Following Transformative ClientConnect
Acquisition, non-GAAP Revenues Reach $117 Million and EBITDA Grows
to $34 Million
Perion Network Ltd. (NASDAQ: PERI) today announced record
financial results for the first quarter ended March 31, 2014.
Q1 2014 non-GAAP Financial Highlights:
- Revenues increased to $117.1
million;
- EBITDA increased to $33.6 million, or
29% of revenues;
- Net income increased to $27.6 million,
or 24% of revenues;
- Earnings per diluted share were
$0.40;
- Cash flow from operations reached $13.9
million; and
- Perion completed the quarter with $51.2
million in cash and cash equivalents.
Josef Mandelbaum, Perion’s CEO, commented: “We are very pleased
with our first quarter performance as a combined company. The
integration proceeded more smoothly and more rapidly than we
anticipated, and the combined operations are delivering record
results with strong top- and bottom-line growth. The post-merger
integration work we completed, combined with our new found scale,
sophisticated analytical capabilities, and combined talent, helped
produce a strong start to 2014. While there still remain some
headwinds in the overall industry, we are increasingly confident in
our ability to adapt, gain market share and diversify and are
therefore very excited about the future of the new Perion.”
“As an industry leader in the app developer ecosystem on the
desktop, we are now positioning ourselves to be the same on the
mobile platform,” added Mr. Mandelbaum. “Our expertise in helping
app developers grow, monetize and optimize their business makes us
the ideal partner for the mobile platform. Our technology, data set
and people give me great confidence that we will be one of the
leading companies that provides solutions for each platform and
more importantly cross platform. Over the course of the remainder
of the year you should expect to see some exciting new initiatives
from us in the mobile and data driven programmatic advertising
space which will further diversify and strengthen our
business.”
Non-GAAP Financial Comparison for the First Quarter of
2014:
In accordance with US generally accepted accounting principles
the acquisition of ClientConnect by Perion, which closed on January
2, 2014, is accounted for as a reverse acquisition. Therefore going
forward, Perion will be comparing its results to those of
ClientConnect in 2013. In the interest of transparency, the Company
is also providing this quarter, comparative results on a combined
basis. The combined results are calculated as the sum of Perion and
ClientConnect results for the entire first quarter of last
year.
Revenue: In the first quarter of 2014 revenues were a
record $117.1 million, increasing 47%, compared to ClientConnect
revenues of $79.7 million in the first quarter of 2013 and
increasing 9% compared to combined revenues of $ 107.3 million in
the first quarter of 2013. Non-GAAP revenues in the first quarter
of 2014 include $2.3 million of deferred product revenues, which in
accordance with U.S. GAAP were recorded at fair value on the
acquisition date.
Customer Acquisition Costs (“CAC”): In the first quarter
of 2014, Perion increased its investment in CAC to $59.6 million.
In the first quarter of 2014 CAC represented 51% of revenues,
compared to 50% in the first quarter of 2013 by ClientConnect and
48% revenues on a combined basis in the first quarter of 2013.
Operating Expenses: Excluding CAC, operating expenses in
the first quarter of 2014 were $24.5 million, or 21% of revenues,
compared to $17.9 million, or 22% of revenues, at ClientConnect in
the first quarter of 2013. Non GAAP operating expenses in the first
quarter of 2014 excluded $4.5 million amortization of acquired
intangible assets, $4.4 million in non-cash equity compensation
expenses and $2.9 million in acquisition related expenses, all of
which were included in the GAAP numbers. In the first quarter of
2013, non GAAP operating expenses included $7.7 million activity
which in the GAAP report were associated with discontinued
operations and excluded from operating expenses.
EBITDA: In the first quarter of 2014, EBITDA was $33.6
million, or 29% of revenues, a 49% increase compared to the $22.5
million, or 28% of revenues at ClientConnect in the same quarter
last year, despite the $19.5 million increase in CAC. On a combined
basis EBITDA increased 10% from the first quarter of 2013.
Net Income: In the first quarter of 2014, net income was
$27.6 million, or 24% of revenues, increasing 41%, from $19.5
million at ClientConnect in the first quarter of 2013. On a
combined basis, net income increased 9% from $25.3 million in the
first quarter of 2013.
Cash and Cash Flow from Operations: As of March 31, 2014
cash and cash equivalents were $51.2 million. This was made up of
primarily $13.9 million, cash flow from operations, a $23.4 million
cash balance at Perion prior the acquisition and a $14.8 million
short term loan from Conduit to support working capital post
acquisition.
2014 Financial Outlook:
Management today reaffirmed its financial outlook for 2014, on a
non-GAAP basis, as announced on March 3, 2014:
- Revenue is expected to be in the range
of $460 million to $470 million.
- EBITDA is expected to be in the range
of $125 million to $130 million.
- Net Income is expected to be in the
range of $103 million to $108 million.
Conference Call
Perion will host a conference call to discuss the results today,
May 15, 2014 at 10 a.m. EDT (5 p.m. Israel Time). Details are as
follows:
- Conference ID: 3820590
- Dial-in number from within the United
States: 1-888-438-5525
- Dial-in number from Israel:
1-80-924-5906
- Dial-in number (other international):
1-719-457-1512
- Playback, available until May 22, 2014
by calling 1-877-870-5176 (United States) or 1-858-384-5517
(international). Please use pin number 3820590 for the replay.
- A live webcast is accessible at
http://www.perion.com/events-presentations
About Perion Network Ltd.
Perion powers innovation. Perion is a global performance-based
media and Internet Company, providing online publishers and app
developers advanced technology and a variety of intelligent,
data-driven solutions to monetize their application or content and
expand their reach to larger audiences. Our leading self-service
platform with simple integration and robust, built-in analytics,
empowers digital businesses to optimize distribution and maximize
revenue. Our distribution solutions, which are based on our own
experience as an app developer, position us to best understand the
needs of developers, and enable developers to focus exclusively on
creating high-quality digital product and content. The Perion team
brings decades of experience, operating and investing in
digitally-enabled businesses, and we continue to innovate and
create value for the app ecosystem. More information about Perion
may be found at www.perion.com.
Non-GAAP measures
Non-GAAP financial measures consist of GAAP financial measures
adjusted to exclude: amortization of acquired intangible assets,
share-based compensation expenses, acquisition related expenses,
certain business combination accounting entries and tax adjustments
re non-GAAP adjustments: non-recurring financial income; deferred
financial expenses; and discontinued operations related expenses.
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.
The intangible assets created in the reverse acquisition of Perion
are preliminary and subject to further review and completion of
valuation analyses.
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
the ClientConnect 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 for the year ended December 31, 2013. Perion 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 March 31,
2014 2013
2013 ClientConnect Combined
Revenue $ 117,115 $ 79,679 $ 107,257 Operating
expenses $ 84,108 $ 57,945 $ 77,901 EBITDA $ 33,562 $ 22,488
$ 30,389 Net Income $ 27,598 $ 19,536 $ 25,319
Diluted EPS $ 0.40 $ 0.36
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 ended March 31,
2014 2013 Revenues: Search
$
95,182
$
69,465
Products and other 19,641 9,838
Total revenues 114,823 79,303 Operating expenses: Cost of revenues
6,393 1,449 Customer acquisition costs 59,582 40,089 Research and
development 13,327 5,136 Selling and marketing 5,824 2,522 General
and administrative 10,866 2,235 Total
operating expenses 95,992 51,431
Operating income 18,831 27,872 Financial (expense) income, net
(393 ) 852 Income before taxes on income
18,438 28,724 Taxes on income 4,622 3,785
Net income – continuing operations 13,816 24,939 Net loss -
discontinued operations - (6,565 ) Net income
$
13,816
$
18,374
Net income (loss) per share - basic: Continuing
operations
$
0.21
$
0.46
Discontinued operations
$
-
$
(0.12
)
Net income (loss) per share - diluted: Continuing operations
$
0.20
$
0.46
Discontinued operations
$
-
$
(0.12
)
Number of shares - basic: Continuing and discontinued
operations 67,175 53,906 Number
of shares - diluted: Continuing operations 68,226
54,555 Discontinued operations 68,226
53,906 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 ended March 31,
2014 2013 GAAP revenues $
114,823 $ 79,303 Revenues from discontinued operations - 376
Valuation adjustment on acquired deferred product revenues
2,292 - Non-GAAP revenues $ 117,115 $
79,679 GAAP operating expenses $ 95,992 $ 51,431
Acquisition related expenses ( 2,948 ) - Discontinued operations
operating expenses - 7,676 Share based compensation ( 4,436 ) (
1,162 ) Amortization of acquired intangible assets ( 4,500 )
- Non-GAAP operating expenses $ 84,108 $
57,945 GAAP net income $ 13,816 $ 18,374 Valuation
adjustment on acquired deferred product revenues 2,292 -
Acquisition related expenses 2,948 - Share based compensation 4,436
1,162 Amortization of acquired intangible assets 4,500 - Accretion
of payment obligation related to acquisitions 268 - Taxes related
to amortization of acquired intangible assets (662 )
- Non-GAAP net income $ 27,598 $ 19,536
Non-GAAP net income $ 27,598 $ 19,536 Income tax expense 4,622
3,785 Interest expense (income), net 393 ( 852 ) Accretion of
payment obligation related to acquisitions ( 268 ) - Taxes related
to amortization of acquired intangible assets 662 - Depreciation
555 754 Discontinued financial income, net - ( 60 ) Discontinued
tax benefit - ( 675 ) Non-GAAP EBITDA $ 33,562
$ 22,488 GAAP diluted earnings per share $
0.20 $ 0.46 Non-GAAP diluted earnings per share $
0.40 $ 0.36 Shares used in computing US GAAP and
non-GAAP diluted earnings per share 68,226
54,555 PERION NETWORK LTD. RECONCILIATION OF
CLIENTCONNECT NON-GAAP TO COMBINED NON-GAAP RESULTS FOR FIRST
QUARTER OF 2013 U.S. dollars and number of shares in thousands
(except per share data), unaudited
Quarter endedMarch 31,
2013
ClientConnect non-GAAP revenues $ 79,679 Perion non-GAAP
revenues as reported 27,578 Combined non-GAAP revenues $
107,257 ClientConnect non-GAAP operating expenses $
57,945
Perion non-GAAP operating expenses
(including cost of revenues) as reported
19,956 Combined non-GAAP operating expenses $ 77,901
ClientConnect non-GAAP net income $ 19,536 Perion non-GAAP
net income as reported 5,783 Combined non-GAAP net income $
25,319 ClientConnect non-GAAP EBITDA $ 22,488 Perion
non-GAAP EBITDA as reported 7,901 Combined non-GAAP EBITDA $
30,389 PERION NETWORK LTD. GAAP FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS U.S. dollars in thousands
March 31, 2014
December 31, 2013 Assets
Unaudited
Current assets: Cash and cash equivalents
$
51,174
$
949
Restricted cash 1,541 - Trade receivables 48,871 - Other current
assets 6,127 400 Total current assets 107,713 1,349
Property and equipment, net 3,723 2,189 Goodwill and other
intangible assets, net 191,829 27,520 Other assets 3,064
- Total assets
$
306,329
$
31,058
Liabilities and Stockholders’ Equity Current
liabilities: Current maturities of long term debt
$
17,133
$
-
Trade payables 45,283 13,358 Deferred revenues 7,923 6,250 Payment
obligation related to acquisition 8,996 - Accrued expenses and
other liabilities 19,455 1,423 Total current
liabilities 98,790 21,031 Long-term debt 3,675 - Other long term
liabilities 4,927 - Total liabilities 107,392
21,031 Stockholders’ equity: Ordinary shares 183 147
Additional paid-in capital 184,938 9,880 Retained earnings
13,816 - Total stockholders’ equity: 198,937
10,027 Total liabilities and stockholders’ equity
$
306,329
$
31,058
PERION NETWORK LTD. GAAP FINANCIAL
STATEMENTS CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS U.S. dollars in thousands, (unaudited)
Quarter ended March 31,
2014 2013
Operating
activities:
Net income
$
13,816
$
18,374
Loss from discontinued operations, net -
(6,565 ) Income from continuing operations 13,816 24,939
Adjustments required to reconcile net income to net cash provided
by operating activities: Depreciation and amortization 5,055 521
Stock based compensation expense, net 4,436 721 Acquisition related
expenses paid by shareholders 3,060 - Accrued interest, net 81 243
Accretion of payment obligation related to acquisition 268 -
Deferred income taxes (1,350 ) 89 Changes in assets and liabilities
(11,502 ) 10,451 Net cash provided by
operating activities 13,864 36,964 Net cash used in discontinued
operations - (6,986 ) Net cash provided by
operating activities 13,864 29,978
Investing
activities:
Purchase of property and equipment (711 ) (249 ) Restricted
cash, net (422 ) - Proceeds from short-term bank deposits - 45,970
Cash acquired through merger with Perion Network Ltd. 23,364
- Net cash provided by continuing operations
22,231 45,721 Net cash provided by discontinuing operations
- 469 Net cash provided by investing
activities 22,231 46,190
Financing
activities:
Deferred payment made in connection with acquisition (45 ) -
Proceeds from short-term loan 14,750 - Repayment of long-term loans
(575 ) - Net cash provided by financing
activities 14,130 - Net Increase in cash and cash
equivalents 50,225 76,168 Increase in cash and cash equivalents -
discontinued operations - 1,509 Cash and cash equivalents at
beginning of year 949 78,395
Cash and cash equivalents at end of period
$
51,174
$
156,072
Perion Investor RelationsDeborah
Margalit+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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