Good day, and welcome to the Purion Third Quarter 20 13 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Ms. Deborah Margolit, Perion Investor Relations. You may begin.
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 and 1st 9 months of 2013. 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 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 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 and has also been filed on Forbes 6 ks.
With that, I'll turn the call over to Joseph Mandelbaum, Chief Executive Officer. Joseph?
Thank you, Deborah, and good morning, everyone. Welcome to our 2013 Q3 earnings call. As usual, I will begin with remarks about the quarter, provide some color on our operations and our going forward strategy, and Yaacov will review our financials in more detail and also provide updated pro form a numbers of Conduit's ClientConnect business. Following that, we will open up the call to questions. Before I discuss the Q3, I'd like to share with you our vantage point regarding recent events in the industry.
While we understand concerns investors may have in this regard, we look at these changes as an opportunity for growth over the long term. We intend to utilize our expertise and quality relationships to continue to provide real value in the ecosystem by enabling consumers to download their favorite products for free. Over the last few months, we have further enhanced our controls and systems to enable us to maintain a high quality business with better insights into how to grow it and an increasing ROI. The 3rd quarter was certainly a momentous quarter for Perion. Obviously, our primary focus is the planned merger with Conduit's ClientConnect Business.
This combination and the resulting larger and more profitable Perion will be uniquely positioned to execute the company's business strategy and become a preferred partner of app developers by offering them the best solution to distribute and monetize their apps across all devices. We will emerge as an industry powerhouse with the size, recognition and resources to further strengthen and grow our business. We will be able to increase investment in our technology platform, expand faster into mobile and invest in growth through acquisitions. Since the transaction was announced, we are now in a position to selectively pursue more strategic acquisitions focused on mobile, advertising and data technology companies. I fully expect 2014 will be another milestone year in Perion's history and one that will shape its future for the next few years.
While our primary focus right now is on the new Perion combined with ClientConnect, we are also very pleased about Perion's financial performance during the quarter, particularly in light of the current headwinds in the industry. We hit the upper range of our revenue guidance with $21,300,000 which represents a 31% increase year over year and surpassed our EBITDA net profit expectations with EBITDA of $5,600,000 and net income of $4,500,000 During the quarter, we successfully executed on our search diversification strategy with no single partner accounting for more than 40% of our search generated revenues. We have expanded from 1 search partner to 5 and now work with Google, Bing, Ask.com, Yahoo! And Conduit. The merger with SuitePaks last November provided us with the scale necessary to successfully diversify this business.
Once we complete the merger with ClientConnect, we will be an even more attractive partner to such providers, thereby further lowering the risk profile of our business. We maintain strong relationships with all of our search partners and we are confident these relationships will continue into the future. As we discussed in the Q2 call, the industry is going through a transition period while it adjusts to new policies. We stated that we thought the market would find its equilibrium in 6 months or so. And while generally that seems to be the trend, it is taking slightly longer than expected.
In addition, we discussed how certain delays in implementing multiple new search partnerships would impact our Q3 revenue. These issues have been resolved and we began ramping up our marketing efforts to drive future growth towards the end of the quarter. The Q4 will indeed show significant growth over this quarter as well as compared to last year's 4th quarter. Turning to the product side of our business. Guardius was just released to the public last week.
With over 120,000 installs to date, we are very happy with this growth and positive consumer feedback. Over 50% of users have acted on the recommendations of other Guardian's users to help speed up their browser experience by removing unwanted add ons and extensions. In addition, SmartBox and IncrediMail are performing very nicely and we continue to invest in their mobile expansion. Smilebox continues to grow at a double digit pace and is on track to deliver strong profits. In addition, this year's content selection and new website have already taken the user experience to a new level.
With over 2,000,000 installs, Smilebox Mobile is progressing steadily and getting great ratings along the way. We are also very proud of our new messaging app, Molto, for the iPad, iPhone and Android tablet. With great reviews and ratings from consumers, we are hopeful about its success. With that, I'll turn the call over to Yaacov and we'll take your questions.
Thank you, Joseph. As Joseph just mentioned, in addition to the operational and strategic achievements, this was a very good quarter from a financial standpoint as well. Revenues this quarter were $21,300,000 increasing 31% compared to the $16,300,000 in the Q3 last year. The increase reflected growth across all our revenue streams year over year, reflecting organic growth with added growth coming from our SweetPaks acquisition. Specifically, this increase was attributable to a 25% year over year increase in search generated revenues from $10,900,000 to $13,600,000 In addition, product and other advertising sales increased 43% from $5,400,000 in the Q3 last year to $7,700,000 this last quarter.
Gross profit in the Q3 of 2013 grew both nominally and as a percentage of sales, reaching $20,400,000 up 34% compared to the $15,200,000 in the Q3 last year. This reflects an increase in our gross profit margin to 96% compared to 94% of sales in the Q3 of 2012. Total operating expenses were $15,200,000 in the Q3 of 2013. Excluding customer acquisition costs of $8,200,000 these expenses totaled $7,000,000 reflecting a relatively small increase when looking at our year over year top line growth. As I just mentioned, the Q3 of 2013, we invested $8,200,000 in customer acquisition costs, down sequentially from $12,500,000 in the 2nd quarter, but up compared to $5,800,000 last year.
EBITDA was $5,600,000 or 26 percent of sales in the Q3 of 2013, compared to $3,800,000 or 23 percent of sales in the Q3 of 2012. Net income in the Q3 of 2013 was $4,500,000 increasing 68% compared to $2,700,000 in the Q3 of 2012. Earnings per share this quarter was $0.34 per diluted share, representing a 31% increase from $0.26 in the Q3 of 2012. In the Q3 of 2013, GAAP operating expenses included $400,000 of non cash share based compensation, $2,300,000 amortization of acquired intangible assets as well as $3,400,000 one time acquisition related expenses for a total of $6,100,000 excluded from our non GAAP operating expenses. In the Q3 of 2012, expenses included in our GAAP report and excluded from our non GAAP report totaled $1,000,000 The GAAP net loss inclusive of these expenses in the Q3 of 2013 was $1,700,000 or 0 point $3 per diluted share compared to a net income of $1,700,000 or $0.17 per diluted share in the Q3 of 2012.
The one time expense of $3,400,000 for the acquisition of Conduent's ClientConnect business alone represented a $0.26 expense per diluted share. Turning to the financial results for the 9 months ended September 30, 2013, total revenues were $73,300,000 an 84% increase compared to $39,800,000 in the 1st 9 months of 2012. This increase was driven by a $29,200,000 or 128% increase in search generated revenues, along with a $4,300,000 or 25% increase in our product and other advertising revenues. Gross profit in the 1st 9 months of 2013 increased 88 percent to $70,100,000 or 96 percent of revenues compared to $37,200,000 or 93 percent of revenues in the same period of 2012. In the 1st 9 months of 2013, GAAP gross profit was net of $5,600,000 amortization of acquired intangible assets, which were not deducted from our non GAAP gross profit.
In the 1st 9 months of 2012, the difference between gross profit in our GAAP report and that in our non GAAP report totaled $1,700,000 R and D expenses in the 1st 9 months of 2013 were $9,000,000 compared to $7,700,000 in 2012. As a percentage of sales, R and D decreased from 19% in 2012 to 12% in 2013. Looking forward, we intend to increase our investment in developing new products for new platforms without increasing the expense as a percentage of sales. Sales and marketing expenses excluding customer acquisition costs in the 1st 9 months of 2013 were $6,600,000 compared to $4,500,000 in 2012. This increase resulted from adding to our marketing staff from the SweetPaks acquisition.
As a percentage of sales, these expenses have decreased as well from 11% in 2012 to 9% of revenues in 2013. Customer acquisition costs in the 1st 9 months of 2013 reached $32,000,000 compared to $12,400,000 in 2012. The increased expense was a significant factor in powering our revenue growth. Our G and A expense in the 1st 9 months of this year was $5,700,000 or 8% of revenues compared to $4,300,000 or 11 percent of revenues in 2012. GAAP operating expenses in 2013 included $1,100,000 non cash share based compensation, dollars 6,900,000 amortization of acquired intangible assets and $3,400,000 in acquisition related expenses totaling $11,500,000 which were adjusted for in the non GAAP numbers.
In 2012, the adjustment of GAAP numbers totaled $3,700,000 In the 1st 9 months of 2013, EBITDA was $17,800,000 or 24 percent of revenues, significantly up compared to $9,100,000 or 23 percent of revenues in 2012. Non GAAP net income in the 1st 9 months of 2013 increased to $13,600,000 or $1.05 per diluted share compared to $6,700,000 or $0.66 per diluted share in the same period in 2012. In the 1st 9 months of 2013, GAAP cash flow from operations was $12,700,000 compared to $4,800,000 in the same period last year. This reflects a $1,600,000 decrease in cash flow from operations during the Q3 of this year. The primary reason for the decrease is a $3,100,000 increase in trade receivables this quarter as compared to last quarter.
The increase in trade receivables resulted from new terms of payment from our recently diversified search partnerships as well as timing of revenues within the quarter. As of September 30, 2013, we had cash and cash equivalents of approximately $27,300,000 up from $21,800,000 as of the end of last year. With regards to ClientConnect, their business continued to perform well in the Q3 of 2013. Based on the pro form a non GAAP numbers we received, 3rd quarter revenues increased 58% year over year reaching $80,900,000 EBITDA increased 48% year over year, reaching $21,200,000 and net income increased 44% year over year, reaching $19,400,000 This concludes my financial review. Let me now talk about our outlook.
We are encouraged by the trends we see. As the Q3 progressed, we saw a notable surge in our search related revenues and improved ROI from our customer acquisition efforts. We see this trend continue into the 4th quarter. As a result, we believe we are emerging from the transition period we spoke of and the 4th quarter is shaping up to be a very strong quarter for us, both in terms of revenue and profitability. That being said, we are not impregnable to the changes in the market and have become even more selective regarding who we partner with and how we invest in customer acquisitions.
As a result, we are adjusting our guidance for this year and expect revenues to be in the range of $102,000,000 to $104,000,000 EBITDA is expected to be between $24,000,000 $25,000,000 and net income is expected to be in the range of $18,000,000 to $19,000,000 With that, we will now open the call to questions. Operator?
Thank And we'll take our first question from Carey Rice with Needham and Company.
Thanks a lot. Hi, Yakov. Hi, Joseph. Quick questions on growth for Q4. You mentioned being more selective around partners.
And so if I think about the growth or what's going to be the growth drivers in Q4, are they look are you looking for new partners in the industry? Or are you planning to do more organic marketing around IncrediMail and Smilebox to drive more tools with our downloads or increase ads in the install process? Maybe some color around that. And other people other companies, I should say, have highlighted that the competitive environment has been pretty strong and that's caused some weakness in revenue for other companies. If that's the case, what gives you confidence that you can kind of reaccelerate that revenue growth to 34% sequentially?
Sure. Thanks, Carey. Thanks for the questions. I'll answer the first question first part of the question first, then I'll go to the second. With regards to Selective, I think partners when Joakim mentioned partners, we're talking about distribution partners not search partners.
So we're not we are very happy with the search partners we have in Google, in Ask, Yahoo! Bing and Conduit and we're not looking for new search partners. These are affiliates of ours or distribution partners and the growth will come from 3 things. 1, we are doing more organic investments in our own downloads for marketing for our own products, more SEM both display and search marketing, which we're seeing frankly that is less sensitive to the market environments out there, because you're controlling your own funnel and buying yourself. So we're increasing that number 1.
Number 2, we do see some partnerships distribution partnerships or affiliates that are opportunities for us to grow in the Q4 and beyond. And we are looking at those and we are being selective about what we're taking. We do want to maintain obviously the position we have in the marketplace today in terms of the quality and so on and so forth. But we are looking at additional partnerships or distribution partnerships I should say. And so those are the primary ways we'll be growing.
What gives us confidence is we're in the middle of November and I know what October was and I know we're seeing in the marketplace. So we're relatively again, as Jacque said, we're not immune to what's happening. So I think originally we thought the Q4 would probably be a little bit even better, but we're excited about the 34% growth as you said sequentially. We're giving a very good position. I think we prepared as you know Kerry, we mentioned I think on our Q2 earnings call already and we started talking about this in June that we saw some of the changes and policy changes and we've been working with it now for 8 or 9 6 to 8 months.
I think we've certainly been working hard on the analytics side, on the personnel side, on the marketing side to find ways of going into headwinds and finding opportunities for growth. And what you're seeing in Q4 is a combination of that. Plus, as I mentioned in our last earnings call, we do have a mix as we saw the market kind of developing a mix between search revenue shares and obviously paper install deals and we've been doing both. We're looking to grow as a way of helping us grow through the quarter. Those are the 3 major things we're doing and we have confidence because a month is behind us already and we're seeing the trend.
So we're fairly confident about the quarter.
Okay. And just one follow-up question. As you think about that 34% sequential growth, what does that imply for customer acquisition costs for Q4 and maybe the impact that that could have on margins?
I mean, I think what we're seeing in general, I think Jaakko mentioned this a little earlier about the ROI. So by the way, while you mentioned about other people out there, the market is certainly more competitive. There's no question about that. And the ROIs, look at our numbers in Q3 as well and we said that before, are not that what they were last year. But we are seeing that if you're smart and if you have good systems and you buy right, the ROI can still be very good for us and we're happy about where it's going.
It's a balance between the PPI and the revenue share side of it, which helps us as well. And in terms of the acquisition cost, I don't know if we'll get to the full $50,000,000 we originally thought we would. And that's part of the reason why we're still going to be very, very close to the EBITDA numbers we originally gave, while we'll be a little short of the revenue numbers. We're still very, very strong year over year growth. And when you look at the balance between the PPI and the revenue share that does offset some of the EBITDA hits you normally take with just acquisition marketing.
I do want to add though and I think it's important, as we get into the quarter and we see things evolve, it may be there'll be good opportunities for us to invest more money for future growth in 2014 and beyond. And we would look at that very carefully to see what if anything makes sense. And if we do that, we'd certainly update investors and the analysts about doing that. But right now, we're comfortable with the numbers we gave. We're very confident we could hit these numbers.
And I think it shows at least for us a very good rebound in our positioning in the marketplace. And with the acquisitioncombination of Conduent's ClientConnect, we remain very excited about next year.
We'll take our next question from Jay Srivatsa with Chardan Capital Markets.
Thanks for taking the question. Joseph, it appears at least few of the other players in the market are still figuring out ways to counter the changes that Google has made. But your guidance seems to suggest you're well past that. Can you clarify what are some of the things you've done that has allowed you to counter some of those changes? And why you expect to have pretty dramatic growth in Q4 while some of the other players appear to still be kind of tried to grapple with the changes?
Well, I'll certainly try and thanks for asking the question Jay. So one is I'm not giving you specifics because that's what competitive positioning is about. So I'm not about to give you specifics. What I can say though is as follows. There certainly has been a shift to more direct media buying ourselves as opposed to dealing with affiliates.
We think that certainly is better for us in terms of the long term and the short term both with regards to compliance issues as well as with regards to LTV and ROI. So that's number 1. It's not a secret. That's what we've been doing. And I think we were taking Q3.
We got all these other partnerships up and running Jay. I think we're one of the few companies that has I think 5 partnerships on the search side. And what we're doing is we're utilizing those 5 partnerships and optimizing them accordingly, so that we can actually grow the business and work through some of these changes. And the changes as we've mentioned overall, as we see some of the industry events happening, we think that ultimately pricing will go down a little bit to provide other opportunities for us in the future. We're seeing a little bit in Q4.
I expect more of it in next year than this year. But that's really what the things we've been focusing on is being smart about how we spend the money. So we're not just spending money to get revenues and that's why we're coming out and saying we not get the original full year guidance for revenues, but we are going to show extreme very good growth in Q4. And we're doing that through the combination of the systems we've always talked about and we're very pleased and our systems are giving us a very good indications of who to work with, who not to work with, where to buy, where not to buy. And we're also looking at doing more direct sales, which gives us more control over our own destiny.
Those are the 2 major things that we're doing that provides us the confidence in the Q4 increase.
All right. In terms of partnerships, at least one of the other players appears to have been dropped by Google and possibly even by Yahoo! As you look ahead to your own contractual agreements, how comfortable are you in terms of continued presence at these large search engine firms partnerships? And how do you see that playing out in the next years?
Well, first of all, we feel extremely confident that our partnerships will continue. We have good relationships. And from our standpoint, we're very comfortable that moving forward we'll be working together with them for many years. We did renew with Google in May for 2 years. We signed a 2 year deal with Yahoo!
And I think we announced it in July. We signed a multi 3 year deal with Ask. With Bing, we have a multi year deal. So I think we have good relationships and conduit. We have obviously a deal as well.
We're very confident about the position we're in today. What I see in the future, I would expect that as the business progresses and evolves, the partners will work with players like us. Obviously post the merger we'll be a much bigger player. And I think that makes us more attractive as we look at competitiveness down the road. And I think that will only work to our benefit as we look over the next 1, 2, 3 years.
All right. Then in terms of the merger itself, can you give us an update on where things are? When do you expect to close? And more importantly, what are some of the financial metrics that you think will really start to have an impact in terms of financials next year?
Sure. I'll give you a quick update on where we stand. So we from an operating standpoint, obviously, the company is still 2 separate companies, but we have officially kicked off a post merger integration process where the teams from both respective companies are working hand in hand, really just getting to know each other. We've broken up to about 10 different work groups to basically attack and investigate and analyze different areas of the companies that we either can get synergies from both in the top line and the bottom line as well as work through the business to make efficiencies and for future growth to understand that we can integrate better. So that process has been kicked off.
Obviously, nothing formal can be done until the deal is closed. But we're talking and we're working together to try to look and see how we can better repair. So when the deal closes, we can hit the ground running. That's number 1. Number 2, the vote is next week as you know the shareholder vote.
We do not anticipate any issues with the shareholder vote. When Yakov and I were on the road a few weeks ago, we've only received pretty much overwhelming support for the merger. So we would expect that to go out to go on without a hitch. Once that happens, I think we mentioned before there are some regulatory approvals we're waiting for. Again, we don't expect any issues with them.
I think some of them already we've gotten approvals for. Some we've gotten verbal indications and we'll get the formal approvals over the next few weeks. So with regards to any obstacles, we don't see any and we're very optimistic and happy with the progress. Just to remind everybody, what that means is by December 31st, there'll be officially a split of Conduit and ClientConnect. And then roughly or so a few days to a week or so afterwards, we would then proceed to close the transaction in early January.
I don't know the exact date yet, but it would be as soon as possible in January. We then close the date, close on the merger and then officially from that point in time, we would be one company. So roughly for now I'd say 2 months or 7 weeks from now we should be ready to close and move forward. With regards to metrics and everything else, the general savings for the Q1 when we kind of really talk about our post the merger and we see things going forward, we'll certainly talk about the metrics and we will as you know us by now, Joe and I, I think we're fairly transparent. We'd like to put things for investors so that they can see what we're seeing and we will put our metrics about what we're hoping to do.
It's a little premature for me to comment on that now. So we'll do that in Q1.
Okay. And then last question on the mobile part. What are some of the areas that you think are sectors that we can go after in terms of getting more mobile penetration? And then what are when do you expect to start to get some revenues from that given that the business model of the mobile world is obviously slightly different from the current model that Perion has?
Yes. So it's interesting. I mean it is different in the sense that today primarily obviously search drives a lot of our revenues. But when you look at it, it's just a monetization vehicle, right? So on mobile today search is big for Google, but other than that not a whole lot of other people.
Most of the people are making their money today through advertising, right? Display, video advertising and virtual currencyin app purchases and so on and so forth. As we look at mobile, on our existing products, I think we've always mentioned, we're looking to get scale first. So 2,000,000 installs on SmartBox, we're very happy about that. We'd like to get higher.
On Molto, we just launched it on the iPhone. Hopefully, by AMD, we'll come up with an Android phone version, but we just launched on the Android tablet. We're doing okay. I'd like to see more installs. We're doing okay and we're doing and we're getting great reviews and great customer comments.
I think you'll see the mobile revenues for us really have an impact post probably some acquisitions that we'd hope to do over the next, let's say, 0 to 24 months. And that's where you'll probably see that. And we'll look to round out part of our new strategy as we mentioned last time is really kind of building this ecosystem for the app developerpublisher where we can help them with distribution, monetization and analytics. And we think we have a lot of the existing core competencies to do that, but we will need to augment that with some other acquisitions and or organic investments. And those two things combined, I would expect mobile revenues to be a little bit next year and then really start scaling up in 2015.
Thank you very much.
Thank you, Jay.
We'll take our next question from Dan Kurnos with The Benchmark.
Great. Thank you. Good evening, gentlemen. Joseph, let me just ask you a couple of high level questions and dig into some of the things you talked about earlier. Just first, and I'm not sure if you'll answer this or not, but if you have any thoughts on ABG's decision to exit the 3rd party toolbar business that would be great.
All right. So first of all, nice to have you on the phone Jay Dan, sorry. And no, I don't have an opinion on ABG. I think they're a great company and obviously he's making the best decisions for his company and that's great. I think you have to ask Gary those questions.
From our vantage point, we see the business as an opportunity. And hopefully, we'll be able to execute against that and increase our market share over time.
Okay, great. And then we talked about the competitive landscape to a fair degree here. So I'm just curious as we go forward into 2014, excluding any synergies you're going to get or should get from the Conduit acquisition, how do you see your customer acquisition costs pacing? And is there any negative impact to margins due to competition as we go forward?
Yes. So first of all, I think in general, margin impact in any business as it matures and goes forward, I'm sure there'll be there's competitiveness. We believe, however, with the recent policy changes that are happening in the marketplace from all the different partners, And I think everybody on the phone knows, we've been very supportive of those policy changes. We think ultimately it favors companies like us. We're not unique, but companies like us that some of the pricing increases that were happening was because of certain practices that increased the LTV that probably weren't allowed.
As those get shut down, the pricing actually in a lot of cases will come back to a normal standpoint. And for those of us who were ultimately doing playing more or less by the rules to begin with, fundamentally that only works to our benefit. So I think as we see it in 2014, there's still probably some cleanup in the industry and that could mean other affiliates of ours as well as we look at next year, as we look to clean continually clean up and police ourselves. I think that's the responsibility of all the companies in this marketplace if we're going to have a long term business, which I believe we will. And that also though should mean as we see those policy stringencies as you get now a year past the Google changes and other changes by other partners, I believe the other pricing will come to a normal level and that will benefit people like us.
Great. Thanks. That's helpful. And then speaking of conduit, it looks like growth moderated a little bit sequentially for them. But I would think that given some of the opportunities in the environment, particularly with one of the larger competitors citing some issues in the B2B space that they might be able to take share, particularly given their larger reliance on Bing.
So I'm curious what you think of Conduit's ability to take share in this market place and sort of the growth profile for them going forward?
Yes. It's a great question. Actually, it's worth explaining. When we announced this deal and we did this deal obviously conduit is splitting the business in 2, the conduit part and the client connect part which we're buying. And obviously in the negotiations and discussions, cash flow is an issue on both sides and revenue.
So what was kind of decided is we're keeping the level of investments relatively stable since the Q2. So actually do not think that conduit in the short term for Q4 is going to be very aggressive in increasing the marketing spend to get new business. And it's understandable because the owners of Conduit won't get really the benefit of that because all the revenue goes to ClientConnect. So obviously from their standpoint, we've agreed that we're going to keep the relative same spend level. And that is what's enabling us.
Net lives also the revenues are relatively on a quarter over quarter basis relatively relatively flat, some slight growth here and there. To answer your question for 2014 though, yes, we certainly believe obviously once the deal closes and now we're one company, yes, we believe that conduit, their ClientConnect has some opportunities for growth in the market share. As I mentioned, that wasn't really a business we were in. So that is certainly a business which they are very big in and we think there will be opportunities for us.
And just one point of housekeeping. You did talk about the installs for Guardius. I'm just curious if you could give us the contribution to quarter from Guardius and what you expect from Guardius in Q4?
Yes. Our expectations in Guardius in Q4 are not high. We're just we're taking it slow and we are we just launched out of beta last week to make it public. Really the power of Guardant is the power of the people. So again our objective here is to get a lot of people using it.
It's a self learning application and technology, which uses the wisdom of the crowd to help us help them. And you'll see a lot of that we're focusing on tweaking the product, improving the product, going deeper and frankly going a little broader in some other activities that we can probably do over the quarter to help the consumer. And next year I think is when we'll start looking at that and really helping us grow the business. And actually there's some things in the ClientConnect side of the business that similar technology in the background that we think actually can make a very good combination to make even stronger product. So that's really going to be our focus in Q4 is getting more consumers, getting more feedback, working to tweak the product and make it even better and really 2014 hopefully grow it in a more meaningful way.
And Yaacob just one maybe one quick point of clarification.
Yes, I can do that for you. Just one second. So our product revenues in the 3rd quarter were approximately $4,300,000 and other advertising revenues were about $3,400,000 in the Q3 of this year. And when you're looking at the Q3 of 2012, the product revenues were $4,100,000 and the other revenues were about $1,300,000
Great. Thank you very much, Yaakov, and thank you, Joseph.
Thank you, Dan.
We'll take our next question from Aram Fuchs with Fertilman Capital.
Yes. Joseph, I was wondering as a follow-up to that other segmentation. Can you talk about a bit why advertising in the other segment is expanding so much more quickly than search?
Sure. So the other advertising increased dramatically. It's actually a follow-up on how we put the emphasis when we distribute our search inventory or we're looking at the search assets and how we are able to monetize from that distribution. And there were some opportunities in the 3rd quarter that enabled us to put a strong emphasis on the advertising part of it as compared to the search part of it. I would expect it to reverse itself actually in the Q4 and that while search revenues will go up dramatically, I would expect the advertising revenues actually possibly decrease.
Okay. And revenue from things like retargeting, is that done in is that placed in the search line item or in the
online? That would be in other advertising. So as Jaakko mentioned, we're starting to do a little bit of that and certainly helped us with CPMs and increasing those. As we go forward, we're looking to continually evolve that as we go forward.
And then Yaakov, another question. In the receivables, trade receivables, you mentioned that one of the I think what you said was one of the new vendors demand slightly better payment terms in terms of schedule. Is that Yes.
Well, we're very happy with the diversification of our revenues. But with the new partnerships come new terms of payment. We had a single partner Google in the past and we had certain terms of payment. Actually the terms of payment coming from some of the other partners the likes of Bing and Yahoo are slightly longer than that. And therefore, the accounts receivable on those accounts would be further pushed out.
So that was one reason. And the second reason was also as I mentioned was the mix of revenues within the quarter. As we explained, this growth has been happening slowly. And obviously, within the Q3, our best month was the 3rd month. And therefore, the accounts receivable naturally grew just as a matter of timing in the Q3 compared to the Q2.
And then the payment obligation related to acquisitions, is that it bumped up from December 12. Is that SuitePax or are you there's nothing in ClientConnect for that, right?
So it actually didn't bump up. What happened was it was a shift from long term to short term because our 3rd payment is now classified as short term.
Okay. Got it. Got it. Joseph, you mentioned that mobile might be picking up that you're projecting to The Street that it might pick up in 2015. But it seems that this is a duopoly still with Google Play and iTunes.
What do you see that gives you confidence that you can start to muscle your way into that revenue
So I think it'd be arrogant to me to say, Guy can muscle in between Apple and Google, but I appreciate the contextual reference. It's nice to be put in that sentence. Actually, we don't think search right now will be a big part of the mobile for us. What we're really focusing on is and this is you mentioned before is the other advertising revenues and frankly our products whether it's in app purchases or others. But we think on a platform basis, we're going to look to invest heavily and organically and through acquisitions in more of the ad tech space and the mobile tech ad space and leveraging the data we have and really looking to cross platform the data we have on the desktop with mobile, which a lot of now many more companies are doing that.
We think that's the way we can help a lot of app developers and publishers on the mobile front actually make money. And we think we have some unique positioning in certain places. That's also a competitive space, but everybody knows mobile advertising is growing exponentially. And we think we have a lot of good relations with a lot of app developers already that we can leverage.
Okay. And then on this integration with ClientConnect, What oversight determining the LTV on these things is really the key variable to creating free cash flow through a positive rate of return on these campaigns. I'm just curious, is there a plan where you're sort of overseeing these campaigns that are going on in Q4 into this holiday season? What's the process between the two teams right now?
Yes. So it's important to know again, we're 2 separate companies. So we have no oversight and jurisdiction. The only thing we have contractually for example both sides have is they can't make an acquisition without my approval and I can't make an acquisition of their approval or any out of the ordinary type of expense. Other than that they're running their business the way they always run their business, which they've done a pretty good job up to now and that would continue through closing.
Yes, we're certainly talking to each other. But in terms of business and pricing and things like that, we're not involved and nor are they involved in ours because we're still 2 separate businesses and until it closes, we're not allowed to really discuss those things.
Okay. Thanks for your time.
Thank you, Aram.
At this time, I'd like to turn the conference back to the speakers for any additional or closing remarks.
Thank you. To conclude, our optimism surrounding the ClientConnect merger continues to grow and we believe the industry changes create a tremendous opportunity for the new Perion to increase market share and continue to build upon our strong foundation. As a new, larger and more profitable company, we will have the resources to fuel continued organic and inorganic growth. As always, I'd like to thank the great team we have at Tereon for their hard work and dedication in helping us achieve these great results. I am also excited to welcome the ClientConnect team to the family.
Together, I know we are going to accomplish great things. Thank you and have a good day.
That does conclude today's conference. We appreciate your participation. You may now disconnect.