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Edited Transcript of PERI earnings conference call or presentation 12-Feb-20 1:30pm GMT

Q4 2019 Perion Network Ltd Earnings Call

Tel Aviv Feb 19, 2020 (Thomson StreetEvents) -- Edited Transcript of Perion Network Ltd earnings conference call or presentation Wednesday, February 12, 2020 at 1:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Doron Gerstel

Perion Network Ltd. - CEO & Director

* Maoz Sigron

Perion Network Ltd. - CFO

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Conference Call Participants

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* Austin William Moldow

Canaccord Genuity Corp., Research Division - Associate

* Christopher Paul McGinnis

Sidoti & Company, LLC - Special Situations Equity Analyst

* Eric Martinuzzi

Lake Street Capital Markets, LLC, Research Division - Head of Research & Senior Research Analyst

* John Nobile

Taglich Brothers, Inc., Research Division - Principal Equity Analyst

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Presentation

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Operator [1]

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Good day, and welcome to the Perion Fourth Quarter and Annual 2019 Earnings Conference Call. This conference is being recorded. The press release detailing the financial results is available on the company's website at perion.com.

Before we begin, I'd like to read the following safe harbor statement. Today's discussion will include forward-looking statements. These statements reflect the company's current views with respect to future events. These forward-looking statements involve known and unknown risks, uncertainties and other factors, including those discussed under the heading Risk Factors and elsewhere in the company's annual report on Form 20-F that may cause actual results, performance or achievements to be materially different and any future results, performance or achievements anticipated or implied by these forward-looking statements.

The company does not undertake to update any forward-looking statements to reflect future events or circumstances. As in prior quarters, the results reported today will be analyzed both on a GAAP and a non-GAAP basis. While mentioning EBITDA, we will be referring to adjusted EBITDA. We have provided a detailed reconciliation of non-GAAP measures to their comparable GAAP measures in our earnings release, which is available on our website and has also been filed on Form 6-K.

Hosting the call today are Doron Gerstel, Perion's Chief Executive Officer; Maoz Sigron, Chief Financial Officer. I would now like to turn the call over to Doron Gerstel. Please go ahead.

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Doron Gerstel, Perion Network Ltd. - CEO & Director [2]

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Thank you, and good morning. 2019 was a transformative year for Perion, marked by strong financial results, significant operational progress and confirmation that our CodeFuel business can be a predictable economic engine. Our efforts over the past 2 years to position Perion for a long-term profitable growth by strengthening our underlying financial structure and innovating our core technology to better align with the diverse dynamic and increasingly sophisticated needs of our agency and brand customer is paying dividends.

Since my first earnings call in 2017, I've been consistent around the 3 phases of our turnaround plan. First, to finally optimize Perion and strengthen our balance sheet. For example, cash from operations increased 36% year-over-year, and we ended 2019 with a net cash position of $45 million, an increase of more than 35% quarter-over-quarter, our highest level in 4 years. And second, to create a deeper and wider move for our business units, a significant factor behind the growth of our search revenue that grew 37% year-over-year.

With the first 2 phases of our strategy complete, we began to see the third phase, driving sustainable and predictable revenue growth, exhibit vitality in 2019.

Now I'd like to briefly review the drivers of our success last year as well as today announcement of Privado, which is an important advancement in our relationship with Microsoft Bing. Following that, I will take you on a journey to 2020 and beyond to share my vision of how this strategic and accretive acquisition of Content IQ or CIQ, as we call it, represent both a driver of our current business as well as -- and this is important, an opportunity to reshape our advertising business to become even more competitive and differentiated.

The key driver of our financial improvement in 2019 was the continued strength of CodeFuel, our search business. We have built a deep moat around our search business and dramatically changed the revenue trajectory through both product innovation and more targeted and effective sales effort. At the core of our success is the fact that consumers are making more purchases online and retailers are paying more to reach targeted consumer who are responsible for those clicks. The rise in direct-to-consumer brands is leading to higher spend on ad search, which increased the demand for quality searches for Microsoft Bing and Perion is a direct beneficiary from that trend.

Earlier today, we announced the launch of Privado, a private search engine developed in partnership with Microsoft Bing. The market of privacy, conscious consumer, is large and growing with nearly 80% of Internet users taking steps to preserve their privacy.

Privado is a new search engine that is owned and operated by CodeFuel. What Privado offer users is a private and anonymous search experience. Users search queries cannot be traced back by search engine providers, in our case, Microsoft Bing. In other words, it means that search results and ads are associate only with keywords and are not independent of any personal information. The product was developed by CodeFuel and Microsoft in a close collaboration, answering the growing demand for user privacy in the market.

Privado is a substantial vote of confidence for Perion. This is a joint product development is a significant milestone in the strategic partnership we've established with Microsoft Bing.

Now let's turn to CIQ. The acquisition of this innovative technology company is consistent with what I have told you about an accelerated ramp of investment in technology that can create synergies to drive our synchronized digital branding solution. To remind you of the core capabilities of CIQ, it is a digital publishing optimization platform with proprietary data algorithms and analytic tools that dynamically optimize both publisher content and audience interest to maximize return on ad spend.

One of the most powerful trends that we're seeing is the need that brands have to continue their connection to consumers beyond the ad impression. Wherever it may be all the way through to targeted call to action messages and landing page personalization, customization and personalization, create optimization. And that is precisely what CIQ make possible. And this is why we acquired them. Their proven ability to drive traffic to publisher and optimize the revenue by reconfiguring their content pages is in real-time can be simultaneously deployed to bring personalization to the Undertone business.

CIQ gives us the ability to offer brands and advertiser a solution that extends beyond the click and beyond the impression to landing page personalization that recognize their intent, interest and user state. With CIQ technology, Undertone can now offer personalized content as its centerpiece as CIQ dynamically generates an optimized content to provide a one-to-one user experience and page level engagement throughout what I call the exposure chain.

That's how CIQ can reshape our advertising business, giving us capabilities we don't currently possess. It will make Undertone stronger as it increasingly focus its sales force on agencies.

With that, I'd like to turn the call over to Maoz to review the financial results on the third (sic) [fourth] quarter. Maoz?

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Maoz Sigron, Perion Network Ltd. - CFO [3]

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Thank you, Doron. Turning on financial performance. During 2019 reflects an ongoing execution of our 3-phases strategy plan. We believe that the strong business momentum will set as a tailwind for additional improvement during 2020. During the fourth quarter of 2019, our cash position continued to improve. Cash from operations in 2019 was $44.7 million, cash and short-term bank deposit of $61.6 million, resulting in a net cash of $45 million as of December 31, 2019.

Each of these items has reached its highest level during the last 4 years. During the fourth quarter of 2019, revenue for Perion totaled $78.3 million, composed of $26.4 million from advertising and $51.8 million from sales and other revenue.

Total revenue increased by 9% from $72 million in the fourth quarter last year. This increase was primarily achieved as a result of a 49% growth in sales and other revenues, resulting from increased activity with our existing publisher and increased number of server publisher, a growing number of unique searches and higher RPM.

Advertising revenue decreased by 29% as a result of the continuing transition from selling format to any integrated solution. Sales and other revenues represented 66% of the fourth quarter of 2019 revenue, with advertising contributing 34%. Customer acquisition costs and media buy in the fourth quarter of 2019 were $41.1 million or 53% of revenue compared to $36.6 million or 51% of revenue in the fourth quarter of 2019 -- '18.

Net income for the fourth quarter of 2019 was $5.9 million or $0.22 per diluted share compared to $4.9 million or $0.19 per diluted share in the fourth quarter of 2018. Perion's non-GAAP net income in the fourth quarter of 2019 was $8.9 million or $0.32 per diluted share compared to $5.8 million or $0.21 per diluted share in the fourth quarter of 2018.

Adjusted EBITDA in the fourth quarter of 2019 was $12.2 million compared to $11.5 million in the fourth quarter of 2019. As of December 31, 2019, we had cash, cash equivalents and short-term bank deposits of $61.6 million compared to $43.1 million as of December 31, 2018. As of December 31, 2019, total debt was $16.7 million compared to $40.5 million as of December 31, 2018.

Turning to our 2019 full year results. Total revenue for 2019 was $261.5 million compared to $252.8 million in 2018, representing an increase of 3%. Sales and other revenue represented 66% of revenue for the full year 2019, with advertising contributing 34%. They compared to the full year 2018 when sales and other revenue contributed 49.8% and advertising contributed 50.2%.

Customer acquisition costs and media buy for 2019 were $135.9 million or 52% of revenue compared to $128.8 million or 51% of revenue in 2018. On a GAAP basis, full year 2019 net income was $12.9 million or $0.49 per diluted share compared to $8.1 million or $0.31 per diluted share in 2018. Perion's non-GAAP net income for the full year 2019 was $21.6 million or $0.83 per diluted share compared to $17.8 million or $0.65 per share in 2018.

During 2019, adjusted EBITDA was $32.4 million or 12.4% of revenue compared to $29.6 million or 11.7% of revenue in 2018. Cash flow from operating activities for the full year 2019 was $44.7 million compared to $32.8 million for the full year 2018.

This concludes my financial overview for the fourth quarter and the full year of 2019. I will now turn the call back to Doron for a closing statement.

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Doron Gerstel, Perion Network Ltd. - CEO & Director [4]

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Thank you, Maoz. As discussed, 2019 was a transformative year for Perion so we've entered 2020 with accelerating momentum. We remain focused on building a more sustainable, predictable and profitable operating model. Our successful financial performance in 2019 is an affirmation of our diversification strategy, providing wealth of offerings across the 3 main pillars of digital advertising, search, social, display and video, capitalizing on any unpredicted changes on digital media spend.

I'm confident meeting 2020 financial objectives for the 3 following reasons: first, our 3 phases turnaround plan continues to be executed effectively. Second, the launch of Privado is an evidence of the depth of our Microsoft Bing relationship and partnership. And third, the acquisition of Content IQ provides a catalyst for the reshaping of our advertising business providing very real opportunities for increased market relevance and sales velocity as we offer brands and advertisers an AI-driven dynamically optimized personalization engine that extends from Facebook and other channels through landing page optimization.

For these reasons, we expect 2020 to be a year of growth as we integrate the CIQ acquisition and work to drive organic growth efforts. We remain focused on managing our business to maximize earnings and for full year 2020, we expect to generate adjusted EBITDA in the range of $38 million to $40 million.

I want to close by thanking the incredible team I work with in New York, Israel, France and Ukraine, without whom none of this would be possible. I'm honored to be working shoulder to shoulder with them.

With that said, operator, will you please open the call for questions. Operator?

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Questions and Answers

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Operator [1]

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(Operator Instructions) And we will take our first question from Eric Martinuzzi in Lake Street.

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Eric Martinuzzi, Lake Street Capital Markets, LLC, Research Division - Head of Research & Senior Research Analyst [2]

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Congratulations on a strong finish to a terrific year. Doron, I wanted to focus on the search side of the business, we've got a terrific relationship with Microsoft here, but from what I understand, I think December 2020 is the termination of the existing agreement with them. Can you give us an update on the status of the renewal of that relationship?

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Doron Gerstel, Perion Network Ltd. - CEO & Director [3]

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Yes, definitely. So the termination of the 3 years agreement that we signed back in 2017 is terminated in the end of 2020 with another 12 months of notice. But we're not -- we are very much expecting to renew the agreement and as I mentioned on the call, I think that the fact that we are launching Privado, which is a teamwork with Microsoft Bing is a huge evidence of both companies that are aim to renew the agreement.

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Eric Martinuzzi, Lake Street Capital Markets, LLC, Research Division - Head of Research & Senior Research Analyst [4]

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Okay. And then for 2020, you just finished the year where the search business was 2/3 of revenue, what is your anticipation for the revenue mix in 2020?

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Doron Gerstel, Perion Network Ltd. - CEO & Director [5]

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So the focus of 2020 is definitely on the advertising side of the business. And I think that the acquisition of Content IQ is going to give us a huge boost, even more than that. It's -- the idea is how we're able to reshape our advertising offering. The taking content, and we said that contact is the high-impact of our future because we definitely see a growing demand for personalized content. So all eyes or all efforts here is to ramp up advertising revenue. So I think that the ratio that is currently 60-40 or 55 -- it's a 55-45, let's put it this way. I'm thinking that it will be at least half and half.

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Eric Martinuzzi, Lake Street Capital Markets, LLC, Research Division - Head of Research & Senior Research Analyst [6]

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Okay. And then lastly, I did want to focus on the advertising side of the business. Obviously, you pulled back from -- you talk about the advertising business, which was down 29% in the fourth quarter. That's a result of the conscious decision. But when can we expect -- and I'm talking about on an organic basis because I understand Content IQ will contribute to the advertising segment. But from an organic basis, when does the advertising business return to growth?

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Doron Gerstel, Perion Network Ltd. - CEO & Director [7]

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Yes. So yes, that's true. We're going to report the Content IQ as part of advertising. But I think it will be a bit difficult for us to look at it from an organic standpoint, since as we speak right now, our sellers of Undertone, start selling the concept of the content, which you are using, currently, the Content IQ technology. And that's going to be part of the offering to agency or to advertiser. So I think it will be really difficult to isolate the impact of Content IQ. All in all, we're definitely expecting that this year, 2020 will -- definitely will bend the curve from advertising revenue as a whole in Undertone, specifically.

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Operator [8]

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Our next question comes from Austin Moldow in Canaccord.

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Austin William Moldow, Canaccord Genuity Corp., Research Division - Associate [9]

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Congrats on the quarter. I want to ask 2 about Privado. The first question is, how do you and Microsoft plan to drive more searchers to this new engine? Are there any marketing commitments from Microsoft or ways in which traffic be funneled from Bing?

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Doron Gerstel, Perion Network Ltd. - CEO & Director [10]

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Right. So on the marketing front, what we've discussed, we should distinguish between the consumer effort towards consumer to download this own and operate Privado and the efforts that we're doing towards businesses more specifically, browser that are planning to use Privado as part of their offering. The focus at this point between us and Microsoft Bing leads more on the OEM front. In other words, to have more and more browsers using Privado as part of their offering in order to provide the search -- the Privado capability, the secured search capability, into their users. That's our main effort in 2020 and that is being done, of course, in conjunction with Bing.

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Austin William Moldow, Canaccord Genuity Corp., Research Division - Associate [11]

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Got it. And my second question on Privado is given that ads will only be targeted based on keywords and no personal information. How do you think that will impact ad provision?

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Doron Gerstel, Perion Network Ltd. - CEO & Director [12]

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So no, it's a very, very good question. And because the idea that they had is definitely -- so the engine that currently Bing is developing, and I must say that they're developing it as we speak, it's an ongoing develop, is to have a maximum optimization between the ad and the keyword. They fully understand where the market is heading and what consumer is preferred. And at this point, based on extensive test that we did, it was a year-long of beta test -- testing, they didn't see any decrease in terms of advertising revenue or the click-through rate that has to do with the Privado product capability.

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Operator [13]

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Question is from Chris McGinnis in Sidoti & Company.

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Christopher Paul McGinnis, Sidoti & Company, LLC - Special Situations Equity Analyst [14]

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It's a nice quarter. Just on the advertising component of the business. Can you just talk about how CIQ helps with the -- is it the relaunch or the first half offering that you plan to kind of -- to change in the first half of the year? Can you just talk about how that changed it? And then maybe the growth rates around CIQ?

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Doron Gerstel, Perion Network Ltd. - CEO & Director [15]

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Yes. So in terms of the offering, CIQ capability, and that's the technology that has to do with offering a personalized content, one. Second, ability to optimize the layout of the site, optimize the content and the ability to drive targeted audience through Facebook and other channels. That by itself created what we call the -- a way for the advertiser to better control the destination, the destination, vis-à-vis the publisher. That's by itself a significant change because at this point, advertiser are very much limited of their optimization capability. At this time, advertisers are very much limited to get the right ad to the right spot and not beyond. And this additional capability is going to change dramatically the return on ad spend because of the other elements that I described, that will be optimized according to the specific campaign. And taking this into our offering will get us -- will able us to show, as I said, better return on ad spend than what we did before and what others are doing.

That's the offering and how it's being integrated in terms of the Synchronized Digital Branding Offering. Now to the second part of your question that has to do with CIQ growth plan. What we shared already with the market is the fact that a significant part of the CIQ transaction has to do with meeting both EBITDA and revenue targets. We shared with the market that we are distinguishing between target one and even extend the target. And the budget that we are putting in place, and we agreed with the CIQ, is of course, designed to meet those targets. Target one and the extended target. And at this point, that's our aim.

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Christopher Paul McGinnis, Sidoti & Company, LLC - Special Situations Equity Analyst [16]

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Okay. And just lastly, on the first half relaunch or rebranding? Is that still on target on the advertising side?

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Doron Gerstel, Perion Network Ltd. - CEO & Director [17]

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This was a question?

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Christopher Paul McGinnis, Sidoti & Company, LLC - Special Situations Equity Analyst [18]

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Yes. If I remember on Q3, you talked about a new product suite coming out for the first half of the year to help drive the advertising business. Is that still on target? Or does that change at all in CIQ?

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Doron Gerstel, Perion Network Ltd. - CEO & Director [19]

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That's still on target. It's definitely an effort to taking the concept of at this point that we're delivering the media as a managed service through Undertone with the additional of CIQ to productize, or as I mentioned in previous calls, to SaaS-ified it into a solution on the foundation of MakeMeReach, that's a huge effort from our side, on the engineering, on the -- incorporate content and incorporate Captain Growth, the company that we acquired in Ukraine, all in all to bring to market this platform. We are definitely making a huge progress and we are planning to launch it as I mentioned during 2020.

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Operator [20]

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Question from [Derek Baulding], private investor.

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Unidentified Participant, [21]

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Congratulations on a very solid earnings report. Great progress hearing the evolution of Perion.

So very surprised by the quarter-over-quarter increase in cash. Curious if you could give us a little bit more color on that? How are you generating so much cash? And is most of that coming from search? Or is there some coming from advertising as well?

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Maoz Sigron, Perion Network Ltd. - CFO [22]

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Thank you. This is Maoz. Part of the reason for the improvement, the cash flow during 2019 related first to the fact that we have more revenue coming from the search as we have mentioned. And second, we improved dramatically our collection efforts on both sides, on search and advertising, actually, the DSO reduced dramatically. And I believe that the $44 million cash flow from 2019 is something that's unique for this year. I will not say that it should be the same next year. So we had a kind of some improvement that we did this year, that this is a onetime improvement. If I'm looking moving forward, it should be more aligned with the EBITDA guidance that provide to the market, more or less, the cash flow from operations should be more or less the same.

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Unidentified Participant, [23]

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Second question, you've had a number of really impressive executives added to the team over the past 6 to 9 months. Can you talk a little bit more about that and how they fit in with the team and how they're helping with growth?

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Doron Gerstel, Perion Network Ltd. - CEO & Director [24]

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Yes, definitely. So we are doing some changes to our executive. It has to do with the different objective in front of us. We started by appointing Dan Aks to be head of Undertone, and he's based in New York, and he started in September, and he will be very much responsible of changing the Undertone revenue curve in 2020.

We also appoint 2 other executives, one is Tal, who is very much responsible as the GM of CodeFuel to the tremendous growth and strengthening the relationship with Microsoft Bing, doing exceptional work. The 2 others that just joined is -- one of them is Dan Mano, who is running -- he came from an Israeli company, which called MyHeritage, and he's running our only B2C BU, which is Smilebox. But the most important guy that joined, and I think it was a very impressive hiring, a guy that came with Adobe that has to do with the acquisition of Marketo, and before that, this company was acquired by Salesforce, veteran executive that will be responsible and the GM of our advertising cloud platform, his name is Shai.

And with that, I think that I feel very comfortable that we did what is always -- is the most difficult part, at least from my point of view, is having the team that needs to take the company to the next level. And definitely, 2020, we see it as a next level when it comes to aim for exceptional growth. If I will add the 2 other guys that joined through the acquisition, which is Asaf and Ziv, I think that we have a really great team. That's one of the main reason I feel so, let's say, comfortable, with meeting our 2020 objectives.

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Unidentified Participant, [25]

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That's very helpful. It appears that your market cap is going to be large enough to be included in the Russell 2000 soon. So hopefully, that will garner some more institutional and investment interest. I wish you great luck going forward to the next quarter.

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Operator [26]

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(Operator Instructions) The question comes from John Nobile in Taglich Brothers.

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John Nobile, Taglich Brothers, Inc., Research Division - Principal Equity Analyst [27]

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And congratulations, obviously. I know that the search business is growing a lot better than anticipated. And I anticipate Privado only adding to this. So I look forward to the year 2020 as far as that's concerned. But in regard to your Content IQ acquisition. I believe there's earnout associated with that, and it's going to be triggered by approximately $158 million in revenue over the next 2 years.

So I believe in the press release, it said there was about a $39 million revenue year in 2019. So looking at that level and what's to be achieved, I'm just curious how confident are you that, that level of revenue could be obtained? And if so, what would be the driving force to drive that dramatical increase in revenue on Content IQ?

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Doron Gerstel, Perion Network Ltd. - CEO & Director [28]

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Yes. So that's a great question. I must say that just -- that's why, by the way, we split it into 2. So we have the 2 year target, and we have 2 years extended target with the notion of meeting the extended target and -- but from Bing, I can say, conservative because even target one is showing some growth. We are -- split the revenue target into 2.

Now part of our diligence that we did was very much looking about what is the synergy and what we're able to generate the day after with Content IQ. And the model that we've built that we reached these numbers, which are impressive revenue growth numbers, is very much based on 3 level or what we called internally 3 floor and -- of potential revenue.

One -- the first one is what the content IQ is doing. And there, let's call it, organic growth, to support their organic growth, we are going to spend more and going to grow their OpEx. This is the floor one.

The second floor that we tested carefully during the diligence, has to do with the synergy between Content IQ and CodeFuel, which is the search and Content IQ and Undertone. These 2 are potentially -- is going to provide a significant boost to Content IQ revenue.

Third, which is definitely another thing. Currently, Content IQ technology of content optimization is something that is being done internally with a very limited number of publishers that is using this technology outside of Content IQ. The idea is to expand this offering and to attract more and more publisher that are going to use the Content IQ technology. And this is definitely a key element in our revenue projection. Currently we are working on how we're able to productize and take their insight -- their technology into a platform that a publisher able to use.

Based on those 3 factors, we've built the revenue model of Content IQ for 2020 and 2021.

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John Nobile, Taglich Brothers, Inc., Research Division - Principal Equity Analyst [29]

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Okay. And that came up with $158 million based on these factors and...

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Doron Gerstel, Perion Network Ltd. - CEO & Director [30]

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It came up -- no, it -- yes, it came up with 2 numbers. One is the goal one and second is the extended goal. I think that we should definitely, even though we are -- would love to pay the earn-out in full, there is a reason why we are coming with the cautious of 2 targets. Target one and extended target.

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John Nobile, Taglich Brothers, Inc., Research Division - Principal Equity Analyst [31]

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Now you mentioned the first fact to driving that growth is organic growth. Content IQ, the press release said, I think, $39 million was a 2019 revenue year. So what kind of growth was that organically in Content IQ? What was it for 2018? Just to get an idea of how that's growing.

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Doron Gerstel, Perion Network Ltd. - CEO & Director [32]

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So as far the growth -- Content IQ changed a bit of what they are doing, and they definitely pivot the source of their revenue. And I don't think that applies to 2018 to '19 is relevant for this discussion because a lot of it's 2019 revenue is coming from a different source that was not applied to 2018. So I think we are not comparing the right things.

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John Nobile, Taglich Brothers, Inc., Research Division - Principal Equity Analyst [33]

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Okay. Okay. And another question on Content IQ. You're talking -- they have operations in New York, and you're looking to relocate that into your New York offices.

So I was wondering, Maoz, if you might be able to actually quantify what kind of cost savings will be afforded by that relocation into your New York offices?

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Doron Gerstel, Perion Network Ltd. - CEO & Director [34]

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No, I don't think it has to do with cost saving because we got a really great deal from...

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Maoz Sigron, Perion Network Ltd. - CFO [35]

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WeWork.

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Doron Gerstel, Perion Network Ltd. - CEO & Director [36]

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From WeWork. So it's not the saving. What is more we'd like to very much accomplish by this move is that we would very much would like to strengthen the synergy potential between Content IQ and Undertone. And that's why -- and that's motivate us more than the cost savings.

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John Nobile, Taglich Brothers, Inc., Research Division - Principal Equity Analyst [37]

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Okay. Understood. And actually, just one other question, my final question. In regard to TVadSync, I was just hoping to get a better understanding of how your partnership with TVadSync, how that's going to benefit the -- it was mentioned, ad creation on second screen devices.

So I was hoping you can actually provide a little more detail on that benefit from the TVadSync assets to how that's going to benefit the second screen devices.

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Doron Gerstel, Perion Network Ltd. - CEO & Director [38]

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Yes. So we're very happy with our partnership with TVadSync. That's a good point for next earnings call to provide some numbers and to get this to be more quantifiable. And I wasn't prepared to get this. But on the overall and it definitely -- it allows us to get great -- greater deals for Undertone. It's integrated very well with what we are doing, both on the display side and in the video side. Now we're taking it even more to the social side of our offering. I'm taking it as an action item to be more informative in our next earnings call.

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John Nobile, Taglich Brothers, Inc., Research Division - Principal Equity Analyst [39]

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Okay. But in general, what you -- your comments, it's not just really going to be beneficial to your advertising segment. This should also be a benefit to search. Is that correct?

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Doron Gerstel, Perion Network Ltd. - CEO & Director [40]

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The TVadSync?

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John Nobile, Taglich Brothers, Inc., Research Division - Principal Equity Analyst [41]

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Yes. I mean, that's -- I just wanted to understand where that's going to really benefit you as far as total revenue.

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Doron Gerstel, Perion Network Ltd. - CEO & Director [42]

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At this point the partnership is very much limited to Undertone or to our advertising business. Finding -- we are testing some use cases with CodeFuel as well. It has to do with priority. We have other venues, which provide a greater return on our efforts. So that's got some lower priority.

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Operator [43]

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No questions at this time. So I'd like to hand the call back to the host today.

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Doron Gerstel, Perion Network Ltd. - CEO & Director [44]

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Okay. Guys, thank you very much for joining our call today. Thanks, again. Bye-bye.

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Operator [45]

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This concludes today's conference call. Thank you for your participation. Ladies and gentlemen, you may now disconnect.