Good day, and welcome to this Perion third quarter 2014 earnings conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Deborah Margalit, Perion Investor Relations. Please go ahead.
Thank you. We appreciate the attention of everyone who is joining us today. On today's call, management will be reviewing the financial results and business highlights of the third quarter ended September 30, 2014. 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. The 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 and the report on Form 6-K filed with the SEC on September 23rd, 2014 that may cause actual results, performance, or achievements to be materially different from any future results, performances, or achievements anticipated or implied by these forward-looking statements.
The company does not undertake to revise any forward-looking statements to reflect future events or circumstances. In addition, as in prior quarters, the results reported today will be analyzed on a non-GAAP basis, which management believes better conveys the operational state of the business. We have provided a detailed reconciliation of non-GAAP measures to the comparable GAAP measures in our earnings release, which is available on our website and has also been filed on Form 6-K. With that, I turn the call over to Josef Mandelbaum, Chief Executive Officer. Joseph?
Thank you, Deborah. Good morning, everyone. Welcome to our 2014 third quarter earnings call. This morning, I'd like to briefly review our third quarter results, discuss our strategy going forward for our search monetization business, and conclude my remarks with an update on our mobile business. Yaakov will then review our financial results in more detail. We'll then open the call up to your questions. To start, our third quarter results are in line with our expectations and guidance, despite a very challenging market backdrop. For the quarter, we delivered $87.4 million of revenue and $33.9 million of EBITDA, with earnings per share of $0.38. Overall, the changing market and deteriorating practices of the search distribution business have created an inflection point for our company.
We have decided to be more selective in choosing our partners, executing a controlled transition to a higher quality, more transparent, albeit smaller, search monetization business. This will also enable us to accelerate our strategy and focus on leveraging our core competencies to provide cross-platform monetization solutions for publishers and marketing solutions for advertisers. We remain confident that continued execution and focus on this strategy will lead to a healthier, less volatile, and more valuable business. As discussed on the second quarter call, we have been experiencing headwinds from many sides of the download search ecosystem, including new guidelines, browser changes, and competitive practices that we have chosen not to follow. Taking these ongoing challenges into account, we've proactively pulled back on our marketing spend in the third quarter and are continuing to do so in the fourth quarter.
We implemented a reorganization of our search business, which included a headcount reduction and other cost-saving measures. The goal is to align our costs to lower future search revenues, maintaining healthy margins and cash flow to fuel our strategy. In addition to cost savings, we are taking a couple of important steps to evolve our monetization business. First, we are expanding our monetization portfolio to include non-search solutions. We all understand that advertising, when done well and tied to the content or product being used, is a necessary and accepted part of the free content ecosystem. Our job is to create and provide value-added solutions to publishers and developers so consumers can keep on enjoying the content or products being consumed. As an example, we are developing new products like PC to mobile app monetization and targeted advertising for publishers. Excuse me.
We are going to be more selective with our partners and focus on providing higher quality, more transparent search and non-search monetization solutions for their specific needs. In regards to our mobile efforts, we have made considerable progress and are excited to announce the launch of our Grow Mobile self-service platform next week in London. Today, the large number of mobile ad networks, disparate systems, and technologies platforms, each involving reporting, analytics, and technical integration, result in a costly and inefficient marketplace. Advertisers use up to half a dozen different systems coupled with complex manual processes to plan and execute an advertising campaign. This is a tremendous challenge to navigate effectively. Our Grow Mobile solution is specifically designed to alleviate these issues.
Our dashboard allows advertisers to buy, track, optimize, and scale their user acquisition campaigns while providing a single view of all the cost and revenue data which advertisers need to successfully manage their marketing campaign. Ultimately, having this information on one platform with a very user-friendly interface will allow advertisers to make better and smarter decisions. Beyond Grow Mobile, we are also investing in a unique mobile analytics solution designed to help publishers and advertisers better understand their users, and as a result, increase the engagement and value of their users. We are already in the design phase with a couple of partners and expect a beta launch in the second quarter of 2015. We intend to utilize our strong cash position and ongoing positive cash flow to acquire companies that are synergistic with our strategy and have a promising pipeline of potential candidates.
Now, let me turn the call over to Yacov, who will walk you through the financials. Yacov?
Thank you, Josef. As we stated in our press release, the acquisition of ClientConnect was viewed by U.S. GAAP as a reverse merger, and as such, our 2014 performance is being compared to that of ClientConnect in 2013. It goes without saying that the growth seen, that I will further elaborate on, is to a great extent, and sometimes entirely due to the 2013 Perion performance not included in the ClientConnect business for that year. Revenue for Perion this quarter was $87.4 million, increasing $5.8 million or 7% compared to $81.6 million at ClientConnect in the third quarter last year. In the third quarter of 2014, non-GAAP revenues include $1.1 million of Perion's deferred product revenues, which were deducted in accordance with U.S. GAAP as a result of acquisition.
In the third quarter of 2013, non-GAAP revenues included $0.6 million of revenues, which in the GAAP report were associated with discontinued operations. In the third quarter of 2014, and as indicated last quarter, we were more selective in engaging our marketing partners. As a result, we reduced the investment in customer acquisition by 40%, bringing it to $30 million, representing 34% of revenues as compared to $49.8 million or 61% of revenues in the third quarter of 2013 by ClientConnect. This reduction impacted the growth and the revenues this quarter and will contribute to lowering revenues in the coming quarters. As we transition the company, investing and developing our proprietary mobile and marketing solutions, R&D expenses continue to increase year-over-year and were $10.1 million or 12% of revenues compared to $9.2 million or 11% of revenues in the third quarter of 2013 at ClientConnect.
Looking forward, we intend to further increase our investments in developing new products for new platforms, enabling us to rapidly create revenues on these platforms. Sales and marketing expenses for the quarter, excluding customer acquisition costs, were $5.3 million or 6% of revenues compared to $4.6 million, a similar 6% of revenues at ClientConnect in the same quarter last year. G&A expenses for the quarter were $5.3 million or 6% of revenues compared to $4.5 million, a similar 6% of revenues at ClientConnect in the third quarter of last year. GAAP costs and expenses during the third quarter of 2014 included $4.4 million of non-cash share-based compensation, $4.8 million for amortization of acquired intangible assets, and $1 million in acquisition-related expenses for a total of $10.1 million in adjustments to GAAP costs and expenses.
In the third quarter of 2013, the GAAP costs and expenses were increased by $11.5 million classified as discontinued operations in the GAAP report, partially offset by $4.1 million decreased, reflecting non-cash employee share-based compensation. While revenues increased this quarter 6% year-over-year, adjusted EBITDA increased to $33.9 million or 39% of non-GAAP revenues, primarily due to our decision to reduce customer acquisition costs, which decreased by 40%. In the third quarter of 2013, adjusted EBITDA at ClientConnect was $12.7 million or 16% of non-GAAP revenues. Perion net income in the third quarter of 2014 was $26.6 million, representing a 30% net profit margin compared to $6.1 million or 7% net profit margin at ClientConnect in the third quarter of 2013.
As a result, earnings per diluted share in the third quarter of 2014 was $0.38 compared to $0.11 in the third quarter last year at ClientConnect. GAAP cash flow from operations for the first nine months of 2014 was $37.2 million. As of September 30th, 2014, cash and cash equivalents were $96.9 million. The significant increase in cash and cash equivalents this quarter was primarily due to the $25.3 million generated by cash flow from operations and $37.9 million long-term convertible debt raised this quarter. The infusion of cash, partially financed by long-term debt, caused working capital in the last quarter to increase to $77.8 million. We expect cash from operations and working capital to continue and increase in the coming quarters. This concludes my financial review. Let me now review some key operating metrics for the third quarter and end with our 2014 outlook.
As a result of our reducing customer acquisition spend, total queries in the quarter decreased by 25% year-over-year to 2.5 billion, of which 1.2 billion were from Tier 1 countries, declining 10%. 1.3 billion from the rest of the world, declining 34%. With the decrease in new installs, ad impressions decreased as well, a total of 2.7 billion impressions, including in this quarter, for the first time, 0.5 billion impressions from mobile. Turning to our full year guidance, as we indicated in the press release, we continue to expect non-GAAP revenue to be in the range of $380 million-$400 million. We are raising the low end of our adjusted EBITDA guidance to be in the range of $115 million-$120 million and raising non-GAAP net income guidance to be in the range of $90 million-$95 million.
In summary, as we mentioned on our second quarter earnings call, the search monetization business is in a period of transition that is now expected to extend into 2015 with limited visibility. As Josef mentioned, we are taking proactive measures to reduce costs, including a headcount reduction of roughly 20%. As a result, we expect an annual saving starting in 2015 to be in excess of $10 million, with an expected one-time charge in the fourth quarter to be quantified by year-end as we complete the process. With that being said, we believe the team is well-positioned to navigate through these challenges and has emerged as a stronger, more diversified monetization business, are excited about our growing mobile initiatives, and have a strong cash balance and pipeline for future acquisitions that will help us execute on our strategy. With that, we will now open the call to questions. Operator?
Yes, sir. 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 time to reach our equipment. Once again, that is star one to ask a question. We will pause for just a moment to allow everyone the opportunity to signal for questions. We'll take our first question from Kerry Rice with Needham.
Thank you. Josef, maybe you can provide a little more color, maybe stepping back to last quarter and you talking about the headwinds and those extending into 2015. Can you provide some details on that? Is it primarily the impact around Chrome that you highlighted last quarter, or is there still some of the technical issues that are impacting search? Follow-up question is just, can you talk a little bit more or can you give some details around what GrowMobile initiatives contributed in the quarter? Thank you.
Thanks for joining the call, Kerry. Excuse me, I have a cold. First, I want to address the technical issue with Flip. It was a one-time thing. We fixed it, and we moved on. The headwinds we referred to, I mentioned briefly earlier on, really coming from three forces. First is browser changes, Chrome being the most significant browser changes. That are, as you know, making it more difficult in terms of conversion on a download, because you have to use their API. It's pretty much almost like a double opt-in, because the way they execute is, if you have an extension, it goes in. The default is do not enable, and then you have to click enable.
Usually, the enable button's on the right side, and Chrome put it on the left side, and I'm assuming they did it to make sure that the consumer really knows what they're doing. As you'd expect, that has a dramatic impact on conversion, and I think the industry is working through how to adjust to that, and hopefully over time, I'm very confident this will happen, the industry will adjust. That's just one aspect, browser changes. The second is new guidelines. As with many other antivirus companies, we've noticed, the industry's noticed in the past probably five or six months, have certainly increased the detection of some of our programs. They're not viruses, they're not malware. Nobody in the industry that I know of is, but the antivirus companies have certainly increased the detection, which again, hurts conversion.
If you're starting to get the theme, the more you hurt conversion, your effective lifetime value or your effective payout, depending on which side you are of the equation, certainly gets hurt. Second and third thing is there are competitive practices out there that as these things happen, a lot of companies try to work with it. A lot of companies try to circumvent it. We just, at some point in time, we realized ourselves that we just don't want to go there. We think we want to move and move forward on creating real value and working on higher quality partners. We think the search is still a good business, and it's going to be around for a long time. No one's taking that away. People still need to monetize free content.
We're working on that, and that's the transition in the monetization business, and that's why we're also going to focus on non-search offers as well. That kind of gives you the picture of what's happening in the industry, and I think you're seeing that other competitors of ours who certainly are public, who've announced similar issues. No, none of us coordinate on earnings calls. We certainly are all saying the same thing for a reason. In regards to Grow Mobile specifically, we bought it in June. At this point in time, it's still not material to the business, but it is growing nicely. Next year, as it gets bigger, we'll certainly disclose more about that. We're excited, and so far it's living up to the expectations we had when we bought it.
I think we're excited about where it's going and certainly excited about the product launch that I mentioned in Apps World in London. That really is the first combination of our internal group here in Israel with the Grow Mobile team in San Francisco, building a self-service
version of the GrowMobile fully managed platform. We're excited about that, and we've got a lot of great feedback from advertisers. We're looking forward to, hopefully, that being a big success for us.
Maybe just quick follow-up on the technical issue. I realize, I think that you had indicated it was fixed, but I thought last quarter you had indicated some, you had either lost some customers or something occurred that may drag on or it may take time to re-sign up those customers coming back technical issue. Have you seen the recovery there, or is that, again, one of the headwinds?
Yeah. Sure. I think we mentioned this specifically, that there was some technical issues that caused us to lose, on a one-time basis, some of our existing tail, our existing revenue. That's what we mentioned, and that was not recoverable because it was gone. On a new install basis, we did fix the technical issue that was going forward. As we mentioned, the other headwinds in the industry is what really caused us. In Q2, we certainly had some technical issues that hurt some of our revenues and profitability in Q2. It's not significant, but we hurt it. When you lose it, you also lose the tail for the rest of the year. The bigger issue was the headwinds that I mentioned is what really made us cut down on our marketing spend and go and do the reductions we did today.
That's helpful. Thank you.
We'll take our next question from Daniel Kurnos with The Benchmark Company.
Yeah, great. Good morning. Thanks for taking my question. Or good afternoon for you guys. Just a quick housekeeping question first, maybe for Yacov. Just can you split out between product and other, what the product revenue was in the quarter?
Certainly. In the third quarter, our product revenues were about $5.1 million. The other advertising was about $9 million.
Great. Thanks. Josef, let's go back to search for a second, because I do want to get into some of these headwinds and to talk about more specifically what's actually going on in the market here. It sounds like the DLA market seems to have stabilized, at least from what we've heard a little bit, particularly on the B2C front. Although we did hear that.
Google did limit inventory blocks, which I think is probably still causing a little bit of a headwind, but maybe of more concern. I just wanted to ask a quick question of you guys, if Conduit has any exposure to the content market, because we know that Google has been making some unofficial changes with regards to their SEM arbitrage policies. I was curious if Bing was considering following Google down that rabbit hole.
Two things. One is, Conduit isn't our business anymore, there still is a business called Conduit, but it's not us. I assume you meant the business we bought from Conduit. No, we're not exposed to the Google changes on Panda or on Penguin. We're not exposed to that on our side. Most of our partners aren't. I do think there are some AdWords policies that do impact some of our partners in terms of their ability to effectively buy media for downloads.
I was definitely referring to your business. I was just curious on the content side. These are unofficial changes Google has made on the SEM arbitrage side that seem to be filtering through to portal sites right now or content-rich sites, not necessarily even related to the Panda or Penguin changes.
are things that are in the pipe. It sounds like that's not an area of exposure to you. I'll follow up then on, look, it sounds like Yahoo, who has been a good partner to many, particularly in the mobile side, made some pretty public comments. It sounds like they're getting more aggressive in the B2B market. I know that they've been taking some share there. We've also heard from IAC that the B2B market is probably going to compress through the first half of next year. I want to get your sense on the core business, on the color going forward, the search outlook. Can core search grow without mobile?
The answer, I think is, in the short term, I probably agree with what you said from IAC's call. I don't think it is going to grow into the second half of 2015 as well. Yahoo is in the marketplace and others. I think mobile itself remains challenging because, obviously, Android and Apple being the two largest, by far, operating systems and suppliers, obviously, have existing contracts with Google, and therefore, it's difficult for me to have a business model today in the mobile ecosystem. I'm sure that over time that will eventually happen, but today, for someone like us, it's really not an area of focus. We're looking at alternative monetization to search, rather, in the mobile space and not search in the mobile space. With regards to overall Yahoo in the marketplace and market share, as you mentioned, Yahoo is a partner of ours as well.
We are the only one in the marketplace who has a deal with Bing. We think that's a competitive advantage of ours, and we have an excellent partnership and a good partnership with them. We, therefore, while we work with Yahoo and we still have the deal with Google, as you mentioned, clearly Bing is a competitive advantage of ours. As I mentioned, that doesn't take away from the headwinds. Your search partnership is great, but if your conversion goes down, I don't care who your search partner is. The economics of where the business models work for most of our partners is that they're spending money on buying some downloads for their products. They have to recoup that money. If they can't recoup the money, they need to find ways of doing it.
If they can't, they don't spend the money, in which case, we're helping them, but if my lifetime value is lower, I'm going to lower my payouts, which is what Yacov mentioned we did. We lowered our payout to partners. We think that's going to continue as their challenges remain to buy traffic effectively and cost-effectively. It will certainly trickle down to us. Because of the policy changes, the browser changes, the conversion is challenged as well, and that, again, makes the effective payout or effective lifetime value different. We think it's going to change. Again, I haven't spoken to IAC or to Bluecore, but I would venture to say all of us think it is, and I think all of us think that we'll be the ones who benefit in the long term.
As I mentioned, we're working on some new initiatives, which I'm not at liberty to say today, but to hopefully, as a leader in this industry, proactively try to get consistent, clear guidelines with all the partners in this ecosystem so that really, we can continue to provide a value-added service to the app developers who really want to provide consumers with something free. That's what we're focused on. We think we can do that, and we think it will take a little longer than we originally expected, but we believe we can get there.
Yeah, that last point is something I've heard echoed by everyone in the space in terms of clarity on guidelines. I think we'll probably get some within the next 3 to 6 months. Only time will tell there. Since you brought it up, though, on the mobile side, it's really interesting to hear how you think about monetizing there because the initial view is you're kind of trading off dollars for pennies given the gap in CPMs there. I want to hear maybe a little bit more color or granularity on how you get a more efficient ROI in the mobile channel given that CPMs haven't caught up yet, and how long you think it might take for CPMs to catch up from mobile to desktop.
It's a great question. I think I'm going to go back and answer your question just a little bit circuitously, just to hopefully put it in context. If you look at the core competencies of our business, it's focused on really two areas. One, we know how to help people monetize, and we've done that for years through search monetization, understanding optimization, and so on and so forth. What we've less talked about, but we realize is really a core competency and asset, is that we actually bought, and we still buy $200-plus million of media buying, and we are one of the few companies that knows how to measure LTV on a cohort analysis across multiple platforms and networks and measure ROI and on a cash-by-cash basis.
That, we decided, when it comes to mobile, to focus on that side of our business and expertise and not the former. The reason is because today, at least right now, search is not a viable monetization for us in mobile. It just isn't. When we look to advertising, we think it is, and we'll get there, but it's a very crowded space. When we looked at it, we decided when we're making bets and we want to be focused, we thought that the pain points of advertisers and publishers who are trying to get downloads or installs for their business and their products and their apps. It's a really complicated world out there without uniformity of pretty much any kind, whether it's across social, mobile, different ad networks, exchanges. In doing a lot of research, we realize a lot of the advertisers have a problem.
We decided our initial focus in mobile is to focus on that. Therefore, the business model there is really one of two. It's either a percentage of the media spend, which is typical in companies like the Rubicon Project, or it's a SaaS model where it's a fee or some type of negotiated price where essentially they pay for the services, self-service otherwise, or just a fully managed basis. We are very confident that we have a great solution technically. Again, the Grow Mobile acquisition certainly helped us, and that's what we're building off of. We have a great team in Israel that kind of worked with them together, and we've been out in the market talking to a lot of advertisers, a lot of publishers, and as I said, we're launching next week in London, and we're very excited about the opportunities ahead of us there.
It is a different business model, Dan, you're right. It's, again, probably more akin to the business models of the Rubicon Project and the like of them than it is of the old, whether it's Perion, Bluecore, IAC or AVG.
That's really helpful, Josef, to think of it more as a licensing business as opposed to something related to the CPM side. It's definitely a different area of opportunity. Last one from me, I promise. You talked about getting more aggressive in the display vertical previously. Is there any update there?
Yeah. As you talked about previously, we've had some start and stops in that business. We originally tried to look a lot on the doing data-driven advertising and going into the RTB market. We had some limited success there. As you know, there are a lot of companies out there. It's a tough market. We look at the data we had. It did increase conversion and yield, but we didn't feel it was enough to really build a big business off of when it came to scaling. What we did find, though, is that there's a lot of companies who are in the ecosystem of whether they're download companies or portals that really don't optimize their inventory based on what they have today, whether that's just optimization based on the data they have or optimizing their own inventory, just frankly, by paying closer attention to it.
We started really working on that aspect of it, and that we've actually found some good success there because we're doing it on our own network, which we know, and we've done a very good job of ratcheting up the CPMs, or I say ratcheting is the wrong word. Of extracting higher CPMs because of just optimizing it. We're now taking that skill set, and we have already started launching with other people, so who have inventory that's not related to search. Our search, and we think that a big opportunity as we look to the marketplace, kind of an ignored part of the market, which we think we have a unique expertise to excel in, because we know the market, and we certainly understand the type of advertising and the type of advertisers that want to play there and the publishers on the other side.
I think next year we'll see that grow and hopefully, we think it's an area of investment as we look going forward.
Terrific. Thanks for all the color, Josef. Really appreciate it.
Pleasure. Thanks, Dan.
We'll take our next question from Jason Helfstein with Oppenheimer.
Thanks. Josef, can you talk a bit more about the acquisition strategy? You alluded to it. Could you on the types of acquisitions you're looking at, the pace of acquisitions, i.e., one a year? Just, you have $100 million, how much? Is that five small acquisitions, one large acquisition? Maybe talk about strategically what you want to accomplish with the acquisitions, given your comments around mobile, you believe we'll monetize more on the mobile display side. There's obviously a lot going on programmatically. I think people are still struggling to figure out how to integrate programmatic with mobile, so maybe just talk in detail about how you feel on all that. Thanks.
Sure. Thanks, Jason. Excuse me. Yeah, basically, the way we look at acquisitions, I don't have an answer if it's a $100 million acquisition or a $200 million or a $50 million. What we're focusing on is acquiring companies that are synergistic and add value over the long term to create something that's unique and meaningful. We're going to focus on two areas. Let's talk about mobile first. In the mobile, we agree programmatic is a key aspect of it, both whether it's display or video. We think they're two exciting areas, and video on the desktop is also interesting and growing, and is just really starting now on the programmatic side. We think there's opportunities there, as well as display. As I mentioned, really trying to solve for the needs of the advertisers across all the display platforms.
As you know, there aren't many large companies there. It's more of buying companies, I'd say, in the range there, that probably have anywhere from five to $50 million of revenue, that are growing nicely. High double-digit growth year-over-year. That we're looking for them to ideally, mostly what we're looking for is things that are going to be profitable, breakeven, or things we can add scale to that are not losing a lot of money, that we have to put more cash in from that standpoint. We're looking focused on those types of acquisitions that will either, A, help build out and accelerate our Lightspeed. When we looked at the Grow Mobile acquisition, there are other components that we still need to add to that platform to be a full 360 solution for advertisers. Social and other aspects that we're still working on.
I think you can expect us to look there. Then I think you'd expect us to expand. Today it's mostly in display banners, interstitials, to expand also in video in that area as well. Those are on the mobile side. I think you can expect us mostly on the demand side and/or as I mentioned on the analytics. Not analytics like App Annie or others, but really engagement analytics, where I think, Jason, you and I had this conversation once before. The mobile play on the engagement side is really probably 10 years behind the web. We believe that there's an opportunity there. It's still young, in the early innest stages, we're investing that organically, but as we see opportunities, we would certainly look to add some technology talent and/or scale in our reach in that side of the business on the mobile front.
Those are primarily two things in mobile. Last thing on the monetization side, that's the mobile side of the demand or advertising side of it. On the monetization side, we'll focus on two primary areas. One is non-search type of offerings that really make the ability for us to go to our existing client base and go to them with other offers to add on to search. As I mentioned, PC to mobile is a good example, where there's a lot of download for apps on the PC that you can use for mobile. It's a very effective way of doing it that, high yield and that's a very user-friendly way of doing this for consumers and for publishers. There's obviously all second offers, whether it's things out there that alter your payments.
When you're going to make your payment for something and instead of paying with a credit card, they give you an opportunity to pay with taking an offer of some type of offer, an affiliate or something like that. There are companies out there that we think can fit nicely into our platform. Lastly, we're looking at mobile from that as well. How do you expand cross-platform? Clearly, a lot of the publishers today, especially on the mobile web standpoint, if you're a website, you have traffic on the web, on the mobile, almost 50%, just because that's the penetration today of smartphones. We're looking at other acquisitions there to complement again, the monetization solutions we can provide to our partners. In terms of scale and size, I'd say the following. Certain businesses, we may do all with equity.
It depends on, thank you, the nature of the business, right? I'll give you an example, not of a company, but a situation. If there's a company that is a private company that wants to, clearly wants to go public and for whatever reason hasn't, and we can provide them a great venue that's a mutual, it's synergistic with our business, it fits into one of those 2 categories I mentioned. That may be an all-equity deal and I need some more cash for it. To get back to your original point. We think our capacity is we can still do more than one acquisition a year. We've built up a corporate dev department. We've done already four acquisitions.
Our legal finance, our G&A, while lean, is very experienced and focused on the acquisition front. We think we can certainly handle more than one, I think more than two or three in a given year. It really depends on ultimately, the structure of the deals, if it's all equity or if it's cash. Frankly, ideally looking to kind of augment and supplement both of our main strategic initiatives going forward. We look for multiple acquisitions. Having said that, I think you know us, and everybody on the phone knows this, we're relatively disciplined. We're not going out there and buying everything that walks around. We talk to a lot of people, we like to find something that's a good cultural fit as well as a good strategic fit. We'll continue to do that.
Since we have cash and we have a profitable business, we're not desperate to do an acquisition. We believe it's a great strategy for us to build the business going forward. That's what our intention is.
Thanks. That's helpful.
We'll take our next question from Jay Srivatsa with Chardan Capital Markets.
Thanks for taking my question. Just a couple of quick questions there, Josef. In terms of media buying, obviously they correlate heavily towards the revenues in the next quarter for you. When do you expect to resume meaningful media buying, and when do you expect the overall market to really start to fix something like that?
Jay, it's a great question, and the truth is, I wish I had a great answer for you. We like to be transparent with investors as well, and I don't have a great answer. What I can tell you is we're seeing similar things. I also listened to the conference call of IAC and Viacom, as was mentioned, Dan mentioned earlier. I think all of us are seeing that mid-2015, we expect things to get to a much more stable state. Then certainly, I think that bodes in our favor as we're some of the biggest players out there, a stable state and working on some initiatives, as we mentioned, and the guidelines are clear. As I think I agree with Dan, I think they will be over time.
I think that's good news for us, and we have a staying power, and then we'll grow from that baseline. If it happens sooner, then clearly we'll certainly do that, as we said before. We are always looking at opportunities, but we're disciplined, and we have a great system, as I mentioned, the analytics and engagement systems that we use internally, not just what we want to sell to our mobile partners. Those systems are very, very good at telling us what a lifetime value is, what the ROI is. We believe that the best course of action for our business and for our shareholders is to exercise prudence with regard to how we spend our money. We know that obviously that means we'll have lower revenues next year because when you spend less money now, lower revenues.
I think the most important thing we're focused on is the next two or three years. We're not focused on the next quarter or quarter after that. We're focused on building a long-term business that can grow, that will grow, and is sustainable, less volatile, that really, we think, unique value-added proposition to advertisers and developers. We actually really firmly believe we can get there, and we're excited about that path, despite and certainly not pleasant, challenging environment we have today. That's how we look at it, Jay, and we hopefully will increase media buying as soon as we believe is the right time with the right metrics and ROI. We'll certainly do that. I'd say the best guess for now is mid-2015 in a more significant way. Hopefully, we're certainly working on things to make that happen sooner.
Thank you. Question for Yacov. You mentioned 20% reduction in headcount. Was that all completed or is there more to be done? Give us some update on that, please.
Yeah, sure, Jay. Yes, we completed those measures actually just the last few days, as well as planning through the rest of the cost reductions that we're intending to implement in 2015.
Thank you.
Our next question comes from Kerry Rice with Needham.
Just a quick follow-up on that. I think, Yacov, you mentioned what you thought the charge would be for that in Q4 for the workforce reduction. Then on the customer acquisition costs, how far do you think about those falling, either as a percentage of revenue or on absolute $ in Q4?
With regard to the first question, we did not quantify it actually because actually we haven't completed the cost-saving exercises that we've begun. We will tell you as soon as, and we'll tell the market, as soon as we've completed the process. Obviously, when you go through a reorganization of your workforce as well as the facility, there will be some charge, and as I said, we'll inform the market as soon as that happens. With regard to the level of media buying, we're expecting it actually to level out currently, and we'll try to maintain that going forward.
Thank you.
Ladies and gentlemen, this does conclude today's question-and-answer session. I would like to turn the conference back over to management for any closing or additional remarks.
Thank you. To wrap things up, we are pleased with our third quarter results and are proactively making the decisions necessary for building a stronger business, thus creating long-term value for all stakeholders. We are cognizant of the challenges before us, as well as the opportunities that exist. We are confident in our strategy and look forward to updating you on our progress in future quarters. Lastly, I want to say a special thank you to all of our associates. I know these are challenging times, but together we can and will rise to the occasion. Together, we will accomplish our mission of building a long-term sustainable and valuable business for ourselves and our shareholders. Thank you, and have a good day.
Ladies and gentlemen, that does conclude today's conference. We do thank you for your participation. You may now disconnect. Have a great rest of your day.