Perion Network Ltd. (PERI) Earnings Call Transcript & Summary

Hello, everybody, and welcome to the Perion Network Second Quarter 2026 Earnings Conference Call. Today's conference call is being recorded. An archive of the webcast will be posted on the company's website. The press release detailing the financial results is available on the company's website at www.perion.com. Before we begin, I'd like to read the following safe harbor statement. Today's discussion includes forward-looking statements. These statements reflect the company's current views with respect to future events. These forward-looking statements involve known and unknown risks, uncertainties and other factors including those discussed under the headings Risks and elsewhere in the company's annual report on Form 20-F that males actual results, performances or achievements to be materially different and any future results, performance or achievements anticipated or implied by these forward-looking statements. Company does not undertake to update any forward-looking statements to reflect future events or circumstances. As in prior quarters, the results reported today will be analyzed both on a GAAP and a non-GAAP basis. While mentioning EBITDA, we will be referring to adjusted EBITDA. We have provided a detailed reconciliation of non-GAAP measures in their comparable GAAP measures in our earnings release. which is available on our website and has also been filed on Form 6-K. Hosting the call today are Tal Jacobson, Perion's Chief Executive Officer; and Elad Tzubery, Perion's Chief Financial Officer. I would now like to turn the call over to Tal Jacobson, please go ahead.

Good morning, and thank you for joining us on Perion's earnings call for the second quarter of 2020. Nearly 2 years ago, we made a deliberate decision to diversify [indiscernible] away from the open web. We quickly adapt to the demands of the marketplace ahead of the budget shift the industry is experiencing today. This diversification was driven by both our organic investment in CTV and Retail Media and our M&A strategy from high stacking digital out-of-home to green bits and the [indiscernible] AI agent. Ever since, we've been doubling down on that strategy, and this quarter results reflect that conviction with strong traction across all our key growth engines. In the second quarter of 2026, we saw a massive adoption of the Perion One platform and its product lines. This reflects a growing advertising trust and accelerating adoption of our solution across our client base. TTV, retail media and digital of home all outpaced the market and our advanced AI technology, AuthMax continue to scale rapidly with triple-digit year-over-year spend growth. We also continue to expand our reach this quarter, both geographically and in the depth of our platform capabilities. Retail Media, Best Buy Canada selected Perion as its end-to-end in-store retail media technology partner, which is now available to our retail and digital out-of-home advertisers. As part of our strategy to double down on retail media and digital home, especially with in-store inventory, we expect those new partnerships to unlock new budget from high-growth verticals. The same verticals that are targeting consumers at the moment of purchase decisions. This quarter, we also added a new distribution partner to bring out Max to Greece and to the Central and Eastern Europe. This partnership extended our reach into new regions through the partner-led model. On the technology side, we extended our full-stack digital home infrastructure into Google 360 and giving buyers the ability to activate our programmatic guaranteed inventory through Google's media platform. We also launched an agentic self-serve mobile application within Perion One, which we call Ask Perion. This upgrade transform our execution capability to be more accessible to advertisers and agencies. New distribution channels, new retail media and digital of home partnership and advancing our technologies are exactly what's driving the sustainable momentum we're seeing across our growth engines. Marketers navigate a universe of channels, screens, platform, formats, data sets and buying environments, all while consistently chasing higher performance. Budget, signals and optimization remain siloed by channels. This fragmentation is exactly what breaks efficiency and performance. Perion One is designed to close that gap with advanced technology-driven solutions. Perion One is our unified AI native execution infrastructure for advertisers. It is built to plan, activate and optimize advertising campaigns across TV, social digital home, Retail Media and Open Web. At the center of Perion One is [indiscernible], a proprietary agent continuously optimizing outcomes across channels and platforms. Perion One is an infrastructure, not a Here's what it looks like in practice. The advertisers entry point is Perion One, our platform and AI execution layer. Under the hood, whenever we need outcome-driven activations, AuthMax operates as an agent that plans and execute on our advertisers' behalf. Perion One leverages multiple connections to audiences, data and measurement technologies, including our own sort audience segmentation technology. From there, N1 reaches into the channels themselves. Every major open and world garden DSP and SSP from YouTube, Meta, TikTok and the broader Open Web plus our own Perion owned digital out-of-home DSP and SSP. It's an open ecosystem with effectively unlimited connections we keep adding giving advertisers the reach to the entire global market. Out mix, our AI agent works across all major channels, which allows us to optimize complex campaigns and drive better business outcomes to advertisers. Amex removes the guesswork and replace it with algorithm certainty, allocating spend, managing pacing and optimizing outcomes inside Perion One and beyond. This quarter, we introduced Ask Perion, sparking deeper conversations with CMOs and agencies eager to get ahead of the Agentic media buying curve. Ask Perion puts the power of Perion One directly into the hands of advertisers and agencies through a simple conversational interface. Ask Perion is about making sophisticated execution more accessible to more customers. This expansion gives our customers easier access to our technology, while embedding Perion 1 more deeply within the infrastructure they use. This quarter, Best Buy Canada selected Perion as its end-to-end in-store retail media technology partner for its digital signage network using Perion's ad server, SSP and header bidding technologies, Best Buy Canada is moving from a fixed loop-based signage to a programmatic retail media model that selects ads dynamically. This technological adoption is designed to give advertisers more measurable in-store retail media campaign capabilities. For Perion, this partnership expands our retail media reach depends our role as a full stack infrastructure partner and supports a repeatable model for building more predictable infrastructure level revenue streams over time. This full stack infrastructure is also becoming easier for buyers to access. We added programmatic guaranteed deal execution for a digital phone directly within Google's DV360 media platform. This gives buyers access to premium digital out-of-home inventory through their primary DSP with fixed pricing, committed inventory and predictable delivery. This capability is available across our full global digital out-of-home supply reach covering more than 1.6 million screens in over 40 countries. By bringing guarantee digital out-of-home buying into the same workflow, advertisers already use for display, video and CTV we are making our supply more accessible and expanding monetization potential. We are also extending our reach geographically through our capital-efficient partner-led model. Most recently, we partnered with across Media 241 to bring out max to agencies and brands across Greece and the broader Central and Eastern European region. Across media 2-for-1 brings established relationships across agencies, national tourism boards and international bank desks as well as existing experience with the Perion's digital out-of-home technology. Through this partnership, Altex can be applied across major digital channels and optimize toward advertisers defined business outcomes. This builds on a distribution model we've already applied in other markets. The partnership is expected to accelerate AuthMax path to revenue growth and extend our reach with low incremental cost and margin accretive growth potential. This quarter, we also added a new data partnership with Fetch leading consumer reward and purchase intelligent platform, access through LiveRamp. This gives our advertisers access to verified SQ level purchase data from over 13 million monthly active users and 26,000-plus merchants. Purchase behavior is the most direct signal of consumer intent and accessing it at the scale outside the closed platform has been a persistent industry challenge. Fetch data spends more than 1,300 retail agnostic segments from category-level shopper profiles to SKU specific competitor targeting. Taken together those initiatives show how Perion on scales, first, by embedding more deeply with enterprise customers. secondly, by expanding access to our infrastructure. And finally, by extending AuthMax into new markets through our partners. This reach and trust of the foundation of our land-and-expand model. giving us a strong base to deepen customer relationships and drive sustainable growth over time. With that, I will hand it over to Elad to walk through the financials.

Thank you, Tal, and good morning, everyone. Our second quarter performance reflects our continued operational focus on driving scale and adoption across Perion One. In the second quarter, Perion One spend increased 15% year-over-year to $156.7 million. This was driven by the strong momentum in CTV and digital out-of-home channels growing 56% and 45% year-over-year, respectively. In addition, our retail media vertical spend grew by 60% and partially offset by continued softness in the open web advertising across the industry. Perion One contribution ex TAC came in at $34.9 million, down 4% year-over-year. This was driven by the use of promotional terms to acquire new accounts and drive incremental spend from existing customers, which temporarily impacted our take rates. As we scale the platform take rates naturally normalize over time, though we expect them to modestly improve in the second half of the year. AuthMax, our AI agent continue to scale rapidly spend growing 136% year-over-year on a pro forma basis, reflecting strong adoption across walled gardens. Our focus on delivering advanced technological solutions is translating into tangible enterprise wins. During the quarter, Best Buy Canada selected Perion as its end-to-end retail digital out-of-home technology partner, deploying our complete ad server and header bidding technologies to power 1 of the largest SSP-enabled digital out-of-home media networks in Canada. This relationship validates our digital out-of-home business strategy and it allows us to replicate this offering to other retailers, growing our retail media business globally. We also remain focused on creating immediate value through our shareholders' return program. Our highly disciplined approach to capital allocation allowed us to repurchase 2.7 million shares for $24.5 million during the quarter. Finally, based on our growing visibility going into the second half of the year, the strong momentum we are seeing in our pipeline, new strategic agreements and the structural efficiencies we have secured, we are narrowing our full year guidance ranges. We are adjusting the high end of our contribution ex TAC outlook to reflect the softer first half while maintaining the midpoint of our EBITDA guidance. I will discuss this in more detail shortly. Let's take a look at spend. the top line metric, which reflect customers' adoption of Perion solutions. Total spend for the quarter increased 9% year-over-year, reaching $194.7 million. More importantly, spend on the Perion One platform grew 15% year-over-year to $156.7 million, accounting for 80% of our total spend. This compares to 76% in the same period last year proving that our unified platform strategy is successfully attracting enterprise media budgets. This was driven by the continuous acceleration of our core growth engines. CTV spend grew 56% year-over-year to $17.7 million. Digital out-of-home spend grew 45% year-over-year to $87.7 million. Both continue to vastly outpace the broader market growth expectations as advertisers are actively shifting budgets towards Perion One to gain precise performance and cross-channel execution. In addition, our retail media vertical spend significantly accelerated growing 60% year-over-year to $59.4 million. Retail Media represents a strategic focus for Perion, bringing together our CTV digital out-of-home and display capabilities. Enterprise mandates, like Best Buy Canada demonstrate our ability to modernize in-store media networks. This uniquely positions us to bridge the physical and digital worlds. The combination of physical and digital unlocks powerful synergies between in-store digital screens and external digital out-of-home screens, delivering a truly unified end-to-end customer journey that few in the industry can match. Revenue for the second quarter was $98.2 million, down 5% year-over-year. Contribution ex TAC for the second quarter was $42.3 million, down 11% year-over-year. Perion One contribution ex TAC was $34.9 million, representing 83% of total contribution ex TAC in the quarter, up from 76% last year. Perion One contribution ex TAC declined 4% year-over-year due to our use of promotional terms to acquire new accounts and drive incremental spend from existing customers through our platform. As we continue to scale the platform, we expect take rates to naturally normalize over time, though modestly improve in the second half of the year. As expected, search revenue declined 2% year-over-year, while search contribution ex TAC declined 30% year-over-year. We continue to manage the search business to maximize cash flow to reinvest into Perion One and return capital to shareholders through share repurchase program. Adjusted EBITDA for the second quarter was $2.8 million, representing a 7% margin of contribution ex TAC. This includes a $1.6 million of foreign exchange headwind. Excluding this foreign exchange impact, adjusted EBITDA would have been $4.4 million. As we are scaling our top line and capturing more market share, we remain focused and disciplined on improving our operational efficiency. At the end of the second quarter, we executed targeted efficiency initiatives to optimize our cost base as part of this year's efficiency plan. While the second quarter did not benefit from these actions, we expect adjusted EBITDA margin to meaningfully inflect upward in the second half of the year to reach our full year targets. On a GAAP basis, second quarter net loss was $6.8 million or $0.18 per diluted share. On a non-GAAP basis, net income was $3.9 million or $0.09 per diluted share. It is important to emphasize that the year-over-year increase in our GAAP net loss was almost entirely driven by negative foreign exchange impact to our nonoperating finance income and lower interest income from our cash balance. While our underlying operations remain profitable on a non-GAAP basis, the combination of these nonoperating financial headwinds and the lower outstanding share count mathematically amplifies our GAAP loss per share this quarter. However, we are making a highly strategic trade-off by aggressively executing our buybacks now and depressed valuations we are permanently reducing our share count. As our profitability scales in the second half of the year and into 2027, this concentrated equity base is expected to serve as a powerful multiplier for future EPS growth. In the second quarter, we generated $2.5 million in net cash from operating activities while adjusted free cash flow reached $4.8 million. On a yearly basis, we expect to maintain a strong conversion rate relative to adjusted EBITDA as we did in previous years. This reliable cash generation provides us with the financial flexibility to fund our organic growth initiatives, invest in platform innovation and support our shareholders' return commitments, all without stretching our balance sheet. As of June 30, 2026, we held $268 million in cash, cash equivalents, short-term bank deposits and marketable securities with 0 debt. During the second quarter, we continued the strong execution of our shareholder return program. We repurchased 2.7 million shares for $24.5 million at an average price of $9.12 per share. Since the initiation of this buyback program, 9 quarters ago, we have repurchased a cumulative total of 18 million shares for $166.8 million. By the end of this year, we plan to fully execute the remaining $33.2 million under the current plan. Repurchasing our stock at current valuation levels reflects our confidence in Perion's long-term value and future prospects. Turning to our updated 2026 outlook. Based on our increased visibility for the second half of the year, and the momentum we see building in our pipeline, we are nearing our full year 2026 outlook ranges. We now expect contribution ex TAC of $215 million to $225 million and adjusted EBITDA of $51 million to $53 million, implying an adjusted EBITDA margin of 24% at the midpoint. Our confidence in meeting this guidance is driven by tangible second half catalysts. Leading these catalysts is the execution of large-scale strategic agreements. These recently signed agreements are actively in the onboarding phase -- their material financial contribution is expected to kick in towards the end of the third quarter and accelerate moving forward. In addition, the continued scaling of Perion One growth engines combined with a streamlined sales organization, is rapidly converting a robust pipeline into realized spend. In parallel to our top line expansion, operational efficiency remains a core priority. In the first half of the year, we took decisive steps to optimize our cost structure and streamline operations. These deliberate actions are yielding productivity gains and cost savings designed to positively impact our profitability starting in the second half of the year and beyond. With an optimized expense base and growing momentum across Perion One, we are scaling our business on a strong agile foundation, and we remain completely on track to achieve our 2028 growth and efficiency targets. With that, I will now turn the call back to the operator for the Q&A session. Thank you.

[Operator Instructions] Our first question comes from Andrew Marok at Raymond James.

Maybe first on the tax in the [indiscernible] area and the trends that you're seeing so far, obviously, the double-digit growth in out [indiscernible] but can you also talk about the synergy possibilities you've seen between [indiscernible] Max? And maybe more generally, what you're seeing with clients and tools like this are helping to make complex work both more...

Thank you, Andrew. You were breaking off. So I'll see if I got a little bit. So next grew and continues to grow very fast. We do see synergies between our products as AuthMax is now pushing out of CTV, retail and social and outlook is becoming an integrated part of billion, it actually drives a lot of the AI technologies within the platform. Again, I -- you were breaking up a bit, so I'm not answer the entire question. So if you want to -- if you want to repeat the parts that were not as that would be great.

I think you've got most of news really just kind of the synergies between a carry on and Matt kind of these agent tools and how generally the agenetic workflows that you're bringing to market or helping make some of these complex workflows for advertising more portable.

Yes. So absolutely, the Genetic solution that we have, including billion is fully integrated with AuthMax, so AuthMax actually provide a lot of the answers within Aspera, including the suggestion of how do you reallocate budgets in between platforms if you just completed a campaign on different OTT platforms, it will suggest what's next, right? So you would say, I would put more money towards OpenWeb CPP or meta or YouTube or whatever it is, but Amex is becoming an even more integrated solution within our entire Agentic platform and Astelin, obviously.

All right. Maybe 1 more if my audio will allow me. Can you talk a little bit about the trajectory for your medium-term goals given the 2024 performance you're seeing so far? Are those still flexible for you and in the path to get there? Thank you.

Andrew, you if you -- going to repeat it for us again.

Just talking about your medium-term goals and the 2026 performance so far. If you are still on track for the medium term goals at the beginning of the year and we'll track that how to get both?

Yes. All right. So towards elegant stage of 2026 million we are starting right now to onboard some static agreement we discussed about in Q1. There recently some we're seeing right now onboarding into our pipeline. And we see all of our growth engines are continued to generate healthy pipeline as we're looking at Q3 and Q4 and look at last year as well, when we see the -- today stack in EBITDA had wave on the second half of the year, still -- and right now, we have the right visibility to narrowing down a bit the guidance for the continuous of the year. And of course, taking into account everything that we already did in with respect to efficiency measure that took in Q1, we have the right visibility right now towards the second half of the year.

SP1 Our next question comes from Jason Helfstein at Oppenheimer.

Everybody, can you hear me okay? Right. Okay. So can you give us a little bit of help? Obviously, you've given us kind of the spend for Perion One, but we don't know the revenue. So I mean, obviously, the other parts of the business are still having a negative mix shift because overall revenue is still down, obyouare guiding for like a mid-teen-ish type of growth in the back half of the year. So just maybe help us understand how much was either Perion One revenue in the quarter or the non-Par revenue year-over-year declines. That's question number one. Number two, would you think about perhaps changing like the segment disclosure to revenue tax since you're now guiding to revenue ex TAC and not revenue and to maybe giving us that like level of detail? Next question, you highlighted a risk head count reduction. I'm just curious if we can get some more details like what percent of people -- how many people at percent that impact. And then lastly, with the $268 million of cash. Should investors assume it entirely goes to buybacks? Or are there other M&A opportunities you're looking at?

Okay. Thank you, Andrew. So I'll start with the revenue Jason. The revenue for Q2 for period 1 was $74.2 million. You haven't ever seen in the presentation that we will look at to begin to the website. In today's shows a slight decline year-over-year. We are looking at the revenue, but it's something that we expect that we onboard more customers into the period on from revenue recognition method. Most of them will come on a net perspective, not necessarily as growth. So we expect it to see it this way. From -- looking at the segment, how we are breaking that down, it is important for us to really speak about the spend and how we are contributing to expand towards a different channel because we believe that the real adoption of our solution what our customers is really coming into place when you're looking at the spend level. It's more giving indication of the adoption of the customers. And at the end 1 is in China and mostly, so when we are contributing to different channels, it makes sense to give it breaking down through the spend, and Perion is a total number, which obviously is supposed to produce the better ROI for the intensive -- from the reduction standpoint. So as we discussed, I believe in starting last year, we are constantly doing improvements on how we're operating our business. and improving our cost base to be more efficient. We were able to, first of all, of course, support all of the scale with the current cost base and improve wherever we can. We -- in H1, we're very focused about also creating this operational leverage going into the second half of the year. We just announced right now the restructuring the bit. Roughly, I can tell you that reduced roughly 10% of the cost base, it was intentionally made us to support the different fluctuation in the assets, but also to give us some room to invest more in when we are going into 2027. We want to hit the top line expansion that we are aiming to get in the growth range and growth rates still parent. So not everything will be making a set without even getting into the guidance right now. For a question to the -- with respect to the cash, we currently have almost $270 million in cash in our balance sheet. We are continuously trying to do -- also looking at the buybacks. So we expect to end the buyback by the end of the current plan by the end of the year. But we are constantly also looking on M&A activities to see if there are any interesting opportunities out there that can that can generate more value to the pet customers and to really increase our synergy dollars. Something very important to highlight the debt. We are doing -- we are taking a very disciplined approach when we are looking at our cash, and we're always trying to see what will get the best value to our shareholders. whether this can be a buyback or an M&A or investing in our own business growth, but there always striving to balance between those 2.

Yes. I'll just echo what Elad said and say -- with our current cash, obviously, buyback, we still have a healthy chunk to complete this year. We're investing in agitate. So all the growth engines, we're paying some investment there to make sure that they continue to grow and continue to outpace the market. And we're constantly looking at M&A. But as you can see in the past 2 or 3 years, we've always been disciplined in buying the right things with high stack, which is showing almost 3 years after it's still showing amazing growth with it home, reinvest with AuthMax showing amazing growth. So we're not running just spend the money, we are looking for good opportunities. And when we find something that makes sense and it's extremely synergic profitable, then we can explore that.

[Operator Instructions] Our next question today comes from Matthew Weber at Canaccord.

Okay. Great. Actually, one from me. You talked about execution of recently signed agreements I in the onboarding phase and we're starting to kick towards the end of Q3. Can you just talk about some of the factors that go into sort of a pacing of those contributions and what implies then to tie to drive some variance relative to your expectations and [indiscernible]?