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Perion’s Momentum Continues, Delivering 119% Year-Over-Year Net Income Growth in the Fourth Quarter 2022; Diluted EPS of $0.79

2022 revenue increased by 34% year-over-year, net income grew by 156% to $99 million; diluted EPS doubled to $2.06 and adjusted EBITDA increased by 90% to $132 million

Perion names Tal Jacobson as Chief Executive Officer to succeed Doron Gerstel effective August 1st, 2023

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 fourth quarter and full year period ending December 31, 2022.

“Perion operates in a dynamic digital advertising market, and our strong financial performance is a clear indication of our unique capability to identify shifts in ad spending, delivering the right solutions at the right time,” said Doron Gerstel, Perion’s CEO. “A three-year EBITDA CAGR of 101% and revenue CAGR of 40% demonstrates the high level of predictability and sustainability of our business model, underpinned by our diversification and profitability-biased strategy. By connecting all our data assets across all media channels on both sides of the open web into an intelligent central hub (iHUB), we’re able to rapidly analyze changes in consumer behavior and shift our business to where media budgets are trending, while consistently delivering superior return on advertising spend to our clients and increasing our profit margins.”

“I’d like to stress that the consistency of our performance over the past three years is even more impressive when you consider the unprecedented volatility presented by the global pandemic, supply chain distortions, interest rate increases, and the resultant emotional swings among advertisers and brands,” added Mr. Gerstel.

Full-Year 2022 Business Highlights

  • Video revenue increased by 129%, representing 43% of Display Advertising revenue
  • CTV revenue increased by 108% year-over-year
  • 59% of our agencies and brand customers adopted our SORT™ solution, and generated $59.4 million
  • Customer retention rate of 115%
  • Media margin increased to 42% compared with 40% in 2021
  • The number of publishers increased by 27% year-over-year to 265
  • Average daily searches increased by 11% and average RPM increased by 21% year-over-year

Fourth Quarter 2022 Business Highlights

  • Video revenue increased by 33% year-over-year, representing 42% of Display Advertising revenue
  • CTV revenue increased by 42% year-over-year
  • Increased adoption of our holistic Video Platform solution continues to deliver strong results:
    • 72% year-over-year increase in the number of Video Platform publishers
    • 78% year-over-year increase in revenue from existing Video Platform publishers
  • Media margin increased to 42% compared with 41% in the fourth quarter of 2021
  • Average daily searches increased by 26% and average RPM increased by 13% year-over-year

Fourth Quarter 2022 Financial Highlights(1)

In millions,

except per share data

Three months ended

 

Year ended

 

 

December 31,

 

December 31,

 

 

2022

 

2021

 

%

 

2022

 

2021

 

%

 

Display Advertising Revenue

$

123.8

 

$

100.2

 

+24%

 

$

360.7

 

$

265.3

 

+36%

 

Search Advertising Revenue

$

85.9

 

$

57.8

 

+49%

 

$

279.6

 

$

213.2

 

+31%

 

Total Revenue

$

209.7

 

$

158.0

 

+33%

 

$

640.3

 

$

478.5

 

+34%

 

GAAP Net Income

$

38.7

 

$

17.7

 

+119%

 

$

99.2

 

$

38.7

 

+156%

 

Non-GAAP Net Income

$

44.7

 

$

25.3

 

+77%

 

$

119.8

 

$

60.0

 

+100%

 

Adjusted EBITDA

$

48.2

 

$

28.9

 

+67%

 

$

132.4

 

$

69.6

 

+90%

 

Adjusted EBITDA to Revenue ex-TAC

 

55%

 

 

45%

 

 

 

49%

 

 

37%

 

 

Net Cash from Operations

$

38.2

 

$

28.8

 

+32%

 

$

122.1

 

$

71.1

 

+72%

 

GAAP Diluted EPS

$

0.79

 

$

0.44

 

+80%

 

$

2.06

 

$

1.02

 

+102%

 

Non-GAAP Diluted EPS

$

0.90

 

$

0.62

 

+45%

 

$

2.47

 

$

1.57

 

+57%

 

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

 

Outlook for 2023

Mr. Gerstel concluded, “We expect the strong business momentum to carry on in 2023. We will continue to execute our strategy, harnessing our innovative capabilities and our efficiency measures to further drive growth and high profitability.”

In millions

 

 

 

2022

 

 

2023 Guidance

 

YoY

Growth %1

 

Revenue

$640.3

 

 

$720-$740

 

14%1

 

Adjusted EBITDA

$132.4

 

 

$149-$153

 

14%1

 

Adjusted EBITDA to Revenue

21%

 

 

21%1

 

 

 

Adjusted EBITDA to Revenue ex-TAC

49%

 

 

50%1

 

 

 

(1) Calculated at guidance midpoint

 

Financial Comparison for the Full-Year of 2022

Revenue: Revenue increased by 34% to $640.3 million in 2022 from $478.5 million in 2021. Display Advertising revenue increased by 36%, accounting for 56% of revenue, mainly driven by 129% growth in video revenue, 108% growth in CTV revenue and 4% increase in the number of agencies and brand customers. Search Advertising revenue increased by 31%, accounting for 44% of revenue, primarily due to a 21% increase in RPM and 11% increase in average daily searches.

Traffic Acquisition Costs (“TAC”): TAC amounted to $372.6 million, or 58% of revenue, compared with $288.0 million, or 60% of revenue, in 2021. The improvement in media margin was primarily due to a favorable product mix and our ability to connect the supply and demand sides of the marketplace, bringing Perion and its client’s significant efficiencies.

Net Income: On a GAAP basis, net income increased by 156% to $99.2 million in 2022 from $38.7 million in 2021. Non-GAAP net income was $119.8 million, or 19% of revenue, compared with $60.0 million, or 13% of revenue in 2021. A reconciliation of GAAP to non-GAAP net income is included in this press release.

Adjusted EBITDA: Adjusted EBITDA was $132.4 million, or 21% of revenue (and 49% of revenue ex-TAC), compared with $69.6 million, or 15% of revenue (and 37% of revenue ex-TAC) in 2021. A reconciliation of GAAP Net Income to Adjusted EBITDA is included in this press release.

Cash and Cash Flow from Operations: As of December 31, 2022, cash and cash equivalents and short-term bank deposits amounted to $429.6 million. Net cash provided by operating activities in 2022 was $122.1 million, a 72% increase compared with $71.7 million in 2021.

Financial Comparison for the Fourth Quarter of 2022

Revenue: Revenue increased by 33% to $209.7 million in the fourth quarter of 2022 from $158.0 million in the fourth quarter of 2021. Display Advertising revenue increased by 24%, accounting for 59% of total revenue, mainly driven by 33% growth in video revenue, 42% growth in CTV revenue and 11% increase in the number of agencies and brand customers. Search Advertising revenue increased by 49% year-over-year, accounting for 41% of revenue, primarily due to a 13% increase in RPM and a 26% increase in average daily searches.

Traffic Acquisition Costs (“TAC”): TAC amounted to $122 million, or 58% of revenue in the fourth quarter of 2022, compared with $93.3 million, or 59% of revenue, in the fourth quarter of 2021. The improvement in media margin was primarily due to a favorable product mix and our ability to connect the supply and demand sides of the marketplace, bringing Perion and its client’s significant efficiencies .

Net Income: On a GAAP basis, net income increased by 119% to $38.7 million in the fourth quarter of 2022 from $17.7 million in the fourth quarter of 2021. Non-GAAP net income was $44.7 million, or 21% of revenue, compared with $25.3 million, or 16% of revenue, in the fourth quarter of 2021. A reconciliation of GAAP to non-GAAP net income is included in this press release.

Adjusted EBITDA: Adjusted EBITDA was $48.2 million, or 23% of revenue (and 55% of revenue ex-TAC), compared with $28.9 million, or 18% of revenue (and 45% of revenue ex-TAC) in the fourth quarter of 2021. A reconciliation of GAAP Net Income to Adjusted EBITDA is included in this press release.

Cash and Cash Flow from Operations: Net cash provided by operating activities in the fourth quarter of 2022 was $38.2 million, a 32% increase compared with $28.8 million in the fourth quarter of 2021.

Conference Call

Perion will host a conference call to discuss the results at 8:30 a.m. ET today. A replay and a transcript will be available within approximately 24 hours of the live event on Perion’s website.

Call details:

CEO Transition

As disclosed earlier today, Perion has announced that Tal Jacobson will succeed Doron Gerstel as CEO on August 1, 2023. Additional information can be found in a press release at https://www.perion.com/investors/press-releases/

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

 

Year ended

December 31,

 

December 31,

2022

 

2021

 

2022

 

2021

(Unaudited)

 

(Unaudited)

 

(Unaudited)

 

(Audited)

 

Revenue:

Display Advertising

$ 123,757

$ 100,177

$ 360,690

$ 265,323

Search Advertising

85,913

57,798

279,566

213,175

Total Revenue

209,670

157,975

640,256

478,498

 

Costs and Expenses:

Cost of revenue

9,390

7,318

30,404

25,197

Traffic acquisition costs and media buy

122,046

93,342

372,601

288,018

Research and development

9,289

9,245

34,424

35,348

Selling and marketing

16,130

16,799

56,014

53,209

General and administrative

7,886

6,878

23,813

20,933

Depreciation and amortization

3,741

3,598

13,838

9,897

Total Costs and Expenses

168,482

137,180

531,094

432,602

 

Income from Operations

41,188

20,795

109,162

45,896

Financial expense (income), net

(1,976)

465

(4,502)

581

Income before Taxes on income

43,164

20,330

113,664

45,315

Taxes on income

4,487

2,635

14,439

6,609

Net Income

$ 38,677

$ 17,695

$ 99,225

$ 38,706

 

Net Earnings per Share

Basic

$ 0.84

$ 0.48

$ 2.21

$ 1.13

Diluted

$ 0.79

$ 0.44

$ 2.06

$ 1.02

 

Weighted average number of shares

Basic

45,842,833

36,768,367

44,871,149

34,397,134

Diluted

48,872,169

40,349,416

48,071,638

37,829,725

PERION NETWORK LTD. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

In thousands

 

December 31,

 

December 31,

 

2022

 

2021

 

(Unaudited)

 

(Audited)

ASSETS

 

 

 

Current Assets:

 

 

 

Cash and cash equivalents

$ 176,226

 

$ 104,446

 

Restricted cash

1,295

 

1,089

 

Short-term bank deposits

253,400

 

217,200

 

Accounts receivable, net

160,488

 

115,361

 

Prepaid expenses and other current assets

12,049

 

8,075

Total Current Assets

603,458

 

446,171

 

 

 

 

Long-Term Assets:

 

 

 

 

Property and equipment, net

3,611

 

4,211

 

Operating lease right-of-use assets

10,130

 

11,578

 

Goodwill and intangible assets, net

247,191

 

245,965

 

Deferred taxes

5,779

 

5,228

 

Other assets

49

 

79

 

Total Long-Term Assets

266,760

 

267,061

Total Assets

$ 870,218

 

$ 713,232

 

 

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

Current Liabilities:

 

 

 

Accounts payable

$ 155,854

 

$ 107,730

 

Accrued expenses and other liabilities

37,869

 

40,331

 

Short-term operating lease liability

3,900

 

3,615

 

Deferred revenue

2,377

 

3,852

 

Short-term payment obligation related to acquisitions

34,608

 

38,179

Total Current Liabilities

234,608

 

193,707

 

 

 

 

Long-Term Liabilities:

 

 

 

 

Payment obligation related to acquisition

33,113

 

33,250

 

Long-term operating lease liability

7,580

 

9,774

 

Other long-term liabilities

11,783

 

9,541

Total Long-Term Liabilities

52,476

 

52,565

Total Liabilities

287,084

 

246,272

 

 

 

 

Shareholders' equity:

 

 

 

 

Ordinary shares

398

 

375

 

Additional paid-in capital

513,534

 

496,154

 

Treasury shares at cost

(1,002)

 

(1,002)

 

Accumulated other comprehensive loss

(582)

 

(128)

 

Retained earnings (accumulated deficit)

70,786

 

(28,439)

Total Shareholders' Equity

583,134

 

466,960

Total Liabilities and Shareholders' Equity

$ 870,218

 

$ 713,232

PERION NETWORK LTD. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

In thousands

 

Three months ended

 

Year ended

 

December 31,

 

December 31,

 

2022

 

2021

 

2022

 

2021

 

(Unaudited)

 

(Unaudited)

 

(Unaudited)

 

(Audited)

 

Cash flows from operating activities:

Net Income

$ 38,677

$ 17,695

$ 99,225

$ 38,706

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

Depreciation and amortization

3,741

3,598

13,838

9,897

Stock-based compensation expense

3,205

3,252

11,570

6,985

Foreign currency translation

258

(116)

20

(223)

Accrued interest, net

(1,639)

(80)

(3,646)

(300)

Deferred taxes, net

(2,755)

(2,572)

(1,428)

(2,755)

Accrued severance pay, net

222

330

(106)

663

Gain from sale of property and equipment

(2)

132

(12)

121

Net changes in operating assets and liabilities

(3,536)

6,597

2,658

18,012

Net cash provided by operating activities

$ 38,171

$ 28,836

$ 122,119

$ 71,106

 

Cash flows from investing activities:

Purchases of property and equipment, net of sales

(267)

(37)

(1,046)

(532)

Short-term deposits, net

(34,400)

(157,200)

(36,200)

(204,500)

Cash paid in connection with acquisitions, net of cash acquired

-

(35,000)

(9,570)

(38,438)

Net cash used in investing activities

$ (34,667)

$ (192,237)

$ (46,816)

$ (243,470)

 

Cash flows from financing activities:

Issuance of shares in private placement, net

-

169,529

-

230,489

Proceeds from exercise of stock-based compensation

1,392

1,958

5,833

6,898

Payments of contingent consideration

-

-

(9,091)

-

Repayment of long-term loans

-

-

-

(8,333)

Net cash provided by (used in) financing activities

$ 1,392

$ 171,487

$ (3,258)

$ 229,054

 

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

228

16

(59)

(33)

Net increase in cash and cash equivalents and restricted cash

5,124

8,102

71,986

56,657

Cash and cash equivalents and restricted cash at beginning of period

172,397

97,433

105,535

48,878

Cash and cash equivalents and restricted cash at end of period

$ 177,521

$ 105,535

$ 177,521

$ 105,535

PERION NETWORK LTD. AND ITS SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP RESULTS

In thousands (except share and per share data)

Three months ended

 

Year ended

December 31,

 

December 31,

2022

 

2021

 

2022

 

2021

(Unaudited)

 

(Unaudited)

 

GAAP Net Income

$ 38,677

$ 17,695

$ 99,225

$ 38,706

Stock-based compensation

3,205

3,252

11,570

6,985

Amortization of acquired intangible assets

2,988

2,807

11,884

6,875

Retention and other related to M&A related expenses

100

3,547

1,618

9,074

Changes in FV of Earnout contingent consideration

-

(2,246)

(3,816)

(2,246)

Foreign exchange losses (gains) associated with ASC-842

3

169

(821)

(38)

Revaluation of acquisition related contingent consideration

184

286

786

761

Taxes on the above items

(506)

(222)

(651)

(130)

Non-GAAP Net Income

$ 44,651

$ 25,288

$ 119,795

$ 59,987

 
 

Non-GAAP Net Income

$ 44,651

$ 25,288

$ 119,795

$ 59,987

Taxes on income

4,993

2,857

15,090

6,739

Financial income, net

(2,163)

10

(4,467)

(142)

Depreciation

753

791

1,954

3,022

Adjusted EBITDA

$ 48,234

$ 28,946

$ 132,372

$ 69,606

Non-GAAP diluted earnings per share

$ 0.90

$ 0.62

$ 2.47

$ 1.57

 

Shares used in computing non-GAAP diluted earnings per share

49,511,914

40,613,055

48,496,154

38,176,470

 

 

Contacts

Perion Network Ltd.

Dudi Musler, VP of Investor Relations

+972 (54) 7876785

dudim@perion.com

Source: Perion Network Ltd.

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