Perion Network Ltd. (NASDAQ:PERI), a global technology leader in
advertising solutions for brands and publishers, announced today
its financial results for the first quarter ended March 31, 2017.
Financial Highlights*(In
thousands, except per share data)
|
|
Three months ended |
|
|
March 31, |
|
|
2016 |
|
|
2017 |
|
Revenues |
|
$ |
75,789 |
|
|
$ |
61,976 |
|
GAAP Net Loss from Continuing Operations |
|
$ |
(2,023 |
) |
|
$ |
(2,074 |
) |
Non-GAAP Net Income |
|
$ |
6,673 |
|
|
$ |
2,754 |
|
Adjusted EBITDA |
|
$ |
8,791 |
|
|
$ |
3,489 |
|
GAAP Diluted Loss Per Share from continuing operation |
|
$ |
(0.02 |
) |
|
$ |
(0.03 |
) |
Non-GAAP Diluted Earnings Per Share |
|
$ |
0.09 |
|
|
$ |
0.04 |
|
|
|
|
|
|
|
|
|
|
* Reconciliation of GAAP to Non-GAAP measures follows. |
|
Alan Gelman, Chairman of the Board of Directors
commented, “The Board is encouraged that we have a new management
team in place that has the experience needed to lead Perion in a
new strategic direction and guide the company to the next phase of
its growth. Doron Gerstel, who took over as CEO on April 2, 2017,
has extensive experience leading technology-focused companies
efficiently expand in competitive markets and a proven ability to
create shareholder value. I am confident that he is the right
leader to drive Perion’s long-term growth.”
Mr. Gerstel commented, “My mission is clear:
drive long term exponential growth and unlock sustainable
shareholder value. The key element of our growth strategy will be
leveraging our technology asset in an integrated solution. We will
use data-driven analytic capabilities to allow us to transform
current stand-alone product offerings into a more integrated
solutions-based offering. We are confident that these more holistic
and synergistic solutions will resonate with customers, accelerate
our growth and enable margin expansion. A significant component of
our long-term growth plan will be to continue to optimize our cost
structure and redirect investments to further capitalize on our
core technology.”
“During the second quarter we will begin
implementing new initiatives that will help position Perion for the
next phase of its growth, and I expect to provide more specific
details on our strategic plan, when we report our second quarter
financial results,” Mr. Gerstel added. “Based on our current
visibility, I am encouraged by our prospects for the second quarter
in comparison to this past quarter, as well as the second quarter
last year. I am confident regarding the near- and long-term outlook
for Perion. During my 30 days at Perion, I have already found that
the assets we have in place exceed my original expectations that
had encouraged me to take this position in the first place.”
Financial Comparison for the First
Quarter of 2017:
Revenues: Revenues decreased by
18%, from $75.8 million in the first quarter of 2016 to $62.0
million in the first quarter of 2017. This decrease, was primarily
a result of advertising revenues declining 22% and search and other
revenues declining 16%, as compared to the first quarter of 2016.
The decline in search and other revenues primarily reflects the
continued decline in expense free search revenues generated by
legacy users, engaged over two years ago, the effect of which is
expected decrease over time.
“Our advertising business experienced a
significant impact related to the uncertainty in the U.S. following
the U.S. elections,” continued Mr. Gerstel. “This directly
contributed to lower ad spend, and related revenue, primarily
during January. I am encouraged that our advertising business
recovered shortly thereafter, and April’s revenues is over 20% than
April last year. The positive effects of programmatic advertising
and the effort to increase ‘in-flight’ campaign spend, has become
more significant in our Q2 revenue forecast and our outlook for
2017 overall. More specifically, in our advertising business, due
to Q2 strong start, meeting Q2 Plan and even closing Q1 gap,
becomes more and more realistic.”
Customer Acquisition Costs and Media Buy
(“CAC”): CAC in the first quarter of 2017
were $30.1 million, or 48% of revenues, as compared to $34.3
million, or 45% of revenues in the first quarter of 2016. The
decreased in the nominal costs was primarily due to the lower level
of advertising revenues.
Net Loss: On a GAAP basis, net
loss in the first quarter of 2017 was $2.1 million, as compared to
a net loss of $5.6 million in the first quarter of 2016. The loss
in the first quarter of 2017, was due to the lower revenues,
partially offset by an improved cost structure. The loss in the
first quarter of 2016 was mainly due to a loss of $3.6 million from
operations that were discontinued in 2016.
Non-GAAP Net Income: In the
first quarter of 2017, non-GAAP net income was $2.8 million, or 4%
of revenues, compared to the $6.7 million, or 9% of revenues, in
the first quarter of 2016.
Adjusted EBITDA: In the first
quarter of 2017, Adjusted EBITDA was $3.5 million, or 6% of
revenues, compared to $8.8 million, or 12% of revenues, in the
first quarter of 2016.
Cash and Cash Flow from
Operations: As of March 31, 2017, cash and cash
equivalents, were $22.8 million. Cash provided by operations in the
first quarter of 2017 was $8.2 million, compared to $3.5 million in
the first quarter of 2016. The increase in cashflow from operations
was primarily due to the discontinuation of certain activities
related to Growmobile in 2016, as well as improving our DSO.
Perion currently satisfies all the financial
covenants associated with its debt.
Conference Call:
Perion will host a conference call to discuss
the results today, May 4, 2017, at 10 a.m. ET. Details are as
follows:
- Conference ID: 7455488
- Dial-in number from within the United States:
1-888-218-8142
- Dial-in number from Israel: 1-809-246-037
- Dial-in number (other international): 1-913-312-0966
- Playback available until May 11, 2017 by calling 1-844-512-2921
(United States) or1-412-317-6671 (international). Please use PIN
code 7455488 for the replay.
- Link to the live webcast accessible at
http://www.perion.com/ir-events
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, amortization of acquired intangible
assets and the related taxes thereon, non-recurring tax expenses,
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 StatementsThis
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 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, 2016 filed with the SEC on March 7, 2017. Perion does
not assume any obligation to update these forward-looking
statements.
|
PERION NETWORK LTD. AND ITS
SUBSIDIARIES |
|
|
|
|
|
CONSOLIDATED STATEMENTS OF OPERATIONS:
UNAUDITED |
In thousands (except share and per share
data) |
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
|
March 31, |
|
|
|
|
2016 |
|
|
|
2017 |
|
Revenues: |
|
|
|
|
|
|
|
|
|
Search
and other |
|
|
|
$ |
44,554 |
|
|
|
$ |
37,588 |
|
Advertising |
|
|
|
|
31,235 |
|
|
|
|
24,388 |
|
Total Revenues |
|
|
|
|
75,789 |
|
|
|
|
61,976 |
|
|
|
|
|
|
|
|
|
|
|
Costs and Expenses: |
|
|
|
|
|
|
|
|
|
Cost of
revenues |
|
|
|
|
4,093 |
|
|
|
|
3,509 |
|
Customer
acquisition costs and media buy |
|
|
|
|
34,291 |
|
|
|
|
30,052 |
|
Research
and development |
|
|
|
|
7,391 |
|
|
|
|
5,299 |
|
Selling
and marketing |
|
|
|
|
16,059 |
|
|
|
|
15,010 |
|
General
and administrative |
|
|
|
|
7,201 |
|
|
|
|
5,175 |
|
Depreciation and amortization |
|
|
|
|
7,339 |
|
|
|
|
4,901 |
|
Restructuring costs |
|
|
|
|
728 |
|
|
|
|
- |
|
Total Costs and Expenses |
|
|
|
|
77,102 |
|
|
|
|
63,946 |
|
|
|
|
|
|
|
|
|
|
|
Loss from Operations |
|
|
|
|
(1,313 |
) |
|
|
|
(1,970 |
) |
Financial
expense, net |
|
|
|
|
3,138 |
|
|
|
|
2,184 |
|
|
|
|
|
|
|
|
|
|
|
Loss before Taxes on Income |
|
|
|
|
(4,451 |
) |
|
|
|
(4,154 |
) |
Taxes on
income |
|
|
|
|
(2,428 |
) |
|
|
|
(2,080 |
) |
|
|
|
|
|
|
|
|
|
|
Net
Loss from Continuing Operations |
|
|
|
|
(2,023 |
) |
|
|
|
(2,074 |
) |
Net Loss
from discontinued operations |
|
|
|
|
(3,585 |
) |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
Net
Loss |
|
|
|
$ |
(5,608 |
) |
|
|
$ |
(2,074 |
) |
|
|
|
|
|
|
|
|
|
|
Net
Earnings (Loss) per Share - Basic and Diluted: |
|
|
|
|
|
|
|
|
|
Continuing operations |
|
|
|
$ |
(0.02 |
) |
|
|
$ |
(0.03 |
) |
Discontinued operations |
|
|
|
$ |
(0.05 |
) |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares continuing and
discontinued |
|
|
|
|
|
|
|
|
|
Basic and
Diluted |
|
|
|
|
76,169,607 |
|
|
|
|
77,486,996 |
|
|
PERION NETWORK LTD. AND ITS
SUBSIDIARIES |
|
|
|
|
|
CONDENSED CONSOLIDATED BALANCE SHEETS:
UNAUDITED |
In
thousands |
|
|
|
|
|
December 31, |
|
|
March 31, |
|
2016 |
|
|
|
2017 |
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Assets: |
|
|
|
|
|
|
Cash and
cash equivalents |
$ |
23,962 |
|
|
|
$ |
22,809 |
|
Short-term bank deposit |
|
8,414 |
|
|
|
|
- |
|
Accounts
receivable, net |
|
71,346 |
|
|
|
|
55,494 |
|
Prepaid
expenses and other current assets |
|
10,036 |
|
|
|
|
12,761 |
|
Total Current
Assets |
|
113,758 |
|
|
|
|
91,064 |
|
|
|
|
|
|
|
|
Property
and equipment, net |
|
14,205 |
|
|
|
|
14,748 |
|
Goodwill
and intangible assets, net |
|
234,755 |
|
|
|
|
230,744 |
|
Deferred
taxes |
|
4,117 |
|
|
|
|
4,004 |
|
Other
assets |
|
1,617 |
|
|
|
|
1,476 |
|
|
|
|
|
|
|
|
Total Assets |
$ |
368,452 |
|
|
|
$ |
342,036 |
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Liabilities: |
|
|
|
|
|
|
Accounts
payable |
$ |
38,293 |
|
|
|
$ |
31,521 |
|
Accrued
expenses and other liabilities |
|
17,466 |
|
|
|
|
15,066 |
|
Short-term loans and current maturities of long-term and
convertible debt |
|
17,944 |
|
|
|
|
11,799 |
|
Deferred
revenues |
|
5,354 |
|
|
|
|
5,126 |
|
Payment
obligation related to acquisitions |
|
7,653 |
|
|
|
|
7,683 |
|
Total Current Liabilities |
|
86,710 |
|
|
|
|
71,195 |
|
Long-Term Liabilities: |
|
|
|
|
|
|
Long-term
debt, net of current maturities |
|
37,928 |
|
|
|
|
36,792 |
|
Convertible debt, net of current maturities |
|
21,862 |
|
|
|
|
16,039 |
|
Deferred
taxes |
|
8,087 |
|
|
|
|
5,343 |
|
Other
long-term liabilities |
|
5,721 |
|
|
|
|
5,682 |
|
Total Liabilities |
|
160,308 |
|
|
|
|
135,051 |
|
|
|
|
|
|
|
|
Shareholders' equity: |
|
|
|
|
|
|
Ordinary
shares |
|
210 |
|
|
|
|
211 |
|
Additional paid-in capital |
|
234,831 |
|
|
|
|
235,397 |
|
Treasury
shares at cost |
|
(1,002 |
) |
|
|
|
(1,002 |
) |
Accumulated other comprehensive loss |
|
(265 |
) |
|
|
|
83 |
|
Accumulated deficit |
|
(25,630 |
) |
|
|
|
(27,704 |
) |
Total Shareholders' Equity |
|
208,144 |
|
|
|
|
206,985 |
|
|
|
|
|
|
|
|
Total Liabilities and Shareholders' Equity |
$ |
368,452 |
|
|
|
$ |
342,036 |
|
|
|
|
|
|
|
|
|
PERION NETWORK LTD. AND ITS
SUBSIDIARIES |
|
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS: UNAUDITED |
In
thousands |
|
|
Three months ended March 31, |
|
2016 |
|
|
|
2017 |
|
Operating activities: |
|
|
|
|
|
|
Net
Loss |
$ |
(5,608 |
) |
|
|
$ |
(2,074 |
) |
Loss from
discontinued operations, net |
|
(3,585 |
) |
|
|
|
- |
|
Net Loss
from Continuing Operations |
|
(2,023 |
) |
|
|
|
(2,074 |
) |
|
|
|
|
|
|
|
Adjustments
required to reconcile net income to net cash provided by operating
activities: |
|
|
|
|
|
|
Depreciation and amortization |
|
7,339 |
|
|
|
|
4,901 |
|
Stock
based compensation expense |
|
1,858 |
|
|
|
|
558 |
|
Foreign
currency translation |
|
189 |
|
|
|
|
(11 |
) |
Accrued
interest, net |
|
83 |
|
|
|
|
100 |
|
Deferred
taxes, net |
|
(1,649 |
) |
|
|
|
(2,643 |
) |
Change in
payment obligation related to acquisition |
|
567 |
|
|
|
|
30 |
|
Fair
value revaluation - convertible debt |
|
2,319 |
|
|
|
|
2,833 |
|
Net
changes in operating assets and liabilities |
|
(2,423 |
) |
|
|
|
4,532 |
|
Net cash
provided by continuing operating activities |
|
6,260 |
|
|
|
|
8,226 |
|
Net cash
used in discontinued activities |
|
(2,712 |
) |
|
|
|
- |
|
Net
cash provided by operating activities |
$ |
3,548 |
|
|
|
$ |
8,226 |
|
Investing activities: |
|
|
|
|
|
|
Purchases
of property and equipment |
$ |
(481 |
) |
|
|
$ |
(831 |
) |
Capitalization of development costs |
|
(1,461 |
) |
|
|
|
(970 |
) |
Short-term deposits, net |
|
32,061 |
|
|
|
|
8,414 |
|
Net
cash provided by investing activities |
$ |
30,119 |
|
|
|
$ |
6,613 |
|
Financing activities: |
|
|
|
|
|
|
Exercise
of stock options and restricted share units |
|
1 |
|
|
|
|
1 |
|
Payment
made in connection with acquisition |
|
(3,880 |
) |
|
|
|
- |
|
Repayment
of convertible debt |
|
(7,620 |
) |
|
|
|
(7,901 |
) |
Repayment
of short-term loans |
|
- |
|
|
|
|
(8,137 |
) |
Repayment
of long-term loans |
|
(1,365 |
) |
|
|
|
- |
|
Net
cash used in financing activities |
$ |
(12,864 |
) |
|
|
$ |
(16,037 |
) |
Effect of
exchange rate changes on cash and cash equivalents |
|
53 |
|
|
|
|
45 |
|
Net
increase (decrease) in cash and cash equivalents |
|
23,568 |
|
|
|
|
(1,153 |
) |
Net cash
used in discontinued activities |
|
(2,712 |
) |
|
|
|
- |
|
Cash and
cash equivalents at beginning of year |
|
17,519 |
|
|
|
|
23,962 |
|
Cash and cash equivalents at end of year |
$ |
38,375 |
|
|
|
$ |
22,809 |
|
|
|
|
|
|
|
|
|
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, |
|
|
|
|
2016 |
|
|
|
2017 |
|
|
|
|
|
|
|
|
|
|
|
GAAP Net Loss from Continuing Operations |
|
|
|
$ |
(2,023 |
) |
|
|
$ |
(2,074 |
) |
Acquisition related expenses |
|
|
|
|
179 |
|
|
|
|
- |
|
Share
based compensation |
|
|
|
|
1,858 |
|
|
|
|
558 |
|
Amortization of acquired intangible assets |
|
|
|
|
6,445 |
|
|
|
|
4,052 |
|
Restructuring costs |
|
|
|
|
728 |
|
|
|
|
- |
|
Fair
value revaluation of convertible debt and related derivative |
|
|
|
|
839 |
|
|
|
|
1,431 |
|
Accretion
of payment obligation related to acquisition |
|
|
|
|
567 |
|
|
|
|
30 |
|
Taxes
related to amortization of acquired intangible assets |
|
|
|
|
(1,920 |
) |
|
|
|
(1,243 |
) |
Non-GAAP Net Income from Continuing
Operations |
|
|
|
$ |
6,673 |
|
|
|
$ |
2,754 |
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Net Income from Continuing
Operations |
|
|
|
$ |
6,673 |
|
|
|
$ |
2,754 |
|
Taxes on
income |
|
|
|
|
(508 |
) |
|
|
|
(837 |
) |
Financial
expense, net |
|
|
|
|
1,732 |
|
|
|
|
723 |
|
Depreciation |
|
|
|
|
894 |
|
|
|
|
849 |
|
Adjusted EBITDA |
|
|
|
$ |
8,791 |
|
|
|
$ |
3,489 |
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP diluted earnings per share |
|
|
|
$ |
0.09 |
|
|
|
$ |
0.04 |
|
|
|
|
|
|
|
|
|
|
|
Shares used in computing non-GAAP diluted earnings per
share |
|
|
|
|
76,207,450 |
|
|
|
|
77,930,738 |
|
Contact Information:
Perion Network Ltd.
Investor relations
Vicky Batkin
+972 (73) 398-1000
investors@perion.com
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