Perion Continues to Deliver Strong Results with 17% Year-Over-Year Increase in Revenue and 29% Growth in Adjusted EBITDA

Rhea-AI Summary

Perion Network Ltd. reported its financial results for Q3 2023, with revenue increasing by 17% and adjusted EBITDA increasing by 29% year-over-year. The company's Retail Media solutions are on track to exceed annual revenue goals. Perion also launched WAVE, a generative AI-powered dynamic audio advertising solution. Albertsons is an early adopter of WAVE and plans to scale its use. Perion plans to expand WAVE to other verticals such as QSR, automotive, and travel.

Positive

• Perion's Q3 2023 revenue increased by 17% year-over-year.
• Adjusted EBITDA for Q3 2023 increased by 29% year-over-year.
• Retail Media solutions are tracking to exceed annual revenue goals.
• Perion launched WAVE, a generative AI-powered dynamic audio advertising solution.
• Albertsons is an early adopter of WAVE and plans to scale its use.
• Perion plans to expand WAVE to other verticals such as QSR, automotive, and travel.

Negative

• None.

The company launches WAVE, a generative AI-powered dynamic audio advertising solution

NEW YORK & TEL AVIV--(BUSINESS WIRE)-- Perion Network Ltd. (NASDAQ and TASE: PERI), a global technology company whose synergistic solutions serve all major digital advertising channels - including search, social, display, and video/CTV, today reported its financial results for the third quarter ended September 30, 2023.

“Once again, our business results proved that our strategically diversified model gives us the agility to deliver continued growth,” stated Tal Jacobson, Perion’s CEO. “Despite macroeconomic headwinds, our third-quarter year-over-year revenue and adjusted EBITDA increased 17% and 29%, respectively. These results were made possible by the ability to leverage our technological capabilities and focus resources on the strongest industry verticals to achieve top-line profitability and margin expansion. Specifically, our Retail Media solutions are tracking to significantly exceed our annual revenue goal for 2023.”

“Our diversification remains a key differentiator for Perion, powered by exceptional execution and ongoing investment in technology,” added Mr. Jacobson.

Introducing WAVE

Reaffirming its commitment to technological innovation, Perion expands its advertiser suite of solutions with the introduction of WAVE (Waveform Audio Voice Engine), a generative AI-powered dynamic audio solution that enables advertisers to generate personalized audio advertising messages at scale. The power of the solution is based on advanced algorithmic AI processing which combines first-party data with voice, reaching consumer audiences with tailored audio messages that adapt in real time to parameters such as weather, location, daypart, and many others.

"We are focused on developing technology that creates deeper and more meaningful consumer experiences," explained Mr. Jacobson. "WAVE represents our commitment to changing the game for advertisers, enabling us to tap into lucrative channels and create entirely new categories. We envision a future where every consumer interaction is customized, localized and commerce-enabled."

Albertsons is an early adopter that has seamlessly integrated WAVE into several successful campaigns and is now looking to scale the solution more broadly.

"When Perion introduced us to the AI script and voice, we were blown away. It was very hard to detect that it was an actual AI voice – right down to the nuances of how certain products are pronounced, and the annunciation. To see the machine actually learning those dialogue differences was super important to us,” said Tony Colvin, Director – Paid Media, Albertsons Companies.

WAVE is launching into the Retail vertical, adding a richer, multi-dimensional capability to each consumer touchpoint. Perion plans to quickly roll out WAVE to additional verticals, including QSR - Quick-Service Restaurants, automotive, and travel.

Third Quarter 2023 Business Highlights

● Retail Media¹ revenue increased 112% year-over-year to $13.0 million, representing 13% of Display Advertising revenue compared to 7% last year

● CTV revenue² increased 39% year-over-year to $7.9 million, representing 8% of Display Advertising revenue compared to 7% last year

● Video revenue decreased 16% year-over-year, driven by shifting inventory from video to display to gain higher profit, representing 32% of Display Advertising revenue, compared to 44% last year

● The number of Average Daily Searches increased by 86% year-over-year to 31.3 million. The number of Search Advertising publishers increased by 16% year-over-year to 164

1 Retail Media revenue includes all media channels, such as CTV, video and others

2 Starting in the previous quarter, we changed our methodology for measuring our CTV activity. We moved from measuring CTV campaigns to measuring CTV channels. The CTV growth trend under both methodologies remains in the same trajectory. Under our updated methodology, revenue generated from CTV in the third quarter of 2022 was $5.7 million vs. $7.4 million under the previous methodology.

Third Quarter 2023 Financial Highlights¹

In millions,		Three months ended						Nine months ended
except per share data
		September 30,						September 30,
			2023		2022	%			2023		2022	%
Display Advertising Revenue		$	99.2	$	86.8	14%		$	278.5	$	236.9	18%
Search Advertising Revenue		$	86.1	$	71.8	20%		$	230.5	$	193.7	19%
Total Revenue		$	185.3	$	158.6	17%		$	509	$	430.6	18%
Contribution ex-TAC (Revenue ex-TAC)1		$	77.3	$	65	19%		$	219.6	$	180	22%
GAAP Net Income		$	32.8	$	25.6	28%		$	78	$	60.5	29%
Non-GAAP Net Income1		$	42.4	$	29.9	42%		$	114.4	$	75.1	52%
Adjusted EBITDA1		$	42.7	$	33	29%		$	115.2	$	84.1	37%
Adjusted EBITDA to Revenue ex-TAC			55%		51%				52%		47%
Net Cash from Operations		$	40.1	$	34.7	16%		$	105.2	$	83.9	25%
GAAP Diluted EPS		$	0.65	$	0.53	23%		$	1.57	$	1.27	24%
Non-GAAP Diluted EPS1		$	0.84	$	0.61	38%		$	2.28	$	1.56	46%

Outlook for 2023 ²

With the first three quarters of 2023 behind us, Perion reiterates its annual revenue and adjusted EBITDA guidance.

In millions	2022	2023 Guidance	YoY Growth %3
Revenue	$640.3	$730-$750	16%
Adjusted EBITDA	$132.4	$167+	26%
Adjusted EBITDA to Revenue	21%	23%3
Adjusted EBITDA to Contribution ex-TAC	49%	54%3

1 Contribution ex-TAC, non-GAAP Net Income, Adjusted EBITDA and non-GAAP Diluted EPS are non-GAAP measures. See below reconciliation of GAAP to non-GAAP measures.

2 We have not provided an outlook for GAAP Income from operations or reconciliation of Adjusted EBITDA guidance to GAAP Income from operations, the closest corresponding GAAP measure, because we do not provide guidance for certain of the reconciling items on a consistent basis due to the variability and complexity of these items, including but not limited to the measures and effects of our stock-based compensation expenses directly impacted by unpredictable fluctuation in our share price and amortization in connection with future acquisitions. Hence, we are unable to quantify these amounts without unreasonable efforts.

3 Calculated at revenue guidance midpoint. Adjusted EBITDA year-over-year growth calculated based on $167 million.

Financial Comparison for the Third Quarter of 2023

Revenue: Revenue increased 17% to $185.3 million in the third quarter of 2023 from $158.6 million in the third quarter of 2022. Display Advertising revenue increased 14% year-over-year, accounting for 54% of total revenue, primarily due to a 112% year-over-year increase in Retail revenue to $13.0 million and a 39% year-over-year increase in CTV revenue to $7.9 million. Search Advertising revenue increased 20% year-over-year, accounting for 46% of revenue, with 86% increase in Average Daily Searches and 16% increase in the number of publishers.

Traffic Acquisition Costs and Media Buy (“TAC”): TAC amounted to $108.0 million, or 58% of revenue, in the third quarter of 2023, compared with $93.6 million, or 59% of revenue, in the third quarter of 2022. The margin expansion was primarily attributed to favorable product mix and media buying optimization through our platform.

GAAP Net Income: GAAP net income increased by 28% to $32.8 million in the third quarter of 2023 compared with $25.6 million in the third quarter of 2022.

Non-GAAP Net Income: Non-GAAP net income was $42.4 million, or 23% of revenue, in the third quarter of 2023, compared with $29.9 million, or 19% of revenue, in the third quarter of 2022. A reconciliation of GAAP to non-GAAP net income is included in this press release.

Adjusted EBITDA: Adjusted EBITDA was $42.7 million, or 23% of revenue (and 55% of Contribution ex-TAC) in the third quarter of 2023, compared with $33.0 million, or 21% of revenue (and 51% of Contribution ex-TAC) in the third quarter of 2022. A reconciliation of GAAP income from operations to Adjusted EBITDA is included in this press release.

Cash Flow from Operations: Net cash provided by operating activities in the third quarter of 2023 was $40.1 million, compared with $34.7 million in the third quarter of 2022.

Net cash: As of September 30, 2023, cash and cash equivalents, short-term bank deposits and marketable securities amounted to $523.6 million, compared with $429.6 million as of December 31, 2022.

Conference Call

Perion’s management will host a conference call to discuss the results at 8:30 a.m. ET today:

● Registration link:

https://incommconferencing.zoom.us/webinar/register/WN_Mwx-qMqNRZKyt3FCZ1XXxQ

● 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 multi-channel advertising technology company that delivers synergistic solutions across all major channels of digital advertising – including search advertising, social media, display, video and CTV advertising. These channels converge at Perion’s intelligent HUB (iHUB), which connects the company’s demand and supply assets, 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 certain items. This press release includes certain non-GAAP measures, including Contribution ex-TAC, Adjusted EBITDA, non-GAAP net income and non-GAAP diluted earnings per share.

Contribution ex-TAC presents revenue reduced by traffic acquisition costs and media buy, reflecting a portion of our revenue that must be directly passed to publishers or advertisers and presents our revenue excluding such items. We believe Contribution ex-TAC is a useful measure in assessing the performance of the Company because it facilitates a consistent comparison against our core business without considering the impact of traffic acquisition costs and media buy related to revenue reported on a gross basis.

Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA") is defined as income from operations excluding stock-based compensation expenses, depreciation, amortization of acquired intangible assets, retention and other acquisition-related expenses and gains and losses recognized with respect to changes in the fair value of contingent consideration.

Non-GAAP net income and non-GAAP diluted earnings per share are defined as net income and net earnings per share excluding stock-based compensation expenses, retention and other 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 and losses associated with ASC-842, as well as gains and losses recognized with respect to changes in fair value of contingent consideration.

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 in this press release. 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, but not limited to, the current war between Israel and Hamas and any worsening of the situation in Israel such as further mobilizations, 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, data breaches, cyber-attacks and other similar incidents, unpredictable sales cycles, competitive pressures, market acceptance of new products, changes in applicable laws and regulations as well as industry self-regulation, 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.

PERION NETWORK LTD. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

In thousands (except share and per share data)

		Three months ended						Nine months ended
		September 30,						September 30,
			2023			2022			2023			2022
		(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Revenue
	Display Advertising	$	99,193		$	86,779		$	278,450		$	236,933
	Search Advertising		86,112			71,836			230,475			193,653
Total Revenue			185,305			158,615			508,925			430,586
Costs and Expenses
	Cost of revenue		9,805			7,540			26,953			21,014
	Traffic acquisition costs and media buy		107,981			93,625			289,338			250,555
	Research and development		7,763			7,766			24,352			25,135
	Selling and marketing		14,171			12,591			42,983			39,884
	General and administrative		7,712			1 7,609			21,668			1 19,743
	Change in fair value of contingent consideration		1,982			1 (3,816)			16,584			1 (3,816)
	Depreciation and amortization		3,425			3,704			10,191			10,097
Total Costs and Expenses			152,839			129,019			432,069			362,612
Income from Operations			32,466			29,596			76,856			67,974
	Financial income, net		6,103			1,019			14,689			2,526
Income before Taxes on income			38,569			30,615			91,545			70,500
	Taxes on income		5,748			5,033			13,533			9,952
Net Income		$	32,821		$	25,582		$	78,012		$	60,548
Net Earnings per Share
	Basic	$	0.69		$	0.57		$	1.66		$	1.36
	Diluted	$	0.65		$	0.53		$	1.57		$	1.27
Weighted average number of shares
	Basic		47,392,072			45,146,639			46,915,616			44,544,483
	Diluted		50,270,296			47,997,745			49,831,190			47,560,112

1 Reflects reclassification of $3.8 million of earnout liability in 2022 that was incurred in connection with a transaction from general and administrative to change in fair value of contingent consideration.

PERION NETWORK LTD. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

In thousands

		September 30,			December 31,
		2023			2022
		(Unaudited)			(Audited)
ASSETS
Current Assets
	Cash and cash equivalents	$	197,853		$	176,226
	Restricted cash		1,327			1,295
	Short-term bank deposits		253,950			253,400
	Marketable securities		71,817			-
	Accounts receivable, net		142,106			160,488
	Prepaid expenses and other current assets		16,641			12,049
	Total Current Assets		683,694			603,458
Long-Term Assets
	Property and equipment, net		3,012			3,611
	Operating lease right-of-use assets		7,400			10,130
	Goodwill and intangible assets, net		238,218			247,191
	Deferred taxes		7,651			5,779
	Other assets		75			49
	Total Long-Term Assets		256,356			266,760
Total Assets		$	940,050		$	870,218
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
	Accounts payable	$	139,476		$	155,854
	Accrued expenses and other liabilities		33,759			37,869
	Short-term operating lease liability		3,940			3,900
	Deferred revenue		1,530			2,377
	Short-term payment obligation related to acquisitions		71,464			34,608
	Total Current Liabilities		250,169			234,608
Long-Term Liabilities
	Payment obligation related to acquisition		-			33,113
	Long-term operating lease liability		4,415			7,580
	Other long-term liabilities		12,023			11,783
	Total Long-Term Liabilities		16,438			52,476
Total Liabilities			266,607			287,084
Shareholders' equity
	Ordinary shares		409			398
	Additional paid-in capital		526,399			513,534
	Treasury shares at cost		-1,002			-1,002
	Accumulated other comprehensive loss		-1,161			-582
	Retained earnings		148,798			70,786
Total Shareholders' Equity			673,443			583,134
Total Liabilities and Shareholders' Equity		$	940,050		$	870,218

PERION NETWORK LTD. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

In thousands

		Three months ended						Nine months ended
		September 30,						September 30,
		2023			2022			2023			2022
		(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Cash flows from operating activities
Net Income		$	32,821		$	25,582		$	78,012		$	60,548
Adjustments required to reconcile net income to net cash provided by operating activities:
	Depreciation and amortization		3,425			3,704			10,191			10,097
	Stock-based compensation expense		4,425			3,236			10,927			8,365
	Foreign currency translation		22			-64			9			-238
	Accrued interest, net		-2,208			-825			-4,239			-2,006
	Deferred taxes, net		-1,257			1,575			-1,733			1,327
	Accrued severance pay, net		-187			-831			-462			-328
	Gain from sale of property and equipment		-5			-5			-22			-10
	Net changes in operating assets and liabilities		3,059			2,300			12,563			6,194
Net cash provided by operating activities		$	40,095		$	34,672		$	105,246		$	83,949
Cash flows from investing activities
	Purchases of property and equipment, net of sales		-152			-349			-503			-779
	Investment in marketable securities, net of sales		597			-			-71,598			-
	Short-term deposits, net		-28,650			31,600			-550			-1,800
	Cash paid in connection with acquisitions, net of cash acquired		-			-			-			-9,570
Net cash provided by (used in) investing activities		$	(28,205)		$	31,251		$	(72,651)		$	(12,149)
Cash flows from financing activities
	Proceeds from exercise of stock-based compensation		150			3,147			2,338			4,441
	Payments of contingent consideration		-			-			-13,256			-9,091
Net cash provided by (used in) financing activities		$	150		$	3,147		$	(10,918)		$	(4,650)
Effect of exchange rate changes on cash and cash equivalents and restricted cash			-103			-110			-18			-288
Net increase in cash and cash equivalents and restricted cash			11,937			68,960			21,659			66,862
Cash and cash equivalents and restricted cash at beginning of period			187,243			103,437			177,521			105,535
Cash and cash equivalents and restricted cash at end of period		$	199,180		$	172,397		$	199,180		$	172,397

PERION NETWORK LTD. AND ITS SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP RESULTS

In thousands (except share and per share data)

		Three months ended						Nine months ended
		September 30,						September 30,
		2023			2022			2023			2022
		(Unaudited)						(Unaudited)
Revenue		$	185,305		$	158,615		$	508,925		$	430,586
	Traffic acquisition costs and media buy		107,981			93,625			289,338			250,555
Contribution ex-TAC		$	77,324		$	64,990		$	219,587		$	180,031

		Three months ended						Nine months ended
		September 30,						September 30,
		2023			2022			2023			2022
		(Unaudited)						(Unaudited)
GAAP Income from Operations		$	32,466		$	29,596		$	76,856		$	67,974
	Stock-based compensation expenses		4,425			3,236			10,927			8,365
	Retention and other acquisition related expenses		401			288			658			1,518
	Change in fair value of contingent consideration		1,982			-3,816			16,584			-3,816
	Amortization of acquired intangible assets		3,017			3,295			8,972			8,896
	Depreciation		408			409			1,219			1,201
Adjusted EBITDA		$	42,699		$	33,008		$	115,216		$	84,138

		Three months ended						Nine months ended
		September 30,						September 30,
		2023			2022			2023			2022
		(Unaudited)						(Unaudited)
GAAP Net Income		$	32,821		$	25,582		$	78,012		$	60,548
	Stock-based compensation expenses		4,425			3,236			10,927			8,365
	Amortization of acquired intangible assets		3,017			3,295			8,972			8,896
	Retention and other acquisition related expenses		401			288			658			1,518
	Change in fair value of contingent consideration		1,982			-3,816			16,584			-3,816
	Foreign exchange gains associated with ASC-842		-83			-80			-280			-824
	Revaluation of acquisition related contingent consideration		149			342			441			602
	Taxes on the above items		-291			1,067			-865			-145
Non-GAAP Net Income		$	42,421		$	29,914		$	114,449		$	75,144
Non-GAAP diluted earnings per share		$	0.84		$	0.61		$	2.28		$	1.56
Shares used in computing non-GAAP diluted earnings per share			50,543,534			48,873,796			50,106,425			48,112,823

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20231101750361/en/

Perion Network Ltd.

Dudi Musler, VP of Investor Relations

+972 (54) 7876785

dudim@perion.com

Source: Perion Network Ltd.

FAQ

What were Perion's financial results for Q3 2023?

Perion's Q3 2023 revenue increased by 17% and adjusted EBITDA increased by 29% year-over-year.

What is WAVE?

WAVE is a generative AI-powered dynamic audio advertising solution launched by Perion.

Which company is an early adopter of WAVE?

Albertsons is an early adopter of WAVE.

What verticals does Perion plan to expand WAVE to?

Perion plans to expand WAVE to other verticals such as QSR, automotive, and travel.