Perion Revenues Nearly Double and Non GAAP Net Income up 85% in Second Quarter of 2013

  Perion Revenues Nearly Double and Non GAAP Net Income up 85% in Second
  Quarter of 2013

Business Wire

TEL AVIV, Israel & SEATTLE -- August 12, 2013

Perion Network Ltd. (NASDAQ: PERI) today announced financial results for the
second quarter and six months ended June 30, 2013.

Q2 2013 non-GAAP Financial Highlights Include:

  *Quarterly revenues increased 99% year-over-year reaching $24.4 million;
  *EBITDA increased 61% year-over-year to $4.3 million;
  *Net income increased 85% year-over-year, reaching $3.4 million, or 14% of
    revenues;
  *Earnings Per Share was $0.26; and
  *GAAP Cash flow from operations was $6.8 million.

First Six Months 2013 non-GAAP Financial Highlights Include:

  *Year-to-date revenues increased 121% year-over-year to $52.0 million;
  *EBITDA increased 131% year-over-year to $12.2 million;
  *Net income increased 129%, reaching $9.2 million, or 18% of revenues;
  *Earnings Per Share was $0.71; and
  *GAAP Cash flow from operations was $14.3 million.

Josef Mandelbaum, Perion’s CEO, commented: “We had strong results in the
second quarter and a record first half of 2013. We nearly doubled revenues and
profits in the second quarter compared to last year and generated $6.8 million
in cash flow from operations. In the first half of the year we also signed a
renewal with Google and two new search agreements with Bing and Ask.com. In
addition, earlier today we announced a partnership with Yahoo!, and I am also
pleased to announce today that we have signed and launched a search
distribution partnership with Conduit, expanding our search partners to five.”

“In the past seven months we have significantly diversified and strengthened
our search business,” concluded Mr. Mandelbaum. “However, the implementation
of these partnerships has taken longer than we expected, dampening our second
quarter results and pushing revenue expected in the third quarter into the
fourth quarter of the year. With implementation of these partnerships now well
underway and the new product launch of Guardius, in addition to our other
products, we are well positioned for future growth in the fourth quarter and
leading into 2014.”

Non-GAAP Financial Comparison for the First Six Months and Second Quarter of
2013:

Revenue: In the second quarter of 2013, revenues reached $24.4 million, nearly
double the $12.3 million of revenues in the second quarter of 2012. This
increase was attributable to a 183% year over year increase in search
generated revenues, while other revenues increased 6%. The increase in search
revenues was achieved while diversifying our search partners, with only 51% of
our search generated revenues coming directly from Google in the second
quarter. We continue to diversify our search relationships and expect to see
this trend progress in the coming quarters.

In the first six months of 2013 revenues were $52.0 million, increasing 121%
from the $23.6 million recorded in the same period in 2012. This too was
primarily as a result of our more than tripling search generated revenues and
increasing other revenues by 17%. The increase in search generated revenues
was due to both organic growth and our acquisition of SweetPacks in November
2012. Growth in other revenues was attributable to other advertising revenues,
while the growth in product sales was primarily reflected in a 13% increase in
Deferred Revenues on our Balance Sheet.

Gross Profits: As a result of the increase in revenues, in the second quarter
of 2013 gross profit doubled as well, and was $23.3 million, or 95% of sales,
compared to $11.5 million, or 93% of sales in the second quarter of 2012.
Gross profit in the first half of 2013 was $49.7 million, or 95% of revenues,
increasing 126% compared to $22.0 million, or 93% of revenues in the first
half of 2012.

Customer Acquisition Costs (“CAC”): In the second quarter of 2013, CAC was
$12.5 million, more than triple the $3.9 million spent in the second quarter
of 2012. In the first half of 2013, Perion invested $23.9 million in CAC, more
than three-fold the $6.5 million invested in the first half of 2012. The
increase in CAC was lower than initially planned for this period, as the
company was adapting its acquisition strategy to its new partners. We expect
this transition to continue in the third quarter, and then CAC will increase
significantly in the fourth quarter, powering our growth in the latter part of
this year and into 2014.

EBITDA: In the second quarter of 2013, EBITDA was $4.3 million, increasing 61%
compared to $2.7 million in the second quarter of 2012, despite the $8.6
million increase in CAC. In the first half of 2013 EBITDA was $12.2 million,
increasing 131%, compared to $5.3 million in the first half of 2012.

Net Income: In the second quarter of 2013, net income was $3.4 million or
$0.26 per share, compared to $1.8 million, or $0.18 per share in the second
quarter of 2012. In the first half of 2013 net income was $9.2 million, or
$0.71 per share, compared to $4.0 million, or $0.40 per share, in the first
half of 2012.

Cash Flow from Operations: Based on U.S. GAAP, in the first half of 2013, cash
flow from operations was $14.3 million, compared to $2.5 million in the first
half of 2012. Cash flow from operations in the first half of 2013 was
primarily due to our $3.7 million in GAAP net income, in addition to non-cash
amortization and accretion expenses of $6.6 million, as well as realizing $4.0
million of other working capital.

Financial Outlook

Given current industry trends, management has decided to provide an outlook
for the third quarter of 2013. The Company expects third quarter revenues to
be between$20million and$22 million, reflecting 30% year over year growth
and EBITDA to be between$4.5 millionand$5.5million, reflecting a 32%
increase year over year. At this time, management remains optimistic that it
can achieve its full year guidance.

Conference Call

Perion will host a conference call to discuss the results today, August 12^th
at 10 a.m. EDT (5 p.m. Israel Time). Details are as follows:

  *Dial-in number from within the United States: 1-888-427-9376
  *Dial-in number from Israel: 180-924-5906
  *Dial-in number (other international): 1-719-785-1753
  *Playback, available until August 19, 2013 by calling 1-877-870-5176
    (United States) or 1-858-384-5517 (international). Please use pin number
    2633918 for the replay.
  *A live webcast is accessible at
    http://www.perion.com/events-presentations.

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 turn 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.
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 http://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/A for
the year ended December 31, 2012. 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 June 30,   Six months ended June 30,
                      2013        2012         2013           2012
Revenues:
Search                $  18,137     $ 6,398      $  38,446        $ 11,950
Product and Other       6,290       5,907        13,559         11,611
Total revenues        $  24,427     $ 12,305     $  52,005        $ 23,561
Gross Profit          $  23,304     $ 11,494     $  49,656        $ 21,986
EBITDA                $  4,255      $ 2,650      $  12,157        $ 5,267
Net Income            $  3,402      $ 1,840      $  9,186         $ 4,016
Diluted EPS           $  0.26       $ 0.18       $  0.71          $ 0.40
                                                                    
                                                                    

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 June 30,     Six months ended June 30,
                          2013        2012         2013           2012
                                                                      
Revenues:
Search                    $  18,137     $ 6,398      $  38,446        $ 11,950
Product and Other           6,290       5,585        13,559         10,692
Total revenues               24,427       11,983        52,005          22,642
Cost of revenues            2,981       1,064        6,069          2,087
Gross profit                21,446      10,919       45,936         20,555
Operating expenses:
Research and                 2,922        2,464         6,293           5,147
development, net
Selling and marketing        2,558        1,543         5,342           3,224
Customer acquisition         12,516       3,925         23,881          6,538
costs
General and                 2,066       1,524        4,284          3,515
administrative
Total operating             20,062      9,456        39,800         18,424
expenses
Operating income             1,384        1,463         6,136           2,131
Financial expense,          347         248          801           196
net
Income before taxes          1,037        1,215         5,335           1,935
on income
Taxes on income             195         337          1,604          687
Net income                $  842        $ 878        $  3,731         $ 1,248
                                                                      
Basic earnings per        $  0.07       $ 0.09       $  0.31          $ 0.13
share
Diluted earnings per      $  0.06       $ 0.09       $  0.29          $ 0.12
share
                                                                      
Basic weighted number       12,274      9,984        12,181         9,950
of shares
Diluted weighted            13,030      10,022       12,935         10,015
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             Six months ended
                           June 30,                    June 30,
                           2013        2012         2013        2012
GAAP revenues              $ 24,427      $ 11,983     $ 52,005       $ 22,642
Valuation adjustment
on acquired deferred        -            322         -            919
product revenues
Non-GAAP revenues          $ 24,427      $ 12,305     $ 52,005      $ 23,561
                                                                        
GAAP gross profit          $ 21,446       $ 10,919     $ 45,936       $ 20,555
Valuation adjustment
on acquired deferred         -              322          -              919
product revenues
Share based                  1              3            5              12
compensation
Amortization of
acquired intangible         1,857        250         3,715        500
assets
Non-GAAP gross profit      $ 23,304      $ 11,494     $ 49,656      $ 21,986
                                                                        
GAAP operating             $ 20,062       $ 9,456      $ 39,800       $ 18,424
expenses
Acquisition related          -              -            -              313
expenses
Share based                  178            178          724            529
compensation
Amortization of
acquired intangible         486          209         949          419
assets
Non-GAAP operating         $ 19,398      $ 9,069      $ 38,127      $ 17,163
expenses
                                                                        
GAAP operating income      $ 1,384       $ 1,463      $ 6,136       $ 2,131
Valuation adjustment
on acquired deferred         -              322          -              919
product revenues
Acquisition related          -              -            -              313
expenses
Share based                  179            181          729            541
compensation
Amortization of
acquired intangible         2,343        459         4,664        919
assets
Operating income            2,522        962         5,393        2,692
adjustments
Non-GAAP operating         $ 3,906       $ 2,425      $ 11,529      $ 4,823
income
                                                                        
GAAP net income            $ 842          $ 878        $ 3,731        $ 1,248
Operating income             2,522          962          5,393          2,692
adjustments
Accretion of payment
obligation related to        283            -            550            76
acquisitions
Taxes on amortization
of acquired intangible      (245   )      -           (488   )       -
assets
Non-GAAP net income        $ 3,402       $ 1,840      $ 9,186       $ 4,016
                                                                        
GAAP diluted earnings      $ 0.06        $ 0.09       $ 0.29        $ 0.12
per share
                                                                        
Non-GAAP diluted           $ 0.26        $ 0.18       $ 0.71        $ 0.40
earnings per share
                                                                        
Shares used in
computing US GAAP and       13,030       10,022      12,935       10,015
Non-GAAP diluted
earnings per share
                                                                        
Non-GAAP net income        $ 3,402        $ 1,840      $ 9,186        $ 4,016
Income tax expense           195            337          1,604          687
Taxes on amortization
of acquired intangible       245            -            488            -
assets
Interest expense, net        64             248          251            120
Depreciation and            349          225         628          444
amortization
Non-GAAP EBITDA            $ 4,255       $ 2,650      $ 12,157      $ 5,267
                                                                        
                                                                        

PERION NETWORK LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands

                                            June 30,      December 31,
                                                2013              2012
                                                Unaudited
ASSETS
CURRENT ASSETS:
Cash and cash equivalents                       $ 30,385          $   21,762
Trade receivables                                 8,893               10,246
Restricted cash                                   10,260              10,260
Other receivables and prepaid expenses           4,334              5,424
Total current assets                             53,872             47,692
LONG-TERM ASSETS:
Property and equipment, net                       1,492               1,522
Goodwill and other intangible assets,             69,166              72,730
net
Other assets                                     1,424              1,215
Total long-term assets                           72,082             75,467
Total assets                                    $ 125,954         $   123,159
                                                                  
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt            $ 2,300           $   2,300
Trade payables                                    8,224               9,560
Deferred revenues                                 5,360               5,132
Payment obligation related to                     17,694              20,317
acquisitions
Accrued expenses and other liabilities           17,771             14,679
Total current liabilities                        51,349             51,988
LONG-TERM LIABILITIES:
Long-term debt                                    5,400               6,550
Contingent purchase consideration                 6,541               6,078
Other long-term liabilities                      3,472              3,833
Total long-term liabilities                      15,413             16,461
                                                                  
SHAREHOLDERS' EQUITY                             59,192             54,710
Total liabilities and shareholders'             $ 125,954         $   123,159
equity
                                                                      
                                                                      

PERION NETWORK LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands, (unaudited)
                                            
                                                 Six months ended June 30,
                                                 2013           2012
Operating activities:
Net income                                       $ 3,731            $ 1,248
Adjustments required to reconcile net
income to net cash provided by operating
activities:
Depreciation and amortization                      5,292              1,363
Stock based compensation expense                   729                541
Accretion of payment obligation related            550                389
to acquisition
Net change in operating assets and                4,030            (1,038 )
liabilities
Net cash provided by operating                    14,332           2,503  
activities
                                                                             
Investing activities:
Purchase of property and equipment                 (364   )           (361   )
Restricted cash                                    (167   )           -
Payment in connection with acquisition             (2,710 )           -
Capitalization of software development             (1,319 )           (447   )
and content costs
Acquisition of subsidiary                         -                (6,626 )
Net cash used in investing activities             (4,560 )          (7,434 )
                                                                             
Financing activities:
Exercise of share options                          1                  1
Proceeds from (payment of) long-term              (1,150 )          10,000 
loans
Net cash provided by (used in) financing          (1,149 )          10,001 
activities
Net increase in cash and cash                      8,623              5,070
equivalents
Cash and cash equivalents at beginning            21,762           11,260 
of period
Cash and cash equivalents at end of              $ 30,385          $ 16,330 
period
                                                                    
Supplemental disclosure of non-cash
investing activities:
Stock-based compensation that was
capitalized as part of capitalization of         $ 19              $ 23     
software development costs

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