Perion(US:PERI)2024-11-06 15:31Financial Data and Key Metrics Changes - For Q3 2024, revenue was $102.2 million, a 45% year-over-year decrease, primarily due to a 76% decrease in search revenue and ongoing weakness in open web video and standard ad formats [24][25] - Adjusted EBITDA was $7.4 million, representing an 83% year-over-year decrease, resulting in a 7% adjusted EBITDA margin and a 16% ex-TAC margin [25][32] - GAAP net income was $2.1 million, down from $32.8 million in Q3 2023, while non-GAAP net income decreased by 72% to $11.9 million [33] - Cash flow from operating activities generated $16.2 million compared to $40.1 million in the same period last year [34] Business Line Data and Key Metrics Changes - Revenue from advertising solutions was $81.3 million, down 18% year-over-year but up 9% sequentially, representing 80% of total revenue [26] - Digital out of home business grew by 63% year-over-year to $19.1 million, representing 23% of advertising solutions revenue [28] - CTV business grew by 90% year-over-year to $9.5 million, representing 12% of advertising solutions revenue [28] - Retail media increased 62% year-over-year to $21 million, representing 26% of advertising solutions revenue [29] - Search advertising revenue was $20.9 million, down 76% year-over-year, representing 20% of total revenue [30] Market Data and Key Metrics Changes - The company noted a decline in search business due to actions taken by Microsoft Bing, with expectations for a normalized revenue run rate in Q4 2024 [22] - The overall advertising market is experiencing shifts, with open web inventory becoming less attractive, impacting traditional display and video advertising [57] Company Strategy and Development Direction - The company is focused on high-growth areas such as digital out of home, retail media, and CTV, positioning itself at the forefront of the market [20] - The leadership team emphasizes innovation and technology as core elements of the company's strategy, aiming to provide holistic solutions for advertisers [19][20] - The company is committed to maintaining a strong net cash position to invest in technology and organic growth, as well as executing its M&A strategy [23] Management's Comments on Operating Environment and Future Outlook - Management expects to see a slight increase in advertising revenue year-over-year starting in Q1 2025, with more significant growth anticipated in Q3 2025 [44] - The company is actively working on improving efficiency and EBITDA margins while maintaining current headcount levels [44] - Management expressed confidence in the company's ability to generate positive cash flow and EBITDA moving forward [34] Other Important Information - The company repurchased 1.6 million shares for a total of $13.5 million during the quarter, continuing its buyback program [26][36] - As of September 30, 2024, net cash was $383.9 million, down from $407.1 million at the end of Q2 2024, primarily due to an earnout settlement related to previous acquisitions [35] Q&A Session Summary Question: Growth in Digital Out of Home - Management noted that digital out of home continues to grow, with programmatic growth outpacing overall growth, and highlighted synergies with retail solutions [39] Question: Dynamics in CTV - Management acknowledged a slight decline in CTV growth due to fewer live events during summer months but expects growth to pick up as live events resume [41] Question: Advertising Revenue Recovery - Management anticipates a return to positive growth in advertising revenue starting in Q1 2025, with further acceleration expected in Q2 and Q3 [44] Question: Microsoft Contract and Revenue Impact - Management confirmed that the Microsoft contract will not be renewed, but there will be residual revenue in 2025 due to a tail clause in the agreement [48][49] Question: Hivestack Integration - Management reported successful integration of dynamic content optimization technology into Hivestack, leading to increased inventory and growth opportunities [53] Question: Search Business Concerns - Management does not foresee similar issues with Yahoo as experienced with Microsoft, emphasizing that search is not a strategic focus for the company [59] Question: Trends in Traditional Display and Video Advertising - Management indicated that open web inventory is becoming less attractive, leading to declines in traditional advertising, but expects improvements in the coming year [57]