Perion Network Ltd (PERI) 2010 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the IncrediMail second-quarter 2010 results conference call. All participants are at present in a listen-only mode. Following management's formal presentation, instructions will be given for the question and answer session. (Operator instructions). With us today from IncrediMail we have Ofer Adler, CEO; Josef Mandelbaum, incoming CEO; Yacov Kaufman, CFO; and Jeff Holzmann, President of IncrediMail New York. I would now like to hand the call over to Marybeth Csaby of KCSA for the Safe Harbor information. Would you like to begin, please?

Yes, thank you, and thank you all for joining us today for IncrediMail's second-quarter earnings call for 2010. Before I turn the call over to Mr. Ofer Adler, I would like to read the following Safe Harbor statement.

This conference call contains statements that constitute forward-looking statements. These statements reflect the Company's current views with respect to future events. These forward-looking statements involve known and unknown risks, uncertainties and other factors, including those discussed under the heading Risk Factors and elsewhere in the Company's annual report on Form 20-F that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements anticipated or implied by these forward-looking statements. The Company does not undertake to revise any forward-looking statements to reflect future events or circumstances.

With that I would like to turn the call over to Ofer. Ofer, the floor is yours.

Thank you, Marybeth; good morning and thank you for joining us today. I will keep our comments and analysis of the results for the second quarter brief, allowing most of the time on this call to introduce you to our new CEO, Josef Mandelbaum, and answering your questions.

The second quarter of 2010 was another excellent quarter. Revenues continued to grow, reaching $7.2 million and a record high EBITDA of $3.6 million, or 50% of revenues. Net profit for the quarter was $2.3 million or $0.23 a share. The underlying factors pushing these results were a record number of [month] unique visitors to our web properties, reaching 18 million this quarter, and the continued growth in search queries from IncrediMail users, which reached a monthly average of over 110 million during the quarter.

I would like now to turn the call over to Yacov Kaufman for a financial review of this past quarter. We will then introduce Josef before starting Q&A. Yacov?

Thank you, Ofer. Allow me to briefly summarize some of our second-quarter financial highlights.

Our continued growth more than offset seasonality as revenues increased sequentially by 3% in the second quarter of 2010 and 7% year-over-year, reaching $7.2 million this quarter. This growth was powered by increased search-generated revenues, which accounted for 78% of revenue this quarter, while product and subscriptions accounted for 18% of revenues. Other advertising revenues now account for 4% of our revenues, and we expect this area to continue and grow.

We maintained a high 95% gross profit margin so that the growth in revenues translated into a 7% increase in gross profit this quarter as compared to the second quarter of 2009. Operating expenses continued to decline sequentially this quarter, although they were 12% higher year-over-year. The increase compared to the same quarter last year was primarily due to increases in compensation expenses, particularly in the marketing headcount.

Although expenses increased year-over-year, EBITDA still increased 6%, reaching a record $3.6 million or 50% of revenues this quarter. As a result, net profit in the second quarter of 2010 was $2.3 million or $0.23 per diluted share, despite the decline in financial income that resulted in declining returns from our conservative investment policies.

As to our balance sheet, as of the end of this quarter we had an excess of $27 million in cash and investments. While this is $2.8 million less than last year, this was expected, due to our distributing almost $13 million in dividends during the last 12 months.

That is the breakdown of our financials, and I would now like to turn the call back over to Ofer for closing remarks.

Thank you. Before we open the call for questions, I am very excited about introducing you to Josef Mandelbaum, our recently appointed CEO. Josef brings with him extensive corporate development, marketing and operating experience in our industry, and these are precisely the qualities we need to advance IncrediMail to the next level as we seek to boost our growth organically and non-organically. I look forward to working with and assisting Josef in this role and am confident he is the right person for the job. Josef?

Thank you, Ofer. First I'd like to take this opportunity to thank Ofer for all the strategic direction and hard work in making IncrediMail what it is today and for inviting me to take part in leading this fantastic company. It is indeed rare to have a Founder/CEO like Ofer who recognizes the need to bring in someone new and actively recruited me for this job. I look forward to working with Ofer Adler going forward and will certainly seek his advice and counsel.

Second, I'd like to let you all know how energized I am to join IncrediMail. The financial results you just heard from Yacov and Ofer confirm my belief that the future is bright, full of possibilities for IncrediMail. If I didn't believe that the opportunity set was realizable, I would not have left my CEO position at American Greetings Intellectual Properties. I believe that IncrediMail's strong balance sheet, healthy cash flow and quality products are the building blocks for a company poised for growth.

To be clear, this doesn't mean that there aren't challenges in front of us. Every company has challenges, and the truly good ones find a way to turn them into opportunities. I believe that to be the case here at IncrediMail, and with over 16 years of experience in the consumer technology industry I believe I can bring some unique perspective and experience to the Company as it embarks on its next phase of development. The combination of my contacts and experience with most of the major players in this space along with my experience in growing a company from six employees to over 350 in multiple countries as well as growing revenue to $120 million through both organic and non-organic growth, I think, position me well to hopefully help IncrediMail reach its full potential.

With that, I now open the call to questions. Operator?

(Operator instructions) Abba Horowitz, 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 if maybe it's just too early, what 2011 is going to look like for this Company. Obviously, you have a nice cash horde 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.

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 would be -- I'm going to be a little hesitant to 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, that one of the strong things about the Company is its cash position. And I think, as we go forward into 2011, we are going to be very cognizant of that as well.

Okay, thanks. I'm wondering -- 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?

I think -- 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've 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.

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

Fair enough. I look forward to meeting you, Josef, and congrats on the position.

Michael Prouting, 10K Capital.

Good morning, and thanks for hosting the call this morning. I'm wondering if, just to start, if you could give us some guidance for the September quarter.

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 into 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 quarter has historically been the fourth quarter. But as a general outlook, we are expecting the third quarter to be similar to the second quarter.

Okay, thanks, and, similar in terms of both margins as well as revenue?

Similarly as having very high revenues and being very profitable.

Okay, thanks. And then, I guess I had a strategic question. So just going back to the observation you made earlier in terms of relatively high-value private companies relative to public companies, I guess one observation is, if I look at where you guys are trading, you're 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?

I think -- my answer to that is that, my first objective and I think our first objective as 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, or continue to deliver on what we're doing and start delivering a message, that hopefully the Street will reflect that. Obviously, we don't control 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 the shareholder value over the long term, and that's what our plans are.

Okay, I suppose just one final follow-up question, then. So, given that you do only have roughly $30 million in cash, and given that you are only trading at one times EBITDA, it seems like it would be pretty hard to make any strategically attractive acquisitions at this point. So if, as you continue to go down the road, the stock price doesn't reflect the value of the Company, is there any reason not to put the Company up for sale?

Again, I think the right thing to answer here is that we are going to focus on creating shareholder value, and we will certainly do that in all aspects of that, whatever that entails. But frankly, there's a process and a sequence to everything that you are mentioning. And I think, under the right process and sequence, the opportunities will present themselves.

Alright, thanks for taking my questions.

Walter Ramsley, Walrus Partners.

Thanks, congratulations on another good quarter. Nice to meet you, Josef, and hopefully, things are definitely heading upward from here. Got a few kind of specific questions -- could you discuss how the results were in the second quarter by the different product lines, the instant messenger, the e-mail products and whatever else may have been significant?

Certainly. As I indicated earlier in the call, our search revenues during the second quarter accounted for some 78% of our revenues. And our product sales accounts for approximately some 18%, with the remaining percentages coming from other advertising revenues.

Within the product sales, our anti-spam product accounted for approximately 8% of revenues, and our other content, if you wish, product accounted for about 10% of those revenues.

So, as far as the search itself goes, was the instant messenger product still gaining ground on the e-mail, or are they both growing at the same rate now?

As we indicated earlier, in prior quarters most of our search-generated revenues are coming from our IncrediMail users, and there are multiple reasons for that. Most of those reasons stem from the demographic of those users, which is significantly different from the demographic of our instant messaging users so that, when looking at revenues generated by search, our instant messaging users are generating some 10% of those revenues, while the IncrediMail users are generating some 80%.

So in that context, they are not as significant in the larger picture.

Okay, and as far as the Google relationship goes, can you give us an update on where the current contractual situation stands and what the outlook is?

Well, I'll take a shot at answering that; this is Josef. First, I think the contractual situation remains the same as it was the last quarter, if I'm not mistaken. And as for going forward, what I'd like to say here is I just -- again, I'm here for a week. I have, thankfully, been around this industry for a long time and I have people and relationships at different companies, including Google. And I hope, over the next few months or so, I'll be able to update you on something as we go forward.

But fundamentally, I think in general that my experience is that things are never going to be as bad as people think they are going to be. While there may be some challenges ahead, there's no questions about that, everything is overcome-able with the right strategy and the right execution, and I believe that to be the case here. So I'm not saying that there aren't risks involved; I think we have disclosed that in the 20-F very nicely. But I'm also, I'm optimistic about the future, and that includes Google and anything else related to the search revenues as we go forward. I think they are all --problems and challenges are overcome-able. And I think you will see, over hopefully the next few months to few quarters, that we will in fact be able to do that.

But as far as right now, have you begun to more actively view some of the other search engines, or what's the situation there?

We have a deal, obviously, with InfoSpace, and we are talking to others. And I'm not going to comment on the status of negotiations with anybody else at this point in time, but when we have something to actually comment on, we will certainly comment on that.

And just one last thing, I guess. There was a summary in the very end of the press release that funneled together depreciation, amortization and stock-based compensation. Can you break out those three things?

Well, the depreciation and amortization part this quarter was about $215,000, and employee stock option plan was about $220,000, so they pretty much were half-half this quarter.

Okay, thanks again, congratulations.

Abba Horowitz.

I'm sorry to keep pushing this, but if we go to Q1 2011, and assuming that Google does not renew itself, would the Company still be profitable at that point? And, how would the income statement look at that point, assuming you are not able to transition fast enough to others to make up for the loss of Google?

Abba, what I'd say right now is, I don't think we're comfortable commenting on hypotheticals on what may happen. So I think, over the -- we will make sure to keep you posted and everybody else posted on the progress we make. I'm confident we will make some progress on that, and we will be delivering that message as soon as we know what it is, and we will be giving it to you. But I think it's premature in August to speculate on what may or may not happen in the first quarter of 2011.

But the only reason I'm putting it that way is because I think right now the way your stock is trading is making an assumption by most that, assuming you lose Google, you will start losing money. And that's what I want to understand is, would that happen? Or would you guys still be profitable at that level?

As Josef mentioned earlier, we are very confident in the search business continuing and the relationship with Google so that a doomsday scenario of there being no Google and thereafter being no search revenues is not something we are considering right now. But I would like to just -- if you wish -- I mean, I've mentioned this in various meetings. The Company has a 95% gross profit margin. The Company has a 50% EBITDA. Those kind of numbers provide a lot of flexibility in tweaking the model to adjust ourselves to any scenario. So we are expecting things to improve; but, even if they weren't to improve, when you have those kind of numbers as margins, we don't foresee any -- we are not concerned with any doomsday assumption of having losses.

Okay, fair enough. You answered my question. Thank you.

Michael Prouting.

I had a very small question. I happened to notice that accrued expenses were down a couple of million sequentially, and I'm just curious what the reason for that was.

Well, there is just a little seasonality in the numbers. Historically, our expenditures have been higher in the fourth quarter and the first quarter. You have all kinds of yearly compensation, bonuses on performance. And we did have an excellent year in 2009, and the employees received some compensation on that. So there was higher compensation expenses in the first quarter. And, generally speaking, the differences weren't very large. But there was some -- the compensation expenses were slightly higher in the first quarter.

You mean in the second, in the June quarter? Because you accrued expenses -- actually, on the balance sheet, actually dropped a couple million from the March quarter to the June quarter.

Oh, no. That's something that happens to be -- it gives a snapshot from a certain day, and our accruals -- we may have paid off different expenses. Our expense structure hasn't changed significantly.

Kenneth Miller, Nokomis Capital.

Hello, gentlemen, and congrats on joining IncrediMail, Mr. Mandelbaum. I was just curious if we could get an update on the product development pipeline, if you have any new products coming out besides IncrediMail and Hi-Yo or any big enhancements coming along, and where you want to aim your product development efforts in the future.

We have been spending a few months now working on the kind of Version 2, if you will, of our premium offering, meaning that the product that we sell, the IncrediMail Premium product, the Gold Gallery and the JunkFilter Plus -- each one of them we have been -- has been, and we will probably introduce it in the next two months or so in order, obviously, to grow the revenues, and we have improved each and every one of them.

For example, IncrediMail -- we've added more personalization features like a personalized notifier and such that you can add personal photos. The same goes for e-cards and the animation. We've added another feature for our security in the JunkFilter Plus, which is actually a link scanner which scans all your links in your e-mails and warns you if any of them is harmful or bad in any way. We've added another feature for IncrediMail called IncrediMail Backup, which is the feature that we got a lot of requests for and is going to be also a part of the IncrediMail Premium.

So obviously, we're aiming in increasing our product sales; this is one hand. In the free version side, we are working and are about to release all kinds of features that relate to social networks, such, of course, as Facebook. We're going to do all kinds of sharing very easily from inside the IncrediMail client, sharing links and sharing photos, etc.

We also added a feature called [top level folder], which is actually like a daily page where we can update all users in all kinds of things that are happening. And we are continuously integrating our PhotoMail Maker, which is a very successful product, into IncrediMail in better ways and giving our users better ways to sending their photos and their personal family-related photos more easily to their friends.

Do you expect, then, for the subscription -- product and subscription revenue to become a larger percentage of your revenue over time?

This is not something that happens very fast, as we experienced in the past update. We really are trying to change the trend, and we believe that we can do so. And these are things that, once we did them, the changes is there and it's going to -- we are doing the work one time, and the percentage will, hopefully -- and gradually starts to grow from there.

Mr. Mandelbaum, I know you've only been there a week, but I would be curious to hear your opinion of the dividend policy and whether that's something you are leaning towards continuing or leaning towards discontinuing or how you will be thinking about the uses of cash for the Company.

Sure, thank you for the question. So now, since I have only been here for a week, I would say at this point in time, none of the existing policies are going to be changing. Obviously, after being only here for a week I think it would be imprudent of me to do that. So not doing that at this point in time, we are going to keep the policies as they were. However, as you would expect, and I think everybody would expect, over the next few months I plan on looking at all the operations of the Company and all the policies of the Company to evaluate whether it's in the best interests of the long-term shareholder value creation.

And as we do that, we will update you on what we find and what changes we may or may not make. At this point in time, that's where things are at, after the first week of being here.

Well, I, for one, am firmly in favor of the dividend policy, kind of in contrast to another shareholder on this call. But we all have our own opinions.

I'm curious. How do you think about making acquisitions with your cash when your stock is trading at one times EBITDA? One concern would be, if you didn't start getting a better multiple, those could actually be destructive to shareholder value, given your stock is so much more low valued than any kind of market multiple I would expect you will be able to achieve in M&A.

Again, I think, as I mentioned earlier, there's a sequence to events, and we are going to have discipline and we are going to have a process. And through that sequence and process, I expect and sincerely hope that our valuation will reflect the true valuation of the Company. And if it does that, then there will be opportunities for us as they present themselves.

Okay, and last question, probably more one for Ofer -- when do you expect better clarity on the Google relationship? I know you have confirmation you can continue in the same manner through the end of the year. But it would seem like in the next couple of months, it would be very helpful for you to know what 2011 looks like. Is there any point at which Google told you what policy changes, if any, are going to happen for 2011?

I'll actually answer that question. On a going-forward basis -- and Ofer and I have discussed this -- I will be handling the Google relationship as we go forward. And I expect that, as I mentioned before, over the next few months I would hopefully be able to update all of you on the progress of that relationship. But, as Yacov mentioned, again, I am not -- while there may be some challenges, I am quite sure that the search business will be around, in general, for a long time as an industry, and we will participate in it. And I am hopeful and optimistic that Google will be a partner of ours even going forward.

What that partnership may or may not look like -- again, give me some time, as I have only been here for a week, to get to talk to them directly, discuss things. And then, as we have something to update everybody on, we will certainly update people.

But right now, you don't have a specific time line for when they will let you know their decision for potential policy changes?

Right now, to my knowledge, there is no time line that was given.

Okay, thanks very much and good luck.

Mike Onghai, Ibis Management.

I'm sorry if I repeat a question; I came in late. But one question I have is share buybacks at way below intrinsic value, if the stock price is way below intrinsic value, it's a lot better than dividend. Have you guys put in a share buyback authorization? And what are your views about share buyback? Do we have a limit of one question per person?

No limit.

And my second question is, the insiders were quite good in buying and selling in the last crisis. I am surprised that there was no insider buying when the stock hit below $4 over the last couple months or so. Is that because there's a quiet period, or is there another reason?

I'll answer the first question, and I'll let Yacov or Ofer answer the second, since I wasn't here during that period of time.

With regards to the question of share buybacks, as I mentioned earlier, we will be considering everything that we think increases shareholder value. And obviously, that is something that we will be considering. I do not know if it has been considered up to this point in time or not. But, going forward, as we start looking and evaluating how to move the Company forward and to reflect its true value, we will be looking at everything and considering everything as we go forward.

And with regards to the blackout to your second question, Yacov?

Well, just to complete Josef's response is that, in the past we did have share buyback program, in 2008. And with regard to the future -- and so we are not averse to it. And with regards to the future, as Josef said.

As far as insiders, yes; as is characteristic of any publicly-traded company, we have very prolonged blackout periods, and definitely the insiders have been in a blackout period for a considerable amount of time now.

And when does your blackout period stop or end?

Well, the blackout period has one that is structured, and that's because of quarterly results. So that kind of a blackout would probably end tomorrow. Okay? However, Josef has just joined the Company, and there are many ideas that are being discussed. So there could be subsequent blackout periods not only because of results but because of other things that we may be considering. So it's difficult to say how long this open window will last. But as far as the results are concerned, the blackout will be over tomorrow.

And then as far as -- do you have an existing buyback authorization?

We do not.

Okay, because I was going to suggest, before you guys look into acquiring other companies or even developing a lot of projects -- although I think you guys are doing well as a developer. But before increasing your budget in those things, maybe you should consider -- or even before you can split some of your money in buying back shares, instead of putting it all of it in issuing a dividend because the benefits of buyback is you reduce your shares outstanding. And so the benefit is a lot more permanent than actually giving out a dividend, where you are paying out quarterly. That's my comment there.

Thank you, we appreciate your input.

(Operator instructions) Mike Onghai.

As far as in your presentation as you talked about Microsoft issuing bounties, and InfoSpace also has some marketing bounties, I guess. Do they still have that right now? And have you -- because I missed the first part of this conference call. So can you guys talk about that?

InfoSpace, Microsoft, Google -- they all have similar and then some different types of revenue sharing agreements, and bounties are one of them that some of the providers use to try to reward and gain market share in this space. I think we have in the past and will look at -- we discussed talking to all the providers, and to make sure that we optimize, again, our consumers and the value of our consumers in the best possible way. And when we look at that, we will evaluate all the different financial models that are available to us, which includes everything you mentioned.

It's not always clear that that is the best monetization aspect over the long-term. So those are things we have to consider, but we have good relationships with all the providers and we are in discussions. We will continue to be in discussions and develop our partnerships with them, and we will make, hopefully, the best decisions we can to maximize the value of the Company and increase the shareholder value.

Okay, Josef, can you talk about your previous accomplishment at American Greetings; what you did there before you came in and after you came in, so we can get a sense of your track record?

I'd be happy to. Basically, I was at American Greetings for almost 15.5 -- about 15.5 years. I started in their Internet division in 1995, I was hired at the end of '94. I was the sixth employee in that division. Basically, I signed many of the first deals we had as a company with Microsoft, AOL, Yahoo!, Google and others. I was in business development when I first started there, then basically worked my way up the ranks until I took over as CEO in January of 2000 for the company.

And at that point in time we were mostly an advertising-based business, and we had launched a subscription in December of 2001. We had launched a strategy at that point in time to -- when the market crashed, we saw an opportunity to basically buy two of our competitors, BlueMountain.com and e-greetings.com., and combined it with our AmericanGreetings.com business, and we launched a paid subscription model in addition to an advertising business model, which has turned out to be very successful. Publicly, I think American Greetings has announced last earnings call, I believe, that there's 4 million paying subscribers. And so that's -- we started with nothing, got to 4 million paying subscribers, which I believe still is one of the largest content subscriptions online.

Subsequently, from that, the revenues -- when I took over as CEO, the year before I took over was roughly $12 million. And this past year, when you look at the intellectual properties group, our revenues were $118 million. So we have, over the 10-year period, grew from that number. And this past year I believe, again, our profits disclosed again publicly at American Greetings were $20 million was the disclosed profit.

So I think we had our ups and downs, like every company, but all in all, very happy and proud of the success we had. And, as we go forward, hopefully looking to bring some of that experience to IncrediMail.

Okay, one of my concerns was that I think you guys paid $1 billion for Blue Mountain. Is that correct, or is that -- no?

That is not correct.

Oh, that's Excite. Right?

Excite@Home paid $1 billion, and American Greetings bought it 18 months later for $32 million.

Okay, so it was a very, very profitable investment, then. Right?

I can assure you, had I bought them for $1 billion, I wouldn't have this job. I wouldn't have (laughter) job.

So, I guess my next question is, did you guys part amicably with American Greetings so that, if you guys were to do some strategic partnerships with them -- ?

100%. It was my -- again, Ofer, as I mentioned earlier in the phone call in the script, that Ofer recruited me to this job. I had just recently moved to Israel, and Ofer sought me out. I know Ofer for seven years now, I believe. I have a friendship, and he recruited me, and American Greetings -- I think they were sad to see me leave. After 15.5 years at a company, I was sad to leave as well, but I think it was a good opportunity that I couldn't pass up, and I'm excited to be here working in Israel and working with IncrediMail and with Ofer and Yacov.

Okay, great, thank you.

Michael Prouting.

I'm sorry to prolong the call, but Joseph, I think your comments are actually very, very helpful, at least in helping us understand how to value the Company and think about things going forward.

One thing I was curious about is you've talked in some of the press releases recently about social networking. And I'm just wondering if you can flesh that out a little bit for us, understanding, of course, that you have only been at the Company a short time.

Here's what I can say. Obviously -- I think it's going to be fairly obvious, so I apologize in advance if it's too obvious. But, like search, social networking is here to stay. The players may, over time, change, but the core activity that users benefit from, I think, will stay for a long period of time. I think Facebook has a pretty significant position at this point in time. It's hard to see how they may go by -- may decline, as Friendster and others have done, so let's assume that doesn't happen.

I think at IncrediMail -- I think Ofer would say the same thing, and I'll let him do this in a second. But one of our clear focuses going forward will have to be on understanding how we can help our users interact with social networks and how our products enable them to do that, how we take advantages of the social networking and phenomena to really help grow our business in addition, as well as mobile. I think, clearly, more and more -- there's a statistic from CTIA and 3GSM that came out recently; those are mobile conferences or -- what's the word I'm looking for? I'm losing my English; I'm only in Israel for a week.

But those are associations, and I think more people will be surfing the Internet on mobile phones, I believe, in -- if not already today, by 2011 or '12, than there are today. Clearly, we have to look at how we can take advantage of that as a Company because that is also another phenomenon and a trend that is certainly not going to go away, going to increase. And I believe it's a phenomenal opportunity for us to look at our users and focus on users first and then focus on how we can help them benefit by what they are doing already on these different platforms, be it mobile, be it social networks.

Okay, great, thanks, yes, that's helpful. But it sounds like, just stepping back, that what you guys are saying is that basically you have a valuable franchise here in terms of your user base and that, regardless of what happens or doesn't happen with Google, that you are smart guys and you are basically going to figure out a way to monetize the value of that. Is that fair?

Well, if we say we are smart guys, it sounds like we're a little bit boastful, egotistical. I think it's fair that, based on our experiences, I would agree with your statement.

Okay. And then, just finally, I don't want to tell you how to run the Company, but for what it's worth, we would also be very much in favor of stock buyback as opposed to continuing dividends.

Okay, thank you for your input. We will -- I think, as we mentioned earlier, that's why we have these phone calls, one of the reasons. And we appreciate everybody's input, and we'll take it under consideration.

There are no further questions at this time. Before I ask Mr. Mandelbaum to go ahead with his closing statement, I would like to remind participants that a replay of this call will be available in three hours on the Company website at www.IncrediMail.com. Mr. Mandelbaum, would you like to make your concluding statement?

Yes, thank you very much. I'm a firm believer that my job is to create long-term shareholder value, and in fact that's what I intend to do. I look forward to meeting many of you in the near future after I've had some time to get to know the Company a little better from the inside and develop our multi-year strategy. Thank you again for participating in today's call and look forward to meeting you in the future.

Thank you. This concludes the IncrediMail second-quarter 2010 results conference call. Thank you for your participation. You may go ahead and disconnect.