Perion Network Ltd
NASDAQ:PERI
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
7.7
32.43
|
| Price Target |
|
We'll email you a reminder when the closing price reaches USD.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
Perion Network Ltd
You don't have any saved screeners yet
Good day and welcome to the Perion First Quarter 2018 Earnings Conference Call. Today's conference is being recorded. The press release detailing the financial results is available on the company's web site at perion.com.
Before we begin, I'd like to read the following Safe Harbor statement. Today's discussion will include forward-looking statements. These statements reflect the company's current views with respect to future events. These forward-looking statements involve known and unknown risks, uncertainties and other factors, including those discussed under the heading Risk Factors and elsewhere in the company's Annual Report on Form 20-F that may cause actual results, performance or achievements to be materially different from any future results, performances or achievements anticipated or implied by these forward-looking statements. The company does not undertake to update any forward-looking statements to reflect future events or circumstances.
As in prior quarters, the results reported today will be analyzed both on a GAAP and non-GAAP basis. While mentioning EBITDA, we will be referring to adjusted EBITDA. We have provided a detailed reconciliation of non-GAAP measures to their comparable GAAP measures in our earnings release, which is available on our web site, and has also been filed on Form 6-K.
Hosting the call today are Doron Gerstel, Perion's Chief Executive Officer; Maoz Sigron, Perion's Chief Financial Officer; Mike Pallad, President of Undertone and Mike Glover, GM of Search division.
I would now like to turn the call over to Doron Gerstel. Please go ahead, sir.
Thank you and good morning. Today, our CFO, Maoz Sigron will discuss the first quarter results, then we will open the call up for your questions. Mike Pallad, President of our Undertone business, and Mike Glover, GM of our Search Division will join us for the Q&A session.
We are here to share our Q1 performance results, but before we get into the details, which are very positive I'd like to start off by providing an update on our turnaround process. Our turnaround consisted of three initiatives; the first initiative was the imperative to significantly reduce costs. On this matter, we are ahead of schedule, and I would like to congratulate the team for working with the implementation of those measures. It has been a year, since we started this initiative, and the expected cost cutting amount in sales and marketing and G&A for 2018 compared to 2017 is more than $14 million.
Let me hope, that we achieve these cost reduction without hindering our investment into technology. Technology is essential for our competitive advantage, and the mood we are building. This brings me to the second and third initiative, which are connected. Achieving [indiscernible] results and leveraging our technology assets. These efforts will further have to differentiate and enhance our offering. This quarter's results demonstrate the strength of both sides of our business.
Our Search business is healthy and profitable. And our agreement with Bing guarantees revenue for years to come. We are currently evolving our search business from its dependency on a small number of large publishers, and extending it to a network of greater number of publishers. Our efforts on our technology in 2017 to rewrite our platform, cleanup technical depth, will allow us to efficiently onboard more publisher in 2018 and beyond. This is the move to diversify the monetization, the user acquisition and to provide users with a product that provides utility.
Consequently, we are focusing our efforts and attention on our advertisement business. Undertone and Make Me Reach, our social media arm. The most significant driver of Perion's growth in both its market potential and distinctive competitive advantages.
I would now like to share my perspective on Undertone before getting into the details for the quarter. It's no secret, that Perion's stock is depressed and I recognize that we have done a less than a stellar job explaining why; why I strongly believe in Perion's ability to create value for our shareholders.
To share with you why, we are so excited about Undertone's prospect, I will now discuss the fundamentals of the Undertone business and where it fits into the digital ecosystem. As many of you know, Undertone is a 16 years old business. It has gone through many transitions over this decade and a half, but its prospect has never been greater. I said it because of its fundamental capability, which is a unique fusion of creating data and technology, that helps solve the marketing program for the world's most sophisticated brands, which has never been more relevant than at this moment.
At its core, Undertone is an ad company. A sector I fully understand, is not exactly lighting up the world these days. But its position and value proposition with ad tech is so unique and valuable, serving as a partner to brand conscious brands, extremely aware and protective of their image, their perception, and the customer experience they create. That's where Undertone proprietary ad tech and our creative capabilities fit in. We combine the technology that brands need and the relationship they cover.
More and more premium brands are hyper focused on forming meaningful relationship with consumer and telling consistent story and quality safe environment. They are seeking ways to take their investment in advertising and extend them into a digital life of their consumer in a unique and authentic way. There is no longer a play for generic commoditized ad units. Today, the biggest challenge the ad tech industry faces, is the silo platforms are getting good targeting results amidst their own universe. That consumer don't live exclusively in one universe. Consumers are more diverse they bounce from Facebook to Google to News apps and are wise enough to know a misleading brand, when they see one.
They are looking for brands that connect with them through consistent, relevant and personal messaging across any channel. Brands today are extremely focused on creating seamless and continuous relationship with their customer, where one message builds on another, and the next builds on the preceding one. This synergistic messaging cannot occur within silo platform, that only agree with a degree of coordination.
Once the consumer leaves the silo platform, brand messaging becomes fragmented, unable to weave together a coherent story. Undertone is a unique ad tech solution that combines insight driven creative, with synchronized holistic platform, driven by proprietary technology, that connects display and social media. Undertone keeps the highest standard of brand safe environment, enhance the publisher sites. Each element is essential and will drive our market penetration and growth.
Delivering on that experience is crucial [ph]. Yet, is the heart of Undertone advantage. We describe it as synchronized digital branding, and it's the key to staying relevant and continue winning in the ad tech world. Undertone synchronized digital branding solves this huge problem, with the work done by our in-house creative team, Pixel Studios, a brand's advertising asset, are transformed into beautiful digital units, optimized for performance over our network of premium [indiscernible] publishers. These units are believers [ph] in a cross screen harmony, perfectly synchronized, so that the right methods reaches the right person at the right time.
Since launching our synchronized digital platform in Q4 of 2017, we have seen an increased appetite in the market for exactly what Undertone is now providing. As a direct result, our average campaign investment has increased, while our client attrition has decreased. Two important factors, led to our 20% year-over-year growth in Q1 of 2018.
I will now turn it over to our CFO, Maoz, who will break down this quarter's financial overview.
Thank you, Doron. In the first quarter of 2018, revenue for Perion totaled $60.9 million comprised of $29.3 million of Advertising revenues and $31.6 million of search and other revenues. Revenue was down 2% from $62 million in the first quarter last year. This decrease was due to search and other revenues declining 16%, offset by 20% increase in advertising revenue. The decline in search and other revenues is mainly due to proactive network cleanup that took place in 2017 and the expected natural churn of search legacy products.
The 20% increase in advertising revenue is nearly due to the higher brand spend by existing customer, during the first quarter of 2018. Search and other revenues represents 62% of revenue for the first quarter of 2018, with advertising contributing 48%. This is compared to the first quarter of 2017, in which search contributed 60.6% and advertising contributed 39%. Customer acquisition costs and Media Buy in the first quarter of 2018 accounted for $31.9 million or 52% of revenue compared to $30.1 million or 48% of revenue in the first quarter of 2017.
In Search, the increase as a percentage of revenue is finally due to churn of our legacy products, while in Advertising the increase is mainly attributed to product mix and due to the effect of the header bidding and Chrome ad blocker.
We reported a net income of $0.1 million or zero cents per diluted share for the first quarter of 2018 compared to a net loss of $2.1 million or $0.03 per diluted share in the first quarter of 2018.
Perion non-GAAP net income in the first quarter of 2018 was $3 million or $0.04 per share, compared to $2.8 million or $0.04 per share in the third quarter of 2017. Adjusted EBITDA in the first quarter of 2018 was $4.3 million compared to $3.5 million in the first quarter of 2017. Cash flow from operating activities for the first quarter of 2018 was $14.6 million compared to $8.2 million for the first quarter last year. The increase in cash generated was primarily the result of better collection during the quarter, as well as improved profitability due to the cost reduction effort.
As of March 31, 2018, we have cash, cash equivalents and short term deposits of $41.7 million compared to $37.5 million as of December 31, 2017.
This concludes my financial overview for the first quarter of 2018. I will now turn the call back to Doron.
Thank you, Maoz. In our press release today, we reiterated our full year guidance of adjusted EBITDA of $28 million to $32 million for 2018.
Before I open the call for questions, I want to say that while we are pleased by our results and our team's performance, we are keeping our foot on the gas pedal. We work in a competitive, fast changing industry. We stay alert to these changes and are constantly adapting to meet them. We believe that undertone offers brand, the optimal fusion of creativity and technology. While creative drives engagement and our technology enables synchronized digital branding, the holy grail for brands that want to connect with the consumer and create meaningful experiences for them.
We believe more and more brands will be seeking our consumer-based solution. In a world of commodified ad tech, we are a welcome alternative. The trends are in our favor and putting us on the path to long term growth. That's what we are here for. Thank you.
Operator?
Thank you.