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Perion Revenues Increase 31% And Non GAAP Net Income Up 68% In Third Quarter Of 2013

Stocks in this article: PERI

Perion’s expectation of non-GAAP adjusted net income for the fiscal year 2013 excludes share-based compensation expense, acquisition amortization and certain other adjustments, and assumes an effective tax rate of 25 percent. For the purpose of calculating diluted EPS and non-GAAP diluted EPS, the Company assumes approximately 13.1 million weighted-average diluted ordinary shares outstanding for the fourth quarter and for the full year.

Conference Call

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

  • Dial-in number from within the United States: 1-888-438-5448
  • Dial-in number from Israel: 180-924-5906
  • Dial-in number (other international): 1-719-785-1765
  • Playback, available until November 19, 2013 by calling 1-877-870-5176 (United States) or 1-858-384-5517 (international). Pin number for the replay 3708973.
  • 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 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. 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, accretion of payment obligation related to acquisition and taxes on amortization of acquired intangible assets. 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 Operations.

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 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 of any closing conditions to the Share Purchase to be satisfied and the failure of the proposed transaction to be consummated for any other reason, the failure to realize the anticipated benefits of the proposed transaction; risks entailed in integrating the ClientConnect business with Perion’s other businesses, including employee retention and customer acceptance; the risk that the transaction will divert management and other resources from the ongoing operations of the two businesses or otherwise disrupt the conduct of those businesses, potential litigation associated with the transaction, and general risks associated with the business of Perion and with the ClientConnect business, including 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/A for the year ended December 31, 2012. Perion does not assume any obligation to update these forward-looking statements.

    1   For the purposes of comparison, ClientConnect financials for the third quarter and first nine months of 2012 have been adjusted to reflect 2013 economic terms.
 

Source: Perion Network Ltd.

 
PERION NETWORK LTD.
NON-GAAP SUMMARY FINANCIAL METRICS
U.S. dollars in thousands (except per share data), unaudited
       

 

Quarter ended September 30,

Nine months ended September 30,

2013     2012 2013     2012
Revenues:
Search $ 13,562 $ 10,861 $ 52,008 $ 22,811
Product and Other   7,722   5,413   21,281   17,024
Total revenues $ 21,284 $ 16,274 $ 73,289 $ 39,835
Gross Profit $ 20,423 $ 15,233 $ 70,079 $ 37,219
EBITDA $ 5,634 $ 3,801 $ 17,791 $ 9,068
Net Income $ 4,454 $ 2,649 $ 13,640 $ 6,665
Diluted EPS $ 0.34 $ 0.26 $ 1.05 $ 0.66
 
 

PERION NETWORK LTD.

GAAP FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF OPERATIONS

U.S. dollars and number of shares in thousands (except per share data), (unaudited)

 
   

Quarter ended September 30,

   

Nine months ended September 30,

2013     2012 2013     2012
 
Revenues:
Search $ 13,562 $ 10,861 $ 52,008 $ 22,811
Product and Other   7,722     5,354   21,281   16,046
Total revenues 21,284 16,215 73,289 38,857
Cost of revenues   2,721     1,293   8,790   3,380
Gross profit   18,563     14,922   64,499   35,477
Operating expenses:
Research and development, net 2,928 2,711 9,221 7,858
Selling and marketing 2,761 2,036 8,103 5,260
Customer acquisition costs 8,162 5,825 32,043 12,363
General and administrative   5,573     1,738   9,857   5,253
Total operating expenses   19,424     12,310   59,224   30,734
Operating income (loss) (861 ) 2,612 5,275 4,743
Financial expense, net   483     58   1,284     254
Income (loss) before taxes on income (1,344 ) 2,554 3,991 4,489
Taxes on income   314     861   1,918   1,548
Net income (loss) $ (1,658 ) $ 1,693 $ 2,073 $ 2,941
 
Basic earnings (loss) per share $ (0.13 ) $ 0.17 $ 0.17 $ 0.30
Diluted earnings (loss) per share $ (0.13 ) $ 0.17 $ 0.16 $ 0.29
 
Basic weighted number of shares   12,468     10,003   12,277   9,968
Diluted weighted number of shares   12,468     10,158   12,998   10,062
 
 
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 September 30,

Nine months ended September 30,

2013     2012 2013     2012
GAAP revenues $ 21,284   $ 16,215 $ 73,289 $ 38,857
Valuation adjustment on acquired deferred product revenues   -     59   -     978
Non-GAAP revenues $ 21,284   $ 16,274 $ 73,289   $ 39,835
 
GAAP gross profit $ 18,563 $ 14,922 $ 64,499 $ 35,477
Valuation adjustment on acquired deferred product revenues - 59 - 978
Share based compensation 2 2 7 14
Amortization of acquired intangible assets   1,858     250   5,573     750
Non-GAAP gross profit $ 20,423   $ 15,233 $ 70,079   $ 37,219
 
GAAP operating expenses $ 19,424 $ 12,310 $ 59,224 $ 30,734
Acquisition related expenses 3,432 188 3,432 501
Share based compensation 357 246 1,081 775
Amortization of acquired intangible assets   414     211   1,363     632
Non-GAAP operating expenses $ 15,221   $ 11,665 $ 53,348   $ 28,826
 
GAAP operating income (loss) $ (861 ) $ 2,612 $ 5,275   $ 4,743
Valuation adjustment on acquired deferred product revenues - 59 - 978
Acquisition related expenses 3,432 188 3,432 501
Share based compensation 359 248 1,088 789
Amortization of acquired intangible assets   2,272     461   6,936     1,380
Operating income adjustments   6,063     956   11,456     3,648
Non-GAAP operating income $ 5,202   $ 3,568 $ 16,731   $ 8,391
 
GAAP net income (loss) $ (1,658 ) $ 1,693 $ 2,073 $ 2,941
Operating income adjustments 6,063 956 11,456 3,648
Accretion of payment obligation related to acquisitions 293 - 843 76
Taxes on amortization of acquired intangible assets   (244 )   -   (732 )   -
Non-GAAP net income $ 4,454   $ 2,649 $ 13,640   $ 6,665
 
GAAP diluted earnings (loss) per share $ (0.13 ) $ 0.17 $ 0.16   $ 0.29
 
Non-GAAP diluted earnings per share $ 0.34   $ 0.26 $ 1.05   $ 0.66
 
Shares used in computing GAAP diluted earnings (loss) per share   12,468     10,158   12,998     10,062
Shares used in computing Non-GAAP diluted earnings per share   13,123     10,158   12,998     10,062
 
Non-GAAP net income $ 4,454 $ 2,649 $ 13,640 $ 6,665
Income tax expense 314 861 1,918 1,548
Taxes on amortization of acquired intangible assets 244 - 732 -
Interest expense, net 190 58 441 178
Depreciation and amortization   432     233   1,060     677
Non-GAAP EBITDA $ 5,634   $ 3,801 $ 17,791   $ 9,068
 
 
PERION NETWORK LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands
               
September 30, December 31,
2013 2012
Unaudited
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 27,276 $ 21,762
Trade receivables 12,024 10,246
Restricted cash 10,260 10,260
Other receivables and prepaid expenses   4,249   5,424
Total current assets   53,809   47,692
LONG-TERM ASSETS:
Property and equipment, net 1,456 1,522
Goodwill and other intangible assets, net 67,402 72,730
Other assets   1,433   1,215
Total long-term assets   70,291   75,467
Total assets $ 124,100 $ 123,159
 
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 2,300 $ 2,300
Trade payables 9,322 9,560
Deferred revenues 4,800 5,132
Payment obligation related to acquisitions 24,484 20,317
Accrued expenses and other liabilities   17,177   14,679
Total current liabilities   58,083   51,988
LONG-TERM LIABILITIES:
Long-term debt 4,825 6,550
Contingent purchase consideration - 6,078
Other long-term liabilities   3,297   3,833
Total long-term liabilities   8,122   16,461
 
SHAREHOLDERS' EQUITY   57,895   54,710
Total liabilities and shareholders' equity $ 124,100 $ 123,159
 
 

PERION NETWORK LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

U.S. dollars in thousands, (unaudited)

       
Nine months ended September 30,
2013         2012

Operating activities:

Net income $ 2,073 $ 2,941
Adjustments required to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 7,996 2,057
Stock based compensation expense 1,088 789
Accretion of payment obligation related to acquisition 843 389
Net change in operating assets and liabilities   742     (1,418 )
Net cash provided by operating activities   12,742     4,758  
 

Investing activities:

Purchase of property and equipment (545 ) (447 )
Other (171 ) -
Capitalization of software development and content costs (2,033 ) (585 )
Acquisition of subsidiary   -     (6,626 )
Net cash used in investing activities   (2,749 )   (7,658 )
 

Financing activities:

Exercise of share options - 75
Deferred payment made in connection with acquisition (2,754 ) -
Proceeds from long-term loans - 10,000
Payment of long-term loans   (1,725 )   (575 )
Net cash provided by (used in) financing activities   (4,479 )   9,500  
Net increase in cash and cash equivalents 5,514 6,600
Cash and cash equivalents at beginning of period   21,762     11,260  
Cash and cash equivalents at end of period $ 27,276   $ 17,860  
 
Supplemental disclosure of non-cash investing activities:
Issuance of shares in connection with the acquisition of Smilebox $ - $ 337
Stock-based compensation that was capitalized as part of capitalization of software development costs $ 25   $ 25  




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