Skip to main content

J2 Global Reports Record Second Quarter 2021 Results & Raises Full Year 2021 Guidance

J2 Global, Inc. (NASDAQ: JCOM) today reported financial results for the second quarter ended June 30, 2021.

“Our organization produced yet another record quarter that was materially ahead of our expectations," said Vivek Shah, CEO of J2 Global. "We're raising our full-year outlook for a second time this year, as our company continues to perform impressively."

SECOND QUARTER 2021 RESULTS

Q2 2021 quarterly revenues increased 29.6% to a Q2 record of $429.0 million as compared to $331.0 million for Q2 2020. On a pro-forma(6) basis, Q2 2021 quarterly revenues increased 33.5% to $417.7 million as compared to $312.8 million for Q2 2020.

Net cash provided by operating activities decreased to $111.3 million as compared to $139.6 million for Q2 2020. Q2 2021 free cash flow(2) decreased 30.6% to $80.5 million as compared to $115.9 million for Q2 2020. Free cash flow decreased primarily due to additional tax payments during Q2 2021 in comparison to the prior comparable period in the amount of $27.6 million. In addition, the Company experienced higher collections of receivables generated in Q4 2020 in Q1 2021 in comparison to collections in Q1 2020. Accordingly, a higher portion of collection activity from the prior year was collected in Q2 2020 related to Q4 receivables in comparison to the current quarter. Also, the Company had additional capital expenditures in comparison to the prior comparable period in the amount of approximately $7.8 million.

GAAP earnings per diluted share(3) decreased to $0.33 in Q2 2021 compared to $0.80 for Q2 2020. Earnings decrease was primarily due to the impairment of the B2B Backup business unit for $24.6 million, net of tax, as well as a loss on investments associated with a pending sale of the Company’s investee in the amount of $12.7 million, net of tax.

Adjusted non-GAAP earnings per diluted share(3)(4) for the quarter increased 40.9% to $2.41 as compared to $1.71 for Q2 2020. On a pro-forma(6) basis, Adjusted non-GAAP earnings per diluted share(3)(4) for the quarter increased 45.0% to $2.32 as compared to $1.60 for Q2 2020.

GAAP net income decreased to $15.7 million as compared to $38.1 million for Q2 2020.

Adjusted non-GAAP net income increased by 33.8% to $107.9 million as compared to $80.6 million for Q2 2020. On a pro-forma(6) basis, Adjusted non-GAAP net income increased by 37.9% to $104.1 million as compared to $75.5 million for Q2 2020.

Adjusted EBITDA(5) for the quarter increased 29.5% to $172.0 million compared to $132.9 million for Q2 2020. On a pro-forma(6) basis, Adjusted EBITDA(5) for the quarter increased 33.0% to $167.2 million compared to $125.7 million for Q2 2020.

J2 ended the quarter with approximately $465 million in cash, cash equivalents, and investments after deploying approximately $94.9 million during the quarter for current and prior year acquisitions.

Key unaudited financial results for Q2 2021 versus Q2 2020 are set forth in the following table (in millions, except per share amounts). Reconciliations of Adjusted non-GAAP earnings per diluted share, Adjusted EBITDA and free cash flow to their nearest comparable GAAP financial measures are attached to this Press Release. The Pro-Forma Results below exclude Voice assets in Australia, New Zealand, and the United Kingdom that have been sold as well as the Company’s B2B Backup business which it expects to sell.

Pro-Forma Results(6)

Q2 2021

Q2 2020

% Change

Q2 2021

Q2 2020

% Change

Revenues

Cloud Services

$

175.3

$

167.1

4.9

%

$

163.9

$

148.9

10.1

%

Digital Media

$

253.8

$

163.9

54.8

%

$

253.8

$

163.9

54.8

%

Total Revenue: (1)

$

429.0

$

331.0

29.6

%

$

417.7

$

312.8

33.5

%

Operating Income

$

94.3

$

73.0

29.1

%

Net Cash Provided by Operating Activities

$

111.3

$

139.6

(20.3

)%

Free Cash Flow (2)

$

80.5

$

115.9

(30.6

)%

GAAP Earnings per Diluted Share (3)

$

0.33

$

0.80

(58.7

)%

Adjusted Non-GAAP Earnings per Diluted Share (3) (4)

$

2.41

$

1.71

40.9

%

$

2.32

$

1.60

45.0

%

GAAP Net Income

$

15.7

$

38.1

(58.7

)%

Adjusted Non-GAAP Net Income

$

107.9

$

80.6

33.8

%

$

104.1

$

75.5

37.9

%

Adjusted EBITDA (5)

$

172.0

$

132.9

29.5

%

$

167.2

$

125.7

33.0

%

Adjusted EBITDA Margin (5)

40.1

%

40.1

%

%

40.0

%

40.2

%

(0.2

)%

REVISED BUSINESS OUTLOOK

Based on better-than-expected operating performance, the Company is raising its revenue, Adjusted EBITDA, and Adjusted non-GAAP EPS estimates:

Current Guidance (A)

Revised 2021 Range of Estimates (A)(B)

Low

High

Low

High

Revenue

$

1,676

$

1,700

$

1,722

$

1,742

Adjusted EBITDA

$

666

$

680

$

695

$

705

Adjusted non-GAAP EPS

$

9.27

$

9.51

$

9.57

$

9.73

(A) Balances are in millions, except per share amounts, and exclude the B2B Backup business and Voice assets in the United Kingdom.

(B) Adjusted non-GAAP EPS includes the weighted average impact of an additional 3.0 million shares of J2 Global common stock for the remainder of the year in connection with the settlement of the 3.25% Convertible Notes.

Adjusted non-GAAP earnings per diluted share for 2021 excludes share-based compensation of between $20 million and $24 million, amortization of acquired intangibles and the impact of any currently unanticipated items, in each case net of tax.

It is anticipated that the non-GAAP effective tax rate for 2021 (exclusive of the release of reserves for uncertain tax positions) will be between 22% and 24%.

The Company has not reconciled the non-GAAP Business Outlook 2021 Adjusted EBITDA, Adjusted non-GAAP earnings per diluted share, and tax rate information included in this release to the most directly comparable GAAP measure because this cannot be done without unreasonable effort due to the variability with respect to forecasted revenues and costs primarily related to acquisitions and taxation, which are potential adjustments to future earnings, and the uncertainty as to when or if the B2B Backup Business will be sold. We expect the variability of forecasted revenues and costs to have a potentially unpredictable and significant impact on our future GAAP financial results.

Notes:

(1)

The revenues associated with each of the businesses may not foot precisely since each is presented independently.

(2)

Free cash flow is defined as net cash provided by operating activities, less purchases of property and equipment, plus contingent consideration. Free cash flow amounts are not meant as a substitute for GAAP, but are solely for informational purposes.

(3)

The estimated GAAP effective tax rates were approximately 9.1% for Q2 2021 and 26.7% for Q2 2020. The estimated Adjusted non-GAAP effective tax rates were approximately 22.7% for Q2 2021 and 21.8% for Q2 2020.

(4)

Adjusted non-GAAP earnings per diluted share excludes certain non-GAAP items, as defined in the Reconciliation of GAAP to Adjusted non-GAAP Financial Measures, for the three months ended June 30, 2021 and 2020 totaled $2.08 and $0.91 per diluted share, respectively.

(5)

Adjusted EBITDA is defined as earnings before interest; gain on sale of businesses; goodwill impairment of business; loss on investments, net; other income (expense), net; income tax expense; income (loss) from equity method investment, net; depreciation and amortization; and the items used to reconcile EPS to Adjusted non-GAAP EPS, as defined in the Reconciliation of GAAP to Adjusted non-GAAP Financial Measures. Adjusted EBITDA amounts are not meant as a substitute for GAAP, but are solely for informational purposes.

(6)

Pro-forma figures are provided taking into consideration the sale of certain Voice assets in Australia, New Zealand, and the United Kingdom as well as the expected sale of the Company’s B2B Backup business as if they had occurred January 1, 2020.

About J2 Global

J2 Global, Inc. (NASDAQ: JCOM) is a leading internet information and services company consisting of a portfolio of brands including IGN, Mashable, Humble Bundle, Speedtest, PCMag, RetailMeNot, Offers.com, Spiceworks, Ekahau, Everyday Health, BabyCenter and What To Expect in its Digital Media business and eFax, eVoice, Moz, iContact, Campaigner, Vipre and IPVanish in its Cloud Services business. J2 reaches in excess of 240 million people per month across its brands. As of December 31, 2020, J2 had achieved 25 consecutive fiscal years of revenue growth. For more information about J2, please visit www.J2global.com.

“Safe Harbor” Statement Under the Private Securities Litigation Reform Act of 1995: Certain statements in this Press Release are “forward-looking statements” within the meaning of The Private Securities Litigation Reform Act of 1995, including those contained in Vivek Shah’s quote and the “Business Outlook” portion regarding the Company’s expected fiscal 2021 financial performance. These forward-looking statements are based on management’s current expectations or beliefs and are subject to numerous assumptions, risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. These factors and uncertainties include, among other items: the Company’s ability to grow non-fax revenues, profitability and cash flows; the Company’s ability to identify, close and successfully transition acquisitions; subscriber growth and retention; variability of the Company’s revenue based on changing conditions in particular industries and the economy generally; protection of the Company’s proprietary technology or infringement by the Company of intellectual property of others; the risk of adverse changes in the U.S. or international regulatory environments, including but not limited to the imposition or increase of taxes or regulatory-related fees; and the numerous other factors set forth in J2 Global’s filings with the Securities and Exchange Commission (“SEC”). For a more detailed description of the risk factors and uncertainties affecting J2 Global, refer to the 2020 Annual Report on Form 10-K filed by J2 Global on March 1, 2021, and the other reports filed by J2 Global from time-to-time with the SEC, each of which is available at www.sec.gov. The forward-looking statements provided in this press release, including those contained in Vivek Shah’s quote and in the “Business Outlook” portion regarding the Company’s expected fiscal 2021 financial performance are based on limited information available to the Company at this time, which is subject to change. Although management’s expectations may change after the date of this press release, the Company undertakes no obligation to revise or update these statements.

About Non-GAAP Financial Measures

To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we use the following Adjusted non-GAAP financial measures: Adjusted non-GAAP net income, Adjusted non-GAAP earnings per diluted share, Adjusted EBITDA and free cash flow. The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.

We use these Adjusted non-GAAP financial measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons. Our management believes that these Adjusted non-GAAP financial measures provide meaningful supplemental information regarding our performance and liquidity by excluding certain expenses and expenditures that may not be indicative of our recurring core business operating results. We believe that both management and investors benefit from referring to these Adjusted non-GAAP financial measures in assessing our performance and when planning, forecasting, and analyzing future periods. These Adjusted non-GAAP financial measures also facilitate management’s internal comparisons to our historical performance and liquidity. We believe these Adjusted non-GAAP financial measures are useful to investors both because (1) they allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making and (2) they are used by our institutional investors and the analyst community to help them analyze the health of our business.

For more information on these Adjusted non-GAAP financial measures, please see the appropriate GAAP to Adjusted non-GAAP reconciliation tables included within the attached Exhibit to this release.

J2 GLOBAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED, IN THOUSANDS)

 

June 30, 2021

December 31, 2020

ASSETS

Cash and cash equivalents

$

347,857

$

242,652

Short-term investments

663

Accounts receivable, net of allowances of $16,255 and $16,018, respectively

249,005

325,619

Prepaid expenses and other current assets

56,177

53,909

Current assets held for sale

8,939

Total current assets

661,978

622,843

Long-term investments

117,396

97,495

Property and equipment, net

171,645

156,577

Operating lease right-of-use assets

82,961

105,845

Goodwill

1,837,539

1,867,430

Other purchased intangibles, net

676,146

741,569

Deferred income taxes, noncurrent

40,755

56,545

Other assets

16,759

17,027

Noncurrent assets held for sale

98,187

TOTAL ASSETS

$

3,703,366

$

3,665,331

LIABILITIES AND STOCKHOLDERS’ EQUITY

Accounts payable and accrued expenses

$

198,220

$

230,651

Income taxes payable, current

11,471

31,753

Deferred revenue, current

193,531

190,644

Operating lease liabilities, current

30,818

32,211

Current portion of long-term debt

402,134

396,801

Other current liabilities

52

497

Current liabilities held for sale

8,793

Total current liabilities

845,019

882,557

Long-term debt

1,189,727

1,182,220

Deferred revenue, noncurrent

16,635

14,440

Operating lease liabilities, noncurrent

81,752

99,177

Income taxes payable, noncurrent

11,675

11,675

Liability for uncertain tax positions

53,515

57,081

Deferred income taxes, noncurrent

158,173

162,700

Other long-term liabilities

39,718

44,463

Noncurrent liabilities held for sale

12,652

TOTAL LIABILITIES

2,408,866

2,454,313

Commitments and contingencies

Preferred stock

Common stock

447

443

Additional paid-in capital

461,422

456,274

Retained earnings

892,605

809,107

Accumulated other comprehensive loss

(59,974

)

(54,806

)

TOTAL STOCKHOLDERS’ EQUITY

1,294,500

1,211,018

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

$

3,703,366

$

3,665,331

J2 GLOBAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED, IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)

 

Three Months Ended

June 30,

Six Months Ended

June 30,

2021

2020

2021

2020

Total revenues

429,044

$

330,984

827,228

663,377

Cost of revenues (1)

63,337

56,802

121,160

115,933

Gross profit

365,707

274,182

706,068

547,444

Operating expenses:

Sales and marketing (1)

134,103

92,805

255,288

192,243

Research, development and engineering (1)

19,644

13,606

40,995

29,012

General and administrative (1)

117,676

94,731

237,021

197,902

Total operating expenses

271,423

201,142

533,304

419,157

Income from operations

94,284

73,040

172,764

128,287

Interest expense, net

(21,403

)

(22,196

)

(42,970

)

(43,167

)

Gain on sale of businesses

823

2,802

Goodwill impairment on business

(32,629

)

(32,629

)

Loss on investments, net

(16,677

)

(3

)

(16,677

)

(20,835

)

Other income (expense), net

(777

)

9,059

(293

)

2,183

Income before income taxes and income (loss) from equity method investment, net

23,621

59,900

82,997

66,468

Income tax expense

2,152

15,978

7,876

24,681

Income (loss) from equity method investment, net

(5,752

)

(5,821

)

18,519

(10,090

)

Net income

$

15,717

$

38,101

$

93,640

$

31,697

Basic net income per common share:

Net income attributable to J2 Global, Inc. common shareholders

$

0.35

$

0.81

$

2.10

$

0.67

Diluted net income per common share:

Net income attributable to J2 Global, Inc. common shareholders

$

0.33

$

0.80

$

1.98

$

0.65

Basic weighted average shares outstanding

44,613,533

46,850,944

44,506,933

47,235,859

Diluted weighted average shares outstanding

47,528,902

47,437,555

47,130,979

48,279,417

(1) Includes share-based compensation expense as follows:

Cost of revenues

$

117

$

143

$

249

$

277

Sales and marketing

371

416

732

814

Research, development and engineering

557

484

1,077

915

General and administrative

5,206

5,487

10,305

10,837

Total

$

6,251

$

6,530

$

12,363

$

12,843

J2 GLOBAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED, IN THOUSANDS)

 

Six Months Ended
June 30,

Cash flows from operating activities:

2021

2020

Net income

$

93,640

$

31,697

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

130,226

104,068

Amortization of financing costs and discounts

14,058

14,102

Non-cash operating lease costs

6,714

11,453

Share-based compensation

12,363

12,843

Provision for doubtful accounts

4,329

6,793

Deferred income taxes, net

(11,853

)

2,752

Gain on sale of businesses

(2,802

)

Lease asset impairments

7,829

Goodwill impairment on business

32,629

Changes in fair value of contingent consideration

562

(232

)

Foreign currency remeasurement gain

415

(704

)

(Income) loss from equity method investments

(18,519

)

10,090

Loss on equity and debt investments

16,677

20,826

Decrease (increase) in:

Accounts receivable

65,312

63,675

Prepaid expenses and other current assets

(7,720

)

(4,185

)

Other assets

(701

)

(300

)

Increase (decrease) in:

Accounts payable and accrued expenses

(23,438

)

(34,682

)

Income taxes payable

(15,123

)

7,376

Deferred revenue

2,499

(2,698

)

Operating lease liabilities

(13,529

)

(8,780

)

Liability for uncertain tax positions

(3,567

)

5,114

Other long-term liabilities

21

2,419

Net cash provided by operating activities

290,022

241,627

Cash flows from investing activities:

Proceeds on sale of available-for-sale investments

663

Purchases of equity method investment

(11,053

)

(26,523

)

Purchases of equity investments

(999

)

(843

)

Purchases of property and equipment

(57,766

)

(50,537

)

Acquisition of businesses, net of cash received

(89,489

)

(19,349

)

Proceeds from sale of assets

6,033

407

Purchases of intangible assets

(23

)

Net cash used in investing activities

(152,611

)

(96,868

)

Cash flows from financing activities:

Payment of debt

(3,092

)

Proceeds from line of credit

2,811

Repurchase of common stock

(22,934

)

(88,469

)

Issuance of common stock under employee stock purchase plan

4,232

3,303

Exercise of stock options

1,331

952

Dividends paid

(672

)

Deferred payments for acquisitions

(12,934

)

(16,296

)

Other

(332

)

(1,032

)

Net cash used in financing activities

(31,590

)

(101,542

)

Effect of exchange rate changes on cash and cash equivalents

(616

)

(2,012

)

Net change in cash and cash equivalents

105,205

41,205

Cash and cash equivalents at beginning of period

242,652

575,615

Cash and cash equivalents at end of period

$

347,857

$

616,820

J2 GLOBAL, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP FINANCIAL MEASURES
THREE MONTHS ENDED JUNE 30, 2021 AND 2020
(UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

Non-GAAP net income is GAAP net income with the following modifications: (1) elimination of share-based compensation; (2) elimination of certain acquisition related integration costs; (3) elimination of interest costs in excess of the coupon rate associated with outstanding debt; (4) elimination of amortization of patents and intangible assets that we acquired; (5) elimination of change in value on investment; (6) elimination of additional tax expense/benefit from prior years; (7) elimination of gain on sale of assets; (8) elimination of intra-entity transfers; (9) elimination of lease asset impairments and other charges; (10) elimination of disposal related costs; (11) elimination of goodwill impairment on business and (12) elimination of dilutive effect of the convertible debt.

Three Months Ended June 30,

2021

Per Diluted
Share *

2020

Per Diluted
Share *

Net income

$

15,717

$

0.33

$

38,101

$

0.80

Plus:

Share based compensation (1)

2,576

0.06

4,990

0.11

Acquisition related integration costs (2)

988

0.02

498

0.01

Interest costs (3)

4,840

0.11

4,831

0.10

Amortization (4)

37,156

0.83

25,225

0.54

Investments (5)

18,490

0.41

9,714

0.21

Tax expense from prior years (6)

1,977

0.04

Sale of assets (7)

(823

)

(0.02

)

(137

)

Intra-entity transfers (8)

(6,432

)

(0.14

)

Lease asset impairments and other charges (9)

4,896

0.11

1,826

0.04

Disposal related costs (10)

(619

)

(0.01

)

Goodwill impairment on business (11)

24,635

0.55

Convertible debt dilution (12)

0.02

0.01

Adjusted non-GAAP net income

$

107,856

$

2.41

$

80,593

$

1.71

* The reconciliation of net income per share from GAAP to Adjusted non-GAAP may not foot since each is calculated independently.

J2 GLOBAL, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP FINANCIAL MEASURES
SIX MONTHS ENDED JUNE 30, 2021 AND 2020
(UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

Non-GAAP net income is GAAP net income with the following modifications: (1) elimination of share-based compensation; (2) elimination of certain acquisition related integration costs; (3) elimination of interest costs in excess of the coupon rate associated with outstanding debt; (4) elimination of amortization of patents and intangible assets that we acquired; (5) elimination of change in value on investment; (6) elimination of additional tax expense/benefit from prior years; (7) elimination of gain on sale of assets; (8) elimination of intra-entity transfers; (9) elimination of lease asset impairments and other charges; (10) elimination of disposal related costs; (11) elimination of goodwill impairment on business and (12) elimination of dilutive effect of the convertible debt.

Six Months Ended June 30,

2021

Per Diluted
Share *

2020

Per Diluted
Share *

Net income

$

93,640

$

1.98

$

31,697

$

0.65

Plus:

Share based compensation (1)

6,624

0.15

9,798

0.21

Acquisition related integration costs (2)

2,994

0.07

1,593

0.03

Interest costs (3)

9,685

0.22

9,146

0.19

Amortization (4)

70,499

1.58

57,083

1.21

Investments (5)

(6,954

)

(0.16

)

34,808

0.73

Tax expense from prior years (6)

2,365

0.05

Sale of assets (7)

(2,697

)

(0.06

)

(334

)

(0.01

)

Intra-entity transfers (8)

131

Lease asset impairments and other charges (9)

6,545

0.15

1,826

0.04

Disposal related costs (10)

44

Goodwill impairment on business (11)

24,635

0.55

Convertible debt dilution (12)

0.02

0.01

Adjusted non-GAAP net income

$

205,015

$

4.50

$

148,113

$

3.11

* The reconciliation of net income per share from GAAP to Adjusted non-GAAP may not foot since each is calculated independently.

J2 GLOBAL, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP FINANCIAL MEASURES
THREE MONTHS ENDED JUNE 30, 2021 AND 2020
(UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

Non-GAAP net income is GAAP net income with the following modifications: (1) elimination of share-based compensation; (2) elimination of certain acquisition related integration costs; (3) elimination of interest costs in excess of the coupon rate associated with outstanding debt; (4) elimination of amortization of patents and intangible assets that we acquired; (5) elimination of change in value on investment; (6) elimination of additional tax expense/benefit from prior years; (7) elimination of gain on sale of assets; (8) elimination of intra-entity transfers; (9) elimination of lease asset impairments and other charges; (10) elimination of disposal related costs; (11) elimination of goodwill impairment on business and (12) elimination of dilutive effect of the convertible debt.

Three Months Ended June 30,

2021

2020

Cost of revenues

$

63,337

$

56,802

Plus:

Share based compensation (1)

(117

)

(143

)

Acquisition related integration costs (2)

(36

)

(55

)

Amortization (4)

(349

)

(448

)

Adjusted non-GAAP cost of revenues

$

62,835

$

56,156

Sales and marketing

$

134,103

$

92,805

Plus:

Share based compensation (1)

(371

)

(416

)

Acquisition related integration costs (2)

23

(167

)

Adjusted non-GAAP sales and marketing

$

133,755

$

92,222

Research, development and engineering

$

19,644

$

13,606

Plus:

Share based compensation (1)

(557

)

(484

)

Acquisition related integration costs (2)

(206

)

26

Adjusted non-GAAP research, development and engineering

$

18,881

$

13,148

General and administrative

$

117,676

$

94,731

Plus:

Share based compensation (1)

(5,206

)

(5,487

)

Acquisition related integration costs (2)

(1,075

)

(605

)

Amortization (4)

(47,893

)

(35,439

)

Lease asset impairments and other charges (9)

(6,472

)

(2,406

)

Disposal related costs (10)

992

Adjusted non-GAAP general and administrative

$

58,022

$

50,794

Interest expense, net

$

(21,403

)

$

(22,196

)

Plus:

Interest costs (3)

6,079

6,018

Adjusted non-GAAP interest expense, net

$

(15,324

)

$

(16,178

)

Gain on sale of businesses

$

823

$

Plus:

Sale of assets (7)

(823

)

Adjusted non-GAAP gain on sale of businesses

$

$

Goodwill impairment on business

(32,629

)

Plus:

Goodwill impairment on business (11)

32,629

Adjusted non-GAAP goodwill impairment on business

$

$

Loss on investments, net

$

(16,677

)

$

(3

)

Plus:

Investments (5)

16,677

Adjusted non-GAAP loss on investments, net

$

$

(3

)

Other income (expense), net

$

(777

)

$

9,059

Plus:

Sale of assets (7)

(181

)

Intra-entity transfers (8)

(8,267

)

Adjusted non-GAAP other income (expense), net

$

(777

)

$

611

Income tax provision

$

2,152

$

15,978

Plus:

Share based compensation (1)

3,675

1,540

Acquisition related integration costs (2)

306

303

Interest costs (3)

1,239

1,187

Amortization (4)

11,086

10,662

Investments (5)

3,939

(3,893

)

Tax benefit from prior years (6)

(1,977

)

Sale of assets (7)

(44

)

Intra-entity transfers (8)

(1,835

)

Lease asset impairments and other charges (9)

1,576

580

Disposal related costs (10)

(373

)

Goodwill impairment on business (11)

7,994

Adjusted non-GAAP income tax provision

$

31,594

$

22,501

Income (loss) from equity method investment, net

$

(5,752

)

$

(5,821

)

Plus:

Investments (5)

5,752

5,821

Adjusted non-GAAP income (loss) from equity method investment, net

$

$

Total adjustments

$

(92,139

)

$

(42,492

)

GAAP earnings per diluted share

$

0.33

$

0.80

Adjustments *

$

2.08

$

0.91

Adjusted non-GAAP earnings per diluted share

$

2.41

$

1.71

* The reconciliation of net income per share from GAAP to Adjusted non-GAAP may not foot since each is calculated independently.

The Company discloses Adjusted non-GAAP Earnings Per Share (“EPS”) as a supplemental Non-GAAP financial performance measure, as it believes it is a useful metric by which to compare the performance of its business from period to period. The Company also understands that this Adjusted non-GAAP measure is broadly used by analysts, rating agencies and investors in assessing the Company’s performance. Accordingly, the Company believes that the presentation of this Adjusted non-GAAP financial measure provides useful information to investors.

Adjusted non-GAAP EPS is not in accordance with, or an alternative to, net income per share and may be different from Non-GAAP measures with similar or even identical names used by other companies. In addition, this Adjusted non-GAAP measure is not based on any comprehensive set of accounting rules or principles. This Adjusted non-GAAP measure has limitations in that it does not reflect all of the amounts associated with the Company’s results of operations determined in accordance with GAAP.

J2 GLOBAL, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP FINANCIAL MEASURES
SIX MONTHS ENDED JUNE 30, 2021 AND 2020
(UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

Non-GAAP net income is GAAP net income with the following modifications: (1) elimination of share-based compensation; (2) elimination of certain acquisition related integration costs; (3) elimination of interest costs in excess of the coupon rate associated with outstanding debt; (4) elimination of amortization of patents and intangible assets that we acquired; (5) elimination of change in value on investment; (6) elimination of additional tax expense/benefit from prior years; (7) elimination of gain on sale of assets; (8) elimination of intra-entity transfers; (9) elimination of lease asset impairments and other charges; (10) elimination of disposal related costs; (11) elimination of goodwill impairment on business and (12) elimination of dilutive effect of the convertible debt.

Six Months Ended June 30,

2021

2020

Cost of revenues

$

121,160

$

115,933

Plus:

Share based compensation (1)

(249

)

(277

)

Acquisition related integration costs (2)

(76

)

(110

)

Amortization (4)

(945

)

(898

)

Adjusted non-GAAP cost of revenues

$

119,890

$

114,648

Sales and marketing

$

255,288

$

192,243

Plus:

Share based compensation (1)

(732

)

(814

)

Acquisition related integration costs (2)

(814

)

(681

)

Adjusted non-GAAP sales and marketing

$

253,742

$

190,748

Research, development and engineering

$

40,995

$

29,012

Plus:

Share based compensation (1)

(1,077

)

(915

)

Acquisition related integration costs (2)

(530

)

26

Adjusted non-GAAP research, development and engineering

$

39,388

$

28,123

General and administrative

$

237,021

$

197,902

Plus:

Share based compensation (1)

(10,305

)

(10,837

)

Acquisition related integration costs (2)

(2,785

)

(1,334

)

Amortization (4)

(96,309

)

(74,152

)

Lease asset impairments and other charges (9)

(8,651

)

(2,406

)

Disposal related costs (10)

(127

)

Adjusted non-GAAP general and administrative

$

118,844

$

109,173

Interest expense, net

$

(42,970

)

$

(43,167

)

Plus:

Interest costs (3)

12,495

11,952

Adjusted non-GAAP interest expense, net

$

(30,475

)

$

(31,215

)

Gain on sale of businesses

$

2,802

$

Plus:

Sale of assets (7)

(2,469

)

Adjusted non-GAAP gain on sale of businesses

$

333

$

Goodwill impairment on business

(32,629

)

Plus:

Goodwill impairment on business (11)

32,629

Adjusted non-GAAP goodwill impairment on business

$

$

Loss on investments, net

$

(16,677

)

$

(20,835

)

Plus:

Investments (5)

16,677

20,825

Adjusted non-GAAP loss on investments, net

$

$

(10

)

Other income (expense), net

$

(293

)

$

2,183

Plus:

Acquisition related integration costs (2)

Sale of assets (7)

(132

)

(438

)

Intra-entity transfers (8)

(1,565

)

Adjusted non-GAAP other income (expense), net

$

(425

)

$

180

Income tax provision

$

7,876

$

24,681

Plus:

Share based compensation (1)

5,739

3,045

Acquisition related integration costs (2)

1,211

506

Interest costs (3)

2,810

2,806

Amortization (4)

26,755

17,967

Investments (5)

5,112

(3,893

)

Tax (benefit) expense from prior years (6)

(2,365

)

Sale of assets (7)

96

(104

)

Intra-entity transfers (8)

(1,696

)

Lease asset impairments and other charges (9)

2,106

580

Disposal related costs (10)

83

Goodwill impairment on business (11)

7,994

Adjusted non-GAAP income tax provision

$

59,782

$

41,527

Income (loss) from equity method investment, net

$

18,519

$

(10,090

)

Plus:

Investments (5)

(18,519

)

10,090

Adjusted non-GAAP income (loss) from equity method investment, net

$

$

Total adjustments

$

(111,375

)

$

(116,416

)

GAAP earnings per diluted share

$

1.98

$

0.65

Adjustments *

$

2.52

$

2.46

Adjusted non-GAAP earnings per diluted share

$

4.50

$

3.11

* The reconciliation of net income per share from GAAP to Adjusted non-GAAP may not foot since each is calculated independently.

The Company discloses Adjusted non-GAAP Earnings Per Share (“EPS”) as a supplemental Non-GAAP financial performance measure, as it believes it is a useful metric by which to compare the performance of its business from period to period. The Company also understands that this Adjusted non-GAAP measure is broadly used by analysts, rating agencies and investors in assessing the Company’s performance. Accordingly, the Company believes that the presentation of this Adjusted non-GAAP financial measure provides useful information to investors.

Adjusted non-GAAP EPS is not in accordance with, or an alternative to, net income per share and may be different from Non-GAAP measures with similar or even identical names used by other companies. In addition, this Adjusted non-GAAP measure is not based on any comprehensive set of accounting rules or principles. This Adjusted non-GAAP measure has limitations in that it does not reflect all of the amounts associated with the Company’s results of operations determined in accordance with GAAP.

Non-GAAP Financial Measures

To supplement its condensed consolidated financial statements, which are prepared and presented in accordance with US GAAP, the Company uses the following Non-GAAP financial measures: Adjusted EBITDA, Adjusted non-GAAP Net Income, and Adjusted non-GAAP Diluted EPS (collectively the “Non-GAAP financial measures”). The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with U.S. GAAP. The Company uses these Non-GAAP financial measures for financial and operational decision making and as a means to evaluate period-to-period comparisons. The Company believes that they provide useful information about core operating results, enhance the overall understanding of past financial performance and future prospects, and allow for greater transparency with respect to key metrics used by management in its financial and operational decision making.

(1) Share Based Compensation. The Company excludes stock-based compensation because it is non-cash in nature and because the Company believes that the Non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance. The Company further believes this measure is useful to investors in that it allows for greater transparency to certain line items in its financial statements. In addition, excluding this item from the Non-GAAP measures facilitates comparisons to historical operating results and comparisons to peers, many of which similarly exclude this item.

(2) Acquisition Related Integration Costs. The Company excludes certain acquisition and related integration costs such as adjustments to contingent consideration, severance, lease terminations, retention bonuses and other acquisition-specific items. The Company believes that the Non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance. In addition, excluding this item from the Non-GAAP measures facilitates comparisons to historical operating results and comparisons to peers, many of which similarly exclude this item.

(3) Interest Costs. In June 2014, the Company issued $402.5 million aggregate principal amount of 3.25% convertible senior notes and in November 2019, the Company issued $550.0 million aggregate principal amount of 1.75% convertible senior notes. In accordance with GAAP, the Company separately accounts for the value of the liability and equity features of its outstanding convertible senior notes in a manner that reflects the Company’s non-convertible debt borrowing rate. The value of the conversion feature, reflected as a debt discount, is amortized to interest expense over time. Accordingly, the Company recognizes imputed interest expense on its 3.25% and 1.75% convertible senior notes of approximately 5.8% and 5.5%, respectively, in its statement of operations. The Company excludes the difference between the imputed interest expense and the coupon interest expense of 3.25% and 1.75%, respectively, because it is non-cash in nature and because the Company believes that the Non-GAAP financial measures excluding this item provide meaningful supplemental information regarding core operational performance. In addition, the Company has excluded the difference between the imputed and coupon interest expense associated with the 4.625% Senior Notes. The Company has determined excluding these items from the Non-GAAP measures facilitates comparisons to historical operating results and comparisons to peers, many of which similarly exclude this item.

(4) Amortization. The Company excludes amortization of patents and acquired intangible assets because it is non-cash in nature and because the Company believes that the Non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance. In addition, excluding this item from the Non-GAAP measures facilitates comparisons to historical operating results and comparisons to peers, many of which similarly exclude this item.

(5) Change in Value on Investments. The Company excludes the change in value on its investments. The Company believes that the Non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance. In addition, excluding this item from the Non-GAAP measures facilitates comparisons to historical operating results.

(6) Tax Expense/Benefit from Prior Years. The Company excludes certain income tax-related items in respect of income tax audit settlements and their related reversals of income tax reserves accounted for through ASC 740-10. The Company believes that the Non-GAAP financial measures excluding these items provide meaningful supplemental information regarding operational performance. In addition, excluding these items from the Non-GAAP measures facilitates comparisons to historical operating results.

(7) Gain on Sale of Assets. The Company excludes the gain on sale of certain of its assets. The Company believes that the Non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance. In addition, excluding this item from the Non-GAAP measures facilitates comparisons to historical operating results.

(8) Intra-Entity Transfers. The Company excludes certain effects of intra-entity transfers to the extent the related tax asset or liability in the financial statement is not recovered or settled, respectively during the year. During December 2019, the Company entered into an intra-entity asset transfer that resulted in the recording of a tax benefit and related tax asset representing tax deductible amounts to be realized in future years which is expected to be recovered over a period of up to 20 years and related foreign currency fluctuations. The Company believes that the Non-GAAP financial measures excluding the cumulative future unrealized benefit of the assets transferred and including the tax benefit in the year of realization provides meaningful supplemental information regarding operational performance. In addition, excluding this item from the Non-GAAP measures facilitates comparisons to historical operating results.

(9) Lease Asset Impairments and Other Charges. The Company excludes lease asset impairments and other charges as they are non-cash in nature and because the Company believes that the Non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance. In addition, excluding this item from the Non-GAAP measures facilitates comparisons to historical operating results.

(10) Disposal related Costs. The Company excludes expenses associated with the disposal of certain businesses. The Company believes that the Non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance. In addition, excluding this item from the Non-GAAP measures facilitates comparisons to historical operating results.

(11) Goodwill Impairment on Business. The Company excludes the goodwill impairment on business because it is non-cash in nature and the Company believes that the Non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance. In addition, excluding this item from the Non-GAAP measures facilitates comparisons to historical operating results.

(12) Convertible Debt Dilution. The Company excludes convertible debt dilution from diluted EPS. The Company believes that the Non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance. In addition, excluding this item from the Non-GAAP measures facilitates comparisons to historical operating results.

The Company presents Adjusted non-GAAP Cost of Revenues, Adjusted non-GAAP Research, Development and Engineering, Adjusted non-GAAP Sales and Marketing, Adjusted non-GAAP General and Administrative, Adjusted non-GAAP Interest Expense, Adjusted Gain on Sale of Businesses, Adjusted non-GAAP Loss on Investments, Adjusted non-GAAP Other (Income) Expense, Adjusted non-GAAP Income Tax Provision, Adjusted non-GAAP (Income) Loss from Equity Method Investment, Net and Adjusted non-GAAP Net Income because the Company believes that these provide useful information about our operating results and enhance the overall understanding of past financial performance and future prospects.

Pro-Forma Financial Results

Key pro-forma financial results for Q2 2021 versus Q2 2020 are set forth in the following table (in millions, except per share amounts). The financial results below reflect the Company’s results, on a pro-forma basis, taking into consideration the sale of certain Voice assets in Australia, New Zealand, and the United Kingdom as well as the expected sale of the Company’s B2B Backup business as if they had occurred January 1, 2020.

Q2 2021

Q2 2020

% Change

Total Revenues

$429.0 million

$331.0 million

29.6%

Pro-Forma Revenue Adjustments

$(11.3) million

$(18.2) million

(37.9)%

Pro-Forma Total Revenue: (1)

$417.7 million

$312.8 million

33.5%

Adjusted Non-GAAP Earnings per Diluted Share (1)

$2.41

$1.71

40.9%

Pro-Forma Earnings per Diluted Share Adjustments

$(0.09)

$(0.11)

(18.2)%

Adjusted Pro Forma Earnings per Diluted Share (1)

$2.32

$1.60

45.0%

GAAP Net Income

$15.7 million

$38.1 million

(58.7)%

Pro-Forma Net Income Adjustments

$21.2 million

$(2.4) million

(983.3)%

Adjusted Pro-Forma Net Income

$36.9 million

$35.7 million

3.4%

Adjusted EBITDA (1)

$172.0 million

$132.9 million

29.5%

Pro-Forma EBITDA Adjustments

$(4.8) million

$(7.2) million

(33.3)%

Adjusted Pro-Forma EBITDA (1)

$167.2 million

$125.7 million

33.0%

Adjusted EBITDA Margin (1)

40.1%

40.1%

—%

Pro-Forma EBITDA Margin Adjustments

(0.1)%

0.1%

(0.2)%

Adjusted Pro-Forma EBITDA Margin (1)

40.0%

40.2%

(0.2)%

(1) Refer to the notes on page 2 of this Release

J2 GLOBAL, INC. AND SUBSIDIARIES
NET INCOME TO ADJUSTED EBITDA RECONCILIATION
THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND 2020
(UNAUDITED, IN THOUSANDS)

The following table sets forth a reconciliation of Adjusted EBITDA to net income, the most directly comparable GAAP financial measure.

Three Months Ended June 30,

Six Months Ended June 30,

2021

2020

2021

2020

Net income

$

15,717

$

38,101

$

93,640

$

31,697

Plus:

Interest expense, net

21,403

22,196

42,970

43,167

Gain on sale of businesses

(823

)

(2,801

)

Loss on investments, net

16,677

3

16,677

20,835

Other income (expense), net

777

(9,059

)

292

(2,183

)

Income tax expense

2,152

15,978

7,876

24,681

Income (loss) from equity method investment, net

5,752

5,821

(18,519

)

10,090

Depreciation and amortization

64,734

50,088

130,226

104,068

Reconciliation of GAAP to Adjusted non-GAAP financial measures:

Share-based compensation

6,251

6,530

12,363

12,843

Acquisition-related integration costs

1,294

801

4,206

2,099

Lease asset impairments and other charges

6,472

2,406

8,651

2,406

Disposal related costs

(992

)

127

Goodwill impairment on business

32,629

32,629

Adjusted EBITDA

$

172,043

$

132,865

$

328,337

$

249,703

Adjusted EBITDA as calculated above represents earnings before interest, gain on sale of businesses, goodwill impairment of business, loss on investments, net, other (income) expense, net, income tax expense, (income) loss from equity method investments, net, depreciation and amortization and the items used to reconcile GAAP to Adjusted non-GAAP financial measures, including (1) share-based compensation, (2) certain acquisition-related integration costs, and (3) lease asset impairments and other charges. We disclose Adjusted EBITDA as a supplemental Non-GAAP financial performance measure as we believe it is a useful metric by which to compare the performance of our business from period to period. We understand that measures similar to Adjusted EBITDA are broadly used by analysts, rating agencies and investors in assessing our performance. Accordingly, we believe that the presentation of Adjusted EBITDA provides useful information to investors.

Adjusted EBITDA is not in accordance with, or an alternative to, net income, and may be different from Non-GAAP measures used by other companies. In addition, Adjusted EBITDA is not based on any comprehensive set of accounting rules or principles. This Adjusted non-GAAP measure has limitations in that it does not reflect all of the amounts associated with the Company’s results of operations determined in accordance with GAAP.

J2 GLOBAL, INC. AND SUBSIDIARIES

NON-GAAP FINANCIAL MEASURES

(UNAUDITED, IN THOUSANDS)

 

Q1

Q2

Q3

Q4

YTD

2021

Net cash provided by operating activities

$

178,724

$

111,298

$

$

$

290,022

Less: Purchases of property and equipment

(26,269

)

(31,497

)

(57,766

)

Add: Contingent consideration*

685

685

Free cash flows

$

152,455

$

80,486

$

$

$

232,941

Q1

Q2

Q3

Q4

YTD

2020

Net cash provided by operating activities

$

102,036

$

139,591

$

114,382

$

124,070

$

480,079

Less: Purchases of property and equipment

(26,885

)

(23,652

)

(20,729

)

(21,286

)

(92,552

)

Add: Contingent consideration*

20,054

49

99

20,202

Free cash flows

$

95,205

$

115,939

$

93,702

$

102,883

$

407,729

* Free Cash Flows of $80.5 million for Q2 2021, $95.2 million for Q1 2020, $93.7 million for Q3 2020 and $102.9 million for Q4 is before the effect of payments associated with certain contingent consideration associated with recent acquisitions.

The Company discloses free cash flows as supplemental Non-GAAP financial performance measure, as it believes it is a useful metric by which to compare the performance of its business from period to period. The Company also understands that this Non-GAAP measure is broadly used by analysts, rating agencies and investors in assessing the Company’s performance. Accordingly, the Company believes that the presentation of this Non-GAAP financial measure provides useful information to investors.

Free cash flows is not in accordance with, or an alternative to, Cash Flows from Operating Activities, and may be different from Non-GAAP measures with similar or even identical names used by other companies. In addition, the Non-GAAP measure is not based on any comprehensive set of accounting rules or principles. This Non-GAAP measure has limitations in that it does not reflect all of the amounts associated with the Company’s results of operations determined in accordance with GAAP.

J2 GLOBAL, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP FINANCIAL MEASURES

THREE MONTHS ENDED JUNE 30, 2021

(UNAUDITED, IN THOUSANDS)

 

Cloud

Digital

Services

Media

Corporate

Total

Revenues

GAAP revenues

$

175,283

$

253,761

$

$

429,044

Gross profit

GAAP gross profit

$

137,094

$

228,622

$

(9

)

$

365,707

Non-GAAP adjustments:

Share-based compensation

115

2

117

Acquisition related integration costs

32

4

36

Amortization

349

349

Adjusted non-GAAP gross profit

$

137,590

$

228,628

$

(9

)

$

366,209

Operating profit

GAAP operating profit

$

63,034

$

44,106

$

(12,856

)

$

94,284

Non-GAAP adjustments:

Share-based compensation

1,429

1,784

3,038

6,251

Acquisition related integration costs

1,169

125

1,294

Amortization

10,713

37,483

45

48,241

Lease asset impairments and other charges

277

6,195

6,472

Disposal related costs

(992

)

(992

)

Adjusted non-GAAP operating profit

$

76,622

$

89,693

$

(10,765

)

$

155,550

Depreciation

5,001

11,492

16,493

Adjusted EBITDA

$

81,623

$

101,185

$

(10,765

)

$

172,043

NOTE 1: Table above excludes certain intercompany allocations

J2 GLOBAL, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP FINANCIAL MEASURES

THREE MONTHS ENDED JUNE 30, 2020

(UNAUDITED, IN THOUSANDS)

 

Cloud

Digital

Services

Media

Corporate

Total

Revenues

GAAP revenues

$

167,058

$

163,926

$

$

330,984

Gross profit

GAAP gross profit

$

127,631

$

146,588

$

(37

)

$

274,182

Non-GAAP adjustments:

Share-based compensation

140

3

143

Acquisition related integration costs

55

55

Amortization

448

448

Adjusted non-GAAP gross profit

$

128,274

$

146,591

$

(37

)

$

274,828

Operating profit

GAAP operating profit

$

64,857

$

19,840

$

(11,657

)

$

73,040

Non-GAAP adjustments:

Share-based compensation

1,628

1,544

3,358

6,530

Acquisition related integration costs

37

764

801

Amortization

13,088

22,268

531

35,887

Lease asset impairments and other charges

2,406

2,406

Adjusted non-GAAP operating profit

$

79,610

$

46,822

$

(7,768

)

$

118,664

Depreciation

3,904

10,297

14,201

Adjusted EBITDA

$

83,514

$

57,119

$

(7,768

)

$

132,865

NOTE 1: Table above excludes certain intercompany allocations

NOTE 2: Table above has been recast to remove the impact of certain expenses associated with the Corporate entity that were previously allocated to the Cloud Services and Digital Media businesses.

Contacts:

Rebecca Wright
J2 Global, Inc.
800-577-1790
press@J2.com

Data & News supplied by www.cloudquote.io
Stock quotes supplied by Barchart
Quotes delayed at least 20 minutes.
By accessing this page, you agree to the following
Privacy Policy and Terms and Conditions.