Perion Network Ltd.

Revenues in the third quarter of 2008 were $5.9 million, up 27% compared with $4.6 million in the third quarter of 2007, and up 12% sequentially from the second quarter of 2008. The increase in revenues resulted from a 77% increase in search-related revenues which reached $3.3 million, partially offset by a decrease in product and subscription revenues.

Total operating expenses in the third quarter of 2008 were $4.8 million, increasing $1.1 million, or 30%, compared to $3.7 million in the third quarter of 2007. This increase was primarily attributable to the Company’s investment in planned media buying expenses, which increased more than four-fold, reaching $1 million in the third quarter of 2008, including those investments in its new HiYo instant messaging tool, which is not yet generating revenues. While the Company expects to spend an additional $1.5 million in this effort in the coming quarter, in the first quarter of 2009 it anticipats having a substantial user base for its HiYo product that will allow it to expand primarily through organic growth and drastically reduce its media buying expenditures.

Financial expenses in the third quarter of 2008 were $0.4 million, reflecting the negative returns on investments due to current market conditions, and does not include the $4.8 million gain to be recorded in the fourth quarter from the sale of securities previously written down, as recently announced.

The Company remained break-even with net profit according to U.S. GAAP (Generally Accepted Accounting Principles) of $0.1 million, or $0.01 per diluted share, for the third quarter of 2008, a decline from $0.3 million, or $0.03 per diluted share in the third quarter of 2007.

Commenting on the results, Mr. Ofer Adler, IncrediMail’s CEO, said, “IncrediMail’s strategy to drive more profitable growth through increased Google search and subscription-based e-mail and instant messaging products is positively impacting our results. It is worth noting, that while Google remains our primary search partner, more than 15% of our search revenues are currently generated from other search providers with similar results, reducing our single source dependency. Our media buying efforts in the third quarter of 2008 have begun to bear fruit, as indicated by the increase in registrations in both our flagship IncrediMail product as well as in HiYo, our instant messaging add-on. In turn, this traction is driving an increase in higher-margin search business. These initial results give us confidence that we are on the right track and are creating a solid base for future growth in revenues and subsequently in profits. Although these investments in marketing and media will continue to grow, we are doing so prudently and are constantly monitoring the effectiveness and long-term profitability of this effort.

“We are simultaneously investing in controlling and further reducing our other costs, creating a lean and effective business model. In order to do so, we recently reduced our staff size in the Israeli office by 13 employees. We feel that these cost cutting measures will help us achieve the efficiency we desire, and allow more flexibility during these unfavorable global economic conditions.”

Mr. Adler continued, “We are pleased to report that HiYo continues its rapid growth, accumulating more than a million registered downloads in less than half a year since its introduction, and expect to introduce our revenue generating models in the coming months. Following the success of HiYo, we are preparing for the fourth-quarter launch of the new version of IncrediMail which will enhance the user’s experience. We believe that with our new growth strategy in place, the traction of our existing products and the launch of the new version of IncrediMail, we are well positioned to achieve our growth objectives going forward. As to 2009, we currently expect to grow revenues by 20% over 2008, and achieve EBITDA of approximately $5 million.

 

IncrediMail will host a conference call to discuss the results today, November 13^th at 10:00 AM EST. We invite all those interested in participating in the call to dial
1-(888)-642-5032. Callers from Israel may access the call by dialing (03) 918-0650. Participants may also access a live webcast of the conference call through the Investor Relations section of IncrediMail's website at www.incredimail-corp.com. The webcast will be archived on the company’s website for seven days.

 

IncrediMail Ltd. (NASDAQ: MAIL) is an internet company that designs, markets and delivers high end personal desktop software. The company’s award winning e-mail client product, IncrediMail Premium, is sold in over 100 countries in 10 different languages. Other products include Magentic, a wallpaper and screensaver software for presenting digital personal photos, and HiYo, a graphic add-on to instant messaging software.