Perion Network Ltd. (PERI) Earnings

Management highlights

- Strategic Diversification & Platform Development: Management continues executing a deliberate strategy to diversify away from the legacy open web advertising business, investing organically and via M&A in high-growth CTV, retail media, and digital out-of-home. The core offering is Perion One, a full-stack cross-channel advertising infrastructure centered on OutMatch, the company's proprietary AI optimization agent that plans and executes outcome-driven campaigns across all major DSPs, SSPs, and digital channels. In Q2 2026, the company launched AskPerry (AskPerion), an agentic conversational mobile application that gives advertisers and agencies simplified, direct access to Perion One's capabilities. New data partnership with Fetch via LiveRamp provides advertisers access to verified SK-level purchase data from over 13 million monthly active users and 26,000+ merchants, addressing a key industry pain point of accessing large-scale purchase intent data outside closed platforms. - New Business Wins & Geographic Expansion: Best Buy Canada selected Perion as its end-to-end in-store retail media technology partner, to transition from fixed signage to dynamic programmatic in-store advertising. This win validates the company's full-stack retail media model and creates a repeatable template for future infrastructure-level revenue. Perion added Programmatic Guaranteed Deal Execution for digital out-of-home inventory directly within Google's DV360, giving buyers access to over 1.6 million premium screens across 40 countries through their existing workflow, improving accessibility and monetization of Perion's digital out-of-home supply. A new distribution partnership with Across Media 2 for 1 brings OutMatch to agencies and brands across Greece and Central/Eastern Europe, extending the company's geographic reach with low incremental cost and margin-accretive growth potential. - Capital Allocation: Management maintains a highly disciplined capital allocation strategy focused on shareholder returns. During Q2 2026, the company repurchased 2.7 million shares for $24.5 million. Nine quarters into the current buyback program, cumulative repurchases total 18 million shares, with $33.2 million remaining to be fully executed by the end of 2026. As of Q2 end 2026, the company held $268 million in cash, cash equivalents, short-term deposits and marketable securities, with zero debt on its balance sheet, providing full financial flexibility for organic growth, buybacks and potential M&A. - Cost Efficiency: Targeted cost optimization initiatives were executed in Q2 2026 as part of the company's 2026 efficiency plan; full benefits from these actions are expected to begin in the second half of 2026.

Guidance

- Management narrowed the full-year 2026 guidance ranges, maintaining the adjusted EBITDA midpoint and narrowing the range to $51-53 billion, with an implied adjusted EBITDA margin of 24% at the midpoint. - The guidance narrowing and confidence in hitting full-year targets is driven by onboarding of recently signed large-scale strategic agreements, which are expected to begin contributing materially to financial results in late Q3 2026 and accelerate through the end of the year. - Management expects Perion 1 take rates to naturally normalize and modestly improve in the second half of 2026, after promotional pricing for new client acquisition in the first half of the year. - Adjusted EBITDA margins are expected to meaningfully increase upward in the second half of 2026 as cost efficiency initiatives take hold and new large agreements scale. - Management remains fully on track to hit its long-term 2028 growth and efficiency targets.

Segment performance

Perion 1 (the company's unified growth platform) had total platform spend of $176.7 million, up 15% year-over-year. Within Perion 1: Digital out-of-home spend grew 45% YoY to $87.7 million; Retail media spend grew 60% YoY to $59.4 million. Perion 1 Contribution X-Stack was $42.3 million, representing 83% of total company Contribution X-Stack in the quarter, up from 76% in the year-ago quarter. Legacy Open Web/ Search: Open web advertising spend was down 4% YoY, continuing industry-wide softness. Search revenue declined 2% YoY, while search Contribution X-Stack declined 30% YoY. Total company Contribution X-Stack declined 11% year-over-year, primarily driven by promotional pricing to acquire new Perion 1 accounts. Reported adjusted EBITDA for Q2 2026 was $2.8 million (7% margin on Contribution X-Stack); excluding negative foreign exchange impacts, adjusted EBITDA would have been $4.4 million. GAAP net loss was $6.8 million ($0.09 per diluted share), while non-GAAP net income was $3.9 million ($0.09 per share).

Risks & headwinds

- Continued industry-wide softness in the legacy open web advertising market, which is offsetting some growth from the company's new core segments. - Negative foreign exchange impacts reduced Q2 2026 adjusted EBITDA by $1.6 million, and created additional pressure on current year profitability that required proactive cost optimization to offset. - Onboarding of large new strategic agreements takes longer than initial projected timelines, pushing material revenue and contribution into later quarters than originally expected. - Lower near-term take rates from promotional pricing for new Perion 1 client acquisition reduced current period contribution and profitability, even as it is expected to normalize over time.

Analyst Q&A

• Q: The company provided Perion 1 spend data but no corresponding revenue figures. What is current Perion 1 revenue, will you update segment disclosure to include revenue breakdowns, how large was the recent cost reduction, and how will the $268 million cash balance be allocated between buybacks and M&A? /

  A: Perion reports Perion 1 metrics by platform spend to show customer adoption, as the platform is channel-agnostic and spend better reflects market traction. The recent cost restructuring was intentionally sized to offset foreign exchange headwinds and free up capacity for further growth investment. For cash allocation, the company will complete the current share repurchase plan by end of 2026, balances between organic investment, buybacks and M&A, and only pursues highly synergistic, profitable M&A opportunities rather than rushing to deploy capital.

• Q: Can you explain your promotional activity for Perion 1, how do take rates normalize from current promotional levels, and when will overall consolidated growth align with high-growth new segments instead of declining legacy segments? /

  A: Promotional pricing is used for initial test campaigns to win new clients and demonstrate the value of Perion One's technology. As clients sign permanent strategic agreements, take rates will normalize and increase starting in the second half of 2026. Industry ad spend is structurally shifting away from the open web to high-growth performance channels that Perion focuses on. Healthy adoption trends indicate that consolidated growth will increasingly align with the high growth of new segments, and take rates are not expected to fall below current levels, with moderate increases expected in H2 2026.

• Q: Do repeat OutMatch customers increase their spend over time, and why did you lower the 2026 Contribution X-Stack guidance midpoint? /

  A: OutMatch's outcome-driven model drives organic expansion within existing client accounts: most clients start with smaller spend and grow their spend incrementally after seeing positive business results. The lower Contribution X-Stack midpoint is due to slower-than-expected onboarding of the two large strategic agreements signed earlier in the year, combined with other headwinds in the first half of 2026. Adjusted EBITDA guidance midpoint was maintained, as cost optimization offset the contribution timing impact.