Ziff Davis Inc (ZD) 2006 Q1 法說會逐字稿

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  • Operator

  • Greetings, ladies and gentlemen, and welcome to the j2 Global Communications first quarter earnings conference call.

  • It is my pleasure to introduce your host, Mr. Scott Turicchi, Co-President and Chief Financial Officer of j2 Global Communications.

  • Thank you.

  • Mr. Turicchi, you may begin.

  • Scott Turicchi - CoPresident, CFO

  • Thank you very much.

  • Good afternoon, and welcome to the j2 Global investor conference call for the first quarter 2006 financial results.

  • As the operator mentioned, I'm Scott Turicchi, Co-President and Chief Financial Officer.

  • And joining me today is Hemi Zucker, Co-President and Chief Operating Officer, and Gregg Kalvin, our Chief Accounting Officer.

  • As the operator mentioned, we will be on this call discussing our Q1 financial results.

  • We will also discuss guidance for second quarter and full fiscal year 2006.

  • In addition, we will provide additional information, this quarter focusing on our services roadmap.

  • We will use a portion of the IR presentation as a roadmap for today's call.

  • A copy of this presentation is available at our Website.

  • I would remind you to turn off your popup blockers to be able to download those slides to your hard drive.

  • If you have not received a copy of the press release, you may access it through our corporate Website at j2global.com/press.

  • In addition, you'll be able to access the webcast from this site.

  • After completing the formal presentation, we will be conducting a question and answer session.

  • The operator will instruct you at that time regarding the procedures for asking a question.

  • In addition, you may email questions to investor@j2global.com at any time.

  • Before we begin our remarks, allow me to read the Safe Harbor language.

  • As you know, this call and the Webcast will include forward-looking statements.

  • Such statements may involve risks and uncertainties that would cause actual results to differ materially from the anticipated results.

  • Some of those risks and uncertainties include but are not limited to the risk factors we have disclosed in our SEC filings, including our 10-K filings, recent 10-Q filings, various proxy statements and 8-K filings, as well as additional risk factors that we have included as part of the slideshow for the webcast.

  • We refer you to discussions in those documents regarding Safe Harbor language as well as forward-looking statements.

  • I will now turn to the results for the quarter.

  • This was another outstanding quarter for j2 Global.

  • Our revenues were $42 million, up 30% from the first quarter 2005.

  • The revenue was at the high end of our range, due to an outstanding quarter across the board and higher than anticipated patent licensing revenues.

  • Our net paid DID growth continued to be strong, in the approximately 50,000 range.

  • Our gross profit margin was 78.8%, comparable to that in Q4 of 2005.

  • Due to the implementation in this quarter of 123-R, we are presenting both GAAP and non-GAAP financials.

  • For purposes of comparability, we will state our margins based on the exclusion of the 123-R expense, which ripples through all four of our operating categories; cost of goods sold, G&A, R&D and sales and marketing.

  • Operating earnings on a non-GAAP basis were $17.8 million, representing a 42.3% operating margin.

  • This was after an approximately 1% increase in our G&A costs, due to the filing of our 10-K.

  • Net earnings were $13.4 million on a non-GAAP basis, or $0.52 per fully diluted share.

  • On a GAAP basis, net earnings were $12.3 million, or $0.48 per share.

  • We expect that for the full year 2006, 123-R expense will have an impact net of tax of between $0.14 and $0.17 per share, consistent with the $0.04 realized in Q1.

  • Strong free cash flow in the quarter bolstered funds available to grow our business, which rose to $162.3 million.

  • I will note, we made no purchases under the recently announced stock repurchase program during the quarter, as that plan was announced going into a blackout period.

  • In addition, the Company announces today a two-for-one stock split, subject to a vote before the shareholders on May the 3rd, to increase our authorized common shares.

  • At this time we will now turn to the presentation and highlight some of the areas that have evolved over the last quarter, as well as to provide additional insights through Hemi, on our service roadmap.

  • I would draw your attention to slide 4.

  • Slide 4 is looking at the various market places that we operating in; the fax space, the voice space, unified messaging and email.

  • Below each of those categories, you will see the core brands that we offer those various services under.

  • On slide 5, I’d like to point out that we had an increase this quarter in our issued US patents.

  • One of them came through a small acquisition, one of them was newly granted and two of them were granted under an existing continuation.

  • That brings our total portfolio to 29 issued US patents.

  • We continue to maintain patent licensing programs to monetize that portfolio.

  • It was our 36th consecutive quarter of revenue growth and our 17th consecutive quarter of positive and growing operating earnings.

  • Slide 6, looks predominantly the same, however, you will notice the insertion of the small to midsized enterprise piece of our subscriber acquisition.

  • While our subscriber acquisition is still dominated by our individual small to midsize business and large enterprise government channels, in late 2005, we launched an SME sales force.

  • This sales force consists of 4 people, who are distributed in various locations throughout the United States.

  • Their goal is to bring in targeted accounts of between 150 and 750 DIDs or phone numbers.

  • We believe this piece now completes a continuum that ranges from a true individual single-number sale, all the way up to multiple thousands or tens of thousands of numbers.

  • If you go to slide 7, you’ll see that that SME sales has been added now as one of our paid subscription drivers.

  • So we now have 7 ways, in any given month or quarter, that we generate gross paid DIDs.

  • As we’ve stated before, up to, and in fact, in the last quarter, slightly more than one-half of our gross paid signups came directly to the Company’s websites and/or telesales channels.

  • Also, I would note, as we’ve said before, that our free-to-paid upgrades constitute less than 10% of our gross paid signups.

  • At this time I will turn the presentation over to Hemi, who will give you an update on our service roadmap.

  • Hemi Zucker - CoPresident, COO

  • Good afternoon, everybody.

  • I’m happy to have you here today.

  • As you know, every quarter we are focusing on one side or another side of our operations.

  • Today we have chosen to talk about our service update.

  • As you know, most companies are referring to it as product roadmap.

  • We are a service-focused company and we are calling it our service roadmap.

  • Let's go now to slide number 9.

  • In slide number 9, in the center column, you can see how we configure and break down our business.

  • On the fax rung, our mostly known brands are eFax and UniFax.

  • We’ll discuss in a moment about the new exciting developments and product enhancements we are going to announce soon.

  • On the next one, which is our voice services, we have established eVoice as our leading brand and we are adding on, under the traditional eVoice, new services like eVoice Receptionist and eVoice Call-forwarding.

  • The next one is unified messaging.

  • Unified messaging is mostly known in j2 under the names of jConnect and mostly onebox.

  • In the onebox front, we are now not only adding features, but working on simplifying the message, so we can increase the sales of onebox.

  • Onebox is going nicely.

  • In order to use the j2 marketing model, we need to simplify the message and make the pieces of the service more simplified and common to users to [adoptive via] online sales.

  • The last one is our email segment of our business, known mostly as electricmail, which is enhancing the product by adding archiving and secured email services.

  • As you know, we are constantly looking into new markets and we have dedicated teams that are looking and bringing in front of us a constant and new opportunities to enhance our profile of services.

  • Let’s move to slide number 10.

  • Slide number 10 is a very big deal for us.

  • As you know, all those years we were able and we were selling our fax services to customers, that basically, in order to move their service to eFax, had to give up their existing number and adopt a new number.

  • We are doing it for years and so far have 10 million customers that basically agreed to give up on their number and take a new number.

  • Now, with the development and soon to be introduced new enhancement, customers will be able to migrate their existing number into j2.

  • What does it mean?

  • They’ll go online, they’ll enter a phone number, go through a signup process and at the end of the process, in an automated fashion, their number will be migrated into our system.

  • And basically, they will get the message from us that it’s a painless transformation, where they don’t have to print new business cards and they don’t have to notify anybody, and their old numbers will be basically moving to us.

  • We believe that this will be great and all those customers that were reluctant to move and take our services, will be able now to basically move their own numbers into j2, and therefore, introduce us to a new wave of customers more conservatively weighted with their own fax number.

  • Let’s move to the next page, 11.

  • Last year we introduced enhanced services in the form of storage.

  • Our faxes and messages were stored for our customers who come to the j2 message center, where they could basically view their old faxes.

  • We were encouraged with the success of this program and we are now enhancing the service to include more archive days.

  • Meaning free customers that have one week, will go now to more days, and paid customers have one month, will move to one, two and maybe even three years of stored faxes.

  • By doing it, we are enabling them to use eFax for purposes like compliance, when you need a copy of faxes and other messages, disaster recovery and also we are introducing additional security features, where people can access their faxes through secured ways, and again, comply with the various requests.

  • The new capabilities beyond just enhancing the size and the time that we archive messages, are features like searchable fax.

  • You all know that today people can do search on the desktop and find documents and work and everything, if it has to do with emails and other documents.

  • Up to now, faxes were not a document that could be searchable.

  • We are going to convert faxes.

  • And basically by converting faxes to searchable documents like searchable pdf, Word, or other various formats, customers will be able to find information that today is stored on faxes.

  • This is a unique capability that the traditional fax machines and the current format do not allow.

  • We’re excited about this as well.

  • It’s another feature that we will basically make eFax beyond the regular fax, a tool that can enhance the searching capabilities, which we all know is a hot topic on those [days].

  • Through the message center we also will be able to follow on the usage of our customers, of their faxes, on the free faxes we might consider to deliver instead of the fax, just a link.

  • The link will basically redirect the customers to our j2 messenger, a message center.

  • And again, through seeing the activity and the repeat use of our free and paid services, we will be able to better enhance the service and monetize the free customer base.

  • All of those, we believe will enhance our ability to monetize the use of the fax and the voice services.

  • Going to the last slide, which is page 12, eFax Developer.

  • As you know, in the last few years we have increased dramatically the extension of j2 into enterprise users.

  • One of the things that you are repeatedly seeing, those enterprise users are using industrial strength for other features beyond just fax to email and email to fax.

  • Most of those enterprises are buying those services from another company’s order.

  • They would like to see us as a one-stop shopping place for them.

  • And we are now introducing on the eFaxDeveloper.com the one-stop shopping for enterprise, which will include beyond the regular services, inbound routing faxes.

  • For example, you can get faxes in document that have bar code and we can basically read the bar code for you and channel the faxes to where they need to go.

  • And also, we will be able to take documents that are produced on the infrastructure of our customers’ infrastructure and basically, from the infrastructure route the faxes out to the designated customers and so on.

  • So we are very excited.

  • And I’m going to transfer the call again to Scott.

  • Scott Turicchi - CoPresident, CFO

  • Thank you, Hemi.

  • Hopefully there will be some questions on some of the reintroduction of the service roadmap during the Q&A session.

  • Just very quickly on the financial highlights and the guidance and then we will turn it over to questions.

  • Slide 14 is a continuation of the consecutive quarters of both revenue and operating earnings growth, which we continue to be very proud of.

  • Slide 15 is the operating margins.

  • Once again, this is on a non-GAAP basis.

  • As I mentioned earlier, the expenses of non-cash stock compensation expense, pursuant to 123-R, flow through all of our expense categories.

  • But in order to give you comparability, these have been extracted.

  • At the back of our financial statement there is a GAAP reconciliation, as well as the back of this presentation.

  • As I mentioned earlier, gross margin was about 79%, pretty much consistent with where we were in Q4.

  • Continue to believe that there is some opportunity over the next several quarters to see that gross margin improve.

  • You will notice that as part of Hemi’s quote in the press release today, we’ve added a new country recently, which is India.

  • And that is beyond Poland and Austria, which were previously announced.

  • The operating margin came in at 42.3%.

  • Most notably, this quarter G&A was about 1 point higher than expected.

  • That had to do with increased cost borne from various professionals, relating to the filing of our 10-K.

  • Sales and marketing continue to be in its band of 15 to 17% of revenues almost right down the middle.

  • And engineering and R&D was a little over 4%.

  • Turning to slide 16, this is our guidance for the second quarter, $43.6 to $44.6 million of revenues.

  • I would note that we are expecting less patent revenue in Q2 than Q1, by about $400,000.

  • As we mentioned previously, patent licensing revenue tends to be somewhat lumpy and we had a very strong Q1, slightly in excess of $800,000 of bookable GAAP revenue in Q1.

  • It will probably be about half of that in Q2.

  • Also, with Easter and the related holidays falling in Q2 this year, there will be very little change, if any, in business days between Q1 and Q2, versus last year, where there was a pick up of about 2 business days.

  • That all translates into a non-GAAP EPS of between $0.55 and $0.57 per share.

  • That assumes an approximately 30% tax rate and 25.7 million fully diluted shares.

  • For the full fiscal year, the Company is reaffirming its revenue guidance of 181 to 191 and its non-GAAP EPS, under the same assumptions, of $2.24 to $2.36.

  • At this time, that concludes the formal part of our presentation.

  • The last four slides are supplemental information.

  • There is a metric slide on page 18, which goes through the DID non-DID base revenue, the variable versus fixed revenue, the cancel rate, the ARPU and various other financial metrics.

  • Slides 19 and 20 are the reconciliation for free cash flow and our GAAP to non-GAAP analysis.

  • At this time, the operator will instruct you as to how to ask live questions.

  • Operator

  • [OPERATOR INSTRUCTIONS]

  • Scott Turicchi - CoPresident, CFO

  • While we do that, I would remind everybody that questions can be sent via email at investor@j2global.com.

  • And in fact, the first question we’d like to take today is one that has been observed, that as we said last quarter, you may see us in the future experiment with different prices for our services.

  • And so, I’d actually turn that question over to Hemi, to discuss what we’re doing in terms of price changes.

  • Hemi Zucker - CoPresident, COO

  • The question is about our website, when if you go now you see that we are trying prices like $15.95, $16.95 and also the $12.95 price that we are using for the core faxes.

  • So basically, we started about 10 days ago, to trial those new price points.

  • I cannot talk too much about what we are seeing, but the results are going to be evaluated in the next 20 days.

  • We have experience of price changes with the new features that I announced and all the other good things that we are doing, we believe that it justifies a higher price.

  • And all the numbers and the full cart that we have come with, and as Scott mentioned before, do not include any price change.

  • So the price change is something that we are testing and once we decide how to move, we will further disclose it.

  • Scott Turicchi - CoPresident, CFO

  • Okay.

  • First live question?

  • Operator

  • Daniel Ives of Friedman, Billings, Ramsey.

  • Daniel Ives - Analyst

  • Congrats, great quarter.

  • First on the enterprise, how many enterprise, north of 1,000 DIDs, customers did you have?

  • Scott Turicchi - CoPresident, CFO

  • Yes, let me give you some metrics on the whole enterprise space.

  • We had 3 additions during Q1, bringing the total to 21, up from the 18.

  • The largest account is now in excess of 11,000 provisioned phone numbers.

  • The number of reps remains the same as it was last quarter.

  • The pipeline is in excess of 57.

  • We won 3, we lost a couple.

  • And then we did a hard look at the database and cleared out some that we felt were just not moving along.

  • Not that they moved away from us to somebody else, but they just really weren’t moving along towards a decision.

  • So we added some to the pipeline, but we also decided to clean and purge some of the pipeline.

  • Daniel Ives - Analyst

  • Okay.

  • And as a follow-up to that – I know you don’t talk about specific customers, but could you confirm that one of those is a large aerospace company based in Jew Jersey?

  • Hey, I’m not asking for the name!

  • Scott Turicchi - CoPresident, CFO

  • I understand.

  • I think the answer to that question is, yes.

  • Daniel Ives - Analyst

  • Okay.

  • And just finally, can you talk about – maybe this is for Hemi – the international opportunities?

  • It seems like you guys are excited about that and maybe just talk about traction there and just that overall market opportunity, maybe just give us the sub-count for international?

  • Thanks.

  • Hemi Zucker - CoPresident, COO

  • Yes.

  • First of all, being the less conservative guy in the two of us, and I’m conservative, we are about to sign any day now, another large deal in the corporate channel.

  • I think it will be the largest deal we ever signed.

  • But you know, being conservative, we are not talking about it.

  • But I did get a call from Tom Dolan on his way, that’s kind of encouraging to talk about it.

  • Anyway, regarding our international, as I said, I think I mentioned it last quarter, we have two salespeople internationally and they are really tracking.

  • And we are heading more and more international, mostly European deals that are larger than 1,000.

  • Without getting into too many details, we are very encouraged about the activity there and it’s building up.

  • Scott Turicchi - CoPresident, CFO

  • I would add two other metrics to what Hemi is saying on the international front.

  • International revenue, which does include electricmail and other revenue beyond the DID base, is about 11.6%-11.7% of revenues in Q1.

  • So it continues to be an increasing share of the Company’s total revenues.

  • Secondly, it is becoming an increasingly more important driver of gross paid DIDs.

  • I think ordinarily, after direct-to-website and direct vendors, including things like search, it was the number three contributor this quarter to gross paid adds.

  • Also, as you saw in the release, we launched three new countries to aid our international efforts;

  • India, Austria and Poland.

  • So there are major efforts also going on in other parts of Asia as we begin to lay the groundwork for not so much ’06, but really into ’07 and beyond, to sell our services locally there.

  • Operator

  • William Benson of William Blair.

  • William Benton - Analyst

  • Just a couple of other questions.

  • In terms of the tax situation, it sounds like – if my math is correct, I think you’re talking about a little over $400,000 to $500,000 you spend incremental this quarter?

  • Scott Turicchi - CoPresident, CFO

  • That’s correct.

  • William Benton - Analyst

  • Okay, just wanted to make sure.

  • And so that pretty much goes away in this quarter?

  • Scott Turicchi - CoPresident, CFO

  • Yes.

  • William Benton - Analyst

  • Okay.

  • And then you feel pretty confident about that 30% tax rate?

  • Has your confidence increased, I guess, with regard to that 30% tax rate, since you put out your 10-K?

  • Scott Turicchi - CoPresident, CFO

  • Well, I think our confidence was very high when we put out the 10-K, both as to not only the backward-looking, but the forward-looking tax rate.

  • As you know, the tax rate can move around, because it is subject to a number of factors, including the percentage of our unaffiliated revenue and operating income that comes from our international business.

  • But I think that in terms of the methodologies that were utilized in determining the tax provision for 2005, we have a very good understanding internally, but also with respect to our auditors in terms of how those intercompany relationships should be valued.

  • Now, we will do additional work on the ’06 provision.

  • We will have additional opinions regarding the various intercompany transfer pricings.

  • So there is some work yet to be done for ’06.

  • But in terms of the overall fundamental methodology, I think, yes, there’s clearly an understanding amongst all parties.

  • William Benton - Analyst

  • Okay.

  • And then on the gross margin side, obviously it’s a healthy gross margin overall, but you said you expect it to strengthen as the year goes along.

  • You didn’t see that as much this quarter and I’m just kind of curious.

  • I know you added 3 new international countries.

  • What may have not allowed the leverage to show through in this current quarter?

  • Scott Turicchi - CoPresident, CFO

  • I think that’s part of it, the adding of the countries.

  • But if you really go back to last year, what we’ve done in the last four quarters, call it 13 months, is we’ve added I think 8 or 9 new countries.

  • And each of those countries, on average, is about $10,000 a month in expense.

  • So we’re probably, in the aggregate, bearing between $75,000 and $100,000 a month in incremental expense with today’s modest amount of revenue against it.

  • Certainly not 80% gross margins for those 9 new countries.

  • I think there are two opportunities in the gross margin.

  • As we build the international revenue in the countries where those physical points of presence are located, we will obviously see the gross margin increase.

  • And also, in some of our acquired companies that we bought in the last year, there is still some opportunity to improve their gross margin and bring some of their traffic onto our network, which would also improve the gross margin.

  • William Benton - Analyst

  • Okay.

  • And then final question, somewhat related to, obviously, the USF situation.

  • I think, just to confirm there, you said, Scott, the free-to-paid is less than 10% of your gross adds right now?

  • Scott Turicchi - CoPresident, CFO

  • That’s correct.

  • That’s less than 10% of our gross signups or gross paid DIDs on a quarterly basis.

  • That’s been true for the last couple of quarters, if not longer.

  • William Benton - Analyst

  • Okay.

  • And then obviously, your free base did decline in this quarter.

  • I know sometimes you guys go through a cleanup, but I’m also curious if maybe you have dialed back maybe your effort, as you push forward on interest enterprise with regard to that channel, because of maybe some expectation that you’re kind of looking at with regard to the USF situation.

  • Hemi Zucker - CoPresident, COO

  • No, we did not.

  • As a matter of fact, we are still maintaining the program.

  • The only thing [receding] [inaudible] you’re focusing on higher quality free customers.

  • And we are successful to retain higher quality.

  • But the quantity is pretty much the same, based on the opportunity of the CPAs, etc.

  • William Benton - Analyst

  • Okay.

  • Did you guys cleanup the base this quarter?

  • Is that why we saw the drop sequentially?

  • Scott Turicchi - CoPresident, CFO

  • I don’t think it was a major cleanup, no.

  • Usually if you see a major cleanup, you might see a decline of 1 million DIDs or so.

  • I think it was 200,000 this quarter.

  • Hemi Zucker - CoPresident, COO

  • It’s just a matter of timing.

  • You know, sometimes if the cleanup will be a day before the earning or a few weeks before an earning it might move a few hundred thousand.

  • Nothing dramatic.

  • Operator

  • Youssef Squali of Jefferies & Company.

  • Youssef Squali - Analyst

  • Just a couple of questions.

  • For the third quarter in a row now, your sub adds has been hovering in the 48,000-49,000, but your sales and marketing has increased by about $1 million over the same period.

  • So that translates into higher [SAC] but I know there are more elements to that.

  • First, why is that happening, i.e. why aren’t you adding more subs.

  • And what can you do to add more subs if it’s not related to just more marketing spend?

  • And then I have a follow-up.

  • Scott Turicchi - CoPresident, CFO

  • It’s two things.

  • One, I don’t believe the SAC cost is going up.

  • Remember that with a 2.5 to 2.75% monthly cancel rate, you’ve got to bring in more subs each month as the base grows bigger, to maintain a 48,000-50,000 net DID productivity.

  • Also remember that our sales and marketing costs – and you can look at it fully loaded or not – about half of that spend, in fact, I’d say it’s now somewhat more, are people within j2.

  • And that ranges from the creative people and the marketing people that service our web activities, all the way up through our various sales forces, including the new SME sales force.

  • So with the advent of more salespeople in the corporate side of the business, there have been more people add in the website in the international side of the business, and that’s all headcount.

  • In fact, the external spend has been fairly stable the last 2 to 3 quarters, as a result, creating a decline, at least in our staff cost, as it relates to external spend.

  • Think of it as we’re seeding the future with some of the expense we’re absorbing now.

  • The SME channel, for example, that was launched in late Q4 of 2005, is beginning to bear some result.

  • It had productivity in Q1.

  • But given that these reps are anywhere from 2 to 4 months with the Company, they’re still in their ramp portion of the curve.

  • They each have draws that they’re receiving as compensation on a monthly basis.

  • Youssef Squali - Analyst

  • Okay, so I guess a follow-up question is, what assumption in guidance have you guys baked in for sub adds for the rest of the year?

  • Scott Turicchi - CoPresident, CFO

  • I think this quarter you could see around the same or possibly somewhat less sub adds than the 50,000, because of the price test.

  • When you do price testing, at higher levels, you would expect a lesser rate of signups for some period of time, until you get back to trend lines.

  • That’s what we experienced back in June of 2003, when we tested the $12.95 versus the then $9.95 pricing.

  • So, for the amount of time that we do testing, since we have alternative prices that are higher, there will be a portion that we will experience probably a lower gross adds, at least in our web activity.

  • I think that will be offset somewhat, maybe even fully, by the activities in some of our other channels.

  • Hemi Zucker - CoPresident, COO

  • And by the same, those that are buying are paying more for [service].

  • Scott Turicchi - CoPresident, CFO

  • That’s from a revenue standpoint, but just from a net DID standpoint, I’d say you’re around 50,000 this quarter, maybe somewhat less.

  • Youssef Squali - Analyst

  • But it seems to me that these investments that you guys have been incurring over the last 2, 3 or 4 quarters, should start bearing fruit probably in the second half and particularly in ’07, from a net add perspective.

  • Scott Turicchi - CoPresident, CFO

  • I would think that’s right.

  • As you know, particularly in the corporate arena – and we don’t know enough yet about the SME channel.

  • In fairness, we have to reserve comment on that for probably another quarter until we see more data.

  • But certainly in the enterprise channel, and I think there’s an element of it that’s true in the SME channel, given the ramp timeframe for a rep, plus the timeframe for them to build their pipeline and then convert it, people that we are hiring now, really will not have an ’06 revenue impact.

  • They might get lucky on a couple of deals, but for the most part, they will be an expense in ’06 for revenue productivity in ’07.

  • That’s exactly correct.

  • Same thing in our international channel.

  • We’re starting to spend dollars for Asia – 0 incremental revenue productivity in ’06, but it’s really setting the stage for ’07 and beyond.

  • And some of that is being spent at the cogs line, like launching India, and some of that is being spent at the sales and marketing line.

  • Hemi hired, I think it was very recently, in the last few months, a small group that’s focused specifically on Asia.

  • So the answer is yes, that we’re seeding for the future.

  • They’ll reap some, maybe partial or modest benefit in ’06, but these are really for looking outward beyond.

  • Youssef Squali - Analyst

  • Makes sense.

  • And lastly, why the stock split?

  • Scott Turicchi - CoPresident, CFO

  • You know, the last time we did a stock split, the stock was around this range.

  • It was in the mid to high-40s.

  • We think that as we said in the proxy or we hinted at in the proxy, the stock is getting to a point where some additional liquidity in terms of shares, a lower stock price for smaller individual investors seems to make sense.

  • We’re timing it in conjunction with the annual meeting, so unlike a few years ago when we did the last split, there is no hard incremental cost to the Company.

  • Last time we had to go out and get a special vote for the shares, independent of our annual meeting.

  • And just coincidentally, this happens to reverse out now the 4-for-1 reverse split the Company did in 2001.

  • So, we went public, we did a 4-for-1 reverse, we did a 2-for-1 forward.

  • If we have a successful vote for the shares, we’ll do another 2-for-1 forward and be back kind of where we started.

  • Operator

  • Ari Moses of Kaufman Brothers.

  • Ari Moses - Analyst

  • I want to discuss a little bit on the licensing revenue.

  • As far as, first of all, I missed the dollar amount that you said.

  • Did you say it was $800,000 in the first quarter?

  • Scott Turicchi - CoPresident, CFO

  • Yes.

  • I think it was closer to $850,000 of revenue in Q1 from our patent and licensing activities.

  • And as you know, that is encompassed in other revenue on our GAAP statement.

  • Ari Moses - Analyst

  • Okay, so you’re saying it’s going to be about $400,000 less next quarter.

  • How should we be thinking about those revenues on a full-year basis, as far as the timing, as far as how the model works for recognizing those revenues?

  • I know there are various models where some may be recurring and some you may get paid up-front.

  • Is there any way for us to think about them, whether it’s a quarter to quarter basis or on an annual basis on what they may represent of the total or what they may represent of your guidance?

  • Scott Turicchi - CoPresident, CFO

  • I can tell you, I think over the course of the year what we think it will bring in.

  • As I say, the timing in a given quarter or given month is tricky, because even for us, as we negotiate these deals, there’s different types of deals that have different implications for a GAAP purpose.

  • But, we now have been generating license revenues for three running quarters;

  • Q3, Q4 of ’05, Q1 of ’06.

  • The average has been about $600,000 a quarter.

  • Some have been higher, some have been lower.

  • This was our best quarter to date.

  • And I think as we’ve looked at our own guidance for 2006, the belief was we would be probably in that range of about $600,000 a quarter, on average, recognizing some quarters would be higher, some quarters would be lower.

  • And so, I think that is still a fair and comfortable assumption, knowing where we are through Q1 and looking at the pipeline and our best expectations for Q2.

  • Ari Moses - Analyst

  • So, if we step back and look at fourth quarter for a moment, the number came in at the low end of guidance, you had partially sited the licensing revenue partially was seasonally.

  • Obviously, you’ve got a tight range on revenues now in Q2, a relatively wide range for the year.

  • How much of that variability that you’re looking at for the year is based on the licensing revenue, if you can put it--?

  • Scott Turicchi - CoPresident, CFO

  • I think there’s a piece of it.

  • That’s not a seminal driver.

  • I think when we look at our range for the year, we’re taking into account baskets of variability across really all the major drivers.

  • What we reference in Q4 is we had a situation that was in negotiation.

  • I’d have to check to see whether it still is.

  • But it alone could be 7 figures.

  • One licensing transaction, one licensing relationship which could be 7 figures and I don’t mean with a 1 in front of it.

  • So, obviously, if a transaction like that hits in a given quarter or even in a given fiscal year, you’ve got to put a little bit of a range in to accommodate for that.

  • Now, it did not occur in Q4, nor did that transaction occur in Q1, but there are some that are more meaningful than others in terms of their potential.

  • Ari Moses - Analyst

  • Got it.

  • Okay, just a couple of other things.

  • First, on the corporate enterprise front, you gave a bunch of metrics.

  • Can you tell us what percent of revenues that segment was representing now, if there’s a way to break it down?

  • I think in the past you talked about 5% ballpark.

  • Scott Turicchi - CoPresident, CFO

  • I think that’s still true, the enterprise piece.

  • If we look at the corporate piece as really having three components.

  • There’s an SMB component, which continues to be the largest.

  • There’s an enterprise piece and then there’s the newly launched SME piece.

  • In the aggregate, those pieces, plus some of the business customers that are in our individual channel, they account for about 30% of total revenues.

  • So we call those our corporate customers, then broken down into the subcategories.

  • The enterprise would still be probably a little less than 5% of our total.

  • Ari Moses - Analyst

  • In terms of the new pricing or the price test that you’re conducting, and then looking at the guidance for the year, it looks like the revenue guidance is back-half weighted if I take the midpoint of your second quarter range.

  • Looking at roughly, ballpark of 85 to 90 million was the first half, 90 to 95 million the second half.

  • Are you making assumption there that some of this higher pricing does go into effect in the second half?

  • Scott Turicchi - CoPresident, CFO

  • No.

  • Right now we’re making no assumptions as to our guidance regarding any price change, because in fact, there could be no price change.

  • Ari Moses - Analyst

  • You had mentioned, if I got it correctly, you had mentioned up front that part of what went into second quarter guidance was the fact that your adds could be slightly affected in second quarter due to this price test, which, if I’m not mistaken, is a new test.

  • You had not planned this before – or at least not told us about it before.

  • And therefore, when you look at the full year, no change in the guidance on full year, suggests that you somehow are making up for the slightly fewer adds that you may have in second quarter.

  • Scott Turicchi - CoPresident, CFO

  • Adds from the test are not going to buy us the overall annual numbers.

  • Ari Moses - Analyst

  • It’s not a meaningful number of--?

  • Scott Turicchi - CoPresident, CFO

  • I don’t think it’s a meaningful enough number.

  • Now, the outcome of the test may influence our view on the back-half of the year.

  • And certainly if prices go to some of the prices that the marketing team is testing, we’ll have to rethink the implication of both the ARPU for the back half of the year, and also the net gross adds, at least from those customers who are affected or those channels that are affected.

  • What tends to happen in these things, at least the way it worked in 2003, is for about a 60 to maybe 90-day period, you have lesser gross signups, at a higher price.

  • And over the timeframe, the gross signups should come back to trend line, meaning that somewhere between your 61st and 91st day, you’ll be back on trend line of gross paying adds, but at a higher price.

  • Ari Moses - Analyst

  • And last question on that.

  • For the customers that are in the test, if you do end up reversing the prices, is there a clause in the test where their prices get reversed or are these customers that sign up for these services and we’ll keep that going forward, keep those price-points and keep the services that they receive?

  • Scott Turicchi - CoPresident, CFO

  • I don’t think we’ve determined that yet.

  • Hemi Zucker - CoPresident, COO

  • We have a history of successful price changes, so we never had to deal with something like this.

  • But you know, being a fair Company, which I think if it will happen, it’s very easy to credit customers.

  • But to be honest, I just don’t think we’re going to have an issue like that.

  • Operator

  • Frank Marsala of First Albany.

  • Frank Marsala - Analyst

  • Just a couple of easy questions I think.

  • Property and equipment spending looked like it was down this quarter.

  • Can you give us a sense of what went on there versus in prior quarters?

  • Scott Turicchi - CoPresident, CFO

  • I don’t think there’s anything specific.

  • Usually our expenses in that are aggregate, roughly, our depreciation and amortization, which is about an $8 million run rate, but the spending is lumpy.

  • We do some of our equipment buys opportunistically.

  • So there will be quarters where we will buy more than we intend to consume or put in the field, because we have good opportunities.

  • I believe in Q4, such an opportunity arose.

  • Somebody was exiting the market or they basically had a lot of cards available, fax and voice cards.

  • We went in and bought them at $0.30-$0.40 on the dollar.

  • Now, that amount that we spent in Q4 was not all deployable or utilizable in Q4.

  • So we just inventoried those and then as our needs require it, as we launch new countries, new pops, new areas of presence or change out old equipment, we’ll just dip into that inventory.

  • We tend to moderate it like that, where when we think there are good buys available, we’ll jump in, we’ll buy more than we need.

  • We know that probably within a year we’ll use it all.

  • Frank Marsala - Analyst

  • Okay.

  • And then Scott, just on usage, and I know you’ve talked a little bit about it, what are you doing now – where are we as far as usage is concerned?

  • How did you see this quarter developing and how do you think it goes, looking forward?

  • Scott Turicchi - CoPresident, CFO

  • The usage is strong.

  • I think in Q2, as I mentioned, there probably will not be much, if any, pick up in business days relative to Q1.

  • Last year that was not the case, because Easter fell in Q1, so you’ve got about a 2 business day pickup.

  • To give you a sense, a business day on variable or usage revenue is about $189,000, so we’re not looking for much, if any, pickup between Q1 and Q2 this year.

  • But I think usage revenue should still be strong.

  • We do have this phenomenon that we are not accounting for, not attempting to handicap, which is that we usually do see a seasonal spike in usage, meaning a positive spike, in the second quarter relative to the first quarter, even beyond any business day activities.

  • Since we do not have a way of handicapping or fully understanding why that happens, we’re uncomfortable putting that into our guidance.

  • So that is not part of our guidance.

  • But the underlying sort of core usage trends in the business look strong.

  • I have no reason to believe that will not continue.

  • I would still [caveat] as we get later in the year, expect it to be softer in Q4 than say Q3.

  • Frank Marsala - Analyst

  • Okay.

  • I appreciate it.

  • Thanks, guys.

  • Scott Turicchi - CoPresident, CFO

  • We have a couple of email questions that we want to address before we go back to the live questions.

  • One question had to do with any repurchase activity.

  • As I announced earlier, no.

  • When the program was announced, we were in the midst of going into a blackout period, so there were no repurchases made during the first quarter or for that matter, as of and through today.

  • And then on the patent litigation, there’s really no update on any of the pending litigation.

  • As we said last quarter, we are still awaiting a response from the patent office on several of the patents that are under review.

  • We thought that the earliest of the patents that was under review, there would be comment on by now.

  • That has not been the case.

  • The patent office continues to be deluged with a lot of activity, so we continue to monitor that and if there’s any change in the patent landscape, litigation, I’m sure it will be available through our various filings or conference calls.

  • Next question that comes from an email is for you, Hemi, in terms of how the bring your own number expands the addressable market for our services.

  • Hemi Zucker - CoPresident, COO

  • Oh, this is a very simple one.

  • Today, customers that are considering to migrate to j2 are going to save themselves between $20 and $30 a month, but on the other hand, have to give up their number.

  • Many people say for $20 they don’t want to go through the effort of getting a new number and advertising it and you know, those numbers show up on Yellow Pages, on advertising, everywhere.

  • Now that we offer them to keep their number, we believe that not only they will be able to save money, but they will also be able to move on with the existing number, and therefore, all those people that were not so impressed by the savings, are going to basically take it and move on.

  • And therefore, our addressable market now is everybody with a fax machine, versus before it was everybody with a fax machine that is ready to change his number.

  • The next question from the same email is, how do the developer tools for the enterprise channels expand potential pipelines and shorten sales cycles?

  • Two parts I see here.

  • Shortened sales cycle, I don’t really – I’m not sure it will.

  • Sometimes the decision is being held by the fact that it’s a company that is about to buy our services have arrangements with a competitor that is supporting their IPI faxing devices.

  • Now that we can provide it, we can eliminate the cause of the headache or the problem, in migrating from the service that they have.

  • In many cases they have servers that are providing the fax services, but also to servers are sometimes getting additional funds and this is not directly at risk by our product offering today.

  • When we’ll have it, basically it will be easier for them to do the full transaction and move to j2.

  • Operator

  • Shyam Patil of Raymond James.

  • Shyam Patil - Analyst

  • Hi, this is Shyam Patil, filling in for Mike Lattermore.

  • You know, going to the enterprise side, you’ve typically added about 2 enterprise customers a quarter.

  • This quarter you added 3.

  • When do you expect that to ramp-up more around to 4 or a little higher than that?

  • Scott Turicchi - CoPresident, CFO

  • Well, obviously made a step there this quarter.

  • As you know, last year, for each of the four quarters we added 2.

  • We have been, as you pointed out, looking for when we consistently get to 4 or more per quarter.

  • I think the company made good strides in getting there in Q1.

  • The pipeline is something that is clearly there, it’s clearly very robust, but as we said before, it’s a little tricky to predict the exact timing of when these deals will actually be signed and then as a result, deployed.

  • Which will be 1 to 3 months after signing.

  • So, I continue to believe that the answer to your question will occur at some point this year.

  • I’m unwilling to make a prediction as to which quarter that will be in, because I think that we could all see an avalanche occur in one quarter or you could see it spread out over 2 or 3 quarters.

  • That’s just the nature of that channel and that business.

  • Hemi Zucker - CoPresident, COO

  • Also, some of the deals that are on the wake line are larger than the ones that we have signed in the past, which also, you know, not only more customers, also larger ones.

  • Scott Turicchi - CoPresident, CFO

  • But it increases the complexity.

  • Hemi Zucker - CoPresident, COO

  • Yes.

  • Shyam Patil - Analyst

  • Okay.

  • And could you talk a little bit about the typical sales cycles for enterprise deals and whether there’s been any change this quarter and whether you expect a change in the future?

  • Hemi Zucker - CoPresident, COO

  • I don’t think – Scott, correct me if I’m wrong.

  • I don’t think that we have any noticeable change.

  • Our salespeople are getting better in teaching the product or the service.

  • The decision making of buying our enterprise products are usually in the bottom of the priority of the decision makers.

  • And therefore, while we are doing an excellent job in some customers, you need to wait, because it’s driven by their desire to change the infrastructure and move away from the fax server to our services, in the case of the larger customers.

  • In the smaller ones, we are seeing some shortening of the cycle, but nothing that I would take into account in a meaningful way.

  • Scott Turicchi - CoPresident, CFO

  • I think we’ve seen some improvement.

  • I think where continuing improvement comes in that channel is not so much in trying to push a Fortune 100 company to move faster, because they’re going to dance to their music and their timeframe.

  • The key – and this is why we threw some of the pipeline out this quarter, is internally, for us to focus our people and to sharpen their skills to see when is a transaction really going to be right within a 6-month to 12-month period?

  • And as we get more into this channel and as we land more deals and as we look at more processes, I think there are indicators that will tell you, yes, this is really going to happen within a year.

  • Something is going to happen within a year.

  • Or, this may be a fishing expedition.

  • Something will eventually happen, but it might be 2 years out.

  • And so Tom and his team, from a management perspective, are trying to hone our sales force in on really identifying, here are those triggering points that are going to force this company to make some decision within some number of months.

  • It’s those situations that we want to be playing in .

  • And as I say, with each month that goes by, with each deal we do, with each deal we pass on, we are able to better define what those triggering moments are for a potential company.

  • And then really focus the sales force on that subset that can bear fruit within the next, in this case, say, fiscal year 2006 – the next 8 months.

  • Operator

  • Tavis McCourt of Morgan Keegan.

  • Tavis McCourt - Analyst

  • First of all, just a quick detail.

  • On the bring your own fax number capabilities, is that something up and running now or planned for later this year?

  • And then also on that, in that situation, who ends up being the customer of record from a number portability standpoint?

  • Hemi Zucker - CoPresident, COO

  • I think I’ve indicated, but we are going to start and do beta testing of this service during Q2, in the next 30 to 45 days.

  • The service is in alpha, which means we are testing it internally on which will be exposed to the public.

  • Those customers are basically forwarding their numbers to our telco and therefore, we become the holder of record.

  • But we are going to offer them also the capability, for a fee, to take the number back.

  • Tavis McCourt - Analyst

  • Got you.

  • Then on the ARPU, it looks like it was kind of still in the 1635 to 1640 range, which is down from where it was this time last year.

  • Q4, obviously, there was usage and days.

  • It looked like the usage picked up.

  • Are we just seeing the impact here of more enterprise customers in the customer base or is there something else going on that’s kind of holding ARPU down near-term?

  • Scott Turicchi - CoPresident, CFO

  • I think you’re seeing 2 things.

  • First of all, every quarter we have to look at the average life of a customer.

  • If you look at the cancel rate, you’ll see that it has been at the lower bound of our range of 2.5 to 2.75.

  • The effect of that is that in Q1 we had to extend the average life of a customer.

  • It cost us a little under $200,000 in revenue and about $0.08 or $0.9 in ARPU.

  • That would be fixed ARPU.

  • So if you go back and you normalize it, the fixed ARPU would have been roughly constant with Q4 and the variable ARPU was up about $0.14.

  • So I think that from time to time we will have those alterations in the life of a customer, sometimes longer, sometimes shorter.

  • If the customer life gets longer, which is generally a good thing, we bring in less of the activation fees.

  • We have to amortize that over a longer timeframe.

  • If the customer life gets shorter, it works in the reverse.

  • It’s generally not going to move the needle a lot, but it can move it a nickel to a dime per month in ARPU.

  • And then I think the second point is, the answer to your question, yes.

  • The enterprise, even some of the SME customers, clearly come in and eVoice as well, clearly come in at lower fixed as well as generally aggregate ARPU.

  • The fixed ARPU of all of those services are anywhere from $4.00 to $6.00 or $7.00 a month and the aggregate ARPU is often times $10.00 or less.

  • So as more of those customers come in, it’s a function of how many of our high ARPU customers that are doing $40 and $50 a month come in and do they roughly offset.

  • Historically, the answer was, yes, they roughly offset.

  • Last couple of quarters it’s been more of the lower ARPU per DID, relative to the heavier or higher ARPU per DID, so you’ve seen it weigh down somewhat on the average ARPU.

  • Tavis McCourt - Analyst

  • Got you.

  • And then some clarification on the purchase in the quarter.

  • Were there any revenues associated with that or was that just a strict technology purchase?

  • Scott Turicchi - CoPresident, CFO

  • It was actually a patent, no revenues.

  • And it was de minimis in terms of cost.

  • I mean, literally de minimis.

  • Operator

  • Follow-up question from William Benton of William Blair.

  • William Benton - Analyst

  • I know that you guys have said before that real estate is less than 10% of your revenue, but you know that there are a lot of people that are always worrying about this.

  • I was wondering if you could – given that you guys are not obviously, you’re talking about variable revenue staying pretty flat, I’m sure there are people reading into these types of things.

  • So I was wondering if you could just offer us any sort of look in terms of what you’re seeing in terms of the impact on your business from any of the residential housing softness?

  • Scott Turicchi - CoPresident, CFO

  • Two things.

  • First of all, we’re not saying that variable revenue will be flat in Q2.

  • William Benton - Analyst

  • I’m sorry, you’re not banking on the pickup.

  • Scott Turicchi - CoPresident, CFO

  • Well, we’re not banking on the pickup only because in the last three fiscal years where there’s been one that is in excess of the business days, there has been no variable to point to as to why.

  • And I think it would be imprudent to try to predict or guesstimate that in fact it will happen again, when the reason underlying it historically is unknown.

  • We certainly hope it happens.

  • Back to your earlier question, in terms of real estate, it is about 10%, as we’ve said before, what we can identify, the revenue of the Company.

  • So as we’ve said before, that piece of the revenue does get affected by whatever is going on in the real estate market.

  • You know, rates up, rates down, housing starts up, re-fi activity up or down, all of that tends to move the needle, but on the margin.

  • William Benton - Analyst

  • Okay.

  • So you’re not noticing much difference yet in terms of adds or variable usage?

  • Scott Turicchi - CoPresident, CFO

  • Well, on the adds side, you mean the gross adds, for quite a while now we have not emphasized the real estate-related business as a targeted area.

  • It’s a good business, no doubt, even in it’s less good times.

  • But the corporate channel is really focused on the other verticals like legal, medical, even professional services.

  • Some of our larger customers come from the professional services area.

  • So there has been, by design, a movement amongst the corporate channels to bring in other verticals that we know are heavy users of our kinds of services.

  • That created a dilutive effect on the impact real estate had.

  • We clearly have a piece of our business is real estate and we clearly like that.

  • But it’s had a dilutive impact.

  • But I don’t think it’s really affected the gross adds, because it just hasn’t been a focus for us.

  • What it can affect positively or negatively, is the variable or usage revenue.

  • William Benton - Analyst

  • Right.

  • What about the churn, anything there noticeable?

  • Scott Turicchi - CoPresident, CFO

  • No, none that I can see.

  • William Benton - Analyst

  • Okay.

  • And then in terms of – you’re talking about Asia is a little bit of a focus.

  • Have you guys adjusted or maybe can you offer us any more color on what your channel strategy is going to be in terms of penetrating some of those markets?

  • Hemi Zucker - CoPresident, COO

  • Yes.

  • We are trying to identify the market, if it’s right for us.

  • And the two markets that we are seeing now is Japan is being a very large fax-intensive country, which is as modern as the US.

  • And it’s one of the avenues that we are trying to do is penetrate into Japan.

  • And the other one, which is more the bluebird in China, where we know that there is demand and we know that the market is booming, but we have the issues like the need to go with a local partner and all the other issues.

  • We constantly meet with potential partners and potential acquisitions.

  • We have in our 10 people that can cover in both languages, etc., but we don’t have anything yet.

  • I would say that I think most obviously, the easier one to predict, even though I’m not suggesting a certain date, would be Japan.

  • But the largest one on the long-run will be China.

  • William Benton - Analyst

  • Okay, but the channel development is kind of a work in process, you’re really looking at it as ’07 kind of a benefit.

  • Hemi Zucker - CoPresident, COO

  • Well, we are talking with a few companies that are small, but leaders in their markets and those companies are talking mostly on an acquisition bases, so those things can happen faster.

  • But I cannot tell you anything in specific.

  • Operator

  • There are no further questions at this time.

  • Scott Turicchi - CoPresident, CFO

  • We have one last question that has come via email.

  • It has to do with what has been termed here a fax over IP standard.

  • So Hemi, if you would discuss what various standards exist today and what we see and whether that might be an opportunity in the future?

  • Hemi Zucker - CoPresident, COO

  • I think that the question here is referring to the fact that there is a new standard called T.38 which is supposed to solve the issue of fax over IP.

  • As you know, we have a department in the engineering group that is focused on all the various technology for faxing, etc.

  • T.38 is the protocol that we are closely following.

  • We have decided not to adopt it, because it doesn’t resolve the issues that our customers have now.

  • It’s not a standard that is stable and reliable yet.

  • If and when it will become the standard, we will be in a very good position to move into it.

  • It doesn’t really impact the customers.

  • It’s more a technology that is being used to save cost.

  • So if and when we decide to adopt the T.38, you will see or cost going down.

  • We will not do it before we are certain that while saving on the cost, you will also be able to keep or improve the level of service.

  • Scott Turicchi - CoPresident, CFO

  • I believe we have one last live question.

  • Operator

  • Rod Ratliff of Stanford Group.

  • Rod Ratliff - Analyst

  • Just a very simple question, following-up on the Asia question.

  • Any further developments with regard to native language service?

  • Scott, I know that you and I have talked about this rather extensively recently.

  • But is there any more color that you might be able to provide?

  • Scott Turicchi - CoPresident, CFO

  • Well, I think at this point it is still to be done.

  • Clearly, we do not have it today and we need websites in various Asian languages.

  • That’s part of the overall plan, in terms of how we go into Asia.

  • I think as Hemi mentioned, probably Japanese would be the first one.

  • But that is something that is not live today.

  • Hemi Zucker - CoPresident, COO

  • And I want to mention that we do have a mini-site in Mandarin Chinese, that is being supported, including customer support and all the [inaudible], but it’s only for Hong Kong.

  • We have service and employees in Hong Kong and we are covering it, but it’s really not what the Mainland China is looking for.

  • As Scott said, probably Japanese would be the next language that we will support.

  • But we are looking, first of all, to get the customer base through an acquisition and then take with this acquisition whatever we have and then enhance it to what we consider full support.

  • If and when we decide that acquisition is not our best strategy, we will just develop it on our own as we did in all the other languages that we are currently supporting [inaudible].

  • Rod Ratliff - Analyst

  • So likely no earlier than ’07?

  • Hemi Zucker - CoPresident, COO

  • Again, if we will acquire a company and we have several companies that we are talking, it might be something that will happen as fast as it takes to close the deal.

  • If we will not buy a company, then to 2007 actually.

  • Operator

  • There are no further questions at this time.

  • Scott Turicchi - CoPresident, CFO

  • We’d like to thank you for joining us for the Q1 call.

  • I would encourage you to look for our upcoming schedule of IR conferences that we will be presenting at over the May and June timeframe.

  • I think we have 5 or 6 scheduled, beginning in early May and ending as late as late June.

  • I would remind everybody of the Company’s guidance policy, that in those conferences where we are speaking, prior to June the 8th we will comment on guidance, either reaffirm it or if we have a reason to change it we will do so.

  • But any conference that we speak at after June the 8th, we will not comment on guidance.

  • So that’s part of the Company’s standard policy.

  • Just to remind you of that, so if you see us speaking after June the 8th, you’re not surprised to see no comment on guidance.

  • And then we look forward to all of you joining us in late July for the Q2 conference call.

  • Thank you.

  • Hemi Zucker - CoPresident, COO

  • Thank you, everybody.

  • Operator

  • Ladies and gentlemen, this does concluded today’s teleconference.

  • We thank you for your participation and you may disconnect your lines at this time.