“The transaction with ClientConnect has not yet closed, however, our optimism surrounding the combination continues to grow,” continued Mr. Mandelbaum. “As the new, larger and more profitable Perion, we will be uniquely positioned to execute our business strategy and become a preferred partner of app developers, by offering them the best solution to monetize and distribute their apps across all devices. Furthermore, this combination will enable us to increase organic investment in our technology and data platforms, expand faster into mobile and invest in growth through acquisitions. I fully expect 2014 to be another milestone year in Perion’s history, and one that will positively shape our future in the coming years.”Non-GAAP Financial Comparison for the First Nine Months and Third Quarter of 2013: Revenue: In the third quarter of 2013, revenues reached $21.3 million, reflecting a 31% increase compared to the $16.3 million of revenues in the third quarter of 2012. This increase was attributable to a 25% year over year increase in search generated revenues, while other revenues increased 43%. The increase in search revenues was achieved while continuing to diversify the Company’s search partners, with no more than 40% of search generated revenues coming directly from any one of our search partners. In the first nine months of 2013 revenues were $73.3 million, increasing 84% from the $39.8 million recorded in the same period in 2012. Search generated revenues increased by 128% and other revenues grew by 25%. The increase in search generated revenues was due to both organic growth and the acquisition of SweetPacks in November 2012. Growth in other revenues was attributable to other advertising revenues. Gross Profits: As a result of the increase in revenues, in the third quarter of 2013 gross profit increased as well, and was $20.4 million, or 96% of sales, increasing 34%, compared to $15.2 million, or 94% of sales in the third quarter of 2012. Gross profit in the first nine months of 2013 was $70.1 million, or 96% of revenues, increasing 88% compared to $37.2 million, or 93% of revenues in the first nine months of 2012. Customer Acquisition Costs (“CAC”): In the third quarter of 2013, CAC was $8.2 million, 40% higher than the $5.8 million spent in the third quarter of 2012. In the first nine months of 2013, Perion invested $32.0 million in CAC, increasing 159% compared to the $12.4 million invested in the first nine months 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 and the new industry environment. Management is in the process of cautiously ramping up this investment in the fourth quarter, increasing revenues in that quarter and powering growth into 2014. EBITDA: In the third quarter of 2013, EBITDA was $5.6 million, increasing $1.8 million, or 48%, compared to $3.8 million in the third quarter of 2012, despite the $2.3 million increase in CAC. Perion’s EBITDA margin increased this quarter to 26%, compared to 23% the same quarter last year. In the first nine months of 2013 EBITDA was $17.8 million, or 24% of revenues, and nearly double the $9.1 million, or 23% of revenues, in the first nine months of 2012. Net Income: In the third quarter of 2013, net income increased 68%, reaching $4.5 million or $0.34 per share, compared to $2.6 million, or $0.26 per share in the third quarter of 2012. In the first nine months of 2013, net income was more than double the same period last year, reaching $13.6 million, or $1.05 per share, compared to $6.7 million, or $0.66 per share, in the first nine months of 2012. The GAAP Net Loss was $1.7 million, due to one-time, non-deductible, acquisition-related costs of $3.4 million. Cash Flow from Operations: Based on U.S. GAAP, in the first nine months of 2013, cash flow from operations was $12.7 million, compared to $4.8 million in the first nine months of 2012. Cash flow from operations in the first nine months of 2013 was due to $2.1 million in GAAP net income, non-cash amortization, stock based compensation and accretion expenses of $9.9 million and $0.7 million from change in operating assets and liabilities. Financial Outlook Based on currently available information, Perion is updating its outlook for fiscal 2013 as follows:
- Revenue is expected to be in the range of $102 million to $104 million.
- EBITDA is expected to be in the range of $24 million to $25 million.
- Non-GAAP Net Income is expected to be in the range of $18 million to $19 million; and
- Non-GAAP diluted EPS between $1.38 and $1.45.