NEW YORK & TEL AVIV - Perion Network (LON:NETW) (NASDAQ:PERI) Ltd. (NASDAQ & TASE: PERI), a global technology company specializing in digital advertising, has revised its financial guidance for the second quarter and the full year of 2024. This adjustment comes after Microsoft (NASDAQ:MSFT) Bing's decision to remove several publishers from its search distribution marketplace, a move that has also affected other partners in the network.
According to the updated projections, Perion anticipates Q2 revenue to be between $106 and $108 million, with adjusted EBITDA expected to range from $6.5 to $7.5 million. For the full year, the company estimates revenue to fall between $490 and $510 million, with adjusted EBITDA projected at $48 to $52 million.
The changes implemented by Microsoft Bing earlier in the year, which have now culminated in the exclusion of certain publishers, are set to reduce Perion's search revenue to less than 5% of the company's total revenue in the latter half of 2024. Perion's Chief Executive Officer, Tal Jacobson, expressed disappointment over these developments but reaffirmed the company's commitment to expanding its AI-driven advertising solutions and diversifying its growth engines.
Despite the setback, Perion is actively pursuing expansion in various high-growth sectors, including Connected TV (CTV), Retail Media, and programmatic Digital Out-of-Home (DOOH) advertising. Moreover, management is leveraging Perion's robust balance sheet to invest in technology, acquire complementary solutions, and execute a $75 million stock buyback program which has already commenced.
The company also acknowledged a recent decline in revenue from standard video and display formats, attributing it to market conditions and a transition to premium formats that promise higher returns on investment for advertisers. Although revenue from these premium formats has increased, it has not been sufficient to offset the decrease resulting from the shift.
Perion's financial outlook is based on non-GAAP measures, such as contribution ex-TAC and adjusted EBITDA, which exclude certain expenses and are commonly used in the industry to provide a clearer picture of a company's operating performance.
In other recent news, Perion Network Ltd. navigated through Q1 challenges, posting a 9% increase in revenue to $157.8 million despite changes in Microsoft Bing's advertising pricing causing a decline in search advertising activity. The company's diversified growth engines, including retail media solutions, CTV advertising, and programmatic digital out-of-home advertising, have demonstrated significant growth, offsetting declines elsewhere. However, adjusted EBITDA and GAAP net income saw considerable declines.
Perion's search activity grew by 26% year-over-year in Q1 2024. Other growth engines such as retail media, CTV, and digital out-of-home advertising showed significant growth, with retail media up by 134%, CTV by 108%, and digital out-of-home by 25%. The company's recent acquisition of HiveStack has been vital to its success in these areas.
Perion anticipates a decline in revenue in the next quarter due to changes in Microsoft Bing's pricing strategies but remains confident in its long-term prospects. The company's focus on creating an advertiser-centric universe with technologies that power brand presence across the consumer journey underpins this confidence. The company also plans to initiate a $75 million share buyback plan and is actively seeking M&A opportunities.
InvestingPro Insights
As Perion Network Ltd. (NASDAQ & TASE: PERI) navigates the challenges posed by Microsoft Bing's decision and shifts in its advertising formats, the company's financial resilience and strategic planning come into focus. With a market capitalization of $599.31 million, Perion's valuation stands out with a price-to-earnings (P/E) ratio of 5.58, which further adjusts to 4.94 when considering the last twelve months as of Q1 2024. This indicates an attractive valuation for investors, especially when considering the strong revenue growth of 14.5% during the same period.
An InvestingPro Tip that aligns with Perion's current situation is the company's ability to hold more cash than debt on its balance sheet, which suggests a solid financial position to withstand market fluctuations and invest in growth opportunities. Additionally, analysts have revised their earnings upwards for the upcoming period, indicating potential confidence in the company's ability to recover and capitalize on its diversified advertising strategies.
Despite the recent price decline, with the stock having taken a significant hit over the last six months, Perion's fundamental strength is underscored by a strong free cash flow yield as per another InvestingPro Tip, which could signal a buying opportunity for value investors. Moreover, with a robust balance sheet and liquid assets exceeding short-term obligations, Perion is well-equipped to continue its investment in AI-driven advertising solutions and explore high-growth sectors like Connected TV and Retail Media.
For those interested in a deeper analysis, there are 12 additional InvestingPro Tips available at https://www.investing.com/pro/PERI. These tips provide further insights into Perion's financial health and market potential. To access these valuable tips and metrics, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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