Perion’s Momentum Continues, Achieves Record Second Quarter With Revenue Up 34% Year-over-Year, Net Income Up 175%

Rhea-AI Summary

Perion Network Ltd. (NASDAQ: PERI) reported strong Q2 2022 results, achieving record revenues of $146.7 million, a 34% increase year-over-year. Display advertising revenue grew by 41%, driven by a 273% rise in video revenue. The company’s net income surged by 175% to $19.5 million, and Adjusted EBITDA increased by 99% to $28.5 million, showcasing effective growth strategies amid economic challenges. Perion remains confident in achieving its annual guidance, having increased its revenue and EBITDA expectations due to strong market performance and effective operational efficiencies.

Positive

• Total revenue increased by 34% to $146.7 million year-over-year.
• Net income grew by 175% to $19.5 million compared to Q2 2021.
• Adjusted EBITDA rose by 99% to $28.5 million, indicating strong operational performance.
• Video revenue surged by 273%, now constituting 44% of Display Advertising revenue.
• SORTTM customer base nearly doubled to 126, with a 62% increase in customer spend.

Negative

• Traffic Acquisition Costs (TAC) accounted for 58.6% of revenue, highlighting high costs in acquiring traffic.

Company Reiterates Annual Guidance, Reflecting Ongoing Confidence in Sustainable Growth Despite Challenging Macro Environment

TEL AVIV, Israel & NEW YORK--(BUSINESS WIRE)-- 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 record financial results for the second quarter ended June 30, 2022.

“Second quarter 2022 results mark Perion’s eighth consecutive quarter of year-over-year revenue and Adjusted EBITDA growth, demonstrating the predictability and sustainability of our business model, underpinned by our diversification strategy,” said Doron Gerstel, Perion’s CEO. “Our structural diversification by channel provides us with a unique level of agility to shift our business to where media budgets are trending. In response to the current macro-economic pressure, advertisers are demanding greater performance, and shifting media budgets to direct response. This has driven the RPM (Revenue Per Thousand searches) of our search advertising to an all-time record high.”

“Perion’s continued margin expansion demonstrates the effectiveness of our Intelligent HUB (iHUB). By connecting all our data assets and analyzing signals from all channels on both sides of the open web, iHUB optimizes campaign yields, increases operational efficiencies and powers new, innovative products like SORT^TM. These capabilities leverage our data advantage and deep understanding of market trends to support the growing number of advertisers who struggle to tackle the cookieless future ahead, and even more importantly, reflect that consumers increasingly favor brands that protect their privacy,” added Mr. Gerstel.

“Our growing marketplace traction is measurable by a significant increase in SORT™ campaigns, which, when combined with ongoing positive trends, have increased customer spend on video and CTV, giving us confidence that our momentum is sustainable even in the face of global economic concerns,” concluded Mr. Gerstel.

Second Quarter 2022 Highlights

- Video revenue grew by 273% year-over-year, representing 44% of Display Advertising revenue

- CTV revenue grew by 90% year-over-year, representing 6% of Display Advertising revenue

- SORT^TM customers nearly doubled quarter-over-quarter from 65 to 126, and SORT^TM customers' spend increased by 62%, accounting for 14% of Display Advertising revenue

- Increase in the adoption of our Video Platform holistic solution:

• 145% year-over-year increase in Video Platform to 54 publishers
• 52% year-over-year increase in revenue from retained Video Platform publishers

- The number of search advertising publishers increased by 33% year-over-year, RPM increased by 42% over the same period

Second Quarter 2022 Financial Highlights⁽¹⁾

In millions, except per share data	Three months ended								Six months ended
	June 30,								June 30,
	2022			2021			%		2022			2021			%
Display Advertising Revenue	$	81.6		$	58.0		+41%		$	150.2		$	96.2		+56%
Search Advertising Revenue	$	65.1		$	51.6		+26%		$	121.8		$	103.3		+18%
Total Revenue	$	146.7		$	109.7		+34%		$	272.0		$	199.5		+36%
GAAP Net Income	$	19.5		$	7.1		+175%		$	35.0		$	10.4		+237%
Non-GAAP Net Income	$	24.5		$	12.3		+99%		$	45.2		$	19.3		+134%
Adjusted EBITDA	$	28.5		$	14.3		+99%		$	51.1		$	23.1		+122%
Adjusted EBITDA to Revenue Ex-TAC		47%			33%		+43%			44%			29%		+51%
Net Cash from Operations	$	25.7		$	14.6		+76%		$	49.3		$	28.1		+75%
GAAP Diluted EPS	$	0.41		$	0.19		+116%		$	0.74		$	0.29		+155%
Non-GAAP Diluted EPS	$	0.51		$	0.33		+55%		$	0.95		$	0.53		+79%

⁽¹⁾See below reconciliation of GAAP to Non-GAAP measures

Outlook

“Our strong performance, our team's excellent execution, continuing market share gains and improving efficiencies give us confidence that we will, at least, achieve the high-end of our full-year Adjusted EBITDA guidance, even when taking further global recessionary conditions into account,” Mr. Gerstel concluded.

($M)	2021	Prior 2022 Guidance	Current 2022 Guidance	YoY Growth %
Revenue	$478.5	$620-$640	$620-$640	32%(1)
Adjusted EBITDA	$69.6	$98-$102	$102 +	47%
Adjusted EBITDA to Revenue Ex-TAC	37%	40%(1)	41%(1)+

⁽¹⁾At guidance midpoint

Financial Comparison for the Second Quarter of 2022

Revenue: Revenue increased by 34% to $146.7 million in the second quarter of 2022 from $109.7 million in the second quarter of 2021. Display Advertising revenue increased by 41% year-over-year, primarily due to a 273% growth in video, now representing 44% of Display Advertising revenue (17% in 2021) and 90% increase in CTV revenue, which represents 6% of Display Advertising revenue. Number of SORT^TM customers nearly doubled quarter-over-quarter, from 65 to 126, SORT^TM customers spending increased by 62%, representing 14% of Display Advertising revenue. Search revenue increased by 26%, accounting for 44% of revenue, primarily due to a 42% increase in average RPM and a 33% increase in number of publishers.

Traffic Acquisition Costs (“TAC”): TAC amounted to $86.0 million, or 58.6% of revenue, in the second quarter of 2022, compared to $66.2 million, or 60.4% of revenue, in the second quarter of 2021. The media margin improvement was primarily due to improved commercial terms, a favorable product mix of ad formats, and the iHUB Control Systems.

Net Income: On a GAAP basis, net income increased by 175% to $19.5 million in the second quarter of 2022 from $7.1 million in the second quarter of 2021.

Non-GAAP Net Income: Non-GAAP net income was $24.5 million, or 16.7% of revenue, in the second quarter of 2022, compared to $12.3 million, or 11.2% of revenue, in the second quarter of 2021. A reconciliation of GAAP to non-GAAP net income is included in this press release.

Adjusted EBITDA: Adjusted EBITDA was $28.5 million, or 19.4% of revenue (and 47% of revenue Ex TAC), in the second quarter of 2022, compared to $14.3 million, or 13.0% of revenue (and 33% of revenue Ex TAC), in the second quarter of 2021. A reconciliation of GAAP Net Income to Adjusted EBITDA is included in this press release.

Cash and Cash Flow from Operations: As of June 30, 2022, cash and cash equivalents and short-term bank deposits were $353.0 million. Net cash provided by operating activities in the second quarter of 2022 was $25.7 million, compared to $14.6 million in the second quarter of 2021.

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_oEkHYSvyQ--7h7MrEhjNkg

● 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 / video / CTV advertising. These channels are brought together by Perion’s intelligent HUB, which integrates the company’s business assets from both sides of the open Web, providing significant benefit to its brands and publisher customers.

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 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, 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 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. Revenue after 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” 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, 2021 filed with the SEC on March 16, 2022. Perion does not assume any obligation to update these forward-looking statements.

Source: Perion Network Ltd.

PERION NETWORK LTD. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

In thousands (except share and per share data)

		Three months ended				Six months ended
		June 30,				June 30,
		2022		2021		2022		2021
		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Revenue:
	Display Advertising	$ 81,551		$ 58,029		$ 150,154		$ 96,166
	Search Advertising	65,105		51,648		121,817		103,328
Total Revenue		146,656		109,677		271,971		199,494
Costs and Expenses:
	Cost of revenue	6,861		6,159		13,474		11,595
	Traffic acquisition costs and media buy	85,956		66,226		156,930		121,086
	Research and development	8,336		8,928		17,369		17,473
	Selling and marketing	13,955		12,879		27,293		23,484
	General and administrative	6,468		4,629		12,134		8,760
	Depreciation and amortization	3,208		2,000		6,393		4,377
Total Costs and Expenses		124,784		100,821		233,593		186,775
Income from Operations		21,872		8,856		38,378		12,719
	Financial expense (income), net	(903)		298		(1,507)		105
Income before Taxes on income		22,775		8,558		39,885		12,614
	Taxes on income	3,275		1,475		4,919		2,225
Net Income		$ 19,500		$ 7,083		$ 34,966		$ 10,389
Net Earnings per Share
	Basic	$ 0.44		$ 0.21		$ 0.79		$ 0.31
	Diluted	$ 0.41		$ 0.19		$ 0.74		$ 0.29
Weighted average number of shares
	Basic	44,439,023		34,074,321		44,238,414		33,116,072
	Diluted	47,292,249		37,085,265		47,210,769		36,289,802

PERION NETWORK LTD. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

In thousands

		June 30,		December 31,
		2022		2021
		(Unaudited)		(Audited)
ASSETS
Current Assets:
	Cash and cash equivalents	$ 102,398		$ 104,446
	Restricted cash	1,039		1,089
	Short-term bank deposits	250,600		217,200
	Accounts receivable, net	86,251		115,361
	Prepaid expenses and other current assets	11,809		8,075
	Total Current Assets	452,097		446,171
Long-Term Assets:
	Property and equipment, net	3,935		4,211
	Operating lease right-of-use assets	9,961		11,578
	Goodwill and intangible assets, net	240,364		245,965
	Deferred taxes	5,398		5,228
	Other assets	70		79
	Total Long-Term Assets	259,728		267,061
Total Assets		$ 711,825		$ 713,232
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
	Accounts payable	$ 96,687		$ 107,730
	Accrued expenses and other liabilities	25,314		40,331
	Short-term operating lease liability	3,251		3,615
	Deferred revenue	2,560		3,852
	Short-term payment obligation related to acquisitions	37,724		38,179
	Total Current Liabilities	165,536		193,707
Long-Term Liabilities:
	Payment obligation related to acquisition	21,491		33,250
	Long-term operating lease liability	7,663		9,774
	Other long-term liabilities	9,935		9,541
	Total Long-Term Liabilities	39,089		52,565
Total Liabilities		204,625		246,272
Shareholders' equity:
	Ordinary shares	379		375
	Additional paid-in capital	502,573		496,154
	Treasury shares at cost	(1,002)		(1,002)
	Accumulated other comprehensive loss	(1,277)		(128)
	Retained earnings (accumulated deficit)	6,527		(28,439)
Total Shareholders' Equity		507,200		466,960
Total Liabilities and Shareholders' Equity		$ 711,825		$ 713,232

PERION NETWORK LTD. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

In thousands

		Three months ended				Six months ended
		June 30,				June 30,
		2022		2021		2022		2021
		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Cash flows from operating activities:
Net Income		$ 19,500		$ 7,083		$ 34,966		$ 10,389
Adjustments required to reconcile net income to net cash provided by operating activities
	Depreciation and amortization	3,208		2,000		6,393		4,377
	Stock-based compensation expense	2,701		1,234		5,129		1,989
	Foreign currency translation	(128)		31		(174)		(89)
	Accrued interest, net	(639)		(92)		(1,181)		(167)
	Deferred taxes, net	(44)		59		(248)		295
	Accrued severance pay, net	409		89		503		198
	Gain from sale of property and equipment	(6)		(10)		(6)		(11)
	Net changes in operating assets and liabilities	720		4,231		3,893		11,115
Net cash provided by operating activities		$ 25,721		$ 14,625		$ 49,275		$ 28,096
Cash flows from investing activities:
	Purchases of property and equipment, net of sales	(177)		(211)		(429)		(355)
	Short-term deposits, net	(1,000)		(27,000)		(33,400)		(70,300)
	Cash paid in connection with acquisitions, net of cash acquired	(6,170)		(3,438)		(9,570)		(3,438)
Net cash used in investing activities		$ (7,347)		$ (30,649)		$ (43,399)		$ (74,093)
Cash flows from financing activities:
	Issuance of shares in private placement, net	-		-		-		60,960
	Proceeds from exercise of stock-based compensation	346		2,170		1,294		3,871
	Payment made in connection with acquisition	(9,091)		-		(9,091)		-
	Repayment of long-term loans	-		-		-		(8,333)
Net cash provided by (used in) financing activities		$ (8,745)		$ 2,170		$ (7,797)		$ 56,498
Effect of exchange rate changes on cash and cash equivalents and restricted cash		(147)		9		(177)		(3)
Net increase (decrease) in cash and cash equivalents and restricted cash		9,482		(13,845)		(2,098)		10,498
Cash and cash equivalents and restricted cash at beginning of period		93,955		73,221		105,535		48,878
Cash and cash equivalents and restricted cash at end of period		$ 103,437		$ 59,376		$ 103,437		$ 59,376

PERION NETWORK LTD. AND ITS SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP RESULTS

In thousands (except share and per share data)

		Three months ended				Six months ended
		June 30,				June 30,
		2022		2021		2022		2021
		(Unaudited)				(Unaudited)
GAAP Net Income		$ 19,500		$ 7,083		$ 34,966		$ 10,389
	Stock-based compensation	2,701		1,234		5,129		1,989
	Amortization of acquired intangible assets	2,812		1,356		5,601		2,698
	Retention and other related to M&A related expenses	679		2,178		1,230		3,966
	Foreign exchange losses (gains) associated with ASC-842	(548)		105		(745)		(213)
	Revaluation of acquisition related contingent consideration	129		170		261		339
	Taxes on the above items	(771)		197		(1,212)		146
Non-GAAP Net Income		$ 24,502		$ 12,323		$ 45,230		$ 19,314
Non-GAAP Net Income		$ 24,502		$ 12,323		$ 45,230		$ 19,314
	Taxes on income	4,046		1,278		6,131		2,079
	Financial expense (income), net	(484)		23		(1,023)		(21)
	Depreciation	396		644		792		1,679
Adjusted EBITDA		$ 28,460		$ 14,268		$ 51,130		$ 23,051
Non-GAAP diluted earnings per share		$ 0.51		$ 0.33		$ 0.95		$ 0.53
Shares used in computing non-GAAP diluted earnings per share		47,906,671		37,429,049		47,744,781		36,576,534

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20220803005459/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 Q2 2022 financial results?

Perion reported a 34% increase in total revenue to $146.7 million and a 175% increase in net income to $19.5 million.

How much did Adjusted EBITDA grow for Perion in Q2 2022?

Adjusted EBITDA increased by 99% to $28.5 million in Q2 2022.

What percentage of Display Advertising revenue came from video in Q2 2022 for Perion?

Video revenue contributed 44% of Display Advertising revenue, growing by 273% year-over-year.

What is the outlook for Perion after the Q2 2022 results?

Perion is confident in achieving the high-end of its full-year Adjusted EBITDA guidance.

How did Traffic Acquisition Costs (TAC) impact Perion's revenue?

TAC represented 58.6% of revenue in Q2 2022, reflecting high costs for traffic acquisition.