Austin, Texas, November 14, 2016 – Perk Inc. (TSX: PER) (“Perk” or “the Company”), the Rewarded Engagement Platform that connects brands with consumers, reported today its operating and financial results for the third quarter and nine-month period ended September 30, 2016. Unless otherwise noted, all amounts are in US dollars.
2016 Third Quarter Highlights (all comparisons to the same prior year period)
- Total revenue increased approximately 41% to $18.7 million.
- Gross Profit was $7.3 million, or 39% of total revenue.
- Net income was approximately $2.8 million as compared to a net loss of $0.9 million.
- Earnings of $0.12 per share, as compared to a loss per share of $0.05.
- Excluding the results of Corona Labs Inc. (“Corona”) (which was disposed of in the quarter), Adjusted EBITDA (as defined below) was $2.8 million compared to $2.3 million of Adjusted EBITDA for the prior year period. See the table “Reconciliation of net income (loss) to Adjusted EBITDA” at the end of this release.
2016 Year-to-Date Highlights (all comparisons to the same prior year period)
- Total revenue increased 67% to $52.8 million for the nine months ended September 30, 2016.
- Gross Profit was $23.2 million, or 44% of total revenue.
- Net income was approximately $0.02 million, as compared to a net loss of $18.3 million.
- Excluding the results of Corona, Adjusted EBITDA of $5.9 million, compared to Adjusted EBITDA of $4.0 million for the same period of the prior year.
Ted Hastings, Chief Executive Officer of Perk commented, “We reported a 41% increase in revenue, maintained our strong capital position and achieved Adjusted EBITDA of $2.8 million excluding the results of Corona which we disposed of in the quarter. We also closed two significant transactions that resulted in the buyback of approximately 18% of the Company’s stock and we utilized our strong cash position to eliminate obligations from our balance sheet that will allow us to retain 100% of the EBITDA generated going forward. We believe that the transactions that occurred demonstrate management’s confidence in the future and belief in the true value of the Company.”
Mr. Hastings continued, “In addition, during the third quarter we developed and launched Perk IQ™, an analytics platform that puts us ahead of the competition by delivering targeted advertising for our brands and having the capability to measure a brand’s campaigns performance with tailored research and pre and post-campaign studies.”
2016 Third Quarter Operational Review
- The Company launched Perk IQ, an advanced audience targeting and insight solution that enables advanced segmentation and audience targeting across Perk properties to help brands target consumers.
- During the quarter, the Company bought out the remaining EBITDA based earn-out obligations owed to Orion Foundry (Canada) Inc. (“Orion”) pursuant to the asset purchase agreement entered into between the Company’s subsidiary, Perk Canada, and Orion on April 13, 2015. The Company paid $1.8 million to buy out the remaining earn-out obligations.
- Perk increased its credit facility with present lender, Silicon Valley Bank, from $4.5 million to $17.3 million. The Company used a portion of the facility to fund the Orion EBITDA buyout.
- The Company completed the sale of Corona to Roj Niyogi, Chief Executive Officer of Corona. In consideration of the purchase, Mr. Niyogi returned to Perk for cancellation 1,879,532 common shares and 1,505,972 Class A restricted voting shares in the capital of Perk, representing all of the shares held by Mr. Niyogi in Perk, and Perk paid to Mr. Niyogi aggregate cash proceeds of $1.75 million. Additionally, over the 12-month period following closing of the transaction, Perk will pay up to a maximum of $0.75 million to help facilitate the transition of Corona’s operations to Mr. Niyogi. Mr. Niyogi also resigned as a Director and the President of Perk in conjunction with this transaction.
- Perk closed a securities repurchase transaction with Function(X), Inc. (formerly Viggle Inc.) (“FNCX”) resulting in the repurchase for cancellation of 1,012,968 Perk securities held by FNCX (the “Repurchased Securities”) in exchange for payment to FNCX of aggregate cash proceeds of $1.3 million. The Repurchased Securities were previously issued to FNCX on February 8, 2016 in connection with the purchase by Perk of all of FNCX’s interests in the Viggle App, including its rights to the Viggle name and brand.
- The Company retroactively restated its previously issued unaudited interim condensed consolidated statement of operations and comprehensive loss to reflect the following:
- On November 25, 2015, Perk acquired the shares of Playerize Network Inc. After reviewing the operations of Playerize, Management determined that Playerize is acting as an agent when conducting certain direct payment and performance advertising platform transactions and revenues generated must be recorded net of the related revenue share payments made to third party publishers in accordance with applicable International Financial Reporting Standards. This change was implemented effective July 1, 2016 and the Company has retroactively restated the related revenue and cost of revenue for the three months ended March 31, 2016 and June 30, 2016 to reflect the updated revenue recognition policy. The change in accounting policy results in an equivalent reduction in revenue and cost of revenue of $1.2 million and $1.5 million for the three months ended March 31, 2016 and June 30, 2016, respectively. This change in accounting policy did not have a material impact on the Company’s annual audited financial statements for the year ended December 31, 2015. These adjustments did not have an impact on the Company’s Adjusted EBITDA, gross profit, comprehensive loss, income tax payable, cash flow, deferred tax liabilities, current or deferred income tax expense (recovery); and
- A reduction in revenue from advertising barter transactions of $0.9 million with an equivalent decrease in marketing and user acquisition expense for the three months ended March 31, 2016. These reductions were necessary to accurately reflect advertising rates used in accounting for barter transactions. These adjustments did not have an impact on the Company’s Adjusted EBITDA, comprehensive loss, income tax payable, deferred income tax liabilities, current or deferred income tax expense (recovery).
- For more information regarding the restatement please see the “Restatement of 2016 Unaudited Interim Condensed Consolidated Financial Statements” section of this MD&A and Note 2 to the Company’s unaudited interim condensed consolidated financial statements for the three and nine months ended September 30, 2016.
2016 Third Quarter Financial Review
- Total revenue for the third quarter of 2016 increased 41% to $18.7 million, as compared to $13.3 million during the third quarter of 2015. Excluding the impact from the Acquisitions, which excludes the results from the AppRedeem acquisition, the Playerize acquisition, the Corona acquisition and the Viggle acquisition (collectively the “Acquisitions”), revenue in the third quarter of 2016 increased 22% to $16.1 million, compared to $13.3 million during the same period in 2015. The increase in advertising revenues is a result of an increase in traffic and monetization of Perk’s mobile web and desktop properties which helped to offset lower fill rates from third party ad networks partners.
- Perk reported cost of revenue, which is comprised of the costs of the rewards provided to users, platform fees, and traffic acquisition costs to its desktop and mobile websites and revenue sharing commissions, for the three months ended September 30, 2016 of $11.4 million compared to $7.0 million during the same period in 2015. Excluding the impact of the Acquisitions, cost of revenue as a percentage of revenue earned was 66% compared to 53% for the same period in 2015. The increase in cost of revenue was the result of growth of the business and monetization opportunities across the Company’s mobile web and desktop properties.
- Gross profit for the three months ended September 30, 2016 was approximately $7.3 million, or 39% of revenues, compared to approximately $6.3 million, or 47% of revenues, for the third quarter of 2015. The reduction in gross margin as a percentage of revenue was the result of the growth in monetization opportunities on the Company’s owned and operated mobile web and desktop properties which typically generate margins on revenue at a lower rate than the Company’s mobile apps business.
- Net income for the three months ended September 30, 2016 was $2.8 million compared to a net loss of $0.9 million for the same period during 2015.
- Excluding the results of Corona, Adjusted EBITDA was approximately $2.8 million for the three months ended September 30, 2016, as compared to approximately $2.3 million of Adjusted EBITDA generated in the three months during the same period of the prior year.
2016 Year-to-Date Financial Review
- Total revenue for the nine months ended September 30, 2016 was $52.8 million compared to $31.6 million during the same period in 2015. Perk’s revenue, excluding the impact of the Acquisitions, increased by $14.4 million to $45.6 million for the nine-month period ended September 30, 2016, as compared to the same period of the prior year.
- Perk reported cost of revenue for the nine months ended September 30, 2016 of approximately $29.5 million compared to $17.3 million for the same prior year period. Excluding cost of revenue from the Acquisitions cost of revenue increased for the nine months ended September 30, 2016 by $10.9 million from the same prior year period.
- Gross profit for the nine months ended September 30, 2016 was approximately $23.2 million, or 44% of revenues, compared to approximately $14.3 million, or 45% of revenues, for the same prior year period.
- Net income for the nine months ended September 30, 2016 was approximately $0.02 million compared to a net loss of $18.3 million during the same prior year period.
- For the nine months ended September 30, 2016, Adjusted EBITDA was approximately $3.4 million compared to $4.0 million during the same period in 2015. Excluding the Adjusted EBITDA loss of $1.4 million generated by the Acquisitions during the first nine months of 2016, Adjusted EBITDA was $4.8 million as compared to $4.0 million during the first nine months of 2015. For the nine months ended September 30, 2016, the Corona acquisition generated a $2.5 million Adjusted EBITDA loss, which was partially offset by positive Adjusted EBITDA from the other Acquisitions.
Balance Sheet Summary
- Perk had cash and restricted marketable securities of approximately $10.7 million at September 30, 2016 compared with approximately $17.5 million at December 31, 2015.
- At September 30, 2016, shareholders’ equity was approximately $32.2 million, compared to approximately $32.1 million at December 31, 2015.
- At November 11, 2016, the Company had 18,654,408 common shares and 652,502 restricted common shares issued and outstanding.
Conference Call Details
Date/Time: Monday, November 14, 2016 at 12 pm ET
Live Participant Dial-In (Toll-Free US & Canada): 877-407-9711
Live Participant Dial-In (International): 412-902-1014
The call will also be simultaneously webcast over the Internet via the “Investor Relations” section of Perk’s website at ir.perk.com or by clicking on the conference call link: http://perk.equisolvewebcast.com/q3-2016.
About Perk Inc.
Perk’s Rewarded Engagement Platform brings together the interests of advertisers and consumers to deliver profound insights and actionable results. With Perk, brands form deep connections with consumers to achieve greater engagement, loyalty, and conversion. Perk’s insights and intelligence solution, Perk IQ™, allows brands to measure performance and uncover valuable data around advertising attribution, brand impact, and purchase behavior.
Additional information about Perk Inc. can be found at the Company’s corporate website: www.ir.perk.com.
A copy of Perk’s unaudited interim condensed consolidated financial statements for the three and nine months ended September 30, 2016, which are prepared in accordance with International Accounting Standard 34, Interim Financial Reporting (“IAS 34”) and Perk’s Management’s Discussion & Analysis, will be available on or before the date of this release via the Canadian Securities Administrators’ website at www.sedar.com or through the Company’s website at www.ir.perk.com.
The Company defines Adjusted EBITDA as net income (loss) from operations before: (a) depreciation of property and equipment and amortization of intangible assets; (b) share-based compensation; (c) income tax expense (recovery); and (d) other charges, net. Management uses Adjusted EBITDA as a measure of the Company’s operating performance because it provides information related to the Company’s ability to provide operating cash flows for acquisitions, capital expenditures and working capital requirements. The Company also believes that analysts and investors use Adjusted EBITDA as a supplemental measure to evaluate the overall operating performance of companies in its industry. Adjusted EBITDA should be used in addition to and in conjunction with the results presented in the Company’s unaudited interim condensed consolidated financial statements prepared in accordance with IAS 34. Management strongly encourages investors to review the Company’s financial statements in their entirety and to not rely on any single financial measure. As non-IFRS financial measures are not standardized, it may not be possible to compare these financial measures with other companies’ non-IFRS financial measures having the same or similar names.
Cautionary Statement Regarding Forward-Looking Statements
This press release contains forward-looking statements, including which may relate to, but which are not be limited to, Perk’s business; Perk’s strategy, operations and financial performance; Perk’s user and advertiser engagement; Perk’s ability to establish new marketing partnerships; Perk’s ability to expand into new markets; and Perk’s ability to acquire and integrate new businesses and technologies. Such forward-looking statements reflect Perk’s expectations about its future operating results, performance and opportunities that involve substantial risks and uncertainties. When used herein, the words “anticipate”, “believe”, “estimate”, “upcoming”, “plan”, “target”, “intend” and “expect” and similar expressions, as they relate to Perk or its management, are intended to identify such forward-looking statements. These forward-looking statements are based on information currently available to Perk and are subject to a number of risks, uncertainties, and other factors that could cause Perk’s actual results, performance, prospects, and opportunities to differ materially from those expressed in, or implied by, these forward-looking statements, including, but not limited to: maintenance by Perk of relationships with advertising network providers and partners; successful development of the “Perk” brand; Perk’s ability to keep up with rapid technology developments in Perk’s markets; Perk’s ability to avoid defects in products and services delivered by Perk; Perk’s ability to attract app and website developers to Perk’s SDK’s; Perk’s ability to successfully enter new business areas and geographic markets; success of new products developed by Perk; Perk’s ability to retain key members of its management team; and certain other risk factors set forth in Perk’s Management’s Discussion and Analysis for the three and nine months ended September 30, 2016. Perk does not undertake to update any forward-looking statement, except as required by law.