Earnings Call Transcript - PERI Q1 2021

Operator, Operator

Welcome to the Perion Network First Quarter of 2021 Earnings Conference Call. 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 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 and 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, these results reported today will be analyzed both on a GAAP and 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 today’s call 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 Mr. Doron Gerstel. Please go ahead, sir.

Doron Gerstel, CEO

Thank you and good morning, everyone. There is no doubt that our first quarter represents a very strong start to the year, continuing the momentum we enjoyed in 2020 and setting the stage for another successful year in 2021 and beyond. In the first quarter, we delivered revenue of $89.8 million, a 36% increase from the first quarter of 2020. Display and Social Advertising revenue was the main growth driver with a 61% increase to $38.1 million. And Search and Other revenue increased 22% to $51.7 million. We remain highly profitable as GAAP net income increased by 148% and adjusted EBITDA by 41%. From a capital position, we have fully repaid all our outstanding debt. For the first time since 2014, Perion is debt-free. We moved the Company from having negative $42 million net cash in 2017 to positive $128 million by the end of the first quarter. I’m proud of this accomplishment, which first and foremost reflects our management's fiscal discipline, as well as our ability to deploy our capital to grow shareholder value without coming up against leverage constraints. To that point, we completed a successful and oversubscribed follow-on offering in January, grossing $66 million. Strong balance sheet and debt-free situation allow us to further invest in technology to continue and improve our competitive position in the marketplace. We accomplished this growth, increased our profitability and saw significant improvement in our balance sheet, thanks to our belief that execution is an essential part of our strategic plan, which many of you heard us speak at length at our recent Investor Day. Our strong performance during the first quarter of 2021 was due to our ability to capitalize on several macro factors. First, millions of consumers were stuck at home and increasingly surfing the web during the pandemic, which dramatically benefited the ad-supported internet. Second, many advertisers pulled back their budgets during the uncertainty of the early weeks and months of the pandemic last year. They released those budgets late in 2020, and this momentum has continued into 2021. Third, while travel advertisers slashed their budget overall during last year, the rise of e-commerce meant that more marketers had reason to shift advertising dollars online, where they could influence a purchase close to action. This offset declines in travel and entertainment. Finally, a lot of you are wondering about the extent to which some of the new consumer behavior will stick and which will revert to the way it was. Let me tell you, we continue to see a meaningful shift in consumer behavior as the pandemic has accelerated the digitalization of nearly all aspects of our lives. Consumer spending and an increasing amount of time online with more and more of this time dedicated to shopping. Consumers are ordering meals online for pickup or delivery, they are cutting the cord and turning to digital sources, as well as rapidly growing new platforms, like CTV for sports and entertainment and news consumption. As TechCrunch said, we saw, and I quote, 'we saw five years worth of e-commerce growth in just a few months.' As a result, online advertisers use of measurable performance-based, cost-per-action buying models made it easier to justify increased investment. Two-thirds of online advertising revenue came from performance pricing models, while 32% use CPM models. This performance-based model impacted our search business. Performance advertisers love search advertising. It is a high-intent category where they can easily see the return of their investment. The long-term renewal with Microsoft Bing helps us even further, giving publishers confidence in our search offering and helping drive our 22% growth in this segment. While the pandemic is declining and life is starting to resemble what we remember as normal, it is clear that consumer behavior will be forever changed. Digitization is here to stay, and the brands that do not respond will face an extinction-level event. What that means is our clients, brands and advertisers are intensively monitoring consumer behavior and adjusting their spend on platforms that are winning the war for attention. Perion is positioned perfectly for this data-driven advertiser insight. Wherever and however advertisers seek to invest to attract consumers, Perion has a solution. Our diversification strategy lets us pivot our marketing and sales efforts to where digital advertising dollars are shifting. As I mentioned, Perion has a unique capability to generate revenues from both the demand and supply side of the open internet. On one hand, we are a demand-side platform that serves agencies and brands with an innovative suite of cross-channel and high-impact creative units, including running and managing interactive digital CTV ad campaigns that we deliver to smart TVs. And we are also a publisher-side platform that brings first- and third-party content monetization systems for owned and operated assets as well as sites such as Newsweek and Entrepreneur and other prominent websites. We also developed solutions and innovative products that connect publishers with the leading search engine like Bing, delivering high-quality leads. We sit at the hub, at the center of where the supply and demand side meet. We enjoy a holistic view and benefit from the virtuous feedback loop that provides unique and accurate insights, making our data inherently more valuable. We generate first-party data that will be invaluable as cookies become a part of digital history. Paragone.ai, our SaaS Actionable Performance Monitoring platform integrates a massive amount of data from cross-social channels. We process that using proprietary technology and algorithms to drive enhanced ROI for customers across their advertising programs. It’s a data advantage that becomes more valuable and sustainable as we grow. Paragone released earlier this year exceeded our internal expectations. We ended the first quarter with seven new clients, and we believe this number will increase significantly in the quarters ahead. This will weave together to put Perion in a unique position with a large technological moat within the digital advertising ecosystem. With that, I’d like to turn the call over to Maoz to review the financial results for the first quarter. Maoz?

Maoz Sigron, CFO

Thank you, Doron. Q1 reflects continued strength of the business momentum from the second half of 2020, and we expect this trend to continue throughout 2021 and in the following year. Our performance during the quarter was echoed by a 26% pro forma revenue growth and improved adjusted EBITDA margin. Turning to the quarterly results. During the first quarter of 2021, revenue for Perion totaled $89.8 million, an increase of 36% from $66.1 million in the first quarter last year. This revenue is composed of $38.2 million from display and social advertising, representing 42% of 2021 first quarter revenue with search advertising and other revenues contributing $51.7 million and representing 58%. On a pro forma basis, assuming we owned Content IQ and Pub Ocean in both periods, revenue for Perion increased by 32%. Our display and social advertising revenue increased by 61% and 32% on a pro forma basis. This increase was primarily due to A: a CTV solution, serving as a key driver for expanding our customer base and a contributor to an 11% increase in average deal size; B: the successful launch of Perion Actionable Performance Monitoring SaaS system for social advertisement that was already chosen by seven new customers; C: the contribution and synergies from Content IQ and Pub Ocean, which were acquired in 2020. Search advertising and other revenue increased by 22% as a result of a higher number of daily monetizable search queries we delivered to Microsoft Bing and others. Our daily number of searches was 17.7 million compared to 12.2 million last year. In addition, we added 13 new publishers to our network during the quarter. Customer acquisition costs in the first quarter of 2021 were $54.9 million or 61% of revenue compared to $36.1 million or 55% of revenue in the first quarter of 2020. The increase as a percentage of revenue is primarily due to the acquisition of Content IQ and Pub Ocean, which carry a higher traffic acquisition cost and product mix. Our media margin remained stable at around 39%. In fact, this margin has remained stable at around 40% for each of the last four quarters. While total revenue increased significantly during the first quarter of 2021 compared to the first quarter of 2020, GAAP SG&A totaled $14.7 million or 16% of revenue compared to $13.6 million or 21% of revenue during the first quarter of 2020. This improvement is a result of an ongoing management efficiency effort, demonstrating the scalability and leverage potential of Perion business model. Perion’s GAAP net income for the first quarter of 2021 was $3.3 million or $0.09 per diluted share compared to $1.3 million or $0.05 per diluted share in the first quarter of 2020. Non-GAAP net income in the first quarter of 2021 was $7 million or $0.19 per diluted share compared to $5 million or $0.17 per diluted share in the first quarter of 2020. Adjusted EBITDA increased to $8.8 million or 10% of revenue for the first quarter of 2021 from $6.2 million or 9% of revenue in the first quarter of 2020. Cash from operating activities for the first quarter was $13.5 million compared to $2.5 million last year. As of March 31, 2021, we had unrestricted cash, cash equivalents and short-term bank deposits of $128 million compared to $60.3 million as of December 31, 2020. As previously disclosed, in January, we completed a follow-on public offering, which was oversubscribed 7 times, generating a net profit of $61 million. We paid off $6.2 million of our debt early and ended the quarter with zero debt on the balance sheet. This concludes my financial overview. I will now turn the call back to Doron for closing statement.

Doron Gerstel, CEO

Thank you, Maoz. As a closing note, I’d like to take a moment here to thank my management team and every Perion associate around the world for their talent, passion and resilience. We would not be in the strong position we are without their efforts. We are delivering on Phase 3 of our business evolution, which is based on financial excellence, strategically growing each business segment and through that, increasing our profitability. We now have a fortress balance sheet with $128 million in cash and no debt. Despite the global pandemic, and to some degree, because of it, Perion continues to excel. Based on the strong first quarter and our continued momentum, we’re increasing our 2021 annual guidance. We now expect revenue between $390 million to $410 million, and adjusted EBITDA between $39 million to $41 million. To provide a cushion of confidence, I want to note that our 2021 guidance does not anticipate a material rebound from travel-oriented advertisers, nor does it assume any additional acquisitions. Both would represent upside to our guidance. And the fact that we are not including any projections of this incremental opportunity demonstrates the confidence we have in this expected performance. Looking further out, we remain laser-focused on achieving sustainable and highly profitable double-digit annual revenue growth. With that, we are reaffirming our strategy to deliver substantial value to our stakeholders and achieving our $500 million annual revenue goal sooner than originally anticipated. It is important for our investors and our team to declare a long-term mission and organize behind it. It is a measure of my confidence in our plan, our technology, our market understanding and most of all, the team beside me. With that said, operator, will you please open the call for questions.

Operator, Operator

Thank you. We’ll now take our first question from Laura Martin of Needham. Please go ahead.

Laura Martin, Analyst

Can you hear me okay?

Doron Gerstel, CEO

Yes. We can hear you. Hi, Laura.

Laura Martin, Analyst

Hi. Congratulations on paying down the debt and raising guidance. I have a question about this guidance. The 22% growth is the midpoint of the range, and I’m curious why you didn’t set a higher target. It seems like the momentum is much stronger. Additionally, why did you not include travel, which significantly impacts Bing and other search engines? Why wouldn’t you expect higher growth than what you’ve updated the guidance to?

Doron Gerstel, CEO

Thank you for the question. Firstly, we are still early in the year. While we have good visibility for the second quarter and to some extent for other quarters, we need to remain cautious. It's important to note that we are maintaining the same growth pace as we did at the end of 2020, which was 26%, while our midpoint now is 22%. We are adopting a conservative approach, which we do every year, despite being pleased with the improved guidance we have provided. Regarding your second question, I referred to a material rebound for travel-oriented advertisers. Although we have observed some changes, travel-oriented advertisers only contribute about 3% to 5% of our revenue at this point. We are taking a conservative stance on this segment's recovery, especially as we approach the summer, considering the setup time and feedback from our advertisers indicating a moderate plan for this year. Hence, we are being careful in our guidance.

Laura Martin, Analyst

Okay. That’s super helpful. And then, maybe stepping back on an industry comment since you’re an expert, I’m very interested in sort of as you think about the industry. When cookies go away, could you talk about how disruptive you think that’s going to be from a headline risk versus a substantive point of view as we go through 2022 next year?

Doron Gerstel, CEO

Yes, we should focus on companies that rely heavily on performance-based models that depend on retargeting and cookies to track potential customers. These companies will likely face challenges ahead. Our situation is quite different, as we do not rely on cookies; instead, our performance advertising is centered around search advertising in collaboration with partners like Bing and Yahoo!. Consequently, the changes regarding cookies will not impact our performance segment. Regarding our display advertising, it’s important to differentiate between ads based on our owned publishers and those of our network. The data derived from publishers we own and operate is considered first-party data. Ultimately, one of our main advantages as a company is our preparation for this transition. We recognized that such changes would occur eventually, and our ability to generate revenue from both demand and supply sides of the open internet positions us favorably. As cookie limitations become more pronounced for other digital advertisers, our capability to leverage this data to target audiences more effectively and enhance frequency and reach will provide greater returns for our advertisers.

Operator, Operator

We’ll now take our next question from John Egbert of Stifel. Please go ahead.

John Egbert, Analyst

The daily search volume growth and recovery in revenue was pretty impressive. Can you talk about the on-ramps fueling this growth in recent quarters? How impactful have content monetization synergies been in driving query volume? And as people go back in the office en masse in the months ahead, even if they’re going in fewer days than pre-COVID, do you have any views on where daily search volumes could settle out at? I mean, it seems like a risk that some of the PC queries could shift back to mobile in that environment. And I have one follow-up, if I could, after that.

Doron Gerstel, CEO

Yes, we are very pleased with our growth. We are currently averaging 17 million searches per day. One of our primary focuses is categorizing these searches into three distinct types. The most critical category for us is transactional searches, which indicate a strong intent to shop, unlike informational or directional searches. The overall number of searches is growing, but what’s noteworthy is the increasing proportion of transactional searches among all searches. This directly influences our revenue. If this trend persists even as people return to the office, it confirms the trend we’ve observed from the pandemic, where people are becoming more adept at shopping online, which has accelerated adoption. Although we are primarily U.S.-focused, we see signs of recovery and a return to normalcy, which I would term the new normal, as we notice a continued growth in transactional searches. Regarding your question about our actions, we are considering content monetization from a use case perspective. One interesting use case we’re focusing on is display-to-search. We define content for our audience on both our own platforms and those like Newsweek and Entrepreneur. We aim our search tools at readers who are in the exploratory phase—those who have high intent but are still undecided between options like Verizon and other providers. We have developed an effective tool that suggests relevant keywords to these readers, which translates into increased searches from our partners. We are pleased to see this synergy between our assets generating significant revenue at a good margin.

John Egbert, Analyst

Great. And then, just one follow-up. On CTV, you obviously called it out as a driver, a bigger deal sizes. Are you able to quantify the contribution to display in 1Q or maybe just a directional sequential trend there? And then, any line of sight, either in new signed deals for inventory or new deals coming in the next few quarters that could kind of take that up to the next level of growth?

Doron Gerstel, CEO

Right, right. So, I think that Dan Aks is on the call. He is the President of Undertone, which is very much behind the main CTV driver. Dan, you there?

Dan Aks, President of Undertone

Yes, I’m here. In terms of your question of asking it, so I can’t disclose, for example, our pipeline of deals. But I could answer that more qualitatively to give you a sense of why I think there’s going to be substantial growth. Would that satisfy you?

John Egbert, Analyst

Yes. Any color you can provide would be great.

Dan Aks, President of Undertone

Part of the business is experiencing growth. Let me discuss it from two perspectives. First, our positioning as a business is crucial. If you are an advertiser looking for high-impact advertising, which is our specialty, we now provide the largest screen option in the home. We are now creating multiscreen capabilities, utilizing our expertise in structuring and designing effective creative advertising. We can now present a campaign using that creative across any screen, whether in the household or on mobile devices. This reinforces our role as a key resource in the market. Secondly, we are applying that creativity to interactive television, which is a significant growth driver for both Undertone and Perion. To break that down, there is standard connected TV, which simply involves distributing video. While it’s beneficial, it doesn’t really provide much added value. However, we enhance that with branded advertising that incorporates creativity directly into the ad. For instance, if you watched a SpongeBob movie, we can introduce fun elements like bubbles rising from the depths of the ocean, making the advertisement more engaging. Then there’s interactive advertising, where viewers can use their television remotes for an expanded experience. For example, if you watch a 30-second Mercedes ad, you might also see clickable options for additional videos that showcase different aspects of the vehicle. This can extend the 30-second spot into a longer experience, providing more value to advertisers. Not only does this increase the viewing time, but it also offers insights into consumer interests. Lastly, dynamic connected TV allows for ad adjustments based on personalization. This represents a significant shift, allowing us to incorporate Undertone’s creative strengths into what has traditionally been straightforward video ads. This capability, combined with connected TV, offers a powerful advantage for advertisers by creating a compelling business model that will drive our growth moving forward.

Operator, Operator

We’ll now take our next question from Jason Helfstein of Oppenheimer. Please go ahead.

Jason Helfstein, Analyst

Thanks. I’ll ask you guys two. So, as we’re coming out of COVID, it’s super clear that the traditional ad agency is in a tough place as most of their infrastructure is set up for linear or non-digital. And just it’s clear that that much more that we’re not going backwards. So, can you talk about how that sets you up to the extent that you should see more demand for your DSP and agency-related products, and again, kind of CTV being an example of a product that would benefit from more demand coming through you? And then, the second question, updated thoughts on M&A. Are we likely to see any transactions this year? Thank you.

Doron Gerstel, CEO

So, I think that this year or so, for advertisers, it’s also very important. The fact that they were trying more and spending more on digital advertising. They are spending more, not just on digital opposed to their conventional way of advertising, it allows them very much to measure the return of ad spend. And what we’ve seen with our advertisers is this ability to correlate advertising spend to performance, to revenue, to something actionable and meaningful, definitely shifting dollars towards digital advertising, more on the performance side for that reason. Something which I think is more interesting is that the tools allow advertisers, as I mentioned on the call, to track very much consumer behavior. The ability is to what extent advertisers are able. I want to emphasize alive, on the spot, on shifting dollars where consumers spend their time. I think that this is definitely...

Jason Helfstein, Analyst

Doron, let me ask it this way. Maybe the question was unclear. So, agencies try to do certain things in-house. They have outside services they bring in, like yours, right? So, I guess what I’m asking is, given that agencies seem like they’re going to be under a lot of cost pressure coming out of COVID, and most of them did not downsize headcount during COVID, I wonder if that positions you to win more agency business because of that? So, in other words, are you seeing more client wins, both on the advertiser side and the agency side relative to six months ago, a year ago? So, maybe talk about that.

Doron Gerstel, CEO

Yes. So, the only thing that we basically see, and as I mentioned, we increased our average deal size, and it very much has to do with something which is quite basic, and it has to do with the performance. Agencies understand that in order to retain their customers, they must show them a higher return on ad spend. So, even though they are under huge cost pressure and they very much would like to do everything in-house, they are under greater pressure to show better results. This is very much driving more dollars into these types of companies like us that invest in technology. They’re trying to be ahead. Dan was mentioning the fact that we have the ability to run one campaign across multiple screens. By the way, if we’re talking about the cost pressure from the agency side, we definitely see our agency would like to minimize the number of vendors, which gives us another advantage because the fact that we cover the three main pillars of digital advertising is very much in line with what they are looking for is to have fewer vendors that they can adjust their offering across those three channels. What we’ve seen is that agencies are very much forced to work more with companies that provide the sophistication and the technology that they’re able to show to their brands and in this way, keep them for years to come. So, on the M&A question, we are working intensively on our M&A pipeline in various areas, which I mentioned on a previous call, and we’re making some progress. We’re not at a stage that we definitely can disclose it, but it’s taking more and more of our management time.

Operator, Operator

We’ll now take our next question from Eric Martinuzzi of Lake Street. Please go ahead.

Eric Martinuzzi, Analyst

Congratulations as well on getting the debt paid off. A major milestone going back to your arrival, Doron. So, that’s terrific. I had a question on the seasonality of the business. Historically, I would say, and this is Q1 versus Q2. Normally, I have those roughly flat on both the advertising and the search. Maybe it’s a question for Maoz. Where do you see the seasonality in Q2 versus Q1 on the two segments?

Maoz Sigron, CFO

So, if we ignore in 2020 as not reflecting here with the COVID, we’re expecting 2021 to move back to normal. So, starting slowly with Q1, and then Q2 and Q3 are similar and higher levels of revenue in Q4. Again, if we’re moving to the segment, search and advertising, we’re also expecting the same trend; Q3 and Q4 should be the same, and Q4 should be stronger. On advertising, the improvement or the increase in Q4 is much higher than the search.

Eric Martinuzzi, Analyst

Okay. Could you please repeat the pro forma figures for total revenue and advertising revenue for Q1?

Maoz Sigron, CFO

Yes, of course. Just a minute. So, as a whole, we’re talking about 26% consolidated; and on advertising, we’re talking about 32%.

Eric Martinuzzi, Analyst

Okay. And then, the search is all organic at 22%, correct?

Maoz Sigron, CFO

Right, right.

Eric Martinuzzi, Analyst

On the search side, there’s a significant change happening with Verizon Media transitioning from Verizon to Apollo Group. Although the transaction is not finalized yet, what are your thoughts on the potential impacts on Perion from this sale, especially considering the demand from advertisers looking to access Yahoo! and AOL properties?

Doron Gerstel, CEO

That's a great question. First and foremost, Yahoo and Verizon Media are valued partners of Perion, and we wish them success as a private entity. We expect to maintain strong partnerships and believe that under the new management, there will be opportunities for expansion and synergy. I've had discussions recently with some key executives managing our account, and I think Yahoo will now face greater pressure as a media-only company to increase their revenue and explore new opportunities with partners. I'm viewing this situation with optimism.

Operator, Operator

We’ll now take our next question from Jeff Martin of Roth Capital Partners. Please go ahead.

Jeff Martin, Analyst

Thanks. And I echo the compliments on the guidance and the balance sheet improvement. It’s great to see.

Doron Gerstel, CEO

Thanks.

Jeff Martin, Analyst

I’m wondering if you can give us an update on Connected TV. You disclosed 41 clients, 64 deals in Q4, and $6.5 million of revenue. Do you have those metrics for the first quarter?

Doron Gerstel, CEO

We have the metrics on the revenue side. Our main focus has been on incorporating Connected TV into our multi-screen offering, particularly for new accounts. This has proven to be a crucial factor in our ability to attract new customers, as adding the CTV component and big-screen capability enhances our overall multi-screen strategy. For us, leveraging CTV to secure new deals was more important than generating revenue solely from CTV, which amounted to approximately $2 million for the quarter.

Jeff Martin, Analyst

Okay. That’s helpful. Thanks. And then, on the search business, you added seven publishers in the first quarter. What does that bring your total to on the platform? And what are the implications for search growth for the balance of the year?

Doron Gerstel, CEO

Seven publishers...

Maoz Sigron, CFO

No. It’s not seven. The seven is on the Paragone.ai. On the search, we’re talking about 13 new publishers.

Doron Gerstel, CEO

So, 13 new publishers on the search side of the business, search advertising and 7 new brand clients that are using Paragone.ai, which is our SaaS platform, optimizing social spend for brands, a platform that we released in January this year, and we are very happy with the progress they’re doing.

Jeff Martin, Analyst

Okay. And then, could you help us kind of get a framework for what your growth expectation is for search for this year?

Doron Gerstel, CEO

We are providing consolidated guidance and believe that the trend we observed in Q1 will continue.

Operator, Operator

We’ll now take our next question from Chris McGinnis of Sidoti & Company. Please go ahead.

Chris McGinnis, Analyst

Yes. Good morning. Thanks for taking my call. Nice quarter, and congrats on the balance sheet. Just maybe just digging on the CTV, you just talked about the different formats and that dynamic sounded the most intriguing. Can you talk about kind of the demand you’re seeing in higher pushing maybe to certain areas, whether it’s that dynamic or whether it’s the standard you’re seeing? Thanks.

Doron Gerstel, CEO

Right. So, Dan, do you want to take this one as you’re ...

Dan Aks, President of Undertone

Yes, I'm happy to share that we are beginning to see an increasing demand for iCTV as we introduce our components. This aligns perfectly with our goals because it truly evaluates function. I believe that over time, features like branded elements, creative skins, and QR codes will be integrated into the video, along with interactive components. These will certainly represent a larger share of the overall demand, and we are already observing this trend.

Operator, Operator

We’ll now take our next question from John Nobile of Taglich Brothers. Please go ahead.

John Nobile, Analyst

Hi, Doron and Maoz. Thanks for taking my question. Once again, congratulations on beating expectations. I just have one question. If you could talk a little about your recently launched Actionable Performance Monitoring system. Specifically, how this differs from other performance monitoring systems and the competitive advantage you believe that this brings to the Company?

Doron Gerstel, CEO

Thank you for the question. First and foremost, our system focuses on three layers. Initially, after a brand installs the system, we provide an assessment regarding their spending across all social channels. Based on this assessment, we offer the second layer, which is the recommendation for the optimal mix or spending strategy to achieve the highest return. The third layer involves transforming these recommendations into actionable steps, like reallocating funds from one channel to another. We are collaborating with Fortune 500 brands that are investing tens of millions in social advertising. To our surprise, many of these brands lack a consolidated view—not just in reporting, but in understanding their total spend and in monitoring what is effective and what is not, as well as identifying the best channels for achieving desired outcomes. We liken this to Actionable Performance Monitoring from traditional enterprise software, which we aim to adapt for the social digital space. The assessment phase prior to making recommendations serves as an excellent selling point. With minimal effort to implement, we can show customers potential immediate savings from adjusting their investments across various social channels. This has proven to be a powerful sales tool, helping us reduce our sales cycle and capture the attention of significant investors. The unique connection between the three layers—assessment, recommendation, and action—sets our platform apart. Another critical component of our assessment is our tracking of extensive data, allowing us to provide customers with benchmarking insights relevant to their industry. For instance, in retail, we can inform a customer, without naming them, whether their social spending is above or below the benchmark for their sector. This serves as a valuable indicator for them to understand industry standards and set appropriate goals regarding their return on ad spend in social media.

John Nobile, Analyst

And how has the feedback been from the clients?

Doron Gerstel, CEO

First of all, the feedback has been positive. We launched in January, and by the end of March, we had signed seven large clients, though I am unable to disclose their names due to NDA agreements. I am pleased with our ability to close what I consider to be an enterprise software, SaaS deal, which features a recurring element and a two-month cycle time, especially since it is a new offering in the market. I am very happy with these results, and this momentum is continuing into the second quarter. During our Investor Analyst Day, I can share that we developed this concept in collaboration with Havas Media, a global agency with 140 offices worldwide, which has standardized all of its social spending on this platform. They served as our design partner and collaborated with us for over a year to achieve what I believe is a strong product market fit, as this is already being utilized with their clients. We are currently in the process of rolling it out to more of their customers. Havas's total spend on social advertising amounts to hundreds of millions of dollars.

Operator, Operator

Thank you. Ladies and gentlemen, no further calls at this time. I would like to turn the conference back over to Mr. Doron Gerstel for any additional or closing remarks.

Doron Gerstel, CEO

Yes. Thank you, guys, for your participation. Thanks again. Bye-bye.

Operator, Operator

Ladies and gentlemen, this concludes today’s call. Thank you for your participation. You may now disconnect.