Perk.com Inc. (TSX:PER) ("Perk" or "the Company"), a leading cloud-based mobile rewards platform provider, today reported its operating and financial results for the fourth quarter and twelve- month period ended December 31, 2015. Unless otherwise noted, all amounts are in US dollars.

2015 Fourth Quarter Highlights (all comparisons to the same period of the prior year)
  • Total revenue increased to $17.7 million, an increase of 155%.
  • Gross profit was $9.1 million, or 51% of total revenue.
  • Adjusted Earnings before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA") was $4.5 million, an increase of 997% compared to $0.4 million.
  • Net income was approximately $1.3 million, which included $0.8 million in non-recurring transaction costs incurred during the quarter.
  • The Company partnered with NBC Universal to promote the launch of the Esquire Network's first scripted series, which resulted in a 10% increase in viewership for the Network.
  • In November 2015, the Company expanded its reward platform with the acquisition of SuperRewards, an innovator in alternative payments and virtual rewards.
  • In December 2015, the Company closed the acquisition of Corona Labs Inc. ("Corona"), an established platform for mobile app development which accelerated the distribution of Perk's SDK to third party developers.
  • In December 2015, the Company entered an asset purchase agreement to acquire the Viggle App, and its related assets which include intellectual property (including Viggle brand and name as well as patents in the rewards category), brand and advertiser relationships, and a direct sales team (the "Viggle Assets"). In the first quarter 2016, the Company completed the transaction.

2015 Annual Highlights (all comparisons to the prior year)
  • Total revenue increased 188% to $49.3 million for the year ended December 31, 2015.
  • Gross profit was $23.4 million, or 47% of total revenue.
  • Adjusted EBITDA of $8.4 million, compared to $0.8 million.
  • Net loss was approximately $17.1 million, compared to $2.2 million. As a result of the restatement (the "FS Restatement") announced by the Company on March 3, 2016, the Company has recorded non-cash revaluation losses in its 2015 and 2014 consolidated statements of operations of approximately $18 million and $2.2 million respectively related to the preferred shares and preferred share warrants which were fully eliminated upon conversion of such preferred shares and preferred share warrants to common shares of Perk ("Perk Shares") as part of the July 2015 Reverse Take-Over Transaction.
  • Acquired prior to the Reverse Take-Over Transaction, all of the assets of Orion Foundry (Canada) Inc. ("Tsavo") to extend Perk's rewards platform.
  • Completed private placement transaction for total gross proceeds of $19.6 million.
  • Completed the acquisition of AppRedeem Inc. ("AppRedeem"), an innovator in rewarded video for mobile devices in an all-stock transaction.
  • Introduced Perk Plastik, a new prepaid debit card that runs via the Discover Network and allows users to convert Perk Points into money available to be used at any retail or online establishment.
  • Launched Perk.TV.
  • As of December 31, 2015, there have been over 10 million installations of Perk apps and users have redeemed more than $20 million worth of digital rewards.

Ted Hastings, Chief Executive Officer of Perk commented, "2015 was a transformational year for Perk, as we made significant progress in our strategy to become the world's leading mobile rewards platform provider. We broadened our advertising partnerships, increased inventory, grew our engaged user base, and enhanced our capabilities through defined, strategic M&A. The Company achieved these milestones while also maintaining profitability and generating free cash flow, with large percentage gains in both revenues and Adjusted EBITDA. We have $16.6 million in available cash and are now turning our focus to building out our direct advertising sales team to take advantage of the large and growing active user base and the expanded platform we have built. In 2016, Perk can now leverage a wide mobile and online platform to provide third-party developers a system in which to monetize their products, while building an eco-system of apps and programs that promote consistent user interaction without disrupting their daily lives. We believe that the Company can achieve robust profitable growth in 2016 as we achieve scale within our infrastructure."

Acquisition Activity

  • The Company entered into an asset purchase agreement on December 13, 2015 with Viggle Inc. ("Viggle") to acquire the Viggle Assets (the "Viggle Acquisition").
  • On December 3, 3015, Perk acquired Corona for total consideration of $2.2 million, pursuant to the terms of a share purchase agreement. Corona produces the award winning Corona SDK, which allows developers to create cross platform applications, games and books.
  • On November 25, 2015, the Company acquired Playerize Networks Inc. ("Playerize"), the creator of SuperRewards a worldwide direct payment network and performance advertising platform that provides developers with monetization opportunities while delivering brands to consumers. Total consideration for the acquisition was $1.6 million.
  • On September 21, 2015, Perk acquired 100% of AppRedeem, a San Francisco based innovator in rewarded video for mobile devices. Total consideration for the acquisition was 831,601 Perk Shares, valued at $2.6 million.
  • On April 17, 2015, the Company acquired substantially all of the assets and liabilities of Tsavo. The purchased assets provided the Company with a publishing and analysis platform providing a network of rich content websites. As consideration for the acquisition, the Company is required to pay the Vendor 50% of the EBITDA generated from the purchased assets, on a quarterly basis, until April 17, 2018, subject to a minimum of $2 million in cumulative payments over the 3 year term.

Subsequent Acquisition Activity / Viggle
  • On February 8, 2016, the Company completed the Viggle Acquisition. Consideration paid for the acquisition, pursuant to the asset purchase agreement was $1.0 million of cash; 1,370,000 of Perk Shares valued at approximately $3.7 million, based on the closing price per Perk Share of CAD $3.75 (U.S. $2.69) on February 5, 2016; 2,000,000 Perk Shares to be issued if the Company's total revenues exceed $130 million for the year ended December 31, 2016 or December 31, 2017; a warrant to purchase 1,000,000 Perk Shares at a strike price of CAD $6.25 per Perk Share in the event that the Perk Shares' volume weighted average price ("VWAP") is greater than or equal to CAD $12.50 for 20 consecutive trading days in the two year period following February 8, 2016; and a warrant to purchase 1,000,000 Perk Shares at a strike price of CAD $6.25 per Perk Share in the event that the Perk Shares' VWAP is greater than or equal to CAD $18.75 for 20 consecutive trading days in the two year period following February 8, 2016.

2015 Fourth Quarter Financial and Operational Review
  • Total revenue for the fourth quarter of 2015 was approximately $17.7 million, representing a 155% increase over total revenue of approximately $6.9 million for the prior year period. Excluding revenues from the Tsavo acquisition, the AppRedeem acquisition, the Playerize acquisition and the Corona acquisition (collectively the "2015 Acquisitions"), Perk's revenue increased to $10.7 million from the fourth quarter of 2014. The increase in revenues was the result of several factors, which include an increase in users, an increase in the number of apps launched, and the use of those apps, an increase in the amount of advertising inventory available and an increase in monetization opportunities available from Perk's apps during the period.
  • Perk reported cost of sales, which is comprised of the costs of the rewards provided to users, platform fees, and revenue sharing commissions, for the three months ended December 31, 2015 of approximately $8.6 million, compared to $4.0 million in the fourth quarter of 2014. Excluding the impact of the 2015 Acquisitions, the Company was able to manage its cost of sales increase year over year to 10% while it increased fourth quarter revenues by 55%.
  • Gross profit for the three months ended December 31, 2015 was approximately $9.1 million or 51% of total revenue, compared to approximately $3.0 million or 43% of total revenue for the fourth quarter of 2014. Excluding the impact of the 2015 Acquisitions, gross profit for Q4 was $6.4 million (60% of revenues) compared to gross profit of $3 million (43% of revenues) in fiscal 2014. The increase in gross profit was due to an increase in revenue as result of a larger user base and increase in usage of the Company's apps in 2015.
  • Net income for the three months ended December 31, 2015 was approximately $1.3 million, compared to a net loss of approximately $2.2 million, for the same period of the prior year. The loss in 2014 was impacted by $2.2 million related to the FS Restatement previously discussed.
  • Adjusted EBITDA was approximately $4.5 million for the three months ended December 31, 2015, an increase of approximately $4.1 million or 997%, as compared to $0.4 million Adjusted EBITDA generated in the three months ended December 31, 2014. A table reconciling Adjusted EBITDA to net income can be found at the end of this release.

2015 Year-End Financial and Operational Review
  • Total revenue for the twelve months ended December 31, 2015 was approximately $49.3 million, representing a 188% increase over total revenue of approximately $17.1 million for the prior year period. Perk's revenue, excluding revenues generated from the 2015 Acquisitions, increased 88% to $32.2 million.
  • Perk reported cost of sales for the year ended December 31, 2015 of approximately $25.9 million compared to $8.2 million for the prior year period. Excluding the results from the 2015 Acquisitions, cost of sales increased to $14.9 million from $8.2 million in 2014, as a result of an increase in apps launched, increase in app usage, and an increase in rewards paid out to users.
  • Gross profit for the year ended December 31, 2015 was approximately $23.4 million (47% of revenues), compared to approximately $9.0 million (52% of revenues) for the prior year period. Excluding the impact from the 2015 Acquisitions, gross margin in 2015 increased by $8.3 million to $17.3 million (54% of revenues) from 2014 when gross margin was 52% of revenues.
  • Net loss for the year ended December 31, 2015 was approximately $17.1 million compared to a net loss of approximately $2.2 million for the prior year period. The 2015 net loss was impacted by $2.3 million of 2015 transaction expenses and the $18 million impact of the FS Restatement discussed above. The non-cash FS Restatement impact in the 2014 statements was $2.2 million.
  • For the twelve months ended December 31, 2015, Adjusted EBITDA was approximately $8.4 million, as compared to $0.8 million Adjusted EBITDA for the prior year period.

Balance Sheet Summary
  • Perk had cash of approximately $16.6 million at December 31, 2015 compared with approximately $2.3 million at December 31, 2014. At December 31, 2015, shareholders' equity was approximately $32.1 million, compared to a deficiency of $2.3 million at December 31, 2014.

Conference Call Details

Date/Time: Friday, March 11, 2016, at 12 p.m. ET

Live Participant Dial-In (Toll-Free US & Canada): 877-407-9711

Live Participant Dial-In (International): 412-902-1014

Webcast

The call will also be simultaneously webcast over the Internet via the "Investor Relations" section of Perk's website at ir.perk.com or by clicking on the conference call link: http://perk.equisolvewebcast.com/q4-2015.

About Perk.com Inc.

As a leading mobile rewards platform, Perk brings together the interests of consumers, advertisers, and publishers by offering consumers rewards such as Perk Points and other digital goods. Perk Points can be redeemed for gift cards, cash, or loaded on to Perk Plastik, a re-loadable branded debit card. Perk works with brands and publishers to reach consumers through truly engaging and innovative formats using rewards as a way to achieve maximum engagement of their brands and products.

Perk currently owns and operates mobile applications and websites that allow members to earn rewards such as Perk Points and digital goods. In addition to offering rewards to members through its own mobile applications and websites, Perk launched its Perk Rewards Platform, powered by Corona Labs, which allows mobile and desktop publishers to utilize rewards to engage and entice users through the publisher's own applications and websites.

Additional information about Perk.com Inc. can be found at the Company's corporate website: www.ir.perk.com.

Financial Information

A copy of Perk's audited consolidated financial statements for the twelve months ended December 31, 2015, which are prepared in accordance with International Financial Reporting Standards ("IFRS") and Perk's Management's Discussion & Analysis, will be available on or before March 21, 2016 via the Canadian Securities Administrators' website at www.sedar.com or through the Company's website at www.ir.perk.com.

Non-IFRS Measures

The Company defines Adjusted EBITDA as net income (loss) from operations before: (a) depreciation of property and equipment and amortization of intangible assets; (b) share-based compensation, and (c) other charges, net. Management uses Adjusted EBITDA as a measure of the Company's operating performance because it provides information related to the Company's ability to provide operating cash flows for acquisitions, capital expenditures and working capital requirements. The Company also believes that analysts and investors use Adjusted EBITDA as a supplemental measure to evaluate the overall operating performance of companies in its industry. Adjusted EBITDA should be used in addition to and in conjunction with the results presented in the Company's consolidated financial statements prepared in accordance with IFRS. Management strongly encourages investors to review the Company's financial statements in their entirety and to not rely on any single financial measure. As non-IFRS financial measures are not standardized, it may not be possible to compare these financial measures with other companies' non-IFRS financial measures having the same or similar names.

Cautionary Statement Regarding Forward-Looking Statements

This press release contains forward-looking statements, including which may relate to, but which are not be limited to, Perk's business; Perk's strategy, operations and financial performance; Perk's user and advertiser engagement; Perk's ability to establish new marketing partnerships; Perk's ability to expand into new markets; and Perk's ability to acquire and integrate new businesses and technologies. Such forward-looking statements reflect Perk's expectations about its future operating results, performance and opportunities that involve substantial risks and uncertainties. When used herein, the words "anticipate", "believe", "estimate", "upcoming", "plan", "target", "intend" and "expect" and similar expressions, as they relate to Perk or its management, are intended to identify such forward-looking statements. These forward-looking statements are based on information currently available to Perk and are subject to a number of risks, uncertainties, and other factors that could cause Perk's actual results, performance, prospects, and opportunities to differ materially from those expressed in, or implied by, these forward-looking statements, including, but not limited to: maintenance by Perk of relationships with advertising network providers and partners; successful development of the "Perk" brand; Perk's ability to keep up with rapid technology developments in Perk's markets; Perk's ability to avoid defects in products and services delivered by Perk; Perk's ability to attract app and website developers to its Perk's SDK's; Perk's ability to successfully enter new business areas and geographic markets; success of new products developed by Perk; Perk's ability to retain key members of its management team; and certain other risk factors set forth in Perk's Management's Discussion and Analysis for the year ended December 31, 2015. Perk does not undertake to update any forward-looking statement, except as required by law.

The Company will make its 2015 consolidated financial statements available on or before March 21, 2016 Perk.com Inc.

Consolidated statements of operations and comprehensive loss

Three months and years ended December 31, 2015 and 2014

(In thousands of US Dollars, except for share amounts)

 

 

Three months endedDecember 31,
 

Twelve months endedDecember 31,
      2015   2014 2015   2014
Revenue $ 17,698 $ 6,936 $ 49,305 $ 17,149
Cost of sales   8,624   3,978   25,945   8,183
Gross profit 9,074 2,958 23,360   8,966
Expenses
Employee compensation and benefits 4,247 1,278 10,504 3,059
Marketing and user acquisition 106 481 1,664 3,156
General and administrative 1,823 1,032 5,037 2,289
Depreciation of property and equipment 73 10 237 39
Amortization of intangible assets 499 4 1,144 14
Transaction and restructuring costs   782   -   2,316   -
  7,530   2,805   20,902   8,557
Income (loss) from operations   1,544   153   2,458   409
 
Foreign exchange gain (5) - (132) -
Other income (expense) 6 (8) 1 (34)
Gain on revaluation of forward exchange contract - - (501) -
Loss on revaluation of derivative liability - 1,768 15,979 1,768
Gain on revaluation of provision (839) - (858) -
Loss on revaluation of preferred shares and warrants - 430 2,026 430
Finance cost   427 127 1,113 207
Income (loss) before income taxes   1,955 (2,164) (15,170) (1,962)
Income tax expense (recovery)
Current 1,054 53 1,891 198
Deferred   (359)   -   (11)   -
  695   53   1,880   198
Net income (loss) from continuing operations 1,260 (2,217) (17,050) (2,160)
 
Discontinued operation
Income (loss) for the period from discontinued operation
Net of tax   - - - (30)
Net income (loss)   1,260 (2,217) (17,050) (2,190)
Net income (loss) attributable to non-controlling interest - 6 3 18
Net income (loss) attributable to the shareholders of the Company   1,260 (2,223) (17,053) (2,208)
 
Other comprehensive income (loss) for items to be reclassified to net income or loss in subsequent periods
Foreign currency translation adjustment -   10   (37)   (109)
Total comprehensive income (loss) for the period   1,260 (2,213) (17,090) (2,317)
 
Net income (loss) per share
Net income (loss) per basic and diluted share 0.05 (0.26) (1.15) (0.26)
Net income (loss) per basic and diluted share from continuing operations 0.05 (0.26) (1.15) (0.25)
 

Perk.com Inc. Consolidated statements of financial position

As at December 31, 2015 and December 31, 2014

(In thousands of US Dollars)
     
December 31, 2015 December 31, 2014
Assets
Current assets
Cash $ 16,592 $ 2,273
Trade receivables 15,378 6,423
Prepaid expenses and other current assets 804 246
Income tax receivable 1,958 533
34,732 9,475
Non-current assets
Restricted marketable securities 881 -
Other Assets 62 -
Property and equipment 634 164
Intangible assets 8,164 100
Goodwill 4,991 -
$ 49,464 $ 9,739
 
Liabilities
Current liabilities
Bank credit facility - 2,696
Trade and other payables 7,647 788
Unredeemed rewards liability 835 240
Current portion of loans and borrowings 728 2,298
Current portion of provisions 1,554 -
Current portion of deferred lease inducements 6 -
Derivative liability - 3,503
Preferred share warrants - 743
Preferred shares - 866
Income taxes payable 2,052 90
12,821 11,224
Non-current liabilities
Provisions 2,435 -
Deferred tax liabilities 2,089 805
Deferred lease inducements 49 33
17,395 12,062
 
Shareholders' equity
Share capital 49,393 62
Contributed surplus 2,570 327
Accumulated other comprehensive income (loss) (28) 9
Retained earnings (19,866) (2,747)
32,069 (2,349)
Non-controlling interest - 26
$ 49,464 $ 9,739
 
Perk.com Inc.

Unaudited reconciliation to Adjusted EBITDA

Three months and years ended December 31, 2015 and 2014

(In thousands of US Dollars)
 

Three months endedDecember 31,
 

Year- endedDecember 31,
2015   2014 2015   2014
Income (loss) from operations 1,544 153 2,458 409
Add:
Depreciation of property and equipment 73 10 237 39
Amortization of intangible assets 499 4 1,144 14
Transaction costs 782 - 2,316 -
Share-based compensation 1,579 241 2,267 312
Adjusted EBITDA 4,477 408 8,422 774
 

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