THIRD QUARTER 2021 RESULTS November 3, 2021 ©2021 Ziff Davis. All rights reserved. www.ziffdavis.com Safe Harbor for Forward-looking Statements 2 Certain statements in this presentation are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, particularly those regarding our 2021 Financial Guidance. Such forward-looking statements are subject to numerous assumptions, risks and uncertainties that could cause actual results to differ materially from those de ...

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, 2021 OR ☐ 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) (State or other jurisdiction (I.R.S. Emplo ...

J2 Global, Inc. (JCOM) Q2 2021 Earnings Conference Call August 6, 2021 8:30 AM ET Company Participants Vivek Shah - CEO Scott Turicchi - President and CFO Conference Call Participants Shyam Patil - SIG James Breen - William Blair Will Power - Robert W. Baird Saket Kalia - Barclays Capital James Fish - Piper Sandler Jon Tanwanteng - CJS Securities Operator Good day, ladies and gentlemen, and welcome to J2 Global’s Second Quarter 2021 Earnings Call. My name is Paul, and I will be the operator assisting you to ...

F I R S T Q U A R T E R 2021 R E S U L T S M A Y 1 1 , 2021 Safe Harbor for Forward-Looking Statements Certain statements in this presentation are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, particularly those regarding our 2021 Financial Guidance. Such forward-looking statements are subject to numerous assumptions, risks and uncertainties that could cause actual results to differ materially from those described in those statements. Readers should ...

Financial Data and Key Metrics Changes - Total revenues grew over 23% with nearly 40% growth in the Digital Media segment and almost 6% growth in the Cloud Services segment [7][14] - Adjusted EBITDA margin improved to 39.3%, a 410-basis point increase year-over-year, with adjusted EBITDA growing nearly 38% [14][32] - Non-GAAP adjusted EPS was $2.18, a growth of 55.8% from Q1 2020 [32] Business Line Data and Key Metrics Changes - Digital Media revenue grew 39.5% to $226.8 million, with adjusted EBITDA up more than 94% to $84.4 million [35] - Cloud Services revenue grew 1% on a reported GAAP basis and 5.6% on a pro forma basis to $158.8 million, with adjusted EBITDA growth rates of 2.2% and 4.9% respectively [35][60] Market Data and Key Metrics Changes - Ookla and Ekahau, part of the Digital Media segment, grew over 30% year-over-year, with Ookla achieving 1.9 billion speed tests, up nearly 60% from last year [7][10] - The Everyday Health Group saw revenues up over 15% as consumer interest in health continues to grow [9] Company Strategy and Development Direction - The company is working on separating into two distinct entities: a healthcare IT business and a vertically focused Internet platform [5][16] - Investments are being directed towards cybersecurity and Martech businesses to drive future organic growth [13][62] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the sustainability of digital media growth, citing favorable advertising trends and strong execution in the RetailMeNot integration [44][50] - The M&A pipeline remains strong, with no slowdown expected due to the spin-off process [49][50] Other Important Information - The company generated $152.5 million of free cash flow, a record for J2, representing a 60.1% increase from Q1 2020 [33] - The company is anticipating a clean execution of the spin-off process, with significant progress already made [19][21] Q&A Session Summary Question: What is driving the outperformance in digital media and the sustainability of it? - Management noted mid double-digit organic growth and strong performance across various verticals, with RetailMeNot integration exceeding expectations [42] Question: Can you discuss the M&A environment and guidance for digital media versus cloud? - Management confirmed a strong M&A pipeline and provided guidance indicating high 30s growth for digital media and mid-single digits for cloud in Q2 [48][52] Question: What are the key drivers of growth in cloud services? - The strength in the cloud business was attributed to large enterprise customers and improved performance in the web channel [56][60] Question: How is the gaming console cycle impacting results? - The gaming segment benefited from the console cycle, with expectations for continued strength throughout the year [65] Question: What is the split of the digital media business between display and performance? - Display business accounted for around 30% of revenues, performance marketing for 47%, and subscription for 22% [74] Question: What are the growth expectations for the consensus business? - Consensus is expected to see mid-single digit organic growth, with additional investments anticipated post-separation [94]

[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) Presents J2 Global's unaudited condensed consolidated financial statements and detailed notes for the quarter ended March 31, 2021 [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents J2 Global's unaudited condensed consolidated financial statements for the quarter ended March 31, 2021, including balance sheets, statements of operations, comprehensive income, cash flows, and stockholders' equity, along with detailed notes explaining accounting policies, recent pronouncements, and specific financial line items [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section provides a snapshot of J2 Global's financial position, detailing assets, liabilities, and stockholders' equity as of March 31, 2021, compared to December 31, 2020 **Condensed Consolidated Balance Sheets (Unaudited, in thousands):** | Metric | March 31, 2021 | December 31, 2020 | Change (vs. Dec 31, 2020) | | :--------------------------------- | :------------- | :---------------- | :------------------------ | | Cash and cash equivalents | $371,971 | $242,652 | +$129,319 | | Total current assets | $675,503 | $622,843 | +$52,660 | | Goodwill | $1,777,745 | $1,867,430 | -$89,685 | | Total assets | $3,703,657 | $3,665,331 | +$38,326 | | Total current liabilities | $867,534 | $882,557 | -$15,023 | | Total liabilities | $2,428,746 | $2,454,313 | -$25,567 | | Total stockholders' equity | $1,274,911 | $1,211,018 | +$63,893 | [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This section outlines J2 Global's financial performance, presenting revenues, gross profit, operating income, and net income for the three months ended March 31, 2021 and 2020 **Condensed Consolidated Statements of Operations (Unaudited, in thousands except share and per share data):** | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | Change (YoY) | | :--------------------------------- | :-------------------------------- | :-------------------------------- | :------------------------ | | Total revenues | $398,185 | $332,393 | +$65,792 (+19.8%) | | Gross profit | $340,363 | $273,262 | +$67,101 (+24.6%) | | Income from operations | $78,480 | $55,247 | +$23,233 (+42.0%) | | Net income (loss) | $77,922 | $(6,404) | +$84,326 | | Basic EPS | $1.75 | $(0.13) | +$1.88 | | Diluted EPS | $1.67 | $(0.13) | +$1.80 | [Condensed Consolidated Statements of Comprehensive Income (Loss)](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) This section details J2 Global's comprehensive income, including net income and other comprehensive income components like foreign currency translation adjustments for the three months ended March 31, 2021 and 2020 **Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited, in thousands):** | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | Change (YoY) | | :--------------------------------- | :-------------------------------- | :-------------------------------- | :------------------------ | | Net income (loss) | $77,922 | $(6,404) | +$84,326 | | Foreign currency translation adjustment | $(8,424) | $(8,714) | +$290 | | Comprehensive income (loss) | $69,498 | $(14,410) | +$83,908 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section summarizes J2 Global's cash inflows and outflows from operating, investing, and financing activities for the three months ended March 31, 2021 and 2020 **Condensed Consolidated Statements of Cash Flows (Unaudited, in thousands):** | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | Change (YoY) | | :--------------------------------- | :-------------------------------- | :-------------------------------- | :------------------------ | | Net cash provided by operating activities | $178,724 | $102,036 | +$76,688 | | Net cash used in investing activities | $(28,956) | $(69,062) | +$40,106 | | Net cash used in financing activities | $(20,139) | $(78,356) | +$58,217 | | Net change in cash and cash equivalents | $129,319 | $(49,061) | +$178,380 | | Cash and cash equivalents at end of period | $371,971 | $526,554 | -$154,583 | [Condensed Consolidated Statements of Stockholders' Equity](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) This section presents changes in J2 Global's stockholders' equity, including common stock, additional paid-in capital, retained earnings, and accumulated other comprehensive loss for the period ended March 31, 2021 **Condensed Consolidated Statements of Stockholders' Equity (Unaudited, in thousands):** | Metric | Balance, January 1, 2021 | Net Income | Repurchase and retirement of common stock | Balance, March 31, 2021 | | :--------------------------------- | :----------------------- | :--------- | :---------------------------------------- | :---------------------- | | Common stock (Amount) | $443 | — | — | $445 | | Additional paid-in capital | $456,274 | — | $(7,221) | $455,625 | | Retained earnings | $809,107 | $77,922 | $(4,958) | $882,071 | | Accumulated other comprehensive loss | $(54,806) | — | — | $(63,230) | | Total Stockholders' Equity | $1,211,018 | $77,922 | $(12,179) | $1,274,911 | [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Provides detailed explanations of J2 Global's accounting policies, recent pronouncements, and specific financial line items [1. Basis of Presentation](index=10&type=section&id=1.%20Basis%20of%20Presentation) This section describes J2 Global's business segments and highlights the significant management estimates involved in preparing the financial statements - J2 Global operates two main businesses: **Digital Media** (technology, shopping, gaming, healthcare content, tools, and services) and **Cloud Services** (cloud fax, cybersecurity, privacy, and marketing technology subscriptions)[22](index=22&type=chunk) - The preparation of financial statements involves significant management estimates, including revenue recognition, valuation and impairment of investments, business combinations, long-lived asset impairment, contingent consideration, income taxes, and allowances for doubtful accounts[26](index=26&type=chunk) [2. Recent Accounting Pronouncements](index=15&type=section&id=2.%20Recent%20Accounting%20Pronouncements) This section details the adoption of new accounting standards and the ongoing evaluation of their potential impact on J2 Global's financial statements - Adopted **ASU 2019-12 (Income Taxes)** and **ASU 2020-01 (Equity Securities)** in Q1 2021, with no material impact on financial statements or disclosures[59](index=59&type=chunk)[60](index=60&type=chunk)[64](index=64&type=chunk) - Currently evaluating the effect of **ASU 2020-04 (Reference Rate Reform)** and **ASU 2020-06 (Convertible Instruments)** on financial statements and disclosures[61](index=61&type=chunk)[63](index=63&type=chunk) [3. Revenues](index=16&type=section&id=3.%20Revenues) This section breaks down J2 Global's revenue streams by source, primarily Digital Media and Cloud Services, and explains revenue recognition policies - Digital Media revenues are primarily from advertising services, subscriptions (video games, health info), licensing assets, and software sales[65](index=65&type=chunk)[67](index=67&type=chunk)[68](index=68&type=chunk)[69](index=69&type=chunk) - Cloud Services revenues are mainly from monthly recurring subscription and usage-based fees for fax, voice, backup, security, CPP, and email marketing[73](index=73&type=chunk) **Revenues by Source (in thousands):** | Revenue Source | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | Change (YoY) | | :--------------------------------- | :-------------------------------- | :-------------------------------- | :------------------------ | | Digital Media - Advertising | $174,124 | $115,265 | +$58,859 (+51.1%) | | Digital Media - Subscription | $50,881 | $45,428 | +$5,453 (+12.0%) | | Total Digital Media revenues | $226,874 | $162,691 | +$64,183 (+39.5%) | | Cloud Services - Subscription | $171,337 | $169,748 | +$1,589 (+0.9%) | | Total Cloud Services revenues | $171,429 | $169,784 | +$1,645 (+1.0%) | | Total Revenues | $398,185 | $332,393 | +$65,792 (+19.8%) | - The majority of revenue (**$392.2 million in Q1 2021**) is recognized "over time," reflecting the subscription and service-based nature of the businesses[75](index=75&type=chunk) [4. Business Acquisitions](index=21&type=section&id=4.%20Business%20Acquisitions) This section outlines J2 Global's recent immaterial media acquisition and the finalization of purchase accounting for prior period acquisitions - Completed an immaterial media acquisition in Q1 2021 for **$0.2 million cash**, contributing an immaterial amount to revenues[90](index=90&type=chunk)[91](index=91&type=chunk) - Finalized purchase accounting for prior period acquisitions in Digital Media and Cloud Services (Voice, Backup, Security, CPP), resulting in a net increase in goodwill of **$2.5 million** and **$0.3 million**, respectively, totaling **$2.8 million**[93](index=93&type=chunk)[94](index=94&type=chunk) [5. Investments](index=23&type=section&id=5.%20Investments) This section provides a summary of J2 Global's investments, including equity securities and an equity method investment, detailing associated gains and losses **Summary of Investments (in thousands):** | Investment Type | March 31, 2021 | December 31, 2020 | Cumulative Impairment Losses (March 31, 2021) | | :--------------------------------- | :------------- | :---------------- | :-------------------------------------------- | | Equity securities (without readily determinable fair value) | $31,300 | $30,300 | $23,800 | | Corporate debt securities (available-for-sale) | $663 | $663 | — | | Equity method investment (OCV Fund) | $107,403 | $67,195 | — | - Recognized an investment gain of **$(24.3) million (net of tax)** from the OCV Fund in Q1 2021, compared to a loss of **$4.3 million** in Q1 2020, primarily due to gains on underlying investments[110](index=110&type=chunk) - The company's maximum exposure to loss from the OCV Fund is limited to its proportional ownership and capital commitment[112](index=112&type=chunk) [6. Assets Held For Sale](index=26&type=section&id=6.%20Assets%20Held%20For%20Sale) This section reports on the sale of certain Voice assets and the reclassification of the B2B Backup business as assets held for sale - Sold certain Voice assets in the United Kingdom for a **$2.0 million gain** in Q1 2021, recorded in gain on sale of businesses[113](index=113&type=chunk) - Committed to selling the B2B Backup business, reclassifying **$135.7 million in assets** and **$22.3 million in liabilities** as held for sale as of March 31, 2021[115](index=115&type=chunk) [7. Fair Value Measurements](index=28&type=section&id=7.%20Fair%20Value%20Measurements) This section details J2 Global's fair value measurements for financial instruments, including contingent consideration and debt, and their classification levels - Money market funds and long-term debt are classified as **Level 1 fair value measurements**, while certain debt securities are **Level 2**[118](index=118&type=chunk)[119](index=119&type=chunk)[124](index=124&type=chunk) - Contingent consideration liabilities are classified as **Level 3** due to reliance on unobservable inputs like volatility and market risks[120](index=120&type=chunk) **Fair Values of Financial Liabilities (in thousands):** | Metric | March 31, 2021 | December 31, 2020 | Change (YoY) | | :--------------------------------- | :------------- | :---------------- | :----------- | | Fair Value of Contingent Consideration | $9,530 | $9,094 | +$436 | | Fair Value of Debt | $2,091,518 | $1,960,527 | +$130,991 | - The fair value of contingent consideration increased by **$0.5 million** during Q1 2021, reported in general and administrative expenses[125](index=125&type=chunk) [8. Goodwill and Intangible Assets](index=31&type=section&id=8.%20Goodwill%20and%20Intangible%20Assets) This section presents changes in J2 Global's goodwill and intangible assets, including amortization expense and reclassifications **Changes in Carrying Amounts of Goodwill (in thousands):** | Metric | Balance as of January 1, 2021 | Goodwill written off related to sale | Goodwill reclassified to noncurrent assets held for sale | Purchase accounting adjustments | Foreign exchange translation | Balance as of March 31, 2021 | | :--------------------------------- | :---------------------------- | :--------------------------- | :------------------------------------------------------- | :------------------------------ | :--------------------------- | :--------------------------- | | Consolidated Goodwill | $1,867,430 | $(1,339) | $(86,389) | $2,790 | $(4,747) | $1,777,745 | **Intangible Assets Subject to Amortization (Net, in thousands):** | Metric | March 31, 2021 | December 31, 2020 | | :--------------------------------- | :------------- | :---------------- | | Net Intangible Assets Subject to Amortization | $657,827 | $709,780 | - Amortization expense for intangible assets increased to **$48.5 million** in Q1 2021 from **$38.8 million** in Q1 2020[129](index=129&type=chunk) [9. Debt](index=33&type=section&id=9.%20Debt) This section outlines J2 Global's various debt instruments, including senior notes and convertible notes, and their respective fair values and classifications **Company's Debt (in thousands):** | Debt Type | March 31, 2021 | December 31, 2020 | | :--------------------------------- | :------------- | :---------------- | | 4.625% Senior Notes | $750,000 | $750,000 | | 3.25% Convertible Notes | $402,413 | $402,414 | | 1.75% Convertible Notes | $550,000 | $550,000 | | Total debt (net of discount/costs) | $1,586,331 | $1,579,021 | - The **3.25% Convertible Notes** were classified as current liabilities due to a holder repurchase option on June 15, 2021[144](index=144&type=chunk) - The fair value of the **4.625% Senior Notes** was approximately **$760.3 million** (March 31, 2021), **3.25% Convertible Notes** was approximately **$682.0 million**, and **1.75% Convertible Notes** was approximately **$648.3 million**[136](index=136&type=chunk)[148](index=148&type=chunk)[159](index=159&type=chunk) [10. Leases](index=37&type=section&id=10.%20Leases) This section details J2 Global's lease expenses, right-of-use assets, and lease liabilities, along with weighted average lease terms and discount rates **Components of Lease Expense (in thousands):** | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--------------------------------- | :-------------------------------- | :-------------------------------- | | Total lease cost | $8,196 | $7,549 | **Supplemental Balance Sheet Information Related to Leases (in thousands):** | Metric | March 31, 2021 | December 31, 2020 | | :--------------------------------- | :------------- | :---------------- | | Total operating lease right-of-use assets | $100,492 | $105,845 | | Total operating lease liabilities | $126,009 | $131,388 | - The weighted average remaining lease term for operating leases is **5.0 years**, with a weighted average discount rate of **3.94%**[165](index=165&type=chunk) [11. Commitments and Contingencies](index=39&type=section&id=11.%20Commitments%20and%20Contingencies) This section addresses J2 Global's legal proceedings, potential loss contingencies, and reserves for non-income related tax assessments - The company is involved in several legal proceedings, including a **TCPA class action lawsuit** with a tentative settlement, and multiple derivative claims alleging breach of fiduciary duty and securities law violations[170](index=170&type=chunk)[171](index=171&type=chunk)[172](index=172&type=chunk)[173](index=173&type=chunk)[174](index=174&type=chunk)[175](index=175&type=chunk) - Accrued approximately **$4.5 million** in connection with potential loss contingencies relating to certain legal proceedings[177](index=177&type=chunk) - Has a **$23.7 million reserve** established for potential non-income related tax assessments in various states, municipalities, and foreign jurisdictions[180](index=180&type=chunk) [12. Income Taxes](index=40&type=section&id=12.%20Income%20Taxes) This section presents J2 Global's income tax expense and effective tax rate, explaining key drivers and liabilities for uncertain tax positions **Income Tax Metrics (in thousands, except %):** | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--------------------------------- | :-------------------------------- | :-------------------------------- | | Income tax expense | $5,725 | $8,703 | | Effective tax rate | 9.6% | 132.5% | - The decrease in effective tax rate was primarily due to a tax benefit recognized related to the release of a valuation allowance on deferred tax assets related to the impairment of certain investments and a reduction in foreign income subject to U.S. GILTI[181](index=181&type=chunk)[265](index=265&type=chunk) - As of March 31, 2021, the company had **$58.4 million in liabilities** for uncertain income tax positions and is subject to ongoing audits by the U.S. IRS, California FTB, and New York State Department of Taxation and Finance[182](index=182&type=chunk)[184](index=184&type=chunk)[185](index=185&type=chunk)[186](index=186&type=chunk) [13. Stockholders' Equity](index=41&type=section&id=13.%20Stockholders'%20Equity) This section details J2 Global's share repurchase activities and the suspension of dividend payments due to investment opportunities - Repurchased **108,287 shares** from plan participants in Q1 2021 to satisfy tax withholding obligations[193](index=193&type=chunk) - The **2012 stock repurchase program was completed** as of December 31, 2020, with all available shares repurchased at an aggregate cost of **$204.6 million**[190](index=190&type=chunk) - Under the 2020 program, **2,490,599 shares** have been repurchased cumulatively at an aggregate cost of **$177.8 million** as of March 31, 2021, with no shares repurchased under this program in Q1 2021[191](index=191&type=chunk) - The Board of Directors suspended dividend payments for the foreseeable future due to significant investment opportunities[194](index=194&type=chunk) [14. Stock Options and Employee Stock Purchase Plan](index=42&type=section&id=14.%20Stock%20Options%20and%20Employee%20Stock%20Purchase%20Plan) This section outlines J2 Global's share-based compensation expenses for stock options, restricted stock, and the ESPP, along with unrecognized compensation **Share-Based Compensation Expense (in thousands):** | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--------------------------------- | :-------------------------------- | :-------------------------------- | | Stock option compensation expense | $200 | $200 | | Restricted stock/units compensation expense | $5,300 | $5,600 | | ESPP compensation expense | $600 | $500 | | Total Share-Based Compensation | $6,113 | $6,313 | - As of March 31, 2021, unrecognized stock compensation for non-vested stock options was approximately **$5.6 million** (expected to be recognized over **4.8 years**), and for restricted stock/units was approximately **$48.0 million** (expected over **3.9-4.7 years**)[199](index=199&type=chunk)[204](index=204&type=chunk) - No shares were purchased under the Employee Stock Purchase Plan in Q1 2021[207](index=207&type=chunk) [15. Earnings Per Share](index=45&type=section&id=15.%20Earnings%20Per%20Share) This section provides J2 Global's basic and diluted earnings per share, including the weighted-average shares outstanding and dilutive effects **Earnings Per Share (in thousands, except share and per share data):** | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--------------------------------- | :-------------------------------- | :-------------------------------- | | Net income (loss) available to common shareholders | $77,834 | $(6,404) | | Basic EPS | $1.75 | $(0.13) | | Diluted EPS | $1.67 | $(0.13) | | Weighted-average outstanding shares (Basic) | 44,399,149 | 47,620,774 | | Weighted-average outstanding shares (Diluted) | 46,731,872 | 47,620,774 | - Dilutive effect for Q1 2021 included **2,224,020 shares** from convertible debt and **108,703 shares** from equity incentive plans[211](index=211&type=chunk) [16. Segment Information](index=45&type=section&id=16.%20Segment%20Information) This section presents J2 Global's financial performance by reportable segment, Digital Media and Cloud Services, and by geographic region - The company's two main businesses are Digital Media and Cloud Services, which are aggregated into three reportable segments: Digital Media; Voice, Backup, Security, and Consumer Privacy and Protection; and Fax and Martech[213](index=213&type=chunk) **Revenue and Operating Income by Reportable Segment (in thousands):** | Segment | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | Revenue Change (YoY) | Operating Income Change (YoY) | | :--------------------------------- | :-------------------------------- | :-------------------------------- | :------------------- | :---------------------------- | | Digital Media Revenue | $226,874 | $162,691 | +39.5% | +519.0% | | Cloud Services Revenue | $171,429 | $169,784 | +1.0% | +13.9% | | Digital Media Operating Income | $30,653 | $4,952 | | | | Cloud Services Operating Income | $63,464 | $55,734 | | | | Total Revenues | $398,185 | $332,393 | +19.8% | | | Total Income from Operations | $78,480 | $55,247 | | +42.0% | **Revenues by Geographic Region (in thousands):** | Geographic Revenue | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--------------------------------- | :-------------------------------- | :-------------------------------- | | United States | $322,968 | $270,309 | | Canada | $19,474 | $16,570 | | Ireland | $15,425 | $13,003 | | All other countries | $40,318 | $32,511 | | Total | $398,185 | $332,393 | [17. Accumulated Other Comprehensive Income](index=48&type=section&id=17.%20Accumulated%20Other%20Comprehensive%20Income) This section details changes in J2 Global's accumulated other comprehensive income, primarily driven by foreign currency translation adjustments **Changes in Accumulated Other Comprehensive Income (Loss) (in thousands):** | Metric | Beginning Balance (Jan 1, 2021) | Other comprehensive loss | Ending Balance (Mar 31, 2021) | | :--------------------------------- | :---------------------- | :----------------------- | :---------------------------- | | Unrealized Gains (Losses) on Investments | $283 | — | $283 | | Foreign Currency Translation | $(55,089) | $(8,424) | $(63,513) | | Total Accumulated Other Comprehensive Loss | $(54,806) | $(8,424) | $(63,230) | [18. Subsequent Events](index=48&type=section&id=18.%20Subsequent%20Events) This section reports on significant events occurring after the reporting period, including a new credit facility, a proposed spin-off, and an acquisition - On April 7, 2021, J2 Global entered into a **$100 million revolving credit facility**, with an option to increase commitments up to **$350 million**, maturing on April 7, 2026[222](index=222&type=chunk) - On April 19, 2021, the company announced plans to separate into two independent publicly traded companies, J2 Global and Consensus (Cloud Fax business), through a spin-off, subject to board approval and tax rulings[223](index=223&type=chunk) - On April 30, 2021, the company acquired certain assets of DailyOM, a California-based self-help e-learning platform[225](index=225&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=50&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on J2 Global's financial condition and results of operations, highlighting key performance drivers, segment-specific results, liquidity, and capital resources [Forward-Looking Information](index=50&type=section&id=Forward-Looking%20Information) This section outlines the inherent risks and uncertainties associated with J2 Global's forward-looking statements, including those related to the proposed spin-off - Forward-looking statements are subject to risks including sustaining growth/profitability, maintaining customer base, generating cash flow, successful acquisitions, international expansion, tax liabilities, third-party vendor relationships, digital media content creation, managing business risks (fraud, system failure, legal), competition, adapting to technological changes, protecting intellectual property, retaining key personnel, and the proposed spin-off[227](index=227&type=chunk)[228](index=228&type=chunk) - Specific risks include the scope and duration of the **COVID-19 pandemic** and its impact on customers and operations, as well as the form, terms, timing, and ability to complete the proposed spin-off transaction or the sale of the B2B Backup business[229](index=229&type=chunk)[235](index=235&type=chunk) [Overview](index=51&type=section&id=Overview) This section provides a high-level summary of J2 Global's business model, segment characteristics, acquisition strategy, and the ongoing evaluation of the COVID-19 pandemic's impact - J2 Global's core businesses are **Digital Media** (advertising, subscriptions, performance marketing, licensing) and **Cloud Services** (customer subscription and usage fees)[230](index=230&type=chunk)[231](index=231&type=chunk) - Digital Media is characterized by advertising revenues, higher sales and marketing expenses, and Q4 seasonal strength, while Cloud Services features higher-margin, stable subscription revenues with minor Q4 weakness[232](index=232&type=chunk) - Acquisitions are a regular strategy to grow customer bases, diversify offerings, enhance technology, acquire personnel, and enter new markets[231](index=231&type=chunk) - The full impact of the **COVID-19 pandemic** remains uncertain and is continuously evaluated[234](index=234&type=chunk) [Digital Media Performance Metrics](index=52&type=section&id=Digital%20Media%20Performance%20Metrics) This section presents key operating metrics for the Digital Media segment, highlighting consumer engagement indicators **Digital Media Key Operating Metrics (in millions):** | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | Change (YoY) | | :--------------------------------- | :-------------------------------- | :-------------------------------- | :----------- | | Visits | 2,291 | 2,145 | +146 (+6.8%) | | Page views | 7,530 | 7,167 | +363 (+5.1%) | - Visits and page views are key indicators of consumer engagement with mobile applications, websites, and other services, which drive advertising and other revenue streams[236](index=236&type=chunk) [Cloud Services Performance Metrics](index=52&type=section&id=Cloud%20Services%20Performance%20Metrics) This section details key operating metrics for the Cloud Services segment, including subscriber revenues, ARPU, and cancel rates **Cloud Services Key Operating Metrics (in thousands, except for percentages):** | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | Change (YoY) | | :--------------------------------- | :-------------------------------- | :-------------------------------- | :----------- | | Fixed subscriber revenues | $144,445 | $141,486 | +$2,959 (+2.1%) | | Variable subscriber revenues | $26,842 | $28,262 | -$1,420 (-5.0%) | | Total subscriber revenues | $171,287 | $169,748 | +$1,539 (+0.9%) | | Total revenues | $171,379 | $169,784 | +$1,595 (+0.9%) | | Average monthly revenue per Cloud Business Customer (ARPU) | $14.40 | $13.95 | +$0.45 (+3.2%) | | Cancel Rate | 2.2% | 2.3% | -0.1 ppt | - ARPU and cancel rate are used to evaluate trends in service types, levels, and usage, and to calculate the lifetime value of customers[239](index=239&type=chunk)[241](index=241&type=chunk) [Critical Accounting Policies and Estimates](index=53&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section confirms that there were no significant changes to J2 Global's critical accounting policies and estimates during the first quarter of 2021 - No significant changes in critical accounting policies and estimates during Q1 2021[242](index=242&type=chunk) [Results of Operations for the Three Months Ended March 31, 2021](index=54&type=section&id=Results%20of%20Operations%20for%20the%20Three%20Months%20Ended%20March%2031,%202021) Analyzes J2 Global's consolidated and segment-specific financial performance for the three months ended March 31, 2021 [Digital Media](index=54&type=section&id=Results%20of%20Operations%20-%20Digital%20Media) Discusses expected revenue growth and margin impacts for the Digital Media segment in fiscal year 2021 - Digital Media revenue is expected to be higher in FY2021 due to the **RetailMeNot acquisition** and organic growth, with a focus on improving ad relevance[243](index=243&type=chunk) - Growth in advertising revenues from owned websites is expected to continue to exceed third-party websites, positively impacting operating margins, but the shift to mobile advertising may put pressure on margins[244](index=244&type=chunk) - Acquisitions are an important component of the Digital Media strategy, but the pace and significance are unpredictable given macroeconomic conditions[245](index=245&type=chunk) [Cloud Services](index=54&type=section&id=Results%20of%20Operations%20-%20Cloud%20Services) Focuses on anticipated revenue growth and strategic initiatives for the Cloud Services segment in fiscal year 2021 - Cloud Services revenue is expected to be higher in FY2021, with a strategic focus on enhancing existing offerings and developing new services to reduce costs, increase sales, and improve productivity for customers[246](index=246&type=chunk) - Acquisitions are a key component of the Cloud Services growth strategy, with an unpredictable pace and significance[247](index=247&type=chunk) [J2 Global Consolidated](index=54&type=section&id=Results%20of%20Operations%20-%20J2%20Global%20Consolidated) Projects higher consolidated revenue for fiscal year 2021, with anticipated decreases in operating profit margins - Consolidated revenue for fiscal year 2021 is anticipated to be higher compared to the prior-year comparable period[248](index=248&type=chunk) - Operating profit as a percentage of revenues is expected to generally decrease in the future primarily due to the increasing proportion of Digital Media business revenue, which has historically operated at a lower operating margin[249](index=249&type=chunk) [Revenues](index=55&type=section&id=Results%20of%20Operations%20-%20Revenues) Details the drivers of J2 Global's 20% consolidated revenue growth for the three months ended March 31, 2021 **Total Revenues (in thousands, except percentages):** | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | Percentage Change (YoY) | | :--------------------------------- | :-------------------------------- | :-------------------------------- | :---------------------- | | Revenues | $398,185 | $332,393 | 20% | - Revenue growth was primarily due to a combination of acquisitions and organic growth, partially offset by declines in certain areas of both the Digital Media and Cloud Services businesses[251](index=251&type=chunk) [Cost of Revenues](index=55&type=section&id=Results%20of%20Operations%20-%20Cost%20of%20Revenues) Explains the 2% decrease in cost of revenues, primarily due to lower content and campaign fulfillment costs **Cost of Revenues (in thousands, except percentages):** | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | Percentage Change (YoY) | | :--------------------------------- | :-------------------------------- | :-------------------------------- | :---------------------- | | Cost of revenue | $57,822 | $59,131 | (2)% | | As a percent of revenue | 15% | 18% | -3 ppt | - The decrease in cost of revenues was primarily due to lower content fees, campaign fulfillment costs, and other editorial and production costs, partially offset by an increase in depreciation and amortization[252](index=252&type=chunk) [Operating Expenses](index=55&type=section&id=Results%20of%20Operations%20-%20Operating%20Expenses) Analyzes changes in J2 Global's sales and marketing, research and development, and general and administrative expenses [Sales and Marketing](index=55&type=section&id=Results%20of%20Operations%20-%20Sales%20and%20Marketing) Attributes the 22% increase in sales and marketing expenses to higher creative services, sales, and advertising costs **Sales and Marketing Expenses (in thousands, except percentages):** | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | Percentage Change (YoY) | | :--------------------------------- | :-------------------------------- | :-------------------------------- | :---------------------- | | Sales and Marketing | $121,186 | $99,438 | 22% | | As a percent of revenue | 30% | 30% | 0 ppt | - The increase was primarily due to increased creative services, sales, advertising operations, and advertising costs, partially offset by lower editorial costs associated with acquired businesses[254](index=254&type=chunk) [Research, Development and Engineering](index=56&type=section&id=Results%20of%20Operations%20-%20Research,%20Development%20and%20Engineering) Explains the 39% increase in research, development, and engineering expenses due to acquired businesses **Research, Development and Engineering Expenses (in thousands, except percentages):** | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | Percentage Change (YoY) | | :--------------------------------- | :-------------------------------- | :-------------------------------- | :---------------------- | | Research, Development and Engineering | $21,351 | $15,406 | 39% | | As a percent of revenue | 5% | 5% | 0 ppt | - The increase was primarily due to an increase in costs associated with businesses acquired in and subsequent to the first quarter 2020[255](index=255&type=chunk) [General and Administrative](index=56&type=section&id=Results%20of%20Operations%20-%20General%20and%20Administrative) Details the 16% increase in general and administrative expenses, driven by amortization, salaries, and professional fees **General and Administrative Expenses (in thousands, except percentages):** | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | Percentage Change (YoY) | | :--------------------------------- | :-------------------------------- | :-------------------------------- | :---------------------- | | General and Administrative | $119,346 | $103,171 | 16% | | As a percent of revenue | 30% | 31% | -1 ppt | - The increase was primarily due to increased amortization of intangible assets, salary and related costs, and professional fees[256](index=256&type=chunk) [Share-Based Compensation](index=56&type=section&id=Results%20of%20Operations%20-%20Share-Based%20Compensation) Presents J2 Global's share-based compensation expenses categorized by functional area for the quarter **Share-Based Compensation Expense by Category (in thousands):** | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--------------------------------- | :-------------------------------- | :-------------------------------- | | 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 | [Non-Operating Income and Expenses](index=56&type=section&id=Results%20of%20Operations%20-%20Non-Operating%20Income%20and%20Expenses) Reviews J2 Global's non-operating financial items, including interest expense, gains on business sales, and investment losses [Interest expense, net](index=56&type=section&id=Results%20of%20Operations%20-%20Interest%20expense,%20net) Explains the increase in net interest expense, primarily due to lower interest income earned **Interest Expense, Net (in thousands):** | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--------------------------------- | :-------------------------------- | :-------------------------------- | | Interest expense, net | $21,704 | $20,971 | - The increase was primarily due to lower interest income earned between the comparable periods[258](index=258&type=chunk) [Gain on sale of businesses](index=57&type=section&id=Results%20of%20Operations%20-%20Gain%20on%20sale%20of%20businesses) Reports a $2.0 million gain from the sale of certain Voice assets in Q1 2021 **Gain on Sale of Businesses (in thousands):** | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--------------------------------- | :-------------------------------- | :-------------------------------- | | Gain on sale of businesses | $1,979 | $0 | [Loss on investments, net](index=57&type=section&id=Results%20of%20Operations%20-%20Loss%20on%20investments,%20net) Highlights the absence of net investment losses in Q1 2021 compared to the prior year **Loss on Investments, Net (in thousands):** | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--------------------------------- | :-------------------------------- | :-------------------------------- | | Loss on investments, net | $0 | $20,832 | - The decrease was due to the absence of net losses realized on certain investments as the result of changes in the investee's capital structure and overall market volatility recognized in the prior comparable period[260](index=260&type=chunk) [Other (income) expense, net](index=57&type=section&id=Results%20of%20Operations%20-%20Other%20(income)%20expense,%20net) Attributes the shift to other income to decreased losses on currency exchange **Other (Income) Expense, Net (in thousands):** | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--------------------------------- | :-------------------------------- | :-------------------------------- | | Other (income) expense, net | $(622) | $6,876 | - The shift to income was primarily due to decreased losses on currency exchange[261](index=261&type=chunk) [Income Taxes](index=57&type=section&id=Results%20of%20Operations%20-%20Income%20Taxes) Details J2 Global's income tax provision and effective tax rate, explaining the drivers of the decrease **Income Tax Provision and Effective Rate (in thousands, except %):** | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--------------------------------- | :-------------------------------- | :-------------------------------- | | Provision for income taxes | $5,725 | $8,703 | | Effective tax rate | 9.6% | 132.5% | - The decrease in the effective income tax rate was primarily attributable to a decrease in tax expense due to the release of a valuation allowance on deferred tax assets related to the impairment of certain investments and a reduction in foreign income subject to U.S. GILTI[263](index=263&type=chunk)[265](index=265&type=chunk) [Equity Method Investment](index=57&type=section&id=Results%20of%20Operations%20-%20Equity%20Method%20Investment) Explains the gain from equity method investment in Q1 2021, contrasting it with the prior year's loss **(Income) Loss from Equity Method Investment, Net (in thousands):** | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--------------------------------- | :-------------------------------- | :-------------------------------- | | (Income) loss from equity method investment, net | $(24,270) | $4,269 | - The first quarter 2021 gain was primarily a result of a gain on the underlying investments[265](index=265&type=chunk) - The first quarter 2020 loss was primarily a result of the impairment of two of its investments as a result of **COVID-19** in the amount of **$7.0 million**, net of tax benefit[265](index=265&type=chunk) [Digital Media and Cloud Services Results](index=58&type=section&id=Digital%20Media%20and%20Cloud%20Services%20Results) Presents the detailed financial performance of J2 Global's Digital Media and Cloud Services segments [Digital Media](index=58&type=section&id=Segment%20Results%20-%20Digital%20Media) Details the significant increases in net sales, gross profit, and operating income for the Digital Media segment **Digital Media Segment Results (in thousands):** | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | Change (YoY) | | :--------------------------------- | :-------------------------------- | :-------------------------------- | :------------------------ | | Net sales | $226,874 | $162,691 | +$64,183 (+39.5%) | | Gross profit | $206,081 | $141,920 | +$64,161 (+45.2%) | | Operating expenses | $175,428 | $136,968 | +$38,460 (+28.1%) | | Operating income | $30,653 | $4,952 | +$25,701 (+519.0%) | - The increase in net sales, gross profit, and operating income was primarily due to business acquisitions[268](index=268&type=chunk)[269](index=269&type=chunk) [Cloud Services](index=59&type=section&id=Segment%20Results%20-%20Cloud%20Services) Outlines the modest increases in net sales and operating income for the Cloud Services segment **Cloud Services Segment Results (in thousands):** | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | Change (YoY) | | :--------------------------------- | :-------------------------------- | :-------------------------------- | :------------------------ | | Net sales | $171,429 | $169,784 | +$1,645 (+1.0%) | | Cost of revenues | $36,964 | $38,360 | -$1,396 (-3.6%) | | Gross profit | $134,465 | $131,424 | +$3,041 (+2.3%) | | Operating expenses | $71,001 | $75,690 | -$4,689 (-6.2%) | | Operating income | $63,464 | $55,734 | +$7,730 (+13.9%) | - Net sales increase primarily due to business acquisitions, partially offset by businesses sold[272](index=272&type=chunk) - Operating expenses decreased due to lower depreciation and amortization costs, partially offset by increased marketing and advertising[274](index=274&type=chunk) [Liquidity and Capital Resources](index=59&type=section&id=Liquidity%20and%20Capital%20Resources) Discusses J2 Global's cash position, investments, cash flows, stock repurchase programs, and contractual obligations [Cash and Cash Equivalents and Investments](index=59&type=section&id=Cash%20and%20Cash%20Equivalents%20and%20Investments) Summarizes J2 Global's cash, cash equivalents, and investment balances, including a new revolving credit facility **Cash, Cash Equivalents and Investments (in thousands):** | Metric | March 31, 2021 | December 31, 2020 | Change | | :--------------------------------- | :------------- | :---------------- | :------- | | Cash, cash equivalents and investments | $511,300 | $340,800 | +$170,500 | | Cash and cash equivalents | $372,000 | $242,700 | +$129,300 | | Short-term investments | $700 | $700 | $0 | | Long-term investments | $138,700 | $97,500 | +$41,200 | - Entered into a **$100 million revolving credit facility** in April 2021, with potential to increase to **$350 million**, for working capital, acquisitions, and capital expenditures[278](index=278&type=chunk) - Has a **$200 million commitment** to the OCV Fund, with **$8.1 million** paid in Q1 2021[279](index=279&type=chunk)[280](index=280&type=chunk) - Anticipates existing cash and operating cash flows will be sufficient to meet anticipated needs for working capital, capital expenditures, and stock repurchases for at least the next 12 months[281](index=281&type=chunk) [Cash Flows](index=60&type=section&id=Cash%20Flows) Details J2 Global's cash flows from operating, investing, and financing activities for the three months ended March 31, 2021 **Cash Flow Summary (in thousands):** | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | Change (YoY) | | :--------------------------------- | :-------------------------------- | :-------------------------------- | :------------------------ | | Net cash provided by operating activities | $178,724 | $102,036 | +$76,688 | | Net cash used in investing activities | $(28,956) | $(69,062) | +$40,106 | | Net cash used in financing activities | $(20,139) | $(78,356) | +$58,217 | - Operating cash flow increase attributed to lower decrease in accounts payable and accrued expenses, a decrease in accounts receivables, an increase in deferred revenue, and lower increase in prepaid expenses and other current assets[282](index=282&type=chunk) - Decrease in investing cash used primarily due to fewer business acquisitions[283](index=283&type=chunk) - Decrease in financing cash used primarily due to lower repurchases of common stock and business acquisitions[284](index=284&type=chunk) [Stock Repurchase Program](index=61&type=section&id=Stock%20Repurchase%20Program) Provides an update on J2 Global's stock repurchase programs, including shares repurchased and remaining authorization - The **2012 stock repurchase program was completed** as of December 31, 2020, with all available shares repurchased at an aggregate cost of **$204.6 million**[285](index=285&type=chunk) - Under the 2020 program (authorized for up to **10 million shares** through August 2025), **2,490,599 shares** have been repurchased cumulatively for **$177.8 million** as of March 31, 2021, with no shares repurchased under this program in Q1 2021[286](index=286&type=chunk) **Stock Repurchases During Q1 2021:** | Period | Total Number of Shares Purchased (1) | Average Price Paid Per Share | Maximum Number of Shares That May Yet Be Purchased Under the Plans or Program | | :--------------------------------- | :----------------------------------- | :--------------------------- | :-------------------------------------------------------------------------- | | January 1, 2021 - January 31, 2021 | 10,779 | $97.69 | 7,509,401 | | February 1, 2021 - February 28, 2021 | 11,571 | $108.89 | 7,509,401 | | March 1, 2021 - March 31, 2021 | 85,937 | $114.99 | 7,509,401 | | Total (Q1 2021) | 108,287 | | 7,509,401 | [Contractual Obligations and Commitments](index=61&type=section&id=Contractual%20Obligations%20and%20Commitments) Lists J2 Global's contractual obligations and commitments as of March 31, 2021, excluding uncertain tax positions **Contractual Obligations and Commitments as of March 31, 2021 (in thousands):** | Contractual Obligation | Total | | :--------------------------------- | :---------- | | Long-term debt - principal | $1,703,323 | | Long-term debt - interest | $412,031 | | Operating leases | $141,309 | | Telecom services and co-location facilities | $3,885 | | Holdback payments | $6,031 | | Contingent consideration payments | $5,468 | | Transition tax | $11,675 | | Self-Insurance | $21,857 | | Other | $1,736 | | Total | $2,308,098 | - Excluded from the table are **$58.4 million in uncertain tax positions** and an approximately **$87.2 million commitment** to OCV Management, LLC, due to the uncertainty of the amounts and timing of cash settlement[291](index=291&type=chunk)[292](index=292&type=chunk) [Off-Balance Sheet Arrangements](index=62&type=section&id=Off-Balance%20Sheet%20Arrangements) States that J2 Global is not party to any material off-balance sheet arrangements - J2 Global is not party to any material off-balance sheet arrangements[293](index=293&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=63&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section discusses J2 Global's exposure to market risks, primarily related to interest rate fluctuations on its investment portfolio and variable-rate debt, and foreign currency exchange rate changes from international operations [Interest Rate Risk](index=63&type=section&id=Interest%20Rate%20Risk) Discusses J2 Global's exposure to interest rate fluctuations on its investment portfolio and variable-rate debt - Exposure to market risk for changes in interest rates relates primarily to the investment portfolio (cash equivalents with short maturities) and variable-rate borrowings under the new **$100 million Credit Facility**[296](index=296&type=chunk)[298](index=298&type=chunk) - The company has not entered into interest rate hedging transactions to control or minimize certain of these risks[300](index=300&type=chunk) [Foreign Currency Risk](index=63&type=section&id=Foreign%20Currency%20Risk) Details J2 Global's primary exposure to foreign currency risk from international operations and inter-company debt - Principal exposure to foreign currency risk relates to investment and inter-company debt in foreign subsidiaries that transact business in functional currencies other than the U.S. Dollar, primarily the **Australian Dollar, the Canadian Dollar, the Euro, the Hong Kong Dollar, the Japanese Yen, the New Zealand Dollar, the Norwegian Kroner and the British Pound Sterling**[301](index=301&type=chunk) **Foreign Exchange Losses (in thousands):** | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--------------------------------- | :-------------------------------- | :-------------------------------- | | Foreign exchange losses | $500 | $7,800 | - The company has not historically hedged translation risks because cash flows from international operations were generally reinvested locally, but may do so in the future[304](index=304&type=chunk)[306](index=306&type=chunk) [Item 4. Controls and Procedures](index=64&type=section&id=Item%204.%20Controls%20and%20Procedures) J2 Global's management, including the principal executive and financial officers, evaluated the effectiveness of disclosure controls and procedures, concluding they were effective as of March 31, 2021 - Disclosure controls and procedures were effective as of March 31, 2021[308](index=308&type=chunk) - No material changes in internal control over financial reporting occurred during the first quarter ended March 31, 2021[309](index=309&type=chunk) [PART II. OTHER INFORMATION](index=65&type=section&id=PART%20II.%20OTHER%20INFORMATION) Presents additional disclosures including legal proceedings, risk factors, equity sales, and exhibits [Item 1. Legal Proceedings](index=65&type=section&id=Item%201.%20Legal%20Proceedings) This section refers to Note 11 – Commitments and Contingencies in Part I for detailed information regarding J2 Global's involvement in various legal proceedings - Refer to Note 11 – Commitments and Contingencies of the Notes to Financial Statements (Part I, Item 1) for information regarding certain legal proceedings in which the company is involved[310](index=310&type=chunk) [Item 1A. Risk Factors](index=65&type=section&id=Item%201A.%20Risk%20Factors) This section updates the risk factors from the 2020 Annual Report on Form 10-K, with new material risks primarily related to the proposed spin-off of the Cloud Fax business - New material risks relate to the proposed spin-off of the Cloud Fax business, including potential delays, increased operating expenses, management distraction, and difficulties retaining key customers or employees[312](index=312&type=chunk)[314](index=314&type=chunk) - If the distribution, together with certain related transactions, does not qualify as a transaction that is generally tax-free for U.S. federal income tax purposes, J2 Global, Consensus, and J2 Global stockholders could be subject to significant tax liabilities[316](index=316&type=chunk)[317](index=317&type=chunk) - The proposed spin-off may result in disruptions to, and negatively impact relationships with, customers and other business partners[315](index=315&type=chunk) - As independent publicly-traded companies, Consensus and the remaining businesses of J2 Global will be smaller, less diversified, and may be more vulnerable to changing market conditions[313](index=313&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=66&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) J2 Global reported no unregistered sales of equity securities. The company completed its 2012 stock repurchase program by December 31, 2020. Under the 2020 program, 2.49 million shares have been repurchased cumulatively for $177.8 million as of March 31, 2021, with 108,287 shares purchased in Q1 2021 primarily for tax withholding obligations - No unregistered sales of equity securities occurred during the period[320](index=320&type=chunk) - The **2012 stock repurchase program was completed** as of December 31, 2020, with all available shares repurchased at an aggregate cost of **$204.6 million**[323](index=323&type=chunk) - Under the 2020 program (authorizing up to **10 million shares** through August 6, 2025), **2,490,599 shares** were repurchased cumulatively at an aggregate cost of **$177.8 million** as of March 31, 2021[324](index=324&type=chunk) **Issuer Purchases of Equity Securities (Q1 2021):** | Period | Total Number of Shares Purchased (1) | Average Price Paid Per Share | Maximum Number of Shares That May Yet Be Purchased Under the Plans or Program | | :--------------------------------- | :----------------------------------- | :--------------------------- | :-------------------------------------------------------------------------- | | January 1, 2021 - January 31, 2021 | 10,779 | $97.69 | 7,509,401 | | February 1, 2021 - February 28, 2021 | 11,571 | $108.89 | 7,509,401 | | March 1, 2021 - March 31, 2021 | 85,937 | $114.99 | 7,509,401 | | Total (Q1 2021) | 108,287 | | 7,509,401 | [Item 3. Defaults Upon Senior Securities](index=68&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) J2 Global reported no defaults upon senior securities during the period - There were no defaults upon senior securities[326](index=326&type=chunk) [Item 4. Mine Safety Disclosures](index=68&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to J2 Global - Not Applicable[327](index=327&type=chunk) [Item 5. Other Information](index=68&type=section&id=Item%205.%20Other%20Information) J2 Global reported no other information for this period - No other information to report[328](index=328&type=chunk) [Item 6. Exhibits](index=68&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including corporate governance documents, stock plan agreements, various certifications, and XBRL financial data - Exhibits include Amended and Restated Certificate of Incorporation, By-Laws, Form of Restricted Stock Unit Agreement, Form of Performance Stock Unit Agreement, Rule 13a-14(a) and Section 1350 certifications, and XBRL financial data[329](index=329&type=chunk)[336](index=336&type=chunk) [SIGNATURE](index=69&type=section&id=SIGNATURE) The report is officially signed by J2 Global, Inc.'s Chief Executive Officer, Principal Financial Officer, and Chief Accounting Officer on May 10, 2021 - The report was signed by Vivek Shah (Chief Executive Officer), R. Scott Turicchi (President and Chief Financial Officer), and Steve P. Dunn (Chief Accounting Officer) on May 10, 2021[334](index=334&type=chunk)

PART I [Item 1. Business](index=4&type=section&id=Item%201.%20Business) J2 Global provides internet information and services through Digital Media and Cloud Services, focusing on growth via acquisitions and diverse offerings. - J2 Global operates two primary business segments: **Digital Media** and **Cloud Services**[14](index=14&type=chunk) - Digital Media revenues are generated from advertising, sponsorships, subscription/usage fees, performance marketing, and licensing fees[15](index=15&type=chunk) - Cloud Services revenues are primarily from customer subscription and usage fees[15](index=15&type=chunk) - The company actively pursues acquisitions to grow its customer base, diversify services, enhance technologies, and enter new markets[15](index=15&type=chunk) - Digital Media business is primarily advertising-driven with higher sales and marketing expenses and seasonal strength in **Q4**[16](index=16&type=chunk) - Cloud Services business is primarily subscription-driven with higher margins, stability, and minor seasonal weakness in **Q4**[16](index=16&type=chunk) - Digital Media web properties attracted approximately **9.1 billion visits** and **31.5 billion page views** in 2020[18](index=18&type=chunk) - Key competitive factors for Digital Media include brand reputation, ability to attract users and advertisers, and monetization expertise[45](index=45&type=chunk) - Cloud Services offerings include cloud fax (**eFax**), cybersecurity (**VIPRE**, **Inspired eLearning**, **IPVanish**), and SMB enablement (**Campaigner**, **eVoice**)[50](index=50&type=chunk)[51](index=51&type=chunk)[54](index=54&type=chunk) - Cloud Services revenues are substantially **fixed subscription revenues**, with a lesser extent from variable usage fees[48](index=48&type=chunk) - Key competitive factors for Cloud Services include financial strength, pricing, service reliability and security, intellectual property, and customer support[58](index=58&type=chunk) - Research, development, and engineering expenditures were **$64.3 million** in 2020, **$54.4 million** in 2019, and **$48.4 million** in 2018[70](index=70&type=chunk) - As of December 31, 2020, J2 Global had approximately **4,700 employees**, split evenly between U.S. and non-U.S. based[71](index=71&type=chunk) - The company has made over **189 acquisitions** since inception, including **nine in 2020**, highlighting its strong acquisition integration capability[72](index=72&type=chunk) - J2 Global's culture is built on core values (leadership, collaboration, efficiency, innovation, purpose) and 'Five Pillars of Purpose' including **Diversity, Equity & Inclusion**[73](index=73&type=chunk)[74](index=74&type=chunk) - In 2020, **38% of new hires were people of color** and **44% were women**, demonstrating efforts in diversity hiring[80](index=80&type=chunk) [Item 1A. Risk Factors](index=13&type=section&id=Item%201A.%20Risk%20Factors) J2 Global faces significant risks from acquisitions, advertising dependency, technological failures, economic downturns, intense competition, and evolving regulations. - Acquisitions are a significant growth driver but pose risks such as integration difficulties, market entry challenges, management distraction, and potential loss of key personnel[95](index=95&type=chunk)[97](index=97&type=chunk) - The Digital Media business's revenue is largely from short-term advertising arrangements, making it vulnerable to reduced advertiser spending or inability to attract advertisers[99](index=99&type=chunk) - System failures, security breaches, or other technological issues could interrupt services, harm reputation, or lead to significant liability[102](index=102&type=chunk)[103](index=103&type=chunk) - The **COVID-19 pandemic** has negatively affected the global economy and could continue to impact J2 Global's business, operations, and financial performance[106](index=106&type=chunk)[107](index=107&type=chunk) - Cloud fax services constitute approximately **22% of consolidated revenues**, making the business dependent on the continued use of fax and the ability to diversify offerings[108](index=108&type=chunk) - The company faces intense competition across its markets, with some competitors having greater resources, superior technologies, or more effective marketing strategies[116](index=116&type=chunk)[119](index=119&type=chunk) - Potential liability for legal claims related to content creation/distribution, patent infringement, and other disputes could incur unforeseen expenses and divert resources[121](index=121&type=chunk)[123](index=123&type=chunk) - Changes in tax rates, new tax legislation, or exposure to additional tax liabilities (e.g., sales and use taxes) may adversely impact financial results[131](index=131&type=chunk)[133](index=133&type=chunk) - International operations expose the company to risks from currency fluctuations, political/social unrest, trade protection measures, and difficulties in managing global operations[130](index=130&type=chunk)[136](index=136&type=chunk) - The level of indebtedness could adversely affect financial flexibility and competitive position, requiring significant cash for debt service and capital requirements[142](index=142&type=chunk)[147](index=147&type=chunk) - The company is subject to evolving data privacy and security regulations worldwide, such as **GDPR** and **CCPA**, which impose significant compliance costs and risks[176](index=176&type=chunk)[178](index=178&type=chunk)[193](index=193&type=chunk) - Developments in the healthcare industry and associated regulations could adversely affect the **Everyday Health Group** brands[199](index=199&type=chunk)[200](index=200&type=chunk) - New technologies that block advertisements or impair interest-based advertising could harm operating results[211](index=211&type=chunk) - Conversions of Convertible Notes will dilute the ownership interest of existing stockholders[217](index=217&type=chunk) [Item 1B. Unresolved Staff Comments](index=39&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) No unresolved staff comments from the SEC. - No unresolved staff comments[223](index=223&type=chunk) [Item 2. Properties](index=39&type=section&id=Item%202.%20Properties) J2 Global leases global headquarters, Digital Media offices, and co-location centers for network equipment, deemed sufficient. - Global headquarters in Los Angeles: approximately **48,000 sq ft**, lease expires **January 31, 2031**[224](index=224&type=chunk) - Digital Media business headquarters in New York City: approximately **39,000 sq ft**, lease extends through **October 2024**[224](index=224&type=chunk) - Digital Media's Everyday Health division occupies **80,000 sq ft**, lease extends through **October 2023**[224](index=224&type=chunk) - Additional smaller leased offices are located across Asia, North America, Europe, and Australia[224](index=224&type=chunk) - All network equipment is housed in leased properties or multiple co-location facilities globally[225](index=225&type=chunk) [Item 3. Legal Proceedings](index=39&type=section&id=Item%203.%20Legal%20Proceedings) Legal proceedings information is detailed in Note 12 of the consolidated financial statements. - Legal proceedings information is incorporated by reference from **Note 12, 'Commitments and Contingencies'**[226](index=226&type=chunk) [Item 4. Mine Safety Disclosures](index=39&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to J2 Global, Inc. - Not applicable[227](index=227&type=chunk) PART II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=40&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) J2 Global's common stock trades on Nasdaq; dividends were suspended, while share repurchase programs remain active, with equity compensation details provided. - Common stock is traded on the **Nasdaq Global Select Market** under the symbol **\"JCOM\"**[228](index=228&type=chunk) - As of February 24, 2021, there were **246 registered stockholders**[229](index=229&type=chunk) - The Board of Directors suspended dividend payments after **June 4, 2019**, to prioritize investment opportunities[231](index=231&type=chunk)[350](index=350&type=chunk) Dividends Declared (Fiscal Year 2019) | Declaration Date | Dividend per Common Share (dollars) | | :--------------- | :------------------------ | | February 6, 2019 | $0.4450 | | May 2, 2019 | $0.4550 | - The **2012 share repurchase program** was completed as of December 31, 2020, with **1,140,819 shares** repurchased in 2020 at an aggregate cost of **$87.5 million**[235](index=235&type=chunk)[362](index=362&type=chunk) - A new **2020 Program** authorized the repurchase of up to **ten million shares** through **August 6, 2025**[236](index=236&type=chunk)[363](index=363&type=chunk) - Under the 2020 Program, **2,490,599 shares** were repurchased in 2020 at an aggregate cost of **$177.8 million**[236](index=236&type=chunk)[363](index=363&type=chunk) - As of December 31, 2020, **7,509,401 shares** remain available for purchase under the 2020 Program[237](index=237&type=chunk)[364](index=364&type=chunk) Equity Compensation Plan Information (as of December 31, 2020) | Plan Category | Number of Securities to Be Issued Upon Exercise of Outstanding Options, Warrants and Rights (a) | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights (b) | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (c) | | :----------------------------------------------- | :------------------------------------------------------------------------------------------ | :------------------------------------------------------------------------------ | :-------------------------------------------------------------------------------------------------------------------------------------------------- | | Equity compensation plans approved by security holders | 475,601 | $69.61 | 3,424,289 | | Equity compensation plans not approved by security holders | — | — | — | | **Total** | **475,601** | **$69.61** | **3,424,289** | [Item 6. Selected Financial Data](index=43&type=section&id=Item%206.%20Selected%20Financial%20Data) This section presents selected consolidated financial data for the past five fiscal years, including income statement and balance sheet highlights. Selected Statement of Income Data (Years Ended December 31, in thousands, except per share amounts) | Indicator | 2020 (in thousands) | 2019 (in thousands) | 2018 (in thousands) | 2017 (in thousands) | 2016 (in thousands) | | :------------------------------------------------ | :------------ | :------------ | :------------ | :------------ | :------------ | | Revenues | $1,489,593 | $1,372,054 | $1,207,295 | $1,117,838 | $874,255 | | Gross profit | $1,257,811 | $1,134,731 | $1,006,221 | $945,525 | $727,155 | | Income from operations | $334,611 | $277,080 | $244,280 | $245,708 | $242,566 | | Net income | $150,668 | $218,806 | $128,687 | $139,425 | $152,439 | | Basic EPS | $3.24 | $4.52 | $2.64 | $2.89 | $3.15 | | Diluted EPS | $3.18 | $4.39 | $2.59 | $2.83 | $3.13 | | Cash dividends declared per common share | $— | $0.9000 | $1.6800 | $1.5200 | $1.3600 | Selected Balance Sheet Data (Years Ended December 31, in thousands) | Indicator | 2020 (in thousands) | 2019 (in thousands) | 2018 (in thousands) | 2017 (in thousands) | 2016 (in thousands) | | :------------------------ | :------------ | :------------ | :------------ | :------------ | :------------ | | Cash and cash equivalents | $242,652 | $575,615 | $209,474 | $350,945 | $123,950 | | Working capital | $(259,714) | $53,786 | $153,009 | $355,325 | $(106,090) | | Total assets | $3,665,331 | $3,505,846 | $2,560,830 | $2,453,093 | $2,062,328 | | Total stockholders' equity | $1,211,018 | $1,311,192 | $1,035,744 | $1,020,305 | $914,536 | [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=44&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section analyzes J2 Global's financial condition, operational results, and liquidity, forecasting higher revenue but lower operating margins due to segment mix. - J2 Global anticipates **higher consolidated revenue** for fiscal year 2021, driven by acquisitions and organic growth[310](index=310&type=chunk) - Operating profit as a percentage of revenues is expected to generally **decrease** due to the increasing proportion of lower-margin Digital Media revenue[311](index=311&type=chunk) Digital Media Performance Metrics (in millions) | Metric | 2020 (in millions) | 2019 (in millions) | 2018 (in millions) | | :--------- | :---- | :---- | :---- | | Visits | 9,091 | 7,542 | 7,706 | | Page views | 31,453| 29,292| 31,727| Cloud Services Performance Metrics (in thousands, except percentages) | Metric | 2020 (in thousands) | 2019 (in thousands) | 2018 (in thousands) | | :-------------------------------------- | :-------- | :-------- | :-------- | | Total subscriber revenues | $678,013 | $660,814 | $597,281 | | Fixed subscriber revenues (% of total) | 84.3% | 83.2% | 81.9% | | Variable subscriber revenues (% of total)| 15.7% | 16.8% | 18.1% | | Average monthly revenue per customer (ARPU) | $13.93 | $14.54 | $15.61 | | Cancel rate | 2.3% | 2.4% | 2.1% | - Revenues increased over the past three years primarily due to acquisitions and organic growth[315](index=315&type=chunk) - Cost of revenues **decreased by 2%** in 2020, primarily due to lower content, campaign fulfillment, and editorial costs, partially offset by increased depreciation and amortization[316](index=316&type=chunk) - Sales and marketing expenses **increased by 9%** in 2020, mainly due to increased personnel costs and advertising associated with recent acquisitions[318](index=318&type=chunk) - Research, development, and engineering costs **increased by 18%** in 2020, primarily due to costs associated with Digital Media business acquisitions[320](index=320&type=chunk) - General and administrative expenses **increased by 5%** in 2020, driven by lease asset impairments, additional depreciation, legal settlements, and professional fees, partially offset by decreased amortization[322](index=322&type=chunk) Share-Based Compensation Expense (in thousands) | Category | 2020 (in thousands) | 2019 (in thousands) | 2018 (in thousands) | | :-------------------------------- | :------ | :------ | :------ | | Cost of revenues | $535 | $525 | $510 | | Sales and marketing | $1,454 | $1,547 | $1,798 | | Research, development and engineering | $1,779 | $1,477 | $1,553 | | General and administrative | $20,238 | $20,373 | $24,232 | | **Total** | **$24,006** | **$23,922** | **$28,093** | - Interest expense, net, significantly increased to **$132.0 million** in 2020 from **$69.5 million** in 2019, primarily due to the issuance of **1.75% Convertible Senior Notes** and refinancing of **6.0% Senior Notes**[324](index=324&type=chunk) - A **$17.1 million gain** on sale of businesses was recognized in 2020 from the sale of certain Voice assets in Australia and New Zealand[325](index=325&type=chunk) - Loss on investments, net, increased to **$21.0 million** in 2020 from **$4.2 million** in 2019, mainly due to net losses from investee recapitalization and market volatility[326](index=326&type=chunk) - Other (income) expense, net, showed a significant income of **$(31.6) million** in 2020, primarily due to currency exchange gains[327](index=327&type=chunk) Effective Tax Rates | Year | Effective Tax Rate (%) | | :--- | :----------------- | | 2020 | 29.7% | | 2019 | (9.7)% | | 2018 | 25.2% | - Net loss in earnings of equity method investment was **$11.3 million** in 2020, primarily due to impairment of two OCV Fund investments as a result of **COVID-19**[336](index=336&type=chunk) - Cash, cash equivalents, and investments decreased to **$340.8 million** at December 31, 2020, from **$675.7 million** at December 31, 2019, due to debt repayment, acquisitions, and stock repurchases[347](index=347&type=chunk) - A net working capital deficit of approximately **$259.7 million** was reported at December 31, 2020, primarily due to cash outflows for business combinations and share repurchases, and the reclassification of **3.25% Convertible Notes** to current liability[348](index=348&type=chunk) - Issued **$750 million** aggregate principal amount of **4.625% Senior Notes due 2030** in October 2020, using proceeds to redeem outstanding **6.0% Senior Notes**[349](index=349&type=chunk)[574](index=574&type=chunk) - Net cash provided by operating activities increased to **$480.1 million** in 2020 from **$412.5 million** in 2019[357](index=357&type=chunk) - Net cash used in investing activities was **$586.2 million** in 2020, primarily for business acquisitions and capital expenditures[358](index=358&type=chunk) - Net cash used in financing activities was **$(234.6) million** in 2020, mainly for debt repayment, stock repurchases, and business acquisitions, partially offset by debt issuance proceeds[359](index=359&type=chunk) Contractual Obligations and Commitments (as of December 31, 2020, in thousands) | Contractual Obligations | 1 Year (in thousands) | 2-3 Years (in thousands) | 4-5 Years (in thousands) | More than 5 Years (in thousands) | Total (in thousands) | | :-------------------------------------- | :-------- | :-------- | :-------- | :---------------- | :---------- | | Long-term debt - principal | $402,414 | $910 | $— | $1,300,000 | $1,703,324 | | Long-term debt - interest | $51,719 | $88,625 | $88,625 | $183,063 | $412,032 | | Operating leases | $34,636 | $58,392 | $28,131 | $38,447 | $159,606 | | Finance leases | $608 | $350 | $— | $— | $958 | | Telecom services and co-location facilities | $2,836 | $1,683 | $— | $— | $4,519 | | Holdback payment | $7,274 | $3,079 | $— | $— | $10,353 | | Transition tax | $— | $— | $11,675 | $— | $11,675 | | Self-Insurance | $21,557 | $479 | $— | $— | $22,036 | | Other | $1,535 | $598 | $— | $— | $2,133 | | **Total** | **$522,579**| **$154,116**| **$128,431**| **$1,521,510** | **$2,326,636**| [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=63&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) J2 Global's market risks primarily involve interest rate fluctuations on investments and foreign currency exposures from international operations, without current hedging. - Primary market risk exposure relates to interest rates on the investment portfolio and foreign currency fluctuations[372](index=372&type=chunk)[375](index=375&type=chunk) - Cash and cash equivalents are primarily in money market funds with maturities of **90 days or less**, limiting significant interest rate risk[373](index=373&type=chunk) - Outstanding long-term debt has **fixed interest rates**, meaning no interest rate risk on debt[373](index=373&type=chunk) - Foreign currency risk stems from operations in Canada, Australia, and the European Union, impacting operating results and comparability[375](index=375&type=chunk)[377](index=377&type=chunk) - Foreign exchange gains amounted to **$28.5 million** in 2020, compared to losses of **$(4.0) million** in 2019 and **$(2.3) million** in 2018[380](index=380&type=chunk) - The company does not currently use derivative financial instruments for hedging, speculative, or trading purposes[381](index=381&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=66&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section provides audited consolidated financial statements for 2018-2020, including auditor's unqualified opinion and detailed notes on accounting and operations. - **BDO USA, LLP** issued an **unqualified opinion** on the consolidated financial statements for the three years ended December 31, 2020[383](index=383&type=chunk) - The company adopted **ASC 842, Leases**, effective **January 1, 2019**, using the modified retrospective approach[385](index=385&type=chunk) Consolidated Balance Sheets (as of December 31, in thousands) | ASSETS | 2020 (in thousands) | 2019 (in thousands) | | :---------------------------------------------- | :------------ | :------------ | | Cash and cash equivalents | $242,652 | $575,615 | | Total current assets | $622,843 | $886,890 | | Goodwill | $1,867,430 | $1,633,033 | | Total assets | $3,665,331 | $3,505,846 | | LIABILITIES AND STOCKHOLDERS' EQUITY | | | | Total current liabilities | $882,557 | $833,104 | | Long-term debt | $1,182,220 | $1,062,929 | | Total liabilities | $2,454,313 | $2,194,654 | | Total stockholders' equity | $1,211,018 | $1,311,192 | | **TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY** | **$3,665,331**| **$3,505,846**| Consolidated Statements of Operations (Years Ended December 31, in thousands) | Indicator | 2020 (in thousands) | 2019 (in thousands) | 2018 (in thousands) | | :------------------------------------------------ | :------------ | :------------ | :------------ | | Total revenues | $1,489,593 | $1,372,054 | $1,207,295 | | Gross profit | $1,257,811 | $1,134,731 | $1,006,221 | | Income from operations | $334,611 | $277,080 | $244,280 | | Interest expense, net | $131,975 | $69,546 | $61,987 | | Net income | $150,668 | $218,806 | $128,687 | | Basic EPS | $3.24 | $4.52 | $2.64 | | Diluted EPS | $3.18 | $4.39 | $2.59 | Consolidated Statements of Cash Flows (Years Ended December 31, in thousands) | Cash Flow Activity | 2020 (in thousands) | 2019 (in thousands) | 2018 (in thousands) | | :------------------------------------------------ | :------------ | :------------ | :------------ | | Net cash provided by operating activities | $480,079 | $412,539 | $401,325 | | Net cash used in investing activities | $(586,220) | $(505,273) | $(406,613) | | Net cash (used in) provided by financing activities | $(234,633) | $456,695 | $(131,362) | | Net change in cash and cash equivalents | $(332,963) | $366,141 | $(141,471) | | Cash and cash equivalents at end of year | $242,652 | $575,615 | $209,474 | - Total revenues for Digital Media were **$811.4 million** in 2020, up **14.2%** from 2019, primarily due to business acquisitions[339](index=339&type=chunk) - Total revenues for Cloud Services were **$678.5 million** in 2020, up **2.5%** from 2019, primarily due to business acquisitions[343](index=343&type=chunk) - In 2020, the company acquired **RetailMeNot, Inc.** for **$414.4 million**, contributing **$47.6 million** to revenues in 2020[498](index=498&type=chunk)[499](index=499&type=chunk)[504](index=504&type=chunk)[506](index=506&type=chunk) - Goodwill recognized from 2020 acquisitions totaled **$218.7 million**[503](index=503&type=chunk) - The **3.25% Convertible Notes** (principal **$402.4 million**) are classified as a current liability as of December 31, 2020, due to the holder's option to convert in **Q1 2021**[348](index=348&type=chunk)[583](index=583&type=chunk) - The company recorded a non-cash impairment charge of **$12.1 million** related to operating lease right-of-use assets in 2020 due to a shift to a remote/partial remote work model[607](index=607&type=chunk) - The total amount of unrecognized tax benefits was **$49.1 million** as of December 31, 2020[638](index=638&type=chunk) - The company is currently under audit by the **IRS** for **2012-2016 tax years**, and by the **California FTB** and **New York State Department of Taxation and Finance** for various tax years[642](index=642&type=chunk)[643](index=643&type=chunk)[644](index=644&type=chunk) [Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure](index=135&type=section&id=Item%209.%20Changes%20In%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) No changes in or disagreements with accountants on accounting and financial disclosure have occurred. - No changes in or disagreements with accountants on accounting and financial disclosure[696](index=696&type=chunk) [Item 9A. Controls and Procedures](index=135&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded disclosure controls and internal control over financial reporting were effective, with an unqualified auditor's opinion, excluding 2020 acquisitions. - Management concluded that disclosure controls and procedures were effective as of **December 31, 2020**[698](index=698&type=chunk) - Management concluded that internal control over financial reporting was effective as of **December 31, 2020**[699](index=699&type=chunk) - The assessment of internal control over financial reporting excluded 2020 acquisitions, which constituted **17.7% of total assets** and **4.2% of revenues** for the year ended December 31, 2020[699](index=699&type=chunk)[705](index=705&type=chunk) - There were no material changes in internal control over financial reporting during the **fourth quarter of fiscal year 2020**[700](index=700&type=chunk) - **BDO USA, LLP** issued an **unqualified opinion** on the company's internal control over financial reporting as of December 31, 2020[701](index=701&type=chunk) [Item 9B. Other Information](index=138&type=section&id=Item%209B.%20Other%20Information) No other information is required to be disclosed in this section. - No other information[710](index=710&type=chunk) PART III [Item 10. Directors, Executive Officers and Corporate Governance](index=138&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information for this item is incorporated by reference from the 2021 Proxy Statement. - Information incorporated by reference from the **2021 Proxy Statement**[711](index=711&type=chunk) [Item 11. Executive Compensation](index=138&type=section&id=Item%2011.%20Executive%20Compensation) Information for this item is incorporated by reference from the 2021 Proxy Statement. - Information incorporated by reference from the **2021 Proxy Statement**[712](index=712&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=138&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information for this item is incorporated by reference from the 2021 Proxy Statement. - Information incorporated by reference from the **2021 Proxy Statement**[713](index=713&type=chunk) [Item 13. Certain Relationships and Related Transactions, and Director Independence](index=138&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information for this item is incorporated by reference from the 2021 Proxy Statement. - Information incorporated by reference from the **2021 Proxy Statement**[714](index=714&type=chunk) [Item 14. Principal Accounting Fees and Services](index=138&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Information for this item is incorporated by reference from the 2021 Proxy Statement. - Information incorporated by reference from the **2021 Proxy Statement**[715](index=715&type=chunk) PART IV [Item 15. Exhibits and Financial Statement Schedules](index=138&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists all financial statements, schedules, and a comprehensive array of exhibits filed with the Annual Report on Form 10-K. - Includes Report of Independent Registered Public Accounting Firm, Consolidated Balance Sheets, Statements of Operations, Comprehensive Income, Stockholders' Equity, and Cash Flows[716](index=716&type=chunk) - Includes Financial Statement Schedule **II—Valuation and Qualifying Accounts**[716](index=716&type=chunk) - A comprehensive list of exhibits is filed with the report or incorporated by reference, covering corporate governance, debt instruments, stock plans, and other agreements[718](index=718&type=chunk)[720](index=720&type=chunk)[721](index=721&type=chunk)[723](index=723&type=chunk) [Item 16. Form 10-K Summary](index=142&type=section&id=Item%2016.%20Form%2010-K%20Summary) No Form 10-K Summary is provided. - No Form 10-K Summary is provided[722](index=722&type=chunk)

F O U R T H Q U A R T E R A N D F U L L Y E A R 2 0 2 0 R E S U L T S F E B R U A R Y 1 2 , 2021 Safe Harbor for Forward-Looking Statements 2 Certain statements in this presentation are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, particularly those regarding our 2021 Financial Guidance. Such forward-looking statements are subject to numerous assumptions, risks and uncertainties that could cause actual results to differ materially from those descri ...

J2 Global, Inc. (JCOM) Q4 2020 Results Earnings Conference Call February 12, 2021 8:30 AM ET Company Participants Vivek Shah - Chief Executive Officer Scott Turicchi - President and CFO Conference Call Participants Cory Carpenter - JPMorgan Daniel Ives - Wedbush Nick Jones - Citi James Fish - Piper Sandler Saket Kalia - Barclays Will Power - Baird James Breen - William Blair Shyam Patil - SIG Rishi Jaluria - D.A. Davidson Jon Tanwanteng - CJS Securities Operator Good day, ladies and gentlemen. And welcome t ...

[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents J2 Global's unaudited condensed consolidated financial statements and management's analysis for Q3 2020 [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents J2 Global's unaudited condensed consolidated financial statements for Q3 2020, including balance sheets, income, cash flows, and detailed notes [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet shows J2 Global's financial position as of September 30, 2020, with decreases in total assets, liabilities, and equity | Metric | Sep 30, 2020 (in thousands) | Dec 31, 2019 (in thousands) | | :--------------------------------- | :-------------------------- | :-------------------------- | | Total Assets | $3,342,993 | $3,505,846 | | Total Liabilities | $2,166,656 | $2,194,654 | | Total Stockholders' Equity | $1,176,337 | $1,311,192 | | Cash and cash equivalents | $567,930 | $575,615 | | Accounts receivable, net | $192,800 | $261,928 | | Goodwill | $1,661,546 | $1,633,033 | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Statements of operations detail J2 Global's performance for Q3 and nine months 2020, showing revenue growth and mixed net income trends | Metric | 3 Months Ended Sep 30, 2020 (in thousands) | 3 Months Ended Sep 30, 2019 (in thousands) | Change (YoY) | 9 Months Ended Sep 30, 2020 (in thousands) | 9 Months Ended Sep 30, 2019 (in thousands) | Change (YoY) | | :--------------------------------- | :--------------------------------------- | :--------------------------------------- | :----------- | :--------------------------------------- | :--------------------------------------- | :----------- | | Total revenues | $356,976 | $344,141 | 3.7% | $1,020,353 | $966,466 | 5.6% | | Gross profit | $301,154 | $282,425 | 6.6% | $848,598 | $793,471 | 7.0% | | Income from operations | $77,438 | $59,359 | 30.5% | $205,725 | $166,835 | 23.3% | | Net income | $60,883 | $30,745 | 98.0% | $92,580 | $95,783 | (3.3)% | | Basic EPS | $1.31 | $0.63 | 107.9% | $1.96 | $1.98 | (1.0)% | | Diluted EPS | $1.31 | $0.62 | 111.3% | $1.93 | $1.93 | 0.0% | [Condensed Consolidated Statements of Comprehensive Income](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) Comprehensive income statements show increased Q3 net income but a nine-month decrease, impacted by foreign currency translation adjustments | Metric | 3 Months Ended Sep 30, 2020 (in thousands) | 3 Months Ended Sep 30, 2019 (in thousands) | Change (YoY) | 9 Months Ended Sep 30, 2020 (in thousands) | 9 Months Ended Sep 30, 2019 (in thousands) | Change (YoY) | | :--------------------------------- | :--------------------------------------- | :--------------------------------------- | :----------- | :--------------------------------------- | :--------------------------------------- | :----------- | | Net income | $60,883 | $30,745 | 98.0% | $92,580 | $95,783 | (3.3)% | | Foreign currency translation adjustment | $(3,202) | $(8,166) | (60.8)% | $(12,085) | $(8,852) | 36.5% | | Other comprehensive loss, net of tax | $(3,194) | $(8,166) | (60.9)% | $(11,532) | $(8,294) | 39.0% | | Comprehensive income | $57,689 | $22,579 | 155.5% | $81,048 | $87,489 | (7.4)% | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Cash flow statements show increased operating cash, decreased investing cash, and higher financing cash outflow for nine months 2020 | Metric | 9 Months Ended Sep 30, 2020 (in thousands) | 9 Months Ended Sep 30, 2019 (in thousands) | Change (YoY) | | :--------------------------------- | :--------------------------------------- | :--------------------------------------- | :----------- | | Net cash provided by operating activities | $356,009 | $309,307 | 15.1% | | Net cash used in investing activities | $(107,286) | $(472,928) | (77.3)% | | Net cash (used in) provided by financing activities | $(256,854) | $46,852 | (648.1)% | | Net change in cash and cash equivalents | $(7,685) | $(117,289) | (93.4)% | | Cash and cash equivalents at end of period | $567,930 | $92,185 | 516.1% | [Condensed Consolidated Statements of Stockholders' Equity](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Equity) Stockholders' equity decreased from December 2019 to September 2020, mainly due to common stock repurchases | Metric | Sep 30, 2020 (in thousands) | Dec 31, 2019 (in thousands) | | :--------------------------------- | :-------------------------- | :-------------------------- | | Total Stockholders' Equity | $1,176,337 | $1,311,192 | | Common stock, shares outstanding | 44,767,341 | 47,654,929 | | Repurchase and retirement of common stock (9 months ended Sep 30, 2020) | $(238,905) | N/A | | Net income (9 months ended Sep 30, 2020) | $92,580 | N/A | [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Detailed notes explain accounting policies, revenue, acquisitions, investments, debt, leases, taxes, equity, and other financial disclosures [1. Basis of Presentation](index=11&type=section&id=1.%20Basis%20of%20Presentation) J2 Global, an internet services provider, presents unaudited financials for Cloud Services and Digital Media, with modest COVID-19 impacts - J2 Global operates two main businesses: **Cloud Services** (fax, voice, backup, security, consumer privacy and protection, email marketing) and **Digital Media** (technology, gaming, broadband, B2B, healthcare markets)[20](index=20&type=chunk)[224](index=224&type=chunk) - The COVID-19 pandemic has had modest adverse impacts on the company's operations, with no material decline in asset carrying values (except for equity method investments) as of September 30, 2020, but future impacts are uncertain[25](index=25&type=chunk)[27](index=27&type=chunk) [2. Recent Accounting Pronouncements](index=16&type=section&id=2.%20Recent%20Accounting%20Pronouncements) J2 Global is evaluating new FASB ASUs, with ASU 2019-12 and 2020-01 expected to have no material impact - J2 Global expects to adopt **ASU 2019-12** (Income Taxes) and **ASU 2020-01** (Investments) on January 1, 2021, with no material impact on financial statements or disclosures[55](index=55&type=chunk)[56](index=56&type=chunk) - The company is currently evaluating the effects of **ASU 2020-04** (Reference Rate Reform) and **ASU 2020-06** (Convertible Instruments) on its financial statements and disclosures[57](index=57&type=chunk)[58](index=58&type=chunk) [3. Revenues](index=16&type=section&id=3.%20Revenues) Revenue from Digital Media and Cloud Services shows growth, with most revenue recognized 'over time' | Revenue Source | 3 Months Ended Sep 30, 2020 (in thousands) | 3 Months Ended Sep 30, 2019 (in thousands) | Change (YoY) | 9 Months Ended Sep 30, 2020 (in thousands) | 9 Months Ended Sep 30, 2019 (in thousands) | Change (YoY) | | :----------------------- | :--------------------------------------- | :--------------------------------------- | :----------- | :--------------------------------------- | :--------------------------------------- | :----------- | | Digital Media - Advertising | $135,219 | $123,463 | 9.5% | $371,403 | $339,024 | 9.5% | | Digital Media - Subscription | $49,386 | $47,048 | 5.0% | $136,534 | $128,402 | 6.3% | | Cloud Services - Subscription | $170,233 | $170,971 | (0.4)% | $507,021 | $491,669 | 3.1% | | Total Revenues | $356,976 | $344,141 | 3.7% | $1,020,353 | $966,466 | 5.6% | - The majority of the company's revenue (over **97%** for both periods) is recognized "over time," reflecting the subscription and service-based nature of its offerings[68](index=68&type=chunk) [4. Business Acquisitions](index=20&type=section&id=4.%20Business%20Acquisitions) J2 Global completed several acquisitions in 2020, adding **$5.9 million** in revenue and recognizing **$23.8 million** in goodwill - J2 Global completed acquisitions including SRFax and other Digital Media/Martech businesses in the first nine months of 2020[85](index=85&type=chunk) | Metric | 9 Months Ended Sep 30, 2020 (in thousands) | | :--------------------------------- | :--------------------------------------- | | Revenue contributed by 2020 acquisitions | $5,900 | | Total consideration for 2020 acquisitions | $39,100 | | Goodwill recognized from 2020 acquisitions | $23,817 | | Tax-deductible goodwill from 2020 acquisitions | $22,600 | [5. Investments](index=21&type=section&id=5.%20Investments) Investments saw a **$19.6 million** impairment loss on equity securities and a **$10.8 million** loss in the OCV Fund for nine months 2020 | Metric | Sep 30, 2020 (in thousands) | Dec 31, 2019 (in thousands) | | :--------------------------------- | :-------------------------- | :-------------------------- | | Equity securities (reported amount) | $29,896 | $27,135 | | Impairment loss on equity securities (9 months ended Sep 30, 2020) | $19,600 | N/A | | Available-for-sale corporate debt securities (Fair Value) | $653 | $22,670 | | Equity method investment (carrying amount) | $66,026 | $50,274 | | Investment loss (gain) in OCV Fund (9 months ended Sep 30, 2020) | $10,800 | $(100) | - The **$10.8 million** investment loss in the OCV Fund for the nine months ended September 30, 2020, was primarily due to a **$7.0 million** impairment of two investments resulting from COVID-19[106](index=106&type=chunk) [6. Assets Held For Sale](index=24&type=section&id=6.%20Assets%20Held%20For%20Sale) J2 Global sold non-core Voice assets in Australia and New Zealand in Q3 2020, realizing a **$17.1 million** gain - J2 Global sold non-core Voice assets in Australia and New Zealand on August 31, 2020[109](index=109&type=chunk) | Metric | 3 Months Ended Sep 30, 2020 (in thousands) | | :----------------------- | :--------------------------------------- | | Gain on sale of businesses | $17,100 | [7. Fair Value Measurements](index=25&type=section&id=7.%20Fair%20Value%20Measurements) Fair value measurements categorize assets and liabilities, with contingent consideration decreasing due to earn-out payments | Metric | Sep 30, 2020 (in thousands) | Dec 31, 2019 (in thousands) | | :--------------------------------- | :-------------------------- | :-------------------------- | | Total assets measured at fair value | $317,760 | $418,334 | | Total liabilities measured at fair value | $8,352 | $37,887 | | Contingent consideration liability (Level 3) | $8,352 | $37,887 | - The decrease in contingent consideration liability was due to **$20.0 million** paid for Humble Bundle earn-out targets and **$8.3 million** for other acquisition thresholds in the first nine months of 2020[118](index=118&type=chunk)[119](index=119&type=chunk) [8. Goodwill and Intangible Assets](index=27&type=section&id=8.%20Goodwill%20and%20Intangible%20Assets) Goodwill increased to **$1.66 billion** due to acquisitions, while intangible assets decreased with **$115.6 million** in amortization expense | Metric | Sep 30, 2020 (in thousands) | Jan 1, 2020 (in thousands) | | :--------------------------------- | :-------------------------- | :-------------------------- | | Goodwill | $1,661,546 | $1,633,033 | | Goodwill acquired (9 months ended Sep 30, 2020) | $23,817 | N/A | | Purchase accounting adjustments (9 months ended Sep 30, 2020) | $7,591 | N/A | | Goodwill written off (9 months ended Sep 30, 2020) | $(4,751) | N/A | | Total intangible assets subject to amortization (Net) | $427,832 | $524,868 | | Amortization expense (9 months ended Sep 30, 2020) | $115,600 | N/A | - The company amortizes customer relationship assets in a pattern that recognizes a substantial majority of the expense in the first 4 to 5 years, despite a longer overall asset life[125](index=125&type=chunk) [9. Debt](index=28&type=section&id=9.%20Debt) J2 Global's debt includes Senior and Convertible Notes, with the 6.0% Senior Notes being redeemed by new 4.625% Senior Notes | Debt Instrument | Sep 30, 2020 (in thousands) | Dec 31, 2019 (in thousands) | Fair Value Sep 30, 2020 (in thousands) | Fair Value Dec 31, 2019 (in thousands) | | :--------------------------------- | :-------------------------- | :-------------------------- | :--------------------------------------- | :--------------------------------------- | | 6.0% Senior Notes | $650,000 | $650,000 | $676,200 | $689,800 | | 3.25% Convertible Notes | $402,414 | $402,500 | $461,000 | $583,600 | | 1.75% Convertible Notes | $550,000 | $550,000 | $490,200 | $559,600 | | Total long-term debt, less current portion | $1,075,071 | $1,062,929 | N/A | N/A | - On October 7, 2020, J2 Global issued **$750 million** of 4.625% Senior Notes due 2030 to redeem the outstanding 6.0% Senior Notes[130](index=130&type=chunk)[217](index=217&type=chunk) - The 3.25% Convertible Notes are classified as current liabilities due to a holder repurchase option on June 15, 2021[137](index=137&type=chunk) [10. Leases](index=32&type=section&id=10.%20Leases) J2 Global recorded **$9.8 million** in lease asset impairment due to a remote work shift, with total operating lease liabilities at **$115.2 million** - J2 Global recorded a **$9.8 million** non-cash impairment charge on operating lease right-of-use assets and a **$3.6 million** impairment charge for associated property and equipment in Q3 2020[154](index=154&type=chunk)[155](index=155&type=chunk) - The impairment was due to a permanent shift to a "remote" or "partial remote" work model for a significant number of employees[154](index=154&type=chunk) | Metric | Sep 30, 2020 (in thousands) | Dec 31, 2019 (in thousands) | | :--------------------------------- | :-------------------------- | :-------------------------- | | Operating lease right-of-use assets | $97,439 | $125,822 | | Total operating lease liabilities | $115,236 | $130,997 | | Total lease cost (9 months ended Sep 30, 2020) | $34,463 | N/A | [11. Commitments and Contingencies](index=35&type=section&id=11.%20Commitments%20and%20Contingencies) J2 Global faces legal proceedings and has a **$20.8 million** tax reserve, with its Credit Agreement terminated post-quarter end - J2 Global is involved in several legal proceedings, including a TCPA class action and derivative claims, but management does not anticipate a material adverse effect[166](index=166&type=chunk)[167](index=167&type=chunk)[168](index=168&type=chunk)[169](index=169&type=chunk) - The company has a **$20.8 million** reserve for non-income related tax matters, with potential for additional liabilities[174](index=174&type=chunk) - The **$200.0 million** Credit Facility was terminated on October 7, 2020, with no outstanding amounts as of September 30, 2020[171](index=171&type=chunk)[172](index=172&type=chunk) [12. Income Taxes](index=36&type=section&id=12.%20Income%20Taxes) Effective tax rate increased to **32.2%** for nine months 2020 due to valuation allowances and reduced foreign income benefits | Metric | 3 Months Ended Sep 30, 2020 | 3 Months Ended Sep 30, 2019 | Change (YoY) | 9 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2019 | Change (YoY) | | :--------------------------------- | :-------------------------- | :-------------------------- | :----------- | :-------------------------- | :-------------------------- | :----------- | | Income tax expense | $24,330 | $6,998 | 247.7% | $49,011 | $17,851 | 174.6% | | Effective tax rate | 28.3% | 17.0% | 11.3 pp | 32.2% | 15.7% | 16.5 pp | | Liabilities for uncertain income tax positions (Sep 30, 2020) | $60,200 | N/A | N/A | N/A | N/A | N/A | - The increased effective tax rate for the nine months ended September 30, 2020, was primarily due to a valuation allowance on deferred tax assets related to investment impairments and a decrease in the benefit of foreign income taxed at lower rates[175](index=175&type=chunk)[261](index=261&type=chunk) [13. Stockholders' Equity](index=37&type=section&id=13.%20Stockholders%27%20Equity) J2 Global repurchased **1.14 million** shares for **$87.5 million** (2012 Program) and **2 million** shares for **$141.8 million** (2020 Program) - The 2012 Program, extended through February 2021, had **1,140,819 shares** repurchased for **$87.5 million** in the first nine months of 2020, exhausting the program's capacity[183](index=183&type=chunk)[184](index=184&type=chunk) - A new 2020 Program, approved on August 6, 2020, authorized the repurchase of up to **10 million shares** through August 6, 2025, with **2,000,000 shares** repurchased for **$141.8 million** by September 30, 2020[185](index=185&type=chunk)[186](index=186&type=chunk) - The Board of Directors suspended dividend payments for the foreseeable future after the June 4, 2019 payment, citing significant investment opportunities[188](index=188&type=chunk)[276](index=276&type=chunk) [14. Stock Options and Employee Stock Purchase Plan](index=38&type=section&id=14.%20Stock%20Options%20and%20Employee%20Stock%20Purchase%20Plan) Share-based compensation for nine months 2020 totaled **$18.6 million**, including stock options, restricted stock, and ESPP expenses | Metric | 9 Months Ended Sep 30, 2020 (in thousands) | 9 Months Ended Sep 30, 2019 (in thousands) | | :--------------------------------- | :--------------------------------------- | :--------------------------------------- | | Stock option compensation expense | $700 | $700 | | Restricted stock/RSU compensation expense | $16,400 | $16,700 | | Employee Stock Purchase Plan compensation expense | $1,500 | $1,000 | | Total share-based compensation expense | $18,643 | $18,394 | - As of September 30, 2020, unrecognized compensation for stock options was **$6.1 million** (expected over 5.3 years), and for restricted stock/RSUs was **$44.0 million** (expected over 4.4 years)[195](index=195&type=chunk)[200](index=200&type=chunk) [15. Earnings Per Share](index=41&type=section&id=15.%20Earnings%20Per%20Share) Basic EPS for Q3 2020 significantly increased to **$1.31**, while nine-month EPS remained stable at **$1.96** (basic) and **$1.93** (diluted) | Metric | 3 Months Ended Sep 30, 2020 | 3 Months Ended Sep 30, 2019 | Change (YoY) | 9 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2019 | Change (YoY) | | :--------------------------------- | :-------------------------- | :-------------------------- | :----------- | :-------------------------- | :-------------------------- | :----------- | | Basic EPS | $1.31 | $0.63 | 107.9% | $1.96 | $1.98 | (1.0)% | | Diluted EPS | $1.31 | $0.62 | 111.3% | $1.93 | $1.93 | 0.0% | | Weighted-average outstanding shares (Basic) | 46,279,515 | 47,673,211 | (2.9)% | 46,914,750 | 47,654,327 | (1.5)% | [16. Segment Information](index=42&type=section&id=16.%20Segment%20Information) J2 Global's Cloud Services and Digital Media segments show revenue growth, with Digital Media achieving significant operating income growth - J2 Global's operating segments are Fax and Martech; Voice, Backup, Security, and Consumer Privacy and Protection (CPP); and Digital Media[207](index=207&type=chunk) | Segment Revenue | 3 Months Ended Sep 30, 2020 (in thousands) | 3 Months Ended Sep 30, 2019 (in thousands) | Change (YoY) | 9 Months Ended Sep 30, 2020 (in thousands) | 9 Months Ended Sep 30, 2019 (in thousands) | Change (YoY) | | :--------------------------------- | :--------------------------------------- | :--------------------------------------- | :----------- | :--------------------------------------- | :--------------------------------------- | :----------- | | Cloud Services Total | $170,248 | $171,163 | (0.5)% | $507,090 | $492,540 | 3.0% | | Digital Media | $186,784 | $172,992 | 8.0% | $513,462 | $474,034 | 8.3% | | Total revenues | $356,976 | $344,141 | 3.7% | $1,020,353 | $966,466 | 5.6% | | Segment Operating Income | 3 Months Ended Sep 30, 2020 (in thousands) | 3 Months Ended Sep 30, 2019 (in thousands) | Change (YoY) | 9 Months Ended Sep 30, 2020 (in thousands) | 9 Months Ended Sep 30, 2019 (in thousands) | Change (YoY) | | :--------------------------------- | :--------------------------------------- | :--------------------------------------- | :----------- | :--------------------------------------- | :--------------------------------------- | :----------- | | Cloud Services Total | $65,757 | $60,945 | 7.9% | $183,470 | $181,826 | 0.9% | | Digital Media | $26,082 | $5,493 | 374.8% | $47,854 | $6,011 | 696.1% | | Total income from operations | $77,438 | $59,359 | 30.5% | $205,725 | $166,835 | 23.3% | [17. Accumulated Other Comprehensive Income](index=45&type=section&id=17.%20Accumulated%20Other%20Comprehensive%20Income) Accumulated other comprehensive loss increased to **$(57.99) million** due to foreign currency translation adjustments | Metric | Sep 30, 2020 (in thousands) | Jan 1, 2020 (in thousands) | | :--------------------------------- | :-------------------------- | :-------------------------- | | Ending balance of accumulated other comprehensive loss | $(57,994) | $(46,462) | | Foreign Currency Translation (9 months ended Sep 30, 2020) | $(12,085) | N/A | [18. Subsequent Events](index=45&type=section&id=18.%20Subsequent%20Events) Post-quarter end, J2 Global issued **$750 million** in new Senior Notes, terminated its Credit Agreement, and completed two acquisitions - On October 7, 2020, J2 Global issued **$750 million** in 4.625% Senior Notes due 2030 to fund the redemption of its 6.0% Senior Notes, including a **$29.2 million** early redemption premium[217](index=217&type=chunk) - The company terminated its Credit Agreement on October 7, 2020[218](index=218&type=chunk) - J2 Global completed the acquisition of RetailMeNot for approximately **$420 million** on October 28, 2020, and Inspired eLearning on November 2, 2020[218](index=218&type=chunk)[219](index=219&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=47&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management's discussion analyzes J2 Global's financial condition and results for Q3 and nine months 2020, including forward-looking statements and liquidity [Forward-Looking Information](index=47&type=section&id=Forward-Looking%20Information) Forward-looking statements are subject to risks including economic uncertainty, debt, acquisition integration, and the ongoing COVID-19 pandemic - Forward-looking statements are subject to risks including economic uncertainty, customer acquisition/retention, debt management, successful acquisition integration, international expansion challenges, and tax liabilities[221](index=221&type=chunk)[222](index=222&type=chunk) - The COVID-19 pandemic is a significant factor that could materially impact financial results, with its full extent, duration, and overall impact currently unknown[223](index=223&type=chunk)[230](index=230&type=chunk)[231](index=231&type=chunk) [Overview](index=48&type=section&id=Overview) J2 Global's core businesses, Cloud Services and Digital Media, drive growth through organic efforts and acquisitions, with COVID-19 impacts monitored - J2 Global operates two core businesses: **Cloud Services** (subscription-based, high-margin, stable) and **Digital Media** (advertising-driven, seasonal strength in Q4)[224](index=224&type=chunk)[228](index=228&type=chunk) - Acquisitions are a key growth strategy to expand customer bases, diversify offerings, enhance technology, and enter new markets[227](index=227&type=chunk) - The company is actively monitoring the global COVID-19 pandemic and its potential adverse effects on operations, financial position, and liquidity[229](index=229&type=chunk)[230](index=230&type=chunk)[231](index=231&type=chunk) [Cloud Services Performance Metrics](index=49&type=section&id=Cloud%20Services%20Performance%20Metrics) Cloud Services revenue slightly decreased in Q3 but increased for nine months 2020, with improved cancel rates | Metric | 3 Months Ended Sep 30, 2020 (in thousands) | 3 Months Ended Sep 30, 2019 (in thousands) | Change (YoY) | 9 Months Ended Sep 30, 2020 (in thousands) | 9 Months Ended Sep 30, 2019 (in thousands) | Change (YoY) | | :--------------------------------- | :--------------------------------------- | :--------------------------------------- | :----------- | :--------------------------------------- | :--------------------------------------- | :----------- | | Total subscriber revenues | $170,233 | $170,971 | (0.4)% | $507,021 | $491,669 | 3.1% | | Fixed subscriber revenues | $144,525 | $141,832 | 1.9% | $426,766 | $406,493 | 5.0% | | Variable subscriber revenues | $25,708 | $29,139 | (11.8)% | $80,255 | $85,176 | (5.8)% | | Average monthly revenue per Cloud Business Customer (ARPU) | $13.98 | $14.15 | (1.2)% | N/A | N/A | N/A | | Cancel Rate (3 months average) | 2.1% | 2.4% | (0.3 pp) | N/A | N/A | N/A | [Digital Media Performance Metrics](index=50&type=section&id=Digital%20Media%20Performance%20Metrics) Digital Media engagement increased for both Q3 and nine months 2020, with visits growing by **18.3%** and **26.8%** respectively | Metric | 3 Months Ended Sep 30, 2020 (in millions) | 3 Months Ended Sep 30, 2019 (in millions) | Change (YoY) | 9 Months Ended Sep 30, 2020 (in millions) | 9 Months Ended Sep 30, 2019 (in millions) | Change (YoY) | | :--------------------------------- | :---------------------------------------- | :---------------------------------------- | :----------- | :---------------------------------------- | :---------------------------------------- | :----------- | | Visits | 2,197 | 1,857 | 18.3% | 6,701 | 5,282 | 26.8% | | Page views | 7,244 | 7,008 | 3.4% | 22,777 | 20,587 | 10.6% | [Critical Accounting Policies and Estimates](index=50&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Critical accounting policies and estimates remained unchanged during the three months ended September 30, 2020 - No significant changes occurred in critical accounting policies and estimates during the three months ended September 30, 2020[238](index=238&type=chunk) [Results of Operations](index=50&type=section&id=Results%20of%20Operations) Results of operations detail financial performance across segments, including revenues, costs, operating expenses, and taxes [Cloud Services Segment Results](index=55&type=section&id=Cloud%20Services%20Segment%20Results) Cloud Services net sales decreased in Q3 due to COVID-19 but increased for nine months 2020, with operating income growth - Cloud Services net sales decreased by **0.5%** for the three months ended September 30, 2020, due to COVID-19, but increased by **3.0%** for the nine-month period, primarily from acquisitions[266](index=266&type=chunk) - Operating income for Cloud Services increased by **7.9%** for the three months and **0.9%** for the nine months ended September 30, 2020, mainly due to lower amortization of intangible assets[268](index=268&type=chunk)[269](index=269&type=chunk) - Revenue for the remainder of fiscal year 2020 is expected to be flat to modestly lower due to the macroeconomic environment and COVID-19[239](index=239&type=chunk) [Digital Media Segment Results](index=56&type=section&id=Digital%20Media%20Segment%20Results) Digital Media net sales increased by **8.0%** (Q3) and **8.3%** (nine months) due to acquisitions, with substantial operating income growth - Digital Media net sales increased by **8.0%** for the three months and **8.3%** for the nine months ended September 30, 2020, primarily driven by business acquisitions[270](index=270&type=chunk) - Operating income for Digital Media surged by **374.8%** for the three months and **696.1%** for the nine months ended September 30, 2020, due to acquisitions and lower campaign fulfillment costs, despite lease asset impairments[271](index=271&type=chunk)[272](index=272&type=chunk) - Revenue for the remainder of fiscal year 2020 is expected to be higher due to the RetailMeNot acquisition, though still subject to COVID-19 risks[241](index=241&type=chunk) [J2 Global Consolidated Outlook](index=51&type=section&id=J2%20Global%20Consolidated%20Outlook) J2 Global expects higher consolidated revenue for the remainder of 2020, but operating profit margin may decrease due to Digital Media growth - Consolidated revenue for the remainder of fiscal year 2020 is expected to be higher compared to the prior-year comparable period[244](index=244&type=chunk) - Operating profit as a percentage of revenues is expected to decrease due to the growing share of the Digital Media business, which has lower operating margins[245](index=245&type=chunk) [Consolidated Revenues](index=51&type=section&id=Consolidated%20Revenues) Consolidated revenues increased by **4%** (Q3) and **6%** (nine months) driven by acquisitions and organic growth | Metric | 3 Months Ended Sep 30, 2020 (in thousands) | 3 Months Ended Sep 30, 2019 (in thousands) | Change (YoY) | 9 Months Ended Sep 30, 2020 (in thousands) | 9 Months Ended Sep 30, 2019 (in thousands) | Change (YoY) | | :--------------------------------- | :--------------------------------------- | :--------------------------------------- | :----------- | :--------------------------------------- | :--------------------------------------- | :----------- | | Revenues | $356,976 | $344,141 | 4% | $1,020,353 | $966,466 | 6% | - Revenue growth was primarily due to acquisitions and organic growth, partially offset by declines in specific areas of both Digital Media and Cloud Services[247](index=247&type=chunk) [Consolidated Cost of Revenues](index=52&type=section&id=Consolidated%20Cost%20of%20Revenues) Cost of revenues decreased by **10%** (Q3) and **1%** (nine months), primarily due to lower content and fulfillment costs | Metric | 3 Months Ended Sep 30, 2020 (in thousands) | 3 Months Ended Sep 30, 2019 (in thousands) | Change (YoY) | 9 Months Ended Sep 30, 2020 (in thousands) | 9 Months Ended Sep 30, 2019 (in thousands) | Change (YoY) | | :--------------------------------- | :--------------------------------------- | :--------------------------------------- | :----------- | :--------------------------------------- | :--------------------------------------- | :----------- | | Cost of revenue | $55,822 | $61,716 | (10)% | $171,755 | $172,995 | (1)% | | As a percent of revenue | 16% | 18% | (2 pp) | 17% | 18% | (1 pp) | - The decrease in cost of revenues was primarily driven by lower content fees, campaign fulfillment costs, and other editorial/production costs, partially offset by increased depreciation and amortization[248](index=248&type=chunk) [Consolidated Operating Expenses](index=52&type=section&id=Consolidated%20Operating%20Expenses) Consolidated operating expenses show mixed trends across sales and marketing, R&D, and general and administrative costs [Sales and Marketing](index=52&type=section&id=Sales%20and%20Marketing) Sales and marketing expenses decreased by **3%** (Q3) but increased by **5%** (nine months) due to acquisitions and personnel costs | Metric | 3 Months Ended Sep 30, 2020 (in thousands) | 3 Months Ended Sep 30, 2019 (in thousands) | Change (YoY) | 9 Months Ended Sep 30, 2020 (in thousands) | 9 Months Ended Sep 30, 2019 (in thousands) | Change (YoY) | | :--------------------------------- | :--------------------------------------- | :--------------------------------------- | :----------- | :--------------------------------------- | :--------------------------------------- | :----------- | | Sales and Marketing | $95,074 | $98,486 | (3)% | $287,317 | $273,812 | 5% | | As a percent of revenue | 27% | 29% | (2 pp) | 28% | 28% | 0 pp | - The three-month decrease was due to lower advertising costs, while the nine-month increase was driven by higher personnel costs and partner revenue share from acquisitions[249](index=249&type=chunk) [Research, Development and Engineering](index=52&type=section&id=Research,%20Development%20and%20Engineering) R&D expenses increased by **4%** (Q3) and **12%** (nine months), driven by costs from recent business acquisitions | Metric | 3 Months Ended Sep 30, 2020 (in thousands) | 3 Months Ended Sep 30, 2019 (in thousands) | Change (YoY) | 9 Months Ended Sep 30, 2020 (in thousands) | 9 Months Ended Sep 30, 2019 (in thousands) | Change (YoY) | | :--------------------------------- | :--------------------------------------- | :--------------------------------------- | :----------- | :--------------------------------------- | :--------------------------------------- | :----------- | | Research, Development and Engineering | $14,261 | $13,770 | 4% | $43,273 | $38,692 | 12% | | As a percent of revenue | 4% | 4% | 0 pp | 4% | 4% | 0 pp | - The increase in R&D costs was primarily due to expenses from businesses acquired in and subsequent to Q3 2019[251](index=251&type=chunk) [General and Administrative](index=53&type=section&id=General%20and%20Administrative) G&A costs increased by **3%** (Q3) due to impairments but decreased by **1%** (nine months) from lower amortization | Metric | 3 Months Ended Sep 30, 2020 (in thousands) | 3 Months Ended Sep 30, 2019 (in thousands) | Change (YoY) | 9 Months Ended Sep 30, 2020 (in thousands) | 9 Months Ended Sep 30, 2019 (in thousands) | Change (YoY) | | :--------------------------------- | :--------------------------------------- | :--------------------------------------- | :----------- | :--------------------------------------- | :--------------------------------------- | :----------- | | General and Administrative | $114,381 | $110,810 | 3% | $312,283 | $314,132 | (1)% | | As a percent of revenue | 32% | 32% | 0 pp | 31% | 33% | (2 pp) | - The three-month increase was due to lease asset impairments and additional depreciation, while the nine-month decrease was primarily due to lower amortization of intangible assets[252](index=252&type=chunk) [Consolidated Share-Based Compensation](index=53&type=section&id=Consolidated%20Share-Based%20Compensation) Total share-based compensation was **$5.8 million** for Q3 and **$18.6 million** for the nine months ended September 30, 2020 | Metric | 3 Months Ended Sep 30, 2020 (in thousands) | 3 Months Ended Sep 30, 2019 (in thousands) | Change (YoY) | 9 Months Ended Sep 30, 2020 (in thousands) | 9 Months Ended Sep 30, 2019 (in thousands) | Change (YoY) | | :--------------------------------- | :--------------------------------------- | :--------------------------------------- | :----------- | :--------------------------------------- | :--------------------------------------- | :----------- | | Total share-based compensation | $5,800 | $6,446 | (10.1)% | $18,643 | $18,394 | 1.3% | [Consolidated Non-Operating Income and Expenses](index=53&type=section&id=Consolidated%20Non-Operating%20Income%20and%20Expenses) Non-operating items show increased interest expense, a significant gain on business sales, and higher investment losses [Interest expense, net](index=53&type=section&id=Interest%20expense,%20net) Net interest expense increased by **31.2%** (Q3) and **30.2%** (nine months) due to 1.75% Convertible Senior Notes issuance | Metric | 3 Months Ended Sep 30, 2020 (in thousands) | 3 Months Ended Sep 30, 2019 (in thousands) | Change (YoY) | 9 Months Ended Sep 30, 2020 (in thousands) | 9 Months Ended Sep 30, 2019 (in thousands) | Change (YoY) | | :--------------------------------- | :--------------------------------------- | :--------------------------------------- | :----------- | :--------------------------------------- | :--------------------------------------- | :----------- | | Interest expense, net | $22,700 | $17,300 | 31.2% | $65,900 | $50,600 | 30.2% | - The increase in interest expense was primarily due to the issuance of 1.75% Convertible Senior Notes in Q4 2019[254](index=254&type=chunk) [Gain on sale of businesses](index=53&type=section&id=Gain%20on%20sale%20of%20businesses) J2 Global recognized a **$17.1 million** gain from the sale of Voice assets in Australia and New Zealand in Q3 2020 | Metric | 3 Months Ended Sep 30, 2020 (in thousands) | 3 Months Ended Sep 30, 2019 (in thousands) | Change (YoY) | 9 Months Ended Sep 30, 2020 (in thousands) | 9 Months Ended Sep 30, 2019 (in thousands) | Change (YoY) | | :--------------------------------- | :--------------------------------------- | :--------------------------------------- | :----------- | :--------------------------------------- | :--------------------------------------- | :----------- | | Gain on sale of businesses | $17,122 | $0 | N/A | $17,122 | $0 | N/A | - The gain resulted from the sale of certain Voice assets in Australia and New Zealand in Q3 2020[255](index=255&type=chunk) [Loss on investments, net](index=53&type=section&id=Loss%20on%20investments,%20net) Net loss on investments significantly increased to **$21.0 million** for nine months 2020 due to investee capital structure changes | Metric | 3 Months Ended Sep 30, 2020 (in thousands) | 3 Months Ended Sep 30, 2019 (in thousands) | Change (YoY) | 9 Months Ended Sep 30, 2020 (in thousands) | 9 Months Ended Sep 30, 2019 (in thousands) | Change (YoY) | | :--------------------------------- | :--------------------------------------- | :--------------------------------------- | :----------- | :--------------------------------------- | :--------------------------------------- | :----------- | | Loss on investments, net | $156 | $7 | 2128.6% | $20,991 | $45 | 46546.7% | - The substantial increase in loss on investments for the nine-month period was due to net losses from changes in investee capital structure and market volatility[257](index=257&type=chunk) [Other (income) expense, net](index=54&type=section&id=Other%20(income)%20expense,%20net) Other (income) expense, net, shifted to significant income due to increased gains on currency exchange | Metric | 3 Months Ended Sep 30, 2020 (in thousands) | 3 Months Ended Sep 30, 2019 (in thousands) | Change (YoY) | 9 Months Ended Sep 30, 2020 (in thousands) | 9 Months Ended Sep 30, 2019 (in thousands) | Change (YoY) | | :--------------------------------- | :--------------------------------------- | :--------------------------------------- | :----------- | :--------------------------------------- | :--------------------------------------- | :----------- | | Other (income) expense, net | $(14,230) | $857 | (1759.9)% | $(16,413) | $2,657 | (718.9)% | - The shift to income was primarily driven by increased gains on currency exchange[258](index=258&type=chunk) [Consolidated Income Taxes](index=54&type=section&id=Consolidated%20Income%20Taxes) Income tax provision significantly increased, with the effective tax rate rising to **32.2%** for nine months 2020 | Metric | 3 Months Ended Sep 30, 2020 (in thousands) | 3 Months Ended Sep 30, 2019 (in thousands) | Change (YoY) | 9 Months Ended Sep 30, 2020 (in thousands) | 9 Months Ended Sep 30, 2019 (in thousands) | Change (YoY) | | :--------------------------------- | :--------------------------------------- | :--------------------------------------- | :----------- | :--------------------------------------- | :--------------------------------------- | :----------- | | Provision for income taxes | $24,300 | $7,000 | 247.1% | $49,000 | $17,900 | 173.7% | | Effective tax rate | 28.3% | 17.0% | 11.3 pp | 32.2% | 15.7% | 16.5 pp | - The increase in the effective tax rate was primarily due to a valuation allowance on deferred tax assets related to investment impairments and a decrease in the benefit of foreign income taxed at lower rates[261](index=261&type=chunk) [Consolidated Equity Method Investment](index=55&type=section&id=Consolidated%20Equity%20Method%20Investment) Net loss from equity method investment was **$10.8 million** for nine months 2020, primarily due to COVID-19 related impairments | Metric | 3 Months Ended Sep 30, 2020 (in thousands) | 3 Months Ended Sep 30, 2019 (in thousands) | Change (YoY) | 9 Months Ended Sep 30, 2020 (in thousands) | 9 Months Ended Sep 30, 2019 (in thousands) | Change (YoY) | | :--------------------------------- | :--------------------------------------- | :--------------------------------------- | :----------- | :--------------------------------------- | :--------------------------------------- | :----------- | | Net loss (income) in earnings of equity method investment | $700 | $3,500 | (80.0)% | $10,800 | $(100) | 10900.0% | - The significant loss for the nine-month period was primarily due to a **$7.0 million** impairment of two investments resulting from COVID-19[263](index=263&type=chunk) [Liquidity and Capital Resources](index=57&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity decreased due to stock repurchases and acquisitions, despite increased operating cash flow, with new senior notes issued [Cash and Cash Equivalents and Investments](index=57&type=section&id=Cash%20and%20Cash%20Equivalents%20and%20Investments) Cash, cash equivalents, and investments decreased to **$664.5 million** due to repurchases and acquisitions, offset by operating cash flow | Metric | Sep 30, 2020 (in thousands) | Dec 31, 2019 (in thousands) | | :--------------------------------- | :-------------------------- | :-------------------------- | | Cash, cash equivalents and investments | $664,500 | $675,700 | | Cash and cash equivalents | $567,900 | $575,600 | | Long-term investments | $96,600 | N/A | - The decrease was primarily due to cash used for common stock repurchases, property and equipment purchases, investments, and business acquisitions, partially offset by operating cash flow[273](index=273&type=chunk) - Post-quarter end, the company terminated its Credit Agreement and issued **$750 million** in new 4.625% Senior Notes due 2030[274](index=274&type=chunk)[275](index=275&type=chunk) [Cash Flows](index=58&type=section&id=Cash%20Flows) Operating cash flow increased by **15.1%**, investing cash flow decreased by **77.3%**, and financing cash flow became a net outflow | Metric | 9 Months Ended Sep 30, 2020 (in thousands) | 9 Months Ended Sep 30, 2019 (in thousands) | Change (YoY) | | :--------------------------------- | :--------------------------------------- | :--------------------------------------- | :----------- | | Net cash provided by operating activities | $356,000 | $309,300 | 15.1% | | Net cash used in investing activities | $(107,300) | $(472,900) | (77.3)% | | Net cash (used in) provided by financing activities | $(256,900) | $46,900 | (648.1)% | - The increase in operating cash flow was due to decreased accounts receivable, prepaid expenses, and higher uncertain tax positions, partially offset by reduced accounts payable and deferred revenue[280](index=280&type=chunk) - The shift in financing cash flow was primarily due to common stock repurchases and the absence of net borrowings under the line of credit seen in 2019[282](index=282&type=chunk) [Stock Repurchase Program](index=58&type=section&id=Stock%20Repurchase%20Program) J2 Global repurchased **1.14 million** shares for **$87.5 million** (2012 Program) and **2 million** shares for **$141.8 million** (2020 Program) - Under the 2012 Program, **1,140,819 shares** were repurchased for **$87.5 million** in the first nine months of 2020, exhausting the program's capacity[283](index=283&type=chunk) - The new 2020 Program, approved in August 2020, authorized up to **10 million shares**, with **2,000,000 shares** repurchased for **$141.8 million** by September 30, 2020[284](index=284&type=chunk) [Contractual Obligations and Commitments](index=59&type=section&id=Contractual%20Obligations%20and%20Commitments) Total contractual obligations were **$2.05 billion**, primarily long-term debt and operating leases, excluding uncertain tax positions | Contractual Obligation | Total (in thousands) | | :--------------------------------- | :------------------- | | Long-term debt - principal | $1,602,414 | | Long-term debt - interest | $270,641 | | Operating leases | $135,179 | | Finance leases | $1,418 | | Telecom services and co-location facilities | $4,368 | | Holdback payments | $7,630 | | Transition Tax | $11,675 | | Self-Insurance | $11,980 | | Other | $1,600 | | Total | $2,046,905 | - The table excludes **$60.2 million** in uncertain tax positions, contingent acquisition consideration, and a **$102.0 million** commitment to OCV Management, LLC due to timing uncertainties[290](index=290&type=chunk)[291](index=291&type=chunk) [Off-Balance Sheet Arrangements](index=59&type=section&id=Off-Balance%20Sheet%20Arrangements) J2 Global has no material off-balance sheet arrangements - J2 Global has no material off-balance sheet arrangements[292](index=292&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=60&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section details J2 Global's market risk exposure, focusing on interest rate fluctuations and foreign currency risk [Interest Rate Risk](index=60&type=section&id=Interest%20Rate%20Risk) Interest rate risk stems from investments and variable-rate borrowings, with no impact from LIBOR changes due to no Credit Facility outstanding - J2 Global's interest rate risk is primarily related to its investment portfolio and variable-rate borrowings[294](index=294&type=chunk) | Metric | Sep 30, 2020 (in thousands) | Dec 31, 2019 (in thousands) | | :--------------------------------- | :-------------------------- | :-------------------------- | | Debt securities (maturities > 1 year) | $700 | N/A | | Cash and cash equivalent investments (maturities <= 90 days) | $567,900 | $575,600 | - As of September 30, 2020, there were no outstanding amounts under the Credit Facility, meaning a **100 basis point** increase in LIBOR would not impact annual interest expense from this facility[296](index=296&type=chunk)[298](index=298&type=chunk) [Foreign Currency Risk](index=61&type=section&id=Foreign%20Currency%20Risk) Foreign currency risk from international operations led to significant foreign exchange gains due to lower inter-company balances - J2 Global's principal foreign currency risk exposure relates to investments and inter-company debt in foreign subsidiaries operating in currencies like AUD, CAD, EUR, HKD, JPY, NZD, NOK, and GBP[300](index=300&type=chunk) | Metric | 3 Months Ended Sep 30, 2020 (in thousands) | 3 Months Ended Sep 30, 2019 (in thousands) | Change (YoY) | 9 Months Ended Sep 30, 2020 (in thousands) | 9 Months Ended Sep 30, 2019 (in thousands) | Change (YoY) | | :--------------------------------- | :--------------------------------------- | :--------------------------------------- | :----------- | :--------------------------------------- | :--------------------------------------- | :----------- | | Foreign exchange (gains) losses | $(13,900) | $1,000 | (1490.0)% | $(15,000) | $2,800 | (635.7)% | - The decrease in foreign exchange losses (i.e., increase in gains) was attributed to lower inter-company balances in foreign subsidiaries and exchange rate fluctuations[304](index=304&type=chunk) [Item 4. Controls and Procedures](index=61&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were effective, with no material changes in internal control over financial reporting during Q3 2020 [Evaluation of Disclosure Controls and Procedures](index=61&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of September 30, 2020 - Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of September 30, 2020[308](index=308&type=chunk) [Changes in Internal Controls](index=61&type=section&id=Changes%20in%20Internal%20Controls) No material changes in internal control over financial reporting occurred during the third quarter ended September 30, 2020 - No material changes in internal control over financial reporting occurred during the third quarter ended September 30, 2020[309](index=309&type=chunk) [PART II. OTHER INFORMATION](index=62&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section provides other information, including legal proceedings, risk factors, equity sales, defaults, and exhibits [Item 1. Legal Proceedings](index=62&type=section&id=Item%201.%20Legal%20Proceedings) Legal proceedings, detailed in Note 11, are not expected to have a material adverse effect on the company - Information on legal proceedings is detailed in Note 11, where the company does not believe current claims will have a material adverse effect[310](index=310&type=chunk)[169](index=169&type=chunk) [Item 1A. Risk Factors](index=62&type=section&id=Item%201A.%20Risk%20Factors) Risk factors refer to prior filings, with no material changes reported from previously disclosed risks - Readers are directed to previously filed 10-K and 10-Q reports for detailed risk factors[311](index=311&type=chunk) - No material changes to the previously disclosed risk factors have occurred[311](index=311&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=62&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities were reported, with details on common stock repurchase programs [Unregistered Sales of Equity Securities](index=62&type=section&id=Unregistered%20Sales%20of%20Equity%20Securities) No unregistered sales of equity securities were reported during the period - There were no unregistered sales of equity securities[312](index=312&type=chunk) [Issuer Purchases of Equity Securities](index=62&type=section&id=Issuer%20Purchases%20of%20Equity%20Securities) J2 Global repurchased **2.15 million** shares for **$69.80** average price in Q3 2020, with **8 million** shares remaining in the 2020 Program | Metric | 3 Months Ended Sep 30, 2020 | | :--------------------------------- | :-------------------------- | | Total shares purchased | 2,145,243 | | Average price paid per share | $69.80 | | Shares purchased under publicly announced plans | 2,140,819 | | Maximum shares yet to be purchased under 2020 Program | 8,000,000 | - The 2012 Program is fully utilized, and **8 million shares** remain available for repurchase under the 2020 Program[315](index=315&type=chunk)[316](index=316&type=chunk)[317](index=317&type=chunk) [Item 3. Defaults Upon Senior Securities](index=64&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities were reported by J2 Global - There were no defaults upon senior securities[318](index=318&type=chunk) [Item 4. Mine Safety Disclosures](index=64&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Mine Safety Disclosures are not applicable to J2 Global - Mine Safety Disclosures are not applicable to the company[319](index=319&type=chunk) [Item 5. Other Information](index=64&type=section&id=Item%205.%20Other%20Information) No other information was reported under this item - No other information was reported under this item[320](index=320&type=chunk) [Item 6. Exhibits](index=64&type=section&id=Item%206.%20Exhibits) Exhibits include corporate governance documents, certifications, and XBRL financial information filed with the Form 10-Q - Exhibits include corporate governance documents, Sarbanes-Oxley certifications (Rule 13a-14(a) and Section 1350), and XBRL formatted financial information[321](index=321&type=chunk)[329](index=329&type=chunk) [Signature](index=65&type=section&id=Signature) The report was signed by the CEO, President and CFO, and Chief Accounting Officer on November 9, 2020 - The report was signed by the Chief Executive Officer, President and Chief Financial Officer, and Chief Accounting Officer on November 9, 2020[327](index=327&type=chunk)