Perion Network CEO Discusses Q2 2013 Results - Earnings Call Transcript

| About: Perion Network (PERI)

Perion Network Ltd. (NASDAQ:PERI)

Q2 2013 Earnings Call

August 12, 2013 10:00 AM ET


Deborah Margalit - Director of Investor Relations

Josef Mandelbaum - CEO

Yacov Kaufman - CFO


Kerry Rice - Needham & Company

Jared Schramm - Roth Capital Partners

Dan Kurnos - The Benchmark Company

Jay Srivatsa - Chardan Capital Markets


Ladies and gentlemen, thank you for standing by. Welcome to the Perion second quarter 2013 Results Conference Call. All participants are in listen-only mode. Following management’s formal presentation, instructions will be given for the question and answer session. For operator assistance during the conference, please press *0. As a reminder this conference is being recorded. With us today from Perion are Josef Mandelbaum, CEO and Yacov Kaufman, CFO. I would now like to turn the call over to Deborah Margalit, Director of Investor Relations.

Deborah please begin.

Deborah Margalit

Thank you, and we appreciate the attention of everyone who is joining us today. On today’s call, management will be reviewing the financial results and business highlights of the second quarter and first half of 2013. The press release detailing the results is available on the Company’s website at

Before we begin, I’d like to read the following Safe Harbor Statement: Today’s discussion will include forward-looking statements. These statements reflect the Company’s current views with respect to future events. These forward-looking statements involve known and unknown risks, uncertainties and other factors, including those discussed under the heading “Risk Factors” and elsewhere in the Company’s annual report on form 20-F that may cause actual results, performance or achievements to be materially different from any future results, performances or achievements anticipated or implied by these forward-looking statements. The Company does not undertake to revise any forward-looking statements to reflect future events or circumstances.

In addition, and as in prior quarters, the results reported today will be analyzed on a non-GAAP basis, which better conveys the operational state of the business. We have provided a detailed reconciliation of non-GAAP measures to their comparable GAAP measures in our earnings release, which is available on our website, and has also been filed on Form 6-K.

With that, I’ll turn the call over to Josef Mandelbaum, Chief Executive Officer. Josef?

Josef Mandelbaum

Thank you Deborah and good morning everyone. Welcome to our 2013 second quarter earnings call. As usual, I will begin with remarks about the quarter and provide some color on our operations, and Yacov will review our financials in more detail before opening the call up to questions.

The second quarter was highlighted by great year over year growth in both revenues and EBITDA as well as strong cash flow from operations. Revenues grew by 99%, EBITDA by 61% and Cash flow from Operations grew to $6.8 million from breakeven last year These results were achieved through a healthy mix of organic and acquired growth resulting from our acquisition of SweetPacks last November. Operationally the second quarter was highlighted by the successfull diversification of our search business, the development of new products such as Guardius which was launched last week, as well as continued optimization of Incredimail and Smilebox.

When we announced our SweetPacks acquisition last November, we said that one of the main benefits, in addition to the economics, was scale. This has certainly proven to be true and was the main driver in our ability to close four additional search distribution partnerships in the past 7 months. We have transformed our search business from total reliance on Google, to one where we have partnerships with Bing, and most recently as you heard today Yahoo and Conduit. This has proven to be especially important given the recent industry trends as a result of policy changes earlier this year. In the second quarter alone our search diversification strategy resulted in Google accounting for 51% of our search revenues while Bing and Ask combined, were the same.

Let me address in slightly more detail the search side of our business. While our search revenue increased 183% year-over-year, it was down sequentially, as we expected and discussed on our first quarter earnings call. The main reasons behind this are: the after effects of the Google policy changes last November and this past February; heightened competition in the application download environment; and some execution delays in the implementation of our additional search partnerships.

The industry is in a state of transition following the policy changes and we expect this to continue through the third quarter. A byproduct of these changes is that the distribution environment of third party apps has become more competitive. In the short term this translates into higher pricing and more aggressive practices putting pressure on margins.

As I mentioned last quarter, this isn’t the first time the industry has been in transition following policy changes, in fact it has happened twice before and each time it has taken 2-3 quarters before accelerated growth returns. We are confident the same dynamics will play out this time as well. The reason is simple. Macroeconomics always wins out. There will continue to be strong demand for downloading applications, continued resistance from consumers to pay for the majority of them and the need by developers to monetize their work.

Finally, our second quarter results were impacted by certain execution delays in launching our new partnerships. Although these delays will also effect our third quarter, we are now ramping up our marketing efforts and will return to sequential growth in the fourth quarter of 2013 and beyond.

Turning to the products side of the business, Smilebox and Incredimail are performing very nicely and we continue to invest in their mobile expansion. We expect to launch an iPhone version of Incredimail and Android versions of both Smilebox and Incredimail by the end of the year.

While we are only at the Beta stage, we are very excited about our Guardius launch. This product is designed to facilitate better browsing through the wisdom of the crowd. Our Guardius product enables users to manage and control the numerous add-ons and extensions that have been installed on their web browser. Users are presented with a graphic display showing how much faster their browser will become once they disable specific apps. And in order for them to make an educated decision regarding wether to keep or disable an add-on, we inform them what other users have done with these add-ons. We have received great coverage in the Wall Street Journal, Techcrunch, The Next Web and Tech Investors News. We will update you on our progress on future calls.

And with that I’ll turn the call over to Yacov and then take your questions.


Yacov Kaufman

Thank you Josef.

As Josef just mentioned, in addition to the operational and strategic achievements, this was a very good quarter from a financial standpoint as well.

Revenues this quarter were $24.4 million, nearly double the $12.3 million in revenues the same quarter last year. This increase reflected growth across all our revenues streams year over year, reflecting organic growth with added growth coming from our Sweetpacks acquisition.

Product and other advertising sales were $6.3 million, compared to $5.9 million in the second quarter last year, reflecting 6% growth.

Gross profit in the second quarter of 2013 grew both nominally and as a percentage of sales, reaching $23.3 million, more than double the $11.5 million in the second quarter of last year. This reflects an increase in our gross margin to 95% compared to 93% of sales in the second quarter of 2012. In the second quarter of 2013, GAAP gross profit was net of $1.9 million amortization of acquired intangible assets, which were not deducted from our non GAAP gross profit. In the second quarter of 2012, the difference between gross profit in our GAAP report and that in our non-GAAP report totaled $0.6 million.

Total operating expenses were $19.4 million in the second quarter of 2013. Excluding customer acquisition costs of $12.5 million, these expenses totaled $6.9 million. This represents a 34% increase compared to the same expenses in the second quarter of 2012, demonstrating the continued leverage of our model as revenues nearly doubled.

EBITDA was $4.3 million in the second quarter of 2013, compared to $2.7 million in the second quarter of 2012, increasing 61%.

In the second quarter of 2013, GAAP operating expenses included $0.2 million of non-cash share based compensation and another $0.5 million amortization of acquired intangible assets, for a total of $0.7 million deducted from our non-GAAP operating expenses. In the second quarter of 2012, expenses included in our GAAP report and excluded from our non-GAAP report totaled $0.4 million.

Net income in the second quarter of 2013 increased 85%, reaching $3.4 million, or $0.26 per share, compared to $1.8 million, or $0.18 a share in the second quarter of 2012. The EPS increase was lower than that of our net income due to the increase in number of fully diluted shares to 13 million from 10 million in the same quarter last year.

Turning to financial results for the six months ended June 30, 2013, total revenues were $52.0 million, a 121% increase, compared to $23.6 million in first half 2012. This increase was driven by a $26.5 million, or 222% increase in search generated revenues, along with a $1.9 million, or 17% increase in our product and other advertising revenues.

Gross profit in first half 2013 increased 126% to $49.7 million, or 95% of revenues, compared to $22 million, or 93% of revenues in the same period in 2012.

In the first half 2013, GAAP gross profit was net of $3.7 million amortization of acquired intangible assets, which were not deducted from our non GAAP gross profit. In the first half of 2012, the difference between gross profit in our GAAP report and that in our non-GAAP report totaled $1.4 million, including a $0.9 million difference in revenues.

R&D expenses in the first half of 2013 were $6.2 million compared to $5.0 million in 2012. As a percentage of sales, R&D decreased from 21% in 2012 to 12% in 2013. Looking forward, we intend to increase our investment in developing new products for new platforms, without increasing the expense as a percentage of sales.

Sales and Marketing expenses, excluding customer acquisition costs in first half of 2013 were $4.3 million, compared to $2.7 million in 2012. This increase resulted from adding to our marketing staff from the SweetPacks acquisition. As a percentage of sales these expenses have decreased as well from 12% in 2012 to 8% in 2013.

Customer acquisition costs in first half 2013 reached $23.9 million compared to $6.5 million in 2012. As you know, this is a forward looking expense and as such will contribute to the revenue growth projected for the remainder of 2013.

G&A expense was $3.8 million, or 7% of revenues in the first half of 2013, as compared to $2.9 million, or 12% of revenues in 2012.

GAAP operating expenses in 2013 included $0.7 million of non-cash share-based compensation and $1.0 million amortization of acquired intangible assets, totaling $1.7 million which were adjusted for in the non-GAAP numbers. In 2012, the adjustment of GAAP numbers totaled $1.3 million.

In the first half of 2013, EBITDA was $12.2 million, increasing 128% compared to $5.3 million in 2012, despite the $17.3 million increase in customer acquisition costs.

Non-GAAP net income increased in the first half 2013 to $9.1 million, or $0.71 per share, compared to $4.0 million or $0.40 per share, in the same period in 2012.

In first half 2013, GAAP cash flow from operations was $14.3 million compared to $2.5 million in the same period last year. As of June 30, 2013, we had cash and cash equivalents of approximately $30.4 million, up from $21.8 million as of December 31, 2012.

As Josef mentioned, we are working through implementation delays with new search partners and adjusting to search policy changes. However we continue to expect a record year with significant year-over-year growth. Given the current industry trends we have decided to provide an outlook for the third quarter. That being said we are not committing to provide quarterly guidance in the future.

Looking forward we expect third quarter revenues to be between $20 million and $22 million, reflecting 30% year over year growth and EBITDA to be between $4.5 million and $5.5 million, reflecting a 32% increase year over year. At this time, we remain optimistic we can still achieve our full year guidance.

This concludes my financial overview. We will now open the call to questions. Operator.

Question-and-Answer Session


(Operator Instructions) You will hear first from Kerry Rice from Needham & Company

Kerry Rice - Needham & Company

Just a couple of questions on Search. It looks like that Bing and Ask search partners have been launched given the growth of revenue driven by those two. Can you talk a little bit about maybe the timing regarding Yahoo! and Conduit, and maybe what you expect the search revenue mix to look like exiting 2013?

Josef Mandelbaum

First with regards to Bing and Ask. To be precise Bing was fully launched early in Q2, Ask really was towards the very end of Q2. So, really Q3 we are still in the midst of working on optimizing We are very optimistic and bullish about that. It’s a great partnership and we are also working very well in terms of relationship but we are still not fully running with into Q3.

In terms of Yahoo!, we just launched also recently with Yahoo!, we have some testing we are doing or probably in the next few weeks up we will up and running with them as well. One of the important things and I am glad you asked the question is, from our standpoint we went from one search provider and we are working with Google for on a eight years. So all of our systems and all of our processes were designed to work with them. We are adding on two almost new partners each quarter. It takes a while to wrap up frankly, to do testing, to get the history about the LTV, and ROI and actually just technically working with them and other partners, it takes a while and frankly longer than we expected in some cases and we are working through that as we go and as Yacov said, that's one of the biggest issue in terms of kind of pushing out our results in the quarter.

With regards to what looks like at the end of the year, I would expect that probably very well balanced mix. I would expect in the range, I think you probably have in the range of 15% to 20% to 25% and some would be a little higher. I think it depends on who is stronger in certain territories but you should see a pretty good mix. We are going to look to optimize obviously for yield and will assume we have much better feeling for that over the next two of three months as we conclude a lot of our testing, get the history we need to kind predict actually the LTV as we have done with Google in the past and we are doing that with Bing and that’s one of the reasons why we have given the outlook for Q3 but also very confident that we will have recurrent significant sequential growth in Q4 which will lead us into a very strong position for 2014.

Kerry Rice - Needham & Company

Would you mind us commenting on your partnership with Conduit? Is that a kind of a different partnership than with your other search partners or do we kind of see that providing the same kind of search results or can you just talk a little bit about that partnership?

Josef Mandelbaum

Sure. So as you look, I think Ask and Conduit are similar in a sense that obviously both of them use other search engines, whether its Google or Bing, but also some of the largest players out there, Conduit has proven itself to be an excellent company, executing very, very well over the past few years and has I think got great results from everything you read. So from that perspective we are excited to work with them.

I think in general with all of our partnerships we are looking at different types of business models to go forward. It’s not necessarily only with one partner and as we look forward to that, some of it as looking frankly, Kerry adjusting the risk reward ratio of the partnerships, so that in a lot of cases what has happened historically and this is I think a changing trend in the industry, historically is someone like Google gave a rev share type of deal to somebody and someone like us took over the risk and down the road partnerships.

As you start doing more third party distribution, I think some of those deals are changing so that there are different business models that have a different risk reward ratio. Some of it may be recognition of immediate payments on certain things versus only rev share, some of the combination. So we are trying to be creative as the industry changes to change with the industry and one of the reasons why we are confident about Q4.


We will now hear from Jared Schramm with Roth Capital Partners.

Jared Schramm - Roth Capital Partners

Looking at customer acquisition spend, so it was $23.9 million in the first half of the year. Are you still looking for north of $50 million in total cash spend for 2013 and do you think that will be evenly spread out between Q3 and Q4?

Josef Mandelbaum

The answer to the first thing is in general yes, we see $50 million but absolutely not. Q3, the customer acquisition spend will be down from Q2. As I mentioned to Kerry earlier, I think you already know this, we have always been prudent. We are not going to spend money recklessly and as we got delayed in launching some of these partnerships, it does take time when you launch the partnerships to make sure that you are optimizing your ROI and making sure you are getting a return on the money spent.

And therefore, we will not be spending as much customer acquisition spend in Q3. it’s One of the reasons why the revenues were a little lower and obviously as we go into Q4 we expect to fully be beyond that and into growth mode again in Q4 and we expect to heavily spend in Q4, assuming all the numbers and by now we are seeing good trends and we are optimistic about that as we go forward. So we still expect to be very close to the $50 million but it’s going to be back in terms of back-half loaded, back half or the second half loaded.

Jared Schramm - Roth Capital Partners

And then in this quarter 51% of search revenues were derived from Google. Looking into 2014 how do you expect the mix to look as far as search revenue contribution is concerned?

Josef Mandelbaum

I would say unless Google does some significant changes to their policies, Google will be in low double-digits, maybe even single digits in 2014. I think if you look at all the public companies in the space who have announced their results, I am extremely confident all of them are seeing the exact same thing. The policy changes that Google has implemented certainly had the desired effect for I guess Google and Google announced it publicly on their earnings call as well that they are certainly seeing a decline and that’s been their choice. So I think that you will see that shift as it has been shifting with all the public companies out there to Yahoo!, Ask, Bing and people like Conduit.

Jared Schramm - Roth Capital Partners

And can you just give a little feedback on the initial reaction to Guardius, I realized the launch, it’s pretty early on but as far as you're optimistic, I look forward what you are seeing there and how you think the market will take to it?

Josef Mandelbaum

So I think one of the things we've been working on with Guardius is really timing for some of the industry trends we are seeing today and we spent a lot of time working on that. So far we have I think about 50,000 beta people who have been using the product. I would say it was probably an [engagement] (ph) rate in upwards about 40% of those are actively using the product and what we are seeing is that we are getting great feedback that it is really helping them improve their performance and some of their privacy, of what’s been on their computers that they didn’t know about or they forgot about that either slowed them down or frankly is gathering data about them that they did not want.

We’re optimizing it now. We just really opened it up to more people as we did the official launch little over week ago. One of the things which we will do over time in the next couple of months is we will introduce to that a monetization play that says, let us help you manage your search, so that in fact don’t leave it to somebody else to pick you without you knowing it is an add-on and then put it on there, and we want it to be active. So this is almost as opt-in as you can get by being in your face and presenting it as a value added product versus sometimes what has been known to happen in industries more of an aftereffect where someone doesn’t realize something has happened to them.

Jared Schramm - Roth Capital Partners

And are you planning in launching specific ad campaign targeted at getting users onboard with Guardius there or just going to let it play out as you have some of the other products?

Josef Mandelbaum

We’ll do mix. We will certainly going to do some testing with acquisition marketing and overall marketing for it in probably next two months where really beta, launching that to get better feedback, optimize it, kind of make some changes based on consumer feedback and then we’ll probably take some of our marketing spend that we would have spent on other things and put it against Guardius and hoping that it improves the LTV and helps us to get a better ROI.

Jared Schramm - Roth Capital Partners

And lastly here just in regards to the acquisition space, what are you seeing right now from your end as far as nice targets that out there that you could tuck-in. As far as property wise, do you think valuations are going to get lofty right now, just maybe some quick color on what you’re seeing in that space?

Josef Mandelbaum

Sure. So actually what we’re seeing, I think before, we were actually seeing a pretty healthy pipeline. There are some companies that are in our opinion, probably at least for us a little over value than what we (inaudible) them. We’re looking at accretive acquisitions. And we see pretty good pipeline.

I’d say what in general we see is that fundamentally, as always it takes two to tango. So we’ve had a couple of things that to be [candid] (ph) we're close, but at the end of the day we’re being very disciplined about what we think is the right acquisition for us at the right time and we’re being focused on that but we have a good pipeline and we certainly still hope that by the end of this year we will have announcements to make about acquisitions.


And the next question will come from Dan Kurnos from Benchmark Company.

Dan Kurnos - The Benchmark Company

On the policy side, just a quick question. It looks IAC sort of hit their reset button in Q3 reflecting the timing of the Google policy implementation. Josef, is this having any impact on your Ask business and was the timing really unique to IAC in terms of their Google policy agreement?

Josef Mandelbaum

I’ll start with the second half. Obviously I'm not privy to the contract with and I don’t know Google specifically but from the marketplace I can tell you yes, the Ask implementation of the Google policies was five to six months after everybody else's, just from what I know from being in the industry. I didn’t know that and then I know that from a contractual or factual standpoint.

But certainly that had an impact to the industry in the competitiveness of the industry when everybody else had to go to one set of policies and you had partners out there with a different set, certainly made ROI a little bit harder obviously from that perspective.

With regards to going forward, again you have to ask Ask specifically about their products. I can't comment to that as we have a contract with them in confidentiality. But there are still some things that because of the size and nature of their relationship the Ask will still have some advantages and one of the reasons why we partnered with them is we fully expect to work with them to take advantage of those advantages they have in the long term. But as for when it takes effect officially, as you did mention, it took effect in July of this year.

Dan Kurnos - The Benchmark Company

And then just a quick one again on search. Has Google's enhanced campaigns had any impact in results to the marketplace in general?

Josef Mandelbaum

We’re not seeing ton of change from the introduction of enhanced campaigns thus far. I think its pretty standard. And I don't really have a big concern on the monetization front. We know about it. We haven't seen a huge change in this point in time. I am not saying that it won't happen, but I don't, it's been a big issue at this point in time.

Dan Kurnos - The Benchmark Company

Just one follow up on the acquisition side. You talked about maybe having something to tell us by the end of the year on the acquisition front. Are you still looking to potentially make an acquisition this year that would be more of a 2014 event? And I am assuming that your guidance doesn't include any impact from any projected acquisitions. Correct?

Josef Mandelbaum

Our guidance does not include any impact from acquisitions and the answer is we are looking to make still acquisitions in 2013, yes.

Dan Kurnos - The Benchmark Company

And then one more from me. On the mobile front now that you guys are launching iPhone versions for Smilebox and Incredimail, maybe talk about the path to monetization there and how big an impact on revenue you think mobile could be for you guys in 2014?

Josef Mandelbaum

I don't think monetization is going to be huge impact on us in 2014. I do hope we will start seeing a little bit monetization 2014. I think the standard answer, I hate to sound like a broken record, but there is advertising. We have deals in place ready when we have enough traffic to kind of make some modest income from advertising. We have, today for example an iPad product with Incredimail. We have Bing search baked into our product on Incredimail and we have experimented with (inaudible) purchases, but as we mentioned earlier, all this at the end of the day, we're focusing on getting to scale first, getting enough overall downloads, enough (inaudible) small pace and active users. And then as the mobile market matures, we'll be in a position to take advantage of it like frankly everybody else. I don't pretend to be a market maker in the mobile space but we believe we're as we can create compelling value products that are valued to users and if we do that and get enough of them to use it, we'll be in a position to make money.


Now we'll hear from Jay Srivatsa from Chardan Capital Markets.

Jay Srivatsa - Chardan Capital Markets

Josef, if I look at your Q3 guidance and your full year number, it appears to me you would have to have a very strong Q4, as much as roughly $37 million if I take the midpoint of your Q3 guidance. So help us understand what gives you the confidence you are going to see such a big jump in revenues in Q4, given the environment you have painted for us currently?

Josef Mandelbaum

So, I think everybody on the phone call knows myself and Yacov and there is no question. First of all, I will answer your question directly. We have obviously now multiple partnerships we just invested in. We are launching them as we go forward. We have some history now as we get more familiar with them in the marketplace and we are seeing the marketplace evolve and transition. And I think as frankly anybody else in the industry who's reported their numbers, everybody is saying the same thing which tells you what we're saying which is Q3 will still be down from Q2 and Q4 is expecting to go up.

And I think the reason Jay is relatively simple. At some point in time, and we’ve seen this before as I mentioned with the past two changes that Google has done over the last four or five years, it takes a while for the market to adjust and there are small companies, they are just, without giving names, who have approached us to be brought. We have said no and unfortunately for us because they’re not going to be able to survive.

As you think as the business frankly transitions and stabilizes, the bigger players will be in a better position, and with now four new deals added, we think we have an unique ability which most of the companies don’t have for to increase the yield on the monetization as we go forward. That's answer number one.

Number two, as that increases and as the overall increases, Q4 is a better quarter for us in terms of our products and advertising revenue, and we see that coming and last but not least, as I mentioned earlier to response to I think Kerry’s question, we are certainly adjusting the type of deals we do to allow us to scale the business faster and with a different risk reward ratio, there are certain things that we think we can see through partnerships that can allow us to grow the revenues and the profits at the same time into Q4. And I think if you look at the numbers Jay, on the profit side, it is not a big stretch from where we were in Q1.

On the revenue side, it is certainly a big jump, we understand that which is why Yacov and I both said we’re optimistic we can hit our numbers for the full year. There is no question; we are little bit of delayed, more than we expected, and I think we’re being transparent as we always are with you and with everybody on the phone. Can't say I’m extremely happy about that but to be candid also the industry is changing and is going through a transition, some of which we predicted and some of it is not as we predicted.

At the end of the day though, as I said earlier on the script the macroeconomics still play out here. We actually don’t see a decrease in number of downloads. We’re not seeing a decrease in the number of people or increased amount of people, all of sudden want to take up their credit cards and start paying for applications. And as we see the market rebound, in this rebound, we think we’re well positioned in Q4 to have a great quarter.

Jay Srivatsa - Chardan Capital Markets

All right. You’ve mentioned actually due to some delays during the quarter. I suspect it's because of the systems being a little different with your existing systems for Google versus the Bing and the Ask. As you look ahead, now that you’re absorbing Yahoo! into the fold, are you feeling comfortable with how are set up to not have any more delays or is that a concern for you as you look ahead?

Josef Mandelbaum

The delays are not a concern for me as we look ahead, but each partner by itself, just give you an understanding, everybody has own set of policies, just as an example. And the way the general flow works is you sign a contract, you start working with the account teams, the technical teams; and then basically they will give you some technology that you include in your products and your installer, then we do QA on it to make sure it actually works so it sells (ph) too. Then we sent it to the other party. The other party does QA on it, and then they send it back to us. Then if we work with other third party distributors, we send it to them and that whole process repeats and we have to make sure that the information gets set with database in an appropriate way and that in fact, you’re here into the policies of now, all the different partners out there. And what I just described, just physically takes one to two months. There are no short cuts.

So I don’t speculate because when you say internally where they were at the beginning as we mentioned. I think now it’s just a normal process of what it takes to get a partner up and running which again is one of the reasons why we decided to give a Q3 outlook, which we usually do not do and we don’t intend to do going forward because we wanted to be more open and transparent with people who don’t understand how the operations work, getting up partners, and going from one to five partners, it’s a lot of work to do and honestly the team here has done a great job in actually working almost day and night to try to get us as fast as we can. There are limitations of just what physically can be done. But we are excited about the partnerships we have. We are very happy working with all of them and we think that they will yield good results going into Q4 and beyond.

Jay Srivatsa - Chardan Capital Markets

Last question from me in terms of competition. You mentioned third party apps. Can you paint us a little bit of a picture on how you see that playing out going forward? Do you see it intensifying or do you feel comfortable with how you are holding up relative to some of these newer competitive pressures that are coming through?

Josef Mandelbaum

I think we are holding on balance sheet very nicely. And we are very comfortable with our position and I know nobody likes missing street estimates, but at the end of the day we look at the overall business and health and look at the long term of the business and we are actually very excited about the future and very confident about it. It is true that if you look at other big players in this industry, without naming names, I think everybody is going through the same transition. What is happening is, there are some other players who are smaller or more aggressive, and they are trying to fight through this as well and that has made a more competitive environment than we probably anticipated, three or four months ago. We don’t see it and I don’t think anybody sees that lasting for a long time, and which is why going to back to your original question, we’re very comfortable in Q4, we’re positioned well to have significant growth.


And it looks like that’s all the time we have for questions today. I will now turn the call back over to Josef Mandelbaum for closing remarks.

Josef Mandelbaum

Thank you.

As I look at our accomplishments in the first six months of the year, including exciting new product launches for both the mobile and desktop platforms, and the progress we’ve made in significantly diversifying our search business, I feel that Perion has never been stronger and is well positioned for future growth. We generated phenomenal cash flow and significantly increased revenue, EBITDA and net income. None of this would have been possible without the great team we have at Perion. I’d like to thank all of them for their continued hard work, dedication and innovation.

Thank you and have a great day.

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