Perion Network Ltd. (NASDAQ: PERI), today announced financial
results for the second quarter and six months ended June 30,
2012.
Q2 2012 non-GAAP Financial Highlights Include:
- Quarterly revenues increased 53%
year-over-year to $12.3 million;
- Product and other advertising revenues
tripled year-over-year, reaching $5.9 million;
- Search revenue increased sequentially
15% to $6.4 million;
- EBITDA was $2.7 million, or 22% of
revenues; and
- Net income totaled $1.8 million, or 15%
of revenues;
First Six Months 2012 non-GAAP Financial Highlights
Include:
- Year-to-date revenues increased 41%
year-over-year to $23.6 million;
- Combined product and other advertising
revenues tripled year-over-year, reaching $11.6 million and
accounted for almost half of the revenues in the first half of
2012;
- EBITDA was $5.3 million, or 22% of
revenues; and
- Net income totaled $4.0 million, or 17%
of revenues;
“Based on strong second quarter results and ongoing operational
improvements, we are increasing our outlook for the full year,”
commented Chief Executive Officer Josef Mandelbaum. “We
currently expect a better than 50% increase in revenues in the
second half of this year compared to the second-half of last
year.”
“In particular, our search business showed a 15% growth from the
first quarter and is on a significant upward trajectory as we begin
to reap the benefits of our investments in infrastructure and
systems over the past year,” added Mr. Mandelbaum. “In addition, as
we approach the one year anniversary of our Smilebox acquisition, I
am pleased to report that it continues to be profitable with 30%
top-line growth. Looking forward, we continue to invest in our
future, and are on track to launch our revolutionary iPad email app
at the end of the third quarter as well as major improvements to
our Smilebox iPhone app during the quarter.”
Non-GAAP Financial Comparison for the Second Quarter and
First Six Months of 2012:
Revenue: Q2’12 revenues were $12.3 million, increasing 9%
over the prior quarter and 53% compared to the second quarter of
2011. This was primarily as a result of the consolidation of
Smilebox revenues and growth in product and other advertising
revenues derived from Perion’s IncrediMail product. The increase in
IncrediMail premium product revenue was primarily due to the
continued shifting from a service offering to a product offering, a
process management plans to continue in future periods. Search
revenue was up as well. As a result of steps taken and improvements
made in the beginning of the quarter, the decrease in the first
months was more than offset by record monetization in the last
month of the quarter, and management believes this trend of
increased monetization will continue in the second half and
beyond.
In the first half of 2012, revenues increased 41%, reaching
$23.6 million, compared to $16.7 million in the first half of 2011.
This increase was due to our increasing product sales four-fold,
partially offset by a small decrease in search generated revenues
experienced in the first quarter of 2012 and since remedied.
Gross Profits: Gross profit in the second quarter of 2012
was $11.5 million, up 10% sequentially and up 51% from the second
quarter of 2011. The gross profit margin remained healthy at 93%
this last quarter, compared to 94% in the second quarter of 2011.
In the first six months of 2012, gross profit increased 38%,
reaching $22.0 million, or 93% of sales, compared to $15.9 million,
or 95% of revenues in the first half of 2011.
Customer Acquisition Costs (“CAC”): In the second quarter
of 2012, Perion invested $3.9 million in CAC, compared to $2.6
million last quarter and $1.7 million in the second quarter of
2011. The increase in CAC was in conjunction with the improvement
in the return on this investment, credited to the Company’s
enhanced back-end systems and improved methodology. The marketing
investment in the second quarter generated a return of more than
50% in revenues during the second quarter, and the remaining return
on investment is expected primarily in the third and fourth quarter
of this year. In the first half of 2012, CAC was $6.5 million,
compared to $2.3 million in the first half of 2011.
EBITDA: In the second quarter of 2012, EBITDA was $2.7
million, increasing 13% compared to the same quarter last year,
despite the $2.2 million increase in CAC, as the return on this
investment started to take effect. In the first half of 2012 EBITDA
was $5.3 million, decreasing $0.8 million from $6.1 million in the
first half of 2011, primarily due to the $4.2 million increase in
CAC.
Net Income: In the second quarter of 2012, net income was
$1.8 million or $0.18 per share, compared to $1.9 million, or $0.19
per share in the second quarter of 2011. In the first half of 2012
net income was $4.0 million, or $0.40 per share, compared to $4.9
million, or $0.48 per share, in the first half of 2011.
Cash Flow from Operations: Based on reports in U.S. GAAP,
in the first half of 2012, cash flow from operations was $2.5
million, compared to $4.1 million in the first half of 2011. The
decrease in cash flow from operations is primarily due to the
increase in CAC and search revenues receivable in the second
quarter of 2012.
Outlook: Management is raising non-GAAP guidance for 2012
with revenues in the range of $50 - $52 million, EBITDA of $10.5 -
$11.5 million and Net Income projected to be $7.5 - $8.5
million.
Conference CallPerion will host a conference call to
discuss the results today, August 8th at 10 a.m. EDT (17 p.m.
Israel Time). To listen to the call please visit the Investor
Relations section of Perion’s website at
www.perion.com/events-presentations. Click on the link provided for
the webcast, or dial 1-866-744-5399. Callers from Israel may access
the call by dialing (03) 918-0685. The webcast will be archived on
the company’s website for seven days.
About Perion Network Ltd.,
Perion Network, Ltd. (NASDAQ: PERI) is a global internet
consumer software company that develops applications to make the
online experience of its users simple, safe and enjoyable. Perion’s
two main award winning consumer brands are: IncrediMail and
Smilebox. Together these products have had over 150 million
downloads and have an installed base of over 18 million.
IncrediMail, is a streamlined e-mail and Facebook
application with an easy-to-use interface that allows for more
personalized communications sold in over 100 countries in 10
languages and Smilebox, a leading photo sharing and social
expression product and service that lets customers quickly turn
life's moments into digital creations to share and connect with
friends and family in a fun and personal way. Perion’s applications
are monetized through a freemium model. Free versions of our
applications are monetized primarily through our toolbar which
generates search revenue, and advertising revenue generated through
impressions, while a more advanced feature rich version is
available with a premium upgrade. Perion also offers and develops a
range of products for mobile phones and tablets to answer its users
increasing mobile demands. For more information on Perion please
visit www.perion.com.
Non-GAAP measures
Non-GAAP financial measures consist of GAAP financial measures
adjusted to exclude: Valuation adjustment on acquired deferred
product revenues, amortization of acquired intangible assets,
share-based compensation expenses, acquisition related expenses,
deferred finance expenses and non-recurring tax benefits. 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. 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.
Our management regularly uses our supplemental non-GAAP financial
measures internally to understand, manage and evaluate our business
and make operating decisions. These non-GAAP measures are among the
primary factors management uses in planning for and forecasting
future periods. Business combination accounting rules requires us
to recognize a legal performance obligation related to a revenue
arrangement of an acquired entity. The amount assigned to that
liability should be based on its fair value at the date of
acquisition. The non-GAAP adjustment is intended to reflect the
full amount of such revenue. We believe this adjustment is useful
to investors as a measure of the ongoing performance of our
business. We believe these non-GAAP financial measures provide
consistent and comparable measures to help investors understand our
current and future operating cash flow performance. These non-GAAP
financial measures may differ materially from the non-GAAP
financial measures used by other companies. Reconciliation between
results on a GAAP and non-GAAP basis is provided in a table
immediately following the Consolidated Statements of Income.
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 the
Company. The words “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 the Company with respect to future events and
are subject to risks and uncertainties. Many factors could cause
the actual results, performance or achievements of the Company to
be materially different from any future results, performance or
achievements that may be expressed or implied by such
forward-looking statements, including, among others, potential
litigation associated with the transaction, risks that the
transaction disrupts current plans and operations and the potential
difficulties in employee retention as a result of the transaction
and in integrating the acquired business, the distraction of
management and the Company resulting from the transaction, changes
in the markets in which the Company operates and in general
economic and business conditions, loss of key customers and
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 the
Company 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, 2011. The Company does not assume any
obligation to update these forward-looking statements.
Source: Perion Network Ltd.
PERION NETWORK LTD. NON-GAAP SUMMARY FINANCIAL METRICS U.S. dollars
in thousands (except per share data), unaudited
Quarter ended June 30, Six months ended June 30,
2012 2011 2012 2011
Revenues: Search $ 6,398 $ 6,249 $ 11,950 $ 13,052 Product 5,062
1,189 10,033 2,510 Other 845 613 1,578
1,176 Total revenues $ 12,305 $ 8,051 $ 23,561 $ 16,738 Gross
Profit $ 11,494 $ 7,595 $ 21,986 $ 15,900 Operating Income $ 2,425
$ 2,177 $ 4,823 $ 5,736 Net Income $ 1,840 $ 1,926 $ 4,016 $ 4,855
Diluted EPS $ 0.18 $ 0.19 $ 0.40 $ 0.48
PERION NETWORK LTD.
GAAP FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF INCOME
U.S. dollars and number of shares in
thousands (except per share data), (unaudited)
Quarter ended June 30, Six months ended
June 30, 2012 2011 2012
2011 Revenues: Search $ 6,398 $ 6,249 $ 11,950 $
13,052 Product 4,740 1,189 9,114 2,510 Other 845
613 1,578 1,176 Total
revenues 11,983 8,051 22,642 16,738 Cost of revenues 1,064
459 2,087 843
Gross profit 10,919 7,592 20,555
15,895 Operating expenses: Research and
development, net 2,464 1,465 5,147 3,341 Selling and marketing
1,543 887 3,224 1,749 Customer acquisition costs 3,925 1,681 6,538
2,333 General and administrative 1,524 1,911
3,515 3,546 Total operating
expenses 9,456 5,944 18,424
10,969 Operating income 1,463 1,648 2,131
4,926 Financial income (expense), net (248 ) 57
(196 ) 134 Income before taxes
on income 1,215 1,705 1,935 5,060 Taxes on income (credit)
337 (509 ) 687 (396 ) Net income
$ 878 $ 2,214 $ 1,248 $ 5,456
Basic earnings per share $ 0.09 $ 0.23 $ 0.13
$ 0.56 Diluted earnings per share $ 0.09 $ 0.22
$ 0.12 $ 0.54 Basic weighted number of
shares 9,984 9,740 9,950
9,726 Diluted weighted number of shares 10,022
10,022 10,015 10,017
PERION NETWORK LTD. RECONCILIATION OF GAAP TO
NON-GAAP RESULTS U.S. dollars and number of shares in thousands
(except per share data), unaudited
Quarter endedJune 30,
Six months endedJune 30,
2012 2011 2012 2011 GAAP
revenues $ 11,983 $ 8,051 $ 22,642 $ 16,738 Valuation
adjustment on acquired deferred product revenues 322
- 919 - Non-GAAP revenues $ 12,305 $
8,051 $ 23,561 $ 16,738 GAAP gross profit $ 10,919 $
7,592 $ 20,555 $ 15,895 Valuation adjustment on acquired deferred
product revenues 322 -- 919 - Share based compensation 3 3 12 5
Amortization of acquired intangible assets 250 --
500 - Non-GAAP gross profit $ 11,494 $
7,595 $ 21,986 $ 15,900 GAAP operating expenses $
9,456 $ 5,944 $ 18,424 $ 10,969 Acquisition related expenses - 221
313 221 Share based compensation 178 305 529 584 Amortization of
acquired intangible assets 209 - 419
- Non-GAAP operating expenses $ 9,069 $ 5,418
$ 17,163 $ 10,164 GAAP operating income $ 1,463 $ 1,648
$ 2,131 $ 4,926 Valuation adjustment on acquired
deferred product revenues 322 - 919 - Acquisition related expenses
- 221 313 221 Share based compensation 181 308 541 589 Amortization
of acquired intangible assets 459 - 919
- Operating income adjustments 962 529
2,692 810 Non-GAAP operating income $
2,425 $ 2,177 $ 4,823 $ 5,736 GAAP Net income $ 878 $
2,214 $ 1,248 $ 5,456 Operating income adjustments 962 529 2,692
810 Deferred finance expenses - - 76 - Non-recurring tax benefits
- (817 ) - (1,411 ) Non-GAAP net income $
1,840 $ 1,926 $ 4,016 $ 4,855 GAAP diluted earnings
per share $ 0.09 $ 0.22 $ 0.12 $ 0.54 Non-GAAP
diluted earnings per share $ 0.18 $ 0.19 $ 0.40 $ 0.48
Shares used in computing US GAAP and Non-GAAP diluted
earnings per share 10,022 10,022 10,015
10,017 Non-GAAP net income $ 1,840 $ 1,926 $ 4,016 $
4,855 Income tax expense (credit) 337 (509 ) 687 (396 )
Non-recurring tax benefits - 817 - 1,411 Interest expense (income),
net 248 (57 ) 120 (134 ) Depreciation and amortization 225
169 444 349 Non-GAAP EBITDA $
2,650 $ 2,346 $ 5,267 $ 6,085 PERION NETWORK
LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands (except share data)
June
30, December 31, 2012 2011
Unaudited ASSETS CURRENT ASSETS: Cash and cash equivalents $
16,330 $ 11,260 Trade receivables 4,100 3,265 Other receivables and
prepaid expenses 6,320 6,459 Total current assets
26,750 20,984 LONG-TERM ASSETS: Severance pay fund
402 484 Property and equipment, net 1,335 1,300 Other intangible
assets, net 6,039 6,606 Goodwill 24,753 24,753 Other assets
1,028 777 Total long-term assets 33,557 33,920
Total assets $ 60,307 $ 54,904 LIABILITIES AND SHAREHOLDERS'
EQUITY CURRENT LIABILITIES: Current maturities of long-term debt $
2,300 $ - Trade payables 3,734 3,207 Deferred revenues 4,761 4,280
Payment obligation related to acquisition - 6,574 Accrued expenses
and other liabilities 6,920 6,950 Total current
liabilities 17,715 21,011 LONG-TERM LIABILITIES:
Long-term debt 7,700 - Deferred revenues - 1,120 Deferred tax
liability 61 12 Accrued severance pay 866 946 Total
long-term liabilities 8,627 2,078
SHAREHOLDERS' EQUITYShares authorized:
40,000,000Shares issued and outstanding: 9,987,325 and 9,916,194 as
of June 30, 2012 and December 31, 2011, respectively;
33,965 31,815 Total liabilities and shareholders'
equity $ 60,307 $ 54,904
PERION NETWORK LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands, (unaudited)
Six months ended June 30, 2012
2011
Cash flows from
operating activities:
Net income $ 1,248 $ 5,456 Adjustments required to reconcile net
income to net cash provided by operating activities: Depreciation
and amortization 1,363 349 Stock based compensation expense 541 589
Accretion of payment obligation related to acquisition 76 -
Adjustment of payment obligation related to acquisition 313
Amortization of premium and accrued interest on marketable
securities - 30 Loss from marketable securities, net - 48 Deferred
taxes, net 22 35 Accrued severance pay, net 2 65 Net changes in
operating assets and liabilities: Trade receivables (835 ) 335
Other receivables and prepaid expenses 166 (2,789 ) Other long-term
assets (251 ) 2 Trade payables 527 588 Deferred revenues (639 )
(137 ) Accrued expenses and other liabilities (30 )
(453 ) Net cash provided by operating activities 2,503
4,118
Cash flows from
investing activities:
Purchase of property and equipment (361 ) (140 ) Long term
restricted cash - 100 Capitalization of software development and
content costs (447 ) (310 ) Acquisition of subsidiary (6,626 ) -
Proceeds from sales of marketable securities - 8,180 Investment in
marketable securities - (11,915 ) Net cash
used in investing activities (7,434 ) (4,085 )
Cash flows from
financing activities:
Exercise of share options 1 29 Proceeds from long-term loans 10,000
- Dividend paid - (3,885 ) Net cash provided
by (used in) financing activities 10,001
(3,856 ) Increase (Decrease) in cash and cash equivalents 5,070
(3,823 ) Cash and cash equivalents at beginning of year
11,260 16,055 Cash and cash equivalents at end
of period $ 16,330 $ 12,232
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