MAIL Incredimail Ltd. (MM)

IncrediMail Ltd. (NASDAQ: MAIL) (www.incredimail-corp.com), an Internet company, today reported financial results for the second quarter ended June 30, 2009.

Total revenue for the second quarter of 2009 rose $1.5 million, or 29%, to $6.7 million, from $5.2 million in the same quarter in 2008. Net income for the second quarter of 2009 was $2.4 million, or $0.26 per diluted share, compared to $0.6 million, or $0.07 per diluted share in the same quarter last year.

In the first half of 2009, revenues were $13.1 million, increasing 31%, from $10 million in the same period last year. Net income in the first half of 2009 was $3.8 million, or $0.41 per diluted share, compared to a $48 thousand loss in the first half of 2008.

Commenting on the results, Mr. Ofer Adler, IncrediMail’s CEO, said, “Our second quarter results demonstrate the success of our growth strategy coupled with our ability to increase profitability. This quarter, our strong growth more than offset the historically seasonal effect on sales, providing for yet another record quarter. The effective management of our costs, pushed this revenue growth straight to the bottom line.”

Gross profit increased 33% to $6.4 million in the second quarter of 2009, from $4.8 million reported for the second quarter last year, as a result of the higher revenues and an increase in gross profit margin to 95%, from 92% in the second quarter of 2008. The increased profitability was due to the growing portion of search related revenues, which have no associated direct costs, and accounted for over 75% of revenues this quarter.

Total operating expenses for the second quarter of 2009 were $3.2 million, down $1.0 million, or 24%, from the second quarter of 2008.

R&D expenses decreased 29%, to $1.3 million in the second quarter of 2009 from $1.9 million in the same quarter last year. Sales and Marketing expenses were $1.2 million in the second quarter of 2009, decreasing by $0.4 million, or 25%. These decreases were primarily a result of a successful reorganization and shifting focus towards search related revenues.

In the first quarter of 2009, EBITDA was $3.4 million and in the first half of 2009 it was $6.3 million, a robust 48% of revenue, representing a rate of EBITDA exceeding $1 million a month. Operating income in the first half of 2009 was $5.6 million, compared to an operating loss in the first half of 2008.

Taxes on income in the second quarter of 2009 were $1.0 million, representing an effective tax rate of approximately 29% for the quarter of 2009. This reflects the Company’s decision to institute a dividend policy beginning 2009 and as a result forgo some of its Israeli tax benefits.

“We are pleased with IncrediMail’s execution in the second quarter and the first half of 2009. Looking ahead, we believe we can sustain this level of sales with high profits. Although the third quarter is expected to be affected by seasonality, we expect this to be more than offset in the fourth quarter. We believe that the introduction of IncrediMail 2 during the third quarter of 2009, together with other initiatives we have taken, should provide us with the momentum to attain record results again in the fourth quarter,” concluded Mr. Ofer Adler.

Conference Call

IncrediMail will host a conference call to discuss the results today, August 6th at 9:30 AM EDT (16:30 PM Israel Time). We invite all those interested in participating in the call to dial 1-(888)-668-9141. Callers from Israel may access the call by dialing (03) 918-0650. Participants may also access a live webcast of the conference call through the Investor Relations section of IncrediMail’s website at www.incredimail-corp.com. The webcast will be archived on the company’s website for seven days.

About IncrediMail Ltd.

IncrediMail Ltd. (NASDAQ: MAIL) is an internet company that develops customized, downloadable graphic consumer applications used to generate search related revenues and designs, markets and delivers high end personal desktop software. The company’s award winning e-mail client product, IncrediMail Premium, is sold in over 100 countries in 10 different languages. Other products include, HiYo, a graphic add-on to instant messaging software, Magentic, a wallpaper and screensaver software, and PhotoJoy, software for presenting digital personal photos.

Non-GAAP measures

Use of Non-GAAP Financial Information - In addition to reporting financial results in accordance with generally accepted accounting principles, or GAAP, IncrediMail uses non-GAAP measures of net income and earnings per share, which are adjustments from results based on GAAP to exclude reorganization expenses and non-cash stock-based compensation expenses. IncrediMail also uses EBITDA as a non-GAAP financial performance measurement. EBITDA is calculated by adding back to net income; interest, taxes, stock-based compensation and depreciation and amortization. IncrediMail's management believes the non-GAAP financial information provided in this release is useful to investors' understanding and assessment of IncrediMail’s on-going core operations and prospects for the future. The presentation of this non-GAAP financial information is not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP. Management uses both GAAP and non-GAAP information as presented in this press release in evaluating and operating business internally and as such deemed it important to provide all this information to investors. These non-GAAP financial measures may differ materially from the non-GAAP financial measures used by other companies. Reconciliation between results on a GAAP and non-GAAP basis is provided in tables immediately following IncrediMail's Statement of Operations in this press release.

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.

   

CONDENSED BALANCE SHEETS

       

U.S. dollars in thousands (except share data)

  June 30, December 31, 2009 2008 ASSETS Unaudited CURRENT ASSETS: Cash and cash equivalents $ 15,012 $ 7,835 Short-term bank deposits 1,012 -- Marketable securities 13,825 18,790 Trade receivables 2,376 2,194 Deferred taxes 439 362 Other receivables and prepaid expenses   4,501   4,941 Total current assets   37,165   34,122 LONG-TERM ASSETS: Severance pay fund 964 955 Deferred taxes 324 328 Other long-term assets 438 619 Property and equipment, net 1,326 1,478 Other intangible assets, net   136   149 Total long-term assets   3,188   3,529 Total assets $ 40,353 $ 37,651   LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Trade payables $ 967 $ 1,948 Dividend payable 4,634 -- Deferred revenues 2,366 2,605 Accrued expenses and other liabilities   4,017   4,426 Total current liabilities   11,984   8,979 LONG-TERM LIABILITIES: Deferred revenues 1,691 1,743 Accrued severance pay   1,382   1,385 Total long-term liabilities   3,073   3,128   SHAREHOLDERS' EQUITY

Shares issued and outstanding: 9,268,081 and 9,271,159 at June 30, 2009 and December 31, 2008, respectively

  25,296   25,544 Total liabilities and shareholders' equity $ 40,353 $ 37,651  

INCREDIMAIL LTD.

   

CONDENSED STATEMENTS OF OPERATIONS

       

U.S. dollars in thousands (except per share data), unaudited

  Quarter ended June 30, Six months ended June 30,   2009       2008     2009       2008   Revenues $ 6,746 $ 5,217 $ 13,122 $ 9,980 Cost of revenues   367     437     754     888  

Gross profit

  6,379     4,780     12,368     9,092   Operating expenses: Research and development 1,336 1,891 2,694 4,075 Selling and marketing 1,150 1,537 2,319 2,953 General and administrative   747     817     1,746     2,404   Total operating expenses   3,233     4,245     6,759     9,432   Operating income (loss) 3,146 535 5,609 (340 ) Financial income (expense), net   274     193     (124 )     335   Income (loss) before taxes on income 3,420 728 5,485 (5 ) Taxes on income   1,003     100     1,645     43   Net income (loss) $ 2,417   $ 628   $ 3,840   $ (48 )   Net earnings (loss) per Ordinary share: Basic $ 0.26   $ 0.07   $ 0.41   $ (0.01 ) Diluted $ 0.26   $ 0.07   $ 0.41   $ (0.01 ) Diluted weighted number of shares (in thousands)   9,378     9,584     9,329     9,476   RECONCILIATION OF GAAP TO NON-GAAP RESULTS: GAAP Net income (loss) $ 2,417 $ 628 $ 3,840 $ (48 ) Reorganization expenses -- -- -- 745 Stock based compensation   99   $ 141     319     523   Non-GAAP net income $ 2,516   $ 769   $ 4,159   $ 1,220   Non-GAAP net earnings per share : Basic $ 0.27   $ 0.08   $ 0.45   $ 0.13   Diluted $ 0.27   $ 0.08   $ 0.45   $ 0.13   GAAP net income $ 2,417 $ 628 $ 3,840 $ (48 ) Income tax expense 1,003 100 1,645 43 Interest (income) expense, net (274 ) (193 ) 124 (335 ) Depreciation, Amortization and Stock-based Compensation   265     342     672     905   EBITDA $ 3,411   $ 877   $ 6,281   $ 565