My initial analysis on Perion [PERI]

I am across Perion [Nasdaq: PERI] recently while doing some analysis on other positions. I’m just sharing my findings, and would like to hear from others if you know anything about this company. This is my initial research, and it has peaked my interest.

Perion is a digital advertising firm based in Israel, they operate in three digital advertising areas; ad search, social media, and display/video/CTV. So that puts them in competition with TTD, ROKU, and MGNI, among others. Perion claims they have an integrated technology moat, which they branded as “Capture and Convince”. The tech is supposed to cookie-less, and generates first-party data and improves revenue per session using AI to optimize ad delivery and content to engage new users for up to six minutes. The company views being cookie-less as a competitive advantage, and cites privacy laws, especially in EU, that are evolving and phasing out the use of cookies. They estimate the potential target market at over $300 Billion, and their partner list includes Mercedes Benz, Starbucks, Target, Visa, BMW, Honda, Nike, HBO, Microsoft and McDonalds among others.

About a month ago Perion completed a secondary offering of $66 million after a pretty stelar Q4 that beat expectations handily, with 51% revenue growth, 56% non-GAAP net income growth, and 41% non-GAAP EPS growth. More than half their revenue comes from display and social media advertising, which grew 159% in Q4, in part driven by two acquisitions in 2020 (Content IQ and Pub Ocean). The company is actually profitable after having paid off much of their debt and improved their balance sheet.

Here are two years of financials, but bear in mind the COVID impact in Q2.

 **FY2019     Q4     Q3     Q2     Q1**  
Rev. Display & Social	    87.9   26.4	  21.6	 21.3	18.6
Rev. Search	           173.6   51.8	  44.2	 42.3	35.3
Total Revs	           261.5   78.3	  65.8	 63.6	53.8
Total Costs/Exp	           243.4   70.6	  61.8	 59.2	51.8
GAAP Net Income	            12.9    5.9	   2.9    2.9	 1.2
Non-GAAP Net Income	    21.6    8.9	   5.0	  4.5	 3.3
Adj. EBITDA	            32.4   12.2    7.6    7.4    5.1
Net Operating Cash	    44.7   11.2	  11.1	  8.4	14.0
GAAP EPS Diluted	    0.49   0.22	  0.11	 0.11	0.05
Non-GAAP EPS                0.83   0.32	  0.18	 0.17	0.13

 **FY2020     Q4     Q3     Q2     Q1**  
Rev. Display & Social      148.7   68.4   37.9   18.7   23.7
Rev. Search 	           179.4   49.9	  45.5   41.7	42.3
Total Revs                 328.1  118.3   83.4   60.3	66.1
Total Costs/Exp	           315.8  108.3   79.6	 62.9   65.1
GAAP Net Income	            10.2    9.0	   2.1   -2.2    1.3
Non-GAAP Net Income         26.6   13.8	   5.9	  1.9    5.0
Adj. EBITDA	            32.8   15.3	   8.7    2.5    6.2
Net Operating Cash	    22.0   12.8	   7.0	  0.2	 2.5
GAAP EPS Diluted            0.36   0.30   0.08	-0.08   0.05
Non-GAAP EPS	            0.91   0.45   0.21	 0.07   0.17

In November, the company announced Microsoft Bing had renewed their contract for an additional four years. In the new contract Perion gets revenue sharing, and the scope was expanded from 6 countries to 34 countries. Perion estimates Microsoft’s revenue contribution in the next four years will be about $200 million/year, $800 million overall, up from an average of $172 million/year.

On the most recent conference call, Perion’s CEO said “average daily searches reached 15.7 million during the fourth quarter and is an increase of 32% year over year, an all-time record. These type in keywords are what online retailers are most interested in because they are consumer who express the highest possible intent to buy. These signals are more valuable than what is really obtainable from any other media channel.”

The company’s guidance for 2021 was rather soft, just 10% top-line growth in Q1, but the CEO openly admitted in the Q&A that it is a very cautious, conservative number to start the year. Revenues across the industry seem to be growing by about 30%, and as COVID vaccines do their job, the travel and hospitality industry should start to rebound, which could be an important factor for Perion, having derived 15% (over $10 million) of its 2019 revenue from travel and hospitality. For FY2021 the company is forecasting $350 million to $370 million in revenues, an increase of 142% at the midpoint from FY2020, increasing to $500 million by 2023. Adjusted EBITDA in FY2021 is expected to be in the range of $35 million to $37 million, an increase of 9.8% from FY2020.

The company is open about the fact they will be doing more acquisitions soon, and expects to have over $140 million in cash at the end of Q1 to put towards acquiring more businesses.

I shall be following this company for a while and may open a position soon, just to keep it on my radar. I hold no position in this stock at this time.


In the above regarding the company’s guidance for 2021, this paragraph reads as follows:

For FY2021 the company is forecasting $350 million to $370 million in revenues, an increase of 142% at the midpoint from FY2020, increasing to $500 million by 2023.

That was a mistake. It should read like this instead:

For FY2021 the company is forecasting $350 million to $370 million in revenues, an increase of 9.7% at the midpoint from FY2020, increasing to $500 million by 2023, an increase of 52.4%.

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I believe PERI was discussed briefly a long time ago, back when MGNI was still the Rubicon Project, and I’m glad this has been brought back to the board for more discussion, given the digital advertising/CTV trending over the last couple years. I have to assume the stock price has gone up considerably recently due to the attention MGNI has received.

I have been watching this closely as well and am close to opening a position. The small market cap and P/S of roughly 2 are very intriguing if they can continue to accelerate growth, and also as mentioned, they are already profitable and have essentially no debt.

One question I have, is what accounted for the drop in revenue from 2017 to 2018, along with stagnant growth from 2018 to 2019? FY2019 and 2020 show good consistent growth, but when you look further back the case isn’t quite as compelling. Compare that to TTD which has shown a high rate of growth YOY every year.

Just for the fun of it, if they did post $500 million in revenue by 2023, if they traded at a p/s of 10 (modest compared to almost all of the stocks discussed here), that would be something like a 600% return from the current market cap.


PERI is indeed interesting at such a low valuation and with magnificent gross margins (93%) and profitable, while operating in a space with major tailwinds. However, their organic growth last quarter (subtracting acquisitions) was only 20% (as stated in their earnings call), and they were reluctant to give the answer when asked. Laura Martin of Needham had to pull it out of them (she has been famously bullish on ROKU and MGNI and is one smart cookie).


First post here, hopefully not breaking the rules

Wanting to have positions on both the buy side and the sell side of ctv, I opened a position on PERI yesterday to go along with existing TTD, ROKU, MGNI.