JCOM j2 Global Inc

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