iMERGENT, Inc. ( IIG)

Q3 2010 Earnings Conference Call

November 3, 2010 4:30 PM ET

Executives

Steve Mihaylo – CEO

Jon Erickson – CFO

Clint Sanderson – SVP, President - StoresOnline & Crexendo Division

Dave Kreitzburg – Chief Administrative Officer

Jeff Korn – Chief Legal Officer

Analysts

Neal Goldman – Goldman Capital Management

Mike Shonstrum [ph] – GDC Capital

Jeff Bash – Private Investor

Craig Samuels – Samuels Capital

Presentation

Operator

Good day everyone and welcome to the iMergent Incorporated third quarter calendar 2010 financial results conference. Today’s program is being recorded. At this time I’d like to turn the conference over to Mr. Steve Mihaylo, Chief Executive Officer. Please go ahead sir.

Steve Mihaylo

Thank you. Good afternoon everyone. I’m pleased to have you on this conference call for our third quarter 2010. Normally I would be going over the numbers at a very high level. I decided instead to talk a little bit about the past and what the future means for the company, and then finally about our tender offer, and then after that, I’ll turn it over to Jon Erickson to go over all the numbers both at a high level and in granularity and talk to you about what’s happening in the company, and then we’ll open it up for questions.

As you know, when I became CEO of the company back in November of 2008, the company was plagued with a lot of lawsuits from Attorney’s General around the country, and obviously there were changes that had to be made.

Another think that I noticed when I came into the company is that we only have one revenue stream and one go to market strategy. So the first thing that I started working on was the legal issues. I can tell you today that we’ve resolved all the legal issues and we’re confident about the future. That doesn’t mean that somebody might attempt to bring up additional legal issues, but I think we’re pretty protected with the new go to market strategy that we’ve adopted.

From there we went into looking at other revenue streams and one of the most obvious ones is getting higher retention on our web hosting customers. Right now we have a small number of customers that stay with us and host and our goal is to get the number up from currently a little bit above 10% to at least in the 50 to 60% range.

The next thing that we had to do is, we had to change the type of go to market strategy in our StoresOnline division, and in that area, we had to go from what we call a license model, in other words, selling our software to a SAS model, which is software as a service. We made that transition in the third quarter of this year. We started it earlier this year and we completed the transition in September of this year.

And last but not least, we had to get additional revenue streams and that’s where our Crexendo division came in. We had to look at the opportunity of going directly to businesses, in other words, a BtoB model here. Obviously it took some retooling of our software to make it more conducive for larger businesses and we had to hire and train a sales force.

We had to look at all of the market opportunities which we think are building websites, doing search engine optimization, link building, conversion rate optimization and training. I am happy to say that we’ve also made that transition.

We’ve had a few bumps in the road, both on the sales side and on the fulfillment side, and we think that we’ve dialed that in and we’ve got that under control. So now, it’s just a case of growing that business.

Another thing that I told you about last quarter, which we’re implementing this quarter, and we’re very excited about, is our quality initiative. This company will be run on the idea of continuous improvement from here on out, now that we’ve got a lot of the other issues either under control or mostly under control.

By striving for continuous improvement, it does two things. It drives your cost down and it drives decision making as well in the organization as possible. All of the management team is on the same page. We all have the same vision and we’re all very optimistic about the future going forward, and that’s one of the reasons why we filed with the SEC today, our tender offer for up to one million shares of our stock.

And you will notice that originally we had a price range of $4.25 to $4.75. We’ve bumped it up from the lower end to $4.35 to $4.75 as an expression of our faith in the company going forward.

At this point in time, I’d like to turn this over to Jon Erickson and he’ll go through all the numbers.

Jon Erickson

Thank you Steve. So I’ll start off by talking a little bit about revenue and then give you some insight and clarity into why the numbers are the way they are.

Revenue for the third quarter of 2010 was approximately $14.3 million which included Crexendo revenue of $315,000 compared to revenue of $17.4 million for the prior year quarter, including $44,000 in Crexendo revenue.

For this current quarter, we had a net loss of $79,000 or $0.01 per share which included $117,000 income tax benefit due to the reversal of FIN48 liability as a result of a favorable outcome to a New Zealand income tax audit we had been undergoing, compared to net income of $178,000 or $0.06 per diluted common share in the prior year quarter.

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