j2 Global(US:ZD)2020-11-03 18:38Financial Data and Key Metrics Changes - J2 Global reported a 3.7% increase in revenue year-over-year for Q3 2020, reaching $357 million, exceeding expectations [33] - Adjusted EBITDA grew by 14.4% to a record $154.1 million, with an EBITDA margin of 43.2%, up from 39.2% a year ago [34] - Adjusted EPS increased approximately 20% to $2.02 per share compared to $1.70 per share in Q3 2019 [34] - Free cash flow reached a record $93.7 million, a 20% increase from Q3 2019, with a trailing 12-month free cash flow of $387 million [35] Business Line Data and Key Metrics Changes - The gaming business grew approximately 10% organically, benefiting from a new console cycle [9] - Broadband businesses also saw a 10% organic growth, with the Ekahau business returning to growth after previous COVID-related impacts [10] - Everyday Health revenues grew by 25%, primarily organic, with the MedPage brand traffic up 119% year-over-year [11] - Cloud fax businesses experienced a 4% revenue growth, with corporate cloud fax growing over 12% [12] - Cybersecurity portfolio saw a 10% organic growth in VPN businesses, while backup businesses declined as expected [13] Market Data and Key Metrics Changes - Speedtest set testing records with 1.75 billion tests in Q3, up 62% year-over-year [10] - RetailMeNot, acquired during the quarter, had trailing 12-month revenues of about $180 million with low 30s EBITDA margins [22] Company Strategy and Development Direction - The acquisition of RetailMeNot is seen as a strategic move to enhance the affiliate publishing and commerce space, with expectations of significant synergies [16][19] - The company aims to improve take rates and margins in its affiliate publishing business, with a focus on driving demand clicks [23][24] - J2 Global is committed to ongoing M&A activity, with a pipeline of mid-sized and larger deals, while also executing share buybacks [92] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate the pandemic, achieving record financial results [3][7] - The company remains cautious about the ongoing pandemic's impact on the economy but is optimistic about continued growth in digital media and healthcare sectors [50][90] - Management highlighted the importance of focusing on execution during peak shopping periods, such as Black Friday and Cyber Monday [69] Other Important Information - J2 Global has made significant progress in ESG initiatives, including a $10 million deposit in Black-run banks and a $6 million advertising commitment to the NAACP [29] - The board has been refreshed with new directors bringing valuable industry experience, particularly in healthcare [30] Q&A Session Summary Question: Strategic benefits of RetailMeNot - Management highlighted the strong track record in affiliate publishing and the potential for robust synergies with RetailMeNot [45] Question: Expectations for revenue and profit in digital media vs. cloud segment - Management indicated that RetailMeNot would contribute significantly in Q4, with expectations of seasonality affecting cloud revenue [47][49] Question: Work composition and changes - Management expressed satisfaction with the current board composition and ongoing efforts to refresh it [52][55] Question: Trends in media segment - Management noted sequential improvement in digital media performance throughout Q3, with positive early trends in Q4 [57] Question: Opportunities in healthcare business - Management acknowledged existing affiliate commerce within Everyday Health and potential growth areas in pharmaceuticals [60] Question: Revenue and EBITDA guidance for RetailMeNot - Management indicated expectations for potential revenue decline in 2021 due to the shrink-to-grow strategy, but with improved margins [66] Question: Growth opportunity within fax business - Management expressed bullishness on the corporate fax business, highlighting its importance in healthcare for HIPAA compliance [70][71] Question: Impact of share buybacks and M&A strategy - Management confirmed the ability to pursue both share buybacks and M&A, emphasizing the attractiveness of current stock valuation [77] Question: Trends in healthcare pharma advertising - Management reported strong growth in the pharma market, with a shift from traditional to digital advertising [89]