Perion Announces Accretive Acquisition of SweetPacks

  Perion Announces Accretive Acquisition of SweetPacks

                2013 Revenues Expected to Exceed $100 Million

Business Wire

TEL AVIV, Israel -- November 08, 2012

Perion Network Ltd. (NASDAQ: PERI), today announced the acquisition of SweetIM
(a.k.a. “SweetPacks”), an Israeli consumer internet company. SweetPacks
produces a variety of free, fun, easy to use and safe apps and downloadable
content for everyday use.

“I am very excited about this powerful acquisition that builds off of our
great Q3 numbers and accelerates our growth rate. In addition, the acquisition
significantly increases our revenues, nearly doubles our profits and expands
our profit margins enabling us to exceed $100 million in revenue in 2013,”
commented Josef Mandelbaum, Perion’s Chief Executive Officer.

SweetPacks generated $29.7 million in revenues in the 12 month period ending
September 30, 2012, with Adjusted EBITDA of $9.0 million, at a 30% margin.
This is 89% higher than 2011 revenues of $15.7 million and almost double 2011
Adjusted EBITDA of $4.5 million.


Combined Metrics

Trailing Twelve Months “TTM” 9/30/12
In millions ($US)       Perion ^(1)       SweetPacks        Combined
                                              ^(2)
Revenue                 $  51.1          $  29.7          $  80.8  
Adjusted EBITDA         $  10.3   %)      $  9.0    %)      $  19.2  %)
(Margin)                     (20                 (30                 (24
Enterprise Value        $  71.4M         $  40.0M         
(EV)
EV/Revenue                1.4             1.3           
EV/Adjusted EBITDA        7.1             4.5           
(1) Perion revenue and Adjusted EBITDA are on a non-GAAP basis; a detailed
reconciliation can be found in table attached.
(2) Based on company preliminary financials.


“This combination provides meaningful scale and adds improved back-end systems
that will strengthen our competitive advantage,” added Mr. Mandelbaum. “This
acquisition further accelerates our own efforts to scale, adds 22 million new
users, creating a larger and more profitable company.”

In consideration for the acquisition, Perion will make an initial payment of
$10 million in cash and 1.99 million Perion shares. A second payment of $7.5
million in cash is due 12 months after closing. A third, conditional payment
of $7.5 million in cash is due 18 months after closing, subject to certain
milestones and achievements, bringing the total potential purchase price, as
of close of business November 6, 2012, to $41 million.

“We are able to fund this accretive acquisition using cash on hand and through
expected operating cash flow of the acquired entity. While the total share
count will now be approximately 12 million shares outstanding, this
acquisition significantly increases earnings per share.”

“Lastly, I am thrilled to welcome SweetPacks’ CEO, Nadav Goshen to Perion as
its new Chief Operating Officer. His successful industry track record and
strong management capabilities are sure to contribute to our future growth.”
concluded Mr. Mandelbaum.

Mr. Goshen commented, “I am very excited to join the Perion team. This
combination is a unique and powerful opportunity to leverage the successes of
both Perion and SweetPacks. I firmly believe in Perion’s vision for the future
and am confident that together we can accelerate growth and increase
profitability.”

Management expects the acquisition to close within the month, subject to
customary closing conditions.

Conference Call

Perion will host a conference call to discuss the acquisition today, November
8th at 10 a.m. EST (5 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 and click on the link provided for the
webcast. Interested parties can also dial 1-866-744-5399 to participate in the
live call. 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. Adjusted EBIDTA of SweetPacks’ excludes the impact of non-cash and
non-recurring stock based compensation, as its value has not yet been
determined. As a privately held company SweetPacks had not valued or accounted
for, share based compensation effecting its past operations, in accordance
with GAAP. Perion also uses Adjusted EBITDA as a non-GAAP financial
performance measurement. Adjusted EBITDA is calculated by adding back to net
income; Valuation adjustment on acquired deferred product revenues,
acquisition related expenses, interest, taxes, stock-based compensation,
depreciation and amortization and one-time expenses (credits). The purpose of
such adjustments is to give an indication of performance exclusive of non-cash
charges and other items that are considered by management to be outside of
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.

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. In addition, the financial information set forth in
this press release is not an indication of the future financial results of the
Company following the consummation of the acquisition. 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, or financial
information, including, among others, risk associated with uncertainty as to
whether the transaction will be consummated, the occurrence of any event,
change or other circumstances that could give rise to the termination of the
acquisition agreement, potential litigation associated with the transaction,
risks that the proposed transaction disrupts current plans and operations and
the potential difficulties in employee retention as a result of the proposed
transaction and in integrating the acquired business, the distraction of
management and the Company resulting from the proposed transaction, 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.
RECONCILIATION OF GAAP TO NON-GAAP RESULTS
U.S. dollars and number of shares in thousands (except per share data),
unaudited

                                                                 Twelve months
                                                              ended
                                                                 September 30,
                                                                 2012
GAAP revenues                                                    $  49,160
Valuation adjustment on acquired deferred product                  1,951   
revenues
Non-GAAP revenues                                                $  51,111  
GAAP Net income                                                  $  3,133
Valuation adjustment on acquired deferred product                   1,951
revenues
Acquisition related expenses                                        540
Share based compensation                                            1,048
Amortization of acquired intangible assets                          1,892
Deferred finance expenses                                           76
Income tax expense (credit)                                         1,791
Non-recurring tax expense                                           (379    )
Interest expense (income), net                                      881
Depreciation and amortization                                      (275    )
Non-GAAP EBITDA                                                  $  10,279  

Contact:

Perion Investor Relations
Deborah Margalit
+972-3-7696100
investors@perion.com
or
Hayden/MS-IR LLC
Brett Maas / Miri Segal-Scharia
646-536-7331 / 917-607-8654
Brett@haydenir.com / msegal@ms-ir.com
 
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