Q2 2023 Perion Network Ltd Earnings Call
Welcome to the network.
23.
<unk>.
Conference is being recorded.
Detailing the financial results is available on the company's website at Www Dot Dot com.
Before we begin I'd like to read the following safe Harbor statement.
Discussion includes forward looking statements.
Reflect the companies.
Respect the future.
Okay statements and Bob.
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.
Any future results.
Once anticipated.
Bored looking statement.
The company did not undertake to update any forward looking statements reflect future events or circumstances.
As in prior quarters. The results reported today will be analysed, both on a gap.
Basis.
EBITDA, we will be referring to adjusted EBITDA provide.
Provided a detailed reconciliation of non-GAAP measures to their comfortable GAAP measures and our earnings release.
Available on our website and has also been filed on form 6K.
The call today, our top Jacobsen cheap.
Chief Executive Officer.
<unk> <unk> Chief Financial Officer.
Turn the call over to Cal Jacobsen. Please go ahead.
Hello, everyone Jacobs.
Jacobson and I'm excited to welcome you to our second quarter report.
First I must spell you'll see ya.
With me.
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It is truly an honor.
This rule.
<unk> into the future.
I've been wanting videos.
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We build a thriving business model.
Part of the shape with Microsoft advertising.
And I was also part of the executive team.
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Have an incredible team.
Individuals.
Foundation.
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The future.
I Wanna. Thank.
One of them.
Your hard work and dedication.
Yes.
Previous to Ya.
Combining imagination execution.
I'd like to thank you and for us out.
Leadership.
Stay with us.
<unk> allow me to continue to save the future.
My journey to this point was full of life license.
The most important lessons I've learned about business is that agility.
Factor for long lasting success.
Almost 20 years ago.
Together with some incredible people to create.
<unk> I C Q.
You will.
The first global success.
Come out of the Israeli start-up nation.
A O L acquired I C Q instant.
Instant messaging technology and rapid growth.
At that time.
Finish developing a new product for mobile group messaging.
Features that what's up in telegram half today.
Now think about it.
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20 years ago.
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Mobile products.
Back then.
The primary objective.
For which I was employed.
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And the death of product was a huge success.
The company was so captivated by the desktop success.
Dropping the ball when mobile messaging and.
And I see two lost its competitive edge.
Add.
At times.
The lesson here is that to be winners.
Keep one foot.
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One foot in the future.
Winners.
Build.
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And at the same time look forwards to product innovation and quickly adopt when needed.
Continues to grow in the digital advertising market.
To our ability to remain a joe gaining market share.
Activities.
Cause it'd be thinking of new markets to penetrate.
Now, let's get down to business and leave you here.
220, 23 result.
The market trends.
Video continues to demonstrate.
<unk> ability to outperform the industry.
The digital advertising industry is filled with many sports companies.
With strong leaders and with excellent technology and yet we continue to outperform.
Our success.
<unk> of our ability to capture ship.
Advertising bed budget.
While maintaining high margins.
The best way to achieve both level of growth.
Our strategic diversification business model.
This is accompanied by a culture that fosters agility.
Moving fast.
Opportunities.
They emerge.
Despite the rapid shifts in media location strategies in the market.
Well positioned to gain market share.
Are there reciprocation allows us to be flexible.
And the moment no matter, how much it shifts and changes.
Billions Q too gross numbers across search advertising video CTV retail media and digital advertising as a whole.
The story.
It's all part of our strategy to follow digital advertising budgets.
<unk> between channels and it's done.
A strong foothold in fast growing markets worth technology matters in March is the higher.
2023 second quarter performance. We also continue to all performed the industry on revenue growth.
Revenue by 22% over the same quarter last year.
Above $178 million.
What is even more impressive is that we achieve that against the backdrop of continued economic headwinds.
Certainties.
Another indicator.
Of our outstanding Q2 performance is R. E meter that grew by an impressive 45% year over year.
A strong results.
<unk> two are focused on growing profitability.
Margin expenses.
Basin execution abilities and operational efficiency.
The main factor that lead to our amazing EBITDA growth and are incredible EBITDA margin amongst the highest in the industry.
Let's take a deep dive into our retail media business.
Then what enables us to.
To build this activity.
Retail business is a great example of how we bring together skills.
Technology in a powerful way that allows us to grow our market share.
Behind those gross numbers, he's a smart plot for.
It is designed to enable large retailers to leverage their own data.
For greater sales loyalty.
Why.
We're replacing the outdated circular that is being around for over 100 years.
With the accuracy of digital targeting.
Our magic begins with the layers of data.
The anonymised retail data.
The third party and Riechmann data that includes among others demographic behavioral contextual location and other environmental conditions and finally.
The most important parts.
Alone proprietary I of data.
All three layers are they being added.
Decisioning engine to produce.
Houses of dynamic creative.
Video solution allows us to deliver relevant personalized localized.
Experiences for example, we can customize our retail it's creative.
Flick local weather.
Raining in one city.
See an AD for a comforting suit.
If it's hot and Sunny.
[noise] heads will promote the ice cream.
And thanks to sorts R. A I base <unk> technology.
We can now target the right product to the right person at the right moment.
Are they NAMIC retail solution is distributed across all our immediate channel.
As you would expect from a unified solutions such as ours.
Alright technology has already won the retail touch point awards for brand experience.
The hearts of some of the biggest retailers such as <unk> Rite aid home depot Albertsons.
Sure.
Yeah, all working with us to drive meaningful business results.
Before we dive into the numbers I'd like to thank all of you.
Many of whom have been following.
A long time.
Your continuous support and believe in the company is invaluable.
Is it will now see the future is brighter than ever.
Budget review the queue to results presented by our CFO Mo Ceylon.
Thank you Tom.
Afternoon, and good morning to those of you joining us from the U S.
<unk> Oh, the financial and business will result.
<unk> for the second quarter of 282 minute three we build on the success over the first quarter experiencing growing momentum.
<unk> continues to outperform the tech industry against the backdrop of continuing to economics are the means.
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Our ability to entertain this result.
Most of our strength of the global multichannel advertising technology company.
Our second quarter numbers showed that I was strong technology infrastructure.
Suffice for that portfolio and our agility to keep up with market <unk>.
K position nussle success.
Our store results.
So <unk> the focus on growing profitability and mountain expansion Israelis implementation of our efficiency measures throughout with our business operations.
<unk> commitment to innovation and execution of our business plans. It costs are a keg over survivor, such as video C. T V and retail media real fully committed to continue our boss the big Wolf to product innovation and to execute musicians.
Let's review the quarter of financial <unk>.
<unk> by 22 per cent you over a year to 178.5 million.
<unk> for the court to go by 27% the overview to 77 million.
<unk> for the call to go by 45 per cent you over you 241.2 medium.
And I think increased by 10 per cent the overview to 21.4 million and not get diluted EPS go by 65 per cent of the over the ear 284 <unk>.
The quality of the revenue clearly show.
Consistently guang a top line you over a year.
Revenue for the second quarter was one analyst 78.5 million.
Increase of 22 per cent over the your.
<unk> is strong continued <unk>, 38%.
Display advertising revenue for the second quarter increased by 22 per cent the over the U 299.4 million accounting for 56 per cent of total Avenue.
So the revenue increased by a default with Cynthia overview, representing 21% instead without the revenue compared with 14% in the second quarter lost Ya.
Alright, and media business continued to do.
To accelerate going six to three per cent year over year accounting.
Counting for 10% of the revenue versus 8% last year.
Video integrated by forward them to send you over a year, representing 41% of the revenue compared with 44% in the second quarter last year.
C T V revenue more than doubled compared with the second quarter of 22 minutes to representing 7% of the revenue versus four per cent last year.
Dutch advertising revenue for the second quarter, you go by 21% you over a year to 79.1 million, 44% of total Avenue.
<unk> daily searches dealing with the quote there grew by 68% year over year 228.6 million.
This was driven by at 28 per cent increase in the number of Thursday that as a barbecue to 159 and by increased plastic film existing partnership.
<unk> is also gradually increased in comparison with the first quarter of this year.
<unk>, excluding Doc was 77 million Oh 43 per cent of revenue compared with 41% of revenue in the second quarter last year.
This knowledge in an extension was primarily due to improved for that <unk>.
And also thanks to media buying <unk> optimization enabled by leveraging data and buying power is spout off our intelligent up.
Our continued implementation of efficiency measures, coupled with a focus on wolf and I imagine business.
Thus to generate adjusted EBITDA, Oh 41.2 million.
An increase of 45% over the second quarter last year.
He just the D V. The analogy inquiries from 19% to 23% this year, while adjusted EBITDA to <unk> talk margin increase from 47 per cent to 54 per cent of D. C U.
This romantic improvement is continuous investment and innovation and it cost control, resulting in a very strong incremental margin.
I Wanna get basis second quarter net income was 21.4 million Oh, <unk>, an increase of 10% compared with 419.5 million Oh 41 cents per share in the second quarter last year.
<unk> net income includes a fair value adjustment of the contingent consideration pay bill with respect to the videos that acquisition or 14.6 million.
During the quarter.
<unk> sure the purchase agreement as a result of their outstanding performance during that period.
I was sworn cash position and effective cash management generated 5.2 million financial income in the second quarter.
We also enjoyed.
An effective tax rate of approximately 50 per cent as a result of our discipline tax planning.
On a non-GAAP basis second quarter, and it didn't come with 42.1 million for.
84 center the Luther Sheryl in any case of 72 per cent compared with 24.5 million or 51 cents, a little bit Sheryl in the second quarter last year.
Over the past three years, they're consistently demonstrate our ability to implement efficiency measures throughout our business operations.
None get Opex and cooks.
<unk> revenue compared with 22% in the second quarter last year.
<unk> <unk> <unk> 456000 in the second quarter last year 280 280.
82000 this <unk>.
This impressive.
Movement in with activity is a testament through our business strategy execution.
This created an efficient operational infrastructure that allows incremental top and bottom line going.
At lower cost.
They can call their <unk> was 47.4 million compared with 25.7 million in the second quarter of 2022.
This song operating cash flow was driven by strong collection in the second floor too.
They include that in 8 million customers collection that shifted from March to April this year.
The joint therapy, when it's been this way I would kiss and catch exuberance short and bug deposit and knock the securities and graceful fall out of 36 million at the end of the first quarter to 483 million at the end of the second quarter.
We have encouraged by the strong results we achieved in the first off of the year.
And therefore, we are raising <unk> guidance.
Act increase for stability and margin expansion.
Oh and your revenue guidance represent a 60 per cent yoga a wolf at the midpoint.
Point.
Just the D V that is expected to go at least 26 per cent you over to you.
This concludes 90 financial overview.
We'll be happy to answer any of your questions <unk> <unk>.
<unk>.
Thank you the floor is now open if you would like to register a question. Please press star Sierra on your telephone keypad at this time.
Information tunnel indicate that your Linus and the question queue you may.
Press start to if you would like to remove your question from the queue.
Participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys for participants connected in.
You may use to raise your hand feature if you would like to ask a question today. The first question is coming from Laura Martin.
Company. Please go ahead.
Good morning can you guys hear me okay.
Yeah, Yeah in the morning.
Okay.
Hello, welcome to the top seat so what I'm interested in learning from you is you've been sitting in a search C. For the last five years I'm interested is C. E O. What you want to achieve in search over the next two or three years and what you want to achieve and the other half of the business you haven't run in the past over the next three years place.
Absolutely absolutely. So thanks for joining me thanks for asking the question.
So on search we obviously.
Looking to grow we're increasing.
The number of publishers to that number.
Searches.
And we're constantly looking for more and more strategic publishers to be added to our network and.
And on the other side on the advertising side is bayside.
We're constantly investing as you saw the presentation in other vertical so to expand our display advertising solution into other vertical such as retail and and all of that is gonna be two investments in technology.
Anne.
So that's the organic part and Emily.
So we're constantly looking to add more and more technology and more and more company.
That's the goal to keep increasing both site.
Fantastic and then my second.
My second question is on January .
I know you guys are you homemakers.
Cause.
Here in January .
Integrating that in your products can you talk about your roadmap.
The next two or three years and how you think about using Saturday I can make your products that are place.
Yeah, absolutely without going into too many too many details on specific features we're investing heavily in general T V I.
Again as you saw on the presentation.
Creating thousands of fermentation for <unk> in each ad.
Just on data so one person in the specific location will get a specific add on another vacation will get a different AD and we're now adding another layer of Jack and the giant D V I to <unk>.
<unk> <unk>, because you know generic D V I keeps randomly create images, we wanted to be sure.
It's a brand safe environment nothing nothing.
Nothing would be broken or those images. So that's another layer the 20 of us again and again.
I think two through the year, we're gonna.
Show more and more things that were release C.
Ruined the surprise, but we are working on a few pretty incredible things.
Thank you very much.
Thank you.
Thank you. The next question is coming from entering Iraq, a frame and James. Please go ahead.
Hello, Thank you for taking my questions and tell again welcome to the welcome to the seats.
First question for me and wanted to dig a little bit deeper on the search volume versus revenue per query dynamic I know, we still have some cough issues from pricing strength. This time last year, but does that count for the entirety of the revenue decline.
I know you are also growing publishers at a good clip are there any characteristics or attributes of the new publishers coming on that could affect that volume versus pricing situations.
No. So let's let's divided into two parts right. So we're in charge of adding publishers, which are heading searches.
That's our side.
Fries the economic units.
What's equal Rpms, which is very thousand searches that's not based on us that space.
They cannot be condition advertising budgets and order those are things that are not based on our ability to control. This.
This is why we're not you know we're not focused on the rpms, because we kind of controlling that that's the economic condition, we're focusing on adding one more publishers, which are going to add one more surgery.
That's that's the game here.
Okay, and then on the margins side, you know another really good margin quarter. It seems that you have another a number of tech focus opportunities in front of you whether it's building out the CTV in retail media businesses, expanding and enhancing sort and I have to say nothing of for instance, degenerative AI opportunities that are yet to come.
You've talked about R&D spell was down again, you over to an absolute dollars into a queue. So how do you think about that check and product investment is a room to may be developed more spend since you're running as such high margins.
Yes. So first we are taking you know disadvantage to be competitive and to be able to give the good momentum and to make sure that we are attractive and we can definitely sure. This great margin also with our own partners and our customer this is <unk>.
I agree with you and we agree with you that is we have a very good margin on the growth. We're talking about 43% on then and this is about 50%. So we definitely margarine that you can translate into investment that will help us to keep.
Wait a moment doom when you're thinking about 25 26 with different investment. This is something that is happening of course part of what we enter downtown and being through the investment with more to come in this is more of a long term.
Definitely adopting with the flexibility that we have.
Based on our current financial.
Thanks for taking my questions.
Thank you.
Thank you. The next question is coming from Jason healthy <unk> Oppenheimer. Please go ahead.
Okay, some things to make sure you haven't needed your line.
Hi can you hear me now.
Alright, they're going to call. The one okay. So two questions to retail media's become 10% of AD revenue very quickly what's your incremental value added versus other solutions in the market and where do you think that makes it goes over the next 18 months and then.
In cash continues to grow what's the <unk> acquisition, and if you're not finding something that meeting your target would you consider survive aspect.
Thanks, Thanks for the questions. So first of all retail media I think.
The name of the game there is data so once you connect.
Your systems do the retail data.
It's it's within the house. So you can create more and more campaign and that continues to grow.
As opposed to other segments in online advertising is the whole retail media is a lot more secure so we you know we predict that this will continue to grow.
With other question M&a's.
We're we're aiming to become you know even bigger it a revenue growth. So we definitely need to buy companies were ruined organically as you can see in a retail is organically cpp's organically we didn't buy.
By companies do that.
But if you want to continue to grow even faster for that we're looking for M&a's again m&a's those specific very cool is very.
Very attractive so CTV, all of whom maybe some technological components for retail media. Those are the companies were looking at and that's our main focus to use that too.
He knew to grill. So that's R. A few will continue to grow.
Jason did you have any additional questions. Your line was muted.
No. That's it. Thank you. Thank you. Thank you.
Thank you. The next question is coming from Mark Kelly of Stifel. Please go ahead.
Good morning, everybody. Thanks for taking my question I wanted to focus on Cept, obviously very nice gorilla, okay. So in the industry.
He would call out there.
In terms of whether it is.
Different types of creative.
To the rest of it it looks like another surface I totally get that you guys are.
How old is yours.
Figure out at Microsoft.
<unk> search.
Can we also read into that a bit Ah assume that anything is.
A smaller contributor at all your.
Adding sir Ernest as well.
Alright, so CTV, we we don't have a breakdown procreated with CD visa is really growing lives CTV.
Is a great grilled.
<unk>, where were you using likely to be on sports events.
You know, especially now that people are usually looking with more live events as opposed to content and how about whatever's going on out in.
In Hollywood with fresh content, so life ctv's definitely solving that.
And that's that's the CVV part.
What was the other question search.
Yes, Sir.
Let's separate the adding publishers side can we assume that also.
Other search partners or maybe messing up and becoming.
Something a bigger part of that that appointment for Ya.
Yeah. So again, we're working with do it.
More than one search partner.
Obviously, Microsoft is the biggest one is.
Here.
We constantly work with with.
More partners to diversify two different countries different devices.
So we definitely have a mix.
Okay. Thank you.
Thank you.
Thank you. The next question is coming from Jason Schmidt of Lake Street. Please go ahead.
Hey, guys. Thanks for taking my questions I'm, sorry, I missed it but on the search side. It continues to be strong on the publisher <unk> do you see continued publisher growth over the next 12 months or does it cool off.
You know we work at full speed ahead to add more and more publishers. We don't we don't see any slowed in in the amount of service <unk>.
You know from the visibility we have now it seems like.
Continued Willie.
Okay extra right and then just as a follow up <unk> any areas, you'll be focused on to a greater extent as far as people process your product development.
Sure so.
You know I think technology is what drives.
All parts of digital advertising, so we're gonna call focus really hard on technology.
We have two teams there'll be I hear one for the supply one for the demand part, we constantly invest more and more of that.
And we're we're constantly looking to add more.
Knowledge is into all our businesses while activities for example.
More data features 12 <unk>.
Retail activity, so strengthening what we do now and adding more things.
Does your focus.
Okay perfect. Thanks, a lot guys.
Thank you.
Thank you. The next question is coming from Jeff Martin of Froth. Please go ahead.
Great. Thanks, Good afternoon guys.
Wanted to ask a couple more questions room surge. The first is how does growth.
International markets compared to say the U S or North America, I know with the renewed partnership with.
From being awhile back International expansion was a big part of that and then secondly.
Are you seeing any noticeable impact from check G. P T with respect to Microsoft.
Yeah. So we we we've added a lot more countries with the new agreements, we've signed two years ago.
The <unk> the majority of our business with with Microsoft is the U S. But we do have allowed activities.
Europe .
And.
Definitely a good addition that we have those countries.
Now when did <unk> you know I think we all agree that Cherokee.
The future of the Internet and I just advertising.
Having said that I think it's really early days to see how this moves forward and in what way.
Omar conversation with Microsoft you know, we have a great belief in Microsoft advertising the day can make Microsoft being even even greater and add those features to create stickiness and more engagement.
But it's early days you know that's.
Everybody is releasing the on a chat bot and it's great I think I think this is really driving you know technology forward.
But at the end of the day it doesn't drive currently doesn't drive a lot of advertising budget extra advertising budgets.
So it's early days, we'll have to wait.
And then for my follow up question your flow through incremental revenue to EBITDA. It's about a 40 per cent margin is pretty consistent for the last six quarters.
Just curious if you think that's a sustainable flow through rate and.
And as I said.
And part of that question your customer acquisition immediate by Cos I've come down per cent of revenue do you think that Trent persist.
So thank you for the question you know, we definitely always trying to find the area for you know personal investment in.
No we get the question before and this is one.
And the second hand, and Gale is optimizing.
<unk> the media buying and based on the fact that you are going to visit and getting more and more opportunities. We can we can better margin and this is something that where we are today with your 400 <unk>.
43% of the second call too.
Very much in line with the product mix up the second boat there is expecting to get into the second half of the year, we're expecting the year to be around 42%. So cute we will be similar to do you do in queue for with a product minutes, you will will be lower than that again not romantic with the <unk>.
I'm very long before the <unk>.
<unk>, we sent in queue for if you're thinking about 24 again, we are now with model that is very off the minds with the App and we implemented I will notice you want something that is more than that.
Once we will and other things that we are doing we will reflected but currently this is more or less <unk>.
The forecast and our modem and I'll be expecting to India for a mountain point of view.
Thank you.
Thank you. The next question is coming follow up from Mark Kelly of Stifel. Please go ahead.
Mr. Kelly do you have a follow up.
I didn't realize that.
Sorry about that.
Oh, Alaska.
The source products you know is there still apply the navy monetize over the long run or are you still see that is something that.
Nice to have.
More advertising.
Okay.
Sure.
So I think this is a bit more than just nice to have it.
Currently we are using that as a secret sauce.
To gain more and more advertising budget and run a complaint to that and I think the numbers are showing that you know.
Gaming.
It gains traction and pulls more companies to work and will continue to use it that way.
As we think about what is or 2.0, where can we take us even further.
Maybe more platforms, maybe more countries may be more models, but currently.
It helps us.
Five more results, which is great.
Okay, great. Thank you.
Thank you, we're showing no additional questions and Q at this time did you have any additional or closing comments today.
Alright, Thank you everyone for joining us.
And.
Hope to see you next time.
Thank you ladies and gentlemen.
Today's conference you may disconnect your lines or walk off the webcast at this time and enjoy the rest of your day.
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