Perion Delivers Another Strong Quarter, with 31% Revenue Growth and 141% Growth in Net Income

Company increases 2022 adjusted EBITDA guidance from $102M to at least $120M as a result of a sustainable improvement in profitability

Perion Network Ltd. a global advertising technology company whose synergistic solutions are delivered across the three primary channels of digital advertising – ad search, social media and display/video/CTV advertising – today reported record financial results for the third quarter ended September 30, 2022.

“This was the eighth consecutive quarter we delivered top and bottom-line double-digit growth on a year-over-year basis”

Doron Gerstel, Perion’s CEO, stated, “Once again, Perion outperformed the adtech industry – and we believe will continue to do so for the following reasons:

• We are leveraging our diversification strategy as advertisers are shifting their direct response budgets from social advertising (mainly Facebook) to search advertising
• We are continuously expanding our profit margins, which demonstrates the strategic and economic value of our Intelligent HUB (iHUB)
• We are bringing innovation – through SORT™ – in response to advertiser recognition that privacy matters more than ever
• We are meeting our clients’ objective to enhance their brand equity by increasing user engagement through Perion’s High-Impact ad suite.”

“This was the eighth consecutive quarter we delivered top and bottom-line double-digit growth on a year-over-year basis,” Mr. Gerstel continued. “The 145% year-over-year increase in operating cash flow to nearly $35 million, reflects the significant earnings power of our business model. With a cash position of $390 million at quarter end, we have significant dry powder to execute on our growth strategy, delivering value to shareholders for years to come.”

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Third Quarter 2022 Business Highlights

• Media margin increased to 41%, compared with 39% in Q3 2021
• Adjusted EBITDA to revenue ex-TAC of 51% vs. 37% last year. This is among the highest in the industry
• Video revenue increased by 209% year-over-year, representing 44% of Display Advertising revenue
• CTV revenue increased by 134% year-over-year, representing 9% of Display Advertising revenue compared with 5% last year
• SORT^TM spending increased by 25% over the previous quarter, driven by an 11% increase in the number of customers from 126 to 140
• The increase in market adoption of our holistic Video Platform solution continues to deliver strong results:
  • 88% year-over-year increase in the number of Video Platform publishers
  • 67% year-over-year increase in revenue from existing Video Platform publishers
• The number of search advertising publishers increased by 60% year-over-year, RPM increased by 42% over the same period

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Financial Comparison for the Third Quarter of 2022

Revenue: Revenue increased by 31% to $158.6 million in the third quarter of 2022 from $121.0 million in the third quarter of 2021. Display Advertising revenue increased by 26% year-over-year, accounting for 55% of total revenue. This is primarily due to 209% growth in video, now representing 44% of Display Advertising revenue compared with 18% in the third quarter of 2021, 134% growth in CTV revenue, which represents 9% of Display Advertising revenue, as well as a 10% increase in average deal size and a 9% increase in the number of clients for high impact solutions. The number of SORT^TM customers increased by 11% quarter-over-quarter to 140, and SORT^TM customers’ spending during the period increased by 25%, representing 17% of Display Advertising revenue compared with 14% in the previous quarter. Search Advertising revenue increased by 38% year-over-year, accounting for 45% of revenue, primarily due to a 42% increase in RPM and a 60% increase in the number of publishers.

Traffic Acquisition Costs (“TAC”): TAC amounted to $93.6 million, or 59% of revenue, in the third quarter of 2022, compared with $73.6 million, or 61% of revenue, in the third quarter of 2021. The improvement in media margin was primarily due to a favorable product mix of ad formats and the iHUB contribution.

Net Income: On a GAAP basis, net income increased by 141% to $25.6 million in the third quarter of 2022 from $10.6 million in the third quarter of 2021.

Non-GAAP Net Income: Non-GAAP net income was $29.9 million, or 19% of revenue, in the third quarter of 2022, compared with $15.4 million, or 13% of revenue, in the third quarter of 2021. A reconciliation of GAAP to non-GAAP net income is included in this press release.

Adjusted EBITDA: Adjusted EBITDA was $33.0 million, or 21% of revenue (and 51% of revenue ex-TAC), in the third quarter of 2022, compared with $17.6 million, or 15% of revenue (and 37% of revenue ex-TAC), in the third quarter of 2021. A reconciliation of GAAP Net Income to Adjusted EBITDA is included in this press release.

Cash and Cash Flow from Operations: As of September 30, 2022, cash and cash equivalents and short-term bank deposits amounted to $390.4 million. Net cash provided by operating activities in the third quarter of 2022 was $34.7 million, compared with $14.2 million in the third quarter of 2021.

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