Good day, ladies and gentlemen, and welcome to Perion's Second Quarter and Annual 2020 Earnings Conference Call. For information, today's conference is being recorded. The press release detailing the financial results is available on the company's website at perion.com. Before we begin, I'd like to read the public safe harbor statement. Today's discussion will include 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 reports on Form 20-F that may cause actual results, performance or achievements to be materially different from 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 non-GAAP basis. While mentioning EBITDA, we'll be referring to the adjusted EBITDA. We have provided a detailed reconciliation of non-GAAP measures to the comparable GAAP measures in our earnings release, which is available on our website and has also been filed on Form 6-K. Hosting the call today are Doron Gerstel, Perion Chief Executive Officer; and Maoz Sigron, Perion's Chief Financial Officer. I'd now like to turn the call over to Doron Gerstel. Please go ahead, sir.

Thank you, and good morning. As we shared on our last quarterly call, the impact of COVID-19 has been broadly evident across the advertising industry in the first half of 2020, with the most severe impact experienced in the second quarter. According to a recent eMarketer report, digital ad spending is expected to decline by approximately $20 billion, representing a steep 20% drop from 2019. This estimate, in essence, points to a second half rebound. Depending on how you analyze the data and which statistics you follow, the decline during the second quarter was as much as 45%. Despite this massive and material industry-wide decline in spending, Perion delivered consolidated year-over-year revenue growth in the first half, and the decline in our second quarter revenue was approximately 5%, far lower than the steep double-digit decline experienced across the broader industry. We are achieving this from a position of financial strength while advancing our fundamental strategy of driving additional top-line growth and profitability through innovation and accretive M&A without raising additional capital or risking our balance sheet. Our strategic diversification across the main pillars of the digital media ecosystem served us well, as did our ability to cut costs quickly and surgically. Our leadership and management have been through a turnaround plan that required a clear-eyed assessment of the situation and a willingness to cut under stress. The culture and muscle memory enabled us to get through this devastating second quarter far better than most. Despite the more than 15% industry-wide decline in paid search advertising and significantly reduced cost per click rate in the first half of 2020, our revenue grew by 8% year-to-date as we continue to grow the number of monetizable search queries we delivered to Microsoft Bing. Simply put, we are outperforming our peers and mitigating near-term pressure from lower advertising budgets. We are leveraging our technology platform and are identifying new publishers who have been hurt by the crisis and are seeking new sources of revenue. In advertising, the reduction in ad spending across all sectors, particularly in travel and automobile, at a rate of 25% to 35% negatively impacted our advertising business, but to a much smaller extent due to the acquisition of Content IQ. Looking forward, I'm encouraged by business indicators and market trends in the early part of the third quarter that provide us with improved visibility and increasing confidence that the worst of COVID-19's impact is behind us. So much so that we have made the decision to provide the revenue and adjusted EBITDA outlook for the second half of the year. While the first half of the year was strong, there is no doubt the second quarter was challenging. The financial impact of COVID-19 and stay-at-home orders had a significant impact on consumer behavior and marketing activity with few exceptions across client industries and geographies. In this regard, management's decision to execute a $10 million annual cost-saving plan happened to be the right move. I'd like to move to some highly significant business achievements made during the second quarter. We are very pleased with our deep, lasting and expanding partnership with Microsoft. The growing number of high-quality and monetizable searches is fundamental to the strength of this relationship. More specifically, over the last three months, we enhanced our partnership with Microsoft to cover more products, business models, and additional geographies. We partnered with Microsoft MSN to distribute MSN News in 140 countries on a rev-share basis. It is a unique opportunity to provide our publishers with high-quality content from a premium news outlet in 140 countries. This will not only drive new revenue streams for online publishers but will also keep their visitors engaged. Furthermore, Perion will start distributing product ads in 14 countries, which we estimate will boost CTR and RPM. We are also happy to announce that Microsoft approved Privado for mobile, and it is now being tested with a large mobile operator in France as privacy remains a hot issue in Europe. The Content IQ integration has gone smoothly, and it is now completed. We are very pleased with the CIQ performance in the second quarter and our confidence in the business and its leadership is behind our recent acquisition of Pub Ocean, which I will get to shortly. As the digital advertising ecosystem is being reshaped, without cookies, publishers will have to find new ways to measure and track user engagement; this couldn't be better for CIQ because it dramatically increases the value of what they do, which is create invaluable first-party data for brands through engaging content and contextually relevant advertising, keeping the consumer on brand-safe sites for up to seven minutes, an extraordinarily long time in today's ADHD consumer world. We are currently working on developing the infrastructure to enhance the integration of CodeFuel's intense signals into the Content IQ and Pub Ocean platforms, and also integrating Undertone's high-impact ad units. This is an example of the cross-platform integration and the synergy within the current portfolio that will increasingly occupy our strategic and technology focus. Moving to our recent acquisition, Pub Ocean. Last month and subsequent to the end of the second quarter, we acquired this innovative publisher technology platform. It's part of our pub-tech strategy. We are impressed by their recommendation engine, called Mission, and real-time revenue analytics technology, called LiveYield, which are a perfect fit with CIQ. This accretive and synergistic acquisition offers significant and immediate synergies to CIQ. With Mission and LiveYield technology, CIQ's programmatic bidding algorithm can better optimize media buying campaigns by using higher quality data. Improved content recommendation engines will open the door to additional audience segments and further optimize consumer sessions. In parallel, Content IQ's superior on-page monetization capabilities are instantly synergistic to Pub Ocean's yield and growth. Pub Ocean is expected to generate an incremental $25 million in revenue and $5 million in adjusted EBITDA over the next 12 months. We were able to make this acquisition from a position of strength without raising additional capital or adding leverage to our balance sheet. Perion's social brand advertising SaaS platform, MakeMeReach, has expanded its partnership with Havas Media Group. Havas will leverage Perion's platform across its global network to deliver meaningful social campaigns for clients and their consumers across their 140 offices around the world. The MMR SaaS platform has now completed over 50% growth year-over-year in ACV. In our Undertone business, a bright spot was video, which was up 115% in the first half, driven by budgets shifted from linear TV and other digital formats and a very high and increasing time spent with digital video, largely connected TV. With that, I would like to turn the call over to Maoz to review the financial results for the second quarter. Maoz?

Thank you, Doron. Amid COVID-19, during the second quarter of 2020, we completed our cost-saving plan and experienced better-than-expected business results, both in our advertising and search business units. Based on current visibility, we believe that the worst is behind us, which enables us to provide revenue and adjusted EBITDA outlook for the second half of the year. We believe that the trajectory of the recovery will be gradual and uneven. At the beginning of the third quarter, we completed the acquisition of Pub Ocean, further bolstering our advertising business unit. Similarly to CIQ, this acquisition includes a substantial earn-out component, tied to various financial metrics over the next two years. Turning to the results. During the second quarter of 2020, revenues decreased by 5% from $63.6 million in the second quarter of 2019 to $60.3 million, composed of $18.7 million from advertising and $41.7 million from search and other revenues. This decrease was primarily a result of a 12% decline in advertising revenue, mainly due to COVID-19's impact on ad spend across the industry. The negative impact was partially offset by the acquisition of CIQ on January 14, 2020. Sales and other revenue decreased by 1% as a result of a lower paid sales rate due to COVID-19, offset by a growing number of monetized search queries. Sales and other revenue represented 69% of the second quarter of 2020 revenues, with advertising contributing 31%. Customer acquisition costs in media buy in the second quarter of 2020 were $36.8 million or 61% of revenue compared to $33.2 million or 52% of revenues in the second quarter of 2019. The increase, as a percentage of revenue, is primarily due to the acquisition of CIQ and the product mix. Net loss for the second quarter of 2020 was $2.2 million or $0.08 per diluted share compared to net income of $2.9 million or $0.11 per diluted share in the second quarter of 2019. Perion's non-GAAP net income in the second quarter of 2020 was $1.9 million or $0.07 per diluted share compared to $4.5 million or $0.17 per diluted share in the second quarter of 2019. Adjusted EBITDA in the second quarter of 2020 was $2.5 million compared to $7.4 million in the second quarter of 2019. Cash provided from operations in the second quarter of 2020 was $200,000, inclusive of approximately $2 million decrease due to working capital needs in connection with the acquisition of CIQ, compared to $8.4 million in the second quarter of 2019. As of June 30, 2020, we had cash, cash equivalents, and short-term bank deposits of $47.9 million compared to $61.6 million as of December 31, 2019. Total debt as of June 30, 2020, was $12.5 million compared to $16.7 million as of December 31, 2019. During the second quarter, we paid $2.1 million of total debt as part of our payment schedule. I will now turn the call back to Doron for closing statements.

Thank you, Maoz. While the pandemic impacted our second quarter results at levels much lower than the overall industry, it has not interrupted the implementation of our strategy to drive additional top-line growth and profitability through accretive M&A. The accretive acquisition of Pub Ocean, along with rapid cost containment initiatives and the successful integration of Content IQ are supporting our growth strategy and enable us to remain highly profitable. Based on business indicators and improving trends that we are experiencing during the third quarter, we believe that the worst of the COVID-19 disruption is behind us. And while we believe the trajectory of the recovery will be gradual and uneven, we're increasingly confident in our visibility. Based on this, we are providing guidance for the second half of 2020. We expect to generate revenue between $150 million to $160 million. We expect to generate $11 million to $13 million in adjusted EBITDA. We are continuing to leverage our diversification strategy to capitalize on increased volatility in the market. We are also building towards a more synergistic Perion, which will simplify and streamline the effectiveness of our go-to-market effort and create further shareholder value. I would like to end our earnings call by thanking the entire Perion team for their resiliency and agility this quarter through very challenging conditions. I'm proud of how they stepped up and didn't miss a beat, serving current clients and driving new revenue. Operator, you can now open the call for questions.

[Operator Instructions] Today's first question is coming from Mr. Eric Martinuzzi, calling in from Lake Street.

Congratulations on the second quarter results. I wanted to ask you a question on your two acquisitions and just if you could compare and contrast Pub Ocean versus CIQ? And then I have a follow-up. I understand they're both publisher-facing technologies, but just a layer deeper on those two, please?

Yes, definitely. So I think we described in brief the use case, but they are quite complementary, and what Content IQ was very much missing is what's on in the industry is content recommendation, content recommendation capability. Content IQ is very much driving traffic from Facebook through their buying capability in Facebook. There is a whole other way of doing it through content recommendation. That was very much on the plans of Content IQ to develop. And between the decision of building it or buying it, we decided to go and search for companies that have this capability that not just can provide this capability and very much shorten the time to market but also be accretive. So together with the buying system of Content IQ and the buying system of Pub Ocean, we basically cover the entire universe that we have the plan.

With Pub Ocean, I understand they have some of their own websites and that they also provide content recommendations on client sites. What percent of Pub Ocean revenue is monetized via own sites versus client sites?

So the majority is on their own site. It's like 80-20.

Expected to persist? Or is that more things to more like a 50-50 over time?

So we're definitely looking to expand our capability to other sites. And at this time, what we are doing is consolidating the two systems. Content IQ already started with this effort, and there are two very large sites. One of them is Newsweek and the other one is AbonAir, which we are providing this capability. Keep in mind that it must be -- use our infrastructure vis-à-vis the content management system. That's the only way for us to ensure the five to seven minutes time, or what we call the session time. So the partnerships, those two sites are providing us valuable content to what we call the mini site that we are operating and basically using our optimization capability. That has to do with targeting the right audience, the ability to control the layout and the content, and provide the right ad unit, all in all, in order to optimize what we call profit per session, even though it's running on domains, which are outside of our own. Does that make sense?

Yes. I had a follow-up question with the search business, which was very strong there in the first six months of the year, being up 8%. Obviously, Q2 was down 1%, but that's sort of to be expected contraction and certainly being down only single digits relative, a substantial outperformer. Just curious to know where we are on that relationship with Microsoft Bing. I know you've talked in the past about having it renewed around the October timeframe. What can you tell us about the renewal of that relationship?

So I think that first and foremost, the revenue in the six months was very much driven also by new products that we launched. I think we are very happy about strengthening our partnership. This is the MSN News that we are feeding to 140 countries. It fits the product ad, and I must say that Bing is very, very happy with the experiment that we are doing with a large operator in France. It gives them presence on mobile, which they're looking at very strategically. Those efforts are very much in line with their expectations. As I mentioned, strengthening our partnership, and I'm very much expecting that we will renew the agreement in October, as I said in previous calls, and the efforts, the achievements that we're doing in the second quarter, are definitely in line with this plan.

Now we'll go to Chris McGinnis, calling in from Sidoti & Company.

Nice quarter. I was just wondering if you could dig in a little bit more in terms of the trends you're seeing on the ad side, performed a little bit better than I was expecting. Is there any markets that are coming back? Can you just provide a little bit more color around what you're seeing there?

It's very difficult to hear you. If I get it right, you were asking us to elaborate more on the advertising business.

Yes, it was. Yes. Is that better?

Okay. Yes, yes. Now it's much better. So I think that definitely, from the advertising business, as I mentioned, due to the fact that travel and automobile are responsible for a good 15% to 20% of our revenue, you would expect that while others maybe increase their spend, in some cases due to COVID, it's not that compensate the loss of these verticals. And that's definitely something which happened in the second quarter. Our indicators right now, and as you can imagine, based on the clients that we're working with -- and those are, let's say, global 1000 customers who have already placed their campaigns for the third quarter. And that's very much the optimism and the indicators that we're getting from, which we see as quite a change from what happened in the second quarter. Actually, it started very much in March already, where they were very much on the fence. And so we see them coming back. We see them spending more money. We see them engaged with more units, and it's not just a display. It's also the video. It's also the CTV units that we are now offering. So all in all, I think this is a very, very good indicator for us that gives us the visibility for H2, especially on the advertising business.

Okay. No, I appreciate that. And that was exactly what I looked for. Just following the Pub Ocean acquisition, is there anything else you feel like you need to add to strengthen the platform and the offer?

No. I think that we are very happy with the technology that they have. I think that we are now -- Pub Ocean was a privately held company, and Pub Ocean was very much limited in their ability to scale, even though we're very happy with their projections in the next 12 months, which we have very much stated. The $25 million and the $5 million in revenue and in EBITDA. But I think that the capability is -- their ability to scale is, we didn't mention it, but we definitely see a great opportunity there. It requires us to inject more working capital. It requires adding more people, more on data science, as we see it, but I think that we knew it because our capability is not what they have, and we are very much getting here the core competence that we didn't see, and probably it will take us around 2 to 3 years to develop. So it was a very wise decision. The other element, which I think we put a lot of emphasis on during our diligence is the company, their management capability, and the culture fit, since we are expecting them to contribute, as I mentioned, from their financials from day one.

Today's next question is coming from Derik Bob, a private investor.

Congratulations on showing resilience during a very challenging market. I apologize if any of these questions have been asked. The system kicked me off at the beginning of Q&A, so I missed the first couple of questions. So just to join in -- I'll listen to the replay. Curious, you did some really great work on search, like you said, demonstrating growth in the first half despite a very challenging environment, despite downturns in both Microsoft and Google. How do you manage to show this degree of reliance in search despite such a difficult environment?

Yes. So I think that there are two factors, and the two factors very much have to do with the different products that we have. The different products allow us here, especially the new products that we launched, as you can imagine, those are -- that are coming to -- being installed in, let's say, a mature large network of publishers that, for instance, if this is the MSN News, it's something which we have the platform to roll out easily. And that too, from the product ads that we will add. All those things that their time to market is very, very short, allow us, once it's being crossed the gate of Bing -- it takes a matter of days until we're able to see huge scale on our publishers. And that, I think, is a great platform onboarding technology that we have that allows us to take new products off the gate really fast and immediately see the contribution to the revenue.

That's helpful. And can you talk a little bit more about industry trends, CPM trends, in particular, starting in mid-March when shelter in place really hit and then through present?

Yes. Yes. So I think that the CPM trend is definitely something that hit us hard. It hit us hard because, as you can -- as you know, we are selling high-impact or rich media ad units. As the industry describes, rich media ad units, by nature, are way higher CPM than standard units. To some point, we're talking about $15 to $17 CPM versus you can find $2, $3 of banner. In this situation, advertisers, when they reduce their budget, the first thing is that by reducing the budget, they don't want to reduce the number of impressions. In order to accommodate both while you reduce budget, but you want to keep the number of impressions, you're going from high-impact, rich media ad units to lower-cost ad units and a lower CPM ad, which puts those luxury, even though giving way better return on ad spend, a bit on the side. I'm talking about from the advertiser portfolio standpoint, and we definitely hit it. One of the indicators that we're looking at, we basically see how now large advertisers are putting more and more budget towards those high CPM units that we are selling. And then we are very much encouraged about it. But that was mainly -- other than the fact that we're a few verticals, as I mentioned, that travel and automobile, that completely stopped their advertising budget. But the others were very much -- when I'm saying on the fence, they were very much allocating their budget differently and very much towards low-end units, which is something that hurts us.

Great. Appreciate the color there. And then just thinking about the acquisitions; the recent acquisitions of Content IQ and Pub Ocean. Curious what Perion looks like one to two years out, once you've had a chance to integrate everything. And then are you anticipating additional acquisitions as well?

Yes. So at this point, we definitely -- we are really -- even though we are happy after six months, we finished the acquisition of Content IQ January 14. I must say that even though we are happy, the post-merger integration efforts are still on, and we are looking about the second phase of it, which is very much integrated with other units and assets that we have. That's not trivial. I can tell you that we are getting huge intent signals from the 13 million searches that we are delivering every day to Microsoft Bing. This trend, by itself, is once you analyze it and analyze it carefully, can be a great insight for the consolidated business unit, and this is definitely something that we're busy with right now. We're able to see a great lift, even though we are in -- still in initial stages of how data that is being injected from CodeFuel or from Undertone is definitely helping Content IQ and vice versa. So all in all, I think that two years from now, we are basically going to offer advertisers, and I said that we are getting prepared for a cookie-less era through our all-in-all. We are developing our own walled garden in which advertisers will be able to put their ads in a completely controlled, safe environment where they're able to control their content, their layouts, they're able to control very much the audience that we're targeting, enjoy insights from the data that we get from CodeFuel, all in all, to get way higher return on ad spend and enjoy first-party data and not be relying on third-party data, which we expect two years from now will be off the table. So we are building all this in order to serve advertisers better. Currently, we are serving around almost 700 to 800 campaigns a year at Undertone, and we're dealing with Fortune 500 customers. We are building together this offering, which will, in a way, need to handle the situation that is going to be a year from now through all the acquisitions and other assets that we have from other business units.

That's great. Really appreciate the color, Doron. And congratulations again on demonstrating resilience during a very difficult time. And it's been a long journey for Perion, and just wonderful to see how well you tell about not that you've improved the balance sheet and are working from a position of strength within a difficult market environment.

Thanks again.

[Operator Instructions] We'll now go to Mr. John Nobile calling in from Taglich Brothers.

I just wanted to get a little better understanding of certain things that you used in the press release related to Pub Ocean. In that press release, it stated that the integration of Pub Ocean into CIQ will benefit a new media supply chain. Could you talk a little about this new media supply chain? And how will this benefit brand recognition?

Yes, the new media supply chain has to do with content recommendation. You need to distinguish between the current tactics that Content IQ is using, where they drive their audience mainly from Facebook through their buying platform. What Pub Ocean is doing, which is driving their audience from a content recommendation engine, that's completely two different channels. Combining these two into a one buying system is very powerful in order, of course, to reduce the cost of driving audiences and allows us to optimize the profit per session. That's very much what is behind this acquisition. Just to translate it into numbers: currently, Pub Ocean is profitable, and it has its own great, great business. If you add it to the existing business of Content IQ, that's what you're coming into the $25 million and the $5 million EBITDA because at any given point of decision, you can ask, and this is the AI element that we're using, what is the best way to get this audience? Is it through our Facebook buying system or through the content recommendation? That's a very, very sophisticated but very essential type of technology, as I said, that can allow us to reduce substantially the cost of acquiring audience.

Okay. I appreciate that additional color on that. A lot of my questions have been addressed, but I just have one further question. If you could actually provide us with an update on your collaboration with Check Point's ZoneAlarm in your CodeFuel division?

Yes. Yes, definitely. So the ZoneAlarm and Check Point was in our presentation; it's only one example out of the thousand partnerships that we have. It is very much showing the value that we're able to bring to this enterprise because at this point, nobody is very much paying for extensions. The only way for you to monetize your efforts, in this case, the Check Point acquisition of ZoneAlarm, is very much through the fact that you are getting your rev share from searches that are going through us, and we are very much optimizing the ZoneAlarm search results page in order for them to get the most rev share from any keyword that their user is typing in. So that's very much it. It's going very well. I think that the best way for us, and I think that it's something that we need to address in the next call, is what we call the lifetime value of those users. Lifetime value is the time that from they download and start basically using the extension and start generating search keywords until they remove the extension. That's a very important KPI that we are using to rank the extension and its revenue and EBITDA contribution. And I can -- since you mentioned the ZoneAlarm is very much up because they're providing true value to their users and their lifetime value is strong. One installation is bringing a lot of revenue -- a lot of searches that translate into a rev share for both companies, for us and for Check Point. What was the other thing that you were asking other than Check Point?

[Operator Instructions] Okay. We do not appear to have any further questions at this time. I'll turn the call back over to Doron Gerstel for any additional or closing remarks.

Yes. I would like to thank you again for joining our call. It's definitely -- it was a challenging quarter. We are very happy here. Management and teams that we're looking at second half and have more visibility and are able to share our optimism. I hope you guys are all okay. Looking forward to talking with you in the coming days. Thanks so much for joining. Bye-bye.

Thank you very much, sir. Ladies and gentlemen, that will conclude today's conference. We thank you for your attendance. You may now disconnect. Have a good day.