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Executives

Josef Mandelbaum – CEO

Yacov Kaufman – CFO

Brett Maas – IR, Hayden IR

Analysts

Jared Schramm – Roth Capital

Aram Fuchs – Fertilemind Capital

Perion Network Ltd. (PERI) Q2 2012 Earnings Call August 8, 2012 10:00 PM ET

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Perion second 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 IR.

Brett please begin...

Brett Maas

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 2012. The press release detailing the results is available on the company’s website at 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. Welcome to our second quarter earnings call. This morning, I’d like to focus my comments on a review of our record second quarter and first-half results, and to highlight some of our exciting initiatives for the remainder of the year. I will then turn the call over to Yacov, for more details regarding the financial results before opening up the call for questions.

The second quarter was another great quarter for the company and the 26th consecutive quarter of growth on a year over year basis. After a lot of hard work and investment in our backend systems, as well as refining and optimizing our media buying capabilities, we seem to have hit an inflection point with our search business in the middle of the second quarter. We are very optimistic that this trend will continue in the second half of 2012 and beyond. Therefore, we are increasing our non-GAAP guidance for 2012 to the range of $50 - $52 million in revenue, and to $10.5 - $11.5 million in EBITDA.

Non-GAAP Revenues in the second quarter increased by 53% year over year to $12.3 million dollars, primarily as a result of an increase in product and advertising revenues. Our product focused strategy enables us to continue to communicate with our users while increasing their life time value to Perion.

Search revenue was up 15% compared to the previous quarter, as a result of steps taken to recapture the monetization of our existing users and better protect the monetization of our new users.

In addition, we have significantly enhanced our ability to track our marketing efforts and rapidly adjust our programs to maximize their effectiveness. This in turn has dramatically improved the return on our investment.

We are pleased to report that, as a result of these efforts, June was a record revenue month for us and we see that trend continuing into the third and fourth quarters. As I have mentioned all along, building the proper fundamentals take time and discipline, but we have made significant progress over the last year, enabling us to scale the business and accelerate growth.

More exciting news for us this quarter continues to come from Smilebox as it grew revenues by 30% in the quarter and continues to be cash flow positive and profitable, with an 18% EBITDA margin this quarter. Smilebox has been exactly the acquisition we thought it would be. It has significantly enhanced our premium revenue, providing a stable, recurring, revenue stream and has helped us diversify our revenue base providing a larger profitable platform for growth.

We have also strategically positioned ourselves to address new mobile and tablet platforms. We have begun, and intend to further develop and offer, a range of iPhone, iPad, Android and Windows Mobile / Surface products over time, to answer the increasing penetration and demands of our primary target audience. We believe this is of critical importance for Perion, and one that will serve as the basis for our growth in the future, as mobile devices, and especially tablets, are an ideal platform for our products and consumers.

While we already have a few mobile products, including Smilebox mobile, we need to do more now to establish a leadership position with our audience. I am excited to announce that we expect to launch a revolutionary new email app, that for the first time will make your email enjoyable. We expect to launch for the iPad later this year. We will also be releasing major upgrades to our photo offering on mobile platforms and we look to add additional products over the coming quarters.

As we look ahead to the coming quarters, we expect significant growth in revenues and profits, resulting from the investments we’ve made to date.

Now, I would like to turn the call to Yacov. Yacov….

Yacov Kaufman

Thank you Josef.

As in prior quarters, 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 $12.3 million, up 9% from the previous quarter and up 53% from the second quarter of 2011. In the first half of 2012, revenues increased 41%, from $16.7 million in the first half of 2011, to $23.6 million in the first half of 2012. The increase was due to product sales increasing four-fold, partially offset by a small decrease in search generated revenues, experienced in the first quarter of 2012 and since remedied. In fact, late in the quarter, we experienced a sharp acceleration in search revenue. Search revenue for the month of June was up 76% compared to May this year, and up 67% compared to June of 2011. This improvement in search revenue gives us ample optimism for the second-half of this year, and was a key factor in our increased guidance.

This quarter’s revenues included $6.4 million in search generated revenues and a dramatic increase in product sales from $1.2 million in the second quarter of 2011 to $5.1 million this past quarter. As Josef mentioned, this growth is primarily attributed to our Smilebox product.

Product sales grew four-fold from $2.5 million in the first six months last year to $10 million in the first six months of 2012. This demonstrates one of the strengths of our business, having multiple revenue streams, providing for consistent growth.

As we mentioned in previous calls, since the Smilebox acquisition, there is a difference between GAAP and non-GAAP revenues. This quarter, it amounted to $0.3 million, and was $0.9 million in the first half of 2012. This difference will gradually decrease through the next quarter of 2012, one year post the closing of the acquisition.

Gross profit in the second quarter of 2012 was $11.5 million, up 10% sequentially and up 51% from the second quarter of 2011. The gross profit margin remained healthy at 93% this last quarter, compared to 94% in the second quarter of 2011. The $0.3 million difference between GAAP and non-GAAP revenues, together with $0.3 million in amortization of intangible assets, provided for the $0.6 million total difference between GAAP and non-GAAP gross profit in this quarter. With gross margins exceeding 90%, we maintain a compelling business model. This level of profitability is a key reason we are investing in marketing and customer acquisition, to accelerate our top-line growth and subsequently increase profitability.

In the first six months of 2012, gross profit increased 38%, reaching $22.0 million, or 93% of revenues, compared to $15.9 million, or 95% of revenues in the first half of 2011.

Research and Development expenses for the second quarter of this year were $2.4 million, compared sequentially to $2.6 million in the first quarter, and compared to $1.4 million in the second 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.

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 second quarter of 2012, excluding customer acquisition costs, were $1.3 million, compared to $0.9 million in the second quarter last year, prior to the Smilebox acquisition, and $1.4 million in the first quarter of 2012. The changes are primarily due to the sales and marketing expenses from Smilebox.

In the second quarter of 2012, we invested $3.9 million in customer acquisition, compared to $2.6 million last quarter and $1.7 million in the second quarter of 2011. The increase was in conjunction with the improvement in the return on investment and the enhancement of our back-end systems.

Typically, over half the return on investment is received in the quarter the investment is made, so in this case, we expect to see the remaining return on investment primarily in the third and fourth quarter of this year.

In the first half of 2012, CAC was a $6.5 million, compared to $2.3 million in the first half of 2011. We believe this important investment will enable us to continuously grow our revenues, and as I mentioned, we are already enjoying the fruits of this expenditure.

Since the third quarter of last year, we have been ramping up this investment, increasing it almost three fold year-over-year, in order to accelerate our growth. We plan on continuing to increase our CAC investment, however, as a result of investments already made, we expect profits to increase despite the increased investment.

General and Administrative was $1.4 million in the second quarter of 2012, similar to the previous quarter and in the second quarter of 2011. Our ability to maintain this level of G&A has significantly reduced the G&A expense as a percentage of sales from 18% in the second quarter of 2011 to 12% in the second quarter of this year.

GAAP Operating expenses in the second quarter of 2012 included $0.2 million of share based compensation, and $0.5 million for amortization of acquired intangible assets, which were adjusted for in the non-GAAP numbers. In the second quarter of 2011, these expenses totaled $0.5 million, attributable to share based compensation and acquisition expenses related to Smilebox.

In the second quarter of 2012, EBITDA was $2.7 million, increasing 13% compared to second quarter last year, despite the $2.3 million increase in CAC, as the return on this investment started to take effect. In the first half of 2012 EBITDA was $5.3 million, decreasing $0.8 million from $6.1 million in the first half of 2011, primarily due to the $4.2 million increase in CAC. Specifically, the $3.3 million CAC for search generated revenues this quarter, created a $1.5 million negative EBITDA in the 2012 periods, all of which and more are expected to be covered already in the third quarter of this year.

While EBITDA increased year over year, due to a $0.3 million increase in finance expenses, net income in the second quarter of 2012 decreased year over year by $0.1 million and was $1.8 million or $0.18 per share. The increase in finance expenses was associated primarily with the bank debt drawn down in the beginning of this quarter. In the first half of 2012 net income was $4.0 million, or $0.40 per share, compared to $4.9 million, or $0.48 per share, in the first half of 2011.

In the first half of 2012, GAAP cash flow from operations was $2.5 million compared to $4.1 million in the first half of 2011. The decrease in year-to-date cash flow from operations, compared to the first half of last year, is primarily due to the increase in search revenues receivable coupled with investments in CAC. As of June 30, 2012, we had cash and cash equivalents of approximately $16.3 million.

Looking forward we believe that Perion will report sequential and year over year improvements in all key financial metrics, including cash flow from operations, throughout the rest of 2012.

With that, I’d like to open the call to questions.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) The first question is from Jared Schramm of Roth Capital. Please go ahead.

Jared Schramm – Roth Capital

Congratulations on the quarter.

Josef Mandelbaum

Thanks, Jared.

Jared Schramm – Roth Capital

Turning to R&D spend, Josef I think you mentioned that it will be confident at current levels. Was that an absolute dollar amount or is that a percentage of revenue?

Josef Mandelbaum

That was at the percentage of revenue. We are continuing our R&D expense and as we mentioned earlier in the call we are also focusing now on the mobile platform and the iPad. So we see it increasing normally, but as a percentage of field we expect it to remain what it is today.

Jared Schramm – Roth Capital

Okay. And now turning to CAC, you seem to be getting more efficient there as well in the quarter. Growth in that metric, can we kind of anticipate the same level of growth we’ve been saying for last several quarters here on a year-over-year basis as you really ramp up and leverage the back-end half that you built up for last year?

Josef Mandelbaum

Yes. I believe we expect to see the same type of growth and frankly I think – we think we are going to get a little stronger growth in the back half of the year.

Jared Schramm – Roth Capital

Okay. And, but turning to customer acquisitions, with the efficiencies there, does it make sense to even ramp that up a little more aggressively than we’ve been seeing?

Yacov Kaufman

Well frankly we’re doing that very prudently. In other words we’re leveraging our new capabilities in the back-end system. However, we do wish also to increase our profitability so that we will be accelerating our growth, but we will be increasing our profitability as well.

Jared Schramm – Roth Capital

Okay. And I think you mentioned Smilebox, you saw 30% the year-over-year revenue growth and now at an 18% EBITDA margin obviously does appears they’ve been a great success from the initial date of acquisition. Just some high level thoughts on where Smilebox stand today versus expectations originally. And secondly, how many of these Smilebox type acquisitions are you currently looking out in the marketplace today?

Josef Mandelbaum

Sure. I’ll suggest the first part of the question. Smilebox today is doing, I would say slightly better than our initial predictions when we bought the company. We had – I think we fairly well understood what we are buying and how we could enhance it and continue to grow and with the profits. So I think to say that it was a big price to us, it wasn’t I think and potentially to some of our investors it was a big surprise, but the rest were actually very happy with it and what we’ve accomplished there and frankly we see it continuing as we go forward, I think the opportunity for Smilebox in the photo space, there is a lot happening today in activity and we think the amount of invasion will lag that activity as we go forward, but we’re in a good position for a company of our size to get our shares on market spend.

With regards to other companies, we believe there are – there is a very good pipeline of companies out there that are similar to Smilebox. We have a good pipeline of our own and we’re aggressively pursuing deals that make sense. I think the one thing we would say there will be a difference between what we did with Smilebox is we’re focusing obviously a little bit more on our future acquisition or acquisitions we do that they will be accretive and profitable from day one.

Whereas Smilebox, because we knew it’s ultimately well, we knew we could turn it around very quickly which we did. Going forward, we believe it’s a little more prudent given our current levels of cash and the current state of business to focus on similar types of business in terms of the state of the business of the Smilebox, but with profitability of writing in hand so that could be accretive in the – from day one.

Jared Schramm – Roth Capital

With these future acquisitions, will they be roughly the same size as Smilebox or smaller?

Josef Mandelbaum

I think they will be in a range frankly between the size of Smilebox, maybe a little bit bigger to $5 million to the range of Smilebox a little bigger in that range. We’ll come from that range and obviously we will look to use a combination of our equity and our stock and our cash prudently, but we’re going to make sure dimension is going to be accretive from day one.

Jared Schramm – Roth Capital

Okay. Well congratulations on the quarter and the progress. Thank you.

Josef Mandelbaum

Thank you. Thanks, Jared.

Operator

The next question is from (inaudible). Please go ahead.

Unidentified Analyst

Good afternoon. And great results guys.

Josef Mandelbaum

Thank you.

Unidentified Analyst

Maybe you can give us some more color about the search side of the business, maybe about some colors about the competition about how aggressive things are on the bidding side, advertising and Fine Media. And maybe some color about how did you manage to grow so fast in (inaudible) the return you expect? Thank you.

Josef Mandelbaum

Sure. Thanks for joining the call. If I understood the question, it’s a three-part question, so I’ll answer the first part.

What do we see in the marketplace with regards to competition and I think you’re specific on pricing ground competition. There was no question in the past frankly three or four quarters as that the industry has heated up and there has been a lot of activity in the search generated distribution business model.

Because of that, there clearly is a pricing pressure – upward pricing pressure that will ultimately lower the ROI on a lot of different players in industry. I think the key factor and we’re seeing that in certain places. Obviously the most sophisticated systems you have, allows you to better adopt and to have better results. And I think our comment, because you’ve made a comment that it seems like we’re going so quickly, I would say actually that it’s taken us time through investments in the back-end systems to actually get us to the place we’re at now.

I think we said it a little along, it – this is – it’s a marathon, it takes time to build up the systems and make it scalable. I think what we’re seeing now is the fruits of our labor. We’ve hit in an inflection point where we think our system while not perfect, are much better than they were before which allows us to compete favorably in that competitive – in this landscape, that’s number one.

Number two, cover on the media buying. I think as Yacov mentioned before, we’re really striving, first of all I think we’ve grown media buying since when I joined the company they were doing about $1.5 million to $1.8 million for the year. As you can see in Q2 alone we doubled that. So we think we’re making good progress on the media buying efforts. We’ll continue to do that as we look to leverage our systems and investments we’ve made and we will – but we’re going to balance it out with making sure that we also increase the profitability as we go forward.

We believe that’s the prudent way of running the business and not just running to frankly get any dollar at any cost going forward. So we’re not going to do that at this point in time. But we think there is enough growth and with good discipline that we can make some good revenue growth as well as profits.

And then lastly, which is expected returns, in this business what you see is not, I can summarize it on a global basis, but it’s really misleading. There are certain countries where your acquisition costs is very low, but your ROI is frankly about 200% and then other countries where your amount of revenue can maybe much higher but your ROI is lower. So you always looking to balance out those two things as you go forward and the systems we built actually allow us the visibility on a country basis, on a campaign basis, on a daily basis to look to optimize the revenue trade-off with profitability and return on investment trade-off.

And we’re very optimistic and confident that what we have we’re just getting to the tip of iceberg and we think we can increase that as we go forward and frankly there is a lot of optimization on the other end both in buying media, looking to buy in better places, more targeted places, sometimes more global shotgun approach, we buy a bulk of media to get a number of downloads as well as optimization on the search result stage. There is a lot of work to be done there as well, which really could increase the amount of revenue yet per click on a paid sponsored link. And we’re doing both and we’re seeing very good returns and we expect that to continue.

Unidentified Analyst

Okay. Very encouraging. Thank you very much.

Josef Mandelbaum

Thank you.

Operator

The next question is from Aram Fuchs of Fertilemind Capital. Please go ahead.

Aram Fuchs – Fertilemind Capital

Hi, I have a couple of questions here. The expense reduction on C&A, just curious what brought that on and why you think that that is near permanent.

Yacov Kaufman

First of all, hi Aram, thanks for joining the call. And to your question, actually I think it’s been stable, it’s been stable now for number of quarters. And we see that quite an achievement, but we’ve been successful in doing it scaling the business once we’ve already created the foundation for accommodating a larger business. So basically, what happen was, when Josef has joined the company, he said, well we have to strengthen management and we have to strengthen the basis for creating a larger and more comprehensive business. So that has been about $1.4 million ever since like the fourth quarter of 2011 or so.

There was a slight reduction compared to last year. Last year we did have some other expenses with regard to both, with regard to compensation and with some all the life of some of the transition we did. We believe that we’ll (inaudible) think well at this level that we have today.

Aram Fuchs – Fertilemind Capital

Okay. But there was a drop from Q1 to Q2, right, is 2 million in Q1, 1.5 million…

Yacov Kaufman

Well Q1 and Q2, in Q1 our G&A, our non-GAAP G&A expense in Q1 was $1,450,000 and this one, this quarter is $1,440,000. So it was really very close. The main difference when you’re looking at the six months numbers is because of what’s happening last year that was just slightly higher that’s all.

Aram Fuchs – Fertilemind Capital

Okay. And then can you remind us, what was the business purpose for changing some of these subscriptions on a more permanent sale, how did that help the customer or the company? Can you talk about that?

Yacov Kaufman

Sure. Yes, sure. Basically what the company was transitioning from an open-ended service commitment to more of a product model and that is, if I sell somebody a license fee or perpetual fee rather than refer to that as subscription which means an ongoing relationship between the customer and our servers and the dependency of the customer on our infrastructure what we did was we moved the product so that there should be local on the conclusion of computer so that the consumers no longer depends on us and the product is all by the consumer. So that model enabled us also to discontinue an ongoing dependency, which we believe is both good for the consumer and both – and good for us financially.

Josef Mandelbaum

Just to add one more thing Aram, so from the consumer standpoint, first of all, we’ve heard only positive feedback on the changes. And really just setup their experience because now everything is local and they get all the content and they can do it much quicker in a better experience. So it did have both a consumer benefit as well as the financial benefit.

Aram Fuchs – Fertilemind Capital

Okay. And then, Josef, you mentioned that you’re looking forward to this launch of what you call revolutionary iPad app. Obviously email and applications in general are moving from a basic desktop to something that access data from the cloud and is available on different devices. Can you – in that context, can you tell us why you think this is revolutionary?

Josef Mandelbaum

Sure. First of all, it’s interesting you bring up the point, Aram, but actually the world is moving more back to what I call, people call desktop and, but, our desktop incredibility is just an app. Everything is based in the cloud. It’s just a conduit to allow you to access your data. It totally syncs, we have new versions on the desktop. There are imap compatible which means it synchronize compatibility with your Gmail or your Yahoo! Or Hotmail or what have you. So it just automatically does that, so it’s all cloud based, but the way it actions it frankly is on your desktop.

We think the world is moving towards applications as you said which frankly place to our strength. We’re a company that – we’re internet software type of company that knows how to build applications where ex-presence residents on someone’s local hardware could be a phone, could be a tablet, could be a desktop and allows a data is stored in the cloud whether by us or somebody else and we look you access it. So we are giving the world moving towards is actually great for us as a company because it takes advantages of our skill sets, but also the consumers get much more use of downloading applications, which both we think will have a benefit maybe a couple of years now, but a benefit on the desktop as Apple moves to – as an Mac moves to app store on the desktop as Windows metro move to an app model on their desktop. People will be much more used to and in fact we think the downloading of apps will increase, which I think allows us with our product to be, to have our legs up so to speak. Put those in each position.

The uniqueness of the email iPad app that we’ll be launching in the few months hopefully is really the way we’re re-thinking how you interact with email and the only way you’re really going to see that as when you see the product which this one time we’re not prepared to show, it’s the one of their app, so we’re getting both, internally we’re very excited about it and we did an usability testing, consumers and they’re very excited about it. We think that it really changes the paradigm of how someone interacts with email and in front with other communications. It just you’ll also get Facebook messages in there, the ones you will obviously hook it up as well with Twitter and other forms of communications as well. So we’re excited about that and to be candid, you got to wait a little bit and see but we’re very excited about the opportunity.

Aram Fuchs – Fertilemind Capital

Okay. So when you call, you called it an email app in the press release. It sounds like it’ll be more multifaceted communications hub to use it.

Josef Mandelbaum

Correct. Yeah it was harder to write down in the press release, the multifaceted market.

Aram Fuchs – Fertilemind Capital

Perfect, all right (inaudible).

Josef Mandelbaum

Now what does that mean?

Aram Fuchs – Fertilemind Capital

All right. Okay. And then one more question on the presentation of your results, you didn’t mention subscribers, you used to mention that. Is there a particular reason why you decided to not calling out the subscriber count?

Josef Mandelbaum

No, actually we did announce, just a matter of what we put in and what we didn’t put in, in the press release going forward. But the subscriber count went up to roughly 413,000.

Yacov Kaufman

No, went up to actually over 0.5 million. We had 0.5 million subscribers. The number continues to trail upwards. Obviously most of the increase is coming from the Smilebox and we kind of actually, Josef was correct, that was 413,000 subscribers that we had in this quarter.

Aram Fuchs – Fertilemind Capital

Okay. Okay, and then you started moving to debt this quarter I’m just curious what you think you’re comfortable with in terms of working capital and remind us that the debt terms are just the fix rate over LIBOR and that that becomes fixed once you drive down, right?

Yacov Kaufman

That’s correct. With regards to working capital, as you can see the debt is so structured than most of its long-term so that we have very positive working capital. And also going forward, this quarter we believe was an anomaly. Because of our ramped up growth, our cash flow from operations was negligible, but going forward, we expect to have positive cash flow from operations and then in the coming quarters so that we see our working capital will increase.

Josef Mandelbaum

And if I can add this a little color to yourself and people on the phone, to be a little more specific, as our systems are ramping up I think we mentioned this in our last phone call, we did a lot of testing starting March, April and beginning of May. So actually a lot of customer existing cost was backend loaded in the second quarter which is why that have the impact Yacov just mentioned.

On a steady state basis you won’t see that, but since we were more conservative at the beginning of the quarter and towards the end of Q1 as you remember, we were much more aggressive in the second half of the quarter which led to the higher expenditure in that second half.

Aram Fuchs – Fertilemind Capital

Okay. And then last question, this term search revenue receivable, that’s not a receivable on the conventional sense. You’re saying if the revenue comes in as predicted according to your model.

Josef Mandelbaum

No matter, this is as traditional as it comes. Google and other search providers vow us that money contractually, that’s a real receivable. What happens is, is that active search revenues grow when you have the end of the month cut-off, direct use and even trade receivables increased dramatically. We had $2 million of search revenues in June alone, okay so that our receivables are increasing.

Aram Fuchs – Fertilemind Capital

Okay. So it is that in this trade receivable line under current asset.

Josef Mandelbaum

Yeah, that’s correct.

Aram Fuchs – Fertilemind Capital

That’s part of it. Okay I didn’t – okay I follow-up offline with my question. Okay great. Thanks a lot for your time.

Josef Mandelbaum

Thanks, Aram.

Operator

(Operator Instructions) There are no further questions at this time. Before I ask 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

Yes, thank you. As some of you may recall, this earnings calls marks my second anniversary with the company. As I look back on the past two years I am very proud of what we have accomplished. The foundation of our business is stronger today that it ever has been, specifically we have reignited growth and we’ll have increase revenues roughly 80% by the end of the fiscal year maintain 25% EBITDA margins while investing and improving our infrastructure as well.

In addition, we’ve added management counts and debt strengthened our Google partnership successfully increased media buying with a positive ROI and diversified revenues with a highly successful Smilebox acquisition.

We also have a number of exciting growth catalysts ahead of us in the next few quarters including the resurgence of our search revenue which we believe we’ll continue to grow and it’s sustainable and introduction of some new Tablet and mobile applications that we are confident we’ll strike accord with consumers.

Lastly, I would like to thank the entire Perion team in Tel Aviv and Seattle, for another great quarter and their unyielding dedication and focus effort in delivering the results Yacov and I just mentioned. Thank you very much and have a nice day.

Operator

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

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