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 Marguerite, Perion Investor Relations. Please go ahead.
Thank you, and 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 Q3 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. 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 and the report on Form 6 ks filed with the SEC on September 23, 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 and as in prior quarters, the results recorded 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 their comparable GAAP measures in our earnings release, which is available on our website, has also been filed on Form 6 ks.
With that, I'll turn the call over to Jogas Mendelbaum, Chief Executive Officer. Jogus?
Thank you, Gabriel, and good morning, everyone. Welcome to our 2014 3rd quarter earnings call. This morning, I'd like to briefly review our 3rd quarter results, discuss our strategy going forward for our search monetization business and conclude my remarks with an update on our mobile business. Yaacov will then review our financial results in more detail and we'll then open the call up to your questions. To start, our 3rd quarter results are in line with our expectations and guidance despite a very challenging market backdrop.
For the quarter, we delivered $87,400,000 of revenue and $33,900,000 of EBITDA with earnings per share of $0.38 Overall, the changing market and deteriorating practices of the service distribution business have created an inflection point for our company. We have decided to be more selective in choosing our partners, executing our controlled transition to a higher quality, merchant spend, 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 to 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 Q2 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 proactively pulled back on our marketing spend in the Q3 and are continuing to do so in the Q4. In addition, we implemented a reorganization of our search business, which included a headcount reduction and other cost saving measures. The goal is to align our cost to lower the 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. 1st, 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 where 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. 2nd, 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 technology platforms, feature 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 effectively manage their marketing campaign.
Ultimately, having that 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 design phase with a couple of partners and expect a better launch in the Q2 of 2015. Lastly, 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 Jaco, who will walk you through the financials.
Jaco? Thank you, Joseph. 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 client connect in 2013. It goes without saying that the growth theme 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 $87,400,000 increasing $5,800,000 or 7 percent compared to $81,600,000 at ClientConnect in the Q3 last year. In the Q3 of 2014, non GAAP revenues include $1,100,000 of Parion's deferred product revenues, which were deducted in accordance with U. S.
GAAP as a result of acquisition. In the Q3 of 2013, non GAAP revenues included $600,000 of revenues, which in the GAAP report were associated with discontinued operations. In the Q3 of 2014 and as indicated last quarter, we were more selective in engaging our marketing partners. And as a result, we reduced the investment in customer acquisition by 40%, bringing it to $30,000,000 representing 34% of revenues as compared to $49,800,000 or 61 percent of revenue in the Q3 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 and D expenses continued to increase year over year and were $10,100,000 or 12 percent of revenues compared to $9,200,000 or 11% of revenues in the Q3 of 2013 at Klein Connect. Looking forward, we intend to further increase our investment 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 $5,300,000 or 6 percent of revenues compared to $4,600,000 or similar 6% of revenue at ClientConnect in the same quarter last year. G and A expenses for the quarter were $5,300,000 or 6% of revenues compared to $4,500,000 a similar 6 percent of revenues at clientele in the Q3 of last year. GAAP costs and expenses during the Q3 of 2014 included $4,400,000 of non cash share based compensation, $4,800,000 for amortization of acquired intangible assets and $1,000,000 in acquisition related expenses for a total of $10,100,000 in adjustments to GAAP costs and expenses.
In the Q3 of 2013, the GAAP costs and expenses were increased by $11,500,000 classified as discontinued operations in the GAAP report, partially offset by $4,100,000 decrease reflecting non cash employee share based compensation. While revenues increased this quarter 6% year over year, adjusted EBITDA increased $33,900,000 or 39% of non GAAP revenues, primarily due to our decision to reduce customer acquisition costs, which decreased by 40%. In the Q3 of 2013, adjusted EBITDA at Clients Connect was $12,700,000 or 16% of non GAAP revenues. Perion's net income in the Q3 of 2014 was $26,600,000 representing a 30% net profit margin compared to $6,100,000 or 7% net profit margin at Climb Connect in the Q3 of 2013. As a result, earnings per diluted share in the Q3 of 2014 was $0.38 compared to $0.11 in the Q3 last year at Clients Connect.
GAAP cash flow from operations for the 1st 9 months of 2014 was $37,200,000 And as of September 30, 2014, cash and cash equivalents were $96,900,000 The significant increase in cash and cash equivalents this quarter was primarily due to the $25,300,000 generated by cash flow from operations and $37,900,000 long term convertible debt raise this quarter. The infusion of cash partially financed by long term debt caused working capital in the last quarter to increase to $77,800,000 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 Q3 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 2,500,000,000, of which RMB 1,200,000,000 were from Tier 1 countries declining 10% and RMB 1,300,000,000 from the rest of the world declining 34%.
With the decrease in new installs, ad impressions decreased as well and totaled 2,700,000,000 impressions, including in this quarter for the first time 0.5000000000 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 $380,000,000 to $400,000,000 We are raising the low end of our adjusted EBITDA guidance to be in the range of $115,000,000 to $120,000,000 and raising non GAAP net income guidance to be in the range of $90,000,000 to $95,000,000 In summary, as we mentioned on our Q2 earnings call, the search monetization business is in a period of transition that is now expected to extend into 2015 with limited visibility. As Joseph mentioned, we're taking proactive measures to reduce costs, including a headcount reduction of roughly 20%. As a result, we expect the annual savings starting in 2015 to be in excess of $10,000,000 with an expected one time charge in the Q4 to be quantified by year end as we complete the process.
With that being said, we believe this team is well positioned to navigate through these challenges and emerge 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 And we'll take our first question from Kerry Rice with Needham.
Thank you.
Joseph, maybe you can provide
a little more color, maybe stepping back to last quarter and you're 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? And or is there still some of the technical issues that you that are impacting search? And then follow-up question is just can you talk a little bit more or can you give some details around what revenue Gro or your mobile initiatives contributed in the quarter?
Thank you.
Thanks for joining the call, Kerry. So I want to address the technical issue was fixed. So it was a one time thing. We fixed it and we moved on. The headwinds we referred to I mentioned briefly going on really coming from 3 forces.
1st 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 the you have to use their API, it's pretty much almost like a double opt in because the way they execute is you have an extension, it goes in. The default is do not enable and then you have to click enable. So usually the enable button is on the right side and Chrome put it on the left side and I'm assuming that we need 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. But that's just one aspect, gradual changes. The second is new guidelines. As a example, antivirus companies, we've noticed the industry has noticed in the past probably 5 or 6 months have certainly increased the detection of some of our programs. They're not viruses.
They're not malware. No one in the industry that I know of it is, but the antivirus companies have certainly increased the detection, which again hurts conversion. And if you're starting to get the same, the more you hurt conversion, your effective lifetime value or your effective payout depending on which side you have the equation certainly gets pushed. 2nd and third thing is there are competitive practices out there that as these things happen, a lot of companies try to work with it and a lot of companies try to circumvent it. And 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 is taking that away. People still need to monetize free content. But 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 core trailers as well.
So that's kind of, I mean, gives you the picture of what's happening in the industry. I think you're seeing that other competitors of ours who certainly are public who've announced similar issues and no, none of us coordinate the earnings calls. So we certainly are doing the same thing for a reason. With regards to Grow Mobile specifically, we brought it in June. At this point, Giant is still not material to the business, but it is growing nicely.
And next year, it gets bigger, we'll certainly disclose more about that. But we're excited and so far it's giving up the expectations we had in the quarter. And I think we're excited about where it's growing 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 Grow Mobile fully managed platform. So we're excited about that and we've got a lot of great feedback from advertisers. So we're looking forward to hopefully helping you with 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 come to that technical issue. Have you seen the recovery there? Or is that again one of the headwinds?
Yeah. So Sure. I think we mentioned there specifically that there was some type of issues that caused us to lose on a one time basis some of our existing tail or existing revenue. That's what we mentioned and that was not recoverable because it was run. But on a new install basis, we did fix the technical issue that was going forward.
And then as we mentioned, the other headwinds in the industry is what really caused us. So in Q2, we certainly had some technical issues that hurt some of our revenues and profitability in Q2, perhaps in midway, but we heard it. When you lose it, you also lose the tail for the rest of the year. But the bigger issue was that the headwinds that I mentioned is what really made us cut down on our marketing spend and go do the reductions we did today.
That's helpful. Thank you.
And we'll take our next question from Dan Kurnos with The Benchmark Company.
Yes, great. Good morning. Thanks for taking my questions and good afternoon for you guys. Just a quick housekeeping question first maybe for Yaakov. Can you split out between product and other what the product revenue was in the quarter?
Certainly. In the Q3, our product revenues were about $5,100,000 and the other advertising was about $9,000,000
Great. Thanks. Joseph, 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 not 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 slots, which I think is probably still causing a little bit of a headwind.
But maybe of more concern, I just wanted to get 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. And I was curious if Bing was considering following Google down that rabbit hole.
So two things. 1 is conduit isn't our business anymore. So that's the there still was a business called conduit, but it's not us. So I assume you meant the business we bought from conduit. No, we're not exposed to the Google changes on Panda or on Penguin.
That's not we're not exposed 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.
Yes. 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 the portal sites right now or content rich sites as they not necessarily even related to Panda or Penguin changes, but these are things that are in the pipe. But it sounds like that's not an area of exposure to you.
So 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. And we've also heard from IAC that the B2B market is probably going to compress through the second half or through the first half of next year. So I just I want to get your sense on the core business on the color going forward, the search outlook and core search grow without mobile?
Okay. So the answer, I think, is in the short term, I probably agree with what you said from ROCE's call. I don't think that we're going to grow into the second half of twenty fifteen as well. Yahoo! Is in the marketplace and others.
I think mobile itself remains challenging because obviously Android and Apple being the 2 largest by far, operating systems and suppliers obviously have existing contracts with Google. And therefore, it's difficult to make that as 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. And we therefore, while we work with Yahoo!
And we start to deal with Google as I mentioned, clearly Bing is the competitive advantage of ours. However, 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 and they have to keep that money.
And if they can't receive the money, they need to find ways of doing it. And if they can't, they don't spend the money. In which case, we don't we're helping them that if my lifetime value is lower, I'm going to lower my payouts, which is what Jacobe mentioned we did. We lowered our payout to partners. And we think that's going to continue
as the
bear challenges remain to buy traffic effectively and cost effectively. It will certainly trickle out to us. And 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. So we think it's going to change.
I think again, I haven't spoken to ISE or the Blue Cross, 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 can I'm not ready to say today, but to hopefully as a leader in this industry proactively try to get consistent, clear guidelines with all the partners in the speaker system 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. And that's what we're focused on. We think we can do that. And we think we'll take a little longer than we originally expected.
But we believe we can get there.
Yes. That last point, is something I've heard echoed by everyone in the space in terms of clarity on guidelines. So 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.
So I kind of 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 might think how long you think it might take for CPMs to catch up from mobile to desktop?
So it's a great question. I think I'm going to go back and answer your question just a little bit securitously just to help me put it in context. If you look at the core competencies of our business, it's focused on really 2 areas. 1, 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. But what we've left talked about, but we realized is really a core competency in asset is that we actually bought and we sold by $200 plus 1,000,000 of media buying and we are one of the few companies that know that 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 performer. And the reason is because today, at least right now, search is not a viable monetization for us in mobile, just isn't. When we look to advertising, we think it is and we'll get there, but it's a very crowded space. And when we looked at it, we decided when we're making bets, 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 time whether it's across social, mobile, different ad networks, exchanges. And in doing a lot of research, we realized a lot of the advertisers have a problem. And we decided our initial focus on mobile is to focus on that. And that's the business model there is really 1 of 2. 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.
And 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 work 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. But it is a different business model, Dan, you're right.
And 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, Blucora, ISD or
SDG. That's really helpful, Joseph, to think of it more as a licensing business as opposed to something related to CPM side. So it's definitely a different area of opportunity. Last one for me, I promise. You talked about getting more aggressive in the display vertical previously.
Is there any update there?
Yes. We did talk about previously. We've had some start and stops in that business. We've we recently tried to look a lot on the doing data driven advertising and going to RTV market. And we hope some good success there.
But as you know, there are 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 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 paying closer attention to it.
And we started really working on that aspect of it. And that was actually found some good success where 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 one word, extracting higher CPMs because of this optimizing. We're now taking that skill set and we have already started launching with other people who have inventory that's not related to search, our search. And we think that a big opportunity as you look to the market, there's 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. So 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, Joseph. Really appreciate it.
Pleasure. Thanks, Dan.
And we'll take our next question from Jason Helfstein
Joseph, can you talk a bit more about the acquisition strategy? You alluded to it. Could you be on the price of acquisitions you're looking at, the pace of acquisitions, I. E. 1 a year, like how do you think about it and kind of the ability to integrate it?
Or just you have $100,000,000 how much would is that 5 small acquisitions, 1 large acquisition? And maybe talk about strategically what you want to accomplish with the acquisition 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. And so maybe just talk in detail about what you want to call that?
Thanks.
Sure. Thanks, Jason. Excuse me. Yes, basically, the way we look at acquisitions, don't have an answer if it's a $100,000,000 acquisition or $200,000,000 or $50,000,000 What we're focusing on is acquiring companies that as soon as they can add value over the long term to create something that's unique and meaningful. We're going to focus on 2 areas.
So let's talk about mobile first. In the mobile, we agree programmatic is a key asset of it, both whether it's display or video. I think they're 2 exciting areas. Video on the desktop is also interesting and growing. And we're just really starting now on the programmatic side.
So I think there's opportunities there as well as display. And as I mentioned, really trying to solve for the needs of the advertisers across all the disparate platforms. So we'll look at companies in that area. As you know, there aren't many large companies. There is more of the buying companies I'd say in the range there that probably have anywhere from $5,000,000 to $30,000,000 of revenue that are growing nicely, high double digit growth year over year and that we're looking for them to ideally most of what we're looking for is things that are going to be profitable, break even or things you can add scale to that are not losing a lot of money that we have to put more cash in from that standpoint.
So we are looking focused on those type of acquisitions that will either A, help build out and accelerate our life speed. So when we look at the Grow Mobile acquisition, there are other components that we still need to add to that platform to be a full 360 solution to advertisers, social and other aspects that we're still working on. I think you can expect us to look there. And then we could expect us to expand today it's mostly in display banners and the officials to expand also in video in that area as well. Those are on the mobile side I think that you can expect us mostly on the demand side and or as I mentioned on the analytics, not analytics App Annie or others, but really engagement analytics where I think Jason you and I had this conversation once before.
The mobile today on the engagement side is really probably 10 years behind the web. And we believe that there is an opportunity there, still young, in the early stages and we're investing that organically. But as we see opportunities, we would certainly look to add some technology talent and their scale in reach in that side of the business on the mobile front. Those are another key things in mobile. If we and last thing on the monetization side, so that's the mobile side of the demand or advertising side of it.
On the monetization side, we'll focus on 2 primary areas. One is non search type of offering that really make the ability for us to go to our existing client base and go then 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 do for mobile. It's a very effective way of doing it, but high yield and that's a very user friendly way of doing it for consumers and for publishers. There is obviously all second offers, whether it's things out there that all turn into payments and you're going to make a payment for something and instead of paying with credit card, they give you an opportunity to pay with taking an offer, some type of offer and affiliate or something like that.
There are companies out there that we think can fit nicely into our platform. And lastly, we're looking at mobile from that as well. How do you expand cross platform? Clearly, a lot of the publishers today, especially in the mobile web standpoint, if you have a website, you have traffic on the web on the mobile almost 50% just because that's the penetration to smartphones. So we're looking at other acquisitions there to complement again the monetization solutions we can provide to our partners.
And in terms of scale and size, I'd say the following. Certain businesses, we may do all those equity. It depends on, thank you, the nature of the business, right? So I'll give you an example, not of a company, but a situation. If there is a company that is a private company that wants liquidity, wants to go public and for whatever reason hasn't And we're to 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 up to you when I use my cash flow. And then to get back to original points, we think our capacity is we continue to do more than 1 acquisition a year. We've built up a club drug department. We've done already 4 acquisitions. Our legal, finance, our G and A, while lean is very experienced and focused on the acquisition front.
And we think we can certainly handle more than 1, I think more than 2 or 3 in a given year. It really depends on ultimately the structure of the deals, if it's all equity or if it's cash. And then 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, nobody on the phone knows us, we're relatively disciplined. We're not going out there and buying everything that walks around.
And we talk to a lot of people and we'd like to find something that's a good cultural fit as well as a good strategic fit. And we'll continue to do that. And since we have cash and we have a profitable business, we're not desperate to do an acquisition, but we believe it's a great strategy for us to build the business going forward. And that's what our intention is.
Thanks. That's helpful.
And 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, Joseph. 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?
It's a great question. And the truth is, I wish I had a great answer for you. But we'd 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 assume the confidence score of ISE and Vucora. As I've mentioned Dan mentioned earlier, I think all of us are seeing that mid-twenty 15 we expect things to get to a much more stable state. And 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 and I think I'll do it again. I think they will be over time. I think that's good news for us and we have sustained power and then we're growing at baseline.
If it happens sooner then clearly we'll certainly do that as we said before. We are always looking at opportunities that we're disciplined and we have a great system as I mentioned the analytics, we engage in systems that we use internally, not just where we want to sell for our mobile partners. And those systems are very, very good. They're telling us what a lifetime value is, what the ROI is. And 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 have lower revenues next year because when you spend less money now, lower revenues. But I think the most important thing we're focused on is the next 2 or 3 years. We're not focused on the next quarter or the quarter as that. We're focused on building the long term business that can grow, that will grow and the 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 clearly not pleasant challenging environment we have today.
But that's how we look at it Jay and we hopefully will increase the volume soon as we believe with the right time, with the right metrics and ROI, we'll certainly do that. I'd say the best guess for now is mid-twenty 15 in a more significant way. But hopefully, we're certainly working on things to make that happen sooner.
Thank you. Question for Yaacov. You mentioned 20% reduction in headcount. Was that all completed? Or is there more to be done?
Give us some update on that please.
Yes. Sure. Sure, Jay. Yes, we completed that 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 2013.
Thank you.
And our next question comes from Kerry Rice with Needham.
Just a quick follow-up on that. I think, you mentioned what you thought the charge would be for that in Q4 for the workforce reduction. And then on the customer acquisition costs, how far do you think about those falling either as a percentage of revenue or an absolute dollar in Q4?
So with regards to the first question, we did not quantify it actually because actually we haven't completed the cost saving exercise that we've begun. We will tell you as soon as and we'll call the market, as soon as we've completed the process. But obviously, when you go through a reorganization of your work force 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.
And 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 3rd quarter results and are proactively making the decisions necessary for building a stronger business, thus creating long term value for all stakeholders. We are confident 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 by building a long term sustainable and valuable business for ourselves and our shareholders. Thank you and have a good day.
And 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