J2 Global Earnings 2020-06-30

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

jcom-20200630

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 June 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 August 6, 2020, the registrant had 47,606,450 shares of common stock outstanding.

J2 GLOBAL, INC. AND SUBSIDIARIES

FOR THE QUARTER ENDED JUNE 30, 2020

INDEX

PAGE

PART I.

FINANCIAL INFORMATION

Item 1.

Financial Statements

Condensed Consolidated Balance Sheets (unaudited)

Condensed Consolidated Statements of Operations (unaudited)

Condensed Consolidated Statements of Comprehensive Income (unaudited)

Condensed Consolidated Statements of Cash Flows (unaudited)

Condensed Consolidated Statements of Stockholders’ Equity (unaudited)

Notes to Condensed Consolidated Financial Statements (unaudited)

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Item 4.

Controls and Procedures

Item 1.

Item 1A.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Item 3.

Defaults Upon Senior Securities

Item 4.

Mine Safety Disclosures

Item 5.

Other Information

Item 6.

Exhibits

Signature

-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)


	June 30, 2020		December 31, 2019
ASSETS
Cash and cash equivalents	$	616,820	$	575,615


Accounts receivable, net of allowances of $11,834 and $12,701, respectively	188,383		261,928
Prepaid expenses and other current assets	45,767		49,347

Current assets held for sale	2,175		—
Total current assets	853,145		886,890
Long-term investments	94,042		100,079
Property and equipment, net	144,494		127,817
Operating lease right-of-use assets	110,031		125,822
Trade names, net	130,540		138,029

Customer relationships, net	206,478		238,502
Goodwill	1,637,287		1,633,033
Other purchased intangibles, net	153,417		180,022
Deferred income taxes, noncurrent	56,947		59,976
Other assets	16,199		15,676
Noncurrent assets held for sale	16,865		—
TOTAL ASSETS	$	3,419,445	$	3,505,846
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable and accrued expenses	$	166,289	$	238,059
Income taxes payable, current	24,402		17,758
Deferred revenue, current	159,907		162,855


Operating lease liabilities, current	26,602		26,927


Current portion of long-term debt	391,092		385,532
Other current liabilities	1,501		1,973
Current liabilities held for sale	2,388		—
Total current liabilities	772,181		833,104
Long-term debt	1,071,364		1,062,929
Deferred revenue, noncurrent	11,501		12,744

Operating lease liabilities, noncurrent	91,279		104,070
Income taxes payable, noncurrent	11,675		11,675
Liability for uncertain tax positions	57,565		52,451
Deferred income taxes, noncurrent	111,746		107,453
Other long-term liabilities	28,810		10,228
Noncurrent liabilities held for sale	156		—
TOTAL LIABILITIES	2,156,277		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 46,892,691 and 47,654,929 shares at June 30, 2020 and December 31, 2019, respectively.	469		476
Additional paid-in capital	467,267		465,652

Retained earnings	850,232		891,526
Accumulated other comprehensive loss	(54,800)		(46,462)
TOTAL STOCKHOLDERS’ EQUITY	1,263,168		1,311,192
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	3,419,445	$	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 June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Total revenues	$	330,984	$	322,432	$	663,377	$	622,325

Cost of revenues ⁽¹⁾	56,802		60,266		115,933		111,279
Gross profit	274,182		262,166		547,444		511,046
Operating expenses:
Sales and marketing ⁽¹⁾	92,805		88,446		192,243		175,326
Research, development and engineering ⁽¹⁾	13,606		11,938		29,012		24,922
General and administrative ⁽¹⁾	94,731		105,168		197,902		203,322
Total operating expenses	201,142		205,552		419,157		403,570
Income from operations	73,040		56,614		128,287		107,476
Interest expense, net	22,196		17,335		43,167		33,354
Loss on investments, net	3		24		20,835		38
Other (income) expense, net	(9,059)		(401)		(2,183)		1,800
Income before income taxes and net loss (income) in earnings of equity method investment	59,900		39,656		66,468		72,284
Income tax expense	15,978		11,148		24,681		10,853
Net loss (income) in earnings of equity method investment	5,821		(4,081)		10,090		(3,607)
Net income	$	38,101	$	32,589	$	31,697	$	65,038

Net income per common share:
Basic	$	0.81	$	0.67	$	0.67	$	1.35
Diluted	$	0.80	$	0.66	$	0.65	$	1.32
Weighted average shares outstanding:
Basic	46,850,944		47,727,786		47,235,859		47,644,729
Diluted	47,437,555		49,102,879		48,279,417		48,806,492

⁽¹⁾ Includes share-based compensation expense as follows:
Cost of revenues	$	143	$	131	$	277	$	263
Sales and marketing	416		389		814		793
Research, development and engineering	484		361		915		719
General and administrative	5,487		5,981		10,837		10,173
Total	$	6,530	$	6,862	$	12,843	$	11,948

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 June 30,						Six Months Ended June 30,
	2020		2019		2020		2019

Net income	$	38,101	$	32,589	$	31,697	$	65,038
Other comprehensive loss, net of tax:
Foreign currency translation adjustment	(169)		(1,177)		(8,883)		(686)
Change in fair value on available-for-sale investments, net of tax expense of $173 and $173 for the three and six months ended June 30, 2020, respectively, and $7 and $184 for the three and six months ended June 30, 2019, respectively.	(163)		(2)		545		558
Other comprehensive loss, net of tax	(332)		(1,179)		(8,338)		(128)
Comprehensive income	$	37,769	$	31,410	$	23,359	$	64,910

See Notes to Condensed Consolidated Financial Statements

-5-

J2 GLOBAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)


	Six Months Ended June 30,
Cash flows from operating activities:	2020		2019
Net income	$	31,697	$	65,038
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	104,068		106,212

Amortization of financing costs and discounts	14,102		5,995
Non-cash operating lease costs	11,453		9,038
Share-based compensation	12,843		11,948
Provision for doubtful accounts	6,793		5,686
Deferred income taxes, net	2,752		3,908




Changes in fair value of contingent consideration	(232)		8,475
Foreign currency remeasurement gain	(704)		—
Loss (income) on equity method investments	10,090		(4,765)
Loss on equity and debt investments	20,826		—
Decrease (increase) in:
Accounts receivable	63,675		42,930
Prepaid expenses and other current assets	(4,185)		(3,277)
Other assets	(300)		(1,233)
Increase (decrease) in:
Accounts payable and accrued expenses	(34,682)		(12,452)
Income taxes payable	7,376		(3,810)
Deferred revenue	(2,698)		(3,292)
Operating lease liabilities	(8,780)		(8,833)
Liability for uncertain tax positions	5,114		(10,811)
Other long-term liabilities	2,419		1,454
Net cash provided by operating activities	241,627		212,211
Cash flows from investing activities:


Purchases of equity method investment	(26,523)		(14,668)
Purchases of equity investments	(843)		—


Purchases of property and equipment	(50,537)		(30,791)
Acquisition of businesses, net of cash received	(19,349)		(266,000)
Proceeds from sale of assets	407		—
Purchases of intangible assets	(23)		—
Net cash used in investing activities	(96,868)		(311,459)
Cash flows from financing activities:




Proceeds from line of credit	—		100,000

Repurchase of common stock	(88,469)		(3,807)
Issuance of common stock under employee stock purchase plan	3,303		1,995
Exercise of stock options	952		5,274
Dividends paid	—		(43,965)
Deferred payments for acquisitions	(16,296)		(14,269)
Other	(1,032)		(429)
Net cash (used in) provided by financing activities	(101,542)		44,799
Effect of exchange rate changes on cash and cash equivalents	(2,012)		451
Net change in cash and cash equivalents	41,205		(53,998)
Cash and cash equivalents at beginning of period	575,615		209,474
Cash and cash equivalents at end of period	$	616,820	$	155,476

See Notes to Condensed Consolidated Financial Statements

-6-

J2 GLOBAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Three and Six Months Ended June 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, April 1, 2019	47,661,015	$	477	$	358,932	—	$	—	$	742,173	$	(44,928)			$	1,056,654

Net income	—	—		—		—	—		32,589		—				32,589
Other comprehensive income, net of tax expense of $7	—	—		—		—	—		—		(1,179)				(1,179)
Dividends ($0.4550 per share)	—	—		—		—	—		(22,208)		—				(22,208)
Exercise of stock options	500	—		15		—	—		—		—				15
Issuance of shares under employee stock purchase plan	32,154	—		1,995		—	—		—		—				1,995
Vested restricted stock	101,680	1		(1)		—	—		—		—				—
Repurchase and retirement of common stock	(29,480)	—		(2,086)		—	—		(544)		—				(2,630)


Share based compensation	—	—		6,832		—	—		30		—				6,862
Balance, June 30, 2019	47,765,869	$	478	$	365,687	—	$	—	$	752,040	$	(46,107)			$	1,072,098


											Accumulated
	Common stock					Additional paid-in	Treasury stock						Retained	other comprehensive			Total Stockholders’
	Shares	Amount		capital		Shares	Amount		earnings		loss				Equity
Balance, April 1, 2020	47,113,423	$	471	$	462,430	—	$	—	$	832,648	$	(54,468)			$	1,241,081

Net income	—	—		—		—	—		38,101		—				38,101
Other comprehensive income, net of tax expense of $173	—	—		—		—	—		—		(332)				(332)


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	70,505	1		(1)		—	—		—		—				—
Repurchase and retirement of common stock	(344,931)	(3)		(4,983)		—	—		(20,517)		—				(25,503)


Share based compensation	—	—		6,530		—	—		—		—				6,530

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	2020-06-30	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	2020-09-08	Regulation FD
8-K	2020-08-10	Officers
8-K	2020-08-10	Earnings, Regulation FD, Other Events, Exhibits
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-10.1	formofdividendwaiverlett.htm
EX-31.1	jcom20200630ex-311.htm
EX-31.2	jcom20200630ex-312.htm
EX-32.1	jcom20200630ex-321.htm
EX-32.2	jcom20200630ex-322.htm

JCOM 10Q Quarterly Report

J2 Global Earnings 2020-06-30