j2 Reports First Quarter 2016 Results

Achieves Record First Quarter Revenues (up 24.3% to $201 million vs. Q1 2015), EBITDA (up 25.1% to $87 million vs. Q1 2015), Free Cash Flow (up 38.8% to $61 million vs. Q1 2015) and Adjusted Non-GAAP EPS (up 23.5% vs. Q1 2015)

Announces

Nineteenth Consecutive Quarterly Dividend Increase

LOS ANGELES -- j2 Global, Inc. (NASDAQGS: JCOM) today reported financial results for the first quarter ended March 31, 2016 and announced that its Board of Directors has declared an increased quarterly cash dividend of $0.3350 per share.

Q1 2016 quarterly revenues increased 24.3% to a Q1 record of $200.5 million compared to $161.3 million for Q1 2015.  

GAAP earnings per diluted share⁽¹⁾ for the quarter increased 35.6% to $0.61 compared to $0.45 for Q1 2015. Adjusted Non-GAAP earnings per diluted share⁽¹⁾⁽²⁾ for the quarter increased 23.5% to a Q1 record $1.05 compared to $0.85 for Q1 2015.

Quarterly EBITDA⁽³⁾ increased 25.1% to a Q1 record $86.7 million compared to $69.3 million for Q1 2015.

Q1 2016 free cash flow⁽⁴⁾ increased to a Q1 record of 38.8% to $60.5 million compared to $43.6 million for Q1 2015.

j2 ended the quarter with approximately $394.5 million in cash and investments after deploying $83.2 million during the quarter for acquisitions and j2's regular quarterly dividend.

Key financial results for Q1 2016 versus Q1 2015 are set forth in the following table (in millions, except per share amounts). Reconciliations of Adjusted Non-GAAP earnings per diluted share, EBITDA and free cash flow to their nearest comparable GAAP financial measures are attached to this Press Release.

 

 

"With 24.3% revenue growth and an increase of 25.1% in EBITDA compared to the same quarter year over year, our first quarter represents a strong start to 2016," said Hemi Zucker, CEO of j2 Global. "Q1 free cash-flow grew by 39% to $60.5M and Non-GAAP EPS grew by 24% year over year. All segments of our business are performing well and we have seen increasing margins both in our Media and Cloud Backup businesses as they both continue to benefit from economies of scale. During the quarter we acquired 6 cloud services businesses, which completed the M&A activity that we planned for with respect to our full year 2016 business outlook. This makes me very optimistic regarding the rest of the year."

For fiscal 2016, the Company estimates that it will achieve revenues between $830 and $860 million and Adjusted Non-GAAP earnings per diluted share of between $4.70 and $5.00.

Adjusted Non-GAAP earnings per diluted share for 2016 excludes share-based compensation of between $12 and $14 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 2016 (exclusive of the release of reserves for uncertain tax positions) will increase from 28.4% to between 29% and 31%.

j2's Board of Directors has approved a quarterly cash dividend of $0.3350 per common share, a $0.01, or 3.1% increase versus last quarter's dividend. This is j2's nineteenth consecutive quarterly dividend increase since its first quarterly dividend in September 2011. The dividend will be paid on June 2, 2016 to all shareholders of record as of the close of business on May 18, 2016. Future dividends will be subject to Board approval.

Notes:

 

 

About j2 Global

j2 Global, Inc. (NASDAQ: JCOM) provides Internet services through two divisions: Business Cloud Services and Digital Media. The Business Cloud Services Division offers Internet fax, virtual phone, hosted email, email marketing, online backup, unified communications and CRM solutions. It markets its services principally under the brand names eFax ®, eVoice ®, FuseMail ®, Campaigner ®, KeepItSafe ®, Livedrive®, Onebox ®, and LiveVault®, and operates a messaging network spanning 50 countries on six continents. The Digital Media Division offers technology, gaming and lifestyle content through its digital properties, which include PCMag.com, IGN.com, AskMen.com, Toolbox.com and others. The Digital Media Division also operates NetShelter ® Powered by BuyerBase ®, an advanced digital ad targeting platform, and Ziff Davis B2B, a leading provider of research to enterprise buyers and leads to IT vendors. As of December 31, 2015, j2 had achieved 20 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, particularly those contained in Hemi Zucker's quote and the "Business Outlook" portion regarding the Company's expected fiscal 2016 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 2015 Annual Report on Form 10-K filed by j2 Global on February 29, 2016, 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 and particularly those contained in Hemi Zucker's quote and the "Business Outlook" portion regarding the Company's expected fiscal 2016 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 earnings per diluted share, 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.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED, IN THOUSANDS)

 

 

		MARCH 31, 2016				DECEMBER 31, 2015
ASSETS
Cash and cash equivalents		$	242,755			$	255,530
Short-term investments			69,821				79,655
Accounts receivable, net of allowances of $5,267 and $4,261, respectively			98,329				114,680
Prepaid expenses and other current assets			19,706				25,722
Deferred income taxes, current			—				7,218
Total current assets			430,611				482,805
Long-term investments			81,896				78,563
Property and equipment, net			56,370				57,442
Goodwill			829,012				807,661
Other purchased intangibles, net			362,689				352,641
Deferred income taxes, non-current			5,884				—
Other assets			5,372				4,607
TOTAL ASSETS		$	1,771,834			$	1,783,719
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses		$	82,813			$	114,384
Income taxes payable			5,729				5,589
Deferred revenue, current			78,975				76,104
Capital lease, current			198				214
Deferred income taxes, current			—				363
Total current liabilities			167,715				196,654
Long-term debt			594,406				592,037
Deferred revenue, non-current			5,688				6,538
Capital lease, non-current			139				148
Liability for uncertain tax positions			37,658				35,917
Deferred income taxes, non-current			40,637				43,989
Other long-term liabilities			17,547				18,228
Total liabilities			863,790				893,511
Commitments and contingencies
Stockholders' Equity
Preferred stock			—				—
Common stock			480				479
Additional paid-in capital			295,633				292,064
Retained earnings			640,001				626,789
Accumulated other comprehensive loss			(28,070	)			(29,124	)
			908,044				890,208
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY		$	1,771,834			$	1,783,719

 

 

j2 GLOBAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED, IN THOUSANDS)

 

 

		THREE MONTHS ENDED MARCH 31,
		2016				2015
Revenues		$	200,502			$	161,253
Cost of revenues (1)			34,288				28,186
Gross profit			166,214				133,067
Operating expenses:
Sales and marketing (1)			48,112				37,590
Research, development and engineering (1)			8,988				8,447
General and administrative (1)			55,776				46,500
Total operating expenses			112,876				92,537
Income from operations			53,338				40,530
Interest expense, net			10,233				10,313
Other expense (income), net			126				(784	)
Income before income taxes			42,979				31,001
Income tax expense			13,036				9,124
Net income		$	29,943			$	21,877
Basic net income per common share:
Net income attributable to j2 Global, Inc. common shareholders		$	0.62			$	0.45
Diluted net income per common share:
Net income attributable to j2 Global, Inc. common shareholders		$	0.61			$	0.45
Basic weighted average shares outstanding			47,966,718				47,422,396
Diluted weighted average shares outstanding			48,238,098				47,766,088
(1) Includes share-based compensation expense as follows:
Cost of revenues		$	95			$	83
Sales and marketing			531				584
Research, development and engineering			207				194
General and administrative			1,976				2,143
Total		$	2,809			$	3,004

 

 

 

 

 

 

 

j2 GLOBAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

 

 

 

j2 GLOBAL, INC.

RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP FINANCIAL MEASURES

THREE MONTHS ENDED MARCH 31, 2016

(UNAUDITED, IN THOUSANDS, EXCEPT SHARE AND 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 of additional tax or indirect tax related (expense) benefit from prior years; and (6) elimination of income tax provision associated with the noted modifications.

 

 

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

 

 

 

 

 

 

 

The Company discloses adjusted non-GAAP Earnings Per Share ("EPS") 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 adjusted non-GAAP measure is broadly used by analysts, rating 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.

RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP FINANCIAL MEASURES

THREE MONTHS ENDED MARCH 31, 2015

(UNAUDITED, IN THOUSANDS, EXCEPT SHARE AND 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) IRS consulting fee; (5) elimination of amortization of patents and intangible assets that we acquired; (6) elimination of additional tax or indirect tax related (expense) benefit from prior years; and (7) elimination of income tax provision associated with the noted modifications.

 

 

										(2)																(6)
										Acquisition								(4)								Additional
						(1)				related				(3)				IRS								Tax Expense
						Share-based				Integration				Interest				Consulting				(5)				(Benefit) from				Adjusted
		GAAP				Compensation				Costs				Costs				Fee				Amortization				Prior Years				Non-GAAP
Revenues		$	161,253				—				—				—				—				—				—			$	161,253
Cost of revenues			28,186				(83	)			(27	)			—				—				(663	)			—				27,413
Operating expenses:
Sales and marketing			37,590				(584	)			(485	)			—				—				—				—				36,521
Research, development and engineering			8,447				(194	)			(80	)			—				—				—				—				8,173
General and administrative			46,500				(2,143	)			(2,942	)			—				204				(16,975	)			(1,118	)			23,526
Interest expense (income), net			10,313				—				—				(1,779	)			—				—				—				8,534
Other expense (income), net			(784	)			—				—				—				—				—				—				(784	)
Income tax provision (7)			9,124				768				1,120				531				(50	)			5,325				(118	)			16,700
Net income		$	21,877				2,236				2,414				1,248				(154	)			12,313				1,236			$	41,170
Net income per share attributable to j2 Global, Inc. common stockholders*
Basic		$	0.45				0.05				0.05				0.03				(0.00	)			0.26				0.03			$	0.86
Diluted		$	0.45				0.05				0.05				0.03				(0.00	)			0.26				0.03			$	0.85

 

 

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

 

 

 

 

 

 

The Company discloses adjusted non-GAAP Earnings Per Share ("EPS") 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 adjusted non-GAAP measure is broadly used by analysts, rating 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.

NET INCOME TO EBITDA RECONCILIATION

THREE MONTHS ENDED MARCH 31, 2016 AND 2015

(UNAUDITED, IN THOUSANDS)

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

 

 

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, (2) certain acquisition-related integration costs and (3) additional indirect tax expense from prior years. We disclose 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 EBITDA are broadly used by analysts, rating agencies and investors in assessing our performance. Accordingly, we believe that the presentation of EBITDA provides useful information to investors.

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, 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.

NON-GAAP FINANCIAL MEASURES

(UNAUDITED, IN THOUSANDS)

 

 

 

 

* Free cash flows of $54.9 million and $49.6 million for Q2 2015 and Q3 2015, respectively, were before the effect of payments associated with taxes for prior periods under audit.

The Company discloses Free Cash Flows as supplemental non-GAAP financial performance measure, as it believes it is a useful metrics 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.