What happened

Shares of Perion Network (NASDAQ:PERI) were gaining today after the ad tech company posted better-than-expected results in its fourth-quarter earnings report. The company delivered strong growth on top and bottom lines, boosted by its performance in Connected TV (CTV) and display and social advertising, as well as a pair of acquisitions in 2020.

As of 10:39 a.m. EST, Perion shares were up 12%.

A woman looking at a glass wall with TV screens

Image source: Getty Images.

So what

Revenue grew 51% in the quarter to $118.3 million, beating estimates at $111.5 million, as sales from display and social advertising jumped 159% to $68.4 million, passing search revenue as the company's biggest category. The programmatic advertising company also saw strong growth in CTV, which jumped 132% to $6.5 million. Search, meanwhile, was a laggard, with revenue falling 4% to $49.9 million as management noted a slide in RPMs, or revenue per thousand impressions.

A portion of growth in the quarter came from two acquisitions the company made last year: Content IQ and Pub Ocean. Content IQ's full-year revenue in 2019 was $39 million, or 12% of Perion's total 2020 revenue, while Pub Ocean, a publisher technology platform, was expected to generate $25 million in revenue over the 12 months after Perion's takeover last July.

Based on those numbers, Perion's organic revenue growth rate was about 28% in the fourth quarter.

The company's bottom-line results were impressive as well as adjusted EBITDA rose 26% to $15.3 million, and adjusted earnings per share jumped 41% to $0.45, crushing expectations at $0.18.

CEO Doron Gerstel said in a statement: "Perion closed 2020 delivering strong revenues and earnings that well exceeded our 2019 results. The effectiveness of our content monetization engine as a holistic, one-stop solution for brands and agencies, and the acceleration of our Connected TV advertising offering, were the main factors behind 25% revenue growth for the full year."

Now what

Despite the strong performance in the fourth quarter, Perion's guidance only called for modest growth in 2021, forecasting $350 million to $370 million in revenue for the year, or a 10% increase at the midpoint. It also sees a 10% adjusted EBITDA margin, in line with 2020's results. 

The guidance seemed to be conservative after the strong performance in the fourth quarter and since the company said 15% of its 2019 business came from the travel sector, which should rebound later this year. The company also easily beat the 2020 guidance from the third quarter.

Given that reality, management may be providing a low bar for this small-cap stock due to continuing uncertainty around the pandemic.

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