Welcome to j2 Global’s Fourth Quarter and 2019 Year End Earnings Call. I am Sherry, the operator who will be assisting you today. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] On this call will be Vivek Shah, CEO of j2 Global and Scott Turicchi, President of j2. I will turn the call over to Scott Turicchi, President and CFO of j2 Global.

Thank you. Good morning, ladies and gentlemen and welcome to the j2 Global investor conference call for fourth fiscal quarter of 2019. As the operator mentioned, I am Scott Turicchi, President and CFO of j2 Global and joining me today is our CEO, Vivek Shah. We finished the year strong with a record fourth quarter performance. Notably, we had record revenue, EBITDA and non-GAAP earnings and it was our 24th consecutive year of revenue growth. We will use the presentation as a roadmap 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. If you have not received a copy of our 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 we complete the formal presentation, we will be conduct a Q&A session. The operator will instruct you at that time regarding the procedures for asking a question. However, you may e-mail us questions at any time at investor@j2global.com. Before we begin our prepared 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 these risks and uncertainties include, but are not limited to the risk factors that we have disclosed in our various 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 this webcast. We refer you to discussions in those documents regarding Safe Harbor language as well as forward-looking statements. Now, let me turn the call over to Vivek for his opening remarks.

Thank you, Scott and good morning everyone. Let me start by saying how excited I am with our fantastic finish to 2019. With revenues up over 17% and adjusted EBITDA up over 14% in Q4, we just delivered our best quarter of the year, a year in which we exceeded our original guidance by a significant margin. We generated $1.37 billion of annual revenues in 2019 which surpassed the high end of our original guidance by over $40 million and represented year-over-year growth of almost 14%. The stock also performed well in 2019, up nearly 37% and in recent weeks, we have traded as high as $104. Earlier in 2019, we made the decision to suspend our dividend in order to redirect that capital to acquisitions and investment opportunities where we believe we can generate better returns for shareholders. We consummated four important transactions in 2019, iContact, IPVanish, BabyCenter and Spiceworks for a total of about $400 million. All four of those acquisitions represent leading brands in their respective categories and strengthened our existing assets in those categories. We also raised about $550 million through our convertible note offering in November giving us ample dry powder to continue to pursue acquisition opportunities. We also made some key additions to our executive team. Nate Simmons joined us in September to run our Cloud Services division. He came to us from Symantec where we served as SVP and COO of its $2.4 billion consumer division. Given our growing emphasis on security and privacy solutions, including Viper, IPVanish and SugarSync, his addition should only accelerate our growth in those areas. We also hired a new Global Head of Human Resources, Michelle Dvorkin who previously held that role at The Knot Worldwide as well as our first Head of Corporate Communications, Rebecca Wright. Now,…

Thanks, Vivek. As I noted earlier, Q4 of 2019 set a variety of financial records, including revenue, adjusted EBITDA and non-GAAP earnings. These results were driven by several areas of strength in our portfolio of companies notably strength in our performance-based marketing, media subscriptions and growth in our VPN business. In addition, we continue to work through the integrations of both BabyCenter and Spiceworks which contributed to our revenue in the fourth quarter and modestly to our EBITDA. We ended the quarter with approximately $675 million of cash and investments after spending approximately $5 million in the quarter on our two small tuck-in acquisitions. In Q4, we also raised $550 million through the issuance of convertible securities priced at 1.75% interest and a conversion premium of 32.5%. Now, let’s review the summary quarterly financial results which are outlined on Slide 4. For Q4 2019, j2 saw 17.2% increase in revenues from Q4 2018 to $405.6 million. As a reminder, the sequential increase in our revenues from the third to fourth fiscal quarter is due to the holiday seasonality for some of our digital media properties. These outperformed our expectations, particularly Ziff Media Group, IGN and Humble Bundle. Adjusted gross profit margin, which is the function of the relative mix of our 13 business units, remained healthy of 84.3% and improved 30 basis points from Q4 2018. We saw EBITDA grow by 14.3% to $176.3 million. And finally, adjusted EPS grew 12.8% to $2.38 per share versus $2.11 per share for Q4 2018 despite interest being $3 million higher and non-GAAP depreciation being $2 million higher and a slight increase in our tax rate. Moving to Slide 5, for the full fiscal year, we saw 13.6% growth in revenue from 2018 to $1.372 billion. And as Vivek mentioned earlier, this was…

Thank you. [Operator Instructions] Our first question is from Daniel Ives with Wedbush Securities. Please proceed.

Yes, thanks and obviously a great year to you and the team. So when you think about M&A just obviously with the convert and just given your position of strength, are you thinking about it like we are looking for larger deals, ones that maybe rivals some of the biggest you have done or it’s more in the number where we are going to do it across the group? Obviously it depends on what’s out there, but I just want to hear that? Thanks.

Right. Thanks, Dan. Good morning. So I think it’s across the board. I think all 13 of our business units are actively engaged in deals that would sit within those business units. The three parent, the three divisions are also looking at deals: Ziff Davis, Everyday Health Group and Cloud Services and then the parent is also looking at deals. So this is probably I have characterized as robust an M&A pipeline as I have seen in my time at the company, there is just a lot out there for us to assess and process. It has been 4 or 5 months since we have done something needy and so we anticipate that there will be some media opportunities for us in the not too distinct future, but we are also going to continue to do our tuck-ins and continue to do the smaller deals that are turnkey, that are either subscriber acquisition deals or traffic acquisition deals which our platform can integrate pretty easily.

Got it. And maybe just to follow-up like on digital media specifically, in terms of M&A pipeline, why do you think that is? I mean, obviously, well, it’s a background for decades, but just why do you think from an M&A perspective which is robust, I mean, what do you think at least what you are hearing from some of the potential candidates?

Yes, Dan, I think it has a lot to do with our business model and approach to monetization. So in areas where we see the opportunity to deploy affiliate commerce and performance marketing, lead gen type revenues inside of a content business that is one of our specialties and so we will find opportunities where they don’t have – didn’t know how the technology or the team to unlock those and we do. And so we are in a position to create value around the performance marketing business model. In other instances, it’s our ability to marry a consumer audience for content with a subscription service, which is what we have done obviously in the gaming space with IGN and Humble Bundle and then finally what we have proven with the Ookla business is our ability to monetize data and to create data analytic products that are meaningful. And so I think we are a far more versatile digital media company. We have the ability to operate in multiple spaces, technology space, the healthcare space, the gaming space and the shopping space. So, I think it’s that combination of having a fairly broad portfolio, but also very specific ways in which we can unlock value. And then I think the other thing I will say is that many of the digital media companies come out either a venture-backed situation, a unicorn type situation. They were trying to be something that they really work, going to become and we are able to sort of rationalize it and add it to our portfolio and have it be a nice contributor within the mix.

Like Spiceworks.

Like Spiceworks.

Yes, great insight. Thanks.

Our next question is from Shyam Patil with Susquehanna Financial Group. Please proceed.

Hey, guys. Good morning. Great quarter and year. I had a few questions. Vivek, the past couple of years it seems like every time you’ve entered a year, you had one or two kind of key things that you focused on, I know initially it was the GM structure and getting better at executing on M&A across the business. As you look at 2020 what are the one or two kind of big things or key things that you are focused on?

Yes, I will do it. I will go by operating division. So, on the Cloud Services side, I think we are knitting together between IPVanish and SugarSync and Viper and some of the other associated brands. A really interesting security and privacy bundle that I think will be defining for how we approach 2020 and beyond. We will inform our internal activities, our organic growth initiatives as well as our M&A. So, I think security and privacy – and by the way I would through the corporate fax business into that, we have a $130 million business on the corporate fax side, that is all about the secure transmission of document. So, whether we are protecting patient information or we are protecting devices or we are protecting privacy, this notion of protection I think is kind of a very important organizing principle for Nate Simmons in the Cloud Services team. I think on the Ziff Davis side, it’s the continued execution of performance marketing and the subscription generation both in the data subscription business of Speedtest Intelligence as well as the Humble Bundle business. But one thing I will underscore I mentioned it in the prepared remarks and I don’t want it lost is we are very bullish on the Humble Publishing business. This is where we are the publisher of games and we have the ability to – I think through the inside of what we see to our subscription service identify winning games, the ability to market those games through our various channels, including the Humble store and then ultimately being able to include those games in our own subscription service, Humble Choice. There is a really interesting flywheel effect that goes into play. So, we are excited about that. And then I think on the healthcare side, the professional part of that business has done extremely well and it had a very strong 2019. We are optimistic about 2020. This is our MedPage business where we are providing news and information to physicians, our PRIME business, which is continuing medical education for physicians, and our Health eCareers business, which is a recruitment business for hospitals. We like all of those businesses, they work well together and I expect that I think in the past, but when you look at the million physicians in the United States, they are quite literally the most valuable media audience in the world given that they are riding billions of dollars of prescriptions for pharmaceutical drugs every year, so a hard-to-reach and valuable audience. I’ll also say that we are excited about the idea on our parenting and pregnancy side with what to expect in BabyCenter, we own number one and two in the space and it’s a great space to be. And then so I think we are just beginning to scratch the surface of what that power is going to look like. So in each one there are two to three organizing principles that are driving the various operating divisions.

Great, thanks. And just there has been a lot of talk in the industry about changes that Chrome is making it seems like they are going to make from now and then in a couple of years, iOS is constantly updating to limit tracking – user tracking and targeting, just curious I mean as you look out in the near term and kind of intermediate term, do you see much impact from these on digital media or do you think it’s mostly noise, just what are your thoughts on those industry changes?

Yes, no, I think it’s a real subject and I think that the business models that rely on data collection for add targeting, are going to be challenged. Now, the good news is that is not our business model. Our business model is placing advertising and links and lead gen activity contextually. So I think if you are playing a contextual game where you are producing end market content then put in market advertising or in market marketing services I think you are going to do well so I think there is a shift to contextual targeting versus behavioral and interest base target the second thing I will say and I have said this in the past and I think this is going to be this is going to prove to be prescient is that I think email matters and I think having registered users which we have across all of our brands large registered users user databases where we have email address email is in many ways identity and so and it is the one piece of identity that generally never changes right your personal email address or addresses are the addresses that you had probably for the last decade and so we are very focused on building our email databases. We have an entire part of our portfolio, our martech that is dedicated to building e-mail databases for its clients so I think those that have sort of direct relationships with their audiences will also I think be advantaged in this news rep, cookie-free, anti-tracking world. And I will also say that it is just is more attention to the need for privacy solutions like IPVanish.

Great. And I have couple of quick ones for Scott. Scott on for guidance you guys mentioned at the high end system M&A assume can you just talk about what level of M&A are you assuming as it is kind of similar we saw in 2019 and then I know you guys don’t guide quarterly but any color on just how to think about aggregate revenue and EBITDA seasonality just kind of 1Q and throughout the year?

Perfect. So I will take your first question and the first question to guidance is one of sort of a philosophical element so to be clear at the midpoint of our guidance that only contemplates the assets we own today so contemplates no M&A in 2020 so what we are saying is to be at the higher end of the range assuming all other organic and operational activates or as plan that would be driven by M&A now as you can tell to go from the midpoint to the high-end of the range is not that many dollars in revenue or EBITDA so it is only $10 million in EBITDA to go from $585 million to $595 million. So we don’t need the volume of M&A that we did in 2019 to drive that delta and as last year that volume of M&A not only causes to go above the high-end of the range but actually to reset our guidance to be at higher levels so two different elements are going on it is not result as a secondary budget with a certain amount of M&A baked in that says oh here is 10 million of EBITDA it is more of the philosophical bands with the still intention based on what Vivek said earlier that we will expend all our substantial all of our free cash flow generation this year in M&A or at least in capital allocation activities probably heavily weighted M&A but there could be stock buybacks as well. In terms of your second question you are correct we don’t guide quarterly but as to your point we have the slide in the deck about particularly in digital media the seasonality so we come off of a very good quarter in Q4 generally represents 30% plus of the…

Got it. Thanks guys. Congrats again.

Thank you.

Our next question is from James Fish with Piper Sandler. Please proceed.

Hey, guys. Congrats on the year and nice Q4 and also nice to be back on the J2 story here again. You guys are talking more about a bundle approach on the BCS side than you guys have historically before. I understand the product side of it all. But what from a go-to-market perspective, are you encouraging to – for the bundling to occur, given these units operate in siloes historically?

Yes. Hey, Jim, it’s a great question. So, in the – let’s just start with the direct business, which is the online channel as the source of acquisition and we are testing a variety of things. In some instances its one price and you get a suite of services. In other instances, it is an up-sell that come – that you purchased the product and then we are offering you another product at a discount or in a some kind of travel period. And what we are looking for is where can we drive unit revenue and where can we drive retention? And so, we are testing various ways within the online channel and the online channel is a very, very large channel. It is the main channel for SugarSync, for IPVanish and the Viper consumer business. As we move more up-market and we start to leverage our inside sales, which is more of the SMB market, we are starting to move into actually some different solution sets. So a lot of what, sort of your typical endpoint, VPN has privacy and final storage, but then we are also moving into remote access VPN sort of with the traditional sense of VPN when often people think about VPN, VPNing into their corporate network, we have a brand called Encrypt.me that does precisely that and is far more cost effective and easier to deploy than sort of the legacy on-premises VPN solution. So, that’s where we start to bring Encrypt.me into the proposition. And again it’s the same thing, if it’s inside sales, it could be a bundle, it could be a cross-sell, it could be an up-sell. And I think the reason if you take a step back is to why you are hearing us talking about bundling on the cloud side where we have not historically talked about that is I don’t think we ever had like assets, I don’t think we had bundable assets, I think the cloud fax customer was frankly quite different than the martech customer or the need – or the use case was different. And so bringing those together seem like an artificial way to bundle, where these security and privacy really are all protection. They are all protection services and they fit well side by side and together.

Got it. That makes a lot of sense. And then just two quick ones for me, how do we think about the impact of the backup transition on gross margins, you guys alluded to it on the script? And then can we get the difference in the display advertising versus subscription revenue within the digital media business for this quarter?

Yes. So, let me talk a little bit about the strategy at backup and then maybe Scott can answer some of the questions on margins. But generally speaking as you know, backup has been a space in which we were challenge defined compelling M&A valuation that made sense for us. We operated at a very high margin. And what we have come to the conclusion is, is that we are instead of leveraging own IP and selling our own IP into clients, we are essentially going to be a value-added hosted reseller of various solutions, whether it's VIM, OSA or CCRA. And so by transitioning that way we find that we don’t necessarily need to invest the R&D to have the winning technology which is very hard to do but we can leverage our infrastructure in being able to sell through third party technology doing that introduces a new cost which is the cost of that third party technology which in a typical backup business would have offset against our R&D we were not investing in R&D in our own IP and so that does introduce a new cost base but it puts us in a position where we believe and I mentioned in my prepared remarks that the backup business will get the stability and growth within the next 12 to 24 months albeit at a different margin. So I'll pause and just.

Yes I would say that the transition that we are going through right now from a margin prospective is really on a of scale so as we add these additional costs and evolve the business there will be a combination in the gross profit and in the OpEx I think combined we are talking about 10% points lower as we move to this transition and then we expect as we scale that margin then to look back up not necessarily to the 50% or 50% plus percent of that, that business unit operated at historically, but probably somewhere in the high 30% to may be 40% and I talking on an EBITDA margin basis in terms of your second question the advertising for Q4 for the digital media business which is the combination of displaying performance was about 75% of the revenue and a 24% were subscriptions and there is 1% that’s other and for the full fiscal year which is think is a little better way to look at it because of the seasonal bias in the Q4 which does bring us additional display advertising it was about 40% display 33% performance marketing so 73% advertising 26% subscriptions and 1 percentage points of other.

Got it thank you/

Our next question is from James Breen with William Blair and Company. Please proceed.

Thanks for taking the question. Just a couple I guess from – Vivek can you just talk About you made mention in the – growth in the corporate fax business, and what's driving that now? And how you've seen that improve and where you think it is going and then for Scott on the cash flow side you talked about some of the working capital push that’s happening from fourth quarter into first quarter I think you said around digital media around $25 million so just sort of looking at it on an annualized basis would free cash flow being closer to 375 for ‘19 and does this imply that you see sort of an outsized free cash flow number in the first quarter that will normalize back down to the second quarter of ‘20? Thanks.

I think that I will let Vivek chime in. The answer to your question is yes, yes, and yes now you may remember that a similar situation occurred in Q4 of 2017 and for the full fiscal year 17 relative to 2018 you will see in the slide back where we outlined the free cash flow and we got the history which is on slide 6 you will see that 16 to 17 was very muted and then 17 to 18 there was a pop so I would expect we will see something similar in 2020 I can tell you we have had good cash collections in the first 40 days of the year so it is just the timing issue we are not totally able to influence the rate at which these advertisers pay so it is a function of when the actual revenue occurs how late in t he quarter. And then, as you know, it's not uncommon that those collections occur over the next 100 days. So timing is always going to be I think a little bit tricky in predicting the net cash from operations between Q4 and Q1 particularly when you got a robust growing sequential quarter to quarter growth in digital media

Just as a follow up of that you sort of think about free cash flow from 19 to 20 assuming sort of 19 was around at 375 level with the adjustments given the commentary on 20 about where revenue growth would be along with some additional expense taxes up a little bit free cash flow growing modestly sort of mid single digits from 19 to 20?

Well, I think it depends how you deal with the $25 million if you are going to put it back in the 19 then yes you would have a lower rate of growth from 19 to 20 if you take that $25 million and put it in 20 obviously it is going to be a bigger gross I think this year even with some of the additional expenses operational and CapEx with that 25 million we should be somewhat north of 400 million of free cash flow.

Okay, great. Thank you. And then, Vivek, just on the strategy side around the eFax?

Yes look so I would tell you that we have a $130 million healthcare IT business that is growing double digits and has great potential as I talked about in the past the healthcare industry sends something like 9 billion faxes a year that is growing at a reasonably high clip yet on less than 4% of those are faxes that were involved with either on the sender or the receivers side so we actually have a real view into market share and so we got a $130 million business that is not all of healthcare but it is dominated by healthcare in a market where we are still small and the income that really is a machine and I think what we are now seeing to our work which is it is a sales and marketing process as we will be convincing healthcare organizations to eliminate on-site fax hardware servers and machines and replacing the cloud based solutions which we have the market leading solutions so I think execution against that I think it takes a while they want to see these machines hit end of life but we are long term bullish on the opportunity we are going to be at the HIMSS Conference in March we are going to unveil some new features and solutions that go beyond fax that really get into more workflow in the healthcare space I think it is going to be very exciting and help accelerate growth in that business

Great. Thank you.

Our next question is by Nick Jones with Citi Group. Please proceed.

Hi, thanks for taking the question. I guess on the piggyback of that last comment about some workflow processes for healthcare there are robust pipeline and potential acquisitions for kind of health tech I think a big driver for a lot of medical professionals is the amount of administrative work. Any color there would be helpful?

Nick it is a great question again if I can attach the health care IT multiple to our 130 million business that would be fantastic because it really is hard for us to acquire in HCIT that would be a space that would be difficult for us to buy and so we are building in that space and we are making investments capital investments in developing really on our own there is a partnership that we have not announced that we are that is part of this facilitating some of it for the most part it is not going to be a buy it is going to be a build and rent within healthcare the valuations are just too high

That makes sense. And one follow-up on kind of changes in Google I guess I understand impact targeting but do you have the potential impact or ability to assign attribution to some of your cost per action or performance marketing and then I guess could you remind us what kind of the ratio is between display and performance?

Yes. So just to answer that question on a full year basis, display was about 40% of digital media revenues performance market was about 33% so, there are almost equalizing in terms of scale no look attribution is an interesting thing in a lot of the if it is CPC that does not get affected if it is cost per click it does not get affected if it is cost per lead it does not get affected and if it is cost per acquisition or percentage of the part all of the affiliate networks that sit between publishers and merchants have the ability to map to URL so you don’t need cookies even there to get attributions so in our 3 primary performance marketing PC -- CPC, CPL, CPA, the cookie less future does not interfere with attribution.

Great, thanks for taking my questions.

Our next question is from Rishi Jaluria with D.A. Davidson. Please proceed.

Hi guys. Thanks for taking my question. First I wanted to maybe touch on the cloud EBITDA margin side it sounds like you are guiding to margins being relatively flat I understand the VPN business is a little bit of a drag on it sometimes an actual low business may be help us understand how should we be thinking about VPN margin may be going beyond next year is there something structural about the VPN business that is going to make us a lower margin business or is there a path to get that to become a 50% EBITDA margin business and what would be best drivers?

Now so two things one we did not highlight this but in the fourth fiscal quarter the cloud business but really most of it was a VPN business with a little bit from iContact. There were, as we sort of get through the year of these acquisitions and in some cases third parties meaning the sellers were involved in providing us financial information there were certain true ups of about a $1.5 million negative to the top and bottom line most of that in the VPN business so that had about a one point margin impact in Q4 those are nonrecurring but then nevertheless they hit the quarter that is one thing to keep in mind I think in terms of your longer term question we look at the VPN business it is a growth business I think Vivek mentioned in his prepared remarks it is a double digit growth we intend to continue to feed that business and that growth in build that customer base so the goal is not to take that business unit and force it to get the 50% EBITDA margins or something in excess of that with no growth we are going to feed it we are going to continue to market it so I think that on an appropriate margin level for the VPN business is probably somewhere between the high 30s to low 40s We could use 40 as kind of an average margin. And of course, we will make decisions overtime based upon the M&A that we do in that space some of the cross selling activities that Vivek mentioned and that we are working and experimenting on to see how much we should moderate some of that feeding or increase that feeding in terms of both personal and sales and marketing dollars but you should not expect that you should not plan for it to be a 50% EBITDA margin business we look at as a portfolio in cloud and given the relative percentage of its contribution today to still on before corporate allocations to be right around 50% probably little bit under this year but right around or hovering near 50%.

Got it. Thanks. And in the release you talked a little bit about the international reorg not to get too ahead of the Analyst Day next month but may be you could tell us a little bit about what is going on the international side that you had this reorg going on and how that that flows through to the different business units.

Okay. So first of all the reorg has nothing to do with the operations of j2 that’s all a tax manner so you may recall some number of years ago the European union put pressure on Ireland to increase its tax rate so we have operated for 15 to 16 years under what is known as a double Dutch - Irish structure. So we have a fair amount of IP that is outside of the United States there would be two elements for the structure Ireland itself where we have substantial presence and an anti called nonresident Ireland which for us happens to be the isle of Jersey the Isle of Jersey as we enter 2020 is starting to build in more presence rules, meaning they want more personnel and staff literally on the Ireland and the value of that piece diminishes as the Irish tax in Ireland moves up and evolves so we transfer the IP within the j2 system such that it created this game you may have noticed that our GAAP tax rate looks very odd this quarter it is a negative we are of benefits so we have recognized from a GAAP accounting standpoint of $53 million gain hence the negative tax rate. We have eliminated that from our non GAAP presentation hence the more normalized tax rate of 21.3% from a cash prospective we will realize that $53 million roughly over the next 15 years and then we do see [Technical Difficulty] because of the evolution of this structure and where we are earning our money in 2020 about a 70 basis point increase in our tax rate on a non GAAP basis from 21 to 22 but the day to day operations of our international businesses most of which were on the cloud side remain unaffected the people are in London the people are in Ireland throughout Europe all of that stays in place.

Okay, got it. That’s helpful and then turning to the gaming side of the equation two questions there first I think you talked about 20 games publishing this year which should be at the most taking about double the size of the existing – effectively double the size of your portfolio of Indie games publishing. Maybe you can help us understand the economics on that and what sort of competition you expect from that? And then second I think given the strength in your gaming business both from the Humble Bundle side as well as on IGN, what are opportunities for M&A in gaming looking like, are there opportunities to grow more properties and extend the footprint on the advertising side or are there other ways to leather the publishing side of the business, just wanted to know how you think about M&A on the business side? Thanks.

Yes, sure. So, the way the publishing business works is essentially you have a universe of Indie developers who are seeking essentially two things, they are seeking financing and they are seeking marketing in choosing a publisher to go with to publish their game. And so what we typically do is we will write a check. In exchange for that check, we will get a percentage of revenues generated by that game in all channels in which it is sold and distributed. As well as depending on the deal have various other rights, but always including the ability to include it into our subscription service at no incremental charge to us, where we are typically paying for non-owned games a fee for including those games inside of our monthly service. And so the economics are, what is the return on the investment we make against those games? And in all cases, we are looking for positive ROI on the sales of that game in its normal channels. We then have the incremental revenue that comes from sales of that game through our own channel through the Humble store and then ultimately the benefit of having that game inside of Humble Choice, our subscription product at no cost. But those two other things are pure gravy. The first thing has to be true, which is we invested X in the game and we are going to see more than X in our returns related to the normal sales of that game. Now, with respect to your question on M&A, I think we would be open to gaming information news that is advertising base like IGN is today, we like that space, we want to continue to be in that vertical into that space. I think any sort of technology within the gaming space that may enhance our subscription value proposition. We are always thinking about things that make Humble Choice membership even more valuable. So, we are looking at various things that would do that. There would be this possibility of buying a library, buying another publishers library of games if it made sense for us and we saw long-term value in that library and able to leverage that library within our services. So, really all of the above.

Got it. That’s helpful. Alright. Thank you, guys.

Thank you.

Our next question is from Jon Tanwanteng with CJS Securities. Please proceed.

Hi, guys. Thank you for taking my questions and nice quarter. Just a little bit more on the Humble business, what kind of dollar investment will that be needing in 2019 as you grow these Indie games, which I understand are much smaller, what does that investment go in terms of magnitude or percentage of revenue as that as you go to 40, 80 games in that library and even beyond that?

Yeah, so look I think it is in the single digit millions incremental expense in 2020 versus 2019. So, it is not a significant drag on the overall at a j2 level but it is, it does explain I mentioned in the prepared remarks some of the difference in our EBITDA versus revenue growth rate, but If it is not a it’s not large in [indiscernible] now if you see opportunity to put more capital to work, we will but we really limited in our infrastructure on how many games can we actually bring to market based on the team, based on our scheduling. So, that really is more limit than anything else.

Okay, great. And then more broadly on the $10 million an additional either expense of margin drags on year-over-year basis. Could you to help us understand the schedule in that is that way more towards Q the first half for is this any of the lumpiness some as you expense earlier just like a have you had a [indiscernible]?

Yes, I would say this a little bit different elements in that $10 million. So, the drag from the acquisition of baby centre in Spiceworks would be more front-end loaded because, as we said last time we have acquired them that’s a process over a 12 month period of improvement I think in terms of the things like the Humble Bundle publishing and the infosec or the systems element, which occur in corporate, those will probably be more ratable over the 4 quarters. So I think you have different things you have different facings based up on which of those 4 items we are talking about but I would say that in the aggregate there will be a little bit more on the front-end loading side if you take that 10 million in its totality.

Got it. Okay and then last one you mentioned the corporate fax gross rate the expectations for this year about 10% growth. Remind us what the split is again between corporate and non corporate and what your expectations are for growth on the other side of it is it flat or is it growing or if you're still seeing secular declines there?

Yes it is about 40% of the overall cloud fax business is in the corporate space. I'd say the other 60% is flat to declining. Historically, it is been maintained a flat through M&A on the web fax side we have not had a web fax transaction in 2 plus years so I think I view that as kind of modest a very modest decline to flat depending on the couple of factors but we don’t view that view it as stable not growth if we can find M&A in the space great but our focus is really on growing the corporate business.

Got it. And just to tack on one more do you see opportunities in corporate in fax for M&A at this point and also on the backup side where you're changing strategy is M&A still in the cards for that?

Yes look I mean there are deals to be done in both spaces and again because we have the broad portfolio we never feel like we need to do a deal in any one particular space we had a lot of inbound but not at prices that we are willing to transact that so we will wait it out.

Okay thank you so much.

You are welcome.

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