Prepared remarks
Hello, everybody, and welcome to the Perion Network First Quarter 2026 Earnings Conference Call. Today's conference call is being recorded, and an archive of the webcast will be posted on the company's 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. 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, performances or achievements to be materially different than any future results, performances 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 on a non-GAAP measure. Whilst mentioning EBITDA, we will be referring to adjusted EBITDA. We have provided a detailed reconciliation of non-GAAP measures to their comparable GAAP measures in our earnings release, which will be available on our website and has also been filed on Form 6-K. Hosting the call today is Tal Jacobson, Perion's Chief Executive Officer; and Elad Tzubery, Perion's Chief Financial Officer. I would now like to turn the call over to Tal Jacobson. Please go ahead.
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 of our recent acquisitions were extremely successful as both digital 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. Budgets, signals and optimizations are siloed by channels, creating a challenging fragmentation that leads to efficiency and performance breakdowns. 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's 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 algorithmic 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 and 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 the 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 and 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 turned to Perion to achieve greater control across their audience targeting and contextual placement on YouTube, and the results speak for themselves: a viewable rate of 80% above the benchmark, a 20.7% lift in brand awareness and a 4.1% lift in brand recall. Wener, a clothing brand known for its youthful style and bold statement pieces, ran a multichannel campaign across Meta and YouTube with the Outmax AI agent, continuously optimizing delivery in real time. Results show how Outmax delivers performance across multiple platforms with multiple KPIs. And finally, Vaseline ran a campaign that demonstrates 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-coded 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 toward. Eighty-nine percent 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 an 11% to 30% 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 turns 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 roadmap, 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.
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 initiative in Africa by partnering with Media Mark and Murley Media to resell Outmax and programmatic digital out-of-home. As part of Perion One's continued transformation, we will no longer provide a channel 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 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 to 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 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, headwinds from U.S. dollar weakness represented a $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 shareholder returns. 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 over the last 30 days. By doing so, we have already generated immediate tangible value for our shareholders. Buying back our own stock at current valuation levels, alongside disciplined organic and inorganic investments, is the most effective use of our excess cash. It reflects our confidence in Perion's long-term intrinsic value. Despite the expected macro headwinds for the second quarter, given the momentum we see building in our pipeline for the back half of the year, particularly the several large strategic agreements that are in advanced stages, we are reiterating our full year 2026 guidance. To conclude, Perion entered 2026 with a strong financial foundation, a proven platform strategy, highly disciplined operations and a set of growth engines that are constantly outpacing their markets. The infrastructure is in place. The pipeline is building continuously, and we are prioritizing sustainable, profitable growth and 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.
Questions and answers
We will now begin the Q&A. Our first question today comes from Andrew Marok at Raymond James. Andrew, you may now unmute your line and ask your question. Thank you.
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.
Yes. Thank you, Andrew. Yes. So you saw Outmax, the 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 across CTV, web and social with closed gardens, which is a major advantage. To have only one AI agent technology and infrastructure that can run across all those channels and platforms is a major, major advantage.
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.
Sure. Thanks. So in terms of what we are seeing, we see that the inflation in oil prices and a lot of the attention in the Middle East caused some uncertainty in terms of budget expenses. Especially, I would say, around CPG, and slightly around auto. In addition to that, we are continuing to see the short planning cycles of advertisers in terms of their budget spend. So this is what we see core towards Q2. But it is important to say that we are starting to see more momentum growing in our pipeline towards the second half of the year. Now, of course, we do not yet know the timing of when all of those headwinds will really be over. We cannot precisely anticipate that, but we do see more and more strength in our pipeline, especially around Outmax and the adoption by more and more customers of this solution. And, of course, we're taking all of those considerations when we are building the guidance towards the rest of the year.
Our next question comes from Jason Holcim at Oppenheimer. Jason, you may ask your question.
Can you hear me? Your comment just about tracking total spend, which we agree with, are you planning to break down total spend between advertising and search or was that just a comment of like just one number for that? And then I've got some follow-ups.
So in terms of spend, our main strategic focus is around Perion One. So definitely Perion One will continue to give the spend levels and to give the trajectory of how much we are growing year-over-year. And also, as you saw, we started to provide spend for our growth engines, how CTV, digital out-of-home and retail media contribute in terms of spend and how the mix is performing in terms of spend. This is how we are managing our operation in the business as well. So we have tied this together. In search, while it is not our main strategic focus right now, it's still stabilized and we will provide the trajectory moving forward in terms of contribution next to give you the full profitability picture of the business.
And I think search was better than expected in the quarter. Just any thoughts why that happened?
Yes. So we saw a minor increase in search spend year-over-year. This contributed to a 21% increase in Search revenue year-over-year. But if you are looking at it from contribution ex-TAC, which is more important, we are shifting out from the Microsoft agreement 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 that was exactly as we built into our guidance this year. So recycling the contribution ex-TAC year-over-year, what you are seeing is that Perion One increased 7% year-over-year in contribution ex-TAC. Search is actually declining in contribution, which was expected at the beginning of the year.
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 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?
Okay. So I will answer this in three different points. First, we do see a tangible pipeline already increasing towards the second half of the year coming from adoption of Outmax. As we saw in the current quarter, the land-and-expand model takes time to ramp, but we see traction right now and we see adoption toward the second half. In addition to that, as I discussed in my prepared remarks, we have a few strategic agreements that are expected to onboard very soon, already in the next few weeks in Q2, and we will start to see the ramp already in the second half of the year. Those two initiatives are tangible things that we see and are building into the pipeline. I would add that in terms of EBITDA growth, from an expense perspective, we are investing right now in the right places that will give us that growth in H2. We did this last year, both from a growth perspective and also from an EBITDA efficiency perspective. As we saw last year, the second half of the year is much more weighted toward H2, and it's very important right now to continue our investment in terms of growth and in terms of efficiency so that we will be able to see the benefit going into the second half of the year.
Our next question today comes from Matthew Weber at Canaccord. Matthew, you may ask your question.
Just wanted to ask about your comments on pivoting the sales leadership team to better convert pipeline into realized revenue. Can you just provide some additional color on what this entails? Are you looking to make new hires, altering the compensation structure of employees or reorganizing the team? And then I have a quick follow-up.
Yes. Absolutely. Thank you for your question. So the main idea is how do we streamline our growing pipeline toward conversion. We're flattening our organization; as I said earlier in the call, Stephen Yap is transitioning out of his role and we're retooling the organization to make it more streamlined and efficient. We're also introducing a lot of new AI capabilities to the sales team, especially a new capability of AI SDR, which is lead qualification with faster turnaround from leads to sales. We are focusing on accelerating our sales motion as we advance our technology. So that's part of it.
Got it. And then just on the launch of Outmax to African markets, I believe it's currently available in South Africa. What does the timing for a broader continental rollout look like? And are there any major investments you still need to make to support these efforts? Or is it just a matter of execution?
Right. So we've just launched this new partnership with those two partners to work on a reseller agreement to distribute Outmax across Africa, and we're going to put a lot of effort into launching more resellers going forward. We believe Outmax is the perfect product for resellers. It's an easy pitch, easy setup. Worldwide, the majority of marketing budgets sit within Meta, YouTube and TikTok. So it's a good fit anywhere on the planet. At the same time, we can grow without adding extra cost to our P&L. So we believe it's only the beginning of something that can become much bigger worldwide—the reseller program that we launched.
Our next question today comes from Laura Martin at Needham. Laura, you may ask your question.
So the advertising growth was negative 4%. Total growth for net TAC was 0. And most of the industry is reporting now, I think you're last, so 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 product velocity and how you think it helps you retain growth in the advertising part of your business?
I will take the first question, and then I'll hand over to Tal. So in terms of Advertising Solutions revenue, the reason for the decrease that we see right now in Other Solutions revenue 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 on a gross basis. As we move more toward Perion One, we'll see more revenue recognized on a net basis. That's why we started to focus more and more on contribution ex-TAC and spend because, as you see this quarter, those are really reflecting the real trajectory of the business and are the leading indicator for how we grow. Perion One spend increased 6% and contribution ex-TAC increased by 7%. So I would say the gap you're referring to versus peers is not necessarily different; we are investing more toward go-to-market, we changed some of our sales strategy as discussed, and we're building the pipeline. In our models, we are seeing increased growth more in line with the plan that we provided toward 2028.
For AI, we have two layers of AI. Perion One and Outmax are fully AI driven, and the new products that we're about to launch are fully agentic. Internally, everything is becoming AI-driven—from our R&D to operations—and we see accelerated development and accelerated feature launches. Internally, one example is we now have an AI agent for sales development. It's all part of the 2028 plan that we announced three months ago. We believe we're going to start seeing even more meaningful efficiency in H2 because we deploy our AI solutions quickly and they drive efficiency.
Okay. Maybe I'll just follow up. So Google did its I/O Developers Conference keynote yesterday. Their vision seems to be 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 you or any open Internet company can do if Google's vision is to keep consumers within their perimeter for all discovery and purchase consideration, essentially displacing the purchase funnel that we know today? Do you have any points of view about that?
Yes, absolutely. I think it's a great question. As you probably remember, we said two years ago that LLMs and closed environments would change the landscape and that Open Web would be impacted. This is why two years ago we started moving from Open Web toward out-of-home, which is a channel that is not affected by LLMs and closed gardens. Outmax works on YouTube and TikTok—channels that are not going to be affected in the same way by those models. In parallel, our Outmax development team is already researching how to deploy Outmax on platforms such as ChatGPT and Google Shopping Ads. That's already in the works. It requires more development, but we're focusing on marketing budgets, not on the channels themselves. Wherever advertisers want to advertise, we're going to be there. Now, if you look at Google's new products, major parts are basically Google Shopping Ads, which are still paid. Advertisers would still need to go through that ecosystem. That's why our Outmax team is investigating how to deploy Outmax to operate effectively with Google Shopping Ads. That will take time, but we're totally focused on it.
Our next question today comes from Jason Kreyer at Craig-Hallum Capital. Jason, you may ask your question.
Just one question for me. I wanted to talk about the customer pipeline. You've talked a few times about your confidence in the second half of the year. Can you give color on how the RFP process has evolved over the last couple of quarters? Maybe how the different conversations have changed as Perion One and Outmax have evolved?
Sure. Thank you for the question. So I think there are two moving parts. The RFPs—we see what we saw last year: customers do not plan a year ahead; it's three to six months ahead. That pace hasn't changed. What is different this year is the reseller agreements, such as the two resellers in Africa we launched. We also have a few more agreements we consider strategic and expect to start ramping in H2, which gives us more confidence about our pacing. We are working on other strategic initiatives that we'll announce once they're ready. But on an RFP-to-RFP basis, the cadence is similar to last year. The more strategic partnerships are what give us additional confidence.
Our next question comes from Eric Martinuzzi at Lake Street. Eric, you may ask your question.
So the 3-year plan anticipates Perion One contribution ex-TAC about a 20% CAGR—and just based on the early days, typically CAGRs in the early years are greater and then they slow down in later years. We're in what I think I heard was 6% or I guess 7% contribution ex-TAC for Q1? Was that where we were for Q1?
Yes, 7%. And remember that our business, like most ad tech businesses, is extremely seasonal. Q1 is the weakest of the quarters typically, and we do see a 7% increase year-over-year in contribution ex-TAC.
As you go across the three years, I'm just wondering, at a certain point we've got to get better than 20%. I'm trying to size up this 3-year progression—if we're starting out in mid- to high single digits here, at what point should we anticipate—you guys already seeing that this is a slam-dunk and you'll see 20% plus in the back half of 2026?
So to answer your question, when you're looking at 2028, we discussed that we will bring some investment in the early stages to ramp up. The reason we show the incremental expense is because it takes time to win customers. We started with previous customers where the first year might have been only $50,000 in spend, the second year it ramped to $4.5 million, and the third year more than $20 million in spend across different channels. So this is how the 2028 model works. It takes time to ramp up. Now specifically for 2026, we do expect to see, in the second half of the year, double-digit growth and we are aiming toward 20% growth already by Q4 of this year. We will start seeing this progression in H2.
And then the contribution ex-TAC margin, was that totally search related? It was below what I was anticipating. Another way to put it: is the increase in TAC pretty much all search related in your mind?
It's very much search related. Search is becoming a smaller part of our business. As Perion One increases its share of overall contribution, we will see margins improve, as I discussed earlier regarding net recognition differences. Also remember search has lower seasonality than the rest of our business. So in Q1 you will see a higher mix of search contribution. Over the year, Perion One will be a larger share and margins should increase.
Our final question today comes from Jeff Martin at ROTH Capital Partners. Jeff, you may ask your question.
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?
So in terms of these agreements, they are a few strategic agreements that we have been working on over the last year. They do take time to finalize, and we are now in the final stages. We are starting to see more of the contribution as they begin to onboard our platform. It does take time to ramp, but we believe we're going to see a ramp up toward the second half of the year and that will help drive EBITDA improvement. I cannot speak about the specific names or geographies, but they are high-volume agreements with significant spend potential. In tests we did with them, we saw strong potential and we believe the ramp-up will be meaningful in H2 and continue to build into next year.
Great. And then my second question is, and I know this is not the core growth focus of the business, but on web advertising, six to nine months ago commentary was that this business was flattening out for you, and it sounds like in Q1 it was more pressured. 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?
So we do not see a structural shift that changes our guidance. If you look at the revenue, you see roughly a minus 4% which mostly comes from web, but remember web is relatively low margin. At the beginning of 2025 we took proactive action to close some web solutions. If you look at contribution ex-TAC, you'll see that CTV and digital out-of-home and Outmax are compensating. Budgets are shifting away from Open Web toward closed gardens, CTV and out-of-home, which aligns with our strategic shift. Overall, as more revenue flows through Perion One, we are becoming more channel-agnostic and focusing on advertiser ROI. We are not expecting the current web pressures to change our full-year guidance.
Thank you. This concludes today's Q&A. I will now pass back to Tal Jacobson for closing remarks.
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.
This concludes today's call. Thank you, everyone, for joining. You may now disconnect.