Perion Network Ltd. (NASDAQ: PERI), today announced financial
results for the third quarter and nine months ended September 30,
2012.
Q3 2012 non-GAAP Financial Highlights Include:
- Quarterly revenues increased 81%
year-over-year to a record $16.3 million;
- Product and other advertising revenues
increase 78% year-over-year, reaching $5.4 million;
- Search revenue increased year over year
82% to $10.9 million;
- EBITDA increased year over year 71%,
reaching $3.8 million, or 23% of revenues; and
- Net income grew year over year 46%,
reaching $2.6 million, or $0.26 per share, representing 16% of
revenues;
First Nine Months 2012 non-GAAP Financial Highlights
Include:
- Year-to date revenues increased 55%
year-over-year to a record $39.8 million;
- Product and other advertising revenues
increase 153% year-over-year, reaching $17.0 million;
- Search revenue increased year over year
20% to $22.8 million;
- EBITDA increased year over year 9% to
$9.1 million, or 23% of revenues; and
- Net income was $6.7 million, or $0.66
per share, representing 17% of revenues;
Josef Mandelbaum, Perion’s CEO commented: “This quarter was a
phenomenal quarter for us in every aspect of our business. A year
post the acquisition of Smilebox, I am proud to announce that Q3
was a record quarter of profitability for Smilebox and revenues
continue to grow at a 30% pace. The acquisition has truly proven
out to be a big win for us.”
“In addition,” continued Mandelbaum, “thanks to efforts invested
in our back-end systems and analytics, we have succeeded in ramping
up our customer acquisition efforts with a very high return on
investment which in turn created rapid growth in search generated
revenues. Even more encouraging is while we have invested in
growing our business, our profits and profit margins have increased
dramatically. We intend to build and even further improve on these
successes, as we contemplate new acquisition opportunities and plan
for even greater growth in 2013.”
Non-GAAP Financial Comparison for the Third Quarter and First
Nine Months of 2012:
Revenue: Q3’12 revenues were a record $16.3 million,
increasing 32% over the prior quarter and 81% compared to the third
quarter of 2011. The accelerating growth was a result of positive
trends in all Perion’s revenue streams, but primarily as a result
of the Company’s search generated revenues increasing 82%
year-over-year and 70% sequentially quarter-over quarter.
Management continues to work on improving systems powering the
record revenue growth and expect strong performance in the coming
quarters as well.
In the first nine months of 2012, revenues increased 55%,
reaching $39.8 million, compared to $25.7 million in the first nine
months of 2011, and surpassing sales for the entire year of 2011.
This increase was primarily due to increasing product sales
three-fold and a 20% increase in search generated revenues.
Gross Profits: Gross profit in the third quarter of 2012
was $15.2 million, up 33% sequentially and up 82% from the third
quarter of 2011. The gross profit margin increased to 94% this last
quarter, compared to 93% in the third quarter of 2011. In the first
nine months of 2012, gross profit increased 53%, reaching $37.2
million, or 93% of sales, compared to $24.3 million, or 94% of
sales.
Customer Acquisition Costs (“CAC”): In the third quarter
of 2012, Perion invested $5.8 million in CAC, compared to $3.9
million last quarter and $2.6 million in the third quarter of 2011.
In the first nine months of 2012 the investment in CAC totaled
$12.4 million, compared to only $4.9 million in the same period
last year. 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.
Management continues to increase this investment, being the main
force powering Perion’s search generated growth, while remaining
focused on increasing profits.
EBITDA: In the third quarter of 2012, EBITDA was $3.8
million, or 23% of sales, increasing 71% compared to the same
quarter last year, despite the $3.2 million increase in CAC. In the
first nine months of 2012 EBITDA was $9.1 million, increasing $0.8
million from $8.3 million in the first nine months of 2011, even
though CAC increased $7.4 million in the 2012 period, compared to
the 2011 period.
Net Income: In the third quarter of 2012, net income was
$2.6 million or $0.26 per share, compared to $1.8 million, or $0.18
per share in the third quarter of 2011. In the first nine months of
2012 net income was $6.7 million, or $0.66 per share, similar to
the first nine months of 2011, offsetting the decrease in the first
half of the year, as the Company rebounded in the third
quarter.
Cash Flow from Operations: Based on reports in U.S. GAAP,
in the first nine months of 2012, cash flow from operations was
$4.8 million, compared to $5.4 million in the first nine months of
2011. The decrease in cash flow from operations is primarily due to
the increase in CAC and search revenues receivable in 2012.
Conference Call
Perion will host a conference call to discuss the results today,
November 1st at 10 a.m. EDT (4 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. 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 8
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, 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 endedSeptember
30,
Nine months endedSeptember
30,
2012 2011 2012
2011 Revenues: Search $ 10,861 $ 5,955 $ 22,811 $ 19,007
Product 4,142 2,006 14,175 4,516 Other 1,271 1,031
2,849 2,207 Total revenues $ 16,274 $ 8,992 $ 39,835
$ 25,730 Gross Profit $ 15,233 $ 8,389 $ 37,219 $ 24,284 EBITDA $
3,801 $ 2,225 $ 9,068 $ 8,310 Net Income $ 2,649 $ 1,817 $ 6,665 $
6,672 Diluted EPS $ 0.26 $ 0.18 $ 0.66 $ 0.67
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 endedSeptember
30,
Nine months endedSeptember
30,
2012 2011 2012
2011 Revenues: Search $ 10,861 $ 5,955 $ 22,811 $ 19,007
Product 4,083 1,445 13,197 3,955 Other 1,271
1,031 2,849 2,207 Total revenues 16,215
8,431 38,857 25,169 Cost of revenues 1,293 686
3,380 1,529 Gross profit 14,922
7,745 35,477 23,640
Operating expenses: Research and development, net 2,711 1,726 7,858
5,067 Selling and marketing 2,036 712 5,260 2,477 Customer
acquisition costs 5,825 2,625 12,363 4,942 General and
administrative 1,738 2,437 5,253
5,983 Total operating expenses 12,310
7,500 30,734 18,469 Operating
income 2,612 245 4,743 5,171 Financial income (expense), net
(58 ) 100 (254 ) 234 Income
before taxes on income 2,554 345 4,489 5,405 Taxes on income
(benefit) 861 325 1,548
(71 ) Net income $ 1,693 $ 20 $ 2,941 $ 5,476
Basic earnings per share $ 0.17 $ 0.00 $ 0.30
$ 0.56 Diluted earnings per share $ 0.17 $ 0.00 $
0.29 $ 0.55 Basic weighted number of shares
10,003 9,740 9,968 9,726
Diluted weighted number of shares 10,158
10,013 10,062 10,016
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 endedSeptember
30,
Nine months endedSeptember
30,
2012 2011 2012
2011 GAAP revenues $ 16,215 $ 8,431 $ 38,857 $ 25,169
Valuation adjustment on acquired deferred product revenues
59 561 978 561 Non-GAAP revenues
$ 16,274 $ 8,992 $ 39,835 $ 25,730 GAAP gross
profit $ 14,922 $ 7,745 $ 35,477 $ 23,640 Valuation adjustment on
acquired deferred product revenues 59 561 978 561 Share based
compensation 2 - 14 - Amortization of acquired intangible assets
250 83 750 83 Non-GAAP
gross profit $ 15,233 $ 8,389 $ 37,219 $ 24,284
GAAP operating expenses $ 12,310 $ 7,500 $ 30,734 $ 18,469
Acquisition related expenses 188 809 501 1,030 Share based
compensation 246 326 775 915 Amortization of acquired intangible
assets 211 68 630 68 Other - (50 ) -
(50 ) Non-GAAP operating expenses $ 11,665 $ 6,347 $ 28,828
$ 16,506 GAAP operating income $ 2,612 $ 245 $
4,743 $ 5,171 Valuation adjustment on acquired deferred
product revenues 59 561 978 561 Acquisition related expenses 188
809 501 1,030 Share based compensation 248 326 789 915 Amortization
of acquired intangible assets 461 151 1,380 151 Other -
(50 ) - (50 ) Operating income adjustments
956 1,797 3,648 2,607
Non-GAAP operating income $ 3,568 $ 2,042 $ 8,391 $ 7,778
GAAP Net income $ 1,693 $ 20 $ 2,941 $ 5,476
Operating income adjustments 956 1,797 3,648 2,607 Deferred finance
expenses - - 76 - Non-recurring tax expense - -
- (1,411 ) Non-GAAP net income $ 2,649 $ 1,817
$ 6,665 $ 6,672 GAAP diluted earnings per share $ 0.17 $
0.00 $ 0.29 $ 0.55 Non-GAAP diluted earnings per
share $ 0.26 $ 0.18 $ 0.66 $ 0.67 Shares used in
computing US GAAP and Non-GAAP diluted earnings per share
10,158 10,013 10,062 10,016
Non-GAAP net income $ 2,649 $ 1,817 $ 6,665 $ 6,672 Income
tax expense (credit) 861 325 1,548 (71 ) Non-recurring tax expense
- - - 1,411 Interest expense (income), net 58 (100 ) 178 (234 )
Depreciation and amortization 233 183
677 532 Non-GAAP EBITDA $ 3,801 $ 2,225 $
9,068 $ 8,310
PERION NETWORK LTD.
CONDENSED CONSOLIDATED BALANCE
SHEETS
U.S. dollars in thousands (except share
data)
September 30, December 31, 2012
2011 Unaudited ASSETS CURRENT ASSETS: Cash and cash
equivalents $ 17,860 $ 11,260 Trade receivables 5,063 3,265 Other
receivables and prepaid expenses 6,259 6,459 Total
current assets 29,182 20,984 LONG-TERM ASSETS:
Severance pay fund 401 484 Property and equipment, net 1,256 1,300
Other intangible assets, net 5,650 6,606 Goodwill 24,753 24,753
Other assets 700 777 Total long-term assets
32,760 33,920 Total assets $ 61,942 $ 54,904
LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Current
maturities of long-term debt $ 2,300 $ - Trade payables 4,195 3,207
Deferred revenues 4,380 4,280 Payment obligation related to
acquisition - 6,574 Accrued expenses and other liabilities
7,008 6,950 Total current liabilities 17,883
21,011 LONG-TERM LIABILITIES: Long-term debt 7,125 -
Deferred revenues - 1,120 Deferred tax liability 71 12 Accrued
severance pay 881 946 Total long-term liabilities
8,077 2,078 SHAREHOLDERS' EQUITY 35,982 31,815 Shares
authorized: 40,000,000
Shares issued and outstanding: 10,040,490
and 9,916,194 as of September 30, 2012 and December 31, 2011,
respectively;
Total liabilities and shareholders' equity $ 61,942 $ 54,904
PERION NETWORK LTD. CONSOLIDATED STATEMENTS
OF CASH FLOWS
U.S. dollars in thousands, (unaudited)
Nine months ended September 30, 2012
2011
Cash flows from
operating activities:
Net income $ 2,941 $ 5,476 Adjustments required to reconcile net
income to net cash provided by operating activities: Depreciation
and amortization 2,057 683 Stock based compensation expense 789 915
Accretion of payment obligation related to acquisition 389 -
Amortization of accrued interest on marketable securities - 37 Loss
from marketable securities, net - 48 Deferred taxes, net 49 163
Accrued severance pay, net 18 22 Net changes in operating assets
and liabilities: Trade receivables (1,798 ) (2,698 ) Other
receivables and prepaid expenses 210 980 Other long-term assets 77
293 Trade payables 988 (809 ) Deferred revenues (1,020 ) 97 Accrued
expenses and other liabilities 58 144
Net cash provided by operating activities 4,758
5,351
Cash flows from
investing activities:
Purchase of property and equipment (447 ) (193 ) Long term
restricted cash - 100 Capitalization of software development and
content costs (585 ) (1,020 ) Acquisition of subsidiary (6,626 )
(21,708 ) Proceeds from sales of marketable securities - 26,703
Investment in marketable securities - (11,915
) Net cash used in investing activities (7,658 ) (8,033 )
Cash flows from
financing activities:
Exercise of share options 75 29 Proceeds from long-term loans
10,000 - Repayment of long-term loans (575 ) - Dividend paid
- (3,885 ) Net cash provided by (used in) financing
activities 9,500 (3,856 ) Increase (Decrease)
in cash and cash equivalents 6,600 (6,538 ) Cash and cash
equivalents at beginning of year 11,260 16,055
Cash and cash equivalents at end of period $ 17,860 $
9,517
Supplemental
disclosure of non-cash investing activities:
Issuance of shares in connection with the acquisition of Smilebox
337 - Stock-based compensation that was
capitalized as part of capitalization of software development costs
25 -
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