Perk Inc. (TSX:PER) ("Perk" or "the Company"), the Rewarded Engagement Platform that connects brands with consumers, today reported its operating and financial results for the second quarter and six month period ended June 30, 2016.

2016 Second Quarter Highlights (all comparisons to the same prior year period)
  • Total revenue increased approximately 64% to $20.4 million.
  • Gross Profit was $9.1 million, or 45% of total revenue.
  • Net loss was approximately $0.5 million as compared to a net loss of $15.8 million.
  • Adjusted EBITDA of $2.2 million, which included approximately $1 million invested in Corona Labs, compared to $2.1 million in Adjusted EBITDA for the prior year period.
  • In April 2016, Perk Points was accepted as an alternative payment option by over 49,000 apps and games in over 190 countries and territories that use the SuperRewards platform.
  • Corona Labs entered a strategic partnership with KIDOZ, the largest content discovery network for kids, in the launch of the KIDOZ plugin, which provides developers with a kid-friendly way to monetize their apps.
  • Subsequent to the second quarter, the Company announced the launch of Perk IQ TM, a built-in analytics solution which offers brand and agency partners advanced audience targeting and insight capabilities.

2016 Year-to-Date Highlights (all comparisons to the same prior year period)
  • Total revenue increased 106% to $37.7 million for the six months ended June 30, 2016.
  • Gross Profit was $16.8 million, or 45% of total revenue.
  • Net loss was approximately $2.8 million, as compared to a net loss of $17.4 million.
  • Adjusted EBITDA of $1.6 million, compared to Adjusted EBITDA of $1.7 million for the same period of the prior year. The slight decrease in Adjusted EBITDA for the period was the result an increase in operating costs due to planned investments in the Company's Corona Labs platform of approximately $1.5 million.
  • In February 2016, the Company completed the acquisition of the Viggle App and related assets, which consisted of a leading mobile and tablet application, brands and consumers, intellectual property including patents in the rewards category, brand and advertiser relationships, and a direct sales team. Total consideration paid was $7.3 million and the Company used a combination of stock, warrants and cash to pay for the acquisition.
  • As of June 30, 2016, there are over 20 million registered users that have redeemed more than $21.0 million in Perk Rewards.

Ted Hastings, Chief Executive Officer of Perk commented, "We continue to see steady growth in our user base and have more than doubled the number of Perk app downloads since this time last year, while also maintaining a strong retention level across our existing users. We achieved a 64% increase in revenues for the three-month period and returned to positive EBITDA after a seasonally slower first quarter of the year.

We continue to focus on enhancing and diversifying our customer base by building direct advertising relationships with leading brands that see the value of the Perk platform. We are confident that Perk offers a solution that resonates with brands by providing a direct connection to consumers and insight into the effectiveness of their advertising dollars. As the influx of available mobile video inventory settles, we believe that Perk will remain in the forefront as a leader in the digital advertising space. In the months ahead, we will continue to invest in our business, including our Corona Labs platform and direct advertising sales team in addition to growing the Company through the further expansion of our user base and rewards platform. The team at Perk remains focused on driving shareholder value and we look forward to a successful second half of 2016."

2016 Second Quarter Financial and Operational Review
  • Total revenue for the second quarter of 2016 increased 64% to approximately $20.4 million, as compared to approximately $12.4 million for the prior year period. Perk's revenue increased 29% to approximately $16.0 million for the second quarter of 2016, which excludes revenues from the AppRedeem acquisition, the Playerize acquisition, the Corona acquisition and the Viggle acquisition (collectively the "Acquisitions" and acquired after June 30, 2015). The increase in advertising revenues are a result of an increase in traffic and monetization of Perk's mobile web and desktop properties which helped to offset lower than expected fill rates and price compression from third party ad networks which was primarily the result of an abundance of available mobile video inventory in the market.
  • For the second quarter of 2016, Perk generated advertising revenue from barter transactions of approximately $0.6 million, of which approximately $0.1 million was attributed to the Acquisitions. Excluding the impact of the approximately $0.6 million of barter transactions on the second quarter revenues, year over year revenue grew by 59% from approximately $12.4 million to approximately $19.7 million. In conjunction with the revenue generated from barter transactions, Perk recorded an increase in marketing and user acquisition expense of approximately $0.6 million. Perk did not generate advertising revenue from barter transactions during the second quarter of 2015.
  • Perk reported cost of revenue, which is comprised of the costs of the rewards provided to users, platform fees, traffic acquisition costs to its desktop and mobile websites and revenue sharing commissions, for the three months ended June 30, 2016 of approximately $11.2 million, compared to $6.7 million in the second quarter of 2015. Excluding the Acquisitions, cost of revenue increased by $3.0 million to $9.7 million from the second quarter of 2015. The increase in costs is a result of growth in monetization opportunities on the Company's owned and operated mobile web and desktop properties.
  • Gross profit for the three months ended June 30, 2016 was approximately $9.1 million (45% of revenues), compared to approximately $5.8 million (46% of revenues) for the second quarter of 2015. The slight reduction in gross margin as a percentage of revenue was the result of the growth in monetization opportunities on the Company's owned and operated mobile web and desktop properties which typically generate margins on revenue at a lower rate than the Company's mobile apps business. Excluding the Acquisitions, gross profit for the second quarter of 2016 increased by $0.5 million to approximately $6.3 million or 39% of revenue as compared to the second quarter of 2015 when gross profit was approximately 46% of revenue.
  • Net loss for the three months ended June 30, 2016 was approximately $0.5 million compared to a net loss of approximately $15.8 million for same period of the prior year.
  • Adjusted EBITDA was approximately $2.2 million for the three months ended June 30, 2016, as compared to approximately $2.1 million of Adjusted EBITDA generated in the three months ended June 30, 2015. Included in the second quarter Adjusted EBITDA of $2.2 million is approximately $1.0 million in Adjusted EBITDA loss resulting from the Corona Acquisition. Excluding the Acquisitions, Adjusted EBITDA for the three months ended June 30, 2016 was approximately $1.9 million. A table reconciling Adjusted EBITDA to net loss can be found at the end of this release.

2016 Year-to-Date Financial and Operational Review
  • Total revenue for the six months ended June 30, 2016 was approximately $37.7 million, representing a 106% increase over total revenue of approximately $18.3 million for the prior year period. Perk's revenue, excluding the impact of the Acquisitions, increased by $12.4 million to $30.7 million for the six-month period ended June 30, 2016, as compared to the same period of the prior year.
  • Perk's reported cost of revenue for the six months ended June 30, 2016 of approximately $20.8 million compared to $10.3 million for the prior year period. Excluding costs of revenue from the Acquisitions, cost of revenue increased for the six months ended June 30, 2016 by $7.4 million from the prior year period.
  • Gross profit for the six months ended June 30, 2016 was approximately $16.8 million (45% of revenues), compared to approximately $8.0 million (44% of revenues) for the prior year period. Excluding the Acquisitions, gross profit for the six months ended June 30, 2016 was approximately $13.1 million or 42% of revenue as compared to the first six months of 2015 when gross profit was approximately 44% of revenue.
  • Perk generated advertising revenue from barter transactions for the first six months of 2016 of approximately $2.2 million, of which approximately $0.2 million was attributed to the Acquisitions. Revenue for the six-month period ended June 30, 2016, excluding the impact of the approximately $2.2 million in barter transactions, grew by 94% from approximately $18.3 million to approximately $35.5 million. In conjunction with the revenue generated from barter transactions, Perk recorded an increase in marketing and user acquisition expense of approximately $2.2 million for the six-month period ended June 30, 2016. Perk did not generate advertising revenue from barter transactions during the first six months of 2015.
  • Net loss for the six months ended June 30, 2016 was approximately $2.8 million compared to a net loss of approximately $17.4 million for same period of the prior year. The current year net loss is impacted by $2.1 million of amortization and depreciation expense, $1.3 million of share based payment expense, $0.7 million of transaction and restructuring costs, and $0.4 million of interest accretion expense on non-interest bearing provisions.
  • For the six months ended June 30, 2016, Adjusted EBITDA was approximately $1.6 million, a decrease of $0.1 million when compared to the same six months of the prior year. Included in the year-to-date Adjusted EBITDA of $1.6 million is approximately $1.5 million in Adjusted EBITDA loss resulting from the Corona Acquisition. Excluding the Adjusted EBITDA loss of approximately $0.9 million generated by the Acquisitions during the first six months of 2016, Adjusted EBITDA was approximately $1.7 million.

Balance Sheet Summary
  • Perk had cash and investments of approximately $12.5 million at June 30, 2016 compared with approximately $17.5 million at December 31, 2015. The year to date decrease in cash is the result of approximately $2.2 million in cash taxes paid, $1.1 million in payments against term loans /contingent consideration in addition to non-cash working capital items using approximately $1.6 million in cash. The majority of the cash required for working capital was used to reduce the Company's unredeemed rewards liability in addition to reducing our trade and accounts payable balances.
  • At June 30, 2016, shareholders' equity was approximately $36.8 million, compared to approximately $32.1 million at December 31, 2015.
       

Conference Call Details
Date/Time: Friday, August 12, 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/q2-2016.

About Perk Inc.

Perk's Rewarded Engagement Platform brings together the interests of advertisers and consumers to deliver profound insights and actionable results. With Perk, brands form deep connections with consumers to achieve greater engagement, loyalty, and conversion. Perk's insights and intelligence solution, Perk IQ™, allows brands to measure performance and uncover valuable data around advertising attribution, brand impact, and purchase behavior.

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

Financial Information

A copy of Perk's unaudited interim condensed consolidated financial statements for the three and six months ended June 30, 2016, which are prepared in accordance with International Accounting Standard 34, Interim Financial Reporting ("IAS 34") and Perk's Management's Discussion & Analysis, will be available on or before August 12, 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, (c) income tax expense (recovery) and (d) 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 unaudited interim condensed consolidated financial statements prepared in accordance with IAS 34. 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 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 three and six months ended June 30, 2016. Perk does not undertake to update any forward-looking statement, except as required by law.
 
Perk Inc.
Unaudited condensed consolidated statements of operations
and comprehensive loss
Three and six months ended June 30, 2016 and 2015
(In thousands of US dollars, except per share amounts)
             

Three Monthsended June 30,

Six Months endedJune 30,
2016     2015 2016 2015
Revenue $ 20,354 $ 12,429 $ 37,661 18,324
Cost of revenue   11,244     6,673     20,830     10,315  
Gross profit 9,110 5,756 16,831 8,009
Expenses
Employee compensation and benefits 4,716 2,016 9,418 3,163
Marketing and user acquisition 810 565 2,646 1,267
General and administrative 2,091 1,098 4,463 1,964
Depreciation of property and equipment 62 53 124 69
Amortization of intangible assets 1,089 285 2,001 288
Transaction and restructuring costs 455 - 679 -
Foreign exchange loss 37 3 131 2
Other income - - - (3 )
Gain on revaluation of provisions (55 ) - (55 ) -
Gain on revaluation of forward exchange contract - (213 ) - (213 )
Loss on revaluation of derivative liabilities - 15,200 - 15,979
Loss on revaluation of preferred share warrants - 1,855 - 2,026
Finance cost   231     353     463     459  
Loss before income taxes   (326 )   (15,459 )   (3,039 )   (16,992 )
 
Income tax expense (recovery)
Current 471 92 865 92
Deferred   (314 )   296     (1,121 )   296  
  157     388       (256 )   388  
 
Net loss   (483 )   (15,847 )   (2,783 )   (17,380 )
 
Net income attributable to non-controlling interest   -     -     -     3  
Net loss attributable to the shareholders of the Company   (483 )   (15,847 )   (2,783 )   (17,383 )
 
Total comprehensive loss for the period $ (483 ) $ (15,847 ) $ (2,783 ) $ (17,383 )
 
Net loss per share
Basic $ (0.02 ) $ (1.69 ) $ (0.12 ) $ (1.94 )
Diluted $ (0.02 ) $ (1.69 ) $ (0.12 ) $ (1.94 )
 
 
Perk Inc.
Unaudited interim condensed consolidated statements of financial position
As at June 30, 2016 and December 31, 2015
(In thousands of US dollars)
         
June 30, 2016   December 31, 2015
Assets
Current assets
Cash $ 11,610 $ 16,592
Trade receivables 15,394 15,378
Prepaid expenses 748 804
Other current assets   1,216   1,958
28,968 34,732
Non-current assets
Restricted marketable securities 885 881
Other assets 158 62
Property and equipment 687 634
Intangible assets 13,051 8,164
Goodwill   8,674   4,991
$ 52,423 $ 49,464
 
Liabilities
Current liabilities
Trade and other payables $ 7,557 $ 7,647
Unredeemed rewards liability 2,274 832
Current portion of loans and borrowings 386 728
Current portion of provisions for contingent consideration 1,567 1,554
Current portion of deferred lease inducements 6 6
Income taxes payable   681   2,052
12,471 12,819
Non-current liabilities
Provisions for contingent consideration 2,097 2,435
Deferred tax liabilities 968 2,089
Deferred lease inducements   51   52
  15,587   17,395
 
Shareholders' equity
Share capital 53,135 49,393
Share-based payment reserve 6,378 2,570
Accumulated other comprehensive loss - (28)
Accumulated deficit   (22,677)   (19,866)
  36,836   32,069
$ 52,423 $ 49,464
 
 
Perk Inc.
Reconciliation of net income to Adjusted EBITDA
Three and six months ended June 30, 2016 and 2015
(In thousands of US dollars)
 
     

Three months endedJune 30,
   

Six months endedJune 30,
2016     2015 2016     2015
Income (loss) from operations $ (113) 1,738 $ (2,500) 1,257
Share-based compensation 690 58 1,298 63
Transaction and restructuring costs 455 - 679 -
Depreciation of property and equipment 62 53 124 69
Amortization of intangible assets 1,089 285 2,001 288
Adjusted EBITDA $ 2,183 $ 2,134 $ 1,602 $ 1,677
 

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