TEL AVIV & NEW YORK, May 04, 2017 (GLOBE NEWSWIRE) -- Perion Network Ltd. (NASDAQ:PERI), a global technology leader in advertising solutions for brands and publishers, announced today its financial results for the first quarter ended March 31, 2017.
Financial Highlights*
(In thousands, except per share data)
| Three months ended | ||||||||
| March 31, | ||||||||
| 2016 | 2017 | |||||||
| Revenues | $ | 75,789 | $ | 61,976 | ||||
| GAAP Net Loss from Continuing Operations | $ | (2,023 | ) | $ | (2,074 | ) | ||
| Non-GAAP Net Income | $ | 6,673 | $ | 2,754 | ||||
| Adjusted EBITDA | $ | 8,791 | $ | 3,489 | ||||
| GAAP Diluted Loss Per Share from continuing operation | $ | (0.02 | ) | $ | (0.03 | ) | ||
| Non-GAAP Diluted Earnings Per Share | $ | 0.09 | $ | 0.04 | ||||
| * Reconciliation of GAAP to Non-GAAP measures follows. | ||||||||
Alan Gelman, Chairman of the Board of Directors commented, “The Board is encouraged that we have a new management team in place that has the experience needed to lead Perion in a new strategic direction and guide the company to the next phase of its growth. Doron Gerstel, who took over as CEO on April 2, 2017, has extensive experience leading technology-focused companies efficiently expand in competitive markets and a proven ability to create shareholder value. I am confident that he is the right leader to drive Perion’s long-term growth.”
Mr. Gerstel commented, “My mission is clear: drive long term exponential growth and unlock sustainable shareholder value. The key element of our growth strategy will be leveraging our technology asset in an integrated solution. We will use data-driven analytic capabilities to allow us to transform current stand-alone product offerings into a more integrated solutions-based offering. We are confident that these more holistic and synergistic solutions will resonate with customers, accelerate our growth and enable margin expansion. A significant component of our long-term growth plan will be to continue to optimize our cost structure and redirect investments to further capitalize on our core technology.”
“During the second quarter we will begin implementing new initiatives that will help position Perion for the next phase of its growth, and I expect to provide more specific details on our strategic plan, when we report our second quarter financial results,” Mr. Gerstel added. “Based on our current visibility, I am encouraged by our prospects for the second quarter in comparison to this past quarter, as well as the second quarter last year. I am confident regarding the near- and long-term outlook for Perion. During my 30 days at Perion, I have already found that the assets we have in place exceed my original expectations that had encouraged me to take this position in the first place.”
Financial Comparison for the First Quarter of 2017:
Revenues: Revenues decreased by 18%, from $75.8 million in the first quarter of 2016 to $62.0 million in the first quarter of 2017. This decrease, was primarily a result of advertising revenues declining 22% and search and other revenues declining 16%, as compared to the first quarter of 2016. The decline in search and other revenues primarily reflects the continued decline in expense free search revenues generated by legacy users, engaged over two years ago, the effect of which is expected decrease over time.
“Our advertising business experienced a significant impact related to the uncertainty in the U.S. following the U.S. elections,” continued Mr. Gerstel. “This directly contributed to lower ad spend, and related revenue, primarily during January. I am encouraged that our advertising business recovered shortly thereafter, and April’s revenues is over 20% than April last year. The positive effects of programmatic advertising and the effort to increase ‘in-flight’ campaign spend, has become more significant in our Q2 revenue forecast and our outlook for 2017 overall. More specifically, in our advertising business, due to Q2 strong start, meeting Q2 Plan and even closing Q1 gap, becomes more and more realistic.”
Customer Acquisition Costs and Media Buy (“CAC”): CAC in the first quarter of 2017 were $30.1 million, or 48% of revenues, as compared to $34.3 million, or 45% of revenues in the first quarter of 2016. The decreased in the nominal costs was primarily due to the lower level of advertising revenues.
Net Loss: On a GAAP basis, net loss in the first quarter of 2017 was $2.1 million, as compared to a net loss of $5.6 million in the first quarter of 2016. The loss in the first quarter of 2017, was due to the lower revenues, partially offset by an improved cost structure. The loss in the first quarter of 2016 was mainly due to a loss of $3.6 million from operations that were discontinued in 2016.
Non-GAAP Net Income: In the first quarter of 2017, non-GAAP net income was $2.8 million, or 4% of revenues, compared to the $6.7 million, or 9% of revenues, in the first quarter of 2016.
Adjusted EBITDA: In the first quarter of 2017, Adjusted EBITDA was $3.5 million, or 6% of revenues, compared to $8.8 million, or 12% of revenues, in the first quarter of 2016.
Cash and Cash Flow from Operations: As of March 31, 2017, cash and cash equivalents, were $22.8 million. Cash provided by operations in the first quarter of 2017 was $8.2 million, compared to $3.5 million in the first quarter of 2016. The increase in cashflow from operations was primarily due to the discontinuation of certain activities related to Growmobile in 2016, as well as improving our DSO.
Perion currently satisfies all the financial covenants associated with its debt.
Conference Call:
Perion will host a conference call to discuss the results today, May 4, 2017, at 10 a.m. ET. Details are as follows:
- Conference ID: 7455488
- Dial-in number from within the United States: 1-888-218-8142
- Dial-in number from Israel: 1-809-246-037
- Dial-in number (other international): 1-913-312-0966
- Playback available until May 11, 2017 by calling 1-844-512-2921 (United States) or
1-412-317-6671 (international). Please use PIN code 7455488 for the replay. - Link to the live webcast accessible at http://www.perion.com/ir-events
About Perion Network Ltd.
Perion is a global technology company that delivers advertising solutions to brands and publishers. Perion is committed to providing data-driven execution, from high-impact ad formats to branded search and a unified social and mobile programmatic platform. More information about Perion may be found at www.perion.com, and follow Perion on Twitter@perionnetwork.
Non-GAAP measures
Non-GAAP financial measures consist of GAAP financial measures adjusted to exclude acquisition related expenses, share-based compensation expenses, restructuring costs, loss from discontinued operations, accretion of acquisition related contingent consideration, amortization of acquired intangible assets and the related taxes thereon, non-recurring tax expenses, as well as certain accounting entries under the business combination accounting rules that require us to recognize a legal performance obligation related to revenue arrangements of an acquired entity based on its fair value at the date of acquisition. Additionally, in September 2014, the Company issued convertible bonds denominated in New Israeli Shekels and at the same time entered into a derivative arrangement (SWAP) that economically exchanges the convertible bonds as if they were denominated in US dollars when the bonds were issued. The Company excludes from its GAAP financial measures the fair value revaluations of both, the convertible bonds and the related derivative instrument, and by doing so, the non-GAAP measures reflect the Company’s results as if the convertible bonds were originally issued and denominated in US dollars, which is the Company’s functional currency. Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA") is defined as operating income excluding stock-based compensation expenses, depreciation, restructuring costs, acquisition related items consisting of amortization of intangible assets and goodwill and intangible asset impairments, acquisition related expenses, gains and losses recognized on changes in the fair value of contingent consideration arrangements and certain accounting entries under the business combination accounting rules that require us to recognize a legal performance obligation related to revenue arrangements of an acquired entity based on its fair value at the date of acquisition.
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. These non-GAAP measures are among the primary factors management uses in planning for and forecasting future periods. Furthermore, the non-GAAP measures are regularly used internally to understand, manage and evaluate our business and make operating decisions, and we believe that they are useful to investors as a consistent and comparable measure of the ongoing performance of our business. However, 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. Additionally, these non-GAAP financial measures may differ materially from the non-GAAP financial measures used by other companies. A reconciliation between results on a GAAP and non-GAAP basis is provided in the last table of this press release.
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 companies and businesses we acquired and may acquire in the future, risks entailed in integrating the companies and businesses we acquire, including employee retention and customer acceptance; the risk that such transactions will divert management and other resources from the ongoing operations of the business or otherwise disrupt the conduct of those businesses, potential litigation associated with such transactions, and general risks associated with the business of Perion including intense and frequent 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, 2016 filed with the SEC on March 7, 2017. Perion does not assume any obligation to update these forward-looking statements.
| PERION NETWORK LTD. AND ITS SUBSIDIARIES | |||||||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS: UNAUDITED | |||||||||||
| In thousands (except share and per share data) | |||||||||||
| Three months ended | |||||||||||
| March 31, | |||||||||||
| 2016 | 2017 | ||||||||||
| Revenues: | |||||||||||
| Search and other | $ | 44,554 | $ | 37,588 | |||||||
| Advertising | 31,235 | 24,388 | |||||||||
| Total Revenues | 75,789 | 61,976 | |||||||||
| Costs and Expenses: | |||||||||||
| Cost of revenues | 4,093 | 3,509 | |||||||||
| Customer acquisition costs and media buy | 34,291 | 30,052 | |||||||||
| Research and development | 7,391 | 5,299 | |||||||||
| Selling and marketing | 16,059 | 15,010 | |||||||||
| General and administrative | 7,201 | 5,175 | |||||||||
| Depreciation and amortization | 7,339 | 4,901 | |||||||||
| Restructuring costs | 728 | - | |||||||||
| Total Costs and Expenses | 77,102 | 63,946 | |||||||||
| Loss from Operations | (1,313 | ) | (1,970 | ) | |||||||
| Financial expense, net | 3,138 | 2,184 | |||||||||
| Loss before Taxes on Income | (4,451 | ) | (4,154 | ) | |||||||
| Taxes on income | (2,428 | ) | (2,080 | ) | |||||||
| Net Loss from Continuing Operations | (2,023 | ) | (2,074 | ) | |||||||
| Net Loss from discontinued operations | (3,585 | ) | - | ||||||||
| Net Loss | $ | (5,608 | ) | $ | (2,074 | ) | |||||
| Net Earnings (Loss) per Share - Basic and Diluted: | |||||||||||
| Continuing operations | $ | (0.02 | ) | $ | (0.03 | ) | |||||
| Discontinued operations | $ | (0.05 | ) | $ | - | ||||||
| Weighted average number of shares continuing and discontinued | |||||||||||
| Basic and Diluted | 76,169,607 | 77,486,996 | |||||||||
| PERION NETWORK LTD. AND ITS SUBSIDIARIES | ||||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS: UNAUDITED | ||||||||
| In thousands | ||||||||
| December 31, | March 31, | |||||||
| 2016 | 2017 | |||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash and cash equivalents | $ | 23,962 | $ | 22,809 | ||||
| Short-term bank deposit | 8,414 | - | ||||||
| Accounts receivable, net | 71,346 | 55,494 | ||||||
| Prepaid expenses and other current assets | 10,036 | 12,761 | ||||||
| Total Current Assets | 113,758 | 91,064 | ||||||
| Property and equipment, net | 14,205 | 14,748 | ||||||
| Goodwill and intangible assets, net | 234,755 | 230,744 | ||||||
| Deferred taxes | 4,117 | 4,004 | ||||||
| Other assets | 1,617 | 1,476 | ||||||
| Total Assets | $ | 368,452 | $ | 342,036 | ||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | 38,293 | $ | 31,521 | ||||
| Accrued expenses and other liabilities | 17,466 | 15,066 | ||||||
| Short-term loans and current maturities of long-term and convertible debt | 17,944 | 11,799 | ||||||
| Deferred revenues | 5,354 | 5,126 | ||||||
| Payment obligation related to acquisitions | 7,653 | 7,683 | ||||||
| Total Current Liabilities | 86,710 | 71,195 | ||||||
| Long-Term Liabilities: | ||||||||
| Long-term debt, net of current maturities | 37,928 | 36,792 | ||||||
| Convertible debt, net of current maturities | 21,862 | 16,039 | ||||||
| Deferred taxes | 8,087 | 5,343 | ||||||
| Other long-term liabilities | 5,721 | 5,682 | ||||||
| Total Liabilities | 160,308 | 135,051 | ||||||
| Shareholders' equity: | ||||||||
| Ordinary shares | 210 | 211 | ||||||
| Additional paid-in capital | 234,831 | 235,397 | ||||||
| Treasury shares at cost | (1,002 | ) | (1,002 | ) | ||||
| Accumulated other comprehensive loss | (265 | ) | 83 | |||||
| Accumulated deficit | (25,630 | ) | (27,704 | ) | ||||
| Total Shareholders' Equity | 208,144 | 206,985 | ||||||
| Total Liabilities and Shareholders' Equity | $ | 368,452 | $ | 342,036 | ||||
| PERION NETWORK LTD. AND ITS SUBSIDIARIES | ||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS: UNAUDITED | ||||||||
| In thousands | ||||||||
| Three months ended March 31, | ||||||||
| 2016 | 2017 | |||||||
| Operating activities: | ||||||||
| Net Loss | $ | (5,608 | ) | $ | (2,074 | ) | ||
| Loss from discontinued operations, net | (3,585 | ) | - | |||||
| Net Loss from Continuing Operations | (2,023 | ) | (2,074 | ) | ||||
| Adjustments required to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 7,339 | 4,901 | ||||||
| Stock based compensation expense | 1,858 | 558 | ||||||
| Foreign currency translation | 189 | (11 | ) | |||||
| Accrued interest, net | 83 | 100 | ||||||
| Deferred taxes, net | (1,649 | ) | (2,643 | ) | ||||
| Change in payment obligation related to acquisition | 567 | 30 | ||||||
| Fair value revaluation - convertible debt | 2,319 | 2,833 | ||||||
| Net changes in operating assets and liabilities | (2,423 | ) | 4,532 | |||||
| Net cash provided by continuing operating activities | 6,260 | 8,226 | ||||||
| Net cash used in discontinued activities | (2,712 | ) | - | |||||
| Net cash provided by operating activities | $ | 3,548 | $ | 8,226 | ||||
| Investing activities: | ||||||||
| Purchases of property and equipment | $ | (481 | ) | $ | (831 | ) | ||
| Capitalization of development costs | (1,461 | ) | (970 | ) | ||||
| Short-term deposits, net | 32,061 | 8,414 | ||||||
| Net cash provided by investing activities | $ | 30,119 | $ | 6,613 | ||||
| Financing activities: | ||||||||
| Exercise of stock options and restricted share units | 1 | 1 | ||||||
| Payment made in connection with acquisition | (3,880 | ) | - | |||||
| Repayment of convertible debt | (7,620 | ) | (7,901 | ) | ||||
| Repayment of short-term loans | - | (8,137 | ) | |||||
| Repayment of long-term loans | (1,365 | ) | - | |||||
| Net cash used in financing activities | $ | (12,864 | ) | $ | (16,037 | ) | ||
| Effect of exchange rate changes on cash and cash equivalents | 53 | 45 | ||||||
| Net increase (decrease) in cash and cash equivalents | 23,568 | (1,153 | ) | |||||
| Net cash used in discontinued activities | (2,712 | ) | - | |||||
| Cash and cash equivalents at beginning of year | 17,519 | 23,962 | ||||||
| Cash and cash equivalents at end of year | $ | 38,375 | $ | 22,809 | ||||
| PERION NETWORK LTD. AND ITS SUBSIDIARIES | |||||||||||
| RECONCILIATION OF GAAP TO NON-GAAP RESULTS: UNAUDITED | |||||||||||
| In thousands (except share and per share data) | |||||||||||
| Three months ended | |||||||||||
| March 31, | |||||||||||
| 2016 | 2017 | ||||||||||
| GAAP Net Loss from Continuing Operations | $ | (2,023 | ) | $ | (2,074 | ) | |||||
| Acquisition related expenses | 179 | - | |||||||||
| Share based compensation | 1,858 | 558 | |||||||||
| Amortization of acquired intangible assets | 6,445 | 4,052 | |||||||||
| Restructuring costs | 728 | - | |||||||||
| Fair value revaluation of convertible debt and related derivative | 839 | 1,431 | |||||||||
| Accretion of payment obligation related to acquisition | 567 | 30 | |||||||||
| Taxes related to amortization of acquired intangible assets | (1,920 | ) | (1,243 | ) | |||||||
| Non-GAAP Net Income from Continuing Operations | $ | 6,673 | $ | 2,754 | |||||||
| Non-GAAP Net Income from Continuing Operations | $ | 6,673 | $ | 2,754 | |||||||
| Taxes on income | (508 | ) | (837 | ) | |||||||
| Financial expense, net | 1,732 | 723 | |||||||||
| Depreciation | 894 | 849 | |||||||||
| Adjusted EBITDA | $ | 8,791 | $ | 3,489 | |||||||
| Non-GAAP diluted earnings per share | $ | 0.09 | $ | 0.04 | |||||||
| Shares used in computing non-GAAP diluted earnings per share | 76,207,450 | 77,930,738 | |||||||||