Stephanie Mazer - Investor Relations Josef Mandelbaum - Chief Executive Officer Yacov Kaufman - Chief Financial Officer

Kerry Rice - Needham Dan Kurnos - Benchmark Company Marc Estigarribia - Chardan Capital Markets

Thank you, operator and good morning everyone. Thank you for joining us on our third 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 update any forward-looking statements to reflect future events or circumstances.

In addition, and as in prior quarters, the results reported today will be analyzed for the most part on a non-GAAP basis, which management believes better conveys the operational performance of the business. We will be referring to Adjusted EBITDA when mentioning EBITDA in our comments.

We have provided a detailed reconciliation of non-GAAP measures to their comparable GAAP measures in our earnings release, which is available on our 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 third quarter 2015 earnings call.

This morning I will briefly discuss our results, update you on the state of our supply side monetization business and conclude with an update on our demand side mobile marketing platform. Yacov will review our financial results in more detail and we will then open the call to your questions.

To start, I am very pleased with our third quarter financial results as we exceeded our guidance, delivering $52.6 million in revenue, $9.9 million in EBITDA, $6.7 million in non-GAAP net income and non-GAAP diluted EPS was $0.09. More importantly, the third quarter marks a significant milestone in our company’s turnaround as our software monetization business returned to revenue growth for the first time in six quarters.

Our strategy has delivered the results that we expected, validating our long held view that the software monetization business would remain a good business for Perion with healthy margins and cash flow. Looking forward, we expect to continue to deliver sequential revenue growth in the fourth quarter.

As previously indicated, revenue growth is preceding EBITDA growth by a few quarters, as the full impact of our transition to a new revenue model nears completion. Therefore, EBITDA is expected to bottom out in the fourth quarter and return to growth in 2016.

Profit margins will stabilize at attractive levels, providing strong cash flow into the future. This growth, a quarter ahead of schedule, is largely due to the decisions we took last year to focus on higher quality publishers, as well as changing our business model to reduce our financial risk and align the interests of our publishers with ours.

In addition, we have started to expand our publisher base beyond software publishers. We have launched a number of products geared toward web and mobile publishers and are investing to further enhance this offering in 2016.

We believe we are extremely well positioned to understand and address publisher needs, particularly as they relate to balancing monetization and engagement. Another development that should positively impact the future of the software monetization industry is the formation of the Clean Software Alliance, or CSA, which was formally launched in September.

As one of the founding members, Perion has taken a leadership position with the major platform companies, leading antivirus companies and monetization companies to create a self-regulating body that ensures full compliance with industry best practices. While it will take time to roll out the CSA guidelines and enforcement, we are committed to ensuring its success and believe that in the long run, this alliance will help to ensure a stable and healthy software publisher monetization industry for the benefit of all.

Now, allow me to discuss our mobile marketing business and the progress we made in the quarter. The integration of our social advertising solution into the GrowMobile platform is nearly complete and our focus has turned to aggressively ramping-up our investment in sales and marketing to drive revenue growth.

We opened our Barcelona sales office to focus on the Spanish and Portuguese markets and expanded both our New York and San Francisco offices. Spain is one of the fastest growing European markets for Growmobile and we are excited about our increased presence.

As previously announced, we launched our mobile engagement offering this past quarter to further enhance the GrowMobile platform and increase our platform’s competitive advantage. We have already signed up 8 new clients in less than two months.

We have one of the only solutions with built-in multi-variant testing capabilities and intelligent data tied into a campaign management tool that makes it easy to use and, most importantly, gets results. Overall, we had 168 active advertisers with over $33 million of managed ad spend despite the industry-wide summer slow-down.

We expect the fourth quarter to be the strongest of the year. Turning to our balance sheet, our cash balance continues to grow and currently stands at approximately $130 million at quarter end.

As we continue to refine our strategy and focus on high quality advertising solutions for publishers and brands, we have identified a number of attractive acquisition opportunities to further enhance a differentiated and substantial market opportunity. We are simultaneously considering taking a more active approach in the capital markets.

With an eye toward the expiration of the lockup of a large number of shares in January 2016, we have decided to reevaluate our options for increasing shareholder value. We intend to communicate our plans before year end.

Now, let me turn over the call to Yacov who will walk you through our financials. Yacov…….

GAAP Revenue for Perion this quarter was $52.6 million, compared to $48.6 million in the previous quarter and $86.3 million in the third quarter of last year. The comparative reduction on a year over year basis will continue through the fourth quarter as a result of our decision, last year, to exit certain parts of the download industry and thus significantly reduce our customer acquisition costs (CAC) that drive sales.

Importantly, as Josef mentioned, this is the first time in six quarters that we experienced sequential revenue growth, and we expect that to continue going forward. This quarter’s revenues reflect gross revenues of $54.4 million reduced by $1.8 million of our customer acquisition costs netted from top-line revenues.

We continue to transition our business to a lower risk model, with net revenues increasingly closer to gross revenues. Other revenues in the third quarter of 2015 were $7.1 million, which was made up of $3.0 million of other advertising revenues and $4.1 million of product revenues, as compared to $9.5 million and $3.5 million in the third quarter of 2014, respectively.

Other advertising revenues are highly correlated with search generated revenue as it comes from inventory on the home page. With the reduction in CAC, there was a corresponding reduction in queries and home page inventory.

In the third quarter of 2015, customer acquisition costs were $25.3 million, reflecting a gross cost of $27.1 million, reduced by the $1.8 million I mentioned earlier as being netted against revenues. On a gross basis, CAC has started to increase sequentially, providing for our outlook for revenue growth for the next quarter.

When comparing this quarter’s gross CAC expense to the third quarter of 2014 CAC expense of $30.0 million, the reduction in CAC is attributable to two main causes. The first; as I mentioned above, is our decision to exit certain parts of the download industry and to focus on higher quality premium partners.

The second, as a result of our favoring rev-share payments, over prepaid price per install, the CAC is spread over time, in parallel with the revenues recognized. As we began in the latter part of 2014, we continued to improve on our cost structure this year.

As a result, we continued to reduce non-GAAP Operating Expenses, excluding CAC and these were $18.1 million in this past quarter, compared to $24.1 million in the third quarter of 2014. While almost all our expense line items went down, we maintain a high level of investment in future growth.

As we focus on ramping-up the marketing of our Growmobile platform, we expect Sales & Marketing expenses to increase as we go forward. EBITDA in the third quarter of 2015 was $9.9 million, or 19% of revenues, as compared to $33.9 million, or 39% of revenues in the third quarter of 2014.

Perion’s non-GAAP net income in the third quarter of 2015 was $6.7 million, representing a 13% net profit margin, compared to $26.6 million, or a 31% net profit margin in the third quarter of 2014. As a result, non-GAAP diluted EPS in this past quarter was 9 cents per share, as compared to 38 cents per share in the third quarter of last year.

On a GAAP basis we had this past quarter a net loss of $70.8 million, with diluted Loss per Share coming in at 99 cents. The reason for this net loss is due to a one-time, non-cash $74.1 million impairment of acquired goodwill and intangible assets.

Perion’s share price and market value have declined, triggering a reexamination of the book value of intangible assets on an ongoing basis. Most of the intangible assets reflected the value of the monetization business according to the market value in the beginning of 2014.

Therefore, we have reduced the value of acquired goodwill and intangible assets by $74.1 million, so that the current carrying value is $109.3 million. This impairment does not affect Perion’s ongoing operations or tangible equity, which has increased to $96.0 million, as compared to $65.0 million as of year-end and more than double the $43.2 million a year ago, as of September 30, 2014.

GAAP cash flow from operations in the third quarter of 2015 was $4.9 million and as of September 30, 2015 we had cash, cash equivalents and short-term deposits of $129.4 million, and working capital was $112.2 million. This concludes my financial overview.

Let me now share with you our financial outlook for the fourth quarter of 2015. Having turned the corner, we expect revenues to continue to grow in the coming quarter as well.

Specifically, our fourth quarter outlook is as follows: Revenue is expected to be in the range of $52 to $54 million; Adjusted EBITDA is expected to be in the range of $6 to $7 million; and Non-GAAP Net Income is expected to be in the range of $4 to $5 million. As we explained last quarter, profit trends lag behind revenue trends.

This is because in 2015, in addition to our focusing on premium relationships, we reduced the risk inherent in our former PPI-based model, transitioning into a rev-share relationship. As these revenues churn-out, so does the profit from that arrangement.

We expect profits to bottom-out in the fourth quarter and stabilize in the first quarter of 2016. With that, we will now open the call to questions.

Operator…..

Thanks a lot. Nice solid quarter, guys.

I've got kind of a three part question all interrelated. So, as we think about customer acquisitions ramping up in Q4, it sounds like that marketing sales and marketing is related primarily to the mobile initiative and so do we expect to see a material boost in Q4 mobile revenue or just still primarily search.

And then you mentioned that EBITDA is going to stabilize likely in Q1 of 2016. Can you give us any thoughts on just maybe overall growth that you are all thinking about 2016 at this point or any details or guidance there at all thing?

So, we'll start with the beginning and I don’t know we'll answer at the end. With regards to your first question with regard to our CAC expenses as we explained in the call, the CAC expenses are increasing.

That's the result of our transitioning to the rev-share model. So, you're going to continue to see CAC increasing a nominally and as a percentage of revenue.

With regard to other marketing and sales expenses, actually those expenses in general in total went down. What we're saying is that we are expecting the mobile portion within those expenses to increase and therefore we could expect some nominal increase as we go forward.

We do not expect it to be very significant because as I said other marketing expenses have actually got down somewhat. Then finally with regard to 2006 --

Let me explain, can, you have to just to add what Yacov just said, carry on the mobile side. What we're doing is we're basically hiring sales people and account managers to ramp up.

There is a lead time when they get hired before they produce revenues. As we said before, we expect our mobile revenues to double in 2016.

That's the direct result of the hiring we're doing in Q3 and Q4 on the sales and marketing side for mobile. That's where you see it.

You won't see a huge spike in the 2014, I think you see a good increase in mobile revenues in Q4 but there's still going to be a nominal, a very small amount, compared to the other revenues in the business. We expect 2016 to really be a nice breakout year for the mobile business, as we are ramping up sales and marketing in the past two quarters.

So just with regard to the last question Josef already answered. You got the GrowMobile, we expect things to double the business.

With regard to our other businesses, it's too early to say. But we're saying that we are -- you see the -– we do see a positive trend.

We do sequential growth and we expect that to continue in 2016.

Thank you, very much.

I think, Kerry, just --.

Yes.

I think, Kerry, to add to that. First of all, thanks for joining the call, as usual.

But to add to that I would say you can -– we'll give guidance sometime early next year but you can take what we're saying I think just to be really transparent, is we're saying the EBITDA we think in Q4 is going to be the low point then it stabilizes to that point forward. All right.

You can safely assume that we think the revenues obviously will be in line with that because we're generating that EBITDA as we go forward. So, we think the next year is going to be a good year for us.

We'll give you firm guidance early next year as we kind of finish our planning process for 2016 and beyond.

Okay, thank you.

Great, thanks. Good afternoon, to you guys.

High level questions on search for me.

Hi, Dan.

Hi, Josef. High level questions on search for me, start with nice quarter-over-quarter step-up in this quarter and congratulations on executing doing what you said you were going to do.

It seems a little bit more moderate on a go forward basis on the Q4 guide. Can you just maybe give us a sense of how much of the benefit in this quarter was from the Windows 10 tailwind versus a new partner growth or monetization improvements.

And if any of your publishers been impacted by the recent panda refresh?

Okay. I think we could take that, Dan.

So, first of all thanks for joining again. On the Windows 10, I would say in general it wasn't a significant impact one way or the other, Windows 10 for us.

I think as we mentioned last quarter when it first launched, Windows 10 is actually gaining some nice traction. The Edge browser which is really the one that would probably impact, help or impact us one way or the other has not -- doesn't have the same traction as Windows 10 does.

I think that's what we're seeing from all the reports, the industry reports out there. So, I'd say right now neutral.

I think in the future we hope we'll all see other benefit but we still don't know if it's going to be a small benefit or small loss in terms of what happens as Windows 10 and Edge converge which may or may not happen in the future. So, I think from that standpoint, it's been neutral on Windows 10.

In terms of the growth we've in the business today, it is mostly reflection of I'd say two things. One is, we did go to a higher quality premium publishers and as Yacov mentioned in his remarks as we basically wet the one year 15 month anniversary when we started moving the business to a different model, we're just seeing some of our partnerships really grow and take off in a way which is very beneficial to us obviously and to them and I think to the industry as a whole as a lot of the players get out ahead of that.

I think what you're seeing in general is that we took the hard medicine a little about 15 and one and a quarter ago or a year and a quarter ago and some of all of the competitors are just taking to it now. So, I don’t think -- I hope we've executed better, but I think it’s just matter of timing as we go forward on the industry.

I do think that the industry is as you know, Dan, is certainly of many of the companies especially the private ones has had trouble. Some have gone out of business, some are being consolidated.

So, we think that puts us in a good situation with our multiple partnerships whether that’s being obviously Yahoo or Google. Still one of the only companies that has partnerships with all three and we think over time that will really benefit it.

So, to that point, Josef, obviously there is the announcement of the Google Yahoo deal which ethically all suspected some point may get destroyed by antitrust. Just curious if that is going to have any impact on your outlook understanding that things still get 51% of the search queries I believe from Yahoo at this point?

Yes. I think I’d say for us actually it’s probably neutral, the good news.

And I'll explain why. From what I understand and again I'm just -- I just know what I've seen in the press is why I'm over here.

But most of that Google Yahoo partnership is going to be limited to Yahoo’s organic searches on their sites. And it will not be available to third party partners of Yahoo to my knowledge.

So, anybody today is one of competitors using Yahoo in addition to ourselves using Yahoo. I don’t think you'll get a lift from the Google partnership as far as I know about it today.

That may change overtime but I don’t think that’s over today. So, today I think it remains relatively the same which if you have the yahoo deal and the performance for you that’s great.

If you have a Google deal performance to you more big deal, performance to you, that's great and as you know Bing today is our biggest partner because it performs the best for us.

Okay. And then, you've kind of answered this but obviously people are going to continue to have questions about the longevity of the business.

Can you maybe just talk about the puts and takes between the newly launched CSA, the head winds from increasing ad block usage and if your views on potential longer term return that year-over-year growth has changed at all?

Sure. First of all, we're very bullish on the CSA.

Frankly, it's taken us a long time in the industry to kind of get all the actors together. As you can imagine the browser platform companies and the BIOS companies and then all the download companies trying to agree on something, is I think is been challenging.

But the people who are working on this has really spent a lot of time developing guidelines and actually actions that we think will be very beneficial to the industry overall. I think that's what we're betting on.

We've bid on that since the beginning. Some individual companies and very instrumental in moving this forward.

Not at liberty to say that who exactly but they have been very instrumental, we just be one of them. So, I think as that happen, those guidelines are largely in line with what you see from whether it's the search partners or the anti-virus companies and things like that because they were all part of it in addition to the download companies.

I think you'll see an improved overall consumer experience. We want just to be a consumer advocacy group.

So, we believe that's going to be there and we think that will obviously help the overall industry in terms of longevity because as far as we know today and Dan I think you've said in the research I don't see the depth optimism going away, I don't see downloads going away, I don't think it's a big growth area going forward. I think you're seeing that from whether obviously you're Bluecore or sales or other public companies out that that publish numbers, but I think all of us are saying the same thing.

We don't think it's going away. It's changing.

In our case we think it's going to change for our benefit because we are number two I think in the industry today and after IAC and I think they're showing some good results and even growing parts of the business and we believe the same will be with us. With regards to ad blocking, even it doesn't impact search today because the search is all organic on either Google Yahoo or Bing, ad blocking basically impacts mostly ad injection into or Java script injections into the page for ad units, whether it's an ad unit on the page itself or an ad injection that's injected on the page.

And as you know today, most of our revenue in the download space comes from the search revenue which is directly from Bing or Google or Yahoo. So, we don't really believe for us, it's going to be a major issue for our partners as we have spent into other forms of advertising.

I think, overall ad blocking in my personal opinion, this is just personal, I think it's a good thing for the industry in the short, in the long term. In the short term there'll be some pain, but fundamentally all ad blocking is addressing is the fact that ads suck today in most cases.

And at the end of the day advertisers and publishers have to learn better to make better quality advertising. And overtime, if that happens, the ad blocking frankly goes away by itself.

I'm very confident that will not dictate the industry going forward because too much of the world is built on quality free contents and I don't see a lot of consumers stepping up to play pain for that anytime soon. So, eventually there'll be some equilibrium.

Dan, if you remember about 15 years ago there was a pop-ups and pop-unders and that really dominated the industry for a couple of years and they'd be complained about it and eventually threw a lot of things with the [IED] and other industry organizations, frankly, and [might we will hope to see a favor do we], they solved the problem and got to an equilibrium where pretty much every need had to move forward.

That's good color, Josef. If I could just ask just quickly on mobile just two quick questions.

So, first you announced a promo free 15 day's trial a couple of months ago go for GrowMobile. Just wondering what prompted that decision, what the uptake has been and more broadly how you expect customer growth to trend?

And then secondly, I don't know if this is relevant or not but within your customer and if so do you expect any impact from the Activision acquisition?

Can you repeat the last question again, Dan?

Was King mobile a customer of yours?

Okay. So, I'll tell the first one first and then I'll go to the second one.

The free trial. Contrary to popular belief which is kind of funny, we did the free trail not because we are desperate, we just did because it's a good marketing tool as we start ramping up our sales to get people trying our platform because we have a lot of confidence our platform is that good.

And I am pleased to say that we got some good leads from that and some good clients trying our platform. And I don't have the exact numbers in front of me, but at the next quarter call or offline we can certainly let you know roughly how many clients tried it and are sticking with it.

But we actually did, it’s a pure marketing thing. We did it and we announced it.

Basically, we did in a lot of different channels. One of them was the press release and it was just the way of just getting the word out.

We went to confidences, we did it. We did on social media, we did it.

Frankly, again, we're just trying to make sure that advertisers and agencies who are out there know that we are a viable platform, one of the better platforms and we're telling "hey, we'll give you free trails for two weeks to try it." So, it was I think just frankly good block and tackling marketing one-on-one.

And for what I understand from my team, it's worked relatively well. With regard to King and everybody else, we don’t really comment today on who our partners are, but in general even if you look at anything, I think, Dan, no matter who the partner is, as long as app installs end or brand objectives or marketing objectives for brand on mobile grow, we see this as a great opportunity.

And just a consolidation itself, doesn't mean the [Hogwarts] game's as an example, let's assume they were our partner, or the amounts of game they produce, I don't think will change and they still want to get those games and those apps downloaded. So, we would think platforms like ours will be used more and more as you go forward.

And to that point, yes, we think our fourth quarter will be a very nice growth over the third quarter. We've seen that already?

Yes, -- okay.

I'm sorry, what was that, Yacov?

Okay.

No. When it comes to sales and marketing, Yacov doesn’t do a lot of talking.

He just talks is spending too much money but that’s all he says.

I can understand that Josef. All right, anyway, thanks for walking me through all of that.

I appreciate that you've taken the time.

No problem. Thanks, Dan.

Thank you, much for the question. Congrats on the quarter, guys.

In terms of the sales and marketing, can you just update us for with your strategy there in terms of traction going to one platform and what's going on in New York and also just on R&D, what is your strategy going through in R&D. I know the customer acquisition cost has been an up ticking.

What is sort of on the innovation side in terms of diversifying a product offering, if you could make on that as well, please. Thank you?

Sure. Thanks, Marc and thanks for joining us today.

So, on strategy -- on sales and marketing in particular and we've said this before. We look at 2016 as another investment year in our mobile business.

We believe that there is significant value creation that’s available to us. We know there are a lot of private companies for example compete with us in this space.

And I would say they are around the same size maybe slightly bigger and they are getting a value multiple of frankly anywhere from four to six times net revenue. So, we think by focusing in building this business, we have some real value equation for shareholders as you go forward.

Our strategy here is to ramp up. So, in New York we’ve started must have been six, seven months ago, we had zero sales people.

I think today we have eight. In San Francisco we've increased our sales people and obviously in Europe we've done the same, as we really try focus on growing the global business and frankly getting out of the street and fighting the good fight with our competitors out there.

We believe that we’re better positioned than most because that’s part of the bigger company, we have obviously the profits that we’ve and the cash flow that we've described. So, we think we’ll do then, I think you'll see us being aggressive on both increasing the sales headcount and the account managing account as well as more conferences and frankly just marketing dollars to help to get the word out over the next year.

With regard -- so, that’s the first answer on the sales and marketing there. I think you can see that on a nominal basis probably going up next year but overall as we balance our business, I don’t think it's a huge spike in the sales and marketing on an overall basis, but you will see it in the mobile business.

With regards to R&D, specifically on the R&D side, I think when you look at combining the two platforms as an example, a lot of the work on the R&D side as you can imagine is pretty really ramping up the sales people. It's really investing ahead of the curve to build the platform to actually do a lot of work and are consulting the platform, we're almost complete, not quite there yet but we're almost complete.

Hopefully by the end of the year we'll be I think pretty much complete with that process. And then I think the R&D cost would be relatively stable going forward on the mobile side.

I don’t see huge increases in that. I think if anything there maybe slight decreases overtime as hopefully sales growth certainly is a percentage of revenue.

And on the curve -- on the other side of our business, we are, I wouldn’t say increasing R&D but we are shifting resources moving some of the R&D away from what would be the more traditional legacy business, which is now mature business and needs less R&D and focusing in more on developing solution for the content publishers we mentioned mobile and web content publishers. Like for example what we have been doing with SiteFuel, we talked about in the last quarter, really trying to reinvent in site search.

We have few other products we'll be launching end of this quarter early next year to really focus on how to help publishers balance their engagement needs of the users with the monetization needs of their business. And we're excited about that and we think we can leverage a lot of the knowledge we have here to really make that hopefully a big winner for us over the long term.

Great, thanks. And just a follow-up on the -- so in terms of creating the new run rate in the forward model, I'm sure the next quarter is going to stabilize here in terms of cost.

Should we envision next quarter's margins as sort of the new run rate going forward at least for the first half of the year and trend up into 2017? How would you guide us on the offering margin in the second half into 2017?

I think it's probably a fair assessment, Marc, that Q4 will be a good indicator going for at least the first half of the year and then it should increase throughout the year on the EBITDA margins from the overall business.

Great. Thank you very much, great quarter.

Thank you, Mark.

To wrap things up, I am very pleased with our third quarter results. The turnaround in our publisher monetization business, as well as the promising metrics in our mobile marketing business, mark great things to come.

As we build a stronger business and create long-term value for shareholders, it is incredibly gratifying to see our proactive strategy successfully gain traction and return Perion to growth. Of course, none of this would be possible without the professional support and hard work of our dedicated employees.

Thank you to everyone at Perion, and thank you all for joining us today.