Shares of Perion Network (PERI 4.86%) were moving lower today for the second day in a row after the adtech company reported first-quarter earnings Wednesday morning that initially pleased the market but reversed later in the session.
On Thursday, that slide continued as investors had more time to assess the state of the business after Microsoft slashed its payments to ad partners like Perion, causing the stock to plunge by roughly 40% in early April.
Today, Perion stock was down 3% as of 12:04 p.m. ET after slipping 0.5% yesterday.
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Perion has a long road back
First-quarter results weren't directly affected by the Microsoft change, as that happened after the quarter ended.
Perion said revenue in the quarter rose 9% to $157.8, which was slightly better than the consensus at $156.8 million. However, all of the company's growth came from its search advertising segment, which is closely connected to Microsoft Bing. Search revenue was up 26% to $82 million, while ad solutions revenue, its other segment, fell 5% to $75.8 million.
Within the ad solutions segment, the company saw strong growth in retail media, which was up 134% to $14.9 million, and connected TV (CTV), which jumped 108% to $8.2 million. It continued to experience weakness in video revenue, which was down 52% to $16.7 million and explains the decline in ad solutions revenue.
Revenue excluding traffic acquisition costs fell 8% to $60.2 million, and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) tumbled 35% to $20.3 million. Adjusted earnings per share declined 27% to $0.44 but was still ahead of the consensus at $0.22.
CEO Tal Jacobson said, "Perion is a resilient and agile company, and we are confident in our strategic positioning to overcome challenges, including recent changes in advertising pricing and mechanisms introduced by Microsoft Bing."
NASDAQ: PERI
Key Data Points
Can Perion bounce back?
Looking ahead, the company maintained its dialed-down guidance for the year, forecasting revenue growth of $590 million-$610 million, in line with estimates. For the second quarter, it sees revenue of $118 million-$122 million, and adjusted EBITDA of $10 million-$12 million, reflecting the impact of the changes in its business with Microsoft Bing.
Perion has invested in a number of attractive AI products such as SORT cookieless tracking technology and WAVE, its generative audio AI technology for radio, podcasts, and other digital audio, giving it new growth opportunities. The growth in retail media and CTV is also promising, but the company will have to shake off the setback from Bing and the slowing growth from video revenue.
Over the long term, Perion has the potential to be a winner, but investors are likely to be skeptical after Microsoft just kneecapped its business. Perion will have to earn back their confidence.
