Shares of Perion Network (NASDAQ: PERI) were tanking today after the company's relationship with Microsoft took another step back, crushing a key source of revenue for the ad tech company.
As a result, Perion slashed its revenue guidance again, following a guidance cut for the same reason, and the stock was down 28.4% as of 11:15 a.m. ET on Monday.
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Going from bad to worse
Perion has historically relied on traffic from Microsoft Bing for roughly half its revenue, but that relationship took a significant hit in April, sending its stock down about 40% in one session.
This morning, the company said the relationship with Bing was essentially dead after it was notified by Bing that it was one of several publishers being excluded from its search distribution marketplace.
As a result, the company now expects revenue from Bing to make up 5% of total revenue in the second half of the year. It also said the agreement with Bing is no longer material to its business.
Perion lowered its revenue guidance for the second quarter to a range of $106 million to $108 million, down from a previous range of $118 million to $122 million. And adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) are now projected at $6.5 million to $7.5 million, down from a prior range of $10 million to $12 million.
It also slashed its full-year guidance by a similar percentage, now forecasting revenue of $490 million to $510 million and adjusted EBITDA of $48 million to $52 million.
Can Perion recover?
CEO Tal Jacobson said, "The recent changes Microsoft Bing implemented to its search distribution marketplace are unfortunate and significantly impacted our Search Advertising business," though he noted several growth opportunities, including CTV, retail media, and digital out-of-home.
While the company is seeing rapid growth in those categories, overall revenue from ad solutions, which is separate from its Microsoft-driven search business, fell 5% in the first quarter.
Perion still has potential over the long term, but it will take time for the company to restore investor confidence even if it can capitalize on that opportunity.
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Jeremy Bowman has positions in Perion Network. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
