Perion Network Ltd (PERI) 2012 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Perion first-quarter 2012 results conference call. (Operator Instructions). As a reminder, this conference is being recorded May 15, 2012.

With us today from Perion, we have Josef Mandelbaum, CEO, and Yacov Kaufman, CFO. I will now hand the call over to Brett Maas of Hayden IR for the Safe Harbor information. Mr. Maas, please go ahead.

Thank you. On today's call, management will be reviewing the financial results of business highlights for the first quarter of 2012. The press release detailing Q1 results is available on the Company's website, 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.

With that, I'll turn the call over to Josef Mandelbaum, Chief Executive Officer. Josef, this call is yours.

Thank you, Brett, and good morning, everyone.

Today, I'd like to focus my comments on a review of our first-quarter 2012 results, followed by a few comments about the rest of 2012. I will then turn the call over to Yacov for more details regarding the first-quarter financial results and business metrics before opening up the call for questions.

The first quarter was another great quarter for the Company and the 25th consecutive quarter of growth on a year-over-year basis. We are extremely pleased with our results and accomplishments. We made considerable progress on our long-term strategy, invested in future growth, executed well throughout the quarter on a variety of fronts, and are confident that we will deliver on, and perhaps exceed, our original 2012 guidance.

Revenues in the first quarter increased by 30% year over year to $11.3 million as a result of an increase in product and advertising revenues, largely due to our Smilebox acquisition. This 30% revenue growth was achieved even though search revenue declined, mainly due (technical difficulty) significant increase in media buying from competition, which impacted the monetization of our installed base.

The good news is that our installed base grew from 12.3 million to 13.3 million users, demonstrating the strength of our product-focused strategy, which gives us the ability to continue to communicate with our users and consequently increase their lifetime value. We have already begun to test and successfully implement new solutions to recapture our users' monetization. We are confident search revenue will increase in the coming quarters and should provide us with a significant growth catalyst going forward.

As I mentioned in our last earnings call, we are also very proud to report that Smilebox was cash flow positive and achieved a 14% EBITDA margin in the first quarter.

Operationally, our focus continues to be on broadening our product suite; addressing the needs of second-wave adopters, specifically on new platforms; or continuing to improve our back-end systems and technology. As an example, we have decided to make investments in mobile and tablet a priority for us to ensure long-term success. We will develop and offer a range of iPhone, iPad, Android, and Windows mobile products over time to answer the increasing penetration and demands of our target.

Based on market research, worldwide penetration of tablets is expected to be over 250 million by 2014, while smartphones will be well over 2 billion. Paradoxically, second-wave adopters leapfrogged, with regard to tablet adoption, using it mainly for e-mails, photo sharing, and news consumption, precisely what we offer and will offer in the most user-friendly way.

So far, our mobile product offerings include a photo e-mail application; Smilebox mobile, an application with over 500,000 downloads; and PhotoJoy, all available for download in the Apple app store.

We are working on additional exciting products to reinvent e-mail communications, as well as expand and enhance our photo offering on mobile platforms.

Looking ahead to the rest of the year, we expect premium and advertising revenues to continue to provide a solid base for growth and revenue diversification, generating approximately half of total revenues, up from 31% in 2011. As mentioned earlier, we also expect to see significant growth in our search-generated revenue by improving the monetization of our growing user base.

In addition, based on the successful integration performance of our Smilebox acquisition, we continue to actively search for more companies to accelerate growth. We have a strong pipeline of opportunities, with one of our prime criteria now being proven profitability.

Now, I'd like to turn the call over to Yacov for more details on the financial results of the first quarter. Yacov?

Thank you, Josef.

As mentioned on our last call, we will be analyzing our results on a non-GAAP basis, which better conveys the operational state of the business. There is a detailed reconciliation to GAAP results in the financial tables of the earnings press release.

Revenues this quarter were $11.3 million, similar to the previous quarter and up 30% from $8.7 million in the first quarter of 2011. This quarter's revenues included $5.6 million in search-generated revenues, which were lower than prior quarters, as Josef explained earlier.

This decrease was more than offset by the dramatic increase in product sales and other advertising revenues. Product and advertising revenues were $5.7 million, compared to $1.9 million in the first quarter last year prior to the acquisition of Smilebox, and even increased sequentially 18% from $4.8 million in the fourth quarter of 2011. This demonstrates one of the strengths of our business, having multiple revenue streams providing for consistent growth.

As we mentioned last quarter, in the first year after the Smilebox acquisition there will be a difference between GAAP and non-GAAP revenues. This quarter, it amounted to $0.6 million. This difference will gradually decrease through the third quarter of 2012, one year post the closing of the acquisition.

Gross profits also continued to grow, reaching $10.5 million, compared to $8.3 million in the first quarter of 2011 and $10.2 million in the fourth quarter of 2011.

The gross profit margin was a high at 93%, compared to 96% in the first quarter of 2011, prior to the Smilebox acquisition, and 91% in the fourth quarter of last year after fully consolidating Smilebox.

The $0.6 million difference between GAAP and non-GAAP revenue, together with $0.3 million in amortization of intangible assets, provided for the $0.9 million difference between GAAP and non-GAAP gross profit in this quarter.

Research and development expenses for the first quarter were $2.6 million, just above the $2.4 million recorded in the fourth quarter of 2011 and compared to $1.9 million in the first quarter of 2011. The increase year over year was primarily due to the acquisition of Smilebox and the development efforts related to its mobile product.

In addition, this also reflected the development of an e-mail client app for the iPad recently begun and expected to be introduced in the latter part of this year. We expect R&D expenses as a percentage of sales to remain at the current level in coming quarters.

Sales and marketing expenses in the first quarter of 2012, excluding customer acquisition costs, were $1.4 million, compared to $0.8 million in the first quarter last year, prior to the Smilebox acquisition, and $2.2 million in the fourth quarter of 2011. The changes are primarily due to the sales and marketing expenses from Smilebox.

Customer acquisition costs in the first quarter of 2012 were $2.6 million, compared to $0.7 million in the first quarter of 2011 and $3.1 million in the fourth quarter of 2011. Since the third quarter of last year, we have been ramping up this expense, increasing it almost fourfold year over year in order to accelerate our growth.

As we worked on our back-end systems to improve our ROI on this investment, we drew back on the expenditure this quarter compared to the previous quarter. As we improve our systems, ensuring a good return on investment, we expect to further increase our spend, fueling future growth.

General and administrative expenses were 1.4 -- $1.5 million in the first quarter of 2012, compared to $1.4 million in the first and fourth quarters of 2011. Our ability to maintain this level of G&A has reduced the G&A expense as a percentage of sales from 16% in the first quarter of 2011 to 13% in the first quarter of this year.

GAAP operating expenses in the first quarter of 2012 included $0.4 million of share-based compensation, $0.3 million of acquisition-related expenses, and amortization of acquired intangible assets of $0.2 million, which were adjusted for in the non-GAAP numbers. In the first quarter of 2011, prior to the Smilebox acquisition, these expenses totaled $0.3 million, attributable to share-based compensation.

EBITDA in the first quarter of 2012 was $2.6 million, compared to $3.7 million in the first quarter last year and $1.4 million in the last quarter. The change compared to prior periods was primarily attributable to the level of investment in customer acquisition.

Net income in the first quarter of 2012 was $2.2 million, or $0.22 per diluted share, compared to $2.9 million, or $0.29 per diluted share, in the first quarter last year and $1.6 million, or $0.16 per diluted share, in the fourth quarter of 2011.

In the first quarter of 2012, cash generated from operations totaled $2.5 million, up from $2.1 million in the same quarter last year and $1.7 million in the fourth quarter of 2011. As of March 31, 2012, we had cash and cash equivalents of approximately $13.5 million. Since closing the quarter, we paid the second and, we believe, the last installment of our Smilebox acquisition, totaling approximately $7 million as accrued on our books, and we drew down $10 million in long-term bank financing at favorable rates, so that our cash position has since increased.

Before opening the call for questions, allow me to highlight some of the metrics driving our business. Total downloads this quarter were approximately 9 million, compared to only 2.5 million in this same quarter last year, before the ramp-up in customer acquisition and the addition of Smilebox to our product portfolio. And the growth continued sequentially, increasing from 6.4 million downloads in the fourth quarter of 2011.

Our installed base has grown 45% year over year and 8% sequentially, reaching 13.3 million at the end of this quarter, compared to 9.2 million at the same time last year and 12.3 million at the end of the last quarter.

And finally, since the acquisition of Smilebox, the number of premium subscribers has increased to over 403,000 premium subscribers at the end of the quarter, compared to 158,000 the same time last year. We believe that this is a key indicator of the real and long-term value of our strategy.

With that, I would now like to open the call for questions. Operator?

(Operator Instructions). Jared Schramm, ROTH Capital.

Good afternoon. So the EBITDA margin at Smilebox was 14% in the quarter. Looking at a year from now, where do you think the potential can be for the margin for Smilebox?

Thanks for the question, Jerry. We would expect it to actually come up to our profitability, so if our target is between 20% and 25% EBITDA, we would expect them to reach that.

Okay. And you threw out some numbers there on the premium users at Smilebox. At the end of the quarter, what percentage of Smilebox users were actually premium?

Well, the number that Yacov put out, they're all premium users. The 400,000 was a combined number for all premium users, most of which are Smilebox, as we mentioned before. That was a big jump we took in Q3 of last year.

Basically, that's the number. We didn't disclose an installed base number for Smilebox and for other products. We have an overall installed base, as Yacov mentioned, of 13.3 million, of which we have 403,000 paying premium subscribers.

Okay. And turning to customer acquisition costs, it looks like you're getting a little more efficient there as far as the spend is concerned. Does it make sense to ramp this up even further, given the fact you're getting better traction here with the downloads?

It's a good question. Pretty much what you're seeing, it's really -- and you'll see this in some of the numbers. It's a constant battle, so to speak, between balancing out what's going on around you with the competition, going on within the marketing channels you can invest in, and the return are looking for.

So, what Yacov mentioned earlier, and I mentioned in my comments as well, is that we actually reduced the spend a little bit in Q1 because we were trying to hold firm on some of the ROI components that we're trying to make sure that we get a good return for not only ourselves as a Company, but also as shareholders, and when we look at the competition, in Q1, for whatever reasons, there was a significant spike. And when that happens in the marketplace overall, you have to look at, is your spending going to be worthwhile on the ROI targets you have.

So as we go forward, we're looking at a lot of things we can do to react to the market, as we were having -- doing anyway in our back-end systems, as Yacov mentioned, as well as some things in the front end to increase our ability to maintain the ROI targets we have and grow the spend.

So we have become more efficient, and thank you for noticing that. We are looking to go forward to use that efficiency with some other things we were doing in the business to really try to increase that in Q2 and Q3 and Q4, especially.

And one last question here in customer acquisition. Were some channels performing better in that quarter, it looks like, and could you highlight what some of those were?

Sure. Basically, first of all, the channels that usually perform the best in general, today still are the PPC and affiliate channels.

So PPC, as you can imagine -- it's one of the reasons why our friends from Google always do so well -- is a very efficient marketplace. Basically you're buying what page people click.

What we're doing is we're expanding our reach in terms of where we're able to buy. That's because of the systems that Yacov mentioned. And as we get more efficient in that, we can expand the reach and get the higher ROI, and that's actually doing well.

It's harder to scale that in a bigger way because you really have to do that incremental steps. But we are seeing some good responses there.

On the affiliate side, we're really -- we have some good progress there. What happens in affiliates, and this is just the nature of the beast, you try out 10 different, 20 different affiliates, and some do really well and some don't. So it's really culling or pruning the trees, so to speak, in order to get that going, and I think we have a good base today and we'll continue testing it a lot more in going forward.

I think on the display advertising side, it still remains relatively challenging. For us, though, it probably is the weakest performing of the ones that we have -- of the ones that we're doing now, of those three. We're doing okay, but it's harder to scale at the rates we need to get that. But we're still testing as many things as we can because, as you know, Jerry, the marketplace changes all the time.

Obviously with the Facebook IPO coming out and Facebook can potentially, as we look at being in competition, and Yahoo and so on and so forth, the world changes and could be the rates go down significantly in other places, and we're always looking for points where we can buy media, test it out, and if it has a good return, we will ramp up the spending.

And lastly, are there any acquisitions you're looking at right now that you find particularly attractive, or are you kind of content with building the brand up which you currently have?

The answer is yes. We certainly -- I mean, we've been open. We continually look at different opportunities.

We have a corporate development team here that pretty much that's all they do all day long. And there certainly are some things we're looking at we think interesting. Nothing, I'd say, that we're prepared to comment on at this point in time, and mainly because, as you probably know, the way these things go, you can think you're really close, then something happens and nothing happens.

One of the things we're really focusing on, and I think this is a key differentiator for us going forward, is we're really focusing now on companies that have proven profitability, that we think will be accretive from an EBITDA standpoint from day one.

As we look at growth over the next phase of the business, that's probably our main shift in terms of the filters. Everything else remains the same. We're looking for products or services or technologies that help us address and grow our businesses, whether it's premium or search revenue, focusing on the user base we're talking about, but really focusing more on profitability.

Now, as an initial filter, it's probably the biggest shift, and we think we have some good opportunities there. These things take time, and we'll see how they go.

Okay. Thank you very much.

[Abba Horowitz], [Old School Partners].

Hi. Good afternoon. First of all, congratulations. I think you guys are really demonstrating the plan that you set out at the end of last year and beginning of this year, and I just want to congratulate you because you really executed very well.

Thank you, Abba.

Question for you. I mean, I won't get into the stock price right now, but there's a few issues here that I'd like to deal with. One is the payment obligation that appears on your balance sheet. Where does that stand today vis-a-vis the payment? At what point will you have to pay this? Do you have to pay this? And when will this come off your balance sheet?

As I mentioned earlier in my comments, there was a 6.9 -- or actually almost $7 million accrual for the payment obligation. That actually was paid just a couple of days after the end of the quarter, so we already paid that down.

And as I continued to mention, we drew down some $10 million in bank debt at very favorable rates, both to finance that payment and to provide us the liquidity going forward.

Okay. Did you end the quarter with about $13 million of cash?

Yes.

That's correct. $13.5 million.

Okay. So, in theory, you didn't really need it for that pay down.

Correct.

Okay. The other thing is the deferred revenue that appears on the balance sheet, it looks a little bit different this quarter than it did on the comparison quarter. Any reason for that?

There are two reasons for that. The first reason is actually the consolidation of Smilebox, and as we go forward, we're accruing their deferral.

As I mentioned also, when we acquired the company and going forward, we didn't have the tails of deferred revenues when we acquired Smilebox. That was taken off in the acquisition. And therefore, you're going to see that number growing as the quarters advance past the Smilebox acquisition. So that's the first change.

The second change -- and that was very astute, the fact that you noticed it -- is that there is no longer local long-term deferred revenues. And that stems from the fact that we changed our product offering from a service offering to a product-focused offering. And therefore, in the future, we will not be deferring some of our product revenues, and that's why we do not have any longer the long-term deferred revenues and it's all in the short-term deferred revenues.

Okay. Now on a go-forward basis, should we read anything into this short-term number? This short-term deferred revenue number? Is that meaningful at all?

The short-term deferred revenue number is actually the revenues that we've accrued on subscriptions. That is, if you wish, already accounted for, meaning that it's a very good horizon for us for you to see how the revenues are developing going forward. It depends also on the product mix, but it's a good number. It'll probably stabilize probably next quarter, once we're 12 months beyond the Smilebox acquisition.

Okay. So that number, in theory, I should be watching that to see that grow every quarter.

Up until the third quarter of this year.

Okay. Okay. Also, just on a cash flow basis, can you give us a sense what the rest of the year should be looking like, the next three quarters, how you guys are seeing it?

I think there are two indicators. I think over the long term, you're going to find that the cash flow very closely follows -- there's a high correlation between the cash flow and the EBITDA.

The exception to that would be, though, with regard to media buying. Media-buying costs are very much forward looking, and therefore you pay for them upfront. So to the extent we're spending -- we're ramping up our media buying, you'll see that it will take more from the cash flow without -- and may not be as balanced with regard to the EBITDA.

So can I assume, roughly, $2 million, $2.5 million of free cash flow for the next three quarters -- each quarter?

Our EBITDA guidance for the year was about -- between $9 million and $11.5 million. I think we gave an indication of cash flow between $7 million and $8 million, if I'm not mistaken.

Okay. Fair enough. One of the other things is that many of your competitors, if we can call them that, have either gone away or are in serious financial trouble. I'm wondering, Josef, if you could give us a sense of the landscape out there vis-a-vis your current competitors because there has been quite a bit of an issue since Google -- you had to renew Google, and many of the other guys out there are having a lot of trouble continuing as a going concern. I'm just wondering if you can give us a sense of what you see there on the landscape?

Sure. I put our competitors -- and I'll define competitors in a second -- but I put them in into categories.

So a competitor, in this case, for people on the phone, it's really not a competitor for the user in terms of the actual product. To answer Abba's question specifically, you have to look at a competitor as anybody who has a downloadable application; that has a business model that is a premium business model, meaning they take over search assets as well as a premium asset -- anybody is a competitor.

And then, if you look at it that way, we have two camps. I'd say you have the camps of people who actually, since the Google changes and really starting in Q4 of last year, and really in Q1 this year, Abba, they have probably doubled and tripled their media-buying activities, which has caused a major influx into the market of a lot of new downloads.

And that has caused, I think, for the other half of the group, people to have significant challenges in monetizing their base like they used to. So if you go back two years ago, there wasn't that much competition. So you didn't have to be, frankly, on your toes every day, every minute about things, and there wasn't 20 million downloads a day of downloadable products trying to take over search assets.

Today, you're seeing the big guys are separating -- the men are separating from the mice. So there are some companies out there, without naming names, who are having serious problems because the Google impacted them both in terms of the rev share amount they were getting, as well as the amount of ads they were able to monetize on a page. And when you get to a destabilization point, for some of these people who only had media buying as a way of doing business, they can no longer make the arbitrage work.

On the other hand, so therefore companies like us, right now I'd say we're probably in the upper middle of that group. I'm not in the big, big group yet because that big group includes some major players who have hundreds of millions of revenue, and they've really significantly increased their spend -- I mean, literally -- to $25 million to $30 million a quarter. We just spent $2.6 million in this quarter. So 10X our spend.

What they found is that because of the changing dynamics of things, by them spending more money, what they're doing is they're taking over from somebody else -- I'll call them the second group -- and it's low-hanging fruit for them. So that's why the separation is happening.

I think we'll see that continue, frankly. And I think for us, specifically, we are doing a lot of things now, frankly, to be even more diligent about how we think about the download process; how we think about the user, and making sure they're still front and center. But, to be candid, also more aggressive against competitors who are taking away our users.

So I'll give you an example. Someone who downloaded IncrediMail and using IncrediMail, what we found in Q1, to some degree, is they're still using IncrediMail, but all of a sudden one of my competitors took over the monetization of my IncrediMail user.

The good news for us, as I mentioned in my comments, is they're still using IncrediMail, so I have a connection to them that, hopefully, and we have some really good plans and things we're implementing now -- successfully, I might add, that we think we can recapture the monetization for our users.

There are a lot of companies out there in the second class I mentioned don't have that type of product to have the connection with the user, which makes it even more difficult for them to climb out of the hole. And that's where I think you're seeking those two camps go. And I think we'll see that over the next few quarters.

So I think the competitions will still be fierce. We have to be smarter and better about how we do it. We think we have some things we're doing, and they'll be catalysts for us in the next few quarters.

I also think, as you mentioned, there will be some companies who just don't survive the next year in some of the dynamics that are changing in the marketplace.

Okay. Fair enough. Very thorough answer.

Just finally, I know you guys are probably frustrated yourselves by this, but a reflection of the current stock price certainly does not reflect the current value nor the cash flows nor the growth of the Company.

I'm just wondering currently if you could give us maybe a flavor of what you guys are doing to get the word out. I know it's not always up to you. But the feedback that you're getting from other investors or new investors and what you think can be done to enhance the value of the share price.

First of all, yes, we are frustrated. So probably as much as many of our shareholders, so I'll thank the shareholders for being patient.

I wish you had a short, easy, magical solution. I don't, so I'm not going to pretend that I have one.

I think we have to do two things, in my opinion. One, continue to execute on the business. And a good example is what I just talked about. Even taking our eye off the ball for a couple of weeks, in the heated-up environment of the competition on some of the download markets could cause us difficulties. So -- and frankly, I think to some degree we caught ourselves that way and we're correcting it. So we need to make sure at the end of the day that we're executing on the business and focus on execution, and if the results continue to do what they do, I think eventually people will understand that.

In terms of the outreach, we have -- working with a new IR firm called Hayden IR, who we got recommended by many of our existing investors. We thought it was a time for a change. KCSA did a great job for us. We were happy, but we think it was time for a change, given some of the frustrations we all have in the marketplace. And we're excited to work with them -- Brett and [Mary] and Jeff -- and we think they're going to do a great job for us.

We do go to a lot of conferences. We do non-deal road shows.

I think the other thing that we need to do, Abba, is, candidly, and you've said this to me before, the Smilebox acquisition is performing well now. We need another quarter of good performance so we can gain more credibility. Our revenues need to continue to do that, and we need some catalysts, some of which we mentioned in the call, which are the search. We're talking about the premium revenues, and frankly, some of our mobile things we're doing are exciting but may not bring in a lot of revenue, the mobile stuff, in the short term. But we think it's exciting and really helps us plan the long-term future, which I think will address some of the concerns I've heard over time of what's the sustainability of the business.

And clearly, our whole strategy is around making it more sustainable, and I think we're showing over time we're doing that. I hope that by executing and doing our job and increasing the revenues and the profits and addressing the sustainability, which we have been doing, and the Smilebox acquisition proving itself out, with the combination of that plus the Hayden IR team and ourselves going out to the market and getting new interest, I would hope that the stock would ultimately reflect the true value of what we think we have here.

Okay. Appreciate it. Thank you, and again, great job, guys. Thank you.

(Operator Instructions). [Kenneth Miller], [Nokomis Capital].

Hello, gentlemen. Thanks for taking my question. I wanted to dig more into the decline in search revenue. How quickly do you expect that to turn around?

Normally, I think you'd be facing a tough couple of quarters of seasonal declines, but I know that you're putting some things in place to reverse the decline. How quickly do you expect that to kind of improve? How long will it take your changes in strategy to take effect?

The short answer to that question, Kenny, is we think (technical difficulty) internally we'll start seeing that in Q2 a little bit. And if we're lucky, maybe more than a little bit. And in Q3, we should see a significant improvement.

Okay. Can you give us any more detail on what you're doing to combat this more competitive marketplace, or is it more of a competitive secret you'd like to keep to yourself?

That is absolutely correct. We are not planning on disclosing that. As I mentioned, it is very competitive.

Okay. Can you also give me a sense for the magnitude of the customer acquisition spending increases you're talking about for the next couple -- two to three quarters?

As we discussed when we gave the guidance, our guidance is based on the fact that we'll spend in the whereabouts of $14 million this year. That was our assumption.

Which, now, we think we're going to track to.

So we did $2.6 million in the first quarter. You would expect us to do roughly $11 million to $12 million more throughout the rest of the year. And I think to add on to what someone else's question was earlier, to your question now, Kenny, a lot of that, as we said, will ramp up as we see some of the solutions working, and we are doing the testing now and it seems to be working. That will ramp up linearly to that.

So as we see these solutions working, we'll ramp up the spending accordingly.

Okay. And back to the search business, have you rolled out search to the Smilebox user base yet? Do you expect that to provide a bump in revenues?

So what we've done on the Smilebox user base is -- to all new installs on Smilebox, we have rolled it out already.

On the existing installed base to Smilebox, we have not rolled out search at this point in time yet. It is something we are working on. It is a little complicated, and we actually, frankly, we want to be very careful in terms of how we do that in the most efficient way and, frankly, user-friendly way.

So we're not feeling pressure to say, boy, I want to gain X dollars, so let's do it. We're really looking at the consumer first and saying, how do we do it in a way that makes sense for them?

Are new Smilebox users a significant percentage of the search revenue, or is it still pretty small to date?

It's relatively small to date. I mean, it's growing, but it's relatively small to date.

Okay. Thanks very much. That's all I had.

Thank you, Kenny.

There are no further questions at this time. Before I ask Mr. Mandelbaum to go ahead with his closing statements, I was like to remind participants that a replay of this call will be available in three hours on the Company website at www.Perion.com.

Mr. Mandelbaum, would you like to make your concluding statement?

Thank you.

In closing, our business is strong. The Smilebox acquisition has proven to be successful, and we have numerous growth catalysts in the next few quarters. One, the implementation of new solutions to increase monetization from our installed base. Two, the introduction of new mobile and tablet products. And three, a good pipeline of profitable acquisition opportunities.

I'd like to thank the entire Perion team in Tel Aviv and Seattle for another successful quarter, and extend my sincere thanks to all of our customers for their continued support. Thank you very much and have a nice day.

Thank you. This concludes the Perion first-quarter 2012 results conference call. Thank you for your participation. You may go ahead and disconnect.