Perion Network Ltd

Hello everybody and welcome to the Perion Network First Quarter 2026 Earnings Conference Call. Today's conference call is being recorded and 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 SafeArbor 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 heading Risk Factors and elsewhere in the company's annual report on Form 20F, that may cause actual results, performances or achievements to be materially different. and any future results, performances or achievements anticipated or implied by these forward-looking statements. The 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 analysed both on a gap and on a non-gap measure. Whilst mentioning EBITDA, we will be referring to adjusted EBITDA. We have provided a detailed reconciliation of non-GAAP measures to their comparable GAAP measures in our earnings release, which will be available on our website and has also been filed on Form 6K. Posting the call today is Tal Jacobson, Perrion's Chief Financial Officer, Chief Executive Officer, and Elad Tzubery, Perrion'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 Pelion's earning call for the first quarter of 2026. 2025 was year one for the new Pelion. 2026 focuses on advancing our new technologies and accelerating their adoption among our clients. In the first quarter of 2026, we saw an increase across all our growth engines. Our fastest-growing channels, CTV and digital out-of-home, outgrew the market. In retail media adoption, we experienced significant growth that Elad will present. And I'm also happy to share that Outmax, our AI agent technology that was part of the GreenBits acquisition, is growing rapidly and is becoming a meaningful part of Perian 1. A few important data points from our quarterly numbers. The Perian1 product line is seeing an increase of 6% in marketing budgets, which we refer to as spend. This is an encouraging number as we see a faster adoption of our platform and the Outmax AI agent usage among our clients. You can also recognize that both acquisition HiveStack and GreenBits were extremely successful as both out-of-home and out-mixed numbers are continuing to grow quarter after quarter. This represents our ability to acquire high quality companies and integrate them efficiently. Perion One is designed to solve the complexity of the global advertising ecosystem that is both massive and fragmented. Marketers navigate in a universe of screens, platforms, formats, data sets, and buying environments while trying to achieve higher standards of performance. Budgets, signals, and optimizations are siloed by channels, creating a challenging fragmentation that leads to efficiency and performance breakdown. This is the core challenge we've been focused on solving. We are building Perion One as an AI native execution infrastructure to unify the fragmented ecosystem for both advertisers and publishers. Variant 1 enables advertisers to perform highly complex marketing activities. It allows them to make confident decisions faster while continuously optimizing every campaign in real time. With Variant 1, publishers are able to maximize inventory value through smarter demand allocation and yield optimization. By aligning execution across both sides of the ecosystem, demand and supply, Variant 1 improves efficiency, performance, and outcomes end-to-end. Variant 1 is an infrastructure, not a toolset. The most advanced part of Valiant One is the Outmax technology, our AI agent which is showing tremendous growth. Outmax's goal is to be the one AI agent for every channel. Whether it's YouTube, Facebook, Instagram, NBC, or Disney+, Outmax is designed to act as an intelligent execution agent that ensures every dollar spent is working at its maximum potential. Outmax removes the guesswork and replaces it with algorithm certainty. It is designed to allocate spend, manage pacing, and optimize outcomes in real time, both inside Payone One and on external platforms. We're continuously expanding the channels and platforms that Outmax connects to. This quarter, we announced Outmax for TikTok, which is already showing great results. TikTok is one of the fastest growing advertising platforms in the world, with 1.6 billion users and ad revenue projected to exceed $50 billion by next year. Outmatch for TikTok early results are strong, with Outmatch already delivering up to 25% lift in performance on TikTok. This is exactly the land and expand pattern that we are focusing on. Adding new high-growth channels, clear performance advantages, and a global path to allow us to scale across more customers and more platforms. This quarter, we entered into an exclusive partnership with McSurley Media and MediaMarkt, deploying Outmax AI Agent across Africa. This new partnership unlocks a programmatic market forecasted to reach $6.5 billion by 2029, growing at a 15.3% CAGR. The value this partnership brings is clear. Outmax's AI agent and Perion's programmatic digital out-of-home capabilities, paired with our partner's agency footprint across Africa, create an accelerated distribution for our technologies across the region. This expands Perion's commercial footprint and creates new revenue channels without adding further expenses to our P&L. The following case studies show how the same execution model delivers for different brands. Bouic Telecom, one of the leading French telcos, deployed Outmax across always-on campaigns. They embedded Outmax into their enterprise marketing operations to continuously control and optimize media execution. The results show 34% lower customer acquisition costs and a 51% reduction in carbon intensity. Bouygues is already extending Outmix to additional channels, another example of the land and expand model in action. C4 Energy is one of the fastest growing energy drinks brands in the US, with a younger, performance-oriented audience. This makes YouTube a crucial channel for reaching their consumers. C4 Energy turned to Pelion to achieve a greater control across their audience targeting and contextual placement on YouTube. And the results speak for themselves. A skippable view rate of 80% above the benchmark, a 20.7% lift in brand awareness, and a 4.1% lift in brand at recall. Wepner, a clothing brand known for its youthful style and bold statement pieces, ran a multi-channel campaign across Meta and YouTube with Outmax AI Agent, continuously optimizing delivery in real-time. Results show how Altmax delivers performance across multiple platforms with multiple KPIs. And finally, Vaseline, a campaign that demonstrates how our advanced real-time data capabilities and our programmatic digital out-of-home can be leveraged to benefit our brands. Vaseline integrated live UV index data directly into its digital out-of-home creative. dynamically presenting exposure risks through a clear visual color coded system updated in real time. The campaign delivered over 1.65 million impressions, turning everyday commutes into moments of relevant contextual skincare education. This is an example of how digital at home can offer dynamic data-driven storytelling that performs. Many of the challenges marketers face are consistent. Earlier this quarter, we partnered with eMarketer on a research study of senior marketers and agencies. The findings reinforce exactly what we have been building towards. 89% of marketers say that creative is crucial for their performance. Nearly half believe that if creative could be optimized in real time, they would unlock 11-30% of performance lift. and more than half say creative insights arrive too slowly to act upon. The conclusion is structural. The industry does not have a creative problem or a media problem. It has an execution problem. Insights exist. Signals exist. What is missing is a unified layer that turns those signals into action in real time across channels. This is exactly the gap Perion 1 was built to close. We at Perion are committed to continue to evolve. We adjust our processes and our structure whenever we believe they are beneficial for our company's future. With that, I would like to share that our Chief Revenue Officer, Stephen Yap, will be transitioning out of his role. We thank him for his partnership during his tenure. As we enter the next phase of our 2026 roadmap, we are pivoting our sales leadership team to ensure we are better positioned to convert our growing pipeline into realized revenue. With that, I will hand it over to Elad to walk through the financials.

Thank you, Tal, and thank you all for joining us on the call today. Our first quarter results reflect a period of disciplined execution as we are continuing our structural evolution. The results for the first quarter came in largely as we expected, reflecting the seasonally low quarter in our industry. Importantly, we are seeing a significant increase in spend across our core growth engines, and the adoption of Perion One continues to build momentum. This demonstrates that the infrastructure we are building is driving measurable value for our customers. This quarter, we continue the strategic building process of Perion One as an AI-native multi-channel execution infrastructure. Driven by the continued momentum in our growth engines, total Perion One spend increased 6% year-over-year. OutMex, our proprietary AI agent, is rapidly expanding across customers, regions, and platforms. We recently launched Outmax for TikTok, extending our AI-driven optimization capabilities to one of the fastest-growing digital platforms. This has already generated over $1 million in spend during the first quarter. To accelerate our global footprint, we continue to add more collaborations and partnerships. In the first quarter, we launched strategic reseller initiatives in Africa by partnering with MediaMarkt and McSorley Media to resell Outmax and Programmatic Digital out of home. As part of Parion One's continuous transformation, we will no longer provide a channel revenue breakdown as a primary KPI. This shift reflects our evolution into a truly channel-agnostic platform centered around Outmax, our proprietary advanced AI agent designed to plan, execute, optimize, and measure campaigns across diverse media environments. By moving away from siloed reporting, we are aligning our financial disclosures with our operational strategy, focusing on how our technology delivers integrated value for the advertiser rather than focusing on the performance of individual channels. Instead, it makes much more sense to report our growth engines in terms of spend, and not as revenue or contribution extract. Spend represents the total media budget running through our platform. It is the truest leading indicator of our platform's adoption, customers' trust, and long-term scale. And now, to our quarterly results. Revenue for the first quarter was $90.4 million, a 1% increase year-over-year. Total contribution ex-stack was $39.7 million flat year-over-year with a 44% margin consistent with the same period last year. Adjusted EBITDA for the quarter was $0.5 million compared to $1.8 million in the first quarter of 2025. The decrease was mainly the result of higher go-to-market investments aiming to support our three-year growth plan. We generated cash flow from operations of $6.7 million and adjusted free cash flow of $7 million. During the quarter, we repurchased 2.5 million shares for over $24 million bringing our net cash position to $293 million as of the end of the quarter. Let's take a look at the momentum of our growth engines through the lens of spend. As advertisers increasingly trust our AI infrastructure to execute their campaigns, we expect more dollars to flow through the Perion One platform. CTV spend grew 68% year-over-year to $18 million, underscoring the strong demand for our performance-driven CTV capabilities. Digital out-of-home spend grew 29% year-over-year to $60.6 million, reflecting our expanding global footprint and our advanced digital out-of-home technology. Retail media spend increased by 27% year-over-year to $36.5 million. We continue to unlock commerce-related outcomes for top-tier brands despite some market softness, especially in the CPG sector. It is also important to note that CTV, digital out-of-home and retail media have been consistently outpacing the broader market. These impressive growth rates drove a 6% year-over-year increase in total pay-on-one spend, compensating for the decrease in web. The aggregate impact of the customer spend shows a growing momentum through this important KPI. In the first quarter of 2026, we achieved a solid 6% increase in pair-on-one spend, while navigating the near-term macro headwinds and cautious advertisers' planning cycles. This is a testament of the increasing demand for our solutions and our expected scale as we look towards the second half of the year. Revenue for the first quarter came in at $90.4 million with advertising solutions revenue at $66.7 million and search at $23.7 million. Contribution x-stack remained flat year-over-year at $39.7 million. The 44% margin was stable and consistent with last year. While advertising solutions revenue decreased in the first quarter due to the anticipated decline in the web activity, it is important to emphasize that PayOnOne contribution x-stack increased by 7% year-over-year, aligned with the spend trajectory. This demonstrates that as we are gradually shifting our business to the PayOnOne platform, contribution x-stack and spend are becoming the true indicators of our underlining growth. Perion-1 contribution x-stack continue to be the main profit driver, representing 81% of the total contribution x-stack, up from 75% in the first quarter of 2025. We expect this structural shift to continue, with Perion-1 growing to 85-90% of the full year 2026. With respect to our search revenue, as we transition away from the Microsoft agreement, the margin profile of our search activity is naturally shrinking. As a result, even though search revenue increased year-over-year by 21%, the related contribution stock decreased by 70%, as expected. Adjusted EBITDA for the first quarter was half a million dollars compared to $1.8 million in the first quarter of 2025. While we are laser-focused on operational efficiency and disciplined execution, the year-over-year delta was expected. This reflects the incremental expense base from the GreenBits acquisition in the second quarter of 2025 and additional go-to-market investments to support our three-year growth plan. In addition, during the first quarter of 2026, the headwinds of the US dollar weakness represented $1.4 million impact related to foreign exchange. Excluding this foreign exchange impact, adjusted EBITDA would have been $1.9 million, largely flat year-over-year, despite the additional costs planned for. As we onboard several large strategic agreements, currently in advanced stages, we expect adjusted EBITDA to inflect meaningfully in the second half of the year. This is consistent with the second half-weighted profile of our business, similar to last year. On a gap basis, net loss was $10 million or $0.26 per diluted share. This compares with a net loss of $8.3 million or $0.19 per diluted share in the first quarter last year. On a non-gap basis, net income was $4.8 million or $0.11 per diluted share. This compares with $5.4 million or $0.11 per diluted share in the first quarter last year. Net cash provided by operating activities was $6.7 million and adjusted free cash flow was $7 million. The cash generative quality of our business model and our disciplined CapEx investments practices ensure that our internal operations are streamlined to support our growth. We ended the first quarter with $293 million in cash, cash equivalents, short-term bank deposits and marketable securities on our balance sheet. While we continue to generate positive cash flow from operations, the $20 million reduction from year-end is driven by $24.1 million returning cash to our investors in a form of share repurchases. This strong liquidity profile gives us the financial flexibility to pursue organic investments, M&A opportunities, and continued shareholders' return. Our capital allocation priorities remain highly disciplined, focused on creating long-term value. During the first quarter, we repurchased 2.5 million shares for a total of $24.1 million. Under our current authorized program, we have now repurchased a cumulative total of 15.3 million shares for $142.2 million. Since the program's initiation, we have acquired these shares at an average price of $9.27 per share. This is notably lower than our average stock price at the last 30 days. By doing so, we have already generated immediate, tangible value for our shareholders. Buying back our own stock at current valuation levels, alongside disciplined organic and inorganic investments, is the most effective use of our access cash. It reflects our confidence in Perion's long-term intrinsic value. Despite the expected macro headwinds for the second quarter, given the momentum we see building in our pipeline for the back half of the year, particularly the several large strategic agreements that are in advanced stages, we are reiterating our full year 2026 guidance. To conclude, Payon entered 2026 with a strong financial foundation, a proven platform strategy, highly disciplined operations and a set of growth engines that are constantly outpacing their markets. The infrastructure is in place, the pipeline is building continuously and we are prioritizing sustainable, profitable growth and long-term value creation for our shareholders. With that, I will turn the call back to the operator to open the line for questions. Thank you.