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Commtouch Software Ltd. (CTCH)

Q4 2012 Earnings Conference Call

February 20, 2013 10:00 AM ET

Executives

Erik Knettel - Investor Relations

Shlomi Yanai - Chief Executive Officer

Brian Briggs - Chief Financial Officer

Analysts

Jay Srivatsa - Chardan Capital Markets

Gunnar Hansen - Sidoti & Company LLC

Ken Nagy - Zacks Investment Research

Presentation

Operator

Greetings and welcome to the Commtouch Fourth Quarter and Full Year 2012 Earnings Results Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions). As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host Eric Nadel, Investor Relations for Commtouch. Thank you. Mr. Nadel, you may begin.

Erik Knettel

Thank you Melissa and welcome everyone to Commtouch’s Fourth Quarter and Full Year 2012 Financial Results Conference Call. If you have not accessed the copy of today’s earnings press release, please call Commtouch’s Investor Relations team at 1646 284 9426 or visit the Investor Relations Section of the company’s website at www.commtouch.com.

A live webcast and webcast replay of today’s call is also available on the Investor Relations website. I would like to remind everyone that the Safe Harbor statement issues in today’s press release also covers the content of this conference call. Joining us on the call today from Commtouch and management, we have Mr. Shlomi Yanai, Chief Executive Officer and Mr. Brian Briggs, Chief Financial Officer.

I would now like to hand the call over to Shlomi, Shlomi please proceed.

Shlomi Yanai

Thank you Eric. Good day everyone and thank you for joining us. I am pleased to be joined by Brian Briggs, our new Chief Financial Officer. Brian joined us in January and will follow up my opening remarks and take you through our detailed financial results.

Our Saturday call, we will work through some of our operational and performance highlights. The fourth quarter concluded 2012 with renewed revenue growth and tremendous progress on our transformation into a provider of comprehensive “security at the service” offering. As we executed on our strategic acquisition focused on accelerating the new product innovation in line with this vision.

In the fourth quarter, we successfully closed two acquisitions included our previously announced acquisition of FRISK Software International antivirus business and Eleven GmbH, a leading e-mail ‘Security-as-a-Service’ provider based in Germany and the pioneer in the field of managed email security. When combined with our significant investment in our core research and development function, those acquisitions have helped accelerate our cloud based “Security-as-a-Service” solution evolution.

The acquisition of Eleven accelerated the delivery of our “Security-as-a-Service’ quality and broadened it, enabling Commtouch to provide more OEM services and private labeled application as well as expanded our European footprint to head offices closer to many of our customers. On the new product front, Commtouch’s new e-mail “security-as-a-service” solution marks a major launch of our company related cloud based offering. We also recently launched new solutions focused on e-mail security on promise for service providers and mobile security services for android solutions, which covers strength Commtouch’s core operator. All three solutions were recently launched into the market have had a strong initial customer response. Our material progress on executing disparity and deploying our new offering are on-track and had successfully set the stage for serial double digit revenue growth in 2013.

Commtouch’s launch of our new cloud based e-mail “security-as-a-service” solution marks an important milestone in Commtouch’s strategy to provide service providers and security vendors with the ability to rapidly bring innovative cloud based “security-as-a-service” offering to the market alongside their other offerings and under their own brand providing easy and efficient access to the growing market segment. Commtouch’s e-mail “security-as-a-service” combined permanent protection against e-mail based threats such as spam, phishing and malware with maximum post efficiency and minimum time to market.

Our new mobile security service for android is the first ever OEM solution that offer cloud assist antivirus and web security services delivered through a single easy to integrate client as the gate for the popular mobile operating system. Commtouch’s lab has identified more than 360,000 security threats specific to android as of yearend. We have more than 400 million android devices around the globe, Commtouch’s addresses this best market opportunity to increase android device security with an easy-to-deploy mobile security solution that allows vendors and service providers to add security functionality to the protection of their end users.

On the new on promised e-mail security services or service providers, augment our existing market leading messaging security suite and cloud assist malware detection services for service providers environment. The service deliver additional simplified messaging security and optimization functionality enabling Commtouch to better address the requirements of any service provider that offers e-mail services to end users. The new solution leverages e-mail security technology asset which Commtouch acquires as part of its purchase of Eleven GmbH. We will be showcasing all three of those offering as well as our new complete portfolio of internet and cloud based security technologies, and the upcoming RSA conference in San Francisco from February 25th to March 1st.

On the financial front, the fourth quarter and full year 2012 marked Commtouch’s return to topline revenue growth with the full year revenue coming in line with the upper end of our guidance expectation. As acquisition related transaction and integration expenses combined with an increased investment in global business and marketing infrastructure contributed to a lower bottom line profitability year-over-year. New booking growth remains strong in the fourth quarter and for the full year. With new bookings doubling compared to the levels seen in a year ago period. This continues to provide a solid proof point that our improved execution is yielding clear results on the business generation front.

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