Undertone Drives 9% Increase in Advertising
Revenues YoY; Company Implements Targeted Initiatives to Optimize
Expenses in 2018 and Reignite Long-Term Growth
Perion Network Ltd. (NASDAQ: PERI), a global technology leader
in advertising solutions for brands and publishers, announced today
its financial results for the second quarter and six months ended
June 30, 2017.
Financial Highlights*
(In millions, except per share data)
Three months ended Six months
ended June 30, June 30, 2016
2017 2016 2017
Revenues
$ 78.0 $ 69.7 $ 153.8 $ 131.7 GAAP Net
Income (Loss) $ 0.6 $ (36.0) $ (5.0) $ (38.1) Non-GAAP Net Income $
6.8 $ 4.2 $ 13.5 $ 6.9 Adjusted EBITDA $ 10.8 $ 7.0 $ 19.5 $ 10.5
Impairment of Goodwill and Intangible assets $ - $ 43.8 $ - $ 43.8
GAAP Diluted Earnings (Loss) Per Share $ 0.01 $ (0.46) $ (0.06) $
(0.49)
Non-GAAP Diluted Earnings Per Share
$ 0.08 $ 0.05
$ 0.17 $ 0.09
* Reconciliation of GAAP to Non-GAAP measures follows.
Doron Gerstel, Perion’s CEO commented, “In my first 100 days as
CEO I have confirmed that the core assets and underlying business
opportunities are firmly in place, and we have identified issues
that are impacting our financial results and near-term prospects.
The targeted initiatives that we began implementing in the second
quarter to reignite growth and optimize expenses will continue in
the second half of 2017 and into 2018. We believe that the plan we
have in place will strongly position Perion for renewed growth and
enhanced profitability in the future.
During the second quarter, Perion’s new senior leadership began
to put in place a clearly defined roadmap to enhance our technology
and drive our go forward strategy. We unified our research and
product development functions which will allow us to redirect
resources to strengthen our core technology and enhance our suite
of solutions, both of which are key catalysts to reignite organic
growth. We are focused on reducing our corporate expenses over the
next 12 months, and have a goal to lower our corporate costs by a
minimum of $6 million in 2018. In addition, we are carefully
evaluating our media buying costs, and we are working to optimize
these expenses to improve our margins.”
“Operationally, advertising revenues increased 9% on a
year-over-year basis, supporting our long-term optimism for
Undertone and its position as a key growth driver of our business,”
continued Gerstel. “Undertone is strategically well-positioned in
the growth areas of advertising with a strong client portfolio,
including some of the world’s leading brands as customers and a
differentiated offering. Leveraging this momentum, we are taking a
“Sales First” approach to our business and focusing on initiatives
to develop and leverage new partnerships. During the second
quarter, we announced a new content collaboration with The
Associated Press and a social collaboration with Cycle. These
partnerships are a part of a larger effort to complement our core
agency business that we believe will drive incremental advertising
revenues and improve our visibility into the performance of the
business over the long-term. This effort will better position
Undertone to diversify its revenue sources and drive Perion’s
organic growth.
“Subsequent to the end of the quarter, we promoted Mike Pallad,
from Chief Revenue Officer to President of Undertone,” added Mr.
Gerstel. “Mike will replace Rob Schwartz, who has stepped down from
his position to pursue other opportunities after a transition
period. Mike brings strong sales experience from Apple Music and
iAd and I am confident in his ability to lead our new ‘Sales First’
strategy, while continuing to build Undertone’s momentum and set
the foundation for future growth.”
“Simultaneously, on the search side of our business, we see a
significant opportunity to leverage and expand our relationship
with Microsoft Bing,” continued Mr. Gerstel. “During the second
quarter, we appointed Mike Glover as GM of our search business, as
part of our effort to fortify this business and strengthen our
relationship with our largest partner.”
Financial Comparison for the Second Quarter of 2017:
Revenues: Revenues decreased by 11%, from $78.0 million
in the second quarter of 2016 to $69.7 million in the second
quarter of 2017. This decrease, was primarily a result of search
and other revenues declining 24% partially offset by a 9% increase
in our advertising revenues.
Customer Acquisition Costs and Media Buy (“CAC”): CAC in
the second quarter of 2017 were $33.8 million, or 48% of revenues,
as compared to $34.8 million, or 45% of revenues in the second
quarter of 2016.
Impairment Charge: In the second quarter of 2017, the
company recorded a non-cash impairment charge of $43.8 million to
reduce the recorded value of goodwill and intangible assets related
to the Undertone business to its fair value. The impairment charge
is primarily as a result of recent performance of the Undertone
business and management’s expectations for future performance.
Ophir Yakovian, Perion’s Chief Financial Officer commented, “We
remain optimistic about Undertone and believe that the new
initiatives we are implementing to complement our core agency
business will accelerate growth and improve visibility in this
compelling business.”
Net Income (Loss): On a GAAP basis, net loss in the
second quarter of 2017 was $36.0 million, as compared to a net
income of $0.6 million in the second quarter of 2016. The loss in
the second quarter of 2017, was due to the impairment of goodwill
and intangible assets.
Non-GAAP Net Income: In the second quarter of 2017,
non-GAAP net income was $4.2 million, or 6% of revenues, compared
to $6.8 million, or 9% of revenues, in the second quarter of
2016.
Adjusted EBITDA: In the second quarter of 2017, Adjusted
EBITDA was $7.0 million, or 10% of revenues, compared to $10.8
million, or 14% of revenues, in the second quarter of 2016.
Cash and Cash Flow from Operations: As of June 30, 2017,
cash and cash equivalents were $22.4 million. Cash provided by
operations in the second quarter of 2017 was $3.5 million, compared
to $4.3 million in the second quarter of 2016.
Perion currently satisfies all the financial covenants
associated with its debts.
Conference Call:
Perion will host a conference call to discuss the results today,
August 3, 2017, at 10 a.m. ET. Details are as follows:
- Conference ID: 6585658
- Dial-in number from within the United
States: 1-888-857-6930
- Dial-in number from Israel:
1-80-925-8243
- Dial-in number (other international):
1-719-325-4893
- Playback available until August 10,
2017 by calling 1-844-512-2921 (United States) or 1-412-317-6671
(international). Please use PIN code 6585658 for the replay.
- Link to the live webcast accessible at
http://www.perion.com/ir-events
About Perion Network Ltd.
Perion is a global technology company that delivers advertising
solutions to brands and publishers. Perion is committed to
providing data-driven execution, from high-impact ad formats to
branded search and a unified social and mobile programmatic
platform. More information about Perion may be found at
www.perion.com, and follow Perion on Twitter @perionnetwork.
Non-GAAP measures
Non-GAAP financial measures consist of GAAP financial measures
adjusted to exclude acquisition related expenses, share-based
compensation expenses, restructuring costs, loss from discontinued
operations, accretion of acquisition related contingent
consideration, impairment of goodwill, amortization and impairment
of acquired intangible assets and the related taxes thereon,
non-recurring tax expenses, as well as certain accounting entries
under the business combination accounting rules that require us to
recognize a legal performance obligation related to revenue
arrangements of an acquired entity based on its fair value at the
date of acquisition. Additionally, in September 2014, the Company
issued convertible bonds denominated in New Israeli Shekels and at
the same time entered into a derivative arrangement (SWAP) that
economically exchanges the convertible bonds as if they were
denominated in US dollars when the bonds were issued. The Company
excludes from its GAAP financial measures the fair value
revaluations of both the convertible bonds and the related
derivative instrument, and by doing so, the non-GAAP measures
reflect the Company’s results as if the convertible bonds were
originally issued and denominated in US dollars, which is the
Company’s functional currency. Adjusted Earnings Before Interest,
Taxes, Depreciation and Amortization ("Adjusted EBITDA") is defined
as operating income excluding stock-based compensation expenses,
depreciation, restructuring costs, acquisition related items
consisting of amortization of intangible assets and goodwill and
intangible asset impairments, acquisition related expenses, gains
and losses recognized on changes in the fair value of contingent
consideration arrangements and certain accounting entries under the
business combination accounting rules that require us to recognize
a legal performance obligation related 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 an indication 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-GAAP measures are regularly used internally to
understand, manage and evaluate our business and make operating
decisions, and we believe that they are useful to investors as a
consistent and comparable measure of the ongoing performance of our
business. However, our non-GAAP financial measures are not meant to
be considered in isolation or as a substitute for comparable GAAP
measures, and should be read only in conjunction with our
consolidated financial statements prepared in accordance with GAAP.
Additionally, these non-GAAP financial measures may differ
materially from the non-GAAP financial measures used by other
companies. A reconciliation between results on a GAAP and non-GAAP
basis is provided in the last table of this press release.
Forward Looking Statements
This press release contains historical information and
forward-looking statements within the meaning of The Private
Securities Litigation Reform Act of 1995 with respect to the
business, financial condition and results of operations of Perion.
The words “will”, “believe,” “expect,” “intend,” “plan,” “should”
and similar expressions are intended to identify forward-looking
statements. Such statements reflect the current views, assumptions
and expectations of Perion with respect to future events and are
subject to risks and uncertainties. Many factors could cause the
actual results, performance or achievements of Perion to be
materially different from any future results, performance or
achievements that may be expressed or implied by such
forward-looking statements, or financial information, 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 transactions will divert management and other
resources from the ongoing operations of the business or otherwise
disrupt the conduct of those businesses, potential litigation
associated with such transactions, and general risks associated
with the business of Perion including intense and frequent changes
in the markets in which 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, whether referenced or not referenced in this press
release. Various other risks and uncertainties may affect Perion
and its results of operations, as described in reports filed by the
Company with the Securities and Exchange Commission from time to
time, including its annual report on Form 20-F for the year ended
December 31, 2016 filed with the SEC on March 7, 2017. Perion does
not assume any obligation to update these forward-looking
statements.
Source: Perion Network Ltd.
PERION NETWORK LTD. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS: UNAUDITED
In thousands (except share and per share data)
Three months ended Six months
ended June 30, June 30, 2016
2017 2016 2017
Revenues: Search and
other $ 45,531 $ 34,379 $ 90,085 $ 71,967 Advertising
32,472 35,309 63,707
59,697
Total Revenues
78,003
69,688 153,792
131,664 Costs and Expenses: Cost of
revenues 4,121 3,406 8,214 6,915 Customer acquisition costs and
media buy 34,784 33,786 69,075 63,838 Research and development
7,141 4,230 14,532 9,529 Selling and marketing 15,577 15,785 31,636
30,795 General and administrative 7,651 6,013 14,852 11,188
Depreciation and amortization 6,308 5,008 13,647 9,909 Impairment
charges - 43,847 - 43,847 Restructuring costs -
- 728 -
Total Costs
and Expenses 75,582
112,075 152,684
176,021 Income (Loss) from Operations
2,421 (42,387) 1,108 (44,357) Financial
expense, net 2,318 1,338
5,456 3,522
Income (Loss) before Taxes on
income 103 (43,725) (4,348)
(47,879) Taxes on income (1,565)
(7,709) (3,993) (9,789)
Net
Income (Loss) from continuing operations 1,668
(36,016) (355) (38,090) Net Loss from
discontinued operations (1,083) -
(4,668) -
Net Income
(Loss) $ 585 $
(36,016) $ (5,023) $
(38,090) Net Earnings (Loss) per Share - Basic and
Diluted: Continuing operations $ 0.02 $ (0.46) $
0.00 *) $ (0.49) Discontinued operations $
(0.01) $ - $ (0.06) $ -
Weighted average number of shares continuing and
discontinued Basic 76,324,076
77,550,069 76,247,269 77,548,252
Diluted 79,751,099 77,550,069
76,247,269 77,548,252 *) less than
$0.01
CONDENSED CONSOLIDATED BALANCE SHEETS: UNAUDITED
In thousands
December 31, June
30, 2016 2017 ASSETS
Current Assets: Cash and cash equivalents $ 23,962 $ 20,925
Short-term bank deposit 8,414 1,503 Accounts receivable, net 71,346
59,431 Prepaid expenses and other current assets
10,036 13,553
Total Current Assets 113,758
95,412 Property and equipment, net 14,205 16,050 Goodwill
and intangible assets, net 234,755 182,987 Deferred taxes 4,117
6,811 Other assets 1,617 1,493
Total Assets $
368,452 $
302,753
LIABILITIES AND SHAREHOLDERS' EQUITY Current
Liabilities: Accounts payable $ 38,293 $ 31,937 Accrued expenses
and other liabilities 17,466 15,434 Short-term loans and current
maturities of long-term and convertible debt 17,944 13,749 Deferred
revenues 5,354 5,245 Payment obligation related to acquisitions
7,653 7,130
Total Current
Liabilities 86,710 73,495 Long-Term
Liabilities: Long-term debt, net of current maturities 37,928
33,984 Convertible debt, net of current maturities 21,862 16,672
Deferred taxes 8,087 88 Other long-term liabilities
5,721 6,743
Total Liabilities
160,308 130,982 Shareholders'
equity: Ordinary shares 210 211 Additional paid-in capital
234,831 235,966 Treasury shares at cost (1,002) (1,002) Accumulated
other comprehensive gain (loss) (265) 316 Accumulated deficit
(25,630) (63,720)
Total
Shareholders' Equity 208,144
171,771 Total Liabilities and Shareholders'
Equity $
368,452 $
302,753
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS:
UNAUDITED
In thousands
Six months ended June 30, 2016
2017 Operating activities:
Net Loss $ (5,023) $ (38,090) Loss from discontinued
operations, net (4,668) - Net Loss from
continuing operations (355) (38,090) Adjustments required to
reconcile net income to net cash provided by operating activities:
Depreciation and amortization 13,647 9,909 Impairment of goodwill
and intangible assets - 43,847 Stock based compensation expense
3,528 1,119 Foreign currency translation 926 10 Accrued interest,
net 137 217 Deferred taxes, net (4,972) (10,752) Change in payment
obligation related to acquisition 1,207 28 Fair value revaluation -
convertible debt 1,120 3,767 Net changes in operating assets and
liabilities (3,149) 1,716 Net cash
provided by continuing operating activities
12,089
11,771 Net cash used in discontinued activities
(4,232) -
Net cash provided by operating
activities $ 7,857 $
11,771 Investing activities: Purchases
of property and equipment $ (904) $ (1,265) Capitalization of
development costs (2,596) (2,781) Short-term deposits, net
30,067 6,911
Net cash provided by investing
activities $ 26,567 $
2,865 Financing activities: Exercise of
stock options and restricted share units 1 1 Payment made in
connection with acquisition (6,125) (551) Proceeds from short-term
loans 10,000 - Proceeds from long-term loans - 5,000 Repayment of
convertible debt (7,620) (7,901) Repayment of short-term loans
(13,000) (7,000) Repayment of long-term loans (3,565)
(7,414)
Net cash used in financing activities
$ (20,309) $ (17,865)
Effect of exchange rate changes on cash and cash equivalents
31 192
Net increase (decrease) in cash and
cash equivalents 18,378 (3,037) Net cash used in
discontinued activities (4,232) - Cash and cash equivalents at
beginning of period 17,519 23,962
Cash and cash equivalents at end of period $
31,665 $ 20,925
RECONCILIATION OF GAAP TO NON-GAAP RESULTS: UNAUDITED
In thousands (except share and per share data)
Three months ended Six
months ended June 30, June 30, 2016
2017 2016
2017 GAAP Net Income (Loss)
from continuing operations $ 1,668 $
(36,016) $ (355) $ (38,090)
Acquisition related expenses - - 179 - Valuation adjustment on
acquired deferred revenues 359 - 359 - Share based compensation
1,670 561 3,528 1,119 Amortization of acquired intangible assets
5,178 4,059 11,623 8,111 Restructuring costs - - 728 - Impairment
of goodwill and intangible assets - 43,847 - 43,847 Fair value
revaluation of convertible debt and related derivative (283) (18)
556 1,413 Accretion of payment obligation related to acquisition
640 (3) 1,207 27 Taxes on the above items (2,400)
(8,251) (4,320) (9,494)
Non-GAAP Net Income from continuing operations $
6,832 $ 4,179 $
13,505 $ 6,933 Non-GAAP Net
Income from continuing operations $ 6,832
$ 4,179 $ 13,505 $ 6,933
Taxes on income 835 542 327 (295) Financial expense, net 1,961
1,359 3,693 2,082 Depreciation 1,130
949 2,024 1,798
Adjusted EBITDA
$ 10,758 $ 7,029 $
19,549 $ 10,518
Non-GAAP diluted earnings per share $ 0.08
$ 0.05 $ 0.17 $ 0.09
Shares used in computing non-GAAP diluted earnings per
share 80,605,055 77,989,840 77,979,702
77,990,009
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version on businesswire.com: http://www.businesswire.com/news/home/20170803005582/en/
Perion Network Ltd.Investor relationsAngie Geffen+972
(73) 398-1000Perion.Investor.Relations@perion.com
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