Company raises Annual Guidance, Reflecting
Continued Media Margin Expansion and Strong Growth Drivers
Perion Network Ltd. (NASDAQ & TASE: PERI), a global
advertising technology company whose synergistic solutions are
delivered across the three primary channels of digital advertising
– ad search, social media, and display/video/CTV advertising –
today reported its financial results for the first quarter ended
March 31, 2023.
Doron Gerstel, Perion’s CEO, stated, “We continue to outperform
the adtech industry despite the challenging macro environment, as
reflected in our ongoing market share gains and increased
efficiencies, which are made possible by our innovative technology.
All of these collectively, are driving top-line growth and margin
expansion”.
“We are growing in the areas where technology matters most,”
added Mr. Gerstel. “These include video – which continues to
represent an increasing portion of our display revenue; our
fast-growing retail media channel; our privacy-first targeting
solution SORT®, and our search advertising solution. The rapid
emergence of ChatGPT in the market and Microsoft’s mission to
further expand the role of AI within search, has elevated user
interest in Bing. As a result, we experienced a 49% year-over-year
growth in average daily searches, as well as a lift in new
publishers”.
“Our ongoing margin and top-line growth are the result of our
ability to consolidate cross channel data signals in a central
place – Perion’s iHUB. Advanced proprietary AI technology powers a
centralized bidding system that maximizes unit revenue (CPM), while
reducing media cost and simultaneously meeting our customer ROAS
(Return on Ad Spend) expectations,” added Mr. Gerstel.
First Quarter 2023 Business Highlights
- Media margin increased to 45%, compared with 43% in the first
quarter of 2022
- Video revenue increased by 26% year-over-year, representing 44%
of Display Advertising Revenue compared with 41% last year
- The number of video platform publishers increased by 63%
year-over-year to 75 publishers
- Revenue from retained video platform publishers increased by
71% year-over-year
- Average revenue per video platform publisher increased by 22%
year-over-year
- CTV revenue increased by 12% year-over-year, representing 8% of
Display Advertising Revenue - similar to last year, with the number
of CTV customers nearly doubling
- Retail Media revenue increased by 60% year-over-year,
representing 8% of Display Advertising Revenue compared with 6%
last year, with the number of retail media customers up 32% over
the same period
- SORT® spending increased by 93% year-over-year, representing
17% of Display Advertising Revenue, driven by a 142% increase in
the number of customers
- The number of search advertising publishers increased by 29%
year-over-year, while the number of average daily searches
increased by 49% to 26.3 million over the same period
First Quarter 2023 Financial Highlights(1)
In millions, except per share
data
Three months ended
March 31,
2023
2022
%
Display Advertising Revenue
$
79.9
$
68.6
+16%
Search Advertising Revenue
$
65.3
$
56.7
+15%
Total Revenue
$
145.2
$
125.3
+16%
Gross Profit (Revenue ex-TAC)
$
65.3
$
54.3
+20%
GAAP Net Income
$
23.8
$
15.5
+54%
Non-GAAP Net Income
$
29.9
$
20.7
+44%
Adjusted EBITDA
$
31.3
$
22.7
+38%
Adjusted EBITDA to Revenue
ex-TAC
48%
42%
Net Cash from Operations
$
17.8
$
23.6
-25%
GAAP Diluted EPS
$
0.48
$
0.33
+45%
Non-GAAP Diluted EPS
$
0.60
$
0.44
+36%
(1) See below reconciliation of GAAP to Non-GAAP
measures.
Outlook for 2023
“Given our current visibility, and the sustainability and
predictability of our business model, we feel confident in raising
annual guidance for the full year 2023. The management transition
announced in February is on track and I am confident that Perion
will continue to thrive under Tal Jacobson’s leadership,” concluded
Mr. Gerstel.
In millions
2022
Prior 2023 Guidance
Current 2023 Guidance
YoY
Growth %1
Revenue
$640.3
$720-$740
$725-$745
15%1
Adjusted EBITDA
$132.4
$149-153
$155+
17%
Adjusted EBITDA to Revenue
21%
21%1
21%1
Adjusted EBITDA to Revenue
ex-TAC
49%
50%1
50%1
(1) Calculated at revenue guidance midpoint
Financial Comparison for the First Quarter of 2023
Revenue: Revenue increased by 16% to $145.2 million in
the first quarter of 2023 from $125.3 million in the first quarter
of 2022. Display Advertising Revenue increased by 16%
year-over-year, accounting for 55% of total revenue. Growth was
primarily due to a 26% increase in video revenue, 12% increase in
CTV revenue, 93% increase in SORT® customer spending and a 60%
year-over-year increase in Retail media revenue. Search Advertising
Revenue increased by 15% year-over-year, accounting for 45% of
revenue, primarily due to a 29% increase in the number of
publishers and a 49% increase in average daily searches, offsetting
a 22% decrease in RPM.
Traffic Acquisition Costs (“TAC”): TAC amounted to $79.9
million, or 55% of revenue, in the first quarter of 2023, compared
with $71.0 million, or 57% of revenue, in the first quarter of
2022. The improvement in media margin was primarily due to our
proprietary iHUB technology which optimizes media buying and
reduces our media cost, as well as Search and Display advertising
product mix.
Net Income: On a GAAP basis, net income increased by 54%
to $23.8 million in the first quarter of 2023 from $15.5 million in
the first quarter of 2022. Non-GAAP net income was $29.9 million,
or 21% of revenue, in the first quarter of 2023, compared with
$20.7 million, or 17% of revenue, in the first quarter of 2022. A
reconciliation of GAAP to non-GAAP net income is included in this
press release.
Adjusted EBITDA: Adjusted EBITDA was $31.3 million, or
22% of revenue and 48% of revenue ex-TAC, in the first quarter of
2023, compared with $22.7 million, or 18% of revenue and 42% of
revenue ex-TAC, in the first quarter of 2022. A reconciliation of
GAAP Net Income to Adjusted EBITDA is included in this press
release.
Cash Flow from Operations: Net cash provided by operating
activities in the first quarter of 2023 was $17.8 million, compared
with $23.6 million in the first quarter of 2022. Operating cash
flow was affected by the shift of approximately $8 million in
customer collection from March 2023 to April 2023 and a one-time
change in working capital needs.
Cash, cash equivalents, short-term bank deposits and
marketable securities: As of March 31, 2023, cash and cash
equivalents, short-term bank deposits and marketable securities
amounted to $436.3 million, compared with $429.6 million as of
December 31, 2022. The $6.7 million increase is primarily a result
of $17.8 million in cash from operations, partially offset by $13.3
million cash paid in connection with acquisitions.
Conference Call
Perion management will host a conference call to discuss the
results at 8:30 a.m. ET today. Call details:
- Registration link:
https://incommconferencing.zoom.us/webinar/register/WN_Uje6WNcQSpmH5CcsC3x4pg
- Toll Free: 1-877-407-0779
- Toll/International: 1-201-389-0914
A replay of the call and a transcript will be available within
approximately 24 hours of the live event on Perion’s website.
About Perion Network Ltd.
Perion is a global advertising technology company whose
synergistic solutions are delivered across the three primary
channels of digital advertising – ad search, social media and
display, including video and CTV (connected TV) advertising. These
channels are brought together by Perion’s intelligent HUB (iHUB),
which integrates Perion’s business assets from both sides of the
open Web, providing significant benefits to brands and
publishers.
For more information, visit Perion's website at
www.perion.com.
Non-GAAP Measures
Non-GAAP financial measures consist of GAAP financial measures
adjusted to exclude stock-based compensation expenses, retention
and acquisition related expenses, revaluation of acquisition
related contingent consideration, amortization of acquired
intangible assets and the related taxes thereon, non-recurring
expenses, foreign exchange gains (losses) associated with ASC-842,
as well as changes in fair value of earnout contingent
consideration. Adjusted Earnings Before Interest, Taxes,
Depreciation and Amortization ("Adjusted EBITDA") is defined as
operating income excluding stock-based compensation expenses,
depreciation, acquisition related items consisting of amortization
of intangible assets, acquisition related expenses, gains and
losses recognized on changes in the fair value of contingent
consideration arrangements. Revenue excluding Traffic Acquisition
Costs (“Revenue ex-TAC”) presents revenue reduced by traffic
acquisition costs, reflecting that a portion of our revenue must be
directly passed to publishers or advertisers and presents our
revenue excluding such items.
The purpose of such adjustments is to give an indication of our
performance exclusive of non-cash charges and other items that are
considered by management to be outside of our core operating
results. These non-GAAP measures are among the primary factors
management uses in planning for and forecasting future periods.
Furthermore, the non-GAAP measures are regularly used internally to
understand, manage and evaluate our business and make operating
decisions, and we believe that they are useful to investors as a
consistent and comparable measure of the ongoing performance of our
business. However, our non-GAAP financial measures are not meant to
be considered in isolation or as a substitute for comparable GAAP
measures and should be read only in conjunction with our
consolidated financial statements prepared in accordance with GAAP.
Additionally, these non-GAAP financial measures may differ
materially from the non-GAAP financial measures used by other
companies. Due to the high variability and difficulty in making
accurate forecasts and projections of some of the information
excluded from these projected measures, together with some of the
excluded information not being ascertainable or accessible, we are
unable to quantify certain amounts that would be required for such
presentation without unreasonable effort. Consequently, no
reconciliation of the forward-looking non-GAAP financial measures
is included. A reconciliation between results on a GAAP and
non-GAAP basis is provided in the last table of this press
release.
Forward Looking Statements
This press release contains historical information and
forward-looking statements within the meaning of The Private
Securities Litigation Reform Act of 1995 with respect to the
business, financial condition and results of operations of Perion.
The words “will,” “believe,” “expect,” “intend,” “plan,” “should”,
“estimate” and similar expressions are intended to identify
forward-looking statements. Such statements reflect the current
views, assumptions and expectations of Perion with respect to
future events and are subject to risks and uncertainties. Many
factors could cause the actual results, performance or achievements
of Perion to be materially different from any future results,
performance or achievements that may be expressed or implied by
such forward-looking statements, or financial information,
including, among others, the failure to realize the anticipated
benefits of companies and businesses we acquired and may acquire in
the future, risks entailed in integrating the companies and
businesses we acquire, including employee retention and customer
acceptance; the risk that such transactions will divert management
and other resources from the ongoing operations of the business or
otherwise disrupt the conduct of those businesses, potential
litigation associated with such transactions, and general risks
associated with the business of Perion including intense and
frequent changes in the markets in which the businesses operate and
in general economic and business conditions, loss of key customers,
unpredictable sales cycles, competitive pressures, market
acceptance of new products, changes in applicable laws and
regulations as well as industry self-regulation, data breaches,
cyber-attacks and other similar incidents, inability to meet
efficiency and cost reduction objectives, changes in business
strategy and various other factors, whether referenced or not
referenced in this press release. Various other risks and
uncertainties may affect Perion and its results of operations, as
described in reports filed by Perion with the Securities and
Exchange Commission from time to time, including its annual report
on Form 20-F for the year ended December 31, 2022 filed with the
SEC on March 15, 2023. Perion does not assume any obligation to
update these forward-looking statements.
Three months ended
March 31,
2023
2022
(Unaudited)
(Unaudited)
Revenue:
Display Advertising
$ 79,878
$ 68,603
Search Advertising
65,272
56,712
Total Revenue
145,150
125,315
Costs and Expenses:
Cost of revenue
7,559
6,613
Traffic acquisition costs and
media buy
79,875
70,974
Research and development
8,353
9,033
Selling and marketing
14,955
13,338
General and administrative
6,543
5,666
Depreciation and amortization
3,361
3,185
Total Costs and
Expenses
120,646
108,809
Income from Operations
24,504
16,506
Financial income, net
3,428
604
Income before Taxes on
income
27,932
17,110
Taxes on income
4,147
1,644
Net Income
$ 23,785
$ 15,466
Net Earnings per Share
Basic
$ 0.51
$ 0.35
Diluted
$ 0.48
$ 0.33
Weighted average number of
shares
Basic
46,382,655
44,035,576
Diluted
49,467,671
47,030,727
March 31,
December 31,
2023
2022
(Unaudited)
(Audited)
ASSETS
Current Assets:
Cash and cash equivalents
$ 133,440
$ 176,226
Restricted cash
1,304
1,295
Short-term bank deposits
251,300
253,400
Accounts receivable, net
133,482
160,488
Prepaid expenses and other
current assets
13,065
12,049
Marketable Securities
51,583
-
Total Current Assets
584,174
603,458
Long-Term Assets:
Property and equipment, net
3,435
3,611
Operating lease right-of-use
assets
9,228
10,130
Goodwill and intangible assets,
net
244,226
247,191
Deferred taxes
5,719
5,779
Other assets
44
49
Total Long-Term Assets
262,652
266,760
Total Assets
$ 846,826
$ 870,218
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current Liabilities:
Accounts payable
$ 131,154
$ 155,854
Accrued expenses and other
liabilities
22,752
37,869
Short-term operating lease
liability
3,894
3,900
Deferred revenue
1,914
2,377
Short-term payment obligation
related to acquisitions
54,585
34,608
Total Current
Liabilities
214,299
234,608
Long-Term Liabilities:
Payment obligation related to
acquisition
-
33,113
Long-term operating lease
liability
6,534
7,580
Other long-term liabilities
13,668
11,783
Total Long-Term
Liabilities
20,202
52,476
Total Liabilities
234,501
287,084
Shareholders' equity:
Ordinary shares
403
398
Additional paid-in capital
518,994
513,534
Treasury shares at cost
(1,002)
(1,002)
Accumulated other comprehensive
loss
(641)
(582)
Retained earnings
94,571
70,786
Total Shareholders'
Equity
612,325
583,134
Total Liabilities and
Shareholders' Equity
$ 846,826
$ 870,218
Three months ended
March 31,
2023
2022
(Unaudited)
(Unaudited)
Cash
flows from operating activities:
Net Income
$ 23,785
$ 15,466
Adjustments required to reconcile
net income to net cash provided by operating activities:
Depreciation and amortization
3,361
3,185
Stock-based compensation
expense
3,402
2,428
Foreign currency translation
(2)
(46)
Accrued interest, net
(4,181)
(542)
Deferred taxes, net
78
(204)
Accrued severance pay, net
1,598
94
Gain from sale of property and
equipment
(12)
-
Net changes in operating assets
and liabilities
(10,250)
3,173
Net cash provided by operating
activities
$ 17,779
$ 23,554
Cash
flows from investing activities:
Purchases of property and
equipment, net of sales
(134)
(252)
Purchase of marketable
securities, net of sales
(51,406)
-
Short-term deposits, net
2,100
(32,400)
Cash paid in connection with
acquisitions, net of cash acquired
-
(3,400)
Net cash used in investing
activities
$ (49,440)
$ (36,052)
Cash
flows from financing activities:
Proceeds from exercise of
stock-based compensation
2,063
948
Payments of contingent
consideration
(13,256)
-
Net cash provided by (used in)
financing activities
$ (11,193)
$ 948
Effect of exchange rate changes
on cash and cash equivalents and restricted cash
77
(30)
Net decrease in cash and cash
equivalents and restricted cash
(42,777)
(11,580)
Cash and cash equivalents and
restricted cash at beginning of period
177,521
105,535
Cash and cash equivalents and
restricted cash at end of period
$ 134,744
$ 93,955
Three months ended
March 31,
2023
2022
(Unaudited)
GAAP Net Income
$ 23,785
$ 15,466
Stock-based compensation
3,402
2,428
Amortization of acquired
intangible assets
2,963
2,789
Retention and other related to
M&A related expenses
7
551
Foreign exchange gains associated
with ASC-842
(116)
(197)
Revaluation of acquisition
related contingent consideration
144
132
Taxes on the above items
(285)
(441)
Non-GAAP Net Income
$ 29,900
$ 20,728
Non-GAAP Net Income
$ 29,900
$ 20,728
Taxes on income
4,432
2,085
Financial income, net
(3,456)
(539)
Depreciation
398
396
Adjusted EBITDA
$ 31,274
$ 22,670
Non-GAAP diluted earnings per
share
$ 0.60
$ 0.44
Shares used in computing
non-GAAP diluted earnings per share
49,738,514
47,620,874
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version on businesswire.com: https://www.businesswire.com/news/home/20230503005499/en/
Perion Network Ltd. Dudi Musler, VP of Investor Relations +972
(54) 7876785 dudim@perion.com
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