The Struggle Behind Perion’s Declining Stock
Perion Network, a player in the adtech industry, witnessed a disheartening descent in its stock for two consecutive days. The plunge began after the company shared its first-quarter earnings report, initially resonating well with the market but took a nosedive later in the session. The nail in the coffin came when tech giant Microsoft slashed payments to ad partners like Perion, leading to a sharp 40% stock drop in early April.
Quarterly Snapshot and Reactions to Microsoft’s Move
Despite the Microsoft bombshell occurring post-quarter, Perion’s Q1 revenue surged by 9% to $157.8 million, surpassing the consensus of $156.8 million. The growth, however, stemmed solely from the search advertising segment linked closely with Microsoft Bing. During the quarter, search revenue flourished by 26% to $82 million, whereas the ad solutions segment faced a 5% decline, bringing in $75.8 million. Within ad solutions, robust growth in retail media by 134% to $14.9 million, and connected TV (CTV) by 108% to $8.2 million offset the strenuous 52% decrease in video revenue, causing the overall decline.
This setback translated to an 8% drop in revenue excluding traffic acquisition costs, and a 35% tumble in adjusted EBITDA to $20.3 million. Adjusted earnings per share took a 27% hit, falling to $0.44 although still above the estimated $0.22. CEO Tal Jacobson remained optimistic, asserting Perion’s resilience in overcoming challenges, notably the recent shifts in advertising dynamics orchestrated by Microsoft Bing.
Future Prospects in the Shadow of Adversity
Despite the looming shadow of the Microsoft debacle, Perion maintained subdued guidance for the year, eyeing revenue growth in the range of $590 million to $610 million, aligning with projections. In the coming quarter, revenue is anticipated to clock in between $118 million and $122 million, with adjusted EBITDA expected to range from $10 million to $12 million, reflecting the repercussions of the Microsoft Bing dynamics.
Perion’s bets on innovative AI offerings like SORT cookieless tracking technology and WAVE generative audio AI technology for digital audio promise growth avenues. The exponential rise in retail media and CTV also paints a hopeful picture, despite the hurdles posed by Bing’s changes and the dwindling video revenue.
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