EX-99 2 exhibit_1.htm EXHIBIT 1 exhibit_1.htm
 
Exhibit 1
 

 
PERION REPORTS RECORD FIRST QUARTER REVENUE AND EBITDA, DATED MAY 15, 2014
 
Following Transformative ClientConnect Acquisition, non-GAAP Revenues Reach $117
Million and EBITDA Grows to $34 Million
 
Tel Aviv and San Francisco – May 15, 2014 – Perion Network Ltd. (NASDAQ: PERI), today announced record financial results for the first quarter ended March 31, 2014.
 
Q1 2014 non-GAAP Financial Highlights:
·
Revenues increased to $117.1 million;
·
EBITDA increased to $33.6 million, or 29% of revenues;
·
Net income increased to $27.6 million, or 24% of revenues;
·
Earnings per diluted share was $0.40;
·
Cash flow from operations reached $13.9 million; and
·
Perion completed the quarter with $51.2 million in cash and cash equivalents.
 
Josef Mandelbaum, Perion’s CEO commented: “We are very pleased with our first quarter performance as a combined company. The integration proceeded more smoothly and more rapidly than we anticipated, and the combined operations are delivering record results with strong top- and bottom-line growth. The post-merger integration work we completed, combined with our newfound scale, sophisticated analytical capabilities, and combined talent, helped produce a strong start to 2014. While there still remain some headwinds in the overall industry we are increasingly confident in our ability to adapt, gain market share and diversify and are therefore very excited about the future of the new Perion.”
 
“As an industry leader in the app developer ecosystem on the desktop, we are now positioning ourselves to be the same on the mobile platform,” added Mr. Mandelbaum. “Our expertise in helping app developers grow, monetize and optimize their business makes us the ideal partner for the mobile platform. Our technology, data set and people give me great confidence that we will be one of the leading companies that provides solutions for each platform and more importantly cross platform. Over the course of the remainder of the year you should expect to see some exciting new initiatives from us in the mobile and data driven programmatic advertising space which will further diversify and strengthen our business.”
 
Non-GAAP Financial Comparison for the First Quarter of 2014:
 
In accordance with accepted accounting principles the acquisition of ClientConnect by Perion, which closed on January 2, 2014, is accounted for as a reverse acquisition. Therefore going forward, Perion will be comparing its results to those of ClientConnect in 2013. In the interest of transparency, the Company is also providing this quarter, comparative results on a combined basis. The combined results are calculated as the sum of Perion and ClientConnect results for the entire first quarter of last year.
 
Revenue: In the first quarter of 2014 revenues were a record $117.1 million, increasing 47%, compared to ClientConnect revenues of $79.7 million in the first quarter of 2013 and increasing 9% compared to combined revenues of $ 107.3 million in the first quarter of 2013. Non-GAAP revenues in the first quarter of 2014 include $2.3 million of deferred product revenues, which in accordance with U.S. GAAP were recorded at fair value on the acquisition date.
 
 
 
 
 
Customer Acquisition Costs (“CAC”): In the first quarter of 2014, Perion increased its investment in CAC to $59.6 million. In the first quarter of 2014 CAC represented 51% of revenues, compared to 50% in the first quarter of 2013 by ClientConnect and 48% revenues on a combined basis in the first quarter of 2013.
 
Operating Expenses: Excluding CAC, operating expenses in the first quarter of 2014 were $24.5 million, or 21% of revenues, compared to $17.9 million, or 22% of revenues, at ClientConnect in the first quarter of 2013. Non GAAP operating expenses in the first quarter of 2014 excluded $4.5 million amortization of acquired intangible assets, $4.4 million in non-cash equity compensation expenses and $2.9 million in acquisition related expenses, all of which were included in the GAAP numbers. In the first quarter of 2013, non GAAP operating expenses included $7.7 million activity which in the GAAP report were associated with discontinued operations and excluded from operating expenses.
 
EBITDA: In the first quarter of 2014, EBITDA was $33.6 million, or 29% of revenues, a 49% increase compared to the $22.5 million, or 28% of revenues at ClientConnect in the same quarter last year, despite the $19.5 million increase in CAC. On a combined basis EBITDA increased 10% from the first quarter of 2013.
 
Net Income: In the first quarter of 2014, net income was $27.6 million, or 24% of revenues, increasing 41%, from $19.5 million at ClientConnect in the first quarter of 2013. On a combined basis, net income increased 9% from $25.3 million in the first quarter of 2013.
 
Cash and Cash Flow from Operations: As of March 31, 2014 cash and cash equivalents were $51.2 million. This was made up of primarily $13.9 million, cash flow from operations, a $23.4 million cash balance at Perion prior the acquisition and a $14.8 million short term loan from Conduit to support working capital post acquisition.
 
2014 Financial Outlook:
 
Management today reaffirmed its financial outlook for 2014 as announced on March 3, 2014:
 
 
·
Revenue is expected to be in the range of $460 million to $470 million.
 
 
·
EBITDA is expected to be in the range of $125 million to $130 million.
 
 
·
Net Income is expected to be in the range of $103 million to $108 million.
 
Conference Call
 
Perion will host a conference call to discuss the results today, May 15, 2014 at 10 a.m. EDT (5 p.m. Israel Time). Details are as follows:
 
 
·
Conference ID: 3820590
 
 
·
Dial-in number from within the United States: 1-888-438-5525
 
 
·
Dial-in number from Israel: 1-809-245906
 
 
·
Dial-in number (other international): 1-719-457-1512
 
 
·
Playback, available until May 22, 2014 by calling 1-877-870-5176 (United States) or 1-858-384-5517 (international). Please use pin number 3820590 for the replay.
 
 
·
A live webcast is accessible at http://www.perion.com/events-presentations
 
About Perion Network Ltd.
Perion powers innovation. Perion is a global performance-based media and Internet Company, providing online publishers and app developers advanced technology and a variety of intelligent, data-driven solutions to monetize their application or content and expand their reach to larger audiences. Our leading self-service platform with simple integration and robust, built-in analytics, empowers digital businesses to optimize distribution and maximize revenue. Our distribution solutions, which are based on our own experience as an app developer, position us to best understand the needs of developers, and enable developers to focus exclusively on creating high-quality digital product and content. The Perion team brings decades of experience, operating and investing in digitally-enabled businesses, and we continue to innovate and create value for the app ecosystem. More information about Perion may be found at www.perion.com.
 
 
 
 
 
Non-GAAP measures
Non-GAAP financial measures consist of GAAP financial measures adjusted to exclude: amortization of acquired intangible assets, share-based compensation expenses, acquisition related expenses, certain business combination accounting entries and tax adjustments re non-GAAP adjustments: non-recurring financial income; deferred financial expenses; and discontinued operations related expenses. 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. The intangible assets created in the reverse acquisition of Perion are preliminary and subject to further review and completion of valuation analyses.
 
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 to realize the anticipated benefits of the ClientConnect 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 for the year ended December 31, 2013. Perion does not assume any obligation to update these forward-looking statements.
 
Contact Information
Deborah Margalit
Perion Investor Relations
+972-3-7696100
investors@perion.com
 
Hayden/MS-IR LLC
Brett Maas/ Miri Segal-Scharia
646-536-7331/ 917-607-8654
Brett@haydenir.com/msegal@ms-ir.com

Source: Perion Network Ltd.
 
 
 
 
 
PERION NETWORK LTD.
 
NON-GAAP SUMMARY FINANCIAL METRICS
U.S. dollars in thousands (except per share data), unaudited
 
 
  
Quarter ended March 31,
  
 
  
2014
    
2013
    
2013
  
 
  
 
    
ClientConnect
    
Combined
  
 
  
 
    
 
    
 
  
Revenue
   $ 117,115     $ 79,679     $ 107,257  
 
                        
Operating expenses
   $ 84,108     $ 57,945     $ 77,901  
 
                        
EBITDA
   $ 33,562     $ 22,488     $ 30,389  
 
                        
Net Income
   $ 27,598     $ 19,536     $ 25,319  
 
                        
Diluted EPS
   $ 0.40     $ 0.36          
 
 
 
 
 
 
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 March 31,
  
 
  
2014
    
2013
  
Revenues:
  
 
    
 
  
Search
   $ 95,182     $ 69,465  
Products and other
     19,641       9,838  
 
                
Total revenues
     114,823       79,303  
Operating expenses:
                
Cost of revenues
     6,393       1,449  
Customer acquisition costs
     59,582       40,089  
Research and development
     13,327       5,136  
Selling and marketing
     5,824       2,522  
General and administrative
     10,866       2,235  
Total operating expenses
     95,992       51,431  
Operating income
     18,831       27,872  
Financial (expense) income, net
     (393 )     852  
Income before taxes on income
     18,438       28,724  
Taxes on income
     4,622       3,785  
Net income – continuing operations
     13,816       24,939  
Net loss - discontinued operations
     -       (6,565 )
Net income
   $ 13,816     $ 18,374  
 
                
Net income (loss) per share - basic:
                
Continuing operations
   $ 0.21     $ 0.46  
Discontinued operations
   $ -     $ (0.12 )
 
                
Net income (loss) per share - diluted:
                
Continuing operations
   $ 0.20     $ 0.46  
Discontinued operations
   $ -     $ (0.12 )
 
                
Number of shares - basic:
                
Continuing and discontinued operations
     67,175       53,906  
 
                
Number of shares - diluted:
                
Continuing operations
     68,226       54,555  
Discontinued operations
     68,226       53,906  
 
 
 
 
 
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 March 31,
  
 
  
2014
    
2013
  
 
  
 
    
 
  
GAAP revenues
   $ 114,823     $ 79,303  
Revenues from discontinued operations
     -       376  
Valuation adjustment on acquired deferred product revenues
     2,292       -  
Non-GAAP revenues
   $ 117,115     $ 79,679  
 
                
GAAP operating expenses
   $ 95,992     $ 51,431  
Acquisition related expenses
     (2,948 )     -  
Discontinued operations operating expenses
     -       7,676  
Share based compensation
     (4,436 )     (1,162 )
Amortization of acquired intangible assets
     (4,500 )     -  
Non-GAAP operating expenses
   $ 84,108     $ 57,945  
 
                
GAAP net income
   $ 13,816     $ 18,374  
Valuation adjustment on acquired deferred product revenues
     2,292       -  
Acquisition related expenses
     2,948       -  
Share based compensation
     4,436       1,162  
Amortization of acquired intangible assets
     4,500       -  
Accretion of payment obligation related to acquisitions
     268       -  
Taxes related to amortization of acquired intangible assets
     (662 )     -  
Non-GAAP net income
   $ 27,598     $ 19,536  
 
                
Non-GAAP net income
   $ 27,598     $ 19,536  
Income tax expense
     4,622       3,785  
Interest expense (income), net
     393       ( 852 )
Accretion of payment obligation related to acquisitions
     (268 )     -  
Taxes related to amortization of acquired intangible assets
     662       -  
Depreciation
     555       754  
Discontinued financial income, net
     -       (60 )
Discontinued tax benefit
     -       (675 )
Non-GAAP EBITDA
   $ 33,562     $ 22,488  
 
                
GAAP diluted earnings per share
   $ 0.20     $ 0.46  
Non-GAAP diluted earnings per share
   $ 0.40     $ 0.36  
Shares used in computing US GAAP and non-GAAP diluted earnings per share
     68,226       54,555  
 
 
 
 
 
 
 
PERION NETWORK LTD.
 
RECONCILIATION OF CLIENTCONNECT NON-GAAP TO COMBINED NON-GAAP RESULTS FOR FIRST QUARTER OF 2013
U.S. dollars and number of shares in thousands (except per share data), unaudited
 
 
  
Quarter ended
March 31, 2013
  
 
  
 
  
ClientConnect non-GAAP revenues
   $ 79,679  
Perion non-GAAP revenues as reported
     27,578  
Combined non-GAAP revenues
   $ 107,257  
 
        
ClientConnect non-GAAP operating expenses
   $ 57,945  
Perion non-GAAP operating expenses (including cost of revenues) as reported
     19,956  
Combined non-GAAP operating expenses
   $ 77,901  
 
        
ClientConnect non-GAAP net income
   $ 19,536  
Perion non-GAAP net income as reported
     5,783  
Combined non-GAAP net income
   $ 25,319  
 
        
ClientConnect non-GAAP EBITDA
   $ 22,488  
Perion non-GAAP EBITDA as reported
     7,901  
Combined non-GAAP EBITDA
   $ 30,389  
 
 
 
 
 
PERION NETWORK LTD.
 
GAAP FINANCIAL STATEMENTS
 
CONDENSED CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands
 
 
  
March 31, 2014
    
December 31, 2013
  
Assets
  
Unaudited
    
 
  
 
  
 
    
 
  
Current assets:
  
 
    
 
  
Cash and cash equivalents
   $ 51,174     $ 949  
Restricted cash
     1,541       -  
Trade receivables
     48,871       -  
Other current assets
     6,127       400  
Total current assets
     107,713       1,349  
Property and equipment, net
     3,723       2,189  
Goodwill and other intangible assets, net
     191,829       27,520  
Other assets
     3,064       -  
Total assets
   $ 306,329     $ 31,058  
 
                
Liabilities and Stockholders’ Equity
                
 
                
Current liabilities:
                
Current maturities of long term debt
   $ 17,133     $ -  
Trade payables
     45,283       13,358  
Deferred revenues
     7,923       6,250  
Payment obligation related to acquisition
     8,996       -  
Accrued expenses and other liabilities
     19,455       1,423  
Total current liabilities
     98,790       21,031  
Long-term debt
     3,675       -  
Other long term liabilities
     4,927       -  
Total liabilities
     107,392       21,031  
Stockholders’ equity:
                
Ordinary shares
     183       147  
Additional paid-in capital
     184,938       9,880  
Retained earnings
     13,816       -  
Total stockholders’ equity:
     198,937       10,027  
Total liabilities and stockholders’ equity
   $ 306,329     $ 31,058  
 
 
 
 
 
PERION NETWORK LTD.
 
GAAP FINANCIAL STATEMENTS
 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands, (unaudited)
 
 
  
Quarter ended March 31,
  
 
  
2014
    
2013
  
Operating activities:
  
 
    
 
  
Net income
   $ 13,816     $ 18,374  
Loss from discontinued operations, net
     -       (6,565 )
Income from continuing operations
     13,816       24,939  
Adjustments required to reconcile net income to net cash provided by operating activities:
                
Depreciation and amortization
     5,055       521  
Stock based compensation expense, net
     4,436       721  
Acquisition related expenses paid by shareholders
     3,060       -  
Accrued interest, net
     81       243  
Accretion of payment obligation related to acquisition
     268       -  
Deferred income taxes
     (1,350 )     89  
Changes in assets and liabilities
     (11,502 )     10,451  
 
                
Net cash provided by operating activities
     13,864       36,964  
Net cash used in discontinued operations
     -       (6,986 )
Net cash provided by operating activities
     13,864       29,978  
Investing activities:
                
Purchase of property and equipment
     (711 )     (249 )
Restricted cash, net
     (422 )     -  
Proceeds from short-term bank deposits
     -       45,970  
Cash acquired through merger with Perion Network Ltd.
     23,364       -  
Net cash provided by continuing operations
     22,231       45,721  
Net cash provided by discontinuing operations
     -       469  
Net cash provided by investing activities
     22,231       46,190  
Financing activities:
                
Deferred payment made in connection with acquisition
     (45 )     -  
Proceeds from short-term loan
     14,750       -  
Repayment of long-term loans
     (575 )     -  
Net cash provided by financing activities
     14,130       -  
 
                
Net Increase in cash and cash equivalents
     50,225       76,168  
Increase in cash and cash equivalents - discontinued operations
     -       1,509  
Cash and cash equivalents at beginning of year
     949       78,395  
 
                
Cash and cash equivalents at end of period
   $ 51,174     $ 156,072