Perion Network (NASDAQ:PERI) reported first-quarter financial results on Wednesday. The transcript from the company's first-quarter earnings call has been provided below.

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Summary

Perion Network Ltd reported a 6% year-over-year increase in Perion 1 spend, with total revenue for Q1 2026 at $90.4 million, despite macroeconomic headwinds.

Advertising Solutions revenue decreased due to a decline in web activity, but Perion 1's contribution x stack increased by 7%, signaling a strategic shift towards this platform.

The company expects a meaningful EBITDA inflection in the second half of the year, driven by strategic agreements and a strong pipeline, reiterating their full-year guidance for 2026.

Perion Network Ltd's net loss on a GAAP basis was $10 million, but the non-GAAP net income was $4.8 million, maintaining a strong liquidity position with $293 million in cash and equivalents.

Management highlighted the significant growth of Outmax, emphasizing its unique capability to operate across CTV, web, and social platforms, and discussed ongoing investments in AI and strategic agreements to bolster future growth.

Full Transcript

OPERATOR

Retail media have been consistently outpacing the broader market. These impressive growth rates drove a 6% year over year increase in total perion1 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 Perion 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 ex stock 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 Perion One 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 Perion One platform, Contribution x Stack and Spend are becoming the true indicators of our underlining growth. Perron One Contribution XSTAC 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 One growing to 85 to 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 ex stuck 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 from 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 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 GAAP 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 GAAP 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 and in a form of share repurchases. This strong liquidity profile gives us the financial flexibility to pursue organic investments, MA 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 excess 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, Perion 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, 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. We will now begin the Q and A. If you would like to ask a question, we ask that you please use the raised hand function at the bottom of your zoom screen. Or if you have dialled in, please press Star nine. Our first question today comes from Andrew Marrock at Raymond James. Andrew, you may now unmute your line and ask your question. Thank you.

Andrew Marrock (Equity Analyst)

Hi, thanks for taking my questions. Wanted to start off with one on outmax. Some really good numbers there and we're seeing the agency space getting increasingly crowded I guess. How are you differentiating outmax in the marketplace in your go to market process that is allowing it to more than triple spend year over year. And then I have a follow up.

OPERATOR

Yeah, thank you, Andrew. Yes. So you saw Outmax, the AI agent technology that we have grew by over 300%. The main thing in our main advantage is we're the only technology out there that can perform this across both CTV, web and social with the walled gardens, which is a major advantage. To have only one AI agent technology and infrastructure that can run across all those channels, all those platforms is a major, major advantage. Great, thank you.

Andrew Marrock (Equity Analyst)

And then maybe one for Elad. Can you expand a little bit on the commentary that you gave in your prepared remarks on the uneven macro conditions and some of the caution you're seeing from advertisers? You know, from your peer set. We're kind of hearing feedback that's, that's quite variable. So I'd just like to get a little bit more granularity of what you're seeing from your position. Thank you.

Elad

Sure. Thanks Indra. So in terms of the headwinds that we are seeing, we see that the inflation in the, in the oil prices and all of the tension in the Middle east caused some uncertainty in terms of the budget spends especially I would say around CPG we see and slightly around auto in. In addition to that we are continuing to see the slow, I would say short, short planning cycles of the, of the advertisers in terms of their, their budget spend. So this is what we see currently in, towards, in towards Q2. But it is important to say that we already started to see some more momentum growing in our pipeline towards the second half of the year. Now of course we do not know yet the timing of when one of those headwinds will really be over. We don't know to anticipate but we do see more and more strength into our pipeline moving forward especially around Outmax, the adoption of more and more customers to this solution. And of course we're taking all of those consideration when we are building the guidance towards the rest of the year. Thank you. Appreciate the detail.

OPERATOR

Thank you. Our next question comes from Jason Healthsteam at Offenheimer. Jason, please unmute your line by pressing Star six and ask your question.

Jason Healthsteam

Hey Dan, can you hear me? Yes, thank you. Yeah, good morning. So first your comment just about you know tracking total spend which we agree with. Are you planning to break down total spend by between advertising and search or that was just a comment of like you know, just one number for that and then I've got some follow ups.

OPERATOR

Okay. So in terms of the spend our main growth, our main focus and today's focus as you know is around parent one. So definitely for par one we'll continue to give the spend levels for parent one and to give the trajectory of how much we are growing year over year of course and also as you saw we started to provide spend also for our growth engines. How does CTV Digital Auto form contribute in terms of spend? How exactly out next is performing internal spend and this is how we are managing our day to day operation in the business as well. So we attack this one together in search as much as it's not right now our our main strategic focus of the business. We are it's still stabilize and we are providing obviously most of the trajectory moving forward in terms of contribution extracts of course to give it the full profitability of the business.

Jason Healthsteam

And I think search was better than expected in the quarter. Just any thoughts why that happened?

OPERATOR

Yes, so we saw a minor increase in search spend say year over year. This is contributing to 21% in revenue search year over year. But if you are looking at from a contribution X stack which is more importantly as we are shifting out from Microsoft and focusing on other search providers, as expected the margins are lower. The contribution X stack from search activity was actually reduced year over year and I have to say it was exactly as we build into our guidance this year. So despite seeing the contribution X Stack flat year over year actually what you are seeing is Perion One is contribute increased of 7% year over year in the contribution next stock and search is actually declining but ended up exactly as we expected at the beginning of the year.

Jason Healthsteam

Okay. And then I guess with the the weaker advertising in the quarter I think relative to what folks were expecting yet you know you're still Keeping your full year guidance. I mean how much is this, you know, kind of known versus unknown? I mean obviously the macro is unknown, right? I think you said that this macro was maybe a little worse than you thought in the quarter, but yet you're again still keeping your full year guide the same and you were assuming, you know, new clients start spending. So I guess like why is that the most prudent way to look at this right now? Why not kind of lower the full year outlook for the maybe weaker sec, weaker first quarter? I don't know. Why is this the right way to look at the business right now?

OPERATOR

Okay, so I, I will touch this in three different points. I was in the first. We do see tangible pipeline that's increasing already towards the second half of the year coming from adoption of Outmax as we saw by the way in previous quarter. If you remember the land and expand model, it takes time to ramp but we, we see in the traction right now and we see the, the adoption towards the second half in addition to that and I discussed in the meeting in my script, we have few strategic agreements that are expected to be closed very soon to onboard already in the next few weeks in, in Q2 and we will start to see the ramp already in the second half of the year. So those I would say two initiatives are, are tangible things that we see and we are building into the, into the pipeline. I would add also that in terms of the EBITDA that will help our growth, but also from expense perspective, we are investing right now at the right place that will give us this growth to H2, same as we did last year, both from growth perspective and both and also from EBITDA perspective on the efficiency level as we saw last year, the second half of the year is much more, we are much more heavyweighted towards the second half and it's very much important right now to continue our investment in terms of the growth but also in terms of the efficiency that we'll be able to see the benefit going into the second half of the year. Okay, thank you. Thank you. Our next question today comes from Matthew Weber at canaccord. Matthew, you may now unmute your line and ask your question. Thank you.

Matthew Weber (Equity Analyst)

Thanks so much for taking the question. Just wanted to ask about your comments on pivoting the sales leadership team to better convert pipeline into realized revenue. Can you just provide some additional color on what this entails? Are you looking to make new hires, altering the compensation structure of employees or reorganizing the team? And then I have a quick Follow up?

OPERATOR

Yeah, absolutely. Thank you for your question. So the main idea is how do we streamline growing pipeline towards conversion? So we're flattening our organization. As I said, part of the call that Steven Yap is transitioning out of his role and we're flattening the organization to make it more streamlined and more efficient. We're also introducing a lot of new AI capabilities to the sales team, especially a new capability of AI SDR which is liquidation with faster turnaround from leads to sales. And we are now mainly focusing as we advance our technology, focusing a lot on accelerating ourselves. So that's part of it.

Matthew Weber (Equity Analyst)

Got it, thank you. And then just on the launch of outmax to African markets, I believe it's currently available in in South Africa. What does the timing for a broader continental rollout look like and are there any major investments you still need to make to support these efforts or is it just a matter of execution?

OPERATOR

Right, so you know, we've, we've just launched this new partnership with those two new partners to see how do we work on a reseller agreement and have mainly outmax with resellers across now Africa. But we're going to put a lot of efforts to launch new more and more resellers going forward. We believe it's outmax is the perfect product for resellers. It's an easy pitch, easy setup. There are worldwide the majority of budgets in marketing sits within Meta, YouTube and TikTok. So it's pretty perfect anywhere on the planet. At the same time we can grow without adding extra cost to our P and L. So you know, it's, we believe it's only the beginning of something that can become much bigger worldwide. The reseller program that we launched. Thank you. Very helpful. Thank you. Our next question today comes from Laura Martin at Needham. Laura, you may now unmute your line and ask your question. Thank you.

Laura Martin (Equity Analyst)

Hi 2. So the advertising growth was negative. 4 total growth was for net tech was zero and most of the industry is reported now. I think you're last so and then really the benchmark was 10 to 12. So could you talk about how you're planning to close the gap to the rest of the ad tech industry growth rates and then secondly AI, could you talk about what you're doing with Generative AI internally to cut costs and then externally to increase sales velocity. Not sales velocity, but like new products, product velocity and how you think it helps you reattain growth in the advertising part of your business. Thank you.

OPERATOR

Hey Laura. So I will take the I, I will take the first question and then I'll hand over to Charles. So in terms of the advertising solution revenue, the reason for the decrease that we see right now in the advertising solution revenue line is mainly related to product mix from an accounting perspective. There are certain products that are recognized on a net basis and some of them are recognized on a gross basis. That's why we as and by the way more as we are leaning more and moving more towards pair and one solution, we'll see more and more revenue recognized on a net basis. That's why we started to focus more and more on the contribution X stock in the span because as you see in this quarter those are really reflecting the real trajectory of the business as the leading indicator for how we are growing. So the spend of firm one increased 7%, the 6%, I'm sorry the contribution X stock increased by 7%. So I would say the gap that you're referring to from the peers is not that different. We do, we are I would say investing more as I said towards the go to market and we change some of our sales strategies as discussed and we're building the pipeline in, in our models we are seeing much more increased, I would say growth more in line by the way with the plan that we provided also towards the 2028 three year plans that we provided. Yeah to stick to the AI anyway.

Charles

And you know as for AI, we have two layers of AI Obviously Billion one and Outmax is fully AI driven and the new products that we're about to launch are fully agentic but on the internal part, you know, everything is becoming AI driven from our R and D. It's fully deployed with code cloud and we do see accelerated development and accelerated launches of features. And internally like I said before, one of the example is we now have an AI agent for an SDR. It's all part of the 2028 plan that we, we announced three months ago. We believe we're going to start seeing even more meaningful efficiency in H2 because we do deploy pretty fast our AI solution mainly for the efficiency part.

Laura Martin (Equity Analyst)

Okay, maybe I'll just follow up. So Google did its IO Developers conference sort of keynote yesterday and their vision tal is to get consumers in via search and then keep them in the Google perimeter and become essentially a gatekeeper and not really let them get to the open Internet. Is there anything really you or any open Internet company can do? If Google's vision is to keep consumers within their perimeter for all discovery purchase consideration, essentially displacing the purchase funnel that we know, today. Do you have any points of view about that?

OPERATOR

Yeah, absolutely. I think it's a great question and I, I actually thought it was, you know, kind of brilliant on their behalf. Now, as you probably remember, we said that two years ago that Large Language Models (LLMs) are going to take over web is not going to be the future. Open web is not going to be the future. This is why two years ago we started moving from open web in towards out of home, which is a channel that is not going to get affected by Large Language Models (LLMs) and closed gardens. So Outmax works on YouTube, Meta TikTok, things that are not getting affected by those Large Language Models (LLMs). But in parallel, our Outmax AI team, the development team are already researching how do we employ deploy Outmax on platforms such as ChatGPT and Google Shopping ads. So that's only, that's already in the works. It requires a bit more development, but we're focusing on the marketing budgets, not on the channels themselves. And as I said in the past, we want to be channel agnostic. Wherever advertisers would want to advertise, we're going to be there. Now if you look at the new product of Google, the major parts are basically Google Shopping ads. So it's not fully organic. Advertisers would still need to go through that. And that's why our outmax team are investigating how do we get outmax to deploy also on Google Shopping ads. That's going to take a bit of time, but we're totally focusing on it. Super helpful. Thank you. Thank you. Our next question today comes from Jason Crier at Craig Hallam Capital. Jason, you may now unmute your line and ask your question. Thank you.

Jason Crier

Thank you. Just one question for me. Wanted to talk about the customer pipeline. You've talked a few times just about your confidence in the second half of the year. Can you give color on how the RFP processes has evolved over the last couple of quarters? Maybe how the different conversations have changed as Perion 1 and as Outmax have evolved.

OPERATOR

Thanks. Sure. Thank you for the question. So I think two moving parts, the RFPs. We see that, we saw that last year as well, that advertisers do not plan a year ahead. It's three months to six months top ahead and that didn't change. It's still the same pacing. The thing that we have a bit different this year is the reseller agreements. So we launched two resellers in Africa. We have a few more agreements which we consider strategic. We do believe that they're going to start ramping up in H2 which give us a bit more confidence about our pacing. And we do work on other things that we're going to announce once they're ready. But on an RFP to rfp, it's the same kind of pacing that we saw last year that didn't change. It's mainly the more strategic parts like the things we just announced.

Eric Martinuzzi

Thank you. Our next question comes from Eric Martinuzzi at Lake Street. Eric, you may now unmute your line and ask your question. Yeah, can you hear me? We can hear you. Thank you. Yes. Okay, thanks. So the, the three year plan anticipates this. You talk about the platform one contribution xtac at about a, a 20% CAGR and just based on kind of the early days. Typically CAGRs in the early years are greater and then they slow down in the later years. And yet we're in what I think I heard you was 6% or I guess 7% contribution XTAC. Was that where we were for Q1?

OPERATOR

Yes, 7%. And remember that our business, like most ethic business is extremely seasonal. So Q1 is, is the weakest out of the quarters typically. And we do see a 7% increase.

Eric Martinuzzi

As you go through. As you go. I'm just wondering, you know, at a certain point we've actually got to get better than 20. I'm just trying to size up this three year progression, right. If we're starting out and kind of a mid to high single digits here, at what point should we anticipate, you know, is, are you guys already seeing, hey, this is a slam dunk. We're already based on the pipeline, we're going to see 20% plus in the back half of 2026.

OPERATOR

So, so to, to, to answer your question, I will, I will divide my answer for a second for this. First of all, when you're looking at 2028, we discussed right out of the get go that we'll have to bring some investment in the, at early stages, early stages to ramp it up and why and the reason why we showed the landing expense because it takes time to get to the customers we started. If you remember, the previous customer that we saw the first year was only 50k in terms of spend. Second year it was ramped up to 4.5 million and the third year was more than $20 million in spend in different channels etc. And so this is very much also how what you are thinking about the 2028 model with the terms of the lender extent. So it takes time to ramp up. Now when I'm talking specifically about 2026. We do expect to see the second half of the year to be I would say in double digit growth and aiming towards the 20% already towards the the fourth quarter of the year. So we will start seeing this ramp Sorry, could you repeat that last I said it for 2026. We will start of course to see the ramp along the year and I believe that already in Q4 we'll start to see the double digit growth aiming towards 20% already in Q4 in this year. Okay. And then the the contribution ex tech margin was that totally at the hand? It was. It was below what I was anticipating. Another way to put it is hey it was an increased tac. Is that pretty much all search related in your mind?

Eric Martinuzzi

It's very much search related. Is search becoming I would say smaller part of our business and parent one isn't will increase its part of of the overall contribution. We'll see the margin go goes up as I discussed earlier about the net recognition and etc. So definitely something that we see. We need to remember that the search has lower seasonality that all of the rest of our business so in in Q1 you'll see that the search contribution ex stock was roughly 19 19% of the business or 18% of the overall contribution extract. So and if you remember last quarter we said that the overall current one will be 85 to 90%. So along the year we'll see the the seasonality much more rapid in with respect to PER1 and the margin will increase as well.

OPERATOR

Okay, got it. Thanks for taking my questions.

Jeff Martin (Equity Analyst)

Thank you. Our final question today comes from Jeff Martin at Roth Capital Partners. Jeff, you may now unmute your line and ask your question. Thank you. Thank you. I appreciate it. You made mention in your prepared remarks about onboarding agreements will drive a meaningful EBITDA inflection. Just curious if you could elaborate on what those agreements are and the timing in terms of the EBITDA inflection.

OPERATOR

So in terms of this agreement a few strategic agreement that we start working on them already last year. Of course they are taking they're taking time but we are really right now with the final stages and we start to see more of this of their contribution is start on board to our platform. It does take time. We believe that we're going to see some ramp up but relatively to period in terms of the span and then of course I cannot really speak about who are those names in terms of confidentiality but they are very heavy on the spend of how much they are running in different different Markets and from the test that we did with them and we saw the network and what is the potential and how much we are believing that the ramp up of the of their customers will be etc. We see very good traction towards second half of the year and it should start of course building even higher going forward to next year's. This is obviously some of the high volume agreements that we have discussed that we expect to sign during this year. Great.

Jeff Martin (Equity Analyst)

And then my second question is and I know this is not the core growth focus of the business. It's not a growth focus at all. But the web advertising, you go back, you know, six to nine months commentary was that this business was flattening out for you and it sounds like in Q1 it was more pressure on, on growth perhaps. And relative to your initial guidance for 2026, how much of a headwind is any, you know, negative shift in web create a hurdle for hitting your full year guidance?

OPERATOR

Thanks. So we do not, we do not see the web shift is actually our guidance. If you look at the revenue you see the -4%. Obviously it's come mostly from web but we need to remember that web was relatively low margin and at the beginning of 2025 we took proactive action to close even some of the web solution that we are providing. If you look at the contribution X stack level you will see that the CTV and out of home and outputs of course are actually compensated on the web shrinking. So we grouped year over year. I believe that this is is coming from the overall market and budget that are shifting away from open web as we have discussed moving into more closed gardens and and a digital out of home and CTV and also of course I believe in to the LLMs in the in the next future. So overall as we are seeing more revenue flowing for the parent one we are, we are becoming more channel agnostic and we are not really prioritizing our or performance or doing the performance based on certain channels and more focusing on the ROI for the advertise. So overall we are not expecting this to change where we are at the guidance right now. Thank you. Thank you. This concludes today's qa. I will now pass back to Tal Jacobson for closing remarks.

Tal Jacobson

Thank you everyone for joining us at the Q1 earning call. We will continue to invest and advance our technologies and continue to invest in our clients and the adoption rate should be increasing and we'll see you next time. Thank you.

OPERATOR

This concludes today's call. Thank you everyone for joining. You may now disconnect.

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