MAIL Incredimail Ltd. (MM)

Please replace the release with the following corrected version due to multiple revisions. The corrected release reads: INCREDIMAIL�S THIRD QUARTER 2006 FINANCIAL RESULTS REACH RECORD LEVELS Revenue Increases 67%, Doubling Net Income IncrediMail Ltd. (NASDAQ:MAIL) reported record financial results for its third quarter and nine months ended September 30, 2006. Revenues in the third quarter of 2006 increased 67%, reaching $2.6 million, compared with $1.6 million recorded in the third quarter of 2005. Revenues in the first nine months of 2006 were $6.9 million, increasing 31%, compared to $5.3 million in the first nine months of 2005. Net income on a U.S. GAAP (Generally Accepted Accounting Principles) basis for the third quarter of 2006 was double that of the third quarter of 2005, $0.6 million, or $0.06 per diluted share, in 2006, compared with $0.3 million, or $0.04 per diluted share, for the third quarter of 2005. In the first nine months of 2006, net income on a U.S. GAAP basis was $1.5 million, or $0.17 per diluted share, nearly triple net income in the first nine months of 2005, which was $0.5 million, or $0.08 per diluted share, in the first nine months of 2005. Net income for the third quarter of 2006 and the first nine months of 2006, included the effect of a non-cash expense, relating to share-based employee compensation, of $0.2 million and $0.4 million, respectively, as required under accounting standard FAS 123(R). On a non-U.S. GAAP basis excluding this non-cash expense, net income for the third quarter and first nine months of 2006 was $0.7 million and $1.9 million, or $0.08 and $0.21, per diluted share, respectively. Comments by Management Mr. Yaron Adler, Chief Executive Officer of IncrediMail said, �IncrediMail�s record results this quarter were especially rewarding, given that this is generally a slow time of year for Internet use. Our results are a result of the investment in our solid business and new products and revenue streams, fueled by increases in advertising, renewed subscriptions and viral traffic, all of which validate the success of our business model. We believe our momentum will continue well into the fourth quarter and beyond, as a result of these continued investments, and as we generate increasing revenues from existing products and the development of new revenue streams.� �Simultaneous with our growing advertising revenue, we have increased our R&D efforts, to further enhance our product offering, with new products and further improving existing products, as we believe these too will make significant contributions as IncrediMail gains in popularity. One of these products is Magentic which has reached over one million users,� Mr. Adler added. Mr. Yacov Kaufman, Chief Financial Officer of IncrediMail said, �I am very pleased to note the diversification of our revenue base and the transition to the more lucrative subscription revenue model. Both of these provide for better confidence and visibility for future growth. In addition, while we have invested significant funds in our future, via R&D and marketing, and we plan on increasing these efforts, we have done so while remaining profitable and in fact increasing net profits. Finally I may note, our increasing cash reserves provide stability and facilitate our ability to finance future growth.� Mr. Adler concluded, �We are encouraged by our execution and the company�s future outlook. We have expanded our U.S. office, partnered with another leading solution provider, Babylon, Ltd. for a new product, and are generating a lot of interest amongst the IncrediMail community with our Magentic product. We will continue to capitalize on the opportunities that we create by providing high-quality products and generating a large quantity of user traffic, while seeking new sources of revenues and additional partnerships.� Highlights of the Quarter - Record Sales for the Third Quarter: Sales in the third quarter resulted in record-breaking numbers for IncrediMail. Advertising revenues increased three fold in the third quarter of 2006 compared to the same quarter in 2005, accounting for 24% of sales in the third quarter of 2006, compared to only 10% of sales in the third quarter of 2005. Subscription revenues, that are more lucrative in the long term, have increased on account of one-time fee revenues. Subscription revenues more than doubled accounting for over 40% of the increased revenues in the third quarter of 2006, compared to only 30% in the third quarter of 2005. - Magentic by IncrediMail Surpasses One Million Downloads: Magentic was fully released in April 2006 and has drawn over one million registered users, having only been marketed to IncrediMail users. The Company believes this illustrates the strength of its user base. IncrediMail is currently engaged in the process of developing additional products. - Partnership with Babylon: IncrediMail partnered with Babylon Ltd., the world's leading provider of single-click translation and information solutions. Conference call instructions The Company will host a conference call to discuss the results of the third quarter of 2006, at 11:00 AM ET on Tuesday, November 14, 2006. IncrediMail Ltd. invites all those interested in hearing management's discussion of the quarter to join the call by dialing (877) 407-0782. International participants may access the call by dialing +1-(201) 689-8567. A replay will be available for one week following the call by dialing (877) 660-6853 for domestic participants or +1 (201) 612-7415 for international participants and entering account number 286 plus conference ID code 219463 when prompted. Participants may also access webcast of the conference call through the investor relations section of IncrediMail's website at www.incredimail-corp.com. About IncrediMail Ltd. IncrediMail designs and markets an integrated suite of customized and entertaining email software products for the consumer market, offering users the ability to design highly personalized email presentations with our large collection of multimedia content for email communication. Our products include: IncrediMail Xe, which allows users to personalize email messages with creative features and is offered free of charge; IncrediMail Premium, an enhanced version of IncrediMail Xe; IncrediMail Letter Creator, which enables further personalization of backgrounds; The Gold Gallery, a content database of additional backgrounds, animation and notifiers; JunkFilter Plus, an anti-spam solution; and the recently introduced Magentic, a desktop enhancing solution. IncrediMail generates revenue by the sale of these products and services; licensing and co-branding the Incredi brand to operators of third party websites; and selling paid advertising and sponsored links on its website and email client. For more information about IncrediMail, visit www.incredimail-corp.com. Forward Looking Statements This press release contains historical information and forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995 with respect to the business, financial condition and results of operations of the Company. The words "believe," "expect," "intend," "plan," "should" and similar expressions are intended to identify forward-looking statements. Such statements reflect the current views, assumptions and expectations of the Company with respect to future events and are subject to risks and uncertainties. Many factors could cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements, including, among others, changes in the markets�in which the Company operates and in general economic and business conditions, loss of key customers and unpredictable sales cycles, competitive pressures, market acceptance of new products, inability to meet efficiency and cost reduction objectives, changes in business strategy and various other factors, both referenced and not referenced in this press release. Various risks and uncertainties may affect the Company and its results of operations, as described in reports filed by the Company with the Securities and Exchange Commission from time to time. The Company does not assume any obligation to update these forward-looking statements. INCREDIMAIL LTD. BALANCE SHEETS U.S. dollars in thousands (except share and per share data) � December 31, September 30, � 2005� � 2006� ASSETS unaudited � CURRENT ASSETS: Cash and cash equivalents $ 2,428� $ 12,219� Restricted cash 30� -� Marketable securities 2,458� 12,173� Trade receivables 1,814� 1,179� Deferred taxes 244� 361� Other receivables and prepaid expenses � 68� � 227� Total current assets � 7,042� � 26,159� � LONG-TERM ASSETS: Severance pay fund 349� 508� Deferred taxes 149� 303� Long-term deposits 154� 413� Deferred issuance costs 478� -� Restricted cash -� 91� Property and equipment, net 288� 644� Intangible assets � -� � 78� Total long-term assets � 1,418� � 2,037� � Total assets $ 8,460� $ 28,196� � � LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY) � CURRENT LIABILITIES: Trade payables $ 114� $ 250� Deferred revenues 2,333� 2,948� Accrued expenses and other liabilities � 1,629� � 2,259� Total current liabilities � 4,076� � 5,457� � LONG-TERM LIABILITIES: Deferred revenues 961� 897� Accrued severance pay � 428� � 773� Total long-term liabilities � 1,389� � 1,670� � REDEEMABLE CONVERTIBLE PREFERRED SHARES � 3,030� � -� � SHAREHOLDERS' EQUITY (DEFICIENCY) Shares issued and outstanding: 5,108,720 and 9,379,748 at December 31, 2005 and September 30 2006, respectively � (35) � 21,069� � Total liabilities and shareholders' equity (deficiency) $ 8,460� $ 28,196� INCREDIMAIL LTD. STATEMENTS OF INCOME U.S. dollars in thousands (except per share data), unaudited � Nine months ended September 30, Quarter ended September 30, � 2005� � 2006� � 2005� � 2006� � Revenues $ 5,250� $ 6,864� $ 1,570� $ 2,627� Cost of revenues � 496� � 573� � 192� � 225� � Gross profit � 4,754� � 6,291� � 1,378� � 2,402� � Operating expenses: Research and development 1,413� 2,221� 530� 1,061� Selling and marketing, net 651� 1,042� 211� 450� General and administrative � 589� � 1,792� � 196� � 584� � Total operating expenses � 2,653� � 5,055� � 937� � 2,095� � Operating income 2,101� 1,236� 441� 307� Financial income (expense), net � (15) � 638� � (8) � 395� � Income before taxes on income 2,086� 1,874� 433� 702� Taxes on income 607� 320� 140� 131� Prior year tax expense (benefit) � 937� � -� � -� � -� � Net income $ 542� $ 1,554� $ 293� $ 571� � Net earnings per Ordinary share: � Basic $ 0.08� $ 0.17� $ 0.04� $ 0.06� Diluted $ 0.08� $ 0.17� $ 0.04� $ 0.06� � Non-GAAP adjustment: Stock based compensation, net $ 111� $ 367� $ 66� $ 170� Non-GAAP net income $ 653� $ 1,921� $ 359� $ 741� � Non-GAAP net earnings per share : Basic $ 0.10� $ 0.21� $ 0.06� $ 0.08� Diluted $ 0.09� $ 0.21� $ 0.05� $ 0.08� Please replace the release with the following corrected version due to multiple revisions. The corrected release reads: INCREDIMAIL'S THIRD QUARTER 2006 FINANCIAL RESULTS REACH RECORD LEVELS Revenue Increases 67%, Doubling Net Income IncrediMail Ltd. (NASDAQ:MAIL) reported record financial results for its third quarter and nine months ended September 30, 2006. Revenues in the third quarter of 2006 increased 67%, reaching $2.6 million, compared with $1.6 million recorded in the third quarter of 2005. Revenues in the first nine months of 2006 were $6.9 million, increasing 31%, compared to $5.3 million in the first nine months of 2005. Net income on a U.S. GAAP (Generally Accepted Accounting Principles) basis for the third quarter of 2006 was double that of the third quarter of 2005, $0.6 million, or $0.06 per diluted share, in 2006, compared with $0.3 million, or $0.04 per diluted share, for the third quarter of 2005. In the first nine months of 2006, net income on a U.S. GAAP basis was $1.5 million, or $0.17 per diluted share, nearly triple net income in the first nine months of 2005, which was $0.5 million, or $0.08 per diluted share, in the first nine months of 2005. Net income for the third quarter of 2006 and the first nine months of 2006, included the effect of a non-cash expense, relating to share-based employee compensation, of $0.2 million and $0.4 million, respectively, as required under accounting standard FAS 123(R). On a non-U.S. GAAP basis excluding this non-cash expense, net income for the third quarter and first nine months of 2006 was $0.7 million and $1.9 million, or $0.08 and $0.21, per diluted share, respectively. Comments by Management Mr. Yaron Adler, Chief Executive Officer of IncrediMail said, "IncrediMail's record results this quarter were especially rewarding, given that this is generally a slow time of year for Internet use. Our results are a result of the investment in our solid business and new products and revenue streams, fueled by increases in advertising, renewed subscriptions and viral traffic, all of which validate the success of our business model. We believe our momentum will continue well into the fourth quarter and beyond, as a result of these continued investments, and as we generate increasing revenues from existing products and the development of new revenue streams." "Simultaneous with our growing advertising revenue, we have increased our R&D efforts, to further enhance our product offering, with new products and further improving existing products, as we believe these too will make significant contributions as IncrediMail gains in popularity. One of these products is Magentic which has reached over one million users," Mr. Adler added. Mr. Yacov Kaufman, Chief Financial Officer of IncrediMail said, "I am very pleased to note the diversification of our revenue base and the transition to the more lucrative subscription revenue model. Both of these provide for better confidence and visibility for future growth. In addition, while we have invested significant funds in our future, via R&D and marketing, and we plan on increasing these efforts, we have done so while remaining profitable and in fact increasing net profits. Finally I may note, our increasing cash reserves provide stability and facilitate our ability to finance future growth." Mr. Adler concluded, "We are encouraged by our execution and the company's future outlook. We have expanded our U.S. office, partnered with another leading solution provider, Babylon, Ltd. for a new product, and are generating a lot of interest amongst the IncrediMail community with our Magentic product. We will continue to capitalize on the opportunities that we create by providing high-quality products and generating a large quantity of user traffic, while seeking new sources of revenues and additional partnerships." -0- *T Highlights of the Quarter - Record Sales for the Third Quarter: Sales in the third quarter resulted in record-breaking numbers for IncrediMail. Advertising revenues increased three fold in the third quarter of 2006 compared to the same quarter in 2005, accounting for 24% of sales in the third quarter of 2006, compared to only 10% of sales in the third quarter of 2005. Subscription revenues, that are more lucrative in the long term, have increased on account of one-time fee revenues. Subscription revenues more than doubled accounting for over 40% of the increased revenues in the third quarter of 2006, compared to only 30% in the third quarter of 2005. - Magentic by IncrediMail Surpasses One Million Downloads: Magentic was fully released in April 2006 and has drawn over one million registered users, having only been marketed to IncrediMail users. The Company believes this illustrates the strength of its user base. IncrediMail is currently engaged in the process of developing additional products. - Partnership with Babylon: IncrediMail partnered with Babylon Ltd., the world's leading provider of single-click translation and information solutions. *T Conference call instructions The Company will host a conference call to discuss the results of the third quarter of 2006, at 11:00 AM ET on Tuesday, November 14, 2006. IncrediMail Ltd. invites all those interested in hearing management's discussion of the quarter to join the call by dialing (877) 407-0782. International participants may access the call by dialing +1-(201) 689-8567. A replay will be available for one week following the call by dialing (877) 660-6853 for domestic participants or +1 (201) 612-7415 for international participants and entering account number 286 plus conference ID code 219463 when prompted. Participants may also access webcast of the conference call through the investor relations section of IncrediMail's website at www.incredimail-corp.com. About IncrediMail Ltd. IncrediMail designs and markets an integrated suite of customized and entertaining email software products for the consumer market, offering users the ability to design highly personalized email presentations with our large collection of multimedia content for email communication. Our products include: IncrediMail Xe, which allows users to personalize email messages with creative features and is offered free of charge; IncrediMail Premium, an enhanced version of IncrediMail Xe; IncrediMail Letter Creator, which enables further personalization of backgrounds; The Gold Gallery, a content database of additional backgrounds, animation and notifiers; JunkFilter Plus, an anti-spam solution; and the recently introduced Magentic, a desktop enhancing solution. IncrediMail generates revenue by the sale of these products and services; licensing and co-branding the Incredi brand to operators of third party websites; and selling paid advertising and sponsored links on its website and email client. For more information about IncrediMail, visit www.incredimail-corp.com. Forward Looking Statements This press release contains historical information and forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995 with respect to the business, financial condition and results of operations of the Company. The words "believe," "expect," "intend," "plan," "should" and similar expressions are intended to identify forward-looking statements. Such statements reflect the current views, assumptions and expectations of the Company with respect to future events and are subject to risks and uncertainties. Many factors could cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements, including, among others, changes in the markets in which the Company operates and in general economic and business conditions, loss of key customers and unpredictable sales cycles, competitive pressures, market acceptance of new products, inability to meet efficiency and cost reduction objectives, changes in business strategy and various other factors, both referenced and not referenced in this press release. Various risks and uncertainties may affect the Company and its results of operations, as described in reports filed by the Company with the Securities and Exchange Commission from time to time. The Company does not assume any obligation to update these forward-looking statements. -0- *T INCREDIMAIL LTD. BALANCE SHEETS ---------------------------------------------------------------------- U.S. dollars in thousands (except share and per share data) December 31, September 30, 2005 2006 ------------- ------------- ASSETS unaudited CURRENT ASSETS: Cash and cash equivalents $ 2,428 $ 12,219 Restricted cash 30 - Marketable securities 2,458 12,173 Trade receivables 1,814 1,179 Deferred taxes 244 361 Other receivables and prepaid expenses 68 227 ------------- ------------- Total current assets 7,042 26,159 ------------- ------------- LONG-TERM ASSETS: Severance pay fund 349 508 Deferred taxes 149 303 Long-term deposits 154 413 Deferred issuance costs 478 - Restricted cash - 91 Property and equipment, net 288 644 Intangible assets - 78 ------------- ------------- Total long-term assets 1,418 2,037 ------------- ------------- Total assets $ 8,460 $ 28,196 ============= ============= LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY) CURRENT LIABILITIES: Trade payables $ 114 $ 250 Deferred revenues 2,333 2,948 Accrued expenses and other liabilities 1,629 2,259 ------------- ------------- Total current liabilities 4,076 5,457 ------------- ------------- LONG-TERM LIABILITIES: Deferred revenues 961 897 Accrued severance pay 428 773 ------------- ------------- Total long-term liabilities 1,389 1,670 ------------- ------------- REDEEMABLE CONVERTIBLE PREFERRED SHARES 3,030 - ------------- ------------- SHAREHOLDERS' EQUITY (DEFICIENCY) Shares issued and outstanding: 5,108,720 and 9,379,748 at December 31, 2005 and September 30 2006, respectively (35) 21,069 ------------- ------------- Total liabilities and shareholders' equity (deficiency) $ 8,460 $ 28,196 ============= ============= *T -0- *T INCREDIMAIL LTD. STATEMENTS OF INCOME ---------------------------------------------------------------------- U.S. dollars in thousands (except per share data), unaudited Nine months ended Quarter ended September 30, September 30, ------------------ ---------------- 2005 2006 2005 2006 --------- -------- ------- -------- Revenues $ 5,250 $ 6,864 $1,570 $ 2,627 Cost of revenues 496 573 192 225 --------- -------- ------- -------- Gross profit 4,754 6,291 1,378 2,402 --------- -------- ------- -------- Operating expenses: Research and development 1,413 2,221 530 1,061 Selling and marketing, net 651 1,042 211 450 General and administrative 589 1,792 196 584 --------- -------- ------- -------- Total operating expenses 2,653 5,055 937 2,095 --------- -------- ------- -------- Operating income 2,101 1,236 441 307 Financial income (expense), net (15) 638 (8) 395 --------- -------- ------- -------- Income before taxes on income 2,086 1,874 433 702 Taxes on income 607 320 140 131 Prior year tax expense (benefit) 937 - - - --------- -------- ------- -------- Net income $ 542 $ 1,554 $ 293 $ 571 ========= ======== ======= ======== Net earnings per Ordinary share: Basic $ 0.08 $ 0.17 $ 0.04 $ 0.06 ========= ======== ======= ======== Diluted $ 0.08 $ 0.17 $ 0.04 $ 0.06 ========= ======== ======= ======== Non-GAAP adjustment: Stock based compensation, net $ 111 $ 367 $ 66 $ 170 --------- -------- ------- -------- Non-GAAP net income $ 653 $ 1,921 $ 359 $ 741 ========= ======== ======= ======== Non-GAAP net earnings per share : Basic $ 0.10 $ 0.21 $ 0.06 $ 0.08 ========= ======== ======= ======== Diluted $ 0.09 $ 0.21 $ 0.05 $ 0.08 ========= ======== ======= ======== *T