Ladies and gentlemen, thank you for standing by. Welcome to the Perion second quarter 2014Financial 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. (Operator Instructions) As a reminder this conference is being recorded. With us today from Perion are Josef Mandelbaum, CEO and Yacov Kaufman, CFO. I would now like to turn the call over to Deborah Margalit, Director of Investor Relations. Deborah please begin.

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 ended June 30, 2014. The press release detailing the results is available on the Company’s website at www.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. In addition, and as in prior quarters, the results reported today will be analyzed on a non-GAAP basis, which management believes better conveys the operational state of the business. 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. With that, I’ll turn the call over to Josef Mandelbaum, Chief Executive Officer. Josef.

Thank you Deborah and good morning everyone. Welcome to our 2014 second quarter earnings call. Perion produced another strong quarter, with $111 million of revenue and $34 million in EBITDA. The combination with Client Connect has helped Perion achieve precisely what we thought it would, as we continue to expand our EBITDA margins, driving incremental cash flow and fueling initiatives in the mobile space. Our recent acquisition of Grow Mobile significantly enhances our mobile capabilities and fits perfectly within our new Lightspeed division. As the first piece of our strategy, to provide app developers the ability to promote, monetize and optimize their business, we are focusing on helping companies buy advertising, and track the ongoing performance of their media budget, across the complex world of mobile networks and exchanges. According to a recent eMarketer report the mobile advertising market will more than double in the coming years, however, it remains a nascent market, highly fragmented and inefficient. There are over a hundred ad networks offering advertising solutions, each requiring some technical integration and having its own reporting and analytics system. Developers have to connect to, and analyze data from each traffic source separately, in order to optimize spend and increase their audience. Perion Lightspeed and Grow Mobile together provide them with a unique and comprehensive solution to this problem. Today, we have a fully managed solution and we will be launching a self-service platform in the next quarter, leveraging Perion’s years of experience in the demand, supply and analytics part of our business. Perion has lived, and excelled, in the performance based ecosystem both on the demand side, having spent last year alone over $200 million in ROI based advertising, and on the supply side, by helping thousands of developers monetize their desktop applications. Over the years, we have built…

Thank you, Josef. As we stated in our press release, the acquisition of ClientConnect was viewed by US GAAP as a reverse merger, and as such, our 2014 performance is being compared to that of ClientConnect in 2013. As you have seen, and I will provide further details, this comparison shows tremendous year over year growth. It goes without saying that a substantial part of that growth is due to the 2013 Perion performance, not included in the ClientConnect business in 2013. Revenue for Perion this quarter was $111.1 million, increasing $29.4 million, or 36%, compared to $81.7 million at Client Connect in the second quarter last year. In the second quarter of 2014, non-GAAP revenues include $1.5 million of Perion’s deferred product revenues, which were deducted in accordance with US GAAP as a result of the acquisition.In the second quarter of 2013, non-GAAP revenues included $0.5 million of revenue which in the GAAP report was associated with discontinued operations. In the second quarter of 2014, Perion increased its investment in customer acquisition by 34%, reaching $56 million, representing 50% of revenues, as compared to $41.9 million, or 51% of revenues in the second quarter of 2013 by ClientConnect. R&D expenses this quarter were $10.6 million, or 10% of revenues, compared to $9.8 million, or 12% of revenues in the second quarter of 2013 at ClientConnect. Non-GAAP R&D expenses in the second quarter of 2014 and 2013, do not include $0.5 and $0.4 million, respectively, of non-cash employee equity compensation, included in the GAAP report. Non-GAAP R&D expenses in the second quarter of 2013 at ClientConnect, included $5 million of expenses classified as discontinued operations in the GAAP report. Looking forward, we intend to further increase our investment in developing new products for new platforms, enabling us to rapidly create…

Thank you. (Operator Instructions) And we will go first to Kerry Rice with Needham. Kerry Rice – Needham & Co. LLC: Thank you. Josef, I was hoping that maybe you could provide some additional details around this technical item that seems to have resulted in a fairly short decrease in guidance in the second half of the year. I guess it implies, because I’d relate anything to the early termination of the contract with Google, or is it something beyond that and how do we – how do you get confident that that this is an ongoing thing, or something that can’t recur.

First of all, thanks, Kerry, for being on the phone. Kerry Rice – Needham & Co. LLC: Yes.

So the confidence comes from, I think first of all, as you know, Kerry following industry around it, and others in the industry that typically didn’t just happen and you adjust, and then you adjust and frankly Grow continues. So the first line, these things have happened. And the important matter here on the technical side, and I don’t want to get too many details on it, but I will say the following. Net unit of the sales is not the major factor. The major factor more in our guidance is our reduction of media’s buying. The reason we are reducing media buying, or customer acquisition cost is because we see the Chrome future impact is going to affect conversion lifetime value and because of this technical issue value that we have, matter that we’ve had fundamentally those things have affected our lifetime value. And therefore, as we look at our media buying, we are being much more prudent about where to send the money, some of our partners who didn’t have higher ROIs; we would have like, we cut down rates and because we’re taking our media buying, how the business model works, Kerry, given example in Q2, we had $55 million of customer acquisition cost. We would expect in Q3 that’s about half. Now if we take out $26 million or $27 million at media buying, almost all that spend in Q3, almost all that is – would have been recognized the revenues this year, maybe not at the top, we put as revenues. So you’re always on the $25 million, $26 million of revenues going right now. but do that in Q4 as well. You would expect in Q4 probably 50% or so of the revenue thing to be recognized in the year on the media spend.…

Sure. The first one and that is I mean what was mostly in our side I don’t feel comfortable talking about anymore specifics on that again just you could imagine for a lot different reasons. But it wasn’t browser specific, actually it was more of we just lost the user. So it wasn’t because of the browser heading towards the IE, or Firefox, or Chrome and that when it happens. So that one we’re pretty confident, we understand what happened and we are working through that issues now. On the Chrome, two weeks ago, when it was announced I think were changed actually you said say. And like all the industry we are trying to now optimize and see how best we can work within the new guidelines and/or just to how we work with Chrome specifically with that browser, and it hasn’t got a 40%, 45% market share, so it is significant, which is again, in fact the overall LTV because the conversion rate did significantly go down. We like others are working to test a lot of different things now and obviously we can see how it goes. I think we are at the beginning stages of testing it as I mentioned in the past, is usually taking two quarters before things settle down and then, we’d expect to sequential growth through the start of 2015. If we’re luckily or and if are good, which I think we are good and hopefully we’d be lucky that may start sooner in Q4. But right now, being conservative and I think all of you know on the phone this is not something we knew about, we gave guidance in the year I mean it happened now with actual effect and we know about this, we probably want to give the guidance again. So sometimes things are out of our control, Google had other changes that we did account for and I think we accounted very well, as you can see in our Q2 results, but this is one which no one really knew about at least at the time when we gave our original guidance. Kerry Rice – Needham & Co. LLC: Okay. I’ll jump back in line if I have additional question. Thank you.

Thanks, Kerry.

And we’ll go next to Dan Kurnos with Benchmark Company. Dan L. Kurnos – The Benchmark Co. LLC : Yes, thanks for taking my questions. Hi, Josef. Just to push a little bit on the Chrome factors here I know that we’ve heard commentary from IAC and I’m sure – is talking about it as well. In this particular incidents we know the Chrome is now, we know that the market share, you talked about market share and they are still 40% to 45% on new installs. I’m just wondering, as we go forward, while the industry is dealt with this issue in the past what prevents Chrome from making the download process so complicated that ultimately either people just can’t monetize through Chrome or really what give us the confidence that in this particular incidence or the situation sort of will rectify itself within the next six months?

So good question there, and thanks for being on the phone call. My answer to that is as follows. First of all I suggest asking Google. But I’ll answer this from my perspective. We look at the glass, 90% of the data for our guidance and I think all of you normally on the phone taking our – standing up in good times and bad times and given the news. But other going to be careful I’m just optimistic. Google really wanted to shut down the business, because they just told all the downloads and all Chrome any settings they want to do I mean against their platform. I think what Google decide is, yeah, this is me in terms of understanding what they’ve done, they are looking, we won’t opt for their control, we’ve being doing that slowly over the past year and half. This is probably the last (indiscernible) and we are saying you can do downloads and can change settings, we just want to do in a certain way which we think even more and more to the consumer and make sure that as long as the potential compliance to consumers. Therefore, my confidence, let’s assume that all this effect. Over time people learn to adjust and do that, it’s true the business may decline overall, as the overall business decline, but I think the people was scalable actually overall, still be able to have good and profitable business, hope it maybe a little smaller, but assuming very profitable. And I think it will still be significant, I think that’s smaller players ultimately without enough skill hopefully will survive, but will be more possibility quench. Because that is just a way the business works. I think my optimism comes or continents, that if you wanted to survive…

Yeah, I mean it’s basically mostly – I mean as you can imagine the browser is changed frequently, we adopted our software frequently. So, it was certainly in software updated things that were browser related or other related, but it wasn’t kind of the browser or anything else, something that above that, unfortunately because of some users and therefore released. We are working through that, I think we have a good grasp on it, already we fixed some other things, it was a little complicated this time around, but we are certainly on the way path and we think that in time – on the new installed, again looking at that, I think we fixed it and we are just looking through now the overall network to kind of make sure that sometimes when you re-release or revert back something it may cause more damage. So, we’re trying to be very careful to do (indiscernible) and I think that’s what we are focusing on. But as I’ve mentioned, it’s kind of more of a – it took my user base down, that feels what it is. The real impact here today from that is just hurt by LTV and therefore we are lowering our media buying in accordance with that and the growing changes. Dan L. Kurnos – The Benchmark Co. LLC : Okay, great. And then just lastly from me and I’ll step back in the queue. It looks like your product and other revenues were a little bit lower I think than most of us were expecting. And I’m just trying to get a sense of how much of that was a display issue, is display growth was down sequentially pretty meaningfully or if there has been a continued scale back on the product side which doesn’t seem to be a real focus of the company going forward at least at this point.

Yeah, it wasn’t product revenues than pretty stable, a slight growth. The work obviously is we lost users, we lost competitors and lost competitors and well advertising revenue, that’s one of the reasons. It wasn’t long but there were longer reasons. Dan L. Kurnos – The Benchmark Co. LLC : But you are not seeing I mean even with the reduced queries obviously, you’ll see lower display but you are not seeing any particular other headwinds to call out on either the CPC front or anything else. Okay, great. Thank you.

Okay, thanks.

And we’ll go next to Jay Srivatsa with Chardan Capital Markets. Jay Srivatsa – Chardan Capital Markets LLC: Thanks for taking my question. Josef, going back to the (indiscernible) impact, are you able to quantify what percentage of customers or what percentage of revenues were really impacted by that?

In general, yes, not going to number of users I think they mentioned on the phone. But if you take the overall affect of lifetime value and our reduction in media buying. So if we took down our guidance by let’s say $60 million to $70 million, the majority of that – overall majority is media buying. So I think I did a math a few minutes ago that majority is the media buying and the technical matter was a portion of that but the overwhelming majority is the media buying numbers. Jay Srivatsa – Chardan Capital Markets LLC: All right, looking ahead beyond the next couple of quarters when do you foresee getting back to engaging yourself on media buying to start to look at growth for 2015?

We do that every day. I can assure you that (indiscernible) we get daily cash and cash reports, we get daily cash and cash reports, we get weekly reports on performance as you think – as you start seeing things improve, we start adapting to this changes. We’ll increase media buying. Because of the uncertainly today of when else equate, we decided to reconserving on this take the hit once on the guidance as you go forward. We would hope and accept that by the end of Q3, early Q4, we should be able to ramp up to media buying, but we’ll do it slowly. We are not going to do it quickly and so we’ve really have a good sense of what the steady state is. But as we go forward, that’s where we’re looking at today and I think as we mentioned we fully expect that in 2015 we will resume sequential growth. Jay Srivatsa – Chardan Capital Markets LLC: All right, in terms of the Google contract, can you give us some idea on what your thinking was and when you chose to opt out of the Google contract?

Yeah, basically, it was simple. We have two contracts, administratively, we have only one, they worked, Google is no longer material to lots of revenues, typically we just start to Google, there is administrative worker to contracts. We decided it didn’t make sense. So we opted out that, we still have the other one. And we’ll continue to work with them through June 2015, and then we evaluated that. Jay Srivatsa – Chardan Capital Markets LLC: All right, you’ve mentioned on the mobile side, challenges and monetization, what are some of the things that you’re looking at to put in place as you look at launching Grow Mobile as a material part of your revenues?

Yes. So Grow was on actually advertising side, that’s on promotion side, not the monetization. But I will just go to your points. On Grow, Lightspeed or Lightspeed in next month, the numbers taken we should be launching our self-service platform, doing some integration with Grow. Grow is really growing, excuse me ton, nicely in terms of their revenue in clients. And we think we’re well positioned there precisely, because we do know in fact with the Grow partners as well. They were immediate buying people at different big companies things to note. We know we define ourselves, we have – I think a unique insight into what our partners need in terms of their analytics, they’re tracking and their obviously connections to buy across as well as the network is possible to increase the yield of their advertising. I think we’re making good strive there and we’re very confident that that’s going to really hopefully Grow extremely nicely over the next two quarters, three quarters, four quarters and we’re really optimistic about that piece. On the monetization side, which is we’ll call the supply side of the business, we’re working with leveraging our data and really looking at the programmatic targeting size of the business, which we think we have a few things that we’ve learnt on the desktop side applying to the mobile and looking at acquisitions to kind of augment that in a similar fashion to what we did with Grow and buying for Lightspeed. So we have two other divisions, we kind of opened up in the past few months at six months at Perion, want to focus on the monetization side, supply side and want to focus on the analytics and the acquisition side, excuse me, specifically around user engagement and increasing the life time…

Good question. We are not sure what competitor is doing. I think what I say is after the February 2013 changes; many of our competitors really decreased their volume in Google other than probably something like IAC, well obviously big partnership with Google. I think you look at everybody in this space, the amount of revenues and the percentage of their revenues with Google decreased. As I mentioned Google is a great partner, but economically (indiscernible). And I think therefore you saw some shake out already, I don’t know we can see whole lot more shake out because of this. You may see a little bit here and there, but I think neither they will be and I think as you mentioned Jay, we mentioned before. We think we’re in a good position to pick our market share and when that happens, but right now our more main focus is adapting to new changes, focusing on ramping up our media volume again on the desktop side and then investing in the mobile for the future of the company and we remain excited about the future. Sometimes in 2013 or 2014 you are harder and going up the hill is difficult. And that’s what we do. Jay Srivatsa – Chardan Capital Markets LLC: Thank you good luck.

Thank you.

And we’ll go back to Kerry Rice with Needham. Kerry Rice – Needham & Co. LLC: Just a couple more follow-up questions, one about the technical issue, just kind of more of a clarification for me, did you say that, that it has been fixed and if it has, why wouldn’t you go ahead and accelerate media buying to gain those customer quickly than couple of quarters out. And the second question is, well I know there is a lot of moving pieces here, just trying to really get a sense of how to think about 2015 and kind of re-acceleration of the media buying and kind of economics around that and trying to get a better understanding. Where do you think this business can ultimately grow in 2015, you mentioned kind of a 15% to 20% would be tough in the next couple of quarters that kind of what we should think about our reasonable growth rate in 2015?

Okay, I’ll try to answer all this questions and Yacov, will jump in as well. First on the technical issues, so as I mentioned it’s largely fixed, all been largely fixed, but again that’s not causing the drop in revenues, some of that was related to that. The drop in real volume is just the overall LTV and that’s mostly the Chrome, If Chrome is 40% market share and your conversion rate drops significantly, and lifetime value is going to go down and certainly can adapt to the Chrome issues. I’m not just spending a lot of money to be profitable. So there is some lingering effects from the technical issues mostly from the fixed, but once loss of users because I think at the back I can try to buy more new users. As you know those users were profitable users for us because they worked with us for a while already. In the other way the model works, our churn is highest in the first month sort to say and they survived the first month and actually became a very, very valuable user. So in general that will hurt us again that one time issues, the rest is media buying and we are not going to ramp up in media buying, they are still doing $25 million to $26 million media buying, but we are not doing more than that and so we understand that are the effects and how the industry adapts to the Google Chrome changes. With regards to 2015, I want to clear and we, I’m not sure that the growth next year in the overall search monetization piece of the business, I think in Perion, our growth will come from hopefully the proof to our labor in the mobile space. We’ll have sequential growth, I believe as we look to go down next two years in search. And then we’ll have our mobile revenues from what we’ve done today and from hopefully future acquisitions. So I think we still can grow next year, but presumably of a little – of lower rates coming out of 2014. I don’t know I would say in terms of the search monetization business, I felt because that it was a chase question earlier about the market share, if a lot of our competitors remain in place. Then I think you’re still talking about probably next year with single-digit growth, maybe, probably single-digit growth on a year-over-year basis in the search monetization business than mobile we can have high double-digit growth. I think that’s what I think today, but I think a lot of better information for you Kerry in Q3, and let’s call then, or in the proportion of the Q at the end of this quarter and the next quarter too early right now, but that would be my best guess today. Kerry Rice – Needham & Co. LLC: Thank you. appreciate that.

And we’ll go next to Dan Kurnos with Benchmark Company. Dan L. Kurnos –: Yes, thanks. Josef, just a quick follow-up on the Bing renewal graphs on that by the way, just in the press release, you mentioned that there was some limited exclusivity. just without going specifics, can you give us any update on the relative terms relative to your prior Bing contract?

Yes, thanks. Josef, just a quick follow-up on the Bing renewal graphs on that by the way, just in the press release, you mentioned that there was some limited exclusivity. just without going specifics, can you give us any update on the relative terms relative to your prior Bing contract?

Yes, I will be happy too. Sure, I’m sure by General Counsel will love it like; itemize your own particulars of the contract. Since you don’t know, I can’t do that, because the company, generally, what I can say is as follows. The economic churns are substantially smooth to what it has been in the past two years. We did change a few things, but I will tell you we’re over the three years. We’re actually confident and optimistic that actually will do make money over time, both for us simple thing, if two of those of you don’t expect it to go. I think the other changes are more standard changes today, which because the original detail they had with the company was four years ago, more around policy issues and the policy issues, which we fully support and frankly agree to, we are doing almost all of many ways. More policy issues to protect and I think as we’ve said before the user experience and in the previous contract, there just was less of than issue, there was less restrictions on that end. And those are things, which we support. So those are the two main areas – changes in the contract, but on an economic basis, we think you will be substantial somewhere and over time to catch even better, most of options from Bing. and on the policy side, we’re very comfortable with what we did together with Microsoft and Bing to ensure that we have very good and reputable policies for the benefit of consumers. Dan L. Kurnos –: Got it, that’s really helpful. And then just one other quick follow-up from me, since you are launching the self-served platform on the mobile side, I know that it started with you partnering and helping them buy media, just maybe a high level thought on your strategy, and how you balance between the hands on, or the hands off approach and which you think is going to be the most successful going forward, understanding that both will be key components of the strategy.

Got it, that’s really helpful. And then just one other quick follow-up from me, since you are launching the self-served platform on the mobile side, I know that it started with you partnering and helping them buy media, just maybe a high level thought on your strategy, and how you balance between the hands on, or the hands off approach and which you think is going to be the most successful going forward, understanding that both will be key components of the strategy.

Yes. It’s a great question. I think you have to look at it; one of these we’re talking is to really segment the market. So there are different solutions for different segments of the market. Let’s give an example, and that agency is almost always going to pick the self-service platform approach, right, so it will be more salesforce.com/model. And that make sense for that agency, a pretty big media gaming company out there or somebody else, who has internal people who would use it, but also a percentage of that media buying they’ll say in order to balance down and give you a maximization they may outsource stuffs 10%, 20%, 30% for example of their budget source managed as well as using our own platform from their own general people. We see both of those things happening. And I think lastly there is probably some companies out there just don’t have any internal ability to do that, so they’ll outsource it to us as a way of really gaining the best of what we have our platform and our talents and our expertise. I think as it more and more growth of problematic. I think first of all that’s good for us and in terms of our technology platform we build and close deal together and we think this is actually excellent and will give us a lot of opportunity for the growth in the future. And I think as more growth problematic, I would think that there will be healthy balance, but I would say today if you had to push me on this, probably self service will probably be a higher percentage of clients towards that, but I wouldn’t say it’s like 90/10, probably like 60/40 again that’s a gift, then I don’t know, but based on speaking to different partners and different potential partners, we've seen I would say in the next two or three years I would expect it to go there. Today a lot of it is fully managed, the sell through and the platforms are not fully baked in a lot of companies is still ruling again, but are expected to go to that overtime. Dan L. Kurnos –: Got it, great. That’s really good color. Thank you.

Got it, great. That’s really good color. Thank you.

And we have no further questions in the queue at this time.

Okay, is it up to me?

Yes, sir, back to you.

Okay, thanks. All right to wrap it up, as always, I would like to thank talented team at new Perion for all their hard work and dedication, helping us achieve these great results in the second quarter. While we work through industry changes on the desktop through the next two quarters, as in the past we expect the business to stabilize and return to sequential growth in 2015. We are remaining dedicated and focused on building out our mobile platform and are off to a very encouraging start with light speed in our acquisition of Grow Mobile. On the personal notes as a sign of my belief in the business and the great talent we have at this company over the long term I’m pleased to announce as soon as the trading window opens for me I plan on purchasing stock in the company and are confidence over time it will prove to be one of my best investments. Thank you and have a good day.

And this concludes today’s conference. Thank you for your participation.