Perion (PERI) Q1 2026 Earnings Transcript

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DATE

Wednesday, May 20, 2026 at 8:30 a.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Tal Jacobson
• Chief Financial Officer — Elad Tzubery

TAKEAWAYS

• Revenue -- $90.4 million, representing a 1% increase year over year, with Advertising Solutions at $66.7 million and Search at $23.7 million.
• Total Contribution ex-TAC -- $39.7 million, flat year over year, producing a stable 44% margin.
• Adjusted EBITDA -- $0.5 million, down from $1.8 million in the same period last year, reflecting higher go-to-market investment and the Green Bits acquisition.
• Cash Flow from Operations -- $6.7 million, with adjusted free cash flow at $7 million during the quarter.
• Net Cash Position -- $293 million as of quarter end, after $24.1 million in share repurchases.
• Share Repurchase -- 2.5 million shares repurchased for $24.1 million in the quarter; 15.3 million cumulative shares acquired for $142.2 million at a $9.27 average price.
• Perion One Spend -- Increased 6% year over year, reflecting rising adoption and platform momentum.
• Outmax AI Agent -- Grew spend by over 300% year over year and expanded to TikTok, already generating over $1 million in spend in the quarter; performance lift on TikTok reached up to 25%.
• CTV Spend -- Climbed 68% year over year to $18 million, indicating sector leadership among growth engines.
• Digital Out-of-Home Spend -- Increased 29% year over year to $60.6 million, demonstrating further global expansion.
• Retail Media Spend -- Rose 27% year over year to $36.5 million despite some softness in the CPG vertical.
• Contribution ex-TAC from Perion One -- Rose 7% year over year and reached 81% of total contribution ex-TAC, up from 75% last year.
• Search Revenue and Margins -- Search revenue grew 21% year over year, but contribution ex-TAC from search dropped 70% due to lower-margin partner transitions from Microsoft (NASDAQ:MSFT) to alternative providers.
• Foreign Exchange Impact -- $1.4 million headwind from U.S. dollar weakness; excluding this, adjusted EBITDA would have matched last year's levels.
• Guidance -- Full-year 2026 guidance reiterated, supported by expected onboarding of large, strategic agreements and pipeline strength into the second half.
• Reporting Change -- Shift away from channel-level revenue disclosure; company will now emphasize spend as the leading performance indicator and Perion One platform growth.
• Management Change -- Chief Revenue Officer Stephen Yap will transition out as part of a sales leadership realignment aimed at improving pipeline conversion and efficiency.
• Geographic Expansion -- Exclusive partnership with Murley Media and Media Mark to resell Outmax and digital out-of-home technology across Africa, providing entry to a programmatic market forecasted at $6.5 billion by 2029.

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RISKS

• Chief Financial Officer Tzubery stated, "the headwinds of the U.S. dollar weakness represented $1.4 million impact related to foreign exchange."
• Tzubery also cited "uneven macro conditions and some of the caution you're seeing from advertisers," specifically pointing to inflation, fluctuating oil prices, and budget caution in the CPG and automotive sectors.
• Advertising Solutions revenue declined due to anticipated web activity decrease, with negative 4% growth called out during the Q&A.
• Contribution ex-TAC from search dropped 70% year over year as the company transitioned away from higher-margin Microsoft (NASDAQ:MSFT) agreements.

SUMMARY

Perion Network (NASDAQ:PERI) delivered a 1% year-over-year revenue increase to $90.4 million, with higher spend across CTV, retail media, and digital out-of-home channels partially offsetting web declines. Management emphasized a strategic pivot to platform-agnostic, AI-driven execution, highlighted by Outmax's rapid expansion and new TikTok integration, resulting in over 300% growth in spend on that solution. The company maintained a robust net cash position of $293 million, fuelled by positive cash flows and disciplined capital deployment including $24.1 million in share repurchases. Despite advertiser caution related to macro pressures and lower margins in search, Perion reiterated full-year 2026 guidance based on a pipeline of large, strategic agreements expected to ramp in the second half, alongside a structural move to prioritize spend and contribution ex-TAC as primary indicators of platform strength. The management transition and expanded African reseller partnerships suggest further operational and geographic scaling ahead.

• Jacobson stated, "Outmax, AI agent technology that we have grew by over 300%," with competitive differentiation as a unified infrastructure for CTV, web, and social platforms.
• Management confirmed Perion One will account for 85%-90% of total contribution ex-TAC for 2026, up from 81% currently.
• CFO Tzubery affirmed that the reported drop in advertising solution revenue is due to a mix shift towards solutions recognized on a net basis rather than a decline in underlying customer spend.
• Share repurchases have generated "immediate tangible value for our shareholders," according to Elad Tzubery, with the buyback average below recent market prices.
• Reseller and agency partnerships in Africa are positioned to accelerate Outmax platform distribution without increasing operating expenses.

INDUSTRY GLOSSARY

• Contribution ex-TAC: Revenue minus traffic acquisition costs; a core profit measure for ad tech platforms separating direct platform value from pass-through costs.
• CTV: Connected TV, describing ad inventory served through internet-connected television devices and platforms.
• CPG: Consumer Packaged Goods, a key advertising customer vertical referenced for sector softness.
• Outmax: Proprietary AI agent technology developed by Perion, central to their platform and cited for multi-channel campaign optimization.
• Perion One: AI-native execution infrastructure platform designed to unify advertising campaign execution across multiple digital channels, serving both advertisers and publishers.
• Ex-TAC: "Excluding Traffic Acquisition Costs," isolating revenue net of payments made to third-party inventory sources.

Full Conference Call Transcript

Tal Jacobson: Good morning, and thank you for joining us on Perion's earnings call for the first quarter of 2026. 2025 was year 1 for the new Perion. 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 channel, 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 Green Bits acquisition is growing rapidly and is becoming a meaningful part of Perion One.

A few important data points from our quarterly numbers, the Perion One 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 acquisitions high stacking green bits were extremely successful as both out-of-home and Outmax 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. Budget, 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. Perion One 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 Perion One, 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, Perion One improves efficiency, performance and outcomes end-to-end. Perion One is an infrastructure, not a tool set. The most advanced part of Perion One is the Outmax technology, our AI agent, which is showing tremendous growth. Outmax goal is to be the one AI agent for every channel, whether it's YouTube, Facebook, Instagram, NBC or Disney Plus, 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 Perion One and on external platforms. We are 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. Outmax for TikTok early results are strong, with Outmax 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 in a global path to allow us to scale across more customers and more platforms. This quarter, we entered into an exclusive partnership with Murley Media and Media Mark, 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 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. Bouygues Telecom, one of the leading French telcos, deployed Outmax across always-on campaigns. The 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 Outmax 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 U.S. with a younger performance-oriented audience. This makes YouTube a crucial channel for reaching their consumers.

C4 energy, turn to Perion to achieve a greater control across their audience targeting and contextual placement on YouTube, and the results speak for themselves. As capable view rate of 80% above the benchmark, a 20.7% lift in brand awareness and a 4.1% lift in brand at recall. Wener, a clothing brand known for its youthful style and bold statement pieces ran a multichannel campaign across Meta in YouTube with Outmax AI agent, continuously optimizing delivery in real time. Results show how Outmax delivers performance across multiple platforms with multiple KPIs. And finally, Vazanine, a campaign that demonstrate 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-coated system updated in real time. The campaign delivered over 1.65 million impressions, turning everyday commutes into moments of relevant contextual skin care education. This is an example of how digital out-of-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 believed that if creative could be optimized in real time, they would unlock 11% to 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 turned those signals into action in real time across channels. This is exactly the gap Perion One 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 road map, 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.

Elad Tzubery: 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 multichannel execution infrastructure, driven by the continued momentum in our growth engines, total Perion One spend increased 6% year-over-year. Outmax, 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 a strategic reseller initiatives in Africa by partnering with Media Mark and [indiscernible] Media to resell Outmax and programmatic digital out of home.

As part of Perion One's continued transformation, we will no longer provide a charter 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 ex-TAC. 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-TAC 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 3-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 Perion 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 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-TAC 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 ex-TAC 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 ex-TAC and spend are becoming the true indicators of our underlying growth. Perion One Contribution ex-TAC continued to be the main profit driver, representing 81% of the total contribution ex-TAC, up from 75% in the first quarter of 2025. We expect the 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-TAC decreased by 70% as expected.

Adjusted EBITDA for the first quarter was $0.5 million 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 Green Bits acquisition in the second quarter of 2025, and additional go-to-market investments to support our 3-year growth plan. In addition, during the first quarter of 2026, the headwinds of the U.S. 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 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 investment 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 the 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 excess cash.

It reflects our confidence in Perion's long-term intristic 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 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.

Operator: We will now begin the Q&A. [Operator Instructions] Our first question today comes from Andrew Marok at Raymond James. Andrew, you may now unmute your line and ask your question. Thank you.

Andrew Marok: I wanted to start off with one on Outmax, some really good numbers there. And we're seeing the agentic space getting increasingly crowded. I guess how are you differentiating Outmax in the marketplace and your go-to-market process that is allowing it to more than triple spend year-over-year? And then I have a follow-up.

Tal Jacobson: Yes. Thank you, Andrew. Yes. So you saw Outmax, AI agent technology that we have grew by over 300%. The main thing and our main advantage is we're the only technology out there that can perform this across both CTV, web and social with closed gardens, which is a major advantage to have only 1 AI agent technology and infrastructure that can run across all those channels, all those platforms is a major, major advantage.

Andrew Marok: Great. 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. From your peer set, we're kind of hearing feedback that's quite variable, so I'd just like to get a little bit more granularity of what you're seeing from your position.

Elad Tzubery: Sure. Thanks, so in terms of having that we are, we see that the inflation in the oil prices, a lot of the attention in the Middle East caused some uncertainty in terms of the bag expenses. Especially, I would say, around CPG, we see and slightly around auto. In addition to that, we are continuing to see the slow or say, short planning cycles of the [indiscernible] in terms of their budget spend. So this is what we see core towards Q2. But it is important to say that we always start 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 all of those headwinds will really be over. We do not know to anticipate, but we do see more and more strength into our pipeline more especially around Outmax, the adoption of more and more customers to this solution. And of course, we're taking all of those considerations when we are building the guidance towards the rest of the year.

Operator: Our next question comes from Jason Holcim at Oppenheimer. [Operator Instructions]

Jason Helfstein: Can you hear me? .

Operator: Yes

Jason Helfstein: your comment just about 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 just one number for that? And then I've got some follow-ups. .

Elad Tzubery: So in terms of the spend, our main growth -- our main focus and strategic focus is around Perion One. So definitely Perion One will continue to give the spend levels for 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 a spend also for our growth engines, how does CTV digital-of-home contribute in terms of spend how exactly how mix is performing in terms of spend. And this is how we are managing our take-doperation in the business as well. So we have tied this one together.

In search, as much as not right now our main strategic focus of the business, we are -- it's still stabilized and we are providing Obviously, most of the trajectory moving forward in terms of contribution next that, of course, to give you the full profitability of the business.

Jason Helfstein: And I think search was better than expected in the quarter. Just any thoughts why that happens?

Tal Jacobson: Yes. So we saw a minor increase in search spend, say, year-over-year. This is contributing to 21% in revenue research year-over-year. But if you are looking at it from a contribution next step, which is more importantly is we are shifting out from Microsoft and focusing on other search providers. As expected, the margins are lower, the contribution ex TAC from search activity was actually reduced year-over-year. I have to say was exactly as we build into our guidance this year. So recycling the contribution ex-TAC late year-over-year, actually, what you are seeing is that Perion One is increased of 7% year-over-year in the contribution ex-TAC.

And search is actually declining, but ended up exactly as we expected at the beginning of the year.

Jason Helfstein: Okay. And then I guess with the weaker advertising in the quarter, I think, relative to what folks were expecting, yet you're still keeping your full year guidance. I mean, how much is this 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're assuming new clients start spending. So I guess like why is that the most prudent way to look at this right now?

Why not lower the full year outlook for the maybe a weaker first quarter, I don't know why is this the right way to look at the business right now?

Elad Tzubery: Okay. So I will answer this in 3 different points. First, we do see tangible pipeline at increasing already towards the second half of the year coming from adoption of Outmax mix. As we saw by the way in the current quarter, if you remember the land and expand model, it takes time to ramp, but we see in the friction right now. And we see the adoption towards the second half.

In addition to that, and I discussed in the my script, we have a few strategic agreements that are expect to be to very soon to onboard already in the next few weeks in Q2, and we will start to see the ramp already in the second half of the year. So those, I would say, 2 initiatives are tangible things that we see, and we are building into the pipeline.

I would add also that in terms of the EBITDA, that will have growth, but also from an expense perspective, we are investing right now in the right place that will give us this growth to H2 sales we did last year, both from a growth perspective 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 will be able to see the benefit going into the second half of the year.

Operator: Our next question today comes from Matthew Weber at Canacol Matthew.

Matthew Weber: Just wanted to ask about your comments on pivoting the sales leadership team to better convert pipeline into the 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. .

Tal Jacobson: Yes. Absolutely. Thank you for your question. So the main idea is how do we streamline our 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 eating 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 late qualification 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: Got it. And then just on the launch of Outmax to African markets, I believe it's currently available in South Africa. What is 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?

Tal Jacobson: Right. So we've just launched this new partnership with those 2 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 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 planet. At the same time, we can grow without adding extra cost to our P&L.

So it's -- we believe it's only the beginning of something that can become much bigger worldwide, the reseller program that we launched.

Operator: Our next question today comes from Laura Martin at Needham.

Laura Martin: So the advertising growth was negative 4%. Total growth was -- for net TAC was 0. 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 product velocity and how you think it helps you retain growth in the advertising part of your business.

Elad Tzubery: I will take the first question, and then I'll hand over to Tal. So in terms of the advertising solution revenue, the reason for the decrease that we see right now in the other 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 -- and by the way, is more -- as we are leaning more and moving more towards Perion 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 ex-TAC and the spend because as you see in this quarter, those are really reflecting the real trajectory of the business is the leading indicator for how we grow. So the spend of Perion One increased 7%, the -- 6% sorry, the contribution ex-TAC increased by 7%. So I would say the gap that you're referring to from the peers is not different. We do we are I would say, investing more, as I said, towards the go-to-market, and we changed some of our sales strategy as discussed, and we're building the pipeline.

And 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 events that we provide.

Tal Jacobson: For AI, we have 2 layers of AI. Obviously, Perion One.and Outmax is fully AI driven. And the new products that we're about to launch are fully agenetic. But on the internal part, everything is becoming AI-driven from our R&D, it's fully deployed with cost closed, and we do see accelerated development and accelerated launches or features. And internally, like I said before, one other example is we now have an AI agent for [indiscernible]. It's all part of the 2028 plan that we announced 3 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 may put the efficiency part.

Laura Martin: Okay. Maybe I'll just follow up. So Google did its IO Developers Conference sort of keynote yesterday. And their vision tile 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?

Tal Jacobson: Yes, absolutely. I think it's a great question. And I actually thought it was kind of related on their behalf. Now as you probably remember, we said that 2 years ago that LLNs are going to take over, [indiscernible] is not going to be in the future, OpenWeb is not going to be the future. This is why 2 years ago, we started moving from Open Web and towards out-of-home, which is a channel that is not going to get affected by L&M and closed gardens. So Outmax works on YouTube, TikTok things that are not getting affected by those LLNs.

But in parallel, our Outmax AI team, the development team are already researching how we deploy Outmax on platforms, such as ChatGPT and Google Shopping ads. So 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.

Operator: Our next question today comes from Jason Kreyer at Craig Hallum Capital. [Operator Instructions]. .

Unknown Analyst: Just 1 question for me. I 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 a color on how the RFP processes has evolved over the last couple of quarters? Maybe how the different conversations have changed as Perion One and as Outmax have evolved?

Tal Jacobson: Sure. Thank you for the question. So I think 2 moving parts. The RFPs, we see that -- and what we saw that last year as well that evidence do not plan a year ahead. It's 3 months to 6 months top ahead. And that didn't change. It's still the same pace. The things that we have a bit different this year is the reseller agreements, so we launched 2 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 pace that we saw last year. That didn't change. It's mainly the more strategic parts like the things we just announced.

Operator: Our next question comes from Eric Martinuzzi at Lake Street.

Eric Martinuzzi: So the 3-year plan anticipates this -- you talked about the Platform One contribution ex-TAC about 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 ex-TAC. Was that where we were for Q1?

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

Unknown Analyst: As you go AC I'm just wondering, at a certain point, we've actually got to get better than 20%. I'm just trying to size up this 3-year progression, right, if we're starting out in kind of mid- to high single digits here. And at what point should we anticipate -- are you guys already seeing, "Hey, this is a slam on brady based on the pipeline, we're going to see 20% plus in the back half of 2026?

Tal Jacobson: So to answer your question, I would be not a poser. First of all, when you're looking at 2028, we discussed right out the behind that we'll have to bring some investment in the early stages to ramp it up. And the reason why we showed the lending 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 $50,000 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, et cetera.

So this is very much also how what you are thinking about the 2028 model with the terms of an extent. So it takes time to ramp up. Now when I'm talking specifically about 2026, we do expect to see in the second half of the year to date, I would say in double-digit growth and aiming towards the 20% already towards the fourth quarter of the year. We will start seeing this [indiscernible].

Unknown Analyst: Sorry, can you repeat that last?

Tal Jacobson: I said it for 2026, we will start, of course, to see the of 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.

Eric Martinuzzi: And then the contribution ex-TAC margin, was that totally at the -- it was below what I was anticipating. Another way to put it is, say that it was an increased tech. Is that pretty much all search related in your mind? .

Tal Jacobson: It's very much search related. Search becoming, I would say, a smaller part of our business. And Perion One, will increase its part of the overall contribution, we will see the margin goes up, as I discussed earlier about the net recognition and et cetera. So definitely this is something that we see. We need to remember that the search has lower seasonality than all of the rest of our business. So in Q1, you'll see that the search contribution ex-TAC was roughly 90% million of the or 80% of the overall contribution ex-TAC. So if you remember, last quarter, we certainly said that the overall turn 1 will be 85% to 90%.

So along the year, we'll see the seasonality much more revenue with respect to Perion One and the margin will increase as well.

Operator: Our final question today comes from Jeff Martin at ROTH Capital Partners.

Jeff Martin: 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?

Elad Tzubery: So in terms of this agreement a few strategic agreement that we start working on them over the last year, of course, they are taking time. But we are maybe right now with the final stages, and we start to see more of this lock their contribution is start to onboard 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 spread. And then of course, I cannot really speak about who are those names and in terms of geography, but they are very heavy on the spend of how much we are running in different markets.

In 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 their customers will be, et cetera, we see very good traction towards the second half of the year. And it should start, of course, building even higher going forward to next year. This is obviously some of the high-volume agreements that we have discussed that we expect to sign during this year.

Jeff Martin: Great. 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 6 to 9 months commentary was that this business was flattening out for you, and it sounds like in Q1, it was more pressure on growth perhaps and relative to your initial guidance for 2026, how much of a headwind is any negative shift in web create a hurdle for hitting your full year guidance? .

Elad Tzubery: So we do not see that we shift is actually. If you look in the revenue, you see the minus 4%. Obviously, it's come mostly from web, but we need to remember that web was relatively low margin. And we -- at the beginning of 2025, we took proactive action to close some of the web solutions that we are providing. If we look at the contribution ex-TAC level, you will see that the CTV and out of home and Outmax, of course, are actually compensated on the way of shrinking. So it grew year-over-year.

I believe that this is it's coming from the overall market and budget that are shifting away from Open Web as we have discussed, moving into more closed gardens and CTV and also, of course, I believe, to the LLMs in the next future. So overall, as we are seeing more revenue flowing for the Perion One, we are becoming more channel-agnostic and we are not really prioritizing or performance -- or doing the performance based on certain channels. and more focusing on the ROI for the advertise. And so overall, we are not expecting this to change where we are at the guidance right now.

Operator: Thank you. This concludes today's Q&A. I will now pass back to Tal Jacobson for closing remarks.

Tal Jacobson: Thank you, everyone, for joining us on the Q1 earnings 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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