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j2 Global, Inc. (NASDAQ:JCOM)

Q4 2012 Earnings Conference Call

February 13, 2013; 05:00 p.m. ET

Executives

Scott Turicchi - President

Hemi Zucker - Chief Executive Officer

Kathy Griggs - Chief Financial Officer

Analysts

Shyam Patil - Raymond James

James Breen - William Blair

Daniel Ives - FBR

Greg Burns - Sidoti & Company

Operator

Good afternoon ladies and gentlemen, and welcome to the j2 Global, fourth quarter and 2012 year-end earnings 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.

Scott Turicchi

Thank you. Good afternoon and welcome to the j2 Global investor conference call for the fourth quarter 2012. As the operator just mentioned, I am Scott Turicchi, the company’s President and with me today is Nehemia Zucker, our CEO and Kathy Griggs, our CFO.

As you’re probably well aware this has been a very exciting time for j2 since we last spoke. We’ve entered the digital media business through our purchase of Ziff Davis, followed approximately two weeks ago with our purchase of IGN. We will be discussing those acquisitions, as well as our Q4 2012 and full-year financial results, provide an update on our business, as well as guidance for 2013. In addition, our board has increased the quarterly dividend to $0.2325 per share.

We will use the IR presentation as a roadmap for today’s call, a copy of which is available at our website. When you launch the webcast, there’s a button on the view on the right side, which will allow you to expand the slides. If you’ve not yet received a copy of the press release you may access it through our corporate website at j2global.com/press. In addition, you will be able to access the webcast from this site.

After completing our presentation we will conduct a Q&A session. The operator will instruct you at that time regarding the procedures for asking a question. I remind you that at any time you may e-mail those questions to investor@j2global.com.

Before we begin our prepared remarks, I will read the Safe Harbor language. As you know, this call on 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 and our various SEC filings, including our 10-K filings, 10-Q filings, proxy statements and 8-K filings, as well as additional risk factors that we’ve included as part of the slideshow for the webcast. We refer you to discussions in those documents regarding Safe Harbor Language, as well as forward-looking statements.

Now at this time I will turn the presentation over to Kathy to give you the update on our financial results.

Kathy Griggs

Thank you Scott. Good afternoon ladies and gentlemen. Please refer to slide five of the presentation for a recap of our Q4 GAAP and non-GAAP operating results and to the supplemental schedules at the end of the presentation for a reconciliation of all non-GAAP financial measures to the nearest cap equivalent.

I am pleased to report that yet again we achieved record quarterly revenues. Our Q4, 2012 revenues were $102 million. Revenues increased 9.4% over Q3, 2012 and 20% over Q4, 2011. 2012 full year revenue was a record $371.4 million, up 12.5% from $330.2 million for 2011.

In Q4 we recognize $2.1 million in revenue from intellectual property licensing and expect these revenues to continue to come in every quarter; however, they will fluctuate from quarter-to-quarter.

Our cancel rate for the quarter improved from 2.3% down to another new record low rate of 2.2%. We added more than 17,000 paid DID’s and our ARPU grew to $15.31 per DID this quarter versus $15.27 last quarter.

In November 2012 we completed our acquisition of Ziff Davis Inc, giving rise to our new division called Digital Media. Revenues for this division for the partial quarter were $9.7 million, with operating income of $2.9 million.

On February 1, 2013 we completed our second acquisition in the media space by acquiring IGN Inc. In just a few months we more than doubled our media division to become a sizable business of more than $120 million in annual revenue great.

On a non-GAAP basis our net income for the quarter was $32.4 million, an increase of $2.2 million from Q3, 2012. Non-GAAP growth and operating margins were 81.9% and 44.2% respectively.

GAAP net income for the quarter were $30.2 million, our operating income were $42.2 million, growth and operating margins were 81.7% and 41.4% respectively.

For Q4, 2012 we achieved non-GAAP EPS of $0.70 per diluted share, up $0.06 from $0.64 in Q4, 2011. Our GAAP EPS for the quarter was $0.65 per share, up $0.03 from $0.62 in Q4, 2011. The improvement is magnified by the fact that we expensed $5 million of interest during the fourth quarter on our bond issuance.

For fiscal year 2012 we achieved record non-GAAP EPS of $2.69, up 6% from the prior year and despite $9 million of interest expense or $0.12 of EPS due to our 2012 bond issuance which was not present in 2011. In other words, without the new bond costs our EPS grew $0.28.

Free cash flow for the quarter was $45.2 million, representing a 44.3% of revenue. Full year 2012 free cash flow was $166 million, a new record.

We achieved record EBITDA this quarter of $52.1 million, up 13% of $46.1 million in the same quarter last year. For the 12 months ended 12/31/2012 we achieved EBITDA of $196 million, up 16% over full year 2011 and also a record. (inaudible) is attached to our press release for a full reconciliation of EBITDA.

Our cash and investment balances totaled a record $344 million as of 12/31/2012. As of February 8, 2013, our cash balances are approximately $305 million.

Today we announced that we are again increasing our dividend payout to $0.2325 per share, the sixth consecutive quarterly increase. The dividend will be paid on March 4 to shareholders of record as of February 25.

Since starting our dividend program in 2011, we have increased the quarterly payout per share by more than 16%. For Q4 2012 we incurred $5 million in non-cash amortization expense on intangible assets and $16 million for full-year 2012, representing approximately $0.09 and $0.27 per share of our EPS respectively.

Fluctuations of foreign currency this quarter resulted in unrealized gains of approximately $100,000 compared to gains of $0.5 million in Q3, which was reflected in other income and expense. These gains or losses result primarily from the nature of our global structure.

We are very subdued to a short term inter company debt obligation, denominated in currencies other than the US dollars, especially the euro, Australian dollar and the yen. Continued fluctuation in these currencies are going to affect both the direction and the magnitude of the change in this category. There is no cash impact however, unless and until these balances are settled.

Our estimated effective GAAP tax rate for Q4, 2012 was 19.6% down from 19.9% from Q3, 2012. We expect our normalized tax rate for 2013 to be in the 25% to 27% range due to increase in income and higher tax jurisdictions.

In conclusion, let me remind you that the supplemental schedules at the end of the presentation will provide you with more information on our metrics, as well as the non-GAAP to GAAP reconciliation schedule for all financial measures included in our remarks.

Now, I’ll turn the call over to Hemi, who will provide you with an overview of our business metrics for 2012.

Hemi Zucker

Thank you Kathy and good afternoon everybody. I would like to – sorry, Scott, you go first.

Scott Turicchi

Thank you Hemi. You normally would go at this time, but we want to spend a few minutes to discuss our entrance into the digital media business. So for those of you following along in our slides, on slide 8.

Let me give you a little bit of background first on the Ziff Davis transaction, the rationale behind entering the media business and then talk a little bit about IGN, then Hemi will start to talk about all the great things that occurred, both in the cloud business and in the media business.

So, as you’ve heard, since we acquired the Davis, a lot o people have been interested in the thought process that went into entering the space. We believe that one of the elements that is valuable to j2 is bringing to bear a variety of skills to industries, which to-date we have demonstrated in the cloud industry.

Now before looking to another space, though there are a number of criteria that have to resonate before we would make that leap. So you’ll see at the top of page eight, little white spaces that are very large. There’s no doubt that the advertising and display business is quite large. There are some statistics represented by Forrester in IAB that are in the tens of billions of dollars and expect it to grow double-digit over the next several years.

Secondly though, we like spaces where there’s a disruption going on in the marketplace. Most notably you see in advertising and media world, the shift that has been occurring from off-line to online and the unique skill set that is needed to transition properties from off-line to online, as well as the skills needed to monetize traffic in the online world.

We like targets that have a similar type of either customer base or traffic flow. In the case of the media business, there’s a consistency between the terrific that is visiting the websites in this case of Ziff and now IGN that is similar to the customer base we have in the cloud. We like businesses that have superior marginal economics, so that as revenues grow, a very high percentage of that flows through to EBITDA and free cash flow.

We also like spaces where data analytics matters and is important it gives you a competitive edge in how you either monetize your customer base or monetize your traffic. And finally we like industries and spaces that are highly fragmented, because it lends itself well to our desire to do follow-on M&A.

Now, to give you a little sense, we talked about the size of the market being very large and growing. If you go to slide nine, that in and of itself was not enough to enter the space; we need a couple of things beyond that. One, where brands that are well recognized, because that will allow organic traffic to flow freely to the sites without a large cost. We also needed a team that had successfully demonstrated the ability to transitioning properties from off-line to online.

Now a little bit of background on Ziff Davis. The company was actually in bankruptcy in 2010. The data you see for 2010 is for the seven months it was owned by the predecessor owner, but under the guidance of the core of the management team that is with us today.

So they’ve taken the revenues for the seven months from $11 million of fiscal year 2010 to $48.5 million in fiscal ‘12. But more importantly you can see the superior marginal economics as the traffic was better monetized going from $1.6 million to $12.2 million or currently slightly in excess of 25% margins. On the left-hand side you see that that was done in part by driving more visits and more page views to the various websites.

Now, for those of you that aren’t familiar of Ziff Davis, it operates in a variety of brands, the most notable of which would be PCMag.com. The other important ones include ComputerShopper, Geek.com, LogicBUY, Toolbox and these are really geared for influencing and informing buyers of technology.

The tech and telecom space is the second largest online category at approximately $7 billion of annual spend. As I mentioned, because of the strength of these brands, 100% of the traffic is organic, a combination of SEO direct referrals and social. There also is a very rapidly growing mobile component and social component that came with the Ziff Davis acquisition.

Now, shortly after we closed that deal, we became involved in the sales process for IGN on slide 11. This is also within the tech vertical, but caters primarily to gamers and to a lesser extent to lifestyle to the two brands IGN and AskMen.

There were much more visits and page views here, 1.4 billion visits last year in 2012, slightly in excess of 5 billion page views, 1.6 billion video streams and this is important because one of the elements that IGN brings to the table is some enhancements in technology, both in the mobile world and in the video world, which will be important not only for the IGN business, but also for the Ziff Davis business.

What it does for us is expand the media group into gaming and lifestyle. It doubles the size of the revenue of our media business and although we can’t be term specific, we really will acquire IGN at less than one times revenue and it makes now our Ziff Davis media properties the second largest in the digital publishing industry in this category.

Hemi will in his section give you a little bit more view in terms of how these properties will actually be integrated and at this time I’ll ask him to give you an update first on the cloud business and then in the media business.

Hemi Zucker

So now I’m sure that it’s my turn to talk. Thank you Scott and good afternoon everybody and also welcome to the new employees of Ziff Davis and IGN that are listing to our earnings call.

2012 was an amazing year, and 2013 will be even more exciting. I will start with our slide 13 and focus on our cloud business and then I will finish with a discussion about our newly acquired media asset IGN.

In thee recurring business, churn is key. Churn rate is extremely important. Our cancel rate is at record low. The value of the reduction of our churn rate from 3.5% in Q1, 2009 to now 2.2% is very, very important; it’s huge. Tens of millions of dollars are just going all the way to the bottom line and impacting our success and cash flow.

Our customer base is growing in size and in loyalty. The increasing loyalty is mostly dived by our Fax customers. They will place their fax machines with eFax and they love it and stay loyal.

In 2013, we will continue to put many efforts in keeping our low churn rate. These levels of low churn rate is a company wide effort. Every department in j2 is participating and everybody’s active in keeping this high level of loyalty for our customers.

Going forward to page 14. In this page let’s start with the right hand chart. We are here showing the percentage of fax in the general revenue in j2 starting with 2009 going to 2013. 2009, ‘10 and ‘11, the fax revenue was 82% of our general revenue, keeping it flat while growing.

From 2009 to 2013 our fax revenue grew from approximately $200 million to a projected number of $285 million in 2013. While growing, our fax as percentage of the revenue in 2013 has been moving from 82% in ‘11, 75% in ‘12 and 55% projected to be in 2013.

As such, if our DID base revenue is becoming 55% with fax and another, I don’t know, say 10%, 15% with other DID bases, we are thinking about changing our metric and we would stop being focused on DIDs only and probably next quarter we will be able to provide you with new metrics to better fit our new and changing plans.

Now let me move to our different revenue lines covering 2012 and 2013. Our number one and number two drivers in 2013 are going to be more advertising revenue and more technology initiatives like mobile and other improvements to our website and this will be added a little bit with nothing material on the acquisition front.

Not material in revenue, but materially importance, because we are planning to go into new areas and new places around the world. I will start with 2012 and ‘13 on fax. Our fax in 2012, grew organically, mostly driven by our cooperate and in Japan and 2013 will continue with healthy growth, both locally and worldwide.

Our Voice revenue grew organically in the U.S. and we extended in to Australia and New Zealand through the acquisition of Zintel. In 2013 we are focusing organic growth via advertising in new channels. E-mail, even in CRM is mostly our hosted email, our Campaigner email marketing in our CRM that was Landslide now converted into Campaigner CRM. We are continuing to grow this business, mostly through new advertising and new initiatives in 2013. This business in 2012 is worth more than $20 million.

KeepItSafe: KeepItSafe is our in-cloud storage. We extended in 2012 into New Zealand and Netherlands. Our revenue grew from $2.1 million to $3.6 million or 73%. In 2013 we are planning massive growth, we are planning to more than 3% revenue, both through organic and through small acquisitions.

In Media, our new initiative, our new subsidiary. Media, we have entered into the Media space in the last quarter in Q4, 2012 with the acquisition of Ziff Davis and we have continued to grow in 2013 with the acquisition with IGN. We have more than doubled our revenue in the Media through do this acquisition.

Now lets go to site 15 where I will discuss our IGN Integration Plan. As you know, we have acquired IGN in February 1. Our CEO of Media, Vivek is working with the team of IGN on planning the integration. This integration should be relatively easy. The core functions of Ziff Davis are narrowed with IGN, their editorial, their reviews, their traffic and sales and bring on additional Media elements like video.

Our plans are to accelerate the traffic growth via referrals and increase page views per visit. We are going to build upon emerging video advertising business. As you know, video is one of the fastest growing advertising elements out there and IGN, AskMen are bringing strong video experience and growth. We will add substantial data signals, also product expansion for our buyer-based business.

The synergies fixed areas that we are working with are on our common advertisers, overhead efficiency systems and real estate consolidation. This acquisition of IGN make Ziff Davis the second largest digital publisher in the category. This is an amazing achievement thinking about that three months ago we were not in this space and now we are the second largest.

I am very excited about it and I will forward the discussion to Scott.

Scott Turicchi

Thank you Hemi. We’ll just do a quick wrap-up before we turn to Q&A. I direct you to slide 17 for our guidance. This is a consolidated guidance for both the Cloud and the Media business.

We anticipate aggregate revenues of between $500 million and $525 million for fiscal year 2013. Non-GAAP EPS of between $2.65 and $2.85, the assumptions there are for tax rate of between 25% and 27%, so a little higher than we experienced in 2012. It excludes any non-cash comp expense, as well as certain transition costs that will be incurred, at least initially for the media companies upon integration.

I would also like to note that in the guidance for this year, we have an additional $0.15 of bond interest expense versus 2012 and something to note on the Media business that some of you may not be familiar with, it has some seasonality.

Q4 is a seasonally strong period for the Media business. It is not typical for the fiscal year revenues to have approximately 33% to 35% of the revenues fall in Q4, than to drop off in Q1 and then ramp up sequentially from two to one and three to two and then fourth to three. So note that when you think about how the revenues flow over the course of the year.

As I mentioned, as Kathy has mentioned, we will have the dividend of $0.2325 for those who are shareholders of record as of February 25. The payment date will be March 4. The philosophy of the dividend remains the same, which is to payout approximately 30% of quarterly non-GAAP earnings. It will cost us about $10 million in aggregate cash and the dividend is designed not to impact any of our either operational or M&A activities. And as Kathy noted, even after IGN we remain very comfortable with an excess of $300 million of cash and investments.

To that end, the board also authorized that the portion of the 5 million share buyback that we launched in February of 2012, but did not buy in ‘12, which is approximately $2.9 million would be carried over and run through February of 2014. I would note that we did buy 2.1 million shares in 2012 at an average cost of $27.57.

Finally, before we open it up to Q&A, just to highlight, we’ve added some additional information in our supplemental tables. The first slide on 20 is what you are familiar with, which are the metrics for the cloud that remain DID based, although as Hemi mentioned, as our business continues to evolve, we believe that there are probably better metrics to cover both the DID and the non-DID based business.

We’ve added on 21, metrics for the Media business and then information for j2 Global consolidated. 22 is reconciliation of free cash flow and EBITDA to the nearest GAAP measure. 23 and 24 are reconciliations of the quarter and the full fiscal year GAAP to non-GAAP.

Slide 25 gives you the reconciliation of EBITDA for Ziff Davis for the three years of ‘10, ‘11 and ‘12 and then for our bond holders, slide 26 gives you how our financial covenants and ratios look based on the Q4 results.

At this time I would ask our operator to come back and give the instructions for the Q&A session.

Question-and-Answer Session

Operator

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

Shyam Patil - Raymond James

Hi. Thank you guys and congrats on the acquisitions. First question, in terms of the guidance for 2013, I missed it if you give this in your prepared remarks or the slideshow, but do you have a breakout of how much revenue you expect from cloud versus digital media and then within digital media how much you expect from Ziff versus IGN?

Scott Turicchi

Well, as we said both in the press release, that the time we bought IGN, as well as what we said today, you can infer the media business without any further acquisitions is in excess of $120 million.

So the $60 million that we said for Ziff at the time we bought it, we basically reaffirm that and IGN should more than double that, so get us into the somewhat north of the $120 million range and the balance of the revenue comes from the cloud side.

Shyam Patil - Raymond James

Got it, and how about just the blended gross margin and operating margin profile now that you the media business? How should we think about that this year?

Scott Turicchi

Gross margins are very similar. I’d say that today the media business is obviously not as scaled as the cloud business, so we experience about 200 basis point better gross margins in cloud than media. But the media business hovers right around 80% in terms of its gross margin.

What is different is the EBITDA margin. You will see that certainly if you look at the Ziff Davis slide for fiscal year 2012, aggregated about 25% EBITDA margin and growing though as additional revenues come online. So we look at as we build that business in terms of revenues and I say the business meaning the media business, there should be increasing lift in the overall EBITDA margin, although I would not expect at the 120 EBITDA margins to approach the cloud EBITDA margins of 52%, not this year.

Shyam Patil - Raymond James

To have a sense as to what revenue run rate that might start approaching the cloud business?

Scott Turicchi

It’s a tricky question, because it depends on where and how the incremental revenues come in. To the extent they come in from incremental page views that are unpaid for unique visitors and/or incremental revenue on a CPM basis from advertisers, that incremental revenue basically goes right to the bottom line. So you can actually run the math yourself and figure out where the breakeven point is to get from approaching 30% EBITDA margins to 50%.

On the other hand, if you’re going out and you’re buying traffic, then you’ve got a cost against it and then it’s a question of what are you paying to get the traffic versus what are you selling in terms of third party, taking the difference. So how your incremental revenue comes in will influence the answer to your question.

There’s not a specific number, but I think you will see that in generally its going to be much lower to the 120 before one should have an expectation of EBITDA margins at 50.

Hemi Zucker

Generally speaking also, the cloud business in Q4 is on its lightest quarter, while the media its on its heaviest. So this should be something to take into consideration.

Shyam Patil - Raymond James

Okay. And then from a organic growth profile, do you have a sense as to what the digital media business should grow at beyond ‘13 on an organic basis, that’s if you don’t do any further M&A? Do you expect it to grow inline with the markets that you decided earlier or do you think it’s going to be growing at faster rate than that?

Scott Turicchi

Well number one, we are not going to go beyond ‘13, as we normal only give one-year guidance. Number two, I will be very surprised the media business or the cloud business remained static, because our philosophy is the owner of both businesses is to feed them and we have adequate capital. Having said that, I think that it is probably realistic to assume growth rates consistent with the market or better.

Shyam Patil - Raymond James

Got it, and then just my last question, in terms of the revenue synergies for IGN, I think you mentioned previously in a press release or it was implied that IGN had five times the page views, only slightly higher revenue, implying a pretty big differential in the monetization. When do you expect to start to see that gap now and what’s your sense as to what the gap will narrow towards overtime?

Hemi Zucker

So we just started with the integration. To be frank, we started with the integration of both companies. So the plans are conservative that by the fourth quarter of the year we will be in the high efficiency, not both visit are same.

In one side you have people discounts to gain a video game website from the other technical shoppers. So its very hard, especially for me at this stage to predict, but the plans and I’ve seen and I’m pretty confident with the management of Ziff Davis that they will admit, its to have increased every quarter till the end of the year. So you should see continued improvement, where at the end we believe that the Ziff Davis efficiency will be part of the operations of the newly acquired IGN.

Shyam Patil - Raymond James

Great. Thank you.

Hemi Zucker

You’re welcome.

Operator

Thank you. Our next question is from James Breen of William Blair. Please go ahead.

James Breen - William Blair

Thanks. Just a couple of questions; one, just to be clear on the guidance you gave for 2013 does not imply any material M&A, and then secondly, when I do look at that guidance and based on the numbers you gave for the media unit, it seems as through it sort of implies 4% to 5% organic growth on the cloud side. I was just wondering if that’s sort of in the ballpark there and then lastly, any update thoughts on Carbonite and further M&A in the cloud space. Thanks.

Hemi Zucker

So first of all Jim, you’re correct, there is no significant M&A assumption in the outlook. Our plans for the organic and the total growth of the cloud, as I said growth without any martial acquisition is actually more than you said, its more the range of 8%, and regarding our Carbonite, who are they? Seriously, we are now owners of 10% of Carbonite, we are very happy...

Kathy Griggs

9%

Scott Turicchi

9%, very important. I said almost 10 right, so I wasn’t wrong. And actually there is nothing going on. We are waiting. As you know we have offered a price, there was no counter offer. We are sitting here waiting for the development and happy to see that our share value increased 25%.

James Breen - William Blair

That’s great. Thank you. Thanks.

Hemi Zucker

You’re welcome.

Operator

Thank you. The next question is from Daniel Ives of FBR. Please go ahead.

Daniel Ives – FBR

Hi.

Hemi Zucker

Hi Daniel.

Daniel Ives – FBR

So, I mean obviously, it’s new for JCOM in terms of the media business and so always like separate entities. Could you just walk through just philosophically as a management team, how you’re going to kind of balance managing the core traditional JCOM business along with the new media businesses?

Hemi Zucker

So Daniel, we have bought Ziff Davis with a very strong management. Vivek Shah reports to me. He is the CEO of the Media business. I am the CEO of j2 Global in general.

For my end the people that participate in the management of Ziff Davis are only the officers here, plus HR. Basically we are helping them in public company matters, when it comes to compliance, when it comes to everything to help them with resources and everything, but we are aiding them.

Scott and I spent time with the management to make sure that they are progressing, that we understand and we can support them, reviews, etc., but the rest of j2 is divided between cloud business and media business, outside of the offices and of course the board.

Daniel Ives – FBR

Thanks.

Hemi Zucker

You’re welcome.

Operator

Thank you. The next question is from Greg Burns of Sidoti & Company. Please go ahead.

Greg Burns - Sidoti & Company

Hi, good afternoon. Just wanted to better understand the seasonality in the media business. Why is the fourth quarter such a seasonal quarter? And looking at the numbers for Ziff, it looks like very strong fourth quarter in terms of EBITDA and the margin. I think much higher year-over-year in this fourth quarter. Was there anything in particular driving that or just the better economies of scale?

Scott Turicchi

Well, lets start with our first question. So specifically for Ziff Davis, you got a lot of the manufacturers of devices, think tablets, SmartPhones, who do releases going into the holiday season. So there’s a spike in traffic. If you segment it across the four quarters, that’s very favorable to the fourth quarter, where as I mentioned, it’s not unusual to see upwards of 35% of visits and revenue fall into that fourth fiscal quarter.

Now what you see in that quarter is as Kathy mentioned it, you will see much higher margins, because a lot of costs remain fixed over the course of the year. So as you get that incremental bump in revenue, I think in Q4 for example for the 45 days we own Ziff Davis, it was something like 40% plus EBITDA margin, even though for the full-year it was only 25.

So as that business scales and you can see some degree of correlation if you go back to slide nine, between the terrific volume on the left, which is part of the story; the monetization piece is the other part will it drive the revenues and the incremental flow-through to EBITDA. So as the business scales, we would expect continuation of not only top line revenue growth, but improving EBITDA margins.

Greg Burns - Sidoti & Company

Okay, thanks. And in terms of IGN and the amount of accretion you expect for next year, is it going to be contributing anything to earnings next year?

Scott Turicchi

You mean this year, this current year?

Greg Burns - Sidoti & Company

This year, this current year. Yes correct.

Scott Turicchi

Yes, as expected exclusive of some transition costs, we believe that it will be accretive in terms of adding to the EPS. We will own it for 11 months, but I think as Hemi more than hinted at, the real opportunity in IGN really will occur in ‘14, because there is some physical integration to occur, there’s some technical integration, analyzation of the traffic and although we are optimistic that will occur by the fourth fiscal quarter of this year, I think it terms of the full benefit you will see that in ‘14. But yes, it will be accretive as we stated at the time we bought it, and this is contemplated in our guidance.

Hemi Zucker

I was just trying to say that they are possible already.

Greg Burns - Sidoti & Company

Okay. And in terms of driving that increased monetization, what can Ziff bring to bear on those properties or what kind of internal technology or best practices does Ziff have that you can use in IGN to better monetize those properties?

Hemi Zucker

I think the Ziff Davis was a smaller focused company versus IGN is a small asset in a very large company. So they were focused. They were doing one click upon each; they are very strong in getting more value for each visit, each click, each visit there. They are just more efficient. If the company came out of bankruptcy and are very eager to succeed and everywhere you go, they talk money.

Scott Turicchi

They build their own DMP, Data Management Platform. Its part of their focus to really analyze the traffic that comes through their websites and to match that traffic against what the advertisers want to sell, so that there isn’t, there is not a mismatch between a potential customer and what is being offered.

So given that they deal with a large breadth of advertisers, there is an opportunity to take the traffic, segment it and then have a more appropriate offering to that potential customer. That’s what they demonstrated at Ziff.

Its part of the reason why you see the revenues go from, even if you want to analyze the 2010 revenues from the 10 million levels to someone higher levels, even though that included a fourth quarter to now almost $50 million. A lot of that has been through the optimization of the traffic; grow the traffic and optimize the traffic.

Hemi Zucker

Yes also now that you have with acquisition of IGN that was the traffic in advertising. The bigger you are, the more visitors you know, you cookie them, you have interaction with them in the past. The more you know about the customer, the more you can target them, the more you serve them, what they are looking for, and the more money we generate out of it.

Greg Burns - Sidoti & Company

Okay, great. And I might have missed it, but do you give the percent of revenue that was fax, voice and some of the other segments for the quarter?

Hemi Zucker

No, we don’t. But generally speaking as I said, we are expecting fax to be this quarter 285…

Scott Turicchi

This year.

Hemi Zucker

Sorry, this year. This quarter I would say another few years, right. So and voice revenue is what Scott, 70, 80?

Scott Turicchi

It’s in the 60 range.

Hemi Zucker

In the 60 range, and then I organize them by the size.

Scott Turicchi

So 20 for the email.

Hemi Zucker

20 for the email.

Scott Turicchi

Slightly under five for the online backup. I think you said about four, but the run rate is higher.

Hemi Zucker

Right. That’s basically builds it all.

Greg Burns - Sidoti & Company

And those were the 2012 numbers, not productions.

Hemi Zucker

285. (Multiple Speakers).

Scott Turicchi

That’s like 270; five for fax in 2012.

Greg Burns - Sidoti & Company

Okay, thank you.

Scott Turicchi

You’re welcome.

Operator

Thank you. We have no further questions in queue at this time. I would like to turn the floor back over to management for any additional remarks.

Scott Turicchi

All right. Thank you very much. We appreciate you joining us for this call could. As usual, we will be out on the road post the earnings call. There are a couple of conferences coming up in the March that I’ll be speaking at. So look for additional press release announced in terms of the time and the date and whether they will be webcast, and we look forward to speaking to you in early May regarding the Q1 results, if not before then.

Operator

Thank you. Ladies and gentlemen, this does conclude today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.

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