PERI Q3 2024: Digital OOH & Retail Media +62% Offsets Slump
- High-Growth Channel Expansion: Management highlighted robust momentum in growth engines such as Digital out of Home (+63% YoY), Retail Media (+62% YoY), and CTV, with synergies from acquisitions like Hivestack boosting inventory by 40% and enhancing omnichannel solutions, which supports a bullish outlook for future revenue growth.
- Advanced AI and Platform Innovation: The executives emphasized their focus on AI-driven technologies—including dynamic content optimization, generative AI audio ads, and integrated digital platforms—which position the company to capture premium inventory in a competitive landscape and deliver improved ROI for advertisers.
- Improving EBITDA Margins and Financial Resilience: Despite current challenges in legacy segments, management expects EBITDA margins (ex-TAC) to improve in the coming year through operational efficiencies, scale with existing resources, and a strong net cash position, providing a solid base for future profitability.
- Declining legacy revenue streams: The Search business suffered a 76% year-over-year decline and legacy display/video segments are weakening due to falling performance in open web video and standard formats, increasing the reliance on newer, unproven growth engines.
- Uncertainty over Microsoft tail revenue: The non-renewal of a significant Microsoft contract creates uncertainty regarding the residual revenue tail—expected to be de minimis in 2025—with unclear magnitude and timing.
- Seasonal and pricing pressures in CTV: CTV growth is vulnerable to seasonal variations such as the lack of live events during summer and lower CPMs, potentially dampening near-term margins and growth.
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Revenue & Margins
Q: When will revenue and margins improve?
A: Management expects Advertising Solutions to show slight improvement in Q1 2025 with real growth in Q3, and EBITDA margins ex‑TAC to be slightly higher thanks to operational efficiencies, without changing the pricing model. -
Microsoft Tail
Q: How long will Microsoft tail revenue persist?
A: The Microsoft agreement delivers a tail into 2025 at a de minimis level—around less than 2% of revenue for the full year—though exact timing remains uncertain. -
CTV Trends
Q: What drove CTV performance this quarter?
A: CTV grew 19% year‑over‑year; weaker summer live events slowed growth, with expectations for a rebound as live programming picks up in September. -
DoOH Innovation
Q: How is programmatic DoOH evolving?
A: Digital Out‑of‑Home is achieving strong growth as programmatic adoption accelerates, further enhanced by integrating Hivestack to unlock 40% more inventory for retailers. -
Search Risk
Q: Is Yahoo search at risk like Microsoft?
A: Management sees no similar risks with Yahoo; the Search business remains a non‑strategic but steady revenue contributor despite past challenges with Microsoft. -
Display Trends
Q: What factors affect display and video trends?
A: Weakness in open web display and video inventory is evident as clients shift toward premium, higher‑margin channels, with improvements expected next year. -
Hivestack Synergy
Q: Is the Hivestack integration effective?
A: The integration of DCO into Hivestack has boosted inventory by 40%, strengthening synergies with retail advertisers and driving growth. -
M&A Outlook
Q: What is the current M&A strategy?
A: The focus remains on acquiring EBITDA‑positive businesses with strong technological synergies to further rebuild and expand growth engines.
Research analysts covering Perion Network.