Perion Announces Another Record Quarter: Third Quarter Revenues Up 81%; EBITDA Up 71% Business Wire TEL AVIV, Israel -- November 01, 2012 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 1^st 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 ended Nine months ended September 30, September 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 ended Nine months ended September 30, September 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 2,711 1,726 7,858 5,067 development, net Selling and 2,036 712 5,260 2,477 marketing Customer acquisition 5,825 2,625 12,363 4,942 costs General and 1,738 2,437 5,253 5,983 administrative Total operating 12,310 7,500 30,734 18,469 expenses Operating income 2,612 245 4,743 5,171 Financial income (58 ) 100 (254 ) 234 (expense), net Income before taxes 2,554 345 4,489 5,405 on income Taxes on income 861 325 1,548 (71 ) (benefit) Net income $ 1,693 $ 20 $ 2,941 $ 5,476 Basic earnings per $ 0.17 $ 0.00 $ 0.30 $ 0.56 share Diluted earnings per $ 0.17 $ 0.00 $ 0.29 $ 0.55 share Basic weighted 10,003 9,740 9,968 9,726 number of shares Diluted weighted 10,158 10,013 10,062 10,016 number of shares 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 Nine months ended September 30, September 30, 2012 2011 2012 2011 GAAP revenues $ 16,215 $ 8,431 $ 38,857 $ 25,169 Valuation adjustment on acquired deferred 59 561 978 561 product revenues 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 59 561 978 561 product revenues Share based 2 - 14 - compensation Amortization of acquired intangible 250 83 750 83 assets Non-GAAP gross profit $ 15,233 $ 8,389 $ 37,219 $ 24,284 GAAP operating $ 12,310 $ 7,500 $ 30,734 $ 18,469 expenses Acquisition related 188 809 501 1,030 expenses Share based 246 326 775 915 compensation Amortization of acquired intangible 211 68 630 68 assets Other - (50 ) - (50 ) Non-GAAP operating $ 11,665 $ 6,347 $ 28,828 $ 16,506 expenses GAAP operating income $ 2,612 $ 245 $ 4,743 $ 5,171 Valuation adjustment on acquired deferred 59 561 978 561 product revenues Acquisition related 188 809 501 1,030 expenses Share based 248 326 789 915 compensation Amortization of acquired intangible 461 151 1,380 151 assets Other - (50 ) - (50 ) Operating income 956 1,797 3,648 2,607 adjustments Non-GAAP operating $ 3,568 $ 2,042 $ 8,391 $ 7,778 income GAAP Net income $ 1,693 $ 20 $ 2,941 $ 5,476 Operating income 956 1,797 3,648 2,607 adjustments Deferred finance - - 76 - expenses Non-recurring tax - - - (1,411 ) expense Non-GAAP net income $ 2,649 $ 1,817 $ 6,665 $ 6,672 GAAP diluted earnings $ 0.17 $ 0.00 $ 0.29 $ 0.55 per share Non-GAAP diluted $ 0.26 $ 0.18 $ 0.66 $ 0.67 earnings per share Shares used in computing US GAAP and 10,158 10,013 10,062 10,016 Non-GAAP diluted earnings per share Non-GAAP net income $ 2,649 $ 1,817 $ 6,665 $ 6,672 Income tax expense 861 325 1,548 (71 ) (credit) Non-recurring tax - - - 1,411 expense Interest expense 58 (100 ) 178 (234 ) (income), net Depreciation and 233 183 677 532 amortization 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 389 - acquisition Amortization of accrued interest on - 37 marketable securities 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 (585 ) (1,020 ) content costs Acquisition of subsidiary (6,626 ) (21,708 ) Proceeds from sales of marketable - 26,703 securities 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 9,500 (3,856 ) activities Increase (Decrease) in cash and cash 6,600 (6,538 ) equivalents Cash and cash equivalents at beginning of 11,260 16,055 year 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 337 - acquisition of Smilebox Stock-based compensation that was capitalized as part of capitalization of 25 - software development costs Contact: Perion Investor Relations Deborah Margalit +972-3-7696100 firstname.lastname@example.org or Hayden/MS-IR LLC Brett Maas / Miri Segal-Scharia 646-536-7331 / 917-607-8654 Brett@haydenir.com / email@example.com
Perion Announces Another Record Quarter: Third Quarter Revenues Up 81%; EBITDA Up 71%
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