JCOM j2 Global Inc

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

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

SECOND QUARTER 2021 RESULTS

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

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

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

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

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

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

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

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

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

 

 

 

 

Pro-Forma Results(6)

 

Q2 2021

Q2 2020

% Change

Q2 2021

Q2 2020

% Change

Revenues

 

 

 

 

 

 

Cloud Services

$

175.3

 

$

167.1

 

4.9

%

$

163.9

 

$

148.9

 

10.1

%

Digital Media

$

253.8

 

$

163.9

 

54.8

%

$

253.8

 

$

163.9

 

54.8

%

Total Revenue: (1)

$

429.0

 

$

331.0

 

29.6

%

$

417.7

 

$

312.8

 

33.5

%

Operating Income

$

94.3

 

$

73.0

 

29.1

%

 

 

 

Net Cash Provided by Operating Activities

$

111.3

 

$

139.6

 

(20.3

)%

 

 

 

Free Cash Flow (2)

$

80.5

 

$

115.9

 

(30.6

)%

 

 

 

GAAP Earnings per Diluted Share (3)

$

0.33

 

$

0.80

 

(58.7

)%

 

 

 

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

$

2.41

 

$

1.71

 

40.9

%

$

2.32

 

$

1.60

 

45.0

%

GAAP Net Income

$

15.7

 

$

38.1

 

(58.7

)%

 

 

 

Adjusted Non-GAAP Net Income

$

107.9

 

$

80.6

 

33.8

%

$

104.1

 

$

75.5

 

37.9

%

Adjusted EBITDA (5)

$

172.0

 

$

132.9

 

29.5

%

$

167.2

 

$

125.7

 

33.0

%

Adjusted EBITDA Margin (5)

 

40.1

%

 

40.1

%

—

%

 

40.0

%

 

40.2

%

(0.2

)%

REVISED BUSINESS OUTLOOK

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

 

Current Guidance (A)

 

Revised 2021 Range of Estimates (A)(B)

 

Low

High

 

Low

High

Revenue

$

1,676

 

$

1,700

 

 

$

1,722

 

$

1,742

 

Adjusted EBITDA

$

666

 

$

680

 

 

$

695

 

$

705

 

Adjusted non-GAAP EPS

$

9.27

 

$

9.51

 

 

$

9.57

 

$

9.73

 

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

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

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

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

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

Notes:

(1)

 

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

(2)

 

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

(3)

 

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

(4)

 

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

(5)

 

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

(6)

 

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

About J2 Global

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

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

About Non-GAAP Financial Measures

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

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

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

J2 GLOBAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED, IN THOUSANDS)

 

 

June 30, 2021

 

December 31, 2020

ASSETS

 

 

 

Cash and cash equivalents

$

347,857

 

 

$

242,652

 

Short-term investments

—

 

 

663

 

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

249,005

 

 

325,619

 

Prepaid expenses and other current assets

56,177

 

 

53,909

 

Current assets held for sale

8,939

 

 

—

 

Total current assets

661,978

 

 

622,843

 

Long-term investments

117,396

 

 

97,495

 

Property and equipment, net

171,645

 

 

156,577

 

Operating lease right-of-use assets

82,961

 

 

105,845

 

Goodwill

1,837,539

 

 

1,867,430

 

Other purchased intangibles, net

676,146

 

 

741,569

 

Deferred income taxes, noncurrent

40,755

 

 

56,545

 

Other assets

16,759

 

 

17,027

 

Noncurrent assets held for sale

98,187

 

 

—

 

TOTAL ASSETS

$

3,703,366

 

 

$

3,665,331

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

Accounts payable and accrued expenses

$

198,220

 

 

$

230,651

 

Income taxes payable, current

11,471

 

 

31,753

 

Deferred revenue, current

193,531

 

 

190,644

 

Operating lease liabilities, current

30,818

 

 

32,211

 

Current portion of long-term debt

402,134

 

 

396,801

 

Other current liabilities

52

 

 

497

 

Current liabilities held for sale

8,793

 

 

—

 

Total current liabilities

845,019

 

 

882,557

 

Long-term debt

1,189,727

 

 

1,182,220

 

Deferred revenue, noncurrent

16,635

 

 

14,440

 

Operating lease liabilities, noncurrent

81,752

 

 

99,177

 

Income taxes payable, noncurrent

11,675

 

 

11,675

 

Liability for uncertain tax positions

53,515

 

 

57,081

 

Deferred income taxes, noncurrent

158,173

 

 

162,700

 

Other long-term liabilities

39,718

 

 

44,463

 

Noncurrent liabilities held for sale

12,652

 

 

—

 

TOTAL LIABILITIES

2,408,866

 

 

2,454,313

 

Commitments and contingencies

—

 

 

—

 

Preferred stock

—

 

 

—

 

Common stock

447

 

 

443

 

Additional paid-in capital

461,422

 

 

456,274

 

Retained earnings

892,605

 

 

809,107

 

Accumulated other comprehensive loss

(59,974

)

 

(54,806

)

TOTAL STOCKHOLDERS’ EQUITY

1,294,500

 

 

1,211,018

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

$

3,703,366

 

 

$

3,665,331

 

J2 GLOBAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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

 

 

Three Months Ended

June 30,

 

Six Months Ended

June 30,

 

2021

 

2020

 

2021

 

2020

Total revenues

429,044

 

 

$

330,984

 

 

827,228

 

 

663,377

 

 

 

 

 

 

 

 

 

Cost of revenues (1)

63,337

 

 

56,802

 

 

121,160

 

 

115,933

 

Gross profit

365,707

 

 

274,182

 

 

706,068

 

 

547,444

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

Sales and marketing (1)

134,103

 

 

92,805

 

 

255,288

 

 

192,243

 

Research, development and engineering (1)

19,644

 

 

13,606

 

 

40,995

 

 

29,012

 

General and administrative (1)

117,676

 

 

94,731

 

 

237,021

 

 

197,902

 

Total operating expenses

271,423

 

 

201,142

 

 

533,304

 

 

419,157

 

Income from operations

94,284

 

 

73,040

 

 

172,764

 

 

128,287

 

Interest expense, net

(21,403

)

 

(22,196

)

 

(42,970

)

 

(43,167

)

Gain on sale of businesses

823

 

 

—

 

 

2,802

 

 

—

 

Goodwill impairment on business

(32,629

)

 

—

 

 

(32,629

)

 

—

 

Loss on investments, net

(16,677

)

 

(3

)

 

(16,677

)

 

(20,835

)

Other income (expense), net

(777

)

 

9,059

 

 

(293

)

 

2,183

 

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

23,621

 

 

59,900

 

 

82,997

 

 

66,468

 

Income tax expense

2,152

 

 

15,978

 

 

7,876

 

 

24,681

 

Income (loss) from equity method investment, net

(5,752

)

 

(5,821

)

 

18,519

 

 

(10,090

)

Net income

$

15,717

 

 

$

38,101

 

 

$

93,640

 

 

$

31,697

 

 

 

 

 

 

 

 

 

Basic net income per common share:

 

 

 

 

 

 

 

Net income attributable to J2 Global, Inc. common shareholders

$

0.35

 

 

$

0.81

 

 

$

2.10

 

 

$

0.67

 

 

 

 

 

 

 

 

 

Diluted net income per common share:

 

 

 

 

 

 

 

Net income attributable to J2 Global, Inc. common shareholders

$

0.33

 

 

$

0.80

 

 

$

1.98

 

 

$

0.65

 

 

 

 

 

 

 

 

 

Basic weighted average shares outstanding

44,613,533

 

 

46,850,944

 

 

44,506,933

 

 

47,235,859

 

Diluted weighted average shares outstanding

47,528,902

 

 

47,437,555

 

 

47,130,979

 

 

48,279,417

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

Cost of revenues

$

117

 

 

$

143

 

 

$

249

 

 

$

277

 

Sales and marketing

371

 

 

416

 

 

732

 

 

814

 

Research, development and engineering

557

 

 

484

 

 

1,077

 

 

915

 

General and administrative

5,206

 

 

5,487

 

 

10,305

 

 

10,837

 

Total

$

6,251

 

 

$

6,530

 

 

$

12,363

 

 

$

12,843

 

J2 GLOBAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED, IN THOUSANDS)

 

 

 

Six Months Ended June 30,

Cash flows from operating activities:

2021

 

 

2020

 

Net income

$

93,640

 

 

 

$

31,697

 

 

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

 

 

 

Depreciation and amortization

130,226

 

 

 

104,068

 

 

Amortization of financing costs and discounts

14,058

 

 

 

14,102

 

 

Non-cash operating lease costs

6,714

 

 

 

11,453

 

 

Share-based compensation

12,363

 

 

 

12,843

 

 

Provision for doubtful accounts

4,329

 

 

 

6,793

 

 

Deferred income taxes, net

(11,853

)

 

 

2,752

 

 

Gain on sale of businesses

(2,802

)

 

 

—

 

 

Lease asset impairments

7,829

 

 

 

—

 

 

Goodwill impairment on business

32,629

 

 

 

—

 

 

Changes in fair value of contingent consideration

562

 

 

 

(232

)

 

Foreign currency remeasurement gain

415

 

 

 

(704

)

 

(Income) loss from equity method investments

(18,519

)

 

 

10,090

 

 

Loss on equity and debt investments

16,677

 

 

 

20,826

 

 

Decrease (increase) in:

 

 

 

Accounts receivable

65,312

 

 

 

63,675

 

 

Prepaid expenses and other current assets

(7,720

)

 

 

(4,185

)

 

Other assets

(701

)

 

 

(300

)

 

Increase (decrease) in:

 

 

 

Accounts payable and accrued expenses

(23,438

)

 

 

(34,682

)

 

Income taxes payable

(15,123

)

 

 

7,376

 

 

Deferred revenue

2,499

 

 

 

(2,698

)

 

Operating lease liabilities

(13,529

)

 

 

(8,780

)

 

Liability for uncertain tax positions

(3,567

)

 

 

5,114

 

 

Other long-term liabilities

21

 

 

 

2,419

 

 

Net cash provided by operating activities

290,022

 

 

 

241,627

 

 

Cash flows from investing activities:

 

 

 

Proceeds on sale of available-for-sale investments

663

 

 

 

—

 

 

Purchases of equity method investment

(11,053

)

 

 

(26,523

)

 

Purchases of equity investments

(999

)

 

 

(843

)

 

Purchases of property and equipment

(57,766

)

 

 

(50,537

)

 

Acquisition of businesses, net of cash received

(89,489

)

 

 

(19,349

)

 

Proceeds from sale of assets

6,033

 

 

 

407

 

 

Purchases of intangible assets

—

 

 

 

(23

)

 

Net cash used in investing activities

(152,611

)

 

 

(96,868

)

 

Cash flows from financing activities:

 

 

 

Payment of debt

(3,092

)

 

 

—

 

 

Proceeds from line of credit

2,811

 

 

 

—

 

 

Repurchase of common stock

(22,934

)

 

 

(88,469

)

 

Issuance of common stock under employee stock purchase plan

4,232

 

 

 

3,303

 

 

Exercise of stock options

1,331

 

 

 

952

 

 

Dividends paid

(672

)

 

 

—

 

 

Deferred payments for acquisitions

(12,934

)

 

 

(16,296

)

 

Other

(332

)

 

 

(1,032

)

 

Net cash used in financing activities

(31,590

)

 

 

(101,542

)

 

Effect of exchange rate changes on cash and cash equivalents

(616

)

 

 

(2,012

)

 

Net change in cash and cash equivalents

105,205

 

 

 

41,205

 

 

Cash and cash equivalents at beginning of period

242,652

 

 

 

575,615

 

 

Cash and cash equivalents at end of period

$

347,857

 

 

 

$

616,820

 

 

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

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

 

Three Months Ended June 30,

 

2021

Per Diluted Share *

2020

Per Diluted Share *

Net income

$

15,717

 

$

0.33

 

$

38,101

 

$

0.80

 

Plus:

 

 

 

 

Share based compensation (1)

2,576

 

0.06

 

4,990

 

0.11

 

Acquisition related integration costs (2)

988

 

0.02

 

498

 

0.01

 

Interest costs (3)

4,840

 

0.11

 

4,831

 

0.10

 

Amortization (4)

37,156

 

0.83

 

25,225

 

0.54

 

Investments (5)

18,490

 

0.41

 

9,714

 

0.21

 

Tax expense from prior years (6)

—

 

—

 

1,977

 

0.04

 

Sale of assets (7)

(823

)

(0.02

)

(137

)

—

 

Intra-entity transfers (8)

—

 

—

 

(6,432

)

(0.14

)

Lease asset impairments and other charges (9)

4,896

 

0.11

 

1,826

 

0.04

 

Disposal related costs (10)

(619

)

(0.01

)

—

 

—

 

Goodwill impairment on business (11)

24,635

 

0.55

 

—

 

—

 

Convertible debt dilution (12)

—

 

0.02

 

—

 

0.01

 

Adjusted non-GAAP net income

$

107,856

 

$

2.41

 

$

80,593

 

$

1.71

 

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

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

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

 

Six Months Ended June 30,

 

2021

 

Per Diluted Share *

 

2020

 

Per Diluted Share *

Net income

$

93,640

 

 

$

1.98

 

 

$

31,697

 

 

$

0.65

 

Plus:

 

 

 

 

 

Share based compensation (1)

6,624

 

 

0.15

 

 

9,798

 

 

0.21

 

Acquisition related integration costs (2)

2,994

 

 

0.07

 

 

1,593

 

 

0.03

 

Interest costs (3)

9,685

 

 

0.22

 

 

9,146

 

 

0.19

 

Amortization (4)

70,499

 

 

1.58

 

 

57,083

 

 

1.21

 

Investments (5)

(6,954

)

 

(0.16

)

 

34,808

 

 

0.73

 

Tax expense from prior years (6)

—

 

 

—

 

 

2,365

 

 

0.05

 

Sale of assets (7)

(2,697

)

 

(0.06

)

 

(334

)

 

(0.01

)

Intra-entity transfers (8)

—

 

 

—

 

 

131

 

 

—

 

Lease asset impairments and other charges (9)

6,545

 

 

0.15

 

 

1,826

 

 

0.04

 

Disposal related costs (10)

44

 

 

—

 

 

—

 

 

—

 

Goodwill impairment on business (11)

24,635

 

 

0.55

 

 

—

 

 

—

 

Convertible debt dilution (12)

—

 

 

0.02

 

 

—

 

 

0.01

 

Adjusted non-GAAP net income

$

205,015

 

 

$

4.50

 

 

$

148,113

 

 

$

3.11

 

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

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

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

 

Three Months Ended June 30,

 

2021

 

2020

Cost of revenues

$

63,337

 

 

$

56,802

 

Plus:

 

 

 

Share based compensation (1)

(117

)

 

(143

)

Acquisition related integration costs (2)

(36

)

 

(55

)

Amortization (4)

(349

)

 

(448

)

Adjusted non-GAAP cost of revenues

$

62,835

 

 

$

56,156

 

 

 

 

 

Sales and marketing

$

134,103

 

 

$

92,805

 

Plus:

 

 

 

Share based compensation (1)

(371

)

 

(416

)

Acquisition related integration costs (2)

23

 

 

(167

)

Adjusted non-GAAP sales and marketing

$

133,755

 

 

$

92,222

 

 

 

 

 

Research, development and engineering

$

19,644

 

 

$

13,606

 

Plus:

 

 

 

Share based compensation (1)

(557

)

 

(484

)

Acquisition related integration costs (2)

(206

)

 

26

 

Adjusted non-GAAP research, development and engineering

$

18,881

 

 

$

13,148

 

 

 

 

 

General and administrative

$

117,676

 

 

$

94,731

 

Plus:

 

 

 

Share based compensation (1)

(5,206

)

 

(5,487

)

Acquisition related integration costs (2)

(1,075

)

 

(605

)

Amortization (4)

(47,893

)

 

(35,439

)

Lease asset impairments and other charges (9)

(6,472

)

 

(2,406

)

Disposal related costs (10)

992

 

 

—

 

Adjusted non-GAAP general and administrative

$

58,022

 

 

$

50,794

 

 

 

 

 

Interest expense, net

$

(21,403

)

 

$

(22,196

)

Plus:

 

 

 

Interest costs (3)

6,079

 

 

6,018

 

Adjusted non-GAAP interest expense, net

$

(15,324

)

 

$

(16,178

)

 

 

 

 

Gain on sale of businesses

$

823

 

 

$

—

 

Plus:

 

 

 

Sale of assets (7)

(823

)

 

—

 

Adjusted non-GAAP gain on sale of businesses

$

—

 

 

$

—

 

 

 

 

 

Goodwill impairment on business

(32,629

)

 

—

 

Plus:

 

 

 

Goodwill impairment on business (11)

32,629

 

 

—

 

Adjusted non-GAAP goodwill impairment on business

$

—

 

 

$

—

 

 

 

 

 

Loss on investments, net

$

(16,677

)

 

$

(3

)

Plus:

 

 

 

Investments (5)

16,677

 

 

—

 

Adjusted non-GAAP loss on investments, net

$

—

 

 

$

(3

)

 

 

 

 

Other income (expense), net

$

(777

)

 

$

9,059

 

Plus:

 

 

 

Sale of assets (7)

—

 

 

(181

)

Intra-entity transfers (8)

—

 

 

(8,267

)

Adjusted non-GAAP other income (expense), net

$

(777

)

 

$

611

 

 

 

 

 

Income tax provision

$

2,152

 

 

$

15,978

 

Plus:

 

 

 

Share based compensation (1)

3,675

 

 

1,540

 

Acquisition related integration costs (2)

306

 

 

303

 

Interest costs (3)

1,239

 

 

1,187

 

Amortization (4)

11,086

 

 

10,662

 

Investments (5)

3,939

 

 

(3,893

)

Tax benefit from prior years (6)

—

 

 

(1,977

)

Sale of assets (7)

—

 

 

(44

)

Intra-entity transfers (8)

—

 

 

(1,835

)

Lease asset impairments and other charges (9)

1,576

 

 

580

 

Disposal related costs (10)

(373

)

 

—

 

Goodwill impairment on business (11)

7,994

 

 

—

 

Adjusted non-GAAP income tax provision

$

31,594

 

 

$

22,501

 

 

 

 

 

Income (loss) from equity method investment, net

$

(5,752

)

 

$

(5,821

)

Plus:

 

 

 

Investments (5)

5,752

 

 

5,821

 

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

$

—

 

 

$

—

 

 

 

 

 

Total adjustments

$

(92,139

)

 

$

(42,492

)

 

 

 

 

GAAP earnings per diluted share

$

0.33

 

 

$

0.80

 

Adjustments *

$

2.08

 

 

$

0.91

 

Adjusted non-GAAP earnings per diluted share

$

2.41

 

 

$

1.71

 

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

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

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

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

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

 

Six Months Ended June 30,

 

2021

 

 

2020

 

Cost of revenues

$

121,160

 

 

 

$

115,933

 

 

Plus:

 

 

 

Share based compensation (1)

(249

)

 

 

(277

)

 

Acquisition related integration costs (2)

(76

)

 

 

(110

)

 

Amortization (4)

(945

)

 

 

(898

)

 

Adjusted non-GAAP cost of revenues

$

119,890

 

 

 

$

114,648

 

 

 

 

 

 

Sales and marketing

$

255,288

 

 

 

$

192,243

 

 

Plus:

 

 

 

Share based compensation (1)

(732

)

 

 

(814

)

 

Acquisition related integration costs (2)

(814

)

 

 

(681

)

 

Adjusted non-GAAP sales and marketing

$

253,742

 

 

 

$

190,748

 

 

 

 

 

 

Research, development and engineering

$

40,995

 

 

 

$

29,012

 

 

Plus:

 

 

 

Share based compensation (1)

(1,077

)

 

 

(915

)

 

Acquisition related integration costs (2)

(530

)

 

 

26

 

 

Adjusted non-GAAP research, development and engineering

$

39,388

 

 

 

$

28,123

 

 

 

 

 

 

General and administrative

$

237,021

 

 

 

$

197,902

 

 

Plus:

 

 

 

Share based compensation (1)

(10,305

)

 

 

(10,837

)

 

Acquisition related integration costs (2)

(2,785

)

 

 

(1,334

)

 

Amortization (4)

(96,309

)

 

 

(74,152

)

 

Lease asset impairments and other charges (9)

(8,651

)

 

 

(2,406

)

 

Disposal related costs (10)

(127

)

 

 

—

 

 

Adjusted non-GAAP general and administrative

$

118,844

 

 

 

$

109,173

 

 

 

 

 

 

Interest expense, net

$

(42,970

)

 

 

$

(43,167

)

 

Plus:

 

 

 

Interest costs (3)

12,495

 

 

 

11,952

 

 

Adjusted non-GAAP interest expense, net

$

(30,475

)

 

 

$

(31,215

)

 

 

 

 

 

Gain on sale of businesses

$

2,802

 

 

 

$

—

 

 

Plus:

 

 

 

Sale of assets (7)

(2,469

)

 

 

—

 

 

Adjusted non-GAAP gain on sale of businesses

$

333

 

 

 

$

—

 

 

Goodwill impairment on business

(32,629

)

 

 

—

 

 

Plus:

 

 

 

Goodwill impairment on business (11)

32,629

 

 

 

—

 

 

Adjusted non-GAAP goodwill impairment on business

$

—

 

 

 

$

—

 

 

 

 

 

 

Loss on investments, net

$

(16,677

)

 

 

$

(20,835

)

 

Plus:

 

 

 

Investments (5)

16,677

 

 

 

20,825

 

 

Adjusted non-GAAP loss on investments, net

$

—

 

 

 

$

(10

)

 

 

 

 

 

Other income (expense), net

$

(293

)

 

 

$

2,183

 

 

Plus:

 

 

 

Acquisition related integration costs (2)

 

 

—

 

 

Sale of assets (7)

(132

)

 

 

(438

)

 

Intra-entity transfers (8)

—

 

 

 

(1,565

)

 

Adjusted non-GAAP other income (expense), net

$

(425

)

 

 

$

180

 

 

 

 

 

 

Income tax provision

$

7,876

 

 

 

$

24,681

 

 

Plus:

 

 

 

Share based compensation (1)

5,739

 

 

 

3,045

 

 

Acquisition related integration costs (2)

1,211

 

 

 

506

 

 

Interest costs (3)

2,810

 

 

 

2,806

 

 

Amortization (4)

26,755

 

 

 

17,967

 

 

Investments (5)

5,112

 

 

 

(3,893

)

 

Tax (benefit) expense from prior years (6)

—

 

 

 

(2,365

)

 

Sale of assets (7)

96

 

 

 

(104

)

 

Intra-entity transfers (8)

—

 

 

 

(1,696

)

 

Lease asset impairments and other charges (9)

2,106

 

 

 

580

 

 

Disposal related costs (10)

83

 

 

 

—

 

 

Goodwill impairment on business (11)

7,994

 

 

 

—

 

 

Adjusted non-GAAP income tax provision

$

59,782

 

 

 

$

41,527

 

 

 

 

 

 

Income (loss) from equity method investment, net

$

18,519

 

 

 

$

(10,090

)

 

Plus:

 

 

 

Investments (5)

(18,519

)

 

 

10,090

 

 

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

$

—

 

 

 

$

—

 

 

 

 

 

 

Total adjustments

$

(111,375

)

 

 

$

(116,416

)

 

 

 

 

 

GAAP earnings per diluted share

$

1.98

 

 

 

$

0.65

 

 

Adjustments *

$

2.52

 

 

 

$

2.46

 

 

Adjusted non-GAAP earnings per diluted share

$

4.50

 

 

 

$

3.11

 

 

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

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

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

Non-GAAP Financial Measures

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Pro-Forma Financial Results

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

 

Q2 2021

Q2 2020

% Change

 

 

 

 

Total Revenues

$429.0 million

$331.0 million

29.6%

Pro-Forma Revenue Adjustments

$(11.3) million

$(18.2) million

(37.9)%

Pro-Forma Total Revenue: (1)

$417.7 million

$312.8 million

33.5%

 

 

 

 

Adjusted Non-GAAP Earnings per Diluted Share (1)

$2.41

$1.71

40.9%

Pro-Forma Earnings per Diluted Share Adjustments

$(0.09)

$(0.11)

(18.2)%

Adjusted Pro Forma Earnings per Diluted Share (1)

$2.32

$1.60

45.0%

 

 

 

 

GAAP Net Income

$15.7 million

$38.1 million

(58.7)%

Pro-Forma Net Income Adjustments

$21.2 million

$(2.4) million

(983.3)%

Adjusted Pro-Forma Net Income

$36.9 million

$35.7 million

3.4%

 

 

 

 

Adjusted EBITDA (1)

$172.0 million

$132.9 million

29.5%

Pro-Forma EBITDA Adjustments

$(4.8) million

$(7.2) million

(33.3)%

Adjusted Pro-Forma EBITDA (1)

$167.2 million

$125.7 million

33.0%

 

 

 

 

Adjusted EBITDA Margin (1)

40.1%

40.1%

—%

Pro-Forma EBITDA Margin Adjustments

(0.1)%

0.1%

(0.2)%

Adjusted Pro-Forma EBITDA Margin (1)

40.0%

40.2%

(0.2)%

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

 

 

 

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

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

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Net income

$

15,717

 

 

 

$

38,101

 

 

 

$

93,640

 

 

 

$

31,697

 

 

Plus:

 

 

 

 

 

 

 

Interest expense, net

21,403

 

 

 

22,196

 

 

 

42,970

 

 

 

43,167

 

 

Gain on sale of businesses

(823

)

 

 

—

 

 

 

(2,801

)

 

 

—

 

 

Loss on investments, net

16,677

 

 

 

3

 

 

 

16,677

 

 

 

20,835

 

 

Other income (expense), net

777

 

 

 

(9,059

)

 

 

292

 

 

 

(2,183

)

 

Income tax expense

2,152

 

 

 

15,978

 

 

 

7,876

 

 

 

24,681

 

 

Income (loss) from equity method investment, net

5,752

 

 

 

5,821

 

 

 

(18,519

)

 

 

10,090

 

 

Depreciation and amortization

64,734

 

 

 

50,088

 

 

 

130,226

 

 

 

104,068

 

 

Reconciliation of GAAP to Adjusted non-GAAP financial measures:

 

 

 

 

 

 

 

Share-based compensation

6,251

 

 

 

6,530

 

 

 

12,363

 

 

 

12,843

 

 

Acquisition-related integration costs

1,294

 

 

 

801

 

 

 

4,206

 

 

 

2,099

 

 

Lease asset impairments and other charges

6,472

 

 

 

2,406

 

 

 

8,651

 

 

 

2,406

 

 

Disposal related costs

(992

)

 

 

—

 

 

 

127

 

 

 

—

 

 

Goodwill impairment on business

32,629

 

 

 

—

 

 

 

32,629

 

 

 

—

 

 

Adjusted EBITDA

$

172,043

 

 

 

$

132,865

 

 

 

$

328,337

 

 

 

$

249,703

 

 

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

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

J2 GLOBAL, INC. AND SUBSIDIARIES

NON-GAAP FINANCIAL MEASURES

(UNAUDITED, IN THOUSANDS)

 

 

Q1

 

Q2

 

Q3

 

Q4

 

YTD

2021

 

 

 

 

 

 

 

 

 

Net cash provided by operating activities

$

178,724

 

 

$

111,298

 

 

$

—

 

 

$

—

 

 

$

290,022

 

Less: Purchases of property and equipment

(26,269

)

 

(31,497

)

 

—

 

 

—

 

 

(57,766

)

Add: Contingent consideration*

—

 

 

685

 

 

—

 

 

—

 

 

685

 

Free cash flows

$

152,455

 

 

$

80,486

 

 

$

—

 

 

$

—

 

 

$

232,941

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Q1

 

Q2

 

Q3

 

Q4

 

YTD

2020

 

 

 

 

 

 

 

 

 

Net cash provided by operating activities

$

102,036

 

 

$

139,591

 

 

$

114,382

 

 

$

124,070

 

 

$

480,079

 

Less: Purchases of property and equipment

(26,885

)

 

(23,652

)

 

(20,729

)

 

(21,286

)

 

(92,552

)

Add: Contingent consideration*

20,054

 

 

—

 

 

49

 

 

99

 

 

20,202

 

Free cash flows

$

95,205

 

 

$

115,939

 

 

$

93,702

 

 

$

102,883

 

 

$

407,729

 

 

 

 

 

 

 

 

 

 

 

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

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

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

J2 GLOBAL, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP FINANCIAL MEASURES

THREE MONTHS ENDED JUNE 30, 2021

(UNAUDITED, IN THOUSANDS)

 

 

Cloud

 

Digital

 

 

 

 

 

Services

 

Media

 

Corporate

 

Total

Revenues

 

 

 

 

 

 

 

GAAP revenues

$

175,283

 

 

$

253,761

 

 

$

—

 

 

 

$

429,044

 

 

 

 

 

 

 

 

 

 

Gross profit

 

 

 

 

 

 

 

GAAP gross profit

$

137,094

 

 

$

228,622

 

 

$

(9

)

 

 

$

365,707

 

 

Non-GAAP adjustments:

 

 

 

 

 

 

 

Share-based compensation

115

 

 

2

 

 

—

 

 

 

117

 

 

Acquisition related integration costs

32

 

 

4

 

 

—

 

 

 

36

 

 

Amortization

349

 

 

—

 

 

—

 

 

 

349

 

 

Adjusted non-GAAP gross profit

$

137,590

 

 

$

228,628

 

 

$

(9

)

 

 

$

366,209

 

 

 

 

 

 

 

 

 

 

Operating profit

 

 

 

 

 

 

 

GAAP operating profit

$

63,034

 

 

$

44,106

 

 

$

(12,856

)

 

 

$

94,284

 

 

Non-GAAP adjustments:

 

 

 

 

 

 

 

Share-based compensation

1,429

 

 

1,784

 

 

3,038

 

 

 

6,251

 

 

Acquisition related integration costs

1,169

 

 

125

 

 

—

 

 

 

1,294

 

 

Amortization

10,713

 

 

37,483

 

 

45

 

 

 

48,241

 

 

Lease asset impairments and other charges

277

 

 

6,195

 

 

—

 

 

 

6,472

 

 

Disposal related costs

—

 

 

—

 

 

(992

)

 

 

(992

)

 

Adjusted non-GAAP operating profit

$

76,622

 

 

$

89,693

 

 

$

(10,765

)

 

 

$

155,550

 

 

 

 

 

 

 

 

 

 

Depreciation

5,001

 

 

11,492

 

 

—

 

 

 

16,493

 

 

Adjusted EBITDA

$

81,623

 

 

$

101,185

 

 

$

(10,765

)

 

 

$

172,043

 

 

 

 

 

 

 

 

 

 

NOTE 1: Table above excludes certain intercompany allocations

J2 GLOBAL, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP FINANCIAL MEASURES

THREE MONTHS ENDED JUNE 30, 2020

(UNAUDITED, IN THOUSANDS)

 

 

Cloud

 

Digital

 

 

 

 

 

Services

 

Media

 

Corporate

 

Total

Revenues

 

 

 

 

 

 

 

GAAP revenues

$

167,058

 

 

$

163,926

 

 

$

—

 

 

 

$

330,984

 

 

 

 

 

 

 

 

 

Gross profit

 

 

 

 

 

 

 

GAAP gross profit

$

127,631

 

 

$

146,588

 

 

$

(37

)

 

 

$

274,182

 

Non-GAAP adjustments:

 

 

 

 

 

 

 

Share-based compensation

140

 

 

3

 

 

—

 

 

 

143

 

Acquisition related integration costs

55

 

 

—

 

 

—

 

 

 

55

 

Amortization

448

 

 

—

 

 

—

 

 

 

448

 

Adjusted non-GAAP gross profit

$

128,274

 

 

$

146,591

 

 

$

(37

)

 

 

$

274,828

 

 

 

 

 

 

 

 

 

Operating profit

 

 

 

 

 

 

 

GAAP operating profit

$

64,857

 

 

$

19,840

 

 

$

(11,657

)

 

 

$

73,040

 

Non-GAAP adjustments:

 

 

 

 

 

 

 

Share-based compensation

1,628

 

 

1,544

 

 

3,358

 

 

 

6,530

 

Acquisition related integration costs

37

 

 

764

 

 

—

 

 

 

801

 

Amortization

13,088

 

 

22,268

 

 

531

 

 

 

35,887

 

Lease asset impairments and other charges

—

 

 

2,406

 

 

—

 

 

 

2,406

 

Adjusted non-GAAP operating profit

$

79,610

 

 

$

46,822

 

 

$

(7,768

)

 

 

$

118,664

 

 

 

 

 

 

 

 

 

Depreciation

3,904

 

 

10,297

 

 

—

 

 

 

14,201

 

Adjusted EBITDA

$

83,514

 

 

$

57,119

 

 

$

(7,768

)

 

 

$

132,865

 

 

 

 

 

 

 

 

 

NOTE 1: Table above excludes certain intercompany allocations

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

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20210805006157/en/

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