Perion Reports Fourth Quarter and Full-Year 2017 Results
Cost Reduction and Increase Efficiencies Efforts Have Yielded Improved Visibility and Optimized Performance Ahead of Schedule; Management Provides Adjusted EBITDA Guidance for 2018
Financial Highlights*
(In millions, except per share data)
Three months ended | Twelve months ended | ||||||||||
December 31, | December 31, | ||||||||||
2016 | 2017 | 2016 | 2017 | ||||||||
Search and other revenues | $ | 40.5 | $ | 34.3 | $ | 172.7 | $ | 139.5 | |||
Advertising revenues | $ | 44.1 | $ | 43.0 | $ | 140.1 | $ | 134.5 | |||
Total Revenues | $ | 84.5 | $ | 77.3 | $ | 312.8 | $ | 274.0 | |||
GAAP Net Income (Loss) | $ | 0.3 | $ | (37.3) | $ | 0.2 | $ | (72.8) | |||
Non-GAAP Net Income | $ | 6.5 | $ | 6.4 | $ | 27.7 | $ | 17.4 | |||
Adjusted EBITDA | $ | 13.5 | $ | 11.9 | $ | 45.4 | $ | 29.0 | |||
Impairment of Goodwill and Intangible assets | $ | 0.0 | $ | 41.8 | $ | 0.0 | $ | 85.7 | |||
GAAP Diluted Earnings (Loss) Per Share | $ | 0.00 | $ | (0.48) | $ | 0.00 | $ | (0.94) | |||
Non-GAAP Diluted Earnings Per Share | $ | 0.08 | $ | 0.08 | $ | 0.36 | $ | 0.24 |
*Reconciliation of GAAP to Non-GAAP measures follows.
Doron Grestel, Perion’s CEO commented, “The turnaround strategy we
implemented earlier in 2017 is taking hold, providing Perion with a
stable base for profitable growth. During the fourth quarter, we
continued to advance targeted expense reductions while reallocating
resources to support the investment in new technology. With these
investments, we have streamlined efficiencies through the automation of
our platforms and operating systems. Since I joined as CEO, Perion has
secured more than
“The industry trends driven by our Fortune 500 clients and agency
partners are clear: digital media investments must protect the safety of
their brands,” continued Mr. Gerstel. “Their need for engaging creative
in transparent, quality environments plays perfectly into Undertone’s
offering. In a recent
Mr. Gerstel added, “while advertisers look for better quality and more engaging creative, agencies are reducing the number of partners they work with. They are looking for partners like Undertone who can offer a holistic end-to-end solution for their digital ad-spend. In the past year, Undertone has expanded their digital media offering, helping brands reach consumers on the screens and platforms that matter most—with beautiful design and innovative formats in safe and quality environments.”
“On the search side we extended our agreement with Bing through 2020, serving as a meaningful signal to the search ecosystem, stability and trust,” continued Mr. Gerstel. “As a direct result, this extension encouraged new partners to join our network and this is reflected on our fourth quarter search revenue. After five consecutive quarters, we are happy to bend the curve and report quarter-over-quarter growth. We believe this trend will continue due to the strong partnership we have with Bing.”
Financial Comparison for the Fourth Quarter of 2017:
Revenues: Revenues decreased by 9%, from
Customer Acquisition Costs and Media Buy ("CAC"): CAC
in the fourth quarter of 2017 was
Impairment Charge: In the fourth quarter of 2017, the company
recorded a non-cash impairment charge of
Net Income: On a GAAP basis, and inclusive of the non-cash
impairment charge described above, net loss in the fourth quarter of
2017 was
Non-GAAP Net Income: In the fourth quarter of 2017, non-GAAP net
income was
Adjusted EBITDA: In the fourth quarter of 2017, Adjusted EBITDA
was
Cash and Cash Flow from Operations: As of
Financial Comparison for the full year of 2017:
Revenues: Revenues decreased by 12%, from
Customer Acquisition Costs and Media Buy ("CAC"): CAC
in 2017 were
Impairment Charge: In 2017, the company recorded a non-cash
impairment charge of
Net Income: On a GAAP basis, and inclusive of the non-cash
impairment charges described above, the full-year net loss was
Non-GAAP Net Income: In 2017, non-GAAP net income was
Adjusted EBITDA: In 2017, Adjusted EBITDA was
Cash and Cash Flow from Operations: As of
Debt: Short-term debt, long-term debt and convertible debt decreased by 22%, from 77.7 million in 2016 to 60.7 million in 2017.
Perion satisfies all the financial covenants associated with its public debt.
2018 Guidance
Management expects to generate Adjusted EBITDA of
“The turnaround efforts during 2017, related both to cost optimization and the stabilization of our Undertone and Search businesses provide management with sufficient visibility to provide 2018 Adjusted EBITDA guidance,” noted Mr. Gerstel.
Conference Call
Perion will host a conference call to discuss the results today,
- Conference ID: 4677454
-
Dial-in number from within
the United States : 1-866-548-4713 -
Dial-in number from
Israel : 1-809-212-883 - Dial-in number (other international): 1-323-794-2093
-
Playback available until
March 22, 2018 by calling 1-844-512-2921 (United States ) or 1-412-3176671 (international). Please use PIN code 4677454 for the replay. - Link to the live webcast accessible at https://www.perion.com/ir-info/
About
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 tax expenses, 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
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 the Company with the
Source:
CONSOLIDATED STATEMENTS OF OPERATIONS
In thousands (except share and per share data)
Three months ended | Year ended | |||||||||||
December 31, | December 31, | |||||||||||
2016 | 2017 | 2016 | 2017 | |||||||||
Audited | Audited | Audited | Audited | |||||||||
Revenues: | ||||||||||||
Search and other | $ | 40,488 | $ | 34,251 | $ | 172,683 | $ | 139,505 | ||||
Advertising | 44,054 | 43,029 | 140,111 | 134,481 | ||||||||
Total Revenues | 84,542 | 77,280 | 312,794 | 273,986 | ||||||||
Costs and Expenses: | ||||||||||||
Cost of revenues | 7,011 | 6,838 | 25,924 | 24,659 | ||||||||
Customer acquisition costs and media buy | 38,145 | 35,092 | 140,210 | 130,885 | ||||||||
Research and development | 6,054 | 4,406 | 25,221 | 17,189 | ||||||||
Selling and marketing | 14,364 | 14,309 | 54,559 | 52,742 | ||||||||
General and administrative | 7,303 | 5,369 | 28,827 | 21,911 | ||||||||
Depreciation and amortization | 6,174 | 3,294 | 25,977 | 16,591 | ||||||||
Impairment charges | - | 41,820 | - | 85,667 | ||||||||
Restructuring costs | - | - | 728 | - | ||||||||
Total Costs and Expenses | 79,051 | 111,128 | 301,446 | 349,644 | ||||||||
Income (Loss) from Operations | 5,491 | (33,848) | 11,348 | (75,658) | ||||||||
Financial expense, net | 1,882 | 1,756 | 8,288 | 5,922 | ||||||||
Income (Loss) before Taxes on income | 3,609 | (35,604) | 3,060 | (81,580) | ||||||||
Taxes on income | 3,290 | 1,673 | 212 | (8,826) | ||||||||
Net Income (loss) from continuing operations | 319 | (37,277) | 2,848 | (72,754) | ||||||||
Net Loss from discontinued operations | - | - | (2,647) | - | ||||||||
Net Income (Loss) | $ | 319 | $ | (37,277) | $ | 201 | $ | (72,754) | ||||
Net Earnings (Loss) per Share - Basic and Diluted: | ||||||||||||
Continuing operations | $ | 0.00 | $ | (0.48) | $ | 0.04 | $ | (0.94) | ||||
Discontinued operations | $ | - | $ | - | $ | (0.04) | $ | - | ||||
Weighted average number of shares continuing and discontinued | ||||||||||||
Basic | 77,163,670 | 77,550,069 | 76,560,454 | 77,549,171 | ||||||||
Diluted | 77,540,690 | 77,550,069 | 76,673,803 | 77,549,171 | ||||||||
*) less than $0.01 |
CONDENSED CONSOLIDATED BALANCE SHEET
In thousands
December 31, | December 31, | |||||
2016 | 2017 | |||||
Audited | Unaudited | |||||
ASSETS | ||||||
Current Assets: | ||||||
Cash and cash equivalents | $ | 23,962 | $ | 31,567 | ||
Short-term bank deposit | 8,414 | 5,913 | ||||
Accounts receivable, net | 71,346 | 62,830 | ||||
Prepaid expenses and other current assets | 10,036 | 13,955 | ||||
Total Current Assets | 113,758 | 114,265 | ||||
Property and equipment, net | 14,205 | 17,476 | ||||
Goodwill and intangible assets, net | 234,755 | 136,360 | ||||
Deferred taxes | 4,117 | 4,798 | ||||
Other assets | 1,617 | 1,128 | ||||
Total Assets | $ | 368,452 | $ | 274,027 | ||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||
Current Liabilities: | ||||||
Accounts payable | $ | 38,293 | $ | 39,180 | ||
Accrued expenses and other liabilities | 17,466 | 17,784 | ||||
Short-term loans and current maturities of long-term and convertible debt | 17,944 | 13,989 | ||||
Deferred revenues | 5,354 | 5,271 | ||||
Payment obligation related to acquisitions | 7,653 | 5,146 | ||||
Total Current Liabilities | 86,710 | 81,370 | ||||
Long-Term Liabilities: | ||||||
Long-term debt, net of current maturities | 37,928 | 30,026 | ||||
Convertible debt, net of current maturities | 21,862 | 16,693 | ||||
Deferred taxes | 8,087 | - | ||||
Other long-term liabilities | 5,721 | 7,606 | ||||
Total Liabilities | 160,308 | 135,695 | ||||
Shareholders' equity: | ||||||
Ordinary shares | 210 | 211 | ||||
Additional paid-in capital | 234,831 | 236,975 | ||||
Treasury shares at cost | (1,002) | (1,002) | ||||
Accumulated other comprehensive gain (loss) | (265) | 532 | ||||
Accumulated deficit | (25,630) | (98,384) | ||||
Total Shareholders' Equity | 208,144 | 138,332 | ||||
Total Liabilities and Shareholders' Equity | $ | 368,452 | $ | 274,027 |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
In thousands
Year ended December 31, | ||||||
2016 | 2017 | |||||
Unaudited | Unaudited | |||||
Operating activities: | ||||||
Net Income (loss) | $ | 201 | $ | (72,754) | ||
Loss from discontinued operations, net | (2,647) | - | ||||
Net Income (Loss) from continuing operations | 2,848 | (72,754) | ||||
Adjustments required to reconcile net income to net cash provided by operating activities: | ||||||
Depreciation and amortization | 25,977 | 16,591 | ||||
Impairment of goodwill and intangible assets | - | 85,667 | ||||
Restructuring costs related to impairment of property and equipment | 254 | - | ||||
Stock based compensation expense | 6,844 | 2,112 | ||||
Accretion of payment obligation related to acquisition | 320 | 43 | ||||
Foreign currency translation | 980 | 83 | ||||
Accrued interest, net | 406 | 475 | ||||
Deferred taxes, net | (3,268) | (8,877) | ||||
Change in payment obligation related to acquisition | 983 | - | ||||
Fair value revaluation - convertible debt | 1,350 | 3,785 | ||||
Net changes in operating assets and liabilities | (2,910) | 8,888 | ||||
Net cash provided by continuing operating activities | 33,784 | 36,013 | ||||
Net cash used in discontinued activities | (3,329) | - | ||||
Net cash provided by operating activities | $ | 30,455 | $ | 36,013 | ||
Investing activities: | ||||||
Purchases of property and equipment | $ | (1,353) | $ | (1,596) | ||
Capitalization of development costs | (4,591) | (5,756) | ||||
Change in restricted cash, net | 647 | - | ||||
Short-term deposits, net | 34,028 | 2,501 | ||||
Net cash provided by investing activities | $ | 28,731 | $ | (4,851) | ||
Financing activities: | ||||||
Exercise of stock options and restricted share units | 2 | 1 | ||||
Payment made in connection with acquisition | (29,537) | (2,551) | ||||
Proceeds from Short-term loans | 40,000 | - | ||||
Proceeds from Long-term loans | - | 5,000 | ||||
Repayment of convertible debt | (7,620) | (7,901) | ||||
Repayment of short-term loans | (46,000) | (7,000) | ||||
Repayment of long-term loans | (9,452) | (11,389) | ||||
Net cash used in financing activities | $ | (52,607) | $ | (23,840) | ||
Effect of exchange rate changes on cash and cash equivalents | (136) | 283 | ||||
Net increase in cash and cash equivalents | 9,772 | 7,605 | ||||
Net cash used in discontinued activities | (3,329) | - | ||||
Cash and cash equivalents at beginning of period | 17,519 | 23,962 | ||||
Cash and cash equivalents at end of period | $ | 23,962 | $ | 31,567 |
RECONCILIATION OF GAAP TO NON-GAAP RESULTS
In thousands (except share and per share data)
Three months ended | Year ended | |||||||||||||
December 31, | December 31, | |||||||||||||
2016 | 2017 | 2016 | 2017 | |||||||||||
Unaudited | Unaudited | Unaudited | Unaudited | |||||||||||
GAAP Net Income from continuing operations | $ | 319 | $ | (37,277) | $ | 2,848 | $ | (72,754) | ||||||
Acquisition related expenses | - | - | 179 | - | ||||||||||
Valuation adjustment on acquired deferred revenues | - | - | 359 | - | ||||||||||
Share based compensation | 1,859 | 446 | 6,844 | 2,112 | ||||||||||
Amortization of acquired intangible assets | 5,173 | 2,416 | 21,974 | 13,024 | ||||||||||
Restructuring costs | - | - | 728 | - | ||||||||||
Legal fees | - | 206 | - | 206 | ||||||||||
Impairment of goodwill and intangible assets | - | 41,820 | - | 85,667 | ||||||||||
Fair value revaluation of convertible debt and related derivative | 274 | 538 | 408 | 1,148 | ||||||||||
Accretion of payment obligation related to acquisition | 33 | (18) | 1,303 | 43 | ||||||||||
Taxes on the above items | (1,140) | (1,763) | (6,950) | (12,010) | ||||||||||
Non-GAAP Net Income from continuing operations | $ | 6,518 | $ | 6,368 | $ | 27,693 | $ | 17,436 | ||||||
Non-GAAP Net Income from continuing operations | $ | 6,518 | $ | 6,368 | $ | 27,693 | $ | 17,436 | ||||||
Taxes on income | 4,430 | 3,436 | 7,162 | 3,184 | ||||||||||
Financial expense, net | 1,575 | 1,236 | 6,577 | 4,731 | ||||||||||
Depreciation | 1,001 | 877 | 4,003 | 3,566 | ||||||||||
Adjusted EBITDA | $ | 13,524 | $ | 11,917 | $ | 45,435 | $ | 28,917 | ||||||
Non-GAAP diluted earnings per share | $ | 0.08 | $ | 0.08 | $ | 0.36 | $ | 0.24 | ||||||
Shares used in computing non-GAAP diluted earnings per share | 77,540,690 | 77,567,040 | 76,673,803 | 79,122,597 |
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Source:
Perion Network Ltd.
Investor relations
Hila Valdman
+972
(73) 398-1000
Perion.Investor.Relations@perion.com