IncrediMail Ltd. (NASDAQ: MAIL), a digital media company that
builds downloadable consumer products, today announced financial
results for the second quarter and six month period ended June 30,
2011.
Second Quarter Financial
Highlights
- Q2 revenues were $8.1 million,
reflecting 12% year-over-year growth;
- Q2 customer acquisition costs increased
to $1.7 million;
- Net income was $2.2 million for the
quarter; and
- Cash flow from operations in Q2 was
$2.0 million.
Six-Month Financial Highlights
- Revenues for the first six months
increased 18% year-over-year, to a record $16.7 million;
- Net income increased 23% year-over-year
to $5.5 million, or $0.54 per diluted share; and
- Cash flow from operations almost
tripled year-over-year, to over $4.1 million.
Commenting on the results, Josef Mandelbaum, IncrediMail’s CEO,
said, “We significantly improved our top line growth in the first
half of 2011, as our year-over-year organic growth continued in the
second quarter primarily driven by an increase in search revenues,
which was a result of our successful execution of certain changes
required by our search partner. Additionally, to further accelerate
future growth, we increased our customer acquisition costs in a
meaningful way. This is consistent with the strategy discussed in
previous quarters, to ramp up our investment in organic growth,
while maintaining a high level of profitability.”
Gross profits for the second quarter were $7.6 million, up 11%
from $6.8 million in the second quarter of 2010. For the first six
months of 2011 gross profits reached $15.9 million, increasing 18%
compared to the first half of 2010.
Research and Development expenses in the second quarter of 2011
decreased year-over-year and, as a percentage of sales, R&D
expenses were 18% in the second quarter of 2011, compared to 21% in
the same period of last year.
Sales and Marketing expenses increased from $1.2 million in the
second quarter of 2010 to $2.6 million this year. The increase was
primarily attributable to the increased investment in customer
acquisition costs.
Mandelbaum continued, “Our customer acquisition efforts are
progressing nicely as we refine and adjust our spending based on
results. We will continue to optimize our efforts in the third
quarter as we learn more about the efficacy of our efforts. This is
a process that requires patience and discipline, but we believe the
payoff will be significant.”
General and Administrative expenses increased from $0.8 million
in the second quarter of 2010 to $1.9 million this year. G&A
expenses were similar to those in prior quarters, reflecting our
ongoing efforts to enhance and broaden the management of the
Company over the latter part of 2010, and also included
approximately $0.2 million in initial acquisition costs, resulting
from our recently announced Smilebox acquisition. The bulk of these
acquisition costs will be incurred in the third quarter of
2011.
Income taxes in the first half of 2011 included non-recurring
income tax credits of $1.4 million attributable to the successful
resolution of audits of prior period results as well discontinuing
dividend distribution.
“All in all we are making great progress and hitting the
milestones we have laid out over the past year. We have invested in
consumer research and back end systems, increased our internal
product pipeline, started testing and ramping up our media buying
and brought in experienced senior level talent in marketing,
product and corporate development while at the same time reducing
costs in other areas. And now, with the acquisition of Smilebox, we
have executed on our first acquisition, which will significantly
increase our product and revenue mix. These are exciting times for
the Company and we are very optimistic about the future,”
Mandelbaum concluded.
IncrediMail recently announced it has signed a definitive
agreement to acquire Smilebox Inc. and it is expected to close in
the third quarter. Smilebox is an easy-to-use, downloadable desktop
application that allows consumers to use personal photos and videos
to construct one-of-a-kind creations, including: greeting cards,
invitations, slideshows, scrapbooks and photo albums. Smilebox
revenue has grown over 35% each year for the past few years, and it
has established a strong consumer brand and loyal following through
a strong focus on its consumers’ needs.
Conference Call
IncrediMail will host a conference call to discuss the results
today, August 15th at 10:00 AM EDT (17:00 PM Israel Time). To
listen to the call and view the accompanying slide presentation,
please visit the Investor Relations section of IncrediMail's
website at www.incredimail-corp.com. Click on the link provided for
the webcast, or dial 1-(866)-744-5399. Callers from Israel may
access the call by dialing (03) 918-0685. The webcast will be
archived on the company’s website for seven days.
About IncrediMail Ltd.
IncrediMail Ltd. (NASDAQ:MAIL) is a digital media company that
builds downloadable consumer applications. The company’s award
winning e-mail product, IncrediMail Premium, is sold in over 100
countries in 10 different languages. Other products include,
PhotoJoy a photo sharing and discovery product, HiYo a graphic
add-on to instant messaging software and Magentic, a wallpaper and
screensaver software.
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, one-time expenses
and benefits, hand-over 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, risks
associated with uncertainty as to whether the transaction will be
completed, the occurrence of any event, change or other
circumstances that could give rise to the termination of the
acquisition agreement, costs and potential litigation associated
with the transaction, the failure of either party to meet the
closing conditions set forth in the acquisition agreement, risks
that the proposed transaction disrupts current plans and operations
and the potential difficulties in employee retention as a result of
the proposed transaction and in integrating the acquired business,
the distraction of management and the Company resulting from the
proposed transaction, 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, whether referenced or not
referenced in this press release. Various other 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, including its annual
report on Form 20-F for the year ended December 31, 2010. 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,
2011 2010 Unaudited ASSETS CURRENT ASSETS:
Cash and cash equivalents $ 12,232 $ 16,055 Marketable securities
18,695 14,973 Trade receivables 2,460 2,795 Deferred taxes, net 285
- Other receivables and prepaid expenses 6,011 4,485
Total current assets 39,683 38,308 LONG-TERM ASSETS:
Severance pay fund 825 877 Deferred taxes, net 48 102 Other
long-term assets 376 478 Property and equipment, net 1,233 1,381
Other intangible assets, net 459 202 Total long-term
assets 2,941 3,040 Total assets $ 42,624 $ 41,348
LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES:
Trade payables $ 2,419 $ 1,831 Deferred revenues 2,216 2,204
Accrued expenses and other liabilities 4,757 6,206
Total current liabilities 9,392 10,241 LONG-TERM
LIABILITIES: Deferred revenues 1,427 1,576 Accrued severance pay
1,392 1,379 Total long-term liabilities 2,819
2,955
SHAREHOLDERS' EQUITYShares authorized:
15,000,000 and 40,000,000 and Sharesissued and outstanding:
9,765,884 and 9,701,750 as of June30, 2011 and December 31, 2010,
respectively
30,413 28,152 Total liabilities and shareholders'
equity $ 42,624 $ 41,348
INCREDIMAIL LTD.
CONDENSED STATEMENTS OF OPERATIONS
U.S. dollars and number of shares in
thousands (except per share data), unaudited
Quarter ended June 30,
Six months ended June 30, 2011
2010 2011 2010 Revenues $ 8,051
$ 7,213 $ 16,738 $ 14,208 Cost of revenues 459
397 843 772 Gross profit
7,592 6,816 15,895 13,436
Operating expenses: Research and development 1,465 1,550
3,341 3,188 Selling and marketing 2,568 1,248 4,082 2,592 General
and administrative 1,911 821
3,546 1,687 Total operating expenses
5,944 3,619 10,969 7,467
Operating income 1,648 3,197 4,926 5,969 Financial income
(expense), net 57 (63 ) 134
89 Income before taxes on income 1,705 3,134
5,060 6,058 Taxes on income (credit) (509 ) 846
(396 ) 1,634 Net profit $ 2,214
$ 2,288 $ 5,456 $ 4,424 Net earnings
per Ordinary share: Basic $ 0.23 $ 0.24 $ 0.56
$ 0.46 Diluted $ 0.22 $ 0.23 $ 0.54 $
0.45 Diluted weighted number of shares 10,022
9,761 10,017 9,815
RECONCILIATION OF GAAP TO NON-GAAP RESULTS: GAAP Net income $ 2,214
$ 2,288 $ 5,456 $ 4,424 Stock based compensation 316 219 597 362
Non recurring income tax credit (817 ) - (1,411 ) - Acquisition
related expenses 222 - 222
- Non-GAAP net income $ 1,935 $ 2,507
$ 4,864 $ 4,786 Non-GAAP net earnings per
share : Basic $ 0.20 $ 0.26 $ 0.50 $ 0.50
Diluted $ 0.19 $ 0.26 $ 0.49 $ 0.49
GAAP net income $ 2,214 $ 2,288 $ 5,456 $ 4,424 Income tax
expense (credit) (509 ) 846 (396 ) 1,634 Interest (income) expense,
net (57 ) 63 (134 ) (89 ) Depreciation, Amortization and
Stock-based Compensation 485 412
946 747 EBITDA $ 2,133 $ 3,609 $
5,872 $ 6,716
INCREDIMAIL LTD.
CONDENSED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands, unaudited
Six months ended June 30,
2011 2010
Cash flows from
operating activities:
Net income $ 5,456 $ 4,424
Adjustments required to reconcile net
income to net cashprovided by operating activities:
Depreciation and amortization 349 385 Stock based compensation
expense 597 362
Amortization of premium and accrued
interest on marketablesecurities
30 (26 ) Loss (gain) from marketable securities, net 48 (137 )
Deferred taxes, net 35 (889 ) Accrued severance pay, net 65 56 Net
changes in operating assets and liabilities: Trade receivables 335
(242 ) Other receivables and prepaid expenses (2,789 ) (848 ) Other
long-term assets 2 19 Trade payables 588 (229 ) Deferred revenues
(137 ) (333 ) Accrued expenses and other liabilities (453 )
(1,004 ) Net cash provided by operating activities
4,126 1,538
Cash flows from
investing activities:
Purchase of property and equipment (140 ) (170 ) Long term
restricted cash 100 - Capitalization of content costs and domain
(318 ) (124 ) Proceeds from sales of marketable securities 8,180
4,575 Investment in marketable securities (11,915 )
(15,024 ) Net cash used in investing activities (4,093 )
(10,743 )
Cash flows from
financing activities:
Exercise of share options 29 283 Dividend paid (3,885 )
(4,130 ) Net cash used in financing activities (3,856
) (3,847 ) Decrease in cash and cash equivalents (3,823 )
(13,052 ) Cash and cash equivalents at beginning of period
16,055 24,368 Cash and cash equivalents at end
of period $ 12,232 $ 11,316
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