Search Business Positive Trajectory Continues:
Third Consecutive Quarter of Sequential Growth; Year-over-Year
Growth for the First Time in Five Years;
Strong Cash Flow Continues: Company Raises Full
Year Adjusted EBITDA Guidance to $24M - $26M and Further
Strengthens Balance Sheet with Early Redemption of Convertible
Bonds
Perion Network Ltd. (NASDAQ: PERI), a global technology company
that delivers synchronized digital marketing solutions for
advertisers and publishers through the world's largest channels -
digital advertising, social media, and search, announced today its
financial results for the first quarter ended March 31, 2019.
Financial Highlights*
(In millions, except per share data)
Three
months ended March 31, 2018
2019 Advertising revenues $ 29.3 $
18.6 Search and other revenues $ 31.6 $ 35.2 Total Revenues
$ 60.9 $ 53.8 GAAP Net Income $ 0.1 $ 1.2 Non-GAAP Net Income $ 3.0
$ 3.3 Adjusted EBITDA $ 4.3 $ 5.1 Net cash provided by operating
activities $ 14.6 $ 14.0 GAAP Diluted Earnings Per Share $ 0.00 $
0.05 Non-GAAP Diluted Earnings Per Share $ 0.12 $ 0.13
* Reconciliation of GAAP to Non-GAAP measures follows.
Doron Gerstel, Perion’s CEO stated, “Our ongoing efforts to
drive innovation and deepen partnerships in our Search business, is
winning in the market. By leveraging our strategic relationship
with Microsoft Bing, exploring new monetization opportunities and
increasing search demand, the new leadership at CodeFuel has
delivered its third consecutive quarter of sequential growth and
the first quarter of year-over-year growth in five years; we expect
this positive trend to continue.”
“This significant progress has meaningfully expanded the
immediate and longer-term importance of our Search business,” added
Mr. Gerstel. “Our increased Search revenues and strong cash flow
enable us to continue our planned investments in our advertising
offering, to further differentiate Undertone in a growing but
evolving market.”
“Undertones’ Synchronized Digital Branding solution was enhanced
by the acquisition of Captain Growth, which will provide the AI
optimization engine required to offer brands the critical ability
to put their best-performing units in front of the right users at
the right time - for unprecedented cross-channel engagement,” Mr.
Gerstel continued. “We are excited by the acceptance of our
customers and believe in a unique opportunity to differentiate
Undertone in this space.”
Mr. Gerstel concluded, “As a result of the strong start of 2019,
where we achieved higher than planned first quarter Adjusted EBITDA
combined with our current visibility, we feel confident to increase
our annual guidance of Adjusted EBITDA from $22-$24 million to
$24-$26 million. The increased Adjusted EBITDA guidance and our
improved free cash flow, a result of our recent cost optimization
efforts, and the current cash position, we decided to early repay
our bonds and further strengthen our balance sheet.”
Financial Comparison for the First Quarter of 2019:
Revenues: Revenues declined by 12%, from $60.9 million in
the first quarter of 2018 to $53.8 million in the first quarter of
2019. This decline was primarily a result of a 37% decline in
Advertising revenues as a result of the transition from selling
formats to holistic solution. Despite of the decline in revenues,
our gross margin in the Advertising business increased year over
year as we prioritize margins and profitability over sales. Search
and other revenues increased 12% in the first quarter of 2019 as a
result of the addition of new publishers, higher revenue-per-mile
and increased number of searches.
Customer Acquisition Costs and Media Buy (“CAC”): CAC in
the first quarter of 2019 were $27.4 million, or 51% of revenues,
as compared to $31.9 million, or 52% of revenues in the first
quarter of 2018.
Net Income: On a GAAP basis, net income in the first
quarter of 2019 was $1.2 million, as compared to a net income of
$0.1 million in the first quarter of 2018.
Non-GAAP Net Income: In the first quarter of 2019,
non-GAAP net income was $3.3 million, or 6.0% of revenues, compared
to the $3.0 million, or 5.0% of revenues, in the first quarter of
2018.
Adjusted EBITDA: In the first quarter of 2019, Adjusted
EBITDA was $5.1 million, or 9.5% of revenues, compared to $4.3
million, or 7.0% of revenues, in the first quarter of 2018.
Cash and Cash Flow from Operations: As of March 31, 2019,
cash and cash equivalents and short-term deposit were $45.1
million. Cash provided by operations in the first quarter of 2019
was $14.0 million, compared to $14.6 million in the first quarter
of 2018.
Short-term Debt, Long-term Debt and Convertible Debt: As
of March 31, 2019, total debt was $31.0 million, compared to $40.5
million at December 31, 2018.
Perion satisfies all the financial covenants associated with its
public debt.
2019 Guidance:
Management has increased its previously issued Adjusted EBITDA
guidance of $22 million to $24 million for the full year of 2019 to
$24 million to $26 million.
Conference Call:
Perion management will host a conference call to discuss the
results today at 9 a.m. ET. Details are as follows:
- Conference ID: 5831485
- Dial-in number from within the United
States: 1-888-394-8218
- Dial-in number from Israel:
1-809-212-883
- Dial-in number (other international):
1-323-701-0225
- Playback available until May 22, 2019
by calling 1-844-512-2921 (United States) or 1-412-317-6671
(international). Please use PIN code 5831485 for the replay.
- Link to the live webcast accessible at
https://www.perion.com/ir-info/
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 expenses, foreign exchange gains (losses) associated
with ASC-842, 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
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, 2018 filed with the SEC on March 19, 2019. Perion does
not assume any obligation to update these forward-looking
statements.
PERION NETWORK LTD. AND ITS
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
OPERATIONS
In thousands (except share and per
share data)
Three months ended March 31, 2018
2019 Unaudited Unaudited
Revenues: Advertising $ 29,295 $ 18,584 Search and other
31,610 35,265
Total Revenues
60,905 53,849 Costs and
Expenses: Cost of revenues 6,056 5,766 Customer acquisition
costs and media buy 31,885 27,433 Research and development 5,544
4,862 Selling and marketing 9,701 8,325 General and administrative
4,286 3,058 Depreciation and amortization 2,071 2,390 Restructuring
costs 1,138 -
Total Costs and Expenses
60,681 51,834 Income from
Operations 224 2,015 Financial expense, net
607 1,325
Income (Loss) before Taxes on
income (383) 690 Tax benefit 440
542
Net Income $ 57 $
1,232 Net Earnings per Share
Basic
$ 0.00 $ 0.05 Diluted $ 0.00 $ 0.05
Weighted average number of
shares Basic 25,850,023 25,883,768 Diluted
25,850,023 25,885,029
PERION NETWORK LTD. AND ITS
SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEETS
In thousands
December 31, March 31, 2018 2019
Audited Unaudited ASSETS Current
Assets: Cash and cash equivalents $ 39,109 $ 38,386 Short-term
bank deposit 4,000 6,700 Accounts receivable, net 55,557 40,159
Prepaid expenses and other current assets 5,227 5,420
Total Current Assets 103,893 90,665
Property and equipment, net 15,649 14,537 Operating lease
right-of-use assets - 24,889 Goodwill and intangible assets, net
131,547 131,661 Deferred taxes 4,414 4,960 Other assets 943
723
Total Assets $
256,446 $
267,435 LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities: Accounts payable $ 38,208 $
35,297 Accrued expenses and other liabilities 17,240 14,514
Short-term operating lease liability - 4,226 Short-term loans and
current maturities of long-term and Convertible debt 16,059 16,385
Deferred revenues 3,794 3,417 Payment obligation related to
acquisitions 1,813 1,200
Total Current
Liabilities 77,114 75,039 Long-Term
Liabilities: Long-term debt, net of current maturities 16,667
14,583 Convertible debt, net of current maturities 7,726 -
Long-term operating lease liability - 21,367 Other long-term
liabilities 6,158 5,762
Total Liabilities
107,665 116,751 Shareholders'
equity: Ordinary shares 211 211 Additional paid-in capital
239,693 240,285 Treasury shares at cost (1,002) (1,002) Accumulated
other comprehensive gain 142 221 Accumulated deficit
(90,263) (89,031)
Total Shareholders' Equity
148,781 150,684 Total Liabilities
and Shareholders' Equity $
256,446 $
267,435
PERION NETWORK LTD. AND ITS
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
In thousands
Three months ended March
31,
2018 2019 Unaudited
Unaudited
Operating
activities:
Net Income $ 57 $ 1,232
Adjustments required to reconcile net
income to net cashprovided by operating activities:
Depreciation and amortization 2,071 2,390 Share-based compensation
expense 618 463 Foreign currency translation 67 19 Accrued
interest, net 128 (199) Deferred taxes, net (354) (546) Accrued
severance pay, net (626) (316) Fair value revaluation - convertible
debt (986) 699 Net changes in operating assets and liabilities
13,621 10,246
Net cash provided by operating
activities $ 14,596 $ 13,988
Investing
activities:
Purchases of property and equipment, net $ (90) $ (227)
Capitalization of development costs (688) - Short-term deposits,
net 5,909 (2,700)
Net cash provided by (used in)
investing activities $ 5,131 $
(2,927)
Financing
activities:
Exercise of stock options and restricted share units - 129 Payment
made in connection with acquisition - (1,813) Repayment of
convertible debt - (7,901) Repayment of long-term loans
(9,630) (2,083)
Net cash used in financing activities
$ (9,630) $ (11,668) Effect of exchange
rate changes on cash and cash equivalents and restricted cash
74 (110)
Net increase (decrease) in cash and cash
equivalents and restricted cash 10,171 (717) Cash
and cash equivalents and restricted cash at beginning of year
32,755 40,803
Cash and cash equivalents and
restricted cash at end of year $ 42,926 $
40,086
PERION NETWORK LTD. AND ITS
SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP
RESULTS: UNAUDITED
In thousands (except share and per
share data)
Three months ended March 31, 2018
2019 Unaudited Unaudited
GAAP Net Income $ 57 $ 1,232
Share based compensation 618 463 Amortization of acquired
intangible assets 1,204 1,046 Restructuring costs 1,138 -
Non-recurring Legal fees 235 257 Fair value revaluation of
convertible debt and related derivative 127 267 Foreign exchange
losses associated with ASC-842 - 292 Taxes on the above items
(361) (303)
Non-GAAP Net Income $
3,018 $ 3,254 Non-GAAP Net
Income $ 3,018 $ 3,254 Taxes on
income (79) (239) Financial expense, net 480 766 Depreciation
867 1,344
Adjusted EBITDA $
4,286 $ 5,125 Non-GAAP diluted
earnings per share $ 0.12 $ 0.13
Shares used in computing non-GAAP diluted earnings per
share 25,852,909 25,908,734
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version on businesswire.com: https://www.businesswire.com/news/home/20190514006147/en/
Perion Network Ltd.Investor relationsHila Barenboim+972
(73) 398-1000investors@perion.com
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