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Perion Network Ltd. (NASDAQ:PERI)

Q1 2012 Earnings Call

May 15, 2012 9:30 am ET

Executives

Josef Mandelbaum - CEO

Yacov Kaufman - CFO

Brett Maas - IR, Hayden IR

Analysts

Jared Schramm - Roth Capital

Abba Horwitz - Old School Partners

Kenneth Miller - Nokomis Capital

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Perion first quarter 2012 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, we have Josef Mandelbaum, CEO and Yacov Kaufman, CFO. I would now like to hand the call over to Brett Maas of Hayden Communications.

Brett please begin...

Brett Maas

On today's call, management will be reviewing the financial results and business highlights of the first quarter of 2012. The press release detailing Q1 results is available on the company's website perion.com.

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.

With that, I'll turn the call over to Josef Mandelbaum, Chief Executive Officer. Josef, the call is yours...

Josef Mandelbaum

Thank you Brett and good morning everyone. Today I would like to focus my comments on a review of our first quarter 2012 results, followed by a few comments about the rest of 2012. I will then turn the call over to Yacov, for more details regarding the first quarter financial results and business metrics before opening up the call for questions.

The first quarter was another great quarter for the company and the 25th consecutive quarter of growth on a year over year basis. We are extremely pleased with our results and accomplishments. We made considerable progress on our long-term strategy, invested in future growth, executed well throughout the quarter on a variety of fronts and are confident that we will deliver on, and perhaps exceed, our original 2012 guidance.

Revenues in the first quarter increased by 30% year over year to $11.3 million dollars, as a result of an increase in product and advertising revenues largely due to our Smilebox acquisition. This 30% growth was achieved even though search revenue declined, mainly due to a significant increase in media buying from competition which impacted the monetization of our installed base. The good news is that our installed base grew from 12.3 to 13.3 million users, demonstrating the strength of our product focused strategy which gives us the ability to continue to communicate with our users and consequently increase their life time value.

We have already begun to test and successfully implement new solutions to recapture our users' monetization. We are confident search revenue will increase in the coming quarters and should provide us with a significant growth catalyst going forward.

As I mentioned on our last earnings call, we are also proud to report that Smilebox was cash flow positive and achieved a 14% EBITDA margin in the first quarter.

Operationally our focus continues to be on broadening our product suite, addressing the needs of second wave adopters, specifically on new platforms, while continuing to improve our back-end systems and technology.

As an example, we have decided to make investments in mobile and tablet a priority for us to ensure long term success. We will develop and offer a range of iPhone, iPad, Android and Windows Mobile products over time to answer the increasing penetration and demands of our target.

Based on market research worldwide penetration of tablets is expected to be over 250 million by 2014 while smartphones will be well over 2 billion. Paradoxically, second-wave-adopters leap-frog with regard to tablet adoption, using it mainly for emails, photo sharing and news consumption, precisely what we offer, and will offer, in the most user friendly way. So far our mobile product offering includes a photo email application, Smilebox mobile an application with over 500,000 downloads and PhotoJoy, all available for download in the Apple App Store. We are working on additional exciting products to reinvent email communications, as well as expand and enhance our photo offering on mobile platforms.

Looking ahead to the rest of the year we expect premium and advertising revenues to continue to provide a solid base for growth and revenue diversification, generating approximately half of total revenues up from 31% in 2011.

As mentioned earlier, we also expect to see significant growth in our search generated revenue, by improving the monetization of our growing user base.

In addition, based on the successful integration and performance of our Smilebox acquisition, we continue to actively search for more companies to accelerate growth. We have a strong pipeline of opportunities, with one of our prime criteria now being proven profitability.

Now, I would like to turn the call over to Yacov for more details on the financial results for the first quarter. Yacov....

Yacov Kaufman

Thank you Josef.

As mentioned on our last call, we will be analyzing our results on a non-GAAP basis, which better conveys the operational state of the business. There is a detailed reconciliation to GAAP results in the financial tables of the earnings press release.

Revenues this quarter were $11.3 million, similar to the previous quarter and up 30% from $8.7 million in the first quarter of 2011.

This quarter's revenues included $5.6 million in search generated revenues, lower than in prior quarters as Josef explained earlier. This decrease was more than offset by the dramatic increase in product sales and other advertising revenues.

Product and advertising revenues were $5.7 million, compared to $1.9 million in the first quarter last year, prior the acquisition of Smilebox, and even increased sequentially 18%, from 4.8 million in Q4 2011.

This demonstrates one of the strengths of our business, having multiple revenue streams, providing for consistent growth.

As we mentioned last quarter, in the first year after the Smilebox acquisition, there will be a difference between GAAP and non-GAAP revenues. This quarter, it amounted to $0.6 million. This difference will gradually decrease through the third quarter of 2012, one year post the closing of the acquisition.

Gross profits also continued to grow reaching $10.5 million, compared to $8.3 million in the first quarter of 2011 and $10.2 million in the fourth quarter of 2011.

The gross profit margin was high at 93%, compared to 96% in the first quarter of 2011, prior to the Smilebox acquisition, and 91% in the fourth quarter of last year, after fully consolidating Smilebox.

The $0.6 million difference between GAAP and non-GAAP revenues, together with $0.3 million in amortization of intangible assets, provided for the $0.9 million total difference between GAAP and non-GAAP gross profit in this quarter.

Research and Development expenses for the first quarter were $2.6 million, just above the $2.4 million recorded in Q4 of 2011, and compared to $1.9 million in the first quarter of 2011. The increase year over year was primarily due to the acquisition of Smilebox and the development efforts related to its mobile product. In addition, this also reflects the development of an email client app for the iPad, recently begun and expected to be introduced in the latter part of this year.

We expect R&D expenses as a percentage of sales to remain at the current level in coming quarters.

Sales and Marketing expenses, in the first quarter of 2012, excluding customer acquisition costs, were $1.4 million, compared to $0.8 million in the first quarter last year, prior to the Smilebox acquisition, and $2.2 million in the fourth quarter of 2011. The changes are primarily due to the sales and marketing expenses from Smilebox.

Customer acquisition costs were $2.6 million in the first quarter of 2012, compared to $0.7 million in the first quarter of 2011 and $3.1 million in the fourth quarter of 2011. Since the third quarter of last year, we have been ramping up this expense, increasing it almost four fold year over year, in order to accelerate our growth. As we worked on our back-end systems to improve our ROI on this investment, we drew back on the expenditure this quarter compared to the previous quarter. As we improve our systems ensuring a good return on investment, we expect to further increase our spend, fueling future growth.

General and Administrative expenses were $1.5 million in the first quarter of 2012, compared to $1.4 million in the first and fourth quarters of 2011. Our ability to maintain this level of G&A has reduced the G&A expense as a percentage of sales from 16% in the first quarter of 2011 to 13% in the first quarter of this year.

GAAP Operating expenses in the first quarter of 2012 included $0.4 million of share based compensation, $0.3 million of acquisition related expenses and amortization of acquired intangible assets of $0.2 million, which were adjusted for in the non-GAAP numbers. In the first quarter of 2011, prior to the Smilebox acquisition, these expenses totaled $0.3 million attributable to share based compensation.

EBITDA in the first quarter of 2012 was $2.6 million, compared to $3.7 million in the first quarter last year and $1.4 million in the last quarter. The change compared to prior periods, was primarily attributable to the level of investment in customer acquisition.

Net income in the first quarter of 2012 was $2.2 million or $0.22 per diluted share, compared to $2.9 million, or $0.29 per diluted share in the first quarter of last year, and $1.6 million or $0.16 per diluted share in Q4 2011.

In the first quarter of 2012, cash generated from operations totaled $2.5 million, up from $2.1 million in the same quarter last year and $1.7 million in the fourth quarter of 2011. As of March 31, 2012, we had cash and cash equivalents of approximately $13.5 million. Since closing the quarter, we paid the second, and we believe, last installment of our Smilebox acquisition totaling approximately $7 million, as accrued on our books and we drew down $10 million in long-term bank financing at favorable rates, so that our cash position has since increased.

Before returning the call to Josef, allow me to highlight some of the metrics driving our business.

Total downloads this quarter were approximately 9.0 million, compared to only 2.5 million in the same quarter last year, before the ramp up in customer acquisition and the addition of Smilebox to our product portfolio, and the growth continued sequentially from 6.4 million downloads in Q4 2011.

Our install base has grown 45% year over year and 8% sequentially, reaching 13.3 million at the end of this quarter, compared to 9.2 million at the same time last year and 12.3 million at the end of last quarter.

And finally, since the acquisition of Smilebox the number of premium subscribers has increased to over 403,000 premium subscribers at the end of the quarter, compared to 158,000 the same time last year. We believe that this is a key indicator of the real and long-term value of our strategy.

With that, I would now like to open the call for questions.

Question-and-Answer Session

Operator

(Operator Instructions) The first question is from Jared Schramm of Roth Capital.

Jared Schramm - Roth Capital

So the EBITDA margin for Smilebox was 14% in the quarter. And looking at a year from now, where do you think the potential can be for the margin for Smilebox?

Josef Mandelbaum

We will expect it to actually come up to our profitability. So if our target is between 20%, 25% EBITDA, we would expect them to reach that.

Jared Schramm - Roth Capital

And you threw out some numbers there on the premium users of Smilebox. At the end of the quarter, what percentage of Smilebox users were actually premium?

Josef Mandelbaum

Well, the number that Yacov putout, they're all premium user. The 400,000 was a combine number for all premium users, most of which are Smilebox. And as we mentioned before, there was a big jump we took in Q3 of last year. And basically, that number we didn't disclose and an installed base number for Smilebox and for other products. We have an overall installed base, as Yacov mentioned of 13.3 million, of which we have 403,000 paying premium subscribers.

Jared Schramm - Roth Capital

And during the customer acquisition cost, it looks like you're getting a little more efficient there as far as the spend is concerned. Does it make sense to ramp us up even further, given the fact you're getting better traction here with downloads?

Josef Mandelbaum

It's a great question. Pretty much what you're seeing and you'll see it's in some of the numbers, it's a constant battle, so to speak, between balancing out what's going on around you in the competition, going on within the marketing channels you can invest in and the return you're looking for.

So Yacov mentioned earlier, I mentioned in my comments as well is that, we actually reduced the spend a little bit in Q1, because we were trying to hold for some of the ROI components that we're trying to make sure that we get a good return for not only ourselves as a company, but also shareholders.

And when we look at the competition, in Q1 for whatever reasons and there was a significant spike. And when that happens in the marketplace overall, you have to look at your spending is going to be worth while on the ROI targets you have.

So as we go forward, we're looking at a lot of things we can do to react to the market as we were having doing anyway in our backend system as Yacov mentioned. As well as some things in the front-end to increase our ability, to maintain the ROI targets we have and grow the spend.

So we have become more efficient. And thank you, for noticing that. We are looking to go forward to use that efficiency with some other things that we're doing in the business to really try to increase that in Q2, and Q3 and Q4 especially.

Jared Schramm - Roth Capital

And one last question here in customer acquisition, were some channels performing better in that quarter it looks like? And could you kind of highlight what customer those were?

Josef Mandelbaum

First of all, the channels that usually performed the best, in general, today so are the PPC and affiliate channels. So PPC, as you can imagine is one of the reasons why our friends in Google always do so well, is a very efficient marketplace. Basically you (inaudible) pages people click. What we're doing is we're expanding our reach in terms of where we're able to buy, not because of the systems that Yacov mentioned.

And as we get more efficient in that, we can expand the reach and get the high ROI and that's actually doing well. It's harder to skill that in bigger ways, because you really have to do the incremental steps. But we are seeing some good response in there.

On the affiliate side, we have some good progress there. What happens in affiliates and this is just the nature of the beast. You try out 10 different, 20 different affiliates, and some do really well and some don't. So it's really culling or pruning the trees in order to get that going. I think we have a good base today and we'll continue to testing a lot more and going forward.

I think on the display advertising side, still remains relatively challenging for us, probably the least performing of the ones that we're doing now of those three. We're doing okay, but it's harder to scale at the rates we need to get at. But we are still testing as many things as we can, because as you know, Jared, the marketplace changes all the time.

Obviously, with the Facebook IPO coming out and Facebook potentially as we look at being in competition and the Yahoo! and so on and so forth, the world changes and could be the rates go down significantly other places and we're always looking for points where we can buy media tested out and if it has good return we will wrap up the spending.

Jared Schramm - Roth Capital

And lastly, are there any acquisitions you're looking at right now that you found particularly attractive or you're going to contend with the filling the brain of what you currently have?

Josef Mandelbaum

We've been open. We continue to look at different opportunities. We have a corporate development team here that pretty much, that's all they do all day long. And there certainly are some things, we're looking at. We think interesting. Nothing I'd say that we're prepared to comment on at this point in time and mainly because as you probably know the way these things go, you could be thinking really close, then something happens and nothing happens.

We're really focusing now on companies that are proven profitability, that we think will be accretive from EBITDA standpoint from day one. As we look at growth over the next phase of the business, that's probably our main shift in terms of the filters or everything else remains the same. We're looking for products or services or technologies that help us to address and grow our businesses, whether it's premium research revenue focusing on the user base we're taking about. But really focusing more on profitability now as an initial filter some of the bigger shift, and we think we have some good opportunities. These things take time and we'll see how they go.

Operator

The next question is from Abba Horwitz of Old School Partners.

Abba Horwitz - Old School Partners

Question for you, I won't get into the stock price right now, but there is a few issues here, that I'd like to deal with, one is the payment obligation that’s appears on your balance sheet. Where does that stand today, vis-à-vis payment, at what point do you have to pay and when will this off your balance sheet.

Yacov Kaufman

Well, as I mentioned earlier in my comments, there was a $6.9 or actually it was $7 million accrual for the payment obligation. That actual takes up a couple of days after the end of the quarter. So we already paid that down. And as I continue to mention, we drew down some $10 million in bank debt at very favorable rates both to finance that payment and provide the liquidity going forward.

Abba Horwitz - Old School Partners

Did you end the quarter with about $13 million of cash?

Yacov Kaufman

That's right, $13.5 million.

Abba Horwitz - Old School Partners

So in theory, you didn't really need it for that pay down.

Yacov Kaufman

Correct.

Abba Horwitz - Old School Partners

The other thing is the deferred revenue that appeared on the balance sheet, it looks little bit different this quarter than it did on the comparison quarter, any reason for that?

Josef Mandelbaum

There are two reasons for that, the first reason is the acquisition consolidation of Smilebox and as you go forward, we're accruing there deferral. As I mentioned also, while we acquired the company and going forward, we didn't have the tail of deferred revenues when we acquired Smilebox. That was taken off from the acquisition and therefore you're going to see that number growing as the quarters advance past the Smilebox acquisition, so that's the first change.

The second change, from the very fact that you noticed that is that there is no long-term deferred revenues. And that's stands from the fact, that we changed our product offering from a service offering to a products-focused offering. And therefore in the future, we will not be deferring some of our product revenues. And that's why, we do not have any longer term revenues and it's almost shorts of deferred revenues.

Abba Horwitz - Old School Partners

Now on a go-forward basis, should we read anything into the short-term deferred revenue number? Is that meaningful at all?

Yacov Kaufman

The short-term deferred revenue number is actually the revenues that we've accrued on subscription. That is if you wish already accounted for, meaning that's it's a very good horizon for us to see how the revenues are developing going forward. It depends also on the other product mix, but it's a good number and it will probably stabilize, probably next quarter, once we're 12-month beyond the Smilebox acquisition.

Abba Horwitz - Old School Partners

So that number in theory, I should be watching that to see that grow every quarter?

Yacov Kaufman

Up until the third quarter of this year.

Abba Horwitz - Old School Partners

Also just on a cash flow basis, can you give us a sense what the rest of the year should be looking like, the next I guess three quarters. How you guys are seeing it?

Josef Mandelbaum

I think over the long-term, you're going to find that the cash flow very closely followed. There is a high correlation between the cash flow and the EBITDA. The exception to that would be with regard to media buying. Media buying corps are very much forward-looking and therefore you pay for them upfront so that expense we're spending, we're wrapping up our media buying, you will see that it will take more from the cash flow and we do not see it bounce with regard to the EBITDA.

Abba Horwitz - Old School Partners

So can I assume roughly to $2.5 million for free cash flow for the next three quarters, each quarter?

Yacov Kaufman

Our EBITDA guidance for the year was about between $9 million and $11.5 million. I think we gave an indication for cash flow between $7 million and $8 million, if I'm not mistaken.

Abba Horwitz - Old School Partners

One of the other things is that many of your competitors, if we can call them that, have either gone away or are in serious financial trouble. I'm wondering, Joseph, if you could give us a sense of the landscape out there vis-à-vis your current competitors. Because there have been quite a bit of an issue since you had to renew Google, and many of the other guys out there are having a lot of trouble continuing as a going concern. I'm just wondering, if you'd give us a sense of what you see there on the landscape?

Josef Mandelbaum

I'll define competitors in a second, but I'll put them in two categories. So a competitor in this case, for people on the phone, it's really not a competitor for the user in terms of the actual product. To answer all of those questions specifically, you have to look at competitors, anybody who has a downloadable application that has a business model that has a freemium business model. Meaning they take over search assets as well as the premium assets, anybody is a competitor.

And then if you look at it that way, we are two camps. You have a camp of people who actually since the Google changes and really starting in Q4 of last year and really in Q1 this year, I thought they have probably doubled and tripled their media buying activities, which has caused a major influx in the market of a lot of new downloads. And that has caused, I think for the other half of the group, people have significant challenges in monetizing their base like they use to.

So if you go back two years ago, it wasn't that much competition. They didn't have to be, frankly, on your toes everyday, every minute about things. And there wasn't 20 million downloads a day, if downloadable product try to take over search engines.

Today, you're seeing the men are separating from the mice. So there are some companies out there, without naming names, who are having serious problem, because the Google impacted them both in terms of the rent share amount they were getting as well as the amounts of ads they were able to monetize on a page. And when you get to a destabilization point, for some of these people, who only had media buying as the way of doing business, they can no longer make the advertise work.

So therefore, companies like us, right now, I'd say we're probably in the upward-middle of that group. Not in the big group yet, because that group include some major players, who have hundreds of million of revenue. And they really significantly increase their spend, I mean literally to $25 million to $30 million a quarter, we just spent $2.6 million this quarter, so 10x spent.

What they found is that because of changing dynamics for things, but then spending more money, what they're doing is they're taking over from somebody else, I call the second group, and its low-hanging fruit for them. So that's why the separation is happening. I think we'll see that continue frankly.

And I think for us specifically, we are doing a lot of things now. Frankly, to be even more diligence about how we think about the download process and we think about the user, making sure they are still front and center. But to be candid also, more aggressive against competitors who are taking away our users.

And so I'll give you an example, total download in IncrediMail, using IncrediMail, was down in Q1 to some degree as they are still using IncrediMail, but all the sudden one of our competitors took over the monetization of my IncrediMail user. The good news for us as I mentioned in my comment is, they are still using IncrediMail.

So I have a connection to them hopefully and we have some really good plans, and things we're implementing now, successfully I might add. And we think we captured the monetization for our users. There is a lot of companies out there in the second class I mentioned, don't have that type of product to have the connection with a user, which makes it even more difficult for them to climb out of the hole. And that's where I think you're seeing those two camps go.

And I think we'll see that over the next few quarters. So I think the competition will be fierce. We have to be smarter and better, but how we do it, we think we have some things we're doing and there'll be catalyst for us in the next few quarters. I also think as you mentioned there is some companies who just don't survive the next year in some of the dynamics that are changing in the marketplace.

Abba Horwitz - Old School Partners

Just finally, I know you guys have probably frustrated yourself by this, but a reflection of the current stock price certainly does not reflect the current value nor the cash flows nor the growth of the company. I'm just wondering, currently if you could give us maybe a flavor of what you guys are doing to sort of get the word out. I know it's not always up to you. But the feedback that you're getting from other investors or new investors and what you think can be done to enhance the value of the share price?

Josef Mandelbaum

First of all, yes, we are frustrated and so probably as much as many of our shareholders. So I'll thank the shareholders for being patient. I wish I had a short, easy, magical solution that I don't. I'm not going to pretend that I have one.

I think we have to do two things in my opinion, one, continue to execute on the business. And a good example, that I just talked about. Even taking eye off the ball for a couple of weeks, in the heated up environment and the competition on some of the download market could cause us difficulty. So in fact I think to some degree we caught it that way and we're correcting it.

So we need to make sure at the end of the day that we're executing on the business and focus on execution. And if the results continue to do what they do, I think eventually people will understand that.

In terms of the outreach, we are working with a new IR firm called Hayden IR. We got recommended by many of our existing investors. And we thought it was time for a change, as they did a great job for us and we were happy. But we think it was time for a change given some of the frustrations we all have in the marketplace. And we are excited to work with them. Brett and Mary and Jeff and we think they're going to do a great job for us. We do go to a lot of conferences. We do (inaudible) road shows.

I think the other thing that we need to do, Abba, is, and you said it to me before, the Smilebox acquisition is performing well now. We need another quarter of good performance. So we could gain more credibility. Our revenues need to continue do that. And we need some catalysts, some of which we mentioned in the call, which are the search we are talking about the premium revenues and frankly some of our mobile things we are doing are exciting. May not bring in a lot of revenue to mobile stuff in the short-term, but we think it's exciting and really helps us plan the long-term future, which I think will address some of the concerns I've heard over time, what's the sustainability of the business. And clearly, our whole strategy is around making it more sustainable.

And I think we are showing overtime, we are doing that. And I hope that by executing and doing our job and increasing the revenues and the profits and addressing the sustainability which we have been doing. And the Smilebox acquisition proving itself out with the combination of that plus the Hayden IR team and ourselves going out in the market and getting new interests. I would hope that the stock would openly reflect the true value of what we think we have here.

Operator

(Operator Instructions) The next question is from Kenneth Miller of Nokomis Capital.

Kenneth Miller - Nokomis Capital

I want think more into the decline in the search revenue, how quick would you expect the turnaround, normally I think you'd be facing a tough of couple of quarters, of seasonal decline, but I know that you're placing things in place to reverse the decline. How quickly do you expect that to kind of improve along with your change in the strategy to take effect?

Josef Mandelbaum

The short answer to that question, Kenny, is we think internally we'll start seeing that in Q2 a little bit, and if we're lucky maybe more than a little bit and in Q3 we should see a significant improvement.

Kenneth Miller - Nokomis Capital

Can you give us any more detail on what you're doing to combat this more competitive marketplace or is it more of a competitive secret you'd like to keep to yourself?

Josef Mandelbaum

That is absolutely correct. We are not planning on disclosing that, as I mentioned it is very competitive.

Kenneth Miller - Nokomis Capital

Can you also give me a sense for the magnitude of the customer acquisitions spending increases you're talking about for the next couple two to three quarters?

Yacov Kaufman

Well, as we discussed, when we gave the guidance, our guidance to disinfect we'll spend bout $14 million this year. That was our assumption.

Josef Mandelbaum

So we did $2.6 million in the first quarter. You'd expect us to do roughly $11 million to $12 million more throughout the rest of the year. A lot of that, as we said, will ramp up as we see some of the solutions working and we are doing the testing now and seriously working that we'll ramp up linearly to that. As we see these solutions working, we'll ramp up the spending accordingly.

Kenneth Miller - Nokomis Capital

And back to the search business, have you rolled out search to the Smilebox user base. Do you expect that to provide a bump in revenue?

Josef Mandelbaum

So what we've done in the Smilebox user base is to all new installed on Smilebox, we have rolled it out already. On the existing install base to Smilebox, we have not rolled out search at this point in time yet. It is something we are working on. It is little complicated and we actually, frankly we want to be very careful in terms of how we do that in the most efficient way and frankly user-friendly way.

So we're not feeling pressured to say, we want to gain x dollars, so let's do it. The way we're looking is the consumer first and saying how we do it in a way that makes sense to them.

Kenneth Miller - Nokomis Capital

Are new Smilebox users have a significant percentage in this search revenue or is it still pretty mall to date?

Yacov Kaufman

It's relatively small to date. I mean it's growing but it's relatively small to date.

Operator

There are no further questions at this time. Before asking Mr. Mandelbaum to go ahead to with his closing statement, I would like to remind participants that a replay of this call will be available in three hours on the company website at www.Perion.com. Mr. Mandelbaum, would you like to make your concluding statement.

Josef Mandelbaum

Thank you.

In closing, our business is strong, the Smilebox acquisition has proven to be successful and we have numerous growth catalysts in the next few quarters.

1. The implementation of new solutions to increase monetization from our installed base;

2. The introduction of new mobile and tablet products; and

3. A good pipeline of profitable acquisition opportunities.

I would like to thank the entire Perion team in Tel Aviv and Seattle, for another successful quarter and extend my sincere thanks to all of our customers for their continued support.

Thank you very much and have a nice day.

Operator

Thank you. And this concludes the Perion first quarter 2012 results conference call. Thank you for your participation. You might go ahead and disconnect.

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