IncrediMail Ltd. (MAIL)

Q2 2010 Earnings Call Transcript

August 12, 2010 10:00 am ET

Executives

Josef Mandelbaum – CEO

Yacov Kaufman – Chief Technology Officer

Ofer Adler – Founder and CPO

Analysts

Abba Horwitz – Old School Partners

Michael Prouting – 10K Capital

Walter Ramsley – Walrus Partners

Kenneth Miller – Nokomis Capital

Mike Onghai – Ibis Management

Question-and-Answer Session

Operator

(Operator instructions) The first question is from Abba Horwitz of Old School Partners. Please go ahead.

Abba Horwitz – Old School Partners

Hi, good afternoon. And welcome aboard, Josef. I’m wondering maybe you guys can outline for us at least at this stage, it’s maybe just too early, what 2011 is going to look like for this company. Obviously you have a nice cash forward that I would personally suggest you not dish out as dividends. But I’m just wondering given the Google situation if you could comment on what you see going into 2011.

Josef Mandelbaum

I’ll take a shot, Abba, and thank you for the question and for the warm welcome. Since this is my first week on the job, I think I’m going to be a little hesitant to kind of say anything about 2011 yet, other than to say that obviously over the next few months my objective here is to work with Yacov and Ofer and the senior management team here to quickly put together an action plan for growth that we will then share with you and everybody else in terms of what our plans are. And hopefully that will help you understand what our plans are going forward for 2011. And we agree in terms of what you’ve said in general, but one of the strong things about the company is its cash position. And I think as we go forward into 2011, we’re going to very covenant of that as well.

Abba Horwitz – Old School Partners

Okay, thanks. I’m wondering – I mean, you have a lot of experience in this field, both in M&A as well as organic growth. I’m wondering – are there – what are the valuations out there on potential M&A opportunities?

Yacov Kaufman

This is Yacov. As far as our past experience has been, there are numerous opportunities out there and it’s a question of identifying those that are most suited to ourselves. And that’s part of the process that Josef mentioned earlier. Generally, in the past we found that there is a definite difference between privately held companies and publicly held companies, with the privately held ones generally overestimating their value and the public ones having to face their real values on a daily basis. And to give a more precise answer, it will have to be more after Josef has identified the companies that we are interested in.

Abba Horwitz – Old School Partners

Okay. Sorry?

Josef Mandelbaum

I think that’s – that's the answer I would have given. And I think it’s – as we go forward, my experience has always been there are always opportunities out there. We may have to look for them, but it also takes discipline. And we’re going to have discipline in any process we do. It’s not going to be want-in process. And I think, as Yacov just mentioned, we’ll look at it carefully and look for the right opportunities that match the strategy going forward.

Abba Horwitz – Old School Partners

Okay, fair enough. I look forward to meeting you, Josef, and congrats on the decision.

Josef Mandelbaum

Thank you very much.

Operator

The next question is from Michael Prouting of 10K Capital. Please go ahead.

Michael Prouting – 10K Capital

Yes. Good morning, and thanks for hosting the call this morning.

Josef Mandelbaum

You’re welcome.

Michael Prouting – 10K Capital

I’m wondering if – just to start, if you could give us some guidance for the September quarter.

Yacov Kaufman

I think as we said coming into this quarter, right now the numbers were very strong for the first and second quarter. We’re expecting much of the same going to the third quarter. There is some seasonality in the third quarter, as you recall. And definitely if you look into our – if you track our performance, you’ll find that the best quarters has historically been the fourth quarter. But as a general outlook, we’re expecting the third quarter to be similar to the second quarter.

Michael Prouting – 10K Capital

Okay, thanks. And similarly in terms of both margins as well as revenue?

Yacov Kaufman

Similarly, of having very high revenues and being very profitable.

Michael Prouting – 10K Capital

Okay, thanks. And then I guess – I had a strategic question. Just going back to the observation you made earlier in terms of the really high value private companies relative to public companies, I mean, I guess one observation is, if I look at where you guys are trading, you are trading at just over three times trailing 12 months EBITDA at this point. And then if I take the cash on the balance sheet out of the valuation, net of cash you’re trading at roughly one times trailing 12 months EBITDA. So I’m just wondering given where your stock valuation is at and also given the relatively small amount of cash you have, how do you realize that strategic value? And would it make sense instead to put the company up for sale?

Josef Mandelbaum

I think – my answer to that is that my first objective and I think our first objective of the management team is to create long-term shareholder value. That’s what we’re going to do. That’s what our mission is. And we’ll look at all options that create the best long-term shareholder value. Obviously, I think as you pointed out, we think the stock price today is not reflective of the true value of the company. And we hope that over time, as we deliver – continue to deliver what we’re doing and start delivering the message that hopefully the Street will reflect that. Obviously, we have controlled that piece of it. What we have to do is work hard to create and do the right things that we think will position the company to increase significantly to shareholder value over the long-term, and that’s what our plans are.

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