Perion reports Q2 2024 results: revenue down 39% as search business declines

On July 31, 2024, Perion Network, a global digital advertising technology company, announced its financial results for the second quarter ended June 30, 2024. The company reported a significant 39% year-over-year decline in revenue, primarily due to changes in Microsoft Bing's search distribution marketplace and a reduction in open web video and display advertising. Despite these challenges, Perion saw strong growth in its retail media, connected TV (CTV), and digital out-of-home (DOOH) advertising segments.

According to the earnings release, Perion's revenue for Q2 2024 was $108.7 million, down from $178.5 million in the same quarter last year. The company's adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) decreased by 81% year-over-year to $7.7 million, resulting in an adjusted EBITDA margin of 7% of revenue and 15% of contribution ex-TAC (excluding traffic acquisition costs).

The sharp decline in revenue was largely attributed to changes implemented by Microsoft Bing in its search distribution marketplace. These changes led to a 57% year-over-year decrease in Perion's Search Advertising revenue, which fell to $34.3 million in Q2 2024. Perion's Chief Financial Officer, Maoz Sigron, stated that the company expects its business from the agreement with Microsoft Bing to represent about 5% of Perion's revenue in the second half of 2024.

Despite the overall revenue decline, Perion reported strong growth in several key areas. The company's retail media vertical grew by 75% year-over-year to $17.6 million, outpacing the expected 2024 market growth of 26% according to eMarketer estimates. Retail media accounted for 24% of Perion's advertising solutions revenue in Q2 2024, up from 10% in the same period last year.

Connected TV (CTV) advertising also showed robust growth, increasing by 42% year-over-year to $10.2 million. This growth rate more than doubled the projected 2024 market growth of 19%, as estimated by eMarketer. CTV revenue represented 14% of Perion's advertising solutions revenue in Q2 2024, compared to 7% in the same quarter last year.

Digital out-of-home (DOOH) advertising, which includes Perion's recently acquired Hivestack business, grew by 41% year-over-year on a pro forma basis to $13 million. This growth rate significantly outpaced the expected 2024 market growth of 11%, according to eMarketer estimates. DOOH represented 18% of Perion's advertising solutions revenue in Q2 2024, up from 9% in the same period last year on a pro forma basis.

The company's total advertising solutions revenue, which includes all of Perion's digital advertising offerings, was $74.4 million in Q2 2024, a decrease of 25% year-over-year. This segment accounted for 68% of Perion's total revenue for the quarter.

Perion reported a GAAP net loss of $6.2 million, or $0.13 per diluted share, compared to a net income of $21.4 million, or $0.43 per diluted share, in Q2 2023. On a non-GAAP basis, net income was $13.4 million, or $0.26 per diluted share, representing a year-over-year decrease of 68% from $42.1 million, or $0.84 per diluted share, in the same quarter last year.

The company's operating cash flow for Q2 2024 was negative $20.5 million, compared to positive $47.4 million in the same period last year. This decline was primarily due to a one-day delay in collecting $17.6 million from Microsoft, which shifted to July 1, 2024, and a one-time contingent consideration payment of $9.6 million related to the Vidazoo acquisition.

As of June 30, 2024, Perion's net cash position, including cash equivalents, short-term deposits, and marketable securities, stood at $407.1 million. This represents a decrease from $479.7 million at the end of Q1 2024, primarily due to a $41 million payment of contingent consideration and $20 million spent on share buybacks.

Perion's CEO, Tal Jacobson, emphasized the company's focus on providing technology solutions to address the complexities of the digital advertising industry. He highlighted Perion's efforts to connect advertisers with their audiences across multiple channels, including CTV, DOOH, and retail media.

The company also announced changes to its executive team. Maoz Sigron, previously the CFO, has been promoted to Chief Operating Officer. In his new role, Sigron will be responsible for strategic integration of Perion's cross-organization business operations and exploring new business opportunities. Elad Tzubery, formerly Senior Vice President of Finance, has been appointed as the new Chief Financial Officer.

Despite the challenges faced in Q2 2024, Perion reaffirmed its full-year 2024 guidance. The company expects revenue to be between $490 million and $510 million, with adjusted EBITDA projected to be between $48 million and $52 million.

The decline in Perion's search advertising business comes amid broader changes in the digital advertising landscape. Microsoft has been making efforts to improve the quality and relevance of its search results, which may have led to changes in its distribution partnerships. This shift reflects the ongoing evolution of the search advertising market and the increasing focus on user experience and ad quality.

Perion's growth in retail media, CTV, and DOOH advertising aligns with industry trends towards more targeted and immersive advertising experiences. As traditional digital advertising formats face challenges, advertisers are increasingly turning to these emerging channels to reach consumers in more engaging ways.

The company's performance in Q2 2024 highlights the volatility and rapid changes occurring in the digital advertising industry. While Perion faces significant headwinds in its search advertising business, its investments in growing areas like retail media and CTV position it to potentially capture new opportunities in the evolving digital ad landscape.

Key facts from Perion's Q2 2024 earnings report

Revenue: $108.7 million, down 39% year-over-year

Adjusted EBITDA: $7.7 million, down 81% year-over-year

GAAP Net Loss: $6.2 million, or $0.13 per diluted share

Non-GAAP Net Income: $13.4 million, or $0.26 per diluted share

Search Advertising Revenue: $34.3 million, down 57% year-over-year

Retail Media Revenue: $17.6 million, up 75% year-over-year

CTV Revenue: $10.2 million, up 42% year-over-year

DOOH Revenue: $13 million, up 41% year-over-year on a pro forma basis

Net Cash Position: $407.1 million as of June 30, 2024

Full-year 2024 Revenue Guidance: $490 million to $510 million

Full-year 2024 Adjusted EBITDA Guidance: $48 million to $52 million