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Q4 Earnings Review; IncrediMail (MAIL) Posts Record Quarterly Revenues

|Includes: Perion Network Ltd. (PERI)

IncrediMail Ltd., a digital media company that builds downloadable consumer products, yesterday reported record fourth-quarter results, as well as record 2010 revenue.

Revenues in 2010 were a record $29.5 million, increasing 8.5 percent, over revenues reported in 2009; adjusted EBITDA in 2010 was $13.4 million, compared to $12.9 million in 2009, reflecting 46 percent of revenues; net income for 2010 was $8.4 million, or $0.85 per diluted share; and cash flow from operations in 2010 was $9.8 million.

Josef Mandelbaum, IncrediMail’s CEO, said the company’s deal with Google in the second half of 2010, as well as several other achievements, contributed to the positive financial results.

“2010 was another stellar year in terms of financial performance, and our accomplishments in the second half of 2010, including the signing of a new agreement with Google, helped us solidify the foundation for accelerated growth in 2011 and beyond,” Mandelbaum stated in the press release. “Other major accomplishments included the completion of an extensive consumer research study, the results of which were received during the fourth quarter; and the investment in and improvement of our existing processes and backend systems. The benefit of all these efforts should be seen in the second half of 2011.”

For the year-ended December 31, 2010, IncrediMail R&D expenses increased 5 percent to $6.6 million, from $6.3 million in 2009. In terms of a percentage of sales, R&D expenses are expected to remain relatively stable in 2011.

Sales and Marketing expenses were $5.2 million for the year, compared to $4.6 million in 2009. For 2011, as the new growth strategy is implemented, the company anticipates accelerated growth through 2012.

General and Administrative expenses increased to $4.7 million in 2010, from $3.3 million in 2009.

“As we previously announced, our official guidance for 2011 calls for double-digit year-over-year sales growth of 13%-15%, with revenues reaching approximately $33 million to $34 million. Fueling this accelerated growth is our new strategy and a more aggressive customer acquisition activity layered over the viral nature of our products. The back-end analytical systems built in the second half of 2010 will be used to measure our user’s value and ensure ROI positive investments. This marketing effort is being tested and will be gradually implemented over the course of the year. The rollout of our strategic activity is such that we expect growth and the associated investments will be more notable in the second half of 2011. We expect net income for 2011 to be in the $7 million to $8 million range, representing a very healthy 21% – 24% of revenues,” Mandelbaum stated.

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