Good morning, everyone, and thank you for joining us for the Fireside Chat with Perion Network. I'm Jason Helfstein, Head of Internet Research at Oppenheimer. Very excited to have CEO Tal Jacobson and Chief Revenue Officer Stephen Yap. Gentlemen, thanks for joining me. The format is Fireside. If anyone online has some questions, there's a box you can put in and I can ask your question or email me at jason.helfstein@opco.com. Gentlemen, thank you for joining. To start off, for those not familiar, and perhaps because the company has morphed over time, just describe what Perion does and why you think its offering is unique for clients. Yeah, absolutely. Thanks for having us, Jason. As you said, Perion has been around for many years. In the past few years, we've concentrated mostly on the supply side of advertising. We were kind of an SSP, a bit different in the mechanics, but kind of an SSP. In the past two years, we realized that there's a major shift within our industry, and we wanted to focus mostly on the demand side, mostly on the people that are actually spending $1 trillion a year over digital advertising. We morphed the entire company into becoming a centralized platform for marketers, mainly CMOs, to be able to orchestrate those $1 trillion worth of spend in a very fragmented industry. We're just making everything smoother, using AI through our entire technology. We're now announcing more and more features. We just announced a new algorithm for performing CTV, which is, you know, CTV is one of our biggest selling products. We have so many other products like Digital Out-of-Home and other products. Our main focus is focusing on the CMO, focusing on our client, and we're shifting in between channels to get them the best outcome. Great. Stephen, thanks for joining us. For those of you who don't know, Stephen joined the company, was it late last year? No, it was February. February, early this year, right. I guess tell us what was appealing about you're a longtime ad tech executive at much bigger companies. What was appealing about joining Perion as Chief Revenue Officer? Yeah, thank you, Tal, thank you for having me. As you know, I spent 17 years at Google, right? I was blessed with the opportunities to, during that time, take multiple products to market. I built a few like Google Analytics or the LATAM platforms business for Google, some of the different reporting tools, Tag Manager, things like that. During that time, what I really started to understand and fundamentally enjoy was the ability to build and architect solutions for the marketplace, and then get them to scale, obviously, inside a huge place like Google. In my last stint, I was placed in charge of Google Marketing Platform and was asked to rebuild that. After about two years, there's an opportunity that came across through a friend of mine who said he floated my name. When you look at Perion, which was the opportunity, there are very few companies in our industry right now that have the position where they approach their business like a startup. They have the cash to back up all of their innovation aspirations, and they're really just looking to rebuild solutions for the modern marketer. All of those combined, how often do you get a chance in your career or even your lifetime, quite frankly, to rebuild a company and a public one at that? Given the vision of Perion One, for me, it was really just a no-brainer. Got it. Let's talk about, it's a great segue, almost like you got my questions. Let's talk about Perion One strategy, right? Tal, you know, kind of just broadly like, you know, what is the Perion One strategy? Yeah. You want to, or Stephen? From a customer standpoint, why would that be? Yeah, so the Perion One strategy, again, when you look across our industry, one of the things that really stands out is just how innovative the industry has been over the course of its inception. That's also kind of provided some of its challenges, right? With every piece of technology, wherever challenge that you have in digital marketing, there is another piece of technology for it and another one. What we've ended up seeing across the industry plane has been a very siloed, very disconnected approach in technology. It makes it a lot less efficient, much less cost-effective than the industry originally had been for a while. When we look at Perion, we saw the opportunity in Perion, in this concept called Perion One, to actually unify across people, processes, and technologies. In its simplest form, when you look at where we were, you had multiple technologies, so up to like five different sales teams calling on a single person. Now we've actually unified that group, so you only hit, you can, you're only speaking to one, and you're talking about the entire spectrum of your digital marketing challenges. Around the technology side of it specifically, it's how do I start to envision when I want to deliver a digital marketing campaign, how do I do that in the most objective way possible across both technologies and media that allows for the biggest impact that I'm actually going to have? What Perion One allows us to do is create connective tissues between all of these technologies between the channels and allow the systems to dictate, hey, based on the performative nature of your KPIs or the goaling that you have set forth, the system can help you actually achieve those goals by being very channel-agnostic as well as being kind of media-agnostic. We don't necessarily care where it runs or how it runs, so that it just simply delivers that impact for you. That is kind of what our aspirations and our vision for the Perion One platform going forward. I know investors, you know, ad tech can be very confusing. You know, the term DSP is broad. There's managed service, self-service. You know, why does a customer, let's say, choose your buy-side tools versus, let's say, a buy-and-trade desk, basis? There's other solutions out there. Why do they pick the Perion One solution? Right. I think that that's a great question. We're actually getting that quite a lot from investors, less so from our customers. The way we're building Perion One is not to replace other DSPs. It's a way of having a centralized platform to orchestrate your media investments versus to replace them, right? Think about it this way. The majority of the market is actually closed gardens, right? You have Meta and you have Google, and now you have TikTok and you have Reddit and you have Pinterest. We're not going to replace their DSPs, right? That's the majority of the business, the majority of digital advertising. What we can do is say, you know, let us sit in between you guys. Let us optimize your spend. Let us optimize your creative. Let us optimize your data. With that, because we're sitting in between that and it's a centralized platform, we can actually tell you what works best. Maybe for Meta, a specific creative would work better for them. On TikTok or on YouTube, a different creative, right? Because it's in one place, you can now actually compare them. We do get some customers that are saying, listen, you guys are great, but I do love to work with the traders. We think the traders are great. We're not trying to replace them. We do have a feature called Sidekick, which we would tell our customers, listen, you can do a lot of things over our platform. If you want to use The Trade Desk, and that's totally fine, you know, just click on a button and that will push it towards The Trade Desk. We do get our fees from, you know, data or planning or anything else. We're not trying to replace the traders. We're not trying to replace Google or Meta. We're just trying to make a sense out of the whole mess of what digital advertising has become. Yeah. Does that mean you're targeting a specific size advertiser that, let's say, is it the largest advertisers maybe can either figure this out on their own or maybe they get a bespoke level service from like The Trade Desk or Google, Amazon, whereas a medium size or smaller advertiser is not getting that? Maybe talk about what you're, like, why don't, what is maybe the average spend per advertiser today or what's the sweet spot? Yeah. We haven't broken it down in our data yet. What I can tell you is our sweet spot would be advertisers that are using at least two or more DSPs, right? Maybe customers that are spending money with YouTube and Meta. Smaller companies that tend to push all their budgets towards one platform don't actually have that issue, right? They have one platform. They don't need our help. Bigger companies, you know, the 1,000 brands of the U.S. or worldwide definitely need us. We're working nicely with a lot of them. We're also getting into the middle market, not SMBs, but middle market. We're seeing tremendous help that we can provide through our technology. Those are the kind of audiences that we're targeting. If I think about going back two years ago, a good chunk of the business was managed service DSP, like, you know, kind of more customized campaigns that were harder to run programmatically. On a self-service, you really needed people with your expertise, but yet, that isn't the most efficient. You've been transitioning away. How much of the business would you say is still managed service DSP right now? You're absolutely right. As we said six months ago, we only launched this new strategy and new split platform six months ago. We said that it's a transition phase, right? As we're going to look at the future in the next couple of years, everything is going to be Perion One. Everything is, hopefully, most of it is going to be self-serve. We still have all those amazing working products that some of them actually need managed service. Having said that, since we're getting into the AI era, and we just announced our new COO that is coming in, she's going to focus mainly on how do we make managed service streamlined through automation and AI versus manual work, right? That will free a lot of our people to do more things to our customers versus just doing manual work. Even managed service today, I think Yap here, I love that he has a phrase of instead of self-serve, he calls it AI-served, right? Even our managed service. That's where we're going. Yeah, I mean, I think that's the. Because the machines, actually, eventually all of the managed service becomes AI-served. That's a better comparison, right? Yeah. I mean, I think right now there are a lot of things that are driving that, right? One thing that we often don't talk about is the education and the evolution of the end advertiser and the marketer, right? Like how sophisticated are they? There are obviously a lot of companies that we know that still do last click attribution and things like that that we came up with like 15 years ago as an industry. I think the important thing too is that as we move into the AI world, it becomes AI-serviced, right? It becomes much more efficient on that level. The cool thing is that our ability to pivot and meet marketers where they are in that moment, right? If you're using one channel, that's great. We can help you there. If you're totally self-sufficient, wonderful. We'll give you the keys to the tools and off you go. We begin to layer on our AI on top of that to help you be more efficient. If you need a hand, we hold your hand all the way through the process, which we have a lot of clients. Our job is to also partner with them to help them in their journey to get them to be more sophisticated. The optionality exists for both. I think a lot will also depend on how the marketers evolve over time, right? Given. I think that's actually kind of maybe an overlooked aspect, whereas like 100% when you think about self, you know, kind of, historically to do self-service, I wouldn't say you needed a level of simplicity, but you needed a level of standardization, right? We all know it's gotten more complicated, more features, whereas things that you really couldn't figure out how to get the machine to do, you had people do, hence managed service. That being said, the AI becomes the replacement of the machines. If you were the one doing that, presumably the advertiser will look to you first with a machine-based solution as opposed to, you know, no one's really talking about it. I think that is an opportunity for Perion if you can move fast enough. Yeah, I mean, it's a huge opportunity and something that we are, number one, completely focused on and heavily invested into. It presents a really cool opportunity, I think, to again direct the market versus, you know, follow it. I want to talk about channels for a minute. In the first half of your breakdown, it was 63% open web, 23% digital Out-of-Home, and 14% CTV. How do you see that mix evolving, you know, with the new products? You also announced the, you know, the new CTV offering as well, if you want to kind of weave that into the conversation. Yeah, absolutely. As I said, our business is not focusing on channels. It's focusing on the client, right? Within that, we're constantly going to see fluctuations in between the channels as long as we can get more and more budgets and more and more customers. Having said that, we do feel very optimistic about how our CTV solutions are going to grow. We're already seeing we have good indications in Q3 and the pipeline. We're feeling very comfortable with saying that we're going to beat the market in terms of the market growth in terms of CTV. We're feeling more than comfortable with more than 20% on an annual base. Again, I think there's, because we're evolving into a new type of company, I think there's a lot of confusion still about, I think some of the people think that our channels are like separate businesses, and they're not, right? They used to be, but they're not anymore. Absolutely. I think that's where the confusion comes from. I think once you know it's one business, and it's okay if a budget moves in between channels, as long as it stays with us, it's fine, right? I think people think, if that moves down, maybe that specific business, which is CTV, is going down. No, it's not a business. It's a channel within a platform, right? We do feel comfortable with CTV going up just because we think we have a great solution there. We have actually three solutions. We have the High Impact CTV, we have the Performance CTV, and now we have Perion Algo, which is actually the Greenbids part, which offers algorithm for CTV over YouTube, right? All of those solutions should provide. Maybe just going to a little more detail on that. What is that? Why is that appealing to an advertiser of that product? The Perion Algo? Yeah. Absolutely, you want to. The Perion, I mean, it's incredibly appealing because when you look at CTV, a lot of the questions around CTV were, when it first came into the industry, basically it's digital TV, right? It's how do you measure it, right? What are the metrics in which we can measure? What has been really kind of cool to watch is as Greenbids has kind of taken shape and now as we kind of move it into Perion Algo, we find our customers, what they're able to do is they're able to give us their goals and their objectives, right? Here are our KPIs. This is what I need you to hit. When you consider the ways in which this is approaching versus here's my budget, here's my creative, here are the channels I want to be in, they're simply saying, here are the KPIs I need you to hit. Can you have your AI systems begin to optimize that? Obviously, Greenbids was primarily focused on DV, the YouTube via DV for a long time. When you look at the impact that they've had, they've been able to outperform basically every single client that they had signed on all of their KPIs, right? What's really interesting about that business as a marketer going into the AI era is, and this almost goes back to the channel conversations, when you talk to a lot of our customers, it's this mindset shift within the industry of, wow, I can give you a budget and give you objectives, and then you can optimize for outcomes in those objectives, right? The marketers of the future, what eventually is going to happen is the CFO is going to give the CMO a budget and say, here's $20 million, and I want a 5% return and this type of ROS. It's going to not matter. It's basically, we're saying it's PMAX, it's Advantage Plus, it's these products that the biggest walled gardens have created, and it's almost like they've made the new standard, and everyone's going to have to, like the goalposts have been shifted, right? Yes and yes and no, in that like, yeah, I mean, the PMAX, I think PMAX was like the first iteration of this kind of goal-based campaign metric. When you kind of go back to where we're really unique is that, look, we're agnostic from media, technology, and channel. Right, right. That's PMAX in their solution as opposed to all of this. Exactly. This is what you're also seeing from the industry: everyone's developing AI capabilities on top of their silos, so you're basically having siloed AI. Our intent is we need AI to actually work like Greenbids does across multiple channels and multiple entities so that instead of me saying, oh, you buy more YouTube, it's, look, the system is delivering outcomes for whatever circumstances there based on the data. A great example of that is, like in the dead of winter of New York, when you're experiencing a blizzard, the system pulls in the weather data and figures out, look, I'm going to start pulling budgets from digital Out-of-Home because no one's walking the streets in New York. I'm going to put it all to CTV because everyone's at home nice and warm on their couch. Being able to do very simple things and do them objectively with no other intention of, I want to drive you to my media or I want to drive you to technology, I think that's kind of where Greenbids gets really exciting, being able to layer kind of objective AI on top of all channels and allowing the system to then operate in an intelligent way based on all the data feeds that we have. I think there's another big shift happening now in the last few years where marketers are looking at themselves like basically traders, like investment managers, and they want to get the best yield. Right? Think about the Greenbids or Perion Algo, as we call it now, more like an algo trading. Right? I'm putting $1 million of investment. I want the best yield. We've proved that to our customers that we can get up to 40% better yield on the same budget. You basically don't have to, maybe the comparison in trading would be as opposed to having a trader who's watching the bid and being like looking for patterns and trying to make sure they're like, okay, now I'm going to place my order. The algorithmic, basically, you know, it's going to get you maybe not like the top, you know, 98%, but you're going to be within the top 10%. If you can save that time, it's a good value trade-off to give up the other 8 points or something. It is managing a portfolio, right? That is why it is so similar versus managing just a simple, I am just trading this stock. This is all I am going to optimize for. Right. When we think about connected TV, I think a lot of like initially, or as well, we still have somewhere between $90 billion and $100 billion that's still in linear TV. When we think about CTV, the most premium channels, the initial view was like, oh, you don't need ad tech to buy it. You're going to mostly buy it direct, or it's going to be like programmatic guaranteed, and the ad tech fee for that is going to be pretty small. Yet, as we're, now fast channels are growing faster than kind of SVOD right now. You're just seeing more of a proliferation. Where does YouTube go, right? If you watch YouTube on your television, is that CTV or is that online video? Maybe talk about how the explosion of more outlets kind of plays into that strategy where maybe this wasn't something that was even available to Perion like two or three years ago. Yeah, I mean, I think it's a great question. It's also a great example of why ad tech is actually needed. We created our own problem. Now we're trying to solve for the very problem that we created, which is the proliferation of channels. You know, when you look across the digital ecosystem, I think that's always been the issue. It's like there's content being created everywhere and anywhere at any given time. Now we're seeing that in the video channel realm as well. What we need the technology to do is understand, hey, based on where your audience is, based on kind of what you're watching, and then even you're going to start to layer in things like, you know, brand suitability, right? Like those types of metrics, having the system be able to intelligently go, okay, we want this type of audience and this type of content, not this type of content. I think, you know, when you look across the ad tech ecosystems, it is very relevant. I mean, you know, when you look at something like YouTube, right, YouTube's bought via AdWords and/or it's bought via DV. There is, and there's something to be said because there is a, I would actually argue, a vast majority of the YouTube buys happen via DV. The reason. Oh, again, just for our audience, you don't mean DoubleVerify. You mean. Sorry, sorry. He already corrected me on that. You're using your legacy. DV360, the DSP, Google's DSP. There is something to be said of, hey, like marketers understand that they really need technology to cut through and make these buys much more efficient and optimize them. Your ability to do that in a tool is worth that investment. It is a lot of the reasons why, you know, you have DV360, which customers are willing to pay for, to buy YouTube, which is also owned by Google. I do think technology is going to serve the industry much better and more efficiently, especially in the AI era, where you're able to very, very clearly define, here's the target, here's the accepted brand suitability I'm looking for in terms of a grade, and then here's, you know, here's the budget that I've got, you know, and then allow the systems to actually optimize across the web for that. It's interesting, right? The ad agencies are merging to try to get efficiency. At the end of the day, they're going to use AI to do more with less people. At the end of the day, it's going to be their AI talking to your AI, talking to the publisher's AI. That's kind of where this ends up going. Everyone will give it the commands, but there was a whole lot of stuff in the middle that was manual that's basically going away. Right. That's right. I mean, I think when you look at the agency world, they're combining for those two things, efficiencies and the data play, because they also understand fundamentally, which is again why we want to be into all of these different channels. Not only do we want the optionality for our customers and say, look, we'll deliver your ad wherever your customer may be, but also AI is only limited to whatever data pools it sits atop of. You're seeing the agencies play because they now sit on top of these huge, traditionally large data companies that they've acquired over the last couple of years. That's kind of the efficiency play. They recognize, hey, when we get the AI layered on top of this, we'll be able to do that. I think it's also interesting, because you do have siloed AI. All these tech companies are making their little silos of, hey, I've got AI for search, I've got AI for this, I've got AI for that. I think taking a more channel-agnostic approach is what really the industry needs to get. AI for the AI, an AI that sits on the AI. An AI for the AI, exactly. Yeah. I would just say that when we're getting into the AI era, it's not about AI. AI is great, and it becomes a commodity, right? Yeah, it's an efficiency tool. You're still, it's all about outcomes at the end of the day. That's kind of what you're going to be judged on by your client. Absolutely. Within that, AI, it's not about the algorithm or the model, it's about the data. Because if AI has the wrong data, it will destroy everything you do, right? We see that AI is hallucinating. It's becoming worse and worse because it now depends, it now reads its own articles and making decisions based on whatever it said before, right? Our goal is if we're going to have a unified centralized platform, we're going to have so much data and the quality of data is going to be so high that you will be able to depend your business upon versus silos, which is always harder to understand. Let me ask a macro question. I mean, we've seen the business kind of pivot back to positive now. There's obviously a lot of noise in the numbers on a year-to-year basis. I mean, did you see any kind of, in your opinion, macro impacts on the second quarter or not really? Was there any kind of tariff or did you see any categories pull back because, you know, with blaming macro or not really in the results I just got reported? I think what we saw at the beginning of Q2, we saw people getting more nervous. That's why they've asked to push some of the budgets from CTV towards web, where it's proven to be more performative. They're getting better results. As we moved on to the last phase of Q2, we saw it coming back. We saw CTV coming back. We saw people getting more relaxed. Now, within the current situation in the market, I'm not sure anybody's fully relaxed, but things are getting, we're feeling that things are getting back to normal. We're feeling, again, within our customers, we're feeling very comfortable of them coming back, spending more and spending more on the more premium channels like CTV. Yeah, yeah, I would agree. I think as we enter into, especially if you look at advertising, right, and digital ad spend, the vast majority of the industry holds, they basically have this kind of ramp effect all the way going into late Q3 and into Q4. As you enter the second half of the year, where they now, okay, so the budgets have to go now from now until Q4, this is where we're going to start to see the ramp up. I think anything that kind of, from a macro level, anything that kind of shakes the market's confidence a little bit in ad spending, I think the marketers go, hang on, don't know, let me hold this for a minute and then we'll just start to, and then we'll start to go. To Tal's point, yeah, there was a little bit nervous, right, and hesitant at the start of Q2, but then we just saw it basically go right back to where it was towards the end and speaks to the ton of confidence we have in looking at the early indicators of our Q3 that, yeah, we're seeing the net effect of that. I want to go back to gross margins for a second, kind of tying back to Perion One. Gross margins peaked around 90% in 2022. It's on track for something like 74% in our model this year. As you move towards CTV playing a bigger role, is that like positive or negative for gross margins? CTV, but not only CTV, as we move more towards a platform play and a lot of our features are going to become more and more self-served, we're going to become more efficient, you know. Yeah, you'll just be supporting less systems, so there'll be less client support, different systems. Absolutely. Less system, less manual work, the opportunity to scale not necessarily with scaling the amount of people at the same magnitude, right? We do predict that the company will become more and more and more efficient. Maybe asking the same question around sales and, like, you know, sales and marketing headcount. What's, you know, just how do you see that kind of, like, playing out as the strategy goes? I mean, you know, if the business moves to more self-service, maybe there's less people executing, but then do you have more people selling? Do you shift those resources and then that gets you more growth, but that more growth is on a higher incremental margin? I think as we move towards the platform play, I think we're going to take a page out of the books of Google and Meta, right? You're going to need less salespeople to sell campaign by campaign, but you're going to transform your people, your salespeople to actually build relationships and implement your platform within bigger organizations and make sure that they're actually using that, right? We're going to really transform to a Google Meta type of. That's amazing. We are going to do an upgraded salesforce. You may have fewer sellers, but more experienced, better sellers with deeper relationships. Yeah, I mean, I think when you start to look at a platform sell versus kind of an IO by IO, which was how historically media has been transacted, right? Especially in some of the older businesses, it becomes a less transactional-based relationship. In those transactions, you need to basically resource, right? Like kind of almost like a one-to-one relationship with each one of those buyers. In a larger kind of platform play, it's a one-to-many. What I would say is, look, I think that's where we are now in this transition. We're moving towards kind of this, you know, in this evolution to get to that platform play. When we have it, right? When we're kind of organized and ready to push into the market, we do expect we're going to have better efficiencies, right? And better ratios in terms of, you know, what that revenue per head looks like. Obviously, we're all about, you know, which is one of the cool things about the company. We're all about looking like, how do we invest in more growth, right? As we see the growth, we don't want to just kind of rest in our laurels. How do we invest for more? What are the different markets that we can get into? We have five minutes left. We left the kept search till the very end. Tal, I mean, I guess like the typical investor question is, is there a certain point at which it's not worth keeping search? Like you shut it down because it's just a distraction to manage. I guess, A, how much of it is that business a distraction to the advertising strategy, which is the future of the business? I look, it is generating cash flow, but is there just a point at which it's just not worth the organization's effort? Yeah, I would imagine that maybe not in the next year or two, but at some point, maybe that will be the case. For now, it is generating $20 million roughly a quarter. It's pretty stabilized. We're not putting any new investments in R&D on that product. As long as we can continue to generate revenue through that, we're happy with that. It's not creating. Plus, our revenue is as long as you can generate cash flow from it. Right. Absolutely. Cash flow. Absolutely. Within that, as long as it keeps producing, we're happy about it. We've actually built our new company, the new Perion, in a way that this is not a distraction. Got it. It's a completely side business, you know. Effectively, if it got separated out tomorrow, it would have no impact on the organization. Absolutely. Okay, one question came through online. Basically, it was asking about, you know, you're generating cash, you know, basically, why keep so much cash on the balance sheet? You know, why not expand buybacks, dividends, you know, at the current price? Because just mathematically, buybacks are more accretive than pretty much any acquisition you can do. Yeah, no, I think we're absolutely aligned. You saw that last quarter we accelerated our buyback. I think last quarter we actually bought buybacks pretty much at the same level of the amount of cash we're going to produce this year. We've done this in one quarter, right? We're not going to stop. We believe the stock, with everything we have going on, is not going to stay that cheap for so long. That's why we're very bullish on continuing to buy it. At the same time, we do need some of the cash to continue to invest. If we have big expectations out of this, we are expecting to change a huge industry in a meaningful way. That also involves investments. Great. I think that's a perfect ending. Gentlemen, thank you very much for joining us today. If anyone has any more questions online, feel free to reach out to us. We can connect you with the company. Everyone, wherever you are, have a good rest of the day. Thanks, Jason. Thanks for having us.