Shares of adtech company Perion Networks (PERI +10.42%) rallied 14.5% on Wednesday, as of 1:13 p.m. ET.
Perion delivered third-quarter earnings today, showing a return to revenue growth after a few difficult years, with results beating expectations.
Perion is attempting a tough turnaround, and while there is a long way to go, this quarter's return to growth and cash-heavy balance sheet could make for a very interesting deep-value opportunity.
NASDAQ: PERI
Key Data Points
Perion rising from the ashes?
In the third quarter, Perion grew revenue 8.1% to $110.5 million, with adjusted non-GAAP (generally accepted accounting principles) grew 22% to $0.28. Both figures beat expectations, but what was especially notable was Perion's revenue growing for the first time since the first quarter of 2024.
In 2024, Microsoft made a change to its Bing search algorithm that greatly reduced Perion's revenue, then cut Perion and other demand-side platforms out of the loop altogether. That caused a deep decline in Perion's Search business and overall revenue.
However, it appears that the decline in Search-related revenue is now over, with the company's other smaller but high-growth segments outweighing the weaker parts of the business:
|
Perion Networks segment |
Q3 Revenue |
Percentage of Revenue |
YOY Change |
|---|---|---|---|
|
Digital Out-Of-Home (DOOH) |
$24.1 million |
22% |
26% |
|
Connected TV (CTV) |
$16.6 million |
15% |
75% |
|
Web |
$46.6 million |
42% |
(11%) |
|
Search |
$22.8 million |
21% |
9% |
|
Other |
$0.4 million |
0% |
42% |
Data source: Perion Networks Q3 earnings release. YOY=year-over-year.
As you can see, Perion's largest segment in web advertising is struggling, but the high-growth DOOH and CTV segments are gradually making up a larger and larger part of the business. Moreover, even Search revenue seems to have bottomed and is turning upwards again.
There were other operational highlights. The company launched its Perion ONE offering earlier this year, which aimed to unify ad buying across all of these different channels. Perion also announced a retail advertising partnership with Albertsons, leading to retail advertising growth of 40%, spanning several of the categories.
Image source: Getty Images.
Perion's balance sheet is quite compelling
The most interesting part of this story is that Perion has $315.6 million in cash on its balance sheet, and just a $490 million market cap, even after toady's rise. Meanwhile, management guided for adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $45 million this year, meaning the company technically trades at an enterprise value-to-EBITDA ratio of under 4.
Perion is also repurchasing stock, and actually just reupped its authorization to $200 million, up $75 million from the remaining authorization. That could make the stock particularly compelling, as Perion could buy back a significant part of the company at these levels.
However, management is also compensating itself in stock at levels that offset a lot of the effect of current repurchases. Year to date, the company has paid out $25 million in stock to executives, while it has repurchased $47 million. So, while the company is still lowering its share count at what seem like bargain prices, shares outstanding still haven't declined as much as one might have hoped for.
Still, given the inflection to growth, perhaps management will become more aggressive with buybacks going forward.
