Perion Network Ltd. Price & Performance (PERI)

Which is available on our website and has also been filed on Form six k. Hosting today's call is Tal Jacobson, Perion's Chief Executive Officer, and Elad Zubari. Perion's Chief Financial Officer. I would now like to turn the call over to Tal Jacobson, Please go ahead.

Good morning, and thank you for joining us. On the earnings call for the first quarter of twenty twenty five. Every C suite executive needs a platform that powers the right business outcome. CROs have Salesforce. COOs have Monday.com. CTOs have Jira. And now CMOs have Perion, as their go to platform. Perion One gives marketing leaders a platform that delivers what truly matters: better business outcomes at scale. Ethic is often misunderstood. And sometimes it is viewed by investors as complex crowded, and fragmented. Yet the past few decades tell us that ethic companies that are growing through technology can change the world. And more importantly, edtech companies have been using advanced technology to boost value for investors. From DoubleClick and Google to Meta, Amazon, Uplavin and The Trade Desk, companies that are viewed by many investors as tech companies are truly at tech companies at their core. All these businesses mastered how to connect brands with consumers more effectively at scale. They build their foundation in ad technology generating tremendous value for investors. We believe Perion is on the same trajectory. Building Perion I as an outcome driven platform allows us to create a long term value for CMOs and for our shareholders.

Perion One platform is an outcome driven infrastructure. For modern digital advertising. It is aimed to provide measurable outcomes, with channel agnostic, supply neutral, and fully flexible to work with, any agency tech stack. By integrating creative insights and AI powered optimization under one roof, Perion One delivers a unified and intelligent brand experience. From planning to result. The first quarter of twenty twenty five was a strong start to the year, on all four essential pillars. Our business performance, exceeded the result that we initially expected. And we enjoyed an increase in all of our growth engines that continued to outperform the market. This quarter, we advanced our product by creating a new integration partnership with The Trade Desk. Adding UID two point zero to Perion One capabilities. This fosters interoperability across the industry. Enabling more seamless and effective solutions for our clients. Recently, were happy to announce a double digit audience engagement with our first to market AI powered chatbot. Offering brands a new way to create interactive, high impact experience that drives real outcomes. We announced this morning, we advanced our AI capabilities by acquiring GreenBits, a cutting edge AI company that significantly enhanced our technology. This new advanced custom algorithm for leading DSPs and closed gardens allows us to dramatically increase our total addressable market.

And finally, industry recognition. Our innovation and culture continue to be recognized. From campaign finalists at The Drum to winning Ed Age best places to work. All our growth engines continue to show positive momentum. Digital out of home, CTV, and retail media, all outpacing the market growth. We are encouraged by the increase in all of our growth engines, especially the digital out of home, which grew by 80% the consistent growth in our digital out of home activity. Proves that our methodology of buying and integrating companies in this case HiveStack, is working. With that, I'm happy to announce the acquisition of Grimbits, This is one of the most exciting moments in this quarter. A bold step that advances our platform in a meaningful way. GreenBids allows us to embed a custom AI based [indiscernible] Extending our optimization capabilities across walled gardens. These include YouTube, Facebook, and Instagram, alongside leading DSPs platforms such as The Trade Desk, and Google DV360. Grimbit's custom algorithm is focused on reducing waste in advertising budgets and increasing business outcomes. The Green Bids algorithm targets and bypasses inefficiencies in the advertising ecosystem. This is how we win and grow profitability for advertisers. For us, green bids is more than a strategic feat.

It's a significant leap forward. We're thrilled to welcome the world class team of green bids to join us at Perion. They share our vision and bring elite AI and ethic talent to our company. Greenbeads is a trusted platform used by over 80 top global brands. And by applying our scale, can accelerate its reach even further. [indiscernible] didn't just acquire tech. We gained talent and momentum from day one.

Together, we are poised to unlock the next phase of intelligent advertising. Historically, our strength has been in top and mid funnel environments on the open web. Helping brands reach broader audience and drive consideration. With Green Bids, we are expanding into the lower funnel where purchase decisions are made. And we are gaining deeper access to performance budgets across social and video walled garden platforms. This significantly increased our addressable market and creates more ways to deliver value to advertisers. It's always rewarding when strong execution translates into strong numbers. And that's exactly why we're raising our guidance today. It is essential to state that even without the Greenbids acquisition, it would have raised our guidance. As our Q1 results were very encouraging. With green bids, we expect this growth to be even stronger. Based on our Q1 performance, the financial contribution we expect from the Green Beads acquisition, and our continued confidence in execution, we are raising our full year 2025 guidance. This reflects our strengthened position the growing market opportunities ahead. As we grow, we remain committed to what drives long term value. Continued investment in our customers, our people and our technology. Before I hand it over to our CFO, Elatso Berri, I'd like to personally invite you to meet us at one of those upcoming events.

Today, we'll be at the LUMA And Needham events. Next week at the Oppenheimer event, and of course at the Cannes Lions next month. Ready to connect, share more, and show you how Perion is shaping the future of outcomes driven intelligent advertising. Elad, over to you. Thank you, Tal, and thank you all for joining us on the call today.

Four main factors allowed us to exceed our expectations for the first quarter of twenty twenty five. Our performance was hallmarked by solid execution, the market's positive response to our new Perion One platform strategy, our continued operational discipline, and our continued focus on growth on both top and bottom lines. All these factors give us the conviction to increase our 2025 full year financial guidance. In the first quarter, our core growth channels digital out of home and CTV, continued to outperform the market, growing 8031% year over year respectively. These channels now represent 31% of our total revenue. In addition, our retail media vertical grew by 33% year over year, also outperforming the broader market. This reflects the growing alignment between our strategy and the evolving advertisers demand. Moving to our financial results for the quarter. Total revenue for the first quarter was $89,300,000 This is higher than our initial expectations as a result of outperforming in CTV and digital out of home channels and continued growth of our retail media business. Adjusted EBITDA was $1,800,000 higher than our expectations, reflecting a continuous operational control and margin discipline. Our cash position remains strong. With nearly $360,000,000 in net cash.

We remain focused on profitable growth operational leverage and strategic reinvestment where we see long term return. Perion's revenue mix reflects where the market is headed. We remain focused on our core growth channels, including digital out of home and CTV. Which outperformed the first quarter. Digital out of home increased by 80% year over year reaching 19% of the total revenue, up from 6% last year. CTV increased by 31% year over year, representing 12% of revenue compared to 5% last year. Web revenue declined by 28% year over year representing 46% of the total revenue, compared to 37% in the same quarter of last year. We expect web revenue to stabilize on a year over year comparison starting next quarter. In the past three quarters, we have been seeing the search revenue stabilizing at approximately $20,000,000 per quarter. For the first quarter of twenty twenty five, search revenue represented 22% of the total revenue compared to 52% in the same quarter of last year. In the first quarter, contribution excluding traffic acquisition costs margin was 44% compared with 38% in the first quarter of twenty twenty four. This is primarily due to the changes in our product mix that is now centered around more profitable solutions.

Adjusted EBITDA for the first quarter was $1,800,000 representing 5% of contribution ex TAC. During the first quarter of twenty twenty five, and as part of the ongoing implementation of our Perion One strategy, we continue to take structural steps to optimize our cost base, that align with our unified operations. These actions include a reduction in headcount, tighter expense control, and improvements in sales and marketing efficiency. These efforts are directly tied to our broader transformation, creating a more agile and scalable organization designed to drive long term growth and profitability. On a GAAP basis, our first quarter net loss was $8,300,000 or 19¢ per diluted share versus net income of $11,800,000 in the first quarter of twenty twenty four or 24¢ per diluted share. On a non GAAP basis, net income was $5,400,000 or $0.11 per diluted share versus $22,600,000 in the first quarter of twenty twenty four or 44¢ per diluted share. Our ability to remain profitable on a non GAAP basis despite the loss of search revenue is a testament to the operational efficiency of our business. In the first quarter of twenty twenty five, cash used in operating activities was $7,100,000 Adjusted free cash flow was a negative $7,400,000 The first quarter cash from operation was temporarily impacted by $8,000,000 of collections that shifted from March to April.

We remain confident in our ability to return to a high cash flow conversion rate. We expect full year adjusted free cash flow to be closely in line with our adjusted EBITDA guidance. As of March 31, we had on our balance sheet $358,500,000 in cash, cash equivalents, short term bank deposits and marketable securities. We continue to maintain a very strong financial position. Our cash balance provides us the flexibility to execute our inorganic growth strategy, invest in innovation, and return capital to our shareholders. We continue to execute on our capital allocation plan with discipline. On March 10, our Board approved an expansion of the share repurchase program to $125,000,000 reinforcing our long term confidence in Perion's value. Since the beginning of the buyback program until the end of the first quarter of twenty twenty five, we've repurchased almost 6,000,000 shares at a total amount of $53,300,000. In March, Perion adopted an accelerated share repurchase plan, and to date, in the second quarter, we already repurchased additional 3,000,000 shares at a total amount of over $26,000,000 Earlier today, we announced the acquisition of Greenbeads. A cutting edge AI platform focused on custom bidding algorithms across walled garden platforms, including YouTube, Facebook, and Instagram.

This strategic acquisition allows Perion to expand our total addressable market into new lower funnel performance opportunities. It introduced us to brand specific KPI driven optimization capabilities that enhance client retention, It also enriches our Perion One platform with incremental data and intelligence, improving our automation and measurement capabilities over time. The transaction terms include $27,500,000 in cash paid at closing, a 22,500,000.0 cash earn out over two years, tied to performance milestones, and a $15,000,000 retention package in cash and equity structured over three years. The transaction is expected to be accretive to adjusted EBITDA already starting this year, with early synergies contributing profitability. Looking ahead, the contribution to both adjusted EBITDA and revenue is expected to significantly accelerate from 2026 onwards. Driven by incremental synergies across technology integration, go to market expansion, and platform scalability. This is fully aligned with our M and A strategy. Minimizing upfront risk while maximizing strategic value, and synergetic with our core business ensuring seamless integration. Turning to our 2025 guidance. Based on our strong performance in the first quarter, our organic growth expectation along with the onboarding of Greenbeads, we are revising our full year 2025 guidance upwards to reflect our improved outlook and stronger market position.

We are increasing our revenue guidance for the year from a range of 400 to $420,000,000 to a new range of 430 to $450,000,000. Reflecting an increase of 7% at the midpoint. In addition, we are increasing our adjusted EBITDA guidance from a range of 40,000,000 to $42,000,000 to a new range of $44 to $46,000,000 reflecting an increase of 10% at the midpoint. This updated guidance demonstrates our ability to grow efficiently unlock synergies, and continue to deliver meaningful value to our shareholders. To summarize, we started the year strong repositioned ourselves to maintain this momentum going forward. We remain disciplined in execution. Prioritizing value for our customers employees and shareholders. With that, I will now turn it back to the operator for the Q and A session. Thank you.

If you would like to ask a question, we ask that you use the raised hand at the bottom of your Zoom screen, or if you have dialed in, please press 9. Our first question comes from Jason Health stein at Oppenheimer. Please unmute your line and ask your question. Thank you.

Thanks. Hey, everybody. I so I'll I'll do two questions. One, obviously, the guidance has a know, a significant kind of pickup in the business over the next few quarters. I guess, you know, you alluded part of it. You you you addressed the decline in in open web. Or, I guess, in display. So maybe just talk a little bit about why you feel comfortable that display has stabilized And then just kinda maybe some of the other factors you're you're you're thinking about to drive the acceleration in advertising for the rest of the year. And then just can you review the impact of the on on revenue on on the full year guide? Thanks. [indiscernible] Yes. Hi, Jason. Good morning.

So regarding the guidance, we see we raised our guidance with our strong q q one performance, first of all. Our organic growth together with the GreatWiz acquisition, allowed us to increase the guidance We see a healthy pipeline going into the rest of 2025, also contributing from from the web businesses you indicated. And that's why we believe that the web will be stabilized already from the next quarter on a year over year basis. I think that the the entire guidance is taken to consideration both the the grid big numbers, but also the synergy that we already see taking place as part of the acquisition, we we checked some of the synergies as part and we saw good traction on that. So we felt very comfortable to increase already the guidance, the EBITDA guidance by 10%. And on the revenue side, you see additional 7% at the midpoint. Everything is combined. First of all, from our organic growth, in addition to that, in for 2025, we have the green mates and to get to align with the synergy that we see. I think that in in 2026, will actually see even more contributing. Our top line and the bottom line.

Investing more in green bits to see even see we'll we'll be able to see scale and to gain even more market share quite fast. So the real impact you'll receive in the guidance even more will be in 2026.

Yeah.

Let me let me just echo a few of the things that Elad said. One, you know, even though you're you're seeing q one numbers better than we expected, What we're really encouraged is by the fact that our pipeline is better than we expected. So we're actually seeing a healthy pipeline in that touched on that. We also wanted to note that with Greenpits, we've started from a partnership. Working on a few things together and now we're seeing those customers that Greenpins and us work together on back and asking for more. So it synergies from day one. And by our pipeline, their pipeline, and the immediate synergies, that's what makes us feel so comfortable about raising our guidance.

Thank you.

Our next question comes from Andrew Marrott at Raymond James. Please unmute your line and ask your question. Thank you. Andrew, you may now unmute your line and ask your question. Thank you. [indiscernible] Andrew, I'll come back to you shortly. I'm just gonna head Okay. Hi. [indiscernible] Andrew, I'm just gonna come back to you shortly. We seem to have some problem with your audio there. So our next question comes from Eric Martinuzzi at Alix. Street. You may now unmute your line and ask your question. Thank you.

Yeah. I wanted to follow-up on the most your comment about the contribution for the year. I just wanna make sure I've got the impact of green bids as well as the performance of the legacy business [indiscernible] The midpoint of your revenue increased 30,000,000 and the midpoint of your adjusted EBITDA increased 4,000,000 How much of that increase is due to green bid?

So Greenbid is a stand alone despite being young company, they're already profitable. On a I would say on a on a single low digit.

As as I previously said in in we see many synergies from day one in this acquisition. And we are looking at everything combined in together.

And having said that, we are planning to invest even more in Greenwich in 2025. Order to be even scale to to to be able to scale and to get more market share starting from day one with that. And that's why we will leave it fully active enough to this acquisition will see in 2026. They are on stand alone or profitable, but together, we can be we can definitely be run to the market much more, faster. And to be their distribution with all of our global presence.

Was that Since you won't answer my question, what about this? Maybe if I ask it this way, what was in 2024, what was Greenbids revenue and adjusted EBITDA? Yeah. So rabbits is is a very new company. It's accelerated very fast. They are profitable as a alone company, and they're growing fast. The reason why we're not breaking up breaking it down into what they're doing and what we're doing is we we start to see synergies from day one. It's gonna be complete and very hard to break them down into separate businesses. From day one, our sales team is gonna sell them technology and their technology is gonna be integrated. That's why we do not think we need to look at them as as separate entities. I can say that as even as a stand alone, they're growing very fast. And they're very profitable to do this.

And and and, Eric, to your question on 2024, on on a stand alone basis, there were the revenue contribution was I would I would say, the low double digit and the EBITDA contribution are low single digit. But they are as I mentioned, they are growing fast, and together with us, we believe that they will even grow faster.

Okay. Let me shift gears then. The, is there going to be a timeline required to embed Greenbid's technology into Perion one? Is that why we're saying the 2026 better contribution?

No. It's not about the the integration. The integration, it happens immediately. So the integration part is not is not gonna take time. I think what we're trying to do here is while there extremely strong in Europe, we're now taking them to to more American companies, American brands, and we're gonna see the full impact within a few quarters. But even even this year, they have a very healthy pipeline of of new customers and a goods base of existing customers We just think that the acceleration is gonna take a bit more time to get a bigger base of customers in The US.

K. Well, the technology definitely sounds interesting and kind of leading edge. So we'll be looking to see what you can do with the acquisition here. But congratulations on landing it. Thank you very much. Thank you.

Thank you, Rick.

For our next question, I'm going to head back to Andrew Merrick and see if our audio line is clear. Andrew, please unmute your line and ask your question. Thank you.

Hi. Apologies for that earlier. Is now better?

Yep. Loud and clear. Thank you so much. Great. Thank you. Just one for me, please.

So as the the Perion One concept is kinda rolled here and you've added capabilities like UID two point o, and now Greenbix. How is that message to CMOs coming across in terms of familiarity, excitement with the kind of unified offering, and kind of the opportunities that you can see coming out of that. Thank you.

Yeah. Thank you. Thank you for your question. So the way we've actually thought about green bits is as you know, Steven Yap which was, you know, leading all the sales of the Google d v three sixty for seventeen years, left Google to come with the to come to for Perion to push this towards more CMOs. And the process with Greenpits actually start from partnership but then we've we've sent Steven to speak with CMOs. And the the response was so positive. About this is what the market needs. This is what on the Perion one and with the custom algorithm through AI, to reduce waste. So I think you know, CMOs are excited about both Perion One and the custom algorithm through AI and the actual results of Greenbits with customers. And they're actually telling us that a unified solution under one platform makes a lot of sense is they do not wanna continue to handle so many platforms. So all in all, it's it's been a very positive responses both on Perion one and the Green Beds custom algorithm solutions. And we're thinking that now combining both of them is gonna is gonna drive it even faster.

I hope that answered the question. Great to hear. Thank you for the it does. Thank you very much. Appreciate the color.

Thank you.

Our next question comes from Jeff Martin at Roth. Jeff, you may now unmute your line and ask your question. Thank you.

Thanks. Good afternoon and good morning. Wanted to dive into the expanded TAM opportunity is that fairly easy to achieve know, capitalization on that expanded TAM? And if you could elaborate on the details of the strategy to go after that expanded TAM.

Yes. So Green Meats is actually working today on on the walled garden. And it brings us, much more, new capabilities including in in YouTube, in Facebook, in Instagram, We are expanding in it. We are what part of our road map is to expand it very much quickly into even new new platforms. So, overall, it allows it gives us more lower funnel performance capabilities. Those platforms. [indiscernible] when there are uncertainties in the market, would be able to say, we see budget or shifts towards performance. So it actually gives us the right time to do this acquisition. It's opened up. We leave the doors, and the fact that they are really able to bring the brands better ROIs, show them how the they are reducing the waste, on nonmonetized spend, Combining everything together, it's it's definitely it gives us more and more possibilities in offering more in this market. And as Stan mentioned, I think that combining everything together, going with the brand we're working today, showing them those capabilities, We we already started to see, and we believe it will actually be able to see more and more opportunities. Going diving into those to those platform, the walled gardens that we we in the next, I would say, few quarters, we'll see more traction in them.

Yeah. I'll definitely So Absolutely. And I think it's important to note that all the agencies and brands are looking you know, to shift more dollars towards performance based campaigns So while Perion historically was was amazing on the upper funnels of brand awareness, With Green Beads, we're actually getting into an even more interesting segment, which is performance based reducing risks, especially now, you know, with all the uncertainty the markets. The more you can show actual performance, the more traction you can get with customers. And the second thing is you know, at the end of the day, the majority of money goes into the walled garden, not the open web.

Right? So Google, YouTube, Facebook, and and others are holding the bigger parts. So we're actually entering those two parts, the performance space, and the walled gardens. So it's significant. For us, it it is a significant move.

Thank you.

Thank you.

There are no further questions on the line, which concludes today's q and a. Session. So I'll now hand the call back over to Tal Jacobsen and Elad Zubari for closing remarks. Thank you.

Thank you very much for joining us today. We're excited about the future with advanced regard technology, and raising our guidance we think the Perion one platform and strategy is the right way to continue our path Thank you for being part of our journey and supporting us and we hope to see you in next quarter.

Thank you.

Thank you.