Good day and welcome to the Perion First 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 first quarter 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 provide 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 are 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 Web site, 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 first quarter 2015 earnings call. This morning I would like to briefly discuss our results, update you on the state of our download monetization business and conclude with an update on our marketing platform where we will continue to make great strives. Yacov will review our financial results in more detail and we will then open the call to your questions. To start, I am pleased with our first quarter financial results. We exceeded our guidance both on EBITDA and non-GAAP net income with $20 million and $14 million, respectively. Revenues were $52 million at the higher end of guidance and non-GAAP diluted earnings per share were $0.19. These results were largely driven by a slightly higher than expected RPM slightly lower than expected customer acquisition cost as well as prudent expense management While the environment for download monetization remains challenging, we are encouraged by the improving visibility. This improved visibility gives us increased confident in our stated outlook that search revenues will level off in the third quarter and return to a modest growth in the fourth. Looking forward, we will continue to generate strong cash flow and expect to download monetization business to remain highly profitable albeit smaller, well into the future. To power our future growth in [indiscernible], we continue to invest our R&D dollars in two major areas. The first is focused on enhancing our portfolio of monetization products with publishers and the second is aimed at extending our monetization solution for mobile. We are primarily adding more point solutions for publishers who use multiple vendors for their monetization need. This includes monetization solution such as video, native ads, text link, data mining and others. We are expanding our efforts beyond download partners and as such…

Thank you, Josef. GAAP revenue for Perion this quarter was $52.1 million compared to $114.8 million in the first quarter of last year. This quarter's revenues reflect gross revenues up $60.9 million reduced by $8.8 million of our customer acquisition cost netted from top line revenue. As we indicated when providing guidance last quarter, this reflects the transition of our revenue generation model over the last few months to a lower risk REV share model and away from prepaying for acquiring customers. While our visibility has improved, our ability to precisely predict the future lifetime value of our distribution is still limited, given the continuing policy changes of the browser and operating system config and the aggressive practices of some of our privately held competitors. We intend to continue this transition to a lower risk REV share model in the coming quarters. Beyond the change in our marketing model and its affect on revenues, the decrease in revenues was primarily result of our maintaining a lower level of customer acquisition. We significantly drew back on cash in the third quarter 2014 becoming more selective in engaging our marketing partners, preferring premium and higher margin partners that and have continue to marginally decrease it since then as well. Other revenues in the first quarter 2015 were $9.2 million which was made up of $5.1 million of other advertising revenues and $4.1 million of product revenues as compared to $15.8 million and $2.3 million in the first quarter of 2014 respectively. Other advertising revenue is highly correlated with sys generated revenue as it comes from inventory on the homepage. Therefore, with the reduction in CAC there was a corresponding reduction in queries and homepage inventory. In the first quarter of 2015 customer acquisition cost were $15.7 million, as compared to $59.6 million…

Maybe if I can think about the Q2 guidance Yacov, could you talk about what happen in Q1 is there some the transition to more of the REV share versus the fee based revenue model. Does that impact Q2 at all and if so how do I think about maybe the split between more managed revenue or the REV share versus the fee base? And then the second question I have is how do I think about customer acquisition costs in Q2, is it still coming down even though revenue is trussing in Q2 and then think about that I guess going forward for the rest of the year stable, or do we start to see the pick-up in Q3 with the growth in Q4?

So first you’ve got to the revenues and the growth and net revenue affect that we’re looking at. We’re expecting more or less and that was to be similar as far as the split between the REV share or the net is against the revenues in the second quarter as in the first quarter. So in the first quarter, we netted out approximately $8.9 million from revenue that came off of revenues and came off of tax. But we will respect that similar number of $9 million to $10 million possibly in the second quarter as well. So that’s with regard to that question. With regard to our media spend as we indicated in our prepared comments, we expect in the second quarter to be slightly lower than in the first quarter as we complete the cycle from started last year. We are having increasing visibility, we have increasing interest in our REV share model from a pipeline of new customers and partners. So we would expect possibly in a lateral part of the third quarter possibly in the fourth quarter to increase the media spend. But it should be slightly lower in the second quarter than in the first quarter.

I will add to that, first thanks for joining. The other thing to add is that if you look at the rate, in Q4 of 2015 and Q3, the total acquisition spend was roughly $29 million in each quarter down from 60 in Q1 and Q2 last year. If you look at Q1 our total acquisition spent or TAC including the net revenue adjusted as we said we around $24 million to $25 million. So you can already see that the rates of decline in terms of -- is starting to stabilize from 29 to 25 is a much more stable and we expect Q2 to be similar to Q1, may be slightly low on the TAC side but not significantly lower. And then as Yacov mentioned in Q3 and assuming Q4 we expect that to increase as you go forward. I think it’s important as you look at the whole year we took the big adjustment was in Q3 of last year and as you know it takes about 12 months to recognize the full revenue impact of prepaid acquisitions so if we look at the first half of the year we spent over a $120 million in the first half of last year, we're still in the first and second quarter of this year seeing some of that benefits. And as you lap that full year you'll get to a stabilized and slightly growing TAC on the new baseline and that will have the impact where we think revenues obviously will grow from there as well.

And one follow up question if I may. On the mobile business, you got a good and growing customer base there. Great managed ad spent of 30 million. Is there any opportunity to raise the take rate there that's associated with mobile, so we could we'll see either a faster ramp and the revenue recognition or just a greater opportunity to drive revenue through the mobile channel.

It’s a great question. The good news for us is the answer is yes. Unlike a lot of our competitors we've seen in spaces, you cover a lot of companies in the space, where there is probably more margin pressure when you're starting from the 30% to 35% plus percent take rate. We're not from that standpoint. If you look at the social side on the self serve and any other the mobile self serve, you're talking about single digit take rate and this is the industry standard if you're talking about on the fully managed side, you're probably for us talking in the high teen take rates as we go forward. What we're looking to do is we look at the business is we're looking to understand what's best for our customers. I'll give you an example. An ad agency can be a great customer for us, in all it can do a -- probably always going to take a self serve model but it can drive a lot of revenue. There are some of our companies we're working with today, where they're actually want us to help then on a fully managed basis and as we looked driving our sales growth, clearly we looked first and foremost to identify the customers we think we can be the best long term clients growth. And as you look to balance that out I think it's possible as if we look to balance that out, we'll see what the competitive landscape is, that we can in fact grow our margins on overall basis, which will as you and likely so, we'll have some positive impact on the revenue growth. But today we're still talking small numbers. I think 30 is a good number for us. If you recall last year at the end of the year we said we're on 80 million run rates. Today we just did annualize it; we're on a 120, so we are surely growing there. And we hope – we actually expect to should take, it will be higher than that run rate by the end of this year as well. So we think we're moving in the right direction. In some cases it really depends on the clients we're getting and we're looking to balance that out as we go forward.

And we’ll take our next question from the Dan Kurnos with the Benchmark Company.

A couple of questions just on core search. Josef, it's that a kind of a high level question, so Bing has now got over 20% share, they're closing the domestic monetization gap. Yahoo! is still struggling and still managing to lose share despite paying negative economics for the Mozilla contract. So I'm just curious on how you see that impacting the market place either from a tailwind perspective, from Bing or from a headwind prospective from Yahoo!, if anything is changed there?

Yes, we’re heading, as we said we're a really good strategic partner of Bing and Yahoo! and even Google obviously. As we look at it though the RPM that Yacov mentioned in Q was driven primarily with the fact that Bing increases its market share and gets more volume, probably better than most how the search business works, the more volume you get the more demand the supply you have the more demand you can fill, the higher you’re actually going to get your RPM. And as we said Bing has certainly done a great job on closing that gap in the North America region with Google in terms of the RPM. As we grow our business in Q1, we would certainly a beneficiary of that plus other things we’ve done and I think we expect that to continue. We think Bing is doing a great job of really closing the gap and growing its market share. I think Yahoo! in that regard I think they’re also doing a lot of interesting things to grow their market share because of the same economics I just mentioned. You need more volume to attract the advertisers so you have the reach and when you attract the advertisers, you attract the demand, you can then raise your prices and I think Yahoo! is doing the same thing and I think they’re doing a good job of being aggressive to increase their market share. Both of those things benefit us and benefit the overall search industry as they really still working with some of the different policy changes on the Google side makes it difficult to scale the business that once was working only with Google. We still have a partnership with them and we obviously like them, but we obviously also working predominantly today with Bing and with Yahoo! is growing as well. So I think as we look at the overall business, these are good shifts for us and one of those implications or consequences in the positive way was the RPM uplift in Q1 that we didn’t expect there was a very nice and good indicator for us.

And then just to maybe get a little bit more clarification on CAC here. It looks to us like there was maybe a little bit more of an intentional draw down in CAC and I just want to be clear here. I understand that you sort of enumerated the fact as to what drove that in your prepared remarks but I just want to get a sense from you just in terms of the landscape you said you have increased visibility and I just want to make sure that it’s not increased visibility means the market size is a little bit smaller than we anticipated and for pulling back CAC a little bit more aggressively now just to maintain profitability for what we perceive to be the true market size?

So first of all great question. We’re wondering who is going to ask it, so we appreciate that. So first and foremost, no, it is not deliberate that we’re doing things to push up, this is the bottom line. What we are doing and we’ve said this many times, we have consciously made a decision to stop working with certain types of partners in the marketplace as we’ve taken the leadership position in the search industry, in the download industry to carry the flag of saying we need to improve the overall performance and longevity of this industry by improving the practices and it’s hard to pinch it we’re not doing it. So we took it on the chin and the falling our stock note in Q3. We’ve been aggressively adhering to that at the extent of working with other partners who have come back to us and said hey can you work with us again? And we just don’t think it’s the right thing for us to do we’re trying to win and we’re trying to migrate to higher quality publishers. Getting higher quality publishers, A: it takes a longer lead time and B: they’re less of them out there. So those are the two things driving it. I think though to your point Dan the industry will be smaller I mean there’s no question about that. What we believe is happening and this is also part of the visibility, we know there are some a lot of smaller private companies a good amount already, they’re going out of business or they’re ramping up their aggressiveness just to squeeze a lot of them because they know they’re going to get out of this business. When that goes through its full cycle I believe there’ll be three to five relatively major players left in the download monetization side of the search business and we believe it will be smaller as an overall industry will position us well and a few of other probably more public companies out there that really get a stable, profitable business that can then be really a foundation stone for growing other parts of the business as well as this piece. And that’s how we look at it and if we had great publishers we work with we would have certainly spent more money. We’re trying out there and we have good pipeline of good things coming but the lead time with the publisher was not only worried about arbitrage is just longer, they’re only worried about making a $1.10 and getting a $1 or spending a $1 getting a $1.10 we can find a lot of those guys we’re looking for people who really are more interested in the quality.

Perfect. And then just, focus shift over to mobile first that that really two part question, we see that are short of smaller also somewhat well capitalized companies like Marchex for example sell their domain assets and focus fully on mobile analytics. I know it’s really early but how do you see through new competition entering the space and are you considering an addition acquisition any partnership opportunities in the mobile space. And actually I have one follow up after that. Thanks.

So, we are -- I think the answer is we are looking at partnerships in the mobile space, we certainly looking at acquisitions as we have and we’ll continue to do. With regards to competition overall on the mobile marketing side of the business, there is certainly some competition but there are actually relatively few players who are directly competing with us, fully managed self served solution. Those just few, but not many. Most of the competitors, if you look term, there are some from the desktop or web competitors who are doing the demand side or the marketing to mobile. They will be competitive to us but we think the mobile first approach will be something which is sustainable and we has some differentiated we think technology and capabilities that will position us well for the future. So, we do look for partnerships to help to augment and increase our differentiation and get us here and we are look at both aspects of that. So I think stay tuned in the future but hopefully we’ll have good news on both of those fronts.

And then just my follow up to that in terms of understanding that it’s still relatively nascent business but if you can give us any insight in to new partner pipeline or demand for your services as we get closer to launch people have either signed up or given you indication that interest that would helpful there. Thank you.

Dan, I think one of the really positive indicators in that area is the fact that we acquired making a research a couple of months ago and already we’re seeing a course over clients between GrowMobile and MakeMeReach so that -- MakeMeReach clients that are in the past were receiving all the social network solution are now receiving solutions from our GrowMobile network and vice versa, the GrowMobile customers are receiving solutions from MakeMeRach. So that prove us a lot of confidence that the pipeline will get even stronger as we go forward.

And we’ll take our next question from Jay Srivatsa with Chardan Capital Markets.

Yes, thanks for taking my question. Josef, in terms of the mobile part the manage had spend, I mean what level of -- what dollar amount would you need to be looking at in order for it to really become material. Currently, it looks like you are about roughly 100 million, when does it really become material for you?

Well, the combination of obviously the take rate managed ad spend, it’s a few hundred million dollars, it’s not going to be less than that. Just a math, I mean if you look at the industry take rate and the self serve as I mentioned, is probably 2% to 5% and on the fully managed taken from 15% to 30% and 30% is really being the high end. So, I think if you look at that and you can do the math but when you get the probably $300 million, $400 million I think you’re going to start seeing a bigger number that has meaningful impact in our business today. But we have the multiple to that as I think we’re seeing from the public market comp much higher because it’s a high quality revenue stream working with these big partners and managing that type of revenue. Our goal was obviously to get much than that but I think we need to get significantly higher than which is today, we still get that type of impact on the overall business from a revenue standpoint but from a growth standpoint clearly it’s surely helping us out and we’re excited about the future.

So, is that dependent on the number of active customers you can get beyond your current number or is it more of the quality of the customers that you need to get?

It’s a combination of both, today we don’t have enough customers to drive there we want to get more obviously. That’s the key aspect because what happens a lot of time the customers is they launch a new app, do a best campaign or campaign it doesn’t go the way they want and they just spend there, it’s nothing to do with the quality of our platform that just advertising in general. So from that perspective, we certainly want to get more customers on our platform, because more we have the more of that volatility which is the overall advertising volatility, if any advertising business is muted. We also obviously want to increase the spend and we manage with all of our existing partners. One of the ways we’re looking do that is to the self-serve platform, which is still today in data. So as we launch look to release add some data and go forward on that, that will help us significantly increasing our numbers there and get more, more clients or customers on-board as well as continue to increase with some of existing clients and a good example of that this quarter, we have more than a few clients who actually increased spend with us month-over-month. We also have some clients who launched a big campaign in January and in March they realized it wasn’t working at all a lot of to do it took out in the spend. That’s just way go we just need to do more those things. I don’t think there is a priority yet, we’re not mature enough that business like I say focusing more on the quality versus quantity but right now we are getting both and we’re certainly focused on both.

So in terms of any future acquisitions on the mobile side are you looking to acquire company that get to more customer base or are you looking at any technological acquisition that with augment to your presence in the market?

Well, it really depend which size of the IO, we were look to buy something. So it’s on the supply out of the demand side. On the demand side today, I think we’re actually very satisfied what we have, we think we bought making reach which completed the solution and brought us both clients and technology and I think if there is anything more in the demand side and probably more technical as oppose to buying clients but it’s a right opportunity present themselves, which certainly be open to them. Most of we are looking for today is more on the supply side, which you also think we’re create real synergies for our demand side client. And that will add as you said increase both the quantity, the quality of the revenues we have with any given clients, but also probably increases our margin overtime. So look for that more on new supply side where similarly we do before look for some size with publishers or clients as well as technology.

Last question Yacov in terms of the Q2 guidance. Does the numbers that give guidance when we’re shakeout the point where you’ll still to GAAP profitable or is that address?

No, we expect to be still the GAAP profitable. As you know it’s also from our already the numbers we gave for the first quarter. Our improved cost structure is both in the GAAP numbers and in the non-GAAP numbers. Another words our cash flow expenditures improved itself as well as amount of amortization that we’re looking at that has been taken out from the GAAP and is going to the GAAP has improved as well. So yes, we will expect to remain profitable from a GAAP perspective in the second quarter.

And we’ll take our next question from Aram Fuchs with Fertilemind Capital.

I was wondering you mentioned that you had a nice surprise on the RPM and you’re not expecting that to go forward. Was that indicative or was that from being exceed or was that broadly disturbed?

So, I will not give specific use of it but since most of the revenue comes or Bing, I think one can draw a conclusion. What happen is really a lot of that was in the Q4 RPM if everybody go up. We saw that linger on in January, very positively and then we saw through the quarter it go down. But still very good numbers but down from where it was. So we were not expecting in January in the high RPM early February that’s what happen. We’re seeing good RPMs now strong from more in line with what we originally expected. Obviously we hope that the RPM is heavily expect and the beauty of the higher RPM as you know it dropped to the bottom-line, I mean one of the earlier question just taken add is we hold that CAC and as where our profits were so high. The matter is the higher RPM all that increase above we expected drops 100% to the bottom-line, which you might to profits we’re also higher than we expected. So we hope it would be nice I don’t control the RPMs, but I assuming including for all my partners RPMs to go up. And if they do we will be the beneficiary.

Okay and throughout ’13 and ’14 both Google and Microsoft use their three different levers of power here at the browser, OS and ad products to create a more secure environment for their user. Are you still seeing in Q1 and looking forward to Q2 more tightening of those screws? Or has that flat now?

So the good news is I'd say we're certainly seen less activity in this quarter than we've seen in a long time from the industry. There was some new ad words policies that affected some of the affiliating marketing partners. But on ad words it wasn't -- it was only which ad that earlier on, they just more enforcing it now. There wasn’t anything new. The only new thing on the horizon is Windows 10 and the new browser and those type of things. We know what to expect. We also will see how it plays out. What we did with Microsoft in Q1 which was the only other thing which again we knew about an event was Microsoft has been working with another partners in the space to make sure that the search protection mechanisms in the products that get downloaded are disabled so that only -- so that Microsoft as on an operating system basis can control that as a neutral player rather than having a lot of potentially fighting software behind the scenes hurting someone's computer. We imported that. We're one of the first ones to implement it. And this longer the Microsoft really enforces that I think it's a good thing for everybody and the industry as well. But we don't see -- again I wish I had full knowledge but we don't see any -- we haven’t heard of any other major changes happening in the next couple of quarters that we think that hopefully as we said part of our increased visibility is -- we are not hearing or seeing anything that we're not expecting today.

Okay. Great and then on the GrowMobile side, I know you like to use that metric of ad spend but I'm just trying to figure out sort of the real business profitability underneath. Just let me derive to a couple of function, may be you can give a feedback on it. When it’s self serve if you got to a see a percent of, may be the ad spend, the incremental cost on dollar of self serve ad spend is very low. Correct? It is pretty much all real businessmen’s profit.

Right, the fixed cost is there, but the incremental cost is very, very well.

And if you're getting mid to high teen on full service you've an account manager and may be some creative waiver there. And the incremental profitability for the -- for another dollar is roughly the same as self serve, because you have those incremental costs? Is that a fair assumption?

Yes. I mean it certainly fully managed because of what you said is high because the incremental cost is longer. It's like everything else. If I have five account managers and I think do they manage 20 accounts, I only have 10. Then what you said is absolutely correct.

But your net cost would still be higher because at the end of the day we also have to readjust the model for scalability. The self serve model is much more scalable and therefore if you wish may do with a low level of nominal profit because we know that customer can easily scale up and be more attractive because of that while the fully managed one is not as scalable and therefore we would expect that the profit dropping down to the bottom line should be somewhat higher.

Got it, got it. And then one quick follow up on Yacov, you referenced the new products from Smilebox and I haven’t heard from then in a while. What is that going on has that been -- has been expensed until practical feasibility is established. Is that where it’s at?

Well, for the most -- until now it's been expensive, possible in the future of based on the different accounting procedures, some of it may be capitalized, but at the moment we have expense everything.

Okay and when will that be launched. Did you publically announce that?

It was publically launched sometime in the end of Q3, early Q4, some data now, most of these new customers and most of our partners tested out, keep the tiers and hopefully improve it. So that when do launch it, with our success.

And with no further question, I’d like to turn the call back to back over to Josef Mandelbaum for additional or closing remarks.

Thank you, Alan. This year is also a good start and the first quarter was ahead of plan. We continue to be very profitable and we are excited about our future vision. As always, never this to be possible without the professional support and hard work of our dedicated employee. To them I simply like to say, thank you. And to all of you, thank you and have a good day.

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