Greetings and welcome to the J2 Global Fourth Quarter and 2015 Year End Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] It is now my pleasure to introduce your host Mr. Scott Turicchi, President of J2 Global. Thank you. Mr. Turicchi, you may begin.

Thank you very much. Good afternoon and welcome to J2 Global’s investor conference call for the fourth fiscal quarter and full fiscal year 2015. As the operator just mentioned, I'm Scott Turicchi, President and CFO of J2; and with me today is Hemi Zucker, our Chief Executive Officer. Simply put Q4 and fiscal year 2015 provided stellar operating results, validating our business strategy of operating in multiple business units focusing on EBITDA and free cash flow generation and utilizing M&A to more rapidly build these businesses to scale. Many records were set, which we will detail throughout the presentation. As a result of this performance, our Board has increased the quarterly dividend by $0.01 to $0.325 per share. As a reminder, we initiated the dividend in Q3 of 2011. For the succeeding five quarters, we raised the dividend by a half penny sequentially. This was then followed by a quarterly dividend raise of three quarters of a penny for the next 12 quarters. Including this declared dividend we will have returned $231 million to our shareholders through this program. We still have on our balance sheet of 12/31, $414 million of cash and investments available, not only to fund our dividend program, but as importantly to fund our M&A. We will use the presentation as a road map for today’s call. A copy of this presentation is available at our website. When you launch the webcast, there is a button on the viewer on the right hand side, which will allow you to expand the slides. Also if you’ve not received a copy of the press release, you can access it through our corporate website at j2global.com. In addition, you will be able to access the webcast from this site. After we complete the presentation we’ll conduct a Q&A session.…

Thank you very much, Scott, and good afternoon everybody. Before I go to the J2 consolidated slide I want just to mention that last December, we celebrated 20 years. For those of who have been around I’ve seen this store growing from $0.23 and up to $80 this December, when we were celebrating 20 years. I’m sure that the next 10 years will be much more exciting than the last 10 years as we continue to grow over 20% year-over-year and it’s a larger company we have much more options than we ever had before. Without further drama, let me go to Slide 8, when I will talk about our total quarterly revenue mix by service. Q4, 2011 to Q4, 2015 is demonstrated here with 25% CAGR. Revenue has increased across our three categories, the category of fax and voice, which was 93% or $79 million in Q4, 2011 is now in Q4, 2015, $88 million and became from 93% of our business, only 43% and we are anticipating it to, while growing to become 36% of our next year revenue. Our gross engines as you can see are the media that was 10% in 2012 and is now 34% and the other cloud that was 7% in 2011 and is now 22%. Let me go to the next slide, when I will talk about our business cloud services. Page 10, is my favorite slide, where we talk about our ever-increasing churn, its down for the first quarter to 2.06%, we have now more than ever larger customers with longer contract and multi-year contract that help us to show and benefit from the lowest churn. Next page. Page 11, cloud connect. Cloud connect is our largest segment is $345 million, mostly as I said before fax and voice still is…

Thank you, Hemi. If you go to Slide 20, I'll give you some of the parameters that generate our 2016 guidance. So in-the-cloud services business what we are expecting is contribution from both Cloud Connect as well as our non-Cloud Connect services, however the larger share of growth will come from those other services. In the Cloud Connect business the goal is to maintain EBITDA margins around the 53% level and then in our non-Cloud Connect businesses to see the EBITDA margins around 48% or hopefully a little higher. IP licensing, we are budgeting at the current run rate, so that's between $3 million and $4 million per year. I would note this does not include or anticipate any future or additional settlements either from the existing portfolio or a portfolio that is in the early to mid stages of going through its licensing program. I think if those were to happen though they would be later in the year. Media, we're expecting to grow greater than 25% this year versus last year. Maintain EBITDA margins in the very high 30s. We are already making some investments in the media business particularly in the area of Ookla and for further benefits in terms of our data monetization strategy but we're not anticipating any benefit from those investments this year that would be 2017 and beyond. I'd also remind you for the digital media business, it is seasonal. As you can see from the Q4 results, so the way our revenue lays out over the four fiscal quarters we are anticipating that the first fiscal quarter that we are now will generate approximately 20% of its annual revenue and the fourth fiscal quarter will generate approximately 30% with Q2 and Q3 being roughly equal. Then on a corporate basis as Hemi…

[Operator Instructions] Our first question comes from the line of Shyam Patil with SIG. Please state your question.

Hey guys, thanks. Great job on the quarter and the year. Just I had a few questions. First one, can you talk about just how the M&A environment is right now obviously the overall market is choppy, is that what you are seeing in the M&A environment and is that a good or bad thing for you guys, and then I have a follow-up to that?

I would say the last five years have been the warm-up act. The question and the issue is really the degree with which this market really the negativity in the market will persist. Right now you are talking about in real-time about six weeks. I don't think that’s sufficient for it to change materially the M&A landscape. As you know I think we've been very successful in very robust market conditions of doing M&A that's been very successful and has returned economically very well to the Company and the shareholders. What we're really looking for is whether it's a combination of external risk that might be systemic, economic recessionary concerns, any basket of those things that will cause a more elongated dampening of valuations as evidence say by where the NASDAQ trades or the DOW or the S&P. Because it takes a while for it to set in and for people to appreciate particularly in larger situations that this is the new norm and this is the basis off of which they have to think about selling their company. So I think today it's too early, but it's a good first phase and it's a good opening act for if this continues to lead to some very interesting opportunities in the next several months, an opportunity that we would have thought literally 10, 12 weeks ago would not be – would not work in our economic model.

So three years, four years ago, we were bidding on companies on our regular purchasing parameters and somebody would come and make a bid that was so high that we said we're out, we’re not even trying to sharpen our pencils. Now, in the last few years, it's much shorter, negotiation – people respect the fact that we can execute that we don't play games. We have the…

Cash.

We have $400 million plus in cash, we have loans available and execution is key and people don't want in this environment to get earn out or complex deals. We pay cold cash and actually we're very excited and we just didn't know how to handicap, so we came with an outlook without it and as we will do those deals you will hear about it and I'm expecting a phenomenal year.

Excellent. And just in terms of the pipeline Scott, how would you characterize the pipeline for M&A? You guys put to work I think about $300 million last year. If you look at 2016, would you characterize your pipeline and kind of making deals as being, as potentially being able to put that much capital or more to work this year? How would you talk about the pipeline?

Yes. Look I think if you look over the last three or four fiscal years, now we’ve put anywhere in each year between the low $200 million and the low $300 million that we're probably $250 million is the average of those last four fiscal years. I just looked at the other day we spent $931 million in M&A from January 1, 2012 to December 31, 2015 in four years. So it’s a little under $250 million a year on average. Although with a general increase I think from year-to-year from 2012 through 2015. So I would say that our garden-variety pipeline of deals in that four-year timeframe the only deal that was really large in size in terms of transaction value was the initial purchase of Ziff Davis in late 2012 for about $167 million. I think it's become a fairly comfortable number to achieve with what I'll call the garden-variety, day in and day out deals generally more heavily weighted to Cloud. Because they have more both jurisdictions in which they can look more services, but also they are also they are able and willing to integrate deals that are smaller than what makes sense on the Media side. So you will notice that the pace of media deals is generally a couple a year versus 20 or more for the Cloud. So I think yes, the pipeline is intact to maintain that. I think the wildcard is will because of these market conditions intermediate size deals or even larger deals come into play which could dramatically change the answer to this question and take the amount of capital deployed up maybe even a whole step function up.

Got it. And this is my last question. For the Media business, you guys are guiding to north of 25% growth this year. I know there is some M&A from the second half of last year that's a net number. Generally, we thought of that business as growing kind of in the 15% and 20% range organically is that still the right organic range as we project out beyond 2016 or is the organic growth is all fixed already.

The Media business is becoming a little bit more complex as we have businesses within businesses, so the answer is I think in general aggregate, no. I would guide to a lower overall organic growth rate. However, having said that we do have pieces of the business that are growing in the high teens to 20%. As you do know, there are systemically some headwinds in the display business; issues that have been talked about before either on this – either on our calls or in general about viewability of ads, to some lesser extent ad blocking technologies and things like that. So we're taking that into account. I hope that we are being unduly conservative and if I looked at Q4, I would say that our budgetary guidance for 2016 is probably more conservative than Q4 would imply. But I think it's a prudent thing to do, because I think the display business which is a declining percentage of our business as we are focusing more on performance-based marketing and licensing. Really the – I'll call it the data monetization from assets like Speedtest are generating a larger and larger share of our revenue, but there is still a piece there that is going to operate at a low growth rate.

Great, thanks guys and congrats again.

Thank you.

Thank you, Shyam.

Our next question comes from James Breen with William Blair. Please state your question.

Thanks for taking the question. Just a couple for the free cash flow obviously seemed like a pretty big quarter here part of that's probably the margin expansion you saw. Can you just talk about what you think drove the margin so high in the fourth quarter. And then on a run rate basis that free cash flow would be closer to $300 million for 2016. I think there's some seasonality there, but what are your general thoughts are in terms of free cash flow? Turicchi, Thanks.

So yes, it was outstanding quarter. I think it was probably if you look at our average quarters the last couple of years, I think 50-ish was sort of the high watermark, so this is almost 50% better than that. I would note and I think you could debate when it should be included. We do have in the $75 million about an $8 million tax refund, so the question we get booked when it gets booked or taken when it taken. Improved pro forma now at $67 million you could back spread it over previous quarters. I think there's a fair conversation that could be had over that. So that's one point I would make. The second point is you are correct. We do have in general now an aggregate seasonal bias in Q4 primarily because the media business has a much you can see between 20% to 30% of its revenues in that much or more of its EBITDA on a percentage basis comes in Q4 relative to say Q1. And it's becoming a bigger piece of J2's overall business its tipping J2 as a whole Company towards a positive Q4 seasonality bias. You recall the Cloud actually has a negative seasonality in Q4, but it is massively swamped by what's going on with media given media's current size. So you cannot take Q4 and seasonalize either $75 million or annualize for $67 million that would not be correct. But I think if you look at say $250 million as a core number for 2015 and you look at the kind of growth rates top and bottom line. And I will tell you EBITDA is going to be consistent with that these are highly qualitive. There's always a little bit of an issue in projecting free cash flow in terms of the actual cash taxes you are going to pay, which can be different from your accrual rate. But in general, it should grow in line with the top and bottom line. It should be roughly within that area. So that would get you to a number that's going to be probably a little bit north of $250 million, $255 million.

Great. And then…

One other wrinkle which is the CapEx, but I don't think we see anything that would cause us in dollars to think that CapEx is going to be materially different in 2016 versus 2015.

Yes. We have done our plans capital asset, if you need to factor it in same percentage as last year would be pretty good.

I think it may be a little higher actually.

Yes, exactly. And that’s added to what’s [indiscernible] we have the cash and then we have the cash flow of the year that we are generating so we are ready to grow.

On the business segment in Cloud, and Cloud Backup now you saw coming out of third quarter with LiveVault sort of a $100 million run rate. Where do you get that business to get that EBITDA margin up sort of I think you talked about the mid-to-low 50s and we’re close to that now.

Yes. So we have in this business several elements those that are fully integrated and those are the less, those are the small, those are the large, for instance we have LiveVault which we is fully integrated heated, in our business this can take more business into it. LiveVault is the higher-end of big companies. They can definitely integrate into this team another $10 million with marginal cost. Our KeepItSafe continues to grows and it grows, so basically improvements can be done on our KeepItSafe and on our LiveVault and in the UK our business, which LiveWire was fully optimized and very profitable. So I think we can definitely grow above 50%. It depends on the speed of the integration and how many acquisitions we will do. But this business has the potential if you analyze it to be in the mid-50s on EBITDA.

Great, thanks.

You’re welcome.

You’re welcome.

Our next question comes from Peter Lowry with JMP. Please state your question.

Great, thanks. Can you provide some color around the Ookla investments you are making and the long-term opportunity to monetize Speedtest and what’s the strategies are there?

Sure. So its something that actually began in 2015, so just to reset everybody, we bought – Ookla is the entity name, Speedtest is how it’s better known, but that allows you to test the speeds of your connection whether it’s on a mobile device a tablet, laptop or…

Anything.

…anything desktop. Now the core of the model when we bought the business improved through 2015 is ads that are being served as the tests is being conducted and the test can be done on one of those devices or through an app. And so depending upon how you are conducting the test, you will see a different array of advertisements. And the first phase was to take the inventory and put it in the more contextual setting. So as you can imagine, if you are testing speed on a mobile device, people like the mobile carriers are very good advertisers to those who are conducting the test. That was not the case prior to our ownership. So Phase I was to enhance the quality and the revenue coming from core display advertising while tests are being conducted. However, when we looked at that deal, we believe that the long-term will benefit and value is going to come from the underlying data that is part of each test. And so there were prior to our ownership, what I will call ad hoc reporting that was done on a fee basis for those that we’re interested in the data. They wanted to know stay here in Los Angeles during the business week between 9 and 12, what the various carriers where in terms of their upload and download speeds, okay. That data was available, but internally it had to be assembled and put into an excel spreadsheet and there would be a fee for that. Our team decided that for a whole variety of reasons in terms of ease of service and used better experience, but also better ability to monetize, this really needed to move to a more formal program where those third parties could have direct access to the…

Let me just add something. As you know the carriers that provide Internet either via antennas or with cable or Wi-Fi whatever, they have massive investment in capital and they really want to know where is the perfect place for them to invest? They can today measure the signal strength, the antenna level, at the socket level of the cable whatever, but they can never test at the end device of the user at the time that he uses it, in the room that he uses it under the weather and everything. We are providing them this amazing data that is very important for them and they are willing to pay for it and we are unique there, so all those are getting us excited about Speedtest and Ookla.

The only thing I’ll add is itreinforce itself, Hemi mentioned it, that there is 172 million downloads or potential users. And I think more importantly than the base is the $15 million approximately that were added in Q4 alone. So it’s a building base of testers if you will, which means an increasing base of data.

Great, thank you.

You’re welcome.

You’re welcome.

Our next question comes from Walter Pritchard with Citi. Please state your question.

Hi, thanks. Scott, I’m wondering just on ARPU. You saw nice improvement there and your backup business is doing well, I’m wondering if you could give us a little level of detail there is to the drivers within of ARPU, it specifically and around back up?

Sure. So I think you are referring on the metric slide that we posted $40.79 average monthly revenue per customer,

Yes.

…up from $14.23 in Q4 of 2014 and up sequentially from $14.06 in Q3 of 2015.

Yes.

So the comment that I make on that is, it has been a general upward trend over the last eight or nine quarters not perfectly quarter-to-quarter sequentially. But what we are seeing and I think this is true really across the Board in the Cloud business is a somewhat larger than historic average customer who is paying us more for either seat, if it’s measure that way or more per account or per customer. And certainly, with the LiveVault acquisition within the backup space we’re getting a somewhat larger customer with a higher ARPU even though in the Cloud Connect business the real trust of that business has been the Corporate Fax. And so we are getting these larger customers to come in. So those are the key core drivers in terms of the rise and ARPU either sequentially or year-over-year.

Great. And then just on – Hemi, on the macro side, I guess the stock markets are obviously telling us that potentially things could get more challenging year. And I’m wondering given sort of what you are seeing, I think we understand the DCF business better, but on the Media side with the performance marketing, I think display is tougher. Can you help us understand what you are looking at to gauge sort of how those businesses are pairing on the leading basis and what we can tell there or trying to do the things?

Yes, absolutely. So we believe that in bid markets, a certain marketing budget will diminish, but those that will stay are those that have a guaranteed result behind them. Offers, for instance is a company that’s facing itself on ability to deliver the best price to the shopper. So we’re investing more and more into product at our performance base, which we’ll always in any economy, if you are telling me what is my given cost to get the customer, I can calculate it just as I tell my marketing team you haveendless amount of marketing money if you can bring the customer for one, two, three months of revenue. So those in my opinion are going to continue to be the winners and those with the lofty promises of 1 million banners or things like this are going through harder time. So I think the performance marketing is the best thing after Google for people that want to advertise and measure by the click and by the moment. So actually that economy in my opinion here is definitely important and good for our EBITDA because those inventories are homemade. We don’t have to go and buy it. It’s all within the current cost structure already baked in all you have to do is sell it. So for us I mean J2 from an M&A standpoint and from media acquisitioning versus the market will do very good in stress environment or economy.

Thank you.

You’re welcome.

Our final question comes from Greg Burns with Sidoti. Please state your question.

Good afternoon.

Hello.

I think in the fourth quarter, you did your first follow-up acquisition in the web hosting market, I know that’s not a huge business for you now, but it seems to be similar to the game plan you followed to build the online backup business. So I was wondering may be you give us an update on that market?

Sure. I think you heard us talk about for several quarters after we bought Web24 that we’ve been attempting to do a small follow-on acquisition consistent with what we did, we bought KeepItSafe and with that matter when we got Campaigner out of protest. And it took a little longer than we would have liked, but the idea is to do a small transaction that is financially inconsequential. So it’s very tiny in terms of its revenue, recall that Web24 itself is only about $5 million of revenue, so it’s not very big. But that transaction closed and it’s important in that it allows us the opportunity to go through as we do in each new business segment or business unit. What are the real stress points or issues in integration? Because for our model – the way our model works, there is a lot of key variables, but one of them is what is a fair expectation for the time of integration. If it’s 30 days versus a year that may very well influence, what you are willing to pay for the business and your ultimate return on invested capital. So having the Web24 business under our ownership for about a year or over a year, we’re able to finally acquire an asset. It is in the process of being integrated as we speak in fact likely by the end of this fiscal quarter if not early Q2, it should be integrated. And then we will take that – we’ll take a step back look at what the issues and challenges were if any and that will then be an influencer in terms of how we look at that business going forward meaning does it change the way we value the businesses? Does it cause us to maybe operate within one region versus multiple reasons, all those things will sort of fallout from our analysis.

Greg, you know J2 is very opportunistic and we saw opportunity and we call it ANZ, Australia and New Zealand. We have been there for a long time with the fax and voice, we have some backup and Ziff Davis also have some advertising people. So we said look, we have offices, we have talents, we have a CFO. We have all the structures there. We have very strong management. And this was a place we could add another product and service without adding a lot of infrastructure actually driving the EBITDA up. So we’re still going to continue in this region to push more backup in fax and voice and under objective product when they make sense. It is a remote area. The good news is there is not a lot of competition of American companies trying to compete against us. The Australian dollar and the New Zealand dollar are very weak. We’re going to be opportunistic there and we feel very comfortable, because we have very good and strong management infrastructure offices and everything that we need to act in the region. At the end of the day the region is not very big. So we have to try the different style of business management and we mimic there basically, what we have in the headquarters and we're waiting for opportunities there including in web hosting, but the all is to make sense. I hope I answered you, Greg.

Yes, thanks.

You’re welcome.

There are no further questions at this time. I would like to turn the floor back to management for closing remarks.

Okay. Thank you. We appreciate you are participating today in our year-end conference call. I would ask you to look for upcoming press releases that will announce various conferences that we will be presenting at particularly in the month of March and we look forward then to talking to you again for our Q1 results in early May. Thank you.

Thank you. Bye, bye.