Perion Network Ltd. Form 6-K Summary
Business Context and Reporting Period
This Form 6-K, filed on August 9, 2018, reports the financial results for Perion Network Ltd. for the second quarter and six months ended June 30, 2018. Perion is a global technology company delivering digital marketing solutions, including advertising, branded search, and programmatic platforms.
Key Financial Metrics
| Metric (in millions) | Q2 2017 | Q2 2018 | 6M 2017 | 6M 2018 |
|---|---|---|---|---|
| Total Revenues | $69.7 | $62.8 | $131.7 | $123.7 |
| Advertising Revenues | $35.3 | $33.2 | $59.7 | $62.5 |
| Search and Other Revenues | $34.4 | $29.6 | $72.0 | $61.2 |
| GAAP Net Income (Loss) | $(36.0) | $1.0 | $(38.1) | $1.0 |
| Non-GAAP Net Income | $4.2 | $4.7 | $6.9 | $7.7 |
| Adjusted EBITDA | $7.0 | $7.1 | $10.5 | $11.4 |
| Cash and Equivalents (End of Period) | $20.9 | $34.7 | $20.9 | $34.7 |
| Total Debt | N/A | $40.8 | $60.7 | $40.8 |
Profitability Margins (Q2 2018): Non-GAAP Net Income margin was 7% of revenues; Adjusted EBITDA margin was 11% of revenues.
Liquidity: Cash provided by operating activities was $2.9 million in Q2 2018. Net debt decreased from $23.2 million to $6.1 million during the first six months of 2018.
Material Changes vs. Prior Period
- Revenue Decline: Total revenues decreased 10% in Q2 2018 compared to Q2 2017. This was driven by a 14% decline in Search and other revenues (due to legacy product churn and 2017 network cleanup) and a 6% decline in Advertising revenues (due to insufficient supply to meet demand).
- GAAP Turnaround: GAAP Net Income improved from a loss of $36.0 million in Q2 2017 to a profit of $1.0 million in Q2 2018. The prior year loss was primarily due to a $43.8 million non-cash impairment of goodwill and intangible assets related to the Undertone business.
- Non-GAAP Growth: Non-GAAP Net Income increased 12% year-over-year to $4.7 million. Adjusted EBITDA increased slightly to $7.1 million.
- Debt Reduction: Total debt decreased to $40.8 million as of June 30, 2018, from $60.7 million at year-end 2017.
Guidance, Outlook, and Risks
- Guidance Update: Management increased the bottom-end of its full-year 2018 Adjusted EBITDA guidance to a range of $29 million to $32 million (previously $28 million to $32 million).
- Management Commentary: CEO Doron Gerstel highlighted strong momentum in the Undertone platform and the Synchronized Digital Platform. He noted that demand for advertising placements exceeded supply in the first half of 2018, limiting growth potential. Five brands increased spend to over $1 million in the first half.
- Corporate Action: Perion will implement a 3-for-1 reverse stock split. The record date is August 24, 2018, with trading resuming on August 26 (Tel Aviv) and August 27 (NASDAQ).
- Risks: Forward-looking statements are subject to risks including integration of acquisitions, market acceptance of new products, competitive pressures, and general economic conditions.
Key Facts for Investor Verification
- Verify the sustainability of the revenue decline in the "Search and other" segment due to legacy product churn.
- Confirm the timeline and impact of the new product pipeline intended to resolve the advertising supply shortage.
- Monitor the execution of the 3-for-1 reverse stock split and its effect on share liquidity.
- Review the reconciliation of GAAP to Non-GAAP measures, specifically the exclusion of convertible debt fair value revaluations.
- Assess the company's ability to meet the updated Adjusted EBITDA guidance of $29 million to $32 million for the full year.