Perion Network is Undervalued; Here’s Why…
Perion Network is facing one of its greatest tests to date. The digital advertiser lost a key component of its business and Wall Street is punishing them. We first wrote about Perion after the stock fell 40%, to $12.50, in April 2024. At the time, the company looked cheap and the market’s reaction seemed slightly irrational given the durability of its business model and financial robustness. However, Perion suffered a major setback when it announced in mid-June that Microsoft, its #1 customer, planned to exclude it, and several partners, from its search distribution marketplace. This was detrimental to Perion because it was expected to cut revenue and profits substantially in 2024. Following the announcement, Microsoft’s search advertising platform would account for less than 5% of revenue; compared to 34% of revenue in 2023 ($247 million). By any measure, Perion was being punished and the market was responding accordingly. The stock fell another 34% on the news, and the business has been trading around $8.60 per share at a market cap of $423 million. The good thing is that this creates a tremendous opportunity. What Wall Street failed to consider was that Perion Network was diversifying and expanding. In several ways, the Microsoft partnership was an anticipated risk, and management was preparing for the shift by investing heavily in markets outside of its search advertising domain. These efforts are expected to improve its intrinsic value over the long run while enhancing its business fundamentals immediately. Now, it is time to see what makes this potential investment attractive. In this article, we highlight the diversity of Perion Network’s business and outline several valuation approaches demonstrating how it appears mispriced by the market. Under these assumptions, we are doubling down on Perion Network’s long-term investment prospects. Here’s why… A Quick Overview of Perion Network Perion Network is an ad tech company with a two-pronged business model: search advertising and advertising solutions. One of its primary objectives is to help advertisers connect with people at several stages of the consumer journey. Search Advertising The company’s search advertising business operates like Google AdSense connecting advertisers to suppliers with a comprehensive and fully customizable solution that delivers maximum exposure and enhanced engagement. This offering has attracted a variety of premium publishers including Fortune, Nasdaq, Benzinga, Business Insider, LG, and HuffPost, among others. Perion coordinates with these publishers to distribute relevant ads without jeopardizing the user experience. In 2023, search advertising accounted for 46% ($344.9 million) of the company’s revenue while in Q2 2024 it fell to 32% ($34 million). As of the second quarter, Perion worked with 95 search publishers (-40% YoY) while achieving 16.3 million Average Daily Searches (+20% YoY). Keep in mind that there may be more heartache in the future as the company reduces its reach on Microsoft Bing. Though this is projected to be a significant loss, Perion continues to operate on Yahoo, YouTube, and every major social media platform. There are still opportunities to capitalize and generate exposure in this space, however, it is unclear what this market will look like moving forward. Advertising Solutions Despite losing a key piece of its business, Perion continues to see strong growth in the second half of its operations. Through its advertising solutions unit, the company has developed and acquired a series of leading advertising platforms and cutting-edge AI solutions. This accounted for $398.2 million (54%) of the company’s revenue in 2023 and $74.4 million (68%) in Q2 2024 while growing 23% annually since 2021–advertising solutions fell 25% YoY in Q1 2024. Here is a list of Perion Network’s offerings: 1. Connected TV (CTV) Advertising The company took a huge leap into the CTV market bridging the gap between traditional cable networks and modernized streaming platforms. Its CTV solution suite allows publishers to leverage a variety of formats including QR codes, polls, games, and more to reach targetted audiences. This is connected to big-time networks and platforms like CBS, ABC, FOX, and Paramount, among others! In Q2 2024, CTV advertising grew 42% YoY to $8.2 million (14% of advertising solutions revenue). According to eMarketer, CTV ad spending is expected to grow 72.4% to $42.4 billion in 2027, representing 10% of total digital ad spend in the US. 2. Digital Out-Of-Home (DOOH) Advertising Another key area of growth for Perion is its DOOH solutions. In 2023, the company acquired Hivestack, a leading DOOH organization for $100 million with access to more than 32 countries; including a recent partnership with Eletromidia Brazil, an OOH media company reaching more than 29 million people daily through over 64,000 DOOH screens. Perion’s DOOH platform is built to streamline operations and efficiently manage ads for distributors and advertisers. For example, the company’s campaign with Lululemon helped the retailer increase its brand image by 640%, interest by 208%, and footfall traffic by 314% while adding 4,296 incremental walk-ins. In Q2 2024, DOOH advertising grew 41% YoY to $13.0 million (18% of advertising solutions revenue). According to PQ Media, worldwide DOOH ad spending is expected to grow 42.8% to $30.7 billion in 2026. 3. Open Web Video One area that has been on the decline recently is Perion’s open web video unit. The company’s solutions enable advertisers to create and show customized ads with audio to attract consumer’s attention while scrolling the web. In the second quarter of 2024, revenue declined 66% YoY, representing 18% of sales in advertising solutions, compared to 44% in 2023. The company’s video solutions are a lower-margin business and thus management has shifted its attention toward display solutions with higher yields. Maoz Sigron, Perion’s COO expects this area to stabilize around 15% of sales in the unit moving forward. 4. Perion Network’s Proprietary AI Technology Alongside Perion’s advertising solutions, the company has built two AI tools to further enhance its capabilities. SORT 2.0 is Perion’s AI-based audience segmentation solution enabling advertisers to reach customers with targeted ads without invading their data and privacy. The technology analyzes all of the non-PII (Personally Identifiable Information) signals present when
How ALUULA made Fabric 8-times Stronger than Steel
ALUULA Composites (TSXV: AUUA) is expanding. After earning the respect of the windsports market with its patented composite materials, winning multiple world titles, and onboarding 16 global windsport brands, the company is set for its next stage of exponential growth. You see, ALUULA Composites developed one-of-a-kind fabrics that are lighter than nylon, eight times stronger than steel, and ultra-durable. More importantly, these fabrics are 100% recycle-ready due to the company’s patented fusion process that bonds high-tech fibers and technical films without the use of glues. This produces a unique material that is garnering the attention of several industries looking to enhance the quality of their products and equipment. For example, the world-renowned outdoor apparel brand, Arc’teryx, signed on to develop high-performance outdoor products using ALUULA’s ultralight fabrics. The company is also collaborating with MICHELIN Inflatable Solutions to maximize the construction potential of more environmentally sustainable composite materials. What most don’t understand is how versatile ALUULA’s composites are. Since 2019, the company introduced over 50 new products for clients in the windsport, aerospace, sailing, and outdoor markets. This product breadth speaks to the company’s growth opportunities and long-term business strategy. With revenue compounding 46.96% YoY (YTD Q2 2024), a growing product pipeline, and market-ready fabrics that trump the competition, there is no telling how high ALUULA Composites ceiling is. That is why now is the perfect time to explore this company. ALUULA has a fantastic opportunity to showcase its unique technical fabrics to the world and management is determined to make it happen. Let’s dive in. ALUULA’s Business Overview Founded in 2019, ALUULA originally set out to revolutionize the windsport market using its patented and proprietary materials that were recycle-ready, lighter, stronger, and more durable than existing fabrics. Product designs in the industry had reached maturity, and the company made a breakthrough in mono-polymer textiles that were fused without adhesives. ALUULA introduced athletes to fabric that enhanced mobility, strength, and durability of their kites, providing them with unmatched performance that enabled ALUULA to reach the top of the market in a short period. In just a couple of years, ALUULA went from being a little-known Victoria-based startup to establishing new performance standards in the industry and helping professional windsports athletes top podiums worldwide. At present, it is working with 16 windsports brands (e.g. Duotone, Naish, Ozone, NeilPryde, etc.), with nine currently offering commercial products that leverage ALUULA materials. However, this is only the start of ALUULA’s ambitions. Over the past six months, the company kickstarted a strategic refocus that would maximize the potential of its mono-polymer materials. This began with expansion into several new verticals (e.g. Outdoor, Sailing, Aerospace, etc.) and the completion of two new materials: ALUULA Durlyte™ and ALUULA Graflyte™. With a larger addressable market and improved product breadth, the company quickly attracted new clients and showcased its latest projects. This included partnerships with Arc’teryx and Durston Gear to develop ultra-lightweight backpacks, and a collaboration with Rockgeist who leveraged ALUULA’s unique fabric to build rugged bikepacking bags to travel faster and lighter in the mountains. ALUULA also inked an R&D project with MICHELIN Inflatable Solutions, a MICHELIN company, to maximize the construction potential of more environmentally sustainable composite materials, and had its materials featured by Max Space at the 39th Space Symposium in Colorado, USA. In all, the company has now sold its material to 28 customers who are in various stages of the development and testing process; 12 of these brands are projected to commercialize products by early 2025. As the company continues to engage with new clients and penetrate new industries, we expect that its market opportunity will grow exponentially over time. ALUULA’s New Leadership To maximize the potential of its strategic refocus, ALUULA welcomed Sage Berryman as its new President and CEO. Sage has an exceptional track record as a C-Suite exec, offering over 15 years of experience. In previous roles, she was critical in leading transaction partnerships valued at over $4 billion, specifically with innovative technology companies. Sage has provided transition and interim C-level services to several organizations during critical shifts, including Co-CEO of Ralmax Group, and currently sits on multiple boards, including Coast Opportunity Funds and Syniad Innovations. She completed her MBA at Queen’s University and received BC’s Top 40 under 40 and BC’s Top Influential Women in Business awards. With Sage overseeing ALUULA’s operations and business development strategy, founder Richard Myerscough is stepping down from his CEO and CIO positions but remains a valued member of the company’s board of directors. In his new role, he will continue to be a key contributor to ALUULA’s product innovation, spearheading its next generation of proprietary composite materials. In all, this leadership shift marks a pivotal moment for ALUULA as it expands beyond the windsports market. With Sage at the helm, the company is set to capitalize on a new era where ALUULA products elevate the quality of materials in several domains. Ms. Berryman said it best, “Reflecting on our journey from when we started in 2019, we have experienced remarkable progress. Our product range has expanded from a single material to fifty, the number of commercialized windsport brands featuring ALUULA has increased from one to sixteen, and we are experiencing ongoing growth in other verticals. […] With our strategic refocus plan now firmly in place, we’re poised to deliver sustainable value to our shareholders in the years ahead.” Here’s to building an enduring business and creating innovative products that stand the test of time. ALUULA’s Financials One might expect that a strategic refocus causes friction for a company in the short run. However, ALUULA Composites’ performance speaks for itself. In YTD Q2 2024, ALUULA grew its revenue by 46.96% YoY, gross profits by 106.18%, and improved its gross margin from 30.67% in H1 2023 to 43.03%. The company also reduced its net loss from $3.78 million to $993.33 thousand. These solid financial results are compounded by the fact that ALUULA has $1.136 million in cash and just $540.22 thousand in long-term debt on
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Active Inference: Humanity’s Final Great Invention
Verses AI (CA: VERS.NE) (USA: VRSSF) is disrupting the most disruptive technology in the world. It transforms artificial intelligence from something that mimics knowledge to one that formulates ideas and fosters curiosity on its own. This is causing a paradigm shift in the industry and leading many to wonder if this is the true path to Artificial General Intelligence, a.k.a. AGI. But understanding this technology isn’t easy. There is an absurd amount of nuance, which can be discouraging when trying to make sense of it. This article attempts to distill that. Because whether you like it or not, AI, and shortly AGI thereafter, is going to alter the fabric of reality. You can either embrace it, or, you will quickly fall behind. The choice is yours. The Letter that Put the World on Notice It has been two weeks since Verses published an open letter to OpenAI in the New York Times. In it, Verses CEO Gabriel René outlines how OpenAI, and other major players, are struggling to produce AGI that is “adaptable, safe [and] sustainable.” He then goes on to highlight OpenAI’s Charter which states: “…if a value-aligned, safety-conscious project comes close to building AGI before we do, we commit to stop competing with and start assisting this project.” René closes the section by expressing that: “VERSES qualifies for [its] assistance.” Bold words for a company 100 times smaller than the creators of GPT-4. But the letter is not merely meant to garner attention. Active Inference is real. It has backing. People and organizations, like Verses, are using it. And it is shaping up to be our best chance at creating human-level intelligence, or greater, that works with us, not against us. So why haven’t OpenAI, and other leading AI players taken notice? My guess is that change can be slow and it is not easy to admit defeat. These organizations have a lot riding on Generative AI technology, and to be fair, they have made significant progress in recent years. Moreover, nearly all computer scientists, software engineers, big data architects, and the like, are disciples of the “Godfather of AI”, Geoffrey Hinton—Hinton is considered a leading figure in deep learning and the creator of artificial neural networks. For them to embrace a new approach, such as Active Inference, it will take a significant event to change their minds; they may need to see-it-to-believe. However, the sooner they do, the greater the benefit Active Inference AI will have for us all. If OpenAI decides to accept Verses’ invitation, there is no doubt that it will set a new precedent for AGI collaboration. With the brightest minds, on both sides, working together, they can create machines that propel our civilization beyond what is comprehensible. But, let’s not get ahead of ourselves. For now, there remains a divide between the Generative AI and Active Inference AI communities. Therefore, if you want to understand the essence of AI, you should familiarize yourself with both approaches. Each offers its advantages, though it is clear that one path is closer to reaching the ultimate goal than the other. Let’s dive in. The Inherent Problem with Generative AI Generative AI is an evolution of the deep learning framework, pioneered by Geoffrey Hinton. It uses artificial neural networks to create connections between billions, and sometimes trillions of data points. This enables the AI to realize patterns and formulate predictions which is how chatbots like Chat-GPT can write entire essays with just a few sentences. To create these Large Language Models (LLMs), developers upload massive datasets into the AI and program it to find connections within the database. Then, using deep learning and reinforcement techniques, the AI begins to derive patterns and relationships between the data points which can then be used to make predictions. Eventually, the AI becomes highly adept at solving these computations and begins generating outputs based on the prompts you give it. But this is where the problems start to manifest. For one, LLMs are inherently biased. Depending on what data you feed it, the AI will spit out responses that seem skewed one way or another. For example, when prompting the image generator Midjourney with “Tech CEO Skydiving in Egypt,” it produces four images of white guys skydiving in the desert. Why? Because the majority of data Midjourney is likely trained on contains “Tech CEOs” who are white. This is just a fun example, but you can see how this could be quite problematic when assessing someone’s credit score, job skills, and the like. Taking it a step further, LLMs struggle to differentiate what they know and do not know. If you ask a chatbot a question it doesn’t have the answer to, it will produce a response regardless of whether it is accurate or not. That is because the AI assigns a “relationship score” to every data point it analyzes. This score falls between 0.0 and 1.0 but never reaches 0.0 or 1.0, exactly. This causes the AI to lie since every response it generates is a “best guess” rather than the truth. I don’t know about you, but I have a hard time trusting a machine or human that isn’t 100% honest when sharing information. Moving on, another limitation of LLMs is that they do not learn in real-time and fail to interoperate with other agents and IoT devices. If you go onto ChatGPT 3.5 right now, you’ll see that its last knowledge update was in January 2022. This means that any information beyond January 2022 does not exist within the LLM’s database. To resolve this lack of knowledge, OpenAI’s scientists must upload and train ChatGPT with new data. This can be quite time-consuming and costly depending on how much data is required. For example, it cost OpenAI over $100 million to train GPT-4 alone. But that’s not all. In addition to costly updates, these LLMs only have access to their personal databases. This means that they are unable to communicate with other LLMs and are privy only to the information they store. If we want