, including context, user interest and behavioral signals. The more data points we have, the better we believe our advertisers' ROAS and yield potential can be.
Our placement optimization and ad serving technology dynamically adjusts both the arrangement and the formats of content delivered to a user, depending on the user's preferences and a media partner's key performance indicators, designed to provide a tailored and engaging experience. We continue to invest in media partner and advertiser focused tools, technology, and products as well as privacy-centric solutions.
Industry Dynamics
Demand for Outcomes Across the Funnel
Our business depends on the overall demand for digital advertising, on the continuous success of our current and prospective media partners, and on general market conditions. Digital advertising has been a growing industry, with growth that has outpaced the growth of the broader advertising industry. Content consumption continues to evolve, requiring media owners to adapt in order to successfully attract, engage and monetize their consumers. As audiences are increasingly engaged across digital media platforms, and as more purchase data is created, collected, integrated and analyzed digitally, advertisers are increasingly able to leverage sophisticated measurement and attribution solutions in order to optimize their advertising spend across the marketing funnel. As a result, advertisers are increasingly shifting spend away from legacy media offerings towards data-based solutions, driven by performance-centric metrics. We believe that our strength in delivering engagement and clear outcomes for advertisers, from high-impact branding to lower-funnel performance, built on our proprietary AI prediction engine, aligns well with the ongoing market shift towards increased accountability and expectations of ROAS from digital advertising spend.
The Role of AI in Content and Personalization
AI is revolutionizing content creation, distribution, and personalization, automating tasks like video editing, image recognition, and language translation. AI-powered systems are also improving content delivery, helping media platforms suggest relevant movies, shows, articles, and advertisements to consumers. This is especially important at a time when advertisers increasingly anticipate measurable results from their digital advertising investments. We believe that our experience in this space enables us to more nimbly capitalize on the opportunities for media owners and advertisers to leverage AI and automation to engage consumers and optimize their business goals. For additional information regarding our strategic approach to these technologies, see "Business-Industry" and "Risk Factors" in our 2025 Form 10-K.
Generative AI and Search Trends
At the same time, the proliferation of generative AI tools, particularly their integration into major search engines and web browsers, is causing a shift in how users discover and consume content online. These tools can provide users with direct answers and AI-generated summaries, which has reduced their need to click through to original publisher websites. This trend of bypassing the traditional user journey to a publisher's site has contributed, and is expected to continue to contribute to a decline in direct user traffic. A reduction in traffic to our media partners directly decreases the inventory of advertising impressions available for us to monetize, which has had, and will likely continue to have, a significant effect on, our revenue and results of operations. For additional information regarding the impact of these trends on our business, see "-Recent Trends, Risks and Uncertainties-Generative AI and Publisher Traffic Trends" above, and for the related risks, see "Business-Industry" and "Risk Factors" in our 2025 Form 10-K.
Regulatory and Platform Changes
Regulators across most developed markets continue to be focused on enacting and enforcing user privacy rules, as well as requirements relating to the development and deployment of AI, including transparency and labeling obligations for AI-generated content, and on maintaining significant oversight over the competitive practices of the major "walled garden" platforms. In the United States, the absence of a comprehensive federal privacy law has produced fragmented state frameworks that continue to create compliance complexity. In the EU, the Digital Markets Act and Digital Services Act are actively being enforced against designated gatekeeper platforms, with recent actions targeting consent practices, data portability and advertising transparency. Industry participants will likely continue to be impacted by changes implemented by platform leaders. For example, although Google has announced that it does not intend to deprecate third-party cookies in its Chrome web browser, its evolving approach to privacy and tracking controls in Chrome will continue to affect our and our clients' compliance requirements. For additional information regarding changing industry dynamics with respect to industry participants and the regulatory environment, see "Business-Industry," "Business-Regulatory" and "Risk Factors" in our 2025 Form 10-K.
Seasonality
The global advertising industry experiences seasonal trends that affect most participants in the digital advertising ecosystem. Our revenue generally fluctuates from quarter to quarter as a result of a variety of factors, including seasonality, as many advertisers allocate the largest portion of their budgets to the fourth quarter of the calendar year to coincide with increased holiday purchasing, as well as the timing of advertising budget cycles. Historically, the fourth quarter of the year has reflected the highest levels of advertiser spending, and the first quarter generally has reflected the lowest level of advertiser spending.
In addition, expenditures by advertisers tend to be cyclical and discretionary in nature, reflecting changes in brand advertising strategy, budgeting constraints, and buying patterns, and a variety of other factors, many of which are outside of our control. The quarterly rate of increase/decrease in our traffic acquisition costs is generally commensurate with the quarterly rate of increase/decrease in our revenue. However, traffic acquisition costs have, at times, grown at a faster or slower rate than revenue, primarily due to the mix of the revenue generated or contracted terms with media partners. We generally expect these seasonal trends to continue, though historical seasonality may not be predictive of future results given the potential for changes in advertising buying patterns and macroeconomic conditions. These trends will affect our operating results and we expect our revenue to continue to fluctuate based on seasonal factors that affect the advertising industry as a whole.
Definitions of Financial and Performance Measures
Revenue
We generate revenue primarily from advertisers who purchase media inventory from us to deliver digital advertising across a broad range of environments, including web, mobile app, online video, and CTV. Advertisers buy media through our platform using multiple buying models, including cost-per-click ("CPC"), cost-per-thousand impressions ("CPM"), video completion-based pricing, and other outcome-based formats.
Revenue is recognized when an advertisement is delivered or when the specified outcome-such as an impression, click, completed video view, or other measurable event as defined in the contract-occurs. The nature of the outcome depends on the campaign objective and the applicable pricing model.
In most arrangements, we act as the principal in the transaction because we control the advertising inventory before it is transferred to the advertiser. In these cases, we recognize revenue on a gross basis for the amount billed to the advertiser. In certain arrangements, where we do not control the advertising inventory prior to transfer, we act as an agent and recognize revenue on a net basis.
Our revenue is impacted by the level of advertiser demand for our products and by the volume, quality, and performance of available advertising inventory. Demand fluctuates based on macroeconomic conditions, seasonal advertising patterns, campaign performance, advertiser ROAS expectations, and budget dynamics across advertiser types. Enterprise marketers and agencies deploy budgets to drive a range of brand outcomes, from awareness, consideration and intent to lower-funnel outcomes such as site traffic or app downloads. By contrast, Direct Response & SME advertisers generally operate against defined performance targets, with spend scaling based on measurable conversion efficiency. To the extent advertisers (of all types) achieve their desired outcomes on our platform, they may increase budgets or expand usage of our solutions over time.
We continue to expand and introduce new platform features that are adopted by our advertisers, expand our omnichannel capabilities, extend our reach to more CTV, video offerings, and other inventory and add additional customers whose businesses may have different underlying business models.
Our agreements with advertisers provide them with considerable flexibility to modify their overall budget, price (CPC and CPM), and the ads they wish to deliver on our platform, which can impact the timing and amount of revenue recognized.
Traffic Acquisition Costs
We define traffic acquisition costs ("TAC") as amounts owed to media partners for the purchase of inventory. We incur costs with our media partners, which may be publishers, third-party intermediaries, or other parties such as original equipment manufacturers, in the period in which certain actions, such as click-throughs, impressions or views occur. Such costs due to media partners are based on the media partners' contractual revenue share, programmatic bidding or guaranteed minimums based on certain media partner conditions. In some circumstances, we incur costs based on a guaranteed minimum payment, which may be based on either impressions, page views or a fixed amount if the partner reaches certain performance targets, in exchange for guaranteed placement on specified portions of the media partners' online properties. As such, traffic acquisition costs may not correlate with fluctuations in revenue, as our costs may remain fixed even with a decrease in revenue. Traffic acquisition costs also include amounts payable to media partners whose supply is purchased programmatically.
Other Cost of Revenue
Other cost of revenue consists of costs related to the management of our data centers, hosting fees, data connectivity costs, research and insight costs, and depreciation and amortization. Other cost of revenue also includes the amortization of capitalized software that is developed or obtained for internal use associated with our revenue-generating technologies and amortization of intangible assets.
Operating Expenses
Our operating expenses consist of research and development, sales and marketing, and general and administrative expenses. The largest component of our operating expenses is personnel costs. Personnel costs consist of wages, benefits, bonuses, stock-based compensation and, with respect to sales and marketing expenses, sales commissions.
Research and Development. Research and development expenses are related to the development and enhancement of our platform, and consist primarily of personnel and the related overhead costs, amortization of capitalized software for non-revenue generating infrastructure and facilities costs.
Sales and Marketing. Sales and marketing expenses consist primarily of personnel and the related overhead costs for personnel engaged in marketing, advertising, client services, and promotional activities. These expenses also include advertising and promotional spend on media, conferences, and other events to market our services, and facilities costs.
General and Administrative. General and administrative expenses consist primarily of personnel and the related overhead costs, professional fees, facilities costs, insurance, and certain taxes other than income taxes. General and administrative personnel costs include, among others, our executive, finance, human resources, information technology and legal functions. Our professional service fees consist primarily of accounting, audit, tax, legal, information technology and other consulting costs, including costs relating to the Acquisition, as well as our compliance with Sarbanes-Oxley Act requirements.
Impairment Charges. Impairment charges consist of non-cash charges recognized when the carrying amount of an asset or asset group is not recoverable or exceeds its estimated fair value, as applicable. These charges may include impairments of goodwill, acquired intangible assets, property and equipment, capitalized software and other long-lived assets. Impairment charges recognized during the nine months ended September 30, 2026 relate to goodwill impairment. Impairment charges recognized during the nine months ended September 30, 2025 relate to intangible assets and capitalized software associated with the discontinuance of the video product offering associated with vi during the first quarter of 2025. These non-cash impairment charges did not impact the Company's cash flows, liquidity, or compliance with debt covenants.
Restructuring Charges. Restructuring charges include severance and related costs incurred in connection with (i) the workforce reduction announced following the Acquisition in February 2025, and (ii) the Strategic Plan initiated in December 2025 to streamline operations and reduce costs. These charges are not reflective of ongoing operating performance and are excluded from certain financial and performance measures.
Other (Expense) Income, Net
Other (expense) income, net is comprised of interest expense, and other (expense) income and interest income, net.
Interest Expense. Interest expense primarily consists of interest on our 10.000% senior secured notes due 2030 ("Senior Secured Notes"), the Overdraft Facility (as defined below) assumed in the Acquisition, our 2025 Revolving Facility (as defined below), our A/R Facility, and amortization of debt discounts and deferred financing cost. Interest expense for 2025 also included interest and fees on our senior secured bridge term loan credit facility drawn and repaid during the first quarter of 2025. Interest expense may increase as a result of borrowings under our 2025 Revolving Facility and A/R Facility or if we enter into new debt facilities or finance lease arrangements.
Other (Expense) Income and Interest Income, net. Other (expense) income and interest income, net primarily consists of interest earned on our cash, cash equivalents and investments in marketable securities, discount amortization on our investments in marketable securities, and foreign currency exchange gains and losses. Foreign currency exchange gains and losses, both realized and unrealized, relate to transactions and monetary asset and liability balances denominated in currencies other than the functional currencies, including mark-to-market adjustments on undesignated foreign exchange forward contracts. Foreign currency gains and losses may continue to fluctuate in the future due to changes in foreign currency exchange rates.
Provision (Benefit) for Income Taxes
Provision (Benefit) for income taxes consists of federal and state income taxes in the United States and income taxes in certain foreign jurisdictions, as well as deferred income taxes and changes in valuation allowance, reflecting the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
Realization of our deferred tax assets depends on the generation of future taxable income. In considering the need for a valuation allowance, we consider our historical and future projected taxable income, as well as other objectively verifiable evidence, including our realization of tax attributes, assessment of tax credits and utilization of net operating loss carryforwards.
Results of Operations
We have one operating segment, which is also our reportable segment. The following table sets forth our condensed consolidated results for the periods presented. Our 2026 results incorporate a full nine months of combined operations, whereas our 2025 results include the Legacy Teads business only from the Acquisition date of February 3, 2025, through September 30, 2025 for the year-to-date period. Because the prior year nine-month period includes the results of the acquired business for only a portion of the nine-month period, the financial information presented for the nine months ended September 30, 2026 is not directly comparable to the corresponding prior year period. Conversely, the financial information presented for the three months ended September 30, 2026 and 2025 is directly comparable, as both quarterly periods reflect a full three months of consolidated operations following the Acquisition.
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||||
|
Revenue
|
$ | 235,073 | $ | 318,772 | $ | 785,645 | $ | 948,225 | ||||||||||||||||||
|
Traffic acquisition costs
|
148,039 | 188,230 | 467,348 | 570,392 | ||||||||||||||||||||||
|
Other cost of revenue
|
26,167 | 24,794 | 78,214 | 69,171 | ||||||||||||||||||||||
| Gross profit | 60,867 | 105,748 | 240,083 | 308,662 | ||||||||||||||||||||||
|
Gross profit margin
|
25.9% | 33.2% | 30.6% | 32.6% | ||||||||||||||||||||||
| Total operating expenses | 369,027 | 112,028 | 585,698 | 361,637 | ||||||||||||||||||||||
| Loss from operations | (308,160) | (6,280) | (345,615) | (52,975) | ||||||||||||||||||||||
| Total other (expense) income, net | (17,380) | (18,078) | (54,878) | (59,491) | ||||||||||||||||||||||
|
Loss before income taxes
|
(325,540) | (24,358) | (400,493) | (112,466) | ||||||||||||||||||||||
| (Benefit) provision for income taxes | (72) | (4,668) | 6,240 | (23,620) | ||||||||||||||||||||||
|
Net loss
|
$ | (325,468) | $ | (19,690) | $ | (406,733) | $ | (88,846) | ||||||||||||||||||
|
Net loss as a percentage of gross profit
|
(534.7)% | (18.6)% | (169.4)% | (28.8)% | ||||||||||||||||||||||
|
Non-GAAP Financial Measures:
|
||||||||||||||||||||||||||
|
Ex-TAC Gross Profit (1)
|
$ | 93,465 | $ | 130,542 | $ | 324,728 | $ | 377,833 | ||||||||||||||||||
|
Adjusted EBITDA(1)
|
$ | (8,097) | $ | 19,171 | $ | (350) | $ | 56,836 | ||||||||||||||||||
|
Adjusted EBITDA as a percentage of Ex-TAC Gross Profit (1)
|
(8.7)% | 14.7% | (0.1)% | 15.0% | ||||||||||||||||||||||
(1)Ex-TAC Gross Profit, Adjusted EBITDA and Adjusted EBITDA as a percentage of Ex-TAC Gross Profit are non-GAAP financial measures. See "Non-GAAP Reconciliations" in this Report for definitions and limitations of these measures, and reconciliations to the comparable U.S. GAAP financial measures.
Three and Nine Months Ended September 30, 2026 Compared to Three and Nine Months Ended September 30, 2025
Revenue
Revenue for the three months ended September 30, 2026 decreased $83.7 million, or 26.3%, to $235.1 million, from $318.8 million for the three months ended September 30, 2025. Revenue for the nine months ended September 30, 2026 decreased $162.6 million, or 17.1%, to $785.6 million, from $948.2 million for the nine months ended September 30, 2025.
These decreases for the three and nine months ended September 30, 2026 compared to the corresponding prior periods were primarily driven by lower revenue from our Direct Response & SME advertisers, reflecting changing search and open-web traffic dynamics, including lower publisher traffic and available advertising impressions. These decreases were partially offset by continued growth in our CTV offerings. The decrease for the nine-month period was also partially offset by the inclusion of an additional month of consolidated results in 2026 compared to 2025, as the Acquisition was completed on February 3, 2025.
Revenue for the three months ended September 30, 2026 included net unfavorable foreign currency effects of approximately $1.5 million, and on a constant currency basis, revenue decreased $82.2 million, or 25.8%, compared to the corresponding prior
year period. Revenue for the nine months ended September 30, 2026 included net favorable foreign currency effects of approximately $9.5 million, and on a constant currency basis, revenue decreased $172.1 million, or 18.2%, compared to the corresponding prior year period.
See "Non-GAAP Reconciliations" for information regarding the constant currency measures provided in this discussion and below to supplement our reported results.
Cost of Revenue and Gross Profit
Traffic acquisition costs ("TAC") - decreased $40.2 million, or 21.4%, to $148.0 million for the three months ended September 30, 2026, from $188.2 million for the three months ended September 30, 2025. TAC decreased $103.1 million, or 18.1%, to $467.3 million for the nine months ended September 30, 2026, from $570.4 million for the nine months ended September 30, 2025. These decreases were primarily driven by lower revenue and a favorable change in revenue mix toward higher-margin offerings, partially offset by the $6.4 million non-cash impairment of a publisher commercial agreement asset and guaranteed minimum payments.
As a percentage of revenue, TAC increased to 63.0% for the three months ended September 30, 2026, from 59.0% for the three months ended September 30, 2025, primarily as a result of the $6.4 million non-cash impairment of a publisher commercial agreement asset. As a percentage of revenue, TAC decreased to 59.5% for the nine months ended September 30, 2026 from 60.2% for the nine months ended September 30, 2025.
TAC for the three months ended September 30, 2026 included net favorable foreign currency effects of approximately $0.8 million, and on a constant currency basis, TAC decreased $39.4 million, or 20.9%, compared to the corresponding prior year period. TAC for the nine months ended September 30, 2026 included net unfavorable foreign currency effects of approximately $5.1 million and on a constant currency basis, TAC decreased $108.2 million, or 19.0%, compared to the corresponding prior year period.
Other cost of revenue - increased $1.4 million, or 5.6%, to $26.2 million for the three months ended September 30, 2026, compared to $24.8 million in the prior year period. The increase was primarily driven by higher technology costs associated with our expanded platform. As a percentage of revenue, other cost of revenue increased to 11.1% for the three months ended September 30, 2026, from 7.8% for the three months ended September 30, 2025.
Other cost of revenue increased $9.0 million, or 13.0%, to $78.2 million for the nine months ended September 30, 2026 compared to $69.2 million in the prior period. The increase was primarily driven by the inclusion of an additional month of consolidated operations in 2026 compared to 2025, higher technology costs associated with our expanded platform and higher amortization expense of approximately $1.4 million. As a percentage of revenue, other cost of revenue increased to 10.0% for the nine months ended September 30, 2026, from 7.3% for the nine months ended September 30, 2025.
Gross profit - decreased $44.8 million, or 42.4%, to $60.9 million for the three months ended September 30, 2026, compared to $105.7 million for the three months ended September 30, 2025. Gross profit decreased $68.5 million, or 22.2%, to $240.1 million for the nine months ended September 30, 2026, compared to $308.7 million for the nine months ended September 30, 2025.
Gross profit margin - decreased 7.3 percentage points to 25.9% for the three months ended September 30, 2026, compared to 33.2% for the three months ended September 30, 2025 primarily driven by a $6.4 million non-cash impairment of a publisher commercial agreement asset that increased TAC as a percentage of revenue combined with higher technology costs from our expanded platform that increased other cost of revenue. Gross profit margin decreased 2.0 percentage points to 30.6% for the nine months ended September 30, 2026, compared to 32.6% for the nine months ended September 30, 2025 due to higher technology costs, increased amortization expense, and an extra month of consolidated operations, which outpaced a modest reduction in TAC as a percentage of revenue.
Ex-TAC Gross Profit
Our Ex-TAC Gross Profit decreased $37.0 million, or 28.4%, to $93.5 million for the three months ended September 30, 2026, from $130.5 million for the three months ended September 30, 2025. Our Ex-TAC Gross Profit decreased $53.1 million, or 14.1%, to $324.7 million for the nine months ended September 30, 2026, from $377.8 million for the nine months ended September 30, 2025. The decreases were primarily driven by lower revenue, partially offset by the corresponding decreases in TAC. The nine-month decrease was also partially offset by the inclusion of an additional month of consolidated results in 2026 compared to 2025. See "Non-GAAP Reconciliations" for the related definition and reconciliations to gross profit.
Operating Expenses
Operating expenses increased $257.0 million, or 229.5%, to $369.0 million for the three months ended September 30, 2026, from $112.0 million for the three months ended September 30, 2025. The increase was primarily driven by the following
factors:
•Goodwill impairment charges - non-cash goodwill impairment charge of $272.4 million recognized during the three months ended September 30, 2026 as a result of continued weakness primarily due to changing search and open-web traffic dynamics, including lower publisher traffic and available advertising impressions, which led us to reduce projected revenue and profitability and extend the anticipated recovery period. These developments constituted a triggering event, prompting an interim goodwill impairment assessment as of September 30, 2026 that indicated the reporting unit's carrying value exceeded its fair value.
partially offset by,
•General and administrative expenses - decreased $8.7 million from $32.0 million for the three months ended September 30, 2025, to $23.3 million for the three months ended September 30, 2026 driven by a $2.4 million decrease in strategic, transaction and integration-related costs, a $2.1 million decrease in bad debt expense, a $1.9 million decrease in non-income tax expense, and a $1.0 million decrease in employee-related incentive compensation costs; and
•Sales and marketing expenses - decreased $6.2 million from $68.7 million for the three months ended September 30, 2025, to $62.5 million for the three months ended September 30, 2026 driven by lower employee-related expenses as a result of headcount reductions and cost efficiencies achieved through the integration of our global operations.
Operating expenses for the three months ended September 30, 2026, included net favorable foreign currency effects of approximately $6.8 million, and on a constant currency basis, operating expenses increased $263.8 million, or 235.5%, compared to the corresponding prior year period.
Operating expenses increased $224.1 million, or 62.0%, to $585.7 million for the nine months ended September 30, 2026 compared to $361.6 million for the nine months ended September 30, 2025. The increase was primarily driven by the following factors:
•Goodwill impairment charges - non-cash goodwill impairment charge of $272.4 million recognized during the nine months ended September 30, 2026 as a result of continued weakness primarily due to changing search and open-web traffic dynamics, including lower publisher traffic and available advertising impressions, which led us to reduce projected revenue and profitability and extend the anticipated recovery period. These developments constituted a triggering event, prompting an interim goodwill impairment assessment as of September 30, 2026 that indicated the reporting unit's carrying value exceeded its fair value.
partially offset by,
•General and administrative expenses - decreased $18.1 million from $96.3 million during the nine months ended September 30, 2025 to $78.2 million during the nine months ended September 30, 2026, driven by strategic, transaction and integration-related costs which decreased $21.4 million during the nine months ended September 30, 2026 compared to the prior year period. This decrease was partially offset by a $1.2 million increase in bad debt expense and a $0.9 million increase in non-income tax expense;
•Intangible asset impairment charges - the absence in 2026 of $15.6 million in impairment charges recorded in the first quarter of 2025 related to the discontinuation of a legacy video product offering;
•Restructuring charges - decreased $6.3 million compared to the nine months ended September 30, 2025. The actions associated with the Strategic Plan have been substantially completed, subject to the completion of certain actions governed by local law and consultation requirements;
•Research and development expenses - decreased $5.5 million compared to the nine months ended September 30, 2025, primarily due to lower employee-related costs, resulting from higher capitalization of internal labor costs toward qualifying development activities, partially offset by foreign currency translation impacts and an additional month of base operating costs resulting from a full nine months of consolidated operations in 2026 compared to eight months in 2025; and
•Sales and marketing expenses - decreased $2.9 million compared to the nine months ended September 30, 2025, primarily driven by $7.4 million lower employee-related expenses as a result of headcount reductions and cost efficiencies achieved through the integration of our global operations, partially offset by $3.0 million additional amortization of acquired intangible assets.
Operating expenses for the nine months ended September 30, 2026, included net unfavorable foreign currency effects of approximately $10.6 million, and on a constant currency basis, operating expenses increased $213.5 million, or 59.0%, compared to the corresponding prior year period.
Other (Expense) Income, Net
Other (expense) income, net improved $0.7 million, or 3.9%, to $(17.4) million for the three months ended September 30, 2026, from $(18.1) million for the three months ended September 30, 2025.
Other (expense) income, net improved $4.6 million, or 7.8%, to $(54.9) million for the nine months ended September 30, 2026, from $(59.5) million for the nine months ended September 30, 2025. The improvement is primarily attributable to a $5.5 million decrease in interest expense. The decrease in interest expense reflected the absence in 2026 of $13.3 million in fees and interest related to the $625 million senior secured bridge term loan credit facility (the "Bridge Facility") which was incurred and repaid during February 2025 in connection with financing the Acquisition. This decrease was partially offset by a $7.7 million increase in interest expense related to the Senior Secured Notes. Interest expense for the Senior Secured Notes was $50.6 million for the nine months ended September 30, 2026, compared to $42.9 million for the nine months ended September 30, 2025, reflecting a full nine months of interest expense and amortization of related debt discount and deferred financing costs in 2026, compared to a partial period in 2025. The improvement was also partially offset by the absence in 2026 of the $1.2 million gain on the repurchase of long-term debt recognized during the second quarter of 2025.
(Benefit) Provision for Income Taxes
(Benefit) provision for income taxes was $(0.1) million and $6.2 million for the three and nine months ended September 30, 2026, respectively, compared to $(4.7) million and $(23.6) million for the three and nine months ended September 30, 2025, respectively. The increases in the provision for income taxes for the three and nine months ended September 30, 2026, as compared to their respective prior year periods, were primarily due to impairment of goodwill and U.S. and various non-U.S. losses for the three and nine months ended September 30, 2026 being subject to valuation allowances.
Our effective tax rate decreased to zero and (1.6)% for the three and nine months ended September 30, 2026, respectively, compared to 19.2% and 21.0% for the three and nine months ended September 30, 2025, respectively. These decreases in effective tax rates for the three and nine months ended September 30, 2026, as compared to their respective prior year periods, were primarily due to impairment of goodwill and pre-tax losses, including U.S. and various non-U.S. losses for the three and nine months ended September 30, 2026 being subject to valuation allowances.
As of September 30, 2026, we are in a three-year cumulative loss position in the U.S. Under applicable accounting guidance, a cumulative loss in recent years represents significant, objective evidence that is difficult to overcome. After weighing all the evidence, we determined that the weight of the objective negative evidence continues to outweigh the positive evidence and we retain the valuation allowance against U.S. federal and state deferred tax assets. The Company will continue to consider existing evidence, both positive and negative, that could impact its view with regard to future realization of deferred tax assets.
On July 4, 2025, the One Big Beautiful Bill Act (the "OBBBA") was enacted into law in the U.S. In 2026, Global Intangible Low-Taxed Income and Foreign-Derived Intangible Income have been modified to net controlled-foreign-corporation tested income ("NCTI") and foreign-derived deduction eligible income ("FDDEI"), respectively. The OBBBA provisions did not have a material impact on the Company's total tax benefit for the nine months ended September 30, 2026.
Our future effective tax rate may be affected by the geographic mix of earnings in countries with different statutory rates. Additionally, our future effective tax rate may be affected by our ongoing assessment of the need for a valuation allowance on our deferred tax assets or liabilities, or changes in tax laws, regulations, or accounting principles, tax planning initiatives, as well as certain discrete items.
Net Loss
As a result of the foregoing, we recorded net losses of $325.5 million and $406.7 million, respectively, for the three and nine months ended September 30, 2026, as compared to net losses of $19.7 million and $88.8 million, respectively, for the three and nine months ended September 30, 2025. Net losses for the three and nine months ended September 30, 2026 include a non-cash goodwill impairment of $272.4 million.
Adjusted EBITDA
Our Adjusted EBITDA decreased $27.3 million to $(8.1) million for the three months ended September 30, 2026 from $19.2 million for the three months ended September 30, 2025, including net unfavorable foreign currency effects of approximately $1.5 million. Our Adjusted EBITDA decreased $57.2 million to $(0.4) million for the nine months ended September 30, 2026 from $56.8 million for the nine months ended September 30, 2025, including net unfavorable foreign currency effects of approximately $5.8 million. These decreases were primarily driven by the lower revenue and Ex-TAC Gross Profit discussed above, partially offset by lower expenses directly related to our operations. See "Non-GAAP Reconciliations" for the related definitions of Adjusted EBITDA and reconciliations to our net loss.
Non-GAAP Reconciliations
Because we are a global company, the comparability of our operating results is affected by foreign exchange fluctuations. We calculate certain constant currency measures and foreign currency impacts by translating the current year's reported amounts, excluding new acquisitions, into comparable amounts using the prior year's exchange rates. All constant currency financial information being presented is non-GAAP and should be used as a supplement to our reported operating results. We believe that this information is helpful to our management and investors to assess our operating performance on a comparable basis. However, these measures are not intended to replace amounts presented in accordance with U.S. GAAP and may be different from similar measures calculated by other companies.
We present Ex-TAC Gross Profit, Adjusted EBITDA, Adjusted EBITDA as a percentage of Ex-TAC Gross Profit, Free Cash Flow, and Adjusted Free Cash Flow because they are key profitability measures used by our management and our Board to understand and evaluate our operating performance and trends, develop short-term and long-term operational plans, and make strategic decisions regarding the allocation of capital. Accordingly, we believe that these measures provide information to investors and the market in understanding and evaluating our operating results in the same manner as our management and the Board.
These non-GAAP financial measures are defined and reconciled to the corresponding U.S. GAAP measures below. These non-GAAP financial measures are subject to significant limitations, including those identified below. In addition, other companies in our industry may define these measures differently, which may reduce their usefulness as comparative measures. As a result, this information should be considered as supplemental in nature and is not meant as a substitute for revenue, gross profit, net loss or net cash provided by (used in) operating activities presented in accordance with U.S. GAAP.
Ex-TAC Gross Profit
Ex-TAC Gross Profit is a non-GAAP financial measure. Gross profit is the most comparable U.S. GAAP measure. In calculating Ex-TAC Gross Profit, we add back other cost of revenue, including the non-cash impairment of a publisher commercial agreement asset, to gross profit. Ex-TAC Gross Profit may fluctuate in the future due to various factors, including, but not limited to, seasonality and changes in the number of media partners and advertisers, advertiser demand or user engagements.
There are limitations on the use of Ex-TAC Gross Profit in that traffic acquisition cost is a significant component of our total cost of revenue but not the only component and, by definition, Ex-TAC Gross Profit presented for any period will be higher than gross profit for that period. A potential limitation of this non-GAAP financial measure is that other companies, including companies in our industry which have a similar business, may define Ex-TAC Gross Profit differently, which may make comparisons difficult. As a result, this information should be considered as supplemental in nature and is not meant as a substitute for revenue or gross profit presented in accordance with U.S. GAAP.
The following table presents the reconciliation of Ex-TAC Gross Profit to gross profit, the most directly comparable U.S. GAAP measure, for the periods presented:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||||
| Revenue | $ | 235,073 | $ | 318,772 | $ | 785,645 | $ | 948,225 | ||||||||||||||||||
|
Traffic acquisition costs (1)
|
(148,039) | (188,230) | (467,348) | (570,392) | ||||||||||||||||||||||
| Other cost of revenue | (26,167) | (24,794) | (78,214) | (69,171) | ||||||||||||||||||||||
| Gross profit | 60,867 | 105,748 | 240,083 | 308,662 | ||||||||||||||||||||||
|
Other cost of revenue (1)
|
32,598 | 24,794 | 84,645 | 69,171 | ||||||||||||||||||||||
| Ex-TAC Gross Profit | $ | 93,465 | $ | 130,542 | $ | 324,728 | $ | 377,833 | ||||||||||||||||||
(1)The three and nine months ended September 30, 2026 included $6.4 million non-cash impairment of a publisher commercial agreement asset.
Adjusted EBITDA
We define Adjusted EBITDA as net income (loss) before gain on repurchase of long-term debt; interest expense; other expense (income) and interest income, net; provision (benefit) for income taxes; depreciation and amortization; stock-based compensation, and other income or expenses that we do not consider indicative of our core operating performance, including,
but not limited to acquisition and integration costs, restructuring, and impairment charges. We present Adjusted EBITDA as a supplemental performance measure because we believe it facilitates operating performance comparisons from period to period.
We believe that Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and the Board. However, our calculation of Adjusted EBITDA is not necessarily comparable to non-GAAP information of other companies. Adjusted EBITDA should be considered as a supplemental measure and should not be considered in isolation or as a substitute for any measures of our financial performance that are calculated and reported in accordance with U.S. GAAP.
The following table presents the reconciliation of Adjusted EBITDA to net loss, the most directly comparable U.S. GAAP measure, for the periods presented:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||||
|
Net loss
|
$ | (325,468) | $ | (19,690) | $ | (406,733) | $ | (88,846) | ||||||||||||||||||
|
Gain on repurchase of long-term debt
|
- | - | - | (1,225) | ||||||||||||||||||||||
| Interest expense | 17,407 | 17,084 | 52,233 | 57,732 | ||||||||||||||||||||||
| Other expense (income) and interest income, net | (27) | 994 | 2,645 | 2,984 | ||||||||||||||||||||||
| (Benefit) provision for income taxes | (72) | (4,668) | 6,240 | (23,620) | ||||||||||||||||||||||
| Depreciation and amortization | 17,841 | 17,497 | 52,822 | 48,707 | ||||||||||||||||||||||
| Stock-based compensation | 1,744 | 3,641 | 6,175 | 10,372 | ||||||||||||||||||||||
|
Acquisition and integration costs
|
1,266 | 3,656 | 4,115 | 25,508 | ||||||||||||||||||||||
|
Restructuring charges
|
349 | 657 | 3,290 | 9,610 | ||||||||||||||||||||||
| Impairment of intangible assets | - | - | - | 15,614 | ||||||||||||||||||||||
| Impairment of goodwill | 272,432 | - | 272,432 | - | ||||||||||||||||||||||
|
Impairment of publisher commercial agreement asset
|
6,431 | - | 6,431 | - | ||||||||||||||||||||||
| Adjusted EBITDA | $ | (8,097) | $ | 19,171 | $ | (350) | $ | 56,836 | ||||||||||||||||||
|
Net loss as % of gross profit
|
(534.7)% | (18.6)% | (169.4)% | (28.8)% | ||||||||||||||||||||||
| Adjusted EBITDA as % of Ex-TAC Gross Profit | (8.7)% | 14.7% | (0.1)% | 15.0% | ||||||||||||||||||||||
Free Cash Flow
Free cash flow is defined as cash flow provided by operating activities, less capital expenditures and capitalized software development costs. Adjusted free cash flow is defined as free cash flow plus direct acquisition costs. Free cash flow and adjusted free cash flow are supplementary measures used by our management and the Board to evaluate our ability to generate cash and we believe it allows for a more complete analysis of our available cash flows. Free cash flow and adjusted free cash flow should be considered as supplemental measures and should not be considered in isolation or as a substitute for any measures of our financial performance that are calculated and reported in accordance with U.S. GAAP.
The following table presents the reconciliation of free cash flow to net cash (used in) provided by operating activities:
| Nine Months Ended September 30, | |||||||||||
| 2026 | 2025 | ||||||||||
| (In thousands) | |||||||||||
| Net cash (used in) provided by operating activities | $ | (53,588) | $ | 344 | |||||||
|
Purchases of property and equipment
|
(2,349) | (4,853) | |||||||||
|
Capitalized software development costs
|
(15,071) | (12,020) | |||||||||
| Free cash flow | $ | (71,008) | $ | (16,529) | |||||||
|
Direct acquisition costs
|
- | 19,918 | |||||||||
|
Adjusted free cash flow
|
$ | (71,008) | $ | 3,389 | |||||||
LIQUIDITY AND CAPITAL RESOURCES
We regularly evaluate our cash requirements for operations, commitments, development activities and capital expenditures and manage our liquidity in a manner consistent with our corporate priorities.
We have experienced significant disruption and competitive pressures in our industry driven by an evolution in media consumption and consumer behavior trends, including the proliferation of social media properties, streaming services and other platforms, as well as the adoption of AI. These factors have negatively impacted our business, including our stock price, as described under "-Generative AI and Publisher Traffic Trends" above.
As of September 30, 2026, the Company had an accumulated deficit of $318.2 million compared to accumulated equity of $95.4 million at December 31, 2025. For the nine months ended September 30, 2026, the Company incurred a net loss of $406.7 million, compared to net loss of $88.8 million for the nine months ended September 30, 2025, and $53.6 million of cash used in operating activities compared to cash provided by operations of $0.3 million for the nine months ended September 30, 2025. The net loss included a non-cash goodwill impairment charge recorded in the third quarter of 2026. Refer to Note 4, Goodwill and Intangible Assets, to the accompanying condensed consolidated financial statements for additional information regarding the goodwill impairment.
In August 2026, certain credit ratings agencies that provide credit ratings of us and our debt, including Fitch Ratings and S&P Global Ratings, took actions to downgrade such ratings. Changes with respect to our corporate and debt credit ratings, like the downgrades that occurred earlier this year, could limit access to or make it more difficult or costly for us to obtain financing on terms favorable to us or at all.
Our liquidity depends on operating performance, the timing and collectability of receivables from advertisers, payments to media partners, debt service and other contractual cash requirements. The closing of the A/R Facility in September 2026 provides an additional source of liquidity, but borrowing availability is subject to a borrowing base which fluctuates and a minimum liquidity covenant (see "-Sources of Liquidity"). Refer to Note 8, Debt Obligations, to the accompanying condensed consolidated financial statements for additional information. We continue to actively evaluate our capital structure and intend to engage with our stakeholders to explore transactions to strengthen our balance sheet and reduce our leverage and interest expense, however the success of these plans is not entirely within our control. Additionally, we have executed and continue to identify and implement further cost-savings initiatives and restructurings to proactively manage our liquidity and seek to optimize operations, and have engaged advisors for this purpose. We have identified areas where we will implement cost savings and restructure our business, including workforce scale and efficiency initiatives. Based on our current operating forecast and stated plans that are within our control, we believe that our cash and cash equivalents, expected operating cash flows and available borrowing capacity under our financing arrangements, will be sufficient to meet our obligations as they become due for at least the next 12 months.
However, due to the continued industry pressures and volatility in the business, our assessment is inherently subjective, judgment-based and subject to various risks and uncertainties. Therefore, there can be no certainty that our plans will be successful. Absent acting on the plans described above, we will require additional liquidity to continue our operations over the next 12 months.
Sources of Liquidity
Our primary sources of liquidity include cash receipts from advertisers, cash and cash equivalents, and available borrowing capacity under our A/R Facility and 2025 Revolving Facility.
As of September 30, 2026, we had cash and cash equivalents of $90.3 million and no short-term investments. Additional borrowing availability was $25.0 million under our 2025 Revolving Facility and $29.1 million under our A/R Facility, subject to applicable borrowing-base requirements, covenant limitations and other contractual conditions. Subsequent borrowings under the A/R Facility and the 2025 Revolving Facility, and repayment of the 2025 Revolving Facility, are described below.
As of September 30, 2026, approximately $58.9 million of our cash was held by non-U.S. subsidiaries. The Company's previously undistributed earnings of foreign subsidiaries are not indefinitely reinvested due to current U.S. funding needs. At September 30, 2026, we had a deferred tax liability of $8.6 million associated with the expected tax consequences of future distributions of foreign earnings, including amounts related to cash and cash equivalents held outside the United States.
We have historically experienced higher cash collections during the first quarter due to seasonally strong fourth quarter sales, which typically reduces working capital requirements during that period. We expect this seasonal pattern to continue, subject to operating performance and customer payment timing. Our operating cash flows are also affected by semi-annual interest payments on our Senior Secured Notes in February and August. During the nine months ended September 30, 2026, these payments totaled $62.8 million compared with $32.1 million in the corresponding prior-year period. The 2026 period included
payments in February and August, while the 2025 period included only the first semi-annual payment in August, following issuance of the Senior Secured Notes in February 2025.
A/R Facility
On September 30, 2026, certain of our subsidiaries entered into the A/R Facility, which is scheduled to terminate on September 30, 2030, subject to earlier termination, including if more than $35.0 million of the Senior Secured Notes remains outstanding 90 days prior to their maturity and liquidity, as defined in the A/R Facility, at that time is not sufficient to repay those Senior Secured Notes in full. The maximum availability under the A/R Facility is limited by eligible accounts receivable balances, as defined under the terms of the A/R Facility, and we expect our availability under the A/R Facility to fluctuate as those balances change. As of September 30, 2026, the maximum availability and the amount outstanding under the A/R Facility were approximately $60.0 million and $30.9 million, respectively. On October 1, 2026, we borrowed an additional €17.5 million and £3.0 million (approximately $23.7 million) under the A/R Facility. The A/R Facility requires us to maintain consolidated liquidity of at least $50.0 million at all times. A failure to comply with this requirement would permit the lenders to cease funding and to accelerate amounts outstanding under the A/R Facility. See Note 8, Debt Obligations, to the accompanying condensed consolidated financial statements.
Revolving Credit Facility
We maintain a $100.0 million revolving credit facility ("2025 Revolving Facility") pursuant to the credit agreement dated February 3, 2025, among the Company, OT Midco Inc., the additional borrowers party thereto from time to time, Goldman Sachs Bank USA, as sole administrative agent and swingline lender, U.S. Bank Trust Company, National Association, as the collateral agent, and the lenders, issuing banks and arrangers party thereto from time to time. The 2025 Revolving Facility may be used for working capital and general corporate purposes.
The 2025 Revolving Facility includes a springing financial covenant requiring compliance with a maximum senior secured net leverage ratio when outstanding revolving loans and certain letter of credit obligations exceed 40% of the revolving commitments as of the end of a fiscal quarter. At September 30, 2026, additional borrowing availability was limited to $25.0 million after accounting for the $15.0 million outstanding balance and applicable covenant limitations. As of September 30, 2026, outstanding borrowings were $15.0 million, which we repaid in full on October 6, 2026. On October 22, 2026, we borrowed $40.0 million under the 2025 Revolving Facility. Following this borrowing, outstanding borrowings under the 2025 Revolving Facility equaled 40% of the revolving commitments, the level above which the springing financial covenant would be tested as of the end of a fiscal quarter. The Company was in compliance with all applicable covenants as of September 30, 2026.
See Note 8, Debt Obligations, to the accompanying condensed consolidated financial statements for additional information regarding the terms of the 2025 Revolving Facility.
Material Cash Requirements
We plan to meet our liquidity needs through available cash, cash generated from operations and available borrowing capacity under our A/R Facility and the 2025 Revolving Facility.
Our primary uses of liquidity include payments to media partners, operating expenses, capital expenditures, and interest payments on our debt. Our arrangements with media partners are generally based on variable bids tied to impressions or may include guaranteed minimum payments if specified performance targets are achieved, and in certain cases include revenue-sharing arrangements.
As of September 30, 2026, approximately $628.2 million aggregate principal amount of Senior Secured Notes was outstanding, maturing on February 15, 2030. Annual cash interest requirements on the Senior Secured Notes are approximately $62.8 million, payable semi-annually in February and August. We also have contractual obligations for principal and interest payments under the A/R Facility, and borrowings under the A/R Facility may be required to be repaid prior to its scheduled termination if the borrowing base declines below the amount outstanding or an amortization event occurs. The $15.0 million outstanding under the 2025 Revolving Facility at September 30, 2026 was repaid on October 6, 2026, and on October 22, 2026, we borrowed $40.0 million under the 2025 Revolving Facility. We were in compliance with all applicable covenants as of September 30, 2026.
In addition, the Company's French subsidiary, Teads France SAS ("Teads France"), previously maintained a short-term overdraft facility with HSBC (the "Overdraft Facility") to fund its working capital needs. In May 2026, the Company commenced a repayment plan with HSBC to fully repay the Overdraft Facility. As of September 30, 2026, approximately $2.8 million (€2.4 million) in borrowings were outstanding under the Overdraft Facility, reflecting payments made during the second and third quarters of 2026. These outstanding borrowings are recorded within short-term debt in the Company's
condensed consolidated balance sheets. Subsequent to quarter-end, in November 2026, the borrowings outstanding under the Overdraft Facility were repaid in full.
We may from time to time pursue acquisitions or investments in complementary businesses or technologies.
We may from time to time seek to purchase or exchange our outstanding debt through privately negotiated transactions, open market purchases, redemptions, tender offers or otherwise. Any such purchases or retirement of debt will be made in our sole discretion in light of prevailing market conditions, applicable contractual limitations, liquidity requirements and other relevant factors. The amounts involved in any such purchase transactions, individually or in the aggregate, may be material.
See Note 8 to the accompanying condensed consolidated financial statements for additional information regarding our debt obligations and other commitments as of September 30, 2026.
Share Repurchases
On December 14, 2022, our Board approved a stock repurchase program authorizing us to repurchase up to $30 million of our Common Stock. There were no shares repurchased under the stock repurchase program during the nine months ended September 30, 2026. As of September 30, 2026, the remaining availability under our $30 million share repurchase program was $6.6 million.
In addition, we periodically withhold shares to satisfy employee tax withholding obligations in connection with the vesting of equity awards. During the three and nine months ended September 30, 2026, the Company withheld 12,356 and 120,826 shares, respectively, with fair values of less than $0.1 million and $0.1 million, respectively, to satisfy employee tax withholding obligations. During the three and nine months ended September 30, 2025, the Company withheld 52,063 and 195,171 shares, respectively, with fair values of $0.1 million and $0.6 million, respectively.
Capital Expenditures and Capitalized Software Development Costs
Our cash flows used in investing activities include capital expenditures and capitalized software development costs. We expect capital expenditures to be between $3 million and $5 million for the year ending December 31, 2026, primarily related to servers, computing equipment, and other infrastructure. We also expect capitalized software development costs to be between $20 million and $27 million in 2026, primarily related to continued investment in our platform, including infrastructure to support AI and machine learning capabilities and the development of internal software to enhance scalability and operational efficiency. Actual amounts may vary from these estimates.
Other Contractual Cash Obligations
In the ordinary course of business, we enter into non-cancelable purchase commitments, primarily related to data services, hosting and network infrastructure, and other technology and platform-related costs. These commitments support the ongoing operation and scalability of our platform. See "Other Contractual Cash Obligations" disclosure within the "Liquidity and Capital Resources" section of our 2025 Form 10-K for detailed disclosures of our other material cash obligations as of December 31, 2025.
We also enter into arrangements with certain media partners that may include guaranteed minimum payments tied to performance metrics. These arrangements may result in losses on individual contracts if guaranteed amounts exceed the revenue ultimately generated.
In addition, we have obligations under our debt arrangements and operating leases, as well as liabilities related to uncertain tax positions, the timing of which cannot be reasonably estimated.
See Notes 7, 8 and 10 to the accompanying condensed consolidated financial statements for additional information regarding these obligations and commitments.
See Cash Flows below for a discussion of changes in our cash position during the period.
Cash Flows
The following table summarizes the major components of our net cash flows for the periods presented:
| Nine Months Ended September 30, | |||||||||||
| 2026 | 2025 | ||||||||||
| (In thousands) | |||||||||||
| Net cash (used in) provided by operating activities | $ | (53,588) | $ | 344 | |||||||
|
Net cash used in investing activities
|
(6,319) | (545,380) | |||||||||
| Net cash provided by financing activities | 23,570 | 585,358 | |||||||||
| Effect of exchange rate changes | 748 | 1,834 | |||||||||
|
Net (decrease) increase in cash, cash equivalents and restricted cash
|
$ | (35,589) | $ | 42,156 | |||||||
Operating Activities
Net cash from operating activities decreased $53.9 million, from $0.3 million provided in the nine months ended September 30, 2025 to $53.6 million used in the nine months ended September 30, 2026. The decrease reflected a higher net loss after adjustments for non-cash items and less favorable changes in working capital. Changes in accounts payable, accrued expenses and other current liabilities used $54.8 million more cash than in the prior-year period, due in part to the timing of semiannual interest payments on our Senior Secured Notes. Cash paid for interest includes $62.8 million of semi-annual interest payments on our Senior Secured Notes in the current period compared to $32.1 million in the prior period. This was partially offset by $36.9 million of additional cash provided by changes in accounts receivable.
Investing Activities
Net cash used in investing activities decreased $539.1 million, from net cash used of $545.4 million for the nine months ended September 30, 2025 to net cash used of $6.3 million for the nine months ended September 30, 2026. The decrease was primarily attributable to the absence in 2026 of $598.3 million of cash consideration paid, net of cash acquired, in connection with the Acquisition. This decrease was partially offset by a $59.2 million decrease in net proceeds from sales, maturities and purchases of marketable securities.
Financing Activities
Net cash provided by financing activities decreased $561.8 million, from net cash provided of $585.4 million for the nine months ended September 30, 2025 to net cash provided of $23.6 million for the nine months ended September 30, 2026. Financing cash flows in 2026 primarily reflected $30.9 million of proceeds from the A/R Facility and $15.0 million of proceeds from the 2025 Revolving Facility, partially offset by $14.6 million of net repayments of bank overdrafts and $7.6 million of deferred financing and debt issuance cost payments. Financing cash flows in 2025 primarily reflected $625.3 million of proceeds from the issuance of the Senior Secured Notes, partially offset by $31.0 million of deferred financing and debt issuance cost payments and $7.7 million of repayments of long-term debt. The 2025 period also included $625.0 million of proceeds from the Bridge Facility and the corresponding $625.0 million repayment.
Critical Accounting Policies and Estimates
Our condensed consolidated financial statements are prepared in accordance with U.S. GAAP. The preparation of these condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates.
Goodwill
Goodwill represents the excess of the purchase price over the estimated fair value of the net tangible and identifiable intangible assets acquired in business combinations. Goodwill is not amortized but is tested for impairment at least annually in the fourth quarter, or more frequently if events or changes in circumstances indicate that it is more likely than not that the fair value of a reporting unit is below its carrying amount. Under ASC 350, goodwill impairment testing is performed by comparing the fair value of a reporting unit with its carrying amount and recognizing an impairment charge for the amount by which the carrying amount exceeds fair value.
During the third quarter of 2026, continued weakness primarily due to changing search and open-web traffic dynamics, including lower publisher traffic and available advertising impressions, led us to reduce projected revenue and profitability and
extend the anticipated recovery period. These developments constituted a triggering event, prompting an interim impairment assessment as of September 30, 2026. We evaluated our long-lived assets for impairment under ASC 360, "Property, Plant and Equipment," prior to testing goodwill. A recoverability test performed as of September 30, 2026, determined that estimated undiscounted future cash flows exceeded the asset group's carrying value. Consequently, the long-lived assets were deemed recoverable, and no impairment was recognized. We then conducted a quantitative goodwill impairment test during the third quarter of 2026 and estimated the fair value of our single reporting unit using a discounted cash flow model under the income approach. For this assessment, the reporting unit's carrying amount was determined on an invested-capital basis, differing from consolidated stockholders' equity of approximately $(46) million immediately prior to impairment. Because the carrying amount exceeded estimated fair value, we recognized a non-cash goodwill impairment charge of $272.4 million for the three and nine months ended September 30, 2026, fully impairing our remaining goodwill balance to zero.
Other than as described above, there have been no material changes to our critical accounting policies and estimates as compared to those described in "Management's Discussion and Analysis of Financial Condition and Results of Operations" set forth in our 2025 Form 10-K.
Recently Issued Accounting Pronouncements
See Note 1 to the accompanying condensed consolidated financial statements for recently issued accounting standards, which may have an impact on our financial statements upon adoption.
Off-Balance Sheet Arrangements
We do not currently engage in off-balance sheet financing arrangements.
Teads Holding Co. published this content on November 09, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on November 09, 2026 at 22:27 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]