Perion Network PERI recently announced the acquisition of privately-held Content IQ (CIQ) for a total consideration of $73.05 million, including $15 million in cash. Shares rose 5% to close at $8.72 on Jan 14.
CIQ’s proprietary data algorithms and analytical tools help advertisers gain better clarity about the targeted audience. Moreover, per Perion CEO Doron Gerstel, the acquisition will help the company navigate in a “cookie-less” environment amid regulations like GDPR and CCPA.
CIQ’s “pub-tech capabilities” that leverage AI and machine learning to optimize content and page-level reader engagement will help Perion address the evolving needs of brands, as the value of content and contextual advertising gains immense importance in a “cookie-less” environment.
The deal is expected to benefit Perion’s advertising and search businesses. Moreover, CIQ is likely to be accretive to the company’s top and bottom lines. The company is estimated to have generated revenues, adjusted EBITDA and GAAP net income of $39 million, $5.9 million and $5.5 million, respectively, in 2019.
Notably, the total consideration includes a maximum of $47.05 million in earn-outs, which is tied to revenues and EBITDA-based metrics. The earn-out would be paid in full, if CIQ generates $158 million in revenues and more than $17 million of EBITDA in aggregate over the next two years.
Perion Network Ltd Price and Consensus
Perion Network Ltd price-consensus-chart | Perion Network Ltd Quote
Perion’s Turnaround Story Continues
Perion’s shares have gained a whopping 187.8% in the past year compared with the industry’s growth of 16.7%. The massive return can be attributed to solid execution, particularly in the search business. The addition of CIQ is expected to enhance Perion’s turnaround story.
Notably, the company recently revised its 2019 adjusted EBITDA guidance, which is now expected to hit at least $30 million, comfortably exceeding the previous guidance of $25-$27 million. The improved guidance reflects higher revenues.
Perion has been benefiting from higher search revenues, primarily owing to the unique searches it provides to Microsoft’s MSFT Bing. This has also helped the company attract new publishers to its platform and expand its total addressable market.
Although the advertising business has been disappointing, estimated higher advertising spending for 2020 bodes well for Perion’s digital branding solution.
Per World Advertising and Research Center (WARC) expectations, cited by Marketing Dive, digital advertising of $336 billion will form more than half of the total global media spending of $656 billion in 2020. The expected 6% growth in 2020 is much better than a 2.5% increase estimated for 2019, driven by Olympics and higher political advertising related to the U.S. presidential elections.
Alphabet GOOGL is expected to dominate the global ad market with a 23% share, trailed by Facebook and Amazon with 13% and 2.5%, respectively.
Perion, based on its portfolio strength, is well poised to benefit from higher global ad spending. The company’s focus on integrating Undertone’s display and video offerings with its social media offerings to create a meaningful and trackable cross-channel advertising platform is a key catalyst.
Moreover, the partnership with Pinterest PINS related to Perion’s social media offering is noteworthy. Further, Undertone’s partnerships with the likes of Alphonson and TVadSync help Perion reach a broader audience.
Perion currently has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
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