J2 Global, Inc. (NASDAQ: JCOM) today reported financial results
for the first quarter ended March 31, 2021.
“J2 continues to produce outstanding results across the board,”
said Vivek Shah, CEO of J2 Global. “Our strong momentum adds to the
considerable excitement within our organization as we prepare to
separate into two independent publicly traded companies.”
FIRST QUARTER 2021
RESULTS
Q1 2021 quarterly revenues increased 19.8% to a Q1 record of
$398.2 million compared to $332.4 million for Q1 2020. On a
pro-forma(6) basis, Q1 2021 quarterly revenues increased 23.2% to
$385.6 million compared to $313.0 million for Q1 2020.
Net cash provided by operating activities increased to $178.7
million compared to $102.0 million for Q1 2020. Q1 2021 free cash
flow(2) increased 60.1% to $152.5 million compared to $95.2 million
for Q1 2020.
GAAP earnings per diluted share(3) increased to $1.67 in Q1 2021
compared to $(0.13) for Q1 2020.
Adjusted non-GAAP earnings per diluted share(3)(4) for the
quarter increased 55.8% to $2.18 as compared to $1.40 for Q1 2020.
On a pro-forma(6) basis, Adjusted non-GAAP earnings per diluted
share(3)(4) for the quarter increased 60.0% to $2.11 as compared to
$1.32 for Q1 2020.
GAAP net income increased to $77.9 million as compared to $(6.4)
million for Q1 2020.
Adjusted non-GAAP net income increased by 43.9% to $97.2 million
as compared to $67.5 million for Q1 2020. On a pro-forma(6) basis,
Adjusted non-GAAP net income increased by 48.3% to $94.0 million as
compared to $63.4 million for Q1 2020.
Adjusted EBITDA(5) for the quarter increased 33.8% to $156.3
million compared to $116.8 million for Q1 2020. On a pro-forma(6)
basis, Adjusted EBITDA(5) for the quarter increased 37.5% to $151.5
million compared to $110.2 million for Q1 2020.
J2 ended the quarter with approximately $511 million in cash,
cash equivalents, and investments after deploying approximately $8
million during the quarter for prior year acquisitions.
Key financial results for Q1 2021 versus Q1 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)
Q1 2021
Q1 2020
% Change
Q1 2021
Q1 2020
% Change
Revenues
Cloud Services
$171.4
$169.8
0.9%
$158.8
$150.4
5.6%
Digital Media
$226.8
$162.6
39.5%
$226.8
$162.6
39.5%
Total
Revenue: (1)
$398.2
$332.4
19.8%
$385.6
$313.0
23.2%
Operating Income
$78.5
$55.2
42.1%
Net Cash Provided by Operating
Activities
$178.7
$102.0
75.2%
Free Cash Flow (2)
$152.5
$95.2
60.1%
GAAP Earnings per Diluted Share
(3)
$1.67
$(0.13)
NM
Adjusted Non-GAAP Earnings per Diluted
Share (3) (4)
$2.18
$1.40
55.8%
$2.11
$1.32
60.0%
GAAP Net Income (Loss)
$77.9
$(6.4)
NM
Adjusted Non-GAAP Net Income
$97.2
$67.5
43.9%
$94.0
$63.4
48.3%
Adjusted EBITDA (5)
$156.3
$116.8
33.8%
$151.5
$110.2
37.5%
Adjusted EBITDA Margin (5)
39.3%
35.1%
11.7%
39.3%
35.2%
11.6%
BUSINESS OUTLOOK
Based on better-than-expected operating performance, the Company
is raising its revenue, Adjusted EBITDA, and Adjusted non-GAAP EPS
estimates:
Original 2021 Range of
Estimates (A)
Revised 2021 Range of
Estimates (A)
Low
High
Low
High
Revenue
$
1,630
$
1,676
$
1,676
$
1,700
Adjusted EBITDA
$
646
$
666
$
666
$
680
Adjusted non-GAAP EPS (B)
$
8.93
$
9.27
$
9.27
$
9.51
(A)
Balances are in millions, except per share
amounts, and exclude the B2B Backup business and Voice assets in
the United Kingdom
(B)
Assumed share cost does not factor in any
share repurchases or issuances (e.g. convert settlement)
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 9.6% for Q1 2021 and 132.5% for Q1 2020. The
estimated Adjusted non-GAAP effective tax rates were approximately
22.5% for Q1 2021 and 22.0% for Q1 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 March 31, 2021 and 2020 totaled $0.51 and
$1.53 per diluted share, respectively.
(5)
Adjusted EBITDA is defined as earnings
before interest; gain on sale of businesses; 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,
iContact, Campaigner, Vipre, IPVanish and KeepItSafe 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)
March 31, 2021
December 31, 2020
ASSETS
Cash and cash equivalents
$
371,971
$
242,652
Short-term investments
663
663
Accounts receivable, net of allowances of
$17,971 and $16,018, respectively
242,420
325,619
Prepaid expenses and other current
assets
52,386
53,909
Current assets held for sale
8,063
—
Total current assets
675,503
622,843
Long-term investments
138,703
97,495
Property and equipment, net
155,799
156,577
Operating lease right-of-use assets
85,342
105,845
Goodwill
1,777,745
1,867,430
Other purchased intangibles, net
676,699
741,569
Deferred income taxes, noncurrent
49,282
56,545
Other assets
16,993
17,027
Noncurrent assets held for sale
127,591
—
TOTAL ASSETS
$
3,703,657
$
3,665,331
LIABILITIES AND STOCKHOLDERS’
EQUITY
Accounts payable and accrued expenses
$
201,141
$
230,651
Income taxes payable, current
32,693
31,753
Deferred revenue, current
193,934
190,644
Operating lease liabilities, current
30,330
32,211
Current portion of long-term debt
399,893
396,801
Other current liabilities
41
497
Current liabilities held for sale
9,502
—
Total current liabilities
867,534
882,557
Long-term debt
1,186,438
1,182,220
Deferred revenue, noncurrent
15,134
14,440
Operating lease liabilities,
noncurrent
80,465
99,177
Income taxes payable, noncurrent
11,675
11,675
Liability for uncertain tax positions
58,386
57,081
Deferred income taxes, noncurrent
163,348
162,700
Other long-term liabilities
32,953
44,463
Noncurrent liabilities held for sale
12,813
—
TOTAL LIABILITIES
2,428,746
2,454,313
Commitments and contingencies
—
—
Preferred stock
—
—
Common stock
445
443
Additional paid-in capital
455,625
456,274
Retained earnings
882,071
809,107
Accumulated other comprehensive loss
(63,230
)
(54,806
)
TOTAL STOCKHOLDERS’ EQUITY
1,274,911
1,211,018
TOTAL LIABILITIES AND STOCKHOLDERS’
EQUITY
$
3,703,657
$
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 March
31,
2021
2020
Total revenues
$
398,185
$
332,393
Cost of revenues (1)
57,822
59,131
Gross profit
340,363
273,262
Operating expenses:
Sales and marketing (1)
121,186
99,438
Research, development and engineering
(1)
21,351
15,406
General and administrative (1)
119,346
103,171
Total operating expenses
261,883
218,015
Income from operations
78,480
55,247
Interest expense, net
21,704
20,971
Gain on sale of businesses
(1,979
)
—
Loss on investments, net
—
20,832
Other (income) expense, net
(622
)
6,876
Income before income taxes and (income)
loss from equity method investment, net
59,377
6,568
Income tax expense
5,725
8,703
(Income) loss from equity method
investment, net
(24,270
)
4,269
Net income (loss)
$
77,922
$
(6,404
)
Basic net income (loss) per common
share:
Net income (loss) attributable to J2
Global, Inc. common shareholders
$
1.75
$
(0.13
)
Diluted net income (loss) per common
share:
Net income (loss) attributable to J2
Global, Inc. common shareholders
$
1.67
$
(0.13
)
Basic weighted average shares
outstanding
44,399,149
47,620,774
Diluted weighted average shares
outstanding
46,731,872
47,620,774
(1) Includes share-based compensation
expense as follows:
Cost of revenues
$
132
$
134
Sales and marketing
362
398
Research, development and engineering
520
431
General and administrative
5,099
5,350
Total
$
6,113
$
6,313
J2 GLOBAL, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(UNAUDITED, IN
THOUSANDS)
Three Months Ended
March 31,
Cash flows from operating activities:
2021
2020
Net income (loss)
$
77,922
$
(6,404
)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization
65,492
53,980
Amortization of financing costs and
discounts
7,296
6,997
Non-cash operating lease costs
3,320
4,834
Share-based compensation
6,113
6,313
Provision for doubtful accounts
2,485
2,826
Deferred income taxes, net
(5,380
)
(1,106
)
Gain on sale of businesses
(1,979
)
—
Lease asset impairments
1,086
—
Changes in fair value of contingent
consideration
510
(240
)
Foreign currency remeasurement gain
655
7,801
(Income) loss from equity method
investments
(24,270
)
4,269
Loss on equity and debt investments
—
20,826
Decrease (increase) in:
Accounts receivable
68,564
52,949
Prepaid expenses and other current
assets
(2,481
)
(8,169
)
Other assets
1,193
2,612
Increase (decrease) in:
Accounts payable and accrued expenses
(22,078
)
(43,374
)
Income taxes payable
2,471
1,616
Deferred revenue
7,867
(686
)
Operating lease liabilities
(5,951
)
(5,062
)
Liability for uncertain tax positions
1,304
1,654
Other long-term liabilities
(5,415
)
400
Net cash provided by operating
activities
178,724
102,036
Cash flows from investing activities:
Purchases of equity method investment
(8,064
)
(22,840
)
Purchases of equity investments
(999
)
(843
)
Purchases of property and equipment
(26,269
)
(26,885
)
Acquisition of businesses, net of cash
received
385
(18,701
)
Proceeds from sale of businesses, net of
cash divested
5,999
—
Proceeds from sale of assets
—
226
Purchases of intangible assets
(8
)
(19
)
Net cash used in investing activities
(28,956
)
(69,062
)
Cash flows from financing activities:
Repurchase of common stock
(12,179
)
(62,966
)
Exercise of stock options
444
952
Deferred payments for acquisitions
(7,853
)
(15,503
)
Other
(551
)
(839
)
Net cash used in financing activities
(20,139
)
(78,356
)
Effect of exchange rate changes on cash
and cash equivalents
(310
)
(3,679
)
Net change in cash and cash
equivalents
129,319
(49,061
)
Cash and cash equivalents at beginning of
period
242,652
575,615
Cash and cash equivalents at end of
period
$
371,971
$
526,554
J2 GLOBAL, INC. AND
SUBSIDIARIES
RECONCILIATION OF GAAP TO
ADJUSTED NON-GAAP FINANCIAL MEASURES
THREE MONTHS ENDED MARCH 31,
2021 AND 2020
(UNAUDITED, IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)
Non-GAAP net income is GAAP net income
(loss) 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; and (10) elimination of dilutive effect of the
convertible debt.
Three Months Ended March
31,
2021
Per Diluted Share *
2020
Per Diluted Share *
Net income (loss)
$
77,922
$
1.67
$
(6,404
)
$
(0.13
)
Plus:
Share based compensation (1)
4,049
0.09
4,808
0.10
Acquisition related integration costs
(2)
2,670
0.06
1,095
0.02
Interest costs (3)
4,845
0.11
4,315
0.09
Amortization (4)
33,343
0.75
31,858
0.67
Investments (5)
(25,444
)
(0.57
)
25,094
0.53
Tax expense from prior years (6)
—
—
388
0.01
Sale of assets (7)
(1,875
)
(0.04
)
(197
)
—
Intra-entity transfers (8)
—
—
6,563
0.14
Lease asset impairments and other charges
(9)
1,648
0.04
—
—
Convertible debt dilution (10)
—
0.08
—
—
Adjusted non-GAAP net income
$
97,158
$
2.18
$
67,520
$
1.40
* 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,
2021 AND 2020
(UNAUDITED, IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)
Non-GAAP net income is GAAP net income
(loss) 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; and (10) elimination of dilutive effect of the
convertible debt.
Three Months Ended March
31,
2021
2020
Cost of revenues
$
57,822
$
59,131
Plus:
Share based compensation (1)
(132
)
(134
)
Acquisition related integration costs
(2)
(40
)
(55
)
Amortization (4)
(596
)
(450
)
Adjusted non-GAAP cost of
revenues
$
57,054
$
58,492
Sales and marketing
$
121,186
$
99,438
Plus:
Share based compensation (1)
(362
)
(398
)
Acquisition related integration costs
(2)
(837
)
(514
)
Adjusted non-GAAP sales and
marketing
$
119,987
$
98,526
Research, development and
engineering
$
21,351
$
15,406
Plus:
Share based compensation (1)
(520
)
(431
)
Acquisition related integration costs
(2)
(324
)
—
Adjusted non-GAAP research, development
and engineering
$
20,507
$
14,975
General and administrative
$
119,346
$
103,171
Plus:
Share based compensation (1)
(5,099
)
(5,350
)
Acquisition related integration costs
(2)
(2,830
)
(729
)
Amortization (4)
(48,417
)
(38,713
)
Lease asset impairments and other charges
(9)
(2,179
)
—
Adjusted non-GAAP general and
administrative
$
60,821
$
58,379
Interest expense, net
$
21,704
$
20,971
Plus:
Interest costs (3)
(6,417
)
(5,934
)
Adjusted non-GAAP interest expense,
net
$
15,287
$
15,037
Gain on sale of businesses
$
(1,979
)
$
—
Plus:
Sale of assets (7)
1,979
—
Adjusted non-GAAP gain on sale of
businesses
$
—
$
—
Loss on investments, net
$
—
$
20,832
Plus:
Investments (5)
—
(20,825
)
Adjusted non-GAAP loss on investments,
net
$
—
$
7
Other (income) expense, net
$
(622
)
$
6,876
Plus:
Sale of assets (7)
(200
)
257
Intra-entity transfers (8)
—
(6,702
)
Adjusted non-GAAP other (income)
expense, net
$
(822
)
$
431
Income tax provision
$
5,725
$
8,703
Plus:
Share based compensation (1)
2,064
1,505
Acquisition related integration costs
(2)
1,361
203
Interest costs (3)
1,572
1,619
Amortization (4)
15,670
7,305
Investments (5)
1,174
—
Tax benefit from prior years (6)
—
(388
)
Sale of assets (7)
96
(60
)
Intra-entity transfers (8)
—
139
Lease asset impairments and other charges
(9)
531
—
Adjusted non-GAAP income tax
provision
$
28,193
$
19,026
(Income) loss from equity method
investment, net
$
(24,270
)
$
4,269
Plus:
Investments (5)
24,270
(4,269
)
Adjusted non-GAAP (income) loss from
equity method investment, net
$
—
$
—
Total adjustments
$
(19,236
)
$
(73,924
)
GAAP earnings per diluted share
$
1.67
$
(0.13
)
Adjustments *
$
0.51
$
1.53
Adjusted non-GAAP earnings per diluted
share
$
2.18
$
1.40
* 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) 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 Q1 2021 versus Q1 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.
Q1 2021
Q1 2020
% Change
Total Revenues
$398.2 million
$332.4 million
19.8%
Pro-Forma Revenue Adjustments
$(12.6) million
$(19.4) million
(35.1)%
Pro-Forma Total Revenue: (1)
$385.6 million
$313.0 million
23.2%
Adjusted Non-GAAP Earnings per Diluted
Share (1)
$2.18
$1.40
55.8%
Pro-Forma Earnings per Diluted Share
Adjustments
$(0.07)
$(0.08)
(12.5)%
Adjusted Pro Forma Earnings per Diluted
Share (1)
$2.11
$1.32
60.0%
GAAP Net Income (Loss)
$77.9 million
$(6.4) million
(1,316.8)%
Pro-Forma Net Income
Adjustments
$16.1 million
$69.8 million
(76.9)%
Adjusted Pro-Forma Net Income
$94.0 million
$63.4 million
48.3%
Adjusted EBITDA (1)
$156.3 million
$116.8 million
33.8%
Pro-Forma EBITDA Adjustments
$(4.8) million
$(6.6) million
(27.3)%
Adjusted Pro-Forma EBITDA (1)
$151.5 million
$110.2 million
37.5%
Adjusted EBITDA Margin (1)
39.3%
35.1%
11.7%
Pro-Forma EBITDA Margin
Adjustments
0.0%
0.1%
(45.8)%
Adjusted Pro-Forma EBITDA Margin
(1)
39.3%
35.2%
11.6%
(1) Refer to the notes on page 2 of this
Release
J2 GLOBAL, INC. AND
SUBSIDIARIES
NET INCOME TO ADJUSTED EBITDA
RECONCILIATION
THREE MONTHS ENDED MARCH 31,
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 March
31,
2021
2020
Net income (loss)
$
77,922
$
(6,404
)
Plus:
Interest expense, net
21,704
20,971
Gain on sale of businesses
(1,979
)
—
Loss on investments, net
—
20,832
Other (income) expense, net
(622
)
6,876
Income tax expense
5,725
8,703
(Income) loss from equity method
investment, net
(24,270
)
4,269
Depreciation and amortization
65,492
53,980
Reconciliation of GAAP to Adjusted
non-GAAP financial measures:
Share-based compensation
6,113
6,313
Acquisition-related integration costs
4,031
1,298
Lease asset impairments and other
charges
2,179
—
Adjusted EBITDA
$
156,295
$
116,838
Adjusted EBITDA as calculated above represents earnings before
interest, gain on sale of businesses, 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
$
—
$
—
$
—
$
178,724
Less: Purchases of property and
equipment
(26,269
)
—
—
—
(26,269
)
Free cash flows
$
152,455
$
—
$
—
$
—
$
152,455
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 $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 MARCH 31,
2021
(UNAUDITED, IN
THOUSANDS)
Cloud
Digital
Services
Media
Corporate
Total
Revenues
GAAP revenues
$
171,379
$
226,806
$
—
$
398,185
Gross profit
GAAP gross profit
$
134,415
$
206,013
$
(65
)
$
340,363
Non-GAAP adjustments:
Share-based compensation
129
3
—
132
Acquisition related integration costs
40
—
—
40
Amortization
596
—
—
596
Adjusted non-GAAP gross profit
$
135,180
$
206,016
$
(65
)
$
341,131
Operating profit
GAAP operating profit
$
63,517
$
30,600
$
(15,637
)
$
78,480
Non-GAAP adjustments:
Share-based compensation
1,491
1,647
2,975
6,113
Acquisition related integration costs
859
2,053
1,119
4,031
Amortization
11,859
37,059
95
49,013
Lease asset impairments and other
charges
463
1,716
—
2,179
Adjusted non-GAAP operating profit
$
78,189
$
73,075
$
(11,448
)
$
139,816
Depreciation
5,188
11,291
—
16,479
Adjusted EBITDA
$
83,377
$
84,366
$
(11,448
)
$
156,295
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 MARCH 30,
2020
(UNAUDITED, IN
THOUSANDS)
Cloud
Digital
Services
Media
Corporate
Total
Revenues
GAAP revenues
$
169,784
$
162,608
$
1
$
332,393
Gross profit
GAAP gross profit
$
131,424
$
141,837
$
1
$
273,262
Non-GAAP adjustments:
Share-based compensation
132
2
—
134
Acquisition related integration costs
55
—
—
55
Amortization
450
—
—
450
Adjusted non-GAAP gross profit
$
132,061
$
141,839
$
1
$
273,901
Operating profit
GAAP operating profit
$
59,022
$
8,370
$
(12,145
)
$
55,247
Non-GAAP adjustments:
Share-based compensation
1,590
1,303
3,420
6,313
Acquisition related integration costs
110
1,188
—
1,298
Amortization
16,197
22,380
586
39,163
Adjusted non-GAAP operating profit
$
76,919
$
33,241
$
(8,139
)
$
102,021
Depreciation
4,642
10,175
—
14,817
Adjusted EBITDA
$
81,561
$
43,416
$
(8,139
)
$
116,838
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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210510005844/en/
Rebecca Wright J2 Global, Inc. 800-577-1790 press@J2.com
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