INVESTOR RELATIONS PRESENTATION January 2015 1 Forward Looking - - PowerPoint PPT Presentation

January 2015

INVESTOR RELATIONS PRESENTATION

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Confidential

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Forward Looking Statements

This presentation contains historical information and forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995 with respect to the business, financial condition and results of operations of Perion. The words “will”, “believe,” “expect,” “intend,” “plan,” “should” and similar expressions are intended to identify forward-looking statements. Such statements reflect the current views, assumptions and expectations of Perion with respect to future events and are subject to risks and uncertainties. Many factors could cause the actual results, performance or achievements of Perion to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements, or financial information, including, among others, the failure to realize the anticipated benefits of the ClientConnect transaction; risks entailed in integrating the ClientConnect business with Perion’s other businesses, including employee retention and customer acceptance; the risk that the transaction will divert management and other resources from the ongoing operations of the two businesses or otherwise disrupt the conduct of those businesses, potential litigation associated with the transaction, and general risks associated with the business of Perion and with the ClientConnect business, including changes in the markets in which the businesses operate and in general economic and business conditions, loss of key customers, unpredictable sales cycles, competitive pressures, market acceptance of new products, inability to meet efficiency and cost reduction objectives, changes in business strategy and various other factors, whether referenced or not referenced in this presentation. Various other risks and uncertainties may affect Perion and its results of operations, as described in reports filed by the Company with the Securities and Exchange Commission from time to time, including its annual report on Form 20-F for the year ended December 31, 2013 and the report on Form 6-K filed with the SEC on September 23, 2014. Perion does not assume any obligation to update these forward-looking statements.

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Use of Non-GAAP measures

Non-GAAP financial measures, as well as adjusted EBITDA, consist of GAAP financial measures adjusted to include the results

• f discontinued operations, and to exclude acquisition related expenses, share-based compensation expenses, amortization of

acquired intangible assets and non-recurring tax expenses, as well as certain accounting entries that are required under the business combination accounting rules. The purpose of such adjustments is to give an indication of our performance exclusive

• f non-cash charges and other items that are considered by management to be outside of our core operating results. These

non-GAAP measures are among the primary factors management uses in planning for and forecasting future periods. Furthermore, the non-GAAP measures are regularly used internally to understand, manage and evaluate our business and make operating decisions, and we believe that they are useful to investors as a consistent and comparable measure of the

• ngoing performance of our business. However, our non-GAAP financial measures are not meant to be considered in isolation
• r as a substitute for comparable GAAP measures, and should be read only in conjunction with our consolidated financial

statements prepared in accordance with GAAP. Additionally, these non-GAAP financial measures may differ materially from the non-GAAP financial measures used by other companies. A reconciliation between results on a GAAP and non-GAAP basis is provided in the Appendix of this presentation.

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Perion’s Mission and Strategy

A leading search and display advertising monetization platform providing cash flow to fuel future growth Aggregated mobile media buying and retargeting platform, providing software developers the best ROI Continued innovation and a strong acquisition pipeline that will accelerate execution of our vision, driving future growth

Perion is a leading performance based cross device technology marketing company

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Perion’s Management Team

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Josef Mandelbaum CEO 20+ years experience, former CEO of American Greetings Interactive Yacov Kaufman CFO 20+ years experience Acorn Energy, Tower Semiconductor Shai Gottesdiener General Manager, Mobile 15+ years management experience in Internet companies Limor Gershony General Counsel 15+ years experience Veraz Networks, Medigate Dana Maor SVP Human Resources 15+ years experience Frutarom, Radvision Strong M&A background Miki Kolko CTO 20 years experience in Internet and Big Data tech Former founder and CTO of 3 startups Amir Nahmias General Manager Codefuel 15+ years experience in the software and content industry Yuval Hamudot General Manager Consumer Apps 15+ years experience in R&D product development

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• We offer our partners a range of innovative and reliable monetization solutions including:
• Search based monetization tool, offering higher LTV and conversion rates than traditional monetization tools
• Customizable installer offering targeted secondary offers and advanced installer technology.
• Targeted display ads
• Robust analytics system enabling real time, easy access to campaign data and immediate optimization.
• One of the industry leaders with over 300M monthly queries in the US – representing approximately 2%

share of the US market

• Long term relationship with Bing since 2010
• New 3+1 year contract from Jan 2015
• Perion represents approximately 10% of Bing searches
• Perion has long-term partnerships with all the main search engines

(Google, Yahoo, Bing, Ask)

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Perion’s Monetization Platform

250M

End-users worldwide

50M+

Top performing ads served daily

20%

Avg rise in rev per install

100+

Countries in our ad network

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Pushing through the Headwinds

• Industry wide policy changes by search and browser providers and anti-virus companies are

adversely impacting our monetization business and ability to forecast the future

• Causing decreasing revenues through 2014 and expected to continue into 2015

Executing in a Challenging Environment:

• Implemented a cost savings program to maintain margins
• Controlling customer acquisition spend, maximizing RoI and

growing cash position for future investment

• Developing new monetization products to return to growth
• Focus on increasing market share in a smaller market
• Accelerate development and marketing of mobile offering

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Transitioning into Mobile Performance Advertising

GrowMobile by Perion, an aggregated mobile media buying and retargeting platform

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A Booming but Still Nascent Market

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• Mobile is the fastest-growing digital ad medium

➢ US mobile ad revenue will top nearly $42B in 2018 - 5-year CAR of 43% from 2013 ➢ The games vertical reached revenue of $25 billion in 2014

• Material upside: ad spending still has to catch up with consumer time spent on mobile media
• Market still immature, leading to inefficiencies and room for improvement and automation

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A Very Fragmented Environment

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• Vast amounts of ad space across millions of mobile apps,

websites and games.

• Many ways to buy media (RTB ad exchanges, ad networks

Google, Facebook etc.)

• Numerous types of ads (display, video, etc.)
• Countless traffic sources
• Various campaign and user-acquisition strategies
• Technical integration required with each traffic source

>> Unorganized, time and resource consuming >> Ongoing administrative and manual hassles X100 X20

Your Ad

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Making Measurement and Optimization Challenging

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Inefficient campaign measurement

• No equivalent of cookies on mobile
• Data about cost, campaign performance, usage, and

revenue are in different systems:

• Revenue from attribution tracking partner
• Cost from ad network
• Install numbers from internal systems
• No real time data

Lack of retargeting tools

• Huge amount of time on manual reconciliation of

reports. Cost Installs Data Device

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Introducing

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• Simplifying mobile media buying: Aggregates hundreds of networks and

exchanges in real time, through one Insertion Order

• Tracking and attribution: Single lightweight, open sourced SDK integration to

instantly plug into 100+ ad networks, exchanges and direct publishers.

• Robust Analytics: Cost, campaign performance, usage, and revenue data for

all traffic sources and all your campaigns in one easy-to-read dashboard.

• Intelligence Benchmark: Leverage algorithmic learning to optimize predictive

analysis

A mobile advertising platform that provides aggregated, programmatic mobile media buying, measurement and performance analytics.

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Recent Launch of GrowMobile Self-Serve

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• First cross-network, self-serve mobile advertising platform, offering aggregated access and

programmatic mobile media buying measurement, analysis and optimization from a single dashboard

• Beta version launched at the Appworld conference in November 2014
• Full launch expected by end of Q1 2015

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Client Segmentation

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How is User Acquisition managed?

Small Players (with some exceptions) Ex: Pixelberry Mobile Marketing Agencies Ex: Fetch Medium to Big Players Ex: Glu

Through an internal User Acquisition team ~10% 90% 80% Externally managed 90% 10% 20%

Most of the competition targets this (small) part of the market OUR SWEETSPOT (and an underserved market)

Source: internal analysis

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Fully managed Self service Only one sort of Traffic Source All range of Traffic Sources

(social, RTB etc)

• Facebook automated

PMDs

• RTB platforms (ex:

LiquidM, Strikead Solo)

• Agencies
• Fiksu

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Competitive Landscape

• Facebook fully

managed PMDs (ex: SocialClicks, Bidalgo)

• Strikead Engage

Growmobile Self Serve

• Growmobile

Source: internal analysis

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Customer Testimonials

“With Grow Mobile we've been able to scale our ad spends and provide a very strong ROI month over month.”

Tim Hsu User Acquisition

“Grow Mobile provides cutting edge solutions for mobile… their technology and dedication has made them an essential partner to grow our business.”

Sho Masuda VP of Marketing Ko Chiu VP Business Development

“Grow Mobile provides an all-in-

• ne solution from user acquisition

to downstream analysis. In this ever-changing landscape of mobile advertising, Grow Mobile has been a stable and valuable partner for Kabam.”

First-rate Feedback from GrowMobile’s Clients

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Client Case Study

The Objective:

Pixelberry is a leading game developer based in Mountain View, California. As part of their global launch for High School Story on iOS, they partnered with GrowMobile to develop a UA strategy and to help promote and monetize their app.

The Results of GrowMobile Campaign Management:

• The game hit #5 top free on iTunes in the US and reached #12 top grossing.
• They were able to sustain in the top 100 free and grossing charts for several weeks

through efficient ad spend across high quality traffic and exceptional campaign management.

• Pixelberry has spent millions of dollars with Grow Mobile to-date, delivering long-

term value and ROI.

“Their knowledge, their belief in our product, and their willingness to look out for Pixelberry’s best interests won me over.” “We were moving up in the Top Grossing charts and earning our marketing money back.” “UA is not just about a launch budget, but about long term sustained strategy.”

5K – 15K Sustained Daily Installs $1.25 Paid eCPI #12 Top Grossing

Next Steps for Perion

• Strategic M&A to enhance our mobile offerings and further

increase market reach

• Enriching our mobile demand platform
• Launch of our mobile engagement platform in late 2015
• Continue to invest in R&D to develop new products – more to

come in 2015

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FINANCIAL OVERVIEW

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Quarterly Revenue

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Strong Cash Flow Generation and Margins

• Cash flow from operations in the

first 9 months of 2014: $47M

• Cash position of $96M as of end
• f Q3.14

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Key Takeaways:

• Seasoned and Adaptive Management with proven ability to execute
• Executing in a challenging desktop search market to maintain margins

and develop new products to drive growth

• Strong cash flow generation and flexible cost structure together with

high profitability

• Successful mobile expansion provides significant growth opportunity

and leverages core competencies

QUESTIONS?

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APPENDIX – GAAP RECONCILIATION

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Confidential

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Quarterly Revenue Reconciliation

Q1.13 Q2.13 Q3.13 ClientConnect GAAP Revenue 79,303 81,147 80,929 Revenue from discountinued operations 376 533 639 ClientConnect non-GAAP Revenue 79,679 81,680 81,568 Q1.14 Q2.14 Q3.14 Perion GAAP Revenue 114,823 109,534 86,285 Deferred Revenue 2,292 1,521 1,092 Perion non-GAAP Revenue 117,115 111,055 87,377

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Year to Date Reconciliation

Three months ended September 30, Nine months ended September 30, 2013 2014 2013 2014 GAAP revenues $ 80,929 $ 86,285 $ 241,379 $ 310,643 Revenues from discontinued operations 639

• 1,548
• Valuation adjustment on acquired deferred product

revenues

• 1,092
• 4,905

Non-GAAP revenues $ 81,568 $ 87,377 $ 242,927 $ 315,548 GAAP costs and expenses $ 64,015 $ 64,260 $ 170,188 $ 247,188 Acquisition related expenses

• (1,010)
• (4,429)

Discontinued operations operating expenses 11,492

• 28,736
• Share based compensation

(4,088) (4,370) (9,210) (12,679) Amortization of acquired intangible assets

• (4,769)
• (13,770)

Non-GAAP costs and expenses $ 71,419 $ 54,111 $ 189,714 $ 216,310 GAAP net income (loss) $ (9,815) $ 16,996 $ 22,222 $ 48,499 Valuation adjustment on acquired deferred product revenues

• 1,092
• 4,905

Acquisition related expenses

• 1,010
• 4,429

Share based compensation 4,088 4,370 9,210 12,679 Amortization of acquired intangible assets

• 4,769
• 13,770

Fair value revaluation - convertible note

• (584)
• (584)

Non-recurring tax expense 11,838

• 11,838
• Accretion of payment obligation related to acquisitions
• 452

Taxes related to amortization of acquired intangible assets and share based compensation

• (1,006)
• (2,511)

Non-GAAP net income $ 6,111 $ 26,647 $ 43,270 $ 81,639 Non-GAAP net income $ 6,111 $ 26,647 $ 43,270 $ 81,639 Income tax expense 2,082 4,996 10,833 15,561 Financial (income) expense, net (602) 1,623 (2,014) 2,038 Depreciation 2,504 679 4,014 1,871 Discontinued financial income, net (24)

• (107)
• Discontinued tax expense

2,581

• 1,230
• Adjusted EBITDA

$ 12,652 $ 33,945 $ 57,226 $ 101,109