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GLOBAL AD TECH COMPANYFOR BRANDS & PUBLISHERSPowered by technology. Enriched by data.
This press release contains historical information and forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995with respect to the business, financial condition and results of operations of Perion. The words “will”, “believe,” “expect,” “intend,” “plan,” “should” and similarexpressions are intended to identify forward-looking statements. Such statements reflect the current views, assumptions and expectations of Perion withrespect to future events and are subject to risks and uncertainties. Many factors could cause the actual results, performance or achievements of Perion to bematerially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements, or financialinformation, including, among others, the failure to realize the anticipated benefits of companies and businesses we acquired and may acquire in the future,risks entailed in integrating the companies and businesses we acquire, including employee retention and customer acceptance; the risk that such transactionswill divert management and other resources from the ongoing operations of the business or otherwise disrupt the conduct of those businesses, potentiallitigation associated with such transactions, and general risks associated with the business of Perion including intense and frequent changes in the markets inwhich the businesses operate and in general economic and business conditions, loss of key customers, unpredictable sales cycles, competitive pressures,market acceptance of new products, inability to meet efficiency and cost reduction objectives, changes in business strategy and various other factors, whetherreferenced or not referenced in this press release. Various other risks and uncertainties may affect Perion and its results of operations, as described in reportsfiled by Perion with the Securities and Exchange Commission from time to time, including its annual report on Form 20-F for the year ended December 31, 2017filed with the SEC on March 27, 2018. Perion does not assume any obligation to update these forward-looking statements.
FORWARD LOOKING STATEMENTS
Non-GAAP financial measures, including adjusted EBITDA, consist of GAAP financial measures adjusted to exclude acquisition related expenses, other non-recurring expenses, share-based compensation expenses, accretion and gain from the reversal of acquisition related contingent consideration, impairment ofgoodwill, fair value revaluation of convertible debt and related derivative, amortization and impairment of acquired intangible assets and the related taxesthereon, as well as certain accounting entries under the business combination accounting rules that require us to recognize a legal performance obligationrelated to revenue arrangements of an acquired entity based on its fair value at the date of acquisition. The purpose of such adjustments is to give anindication of our performance exclusive of non-cash charges and other items that are considered by management to be outside of our core operating results.These non-GAAP measures are among the primary factors management uses in planning for and forecasting future periods. Furthermore, the non-GAAPmeasures are regularly used internally to understand, manage and evaluate our business and make operating decisions, and we believe that they are useful toinvestors as a consistent and comparable measure of the ongoing performance of our business. However, our non-GAAP financial measures are not meant tobe considered in isolation or as a substitute for comparable GAAP measures, and should be read only in conjunction with our consolidated financial statementsprepared in accordance with GAAP. Additionally, these non-GAAP financial measures may differ materially from the non-GAAP financial measures used byother companies.
NON-GAAP MEASURES
2
2
Confidential
3
• Setting the stage
• Advertising
• Search
• Investment opportunity
• Financials
Agenda
Confidential
4
• A new management committed to improving revenue
and profit through innovative technology
• Strong financial positioning (positive net cash position
for the first time in four years). Supporting annual
investment of $20M in R&D solely
• Long-term collaboration with Bing and other
Advertising industry leaders
• Undertone’s Synchronized Digital Branding platform is
the perfect solution to the industry’s fragmented
brand story
Investment Opportunity
5
Setting The Stage
Confidential
6
Perion Evolution
Founded
Reverse merger with Conduit
Publicly listed NASDAQ
15/12 Acquired
1999
2006
2007
Publicly listed TASE
20152014
~400 employees with main offices
in Tel Aviv and New York
2015
15/02 Acquired
2018
Confidential
7
We provide data-driven
online advertising solutions
and search monetization
to brands and publishers,
in order to provide an
holistic experience for
brands and users
Awareness
Consideration
Intent
Buy
BRAND PERFORMANCE
BRAND AWARENESS
Who We Are
ADVERTISING
SEARCH
Confidential
8
Management Turnaround Plan
Revenue GrowthDifferentiated Technology
Cost Optimization
Confidential
Financial Highlights ($ M)
Q3-17 Q3-18 %
65.0 57.2 -12%
31.7 26.2 -17%
33.3 31.0 -7%
Revenue
Advertising
Search and Other
6.5 6.7 3%Adjusted EBITDA
274.0
134.5
139.5
2017
28.9
17.1 11.0 -36%Cash from Operations 36.0
Net Cash (Net Debt) (23.2)
Cash and Cash Equivalents 37.5
Debt 60.7
2018 Guidance Adjusted EBITDA 29-32 ($ M)
YTD-17 YTD-18 %
196.7 180.9 -8%
91.4 88.7 -3%
105.3 92.2 -12%
17.0 18.1 6%
28.8 28.5 -1%
(26.8) 1.2 -104%
35.5 40.9 15%
62.3 39.7 -36%
9
Confidential
Overall decrease of $27M
Net Debt
Cash and Cash Equivalents
Debt
31.4 35.5 40.9
86.9 62.3 39.7
55.5 26.8 -1.2
Net Debt and Cost Optimization ($ M)
YTD-16 YTD-17 YTD-18
*Non-GAAP
2016 2017YTD-18
Run-rate
G&A + S&M + R&D* 102 90 75
10
Confidential
Financial Debt and Free Cash Flow Evolution ($ M)
2016 2017 Q1-18 Q2-18 Q3-18
Cash Flow from Operating activities 30.5 36.0 14.6 2.9 11.0
Investment in Equipment and Capitalization cost (5.9) (7.4) (0.8) (0.4) (1.6)
Free Cash Flow 24.5 28.7 13.8 2.5 9.4
Q3-18 First Quarter Achieving Positive Net Cash Position for the First Time in Four Years
3944 42
5645 42 42
27 23 8 6
-1
9992
86 8778
65 64 62 6150
41 40
-10
10
30
50
70
90
110
2015 Q4 2016 Q1 2016 Q2 2016 Q3 2016 Q4 2017 Q1 2017 Q2 2017 Q3 2017 Q4 2018 Q1 2018 Q2 2018 Q3
Net Debt Gross Debt
11
YTD
26.1
Confidential
US Digital Ad Spending, by Format (USD, B)
5
6
28
51
24
41
48
84
2018
2022
Rich Media Video Standard Display Search Other
Global Digital Ad Spend 2018:
$273B
Global Digital Ad Spend 2022:
$427B
Source: eMarketer, October 2018
111
188
CAGR 4% 16% 14% 15% 14%
Addressable Market Accelerated Growth
12
13
Perion Advertising
Confidential
The Industry Challenge
“We emphasized the importance of consistency in brand
building. Focusing less on volume of advertising [and]
more on quality [to] make sure it’s consistently seen
as your brand across the wide variety of mediums
to get people to turn toward it.”
(Procter & Gamble's Chief Brand Officer, Marc Pritchard, Forbes, October 2016)
Synchronized Digital Branding
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Our Solution
Confidential
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Brands Publishers
LIFESTYLENEWS
BUSINESS TRAVEL
HEALTH REAL ESTATE
ENTERTAINMENT SPORTS
Connecting the world’s best brands and publishers
16 Years in Business
Confidential
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Awareness
Consideration
Intent
Buy
Synchronized Digital Branding
Sequence of Ads is
AI-based to optimize
engagement in each
touchpoint across the
funnel, creating a
customized customer
experience
Cross Platform
Cro
ss C
han
nel
Display & Video Social Search
Des
kto
pM
ob
ileO
TT
3rd
Ad2nd
Ad1st
Ad
2nd
Ad
3rd
Ad
Confidential
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Your Brand Creative –
Performance in MindAwareness Touchpoint Consideration Touchpoint Intent Touchpoint
VIDEO
JPG
FONT
LOGO
Ad Story Across the Funnel
DEMO
DEMODEMO
DEMO
Confidential
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DEMO
DEMO
DEMO
Aware of the total-
look line of products Page Grabber
Consider the
newest eyeshadow Brand Reveal
Intent to share
with your friends via gift-card Enhanced Standard
DEMO
Amplified to other potential lookalike consumer via Social Instagram
Awareness
Consideration
Intent
Buy
Campaign objective: 25% YoY increase in Gift-Cards
Confidential
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Funnel Activity (Impressions) Cost per Activity
8,504,276Awareness Activities
$0.10 Cost per Awareness
986,661Consideration Activities
$0.80 Cost per Consideration
12,395Intent Activities
$63.44 Cost per Intent
Optimizing Engagement in Sequence of Touchpoints
Awareness
Consideration
Intent
Buy
Confidential
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Engagement
Beating the Market Metrics
1.19%
24.81%
$0.60
$0.08 0.27%
1.93%
CTR Attention*(Cost Per Second)
*CPAT: Cost per Second of Attention. Undertone: Cost/Interaction Time (Seconds). TV based on average cost, viewership and attention assumptions Sources: Undertone 2018 benchmarks, Sizmek 2017 benchmarks, Ad Age
Industry Undertone Industry Undertone Industry Undertone
Sizmek RM/Undertone HI
Sizmek RM/Undertone HI
30sec National TV/Undertone HI
Confidential
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Undertone Growth Strategy
Short-term Long-termNear term Long term
Data-based AI to better optimize campaign performance
across all touchpoints, by delivering a coherent brand story across all
media platforms & channels
Innovate technology that enables advertisers to manage their brand
campaigns with a holistic, scalable & profitable solution
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Perion Search
Confidential
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The Search Market
Source: eMarketer, September 2018Source: Microsoft, August 2017
34%Bing Ads Search Share
in US (PC)
145MBing Unique Searchers
6BBing Monthly Searches
While Mobile usage is on the rise, Desktop usage has remained consistent
Source: Microsoft, March 2018
Confidential
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OutlookMicrosoft Edge
Bing’s Strategic Partner
An extended agreement through 2020, is bolstering the
relationship with Bing and expanding Perion’s reach
within the Search ecosystem
Confidential
25
CodeFuel Monetization – User Flow
Extension installation through the browser
1
Changing homepage & default search engine
to Bing
2
A) A search leads the user to Bing search results pageOR
B) Customized search results page –CodeFuel proprietary
3 BA
Confidential
26
CodeFuel Growth Strategy
Expand product offerings through Bing
Diversify the
publishers pool
Develop internal
offerings (O&O, D2S)
Long-term relationship with Bing that drivesexpansion into joint adjacent products
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27
Investment Opportunity
Confidential
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Attractive Investment Opportunity
A new management committed to improving revenue and profit through innovative technology and lower cost structure
Strong cash flow and coverage ratios (Solid Net Debt to EBITDA ratio), enable continuous investment in Undertone
Long-term collaboration with Bing and other Advertising industry leaders
Our advanced technology combines Ad creative platform and AI capabilities, that deliver on-moment and on-target messages across the entire consumer journey
Undertone’s Synchronized Digital Branding platform provides the perfect solution to the siloed Ads that brand-conscious brands are facing
An Attractive Investment Opportunity in a
Fast-Growing Market
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Appendix
Confidential
Income Statement ($ M)
P&L 2017 YTD-17 YTD-18 Q3-17 Q3-18
Search 139.5 105.3 92.2 33.3 31.0
Advertising and other 134.5 91.4 88.7 31.7 26.2
Total Revenues 274.0 196.7 180.9 65.0 57.2
Cost of revenues (24.7) (17.0) (17.3) (5.7) (5.5)
Customer acquisition costs (130.9) (95.8) (91.8) (32.0) (28.8)
Research and development (17.2) (13.6) (14.6) (4.1) (4.3)
Selling and marketing (52.7) (38.4) (28.3) (11.8) (8.6)
General and administrative (21.9) (16.6) (13.1) (5.4) (3.9)
Depreciation and amortization (16.6) (13.3) (7.1) (3.5) (2.6)
Restructuring charges 0.0 0.0 (2.1) 0.0 0.0
Impairment, net change in fair value of contingent consideration (85.7) (43.8) 0.0 0.0 0.0
EBIT (75.7) (41.8) 6.6 2.5 3.5
% Revenue -27.6% -21.3% 3.6% 3.8% 6.1%
Financial expense, net (5.9) (4.2) (3.1) (0.6) (1.2)
Taxes on income 8.8 10.5 (0.3) 0.7 (0.1)
Net Income (Loss) (72.8) (35.5) 3.2 2.6 2.2
% Revenue -26.6% -18.0% 1.8% 4.0% 3.8%
Net Income Non-GAAP 17.4 11.1 12.0 4.1 4.3
% Revenue 6.4% 5.6% 6.6% 6.3% 7.5%
Adjusted EBITDA 28.9 17.0 18.1 6.5 6.7
% Revenue 10.6% 8.6% 10.0% 10.0% 11.7%
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Confidential
Non-GAAP Adjustments ($ M)
Reconciliation of GAAP to NON-GAAP Results 2017 YTD-17 YTD-18 Q3-17 Q3-18
CAAP Net Income (loss) from continuing operations (72.8) (35.5) 3.2 2.6 2.2
Share based compensation 2.1 1.7 2.1 0.5 0.6
Amortization of acquired intangible assets 13.0 10.7 3.6 2.6 1.3
Restructuring costs 0.0 0.0 2.1 0.0 0.0
Non-recurring Legal fees 0.2 0.0 0.2 0.0 0.0
Impairment of goodwill and intangible assets 85.7 43.8 0.0 0.0 0.0
Fair value revaluation of convertible debt and related derivative 1.1 0.6 1.1 (0.8) 0.2
Accretion of payment obligation related to acquisition 0.0 0.0 0.0 0.0 0.0
Taxes on the above items (11.9) (10.2) (0.3) (0.8) 0.0
Non-GAAP Net Income from continuing operations 17.4 11.1 12.0 4.1 4.3
Taxes on income 3.2 (0.3) 0.6 0.1 0.1
Financial expense, net 4.7 3.6 2.0 1.4 1.0
Depreciation 3.6 2.6 3.5 0.9 1.3
Adjusted EBITDA 28.9 17.0 18.1 6.5 6.7
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Confidential
Balance Sheet Overview as of 30.09.2018 ($ M)
Current Assets Current Liabilities
Cash and cash equivalents & Short-term bank deposit 40.9 Current maturities of long-term loans 13.5
Accounts receivable, net 43.2 Accounts payable 36.2
Prepaid expenses and other current assets 8.6 Accrued expenses and other liabilities 13.8
92.7 Deferred revenues 3.9
Payment obligation related to acquisitions 3.4
70.8
Non-Current Assets Long-Term Liabilities
Property and equipment, net 16.2 Long-term Debt 26.2
Intangible assets, net 7.6 Other long-term liabilities 6.4
Goodwill 125.1 32.6
Deferred taxes & Other assets 5.2
154.1 Shareholders' Equity
143.4
Total Assets 246.8 Total Liabilities and Shareholders' Equity 246.8
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