Good afternoon, ladies and gentlemen and welcome to the j2 Global First Quarter Earnings Conference Call. It is now my pleasure to introduce your host, Mr. Scott Turicchi, President of j2 Global Communications. Thank you. You may begin.

Thank you and good afternoon and welcome to our Q1 investors' conference call. As the operator just mentioned, I am Scott Turicchi, the Company's President and joining me today is Hemi Zucker, our Chief Executive Officer and Kathy Griggs, our |Chief Financial Officer. We'll be using this time to discuss our Q1 financial results as well as provide an update on operations and an outlook for the remainder of fiscal 2009. We'll use the IR presentation as a roadmap for today's call, a copy of which is available at our website. In addition, if you've not received the copy of the press release and the related slides, you may access them our corporate website at www.j2global.com/press. After completing the formal presentation, we'll be conducting a Q&A session, the operator will instruct you at that time regarding the procedures for asking a question. In addition, you may email questions at any time to investor@j2global.com 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 that 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 the discussions in those documents regarding Safe Harbor language as well as forward-looking statements. I'll now turn the presentation over to Kathy who will take you through our financial results which are on slide 4 for the quarter.

Thank you, Scott. Good afternoon, ladies and gentlemen. As Scott indicated, please refer to slide 4 in the presentation for a recap of our GAAP based results. 2009 Q1 revenues were 60.4 million, an annual increase of 1.7 million or 3% over Q1 of 2008. Our revenue growth was driven largely by higher subscription revenue, which increased 2.4 million or 4.2%, offset by lower usage base revenue primarily in Europe. Similar to prior quarter, voice revenue was our strongest growth segment with an annual increase of 95%. The continued strength of the U.S. dollar compared to the euro and the pound had adverse quarter-to-quarter revenue impact of approximately $200,000 on our revenues. This quarter, we also completed our 22nd acquisition with the successful purchase of CallWave Fax e-mail assets in February. In Q1, we added approximately 38,000 deeds for a 3.1% increase. Corporate fax, our lower cost fax brands and voice products, all continued to show a sustainable growth. In fact, compared to a year ago, we've added over 175,000 deeds for a 16% ... 16% growth increase. Voice sales and lower priced fax products have increased by 100% and 110% respectively, while corporate deeds have increased by 19%. Total Q1 ending pay deeds are at 1,274,000. Our continued commitment and success in managing our cost structure is reflected in the quarterly results. We have been able to support a growing customer in revenue base with essentially the same infrastructure. In fact we have been able to keep most costs at or below Q1 2008 level. Q1 2009 GAAP gross margins of 81.1% is approximately one percentage point higher than Q1 2008 margin of 80.2%. This quarter selling expense was 14.7% of revenues, R&D expense was 4.9% of revenues and G&A was 17.7% of revenues. Total GAAP operating profit for…

Thank you Kathy and good afternoon everybody. Today, Scott have asked me to keep it short so I will, so we'll have more time for the Q&A. On our fax business. Our fax business continues to grow and especially, we are seeing a growth of, as Kathy said, we noted that in the last year our lower price segments of the fax to email products. On the corporate side, we have now had 70 large corporate deals, of them seven were added in the last quarter, four of them are new and three of them are corporate accounted versus smaller and through the additional phone numbers grew to become up to the finest large corporate deal, top 70,000 units per account. Mijanda, if you know we acquired Mijanda last year, last quarter. We by now have migrated all the Mijanda customers into the j2 platform. They had five brands. We kept only one which is SmartFax and the other smaller brands were moved into our fax brand by keeping the customers on this brand. The main point for the quarter was the usage and the cancel rate. The usage is continuing to decline as the economy and the cancel rates are effected on the consumer side by customers hitting their credit limits and on the corporate side it sounds our customers have to do reduction of the workforce, we see that's why they are not canceling their account, there is reduction in the accounts due to adjustments to the less people. On our voice business. our voice business is doing very well. Last time, if you recall, I said that we had approximately 190,000 customers. Now at this time, we are approaching 200,000 paying deeds. Europe has been strong. In Europe we are operating under eReceptionist and the results there…

Thank you. On slide 8, we are conforming the guidance that we provided last quarter which is we believe that we will continue to have modest increases in revenues and non-GAAP EPS for 2009. A lot of the commentary that we provided in the last call we believe still stands which as Hemi and Kathy have mentioned clearly, the economy remains weak although there maybe some signs that it is becoming less weak it is still contracting. We still see on a macro level unemployment, statistics going up and multiple being on (ph) employees. So we are taking those factors into account as we look towards the balance of the year. We continue to remain optimistic in terms of the margin profile of the company, the ability to deliver on improved EPS on a non-GAAP basis and we also believe that this will continue in this environment to fuel the M&A pipeline. And as Kathy mentioned, we now have 179 million of cash and funds available in addition to a $25 million un-drawn line of credit so such larger deals become available and be of interest to j2. At this time, we would ask the operator to come back on and open it up for questions.

Thank you. (Operator Instructions) Our first question is from Shyam Patil with Raymond James. Please go ahead with your question.

Hi. Good evening. My first question is around the cancellations, just wondering if you guys have seen any noticeable trends within certain pricing points or geographies for factors or the more services?

No. I would say that it is pretty much across the board. What's unique about the cancel rate, it was predominately concentrated in the month of March. And we've actually seen a return to albeit elevated levels, lower levels in April than what occurred in March. So you had this blip up in March. I think that it was the lag effect from Q4 when the larger companies made their initial announcements of reductions and downsizing in their sales forces and across the board which actually took effect in Q1 and by the time they got around to looking at the services they needed for those employees who were no longer there, it happened to occur in the month of March where they did those clean ups. I think that's pretty much rippled down the board including the smaller customers, but no, it was not unique to a specific either any area of the world, vertical, brand or a price point.

Great, thank you. And regarding the M&A environment, just wondering if you can talk a little about how valuations have trended past four months? Has there been any correlation with private valuations in the depreciation we've seen in the stock market? Or do you think that the private evaluations are holding steady and coming down a little bit?

I actually think you've got kind of two groups of fellows. You have those that for whatever internal reasons are motivated and I would say certainly relative to a year ago, the valuation expectation has come down. I think we've demonstrated that within the last year, if we go back and we look at the Phone People acquisition which occurred almost a year ago and occurred at the highest multiple, and then you will forward to the CallWave acquisition of their Fax assets which occurred just six weeks ago, and that was the lowest evaluation but again it may have being in between and occurring in November of last year. There is a second category though of companies who may have enough financial wherewithal, either because they have hoarded some cash or operate on a cash profitable basis, and I think we're finding there they tend to be holding out not too outlandish evaluations may be of two or three years ago, but certainly evaluations more consistent with a year ago and those evaluations we're not particularly enthusiastic about executing against. So, I think you have these two camps. Our challenge is dealing with literally several hundred of these primarily small to at best mid-sized companies is to try to sort through them as quickly as possible and put them into two categories. Those that were looking for a little bit more, we've kind of put through the back end of the line in terms of spending our time trying to negotiate the due diligence and those that have a reason to be a motivated fellow we put to the front of the line. And I think that the volatility in the stock market to your point maybe creating some confusion for everybody, because certainly there's a psychological factor I think that's a play here, when the stock market was going down and it seemed like it was going down everyday, there were probably some more that fell in that category of being motivated sellers, now that there's been some lifting, it's still albeit well below the highs of late of seven. I think it shifted some of those into the wait and see category. So, we're seeing that going on, but as I say, we're ploughing ahead. I think the key is really the underlying fundamentals in the economy which by everyone's acknowledgement, still remain weak even if there is some optimism that later this year or early next year that will be positive GDP comparisons. And a peaking of the unemployment rate.

Great, thank you and congrats on the operational execution in the quarter.

Thank you.

Thank you.

The next question is from Michael Howard with William Blair. Please go ahead with your question.

Hi, it's actually Corey Tobin from William Blair. Just a quick question on margins and congrats on a good result this quarter. What -- how would you guide us to think about what happens to margins in both the flat revenue environment or when we trying to grow, is the current margin level that we are seeing here, the new baseline as you'd expect to see it or how would you think about the level of margins currently?

I'll let Hemi answer then I just want to add one comment about the Q1 margin, specifically as it relates to sales and marketing. I'll let him take the bigger picture view of the question.

Yeah, hi, Corey, how are you?

Good, thank you. How are you?

Good. So we've done a lot of work on efficiencies and I believe that now with 400 people we can support the 1.3 million customers, 1.5. You know really when we grow the areas that we need to grow now is mostly -- are mostly in customer support and telefax, maybe a little bit mostly customer support. We have done a lot of improvement. So unless you will see astonishing growth in customers, I think that you can, if you want we can keep very similar level of employees because during this time we continue to work on improvement that are basically on our infrastructure and everything else. So to answer your question, if the economy will turn to be positive, I expect the margin to stay the same and the only thing that might be a little bit more challenging is if the economy will change so the advertising steps out of the basic which you search and some display then we might need a bit more talent to buy. But other than that, I think that our margins are good and we, on the long run, can stay in this area.

I didn't get your last part, if the ad business -- can you just repeat that last part again, please.

Well, you see, our advertising now is much more basic that it used to be two, three years ago. We don't buy display, we don't go into radio and all these TV.

We don't buy as much.

We do but -- so it's more simple, so you can run it with less people. But once they will be payback for doing nice campaign with Yahoo!, we will need people.

Right.

I think the other part to your question is, we've talked a quarter ago that we thought the 46% non-GAAP margins, we had a low sales and marketing as a percent of reps in Q4 was not certain whether that would repeat in Q1. It pretty much did and the in fact the margins went on a non-GAAP basis north of 47.5. I think that Hemi was commenting on the people aspect. The other aspect is though, it is our desire to spend more money in sales and marketing but always subject to the ROI discipline that we discussed previously. Clearly, this is an environment where both on a competitive basis in search of display/CPA or quick bases and the other online areas of advertising, those rates are following. So that's accrued to our benefit. Now at some point, probably co-related with the economy turning or certainly if it were to turn for a couple of quarters, it may stabilize or increase those rates. So, I think that where there's likely to be the most volatility in our margins, partly based on the market conditions of the time and partly based on our own attitude towards spending, will be in sales and marketing. I think the foreign (ph) employees, which are distributed across the four GAAP line items should be relatively stable meaning that the people component of cost -- the people component of R&D which is almost a 100%, the people component of G&A should be very, very stable. We may see some increase in sales and marketing as a percent of reps as the economy improves. Although I think that would be offset to some extent by an improvement in essentially bad debt charges in the G&A. So you got these various variable that will move in conjunction, A with the economy, and then B with decisions that we make around how we view the economy performing and turning.

Great.

We'll not take 475 and run with it the next three years. But I think that certainly, we have built ourselves to a margin structure that is superior than it has ever been in the past and should be sustainable into the future.

Thank you. And switching gears just for a second on the churn level, Scott to come back to your earlier response. So is the number take that fairly significantly I was assuming margin that to (ph) have a 3.5% burning rate for the whole quarter?

That's correct. (Multiple Speakers)

It went up in the month of March it was higher than 3.5...

Certainly.

3.5 for the quarter. And then in April it has come back down to its January and February levels.

Okay. Good. And then where at this point -- is it too soon to make that one venture guess that if as you think it internally, you think those January, February type levels is what you'd expect to stay for rest of the year or...

I think it's hard to say. Because I think if the macroeconomists are right and the unemployment rate has not yet peaked. You have an argument that it may continue to creep up not necessarily leap up but creep up until that has run through the systems. Now it appears and I'm hopeful that from the larger corporate perspective they've done their ringing out of their, rightsizing of their base of employees between Q4, Q1 and that therefore there won't be any big surprises or shocks in that that. But I think a lot of it is very dynamic. If the economy has or was approaching the bottom then that's probably more likely that statement is correct. If there is another chuck down in the economy then I think all that that are off.

Understood.

I don't believe that we are uniquely qualified to prognosticate or guesstimate that. I mean Chairman had some comments this morning for Congress that we're reasonably consistent that there is going to be a bottoming and a pull outcome into this year, with no particular data that can confirm or disagree with the statements. I hope you get that data and we do.

Excellent, Thank you. Congratulations again on that cash flow.

Thank you. Gordon.

Thank you.

The next question is from Youssef Squali with Jefferies & Company. Please state your question. Naved Khan - Jefferies & Co.: Hey guys. This is Naved Khan for Youssef.

Hello, Naved. Naved Khan - Jefferies & Co.: Just on the cancellation rate, you guys said that in April or in actually in March have spiked up did you have loose any large customer in that month.

No.

As Hemi pointed there were accounts that had 1800 bids and 1500 bids, the account maintained itself but there was lesser bids which as we've talked about before it permissible provided and you stay above the minimums. And usually most of the large corporate clients do deploy well above the minimum meaning they have that flexibility to both add and subtract bids as market conditions regain. Naved Khan - Jefferies & Co.: Okay. And I'm trying to reconcile the slide number 12, which potentially shows that users incorporate and the web was actually slightly higher quarter-on-quarter?

Yeah. Naved Khan - Jefferies & Co.: But if I try to look back into the variable ARPU, that shows a decline quarter-on-quarter.

Yeah. Naved Khan - Jefferies & Co.: Can you...

Two issues there, you're correct about that. The slide on 12 is a raw usage slide and it does not perfectly correlate to revenues, variable revenues. Now two things there, as Kathy mentioned in her presentation, we saw a softness in international non-pay bid usage revenue. So when you look at our three bids of 10.1 million, we have two sources of revenue. In the U.S. it's predominantly all advertising revenue. But in Europe it's substantially driven by call and party paid revenue. So it does not affected the paid ARPU but it does affect the ARPU on the free bid. And you'll notice that it's come from $0.07 in Q3 to $0.06 in Q4 to $0.05 in Q1. So a large portion of that decline has to do with less volume of activity on the column (ph) party paid deeds in Europe meaning there is less revenue for us to collect lesser vessel variable revenue. That's a few hundred thousand dollars. The second piece is that when you look at the slide on 12, which is the activity of our paid deeds, then we just remember that each customer has a bucket of usage associated with their package. And so only when they exceed that bucket, that we generate additional variable revenue. So you can have the aggregate statistics move up and down sequentially quarter-to-quarter but not have that correlate to either increased revenue or decreased revenue as you might think. The third piece of it is, we had usage revenue in Q1 similar to another topic that also influences the declines or the cancel rate where the ultimate revenue was uncollectible. So you saw the usage it was there, but because of the customer being a credit card based small business person and the uncollectibility, its not recognized. Naved Khan - Jefferies & Co.: I see. Okay. And then lastly just on voice, you said that the roll out in Europe was strong. Can you tell us when it was launched and in how many markets are you selling the product?

Yes. It was launched long time ago, but it was re-branded during Q4 to become eReceptionist and the re-branding mostly focused on the English speaking countries, the UK, a little bit in Ireland and also we are going to launch during -- I hope it will happen during Q2, voice services both in Netherlands and in France, under the brand of eReceptionist. Naved Khan - Jefferies & Co.: Actually I also want to follow up if I may?

Sure. Naved Khan - Jefferies & Co.: Can you guys break out the organic subscriber growth? I think 38 was the overall number which includes your CallWave?

Right and as you know, we don't do that. But it is that the CallWave acquisition made up the majority of the deeds. Naved Khan - Jefferies & Co.: Thanks.

Your next question is from Brad Whitt with Broadpoint Amtech. Please state your question.

Hey guys, a couple of quick questions here. On the ... what ... on the free cash flow, a very, very strong this quarter, very impressive there, we expect ... it looks like you probably have some tax payments coming up next quarter, I guess Scott will expect that to trend down or...

Correct, that's correct. If you look historically, Q1 free cash flow is generally the largest. If this proportion is relative to the full year free cash flow. So it doesn't run 25% for each of the fourth quarters. Usually Q2 and Q3 bear the heaviest brunt of the estimated cash tax payments. So yes, we would expect the moderation, but even if you normalized our Q1 '09 free cash flow with the taxes that we paid in Q1 of '08, you would still be around 28 million.

Right.

Okay, very good. And on the other income, is that about the level we should be expecting going forward, was there anything unusual in there this quarter?

No. Regarding less and less and less on the balance -- the good news is the balances -- cash balance is going up. The bad news is the rate is going down, down, down. So I think we're well under a percent pretax in terms of the earnings and then you will also have some FX that is very hard to predict can work for or against you. It worked against us in Q1 and that has to do with where we hold our cash balances, the currencies that they are held in and the functional currencies of the accounts. So I think that yes, to be on the safer side, you got to assume it's more like a 0.5% on the cash balances is the other income. And then usually over the course of the year, FX can't pull itself out. But in any given, quarter it might be 100 grand or 200 grand to the good or to the bad.

Okay.

I think that's the way to think about it until there's more robust interest rate environments.

Okay, and so Hemi did, just so that I'm clear I guess maybe you can help me on the marketing spend, maybe Scott as well. Did you just not see the return and not go as aggressively at new deed or did you just see much lower online ad spend rates that you're able to buy the same equivalents key words for example for a lot less. I mean

Right.

A combination?

We have decided that we are not going to spend more than $8 to bring an account. When you do that decision it's easy to manage it on the search sites. Because the trends how much you pay per work, every work has statistics of past experience, future experience. It's much harder to manage it when you do it on display, display being banners or things like this. Now the outcome networks that we'll agree to work with you on a small amount of a test and then you can test to work, they'll say okay, we are now ready, especially in Europe to say take your number and run with it. And we believe that this will result so many sign-ups and they take the risk because they have a lot of inventory. So, I wish we could do more, deploy more money on that way but we can't. So on the search, yes the search is less expensive, less companies are sprinkling their money all over. And more players like us are more disciplined and they know what they are doing. So the result is we are just buying customer for less, but we cannot spend more money in buy more customers under our discipline.

Okay. I guess found a question to you, did you see updated thoughts on digital signature at all? Are you seeing any kind of resurgence there? I did notice our partner is at Salesforce.com user group meeting recently. It seems to the growing, but I'm just curious as to, do you consider that a competition or potential compliment to your services or any thoughts on that?

Definitely, don't see there was competition and I will give you a secret from the kitchen here, we are always considering new areas to enter and this was one of them. We see it as being small complementary, yes. Competing no, big no. Opportunistically we would do it if the right opportunity will show up in the right evaluation. We are definitely very well aware of all the development. Unfortunately, it's not huge market. So it's not so tempting for us to learn a new skill for something this small. But we are keeping tab and we are very well aware of the competition, the pricing, the revenue, everything you want to know.

Very good. Thanks for taking my questions guys.

You're welcome.

Your next question is from Daniel Ives with FBR Capital Markets. Please state your question.

Hey, guys. When you give that guidance for the year and I think about churn, I mean could we kind of just say that churn's not going to go to 4% or how should we kind of mention throughout the year? I know quarter-to-quarter is tough, but I think about it in the ...

Yeah, I think the way I think the churn is, we thought six weeks ago that it would continue to sort of creep up over the course of this year. If you look at last year, it was moving about 3 to 4 basis points a month on average. We didn't really do that exactly linearly, but effectively that was what occurred. Obviously, in Q1 it went north of that to get to the 35. We are hopeful that the April rate is more representative of where it's going in which case I think that if the pundits are right and we see a stabilization of the economy later this year, it probably continues to go up in that range until that point is found. So I think it continues to go up. I don't think you get the 4%, but that's under the assumption that there is not a big leg down in this economy.

Got you. And just in regards to the cash, how should we think about a buyback? I mean is there a certain level where you hit, where it's maybe a trigger? Can you ... just how should we think about buyback relative to your M&A opportunity?

I think the best way to think about it is sort of what we did a little over a year ago. First of all, from a pure rate of return standpoint, the M&A yields, I mean at the stock very well level. This may not be true, but anywhere, from where the stock has been, even when it hit a low of 13 sometime in Q4 of '07. We're generating higher cash on cash returns on the M&A, because they're yielding the way we're buying them, in excess of 20% after-tax cash-on-cash returns, you can figure out the yield based upon a spot stock price of what it would be. I think last year, we bought five million shares at 21.5, given that then free cash flow characteristics, we got about 12 yield by now, And although, it didn't look so good in Q4, that clearly has performed over the course of the last year. So one framework is where we're going to get the best yield. And the best yield has historically come from the M&A and we believe that continues to be the case. Now, we're realistic that there's not a lot of large things for us to buy. And so, as occurred in '06 and '07, if we can see the pile of cash, because we can't support enough in either a single deal or a series of deals, then I think you start to look at, okay where can I get better yields, because obviously giving in a 0.5% on a 180 million is not very exciting. And so whether the spot yield is a high single digit or a low double digit that certainly becomes on a relative basis more interesting. Now, I don't think where that level yet. The last time we made this decision we had 230 million in cash in our balance sheet, not 180. So the implication, I think, is even if we do no M&A, its still a couple quarters out before we would probably seriously grapple with that question and remain hopeful that between now and a couple of quarters out we'll print that cash to working M&A because I think it not only gives the better yield but also helps to build the overall company through brands, customers, technology and people.

Thanks.

The next question is from Mike Latimore with Northland Securities. Please go ahead with your question.

Hey, good afternoon. Just curious on the mortgage side of the business, that vertical obviously applications grow out from the first quarter. How do you see that influence in your business and I guess sort of space heightened, what would be the potential benefit in the maybe second and third quarter?

Yeah, the ... when we dive in to the slide 12 and we sort of fracture apart the credit sensitive piece of it, we have the best granularity; we've talked about our corporate data because that's very explicit in terms of the company and how they are categorized and what business they are in. The corporate only, so leaving aside the small business and individual users, but the corporate piece of that green bar actually moved up much more aggressively from Q4 to Q1 than the 4 to 5% you see reflected here. I believe that it's highly correlated to the phenomenon that generally speaking credit and lending began to unfreeze in the middle of December of '08. Now it's been most noticeable and most trackable with mortgage data because those are publicly available so statistics, but I think it's even broader than that. So to the extent that continues, I think it's been continuing, but to the extent it continues at these levels for the remainder of the year, we would expect to see a couple of things. One on the graph on slide 12, the green bar going up in terms of increased raw usage. As I mentioned earlier, not all incremental raw usage generates any incremental revenue. Remember, these customers who were at 64 level now; used to be more out of 100 if we rolled a shot back into earlier times. So there's probably a 20-some percent lift in usage on average. It has to occur before an account gets into an overage mode, meaning to pay fully use the package they bought, they then exceed the package and it's only on the excess they pay for quote-unquote variable usage. So, it is a positive trend to see growth in the credit sensitive, it is a positive trend to see it in the real estate related sector but, but the first chunk of growth there probably has very little if any revenue benefit to us because of the dramatic fall off in volumes from 18 months ago.

Also Michael I want to say that now for every mortgage deal, you are required to provide more data, more pages, more revenue per deal and this is really what we care about,

Yeah, that's a positive. Its no longer a one or two page application.

Yes we have started from this.

So I think it's a positive trend, but in the near-term product doesn't generate much revenue (ph).

How about I guess the environment sounds like in terms of the inputs from the accounts (ph) will be better in April. Have you started to do more marketing now in April and early May relative to March?

Yeah it's a little bit more marketing, a bit more encourage the marketing guys to spend all their budget, rather than return some of it back.

Yeah and the real estate related sector.

And what's been the general outcome there? Are you finding that the prospective customers are the kind that you like to see, profitable outlook or are they -- is the traffic coming and not converting to paid (ph), any color on that?

No. The conversion rates good. The real issue is to bring the lease, once we get the conversion rates, the fairs (ph) are good. Its really that there is a step from paying good price or good customers and then when you increase the spend, then you have to make a huge jump and jump from a good right, better right too quick

Okay. And then just last guidance, in terms of your acquisition pipeline, what's the general visibility into sort of the next acquisition? Last few quarters you had pretty good visibility into the our perspective closed. How does that look now?

Because we've been mentioning, we don't have anything be in hope. (Multiple Speakers)

There is a lot of balls in the air and a lot of different both spaces and jurisdiction, meaning international and domestic. But I think to what Hemi eluded to, no, you're not going to see anything within the next four or five days being announced.

Yes. Usually we need to do several rounds with the big deals because it's not like one meeting they like their price, we like everything, we sign and go. And several of our deals are now into round two, round three. We have a lot of sellers that have a number in their mind, and when they come to us, they say this is the number, when we tell them, here is what we are willing to pay. Why won't you go and try and see somebody else who'll pay you more. They never comeback and say somebody else would pay (ph) more. A lot of them have to go to their reality check of what j2 is offering sales and it's a good price and some of them are still doing this negotiation with themselves. We are very willing eager buyers, but we are very disciplined. And I think those of you that have been with us, we didn't loose any deal for somebody who overdid us. So, it's a game of patience.

Right. Thank you.

The next question is from Mark Murphy, with Piper Jaffray. Please go ahead with your question.

Thank you, you had commented on the cancel rate in April, do you have any thoughts on the variable revenue or usage trends in April? Was that also stabilizing or improving?

Well, I think the usage is currently stabile. I don't yet know how that turns into revenue.

Understood.

We'll have a April revenue flash in a few days. But obviously, the quarterly call on the queue take precedence so.

Okay. And then, relative to your guidance you're calling for a modest EPS growth in the course of this year but in Q1 your pro forma earnings are up about 22%. Can you help us think about what are the definitional boundaries around the term modest?

Maybe we took it back into the future, right, that's what you're looking for. We don't know, there are certain events that I'm not sure happen again like there is marketing spend and some other things, I believe that our guidance still on an annual basis is good. The quarter that we delivered now is either a deposit towards the future or maybe something that signifies our ability to improve even further but I think that unless Scott has something else, we were still comfortable with the annual number.

Yeah, I think modest is meant to be a qualitative term without specific quantitative definitions around it, otherwise we'd have given a quantitative range. So I think we look at the nine out of ten analysts that cover us and everyone has got a slightly different interpretation of what that means. I don't think anybody seems to be wildly to one extreme or the other. The two comments that I would make though about where we sit today and looking at the next three quarters is one; it is the goal to fully spend the marketing budget which has been under-spend the last couple of quarters, meaning Q4 and Q1. And secondly, as Hemi alluded to, the three-quarter patents has come out of reexamination as we talked about in the Q4 call six weeks ago, we were optimistic that the stage will be listed sooner than they were but they now are being listed that will now reengage and reenergize the whole patent licensing area. Now there's two pieces to that. The stage that listed litigation recommences, we will start paying legal fees that will affect us dollar-for-dollar in terms of free cash flow. A fractional dollar will flow through in G&A because those are authentic litigations, the litigation costs are capitalized and then they are amortized into expense over the remaining useful life of the portfolio. The other piece is it freezes up to utilize those patents and put together other licensing programs around them and usually expense pre-siege revenue or license, either settlements or license agreements. So those things will start to kick in now, meaning we'll have the next eight months of this year of expense, it will be larger, both GAAP expense and cash expense, versus the last year and a half.

Okay, and then as you think about the CapEx trend in aggregates and the level that's been running out here for the past couple of quarters, is that something that we should be looking at as CapEx being in a maintenance mode or basically you're replacing dying equipment and if so, do you expect that to continue through the rest of the year or is there ... potentially it's a go along with what you were talking about in terms of spending the entire marketing budget, with that parley through and maybe you get into more of an investment mode relating to the CapEx?

Yeah, I think the answer is, yes. It's effectively a maintenance mode from the CapEx. It's been the 3ish million dollar range for the year. As you see historically, it doesn't ... it's about rapidly (ph) spent over the four quarters. So you will see variations quarter-to-quarter. I'm just looking at the last four quarters, and the range was as long as low as 300 grand and one quarter to slightly less than a million in one quarter. So that kind of variation you will see but for the fourth quarters of '09, 3 to $4 million aggregate.

Okay and then just one last one as we try to work through kind of a ballpark for how much revenue CallWave might bring to the table in Q2 on a sequential basis, is there any reason not to just take a fairly representative monthly revenue per deed rate and apply that to your comment that CallWave have contributed a majority of the bids?

Well, CallWave has a little lower ARPU than j2 does.

That's correct. That's the only thing that normalized it for.

Okay, do we know how much lower that is? You want to comment on?

I continue to ... if you go through the website they were selling product anywhere between...

7.95 and 12.95.

7.95 and 12.95 So I'd say the average is towards the 12.95 a little bit, like a little 9 to $10 level.

Correct.

Okay

And that's the...

If you look at our almost $15 ARPU across all of our deeds and if you looked at their ARPU, you'd have to take about 4, $4.5 loss off of our ARPU to come with to a 10 to $11 ARPU for them.

Also you have to remember that during Q1, almost half of the quarterly run rate was already big deal.

Little less and half

Little less. We bought them in 20...

Third week of February.

Third week of February, right?

And then just remember as Hemi pointed out to take out a patent licensing revenue, we associated as roughly 10% of the revenue that flow to us as other income. I mean other revenue.

Okay. Thank you very much.

Thank you very much.

The next question is from Tavis McCourt from Morgan Keegan. Please go ahead with your question.

Thanks. This is Justin Patterson on behalf of Travis. The bulk of my questions have already been asked, but I've just throw out a few housekeeping ones. First, one voice, you have typically provided a monthly run rate on that. Perhaps I missed it on the call, but could you provide that?

I don't think we did.

No.

But I can tell you we say that we are approaching 200,000 customers. You can figure out the ARPU as we said, we mentioned EBITDA and the ARPU for the voice is a bit lower because they take multiple extensions. So 200,000 customers a little lower ARPU. Not so hard to get.

Okay. Thanks and that's actually a nice, straight going to my next question. Just looking at the ARPU trend, we've gone from about 16 to 30 in Q1 '08 to about 14 to 85 today. Should we continue to expect that to just decrease over time from that higher mix of voice and the...

Yes we have double impact on the aggregated ARPU. One, clearly if you look at the metric slide over the last nine quarters, you had independent of the economy an involving shift in mix towards corporate deal, large corporate deals, the seven that Hemi mentioned. Voice deeds at the 10-11 and at most $12 range. And then the secondary fax rent which can be anywhere from 7.95 to 12.95 a month. So all of those things obviously are lower than 14.85. They make up a cost of larger piece of the overall growth in that adds over these eight or nine quarters we're looking at. So that's a downward pressure. And secondly, it's more recent phenomenon on the last probably four quarters has been the usage revenue, which is really more tied to the economy and things that we've seen going on both firstly, in the credit sensitive sector and then probably more recently in the last six, seven months in almost all the sectors as the economy is contracted.

Also Justin, the base price is the base price, its impacted is quoted by the mix. The usage is driven by the economy and I'd say that if the economy gets better, the question is what we will sell more, more of the expensive or more of the less expensive product. And then also I'd say that the usage will it improve to the level that we had before or not? It's all very complex, but I think that the levels of the ARPU that we had in the past, let's say two years. The only way to get there is to price increase. And we don't even think of price increases in this environment.

So I think it's a good qualification. I think under our assumption that the economy remains weak through the end of this year. And to say may not get sequentially weaker, it might get sequentially better. But as long as it remains in a contraction mode then our view would be you'll see something change with upward pressure on cancel rates. And you will continue to see shift mix and variable revenue pressure that will push the average ARPU downward. And then once the bottom has been found and there is an uptick, then the questions come in how fast is the cancel rate normalize because we're on a spot basis, 90 basis points a month higher than the normalized cancel rate. That's a lot of potential pickup in bids that wouldn't cancel in the future if they'd have return to that rate. And then the next question is the variable revenue the raw usage return to normal levels and then how much of that converts into actual revenue.

Okay, thanks. It's very helpful. And then on just bad debts the allowance for doubtful accounts obviously jumped dramatically from a fact credit sensitive base. Are you considering just kind of tightening the credit standards at all or anything like that prevent such an uptick going forward?

Yeah, we did, we had some customers that took longer than we liked to pay, and we did. But I can tell you it's a very essential service. And we are not as aggressive as your mobile phone company, but we can. And we can tweak the level of aggression on an individual customer basis. So I don't expect the big surprise but definitely in the past we were less nervous about somebody being late. Now Kathy you know, that's already controlled from the different department. And the message is very clear, a lower tolerance for being late. And if we don't like to do it, we -- it's very easy for us to suspend the accounts or whatever this to be done. And usually it's very effective.

Okay. Got it now. Thank you very much.

All the best.

Okay. And let me just address the bad debt. As we indicated last year, we had actually taken the more aggressive steps on the bad debts in terms of our decline, probably declines to the credit card declines. And so during the middle half of last year, we actually set a new policies with control features so that we could monitor this much more tightly. But you will notice is that ongoing basis and particularly in this economy what we find is the rate of decline can increase based on people's credit flow being changed or limited by their own banks. So the obvious situation that we have here is that banks are encouraging, shall we say their cardholders to reduce their credit limit that obviously has an impact. So we're very much driven by the credit card environment. And with that said, you will see fluctuations on that based on that. So we believe to stabilize somewhat, we can't really tell whether the economy is going to take a switch or you're going to have other issues that arise from your credit card companies that could impact that.

There are no further questions in queue. I'd like to turn the call back over to management for closing remarks.

Good. We thank you for joining us for the Q1 call. I will remind everybody we have our annual shareholders meeting this Thursday at 10:00 AM Pacific time. The only matters before the shareholders or the election or the reelection of our seven directors, as well as the appointment of Singer Lewak as our auditors. We will then participate in some upcoming conferences over the course of this quarter which will put our press releases to alert you to. And then look forward to talking to you in about three months to discuss the Q2 results. Thank you.

Thank you.

Thank you.

This concludes the teleconference. You may disconnect your lines. Thank you for your participation.