Market Overview

Perion Reports 27% Year Over Year Topline Growth for the Third Quarter of 2020

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Connected television (CTV) offering drove advertising business to 76% YoY revenue growth

Company out-performs on bottom line despite COVID-19

Perion Network Ltd. (NASDAQ:PERI), a global technology company that delivers its Synchronized Digital Branding solution across the three main pillars of digital advertising - ad search, social media and display / video advertising – announced today its financial results for the third quarter and nine months ended September 30, 2020.

Financial Highlights*

(In millions, except per share data)

 

Three months ended

 

Nine months ended

 

 

September 30,

 

September 30,

 

 

2020

 

2019

 

%

 

2020

 

2019

 

%

 

Advertising revenues

$

37.9

 

$

21.6

 

+76%

 

$

80.3

 

$

61.4

 

+31%

 

Search and other revenues

$

45.5

 

$

44.2

 

+3%

 

$

129.5

 

$

121.8

 

+6%

 

Total Revenues

$

83.4

 

$

65.8

 

+27%

 

$

209.8

 

$

183.2

 

+15%

 

GAAP Net Income

$

2.1

 

$

2.9

 

-26

%

 

$

1.2

 

$

7.0

 

-83

%

 

Non-GAAP Net Income

$

5.9

 

$

5.0

 

+19%

 

$

12.8

 

$

12.8

 

+1%

 

Adjusted EBITDA

$

8.7

 

$

7.6

 

+15%

 

$

17.4

 

$

20.2

 

-14

%

 

Net cash provided by operating activities

$

6.6

 

$

11.1

 

-41

%

 

$

9.2

 

$

33.5

 

-72

%

 

GAAP Diluted Earnings Per Share

$

0.08

 

$

0.11

 

-27

%

 

$

0.04

 

$

0.27

 

-85

%

 

Non-GAAP Diluted Earnings Per Share

$

0.21

 

$

0.18

 

+17%

 

$

0.45

 

$

0.49

 

-8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

* Reconciliation of GAAP to Non-GAAP measures follows.

"Perion is successfully weathering pandemic driven volatility due to our ongoing strategic diversification across the three main pillars of digital advertising, which we implemented before the pandemic to insulate us against jolts in any single advertising channel," commented Doron Gerstel, Perion's CEO. "Our performance is also being bolstered by prudent cost savings initiatives to protect profitability, and disciplined deployment of capital to further fortify our technology moat. Along with renewed traction of the digital advertising market, our efforts position Perion for stronger-than-expected second half financial performance and accretive expansion of our revenue potential in the years ahead."

Gerstel continued, "We saw substantial improvement in ad spend as the quarter progressed towards connected TV advertising, as it becomes critical for marketers looking for a full-funnel solution to maximize reach and build their brand among their total addressable market. The integration of ContentIQ and Pub Ocean is now completed. This powerful technology, which we are describing as the ability to ‘Capture and Convince,' enhances our ability to deploy our unique and propriety technology across all of our business units, bringing a synergistic solution to the market and accretive revenue to Perion. "

"In addition to accelerated revenue growth, we delivered a meaningful improvement in profitability and cash flow in the third quarter which we expect to continue," Gerstel concluded. "As announced earlier in October, we raised our expectations for the second half of 2020 to revenue of $164-$174 million and Adjusted EBITDA of $16-18 million. Perion has the well-diversified strategy and financial model to deliver long-term growth and attractive returns for our stakeholders."

Financial Comparison for the Third Quarter of 2020:

Revenues:

Revenues increased by 27%, from $65.8 million in the third quarter of 2019 to $83.4 million in the third quarter of 2020. This increase was primarily a result of a 76% increase in Advertising revenues driven by a 200% revenue growth in CTV, along with the acquisitions of Content IQ and Pub Ocean. Search and other revenues increased by 3% as a result of growing number of monetizable search queries.

Customer Acquisition Costs and Media Buy ("CAC"):

CAC in the third quarter of 2020 were $49.9 million, or 60% of revenues, as compared to $34.2 million, or 52% of revenues, in the third quarter of 2019. The increase as a percentage of revenues is primarily due to the acquisitions of Content IQ and Pub Ocean.

Net Income:

On a GAAP basis, net income in the third quarter of 2020 was $2.1 million, or 3% of revenues, compared to a net income of $2.9 million, or 4% of revenues, in the third quarter of 2019.

Non-GAAP Net Income:

In the third quarter of 2020, non-GAAP net income was $5.9 million, or 7% of revenues, compared to the $5.0 million, or 8% of revenues, in the third quarter of 2019. A reconciliation of GAAP to non-GAAP net income is included in this press release.

Adjusted EBITDA:

In the third quarter of 2020, Adjusted EBITDA was $8.7 million, or 10% of revenues, compared to $7.6 million, or 12% of revenues, in the third quarter of 2019. A reconciliation of GAAP to Adjusted EBITDA is included in this press release.

Cash and Cash Flow from Operations:

As of September 30, 2020, cash, cash equivalents and short-term bank deposits were $60.0 million. Cash provided from operations in the third quarter of 2020 was $6.6 million, compared to $11.1 million in the third quarter of 2019. The primary reason for the lower cash flow from operations compared to the prior year period is due to working capital needs of approximately $4 million in connection with the acquisitions of CIQ and Pub Ocean.

Short-term Debt, Long-term Debt

As of September 30, 2020, total debt was $22.9 million, comprised of a $10.4 million credit facility and $12.5 million withdrawn from the secured credit line and used as a short-term precautionary measure related to COVID-19, comapred to $16.7 million at December 31, 2019. During the third quarter of 2020 total debt decreased by $2.1 million due to scheduled paydown.

Conference Call:

Perion will host a conference call to discuss the results today, Wednesday, October 28, 2020 at 8:00 a.m. ET. Details are as follows:

  • Conference ID: 3939260
  • Dial-in number from within the United States: 1-800-289-0438
  • Dial-in number from Israel: 1809 212 883
  • Dial-in number (other international): 1-323-794-2423
  • Playback available until Wednesday, November 4, 2020 by calling 1-844-512-2921 (United States) or 1-412-317-6671 (international). Please use PIN code 3939260 for the replay
  • Link to the live webcast accessible at https://www.perion.com/ir-info/

About Perion Network Ltd.

Perion is a global technology company that provides agencies, brands and publishers with innovative solutions that cover the three main pillars of digital advertising. From its data-driven Synchronized Digital Branding platform and high-impact ad formats in the display domain; to its powerful social media platform; to its branded search network, Perion is well-positioned to capitalize on any changes in marketers' allocation of digital advertising spend. More information about Perion can be found at www.perion.com.

Non-GAAP measures

Non-GAAP financial measures consist of GAAP financial measures adjusted to exclude share-based compensation expenses, retention and acquisition related expenses, restructuring costs, loss from discontinued operations, revaluation of acquisition related contingent consideration, impairment of goodwill, amortization and impairment of acquired intangible assets and the related taxes thereon, non-recurring expenses, foreign exchange gains (losses) associated with ASC-842, as well as certain accounting entries under the business combination accounting rules that require us to recognize a legal performance obligation related to revenue arrangements of an acquired entity based on its fair value at the date of acquisition. The Company excludes from its GAAP financial measures the fair value revaluations of both, the convertible bonds and the related derivative instrument, and by doing so, the non-GAAP measures reflect the Company's results as if the convertible bonds were originally issued and denominated in US dollars, which is the Company's functional currency. Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA") is defined as operating income excluding stock-based compensation expenses, depreciation, restructuring costs, acquisition related items consisting of amortization of intangible assets and goodwill and intangible asset impairments, acquisition related expenses, gains and losses recognized on changes in the fair value of contingent consideration arrangements and certain accounting entries under the business combination accounting rules that require us to recognize a legal performance obligation related to revenue arrangements of an acquired entity based on its fair value at the date of acquisition.

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. 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" 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, 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, 2019 filed with the SEC on March 16, 2020. Perion does not assume any obligation to update these forward-looking statements.

Three months ended

Nine months ended

September 30,

September 30,

2020

2019

2020

2019

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

 

Revenues:

Advertising

$

37,891

$

21,552

$

80,298

 

$

61,436

Search and other

 

45,522

 

44,225

 

129,509

 

 

121,757

Total Revenues

 

83,413

 

65,777

 

209,807

 

 

183,193

 

Costs and Expenses:

Cost of revenues

 

5,292

 

6,819

 

15,938

 

 

18,653

Customer acquisition costs and media buy

 

49,878

 

34,170

 

122,817

 

 

94,778

Research and development

 

8,071

 

5,976

 

22,400

 

 

16,448

Selling and marketing

 

9,448

 

8,649

 

27,368

 

 

25,641

General and administrative

 

4,239

 

3,562

 

11,759

 

 

10,039

Depreciation and amortization

 

2,695

 

2,628

 

7,248

 

 

7,304

Total Costs and Expenses

 

79,623

 

61,804

 

207,530

 

 

172,863

 

Income from Operations

 

3,790

 

3,973

 

2,277

 

 

 

10,330

Financial expense, net

 

459

 

419

 

1,192

 

 

2,733

Income before Taxes on income

 

3,331

 

3,554

 

1,085

 

 

7,597

Taxes on income (benefit)

 

1,203

 

680

 

(138

)

 

591

Net Income

$

2,128

$

2,874

$

1,223

 

$

7,006

 

Net Earnings per Share

Basic

$

0.08

$

0.11

$

0.05

 

$

0.27

Diluted

$

0.08

$

0.11

$

0.04

 

$

0.27

 

Weighted average number of shares

Basic

 

26,707,649

 

25,966,097

 

26,600,837

 

 

25,915,134

Diluted

 

28,336,902

 

26,895,407

 

28,318,091

 

 

26,054,203

September 30,

 

December 31,

 

2020

 

2019

 

(Unaudited)

 

(Audited)

 

ASSETS

 

 

 

 

Current Assets:

 

 

 

 

Cash and cash equivalents

$

51,660

 

 

$

38,389

 

 

Restricted cash

 

1,221

 

 

 

1,216

 

 

Short-term bank deposits

 

8,300

 

 

 

23,234

 

 

Accounts receivable, net

 

51,687

 

 

 

49,098

 

 

Prepaid expenses and other current assets

 

3,155

 

 

 

3,170

 

 

Total Current Assets

 

116,023

 

 

 

115,107

 

 

 

 

 

 

Long-Term Assets:

 

 

 

 

Property and equipment, net

 

7,667

 

 

 

10,918

 

 

Operating lease right-of-use assets

 

20,065

 

 

 

22,429

 

 

Goodwill and intangible assets, net

 

178,289

 

 

 

128,444

 

 

Deferred taxes

 

6,297

 

 

 

6,171

 

 

Other assets

 

574

 

 

 

708

 

 

Total Long-Term Assets

 

212,892

 

 

 

168,670

 

 

Total Assets

$

328,915

 

 

$

283,777

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

Current Liabilities:

 

 

 

 

Accounts payable

$

48,031

 

 

$

47,681

 

 

Accrued expenses and other liabilities

 

17,859

 

 

 

18,414

 

 

Short-term operating lease liability

 

3,913

 

 

 

3,667

 

 

Short-term loans and current maturities of long-term loans

 

20,833

 

 

 

8,333

 

 

Deferred revenues

 

4,149

 

 

 

4,188

 

 

Short-term payment obligation related to acquisitions

 

17,458

 

 

 

1,025

 

 

Total Current Liabilities

 

112,243

 

 

 

83,308

 

 

 

 

 

 

Long-Term Liabilities:

 

 

 

 

Long-term loans, net of current maturities

 

2,083

 

 

 

8,333

 

 

Payment obligation related to acquisition

 

19,206

 

 

 

-

 

 

Long-term operating lease liability

 

17,623

 

 

 

20,363

 

 

Other long-term liabilities

 

6,202

 

 

 

6,591

 

 

Total Long-Term Liabilities

 

45,114

 

 

 

35,287

 

 

Total Liabilities

 

157,357

 

 

 

118,595

 

 

 

 

 

 

Shareholders' equity:

 

 

 

 

Ordinary shares

 

219

 

 

 

213

 

 

Additional paid-in capital

 

248,204

 

 

 

243,211

 

 

Treasury shares at cost

 

(1,002

)

 

 

(1,002

)

 

Accumulated other comprehensive gain

 

284

 

 

 

130

 

 

Accumulated deficit

 

(76,147

)

 

 

(77,370

)

 

Total Shareholders' Equity

 

171,558

 

 

 

165,182

 

 

Total Liabilities and Shareholders' Equity

$

328,915

 

 

$

283,777

 

 

 

 

 

 

 

Three months ended

Nine months ended

September 30,

September 30,

2020

 

2019

2020

 

2019

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

 

Cash flows from operating activities:

Net Income

$

2,128

 

$

2,874

 

$

1,223

 

$

7,006

 

Adjustments required to reconcile net income to net

cash provided by operating activities:

Depreciation and amortization

 

2,695

 

 

2,628

 

 

7,248

 

 

7,304

 

Stock based compensation expense

 

972

 

 

678

 

 

2,913

 

 

1,601

 

Foreign currency translation

 

(42

)

 

(103

)

 

(89

)

 

(109

)

Accrued interest, net

 

13

 

 

-

 

 

13

 

 

(203

)

Deferred taxes, net

 

(387

)

 

(363

)

 

(2,339

)

 

(1,223

)

Accrued severance pay, net

 

172

 

 

179

 

 

205

 

 

(39

)

Fair value revaluation - convertible debt

 

-

 

 

-

 

 

-

 

 

600

 

Loss from sale of property and equipment

 

4

 

 

-

 

 

88

 

 

-

 

Net changes in operating assets and liabilities

 

1,037

 

 

5,254

 

 

(23

)

 

18,600

 

Net cash provided by operating activities

$

6,592

 

$

11,147

 

$

9,239

 

$

33,537

 

 

Cash flows from investing activities:

Purchases of property and equipment

 

(274

)

 

(248

)

 

(386

)

 

(589

)

Short-term deposits, net

 

8,572

 

 

(10,550

)

 

14,934

 

 

(12,550

)

Cash paid in connection with acquisitions, net of
cash acquired

 

(4,041

)

 

-

 

 

(20,186

)

 

(1,200

)

Obligation in connection with acquisitions

 

(1,002

)

 

-

 

 

1,347

 

 

-

 

Net cash provided by (used in) investing activities

$

3,255

 

$

(10,798

)

$

(4,291

)

$

(14,339

)

 

Cash flows from financing activities:

Exercise of stock options and restricted share units

 

345

 

 

574

 

 

2,086

 

 

703

 

Payment made in connection with acquisition

 

-

 

 

-

 

 

-

 

 

(1,813

)

Proceeds from short-term loans

 

12,500

 

 

-

 

 

12,500

 

 

-

 

Repayment of convertible debt

 

-

 

 

-

 

 

-

 

 

(15,850

)

Repayment of long-term loans

 

(2,083

)

 

(2,083

)

 

(6,249

)

 

(6,249

)

Net cash provided by (used in) financing activities

$

10,762

 

$

(1,509

)

$

8,337

 

$

(23,209

)

 

Effect of exchange rate changes on cash and cash

equivalents and restricted cash

 

65

 

 

5

 

 

(9

)

 

(97

)

Net increase (decrease) in cash and cash equivalents

and restricted cash

 

20,674

 

 

(1,155

)

 

13,276

 

 

(4,108

)

Cash and cash equivalents and restricted cash at

beginning of period

 

32,207

 

 

37,850

 

 

39,605

 

 

40,803

 

Cash and cash equivalents and restricted cash at end

of period

$

52,881

 

$

36,695

 

$

52,881

 

$

36,695

 

Three months ended

 

Nine months ended

September 30,

 

September 30,

2020

 

2019

 

2020

 

2019

(Unaudited)

 

(Unaudited)

 

GAAP Net Income

$

2,128

 

$

2,874

 

$

1,223

 

$

7,006

 

Share based compensation

 

972

 

 

678

 

 

2,913

 

 

1,601

 

Amortization of acquired intangible assets

 

1,491

 

 

1,139

 

 

3,650

 

 

3,233

 

Retention and other related to M&A related expenses

 

1,292

 

 

339

 

 

5,011

 

 

943

 

Fair value revaluation of convertible debt and related
derivative

 

-

 

 

-

 

 

-

 

 

89

 

Foreign exchange losses associated with ASC-842

 

27

 

 

205

 

 

(52

)

 

653

 

Revaluation of acquisition related contingent
consideration

 

162

 

 

-

 

 

445

 

 

-

 

Taxes on the above items

 

(127

)

 

(219

)

 

(344

)

 

(748

)

Non-GAAP Net Income

$

5,945

 

$

5,016

 

$

12,846

 

$

12,777

 

 
 

Non-GAAP Net Income

$

5,945

 

$

5,016

 

$

12,846

 

$

12,777

 

Taxes on income

 

1,330

 

 

899

 

 

206

 

 

1,339

 

Financial expense, net

 

270

 

 

214

 

 

799

 

 

1,991

 

Depreciation

 

1,204

 

 

1,489

 

 

3,598

 

 

4,071

 

Adjusted EBITDA

$

8,749

 

$

7,618

 

$

17,449

 

$

20,178

 

Non-GAAP diluted earnings per share

$

0.21

 

$

0.18

 

$

0.45

 

$

0.49

 

 

Shares used in computing non-GAAP diluted earnings

per share

 

28,977,861

 

 

27,148,738

 

 

28,864,722

 

 

26,225,689

 

 

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