AI and search shifts challenge Perion Network (NASDAQ: PERI) ad model
Filing Impact
Filing Sentiment
Form Type
20-F
Rhea-AI Filing Summary
Perion Network Ltd. files its annual Form 20-F outlining its digital advertising and search businesses and extensive risk factors. The company operates in a highly competitive AdTech market, facing concentration of power among large platforms, growing use of ad blockers, and heavy reliance on key supply partners and data vendors.
The report highlights disruption from generative AI and AI-mediated content, which may reduce web traffic, ad impressions, and traditional search usage, pressuring revenue. Perion is unifying its brands and technologies into the Perion One platform, but warns of execution, technology and adoption risks. As of December 31, 2025, it had 39,024,964 ordinary shares outstanding.
Positive
- None.
Negative
- None.
UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
20-F
OR
For
the fiscal year ended December
31 , 2025
OR
OR
Date of event requiring
this shell company report ___________
For the transition period
from _____ to _____
Commission
File No. 000-51694
(Exact Name of Registrant as specified in its charter)
N/A
(Translation of Registrant’s name into English)
(Translation of Registrant’s name into English)
(Jurisdiction of incorporation or organization)
(Address of principal executive offices)
Chief
Financial Officer
Tel: +972 -73-3981000
Tel: +
Fax:
+972-3-603-1585
2
Leonardo Da Vinci Street
Tel
Aviv , Israel 6473309
(Name, Telephone, E-mail and/or Facsimile Number and Address of Company Contact Person)
(Name, Telephone, E-mail and/or Facsimile Number and Address of Company Contact Person)
Securities registered
or to be registered pursuant to Section 12(b) of the Act.
|
Title
of Each Class |
Trading
Symbol(s) |
Name
of Each Exchange on which Registered |
|
|
|
|
Securities registered
or to be registered pursuant to Section 12(g) of the Act.
None
(Title of Class)
(Title of Class)
Securities
for which there is a reporting obligation pursuant to Section 15(d)
of the Act.
None
(Title of Class)
(Title of Class)
Indicate
the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered
by the Annual Report.
As
of December 31, 2025, the Registrant had outstanding 39,024,964
ordinary shares, par value NIS 0.03 per share (excluding treasury shares).
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ☐ No
☒
If
this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section
13 or 15(d) of the Securities Exchange Act of 1934.
Yes ☐ No ☒
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data
File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12
months (or for such shorter period that the registrant was required to submit and post such files).
Indicate by check mark
whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See
definition of “large accelerated filer, “accelerated filer,” and “emerging growth company” in Rule 12b-2
of the Exchange Act.
|
Large
accelerated filer ☐ |
|
Non-accelerated
filer ☐ |
|
|
|
|
|
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|
Emerging
growth company
|
If
an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant
has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant
to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of
its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public
accounting firm that prepared or issued its audit report. ☒
If
securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate
by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate
by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
|
|
International
Financial Reporting Standards as issued by
the
International Accounting Standards Board ☐ |
Other
☐ |
If
“Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant
has elected to follow.
Item
17 ☐ Item 18 ☐
If
this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):
Yes
☐ No ☒
2
TABLE OF CONTENTS
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|
Page |
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Introduction |
5 |
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Cautionary Statement Regarding Forward Looking Statements
|
5 |
|
Presentation of Financial and Other Information |
|
|
PART I |
8 |
|
Item 1. Identity of Directors, Senior Management and Advisers |
8 |
|
Item 2. Offer Statistics and Expected Timetable |
8 |
|
Item 3. Key Information |
8 |
|
A. Selected Financial Data
|
8 |
|
B. Capitalization and Indebtedness
|
8 |
|
C. Reasons for the Offer
and Use of Proceeds |
8 |
|
D. Risk Factors |
8 |
|
Item 4. Information on the Company |
41 |
|
A. History and Development of the Company
|
41 |
|
B. Business Overview
|
41 |
|
C. Organizational Structure
|
52 |
|
D. Property, Plants and Equipment
|
53 |
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Item 4A. Unresolved Staff Comments |
53 |
|
Item 5. Operating and Financial Review and Prospects |
53 |
|
A. Operating Results
|
53 |
|
B. Liquidity And Capital
Resources |
56 |
|
C. Research, Development,
Patents and Licenses, Etc. |
57 |
|
D. Trend Information
|
58 |
|
E. Critical Accounting Estimates
|
59 |
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Item 6. Directors, Senior Management and Employees |
62 |
|
A. Directors and Senior Management
|
62 |
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B. Compensation |
64 |
|
C. Board Practices
|
66 |
|
D. Employees |
69 |
|
E. Share Ownership
|
70 |
|
F. Disclosure of a Registrant’s
Action to Recover Erroneously Awarded Compensation |
71 |
|
Item 7. Major Shareholders and Related Party Transactions |
72 |
|
A. Major Shareholders
|
72 |
|
B. Related Party Transactions
|
73 |
|
C. Interests of Experts and
Counsel |
73 |
|
Item 8. Financial Information |
73 |
|
A. Consolidated Statements
and Other Financial Information |
73 |
|
B. Significant Changes
|
74 |
|
Item 9. The Offer and Listing |
74 |
|
A. Offer and Listing Details
|
74 |
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B. Plan of Distribution
|
74 |
|
C. Markets |
74 |
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D. Selling Shareholders
|
74 |
|
E. Dilution |
74 |
|
F. Expenses of the Issue |
74 |
3
|
Item 10. Additional Information |
75 |
|
A. Share Capital |
75 |
|
B. Memorandum and Articles
of Association |
75 |
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C. Material Contracts
|
75 |
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D. Exchange Controls
|
75 |
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E. Taxation |
75 |
|
F. Dividends and Paying Agents
|
83 |
|
G. Statement by Experts
|
83 |
|
H. Documents on Display
|
83 |
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I. Subsidiary Information
|
83 |
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J. Annual Report to Security Holders
|
83 |
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Item 11. Quantitative and Qualitative Disclosures about Market Risk |
84 |
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Item 12. Description of Securities Other than Equity Securities |
84 |
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PART II |
85 |
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Item 13. Defaults, Dividend Arrearages and Delinquencies |
85 |
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Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
|
85 |
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Item 15. Controls and Procedures |
85 |
|
Item 16. Reserved |
86 |
|
Item 16A. Audit Committee Financial Expert |
86 |
|
Item 16B. Code of Ethics |
86 |
|
Item 16C. Principal Accountant Fees and Services |
86 |
|
Item 16D. Exemptions from the Listing Standards for Audit Committees |
86 |
|
Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
|
87 |
|
Item 16F. Change in Registrant’s Certifying Accountant |
87 |
|
Item 16G. Corporate Governance |
87 |
|
Item 16H. Mine Safety Disclosure |
88 |
|
Item 16I. Disclosure Regarding Foreign Jurisdictions that Prevent Inspection
|
88 |
|
Item 16J. Insider Trading Policies |
89 |
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Item 16K. Cybersecurity |
89 |
|
PART III |
91 |
|
Item 17. Financial Statements |
91 |
|
Item 18. Financial Statements |
91 |
|
Item 19. Exhibits |
92 |
|
Signatures |
93 |
|
Index |
F-1 |
4
INTRODUCTION
Terms
As used herein, and unless the context suggests otherwise, the
terms “Perion,” “Company,” “we,” “us” or “ours” refer to Perion Network Ltd.
and subsidiaries. References to “dollar” and “$” are to U.S. dollars, the lawful currency of the United States,
and references to “NIS” are to New Israeli Shekels, the lawful currency of the State of Israel. This annual report on Form
20-F contains translations of certain NIS amounts into U.S. dollars at specified rates solely for your convenience. These translations
should not be construed as representations by us that the NIS amounts actually represent such U.S. dollar amounts or could, at this time,
be converted into U.S. dollars at the rate indicated. Unless otherwise indicated, we have translated NIS amounts into U.S. dollars at
an exchange rate of NIS 3.190 to $1.00, the representative exchange rate reported by the Bank of Israel on December 31, 2025.
This Annual Report contains estimates, projections and other
information concerning our industry and our business, as well as data regarding market research, estimates and forecasts prepared by our
management. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject
to uncertainties, and actual events or circumstances may differ materially from events and circumstances that are assumed in this information.
The industry in which we operate is subject to a high degree of uncertainty and risk due to a variety of factors, including those discussed
under the headings “Cautionary Statement Regarding Forward-Looking Statements” and Item 3.D. “Risk Factors” in
this Annual Report.
CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 20-F contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), the Securities Exchange
Act of 1934, as amended (the “Exchange Act”), and the safe harbor provisions of the Private Securities Litigation Reform Act
of 1995. Forward-looking statements relate to future events or our future financial performance and involve known and unknown risks, uncertainties
and other factors that may cause our, or our industries’ actual results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or achievements expressed, implied or inferred by these forward-looking
statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,”
“could,” “would,” “expects,” “plans,” “intends,” “anticipates,”
“believes,” “estimates,” “predicts,” “projects,” “potential” or “continue”
or the negative of such terms and other comparable terminology, such forward-looking statements are based on our current beliefs, expectations
and assumptions.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we do not know whether we can achieve positive future results, levels of activity, performance, or goals. Actual
events or results may differ materially from our current expectations. All forward-looking statements included in this report are based
on information available to us on the date of this report. Investors are cautioned not to place undue reliance on any such forward-looking
statements, which speak only as of the date they are made. Except as required by applicable law, we undertake no obligation to update
or revise any of the forward-looking statements after the date of this Annual Report on Form 20-F to conform those statements to reflect
the occurrence of unanticipated events, new information or otherwise.
You should read this annual report on Form 20-F and the documents
that we reference in this report completely and with the understanding that our actual future results, levels of activity, performance
and achievements may be materially different from what we currently expect.
Factors that could cause actual results to differ from our expectations
or projections include certain risks, including but not limited to the risks and uncertainties relating to our business, intellectual
property, industry and operations in Israel, as described in this Annual Report on Form 20-F, including, under Item 3.D. – “Key
Information – Risk Factors,” the information about us set forth under Item 4. – “Information on the Company,”
and information related to our financial condition under Item 5. – “Operating and Financial Review and Prospects.” Assumptions
relating to the foregoing, involve judgment with respect to, among other things, future economic, competitive and market conditions, and
future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. In
light of the significant uncertainties, inherent in the forward-looking information included herein, the inclusion of such information
should not be regarded as a representation by us or any other person that our objectives or plans will be achieved. Moreover, we operate
in a very competitive and rapidly changing environment. New risks emerge from time to time and it is not possible for our management to
predict all risks, nor can we assess the impact of all risks on our business or the extent to which any risk, or combination of risks,
may cause actual results to differ from those contained in any forward-looking statements.
We obtained statistical data, market data and other industry data
and forecasts used in preparing this annual report from market research, publicly available information and industry publications. Industry
publications generally state that they obtain their information from sources that they believe to be reliable, but they do not guarantee
the accuracy and completeness of the information. Similarly, while we believe that the statistical data, industry data and forecasts and
market research are reliable, we have not independently verified the data, and we do not make any representation as to the accuracy of
the information.
5
Our estimates and forward-looking statements may be influenced
by factors including:
| • |
Our advertising customers comprised of brands, advertising agencies, DSPs and SSPs may reduce or terminate their business relationship
with us at any time. If customers representing a significant portion of our revenue reduce or terminate their relationship with us, it
could have a material adverse effect on our business, financial condition and results of operation. |
| • |
The rapid development and broad adoption of generative AI chatbots cause a shift to AI mediated content and a decrease in web traffic
and a disruption in our industry, which could harm our business. |
| • |
Large and established internet and technology companies, such as Google, Meta, Apple, TikTok and Amazon, play a substantial role
in the digital advertising market and may significantly harm our ability to operate in this industry. |
| • |
If the demand for digital advertising does not continue to grow or customers do not embrace our solutions, including our Perion One
platform, it could have a material adverse effect on our business and results of operation. |
| • |
Due to our evolving business model and rapid changes in the industry in which we operate and the nature of services we provide, it
is difficult to accurately predict our future performance and may be difficult to increase revenue or profitability. |
| • |
We depend on supply sources to provide us with advertising inventory in order for us to deliver advertising campaigns in a cost-effective
manner. We also depend on service providers or partners who provide us with critical products and services. |
| • |
Non-compliance with industry self-regulation could negatively impact our Advertising Solutions business, brand and reputation.
|
| • |
The advertising industry is highly competitive. If we cannot compete effectively and overcome the technological gaps in this market,
our revenue is likely to decline. |
| • |
If our campaigns are not able to reach certain performance goals or we are unable to measure certain metrics proving achievement
of those goals, it could have a material adverse effect on our business. |
| • |
Increased availability of advertisement-blocking technologies could limit or block the delivery or display of advertisements by our
solutions, which could undermine the viability of our business, financial condition and results of operations. |
| • |
Our business depends on our ability to collect, use, maintain and otherwise process data, including personal data, and any limitation
on the collection, use, maintenance and other processing of this data could significantly diminish the value of our solutions and cause
us to lose customers, revenue and profit. |
| • |
If we do not continue to innovate and provide high-quality advertising solutions and services, we may not remain competitive, and
our business and results of operations could be materially adversely affected. |
| • |
The development and use of AI, any actual or perceived failure to comply with evolving legal and regulatory frameworks related thereto,
and the increase of competition in the advertising technology due to the impact of AI, could adversely affect our business, results of
operations, and financial condition. |
| • |
Our growth depends in part on the success of our relationships with advertising agencies, and third-party DSPs and SSPs. |
| • |
Our products are dependent on the platform terms of use and policies that are subject to changes out of our control. |
| • |
Global economic and market conditions and actions taken by our customers, suppliers and other business partners in markets in which
we operate might materially adversely impact us. |
| • |
Our search advertising solution depends highly upon revenue generated from our agreements with our search provider. Any adverse changes
in those agreements could adversely affect our business, financial condition and results of operations. |
| • |
The emergence of AI-powered tools and generative AI search alternatives have reduced traditional search engine usage, which could
materially adversely affect our business, financial condition and results of operations. |
| • |
The generation of search advertising revenue through publishers is subject to competition. If we cannot compete effectively in this
market, our revenue is likely to decline. |
| • |
In order to receive advertising generated revenue from our search providers, we depend, in part, on factors outside of our control.
|
6
| • |
Should the methods used for the distribution of our search solution, be blocked, constrained, limited, materially changed, based
on a change of policies, technology or otherwise (as has happened in the past), or made redundant by any of our search engine providers,
our ability to generate revenue from our search activity could be significantly reduced. |
| • |
Should the providers of platforms, particularly browsers, further block, constrain or limit our ability to offer or change search
properties, or materially change their policies, technology or the way they operate, our ability to generate revenue from our search activity
could be significantly reduced. |
| • |
A loss of the services of our senior management and other key personnel could adversely affect execution of our business strategy.
|
| • |
We have acquired and may continue to acquire other businesses. These acquisitions divert a substantial part of our resources and
management attention and could in the future, adversely affect our financial results. |
| • |
Our share price has fluctuated significantly and could continue to fluctuate significantly. |
| • |
Our business could be negatively affected as a result of actions of activist shareholders, and such activism could impact the trading
value of our securities. |
| • |
Our business and financial performance may be materially adversely affected by information technology issues, data breaches, cyber-attacks
and other similar incidents, as well as insufficient cybersecurity and other business disruptions. |
| • |
If we fail to detect or prevent fraudulent, suspicious or other invalid traffic or engagement with our ads, or otherwise prevent
against malware intrusions, we could lose the confidence of our advertisers, damage our reputation and be responsible to make-good or
refund demands, which would cause our business to suffer. |
| • |
We depend on third-party service providers, suppliers and vendors, such as Internet, telecommunication, data centers, cloud computing
and hosting providers as well as data providers, to operate our platform, websites and services. Temporary failure of these services,
including catastrophic or technological interruptions, would materially reduce our revenue and damage our reputation, and securing alternate
sources for these services could significantly increase our expenses and be difficult to obtain. |
| • |
Our business depends on our ability to collect, use, maintain and otherwise process data, including personal data, to help our clients
deliver advertisements and to disclose data relating to the performance of advertisements. Any limitation imposed on our collection, use,
maintenance or other processing of this data could significantly diminish the value of our solution and cause us to lose sellers, buyers,
and revenue. Regulations, legislation or self-regulation relating to data protection, data privacy, cybersecurity, AI, e-commerce and
internet advertising and uncertainties regarding the application or interpretation of existing or newly adopted laws and regulations threaten
our ability to collect, use, maintain and otherwise process this data, could harm our business and subject us to significant costs and
legal liability for non-compliance. |
| • |
Our proprietary information, technology and other intellectual property may not be adequately protected and thus our intellectual
property may be unlawfully copied by or disclosed to other third parties. |
| • |
Our business relies significantly on the U.S. market. Any material adverse change in that market could have a material adverse effect
on our results of operations. |
| • |
Our business may be materially affected by changes to fiscal and tax policies. Potentially negative or unexpected tax consequences
of these policies, or the uncertainty surrounding their potential effects, could adversely affect our results of operations and share
price. |
| • |
Political, economic and military instability in the Middle East and specifically in Israel, including Israel’s war with Hamas
and conflict with other parties in the region, may adversely affect our operations and limit our ability to market our products, which
would lead to a decrease in revenues. |
You should not rely on forward-looking statements as predictions
of future events. We have based the forward-looking statements contained in this Annual Report primarily on our current expectations and
projections about future events and trends that we believe may affect our business, financial condition and operating results. The outcome
of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described under Item
3.D. – “Key Information – Risk Factors” and in other parts of this Annual Report. Moreover, we operate in a very
competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict
all risks and uncertainties that could have an impact on the forward-looking statements contained in this Annual Report. The results,
events and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events or circumstances
could differ materially from those described in the forward-looking statements.
In addition, statements indicating that “we believe”
and similar statements reflect our beliefs and opinions on the relevant subject at the relevant time. These statements are based on information
available to us as of the date of this Annual Report. While we believe that information provides a reasonable basis for these statements,
that information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry
into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely
on these statements.
The forward-looking statements made in this Annual Report relate
only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made
in this Annual Report to reflect events or circumstances after the date of this Annual Report or to reflect new information or the occurrence
of unanticipated events, except as required by law. We may not actually achieve the plans, intentions, or expectations disclosed in our
forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements
do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments.
7
PART I
ITEM 1. IDENTITY
OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Not applicable.
ITEM 2. OFFER
STATISTICS AND EXPECTED TIMETABLE
Not applicable.
ITEM 3. KEY
INFORMATION
| A. |
SELECTED FINANCIAL DATA |
Reserved.
| B. |
CAPITALIZATION AND INDEBTEDNESS |
Not applicable.
| C. |
REASONS FOR OFFER AND USE OF PROCEEDS |
Not applicable.
| D. |
RISK FACTORS |
An investment in our ordinary shares involves
a high degree of risk since we are subject to various risks and uncertainties relating to or arising out of the nature of our business
and general business, economic, financial, legal, geopolitical, and other factors or conditions that may affect us. We believe that
the occurrence of any one or some combination of the following factors could have a material adverse effect on our business, financial
condition, cash flows, and results of operations. You should carefully consider the risks described below, as well as the other information
in this Annual Report, before making an investment decision. We can give no assurance that we will successfully address any of these risks.
Risks Related to our Business
and Industry
Our advertising customers comprised of brands,
advertising agencies, DSPs and SSPs may reduce or terminate their business relationship with us at any time. If customers representing
a significant portion of our revenue reduce or terminate their relationship with us, it could have a material adverse effect on our business,
financial condition and results of operation.
We generally do not enter into long-term contracts with our advertising
customers, which include brands, demand side partners, advertising agencies, and supply side partners, and such customers do business
with us on a non-exclusive basis. In most cases, our customers may terminate or reduce the scope of their agreements with little or no
penalty or notice. Accordingly, our business is highly vulnerable to adverse economic conditions, market evolution (e.g.,
the shift to AI-mediated content), development of new or more compelling offerings by our competitors and development by our advertising
customers of in-house replacement services. Any reduction in spending by, or loss of, existing or potential advertisers and advertising
agencies would negatively impact our business, financial conditions and results of operation.
Furthermore, the discretionary, non-exclusive nature of our relationships
with advertising customers subjects us to increased pricing pressure. Although we believe our rates are competitive, our competitors may
offer more favorable pricing or other advantageous terms. While we seek to diversify our offerings and, as part of our strategy, provide
our customers with different advertising solutions and constantly adapt our relationship with our customers to respond to their ever-changing
needs, there is no assurance that our strategy will successfully address these risks. As a result, we may be compelled to reduce our rates,
offer other incentives or other more compelling pricing models in order to maintain our current customers and attract new customers. If
a significant number of customers compel us to charge lower rates or provide rate concessions or incentives, there is no assurance that
we would be able to compensate for such price reductions or maintain our profit margins.
The rapid development and broad adoption of generative AI chatbots
cause a shift to AI mediated content and a decrease in web traffic and a disruption in our industry, which could harm our business.
The shift to AI-mediated content consumption threatens traditional AdTech revenue streams
through reduced web traffic, fewer ad impressions, and disrupted attribution. AdTech industry's business model, and our business model,
rely on users’ web traffic, and our search business model relies significantly on third-party search engine results. This dependence
exposes our operations to the evolving landscape of artificial intelligenc (“AI”) technologies, including OpenAI’s ChatGPT,
Grok by X, Anthropic’s Claude, Microsoft’s Copilot and Google’s Gemini, which are increasingly becoming integral to
search engines. As AI chatbots and AI-driven search features provide direct answers without redirecting users to publisher sites, fewer
page views and fewer clicks are generated, leading to a significant decline in traditional search engine volume and web traffic, a trend
that is expected to accelerate in the future. This decline in volume results in decreased revenues and may adversely impact our financial
results, a trend we expect to deepen going forward. For additional information, see also the Risk Factor titled - “The emergence
of AI-powered tools and generative AI search alternatives have reduced traditional search engine usage, which could materially adversely
affect our business, financial condition and results of operations.”
8
Furthermore, AI companies, such as OpenAI, Anthropic, Google, Microsoft,
X and other companies developing AI platforms introduce and are expected to continue introducing tools that could enhance competition
in the advertising technology industry and reduce barriers to entry. Additionally, the rapid proliferation of accessible, enterprise-grade
artificial intelligence platforms, such as those offered by OpenAI for sales and marketing, may enable brands to independently generate
ad variations and analyze campaign performance. If brands or advertising agencies increasingly rely on these generalized third-party AI
solutions rather than our platform to execute their marketing strategies, the demand for our offerings could decline, materially adversely
affecting our revenue and results of operations.
Large and established internet and technology
companies, such as Google, Meta, Apple, TikTok and Amazon, play a substantial role in the digital advertising market and may significantly
harm our ability to operate in this industry.
Google, Meta, Apple, TikTok and Amazon account for a large portion
of the digital advertising market and digital advertising budgets. The high concentration in the market subjects us to the risk of any
unilateral changes Google, Meta, Apple, TikTok or Amazon may make with respect to advertising on their respective lucrative platforms.
These changes may significantly harm our ability to operate in this industry and we could be limited in our ability to respond and adjust
to such changes.
These companies, along with other large and established internet
and technology companies, may also leverage their power to make changes to their web browsers, operating systems, platforms, networks
or other products or services in ways that impact the entire digital advertising marketplace.
Google’s Chrome internet browser supports the “Better
Ads Standards” implemented by the Coalition for Better Ads, an industry body formed by leading international trade associations
and companies involved in online media (in which one of our US subsidiaries is also a member) and removes all ads from certain sites that
violate this standard. In addition, while Google announced in July 2024, that it reversed its plans to deprecate third-party cookies in
its Chrome browser, and subsequently announced in April 2025 that it will not introduce a new standalone user-facing choice prompt for
third-party cookies in Chrome as previously indicated, meaning users will continue to manage cookie preferences through Chrome’s
existing privacy settings, it also announced the introduction of a new feature in Chrome providing users with a more informed choice regarding
their web browsing data. Furthermore, Google has announced an initiative known as “IP Protection,” to be introduced as a feature
in Chrome’s Incognito mode, which will allow the anonymization of the user’s IP address, to help protect it from being used
by third parties for web-wide cross-site tracking. If implemented, this could limit geo-targeting for advertisements for users of
Chrome Incognito. Moreover, the leading mobile operating systems, Apple iOS and Google Android have implemented and may plan to further
implement, advertising and targeting restrictions within applications running on their platforms, including the requirement to obtain
user consent before permitting access to Apple’s unique identifier and allowing users to opt-out of tracking across devices on Android.
These changes, together with other advertisement-blocking technologies
incorporated in or compatible with leading internet browsers and operating systems, as well as the emergence of new or alternative internet
browsers and browser-like environments introduced by existing or new market participants (including AI-enabled browsers), may further
impact the digital advertising ecosystem. The monetization models, advertising formats and policies of such new browsers, including whether
and to what extent advertising will be permitted, restricted or blocked by default, are still evolving and uncertain. If such browsers
gain meaningful user adoption and adopt ad-free or more restrictive advertising models, or otherwise limit advertiser access, our (as
well as those of our competitors’) advertising business could be adversely affected. These changes could materially impact the way
we do business, and if we or our advertisers and advertising agencies and publishers are unable to quickly and effectively adjust and
provide solutions to those changes, there could be an adverse effect on our revenue and performance.
The concentration of large companies within
the industry and consolidation among participants within the digital advertising market could have a material adverse impact on our business,
financial condition and results of operations.
The digital advertising industry has experienced substantial evolution
and consolidation in the past and we expect this trend to continue, increasing the capabilities and competitive posture of larger companies,
particularly those that are already dominant in various ways, and enabling new or stronger competitors to emerge. We are currently able
to serve, track and manage advertisements on a variety of networks, platforms and websites for our customers as well as for our own operations.
The consolidation trend could substantially harm our ability to operate if such larger companies decide not to permit us to serve, track
or manage advertisements on their websites, platforms and/or on our properties, if they develop ad placement systems that are incompatible
with our ad serving capabilities or if they use their market power to force their customers to use certain vendors on their networks or
websites and/or on our properties.
Certain of our primary advertisers, advertising agencies and publishers
are owned, affiliated with or controlled by a small number of large holding companies. If any of these holding companies decide to reduce,
amend or terminate their business relationship with us for any reason, and/or in case there is a rapid and/or significant decline in inventory
available to us, it may lead to a material adverse impact on our business, financial conditions and results of operation.
9
If the demand for digital advertising
does not continue to grow or customers do not embrace our solutions, including our Perion One platform, it could have a material adverse
effect on our business and results of operation.
A substantial portion of our advertising revenue is derived from
the sale of our digital advertising solutions and we have made significant investments in our ability to deliver different types of advertisements
on diverse digital channels, including high-impact web and CTV advertising, Outmax, Retail & Commerce, DOOH, AI based digital audio,
audience segmentation - SORT®, contextual and UID, and display and video, website publisher’s solutions, which are compatible
on many devices and channels as well as different content monetization solutions for which we partner with advertising networks to serve
ads on our properties as well as on properties of our publishers. Nonetheless, (i) customers may prefer other solutions than ours, (ii)
the demand to our offerings may decrease due to the impact of the rapid development of generative AI on our industry; (iii) our integration,
including in particular integration of our Perion One platform, with advertising networks may be unsuccessful, (iv) the implementation
of our Perion One strategy and platform may be delayed, fail or be less successful than planned; (v) there may be a reduction in general
demand for digital advertising or in spend for certain channels or solutions, or (vi) the demand for our specific solutions and offerings
may decrease, as have impacted us in the past, and could lead to a material adverse impact on our business, financial conditions and results
of operation.
Furthermore, in February 2025, we announced a transformation in
our strategy, by unifying our business units under the Perion brand. This strategy intends to unify our brands and technologies into one
advanced platform named Perion One, that will allow brands, agencies, and retailers navigating the complexities of modern advertising
via the platform. If we fail to design and implement the Perion One strategy and the platform in a manner compelling to our business partners,
if we fail to meet our technological goals in connection with the platform, or if the Perion One strategy and platform is not successful
for other reasons, we may not be able to attract brands, agencies and retailers, which will adversely impact our ability to grow or otherwise
adversely materially impact the results of our operations. If our partners prefer
other solutions than ours or otherwise decrease their business with us, this may lead to a material adverse impact on our business, financial
conditions and results of operation.
Due to our evolving business model and rapid
changes in the industry in which we operate and the nature of services we provide, it is difficult to accurately predict our future performance
and may be difficult to increase revenue or profitability.
As the digital advertising ecosystem is dynamic, seasonal and subject
to shifts in spending trends and other factors impacting the digital advertising ecosystem, such as the increasing use and relevance of
generative AI, it is hard to predict our future performance, particularly with regard to the effect of our efforts to increase revenue
and profitability. Although we diversify our business, there is no assurance that we will not be adversely affected by shifts in advertisers
spending and other factors impacting our industry. If we are unable to continuously improve our systems and processes, including in particular
our Perion One platform, adapt to the changing and dynamic needs of our customers or align our expenses with our revenue level, it will
impair our ability to be compelling and may adversely affect our business and profitability.
In addition, we may experience an overall decline in advertising
spending and demand for our solutions as a result of enhanced competition, decrease in market demand, macroeconomic conditions, higher
rates of global inflation and shifts in spending trends. If we are unable to respond to such changes and timely adapt our business model,
we may not be able to sustain growth, meet our business targets or achieve or sustain profitability and our business and results of operations
may be adversely affected.
We depend on supply sources to
provide us with advertising inventory in order for us to deliver advertising campaigns in a cost-effective manner. We
also depend on service providers or partners who provide us with critical products and services.
We rely on a diverse set of supply sources, including publishers
(such as direct publishers, advertising exchange platforms, media owners, social networks and other platforms) that aggregate advertising
inventory to provide us with high-quality digital advertising inventory on which we deliver ads, collectively referred to as “supply
sources”, as well as data brokers, data management platforms and other platforms that provide data to enhance our targeting capabilities.
The future growth of our advertising business will depend, in part, on our ability to maintain, expand and further develop successful
business relationships in order to increase the network of our supply sources.
Our supply sources typically make their advertising inventory available
to us on a non-exclusive basis and are not required to provide any minimum amounts of advertising inventory to us or to provide us with
a consistent supply of advertising inventory, at any predetermined price or through real-time bidding. Supply sources often maintain relationships
with various demand partners that compete with us, and it is easy for such supply sources to quickly shift their advertising inventory
among these demand partners, or to shift inventory to new demand partners, without notice or accountability. Supply sources may also change
the terms on which they offer inventory to us, or they may allocate their advertising inventory to our competitors who may offer more
favorable economic terms, better solutions or more advanced technology. Supply sources may also elect to sell all, or a portion, of their
advertising inventory directly to advertisers and advertising agencies, or they may develop their own offerings competitive to ours, which
could diminish the demand for our solutions. In addition, significant supply sources within the industry may enter into exclusivity arrangements
with our competitors, which could limit our access to a meaningful supply of inventory. As a result of all of these factors, our supply
sources may not provide us with sufficient amounts of high-quality digital advertising inventory in order for us to fulfill the demands
of our advertising customers. Restrictions from advertisers, advertising agencies, DSPs or SSPs regarding usage of this inventory source
have impacted us and could materially adversely impact our operations and revenue.
10
Additionally, our ability to access advertising inventory in a
cost-effective manner may be constrained or affected as a result of a number of other factors, including, but not limited to:
| • |
Supply sources may impose significant restrictions on the advertising inventory they sell or may impose other unfavorable terms and
conditions on the advertisers using their sites or platforms. For example, these restrictions may include frequency caps, prohibitions
on advertisements from specific advertisers or specific industries, or restrictions on the use of specific creative content or advertising
formats as well as content adjacent restrictions, which would restrain our supply of available inventory. |
| • |
Supply sources may experience a decline in users’ traffic due to the extensive availability of generative AI chatbots, which
would restrain our supply of available inventory. |
| • |
Supply sources that offer online content and mobile applications may shift from an advertising-based monetization method to a pay-for-content/services
model, allowing users of services to pay a subscription in exchange for not to being shown advertisements. If they elect not to pay, then
in order to use the service, the user consents to the processing of their data for advertising purposes. This may reduce available inventory.
|
| • |
Social media platforms, such as Meta’s Facebook, Instagram or TikTok, are “walled gardens” and are and may continue
to be successful in keeping users within their sites, which may be competitive to our offerings and solutions. If, as a result, users
are not on the open web, online advertising inventory outside of such platforms (including our publishers’ and our owned and operated
sites) may be reduced or may become less attractive to our advertising customers. |
| • |
Supply sources may be reluctant or unable to adopt certain of our proprietary and unique high-impact display, CTV, Open Web, our
AI-driven supply-side optimization technologies- SODA and other website publisher’s solutions for a variety of reasons (such as
changes in user preference making such ad formats less desirable or concerns regarding page load latency, or technological limitations,
such as in connection with header bidding or the ability to transact programmatically), resulting in limited advertising inventory supply
for such formats and inhibiting our ability to scale such formats and technologies. |
| • |
The DOOH industry is highly concentrated and characterized by intense competition among media owners. A withdrawal of a DOOH media
by a large supplier could have material adverse impacts on our business. |
Similarly, our service providers or partners which provide us with
services that are critical to our business could terminate their relationship with us at any time or with minimal notice. Our digital
advertising business relies on a number of third-party data, measurement and verification vendors as well as cloud computing and API services.
Should any of these vendors choose to terminate or modify on less favorable terms their relationships with us, and/or if we were to fail
to identify and contract with acceptable substitute vendors, we may not be able to offer those of our services that depend on such vendors
at the level of quality our customers expect or at all.
Because of these factors, we seek to expand and diversify our supply
sources; nonetheless, if we fail to diversify our sources or if our supply sources terminate or reduce our access to their advertising
inventory or services, increase the price of inventory or services or place significant restrictions on the sale of their advertising
inventory or services, or if platforms or exchanges terminate our access to them and we are unsuccessful in establishing or maintaining
our relationships with supply sources on commercially reasonable terms, we may not be able to replace these sources with inventory from
other supply sources that satisfy our quality requirements as well as other requirements in a timely and cost-effective manner. If any
of these happens, our revenue could decline or our cost of acquiring inventory could increase, which, in turn, could lower our operating
margins and materially adversely affect our advertising business. For additional information see also the Risk Factor titled - “The
concentration of large companies within the industry and consolidation among participants within the digital advertising market could
have a material adverse impact on our business, financial condition and results of operations.”
Our Advertising Solutions business depends on
a strong brand reputation, and if we are not able to maintain and enhance our brand, our business and results of operations could be materially
adversely affected.
Maintaining and enhancing our brands is an important aspect of
our efforts to attract and expand demand from brands, advertising agencies, demand side partners (which include third-party DSPs) and
supply side partners (which include third-party SSPs). We have spent, and expect to continue spending, considerable sums and other resources
on the establishment, building and maintenance of our brands, as well as on enhancing market awareness of them. Our brands, however, may
be negatively impacted by a number of factors, including but not limited to, fraudulent, inappropriate or misleading content on our own
sites and those we operate, as well as on publishers’ inventory on which we serve ads, service outages, product malfunctions, data
protection, data privacy and cybersecurity issues, and exploitation of our trademarks by others without our permission. We are actively
executing our strategy, which is unifying the Company’s various brands and technologies into one advanced platform named Perion
One, with the objective of enhancing the Perion brand over other legacy brands used by our Company. By transitioning from our legacy brands
to our relatively newly adopted ones, we may lose some of the recognition and reputation associated with the brands we have discontinued.
If we are unable to successfully execute this transition, or otherwise maintain or enhance our brand in a cost-effective manner, our business
and operating results could be materially adversely affected.
11
Non-compliance with industry self-regulation
could negatively impact our Advertising Solutions business, brand and reputation.
In addition to compliance with applicable laws and regulations,
we voluntarily participate in industry self-regulatory bodies which promulgate best practices or codes of conduct addressing, among other
things, data protection, data privacy, cybersecurity, brand safety and other aspects pertaining the delivery of digital advertising. Some
of our subsidiaries voluntarily participate in several such trade associations and industry self-regulatory groups, such as the Network
Advertising Initiative (NAI), and the Digital Advertising Alliance (DAA), the Interactive Advertising Bureau (IAB) and TAG Certified Against
Fraud. If we or our subsidiaries are unable to follow and abide by the rules and principles provided by such self-regulatory bodies or
align the conduct of our business and practices with changes to such rules and principles, we may be subject to investigations by such
self-regulatory bodies or other accountability groups, or by our customers and partners as well as users. Handling such actions may require
us to devote financial and managerial resources, require us to change our business practices, or cause damage to our brand, which in turn
could materially adversely affect our business, financial condition and results of operations. We also could be adversely affected by
new or altered self-regulatory guidelines that are inconsistent with our current practices or in conflict with applicable laws and regulations
in the United States, Canada, Europe, Israel and other regions where we do business. Additionally, adherence to best practices set by
these regulatory bodies does not necessarily mean that such practices will be deemed acceptable or fully compliant by privacy authorities.
If we fail to abide by or are perceived as not operating in accordance with industry best practices or any industry guidelines or codes
or regulations with regard to data protection, data privacy, cybersecurity, brand safety or other aspects pertaining the delivery of digital
advertising, our reputation may suffer and we could lose relationships with both buyers and sellers which may adversely affect our business
and results of operations.
We may be unable to deliver advertising in a
brand-safe environment or protect inventory from receiving unsafe advertising or content, which could harm our reputation and cause our
business to suffer.
It is important for advertisers that their advertisements are not
placed in or near content that is unlawful or would be deemed offensive or inappropriate by their customers, or near other advertisements
for competing brands or products. It is equally important for publishers not to have inappropriate content placed within their inventory.
While we strive to have all of our advertisements appear in a brand-safe environment and all inventory free from inappropriate content,
we cannot guarantee that they will be delivered in such an environment. If we are not successful in doing so, we may experience reputational
damage that could impede our ability to attract new business and additionally could decrease business affairs with existing advertisers,
advertising agencies and publishers, or our customers may seek to avoid payment or demand refunds, any of which could harm our business,
financial condition and results of operations.
The advertising industry is highly competitive.
If we cannot compete effectively and overcome the technological gaps in this market, our revenue is likely to decline.
We face intense competition in the advertising industry. We operate
in a dynamic market that is subject to rapid development and the introduction of new technologies, products and solutions, changing branding
objectives, evolving customer demands rules, regulations and industry guidelines, all of which affect our ability to remain competitive.
There is a large number of digital media companies and advertising technology companies that offer products or services similar to or
more compelling than ours that compete with us for finite advertising budgets and for limited inventory from publishers. Additionally,
companies that do not currently compete with us in this space may change their strategy and the services they provide to be competitive
if a revenue opportunity arises, and new or stronger competitors may emerge through consolidations or acquisitions in the market. Additionally,
the advertising spends of large advertisers and agencies seeking to consolidate their technology partners may continue to migrate towards
large technology platforms, including both social and walled-gardens players, which may harm our ability to operate in this industry and
decrease our results of operations. If our digital advertising platforms and solutions, including our Perion One strategy which is unifying
our brands and technologies into one advanced platform, are not perceived as competitively differentiated, or if we fail to
develop adequately to meet market evolution, or fail to acquire companies to help us overcome the technological gaps in a timely manner
and meet the market demands, we could lose customers and market share or be compelled to reduce our prices and harm our operational results.
Our reputation is a key factor in our ability to compete successfully.
There can be no assurances that our ability to compete effectively in the future may not be affected by negative market perception. Because
of these factors, we continuously seek to diversify our product suite to respond to the changing needs and interests of our customers
to benefit from a variety of different offerings, however, we cannot guarantee that we will always be able to accommodate such needs,
that such efforts will yield the expected revenue or that we will adapt quickly enough (or in a cost-effective manner) to the global AI
evolution or evolving changes in the industry in which we operate and related regulations, technologies, applications and devices, which
could adversely impact our reputation, and, in turn, our business, financial condition and results of operations.
12
Our advertising business is susceptible to seasonality,
unexpected changes in campaign size and prolonged cycle time, which could affect our business and results of operations.
The revenue from our advertising business is affected by a number
of factors, including:
| • |
Historically, our advertising business has experienced the lowest revenue levels in the first quarter and highest revenue levels
in the fourth quarter, with the second and third quarters being slightly stronger than the first quarter; |
| • |
In any single period, our advertising solutions revenue and delivery costs are subject to significant variation based on changes
in the volume and mix of deliveries performed during such period; |
| • |
Revenue is subject to the changes of brand marketing trends, including when and where brands choose to spend their money in a given
year; |
| • |
Advertising customers generally retain the right to supplement, extend, or cancel existing advertising orders at any time prior to
their delivery, and we have no control over the timing or magnitude of these revenue changes; |
| • |
Relative complexity of individual advertising formats, and the length of the creative design process; and |
| • |
A prolonged cycle time for entering into transactions with retail media networks (RMNs) or other advertising customers. |
As a result, in most cases, our profit from these operations is
seasonal, with the fourth quarter being the major contributor to our profits and the first quarter resulting in the lowest profit. There
can be no assurance that we will correctly predict the results of these and other factors on our business and that we will be successful
in mitigating any negative impact resulting from these factors.
If our campaigns are not able to reach certain
performance goals or we are unable to measure certain metrics proving achievement of those goals, it could have a material adverse effect
on our business.
Our advertising clients expect and often demand that our advertising
campaigns achieve certain performance levels based on metrics such as in our online business, user engagement, view ability, clicks or
conversions; or, in our DOOH business, brand awareness, foot traffic, and sales lift to validate their value proposition, particularly
as we offer costlier premium advertising services to clients. We may have difficulty achieving or proving these performance levels for
a variety of reasons (for example, it may be difficult to track viewability on our proprietary high-impact ad units, either directly or
through a third-party vendor), which could cause clients to cancel campaigns, not provide repeat business or request make-goods or refunds,
any of which could have a material adverse effect on our business and results of operations.
Increased availability of advertisement-blocking
technologies could limit or block the delivery or display of advertisements by our solutions, which could undermine the viability of our
business, financial condition and results of operations.
Advertisement-blocking technologies, such as mobile apps or browser
extensions that limit or block the delivery or display of advertisements, are currently available for desktop, tablet and mobile users.
Further, new browsers and operating systems, or updates to current browsers or operating systems, offer native advertisement-blocking
technologies to their users, such as the support in Google Chrome for blocking advertisements from web sites that violate the “Better
Ads Standards” established by the Coalition for Better Ads (in which one of our U.S. subsidiaries is a member). Furthermore, users
can employ their own advertisement-blocking client-based technology or use a browser that blocks advertisements. As such technologies
or practices continue to become widespread, this could have a material adverse effect on our business, financial condition and results
of operations.
Our business depends on our ability to collect,
use, maintain and otherwise process data, including personal data, and any limitation on the collection, use, maintenance and other processing
of this data could significantly diminish the value of our solutions and cause us to lose customers, revenue and profit.
In many cases, when we deliver an advertisement, we are able to
collect certain data, including personal data, about the content and placement of the ad, the relevancy of such ad to a user and the interaction
of the user with the ad, such as whether the user viewed or clicked on the ad or watched a video. As we collect and aggregate data provided
by billions of ad impressions and third-party providers, we analyze the data in order to measure and optimize the placement and delivery
of our advertising inventory and provide cross-channel advertising capabilities. Our ability to collect, use, maintain and otherwise process
such data is crucial.
Our publishers or advertisers and advertising agencies may decide
not to allow us to collect some or all of this data or may limit our use, maintenance or other processing of this data. Additional details
regarding limitations on the collection, use, maintenance and other processing of this data due to current and potential future laws and
regulations are provided below under the Risk Factor titled – “Our business depends on our
ability to collect, use, maintain and otherwise process data, including personal data, to help our clients deliver advertisements, and
to disclose data relating to the performance of advertisements. Any limitation imposed on our collection, use, maintenance or other processing
of this data could significantly diminish the value of our solutions and cause us to lose sellers, buyers, and revenue. Regulations, legislation
or self-regulation relating to data protection, data privacy, cybersecurity, AI, e-commerce and internet advertising and uncertainties
regarding the application or interpretation of existing or newly adopted laws and regulations threaten our ability to collect, use, maintain
and otherwise process this data, could harm our business and subject us to significant costs and legal liability for non-compliance.”
13
If we do not continue to innovate and provide
high-quality advertising solutions and services, we may not remain competitive, and our business and results of operations could be materially
adversely affected.
Our success depends on our ability to provide customers with innovative,
high-quality advertising solutions and services that foster consumer engagement. We face intense competition in the marketplace and are
faced with rapidly changing technology, evolving industry standards, laws, rules and regulations and consumer needs, and the frequent
introduction of new products and solutions by competitors, as well as publishers themselves, that we must adapt and respond to in order
to remain competitive. Similarly, in order to remain competitive, we are required to adapt to the rapidly evolving AI landscape and the
potential entry of new players reshaping our industry. Further, in order to remain competitive in the rapidly evolving landscape of advertising
technologies, we must continue to invest in and rely on AI, both as the infrastructure of our platform and as a mechanism for driving
efficiency and enabling generative capabilities. Our investments in AI technologies may not be successful, may not produce the desired
outcomes, or may be insufficient in order to remain competitive. In order to be innovative and competitive, we rely on AI based technologies
for our solutions and products. We spend substantial amounts of time and money researching and developing AI based products and enhanced
versions of existing products. There is no assurance that our enhancements to our platform or our new products, capabilities, or offerings,
will, either individually or in the aggregate, be compelling, successful in achieving its goals, gain market acceptance, or have a positive
or material impact on our business, financial condition, or results of operations, in each case in a timely or cost-effective manner.
While developments in AI in our industry may present significant opportunities to our business, at the same time, such developments may
raise unexpected challenges, legal, reputational, ethical or technological, or may not function as expected. For more information on AI-related
risks, see the Risk Factor titled – “The development and use of AI and any actual or perceived
failure to comply with evolving legal and regulatory frameworks related thereto could adversely affect our business, results of operations,
and financial condition. Additionally, AI could increase competition in the advertising technology industry.”
Therefore, our continued success depends in part upon our ability
to develop new solutions and technologies, enhance our existing solutions and expand the scope of our offerings to meet the evolving needs
of the industry. As a result, we must continue to invest significant resources in research and development in order to enhance our technology
and our existing solutions and services and introduce new high-quality solutions and services.
Our operating results will also suffer if our innovations are not
responsive to the needs of our customers, are not appropriately timed with market opportunity or are not effectively brought to market.
If we are unable to accurately forecast market demands or industry changes, if we are unable to develop or introduce our solutions and
services in a timely manner, or if we fail to provide quality solutions and services that run without complication or service interruptions
or do not respond properly to the ever-changing technological landscape, we may damage our brand and our ability to retain or attract
customers. As online advertising technologies continue to develop, our competitors may be able to offer solutions that are, or that are
perceived to be, substantially similar to or better than those offered by us. Customers will not continue to do business with us if our
solutions do not deliver advertisements in an appropriate and effective manner, through a variety of distribution channels and methods,
or if the advertising we deliver does not generate the desired results, or if we fail to meet customer expectations including but not
limited to Perion One platform quality, reliability, costs, or execution efficiency. In addition, advertising customers may find that
content made available through our properties is not suitable for their advertising requirements or that our competitors offer content
which is more lucrative and relevant to their advertising needs, resulting in reduction of their advertising spend with us. If we are
unable to meet these challenges, our business, financial condition and results of operations could be materially adversely affected.
The development and use of AI, any actual or
perceived failure to comply with evolving legal and regulatory frameworks related thereto, and the increase of competition in the advertising
technology due to the impact of AI, could adversely affect our business, results of operations, and financial condition.
We leverage new technologies and platforms to improve our products
and business effectiveness, including use of AI technologies. We leverage machine learning for campaign delivery and optimization, using
real-time predictions and algorithms to deliver the most effective advertisements for specific target audiences, in conjunction with our
creative platform. Outmax, our AI agent, and our AI-based Perion One platform form the foundation of our transformation strategy. This
is in addition to our existing AI-based offerings such as WAVE, our Waveform Audio Voice Engine, a generative AI-powered dynamic audio
solution that enables advertisers to generate personalized audio advertising messages at scale, and SORT®, our Smart Optimization
of Responsive Traits technology, which is a pre-bid technology solution that analyzes all of the non-personal data signals present when
a user lands on a page in our advertising solutions networks and uses our proprietary AI technology to classify such signals into intent
groups. The solution then serves the most relevant ad for that intent group.
There are significant risks involved in utilizing AI and no assurances
can be provided that our use will enhance our solutions or services or produce the intended results. For example, AI algorithms may be
flawed, insufficient, of poor quality, reflect unwanted forms of bias or contain other errors or inadequacies, any of which may not be
easily detectable; AI has been known to produce false or “hallucinatory” inferences or outputs. AI can also present ethical
issues and may subject us to new or heightened legal, regulatory, ethical or other challenges and inappropriate or controversial data
practices by developers and end-users, or other factors adversely affecting public opinion of AI, could impair the acceptance of AI technologies,
including those incorporated into our solutions and services. If the AI tools that we create or use, including the content, analyses or
recommendations such AI tools assist in producing and the data or algorithms such AI tools rely on, are or are alleged to be deficient,
inaccurate, biased or controversial, we could incur operational inefficiencies, competitive harm, legal liability, brand or reputational
harm, or other adverse impacts on our business and financial results. Furthermore, our use or integration of third-party AI models with
our products may rely on such third-party's model inherent features aimed to provide a certain safeguard relating to the output, which
may be insufficient in achieving their goals. Additionally, our employees, contractors, vendors or service providers use or
may use third-party AI tools in connection with our business or the services they provide to us. This may involve additional risks which
may include, without limitation, outputs obtained from such third-party AI tools containing copyrighted content and disclosure of our
sensitive, proprietary, confidential or personal information into publicly available or third-party training sets. If we do not have sufficient
rights to use the data or other material or content on which the AI tools we use rely, or to use the output of such AI tools, we also
may incur liability through the violation of applicable laws and regulations, third-party intellectual property, data protection, data
privacy or other rights, or contracts to which we are a party.
14
The technologies underlying AI and its uses are subject to a variety
of laws and regulations, including those related to intellectual property, data protection, data privacy, cybersecurity, consumer protection,
competition and equal opportunity, and are expected to be subject to increased regulation and new laws or new applications of existing
laws and regulations. The AI legal and regulatory landscape is rapidly evolving, and we are or may become subject to numerous state, federal
and foreign laws and regulations governing the use of AI. Implementation standards and enforcement practices are likely to remain uncertain
for the foreseeable future, and we cannot yet determine the impact future laws and regulations may have on our business.
In the United States and internationally, AI is the subject of
evolving review by various governmental and regulatory agencies, including the SEC and the Federal Trade Commission (the “FTC”),
and changes in laws and regulations governing the use of AI may adversely affect the ability of our business to use or rely on AI and
our ability to provide and to improve our solutions and services, may require additional compliance measures and changes to our operations
and processes, and may result in increased compliance costs and potential increases in civil claims against us. Many federal, state
and foreign government bodies and agencies have introduced or are currently considering additional laws and regulations governing the
use of such technologies. For example, in March 2024, Utah enacted the Artificial Intelligence Policy Act, which imposes certain disclosure
obligations and consumer protection responsibilities on companies that use generative AI. In May 2024, Colorado enacted the Colorado AI
Act, which creates duties for developers and for those that deploy AI with a specific focus on preventing bias and discrimination. In
September 2024, California enacted the California AI Transparency Act, which imposes transparency obligations on companies that develop
or substantially modify AI models, and in September 2025 enacted the Transparency in Frontier Artificial Intelligence Act requiring developers
of certain AI models to implement specified safety measures and make certain disclosures. In June 2025 Texas enacted the Texas Responsible
Artificial Intelligence Governance Act which establishes a comprehensive legal framework for AI development, deployment, and oversight.
On a federal level, in December 2025, the Trump administration issued the “Ensuring a National Policy Framework for Artificial Intelligence”
executive order. This executive order calls for federal standards and legislation that would preempt conflicting state AI regulations
and create a federal litigation task force focused on challenging state AI laws in court. The Trump administration may continue to rescind
other existing federal orders and/or administrative policies relating to AI or may implement new executive orders and/or other rule making
relating to AI in the future.
The most comprehensive AI legislation passed in the European
Union is the EU Artificial Intelligence Act (the “EU AI Act”) under which certain provisions regulating prohibited AI practices
and AI literacy became effective on February 2, 2025 and certain provisions pertaining to general purpose AI models became effective on
2 August 2025, with additional provisions to become gradually applicable on later dates in 2026 and 2027. The EU AI Act contains a list
of prohibited practices, classifies certain AI systems as high risk, depending on the level of risk they pose, includes transparency obligations
for providers and deployers of certain AI systems, and includes obligations and requirements around general-purpose AI models and general-purpose
AI systems. For example, fines for noncompliance include fines of up to the higher of €35,000,000 or 7 percent of a company’s
total worldwide annual turnover for noncompliance with prohibited AI practices, fines of up to the higher of €15,000,000 or 3 percent
of a company’s total worldwide annual turnover for noncompliance with the requirements for “high” risk AI systems, and
fines of up to the higher of €7,500,000 or 1 percent of a company’s total worldwide annual turnover for the supply of incorrect,
incomplete, or misleading information to notified bodies and national competent authorities in certain contexts. The foregoing laws and
regulations, and any additional laws and regulations that have been, or may in the future be, enacted, may have an impact on our ability
to develop, use and commercialize AI technologies in the future. Noncompliance with the EU AI Act could also result in other consequences
such as loss of business opportunities or reputational damage. The European Commission’s Digital Omnibus Proposal, published in
November 2025, includes proposed amendments to certain EU laws and regulations, including (among others) the EU AI Act, and was submitted
to the European Parliament and the Council for review.
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Our use and development of proprietary AI technologies and our
use of third-party AI tools could result in the risks mentioned above and additional risks to our business deriving from, or associated
with, existing or upcoming AI-related laws and regulations such as legislation in the U.S., the EU AI Act, enforcement actions related
to AI, or court precedents involving AI. We may not be able to anticipate how to respond to these rapidly evolving laws and regulations,
and we may need to expend resources to adjust our offerings in certain jurisdictions if the legal and regulatory frameworks are inconsistent
across jurisdictions. Furthermore, because AI itself is highly complex and rapidly developing, it is not possible to predict all of the
legal or regulatory risks that may arise relating to the use of AI. If laws and regulations relating to AI are implemented, interpreted
or applied in a manner inconsistent with our current practices or policies, such laws and regulations may adversely affect our use of
AI and our ability to provide and to improve our services, require additional compliance measures and changes to our operations and processes,
result in increased compliance costs and potential increases in civil claims against us, and could adversely affect our business, operations
and financial condition.
Additionally, the emergence of generative AI is anticipated to
result in the development of tools that could enhance competition in the advertising technology industry and reduce barriers to entry
that could have negative impacts on our business. For more information on AI relatd risks see Risk Factor titled – “The
rapid development and broad adoption of generative AI chatbots cause a shift to AI mediated content and a decrease in web traffic and
a disruption in our industry, which could harm our business.“
Sales efforts with advertisers and advertising
agencies require significant time and expense and may ultimately be unsuccessful.
Contracting with new advertisers and advertising agencies requires
substantial time and expenses, and we may not be successful in establishing new relationships or in maintaining current relationships.
It is often difficult to identify, engage, and market to potential advertising customers who are unfamiliar with our brand or services,
and we may spend substantial time and resources educating customers about our unique offerings, including providing demonstrations and
comparisons against other available solutions, without ultimately achieving the desired results. In addition, there has been commoditization
of services provided in digital advertising, resulting in margin pressure. Furthermore, many of our advertising clients’ purchasing
and design decisions generally require input from multiple internal and external parties of these clients, requiring that we identify
those involved in the purchasing decision and devote a sufficient amount of time to present our services to each of those decision-making
individuals. We may not be able to reduce our sales and marketing expenses to correspond proportionately to periods of reduced revenue.
If we are not successful in streamlining our sales processes with potential clients in a cost-effective manner, or if our efforts are
unsuccessful, our ability to grow our business may be adversely affected.
Our growth depends in part on the success of
our relationships with advertising agencies, and third-party DSPs and SSPs.
While we work with some advertisers directly, our primary advertising
customers are advertising agencies, third-party DSPs and SSPs who are paid by their brand or other advertiser customers to develop their
media plans. Such agencies, DSPs and SSPs in turn, contract with third parties, like us, to execute and fulfill their brands’ advertising
campaigns. As a result, our future growth will depend, in part, on our ability to enter into and maintain successful business relationships
with advertising agencies, third-party DSPs and SSPs.
Identifying advertising agencies, third-party DSPs and SSPs, engaging
in sales efforts, and negotiating and documenting our agreements with advertising agencies, DSPs and SSPs require significant time and
resources. These relationships may not result in additional brand or other advertiser customers or campaigns for our business, and may
not ultimately enable us to generate significant revenue. Our contracts with advertising agencies, DSPs and SSPs are typically non-exclusive
and they often work with our competitors or offer competing services or solutions.
When working with advertising agencies, third-party DSPs and SSPs
to deliver campaigns on behalf of their brand and other advertiser customers, we generally bill the agency, DSP and SSP for our products
and services, and in most cases, the brand has no direct contractual commitment to us to make any payments. While we have benefited from
our relationships with the advertising agencies, DSPs and SSPs we work with, there is no assurance that these circumstances do not result
in the future in longer collection periods, increased costs associated with pursuing brands directly for payments, or our inability to
collect payments. In summary, if we are unsuccessful in establishing or maintaining our relationships with these advertising agencies,
DSPs and SSPs on commercially reasonable terms or if the advertising agencies are unable to effectively collect corresponding payments
from the brands, our ability to compete in the marketplace or to grow our revenue could be impaired and our operating results could suffer.
Our products are dependent on the platform terms
of use and policies that are subject to changes out of our control.
Most of our products depend upon others’ platforms’
terms of use and policies (e.g., Google Chrome, Edge, Mozilla, Apple, and Microsoft) which could also affect the terms of use of other
platforms in the industry. We do not control these platforms and cannot anticipate changes made to their policies, and as a result, we
are subject to risks and uncertainties. These policies, guidelines and terms of service govern the promotion, distribution, content and
operation generally of applications and content available through such platforms. Each platform has broad and usually absolute discretion
to revise its terms of service, guidelines and policies, and those changes may have an adverse effect on us or our partners’ ability
to use and distribute our products.
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A platform may also limit the use of personal information and other
data for advertising purposes or restrict how users can share information on their platform or across other platforms. If we or our customers
were to violate the terms of service, guidelines, certifications or policies, or if a platform believes that we or our customers have
violated, its terms of service, guidelines, certifications or policies, then that platform could limit or discontinue our or our customers’
access. In some cases, these requirements may not be clear and our interpretation of the requirements may not align with that of the platform,
which could lead to inconsistent enforcement of these terms of service or policies against us or our customers and could also result in
limiting or discontinuing access to such platform.
Further, these platforms frequently introduce new technology. Our
reliance on their technology reduces our control over quality of service and exposes us to potential service outages.
Global economic and market conditions
and actions taken by our customers, suppliers and other business partners in markets in which we operate might
materially adversely impact us.
Negative conditions in the general economy, including conditions
resulting from changes in gross domestic product growth, labor shortages, supply chain disruptions, inflationary pressures, rising interest
rates, financial and credit market fluctuations, international trade relations and/or the imposition of trade tariffs, changes to fiscal
and monetary policy, political turmoil, natural disasters, regional or global outbreaks of contagious diseases, such as a pandemic or
an epidemic, warfare and terrorist attacks, could cause a decrease in business investments, including spending on advertising, disrupt
the timing and cadence of key industry events and otherwise could materially and adversely affect the growth of our business.
Geopolitical risks, including those arising from trade tension
and/or the imposition of trade tariffs, terrorist activity or acts of civil or international hostility, such as the wars between Israel
and its neighboring countries and regions, and armed conflicts between the U.S. and Israel against Iran are increasing. Similarly,
the ongoing military conflict between Russia and Ukraine has had negative impacts on the global economy, including by contributing to
rapidly rising costs of living (driven largely by higher energy prices) and creating uncertainty in the global capital markets and is
expected to have further global economic consequences, including disruptions of the global supply chain and energy markets. Further, other
events outside of our control, including natural disasters, climate change-related events, pandemics, or health crises may arise from
time to time and be accompanied by governmental actions that may increase international tension. Any such events and responses, including
regulatory developments, may cause significant volatility and declines in the global markets, disproportionate impacts to certain industries
or sectors, disruptions to commerce (including economic activity, travel and supply chains), loss of life and property damage, and may
materially and adversely affect the global economy or capital markets, as well as our business and results of operations.
Additionally, the global economy, including credit and financial
markets, has experienced extreme volatility and disruptions, and may continue to experience such disruptions in the future, including
severely diminished liquidity and credit availability, difficulties in collection of funds related to accounts receivable, declines in
consumer confidence, declines in economic growth, increases in unemployment rates, increases in inflation rates, higher interest rates
and uncertainty about economic stability. As a result of these factors, our revenue may be affected by both decreased customer acquisition
and lower than anticipated revenue growth from existing customers. For example, the ongoing military conflict between Russia and Ukraine
has created extreme volatility in the global capital markets and has caused and could continue to cause disruptions of the global supply
chain and energy markets. While the portion of our revenue directly associated with Russia, Ukraine and Israel is not material to our
consolidated financial results, our business may be affected by broader economic factors caused or intensified by armed conflicts.
As a result of revisions in the U.S. administration’s policy,
there have been changes to existing trade agreements, greater restrictions on free trade, and significant increases in tariffs on goods
imported into the United States. Consequently, there is ongoing uncertainty about the future relationship between the U.S. and other countries
regarding trade policies, taxes, government regulations, and tariffs. The U.S. has signaled its intention to modify trade policies, potentially
renegotiating or terminating existing agreements and leveraging tariffs. For example, the U.S. has imposed tariffs on imports from China
(beginning in 2018 and escalating through 2025) and has taken actions regarding tariffs on imports from Canada and Mexico (in 2025). Although
major tariffs previously issued by the Trump administration under the International Emergency Economic Powers Act were found invalid by
the United States Supreme Court, administration immediately responded by invoking Section 122 of the Trade Act of 1974 to implement
a temporary 10% global tariff effective February 24, 2026 and extensive tariff policy still marks the intention of the administration.
These developments, along with retaliatory measures and further potential retaliatory measures by other governments, have introduced significant
uncertainty into the market. Future actions by both the U.S. administration and foreign governments, regarding tariffs and international
trade agreements may impact our industry and our business.
Any such volatility and disruptions may have material and adverse
consequences on us and our customers. Increased inflation and/or interest rates can adversely affect us by increasing our costs, including
labor and employee benefit costs and any significant increases in inflation and related increase in interest rates could have a material
and adverse effect on our business, financial condition or results of operations.
Further, to the extent there is a sustained general economic
downturn and if there is a reduction in general demand and spending for digital advertising, our revenue may be disproportionately affected.
Competitors, many of whom are larger and more established than we are, may respond to market conditions by lowering prices and attempting
to lure away our customers and partners. We cannot predict the timing, strength or duration of any economic slowdown, instability or recovery,
generally or within any particular industry. If the economic conditions of the general economy or markets in which we operate worsen from
present levels, our business, results of operations and financial condition could be materially and adversely affected.
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Additionally, our financial condition and results of operations
may vary and continue to fluctuate as a result of a number of other factors, many of which may be outside of our control or difficult
to predict, including our ability to successfully expand our business globally, our ability to successfully integrate any newly acquired
business or company, the introduction of new accounting pronouncements or changes in our accounting policies or practices, and geopolitical,
economic, or regional instability. For more information on the effect of the war in Gaza and elsewhere in the region see Item 3.D “Key
Information—Risk Factors – Political, economic and military instability in the Middle East and specifically in Israel may
impede our ability to operate and harm our financial results.” Any of these factors may result in significant fluctuations in our
financial condition and operating results, which could result in our failure to meet our operating plan or the expectations of investors
or analysts for any given period, causing the market price of our ordinary shares to be negatively impacted.
Risks
Related to our Search Business
Our search advertising solution depends highly
upon revenue generated from our agreements with our search provider. Any adverse changes in those agreements could adversely affect our
business, financial condition and results of operations.
Our search advertising business is highly dependent on search services
agreements with our search provider. There are only a few companies in the market that provide internet search and search advertising
services, limiting the potential expansion of our search business.
In previous years, we have been highly dependent on our agreement
with Microsoft Ireland Operations Limited. (“Microsoft” and the “Microsoft Agreement”, respectively). The Microsoft
Agreement accounted for 34% and 23% of our revenue, in 2023 and 2024, respectively. In the first quarter of 2024, we experienced a decline
in our search advertising activity, attributable to changes in advertising pricing and mechanisms implemented by Microsoft in its search
distribution marketplace. These adjustments led to a reduction in Revenue Per Thousand Impressions (RPM) for both Perion and other Microsoft
distribution partners. In the second quarter of 2024, we experienced an additional decline in our search advertising activity attributable
to Microsoft’s exclusion of a number of publishers from its search distribution marketplace. These changes resulted in a material
decrease in our search advertising activity and results of operations. The Microsoft Agreement expired on December 31, 2024, and the tail
period concluded on December 31, 2025.
In 2024 and 2025, 10% and 16% of our revenue, respectively, was
generated from our agreements with our current search provider in our search business. Going forward, we expect nearly all revenue generated
from our search business to stem from this relationship. If our agreement with such search provider is terminated, expire or is
substantially amended on terms not favorable to us, we would experience a material decrease in our business, which could result in a material
adverse effect on our business, financial condition and results of operations.
The emergence of AI-powered tools and generative
AI search alternatives have reduced traditional search engine usage, which could materially adversely affect our business, financial condition
and results of operations.
The rapid adoption of AI-powered tools, including generative AI
assistants such as OpenAI’s ChatGPT, Google's Gemini, Microsoft’s Copilot, and similar technologies, has created new methods
for users to obtain information that historically would have been obtained through traditional search engines. These AI-based solutions
provide direct answers and conversational interfaces that reduce can significantly reduce the traditional search volume and web searches
by users, consequently, causing a decline in page views and clicks on ads. This may result in a decline in the advertising impressions
and clicks we can generate and lead to decreased revenue. We expect this trend to accelerate as AI usage deepens. We have limited ability
to mitigate this risk, since we do not control the impact of this trend on the search business and our ability to pivot our model to align
with such trends is limited. If traditional search engine usage continues to decline and such decline accelerates due to AI adoption,
our search advertising revenue could decrease in a rapid pace, faster than our expectations, which could have a material adverse effect
on our business, financial condition, and results of operations. For additional information see also the Risk Factor titled – “The
rapid development and broad adoption of generative AI chatbots cause a shift to AI mediated content and a decrease in web traffic and
a disruption in our industry, which could harm our business.”
The generation of search advertising revenue
through publishers is subject to competition. If we cannot compete effectively in this market, our revenue is likely to decline.
We obtain a significant portion of our revenue through the configuration
of or search service as the default search provider during the download and installation of our publishers’ products and/or use
by their services of our search offering and the subsequent searches performed by the users thereof. In each of the years 2024 and 2025,
the top five publishers distributing our search services accounted for approximately 15% of our revenue, respectively. There can be no
assurance that our current publishers will continue utilizing our revenue-generating monetization services at the levels they did in the
past or at all or on terms not less favorable to us. Additionally, traffic from low-quality sources, including websites with irrelevant
content or poor user engagement have impacted and may negatively impact the effectiveness of our search advertising. The loss of a substantial
portion of our relationships with our publishers, or a substantial reduction in their level of activity, could cause a material decline
in our revenue and profitability.
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To achieve our business goals, we heavily rely on third-party publishers
to implement our search offering as a value-added component of their own offerings and/or distribute our owned & operated products
where the search component is added, at a price sufficient to drive acceptable margins. We are therefore constantly looking for more ways
to distribute our search offering through various channels, including through independent distribution efforts of our owned and operated
products and services. There are other companies that generate revenue from searches and some of them may have other monetization solutions.
The large search engine companies, including Google, Microsoft, Yahoo and others, have become increasingly aggressive in their own search
service offerings. In addition, we need to continuously maintain the technological advantage of our platform, products and other services
in order to attract publishers to our offerings. If the search engine companies engage in more direct relationships with publishers or
if we are unable to maintain the technological advantage to service our publishers, we may lose both current and potential new publishers
and our ability to generate revenue will be negatively impacted.
In order to receive advertising generated revenue
from our search providers, we depend, in part, on factors outside of our control.
The amount of revenue we receive from search providers depends
upon a number of factors outside of our control, including the amount such search providers charge for advertisements, the efficiency
of the search providers’ systems in attracting advertisers and syndicating paid listings in response to search queries, and parameters
established by such search provider regarding the number and placement of paid listings displayed in response to search queries. In addition,
search providers analyze the relative attractiveness (to their advertiser) of clicks on paid listings from searches performed on or through
our search assets, and these judgments factor into the amount of revenue we receive. Changes in the efficiency of a search providers’
paid listings network, in their judgment, about the relative attractiveness of clicks on paid listings or in the parameters applicable
to the display of paid listings, which could come about for a number of reasons, including general market conditions, competition, inventory
availability or policy and operating decisions made by the search providers we work with (as happened in the past), have previously materially
impacted our business and could have an adverse effect on our business, financial condition and our results of operations. In the first
quarter of 2024, we experienced a decline in our search advertising activity, attributable to changes in advertising pricing and mechanisms
implemented by Microsoft in its search distribution marketplace. These adjustments led to a reduction in RPM for both Perion and other
Microsoft distribution partners. In the second quarter of 2024, we experienced an additional decline in our search advertising activity
attributable to Microsoft’s exclusion of a number of publishers from its search distribution marketplace. These changes resulted
in a material decrease in our search advertising activity and results of operations. The Microsoft Agreement expired on December 31, 2024,
and the tail period concluded on December 31, 2025. For additional information see also the Risk Factor titled - “Our
search advertising solution depends highly upon revenue generated from our agreements with our search provider. Any adverse change in
those agreements could adversely affect our business, financial condition and results of operations.”
Should the methods used for the distribution
of our search solution, be blocked, constrained, limited, materially changed, based on a change of policies, technology or otherwise (as
has happened in the past), or made redundant by any of our search engine providers, our ability to generate revenue from our search activity
could be significantly reduced.
Typically, agreements with search providers, such as our agreement
with Yahoo, require compliance with certain policies promulgated by them for the use of the respective brands and services, including
the manner in which paid listings are displayed within search results, as well as the establishment of policies to govern certain activities
of third parties to whom the search services are syndicated, including the manner in which those third parties can acquire new users and
drive search traffic. Subject to certain limitations, search partners may unilaterally update their policies (as has happened in the past),
which could, in turn, require modifications to, or prohibit and/or render obsolete certain of our search solutions, products, services
and practices, which could be costly to address or otherwise have an adverse effect on our business, our financial condition and results
of operations. Noncompliance with the search partners’ policies, whether by us or by third parties to which we syndicate paid listings,
or by the publishers through whom we secure distribution arrangements could, if not cured, result in such companies’ suspension
of some or all of their services to us, or to the websites of our third-party publishers, or the reimbursement of funds paid to us, or
the imposition of additional restrictions on our ability to syndicate paid listings or distribute our search solution or the termination
or expiration of the search distribution agreement by our search partners.
Our search providers have changed these policies, with respect
to methods of distribution, quality of traffic sources, homepage resets, and default search resets as well as other matters, numerous
times in the past, having negative revenue implications for us, and may continue changing the policies governing their relationship with
search partners like us. Should any of our large partnerships be deemed non-compliant, blocked or should choose to partner with different
providers, it could be difficult to replace the revenue generated by that partnership and we would experience a material reduction in
our revenue and, in turn, our business, financial condition and results of operations would be adversely affected.
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Should the providers of platforms, particularly
browsers, further block, constrain or limit our ability to offer or change search properties, or materially change their policies, technology
or the way they operate, our ability to generate revenue from our search activity could be significantly reduced.
As we provide our services through the internet, we rely on our
ability to work with different internet browsers. The internet browser market is extremely concentrated with Google’s Chrome, Apple’s
Safari, Microsoft Edge and Mozilla’s Firefox, accounting for almost 94% of the desktop browser market in 2025, with Google’s
Chrome alone accounting for more than 70%, based on StatCounter reports as of February 2026. In the past years, internet browser providers
such as Google and Microsoft made changes and updated their policies and technology in general, and specifically those relating to changes
of search settings. Each such change limits and constrains our ability to offer or change search properties. In addition, the desktop
operating system market is very concentrated as well, with Microsoft Windows accounting for nearly 70% of the market in 2025 and Apple
macOS accounting for nearly 15% of the market, based on StatCounter reports as of February 2026. In June 2018, Google limited the ability
to install Chrome browser extensions by requiring distribution exclusively through the Chrome Web Store. Some of these changes have
adversely affected our ability to ensure that users’ browser settings remain optimally compatible with our services. If Microsoft,
Google, Apple or other companies that provide internet browsers, operating systems, app stores or other platforms were to further restrict,
discourage or otherwise hamper companies, like us, from offering or changing search services, this would cause a material adverse effect
on our revenue and our financial results.
Additionally, changes in browser or platform policies, for instance,
increasing technical or contractual barriers, introducing proprietary alternatives, or promoting exclusive partnerships, may limit our
ability to innovate, access users, or ensure service compatibility. Such developments could increase user acquisition costs or reduce
service quality. There can be no assurance that our mitigation strategies, including monitoring these changes, adapting our practices
and exploring partnerships or technological workarounds, will fully address these risks. Any sustained incompatibilities or limitations
could undermine our competitiveness and financial performance and materially and adversely affect our results of operations.
Currently most users access the internet through
mobile devices, while a substantial part of our search revenue generation and services are currently not widely spread on mobile platforms.
Also, web-based software and similar solutions impact the attractiveness of downloadable software products.
Historically, the market for search services on desktop computers
has represented a significant portion of our search revenue. However, over the past years, internet usage has shifted from desktop computers
to mobile devices, including smartphones and tablets.
In 2016, desktops accounted for 54.09% of global internet usage,
but this share has steadily declined over the years, reaching 40.56% in 2025, according to StatCounter reports. Conversely, mobile devices,
which had a 45.91% share in 2016, have experienced continuous growth, rising to 59.44% in 2025.
If this trend of increasing mobile device usage continues and desktop
usage declines further, our search services could become less relevant in the marketplace, potentially impacting their ability to attract
publishers and sustain web traffic.
Web- (or “cloud-”) based software and similar solutions
do not require the user to download software to their device and thus provide a very portable and accessible alternative to downloadable
software. While there are advantages and disadvantages to each method and system and the markets for each of them remain large, the market
for web-based systems is growing at the expense of downloadable software. Should this trend accelerate faster than our partners’
ability to provide differentiating advantages in their downloadable solutions, this could result in fewer downloads of their products
and lower search revenue generated through the use of these products.
Our software or provision of search services
or advertising is occasionally blocked by software or utilities designed to protect users’ computers, thereby causing our business
to suffer.
Some third parties, such as anti-virus software providers, categorize
some of our products and offerings as promoting or constituting “malware” or “spamming,” or unnecessarily changing
the user’s computer settings. As a result, our software, the software of our publishers, provision of search services or advertising
is occasionally blocked by software or utilities designed to detect such practices. If this problem increases or if we are unable to detect
and effectively reverse such categorization of our products and offerings, we may lose both existing and potential new users and our ability
to generate revenue will be negatively impacted.
Risks Related to our Financial and Corporate
Structure
A loss of the services of our senior management
and other key personnel could adversely affect the execution of our business strategy.
We depend on the capabilities and experience, and the continued
services of our senior management. The loss of the services of members of our senior management could create a gap in management and could
result in the loss of expertise necessary for us to execute our business strategy and thereby adversely affect our business. In
August 2023, Tal Jacobson, former General Manager of our search advertising business, was promoted to Chief Executive Officer. Following
Jacobson’s promotion, our previous Chief Executive Officer, Doron Gerstel, stepped down from the executive team and later also from
our board of directors (when Mr. Jacobson replaced him as a director). Furthermore, in connection with the launch and execution of our
Perion One strategy, the majority of our senior management team changed in 2025. While we believe these leadership changes will benefit
the company and support execution of our strategy, such widespread transitions inherently involve risks, including integration and execution
risks.
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Further, our ability to execute our business strategy depends in
part on our ability to continue to attract, retain and motivate qualified, skilled and creative key personnel and management, in technical,
marketing and sales and other positions, and in addition, to attract third-party technology vendors and other consultants and contractors.
We operate out of different locations around the globe and competition for well-qualified employees in our industry is intense and our
continued ability to compete effectively depends, in part, upon our ability to retain existing key employees and to attract new skilled
and qualified key employees, which can be difficult, expensive and time-consuming. If we cannot attract and retain additional experienced
key employees or if we lose one or more of our current key employees, our ability to implement our strategy, develop or market our products
and attract or acquire new users and partners could be adversely affected. Although we have established programs to attract new employees
and provide incentives to retain existing employees, particularly senior management, we cannot be assured that we will be able to retain
the services of senior management or other key employees as we continue to integrate and develop our solutions or that we will be able
to attract new employees in the future who are capable of making significant contributions and we may face challenges in adequately or
appropriately integrating them into our workforce and organizational culture. See Item 6. “Directors, Senior Management and Employees.”
Competition for highly skilled technical and
other personnel mainly in Israel, the United States and Canada is intense, and as a result we may fail to attract, recruit, retain and
develop qualified employees, which could materially and adversely impact our business, financial condition and results of operations.
We compete in a market marked by rapidly changing technologies
and an evolving competitive landscape. In order for us to successfully compete and grow, we must attract, recruit, retain and develop
personnel with requisite qualifications to provide expertise across the entire spectrum of our intellectual capital and business needs.
Our principal research and development, certain sales and marketing
as well as significant elements of our general and administrative activities are conducted at our headquarters in Israel, in the United
States, Canada and Europe, and we face significant competition for suitably skilled employees in these places. There has been intense
competition for qualified human resources in the high-tech industry, which may intensify in times of sharp growth of the industry, as
was the case in 2021-2022, which resulted in high employee attrition. While layoffs carried out from time to time by large companies may
present good recruitment opportunities to our company, our industry is still characterized by high competition between employers. Many
of the companies with which we compete for qualified personnel have greater resources than we do, and we may not succeed in recruiting
additional experienced or professional personnel, retaining personnel or effectively replacing current personnel who may depart with qualified
or effective successors.
In addition, as a result of the intense competition for qualified
human resources, the Israeli, American and Canadian high-tech markets as well as other markets have also experienced and may continue
to experience significant wage inflation. Accordingly, our efforts to attract, retain and develop personnel may also result in significant
additional expenses, which could adversely affect our profitability. Furthermore, in making employment decisions, particularly in the
high-technology industry, job candidates often consider the value of the equity they are to receive in connection with their employment.
While we offer competitive equity and compensation terms with our employees as a means of improving our employee retention, those terms
and agreements may not be effective towards that goal in particular when the price of our ordinary shares significantly declines.
In light of the foregoing, there can be no assurance that qualified
employees will remain in our employ or that we will be able to attract and retain qualified personnel in the future. Failure to retain
or attract qualified personnel could have a material adverse effect on our business, financial condition and results of operations.
We have acquired and may continue to acquire
other businesses. These acquisitions divert a substantial part of our resources and management attention and could, in the future, adversely
affect our financial results.
We acquired Vidazoo Ltd., in October 2021 Hivestack Technologies
Inc. (“Hivestack”), in December 2023, and Greenbids SAS, in May 2025, and we may continue to acquire complementary products,
technologies or businesses. These acquisitions and integration of the acquired businesses divert a substantial part of our resources and
management attention, which could, adversely affect our financial results. Seeking and negotiating potential acquisitions to a certain
extent diverts our management’s attention from other business concerns and is expensive and time-consuming. It is not certain that
negotiations with respect to potential acquisition may lead to the consummation of such acquisition. Acquisitions expose us and our business
to unforeseen liabilities or risks associated with the business or assets acquired or with entering new markets. In addition, we lost
and might continue to lose key employees and vendors while integrating new organizations and may not effectively integrate the acquired
products, technologies or businesses or achieve the anticipated revenue or cost benefits, and we might harm our relationships with our
future or current technology suppliers. Future acquisitions could result in customer or vendor dissatisfaction or performance problems
with an acquired product, technology, or company. Paying the purchase price for acquisitions in the form of cash, debt or equity securities
may weaken our cash position, increase our leverage or dilute our existing shareholders, as applicable. Furthermore, a substantial portion
of the price paid for these acquisitions is typically for intangible assets. We may be required to pay additional funds for earn-outs
based on achievement of milestones, or may incur contingent liabilities, amortization expenses related to intangible assets or possible
impairment charges related to goodwill or other intangible assets (which has occurred in the past) or become subject to litigation or
other unanticipated events or circumstances relating to the acquisitions, and we may not have, or may not be able to enforce, adequate
remedies in order to protect our Company. Moreover, acquisitions may result in losses, unwanted results and wasting valuable resources,
time and money.
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In past years, we have recognized impairments
in the carrying value of goodwill and purchased intangible assets. Additional such charges in the future could negatively affect our results
of operations and shareholders’ equity.
We continue to have a substantial amount of goodwill and purchased
intangible assets on our consolidated balance sheet as a result of historical acquisitions. The carrying value of goodwill represents
the excess of the purchase price in a business combination over the fair value of identifiable tangible and intangible assets acquired.
The carrying value of intangible assets with identifiable useful lives represents the fair value of customer relationships and acquired
technology, among other things, as of the acquisition date, and are amortized based on their economic or useful lives. Goodwill that is
expected to contribute indefinitely to our cash flows is not amortized but must be tested for impairment at least annually. If the carrying
value exceeds current fair value as determined based on the discounted future cash flows of the related business, the goodwill or intangible
asset is considered impaired and is reduced to fair value via a non-cash charge to earnings. Impairment indicators include any significant
changes in the manner of our use of the assets or the strategy of our overall business, significant negative industry or economic trends,
a significant decline in our share price for a sustained period or other factors leading to reduction in expected long-term growth or
profitability. Goodwill impairment analysis and measurement is a process that requires significant judgment. Our share price and any control
premium are factors affecting the assessment of the fair value of our underlying reporting unit for purposes of performing any goodwill
impairment assessment. As disclosed elsewhere in this report, our share price has fluctuated significantly in the past and a decline in
the price for our ordinary shares for a sustained period of time would likely impact the results of our impairment testing in the future.
We will continue to conduct impairment analyses of our goodwill
as required. Further impairment charges with respect to our goodwill could have a material adverse effect on our results of operations
and shareholders’ equity in future periods.
Shareholders may be able to control us.
As of March 5, 2026, three shareholders beneficially held more
than 5% of our outstanding shares. See Item 7.A. “Major Shareholders and Related Party Transactions—Major Shareholders”
for more information. To our knowledge, those shareholders are not party to a voting agreement with respect to our shares. However, should
any of these shareholders or any other shareholders decide to act together, they may have the power to control the outcome of proposals
submitted for the vote of shareholders. In addition, such share ownership may make certain transactions more difficult and result in delaying
or preventing a change in control of the Company, unless approved by such shareholders.
Our share price has fluctuated significantly
and could continue to fluctuate significantly.
The market price for our ordinary shares, as well as the prices
of shares of other technology and internet companies, has been volatile. Between January 1, 2025, and March 5, 2026, our share price on
Nasdaq has fluctuated from a low of $7.08 to a high of $11.43, and the daily average trading volume in that period was 369,574 shares
(and for the period of January 1, 2025, and until December 31, 2025, was 375,214 shares). The following factors may cause significant
fluctuations in the market price of our ordinary shares:
| • |
negative fluctuations in our quarterly revenue and earnings or those of our competitors; |
| • |
pending sales into the market due to the sale of large blocks of shares, due to, among other reasons, the expiration of any tax-related
or contractual lock–ups with respect to significant amounts of our ordinary shares; |
| • |
shortfalls in our operating results compared to levels forecast by us or by securities analysts; |
| • |
uncertainty regarding the execution, market acceptance and realized benefits of our strategy; |
| • |
changes in our senior management; |
| • |
activist shareholder activities, which could result in significant costs, management distraction, and perceived uncertainty;
|
| • |
changes in regulations or in policies of search engine companies or other industry conditions; |
| • |
mergers and acquisitions by us or our competitors; |
| • |
technological innovations, including AI-driven disruption that has pressured the share prices of companies perceived as vulnerable
to such disruption, whether directly or via secondary cascading effects; |
| • |
the introduction of new products; |
| • |
the conditions of the securities markets, particularly in the internet and Israeli sectors; and |
| • |
political, economic and other developments in Israel (including the recent war between Israel and Hamas, hostilities with Hezbollah
in Lebanon, military or cyber conflicts with Iran, and other proxies like the Houthi movement in Yemen and armed groups in Iraq) and worldwide.
|
In addition, we were, and may be in the future, the subject of
unfavorable allegations made by short sellers, who hope to profit from a decline in the value of our shares. Any such allegations may
be followed by periods of instability or decrease in the market price of our ordinary shares and negative publicity.
Further, share prices of many technology companies in general and
ad-tech companies in particular fluctuate significantly for reasons that may be unrelated or disproportionate to operating results. The
factors discussed above may depress or cause volatility to our share price, regardless of our actual operating results.
22
We are currently subject to putative securities
class actions and a putative derivative action and may be subject to similar or other litigation in the future, which could cause us to
incur substantial costs and divert our management’s attention and resources.
Historically, public companies listed on U.S. exchanges that experience
periods of volatility in the market price of their securities and/or engage in substantial transactions are sometimes the target of class
action litigation. Companies in the internet and software industry, such as ours, are particularly vulnerable to this kind of litigation
as a result of the volatility of their stock prices and their regular involvement in transactional activities. We are, and may in the
future become, subject to various legal proceedings and claims that arise in or outside the ordinary course of business.
In April 2024, a putative class action complaint was filed, alleging
violations of U.S. federal securities laws against the Company and certain of its officers in the United States District Court for the
Southern District of New York (the: “SDNY”). In the complaint, the Plaintiffs assert claims under Sections 10(b) and 20(a)
of the Exchange Act and alleges that the defendants materially misrepresented and/or omitted facts in various public disclosures concerning
the Company’s search advertising business and its partnership with Microsoft Bing. In November 2024, we filed a motion to dismiss
the compliant, which was granted in June 2025 by the district court with leave for Plaintiffs to file an amended complaint on limited
grounds. In July 2025, Plaintiffs filed notices of appeal to the Second Circuit Court of Appeals and the appeal is currently pending.
In April 2024, a complaint and a motion to certify a class action was filed with the Financial Department of the District Court of Tel
Aviv against the Company and certain of its officers, and a putative derivative complaint was filed in February 2025 in the SDNY, both
surrounding the same events and are stayed pending the conclusion of the appeal in the securities litigation in the SDNY. For more
information, see Item 8.A. – “Legal Proceedings.”
Any such litigation could result in substantial costs defending
the lawsuits and a diversion of management’s attention and resources and/or, if we are not successful in defending any such litigation,
could result in judgments against us. Any of the foregoing could harm our business and financial condition as well as our reputation.
Future sales of our ordinary shares could reduce
our stock price.
As of March 5, 2026, there was an aggregate of 4,599,950 outstanding
options to purchase our ordinary shares and restricted share units (“RSUs”). As these securities vest, the holders thereof
could sell the underlying shares without restrictions, except for the volume limitations under Rule 144 applicable to our affiliates.
Sales by shareholders of substantial amounts of our ordinary shares,
or the perception that these sales may occur in the future, could materially and adversely affect the market price of our ordinary shares.
Furthermore, the market price of our ordinary shares could drop significantly if our executive officers, directors, or certain large shareholders
sell their shares, or are perceived by the market as intending to sell them.
We cannot guarantee that we will repurchase
any of our ordinary shares pursuant to our announced repurchase program or that our repurchase program will enhance long-term shareholder
value.
In 2024, our board of directors authorized our repurchase program
under which an amount of $75 million was made available to purchase our ordinary shares. In March 2025, our board of directors authorized
a $50 million expansion of the previously authorized share repurchase program to a total of $125 million, and in December 2025, authorized
an additional $75 million expansion to a total of $200 million. The repurchase program, as authorized by our board of directors, provides
the Company with the authority to make repurchases of our ordinary shares. The specific timing and amount of repurchases under the repurchase
program will depend upon several factors, including but not limited to market and business conditions, the trading price of our ordinary
shares, regulatory requirements and capital availability. The program does not require the purchase of any minimum dollar amount or number
of shares, and the program may be modified, suspended or discontinued at any time. As of December 31, 2025, the Company has repurchased
12.9 million of our ordinary shares in an aggregate amount of $118.1 million.
Repurchases of our ordinary shares pursuant to our repurchase program
could affect the market price of our ordinary shares or its volatility. Additionally, our repurchase program could diminish our cash reserves,
which may impact our ability to finance future growth and to pursue possible future strategic opportunities and acquisitions. There is
no assurance that our repurchase program will enhance long-term shareholder value, and short-term share price fluctuations could reduce
the repurchase program’s effectiveness.
Exchange rate fluctuations may harm our earnings
and asset base if we are not able to hedge our currency exchange risks effectively.
A significant portion of our costs, primarily salary and other
personnel related expenses, are incurred in NIS and Canadian Dollars. Inflation in Israel or in Canada may have the effect of increasing
the U.S. dollar cost of our operations in Israel and Canada, respectively. Further, whenever the U.S. dollar declines in value in relation
to the NIS or Canadian Dollar, it will become more expensive for us to fund our operations in Israel or in Canada, respectively. Based
on our estimation, without an effective hedging, a revaluation of one percent of the NIS or the Canadian Dollars compared to the U.S.
dollar could impact our income before taxes by approximately $0.4 million and by $0.2 in each case, respectively. The exchange rate of
the U.S. dollar to the NIS has been volatile in the past, it decreased by approximately 13% in 2025 and increased by approximately 1%
in 2024. As of December 31, 2025, we had a foreign currency net asset of approximately $39.9 million (which amount includes a NIS
denominated provision in an amount equal to approximately $21.2 million for our liability in relation to our offices in Israel), and our
total foreign exchange loss was approximately $2.0 million for the year ended December 31, 2025. To assist us in assessing whether, and
how to, hedge risks associated with fluctuations in currency exchange rates, we have contracted a consulting firm proficient in this area.
We may incur losses from unfavorable fluctuations in foreign currency exchange rates.
23
We do not intend to pay cash dividends in the
foreseeable future.
Although we have paid cash dividends in the past, we have not adopted
a policy regarding the distribution of dividends in the foreseeable future. Our current policy is to retain future earnings, if any, for
funding growth as well as for our plan for repurchase of our shares. If we do not pay dividends, long-term holders of our shares will
generate a return on their investment only if the market price of our shares appreciates between the date of purchase and the date of
sale of our shares.
Any future dividend distributions are subject to the discretion
of our board of directors and will depend on various factors, including our operating results, future earnings, capital requirements,
financial condition, and tax implications of dividend distributions on our income, future prospects and any other factors deemed relevant
by our board of directors. The distribution of dividends is also limited by Israeli law, which permits the distribution of dividends by
an Israeli corporation only out of its retained earnings as defined in the Israeli Companies Law, 5759-1999, or the Companies Law, provided
that there is no reasonable concern that such payment will cause us to fail to meet our current and expected liabilities as they become
due, or otherwise with the court’s approval. See Item 8.A “Consolidated Statements and Other Financial Information—Policy
on Dividend Distribution” for additional information regarding the payment of dividends.
We are subject to ongoing costs and risks associated
with complying with extensive corporate governance and disclosure requirements.
As an Israeli public company, traded on Nasdaq and Tel Aviv Stock
Exchange Ltd. (“TASE”), we incur significant legal, accounting and other expenses. We incur costs associated with public company
reporting, corporate governance and public disclosure requirements, including requirements under the Sarbanes-Oxley Act of 2002 (“SOX”),
the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the Listing Rules of the Nasdaq Stock Market and SEC regulations,
including the recent amendment of Section 16(a) of the Exchange Act effective on March 18, 2026, eliminating the reporting exemption under
such section 16(a) for foreign private issuers with respect to our directors and officers, the provisions of the Israeli Securities Law
applicable to companies listed on both the TASE and another recognized stock exchange outside of Israel and the provisions of the Companies
Law that apply to us. We have also contracted an internal auditor and a consultant to implement and comply with the SOX requirements.
Section 404 of the SOX requires an annual assessment by our management of our internal control over financial reporting and of the effectiveness
of these controls as of year-end. In connection with our efforts to comply with Section 404 and the other applicable provisions of the
SOX, our management and other personnel devote a substantial amount of time, and we have hired, and may need to hire, additional accounting
and financial staff to assure that we comply with these requirements. We are also required to have our independent registered public accounting
firm issue an opinion on the effectiveness of our internal control over financial reporting on an annual basis. During the evaluation
and testing process, if we identify one or more material weaknesses in our internal control over financial reporting, we will be unable
to assert that our internal control over financial reporting is effective. If we are unable to assert that our internal control over financial
reporting is effective, or if our independent registered public accounting firm is unable to express an opinion on the effectiveness of
our internal control over financial reporting, we could lose investor confidence in the accuracy and completeness of our financial reports,
which could cause the price of our common stock to decline, and we may be subject to investigation or sanctions by the SEC. Additionally,
if our directors and officers fail to timely file the reports required under Section 16(a) of the Exchange Act, we could be subject to
regulatory scrutiny, potential enforcement actions or reputational harm, which could adversely affect investor confidence in us. The additional
management attention and costs relating to compliance with the foregoing requirements could adversely affect our financial results. See
Item 5.A “Operating and Financial Review and Prospects—Operating Results—General and Administrative Expenses”
for a discussion of our increased expenses as a result of being a public company.
If we lose our foreign private issuer status
under U.S. federal securities laws, we would incur additional expenses and reporting and other requirements associated with compliance
with the U.S. securities laws applicable to U.S. domestic issuers.
We are a foreign private issuer, as such term is defined under
U.S. federal securities laws, and, therefore, we are not required to comply with all of the periodic disclosure and current reporting
requirements applicable to U.S. domestic issuers. In June 2025 the SEC issued a concept release soliciting public comment on potential
changes to the definition of a foreign private issuer. This release is the first review of the foreign private issuer framework since
2008, and the SEC is considering revisions that could significantly impact which foreign companies qualify for the more-relaxed U.S. reporting
requirements afforded to foreign private issuers. This early concept release outlines several potential approaches to revising the foreign
private issuer definition, including updating existing eligibility criteria, adding foreign trading volume requirements, and incorporating
an assessment of foreign regulation. If we lose our foreign private issuer status, we would be required to comply with the reporting and
other requirements applicable to U.S. domestic issuers, which are more extensive than the requirements for foreign private issuers and
more expensive to comply with.
24
There can be no assurances that we will not
be a passive foreign investment company (“PFIC”) for any taxable year, which could subject U.S. Shareholders to significant
adverse U.S. federal income tax consequences.
In general, a non-U.S. corporation is a PFIC for any taxable year
in which (i) 75% or more of its gross income consists of passive income or (ii) 50% or more of the value of its assets (generally determined
on an average quarterly basis) consists of assets that produce, or are held for the production of, passive income. For purposes of the
above calculations, a non-U.S. corporation that owns (or is treated as owning for U.S. federal income tax purposes), directly or indirectly,
at least 25% by value of the shares or equity interests of another corporation is treated as if it held its proportionate share of the
assets of the other corporation and received directly its proportionate share of the income of the other corporation. Passive income generally
includes dividends, interest, rents, royalties and certain gains. Cash and marketable securities are generally passive assets for these
purposes. Goodwill and other intangible assets are generally characterized as non-passive or passive assets based on the nature of the
income produced in the activity to which the goodwill and other intangible assets relate.
Because we hold a substantial amount of cash and other passive
assets, our PFIC status for any taxable year generally will depend on the average value of our goodwill and other intangible assets (as
well as the value of our other active assets). If the value of our assets were determined by reference to the sum of our market
capitalization and liabilities, we would likely be a PFIC for 2025 due to the low average value of our market capitalization during 2025.
However, based on external advice, we believe that market capitalization plus liabilities does not fairly reflect the gross value of our
total assets, and that alternative valuation methods are appropriate. Specifically, we believe that if our assets were valued based on
the discounted cash flows or revenue multiples methods, our enterprise value for 2025 would be significantly larger than the value derived
from using the market capitalization method.
Accordingly, we believe that we were likely not a PFIC for 2025.
However, our position is not binding on the U.S. Internal Revenue Service and there can be no assurance that it will agree with our valuation
approach.
In addition, we may also be a PFIC for any future taxable year
if the portion of our financial income out of our gross income were to increase to 75% or more for any taxable year. Our PFIC status for
any taxable year is an annual factual determination that can be made only after the end of that taxable year and will depend on the composition
of our income and assets and the value of our assets from time to time (including the value of our goodwill and other intangible assets).
For the reasons described above, we cannot express any expectation regarding our PFIC status for the current or any future taxable year.
If we are a PFIC for any taxable year during which a U.S. investor
owns our ordinary shares, we will generally continue to be a PFIC with respect to that investor for all succeeding taxable years, even
if we cease to meet the threshold requirements for PFIC status, unless certain elections are timely made by the investor. In addition,
a U.S. investor could be subject to adverse U.S. federal income tax consequences and reporting obligations with respect to its ownership
of PFIC stock. See “Taxation – U.S. Federal Income Tax Considerations – Passive Foreign Investment Company Rules.”
Our business could be negatively affected as
a result of actions of activist shareholders, and such activism could impact the trading value of our securities.
In recent years, certain issuers listed on U.S. exchanges, including
our Company, have faced governance-related and other demands from activist shareholders, as well as unsolicited tender offers and proxy
contests. For example, in April 2025, following a decline in the market price of our ordinary shares, our board of directors adopted a
shareholder rights plan. Shortly thereafter, we received an open letter from Value Base Fund Limited Partnership, a shareholder of the
Company and then a significant shareholder, demanding the immediate rescission of the rights plan or its submission to a shareholder vote,
alleging, among other things, that the plan was adopted in violation of law and our articles of association. We rejected these allegations
and asserted that they were without merit. In July 2025, our board of director approved the early termination of the rights plan after
determining that the circumstances that led to its adoption no longer warranted its continuation. Additionally, we received a demand letter
from Phoenix Financial Ltd., one of our then significant shareholders, requiring us to submit for shareholder approval an amendment to
our articles of association relating to the future adoption of shareholder rights plans. Such proposal was not approved by our shareholders.
However, we may face similar or other demands in the future, Such activities could interfere with our ability to execute our strategic
plans. Although as a foreign private issuer we are not subject to U.S. proxy rules, responding to these types of actions by activist shareholders
could be costly and time-consuming, disrupting our operations and diverting the attention of management and our employees. In addition,
a proxy contest for the election of directors at our annual meeting would require us to incur significant legal fees and proxy solicitation
expenses and require significant time and attention by management and our board of directors. The perceived uncertainties due to these
potential actions of activist shareholders also could adversely affect the market price and volatility of our securities.
25
The rights and responsibilities of our shareholders
are governed by Israeli law and differ in several key respects from the rights and responsibilities of shareholders under U.S. laws, including
the duty to act in good faith and the lack of extensive case law.
We are incorporated in accordance with the Israeli Companies Law.
The rights and responsibilities of holders of our ordinary shares are governed by our memorandum of association, articles of association
and by applicable Israeli law. These rights and responsibilities differ in several key respects from the rights and responsibilities of
shareholders of typical U.S. corporations. In particular, a shareholder of an Israeli company has a duty to act in good faith in exercising
his or her rights and fulfilling his or her obligations toward a company and the other shareholders, and to refrain from abusing his or
her power in the company, including, among other things, in voting at the general meeting of shareholders on certain matters. This duty
to act in good faith is a significant difference from U.S. law. Israeli law provides that these duties are applicable in shareholder votes
at the general meeting with respect to, among other things, amendments to a company’s articles of association, increases in a company’s
authorized share capital, mergers and actions and transactions involving interests of officers, directors or other interested parties
which require shareholders’ approval. Another key difference is that there is little case law available to assist in understanding
the implications of these provisions that govern shareholder behavior, making the interpretation of these duties less predictable compared
to U.S. law.
As a foreign private issuer, whose shares are
listed on Nasdaq, we follow certain home country corporate governance practices instead of certain Nasdaq requirements.
As a foreign private issuer (as such term is defined in Rule 3b-4
under the Exchange Act), whose shares are listed on Nasdaq, we are permitted to follow certain home country corporate governance practices
instead of certain requirements contained in the Nasdaq Listing Rules. We follow the requirements of the Companies Law in Israel, rather
than comply with the Nasdaq requirements, in certain matters, including with respect to the quorum for shareholder meetings, sending annual
reports to shareholders, and shareholder approval with respect to certain issuances of securities. See Item 16.G. “Corporate Governance”
in this Annual Report on Form 20-F for a more complete discussion of the Nasdaq Listing Rules and the home country practices we follow.
As a foreign private issuer listed on Nasdaq, we may also elect in the future to follow home country practice with regard to other matters
as well. Accordingly, our shareholders may not be afforded the same protection as provided under Nasdaq’s corporate governance rules
to the shareholders of U.S. domestic companies.
Provisions of our articles of association and
Israeli law may delay, prevent or make an acquisition of our Company difficult, which could prevent a change of control and, therefore,
depress the price of our shares.
Israeli corporate law regulates mergers, requires tender offers
for acquisitions of shares above specified thresholds, requires special approvals for transactions involving directors, officers or significant
shareholders and regulates other matters that may be relevant to these types of transactions. In addition, our articles of association
contain provisions that may make it more difficult to acquire our Company, such as provisions establishing a staggered board. Furthermore,
Israeli tax considerations may make potential transactions unappealing to us or to some of our shareholders. See Exhibit 2.1 to this annual
report on Form 20-F, which is incorporated by reference into this annual report on Form 20-F, and Item 10.E. “Taxation—Israeli
Taxation” for additional discussion about some anti-takeover effects of Israeli law.
These provisions of Israeli law may delay, prevent or make difficult
an acquisition of our Company, which could prevent a change of control and therefore depress the price of our shares.
We must meet the Nasdaq Global Select Market’s
continued listing requirements and comply with the other Nasdaq rules, or we may risk delisting. Delisting could negatively affect the
price of our ordinary shares, which could make it more difficult for us to sell securities in a financing and for you to sell your ordinary
shares.
We are required to meet the continued listing requirements of the
Nasdaq Global Select Market and comply with the other Nasdaq rules, including those regarding minimum shareholders’ equity, minimum
share price, and certain other corporate governance requirements. Delisting of our ordinary shares from the Nasdaq Global Select Market
would cause us to pursue eligibility for trading on other markets or exchanges, or on the pink sheets. In such case, our shareholders’
ability to trade, or obtain quotations of the market value of, our ordinary shares would be severely limited because of lower trading
volumes and transaction delays. These factors could contribute to lower prices and larger spreads in the bid and ask prices for our securities.
There can be no assurance that our ordinary shares, if delisted from the Nasdaq Global Select Market in the future, would be listed on
a national securities exchange or quoted on a national quotation service, the OTCQB or OTC Pink. Delisting from the Nasdaq, or even the
issuance of a notice of potential delisting, would also result in negative publicity, make it more difficult for us to raise additional
capital, adversely affect the market liquidity of our ordinary shares, reduce security analysts’ coverage of us and diminish investor,
supplier and employee confidence. In addition, as a consequence of any such delisting, our share price could be negatively affected and
our shareholders would likely find it more difficult to sell, or to obtain accurate quotations as to the prices of, our ordinary shares.
26
Our ordinary shares are traded on more than
one market, and this may result in price variations.
Our ordinary shares are traded on both the Nasdaq Global Select
Market and on TASE. Trading in our ordinary shares on these markets is affected in different currencies (U.S. dollars on Nasdaq and NIS
on TASE) and at different times (resulting from different time zones and different public holidays in the United States and Israel). In
January 2026, TASE changed its trading week from Sunday–Thursday to Monday–Friday, which has affected, and may continue to
affect trading volumes, liquidity, price discovery, and arbitrage opportunities between the markets. Consequently, the trading prices
of our ordinary shares on these two markets often differ, resulting from the factors described above as well as differences in exchange
rates and from political events and economic conditions in the United States and Israel. Any decrease in the trading price of our ordinary
shares on one of these markets could cause a decrease in the trading price of our ordinary shares on the other market.
Increasing scrutiny from investors, customers
and other market participants with respect to our Environmental, Social and Governance (“ESG”), policies could negatively
affect the price of our shares or impose additional costs on us.
In recent years, increasing attention has been given to ESG policies
of corporations across industries, including with respect to climate change and diversity, equity and inclusion matters. Growing public
concern about climate change has resulted in increased focus of local, state, regional, national and international regulatory bodies on
greenhouse gas, or GHG, emissions and climate change issues. We may incur additional expenses, such as costs related to data collection,
reporting, auditing, and compliance systems, as U.S. and international regulators require additional disclosures regarding GHG emissions
or climate-related risks. Compliance with such regulations and the associated potential cost is complicated by the fact that various countries
and regions are following different approaches to the regulation of climate change. These differing approaches can include variations
in emission reduction targets, reporting requirements, timelines for implementation, and enforcement mechanisms. The current presidential
administration in the United States in particular has been taking steps to roll back restrictions on greenhouse gas emissions and regulations
targeting climate change and is expected to continue to do so. Additionally, in the U.S., there is an increasing number of state-level
initiatives aimed at discouraging or penalizing the adoption of ESG or sustainability policies. This lack of uniformity can increase complexity
and cost as we navigate and comply with a patchwork of regulations. We could fail to achieve, or be perceived to fail to achieve, evolving,
expectations, standards, or regulations on ESG matters, or be perceived by investors, customers and other market participants as having
not responded appropriately to growing ESG concerns. As a result, we may experience reputational damage and our business, financial condition
and the price of our shares could be materially and adversely affected.
Our cash, cash equivalents, Marketable Securities
and short-term deposits are subject to risks that may cause losses and affect the liquidity of these investments.
As of December 31, 2025, we had $312.9 million in cash, cash equivalents,
marketable securities and short-term deposits. We regularly maintain cash, cash equivalent, marketable securities and short-term deposits
at third-party financial institutions. We maintain and invest our cash and cash equivalents based on an investment policy approved by
our Investment Committee of the board and by our board of directors. Our investment policy set various principles for managing our cash,
including the rating level of third-party financial institutions in which we keep our cash, diversified portfolio and diversified countries
of incorporation of the relevant financial institutions. These deposits and investments are subject to general credit, liquidity, market
and interest rate risks. Further, we may be adversely affected by a crisis in the banking industry. If banks and financial institutions
enter receivership or become insolvent in the future and a portion of our cash, cash equivalents, marketable securities or short-term
deposits is held in such banks and financial institutions, our ability to access our existing cash, cash equivalents and investments may
be impacted and could have a material adverse effect on our business and financial condition.
Risks Related to our Technological Environment
Our business and financial performance may be
materially adversely affected by information technology issues, data breaches, cyber-attacks and other similar incidents, as well as insufficient
cybersecurity and other business disruptions.
We rely on information technology systems and networks to operate
and manage our business and to collect, use, maintain and otherwise process information, including information related to our business,
customers, partners, and personnel. This information is stored and managed within our internal information technology infrastructure or,
in certain instances, on platforms maintained by third-party service providers, suppliers and vendors. These systems and networks, whether
operated internally or externally, may be subject to information technology issues, data breaches, cyber-attacks and other similar incidents.
Our business is constantly challenged and may be impacted by information technology issues, data breaches, cyber-attacks and other similar
incidents, as well as insufficient cybersecurity and other business disruptions experienced by us or our third-party service providers,
suppliers and vendors. Data breaches, cyber-attacks, and other similar incidents in particular are a growing and evolving risk and often
are difficult or impossible to detect for long periods of time or to successfully defend against. Such incidents may include, but are
not limited to software bugs, server malfunctions, software or hardware failure, service outages, malicious software or activity, computer
viruses, ransomware attacks, denial-of-service attacks, social engineering, domain name spoofing, fraud, phishing attacks, worms/trojan
horses, insider threats, human error, attempts to gain unauthorized access to data, and other cybersecurity breaches that could lead to
disruptions in systems and networks, denial of services, remote code execution, unauthorized access to or release of sensitive, proprietary,
confidential, personal or otherwise protected information corruption of data, telecommunications failures, terrorist attacks, natural
disasters, power loss, war, physical security breaches, or other events that may harm our systems and networks, or those of our third-party
service providers, suppliers and vendors. Moreover, the increasing integration of AI technology within our platform introduces new attack
vectors, such as prompt injection, data poisoning and adversarial attacks, which could compromise the integrity and security of our platform
and technology and the data processed thereon. At the same time, growing sophistication and accessibility of AI tools empower malicious
actors, potentially lowering the barrier to complex cyber-attacks and increasing their frequency and impact. All of the foregoing incidents
are increasing in frequency, levels of persistence, sophistication and intensity, are evolving in nature, and are conducted by organized
groups and individuals with a wide range of motives and expertise, including organized criminal groups, “hacktivists,” terrorists,
nation states, nation state-supported actors, and others, any of whom may see their effectiveness enhanced by the use of AI. Unidentified
groups continuously target numerous internet websites and servers, including our own, for various reasons, political, commercial and other.
High-profile data breaches, cyber-attacks and other similar incidents at other companies and government agencies have increased in frequency
and sophistication in recent years. Moreover, geopolitical tensions, particularly the Hamas-Israel, Iran-Israel and the Russia-Ukraine
conflicts, have contributed to a surge in cyber-attacks targeting Israeli companies, individuals and products globally, posing a threat
to critical infrastructure. Any data breach, cyber-attack or other similar incident impacting us or our third-party service providers,
suppliers and vendors, or any failure to make adequate or timely disclosures to the public, regulators, or law enforcement agencies following
any such incident, could subject us to substantial system downtimes, operational delays, other detrimental impacts on our operations or
ability to provide products and services to our customers, the compromising of sensitive, proprietary, confidential, personal or otherwise
protected information, the destruction or corruption of data, other manipulation or improper use of our systems and networks, violations
of applicable data protection, data privacy and cybersecurity laws and regulations or notification obligations, violation of contracts,
legal claims, regulatory scrutiny or enforcement actions, investigations, financial losses from remedial actions, loss of business or
potential liability, and/or damage to our reputation, any of which could have a material adverse effect on our cash flows, competitive
position, financial condition and results of operations.
27
Given the unpredictability of the timing, nature and scope of such
incidents, and because techniques used to obtain unauthorized access to or sabotage systems and networks change frequently and generally
are not identified until they are launched against a target, there can be no assurance that such incidents can be prevented, that such
incidents are not occurring currently without our knowledge, or that any such incidents will not have a material adverse effect on us
in the future. Additionally, the rapid evolution of AI technology may also cause new vulnerabilities and attack methods to emerge faster
than our ability to develop countermeasures, creating a persistent and escalating challenge to our cybersecurity defenses.
As cybersecurity threats continue to evolve, we expect to continue
to expend significant additional resources to continue to maintain, modify or enhance our protective measures or to investigate or remediate
any information technology issues, business interruptions, data breaches, cyber-attacks or other similar incidents. However, we may not
be able to anticipate such incidents, and such measures, as well as our response process, may not be adequate, may fail to detect or react
to such incidents in a timely manner, may fail to identify or accurately assess the severity of an incident, may not respond quickly enough,
or may fail to sufficiently remediate an incident. As a result, we may suffer significant legal, reputational, or financial exposure,
which could harm our business, financial condition, and operating results.
With respect to our third-party risk management processes, while
we generally seek to impose certain cybersecurity requirements on critical third parties with whom we do business, for example, by employing
due diligence and onboarding procedures, our ability to monitor such practices is limited, we do not control their cyber risk management
and there can be no assurance that we will detect, prevent, mitigate, or remediate the risk of any weakness, compromise, or failure in
the systems, networks, and information owned or controlled by such third parties. Due to applicable laws and regulations or contractual
obligations, we may be held responsible for business interruptions, data breaches, cyber-attacks or other similar incidents attributed
to such third parties as they relate to the information we share with them. In addition, if we suffer a highly publicized business interruption,
data breach, cyber-attack or other similar incident, even if our platform and solutions perform effectively, such an incident could have
an adverse effect and cause us to suffer reputational harm, lose existing commercial relationships and customers or deter existing customers
from purchasing additional solutions and prevent new customers from purchasing our solutions.
We cannot ensure that any indemnification or limitation of liability
provisions in our agreements with customers, service providers, suppliers, vendors and other third parties with which we do business would
be enforceable or adequate or would otherwise protect us from any liabilities or damages with respect to any particular claim in connection
with a business interruption, data breach, cyber-attack or other similar incident. Additionally, we cannot be certain that our insurance
coverage will be adequate for cybersecurity liabilities actually incurred, that insurance will continue to be available to us on economically
reasonable terms, or at all, or that our insurer will not deny coverage as to any future claim.
We have contractual, legal and regulatory obligations to notify
relevant stakeholders of certain data breaches, cyber-attacks or similar incidents, as defined in the relevant laws, regulations or respective
contracts. Most jurisdictions have enacted laws and regulations requiring companies to notify individuals, regulatory authorities and
others of data breaches, cyber-attacks or similar incidents involving certain types of data. In addition, our agreements with certain
customers and third-party partners may require us to notify them in the event of a data breach, cyber-attack or similar incident. Such
mandatory disclosures are costly, could lead to negative publicity and may cause our customers to lose confidence in the effectiveness
of our security measures. If we fail to make such notification within the mandatory time frames, we may be subject to penalties and legal
actions.
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Although we have implemented administrative, technical and organizational
safeguards to comply with applicable data protection, data privacy and cybersecurity laws and regulations in connection with the collection,
use, retention, disclosure and other processing of personal information, if a significant failure of such safeguards were to occur, our
business and reputation could be materially adversely affected. A business interruption, data breach, cyber-attack or other similar incident
could lead to claims by our customers, data subjects or other relevant parties that we have failed to comply with applicable laws, regulations
or contractual obligations to implement specified security measures. As a result, we could be subject to legal action or our customers,
data providers or other relevant parties could end their relationships with us.
Data protection, data privacy and cybersecurity laws and regulations
in certain jurisdictions may require us to notify individuals and government or regulatory authorities of data breaches, cyber-attacks
or other similar incidents involving certain types of personal data. Pursuant to certain data protection, data privacy and cybersecurity
laws and regulations, including certain U.S. states’ privacy laws, such as the California Consumer Privacy Act (as amended by the
California Privacy Rights Act, the “CCPA”), and the Israeli Privacy Protection Law, 1981 and the regulations thereunder (“Israeli
Privacy Law”), if we experience a data breach, cyber-attack or other similar incident, affected individuals could, under certain
circumstances relating to such incidents, bring a private action claiming the breach was the result of our violation of the duty to implement
and maintain reasonable security procedures and practices and recover civil damages, which could be costly, impact the operation of our
business and cause reputational harm. Similarly, there is a risk of class actions in the United Kingdom (the “U.K.”), Europe,
Israel as well as other countries. In Canada, there has been an increase in tort claims and related civil litigation. Data breaches, cyber-attacks
or other similar incidents could also result in enforcement actions, including significant penalties and fines, by government or regulatory
authorities alleging that we have violated applicable laws or regulations that require us to maintain reasonable security measures and
comply with mandatory disclosure requirements. In the coming years, we expect further regulation regarding data protection, data privacy
and cybersecurity in the U.S., Canada and other countries that will likely apply to our business. These laws, regulations and other obligations
may create additional regulatory, liability, and reputational risks and may increase financial costs to mitigate such risks. For more
information, see the Risk Factor titled – “Our business depends on our ability to collect,
use, maintain and otherwise process data, including personal data, to help our clients deliver advertisements, and to disclose data relating
to the performance of advertisements. Any limitation imposed on our collection, use, maintenance or other processing of this data could
significantly diminish the value of our solution and cause us to lose sellers, buyers, and revenue. Regulations, legislation or
self-regulation relating to data protection, data privacy, cybersecurity, AI, e-commerce and internet advertising and uncertainties regarding
the application or interpretation of existing or newly adopted laws and regulations threaten our ability to collect, use, maintain and
otherwise process this data, could harm our business and subject us to significant costs and legal liability for non-compliance.”
If we fail to detect or prevent fraudulent,
suspicious or other invalid traffic or engagement with our ads, or otherwise prevent against malware intrusions, we could lose the confidence
of our advertisers, damage our reputation and be responsible to make-good or refund demands, which would cause our business to suffer.
Our business relies on delivering positive results to our advertisers
and their consumers. We are exposed to the risk of fraudulent, suspicious or other invalid traffic, impressions, clicks, conversions,
or other ad engagements that advertisers may perceive as undesirable. Such fraudulent, suspicious or other invalid activities may occur
when a software program, usually known as a bot, spider or crawler, intentionally simulates user activity causing impressions, ad engagements
or clicks to be counted as real users. Such malicious software programs can run on a single machine or on tens of thousands of machines,
making them difficult to detect and filter.
We implement and use proprietary and third-party technologies designed
to identify fraudulent, suspicious or other invalid traffic, impressions, clicks, conversions or other ad engagements. Despite our efforts,
it can be difficult to detect fraudulent, suspicious or other invalid activity for different reasons. If we are unable to detect and prevent
fraudulent, suspicious or other invalid activity, the affected advertisers may experience or perceive a reduced return on their investment.
High levels of fraudulent, suspicious or other invalid activity could lead to dissatisfaction with our advertising services, refusals
to pay, refund or make-good demands or withdrawal of future business. Any of these occurrences could damage our brand and lead to a loss
of revenue.
We may not be able to enhance our platform,
technology and solutions to keep pace with technological and market developments in our evolving industry.
To keep pace with technological developments, satisfy increasing
developer requirements, maintain the attractiveness and competitiveness of our advertising solutions offered by our platform, and
ensure compatibility with evolving industry standards, we will need to regularly enhance our platform, technology and solutions as well
as develop and introduce new services on a timely basis, including on our platform. The success of our platform relies on our ability
to further develop and enhance our platform’s AI infrastructure and our AI-agent.
We also must update our software to reflect changes in advertising
networks’ application programming interfaces (“APIs”), technological integration, data protection, data privacy, cybersecurity
and terms of use. The success of any enhancement or new solution depends on several factors, including timely completion, adequate quality
testing, appropriate introduction and market acceptance. Our inability, for technological, business or other reasons, to timely enhance,
develop, introduce and deliver compelling advertising services and AI capabilities in response to changing market conditions and technologies
or evolving expectations of advertisers or consumers could hurt our ability to grow our advertising business and adversely impact our
business. For additional information see also the Risk Factors titled – “If the demand for
digital advertising does not continue to grow or customers do not embrace our solutions including our Perion One platform, it could have
a material adverse effect on our business and results of operation.”
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Our products operate in a variety of computer
and device configurations and could contain undetected errors, failures or defects that could result in product failures, lost revenue,
and loss of market share.
Our software and advertising products may contain undetected errors,
failures or defects, especially when the products are first introduced or when new versions are released. Our customers’ computer
and other device environments are often characterized by a wide variety of standard and non-standard configurations that make pre-release
testing for programming or compatibility errors very difficult and time-consuming. As a result, there could be errors, failures or defects
in our products or our platform. In addition, despite testing, errors, failures or defects may not be found in our products and new versions
of our products and platform. In the past, we have discovered software errors, failures and defects in certain of our product offerings
after their full introduction and have experienced delayed or lost revenue during the period required to correct these errors, failures
and defects.
Errors, failures or defects in our products and platform could
result in negative publicity, make-goods, refunds, loss of or delay in market acceptance of our products, loss of competitive position
or claims by customers. Alleviating any of these problems could require significant expense and resources and could cause interruptions
to our products.
We depend on third-party service
providers, suppliers and vendors, such as Internet, telecommunication, data centers, cloud computing and hosting providers as
well as data providers, to operate our platform, websites and services. Temporary failure of these services, including catastrophic or
technological interruptions, would materially reduce our revenue and damage our reputation, and securing alternate sources for these services
could significantly increase our expenses and be difficult to obtain.
The availability of our products and services and fulfillment of
our customer contracts depend on the continuing operation of our information technology and communications systems and networks, and those
of our third-party service providers, suppliers and vendors. Our products and platform’s operation as well as our internal conduct
and daily management are supported by third-party internet, hosting, SaaS services, telecommunication providers as well as data providers
and others. We also rely on third-party AI infrastructure and service providers including large language model (LLM) providers, AI model
APIs, and machine learning platforms, to power and enhance our advertising technology and products. Such third-party service providers,
suppliers and vendors may experience disruptions, which would reduce our revenue and increase our costs.
We own servers located in Israel, Europe and the United States
and we also rent the services of thousands of servers located around the world. Our servers mainly include web servers, application servers,
data collection servers, data storage servers, data processing servers and database servers. While we believe that there are many alternative
providers of hosting and other communication services available to us, the costs associated with any transition to a new service provider,
supplier or vendor could be substantial.
Furthermore, although we maintain back-up systems and networks
for most aspects of our operations, and we could still experience deterioration in performance or interruption in our systems and networks,
delays, and loss of critical data and registered users and revenue. Our systems and networks, and those of our third-party service providers,
suppliers and vendors, are vulnerable to damage, interference, or interruption from modifications or upgrades, terrorist attacks, war,
natural disasters, fires, epidemics and pandemics, the effects of climate change (such as sea level rise, drought, flooding, wildfires,
and increased storm severity), power loss, telecommunications failures, cyber-attacks, computer viruses, ransomware attacks, denial-of-service
attacks, phishing schemes, break-ins, sabotage, intentional acts of vandalism, misconduct or similar events. Such events, a decision to
close third-party facilities on which we rely without adequate notice, or other unanticipated problems, could result in lengthy interruptions
to our services.
Our systems and networks are also not fully redundant, and our
disaster recovery planning may not be sufficient for all eventualities. In addition, we may have inadequate insurance coverage to compensate
us for losses from a major interruption. Furthermore, interruptions in the services of our providers or their inability to provide us
the services or data or meet the service capacity we require, could result in interruptions in the availability or functionality of our
solutions or materially impede our ability to attract and onboard new customers to services and to maintain relationships with current
customers. Difficulties of this kind could damage our reputation, be expensive to remedy, curtail our growth and materially adversely
impact our business operations. For more information, see the Risk Factor titled – “Our business
and financial performance may be materially adversely affected by information technology issues, data breaches, cyber-attacks and other
similar incidents, as well as insufficient cybersecurity and other business disruptions.”
Additionally, should some of our third-party service providers,
suppliers and vendors terminate their relationship with us, our ability to continue the development of some of our products could be adversely
affected, until such time that we find adequate replacement for these vendors, or until such time that we can continue the development
on our own. Any of the foregoing could materially adversely affect our business, financial condition, and operating results.
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The introduction of new browsers and other popular
software products may materially adversely affect user engagement with our search services.
Users typically install new software and update their existing
software as new or updated software is introduced online by third-party developers. In addition, when a user purchases a new computing
device or installs a new internet browser, it generally uses the internet search services that are typically pre-installed on the new
device or internet browser. Our products are distributed online and are usually not pre-installed on computing devices. Further, as many
software vendors that distribute their solutions online also offer search services alongside their primary software product, users often
replace our search services with those provided by these vendors while installing new software or updating existing software. Furthermore,
the migration of users to new browsers, and particularly to AI-powered browsers, render our search services not relevant to such users.
After users have installed search solutions offered by us, any
event that results in a significant number of our users changing or upgrading their internet browsers could result in the failure to generate
the revenue that we anticipate from our users and result in a decline in our user base. Should we not be able to timely respond to such
changes or in the event that the search solutions offered by vendors would offer better user experience than the one offered by us, this
could have an adverse effect on our business, financial condition and our results of operations.
Finally, although we constantly monitor the compatibility of our
internet search services and related solutions with such new versions and upgrades, we may not be able to make the required adjustments
to ensure constant availability and compatibility of such solutions.
Risks Related to Data Protection, Data Privacy
and Cybersecurity Laws and Regulations
Our business depends on our ability to collect,
use, maintain and otherwise process data, including personal data, to help our clients deliver advertisements and to disclose data relating
to the performance of advertisements. Any limitation imposed on our collection, use, maintenance or other processing of this data could
significantly diminish the value of our solution and cause us to lose sellers, buyers, and revenue. Regulations, legislation or self-regulation
relating to data protection, data privacy, cybersecurity, AI, e-commerce and internet advertising and uncertainties regarding the application
or interpretation of existing or newly adopted laws and regulations threaten our ability to collect, use, maintain and otherwise process
this data, could harm our business and subject us to significant costs and legal liability for non-compliance.
Our business is conducted through the internet and therefore, among
other things, we are subject to the laws and regulations that apply to e-commerce and online businesses around the world. These laws and
regulations are becoming more prevalent in the United States, Europe, Israel, Canada and elsewhere and may impede the growth of the internet
or otherwise adversely impact our business. These laws and regulations cover data protection, data privacy, data protection, cybersecurity,
e-commerce, content, use of “cookies,” pricing, advertising, distribution of “spam,” copyright and other intellectual
property, libel, marketing, distribution of products, protection of minors, consumer protection, accessibility, taxation, online payment
services, and the use of AI to process data or for automated decision-making . Many areas of laws and regulations affecting the
internet remain largely unsettled, even in areas where there has been some legislative or regulatory action.
We collect, use, maintain and otherwise process certain data, including
personal data, about our customers (including, without limitation, customers’ clients or users), partners, candidates and employees,
consultants, leads and consumers. Our ability to collect, use, maintain or otherwise process personal data has been, and could be further,
restricted by existing and new laws and regulations relating to data protection, data privacy and cybersecurity, including the EU
General Data Protection Regulation 2016/679 (the “GDPR”), the U.K.’s General Data Protection Regulation (“U.K.
GDPR”), the rules and regulations promulgated under the authority of the FTC, the CCPA and privacy laws of various U.S. states,
the Israeli Privacy Law, Canada’s federal Personal Information Protection and Electronic Documents Act (the “PIPEDA”),
the Quebec Privacy Act and other laws such as Quebec’s new Privacy Legislation Modernization Act (“Quebec’s Law 25”
and together with the PIPEDA and the Quebec Privacy Act, “Canadian Privacy Law”),
and the EU ePrivacy Directive (“ePD”). These laws and regulations generally define personal data to include location data
and online identifiers, which are commonly used and collected parameters in digital advertising and, among other things, impose stringent
user consent requirements and permit data subjects to request that we discontinue using certain data. The obligations imposed under data
protection, data privacy and cybersecurity laws and regulations could increase our potential liability and adversely affect our business.
In the European Economic Area (“EEA”), the U.K. and
Canada, we are subject to the GDPR, the U.K. GDPR and Canadian Privacy Law, respectively, which, among other things, impose requirements
to provide detailed and transparent disclosures about how personal data is collected and processed, grant rights for data subjects to
access, delete or object to the processing of their personal data, provide for a mandatory breach notification to supervisory authorities
(and in certain cases, affected individuals) of certain data breaches, set limitations on the retention of personal data and outline significant
documentary requirements to demonstrate compliance through policies, procedures, training and audits. In the EEA and the U.K., failure
to comply with the GDPR and the U.K. GDPR can result in significant fines and other liability under applicable law. In particular, under
the GDPR, fines of up to EUR 20 million (or GBP 17.5 million under the U.K. GDPR) or up to 4% of the annual global revenue of the noncompliant
company, whichever is greater, could be imposed for violations of certain of the GDPR’s requirements. European data protection authorities
have already imposed fines for GDPR violations, in some cases, of hundreds of millions of euros.
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In Canada, the data privacy landscape is made up of different provincial
data privacy laws (including the Quebec Privacy Act and Quebec’s Law 25), Canadian federal data privacy laws as well as sector-specific
data privacy laws. In 2021, Quebec passed Quebec’s Law 25 overhauling the Quebec Privacy Act. Quebec’s Law 25 imposes strict
controller requirements, such as privacy policies; enhanced consent requirements when collecting, using or disclosing personal data; risk
assessments and data breach notification. Quebec’s Law 25 also granted individuals certain data privacy rights including a right
to erasure, right to restrict processing and, as of September 22, 2024, a right to data portability. Also under Quebec’s Law 25,
organizations must provide, by default, the parameters ensuring the highest level of confidentiality of a technological product or service
offered to the public. Canadian Privacy Law applies not only to third-party transactions, but also to transfers of information between
us and our subsidiaries, and under Quebec’s Law 25, personal data would include employee information. Failure to comply with Canadian
Privacy Law and other data privacy laws within Canada may expose us to administrative fines, litigation or enforcement actions brought
by data subjects and regulatory authorities, class actions and even punitive damages. Canadian federal data privacy law is currently being
overhauled and we expect that data privacy legislation across Canada will continue to evolve in the coming months and years.
In the U.S., both federal and state laws and regulations govern
the collection, use, maintenance and other processing of personal data, and the advertising industry has been subject to review by the
FTC, U.S. Congress, and individual states. For example, at the U.S. federal level, we are subject to the rules and regulations promulgated
under the authority of the FTC, which regulates unfair or deceptive acts or practices, including with respect to data protection, data
privacy and cybersecurity, and has taken an increasingly active approach to enforcing such regulations against companies that handle personal
data that is considered by the FTC a sensitive data for advertising purposes, including location data brokers and companies that process
health-related data. These enforcement actions by the FTC signal an increased regulatory scrutiny of advertising practices that involve
such data processing activities, which could adversely impact our ads business. In recent years, U.S. Congress has regularly considered
proposals for new data privacy and security laws to which we may become subject if enacted. Additionally, at the U.S. state level, we
are subject to, among other things, state privacy laws, such as the CCPA which provides data privacy rights for California residents and
operational requirements for covered companies. Among other things, companies covered by the CCPA must provide certain disclosures to
California residents and afford such residents the ability to opt-out of certain sales of personal data. The CCPA provides for civil penalties
for violations, as well as a private right of action for certain data breaches that is expected to increase data breach litigation. In
addition, the California Privacy Rights Act, which took effect in January 2023, has expanded the rights granted under the CCPA and imposed
additional notice and opt out-obligations, including an obligation to provide California residents with the ability to opt-out of the
processing of personal data for purposes of behavioral advertising and restrictions on the “sale” or “share” of
personal data (which it defines broadly under the CCPA), with significant enforcement penalties for non-compliance. Many other U.S. states
also have implemented, or are in the process of implementing, similar new laws or regulations, reflecting a trend toward more stringent
U.S. federal and state data privacy legislation, which could increase our potential liability and adversely affect our business. These
laws and regulations often make it easier for certain individuals to opt-out of having their personal data processed and disclosed to
third parties through various opt-out mechanisms, and this could result in an increase to our operational costs to ensure compliance with
such legal and regulatory changes and a decrease in personalized advertising leading to a decrease in revenues. Further, laws in all 50
states, under certain circumstances, require businesses to provide notice to consumers whose certain types of personal data has been disclosed
as a result of a data breach. Additionally, tracking technology litigation—including lawsuits brought under the California Invasion
of Privacy Act (“CIPA”) and the Electronic Communications Privacy Act continues
to create risk for organizations, prompting many companies to adopt an opt-in approach to placement of tracking technologies, such as
cookies, on their websites. Such litigation can be brought against any website using tracking technologies, advertisers placing such cookies
tracking technologies on publishers’ websites or other intermediaries placing tracking technologies on advertisers or publishers’
websites or platforms. We may be named in such litigaiton or other legal proceedings regarding evolving interpretations of privacy laws,
including CIPA, which could result in substantial damages and legal costs, civil damages, impact the operation of our business and cause
us reputational harm. The U.S. Department of Justice has issued rules restricting the transfer of certain personal data to countries of
concerns, i.e., China, Russia, Iran, North Korea, Cuba and Venezuela, as well as to individuals or organizations associated with these
countries. These restrictions may limit our ability to share such data and could subject us to liability in case of noncompliance.
Certain U.S. states (including Vermont, California, Texas, and
Oregon) have enacted data broker laws and regulations imposing certain requirements on data brokers, including, without limitation, requirements
relating to registration, consent, disclosure, and/or cybersecurity. California also amended its data broker law to impose additional
requirements applicable to companies that are registered there as data brokers (such as our subsidiary Hivestack Technologies Inc.), effective
on August 1, 2026, to honor requests by California residents to delete such residents’ personal information submitted through a
universal deletion mechanism. Furthermore, on June 20, 2025, the Texas governor signed two bills amending the Texas Data Broker Act. These
bills, among others, broaden the definition of “data broker”, alter certain applicability thresholds, and provide enhanced
notice and registration statement requirements. In addition, the FTC has increasingly issued orders restricting data brokers from selling
certain location data obtained by tracking individuals’ mobile devices. Other countries and jurisdictions have enacted and may further
enact similar or related laws or regulations, and/or their authorities may reach similar decisions. These laws, regulations, and decisions
and any additional laws, regulations and decisions that may be enacted or issued in the future, may result in significantly larger numbers
of consumers opting out of having their personal data used for targeted advertising purposes relative to historical averages. In addition,
consent requirements in the EU under the GDPR have become complex due to the CJEU ruling regarding the IAB Transparency and Consent Framework
(TCF). Further, due to ruling of the Belgian Market Court, there may be ambiguity around the lawfulness of informed consent obtained via
the TCF in the EEA and UK. If our implementation of these current or future laws, regulations, and decisions, including of the TCF or
other practices are found to be deficient by EU supervisory or other authorities, this could result in fines and enforcement actions,
reduced access to consumer’s personal data, impacting performance of our services or resulting in loss of business, and may require
us to develop complex and expensive compliance tools and procedures. Moreover, there has been an increase in laws and regulation for data
privacy in specific sectors. For example, laws and regulations specific to consumer health data have been enacted in certain U.S. states,
with an expectation that more states will follow. Such laws and regulations include Washington’s My Health My Data Act which imposes
certain requirements and obligations regarding the collection, sharing and sale of “consumer health data” – broadly
defined as personal information that is linked or reasonably linkable to a consumer and that identifies the consumer’s past, present,
or future physical or mental health status. The Washington My Health My Data Act provides a private right of action and, together with
the broad definition and scope, is likely to trigger a wave of related litigation. As such, we may be limited with the advertising services
we can provide to customers in certain sectors in jurisdictions with such data privacy laws and regulations.
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The Israeli Privacy Law and its regulations, including but
not limited to the Israeli Privacy Protection Regulations (Data Security) 2017 and the guidelines issued by the Israeli Privacy Protection
Authority (“PPA”), impose obligations regarding the collection, use, processing, transferring and securing of personal data.
In addition, the Privacy Protection Regulations (Provisions Regarding Information Transferred to Israel from the European Economic Area),
2023 were enacted and consequently provide, in certain cases, additional rights to data subjects from the EEA or other data subjects whose
personal data is stored in the same database. A material amendment to the Israeli Privacy Law took effect in August 2025 (“Amendment
13”) which sets forth additional obligations regarding the processing of personal data and, among other things, expands the PPA’s
investigative authority and monetary sanctions that can be imposed for breach of the Israeli Privacy Law, to substantial amounts that
may reach in certain cases millions of NIS. Amendment 13 also imposes more extensive obligations on data brokers and grants the PPA authority
issued guidance regarding required consents and transparency, reflecting the PPA's legal interpretation for purposes of exercising its
authorities. Therefore, significant changes to the Israeli Privacy Law may necessitate adjustments to our data protection and security
practices. Lack of compliance with the Israeli Privacy Law could result in enforcement actions, litigation (including class actions),
fines and penalties and, in certain cases, criminal liability.
Most of our products and services are provided without direct relationships
with users/consumers, therefore, we rely on our data providers, customers or publishers to establish a legal basis required under the
applicable data protection and data privacy laws and regulations (for example, to obtain the consent from the user) on our behalf to process
their data and to implement any notice or choice mechanisms required under applicable data protection and data privacy laws and regulations.
However, if our data providers, customers, or publishers fail to follow this process, or to adapt their practices as the legal requirements
in this area continue to evolve, we could be exposed to legal liability and experience a reduction in the volume of data we receive, which
could adversely affect our business and results of operations.
The uncertainty created by these laws and regulations can be compounded
when services hosted in one jurisdiction are directed at users in another jurisdiction. For instance, certain data protection and data
privacy laws (including the GDPR, CCPA and Canadian Privacy Law) have an extra-territorial scope causing such laws to potentially govern
activities conducted by organizations established in jurisdictions outside of, in the case of the GDPR, the EEA, in the case of the CCPA,
California, and, in the case of PIPEDA and Quebec’s Law 25, Canada and Quebec, respectively. These laws contain significant penalties
for non-compliance. Additionally, under the GDPR, supervisory authorities in the EU member states have some flexibility when implementing
European Directives and certain aspects of the GDPR, which can lead to diverging national rules. In addition, following the withdrawal
of the U.K. from the EU, we are subject to the U.K. GDPR. While the U.K. GDPR currently imposes substantially the same obligations as
the GDPR, the U.K. GDPR does not automatically incorporate changes to the GDPR (which would need to be specifically incorporated by the
U.K. government). Moreover, the U.K. government has amended the U.K. GDPR through the Data (Use and Access) Act 2025 and may further reform
the U.K. GDPR in ways that, if formalized, are likely to deviate from the GDPR, all of which exposes us to two parallel regimes (GDPR
and U.K. GDPR), each of which authorizes similar fines and may subject us to increased compliance risk based on differing, and potentially
inconsistent or conflicting, interpretation and enforcement by regulators and authorities (particularly, if the laws are amended in the
future in divergent ways). The European Commission’s Digital Omnibus Proposal, published in November 2025, includes proposed amendments
to the GDPR and other EU laws and regulations, but it remains at an early stage of the EU legislative process.
Additionally, some countries are considering or have enacted legislation
requiring local storage and processing of data or otherwise restricting cross-border transfers of personal data that could increase the
cost and complexity of delivering our services. For example, as of September 22, 2023, Quebec’s Law 25 requires organizations
to conduct a privacy impact assessment (“PIA”) in certain circumstances, such as when transferring personal data from Quebec
to other jurisdictions (including to other provinces in Canada) as well as when acquiring, developing, or overhauling an information system
or electronic service delivery system that involves the collection, use, release, keeping, or destruction of personal data. Such PIAs
can be time consuming and costly and may impact our ability to attract/retain customers and service providers. Additionally, the GDPR
and the U.K. GDPR generally prohibit the transfer of personal data from the EEA and the U.K. to the United States and third countries,
unless the transfer is to a country deemed to provide adequate protection (such as Israel or Canada), the recipient is certified under
the EU-U.S. Data Privacy Framework (“DPF”), or the parties to the transfer have implemented specific safeguards to protect
the transferred personal data. The GDPR and the U.K. GDPR requirements apply not only to third-party transactions, but also to transfers
of information between us and our subsidiaries, including employee information.
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Where we transfer personal data outside the EEA or the U.K. to
a country that is not deemed to be “adequate,” we rely on transfer mechanisms available under the relevant laws and regulations,
such as DPF certification or the EU Standard Contractual Clauses and their UK Addendum, and the efficacy and longevity of such mechanisms
remains uncertain. In some jurisdictions like the EU, U.K., Canada and Israel, the law and guidance on data transfers is rapidly developing
and recent developments will require us to review and may require us to amend or supplement the legal mechanisms by which we make and/or
receive personal data transfers. Additional costs may need to be incurred in order to implement necessary safeguards to comply with the
GDPR and the U.K. GDPR and potential new rules and restrictions on cross-border transfers of personal data could increase the cost and
complexity of conducting business in some markets. If our policies and practices, or those of third parties who process personal data
on our behalf, are, or are perceived to be, insufficient, or if individuals have concerns regarding the transfer of personal data from
the EEA or the U.K. to the U.S., we could be subject to enforcement actions or investigations by individual EU or U.K. data protection
authorities or lawsuits by private parties.
European supervisory authorities have also been very active in
terms of enforcing data protection rules. EU national laws that implement the ePD, which concerns the processing of personal data
and the protection of privacy in the electronic communications sector, continue to be subject to uncertainty in light of the European
Commission’s withdrawal of the ePrivacy Regulation, which was expected to alter rules on cookies and other tracking technologies,
impose burdensome requirements surrounding obtaining consent and significantly increase fines for non-compliance in February 2025. A European
court decision, regulatory guidance, and campaigns by privacy activists are continuing to draw attention to cookies and other tracking
technologies under existing laws and regulations. Increased regulation of cookies and similar technologies in the EEA and the U.K., in
addition to certain other jurisdictions such as Canada and the U.S., and any decline of cookies or similar online tracking technologies
as a means to identify and potentially target individuals, may lead to broader restrictions and impairments on our business activities
and negatively impact our efforts to understand users. Industry participants in the advertising technology ecosystem have taken or may
take action to eliminate or restrict the use of cookies and other identifiers. For example, Google had at one point announced plans to
fully eliminate support for third-party cookies in the Chrome browser but cancelled such plans instead opting to allow users to choose
whether to retain third-party cookies rather than completely removing them, and Apple implemented further restrictions on the use of mobile
identifiers on its devices. If such industry changes are pursued, we may need to take adaptive measures, which may include substantial
development and commercial changes. While we are taking measures to shift away from third-party cookies-based solutions, for example,
by using our proprietary cookieless solution, SORT®, which enables advertisers to reach their audience in real time without storing
any personally identifiable data, we generally rely on third-party cookies-based solutions. If the use of cookies is substantially limited
or if regulators start to enforce an increasingly strict approach, this could lead to substantial costs, require significant systems changes,
limit the effectiveness of our solutions and services, divert the attention of our personnel, adversely affect our business, and subject
us to additional liabilities.
The increase in attention to and regulation of data protection,
data privacy and cybersecurity across the globe in recent years will require us to further devote resources and incur additional costs
associated with compliance, as well as impose additional restrictions on our and our partners’ operations. Although we strive to
comply with applicable laws and regulations regarding data protection, data privacy and cybersecurity and to inform our customers of our
business practices prior to any installations of our product and use of our services, it is possible that these laws and regulations may
be interpreted and applied in a manner that is inconsistent with our data collection, use, maintenance and other processing practices
or that it may be argued that our practices do not comply with certain countries’ data protection, data privacy and cybersecurity
laws and regulations. Due to rapid changes in technology and the inconsistent interpretations of privacy and data collection and protection
laws and regulations, we may be required to materially change the way we do business. The challenges imposed by the ongoing need to remain
compliant with such laws and regulations, as well as the need to implement any changes due to newly introduced laws and regulations, may
slow our growth, and if we are not able to cope with these challenges as effectively as other companies, we will be competitively disadvantaged.
Any limitation on our ability to collect and utilize data, including personal data, would make it more difficult for us to be able to
optimize ad placement for the benefit of our advertisers and publishers, which could render our solutions less valuable and potentially
result in loss of clients and a decline in revenue. For example, we may need to adapt our advertising solutions that rely on third-party
cookies to a “cookie-less” environment and introduce alternative solutions which may not provide the targeting capabilities
provided by cookies, or adapt due to restrictions imposed on data brokers — for example with respect to geolocation data. In addition,
we may be required to implement physical, administrative and technological security measures that differ from those we have now, such
as different data access controls or encryption technology. Further, we use cloud-based computing, which is not without substantial risk,
particularly at a time when businesses of almost every kind are finding themselves subject to an ever-expanding range of privacy, data
collection and processing and cybersecurity laws and regulations, document retention requirements, and other standards of accountability.
Compliance with such existing and new laws and regulations can be costly and can delay or impede the development of new products.
In November 2022, the EU’s Digital Services Act (the “DSA”)
came into force in the EEA, and the majority of its substantive provisions took effect on February 17, 2024. The DSA imposes new content
moderation obligations, notice obligations, advertising restrictions and other requirements on online intermediaries and platforms, including
providers of intermediary services, hosting services and social media services. Additionally, the DSA may indirectly impact additional
players in the advertising technology industry by subjecting them to the DSA’s transparency requirements concerning online advertising.
Although we do not expect the DSA to have a material impact on our operations, there could be indirect consequences that adversely affect
the advertising technology industry and our business.
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Any failure or perceived failure to comply with the foregoing
laws and regulations could result in negative publicity, increase our operating costs, require significant management time and attention
and subject us to inquiries or investigations, litigation (including class actions), claims, or other remedies, including penalties, fines,
sanctions and criminal and civil liabilities, or demands or orders that we modify or cease existing business practices, each of which
could materially adversely affect our operating results and our business. Further, any failure or perceived failure to comply with our
public privacy policies and other public statements about privacy and cybersecurity could potentially subject us to regulatory investigations,
enforcement or legal actions, and harm to our reputation and, if such policies or statements are found to be deceptive, unfair or misrepresentative
of our actual practices, fines, monetary or other penalties, and other damage to our business, financial condition and results of operations.
Moreover, concerns about our collection, use, maintenance and other processing of personal data or other data protection-, data privacy-
or cybersecurity-related matters, even if unfounded, could harm our reputation and operating results. For more information regarding government
regulations to which we are subject, see Item 4.B. “Business Overview— Government Regulation.”
If one or more states or countries determine
that we are required to collect sales, use, or other taxes on the services that we sell, this may result in liability to pay sales, use,
and other taxes (plus interest and penalties) on prior sales and a decrease in our future sales revenue.
While in some states we are subject to sales tax, in general, the
digital advertising business has not traditionally paid sales tax. However, a successful assertion by one or more cities, states or countries
that digital advertising services should be subject to such taxes or that we are not providing digital advertising services but other
services, and should collect sales, use, or other taxes on the sale of our services, or that we have failed to do so where required in
the past, could result in a decrease in future sales and/or substantial tax liabilities for past sales. Each state and country has different
rules and regulations governing sales, use, and other taxes, and these rules and regulations are subject to varying interpretations that
may change over time.
Following a U.S. Supreme Court decision regarding the rights of
individual states to tax out-of-state suppliers, certain states have adapted their statutes to expand taxation on out-of-state suppliers
of goods and services. Some states are also pursuing legislative expansion of the scope of goods and services that are subject to sales
and similar taxes as well as the circumstances in which a vendor of goods and services must collect such taxes. Furthermore, legislative
proposals have been introduced in Congress that would provide states with additional authority to impose such taxes. Accordingly, it is
possible that either federal or state legislative changes may require us to collect additional sales and similar taxes from our clients
in the future which could impact our future sales, and therefore could result in a material adverse effect on our revenue.
For example, the State of Maryland and the State of Washington
have enacted legislation to tax digital advertising revenues. Maryland's tax has been subject to ongoing judicial review, Washington’s
tax, which became effective in October 2025, is also facing legal challenges. Similar bills have been introduced in several other states.
Under current Israeli, U.S., Canada,
U.K., French and Ukrainian law, as well as other laws, we may not be able to enforce non-competition
and non-solicitation covenants and, therefore, we may be unable to prevent our competitors from benefiting from the expertise of some
of our former employees and/or vendors, whether current or former.
We have entered into non-competition and non-solicitation agreements
with many of our employees and vendors. These agreements prohibit our employees and vendors, if they terminate their relationship with
us, from competing directly with us, working for our competitors, or soliciting current employees away from us for a limited period. Under
current Israeli, U.S., U.K., French, and Ukrainian law, as well as other laws, and further under proposed legislation such as Senate Bill
S4641A in New York, we may be unable to enforce these agreements, in whole or in part, and it may be difficult for us to restrict our
competitors from gaining the expertise that our former employees gained while working for us. For example, Israeli courts have required
employers seeking to enforce non-compete undertakings of a former employee to demonstrate that the competitive activities of the former
employee will harm one of a limited number of material interests of the employer which have been recognized by the courts, such as the
secrecy of a company’s confidential commercial information or its intellectual property. If we cannot demonstrate that such harm
would be caused to us, we may be unable to prevent our competitors from benefiting from the expertise of our former employees.
Risks Related to our Intellectual Property
Our proprietary information, technology and
other intellectual property may not be adequately protected and thus our intellectual property may be unlawfully copied by or disclosed
to other third parties.
We regard the protection of our proprietary information, technology,
and other intellectual property as critical to our success. We strive to protect our intellectual property rights by relying on contractual
restrictions, trade secret, trademark, copyright and patent laws and other common law rights, as well as federal and international intellectual
property registrations and the laws on which these registrations are based. However, the technology we use and incorporate into our offerings
may not be adequately protected by these means.
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We generally enter into confidentiality and invention assignment
agreements with our employees and contractors, and confidentiality agreements with parties with whom we conduct business, in order to
limit access to, and the disclosure and use of, our proprietary information, technology and other intellectual property. However, we may
not be successful in executing these agreements with every party who has access to our confidential information or contributes to the
development of our intellectual property. In addition, those agreements that we do execute may be breached, and we may not have adequate
remedies for any such breach. Further, these contractual arrangements do not prevent or deter independent development of similar intellectual
property by others.
In addition, there is no assurance that any existing or future
trade secrets, patents, copyrights or trademarks will afford adequate protection against competitors and similar technologies. Our intellectual
property rights may be misappropriated, infringed, reverse-engineered, circumvented, or otherwise violated by others, or challenged and
invalidated through administrative processes or litigation. Effective trade secret, trademark and patent protections are expensive to
develop and maintain, as are the costs of defending or enforcing our rights. Further, we cannot provide any assurances that competitors
will not challenge, invalidate, misappropriate, infringe, reverse-engineer, circumvent or otherwise violate our intellectual property
rights, or that we will have adequate resources to defend or enforce our rights. In addition, the laws of some countries do not
provide the same level of intellectual property protection as U.S. or Israeli laws and courts.
Claims of misappropriation, infringement
or other violation of third-party intellectual property rights or other third-party claims
against us could require us to redesign our products, seek licenses, or engage in costly intellectual property litigation, which could
adversely affect our financial position and our ability to execute our business strategy.
Given the competitive and technology-driven nature of the digital
advertising industry, companies within our industry often design and use similar products and services, which may lead to claims of third-party
intellectual property misappropriation, infringement, or other violation and subsequent litigation. We have been, and in the future may
be, the subject of claims that our solutions and underlying technology misappropriate, infringe or otherwise violate the intellectual
property rights of others. Regardless of whether such claims have any merit, they are time-consuming and costly to evaluate and defend,
and the outcome of any litigation is inherently uncertain. Our business may suffer if we are unable to resolve claims of third-party intellectual
property misappropriation infringement or other violation without major financial expenditures or adverse consequences.
We may seek to obtain licenses to third-party intellectual property
rights that we desire to use, which we would be allegedly misappropriating, infringing or otherwise violating or may misappropriate, infringe
or otherwise violate, without such licenses. Although holders of intellectual property rights often offer these licenses, we cannot provide
any assurances that such licenses will be offered on acceptable terms or at all. Our failure to obtain a license for key intellectual
property rights from a third party for technology, content, sound, or graphics we use could cause us to incur substantial liabilities
or to suspend the development or sale of our products. Alternatively, we could be required to expend significant resources to redesign
our products or develop non-infringing technology, content, sound, or graphics. If we are unable to redesign our products or develop non-infringing
technology, content, sound, or graphics, our revenue could decrease and we may not be able to execute our business strategy.
We may also become involved in litigation in connection with the
brand-name rights associated with our Company name or the names of our products. Third parties may claim that our Company name, our brand
names, or product names infringe their trademark rights. If we will need to change the name of our Company or any of our subsidiaries,
brands or products, we may experience a loss in goodwill associated with such name, customer confusion or a loss of sales. Any lawsuit
involving such a name, regardless of its merit, would likely be time-consuming, expensive to resolve, and divert our management’s
time and attention.
We may become subject to claims for remuneration
or royalties for assigned service invention rights by our employees, which could result in litigation and adversely affect our business.
A significant portion of our intellectual property has been developed
by our employees in the course of their employment for us. Under the Israeli Patent Law, 5727-1967 (the “Israeli Patent Law”),
inventions conceived by an employee in the course and as a result of, or arising from, his or her employment with a company are regarded
as “service inventions,” which belong to the employer, absent a specific agreement between the employee and employer giving
the employee service invention rights. The Israeli Patent Law also provides that if there is no such agreement between an employer and
an employee, the Israeli Compensation and Royalties Committee (the “Israeli Royalties Committee”), a body constituted under
the Israeli Patent Law, shall determine whether the employee is entitled to remuneration for his or her inventions. An employee may waive
the right to receive remuneration for “service inventions” and case law has held that in certain circumstances, such waiver
does not necessarily have to be explicit. The Israeli Royalties Committee will examine, on a case-by-case basis, the general contractual
framework between the parties in accordance with general Israeli contract law. Further, there is no specific formula for calculating this
remuneration. Under Canadian law, employees benefit from a presumption that they are entitled to ownership of a patent of any invention
they created in the course of their employment unless there is an express contract to the contrary or the employer can prove that the
employee was employed for the express purpose of inventing. Although we generally enter into invention assignment agreements with our
employees pursuant to which such individuals assign to us all rights to any inventions created in the scope of their employment or engagement
with us, we may still face claims demanding ownership rights or remuneration in consideration for such inventions. As a consequence of
such claims, we could be required to pay additional remuneration or royalties to our current and/or former employees, or be forced to
litigate such claims, which could negatively affect our business.
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We use certain “open-source”
software tools that may be subject to intellectual property infringement claims or that may subject derivative works of such open-source
software to unintended consequences, which may impair our product development plans, interfere
with our ability to provide services to our clients, require us to allow access to the source code of our products or necessitate that
we pay licensing fees.
Certain of our products contain open-source code, and we may use
more open-source code in the future. In addition, certain third-party software embedded in our products contains open-source code. Open-source
code is computer code that is covered by a license agreement that permits the user to liberally use, copy, modify and distribute the software
without cost, provided that such users and modifiers abide by certain requirements. The original developers of the open-source code provide
no warranties on such code.
As a result of our use of open-source software, we could be subject
to suits by parties claiming ownership of what they believe to be their proprietary code or claims alleging non-compliance with, or seeking
to enforce, certain open-source code license terms. If we are not successful in defending against any such claims that may arise, we may
be subject to injunctions and/or monetary damages or be required to purchase a costly license or re-engineer our software products to
remove the open-source code from our products, which may be a costly and time-consuming process, and we may not be able to complete such
re-engineering process successfully. Such events could disrupt our operations and the sales of our products, which would negatively impact
our revenue and cash flow.
Moreover, under certain conditions, we may be obligated to make
derivative works of open-source code available to others at no cost. The circumstances under which our use of open-source code would compel
us to offer derivative code at no cost are subject to varying interpretations. If we are required to publicly disclose the source code
for such derivative products or to license our derivative products that use an open-source code license, our previously proprietary software
products may be made available to others at no charge. As a result, our customers and our competitors may have access to our products
at no cost to them which could harm our business. Certain open-source code licenses require, as a condition to use, modify and/or distribute
such open-source code, that proprietary software incorporated into, derived from or distributed with such open-source code be disclosed
or distributed in source-code form, be licensed for the purpose of making derivative works, or be redistributable at no charge. The foregoing
requirements may under certain conditions be interpreted to apply to our software, depending upon the use of the open-source code and
the interpretation of the applicable open-source code licenses. The terms of many open-source code licenses to which we may be subject
have not been interpreted by U.S. or foreign courts, and there is a risk that open-source code licenses could be construed in a manner
that imposes unanticipated conditions or restrictions on our ability to provide or distribute our products or services. The use of open-source
code may ultimately subject some of our products to unintended conditions so that we are required to take remedial action that may divert
resources away from our development efforts and have a material adverse effect on our business, financial condition and results of operation.
In addition, third-party software licensors generally do not provide
warranties or controls on the origin of software or other contractual protections regarding infringement claims or the quality of the
code with respect to the open-source components of their products and would not indemnify us in the event that we or our customers are
held liable for intellectual property infringement or other software-related claims in respect of the open-source components contained
in such third-party software. Further, some open-source code is known to have security risks and other vulnerabilities and architectural
instabilities or are otherwise subject to security breaches due to their wide availability, and are provided on an “as-is”
basis. There is typically no support available for open-source code, and we cannot ensure that the authors of such open-source code will
implement or push updates to address security risks or will not abandon further development and maintenance. Many of the risks associated
with the use of open-source code, such as the lack of warranties or assurances of title or performance, cannot be eliminated, and could,
if not properly addressed, have a material adverse effect on our business, financial condition and results of operation.
Risks Related to the Geographical Location
of our Operations
Our business relies significantly on the U.S.
market. Any material adverse change in that market could have a material adverse effect on our results of operations.
Our revenue has been concentrated within the U.S. market, accounting
for approximately 73% of our revenue in 2025. A recession that causes a reduction in advertising expenditures generally or other circumstances
that cause a decrease in our U.S. revenue could have a material adverse effect on our results of operations. Recent fluctuations in prevailing
interest rates due to higher-than-average inflation materially increase the likelihood of such circumstances and present significant potential
challenges to our U.S. business.
37
Our business may be materially affected by changes
to fiscal and tax policies. Potentially negative or unexpected tax consequences of these policies, or the uncertainty surrounding their
potential effects, could adversely affect our results of operations and share price.
We operate in a global market and are subject to tax in Israel
and other jurisdictions. Our tax expenses may be affected by changes in tax laws, international tax treaties, and international tax guidelines
(such as the Base Erosion and Profit Shifting project of the OECD’s Inclusive Framework (“BEPS”)).
The members of the OECD’s Inclusive Framework on BEPS have
agreed in October 2021 on certain recommendations, informally known as BEPS 2.0 or Pillar Two, which aim to modify international taxation
norms with the introduction of a 15% minimum tax applicable to in-scope multinational enterprises (with revenue in excess of Euro 750
million). The UK and the EU member countries as well as additional countries have already enacted legislation to implement the recommendations
which have come into effect gradually in 2024 and 2025. In January 2026, the OECD released a ‘Side-by-Side’ (SbS) relief package
and administrative guidance intended to coordinate the application of Pillar Two rules with existing tax regimes in jurisdictions like
the United States.
On December 31, 2025, Israel enacted the Law on the Minimum Corporate
Tax for Multinational Groups-2025, which is intended to align with the OECD Pillar Two framework and imposes a Qualified Domestic Minimum
Top-up Tax (QDMTT) at a rate of 15% effective for fiscal years beginning on or after January 1, 2026.
The application of the QDMTT law or other laws in other jurisdictions
enacted under the Pillar Two framework on us will depend on our consolidated global revenue and effective tax rate in future periods.
Our effective tax rate and cash tax payments could increase in
future years as a result of these changes. Further, the OECD’s Inclusive Framework on BEPS known as Pillar One which deals with
the allocation of taxing rights with respect to multinational enterprises with revenue in excess of Euro 20 billion and profitability
of more than 10%, focusing mostly on the digital economy, has made some progress - the OECD has released the text for a Multilateral
Convention (MLC) to implement these changes. However, as of early 2026, the MLC has not yet entered into force. The delay in ratification
may result in the continued imposition of unilateral digital services taxes by various jurisdictions, which could indirectly impact our
business and results of operations.
Certain of these changes could have a negative impact on our results
of operations and business. The impact of these changes is uncertain and may not become evident for some period of time. The uncertainty
surrounding the effect of the reforms on our financial results and business could also weaken confidence among investors in our financial
condition. This could, in turn, have a materially adverse effect on the price of our ordinary shares.
Our international operations involve special
risks that could increase our expenses, adversely affect our operating results and require increased time and attention of our management.
A large portion of our operations are performed from outside the
United States. In addition, we derive and expect to continue to derive a portion of our revenue from customers and users outside the United
States. Our international operations and sales are subject to a number of inherent risks, including risks with respect to:
| • |
potential loss of proprietary information, technology and other intellectual property due to piracy, misappropriation, infringement,
or other violation or laws that may be less protective of our intellectual property rights than those of the United States; |
| • |
costs and delays associated with translating and supporting our products in multiple languages; |
| • |
foreign exchange rate fluctuations and economic instability, such as higher interest rates and inflation, which could make our products
more expensive in those countries; |
| • |
costs of compliance with a variety of laws and regulations; |
| • |
restrictive governmental actions such as trade restrictions or retaliatory trade measures, including trade wars; |
| • |
limitations on the transfer and repatriation of funds and foreign currency exchange restrictions; |
| • |
compliance with different consumer, data protection, data privacy and cybersecurity laws and regulations, and restrictions on pricing
or discounts; |
| • |
lower levels of adoption or use of the internet and other technologies vital to our business and the lack of appropriate infrastructure
to support widespread internet usage; |
| • |
lower levels of consumer spending on a per capita basis and fewer opportunities for growth in certain foreign market segments compared
to the United States; |
| • |
lower levels of credit card usage and increased payment risk; |
| • |
changes in domestic and international tax regulations; and |
| • |
geopolitical events, including war and terrorism. |
Political, economic and military instability
in the Middle East and specifically in Israel, including Israel’s war with Hamas and conflict with other parties in the region,
may adversely affect our operations and limit our ability to market our products, which would lead to a decrease in revenues.
We are incorporated under Israeli law, and many of our employees,
including our Chief Executive Officer, our Chief Financial Officer, and other senior members of our management team, operate from our
headquarters located in Israel. In addition, many of our officers and directors are residents of Israel. Accordingly, our business and
operations are directly affected by economic, political, geopolitical, and military conditions in Israel.
38
Since the establishment of the State of Israel in 1948, the region
has experienced ongoing, armed conflicts and hostilities. These events have included conflicts between Israel and neighboring countries
as well as terrorist organizations. Such conflicts have involved various forms of aggression, including missile strikes, hostile infiltrations,
and terrorism against civilian targets.
Following the October 7, 2023 attacks by Hamas, Israel declared
that it is in war against Hamas, leading to military conflicts with Hamas, Hezbollah and Iran (both directly and through proxies). Despite
some ceasefire agreements, military activity and hostilities continue varying levels of intensity. At the same time, in June 2025, Israel
launched a major military strike against Iran, resulting in a twelve-day armed conflict (the “Twelve-Day War”) that also involved
direct U.S. airstrikes on Iranian nuclear facilities. A ceasefire was reached on June 24, 2025. On February 28, 2026, Israel and the United
States launched a second, larger-scale offensive against Iran. Iran has retaliated with sustained attacks across the Middle East and was
joined by renewed Hezbollah attacks on Israel. As of the date of this filing, the conflict is ongoing with no ceasefire in place and the
situation remains volatile, with the potential for escalation into a broader regional conflict involving additional terrorist organizations
and possibly other countries.
While our facilities have not been damaged during the current conflicts,
ongoing hostilities have caused and may continue to cause damage to private and public facilities, infrastructure, utilities, and telecommunication
networks, and potentially disrupting our operations and supply chains. In addition, Israeli organizations, government agencies and companies
have been subject to extensive cyber-attacks. These factors could lead to increased costs, risks to employee safety, and challenges to
business continuity, with potential financial losses.
The continuation of the conflict has led to a deterioration of
certain indicators of Israel’s economic standing, for instance, credit rating actions or outlook changes by international rating
agencies.
The ongoing conflict has resulted in the drafting of a significant
number of Israeli military reservists for active duty, with expectations of continued reserve service in the coming years. While only
a few of our employees are called to active military duty, the absence of our employees due to military service in current or future conflicts
may materially adversely affect our ability to conduct our operations.
Our commercial insurance does not cover losses that may occur
as a result of events associated with war and terrorism. Although the Israeli government currently covers the reinstatement value of certain
direct physical damages caused by terrorist attacks or acts of war in Israel, we cannot assure you that such government coverage will
be maintained or that it will sufficiently cover our potential damages. Any losses or damages incurred by us could have a material adverse
effect on our business.
The global perception of Israel and Israeli companies, influenced
by international judicial bodies and geopolitical events, may lead to increased sanctions and other negative measures against Israel,
as well as Israeli companies and academic institutions. There is also a growing movement among countries, activists, and organizations
to boycott Israeli goods, services and academic research or restrict business with Israel, which could affect business operations. If
these efforts become widespread, along with any future rulings from international tribunals against Israel, they could significantly and
negatively impact business operations.
Prior to the October 2023 war, the Israeli government pursued changes
to Israel’s judicial system and has recently renewed its efforts to effect such changes. As of early 2026, several pieces of legislation
aimed at restructuring the judicial selection committee and re-regulating the civil service have advanced in the Knesset. These developments
have raised concerns that such proposed changes may negatively impact the business environment in Israel and could lead to political instability
or civil unrest. If such changes are pursued and approved, this may have an adverse effect on our business, results of operations, and
ability to raise additional funds. In addition, Israel’s election cycle (or the possibility of early elections) may contribute to
governmental inconsistency, policy uncertainty and civil unrest, any of which could adversely affect our operations and the Israeli business
environment.
We are exposed to the risk of natural disasters,
political events, war, terrorism, and pandemics, each of which could disrupt our business and adversely affect our results of operations.
Events beyond our control could have an adverse effect on our business,
financial condition, results of operations and cash flows. Disruption to our business resulting from natural disasters, political events,
war, terrorism, pandemics or other reasons could impair our ability to continue to provide uninterrupted service to our advertisers and
partners. For example, tensions between Russia and Ukraine, resulting in Russia’s invasion of Ukraine, and the possibility of retaliatory
measures taken by the United States and NATO have created global security concerns that could have a lasting adverse impact on regional
and global economies, and in turn, may lead to reduced spending on advertising and adversely affect our results of operations. Similarly,
the escalating military conflict between Israel, the United States, and Iran, including Israel’s Twelve-Day War against Iran in
June 2025 and the joint U.S.-Israel strikes on Iran that commenced in February 2026, has created significant instability across
the Middle East. Given that our headquarters and many of our operations are located in Israel, this conflict presents heightened and direct
risks to our business. Similarly, disruptions in the operations of our key third-parties, such as data centers, servers or other technology
providers, could have a material adverse effect on our business.
39
While we have disaster recovery and wartime resilience plan for
power and communication continuity arrangements in place, they have not been tested under actual disasters or similar events and may not
effectively permit us to continue to provide our services. If any of these events were to occur, our business, results of operations,
or financial condition could be materially adversely affected.
Investors and our shareholders generally may
have difficulties enforcing a U.S. judgment against us, our executive officers or our directors or asserting U.S. securities laws claims
in Israel.
We are incorporated under the laws of the State of Israel. Service
of process on us, our Israeli subsidiaries, our directors and officers and the Israeli experts, if any, named in this Annual Report on
Form 20-F, substantially all of whom reside outside of the United States, may be difficult to obtain within the United States.
Furthermore, because a significant portion of our assets and investments,
and most of our directors, officers and Israeli external experts are located outside the United States, any judgment obtained in the United
States against us or any of them may be difficult to collect within the United States.
We have been informed by our legal counsel in Israel that it may
also be difficult to assert U.S. securities laws claims in original actions instituted in Israel. Israeli courts may refuse to hear a
claim based on an alleged violation of U.S. securities laws reasoning that Israel is not the most appropriate forum to bring such a claim.
In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law is applicable to the
claim. There is little binding case law in Israel addressing these matters. If U.S. law is found to be applicable, the content of applicable
U.S. law must be proved as a fact, which can be a time-consuming and costly process. Certain matters of procedure will also be governed
by Israeli law.
Subject to specified time limitations and legal procedures, under
the rules of private international law currently prevailing in Israel, Israeli courts may enforce a U.S. judgment in a civil matter, including
a judgment based upon the civil liability provisions of the U.S. securities laws, as well as a monetary or compensatory judgment in a
non-civil matter, provided that the following key conditions are met:
| • |
subject to limited exceptions, the judgment is final and non-appealable; |
| • |
the judgment was given by a court competent under the laws of the state of the court and is otherwise enforceable in such state;
|
| • |
the judgment was rendered by a court competent under the rules of private international law applicable in Israel; |
| • |
the laws of the state in which the judgment was given provide for the enforcement of judgments of Israeli courts; |
| • |
adequate service of process has been effected and the defendant has had a reasonable opportunity to present his arguments and evidence;
|
| • |
the judgment and its enforcement are not contrary to the law, public policy, security or sovereignty of the State of Israel;
|
| • |
the judgment was not obtained by fraud and does not conflict with any other valid judgment in the same matter between the same parties;
and |
| • |
an action between the same parties in the same matter was not pending in any Israeli court at the time the lawsuit was instituted
in the U.S. court. |
The tax benefits available to us for activities
in Israel and in other jurisdictions in which we operate require us to meet several conditions and may be terminated or reduced in the
future, which would increase our costs and taxes.
We have benefited and currently benefit from a variety of government
programs and tax benefits with regards to our operations, that generally carry conditions that we must meet in order to be eligible to
obtain any benefit. Our tax expenses and the resulting effective tax rate reflected in our financial statements may increase over time
as a result of changes in corporate income tax rates, tax incentive regimes or other changes in the tax laws of the countries in which
we operate, non-deductible expenses, loss and timing differences, or changes in the mix of countries, where we generate profit.
If we fail to meet the conditions upon which certain favorable
tax treatment is based, we would not be able to claim future tax benefits and could be required to refund tax benefits already received
including interest, and linkage. Any of the following could have a material effect on our overall effective tax rate:
| • |
we may be unable to meet the requirements for continuing to qualify for some programs; |
| • |
these programs and tax benefits may be unavailable at their current levels; or |
| • |
we may be required to refund previously recognized tax benefits if we are found to be in violation of the stipulated conditions.
|
Additional details are provided in Item 5.A “Operating Results”
under the caption “Taxes on Income”, in Item 10.E. “Taxation” under the caption “Israeli Taxation”
and in Note 15 to our Financial Statements.
40
| ITEM 4. |
INFORMATION ON THE COMPANY |
| A. |
HISTORY AND DEVELOPMENT OF THE COMPANY |
Our History
We were incorporated in the State of Israel in November 1999 under
the name Verticon Ltd., changed our name to IncrediMail Ltd. in November 2000 and in November 2011 changed our name to Perion Network
Ltd. We operate under the laws of the State of Israel. Our headquarters are located at 2 Leonardo Da Vinci Street, 24th
floor, Tel Aviv 6473309, Israel. Our phone number is 972-73-398-1000. Our website address is www.perion.com. The information
on our website does not constitute a part of this annual report. Our agent for service in the United States is our US subsidiary, Intercept
Interactive Inc. d/b/a Perion, which is located at One World Trade Center, 71st Floor,
Suite J, New York, NY 10007.
We completed the initial public offering of our ordinary shares
in the United States on February 3, 2006. Since November 20, 2007, our ordinary shares have also traded on the TASE.
In recent years, we completed several acquisitions, including the
acquisition of Vidazoo Ltd. in October 2021, the acquisition of Hivestack Technologies Inc. in December 2023, and the acquisition of Greenbids
SAS in May 2025.
Our SEC filings are available to you on the SEC’s website
at http://www.sec.gov. This site contains reports, proxy and information statements, and other information regarding issuers that
file electronically with the SEC. The information on that website is not part of this annual report on Form 20-F and is not incorporated
by reference herein.
For a description of our principal capital expenditures and divestitures,
see Item 5. “Operating and Financial Review and Prospects - Liquidity and Capital Resources.”
| B. |
BUSINESS OVERVIEW |
Perion is an advanced technology leader solving the complexities
of modern digital advertising through AI-native execution infrastructure. The global digital advertising market continues to expand rapidly;
according to eMarketer, total digital advertising represents an addressable market of $870 billion in 2026, which is expected to grow
to $1.13 trillion globally by 2029.
To help brands, agencies and retailers maximize the value of their
media investments, we focus on making advertising more effective by seamlessly connecting data, creative, and media channels. On February
3, 2025, we introduced Perion One, a unified platform designed to eliminate industry silos and bridge the gap between marketing intent
and measurable business results.
Through Perion One and our proprietary AI agent, Outmax, we provide
a centralized execution infrastructure where AI allocates spend, manages pacing, and optimizes outcomes across the digital ecosystem.
This infrastructure enables advertisers to efficiently navigate a fragmented landscape, capturing high-value audiences across Connected
TV (CTV), Digital Out of Home (DOOH), Retail Media, social platforms, and the Open Web.
Industry Overview
The digital advertising industry is undergoing a structural transformation
driven by the rapid advancement of AI, changing consumer consumption habits across emerging digital channels, and evolving privacy standards.
Advertisers face a complex ecosystem defined by speed and fragmentation, prompting a strategic reassessment of media budgets, thus increasingly
demanding outcome-driven, performance-based omnichannel solutions that reduce media waste and maximize Return on Ad Spend (ROAS).
According to eMarketer reports, digital advertising spending will
account for 77% of total worldwide media advertising in 2026, reaching approximately $870 billion and is expected to increase to approximately
$1.13 trillion and 80.9% of total media advertising spend by 2029.
Below are some of the key trends and opportunities in the industry:
The rise of AI in Digital Advertising
AI is fundamentally altering the ad tech landscape. While initial
AI applications focused primarily on the planning, workflow, and creative generation layers, the industry is now transitioning toward
AI-native execution infrastructure. Modern advertisers are increasingly demanding AI agents capable of operating directly within real-time
delivery systems, managing supply paths, optimizing pacing, and allocating budgets under live constraints. This shift from manual orchestration
to machine-to-machine, agent-driven execution allows advertisers to process vast datasets instantly, dynamically tailor high-impact creative
formats, and achieve superior operating leverage and capital efficiency in their campaigns.
41
The Shift Towards Performance-Driven Solutions
Amid macroeconomic uncertainty and the demand for clear Return
on Ad Spend (ROAS), the industry is increasingly shifting toward performance-driven advertising. Advertisers are reallocating digital
advertising budgets from traditional, top-of-funnel brand awareness campaigns toward direct response and measurable, outcome-driven solutions.
This trend demands advanced multi-touch attribution, real-time analytics, and AI-driven optimization to directly link media investments
across all channels to tangible business KPIs, such as online conversions, app installs, or offline store visits.
The Shift Towards Premium
Video and Connected TV (CTV)
As viewership continues to migrate from conventional broadcast
and cable television to streaming platforms, advertising budgets are accelerating toward Connected TV (CTV). According to eMarketer, CTV
ad spending in the U.S. accounted for $33.1 billion in 2025, or 9.5% of total U.S. digital ad spending, and is expected to grow to $52.5
billion in 2029, representing 10.5% of total U.S. digital ad spending for that year, taking a growing share of linear TV ad spending.
Historically treated primarily as a top-of-funnel brand awareness
channel, CTV is evolving into a full-funnel, performance-driven environment. Marketers increasingly demand measurable outcomes, utilizing
advanced targeting, granular audience insights, and multi-touch attribution to link premium video investments directly to engagement,
conversions and ROAS.
Growth of Commerce and Retail
Media
Retail Media is one of the fastest-growing segments in digital
advertising, leveraging valuable, purchase-based first-party data to drive sales. According to eMarketer, worldwide retail media ad spending
accounted for $173.1 billion in 2025, or 21.9% of total digital ad spending, an 18.2% year-over-year increase. In the U.S., Omnichannel
Retail Media ad spending accounted for $60.8 billion representing 17.4% of total U.S. digital ad spending in 2025 and is expected to reach
$71.7 billion by 2026 and $98.3 billion by 2029, representing 18.4% and 19.6% of total U.S. digital ad spending, respectively.
The sector is expanding beyond retailer-owned websites to distribute
personalized offers across off-site digital channels, including CTV, Social and DOOH. By bridging media exposure with actual sales data,
Retail Media provides closed-loop measurement that enables brands to deliver localized campaigns and drive immediate purchasing decisions.
Multichannel Advertising
and Cross-Platform Engagement
The modern consumer journey is more fragmented than ever, spanning
multiple devices, platforms, and formats. Consumers today interact with brands across multiple platforms such as social media, search
engines, websites, streaming services, and more, before making a purchasing decision. To maximize reach and engagement, advertisers
are shifting toward multichannel advertising strategies, ensuring a seamless and consistent brand experience across all digital touchpoints.
Digital Out-of-Home (DOOH)
Digital out-of-home (DOOH) refers to digital media used for advertising
outside of the consumer's home in the public domain. Unlike traditional out-of-home advertising, such as billboards with printed posters,
DOOH utilizes advanced digital technology to deliver engaging, contextually relevant content in public spaces.
The DOOH advertising channel is undergoing a rapid transition toward
programmatic DOOH (pDOOH), which automates the buying, placement, and real-time optimization of outdoor inventory. Driven by dynamic data
inputs and its growing integration with Retail Media, DOOH offers highly targeted reach and enhanced, measurable ROI for out-of-home audiences.
According to Statista, worldwide DOOH ad spending is expected to
increase from $17.2 billion in 2024 to $26.3 billion in 2030, reflecting a 53.0% growth. In the U.S., eMarketer expects DOOH to grow from
$3.9 billion in 2025 to $5.3 billion in 2029.
The Decline in Open Web
While display advertising across the Open Web has historically
been a foundational channel, it is currently experiencing structural headwinds and a gradual decline in traffic. This contraction is driven
primarily by two factors: the rapid proliferation of generative AI and search conversational interfaces—which increasingly provide
users with direct answers and reduce outbound click-through rates to independent publisher sites—and a broader consumer attention
shift toward closed media ecosystems. As audiences migrate to these “walled gardens,” advertising spend follows, causing the
Open Web to lose relative market share. Consequently, success for publishers and advertisers in the remaining Open Web environment increasingly
relies on AI-driven supply path optimization and high-impact dynamic creative formats to maximize user engagement and extract maximum
value from every available impression.
The Rise in Social Media
and Video-first Platforms Advertising
Conversely, social media and video-first platforms such as Meta,
YouTube, TikTok, LinkedIn, Reddit and Pinterest - are experiencing a continuous rise in usage and consumer engagement. Driven by shifts
in consumer behavior, algorithmic feeds, immersive video, and integrated commerce capabilities, these closed ecosystems are capturing
an increasing share of digital advertising budgets, actively taking market share away from the Open Web. However, executing campaigns
across these fragmented “walled gardens” presents significant complexity. Because each platform operates its own opaque delivery
environment, advertisers increasingly require sophisticated, cross-channel technology to avoid isolated, inefficient buying. Companies
that have access to both those social “walled gardens” and the Open Web have an important competitive advantage; Advertisers
are expected to increasingly rely on AI-native execution infrastructure and proprietary agents, such as Perion’s Outmax, to deploy
custom bidding algorithms tailored to specific KPIs. This technology enables brands to navigate platform-specific constraints, dynamically
allocate real spend, and secure highly efficient, performance-driven outcomes within these closed ecosystems.
42
Digital Audio
As consumer engagement with podcasts and music streaming platforms
rises, digital audio advertising continues to experience steady growth. According to eMarketer, digital audio ad spending accounted for
$7.6 billion in 2025, and is projected to climb to $9.4 billion by 2029. Advances in Generative AI have fundamentally enhanced this channel,
enabling advertisers to dynamically generate personalized audio ads at scale, adapting messages in real time based on listener context,
demographics, and behavior. Additionally, in store or in malls audio messages are ripe for programmatic integration replacing the old
fashion manual announcements. To capture this expanding addressable market, Perion offers WAVE, a cutting-edge generative AI solution
designed to dynamically produce tailored audio advertisements that adapt messaging in real time based on a listener’s context, behavior,
geography, and demographics.
Search Advertising
Search advertising is a direct-response channel for capturing high-intent
consumer behavior. According to eMarketer, U.S. search advertising spend accounted for $145.0 billion in 2025, representing 41.4% of total
U.S. digital media ad spending, and is expected to grow to $200.0 billion in 2029 or 39.9% of total digital media ad spend. However, the
growth rate is expected to decline. The search landscape is experiencing a dynamic transformation due to the rapid integration of generative
AI, conversational interfaces, and alternative discovery tools. These advancements are redefining traditional search behaviors, creating
new competitive pressures, and modifying publisher monetization dynamics.
Continued Focus on user privacy
While Google reversed its decision to phase out third-party cookies
in Chrome in July 2024, the digital advertising industry remains committed to a privacy-first ecosystem. Regulatory bodies in the U.S.
and Europe continue to enforce strict data protection laws, compelling AdTech platforms to reduce reliance on legacy tracking methods.
The industry continues to invest in alternative identity solutions, first-party data strategies, clean rooms, and AI-driven contextual
targeting or statistically based optimization to ensure robust campaign performance while safeguarding consumer privacy. Regulators in
the U.S., EU, U.K. and other countries remain firm on enforcing stricter data privacy laws and consumer protections, and enforcement bodies
continue to scrutinize industry practices, to ensure that consumer privacy is safeguarded, setting compliance requirements that push advertisers
to adopt privacy-centric approach.
Our Strengths
Perion
One
On February 3, 2025, we introduced our Perion One strategy, designed
to unify our diverse advertising channels, brands, and technologies into a single, advanced AI-native execution infrastructure. Perion
One is intended to eliminate industry silos, enhance operational efficiency, and provide advertisers with a seamless way to execute and
optimize cross-channel campaigns. Unlike traditional application-layer software, Perion One serves as an execution platform where AI directly
controls real-time delivery systems, manages supply paths, and executes outcomes. This unified platform empowers brands, retailers, and
agencies to increase audience reach, improve engagement, and drive measurable performance across the entire digital landscape.
Performance & Accountability:
Outcome-Driven Solutions
As marketers increasingly demand solutions that link media investments
to tangible business KPIs such as Return on Ad Spend (ROAS), we focus heavily on delivering outcome-driven solutions. Our proprietary
technologies, such as our Performance CTV Solution, are designed to bridge the gap between brand awareness and performance marketing,
turning traditionally top-of-funnel channels into full-funnel, ROI-focused environments. By combining advanced targeting, personalized
creative formats, multi-touch attribution, and real-time insights, our solutions allow advertisers to optimize every dollar spent by reaching
the right customers at the right moment with precision, relevance, and measurable impact.
Customer-Centric: Built
Around the Brand, Not the Channel
We believe advertisers increasingly seek integrated solutions that
optimize performance across platforms rather than within isolated channels. Our technology is designed to provide a customer-centric,
channel-agnostic approach that supports end-to-end campaign management for brands, agencies, and retailers. Our AI-native execution agent,
Outmax, operates independently and remains truly agnostic, allocating real spend and optimizing outcomes across multiple environments—including
Connected TV (CTV), Digital Out of Home (DOOH), social, commerce, and the Open Web. Because our infrastructure is not constrained by the
incentives of a single ecosystem, we can reallocate budgets seamlessly based on performance signals rather than platform bias, allowing
us to optimize outcomes for our clients.
43
AI at the Core: Intelligent
Execution Infrastructure
AI is embedded at the core of Perion One. We have transformed from
merely utilizing AI in planning workflows to deploying an AI-native execution infrastructure. At the center of this is Outmax, our proprietary
AI agents that operate directly at the execution layer. Outmax allocates real spend, manages pacing, and optimizes outcomes in real time
under live delivery constraints. Furthermore, through our acquisition of Greenbids (the technology behind Outmax for walled gardens),
the leveraging of Outmax for CTV that was built in-house organically, and the launch of SODA (Supply Optimization & Demand Amplification),
our AI algorithms create custom, brand-specific bidding optimizations across major Demand Side Platforms (DSPs) and walled gardens, enabling
us to significantly increase supply yield, increasing ROI, and reducing carbon emissions through highly efficient supply path optimization.
Market Agility and Cross-Channel
Adaptability
In a landscape defined by macroeconomic volatility, rapidly shifting
consumer behaviors, and economic uncertainty, agility is crucial. Advertisers frequently shift their preferences from brand awareness
to direct response and performance-driven formats to maximize engagement and ROAS. Our multichannel footprint enables us to quickly adapt
to these shifts, maintaining a strong presence across CTV, DOOH, retail media, the Open Web, and walled gardens such as YouTube, Meta,
TikTok and Google DV360. This agility allows Perion to swiftly reallocate resources and capture spending in areas of increased advertiser
demand, ensuring that we continue to provide value and adapt to our clients' needs regardless of broader market fluctuations.
AI-Driven Operational Efficiency
and Scalability
We continuously focus on driving internal and external operational
efficiencies. The transition to the Perion One platform was designed to drive cross-company efficiency by unifying our brands, operations,
and global departments to streamline our organizational structure. Furthermore, the integration of our AI agents, Outmax, brings significant
operating leverage by automating the most labor-intensive aspects of campaign execution, such as real-time pacing, spend allocation, and
cross-channel tuning. By reducing manual tasks, our AI-driven automation processes enable us to manage higher ad spend and campaign complexity
with leaner teams, driving higher productivity and lower server costs, and a structurally more efficient execution model that supports
sustainable profitability.
Strong Balance Sheet and
Robust Cash Generation
Perion prides itself in its decade-long generation of positive
cash flow from operations. Throughout the years, the Company built a strong cash position, focusing on profitable growth, and has accumulated
cash and cash equivalents, short-term bank deposits and marketable securities that stands at over $312.9 million as of December 31, 2025,
with no debt. The Company’s capital allocation strategy strikes a balance between organic growth, strategic inorganic growth through
targeted acquisitions and a share repurchase program of up to $200 million, of which $118 million were already executed through December
31, 2025.
Business Strategy
Overview
Our strategy is centered on operating and scaling an AI-native
execution infrastructure that drives measurable outcomes across major digital advertising channels and market verticals.
In 2025, we unified our technologies, brands and operating structure
under Perion One, transitioning from a portfolio of solutions toward an integrated execution platform. Perion One is designed to operate
at the execution layer of digital advertising, where media spend is allocated, pacing is managed, supply paths are optimized and performance
is measured under real-time constraints.
At the core of this infrastructure is Outmax, our proprietary AI
execution agents, embedded directly into live campaign environments.
We believe that as AI increasingly automates planning, analytics
and workflow layers across the industry, value may increasingly concentrate in execution infrastructure, where real-time decisioning,
financial accountability and supply access reside.
Our strategy is built on three pillars.
1. Build and Scale Execution
Infrastructure Across High-Growth Channels
We focus on embedding AI directly into live media delivery systems
rather than operating solely at the planning or workflow layer.
Our execution infrastructure is designed to unify fragmented media
environments across Connected TV (CTV), Digital Out-of-Home (DOOH), Retail Media and Commerce, social platforms, walled gardens and the
open web. Rather than requiring customers to change their existing buying models, we integrate with major platforms while providing centralized
execution logic and accountability.
44
Our growth strategy prioritizes channels where measurable performance
is increasingly required, linear budgets are migrating to digital and programmatic adoption is accelerating. These include CTV, DOOH Social,
Video Platforms, and Web. We continue to expand our capabilities across these environments while maintaining a channel-agnostic architecture.
We believe this execution-layer positioning differentiates us from
application-layer software providers whose primary function is reporting, orchestration or workflow management.
2. Invest in AI Innovation
Across Demand and Supply
AI is a central component of our long-term strategy and a core
area of ongoing investment.
We invest in AI technologies that enhance campaign execution, optimization,
targeting, creative adaptation and measurement across channels. Our AI capabilities operate directly within live media environments, enabling
real-time allocation of spend, pacing control and performance optimization under defined constraints.
Our strategy spans both demand-side execution and supply-side monetization.
We apply transaction-level intelligence to optimize supply paths, improve yield, reduce latency and enhance transparency into partner
economics. We believe aligning demand and supply through intelligent infrastructure enhances ecosystem efficiency while supporting sustainable
monetization models for publishers.
In parallel, we apply AI and automation across our internal infrastructure
and operational processes to streamline workflows, strengthen pricing discipline, improve data analysis and increase scalability without
proportional increases in operational resources.
We believe continued investment in AI-driven infrastructure supports
our ability to manage increasing campaign complexity and adapt to evolving privacy and platform dynamics.
3. Expand Our Ecosystem
Through Global Presence, Partnerships and Disciplined Inorganic Growth
We operate globally, with headquarters in Israel, primary sales
offices in the United States and additional presence across North America, EMEA, APAC and other regions.
Our strategy includes expanding our geographic footprint in markets
where digital media consumption, programmatic adoption and retail media ecosystems are developing. Geographic diversification broadens
our addressable opportunity and strengthens relationships with multinational advertisers and publishers.
A core component of our expansion strategy is forming strategic
partnerships that enhance access to demand, supply and data. These include integrations with major buying platforms, retail media networks,
audience data companies, commerce and payment data providers and media owners. Our objective is to remain platform-neutral while embedding
our execution infrastructure wherever media is bought and sold.
In addition to organic innovation, we selectively pursue acquisitions
and strategic investments that accelerate our execution infrastructure strategy. We evaluate potential transactions based on strategic
fit, technology differentiation, integration feasibility, financial profile and cultural alignment. We believe disciplined inorganic growth
enables us to expand capabilities and enter new markets while maintaining operational focus.
Strategic Positioning
The digital advertising industry is transitioning from fragmented,
interface-driven software toward infrastructure that enables real-time execution.
Our objective is to position Perion as:
| • |
A neutral, cross-channel execution layer |
| • |
A production-grade AI agent operator |
| • |
A scalable infrastructure platform serving both advertisers and publishers |
While AI continues to reshape the broader technology landscape,
we believe execution infrastructure where real dollars are allocated and outcomes are delivered, remains structurally durable.
Our strategy is to continue investing in this layer, scaling Perion
One adoption and enhancing operational discipline over time.
45
Our Solutions
In an increasingly fragmented digital ecosystem, Perion provides
advertisers, agencies, and publishers with a comprehensive suite of advanced technology solutions. Designed to drive measurable outcomes
and operational efficiency, our solutions bridge the gap between media exposure and business results across all major digital channels.
AI Infrastructure for Demand
& Supply Solutions
The foundation of our offerings is the Perion One platform, an
AI-native execution infrastructure designed to unify our diverse advertising channels, technologies, and data sets. Unlike application-layer
software that merely visualizes data or routes workflows, Perion One operates directly at the execution layer of media delivery. It provides
a centralized ecosystem where marketers define their objectives, budgets, and guardrails, while our underlying AI algorithms orchestrate
real-time bidding, pacing, and supply path optimization. All of the solutions detailed below—spanning across Connected TV (CTV),
Digital Out of Home (DOOH), social, and the open web - operate natively on top of or seamlessly complement this unified infrastructure,
driving consistent performance and structural efficiency across the entire advertising lifecycle.
| A. |
Outmax AI Agent |
Outmax is Perion’s proprietary, production-grade AI execution
agent embedded directly within the Perion One infrastructure and operates across several major social platforms, Open Web, major DSPs,
and CTV channels. Operating under real-world delivery constraints, Outmax shifts the burden of manual campaign optimization to machine
learning. The agent allocates real advertising spend, manages real-time pacing, and continuously optimizes outcomes across multiple channels.
By systematically identifying and executing upon high-performing audiences and inventory subsets without ecosystem bias, Outmax drives
high Return on Ad Spend (ROAS) while delivering significant operating leverage for our clients.
| B. |
CTV |
Perion’s Connected TV solutions enable brands to reach highly
engaged audiences across premium streaming channels, such as Hulu, HBO Max, Disney+, and DirecTV. In 2025, our CTV revenue increased by
42% year-over-year, also driven by the launch of our Performance CTV Solution. This solution integrates Perion’s AI-powered creative
optimization and multi-touch attribution technology with premium inventory, effectively bridging the gap between top-of-funnel brand awareness
and lower-funnel performance marketing. By turning CTV into a full-funnel, ROI-focused environment, Outmax for Performance CTV allows
marketers to link their television media investments directly to tangible business key performance indicators (KPIs) like conversions
and measurable ROAS.
Complementing our performance capabilities is our High-Impact CTV
Solution Suite, which provides a wide array of immersive, high-end formats designed to captivate viewers during prime moments, such as
gripping live sports events or show intermissions. These premium formats include Branded CTV and Dynamic CTV, which personalize content
in real time designed to maximize relevance. Furthermore, our Stay-Live CTV provides a picture-in-picture experience to keep viewers connected
during live events, while our Live CTV with the L Bar format maintains brand visibility via a non-intrusive banner during live broadcasts.
We also offer interactive overlays and Pause Ads, which allow brands to occupy the screen during user-initiated reflective break moments.
Together, these innovations ensure that advertisers can sustain visibility and drive deeper engagement without relying solely on conventional
video assets.
| C. |
DOOH |
Our programmatic Digital Out of Home (pDOOH) platform offers media
buyers and owners a comprehensive, full-stack technology solution to manage, deliver, and optimize advertising across physical public
spaces. In late 2025, we further advanced this channel with the launch of the Perion DOOH Player. Integrated directly into our Ad Server,
Header Bidder, and Supply-Side Platform (SSP), the DOOH Player acts as an end-to-end operating system that unifies ad delivery and yield
optimization, replacing fragmented legacy workflows. This hardware-agnostic solution allows media owners and digital signage partners
to optimize both direct and programmatic revenue while scaling recurring revenue opportunities across the DOOH and Retail Media ecosystems.
Perion’s DOOH business continued to gain traction, growing
by 36% year-over-year in 2025, representing 22% of our total display advertising revenue.
According to Statista, worldwide DOOH ad spending is expected to
increase from $17.2 billion in 2024 to $26.3 billion in 2030, reflecting a 53.0% growth while in the U.S., eMarketer expects DOOH to grow
from $3.9 billion in 2025 to $5.3 billion in 2029.
| D. |
Retail Media & Commerce |
Retail Media remains a highly strategic growth engine for Perion,
achieving a 36% year-over-year revenue increase in 2025 to over $109.9 million. Our omnichannel solutions allow advertisers to leverage
purchase-based, first-party data to deliver dynamic, personalized, and localized offers across off-site screens, including CTV and DOOH.
In 2025, we significantly expanded our commerce capabilities through strategic integrations and partnerships with Albertsons Media Collective,
Walmart Connect, and Mastercard. These integrations allow advertisers to activate aggregated, real-world purchase insights, engage high-intent
shoppers across multiple touchpoints, and utilize closed-loop measurement to connect media exposure directly to offline and online sales.
46
| E. |
High-Impact Display |
Our High-Impact Display suite transforms standard open-web display
advertising into immersive, attention-driven experiences. In 2025, U.S. display advertising spend, including banners, rich media, video
and social, was $198.1 billion and, according to eMarketer, is expected to increase by 49% and reach $294.3 billion in 2029. eMarketer
also reports that rich media, including high-impact ad formats, as well as outstream and instream video accounted for $143.7 billion of
U.S. digital display ad spend in 2025 and is expected to increase by 60.5%, reaching approximately $230.6 billion in 2029.
Utilizing AI-driven Dynamic Creative Optimization (DCO), our platform
renders and customizes visually striking ad formats across desktop and mobile devices based on real-time data points. This suite also
incorporates innovative features such as our in-ad AI Chatbot, which enables consumers to interact dynamically with advertisers in real
time, driving deeper user engagement and stronger brand connection.
| F. |
Digital Audio |
The U.S. Digital Audio Advertising Market is on a significant upward
trajectory, with projections indicating that advertising budgets will approach $9.4 billion by 2029. This rapidly growing sector represents
a substantial opportunity for innovative advertising solutions.
To capture the expanding digital audio advertising market, Perion
offers WAVE, a cutting-edge generative AI solution. WAVE dynamically produces tailored, personalized audio advertisements at scale, adapting
messages in real time based on a listener’s context, behavior, geography, and demographics.
| G. |
Social |
Executing optimized campaigns across fragmented, closed “walled
gardens” such as Meta, YouTube and TikTok, requires specialized technology to overcome platform-specific constraints. Perion One,
through Outmax, provides advanced AI algorithms that create custom, brand-specific bidding optimizations across an increasing range of
major social ecosystems. This technology reduces media waste, aligns every campaign with specific business KPIs, and allows advertisers
to extract highly efficient, performance-driven results from walled garden investments.
| H. |
Audience Segmentation |
SORT® is our proprietary, AI-driven audience segmentation
technology that provides scalable, privacy by design targeting without the use of third-party cookies or personally identifiable information.
By analyzing real-time, cookieless data signals to identify shared traits and behaviors, SORT® classifies users into anonymous Smart
Groups, enabling advertisers to maintain robust campaign performance while adhering to evolving global privacy standards.
| I. |
Website Publisher’s Solution |
Perion equips digital publishers with advanced monetization technology,
including ad serving and display monetization. In 2025, we enhanced our publisher offering with the launch of SODA (Supply Optimization
& Demand Amplification). SODA is a next-generation AI algorithm designed for intelligent Supply Path Optimization (SPO) and traffic
shaping. By evaluating incoming bid requests through a smart mediation layer, SODA identifies and selects only the most efficient, top-performing
paths, significantly optimizing yield for publishers while optimizing site performance and latency.
| J. |
Search Advertising |
Search advertising historically provided a reliable method for
capturing high-intent consumer behavior. Throughout 2025, our Search advertising business operated under the tail period of our legacy
agreement with Microsoft Bing, which expired on December 31, 2024. Starting in 2026, our Search operations transitions to operate primarily
with Yahoo.
According to eMarketer reports, advertisers will increase their
investment in search through 2029. The U.S. search advertising market is expected to reach $200.0 billion in 2029, representing 39.9%
of U.S. digital ad spending. Due to structural market changes and strategic platform shifts, Search advertising is becoming a much less
significant part of our overall operations and going forward is expected to represent a significantly smaller portion of our total revenue
and Contribution ex-TAC; however, the segment remains profitable and continues to generate positive cash flow for the Company.
47
Our Technology
2025 was a pivotal year for Perion’s technology. Several
significant investments were brought together:
| ● |
Perion’s decades of building and operating a portfolio of advanced adtech technologies |
| ● |
The acquisition of the Greenbids AI media optimization technology |
| ● |
Significant investment in a foundational AI infrastructure that powers our agentic initiatives |
| ● |
Significant investment in ad tech engine efficiency |
| ● |
Significant investment in unifying all of the above under the Perion One platform |
The amalgamation of the above existing and new technologies is
designed to create a stronger moat that powers the delivery and innovation of our products and solutions described above. Our Outmax AI-native
execution infrastructure empowers:
| ● |
Intelligent buy-side planning, activation, optimization and reporting, across multiple channels and all stages of the consumer journey
|
| ● |
Intelligent publisher-side inventory optimization and monetization |
The technology backbone behind our solutions is designed to connect
brands with consumers via meaningful digital interactions and experiences. This is done through these key components:
| a. |
Perion One, Insights, & Perion ID |
Introduced on February 3, 2025, Perion One serves as both an advanced
technology framework and a strategic consolidation of our existing capabilities. By integrating and reimagining multiple technologies,
Perion One is designed to provide a seamless, streamlined experience for both supply- and demand-side customers, making it easier to access,
explore, and optimize our products and services.
As we continue to develop and scale the platform, Perion One is
being designed to provide advanced analytical capabilities and performance metrics. We are building infrastructure intended to aggregate
critical data—including total budget, reach, impressions, and engagement metrics—aiming to give clients full visibility into
Key Performance Indicators (KPIs) through self-serve operational interfaces and pre-built dashboards. To support unification across the
platform, we also developed Perion ID, our proprietary identity solution for unified client and user access. Perion ID is built on modern
security standards, featuring a flexible authentication framework for individual users and federated enterprise system integrations to
support the fluid adoption of our multiple offerings.
| b. |
Outmax AI Agent |
Outmax is Perion’s proprietary, production-grade AI execution
agent embedded directly within the Perion One infrastructure. It brings deep intelligence to the various phases of campaigns: planning,
activation, optimization and reporting, utilizing models built on top of our data as well as that supplied by our customers. Based on
campaign-to-campaign learnings and complex problem solving methodologies, these technologies are leveraged to build products that generate
better performance for our customers and improved efficiency by providing rules-based as well as budget and pacing optimizations.
A strong feature of Outmax is its ability to optimize a customer’s
campaign, in real time, towards a specific desired performance outcome. The technology is embedded in Perion’s campaign execution
engines, and the Outmax AI Agent is also able to dynamically optimize campaigns running within walled gardens, and emerging digital touchpoints.
48
| c. |
Buying Technologies |
The set of buying technologies is designed to assist advertisers
with campaign planning, design, activation, and optimization by providing data-driven recommendations and automations aligned with their
specific objectives. It suggests advertising channels, audience targeting strategies, and ad product mixes based on benchmarks and past
campaign data.
Outmax AI Agent is able to assist or own the above workflow components
and features. Especially during the execution and optimization phases, it is able to manage a proprietary mix of sub-agents and
optimizes based on campaign, channel and client objective, using:
| ● |
Its own set of advanced machine-learning optimization models for continuous campaign optimization towards specific performance goals.
|
| ● |
SORT®, our proprietary cookieless targeting technology, which was developed in response to advertisers’ growing recognition
of user privacy matters and the planned deprecation of cookies by Google. SORT® displays the result of our ability to analyze the
complex data signals that are derived from our assets that flow through our technology. |
| ● |
Campaign targeting, pacing, and audience configurations |
| d. |
Creative Platform |
Perion’s DCO - high-impact Dynamic Creative Optimization
Platform is a key component of our solutions. Our proprietary creative technology platform enables the automation of High Impact ad unit
production across all formats (Display, Video, CTV and DOOH). Our consolidated technology workflow touches every aspect of campaign flow,
including ad building, tag creation, creative optimizations & post-campaign performance. We learn, adjust, and continually iterate
- allowing us to create engaging, high-performing user experiences that perform across all stages of the funnel. Available for use in
fully managed campaigns or in programmatic channels, our platform delivers superior results for advertisers and agencies looking to take
their creativity to the next level.
In conjunction with our creative platform, Outmax AI leverages
Machine Learning for campaign delivery and optimization, using real-time analysis to determine the most effective advertisements for specific
target audiences, leading to improved campaign performance. Our AI-based creative platform has the ability to create hundreds and thousands
of different ad permutations, targeted at different audiences and optimized across devices and browsers, based on real-time signals such
as weather and user intent groups.
| e. |
Supply Technology & SODA |
The Supply Management set of technologies designed to facilitate
relationships with our publishers by treating impressions in an optimal manner. Our platform is driven by business requirements and agreed
upon monetary expectations, which in turn determine which ads are allowed, what prices are expected, and the allowable frequency.
SODA (Supply Optimization & Demand Amplification) is our intelligent
AI solution that helps publishers improve the monetization of their inventory. The efficiency gains result in a leaner technology footprint
and lower costs without sacrificing performance, as well as benefits partners on both sides of transactions via SPO/DPO (Supply Path Optimization
/ Demand Path Optimization).
Our proprietary Online Video Player (OVP), which integrates a full,
comprehensive suite of services, including an ad server, allows publishers and brands to upload, manage and stream video content to targeted
audiences. Perion’s OVP is certified with the major advertising platforms and compatible with all devices and video formats. The
OVP is integrated with a proprietary ad server, ensuring a consistent user experience by reducing latency and errors, adding to its inherent
power and efficiency.
| f. |
Search Advertising Technology |
The technology behind our search solution is composed of the following systems:
| ● |
Publisher management system that provides publishers access to an online dashboard providing analytics and performance optimization
tools, as well as reports designed to enable them to maximize their distribution and monetization. |
| ● |
Search demand management system that integrates and onboards demand vendors to our monetization products. The integration supports
multiple vendors according to predefined configurations and rules, enabling various business models and offerings, and making it possible
for Perion’s R&D team to innovate on the “search stack.” |
| ● |
Monetization products designed to deliver algorithmic search results concurrently with sponsored listings, both served for the same
search queries. They can be operationalized in different ways, including the transmission of search queries to search engines, search
Feed APIs operated on publishers’ domains and an enriched and optimized hosted search results page which offers an enhanced user
experience. |
49
| g. |
Agentic Development |
Behind all of the advanced technologies we build and operate is
a talented engineering team. Aside from building and operating AI systems for our platform and our customers, we are also heavy users
of AI for all internal software development. We are firm believers in the power of AI, and are investing in internal AI adoption
that remains at the service of enterprise requirements.
Competitive Landscape
The advertising technology industry is highly competitive and rapidly
evolving. Numerous digital media and advertising technology companies offer services comparable to our advertising solutions and compete
for finite advertiser and agency budgets as well as limited publisher inventory. In addition, a number of niche providers compete with
us by delivering specific components or subsets of the services we offer.
Our competitors on both the supply and demand sides include privately
held companies such as Kargo and GumGum, as well as publicly traded companies such as The Trade Desk, Zeta, Criteo, PubMatic, Nexxen,
Magnite, and Teads, among others. We also compete with large, well-capitalized technology companies, including Google, Meta, Amazon, and
Microsoft, which possess substantially greater financial, technological, and other resources than we do.
Certain companies in the ecosystem operate simultaneously as partners
and competitors. For example, Google and The Trade Desk compete with various aspects of our offerings and partner with us in certain areas.
Our Outmax solution is integrated with many leading platforms to enable clients to optimize performance outcomes, while at the same time
we compete with certain platform-based and independent solutions. Similarly, although we compete to some extent with major demand-side
platforms (DSPs), our technology is integrated with leading DSPs to facilitate activation of Perion’s advanced solutions and high-impact
campaigns. In our search business, search engines independently generate organic traffic outside of our publisher network while also contributing
to our search monetization activities.
We also face competition from specialized point solutions in discrete
segments of our business. For example, in digital out-of-home (DOOH), we compete with T-Mobile’s Vistar platform and other DOOH-focused
providers. In YouTube optimization, we compete with companies such as Channel Factory and other targeted optimization providers. Within
our search business, beyond traditional search engines, we face competition from alternative discovery platforms that enable users to
access content outside conventional search environments. These include companies such as IAC and System1, as well as emerging platforms
leveraging AI-driven discovery tools, browser integrations, contextual search models, and other alternative access points.
As we introduce new solutions and expand our capabilities, and
as our competitors do the same, we expect competitive pressures to intensify. Many of our current and potential competitors have significantly
greater financial, research and development, data analytics, infrastructure, manufacturing, and sales and marketing resources than we
do. These competitors may use their superior resources to acquire complementary businesses, enhance brand recognition, expand market share,
accelerate innovation, and develop new technologies, systems, products, or features that compete directly or indirectly with our solutions
and search services. As a result, demand for our solutions, products, and services could be adversely affected, regardless of whether
competing offerings are equivalent or superior.
With respect to our supply-side technologies, through which we
provide monetization and yield optimization solutions to publishers, we compete with a range of private companies, including Assertive
Yield and Aditude, as well as other specialized providers. In addition, we compete with large supply-side platforms (SSPs) that, while
often serving as integration partners within the broader ecosystem, also offer competing monetization, optimization, and infrastructure
solutions. These dual relationships create a dynamic in which certain market participants act simultaneously as collaborators and direct
competitors.
In addition, the introduction and rapid adoption of generative
AI platforms, including ChatGPT, Perplexity, Copilot by Microsoft, Gemini by Google, Claude by Anthropic, and Grok by X, may lead to the
development of new advertising, content discovery, and media activation tools that increase competition within the advertising technology
industry. These technologies may lower barriers to entry, alter user behavior, shift traffic patterns, and disrupt traditional monetization
models, which could intensify competitive dynamics across our markets.
50
Intellectual Property
Our proprietary technology, including our platform, products and related algorithms, are
critical to our operations and competitive advantage. We strive to protect our intellectual property rights by relying on confidentiality
and invention assignment agreements, trade secret, trademark, copyright, and patent laws in the United States and other countries as well
as technical measures to establish and protect our intellectual property. Our portfolio includes registered trademarks and domain names
in various countries as well as approximately 8 patents registered mainly in the U.S.
Some components of our software products were developed solely
by us. We license certain components of our software from third parties. We believe that the components we license are not material to
the overall performance of our software and may be replaced without significant difficulty. We enter into licensing arrangements with
third parties for the use of software components, graphic, sound and multimedia content integrated into our products.
Our employees and consultants are required to execute confidentiality
covenants in connection with their employment and consulting relationships with us. These agreements generally contain assignment and
waiver provisions relating to the employee’s or consultant’s rights in respect of inventions.
Intellectual property laws, together with our efforts to protect
our proprietary rights, provide only limited protection, and any of our intellectual property rights may be challenged, invalidated, circumvented,
infringed or misappropriated.
For more information, see the Risk Factor titled – “Our
proprietary information, technology and other intellectual property may not be adequately protected and thus our intellectual property
may be unlawfully copied by or disclosed to other third parties.”
Government Regulation
Our business is conducted through the internet and therefore, among
other things, we are subject to the laws and regulations that apply to e-commerce and online businesses around the world. These laws and
regulations have been enacted and still evolving in the United States, Europe, Israel, Canada, and elsewhere and may impede the growth
of the internet and AdTech or otherwise adversely impact our services. These laws and regulations cover data protection, data privacy,
cybersecurity, e-commerce, content, use of “cookies”, pricing, advertising, distribution of “spam”, copyright
and other intellectual property, use of AI systems and related technologies, libel, marketing, distribution of products, protection of
minors, consumer protection, accessibility, taxation, online payment services and more. Many areas of laws and regulations affecting the
internet and AdTech remain largely unsettled, even in areas where there has been some legislative or regulatory action.
In many cases, when we deliver an advertisement we are able to
collect certain data, including personal data, about the content and placement of the ad, the relevancy of the ad to a user and the interaction
of the user with the ad, such as whether the user viewed or clicked on the ad or watched a video. As we collect and aggregate data provided
by billions of ad impressions and third-party providers, we analyze the data in order to measure and optimize the placement and delivery
of our advertising inventory and provide cross-channel advertising capabilities. Our ability to collect, use, maintain and otherwise process
such data is crucial.
We are subject to the data privacy laws and regulations of various
jurisdictions, including the GDPR, U.S. state privacy laws such as the CCPA, the Israeli Privacy Law, the Canadian Privacy Law and the
ePD. These laws and regulations generally impose stringent requirements such as transparency and user consent requirements and allow data
subjects to request that we discontinue using certain data. In addition, some countries are considering or already enacted legislation
requiring local storage and processing of data. Certain U.S. federal laws restrict online service providers’ collection of user
information on minors and certain states in the U.S. have adopted “data brokers” laws and regulations imposing a centralized
deletion mechanism, such as California’s Delete Request and Opt-out Platform (DROP) that will enable consumers to submit a single
request triggering deletion obligations across all registered data brokers. This could affect data made available to us by our data brokers.
Such laws and regulations further impose certain requirements on data brokers, including, without limitation, requirements relating to
registration, consent, disclosure, and/or cybersecurity as well as restrictions on the collection or transfer of certain data sets considered
to be sensitive such as precise geolocation data. Non-compliance with such laws could result in enforcement actions, significant fines
and reputational harm.
We voluntarily participate in industry self-regulatory bodies such
as the IAB TCF, IAB GPP, NAI, IAB, DAA and the DAAC, which promulgate best practices or codes of conduct addressing, among other things,
data protection, data privacy, cybersecurity and the delivery of digital advertising. In light of court rulings relating to the TCF, there
may be some ambiguity around the lawfulness of informed consent obtained via the TCF in the EEA and UK.
We adopted privacy policies and practices to address privacy implications
on our various business activities. As part of our compliance program, we regularly review our privacy policies and practices in light
of evolving regulation.
51
An increasing number of U.S. states, such as California, Virginia,
Connecticut, Colorado, Texas, New York and Washington, adopted and additional states are planning to adopt, statutes concerning data protection
and/or AI regulations which could affect us. This has led to an increasingly varied and complex regulatory landscape and could result
in materially increased costs. The interpretation of data protection, data privacy and cybersecurity laws and regulations, and their application
to our business may, in certain cases, be interpreted and applied in conflicting and more restrictive ways and in a manner that is not
consistent with our current data protection, data privacy and cybersecurity practices. The enactment of new proposed laws, and the interpretation
of existing laws, adds complexity to our operations, and could result in material costs, and may restrict the growth and profitability
of our business.
For more information, see the Risk Factor titled –
“Our business depends on our ability to collect, use, maintain and otherwise process data, including personal data, to help our
clients deliver advertisements and to disclose data relating to the performance of advertisements. Any limitation imposed on our collection,
use, maintenance or other processing of this data could significantly diminish the value of our solution and cause us to lose sellers,
buyers, and revenue. Regulations, legislation or self-regulation relating to data protection, data privacy, cybersecurity, AI, e-commerce
and internet advertising and uncertainties regarding the application or interpretation of existing or newly adopted laws and regulations
threaten our ability to collect, use, maintain and otherwise process this data, could harm our business and subject us to significant
costs and legal liability for non-compliance.”
Recent Acquisitions
Acquisition of Hivestack
On December 11, 2023, Perion announced it has completed the acquisition
of Hivestack Technologies Inc., a global innovative full-stack programmatic DOOH company. The terms of the transaction included
US $100 million in cash paid at closing and a 3-year employee retention and performance-based payment plan of up to US $25 million.
DOOH advertising transforms ordinary public spaces into dynamic
experiences, engaging audiences with eye-catching, personalized content in real-time. It harnesses cutting-edge technologies to target,
deliver and measure immersive ads that connect brands with people on the go.
Acquisition of Greenbids
On May 13, 2025, Perion announced it has completed the acquisition
of Greenbids SAS, an innovative AI platform that creates custom algorithms for campaign-level optimization across walled garden platforms
such as YouTube, Facebook and Instagram, as well as other leading DSPs such as Google DV360 and The Trade Desk. The terms of the transaction
included US $27.5 million in cash paid at closing, a three-year employee retention of US $15 million in cash and equity, and two-year
performance-based payment of up to US $22.5 million.
C. ORGANIZATIONAL
STRUCTURE
The legal name of our Company is Perion Network Ltd. and we are
organized under the laws of the State of Israel.
The following table sets forth our significant subsidiaries, all
of which are 100% owned directly or indirectly by Perion Network Ltd.:
|
Name
of Subsidiary |
Place
of Incorporation |
|
Codefuel Ltd. |
Israel |
|
IncrediMail, Inc. |
Delaware |
|
Intercept Interactive, Inc. |
New York |
|
Vidazoo Ltd. |
Israel |
|
Hivestack Technologies Inc. |
Canada |
|
Perion SAS |
France |
52
| D. |
PROPERTY, PLANTS AND EQUIPMENT |
Our headquarters are located in Tel Aviv, Israel. As of December
31, 2025, we lease approximately 32,328 square feet, excluding office space which we currently sublease. The lease expires in April 2029,
with an option to extend for two additional three-year and two-year periods, unless we issue a 270-day prior written notice to the contrary
at our sole discretion. Annual net cost is approximately $1.2 million.
Our principal offices in the United States are located at the World
Trade Center (WTC) in New York. As of December 31, 2025, we lease approximately 9,500 square feet, excluding office space which we currently
sublease. The lease expires in June 2026 and the annual net cost is approximately $0.7 million.
Our principal offices in Canada are located in Montreal,
Canada. As of December 31, 2025, we lease approximately 4,000 square feet. The lease expires in September 2026 with an option to extend
for one additional two-year period. Annual net cost is approximately $0.1 million. This excludes co-working spaces we currently rent on
short-term basis.
ITEM 4A. UNRESOLVED
STAFF COMMENTS
None.
ITEM 5. OPERATING
AND FINANCIAL REVIEW AND PROSPECTS
The following discussion of our financial condition
and results of operations should be read in conjunction with our consolidated financial statements. In addition to historical financial
information, the following discussion and analysis contains forward looking statements within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act, including, without limitation, statements regarding the Company’s expectations, beliefs,
intentions, or future strategies that are signified by the words “expects,” “anticipates,” ”intends,”
“believes,” or similar language. These forward-looking statements involve risks, uncertainties, and assumptions. Our actual results
and timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of many factors,
including those discussed under Item 3.D. “Risk Factors” and elsewhere in this annual report.
Comparison of Years Ended December 31, 2024
and 2023 is incorporated by reference to the Company’s Annual Report on Form 20-F filed with the Securities and Exchange Commission
on March 25, 2025.
Company Overview
Perion is an advanced technology leader redefining advertising through AI-native infrastructure,
delivering real-time media execution across CTV, digital out-of-home, commerce and retail media, social and digital environments. Powered
by Outmax, the company’s proprietary AI engine, Perion helps brands, agencies, and retailers optimize spend and performance, driving
measurable outcomes at scale.
Our headquarters are located in Israel and our primary research
and development facilities are located in Israel, Canada and across Europe. Our primary sales offices are located in the United States.
We also have several sales and representative offices located in North America, APAC, and EMEA.
| A. |
OPERATING RESULTS |
Components of Statements of Operations
The following describes the nature of our principal items of income
and expense:
Revenue
We generate our revenue primarily from two major sources, Advertising Solutions and
Search Advertising.
Advertising Solutions –
We generate revenue from Advertising Solutions by delivering outcome-driven campaigns across multiple digital channels, including standard
and high-impact display, social, CTV, digital audio and DOOH, primarily through our unified Perion One platform, an AI-native execution
infrastructure to advertisers, agencies, and publishers. In addition, we generate revenue by providing advanced monetization solutions
to Web and CTV publishers and DOOH media owners such as Supply Optimization, Ad Servers, SSP, Header Bidder and Media Player. Our diverse,
technology-focused multi-channel set of solutions is designed to drive consumer engagement and high ROI for advertisers through high-impact
ad formats.
Search Advertising –
We generate Search Advertising revenue from service agreements with our search partners. This revenue is primarily derived from transaction
volume-based fees earned by making our applications and intent-based search solutions available to online publishers and app developers
on a revenue-share basis relative to the revenue generated by our search partners.
Geographic Breakdown of
Revenue
For the distribution of our total revenue, by geographic areas,
see Note 18 to our consolidated financial statements.
53
Cost of Revenue
Cost of revenue consists primarily of expenses associated with
the operation of our server hosting, data verification and targeting, campaign creative, labor, as well as customer support.
Traffic Acquisition Costs and Media Buy (“TAC”)
Our traffic acquisition costs and media buy consist primarily of
the costs of advertising inventory incurred to deliver ads, payments to publishers and developers who distribute our search properties
together with their products, and the cost of distributing our own products. Traffic acquisition costs are primarily based on revenue
share agreements with our traffic sources, and the media buy costs are primarily based on Cost Per Click (“CPC”) and Cost
Per Mille (“CPM”).
Research and Development Expenses (“R&D”)
Our research and development expenses consist primarily of salaries
and other personnel-related expenses, allocated facilities costs, subcontractors, and consulting fees. Research and development
costs are generally expensed as incurred and recorded in the consolidated statements of income (loss), except to the extent that such
costs are associated with internal-use software that qualifies for capitalization.
Selling and Marketing Expenses (“S&M”)
Our selling and marketing expenses consist primarily of salaries
and other personnel-related expenses, allocated facilities costs, as well as other outsourced selling and marketing activities.
General and Administrative Expenses (“G&A”)
Our general and administrative expenses consist primarily of salaries
and other personnel-related expenses, allocated facilities costs, professional fees, and other general corporate expenses.
Change in fair value of contingent consideration
Our change in fair value of contingent consideration expenses consist
of fair value adjustments of contingent consideration liabilities related to acquisitions.
Depreciation and Amortization
Depreciation and amortization consist primarily of depreciation
of our property and equipment and the amortization of our intangible assets as a result of our acquisitions.
Restructuring costs and other charges
Restructuring costs and other charges consist of the expenses incurred
by the company to adjust its operations and increase efficiency.
Financial Income, Net
Financial income, net consists mainly of interest income, foreign
currency exchange gains or losses and foreign exchange forward transactions expenses. Interest income consists of interest earned on our
cash, cash equivalents, short-term bank deposits and marketable securities. We expect interest income to vary depending on our average
investment balances and market interest rates during each reporting period. Foreign currency exchange changes reflect gains or losses
related to transactions denominated in currencies other than the U.S. dollar.
Income Tax Expense
A significant portion of our income is taxed in Israel and, as
a result of previous acquisitions, in the United States and Canada. The standard corporate tax rate in Israel was 23% in 2024 and 2025.
For our Israeli operations, starting in 2017 and through 2025, part of our subsidiaries elected to implement the “Preferred
Technological Enterprise” benefits pursuant to an amendment to the taxation laws which went into effect in 2017, under which a tax
rate of 12% is applied to a portion of our income which qualifies for the benefits. Any other income which does not qualify for special
benefits is subject to the standard corporate tax rate. We continue to utilize accumulated losses and other tax attributes in the United
States and Canada. The federal statutory income tax rate in the United States has been 21% in 2024 and 2025. The federal statutory income
tax rate in Canada has been 15% (as well as a provincial tax rate of 11.5% in Quebec) in 2024 and 2025. Other subsidiaries are taxed globally
according to the tax laws in their respective countries of residence.
54
Comparison of Period to Period Results of Operations:
The following table sets forth our results of operations in dollars
amounts and as a percentage of revenue for the periods indicated (in thousands of U.S. dollars):
|
Year ended December 31, |
||||||||||||||||
|
2024 |
2025 |
|||||||||||||||
|
Amount |
% of Revenue |
Amount |
% of Revenue |
|||||||||||||
|
Revenue: |
||||||||||||||||
|
Advertising Solutions |
$ |
335,550 |
67 |
% |
$ |
348,930 |
79 |
% | ||||||||
|
Search Advertising |
162,736 |
33 |
90,997 |
21 |
||||||||||||
|
|
||||||||||||||||
|
Total Revenue |
498,286 |
100 |
439,927 |
100 |
||||||||||||
|
|
||||||||||||||||
|
Costs and Expenses: |
||||||||||||||||
|
Cost of revenue |
46,643 |
10 |
51,800 |
12 |
||||||||||||
|
Traffic acquisition costs and media buy |
285,962 |
57 |
236,484 |
54 |
||||||||||||
|
Research and development |
36,655 |
8 |
34,653 |
8 |
||||||||||||
|
Selling and marketing |
68,497 |
14 |
76,491 |
17 |
||||||||||||
|
General and administrative |
38,697 |
8 |
36,402 |
8 |
||||||||||||
|
Change in fair value of contingent consideration |
1,541 |
0 |
- |
0 |
||||||||||||
|
Depreciation and amortization |
16,434 |
3 |
17,677 |
4 |
||||||||||||
|
Restructuring costs and other charges |
6,895 |
1 |
1,322 |
0 |
||||||||||||
|
Total Costs and Expenses |
501,324 |
101 |
454,829 |
103 |
||||||||||||
|
|
||||||||||||||||
|
Loss from Operations |
(3,038 |
) |
(1 |
) |
(14,902 |
) |
(3 |
) | ||||||||
|
Financial income, net |
18,520 |
4 |
9,928 |
2 |
||||||||||||
|
|
||||||||||||||||
|
Income (loss) before Taxes on Income
|
15,482 |
3 |
(4,974 |
) |
(1 |
) | ||||||||||
|
Taxes on income |
2,868 |
1 |
2,959 |
1 |
||||||||||||
|
|
||||||||||||||||
|
Net Income (loss) |
$ |
12,614 |
3 |
% |
$ |
(7,933 |
) |
(2 |
)% | |||||||
55
Year Ended December 31,
2025 Compared to December 31, 2024
Revenue. Revenue decreased
by 12% from $498.3 million in 2024 to $439.9 million in 2025.
Advertising Solutions revenue. Advertising Solutions
revenue increased by 4%, from $335.6 million in 2024 to $348.9 million in 2025, accounting for 79% of revenue in 2025. This increase was
primarily due to a 42% increase in our CTV channel and a 36% increase in Digital Out of Home revenue. The increase in Advertising Solutions
revenue was partially offset by a 13% decline in Web revenue, mainly due to several discontinued web activities at the end of 2024.
Search Advertising revenue. Search Advertising
revenue decreased by 44%, from $162.7 million in 2024 to $91.0 million in 2025, accounting for 21% of revenue in 2025. The decrease was
primarily due to decrease in average daily searches and the number of publishers we work with following the changes implemented by Microsoft
Bing during 2024.
Cost of revenue. Cost of revenue increased by
11%, from $46.6 million, or 10% of revenue in 2024, to $51.8 million, or 12% of revenue in 2025. The increase in cost of revenue
was primarily as a result of higher direct costs supporting campaign execution and targeting, higher hosting costs, and increased data
verification expenses.
Traffic acquisition costs and
media buy. TAC amounted to $236.5 million, or 54% of revenue, in 2025, compared with $286.0 million, or 57% of revenue, in 2024.
The margin expansion was primarily due to changes in the product mix, focusing on more profitable solutions.
Research and development expenses.
R&D decreased by 5%, from $36.7 million, or 8% of revenue in 2024 to $34.7 million, or 8% of revenue in 2025. The decrease was primarily
due to lower payroll and consulting costs driven by Perion One unification and higher software capitalization in 2025.
Selling and marketing expenses.
S&M expenses increased by 12%, from $68.5 million, or 14% of revenue in 2024 to $76.5 million, or 17% of revenue in 2025. The
increase was primarily a result of increased marketing expenses to support our go-to-market strategy following the Perion One unification,
as well as an increase in our stock-based compensation and higher employee-related costs and sales commissions.
General and administrative expenses.
G&A decreased by 6%, from $38.7 million, or 8% of revenue in 2024 to $36.4 million, or 8% of revenue in 2025. The decrease was primarily
due to a decrease in our rent and utilities as well as a decrease in consulting and outsource services.
Change in fair value of contingent
consideration. Changes in fair value of contingent consideration in 2024 include a $1.5 million fair-value adjustment of the contingent
consideration payable with respect to a previous acquisition.
Depreciation and amortization.
Depreciation and amortization expenses increased by 8%, from $16.4 million in 2024 to $17.7 million in 2025. The increase was primarily
attributable to the amortization of the acquired intangible assets derived from the Greenbids acquisition in May 2025.
Restructuring costs and other
charges. Restructuring costs and other charges in 2024 and 2025 amounted to $6.9 million and $1.3 million, respectively, related
to our restructuring plan which was implemented during 2024 and completed in 2025.
Financial Income, Net. Financial
income, net decreased by $8.6 million from $18.5 million in 2024 to $9.9 million in 2025. The decrease was primarily due to lower interest
income earned on reduced cash balances following our share repurchase program and the Greenbids acquisition, as well as unfavorable exchange
rate fluctuations.
Taxes on income. Taxes
on income increased from $2.9 million in 2024 to $3.0 million in 2025. Despite the loss before income taxes in 2025, the Company
recognized income tax expense primarily due to permanent differences related to stock-based compensation.
| B. |
LIQUIDITY AND CAPITAL RESOURCES |
To date, we have financed our general capital expenditures with
cash generated from operations, debt and equity offerings. To the extent we acquire new businesses, these acquisitions may be financed
by any of, or a combination of, current cash on the balance sheet, cash generated from operations, debt or equity issuances.
As of December 31, 2025, we had $312.9 million in cash, cash equivalents,
short-term deposits and marketable securities, compared to $373.3 million at December 31, 2024. The $60.4 million decrease is primarily
a result of $26.6 million net cash paid in connection with acquisition, net of cash acquired, and $71.2 million paid for the repurchase
of shares, offset by $41.9 million net cash provided by operating activities. We believe that our current working capital and cash flow
from operation, in addition to proceeds from our 2021 public offerings, are sufficient to meet our operating cash requirements for at
least the next twelve months. Our cash requirements have principally been for working capital, capital expenditures and acquisitions.
56
The following table presents the major components of net cash flows
for the periods presented (in thousands of U.S. dollars):
|
|
Year ended December 31, |
|||||||
|
|
2024 |
2025 |
||||||
|
Net cash provided by operating activities |
$ |
6,939 |
$ |
41,927 |
||||
|
Net cash provided by (used in) investing activities |
62,602 |
(37,397 |
) | |||||
|
Net cash used in financing activities |
(100,913 |
) |
(71,052 |
) | ||||
|
Effect of exchange rate changes on cash and cash equivalents |
(214 |
) |
333 |
|||||
|
Net decrease in cash and cash equivalents and restricted cash |
$ |
(31,586 |
) |
$ |
(66,189 |
) | ||
Net cash provided by operating activities
In 2025, our operating activities provided cash in the amount of
$41.9 million, primarily as result of stock-based compensation expenses of $31.1 million, depreciation and amortization of $17.7 million,
offset by a net loss in the amount of $7.9 million.
In 2024, our operating activities provided cash in the amount of
$6.9 million, primarily as result of income in the amount of $12.6 million, increased by stock-based compensation expenses of $27.2 million,
depreciation and amortization of $16.4 million and restructuring costs of $6.9 million, offset by a net change of $49.2 million in operating
assets and liabilities and $7.3 million change in payment obligation related to acquisitions.
Net cash provided by (used in) investing activities
In 2025, we used in our investing activities $37.4 million cash,
primarily due to $26.6 million cash paid for the acquisition of Greenbids, net of cash acquired, and $11.7 million investment in short-term
deposits, net.
In 2024, our investing activities provided cash in the amount of
$62.6 million cash, primarily due to $68.1 million proceeds from short-term deposits, net, offset by $6.8 million purchase of property
plant and equipment.
Net cash used in financing activities
In 2025, we used in our financing activities $71.1 million, primarily a result of $71.2
million paid for the repurchase of shares.
In 2024, we used in our financing activities $100.9 million, primarily a result of $54.5
million net cash with connection to previous acquisition contingent consideration, and $46.9 million paid for the repurchase of shares.
Off Balance
Sheet Arrangements
We do not have off-balance sheet arrangements (as such term is
defined by applicable SEC regulations) that have or are reasonably likely to have a current or future effect on our financial condition,
changes in financial conditions, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources that
are material to investors.
| C. |
RESEARCH, DEVELOPMENT, PATENTS AND LICENSES, ETC. |
We conduct our research and development activities primarily in
Israel, Canada and Europe. As of December 31, 2025, our research and development department included 128 employees and the services of
additional 7 contractors through third-party service providers. Research and development expenses were $36.7 million and $34.7 million
in the years ended December 31, 2024 and 2025, respectively. We regard technology and innovation as core drivers of our culture and operations
and are essential for our growth. Hence, we invest substantial resources in research and development, both in-house and through sub-contractors
and collaborations with third parties, to develop new products and platform solutions, applications and services, improve our core technologies
and enhance our technology infrastructure and capabilities. Our advanced technological solutions, which are applied throughout the consumer
journey and marketing funnel, include capabilities that enabled us to achieve above industry average margins.
In 2025, our efforts were focused on adapting, extending and maintaining
compatibility with the ever-changing business landscapes and automation of our platform and operating systems, including the preparation
for our strategy aimed to unify all businesses units, brands and technologies under the Perion brand and into one advanced platform named
“Perion One”, which we announced on February 3, 2025. Within the Perion One initiative, we have also significantly invested
in a state-of-the-art foundational AI infrastructure to power our various agentic initiatives.
For a discussion of our intellectual property and how we protect
it, see “Business Overview—Intellectual Property” under Item 4.B. above.
57
| D. |
TREND INFORMATION |
Industry trends are expected to affect our revenue, income from
continuing operations, profitability and liquidity or capital resources:
The following Industry trends are expected to affect our revenue,
income from continuing operations, profitability and liquidity or capital resources. To successfully navigate these currents, our strategy
bridges broader industry realities with specific operational pivots designed to capture market share and drive sustainable growth.
Macroeconomic Sensitivity.
Overall digital advertising spend remains highly sensitive to broader macroeconomic health, inflation, consumer confidence, and interest
rates. In periods of economic uncertainty, advertisers frequently reassess media budgets and exercise heightened scrutiny over their investments.
Macroeconomic pressure actively drives the reallocation of budgets toward performance-driven, measurable formats that ensure high engagement
and tangible Return on Ad Spend (ROAS).
The Transition to AI-Native Execution.
The advertising technology industry is rapidly moving past basic workflow automation into an era of AI-driven campaign execution. Generative
AI and predictive algorithms have shifted from theoretical features to core operational drivers that increase real-time bidding efficiency,
automate dynamic creative generation, and optimize advertiser ROI. For Perion, AI is no longer just a feature, it is a structural advantage
embedded directly into our infrastructure. Advertisers are increasingly adopting our proprietary AI agent, Outmax, to optimize yield,
drive measurable outcomes, and manage cross-channel complexity under live delivery constraints. By automating the most labor-intensive
aspects of campaign management, this transition to agentic AI is expected to bring significant operating leverage, drive higher productivity
and serve as a fundamental catalyst for our future margin expansion.
Advertiser Demand for Platform
Consolidation (Omnichannel). Advertisers are experiencing "point-solution fatigue" and are actively seeking unified platforms that
offer a full-funnel, channel-agnostic view of the consumer. Navigating a fragmented ecosystem of screens and formats has created significant
media waste, leading brands to demand synchronized execution across Connected TV (CTV), Retail Media, and Digital Out of Home (DOOH) rather
than operating in disconnected silos. We positioned the strategic unification of our assets into the Perion One platform as a direct response
to this trend. By providing a centralized execution infrastructure, Perion One allows brands and agencies to consolidate their vendor
relationships, reduce operational friction, and execute holistic, data-driven campaigns across the digital landscape.
The Shift from Linear TV to Connected
TV (CTV). The advertising industry is experiencing an ongoing, structural shift in viewership from traditional broadcast and cable
linear TV to streaming platforms. While traditional linear TV still commands a significant share of ad spending, budgets are rapidly being
reallocated to CTV as advertisers seek digital, data-driven, and measurable video formats. According to eMarketer, by 2028, U.S. CTV ad
spending is projected to surpass linear TV ad spending for the first time. Perion is actively capitalizing on this trend by shifting CTV
from a top-of-funnel brand awareness channel into an outcome-driven environment. Driven by the launch of our Performance CTV solution,
which links premium video investments to tangible business KPIs, our CTV revenue increased by 42% year-over-year in 2025, significantly
outpacing broader market growth.
The Evolution and Programmatic
Automation of Digital Out-of-Home (DOOH). The Out-of-Home advertising sector is undergoing a rapid transition from traditional
static billboards to dynamic, digital formats driven by advanced programmatic technology (pDOOH). This evolution enables advertisers to
automate the buying, placement, and real-time optimization of out-of-home inventory based on dynamic data inputs. Global DOOH ad spending
is projected to increase from $17.2 billion in 2024 to $26.3 billion by 2030. To capture this expanding total addressable market, Perion
offers a full-stack DOOH technology ecosystem. In 2025, we launched the Perion DOOH Player, a hardware-agnostic solution that unifies
ad delivery and yield optimization for media owners, driving operational scale and predictable recurring revenue. Reflecting our strong
competitive positioning in this space, our DOOH revenue grew 36% year-over-year in 2025.
The Growth of Commerce and Retail
Media Retail Media continues to be one of the fastest-growing segments in digital advertising, as marketers increasingly prioritize
purchase-based, first-party data to drive highly measurable Return on Ad Spend (ROAS). The sector is rapidly expanding beyond retailer-owned
websites to distribute personalized offers across off-site digital channels, including CTV and DOOH. We address this highly durable trend
by integrating real-world commerce data directly into our programmatic execution infrastructure. In 2025, we forged strategic partnerships
with major retail and commerce platforms, including Albertsons Media Collective, Amazon DSP, and Walmart Connect. These integrations allow
advertisers to activate premium first-party data across Perion's high-impact display and DOOH formats, contributing to a 36% year-over-year
revenue increase in our Retail Media vertical for 2025.
The Shift of Budgets to High-Impact
Channels. There is an accelerated, structural shift of consumer attention and retail marketing budgets from traditional media to
high-impact digital environments. This trend is directly reflected in the sustained, market-outpacing growth of our core engines; for
the full year 2025, our CTV, DOOH, and Retail Media revenues grew by 42%, 36%, and 36% year-over-year, respectively. Furthermore, the
integration of real-world commerce and purchase data into programmatic buying is a highly durable trend driving the expansion of the Retail
Media vertical. Through strategic integrations with leading platforms such as Amazon DSP and Albertsons Media Collective, we are empowering
marketers to activate premium, first-party commerce data across our high-impact display and DOOH formats, firmly establishing Perion's
presence in high-intent media environments.
58
Supply Path Optimization (SPO)
and Ecosystem Efficiency. Brands and agencies are increasingly consolidating their advertising spend into fewer, larger, and more
transparent technology partners. This trend towards Supply Path Optimization (SPO) is driven by the desire to shorten the supply chain,
eliminate intermediary friction, and secure highly efficient media buys. In response, we launched SODA (Supply Optimization & Demand
Amplification), which introduces our SPO 2.0 solution. SODA uses an AI-powered smart mediation layer to intelligently evaluate incoming
bid requests, selecting only the most efficient paths to optimize yield for publishers while reducing waste for advertisers.
The Evolution of Search Advertising
Dynamics. The search advertising landscape is undergoing a significant transformation due to evolving consumer discovery behaviors,
accelerated by generative AI and conversational interfaces, and structural shifts in legacy search partnerships. These AI-based solutions
provide direct answers and conversational interfaces that significantly reduce the traditional search volume and web searches by users,
consequently, causing a decline in page views and clicks on ads. We expect this trend to accelerate as AI usage deepens.
In 2024 and 2025, our Search Advertising revenue experienced a
decline due to pricing adjustments and marketplace exclusions implemented by Microsoft Bing. Following the expiration of our legacy Bing
agreement on December 31, 2024, our search business operated under a tail period in 2025 and is transitioning to operate primarily with
Yahoo starting in 2026.
Privacy, Identity Deprecation,
and Cookieless Solutions. The digital advertising industry continues to navigate the complex evolution of data privacy. While Google
reversed its decision to fully deprecate third-party cookies on Chrome in favor of a user-choice model, the eventual transition away from
legacy tracking methods remains inevitable due to strict regulatory enforcement in the U.S. and Europe.
Advertisers require robust, identity-free targeting frameworks
that respect consumer privacy while maintaining campaign performance. We proactively address this ongoing trend through SORT®, our
proprietary AI-driven audience segmentation technology. By utilizing real-time data signals rather than cookies or personally identifiable
information, SORT® allows advertisers to safely and effectively identify high-intent consumer groups, designed to ensure compliance
and resilient performance in a privacy-first ecosystem
For more information on uncertainties, demands, commitments or
events that are reasonably likely to have a material effect on our business, see Item 3.D “Key Information—Risk Factors.”
For additional trend information, see the discussion in Item 5.A.
“Operating and Financial Review and Prospects—Operating Results.”
E. CRITICAL
ACCOUNTING ESTIMATES
We have provided a summary of our significant accounting policies,
estimates and judgments in Note 2 to our consolidated financial statements, which are included elsewhere in this Annual Report. The following
critical accounting discussion pertains to accounting policies management believes are most critical to the portrayal of our historical
financial condition and results of operations and that require significant, difficult, subjective or complex judgments. Other companies
in similar businesses may use different estimation policies and methodologies, which may impact the comparability of our financial condition,
results of operations and cash flows to those of other companies.
Revenue recognition
The Company applies the provisions of Accounting Standards Codification
606, Revenue from Contracts with Customers (“ASC 606” or “Topic 606”). The Company applies the practical
expedient for incremental costs of obtaining contracts when the amortization period is less than one year.
The Company evaluates whether Advertising Solutions Revenue
and Search Advertising Revenue should be presented on a gross basis, which is the amount that a customer pays for the service, or on a
net basis, which is the amount of the customer payment less amounts the Company pays to publishers. In making that evaluation, the Company
considers whether it controls the promised good or service before transferring that good or service to the customer. The Company considers
indicators such as whether the Company is the primary obligor in the arrangement and assumes risks and rewards as a principal or an agent,
whether it changes the products or performs part of the service, whether the Company has discretion in establishing prices and whether
it controls the underlying advertising space. The evaluation of these factors is subject to significant judgment and subjectivity, and
is based on management assessment of whether the Company is acting as the principal or an agent in the transaction. The Company
has determined that in certain arrangements it acts as principal because the Company controls the specified good or service before it
is transferred to a customer, as such revenue is recorded on a gross basis, while in others it does not and revenue is recorded on a net
basis.
Revenue is recognized net of any taxes collected from customers which are subsequently
remitted to governmental entities.
Generally, in cases in which the Company controls the specified good or service before
it is transferred to a customer, revenue is recorded on a gross basis.
59
Stock-Based Compensation
The Company accounts for share-based compensation under ASC 718,
“Compensation - Stock Compensation”, which requires the measurement and recognition of compensation expense based on estimated
fair values for all share-based payment awards made to employees, contractors, and directors. ASC 718 requires companies to estimate
the fair value of equity-based awards on the date of grant, using an option-pricing model. The value of the portion of the award that
is ultimately expected to vest is recognized as an expense over the requisite service periods in the Company's consolidated statement
of income. The Company estimates forfeitures at the time of grant, and revised if necessary in subsequent periods, if actual forfeitures
differ from those estimates.
The Company recognizes compensation expenses for the value
of its awards, which have graded vesting based on service conditions, using the straight-line method, over the requisite service period
of each of the awards, net of estimated forfeitures. Estimated forfeitures are based on actual historical pre-vesting forfeitures. For
performance-based share units, the Company recognizes compensation expenses for the value of such awards, if and when the Company concludes
that it is probable that a performance condition will be achieved based on the accelerated attribution method over the requisite service
period. The Company reassess the probability of vesting at each reporting period for awards with performance conditions and adjust compensation
cost based on its probability assessment.
Total stock-based compensation expense recorded during 2025 was $31.1 million,
of which $3.3 million was included in cost of revenue, $5.4 million in research and development expenses, $12.6 million
in selling and marketing expenses, and $9.8 million in general and administrative expenses.
As of December 31, 2025, the maximum total compensation cost related
to options and RSU’s, granted to employees and directors not yet recognized amounted to $17.8 million. This cost is expected to
be recognized over a weighted average period of 1.46 years.
Taxes on Income
We are subject to income taxes primarily in Israel and the United
States. Significant judgment is required in evaluating our uncertain tax positions and determining our provision for income taxes. Based
on the guidance in ASC 740 “Income Taxes”, we use a two-step approach to recognizing and measuring uncertain tax positions.
The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is
more likely than not that the position will be sustained upon examination by the relevant tax authority, including resolution of related
appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely
of being realized upon settlement.
Although we believe we have adequately reserved for our uncertain
tax positions, no assurance can be given that the final tax outcome of these matters will not be different. We adjust these reserves in
light of changing facts and circumstances, such as the closing of a tax examination, the refinement of an estimate or changes in tax laws.
To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will impact the provision
for income taxes in the period in which such determination is made. The provision for income taxes includes the impact of reserve provisions
and changes to reserves that are considered appropriate.
Accounting for tax positions requires judgments, including estimating
reserves for potential uncertainties. We also assess our ability to utilize tax attributes, including those in the form of carry forwards
for which the benefits have already been reflected in the financial statements. We record valuation allowances for deferred tax assets
that we believe are not more likely than not to be realized in future periods. While we believe the resulting tax balances as of December
31, 2025 are appropriately accounted for, the ultimate outcome of such matters could result in favorable or unfavorable adjustments to
our consolidated financial statements and such adjustments could be material. See Note 15 of the Financial Statements for further information
regarding income taxes. We have filed or are in the process of filing local and foreign tax returns that are subject to audit by the respective
tax authorities. The amount of income tax we pay is subject to ongoing audits by the tax authorities, which often result in proposed assessments.
We believe that we adequately provided for any reasonably foreseeable outcomes related to tax audits and settlement. However, our future
results may include favorable or unfavorable adjustments to our estimated tax liabilities in the period the assessments are made or resolved,
audits are closed or when statutes of limitation on potential assessments expire.
Goodwill and Other Intangible Assets
Goodwill and certain other purchased intangible assets have been
recorded in our financial statements as a result of acquisitions. In business combinations, in accordance with ASC Topic 805, “Business
Combination,” we allocate the fair value of purchase consideration to the tangible assets acquired, liabilities assumed, and intangible
assets acquired based on their estimated fair values. Such valuations require us to make significant estimates, assumptions, and judgments,
especially with respect to intangible assets. The estimated fair values and useful lives of identifiable intangible assets are based on
many factors, including estimates and assumptions of future operating performance and cash flows of the acquired business, market conditions,
technological developments and specific characteristics of the identified intangible assets. The allocation of the consideration transferred
in certain cases may be subject to revision based on the final determination of fair values during the measurement period, which may be
up to one year from the acquisition date.
60
Goodwill represents excess of the purchase price in a business
combination over the fair value of identifiable tangible and intangible assets acquired. Goodwill is not amortized, but rather is subject
to an impairment test.
During 2025, the Company completed a global restructuring that
resulted in changes to its operating structure. As a result, the Company determined that it now has a single reporting unit, compared
to the two reporting units it previously had (Advertising Solutions and Search Solutions), and all goodwill previously assigned to the
Company's reporting units is now attributed to this single reporting unit.
ASC No. 350, “Intangible—Goodwill and Other”
requires goodwill to be tested for impairment at least annually and, in certain circumstances, between annual tests. The accounting guidance
gives the option to perform a qualitative assessment to determine whether further impairment testing is necessary. The qualitative assessment
includes judgement and considers events and circumstances that might indicate that a reporting unit’s fair value is less than its
carrying amount.
During the Company’s annual impairment testing as of December
31, 2025, the Company performed a qualitative assessment to its reporting unit. The carrying value of the reporting unit was $403.7 million
on December 31, 2025, including approximately $266.1 millions of goodwill. Based on the Company’s assessment, the estimated fair
value of the reporting unit exceeded it carrying value by approximately 17%. If all assumptions are held constant, either a 13% increase
in the discount rate or a 100% decrease in the long term growth would result in approximately a $67.9 million decreases in the estimated
fair value of the reporting unit. A higher increase or decrease, respectively, in either of these assumptions individually would result
in the reporting unit to fail Step 1 of the goodwill impairment analysis as of December 31, 2025.
For the years ended December 31, 2024 and 2025, no impairment losses
were recorded.
Business Combinations
We account for our business combinations using the acquisition
method of accounting, which requires, among other things, allocation of the fair value of purchase consideration to the tangible and intangible
assets acquired and liabilities assumed at their estimated fair values on the acquisition date. The excess of the fair value of purchase
consideration over the values of these identifiable assets and liabilities is recorded as goodwill. When determining the fair value of
assets acquired and liabilities assumed, we make estimates and assumptions, especially with respect to intangible assets. Our estimates
of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable, and, as a result,
actual results may differ from estimates. During the measurement period, not to exceed one year from the date of acquisition, we may record
adjustments to the assets acquired and liabilities assumed, with a corresponding offset to goodwill if new information is obtained related
to facts and circumstances that existed as of the acquisition date. Acquisition costs, such as legal and consulting fees, are expensed
as incurred.
Impairment of Long-Lived Assets
We are required to assess the impairment of tangible and intangible
long-lived assets and right-of-use assets subject to amortization, under ASC 360 “Property, Plant and Equipment”, on a periodic
basis and when events or changes in circumstances indicate that the carrying value may not be recoverable. Impairment indicators include
any significant changes in the manner of our use of the assets or the strategy of our overall business, significant negative industry
or economic trends and significant decline in our share price for a sustained period.
Upon determination that the carrying value of a long-lived asset
may not be recoverable based upon a comparison of aggregate undiscounted projected future cash flows from the use of the asset or asset
group to the carrying amount of the asset, an impairment charge is recorded for the excess of carrying amount over the fair value. We
measure fair value using discounted projected future cash flows. We base our fair value estimates on assumptions we believe to be reasonable,
but these estimates are unpredictable and inherently uncertain. If these estimates or their related assumptions change in the future,
we may be required to record impairment charges for our tangible and intangible long-lived assets subject to amortization.
For the years ended December 31, 2024 and 2025, no impairment of
long-lived assets was recorded.
Recent Accounting Standards
For a discussion of other significant accounting policies used
in the preparation of our financial statements and recent accounting pronouncements, see Note 2 to our consolidated financial statements
contained elsewhere in this Annual Report.
61
ITEM
6. DIRECTORS, SENIOR MANAGEMENT AND
EMPLOYEES
| A. |
DIRECTORS AND SENIOR MANAGEMENT |
The following table sets forth information regarding our executive
officers and directors as of March 5, 2026:
|
Name |
|
Age |
|
Position |
|
Eyal Kaplan*(1)(2)
|
|
66 |
|
Chairman of the Board of Directors |
|
Tal Jacobson |
|
51 |
|
Chief Executive Officer; Director |
|
Elad Tzubery |
|
42 |
|
Chief Financial Officer |
|
Stephen Yap |
50 |
Chief Revenue Officer | ||
|
Michal Drayman*(1)(4)
|
|
53 |
|
Director |
|
Amir Guy*(1)(3)
|
|
56 |
|
Director |
|
Joy Marcus*(2)(3)(4)
|
64 |
Director | ||
|
Rami Schwartz*(4)
|
|
68 |
|
Director |
|
Michael Vorhaus*(2)(3)
|
|
68 |
|
Director |
* “Independent director” under the Nasdaq Listing Rules.
(1) Member of our Investment Committee.
(2) Member of our nominating and Governance Committee.
(3) Member of our Compensation Committee.
(4) Member of our Audit Committee.
There are no arrangements or understandings between any of our
directors or executive officers and any other person pursuant to which our directors or executive officers were selected.
Eyal Kaplan has
served as the chairperson of the board of directors of the Company since May 2018. He is also the chairperson of Medial Earlysign, a privately
held company in the healthcare technology field, since 2020 and a board member at CUBEC Investment Corporation, a privately held company
owned by the University of Colorado at Boulder from 2021 through March 2026. Mr. Kaplan was a member of the Technion (Israel Institute
of Technology) Council (executive board) from January 2014 through September 2023, serving the maximum allowed term, where he chaired
the Finance and Budget Committee. He currently serves as the chairman of the Technion’s Endowment Investment Committee. Mr. Kaplan
is also engaged in advisory and consulting, focusing on growth-through-innovation and corporate strategies. Prior to that, he was Managing
General Partner with Walden Israel, a venture capital firm, during which time he was Director and chairperson of numerous portfolio companies.
In 1990 he co-founded Geotek Communications, an international Nasdaq traded wireless communications company, and served as senior vice
president with broad strategic, managerial and operational responsibilities until 1995. Since 2012 he has been a member of the Technion
Board of Governors, a body of some 300 high-profile visionaries and decision makers with outstanding achievements in the fields of science,
technology, economy, industry, culture and society. From 2007 to 2012, Mr. Kaplan was a member of the Advisory Committee of Caesarea Center
for Capital Markets & Risk Management, and from 2005 to 2014, he was a member of the Advisory Committee of the Global Consulting Practicum
at the Wharton School of the University of Pennsylvania. Mr. Kaplan holds an MBA from the Wharton School of the University of Pennsylvania,
a Master of Arts in International Studies from the Lauder Institute of the University of Pennsylvania, and a Bachelor of Science degree
(with Honors) in economics and management from the Technion - Israel Institute of Technology.
Tal Jacobson has served
as our chief executive officer since August 2023 and as a director of the Company since November 2023. Mr. Jacobson has been a leader
and executive in the ad-tech industry for more than two decades. Prior to his appointment as Perion’s CEO, Mr. Jacobson served as
General Manager of CodeFuel, Perion’s Search Advertising business unit. During his tenure, he turned CodeFuel into a significant
driver of Perion’s market share and valuation. He also cemented a strategic relationship with Microsoft for which the company won
the Microsoft Advertising Global Supply Partner Award. Mr. Jacobson’s success is rooted in his extensive experience in all facets
of the tech industry. As Chief Revenue Officer and then Chief Business Development Officer of SimilarWeb, from 2012 through 2017, he was
paramount to the Israeli unicorn growth spurt in its early days. Prior to that, Mr. Jacobson held several executive positions, by serving
as VP of Business at McCann Erickson, as the chief executive officer of Watchitoo, a video collaboration platform, and Director of Business
Development at AOL (ICQ).
62
Elad Tzubery
has served as our Chief Financial Officer since August 2024. Prior to that, Mr. Tzubery served as our SVP Finance from July 2023 until
August 2024 and as our VP Finance from December 2020 until July 2023. Prior to that, Mr. Tzubery served as our Senior Director of Finance
from June 2018 until November 2020. Prior to that, he served as corporate controller at Allot Communications Ltd. (Nasdaq:ALLT), and prior
to that he served as a CPA at Kost Forer Gabbay & Kasierer, a member of EY Global. Mr. Tzubery holds a BA in Accounting and Business
Administration from the College of Management, Israel.
Stephen Yap
has served as our Chief Revenue Officer since February 2025. Prior to that, Mr. Yap held several positions at Google. From July 2023 to
February 2025, he served as the Head of Americas for the Google Marketing Platform, and prior to that, from January 2018 through July
2023, he was the Managing Director of Retail - Google Marketing Platform, overseeing Google’s data and technology solutions for
retail and commerce in the Americas. In this role, he helped marketers advance digital maturity and transform their businesses by leveraging
Google’s industry-leading technology platforms, including Display & Video 360, Campaign Manager, Search Ads 360, Google Analytics,
and other cloud-based analytics tools. Prior to that, Mr. Yap held several key positions at Google, including as the Head of Global Emerging
Products and Markets, where, among other things, he led the launch and commercialization of Google Analytics Premium (GA360) and oversaw
the global sales of Google Tag Manager, Audience Center, and Data Studio. Mr. Yap is a member of the Boston College Alumni Group, the
Boston Interactive Marketing Association, and the Web Analytics Association. He was the founder of Google’s Asians in Business in
the Americas and served as a member of Alphabet’s Asian Leadership Group and as Executive Sponsor of the Filipino Googler Network.
Mr. Yap holds a BA in Psychology from Boston College, Massachusetts.
Michal Drayman has
served as a director of the Company since June 2022. Ms. Drayman serves as a director and member of the audit and compensation committee
of Meshek Energy-Renewable energy Ltd. (TASE: MSKE) since October 2024 and serves on the boards of several privately held companies including
Able TX Ltd. and MetzerPlast. Ms. Drayman served as a director and member of the audit and compensation committee of Ree Automotive Ltd.
(Nasdaq:Ree) from April 2023 to March 2025. A long standing investor who served as a partner in Jerusalem Venture Partners VC since 2014
to September 2023 and a CFO and VP business development at European High Tech Capital, a privately held investment firm which is focused
on healthcare investments. Prior to that from 2001 to 2004 Ms. Drayman served as the VP Finance America of Lumenis Inc. From 1994 to 2001,
Ms. Drayman served in different financial positions in Lumenis Ltd. (previously, Nasdaq:LMNS). Ms. Drayman holds a BA in Economics and
Accounting from Haifa University, and an MBA in excellence from The College of Management, Rishon Letzion, Israel, Biomedical Management
Track.
Amir Guy
has served as a director of the Company since June 2022. Mr. Guy spent more than 27 years, in the advertising industry, both in corporate
and entrepreneurial settings. Mr. Guy is the founder of Moonshoot since October 2023. Mr. Guy was the founder of togetherr (a Fiverr company)
and served as its CEO from March 2021 through 2022. Mr. Guy served as Adler-Chomski Group’s / Grey Israel’s co-CEO and equity
partner from February 2005 through January 2021. Prior to joining Adler-Chomski Group, Mr. Guy served in various accounts management roles,
including Wunderman Thompson LLC and other private advertising companies. Mr. Guy holds a B.B.A in marketing and finance from the College
of Management in Israel and an MBA from the Kellogg School of Management at Northwestern University.
Joy Marcus has served as
a director of the Company since November 2019. Ms. Marcus has a wealth of experience in the media industry, including as EVP and GM Digital
Video at Condé Nast Entertainment, CEO of Bloglovin’, SVP Global Marketing Solutions at Time Warner (now WarnerDiscovery),
VP International at MTV Networks, a division of Viacom (now Paramount), GM North America of Dailymotion (acquired by Orange/France Telecom)
and VP Business Development at B&N.com. Ms. Marcus is a member of the board of directors of BBC Maestro, Muso and Granite, which operate
in the digital media industry and MOUSE (a nonprofit). Ms. Marcus is the Co-Founder and General Partner of The 98, a venture fund that
invests in women-led technology businesses. Ms. Marcus is a Lecturer at the Keller Center of Entrepreneurship at Princeton University
and previously served as the James Wei Visiting Professor in Entrepreneurship. She has also taught at Columbia University’s Masters
in Technology Management program. Ms. Marcus holds an A.B. degree (Magna Cum Laude, Phi Beta Kappa), from Princeton University, holds
a J.D. from New York University School of Law, and completed the management course in Finance & Accounting at the Columbia University
Graduate School of Business.
Rami Schwartz has
served as a director of the Company since January 2019. Mr. Schwartz joined The Portland Trust as Managing Director of the Tel Aviv office
in April 2018. Mr. Schwartz also serves as the chairman of Radcom (NASDAQ: RDCM) and an advisory board member of Algosec. Previously,
Mr. Schwartz was the President of the Amdocs Products and Amdocs Delivery groups from November 2010 through December 2017. Prior to joining
Amdocs, Mr. Schwartz was the chairperson of Olive Software (acquired by ESW Capital), and Comply (acquired by Qualitest), as the co-founder
and as the CEO of Zizio and DigiHOO, as an “entrepreneur in residence” at the Cedar Fund. In addition, Mr. Schwartz served
as the CEO and director of Exanet (acquired by Dell) and as the General Manager of Precise Software (acquired by Veritas software). Mr.
Schwartz holds a B.Sc. in excellence, in Mathematics and Computer Science from the Hebrew University in Jerusalem.
63
Michael Vorhaus has
served as a director of the Company since April 2015. Mr. Vorhaus also serves as a director of Ionik (formerly known as Popreach) (TSXV:INIK).
Mr. Vorhaus also serves as a Director of Turtle Rock Studies, a division of Tecent Holdings, Ltd (Nasdaq: TCEHY). Mr. Vorhaus founded
Vorhaus Advisors in December 2018 and serves as its CEO since its inception. From 1994 to November 2018, Mr. Vorhaus held a variety of
positions at of Frank N. Magid Associates, Inc. a research based strategic consulting firm. Mr. Vorhaus served as the President of Magid
Advisor a unit of Magid Associates, from 2008 through 2018, and as Magid Associates’ Senior Vice President and Managing Director,
from 1994 through 2008. From 2013 to 2014, Mr. Vorhaus served as a director of Grow Mobile Inc. In 1987, he founded Vorhaus Investments.
Mr. Vorhaus routinely advises start-ups and venture capital firms. Mr. Vorhaus has invested in a wide variety of early stage companies
primarily in the media and related industries. Mr. Vorhaus formerly served as a director of Altimar Acquisitions Corporation I (NYSE),
II (Nasdaq) and III (NYSE). Mr. Vorhaus holds a B.A. in Psychology from Wesleyan University and completed the Management Development Program
at the University of California, Berkeley’s Haas School of Business. There are no family relationships between any of our directors
or executive officers.
B. COMPENSATION
The aggregate direct compensation we paid to our directors and
officers as a group (10 persons) for the year ended December 31, 2025, was approximately $12.6 million, which included approximately $0.3
million that was set aside or accrued to provide for pension, retirement, severance, or similar benefits. This amount includes bonuses
paid to our officers pursuant to our executive bonus plan based on company performance measures, in accordance with our Compensation Policy.
This amount does not include expenses we incurred for other payments, including dues for professional and business associations, business
travel and other expenses, and other benefits commonly reimbursed or paid by companies in Israel. In addition, our directors are reimbursed
for expenses incurred in order to attend board of directors or committee meetings.
In the year ended December 31, 2025, we granted our directors and
officers in the aggregate (i) 413,328 restricted share units (“RSUs”), which vest over a one-year period or three-year period;
and (ii) 417,163 performance-based share units (“PSUs”), linked to certain financial and operational performance and share
price related metrics. These awards were granted under our 2024 Share Incentive Plan, as amended.
We pay each of our non-executive directors an annual fee of $62,500.
In addition, as approved at the annual general meeting of our shareholders held on September 30, 2024, the 2024 AGM, we granted our non-executive
directors (other than our chairperson of the Board) an annual RSU grant according to his or her role, with a value as follows:
| • |
chairperson of our Audit Committee: $177,500; |
| • |
chairperson of our Compensation Committee: $175,000; |
| • |
chairperson of our Nominating and Governance Committee: $172,500; and |
| • |
other non-executive directors: $165,000. |
We pay our chairman of the board of directors, Mr. Kaplan, and
annual fee of $125,000, paid in four quarterly payments. Mr. Kaplan is also entitled to reimbursement of out-of-pocket expenses incurred
in connection with his services as chairman and indemnification and liability insurance as provided to other members of the board of directors.
Mr. Kaplan’s services agreement also includes customary non-disclosure, non-compete, and ownership assignment of intellectual property
undertakings.
In addition, as approved at the 2024 AGM, Mr. Kaplan is entitled
to an annual equity-based compensation of $270,000 per vesting annum. The RSUs shall vest on a quarterly basis, in equal tranches,
during the year following the grant. All unvested RSUs held by a chairperson in office will automatically vest upon a Change of Control
event (as defined below).
The Company maintains a mechanism aimed at aligning the date
of the grant to all directors as of January 1 of each year regardless of the date on which they joined the Board. Incumbent directors
will be awarded the grant less the value of vesting of the previous grant in the applicable year. The foregoing mechanism shall also apply,
mutatis mutandis, in case we appoint a new chairperson to one of our Board committees. Newly appointed or elected directors will receive
a pro-rated portion of the equity award as of the date of such individual’s appointment or election, and follow-up grants on January
1 of each subsequent year. The RSUs vest on a quarterly basis, in equal tranches, during the year following the grant. As an exception
to the foregoing, the first annual grant of RSUs to be granted to a person upon his or her appointment as a director of the Company for
the first time following the 2024 AGM will vest at the first anniversary of the grant date. All unvested RSUs held by a director in office
will automatically vest upon a change of control of the Company, which is defined for this purpose as (i) a merger, acquisition, or reorganization
of the company with one or more other entities in which the company is not the surviving entity, (ii) a sale of all or substantially all
of the assets of the Company, or (iii) a transaction or a series of related transactions as a result of which more than 50% of the outstanding
shares or the voting rights of the Company are beneficially owned by one person or group (as defined in the SEC rules) (the “Change
of Control”).
The table below reflects the compensation granted to our five
most highly compensated office holders during or with respect to the year ended December 31, 2025. We refer to the individuals for whom
disclosure is provided herein as our “Covered Executives.”
64
For purposes of the table below, “compensation”
includes salary cost, bonuses, equity-based compensation, retirement or termination payments, benefits and perquisites such as car, phone
and social benefits and any undertaking to provide such compensation. All amounts reported in the table are in terms of cost to the Company,
as recognized in our financial statements for the year ended December 31, 2025, including the compensation paid to such Covered Executive
following the end of the year in respect of services provided during the year. Each of the Covered Executives was covered by our D&O
liability insurance policy and was entitled to indemnification and exculpation in accordance with applicable law and our articles of association.
All numbers below are in US Dollars in thousands.
|
Name and Principal Position (1)
|
Salary Cost(2)
|
Bonus(3)
|
Equity-Based
Compensation(4) |
Total |
||||||||||||
|
Tal Jacobson, Chief Executive Officer |
700 |
1,113 |
3,797 |
5,610 |
||||||||||||
|
Maoz Sigron, former Chief Operating Officer
(5) |
146 |
58 |
1,957 |
2,161 |
||||||||||||
|
Stephen Yap, Global Chief Revenue Officer(6)
|
900 |
902 |
281 |
2,083 |
||||||||||||
|
Elad Tzubery, Chief Financial Officer |
427 |
445 |
511 |
1,383 |
||||||||||||
|
Eyal Kaplan, Chairman of the Board of Directors |
125 |
0 |
232 |
357 |
||||||||||||
(1) Unless otherwise indicated herein and excluding Mr. Eyal Kaplan, all Covered Executives
are employed on a full-time (100%) basis.
(2) Salary cost includes the Covered Executive’s gross salary plus payment of
social benefits made by the Company on behalf of such Covered Executive. Such benefits may include, to the extent applicable to the Covered
Executive, payments, contributions and/or allocations for savings funds (e.g., Managers’ Life Insurance Policy), education funds
(referred to in Hebrew as “keren hishtalmut”), pension, severance, risk insurances (e.g., life, or work disability insurance),
payments for social security and tax gross-up payments, vacation, medical insurances and benefits, phone, convalescence or recreation
pay and other benefits and perquisites consistent with the Company’s policies.
(3) Annual bonus granted to the Covered Executives based on formulas set forth in
the annual compensation plan and/or special bonus and/or signing bonus approved by compensation committee of the board and the board of
directors pursuant to the terms of our Compensation Policy for Directors and Officers.
(4) Represents the equity-based compensation expenses recorded in our consolidated
financial statements for the year ended December 31, 2025. Such numbers are based on the RSU grant date fair value in accordance with
accounting guidance for equity-based compensation and does not necessarily reflect the cash proceeds to be received by the applicable
officer upon the vesting and sale of the underlying shares. For a discussion of the assumptions used in reaching this valuation, see Note
2 to our Financial Statements.
(5) Mr. Sigron served as our Chief Operation Officer until May 25, 2025.
(6) Mr. Yap was appointed as our Global Chief Revenue Officer effective as of February
1, 2025.
Compensation Terms of our Chief Executive Officer
Tal Jacobson was appointed as our Chief Executive Officer effective
August 1, 2023. The following is a summary of Mr. Jacobson’s compensation terms, which are consistent with the Company’s Compensation
Policy.
Mr. Jacobson’s annual base salary is NIS 1,800,000 (equivalent
to approximately 564,263 USD). Mr. Jacobson is eligible for a target annual cash bonus of up to 100% of his annual base salary, or 150%
in case of overachievement, based on a performance matrix pre-approved annually by our Compensation Committee and Board. The bonus also
includes a discretionary component based on individual qualitative performance assessment. The discretionary component was set by the
Compensation Committee and the Board at up to 20% of the amount of the bonus. In addition, our Compensation Committee and the Board are
authorized to grant Mr. Jacobson, from time to time, a special bonus as set out in, and subject to the terms of, our Compensation Policy.
In addition, Mr. Jacobson was granted (i) 90,000 RSUs and 90,000
PSUs as of February 7, 2023 (the “2023 CEO Grant”), (ii) 250,000 RSUs and 250,000 PSUs as of July 30, 2024 (the “2024
CEO Grant”), and (iii) 200,000 RSUs and 300,000 PSUs as of November 3, 2025 (the “2025 CEO Grant”). The RSUs under the
2023 CEO Grant vested over three years with a 12-month cliff. The RSUs under the 2024 CEO Grant vest over three years with a 12-month
cliff; one-third vested on the first anniversary of the grant date, and the balance vests quarterly over the next eight quarters. The
RSUs under the 2025 CEO Grant vest over three years commencing as of January 1, 2026 (the "Vesting Start Date"), with a 12-month cliff;
one-third vests on the first anniversary of the Vesting Start Date, and the balance vests quarterly over the next eight quarters. The
PSUs granted in 2023, 2024 and 2025 are subject to performance conditions established by the Compensation Committee and the Board, which
include financial and operational performance metrics and, in certain cases, share price-based measures. PSU vesting is generally contingent
on achievement of applicable threshold levels and/or other vesting conditions, as determined under the relevant award terms. The maximum
vesting of all granted PSUs is capped at 100%. All granted PSUs will not vest prior to the first anniversary of the grant date. As of
March 5, 2026, 301,660 units out of the 2023 CEO Grant, 2024 CEO Grant and 2025 CEO Grant have vested.
65
The PSUs and RSUs will become fully vested upon the closing of
an M&A Event, which shall mean in essence (A) any consolidation, merger or reorganization (“Transaction”) of the Company,
in which the shareholders of the Company, immediately prior to such Transaction, own less than 50% of the voting power of the surviving
entity (or its affiliated company, as the case may be) immediately after such Transaction; or (B) any transaction or series of related
transactions to which the Company is a party, in which all or substantially all of the Company’s outstanding share capital is transferred
to any entity or person (excluding a public offering in a stock exchange, or any consolidation, merger or reorganization effected exclusively
to change the domicile of the Company, or a transaction or series of related transactions, in which the shareholders of the Company prior
to such transaction, hold more than 50% of the voting and economic rights of the Company or surviving entity, as applicable, immediately
following such transaction), or (C) the sale, lease, exclusive license, transfer or other disposition, in a single transaction or series
of related transactions of all or substantially all the assets of the Company and its subsidiaries taken as a whole, or the sale or disposition
of one or more subsidiaries of the Company if substantially all of the assets of the Company and its subsidiaries taken as a whole are
held by such subsidiary or subsidiaries, or any exclusive license of material intellectual property of the Company, other than when any
such transfer is to a wholly owned subsidiary of the Company.
For additional information regarding the 2023 CEO Grant, 2024 CEO
Grant, and 2025 CEO Grant, including the applicable award terms and performance criteria, see the Company’s proxy statements filed
in connection with the applicable annual general meetings.
Mr. Jacobson’s employment agreement includes non-solicitation,
confidentiality, intellectual property assignment, insurance plan participation, expense reimbursement, and 28 annual vacation days. The
employment agreement is for an indefinite period and may be terminated by either party with a 6-month advance notice. Mr. Jacobson's performance-based
compensation is subject to our clawback policy.
We also have employment agreements with our other executive officers.
These agreements usually do not contain any change of control provisions and otherwise contain salary, benefit and non-competition provisions
that we believe to be customary in our industry.
C. BOARD
PRACTICES
Corporate Governance Practices
We are incorporated in Israel and therefore are subject to various
corporate governance practices under the Companies Law, relating to such matters as external directors (or, to the extent applicable,
the provisions of the opt-out from external directors), the audit committee, the internal auditor and approvals of interested party transactions.
These matters are in addition to the ongoing listing conditions of Nasdaq and other relevant provisions of U.S. securities laws. Under
the Nasdaq Listing Rules, a foreign private issuer may generally follow its home country rules of corporate governance in lieu of the
comparable Nasdaq requirements, except for certain matters such as composition and responsibilities of the audit committee. For further
information, see Item 16.G “Corporate Governance.”
Nasdaq Requirements
As required by the Nasdaq Listing Rules, a majority of our directors
are “independent directors” as defined in the Nasdaq Listing Rules.
As contemplated by the Nasdaq Listing Rules, we have an Audit Committee,
a Compensation Committee and a Nominating and Governance Committee, all of whose members are independent directors.
See Item 16.G. “Corporate Governance” for exemptions that we have taken
from certain Nasdaq Listing Rule requirements.
66
Israeli Companies Law
Board of Directors
According to the Companies Law and our articles of association, our board of directors
is responsible, among other things, for:
| • |
establishing our policies and overseeing the performance and activities of our chief executive officer; |
| • |
convening shareholders’ meetings; |
| • |
approving our financial statements; |
| • |
determining our plans of action, principles for funding them and the priorities among them, our organizational structure and examining
our financial status; and |
| • |
issuing securities and distributing dividends. |
Our board of directors may exercise all powers and may take all
actions that are not specifically granted to our shareholders. Our board of directors also appoints and may remove our chief executive
officer and may appoint or remove other executive officers, subject to any rights that the executive officers may have under their employment
agreements.
As of March 5, 2026, our board of directors consists of seven directors.
Our directors are elected in three staggered classes by the vote of a majority of the ordinary shares present and entitled to vote at
meetings of our shareholders at which directors are elected. The members of only one staggered class will be elected at each annual meeting
for a three-year term, so that the regular term of only one class of directors expires annually. Our annual meeting of shareholders is
required to be held at least once during every calendar year and not more than fifteen months after the last preceding meeting.
If the number of directors constituting our board of directors
is changed, any increase or decrease shall be apportioned among the classes so as to maintain the number of directors in each class as
nearly equal as possible, but in no case will a decrease in the number of directors constituting our board of directors reduce the term
of any then current director.
Our board of directors may appoint any other person as a director,
whether to fill a vacancy or as an addition to the then current number of directors, provided that the total number of directors shall
not, at any time, exceed seven directors. Any director so appointed shall hold office until the annual meeting of shareholders at which
the term of his class expires, unless otherwise determined by our board of directors. There is no limitation on the number of terms that
a non-external director may serve.
Shareholders may remove a non-external director from office by
a resolution passed at a meeting of shareholders by a vote of the holders of more than two-thirds of our voting power.
A resolution proposed at any meeting of our board of directors
is deemed adopted if approved by a majority of the directors present and voting on the matter. Under the Companies Law, our board of directors
must determine the minimum number of directors having financial and accounting expertise, as defined in the regulations that our board
of directors should have. In determining the number of directors required to have such expertise, the board of directors must consider,
among other things, the type and size of the company and the scope and complexity of its business and operations. Our board of directors
has determined that we require at least one director with the requisite financial and accounting expertise and that Ms. Michal Drayman
has such expertise.
Under the Companies Law, a person, who is, directly or indirectly
subordinated to the chief executive officer of a public company, may not serve as the chairman of its board of directors. In addition,
neither the chief executive officer nor his relative is eligible to serve as chairman of the board of directors (and vice versa), unless
such nomination was approved by a majority of the company’s shareholders for a term not exceeding three years, and either: (i) such
majority included the majority of the voting shareholders (shares held by abstaining shareholders are not considered) which are not controlling
shareholders and have not personal interest regarding the decision; or (ii) the aggregate number of shares voting against the proposal
did not exceed 2% of company voting shareholders. The term can be extended for additional three year terms, in the same manner.
External Directors
Under the Companies Law, Israeli companies whose shares have been
offered to the public in or outside of Israel are required to appoint at least two individuals to serve as external directors.
Pursuant to regulations promulgated under the Companies Law, companies
with shares traded on a U.S. stock exchange, including the Nasdaq Global Select Market, may, subject to certain conditions, “opt
out” from the Companies Law requirements to appoint external directors and related Companies Law rules concerning the composition
of the audit committee and compensation committee of the board of directors. In accordance with these regulations, in August 2019, we
elected to “opt out” from the Companies Law requirements to appoint external directors and related Companies Law rules concerning
the composition of the audit committee and compensation committee of the board of directors (the “Opt-Out”).
Under these regulations, the exemptions from such Companies Law
requirements will continue to be available to us so long as: (i) we do not have a “controlling shareholder” (as such term
is defined under the Companies Law), (ii) our shares are traded on a U.S. stock exchange, including the Nasdaq Global Select Market, and
(iii) we comply with the director independence requirements, the audit committee and the compensation committee composition requirements,
under U.S. laws (including applicable Nasdaq Rules) applicable to U.S. domestic issuers.
67
Committees of the Board of Directors
Our board of directors has established an Audit Committee, a Compensation
Committee, an Investment Committee and a Nominating and Governance Committee.
Audit Committee
Our audit committee (the “Audit Committee”) is comprised
of Ms. Michal Drayman (chairperson), Ms. Joy Marcus and Mr. Rami Schwartz, and operates pursuant to a written charter.
Nasdaq Requirements
Under the listing requirements of the Nasdaq Stock Market, a foreign
private issuer is required to maintain an audit committee that has certain responsibilities and authority. The Nasdaq Listing Rules require
that all members of the audit committee must satisfy certain independence requirements, subject to certain limited exceptions. We have
adopted an audit committee charter as required by the Nasdaq Listing Rules. Our audit committee assists the board of directors in fulfilling
its responsibility for oversight of the quality and integrity of our accounting, auditing and financial reporting practices and financial
statements. Our audit committee is also responsible for the establishment of policies and procedures for review and pre-approval by the
committee of all audit services and permissible non-audit services to be performed by our independent auditor, in order to ensure that
such services do not impair our auditor’s independence. For more information see Item 16.C “Principal Accountant Fees and
Services.” Under the Nasdaq Listing Rules, the approval of the audit committee is also required to effect related-party transactions
that would be required to be disclosed in our annual report.
Companies Law Requirements
Under the Companies Law, the board of directors of a public company
must establish an audit committee. The audit committee must consist of at least three directors who meet certain independence criteria.
The responsibilities of the audit committee under the Companies Law include to identify and address problems in the management of the
company, review and approve interested party transactions, establish whistleblower procedures and procedures for considering controlling
party transactions and oversee the company’s internal audit system and the performance of the internal auditor.
Our Audit Committee is authorized to, among other things, oversee
data privacy and data collection compliance.
Compensation Committee
Pursuant to the Companies Law, the compensation committee of a
public company must be comprised of at least three directors, include all of the external directors (and also the chairman is required
to be an external director), and any other members must satisfy certain independence standards under the Companies Law. Following the
Opt-Out, our compensation committee is comprised of Ms. Joy Marcus (chairperson), Mr. Michael Vorhaus and Mr. Amir Guy, all of whom satisfy
the respective “independence” requirements of the Companies Law, SEC and Nasdaq Listing Rules for compensation committee members.
Our compensation committee meets at least once each quarter, with additional special meetings scheduled when required.
Our Compensation Committee is authorized to, among other things,
review, approve and recommend to our board of directors base salaries, incentive bonuses, including the specific goals and amounts, stock
option grants, employment agreements, and any other benefits, compensation or arrangements of our executive officers and directors. In
addition, our Compensation Committee is required to propose for shareholder approval by a special majority, a compensation policy governing
the compensation of office holders based on specified criteria, to review, from time to time, modifications to the said compensation policy
and examine its implementation, and to approve the actual compensation terms of office holders prior to approval thereof by the board
of directors. As required under the Companies Law, a compensation policy should be approved by the shareholders every three years. Our
shareholders adopted a Compensation Policy for Directors and Officers at the general meeting of the shareholders held on December 18,
2025, which is identical to the prior Compensation Policy. Our Compensation Committee also oversees the administration of our equity incentive
plans.
Investment Committee
Our investment committee (the “Investment Committee”)
is comprised of Mr. Eyal Kaplan (chairperson), Ms. Michal Drayman and Mr. Amir Guy. The Investment Committee is responsible for formulating
the overall investment policies of the Company, and establishing investment guidelines in furtherance of those policies. The Committee
monitors the management of the portfolio for compliance with the investment policies and guidelines and for meeting performance objectives
over time as well as assist the board of directors in fulfilling its oversight responsibility for the investment of assets of the company.
Nominating and Governance Committee
Our Nominating and Governance Committee is comprised of Mr. Michael
Vorhaus (chairperson), Mr. Eyal Kaplan, and Ms. Joy Marcus, and operates pursuant to a written charter. It is responsible for making recommendations
to the board of directors regarding candidates for directorships and the size and composition of the board. In addition, the committee
is responsible for overseeing our corporate governance guidelines and reporting and making recommendations to the board concerning corporate
governance matters. Under the Companies Law, nominations for director are generally made by our board of directors but may be made by
one or more of our shareholders pursuant to applicable law and our articles of association.
68
Internal Auditor
Under the Companies Law, the board of directors of a public company
must appoint an internal auditor nominated based on the audit committee’s recommendation. The role of the internal auditor is to
examine whether a company’s actions comply with the law and proper business procedure. The internal auditor may be an employee of
the company employed specifically to perform internal audit functions but may not be an interested party or office holder, or a relative
of any interested party or office holder, and may not be a member of the company’s independent accounting firm or its representative.
The Companies Law defines an interested party as a substantial shareholder of 5% or more of the shares or voting rights of a company,
any person or entity that has the right to nominate or appoint at least one director or the general manager of the company or any person
who serves as a director or as the general manager of a company. The internal auditor’s term of office shall not be terminated without
his or her consent, nor shall he or she be suspended from such position unless the board of directors has so resolved after hearing the
opinion of the audit committee and after giving the internal auditor a reasonable opportunity to present his or her position to the board
and to the audit committee. Our internal auditor is Ms. Tali Yaron, CPA, of Brightman Almagor Zohar & Co., a member of Deloitte Touche
Tohmatsu.
D. EMPLOYEES
The breakdown of our employees, by department, as of the end of
each of the past three fiscal years is as follows:
|
|
December 31, |
|||||||||||
|
|
2023 |
2024 |
2025 |
|||||||||
|
Cost of sales |
129 |
152 |
144 |
|||||||||
|
Research and development |
158 |
135 |
128 |
|||||||||
|
Selling and marketing |
170 |
136 |
131 |
|||||||||
|
General and administration |
104 |
105 |
108 |
|||||||||
|
Total |
561 |
528 |
511 |
|||||||||
As of December 31, 2025, we had 511 employees globally, from whom
160 were located in Israel, 158 were located in the United States, 106 were located in Canada, 62 were located in Europe and 25 of our
employees were located across APAC. As of December 31, 2025, we also engaged the services of 104 contractors in different locations through
a third-party service organization.
We provide our employees around the world with fringe benefits
in accordance with applicable law and we are subject to various labor laws and labor practices around the world. In Israel we are subject
to certain labor statutes and national labor court precedent rulings, as well as to some provisions of the collective bargaining agreements.
These provisions of collective bargaining agreements apply to our Israeli employees by virtue of extension orders issued in accordance
with relevant labor laws by the Israeli Ministry of Economy and Industry, and which apply such provisions under the extension orders to
certain or all Israeli employees including our employees even though they are not directly part of a union that has signed a collective
bargaining agreement. The laws and labor court rulings that apply to our employees principally concern, among others, minimum wage laws,
procedures for dismissing employees, determination of severance pay, leaves of absence (such as annual vacation or maternity leave), sick
pay and other conditions for employment. The extension orders which apply to our employees principally concern, among others, the requirement
for the length of the workday and the work-week, annual recuperation pay and commuting expenses, and payments to pension funds. As mentioned
above, we are required to insure all of our employees by a comprehensive pension plan or a managers’ insurance according to the
terms and the rates detailed in the extension order. In addition, Israeli laws determine minimum wages for workers, minimum paid leave
or vacation, sick leave, working hours and days of rest, insurance for work-related accidents, determination of severance pay, the duty
to give notice of dismissal or resignation and other benefits and terms of employment. We have never experienced a work stoppage, and
we believe our relations with our employees are good.
Israeli law generally requires the payment of severance by employers
upon the retirement or death of an employee or upon termination of employment by the employer or, in certain circumstances, by the employee.
Substantially all of our agreements with employees in Israel contain an arrangement made in accordance with Section 14 of the Severance
Pay Law, 5723-1963 (“Section 14”), where our contributions for severance pay are paid in lieu of any severance liability.
Upon termination of employment, for any reason, and subject to contribution of the employee’s entire monthly salary as of the commencement
date of his/her employment, and release of the policy to the employee, no additional severance payments are required to be made by us
to the employee. Additionally, the related obligation and amounts deposited pursuant to such obligation are not stated on the balance
sheet, as we are legally released from any obligation to employees once the deposit amounts have been paid.
Furthermore, Israeli employees and employers are required to pay
predetermined sums to the National Insurance Institute, which covers, amongst other benefits, payments for state retirement benefits and
survivor benefits (similar to the United States Social Security Administration), as well as state unemployment benefits. These amounts
also include payments for national health insurance. The payments to the National Insurance Institute can equal up to approximately 19.77%
of wages subject to a cap if an employee’s monthly wages exceed a specified amount, of which the employee contributes up to approximately
12.17% and the employer contributes approximately 7.6%.
69
Our U.S. subsidiaries sponsor a retirement plan for eligible employees.
Their 401(k) Plan allows eligible employees to defer compensation up to the maximum amount allowed under the current Internal Revenue
Code. Our U.S. subsidiaries may make discretionary employer matching contributions to the 401(k) Plan to match employees’ elective
deferrals subject to certain non-discrimination requirements under the Internal Revenue Code. This matching contribution is made
for all eligible employees who elected to make salary deferral contributions into the plan. In addition to 401(k) Plan, our U.S. subsidiaries
provide healthcare and life insurance coverage to all eligible employees.
Our Canadian subsidiary offers its employees a Registered Retirement
Savings Plan with employer matching contributions. A Registered Retirement Savings Plan is a savings plan that is registered with the
Canada Revenue Agency. The employer will match employee contributions up to a specific percentage of earnings and up to a maximum dollar
amount per calendar year. Our Canadian subsidiary also offers eligible employees a group insurance program for life, disability,
health and dental benefits. All benefits are employer paid except the long-term disability benefit.
Our subsidiaries in Europe, provide employees with benefits in
accordance with applicable local laws and customary market practice. Employees in these jurisdictions are generally entitled to participate
in mandatory state social security and pension schemes, funded by employer and employee contributions calculated as a percentage of salary
and subject to applicable caps or thresholds. In addition, eligible employees receive statutory benefits such as paid annual leave, sick
leave and other social benefits, and may receive supplementary benefits, which may include private health coverage, and additional pension
arrangements, as customary in the relevant jurisdiction.
E. SHARE
OWNERSHIP
Security Ownership of Directors and Executive Officers
The following table sets forth information regarding the beneficial
ownership of our ordinary shares as of March 5, 2026, by all of our directors and executive officers as a group and by each officer and
director who beneficially owns 1% or more of our outstanding ordinary shares.
Beneficial ownership of shares is determined in accordance with
the rules of the SEC and generally includes any shares over which a person exercises sole or shared voting or investment power. Ordinary
shares that are subject to warrants, RSUs or stock options that are vested or will vest within 60 days of a specified date are deemed
to be outstanding and beneficially owned by the person holding the stock options for the purpose of computing the percentage ownership
of that person, but are not treated as outstanding for the purpose of computing the percentage of any other person.
Except as indicated in the footnotes to this table, each officer
and director in the table has sole voting and investment power for the shares shown as beneficially owned by them. Percentage ownership
is based on 39,330,319 ordinary shares outstanding as of March 5, 2026 (such amount excludes 115,339 ordinary shares held by the Company).
|
Name |
Number of Ordinary Shares Beneficially Owned |
Percentage of Ordinary Shares Outstanding |
||||||
|
All directors and officers as a group (9 persons) (1)
|
834,549 |
2.11 |
% | |||||
| (1) |
Includes 231,676 RSUs and options to purchase ordinary shares that are vested or will vest within 60 days of March 5, 2026.
|
70
Share Option Plans
2013 Incentive Plan
Our 2013 Equity Incentive Plan, or the 2013 Plan, was initially
adopted in 2003, providing certain tax benefits in connection with stock-based compensation under the tax laws of Israel and potentially
the United States. On November 8, 2022, our board of directors approved extending the term of the 2013 Incentive Plan for an additional
period of two years, which expired on December 9, 2024. The 2013 Plan provided for the grant of equity-based compensation to our employees,
directors, office holders, service providers, and consultants.
We no longer grant any awards under the 2013 Plan as it was superseded
by our 2024 Share Incentive Plan, although previously granted awards under the 2013 Plan remain outstanding. Ordinary shares subject to
outstanding equity awards granted under the 2013 Plan that expire or become un-exercisable without having been exercised in full will
become available again for future grant under the 2024 Plan (as defined below). As of December 31, 2025, a total of 136,429 options to
purchase ordinary shares were outstanding under the 2013 Plan, with a weighted average exercise price of $6.78 per share, and 1,619,451
restricted share units were outstanding under the 2013 Plan. Our board of directors, or a duly authorized committee of our board of directors,
administers the 2013 Plan.
2024 Share Incentive Plan
On November 19, 2024, our board of directors approved the adoption
of the 2024 Share Incentive Plan. and on May 15, 2025, our board of directors approved the adoption of the French Sub-Plan to the 2024
Share Incentive Plan, or collectively, the 2024 Plan.
We maintain the 2024 Plan, under which we may grant equity-based
incentive awards, to attract, motivate, and retain the talent for which we compete. The 2024 Plan is administered by our board of directors, or
a duly authorized committee of our board of directors and provides for the grant of stock options (including incentive stock options and
nonqualified stock options), ordinary shares, restricted shares, restricted share units, and other share-based awards.
The maximum number of ordinary shares available for issuance under
the 2024 Plan is equal to the sum of (i) 250,000 shares, (ii) any shares subject to awards under the 2013 Plan which will expire or become
un-exercisable without having been exercised, and (iii) such additional number of shares as determined by our board of directors from
time to time, if so determined, subject to the availability of unissued registered share capital; provided, however, that no more than
200,000 shares may be issued upon the exercise of incentive stock options. As of December 31, 2025, 2,388,236 restricted share units were
outstanding and 129,545 ordinary shares were available for future issuance under the 2024 Plan.
The 2024 Plan provides for granting awards under various tax regimes,
including, without limitation, in compliance with Section 102 of the Israeli Income Tax Ordinance (New Version), 5721-1961, or the Ordinance,
and Section 3(i) of the Ordinance and for awards granted to our United States employees or service providers, including those who are
deemed to be residents of the United States for tax purposes, Section 422 of the Internal Revenue Code of 1986, as amended, or the Code,
and Section 409A of the Code and for awards granted to our employees in France, in compliance with the French Commercial Code, as amended.
Section 102 of the Ordinance allows employees, directors, and officers
who are not controlling shareholders and are considered Israeli residents to receive favorable tax treatment for compensation in the form
of shares or options, subject to the terms and conditions set forth in the Ordinance. Our non-employee service providers and controlling
shareholders may only be granted shares or options under Section 3(i) of the Ordinance, which does not provide similar tax benefits.
Options granted under the 2024 Plan to our employees who are U.S.
residents may qualify as “incentive stock options” within the meaning of Section 422 of the Code or may be non-qualified stock
options. As of the date of this annual report, we don’t intend to grant “incentive stock options” under the 2024
Plan.
Please also see Note 13 to our Financial Statements for information
on the options and restricted share units issued under the 2013 Plan.
F. DISCLOSURE
OF A REGISTRANT’S ACTION TO RECOVER ERRONEOUSLY AWARDED COMPENSATION
None.
71
ITEM 7. MAJOR
SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
A. MAJOR
SHAREHOLDERS
The following table sets forth information with respect to
the beneficial ownership of our shares as of March 5, 2026, by each person or entity known by us to beneficially own 5% or more of our
outstanding ordinary shares.
Beneficial ownership of shares is determined in accordance with
the Exchange Act and the rules promulgated thereunder, and generally includes any shares over which a person exercises sole or shared
voting or investment power. Ordinary shares that are issuable pursuant to an outstanding right within 60 days of a specified date are
deemed to be outstanding and beneficially owned by the person holding the right for the purpose of computing the percentage ownership
of that person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.
For the purpose of calculating the percentage of shares beneficially
owned by any shareholder, this table lists the applicable percentage ownership based on 39,330,319 ordinary shares issued and outstanding
as of March 5, 2026 (such amount excludes 115,339 ordinary shares held by the Company).
Except as indicated in the footnotes to this table, to our knowledge,
each shareholder in the table has voting and investment power for the shares shown as beneficially owned by such shareholder, except to
the extent the power is shared by spouses under community property law. Our major shareholders do not have different voting rights than
our other shareholders. The information in the table below with respect to the beneficial ownership of shareholders is based on the public
filings of such shareholders with the SEC through March 5, 2026, and information provided to us by certain shareholders.
|
Name of Beneficial Owner |
Shares Beneficially Owned |
|||||||
|
|
Number |
Percentage |
||||||
|
Private Capital Management, LLC (1) |
4,215,406 |
10.72 |
% | |||||
|
Harel Insurance Investments & Financial Services Ltd. (2) |
3,637,418 |
9.25 |
% | |||||
|
Migdal Insurance & Financial Holdings Ltd. (3) |
2,328,988 |
5.92 |
% | |||||
(1) Based solely upon, and qualified in its entirety with reference
to Amendment No. 1 to Schedule 13G filed with the SEC on February 6, 2026, regarding holdings as of November 30, 2025, by Private Capital
Management, LLC (“PCM”). Of the 4,215,406 ordinary shares beneficially owned by PCM: (i) 1,717,856 ordinary shares are beneficially
held for PCM’s own account; and (ii) 2,497,550 ordinary shares, are deemed to be under shared dispositive power by virtue of
PCM clients that have delegated proxy voting authority to PCM. The address of PCM is 8889 Pelican Bay Boulevard, Suite 500, Naples, FL
34018.
(2) The information is based upon the shareholder notification
provided to the Company by Harel Insurance Investments & Financial Services Ltd. (“Harel”) on January 4, 2026, regarding
holdings as of December 31, 2025. Prior to that Harel filed an Amendment No. 4 to Schedule 13G with the SEC on August 5, 2025, which set
forth that its holdings in the Company were 3,961,645 ordinary shares The reported ordinary shares are held for members of the public
through, among others, provident funds and/or mutual funds and/or pension funds and/or insurance policies and/or exchange traded funds,
which are managed by subsidiaries of Harel, each of which operates under independent management and makes independent voting and investment
decisions. The address of Harel is Harel House; 3 Aba Hillel Street; Ramat Gan 52118, Israel.
(3) Based solely upon, and qualified in its entirety with reference
to Schedule 13G filed with the SEC on November 13, 2025, regarding holdings as of September 30, 2025, by Migdal Insurance & Financial
Holdings Ltd. (“Migdal”). According to such Schedule 13G, Migdal and certain of its direct or indirect, majority or wholly-owned
subsidiaries reported beneficial ownership of 2,328,988 ordinary shares. The reported ordinary shares are held for members of the public
through, among others, mutual funds, provident funds, pension funds and insurance policies managed by Migdal and its subsidiaries, each
of which operates under independent management and makes independent voting and investment decisions. The address of Migdal is 4 Efal
Street; P.O. Box 3063, Petach Tikva 49512, Israel.
72
To our knowledge, the significant changes in the percentage of
ownership held by our major shareholders during the past three years preceding the date of this annual report on Form 20-F have been:
(i) the increase in the percentage of ownership by PCM, above 5% during 2024, and a further increase in the percentage of ownership by
PCM and its client accounts, above 10% during 2025; (ii) the increase in the percentage of ownership by Harel Insurance Investments &
Financial Services Ltd. held for members of the public through various direct or indirect, majority or wholly-owned subsidiaries, above
5% during 2023, a further increase above 10% in 2024, and a decrease below 10% in 2025; (iii) the increase in the percentage of ownership
by Migdal Insurance & Financial Holdings Ltd. and certain of its direct or indirect, majority or wholly-owned subsidiaries, above
5% during 2025; and (iv) the decrease in the percentage of ownership by Phoenix Holdings Ltd. and its various direct or indirect, majority
or wholly-owned subsidiaries, below 5% during 2023, which later increased above 5% during 2023 and 2024, and a further decrease below
5% during 2025; (v) the increase in the percentage of ownership by Clal Insurance Enterprises Holdings Ltd. and its third-party client
accounts and various direct or indirect, majority or wholly-owned subsidiaries, above 5% during 2023, and a subsequent decrease below
5% during 2024; and (vi) the increase in the percentage of ownership by Value Base Ltd. and its third-party client accounts and various
direct or indirect, majority or wholly-owned subsidiaries, above 5% during 2025, followed by a subsequent decrease below 5% in that same
year.
To our knowledge, as of March 5, 2026, we had five (5) shareholders
of record (excluding the Depository Trust Company), all of whom were registered with addresses in the United States. These U.S. holders
were, as of such date, the holders of record of approximately 0.02% of our outstanding shares. The number of record holders in the United
States is not representative of the number of beneficial holders, nor is it representative of where such beneficial holders are resident,
since many of these ordinary shares were held of record by brokers or other nominees.
B. RELATED
PARTY TRANSACTIONS
It is our policy that transactions with office holders or transactions
in which an office holder has a personal interest will be on terms that, on the whole, are no less favorable to us than could be obtained
from independent parties.
See Exhibit 2.1 to this annual report on Form 20-F, which is incorporated
by reference into this annual report on Form 20-F, for a discussion of the requirements of Israeli law regarding special approvals for
transactions involving directors, officers or controlling shareholders.
The following is a description of some of the transactions with
related parties to which we are party and which were in effect within the past three fiscal years. The descriptions provided below are
summaries of the terms of such agreements and do not purport to be complete and are qualified in their entirety by the complete agreements.
Indemnification Agreements
Our articles of association permit us to exculpate, indemnify and
insure our directors and officeholders to the fullest extent permitted by the Companies Law. We have obtained directors’ and officers’
insurance for each of our officers and directors and have entered into indemnification agreements with all of our current officers and
directors.
We have entered into indemnification and exculpation agreements
with each of our current office holders and directors exculpating them to the fullest extent permitted by the law and our articles of
association and undertaking to indemnify them to the fullest extent permitted by the law and our articles of association, including with
respect to liabilities resulting from this annual report, to the extent such liabilities are not covered by insurance. See also Item 10.B.
“Related Party Transactions—Indemnification Agreements.”
Employment and Consulting Agreements
We have or have had employment, consulting or related agreements
with each member of our senior management. For more information on employment and consulting agreements see Item 6.B. “Compensation.”
C. INTERESTS
OF EXPERTS AND COUNSEL
Not applicable.
ITEM 8. FINANCIAL
INFORMATION
A. CONSOLIDATED
STATEMENTS AND OTHER FINANCIAL INFORMATION
Our Financial Statements are included in this annual report pursuant to Item 18.
Legal Proceedings
On April 16, 2024, Craig Beisner, a purported shareholder of the Company, filed a putative
class action complaint, alleging violations of U.S. federal securities laws against, the Company and certain of our former and current
directors and officers, in the United States District Court for the Southern District of New York (the “SDNY,” and the putative
class action, the “SDNY Action”). The SDNY Action asserts claims under Sections 10(b) and 20(a) of the Exchange Act
and alleges that the defendants materially misrepresented and/or omitted facts in various public disclosures concerning the Company’s
search advertising business and its partnership with Microsoft Bing. On August 5, 2024, the court appointed Menora Mivtachim Insurance
Ltd., Menora Mivtachim Pensions and Gemel Ltd., Menora Mivtachim Vehistadrut Hamehandesim Nihul Kupot Gemel LTD, Clal Insurance Company
Ltd., Clal Pension and Provident Ltd., and Atudot Pension Fund for Employees & Independent Workers Ltd. as joint lead plaintiffs (“Lead
Plaintiffs”). On September 20, 2024, Lead Plaintiffs filed an amended complaint against the aforementioned defendants and
one additional defendant, one of the founders of Content IQ (the “Amended Complaint”). On November 4, 2024, the Company filed
a motion to dismiss the Amended Compliant, which was granted in June 2025 by the SDNY with leave for plaintiffs to file an amended complaint
on limited grounds. In July 2025, Plaintiffs filed notices of appeal to the Second Circuit Court of Appeals and the appeal was fully briefed
as of February 27, 2026. The Company disputes the allegations of wrongdoing and intends to continue to vigorously defend against them.
73
On April 11, 2024, Ms. Hadar Shamai, filed a motion to certify a class action with the
Financial Department of the District Court of Tel Aviv (the “DCTA”) against the above mentioned defendants. The proceedings
in Israel are stayed until final resolution of plaintiffs’ appeal in the SDNY Action.
On February 13, 2025, purported shareholder John Carr filed a putative derivative action
on behalf of the Company in the SDNY against all of the Company’s directors and certain of its officers and former directors, principally
alleging that the Board breached its duties by allowing the Company to make material misrepresentations and/or omissions in various public
disclosures concerning the Company’s search advertising business and partnership with Microsoft Bing (the “Derivative Action”).
The derivative action is stayed, pending final resolution of plaintiffs’ appeal in the SDNY Action. The Company also disputes the
allegations of wrongdoing and intends to defend against them vigorously.
From time to time, we or our subsidiaries may be a party to legal proceedings and claims
in the ordinary course of business. The outcome of such matters cannot be predicted with certainty.
Policy on Dividend Distribution
It is currently our policy not to distribute dividends.
B. SIGNIFICANT
CHANGES
None.
ITEM 9. THE
OFFER AND LISTING
A. OFFER
AND LISTING DETAILS
Our ordinary shares have been listed on the Nasdaq Stock Market
since January 2006. Our ordinary shares commenced trading on the TASE on December 4, 2007. Our trading symbol on Nasdaq is “PERI”
and on TASE is “PERION.”
B. PLAN
OF DISTRIBUTION
Not applicable.
C. MARKETS
See “—Listing Details” above.
D. SELLING
SHAREHOLDERS
Not applicable.
E. DILUTION
Not applicable.
F. EXPENSES
OF THE ISSUE
Not applicable.
74
ITEM 10.
ADDITIONAL INFORMATION
A. SHARE
CAPITAL
Not applicable
B. MEMORANDUM
AND ARTICLES OF ASSOCIATION
A copy of our amended and restated articles of association is attached
as Exhibit 1.1 to this annual report on Form 20-F. The information called for by this Item is set forth in Exhibit 2.1 to this annual
report on Form 20-F and is incorporated by reference into this annual report on Form 20-F.
C. MATERIAL
CONTRACTS
We have not entered into any material contract within the three
years prior to the date of this Annual Report, other than contracts entered into in the ordinary course of business, or as otherwise described
herein in Item 4.A “History and Development of the Company,” Item 4.B “Business
Overview,” Item 5.B “Operating and Financial Review and Prospects—Liquidity
and Capital Resources,” Item 6.C “Board Practices” and Item 7.B “Related
Party Transactions.”
D. EXCHANGE
CONTROLS
Non-residents of Israel who hold our ordinary shares are able to
receive any dividends, and any amounts payable upon the dissolution, liquidation and winding up of our affairs, freely repatriable in
non-Israeli currency at the rate of exchange prevailing at the time of conversion. However, Israeli income tax is required to have been
paid or withheld on these amounts. In addition, the statutory framework for the potential imposition of exchange controls has not been
eliminated, and may be restored at any time by administrative action.
E. TAXATION
The following is a general summary only and should not be considered
as income tax advice or relied upon for tax planning purposes.
ISRAELI TAXATION
THE FOLLOWING DESCRIPTION IS NOT INTENDED TO CONSTITUTE A COMPLETE
ANALYSIS OF ALL TAX CONSEQUENCES RELATING TO THE OWNERSHIP OR DISPOSITION OF OUR ORDINARY SHARES. YOU SHOULD CONSULT YOUR OWN TAX ADVISOR
CONCERNING THE TAX CONSEQUENCES OF YOUR PARTICULAR SITUATION, AS WELL AS ANY TAX CONSEQUENCES THAT MAY ARISE UNDER THE LAWS OF ANY STATE,
LOCAL, FOREIGN OR OTHER TAXING JURISDICTION.
The following is a summary of the material Israeli tax laws applicable
to us, and some Israeli Government programs benefiting us. This section also contains a discussion of some Israeli tax consequences to
persons acquiring our ordinary shares. This summary does not discuss all the aspects of Israeli tax law that may be relevant to a particular
investor in light of his or her personal investment circumstances or to some types of investors subject to special treatment under Israeli
law. Examples of this kind of investor include residents of Israel or traders in securities who are subject to special tax regimes not
covered in this discussion. Since some parts of this discussion are based on new tax legislation that has not yet been subject to judicial
or administrative interpretation, we cannot assure you that the appropriate tax authorities or the courts will accept the views expressed
in this discussion.
The discussion below should not be construed
as legal or professional tax advice and does not cover all possible tax considerations. Potential investors are urged to consult
their own tax advisors as to the Israeli or other tax consequences of the purchase, ownership and disposition of our ordinary shares,
including, in particular, the effect of any foreign, state or local taxes.
75
General Corporate Tax Structure in Israel
Taxable income of Israeli companies is generally subject to corporate
tax at the rate of 23%. However, the effective tax rate payable by a company that derives income from a Preferred Enterprise or a Preferred
Technological Enterprise (as further discussed below) may be considerably lower.
Under Israeli tax legislation, a corporation is considered as an
“Israeli resident company” under the Ordinance if it meets one of the following: (i) it was incorporated in Israel; or (ii)
the control and management of its business are exercised in Israel.
Foreign Currency Regulations
We are permitted to measure our Israeli taxable income in U.S.
dollars pursuant to regulations published by the Israeli Minister of Finance, which provide the conditions for doing so. We believe that
we meet and will continue to meet, the necessary conditions and as such, we measure our results for tax purposes based on the U.S. dollar/NIS
exchange rate as of December 31st of each year.
Law for the Encouragement of Capital Investments, 1959
The Law for Encouragement of Capital Investments, 1959 (the “Investment
Law”) provides tax benefits for income of Israeli companies meeting certain requirements and criteria. The Investment Law has undergone
certain amendments and reforms in recent years.
The Israeli parliament enacted a reform to the Investment Law,
effective January 2011 (the “2011 Amendment”). The reform introduced new benefits for “Preferred Enterprises”
instead of the benefits granted in accordance with the provisions of the Investment Law in effect prior to the 2011 Amendment. However,
companies entitled to benefits under the Investment Law in effect up to January 1, 2011, which were referred to as an Approved Enterprise
and Benefited Enterprise, were entitled to choose to continue to enjoy such benefits, provided that certain conditions were met, or elect
instead, irrevocably, to forego such benefits and elect the benefits of the Preferred Enterprise. The 2017 Amendment introduced new benefits
for Technological Enterprises, alongside the existing Preferred Enterprise tax benefits. According to the 2011 Amendment, a flat rate
tax applies to companies eligible for the Preferred Enterprise status. In order to be eligible for Preferred Enterprise status, a company
must meet minimum requirements to establish that it contributes to the country’s economic growth and is a competitive factor for
the Gross Domestic Product (a competitive enterprise).
We elected the Preferred Enterprise status commencing in 2011 and
one of our Israeli subsidiaries became a Preferred Enterprise in 2017.
We believe that the Company and certain of its Israeli subsidiaries,
qualify as a Preferred Technology Enterprise in 2025 and therefore, the portion of the income derived from Preferred Technology Income,
as defined in the Investment Law, which qualifies for the benefits, is subject to a lower tax rate of 12% according to Amendment 73 to
the Law, as described below.
Benefits granted to a Preferred Enterprise’s Preferred Income
include reduced tax rates. In peripheral regions (Development Area A) the reduced tax rate was 7.5%. In other regions the tax rate was
16%. Preferred Enterprises in peripheral regions will be eligible for grants from the Israeli Authority for Investments and Development
of the Industry and Economy (the “Investment Center”), as well as the applicable reduced tax rates.
A dividend distribution from a Preferred Enterprise out of the
“Preferred Income” would be generally subject to 20% withholding tax (in the case of non-Israeli shareholders - subject to
the receipt in advance of a valid certificate from the Israel Tax Authority ("ITA") allowing for such reduced 20% withholding tax rate,
or such lower rate as may be provided under an applicable double tax treaty). Dividend distributions out of “Preferred Income”
to an Israeli company, are not subject to withholding tax (although, if such dividends are subsequently distributed to individuals or
a non-Israeli company the aforesaid will apply).
In December 2016, the Economic Efficiency Law (Legislative Amendments
for Applying the Economic Policy for the 2017 and 2018 Budget Years), 2016, which includes Amendment 73 to the Investment Law, was published.
Amendment 73 prescribed special tax tracks for technological enterprises as described below, and is in addition to the other existing
tax beneficial programs under the Investment Law. On June 30, 2021, certain grandfather rules in Amendment 73 pertaining the preferred
enterprises have expired, most significantly the limitation of Preferred Income to exclude such which is generated by intangible assets
not related to the manufacturing or such that would not have been recognized as Preferred Technology Income.
Tax benefits under Amendment 73 that became effective on January
1, 2017.
Amendment 73 provides tax benefits for two types of “Technology
Enterprises”, as described below, and is in addition to the other existing tax beneficial programs under the Investment Law.
76
Amendment 73 applies to “Preferred Technology Enterprise” that meet certain
conditions, including, inter-alia, the following:
| • |
A company’s average R&D expenses in the three years prior to the current tax year must be greater than or equal to 7% of
its total revenue or exceed NIS 75 million (approximately $21 million) per year; and |
| • |
A company must also satisfy one of the following conditions: (1) at least 20% of the workforce (or at least 200 employees) are employees
whose full salary has been paid and reported in the Company’s financial statements as R&D expenses; (2) a venture capital investment
of an amount approximately equivalent to at least NIS 8 million (approximately $2.2 million) was previously made in the company, and the
company did not change its line of business after such investment; (3) growth in sales by an average of 25% or more, over the three years
preceding the tax year provided that the company’s turnover in the tax year and in each of the previous three years was at least
NIS 10 million (approximately $2.8 million); or (4) the number of the company’s employees increased by 25% (on average) or more
in the course of three years, provided that the company employed at least 50 employees in the tax year and in each of the previous three
years. |
| • |
Companies that do not meet one of the above two conditions may request preliminary approval from the National Authority for Technological
Innovation regarding being companies that own an innovation-promoting enterprise. |
| • |
A company must qualify as a “Competitive Enterprise” as described under the Investment Law. |
| • |
Total annual consolidated revenue is below NIS10 billion (approximately $3.1 billion). |
A “Special Preferred Technology Enterprise” is an enterprise
that meets conditions one and two above, and in addition is a part of a group of companies that have total annual consolidated revenue
in excess of NIS 10 billion (approximately $3.1 billion).
A “Preferred Technology Enterprise” satisfying the
required conditions will thereby enjoy a reduced corporate tax rate of 12% on income that qualifies as “Preferred Technology Income”,
as defined in the Investment Law. The tax rate is further reduced to 7.5% for a Preferred Technology Enterprise located in Development
Area A. These corporate tax rates shall apply only with respect to the portion of intellectual property developed in Israel unless certain
exceptions apply. In addition, a Preferred Technology Enterprise will enjoy a reduced corporate tax rate of 12% on capital gain derived
from the sale of certain “Benefitted Intangible Assets” (as defined in the Investment Law) to a related foreign company if
the Benefitted Intangible Assets were acquired from a foreign company on or after January 1, 2017 for at least NIS 200 million (approximately
$62 million), and the sale receives prior approval from the National Authority for Technological Innovation (previously known as the Israeli
Office of the Chief Scientist), to which we refer as the IIA.
A “Special Preferred Technology Enterprise” satisfying
the required conditions, will thereby enjoy a reduced corporate tax rate of 6% on “Preferred Technology Income” regardless
of the company’s geographic location within Israel. In addition, a Special Preferred Technology Enterprise will enjoy a reduced
corporate tax rate of 6% on capital gain derived from the sale of certain “Benefitted Intangible Assets” to a related foreign
company if the Benefitted Intangible Assets were either developed by the Special Preferred Technology Enterprise or acquired from a foreign
company on or after January 1, 2017, and the sale received prior approval from IIA. A Special Preferred Technological Enterprise that
acquires Benefitted Intangible Assets from a foreign company for more than NIS 500 million (approximately $155 million) will be eligible
for these benefits for at least ten years, subject to certain approvals as specified in the Investment Law.
Dividends distributed to Israeli shareholders by a Preferred Technological
Enterprise or a Special Preferred Technology Enterprise, paid out of Preferred Technology Income, are generally subject to withholding
tax at source at the rate of 20% (in the case of non-Israeli shareholders - subject to the receipt in advance of a valid certificate from
the ITA allowing for such 20% reduced withholding tax rate or such lower rate as may be provided in an applicable tax treaty). However,
if such dividends are paid to an Israeli company, no tax is required to be withheld (although, if such dividends are subsequently distributed
to individuals or a non-Israeli company the aforesaid will apply). If such dividends are distributed to a parent foreign company that
holds solely or together with other foreign companies at least 90% of the shares of the distributing company and other conditions are
met, the withholding rate will be 4% (or a lower rate under a tax treaty, if applicable, subject to the receipt in advance of a valid
certificate from the ITA allowing for a reduced tax rate).
We believe that we and our Israeli subsidiary Vidazoo are qualified
as a “Preferred Technology Enterprise” in 2024 and 2025 and subject to a lower tax rate of 12% according to Amendment 73 to
the Law, as described above.
Law for the Encouragement of Knowledge Intensive Industry (Temporary
Provision), 2023
In July 2023, the Israeli Parliament enacted the Law for the Encouragement
of Knowledge Intensive Industry (Temporary Provision), 2023 (“the Angel’s Law”)
among other stipulations, the Angel’s Law provides certain benefits to companies qualifying for the Preferred Technological Enterprise
status in the form of tax deductions when acquiring other companies, Israeli or foreign. In order to obtain the benefits, the acquiror
and target companies must meet certain criteria, perform certain actions and obtain certain approvals from the government.
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Law for the Encouragement of Industry (Taxes), 5729-1969
We believe that we, and one of our Israeli subsidiaries, currently
qualify as an “Industrial Company” within the meaning of the Law for the Encouragement of Industry (Taxes), 5729-1969, or
the Industry Encouragement Law. The Industry Encouragement Law defines an “Industrial Company” as a company resident of Israel
which was incorporated in Israel, of which 90% or more of its income in any tax year, other than income from certain government loans,
is derived from an “Industrial Enterprise” owned by it and located in Israel or in the “Area”, in accordance with
the definition in section 3A of the Ordinance. An “Industrial Enterprise” is defined as an enterprise whose major activity
in any given tax year is industrial production.
The following corporate tax benefits, among others, are available to Industrial Companies:
| • |
Amortization of the cost of purchased know-how, patents, and right to use patent or know how that were purchased in good faith and
are used for the development or promotion of the Industrial Enterprise, over an eight-year period beginning from the year in which such
rights were first used; |
| • |
Under specified conditions, an election to file consolidated tax returns with additional related Israeli Industrial Companies controlled
by it; and |
| • |
Deduction of expenses related to a public offering in equal amounts over three years beginning from the year of the offering.
|
Eligibility for the benefits under the Industry Encouragement Law
is not subject to receipt of prior approval from any governmental authority. We cannot assure that we qualify or will continue to qualify
as an “Industrial Company” or that the benefits described above will be available in the future.
Taxation of our Shareholders
Capital Gains Taxes Applicable
to Non-Israeli Resident Shareholders. The Ordinance, generally imposes a capital gains tax on the disposition of capital assets
by non-Israeli tax residents if those assets (i) are located in Israel, (ii) are shares or a right to shares in an Israeli resident corporation,
or (iii) represent, directly or indirectly, rights to assets located in Israel, unless a specific exemption is available or unless a tax
treaty between Israel and the shareholder’s country of residence provides otherwise. The Ordinance distinguishes between real capital
gain and inflationary surplus. The inflationary surplus is a portion of the total capital gain equivalent to the increase of the relevant
asset’s tax basis attributable to an increase in the Israeli consumer price index or, in certain circumstances, a foreign currency
exchange rate, between the date of purchase and the date of disposition. Inflationary surplus is not currently subject to tax in Israel.
The real capital gain is the excess of the total capital gain over the inflationary surplus.
Generally, a non-Israeli resident (whether an individual or a corporation)
who derives capital gains from the sale of shares in an Israeli resident company purchased upon or after the registration of the shares
on the TASE or on a regulated market outside of Israel (such as Nasdaq) should be exempt from Israeli capital gains tax unless, among
others, (i) the shares were held through a permanent establishment that the non-Israeli resident shareholder maintains in Israel, or (ii)
the Israeli resident company is classified as a real estate investment trust or ceased to be a real estate investment trust (as defined
in the Ordinance). If not exempt, a non-Israeli resident shareholder would generally be subject to tax on capital gain at the ordinary
corporate tax rate (23% in 2025), if generated by a company, or at the rate of 25%, if generated by an individual, or 30%, if generated
by an individual who is a “substantial shareholder” (as defined under the Ordinance), at the time of sale or at any time during
the preceding 12-month period (or if the shareholder claims a deduction for interest and linkage differences expenses in connection with
the purchase and holding of such shares). A “substantial shareholder” is generally a person who alone or together with such
person’s relative or another person who collaborates with such person on a permanent basis, holds, directly or indirectly, at least
10% of any of the “means of control” of the corporation. “Means of control” generally include, among others, the
right to vote, receive profits, nominate a director or an executive officer, receive assets upon liquidation, or order someone who holds
any of the aforesaid rights how to act, regardless of the source of such right. Individual and corporate shareholders dealing in securities
in Israel are taxed at the tax rates applicable to business income (a corporate tax rate for a corporation (23% in 2025) and a marginal
tax rate of up to 47% for an individual in 2025 (excluding excess tax as discussed below)) unless contrary provisions in a relevant tax
treaty apply. Non-Israeli entities (including corporations) will not be entitled to the foregoing exemption if Israeli residents, whether
directly or indirectly: (i) have a controlling interest of more than 25% in such non-Israeli entity or (ii) are the beneficiaries of,
or are entitled to, 25% or more of the revenue or profits of such non-Israeli entity. Such exemption is not applicable, inter alia, to
a person whose gains from selling or otherwise disposing of the shares are deemed to be business income.
Additionally, a sale of shares by a non-Israeli resident may be
exempt from Israeli capital gains tax under the provisions of an applicable tax treaty between Israel and the shareholder’s country
of residence. For example, under the Convention Between the Government of the United States and the Government of the State of Israel
with respect to Taxes of Income, as amended, or the United States-Israel Tax Treaty, the disposition of shares by a shareholder who (i)
is a U.S. resident (for purposes of the United States-Israel Tax Treaty), (ii) holds the shares as a capital asset, and (iii) is entitled
to claim the benefits afforded to such person by the United States-Israel Tax Treaty, is generally exempt from Israeli capital gains tax.
Such exemption will not apply, inter alia, if (a) the capital gain arising from such sale, exchange or disposition is attributed to a
permanent establishment that the shareholder maintains in Israel, (b) the shareholder holds, directly or indirectly, shares representing
10% or more of the voting capital of the company at any time in the 12-month period preceding such sale, exchange or disposition, subject
to certain conditions, (c) such U.S. resident is an individual and was present in Israel for a period or periods aggregating to 183 days
or more during the relevant taxable year, (d) the capital gains arising from such sale, exchange or disposition is attributed to real
estate located in Israel, or (e) the capital gain arising from such sale, exchange or disposition is attributed to royalties. In each
case, the sale, exchange or disposition of our ordinary shares would be subject to Israeli tax, to the extent applicable.
78
Regardless of whether non-Israeli shareholders may be liable for
Israeli capital gains tax on the sale of our ordinary shares, the payment of the consideration may be subject to the withholding of Israeli
tax at source. Shareholders may be required to demonstrate that they are exempt from tax on their capital gains in order to avoid withholding
at source at the time of sale. Specifically, in transactions involving a sale of all of the shares of an Israeli resident company, in
the form of a merger or otherwise, the ITA may require from shareholders who are not liable for Israeli tax to sign declarations in forms
specified by this authority or obtain a specific exemption from the ITA to confirm their status as non-Israeli tax residents, and, in
the absence of such declarations or exemptions, may require the purchaser of the shares to withhold taxes at source.
In addition, with respect to mergers involving an exchange of shares,
Israeli tax law allows for tax deferral in certain circumstances but makes the deferral contingent on the fulfillment of a number of conditions,
including, in some cases, a holding period of two years from the date of the transaction during which sales and dispositions of shares
of the participating companies are subject to certain restrictions. Moreover, with respect to certain share swap transactions in which
the sellers receive shares in the acquiring entity that are publicly traded on a stock exchange, the tax deferral is limited in time,
and when such time expires, the tax becomes payable even if no disposition of such shares has occurred. In order to benefit from the tax
deferral, a pre-ruling from the ITA might be required.
Taxation of Non-Israeli Resident
Shareholders on Receipt of Dividends. Non-Israeli residents (whether individuals or corporations) are generally subject to
Israeli income tax on the receipt of dividends paid on our ordinary shares at the rate of 25%, unless relief is provided under the provisions
of an applicable tax treaty between Israel and the shareholder’s country of residence (provided that a certificate from the ITA
allowing for a reduced withholding tax rate or a tax exemption is obtained in advance). With respect to a person who is a “substantial
shareholder” (described above) at the time of receiving the dividend or at any time during the preceding 12 months, the applicable
tax rate is 30%. Dividends paid on publicly traded shares, like our ordinary shares, to non-Israeli residents, are generally subject to
Israeli withholding tax at a rate of 25%, so long as the shares are registered with a nominee company (whether or not the recipient is
a substantial shareholder), unless a lower rate is provided under an applicable tax treaty (provided that a certificate from the ITA allowing
for a reduced withholding tax rate is obtained in advance). However, a distribution of dividends to non-Israeli residents is generally
subject to withholding tax at source at a rate of 20% if the dividend is distributed from income attributed to a “Preferred Enterprise”
(as such terms are defined in the Investment Law), subject to the receipt in advance of a valid certificate from the ITA allowing for
such reduced tax rate, or such lower rate as may be provided under an applicable tax treaty. If such dividends are distributed by a “Preferred
Technology Enterprise” or a “Special Preferred Technology Enterprise”, paid out of “Preferred Technology Income”
(as such terms are defined under the Investment Law), to a parent non-Israeli company that holds, alone or together with other foreign
companies, 90% or more in the Israeli company and other conditions are met, the withholding tax rate will be 4% (or a lower rate under
a tax treaty, if applicable, subject to the receipt in advance of a valid certificate from the ITA allowing for a reduced tax rate).
For example, under the United States-Israel Tax Treaty and subject
to the eligibility to the benefits under such treaty, the maximum rate of tax withheld at source in Israel on dividends paid to a holder
of our ordinary shares who is a U.S. resident (for purposes of the United States-Israel Tax Treaty) is 25%. However, for dividends not
generated by a Preferred Enterprises and paid to a U.S. corporation holding 10% or more of the outstanding voting capital throughout the
tax year in which the dividend is distributed as well as during the previous tax year, the maximum rate of withholding tax is generally
12.5%, provided that not more than 25% of the gross income of the Israeli resident paying corporation for such preceding year consists
of certain types of dividends and interest. Notwithstanding the foregoing, dividends distributed from income attributed to a Preferred
Enterprise are not entitled to such reduction under such tax treaty but are subject to withholding tax at the rate of 20% for such a United
States corporate shareholder (subject to the receipt in advance of a valid certificate from the ITA allowing for a reduced tax rate),
provided that the conditions related to the holding of 10% of our voting capital and to our gross income for the previous year (as set
forth in the previous sentence) are met. The aforementioned rates under the United States-Israel Tax Treaty would not apply if the dividend
income is derived through a permanent establishment of the U.S. resident in Israel.
If the dividend is attributable partly to income derived from a
Preferred Enterprise, and partly to other sources of income, the withholding rate will be a blended rate reflecting the relative portions
of the two types of income. U.S. residents (for purposes of the United States-Israel Tax Treaty) who are subject to Israeli withholding
tax on a dividend may be entitled to a credit or deduction for United States federal income tax purposes up to the amount of the taxes
withheld, subject to detailed rules contained in U.S. tax law.
We cannot assure you that we will designate the profits that we
may distribute in a way that will reduce shareholders’ tax liability.
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A non-Israeli resident who receives dividends from which tax was
withheld is generally exempt from the obligation to file tax returns in Israel in respect of such income, provided, inter alia, that (i)
such income was not derived from a business conducted in Israel by the taxpayer, (ii) the taxpayer has no other taxable sources of income
in Israel with respect to which a tax return is required to be filed and (iii) in the case of individuals, the taxpayer is not obliged
to pay excess tax (as further explained below).
Excess Tax. Individuals
who are subject to tax in Israel (whether any such individual is an Israeli resident or non-Israeli resident) are also subject to an additional
tax at a rate of 3% on annual income exceeding NIS 721,560 (approximately $226 thousand) for 2025 (which amount is generally linked to
the annual change in the Israeli consumer price index, with the exception that based on Israeli new legislation such amount, and certain
other statutory amounts will not be linked to the Israeli consumer price index for the years 2025-2027), including, but not limited to,
dividends, interest and capital gain. In addition, pursuant to legislation effective as of January 1, 2025, an additional
2% excess tax is imposed on Capital-Sourced Income (defined as income from any source other than employment income, business income or
income from “personal effort”), to the extent that the Individual’s Capital Sourced Income exceeds the specified threshold
of NIS 721,560 (and regardless of the employment/business income amount of such individual). This new excess tax applies, among other
things, to income from capital gains, dividends, interest, rental income, or the sale of real property.
Estate and Gift Tax. Israeli tax law
presently does not impose estate or gift taxes.
U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following is a description of material U.S. federal income
tax consequences to the U.S. Holders described below of owning and disposing of our ordinary shares, but this discussion does not purport
to be a comprehensive description of all of the tax considerations that may be relevant to a particular person’s decision to own,
or dispose of, our ordinary shares.
This discussion applies only to a U.S. Holder that holds the ordinary
shares as capital assets for U.S. federal income tax purposes (generally, property held for investment). It does not describe all of the
tax consequences that may be relevant in light of a U.S. Holder’s particular circumstances, including any minimum tax, the Medicare
contribution tax on net investment income and tax consequences applicable to U.S. Holders subject to special rules, such as:
| • |
certain financial institutions; |
| • |
dealers or traders in securities that use a mark-to-market method of tax accounting; |
| • |
persons holding ordinary shares as part of a straddle, integrated or similar transaction; |
| • |
persons whose functional currency for U.S. federal income tax purposes is not the U.S. dollar; |
| • |
entities classified as partnerships for U.S. federal income tax purposes and their partners; |
| • |
tax-exempt entities, “individual retirement accounts” or “Roth IRAs”; |
| • |
real estate investment trusts or regulated investment companies; |
| • |
persons who acquired our ordinary shares pursuant to the exercise of an employee stock option or otherwise as compensation;
|
| • |
persons that own or are deemed to own 10% or more of our stock by voting power or value; or |
| • |
persons holding ordinary shares in connection with a trade or business outside the United States . |
If a partnership (or other entity that is classified as a partnership
for U.S. federal income tax purposes) owns ordinary shares, the U.S. federal income tax treatment of a partner will generally depend on
the status of the partner and the activities of the partnership. Partnerships owning ordinary shares and their partners should consult
their tax advisers as to their particular U.S. federal income tax consequences of owning and disposing of ordinary shares.
This discussion is based on the Internal Revenue Code of 1986,
as amended (the “Code”), administrative pronouncements, judicial decisions, final, temporary and proposed Treasury regulations,
and the income tax treaty between the United States and Israel, (the “Treaty”), all as of the date hereof, any of which is
subject to change, possibly with retroactive effect.
As used herein, a “U.S. Holder” is a person that is
eligible for the benefits of the Treaty and is, for U.S. federal income tax purposes, a beneficial owner of ordinary shares and:
| • |
a citizen or individual resident of the United States; |
| • |
a corporation, or other entity taxable as a corporation, created or organized in or under the laws of the United States, any state
therein or the District of Columbia; or |
| • |
an estate or trust the income of which is subject to U.S. federal income taxation regardless of its source. |
This discussion does not address any U.S. federal taxes (such as
estate or gift taxes) other than income taxes, nor does it address any state, local or non-U.S. tax considerations. U.S. Holders should
consult their tax advisers concerning the U.S. federal, state, local and non-U.S. tax consequences of owning and disposing of our ordinary
shares in their particular circumstances.
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Passive Foreign Investment Company Rules
In general, a non-U.S. corporation is a PFIC for any taxable year
in which (i) 75% or more of its gross income consists of passive income or (ii) 50% or more of the value of its assets (generally determined
on an average quarterly basis) consists of assets that produce, or are held for the production of, passive income. For purposes of the
above calculations, a non-U.S. corporation that owns (or is treated as owning for U.S. federal income tax purposes), directly or indirectly,
at least 25% by value of the shares or equity interests of another corporation is treated as if it held its proportionate share of the
assets of the other corporation and received directly its proportionate share of the income of the other corporation. Passive income generally
includes dividends, interest, rents, royalties and certain gains. Cash and marketable securities are generally passive assets for these
purposes. Goodwill and other intangible assets are generally characterized as non-passive or passive assets based on the nature of the
income produced in the activity to which the goodwill and other intangible assets relate.
Because we hold a substantial amount of cash and other
passive assets, our PFIC status for any taxable year generally will depend on the average value of our goodwill and other intangible assets
(as well as the value of our other active assets). If the value of our assets were determined by reference to the sum of our market capitalization
and liabilities, we would likely be a PFIC for 2025 due to the low average value of our market capitalization during 2025. However, based
on external advice, we believe that the market capitalization plus liabilities does not fairly reflect the gross value of our total assets,
and alternative valuation methods are appropriate. Specifically, we believe that if our assets were valued based on the discounted cash
flows or revenue multiples methods, our enterprise value for 2025 would be significantly larger than the value derived from using the
market capitalization method. Accordingly, we believe that we were likely not a PFIC for 2025. However, our position is not binding on
the U.S. Internal Revenue Service and there can be no assurance that it will agree with our valuation approach.
In addition, we may also be a PFIC for any future taxable
year if the portion of our financial income out of our gross income were to increase to 75% or more for any taxable year.
Our PFIC status for any taxable year is an annual factual determination
that can be made only after the end of that taxable year and will depend on the composition of our income and assets and the value of
our assets from time to time (including the value of our goodwill and other intangible assets). For the reasons described above, we cannot
express any expectation regarding our PFIC status for the current or any future taxable year.
If we are a PFIC for any taxable year and any of our non-U.S. subsidiaries
or other companies in which we own equity interests is also a PFIC (any such entity, a “Lower-tier PFIC”), a U.S. Holder will
be deemed to own a proportionate amount (by value) of the shares of any Lower-tier PFIC and will be subject to U.S. federal income tax
according to the rules described in the subsequent paragraph on (i) certain distributions by the Lower-tier PFIC and (ii) dispositions
of shares of the Lower-tier PFIC, in each case as if the U.S. Holder held such shares directly, even though the U.S. Holder will not receive
the proceeds of those distributions or dispositions.
In general, if we are a PFIC for any taxable year during which
a U.S. Holder holds ordinary shares, gain recognized by such U.S. Holder on a sale or other disposition (including certain pledges) of
its ordinary shares will be allocated ratably over the U.S. Holder’s holding period. The amounts allocated to the taxable year of
the sale or disposition and to any year before we became a PFIC will be taxed as ordinary income. The amount allocated to each other taxable
year will be subject to tax at the highest rate in effect for individuals or corporations, as appropriate, for that taxable year, and
an interest charge will be imposed on the resulting tax liability for each such year. Furthermore, to the extent that distributions received
by a U.S. Holder in any taxable year on its ordinary shares exceed 125% of the average of the annual distributions on the ordinary shares
received during the preceding three taxable years or the U.S. Holder’s holding period, whichever is shorter, such distributions
will be subject to taxation in the same manner. Under a rule commonly referred to as “once a PFIC always a PFIC,” if
we are a PFIC for any taxable year during which a U.S. Holder owns ordinary shares, we will generally continue to be treated as a PFIC
with respect to the U.S. Holder for all succeeding taxable years during which the U.S. Holder owns the ordinary shares, even if we cease
to meet the threshold requirements for PFIC status, unless the U.S. Holder makes a timely “deemed sale” purging election,
in which case any gain on the deemed sale will be taxed under the PFIC rules described above.. If we are a PFIC for any taxable year but
cease to be a PFIC for subsequent taxable years, U.S. Holders should consult their tax advisers regarding the advisability of making the
“deemed sale” election.
Alternatively, if we are a PFIC for any taxable year and if our
ordinary shares are “regularly traded” on a “qualified exchange,” a U.S. Holder can make a mark-to-market election
that will result in tax treatment different from the general tax treatment for PFICs described above. The ordinary shares will be treated
as “regularly traded” for any calendar year in which more than a de minimis quantity of the ordinary shares are traded on
a qualified exchange on at least 15 days during each calendar quarter. Nasdaq, where the ordinary shares are listed, is a qualified exchange
for this purpose. If a U.S. Holder of ordinary shares makes a timely mark-to-market election, the U.S. Holder generally will recognize
as ordinary income any excess of the fair market value of the ordinary shares at the end of each taxable year over their adjusted tax
basis, and will recognize an ordinary loss in respect of any excess of the adjusted tax basis of the ordinary shares over their fair market
value at the end of the taxable year (but only to the extent of the net amount of income previously included as a result of the mark-
to-market election). If a U.S. Holder makes the election, the U.S. Holder’s tax basis in the ordinary shares will be adjusted to
reflect the income or loss amounts recognized. Any gain recognized on the sale or other disposition of ordinary shares in a year in which
we are a PFIC will be treated as ordinary income and any loss will be treated as an ordinary loss (but only to the extent of the net amount
of income previously included as a result of the mark-to-market election, with any excess treated as a capital loss). If a U.S. Holder
of ordinary shares makes a timely mark-to-market election, distributions paid on ordinary shares will be treated as discussed under “—Taxation
of Distributions” below. U.S. Holders should consult their tax advisers regarding the availability and advisability of making a
mark-to-market election in their particular circumstances. In particular, U.S. Holders should consider carefully the impact of a mark-to-market
election with respect to their ordinary shares given that we may have Lower-tier PFICs and that there is no provision in the Code, Treasury
regulations or other official guidance that would permit them to make a mark-to-market election with respect to any Lower-tier PFIC.
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If we are a PFIC (or are treated as a PFIC with respect to any
U.S. Holder) for a taxable year in which a dividend is paid or the preceding taxable year, the favorable rate for dividends paid to certain
non-corporate U.S. Holders, as described in “—Taxation of Distributions” below, will not apply.
We do not intend to provide information necessary for U.S. Holders
to make “qualified electing fund” elections which, if available, would result in tax treatment different from the general
tax treatment for PFICs described above.
If we are a PFIC for any taxable year during which a U.S. Holder
owns any ordinary shares, the U.S. Holder will generally be required to file annual reports with the U.S. Internal Revenue Service (the
“IRS”). U.S. Holders should consult their tax advisers regarding the determination of whether we are a PFIC for any taxable
year and the potential application of the PFIC rules to their ownership of our ordinary shares.
Taxation of Distributions
This discussion is subject to the discussion under “—Passive Foreign Investment
Company Rules” above.
We currently do not intend to make cash distributions on ordinary
shares. Any distributions (other than certain pro rata distributions of ordinary shares) will be treated as dividends to the extent paid
out of our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. Because we do not maintain
calculations of our earnings and profits under U.S. federal income tax principles, it is expected that distributions generally will be
reported to U.S. Holders as dividends. Dividends will not be eligible for a dividends-received deduction. Subject to applicable limitations,
dividends paid on our ordinary shares to certain non-corporate U.S. Holders may be taxable at a favorable rate, provided that we are not
(and are not treated with respect to any U.S. Holder as) a PFIC for our taxable year in which the dividend is paid or the preceding taxable
year. Non-corporate U.S. Holders should consult their tax advisers regarding the availability of this favorable rate in their particular
circumstances and taking into account our PFIC status for any taxable year.
Dividends will generally be included in a U.S. Holder’s income
on the date of receipt. If any dividend is paid in NIS, the amount of dividend income will be the U.S. dollar amount of the dividend calculated
by reference to the exchange rate in effect on the date of receipt, regardless of whether the payment is in fact converted into U.S. dollars.
If the dividend is converted into U.S. dollars on the date of receipt, a U.S. Holder should not be required to recognize foreign currency
gain or loss in respect of the dividend income. A U.S. Holder may have foreign currency gain or loss if the dividend is converted into
U.S. dollars after the date of receipt. Such gain or loss will generally be treated as U.S.-source ordinary income or loss.
Dividend income will include any amounts withheld in respect of
Israeli taxes and will be treated as foreign-source income. Subject to applicable limitations, some of which vary depending upon the U.S.
Holder’s circumstances, Israeli taxes withheld from dividends on our ordinary shares (at a rate not exceeding the applicable Treaty
rate) generally will be creditable against the U.S. Holder’s U.S. federal income tax liability. The rules governing foreign tax
credits are complex. For example, Treasury regulations provide that, in the absence of an election to apply the benefits of an applicable
income tax treaty, in order for foreign income taxes to be creditable the relevant foreign income tax rules must be consistent with certain
U.S. federal income tax principles, and we have not determined whether the Israeli income tax system meets these requirements. The IRS
has released notices that provide relief from certain of the provisions of the Treasury regulations described above for taxable years
ending before the date that a notice or other guidance withdrawing or modifying the temporary relief is issued (or any later date specified
in such notice or other guidance). In lieu of claiming a non-U.S. tax credit, U.S. Holders may elect to deduct non-U.S. taxes (including
Israeli taxes) in computing their taxable income, subject to applicable limitations. An election to deduct non-U.S. taxes instead of claiming
foreign tax credits applies to all otherwise creditable non-U.S. taxes paid or accrued in the taxable year. U.S. Holders should consult
their tax advisers regarding the creditability or deductibility of Israeli taxes in their particular circumstances.
Sale or Other Taxable Disposition of Ordinary Shares
This discussion is subject to the discussion under “—Passive Foreign Investment
Company Rules” above.
Gain or loss realized on the sale or other taxable disposition
of our ordinary shares will be capital gain or loss and will be long-term capital gain or loss if the U.S. Holder has owned the ordinary
shares for more than one year. The amount of the gain or loss will equal the difference between the U.S. Holder’s tax basis in the
ordinary shares disposed of and the amount realized on the disposition, in each case as determined in U.S. dollars. This gain or loss
will generally be U.S.-source gain or loss for foreign tax credit purposes. The deductibility of capital losses is subject to limitations.
Israeli taxes on capital gains will generally not be eligible for foreign tax credits. U.S. Holders should consult their tax advisers
with respect to the creditability of Israeli taxes, if any, on disposition gains (or the ability to reduce the amount realized on dispositions
by the amount of any such taxes) in their particular circumstances.
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Information Reporting and Backup Withholding
Payments of dividends and sales proceeds that are made within the
United States or through certain U.S.-related intermediaries may be subject to information reporting and backup withholding, unless (i)
the U.S. Holder is a corporation or other “exempt recipient” and (ii) in the case of backup withholding, the U.S. Holder provides
a correct taxpayer identification number and certifies that it is not subject to backup withholding. Backup withholding is not an additional
tax. The amount of any backup withholding from a payment to a U.S. Holder will be allowed as a credit against the U.S. Holder’s
U.S. federal income tax liability and may entitle it to a refund, provided that the required information is timely furnished to the IRS.
Certain U.S. Holders who are individuals (or certain specified
entities) may be required to report information relating to their ownership of ordinary shares or non-U.S. accounts through which the
ordinary shares are held. U.S. Holders should consult their tax advisers regarding their reporting obligations with respect to our ordinary
shares.
F. DIVIDENDS
AND PAYING AGENTS
Not applicable.
G. STATEMENT
BY EXPERTS
Not applicable.
H. DOCUMENTS
ON DISPLAY
We are subject to the informational requirements of the Exchange
Act that are applicable to foreign private issuers, and under those requirements file reports with the SEC. Those other reports or other
information may be inspected without charge at the locations described above. As a foreign private issuer, we are exempt from the rules
under the Exchange Act related to the furnishing and content of proxy statements. Section 8103 of the National Defense Authorization Act
for Fiscal Year 2026, named the “Holding Foreign Insiders Accountable Act”, which was signed into law on December 18, 2025,
will require directors and officers of foreign private issuers to make insider reports under Section 16(a) of the Exchange Act, effective
March 18, 2026. Our principal shareholders continue to remain exempt from the reporting under Section 16(a) of the Exchange Act and our
directors, officers and principal shareholders continue to remain exempt from the short-swing profit recovery provisions contained in
Section 16(b) of the Exchange Act with respect to their purchases and sales of ordinary shares. In addition, we are not required under
the Exchange Act to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptly as United
States companies whose securities are registered under the Exchange Act. However, we will file with the SEC, within 120 days after the
end of each subsequent fiscal year, or such applicable time as required by the SEC, an annual report on Form 20-F containing financial
statements audited by an independent registered public accounting firm, and will submit to the SEC reports on Form 6-K containing unaudited
quarterly financial information.
Our filings with the SEC are also available to the public through
the SEC’s website at http://www.sec.gov. This site contains reports, proxy and information statements and other information
regarding issuers that file electronically with the SEC. The information on that website is not part of this Annual Report on Form 20-F
and is not incorporated by reference herein.
I. SUBSIDIARY
INFORMATION
Not applicable.
J. ANNUAL
REPORT TO SECURITY HOLDERS
Not applicable.
83
ITEM 11.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Exchange Rate Risk. A portion of our revenue
and expenses are denominated in foreign currencies. As a result, numerous balances are denominated or linked to these currencies. Foreign
currency related fluctuations resulted in $0.6 million net losses in 2023, $1.0 million net losses in 2024 and $2.0 million net losses
in 2025. These losses are included in financial income, net, as presented in our statements of income (loss).
As of December 31, 2025, balance sheet financial items in U.S.
dollars, our functional currency, and those currencies other than the U.S. dollars were as follows:
|
|
U.S. dollars |
NIS |
Canadian dollars |
Other Currencies |
Total |
|||||||||||||||
|
|
In thousands of U.S. dollars |
|||||||||||||||||||
|
Current assets |
396,578 |
40,179 |
45,096 |
37,928 |
519,781 |
|||||||||||||||
|
Long-term assets |
1,297 |
7,869 |
476 |
244 |
9,886 |
|||||||||||||||
|
Current liabilities |
(116,586 |
) |
(12,207 |
) |
(33,839 |
) |
(24,744 |
) |
(187,375 |
) | ||||||||||
|
Long-term liabilities |
(28,063 |
) |
(20,965 |
) |
(142 |
) |
- |
(49,171 |
) | |||||||||||
|
Total |
253,226 |
14,876 |
11,591 |
13,428 |
293,121 |
|||||||||||||||
In addition, in territories where our prices are based on local
currencies, fluctuations in the dollar exchange rate could affect our gross profit margin. We may compensate for such fluctuations by
changing product prices accordingly. We also hold a small part of our financial investments in other currencies, mainly NIS and Euro.
The dollar value of those investments may decline. A revaluation of 1% of the foreign currencies (i.e. other than U.S. dollar) would not
have a material effect on our income before taxes possibly reducing it by $0.5 million.
A significant portion of our costs, including salaries and office
expenses are incurred in NIS. Inflation in Israel may have the effect of increasing the U.S. dollar cost of our operations in Israel.
If the U.S. dollar declines in value in relation to the New Israeli Shekel, it will become more expensive for us to fund our operations
in Israel. A revaluation of 1% of the New Israeli Shekel will affect our income before tax by approximately $0.4 million. The exchange
rate of the U.S. dollar to the New Israeli Shekel, based on exchange rates published by the Bank of Israel, was as follows:
|
|
Year Ended December 31, |
|||||||||||
|
|
2023 |
2024 |
2025 |
|||||||||
|
Average rate for period |
3.688 |
3.701 |
3.452 |
|||||||||
|
Rate at year-end |
3.627 |
3.647 |
3.190 |
|||||||||
ITEM 12.
DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
Not applicable.
84
PART II
ITEM 13.
DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
None.
ITEM 14.
MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
None.
ITEM 15.
CONTROLS AND PROCEDURES
| (a) |
Disclosure Controls and Procedures Our chief executive officer and chief financial officer,
after evaluating the effectiveness of our disclosure controls and procedures as of December 31, 2025, have concluded that, as of such
date, our disclosure controls and procedures were effective and ensured that information required to be disclosed by us in reports that
we file or submit under the Exchange Act is accumulated and communicated to our management, including our chief executive officer and
chief financial officer, to allow timely decisions regarding required disclosure and is recorded, processed, summarized and reported within
the time periods specified by the SEC’s rules and forms. |
| (b) |
Management’s Annual Report on Internal Control Over Financial Reporting Our management,
under the supervision of our chief executive officer and chief financial officer, is responsible for establishing and maintaining adequate
internal control over our financial reporting. The Company’s internal control over financial reporting, as defined in Rules 13a-15(f)
and 15d-15(f) of the Exchange Act, means a process designed to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Internal
control over financial reporting includes policies and procedures that: (a) pertain to the maintenance of records that in reasonable detail
accurately and fairly reflect our transactions and asset dispositions; (b) provide reasonable assurance that transactions are recorded
as necessary to permit the preparation of our financial statements in accordance with generally accepted accounting principles, and that
our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (c) provide reasonable
assurance regarding the prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material
effect on our financial statements. Due to its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
|
Our management evaluated the effectiveness
of our internal control over financial reporting as of December 31, 2025. In making this assessment, our management used the criteria
set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in “Internal Control – Integrated
Framework” (2013 framework). Our management has concluded, based on its assessment, that our internal control over financial reporting
was effective as of December 31, 2025.
In accordance with guidance issued by
the Securities and Exchange Commission, companies are permitted to exclude acquisitions from their final assessment of internal control
over financial reporting for the first fiscal year in which the acquisition occurred. Our management’s evaluation of internal control
over financial reporting excluded the internal control activities of Greenbids, which we acquired in May 2025. Greenbids total assets,
excluding goodwill and acquired intangible assets, constituted approximately 0.5% of our consolidated total assets as of December 31,
2025.
| (c) |
Attestation Report of the Registered Public Accounting Firm Kost Forer Gabbay & Kasierer,
an independent registered accounting firm and a member firm of EY Global, has issued an attestation report on the effectiveness of our
internal control over financial reporting, as stated in their report included herein. See “Report of Independent Registered Public
Accounting Firm” on page F-2. |
| (d) |
Changes in Internal Control Over Financial Reporting During the period covered by this report,
no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange
Act) have occurred that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
|
85
ITEM 16.
RESERVED
ITEM 16A.
AUDIT COMMITTEE FINANCIAL EXPERT
Our board of directors has determined that Ms. Michal Drayman,
who is an independent director (as defined in the Nasdaq Listing Rules) and serves as our chairperson of the audit committee, qualifies
as an “audit committee financial expert” as defined in Item 16A of Form 20-F.
ITEM 16B.
CODE OF ETHICS
Our board of directors has adopted an updated code of business
conduct and ethics in November 2025 applicable to all of our directors, officers and employees as required by the Nasdaq Listing Rules,
which also complies with the definition of a “code of ethics” set out in Section 406(c) of the Sarbanes-Oxley Act of 2002.
A copy of the code of ethics can be found on our website at: https://perion.com/investors/governance-documents/. We granted no waivers
under our code of business conduct and ethics in 2025.
ITEM 16C.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
Fees for the professional services rendered by our independent
accountants Kost Forer Gabbay & Kasierer, a member of EY Global, for each of the last two fiscal years were as follows (in thousands
of U.S. dollars):
|
|
2024 |
2025 |
||||||
|
Audit Fees |
$ |
721 |
$ |
800 |
||||
|
Tax Fees |
98 |
75 |
||||||
|
Audit Related fees |
45 |
134 |
||||||
|
Total |
$ |
864 |
$ |
1,009 |
||||
Audit fees include
fees for professional services rendered by our principal accountant in connection with the annual audit, review of quarterly consolidated
financial data, internationally required statutory audits, consents and assistance with review of documents filed with the SEC.
Tax fees include services
related to tax compliance and claims for refunds, tax planning and advice, including assistance with tax audits and appeals, advice related
to additional efforts required in connection with mergers and acquisitions and assistance with respect to requests for rulings from tax
authorities.
Audit-related fees principally
include assistance with audit services and consultations, mainly related to follow-on public offerings, mergers and acquisitions.
Our audit committee provides assistance to our board of directors
in fulfilling its legal and fiduciary obligations in matters involving our accounting, auditing, financial reporting, internal control
and legal compliance functions by pre-approving the services performed by our independent accountants and reviewing their reports regarding
our accounting practices and systems of internal control over financial reporting. Our audit committee also oversees the audit efforts
of our independent accountants and takes those actions that it deems necessary to satisfy itself that the accountants are independent
of management. Our audit committee has authorized all auditing and non-auditing services provided by our independent accountants during
2024 and 2025 and the fees paid for such services.
ITEM 16D.
EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
None.
86
ITEM 16E.
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
In February 2024, our board of directors approved a share repurchase program of up to
$50 million, which was expanded in April 2024 to a maximum of up to $75 million. In March 2025, our board of directors approved an additional
$50 million expansion of the previously authorized share repurchase program, to a total of $125 million and in December 2025, authorized
an additional $75 million expansion to a total of $200 million. As of December 31, 2025, we spent an aggregate of $118.1 million to repurchase
12,868,472 ordinary shares under our share repurchase program. The following table provides information regarding our repurchases of our
ordinary shares for each month included in the period covered by this Annual Report on Form 20-F:
|
Period |
|
(a) Total Number of Ordinary Shares Purchased |
|
|
(b) Average Price Paid per Ordinary Share |
|
|
(c) Total Number of Ordinary Shares Purchased as Part of Publicly Announced Plans or
Programs |
|
|
(d) Approximate Value ($US) that may yet be purchased under the Plan |
| ||||
|
March 1, 2025 - March 31, 2025 |
|
|
762,242 |
|
|
|
8.529 |
|
|
|
762,242 |
|
|
|
71.6 |
M |
|
April 1, 2025 - April 30, 2025 |
|
|
2,086,166 |
|
|
|
8.431 |
|
|
|
2,086,166 |
|
|
|
54.0 |
M |
|
May 1, 2025 - May 31, 2025 |
|
|
1,565,515 |
|
|
|
10.008 |
|
|
|
1,565,515 |
|
|
|
38.3 |
M |
|
September 1, 2025 - September 30, 2025 |
|
|
799,596 |
|
|
|
9.403 |
|
|
|
799,596 |
|
|
|
30.8 |
M |
|
October 1, 2025 - October 31, 2025 |
|
|
838,714 |
|
|
|
9.626 |
|
|
|
838,714 |
|
|
|
22.7 |
M |
|
November 1, 2025 - November 30, 2025 |
|
|
848,667 |
|
|
|
9.661 |
|
|
|
848,667 |
|
|
|
14.5 |
M |
|
December 1, 2025 - December 31, 2025 |
|
|
767,572 |
|
|
|
9.983 |
|
|
|
767,572 |
|
|
|
81.9 |
M |
ITEM 16F.
CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
(1) Not applicable.
ITEM 16G.
CORPORATE GOVERNANCE
We are a foreign private issuer whose ordinary shares are listed
on the Nasdaq Global Select Market. As such, we are required to comply with U.S. federal securities laws, including the Sarbanes-Oxley
Act, and the Nasdaq Listing Rules, including the Nasdaq corporate governance requirements. The Nasdaq Listing Rules provide that foreign
private issuers may follow home country practice in lieu of certain qualitative listing requirements subject to certain exceptions and
except to the extent that such exemptions would be contrary to U.S. federal securities laws, so long as the foreign private issuer discloses
that it does not follow such listing requirement and describes the home country practice followed in its reports filed with the SEC. Below
is a concise summary of the significant ways in which our corporate governance practices differ from the corporate governance requirements
of Nasdaq applicable to domestic U.S. listed companies:
Shareholder Approval. Although
the Nasdaq Listing Rules generally require shareholder approval of equity compensation plans and material amendments thereto, we follow
Israeli practice, which is to have such plans and amendments approved only by the board of directors, unless such arrangements are for
the compensation of chief executive officer or directors, in which case they also require the approval of the compensation committee and
the shareholders.
87
In addition, rather than follow the Nasdaq Listing Rules requiring
shareholder approval for the issuance of securities in certain circumstances, we follow Israeli law, under which a private placement of
securities requires approval by our board of directors and shareholders if it will cause a person to become a controlling shareholder
(generally presumed at 25% ownership) or if:
| • |
the securities issued amount to 20% or more of our outstanding voting rights before the issuance; |
| • |
some or all of the consideration is other than cash or listed securities or the transaction is not on market terms; and |
| • |
the transaction will increase the relative holdings of a shareholder that holds 5% or more of our outstanding share capital or voting
rights or will cause any person to become, as a result of the issuance, a holder of more than 5% of our outstanding share capital or voting
rights. |
Shareholder Quorum. The
Nasdaq Listing Rules require that an issuer have a quorum requirement for shareholders meetings of at least one-third of the outstanding
shares of the issuer’s common voting stock. We have chosen to follow home country practice with respect to the quorum requirements
of an adjourned shareholders meeting. Our articles of association, as permitted under the Companies Law, provide that if at the adjourned
meeting a legal quorum is not present after 30 minutes from the time specified for the commencement of the adjourned meeting, then the
meeting shall take place regardless of the number of members present and in such event the required quorum shall consist of any number
of shareholders present in person or by proxy.
Executive Sessions. While
the Nasdaq Listing Rules require that “independent directors,” as defined in the Nasdaq Listing Rules, must have regularly
scheduled meetings at which only “independent directors” are present. Israeli law does not require, nor do our independent
directors necessarily conduct, regularly scheduled meetings at which only they are present.
Approval of Related Party Transactions. Although
the Nasdaq Listing Rules require the approval of the audit committee or another independent body of a Company’s board of directors
for all “related party transactions” required to be disclosed pursuant to Item 7.B. of Form 20-F, we follow the provisions
of the Israeli Companies Law. Specifically, that all related party transactions are approved in accordance with the requirements and procedures
for approval of interested party acts and transactions, set forth in sections 268 to 275 of the Israeli Companies Law, and the regulations
promulgated thereunder, which allow for the approval of certain related party transactions, which are immaterial, in the normal course
of business and on market terms, by the board of directors. Other specified transactions can require audit committee approval and shareholder
approval, as well as board approval. See also Exhibit 2.1 to this annual report on Form 20-F, which is incorporated by reference into
this annual report on Form 20-F, for the definition and procedures for the approval of related party transactions.
ITEM 16H.
MINE SAFETY DISCLOSURE
Not applicable.
ITEM 16I.
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTION
Not applicable.
88
ITEM
16J.
INSIDER TRADING POLICIES
We
have adopted
an insider trading policy governing the purchase, sale, and other dispositions of our securities by directors, senior
management, and employees that is reasonably designed to promote compliance with applicable insider trading laws, rules and regulations,
and any listing standards applicable to us. A copy of our insider trading policy, as amended, is filed with this Annual Report on Form
20-F as Exhibit 11.1.
ITEM
16K. CYBERSECURITY
RISK MANAGEMENT POLICIES AND PROCEDURES
Cybersecurity
Risk Management and Strategy
We
have developed and implemented a cybersecurity risk management program designed to protect the confidentiality, integrity ,
and availability of our critical systems, networks, and information. Our cybersecurity risk management program includes a cybersecurity
incident response plan and cybersecurity controls. Our cybersecurity risk management program is assessed annually by independent
third-party auditors. Our cybersecurity risk management program is integrated into our overall enterprise risk management program, and
shares common methodologies, reporting channels and governance processes.
Our
cybersecurity risk management program includes:
| • |
risk assessments designed to help identify, manage
and address material cybersecurity risks to our critical systems, networks, information, products, services, and broader enterprise information
technology environment; |
| • |
a cybersecurity management team principally responsible
for managing (1) our cybersecurity risk assessment processes, (2) our cybersecurity controls, and (3) our response to cybersecurity threats
and incidents; |
| • |
|
| • |
a risk management process for third-party service
providers and suppliers and vendors; |
| • |
cybersecurity awareness training of our employees,
incident response personnel, and senior management; and |
| • |
a cybersecurity incident response plan that includes
procedures for responding to cybersecurity threats and incidents. |
89
With
respect to our third-party risk management processes, we generally seek to impose certain cybersecurity requirements on critical third
parties with whom we do business. Although we employ third-party due diligence, onboarding, and other procedures designed to assess the
data protection, data privacy, and cybersecurity practices of third-party service providers, suppliers and vendors (including risk assessments
and contractual protections), our ability to monitor such practices is limited, we do not control their cyber risk management and there
can be no assurance that we will detect, prevent, mitigate, or remediate the risk of any weakness, compromise, or failure in the systems,
networks, and information owned or controlled by such third parties. When we do become aware that a third-party service provider, supplier,
or vendor has experienced any compromise or failure, we attempt to mitigate our risk, which may include termination of such third party’s
connections to our systems, networks and information where we deem it to be appropriate
Cybersecurity
Governance
Our
CISO and CIO periodically report directly to our board of directors on our cybersecurity risk management program and efforts to prevent,
detect, mitigate, and remediate cybersecurity-related risks and incidents. In addition, we have an escalation process in place designed
to inform senior management and, based on management’s assessment of risk, our board of directors, of material cybersecurity-related
risks and incidents.
Our
cybersecurity management
team, together with our Data Protection Officer , supervises efforts to prevent, detect, mitigate, and remediate cybersecurity
risks and incidents through various means, which may include briefings from internal cybersecurity personnel; periodic war games to prepare
for data breaches, cyber-attacks, and other similar incidents; cybersecurity and privacy awareness trainings; periodic fraud risk assessments;
containment and incident response tools; data retention policies; follow research and professional publications by governmental
bodies or other public or private sources, including third-party consultants engaged by us; and alerts and reports produced by cybersecurity
tools deployed in the information technology environment. Our cybersecurity management team actively engages with industry groups
for benchmarking and awareness of best practices.
Data
Protection Governance
Our
Audit Committee considers data protection risk as part of its overall enterprise risk management function and oversees management’s
implementation of our continuing Data Protection Compliance Program which is periodically presented to our Audit Committee. As part of
such oversight, our Audit Committee receives updates from management and our CISO on data protection management and enforcement. In addition,
management updates our Audit Committee, as necessary, regarding certain Data Protection enforcement and regulatory risks and, at least
once a year, our board of directors receives a report from management on the topic. As part of the Data Protection Program we have also
appointed an external DPO working closely with our internal data specialist.
90
PART
III
ITEM
17.
FINANCIAL STATEMENTS
Not
applicable.
ITEM
18.
FINANCIAL STATEMENTS
The
following financial statements and related auditors’ report are filed as part of this annual report on Form 20-F:
91
PERION
NETWORK LTD. AND ITS SUBSIDIARIES
CONSOLIDATED
FINANCIAL STATEMENTS
AS
OF DECEMBER 31, 2025
IN
U.S. DOLLARS
INDEX
|
Page
| |
|
Reports
of Independent Registered Public Accounting Firm (PCAOB ID:
|
F-2
|
|
Consolidated
Balance Sheets |
F-6
|
|
Consolidated
Statements of Income (loss) |
F-7
|
|
Consolidated
Statements of Comprehensive Income (loss) |
F-8
|
|
Consolidated
Statements of Changes in Shareholders' Equity |
F-9
|
|
Consolidated
Statements of Cash Flows |
F-10
|
|
Notes
to the Consolidated Financial Statements |
F-12
|
F
- 1
 |
Kost
Forer Gabbay & Kasierer
144
Menachem Begin Road, Building A,
Tel-Aviv
6492102, Israel |
Tel:
+972-3-6232525
Fax:
+972-3-5622555
ey.com
|
Report
of Independent Registered Public Accounting Firm
To
the Shareholders and the Board of Directors of Perion Network Ltd.
Opinion
on the Financial Statements
We
have audited the accompanying consolidated balance sheets of Perion Network Ltd. and its subsidiaries (the Company) as of December 31,
2025 and 2024, the related consolidated statements of income (loss), comprehensive income (loss), changes in shareholders' equity and
cash flows for each of the three years in the period ended December 31, 2025, and the related notes (collectively referred to as the "consolidated
financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial
position of the Company at December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years
in the period ended December 31, 2025, in conformity with U.S. generally accepted accounting principles.
We
also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's
internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control—Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated March
16, 2026 expressed an unqualified opinion thereon.
Basis
for Opinion
These
financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s
financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent
with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities
and Exchange Commission and the PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits
included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud,
and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts
and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates
made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable
basis for our opinion.
F
- 2
Critical
Audit Matters
The
critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated
or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial
statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters
does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the
critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they
relate.
|
Revenue
Recognition - Gross versus Net presentation | ||
|
Description
of the Matter |
As
described in Note 2 to the consolidated financial statements, the Company’s revenue is comprised primarily of Search Advertising
Revenue and Advertising Solutions Revenue. In determining whether Search Advertising and Advertising Solutions revenue should be presented
on a gross or net basis, the Company evaluates whether it acts as a principal or an agent in the transaction, including whether it controls
the promised service before transferring that service to the customer.
Auditing
the Company's evaluation of the principal versus agent considerations was complex and required a high degree of auditor judgment due to
the significant judgment and subjectivity used by management in determining whether revenue should be presented on a gross or net basis.
This judgment primarily related to evaluating, on a contract-by-contract basis, whether the Company controls the promised services before
transferring those services to the customer and whether the Company is the primary party responsible for fulfilling the promise in the
arrangement.
| |
|
How
We Addressed the Matter in Our Audit |
We
obtained an understanding, evaluated the design and tested the operating effectiveness of internal controls over the Company’s gross
versus net revenue evaluation process, including controls over the review of contracts, the assessment of principal versus agent considerations,
and the completeness and accuracy of the underlying data used in the evaluation.
Our
substantive audit procedures included, on a sample basis, reviewing the terms of contracts with publishers, evaluating management’s
principal versus agent assessment, discussing contractual terms with legal and finance personnel responsible for managing the contractual
arrangements, and evaluating the related disclosures in the consolidated financial statements. |
|
Valuation
of Goodwill | ||
|
Description
of the Matter |
At
December 31, 2025, the Company’s goodwill balance was $266 million. As discussed in Notes 2 and 8 to the consolidated financial
statements, the Company’s goodwill is tested for impairment at least annually, or more frequently if events or circumstances
indicate that the carrying value of goodwill may be impaired. The Company operates as a single reporting unit. The Company performed
a quantitative impairment assessment by estimating the fair value of the reporting unit and comparing it to its carrying amount. Management’s
estimate of the reporting unit’s fair value was primarily based on discounted cash flow projections and market multiplies derived
from comparable businesses.
Auditing
the Company's goodwill impairment test was complex and highly judgmental due to the significant estimates required to determine the fair
value of its reporting unit. In particular, the fair value estimates were sensitive to changes in significant assumptions, including the
discount rate, revenue growth rate, operating margins, working capital, weighted average cost of capital, estimated capital expenditures,
and projected cash flow growth rates. These assumptions are inherently subjective and are affected by expected future market and economic
conditions, as well as industry and company-specific qualitative factors.
| |
|
How
We Addressed the Matter in Our Audit |
We
obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s goodwill impairment
valuation process, including controls over the significant assumptions used in estimating the fair value of the reporting unit.
To
test the Company's goodwill impairment analysis, including the estimated fair value of the reporting unit, our audit procedures included
assessing the methodologies and testing the significant assumptions and underlying data used by management. We evaluated the Company’s
valuation process by comparing the significant assumptions to current industry and economic trends. We analyzed management’s forecasted
revenue, including revenue growth rates, profitability margins, and working capital, and evaluated changes compared to historical
results and selected guideline companies within the industry. In addition, we performed a sensitivity analysis of significant assumptions
to evaluate the effect of changes in those assumptions on the estimated fair value of the reporting unit. We involved our valuation
specialists to assist with our evaluation of the methodologies used by the Company and significant assumptions included in the fair value
estimates. |
F
- 3
|
Business
combination - Valuation of technology acquired in a business combination and fair value of contingent consideration liability
| ||
|
Description
of the Matter |
As
described in Note 5 to the consolidated financial statements, on May 8, 2025, the Company completed the acquisition of 100% of the shares
of Greenbids SAS ("Greenbids") for a total consideration of $49.6 million, which comprised of cash consideration of $30.1 million and
contingent consideration estimated at fair value of $19.5 million on the acquisition date (the “Greenbids acquisition"). The Greenbids
acquisition was accounted for as a business combination in accordance with ASC 805 "Business Combinations". Accordingly, the purchase
price was allocated to the assets acquired and liabilities assumed based on their respective fair values, including intangible assets
of $35.5 million, which consist primarily of $31.0 million of technology.
Auditing
the Company's accounting for the Greenbids acquisition was complex and involved subjective auditor judgment due to the significant assumptions
and judgement required by management in determining the fair value of certain intangible assets and contingent consideration. The
Company used the discounted cash flow method under the income approach ("the valuation model") to measure the fair value of the technology.
The significant assumptions used to estimate the fair value of the technology included the discount rate applied and certain assumptions
that form the basis of the forecasted results, such as revenue growth rates, profitability margins and probability of milestone achievement.
The Company used a Monte Carlo simulation to measure the earn-out. The significant assumptions used in the Monte Carlo simulation included
volatility and projected financial information. These significant assumptions are forward-looking and could be affected by future economic
and market conditions.
| |
|
How
We Addressed the Matter in Our Audit |
We
obtained an understanding, evaluated the design and tested the operating effectiveness of the internal controls over the Company’s
accounting of the Greenbids acquisition. This included testing controls over the estimation process supporting the recognition and measurement
of the technology and the contingent consideration, and management's judgment and evaluation of underlying assumptions and estimates with
regards to the fair values of the technology and the contingent consideration.
To
test the estimated fair value of the technology and contingent consideration, we performed audit procedures that included, evaluating
the Company's use of valuation methodologies, evaluating the prospective financial information and testing the completeness and accuracy
of the underlying data supporting the significant assumptions and estimates. In addition, we compared the significant assumptions, including
forecasted revenue and revenue growth rates to market and economic trends, historical results of the acquired business and to other relevant
factors. We utilized the assistance of our valuation specialists to evaluate the methods used to determine the fair value of the technology
and contingent consideration, which included, independent comparative calculations to estimate the acquired entity discount rate and calculation
of the fair value of the model used to calculate the contingent consideration. To test the estimated fair value of the contingent consideration,
we performed audit procedures that included assessing the terms of the arrangement, including the conditions that must be met for the
contingent consideration to become payable. We have also evaluated the Company’s disclosures regarding the business combinations
included in Note 5 to the consolidated financial statements. |
/s/
Kost Forer Gabbay & Kasierer
A
Member of EY Global
We
have served as the Company's auditor since 2004.
Tel-Aviv,
Israel
March
16, 2026
F
- 4
| |
Kost
Forer Gabbay & Kasierer
144
Menachem Begin Road, Building A,
Tel-Aviv
6492102, Israel |
Tel:
+972-3-6232525
Fax:
+972-3-5622555
ey.com
|
Report
of Independent Registered Public Accounting Firm
To the
Shareholders and the Board of Directors of Perion Network Ltd.
Opinion
on Internal Control Over Financial Reporting
We have audited Perion
Network Ltd. and its subsidiaries' internal control over financial reporting as of December 31, 2025, based on criteria established in
Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework)
(the COSO criteria). In our opinion, Perion Network Ltd. and its subsidiaries (the Company) maintained, in all material respects, effective
internal control over financial reporting as of December 31, 2025, based on the COSO criteria.
As indicated in the accompanying
Management’s Annual Report on Internal Control over Financial Reporting, management’s assessment of and conclusion on the
effectiveness of internal control over financial reporting did not include the internal controls of Greenbids SAS, which is included in
the 2025 consolidated financial statements of the Company and constituted 0.9% and 0.6% of total and net assets, respectively, as of December
31, 2025 and 0.6% and 39.1% of revenues and net income (loss), respectively, for the year then ended. Our audit of internal control over
financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of Greenbids SAS.
We also have audited,
in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets
of the Company as of December 31, 2025 and 2024, the related consolidated statements of income (loss), comprehensive income (loss), changes
in shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2025, and the related notes
and our report dated March 16, 2026 expressed an unqualified opinion thereon.
Basis
for Opinion
The Company's management
is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal
control over financial reporting included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting.
Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are
a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the
U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit
in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining
an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating
the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition
and Limitations of Internal Control Over Financial Reporting
A company’s internal
control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s
internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that,
in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management
and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition,
use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent
limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
/s/ Kost
Forer Gabbay & Kasierer
A Member of EY Global
March 16, 2026
F
- 5
PERION
NETWORK LTD. AND ITS SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
U.S.
dollars in thousands (except share and per share data)
|
|
December
31, |
|||||||
|
|
2025
|
2024
|
||||||
|
ASSETS
|
||||||||
|
Current
Assets |
||||||||
|
Cash and cash equivalents
|
$
|
|
$
|
|
||||
|
Restricted cash
|
|
|
||||||
|
Short-term bank deposits
|
|
|
||||||
|
Marketable securities
|
|
|
||||||
|
Accounts receivable (net
of allowance of $ |
|
|
||||||
|
Prepaid expenses and
other current assets |
|
|
||||||
|
Total
Current Assets |
|
|
||||||
|
|
||||||||
|
Long-Term
Assets |
||||||||
|
Property and equipment,
net |
|
|
||||||
|
Operating lease right-of-use
assets |
|
|
||||||
|
Intangible assets, net
|
|
|
||||||
|
Goodwill
|
|
|
||||||
|
Deferred taxes
|
|
|
||||||
|
Other assets
|
|
|
||||||
|
Total
Long-Term Assets |
|
|
||||||
|
Total
Assets |
$
|
|
$
|
|
||||
|
|
||||||||
|
LIABILITIES
AND SHAREHOLDERS' EQUITY |
||||||||
|
Current
Liabilities |
||||||||
|
Accounts payable
|
$
|
|
$
|
|
||||
|
Accrued expenses and
other liabilities |
|
|
||||||
|
Short-term operating
lease liability |
|
|
||||||
|
Deferred revenue
|
|
|
||||||
|
Short-term payment obligation
related to acquisitions |
|
|
||||||
|
Total
Current Liabilities |
|
|
||||||
|
|
||||||||
|
Long-Term
Liabilities |
||||||||
|
Long-term operating lease
liability |
|
|
||||||
|
Payment obligation related
to acquisition |
|
|
||||||
|
Deferred taxes
|
|
|
||||||
|
Other long-term liabilities
|
|
|
||||||
|
Total
Long-Term Liabilities |
|
|
||||||
|
Total
Liabilities |
|
|
||||||
|
Commitments
and Contingencies |
||||||||
|
|
||||||||
|
Shareholders'
equity |
||||||||
|
Ordinary shares of ILS
at December 31, 2025 and 2024, respectively; Outstanding:
|
|
|
||||||
|
Additional paid-in capital
|
|
|
||||||
|
Treasury shares at cost
( |
(
|
)
|
(
|
)
| ||||
|
Accumulated other comprehensive
income (loss) |
|
(
|
)
| |||||
|
Retained earnings
|
|
|
||||||
|
Total
Shareholders' Equity |
|
|
||||||
|
Total
Liabilities and Shareholders' Equity |
$
|
|
$
|
|
||||
The accompanying notes
are an integral part of the consolidated financial statements.
F
- 6
PERION
NETWORK LTD. AND ITS SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF INCOME (LOSS)
U.S.
dollars in thousands (except share and per share data)
|
Year
ended December 31, |
||||||||||||
|
2025
|
2024
|
2023
|
||||||||||
|
Revenue
|
||||||||||||
|
Advertising Solutions
|
$
|
|
$
|
|
$
|
|
||||||
|
Search Advertising
|
|
|
|
|||||||||
|
Total
Revenue |
|
|
|
|||||||||
|
Costs
and Expenses |
||||||||||||
|
Cost of revenue
|
|
|
|
|||||||||
|
Traffic acquisition costs
and media buy |
|
|
|
|||||||||
|
Research and development
|
|
|
|
|||||||||
|
Selling and marketing
|
|
|
|
|||||||||
|
General and administrative
|
|
|
|
|||||||||
|
Change in fair value
of contingent consideration |
|
|
|
|||||||||
|
Depreciation and amortization
|
|
|
|
|||||||||
|
Restructuring costs and
other charges |
|
|
|
|||||||||
|
Total
Costs and Expenses |
|
|
|
|||||||||
|
Income
(loss) from Operations |
(
|
)
|
(
|
)
|
|
|||||||
|
Financial income, net
|
|
|
|
|||||||||
|
Income
(loss) before Taxes on Income |
(
|
)
|
|
|
||||||||
|
Taxes on income
|
|
|
|
|||||||||
|
Net
Income (loss) |
$
|
(
|
)
|
$
|
|
$
|
|
|||||
|
Net
Earnings (loss) per Share - Basic: |
$
|
(
|
)
|
$
|
|
$
|
|
|||||
|
Net
Earnings (loss) per Share - Diluted: |
$
|
(
|
)
|
$
|
|
$
|
|
|||||
|
Weighted
average number of shares – Basic: |
|
|
|
|||||||||
|
Weighted
average number of shares – Diluted: |
|
|
|
|||||||||
The accompanying notes
are an integral part of the consolidated financial statements.
F
- 7
PERION
NETWORK LTD. AND ITS SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
U.S.
dollars in thousands
|
Year
ended December 31, |
||||||||||||
|
2025
|
2024
|
2023
|
||||||||||
|
Net
income (loss) |
$
|
(
|
)
|
$
|
|
$
|
|
|||||
|
Other comprehensive income
(loss), net of tax: |
||||||||||||
|
Change
in foreign currency translation |
|
(
|
)
|
|
||||||||
|
Changes
in unrealized gain (loss) on marketable securities |
|
|
(
|
)
| ||||||||
|
Cash
Flow Hedge: |
||||||||||||
|
Changes
in unrealized gain (loss) |
|
|
(
|
)
| ||||||||
|
Gain
(loss) reclassified into net income |
(
|
)
|
(
|
)
|
|
|||||||
|
Net
change |
|
(
|
)
|
|
||||||||
|
Total Other comprehensive
income (loss), net of tax: |
|
(
|
)
|
|
||||||||
|
Comprehensive
income (loss) |
$
|
(
|
)
|
$
|
|
$
|
|
|||||
The accompanying notes
are an integral part of the consolidated financial statements.
F
- 8
PERION
NETWORK LTD. AND ITS SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
U.S.
dollars in thousands (except share data)
|
Ordinary
shares |
Additional
paid-in
capital
|
Accumulated
Other
Comprehensive
income
(loss) |
Retained
earnings |
Treasury
shares
|
Total
shareholders’
equity
|
|||||||||||||||||||||||
|
Number
of Shares |
$
|
$
|
$
|
$
|
$
|
$
|
||||||||||||||||||||||
|
Balance
as of December 31, 2022 |
|
|
|
(
|
)
|
|
(
|
)
|
|
|||||||||||||||||||
|
Stock-based compensation
|
-
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Exercise of stock-based
compensation |
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Other comprehensive income
|
-
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Net income
|
-
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Balance
as of December 31, 2023 |
|
|
|
(
|
)
|
|
(
|
)
|
|
|||||||||||||||||||
|
Issuance of shares related
to acquisitions - Vidazoo |
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Repurchase of shares
for retirement |
(
|
)
|
(
|
)
|
(
|
)
|
|
|
(
|
)
| ||||||||||||||||||
|
Stock-based compensation
|
-
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Exercise of stock options
and vesting of restricted stock units |
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Other comprehensive loss
|
|
|
(
|
)
|
|
|
(
|
)
| ||||||||||||||||||||
|
Net income
|
-
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Balance
as of December 31, 2024 |
|
|
|
(
|
)
|
|
(
|
)
|
|
|||||||||||||||||||
|
Repurchase of shares
for retirement |
(
|
)
|
(
|
)
|
(
|
)
|
|
|
(
|
)
| ||||||||||||||||||
|
Stock-based compensation
|
-
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Exercise of stock options
and vesting of restricted stock units |
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Other comprehensive income
|
|
|
|
|
|
|
||||||||||||||||||||||
|
Net loss
|
-
|
|
|
|
(
|
)
|
|
(
|
)
| |||||||||||||||||||
|
Balance
as of December 31, 2025 |
|
|
|
|
|
(
|
)
|
|
||||||||||||||||||||
The accompanying notes
are an integral part of the consolidated financial statements.
F
- 9
PERION
NETWORK LTD. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S.
dollars in thousands
|
Year
ended December 31, |
||||||||||||
|
2025
|
2024
|
2023
|
||||||||||
|
Cash
flows from operating activities |
||||||||||||
|
Net income (loss)
|
$
|
(
|
)
|
$
|
|
$
|
|
|||||
|
Adjustments required
to reconcile net income to net cash provided by operating activities: |
||||||||||||
|
Depreciation and amortization
|
|
|
|
|||||||||
|
Stock-based compensation
expense |
|
|
|
|||||||||
|
Change in payment obligation
related to acquisitions |
|
(
|
)
|
|
||||||||
|
Foreign currency translation
|
(
|
)
|
|
(
|
)
| |||||||
|
Accrued interest, net
|
|
|
(
|
)
| ||||||||
|
Deferred taxes, net
|
(
|
)
|
(
|
)
|
(
|
)
| ||||||
|
Accrued severance pay,
net |
(
|
)
|
|
(
|
)
| |||||||
|
Amortization of premium
and accretion of discount on marketable securities, net |
(
|
)
|
(
|
)
|
(
|
)
| ||||||
|
Gain from sale of property
and equipment |
(
|
)
|
(
|
)
|
(
|
)
| ||||||
|
Restructuring costs and
other charges |
|
|
|
|||||||||
|
Net changes in operating
assets and liabilities: |
||||||||||||
|
Decrease (Increase) in
accounts receivable, net |
(
|
)
|
|
(
|
)
| |||||||
|
Increase (Decrease) in
prepaid expenses and other current assets |
|
(
|
)
|
(
|
)
| |||||||
|
Operating lease right-of-use
assets |
|
|
|
|||||||||
|
Operating lease liabilities
|
(
|
)
|
(
|
)
|
(
|
)
| ||||||
|
Increase (Decrease) in
accounts payable |
|
(
|
)
|
|
||||||||
|
Increase (Decrease) in
accrued expenses and other liabilities |
|
(
|
)
|
(
|
)
| |||||||
|
Deferred revenue
|
(
|
)
|
(
|
)
|
(
|
)
| ||||||
|
Net
cash provided by operating activities |
$
|
|
$
|
|
$
|
|
||||||
|
Cash
flows from investing activities |
||||||||||||
|
Purchases of property
and equipment |
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
| |||
|
Proceeds from sale of
property and equipment |
|
|
|
|||||||||
|
Capitalized internal-use
software development costs |
(
|
)
|
|
|
||||||||
|
Investment in marketable
securities |
(
|
)
|
(
|
)
|
(
|
)
| ||||||
|
Proceeds from maturities
of marketable securities |
|
|
|
|||||||||
|
Proceeds from short-term
deposits |
|
|
|
|||||||||
|
Investment in short-term
deposits |
(
|
)
|
(
|
)
|
(
|
)
| ||||||
|
Cash paid in connection
with acquisitions, net of cash acquired |
(
|
)
|
|
(
|
)
| |||||||
|
Net
cash provided by (used in) investing activities |
$
|
(
|
)
|
$
|
|
$
|
(
|
)
| ||||
|
Cash
flows from financing activities |
||||||||||||
|
Repurchase of shares
for retirement |
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
||||
|
Proceeds from exercise
of stock-based compensation |
|
|
|
|||||||||
|
Repayment of long-term
loans |
(
|
)
|
|
|
||||||||
|
Payments of contingent
consideration |
|
(
|
)
|
(
|
)
| |||||||
|
Net
cash used in financing activities |
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
| |||
|
Effect of exchange rate
changes on cash and cash equivalents |
|
(
|
)
|
|
||||||||
|
Net
increase (decrease) in cash and cash equivalents and restricted cash |
$
|
(
|
)
|
$
|
(
|
)
|
$
|
|
||||
|
Cash and cash equivalents
and restricted cash at beginning of year |
|
|
|
|||||||||
|
Cash
and cash equivalents and restricted cash at end of year |
$
|
|
$
|
|
$
|
|
||||||
The accompanying notes
are an integral part of the consolidated financial statements.
F
- 10
PERION
NETWORK LTD. AND ITS SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
U.S.
dollars in thousands
|
Year
ended December 31 |
||||||||||||
|
2025
|
2024
|
2023
|
||||||||||
|
Reconciliation
of cash, cash equivalents, and restricted cash to the consolidated balance sheet |
||||||||||||
|
Cash and cash equivalents
|
$
|
|
$
|
|
$
|
|
||||||
|
Restricted cash
|
|
|
|
|||||||||
|
Total
cash, cash equivalents, and restricted cash |
$
|
|
$
|
|
$
|
|
||||||
|
Supplemental
Disclosure of Cash Flow Activities: |
||||||||||||
|
Cash
paid during the year for: |
||||||||||||
|
Income taxes, net of
refunds |
$
|
|
$
|
|
$
|
|
||||||
|
Interest
|
$
|
|
$
|
|
$
|
|
||||||
|
Non-cash
investing and financing activities: |
||||||||||||
|
Creation of new lease
right-of-use assets arising from lease liability |
$
|
|
$
|
|
$
|
|
||||||
|
Issuance of shares in
connection with acquisitions |
$
|
|
$
|
|
$
|
|
||||||
|
Measurement period adjustment
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||
|
Purchase of property
and equipment on credit |
$
|
(
|
)
|
$
|
|
$
|
|
|||||
The accompanying notes
are an integral part of the consolidated financial statements.
F
- 11
PERION
NETWORK LTD. AND ITS SUBSIDIARIES
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S.
dollars in thousands (except share and per share data)
|
NOTE
1: |
GENERAL
|
Perion
Network Ltd. ("Perion") and its wholly-owned subsidiaries (collectively referred to as the "Company"), is a global advertising technology
company that provides digital advertising solutions to advertisers, agencies, publishers and retailers. The Company's technology connects
advertisers with consumers across major digital channels, including Connected TV (CTV), Digital Out-of-Home (DOOH), retail media, social
platforms, the Open Web, and search.
|
NOTE
2: |
SIGNIFICANT ACCOUNTING POLICIES |
Basis
of consolidation
The
consolidated financial statements include the accounts of Perion and its wholly owned subsidiaries. All intercompany balances and transactions
have been eliminated.
Use
of estimates
The
preparation of the consolidated financial statements in conformity with U.S. Generally Accepted Accounting Principles (“GAAP”)
requires management to make estimates, judgments and assumptions that affect the amounts reported and disclosed in the financial statements
and the accompanying notes. Actual results could differ materially from those estimates. On an ongoing basis, the Company's management
evaluates its estimates, including those related to revenue recognition, allowance for credit losses, fair value of intangible assets
and goodwill, useful lives of intangible assets, contingent consideration, share-based awards, realizability of deferred tax assets, and
tax uncertainties. Such estimates are based on historical experience and on various other assumptions that are believed to be reasonable,
the results of which form the basis for making judgments about the carrying values of the Company’s assets and liabilities.
Segments
The
Company operates as one
operating segment. Operating segments are defined as components of an enterprise for which separate financial information is regularly
evaluated by the Company’s chief operating decision maker ("CODM"), in deciding how to allocate resources and assess performance.
The Company’s CODM is the chief executive officer.
The
CODM utilizes consolidated GAAP measure of profit and loss to evaluate the Company's overall performance and inform resource allocation
to support strategic priorities and capital allocation needs. The profit and loss measure most consistent with GAAP used by the CODM is
consolidated net income.
There
is no expense or asset information, that are supplemental to those disclosed in these consolidated financial statements, that are regularly
provided to the CODM. Since the Company operates as one operating segment, financial segment information, including profit or loss and
asset information, can be found in the consolidated financial statements.
F - 12
PERION NETWORK LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S.
dollars in thousands (except share and per share data)
|
NOTE
2: |
SIGNIFICANT
ACCOUNTING POLICIES (Cont.) |
Financial
statements in U.S. dollars
The
reporting currency of the Company is the U.S. dollar (“USD”). Major parts of the Company’s operations are carried out
by the Company and its subsidiaries in the United States and Israel. The functional currency of these entities is the USD. Accordingly,
monetary accounts maintained in currencies other than the USD are remeasured into USD, in accordance with ASC 830, Foreign
Currency Matters. All transaction gains and losses resulting from the re-measurement of the monetary balance sheet items are reflected
in the statements of income (loss) as financial income or expenses, as appropriate.
Management
believes that the USD is the currency of the primary economic environment in which the Company operates. The financial statements of other
subsidiaries, whose functional currency is determined to be their local currency, have been translated into USD. All balance sheet accounts
have been translated using the exchange rates in effect at the balance sheet date. Statement of Income amounts have been translated using
the average exchange rate for each applicable quarter. The resulting translation adjustments are reported as an accumulated other comprehensive
income (loss) component of shareholders' equity.
Cash
and cash equivalents and short-term bank deposits
The
Company considers all short-term, highly liquid and unrestricted cash balances, with stated maturities of three months or less from date
of purchase, as cash equivalents. Short-term deposits are bank deposits with maturities of more than three months but less than one year at
the date acquired. The short-term deposits as of December 31, 2025 and 2024 are denominated primarily in USD and bear interest at an average
annual rate of 5.84 %
and 4.95 %,
respectively.
Restricted
cash
Restricted
cash is comprised primarily of security deposits that are held to secure the Company’s lease obligations.
Marketable
Securities
Marketable
securities consist of debt securities. The Company classifies its marketable securities as available-for-sale at the time of purchase
and reevaluates such classification at each balance sheet date. Available-for-sale securities are stated at fair value, with unrealized
gains and losses reported in accumulated other comprehensive income (loss), a separate component of shareholders’ equity, net of
taxes. Realized gains and losses on sales of marketable securities, as determined on a specific identification basis, are included in
Financial income (expense), net. The amortized cost of marketable securities is adjusted for amortization of premium and accretion of
discount to maturity, both of which, together with interest, are included in Financial income (expense), net. The Company may sell these
securities at any time for use in current operations even if they have not yet reached maturity. As a result, the Company classifies its
marketable securities, including those with maturities beyond 12 months, as current assets in the consolidated balance sheets.
F - 13
PERION NETWORK LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S.
dollars in thousands (except share and per share data)
|
NOTE
2: |
SIGNIFICANT
ACCOUNTING POLICIES (Cont.) |
The
Company periodically evaluates its available-for-sale debt securities for impairment. If the amortized cost of an individual security
exceeds its fair value, the Company considers its intent to sell the security or whether it is more likely than not that it will be required
to sell the security before recovery of its amortized basis. If either of these criteria are met, the Company writes down the security
to its fair value and records the impairment charge in the consolidated statements of income (loss). If neither of these criteria are
met, the Company determines whether credit loss exists. Credit loss is estimated by considering changes to the rating of the security
by a rating agency, any adverse conditions specifically related to the security, as well as other factors. Any remaining unrealized losses,
net of taxes, are included in accumulated other comprehensive income (loss) in shareholders’ equity.
Allowance
for credit losses on available-for-sale marketable securities are recognized in the Company’s consolidated statements of income
(loss), and any remaining unrealized losses, net of taxes, are included in accumulated other comprehensive income (loss) in shareholders’
equity.
The
Company did not recognize an allowance for credit losses on marketable securities for the period ended December 31, 2025 and 2024.
Accounts
receivable and allowance for credit losses
Accounts
receivable are recorded at the invoiced amount and amounts for which revenue has been recognized but not invoiced, net of allowance for
credit losses. Unbilled receivables represent revenue recognized for which the Company expects to invoice subsequent to the period end.
The Company evaluates its outstanding accounts receivable and establishes an allowance for credit losses based on information available
on their credit condition, current aging, historical experience and future economic and market conditions. These allowances are reevaluated
and adjusted periodically as additional information is available.
The
following table provides a roll-forward of the allowance for credit losses that is deducted from the amortized cost basis of accounts
receivables to present the net amount expected to be collected as of December 31, 2025:
|
Balance
as of December 31, 2024 |
$
|
|
||
|
Increase in provision
for expected credit losses |
|
|||
|
Recoveries collected
|
(
|
)
| ||
|
Amounts written off charged
against the allowance |
(
|
)
| ||
|
Foreign currency translation
|
(
|
)
| ||
|
Balance
as of December 31, 2025 |
$
|
|
F - 14
PERION NETWORK LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S.
dollars in thousands (except share and per share data)
|
NOTE
2: |
SIGNIFICANT
ACCOUNTING POLICIES (Cont.) |
The
following table provides a roll-forward of the allowance for credit losses that is deducted from the amortized cost basis of accounts
receivables to present the net amount expected to be collected as of December 31, 2024:
|
Balance
as of December 31, 2023 |
$
|
|
||
|
Increase in provision
for expected credit losses |
|
|||
|
Recoveries collected
|
(
|
)
| ||
|
Amounts written off charged
against the allowance |
(
|
)
| ||
|
Foreign currency translation
|
|
|||
|
Balance
as of December 31, 2024 |
$
|
|
Property
and equipment
Property
and equipment are stated at cost, net of accumulated depreciation and impairment. Depreciation is calculated using the straight-line method
over the estimated useful lives of the assets at the following annual rates:
|
%
| |
|
Computers and peripheral
equipment |
|
|
Internal-use software
|
|
|
Office furniture and
equipment |
|
Leasehold
improvements are amortized using the straight-line method over the term of the lease or the estimated useful life of the improvements,
whichever is shorter.
Internal-Use
Software Development Costs
According
to ASC 350-40 the Company capitalizes certain internal-use software development costs associated with creating and enhancing internal-use
software related to its platform and technology infrastructure. These costs include personnel and related employee benefits expenses for
employees who are directly associated with and who devote time to software projects, and services consumed in developing or obtaining
the software.
Software
development costs that do not meet the criteria for capitalization are expensed as incurred and recorded in research and development expenses
in the consolidated statements of income (loss). Software development activities generally consist of three stages, (i) the planning stage,
(ii) the application and infrastructure development stage, and (iii) the post implementation stage. Costs incurred in the planning and
post implementation stages of software development, including costs associated with the post configuration training and repairs and maintenance
of the developed technologies, are expensed as incurred. Costs incurred in the application and infrastructure development stages, including
significant enhancements and upgrades, are capitalized. Capitalization ends once a project is substantially complete, and the software
and technologies are ready for their intended purpose.
F - 15
PERION NETWORK LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S.
dollars in thousands (except share and per share data)
|
NOTE
2: |
SIGNIFICANT
ACCOUNTING POLICIES (Cont.) |
Internal-use
software development costs are amortized using a straight-line method over the estimated useful life of three years, commencing when the
software is ready for its intended use.
Capitalized
internal-use software, net of accumulated amortization, of $2,194
are included in property and equipment, net in the consolidated balance sheets as of December 31, 2025 (see Note 7).
Leases
The
Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”)
assets and short-term and long-term operating lease liabilities in the Company’s consolidated balance sheets.
ROU
assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease
payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value
of lease payments over the lease term.
As
the implicit rate of the leases is not readily determinable, the Company uses incremental borrowing rates based on the estimated rate
of interest for collateralized borrowing over a similar term of the lease payments at commencement date. The operating lease ROU asset
also includes any lease payments made prior to commencement and lease incentives. An option to extend the lease is considered in
connection with determining the ROU asset and lease liability when it is reasonably certain that the Company will exercise that option.
An option to terminate is considered unless it is reasonably certain that the Company will not exercise the option. Lease expenses for
lease payments are recognized on a straight-line basis over the lease term.
The
Company elected the practical expedient allowing not to separate the lease and non-lease components for its leases. For short-term leases
with a term of 12 months or less, operating lease ROU assets and liabilities are not recognized and the Company records lease payments
on a straight-line basis over the lease term.
The
Lease includes obligations to make base rent payments and additional variable lease payments for the Company’s allocated share of
variable costs associated with the operation and management of the property, which include utilities, property taxes, common area maintenance,
and amenities costs.
Intangible
assets, net
Intangible
assets that are not considered to have finite useful life are amortized over their estimated useful lives. The Customer Relationship is
amortized over its estimated useful lives in proportion to the economic benefits realized. This accounting policy results in accelerated
amortization of such intangible asset as compared to the straight-line method.
All
other intangible assets are amortized over their estimated useful lives using the straight-line method.
F - 16
PERION NETWORK LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S.
dollars in thousands (except share and per share data)
|
NOTE
2: |
SIGNIFICANT
ACCOUNTING POLICIES (Cont.) |
Impairment
of long-lived assets, including Right-of-use assets and intangible assets subject to amortization
The
Company’s long-lived assets (assets group) to be held or used, including property and equipment, right of use assets and intangible
assets subject to amortization are reviewed for impairment in accordance with ASC 360, Accounting for
the Impairment or Disposal of Long-Lived Assets, whenever events or changes in circumstances indicate that the carrying value of
an asset may not be recoverable. The recoverability of these assets is measured by comparing the carrying amounts of the asset (assets
group) to the future undiscounted cash flows the assets are expected to generate. If the long-lived assets are considered to be impaired,
the impairment to be recognized equals the amount by which the carrying value of the asset exceeds its fair market value.
In
determining the fair values of long-lived assets for the purpose of measuring impairment, the Company's assumptions include those that
market participants will consider in valuations of similar assets.
There
were no impairment charges to long-lived assets during the periods presented.
Goodwill
Goodwill
reflects the excess of the purchase price of business acquired over the fair value of net assets acquired. Goodwill is not amortized but
instead is tested for impairment, in accordance with ASC 350, Intangibles – Goodwill and Other,
at the reporting unit level, at least annually at December 31 each year, or more frequently if events or changes in circumstances indicate
that the carrying value may be impaired. Any excess of the carrying amount of the reporting unit over its fair value is recognized as
an impairment loss, and the carrying value of goodwill is written down to fair value. There were no impairment losses to goodwill
during the periods presented.
Refer
to Note 8 for further information.
Business
combinations
The
Company accounted for business combination in accordance with ASC 805, Business Combinations (“ASC
805”). ASC 805 requires recognition of assets acquired, liabilities assumed, and any non-controlling interest at the acquisition
date, measured at their fair values as of that date. Any excess of the fair value of net assets acquired over purchase price is allocated
to goodwill. During the measurement period, not to exceed one year from the date of acquisition, the Company may record adjustments
to the assets acquired and liabilities assumed, with a corresponding offset to goodwill only for adjustments resulting from facts and
circumstances that existed as of the acquisition date. After the measurement period, any subsequent adjustments are reflected in the consolidated
statements of income (loss).
Acquisition
related costs are expensed to the statement of income (loss) in the period incurred.
F - 17
PERION NETWORK LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S.
dollars in thousands (except share and per share data)
|
NOTE
2: |
SIGNIFICANT
ACCOUNTING POLICIES (Cont.) |
Revenue
recognition
The
Company applies the provisions of ASC 606, Revenue from Contracts with Customers.
The
Company applies the practical expedient for incremental costs of obtaining contracts when the amortization period is less than one year.
The
Company generates revenue primarily from two major sources:
Advertising
Solutions Revenue - The Company generates revenue from Advertising Solutions, by delivering outcome-driven campaigns across multiple
digital channels, including standard and high-impact display, social, CTV, digital audio and DOOH, primarily through the Company’s
unified Perion One platform, an AI-native execution infrastructure to advertisers, agencies, and publishers. In addition, the Company
generates revenue by providing advanced monetization solutions to Web and CTV publishers and DOOH media owners such as Supply Optimization,
Ad Servers, SSP, Header Bidder and Media Player. The Company’s diverse, technology-focused multi-channel set of solutions is designed
to drive consumer engagement and high ROI for advertisers through high-impact ad formats.
Search
Advertising Revenue - The Company generates Search Advertising revenue from service agreements with its search partners. This revenue
is primarily derived from transaction volume-based fees earned by making the Company’s applications and intent-based search solutions
available to online publishers and app developers on a revenue-share basis relative to the revenue generated by our search partners.
Revenues
are recognized upon successful delivery of advertisements typically measured by impressions, clicks, or actions.
For
more disaggregated information of revenue refer to Note 18.
The
Company has elected to apply the practical expedient such that it does not evaluate payment terms of one year or less for the existence
of a significant financing component. The Company’s payments terms are less than one year. Therefore, no finance component is recognized.
The
Company evaluates whether Advertising Solutions Revenue and Search Advertising Revenue should be presented on a gross basis, which is
the amount that a customer pays for the service, or on a net basis, which is the amount of the customer payment less amounts the Company
pays to publishers. In making that evaluation, the Company considers whether it controls the promised good or service before transferring
that good or service to the customer. The Company considers indicators such as whether the Company is the primary obligor in the arrangement
and assumes risks and rewards as a principal or an agent, whether it changes the products or performs part of the service, whether the
Company has discretion in establishing prices and whether it controls the underlying advertising space. The evaluation of these factors
is subject to significant judgment and subjectivity, and is based on management assessment of whether the Company is acting as the principal
or an agent in the transaction. The Company has determined that in certain arrangements it acts as principal because the Company
controls the specified good or service before it is transferred to a customer, as such revenue is recorded on a gross basis, while in
others it does not and revenue is recorded on a net basis.
F - 18
PERION NETWORK LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S.
dollars in thousands (except share and per share data)
|
NOTE
2: |
SIGNIFICANT
ACCOUNTING POLICIES (Cont.) |
Revenue
is recognized net of any taxes collected from customers which are subsequently remitted to governmental entities.
Generally,
in cases in which the Company controls the specified good or service before it is transferred to a customer, revenue is recorded on a
gross basis.
Contract
balances are presented separately on the consolidated balance sheets as either accounts receivable or deferred revenue.
Remaining
performance obligations (RPOs) represent amounts collected on contracted revenue that have not yet been recognized. As of December 31,
2025 and 2024, the aggregate amount of the RPOs was $1,206
and $2,049 ,
respectively. The Company anticipates that it will satisfy all its remaining performance obligations associated with the deferred revenue
within the prospective fiscal year. Revenue is deferred when the Company invoices in advance of performance under a contract. The current
portion of the deferred revenue balance is recognized as revenue during the 12-month period after the balance sheet date. The noncurrent
portion of the deferred revenue balance is recognized as revenue following the 12-month period after the balance sheet date.
Accounts
receivable includes amounts billed and currently due from customers as well as amounts allowed to be billed according to contractual billing
terms with customers.
Revenue
recognized during 2025, 2024 and 2023 from amounts included within the Deferred revenue balance at the beginning of the period amounted
to $1,505 ,
$2,297
and $2,377 ,
respectively.
Cost
of revenue
Cost
of revenue consists primarily of expenses associated with the operation of the Company’s server hosting, data verification and targeting,
campaign creative, labor and customer support.
Traffic
acquisition costs and media buy
Traffic
acquisition costs and media buy consist primarily of payments to publishers and developers who distribute the Company’s search properties
together with their products, as well as the cost of distributing the Company own products. In addition, media buy costs consist of the
costs of advertising inventory incurred to deliver ads. Traffic acquisition costs are primarily based on revenue share agreements with
the Company traffic sources and the media buy cost are primarily based on CPC (Cost-per-click) and CPM (Cost-per-mile), which are charged
as incurred.
Research
and development costs, net
Research
and development costs are expensed as incurred, except to the extent that such costs are associated with internal‑use software that
qualifies for capitalization.
F - 19
PERION NETWORK LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S.
dollars in thousands (except share and per share data)
|
NOTE
2: |
SIGNIFICANT
ACCOUNTING POLICIES (Cont.) |
Income
taxes
The
Company accounts for income taxes in accordance with ASC 740, Income Taxes (“ASC 740”).
ASC 740 prescribes the use of the liability method, whereby deferred tax asset and liability account balances are determined based on
differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws
that will be in effect when the differences are expected to reverse. To the extent necessary, the Company provides a valuation allowance
to reduce deferred tax assets to their estimated realizable value.
The
Company accounts for uncertain tax positions in accordance with ASC 740, which contains a two-step approach for recognizing and measuring
uncertain tax positions. The first step is to evaluate the tax position taken or expected to be taken in a tax return by determining if
the weight of available evidence indicates that it is more likely than not that the tax position will be sustained on audit, including
resolution of any related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount that is
more than 50% likely to be realized upon ultimate settlement.
Severance
pay
The
Company's agreements with employees in Israel are in accordance with section 14 of the Severance Pay Law, 1963 (“Section 14”),
where the Company's contributions for severance pay is paid to the employee upon termination instead of the severance liability that would
otherwise be payable under the law as aforementioned. Upon contribution to a fund, based on the full amount of the employee's monthly
salary, and release of the fund to the employee, no additional severance payments are required to be made by the Company to the employee.
Therefore, the related obligation and amounts deposited on behalf of such obligation are not stated on the balance sheet, as the Company
is legally released from obligation to such employees once the deposit amounts have been paid.
Severance
expenses for the years ended December 31, 2025, 2024 and 2023 amounted to $1,026 ,
$2,583 ,
and $3,206 ,
respectively. The balances of severance deposits and accrued severance pay are immaterial and included in other assets and other long-term
liabilities on the accompanying balance sheets, respectively.
Employee
benefit plan
The
Company’s U.S. operations maintain a retirement plan (the “U.S. Plan”) that qualifies as a deferred salary arrangement
under Section 401(k) of the Internal Revenue Code. Participants in the U.S. Plan may elect to defer a portion of their pre-tax earnings,
up to the Internal Revenue Service’s annual contribution limit. The Company matches up to 100% of each participant’s contributions,
up to 4% of employee deferral. Contributions to the U.S. Plan are recorded during the year contributed as an expense in the consolidated
statement of income.
Total
employer 401(k) contributions for the years ended December 31, 2025, 2024 and 2023 were $1,138 ,
$1,116 ,
and $1,006 ,
respectively.
F - 20
PERION NETWORK LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S.
dollars in thousands (except share and per share data)
|
NOTE
2: |
SIGNIFICANT
ACCOUNTING POLICIES (Cont.) |
Comprehensive
income (loss)
The
Company accounts for comprehensive income (loss) in accordance with ASC 220, Comprehensive Income.
This statement establishes standards for the reporting and display of comprehensive income and its components in a full set of general
purpose financial statements. Comprehensive income generally represents all changes in shareholders' equity during the period except those
resulting from investments by, or distributions to, shareholders. The Company determined that its other comprehensive income (loss) relates
to hedging derivative instruments, unrealized gain (loss) on marketable securities and foreign currency translation adjustments.
Net
earnings (loss) per share
In
accordance with ASC 260, Earnings Per Share, basic net earnings per share ("Basic EPS") is computed
by dividing net earnings attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the
period. Diluted net earnings per share ("Diluted EPS") reflects the potential dilution that could occur if share options, restricted shares
and other commitments to issue ordinary shares were exercised or equity awards vested, resulting in the issuance of ordinary shares that
could share in the net earnings of the Company.
Concentrations
of credit risk
Financial
instruments, which potentially subject the Company to a concentration of credit risk, consist primarily of cash and cash equivalents,
bank deposits, restricted cash, marketable securities and accounts receivable.
The
majority of the Company’s cash and cash equivalents, bank deposits and restricted cash are invested in USD instruments with major
banks in the U.S. and Israel. Generally, these deposits may be redeemed upon demand and, therefore, bear minimal risk.
The
Company's marketable securities portfolio consists primarily of U.S. Treasury bills, Treasury bonds, corporate bonds and government agency
bonds, all rated investment-grade, managed by established financial institutions. The Company's investment policy limits investments to
high credit quality securities and the portfolio is diversified across issuers and maturities to mitigate concentration risk.
The
Company’s major customers are financially sound, and the Company believes low credit risk is associated with these customers. To
date, the Company has not experienced any material credit losses.
The
allowance against gross accounts receivables reflects the current expected credit loss inherent in the receivables portfolio determined
based on the Company’s methodology. The Company’s methodology is based on historical collection experience, customer creditworthiness,
current and future economic condition, and market condition. Additionally, specific allowance amounts are established to record the appropriate
provision for customers that have a higher probability of default. Accounts receivables are written off after all reasonable means to
collect the full amount have been exhausted.
F - 21
PERION NETWORK LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S.
dollars in thousands (except share and per share data)
|
NOTE
2: |
SIGNIFICANT
ACCOUNTING POLICIES (Cont.) |
Share-based
compensation
The
Company accounts for share-based compensation under ASC 718, Compensation - Stock Compensation
(“ASC 718”), which requires the measurement and recognition of compensation expense based on estimated fair values for all
share-based payment awards made to employees, contractors, and directors. ASC 718 requires companies to estimate the fair value
of equity-based awards on the date of grant, using an option-pricing model. The value of the portion of the award that is ultimately expected
to vest is recognized as an expense over the requisite service periods in the Company's consolidated statement of income. The Company
estimates forfeitures at the time of grant, and revised if necessary in subsequent periods, if actual forfeitures differ from those estimates.
The
Company recognizes compensation expenses for the value of its awards, which have graded vesting based on service conditions, using the
straight-line method, over the requisite service period of each of the awards, net of estimated forfeitures. Estimated forfeitures are
based on actual historical pre-vesting forfeitures. For performance-based share units, the Company recognizes compensation expenses for
the value of such awards, if and when the Company concludes that it is probable that a performance condition will be achieved based on
the accelerated attribution method
over the requisite service period. The Company reassess the probability of vesting at each reporting period for awards with performance
conditions and adjust compensation cost based on its probability assessment.
The
Company accounts for changes in award terms as a modification in accordance with ASC 718.
The
Company estimates the fair value of its options using the Binomial option-pricing model.
Since
2022 only restricted share units (“RSUs”) were granted and the fair value is based on the market value of the underlying shares
on the date of grant.
For
options, the expected volatility is calculated based on the actual historical share price movements of the Company’s share. The
expected option term represents the period that the Company’s share options are expected to be outstanding. The risk-free interest
rate is based on the yield from U.S. Treasury zero-coupon bonds, with a term which is equivalent to the expected term of the share-based
awards.
F - 22
PERION NETWORK LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S.
dollars in thousands (except share and per share data)
|
NOTE
2: |
SIGNIFICANT
ACCOUNTING POLICIES (Cont.) |
Derivative
instruments
The
Company follows the requirements of ASC 815, Derivatives and Hedging (“ASC 815”), which
requires companies to recognize all of their derivative instruments as either assets or liabilities on the balance sheet at fair value.
The accounting for changes in fair value (i.e. gains or losses) of a derivative instrument depends on whether it has been designated and
qualifies as part of a hedging transaction and further, on the type of hedging transaction. For those derivative instruments that are
designated and qualify as hedging instruments, a company must designate the hedging instrument, based upon the exposure being hedged,
as a fair value hedge, cash flow hedge, or a hedge of a net investment in a foreign operation.
Changes
in the fair value of these derivatives are recorded in accumulated other comprehensive income (loss) in the consolidated balance sheets,
until the forecasted transaction occurs. Upon occurrence, the Company reclassifies the related gains or losses on the derivative to the
same financial statement line item in the consolidated statements of income (loss) to which the derivative relates.
In
order to mitigate the potential adverse impact on cash flows resulting from fluctuations in the exchange rate of the new Israeli shekels
(“ILS”), the Company hedges portions of its forecasted expenses denominated in ILS with SWAP, forward and options contracts.
The Company does not speculate in these hedging instruments in order to profit from foreign currency exchanges, nor does it enter into
trades for which there are no underlying exposures.
To
protect against the increase in value of forecasted foreign currency cash flow resulting mainly from salaries and related benefits paid
in ILS during the year, the Company hedges portions of its anticipated payroll denominated in ILS for a period of one to twelve months
with SWAP, forward and options contracts (the “Hedging Contracts”). Accordingly, when the USD strengthens against the ILS,
the decline in present value of future ILS currency expenses is offset by losses in the fair value of the Hedging Contracts. Conversely,
when the USD weakens, the increase in the present value of future ILS expenses is offset by gains in the fair value of the Hedging Contracts.
These Hedging Contracts are designated as cash flow hedges.
The
notional value of the Company’s derivative instruments designated as hedging instruments as of December 31, 2025 and 2024, amounted
to $1,531
and $4,971 ,
respectively.
The
notional value of the Company’s derivative instruments not designated as hedging instruments as of December 31, 2025 and 2024, amounted
to $0
F - 23
PERION NETWORK LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S.
dollars in thousands (except share and per share data)
|
NOTE
2: |
SIGNIFICANT
ACCOUNTING POLICIES (Cont.) |
Fair
value of financial instruments
The
carrying amounts of financial instruments carried at cost, including cash and cash equivalents, short-term deposits, restricted cash,
accounts receivable, prepaid expenses and other assets, accounts payable, accrued expenses and other liabilities approximate their fair
value due to the short-term maturities of such instruments.
The
Company follows the provisions of ASC No. 820, Fair Value Measurement (“ASC 820”),
which defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date.
In
determining a fair value, the Company uses various valuation approaches. ASC 820 establishes a hierarchy for inputs used in measuring
fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable
inputs be used when available. Observable inputs are inputs that market participants would use in pricing an asset or liability, based
on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect assumptions that market participants
would use in pricing an asset or liability, based on the best information available under given circumstances.
Three
levels of inputs may be used to measure fair value, as follows:
| • |
Level
1 - Observable inputs obtained from independent sources, such as quoted prices for identical assets and liabilities in active markets.
|
| • |
Level
2 - Other inputs that are directly or indirectly observable in the market place. |
| • |
Level
3 - Unobservable inputs which are supported by little or no market activity, and unobservable inputs based on the Company's own
assumptions used to measure liabilities at fair value. The inputs require significant management judgment or estimation.
|
The
Company measures its marketable securities (money market funds and available-for-sale marketable securities), foreign currency derivative
instruments and contingent considerations in connection to the acquisitions at fair value. Marketable securities are classified within
Level 1 or Level 2 of the fair value hierarchy because their fair value is derived from quoted market prices or alternative pricing sources
and models utilizing observable market inputs.
The
fair value of Level 2 marketable securities is determined using a market approach based on quoted prices for similar instruments in active
markets, broker/dealer quotations, and pricing models that utilize observable market inputs, including benchmark yield curves, reported
trades, credit spreads, and issuer-specific data. These securities consist primarily of U.S. Treasury bills and bonds, U.S. government
agency bonds, and investment-grade corporate bonds.
Derivative
instruments are classified within Level 2 as the valuation inputs are based on quoted prices and market observable data of similar instruments.
The Company's contingent considerations in connection to the acquisitions were classified within Level 3 because factors used to develop
the estimated fair value are unobservable inputs that are not supported by market activity. The fair value of the contingent consideration
liability was estimated using a Monte Carlo simulation for the revenue-based earn-out payment and a probability-weighted present value
for the milestone-based earn-out payment. Significant unobservable inputs used in these measurements included projected revenue volatility
of 10.5 %,
a discount rate of 4.6 %,
and management's assessment of the probability of achieving the technology milestones.
Repurchase
of shares
In
prior years, the Company repurchased its ordinary shares on the open market and holds these shares as treasury shares, with their acquisition
cost presented as a reduction of shareholders' equity.
In
2024, the Company initiated a new share repurchase program authorized by the Board of Directors, under which repurchased ordinary shares
are immediately retired upon repurchase. Upon retirement, the par value of the repurchased shares is deducted from ordinary share capital,
and the excess of the repurchase price over the par value is recorded as a reduction of Additional Paid-in Capital. See Note 13a, “Share
repurchase” for further details.
F - 24
PERION NETWORK LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S.
dollars in thousands (except share and per share data)
|
NOTE
2: |
SIGNIFICANT
ACCOUNTING POLICIES (Cont.) |
Recently
Adopted Accounting Pronouncements:
In
December 2023, the FASB issued ASU 2023-09 “Income Taxes (Topic 740): Improvements to Income Tax Disclosures”, which expands
the disclosure requirements for income taxes, primarily related to the rate reconciliation and income taxes paid. This ASU is effective
for the fiscal years beginning after December 15, 2024. Early adoption permitted. The Company adopted this guidance on a prospective
basis as reflected in the Notes to the Consolidated Financial Statements. There was no impact to the Company’s consolidated balance
sheets, consolidated statements of income (loss), consolidated statements of shareholders’ equity or consolidated statements
of cash flows (see Note 15).
Recently
issued Accounting Pronouncements not yet adopted
In
November 2024, the FASB issued ASU 2024-03, “Income Statement — Reporting Comprehensive Income — Expense Disaggregation
Disclosures (Subtopic 220-40): Disaggregation of Income (loss) Statement Expenses" (“ASU 2024-03”). ASU 2024-03 requires disaggregation
of certain costs and expenses included in each relevant expense caption on the Company's consolidated income (loss) statements in a separate
note to the financial statements at each interim and annual reporting period, including amounts of purchases of inventory, employee compensation,
depreciation, and intangible asset amortization. ASU 2024-04 is effective fiscal years beginning after December 15, 2026, and interim
reporting periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted. The Company is currently
evaluating the impact of adopting ASU 2024-03.
In
July 2025, the FASB issued ASU 2025-05, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for
Accounts Receivable and Contract Assets”. The amendments in this update provide a practical expedient permitting an entity to assume
that conditions at the balance sheet date remain unchanged over the life of the asset when estimating expected credit losses for current
classified accounts receivable and contract assets. This update is effective for annual periods beginning after December 15, 2025, including
interim periods within those fiscal years. Adoption of this ASU can be applied prospectively for reporting periods after its effective
date. Early adoption is permitted. The Company is currently evaluating the provisions of this ASU.
In
September 2025, the FASB issued ASU 2025-06, “Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40):
Targeted Improvements to the Accounting for Internal-Use Software”. The ASU simplifies the capitalization guidance by removing all
references to prescriptive and sequential software development stages (referred to as “project stages”) throughout ASC 350-40.
The ASU is effective for annual periods beginning after December 15, 2027, and interim periods within those fiscal years. Adoption of
this ASU can be applied prospectively for reporting periods after its effective date; or follow a modified transition approach that is
based on the status of the respective projects and whether software costs were capitalized before the date of adoption; or retrospectively
to any or all prior periods presented in the consolidated financial statements. The Company is currently evaluating the provisions of
this ASU.
F - 25
PERION NETWORK LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S.
dollars in thousands (except share and per share data)
|
NOTE
2: |
SIGNIFICANT
ACCOUNTING POLICIES (Cont.) |
In
November 2025, the FASB issued ASU 2025-09 to amend the guidance in Derivatives and Hedging (Topic 815). The update provides targeted
improvements intended to enhance the application of hedge accounting, including expanded eligibility of forecasted transactions, additional
flexibility in measuring hedge effectiveness, and clarifications related to hedging non-financial items. The guidance is effective for
fiscal years beginning after December 15, 2026, including interim periods within those fiscal years. The Company is currently evaluating
the impact of adopting this ASU 2025-09.
2025-10, Government
Grants (Topic 832): Accounting for Government Grants Received by Business Entities, which establishes authoritative guidance on the recognition,
measurement, presentation, and disclosure of government grants. Under ASU 2025-10, government grants are recognized when it is probable
that the entity will both comply with the conditions of the grant and the grant will be received. The ASU provides specific accounting
models for grants related to assets and grants related to income, including options to recognize government grants as deferred income
or as a reduction of the asset’s cost basis. The ASU also requires enhanced disclosures regarding the nature of government grants,
significant terms and conditions, accounting policies applied, and amounts recognized in the financial statements. ASU 2025-10 is effective
for fiscal years beginning after December 15, 2028, including interim periods within those fiscal years, with early adoption permitted.
The Company is currently evaluating the impact of adopting ASU 2025-10.
|
NOTE 3: |
MARKETABLE SECURITIES |
The
following is a summary of available-for-sale marketable securities by investment categories and contractual maturities as of December
31, 2025:
|
December
31, 2025 |
||||||||||||||||
|
Amortized
cost
|
Gross
unrealized
gain
|
Gross
unrealized
loss
|
Fair
value |
|||||||||||||
|
Matures within one year:
|
||||||||||||||||
|
Corporate
debentures |
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
Government
agencies |
|
|
|
|
||||||||||||
|
Government
debentures |
|
|
|
|
||||||||||||
|
$
|
|
$
|
|
$
|
|
$
|
|
|||||||||
|
Matures after one year
through three years: |
||||||||||||||||
|
Corporate
debentures |
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
Government
agencies |
|
|
|
|
||||||||||||
|
Government
debentures |
|
|
|
|
||||||||||||
|
$
|
|
$
|
|
$
|
|
$
|
|
|||||||||
|
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
F - 26
PERION NETWORK LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S.
dollars in thousands (except share and per share data)
|
NOTE
3: |
MARKETABLE
SECURITIES (Cont.) |
For
the year ended December 31, 2025, the unrealized losses related to marketable securities were as a result of market fluctuations and not
due to credit related losses, therefore, the Company did not record an allowance for credit losses for its available-for-sale marketable
securities.
The
following is a summary of available-for-sale marketable securities by investment categories and contractual maturities as of December
31, 2024:
|
December
31, 2024 |
||||||||||||||||
|
Amortized
cost
|
Gross
unrealized
gain
|
Gross
unrealized loss |
Fair
value |
|||||||||||||
|
Matures within one year:
|
||||||||||||||||
|
Corporate
debentures |
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
Government
agencies |
|
|
|
|
||||||||||||
|
Government
debentures |
|
|
|
|
||||||||||||
|
$
|
|
$
|
|
$
|
|
$
|
|
|||||||||
|
Matures after one year
through three years: |
||||||||||||||||
|
Corporate
debentures |
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
Government
agencies |
|
|
|
|
||||||||||||
|
Government
debentures |
|
|
|
|
||||||||||||
|
$
|
|
$
|
|
$
|
|
$
|
|
|||||||||
|
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Investments
with continuous unrealized losses for less than 12 months and 12 months or greater and their related fair values as of December 31, 2025
were as follows:
|
Less
than 12 months |
||||||||
|
Fair
value
|
Unrealized
losses
|
|||||||
|
Corporate
debentures |
$
|
|
$
|
|
||||
|
Government
agencies |
|
|
||||||
|
Government
debentures |
|
|
||||||
|
Total
|
$
|
|
$
|
|
||||
As
of December 31, 2025, no material unrealized losses relate to securities that have been in a continuous loss position for 12 months or
greater.
F - 27
PERION NETWORK LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S.
dollars in thousands (except share and per share data)
|
NOTE
3: |
MARKETABLE
SECURITIES (Cont.) |
Investments
with continuous unrealized losses for less than 12 months and 12 months or greater and their related fair values as of December 31, 2024
were as follows:
|
December
31, 2024 |
||||||||||||||||||||||||
|
Less
than 12 months |
More
than 12 months |
Total
|
||||||||||||||||||||||
|
Fair
value
|
Unrealized
losses
|
Fair
value
|
Unrealized
losses
|
Fair
value
|
Unrealized
losses
|
|||||||||||||||||||
|
Corporate
debentures |
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||
|
Government
agencies |
|
|
|
|
|
|
||||||||||||||||||
|
Government
debentures |
|
|
|
|
|
|
||||||||||||||||||
|
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||||
| NOTE 4: |
FAIR VALUE OF FINANCIAL
INSTRUMENTS |
The
following table presents financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2025:
|
December
31, 2025 |
||||||||||||||||
|
Fair
value measurements using input type |
||||||||||||||||
|
Level
1 |
Level
2 |
Level
3 |
Total
|
|||||||||||||
|
Financial
Assets: |
||||||||||||||||
|
Money market funds (included
in cash and cash equivalents) |
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
Available-for-sale marketable
securities |
|
|
|
|
||||||||||||
|
|
|
|
|
|
||||||||||||
|
Total
financial assets |
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
Financial
Liabilities: |
||||||||||||||||
|
Contingent consideration
in connection to the acquisitions |
|
|
|
|
||||||||||||
|
Total
financial liabilities |
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
F - 28
PERION NETWORK LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S.
dollars in thousands (except share and per share data)
| NOTE 4: |
FAIR VALUE OF FINANCIAL INSTRUMENTS (Cont.) |
The
following table presents financial assets measured at fair value on a recurring basis as of December 31, 2024:
|
December
31, 2024 |
||||||||||||||||
|
Fair
value measurements using input type |
||||||||||||||||
|
Level
1 |
Level
2 |
Level
3 |
Total
|
|||||||||||||
|
Financial
Assets: |
||||||||||||||||
|
Money market funds (included
in cash and cash equivalents) |
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
Available-for-sale marketable
securities |
|
|
|
|
||||||||||||
|
|
|
|
|
|
||||||||||||
|
Total
financial assets |
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
The
following table sets forth a summary of the changes in the fair value of the contingent consideration:
|
Fair
value as of December 31, 2024 |
$
|
|
||
|
Contingent consideration
related to acquisition |
|
|||
|
Revaluation of acquisition-related
contingent consideration |
|
|||
|
Fair
value as of December 31, 2025 |
$
|
|
| NOTE 5: |
ACQUISITIONS
|
| a. |
Content IQ LLC |
On
January 14, 2020, the Company consummated the acquisition of Content IQ LLC (“Content IQ”), a privately held company founded
in 2014, based in New York City. Content IQ has created data algorithm and analytics tools that deconstruct content, revenue and
distribution to solve current major digital publishing challenges.
The
total consideration for the acquisition was $37,838 ,
comprised of $15,000
paid in cash at closing and a contingent consideration (with a maximum amount of up to $47,050 ),
tied to revenue and EBITDA-based metrics over a period of two
years , estimated at fair value of $22,838
on the acquisition date. In addition, the acquisition includes a retention-based component of up to $11,000 .
As
of December 31, 2024, the remaining balance of the contingent consideration was settled. In 2024 and 2023 the change in fair value of
the contingent consideration that was recorded as expense in the statement of income (loss) was $1,541
and $0 ,
respectively.
F - 29
PERION NETWORK LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S.
dollars in thousands (except share and per share data)
|
NOTE
5: |
ACQUISITIONS
(Cont.) |
| b. |
Vidazoo |
On
October 4, 2021, the Company consummated the acquisition of Vidazoo Ltd., also known as “Vidazoo” (the “Vidazoo Acquisition”),
a leading video technology company that enables both advertisers and publishers to deliver high impact content and advertising to consumers.
The
total consideration for the acquisition was $90,038 ,
comprised of $35,000
paid in cash at closing, contingent consideration (with a maximum amount of up to $58,545 ),
tied to financial targets over a period of 2.25
years, estimated at fair value of $48,903
on the acquisition date, and a net working capital in the amount of $6,135
which will be set-off against collection.
On
June 14, 2023, the Company entered into an amendment to the SPA with Vidazoo’s sellers in connection with an additional overachievement
earnout consideration in an aggregate amount of up to $10,550
payable in the Company’s ordinary shares.
As
of December 31, 2023, Vidazoos’ sellers had met the specified earnout targets, and the Company recognized an expense of $10,550
under 'Changes in fair value of contingent consideration' in the consolidated statements of income (loss).
As
of December 31, 2024, the remaining balance of the contingent consideration was settled.
| c. |
Hivestack |
On
December 11, 2023, the Company consummated the acquisition of Hivestack Inc. (“Hivestack”), a global innovative full-stack
programmatic Digital out of Home (DOOH) company.
The
total consideration for the acquisition was $106,931 ,
comprised of $100,000
paid in cash at closing and a net working capital in the amount of $6,931
subject to working capital adjustments. In
addition, the acquisition includes a retention-based payment of up to $25,000 ,
tied to financial target and service of a period of 3 years to be settled in cash and in the Company’s ordinary shares.
| d. |
Greenbids |
On
May 8, 2025, the Company consummated the acquisition of Greenbids SAS (“Greenbids”), an AI platform that creates custom bidding
algorithms for campaign-level optimization.
The
total consideration for the acquisition was $49,585
comprised of (i) $30,032
in cash (consisting of a base cash consideration of $27,500 ,
subject to customary purchase price adjustments for closing working capital, company cash, company debt and other items as set forth in
the share purchase agreement), and (ii) contingent consideration with a maximum amount of up to $22,500 ,
payable in cash, estimated at a fair value of $19,553
on the acquisition date. The contingent consideration consists of two earn-out payments of up to $11,250
each, subject to achievement of financial and technology KPI’s. The fair value of the contingent consideration was estimated using
a Monte Carlo simulation approach. The contingent consideration is classified as a liability and is remeasured at fair value at each reporting
date, with changes recognized in earnings. As of December 31, 2025, the fair value of the contingent consideration liability was $20,140
(see Note [4] — Fair Value of Financial Instruments).
F - 30
PERION NETWORK LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S.
dollars in thousands (except share and per share data)
|
NOTE
5: |
ACQUISITIONS
(Cont.) |
In
addition, the acquisition includes retention-based arrangements in a total of $15,000 ,
consisting of cash and RSU’s. These arrangements are contingent on the recipients’ continued employment and are therefore
accounted for as post-combination compensation expense recognized on a straight-line basis over the requisite service period, and not
as part of the consideration transferred.
The
following table summarizes the allocation of the purchase price consideration as of the acquisition date for the transaction noted above:
|
May
8, 2025 |
||||
|
Net
Assets1 |
$
|
|
||
|
Technology
|
|
|||
|
Customer
Relationship |
|
|||
|
Deferred
Taxes |
(
|
)
| ||
|
Goodwill
|
|
|||
|
Net
assets acquired |
$
|
|
||
1
Includes cash in the amount of $3,735 .
Goodwill
is primarily attributable to expected synergies arising from technology integration and expanded product availability to the Company’s
existing and new customers. The goodwill is not expected to be deductible for income tax purposes.
Technology includes an
array of AI-optimization software designed to improve programmatic advertising performance. The technology is amortized over the estimated
useful life of 7
years using the straight-line method.
Customer
relationship is derived from customer contracts and related customer relationships with existing customers. Customer relationship
is amortized based on the accelerated method over the estimated useful life of 10
years .
The
results of operations of Greenbids have been included in the consolidated financial statements since the date of the acquisition.
The
Company incurred acquisition related costs of $1,373 ,
which were included in general and administrative expenses in the consolidated statements of income (loss) for the year ended December
31, 2025.
Pro
forma results of operations related to this acquisition have not been presented because they are not material to the Company’s consolidated
statements of income (loss).
For
the year ended December 31, 2025 the Company recorded the following retention-based compensation expenses in the statement of income (loss)
with respect to Hivestack acquisition and Greenbids acquisition:
|
Retention-based
compensation |
||||
|
Cost of revenue
|
$
|
|
||
|
Research and development
|
|
|||
|
Selling and marketing
|
|
|||
|
General and administrative
|
|
|||
|
Total
|
$
|
|
||
F - 31
PERION NETWORK LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S.
dollars in thousands (except share and per share data)
| NOTE 6: |
RESTRUCTURING
COSTS AND OTHER CHARGES |
During
2025 the company carried out a restructuring plan to adjust its operations and increase efficiency.
Restructuring
costs for the year ended December 31, 2025 were as follows:
|
Employee
termination costs |
||||
|
Cost of revenue
|
$
|
|
||
|
Research and development
|
|
|||
|
Selling and marketing
|
|
|||
|
General and administrative
|
|
|||
|
Total
|
$
|
|
||
Restructuring
costs for the year ended December 31, 2024 were as follows:
|
Employee
termination costs |
Contract
termination |
Intangible
assets write-off |
Total
|
|||||||||||||
|
Cost of revenue
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
Research and development
|
|
|
|
|
||||||||||||
|
Selling and marketing
|
|
|
|
|
||||||||||||
|
General and administrative
|
|
|
|
|
||||||||||||
|
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
| NOTE 7: |
PROPERTY AND EQUIPMENT,
NET
|
|
December
31, |
||||||||
|
2025
|
2024
|
|||||||
|
Cost:
|
||||||||
|
Computers and peripheral
equipment |
$
|
|
$
|
|
||||
|
Office furniture and
equipment |
|
|
||||||
|
Leasehold improvements
|
|
|
||||||
|
Capitalized internal-use
software |
|
|
||||||
|
Total cost
|
|
|
||||||
|
Less: accumulated depreciation
and amortization |
(
|
)
|
(
|
)
| ||||
|
Property and
equipment, net |
$
|
|
$
|
|
||||
Depreciation
expenses related to the Company’s property and equipment totaled to $2,425 ,
$2,070
and $1,644 ,
for the years ended December 31, 2025, 2024 and 2023, respectively.
F - 32
PERION NETWORK LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S.
dollars in thousands (except share and per share data)
| NOTE 7: |
PROPERTY AND EQUIPMENT,
NET (Cont.) |
During
2025, the Company capitalized internal-use software development costs of $2,254 .
In 2024 there were no software development capitalization cost.
Amortization
expense for the related capitalized internal-use software in the consolidated statements of income (loss) amounted to $60 during
2025. There were no expenses in 2024 and 2023.
| NOTE 8: |
GOODWILL AND OTHER INTANGIBLE
ASSETS, NET |
| a. |
Goodwill |
The
changes in the net carrying amount of goodwill in 2025 and 2024 were as follows:
|
Balance
as of December 31, 2023 |
$
|
|
||
|
Measurement period adjustment
|
$
|
(
|
)
| |
|
Balance
as of December 31, 2024 |
$
|
|
||
|
Acquisition of Greenbids
|
$
|
|
||
|
Balance
as of December 31, 2025 |
$
|
|
Goodwill
has been recorded as a result of prior acquisitions and represents excess of consideration over the net fair value of the assets of the
businesses acquired. As of December 31, 2025, the Company has one reporting unit. The Company performs tests for impairment of goodwill
at the reporting unit level at least annually, or more frequently if events or changes in circumstances occur that would more likely than
not reduce the fair value of a reporting unit below its carrying value.
During
2025, the Company completed a global restructuring that resulted in changes to its operating structure. As a result, the Company determined
that it now has a single reporting unit, compared to the two reporting units it previously had, and all goodwill previously assigned to
the Company's reporting units is now attributed to this single reporting unit.
As
part of the Company’s annual impairment test, the Company performed a quantitative goodwill impairment test as of December 31, 2025,
which indicated that the fair value exceeded its carrying amount, and therefore, no impairment loss was recorded. The company used the
income approach to measure the fair value of the reporting unit. The significant assumptions used in the model mainly relate to the projected
revenues and operating income in the forecasted years.
No
goodwill impairment was incurred for the years ended December 31, 2025, 2024 and 2023.
F - 33
PERION NETWORK LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S.
dollars in thousands (except share and per share data)
| NOTE 8: |
GOODWILL AND OTHER INTANGIBLE
ASSETS, NET (Cont.) |
| b. |
Intangible assets, net |
The
following is a summary of intangible assets as of December 31, 2025:
|
December 31,
2024 |
Additions
|
Amortization
|
December 31,
2025 |
|||||||||||||
|
Acquired
technology |
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
Accumulated amortization
|
(
|
)
|
|
(
|
)
|
(
|
)
| |||||||||
|
Impairment
|
(
|
)
|
|
|
(
|
)
| ||||||||||
|
Write-off due to restructuring
|
(
|
)
|
|
(
|
)
| |||||||||||
|
Acquired
technology, net |
|
|
(
|
)
|
|
|||||||||||
|
Customer
relationships |
|
|
|
|
||||||||||||
|
Accumulated amortization
|
(
|
)
|
|
(
|
)
|
(
|
)
| |||||||||
|
Impairment
|
(
|
)
|
|
|
(
|
)
| ||||||||||
|
Write-off due to restructuring
|
(
|
)
|
|
(
|
)
| |||||||||||
|
Customer
relationships, net |
|
|
(
|
)
|
|
|||||||||||
|
Tradename
and other |
|
|
|
|
||||||||||||
|
Accumulated amortization
|
(
|
)
|
|
(
|
)
|
(
|
)
| |||||||||
|
Impairment
|
(
|
)
|
|
|
(
|
)
| ||||||||||
|
Tradename
and other, net |
|
|
(
|
)
|
|
|||||||||||
|
Intangible
assets, net |
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||||
F - 34
PERION NETWORK LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S.
dollars in thousands (except share and per share data)
| NOTE 8: |
GOODWILL AND OTHER INTANGIBLE
ASSETS, NET (Cont.) |
The
following is a summary of intangible assets as of December 31, 2024:
|
December 31,
2023
|
Write-off
|
Amortization
|
December 31,
2024
|
|||||||||||||
|
Acquired
technology |
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
Accumulated amortization
|
(
|
)
|
|
(
|
)
|
(
|
)
| |||||||||
|
Impairment
|
(
|
)
|
|
|
(
|
)
| ||||||||||
|
Write-off due to restructuring
|
|
(
|
)
|
|
(
|
)
| ||||||||||
|
Acquired
technology, net |
|
(
|
)
|
(
|
)
|
|
||||||||||
|
Customer
relationships |
|
|
|
|
||||||||||||
|
Accumulated amortization
|
(
|
)
|
|
(
|
)
|
(
|
)
| |||||||||
|
Impairment
|
(
|
)
|
|
|
(
|
)
| ||||||||||
|
Write-off due to restructuring
|
|
(
|
)
|
|
(
|
)
| ||||||||||
|
Customer
relationships, net |
|
(
|
)
|
(
|
)
|
|
||||||||||
|
Tradename
and other |
|
|
|
|
||||||||||||
|
Accumulated amortization
|
(
|
)
|
|
(
|
)
|
(
|
)
| |||||||||
|
Impairment
|
(
|
)
|
|
|
(
|
)
| ||||||||||
|
Tradename
and other, net |
|
|
(
|
)
|
|
|||||||||||
|
Intangible assets, net |
$ |
|
$ |
(
|
)
|
$ |
(
|
)
|
$ |
|
||||||
F - 35
PERION NETWORK LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S.
dollars in thousands (except share and per share data)
| NOTE 8: |
GOODWILL AND OTHER INTANGIBLE
ASSETS, NET (Cont.) |
The
estimated useful life of the intangible assets are as follows:
|
Weighted
average useful life |
Estimated
useful life | ||
|
Acquired technology
|
|
| |
|
Customer relationship
|
|
| |
|
Tradename
|
|
|
Amortization
of intangible assets, net, in each of the succeeding five years and thereafter is estimated as follows:
|
2026
|
$
|
|
||
|
2027
|
|
|||
|
2028
|
|
|||
|
2029
|
|
|||
|
2030
|
|
|||
|
Thereafter
|
|
|||
|
$
|
|
| NOTE 9: |
ACCRUED EXPENSES AND
OTHER LIABILITIES |
|
December
31, |
||||||||
|
2025
|
2024
|
|||||||
|
Employees and payroll
accruals |
$
|
|
$
|
|
||||
|
Government authorities
|
|
|
||||||
|
Accrued expenses
|
|
|
||||||
|
Other short-term liabilities
|
|
|
||||||
|
$
|
|
$
|
|
|||||
F - 36
PERION NETWORK LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S.
dollars in thousands (except share and per share data)
| NOTE 10: |
DERIVATIVES AND
HEDGING ACTIVITIES |
The
fair value of the Company’s outstanding derivative instruments is as follows:
|
December
31, |
|||||||||
|
Balance
sheet |
2025
|
2024
|
|||||||
|
Derivatives
designated as hedging instruments: |
|||||||||
|
Foreign exchange
forward contracts and other derivatives |
''Prepaid expenses
and other current assets'' |
$
|
|
$
|
|
||||
|
''Accumulated other
comprehensive income'' |
$
|
|
$
|
|
|||||
The
net amounts reclassified from accumulated other comprehensive loss to the operating expenses are as follows:
|
Gain
(loss) recognized in Consolidated Statements of Comprehensive income (loss) |
Gain
(loss) recognized
in
Consolidated Statements of
Income (loss)
|
||||||||||||||||
|
Year
ended
December 31,
|
Statement
of
Income
(loss)
|
Year
ended December 31, |
|||||||||||||||
|
2025
|
2025
|
2024
|
2023
|
||||||||||||||
|
Derivatives
designated
as
hedging instruments: |
|||||||||||||||||
|
Foreign exchange
options and forward contracts |
$
|
|
"Operating
expenses" |
$
|
|
$
|
|
$
|
(
|
)
| |||||||
|
Derivatives
not designated
as
hedging instruments: |
|||||||||||||||||
|
Foreign exchange
options and forward contracts |
|
"Financial
income, net" |
(
|
)
|
|
(
|
)
| ||||||||||
|
Total
|
$
|
|
$
|
|
$
|
|
$
|
(
|
)
| ||||||||
F - 37
PERION NETWORK LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S.
dollars in thousands (except share and per share data)
| NOTE 11: |
LEASES
|
In
January 2014, the Company entered into a lease agreement for new corporate offices in Holon, Israel. The lease expires in , with an option by the Company to extend for two additional terms of 24
months each. In 2024, The Company decided not to extend the lease beyond its original expiration date in January 2025. The Company subleased
part of the office to three different sub-tenants.
In
May 2024, the Company entered into a lease agreement for new corporate offices in Tel Aviv, Israel. The lease expires in September 2034,
including an option by the Company to extend for two additional terms of 36 and 24 months.
In
June 2018, a US subsidiary entered into a lease agreement for its office at World Trade Center (WTC) New York. The lease expires in May
2026.
In
October 2022, a US subsidiary entered into an additional lease agreement for its office at World Trade Center (WTC) New York. The lease
expires in June 2026.
Certain
other facilities of the Company are rented under operating lease agreements, which expire on various dates, the latest of which is in
2027. The Company recognizes rent expense under such arrangements on a straight-line basis.
The
following table represents the weighted-average remaining lease term and discount rate:
|
Year
ended December 31, | |||
|
2025
|
2024
| ||
|
Weighted average remaining
lease term |
|
| |
|
Weighted average discount
rate |
|
| |
The
discount rate was determined based on the estimated collateralized borrowing rate of the Company, adjusted to the specific lease term
and location of each lease.
Maturities
of operating lease liabilities were as follows:
|
Year
ending December 31, |
||||
|
2026
|
$
|
|
||
|
2027
|
|
|||
|
2028
|
|
|||
|
2029
|
|
|||
|
2030
|
|
|||
|
Thereafter
|
|
|||
|
Total
lease payments *) |
$
|
|
||
|
Less
– imputed interest |
(
|
)
| ||
|
Present
value of lease liabilities |
$
|
|
||
*)
Total lease payments are not offset by $5,593
of expected non-cancelable future sublease payments.
F - 38
PERION NETWORK LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S.
dollars in thousands (except share and per share data)
| NOTE 11: |
LEASES (Cont.)
|
Facilities
leasing expenses, net in the years 2025, 2024 and 2023 were $2,895 ,
$3,879 ,
and $1,993
respectively. Out of which, Sublease income amounted to $4,072 ,
$3,732
and $3,598
in the years 2025, 2024 and 2023, respectively. Variable lease cost in the years 2025, 2024 and 2023 were $211 ,
$451
and $272 ,
respectively.
Cash
paid for amounts included in measurement of lease liabilities during the years ended 2025, 2024 and 2023 were $1,095 ,
$8,287 ,
and $6,191 ,
respectively.
| NOTE 12: |
COMMITMENTS AND CONTINGENCIES
|
On
April 16, 2024, Craig Beisner, a purported shareholder of the Company, filed a putative class action complaint, alleging violations of
U.S. federal securities laws against, the Company and certain of our former and current directors and officers, in the United States District
Court for the Southern District of New York (the “SDNY,” and the putative class action, the “SDNY Action”).
The SDNY Action asserts claims under Sections 10(b) and 20(a) of the Exchange Act and alleges that the defendants materially misrepresented
and/or omitted facts in various public disclosures concerning the Company’s search advertising business and its partnership with
Microsoft Bing. On August 5, 2024, the court appointed Menora Mivtachim Insurance Ltd., Menora Mivtachim Pensions and Gemel Ltd., Menora
Mivtachim Vehistadrut Hamehandesim Nihul Kupot Gemel LTD, Clal Insurance Company Ltd., Clal Pension and Provident Ltd., and Atudot Pension
Fund for Employees & Independent Workers Ltd. as joint lead plaintiffs (“Lead Plaintiffs”). On September 20, 2024,
Lead Plaintiffs filed an amended complaint against the aforementioned defendants and one additional defendant, one of the founders of
Content IQ (the “Amended Complaint”). On November 4, 2024, the Company filed a motion to dismiss the Amended Compliant, which
was granted in June 2025 by the district court with leave for plaintiffs to file an amended complaint on narrow grounds. In July 2025,
Plaintiffs filed notices of appeal to the Second Circuit Court of Appeals and the appeal was fully briefed as of February 27, 2026. The
Company disputes the allegations of wrongdoing and intends to continue to vigorously defend against them.
On
April 11, 2024, Ms. Hadar Shamai, filed a motion to certify a class action with the Financial Department of the District Court of Tel
Aviv (the “DCTA”) against the above-mentioned defendants. The proceedings in Israel are stayed until final resolution of plaintiffs’
appeal in the SDNY Action.
On
February 13, 2025, purported shareholder John Carr filed a putative derivative action on behalf of the Company in the SDNY against all
of the Company’s directors and certain of its officers and former directors, principally alleging that the Board breached its duties
by allowing the Company to make material misrepresentations and/or omissions in various public disclosures concerning the Company’s
search advertising business and partnership with Microsoft Bing (the “Derivative Action”). The derivative action is
stayed, pending final resolution of plaintiffs’ appeal in the SDNY Action. The Company also disputes the allegations of wrongdoing
and intends to defend against them vigorously.
F - 39
PERION NETWORK LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S.
dollars in thousands (except share and per share data)
| NOTE 13: |
SHAREHOLDERS' EQUITY
|
| a. |
Share repurchase program |
In
2024, the Company’s board of directors authorized our repurchase program under which an amount of $75,000
was made available to purchase our ordinary shares. In March 2025, the Company’s board of directors authorized a $50,000
expansion of the previously authorized share repurchase program to a total of $125,000 .
In December 2025, the Company’s board of directors authorized an additional $75,000
expansion of the previously authorized share repurchase program bringing the total to $200,000 .
As of December 31, 2025, the Company had repurchased a total of 12,868,472
ordinary shares at a total cost of $118,133
million under our share repurchase program. All shares repurchased will be retired.
| b. |
Ordinary shares |
The
ordinary shares of the Company entitle their holders to voting rights, the right to receive cash dividend and the right to a share in
excess assets upon liquidation of the Company.
| c. |
Share Options, Restricted Share Units and Warrants
|
In
2003, the Company's Board of Directors approved the 2003 Equity Incentive Plan for an initial term of ten years from adoption and on December
9, 2012, extended the term of the Plan for an additional ten years (the "2013 Plan"). On August 7, 2013, the Company’s Board of
Directors approved amendments to the 2013 Plan which include the ability to grant RSUs and restricted shares. On November 8, 2022 the
Board extended the term of the 2013 Plan for an additional period of two years which has expired on December 9, 2024. On November 19,
2024, the Board approved the adoption of a new equity incentive plan, the Perion Network Ltd. 2024 Share Incentive Plan, which became
effective on the same date (the “2024 Incentive Plan” and together with the Plan, the “Equity Plans”). Following
the adoption of the 2024 Incentive Plan, no awards were granted under the 2013 Incentive Plan.
The
contractual term of the share options is generally no more than
seven years and the vesting period of the options and the standard RSUs granted under the Plan is generally between
and three
years from the date of grant. The rights of the ordinary shares issued upon the exercise of share options or RSUs are
identical to those of the other ordinary shares of the Company.
On May
15, 2025, our board of directors approved the adoption of the French Sub-Plan to the 2024 Share Incentive Plan, or
collectively, the “2024 Plan”.
As
of December 31, 2025, there were 129,545
ordinary shares reserved for future share-based awards under the Plan.
F - 40
PERION NETWORK LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S.
dollars in thousands (except share and per share data)
| NOTE 13: |
SHAREHOLDERS' EQUITY
(Cont.) |
The
following table summarizes the activities for the Company’s service-based share options and RSUs for the year ended December 31,
2025:
|
Weighted
average |
||||||||||||||||
|
Number
of options and RSUs |
Exercise
price |
Remaining
contractual term (in years) |
Aggregate
intrinsic value |
|||||||||||||
|
Outstanding at January
1, 2025 |
|
$
|
|
|
$
|
|
||||||||||
|
Granted
|
|
|
-
|
-
|
||||||||||||
|
Exercised
|
(
|
)
|
|
-
|
|
|||||||||||
|
Cancelled
|
(
|
)
|
|
-
|
-
|
|||||||||||
|
Outstanding
at December 31, 2025 |
|
$
|
|
|
$
|
|
||||||||||
|
Exercisable
at December 31, 2025 |
|
$
|
|
|
$
|
|
||||||||||
|
Vested
and expected to vest at December 31, 2025 |
|
$
|
|
|
$
|
|
||||||||||
The
weighted-average grant-date fair value of options and RSUs granted during the years ended December 31, 2025, 2024 and 2023 was $9.64 ,
$10.83 ,
and $35.65 ,
respectively. Total fair value of options and RSUs, as their respective vesting dates, during the years ended December 31, 2025, 2024
and 2023 was $14,838 ,
$19,798 ,
and $11,531 ,
respectively.
The
aggregate intrinsic value of the outstanding service-based equity grants at December 31, 2025, represents the intrinsic value of all outstanding
options and RSUs since they were all in-the-money as of such date.
Out
of the total number of options and RSUs outstanding as of December 31, 2025 and 2024, an amount of 136,429
and 250,710 ,
relates to share options for which the weighted average exercise price is $6.78
and $6.07 ,
respectively. During 2025 an amount of 114,281
share options was exercised for which the weighted average exercise price was $5.21 .
F - 41
PERION NETWORK LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S.
dollars in thousands (except share and per share data)
| NOTE 13: |
SHAREHOLDERS' EQUITY
(Cont.) |
The
following table summarizes the activities for the Company’s performance-based RSUs for the year ended December 31, 2025:
|
Weighted
average |
||||||||||||||||
|
Number
of Performance based options and RSUs |
Exercise
price |
Remaining
contractual term (in years) |
Aggregate
intrinsic value |
|||||||||||||
|
Outstanding at January
1, 2025 |
|
$
|
|
|
$
|
|
||||||||||
|
Granted
|
|
|
-
|
-
|
||||||||||||
|
Exercised
|
(
|
)
|
|
-
|
|
|||||||||||
|
Cancelled
|
(
|
)
|
|
-
|
-
|
|||||||||||
|
Outstanding
at December 31, 2025 |
|
$
|
|
|
$
|
|
||||||||||
|
Exercisable
at December 31, 2025 |
|
|
-
|
|
||||||||||||
|
Vested
and expected to vest at December 31, 2025 |
|
$
|
|
|
$
|
| ||||||||||
The
weighted-average grant-date fair value of options and RSUs granted during the year ended December 31, 2025, 2024 and 2023 was $9.56 ,
$8.60
and $34.18 ,
respectively. The total fair value of options and RSUs, as their respective vesting dates, during the years ended December 31, 2025, 2024
and 2023 was $7,782 ,
$3,032 ,
and $2,506 ,
respectively.
The
aggregate intrinsic value of the outstanding performance-based equity grants at December 31, 2025, represents the intrinsic value of all
outstanding options and RSUs since they were all in-the-money as of such date.
The
number of service-based and performance-based options and RSUs expected to vest reflects an estimated forfeiture rate.
F - 42
PERION NETWORK LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S.
dollars in thousands (except share and per share data)
| NOTE 13: |
SHAREHOLDERS' EQUITY
(Cont.) |
The
following table summarizes additional information regarding outstanding and exercisable service-based options and RSUs under the Company's
Equity Incentive Plan as of December 31, 2025:
|
Outstanding
|
Exercisable
|
|||||||||||||||||||||||||
|
Range
of exercise price |
Number
of options and RSUs |
Weighted
average remaining contractual life (years) |
Weighted
average exercise price |
Number
of options and RSUs |
Weighted
average remaining contractual life (years) |
Weighted
average exercise price |
||||||||||||||||||||
|
$
|
|
|
|
$
|
|
|
-
|
$
|
|
|||||||||||||||||
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
$
|
|
|
|
|
|
|
|
|||||||||||||||||||
|
|
|
$
|
|
|
|
$
|
|
|||||||||||||||||||
The
following table summarizes additional information regarding outstanding and exercisable performance-based RSUs under the Company's share
Option Plan as of December 31, 2025:
|
Outstanding
|
Exercisable
|
|||||||||||||||||||||||||
|
Range
of exercise price |
Number
of RSUs |
Weighted
average remaining contractual life (years) |
Weighted
average exercise price |
Number
RSUs |
Weighted
average remaining contractual life (years) |
Weighted
average exercise price |
||||||||||||||||||||
|
$
|
|
|
|
$
|
|
|
-
|
$
|
|
|||||||||||||||||
The
Company recognized share-based compensation expenses related to its share-based awards in the consolidated statements of income (loss)
as follows:
|
Year
ended December 31, |
||||||||||||
|
2025
|
2024
|
2023
|
||||||||||
|
Cost of revenue
|
$
|
|
$
|
|
$
|
|
||||||
|
Research and development
|
|
|
|
|||||||||
|
Selling and marketing
|
|
|
|
|||||||||
|
General and administrative
|
|
|
|
|||||||||
|
Total
|
$
|
|
$
|
|
$
|
|
||||||
As
of December 31, 2025, there was $17,847
of unrecognized compensation cost related to RSUs. These amounts are expected to be recognized over a weighted-average
period of 1.46
years related to RSUs. To the extent the actual forfeiture rate is different from what has been estimated, share-based compensation related
to these awards will differ from the initial expectations.
F - 43
PERION NETWORK LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S.
dollars in thousands (except share and per share data)
| NOTE 14: |
FINANCIAL INCOME (EXPENSE), NET |
|
Year ended December
31, |
||||||||||||
|
2025
|
2024
|
2023
|
||||||||||
|
Financial
income: |
||||||||||||
|
Interest income |
$ |
|
$ |
|
$ |
|
||||||
|
Amortization/accretion of premium/discount on marketable
securities, net |
|
|
|
|||||||||
|
$ |
|
$ |
|
$ |
|
|||||||
|
Financial
expense: |
||||||||||||
|
Foreign currency translation losses |
$ |
(
|
) |
$ |
(
|
) |
$ |
(
|
) | |||
|
Revaluation of acquisition related contingent consideration |
$ |
( |
) |
$ |
$ |
|||||||
|
Interest expense |
(
|
) |
|
|
||||||||
|
Bank charges and other |
(
|
) |
(
|
) |
(
|
) | ||||||
|
$ |
(
|
) |
$ |
(
|
) |
$ |
(
|
) | ||||
|
Financial income, net
|
$ |
|
$ |
|
$ |
|
||||||
| NOTE 15: |
INCOME TAXES |
| a. |
Income (loss) before taxes on income |
Income
(loss) before taxes on income is comprised as follows:
|
Year ended December 31, |
||||||||||||
|
2025 |
2024 |
2023 |
||||||||||
|
Domestic |
$ |
(
|
) |
$ |
|
$ |
|
|||||
|
Foreign |
|
|
|
|
||||||||
|
Total |
$ |
(
|
) |
$ |
|
$ |
|
|||||
F - 44
PERION NETWORK LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S.
dollars in thousands (except share and per share data)
| NOTE 15: |
INCOME TAXES (Cont.) |
| b. |
Taxes on income |
Taxes
on income are comprised as follows:
|
Year ended December 31, |
||||||||||||
|
2025 |
2024 |
2023 |
||||||||||
|
Current taxes |
$ |
|
$ |
|
$ |
|
||||||
|
Deferred tax benefit |
(
|
) |
(
|
) |
(
|
) | ||||||
|
Taxes in respect of previous years |
(
|
) |
(
|
) |
(
|
) | ||||||
|
Total |
$ |
|
$ |
|
$ |
|
||||||
Taxes
on income by jurisdiction were as follows:
|
Year ended December 31, |
||||||||||||
|
2025 |
2024 |
2023 |
||||||||||
|
Domestic |
$ |
(
|
) |
$ |
|
$ |
|
|||||
|
Foreign |
|
|
|
|||||||||
|
Total |
$ |
|
$ |
|
$ |
|
||||||
|
Domestic: |
||||||||||||
|
Current taxes |
$ |
|
$ |
|
$ |
|
||||||
|
Deferred tax benefit |
(
|
) |
(
|
) |
(
|
) | ||||||
|
Taxes in respect of previous years |
(
|
) |
(
|
) |
(
|
) | ||||||
|
Total - Domestic |
$ |
(
|
) |
$ |
|
$ |
|
|||||
|
Foreign: |
||||||||||||
|
Current taxes |
$ |
|
$ |
|
$ |
|
||||||
|
Deferred tax expense |
|
|
|
|||||||||
|
Taxes in respect of previous years |
(
|
) |
(
|
) |
(
|
) | ||||||
|
Total - Foreign |
$ |
|
$ |
|
$ |
|
||||||
|
Total income tax expense |
$ |
|
$ |
|
$ |
|
||||||
F - 45
PERION NETWORK LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S.
dollars in thousands (except share and per share data)
| NOTE 15: |
INCOME TAXES (Cont.) |
| c. |
Deferred Taxes |
Deferred
income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. The significant components of the Company’s deferred tax assets
and liabilities are as follows:
|
December 31, |
||||||||
|
2025 |
2024 |
|||||||
|
Deferred tax assets: |
||||||||
|
Net operating loss and other losses carry forwards |
$ |
|
$ |
|
||||
|
Research and development |
|
|
||||||
|
Share-based compensation |
|
|
||||||
|
Lease liabilities |
|
|
||||||
|
Other temporary differences mainly relating to reserve and allowances |
|
|
||||||
|
Deferred tax assets |
$ |
|
$ |
|
||||
|
Deferred tax liability: |
||||||||
|
Right of use assets |
$ |
(
|
) |
$ |
(
|
) | ||
|
Intangible assets |
(
|
) |
(
|
) | ||||
|
Deferred tax liability |
$ |
(
|
) |
$ |
(
|
) | ||
|
Valuation allowance |
$ |
(
|
) |
$ |
(
|
) | ||
|
Total deferred tax assets, net |
$ |
|
$ |
|
||||
|
Domestic: |
||||||||
|
Long term deferred tax asset, net |
$ |
|
$ |
|
||||
|
$ |
|
$ |
|
|||||
|
Foreign: |
||||||||
|
Long term deferred tax asset (liability), net |
$ |
(
|
) |
$ |
|
|||
|
$ |
(
|
) |
$ |
|
||||
|
Total deferred tax asset, net |
$ |
|
$ |
|
||||
The
$1,557
and $(849 )
change in the total valuation allowance for the year ended December 31, 2024 and 2025, respectively, relates to the projected utilization
of certain operating loss carry-forwards and temporary differences and other tax attributes for which a full valuation allowance was previously
recorded and measurement period adjustments.
F - 46
PERION NETWORK LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S.
dollars in thousands (except share and per share data)
| NOTE 15: |
INCOME TAXES (Cont.) |
| d. |
Reconciliation of the Company’s effective tax rate to the statutory tax rate in Israel |
A
reconciliation between the theoretical tax expense, assuming all income is taxed at the statutory tax rate applicable to income of the
Company, and the actual tax expense as reported in the statement of income (loss) following the adoption of ASU 2023‑09 is as follows:
|
Year ended December 31, |
||||||||
|
2025 |
||||||||
|
$ |
% | |||||||
|
Income before taxes on income |
$ |
(
|
) |
|||||
|
Statutory tax rate in Israel |
|
|
23.0 |
| ||||
|
Theoretical tax income |
$ |
(
|
) |
|||||
|
Foreign tax effects |
||||||||
|
United States: |
||||||||
|
Tax adjustment in respect of different tax rate of foreign subsidiaries |
(
|
) |
|
|||||
|
State and Local tax effect, net of federal income tax effect* |
(
|
) |
|
|||||
|
Share - based payment awards |
|
(
|
) | |||||
|
Transfer Pricing Adjustment |
|
(
|
) | |||||
|
Welfare Expenses |
|
(
|
) | |||||
|
Change in valuation allowance |
(
|
) |
|
|||||
|
Other |
|
(
|
) | |||||
|
Canada: |
||||||||
|
Share - based payment awards |
|
(
|
) | |||||
|
Transfer Pricing Adjustment |
(
|
) |
|
|||||
|
Tax credits and incentives |
(
|
) |
|
|||||
|
Withholding Tax |
|
(
|
) | |||||
|
Welfare Expenses |
|
(
|
) | |||||
|
Change in valuation allowance |
(
|
) |
|
|||||
|
Other |
|
(
|
) | |||||
|
France: |
||||||||
|
Tax credits and incentives |
|
(
|
) | |||||
|
Change in valuation allowance |
(
|
) |
|
|||||
|
Other |
|
(
|
) | |||||
|
Other foreign jurisdictions: |
(
|
) |
|
|||||
F - 47
PERION NETWORK LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S.
dollars in thousands (except share and per share data)
| NOTE 15: |
INCOME TAXES (Cont.) |
|
Nontaxable or nondeductible |
||||||||
|
Share- based payment awards |
|
(
|
) | |||||
|
Nondeductible Amortization |
|
(
|
) | |||||
|
Acquisition cost Adjustments |
(
|
) |
|
|||||
|
Transfer Pricing Adjustment |
(
|
) |
|
|||||
|
Tax Interest Income |
(
|
) |
|
|||||
|
Welfare Expenses |
|
(
|
) | |||||
|
Other |
(
|
) |
|
|||||
|
Changes in valuation allowance |
|
(
|
) | |||||
|
Changes in Unrecognized tax benefits** |
|
(
|
) | |||||
|
Preferred Tax Benefit Regime*** |
(
|
) |
|
|||||
|
Taxes on income |
$ |
|
(
|
) | ||||
|
*** Benefit per ordinary share from "Preferred Enterprise" status: |
||||||||
|
Basic |
$ |
|
||||||
|
Diluted |
$ |
|
||||||
*State
and Local Income Taxes: The majority (greater than 50 percent) of the state and local tax effect in the United States is attributable
to taxes imposed by the State of California.
**Unrecognized
Tax Benefits: Reconciling items presented in the "Changes in unrecognized tax benefits" category are disclosed on an aggregated basis
for all jurisdictions. This line item includes changes in judgment related to tax positions taken in prior years as well as unrecognized
tax benefits recorded for positions taken in the current reporting period.
***Preferred
Tax Benefit Regime (Israel): This item reflects tax benefits derived from the company’s status under the Israeli Law for the Encouragement
of Capital Investments, which grants reduced corporate tax rates for "Preferred Technology Enterprises".
F - 48
PERION NETWORK LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S.
dollars in thousands (except share and per share data)
| NOTE 15: |
INCOME TAXES (Cont.) |
A
reconciliation between the theoretical tax expense, assuming all income is taxed at the statutory tax rate applicable to income of the
Company, and the actual tax expense as reported in the statement of income for years prior to the adoption of ASU 2023‑09 is as
follows:
|
Year ended December 31, |
||||||||
|
2024 |
2023 |
|||||||
|
Income before taxes on income |
$ |
|
$ |
|
||||
|
Statutory tax rate in Israel |
|
% |
|
% | ||||
|
Theoretical tax expense |
$ |
|
$ |
|
||||
|
Increase (decrease) in tax expenses resulting from: |
||||||||
|
"Preferred Enterprise" benefits * |
(
|
) |
(
|
) | ||||
|
Non-deductible expenses |
|
|
||||||
|
Tax adjustment in respect of different tax rate of foreign subsidiaries |
|
|
||||||
|
Deferred taxes related to prior years |
|
|
||||||
|
Previous years taxes |
|
|
||||||
|
Change in valuation allowance |
(
|
) |
(
|
) | ||||
|
Change in unrecognized tax benefits |
(
|
) |
|
|||||
|
Other |
|
(
|
) | |||||
|
Taxes on income |
$ |
|
$ |
|
||||
|
* Benefit per ordinary share from "Preferred Enterprise" status: |
||||||||
|
Basic |
$ |
|
$ |
|
||||
|
Diluted |
$ |
|
$ |
|
||||
| e. |
Tax Paid |
Cash
paid for income taxes, net of refunds received, by jurisdiction pursuant to the disclosure requirements of ASU 2023-09 for the year ended
December 31, 2025 is as follows:
|
Cash paid during the year for: |
||||
|
Federal income taxes paid, net in the US |
$ |
|
||
|
State income taxes paid, net in the US |
|
|||
|
Income taxes paid, net in Israel |
|
|||
|
Income taxes paid, net in other jurisdictions |
|
|||
|
Total tax paid |
$ |
|
||
F - 49
PERION NETWORK LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S.
dollars in thousands (except share and per share data)
| NOTE 15: |
INCOME TAXES (Cont.) |
| f. |
Income tax rates |
Taxable
income of Israeli companies was generally subject to corporate tax at the rate of 23
Non-Israeli
subsidiaries are taxed according to the tax laws in their respective countries of residence.
Deferred
taxes were not provided for undistributed earnings of the Company’s foreign subsidiaries. Currently, the Company does not intend
to distribute any amounts of its undistributed earnings as dividends. Accordingly, no deferred income taxes have been provided in respect
of these subsidiaries. If these earnings were distributed to Israel in the form of dividends or otherwise, the Company would be subject
to additional Israeli income taxes (subject to an adjustment for foreign tax credits) and foreign withholding taxes. As of December 31,
2025, certain foreign subsidiaries of the Company had undistributed earnings of $9.2
million, which were designated as indefinitely reinvested. If these earnings were repatriated to Israel, it would be subject to income
taxes and to an adjustment for foreign tax credits and foreign withholding taxes. The Company has estimated the amount of unrecognized
deferred tax liability related to these earnings to be approximately $2,116 .
| g. |
Technological Enterprise Incentives Regime (Amendment
73 to the Investment Law) |
In
December 2016, the Economic Efficiency Law (Legislative Amendments for Applying the Economic Policy for the 2017 and 2018 Budget Years),
2016 which includes Amendment 73 to the Law for the Encouragement of Capital Investments ("Amendment 73") was published and came into
effect in May 2017. According
to Amendment 73, a Preferred Technological Enterprise, as defined in Amendment 73, with total consolidated revenue of less than NIS 10
billion, shall be subject to 12% tax rate on income derived from intellectual property (in development area A—a tax rate of 7.5%).
In order to qualify as a Preferred Technological Enterprise certain criteria must be met, such as a minimum ratio of annual R&D expenditure
and R&D employees, as well as having at least 25% of annual revenue derived from exports.
Any
dividends distributed from income from the preferred technological enterprises will be subject to tax at a rate of 20 %.
Amendment 73 further provides that, in certain circumstances, a dividend distributed to a foreign corporate shareholder, would be subject
to a 4 %
tax rate (if the percentage of foreign shareholders exceeds 90%).
The
Company assessed the criteria for qualifying as a “Preferred Technological Enterprise,” status and concluded that the Company
and certain of its Israeli subsidiaries are eligible to the above-mentioned benefits.
F - 50
PERION NETWORK LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S.
dollars in thousands (except share and per share data)
| NOTE 15: |
INCOME TAXES (Cont.) |
| h. |
Uncertain tax positions |
A
reconciliation of the beginning and ending balances of the total amounts of unrecognized tax benefits is as follows:
|
December 31, |
||||||||
|
2025 |
2024 |
|||||||
|
Balance at the beginning of the year |
$ |
|
$ |
|
||||
|
Increase related to prior year tax positions |
|
|
||||||
|
Decrease related to prior year tax positions |
(
|
) |
(
|
) | ||||
|
Increase related to current year tax positions |
|
|
||||||
|
Decrease related to current year tax positions |
(
|
) |
|
|||||
|
Balance at the end of the year |
$ |
|
$ |
|
||||
The
Company recognizes interest accrued related to unrecognized tax benefits and penalties in tax expenses. The Company had $2,185
and $1,022
for the payment of interest and penalties accrued at December 31, 2025, and 2024, respectively which are included in the balance at the
end of the year.
The
Company does not expect uncertain tax positions to change significantly over the next 12 months, except in the case of settlements with
tax authorities, the likelihood and timing of which are difficult to estimate.
The
Company’s tax assessments in Israel and the U.S. Federal for tax years prior to 2020 and 2021 respectively are considered final.
The Company is currently under Israeli Tax authority audit for the years 2020-2023. In 2025, the Israel Tax Authority issued a tax assessment
for the 2020 tax year (Stage A); the Company intends to file an objection to this assessment. The Company has net operating losses in
the U.S. from prior tax periods beginning in 2015 which may be subject to examination upon utilization in future tax periods.
| i. |
Tax loss carry-forwards |
As
of December 31, 2025, the Company’s U.S. subsidiaries have Federal net operating loss carry-forwards of $3,178
and States net operating loss carry-forwards of $6,040 .
Net operating losses generated in fiscal years prior to 2018 in the U.S. may be carried forward through periods which will expire in .
Net operating losses generated in 2018 and subsequent years in the U.S. may be carried forward indefinitely for Federal tax purposes,
yet are subject to certain limitations. Different states have varying rules regarding utilization and expiration of net operating losses.
Utilization of U.S. net operating losses may be subject to substantial annual limitation due to the "change in ownership" provisions of
the Internal Revenue Code of 1986 and similar state provisions. The annual limitation may result in the expiration of net operating losses
before utilization.
F - 51
PERION NETWORK LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S.
dollars in thousands (except share and per share data)
| NOTE 15: |
INCOME TAXES (Cont.) |
As
of December 31, 2025, the Company’s European subsidiaries have net operating loss carry-forwards of $5,423
which may be carried forward indefinitely.
As
of December 31, 2025, the Company’s Canadian subsidiary has non-capital loss carry-forwards of $4,120 ,
which are available to offset future taxable income and expire 20 years from the year in which they were incurred.
The
Company has accumulated capital losses for tax purposes as of December 31, 2025, of approximately $6,932 ,
which may be carried forward and offset against taxable capital gains in the future for an indefinite period.
| NOTE 16: |
EARNINGS
PER SHARE |
The
table below presents the computation of basic and diluted net earnings per common share:
|
Year
ended December 31, |
||||||||||||
|
2025
|
2024
|
2023
|
||||||||||
|
Numerator:
|
||||||||||||
|
Net
income (loss) attributable to ordinary shares – basic and diluted |
$
|
(
|
)
|
$
|
|
$
|
|
|||||
|
Denominator:
|
||||||||||||
|
Number
of ordinary shares outstanding during the year |
|
|
|
|||||||||
|
Weighted
average effect of dilutive securities: |
||||||||||||
|
Employee
options and restricted share units |
|
|
|
|||||||||
|
Diluted
number of ordinary shares outstanding |
|
|
|
|||||||||
|
Basic
net earnings (loss) per ordinary share |
$
|
(
|
)
|
$
|
|
$
|
|
|||||
|
Diluted
net earnings (loss) per ordinary share |
$
|
(
|
)
|
$
|
|
$
|
|
|||||
|
Potential
ordinary shares equivalents excluded because their effect would have been anti-dilutive
|
|
|
|
|||||||||
F - 52
PERION NETWORK LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S.
dollars in thousands (except share and per share data)
| NOTE 17: |
MAJOR CUSTOMERS |
A
substantial portion of the Company's revenue is derived from search fees and online advertising, the market for which is highly competitive
and rapidly changing. Significant changes in this industry or in customer buying behavior would adversely affect the Company’s operating
results.
The
following table sets forth the customers that represent 10% or more of the Company’s total revenue in each of the years presented
below:
|
Year
ended December 31, |
||||||||||||
|
2025
|
2024
|
2023
|
||||||||||
|
Customer A
|
|
%
|
|
%
|
|
%
| ||||||
|
Customer B
|
) |
|
%
|
|
%
| |||||||
*
Customer B represented less than 10% of total revenue for the year ended December 31, 2025.
| NOTE 18: | DISAGGREGATION OF REVENUE AND GEOGRAPHIC INFORMATION |
As
part of the Company’s Perion One strategy and the implementation of a unified organizational structure, the Company enhanced its
revenue disclosures beginning in 2025 to present revenue disaggregated by advertising channel.
Comparative
information for the year ended December 31, 2024 has been recast to conform to the current presentation. Disaggregated revenue by channel
has not been presented for periods prior to 2024, as such information was not previously available.
The
following table presents the total revenue by channel for the years ended December 31, 2025 and 2024:
|
Year
ended December 31, |
||||||||
|
2025
|
2024
|
|||||||
|
DOOH
|
$
|
|
$
|
|
||||
|
CTV
|
|
|
||||||
|
Web
|
|
|
||||||
|
Search
|
|
|
||||||
|
Other
|
|
|
||||||
|
$
|
|
$
|
|
|||||
F - 53
PERION NETWORK LTD. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S.
dollars in thousands (except share and per share data)
| NOTE 18: | DISAGGREGATION OF REVENUE AND GEOGRAPHIC INFORMATION (Cont.) |
The
following table presents the total revenue for the years ended December 31, 2025, 2024 and 2023, allocated to the geographic areas in
which they were generated:
|
Year
ended December 31, |
||||||||||||
|
2025
|
2024
|
2023
|
||||||||||
|
U.S.
|
$
|
|
$
|
|
$
|
|
||||||
|
Other
|
|
|
|
|||||||||
|
$
|
|
$
|
|
$
|
|
|||||||
The
total revenue is attributed to geographic areas based on the location of the end-users.
The
following table presents the locations of the Company’s long-lived assets as of December 31, 2025 and 2024:
|
December
31, |
||||||||
|
2025
|
2024
|
|||||||
|
Israel
|
$
|
|
$
|
|
||||
|
U.S.
|
|
|
||||||
|
Other
|
|
|
||||||
|
$
|
|
$
|
|
|||||
(*)
Long-lived assets comprise property and equipment, net and operating lease right-of-use assets, net.
F
- 54
ITEM
19. EXHIBITS:
|
|
|
|
Incorporation
by Reference | ||||
|
Exhibit
No. |
Description |
Form |
File
No. |
Exhibit
No. |
Filing
Date |
Filed
/ Furnished | |
|
1.1 |
Memorandum
of Association of Perion, as amended and restated (translated from Hebrew) |
20-F |
000-51694 |
1.1 |
March
16, 2022 |
||
|
1.2 |
Articles
of Association of Perion, as amended and restated |
20-F |
000-51694 |
1.2 |
March
16, 2022 |
||
|
2.1 |
Description
of Perion’s Securities registered pursuant to Section 12 of the Securities Exchange Act of 1934 |
20-F |
000-51694 |
2.1 |
April
8, 2024 |
||
|
4.1† |
Perion
2003 Israeli Share Option Plan and U.S. Addendum |
20-F |
000-51694 |
4.1 |
April
29, 2013 |
||
|
4.2† |
Perion
Equity Incentive Plan as amended on November 8, 2022 |
20-F |
000-51694 |
4.2 |
March
15, 2023 |
||
|
4.3† |
Perion
Network Ltd. 2024 Share Incentive Plan |
S-8 |
333-284011 |
99.1 |
December
23, 2024 |
||
|
4.4† |
Compensation
Policy for Directors and Officers, as adopted on December 18, 2025 |
* | |||||
|
4.5† |
A
Form of Indemnification Letter Agreement between the Company and its Present and Future Directors and Officers |
20-F |
000-51694 |
4.17 |
March
27, 2018 |
||
| 4.6 |
Bing
Services Framework Agreement by and between Perion Network Ltd. and Microsoft Ireland Operations Limited, effective as of January 1, 2021*** |
20-F |
000-51694 |
4.6 |
March
25, 2021 |
||
|
4.7 |
Summary
in English of Lease Agreement by and between Perion Network Ltd. and Melisron Ltd., and Afi Properties Ltd., Dated as of March 27, 2024*** |
20-F |
000-51694 |
4.7 |
March
25, 2025 |
||
|
8.1 |
List
of Subsidiaries |
* | |||||
|
11.1 |
Perion
Insider Trading Policy, as amended |
* | |||||
|
12.1 |
Certification
required by Rule 13a-14(a) or Rule 15d-14(a) executed by the Chief Executive Officer of the Company |
* | |||||
|
12.2 |
Certification
required by Rule 13a-14(a) or Rule 15d-14(a) executed by the Chief Financial Officer of the Company |
* | |||||
|
13.1 |
Certification
required by Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code |
** | |||||
|
13.2 |
Certification
required by Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code |
** | |||||
|
15.1 |
Consent
of Kost Forer Gabbay & Kasierer, a member of EY Global, Independent Auditors |
* | |||||
|
97.1† |
Perion
Policy for recovery of erroneously awarded compensation |
20-F |
000-51694 |
97.1 |
April
8, 2024 |
||
|
101.INS |
Inline XBRL Instance
Document | ||||||
|
101.SCH |
Inline XBRL Taxonomy
Extension Schema Document | ||||||
|
101.CAL |
Inline XBRL Taxonomy
Extension Calculation Linkbase Document | ||||||
|
101.DEF |
Inline XBRL Taxonomy
Definition Linkbase Document | ||||||
|
101.LAB |
Inline XBRL Taxonomy
Extension Label Linkbase Document | ||||||
|
101.PRE |
|
Inline XBRL Taxonomy
Extension Presentation Linkbase Document | |||||
|
104** |
|
Inline XBRL for the cover
page of this Annual Report on Form 20-F (embedded within the Inline XBRL document) | |||||
|
|
|
* |
Filed herewith. |
|
** |
Furnished
herewith. |
|
*** |
Certain confidential
information contained in this document, marked by brackets, was omitted because it is both (i) not material and (ii) would likely cause
competitive harm to the Company if publicly disclosed. “[***]” indicates where the information has been omitted from this
exhibit. |
|
† |
Indicates
management contract or compensatory plan or arrangement. |
92
SIGNATURES
The
registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the
undersigned to sign this annual report on its behalf.
|
|
PERION NETWORK
LTD. |
| |
|
|
|
|
|
|
|
By: |
/s/ Tal Jacobson |
|
|
|
|
Name: Tal
Jacobson |
|
|
|
|
Title: Chief
Executive Officer |
|
|
|
|
|
|
|
|
By: |
/s/ Elad
Tzubery |
|
|
|
|
Name: Elad
Tzubery |
|
|
|
|
Title: Chief
Financial Officer |
|
|
Date: March
16, 2026 |
|||
93
FAQ
What does Perion Network (PERI) describe as its core business in this Form 20-F?
Perion Network focuses on digital advertising and search monetization, working with brands, agencies, DSPs, SSPs and publishers. It offers multi-channel ad solutions, including high-impact web, CTV, DOOH, audio, contextual and data-driven products, and partners with search providers and publishers to generate advertising revenue.
How is generative AI expected to impact Perion Network (PERI)?
Perion warns that generative AI and AI chatbots reduce traditional web traffic and search queries, cutting ad impressions and clicks. It also expects AI platforms to lower entry barriers in AdTech and let brands create and optimize campaigns independently, which could reduce demand for Perion’s solutions and pressure revenue.
What is the Perion One platform mentioned in Perion Network’s 20-F?
Perion One is a unified platform strategy that combines Perion’s brands and technologies into a single advanced advertising solution. The goal is to help brands, agencies and retailers navigate complex modern advertising, but the company cautions that delays, integration issues or weak adoption could materially harm growth and results.
How dependent is Perion Network (PERI) on large technology and platform companies?
Perion notes that Google, Meta, Apple, TikTok, Amazon and major browser and OS providers control key advertising and distribution channels. Policy or technical changes in browsers, operating systems, mobile platforms, or search marketplaces can limit targeting, inventory access or distribution and materially affect Perion’s revenue and margins.
What risks does Perion Network (PERI) highlight around its search business?
Perion’s search business depends heavily on a small number of search providers and top publishers. It reports past revenue declines from Microsoft policy and pricing changes, warns that contracts can change or end, and notes that AI-driven search alternatives are reducing traditional search usage, threatening future search advertising revenue.
How does Perion Network (PERI) use artificial intelligence within its products?
Perion uses AI and machine learning for campaign delivery and optimization, including its Outmax AI agent, the AI-based Perion One platform, WAVE dynamic audio, and SORT pre-bid intent classification. It cautions that AI models may be flawed, biased or legally risky, and are subject to rapidly evolving global AI regulation.
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