Thanks, Jack. I appreciate the conversation. Happy to elaborate.
Here’s the simple way to put it: As you alluded to, Perion sure has a lot of sales. It is a micro-cap company but their sales are more than micro. They just haven’t made a lot of profit lately. They’re in the middle of a turn-around. My belief is that they have turned things around, and growth is starting to resume.
Let’s look at the profit side first.
Net Income:
Perion has always been profitable with good margins, but in the last 2 quarters, they have big GAAP net losses, and I believe that’s why the stock has been punished. When you look under the hood, it’s due to a couple large write downs of Goodwill & Intangibles. This is a bit nerve-wracking, because even after the write downs, G&I are up YoY as of December. This is because they made another big Acquisition - Undertone (http://www.businesswire.com/news/home/20151201005998/en/Peri…)
Revenue:
Their sales had fallen off a cliff, but the last 2 quarters, revenue has been up sequentially 8% and then 28%. They’re guiding for a 4% increase from Q4 to Q1, which would be a 35% YoY increase. The Undertone acquisition happened last Q, and if memory serves they only counted 1 month of Undertone revenue in their Q4 numbers. Basically they are headed back in the right direction.
Value:
But I’d have to say the most compelling thing here is the valuation. Even in a rough turnaround year last year, they made 38M in non-GAAP earnings. And the market cap is currently about 125M. So yeah, I’d say they’re pretty cheap.
Let me know what follow up thoughts and questions you have!
- Bear