TEL AVIV & NEW YORK--(BUSINESS WIRE)--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:
- Conference ID: 6975750
- Dial-in number from within the United States: 1-800-239-9838
- Dial-in number from Israel: 1-809-212-883
- Dial-in number (other international): 1-323-794-2551
- Playback available until November 13, 2019 by calling 1-844-512-2921 (United States) or 1-412-317-6671 (international). Please use PIN code 6975750 for the replay.
- Link to the live webcast accessible at https://www.perion.com/ir-info/
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
|
|
Nine months ended
|
||||||||||
|
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 |
|
||
