Perion Announces Another Record Quarter and Year: Fourth Quarter Revenues up 90%; Adjusted EBITDA Triples to $4.9 Million

  Perion Announces Another Record Quarter and Year: Fourth Quarter Revenues up
  90%; Adjusted EBITDA Triples to $4.9 Million

    Will exceed $110 Million in Revenue and $26 Million of EBITDA in 2013

Business Wire

TEL AVIV, Israel & SEATTLE -- March 13, 2013

Perion Network Ltd. (NASDAQ: PERI) today announced financial results for the
fourth quarter and full year ended December 31, 2012.

Q4 2012 non-GAAP Financial Highlights Include:

  *Quarterly revenues increased 90% year-over-year to a record $21.4 million;
  *Product and advertising revenues increased 27% year-over-year, reaching
    $6.1 million;
  *Search revenue increased year-over-year 136% to a record $15.3 million;
  *Adjusted EBITDA increased 262% year-over-year, reaching $4.9 million, or
    23% of revenues;
  *Net income doubled year-over-year, reaching $3.6 million, or 17% of
    revenues; and
  *Earnings Per Share was $0.32, double that of the fourth quarter of 2011.

Year of 2012 non-GAAP Financial Highlights Include:

  *Year-to date revenues increased 65% year-over-year to a record $61.2
    million;
  *Product and advertising revenues increased 101% year-over-year, reaching
    $23.1 million;
  *Search revenue increased year-over-year 49% to $38.1 million;
  *Adjusted EBITDA increased year-over-year 44% to $14.0 million, or 23% of
    revenues;
  *Net income was $10.3 million, representing 17% of revenues;
  *Earnings Per Share was $0.99, a 20% increase from 2011; and
  *GAAP Cash Flow from Operations was $16.3 million, a 133% increase from
    2011.

Josef Mandelbaum, Perion’s CEO, commented: “2012 was a great year for Perion.
We had record organic revenue growth, increased profitability, strong cash
generation, made significant progress in our mobile product efforts and we
completed another successful and accretive acquisition. As we enter 2013, I am
as optimistic about our business as I've ever been since joining Perion. Based
on the tremendous advances so far and the opportunities I see ahead, I believe
we are well on our way to achieving our long term objective of building a
growing and profitable company that provides real value to its users through
quality products and services.”

“The momentum has continued in the first quarter and we remain very confident
and excited about 2013,” continued Mr. Mandelbaum. “In addition to reaffirming
our guidance, we fully expect to continue our existing search partnerships
well into the future. At the same time, we are exploring additional search
partnership opportunities to leverage our new scale. 2013 will also be a year
of exciting new product launches, like our recent Incredimail for iPad launch,
further diversification of our business model and accelerated and sustained
growth."

Non-GAAP Financial Comparison for the Fourth Quarter and the Year of 2012:

Revenue: Q4’12 revenues were a record $21.4 million, increasing 90%, compared
to the fourth quarter of 2011. The accelerating growth was a result of
positive trends in all Perion’s revenue streams, particularly with search
generated revenues increasing 136% year-over-year. The extensive growth in
search generated revenues was primarily a result of organic growth, in
addition to which we benefited from one month of revenues from SweetPacks.

In 2012, revenues increased 65%, reaching $61.2 million, compared to $37.0
million in 2011. As product and advertising sales more than doubled in 2012,
they represented 38% of total revenues, as compared to 31% in 2011.

Gross Profits: Gross profit in the fourth quarter of 2012 was $20.3 million,
almost double the $10.2 million in the fourth quarter of 2011. The gross
profit margin increased to 95% this last quarter, compared to 91% in the
fourth quarter of 2011. For the entire year, gross profit in 2012 increased
67%, reaching $57.5 million, compared to $34.5 million, with the gross profit
margin increasing to 94%, from 93% in 2011.

Customer Acquisition Costs (“CAC”): In the fourth quarter of 2012, Perion
increased its investment in CAC to a record $9.7 million, more than triple the
$3.1 million invested in the fourth quarter of 2011. For the entire year, CAC
totaled $22.1 million in 2012, compared to only $8.0 million in 2011. The
increase in CAC was a combination of an organic increase resulting from
ability to better track the return on this investment since the second quarter
of this year, as well as that incurred by the acquisition of SweetPacks in
November of this year.

Adjusted EBITDA: In the fourth quarter of 2012, Adjusted EBITDA was $4.9
million, or 23% of sales, a 262% increase compared to the $1.4 million in the
same quarter last year, despite the $6.6 million increase in CAC. Adjusted
EBITDA in 2012 was $14.0 million, increasing $4.3 million, or 44% from $9.7
million in 2011, even though CAC increased $14.0 million in 2012, compared to
2011.

Net Income: In the fourth quarter of 2012, net income was $3.6 million, or
$0.32 per share, more than double the $1.6 million or $0.16 per share in the
fourth quarter of 2011. Net income in 2012 was $10.3 million, or $0.99 per
share, compared to $8.3 million and $0.83 per share in 2011, increasing 20%
despite the $14.0 million increase in CAC.

Cash Flow from Operations: Based on U.S. GAAP, in 2012 cash flow from
operations was $16.3 million. Included in that number is $3.1 million cash,
from accounts receivable acquired as part of the SweetPacks acquisition, which
will be returned to SweetPacks shareholders in the first half of 2013. In
2011, cash flow from operations was $7.0 million.

2013 Financial Outlook:

Management today reaffirmed its 2013 Financial Outlook from the Company’s
press release on January 8^th that it expects:

  *Revenues to exceed $110 million, representing overall growth of 80%+
    year-over-year, representing at least 25% organic growth year-over-year;
  *Adjusted EBITDA of at least $26 million, representing an EBITDA margin of
    24% and representing approximately 105% growth vs. 2012;
  *Non-GAAP Net Income of at least $20 million, an 18% net profit margin and
    representing approximately 100% growth vs. 2012; with cash flow from
    operations closely tracking Non-GAAP Net Income; and
  *Non-GAAP EPS of $1.61, based on an average of 12.4 million shares
    outstanding.

"Our guidance takes macro changes to the search industry into account, but
reflects minimal contribution from new products we expect to introduce during
the first half of 2013 and does not include the incremental benefit of
potential accretive acquisitions,” concluded Mr. Mandelbaum.

Conference Call

Perion will host a conference call to discuss the results today, March 13^th
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 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.
Most of 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 display advertising revenue, generated through
impressions. A more advanced feature rich version of many of our products 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 “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 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, or financial information,
including, among others, potential litigation associated with the transaction,
risks that the Company's acquisition activities may disrupt current plans and
operations and pose difficulties in employee retention, risks entailed in
integrating acquired businesses, 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 December 31,     Year ended December 31,
                   2012           2011          2012         2011
Revenues:
Search             $  15,250        $  6,458      $  38,061      $ 25,466
Product               4,382            4,209         18,557        8,724
Other                1,739           609          4,588        2,816
Total revenues     $  21,371        $  11,276     $  61,206      $ 37,006
Gross Profit       $  20,262        $  10,215     $  57,481      $ 34,499
EBITDA             $  4,926         $  1,361      $  13,994      $ 9,670
Net Income         $  3,634         $  1,598      $  10,301      $ 8,269
Diluted EPS        $  0.32          $  0.16       $  0.99        $ 0.83
                                                                   
                                                                   

PERION NETWORK LTD.
GAAP FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF INCOME
U.S. dollars and number of shares in thousands (except per share data)
                                                 
                      Quarter ended                   Year ended
                      December 31,                    December 31,
                      2012          2011            2012          2011
                      (unaudited)     (unaudited)     (unaudited)
Revenues:
Search                $   15,250      $  6,458        $  38,061       $ 25,466
Product                   4,377          3,236           17,574         7,191
Other                    1,739         609           4,588        2,816
Total revenues            21,366         10,303          60,223         35,473
Cost of revenues         1,850         1,311         5,230        2,840
Gross profit             19,516        8,992         54,993       32,633
Operating
expenses:
Research and              2,877          2,386           10,735         7,453
development, net
Selling and               2,196          2,494           7,456          4,971
marketing
Customer                  9,698          3,071           22,061         8,013
acquisition costs
General and              3,307         1,665         8,560        7,649
administrative
Total operating          18,078        9,616         48,812       28,086
expenses
Operating income          1,438          (624   )        6,181          4,547
(loss)
Financial income         80            1,059         (174   )     1,293
(expense), net
Income before             1,518          435             6,007          5,840
taxes on income
Taxes on income          925           243           2,473        172
Net income            $   593         $  192         $  3,534       $ 5,668
                                                                      
Basic earnings        $   0.06        $  0.02        $  0.35        $ 0.58
per share
Diluted earnings      $   0.05        $  0.02        $  0.34        $ 0.57
per share
                                                                      
Basic weighted           10,727        9,914         10,159       9,796
number of shares
Diluted weighted         11,275        9,958         10,367       10,002
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                 Year ended
                       December 31,                  December 31,
                       2012         2011           2012         2011
GAAP revenues          $ 21,366      $ 10,303       $ 60,223       $ 35,473
Valuation
adjustment on           5            973          983          1,533  
acquired deferred
product revenues
Non-GAAP revenues      $ 21,371      $ 11,276      $ 61,206      $ 37,006 
                                                                             
GAAP gross profit      $ 19,516       $ 8,992        $ 54,993       $ 32,633
Valuation
adjustment on            5              973            983            1,533
acquired deferred
product revenues
Share based              2              -              16             -
compensation
Amortization of
acquired                739          250          1,489        333    
intangible assets
Non-GAAP gross         $ 20,262      $ 10,215      $ 57,481      $ 34,499 
profit
                                                                             
GAAP operating         $ 18,078       $ 9,616        $ 48,812       $ 28,086
expenses
Acquisition              1,703          39             2,204          1,069
related expenses
Share based              265            268            1,040          1,183
compensation
Amortization of
acquired                 314            255            946            323
intangible assets
Other                   -            -            -            (50    )
Non-GAAP operating     $ 15,796      $ 9,054       $ 44,622      $ 25,561 
expenses
                                                                             
GAAP operating         $ 1,438       $ (624   )     $ 6,181       $ 4,547  
income (loss)
Valuation
adjustment on            5              973            983            1,533
acquired deferred
product revenues
Acquisition              1,703          39             2,204          1,069
related expenses
Share based              267            268            1,056          1,183
compensation
Amortization of
acquired                 1,053          505            2,435          656
intangible assets
Other                   -            -            -            (50    )
Operating income        3,028        1,785        6,678        4,391  
adjustments
Non-GAAP operating     $ 4,466       $ 1,161       $ 12,859      $ 8,938  
income
                                                                             
GAAP Net income        $ 593          $ 192          $ 3,534        $ 5,668
Operating income         3,028          1,785          6,678          4,391
adjustments
Deferred finance         101            -              177            -
expenses
Non-recurring tax        -              (379   )       -              (1,790 )
benefit
Taxes related to
amortization of         (88    )      -            (88    )      -      
acquired
intangible assets
Non-GAAP net           $ 3,634       $ 1,598       $ 10,301      $ 8,269  
income
                                                                             
GAAP diluted           $ 0.05        $ 0.02        $ 0.34        $ 0.57   
earnings per share
                                                                             
Non-GAAP diluted       $ 0.32        $ 0.16        $ 0.99        $ 0.83   
earnings per share
                                                                             
Shares used in
computing US GAAP
and Non-GAAP            11,275       9,958        10,367       10,002 
diluted earnings
per share
                                                                             
Non-GAAP net           $ 3,634        $ 1,598        $ 10,301       $ 8,269
income
Income tax expense       925            243            2,473          172
Non-recurring tax        88             379            88             1,790
benefit
Interest expense         (80    )       (1,059 )       174            (1,293 )
(income), net
Deferred finance         (101   )       -              (177   )       -
expenses
Depreciation and        460          200          1,135        732    
amortization
Non-GAAP EBITDA        $ 4,926       $ 1,361       $ 13,994      $ 9,670  
                                                                             
                                                                             

PERION NETWORK LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands (except share data)
                                              
                                                   December 31,
                                                   2012          2011
                                                   Unaudited         Unaudited
ASSETS
CURRENT ASSETS:
Cash and cash equivalents                          $ 21,762          $  11,260
Trade receivables                                    10,246             3,265
Restricted cash                                      10,260             -
Other receivables and prepaid expenses              5,424             6,459
Total current assets                                47,692            20,984
                                                                        
LONG-TERM ASSETS:
Property and equipment, net                          1,522              1,300
Goodwill and other intangible assets, net            72,250             31,359
Other assets                                        1,216             1,261
Total long-term assets                              74,988            33,920
Total assets                                       $ 122,680         $  54,904
                                                                        
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt               $ 2,300           $  -
Trade payables                                       9,560              3,207
Deferred revenues                                    5,132              4,280
Payment obligation related to acquisition            20,317             6,574
Accrued expenses and other liabilities              14,676            11,230
Total current liabilities                           51,985            21,011
                                                                        
LONG-TERM LIABILITIES:
Long-term debt                                       6,550              -
Contingent purchase consideration                    6,078              -
Other long-term liabilities                         3,357             2,078
Total long-term liabilities                          15,985             2,078
                                                                        
SHAREHOLDERS' EQUITY                                54,710            31,815
Total liabilities and shareholders' equity         $ 122,680         $  54,904
                                                                        
                                                                        

PERION NETWORK LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands, (unaudited)

                                           Year ended December 31,
                                               2012            2011
Cash flows from operating activities:
Net income                                     $ 3,534             $ 5,668
Adjustments required to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization                    3,572               1,388
Stock based compensation expense                 1,056               1,183
Accretion of payment obligation                  490                 100
related to acquisition
Finance expense related to marketable            -                   84
securities
Deferred taxes, net                              (172    )           (1,140  )
Net changes in operating assets and
liabilities:
Trade receivables                                492                 (383    )
Other receivables and prepaid expenses           1,658               (1,100  )
Other long-term assets                           82                  60
Trade payables                                   4,035               108
Deferred revenues                                (268    )           998
Accrued expenses and other liabilities           1,788               112
Accrued severance pay, net                      (3      )          (40     )
Net cash provided by operating                  16,264            7,038   
activities
                                                                   
Cash flows from investing activities:
Purchase of property and equipment               (662    )           (316    )
Restricted cash                                  (343    )           90
Capitalization of software development           (821    )           (829    )
and content costs
Cash paid in connection with                     (13,590 )           (21,712 )
acquisitions, net of cash acquired
Cash paid by employees on previously             727                 -
exercised options of acquired company
Proceeds from sales of marketable                -                   26,704
securities
Investment in marketable securities             -                 (11,915 )
Net cash used in investing activities            (14,689 )           (7,978  )
                                                                   
Cash flows from financing activities:
Exercise of share options                        77                  30
Proceeds from long-term loans                    10,000              -
Repayment of long-term loans                     (1,150  )           -
Dividend paid                                   -                 (3,885  )
Net cash provided by (used in)                  8,927             (3,855  )
financing activities
Increase (Decrease) in cash and cash             10,502              (4,795  )
equivalents
Cash and cash equivalents at beginning          11,260            16,055  
of year
Cash and cash equivalents at end of            $ 21,762           $ 11,260  
period
                                                                   
Supplemental disclosure of non-cash
investing activities:
Issuance of shares in connection with           18,200            750     
acquisitions
Stock-based compensation that was
capitalized as part of capitalization           27                -       
of software development costs

Contact:

Perion Network Ltd.
Deborah Margalit
Perion Investor Relations
+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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