What happened
Shares of advertising-technology company Perion Network (PERI 4.86%) soared on Monday after management raised its guidance for the fourth quarter. At the close of the trading day, Perion stock was up 16.7%.
So what
Previously, Perion management had guided for Q4 revenue in the range of $81 million to $91 million. Now, it expects to report revenue of $100 million to $105 million, which would amount to 31% year-over-year growth at the midpoint. Further, it had forecast earnings before interest, taxes, depreciation, and amortization (EBITDA) of $8 million to $10 million. Now, it's projecting EBITDA in the $13 million to $14 million range.
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One of the main reasons for the guidance raise was Perion's recent deal with Microsoft. The two companies had worked together in the past, but their new four-year deal has more favorable terms for Perion. Moreover, Perion will be supplying ad content for Bing (Microsoft's web browser) searches in 34 countries, up from six countries previously.
Now what
Perion stock has been a chronic long-term underperformer, especially in recent years as the company has been paying down debt. But in 2018, it reached a net-cash position and has further improved its balance sheet since then. Now, its business is starting to take off. Much of its revenue is currently generated from search-based advertising. But the company sees a growing opportunity in connected TV. Given its strengthened balance sheet and its improving prospects (as evidenced by Monday's guidance raise), this may be a small-cap stock worthy of more research.
