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Josef MandelbaumThank you, Brett, and good morning, everyone. Today, I'd like to focus my comments on review of our first quarter 2012 results, followed by a few comments about the rest of 2012. I will then turn the call over to Yacov, for more details regarding the first quarter financial results and business metrics, before opening up the call for questions. The first quarter was another great quarter for the company and the 25 consecutive quarter of growth on a year-over-year basis. We are extremely pleased with our results and accomplishments. We made considerable progress on our long-term strategy, invested in future growth, execute well throughout the quarter on a variety of fronts and are confident that we will deliver on and perhaps exceed our original 2012 guidance. Revenues in the first quarter increased by 30% year-over-year to $11.3 million, as a result of an increase in product and advertising revenues largely due to our Smilebox acquisition. This 30% revenue growth was achieved, even though search revenue declined mainly due to significant increase in media buying from competition, which impacted the monetization of our installed base. The good news is that our installed base grew from 12.3 million to 13.3 million users, demonstrating the strength of our product focus strategy, which gives us the ability to continue to communicate with our users and consequently increase their lifetime value. We have already begun to test and successfully implement new solutions to recapture our user's monetization. We are confident that search revenue will increase in the coming quarters and should provide us with a significant growth catalyst going forward. As I mentioned on our last earnings call, we are also very proud to report that Smilebox is cash flow positive and achieved a 14% EBITDA margin in the first quarter. Operationally, our focus continues to be on broadening our product suite, addressing the needs of second wave adopters specifically on new platforms, while continuing to improve our backend systems and technology.
As an example, we have decided to make investments in mobile and tablet, a priority for us, to ensure long-term success. We will develop and offer a range of iPhone, iPad, android and windows mobile products overtime, to answer the increasing penetration and demands of our target.Based on market research, worldwide penetration of tablet is expected to be over 250 million by 2014, while smartphones will be well over 2 billion. Paradoxically, second wave adopters leapfrogged with regard to tablet adoption using in mainly for e-mails, photo sharing and news consumption, precisely when we offer and will offer in a more user-friendly way. So far our mobile product offerings include a photo email application; Smilebox mobile, an application with over 500,000 downloads and PhotoJoy, all available for download in the Apple App Store. We are working on additional exciting products to reinvest e-mail communications as well as expand and enhance our photo offering on mobile platforms. Looking ahead to the rest of the year, we expect premium and advertising revenues to continue to provide a solid base for growth and revenue diversification, generating approximately half of total revenues, up from 31% in 2011. As mentioned earlier, we also expect to see significant growth in our search generated revenue by improving the monetization of our growing user base. In addition, based on the successful integration performance of our Smilebox acquisition, we continue to actively search for more companies to accelerate growth. We have a strong pipeline of opportunities with one of our prime criteria now being proven profitability. Now, I'd like to turn the call over to Yacov, for more details on the financial results for the first quarter. Yacov Kaufman Thank you, Joseph. As mentioned on our last call, we will be analyzing our results on a non-GAAP basis, which better conveys operational state of the business. There is a detailed reconciliation to GAAP results in the financial tables of the earnings press release.
Revenues this quarter were $11.3 million, similar to the previous quarter and up 30% from $8.7 million in the first quarter of 2011. This quarter's revenue included $5.6 million in search generated revenues, which were lower than the prior quarter's, as Joseph explained earlier.Read the rest of this transcript for free on seekingalpha.com