Press Releases Perion’s Diversification Strategy Continues to Drive Strong Performance as Company Achieves Quarterly Growth in Search, CTV and Retail Media

Perion’s Diversification Strategy Continues to Drive Strong Performance as Company Achieves Quarterly Growth in Search, CTV and Retail Media

Published on

07th Feb 2024

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Delivers Annual Year-Over-Year Growth of 16% in Revenue, 18% in GAAP Net Income and 28% in Adjusted EBITDA

 

NEW YORK & TEL AVIV, Israel–(BUSINESS WIRE)–Feb. 7, 2024– Perion Network Ltd. (NASDAQ and TASE: PERI), a technology leader in connecting advertisers to consumers across all major digital channels, today reported its financial results for the fourth quarter and full year ended December 31, 2023.

 

“Our fourth quarter and annual results showed notable growth in Search, CTV and Retail Media, further demonstrating the positive impact of our business diversification and continued focus on technology and innovation. In 2023, we generated industry-leading adjusted EBITDA to Contribution ex-TAC margins, giving us a solid foundation for 2024,” stated Tal Jacobson, Perion’s CEO.

 

“As advertising budgets shifted between channels, we capitalized on these trends and delivered profitable growth well ahead of the digital advertising market for 2023. We also advanced our growth strategy with the acquisition of Hivestack, a leading innovative full-stack programmatic digital out-of-home (DOOH) company with an extensive global footprint. The acquisition of Hivestack, alongside our existing offering, solidifies Perion’s differentiated offer to our customers. It’s a significant entry into the fast growing DOOH channel, which opens up new synergistic opportunities within our suite of solutions for brands and retailers. By adding critical touch points to the entire consumer journey across channels such as CTV, Audio, Out Of Home, including our products for Near-store and In-Store screens – we are transforming our Retail Media suite into a pure multi-channel, full consumer journey solution.”

 

“Additionally, our strong cash flow from operations of $155 million for the full year of 2023, positions us well to execute additional acquisitions, further expanding our solutions and enhancing shareholder value,” Jacobson concluded.

 

Fourth Quarter 2023 Business Highlights

  • Retail Media1 revenue increased 196% year-over-year to $20.2 million, representing 17% of Display Advertising revenue compared to 6% last year
  • CTV revenue2 increased 69% year-over-year to $14.4 million, representing 12% of Display Advertising revenue compared to 7% last year
  • Video revenue decreased 33% year-over-year, driven by shifting inventory from video to display to gain higher profit, representing 29% of Display Advertising revenue, compared to 42% last year
  • The number of Average Daily Searches increased by 37% year-over-year to 30.2 million. The number of Search Advertising publishers increased by 4% year-over-year to 162

 

Full-Year 2023 Business Highlights

  • Retail Media1 revenue increased 114% year-over-year to $49.7 million, representing 12% of Display Advertising revenue compared to 6% last year
  • CTV revenue2 increased 56% year-over-year to $33.5 million, representing 8% of Display Advertising revenue compared to 6% last year
  • Video revenue decreased 7% year-over-year, driven by shifting inventory from video to display to gain higher profit, representing 36% of Display Advertising revenue, compared to 43% last year
  • The number of Average Daily Searches increased by 57% year-over-year to 29.1 million. The annual average number of Search Advertising publishers increased by 18% year-over-year to 160

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

 

2 Starting in the second quarter of 2023, 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 fourth quarter of 2022 was $8.6 million vs. $12.5 million under the previous methodology.

 

Fourth Quarter 2023 Financial Highlight

In millions,
except per share data

Three months ended

Year ended

December 31,

December 31,

2023

2022

%

2023

2022

%

Display Advertising Revenue

$

119.8

$

123.8

-3%

$

398.2

$

360.7

+10%

Search Advertising Revenue

$

114.4

$

85.9

+33%

$

344.9

$

279.6

+23%

Total Revenue

$

234.2

$

209.7

+12%

$

743.2

$

640.3

+16%

Contribution ex-TAC1

$

90.6

$

87.6

+3%

$

310.2

$

267.7

+16%

GAAP Net Income

$

39.4

$

38.7

+2%

$

117.4

$

99.2

+18%

Non-GAAP Net Income1

$

52.9

$

44.7

+19%

$

167.4

$

119.8

+40%

Adjusted EBITDA1

$

53.9

$

48.2

+12%

$

169.1

$

132.4

+28%

Adjusted EBITDA to Contribution ex-TAC1

59%

55%

55%

49%

Net Cash from Operations

$

50.2

$

38.2

+32%

$

155.5

$

122.1

+27%

GAAP Diluted EPS

$

0.78

$

0.79

-1%

$

2.34

$

2.06

+14%

Non-GAAP Diluted EPS1

$

1.04

$

0.90

+16%

$

3.33

$

2.47

+35%

 

Outlook for 20242

“Our expectations for 2024 reflect increased investments in technology and innovation to enhance our advanced multi-channel solutions, that combined with the acquisition of Hivestack will help Perion deliver strong double-digit revenue and adjusted EBITDA growth in the coming years,” commented Tal Jacobson, Perion’s CEO.

 

In millions

2023

2024 Guidance

YoY Growth %3

YoY proforma Growth %3

Revenue

$743.2

$860-$880

17%

10%

Adjusted EBITDA1

$169.1

$178-$182

6%

10%

Adjusted EBITDA to Revenue1

23%

21%3

Adjusted EBITDA to Contribution ex-TAC1

55%

51%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 and adjusted EBITDA guidance midpoint.

 

Financial Comparison for the Fourth Quarter of 2023

Revenue: Revenue increased by 12% to $234.2 million in the fourth quarter of 2023 from $209.7 million in the fourth quarter of 2022. Display Advertising revenue decreased 3%, accounting for 51% of total revenue, primarily due to 33% decrease in Video revenue to $35.2 million due to shifting inventory from video to display to gain higher profit, partially offset by 196% increase in Retail revenue to $20.2 million and a 69% increase in CTV revenue to $14.4 million. Search Advertising revenue increased by 33%, accounting for 49% of revenue, primarily due to 37% increase in Average Daily Searches and 4% increase in the number of publishers to 162.

 

Traffic Acquisition Costs and Media Buy (“TAC”): TAC amounted to $143.6 million, or 61% of revenue, in the fourth quarter of 2023, compared with $122.0 million, or 58% of revenue, in the fourth quarter of 2022. The margin contraction was primarily due to product mix, partially offset by media buying optimization, which is enabled by leveraging data and buying power.

 

GAAP Net Income: GAAP net income increased by 2% to $39.4 million in the fourth quarter of 2023, compared with $38.7 million, in the fourth quarter of 2022. GAAP net income in the fourth quarter of 2023 includes $3.3 million acquisition related expenses and $2.1 million fair-value adjustment of the contingent consideration payable in respect to the Vidazoo acquisition.

 

Non-GAAP Net Income: Non-GAAP net income increased by 19% to $52.9 million, or 23% of revenue, in the fourth quarter of 2023, from $44.7 million, or 21% of revenue, in the fourth quarter of 2022. A reconciliation of GAAP to non-GAAP net income is included in this press release.

 

Adjusted EBITDA: Adjusted EBITDA was $53.9 million, or 23% of revenue (and 59% of Contribution ex-TAC) in the fourth quarter of 2023, compared with $48.2 million, or 23% of revenue (and 55% of Contribution ex-TAC) in the fourth 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 fourth quarter of 2023 was $50.2 million, a 32% increase from $38.2 million in the fourth quarter of 2022.

 

Net cash: As of December 31, 2023, cash and cash equivalents, short-term bank deposits and marketable securities amounted to $472.7 million, compared with $429.6 million as of December 31, 2022.

 

Financial Comparison for the Full-Year of 2023

Revenue: Revenue increased by 16% to $743.2 million in 2023 from $640.3 million in 2022. Display Advertising revenue increased by 10%, accounting for 54% of revenue, mainly driven by 114% increase in Retail Media revenue to $49.7 million and 56% growth in CTV to $33.5 million, partially offset by 7% decrease in Video revenue to $143.2 million due to shifting inventory from video to display to gain higher profit. Search Advertising revenue increased by 23%, accounting for 46% of revenue, primarily due to a 57% increase in Average Daily Searches and 18% increase in the average annual number of publishers to 160.

 

Traffic Acquisition Costs (“TAC”): TAC amounted to $432.9 million, or 58% of revenue, compared with $372.6 million, or 58% of revenue in 2022. Media margin remained flat year-over-year.

 

GAAP Net Income: GAAP net income increased by 18% to $117.4 million in 2023 from $99.2 million in 2022. GAAP net income in 2023 includes $4.0 million acquisition related expenses and $18.7 million fair-value adjustment of the contingent consideration payable in respect to the Vidazoo acquisition.

 

Non-GAAP Net Income: Non-GAAP net income increased by 40% to $167.4 million, or 23% of revenue, from $119.8 million, or 19% of revenue in 2022. A reconciliation of GAAP to non-GAAP net income is included in this press release.

 

Adjusted EBITDA: Adjusted EBITDA was $169.1 million, or 23% of revenue (and 55% of revenue ex-TAC), compared with $132.4 million, or 21% of revenue (and 49% of revenue ex-TAC) in 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 2023 was $155.5 million, a 27% increase from $122.1 million in 2022.

 

Conference Call

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

A replay of the call and a transcript will be available within approximately 24 hours of the live event on our website here.

 

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.

 

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 earning 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 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

Year ended

December 31,

December 31,

2023

2022

2023

2022

(Unaudited)

(Unaudited)

(Unaudited)

(Audited)

Revenue

Display Advertising

$ 119,795

$ 123,757

$ 398,244

$ 360,690

Search Advertising

114,435

85,913

344,911

279,566

Total Revenue

234,230

209,670

743,155

640,256

Costs and Expenses

Cost of revenue

10,877

9,390

37,830

30,404

Traffic acquisition costs and media buy

143,605

122,046

432,943

372,601

Research and development

8,714

9,289

33,066

34,424

Selling and marketing

15,008

16,130

57,991

56,014

General and administrative

10,131

7,886

31,799

1 27,629

Change in fair value of contingent consideration

2,110

18,694

1 (3,816)

Depreciation and amortization

3,901

3,741

14,092

13,838

Total Costs and Expenses

194,346

168,482

626,415

531,094

Income from Operations

39,884

41,188

116,740

109,162

Financial income, net

6,262

1,976

20,951

4,502

Income before Taxes on income

46,146

43,164

137,691

113,664

Taxes on income

6,745

4,487

20,278

14,439

Net Income

$ 39,401

$ 38,677

$ 117,413

$ 99,225

Net Earnings per Share

Basic

$ 0.83

$ 0.84

$ 2.49

$ 2.21

Diluted

$ 0.78

$ 0.79

$ 2.34

$ 2.06

Weighted average number of shares

Basic

47,756,953

45,842,833

47,128,232

44,871,149

Diluted

50,600,750

48,872,169

50,073,985

48,071,638

 

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

December 31,

December 31,

2023

2022

(Unaudited)

(Audited)

ASSETS

Current Assets

Cash and cash equivalents

$ 187,609

$ 176,226

Restricted cash

1,339

1,295

Short-term bank deposits

207,450

253,400

Marketable securities

77,616

Accounts receivable, net

231,539

160,488

Prepaid expenses and other current assets

21,033

12,049

Total Current Assets

726,586

603,458

Long-Term Assets

Property and equipment, net

3,179

3,611

Operating lease right-of-use assets

6,609

10,130

Goodwill and intangible assets, net

337,990

247,191

Deferred taxes

2,817

5,779

Other assets

85

49

Total Long-Term Assets

350,680

266,760

Total Assets

$ 1,077,266

$ 870,218

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current Liabilities

Accounts payable

$ 217,181

$ 155,854

Accrued expenses and other liabilities

42,636

37,869

Short-term operating lease liability

4,198

3,900

Deferred revenue

2,297

2,377

Short-term payment obligation related to acquisitions

73,716

34,608

Total Current Liabilities

340,028

234,608

Long-Term Liabilities

Payment obligation related to acquisition

33,113

Long-term operating lease liability

3,448

7,580

Other long-term liabilities

15,643

11,783

Total Long-Term Liabilities

19,091

52,476

Total Liabilities

359,119

287,084

Shareholders’ equity

Ordinary shares

413

398

Additional paid-in capital

530,620

513,534

Treasury shares at cost

(1,002)

(1,002)

Accumulated other comprehensive loss

(83)

(582)

Retained earnings

188,199

70,786

Total Shareholders’ Equity

718,147

583,134

Total Liabilities and Shareholders’ Equity

$ 1,077,266

$ 870,218

 

 

PERION NETWORK LTD. AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
In thousands

Three months ended

Year ended

December 31,

December 31,

2023

2022

2023

2022

(Unaudited)

(Unaudited)

(Unaudited)

(Audited)

Cash flows from operating activities

Net Income

$ 39,401

$ 38,677

$ 117,413

$ 99,225

Adjustments required to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

3,901

3,741

14,092

13,838

Stock-based compensation expense

4,663

3,205

15,590

11,570

Foreign currency translation

(36)

258

(27)

20

Accrued interest, net

(1,308)

(1,639)

(5,547)

(3,646)

Deferred taxes, net

1,079

(2,755)

(654)

(1,428)

Accrued severance pay, net

188

222

(274)

(106)

Gain from sale of property and equipment

(6)

(2)

(27)

(12)

Net changes in operating assets and liabilities

2,334

(3,536)

14,897

2,658

Net cash provided by operating activities

$ 50,216

$ 38,171

$ 155,463

$ 122,119

Cash flows from investing activities

Purchases of property and equipment, net of sales

(280)

(267)

(784)

(1,046)

Investment in marketable securities, net of sales

(5,001)

(76,599)

Short-term deposits, net

46,500

(34,400)

45,950

(36,200)

Cash paid in connection with acquisitions, net of cash acquired

(101,921)

(101,921)

(9,570)

Net cash used in investing activities

$ (60,702)

$ (34,667)

$ (133,354)

$ (46,816)

Cash flows from financing activities

Proceeds from exercise of stock-based compensation

95

1,392

2,433

5,833

Payments of contingent consideration

(13,256)

(9,091)

Net cash provided by (used in) financing activities

$ 95

$ 1,392

$ (10,823)

$ (3,258)

Effect of exchange rate changes on cash and cash equivalents and restricted cash

159

228

141

(59)

Net increase (decrease) in cash and cash equivalents and restricted cash

(10,232)

5,124

11,427

71,986

Cash and cash equivalents and restricted cash at beginning of period

199,180

172,397

177,521

105,535

Cash and cash equivalents and restricted cash at end of period

$ 188,948

$ 177,521

$ 188,948

$ 177,521

 

 

PERION NETWORK LTD. AND ITS SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP RESULTS
In thousands (except share and per share data)

Three months ended

Year ended

December 31,

December 31,

2023

2022

2023

2022

(Unaudited)

(Unaudited)

Revenue

$ 234,230

$ 209,670

$ 743,155

$ 640,256

Traffic acquisition costs and media buy

143,605

122,046

432,943

372,601

Contribution ex-TAC

$ 90,625

$ 87,624

$ 310,212

$ 267,655

 

Three months ended

Year ended

December 31,

December 31,

2023

2022

2023

2022

(Unaudited)

(Unaudited)

GAAP Income from Operations

$ 39,884

$ 41,188

$ 116,740

$ 109,162

Stock-based compensation expenses

4,663

3,205

15,590

11,570

Retention and other acquisition related expenses

3,342

100

4,000

1,618

Change in fair value of contingent consideration

2,110

18,694

(3,816)

Amortization of acquired intangible assets

3,476

2,988

12,448

11,884

Depreciation

425

753

1,644

1,954

Adjusted EBITDA

$ 53,900

$ 48,234

$ 169,116

$ 132,372

 

 

PERION NETWORK LTD. AND ITS SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP RESULTS
In thousands (except share and per share data)

Three months ended

Year ended

December 31,

December 31,

2023

2022

2023

2022

(Unaudited)

(Unaudited)

GAAP Net Income

$ 39,401

$ 38,677

$ 117,413

$ 99,225

Stock-based compensation expenses

4,663

3,205

15,590

11,570

Amortization of acquired intangible assets

3,476

2,988

12,448

11,884

Retention and other acquisition related expenses

3,342

100

4,000

1,618

Change in fair value of contingent consideration

2,110

18,694

(3,816)

Foreign exchange losses (gains) associated with ASC-842

114

3

(166)

(821)

Revaluation of acquisition related contingent consideration

142

184

583

786

Taxes on the above items

(301)

(506)

(1,166)

(651)

Non-GAAP Net Income

$ 52,947

$ 44,651

$ 167,396

$ 119,795

Non-GAAP diluted earnings per share

$ 1.04

$ 0.90

$ 3.33

$ 2.47

Shares used in computing non-GAAP diluted earnings per share

50,862,007

49,511,914

50,311,682

48,496,154

 

Perion Network Ltd.
Dudi Musler, VP of Investor Relations
+972 (54) 7876785
dudim@perion.com

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