Perion(PERI) - 2024 Q1 - Quarterly Report

Executive Summary This section provides an overview of Perion's Q4 and full-year 2023 financial performance and strategic initiatives, including key acquisitions Q4 and Full-Year 2023 Performance Overview Perion reported strong Q4 and full-year 2023 results, driven by diversification and technology, achieving significant growth in key financial metrics - Perion's diversification strategy and focus on technology and innovation drove notable growth in Search, CTV, and Retail Media[2] | Metric | Full Year 2023 (in millions) | YoY Growth | Quarter 4 2023 (in millions) | YoY Growth | | :----------------------- | :------------- | :--------- | :------------- | :--------- | | Revenue | $743.2 | +16% | $234.2 | +12% | | GAAP Net Income | $117.4 | +18% | $39.4 | +2% | | Adjusted EBITDA | $169.1 | +28% | $53.9 | +12% | Strategic Initiatives and Acquisitions Perion advanced growth by acquiring Hivestack, expanding its retail media suite, and leveraging strong cash flow for future strategic acquisitions - Acquired Hivestack, a leading full-stack programmatic digital out-of-home (DOOH) company, to expand into the fast-growing DOOH channel and create synergistic opportunities[3] - Transformed Retail Media suite into a pure multi-channel, full consumer journey solution by adding critical touch points across CTV, Audio, Out Of Home, Near-store, and In-Store screens[3] - Strong cash flow from operations of $155 million for the full year 2023 positions the company for additional acquisitions to expand solutions and enhance shareholder value[3] Business Highlights This section details Perion's key business achievements for Q4 and full-year 2023, focusing on growth in Retail Media, CTV, and Search Advertising Fourth Quarter 2023 Business Highlights Q4 2023 saw substantial growth in Retail Media and CTV revenue, a strategic shift from video to display, and strong Search Advertising performance | Metric | Q4 2023 Revenue | YoY Growth | % of Display Advertising Revenue | | :--------------------------- | :-------------- | :--------- | :------------------------------- | | Retail Media Revenue | $20.2M | +196% | 17% (vs 6% last year) | | CTV Revenue | $14.4M | +69% | 12% (vs 7% last year) | | Video Revenue | N/A | -33% | 29% (vs 42% last year) | - Average Daily Searches increased by 37% year-over-year to 30.2 million[4] - The number of Search Advertising publishers increased by 4% year-over-year to 162[4] Full-Year 2023 Business Highlights Full-year 2023 mirrored Q4 trends, with significant Retail Media and CTV growth, reduced Video revenue, and robust Search Advertising expansion | Metric | FY 2023 Revenue | YoY Growth | % of Display Advertising Revenue | | :--------------------------- | :-------------- | :--------- | :------------------------------- | | Retail Media Revenue | $49.7M | +114% | 12% (vs 6% last year) | | CTV Revenue | $33.5M | +56% | 8% (vs 6% last year) |\ | Video Revenue | N/A | -7% | 36% (vs 43% last year) | - Average Daily Searches increased by 57% year-over-year to 29.1 million[7] - The annual average number of Search Advertising publishers increased by 18% year-over-year to 160[7] Financial Performance This section presents a comprehensive analysis of Perion's Q4 and full-year 2023 financial results, covering revenue, costs, profitability, and cash flow Fourth Quarter 2023 Financial Performance Perion's Q4 2023 financial performance showed overall revenue growth from Search, Retail Media, and CTV, with increased profitability and strong operating cash flow Revenue Analysis Q4 2023 total revenue grew 12%, driven by a 33% surge in Search Advertising, with Display Advertising slightly down due to strategic shifts in Video, offset by Retail Media and CTV | Metric | Q4 2023 (in millions) | Q4 2022 (in millions) | YoY Change | | :------------------------- | :-------------------- | :-------------------- | :--------- | | Total Revenue | $234.2 | $209.7 | +12% | | Display Advertising Revenue| $119.8 | $123.8 | -3% | | Search Advertising Revenue | $114.4 | $85.9 | +33% | - Display Advertising revenue accounted for 51% of total revenue, with Retail Media revenue increasing 196% to $20.2 million and CTV revenue increasing 69% to $14.4 million, partially offset by a 33% decrease in Video revenue to $35.2 million due to shifting inventory[13] - Search Advertising revenue accounted for 49% of total revenue, driven by a 37% increase in Average Daily Searches and a 4% increase in the number of publishers[13] Costs and Profitability Q4 2023 saw increased TAC as a percentage of revenue, yet GAAP Net Income, Non-GAAP Net Income, and Adjusted EBITDA all improved, reflecting strong cost management | Metric | Q4 2023 (in millions) | Q4 2022 (in millions) | YoY Change | | :------------------------- | :-------------------- | :-------------------- | :--------- | | Contribution ex-TAC | $90.6 | $87.6 | +3% |\ | GAAP Net Income | $39.4 | $38.7 | +2% |\ | Non-GAAP Net Income | $52.9 | $44.7 | +19% |\ | Adjusted EBITDA | $53.9 | $48.2 | +12% | - Traffic Acquisition Costs (TAC) amounted to $143.6 million, or 61% of revenue, compared with 58% of revenue in Q4 2022, primarily due to product mix[14] - Adjusted EBITDA to Contribution ex-TAC improved to 59% in Q4 2023 from 55% in Q4 2022[8][17] Cash Flow and Net Cash Net cash from operating activities significantly increased in Q4 2023, contributing to a healthy year-end cash position | Metric | Q4 2023 (in millions) | Q4 2022 (in millions) | YoY Change | | :------------------------- | :-------------------- | :-------------------- | :--------- | | Net Cash from Operations | $50.2 | $38.2 | +32% | - Cash and cash equivalents, short-term bank deposits, and marketable securities amounted to $472.7 million as of December 31, 2023, up from $429.6 million as of December 31, 2022[18] Full-Year 2023 Financial Performance Perion delivered robust full-year 2023 financial results with double-digit growth in revenue, GAAP net income, Non-GAAP net income, and Adjusted EBITDA Revenue Analysis Full-year 2023 total revenue grew 16%, primarily from a 23% surge in Search Advertising, with Display Advertising growing due to Retail Media and CTV, despite a strategic Video revenue decrease | Metric | FY 2023 (in millions) | FY 2022 (in millions) | YoY Change | | :------------------------- | :-------------------- | :-------------------- | :--------- | | Total Revenue | $743.2 | $640.3 | +16% | | Display Advertising Revenue| $398.2 | $360.7 | +10% | | Search Advertising Revenue | $344.9 | $279.6 | +23% | - Display Advertising revenue accounted for 54% of total revenue, mainly driven by a 114% increase in Retail Media revenue to $49.7 million and 56% growth in CTV to $33.5 million, partially offset by a 7% decrease in Video revenue to $143.2 million[20] - Search Advertising revenue accounted for 46% of total revenue, primarily due to a 57% increase in Average Daily Searches and an 18% increase in the average annual number of publishers[20] Costs and Profitability Full-year 2023 saw Perion maintain stable media margins while significantly increasing GAAP Net Income, Non-GAAP Net Income, and Adjusted EBITDA | Metric | FY 2023 (in millions) | FY 2022 (in millions) | YoY Change | | :------------------------- | :-------------------- | :-------------------- | :--------- | | Contribution ex-TAC | $310.2 | $267.7 | +16% | | GAAP Net Income | $117.4 | $99.2 | +18% | | Non-GAAP Net Income | $167.4 | $119.8 | +40% | | Adjusted EBITDA | $169.1 | $132.4 | +28% | - Traffic Acquisition Costs (TAC) amounted to $432.9 million, or 58% of revenue, consistent with 58% of revenue in 2022, indicating a flat media margin year-over-year[21] - Adjusted EBITDA to Contribution ex-TAC improved to 55% in 2023 from 49% in 2022[8][22] Cash Flow Net cash from operating activities for full-year 2023 substantially increased, reflecting strong operational cash generation | Metric | FY 2023 (in millions) | FY 2022 (in millions) | YoY Change | | :------------------------- | :-------------------- | :-------------------- | :--------- | | Net Cash from Operations | $155.5 | $122.1 | +27% | 2024 Financial Outlook Perion anticipates strong double-digit revenue and Adjusted EBITDA growth in 2024, driven by strategic technology investments and Hivestack integration - Expects strong double-digit revenue and Adjusted EBITDA growth in the coming years[9] - Increased investments in technology and innovation to enhance advanced multi-channel solutions, combined with the Hivestack acquisition, are expected to drive growth[9] | Metric | 2023 (in millions) | 2024 Guidance (in millions) | YoY Growth % (midpoint) | | :-------------- | :----------------- | :-------------------------- | :---------------------- | | Revenue | $743.2 | $860-$880 | 17% | | Adjusted EBITDA | $169.1 | $178-$182 | 6% | About Perion Network Ltd. Perion Network Ltd. is a global multi-channel advertising technology company providing synergistic solutions across digital advertising channels via its iHUB platform - Perion is a global multi-channel advertising technology company[27] - Delivers synergistic solutions across search advertising, social media, display, video, and CTV advertising[27] - Channels converge at Perion's intelligent HUB (iHUB), connecting demand and supply assets for brands and publishers[27] Non-GAAP Measures This section defines Perion's non-GAAP financial measures and explains their use by management for assessing core operating results and business evaluation Definition of Non-GAAP Measures This section defines Perion's key non-GAAP financial measures, including Contribution ex-TAC, Adjusted EBITDA, and Non-GAAP Net Income/Diluted EPS, adjusted for specific non-operating items - Contribution ex-TAC: Revenue reduced by traffic acquisition costs and media buy, reflecting revenue excluding direct publisher/advertiser pass-throughs[29] - Adjusted EBITDA: Income from operations excluding stock-based compensation, depreciation, amortization of acquired intangibles, retention/acquisition-related expenses, and fair value changes of contingent consideration[30] - Non-GAAP Net Income and Diluted EPS: Net income/EPS excluding stock-based compensation, acquisition-related expenses, revaluation of contingent consideration, amortization of acquired intangibles, related taxes, non-recurring expenses, and certain foreign exchange gains/losses[31] Management's Use of Non-GAAP Measures Management uses non-GAAP measures to assess core operating results, facilitate comparisons, and aid planning, providing investors insight into performance, not as a GAAP substitute - Non-GAAP measures give an indication of performance exclusive of non-cash charges and other items considered outside core operating results[32] - These measures are primary factors management uses in planning, forecasting, and evaluating the business[32] - 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 consolidated financial statements prepared in accordance with GAAP[32] Forward Looking Statements This section contains forward-looking statements about Perion's future business and financial condition, subject to risks and uncertainties that could cause actual results to differ - Statements reflect current views, assumptions, and expectations regarding future events and are subject to risks and uncertainties[33] - Factors that could cause actual results to differ include failure to realize anticipated benefits of acquisitions, integration risks, diversion of resources, potential litigation, intense market changes, loss of key customers, data breaches, and competitive pressures[33] - Perion does not assume any obligation to update these forward-looking statements[33] Contact Information Contact details for Perion Network Ltd.'s Investor Relations - Dudi Musler, VP of Investor Relations, can be reached at +972 (54) 7876785 or dudim@perion.com[34] Consolidated Financial Statements This section includes Perion's Consolidated Statements of Operations, Balance Sheets, and Cash Flows, along with a reconciliation of GAAP to Non-GAAP results Consolidated Statements of Operations The Consolidated Statements of Operations detail Perion's revenues, costs, and net income for Q4 and full-year 2023 and 2022, highlighting Display and Search Advertising | In thousands (except per share data) | Three months ended Dec 31, 2023 | Three months ended Dec 31, 2022 | Year ended Dec 31, 2023 | Year ended Dec 31, 2022 | | :----------------------------------- | :------------------------------ | :------------------------------ | :---------------------- | :---------------------- | | 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 | | Net Income | $39,401 | $38,677 | $117,413 | $99,225 | | Diluted EPS | $0.78 | $0.79 | $2.34 | $2.06 | Condensed Consolidated Balance Sheets The Condensed Consolidated Balance Sheets present Perion's financial position as of December 31, 2023 and 2022, detailing assets, liabilities, and shareholders' equity | In thousands | Dec 31, 2023 | Dec 31, 2022 | | :------------------------------- | :----------- | :----------- | | ASSETS | | | | Total Current Assets | $726,586 | $603,458 | | Total Long-Term Assets | $350,680 | $266,760 | | Total Assets | $1,077,266 | $870,218 | | LIABILITIES AND SHAREHOLDERS' EQUITY | | | | Total Current Liabilities | $340,028 | $234,608 | | Total Long-Term Liabilities | $19,091 | $52,476 | | Total Liabilities | $359,119 | $287,084 | | Total Shareholders' Equity | $718,147 | $583,134 | | Total Liabilities and Shareholders' Equity | $1,077,266 | $870,218 | Condensed Consolidated Statements of Cash Flows The Condensed Consolidated Statements of Cash Flows illustrate Perion's cash generation and usage across operating, investing, and financing activities for Q4 and full-year 2023 and 2022 | In thousands | Three months ended Dec 31, 2023 | Three months ended Dec 31, 2022 | Year ended Dec 31, 2023 | Year ended Dec 31, 2022 | | :------------------------------- | :------------------------------ | :------------------------------ | :---------------------- | :---------------------- | | Net cash provided by operating activities | $50,216 | $38,171 | $155,463 | $122,119 | | Net cash used in investing activities | $(60,702) | $(34,667) | $(133,354) | $(46,816) | | Net cash provided by (used in) financing activities | $0 | $1,392 | $(10,823) | $(3,258) | | Net increase (decrease) in cash and cash equivalents and restricted cash | $(10,232) | $5,124 | $11,427 | $71,986 | Reconciliation of GAAP to Non-GAAP Results This section reconciles Perion's GAAP financial measures to non-GAAP counterparts, detailing adjustments for specific non-operating items | In thousands (except per share data) | Three months ended Dec 31, 2023 | Three months ended Dec 31, 2022 | Year ended Dec 31, 2023 | Year ended Dec 31, 2022 | | :----------------------------------- | :------------------------------ | :------------------------------ | :---------------------- | :---------------------- | | 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 | | GAAP Income from Operations | $39,884 | $41,188 | $116,740 | $109,162 | | Adjusted EBITDA | $53,900 | $48,234 | $169,116 | $132,372 | | GAAP Net Income | $39,401 | $38,677 | $117,413 | $99,225 | | 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 |