Perion
Network Ltd. (NASDAQ: PERI), and Conduit
Ltd., a privately-held corporation, today announced an agreement to
combine Conduit’s Client Connect business (“Client Connect”) with Perion
in an all-stock transaction, establishing Perion as a significant force
in the search distribution industry.
The immediately accretive combination will create a fast-growing, “top
tier” search distribution company, generating $367 million in pro forma
non-GAAP revenue and $109 million in pro forma EBITDA for the 12 months
ended June 30, 2013. The newly combined Perion operation will represent
more than 260,000 publisher and content partners.
Josef Mandelbaum, Perion’s CEO, commented, “This is a transformational
event for our company, and a powerful combination for our employees and
shareholders. This is truly a case where one plus one equals three. Our
businesses complement each other and will enable us to increase
investment in our monetization and distribution platform, mobile
efforts, display advertising and product innovation. I am very happy to
welcome all the talented Client Connect employees to Perion and look
forward to continuing to build on the great success they have achieved
to date.”
Ronen Shilo, CEO and co-founder of Conduit, added, “We couldn’t be
happier with this combination. Perion is a thriving, public company that
shares our values of entrepreneurship and integrity. I have known Josef
for a long time, and I can think of no one better equipped to take
Client Connect forward.”
Conduit will spin off its Client Connect business, which includes its
monetization and distribution platform for publishers and developers.
Under the agreement, the spin-off company will be combined with Perion,
which upon closing will issue to Conduit shareholders between 57-60
million shares, based on Perion’s fully diluted share count at closing.
Following the closing, Perion will be owned 81% by the existing Conduit
shareholders and option holders and 19% by existing Perion shareholders
and option holders, on a fully diluted basis.
The combined organization will be led by Josef Mandelbaum, Perion’s
current Chief Executive Officer, and Yacov Kaufman, Perion’s current
Chief Financial Officer, who will continue to serve in those capacities.
Josh Wine will join Perion as President and continue to lead the Client
Connect business. Dror Erez, co-founder of Conduit, and Roy Gen,
Conduit’s CFO, will join Perion’s Board of Directors at closing.
This combination is the product of Conduit’s decision to spin off Client
Connect, its monetization business, and Perion’s growth strategy through
acquisitions. Conduit will continue to operate and invest in its high
growth emerging businesses which are not part of the transaction; they
include its U browser ecosystem and Conduit Mobile, a fast-growing DIY
app-creation platform.
Highlights of the combination include:
-
Substantially increased scale: The combined business will
represent a top-three search distribution company responsible for over
2% of searches in the U.S.
-
Strong Financials: As of June 30, 2013, non-GAAP pro forma
trailing 12-month revenue of $367 million, EBITDA of $109 million and
non-GAAP net income of $93 million.
-
Significant synergies: Shared cultures, revenue optimization
opportunities, cost efficiencies and complementary assets, including
an extensive partner network and strong media buying capabilities.
-
Accelerated Growth: With the addition of the Client Connect
business, Perion will now have the platform and resources to further
accelerate its product development as well as its distribution network.
Combined Metrics (non-GAAP)
Pro-forma Trailing 12 Months ended 6/30/13*
|
In thousands ($US)
|
Perion*
|
Client Connect*
|
Combined
|
Revenue
|
$89,700
|
$277,500
|
$367,200
|
EBITDA
|
$20,900
|
$88,500
|
$109,400
|
EBITDA margin
|
23%
|
32%
|
30%
|
Net income
|
$15,500
|
$77,000
|
$92,500
|
|
* The pro forma combined metrics are presented for informational
purposes only. They are not necessarily indicative of the results
of operations had the transaction been completed at the beginning
of the indicated period, nor are they necessarily indicative of
the future results of operations of the combined entity.
Reconciliation to GAAP unaudited numbers follows below.
|
|
Michael Eisenberg, General Partner at Benchmark Capital and an early
investor in Conduit, commented, “This is an exceptional opportunity for
shareholders of both companies. Perion’s leadership has proven its
ability to create significant value. They are now poised to become the
partner of choice for developers large and small to distribute and
monetize their innovations. I am very excited for the future.”
The transaction is scheduled to close in early January 2014, subject to
a vote of Perion’s shareholders scheduled for November 2013, as well as
customary closing conditions, tax rulings and approvals of governmental
authorities. Various lock-up provisions are in place for major
shareholders, and no single shareholder will own more than 14% of the
shares outstanding post-closing.
UBS Investment Bank acted as exclusive financial advisor and Goldfarb
Seligman and Kramer Levin Naftalis and Frankel LLP acted as legal
advisors to Perion. RBC Capital Markets provided a fairness opinion to
the Board of Directors of Perion.
Conference Call
Perion will host a conference call to discuss this combination, today,
September 16th at 11 a.m. EST (6 p.m. Israel Time). Details
are as follows:
-
Dial-in number from within the United States: 1-877-719-9796
-
Dial-in number from Israel: 180-925-8243
-
Dial-in number (other international): 1-719-325-4839
-
Playback, available until September 23, 2013 by calling 1-877-870-5176
(United States) or 1-858-384-5517 (international). Please use pin
number 8117730 for the replay.
A live webcast is accessible at http://public.viavid.com/index.php?id=106045
or at http://www.perion.com/events-presentations.
In connection with the proposed transaction, Perion will prepare a proxy
statement to be delivered to its shareholders. INVESTORS AND SECURITY
HOLDERS ARE STRONGLY ADVISED TO READ THE PROXY STATEMENT WHEN IT BECOMES
AVAILABLE, BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION. The proxy
statement and other documents may be obtained for free by directing such
request to Perion Investor Relations, telephone: +972-3-7696100 or on
the Company’s Web site at www.perion.com.
About Conduit
Conduit© provides cloud-based solutions that empower web and mobile
publishers to engage their users across multiple platforms. From
Community Toolbars and mobile apps to mobile-friendly sites and web
bars, the company’s products enable publishers to constantly connect
with their users wherever they are. Founded in 2005, Conduit has grown
in just eight short years to be one of Israel’s largest Internet
companies. Today, hundreds of thousands of publishers of all sizes
leverage the company’s innovative solutions to generate billions of
interactions with over 250 million end users. Some of Conduit’s partners
include Groupon, Fox News, Time Warner Cable, Travelocity, The Weather
Channel, and other major Internet, media, and communication brands.
About Perion Network Ltd.
Perion Network, Ltd. (NASDAQ: PERI) is a global consumer internet
company that develops applications to make the online experience of its
users simple, safe and enjoyable. Perion’s three main consumer brands
are: Incredimail, Smilebox and SweetIM. Incredimail
is a unified messaging application enabling consumers to manage multiple
email accounts and Facebook messages in one place with an easy-to-use
interface and extensive personalization features, and is available in
over 100 countries in 8 languages; Smilebox
is a leading photo sharing and social expression product and service
that quickly turn life's moments into digital keepsakes for sharing and
connecting with friends and family, in a fun and personal way. SweetIM
is an instant messaging application that enables consumers to
personalize their everyday communications with free, fun and easy to use
content. Perion products have had over 300 million downloads to date
with more than 50 million monthly unique visitors across all of its
brands. 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 http://www.perion.com.
Non-GAAP measures
Non-GAAP financial measures consist of GAAP financial measures
adjusted to exclude: certain search revenue adjustment, valuation
adjustment on acquired deferred product revenues, amortization of
acquired intangible assets, share-based compensation expenses,
acquisition related expenses, accretion of payment obligation related to
acquisitions, and taxes on amortization of acquired intangible assets.
The purpose of such adjustments is to give an indication of performance
exclusive of revenue conditions known not to continue, non-cash charges
and other items that are considered by management to be outside of core
operating results. 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 financial statements
prepared in accordance with GAAP. The management regularly uses non-GAAP
financial measures internally to understand, manage and evaluate its
business and make operating decisions. These non-GAAP measures are among
the primary factors used by the management in planning for and
forecasting future periods. Company believes these adjustments are
useful to investors as a measure of the ongoing performance of Perion
business. Company believes these non-GAAP financial measures provide
consistent and comparable measures to help investors understand Perion
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 below.
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 of any closing conditions to be satisfied and the
failure of the proposed transaction to be consummated for any other
reason, the failure to realize the anticipated benefits of the proposed
transaction; risks entailed in integrating the Client Connect business
with Perion’s other businesses, including employee retention and
customer acceptance; the risk that the transaction will divert management
and other resources from the ongoing operations of the two businesses or
otherwise disrupt the conduct of those businesses, potential litigation
associated with the transaction, and general risks associated with the
businesses of Perion and with the Client Connect business, including
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/A for the year
ended December 31, 2012. Perion does not assume any obligation to update
these forward-looking statements.
Source: Perion Network Ltd.
|
PERION NETWORK LTD.
|
RECONCILIATION OF GAAP TO NON-GAAP RESULTS
|
U.S. dollars and number of shares in thousands, unaudited
|
|
|
|
|
|
Twelve months ended June 30, 2013
|
|
|
|
|
|
GAAP revenue
|
|
|
|
$
|
89,586
|
Valuation adjustment on acquired deferred product revenues
|
|
|
|
$
|
64
|
Non-GAAP revenue
|
|
|
|
$
|
89,650
|
|
|
|
|
|
GAAP net income
|
|
|
|
$
|
6,016
|
Valuation adjustment on acquired deferred product revenues
|
|
|
|
$
|
64
|
Share based compensation
|
|
|
|
$
|
1,244
|
Acquisition related expenses
|
|
|
|
$
|
1,891
|
Amortization of acquired intangible assets
|
|
|
|
$
|
6,178
|
Accretion of payment obligation related to acquisitions
|
|
|
|
$
|
651
|
Taxes on amortization of acquired intangible assets
|
|
|
|
|
-$576
|
Non-GAAP net income
|
|
|
|
$
|
15,468
|
|
|
|
|
|
Non-GAAP net income
|
|
|
|
$
|
15,468
|
Income tax expense
|
|
|
|
$
|
3,390
|
Taxes on amortization of acquired intangible assets
|
|
|
|
$
|
576
|
Interest expense, net
|
|
|
|
$
|
779
|
Accretion of payment obligation related to acquisitions
|
|
|
|
|
-$651
|
Depreciation and amortization
|
|
|
|
$
|
1,325
|
Non-GAAP EBITDA
|
|
|
|
$
|
20,887
|
|
CONDUIT LTD’s CLIENT CONNECT OPERATIONS
|
RECONCILIATION OF PRO-FORMA GAAP TO PRO-FORMA NON-GAAP RESULTS
|
U.S. dollars and number of shares in thousands, unaudited
|
|
|
|
|
|
Twelve months ended June 30, 2013
|
|
|
|
|
|
GAAP revenue
|
|
|
|
$
|
437,735
|
Search revenue adjustment
|
|
|
|
$
|
160,234
|
Non-GAAP revenue
|
|
|
|
$
|
277,501
|
|
|
|
|
|
GAAP operating income
|
|
|
|
$
|
242,640
|
Search revenue adjustment
|
|
|
|
$
|
160,234
|
Share-based compensation
|
|
|
|
$
|
4,169
|
Non-GAAP operating income
|
|
|
|
$
|
86,575
|
|
|
|
|
|
GAAP net income
|
|
|
|
$
|
195,601
|
Operating income adjustments
|
|
|
|
$
|
156,065
|
Taxes on operating income adjustments
|
|
|
|
|
-$37,681
|
Non-GAAP net income
|
|
|
|
$
|
77,217
|
|
|
|
|
|
Non-GAAP operating income
|
|
|
|
$
|
86,575
|
Depreciation
|
|
|
|
$
|
1,973
|
Non-GAAP EBITDA
|
|
|
|
$
|
88,548
|
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