Perion Network Ltd (USA) : Perion First Quarter 2012 Revenues Up 30%
05/15/2012| 08:15am US/Eastern
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Smilebox Achieves Strong Top Line Growth and Double Digit EBITDA
Margin
Perion Network Ltd. (NASDAQ: PERI), a digital media company that helps
make the everyday life of second wave adopters easier and more
enjoyable, today announced results for the first quarter ended March 31,
2012.
Q1 2012 non-GAAP Financial Highlights Include:
Revenues increased 30% year-over-year to $11.3 million;
Product and other advertising revenues together tripled year-over-year
reaching $5.7 million and accounted for over half of the revenues in
the first quarter of 2012;
Net income totaled $2.2 million or 19% of revenues, up 36% from Q4 of
2011;
EBITDA was $2.6 million or 23% of revenues, up 117% from Q4 of 2011;
GAAP Cash flow from operations totaled $2.5 million
"The first quarter was a solid start to the year for us with top line
growth of 30%, great profit margins and strong cash flow," said Chief
Executive Officer Josef Mandelbaum. "The substantial growth in premium
product and advertising revenue underpins the strength of our model and
strategy. Given the positive momentum of the beginning of the year we
are confident that we will achieve and perhaps exceed our initial
guidance for 2012."
Q1 2012 Operating Metrics:
Total downloads in the first quarter of 2012 were 9.0 million,
compared to 6.4 million in the fourth quarter of 2011;
Installed base was 13.3 million at the end of the first quarter of
2012, compared to 12.3 million at the end of 2011;
Premium subscribers increased slightly, despite seasonality, to
403,000 in the first quarter of 2012, from 402,000 at the end of 2011.
"Smilebox continues to grow at an accelerated pace with revenues growing
28% year over year and Q1 EBITDA margin reaching 14%," Mr. Mandelbaum
concluded. "Furthermore, our applications in the mobile phone and tablet
space are set to experience significant growth in Q3 with the launch of
our revolutionary iPad email app and enhancements to our existing
Smilebox iPhone photo app."
Non-GAAP Financial Comparison for the First Quarter of 2012:
Revenue: Q1'12 revenues were $11.3 million, similar to the prior
quarter and increasing 30% compared to the first quarter of 2011. This
was primarily as a result of the consolidation of Smilebox revenues and
growth in product and other advertising revenues derived from Perion's
IncrediMail product. The increase in IncrediMail premium product revenue
was primarily due to shifting from a service offering to a product
offering and we expect this to continue in the coming quarters. Search
revenue declined largely due to a significant increase in media buying
from competition which impacted the monetization of our installed base.
As a result of steps taken since then, management is confident search
revenue will increase in the coming quarters.
Gross Profits: Gross profit in the first quarter of 2012 was
$10.5 million, up 3% sequentially and up 26% from $8.3 million in the
first quarter of 2011. The gross profit margin remained healthy at 93%
this last quarter, compared to 96% in the first quarter of 2011 and up
from 91% in the fourth quarter of 2011.
Customer Acquisition Costs ("CAC"): In the first quarter of 2012,
Perion invested $2.6 million in CAC, compared to $3.1 million last
quarter and only $0.7 million in the first quarter of 2011. Management
believes that this higher investment in customer acquisition is already
bearing fruit and will significantly contribute to revenues this year.
EBITDA: In the first quarter of 2012, EBITDA was $2.6 million,
compared to $1.4 million in the previous quarter and $3.7 million in the
first quarter of 2011. The fluctuations in EBITDA were largely due to
the changes in the level of investment in customer acquisition, as the
Company over the last few quarters has ramped up its marketing efforts
taking advantage of current market conditions to accelerate growth.
Net Income: In the first quarter 2012, net income was $2.2
million or $0.22 per share, as compared to $1.6 million, or $0.16 per
share in the previous quarter, and $2.9 million, or $0.29 per share in
the first quarter of 2011.
Cash Flow from Operations: Based on reports in U.S. GAAP, in the
first quarter of 2012, cash flow from operations was $2.5 million
compared to $2.1 million in the first quarter of 2011.
Conference Call
Perion will host a conference call to discuss the results today, May 15th
at 9:30 AM EDT (16:30 PM Israel Time). To listen to the call please
visit the Investor Relations section of Perion's website at www.perion.com/events-presentations.
Click on the link provided for the webcast, or dial 1-866-744-5399.
Callers from Israel may access the call by dialing (03) 918-0685. The
webcast will be archived on the company's website for seven days.
About Perion Network Ltd.
Perion Network Ltd. (NASDAQ: PERI), a digital media company, helps
improve the everyday digital lives of 'second-wave adopters' by
delivering a growing portfolio of easy-to-use applications for
accomplishing popular activities. Perion focuses upon the almost 300
million consumers and under-served 'second-wave adopters', those who
wait to adopt technology and want products that connect them with
friends and family, enhance their online experiences, and offer safe and
easy to use solutions. The Company targets three billion dollar market
verticals: 1) communications, 2) photos and 3) online security. With
120M+ downloads and 13.3M installed base, products include: IncrediMail,
an award-winning email application, Smilebox, a photo sharing and
social expression product, PhotoJoy, a photo discovery and
sharing screensaver and wallpaper product and Fixie, a PC
optimization product. Perion offers and develops a range of iPhone and
iPad products to answer the increasing mobile demands of 'second-wave
adopters'. These include a photo email application, Smilebox application
with over 500,000 downloads and Photojoy application, all available for
download in the Apple App Store. For more information on Perion, visit 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, non-recurring tax
benefits. 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 Income.
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 the Company. The words "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 the Company with
respect to future events and are subject to risks and uncertainties.
Many factors could cause the actual results, performance or achievements
of the Company to be materially different from any future results,
performance or achievements that may be expressed or implied by such
forward-looking statements, including, among others, potential
litigation associated with the transaction, risks that the proposed
transaction disrupts current plans and operations and the potential
difficulties in employee retention as a result of the proposed
transaction and in integrating the acquired business, the distraction of
management and the Company resulting from the proposed transaction,
changes in the markets in which the Company operates and in general
economic and business conditions, loss of key customers and
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 the Company 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, 2011. The
Company does not assume any obligation to update these forward-looking
statements.
Source: Perion Network Ltd.
PERION NETWORK LTD.
NON-GAAP SUMMARY FINANCIAL METRICS
U.S. dollars (except per share data) in thousands, unaudited
Quarter ended March 31,
2012
2011
Revenues:
Search
$
5,552
$
6,803
Product
4,971
1,321
Other
733
563
Total revenues
$
11,256
$
8,687
Gross Profit
$
10,492
$
8,303
Operating Income
$
2,396
$
3,559
Net Income
$
2,174
$
2,929
Diluted EPS
$
0.22
$
0.29
PERION NETWORK LTD.
GAAP FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF INCOME
U.S. dollars and number of shares in thousands (except per share
data), (unaudited)
Quarter ended March 31,
2012
2011
Revenues:
Search
$
5,552
$
6,803
Product
4,374
1,321
Other
733
563
Total revenues
10,659
8,687
Cost of revenues
1,023
384
Gross profit
9,636
8,303
Operating expenses:
Research and development
2,683
1,876
Selling and marketing
1,681
862
Customer acquisition costs
2,613
652
General and administrative
1,991
1,635
Total operating expenses
8,968
5,025
Operating income
668
3,278
Financial income, net
52
77
Income before taxes on income
720
3,355
Taxes on income
350
113
Net income
$
370
$
3,242
Basic earnings per share
$
0.04
$
0.33
Diluted earnings per share
$
0.04
$
0.32
Basic weighted number of shares
9,917
9,712
Diluted weighted number of shares
10,007
10,014
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,
2012
2011
GAAP revenues
$
10,659
$
8,687
Valuation adjustment on acquired deferred product revenues
597
-
Non-GAAP revenues
$
11,256
$
8,687
GAAP gross profit
$
9,636
$
8,303
Valuation adjustment on acquired deferred product revenues
597
-
Amortization of acquired intangible assets
250
-
Share based compensation
9
-
Non-GAAP gross profit
$
10,492
$
8,303
GAAP operating expenses
$
8,968
$
5,025
Acquisition related expenses
313
-
Share based compensation
351
281
Amortization of acquired intangible assets
208
-
Non-GAAP operating expenses
$
8,096
$
4,744
GAAP operating income
$
668
$
3,278
Valuation adjustment on acquired deferred product revenues
597
-
Acquisition related expenses
313
-
Share based compensation
360
281
Amortization of acquired intangible assets
458
-
Operating income adjustments
1,728
281
Non-GAAP operating income
$
2,396
$
3,559
GAAP Net income
$
370
$
3,242
Operating income adjustments
1,728
281
Deferred Finance expenses
76
-
Non-recurring tax benefits
-
(594
)
Non-GAAP net income
$
2,174
$
2,929
GAAP diluted earnings per share
$
0.04
$
0.32
Non-GAAP diluted earnings per share
$
0.22
$
0.29
Shares used in computing US GAAP diluted earnings per share
10,007
10,014
Shares used in computing Non-GAAP diluted earnings per share
10,007
10,014
Non-GAAP net income
$
2,174
$
2,929
Income tax expense
350
113
Non-recurring tax benefits
-
594
Interest income, net
(128
)
(77
)
Depreciation and amortization
223
180
Non-GAAP EBITDA
$
2,619
$
3,739
PERION NETWORK LTD.
CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands (except share data)
March 31,
December 31,
2012
2011
Unaudited
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
$
13,522
$
11,260
Trade receivables
2,551
3,265
Other receivables and prepaid expenses
6,132
6,447
Total current assets
22,205
20,972
LONG-TERM ASSETS:
Severance pay fund
491
484
Property and equipment, net
1,249
1,300
Other intangible assets, net
6,196
6,606
Goodwill
24,753
24,753
Other assets
1,042
777
Total long-term assets
33,731
33,920
Total assets
$
55,936
$
54,892
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade payables
$
3,059
$
3,207
Deferred revenues
5,540
4,280
Payment obligation related to acquisition
6,963
6,574
Accrued expenses and other liabilities
6,836
6,950
Total current liabilities
22,398
21,011
LONG-TERM LIABILITIES:
Deferred revenues
-
1,120
Accrued severance pay
989
946
Total long-term liabilities
989
2,066
SHAREHOLDERS' EQUITY
Shares authorized: 40,000,000
Shares issued and outstanding: 9,916,999 and 9,916,194 as of March
31, 2012 and December 31, 2011, respectively;
32,549
31,815
Total liabilities and shareholders' equity
$
55,936
$
54,892
PERION NETWORK LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands, (unaudited)
Quarter ended March 31,
2012
2011
Cash flows from operating activities:
Net income
$
370
$
3,242
Adjustments required to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization
681
180
Stock based compensation expense
360
281
Amortization of premium and accrued interest on marketable securities
-
47
Loss from marketable securities, net
-
57
Deferred taxes, net
(30
)
(1,340
)
Accrued severance pay, net
36
74
Net changes in operating assets and liabilities:
Trade receivables
714
(322
)
Other receivables and prepaid expenses
345
(1,096
)
Other long-term assets
(265
)
(7
)
Trade payables
(148
)
(518
)
Deferred revenues
140
30
Accrued expenses and other liabilities
275
1,508
Net cash provided by operating activities
2,478
2,136
Cash flows from investing activities:
Purchase of property and equipment
(110
)
(60
)
Capitalization of software development and content costs
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