DATA-DRIVEN AD TECH SOLUTIONS FOR BRANDS & PUBLISHERSCOMPANY DECK
August 2020
1
$333B2019
Global DigitalAd Spend
BIGADDRESSABLEMARKET
2
Source: eMarketer.com 6/2020
ADDRESSABLEMARKET
HUGE $526B2024 FC,
Global DigitalAd SpendTOMORROW
3
Source: eMarketer.com 6/2020
THE GIANTS ARE CONSOLIDATING THE WORLD 65%
4
Source: eMarketer.com 6/2020
ON AD SPENDINGTHE COVID19 IMPACT
According to eMarketer, short-term change in average digital Ad spending due to the Pandemic decreased 25%-35%
Source: eMarketer.com 4/2020
5
6
Perion is well-positioned to capitalize on any shifting budget between3 main pillars of digital advertising
265,470299,537
333,993365,554
391,781411,810
426,124
2017 2018 2019 2020 2021 2022 2023
PERION’S DIVERSIFICATION STRATEGY
Ad Spend ($M)
Source: Statista 10/2019
Search Advertising 45%
Social Advertising 35%
Display Advertising 20%
PERION’SDIVERSIFICATION STRATEGYSEARCH ADVERTISING
VIDEO & DISPLAY
20%
SEARCH42%
SOCIAL MEDIA
38%
7
Online retailers are leading to greater competition in the auction
Improved algorithms accuracy
Direct correlation between search and online purchases.
MARKETTRENDS
8
Source: eMarketer.com 6/2020
Search Ad Spending $MWorldwide, 2019-2024
FOR 10 YEARSA STRATEGIC PARTNER
9
* Microsoft 10K 7/2020** Statcounter.com, 7/2020
963MUNIQUE
GLOBAL VISITORS
144BYEARLY
SEARCHES
18.5%SEARCH SHARE
IN U.S. (PC)**
IN NUMBERS
+1%GROWTH IN REVENUES*
$7.7BIN REVENUESFY2020 YTD*
10
CODEFUELMARKET RECOVERY
11
BEND THE CURVEOUTPERFORM THE BENCHMARK
-2% YoY
12
37.6
34.4 33.3 34.331.6
29.631.0
34.7 35.3
42.344.2
51.8
42.3 41.6
Q1-1
7
Q2-1
7
Q3-1
7
Q4-1
7
Q1-1
8
Q2-1
8
Q3-1
8
Q4-1
8
Q1-1
9
Q2-1
9
Q3-1
9
Q4-1
9
Q1-2
0
Q2-2
0
Based on benchmark -25%
YoY
+10
COLLABORATION WITH CHECK POINT
66
Keywords Data
TrafficValidation
CodeFuel Hosted Search
DataAnalysis
Device GEO ad Unit Channel A/B testing
Search Query
RevenuesOptimization(CPC / RPM)
13
COLLABORATION WITH
14
You Have the Right to Remain Private
73%Of consumers surveyed are more aware of data breaches compared to five years ago
78%said they are taking action to limit the amount of personal information they share online
PRIVADOCO-DEVELOPED BY CODEFUEL AND MICROSOFT
15
Advertising
16
PERION’SDIVERSIFICATION STRATEGYDISPLAY & SOCIAL ADVERTISING
Brands in housing media buying capabilities
Performance marketing growing
Death of the cookie imminent
Continued growth of walled gardens
Creative matters
KEY GUIDING TRENDS
17
FULL FUNNEL– CUSTOMER JOURNEY
18
(RPM) (CPM)
O&O Sites
Personalized Content and
Layout
5-7 minutes
per session
Audience targeting Buying System
Landing Page
Display Ad Units
DisplayTo Search
Cost Per Click
Maximize PPS – Profit Per Session
ADVERTISINGSTRATEGYFull Funnel Attribution Modeling
AdIntelligence Graph (AIG)
(CPA)
19
Action
PredictiveAnalytics
O&O BUSINESS MODEL EVOLUTION
Yield optimization
Platform
Display 2 SearchFormat
CIQAs a Service
CIQAs a Platform
Enhance Synchronized
digital branding
Q2/2020 2021Q3/2020 Q3/2020Q1-Q3 /2020
Establish O&O Network
Externalized ContentIQ servicesTo other publishers (Mini-Site)
CIQ Synergy with CodeFueland Undertone
20
21
18.621.3 21.6
26.423.7
18.7
39.942.4
Q1-1
9
Q2-1
9
Q3-1
9
Q4-1
9
Q1-2
0
Q2-2
0
H1-1
9
H1-2
0
ADVERTISING – KEEPING THE MOMENTUM DESPITE COVID
CONNECTING THE WORLD’S BEST BRANDS & PUBLISHERS WITH AWARD-WINNING CREATIVES
AWARDSPUBLISHERSBRANDS
22
PERION’S TURNAROUND – A THREE PHASES’ APPROACH
Cost optimization Building Tech-Moat Ignite GrowthPhase 1 Phase 2 Phase 3
23
Key Turnaround Financial Optimization Milestone ($M)
24
92.586.2 86.9
77.7
64.6 64.4 62.3 60.7
50.2
40.8 39.7 40.5
31.0
20.8 18.8 16.7 14.6 12.5
-43.7
35.4
Q1-16 Q2-16 Q3-16 Q4-16 Q1-17 Q2-17 Q3-17 Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 Q1-19 Q2-19 Q3-19 Q4-19 Q1-20 Q2-20
Debt Net Cash
Phase 1
In H1 2020 we paid $15M for CIQ acquisition.Total Cash $47.9MTotal Debt $12.5M
Cost optimization
25
33%
28%26% 26%
6% 7% 8%10%
2017 2018 2019 2020
Revenue OPEX R&D
* 2020 revenues and expenses are based on management mid point guidance and analysts’ estimates
Building Tech-Moat
Ignite Growth
274
253261
2017 2018 2019 2020
GROW
TH D
RIVE
RS
ContentIQ / PubOceanAccretive acquisition
Microsoft partnership,Launch of Privado
Synergistic AD solution
Revenues ($M)
26
276-286
27
1. CIQ costs synergy2. Vendors and consultants'
terms renegotiation3. Reduced travel and
marketing expenses4. Reduced rent expenses5. Automation processes to
reduce costs
All the measures we’ve taken resulted in more than $10 million of proforma* cost savings annualized
Proforma Cost-Savings of more than $10M YoY
0.7
1.8
2.6
5.6
R&D
G&A
S&M
COGS
WHAT WE’VE DONE SO FAR:
* - combined financial results of CIQ as if it was acquired at the beginning of 2019.
ADJUSTED EBITDA ($M)2019 - 2020
27
29.6
32.5
7.4
2.5
8.7
11-13
2018 2019 Q2-19 Q2-20 H1-20 H2-20
H2 2020 Guidance
2020GUIDANCE Based on our current
visibility we expect the following results:
28
($M) H1 2020 H2 2020 2020
Revenue $126.4 $150-$160 $276-$286
Adj EBITDA $8.7 $11-$13 $20-$22
www.perion.com29
Appendix
Balance Sheet Overview ($M)
Current Assets 31/12/2019 30/06/2020 Current Liabilities 31/12/2019 30/06/2020
Cash and cash equivalents 38.4 31.0 Current maturities of long-term loans and Convertible debt 8.3 8.3
Restricted cash 1.2 1.2 Accounts payable 47.7 36.6
Short-term bank deposit 23.2 16.9 Accrued expenses and other liabilities 18.4 15.0
Accounts receivable, net 49.1 35.9 Short-term operating lease liability 3.7 3.8
Prepaid expenses and other current assets 3.2 3.3 Deferred revenues 4.2 3.9
115.1 88.3 Payment obligation related to acquisitions 1.0 13.9
83.3 81.5
Non-Current Assets 31/12/2019 30/06/2020 Long-Term Liabilities 31/12/2019 30/06/2020
Property and equipment, net 10.9 8.6 Long-term Debt 8.3 4.2
Operating lease right-of-use assets 22.4 20.7 Long-term operating lease liability 20.4 18.4
Intangible assets, net 2.7 17.2 Payment obligation related to acquisitions - 12.1
Goodwill 125.8 149.2 Other long-term liabilities 6.6 6.0
Deferred taxes & Other assets 6.9 6.5 35.3 40.7
168.7 202.2
Shareholders' Equity 31/12/2019 30/06/2020
165.2 168.3
Total Assets 283.8 290.5 Total Liabilities and Shareholders' Equity 283.8 290.5
30
Income Statement GAAP Basis ($M)
31
Q1-18 Q2-18 Q3-18 Q4-18 Q1-19 Q2-19 Q3-19 Q4-19 Q1-20 Q2-20 2017 2018 2019 2019 2020
Advertising 29.3 33.2 26.2 37.3 18.6 21.3 21.6 26.4 23.8 18.7 134.5 126.0 87.9 39.9 42.4
Search and other 31.6 29.6 31.0 34.7 35.2 42.3 44.2 51.8 42.3 41.6 139.5 126.8 173.6 77.5 84.0
Total Revenues 60.9 62.8 57.2 72.0 53.8 63.6 65.8 78.2 66.1 60.3 274.0 252.8 261.5 117.4 126.4
Customer acquisition costs 31.9 31.1 28.8 36.6 27.4 33.2 34.2 41.1 36.1 36.8 130.9 128.4 135.9 60.6 72.9
Media Margin 29.0 31.7 28.4 35.4 26.4 30.4 31.6 37.1 30.0 23.5 143.1 124.4 125.6 56.8 53.5
% of Revenues 47.6% 50.5% 49.7% 49.2% 49.1% 47.8% 48.0% 47.4% 45.4% 39.0% 52.2% 49.2% 48.0% 48.4% 42.3%
Cost of revenues 6.1 5.8 5.5 6.4 5.8 6.1 6.8 6.9 5.8 4.9 24.7 23.8 25.6 11.9 10.7
Gross Margin 22.9 25.9 22.9 29.0 20.6 24.3 24.8 30.2 24.2 18.6 118.4 100.6 100.0 44.9 42.8
% Gross Margin 37.6% 41.2% 40.0% 40.3% 38.3% 38.2% 37.7% 38.6% 36.6% 30.8% 43.2% 39.8% 38.2% 38.2% 33.9%
Research and development 5.5 4.7 4.4 4.3 4.9 5.6 6.0 6.1 7.2 7.1 17.2 18.9 22.6 10.5 14.3
Selling and marketing 9.7 10.1 8.6 10.5 8.3 8.7 8.6 9.0 9.7 8.2 52.7 38.9 34.7 17.0 17.9
General and administrative 4.3 4.9 3.9 3.4 3.0 3.4 3.6 5.0 3.9 3.6 21.9 16.4 15.0 6.4 7.5
Depreciation and amortization 2.1 2.5 2.5 2.6 2.4 2.3 2.6 2.4 2.4 2.2 16.6 9.7 9.7 4.7 4.6
Impairment, loss of goodwill and intangibles - - - - - - - - - - 85.7 - - - -
Restructuring charges 1.1 0.9 - - - - - - - - - 2.0 - - -
Total OPEX 22.7 23.1 19.4 20.8 18.6 20.0 20.8 22.5 23.2 21.1 194.1 85.9 82.0 38.6 44.3
% of Revenues 37.3% 36.8% 33.9% 28.9% 34.6% 31.4% 31.6% 28.8% 35.1% 35.0% 70.8% 34.0% 31.4% 32.9% 35.0%
EBIT 0.2 2.8 3.5 8.2 2.0 4.3 4.0 7.7 1.0 (2.5) (75.7) 14.7 18.0 6.3 (1.5)
% of Revenues 0.3% 4.5% 6.1% 11.4% 3.7% 6.8% 6.1% 9.8% 1.5% (4.1%) (27.6%) 5.8% 6.9% 5.4% (1.2%)
Financial expense, net 0.6 1.2 1.2 0.8 1.3 1.0 0.4 0.7 - 0.7 5.9 3.8 3.5 2.3 0.7
Tax expenses (benefit) (0.5) 0.6 0.1 2.5 (0.5) 0.4 0.7 1.1 (0.3) (1.0) (8.8) 2.8 1.6 (0.1) (1.3)
Net Income (Loss) 0.1 1.0 2.2 4.9 1.2 2.9 2.9 5.9 1.3 (2.2) (72.8) 8.1 12.9 4.1 (0.9)
% of Revenues 0.2% 1.6% 3.8% 6.8% 2.2% 4.6% 4.4% 7.5% 2.0% -3.6% -26.6% 3.2% 4.9% 3.5% -0.7%
Net Earnings per Share - Basic 0.00 0.04 0.08 0.19 0.05 0.11 0.11 0.23 0.05 (0.08) (2.81) 0.31 0.50 0.16 (0.03)
Net Earnings per Share - Diluted 0.00 0.03 0.08 0.19 0.05 0.11 0.11 0.22 0.05 (0.08) (2.81) 0.31 0.49 0.16 (0.03)
Full year ended, 6 Months ended,
Cash Flow Overview ($M)
32
Q1-18 Q2-18 Q3-18 Q4-18 Q1-19 Q2-19 Q3-19 Q4-19 Q1-20 Q2-20 2017 2018 2019 2019 2020
Operating activities
Net Income 0.1 1.0 2.2 4.9 1.2 2.9 2.9 5.9 1.3 (2.2) (72.8) 8.1 12.9 4.1 (0.9)
Adjustments required to reconcile net income to net cash 14.5 1.9 8.8 (0.6) 12.8 5.5 8.2 5.3 1.2 2.4 108.8 24.7 31.8 18.3 3.5
Net cash provided by continuing operating activities 14.6 2.9 11.0 4.3 14.0 8.4 11.1 11.2 2.5 0.2 36.0 32.8 44.7 22.4 2.6
Investing activities
Deposits and others 5.1 (0.4) (1.6) (4.9) (2.9) 0.6 (10.8) (6.8) 15.4 (9.2) (4.8) (1.8) (19.9) (2.3) 6.3
M&A activity - - - - - (1.2) - - (9.3) (4.5) - - (1.2) (1.2) (13.8)
Net cash provided by (used in) investing activities 5.1 (0.4) (1.6) (4.9) (2.9) (0.6) (10.8) (6.8) 6.1 (13.7) (4.8) (1.8) (21.1) (3.5) (7.5)
Financing activities
Net cash used in financing activities (9.6) (9.5) (3.2) (0.7) (11.7) (10.0) (1.5) (1.5) (0.5) (1.9) (23.9) (23.0) (24.8) (21.7) (2.4)
Effect of exchange rate changes on cash and cash equivalents 0.1 (0.1) 0.1 - (0.1) - - - (0.1) 0.0 0.3 0.1 - (0.1) (0.1)
Net increase (decrease) in cash and cash equivalents and restricted cash 10.2 (7.1) 6.3 (1.3) (0.7) (2.2) (1.2) 2.9 8.0 (15.4) 7.6 8.1 (1.2) (2.9) (7.4)
Cash and cash equivalents and restricted cash at beginning of period 32.7 42.9 35.8 42.1 40.8 40.1 37.9 36.7 39.6 47.6 25.1 32.7 40.8 40.8 39.6
Cash and cash equivalents and restricted cash at end of period 42.9 35.8 42.1 40.8 40.1 37.9 36.7 39.6 47.6 32.2 32.7 40.8 39.6 37.9 32.2
Full year ended, 6 Months ended,
Non-GAAP Adjustments ($M)
33
Reconciliation of GAAP to NON-GAAP Results Q1-18 Q2-18 Q3-18 Q4-18 Q1-19 Q2-19 Q3-19 Q4-19 Q1-20 Q2-20 2017 2018 2019 2019 2020
GAAP Net Income (Loss) from continuing operations 0.1 1.0 2.2 4.9 1.2 2.9 2.9 5.9 1.3 (2.2) (72.8) 8.1 12.9 4.1 (0.9)
Share based compensation 0.6 0.9 0.6 0.6 0.5 0.5 0.7 0.7 1.1 0.8 2.1 2.7 2.3 1.0 1.9
Amortization of acquired intangible assets 1.2 1.2 1.2 1.2 1.0 1.0 1.1 1.0 1.2 1.1 13.0 4.8 4.3 2.0 2.2
Restructuring costs 1.1 0.9 - - - - - - - - - 2.0 - 0.0 -
Retention and other related to M&A related expenses 0.2 - - 0.1 0.3 0.3 0.3 1.4 1.8 1.8 0.2 0.4 2.4 0.6 3.7
Impairment of goodwill and intangible assets - - - - - - - - - - 85.7 - - 0.0 -
Fair value revaluation of convertible debt and related derivative 0.1 0.7 0.3 (0.3) 0.3 (0.2) - - - - 1.2 0.8 0.1 0.1 -
Foreign exchange losses associated with ASC-842 - - - - 0.3 0.2 0.2 - (0.3) 0.2 - - 0.7 0.5 (0.1)
Earnout Financial expenses - - - - - - - - - 0.3 - - 0.0 0.0 0.3
Taxes on the above items (0.3) 0.0 0.0 (0.7) (0.3) (0.2) (0.2) (0.2) (0.1) (0.1) (12.0) (1.0) (1.0) (0.5) (0.2)
Non-GAAP Net Income from continuing operations 3.0 4.7 4.3 5.8 3.3 4.5 5.0 8.8 5.0 1.9 17.4 17.8 21.7 7.8 6.9
Taxes on income (0.1) 0.6 0.1 3.2 (0.2) 0.7 0.9 1.2 (0.3) (0.9) 3.2 3.8 2.6 0.5 (1.1)
Financial expense, net 0.5 0.5 1.0 1.1 0.7 1.0 0.2 0.7 0.3 0.2 4.7 3.1 2.7 1.7 0.5
Depreciation 0.9 1.3 1.3 1.4 1.3 1.2 1.5 1.4 1.2 1.2 3.6 4.9 5.5 2.6 2.4
Adjusted EBITDA 4.3 7.1 6.7 11.5 5.1 7.4 7.6 12.1 6.2 2.4 28.9 29.6 32.5 12.6 8.7
Non-GAAP diluted earnings per share 0.12 0.17 0.16 0.21 0.12 0.17 0.18 0.32 0.17 0.07 0.72 0.65 0.83 0.30 0.24
Full year ended, 6 Months ended,
P&L Non-GAAP ($M)
34
Q1-18 Q2-18 Q3-18 Q4-18 Q1-19 Q2-19 Q3-19 Q4-19 Q1-20 Q2-20 2017 2018 2019 2019 2020
Advertising 29.3 33.2 26.2 37.3 18.6 21.3 21.6 26.4 23.7 18.7 134.5 126.0 87.9 39.9 42.4
Search and other 31.6 29.6 31.0 34.7 35.3 42.3 44.2 51.8 42.3 41.6 139.5 126.9 173.6 77.5 84.0
Total Revenues 60.9 62.8 57.2 72.0 53.8 63.6 65.8 78.3 66.1 60.3 274.0 252.8 261.5 117.4 126.4
Customer acquisition costs 31.9 31.1 28.8 36.6 27.4 33.2 34.2 41.1 36.1 36.8 130.9 128.4 135.9 60.6 72.9
Media Margin 29.0 31.7 28.4 35.4 26.4 30.4 31.6 37.1 29.9 23.5 143.1 124.5 125.6 56.8 53.5
% of Revenues 47.6% 50.5% 49.6% 49.2% 49.1% 47.8% 48.1% 47.5% 45.3% 39.0% 52.2% 49.2% 48.0% 48.4% 42.3%
Cost of revenues 6.0 5.8 5.4 6.4 5.7 6.0 6.8 6.8 5.7 4.9 24.6 23.6 25.4 11.8 10.6
Gross Margin 23.0 25.9 22.9 29.0 20.7 24.4 24.8 30.3 24.2 18.6 118.5 100.9 100.2 45.0 42.9
% Gross Margin 37.8% 41.3% 40.1% 40.3% 38.4% 38.3% 37.8% 38.8% 36.6% 30.8% 43.2% 39.9% 38.3% 38.4% 33.9%
Research and development 5.4 4.6 4.2 4.2 4.8 5.5 5.1 5.7 6.1 6.1 17.0 18.4 21.1 10.3 12.2
Selling and marketing 9.5 9.9 8.4 10.3 8.1 8.6 8.5 9.0 8.7 7.2 52.0 38.1 34.2 16.7 15.9
General and administrative 3.8 4.3 3.6 3.0 2.7 2.8 3.6 3.4 3.2 3.0 20.6 14.8 12.5 5.5 6.1
Depreciation and amortization 0.9 1.3 1.3 1.4 1.3 1.2 1.5 1.4 1.2 1.1 3.6 4.9 5.5 2.6 2.4
Total OPEX 19.6 20.1 17.6 19.0 16.9 18.2 18.7 19.5 19.2 17.4 93.1 76.3 73.3 35.1 36.6
% of Revenues 32.2% 32.0% 30.8% 26.4% 31.4% 28.6% 28.4% 24.9% 29.0% 28.9% 34.0% 30.2% 28.0% 29.9% 29.0%
EBIT 3.4 5.8 5.3 10.1 3.8 6.2 6.1 10.8 5.0 1.2 25.4 24.6 26.9 10.0 6.3
% of Revenues 5.6% 9.2% 9.3% 14.0% 7.0% 9.7% 9.3% 13.8% 7.6% 2.0% 9.3% 9.7% 10.3% 8.5% 5.0%
Financial expense, net 0.5 0.5 1.0 1.1 0.8 1.0 0.2 0.7 0.3 0.2 4.7 3.0 2.7 1.8 0.5
Tax expenses (benefit) (0.1) 0.6 0.1 3.2 (0.2) 0.7 0.9 1.3 (0.2) (0.9) 3.2 3.8 2.6 0.4 (1.1)
Net Income (Loss) 3.0 4.7 4.3 5.8 3.3 4.5 5.0 8.9 5.0 1.9 17.4 17.8 21.6 7.8 6.9
% of Revenues 5.0% 7.4% 7.5% 8.1% 6.0% 7.1% 7.6% 11.3% 7.5% 3.2% 6.4% 7.0% 8.3% 6.6% 5.5%
Net Earnings per Share - Diluted 0.12 0.17 0.16 0.21 0.12 0.17 0.18 0.32 0.17 0.07 0.24 0.65 0.83 0.30 0.24
Full year ended, 6 Months ended,
PERION ADVERTISING STRATEGYTRENDS
PERION PRIVATE WALLED GARDEN FOR BRANDADVERTISING INTENT GRAPH
Brands in housing media buying capabilities
Performance marketing growing
Death of the cookie imminent
Continued growth of walled gardens
Creative matters
KEY GUIDING TRENDS