Q2 2020 Perion Network Ltd Earnings Call
I am encouraged by business indicators and market trends in the early part of the third quarter that provide us with improved visibility.
And increasing confidence that the worst of Corbett 19 impact is behind them. So.
So much so that we have made the decision to provide their revenue and adjusted EBITDA outlook for the second half of the year.
While the first half of the year was stronger there is no doubt this second quarter was challenging the financial impact of cover 19 and stay at home orders had significant impact on consumer behavior and marketing activity with few exceptions across client industries and geography.
In this regard management decision to execute $10 million annual cost savings plan happened to be writing.
I'd like to move to some highly significant business achievements made during the second quarter.
We're very pleased we far a deep lasting and expanding partnership with Microsoft.
The growing number of high quality and Monetizable searches is a fundamental to the strength of this relationship more specifically over the last three months, we enhance our partnership with Microsoft to cover more product business model and additional geography.
We partner with Microsoft MSN to distribute MSN news in 140 countries on the Rev share basis. It is a unique opportunity to provide our publisher high quality content from a premium news outlets in 140 countries.
This will not only drive new revenue stream for online publisher, but with also keep their visitors engage Furthermore, burial will start distributing products to add in 14 countries, which we estimate will brief will both ctr in RPM.
We're also happy to announce that Microsoft improved approved pretty volatile for mobile entities now being tested with the large mobile operator in France as prices Z wireless and remain a hot issuing Europe.
Content died Q integration has gone smoothly Amitiza now completed we're very pleased with the CIA Q performance in the second quarter and our confidence in the business and its leadership is behind our recent acquisition of promotion, which I will get to shortly.
As the digital advertising ecosystem is being reshape without bookies publisher, we'll have to find new ways to measure and track user engagement.
That couldn't be better for Q, because each dramatically increases the value of what they do which is create invaluable first party data for brand through engaging content and contextually relevant advertising keeping that consumer on brand safe sites for up to.
Seven minutes and extra ordinary long time in today 80, HD Consumer award.
We are currently look we're currently working on developing and the infrastructure to enhance the integration of code fuels intend signal into the content Ikea and promotion platform and also integrating undertone hi impacted unit.
This is an example of the cross platform integration and synergy we've seen the parent portfolio that will increasingly occupy our strategic and technology folk.
Moving to our recent acquisition pub auction last month and subsequent to the end of the second quarter. We acquired the innovative publishers technology platform. It's part of our optics strategy were impressed by their recommendation engine caused mission and real time revenue analytics technology costs.
Slide view, which our hand in glove fit with Q.
These are creative and synergistic acquisition offers significant any immediate synergies to see a Q.
With mission and lighting technology.
Q programatic, beating algorithm can better optimize media buying campaign by using higher quality data.
The improved content recommendation engine will open the door to additional audience segment and further optimizing consumers session.
In parallel content tie Q superior on page monetization capabilities are instantly said adjusted.
Two pub ocean yield and growth.
Bob Ocean is expected to generate an incremental $25 million in revenue and $5 million in adjusted EBITDA over the next 12 months.
We were able to make this acquisition from a position of strength.
Without raising additional capital or adding leverage to our balance sheet.
Parion social brand advertising SaaS platform make me reach has expanded its partnership we have asked media group.
Vast will leverage variance platform across its global network to deliver meaningful social campaign for clients and their consumer across their 140 offices around the word.
Marcella fast platform has now completed over 50% growth year over year in HCV.
In our undertone business, a bright spot was video which was up 115% in the first half.
Driven by budget chief from linear TV and other digital format and very high and increasing time spent with digital video largely connected TV.
With that I would like to turn the call over to my old to review the financial results for the second quarter mold. Thank you dawn.
And it covered 19 during the second quarter of 2020, we completed our cross selling plant and experience better than expected business results. Both in our advertising and sales business unit based on current visibility. We believe that there was is behind us, which enable us to provide revenue and adjusted EBITDA.
Outlook for the second half of the year, we believe that the trajectory of the recovery will be gradual and uneven.
At the beginning of the third quarter, we completed the acquisition of promotion further bolstering our advertising business unit. Similarly to CPQ. This acquisition includes a substantial earn outs components.
Back to various financial metrics over the next two years.
Turning to the results during the second quarter of 2020 revenues decreased by 5% from 63.6 million in the second quarter 2019 to 60.3 million composed of 18.7 million from an advertising and 41.7 million from sales.
And other revenue.
This decrease was primarily a result of at 12% decline in advertising revenue, mainly due to cover 90 impact on AD spend across the industry. The negative impact was partially offset by the acquisition of deck you on January 14 Twentytwenty.
Sales and other revenues decreased by 1% as a result of lower paid sales rate you to covert 19 offset by growing number of monetize the us where sales and other revenues represented 69% of the second quarter of 2020 revenues with advertising contributing.
31%.
Customer acquisition cost and media buy in the second quarter of 20 training were 36.8 million all 61% of revenue compared to 33.2 million of 52% of revenues in the second quarter of 2019, they increase as a percentage of revenue.
Q is primarily due to the acquisition of CPQ and the product and product mix.
Net loss for the second quarter of 20 training was 2.2 million or eight cents per diluted share compared to net income of 2.9 million or 11 cents per diluted share in the second quarter of 2019.
There are non-GAAP net income in the second quarter of 2020 was 1.9 million or seven cents per diluted share compared to five to 4.5 million or 17 cents per diluted share in the second quarter of 2019.
Adjusted EBITDA in the second quarter of 20 training was 2.5 million compared to 7.4 million in the second quarter of 2019.
Cash provided from operations in the second quarter of 2020 was 200000 inclusive of approximately 2 million decrease year to working capital needs in connection with acquisitions acute compared to 8.4 million in the second quarter of 2019.
As of June 30, 2020, we had cash cash equivalents and short term bank deposit of 47.9 million compared to 61.6 million as of December 31st 2000 thinking.
Total debt as of June 30, 2020 was 12.5 million compared to 16.7 million as of December 31st 2019.
During the second quarter, we paid 2.2 point 1 million or total debt as part of our payment schedule.
We'll now turn the call back to dawn for closing statement.
While there. Thank you mode, while the pandemic impacted our second quarter results at levels much lower than the overall industry. He says not interrupted the implementation of our strategy to drive additional topline growth and profitability through accretive M&A.
The accretive acquisition of pub Ocean, along with rapid cost containment initiatives and successful integration of content by Q are supporting our growth strategy and enable us to remain highly profitable.
Based on business indicators and improving trends that we are experiencing during the third quarter.
We believe that the award of the coffee 19 disruption is behind them.
And why we believe the trajectory of the recovery will be gradual and uneven we're increasingly confident in our visibility based on this we are providing guidance for the second half of 2020.
We expect to generate revenue between $150 million to $160 million, we expect to generate $11 million to $13 million in adjusted EBITDA.
We are continuing to leverage our diversification strategy to capitalize on increased volatility in the market. We're also building towards a more synergistic period, which will simplify and streamline the effectiveness of our go to market effort and create further shareholder value.
Yes.
I would like to end, our earning call.
By thanking the entire parent team for their resiliency and agility this quarter through very challenging conditions.
Im proud of fight the step up and didn't Miss a beat serving current client than driving new revenue.
Operator, you can now open the call for questions.
Thanks very much.
Ladies and gentlemen, thank you ask an audio questions. Please press star one on top of key Pat.
Also please and should we functions are activated last year.
To reach equipment, so once again, ladies and gentle Please press star one.
Today's first question is coming from Mr., Eric Martinuzzi, calling in from Lake Street. Please go ahead. Your line is open.
Congratulations.
As a result.
A question on year two acquisitions.
Eric and trends.
Action versus Q.
So I understand that or publisher facing technology, just the layer deeper on those.
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Yes, definitely so I think we will describe in brief the use case, but they are they are quite complementary and what what content died Q was very much Miss missing is not only in the industry is constant recommendation.
And contact point a recommendation capability.
Content by Q is very much.
Driving its traffic from Facebook through their buying capability in phase.
And there is a whole other way of doing it through content recommendation.
That was very much on the plans of content Ikea to develop.
And.
Between the decision of building or buying.
We decided to grow in search for companies that has this capability that not just can provide this capability and then I'm very much shortened.
The time to market, but also be accretive.
So together with the buying system of content by Q and they're buying system of promotion that basically cover the entire universe that we have the plan.
Operation.
And they have.
Sites. They also provide countermeasure commendations client sites what percent collaboration revenue.
On a trial sites versus client sites.
Total debt majorities in their own from that.
It's like 80 20.
Expected to percentages that.
Morphing tomorrow.
Total overtime.
So we definitely looking to expand.
Our ability to other side.
And it at this time.
We are doing your we're consolidating the two system.
Continental Q already started with this effort.
And there are two very large side, one of them Newsweek and the other ones bonior than in which we're providing this capability.
They keep in mind.
The debt it tomorrow.
Key.
Use.
Our infrastructure vis-a-vis, namely the content that the CMS content management system, that's the only way for us to ensure.
The five to seven minutes time on what we call. The session time, so the team there the partnership is.
Those two sites are providing us valuable content.
To what we call the Mimi side that we are operating in basically using our optimization capability that has to do with targeting the right the audience.
Absolutely to control the layout.
And the content and provide the right.
The right at Union all in all in order to optimize what we call profit per session and even though it's running on domain, which is outside of our only known.
That makes sense.
Yes. Thank you.
Oh no question.
Search business very strong for six months as the year being up 8%.
Yes.
Just to around 1%.
So.
To be expected that attraction. There certainly is down only single digits relative substantial outperformer, just curious to know where we are on that relationship with Microsoft thing I know you've taught.
In the past about having it renewed.
Around the October timeframe, but can you tell us about the revenue of that relationship.
So I think that that first and foremost.
The the revenue in the six month.
It was very much.
And driven also but new product that we launch I think that we're very happy about strengthening our partnership.
This is the MSN.
The news that we are feeling to 140 countries. If it's the product ahead and.
I must say bidding is very very happy.
With the experiments that we are doing with.
Large operator in France, which gives them present on mobile, which they're looking at the very strategic.
And those efforts are very much in line of their expectation as I mentioned strong trend our partnership and I'm very much expecting that we will we knew the agreement on October as I said in previous calls in.
The steps that the exports the achievements that we're doing in the second quarter is definitely in line.
With this plan.
Thank you further questions and strong quarter with thank you.
Thanks.
Okay.
I can answer now go to Chris spec units coming in from Sidoti and company. Please go ahead. Your line is open Sir.
Good morning, Thanks for taking my questions most quarters.
Okay.
Within a little more.
From.
Okay.
On both the problem.
When markets are coming back on.
About a little bit more color.
Okay.
For very difficult to hear you if I got to thrive you were asking us to elaborate more on the advertising business.
Yes. It was yes is over.
Okay, Yes.
It's much better so I think that definitely from the advertising businesses I mentioned.
Due to the fact that travel and automobile are responsible for good 15% to 20% and of our revenue as you'd expect that while others.
Our.
Maybe increase their spend in some cases in due course, we did not that compensate.
The loss of of these verticals.
And Thats definitely something which.
It happened in the second quarter.
Our indicators right now and you can imagine.
Based on.
The clients that were working with and those are the global thousand.
Customers they already placed their campaign.
For the third quarter.
And that's the that's very much the optimism and the indicators that we're getting from which we see it is quite a change from what happened in the second quarter actually started very much on March already where they were very much on defense.
And so we see them coming back.
We see them spending more money, we see them engage with more ad units.
And it's not just the display. It's also the video it's also the CTV units that.
That we are now offering.
So all known.
I think that this is a very very good very very good indicator for us.
And that gives us visibility for h. too, especially on the on the on the advertising business.
No I appreciate that.
For the core.
Just following.
Although some acquisition as or anything else you can you see what you need to add to strengthen the platform and the offer thanks.
No I think that.
We're very happy with which the technology that they have I think that.
We are now.
Promotion with privately held company.
In pub Ocean was very much limited, which.
All the their ability to scale, even though we're very happy with with their projection in the next 12 months, which is.
We very much stated and the $25 million and approximately 20 $25 million in revenue and $5 million in EBITDA, but I think that.
The capability is their ability to scale is we didn't mention is what we definitely see great opportunity there it require us to.
To inject more working capital will require us to definitely add.
More people more on the debt data science.
But I think that we knew it because.
Our capability is not what they have and where we are very much getting here. The core competence that we didn't see and probably it will take us around two to three years to develop so it was.
At the very wide.
Thanks decision the other element, which I think we put a lot of emphasis on during our diligence is is the company under management capability and the culture fit.
That seems were expecting them to contribute as I mentioned in from their financial from day one.
Okay.
Yes.
In Q4.
Thank you.
Thanks much.
Trace next question is coming from Derek above our bulk coming coming in as private Investor. Please ask your questions. Your line is open.
That's very much and.
Good afternoon teams around team congratulations.
Hi, higher.
Hello.
In the whole bunch behind during very challenging market.
A pause I think you've opened his question burned down at the forefront picking up at the beginning M&A, So and Thats. The first couple of caution for the anymore for done moments in the required.
Curious different will take more conference I'd said demonstrating growth in ore passes by very challenging volume.
Down homes in both Michael Sarcone on diesel.
How did you managed to show the grid resilient imposed by.
Combined.
So I think that.
There are there are two factors.
And the two factors is very much has to do with the different products that we have.
And the different products allows us here.
And especially the new product that we launch.
As you can imagine those are those are coming through.
It is being installed.
And in midstream mature large network of publisher.
And that for instance, if this is Dan missing use it is something which we have the platform.
To rollout easily.
In debts to also from the product ads that we will add all those things that there is time to market is very very very short allows us once it's being.
Caused the gate of being and take us it's a matter of day Gil will able to see a huge scale.
On on our publisher.
In that that I think in great great platform Onboarding technology that we have.
That allows us to take new product off the gates really fast and immediately see the the contribution to the to the revenue.
Thank you Thats helpful.
Ooh talk a little bit more about industry trends since the end trends in particular, starting in mid March one sharper price on health and then through present.
Yes.
Yes, so I think that it's the CPM trend is definitely something that.
Hit us hard.
And it's hard to because.
As you can as you know.
We are selling high impact or reach media had units as the industry, describing and reach media unit by nature.
Our way higher CPM than standard unit.
To some points we're talking about.
15 to $17 CPM versus you can find to $3 of banner.
And.
In this in this situation.
Advertiser.
When they reduced their budget and the first thing is that by reducing the budget. They don't want to reduce the number of impression.
And in order to accommodate both while you reduced budget, but you want to keep the number of impression youre going from a high impact reach media AD units to lower cost at units and the lower and lower CPM and units.
In which put those luxury and even though giving way better return on AD spend a bit on the side.
Talk about from the Advertiser portfolio standpoint, and we definitely need one of the indicator that we looking gap is basically see.
How now large advertisers are putting more more budget towards those high CPM units that we are selling and then we are very much encouraging about but that was mainly other than the fact that were few vertical as I mentioned this travel and.
Automobile that completely stopped their their advertising budget, but the others were very much when I'm, saying on defense they were.
Very much allocate it budgets differently and very much towards low and of units, which.
Something that hurts us.
Great. Thank you appreciate the color there.
In a buffer acquisition with acquisitions on financing promotion.
What what hereon not flight.
One the team were about one team has a chance anagram informing them now are you anticipating additional acquisitions as well.
Yes, so at this point.
We definitely we're we're really even though we are happy after six months. We finished acquisition of contemplate Q January 14.
I must say that even though we are happy the post merger integration efforts is very much the long and we're looking about the second phase of it which is very much integrated with other units in assets that we have.
And that's that's not not trivial I can say that.
At the Frontend is very much the data that we're able.
To extract from from the different units and Thats, what we very much doing so.
I can tell you that we're getting huge intend signals from the 13 million searches that we're delivering.
In everyday to Microsoft Bing.
And this trend by itself is is once you analyze it and analyze it carefully can be a great insight for the consolidate business unit and this is definitely something that were busy right now.
And we able to see a great cliffs, even though we're instilling initial stage of how data that is being inject from core fuel all from undertone is definitely helping a content by Q and vice versa.
So all in all I think that.
Two years from now we are basically can offer advertiser and they said that we're getting prepared for it keyless era.
Through our all in all were developing our own walled garden, which advertiser, we're able to put their ads in complete.
Control.
Safe environment, which they able to control.
Their content they lay out.
They are able to control very much the audience that we're targeting enjoy inside of data that we get from quotes you only known to get way higher return on assets on AD spend and enjoy first party data and not being relying on third party and.
Things, we choose we expect the two years from now will be off the table.
So we are we are building all this in order to serve better our advertiser currently we're serving the around almost 700 to 800 campaigns the year undertone and we're dealing with the fortune 500 customer and we are building together these.
Offering which will deliver in a way need to handle the situation or that is going to be a year or a year from now through the only know that we're acquiring and other asset that we have from other business.
After a little percent cards around and levels of again.
Constrained resilient during a very difficult time.
Spent a long journey to Parion wonderful wonderful the team our how that number achievement for the balance sheet working from a position and strengthening the core market environment. Thank you very much.
Thanks again.
Thank you Sir.
Ladies and gentlemen, once again for any questions or follow up questions. Please press star one several key Pat.
On an English mr., John Noble calling in for parish brothers. Please go ahead eventual cancer.
And thanks again at around and miles for taking my questions on this call.
I just wanted to dig a little better understanding of certain things that used in the press release related to a publication.
And that press release, it stated that the integration of pub ocean and to see Q.
Benefit our new media supply chain.
Could you talk a little about this new media supply chain and how will this benefit brand recognition.
Yes, the new media supply chain has to those content recommendation you need to distinguish between the current.
And the current tactic that.
Content Q is using where they drive their audience, mainly from Facebook through their buying platform.
And then be in what promotion is doing which is driving their audience from content recommendation engine that completed two different channels.
And combine did pitch to into engine that completed two different channels.
In combined did pitch to into a while buying system. This is this is very allows us that.
That the profit per session to to optimize the profit per session that so that's very much what.
What is behind this acquisition.
Okay donor there continues to translate it into.
Just two translated into this into numbers.
Because we are.
Currently publication is profitable and it says.
It's has its own great great business. If you added to the existing business of content per view, that's what youre coming into the $25 million and the $5 million EBITDA because it on any given point of decision you can ask and this is the.
Hi element that we're using in words, the best way to get this audience is it through our Facebook buying system or through the content recommendation.
And that's that's a very very sophisticated but very essential type of technology as they said that can allow us to reduced substantially their cost of acquiring Gordon.
I appreciate that additional color on that.
A lot of my questions have been addressed but I just have one further question.
If you could actually provide us with an update on your collaboration with checkpoints zone, along and your cold fuel division debt.
Yes definitely so.
The zone alarm and check point that was in our presentation is only one example out of the thousand exempt a thousand.
Partnership that we have.
It is very much showing the value that we're able to bring to this.
The these enterprise because at this point nobody is very much pain for extensions in the only way for you to monetize.
Your efforts and this indicates the checkpoint acquisition of zone around.
Very much through the effect that you are getting the Rev share from a from searches that going through us and we are very much optimizing the zone alone search results page in order for them to get the most Rev share.
And from any key words that their user is typing. So that's that very much it is going very well.
I think that the best way for us than I think that boosted.
It's something that we need to address in the next call. It what we called the lifetime value of those users lifetime value is is the time that from their download and start basically using the extension in start generating search keywords Telus.
They removed extension that that's in a very important CPI.
That we are using to rank the extension and its revenue and EBITDA contribution.
In I can see you mentioned the zonal arm is very much up because they providing a true value to the user in the lifetime value strong in one installation is bringing.
A lot of revenue a lot of searches that translated into a rev share for both companies for us than for chip.
What was the article that you were asking other than standpoint.
Oh I just wanted to get an update on how that was going as far as that collaboration.
Yes, so net debt.
Well, they improving very much there extension.
And they opted the user we definitely enjoyed because it means that the user active they adding new users and their existing users are staying longer because they providing more value more features.
Into into their installation.
Okay. That's good to hear and thanks again for additional information on that thank you.
Thank you.
Thanks, a lot Sir.
Ladies and gentlemen, once again, if you many questions or how questions. Please press star one a couple of keypad at this time.
Hey, we do not appear to have any further questions. At this time I try to call back over to historic yourself for any additional or closing remarks.
Yes.
I would like to thank you again for joining our call. It's definitely no towards a challenging quarter and we're very happy here management and teams that were looking at the second half and have more visibility enable to share our optimism I hope you guys are all okay.
And looking forward the talking will fuel and in the coming days. Thanks, so much for joining nearby.
Thank you much Sir ladies and gentlemen, I will conclude todays conference, we take machine attachments connect everyday.
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Okay.