Perion Announces Another Record Quarter: Third Quarter Revenues Up 81%; EBITDA Up 71%

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Perion Announces Another Record Quarter: Third Quarter Revenues Up 81%; EBITDA Up 71%

TEL AVIV, Israel--(BUSINESS WIRE)-- Perion Network Ltd. (NAS: PERI) , today announced financial results for the third quarter and nine months ended September 30, 2012.

Q3 2012 non-GAAP Financial Highlights Include:

  • Quarterly revenues increased 81% year-over-year to a record $16.3 million;
  • Product and other advertising revenues increase 78% year-over-year, reaching $5.4 million;
  • Search revenue increased year over year 82% to $10.9 million;
  • EBITDA increased year over year 71%, reaching $3.8 million, or 23% of revenues; and
  • Net income grew year over year 46%, reaching $2.6 million, or $0.26 per share, representing 16% of revenues;

First Nine Months 2012 non-GAAP Financial Highlights Include:

  • Year-to date revenues increased 55% year-over-year to a record $39.8 million;
  • Product and other advertising revenues increase 153% year-over-year, reaching $17.0 million;
  • Search revenue increased year over year 20% to $22.8 million;
  • EBITDA increased year over year 9% to $9.1 million, or 23% of revenues; and
  • Net income was $6.7 million, or $0.66 per share, representing 17% of revenues;

Josef Mandelbaum, Perion's CEO commented: "This quarter was a phenomenal quarter for us in every aspect of our business. A year post the acquisition of Smilebox, I am proud to announce that Q3 was a record quarter of profitability for Smilebox and revenues continue to grow at a 30% pace. The acquisition has truly proven out to be a big win for us."

"In addition," continued Mandelbaum, "thanks to efforts invested in our back-end systems and analytics, we have succeeded in ramping up our customer acquisition efforts with a very high return on investment which in turn created rapid growth in search generated revenues. Even more encouraging is while we have invested in growing our business, our profits and profit margins have increased dramatically. We intend to build and even further improve on these successes, as we contemplate new acquisition opportunities and plan for even greater growth in 2013."

Non-GAAP Financial Comparison for the Third Quarter and First Nine Months of 2012:

Revenue: Q3'12 revenues were a record $16.3 million, increasing 32% over the prior quarter and 81% compared to the third quarter of 2011. The accelerating growth was a result of positive trends in all Perion's revenue streams, but primarily as a result of the Company's search generated revenues increasing 82% year-over-year and 70% sequentially quarter-over quarter. Management continues to work on improving systems powering the record revenue growth and expect strong performance in the coming quarters as well.

In the first nine months of 2012, revenues increased 55%, reaching $39.8 million, compared to $25.7 million in the first nine months of 2011, and surpassing sales for the entire year of 2011. This increase was primarily due to increasing product sales three-fold and a 20% increase in search generated revenues.

Gross Profits: Gross profit in the third quarter of 2012 was $15.2 million, up 33% sequentially and up 82% from the third quarter of 2011. The gross profit margin increased to 94% this last quarter, compared to 93% in the third quarter of 2011. In the first nine months of 2012, gross profit increased 53%, reaching $37.2 million, or 93% of sales, compared to $24.3 million, or 94% of sales.

Customer Acquisition Costs ("CAC"): In the third quarter of 2012, Perion invested $5.8 million in CAC, compared to $3.9 million last quarter and $2.6 million in the third quarter of 2011. In the first nine months of 2012 the investment in CAC totaled $12.4 million, compared to only $4.9 million in the same period last year. The increase in CAC was in conjunction with the improvement in the return on this investment, credited to the Company's enhanced back-end systems and improved methodology. Management continues to increase this investment, being the main force powering Perion's search generated growth, while remaining focused on increasing profits.

EBITDA: In the third quarter of 2012, EBITDA was $3.8 million, or 23% of sales, increasing 71% compared to the same quarter last year, despite the $3.2 million increase in CAC. In the first nine months of 2012 EBITDA was $9.1 million, increasing $0.8 million from $8.3 million in the first nine months of 2011, even though CAC increased $7.4 million in the 2012 period, compared to the 2011 period.

Net Income: In the third quarter of 2012, net income was $2.6 million or $0.26 per share, compared to $1.8 million, or $0.18 per share in the third quarter of 2011. In the first nine months of 2012 net income was $6.7 million, or $0.66 per share, similar to the first nine months of 2011, offsetting the decrease in the first half of the year, as the Company rebounded in the third quarter.

Cash Flow from Operations: Based on reports in U.S. GAAP, in the first nine months of 2012, cash flow from operations was $4.8 million, compared to $5.4 million in the first nine months of 2011. The decrease in cash flow from operations is primarily due to the increase in CAC and search revenues receivable in 2012.

Conference Call

Perion will host a conference call to discuss the results today, November 1st at 10 a.m. EDT (4 p.m. 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. (NAS: PERI) is a global internet consumer software company that develops applications to make the online experience of its users simple, safe and enjoyable. Perion's two main award winning consumer brands are: IncrediMail and Smilebox. Together these products have had over 150 million downloads. IncrediMail, is a streamlined e-mail and Facebook application with an easy-to-use interface that allows for more personalized communications sold in over 100 countries in 8 languages and Smilebox, a leading photo sharing and social expression product and service that lets customers quickly turn life's moments into digital creations to share and connect with friends and family in a fun and personal way. Perion's applications are monetized through a freemium model. Free versions of our applications are monetized primarily through our toolbar which generates search revenue, and advertising revenue generated through impressions, while a more advanced feature rich version is available with a premium upgrade. Perion also offers and develops a range of products for mobile phones and tablets to answer its users increasing mobile demands. For more information on Perion please 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, deferred finance expenses and 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, 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 in thousands (except per share data), unaudited

    

 

Quarter ended
September 30,

Nine months ended
September 30,

2012  20112012  2011
Revenues:
Search$10,861$5,955$22,811$19,007
Product4,1422,00614,1754,516
Other 1,271 1,031 2,849 2,207
Total revenues$16,274$8,992$39,835$25,730
Gross Profit$15,233$8,389$37,219$24,284
EBITDA$3,801$2,225$9,068$8,310
Net Income$2,649$1,817$6,665$6,672
Diluted EPS$0.26$0.18$0.66$0.67
 
    
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
September 30,

Nine months ended
September 30,

2012  20112012  2011
Revenues:
Search$10,861$5,955$22,811$19,007
Product4,0831,44513,1973,955
Other 1,271  1,031 2,849  2,207 
Total revenues16,2158,43138,85725,169
Cost of revenues 1,293  686 3,380  1,529 
Gross profit 14,922  7,745 35,477  23,640 
Operating expenses:
Research and development, net2,7111,7267,8585,067
Selling and marketing2,0367125,2602,477
Customer acquisition costs5,8252,62512,3634,942
General and administrative 1,738  2,437 5,253  5,983 
Total operating expenses 12,310  7,500 30,734  18,469 
Operating income2,6122454,7435,171
Financial income (expense), net (58) 100 (254)  234 
Income before taxes on income2,5543454,4895,405
Taxes on income (benefit) 861  325 1,548  (71)
Net income$1,693 $20$2,941 $5,476 
 
Basic earnings per share$0.17 $0.00$0.30 $0.56 
Diluted earnings per share$0.17 $0.00$0.29 $0.55 
 
Basic weighted number of shares 10,003  9,740 9,968  9,726 
Diluted weighted number of shares 10,158  10,013 10,062  10,016 
 
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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
September 30,

Nine months ended
September 30,

2012  20112012  2011
GAAP revenues$16,215 $8,431$38,857$25,169
Valuation adjustment on acquired deferred product revenues 59 561  978 561 
Non-GAAP revenues$16,274$8,992 $39,835$25,730 
 
GAAP gross profit$14,922$7,745$35,477$23,640
Valuation adjustment on acquired deferred product revenues59561978561
Share based compensation2-14-
Amortization of acquired intangible assets 250 83  750 83 
Non-GAAP gross profit$15,233$8,389 $37,219$24,284 
 
GAAP operating expenses$12,310$7,500$30,734$18,469
Acquisition related expenses1888095011,030
Share based compensation246326775915
Amortization of acquired intangible assets2116863068
Other - (50) - (50)
Non-GAAP operating expenses$11,665$6,347 $28,828$16,506 
 
GAAP operating income$2,612$245 $4,743$5,171