Good day and welcome to the Perion Fourth Quarter 2015 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Stephanie Mazer, Perion Investor Relations. You may begin.

Thank you, operator and good morning everyone. Thank you for joining us on our fourth quarter and full year results earnings call. The press release detailing the results is available on the Company’s Web site 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 update any forward-looking statements to reflect future events or circumstances. In addition, and as in prior quarters, the results reported today will be analyzed for the most part on a non-GAAP basis, which management believes better conveys the operational performance of the business. We will be referring to Adjusted EBITDA when mentioning EBITDA in our comments. We have provided a detailed reconciliation of non-GAAP measures to their comparable GAAP measures in our earnings release, which is available on our website, and has also been filed on Form 6-K. I would now like to turn the call over to Josef Mandelbaum, Chief Executive Officer of Perion. Josef.

Thank you, Stephanie and good morning everyone. Welcome to our fourth quarter and full year 2015 earnings call. This morning I will briefly discuss our financial results, update you on the state of the business and the company’s evolution, in particular the progress we have made post our acquisition of Undertone, and conclude with my remarks on Perion’s forward-looking strategy. Yacov will review our financial results in more detail, and we will then open the call to your questions. To start, I am proud to say that our year-end financial results capped a very strong year for the company. We surpassed our financial goals and made significant progress in further evolving our strategy. We were at the high end of our revenue and EBITDA guidance, and exceeded non-GAAP Net Income guidance, both for the quarter and year. We have significantly strengthened the company by diversifying our revenue with the acquisitions of Undertone and MakeMeReach, which will represent close to 50% of total revenue in 2016, solidly positioning us in growth categories like mobile, social and video. The company is in good health financially with a total cash amount of $60M and a net financial debt position of roughly $39M. Non GAAP Revenues for the year were $218.7 million, EBITDA was $53.1 million, Non-GAAP net income was $38.0 million and diluted earnings per share was $0.50, all stronger than anticipated both in terms of budget and guidance. For the quarter, we had $65.3 million in Non-GAAP revenue, $10.4 million in EBITDA and $7.4 million in Non-GAAP net Income, all at the high end or above our guidance. This is the second quarter in a row whereby our revenues increased, attributed to the Undertone acquisition and the stabilization of search revenue. We are confident that these trends will continue and that we…

Thank you Josef. Non GAAP Revenue for Perion this quarter was $65.3 million, compared to $78.7 million in the fourth quarter last year. For the entire year, revenues were $218.7 million, as compared to $394.2 million in 2014. Revenues for the year were made up of $172.3 million of search generated revenues $29.8 million of other advertising revenues and $16.6 revenues from consumer products. The comparative reduction on a year-over-year basis, was predominantly in search generated revenues, a result of our decision last year, to exit certain parts of the download industry and focus on premium publishers, and thus significantly reduce our customer acquisition costs, or CAC, that drive these sales. In 2015, CAC and media buy costs were $88.9 million, as compared to $174.6 million in 2014. Besides the reduction in CAC and despite the acquisition of Undertone, CoGs, R&D and G&A decreased in 2015, as compared to 2014. This is as a result of our restructuring the business, adapting it to the new market conditions. Sales and marketing expenses increased in 2015, as we refocused our business to increase revenues as well as consolidate the Undertone activity driven by its sales and marketing effort. Adjusted EBITDA in the fourth quarter of 2015 was $10.4 million, or 16% of revenues, as compared to $25.2 million, or 32% of revenues, in the fourth quarter of 2014. For the entire year, Adjusted EBITDA was $53.1 million, or 24% of revenues, compared to $126.3 million, or 32% of revenue, in 2014. This year over year decrease in adjusted EBITDA was primarily a result of the aforementioned $175.5 million decrease in revenues, partially offset by the $85.6 million decrease in CAC and a $16.3 million decrease in other costs. Perion’s non-GAAP net income in the fourth quarter of 2015 was $7.4 million, representing…

Thank you. [Operator Instructions] We’ll take our first question from Kerry Rice with Needham.

Thanks a lot. A few questions here, maybe first on search, I think that for Q4 search is a little bit weaker than we expected we're looking for some sequential increase. Can you talk a little bit about that also seems you pull back on customer acquisition [clauses]? Have you kind of with Undertone decided to maybe pull back on future customer acquisition cost on search and so that's going to run at a lower level. And then around the goodwill impairment related to GrowMobile. Do we think of that how GrowMobile just kind of wrapped - it being wrapped into Undertone at this point given that big write-off and so there will be less focus on that? And then just one housekeeping question, I know Yacov you I think broke out other and consumer products for the year I didn’t hear what it was for Q4 and maybe could you give us what Undertone contributed in Q4? Thank you.

Okay. So we’ll try to answer all your questions and if we miss one just feel free to remind us.

Definitely…

With regard to the last one, with regard to the breakdown of revenues, so in the fourth quarter it was $18 million from advertising and about $4.2 million from our consumer products and others.

[Indiscernible]

No right obviously so we already had advertising revenues before the Undertone acquisition and that remained pretty much of the similar phase to the prior quarters with some big chunk coming from the Undertone acquisition. Answering your first question with regard to search as we opened up in our remarks search terms are relatively stable and if we look from a beginning of the year first quarter about 42%, second quarter 41%, third quarter 45% and then it’s back to 43%, so plus or minus 5% to all the quarters. So being relatively stable does not make a venue to different kinds of things that happen in the marketplace. For instance one of our partners in the fourth quarter suffered from some technical problems with introduction of Windows 10 and Edge. So there seemed to be a problem there. So there are some small ups and downs in that part of the business, but as we said while we are confident that these are - will remain now relatively stable.

Yes, with regards to your second question, Kerry. On the [indiscernible] there is a -- going forward and I’m going to choose to echo what Yacov, said on search, we’re committed to it. We think it’s again it’s not a stable good business, is not a big growth business we said that. I think the big growth will come from focusing on our impact. But we still believe it’s a good business, it produces a lot of good cash flow for us and we think it’s stable hopefully we can grow with overtime. But its function of RPMs which as you know we don’t control and obviously some other noise in the market which is certainly quietened down in the past year. But that does bring us to the impairment and really a function of your question time to few things together. We have decided to really focus the company and its efforts in really two areas search in one end and the other is in high impact advertising solutions, which is those formats and platforms. And when we look at GrowMobile and we’re looking at what we’re doing in Undertone we believe that there is some good synergies for example on social one of the things we identified really early on Undertone had no social presence whatsoever. But when we look at really focusing our efforts going forward, one of the things we decided is just that we think there is a really big opportunity to focus on high impact as a category and it cannot make us differentiated if you look at and therefore some of the focus and shifting of those resources in terms of focus will be on supporting that goal. And as such it’s just technical, we took - first of all because of our…

That’s helpful. Thank you for answering all the questions. I appreciate it.

Thank you for joining Kerry.

And next we will hear from Dan Kurnos with The Benchmark Company.

Great, thanks. Good afternoon guys.

Hey, Dan.

Hey, Josef a few things here let’s just start with some high level stuff Josef. Can you just tell us kind of where we stand now on all of the lock-up issues? I know we acquired early this year obviously moving kind of see what happened to the stock price, but just from holders what you are hearing on that end and how what’s left and how you plan to address the remaining shares that are out?

Sure. The good news is I mean from a lots of standpoint is over and with most of our tool is behind us, we had roughly as we knew what happened, we tried - that in the first two weeks of January, we had roughly 4 million to 5 million shares hit the market, with the best of our abilities we could tell. And what we thought would be a total of six. So pretty much, all most all that hit the market, and I’m not sure -- stock was pretty much down from four to 270 again after we had a nice increase after the Undertone acquisition. The remaining shares are really in six shareholders hands and those six shareholders were in constant contact with -- none of them are going to dump the stock in the open market. [We are the real] - someone will look for liquidity sooner than others most of them -- look for off market transactions or at some point of time, the other could be some other activity if the stock price goes up enough, we could do some type of [indiscernible] on behalf of them of those shareholders. We don’t plan on raising money at this point in time through any offering obviously. But for the shareholders if the market and the stock price rises to a certain amount where they are willing to sell, we will certainly represent on their behalf. And so I think we should have [others] stability in the stock price. I don’t expect any more big dips based on selling shareholders and therefore I think from that standpoint the worse is behind us, really six shareholders on about 40 million shares and those six are all working with us to be as responsible as we both can. So that we hopefully increase the value of the company and not decrease it.

Great color on that Josef, thank you. And then just quickly on search, obviously we’ve seen a lot of changes. I am not go into too much because you have given the decent background, but we have seen a lot of changes from Google just in the way they are revamp sort of ranking and scores and some other things and Bing is starting to follow suite a little bit and also push their programmatic and maybe if you can just talk some of the puts and takes that you are seeing on the Bing side as they are continuing to play catch up and how that’s impacting sort of your forecast for search in general?

Yes, so I mean clearly first of all just with the market shares - Bing has gained nicely over the past few years and I think they have closed the gap certainly better than it has in past on the RPM gap between and Google and Bing. That gap is probably the rate of closing the gap is probably slowing down. Mostly [indiscernible], I think just in terms of economics obviously if the gap closes more and more I mean we are predominantly being – we will see how Google and Yahoo partnerships will benefit to the extent those RPMs grow as the searches grow if the [RPMs] don’t go fast and our revenue is – [indiscernible]fast. With regards to what we are seeing in the industry itself, the truth is other than Windows 10, we’ve had relative stability I think the regulation changes from the Google Chrome specifically even at the -- companies out there and Microsoft Windows I think they have succeeded largely of getting rid of a lot of their bad practices and progress out there. We haven’t seen significant volatility there. There is still some noise even there, there is no question about it. As Yacov mentioned earlier, one of our partners did have a technical issues in Windows 10 that - and unexpected obviously worked as well in Q4, but other than that I think that you’re seeing mostly with some of the competitors out there especially the public companies. The decreases as you are seeing there is just the fact of redistribute early on a year and a half ago and really we think we got out in front of it, but we took the hard medicine as our stock price will indicate and the other companies I think far and longer you can…

That’s really helpful color Josef. Just one not [indiscernible] that was also curious if you had any thoughts on the new announcements since you have focused on higher quality content publishers with the new support embedded in the Bing as editor for native content, does that changes or helps your partners at all?

We believe it helps us that’s really one of their strategic partners without going too much detail, but we are - certainly we’ll be one of the first companies hopefully working with them to roll that out on a distribution angle. We are excited about some of the initiatives, which I think is really interesting and I think they are actually getting it right in a lot of ways. We are still in the early phases and I am sure – Bing will tell you because that’s been more, but to my standpoint we are excited about what gives us this opportunity to bring to publishers, especially premium publishers with the vast ability that obviously Bing brings to the table.

Great. And then shifting over to the ad tech side, obviously there has been a lot of negative spreads over the last probably six months in the ad tech space I know that you did a good job in your prepared remarks differentiating sort of your products versus the other guys out there. There was a big piece in the journal about declining headcount ramp across the entire industry. So maybe if you could just address specifically how you guys are seeing sales ramp to support your growth initiatives and just any additional color on the differentiation that is helping you through I think was perceived as tough times?

Sure, I think your question hit the nail on the head by - this is why we brought Undertone and this is why we are actually choosing to focus our energies across the company in the advertising space including GrowMobile, the differentiated position that high impact formats in platforms. While we are seeing industry growing nicely and this is not the news for anybody, but essentially there is [discernible] in the ad tech space which is otherwise depressed in the stock market. Hard to differentiate between a lot of them. I think Yacov told me he was at an investor conference recently and he sat listening to few other presenting companies and he said oh my god, they all stand alike, I wonder who stand alike. ,: Number two, is the margins will continue to decrease because technology there is not a differentiator. It will eventually be stand in February. So it really needs real scale, there are some companies who have real scale. I’m not pleased with some people obviously, but other independent companies, but we don’t think we will be one of them. So we focused on - we’re leveraging our history and what we’ve done frankly in on the search side in Perion, and standard company that is profitable that has scale already and we believe together we can scale it further with combining some of our own efforts with their efforts and continue to really expand the high end tech category. So from our perspective what you are seeing today in ad frequency there are a lot of changes, companies are struggling I think that will continue represents we believe in opportunity for us to maybe pick up some good assets along the way. But in our side in the ad tech world we’re growing, we are adding headcount on the ad tech side of the business and we are focusing the resources to try to drive sales and we expect 2016 as Yacov said earlier to be a very good growth year for the company not only overall because of the acquisition but also organically as we focus on the high impact formats at Undertone, we’re growing it 30% plus. So, we are exciting about that opportunity and hopefully we can really seize the moment and become the leader in that category.

I think one of the other issues in the space Josef is that people complaint or ad agencies or even end customers and users complaint that a lot of the products are overly complicated and the choices are widespread. So could you just address that thought process and how if you have it all simplify the process for people through Undertone?

As opposed to banner inventory in different formats out there, [indiscernible] like that. So we try to make it as simple as possible. Frankly, most of the work probably remains [indiscernible] on the publisher side and the advertiser side it is the creative production side of it, but we do a lot of that work for them, we help them out on that, normally they find it difficult, so I don’t know on that particular piece what you are talking about, but from my standpoint we sell the package and we sell what we are delivering to the advertiser which is brand awareness and engaging with their brand and sharing on social networks and if they love the ad they are going to show it to other people and that’s what the brands really want to drive their business.

Okay. And then just one housekeeping question for Yacov just quickly, I know we talked about this last time on the guidance and as we think about Undertone revenues in 2016 have you guys made a decision as to whether or not you are going to record net or gross revenues for those?

So I think as you are able to see now our presentation also when we acquired the company going forward, from a GAAP standpoint we will be reporting them on a gross revenue basis. However, management does view some of the revenue, the standard display revenues, which were our content or what we are contributing to the product is relatively lower, management is going to view those standard display as unit revenues on a net basis. So going forward you are going to see us presenting GAAP and non-GAAP revenue because of that.

And so the way that you’ve done it now there is not going to be any future changes as you assess the business on a go forward.

No, not at all.

Okay. Perfect. All right, thanks, guys, appreciate it.

Thanks Dan.

And our next question comes from Robert [indiscernible].

Thank you. On the first quarter guidance, you talk about the seasonality but the revenues in the first quarter are estimated to be higher than the fourth. What accounts for the large margin drop?

Well, so first of all is a technical difference. In the fourth quarter we are only consolidating one month of Undertone’s activities. So that’s an anomaly going from the fourth quarter to the first quarter, [indiscernible] into the fourth quarter, that’s number one. And as we mentioned the strongest quarter in the Undertone business is the fourth quarter and particularly the strongest month is December and we were fortunate enough to acquire the Company for the entire month of December. As we go into the first quarter that is in the advertising industry in general, and Undertone being a player in that industry in particular, that is the weakest quarter. And in this industry when you have high margins, when you have weaker revenues that goes down to the bottom line. So that’s why even a small drop in revenues has actually a more significant effect on the EBITDA and affecting the margin for the entire company.

Okay, that's helpful. And the second question I have is that much of what you're saying about the recent acquisitions were said about prior acquisitions that have now been written down substantially. What gives you confidence the new business will be so much more successful than the prior acquisitions were?

So, first of all, thank you for the question. Nice talking to you on the phone, Robert. I think in any business I think if you look at the track record, first of all the MakeMeReach acquisition has actually done very well. We look at obviously other acquisitions, Smilebox has done well. The Conduit side of the business as you can imagine, the biggest change there has been the search industry itself. Now, did we - was it a good acquisition, the answer is, [indiscernible] question before was a good acquisition. We got great cash flow out of the business which is what we thought we’d get, close to probably $150 million over the last two years which enabled us by the way to diversify and buy Undertone which we also believe that will be a good acquisition because we brought a mature company that is already on the growth path with strong profitability. I think as you look in the past and therefore technically what did happen in the search business is that we did the big acquisition because the search industry changed, it was not because the acquisition did not work and that’s very important. We had to ultimately write-down because the forecast for the industry changed, and our forecasted revenue has changed. Not to mention the decrease in our stock price caused us to write things down and we have to look at it on a quarterly basis, as opposed to annually when you might have that going. So if you look at all the acquisitions we have done, [indiscernible] I think we have done now, five or six. I think two, we did write-down and there is no question I think that’s probably disappointing. Four we are actually very happy with and they’ve done well and…

Okay. Thank you very much.

And next we have Marc Estigarribia with Chardan Capital Markets.

Thanks for the call, I mean for the questions. And sorry if you answered this already Yacov and Josef, but in terms of going forward the forecasts I think we're looking at 50% growth expectations for this year. Can you just break down the expectation between search and advertising? I know before it was I think there was a 60% plus guidance 50/50 breakdown. If you could just give us the breakdown going forward what to expect because what I'm doing when I look at the search going forward I'm trying to put in some growth in search and I'm putting more in advertising and just trying to get some color?

Sure. First of all, let me just give a little bit of breakdown. We think in general the revenues from search and consumer [apps] [ph] the download and search side of the business will be roughly half of the business and the advertising business which is GrowMobile, Undertone will be other half. So next year it’s roughly a 50/50 split. That’s number one. In terms of the guidance and the 60% to 50%, probably it’s being little more conservative, we said 60% in the acquisition, we’re not actually – [indiscernible] we said in excess of 50%. We said approximately 60% was in excess of 50%. So we are trying to be conservative, to be candid, [indiscernible] the stock price [indiscernible] no credits, we are being [indiscernible] aggressive. We are not going to be over aggressive, we think that there is growth and there will be growth in the advertising side. On the search and the consumer app side I think as I mentioned before, we expect that to be stable plus or minus 5%, in terms of growth 5% maybe little bit less but in that range and then the rest we believe that there will be growth in the GrowMobile and Undertone side of the business.

Thank you. Can you provide us with the net revenue number for full-year 2015 Undertone?

It was approximately 120, but it’s also [120 million] for the entire year for Undertone, but again Undertone as a private company which reports gross revenues and therefore they didn’t really have that gross to net revenue difference and it’s mostly under, if you wish, under the Perion regime that we’re just, from a management standpoint we are looking at it from a non-GAAP with net revenue.

But from a modeling standpoint Mark, so around 120 and change was what the Undertone net revenue number would have been in 2015.

That’s helpful. Thank you. With regards to ad blocking, I know it’s been a huge theme, there is a big conversation between Google, Yahoo and one of the ad blockers in the Mobile World Congress in Barcelona, and also Opera just came out with their big browser and a built-in ad blocking. What are your concerns or what’s your comments going forward this year in terms of combating that issue for the industry and for the Company?

So for the Company let’s be specific, we don’t expect it would have a meaningful impact on our business if at all. Mainly our advertisers and brands and agencies only pay for impression that are viewed. So and if [indiscernible]; we never get charged, we never charge the advertiser and they have [indiscernible] inventory that we are not concerned with that. On the industry standpoint, [indiscernible] seeing you may read recently in Sweden 90% of all the publishers of Swedish websites actually band together and started saying to all consumers in Sweden if you want to look at my content disable the ad block, and if you don’t you can’t look at the content. I expect there to be a nice battle going on between the ad blockers who many of them I think have a lot of good intention, many of them I think are what you call the nice mafia who come to your store and say you need protection, pay me and you say I need protection from whom, and they say, well you don’t want to know, which is themselves. So I’m actually not a big fan of those. I think the [indiscernible] consumers which is the main thing wants a better ad experience and we think we’re positioned nicely and I think the industry overall will go to better formats and better quality advertising and I think we are one of the leaders in that regard. And therefore, as we go forward our proprietary impacts and formats integrated to the publisher side, there are frequency caps on all of them, we don’t bombard anybody, we do it very [indiscernible]; actually, they are the other ones that people share on social network because they are cool ads. I think that’s one way of doing it is…

Great, thank you. Just one last question, with regards to the revenue attributed from Bing on the consolidated going forward I think what we have is around 40%, is that sort of still the concentration from Bing for total revenue?

Total revenue including the Undertone business?

Yes.

That will be a fair assessment, yes.

Okay, thank you. End of Q&A:

There are no further questions. I will turn the call back over to Mr. Josef Mandelbaum.

Thank you and thank you everybody for joining in asking questions today. In conclusion, 2015 was an important year for us. We acquired two strong companies, strengthened the foundation of the overall business, and laid the path for the next phase of our evolving strategy. It is incredibly gratifying to see our proactive strategy gaining traction. We have come a long way and now have a very clear vision for the future in making digital advertising more engaging. As always, I am thankful for the professional support and hard work of our dedicated employees. Thank you to everyone at Perion, and thank you all for joining us today.

And that concludes today's conference call. We appreciate your participation.