IncrediMail Raises Guidance: Expect Stock to Head North

Continuing my series of posts on MAIL and Babylon, today IncrediMail raised guidance to $9M in EBITDA for the year as it goes ex-dividend within the next week. Expect the stock to head north due to the new announcement and significant cash on the balance sheet even after the dividend.

Since Q2 is over already and Google gives pretty real-time AdSense results, I imagine that Q2 was on or ahead of plan and the company already knows that 20 days after the end of the quarter.

The Company currently expects 2009 revenues to exceed $26 million, and Operating Income to exceed $9 million in 2009. In 2008, revenues were $21.9 million and Operating Income $0.2 million.

The expected increase in revenues is powered by the continued growth in search generated revenues. The Company believes that this expected growth, coupled with the improved cost structure maintained by management, will provide for the increase in bottom-line guidance.

Commenting on the new guidance, Mr. Ofer Adler, Chief Executive Officer of IncrediMail, said, “The first quarter results came in at the top of the range of our original expectations, and we expect the second quarter to show positive results as well, proving the sustainability of our growth and profitability. We continue to focus on our core business, as reflected by the recently announced extension of our contract with Google and at the same time, we are diligently controlling our expenditures while maintaining a lean and effective operation. We believe these efforts will result in continued top-line and bottom-line growth.

Babylon dropped 4.5% so far today in trading in Tel Aviv, erasing almost all of yesterday's gains.

Full Disclosure: I am long both MAIL and Babylon

Comments

[Envoy Globa...:]

Actually, they will exceed $9 million in EBITDA this year. I suspect this is still somewhat conservative. And next year with Hi-Yo on additional IM platforms, growth will continue.

Wondering if you, as a VC, have any comps on some of the private Internet advertising company valuations. I would think that MAIL should easily be valued at 10X EV/EBITDA or about $12 per share. In theory, I would imagine that MAIL should trade at a premium to private market valuations, given that it is a public company.

Jul 21 01:21 PM

[mstrb:]

I thought that MAIL had already gone ex-dividend on Jly 9th or 13th?
And dividend date is 7/27.

Jul 21 02:13 PM

[tziv:]

how can a company like MAIL, which gets all revs from search and adsense, provide guidance that's reliable? They have no idea what the next quarter will bring.

Jul 21 02:36 PM

[Envoy Globa...:]

It is actually quite simple to project revenues from search and adsense. Anyone who is in this business does it all the time. It is based on estimates of traffic, search queries, and average cost per click. For all of this data you have historical trends, as well as recent information. Estimates tend to be very conservative here, since you don't assume a major increase in traffic.

Jul 21 02:58 PM