Ziff Davis Inc (ZD) 2007 Q4 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to the j2 Global Communications fourth quarter and year-end results conference call.

It is my pleasure to introduce your host, Mr.

Scott Turicchi, President of j2 Global Communications.Thank you Mr.

Turicchi, you may begin.

Good afternoon, ladies and gentlemen, and welcome to our investor call for fourth quarter and fiscal year end 2007.

As the operator just mentioned, I'm Scott Turicchi, Co-President of j2 Global and with me today, is Hemi Zucker, Co-President and Chief Operating Officer and Kathy Griggs our Chief Financial Officer.

We will be discussing our Q4 financial results and guidance for fiscal year 2008.

In addition we will provide additional DID and financial data that we will be useful to you to better better understand our business.

We will also provide an operational look back at 2007 and and outlook for 2008.

Our IR presentation will be used as a road map for today's call.

A copy of this presentation is available at our website.

In addition, if you have not received a copy of the press release you may access it through our corporate website at j2global.com.

In addition, you will be able to access the webcast from this site.

After completing the 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 at any time, questions to investor@J2 global.com.

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 that we have disclosed in our SEC filings including our 10-K filings, 10-Q filings, various proxy statements and 8K filings as well as additional risk factors that we have included as part of the slide show for the webcast.

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

I would now like to turn to the results for the fourth quarter.

This was a good quarter for j2 in light of the continuing difficult market conditions for our credit sensitive customers and the usual decline in business days relative to Q3, due to the holidays and related vacations.

Our revenues were $56.8 million up 16% from the fourth quarter of 2006.

Our gross margin was approximately 80%.

Operating earnings exclusive of 123R charges were $23.3 million or 41% of revenues.

Net earnings before non-cash comp charges were $18.4 million or $0.36 per fully-diluted share.

On a GAAP basis our net earnings were $16.9 million or $0.34 per share.

We had approximately $0.02 of 123R non-cash comp expense for the quarter and approximately $0.11 for the full fiscal year.

Our funds available to finance our business, repurchase stock and acquire company is $230 million and that is after we spent $32 million in the quarter on stock repurchases which completed our previously outstanding program as well as the acquisition of RapidFAX.

I'd like to turn the presentation over to Kathy, who will discuss our financial results beginning on page nine.

Thank you, Scott.

Good afternoon, ladies and gentlemen.

Please refer to page nine of the presentation.

We'll start there.

Our revenues as Scott indicated, were $56.8 million for the quarter, compared to $48.9 million in the prior year fourth quarter, for an increase of approximately 16%.

We're very pleased with this growth given the continued softness in the U.S.

economy.

We continue to experience strong D.I.D.

growth or DID growth.

Our Q4 net DID additions grew to 45,700 from a Q1 low of 26,300 DIDs which was heavily impacted by the price change early on.

The Q4 net additions include the DIDs from our December acquisition of RapidFAX.

Q4 non-GAAP operating profits were $23.3 million or 41% compared to Q3 at $23.1 million and 41.5%.

Full year revenues were $220.7 million, a 22% increase over prior year revenues of $181.1 million.

And finally full year non-GAAP operating profits were $93.8 million or 42.5%, compared to prior year profits of 71.7 or 39.6% of revenues.

Before I start my discussion on expenses, I want to remind everyone that both 2007 and 2006 non-GAAP financials include--excludes 123R non-cash compensation expense.

The non-GAAP gross margins for Q4 were at approximately 80% which was similar to Q3's and full-year gross margins are at 80.4%, a slight improvement of the prior year's 80%.

At this pointing like to remind you that going forward we are going to be reporting on a GAAP basis.

This is our guidance as well as our actual results we move into 2008.

Q4 2007 non-GAAP selling expense was 17.2% of revenues, R&D was 5.1% of revenues, and G&A was 16.7% of revenues.

Overall R&D expenses were in line with our expectations.

Slide ten will provide you with overview of quarterly 2007 margin trends.

Our diluted non-GAAP EPS was a solid $0.36 a share for the fourth quarter consistent with our Q4 guidance.

Full-year non-GAAP EPS was $1.45, a 29% increase over prior year's EPS of $1.12.

Q4 GAAP EPS which includes 123 non-cash compensation was $0.34.

And 2007 full-year GAAP EPS was $1.35.

A GAAP reconciliation schedule can be found on slides 23 and 24 in the presentation.

Total 123R non-cash compensation for 2007 was approximately $7.5 million pretax and $5.3 million after-tax for approximately $0.11 a share.

Moving on to the balance sheet, our free cash flow was a healthy $21.4 million in Q4 and $84 million for the year.

Please refer to slide 22 for the free cash flow computation.

Q4 2007 capital spending of $4.4 million includes upgrades and investments in our networks and related data centers.

With this infrastructure investment, we are well positioned for future growth and efficiencies, and this will enable us to further improve our already strong gross margins for the coming year.

Our cash and cash equivalents, short and long term investments increased to $229.8 million for the quarter.

In Q4 we spent approximately $32 million as Scott had indicated previously, completing our previously authorized share buy-back and the purchase of RapidFAX.

As you'll note in the press release the Board of Directors authorized a new buy-back program of five million shares through 2010.

Moving to slides 11 and 12, we'll spend a little time there.

These contain new information that we have not previously provided.

We are providing this information to give you a historical insight into the evolution of our business.

The data on these slides are provided for informational purposes only and is to be used with discretion.

We do not intend to provide update on these charts in a go-forward basis, but this is why it is included in this section of the presentation and not in our metrics section on page 21.

On slide 11 we provided you with the 2004 to 2007 paid DID trends by both service type and by market.

As you can see over the past three years we've experienced consistent growth in both our fax and voice businesses in both the United States and international markets.

In particular, I want to point out that this year we've grown our domestic voice business by almost 150% and it now accounts for almost 8% of the total paid DIDs in 2007.

We expect strong organic growth to continue in 2008 and overall we added 160,000 net ads in 2007, while raising prices by about 30% to a substantial portion of our fax customers in a deteriorating economy in second half of 2007.

On slide 12 you will see the same break out but for revenues.

Note that the other revenue line is comprised of revenues derived from our non-subscription based businesses, namely e-mail, advertising, patents and jBlast.

As I mentioned earlier, 2007 revenues increased by approximately 22% over the prior year.

U.S.

revenues increased 19% and international increased 48%.

This concludes our quarter and year end financial highlights.

I would now like to turn the call over to Hemi, who will provide you with recap of our 2007 accomplishments and 2008 outlooks for our products and markets.

Thank you, Kathy.

Good afternoon, everybody.

It is my pleasure as usual to discuss our 2007 results and our 2008 outlook.

This year our structural representation into fax 2007, fax 2008 and then voice 2007 and voice 2008, and in each of them I've broken it also to the U.S.

market and the international.

Let's go to page 14.

Our accomplishment on the Fax Services business in 2007 brought us to 870,000 U.S.

DIDs, most of them are eFax at the price of $16.95.

And if you add it to our international pay DIDs we have at the end of year 981,000 DIDs and I believe that we already now meets the February quarter, one million fax-only DIDS.

Our price increase is virtually down and it was very successful and as you know we've increased the prices by 30% to our individual customers.

Also in perfect timing for 2008, we have launched our multi brand approach to fax services.

As you know, we are now supporting multiple brands like Fax.com, RapidFAX and SEND2FAX.

We are offering service as low as $7.95 on the recently acquired RapidFAX, that we bought in December 2007 and up to $20 per DID per month on eFax flow.

We're basically catering here to various customers, each of them has different approach to marketing and support different customers, starting with Fax.com that have a talking figure that is simplified for those that are first time in the market trying to look for a solution and up to the pre-professional eFax and eFax Corporate.

And as said, we completed the RapidFAX acquisition in December 2007 and fully integrated by now by our dedicated team.

We also in 2007 increase our services staff both to SMB market and to the corporate sales and we continue and we will continue to do it to 2008.

We also launched our Message Center into the corporate customers and now we offer our corporate customers a fa in-and-out logs and copies of our fax, invoice messages in the message center.

Now, let's move to the accomplishment of 2007 in the international market.

Our fax DIDS internationally grew by a healthy growth 47% and we now have 111,000 customers.

We have recently established news languages, like Italian, Polish, and Portuguese on a web presence level.

We added 17 employees in Europe and most of them in Ireland and we now have 50 people in Europe, mostly in Ireland, Dublin and Galway.

We acquired YAC in mid-last year and expanded our network into 42 countries and covering 3,000 cities.

We also have completed the development of our multi-byte product and implemented it into our system in 2008.

Now, let's go to page 15, or slide 15.

This slide talks about our outlook for 2008 for the fax services.

From the M&A involvement in 2008 is very exciting for j2.

We have in j2 all the ingredients to make a successful M&A.

We have the expertise, as you know we bought 16 companies.

We have the cash, $230 million.

We have a very comfortable multiples now.

We have over 100 fax candidates to be identified, and we also have a very supporting Board.

All in all, we are very excited about opportunity in the fax arena and we have three full-time dedicated people in j2 working on it, together with some bankers and together with other people in this on the staff that are working on it on a senior level from part-time, and we are in various discussions starting with the first meeting and ending with letter of intents.

On the U.S.

market, on the fax service, we are projecting double-digit growth and the corporate segment will grow faster than the individuals.

As you know the corporate also is represented by lower churn.

We have also in our model assumed that we will have stable price environment, and with our multiple brands we are basically ready to cater to each price point in each market.

We will focus our marketing effort mostly on eFax and later on the other secondary brands.

We are going to assume that the usage will continue to be light, especially from the credit sensitive customers, and we are going to launch, hopefully, Q1 maybe the beginning of Q2, an indexing or searchable fax, if you're going to index all of the faxes that are now in our message centers, allowing our customers to search them.

On the international front, we are going to continue and increase our market penetration for the top European countries in Canada, as well, continue the penetration into our U.S.

market and in the international market, both organic and to acquisition.

We are planning to go increase our corporate European presence both in senior sales people and Telesales.

We actually started in the beginning of the year to support a corporate sales via Telesales and also in our Dublin facility, and we believe that in 2008 we will see how the effectiveness of all our consolidation in Europe will come into effect in our numbers.

We also are planning in 2008 to deploy the multi-byte system.

Now, let's move to our voice platform.

To those of you who have been following the Company for many years, as you know, we started in '95 and then went public on the premise of unified messaging and unified communication.

We started as jFax and then we changed our name to j2 Global, because we thought fax only is not going to simplify or to symbolize the fact that we are unified messaging, unified communication story.

The truth was that despite all our attempts to sell conference calling and e-mail by phone, we have never seen any success in anything beyond fax.

So we focus on our fax and make very comfortable business and only in 2007 we saw the first success in unified communication through our very exciting success in the voice services and I think now unified messaging for j2 is no longer hype only, but is going to be a cash cow.

Let us go to the presentation.

We have demonstrated a very strong and excellent of growth in newest important Voice services.

Our Voice services or our DIDs grew 147% and we now have 77,000 DIDs and based on our general result we already hit our $10 million revenue run rate for the year .

The two founders of Onebox are working for us in the U.S.

and I just promised them that when they will hit $1 million per month in the U.S., I will spend a full day with them and they are telling me it will be sometime in March or April and I'm looking forward to it.

We have also introduced a new features in Q4, including click-to-call.

Basically click-to-call is when you get a voice message, you can click on it and return the call that is basically a bridge is launched in connecting you and the caller to collect your message.

We also have included a Beta of click--sorry, speech-to-text.

Basically voice messages are converted to text and we believe that with both those services we will be able to sell them and increase the ARPU.

As you know the ARPU for voice services are slightly lower than those of the fax, but we are going to bring a penetration period and we believe that with all of these additional features and the good opposite of those we will slowly but surely increase also our output for the Voice services.

In the U.S.

during 2007 we also increase our Telesales staff and expanded our customer support.

Now we have much more scalability than we had before.

As I said before, the continued growth caught us by surprise and I think we're ready both on the sales and the support side.

On the international side, we have here a history.

When we bought Call Science, the tele Onebox, they had both Onebox U.S.

and Onebox U.K..

The Onebox U.K.

was a very old platform producing approximately $1 million a year and was based on calling party base and we couldn't do a lot with the technology and we were thinking about taking the U.S.

developed and modern platform and basically doing an installation in actually in slowing the U.K.

When we bought YAC we found a company that was ready for the market.

It was a modern platform and already had existing business.

It saved us a lot of time to market in cost.

In late 2007 we started to focus on the YAC product for voice, and basically we are working on it and we are launching the next quarter or during this quarter a reception-like product similar to the U.S.

market.

And let's move to slide 17.

Our outlook for Voice Services.

The Voice Services is in as a whole is in an early stage but we feel as of the beginning or middle of last year that the market is ready, and we see very high and healthy growth with a lot of competitors, and we already are starting to do some investigative discussion with them looking for targets to be acquired and grow our Voice Services.

There is o--clearly they're in the market and we are hoping that through our actions we will become the market leader soon.

In the U.S.

market we expect in 2008 that our organic revenue without acquisitions will more than double.

And as you saw in the slides that Kathy provided you, in 2007, we had $6.6 million of revenue and we are going to double it this year.

We are going to launch new websites both for eVoice and Onebox.

We continue to test all the marketing--the marketing tricks.

We continue to do cross-selling into the SMB, into the fax customer base and also to our eVoice base.

We are going to complete the rollout of speech-to-text, and also we just launched a live Onebox Receptionist basically for those customers who want to outsource the PBX and also want to have a receptionist that can take the call, when nobody else can.

There is an outsource solution we are providing on a small scale, but so far initial response is very exciting.

On the international front we expect to continue organic revenue growth of approximately 50%.

We are going to launch in this quarter the improved YAC website, which is going cater to our Voice Services and we are going to launch a European-centric brand.

As you know, not always names like eVoice Reception, and Onebox Reception translate well into the European markets, and I hope that I will be able to expose to you in the next earning call the new name and the new logo for the services in Europe.

Also as I said before, now with the acquisition of YAC we were able to integrate our U.K.

and Irish platform into one to be serving the entire European region.

All in all, 2008 will be the year in which we anticipate accelerated and large M&A deals to remind you all, the all the 16 deals that we have found so far, with all the 15 companies that we have bought we never paid more than $10 million.

So we hope to have larger views this year.

Voice Services will be the center stage of our growth and, and fax, will continue to grow in a very healthy way.

Now, I'm going to pass the call to Scott to talk about the

Thank you, Hemi.

On slide 19 you see our guidance for 2008.

I would remind you that on the EPS this is a GAAP number by way of reference for 2007, we had $7.4 million pretax of non-cash comp expense pursuant to 123R or $5.3 million after-tax, approximately $0.11 per fully-diluted share.

As we've now completed the price change to eFax, we believe that the correct way to look at j2 and the way we look at it pursuant to our own budgeting process is on an annual basis.

As a result, we will not be providing quarterly guidance for Q1 or any subsequent quarters in the future.

Also, we've attempted to build a range of both revenues and EPS this year that takes into account a number of factors-- , on the revenue side, is the organic growth, which we believe will continue to be the primary driver of our total revenue growth; However, as Hemi mentioned in his presentation, there are numerous opportunities for us on the M&A front, some of which are larger than the deals we have done historically.

We believe that if the economy stays weak or further weakens, this will accrue to our benefit to acquire companies, customer bases and revenue streams, as both they feel the effects of weak economy and also the valuation becomes more palatable to us.

On the other hand, if at some point if through interest rates or other stimulus packages, the economy rebounds, we would expect to see an uptick in both our net DID activity as well as our usage-based revenue, but the contrary is we may do less M&A.

On the bottom line, we have of course, the flow-through of the incremental revenue of both the organic and the acquired companies revenue streams, combined with how we deploy our cash balances and our cash flow.

As both Kathy and I mentioned, the Board has authorized a five million share buy-back.

At where we are currently trading it is a five or six year low in terms of multiples evaluation, whether you would want to look at that on EBITDA, free cash flow or net earnings.

So, at these levels and with the declining interest rate, repurchasing our own stock becomes very attractive.

So those are the elements that will be utilized in terms of coming up with our actual quarterly and annual results.

It is our intention unless there are changes throughout the course of the year, to reaffirm this range of revenue and EPS through out the year.

Obviously, if there are changes in any conditions that would cause us to believe we would be outside of the range, we will make the appropriate disclosure.

And at this time, that concludes our formal remarks and I would now ask the operator to come back and to instruct the callers for the

Thank you.

Ladies and gentlemen, we will now be conduct a question-and-answer session.

(OPERATOR INSTRUCTIONS) Our first question comes from Daniel Ives with Friedman Billings.

Proceed with your question.

Hello?

Hello?

Hello.

Dan?

Do you hear me?

Now, we do.

Okay.

On the quarterly guidance, that's a shift, not giving quarterly guidance, what sort of played into that, 'cause that is a change from the past?

Yes.

Several things played into it--one, I think, internally it is something we would have like to do have done earlier on, ideally in '07.

It was my belief that was not the right time to not provide quarterly guidance, given that we were going through the price change and given as we know from the current price change as the one three years ago it creates a degree of uncertainty and volatility in terms of how analysts and third parties analyze it.

So we felt to maintain the quarterly guidance was appropriate.

But now that that is over, as I just mentioned, we do annual budgets, not quarterly budgets.

We look at the business holistically over a 12-month period, and we would encourage others to look at the business in the same way.

But, I mean, could you just give some sort of--I mean, quantitatively, qualitatively, just in regards to how it should trend throughout the year?

Is it similar to other years, X price increase, or you can't really talk about that?

No, what I would say about this, as it relates to Q1 '08, since we're more than half-way through the quarter, you should assume that even if there are any M&A transactions consummated before the end of the quarter, they're not going to have a material impact for our revenue in Q1.

So Q1 is basically an organic growth quarter.

You've got the sort of a number of net DID activity that we produced over the last several quarters.

As you can see in the last three quarters, excluding Q1 of '07, it is returned to a level that is approaching 50,000 net DIDs per month.

We have given you the monthly ARPU, the average monthly ARPU.

As I said on the previous call in Q3, probably there will be a downward bias over time on that ARPU, given that there is a shifting mix towards corporate DID, international DIDs and voice DIDs, all of which have a lower ARPU an individual domestic fax did, for the most part.

There are some domestic faxes that have lower ARPUs, but for eFax it is between $17 and $21 or $22 dollars a month.

Okay.

And--

In terms of the margin structure, we are starting to experience, as Hemi and Kathy both commented, increases in those margins.

There will be some at the gross level as we weed some of the efficiencies of what was it, heavy year in CapEx for us in '07, over $10 million, I think it is the single biggest year we've had in a number of years.

So that gets absorbed.

t causes some near-term pressure as that rolls off through depreciation, primarily through cogs.

You saw a little bit of that in terms of the near-term pressure in Q4 on the gross margin.

As that gets absorbed as we get the efficiencies out of that piece we should see a lift in gross margin.

Also beginning 1/1/08 we've been previously been absorbing on behalf of our international customers the VAT.

That is being passed through to them.

We will no longer bear that cost that also flows through cogs.

Those two elements give us a lift on our gross margin, and then on the operating margin, as you see the R&D fairly consistent with some minor volatility on on hiring practices, around 5%, a little over 5% of revs.

The G&A moves around.

We had heavy professional services fees in Q4.

Those should roll off in Q1 to a large degree, so I would expect that to be a lower percentage of revs and then the sales and marketing as has historically been the case, depending upon the timing of the programs and how we send spend our money and how effectively we spend it, probably will bounce around from a range of 15 and change to a high of 18%.

Okay--

Net, net, that should still give an increase in the overall operating margin of the Company.

I am speaking now non-GAAP.

Then you have the layer on top of it, the 123R expenses.

Just on M&A, can you just talk more about that?

I mean, how are you sort of looking at it.

Ranges of how high would you go up to from an acquisition.

But just walk us through--if the market continues to be bad, you get a lot of these potential private companies on the cheap.

Certainly cheaper on a relative to their ask and maybe in some cases our bids in previous quarters of previous years.

Yes, that's correct.

Can you just talk about like size?

You guys traditionally have been in smaller deals.

They range from the kind of deals which I would say is our historic deals, where the annualized revenue is a couple, $3 million.

But there are deals that have tens of millions of dollars of revenue.

Okay.

And they flow--both in the fax space and to some extent in the voice space.

The voice space is a narrower set, which in Hemi's presentation we've identified in excess of a 100 companies on a global basis that are fax providers either in whole or in part, but there are probably only 20 companies some companies, primarily domestic, not exclusively, but primarily domestic to approach in the voice services area.

Also since that space is a high-growth space not only for us but from what we can and have observed for the industry as a whole, those will command higher valuations.

And finally when you look at the '08, I mean it is a pretty big range for guidance.

In regards to acquisitions, like does that guidance assume--I guess like RapidFAX like, just talk about like--or organically--

I think if you go to the lower end of the range basically there is no acquisitions that would assume continuing poor economy, no bounce-back, no benefit from falling interest rates, no acquisitions.

If you go to the higher end of the range, that's probably clearly some amount of acquisitions or some grouping of acquisitions, plus, you know, certainly no worse economy than we're suffering now with some uptick if lowering interest rates does create lending from the credit-sensitive sector.

Something certainly that we saw in the '03 to late '02 to mid-'03 time frame, when interest rates fell dramatically and in that case it was specifically mortgage related with a lot of re-fi activity.

So as I said, we attempted to build a range, taking into account over this 12-month period, a variety of scenarios that may very well play out both in the economy and how that then would affect our view as to organic growth and the trade-offs between organic growth and acquiring companies.

It is almost like the middle of the range assumes kind of organic, more potential acquisitions?

Is that the right way to look at it?

Yes.

Heavily weighted to organic but with some acquisitions because as I say we have a history of doing a couple of these deals a year that normally adds one to three points to our growth rate.

Also--

If you look at it on a GAAP basis.

Also, Daniel, it is important to watch the size of the acquisitions and the timing.

So if we do a big one early on, you should look at the upper end.

If we do the big ones later in the year, it will have an impact.

Less impact.

Yes.

Okay.

Thanks.

Thank you.

Our next question comes from Corey Tobin with William Blair Company.

Hi, good afternoon.

Hi, Corey.

A couple of things.

Just to dive in.

Let me just keep going for a minute on the question on the guidance.

Just to dive in.

You're saying the lower end of the range implies no bounce-back and I think the words you used were a falling economy.

Can you go into a little bit more detail on that?

How much deterioration do you have baked into the low end of the guidance range.

Well, it assumes that the usage based revenue and there is, I believe it is the last slide of the presentation, 25 except for the logo slide, shows you the continuation of the credit-sensitive/non-credit-sensitive book of business that we discussed in the Q3 call, and you will see that it basically, albeit there was some improvement on a relative basis, basically it shows trends similar to what we experienced Q2 to Q3.

Which is in the case of non-credit sensitive, the usage held flat, which is a positive given that there was about 4% decline in business days from Q3 to Q4.

You'll notice the yellow and the green are down about 15%, roughly equivalent to what it was Q2 to Q3, and somewhat better in the sense that four percentage points of that can be attributable to the lesser business days, due to holiday activity.

So at the lower end of the range we assume that continues to slide; that there continues to be lesser usage from the green and the yellow customers, the credit-sensitive, but it is a relatively stable book of business from the blue.

Yellow and green you say is down 15% total, the combined?

Individually and collectively, yes.

Remind us again just one more time, the web heavy users.

Web heavy users we deem to be credit sensitive which is probably a bit conservative.

They really small businesses but for some reason they come in through the individual web channel.

hey pay with a debit or credit card.

They generally take one or two numbers, but they they have huge patterns of multiples of that.

Got you.

So now, just to just wrap this piece up.

You're assuming this continues to decline 15% year-on-year across the board?

I didn't give you a specific number.

We continue to see--we continue at the lower end to see a continuing decline in the usage of the heavy users and the direct corporate credit-sensitive customers.

Okay, and the high end assumes it is steady not necessarily growing?

No the high end you will have it aided by more and or larger acquisitions, or lesser on the acquisition side but some pick up from predominantly the usage extensive customers if there is a reversal at some point in the year.

Got you.

One thing that could stimulate, if interest rates fall enough, then lending loosens up, you start to get more lending activity and suddenly your brokerage firms and banks and anything to do with real estate shows increase in activity.

Where would the dollar hit, if you could, from that segment, from the credit-sensitive type.

Was it $1 million, to $1.4 million so last quarter, what was it this quarter?

I didn't quantify it, but if you take another 15% off of $7 million, it would be another million bucks.

Got you.

And that's both variable and fixed, I'm assuming, right?

It is almost all variables.

Okay.

Got it.

So they hit Q2 to Q3 and the impact Q3 to Q4 is substantially all variable in each instance it is about $1 million.

At some point you got to get at a point where it is going to level out.

Right?

Well, yes.

It gets to a point where you get down to absolute--

You are just going to get the fixed.

That's exactly right.

To shift back to the guidance here for a second.

Can you just give us some of the nuts and bolts here?

What share count are you assuming for the guidance next year?

We're not because I think it's fluid this year.

We have an internal share count at various points in the range but we're not specifically providing a share count because depending upon the circumstances there will either be more cash and more shares, or there is going to be less cash and less shares.

Stock prices--basically it's an all I approach.

We got this money, you got the authorization, we can either buy back stock, we can do M&A, so depending upon the timing of the M&A, that may influence it.

And also you have the interest rate component.

If interest rates keep falling, you know, almost anything relative to holding the cash is more attractive.

And the tax rate--

Currently it is a point of note we're at about 50 million fully diluted shares with the completion--you don't see it fully affected during the fourth quarter numbers, but as of 12/31 on a GAAP basis, we have about 50 million shares.

And then--

So that is our baseline, and then obviously there can be grants to take it up as well.

To round out from the guidance, tax rates assume sort of a low 30, is that the right way to look at it?

I think no more than 30.

Some of the decisions we make can influence a tax rate but I think at this point it looks like it is no higher than 30.

Okay, and then finally on the stock comp, is about $0.11 last year after tax.

Is that a fair amount to look at for '08 as well or should it trend up?

I would look more in the dollars,because remember, if the share count moves around you can have a higher or lower on the EPS side.

So that is why I give you the dollar amount, $7.5 million pre-tax, $5.3 million after-tax.

Now there are a lot of assumptions that go into that.

One of it is the forfeiture rate.

That came down this year, which means your costs go up.

If the forfeiture rates go up, your costs come down.

Also how much you grant during the course of the year also affects it as well as the stock price.

There is a lot of variables that go into it, but I think the $7.5 million is certainly within a range of the absolute dollar amount that you should then factor into your numbers.

For next year.

Okay, then finally back to the operation metrics for a second.

Sorry, if did you mention the corporate DID number, the corporate DID for faxes today?

No, I didn't, but in Kathy's presentation I think it's there somewhere, but I'm not so certain.

Our total DIDs were 45,700 that we added for the quarter.

Corporate.

For the component

Either for the quarter or at the end of the year.

I don't think we mentioned it.

No, we didn't.

You want to know.

That would be great.

I think about it.

While you are in the call.

Okay, that would be great.

And then if I could put on the list total voice did you mention domestic was 77,000.

What were the international voice DIDs at this point?

About five.

Total about 82,000 or so for voice.

Right.

And as Hemi pointed out in the presentation, we really did not become engaged in looking at the voice services outside of the U.S.

until we had acquired YAC, which was in July, and then there is a natural several months of integration time frame.

So it's a focus for 2008, but really was not for 2007.

Got you.

I'll jump back into the queue.

Before you go, may I reply?

I'd love to hear it.

All right.

So at the end of 2007, we had--I'm going to say--almost 240,000 corporate DID, both local and international, but vast majority are local.

Meaning domestic U.S.

Domestic.

Okay?

Thank you, much.

Take care.

Our next question comes from Youssef Squali with Jeffries & Company.

Please proceed with your question.

Thank you very much.

Good afternoon.

Scott, on your Q3 call you had guided for 17% top-line growth and at least that much in bottom-line growth.

What did that guidance include, or did it include in the acquisitions?

No, it did not include any specific acquisitions.

There was--it was primarily organic.

We know that there would be little acquisitions would probably contribute a modest amount of revenue throughout the year.

Okay.

So I guess--

Look at it primarily being organic model.

So from where you sit now, versus where you sat three months ago, do you feel more concerned about the core organic growth it looks like, which is what's causing you to kind of guide for the by my math kind of high single-digit organic growth, what is baked into your numbers?

Or is that a fair assumption?

I think--look, you've got six months of usage impacts on the credit-sensitive, and all of the headline news from any of the banks or brokerage firms are not encouraging.

So at the lower--

Arguably we saw--

We assumed a continuing deterioration in their usage profiles, and we've assumed that will continue throughout the year which may turn out to be a fair assumption or a conservative assumption depending upon the timing of the impact depending on the stimulus packages that have been approved in Washington and the Fed interest rate cuts.

If you recall in Q3 we gave the initial outlook and said we're holding the business as it is right now at the end of Q3.

That's the assumption.

The assumption is that the usage patterns are as it is now.

It gets no better, it gets no worse.

Clearly in Q4 the credit-sensitive was off 11% normalized for the business base in terms of their usage patterns.

Okay.

Also use of the --it is Hemi--in DID growth we feel that it will have healthy growth during 2008.

You know, on the other hand, if we will end up selling more voice services or more of our lower-cost brands of fax, it will impact the revenue.

Sure, sure.

And I guess given guidance inclusive of acquisitions implied to me that you're relatively certain, or you're close to having some of these acquisitions sealed.

Can you talk about the level of confidence you have in kind of nailing some of these acquisitions to get you potentially to the high end?

I think if Hemi--let's deal with the high end, the--as Hemi mentioned, there are a number of situations that are active as we speak.

They range from letters of intent to earlier stages in the process.

I don't think we've ever seen at any point in the Company's life such an active pipeline, whether they are in the early-stage, mid-stage, or late-stage of negotiation.

Now, obviously in the M&A world you have to caveat it.

All of them could fall out of bed for a variety of reasons.

Probably not so much to do with pricing, per se, but other terms.

Or diligence.

So from a--speaking as an M&A guy, I am very confident that j2, as I said, if the economy continues to be weak will probably do more M&A deals in number than it has done over the last several years, and those deals will bring more total revenue to the Company in 2008 than they have brought in past years.

But, the timing is an element.

The later they're done in the year the less impactful they'll be in '08, or they'll roll into '09.

Also you we are very (inaudible) with regards to M&A.

You know we did 16 deals and all of them were very accretive and successful.

We take a lot of pride in it.

If we have a deal and something in the terms doesn't right and we still have not signed a purchase agreement, we will walk away if we don't think that the deal is right for us, and we have history that proved itself, when we do the deal, we are fully integrated and we are sure it is going to be good.

So the nature of those deals here, we're in discussion, we have many discussions, we even have due-diligence level with one of the deals.

But again, until the last moment, more than one, but until we sign it is not a done deal, and therefore, we are very hesitant to increase the rates, because it's too risky to predict, and also because now it is under pressure.

If the sellers are going to get crazy, we are not going to buy.

That's correct.

I am assuming some of the sellers may be listening to this call.

I think the important point to understand is that the way we look at it, we have strong cash flows and cash balances.

We'll use them in an ROI efficient manner.

If the pricing goes up or the terms are unpalatable, I am guessing it will weigh buying back more stock.

If the stock is relatively expensive and heads-up basis and a M&A deal is more accretive, or has a higher ROI, we'll lean toward that.

The good news is we have the money to do both, so I don't see them in competition with each other but that is basically how we look at it.

n the stock buy-back issue, historically you guys have been very conservative buying back your own stock I guess except for last quarter where you bought a fair amount.

Is it fair to assume that assuming the stock stays at these levels you have more of an appetite for it than you historically have for others, at other times?

Absolutely.

Based on all of the numbers we've run and you can run, we are probably trading at about, I think it may be an all-time low as a multiple of either cash flows or earnings, but certainly over the last five years when the Company had positive net earnings.

And now you are.

And I say that, combined with the fact that we used to get five and change on the margin on our cash balances in terms of interest income, those are down to low threes and in some cases even in the twos, because we're keeping it short and keeping it liquid.

And we are producing so much more cash now.

Right, right.

So all of those things, you know, certainly make holding cash balances less attractive.

Okay.

My last question is on CapEx.

So CapEx last quarter 4.3 that is almost twice your usual run rate.

What are you baking in for a rate?

Less than that quarter.

Less for the whole year.

That quarter was as a result of building out our data centers and our network infrastructure which I talked about earlier.

I think if you use the Q4 number for the full fiscal year '08 you are probably on the heavy side.

Okay.

Great.

Thanks.

It should be under that quarterly number.

Under four.

Okay.

Thank you.

You're welcome.

Thank you.

Our next question comes from Brad Whitt with Broadpoint Capital.

Please proceed with your questions.

Hey, guys.

Couple of questions.

Thanks for taking my questions.

Sure.

Scott, will you be breaking out the stock-based comp for line item going forward?

Are we going to still be able to model it that way?

That is a good question.

We will have to actually discuss that in terms when we follow the Qs because we currently do that.

We intend to give you the aggregate number per quarter, pretax, after tax, and its share impact, $0.2 a share, $0.3 a share, $2 million for the quarter, pre tax etcetera.

I don't think we yet addressed the issue in terms of the filing of a Q whether we would give it broken out by line item.

I guess another question is do you prefer that the numbers that analysts show--report to First Call be GAAP now going forward?

I am personally indifferent.

From the Company's standpoint it is easier for us and since it is a small portion of our total earnings, that we think the GAAP number is now representative--highly correlated with each other.

It is not like we got a huge chunk of our earnings that are related to non-cash comp expense.

So it probably is easier if everyone goes to GAAP because that is consistent with how we're reported.

It will make it easier for the Reuters and the Thomsons of the world to do their averages, but we have a mix right now, where we've got some analysts that duly report both a GAAP and non-GAAP number.

I would say that the majority historically is reported in non-GAAP number but we have a couple that reported only or primarily in GAAP number.

In our press release we would probably break it out.

Yes.

I think you'll have that granularity if you wish to do non-GAAP margin analysis and things like that.

Okay.

And about how many shares did you buy back this quarter?

It was a little under one million.

983,000 or something like that 978 was what we had going into the quarter and we exhausted it.

Did you disclose approximately how many DIDs you picked up from RapidFAX?

No.

Not so big.

Not so much?

How about if we look at the other revenue for '08, you had a pretty big settlement this year with call wait.

Are you expecting that to be down?

We expect one point in growth, '07 to '06.

It was around $2 million in terms of the $4 million fully paid up license fee that was booked in Q1 '07.

We have other situations out there that we think could be equally as attractive but given the fact that some of those situations there is litigation pending and that moves very slowly, it's it's doubtful, I think, that those will be settled in the course of fiscal '08, but you never know .

So our guidance assumes that what is our patent license revenue is the continuation of the existing programs and for those companies that have running royalty rates, the continuation of their streams of revenue to us under the

It is actually pulling that one point down because we didn't bake into our forecast another $2 million plus dollars one time.

Right.

Okay, and Hemi, are you doing any kind of testing for price increases for voice?

Should we just assume that's going to be flat?

No, see the way we are going to do with voice is by introducing attractive services like speech-to-text, and likely to call all of those are basically going to pull our price up.

The add-on services.

The market is very competitive, and I know that we can definitely increase the prices, because the value is much higher than the fax line, but because we want to penetrate, if you remember we have a history of eFax that we are selling for $2.95 which is now sold for $16.95, so we'll play the same game here.

All right.

And I do have one final question.

Can you discuss a little bit the differences between acquiring a voice services company?

Yes.

And a fax services company.

Fax services historically has been pretty easy for you guys.

Seems like voice will be a little more complex.

You are right.

Fax usually point the phone numbers to one of my points of presence, end of day, end of story.

With voice, we still can do the same situation of pointing the numbers into our infrastructure.

You have to remember that we have points of presence almost everywhere, but then you have to decide either you're going to make the features look the same like yours, and basically move either your customers to where the flavor is acquired, or vice versa, or you can just say I'm going to develop another flavor.

The platforms that we have are so flexible and so sophisticated that we can do both.

For instance, in Ireland, when we combine the U.K.

system with the Irish system, we basically gave the customers almost all the features that they had before, but improved the good interface.

And so to cut a long story short, we can do both and probably based on the acquired companies, if we think that the product is better than ours, and is simpler, we will change.

If not, we will move it.

I am not foreseeing a significant difficulty once we launch it, but since we have not done anything on the side, it might be in the initial period of set up and everything it would be different.

But I also want to refresh you, we have acquired companies in the past, when we kept the platform for a longer period, people were comfortable with it.

So those companies that we are talking most of them are pure play, so the only thing they have is a platform and customers, so we can take the platform, manage it with fewer employees and do it as time passes, in a more relaxed way.

Okay.

Very good.

Thanks for taking my questions.

We'll take a couple questions from e-mail before we go to the next live question.

And the one of the questions was had to do with the ARPU, the aggregated ARPU declining Q4 to Q3, question was why?

Primarily, as it has been typical to the fourth fiscal quarter but for the quarter of '06 when we were in the early stages of the eFax pricing increase which rippled through, there generally is a decline in the ARPU in the fourth quarter, due to usage.

n this case it was both a combination of the lesser business days and as I mentioned earlier, a lightness in the credit-sensitive customers usage patterns.

That alone accounted for almost all of the $0.40 some or $0.39 decline in ARPU from Q3.

The next question was regarding the cancel rates.

The cancel rate as you see has come into the range that we have previously experienced prior to doing price changes.

It was 2.7% on average for the fourth quarter, which is within our range.

Quite frankly we didn't think we would be there until Q1 of '08.

We also believed that at this point any delay cancelled relating to the price change are behind us.

So we don't have a flash yet on a cancel rate for the first quarter, but I think as we've said before we would expect it this year to be--it will move around but be within the range of 2.5% to 2.75% per month.

Everything else I think has been answered.

Next live question.

Thank you.

Our next question comes from Robert with RBC Capital Partners.

Please proceed with your question.

Hi, thanks.

Just wanted to touch base back on the acquisition side and kind of trying to understand a little bit from when you look at the growth on the revenue line, have you forecasted in, I guess it is kind of tricky here with the stock-based compensation as you bring on acquisitions.

How do you intend the management team to stay?

You talked about walking away from deals.

I just want to make sure when I read a press release that said, hey we are acquiring X company, that we don't look at it say it is in the middle of the range but all of a sudden it is more dilutive.

Can just you talk us through the dilutive concept as you look at these acquisitions, how you are going to use stock-based compensation.

Obviously now with the change in earnings reporting guidelines that you're issuing today, it just seems a little harder, I guess, from our perspective.

So any color around how you're going to structuring that would be great.

Two different things.

I think as Hemi mentioned we've done 16 deals.

I don't think we've ever done one that is dilutive.

So, while we will not promise that we'll never do a dilutive deal, I would say what is on the plate right now, all of which would be accretive to the Company, sometimes there is a three to six month integration period where it is kind of a break-even on the bottom line.

But then once the integration is complete they're accretive even on a GAAP basis which takes into the account the amortization of the tangibles and the allocation of the purchase price adjustment, they're much more accretive on cash flow or EBITDA basis.

didn't follow the concept on the non-cash compensation stock expenses.

It is a separate issue.

We are just saying roll it in if you want to report a GAAP number because that would then be consistent with how we report.

Although, as we said in the earlier question, we will give you the pieces if you wish to create a non-GAAP number.

Great.

That's helpful.

Thanks.

Thank you.

Our next question comes from Ray Archibold with Kaufman Brothers.

Please proceed with the question.

Thank you.

Couple questions.

One is sort of housekeeping, for 2008 modeling, what kind of rate should we be assuming?

No higher than 30.

It is a little lower right now as we speak but I think as we --as you've seen, if you look in the release the last couple of years has been closer to 28 than it has been to 30.

But we don't see anything that would take it north of 30.

Okay.

And then related to the voice services, I guess in one of the slides you talk about the organic growth doubling.

I think I heard Hemi say that you weren't doing much in tweaking prices, so is that growth going to be largely a function of adding voice DIDs or is there something else involved?

Yes.

Yes.

It is mostly going to be adding voice DIDs and getting full-year impact versus partial year impact last year.

And of the voice DIDs that you have today, I guess it is 82,000.

Yes.

How many of those are new customers to j Comm exclusive of any acquisitions, et cetera.

Okay.

Only 5,000 or less, I think--

Less.

3,000 came through acquisition in Europe, and we have not done an acquisition of voice in U.S.

since 2004.

So basically virtually all of those customers are customers that we basically advertise to, they click, they bought.

I understand.

But, for example, the 77,000 customers you have in the U.S.

I'm assuming that they're overwhelming existing fax customers.

Is that a fair assumption?

No, they might end up a customer that is fax and now has voice services with us.

But now this customer--we're not counting customer, we're counting phone numbers.

So there are some rare occasions when a customer has a fax number wants to buy a solution because one of our high-end solutions of the voice service also has a fax number but those are fine between.

And how should we think about your advertising budget going forward?

I appreciate that the economy is that uncertain and that is an easy throttle to move back and forth, but some sort of thinking in the middle of your range.

How should we think about advertising going forward here?

Basically the way advertising is allocated for each brand and each sector of the world there is we think of it or the marketing team does in terms of month's payback.

So we're looking to organically acquire customers at between four and eight months of revenue pay-back.

So any and all programs, whether they be online or off line and the majority of our spend has been and will continue to be online, any of the programs that meets those profiles then can be spent.

So we have a--an amount we believe can be spent per brand and per region of the world, but to the extent they perform within those tolerances they can spend more and to the extent they don't, they can get paired back.

Can you give us an update of what the acquisition costs are today for a fax customer and a voice customer or online versus other channels?

Yes, they go anywhere between zero, as you remember we have more than 40% of our eFax, go to side, so those zero.

And then we allow, depending on the brand to go between 4 and up to 8 times revenue.

So eFax is $16.95 and then you had some dollar or two for the usage.

Let us say you look at $18 or $19, then we allow four times of that and eight times of that, sometimes the perception is that we are more excited about providing incentive there.

And have those acquisitions costs changed much in terms of what the net acquisition costs are.

You are talk about how you're budgeting.

Have the acquisitions costs materially changed?

Let me answer you.

As the Company grows, even though we are holding our churn rate, the base is larger.

So every time when you grow you have first of all to cover for the churn.

We pull in a larger base plus the net.

o the calculation should be if you think that this year the base grew so much, you should add to the marketing, because we have to first of all start recovering churn and then the net growth.

Okay.

But now I would say there's been if you look at '07, there has been stability on the [SAC] costs for gross ads across the various ways we spend our money, but recognize there are differences.

We're going to spend more per paid DID for international customer than for a U.S.

customer.

We'll pay more for a voice customer than for a fax customer.

So you have, you know, a whole range of SAC costs based upon which brand we're talking about and which region of the world.

Also, certain of the brands benefit on an average basis from very strong word of mouth and direct to site activity, where there's no hard dollar direct spend.

That is not the case or the voice services generally speaking.

It is also not the case for our newer alternative brands in fax, like Fax.com, RapidFAX or Send-A-Fax.

Because there you have a much higher proportion of the gross ad where there is marketing dollars spent to acquire them.

And last housekeeping item do you have Andy appreciation and amortization number for the quarter?

For the fourth quarter?

Yes.

We will get that to you before this call adjourns.

We don't have it at the top of our heads.

Hold on a second.

It is in the exhibits.

Oh, is it?

Okay.

Cash flow statement.

It is annual but if you wanted the Q3 you take Q3 and Q4 it is there.

Approximately--it would be approximately $3 million.

Okay.

Very good.

We want to take one question--another question from e-mail before we have the next live question.

The--this relates to slide 25, I believe, and it has to do with what--how much or what percent of our revenues in Q4 came from the credit sensitive.

I assume that to be the yellow and the green bars.

Relative to the prior quarter, and if you remember from the last quarterly call in Q2, the yellow and the green represented about $14 million of quarterly revenue, $7 million fixed and $7 million variable.

In Q3 those two represented $7 million of fixed and $6 million of variable for a total of $13.

I don't have the exact number for Q4 but I believe it is in the range of $12 million where it is $7 million fixed and $5 million variable.

Those are rough approximations but I think it gives you a sense of the trend and it is consistent with what you see of the behavior of both the yellow and the green bars.

So as a percent tape of j2's total revs that credit sensitive piece is coming down both in its totality and in terms of the usage based or variable piece in terms of the roughly $57 million for the quarter.

Next live question.

Our next question comes from Shyam Patil with Raymond James.

Please proceed with your question.

Hi, good evening.

Last quarter you talked about shifting corporate customers more toward fixed versus variable revenue.

Can you give us an update how that is going?

We're continuing to do it and we have two exciting phenomena.

First of all, on the very large deals we have now corporate customers that are coming, low usage, but with fixed fee that has no usage included.

Those would be, you know, we penetrated into some very large organization when they covered in the initial stage all the employees that need fax or on a heavier and then they say, okay, we have another few thousand employees, that are using fax very rarely but would still like to give them a number.

In those cases we will sell them the monthly number for much less, no pages included but the pages that will come would be far in between and will be relatively on a higher price, but in fact the usage would be lower.

It is a complex reply, but basically we are continuing to move to less usage or being less dependent on usage.

Got it, got it.

I think last quarter you mentioned you expect aggregate voice services revenue growth of about 100% in '08, is that more or less still the expectation?

Yes, more than 100%.

Okay.

And that's excluding acquisitions or including acquisitions.

Organic only.

Organic only.

Overall churn declined sequentially but when you look at your credit-sensitive customers, you know, we saw lower usage revenue last quarter, was there any noticeable change in churn activity there?

It was included in the numbers already.

So the numbers you saw in Q4 included some customers that you know even bankrupt.

I think it was similar to Q3 where there was some number of DIDs that were either cancelled because of a reduction in head count of their company and/or or at the extreme they went bankrupt so all the DIDs were given back.

I don't have an exact number but I don't think it was more than 1,000 DIDs.

It was not a big number.

Okay.

And then for my last question, what assumptions are you billing in for interest income in your '08 guidance.

It moves around because as I mentioned earlier it depends on the timing of how we deploy or cash both on M&A on stock buy backs and the falling interest rate environment.

A lot of our cash is kept short-term and very liquid.

So you can assume that we're getting sort of the spot three to six month rate with a little bit of premium if we move out of CDs and just treasury type activity.

So, even since three months ago we gave our initial outlook, we brought in the rate by 50 to 75 basis points as the Fed took dramatic action, the unanticipated 75 basis-point cut and the 50 basis point cut at its regular meeting.

We're hovering around 3% as the assumption for cash balances, but to the extent they continue to cut, I expect that to go down for us.

In terms of how much cash we'll have, that is trickier.

Because right now we have $230 million-plus January's cash balances, that is investable, but, you could see an outflow of that based upon the timing of the M&A and the stock buy-backs that makes that a different number.

All right.

Thank you.

Thank you.

Our last question comes from Tavis Mccourt with Morgan Keegan.

Please proceed to question.

Thanks for taking my questions.

Out of my notes from last quarter's conference call that voice subscribers were about 7.5% of the base which would indicate a kind of pretty flattish Q4 is all.

But I certainly could have written that down.

Could you talk about the growth in Q4 in the voice business?

The 7.5% was as of October 31, so there were another roughly 7,000 DIDs added in November and December.

December across the board is usually a light month for us.

We don't spend as much, relatively speaking, in marketing dollars.

We basically get out of the way of retailers and others who are using that six-week period from Thanksgiving through the first week of January to do a bulk of their revenue.

So across the board for all brands we generally have lesser productivity in terms of gross adds and net adds ads in the December months.

That is why you see, even if you take the 7.5 and look at October, you'll say, well, something looks light in the last two months of the year and then it is December.

I can tell you it bounced back very nicely in January, as typically it does.

But it has been a little bit better than our expectations.

Yes.

January was one of the strongest net growth months we have ever seen.

Great.

In terms of--Scott, you talked about being able to do accretive acquisitions, is that a potential on the voice side of the business, as well, given much smaller--

Yes, so I think you should assume there will be less accretive because as I mentioned earlier and I think I mentioned on the last call, everything that we can observe and, granted the companies, that we are talking are not public and not having earnings calls, they are not disclosing much information, but based upon information available on their website, market intelligence we do, and discussions they have been willing to have with us, this is appears to be a space growing consistent with the way we view it for '08 and also the way we performed in '07.

So the natural implication of that is people look for higher multiples of revenues because there may or may not be operating income or EBITDA in these early stages.

So I think that it is--it is--first of all I think it is less likely we do a voice deal because there is a smaller number to approach.

Just on a sheer number.

There is maybe 20 voice companies to approach, and there is over 100 in the fax base.

So sheer law of large numbers, favors the fax deals over the voice.

Secondly I think the voice deals, if any can be done, will come at a higher multiple.

Now, I think there are multiples that can be higher than the fax multiples and still be accretive on a GAAP basis but probably lessee accretive.

Got you.

And understand my own belief is this is not an area that j2 needs to stretch in.

We obviously have a platform.

I think we are in a leadership position in this space already in terms of revenues, DIDs, the strength of j2 in terms of marketing and our capitalization.

So this is not a situation where we're looking at a space saying, wow, that is a neat space, we would like to be there, we don't have a platform to develop it but we're going to be a year or two and so let us go out and pay a big multiple to get into the space.

That is not going to be the case.

I think if we can do a deal we're going to pay more on a multiple basis than we do in fax.

But we aren't going to stretch, we aren't going to do something crazy, because at the end of the day we don't need to pay that premium.

Also--

And I believe the day will come when some of those companies will hit their own road bumps and they'll be trading at more attractive levels so maybe it will be deferred in terms of the timing of when we can do one of those deals.

Also, we can do many fax deals in a year, you know.

We can absorb,many of them.

You know, once every two months a deal.

But with the voice services I can't believe that we can do integration so fast.

You know, it is the first time, lack of experience.

In the fax business we are very experienced and we can do many of them.

I think once we do the first deal we'll have to take a break and see how long it takes us to get up with the expertise of integration with these kind of deals.

Makes sense.

My last question is, it's great that the fixed revenues seem to be hanging in there for the credit-sensitive customers and would seem to suggest you're not getting much churn there.

Is there any long-term contracts either that consumers do or anything like that?

It is a little bit counter-intuitive to me, given that there clearly can't be as many mortgage brokers, or real estate agents out there as six months ago.

I think if we're asking contracts with the consumers.

Consumers are a corporate.

With the corporate we have many contracts but don't remember how many.

In six months to three years it is typical, in the corporate and individual it is month-to-month or annual.

With the predominance being month-to-month.

If I recall it is 80/20 split, versus the annual.

What I would comment on is that it is incorrect to assume or infer, that the base of customers, credit or individuals, are just corporate-sensitive customers.

That is not correct.

There was a broad distribution across a variety of industries, obviously a piece of that that was shown on slide 25 deals with credit sensitive customers and specifically their usage patterns.

I understand that.

But it is fair to say even with the heavy usage consumers that you have seen a decrease in usage patterns with, you have not seen a material uptick and churn with that same user base.

That is correct.

It is hard to say that definitively on the individual base because it is such a law of large numbers and there are pieces of that base we can not, even if we wish to with all of the diligence in the world identify, but certainly on the aggregate it is a true statement.

I thank you for all the added detail.

Yes.

Our final question is a follow-up from Ray Archibold with Kaufman Brothers.

Please proceed with your questions.

Welcome back, Ray.

Thanks.

I wanted to follow up with the guidance.

I want to make sure I heard correctly.

When you gave the 17% revenue guidance at the end of Q3, that was exclusive of acquisitions and then the range we're looking at today includes some mix of acquisitions depending upon low, high end, et cetera.

Is that correct?

Well, you know, we like to remind you, we (inaudible) acquisitions.

We do 16 acquisitions over seven years.

I appreciate that.

So we did include acquisitions, but we did not include the larger ones that are now much more close than everywhere.

Another way to articulate it is the correct way to think about it.

And then if you look at the current guidance range, you've got everything from no acquisitions to acquisitions being, you know, several percentage points of growth relative to '07.

It could be in one deal, but probably not necessarily in one deal, but some combination of deals.

Okay.

Very good.

Thank you.

We have one last question that's come by e-mail regarding the corporate enterprise accounts, and the question is basically to give some update on that.

Had a very strong Q4 signing up six new large accounts, and exiting the year with a pipeline of 60 large customer potential acquisitions.

And they also have strong January.

So, yes, our corporate business still heavily weighted to the U.S.

had a very good Q4 and a very good entree in the beginning of Q1.

Are there any other questions?

That was our final question.

All right.

We thank you all for joining us for this conference call.

As we put out our press release a couple weeks ago, there are two upcoming conferences we will be presenting at.

On February the 27th in New York at the Jeffries Internet Conference and then the following week on March the fourth at the Raymond James Conference.

We'll put out a release as future conference opportunities present themselves so you will know where we will be later in the year, and we will look forward to the Q1 call in early May.

Thank you.

Ladies and gentlemen, this does conclude today's teleconference.

You may disconnect your lines at this time.

Thank you for your participation.