j2 Global Tops on Q1 Earnings, Ups Div - Analyst Blog

j2 Global Inc. JCOM reported better-than-expected financial results for the first quarter of 2014. Net profit significantly outpaced the Zacks Consensus Estimate, whereas total revenue was in line with the same. However, the top line surged significantly over the prior-year quarter.

Additionally, the company's board of directors declared a 2.9% sequential increase in its quarterly dividend, raising the figure to 27 cents per share from 26.25 cents. This is in sync with j2 Global's streak of dividend increases for the last eleven quarters. The new dividend rate implies a 12.5% year-over-year increase. Earlier, the board extended its one-year five million share repurchase program set to expire on Feb 20, 2014, by one more year.

Quarterly GAAP net income came in at $28.8 million or 60 cents per share compared with $22.9 million or 49 cents per share in the year-ago quarter. First-quarter adjusted earnings per share stood at 73 cents, easily surpassing the Zacks Consensus Estimate of 67 cents. Quarterly total revenue was approximately $134.1 million, up 18.1% year over year and almost in line with the Zacks Consensus Estimate of $134 million.

j2 Global posted quarterly gross margin of 82.6% compared with 82.2% in the year-ago quarter. Operating expenses in the reported quarter were $69.2 million as against $60.4 million in the prior-year quarter. Quarterly operating margin was 31% against 29% in the comparable quarter last year. Quarterly EBITDA stood at $57.3 million, up 18.9% year over year.

Churn rate, in the first quarter of 2014, was a record low of 2.34% compared with 2.4% in the year-ago quarter. In the first quarter of 2014, j2 Global generated $37.3 million of cash from operations compared with $40.1 million in the year-ago quarter. Free cash flow, in the reported quarter, was $34.4 million compared with $38.1 million in the prior-year quarter.

At the end of the first quarter of 2014, j2 Global had around $315 million in cash & marketable securities on its balance sheet compared with $345.9 million at the end of 2013. At the end of the reported quarter, the company had $245.8 million of debt as against $245.7 million at the end of 2013. The debt-to-capitalization ratio stood at 0.25 against 0.26 at the end of 2013.

Financial Outlook

For fiscal 2014, management expects total revenue in the band of $580–$600 million. Non-GAAP earnings per share are expected in the $3.23–$3.47 range. Share-based compensation expense will likely to be $10-$12 million. Non-GAAP effective tax rate is estimated between 27% and 29%.

Other Stocks to Consider

j2 Global currently has a Zacks Rank #3 (Hold). Other better-ranked stocks in the Internet/Application software industry include Model N Inc. MODN, Support.com Inc. SPRT and Synchronoss Technologies Inc. SNCR. Currently, both Support.com and Synchronoss sport a Zacks Rank #1 (Strong Buy) while Model N has a Zacks Rank #2 (Buy).