Perion Delivers Record Revenues, Up 45% Year-Over-Year; GAAP Net Income Up 399% for the Third Quarter of 2021

Rhea-AI Summary

Perion Network Ltd. (NASDAQ: PERI) reports strong Q3 2021 results with a 45% revenue increase to $121 million, driven by an 82% growth in display advertising, particularly video and CTV solutions. The company achieved a 399% increase in GAAP net income, totaling $10.6 million. Net cash from operations reached $14.2 million, up 115% year-over-year. Management has raised revenue guidance for 2021 to $455-$465 million and for 2022 to $580-$600 million, reflecting substantial business momentum.

Positive

• 82% growth in display advertising revenues, driven by video and CTV, totaling $69 million.
• GAAP net income increased by 399% to $10.6 million.
• Raised guidance for 2021 revenues to $455-$465 million, representing a 40% growth.
• Non-GAAP earnings per share rose by 90% to $0.40.
• Net cash from operations increased by 115% to $14.2 million.

Negative

• Traffic Acquisition Costs (TAC) increased to $73.6 million, representing 60.8% of revenues.

Display Advertising revenues growth of 82% driven by high-impact video and CTV performance; Management increases guidance for 2021 and 2022

TEL AVIV, Israel & NEW YORK--(BUSINESS WIRE)-- Perion Network Ltd. (NASDAQ: PERI), a global advertising technology company that delivers a holistic solution across the three main pillars of digital advertising – ad search, social media, and display / video / CTV advertising – today announced financial results for the third quarter ended September 30, 2021.

Doron Gerstel, Perion’s CEO, commented, “During the first nine months of the year our display advertising generated more than $165 million of revenues, exceeding the $149 million generated for all of 2020. Driven by the capabilities of our iHub to create unprecedented advertising efficiencies, our average deal size expanded by 30%, as budgets moved to our breakthrough high-impact, creatively led formats especially for Video and CTV. In recognition of the growing demand for video advertising, we made the accretive acquisition of Vidazoo, a leading video tech platform. By combining Perion’s proven, high-impact video suite and Vidazoo’s unique online video player, we can offer a proprietary, end-to-end video solution that extends the efficiency of our iHub, and that meets the needs of publishers for simple, highly scalable, plug-and-play video solutions.”

Third Quarter 2021 Highlights

• Display advertising revenues growth of 82% (or 73% on pro forma basis), driven by accelerating adoption of Perion’s video and CTV solutions, leading to an increase of average client spend by 30% and a 12% increase in number of clients;

• Search advertising revenues growth of 14%, primarily driven by an increased number of monetized searches;

• EBITDA margin of 37% excluding traffic acquisitions costs compared to 26% during the third quarter of 2020, partially resulted from the implementation of Perion’s iHub that provides higher costs efficiencies;

• Net cash provided by operating activities of $14.2 million; Perion had $156.2 million in cash and zero debt as of September 30, 2021;

• Video and CTV grew by 245% year-over-year, representing 20% of the Display advertising revenues.

Third Quarter 2021 Financial Highlights*

(In millions, except per share data)

	Three months ended								Nine months ended
	September 30,								September 30,
	2021			2020			%		2021			2020			%
Display Advertising revenues	$	69.0		$	37.9		+82%		$	165.1		$	80.3		+106%
Search Advertising revenues	$	52.0		$	45.5		+14%		$	155.4		$	129.5		+20%
Total Revenues	$	121.0		$	83.4		+45%		$	320.5		$	209.8		+53%
GAAP Net Income	$	10.6		$	2.1		+399%		$	21.0		$	1.2		+1,618%
Non-GAAP Net Income	$	15.4		$	5.9		+159%		$	34.7		$	12.8		+170%
Adjusted EBITDA	$	17.6		$	8.7		+101%		$	40.7		$	17.4		+133%
Adjusted EBITDA/Revenue Ex TAC		37%			26%		42%			32%			20%		60%
Net cash provided by operating activities	$	14.2		$	6.6		+115%		$	42.3		$	9.2		+358%
GAAP Diluted Earnings Per Share	$	0.28		$	0.08		+250%		$	0.57		$	0.04		+1,325%
Non-GAAP Diluted Earnings Per Share	$	0.40		$	0.21		+90%		$	0.93		$	0.45		+107%

* Reconciliation of GAAP to Non-GAAP measures follows.

Mr. Gerstel continued, “Perion is firing on all cylinders. Our diversified revenue streams coming from both sides of the open web and the synergies derived from our ability to connect all of our operating assets to a central iHub increases our confidence in over-delivering on our commitment to become an Ad Tech unique market leader. As a result, we have increased our 2021 and 2022 guidance.”

Financial Comparison for the Third Quarter of 2021

Revenues: Revenues increased by 45% from $83.4 million in the third quarter of 2020 to $121 million in the third quarter of 2021. This growth was led by an 82% (or 73% on a pro forma basis) increase in Display Advertising revenues, primarily from growth of 245% in video and CTV, a 30% increase in average revenues per client, and a 12% increase in the number of clients. Search revenues increased by 14%, primarily due to 14.7 million of average daily monetizable search queries compared to 12.8 million in the third quarter of 2020, as well as the addition of 17 publishers to our network.

Traffic Acquisition Costs (“TAC”): During the third quarter of 2021 TAC were $73.6 million, or 60.8% of revenues, compared to $49.9 million, or 59.8% of revenues, in the third quarter of 2020.

Net Income: On a GAAP basis, net income increased by 399% from net income of $2.1 million in the third quarter of 2020 to net income of $10.6 million in the third quarter of 2021.

Non-GAAP Net Income: In the third quarter of 2021, non-GAAP net income was $15.4 million, or 12.7% of revenues, compared to the $5.9 million, or 7.1% of revenues, in the third quarter of 2020. A reconciliation of GAAP to non-GAAP net income is included in this press release.

Adjusted EBITDA: In the third quarter of 2021, Adjusted EBITDA was $17.6 million, or 14.5% of revenues, compared to $8.7 million, or 10.5% of revenues, in the third quarter of 2020. A reconciliation of GAAP Net Income to Adjusted EBITDA is included in this press release.

Cash and Cash Flow from Operations: As of September 30, 2021, cash and cash equivalents and short-term bank deposits were $156.2 million. Net cash provided by operating activities in the third quarter of 2021 was $14.2 million, compared to $6.6 million in the third quarter of 2020.

Outlook

Perion has raised its financial guidance for 2021 and 2022, based on the Company’s strong business momentum and improved visibility.

($M)	Guidance 2021	YoY Growth % *	Guidance 2022 *	YoY Growth % *
Revenue	$455-$465	40%	$580-$600	28%
Adjusted EBITDA	$59-$61	83%	$75-$78	28%
EBITDA to REV Ex-TAC	33%		34%

* At guidance midpoint

Conference Call

Perion management will host a Zoom conference call on October 26, 2021 at 8:30 a.m. ET to discuss the third quarter’s results. Please join the call using the following Zoom link:

https://incommconferencing.zoom.us/webinar/register/WN_Pv_H9FZRSxO3ockGT2o4ZA

Participant Dial-in number:

877-407-4779

201-389-0914

About Perion Network Ltd.

Perion is a global technology company that delivers strategic business solutions that enable brands and advertisers to efficiently “Capture and Convince” users across multiple platforms and channels, including interactive connected television – or iCTV. Perion achieves this through its Synchronized Digital Branding capabilities, which are focused on high impact creative; content monetization; its branded search network, in partnership with Microsoft Bing; and social media management that orchestrates and optimizes paid advertising. This diversification positions Perion for growth as budgets shift across categories.

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 certain accounting entries under the business combination accounting rules that require us to recognize a legal performance obligation related to revenue arrangements of an acquired entity based on its fair value at the date of acquisition. Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA") is defined as operating income excluding stock-based compensation expenses, depreciation, restructuring costs, acquisition related items consisting of amortization of intangible assets and goodwill and intangible asset impairments, acquisition related expenses, gains and losses recognized on changes in the fair value of contingent consideration arrangements and certain accounting entries under the business combination accounting rules that require us to recognize a legal performance obligation related to revenue arrangements of an acquired entity based on its fair value at the date of acquisition.

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” 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, 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, 2020 filed with the SEC on March 25, 2021. 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,
	2021			2020			2021			2020
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Revenues:
Display Advertising	$	68,980		$	37,891		$	165,146		$	80,298
Search Advertising		52,049			45,522			155,377			129,509
Total Revenues		121,029			83,413			320,523			209,807
Costs and Expenses:
Cost of revenues		6,284			5,292			17,879			15,938
Traffic acquisition costs and media buy		73,590			49,878			194,676			122,817
Research and development		8,630			8,071			26,103			22,400
Selling and marketing		12,926			9,448			36,410			27,368
General and administrative		5,295			4,239			14,055			11,759
Depreciation and amortization		1,922			2,695			6,299			7,248
Total Costs and Expenses		108,647			79,623			295,422			207,530
Income from Operations		12,382			3,790			25,101			2,277
Financial expense, net		11			459			116			1,192
Income before Taxes on income		12,371			3,331			24,985			1,085
Taxes on income (benefit)		1,749			1,203			3,974			(138)
Net Income	$	10,622		$	2,128		$	21,011		$	1,223
Net Earnings per Share
Basic	$	0.31		$	0.08		$	0.63		$	0.05
Diluted	$	0.28		$	0.08		$	0.57		$	0.04
Weighted average number of shares
Basic		34,567,551			26,707,649			33,605,215			26,600,837
Diluted		37,865,732			28,336,902			36,866,637			28,318,091

PERION NETWORK LTD. AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
In thousands
	September 30,			December 31,
	2021			2020
	(Unaudited)			(Audited)
ASSETS
Current Assets:
Cash and cash equivalents	$	96,210		$	47,656
Restricted cash		1,223			1,222
Short-term bank deposits		60,000			12,700
Accounts receivable, net		74,439			81,221
Prepaid expenses and other current assets		6,948			4,560
Total Current Assets		238,820			147,359
Long-Term Assets:
Property and equipment, net		5,065			6,770
Operating lease right-of-use assets		12,808			20,266
Goodwill and intangible assets, net		172,610			176,679
Deferred taxes		7,245			7,111
Other assets		322			496
Total Long-Term Assets		198,050			211,322
Total Assets	$	436,870		$	358,681
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable	$	78,365		$	72,498
Accrued expenses and other liabilities		23,576			21,188
Short-term operating lease liability		4,070			4,514
Short-term loans and current maturities of long-term loans		-			8,333
Deferred revenues		3,187			5,711
Short-term payment obligation related to acquisitions		29,924			7,869
Total Current Liabilities		139,122			120,113
Long-Term Liabilities:
Payment obligation related to acquisition		5,086			30,035
Long-term operating lease liability		10,429			17,698
Other long-term liabilities		7,681			6,713
Total Long-Term Liabilities		23,196			54,446
Total Liabilities		162,318			174,559
Shareholders' equity:
Ordinary shares		290			224
Additional paid-in capital		321,500			251,933
Treasury shares at cost		(1,002)			(1,002)
Accumulated other comprehensive gain		(102)			112
Accumulated deficit		(46,134)			(67,145)
Total Shareholders' Equity		274,552			184,122
Total Liabilities and Shareholders' Equity	$	436,870		$	358,681

PERION NETWORK LTD. AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
In thousands
	Three months ended						Nine months ended
	September 30,						September 30,
	2021			2020			2021			2020
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Cash flows from operating activities:
Net Income	$	10,622		$	2,128		$	21,011		$	1,223
Adjustments required to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		1,922			2,695			6,299			7,248
Stock-based compensation expense		1,744			972			3,733			2,913
Foreign currency translation		(18)			(42)			(107)			(89)
Accrued interest, net		(53)			13			(220)			13
Deferred taxes, net		(478)			(387)			(183)			(2,339)
Accrued severance pay, net		135			172			333			205
Loss (gain) from sale of property and equipment		-			4			(11)			88
Net changes in operating assets and liabilities		301			1,037			11,415			(23)
Net cash provided by operating activities	$	14,175		$	6,592		$	42,270		$	9,239
Cash flows from investing activities:
Purchases of property and equipment, net of sales		(141)			(274)			(495)			(386)
Short-term deposits, net		23,000			8,572			(47,300)			14,934
Cash paid in connection with acquisitions, net of cash acquired		-			(4,041)			(3,438)			(20,186)
Obligation in connection with acquisitions		-			(1,002)			-			1,347
Net cash provided by (used in) investing activities	$	22,859		$	3,255		$	(51,233)		$	(4,291)
Cash flows from financing activities:
Issuance of shares in private placement, net		-			-			60,960			-
Proceeds from exercise of stock-based compensation		1,069			345			4,940			2,086
Proceeds from short-term loans		-			12,500			-			12,500
Repayment of long-term loans		-			(2,083)			(8,333)			(6,249)
Net cash provided by financing activities	$	1,069		$	10,762		$	57,567		$	8,337
Effect of exchange rate changes on cash and cash equivalents and restricted cash		(46)			65			(49)			(9)
Net increase in cash and cash equivalents and restricted cash		38,057			20,674			48,555			13,276
Cash and cash equivalents and restricted cash at beginning of period		59,376			32,207			48,878			39,605
Cash and cash equivalents and restricted cash at end of period	$	97,433		$	52,881		$	97,433		$	52,881

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,
	2021			2020			2021			2020
	(Unaudited)						(Unaudited)
GAAP Net Income	$	10,622		$	2,128		$	21,011		$	1,223
Stock-based compensation		1,744			972			3,733			2,913
Amortization of acquired intangible assets		1,370			1,491			4,068			3,650
Retention and other related to M&A related expenses		1,561			1,292			5,527			5,011
Foreign exchange losses (gains) associated with ASC-842		6			27			(207)			(52)
Revaluation of acquisition related contingent consideration		136			162			476			445
Taxes on the above items		(54)			(127)			92			(344)
Non-GAAP Net Income	$	15,385		$	5,945		$	34,700		$	12,846
Non-GAAP Net Income	$	15,385		$	5,945		$	34,700		$	12,846
Taxes on income		1,803			1,330			3,882			206
Financial expense (income), net		(131)			270			(153)			799
Depreciation		552			1,204			2,231			3,598
Adjusted EBITDA	$	17,609		$	8,749		$	40,660		$	17,449
Non-GAAP diluted earnings per share	$	0.40		$	0.21		$	0.93		$	0.45
Shares used in computing non-GAAP diluted earnings per share		38,428,524			28,977,861			37,206,600			28,864,722

 

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Perion Network Ltd.

Rami Rozen, VP of Investor Relations

+972 (52) 5694441

ramir@perion.com

Source: Perion Network Ltd.

FAQ

What were the Q3 2021 financial results for Perion Network (PERI)?

Perion reported Q3 2021 revenues of $121 million, a 45% increase from the previous year, with display advertising revenues growing by 82%.

How much did Perion Network increase its net income in Q3 2021?

GAAP net income for Q3 2021 increased by 399% to $10.6 million.

What is Perion's revenue guidance for 2021 and 2022?

Perion has raised its 2021 revenue guidance to $455-$465 million and its 2022 guidance to $580-$600 million.

What percentage did Perion's display advertising revenues grow in Q3 2021?

Display advertising revenues grew by 82% in Q3 2021.

What was the increase in non-GAAP earnings per share for Perion in Q3 2021?

Non-GAAP earnings per share rose by 90% to $0.40 in Q3 2021.