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Perion Reports $0.11 in EPS for the Third Quarter of 2019; Generating $33.5 Million Cash from Operations Year to Date Compared to $32.8 Million for the Entire 2018

November 6, 2019

TEL AVIV & NEW YORK--(BUSINESS WIRE)--Nov 6, 2019--

Perion Network Ltd. (NASDAQ: PERI), a global technology company that delivers Synchronized Digital Branding solutions across the three main pillars of digital advertising - Ad Search, Social media and Display / Video, announced today its financial results for the third quarter and nine months ended September 30, 2019.

Financial Highlights*

(In millions, except per share data)

 

Three months ended

 

Nine months ended

 

 

September 30,

 

September 30,

 

 

2019

 

2018

 

2019

 

2018

 

Advertising revenues

$

21.6

 

$

26.2

 

$

61.4

 

$

88.7

 

Search and other revenues

$

44.2

 

$

31.0

 

$

121.8

 

$

92.2

 

Total Revenues

$

65.8

 

$

57.2

 

$

183.2

 

$

180.9

 

GAAP Net Income

$

2.9

 

$

2.2

 

$

7.0

 

$

3.2

 

Non-GAAP Net Income

$

5.0

 

$

4.3

 

$

12.8

 

$

12.0

 

Adjusted EBITDA

$

7.6

 

$

6.7

 

$

20.2

 

$

18.1

 

Net cash provided by operating activities

$

11.1

 

$

11.0

 

$

33.5

 

$

28.5

 

GAAP Diluted Earnings Per Share

$

0.11

 

$

0.08

 

$

0.27

 

$

0.13

 

Non-GAAP Diluted Earnings Per Share

$

0.18

 

$

0.16

 

$

0.49

 

$

0.44

 

 

 

 

 

 

 

 

 

 

 

 

 

 

* Reconciliation of GAAP to Non-GAAP measures follows.

Doron Gerstel, Perion’s CEO commented, “The financial results of the third quarter are a direct result of the strategic investments in technology we have made to enhance and align our offering with the needs of our customers. By providing a diverse suite of solutions that span display, search and social, Perion is uniquely positioned to capitalize on opportunities as brands and agencies shift their ad budgets holistically across different platforms and channels to maximize their digital strategy objectives. In doing so, we have achieved our second consecutive quarter of year-over-year revenue growth while leveraging our strong earnings power and robust to generate cash. Our cash position improved significantly during the third quarter amounting to $52 million a Net cash balance of $33 million providing the company with the flexibility for future growth opportunities.”

Gerstel continued, “Leveraging new capabilities and offerings in Search, we are attracting new publishers, driving an increasing number of unique searchers to Bing through our partnership with Microsoft and better optimizing the monetization of this traffic, which is driving higher earnings and cash flow to Perion.”

“In parallel, we are advancing ongoing efforts at Undertone to expand and enhance the technological capabilities of our Synchronized Digital Branding solution,” Gerstel added. “Our Synchronized Digital Branding solution is resonating with our customers because they recognize the need to deliver strategically targeted ads, across the entire consumer journey across multiple channels and platforms. We are offering AI-optimized tools and workflow management to make this possible. Our development efforts to scale this offering are progressing as planned, and we remain on track to formally launch a full, new product suite in the first half of next year.”

Financial Comparison for the Third Quarter of 2019:

Revenues: Revenues increased by 15%, from $57.2 million in the third quarter of 2018 to $65.8 million in the third quarter of 2019. This increase was primarily a result of a 43% increase in Search and other revenues as a result of additional new publishers, higher RPMs and an increased number of unique searches. Advertising revenues decreased by 18% as a result of the continuing transition from selling formats to an integrated solution, Perion’s gross margin in the Advertising business continues to grow year over year as the Company continued to prioritize margins over short-term sales.

Customer Acquisition Costs and Media Buy (“CAC”): CAC in the third quarter of 2019 were $34.2 million, or 52% of revenues, as compared to $28.8 million, or 50% of revenues in the third quarter of 2018.

Net Income: On a GAAP basis, net income in the third quarter of 2019 was $2.9 million, as compared to a net income of $2.2 million in the third quarter of 2018.

Non-GAAP Net Income: In the third quarter of 2019, non-GAAP net income was $5.0 million, or 8% of revenues, compared to the $4.3 million, or 8% of revenues, in the third quarter of 2018. A reconciliation of GAAP to non-GAAP net income is included in this press release.

Adjusted EBITDA: In the third quarter of 2019, Adjusted EBITDA was $7.6 million, or 12% of revenues, compared to $6.7 million, or 12% of revenues, in the third quarter of 2018. A reconciliation of GAAP to Adjusted EBITDA is included in this press release.

Cash and Cash Flow from Operations: As of September 30, 2019, cash and cash equivalents and Short-term bank deposit were $52.0 million. Cash provided by operations in the third quarter of 2019 was $11.1 million, compared to $11.0 million in the third quarter of 2018.

Short-term Debt, Long-term Debt and Convertible Debt: As of September 30, 2019, total debt was $18.8 million, compared to $40.5 million at December 31, 2018.

2019 Guidance

Management is reaffirming its full-year guidance for Adjusted EBITDA of $25-27 million and now expects to reach or exceed the top end of the range.

Conference Call:

Perion will host a conference call to discuss the results today, November 6, 2019, at 8:30 a.m. ET. Details are as follows:

About Perion Network Ltd.

Perion is a global technology company that provides agencies, brands and publishers with innovative solutions that cover the three pillars of digital advertising. From its data-driven Synchronized Digital Branding platform and high-impact ad formats in the display domain; to its powerful social media platform; to its branded search network, Perion is well-positioned to capitalize on any changes in marketers’ allocation of digital advertising spend. More information about Perion can be found at www.perion.com.

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, impairment of goodwill, amortization and impairment of acquired intangible assets and the related taxes thereon, non-recurring expenses, foreign exchange gains (losses) associated with ASC-842, 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 Perion with the Securities and Exchange Commission from time to time, including its annual report on Form 20-F for the year ended December 31, 2018 filed with the SEC on March 19, 2019. Perion does not assume any obligation to update these forward-looking statements.

Source: Perion Network Ltd.

 

PERION NETWORK LTD. AND ITS SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF OPERATIONS

In thousands (except share and per share data)
 

 

Three months ended

 

Nine months ended

 

 

September 30,

 

September 30,

 

 

2019

 

2018

 

2019

 

2018

 

 

Unaudited

 

Unaudited

 

Unaudited

 

Unaudited

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

Advertising

$

21,552

 

$

26,224

 

$

61,436

 

$

88,725

 

 

Search and other

 

44,225

 

 

30,957

 

 

121,757

 

 

92,158

 

Total Revenues

 

65,777

 

 

57,181

 

 

183,193

 

 

180,883

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenues

 

6,819

 

 

5,474

 

 

18,653

 

 

17,341

 

 

Customer acquisition costs and media buy

 

34,170

 

 

28,808

 

 

94,778

 

 

91,798

 

 

Research and development

 

5,976

 

 

4,341

 

 

16,448

 

 

14,563

 

 

Selling and marketing

 

8,649

 

 

8,635

 

 

25,641

 

 

28,417

 

 

General and administrative

 

3,562

 

 

3,883

 

 

10,039

 

 

13,050

 

 

Depreciation and amortization

 

2,628

 

 

2,528

 

 

7,304

 

 

7,090

 

 

Restructuring costs

 

-

 

 

-

 

 

-

 

 

2,075

 

Total Costs and Expenses

 

61,804

 

 

53,669

 

 

172,863

 

 

174,334

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from Operations

 

3,973

 

 

3,512

 

 

10,330

 

 

6,549

 

Financial expense, net

 

419

 

 

1,236

 

 

2,733

 

 

3,042

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before Taxes on income

 

3,554

 

 

2,276

 

 

7,597

 

 

3,507

 

Taxes on income

 

680

 

 

84

 

 

591

 

 

272

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income

$

2,874

 

$

2,192

 

$

7,006

 

$

3,235

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Earnings per Share

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

0.11

 

$

0.08

 

$

0.27

 

$

0.13

 

 

Diluted

$

0.11

 

$

0.08

 

$

0.27

 

$

0.13

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

25,966,097

 

 

25,850,188

 

 

25,915,134

 

 

25,850,188

 

 

Diluted

 

26,895,407

 

 

26,420,782

 

 

26,054,203

 

 

26,516,145

 

PERION NETWORK LTD. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

In thousands

 

 

September 30,

 

December 31,

 

 

2019

 

2018

 

 

Unaudited

 

Audited

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

Cash and cash equivalents

$

35,484

 

$

39,109

 

Restricted cash

 

1,211

 

 

1,694

 

Short-term bank deposit

 

16,550

 

 

4,000

 

Accounts receivable, net

 

39,502

 

 

55,557

 

Prepaid expenses and other current assets

 

3,181

 

 

3,533

 

Total Current Assets

 

95,928

 

 

103,893

 

 

 

 

 

 

Property and equipment, net

 

12,155

 

 

15,649

Operating lease right-of-use assets

 

23,406

 

 

-

Goodwill and intangible assets, net

 

129,482

 

 

131,547

Deferred taxes

 

5,622

 

 

4,414

Other assets

 

736

 

 

943

 

 

 

 

 

 

 

Total Assets

$

267,329

 

$

256,446

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

Accounts payable

$

40,466

 

$

38,208

 

Accrued expenses and other liabilities

 

15,849

 

 

17,240

 

Short-term operating lease liability

 

3,090

 

 

-

 

Short-term loans and current maturities of long-term and Convertible debt

 

8,333

 

 

16,059

 

Deferred revenues

 

3,183

 

 

3,794

 

Short-term payment obligation related to acquisitions

 

686

 

 

1,813

 

Total Current Liabilities

 

71,607

 

 

77,114

Long-Term Liabilities:

 

 

 

 

 

 

Long-term debt, net of current maturities

 

10,417

 

 

16,667

 

Convertible debt, net of current maturities

 

-

 

 

7,726

 

Long-term operating lease liability

 

21,547

 

 

-

 

Other long-term liabilities

 

5,773

 

 

6,158

Total Liabilities

 

109,344

 

 

107,665

 

 

 

 

 

 

Shareholders' equity:

 

 

 

 

 

 

Ordinary shares

 

212

 

 

211

 

Additional paid-in capital

 

241,996

 

 

239,693

 

Treasury shares at cost

 

(1,002)

 

 

(1,002)

 

Accumulated other comprehensive gain

 

36

 

 

142

 

Accumulated deficit

 

(83,257)

 

 

(90,263)

Total Shareholders' Equity

 

157,985

 

 

148,781

 

 

 

 

 

 

 

Total Liabilities and Shareholders' Equity

$

267,329

 

$

256,446

PERION NETWORK LTD. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

In thousands

 

Three months ended
September 30,

 

Nine months ended
September 30,

 

2019

 

2018

 

2019

 

2018

 

Unaudited

 

Unaudited

 

Unaudited

 

Unaudited

Operating activities:

 

 

 

 

Net Income

$

2,874

 

$

2,192

 

$

7,006

 

$

3,235

 

 

 

 

 

 

 

 

 

 

 

 

Adjustments required to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

2,628

 

 

2,528

 

 

7,304

 

 

7,090

Stock based compensation expense

 

678

 

 

638

 

 

1,601

 

 

2,121

Foreign currency translation

 

(103)

 

 

-

 

 

(109)

 

 

12

Accrued interest, net

 

-

 

 

134

 

 

(203)

 

 

357

Deferred taxes, net

 

(363)

 

 

100

 

 

(1,223)

 

 

91

Accrued severance pay, net

 

179

 

 

(4)

 

 

(39)

 

 

(749)

Fair value revaluation - convertible debt

 

-

 

 

251

 

 

600

 

 

(741)

Restructuring costs related to impairment of property and equipment

 

-

 

 

-

 

 

-

 

 

462

Net changes in operating assets and liabilities

 

5,254

 

 

5,165

 

 

18,600

 

 

16,580

Net cash provided by operating activities

$

11,147

 

$

11,004

 

$

33,537

 

$

28,458

Investing activities:

 

 

 

 

Purchases of property and equipment

$

(248)

 

$

(1,302)

 

$

(589)

 

$

(1,350)

Capitalization of development costs

 

-

 

 

(330)

 

 

-

 

 

(1,449)

Short-term deposits, net

 

(10,550)

 

 

-

 

 

(12,550)

 

 

5,913

Cash paid in connection with acquisitions, net of cash acquired

 

-

 

 

(1,667)

 

 

(1,200)

 

 

(1,667)

Net cash provided (used) by investing activities

$

(10,798)

 

$

(3,299)

 

$

(14,339)

 

$

1,447

Financing activities:

 

 

 

Exercise of stock options and restricted share units

574

-

703

-

Payment made in connection with acquisition

 

-

 

 

-

 

 

(1,813)

 

 

-

Repayment of convertible debt

 

-

 

 

-

 

 

(15,850)

 

 

(8,167)

Repayment of long-term loans

 

(2,083)

 

 

(1,491)

 

 

(6,249)

 

 

(12,473)

Net cash used in financing activities

$

(1,509)

 

$

(1,491)

 

$

(23, 209)

 

$

(20, 640)

Effect of exchange rate changes on cash and cash equivalents and restricted cash

 

5

 

 

-

 

 

(97)

 

 

44

Net increase (decrease) in cash and cash equivalents and restricted cash

 

(1,155)

 

 

6,214

 

 

(4,108)

 

 

9,309

Cash and cash equivalents and restricted cash at beginning of period

 

37,850

 

 

35,850

 

 

40,803

 

 

32,755

Cash and cash equivalents and restricted cash at end of period

$

36,695

 

$

42,064

 

$

36,695

 

$

42,064

PERION NETWORK LTD. AND ITS SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP RESULTS

In thousands (except share and per share data)

 

 

Three months ended

 

Nine months ended

 

 

 

September 30,

 

September 30,

 

 

 

2019

 

2018

 

2019

 

2018

 

 

 

Unaudited

 

Unaudited

 

Unaudited

 

Unaudited

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP Net Income

$

2,874

 

$

2,192

 

$

7,006

 

$

3,235

 

 

Share based compensation

 

678

 

 

638

 

 

1,601

 

 

2,121

 

 

Amortization of acquired intangible assets

 

1,139

 

 

1,190

 

 

3,233

 

 

3,591

 

 

Non-recurring fees (Expenses related to M&A activity)

 

339

 

 

-

 

 

943

 

 

226

 

 

Restructuring costs

 

-

 

 

-

 

 

-

 

 

2,075

 

 

Fair value revaluation of convertible debt and related derivative

 

-

 

 

269

 

 

89

 

 

1,063

 

 

Foreign exchange losses associated with ASC-842

 

205

 

 

-

 

 

653

 

 

-

 

 

Taxes on the above items

 

(219)

 

 

25

 

 

(748)

 

 

(313)

 

Non-GAAP Net Income

$

5,016

 

$

4,314

 

$

12,777

 

$

11,998

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP Net Income

$

5,016

 

$

4,314

 

$

12,777

 

$

11,998

 

 

Taxes on income

 

899

 

 

59

 

 

1,339

 

 

585

 

Financial expense, net

 

214

 

 

967

 

 

1,991

 

 

1,979

 

 

Depreciation

 

1,489

 

 

1,338

 

 

4,071

 

 

3,499

 

Adjusted EBITDA

$

7,618

 

$

6,678

 

$

20,178

 

$

18,061

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP diluted earnings per share

$

0.18

 

$

0.16

 

$

0.49

 

$

0.44

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares used in computing non-GAAP diluted earnings per share

 

27,148,738

 

 

26,420,621

 

 

26,225,689

 

 

26,213,492

 

 

View source version on businesswire.com:https://www.businesswire.com/news/home/20191106005439/en/

CONTACT: Perion Network Ltd.

Rami Rozen, VP of Investor Relations

+972 (52) 5694441

ramir@perion.com

KEYWORD: NEW YORK UNITED STATES NORTH AMERICA ISRAEL MIDDLE EAST

INDUSTRY KEYWORD: INTERNET MARKETING ADVERTISING COMMUNICATIONS TECHNOLOGY

SOURCE: Perion Network Ltd.

Copyright Business Wire 2019.

PUB: 11/06/2019 06:00 AM/DISC: 11/06/2019 06:01 AM

http://www.businesswire.com/news/home/20191106005439/en