Good day, welcome to the Perion fourth quarter 2015 earnings conference call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Stephanie Mazer, Perion Investor Relations. Please go ahead.
Thank you, operator, good morning, everyone. Thank you for joining us on our fourth quarter and full year results earnings call. The press release detailing the results is available on the company's website 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, 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 website 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, good morning, everyone. Welcome to our fourth quarter and full year 2015 earnings call. This morning, I will briefly discuss our financial results, update you on the state of the business and the company's evolution, in particular, the progress we have made post our acquisition of Undertone, and conclude with my remarks on Perion's forward-looking strategy. Yacov will review our financial results in more detail, we will then open the call to your questions. To start, I'm proud to say that our year-end financial results capped a very strong year for the company. We surpassed our financial goals and made significant progress in further evolving our strategy. We are at the high end of our revenue and EBITDA guidance and exceeded non-GAAP net income guidance, all both for the quarter and year.
We have significantly strengthened the company by diversifying our revenue with the acquisitions of Undertone and MakeMeReach, which will represent close to 50% of total revenue in 2016, solidly positioning us in growth categories like mobile, social, and video. The company is in good health financially, with a total cash amount of $60 million and a net financial debt position of roughly $39 million. Non-GAAP revenues for the year were $218.7 million, EBITDA was $53.1 million, non-GAAP net income was $38 million, and diluted earnings per share was $0.50, all stronger than anticipated, both in terms of budget and guidance. For the quarter, we had $65.3 million in non-GAAP revenue, $10.4 million in EBITDA, and $7.4 million in non-GAAP net income, all at the high end or above our guidance.
This is the second quarter in a row whereby our revenues increased, attributed to the Undertone acquisition and the stabilization of search revenue. We are confident these trends will continue and that we will experience year-over-year growth throughout 2016. EBITDA increased as well on a sequential basis for the first time in six quarters due to the addition of Undertone. We were highly profitable in 2015, and we will continue to be so in 2016. We expect our first quarter EBITDA to be lower, primarily due to the seasonality of the ad industry, which is still its weakest quarter. We will return to EBITDA growth on a sequential basis in the second quarter and on a year-over-year basis in the third and fourth quarters. It's worth taking a step back to review the company's evolution in 2014.
Two years ago, we identified the search advertising industry trends and decided to get out in front of them. With the market dynamics shifting in search, we decided to proactively lower our search media spend, focusing on premium publishers, restructure our business, and change the search revenue model, reducing risk, albeit at lower margins. We then identified the shift in consumer attention and the growing importance of mobile and social, and as a result, the shift of ad spend to those platforms. Therefore, our reaction was to invest in creating our mobile and social business and supplemented these internal initiatives with the acquisitions of GrowMobile and MakeMeReach. From these efforts, we concluded that we should increase our focus on the demand side, specifically on advertisers and agencies, as they are the source of revenue.
As a result of that decision, we began looking for a profitable growth engine that could establish us as a differentiated player on the demand side, and that led us to the Undertone acquisition. I'm proud of our success in restructuring the search business and also establishing a position in social and mobile. That gave us the ability to make the move with Undertone and successfully transition from a search-dominated revenue model to a more diverse and stable model that includes advertising revenue. We have now spent the past three months post the Undertone acquisition in careful analysis and are continuing our evolution. We see a big opportunity for us to focus on making digital advertising more engaging. As brand advertisers move to digital, forecasted to double by 2018, it presents a big opportunity for us.
The challenge for brands in the era of more devices and marketing messages than ever before is capturing consumer attention. Something that standard digital advertising solutions, such as banner ads, found in an unlimited supply across most of the major ad exchanges, simply don't deliver on. We believe that digital advertising can be better, more engaging, and drive real results for brand advertisers. This is why we've chosen to focus on a differentiated offering of high-impact advertising solutions, both formats and platforms, for brands, which according to eMarketer, is a category that will nearly double and reach $11 billion by 2018. Undertone, combined with the assets we have at Perion, provide us with a unique value proposition. Together, we have world-class proprietary high-impact ad formats and platforms, award-winning creative and service teams, outstanding social mobile capabilities, sophisticated analytics, first-party data, and proprietary technology.
Top of that, we are proud of our excellent relations we have with key industry players such as Facebook, Twitter, Google, and Bing. All of these things together enable us to serve the needs of our clients and build on the strong agency and brand relationships we have. Our solution helps brands stand out from the crowd and capture the attention of the consumer creatively and provide better targeting, engagement, and results for advertisers and publishers. While there are some big players out there in the advertising technology industry that will continue to own a strong position, there will also be several category winners. One of those categories is high-impact, which revolves around making digital advertising more engaging for consumers, brands, and publishers, primarily through high-impact ad formats and platforms.
We plan to be synonymous with that definition and intend to be the winner in this category, thus creating a strong catalyst for accelerated growth. We intend to accomplish this with both organic and inorganic investments. Organically, we intend to focus all of our business efforts towards this goal. With Undertone, we have identified real revenue synergies with parts of the GrowMobile business and cost synergies opportunities with other parts. We intend to sharpen our focus on these opportunities over the next two quarters. Inorganically, we believe there will be significant consolidation in the ad tech space, which will present attractive opportunities for us to add scale. We intend to assess these opportunities, and if we find the right one that will extend our market position and high-impact, we will act. Now, let me turn the call over to Yacov who will walk you through our financials. Yacov?
Thank you, Josef. Non-GAAP revenue for Perion this quarter was $65.3 million compared to $78.7 million in the fourth quarter last year. For the entire year, revenues were $218.7 million as compared to $294.2 million in 2014. Revenues for the year were made up of $172.3 million of search-generated revenues, $29.8 million of other advertising revenues, and $16.6 million revenues from consumer products. The comparative reduction on a year-over-year basis was predominantly in search-generated revenues as a result of our decision last year to exit certain parts of the download industry and focus on premium publishers and thus significantly reduce our customer acquisition cost, or CAC, that drive these sales. In 2015, CAC, media buy costs were $88.9 million as compared to $174.6 million in 2014. Besides the reduction in CAC and despite the acquisition of Undertone, COGS, R&D, and G&A decreased in 2015 as compared to 2014.
This is as a result of our restructuring the business, adapting it to the new market conditions. Sales and marketing expenses increased in 2015 as we refocused our business to increase revenues as well as consolidate the Undertone activities driven by its sales and marketing efforts. Adjusted EBITDA in the fourth quarter of 2015 was $10.4 million or 16% of revenues, as compared to $25.2 million or 32% of revenues in the fourth quarter of 2014. For the entire year, adjusted EBITDA was $53.1 million or 24% of revenues, compared to $126.3 million or 32% of revenues in 2014. This year-over-year decrease in adjusted EBITDA was primarily a result of the aforementioned $75.5 million decrease in revenues , partially offset by the $85.6 million decrease in CAC and a $16.3 million decrease in other costs.
Perion's non-GAAP net income in the fourth quarter of 2015 was $7.4 million, representing an 11% net profit margin compared to $20 million or 26% net profit margin in the fourth quarter of 2014. In the entire year of 2015, non-GAAP net income was $38 million or 17% of revenues compared to $101.6 million or 26% of revenues in 2014. As a result, non-GAAP diluted EPS in the past quarter was $0.10 per share as compared to $0.27 per share in the fourth quarter of last year. For the entire year, non-GAAP diluted EPS was $0.50 per share in 2015 as compared to $1.34 in 2014. On a GAAP basis, we had in the fourth quarter and the year of 2015 a net loss of $16.8 million and $68.7 million, respectively, with diluted loss per share coming in at $0.23 and $0.97 respectively.
The reason for this GAAP net loss is due to a $20.6 million and a $98.9 million impairment of acquired goodwill, other intangible asset capitalized software in the fourth quarter and year of 2015. The impairment this quarter is related to the decision we made post the Undertone acquisition to focus our efforts on becoming the market share leader in the high-impact category. Consequently, we have adjusted our GrowMobile business forecast to reflect the evolution in our company's strategy. GAAP cash flow from operations in 2015 was $17.6 million. As of December 31st, 2015, we had cash equivalents, and short-term deposits of $60 million, and working capital was $37.4 million. We have net financial debt of roughly $39 million and are in compliance with all of our debt covenants.
As of this month, we will start paying down our debt at a rate of approximately $11.3 million a year. This concludes my financial overview for the fourth quarter and year of 2015. Let me now share with you our financial outlook for the first quarter of 2016. In the first quarter of 2016, we expect non-GAAP revenues to be in the range of $69 million-$71 million, and adjusted EBITDA to be in the range of $2 million-$3 million. For those of you less familiar with the advertising industry, this industry is extremely seasonal, with the strongest quarter being the fourth quarter of every year as advertisers complete their budgets and leverage the holiday season, while the first quarter is the weakest with budgets slow to start.
Our Undertone business, as different from our legacy business, reflects these general advertising industry characteristics, and the first quarter is historically its weakest, both in terms of revenue and particularly EBITDA. We expect the EBITDA to increase in the second quarter. As we look out toward the entire year, we expect an excess of 50% year-over-year revenue growth with EBITDA margins coming in in the range of 10%-12%. With that, we will now open the call to questions. Operator?
Thank you. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, that's star one to ask a question. We'll take our first question from Kerry Rice with Needham.
Thanks a lot. A few questions here. Maybe first on search. I think that for Q4, search was a little bit weaker than we expected. We're looking for some sequential increase. Can you talk a little bit about that? It also seems you pulled back on customer acquisition costs. Have you, with Undertone, decided to maybe pull back on future customer acquisition costs on search? That's going to run at a lower level. Around the goodwill impairment related to Grow Mobile, do we think of that as Grow Mobile just being wrapped into Undertone at this point given that big write-off? There'll be less focus on that. Just one housekeeping question. I know, Yacov, you, I think, broke out other end consumer products for the year.
I didn't hear what it was for Q4. Maybe could you give us what Undertone contributed in Q4? Thank you.
Okay. We'll try to answer all your questions, but if we miss one, just feel free to remind us.
Certainly.
With regard to the last one, with regard to the breakdown of revenues. In the fourth quarter, it was $18 million from advertising and about $4.2 million from our consumer products and others.
All of the 18 was [inaudible].
No, right. Obviously. We already had advertising revenues before the Undertone acquisition, and that remained pretty much at the similar pace for the prior quarters, with the big jump coming from the Undertone acquisition. Answering your first question with regards to search. As we opened up in our remarks, search revenues are relatively stable. If we look from the beginning of the year, first quarter about $42, second quarter $41, third quarter $45, and then back to $43. Plus/minus 5% through all the quarters. Being relatively stable does not make it immune to different kinds of things that are happening in the marketplace. For instance, one of our partners in the fourth quarter suffered some technical problems with the introduction of Windows 10 and Edge. We had some, if you wish, singular problems there.
There are some still small ups and downs in that part of the business. As we said, we're confident that we remain now relatively stable.
Yeah. With regards to your second question, Kerry, on the impairment and where's it moving going forward. An initial effort, Yacov said on search, we're committed to it. We think, again, it's a stable, good business. It's not a big growth business. We said that. We think the big growth will come from focusing on high-impact. We still believe it's a good business. It produces a lot of good cash flow for us, and we think it's stable. Hopefully, we can grow it over time. It's a function of RPMs, which, as you know, we don't control, and obviously some other noise in the market, which has certainly quieted down from the past year. That does bring us to the impairment and really a function of your question, tying the two things together.
We have decided to really focus the company and its efforts in really two areas, search on one end, and the other is in high-impact advertising solutions, which is both formats and platforms. When we looked at Grow Mobile and we're looking at what we're doing in Undertone, we believe that there is some good synergies, for example, on social. One of the things we identified really early on, Undertone had no social presence whatsoever. We believe we can really enhance that overall pitch to the brands and those agencies by including search in it with our platform.
We hope to work with Facebook and Twitter and other social networks to add high-impact to Facebook and to other places, some of that with their own formats, like Canvas that Facebook just released, but also hopefully with our formats as a strategic partner of theirs, leveraging our existing partnership we have through Grow Mobile MakeMeReach. When we looked at where we're focusing our efforts going forward, one of the things we decided is just that we think there's a really big opportunity to focus on high-impact as a category, and it kind of makes us differentiated. Therefore, some of the focus and shifting of our resources in terms of focus will be on supporting that goal. As such, it was just technical.
First of all, because of our stock price, we actually every quarter now, we have to look at that book value versus our equity value. To tell about that, we have to look at the impairment. As we looked at where we're putting our efforts, we decided that from a Grow Mobile standpoint, the revenues directly related to a standard mobile GFE was not going to be an area where we can grow significantly. I mean, we're still going to have it. It's so important to actually the Undertone business as well, but it won't be as independent going forward. Revenue streams will be more working with the Undertone business and seeing how we can make that work together. We're leveraging a lot of the technology and the platform.
We're certainly not giving up on that side of the business, but we're focusing efforts on that, and that triggered, obviously, a change in our forecast for the independent part of that business. That's what the write-down is. We think as the evolution of our strategy we mentioned earlier, it's the right decision to do now after the Undertone acquisition. It's a really good opportunity. We're excited about it, and we want to take all the resources we have and put it behind really becoming number one in the high-impact category.
That's helpful. Thank you for answering all those questions. Appreciate it.
Thanks again, Kerry.
Next, we'll hear from Daniel Kurnos with The Benchmark Company.
Great. Thanks. Good afternoon, guys.
Hey, Dan.
Hey, a few things here. Let's just start with some high-level stuff. Josef, can you just tell us kind of where we stand now on all of the lock-up issues? I know it expired early this year. Obviously, we can kind of see what happened to the stock price. Just from holders, what you're hearing on that end and what's left and how you plan to address the remaining shares that are out?
Sure. The good news is, from a lock-up standpoint, it's over. We think most of our opportunity is behind us. Roughly, as you know what happened, we tried to have it, but in the first two weeks of January, we had roughly 4 million-5 million shares hit the market to the best of our ability, what we could tell, out of what we thought would be a total of six. Pretty much almost all of it has hit the market, and that's what drove the stock price pretty much down from $4 to $2 something again, after we had a nice increase after the Undertone acquisition. The remaining shares are really in six shareholders' hands. Those six shareholders we're in constant contact with. None of them are going to dump the stock on the open market. Some of them will look for liquidity sooner or later.
Most of them are waiting. We'll either look for off-market transactions. At some point in time, there could be some other activity. If the stock price goes up enough, we could do some type of secondary on behalf of those shareholders. We don't plan on raising money at this point in time through any offering, obviously. For these shareholders, if the market and the stock price rises to a certain amount where they're willing to sell, we would certainly look at that on their behalf. I think we should have relative stability in the stock price. I don't expect any more big dips based on selling shareholders. Therefore, I think the maxed out resolution is behind us.
We have six shareholders own about 40 something, 42 million, 40 million shares, and those six are all working with us to be as responsible as we both can so that we obviously, hopefully, increase the value of the company and not decrease it.
Great color on that, Josef. Thank you. Just quickly on search. Obviously, we've seen a lot of changes. I'm not going to go into too much because you've given a decent background. We've seen a lot of changes from Google just in the way that they're revamps to the rankings and scores and some other things. Bing is starting to follow suit a little bit and also push their programmatic. Maybe if you can just talk some of the push and takes that you're seeing on the Bing side as they're continuing to play catch up and how that's impacting your forecast for search in general?
Clearly, first of all, if you just look at the market share split, Bing has gained nicely over the past few years, and I think they've closed the gap, certainly better than it has in the past, on the RPM gap between Google and Bing. I think that the rate of closing the gap is probably slowing down. Mostly what we saw, I think just in terms of economics, obviously, if the gap closes more and more, predominantly with Bing primarily, we still have Google and our partnerships, we'll benefit to the extent those RPMs grow as our searches grow. If the RPMs don't grow as fast, then our revenues, even the same amount of searches, won't grow as fast. With regards to what we're seeing in the industry itself, the truth is, other than Windows 10, we've had relative stability.
I think the regulation changes from a Google Chrome specifically, or even antivirus companies out there, and Microsoft Windows, I think they have succeeded to a large degree of getting rid of a lot of the bad practices and players out there. We haven't seen significant volatility there. There's still some noise here and there's no question about it. As Yacov mentioned earlier, one of our partners did have a technical issue with something on Windows 10 that hurt them, and unexpectedly, obviously, hurt us as well in Q4. But other than that, I think as you're seeing mostly with some of the competitors out there, especially the public companies, the decreases you're seeing there is just the fact of we bit the bullet early on, a year and a half ago.
We really, we think we got out in front of it, but we took the hard medicine, as our stock price will indicate. The other companies, I think, fought it longer. You can decide which was a better strategy, but you can't fight gravity. At the end of the day, everybody's coming down to the same area, where it's still a good industry, but a much smaller industry than it was. There are pretty much only going to be two or three players left. As you know, BlueKai is put up for sale in full space, so we'll see what happens there. IAC is putting mostly a focus on the B2C part. On their B2B part, they're kind of toning that down as well. Really, maybe the other one major, another private company out there who's decent sized.
So we think we're in a position to hopefully pick up some market share, but if not, keep what we have and grow and further diversify in the search business outside of the download space through the syndication and the web and mobile side, which we are gaining traction in. We believe, over time, that'll help us continue to evolve the search business. Albeit, we may be replacing download revenues, therefore an unable to be growth area for us, but it's still a profitable area for us. The growth will come in shifting of those revenue streams.
That's really helpful color, Josef. Not to belabor the point on this, I was also curious if you had any thoughts on the new announcement since you have focused on higher-quality content publishers, with the new support embedded in the Bing Ads Editor for native content. If that changes or helps your partners at all?
We believe it helps us, as really one of their strategic partners. Without going into too much detail, certainly, we'd be one of the first companies hopefully working with them, to roll that out on a distribution angle. We're excited about some of their initiatives, which I think is really interesting, and I think they're actually getting it right in a lot of ways. It's still in the early phases, I'm sure as probably Microsoft or Bing will tell you, could ask them more. From our standpoint, we're excited at what that gives us, this opportunity to bring to publishers, especially premium publishers, with the vast abilities that obviously Bing brings to the table.
Great. Then, shifting over to the ad tech side, obviously, there's been a lot of negative press over the last probably six months in the ad tech space. I know that you did a good job in your prepared remarks differentiating your product versus the other guys out there. There was a big piece in the journal about declining headcount ramp across the entire industry. Maybe if you could just address specifically how you guys are seeing sales ramp to support your growth initiatives and just any additional color on the differentiation that is helping you through, I think, what's perceived as tough times.
Sure. I think your question hit the nail on the head by this is why we bought Undertone. This is why we're actually choosing to focus our energies across the company, in the advertising space, including mobile, on a differentiated position with high-impact formats and platforms. What we're seeing in the industry very nicely, this is not new news for anybody, essentially, there's too many players in the ad tech space, which is part of why it's depressed in the stock market. Hard to differentiate between a lot of them. I think Yacov told me he was at an investor conference recently, he sat and listened to a few other presenting companies, he said, "Oh my God, they all sound alike." I wonder if we sound alike. We hope we actually are now differentiated, that's part of the problem.
There's just too many, little differentiation, programmatic. While it'll certainly be a big part of the business, we actually believe in our world, we believe in more private marketplaces or personalized direct. OpenRTB programmatic, first of all, as you're seeing from a lot of the players out there, has a lot of garbage inventory, which is problematic. The brands and agencies are not getting, frankly, their money's worth. Number two, is the margins will continue to decrease because technology there is not a differentiator. It will eventually be standard for everybody. You really need real scale. There are some companies who have real scale, and I'm not talking about Facebook and Google, obviously, but other independent companies. We don't think we'd be one of them.
We focused on really leveraging our history and what we've done, frankly, on the social, in Perion . Found a company that is profitable, that has scale already, and we believe together we can scale it further with combining some of our own efforts with their efforts, and continue to really expand the high-impact category. From our perspective, what you're seeing today in the ad tech industry, there are layoffs, there are a lot of changes. Companies are struggling. I think that'll continue. That presents, we believe, an opportunity for us to maybe pick up some good assets along the way. On our side, on the ad tech, we're growing. We're adding headcount on the ad tech side of the business, and we're focusing the resources to try to drive sales.
We expect 2016, as Yacov said earlier, to be a very good growth year for the company, not only overall because of the acquisition, but also organically as we focus on the high-impact formats at Undertone. They are growing at 30-plus %. We're excited about that opportunity, and hopefully we can really seize the moment and become the leader in that category.
I think one of the other issues in the space, Josef, is that people complain, or ad agencies, or even end customers, end users complain that a lot of the products are overly complicated and that the choices are widespread. Could you just address that thought process and how, if you have at all, simplified the process for people through Undertone?
Yeah. Basically, I'm not sure I agree with that statement, by the way, I'll address it in maybe a little similar fashion. With regards to what we do in Undertone, the format itself is proprietary technology. Complicated or not complicated, frankly, it's irrelevant to the brand advertiser. What's relevant is that we're creating something that we are very confident produces great results and engaging the consumer with their brand, and engaging consumers with brand, gets them what they want from their results, and it stands out amongst the noise in the industry, as opposed to banner inventory or different formats out there, or pre-roll video and other things like that. We try to make it as simple as possible. Frankly, most of the work, probably on the integration on the publisher side or advertiser side, is the creative production side of it.
We do a lot of that work for them. We help them out on that. I don't think they find it difficult. I don't know on that particular piece what you're talking about, from our standpoint, we sell the package, and we sell what we're delivering to the advertiser, which is brand awareness and engagement with their brand, and sharing on social networks. If they love the ad, they're going to share it with other people, and that's what the brands really want to drive their business.
Okay. Then just one housekeeping question for Yacov, just quickly. I know we talked about this last time on the guidance. As we think about Undertone revenues in 2016, have you guys made a decision as to whether or not you're going to record net or gross revenues for this?
I think as you were able to see in our presentation, also when we acquire the company going forward. From a GAAP standpoint, we will be reporting them on a gross revenue basis. However, management does view some of the revenues, the standard display revenues, which where our content or what we're contributing to the product is relatively lower. Management is going to view those standard display or ad unit revenues on a net basis. When you go forward, you're going to see us presenting GAAP and non-GAAP revenues because of that.
The way that you've done it now, there's not going to be any future changes as you assess the business on a.
No. None at all.
Okay, perfect. All right. Thanks, guys. Appreciate it.
Thanks, Greg.
Our next question comes from Robert Sussman at Bentley.
Thank you. On the first quarter guide, you talk about the seasonality, the revenues in the first quarter are estimated to be higher than the fourth. What accounts for the large margin drop?
First of all, there's a technical difference. In the fourth quarter, we're only consolidating 1 month of Undertone's activity. That's an anomaly going from the fourth quarter to the first quarter, and the first quarter obviously being in the fourth quarter. That's number 1. As we mentioned, the strongest quarter in the Undertone business is the fourth quarter, particularly the strongest month is December, we were fortunate enough to acquire the company for the entire month of December. As we go into the first quarter, in the advertising industry in general, Undertone being a player in that industry in particular, that is the weakest quarter. In this industry, when you have high margins, when you have weaker revenues, that goes down to the bottom line.
That's why even a small drop in revenues has actually a more significant effect on the EBITDA and affecting the margin for the entire company.
That's helpful. The second question I have is that much of what you're saying about the recent acquisitions were said about prior acquisitions that have now been written down substantially. What gives you confidence the new business will be so much more successful than the prior acquisitions were?
First of all, thank you for the question, and my friends on the phone, Robert. I think in any business, and I think if you look at our track record, first of all, the MakeMeReach acquisition has actually done very well. We looked at, obviously, three other acquisitions. Hotbar has done well. The Conduit side of the business, as you can imagine, the biggest change there has been the search industry itself. Was it a good acquisition? The answer is, and I've been asked this question before, it was a great acquisition.
We got great cash flow out of the business, which is what we thought we'd get, close to probably $150 million over the past two years, which enabled us, by the way, to diversify and buy Undertone, which we also believe will be a good acquisition because we bought a mature company that is already on the growth path with a strong profitability. I think as you look in the past, therefore technically what did happen in the search business is that we did the big acquisition because the search industry changed. It was not because the acquisition did not work, and that's very important. We had to ultimately write down because the forecast of the industry changed, and our forecast of revenues changed. Not to mention, the decrease in our stock price caused us to write things down.
We have to look at it on a quarterly basis as opposed to just annually when you might have that going. If you look at all the acquisitions we've done, the reality is I think we've done, what is it, six? Five or six. I think two we did write down, and there's no question, I think they're probably disappointing. Four we're actually very happy with, and they've done well, and I think that's a pretty good batting average. No one's perfect, and we expect as you continue, whether it's organic investments or inorganic. Even organic investments, rather. You do some things that don't work out, some things do work out. Frankly, that's like anything in life, and we believe we're going to continue that pace. In this case, we decided to, I think, which is a difference to your earlier question.
We decided to go after bigger acquisitions with an existing business that is profitable, that really lowers the risk of something not working out. I think that's the better way of doing it. We could only get to this acquisition because of the one we did earlier with Conduit. We're actually looking at it, and I think you always want everything to be 100% batting average, 1,000% if I'm sorry, but it just never is. I think your question is a legitimate question, and I understand it. I don't look at it the same way. I'm not shying away from the fact that some didn't work out, and therefore we did take write-downs. The last two we're talking about, one on Conduit, was the industry, was not the acquisition itself.
Grow Mobile write-down, actually, wasn't even Grow Mobile as much as it was, we're going to focus our efforts on making sure we can be the winner in high-impact, and we're therefore reshifted some of the focus on that. We've reshifted the focus, again, because our stock price was low as well. That does change the forecast, and the forecast, therefore, is just technically you have to write something down when you change the forecast.
Okay, thank you very much.
Next we have Marc Estigarribia with Chardan Capital Markets.
Thanks for the call. I mean, for the questions. Sorry if you answered this already, Yacov and Josef. In terms of going forward, the forecast, I think we're looking at the 50% growth expectations for this year. Can you just break down the expectations between search and advertising? I know before it was, I think, there was a 60% plus guidance, 50/50 breakdown. If you could just give us a breakdown going forward, what to expect. What I'm doing when I look at the search going forward, I'm trying to put in some growth in search, and I'm putting more in advertising, and just trying to get some color.
Sure. First of all, let me just give you the breakdown. We think, in general, the revenues from search and consumer apps, so the download and the search side of the business, will be roughly half of the business, and the advertising business, which is Grow Mobile, Undertone, will be the other half. Next year, it's roughly a 50/50 split. That's number one. In terms of the guidance and the 60 to 50%, we're probably being a little more conservative. We said 60 on the acquisition. We're not actually backing away from that. We said in excess of 50. We said approximately 60, and we're saying in excess of 50. We're trying to be conservative. To be candid, given where we are in the stock price, I get no credit for being overly aggressive. We're not going to be overly aggressive.
We think that there is growth and there will be growth on the advertising side. On the search and the consumer app side, I think there's an opportunity there. We expect that to be stable, plus or minus 5%, in terms of growth, 5%, maybe a little bit less, but in that range. The rest, we believe there will be growth in the Grow Mobile and Undertone side of the business.
Thank you. Can you provide us with the net revenue number for full year 2015 Undertone?
It was approximately $120, it's also unregulated for the entire year for Undertone. Again, Undertone as a private company, which reports gross revenues, therefore they didn't really have that growth or gross and net revenue difference. It's mostly, if you wish, under the Perion regime, that from a management standpoint, we're looking at it from a non-GAAP with the net revenue.
For the moment, by the way, Marc, it's around $120 and change, was what the Undertone net revenue number would've been in 2015.
That's helpful. Thank you.
With regards to ad blocking, I know it's been a huge theme. There was a big conversation between Google, Yahoo, and one of the ad blockers in the Mobile World Congress in Barcelona. Also Opera just came out with their big browser and the built-in ad blocking. What are your concerns or what are your comments going forward this year in terms of combating that issue for the industry and for the company?
For the company, let's be specific. We don't expect it to have a meaningful impact on our business, if at all. Mainly, our advertisers and brands and agencies only pay for impressions they reviewed. If it doesn't show up, we never get charged, we never charge the advertiser. We have plenty of inventory that we're not concerned with that. On the industry standpoint, as you may have seen, you may have read recently in Sweden, 90% of all the publishers of Swedish websites actually banded together and started saying to all consumers in Sweden, "If you want to look at my content, disable the ad block. If you don't, you can't look at the content." I expect there to be a nice battle going on between the ad blockers, who many of them, I think, have a lot of good intentions.
Many of them, I think, are what you call the nice mafia who come to your store and say, "You need protection, pay me." You say, "I need protection from whom?" They say, "Well, you don't want to know," which is themselves. I actually am not a big fan of those. I think the consumers, which is the main thing here, want a better ad experience, we think we're positioned nicely. I think the industry overall will go to better formats and better quality advertising, and I think we are one of the leaders in that regard. Therefore, as we go forward, our proprietary interactive formats integrate to the publisher side. There are frequency caps around them. We don't bombard anybody. We do it very tastefully. Actually, they're the ones that people share on social media because they're cool ads.
I think that's one way of doing it, is raising the bar on advertising. There's no question that has to happen. I think number 2, publishers will start banding together, and that's the answer is, "Hey, guys, you can't look at my site." I think Sweden is a good example of what's happening. On the browser side, it will be interesting to see what happens. Opera is one example, but they have like a, I don't know, 0.2% market share. The real one is what happens with Edge and Chrome and Firefox, and what they do. Again, a lot of their revenue is also generated because publishers actually are seen through their browsers and a lot of advertising revenue comes there. I do not necessarily see that's going to be as a default implemented. I think for us specifically, the industry will work itself out.
Marc, you may remember, I used to have the Republic 15 years ago, pop-up ads were everywhere. The industry, consumers hated it, they complained. It took two or three years, but eventually it solved itself. The IAB got involved as it did with PREEM. I believe Google on mobile is getting involved with AMP. I think there's a lot of things that are happening that will eventually create equilibrium in the marketplace. You get better quality ads, you get the consumer get a better experience. I don't think ad blocking will be the way we're going. I just don't see most consumers paying for content today. I think what they want is better quality ads, and hopefully we give that to them, and I think we'll soon.
Great. Thank you. Just one last question. With regards to the revenue that's attributed from Bing on the consolidated going forward, I think what we have is around 40%. Is that sort of still the concentration from Bing for total revenue?
Total revenue including the Undertone business?
Yes.
That would be a fair assessment, yes.
Okay. Thank you.
As there are no further questions, I'll turn the call back over to Mr. Josef, now please.
Thank you. Thank you, everybody, for joining and asking questions today. In conclusion, 2015 was an important year for us. We acquired two strong companies, strengthened the foundation of the overall business, and laid the path for the next phase of our evolving strategy. It is incredibly gratifying to see our proactive strategy gain traction. We have come a long way and now have a very clear vision for the future in making digital advertising more engaging. As always, I am thankful for the professional support and hard work of our dedicated employees. Thank you to everyone at Perion, and thank you all for joining us today.
That concludes today's conference call. We appreciate your participation.