j2 Global(US:ZD)2020-08-11 19:15Financial Data and Key Metrics Changes - J2 Global reported a record revenue of $331 million for Q2 2020, representing a 2.7% increase year-over-year [37] - Adjusted EBITDA grew by 6.1% to $132.9 million, with an EBITDA margin of 40.1%, up from 38.8% in Q2 2019 [37][20] - Adjusted EPS increased by 7% to $1.71 per share compared to $1.60 per share in Q2 2019 [37] - Free cash flow reached a record $115.9 million, a 35% increase from Q2 2019 [38] Business Line Data and Key Metrics Changes - The Cloud Services segment saw a slight revenue decline of 1.2% to $167.1 million, primarily due to currency exchange rates and lower healthcare-related variable revenue [39] - Digital Media segment revenue grew by 6.9% to $163.9 million, with EBITDA increasing by 27% to $54 million [41] - Everyday Health display revenues grew by 35% in the quarter, contributing positively to the Digital Media segment [15] Market Data and Key Metrics Changes - The overall advertising market experienced a significant rebound, with J2 Global's ad business growing close to 7% despite initial expectations of a decline [14] - The company noted a stable cancel rate in Cloud Services, indicating resilience in customer retention [17] Company Strategy and Development Direction - J2 Global is focusing on M&A opportunities, particularly in sectors like healthcare digital transformation and cybersecurity solutions [24][23] - The company is committed to ongoing board refreshment and diversity initiatives, aiming to align board expertise with business needs [70][68] - A new leader for cybersecurity business units has been appointed to enhance growth in that area [18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's performance despite the challenging economic environment, citing strong cash flow and operational resilience [12][13] - The company reinstated its fiscal year 2020 guidance, expecting revenues between $1.38 billion and $1.4 billion, with adjusted EBITDA between $556 million and $570 million [44][42] - Management anticipates a tilted U-shaped recovery rather than a sharp V-shaped recovery in the economy [53] Other Important Information - J2 Global ended the quarter with approximately $711 million in cash and investments, after repurchasing $24 million of its shares [21][35] - The company announced a new 10 million share repurchase program, reflecting confidence in its stock value [21] Q&A Session Summary Question: How is the company approaching M&A in the current environment? - Management indicated confidence in conducting M&A virtually and is prepared to pursue both small and larger deals [48][51] Question: Can you provide guidance on Cloud versus Digital Media revenue for Q3 and Q4? - Management expects a decline in Cloud revenue due to the sale of Australian and New Zealand assets, while Digital Media is anticipated to be flat in Q3 and down in Q4 [55][56] Question: What are the drivers of margin expansion despite COVID-19? - Management highlighted cost structure improvements and renegotiated vendor contracts as key drivers for margin expansion [106][111] Question: How are the early bundling efforts on Cloud Services impacting churn rates? - Management noted that retention programs were prioritized, leading to improved cancel rates, while bundling initiatives will be accelerated in the future [118] Question: What is the outlook for the Digital Media business, particularly in tech and gaming? - Management reported strong growth in Everyday Health and noted a favorable category mix, while anticipating some pressure in tech advertising due to console release timing [96][97]