Perion Network Ltd. (NASDAQ: PERI) today announced financial
results for the third quarter and nine months ended September 30,
2013.
Q3 2013 non-GAAP Financial Highlights Include:
- Quarterly revenues increased 31%
year-over-year reaching $21.3 million;
- EBITDA increased 48% year-over-year to
$5.6 million;
- Net income increased 68%
year-over-year, reaching $4.5 million; and
- Earnings per Share increased 31%
year-over-year, reaching $0.34.
First Nine Months 2013 non-GAAP Financial Highlights
Include:
- Year-to-date revenues increased 84%
year-over-year and were $73.3 million;
- EBITDA increased 96% year-over-year
reaching $17.8 million;
- Net income increased 105%, reaching
$13.6 million; and
- Earnings per Share increased 59%,
reaching $1.05.
ClientConnect Pro-forma non-GAAP Financial Highlights
Include:
On September 16, 2013, Perion announced an agreement to combine
with Conduit’s ClientConnect in an all-stock transaction, scheduled
to close in early January 2014, subject to a vote of Perion’s
shareholders and other closing conditions. Management does not
anticipate any issues with the vote or closing at this time.
Select highlights of ClientConnect’s Pro-forma non-GAAP third
quarter financial performance as provided by Conduit are as
follows1:
- Third quarter revenues increased 58%
year-over-year reaching $80.9 million;
- Third quarter EBITDA increased 48%
year-over-year reaching $21.2 million;
- Third quarter net income increased 44%
year-over-year, reaching $19.4 million;
- Year-to-date revenues increased 62%
year-over-year reaching $241.4 million;
- Year-to-date EBITDA increased 65%
year-over-year reaching $79.6 million; and
- Year-to-date net income increased 63%,
reaching $69.6 million.
Josef Mandelbaum, Perion’s CEO, commented: “This was a momentous
quarter for Perion, highlighted by the agreement to combine with
Conduit’s ClientConnect business to create an industry powerhouse.
On a stand-alone basis, we hit the upper range of our revenue
guidance and surpassed our EBITDA and net profit expectations. With
our search diversification strategy now fully implemented, we are
already seeing great progress, and can say with confidence that Q4
will show significant growth over Q3. From a product standpoint, we
launched our new iPhone and Android app, Molto, and are excited by
the great reviews and ratings Molto has been receiving.”
“The transaction with ClientConnect has not yet closed, however,
our optimism surrounding the combination continues to grow,”
continued Mr. Mandelbaum. “As the new, larger and more profitable
Perion, we will be uniquely positioned to execute our business
strategy and become a preferred partner of app developers, by
offering them the best solution to monetize and distribute their
apps across all devices. Furthermore, this combination will enable
us to increase organic investment in our technology and data
platforms, expand faster into mobile and invest in growth through
acquisitions. I fully expect 2014 to be another milestone year in
Perion’s history, and one that will positively shape our future in
the coming years.”
Non-GAAP Financial Comparison for the First Nine Months and
Third Quarter of 2013:
Revenue: In the third quarter of 2013, revenues reached
$21.3 million, reflecting a 31% increase compared to the $16.3
million of revenues in the third quarter of 2012. This increase was
attributable to a 25% year over year increase in search generated
revenues, while other revenues increased 43%. The increase in
search revenues was achieved while continuing to diversify the
Company’s search partners, with no more than 40% of search
generated revenues coming directly from any one of our search
partners.
In the first nine months of 2013 revenues were $73.3 million,
increasing 84% from the $39.8 million recorded in the same period
in 2012. Search generated revenues increased by 128% and other
revenues grew by 25%. The increase in search generated revenues was
due to both organic growth and the acquisition of SweetPacks in
November 2012. Growth in other revenues was attributable to other
advertising revenues.
Gross Profits: As a result of the increase in revenues,
in the third quarter of 2013 gross profit increased as well, and
was $20.4 million, or 96% of sales, increasing 34%, compared to
$15.2 million, or 94% of sales in the third quarter of 2012. Gross
profit in the first nine months of 2013 was $70.1 million, or 96%
of revenues, increasing 88% compared to $37.2 million, or 93% of
revenues in the first nine months of 2012.
Customer Acquisition Costs (“CAC”): In the third quarter
of 2013, CAC was $8.2 million, 40% higher than the $5.8 million
spent in the third quarter of 2012. In the first nine months of
2013, Perion invested $32.0 million in CAC, increasing 159%
compared to the $12.4 million invested in the first nine months of
2012. The increase in CAC was lower than initially planned for this
period, as the Company was adapting its acquisition strategy to its
new partners and the new industry environment. Management is in the
process of cautiously ramping up this investment in the fourth
quarter, increasing revenues in that quarter and powering growth
into 2014.
EBITDA: In the third quarter of 2013, EBITDA was $5.6
million, increasing $1.8 million, or 48%, compared to $3.8 million
in the third quarter of 2012, despite the $2.3 million increase in
CAC. Perion’s EBITDA margin increased this quarter to 26%, compared
to 23% the same quarter last year. In the first nine months of 2013
EBITDA was $17.8 million, or 24% of revenues, and nearly double the
$9.1 million, or 23% of revenues, in the first nine months of
2012.
Net Income: In the third quarter of 2013, net income
increased 68%, reaching $4.5 million or $0.34 per share, compared
to $2.6 million, or $0.26 per share in the third quarter of 2012.
In the first nine months of 2013, net income was more than double
the same period last year, reaching $13.6 million, or $1.05 per
share, compared to $6.7 million, or $0.66 per share, in the first
nine months of 2012. The GAAP Net Loss was $1.7 million, due to
one-time, non-deductible, acquisition-related costs of $3.4
million.
Cash Flow from Operations: Based on U.S. GAAP, in the
first nine months of 2013, cash flow from operations was $12.7
million, compared to $4.8 million in the first nine months of 2012.
Cash flow from operations in the first nine months of 2013 was due
to $2.1 million in GAAP net income, non-cash amortization, stock
based compensation and accretion expenses of $9.9 million and $0.7
million from change in operating assets and liabilities.
Financial Outlook
Based on currently available information, Perion is updating its
outlook for fiscal 2013 as follows:
- Revenue is expected to be in the range
of $102 million to $104 million.
- EBITDA is expected to be in the range
of $24 million to $25 million.
- Non-GAAP Net Income is expected to be
in the range of $18 million to $19 million; and
- Non-GAAP diluted EPS between $1.38 and
$1.45.
“The fourth quarter is shaping up to be a very strong growth
quarter for us, both in terms of revenue and profitability,”
concluded Mr. Mandelbaum. “However, in line with our commitment to
the highest industry standards, we have decided to be even more
selective regarding new business partners. Therefore we are
slightly adjusting our full year guidance. While there are
certainly headwinds in the market right now, we have always been
proactive in our support of better policies and in the long term
continue to believe this presents an opportunity for us to capture
market share.”
Perion’s expectation of non-GAAP adjusted net income for the
fiscal year 2013 excludes share-based compensation expense,
acquisition amortization and certain other adjustments, and assumes
an effective tax rate of 25 percent. For the purpose of calculating
diluted EPS and non-GAAP diluted EPS, the Company assumes
approximately 13.1 million weighted-average diluted ordinary shares
outstanding for the fourth quarter and for the full year.
Conference Call
Perion will host a conference call to discuss the results today,
November 12th at 10 a.m. EST (5 p.m. Israel Time). Details are as
follows:
- Dial-in number from within the United
States: 1-888-438-5448
- Dial-in number from Israel:
180-924-5906
- Dial-in number (other international):
1-719-785-1765
- Playback, available until November 19,
2013 by calling 1-877-870-5176 (United States) or 1-858-384-5517
(international). Pin number for the replay 3708973.
- A live webcast is accessible at
http://www.perion.com/events-presentations.
About Perion Network Ltd.
Perion Network, Ltd. (NASDAQ: PERI) is a global consumer
internet company that develops applications to make the online
experience of its users simple, safe and enjoyable. Perion’s three
main consumer brands are: Incredimail, Smilebox and SweetIM.
Incredimail is a unified messaging application enabling
consumers to manage multiple email accounts and Facebook messages
in one place with an easy-to-use interface and extensive
personalization features, and is available in over 100 countries in
8 languages; Smilebox is a leading photo sharing and social
expression product and service that quickly turns life's moments
into digital keepsakes for sharing and connecting with friends and
family, in a fun and personal way. SweetIM is an instant
messaging application that enables consumers to personalize their
everyday communications with free, fun and easy to use content.
Perion products have had over 300 million downloads to date with
more than 50 million monthly unique visitors across all of its
brands. 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
http://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,
accretion of payment obligation related to acquisition and taxes on
amortization of acquired intangible assets. 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
Operations.
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 of any closing conditions to the Share
Purchase to be satisfied and the failure of the proposed
transaction to be consummated for any other reason, the failure to
realize the anticipated benefits of the proposed transaction; risks
entailed in integrating the ClientConnect business with Perion’s
other businesses, including employee retention and customer
acceptance; the risk that the transaction will divert management
and other resources from the ongoing operations of the two
businesses or otherwise disrupt the conduct of those businesses,
potential litigation associated with the transaction, and general
risks associated with the business of Perion and with the
ClientConnect business, including 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/A for the year ended December 31, 2012. Perion does
not assume any obligation to update these forward-looking
statements.
1 For the purposes of comparison,
ClientConnect financials for the third quarter and first nine
months of 2012 have been adjusted to reflect 2013 economic terms.
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,
2013 2012 2013
2012 Revenues: Search $ 13,562 $ 10,861 $ 52,008 $ 22,811
Product and Other 7,722 5,413 21,281
17,024 Total revenues $ 21,284 $ 16,274 $ 73,289 $ 39,835 Gross
Profit $ 20,423 $ 15,233 $ 70,079 $ 37,219 EBITDA $ 5,634 $ 3,801 $
17,791 $ 9,068 Net Income $ 4,454 $ 2,649 $ 13,640 $ 6,665 Diluted
EPS $ 0.34 $ 0.26 $ 1.05 $ 0.66
PERION NETWORK LTD.
GAAP FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF OPERATIONS
U.S. dollars and number of shares in
thousands (except per share data), (unaudited)
Quarter endedSeptember
30,
Nine months endedSeptember
30,
2013 2012 2013
2012 Revenues: Search $ 13,562 $ 10,861 $ 52,008 $
22,811 Product and Other 7,722 5,354
21,281 16,046 Total revenues 21,284 16,215 73,289 38,857
Cost of revenues 2,721 1,293 8,790
3,380 Gross profit 18,563 14,922
64,499 35,477 Operating expenses: Research and development,
net 2,928 2,711 9,221 7,858 Selling and marketing 2,761 2,036 8,103
5,260 Customer acquisition costs 8,162 5,825 32,043 12,363 General
and administrative 5,573 1,738 9,857
5,253 Total operating expenses 19,424
12,310 59,224 30,734 Operating income (loss) (861 )
2,612 5,275 4,743 Financial expense, net 483
58 1,284 254 Income (loss) before taxes on
income (1,344 ) 2,554 3,991 4,489 Taxes on income 314
861 1,918 1,548 Net income (loss) $ (1,658 ) $
1,693 $ 2,073 $ 2,941 Basic earnings (loss) per share $
(0.13 ) $ 0.17 $ 0.17 $ 0.30 Diluted earnings (loss) per share $
(0.13 ) $ 0.17 $ 0.16 $ 0.29 Basic weighted number of shares
12,468 10,003 12,277 9,968
Diluted weighted number of shares 12,468
10,158 12,998 10,062 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,
2013 2012 2013
2012 GAAP revenues $ 21,284 $ 16,215 $ 73,289 $
38,857 Valuation adjustment on acquired deferred product revenues
- 59 - 978 Non-GAAP
revenues $ 21,284 $ 16,274 $ 73,289 $ 39,835
GAAP gross profit $ 18,563 $ 14,922 $ 64,499 $ 35,477 Valuation
adjustment on acquired deferred product revenues - 59 - 978 Share
based compensation 2 2 7 14 Amortization of acquired intangible
assets 1,858 250 5,573
750 Non-GAAP gross profit $ 20,423 $ 15,233 $ 70,079
$ 37,219 GAAP operating expenses $ 19,424 $ 12,310 $ 59,224
$ 30,734 Acquisition related expenses 3,432 188 3,432 501 Share
based compensation 357 246 1,081 775 Amortization of acquired
intangible assets 414 211 1,363
632 Non-GAAP operating expenses $ 15,221 $ 11,665 $
53,348 $ 28,826 GAAP operating income (loss) $ (861 )
$ 2,612 $ 5,275 $ 4,743 Valuation adjustment on acquired
deferred product revenues - 59 - 978 Acquisition related expenses
3,432 188 3,432 501 Share based compensation 359 248 1,088 789
Amortization of acquired intangible assets 2,272
461 6,936 1,380 Operating income
adjustments 6,063 956 11,456
3,648 Non-GAAP operating income $ 5,202 $ 3,568 $
16,731 $ 8,391 GAAP net income (loss) $ (1,658 ) $
1,693 $ 2,073 $ 2,941 Operating income adjustments 6,063 956 11,456
3,648 Accretion of payment obligation related to acquisitions 293 -
843 76 Taxes on amortization of acquired intangible assets
(244 ) - (732 ) - Non-GAAP net income $ 4,454
$ 2,649 $ 13,640 $ 6,665 GAAP diluted earnings
(loss) per share $ (0.13 ) $ 0.17 $ 0.16 $ 0.29
Non-GAAP diluted earnings per share $ 0.34 $ 0.26 $ 1.05
$ 0.66 Shares used in computing GAAP diluted earnings
(loss) per share 12,468 10,158 12,998
10,062 Shares used in computing Non-GAAP diluted
earnings per share 13,123 10,158 12,998
10,062 Non-GAAP net income $ 4,454 $ 2,649 $
13,640 $ 6,665 Income tax expense 314 861 1,918 1,548 Taxes on
amortization of acquired intangible assets 244 - 732 - Interest
expense, net 190 58 441 178 Depreciation and amortization
432 233 1,060 677 Non-GAAP
EBITDA $ 5,634 $ 3,801 $ 17,791 $ 9,068
PERION NETWORK LTD. CONDENSED CONSOLIDATED BALANCE SHEETS U.S.
dollars in thousands
September 30, December 31, 2013
2012 Unaudited ASSETS CURRENT ASSETS: Cash and cash
equivalents $ 27,276 $ 21,762 Trade receivables 12,024 10,246
Restricted cash 10,260 10,260 Other receivables and prepaid
expenses 4,249 5,424 Total current assets
53,809 47,692 LONG-TERM ASSETS: Property and equipment, net
1,456 1,522 Goodwill and other intangible assets, net 67,402 72,730
Other assets 1,433 1,215 Total long-term assets
70,291 75,467 Total assets $ 124,100 $ 123,159
LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Current
maturities of long-term debt $ 2,300 $ 2,300 Trade payables 9,322
9,560 Deferred revenues 4,800 5,132 Payment obligation related to
acquisitions 24,484 20,317 Accrued expenses and other liabilities
17,177 14,679 Total current liabilities 58,083
51,988 LONG-TERM LIABILITIES: Long-term debt 4,825 6,550
Contingent purchase consideration - 6,078 Other long-term
liabilities 3,297 3,833 Total long-term liabilities
8,122 16,461 SHAREHOLDERS' EQUITY
57,895 54,710 Total liabilities and shareholders' equity $
124,100 $ 123,159
PERION NETWORK LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS
U.S. dollars in thousands, (unaudited)
Nine months ended September 30,
2013 2012
Operating
activities:
Net income $ 2,073 $ 2,941 Adjustments required to reconcile net
income to net cash provided by operating activities: Depreciation
and amortization 7,996 2,057 Stock based compensation expense 1,088
789 Accretion of payment obligation related to acquisition 843 389
Net change in operating assets and liabilities 742
(1,418 ) Net cash provided by operating activities
12,742 4,758
Investing
activities:
Purchase of property and equipment (545 ) (447 ) Other (171 ) -
Capitalization of software development and content costs (2,033 )
(585 ) Acquisition of subsidiary - (6,626 )
Net cash used in investing activities (2,749 ) (7,658
)
Financing
activities:
Exercise of share options - 75 Deferred payment made in connection
with acquisition (2,754 ) - Proceeds from long-term loans - 10,000
Payment of long-term loans (1,725 ) (575 ) Net cash
provided by (used in) financing activities (4,479 )
9,500 Net increase in cash and cash equivalents 5,514 6,600
Cash and cash equivalents at beginning of period 21,762
11,260 Cash and cash equivalents at end of
period $ 27,276 $ 17,860 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 $ 25
Perion Network Ltd.Deborah MargalitPerion Investor
Relations+972-3-7696100investors@perion.comorHayden / MS-IR
LLCBrett Maas / Miri Segal-Scharia646-536-7331 /
917-607-8654Brett@haydenir.com / msegal@ms-ir.com
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