IncrediMail CEO Discusses Q4 2010 Results - Q&A Transcript

IncrediMail Ltd. ( MAIL)

Q4 2010 Earnings Call

March 9, 2011 10:00 AM ET

Executives

Josef Mandelbaum – CEO

Yacov Kaufman – CFO

Analysts

Nick Haylen (ph) – Sidoti & Company

Walter Ramsley – Walrus Partners

Kenneth Miller – Nokomis Capital

Abba Horwitz – Old School Partners

Question-and-Answer Session

Operator

Thank you very much. Ladies and gentlemen at this time, we will begin the question-and-answer session. (Operator Instructions) The first question is from Nick Haylen (ph) of Sidoti & Company. Please go ahead.

Nick Haylen – Sidoti & Company

Hey, good morning guys. Congrats on the quarter.

Josef Mandelbaum

Hey, Nick, thank you.

Nick Haylen – Sidoti & Company

I just had one quick question. And it was about the products that you guys mentioned earlier in the call. I know that in past there wasn’t that major of a focus for you guys. But, it seems like you guys have definitely taken that more seriously and plan on definitely rolling out more products. And I was just wondering if you saw any trends in terms of certain products that were maybe a little stronger than you expected in the quarter. And I guess is there anything in particular on the product side that you’re looking for, any significant strength or – heard on in 2011 going forward?

Josef Mandelbaum

Sure, thank you Nick. Well, with regards to products, first of all in 2010 that you’ll just finished, the focus really was on IncrediMail and using the research we did to really help understand our consumers what they want and how it can really accelerate organic growth in IncrediMail as well as get prepared for hopefully stronger media buying. We deemphasize higher of what roughly said before mainly because it doesn’t fit in with our strategy going forward and the quality of the users, we were getting as Yacov mentioned earlier, really did not significantly increase or add to our revenues.

In 2011, the research, I think gave us some good opportunities to focus on new product development. And I’m confident in the next quarter or so we will have a couple of products coming out in certain categories to help us both enhance our existing IncrediMail product as well as extend our portfolio organically with the couple of products as we have going forward. And those are really going to be based on the research we’ve done. And the example of that will be photo discovery and sharing which for our audience again which is not the early adopted audience. And people usually over the age of 35, they’re still having a lot of difficulties in terms of just not sharing and discovering their photos.

So, it’s not the photo management, it’s not things like Flicker or Facebook, there is really the layer in between. It’s not sending it to Shutterfly or to Snapfish for actually prints or for greeting cards or for Photobooks. That’s really how do you discover us some of the photos you have, many people have so many photos on their desktop, they know how to do it. As well as other products we’re looking at as well that we expect to launch throughout the course of the year.

Nick Haylen – Sidoti & Company

Great, that’s all I had. Thank you.

Operator

The next question is from Walter Ramsley of Walrus Partners. Please go ahead, sir.

Walter Ramsley – Walrus Partners

Thank you. Congratulations, great year, great quarter. Got a couple of questions. You had mentioned few of those operating metrics, the queries figure. I mean is that the search queries or what work was that exactly? I kind of blanked on that one.

Yacov Kaufman

Yes. Sure, first of all, thank you. Those were our search queries, correct. Those are –

Walter Ramsley – Walrus Partners

Okay, okay. That’s good. And could you just say those again, sorry I didn’t get to write them down on time.

Yacov Kaufman

No, no problem. So what we said was that we had about $306 million in the fourth quarter of 2010. And based on our current performance, we’re expecting this number to increase to approximately $330 million in the first quarter of 2011.

Walter Ramsley – Walrus Partners

Okay, okay, great. The stock option expense in 2011, what do you foresee that thing, I mean in the current, the last year 2010, it was $761,000, same ballpark or what do you think?

Josef Mandelbaum

We’re thinking as we go up slightly, vastly recruit and engage senior management, of course that brings along with that some more stock option expenses. So we’re expecting some increase in 2011.

Walter Ramsley – Walrus Partners

Okay, and then just one last thing. The effect that the company is actually paying another cash dividend in 2011, is that going to force the company to pay a higher tax rate this year than it originally was planning to?

Yacov Kaufman

No, the dividend being distributed right now is because – is spending from earnings generated in 2010. And therefore, the tax rate in 2010 took into consideration the fact that we’re going to be dividend in that number. In 2011, we’re still expecting the tax rate to go down significantly as with regard to 2011, we will no longer be distributing dividends.

Walter Ramsley – Walrus Partners

Okay. And can you just refresh my memory, is that supposed to be around 20% you think in 2011 or?

Yacov Kaufman

That’s correct. We’re expecting 20% or lower than that as a matter of fact.

Walter Ramsley – Walrus Partners

Or lower? Okay. So, the earnings forecast that you alluded in the press release that includes what at 20% tax rate or what do you there?

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