J2 Global Earnings 2020-09-30

Balance Sheet	Income Statement	Cash Flow
Assets, Equity	Rev, G Profit, Net Income	Ops, Inv, Fin

jcom-20200930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

ACT OF 1934

For the quarterly period ended September 30, 2020

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

ACT OF 1934

For the transition period from __________ to __________

Commission File Number: 0-25965

J2 GLOBAL, INC.

(Exact name of registrant as specified in its charter)


Delaware			47-1053457
(State or other jurisdiction			(I.R.S. Employer
of incorporation or organization)			Identification No.)

700 S. Flower Street, 15th Floor

Los Angeles, California 90017

(Address of principal executive offices)

(323) 860-9200

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	JCOM	Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-Accelerated filer

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ý

As of November 4, 2020, the registrant had 45,592,054 shares of common stock outstanding.

J2 GLOBAL, INC. AND SUBSIDIARIES

FOR THE QUARTER ENDED SEPTEMBER 30, 2020

INDEX


			PAGE

PART I.	FINANCIAL INFORMATION

	Item 1.	Financial Statements
		Condensed Consolidated Balance Sheets (unaudited)	3
		Condensed Consolidated Statements of Operations (unaudited)	4
		Condensed Consolidated Statements of Comprehensive Income (unaudited)	5
		Condensed Consolidated Statements of Cash Flows (unaudited)	6
		Condensed Consolidated Statements of Stockholders’ Equity (unaudited)	8
		Notes to Condensed Consolidated Financial Statements (unaudited)	10

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	46

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	59

	Item 4.	Controls and Procedures	60


PART II.	OTHER INFORMATION

	Item 1.	Legal Proceedings	61

	Item 1A.	Risk Factors	61

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	61

	Item 3.	Defaults Upon Senior Securities	63

	Item 4.	Mine Safety Disclosures	63

	Item 5.	Other Information	63

	Item 6.	Exhibits	63

		Signature	64

-2-

PART I. FINANCIAL INFORMATION

Item 1.Financial Statements

J2 GLOBAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, in thousands except share and per share data)


	September 30, 2020		December 31, 2019
ASSETS
Cash and cash equivalents	$	567,930	$	575,615


Accounts receivable, net of allowances of $13,202 and $12,701, respectively	192,800		261,928
Prepaid expenses and other current assets	46,594		49,347


Total current assets	807,324		886,890
Long-term investments	96,575		100,079
Property and equipment, net	147,268		127,817
Operating lease right-of-use assets	97,439		125,822
Trade names, net	126,859		138,029

Customer relationships, net	190,689		238,502
Goodwill	1,661,546		1,633,033
Other purchased intangibles, net	142,018		180,022
Deferred income taxes, noncurrent	57,490		59,976
Other assets	15,785		15,676

TOTAL ASSETS	$	3,342,993	$	3,505,846
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable and accrued expenses	$	177,820	$	238,059
Income taxes payable, current	12,733		17,758
Deferred revenue, current	155,806		162,855


Operating lease liabilities, current	27,673		26,927


Current portion of long-term debt	393,980		385,532
Other current liabilities	901		1,973

Total current liabilities	768,913		833,104
Long-term debt	1,075,071		1,062,929
Deferred revenue, noncurrent	11,232		12,744

Operating lease liabilities, noncurrent	87,563		104,070
Income taxes payable, noncurrent	11,675		11,675
Liability for uncertain tax positions	60,197		52,451
Deferred income taxes, noncurrent	115,356		107,453
Other long-term liabilities	36,649		10,228

TOTAL LIABILITIES	2,166,656		2,194,654
Commitments and contingencies	—		—
Preferred stock, $0.01 par value. Authorized 1,000,000 and none issued	—		—
Preferred stock - Series A, $0.01 par value. Authorized 6,000; total issued and outstanding zero	—		—
Preferred stock - Series B, $0.01 par value. Authorized 20,000; total issued and outstanding zero	—		—
Common stock, $0.01 par value. Authorized 95,000,000; total issued and outstanding 44,767,341 and 47,654,929 shares at September 30, 2020 and December 31, 2019, respectively.	448		476
Additional paid-in capital	451,741		465,652

Retained earnings	782,142		891,526
Accumulated other comprehensive loss	(57,994)		(46,462)
TOTAL STOCKHOLDERS’ EQUITY	1,176,337		1,311,192
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	3,342,993	$	3,505,846

See Notes to Condensed Consolidated Financial Statements

-3-

J2 GLOBAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, in thousands except share and per share data)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Total revenues	$	356,976	$	344,141	$	1,020,353	$	966,466

Cost of revenues (1)	55,822		61,716		171,755		172,995
Gross profit	301,154		282,425		848,598		793,471
Operating expenses:
Sales and marketing (1)	95,074		98,486		287,317		273,812
Research, development and engineering (1)	14,261		13,770		43,273		38,692
General and administrative (1)	114,381		110,810		312,283		314,132
Total operating expenses	223,716		223,066		642,873		626,636
Income from operations	77,438		59,359		205,725		166,835
Interest expense, net	22,712		17,271		65,879		50,625
Gain on sale of businesses	(17,122)		—		(17,122)		—
Loss on investments, net	156		7		20,991		45
Other (income) expense, net	(14,230)		857		(16,413)		2,657
Income before income taxes and net loss (income) in earnings of equity method investment	85,922		41,224		152,390		113,508
Income tax expense	24,330		6,998		49,011		17,851
Net loss (income) in earnings of equity method investment	709		3,481		10,799		(126)
Net income	$	60,883	$	30,745	$	92,580	$	95,783

Net income per common share:
Basic	$	1.31	$	0.63	$	1.96	$	1.98
Diluted	$	1.31	$	0.62	$	1.93	$	1.93
Weighted average shares outstanding:
Basic	46,279,515		47,673,211		46,914,750		47,654,327
Diluted	46,309,072		49,064,272		47,620,308		48,892,523

(1) Includes share-based compensation expense as follows:
Cost of revenues	$	136	$	127	$	413	$	390
Sales and marketing	321		419		1,135		1,212
Research, development and engineering	425		373		1,340		1,092
General and administrative	4,918		5,527		15,755		15,700
Total	$	5,800	$	6,446	$	18,643	$	18,394

See Notes to Condensed Consolidated Financial Statements

-4-

J2 GLOBAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited, in thousands)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019

Net income	$	60,883	$	30,745	$	92,580	$	95,783
Other comprehensive loss, net of tax:
Foreign currency translation adjustment	(3,202)		(8,166)		(12,085)		(8,852)
Change in fair value on available-for-sale investments, net of tax expense of $141 and $314 for the three and nine months ended September 30, 2020, respectively, and zero and $184 for the three and nine months ended September 30, 2019, respectively.	8		—		553		558
Other comprehensive loss, net of tax	(3,194)		(8,166)		(11,532)		(8,294)
Comprehensive income	$	57,689	$	22,579	$	81,048	$	87,489

See Notes to Condensed Consolidated Financial Statements

-5-

J2 GLOBAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)


	Nine Months Ended September 30,
Cash flows from operating activities:	2020		2019
Net income	$	92,580	$	95,783
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	163,680		170,409

Amortization of financing costs and discounts	21,393		9,072
Non-cash operating lease costs	15,686		14,474
Share-based compensation	18,643		18,394
Provision for doubtful accounts	9,508		9,217
Deferred income taxes, net	7,815		2,850


Gain on sale of businesses	(17,122)		—
Lease asset impairments and other charges	9,786		—

Changes in fair value of contingent consideration	(243)		8,044
Foreign currency remeasurement gain	(15,919)		—
Loss (income) on equity method investments	10,799		(166)
Loss on equity and debt investments	20,826		—
Decrease (increase) in:
Accounts receivable	57,560		29,953
Prepaid expenses and other current assets	(3,279)		(10,094)
Other assets	543		(1,528)
Increase (decrease) in:
Accounts payable and accrued expenses	(26,430)		623
Income taxes payable	(496)		(15,179)
Deferred revenue	(10,494)		777
Operating lease liabilities	(12,857)		(13,612)
Liability for uncertain tax positions	7,746		(9,144)
Other long-term liabilities	6,284		(566)
Net cash provided by operating activities	356,009		309,307
Cash flows from investing activities:

Distribution from equity method investment	—		10,288
Purchases of equity method investment	(29,979)		(22,338)
Purchases of equity investments	(843)		—


Purchases of property and equipment	(71,266)		(49,483)
Acquisition of businesses, net of cash received	(27,156)		(411,349)
Proceeds from sale of businesses	24,353		—
Proceeds from sale of assets	507		—
Purchases of intangible assets	(2,902)		(46)
Net cash used in investing activities	(107,286)		(472,928)
Cash flows from financing activities:


Payment of note payable	(400)		(5,100)

Proceeds from line of credit	—		185,000
Repayment of line of credit	—		(57,000)
Repurchase of common stock	(238,905)		(20,562)
Issuance of common stock under employee stock purchase plan	3,303		1,995
Exercise of stock options	952		5,274
Dividends paid	—		(43,966)
Deferred payments for acquisitions	(20,427)		(17,734)
Other	(1,377)		(1,055)
Net cash (used in) provided by financing activities	(256,854)		46,852
Effect of exchange rate changes on cash and cash equivalents	446		(520)
Net change in cash and cash equivalents	(7,685)		(117,289)
Cash and cash equivalents at beginning of period	575,615		209,474
Cash and cash equivalents at end of period	$	567,930	$	92,185

See Notes to Condensed Consolidated Financial Statements

-6-

J2 GLOBAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Three and Nine Months Ended September 30, 2019 and 2020

(unaudited, in thousands, except share amounts)


													Accumulated
	Common stock			Additional paid-in	Treasury stock			Retained	other comprehensive						Total Stockholders’
	Shares	Amount				capital		Shares	Amount		earnings		loss			Equity
Balance, July 1, 2019	47,765,869	$	478			$	365,687	—	$	—	$	752,040	$	(46,107)		$	1,072,098

Net income	—	—				—		—	—		30,745		—			30,745
Other comprehensive income, net of tax expense of zero	—	—				—		—	—		—		(8,166)			(8,166)



Vested restricted stock	26,989	—				—		—	—		—		—			—
Repurchase and retirement of common stock	(206,923)	(2)				(2,160)		—	—		(14,593)		—			(16,755)


Share based compensation	—	—				6,446		—	—		—		—			6,446
Balance, September 30, 2019	47,585,935	$	476			$	369,973	—	$	—	$	768,192	$	(54,273)		$	1,084,368


													Accumulated
	Common stock			Additional paid-in	Treasury stock			Retained	other comprehensive						Total Stockholders’
	Shares	Amount				capital		Shares	Amount		earnings		loss			Equity
Balance, July 1, 2020	46,892,691	$	469			$	467,267	—	$	—	$	850,232	$	(54,800)		$	1,263,168

Net income	—	—				—		—	—		60,883		—			60,883
Other comprehensive income, net of tax expense of $141	—	—				—		—	—		—		(3,194)			(3,194)




Vested restricted stock	19,893	—				—		—	—		—		—			—
Repurchase and retirement of common stock	(2,145,243)	(21)				(21,442)		—	—		(128,973)		—			(150,436)


Share based compensation	—	—				5,800		—	—		—		—			5,800
Other, net	—	—				116		—	—		—		—			116
Balance, September 30, 2020	44,767,341	$	448			$	451,741	—	$	—	$	782,142	$	(57,994)		$	1,176,337

-7-


													Accumulated
	Common stock			Additional paid-in	Treasury stock			Retained	other comprehensive						Total Stockholders’
	Shares	Amount				capital		Shares	Amount		earnings		loss			Equity
Balance, January 1, 2019	48,082,800	$	481			$	354,210	(600,000)	$	(42,543)	$	769,575	$	(45,979)		$	1,035,744

Net income	—	—				—		—	—		95,783		—			95,783
Other comprehensive income, net of tax expense of $184	—	—				—		—	—		—		(8,294)			(8,294)
Dividends ($0.9000 per share)	—	—				—		—	—		(43,966)		—			(43,966)
Exercise of stock options	156,038	2				5,272		—	—		—		—			5,274
Issuance of shares under employee stock purchase plan	32,154	—				1,995		—	—		—		—			1,995
Vested restricted stock	167,746	1				(1)		—	—		—		—			—
Repurchase and retirement of common stock	(852,803)	(8)				(9,832)		600,000	42,543		(53,265)		—			(20,562)


Share based compensation	—	—				18,329		—	—		65		—			18,394
Balance, September 30, 2019	47,585,935	$	476			$	369,973	—	$	—	$	768,192	$	(54,273)		$	1,084,368


													Accumulated
	Common stock			Additional paid-in	Treasury stock			Retained	other comprehensive						Total Stockholders’
	Shares	Amount				capital		Shares	Amount		earnings		loss			Equity
Balance, January 1, 2020	47,654,929	$	476			$	465,652	—	$	—	$	891,526	$	(46,462)		$	1,311,192

Net income	—	—				—		—	—		92,580		—			92,580
Other comprehensive income, net of tax expense of $314	—	—				—		—	—		—		(11,532)			(11,532)

Exercise of stock options	41,530	—				1,583		—	—		(631)		—			952
Issuance of shares under employee stock purchase plan	53,694	—				3,303		—	—		—		—			3,303
Exercise of 3.25% Convertible Note	—	—				(12)		—	—		—		—			(12)
Vested restricted stock	267,894	3				(3)		—	—		—		—			—
Repurchase and retirement of common stock	(3,250,706)	(31)				(37,541)		—	—		(201,333)		—			(238,905)


Share based compensation	—	—				18,643		—	—		—		—			18,643
Other, net	—	—				116		—	—		—		—			116
Balance, September 30, 2020	44,767,341	$	448			$

Price	91.74	EPS	3
Shares	49	P/E	31
MCap	4,501	P/FCF	15
Net Debt	1,308	EBIT	171
TEV	5,809	TEV/EBIT	34
TTM 2019-09-30, in MM, except price, ratios

10-Q	2020-09-30	Filed 2020-11-09
10-Q	2020-06-30	Filed 2020-08-10
10-Q	2020-03-31	Filed 2020-05-11
10-K	2019-12-31	Filed 2020-03-02
10-Q	2019-09-30	Filed 2019-11-08
10-Q	2019-06-30	Filed 2019-08-09
10-Q	2019-03-31	Filed 2019-05-10
10-K	2018-12-31	Filed 2019-03-01
10-Q	2018-09-30	Filed 2018-11-09
10-Q	2018-06-30	Filed 2018-08-09
10-Q	2018-03-31	Filed 2018-05-10
10-K	2017-12-31	Filed 2018-03-01
10-Q	2017-09-30	Filed 2017-11-09
10-Q	2017-06-30	Filed 2017-08-09
10-Q	2017-03-31	Filed 2017-05-10
10-K	2016-12-31	Filed 2017-03-01
10-Q	2016-09-30	Filed 2016-11-09
10-Q	2016-06-30	Filed 2016-08-09
10-Q	2016-03-31	Filed 2016-05-10
10-K	2015-12-31	Filed 2016-02-29
10-Q	2015-09-30	Filed 2015-11-09
10-Q	2015-06-30	Filed 2015-08-10
10-Q	2015-03-31	Filed 2015-05-11
10-K	2014-12-31	Filed 2015-03-02
10-Q	2014-09-30	Filed 2014-11-10
10-Q	2014-06-30	Filed 2014-08-11
10-Q	2014-03-31	Filed 2014-05-09
10-K	2013-12-31	Filed 2014-03-03
10-Q	2013-09-30	Filed 2013-11-12
10-Q	2013-06-30	Filed 2013-08-09
10-Q	2013-03-31	Filed 2013-05-10
10-K	2012-12-31	Filed 2013-03-01
10-Q	2012-09-30	Filed 2012-11-06
10-Q	2012-06-30	Filed 2012-08-07
10-Q	2012-03-31	Filed 2012-05-07
10-K	2011-12-31	Filed 2012-02-28
10-Q	2011-09-30	Filed 2011-11-08
10-Q	2011-06-30	Filed 2011-08-08
10-Q	2011-03-31	Filed 2011-05-09
10-K	2010-12-31	Filed 2011-02-28
10-Q	2010-09-30	Filed 2010-11-05
10-Q	2010-06-30	Filed 2010-08-05
10-Q	2010-03-31	Filed 2010-05-05
10-K	2009-12-31	Filed 2010-02-23

8-K	2020-11-18	Regulation FD
8-K	2020-11-03	Earnings, Regulation FD, Exhibits
8-K	2020-10-12	Officers
8-K	2020-10-02	Other Events, Exhibits
8-K	2020-10-02	Enter Agreement, Leave Agreement, Off-BS Arrangement, Other Events, Exhibits
8-K	2020-10-01	Other Events, Exhibits
8-K	2020-09-24	Regulation FD
8-K	2020-09-08	Regulation FD
8-K	2020-08-10	Earnings, Regulation FD, Other Events, Exhibits
8-K	2020-08-10	Officers
8-K	2020-07-02	Regulation FD, Exhibits
8-K	2020-06-25
8-K	2020-06-02
8-K	2020-05-11
8-K	2020-03-03
8-K	2020-02-24
8-K	2020-02-10
8-K	2020-01-27
8-K	2020-01-06
8-K	2019-12-02
8-K	2019-11-27
8-K	2019-11-19
8-K	2019-11-12
8-K	2019-11-11
8-K	2019-09-05
8-K	2019-09-04
8-K	2019-08-16
8-K	2019-08-12
8-K	2019-08-06
8-K	2019-07-01
8-K	2019-06-04
8-K	2019-05-21
8-K	2019-05-03
8-K	2019-03-12
8-K	2019-02-26
8-K	2019-02-12
8-K	2019-01-11
8-K	2019-01-07
8-K	2018-12-04
8-K	2018-11-13
8-K	2018-11-05
8-K	2018-09-05
8-K	2018-08-09
8-K	2018-06-06
8-K	2018-05-10
8-K	2018-05-03
8-K	2018-02-27
8-K	2018-02-06
8-K	2018-02-02
8-K	2018-01-18

EX-31.1	jcom20200930ex-311.htm
EX-31.2	jcom20200930ex-312.htm
EX-32.1	jcom20200930ex-321.htm
EX-32.2	jcom20200930ex-322.htm

JCOM 10Q Quarterly Report

J2 Global Earnings 2020-09-30