Robert Leitz presented his in-depth investment thesis on Perion Network (Nasdaq: PERI; Israel: PERI) at European Investing Summit 2014.
Perion Network: 4th-largest internet search provider in the U.S., powering 1 billion searches monthly. At the core, Perion is a distributor of search engine traffic and represents 10% of Bing searches. Merged with larger ClientConnect business from private Israeli company Conduit (same business model) in early 2014 (Conduit shareholders received 81% in PerionNetwork). Recent controversy related to “browser hijacks” has led to share price declines of Babylon, Blucora and Perion. Leitz thinks Perion is being unjustifiably punished and is a misunderstood company in a challenging market that offers solid downside protection due to locked-in toolbar cash flows in 2015-2017: $100-300 million; cash due from upfront traffic acquisition costs: $250 million; and the value of its own application software portfolio. In terms of upside potential, Leitz sees an opportunity to triple the original investment over the next three years based on: 1) the toolbar business might continue to generate $100m+ cash flow per annum; 2) a media brokerage platform would be a much better, wide moat cash generator; 3) Perion has $200 million (incl. leverage) available for acquisitions; 4) business savvy and growth-oriented management team; and 5) former Conduit shareholders’ stake is large enough to incentivize further growth/commitment.
About the instructor:
Prior to founding iolite Partners in 2011, Robert was a management consultant at KPMG Corporate Restructuring and investment analyst at Goldman Sachs’ European Special Situations Group. He later joined TPG Credit, a credit opportunities hedge fund launched in partnership with private equity firm Texas Pacific Group, as a founding member. Robert graduated from the University of St. Gallen (HSG), Switzerland, with a Masters of Science in Business Administration and Economics. He wrote his master’s thesis at Columbia University under the guidance of Prof. Eli Noam.
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