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IncrediMail Reports Record $8.7 Million Revenues and $3.2 Million Net Income for First Quarter of 2011

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^{Published in Science and Technology on Thursday, May 12th 2011 at 4:05 GMT by Market Wire}  

TEL AVIV, Israel--([ BUSINESS WIRE ])--IncrediMail Ltd. (NASDAQ: MAIL), a digital media company that builds downloadable consumer products, today announced that:

• Revenues increased 24% year-over-year to a record $8.7 million in the first quarter of 2011;
• EBITDA was a record $3.7 million in the first quarter of 2011, or 43% of revenues, compared to $3.1 million in the first quarter of 2010;
• Net income in the first quarter of 2011 was $3.2 million, or $0.32 per diluted share, compared to $2.1 million, or $0.22 per diluted share, in the first quarter of 2010, and;
• Cash flow from operations in the first quarter of 2011 was $2.1 million, compared to $0.7 million in the first quarter of 2010

Commenting on the quarter, Josef Mandelbaum, IncrediMaila™s CEO, said, aWe are extremely pleased with our strong first quarter performance, which is a direct result of our execution on several key fronts: financially, our new deal with Google yielded positive year over year results; operationally, our renewed focus on non-search growth activities and reallocation of resources, led to a significant increase in non-search revenues without added expense; and strategically, our focus on our consumera™s needs helped increase customer engagement. The combined result of these efforts led to our record quarter.a

In the first quarter of 2011 gross profits reached $8.3 million, or 96% of sales, an increase of 25%, compared to the first quarter of 2010.

Research and Development expenses in the first quarter of 2011 were $1.9 million, increasing $0.2 million, compared to the first quarter of 2010. However, as a percentage of sales, R&D expenses decreased to 22% in the first quarter of 2011 from 23% in the first quarter of 2010.

Sales and Marketing expenses in the first quarter of 2011 were $1.5 million, increasing $0.2 million, compared to the first quarter of 2010. The increase was primarily attributable to the increased investment in customer acquisition costs which were $0.7 million, compared to $0.5 million in the first quarter of 2010.

Mandelbaum continued, aWe completed, on schedule, the back-end system needed to measure and track media buying and have begun to test new customer acquisition channels. We expect to see a significant increase in our media spend in the third and fourth quarter, as acquiring new customers is a key ingredient driving future growth.a

General and Administrative expenses increased to $1.6 million in the first quarter of 2011, compared to $0.9 million in the first quarter of 2010. G&A expenses were similar to those in the prior quarter, reflecting our ongoing efforts to enhance and broaden the management of the Company over the latter part of 2010.

Income taxes in the first quarter of 2011 included a non-recurring income tax credit of $0.6 million attributable to the Companya™s decision not to distribute dividends from 2011 earnings and beyond.

aWe are making good progress on our product diversification efforts and expect to have more to report next quarter. Overall we still have much to do, but we are very excited about our strong start to the year and expect to build on this positive momentum throughout the rest of the year,a Mandelbaum concluded.

Conference Call

IncrediMail will host a conference call to discuss the results today, May 12^th at 10:00 AM EDT (17:00 PM Israel Time). We invite all those interested in participating in the call to dial 1-(866)-744-5399. Callers from Israel may access the call by dialing (03) 918-0865. 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 companya™s website for seven days.

About IncrediMail Ltd.

IncrediMail Ltd. (NASDAQ: MAIL) is a digital media company that builds, acquires and enhances downloadable consumer applications. The companya™s award winning e-mail client product, IncrediMail Premium, is sold in over 100 countries in 10 different languages. Other products include, HiYo a graphic add-on to instant messaging software and Magentic, a wallpaper and screensaver software.

Non-GAAP measures

Use of Non-GAAP Financial Information - In addition to reporting financial results in accordance with generally accepted accounting principles, or GAAP, IncrediMail uses non-GAAP measures of net income and earnings per share, which are adjustments from results based on GAAP to exclude reorganization expenses, one-time expenses and benefits, hand-over expenses and non-cash stock-based compensation expenses. IncrediMail also uses EBITDA as a non-GAAP financial performance measurement. EBITDA is calculated by adding back to net income; interest, taxes, stock-based compensation and depreciation and amortization. IncrediMail's management believes the non-GAAP financial information provided in this release is useful to investors' understanding and assessment of IncrediMaila™s on-going core operations and prospects for the future. The presentation of this non-GAAP financial information is not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP. Management uses both GAAP and non-GAAP information as presented in this press release in evaluating and operating business internally and as such deemed it important to provide all this information to investors. These non-GAAP financial measures may differ materially from the non-GAAP financial measures used by other companies. Reconciliation between results on a GAAP and non-GAAP basis is provided in tables immediately following IncrediMail's Statement of Operations in this press release.

Forward Looking Statements

This press release contains historical information and forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995 with respect to the business, financial condition and results of operations of the Company. The words abelieve,a aexpect,a aintend,a aplan,a ashoulda and similar expressions are intended to identify forward-looking statements. Such statements reflect the current views, assumptions and expectations of the Company with respect to future events and are subject to risks and uncertainties. Many factors could cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements, including, among others, changes in the markets in which the Company operates and in general economic and business conditions, loss of key customers and unpredictable sales cycles, competitive pressures, market acceptance of new products, inability to meet efficiency and cost reduction objectives, changes in business strategy and various other factors, both referenced and not referenced in this press release. Various risks and uncertainties may affect the Company and its results of operations, as described in reports filed by the Company with the Securities and Exchange Commission from time to time. The Company does not assume any obligation to update these forward-looking statements.