Perion Network Ltd. (NASDAQ: PERI) announced today its financial results
for the third quarter and nine months ended September 30, 2014.
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Financial Highlights*
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(U.S. dollars in thousands, except for per share data)
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Three months ended September 30,
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Nine months ended September 30,
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2013
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2014
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2013
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2014
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Non-GAAP Revenues
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$
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81,568
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$
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87,377
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$
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242,927
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$
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315,548
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Non-GAAP Net Income
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$
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6,111
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$
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26,647
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$
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43,270
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$
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81,639
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Adjusted EBITDA
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$
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12,652
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$
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33,945
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$
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57,226
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$
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101,109
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Non-GAAP Diluted earnings per share
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$
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0.11
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$
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0.38
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$
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0.78
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$
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1.18
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GAAP Net Income (loss)
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$
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(9,815
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$
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16,996
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$
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22,222
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$
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48,499
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GAAP Diluted earnings per share
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$
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0.06
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$
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0.24
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$
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0.92
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$
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0.69
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GAAP Cash Flow from operations
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$
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68,866
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$
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47,229
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* Reconciliation of GAAP to Non-GAAP measures can be found in the
last table.
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Josef Mandelbaum, Perion’s CEO, commented: “I am pleased with our third
quarter results, as we delivered revenue and profits in line with our
expectations and guidance. As we mentioned last quarter, we took
decisive actions ahead of time and lowered our marketing spend to
proactively deal with the persistent industry headwinds. In addition, we
implemented a reorganization of our search business, which included a
head count reduction as well as other cost saving measures. These
actions will align costs with the expected lower level of future search
revenues.”
Mr. Mandelbaum continued, “We remain confident in our strategy, and will
use our strong cash position and continued positive cash flow to focus
on being the best in class in two main activities: monetization
solutions for developers and mobile marketing solutions for advertisers.
In regards to our mobile efforts, we have made considerable progress and
are excited to announce the launch of our GrowMobile self-service
platform next week in London. GrowMobile Self-Serve is the first
cross-network mobile advertising platform, offering a centralized system
for buying media across hundreds of traffic sources. In addition, we are
developing new monetization products beyond search around activities
like PC2Mobile app monetization and targeted advertising for publishers.
We believe these investments will enable us to emerge a stronger
company, with a unique value proposition to publishers and advertisers.”
In accordance with generally accepted accounting principles (“GAAP”),
the acquisition of ClientConnect by Perion, which closed on January 2,
2014, is accounted for as a reverse acquisition. Therefore, Perion is
comparing its results to the results of ClientConnect in 2013. The year
over year growth described below is attributable to a great extent to
the fact that Perion's 2013 results are not included in the results of
ClientConnect in 2013.
Non-GAAP Financial Comparison for the third Quarter of 2014:
Revenues: In the third quarter of 2014, revenues were
$87.4 million, increasing 7% compared to ClientConnect's revenues of
$81.6 million in the third quarter of 2013. Non-GAAP revenues in the
third quarter of 2014 include $1.1 million of deferred product revenues,
which in accordance with GAAP were recorded at fair value on the
acquisition date. In the third quarter of 2013, non-GAAP revenues
included $0.6 million of revenues which in the GAAP report were
associated with discontinued operations.
Customer Acquisition Costs (“CAC”): In the third quarter of 2014,
Perion decreased its investment in CAC to $30.0 million, representing
34% of revenues, compared to $49.8 million, or 61% of revenues in the
third quarter of 2013 by ClientConnect.
Costs and Expenses: Excluding CAC, costs and expenses in the
third quarter of 2014 were $24.1 million, or 28% of revenues, compared
to $21.7 million, or 27% of revenues, at ClientConnect in the third
quarter of 2013. Non-GAAP costs and expenses in the third quarter of
2014 excluded $4.8 million amortization of acquired intangible assets,
$4.4 million of share based compensation expenses and $1.0 million of
acquisition related expenses, all of which were included in the GAAP
numbers. In the third quarter of 2013, non-GAAP costs and expenses
excluded $4.1 million of share based compensation expenses and included
activities of $11.5 million which in the GAAP report were associated
with discontinued operations and excluded from costs and expenses.
Adjusted EBITDA: In the third quarter of 2014, adjusted EBITDA
was $33.9 million, or 39% of revenues, a 168% increase compared to
$12.7 million at ClientConnect in the same quarter last year.
Net Income: In the third quarter of 2014, net income was
$26.6 million, or 30% of revenues, compared to $6.1 million, or 7% of
revenue at ClientConnect in the third quarter of 2013.
Non-GAAP Financial Comparison for the Nine Months ended September 30,
2014:
Revenues: In the first nine months of 2014 revenues were
$315.5 million, increasing 30% compared to ClientConnect's revenues of
$242.9 million in the first nine months of 2013. Non-GAAP revenues in
the first nine months of 2014 include $4.9 million of deferred product
revenues, which in accordance with GAAP were recorded at fair value on
the acquisition date. In the first nine months of 2013, non-GAAP
revenues included $1.5 million of revenue which in the GAAP report was
associated with discontinued operations.
Customer Acquisition Costs (“CAC”): In the first nine months of
2014, Perion increased its investment in CAC to $145.5 million,
representing 46% of revenues, compared to ClientConnect's $131.7 million
in first the nine months of 2013.
Costs and Expenses: Excluding CAC, costs and expenses in the
first nine months of 2014 were $70.8 million, or 22% of revenues,
compared to $58.0 million, or 24% of revenues, at ClientConnect in the
first nine months of 2013. Non-GAAP costs and expenses in the first nine
months of 2014 excluded $13.8 million amortization of acquired
intangible assets, $12.7 million of share based compensation expenses
and $4.4 million of acquisition related expenses, all of which were
included in the GAAP numbers. In the first nine months of 2013, non-GAAP
costs and expenses excluded $9.2 million of share based compensation
expenses and included activities of $28.7 million which in the GAAP
report were associated with discontinued operations.
Adjusted EBITDA: In the first nine months of 2014, adjusted
EBITDA increased by 77%, to $101.1 million, or 32% of revenues, compared
to $57.2 million, or 24% of revenues at ClientConnect in the same period
last year.
Net Income: In the first nine months of 2014, net income was
$81.6 million, or 26% of revenues, increasing 89% from $43.3 million at
ClientConnect in the first nine months of 2013.
Cash and Cash Flow from Operations:
GAAP Cash Flow: As of September 30, 2014, cash and cash
equivalents were $96.9 million. Included in this balance is $37.3
million of net proceeds raised in September 2014 from a public offering
in Israel of its 5% Series L Convertible Bonds, due 2020. Perion
currently satisfies all of the financial covenants associated with the
bonds. Cash flow from operations in the first nine months of 2014 was
$47.2 million.
2014 Financial Outlook:
The following forward looking statements reflect management’s
expectations as of November 6, 2014:
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Reaffirmed non-GAAP Revenue will be in the range of $380 million to
$400 million, as previously announced.
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Raised adjusted EBITDA, now expected to be in the range of $115
million to $120 million.
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Raised non-GAAP Net Income, now expected to be in the range of $90
million to $95 million.
Conference Call
Perion will host a conference call to discuss the results today,
November 6, 2014 at 10 a.m. ET. Details are as follows:
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Conference ID: 6100298
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Dial-in number from within the United States: 1-888-539-3612
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Dial-in number from Israel: 1-809-245-906
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Dial-in number (other international): 1-719-325-2393
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Playback available until November 13, 2014 by calling 1-877-870-5176
(in the U.S.) or 1-858-384-5517 (international). Please use pin number
6100298 for the replay.
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A live webcast is accessible at http://www.perion.com/events-presentations.
About Perion Network Ltd.
Perion powers innovation. We are a global performance-based media and
Internet company, providing online publishers and app developers
advanced technology and a variety of intelligent, data-driven solutions
to monetize their applications and content and expand their reach to
larger audiences, based on our own experience as an app developer. Our
leading software monetization platform, Perion Codefuel, empowers
digital businesses to optimize installs, analyze data and maximize
revenue. Our app promotion platform, GrowMobile, enables developers to
make wise decisions on where to spend advertising budgets to produce the
highest yield and the most visibility. The Perion team brings decades of
experience, operating and investing in digitally-enabled businesses, and
we continue to innovate and create value for the app ecosystem. More
information about Perion may be found at www.perion.com.
Follow Perion on Twitter @perionnetwork.
Non-GAAP measures
Non-GAAP financial measures, as well as adjusted EBITDA, consist of GAAP
financial measures adjusted to include the results of discontinued
operations, and to exclude acquisition related expenses, share-based
compensation expenses, amortization of acquired intangible assets and
non-recurring tax expenses, as well as certain accounting entries that
are required under the business combination accounting rules. 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 immediately following the Summary of Non-GAAP Financial Results.
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 the ClientConnect
transaction; risks entailed in integrating the ClientConnect 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 business of Perion and with the ClientConnect
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 for the year ended December 31, 2013 and the
report on Form 6-K filed with the SEC on September 23, 2014. Perion does
not assume any obligation to update these forward-looking statements.
Source: Perion Network Ltd.
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PERION NETWORK LTD.
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GAAP FINANCIAL STATEMENTS
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CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
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U.S. dollars and number of shares in thousands (except per share
data)
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Three months ended September 30,
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Nine months ended September 30,
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2013
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2014
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2013
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2014
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Revenues:
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Search
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$
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68,899
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$
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73,310
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$
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206,162
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$
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262,656
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Advertising and other
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12,030
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12,975
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35,217
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47,987
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Total revenues
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80,929
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86,285
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241,379
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310,643
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Costs and expenses:
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Cost of revenues
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1,464
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7,527
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4,418
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20,490
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Customer acquisition costs
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49,752
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30,006
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131,727
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145,548
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Research and development
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5,530
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10,873
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15,773
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34,832
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Selling and marketing
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2,349
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7,617
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7,297
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18,126
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General and administrative
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4,920
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8,237
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10,973
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28,192
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Total costs and expenses
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64,015
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64,260
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170,188
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247,188
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Income from operations
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16,914
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22,025
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71,191
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63,455
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Financial income (expense), net
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602
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(1,039
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2,014
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(1,906
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Income before taxes on income
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17,516
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20,986
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73,205
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61,549
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Taxes on income
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13,920
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3,990
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22,671
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13,050
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Net income from continuing operations
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3,596
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16,996
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50,534
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48,499
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Net loss from discontinued operations
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(13,411
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)
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-
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(28,312
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)
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-
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Net income (loss)
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$
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(9,815
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)
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$
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16,996
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$
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22,222
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$
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48,499
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Net income (loss) per share - basic:
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Continuing operations
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$
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0.07
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$
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0.25
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$
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0.94
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$
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0.71
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Discontinued operations
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$
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(0.25
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)
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$
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-
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$
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(0.53
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)
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$
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-
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Net income (loss) per share - diluted:
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Continuing operations
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$
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0.06
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$
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0.24
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$
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0.92
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$
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0.69
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Discontinued operations
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$
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(0.25
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)
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$
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-
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$
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(0.53
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)
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$
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-
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Number of shares - basic:
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Continuing and discontinued operations
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53,909
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69,002
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53,907
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67,893
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Number of shares - diluted:
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Continuing operations
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55,562
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69,449
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54,991
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69,185
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Discontinued operations
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53,909
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-
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53,907
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-
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PERION NETWORK LTD.
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GAAP FINANCIAL STATEMENTS
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CONDENSED CONSOLIDATED BALANCE SHEETS
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U.S. dollars in thousands
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|
December 31, 2013
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September 30, 2014
|
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Audited
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Unaudited
|
ASSETS:
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Current Assets:
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Cash and cash equivalents
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$
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949
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$
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96,934
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Restricted cash
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-
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1,650
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Accounts receivable, net
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-
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34,250
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Other current assets
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400
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|
|
7,345
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Total current assets
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1,349
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140,179
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Property and equipment, net
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2,189
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11,367
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Goodwill and intangible assets, net
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27,520
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208,027
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Other assets
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-
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2,401
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Total assets
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$
|
31,058
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$
|
361,974
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LIABILITIES AND STOCKHOLDERS' EQUITY:
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Current Liabilities:
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|
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Accounts payable
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|
$
|
13,358
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$
|
24,982
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Accrued expenses and other liabilities
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|
|
1,423
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|
|
|
17,809
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Current maturities of long term debt
|
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|
-
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|
|
|
2,300
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Deferred revenues
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|
|
6,250
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|
7,090
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Payment obligation related to acquisitions
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|
|
-
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|
10,191
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Total current liabilities
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|
|
21,031
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|
|
|
62,372
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Long-term debt
|
|
|
-
|
|
|
|
2,525
|
|
Long-term convertible debt
|
|
|
-
|
|
|
|
37,279
|
|
Long-Term payment obligation related to acquisition
|
|
|
-
|
|
|
|
4,734
|
|
Other long-term liabilities
|
|
|
-
|
|
|
|
6,080
|
Total liabilities
|
|
|
21,031
|
|
|
|
112,990
|
|
|
|
|
|
|
|
|
|
Stockholders' equity:
|
|
|
|
|
|
|
|
|
Common stock and additional paid-in capital
|
|
|
10,027
|
|
|
|
200,485
|
|
Retained earnings
|
|
|
-
|
|
|
|
48,499
|
Total stockholders' equity:
|
|
|
10,027
|
|
|
|
248,984
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders' equity
|
|
$
|
31,058
|
|
|
$
|
361,974
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PERION NETWORK LTD.
|
GAAP FINANCIAL STATEMENTS
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
|
U.S. dollars in thousands
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30,
|
|
|
|
|
|
2013
|
|
|
|
2014
|
|
|
Operating activities:
|
|
|
|
|
|
|
|
Net income
|
|
$
|
22,222
|
|
|
$
|
48,499
|
|
|
|
Loss from discontinued operations, net
|
|
|
(28,312
|
)
|
|
|
-
|
|
|
Net income from continuing operations
|
|
|
50,534
|
|
|
|
48,499
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments required to reconcile net income to net cash
|
|
|
|
|
|
|
|
provided by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
1,536
|
|
|
|
15,641
|
|
|
|
Share based compensation
|
|
|
6,856
|
|
|
|
12,679
|
|
|
|
Acquisition related expenses paid by shareholders
|
|
|
-
|
|
|
|
3,060
|
|
|
|
Accrued interest, net
|
|
|
1,284
|
|
|
|
143
|
|
|
|
Accretion of payment obligation related to acquisition
|
|
|
-
|
|
|
|
958
|
|
|
|
Fair value revaluation of convertible debt
|
|
|
-
|
|
|
|
(584
|
)
|
|
|
Capital loss from sale of property and equipment
|
|
|
-
|
|
|
|
104
|
|
|
|
Deferred income taxes
|
|
|
(69
|
)
|
|
|
(3,889
|
)
|
|
|
Changes in assets and liabilities
|
|
|
27,584
|
|
|
|
(29,382
|
)
|
|
Net cash provided by continuing operating activities
|
|
|
87,725
|
|
|
|
47,229
|
|
|
Net cash used in discontinued operations
|
|
|
(18,859
|
)
|
|
|
-
|
|
|
Net cash provided by operating activities
|
|
|
68,866
|
|
|
|
47,229
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
(1,226
|
)
|
|
|
(4,930
|
)
|
|
|
Restricted cash
|
|
|
-
|
|
|
|
435
|
|
|
|
Investments in short-term bank deposits
|
|
|
(75,749
|
)
|
|
|
-
|
|
|
|
Cash used for the acquisition of Grow Mobile LLC
|
|
|
-
|
|
|
|
(4,322
|
)
|
|
|
Cash acquired through acquisition of Perion Network Ltd.
|
|
|
-
|
|
|
|
23,364
|
|
|
Net cash provided by (used in) continuing operations
|
|
|
(76,975
|
)
|
|
|
14,547
|
|
|
Net cash provided by discontinued operations
|
|
|
922
|
|
|
|
-
|
|
|
Net cash provided by (used in) investing activities
|
|
|
(76,053
|
)
|
|
|
14,547
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from exercise of employee options
|
|
|
68
|
|
|
|
1,576
|
|
|
|
Contribution by shareholders
|
|
|
-
|
|
|
|
585
|
|
|
|
Deferred payment made in connection with acquisition
|
|
|
-
|
|
|
|
(4,079
|
)
|
|
|
Proceeds from issuance of convertible debt
|
|
|
-
|
|
|
|
37,852
|
|
|
|
Repayment of long-term loans
|
|
|
-
|
|
|
|
(1,725
|
)
|
|
Net cash provided by financing activities
|
|
|
68
|
|
|
|
34,209
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
(7,119
|
)
|
|
|
95,985
|
|
|
Decrease in cash and cash equivalents - discontinued operations
|
|
|
1,699
|
|
|
|
-
|
|
|
Cash and cash equivalents at beginning of period
|
|
|
78,395
|
|
|
|
949
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
72,975
|
|
|
$
|
96,934
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PERION NETWORK LTD.
|
RECONCILIATION OF GAAP TO NON-GAAP RESULTS (UNAUDITED)
|
U.S. dollars and number of shares in thousands (except per share
data)
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30,
|
|
|
Nine months ended September 30,
|
|
|
|
2013
|
|
|
|
2014
|
|
|
|
2013
|
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP revenues
|
|
$
|
80,929
|
|
|
$
|
86,285
|
|
|
$
|
241,379
|
|
|
$
|
310,643
|
|
Revenues from discontinued operations
|
|
|
639
|
|
|
|
-
|
|
|
|
1,548
|
|
|
|
-
|
|
Valuation adjustment on acquired deferred product revenues
|
|
|
-
|
|
|
|
1,092
|
|
|
|
-
|
|
|
|
4,905
|
|
Non-GAAP revenues
|
|
$
|
81,568
|
|
|
$
|
87,377
|
|
|
$
|
242,927
|
|
|
$
|
315,548
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP costs and expenses
|
|
$
|
64,015
|
|
|
$
|
64,260
|
|
|
$
|
170,188
|
|
|
$
|
247,188
|
|
Acquisition related expenses
|
|
|
-
|
|
|
|
(1,010
|
)
|
|
|
-
|
|
|
|
(4,429
|
)
|
Discontinued operations operating expenses
|
|
|
11,492
|
|
|
|
-
|
|
|
|
28,736
|
|
|
|
-
|
|
Share based compensation
|
|
|
(4,088
|
)
|
|
|
(4,370
|
)
|
|
|
(9,210
|
)
|
|
|
(12,679
|
)
|
Amortization of acquired intangible assets
|
|
|
-
|
|
|
|
(4,769
|
)
|
|
|
-
|
|
|
|
(13,770
|
)
|
Non-GAAP costs and expenses
|
|
$
|
71,419
|
|
|
$
|
54,111
|
|
|
$
|
189,714
|
|
|
$
|
216,310
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net income (loss)
|
|
$
|
(9,815
|
)
|
|
$
|
16,996
|
|
|
$
|
22,222
|
|
|
$
|
48,499
|
|
Valuation adjustment on acquired deferred product revenues
|
|
|
-
|
|
|
|
1,092
|
|
|
|
-
|
|
|
|
4,905
|
|
Acquisition related expenses
|
|
|
-
|
|
|
|
1,010
|
|
|
|
-
|
|
|
|
4,429
|
|
Share based compensation
|
|
|
4,088
|
|
|
|
4,370
|
|
|
|
9,210
|
|
|
|
12,679
|
|
Amortization of acquired intangible assets
|
|
|
-
|
|
|
|
4,769
|
|
|
|
-
|
|
|
|
13,770
|
|
Fair value revaluation - convertible note
|
|
|
-
|
|
|
|
(584
|
)
|
|
|
-
|
|
|
|
(584
|
)
|
Non-recurring tax expense
|
|
|
11,838
|
|
|
|
-
|
|
|
|
11,838
|
|
|
|
-
|
|
Accretion of payment obligation related to acquisitions
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
452
|
|
Taxes related to amortization of acquired intangible assets and
share based compensation
|
|
|
-
|
|
|
|
(1,006
|
)
|
|
|
-
|
|
|
|
(2,511
|
)
|
Non-GAAP net income
|
|
$
|
6,111
|
|
|
$
|
26,647
|
|
|
$
|
43,270
|
|
|
$
|
81,639
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP net income
|
|
$
|
6,111
|
|
|
$
|
26,647
|
|
|
$
|
43,270
|
|
|
$
|
81,639
|
|
Income tax expense
|
|
|
2,082
|
|
|
|
4,996
|
|
|
|
10,833
|
|
|
|
15,561
|
|
Financial (income) expense, net
|
|
|
(602
|
)
|
|
|
1,623
|
|
|
|
(2,014
|
)
|
|
|
2,038
|
|
Depreciation
|
|
|
2,504
|
|
|
|
679
|
|
|
|
4,014
|
|
|
|
1,871
|
|
Discontinued financial income, net
|
|
|
(24
|
)
|
|
|
-
|
|
|
|
(107
|
)
|
|
|
-
|
|
Discontinued tax expense
|
|
|
2,581
|
|
|
|
-
|
|
|
|
1,230
|
|
|
|
-
|
|
Adjusted EBITDA
|
|
$
|
12,652
|
|
|
$
|
33,945
|
|
|
$
|
57,226
|
|
|
$
|
101,109
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP diluted earnings per share
|
|
$
|
0.11
|
|
|
$
|
0.38
|
|
|
$
|
0.79
|
|
|
$
|
1.18
|
|
Shares used in computing non-GAAP diluted earnings per share
|
|
|
55,562
|
|
|
|
69,449
|
|
|
|
54,991
|
|
|
|
69,185
|
|
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