Perion Network Q2 2025 Earnings Call Transcript

Quartr
Provided by Quartr
August 11, 2025

Key Takeaways

  • Positive Sentiment: Perion is executing a long-term shift to its Perion One CMO platform, supported by the Highstack and Greenbits acquisitions, aiming to unify creative, data and AI under one brand.
  • Positive Sentiment: Q2 advertising solutions revenue grew 8% year-over-year—its first increase since Q3 2023—driven by retail media, digital out-of-home and web, while delivering $7.1 million in adjusted EBITDA, $21.3 million in operating cash flow and reaffirmed full-year guidance.
  • Negative Sentiment: Connected TV revenue declined 5% year-over-year, a drop management attributes to budget shifts into the second half, though they expect to outpace CTV market growth on an annual basis.
  • Positive Sentiment: They launched a new performance CTV feature in Perion One, turning CTV into an ROI-focused channel and opening high-intent budgets from mid-market brands and retailers.
  • Positive Sentiment: Programmatic digital out-of-home revenue surged 35% year-over-year, and Perion expanded its footprint with new partnerships in Korea, Germany and Italy.
AI Generated. May Contain Errors.
Earnings Conference Call
Perion Network Q2 2025
00:00 / 00:00

Transcript Sections

Skip to Participants
Operator

Good morning, twenty twenty five Earnings Conference Call. Today's conference is being recorded, and an archive of the webcast will be posted on the company website. The press release detailing the financial results is available on the company's website at www.perion.com. Before we begin, I'd like to read the following safe harbor statement. Today's discussion includes forward looking statements.

Operator

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 20 F that may cause actual results, performance or achievements to be materially different and any future results, performance 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 analyzed both on a GAAP and a non GAAP basis. While mentioning EBITDA, we will be referring to adjusted EBITDA.

Operator

We have provided a detailed reconciliation of non GAAP measures to their comparable GAAP measures in our earnings release, which is available on our website and has also been filed on Form six ks. Hosting the call today are Tal Jacobson, Perion's Chief Executive Officer and Eli Tubriz, Perion Chief Financial Officer. I would now like to turn the call over to Tal Jacobson. Please go ahead.

Tal Jacobson
Tal Jacobson
CEO and Director at Perion Network

Good morning, and thank you for joining us on the Perion's earnings call for the 2025. We continue to focus on our vision, a future where CMOs and their teams are powered by a centralized platform built for their needs. Contrary to CROs who rely on Salesforce, COOs on monday.com, and CTOs on Jira, CMOs who drive nearly $1,000,000,000,000 annually through the pipes of digital advertising lack a centralized platform that supports their needs. As of now, a comprehensive centralized platform tailored for marketer needs has not emerged. This creates a clear gap in the market.

Tal Jacobson
Tal Jacobson
CEO and Director at Perion Network

Perion One is a platform that connects media with measurable business outcomes: A channel neutral platform that brings together creative, data, and AI. That's the role we want Perion One to play, and the direction we're steadily moving towards. With every feature we develop, every channel we expand into, and every new advertiser we onboard, we're taking a clear step towards becoming the CMO platform of choice. The strategic shift into Perion One strategy didn't happen overnight. We've been planning it since late twenty twenty three.

Tal Jacobson
Tal Jacobson
CEO and Director at Perion Network

We believe this shift towards becoming the CMO centralized platform requires more than one product or one quarter. It requires long term deliberate transformation, and that's exactly what we've been building at Perion. Over the past eighteen months, we've been laying the foundation, reorganizing our structure, unifying our technologies, and aligning our go to market strategy with our long term platform vision. This is both a product evolution and a company wide transformation. In December 2023 we acquired Highstack, an advanced multifunctional digital advertising platform that we knew would evolve into the Perion One platform.

Tal Jacobson
Tal Jacobson
CEO and Director at Perion Network

This also allowed us to enter the exciting world of the global digital out of home space that shows great growth. In addition, we appointed key global executives to lead our new platform strategy. At the beginning of 2025, we announced Perion One strategy and focus on execution. Our strategy is about bringing together all of our technologies and brands under one unified platform that serves the new needs of the digital advertising world in the AI era. We acquired Greenbids, an AI first company to optimize and improve world garden performance.

Tal Jacobson
Tal Jacobson
CEO and Director at Perion Network

By that we extended our TAM and offering to our customers. It initiated a go to marketing transformation focused on vertical solutions and enterprise clients. Looking ahead to 2026 and beyond, we plan to scale this platform so that Perion One will orchestrate planning, activation, and measurement across all major digital channels. We aim to transition towards a platform led company, expanding recurring, high margin revenue streams powered by AI driven insights, self-service capabilities, and creative automation. We aim to improve speed and efficiency while deepening global adoption across brands, agencies, and retailers, unlocking long term growth and margin leverage.

Tal Jacobson
Tal Jacobson
CEO and Director at Perion Network

Each step we take now brings us closer to our vision, a single intelligent platform that delivers better performance, faster decisions, and long term value for marketers and shareholders. While this is our long term journey, we're already seeing the impact of this transformation in our execution, in our innovation, and in the progress we saw this quarter. Let's highlight a few of our most meaningful achievements this quarter. Our non search revenue, or as we call it, advertising solutions, is up year over year for the first time since Q3 twenty twenty three. Our retail media, digital out of home, and web are up year over year as well.

Tal Jacobson
Tal Jacobson
CEO and Director at Perion Network

And as far as CTV, which is slightly down, we remain optimistic about our annual growth in this channel, which brings us to the launch of our new performance CTV solution, a new native feature with Imperion One. While Perion was always focused on high impact CTV ads, now with our performance CTV feature, we are integrating our high impact technology with a new performance algorithm and measurement capabilities. With this new feature, we focus our activation not only on viewability, but also on actual outcomes. It's been three months since we acquired GrimBits and our business and tech integrations are fully on track. It is proving to be a strategic fit, as it's already generating new synergies.

Tal Jacobson
Tal Jacobson
CEO and Director at Perion Network

We are excited by the capabilities that Greenbids added to our AI technology under the Perion ONE suite of solutions. We expanded our programmatic digital out home footprint in APAC with new partnerships in Korea, expanding our reach in a $21,000,000,000 market. We are also expanding our reach in EMEA with two new digital out of home partnerships in Germany and Italy. All our achievements are not isolated wins. They are milestones coming to life in our journey towards our goal: to become a platform of choice for marketers.

Tal Jacobson
Tal Jacobson
CEO and Director at Perion Network

One of the most exciting milestones this quarter is the launch of our new performance CTV solution. It brings the precision of performance marketing to Connected TV, one of the fastest growing, most premium video channels. Our Performance CTV transforms CTV ads into full funnel, ROI focused channel activation. By focusing campaigns on real KPIs and return on ad spent, we're turning what was traditionally an awareness medium into a measurable performance engine. It gives us access to new outcome driven budgets from advertisers who were previously underserved, especially mid market brands and retailers looking for high intent, accountable inventory.

Tal Jacobson
Tal Jacobson
CEO and Director at Perion Network

It strengthens the Perion One value proposition, as it seamlessly integrates with our web, digital out of home, algo, and social offerings. This enables unified activation, cross channel attribution, and platform wide insights. We believe this new solution positions Perion to capture a greater share in a market projected to exceed $36,000,000,000 of ad spent in The U. S. By 2026, as advertisers demand greater accountability from their video investments.

Tal Jacobson
Tal Jacobson
CEO and Director at Perion Network

I'm proud to share our new performance CTV clip to showcase this new feature within the Perion ONE platform.

Imagine connected TV ads that don't just reach audiences but drive real measurable results. Introducing Perion ONE performance CTV, the industry's first high impact CTV platform for outcomes. From website visits to conversions, access premium inventory, advanced targeting, enhanced creative formats with transparency and optimization built into one platform. One Performance CTV, engineered for impact.

Tal Jacobson
Tal Jacobson
CEO and Director at Perion Network

None of this progress from launching our new Performance CTV to scaling the Perion One platform would be possible without world class leadership team behind it. What you see here is a group of highly experienced executives with deep roots in advertising, technology, and operations. Each one of them brings expertise from some of the most respected companies in the world. This team has been instrumental in aligning our strategy, accelerating innovation, and driving disciplined execution across every part of our business. I am pleased to welcome Anat Paran, who recently joined us as Chief Operating Officer, to streamline our operations and accelerate our efficiencies as we plan for growth.

Tal Jacobson
Tal Jacobson
CEO and Director at Perion Network

I'd like to take a moment to thank Maoz Sigron for his incredible contribution to Perion during his nearly eight years as our COO and CFO. Maoz has decided to move on, and we're grateful for the impact he's had. He played a key role in transforming Perion into a platform company, and he was truly a positive force throughout our journey. Thank you, Mose. You will be greatly missed at Perion.

Tal Jacobson
Tal Jacobson
CEO and Director at Perion Network

Anat Paran brings a wealth of operational and organizational leadership, and she's already helping us strengthen the infrastructure needed to scale Perion One globally. The strength of this team and the culture we're building together is one of our greatest long term advantages. With the right strategy in place, strong technology, and an experienced team driving it forward, what does it all mean from an investor's perspective? What makes Perion such a compelling investment opportunity? We operate in a high growth industry with high growth verticals and channels: CTV, digital out of home, and retail media.

Tal Jacobson
Tal Jacobson
CEO and Director at Perion Network

At our core, we're a tech company with proven innovation culture, and for the past ten years we've delivered positive annual adjusted EBITDA and operating cash flow. We have an experienced global management team and we're building a platform designed for an AI first world. We feel confident in our ability to execute and drive long term shareholder value. As Perion is uniquely positioned to lead the next chapter of digital advertising, a chapter in which performance is the product and Perion One is the platform. With that, I'll turn it over to our CFO, Elat Zuberi, to walk you through our financial results for this quarter.

Elad Tzubery
Elad Tzubery
CFO at Perion Network

Thank you, Tal, and hello, everyone. Our second quarter results mark another important step forward in Perion's strategic transformation. It reflects strong operational execution, a disciplined cost structure, and increasing momentum across our core businesses. Our advertising solutions business returned to year over year growth for the first time since the 2023 earlier than we anticipated. This was driven by healthy performance across digital out of home, retail media, and web.

Elad Tzubery
Elad Tzubery
CFO at Perion Network

This quarter, we also delivered a robust free cash flow, reinforcing the cash generative nature of our business model. Perion's main growth engines continue to demonstrate strength, supported by our strategic partnership and access to high quality supply. Digital out of home continued its strong growth trajectory, recording a 35% year over year growth, and we continue to expand our global programmatic digital out of home presence through strategic partnerships. Despite the 5% year over year decline in CTV, going forward, we still see CTV as one of our growth engines. This decline is mostly attributed to CTV budget shifting to the second half of the year.

Elad Tzubery
Elad Tzubery
CFO at Perion Network

We continue to see a healthy demand for our CTV solutions that now also include performance CTV as presented by TAL. Our retail media vertical continues to gain traction, generating $22,300,000 in the second quarter that represent a 27% year over year increase. For the full year, we continue to expect above market growth across our growth engines, including CTV, digital out of home, and retail media. Three months ago, we announced the acquisition of GreenBeatz, a cutting edge AI platform that delivers custom algorithms across walled gardens and major DSP platforms. Since then, we have been focusing on integrating Greenbits into Perion, aiming to maximize and accelerate the potential synergies we identified pre acquisition.

Elad Tzubery
Elad Tzubery
CFO at Perion Network

So far, I can share that we are very pleased with the progress we've made. We are already benefiting from both tangible synergies and a positive market reaction that are reflected in early wings for the Perion algo solution from both existing and new customers. As of today, we already booked more than 1,000,000 of pay on algo deals from existing pay on customers, and our healthy new business pipeline is growing faster than we initially expected. Our quarterly and year to date performance gives us the confidence to reiterate our full year outlook that was raised last quarter in May. With that, let's dive into the numbers.

Elad Tzubery
Elad Tzubery
CFO at Perion Network

Revenue for the second quarter was $103,000,000 marked by 8% year over year increase in advertising solutions revenue. Contribution ex TAC margin was 46% remaining stable year over year. Adjusted EBITDA was $7,100,000 resulting in a 7% adjusted EBITDA margin and a 15% ex TAC margin. Non GAAP net income was $12,000,000 resulting in non GAAP diluted earnings per share of 26¢. Importantly, we generated $21,300,000 in operating cash flow this quarter.

Elad Tzubery
Elad Tzubery
CFO at Perion Network

This reflects the strength of our business model and our ability to convert earnings into cash. Looking at our revenue mix, digital out of home increased by 35% year over year, reaching 17% of total revenue, up from 12% last year. CTV declined by five percent year over year, representing 9% of revenue same as last year. The decline was primarily due to shifts in advertisers' budget to the second half of the year. This is another example of us being channel neutral and focusing on advertisers' budget rather than specific channels such as CTV.

Elad Tzubery
Elad Tzubery
CFO at Perion Network

Having said that, we remain confident that our CTV channel will deliver strong results on an annual basis as we are expecting to outpace the CTV market growth. Web revenue increased by 5% year over year, representing 52% of total revenue compared to 47% in the same quarter of last year. Search revenue for the quarter was $22,400,000 representing 22% of total revenue compared to 32% in the same quarter of last year. Revenue from advertising solutions grew by 8.3% year over year, accounting for 78% of total revenue. This marks the first positive year over year growth since the 2023, ending a streak of six consecutive quarters of decline.

Elad Tzubery
Elad Tzubery
CFO at Perion Network

Search revenue in the second quarter was $22,400,000, accounting for 22% of total revenue. This shows a trend of stability over the past four quarters. Looking ahead, we expect this trend to continue generating roughly similar revenue levels per quarter. In the 2025, the contribution excluding traffic acquisition cost margin was 46. This is similar to the second quarter margin of last year.

Elad Tzubery
Elad Tzubery
CFO at Perion Network

Year to date, we have benefited from the product mix that is centered around more profitable solutions. Moving forward this year, we expect to see similar levels of contribution ex TAC margins. Adjusted EBITDA for the second quarter was $7,100,000, representing 15% of contribution ex TAC. As we noted last quarter, we are actively taking steps to optimize our cost structure to better align with our unified operational structure. As we continue to execute on our cost efficiency initiatives, we expect the second half of twenty twenty five to show continued margin expansion.

Elad Tzubery
Elad Tzubery
CFO at Perion Network

On a GAAP basis, our second quarter net loss was $3,500,000 or 8¢ per diluted share. This compares with a net loss of $6,200,000 or 13¢ per diluted share in the same quarter last year. On a non GAAP basis, net income was $12,000,000 compared to $13,400,000 in the 2024. Despite this income decrease, the earning per share remained stable at 26¢ per diluted share. This is a direct result of our share buyback plan reflected in a reduced number of outstanding shares.

Elad Tzubery
Elad Tzubery
CFO at Perion Network

In the 2025, cash generated from operating activities was $21,300,000, and our adjusted free cash flow was $20,700,000. As we mentioned last quarter, our cash performance in the second quarter benefited from the $8,000,000 of collections that shifted from March to April. Yet, this highlights our strategic focus on profitability and our ability to generate positive cash flow. We continue to expect a strong cash flow conversion rate on an annual basis. As of June 30, our balance sheet includes $318,500,000 in cash, cash equivalents, short term bank deposits, and marketable securities.

Elad Tzubery
Elad Tzubery
CFO at Perion Network

During the quarter, we used $26,600,000 for the Greenbeads acquisition and $33,400,000 for share repurchase under our buyback plan. These were offset by $21,300,000 in cash provided by operating activities. During the quarter, we continued to execute our share buyback program, repurchasing a total of 3,600,000.0 shares for a total amount of $33,400,000. This brings our year to date accumulated share repurchase spend to $86,700,000. These actions further reinforce our confidence in Perion's long term value proposition.

Elad Tzubery
Elad Tzubery
CFO at Perion Network

Our strong cash balance provides the financial flexibility to execute on both organic and inorganic growth opportunities while also supporting capital returns to shareholders. We remain disciplined in our approach and focused on maximizing shareholders' value. Turning to our full year 2025 outlook. Our performance in the 2025 combined with the momentum heading into the second half of the year gives us the confidence to reaffirm our guidance. For the full year, we still expect revenue in the range of $430,000,000 to $450,000,000 and adjusted EBITDA in the range of $44,000,000 to $46,000,000.

Elad Tzubery
Elad Tzubery
CFO at Perion Network

To conclude, we are pleased with our second quarter results and the positive business momentum that we built. We believe we have considerable opportunities to expand both our top and bottom lines in the 2025 and beyond. We are confident that this marks the beginning of our return to year over year growth trajectory. With that, I will now turn it back to the operator to open the line for questions. Thank you.

Operator

If you wish to ask a question, Our first question comes from Eric Martinuzzi with Lake Street. Please unmute your line and ask your question.

Eric Martinuzzi
Senior Research Analyst at Lake Street Capital

Yeah. Congratulations on the good results for the second quarter. I wanted to ask a question regarding kind of the CTV. I was a little bit surprised by the 5% decline in CTV. You attributed that to kind of a budget shift to the second half of the year.

Eric Martinuzzi
Senior Research Analyst at Lake Street Capital

Do you feel like this was a macro industry wide phenomenon or that it was just in particular to the advertisers and agencies with which Perion works?

Tal Jacobson
Tal Jacobson
CEO and Director at Perion Network

Yeah. Thank you, Eric. We we don't think it's it's an actual issue of the industry or within Perion. As as as you know, we've announced the Perion One strategy, which is focused on CMOs and on outcomes of marketing budgets. And within that, you know, we did see in in q two, people are shifting towards other formats, which tend to perform better than than CTV.

Tal Jacobson
Tal Jacobson
CEO and Director at Perion Network

And but we also saw that the CTV budgets are getting shifted towards h two. Now, again, as we focus on CMOs, we're channel agnostic. Right? We're not pushing customers towards specific channels. We're pushing customers towards what works best for them.

Tal Jacobson
Tal Jacobson
CEO and Director at Perion Network

Because at the end of the day, we're after the budgets, not after the channels. And we wanna make sure that our customers are getting the best results. So we can expect, you know, fluctuation in between channels, but our eyes are always about customers and how much more budgets are we getting, and that's the major focus for us.

Eric Martinuzzi
Senior Research Analyst at Lake Street Capital

Okay. My second question is

Tal Jacobson
Tal Jacobson
CEO and Director at Perion Network

I just I

Eric Martinuzzi
Senior Research Analyst at Lake Street Capital

Yeah. Go ahead.

Tal Jacobson
Tal Jacobson
CEO and Director at Perion Network

Sorry. I just wanted to say that that within that, we obviously launched the performance CTV solution now because we know that everybody's focusing on performance, and CTV has to also comes with the performance metrics. So that that should also help the CTV numbers in h two and and onwards.

Eric Martinuzzi
Senior Research Analyst at Lake Street Capital

Okay. And then you've talked, you know, there was issues earlier in the year with marketers running shorter campaigns just because of the uncertainty in the overall economy due to tariff concerns. Have you seen any change in the the campaign length amongst marketers?

Tal Jacobson
Tal Jacobson
CEO and Director at Perion Network

No. So we haven't seen any any major changes. I I think we're not seeing any concerns with regards to tariffs or any of those things. People are are still continuing business as usual, so we haven't seen anything unusual.

Eric Martinuzzi
Senior Research Analyst at Lake Street Capital

Yeah. Thank you for taking my questions.

Tal Jacobson
Tal Jacobson
CEO and Director at Perion Network

Thank you.

Elad Tzubery
Elad Tzubery
CFO at Perion Network

Thank you.

Operator

Our next question comes from Jason Helfstein with Oppenheimer. Please unmute your line and ask your question.

Jason Helfstein
MD & Head - Internet at Oppenheimer & Co. Inc.

Okay. Now I'm unmuted. Thank you. Thanks, everybody. Few questions.

Jason Helfstein
MD & Head - Internet at Oppenheimer & Co. Inc.

So continuing with the CTV question, why are you confident CTV growth will accelerate in the back half? Question number one. Number two, just broadly, like, is the sales organization right sized for Perion One, and should we expect sales sales headcount growth in the back half? And then just broadly, how are you thinking about use of cash over the next six months? Should we expect any meaningful m and a, some kind of buyback, or just be conservative with the cash? Thank you.

Elad Tzubery
Elad Tzubery
CFO at Perion Network

Yes. Hi, Jason. Thank you. So I'll start with CTV for a second. First of all, look, we're not really concerned about the the CTV decrease that we saw at the second half at the second quarter because we do see the budget shifting also towards h two.

Elad Tzubery
Elad Tzubery
CFO at Perion Network

We see a healthy demand, and we do see already the the increase in towards q three and q four in terms of the part in terms of the pipeline itself. It is important to note, by the way, that on the on an annual basis, we do expect, to outpace the market growth in, in '25. EMarketer is discussing roughly 13% of of CTV growth this year. We we believe that we will be even above the 20%. So we are very confident in where we are going towards this year in CTV.

Elad Tzubery
Elad Tzubery
CFO at Perion Network

And as Tal mentioned, by the way, we do see ourselves as channel neutral. Also, in q two, we saw some of the of the budgets shifted from CTV to different channels as a result of of CMOs needs in some cases. If I'm looking at if I'm if discuss about the sales headcount. So looking at at at h two and even going forward to 2026, As we discussed, part of the strategy behind one was that agency will already have the white label of the platform of Perrin one. It is gives us the the leverage and the possibility to increase our sales without having, always, more and more salesperson on ground and to be much more efficient in our sales cycles.

Elad Tzubery
Elad Tzubery
CFO at Perion Network

We have discussed about that that going to the future, we are expecting to see our EBITDA margin to increase and to be much more efficient in how we are operating, and this is including also the sales operation side. Of course, we are tapping into in in '26 and, also, I would say, '27, as Stan mentioned, we are expecting to grow our market share much faster. So I do believe that we will increase our sales sales force in a way. But when we're looking at the efficiency level, it's not going to be in the same scale in terms of how we are expecting to increase the revenue. Now in terms of use of capital for for h two, We are going to continue, of course, with the with the buyback as well, and we are tapping into M and A activities.

Elad Tzubery
Elad Tzubery
CFO at Perion Network

I will I will give Tal to discuss about the M and A in a second. It's too important to say we are constantly reevaluating our capital allocation. What are the the needs that we have in terms of investing in our org our organic growth and how we're planning to to increase our market share going forward. We are looking, of course, at m and a opportunities, of course, and and to to also increase our growth rates through m and a's as well. And, of course, capital return to the to the shareholder is also something that we are constantly considering in and and always trying to find the right balance.

Elad Tzubery
Elad Tzubery
CFO at Perion Network

We still have 38,000,000 in our buyback program that we believe that we will be utilized by the end of the year. We are hoping that it will be closed we will be ended soon as possible, of course. And once this will be done, we'll we'll reconvey whether we do need to increase it or or any more allocation. But as I said, we are constantly working on on the balance between those three angles. Tal, do you wanna discuss a few words about the m and a?

Tal Jacobson
Tal Jacobson
CEO and Director at Perion Network

Yeah. So I'll I'll just echo everything that Delad said. And I'll say, with regards to the headcount, you know, as we progress with PellionOne, we are moving a lot of things to automation, and we are moving a lot of our features to self serve. So we do believe that as we progress, we're gonna become more and more efficient. So we're setting up the company to grow to grow the the the sales and grow the revenues, but not necessarily grow our headcount.

Tal Jacobson
Tal Jacobson
CEO and Director at Perion Network

As for the capital allocation, as Hirad said, we still have a lot more revenue, a lot more funds to deploy into the buyback, and we hope to to complete that as soon as possible. We are evaluating other m and a opportunities, but we are also doing a lot of work on how do we deploy our, our rest of of our capital, and, this is in the work now. Jason, anything else?

Jason Helfstein
MD & Head - Internet at Oppenheimer & Co. Inc.

No. That's it. Thank you.

Operator

Thank you.

Elad Tzubery
Elad Tzubery
CFO at Perion Network

Thank you.

Tal Jacobson
Tal Jacobson
CEO and Director at Perion Network

Thank you.

Operator

And comes from Andrew Maric with Raymond James. Please unmute your line and ask your question.

Andrew Marok
Andrew Marok
Director at Raymond James Financial

Hi. Thanks for taking my questions. I have two on two different topics, so maybe it makes sense to take them one at a time. First, with the web traffic or web revenue increasing 5% year over year, pretty good result given that we've heard concerns around AI search impacts on publisher traffic. I guess, how do you see the impact of that AI search playing out for your web business given it's still the biggest part of your advertising segment?

Tal Jacobson
Tal Jacobson
CEO and Director at Perion Network

So so you're asking how do we see web and search revenue going forward?

Andrew Marok
Andrew Marok
Director at Raymond James Financial

No. So given AI search's impacts on publisher traffic, so on the on the web formats

Tal Jacobson
Tal Jacobson
CEO and Director at Perion Network

Yep.

Andrew Marok
Andrew Marok
Director at Raymond James Financial

How do you see that web business playing out into the the potential risks from AI search?

Tal Jacobson
Tal Jacobson
CEO and Director at Perion Network

Yeah. No. It's that's that's that's a great question. So, as you know, I'm I'm a big believer that web search and websites are not a segment that's gonna continue to grow. But as we focus on on marketers and budgets, I think human behavior might change.

Tal Jacobson
Tal Jacobson
CEO and Director at Perion Network

People are gonna use less web search and less websites, but marketers are gonna continue to look for audiences and deploy budgets. And and we're channel agnostic. Right? So if people are gonna move towards TikTok, we're gonna we're gonna deploy that. If they're gonna move to to Meta or you or YouTube, we're gonna be there.

Tal Jacobson
Tal Jacobson
CEO and Director at Perion Network

And and as I said before, we're not really focusing on specific channels. We're focusing on customers. How many how do we get more customers to spend with us because we can deliver the outcome that they need? So I think you're absolutely right. If we're gonna look at the future in in the next few years, we would probably see search and web starting to decline a few years, but then we'll see other channels starting to grow.

Tal Jacobson
Tal Jacobson
CEO and Director at Perion Network

As long as we're sitting with the advertiser itself and deploying their media investment towards outcomes, I think we're on the right path.

Andrew Marok
Andrew Marok
Director at Raymond James Financial

Great. Thank you. And then Is that maybe one yeah. No. I I I appreciate that.

Andrew Marok
Andrew Marok
Director at Raymond James Financial

And then maybe one on the performance TV business. I think you you mentioned in the prepared remarks and in the slide deck that you're targeting kind of the mid market customers. Is there an I guess, how does that relate to you know, we have some firms already in market targeting the SMB segment. Is that something that you maybe intend to take on directly, or is there a kind of customer segmentation issue where you guys can both kind of coexist and and go after different potential marketers? Thank you.

Tal Jacobson
Tal Jacobson
CEO and Director at Perion Network

Yeah. Yeah. Absolutely. So that that's a great question. As of now, we do not plan to do a self serve feature for this, for the, middle market or local markets.

Tal Jacobson
Tal Jacobson
CEO and Director at Perion Network

We we're continuing to to attract holding companies, independent agencies, and CMOs in on a bigger scale, but also the middle markets, wherever we can actually deploy their creative to our systems. As as I said a few months ago, I think, is as we progress with PellionOne, we're gonna have more and more self serve features, and that's where we're gonna start looking at local markets and small businesses, but not for the next at least year and a half. For now, we're just focusing on on providing more outcome driven results or campaigns versus brand awareness. That's the major thing.

Andrew Marok
Andrew Marok
Director at Raymond James Financial

Understood. Thank you.

Tal Jacobson
Tal Jacobson
CEO and Director at Perion Network

Thank you.

Operator

Our next question comes from Laura Martin with Needham. Please unmute your line and ask your question.

Laura Martin
Senior Analyst at Needham & Company

Hi there. I'll also ask two. One is on is right could you talk about what's going on with the cost of revenue once growing so much faster? And then secondly, could you update us on what you guys are doing with JEM and AI tools to try to integrate those into automating your your PerionOne products, please?

Tal Jacobson
Tal Jacobson
CEO and Director at Perion Network

Yeah. Good morning, Laura. We we didn't hear the first question. So if you can repeat the first one and

Laura Martin
Senior Analyst at Needham & Company

Sure. Just the cost of revenue, I think it rose 15% while your net revenue itself fell 4%. So I'm just wondering why this the increase in cost of revenue.

Elad Tzubery
Elad Tzubery
CFO at Perion Network

So hey, Laura. Good morning.

Laura Martin
Senior Analyst at Needham & Company

Hi.

Elad Tzubery
Elad Tzubery
CFO at Perion Network

So in terms of the cost of revenue, we our as you see, the retail vertical that we have is increasing. And as part of tapping more and more into retailers, we are providing more analysis also for the retailers and and more reporting to that. But I I would echo important thing on that. And, also, of course, the the hosting services that that we have. When we are part of our work this year and tapping into 2026 is about the efficiency of the business.

Elad Tzubery
Elad Tzubery
CFO at Perion Network

And this is exactly the areas that we are working to automate more and more going into into the year. And I do believe it all already in the second half of the year, we'll start to see because of revenue as a percentage of revenue is is increasing more and more already in q three and q four. So I think it's the shift what what you see right now, it's the shift of the business towards more leaning towards, I would say, towards retailer businesses and and more towards the ad the advertising solutions.

Tal Jacobson
Tal Jacobson
CEO and Director at Perion Network

Okay. And then So Jennie I, we're deploying as as you saw, we have Anat Baran, which is our new chief operating officer, and she's her first job is to see how can we streamline our entire operation with GenAI. This goes to our entire company from HR to use more GenAI to answer employees' question to actually deploying the campaigns themselves through GenAI. We are focusing to streamline our entire company with GenAI for the operation part so we can streamline our our growth without increasing our headcount as as we as we grow. Does that answer your question?

Laura Martin
Senior Analyst at Needham & Company

Yeah. It it definitely it definitely does. Thank you so much.

Tal Jacobson
Tal Jacobson
CEO and Director at Perion Network

Thank you.

Elad Tzubery
Elad Tzubery
CFO at Perion Network

Thank you.

Operator

Our next question comes from Jeff Martin with Roth.

Jeff Martin
Co-Director - Research & Senior Research Analyst at Roth Capital Partners, LLC

Wondered if you could comment on any noticeable shifts in trends on digital out of home that's you know, your obviously, biggest strength at this point from a growth perspective? You know, you mentioned some geographic expansion. Is that mainly focused on digital out of home? And how significant do you see that geographic expansion contributing over the next, you know, six to eighteen months? Thanks.

Tal Jacobson
Tal Jacobson
CEO and Director at Perion Network

Yeah. Thank you. So, yes, the the new partnership that we've, announced are all through digital out of home. We're we're seeing this out of home as our, foot in the door in specific markets. But once we're there, we're already training our sales team on the ground to start selling our Perion algo, which is the green bits that we bought, to start pushing Perion algo in those countries.

Tal Jacobson
Tal Jacobson
CEO and Director at Perion Network

So we're seeing a combination, and we're starting to see a lot of cross pollination in between our products. We're starting to see digital out of home together with CTV campaigns, digital out of home together with Perion algo. So when we have a feature that is pretty unique for us, which is the out of home part, it gives us the ability to get into an agency in a smoother way because we don't have a lot of competition. And once we're there, we're actually presenting our entire suite of solutions, and then we're starting to create those cross selling. So our out of home is mainly a strategy of expansion, and then we do the cross selling and the synergies. Does does that answer your question? Anything else?

Elad Tzubery
Elad Tzubery
CFO at Perion Network

Jeff, are you still with us?

Operator

As there are no further questions, I shall now pass to Tal Jacobson for closing remarks.

Tal Jacobson
Tal Jacobson
CEO and Director at Perion Network

Thank you, everyone, for joining us on our earnings of Q2. We hope to see you together in our next earnings when we report our progress on our strategy and business. Thank you.

Executives
    • Tal Jacobson
      Tal Jacobson
      CEO and Director
    • Elad Tzubery
      Elad Tzubery
      CFO
Analysts
    • Eric Martinuzzi
      Senior Research Analyst at Lake Street Capital
    • Jason Helfstein
      MD & Head - Internet at Oppenheimer & Co. Inc.
    • Andrew Marok
      Director at Raymond James Financial
    • Laura Martin
      Senior Analyst at Needham & Company
    • Jeff Martin
      Co-Director - Research & Senior Research Analyst at Roth Capital Partners, LLC
Powered by Quartr