Perion(PERI) - 2023 Q2 - Quarterly Report

Executive Summary & Business Highlights Perion's Q1 2023 results exceeded expectations with strong revenue and net income growth, driven by tech innovations and search, raising full-year guidance - Perion's outperformance is attributed to market share gains and increased efficiencies enabled by its innovative technology and the iHUB's centralized bidding system[2][4] - Growth was concentrated in high-tech areas, including video, retail media, the SORT® targeting solution, and search advertising, with search advertising experiencing 49% YoY growth in daily searches, partly due to heightened user interest in Bing following AI integrations like ChatGPT[3] Q1 2023 Key Business Highlights (YoY) | Metric | YoY Growth / Status | | :--- | :--- | | Media Margin | Increased to 45% (from 43%) | | Video Revenue | +26% | | CTV Revenue | +12% | | Retail Media Revenue | +60% | | SORT® Spending | +93% | | Search Ad Publishers | +29% | | Avg. Daily Searches | +49% (to 26.3 million) | Financial Performance Perion achieved 16% revenue growth and 54% GAAP Net Income increase, with Adjusted EBITDA up 38%, raising full-year guidance Q1 2023 Financial Highlights Perion's Q1 2023 revenue grew 16% to $145.2 million, GAAP Net Income surged 54% to $23.8 million, and Adjusted EBITDA rose 38% to $31.3 million Q1 2023 Financial Highlights (in millions, except per share data) | Metric | Q1 2023 | Q1 2022 | % Change | | :--- | :--- | :--- | :--- | | Total Revenue | $145.2 | $125.3 | +16% | | GAAP Net Income | $23.8 | $15.5 | +54% | | Non-GAAP Net Income | $29.9 | $20.7 | +44% | | Adjusted EBITDA | $31.3 | $22.7 | +38% | | GAAP Diluted EPS | $0.48 | $0.33 | +45% | | Non-GAAP Diluted EPS | $0.60 | $0.44 | +36% | | Net Cash from Operations | $17.8 | $23.6 | -25% | Full Year 2023 Outlook Perion raised its full-year 2023 guidance, now expecting revenue of $725-$745 million and Adjusted EBITDA of $155 million+, citing strong business predictability Updated 2023 Guidance (in millions) | Metric | 2022 Actual | Prior 2023 Guidance | Current 2023 Guidance | | :--- | :--- | :--- | :--- | | Revenue | $640.3 | $720 - $740 | $725 - $745 | | Adjusted EBITDA | $132.4 | $149 - $153 | $155+ | - Management expressed confidence in raising the annual guidance due to the sustainability and predictability of the business model[7] Detailed Financial Analysis Revenue growth was balanced across Display and Search, driven by video, SORT®, retail media, and increased daily searches. Media margin improved, but net cash from operations decreased due to collection timing - Display Advertising revenue growth (+16%) was primarily driven by a 26% increase in video revenue, a 12% increase in CTV revenue, a 93% increase in SORT® customer spending, and a 60% increase in Retail media revenue[8] - Search Advertising revenue increased by 15% due to a 29% rise in publishers and a 49% increase in average daily searches, which offset a 22% decrease in RPM[8] - Traffic Acquisition Costs (TAC) as a percentage of revenue improved to 55% from 57% in Q1 2022, primarily due to the proprietary iHUB technology optimizing media buying[9] - Net cash from operating activities was $17.8 million, compared to $23.6 million in Q1 2022, with the decrease affected by a shift of approximately $8 million in customer collections from March to April 2023[12] Consolidated Financial Statements This section presents the unaudited condensed consolidated financial statements for Q1 2023, including Statements of Income, Balance Sheets, and Cash Flows, offering a detailed GAAP-based financial view Condensed Consolidated Statements of Income For Q1 2023, total revenues reached $145.15 million and net income was $23.79 million, significantly increasing from Q1 2022 Statement of Income Summary (in thousands) | Account | Three months ended March 31, 2023 | Three months ended March 31, 2022 | | :--- | :--- | :--- | | Total Revenue | $145,150 | $125,315 | | Total Costs and Expenses | $120,646 | $108,809 | | Income from Operations | $24,504 | $16,506 | | Net Income | $23,785 | $15,466 | | Diluted Earnings per Share | $0.48 | $0.33 | Condensed Consolidated Balance Sheets As of March 31, 2023, total assets were $846.8 million, shareholders' equity increased to $612.3 million, and liquidity remained strong at $436.3 million Balance Sheet Summary (in thousands) | Account | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total Current Assets | $584,174 | $603,458 | | Total Assets | $846,826 | $870,218 | | Total Current Liabilities | $214,299 | $234,608 | | Total Liabilities | $234,501 | $287,084 | | Total Shareholders' Equity | $612,325 | $583,134 | Condensed Consolidated Statements of Cash Flows Q1 2023 net cash from operations was $17.8 million, with $49.4 million used in investing and $11.2 million in financing, resulting in a $42.8 million net decrease in cash Statement of Cash Flows Summary (in thousands) | Cash Flow Activity | Three months ended March 31, 2023 | Three months ended March 31, 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $17,779 | $23,554 | | Net cash used in investing activities | $(49,440) | $(36,052) | | Net cash provided by (used in) financing activities | $(11,193) | $948 | | Net decrease in cash and cash equivalents | $(42,777) | $(11,580) | Supplemental Information This section defines non-GAAP measures like Adjusted EBITDA and Revenue ex-TAC, reconciles GAAP to non-GAAP results, and includes standard forward-looking statement disclaimers regarding business risks Reconciliation of GAAP to Non-GAAP Results Q1 2023 GAAP Net Income of $23.8 million was reconciled to Non-GAAP Net Income of $29.9 million and Adjusted EBITDA of $31.3 million, primarily by adjusting for stock-based compensation and amortization Reconciliation of GAAP Net Income to Non-GAAP Net Income and Adjusted EBITDA (Q1 2023, in thousands) | Reconciliation Item | Q1 2023 Amount | | :--- | :--- | | GAAP Net Income | $23,785 | | Stock-based compensation | $3,402 | | Amortization of acquired intangible assets | $2,963 | | Other adjustments | $(150) | | Non-GAAP Net Income | $29,900 | | Plus: Taxes, Financial Income (net), Depreciation | ... | | Adjusted EBITDA | $31,274 | Non-GAAP Measures and Forward-Looking Statements The company defines non-GAAP measures like Adjusted EBITDA and Revenue ex-TAC for clearer core operating results, and includes a standard safe harbor statement regarding forward-looking statements and associated risks - Non-GAAP measures are used to provide an indication of performance exclusive of non-cash charges and other items considered outside of core operating results[18][19] - The report contains forward-looking statements that are subject to various risks and uncertainties, and Perion does not assume any obligation to update them[20]