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Perion Delivers Another Strong Quarter, with 31% Revenue Growth and 141% Growth in Net Income

Company increases 2022 adjusted EBITDA guidance from $102M to at least $120M as a result of a sustainable improvement in profitability

TEL AVIV, Israel & NEW YORK, November 09, 2022--(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 third quarter ended September 30, 2022.

Doron Gerstel, Perion’s CEO, stated, "Once again, Perion outperformed the adtech industry – and we believe will continue to do so for the following reasons:

  • We are leveraging our diversification strategy as advertisers are shifting their direct response budgets from social advertising (mainly Facebook) to search advertising

  • We are continuously expanding our profit margins, which demonstrates the strategic and economic value of our Intelligent HUB (iHUB)

  • We are bringing innovation – through SORT™ – in response to advertiser recognition that privacy matters more than ever

  • We are meeting our clients’ objective to enhance their brand equity by increasing user engagement through Perion’s High-Impact ad suite."

"This was the eighth consecutive quarter we delivered top and bottom-line double-digit growth on a year-over-year basis," Mr. Gerstel continued. "The 145% year-over-year increase in operating cash flow to nearly $35 million, reflects the significant earnings power of our business model. With a cash position of $390 million at quarter end, we have significant dry powder to execute on our growth strategy, delivering value to shareholders for years to come."

Third Quarter 2022 Business Highlights

  • Media margin increased to 41%, compared with 39% in Q3 2021

  • Adjusted EBITDA to revenue ex-TAC of 51% vs. 37% last year. This is among the highest in the industry

  • Video revenue increased by 209% year-over-year, representing 44% of Display Advertising revenue

  • CTV revenue increased by 134% year-over-year, representing 9% of Display Advertising revenue compared with 5% last year

  • SORTTM spending increased by 25% over the previous quarter, driven by an 11% increase in the number of customers from 126 to 140

  • The increase in market adoption of our holistic Video Platform solution continues to deliver strong results:

    • 88% year-over-year increase in the number of Video Platform publishers

    • 67% year-over-year increase in revenue from existing Video Platform publishers

  • The number of search advertising publishers increased by 60% year-over-year, RPM increased by 42% over the same period

Third Quarter 2022 Financial Highlights(1)

In millions,
except per share data

Three months ended

Nine months ended

September 30,

September 30,

2022

2021

%

2022

2021

%

Display Advertising Revenue

$

86.8

$

69.0

+26%

$

236.9

$

165.1

+43%

Search Advertising Revenue

$

71.8

$

52.0

+38%

$

193.7

$

155.4

+25%

Total Revenue

$

158.6

$

121.0

+31%

$

430.6

$

320.5

+34%

GAAP Net Income

$

25.6

$

10.6

+141%

$

60.5

$

21.0

+188%

Non-GAAP Net Income

$

29.9

$

15.4

+94%

$

75.1

$

34.7

+117%

Adjusted EBITDA

$

33.0

$

17.6

+87%

$

84.1

$

40.7

+107%

Adjusted EBITDA to Revenue ex-TAC

51%

37%

47%

32%

Net Cash from Operations

$

34.7

$

14.2

+145%

$

83.9

$

42.3

+99%

GAAP Diluted EPS

$

0.53

$

0.28

+89%

$

1.27

$

0.57

+123%

Non-GAAP Diluted EPS

$

0.61

$

0.40

+53%

$

1.56

$

0.93

+68%

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

Outlook for 2022

Mr. Gerstel concluded, "Given our strong performance and our sustainable and predictable business model, we are increasing our guidance for 2022 substantially."

In millions

2021

Prior 2022 Guidance

Current 2022 Guidance

YoY

Growth %1

Revenue

$478.5

$620-$640

$630-$635

32%1

Adjusted EBITDA

$69.6

$102+

$120+

72%1

Adjusted EBITDA to Revenue ex-TAC

37%

41%

46%1

(1) Calculated at revenue guidance midpoint and Adjusted EBITDA of $120 million

Financial Comparison for the Third Quarter of 2022

Revenue: Revenue increased by 31% to $158.6 million in the third quarter of 2022 from $121.0 million in the third quarter of 2021. Display Advertising revenue increased by 26% year-over-year, accounting for 55% of total revenue. This is primarily due to 209% growth in video, now representing 44% of Display Advertising revenue compared with 18% in the third quarter of 2021, 134% growth in CTV revenue, which represents 9% of Display Advertising revenue, as well as a 10% increase in average deal size and a 9% increase in the number of clients for high impact solutions. The number of SORTTM customers increased by 11% quarter-over-quarter to 140, and SORTTM customers’ spending during the period increased by 25%, representing 17% of Display Advertising revenue compared with 14% in the previous quarter. Search Advertising revenue increased by 38% year-over-year, accounting for 45% of revenue, primarily due to a 42% increase in RPM and a 60% increase in the number of publishers.

Traffic Acquisition Costs ("TAC"): TAC amounted to $93.6 million, or 59% of revenue, in the third quarter of 2022, compared with $73.6 million, or 61% of revenue, in the third quarter of 2021. The improvement in media margin was primarily due to a favorable product mix of ad formats and the iHUB contribution.

Net Income: On a GAAP basis, net income increased by 141% to $25.6 million in the third quarter of 2022 from $10.6 million in the third quarter of 2021.

Non-GAAP Net Income: Non-GAAP net income was $29.9 million, or 19% of revenue, in the third quarter of 2022, compared with $15.4 million, or 13% of revenue, in the third quarter of 2021. A reconciliation of GAAP to non-GAAP net income is included in this press release.

Adjusted EBITDA: Adjusted EBITDA was $33.0 million, or 21% of revenue (and 51% of revenue ex-TAC), in the third quarter of 2022, compared with $17.6 million, or 15% of revenue (and 37% of revenue ex-TAC), in the third 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 September 30, 2022, cash and cash equivalents and short-term bank deposits amounted to $390.4 million. Net cash provided by operating activities in the third quarter of 2022 was $34.7 million, compared with $14.2 million in the third 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:

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 changes in fair value of earnout contingent consideration. 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. Revenue excluding 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", "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, 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, changes in applicable laws and regulations as well as industry self-regulation, data breaches, cyber-attacks and other similar incidents, 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.

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,

2022

2021

2022

2021

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

Revenue:

Display Advertising

$ 86,779

$ 68,980

$ 236,933

$ 165,146

Search Advertising

71,836

52,049

193,653

155,377

Total Revenue

158,615

121,029

430,586

320,523

Costs and Expenses:

Cost of revenue

7,540

6,284

21,014

17,879

Traffic acquisition costs and media buy

93,625

73,590

250,555

194,676

Research and development

7,766

8,630

25,135

26,103

Selling and marketing

12,591

12,926

39,884

36,410

General and administrative

3,793

5,295

15,927

14,055

Depreciation and amortization

3,704

1,922

10,097

6,299

Total Costs and Expenses

129,019

108,647

362,612

295,422

Income from Operations

29,596

12,382

67,974

25,101

Financial expense (income), net

(1,019)

11

(2,526)

116

Income before Taxes on income

30,615

12,371

70,500

24,985

Taxes on income

5,033

1,749

9,952

3,974

Net Income

$ 25,582

$ 10,622

$ 60,548

$ 21,011

Net Earnings per Share

Basic

$ 0.57

$ 0.31

$ 1.36

$ 0.63

Diluted

$ 0.53

$ 0.28

$ 1.27

$ 0.57

Weighted average number of shares

Basic

45,146,639

34,567,551

44,544,483

33,605,215

Diluted

47,997,745

37,865,732

47,560,112

36,866,637

PERION NETWORK LTD. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
In thousands

September 30,

December 31,

2022

2021

(Unaudited)

(Audited)

ASSETS

Current Assets:

Cash and cash equivalents

$ 171,355

$ 104,446

Restricted cash

1,042

1,089

Short-term bank deposits

219,000

217,200

Accounts receivable, net

99,862

115,361

Prepaid expenses and other current assets

10,587

8,075

Total Current Assets

501,846

446,171

Long-Term Assets:

Property and equipment, net

3,766

4,211

Operating lease right-of-use assets

9,175

11,578

Goodwill and intangible assets, net

250,179

245,965

Deferred taxes

2,955

5,228

Other assets

68

79

Total Long-Term Assets

266,143

267,061

Total Assets

$ 767,989

$ 713,232

LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities:

Accounts payable

$ 110,672

$ 107,730

Accrued expenses and other liabilities

29,376

40,331

Short-term operating lease liability

3,200

3,615

Deferred revenue

2,098

3,852

Short-term payment obligation related to acquisitions

34,571

38,179

Total Current Liabilities

179,917

193,707

Long-Term Liabilities:

Payment obligation related to acquisition

32,966

33,250

Long-term operating lease liability

6,805

9,774

Other long-term liabilities

9,265

9,541

Total Long-Term Liabilities

49,036

52,565

Total Liabilities

228,953

246,272

Shareholders' equity:

Ordinary shares

389

375

Additional paid-in capital

508,946

496,154

Treasury shares at cost

(1,002)

(1,002)

Accumulated other comprehensive loss

(1,406)

(128)

Retained earnings (accumulated deficit)

32,109

(28,439)

Total Shareholders' Equity

539,036

466,960

Total Liabilities and Shareholders' Equity

$ 767,989

$ 713,232

PERION NETWORK LTD. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
In thousands

Three months ended

Nine months ended

September 30,

September 30,

2022

2021

2022

2021

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

Cash flows from operating activities:

Net Income

$ 25,582

$ 10,622

$ 60,548

$ 21,011

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

Depreciation and amortization

3,704

1,922

10,097

6,299

Stock-based compensation expense

3,236

1,744

8,365

3,733

Foreign currency translation

(64)

(18)

(238)

(107)

Accrued interest, net

(825)

(53)

(2,006)

(220)

Deferred taxes, net

1,575

(478)

1,327

(183)

Accrued severance pay, net

(831)

135

(328)

333

Gain from sale of property and equipment

(5)

-

(10)

(11)

Net changes in operating assets and liabilities

2,300

301

6,194

11,415

Net cash provided by operating activities

$ 34,672

$ 14,175

$ 83,949

$ 42,270

Cash flows from investing activities:

Purchases of property and equipment, net of sales

(349)

(141)

(779)

(495)

Short-term deposits, net

31,600

23,000

(1,800)

(47,300)

Cash paid in connection with acquisitions, net of cash acquired

-

-

(9,570)

(3,438)

Net cash provided by (used in) investing activities

$ 31,251

$ 22,859

$ (12,149)

$ (51,233)

Cash flows from financing activities:

Issuance of shares in private placement, net

-

-

-

60,960

Proceeds from exercise of stock-based compensation

3,147

1,069

4,441

4,940

Payments of contingent consideration

-

-

(9,091)

-

Repayment of long-term loans

-

-

-

(8,333)

Net cash provided by (used in) financing activities

$ 3,147

$ 1,069

$ (4,650)

$ 57,567

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

(110)

(46)

(288)

(49)

Net increase in cash and cash equivalents and restricted cash

68,960

38,057

66,862

48,555

Cash and cash equivalents and restricted cash at beginning of period

103,437

59,376

105,535

48,878

Cash and cash equivalents and restricted cash at end of period

$ 172,397

$ 97,433

$ 172,397

$ 97,433

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,

2022

2021

2022

2021

(Unaudited)

(Unaudited)

GAAP Net Income

$ 25,582

$ 10,622

$ 60,548

$ 21,011

Stock-based compensation

3,236

1,744

8,365

3,733

Amortization of acquired intangible assets

3,295

1,370

8,896

4,068

Retention and other related to M&A related expenses

288

1,561

1,518

5,527

Changes in FV of Earnout contingent consideration

(3,816)

-

(3,816)

-

Foreign exchange losses (gains) associated with ASC-842

(80)

6

(824)

(207)

Revaluation of acquisition related contingent consideration

342

136

602

476

Taxes on the above items

1,067

(54)

(145)

92

Non-GAAP Net Income

$ 29,914

$ 15,385

$ 75,144

$ 34,700

Non-GAAP Net Income

$ 29,914

$ 15,385

$ 75,144

$ 34,700

Taxes on income

3,966

1,803

10,097

3,882

Financial income, net

(1,281)

(131)

(2,304)

(153)

Depreciation

409

552

1,201

2,231

Adjusted EBITDA

$ 33,008

$ 17,609

$ 84,138

$ 40,660

Non-GAAP diluted earnings per share

$ 0.61

$ 0.40

$ 1.56

$ 0.93

Shares used in computing non-GAAP diluted earnings per share

48,873,796

38,428,524

48,112,823

37,206,600

View source version on businesswire.com: https://www.businesswire.com/news/home/20221109005493/en/

Contacts

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