Achieves Record First Quarter Revenues (up 10.2% to $280.6 million vs. Q1 2017)

Announces Twenty-Seventh Consecutive Quarterly Dividend Increase

LOS ANGELES -- j2 Global, Inc. (NASDAQ: JCOM) today reported financial results for the first quarter ended March 31, 2018 and announced that its Board of Directors has declared an increased quarterly cash dividend of $0.4150 per share.

"We are pleased with our Q1 results, particularly the progress we have made with our subscription businesses in the Digital Media segment as well as our initiatives to grow the healthcare business at Cloud Services," said Vivek Shah, CEO of j2 Global. "We are also very excited to have welcomed several new key executives to our leadership team, including Dan Stone, President of Everyday Health, and Ron Burr, General Manager of Voice and Messaging in Cloud Services."

 

Q1 2018 quarterly revenues increased 10.2% to a first quarter record of $280.6 million compared to $254.7 million for Q1 2017.  

Net cash provided by operating activities more than doubled to $103.9 million compared to $51.2 million for Q1 2017. Q1 2018 free cash flow ⁽¹⁾ increased 47.5% to an all-time record of $90.7 million compared to $61.5 million for Q1 2017. The increase in free cash flow ⁽¹⁾ is primarily due to the media business' collection cycle which resulted in greater cash inflows associated with accounts receivable in comparison to Q1 2017.

GAAP earnings per diluted share ⁽²⁾ decreased 26.9% to $0.38 in Q1 2018 compared to $0.52 for Q1 2017. The decrease over the prior comparable period is primarily attributed to (1) fair value adjustments associated with investments and contingent consideration; and (2) an increase in interest expense associated with the issuance of the $650 million 6.0% Senior Notes due in 2025.

Adjusted non-GAAP earnings per diluted share ⁽²⁾⁽³⁾ for the quarter increased 2.5% to $1.22 compared to $1.19 for Q1 2017.

GAAP net income decreased by 26.7% to $18.9 million compared to $25.8 million for Q1 2017. The decrease over the prior comparable period is primarily attributed to (1) fair value adjustments associated with investments and contingent consideration; and (2) an increase in interest expense associated with the issuance of the $650 million 6.0% Senior Notes due in 2025.

Quarterly Adjusted EBITDA ⁽⁴⁾ increased 3.2% to $102.7 million compared to $99.5 million for Q1 2017. The impact of a change in accounting principle associated with revenue recognition (ASC 606) was a decrease of approximately $2.0 million for both the quarterly revenues and quarterly adjusted EBITDA for Q1 2018. Without this impact, Q1 2018 revenues would have been $282.6 million and Adjusted EBITDA would have been $104.7 million.

j2 ended the quarter with approximately $400 million in cash and investments after deploying approximately $100 million during the quarter for acquisitions and j2's regular quarterly dividend.

 

 

 

 

 

Key financial results for Q1 2018 versus Q1 2017 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.

 

 

For fiscal 2018, the Company estimates that it will achieve revenues between $1.20 billion and $1.25 billion, Adjusted EBITDA between $480 million and $505 million and Adjusted non-GAAP earnings per diluted share of between $5.95 and $6.25.

Adjusted non-GAAP earnings per diluted share for 2018 excludes share-based compensation of between $31 million and $34 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 2018 (exclusive of the release of reserves for uncertain tax positions) will be between 23.0% and 25.0%.

The Company has not reconciled the Adjusted non-GAAP earnings per diluted share and tax rate guidance 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 costs related to acquisitions and taxation, which are potential adjustments to future earnings. We expect the variability of these items to have a potentially unpredictable and significant impact on our future GAAP financial results.

 

j2's Board of Directors approved a quarterly cash dividend of $0.4150 per common share, a $0.01, or 2.5% increase versus last quarter's dividend. This is j2's twenty-seventh consecutive quarterly dividend increase since its first quarterly dividend in September 2011. The dividend will be paid on June 1, 2018 to all shareholders of record as of the close of business on May 18, 2018. Future dividends will be subject to Board approval.

Notes:

 

 

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, Offers.com, Everyday Health and What To Expect in its Digital Media segment and eFax, eVoice, Campaigner, Vipre, KeepItSafe and Livedrive in its Cloud Services segment. j2 reaches over 180 million people per month across its brands. As of December 31, 2017, j2 had achieved 22 consecutive fiscal years of revenue growth. For more information about j2, please visit www.j2global.com.

 

Contact:

 

Laura Hinson

j2 Global, Inc.

800-577-1790

"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 2018 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 2017 Annual Report on Form 10-K filed by j2 Global on March 1, 2018, 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 2018 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.

 

 

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)

 

 

		March 31, 2018				December 31, 2017
ASSETS
Cash and cash equivalents		$	331,367			$	350,945
Restricted cash			402				—
Accounts receivable, net of allowances of $9,850 and $8,701, respectively			174,411				234,195
Prepaid expenses and other current assets			31,588				35,287
Total current assets			537,768				620,427
Long-term investments			64,947				57,722
Property and equipment, net			85,852				79,773
Goodwill			1,257,521				1,196,611
Other purchased intangibles, net			494,589				485,751
Other assets			11,541				12,809
TOTAL ASSETS		$	2,452,218			$	2,453,093
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses		$	127,713			$	169,837
Deferred revenue, current			113,940				95,255
Other current liabilities			291				10
Total current liabilities			241,944				265,102
Long-term debt			1,004,796				1,001,944
Deferred revenue, non-current			8,018				47
Income taxes payable, non-current			43,781				43,781
Liability for uncertain tax positions			53,311				52,216
Deferred income taxes			33,691				38,264
Other long-term liabilities			35,509				31,434
TOTAL LIABILITIES			1,421,050				1,432,788
Commitments and contingencies			—				—
Preferred stock			—				—
Common stock			479				479
Additional paid-in capital			332,407				325,854
Retained earnings			723,562				723,062
Accumulated other comprehensive loss			(25,280	)			(29,090	)
TOTAL STOCKHOLDERS' EQUITY			1,031,168				1,020,305
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY		$	2,452,218			$	2,453,093

 

 

 

 

 

j2 GLOBAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

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

 

 

 

j2 GLOBAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 (UNAUDITED, IN THOUSANDS)

 

 

 

 

 

 

 

 

 

 

j2 GLOBAL, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP FINANCIAL MEASURES

THREE MONTHS ENDED MARCH 31, 2018 AND 2017

(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 and the associated payroll tax expense; (2) elimination of certain acquisition-related integration costs; (3) elimination of interest costs in excess of the coupon rate associated with the convertible notes; (4) elimination of amortization of patents and intangible assets that we acquired; (5) elimination change in value on investment; and (6) elimination of dilutive effect of the convertible debt.

 

 

^* 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 MARCH 31, 2018 AND 2017

(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 and the associated payroll tax expense; (2) elimination of certain acquisition-related integration costs; (3) elimination of interest costs in excess of the coupon rate associated with the convertible notes; (4) elimination of amortization of patents and intangible assets that we acquired; (5) elimination change in value on investments; and (6) elimination of dilutive effect of the convertible debt.

 

 

 

 

 

 

Continued from previous page

 

 

 

^* 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.  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 convertible senior notes of approximately 5.8% in its income statement. The Company excludes the difference between the imputed interest expense and the coupon interest expense of 3.25% 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. 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 equity 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) 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 non-GAAP other income, Adjusted non-GAAP income tax provision 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.

j2 GLOBAL, INC. AND SUBSIDIARIES

NET INCOME TO ADJUSTED EBITDA RECONCILIATION

THREE MONTHS ENDED MARCH 31, 2018 AND 2017

(UNAUDITED, IN THOUSANDS)

 

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

 

 

Adjusted EBITDA as calculated above represents earnings before interest and other expense, net, income tax expense, depreciation and amortization and the items used to reconcile GAAP to Adjusted non-GAAP financial measures, including (1) share-based compensation and (2) certain acquisition-related integration costs. 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)

 

 

 

 

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 MARCH 31, 2018

(UNAUDITED, IN THOUSANDS)

 

 

 

 

 

 

 

 

 

j2 GLOBAL, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP FINANCIAL MEASURES

THREE MONTHS ENDED MARCH 31, 2017

(UNAUDITED, IN THOUSANDS)

 

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