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.