Q4 2020 Perion Network Ltd Earnings Call
Welcome to the parallel network fourth quarter and full year 'twenty and 'twenty earnings Conference call. Today's conference is being recorded and the press release detailing the financial results is available on the company's website at Perry of them Dotcom.
Before we begin I'd like to read the following safe Harbor statement.
Today's discussion includes 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 all.
And the company's annual report on form 20-F that may cause actual results performance or achievements to be materially different and any future results performance or achievements anticipated or implied by these forward looking statements the.
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, well and then mentioning EBITDA, we will be referring to adjusted EBITDA. We have provided a detailed reconciliation of non-GAAP measures to their comparable GAAP measures and our earnings release, which is available on our website and has also been filed on form 6K.
Hosting the call today are Doron Gerstel, <unk>, Chief Executive Officer, and mouse the grandparents Chief Financial Officer, I would now like to turn the call over to Doron Gerstel. Please go ahead.
Thank you and good morning, everyone 'twenty and 'twenty was the great year for Paragon and so many weeks, we exceeded our revised guidance for both revenue and adjusted EBITDA and despite the Covid.
2000, Twenty's revenue were 25% higher than 2019.
More than any single SKU for 'twenty and 'twenty results demonstrate the huge momentum behind the company, we achieved record breaking quarter revenue of $118 $3 million, representing 51% increase from Q4 2019.
And the highest quarter adjusted EBITDA of $15 $3 million in the last six years.
So let me capital police position, we Blustered and deleverage our balance sheet, we completed the successful and oversubscribed follow on offering of $61 million three weeks ago positioning <unk> to continue to capitalize on the Gulf of opportunities in front of us.
So all of the numbers execution of the success and the powerful balance sheet. That's the toy sector headline here and we accomplished all of this in the face of the global pandemic market by unparalleled volatility disruption and change of gross the evolving did you tell the media industry and.
The ecosystem.
Let me further point out all of its strong growth numbers are in the face of a sudden decline of travel and hospitality industry, which accounted for the 15% or more than $10 million of our 2019 revenue.
What I was just share is a testimony to the last and probably the most critical the reason for our fourth quarter results and then a lot of performance all of our incredible team across all of our business units.
And then the kit in the second quarter the quickly adjusted to the new reality working with collaboration and excellent the agility and all of them work from home and all of the work from their heart you have my thanks, and the thanks of all our shareholders.
I attribute our success and 'twenty 'twenty, two and three critical trend that would be per round growth catalyst in 'twenty and 'twenty, one and beyond.
And number one is the struggle for attention brands increasingly recognize the need of our high impact AD units to increase their brand equity with creativity and Smiths through the command attention across screens or ads are on the Ignorable, which is why.
And when delivered by our AI engine their truck fortune five hundreds of enterprises like Mercedes constantly deliver higher return on AD spend and the engagement metrics. The conventional standard four months in fact, our ability to bring our clients this attention grabbing advertising and.
Interactive CTV is equal.
Our intelligent high impact AD and the technology behind it is enabled us to Decommodify digital advertising with not the stable results.
Three of the number two is the struggle of publishers to generate revenue in 'twenty and 'twenty publishers continued to face growing monetization challenges and this will continue our rapidly growing content monetization engine brought the brands and publisher of unique ability to engage user four minutes versus the second of.
Commodity fight programmatic display standard advertising. This platform is working so well for owned and operated sites, which brought the first theory publishers, such as Newsweek interpret and all the magazine and the blend of Air group of clients and it's just the beginning is the growing number of publisher of weekend.
Of course, we are our content monetization platform allow us to establish our own strategically controlled walled garden. This is an efficient way and scalable way to generate the first party data and drive revenue in the cookie less worried.
So I and number of three everyone's 13th the era of COVID-19, and accelerated the growing trend of shopping online and it's obvious but theres the reputation and the number of consumer who researched before buying significantly increased the number of searches.
Purion average daily searches reached $15 7 million during the fourth quarter and is an increase of 32% year over year and all time record.
These type of in keywords are what online retailers are most interested in because they are consumer who express the highest possible intent to buy.
The signals are more valuable than what is obtainable from any other media channel.
This growing number of searches compensated for the short term decline and RPM the language search advertising business to provide steady income with healthy margins.
The part of the good news the behind the Micros of being renewal announcement is this the extension for additional four year wasn't just the continuation and we added geography and the new collaborative features it's even more favorable terms and the renewal is the result of the strong and healthy partnership we have cultivated.
And with Microsoft advertising over the last 10 years.
The continuing collaboration between our companies willing and able to further grow its network of publishers offering lucrative search technology solution and sophisticated the experience for monetizing the digital property.
We estimate that the revenue contribution and the next four years under the New agreement, we think will be $800 million.
The macro context behind these trends is the massive shift in behavior as consumer spending and increasing the amount of time online, including but not limited to shopping journey.
Turning to digital sources for sports and entertainment and youth consumption as well as the new platform like CTV.
This was before the pandemic, but it has dramatically accelerated the consumer of social distancing and spending more time at home.
Advertiser are responding to this monitoring consumer behavior and adjusting the digital advertising budget allocation based on shifts in which platform are winning the war for attention. As an example, just recently pinterest and reporting 76% growth and revenue of the long peer.
And where it is the point and at least.
Barry on the east perfectly poised to capitalize on any AD budget shift between the three main pillars of digital advertising search social display and video.
Our diversification strategy, let's just let the people where the growth is.
Whether it's pinterest or Facebook or being at search CTV or whatever is next.
Stepping back for just the moment, it's now being over three years since my first earnings call experience CEO I've been consistent about our three phase of this transformation strategy to establish Spiro and has the unique player in the digital media ecosystem.
And I I quickly review the plan not not so much to pet the ourself on the back but because of our ability to carefully stick to what we said should give you confidence in our ability to realize the aggressive goals, we have set for the future.
You know the first phase, we had strengthened our balance sheet and put in place the sustainable capital structure. We've done that we've increased our net cash position from minus $41 million. When they joined April 2017 to plus $52 million at the end of the fourth quarter 'twenty Duane.
Growth and net cash is the result of our endless efforts during the last three years to leverage our expensive well draw of top line in the fourth quarter of 'twenty and 'twenty, we decreased SG&A expenses from 80% from revenue and the last year.
The <unk> 18 per cent for revenue and last year of 213% in 'twenty and 'twenty.
On top of the last month, we completed the follow on offering which was both upsized and oversubscribed generating net proceeds of more than $61 million. These further solidified our balance sheet and provides optionality to capitalize on the growth opportunity.
And in front of US we've demonstrated throughout the acquisition of both content and thank you and pub ocean, our ability to develop a unique acquisition model and more.
Total debt assures the long term engagement with the leadership team of the acquired the company and most importantly, and accretive transaction, which eats the majority payout is based on the air and up when meeting business goal with all the 20 to 30 per cent paying upfront.
And the second phase, we've increased our investment and research and development for $23 million and 2000 $19 million to $31 million in 'twenty.
2000, and twin the ability to personalize our AD units on the fly.
And I think and interactive layer to CTV advertising developing our own content management system or building a deviation platform for a publisher or some of the example of how we are widening our technology moat.
We are now deep in in the third phase of our strategy financial Excellence, we've laid the foundation for sustainable and profitable revenue growth in 'twenty 'twenty, one and beyond.
We are beyond the highly confident in our ability to deliver.
With that I'd like to turn the call over to modes to review the financial results for the fourth quarter and full year mode.
You go on there.
And the strong financial performance, the only 2020 and composite and and and volatile year for did you did at the.
And of that the industry is a testament to all of the disciplined financial management and before dealing and out there the onset of the pandemic, we expect it to build upon these strong results and the systems, we developed the device predictable and profitable growth in 'twenty and 'twenty, one and beyond and the successful.
Follow on offering we completed the only generally 'twenty 'twenty, one significantly extending our balance sheet and supports the funding of potential growth opportunities and the future the earnings.
Turning to the results during the fourth quarter of 'twenty and 'twenty revenues for Purion total 108, and 108 and one other.
The $18 3 million and increase of 51 per cent for 78 points of $8 million in the fourth quarter of last year the.
These revenues are composed of $68 4 million from display and social advertising and they play.
The 58% of spending the 24th quarter revenue with advertising and other revenues contributing $49 9 million and represent 42%. This increase was primarily attributable due of 159% increase and display and associated and what doesn't get revenue primarily.
And the resulting from the acceleration of other connected television advertising both of them and the contribution of all of our content monetization offerings.
This exercise and get an idea of revenue decreased by 4% and the result of lower up and.
Partially offset by iron and none of those daily sales queries, we delivered the Microsoft and others during the fourth quarter of the Nobel of sales gift improving and achieved the highest level of the average sales per day.
The renewals of contracts, it's Michael So think for additional four years will continue to help us to increase the activity with existing and new partnerships.
Customer acquisition costs, and media buy and the full quarter of 'twenty and 'twenty, whereas 774.8 million of 63 per cent of revenue compared to 41 points of 1 million or 53% of revenue in the fourth quarter of 2019.
The increase is the percentage of revenue is primarily due to the acquisition of content. They couldn't stop of ocean, which carry higher customer acquisition cost of the product mix change as well as lower the opt ins and search advertising, while total revenue increased significantly dealing and the folks out there of 'twenty and 'twenty compared to the.
So quality of 2019, GAAP SG&A total 15.8 million rollout or the percent of revenue compared to floating point and 114.1 million Oh 80 per cent of revenue during the fourth quarter of 2019.
Good day, and net income for the fourth quarter of 'twenty, 'twenty, one 9 million or whatever the sense that they looked at jail compared to $5 9 million or 22 centers. They looked at shale in the fourth quarter of spin and 19 non-GAAP net income in the fourth quarter of 'twenty 'twenty or stay at the endpoint the 8 million all four.
The five cents per diluted share compared to $8 9 million or the if you do center of diluted share and the fourth quarter of 2019.
Adjusted EBITDA increased to $15 3 million and the full quarter of 'twenty, 'twenty, four and $12 2 million and the full quarter of 2019.
Net cash provided by operating activities and the fourth quarter was $12 8 million compared to 11 point, maybe on the last year as of December 31st and then it Wendy we had cash cash equivalents and short term bank deposits of $60 4 million compared to 61 6 million and as of December the faster.
<unk> thousand 19 as of the.
Similar to the past 2020 total debt was $8 3 million downfall, and $22 9 million as of September 32020, and $16 7 million and as of December 31st 2019.
The only the full quarter of 'twenty and 'twenty. The company wrote down $12 5 million the wrong during the third part of 'twenty and 'twenty out of it secured credit line and the net scheduled paydown of two points 1 million of its credit facilities the balance.
Turning to our 'twenty and 'twenty full year result.
Total revenue for 'twenty, and 'twenty was 328 1 million compared to $261 5 million in 2019, representing an increase of 25% sales advertising and other revenue represented 65 per cent of revenue for the full year, 'twenty and 'twenty, we display and <unk>.
Social advertising contributing 45 per cent compared to the full year 2019, when sales advertising and other revenue contributed 66 per cent and display and social advertising contributed 34 per cent.
This increase was driven by 69% growth and display and social advertising, primarily resulting from the acceleration of our connected television advertising offering and the contribution of other contemplated possession of all thing, which was acquired in 'twenty and 'twenty offset by the overall of COVID-19 impact on air.
And of course, the industry during the second quarter of 'twenty and 'twenty. This impressive growth was achieved despite the 10 million total reduction and travel expense with us due to the COVID-19 pandemic compared to 2019.
That's the advertising and other revenue increased by three per cent, you do Io and unveil of daily sales without the alpha.
And the offset by lower op and impacted by COVID-19.
Customer acquisition costs and media buy for 'twenty, and 'twenty, 197, 6 million or 60 per cent of revenue compared to one of $35 9 million or of 52% of revenue in 2019, the increase as the percentage of revenue is primarily due to the acquisition of content and take you into the ocean.
And Jerry I of customer acquisition cost overall product mix change as well as low of rpms and sales advertising when it get basis.
Full year net income was $10 2 million or 36.
Center of the OTA channel compared to $12 9 million of 49 centers diluted share in 2019, non-GAAP net income for the full year 'twenty and 'twenty was $26 6 million, Oh, and 91 cents per diluted share compared to $21 6 million or 83 cents per diluted share in 2019.
And.
The only 'twenty 'twenty adjusted EBITDA was 32.8 million or 10 per cent of revenue compared to $32 4 million or 12% of revenue in 2019 net cash by operating activities for the full year 'twenty and 'twenty was good and 2 million compared to $44 7 million in 2000 and.
19 of the primarily the reason for the decrease compared to prior to the flywheel is mainly due to the one and one time involvement and your working capital during 2019, and approximately 10 million the all our working capital needs and to any to any in connection with the acquisition of the AQR and pebbles and.
This concludes my financial overview for the fourth quarter and the full year 'twenty and 'twenty I will now turn the.
The call back to the Owens for closing statements.
Most of despite the global pandemic and all of the associated and unexpected challenges 'twenty 'twenty one of the monumental year for parents.
We successfully integrated two of accretive acquisition and achieved greater than expected synergies.
We experienced strong demand in the fast growing CTV and video market for interactive CTV AD units, we expanded our technological moat and farther diversify the offering.
And we locked in and expanded our strategic partnership with Microsoft being for additional four years.
We entered 2021 on and exceptionally strong footing debt was further fortified by the closing of the Upsized and oversubscribed offering the generating more than $61 million and gross proceeds.
Looking forward, we remain laser focused on achieving sustainable and highly profitable double digit annual revenue growth targeting $500 million in annual sales by 'twenty and 'twenty three.
Our technology moat, establishing convinced by the R&D Center of excellence enable all of our business units to first captured the attention imagination and the interest of users and then convince them with a proprietary combination and units content and layout that are optimized and real time.
We're taking an important step by launching our new capture and convinced the brand narrative preparing them for the first time, we're establishing powerful connective tissue that makes all of our business units operating are there and the same narrative.
The market for it and the marketing power of capture and convince bring us the perfect. The recipe of consistency and agility. It is the combination as delivered by our current business unit and potential synergistic acquisition that gives me the confidence to hold out and half the $1 billion is our Rev.
The new North Star.
For 'twenty and 'twenty, one we are targeting revenue of $350 million to 300 and system.
For the <unk> 'twenty 'twenty, one we are targeting revenue in $350 million to $370 million range and.
And and working to achieve adjusted EBITDA in the range of $35 million to $37 million Lastly.
I would like to again, thank the amazing Perry and team to their resiliency and agility during the unprecedented I couldn't be prouder of our collective accomplishments and the more appreciative of our collective efforts.
With that said the operator will you. Please open the call for questions operator.
Thank you.
You would like to ask a question. Please signal by pressing star one of your telephone keypads and if you are using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment.
And Thats Star one to ask the question.
And that would take our first question from Jason <unk> from Oppenheimer. Please go ahead. Your line is open.
Hey, thanks, everybody.
And I'm the wrong person.
You talked about.
Exactly.
And I cant of Osha and integration, maybe just elaborate a bit more talk about all of them.
And you already cross selling that one of the synergistic benefits you're seeing from any metrics you can share it.
And now and client penetration and cross selling debt around.
Question number two maybe you could help us understand and organic advertising growth and the fourth quarter, so kind of adjusting for hot and I have no problems and what.
And as the organic advertising in the fourth quarter and how are you thinking about kind of organic advertising growth for 'twenty and 'twenty, one and then last question you.
And you are targeting 500.002 million 20, and revenue with the water in 'twenty and organic I think was the last presentation by $80 million of user acquisition and maybe you can talk about M&A.
M&A plan for this year, maybe help us understand timing and it's something that would be kind of more first half second half and then also equally good and increasing the attack valuation and how.
Does that kind of playing into your thinking and.
Of that impact your ability to have closed the acquisition the here.
And.
Very good okay. One by one so our first and foremost of I think that the content IQ and the pub Ocean the contribution.
And it's not just on what they are able to generate but also of the synergy and I would like to.
To focus on the synergy capability.
So Pablo Osha and has its own owned and operated site and and I basically stated they are expanding and externalize the content optimization platform.
The two other first of all of your publisher I mentioned, Newsweek, and I've mentioned Intrapreneur and veneer of just the first one.
But collectively when you are looking about you know those these are the first year sites is one of the own and operate side, that's created and a great.
Large supply of debt is definitely can be a great opportunity.
Unity for other business unit, the generating demand and.
At this point of this demand was very much a targeted debt.
And the network outside that we'd have to pay for.
For instance stake and undertone and other.
The one is the working with the brands and agencies to deliver.
Their campaigns, we're getting an insertion order and where we can work with the undertone and pub network now when we have and such a great in turn of debt.
And the publisher network that we control.
And the CAC that we're paying outside the will go in house and debt will be a huge a huge synergy savings and so this is the for instance, one example.
The supply of course, the the demand that can be generated.
Form of our partnership with Microsoft being and.
And the way we are tried very much to develop here as we said our own wall the garden.
We're at the same time, we're increasing our of demand capability, we are increasing our supply capability and that gives us a great opportunity to definitely reduce our tech and and this will increase our margin.
And as far as our plans are for M&A.
And I can tell you that a we are looking at few areas.
The test to do with what the what we believe are the main key growth of the factors behind the our success and 'twenty twin.
In the creativity sides are we're looking for the ability to enhance our desio dynamic creative optimization in other words and what the standard we're able to personalize the AD units based on the data that we're getting this is the one.
And we'll remain the.
One of the major factor for Advertiser and we are currently working with our own platform spark flow, but we believe that there are great opportunities.
And out there for that as well and other area, which is interest. The loss is has to do with the blockchain blockchain and the way in our world of advertising, it's more on the search and.
And the monetization word and we believe that the while the number of searches is growing exponentially and.
And our our partner.
And he's looking to increase the safety and.
And the safety of the searches and safety of the keywords and.
All of debt and and we believe the blockchain can be a very interesting way. So those are the two examples of what we're looking at.
And as far as the the the last question the test to do with our goals for the next three years. So of the North Star is to get two of $500 million and what we basically said the <unk>.
During the follow on meetings that we have that we're looking about the minimum CAGR of the 10%.
And the next three years, which get us into the $430 million.
And I underline the word minimum and.
But no matter, if it's 430 or above and we are shooting for.
We believe that and the next three years, we're going to do and the acquisition.
And that's why we did the follow on transaction and this is why we're going to ever at the end of Q1, something close to $140 million and cash.
And we set the very rigid framework of the acquisition as I mentioned in the call which is the majority.
And of the perceived as the two earn out and only 20% to 30% is the upfront cash and we're planning to continue with it because it was the definitely something that we believe.
And it brings value and not just the us but also two of the.
And the companies that we acquire then and allow us to retain and.
Talent of the acquired company for a long period of time.
And I, just I don't know Mala you want and his comment on organic growth and the Borgwarner.
So and so yes, we can say that this is not something that a we have and the public what we can say that if we're looking on a pro forma basis and it will be above the 20% growth.
Thank you.
Well now move to our next question from Eric.
And from Lake Street. Please go ahead your line is open.
Congratulations on the real strong here.
And finished out.
Back to the.
The days of April so kudos to you. Thank you.
Thank you.
Regarding the our connected TV business.
First of all I wanted to understand the difference between CTV and I say T D.
Well I want to ask about kind of percentage of revenue it looks like in Q4, we know the rock.
Because of that.
Oh.
So it's really small part of your overall revenue.
Or do you think that can go percentage wise.
The one.
Yeah.
Right. So the main the main difference between CTV and the ICT. The the interactive is definitely first and foremost from the advertiser's standpoint is the ability to gauge the interaction.
Level between the viewer and the screen.
And as you already understand when the video is running who knows what is the is like any other AD unit that you see on the conventional or linear television and who knows where is your attention is it three or mobile or do anything that is the wrong deal other than the other than the video itself.
And the interaction part of it is is it's sure that you and we grab your attention we capture your attention capture of attention that you need to react with connection and the action is the do you need to click on your removed and.
And basically run the deal out of you options that we are promoting while the main video as Ronnie you and.
Need to choose between fewer option.
Once you choose the video of that you chose the starts running but the most important part is the interaction. If you are not the interesting.
And if you're not interested in learning more you'll not leak and you are removed.
For Advertiser this a factor of clicking the remote demonstrate engagement and everything here is all about engagement that they know to very much appreciate the return on their AD spend so that's the layer of interaction.
And above the the conventional video that you basically see and CTV and of course not everyone is clicking on all of those small boxes with the with video, but those the clicks they know that the 100% or engage with the new with the with the <unk>.
Ed or with the video and the willing to pay more for it and willing to pay more in terms of CPM because they can ensure that the engagement level is very high now.
And now in terms of in terms of the percentage of CTV for the entire this is this is something that we are going to keep reporting the number is growing.
The I can tell you that we definitely in par with what is all CTV from the entire of display.
And six 5 million out of our overall advertising.
Percentage wise, it's 10 per cent and.
And if you're looking about the entire of display and video.
Choose the close to $200 billion I don't think the CTV and.
Reach of 20 billion each way weighted less so we are happy with the 10% when we're looking at about the the the overall display and video spend but definitely this is going to get more and more because we now working on I C. T V two point, though and.
The ICT the two point, though is not just adding those boxes with the addition of the information that you need to click once you will click on them it will be personalised dynamically in other.
And the words the the day.
The video of the the creative will change based on the data based on gender based on location and so on and so forth in order to very much increase your attention and the and ability to engage with these video.
Understand.
And then a follow up of any signs of life and the travel hospitality and entertainment the verticals.
Nope.
This point of the definitely the market is very much on hold.
<unk>.
We're all looking forward to what's going to happen the during the summer of.
But I must say debt, our forecast and guidance.
And for 'twenty, 'twenty, one and he's not taking any consideration at all of.
The recovery of this segment.
I understand thanks for taking my questions.
Thank you.
And we'll now move to our next question from Laura Martin from Needham. Please go ahead. Your line is open.
Hi, Bob.
And my question Great numbers.
The question. Thank you Laura.
And from that.
And I want to ask the question about guidance.
And that's.
Celebrate and revenue growth and side of the fourth quarter and 25 per site revenue growth for the full year.
So what celebrating so massively in 'twenty and 'twenty one of this guidance.
Yeah, so a ton per se.
For the full year.
Building on that question and one of Investor call and.
The other competitor I think you'll have enough.
The Jack in the 30% or what's the cash.
And what would you sort of advertised.
The buy back stock what's the.
And that's about a 10th of that at the top line, whereas most of the competitors.
Yeah.
So that's the that's a very good a very good question and thanks, Thanks for the.
So first and foremost the this is the third year debt, we are providing guidance and the company management is and they don't quite conservative with their estimate of keep in mind. The this is the first quarter.
And keep in mind debt there are some still you know and.
None of them. We are all of our eyes are very much where we want to be you know three years from now so first and foremost I think that we are one of the fewer and you didn't listen to all of our competitors one of the viewers. The basically can even think.
About the providing estimate where they wanted to be three years from them.
And this is one of the second thing I think that we are in the very unique situation from our offering.
The most of our arrivals are very much offering of point solution.
We proved in the past and I think the this is very important to say now that we are offering of diversification strategy.
Diversification strategy that allows us very much too and two very much and deliver based on the capitalize on any changes that are that the that are happening amongst those of the three main pillars.
And with debt and I basically said that.
We are preparing very much for growth and that's the $500 million that are representing a.
The 17% CAGR and and and as I.
<unk> said, we would very much like to start the year.
With a conservative number.
Okay and then my second question is on cookies.
And I'm interested in how you think that's couple of plays out.
And all of them off.
What do you think happened.
The market place.
Yes, so the first of all we need to ask yourself, how much out of all of how much you know the companies are very much depend on cookies form of re targeting standpoint. This is the this is definitely a critical the.
Critical question, how much of the business or depend on the third party cookies.
All the way of overcome the cookie was very much on the on and developing our own.
Our own or control.
Supply network.
<unk> turned to be our first party cookie instead of very much rely on the outside the third party cookie and.
It is the.
And the way it was the southern move because usually and Ed network rely on on other publisher, but we believe the debt will give us the tremendous the tremendous advantage as we are growing our supply not just internally, but also the fact that we were assigned the such a.
Agreement with the first day of publisher and the idea is to continue with it.
And it gives us the the has become our own war the garden and less even depends on the third party cookies.
And the same time the other part of the business if the test to do with.
Search advertising or social advertising and that part of this game because theyre not the affected towards before the cooking. So that's that's something that needs to take into consideration.
Because again, if we were only on display and not having our own supply network I think the debt was definitely get the concern to the way higher level.
Okay.
Okay and on the market.
So first of all the questions.
The company that's it.
Yeah.
And that's part of the basketball.
What's the profile.
So I hope of box of Blah Blah blah.
Because of all that right.
And to keep them out there just in the marketplace outside of the other permanent backup.
Well from a from outside of the barrier and I think that we definitely definitely see the the strength.
Started to do with.
And all the regulation that is happening and in Europe, and then followed it with what's happening with Mississippi.
West coast and and others.
And the other location look what's the Apple just announced last week I think it's part of and overall overall trend and.
And which has to do with privacy overall trend and I don't think that the the issue of calculus will be behind us definitely ied and others that are very much care about consumer privacy needs to match and if it's not even question of if in my opinion, it's just a question of when.
That's super helpful and Morocco.
And if you just go off of.
And then we'll come back.
Does this at all.
Yeah.
Thank you. Thank you.
Yeah.
Okay.
Next question from Jeff Martin from Roth Capital Partners. Please go ahead of your line is open.
Thanks, Good day everyone.
Thank you.
Wanted to focus on the increase your R&D spend significantly over the years wanted to get a sense of what your focus since from the R&D standpoint, and 2021 and then also.
All of us out to 2023, and what does that roadmap look like.
Yeah. Thank you so first of all like never mentioned it but the net.
My background and I'm coming from and enterprise software business, So and one of the main reason.
And for me joining Varian was the fact that I do believe the technology.
Makes the difference.
And the reason we call it a moat and the reason we increased our spend to widen and make the deeper believes is this is definitely something which get us a higher return on investing on the technology.
And the and that's why we're increasing the year over year keep in mind.
Debt, what we are investing now it's the first and foremost and I'm, taking care of our content monetization system.
And we reached the point.
And that we understand and through the acquisition of content IQ and.
The the current content management system that they have and it was based on an open source.
Content management system is not enough for scale and we had to develop our own content monetization system in order to take content optimization into you know the different level.
Current level when it comes to optimization and keep the visitor is more than between six to eight minutes and hours sites and.
And not just debt you rebuild it and the idea was how are we able to externalizing to our so through our partners and.
And that was the huge investment on our site and so that's one example, the other example was very much of the investment that we did and I think was two years ago acquiring and.
And AI center in the Green yet.
Debt, we are farther invest more and more on it and.
And that serve very much all the use.
On a are you modeling that's now become on average.
And I think that every everything that we're doing is the indefinitely and AI service or AI model that is very much generating there.
And as I mentioned before personalization and using the huge amount of data that we have debt is coming from all the different touch points.
From the social.
Two the search to of course to the display it's all come to a huge data lake debt allows us to serve any parts of our business and.
And with the right data the right signal, which is so essential and our business.
And this is the this is the huge investment and the.
And I'm very happy that the we are very much and able to grow our business based on this investment.
Okay, Great and then curious.
Well, the RPM down and Q4 offset by a significant increase and searches.
Are you seeing that and try and continued so far and Q1 and what's what's the what's embedded in your guidance for the balance of the year in terms of those two metrics.
So first of all as far as January two not even to our surprise, but we and the.
The Covid hits US started in March last year and April and May was the worst so it's it's a good comparison to see generally 2000 the two.
2019, 2022 January 2021, and they definitely can tell can tell you. The the trend continue in terms of number of searches.
Which is great. It's compensate on the decrease on RPM.
And allow us to deliver to very much the lever sustain a revenue from the search advertising and.
And our assumption that this trend will continue even even.
If we were able to you know very much overcome COVID-19.
Think that most no a consumer of very much enjoy about a what.
Online shopping online or doing things on line and this is this this trend is definitely to continue the other thing that we think is going to improve the RPM is the huge amount of online retailers.
Are we able to see the new type of online retailers, the not just and they don't have the brick and mortar store, but the most cases, they don't have even and inventory.
And then there their spending is only on the on its search and looking for consumer and with the very high intent and that's the that's a very very very interesting compelling moment for them.
So overall.
And we definitely see the this this strength will stay even if COVID-19 will not be with us somewhere in later 2021.
Yeah.
Okay, and then final question I'm looking at your presentation and that's up on the Investor Relations site here it looks like.
And.
And had an average deal size up 60% from the third quarter and customers grew in the 45 per cent range wondering.
If you can comment on that and and are you seeing increased.
The increased interest continuing so far this year and she can do.
Yeah definitely so are we.
And we grow two things into between the third quarter, where and we just launched it and the fourth quarter of 2020.
Both in absolute numbers of revenue the number of the number of customer, but more importantly on the the average deal size are the every deal size grew significantly which is the for US is the one of the major major kpis because customers see.
And evaluate the return on AD spend on CTV, especially with the factor of it.
They're active CTV and grew the spend and the.
This trend is continuing and indefinitely big day.
And what started as an experiment and the third quarter the increase the spend on the fourth quarter and the further increase it and so far and the first few weeks of the year.
And we believe they will continue and do so when we are going to launch and as we said the ICT V. Two point no. We chose the personalization level on top of what we're doing right now with ICT V. There is the nice slide and as you referred to our IR presentation that we did definitely.
Demonstrate how D C O dynamic creative optimization place of well in the CTV space.
Thank you for that and congratulations on the strong yet.
Thank you.
Okay.
And we will now take our final question from Chris Mcginnis from Sidoti and company. Please go ahead. Your line is open.
And good morning, Thanks for taking my questions and this quarter I was just.
Wondering if you could just maybe expand a little bit of on the Microsoft and relays.
And shipping.
The more collaborations coming true.
And we'll come and all of that.
The change and the lab.
And the new ones it sounds like one of them yet.
Yeah. Thanks for the question so I was.
Owners to do the not the last one of the last one but also the previous one so we did a debt.
Previous one on October 2017 for three years.
And Oh, we did the this one of them announce it and November 2nd 'twenty and 'twenty and it's quite the difference quite the difference not just and duration.
The last one was for three years. This is the four years.
For those who know Microsoft doing the four years agreement.
We are a part of the very few vendors, that's being able to engage for such a long periods of time and that's why the way you require for us not just to.
Renew or extend the agreement in terms of amendment, but definitely writing the the new agreements from scratch.
But it's not just about and.
Four years or more years in terms of contract.
The main important the sector has to do with.
Better Rev share the.
That's one so we are of higher tiers day to represent where we are right now so we're going to get the more margin for Microsoft one second expand into new geography and.
And in the previous agreement we are limited to six countries. Currently is 234 countries.
Which is part of.
Microsoft advertising overall geography expansion strategy.
And the third and is that we are no Abe.
April to offer or market new products, new products that we were not able to do on the previous agreement.
So all in all of this is why we basically share the debt our estimate debt in the course of the next four years, we were able to generate $800 million.
From this agreement.
The $200 million and average annual revenue currently where and the level of 172 million.
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So that's definitely a significant increase.
The increase.
And what I'm more happy with is the fact that it's the sustainable predictable.
Stream of revenue the test to do with this pillar.
Search advertising.
Debt based on any kpis that we're looking and I shared one of them, which is the average daily average daily traffic, it's definitely moving in the the right direction and the it.
And it's generating for us and <unk>.
Potential revenue.
Thanks for taking the questions and good luck and Q1.
Thank you.
That concludes today's question and answer session. So I'd like to hand back to Doron gerstel for any closing remarks.
Yes. Thank you very much for your participation and the stay well bye bye.
Ladies and gentlemen, this concludes today's call. Thank you for your participation you may now disconnect.
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