Perion Reports EPS of $0.11 for the Second Quarter of 2019

  • Revenues of $63.6 million, increased 1% year-over-year, representing the first quarter of growth in the last three years;
  • GAAP Net Income of $2.9 million, increased 194% year-over-year;
  • GAAP Earnings Per Share of $0.11, increased 267% year-over-year;
  • Net cash provided from operations were $8.4 million, up 194% year-over-year;
  • Net cash Increased from $2.7 million to $21.3 million in the last 6 months;
  • Management Increases 2019 Adjusted EBIDTA Guidance to $25-27 million.

TEL AVIV & NEW YORK--()--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 second quarter and six months ended June 30, 2019.

Financial Highlights*

(In millions, except per share data)

 

Three months ended

 

 

Six months ended

 

 

June 30,

 

 

June 30,

 

 

2019

 

2018

 

 

2019

 

2018

 

Advertising revenues

$

21.3

 

$

33.2

 

 

$

39.9

 

$

62.5

 

Search and other revenues

$

42.3

 

$

29.6

 

 

$

77.5

 

$

61.2

 

Total Revenues

$

63.6

 

$

62.8

 

 

$

117.4

 

$

123.7

 

GAAP Net Income

$

2.9

 

$

1.0

 

 

$

4.1

 

$

1.0

 

Non-GAAP Net Income

$

4.5

 

$

4.7

 

 

$

7.8

 

$

7.7

 

Adjusted EBITDA

$

7.4

 

$

7.1

 

 

$

12.6

 

$

11.4

 

Net cash provided by operating activities

$

8.4

 

$

2.9

 

 

$

22.4

 

$

17.5

 

GAAP Diluted Earnings Per Share

$

0.11

 

$

0.03

 

 

$

0.16

 

$

0.04

 

Non-GAAP Diluted Earnings Per Share

$

0.17

 

$

0.17

 

 

$

0.30

 

$

0.28

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

* Reconciliation of GAAP to Non-GAAP measures follows.

Doron Gerstel, Perion’s CEO commented, “Perion continued to bolster its position as an innovative digital advertising company with an increasingly strong balance sheet. Operationally, Perion’s media-spanning suite enables us to benefit from evolving trends in the digital advertising sector. Brands and agencies are operating in a fluid environment, shifting dollars between search, social and display, based on a combination of their own evolving objectives and strategies as well as external factors, including regulatory pressures and other policies. Perion is well-positioned to capitalize on these changes, which is reflected by our quarterly consolidated revenue growth and our decision to increase our guidance for the second time in 2019.”

Mr. Gerstel added, “During the first six months of 2019, we generated $22.4 million in cash from operations, a 28% year-over-year increase from the first half of 2018. As a result, Perion’s net cash was $21.3 million as of June 30, the highest level in three and a half years. This was the fourth consecutive quarter of sequential growth for our Search business, and our third consecutive quarter of year-over-year growth, demonstrating our capability to bend the revenue curve driven by our deep technology investments.”

Mr. Gerstel concluded, “Simultaneously, our ongoing investments in Undertone continue to resonate, as agencies and brands are increasingly recognizing the value of our Synchronized Digital Branding solution. We remain focused on expanding margins and delivering predictable revenues in our Advertising business, this initiative has resulted in an 8% increase in the margins of this business. I continue to be encouraged by our ability to flex where advertising dollars go – including CTV. Our recently announced partnership with Alphonso opens synchronization opportunities in the CTV segment. In just a month, we have already generated 28 Requests for Proposals, incorporating digital TV reach into our Synchronized Digital Branding adverting solution, growing our pipeline by $5 million.”

Financial Comparison for the Second Quarter of 2019:

Revenues: Revenues increased by 1%, from $62.8 million in the second quarter of 2018 to $63.6 million in the second 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 searches. Advertising revenues decreased by 36% as a result of the transition from selling formats to an integrated solution. However, despite a decline in revenues, Perion’s gross margin in the Advertising business increased year over year as the Company continued to prioritize margins over short-term sales.

Customer Acquisition Costs and Media Buy (“CAC”): CAC in the second quarter of 2019 were $33.2 million, or 52% of revenues, as compared to $31.1 million, or 50% of revenues in the second quarter of 2018.

Net Income: On a GAAP basis, net income in the second quarter of 2019 was $2.9 million, as compared to a net income of $1.0 million in the second quarter of 2018.

Non-GAAP Net Income: In the second quarter of 2019, non-GAAP net income was $4.5 million, or 7% of revenues, compared to the $4.7 million, or 7% of revenues, in the second quarter of 2018. A reconciliation of GAAP to non-GAAP net income is included in this press release.

Adjusted EBITDA: In the second quarter of 2019, Adjusted EBITDA was $7.4 million, or 12% of revenues, compared to $7.1 million, or 11% of revenues, in the second quarter of 2018. A reconciliation of GAAP to Adjusted EBITDA is included in this press release.

Cash and Cash Flow from Operations: As of June 30, 2019, cash and cash equivalents and Short-term bank deposit were $42.1 million. Cash provided by operations in the second quarter of 2019 was $8.4 million, compared to $2.9 million in the second quarter of 2018.

Short-term Debt, Long-term Debt and Convertible Debt: As of June 30, 2019, total debt was $20.8 million, compared to $40.5 million at December 31, 2018.

2019 Guidance

Management increased its guidance for 2019, and now expects Adjusted EBITDA in the range of $25-27 million, up from prior guidance of $24-26 million.

Conference Call:

Perion will host a conference call to discuss the results today, August 7, 2019, at 10 a.m. ET. Details are as follows:

  • Conference ID: 6714779
  • 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 August 14, 2019 by calling 1-844-512-2921 (United States) or 1-412-317-6671 (international). Please use PIN code 6714779 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 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, 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.

CONSOLIDATED STATEMENTS OF OPERATIONS

In thousands (except share and per share data)

 

Three months ended

 

Six months ended

 

 

June 30,

 

June 30,

 

 

2019

 

2018

 

2019

 

2018

 

 

Unaudited

 

Unaudited

 

Unaudited

 

Unaudited

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

Advertising

$

21,300

 

$

33,206

 

$

39,884

 

$

62,501

 

 

Search and other

 

42,267

 

 

29,591

 

 

77,532

 

 

61,201

 

Total Revenues

 

63,567

 

 

62,797

 

 

117,416

 

 

123,702

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenues

 

6,068

 

 

5,811

 

 

11,834

 

 

11,867

 

 

Customer acquisition costs and media buy

 

33,175

 

 

31,105

 

 

60,608

 

 

62,990

 

 

Research and development

 

5,610

 

 

4,678

 

 

10,472

 

 

10,222

 

 

Selling and marketing

 

8,667

 

 

10,081

 

 

16,992

 

 

19,782

 

 

General and administrative

 

3,419

 

 

4,881

 

 

6,477

 

 

9,167

 

 

Depreciation and amortization

 

2,286

 

 

2,491

 

 

4,676

 

 

4,562

 

 

Restructuring costs

 

-

 

 

937

 

 

-

 

 

2,075

 

Total Costs and Expenses

 

59,225

 

 

59,984

 

 

111,059

 

 

120,665

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from Operations

 

4,342

 

 

2,813

 

 

6,357

 

 

3,037

 

Financial expense, net

 

989

 

 

1,199

 

 

2,314

 

 

1,806

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before Taxes on income

 

3,353

 

 

1,614

 

 

4,043

 

 

1,231

 

Taxes on income (benefit)

 

453

 

 

628

 

 

(89)

 

 

188

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income

$

2,900

 

$

986

 

$

4,132

 

$

1,043

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Earnings per Share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

0.11

 

$

0.04

 

$

0.16

 

$

0.04

 

 

Diluted

$

0.11

 

$

0.03

 

$

0.16

 

$

0.04

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

25,894,632

 

 

25,850,021

 

 

25,889,230

 

 

25,850,021

 

 

Diluted

 

25,896,520

 

 

26,420,617

 

 

25,891,306

 

 

25,852,109

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CONDENSED CONSOLIDATED BALANCE SHEETS

In thousands

 

 

June 30,

 

December 31,

 

 

2019

 

2018

 

 

Unaudited

 

Audited

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

Cash and cash equivalents

$

36,144

 

$

39,109

 

Short-term bank deposit

 

6,000

 

 

4,000

 

Accounts receivable, net

 

38,957

 

 

55,557

 

Prepaid expenses and other current assets

 

4,897

 

 

5,227

 

Total Current Assets

 

85,998

 

 

103,893

 

 

 

 

 

 

Property and equipment, net

 

13,417

 

 

15,649

Operating lease right-of-use assets

 

24,342

 

 

-

Goodwill and intangible assets, net

 

130,620

 

 

131,547

Deferred taxes

 

5,274

 

 

4,414

Other assets

 

771

 

 

943

 

 

 

 

 

 

 

Total Assets

$

260,422

 

$

256,446

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

Accounts payable

$

36,748

 

$

38,208

 

Accrued expenses and other liabilities

 

13,693

 

 

17,240

 

Short-term operating lease liability

 

3,007

 

 

-

 

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

 

8,333

 

 

16,059

 

Deferred revenues

 

3,531

 

 

3,794

 

Short-term payment obligation related to acquisitions

 

347

 

 

1,813

 

Total Current Liabilities

 

65,659

 

 

77,114

Long-Term Liabilities:

 

 

 

 

 

 

Long-term debt, net of current maturities

 

12,500

 

 

16,667

 

Convertible debt, net of current maturities

 

-

 

 

7,726

 

Long-term operating lease liability

 

22,387

 

 

-

 

Other long-term liabilities

 

5,854

 

 

6,158

Total Liabilities

 

106,400

 

 

107,665

 

 

 

 

 

 

Shareholders' equity:

 

 

 

 

 

 

Ordinary shares

 

211

 

 

211

 

Additional paid-in capital

 

240,745

 

 

239,693

 

Treasury shares at cost

 

(1,002)

 

 

(1,002)

 

Accumulated other comprehensive gain

 

199

 

 

142

 

Accumulated deficit

 

(86,131)

 

 

(90,263)

Total Shareholders' Equity

 

154,022

 

 

148,781

 

 

 

 

 

 

 

Total Liabilities and Shareholders' Equity

$

260,422

 

$

256,446

 

 

 

 

 

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

In thousands

 

Three months ended June 30,

 

Six months ended June 30,

 

2019

 

2018

 

2019

 

2018

 

Unaudited

 

Unaudited

 

Unaudited

 

Unaudited

Operating activities:

 

 

 

 

 

 

 

 

Net Income

$

2,900

 

$

986

 

$

4,132

 

$

1,043

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

2,286

 

 

2,491

 

 

4,676

 

 

4,562

 

Stock based compensation expense

 

460

 

 

865

 

 

923

 

 

1,484

 

Foreign currency translation

 

(25)

 

 

(55)

 

 

(6)

 

 

12

 

Accrued interest, net

 

(4)

 

 

95

 

 

(203)

 

 

223

 

Deferred taxes, net

 

(314)

 

 

345

 

 

(860)

 

 

(9)

 

Accrued severance pay, net

 

98

 

 

(119)

 

 

(218)

 

 

(745)

 

Fair value revaluation - convertible debt

 

(99)

 

 

(6)

 

 

600

 

 

(992)

 

Restructuring costs related to impairment of property and equipment

 

-

 

 

462

 

 

-

 

 

462

 

Net changes in operating assets and liabilities

 

3,100

 

 

(2,206)

 

 

13,346

 

 

11,414

Net cash provided by operating activities

$

8,402

 

$

2,858

 

$

22,390

 

$

17,454

Investing activities:

 

 

 

 

 

 

 

 

 

 

 

 

Purchases of property and equipment

$

(114)

 

$

42

 

$

(341)

 

$

(48)

 

Capitalization of development costs

 

-

 

 

(431)

 

 

-

 

 

(1,119)

 

Short-term deposits, net

 

700

 

 

4

 

 

(2,000)

 

 

5,913

 

Cash paid in connection with acquisitions, net of cash acquired

 

(1,200)

 

 

-

 

 

(1,200)

 

 

-

Net cash provided (used) by investing activities

$

(614)

 

$

(385)

 

$

(3,541)

 

$

4,746

Financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of stock options and restricted share units

 

-

 

 

-

 

 

129

 

 

-

 

Payment made in connection with acquisition

 

-

 

 

-

 

 

(1,813)

 

 

-

 

Repayment of convertible debt

 

(7,949)

 

 

(8,167)

 

 

(15,850)

 

 

(8,167)

 

Repayment of long-term loans

 

(2,083)

 

 

(1,352)

 

 

(4,166)

 

 

(10,982)

Net cash used in financing activities

$

(10,032)

 

$

(9,519)

 

$

(21,700)

 

$

(19,149)

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

 

8

 

 

(29)

 

 

(102)

 

 

45

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

 

(2,236)

 

 

(7,075)

 

 

(2,953)

 

 

3,096

Cash and cash equivalents and restricted cash at
beginning of period

 

40,086

 

 

42,926

 

 

40,803

 

 

32,755

Cash and cash equivalents and restricted cash at end
of period

$

37,850

 

$

35,851

 

$

37,850

 

$

35,851

 

 

 

 

 

 

 

 

 

 

 

 

 

RECONCILIATION OF GAAP TO NON-GAAP RESULTS

In thousands (except share and per share data)

 

 

 

 

Three months ended

 

Six months ended

 

 

June 30,

 

June 30,

 

 

2019

 

2018

 

2019

 

2018

 

 

Unaudited

 

Unaudited

 

Unaudited

 

Unaudited

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP Net Income

$

2,900

 

$

986

 

$

4,132

 

$

1,043

 

Share based compensation

 

460

 

 

865

 

 

923

 

 

1,483

 

Amortization of acquired intangible assets

 

1,048

 

 

1,197

 

 

2,094

 

 

2,401

 

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

 

347

 

 

(9)

 

 

604

 

 

226

 

Restructuring costs

 

-

 

 

937

 

 

-

 

 

2,075

 

Fair value revaluation of convertible debt and
related derivative

 

(178)

 

 

667

 

 

89

 

 

794

 

Foreign exchange losses associated with ASC-842

 

157

 

 

-

 

 

449

 

 

-

 

Taxes on the above items

 

(227)

 

 

23

 

 

(530)

 

 

(338)

Non-GAAP Net Income

$

4,507

 

$

4,666

 

$

7,761

 

$

7,684

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP Net Income

$

4,507

 

$

4,666

 

$

7,761

 

$

7,684

 

Taxes on income

 

680

 

 

605

 

 

441

 

 

526

 

Financial expense, net

 

1,010

 

 

532

 

 

1,776

 

 

1,012

 

Depreciation

 

1,238

 

 

1,294

 

 

2,582

 

 

2,161

Adjusted EBITDA

$

7,435

 

$

7,097

 

$

12,560

 

$

11,383

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP diluted earnings per share

$

0.17

 

$

0.17

 

$

0.30

 

$

0.28

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares used in computing non-GAAP diluted
earnings per share

 

25,923,018

 

 

26,420,617

 

 

25,915,987

 

 

26,136,761

 

Contacts

Perion Network Ltd.
Investor relations
Hila Barenboim
+972 (73) 398-1000
investors@perion.com

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Contacts

Perion Network Ltd.
Investor relations
Hila Barenboim
+972 (73) 398-1000
investors@perion.com