Earnings Call Transcript - PERI Q2 2022

Operator, Operator

Hello everybody and welcome to Perion Network's Second Quarter of 2022 Earnings Conference Call. Today's conference call is being recorded. 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, performance or achievements to be materially different from any future results, performance or achievements anticipated or implied by these forward-looking statements. The company does not undertake to update any forward-looking statements to reflect future events or circumstances. As in prior quarters, the results reported today will be analyzed both on a GAAP and a non-GAAP basis. While mentioning EBITDA, we will be referring to adjusted EBITDA. We have provided a detailed reconciliation of non-GAAP measures to their comparable GAAP measures in our earnings release, which is available on our website and has also been filed on Form 6-K. Hosting the call today are Doron Gerstel, Perion's Chief Executive Officer; and Maoz Sigron, Perion's Chief Financial Officer. I would now like to turn the call over to Doron Gerstel. Please go ahead.

Doron Gerstel, CEO

Thank you very much. Good morning, everyone, and thanks for joining our second quarter 2022 earnings call. Together with me on this call is Maoz Sigron, our CFO, and myself, Doron Gerstel, CEO. Before diving into our exciting second quarter financial results, I'd like to share with you what you're probably aware of. The macro environment is filled with thoughts about ad spending being reduced. What I want to stress is that not all ad tech is impacted in the same way. We heard the same very statement at the start of the pandemic two years ago, and we had a positive comp then, as we have had for the last eight consecutive quarters. We are built for volatility instead of trying to evade it. We embrace volatility. In fact, in ethics, volatility is highly predictable. For example, trends are now favoring search and direct response campaigns; our advertising partners are investing first. With that, I would like to share with you the five things to remember when volatility is now a new norm. First, we are diversified to capitalize on shifting spending across the three main channels of digital advertising: search advertising, social advertising, and display CTV advertising. Second, we are continuously expanding our margin, demonstrating the effectiveness of our intelligent hub, known as the AI hub. Third, we are meeting the demand for higher user engagement with our high-impact ad suite. Fourth, we are bringing innovation in response to advertiser recognition that privacy matters significantly. Last but not least, we execute and acquire with strategic operational discipline. With that, I feel comfortable diving into the numbers. From a revenue standpoint, the company is reporting 34% year-over-year growth and $147 million. In the macro environment, we see where spending is going in real-time and adjust accordingly. We have the diverse platform and signal intelligence to do that from the supply and demand side. We don't look in the rearview mirror and make decisions based on that. Our results very much speak for themselves. From a macro perspective, I definitely can say, based on a 39% CAGR between the years 20 to 22, that our seasoned team knows how to make the most of tailwinds and cope with headwinds, so we continue to outperform the category and win new business through a combination of entrepreneurial energy, strong R&D, and our diversified model. Now regarding EBITDA, we’re so proud of a 99% year-over-year growth, $28 million in the second quarter of EBITDA. But the most important part is the margin. The 47% margin, as you can see at the green bar, reflects 47% of EBITDA to revenue ex-TAC, placing us as best in class, thanks to our investment in further developing our AI engine, which is behind the AI hub, resulting in efficiencies that benefit our clients. Our bottom-line efficiencies and optimization of media margins and cost reduction are yielding significant results. The best innovation is what we showcase to you and your clients, and our margins demonstrate the continuing value we bring to our advertisers. From our perspective, our iHub sits at the center of the supply and demand sides of the market. This innovative model is unmatched in the industry, aggregating data signals from all channels and from both sides of the open web to create a model that eliminates waste and rewards clients. Our data goes into Perion’s privacy-first cookieless solution known as SORT. So the iHub serves both as a source of data and an operational platform. It's important to mention SORT again as we delve into our flywheel model. Additionally, I would like to reference Google's recent announcement delaying their cookieless solution until 2024. This extension grants us time to solidify our leadership and clearly delineates companies on the right side of privacy engaging in ethical practices. Many of you know that the U.S. Congress is exploring stricter regulations, and Europe is already ahead in this regard. We are at the forefront of the privacy trend with SORT. We're proving it’s possible to deliver privacy without sacrificing performance. More advertisers are now recognizing the importance of privacy for their business, and we stand ready to serve them with our world-class innovation. The effectiveness of our SORT flywheel is measured by two KPIs: the number of new advertisers and the spending growth of existing advertisers. From the flywheel perspective, I want to highlight our continuous addition of clicks that drive better performance; as you can see with Google reporting, which is our benchmark, that's increased the return on ad spend (ROS). We secured 61 new customers in the second quarter. More importantly, those existing solid customers experiencing SORT have been found to increase their spending by 50% quarter-over-quarter. That’s a true effective flywheel. While we engage with customers, we consistently discover that advertisers recognize that consumers increasingly favor brands that protect their privacy. It is critical to acknowledge that. Next, our revenue line is divided into advertising revenue and search revenue. From an advertising revenue standpoint, we are reporting a 41% year-over-year growth, reflecting $82 million of advertising revenue. It's getting harder every day to capture and maintain attention, but it is more vital than ever. First impressions can often be formed in just a fraction of a second, and our high-impact ad units represent the breakthrough creative formats essential in today's environment. These units outperform conventional ones across all verticals, including travel, entertainment, and retail, by up to three times based on decades of data. This is critical, especially during an economic slowdown. We are deploying our proven high-impact suite across channels, particularly on CTV, where we are seeing excited reactions from advertisers. Revenue in this segment grew by 90% year-over-year, representing 6% of display advertising revenue. The main factor driving this growth has been a 5% increase in the average deal size, totaling $105,000. Video revenue, on the other hand, soared by 273% year-over-year, comprising 44% of display advertising revenue. Our acquisition, Vidazoo, often dubbed the Shopify of video for its empowering capabilities for long-time publishers, is thriving. The primary objective of our recent campaign involving Beyond Meat, whose objective was to drive net new consumers to try their new hamburger product, exemplifies an awareness-to-performance campaign. The results have been impressive: 124,000 additional products were added to carts, resulting in over $1 million in product value and a significant recall lift. We are also innovating within the gaming sector, using PC, console, and mobile platforms to engage a unique audience of 19 million gamers, particularly among Gen Z. The advertising units deployed are 100% viewable and non-intrusive, with an impressive average viewing time exceeding five seconds, yielding high performance and commendable customer satisfaction. Lastly, our innovations in retail are gaining traction as retailers navigate intense competition from Amazon's extensive data capabilities. They require new solutions to deliver personalized recommendations in real-time. We're achieving promising early success in this emerging vertical, where our ability to personalize and scale aligns perfectly with retailers' needs to be relevant to their customers, thus supporting their budget shifts from linear TV to CTV. We have identified five distinct personas to target, and within 904 stores across 17 states, we are producing 4,520 unique video units to run in parallel with this strategy, enhancing our position in alignment with the shifting trends amongst retailers. As video remains a focal point for our business, we're paying special attention to the rolling adoption of our video platform. We've successfully engaged 54 publishers, marking a steep increase from 18 publishers since the second quarter of 2021. The video platform stands as a comprehensive ecosystem, exemplifying our strategic decisions of when to buy versus build, which we've mirroring in our future M&A plans. I would now like to transition and discuss search advertising, where we are gaining market share and enhancing our presence within the search ecosystem. We have reported a 26% year-over-year growth, generating $65 million in search advertising revenue for the second quarter. Importantly, while the number of searches has remained somewhat flat between quarters—approximately 17 million compared to about 17.1 million from the previous year—the willingness of advertisers to pay has increased significantly. Instrumentally, we are witnessing a 43% quarter-over-quarter rise in RPM within search advertising, reflecting changes in advertiser behavior and preferences leaning toward direct response models. The trend outlines that searches indicate high intent, presenting advertisers a prized opportunity. We have also increased the number of publishers to 124 from 93 last year, and I can confidently say that travel is back in a big way, with consumers seizing travel deals more than ever. This behavior enables advertisers to allocate additional budget to search advertising, naturally increasing RPM to achieve a higher placement where consumers are actively searching for travel opportunities. At this time, I would like to turn the call over to Maoz for a financial overview. Maoz?

Maoz Sigron, CFO

Thank you, Don. Good day, everybody. I'm pleased to present another strong quarter with record financial results. Perion continues to demonstrate the ability to execute our diversification strategy, leading to strong performance despite the macroeconomic situation and uncertainty. With the current macroeconomic environment being more challenging, we are constantly monitoring external and internal signals. Based on what we observe from our customers and partners, we are confident that this momentum will continue in the second half of 2022. Let me share four key financial achievements during the second quarter. First, revenue of $146.7 million reflecting a 34% year-over-year growth, the highest second-quarter revenue since 2014. Second, adjusted EBITDA of $28.5 million, 19% from revenue compared to 13% last year, represents a 99% year-over-year growth, marking the highest second-quarter adjusted EBITDA ever reported. Third, GAAP net income of $19.5 million, a new record with a 175% year-over-year growth, the highest GAAP net income we have ever seen. Lastly, our non-GAAP diluted earnings per share, $0.51, a new record for the second quarter, with a 55% year-over-year growth. Perion’s unique technologies and solutions enhance diversity within our business. This scalable model translates into strong, predictable, and sustainable performance. We were able to improve our margins and efficiency during the second quarter of 2022, thanks to our ongoing efforts to enhance Perion's financial power. Turning now to the quarter's results in more detail, as I just noted, revenue for the second quarter was $146.7 million, marking an increase of 34% year-over-year. Since the second quarter of 2020, we have consistently delivered strong double-digit revenue growth, reflecting a CAGR of 56%. Display advertising revenue was $81.6 million during Q2 of 2022, showing a 41% year-over-year increase. Our video revenue grew by a staggering 273% year-over-year, accounting for 44% of display advertising revenue. The number of video platform publishers surged by 145% year-over-year, increasing from 22 to 54, with revenue from retained video platform publishers rising by 52% year-over-year. CTV revenue increased by 90% year-over-year, reflecting 6% of display advertising revenue. As for SORT's customer base, it nearly doubled quarter-over-quarter from 65 to 126, with SORT customer spending increasing by 62%. Second-quarter search advertising revenue stood at $65.1 million, a 26% year-over-year growth driven by a 42% increase in average RPM and the addition of 31 new publishers to our network. The average number of daily searches remained consistent at 70 million, maintaining the same level as the second quarter of last year. As for the revenue mix, display advertising represented 56% of second-quarter revenue compared to 53% in 2021, with search advertising accounting for 44% of revenue, down from 47% in 2021. This change in revenue mix aligns with our diversification strategy as we continue to extend into video, CTV, and retail verticals. Revenue, excluding TAC, reached $60.7 million, or 41% of revenue, compared to $43.5 million in the second quarter of 2021, representing 40% of revenue. Improvements in media margin were primarily attributed to enhanced commercial terms, a favorable product mix, and our IR control system. Operating expenses and costs stood at $35.6 million in Q2, reflecting 24% of revenue compared to 30% last year. We consistently achieve high operating leverage, mainly due to operational excellence, automation, scalability in our business model, and the continued successful implementation of iHub. Second-quarter net income reached a record $19.5 million, or $0.41 per diluted share, a 175% increase compared to $7.1 million or $0.19 per diluted share in Q2 of 2021. On a non-GAAP basis, our net income was $24.5 million, or $0.51 per diluted share, marking a 99% increase compared to $12.3 million or $0.23 per diluted share in the same quarter last year. Adjusted EBITDA of $28.5 million resulted in a margin of 19% compared to an adjusted EBITDA of $40.3 million and a margin of 13% last year. Our adjusted EBITDA to revenue excluding stock increased from 33% in Q2 of 2021 to 47% in Q2 of 2022. Our continued efforts to maintain stable media margin levels and generate incremental revenue with lower variable costs have persistently improved efficiency and profitability. The net cash provided by operating activities totaled $25.7 million, reflecting a 76% year-over-year growth compared to $14.6 million in the second quarter of 2021. As of June 30, 2022, our cash, cash equivalents, and short-term bank deposits amounted to $353 million compared to $322 million as of December 31, 2021. We are committed to responsible and disciplined capital allocation and anticipate generating positive cash flow, enabling us to pursue both organic and inorganic growth opportunities. This concludes my financial overview for the second quarter of 2022. I will now turn the call back to Doron. Doron?

Doron Gerstel, CEO

For closing remarks, I have three slides to share. First, I would like to present what we as management see as the KPI that we run the company by, which combines growth in revenue and profitability. We’re very encouraged by this KPI, especially calculated on a trailing 12-month basis. The objective is always to be above 40%, which represents a combination of year-over-year revenue growth, as you can see as a percentage for the past 12 months. You can also observe the EBITDA margin, which is improving, contributing to this positive trend. I’m thrilled to announce that instead of referring to it as the 'Rule of 40', it is more apt to call it the 'Rule of 50', or in some cases, even 60 and upward. This reflects the sustainability and predictability of our business performance. Next, I would like to share our guidance for the year. We have realized that the Chief Digital Officer must remain hyper-alert, constantly adjusting our business allocation to current market conditions. This flexibility allows our company, Perion, to expand, as brands have greater access to data for determining spending allocations. They are making decisions more rapidly, further raising the bar on their platforms, from which we stand to gain. With our strong performance and cash reserves of $353 million with zero debt, along with our team's exceptional execution and ongoing market share gains, combined with improved efficiency, we are confident in achieving at least the high end of our full-year adjusted EBITDA guidance, even while factoring in potential global recessionary conditions. As a closing note, remember the five key points that differentiate our outstanding performance and will continue to drive our success. With that, I would like to open the line for Q&A. Thank you very much.

Operator, Operator

Thank you. At this time, we will be conducting a question-and-answer session. Our first question comes from the line of Laura Martin with Needham. Please proceed with your question.

Laura Martin, Analyst

Hi, Guys, can you hear me? Okay.

Doron Gerstel, CEO

Yes. Hi, Laura.

Maoz Sigron, CFO

Hi, Laura.

Laura Martin, Analyst

Great numbers. Really congratulations. These are fantastic numbers for the quarter. I guess let me start with this very strong search revenue growth. As you know, I always give you a hard time for the slow growth rates of search, but Google grew search at 14% and you guys grew search at 26%. Can you talk about what is driving the extraordinary strength in search for your business in the quarter, please?

Doron Gerstel, CEO

Yes. So first and foremost, what drives this growth is our substantial increase in the number of new publishers that we work with; that's number one. More publishers mean more searches provided to our partners. Second, we’ve observed an increase in the RPM. While RPM is a common challenge for our competitors, we have a unique way of directing and guiding our publishers to maximize this aspect. Additionally, we have focused on verticals like travel that drive higher RPMs. This combination, I believe, represents our secret sauce.

Laura Martin, Analyst

That's super helpful. Could you also share your insights on how your ad results differ from Google and Meta? I'm curious about the relative geographic strength and whether you observed more strength in brands or direct response during the quarter.

Doron Gerstel, CEO

On the brand versus direct response side, we're seeing an interesting trend. The recessionary environment has influenced advertiser behavior, causing a notable but not drastic shift in the balance. I mentioned that we can capitalize on these shifts, with our results showing strong growth, particularly in display advertising, which is overtaking search. Our sustained focus on data and insight, especially in CPG, driven home by campaigns like Beyond Meat, reflect our adaptability. The emphasis on performance from awareness to purchase is crucial.

Laura Martin, Analyst

Now sorry, so direct response is stronger or brand was stronger?

Doron Gerstel, CEO

Our overall display advertising is expanding more rapidly compared to search advertising. So we're seeing more pronounced growth there, which is around 43% versus 26% in search.

Laura Martin, Analyst

Okay, and then geographically, can you talk about the geographical...

Maoz Sigron, CFO

It's about 80% U.S. and 20% rest of the world, more or less.

Laura Martin, Analyst

And is U.S. stronger or what’s stronger?

Maoz Sigron, CFO

U.S. is stronger. U.S. accounts for about 80%.

Laura Martin, Analyst

Okay, thank you.

Doron Gerstel, CEO

Thank you.

Operator, Operator

Thank you. Our next question comes from the line of Andrew Marok. Please unmute your line and proceed with your question.

Andrew Marok, Analyst

Hi, guys. Thank you for taking my question today. I think you touched on it a little bit in the previous answer. But you said earlier that not all ad tech is being affected by macro in the same ways, and your results definitely reflect that. I guess from where you sit, if your business isn't affected as sharply, what parts of ad tech do you see as being affected by macro?

Doron Gerstel, CEO

First and foremost, the key to our resilience is our commitment to diversification. Companies that offer point solutions rather than holistic strategies are at significant risk. We take diversification seriously; our model encompasses not only three channels but also spans both sides of the open web, balancing supply and demand. This broad approach minimizes volatility exposure. Companies with narrow offerings face challenges due to rapid changes in advertiser preferences, which we can navigate with our flexible model.

Andrew Marok, Analyst

Thank you, that's very helpful. One more if I could on iHub; it looks like iHub is definitely starting to contribute to cost efficiencies. And I think you've given some numbers in the past on expectations there. Is that progress on schedule ahead of schedule, and have your thoughts on the bottom-line benefits it could provide changed at all?

Doron Gerstel, CEO

We are indeed on track with our targets and expect similar impacts for the remainder of the year. We referenced a $6 million benefit expected from iHub as per our financial model, and we are continuously identifying new optimization opportunities contributing to that benefit.

Andrew Marok, Analyst

Great, thank you.

Doron Gerstel, CEO

Welcome.

Operator, Operator

Thank you. Our next question comes from the line of Mark Kelley. Please unmute and proceed with your question.

Mark Kelley, Analyst

Great. Thank you very much. Good morning, everybody. I missed part of the prepared remarks, so I apologize if I'm asking something you already addressed. With cookie deprecation being pushed out to the second half of 2024, how do you expect that to impact adoption of SORT, if at all? I know you provided a lot of great statistics about how SORT outperforms cookies, so perhaps it's a moot point. But any thoughts there would be helpful. And then the second one, you have a strong relationship with Microsoft, and obviously, they are an initial partner for Netflix with their AVOD offering. I know the details are pretty vague at this point but just curious if you think that relationship with Microsoft might help you or put you in a good position to participate in Netflix with ads. Thank you.

Doron Gerstel, CEO

Regarding Google's recent announcement, they have granted us more time, which is beneficial as it allows us to fortify our leadership position. SORT’s focus has shifted from merely addressing the cookieless challenge to emphasizing privacy-first solutions, which aligns with what advertisers increasingly desire. While SORT addresses the technological aspects of the cookieless future, it also prioritizes consumer privacy—this is critical given heightened regulatory scrutiny. As for our collaboration with Microsoft, we are actively engaging with their advertising division, especially post their recent acquisition of Xander, and preparing to leverage our strong relationship as we explore opportunities with Netflix. We have a proven track record with Microsoft, having been awarded their Partner of the Year in 2021, and we believe this partnership puts us in a favorable position.

Mark Kelley, Analyst

Perfect, thank you very much.

Doron Gerstel, CEO

You're welcome.

Operator, Operator

Thank you. Our next question comes from the line of Eric Martinuzzi with Lake Street. Please proceed with your question.

Eric Martinuzzi, Analyst

Yes. I was curious about the expectation for the revenue mix between advertising and search for the year. I know there are some seasonal aspects, so in Q2 we got 56% advertising, 44% search—it generally aligns with my expectations. I’m modeling for a higher percentage of advertising in Q3 and Q4, so we finish out the year more like 58%, 42%. I wanted to confirm if that aligns with your expectations or if you expect advertising to be a lesser percentage than that?

Doron Gerstel, CEO

You've accurately captured our current stance. However, the word 'volatility' describes a landscape where Chief Digital Officers adjust preferences rapidly. This complicates predicting shifts in ad spend. While we aim for what you’ve highlighted, the reality is that changes may occur as we progress, especially with our diversified strategies adapting to market dynamics.

Eric Martinuzzi, Analyst

Okay. I appreciate the fast-changing environment and the difficulty in predicting future trends. Also, kudos for good execution in Q2 and the outlook for the year. The big upside here is the adjusted EBITDA target being raised for 2022. You mentioned adjusted EBITDA to revenue ex-TAC percent being 47% versus 33% a year ago. That brings me to my question of how high can this go? Given the difficult macro environment, you’re posting top performance in adjusted EBITDA margins, where do you foresee this potentially heading?

Doron Gerstel, CEO

Regarding margins, I cannot offer a definitive target; the expectations from my Board apply pressure in pursuing limits. However, we laid a foundation that unlocks significant potential. When we commenced iHub investments, our expectations were more modest than now. iHub’s efficiency in eliminating waste—and its cost benefits—are increasingly apparent, reflecting a successful shift in operational expenses.

Eric Martinuzzi, Analyst

So, no specific targets? Just the acknowledgment of potential upside?

Doron Gerstel, CEO

Correct, no fixed targets at the moment.

Eric Martinuzzi, Analyst

And then last question, you talk about macro challenges, and how your diversification is how you overcome those challenges. But do you have anecdotal evidence suggesting your customers are spending less? You're implying that spending is shifting toward you and away from others, but could you clarify your statement regarding macro challenges while sustaining revenue expectations?

Maoz Sigron, CFO

From a revenue perspective, it correlates to our small market capitalization as one-tenth of a percent in a $600 billion market. This positioning allows us to capture market share and agility to maneuver based on shifts in customer behavior. Microeconomic conditions can affect macro-level trends, but the key to adaptability is having a broad array of offerings—it permits us to address those shifts effectively. Campaigns like Beyond Meat reflect this flexibility, and we’re actively engaging across multiple channels.

Eric Martinuzzi, Analyst

I understand. Thanks for taking my questions.

Doron Gerstel, CEO

Thank you.

Operator, Operator

Thank you. Our next question comes from the line of Jason Helfstein with Oppenheimer. Please unmute your line and proceed.

Jason Helfstein, Analyst

Hey, guys, how are you?

Doron Gerstel, CEO

Hi.

Jason Helfstein, Analyst

Hey, so just how are you thinking about advertising in the second half? Do you think that we see a continued slowdown or offset by increased search air? Obviously, that search segment is wide encompassing right it’s not just search? Or is the function of your seeing some of the newer channels such as video and ad targeting offsetting, I guess what we'll call it the legacy perhaps headwinds in advertising?

Doron Gerstel, CEO

As for our H2 outlook, the data suggests shifting from traditional advertising spend towards direct response. In our observations powered by RPM increases—42% in Q2—indicates that advertisers are gravitating toward search and direct-response models. This transition supports a promising future for our business, as consumers show intent through search, which stands out as advertisers adjust their strategies.

Jason Helfstein, Analyst

So just to clarify, are you seeing only a positive trend in advertising overall, or are we offsetting headwinds you're projecting?

Doron Gerstel, CEO

I believe we will experience continued growth overall, with diversification shielding us from pressures. We are well-positioned to navigate the shifting sands of advertising preferences, especially proving our strengths in video and CTV, which contribute positively.

Jason Helfstein, Analyst

And last question, how are you thinking about acquisitions from here? You’re performing better than others—asset values are depressed. Do you lean into M&A strategy, or do you remain focused on organic growth for the medium term?

Doron Gerstel, CEO

We are committed to both organic growth and capitalizing on exceptional M&A opportunities. Retail and CTV stand out as focus areas for the future as we explore both build and acquisition strategies. We're waiting for appropriate conditions to acquire promising companies in this space, ensuring that we're positioned for sustained growth.

Jason Helfstein, Analyst

Yes, I’m all set. Thank you.

Doron Gerstel, CEO

Thank you.

Operator, Operator

Thank you. Our next question comes from Mark Kelley. Please unmute and proceed with your question.

Mark Kelley, Analyst

I forgot to lower my hand. I apologize. I'm all set as well. Thank you.

Doron Gerstel, CEO

Thank you.

Maoz Sigron, CFO

Thank you.

Operator, Operator

Thank you. And we do have a follow-up from Jeff Martin. Please unmute your line and proceed with your question.

Jeff Martin, Analyst

I'm sorry, this is Jeff Martin. Did you call on me? My Zoom keeps cutting in and out.

Doron Gerstel, CEO

Yes. Hi, Jeff.

Jeff Martin, Analyst

Hi, guys. Great to see such strong results and a strong outlook for the balance of the year. I was curious if you could give us some insight into the strength and Vidazoo. It looks like it performed very well in the quarter. What were some of the underlying drivers there?

Doron Gerstel, CEO

The main underlying drivers stem from Vidazoo’s holistic platform approach, integrating all that publishers require for video monetization—player capabilities, monetization strategies, and both out-stream and in-stream ad placements. Competitiveness in this market underscores the value of building long-term partnerships with our publishers, and we’ve made significant strides in increasing the number of publishers we work with. The key metrics we're tracking—gaining new publishers and existing publishers increasing their spend—reflect positive engagement, enhancing our predictability.

Jeff Martin, Analyst

Okay, great. My other question was on the retail side. It sounds like that could be part of your imminent M&A strategy, but in the interim, you also mentioned you're going to invest more here. How do you envision that from a market opportunity standpoint? And maybe give us context on what kind of timing we might expect for that to become a meaningful contributor to the CTV revenue.

Doron Gerstel, CEO

Retail and CTV are being viewed separately; however, their intersection is substantial. Retailers, such as in the example of Safeway, heavily invested in linear TV advertising, recognizing the limitations it faces in terms of personalization. We aim to integrate innovative offerings that shift traditional advertising budgets from linear TV to digital avenues like CTV. Our ability to deliver significant personalization enhances retailers' relevancy and integration. While it may take time for this transformation to fully materialize, we are actively pursuing opportunities and learning from our customer engagements to capitalize on emerging trends. This concludes our session unless there are further questions.

Maoz Sigron, CFO

Thank you, everyone.

Doron Gerstel, CEO

Thank you much. Bye.

Operator, Operator

Thank you. This does conclude today's conference, and you may disconnect your lines at this time. Thank you for your participation and have a wonderful day.