Transcript שדגשדג

Presentation for the Capital Market
May 2014
www.perion.com
1
Forward-Looking Information
This presentation was prepared by Perion Network Ltd. (“the Company”) as a general presentation
All forward-looking information is solely intended for the date that it relates to. Other than the
about the Company.
obligation to disclose information as required under the securities laws applicable to the Company,
the Company is not required to update or change any information included in this presentation,
This presentation is not intended to replace the need to review the Prospectus dated May 18, 2014,
whether as a result of new information, a future event or other reasons. Similarly, it is clarified that
and the documents incorporated by reference therein, before making a decision regarding an
the plans and strategy of the Company included in this presentation are correct as of the publication
investment in the Company’s securities. In the event of any conflict between the contents of this
date and may be changed in accordance with the decision of the Company’s board, as it may be
presentation and the reports of the Company required by law, the contents of the said reports shall
from time to time.
govern.
Other than trademarks owned by the Company, the trademarks contained in this presentation are
The information included in this presentation shall not constitute any advice, recommendation,
the property of their owners and have been used in this presentation for the sake of clarifying the
opinion or offering regarding the profitability of an investment and shall not replace an independent
context alone. Use of the trademarks as stated shall not be interpreted as consent or verification
examination and personal consultation in accordance with the particular circumstances of each
regarding the Company’s plans, services or securities.
investor.
This presentation does not purport to contain or exhaust all of the information which may be relevant
This presentation may include forward-looking information as defined in the Securities Law, 5728-
for any decision regarding an investment in the Company’s securities.
1968, including forecasts, estimations, assumptions and other information regarding future matters
and events. In certain cases, forward-looking information may be identified through use of terms such
For the avoidance of doubt, it is clarified that the Company does not undertake to update the
as: “expected”, “believes”, “may”, “estimates”, “anticipates”, “intends”, “continues”, “might”, “plans”,
information included in this presentation. This presentation does not constitute or play a part in any
“projects”, and other similar terms and phrases.
offer or solicitation to purchase the Company’s securities and does not constitute or play a part in a
solicitation to receive offers as stated. Such an offering will only take place by means of the
The forward-looking information in this presentation is based on the updated estimations and
prospectus published by the Company, after the receipt of the permits required from the Securities
assumptions of the Company’s management as of the presentation date, which although the
Exchange and the Tel Aviv Stock Exchange. In any event of conflict or inconsistency between this
Company believes to be reasonable, are uncertain by nature. The forward-looking information
presentation and the prospectus, the provisions of the prospectus shall govern. The presentation
involves risks and uncertainty, including factors which are not under the control of the Company,
also does not constitute any recommendation and/or consultation regarding the Company’s
each of which, or a combination thereof, may materially harm the results of the Company’s
securities.
operations and cause the actual results to be materially different from the forward-looking
information.
www.perion.com
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Business Card
About Perion
 Global and leading media & Internet company that operates in search and digital distribution industries
 Provides advanced distribution and monetization solutions to applications and software developers
 International management team with a proven track record in dynamic and changing markets
• Josef Mandelbaum, CEO - more than 20 years of experience in the Internet & Mobile industries
• Yacov Kaufman, CFO - more than 25 years of experience in international corporations
 Consistent rational growth in revenues and profits without substantial debt
 Commitment to high quality standards
*inc. Client Connect
www.perion.com
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Leading financial data
Strong financial outlook for 2014
Q1 2014 Results: Growth
• Revenue of $460-470M
• Revenue of $117.1M
• EBITDA of $125-130M
• EBITDA of $33.6M
• Net Income of $103-108M
• Net Income of $27.6M
Financial results for 2013 (Pro forma*)
March 31 2014 Balance sheet: Strong & without leverage
• Revenue of $433M
• Cash flow from operations: $13.9M
• EBITDA of $90M
• Working Capital**: $16.8M
Market cap of ~ NIS 2.4 billion (15.05.2014)
• Listed on NASDAQ
• Bank debt: $6.1M
• Total equity: $198.9M
• Listed on TASE
*Inc. ClientConnect, GAAP reconciliations are included in Appendix
www.perion.com
**Inc. Deferred revenue
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Strong financial performance
Revenue growth
(USD millions pro forma* non GAAP)
57%
433
~ 7%
460 - 470
39%
276
2012
2013
2014F
*Perion & Client Connect. The data does not include in 2012 substantial bonus from Bing to ClientConnect. GAAP reconciliations are included in Appendix
 2013 EBITDA of about $90.2M (about 21% of revenues) without significant debt
 2012 EBITDA margin of more than 20%
www.perion.com
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Business development timeline
2000
Company’s
foundation under
the name of
IncrediMail
2006
Nasdaq IPO
2007
TASE Listing
2010
Josef Mandelbaum
joins as CEO
2011
Smilebox
acquisition
Company name
change to Perion
2012
Sweetpacks
acquisition
2014
Client Connect M&A
Successful operations in dynamic and changing market, while performing mergers and acquisitions that complement
strategic gaps
www.perion.com
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The value proposition
Perion provides app developers with a portfolio of solutions
which enable them to efficiently distribute, generate revenue
and optimize their software/app while focusing only on what they
do best: making a great product
www.perion.com
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Value chain of the Internet industry
Search engine
(payable click)
Advertiser
App developer
Quality App
Users
Advertiser
(advertising
revenue)
Revenue from Advertising
$$$
App’ distribution
Revenue from Advertising $$$
Perion
Receives ads and search services $$$
Quality App
App’s final user
Mature and proven business model that Internet industry in general and search engines in particular are based on
www.perion.com
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Internet and mobile advertising continue to grow sharply
Mobile Ad
Internet Ad
Mobile ad spending from total global display advertising: ~16% in 2013.
~27% in 2015
Paid search represents about 48% of all internet advertising revenues
Mobile Ad Spending (USD B)
Global Display Advertising Spend (USD B)
70
70
60
60
59.7
50
47.2
40
20
30
15.8
2011
10
8.8
0
2012
46.9
40.7
40.2
33.7
11.0
11.5
12.0
12.6
2012
2013
2014
2015
0
2013
2014
2015
2016
2017
Total Display
Mobile Ad spending
Source: eMarketer 2013
www.perion.com
48.2
20
24.9
4.0
53.6
40
35.5
30
10
50
61.4
57.6
Source ZenithOptimedia
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Classified
Paid search
App developers are coping with significant business challenges
Distribution
Monetization
Optimization
• Buying traffic is extremely
• The business model is based on
• Most app developers are small
complicated, due to multiple
technologies and platforms
• 1 out of 4 apps never get
installed, mostly for technical
reasons
free software
businesses without analytical
• Search engines do not adjust their
capabilities required to:
business proposal for software
• Improve funnel conversion
developers
• Revenue per user (LTV)
• It is difficult to navigate through
advertising networks
• 80% of the developers fail to
establish a profitable business
tracking
• Maximizing distribution
channels acquiring with a
positive ROI
There are relatively little profitable applications. Of those, few manage to earn more from $ 5,000
www.perion.com
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Perion’s value proposition: Profit generating business model for application
developers
Distribution
Monetization
Optimization
• Marketing and media channels
 Revenue share on revenue from
 Real-time BI platform based on
driven by Business Intelligence
• Dominant player that purchases
media at significant scale media
• Fast Download Manager that
recommends additional
sponsored links with search
engines - Google, Yahoo, Bing and
Ask
huge amount of data
 Extremely accurate ROI models
 User friendly analytical and
 Segmented and customer
reporting tools for developers
orientated advertising
applications to the end user
Perion provides a wide range of digital media and web applications solutions that assist applications developers to
increase their content’s distribution and monetization capabilities
www.perion.com
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Perion increases it’s presence in the U.S. market Vs. competitors (Ask, AOL)
US Search Market Share
Miilion US Queries
(March 2014)
600
80.0%
70.0%
67.5%
500
60.0%
400
50.0%
300
40.0%
200
30.0%
18.6%
20.0%
100
10.1%
10.0%
2.5%
2.1%
1.3%
Ask
Perion
AOL
-
0.0%
Google
Microsoft
Yahoo
Ask
Source: Perion’s data & comScore Explicit Core Search Query Report
www.perion.com
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Perion US searches
Agreements with search engines
Search engine
U.S market share
(January 2014)
Cooperation starting
year
Contract period
Google
68%
2007
August 2015
Bing
18%
2010
December 2014
Yahoo
10%
2013
July 2017
Ask
3%
2013
March 2016
*Agreements with search engines renewed every 1 to 4 years
Positive reputation among search engines
www.perion.com
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Business strategy
 Strengthening of competitive position and leveraging of scale in the Internet search segment
 Strengthening and expanding activities with app and content developers
 Ensuring value proposition for app developers and end-user with full transparency
 Expanding mobile activities and user centered advertising
 Maintaining technological leadership through organic investments and mergers and acquisitions
Extension and expansion activities towards attractive and growing segments that improve Perion’s business and
financial positioning
www.perion.com
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From S&P Maalot credit rating repot: ilA-/Stable (06/03/2014)*
 “The rating of Perion Network Ltd (hereafter: "Perion") is mainly supported by a low-risk financial risk profile as reflected by
strong debt coverage ratios”
 “We estimate that the company's adjusted debt to EBITDA ratio will be lower than 1.5x over the intermediate term,
including M&A activities”
 “Our financial risk profile assessment is also supported by the operations of the company, which generally generate positive
free cash flows supporting its debt service capabilities”
 “We believe that Perion’s merger with "ClientConnect" strengthened the company’s competitive position as well as its debt
servicing capabilities”
 “In our view, over the intermediate term, the company will direct its internal resources to growth initiatives and will not execute
material dividend distribution/buybacks. In addition, we estimate that acquisitions over the near term (up to 1 year), if any, will be
funded through debt, and possibly also with an equity component. As previously indicated, we do not expect such acquisition
activity to lead to a breach of the coverage ratios which we view as commensurate with the current rating”
*Partial quotes. For more information on Perion Network’s credit rating, see S&P Maalot rating report published March 6, 2014.
www.perion.com
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Summary
 Perion is among the worldwide leading companies in the search industry and digital distribution
 Perion is the second biggest worldwide search services distributor
 Business partnerships with leading search engines
 Financial strength reflected in high growing profits over the years
 Expansion of operations towards attractive segments
 Maintaining technological leadership through mergers and acquisitions
 Professional management and quality human capital with years of experience and a proven track record in dynamic
markets
 Standards of a company listed on NASDAQ
Perion has grown from a small scale company that focused on developing end user’s products to a global leader with a
platform of services and a wide range of revenue streams, along with valuable experience which will enable the Company
to take advantage of future business opportunities
www.perion.com
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Appendix
www.perion.com
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GAAP Reconciliation
GAAP revenues
Revenues from discontinued operations
Valuation adjustment on acquired deferred product revenues
Non-GAAP revenues
Quarter ended
March 31 2014
114,823
2,292
117,115
GAAP net income
Valuation adjustment on acquired deferred product revenues
Acquisition related expenses
Share based compensation
Amortization of acquired intangible assets
Accretion of payment obligation related to acquisitions
Taxes related to amortization of acquired intangible assets
Non-GAAP net income
13,816
2,292
2,948
4,436
4,500
268
(662)
27,598
Non-GAAP net income
Income tax expense
Interest expense (income), net
Accretion of payment obligation related to acquisitions
Taxes related to amortization of acquired intangible assets
Depreciation
Discontinued financial income, net
Discontinued tax benefit
Non-GAAP EBITDA
27,598
4,622
393
(268)
662
555
33,562
Perion GAAP reconciliation (in USD 000')
www.perion.com
Perion GAAP reconciliation (in USD 000')
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2013
GAAP revenues
Revenues from discontinued operations
Sales from commercial agreement deducted as intercompany transaction
Non-GAAP revenues
412,657
3,016
17,480
433,153
GAAP net income
Sales from commercial agreement deducted as intercompany transaction
Customer acquisition costs associated with unrecognized sales
Acquisition related expenses
Share based compensation
Amortization of acquired intangible assets
Finance expense deferred
Non recurring tax benefits
Non-GAAP net income
28,926
17,480
(14,334)
8,278
13,163
9,269
751
8,876
72,409
Non-GAAP net income
Income tax expense (benefit)
Finance expense related to discontinued operations
Tax credit on loss from discontinued operations
Non recurring tax expense
Interest expense (income), net
Finance expense deferred
Depreciation and amortization
Non-GAAP EBITDA
72,409
25,067
(40)
454
(8,876)
(1,617)
(751)
3,556
90,202
GAAP Reconciliation (cont’d)
Perion GAAP reconciliation (in USD 000')
2012
GAAP CC revenue
537,008
GAAP Perion revenue
60,223
Combined GAAP revenue
597,231
ClientConnect Search revenue adjustment
Perion deferred revenue adjustment
(322,308)
983
Combined non GAAP revenue
275,906
non GAAP CC revenue
214,700
non GAAP Perion revenue
61,206
www.perion.com
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Balance sheet
Perion GAAP BALANCE SHEET (in USD 000')
Assets
Current assets:
Cash and cash equivalents
Restricted cash
Trade receivables
Other current assets
Total current assets
Property and equipment, net
Goodwill and other intangible assets, net
Other assets
Total assets
Liabilities and Stockholders' Equity
Current liabilities:
Current maturities of long term debt
Trade payables
Deferred revenues
Payment obligation related to acquisition
Accrued expenses and other liabilities
Total current liabilities
Long-term debt
Other long term liabilities
Total liabilities
Stockholders' equity:
Ordinary shares
Additional paid-in capital
Retained earnings
Total stockholders' equity:
Total liabilities and stockholders' equity
www.perion.com
March 31 2014
Unaudited
51,174
1,541
48,871
6,127
107,713
3,723
191,829
3,064
306,329
17,133
45,283
7,923
8,996
19,455
98,790
3,675
4,927
107,392
183
184,938
13,816
198,937
306,329
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