IncrediMail 1Q10 Earnings Call Transcript (Prepared Comments)

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 |  About: Perion Network Ltd. (PERI)
by: SA Transcripts

IncrediMail Ltd. (MAIL) 1Q10 Earnings Call May 6, 2010 6:00 AM ET

Executives

Ofer Adler – Founder, CEO and Chief Product Officer

Yacov Kaufman - CFO

Rob Fink - IR, KCSA Strategic Communications

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the IncrediMail first Quarter 2010 Results Conference Call. All participants are in listen-only mode. Following management's formal presentation, instructions will be given for the question and answer session. For operator assistance during the conference, please press * 0. As a reminder this conference is being recorded May 6, 2010. With us today from IncrediMail, we have Ofer Adler, CEO, Yacov Kaufman, CFO and Rob Fink from KCSA Strategic Communications. I will now hand the call over to - Rob, please begin...

Rob Fink

Thank you all for joining us today for IncrediMail's first quarter earnings call for 2010.

Before I turn the call over to the Company's CEO Mr. Ofer Adler, I would like to read the following Safe Harbor Statement.

This conference call contains statements that constitute 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.

With that, I'll turn the call over to Ofer Adler, Chief Executive Officer. Ofer, the call is yours...

Ofer Adler

Thank you, Rob - Good morning and welcome. In the first quarter of 2010 we continued to show strong results. Revenues were $7 million and in line with our stated quarterly guidance, while EBITDA of $3.1 million came in much stronger than we expected. Net profit for the quarter was $2.1 million, or 22 cents a share, with search related revenues accounting for most of this growth.

To the best of our knowledge, there have been no new developments or decisions made by Google in the six weeks since our last investor call. And, while it is our understanding that any potential changes in policy will not affect us before the end of the year, it is important for us to proactively prepare for the future.

With that, we have begun formulating a diversification strategy to decrease our dependency on one single partner while increasing revenue streams outside of search.

Within search, we have signed an agreement with IAC to power the search service provided to our HiYo users, which we expect to implement shortly. Additionally, we have begun discussions with other search companies to further explore ways to diversify our search generated revenues. We expect to be able to share more details regarding these discussions, as well as an update on our affiliation with Google within the next couple of months.

Outside of search we have also accelerated our activity to increase our sources of revenues going forward. We have enhanced the graphic content and design for our IncrediMail product, offering new photo greetings. In addition, as you may recall we introduced a new product called PhotoMail Maker at the end of 2009. This product has been well received by our users, and the product now works with Facebook and Flickr, so that adding your personal photos to enhance and personalize your emails just became even easier and part of the social media experience. Tapping into world of social media opens a door for us in to a growing market that could offer many opportunities beyond Search.

We continue to explore and engage other web based affiliates and advertisers to find alternative ways to monetize our user base. Our goal is to grow premium product sales and affiliate revenues so they account for a larger percentage of our revenues by the end of 2010.

On April 14th we announced a 43 cent dividend for the second half of 2009, and set May 11th as the date for distributing that dividend. As we complete this distribution, we have effectively distributed almost all our 2009 profits in dividends and we intend to continue our dividend policy in 2010, with our commitment to distribute at least 50% of our profits as dividends.

That is my brief business analysis of our last quarter.

I would now like to turn the call over to Yacov Kaufman for a financial review of this past quarter and then I will return with some closing remarks before starting Q&A. Yacov...

Yacov Kaufman

Thank you Ofer.

Allow me to briefly summarize some of our financial highlights from the first quarter of 2010.

Revenue in the first quarter of 2010 rose 10% to $7 million, up from $6.4 million in the first quarter of 2009.

This growth in revenues was coupled with an increase in our gross profit margin, from 94% in the first quarter of 2009, to 95% in the first quarter of 2010. So that gross profits increased 11%, from just below $6 million in the first quarter of 2009, to more than $6.6 million in the first quarter of 2010.

While operating expenses were lower than last quarter, they increased 9% in the first quarter of 2010, compared to the first quarter of 2009, primarily due the higher level of compensation since the end of last year. EBITDA in the first quarter of 2010 was $3.1 million, increasing 7%, compared to $2.9 million in the first quarter of 2009.

Net profit in the first quarter of 2010 was $2.1 million, or 22 cents a share, increasing 48%, compared to $1.4 million or 15 cents a share, in the first quarter of 2009.

As Ofer indicated, although we have limited visibility, we expect the performance in the second quarter to be similar to that of the first quarter.

That is a breakdown of our financials; I would now like to turn the call back over to Ofer for closing remarks. Ofer......

Ofer Adler

Before I open the call to questions, allow me to summarize...... Although we still lack clarity regarding any decisions Google may make, or their timing, if at all, we have begun planning our strategy for the second half of 2010 and beyond. We are focused on diversifying our revenue sources to maximize long-term growth. To do this we have beefed up our efforts to negotiate contracts and find new affiliations to monetize our user base. We have enhanced our existing product line and will look to expand our offerings to increase our premium product sales and grow our user base.

We expect to attain more clarity within the next couple of months and to maintain maximum transparency and continue to share the information and developments with investors. Our goals are to maintain a high level or profitability while diversifying our business and offering more visibility moving forward.

With that, I now open the call to questions.

Question-and-Answer Session

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