CyberDefender Corporation Q1 2010 Earnings Call Transcript

CyberDefender Corporation Q1 2010 Earnings Call Transcript
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CyberDefender Corporation (CYDE.OB)

Q1 2010 Earnings Call

May 13, 2010 4:30 pm ET

Executives

Kevin Harris – CFO

Gary Guseinov – Chairman and CEO

Analysts

Jim Ragan – Crowell, Weedon & Company

Lewis Rodman [ph] – Canaccord Capital Management

Presentation

Operator

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» CyberDefender Corporation Q1 2010 Earnings Call Transcript

Greetings and welcome to the CyberDefender Corporation first quarter 2010 earnings conference call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator instructions) As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Kevin Harris, CFO for CyberDefender. Thank you. You may begin.

Kevin Harris

Good afternoon and welcome to the CyberDefender first quarter 2010 financial results conference call. Today, we will be discussing the quarter ended March 31, 2010. With me on the call today is Gary Guseinov, Co-Founder, Chairman and CEO of the company.

Before we get started, I’d like to read our Safe Harbor statement. During the course of this conference call, the company will make forward-looking statements. We caution that any statement that is not a statement of historical fact is a forward-looking statement.

This includes any projections of earnings or revenues, sales, cash or other financial statements; any statement about plans, strategies or objectives of management for future operations; any statement regarding expectations for the success of our business; any statement concerning proposed new products; any statement regarding future economic conditions or performance; statements of belief; and any statement of assumption underlying any of the foregoing.

These statements are all based on expectations and assumptions as of the date of this conference call and are subject to numerous risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements.

These risks are described in the Risk Factors section of our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 2010. Investors or potential investors should read these risks. We assume no obligation to update these forward-looking statements to reflect future events or actual outcomes and we do not intend to do so.

In addition, from time to time on this call we refer to the term gross sales. Gross sales are a non-GAAP financial measure that we use in assessing our operating performance. We define gross sales as total sales before refunds and charge-backs and before deferring revenue for GAAP purposes. We reference this non-GAAP financial measure frequently in our decision making and it gives the better indication of our operating performance and the profitability of our marketing initiatives. We include this non-GAAP financial measure in our earnings announcement in order to provide transparency to our investors and enable investors to better understand our operating performance. However, gross sales alone should not be used to assess our financial performance or to formulate investment decisions.

I would now like to turn the call over to Gary who will review our progress for the quarter, then I’ll come back to review the financials before reverting back to Gary who will give some closing remarks and open up the call for a Q&A session. Gary?

Gary Guseinov

Good afternoon, everyone, and thank you for joining us today for our first quarter 2010 financial results conference call. I’m proud to report a solid start for the year, the first quarter of 2010 being our eighth consecutive quarter of growth in revenue and gross sales. We started 2010 with a number of objectives, and I’m pleased to announce we have already achieved a number of these important milestones as well as accomplished operational enhancements or infrastructure that will support continued strong growth.

Our quarterly revenue grew 197% year-over-year, a record $9.5 million, and our gross sales grew 90%, a record of $11.8 million. As mentioned in our press release, we define gross sales as GAAP revenues before refunds and charge-backs, plus the change in deferred revenue. Our CFO will provide additional detail and reconciliation of this non-GAAP financial measure on this call.

Our sales growth this quarter was driven by success in our direct marketing, television and radio campaigns focused on our brands, MaxMySpeed.com, DoubleMySpeed.com and MyCleanPC.com, and the expansion of our internal call center operations. Before I give you an update on the quarter, I’d like to give you a quick overview of the company, our business strategy, and how we differ from our peers.

CyberDefender offers consumers and small businesses software and services that protect against online threats. We offer customers a unique value proposition, a combination of security and optimization software and a live tech-on-call service. We have come to a conclusion that offering consumers only a software security solution is not adequate due to the complexities of today’s threats, such as malware and phishing attacks.

By offering our customers a tech-on-call solution, we are able to repair PCs remotely to ensure proper functionality of their security software. Our business philosophy is no different from companies that sell home alarm systems. In other words, you would not install an alarm system in a home where the windows are broken. The same goes for Internet security. Security software will not be as effective with other parts like the operating system or other software in the computer are not working properly.

With the CyberDefender Help Desk solution, consumers do not need to shift their PCs anywhere or visit a store. We fix virtually any PC or even Mac related problem via remote Internet connection. This allows us to increase our average revenue per customer and improve overall PC security.

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