j2 Reports Record Second Quarter 2015 Results

LOS ANGELES--(BUSINESS WIRE)--

j2 Global, Inc. JCOM today reported financial results for the second quarter ended June 30, 2015 and announced that its Board of Directors has declared an increased quarterly cash dividend of $0.3075 per share.

j2 achieved several quarterly records, including:

• Revenues of $176 million
• EBITDA⁽¹⁾ of $79.6 million
• Adjusted Non-GAAP EPS⁽²⁾⁽³⁾ of $0.99 per diluted share
• Reducing the user cancel rate⁽⁴⁾ to below 2% (1.94%)

SECOND QUARTER 2015 RESULTS

Quarterly revenues increased 21.6% to a Q2 record $176 million compared to $144.7 million for Q2 2014.

GAAP earnings per diluted share⁽²⁾ for the quarter increased 9.6% to $0.80 compared to $0.73 for Q2 2014. Adjusted Non-GAAP earnings per diluted share⁽²⁾⁽³⁾ for the quarter increased 17.9% to a Q2 record $0.99 compared to $0.84 for Q2 2014.

Quarterly EBITDA⁽¹⁾ increased 25% to a Q2 record $79.6 million compared to $63.7 million for Q2 2014.

Q2 2015 free cash flow⁽⁵⁾ increased 1.5% to $54.9 million compared to $54.1 million despite an interest payment of $6.5 million associated with our convertible debt in the current quarter that was not present in the prior year comparable quarter.

j2 ended the quarter with approximately $567.3 million in cash and investments after deploying $17.6 million during the quarter for acquisitions and j2's regular quarterly dividend.

Key financial results for Q2 2015 versus Q2 2014 are set forth in the following table (in millions, except per share amounts). Reconciliations of earnings per diluted share, EBITDA and free cash flow to their nearest comparable GAAP financial measures are attached to this Press Release.

		Q2 2015		Q2 2014		% Change
Revenues
Cloud Services		$123.9 million		$105.3 million		17.7%
Digital Media		$50.8 million		$38.2 million		33%
IP Licensing		$1.3 million		$1.2 million		8.3%
Total:		$176 million		$144.7 million		21.6%
GAAP Net Income		$38.9 million		$35 million		11.1%
GAAP Earnings per Diluted Share (2)		$0.80		$0.73		9.6%
Adjusted Non-GAAP Earnings per Diluted Share (2) (3)		$0.99		$0.84		17.9%
EBITDA (1)		$79.6 million		$63.7 million		25%
Free Cash Flow (5)		$54.9 million		$54.1 million		1.5%

"With nearly $80 million of EBITDA and numerous other quarterly records, I am extremely proud of j2," said Hemi Zucker, CEO of j2 Global®. "Our commitment to success is demonstrated by both our Cloud and Digital Media teams who are focused on driving revenue growth, optimizing expenses and successfully integrating our acquisitions. We remain very well-funded with over $550 million of cash and investments. As current revenues and earnings are already trending toward the high end of our 2015 financial guidance, any significant acquisition is likely to push us beyond that range."

BUSINESS OUTLOOK

The Company reaffirms its fiscal 2015 estimates that it will achieve revenues between $690 and $710 million and Adjusted Non-GAAP earnings per diluted share of between $3.73 and $3.97.

Adjusted Non-GAAP earnings per diluted share for 2015 excludes share-based compensation of between $11 and $12 million, amortization of acquired intangibles and the impact of any currently unanticipated items, in each case net of tax.

It is anticipated that the normalized tax rate for 2015 (exclusive of the release of reserves for uncertain tax positions) will be at the higher end of the provided business outlook range between 27% and 29%.

DIVIDEND

j2's Board of Directors has approved a quarterly cash dividend of $0.3075 per common share, a 10.8% increase versus the dividend paid in Q3 2014. This is j2's sixteenth consecutive quarterly dividend increase since its first quarterly dividend in September 2011. The dividend will be paid on September 1, 2015 to all shareholders of record as of the close of business on August 17, 2015. Future dividends will be subject to Board approval.

Notes:

(1)			EBITDA is defined as earnings before interest and other expense, net; income tax expense; depreciation and amortization; and the items used to reconcile EPS to Adjusted Non-GAAP EPS referred to in Note (3) below. EBITDA amounts are not meant as a substitute for GAAP, but are solely for informational purposes.
(2)			The estimated GAAP effective tax rates were approximately 0.5% for Q2 2015 and 10.9% for Q2 2014. The estimated Adjusted Non-GAAP effective tax rates were approximately 28.5% for Q2 2015 and 27.1% for Q2 2014.
(3)			For Q2 2015, Adjusted Non-GAAP earnings per diluted share excludes share-based compensation, certain acquisition-related integration costs, interest costs in excess of the coupon rate associated with convertible notes, certain tax consulting fees, amortization of acquired intangibles and additional tax expense (benefit) from prior years, in each case net of tax, totaling $0.19 per diluted share. For Q2 2014, Adjusted Non-GAAP earnings per diluted share excludes share-based compensation, certain acquisition-related integration costs, amortization of acquired intangibles and additional tax expense (benefit) from prior years, and adds back the impact of the fair value adjustment to deferred revenues purchased in the Livedrive acquisition, in each case net of tax, totaling $0.12 per diluted share.
(4)			User cancel rate, also called user churn, is defined as cancellation of service by Cloud Business customers with greater than 4 months of continuous service (continuous service includes Cloud Business customers that are administratively cancelled and reactivated within the same calendar month). User cancel rate is calculated monthly and expressed here as an average over the three months of the quarter.
(5)			Free cash flow is defined as net cash provided by operating activities, less purchases of property, plant and equipment, plus excess tax benefit from share-based compensation. In addition, the amount shown for Q2 2015 excludes the effect of payments associated with taxes for prior periods under audit. Free cash flow amounts are not meant as a substitute for GAAP, but are solely for informational purposes.

About j2 Global

j2 Global, Inc. JCOM provides Internet services through two divisions: Business Cloud Services and Digital Media. The Business Cloud Services Division offers Internet fax, virtual phone, hosted email, email marketing, online backup, unified communications and CRM solutions. It markets its services principally under the brand names eFax®, eVoice®, FuseMail®, Campaigner®, KeepItSafe®, Livedrive® and Onebox®, and operates a messaging network spanning 50 countries on six continents. The Digital Media Division offers technology, gaming and lifestyle content through its digital properties, which include PCMag.com, IGN.com, AskMen.com, Toolbox.com and others. The Digital Media Division also operates NetShelter ® Powered by BuyerBase®, an advanced digital ad targeting platform, and Ziff Davis B2B, a leading provider of research to enterprise buyers and leads to IT vendors. As of December 31, 2014, j2 had achieved 19 consecutive fiscal years of revenue growth. For more information about j2, please visit www.j2global.com.

"Safe Harbor" Statement Under the Private Securities Litigation Reform Act of 1995: Certain statements in this Press Release are "forward-looking statements" within the meaning of The Private Securities Litigation Reform Act of 1995, particularly those contained in Hemi Zucker's quote and the "Business Outlook" portion regarding the Company's expected fiscal 2015 financial performance. These forward-looking statements are based on management's current expectations or beliefs and are subject to numerous assumptions, risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. These factors and uncertainties include, among other items: the Company's ability to grow non-fax revenues, profitability and cash flows; the Company's ability to identify, close and successfully transition acquisitions; subscriber growth and retention; variability of the Company's revenue based on changing conditions in particular industries and the economy generally; protection of the Company's proprietary technology or infringement by the Company of intellectual property of others; the risk of adverse changes in the U.S. or international regulatory environments, including but not limited to the imposition or increase of taxes or regulatory-related fees; and the numerous other factors set forth in j2 Global's filings with the Securities and Exchange Commission ("SEC"). For a more detailed description of the risk factors and uncertainties affecting j2 Global, refer to the 2014 Annual Report on Form 10-K filed by j2 Global on March 2, 2015, and the other reports filed by j2 Global from time-to-time with the SEC, each of which is available at www.sec.gov. The forward-looking statements provided in this press release and particularly those contained in Hemi Zucker's quote and the "Business Outlook" portion regarding the Company's expected fiscal 2015 financial performance are based on limited information available to the Company at this time, which is subject to change. Although management's expectations may change after the date of this press release, the Company undertakes no obligation to revise or update these statements.

About Non-GAAP Financial Measures

To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we use the following Adjusted Non-GAAP financial measures: Adjusted Non-GAAP earnings per diluted share, EBITDA and free cash flow. The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.

We use these Adjusted Non-GAAP financial measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons. Our management believes that these Adjusted Non-GAAP financial measures provide meaningful supplemental information regarding our performance and liquidity by excluding certain expenses and expenditures that may not be indicative of our recurring core business operating results. We believe that both management and investors benefit from referring to these Adjusted Non-GAAP financial measures in assessing our performance and when planning, forecasting, and analyzing future periods. These Adjusted Non-GAAP financial measures also facilitate management's internal comparisons to our historical performance and liquidity. We believe these Adjusted Non-GAAP financial measures are useful to investors both because (1) they allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making and (2) they are used by our institutional investors and the analyst community to help them analyze the health of our business.

For more information on these Adjusted Non-GAAP financial measures, please see the appropriate GAAP to Adjusted Non-GAAP reconciliation tables included within the attached Exhibit to this release.

j2 GLOBAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED, IN THOUSANDS)
			JUNE 30,				DECEMBER 31,
			2015				2014
ASSETS
	Cash and cash equivalents		$	415,930			$	433,663
	Short-term investments			97,188				96,206
	Accounts receivable, net of allowances of $4,160 and $3,685, respectively			87,319				91,699
	Prepaid expenses and other current assets			27,140				22,602
	Deferred income taxes			4,514				2,013
	Total current assets			632,091				646,183
	Long-term investments			54,177				60,508
	Property and equipment, net			36,778				38,217
	Goodwill			674,084				635,675
	Other purchased intangibles, net			316,168				311,800
	Other assets			13,511				12,819
	TOTAL ASSETS		$	1,726,809			$	1,705,202
LIABILITIES AND STOCKHOLDERS' EQUITY
	Accounts payable and accrued expenses		$	87,081			$	95,310
	Income taxes payable			1,215				-
	Deferred revenue			75,353				63,457
	Capital lease			324				258
	Deferred income taxes			362				342
	Total current liabilities			164,335				159,367
	Long-term debt			597,209				593,350
	Deferred revenue			8,222				10,182
	Capital lease			195				141
	Liability for uncertain tax positions			25,136				37,551
	Deferred income taxes			63,267				61,960
	Other long-term liabilities			19,242				22,416
	Total liabilities			877,606				884,967
	Commitments and contingencies
	Stockholders' Equity:
	Preferred stock			—				—
	Common stock			476				474
	Additional paid-in capital			282,702				273,304
	Retained earnings			584,831				553,584
	Accumulated other comprehensive loss			(18,806	)			(7,127	)
	Total stockholders' equity			849,203				820,235
	TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY		$	1,726,809			$	1,705,202

j2 GLOBAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED, IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
			THREE MONTHS ENDED JUNE 30,							SIX MONTHS ENDED JUNE 30,
			2015			2014				2015				2014
Revenues			$	176,038		$	144,744			$	337,291			$	278,868
Cost of revenues (1)				29,494			25,558				57,681				48,947
	Gross profit			146,544			119,186				279,610				229,921
Operating expenses:
	Sales and marketing (1)			40,421			35,329				78,011				68,288
	Research, development and engineering (1)			8,969			7,600				17,415				14,814
	General and administrative (1)			47,088			31,419				93,588				60,397
	Total operating expenses			96,478			74,348				189,014				143,499
Income from operations				50,066			44,838				90,596				86,422
Interest expense (income), net				10,881			5,682				21,194				10,630
Other expense (income), net				88			(185	)			(696	)			(505	)
Income before income taxes				39,097			39,341				70,098				76,297
Income tax expense				181			4,292				9,304				12,483
Net income			$	38,916		$	35,049			$	60,794			$	63,814
Basic net income per common share:
	Net income attributable to j2 Global, Inc. common shareholders		$	0.81		$	0.73			$	1.26			$	1.34
Diluted net income per common share:
	Net income attributable to j2 Global, Inc. common shareholders		$	0.80		$	0.73			$	1.25			$	1.33
Basic weighted average shares outstanding				47,537,597			46,745,596				47,480,315				46,556,428
Diluted weighted average shares outstanding				47,853,574			47,067,767				47,737,006				46,911,574
(1) Includes share-based compensation expense as follows:
Cost of revenues			$	91		$	27			$	174			$	181
Sales and marketing				603			426				1,187				917
Research, development and engineering				213			222				408				362
General and administrative				2,261			1,288				4,404				2,887
Total			$	3,168		$	1,963			$	6,173			$	4,347

j2 GLOBAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED, IN THOUSANDS)
						SIX MONTHS ENDED JUNE 30,
						2015				2014
Cash flows from operating activities:
		Net income				$	60,794			$	63,814
	Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation and amortization					43,181				28,455
		Accretion and amortization of discount and premium of investments					551				654
		Amortization of financing costs and discounts					4,480				641
		Share-based compensation					6,173				4,347
		Excess tax benefit from share-based compensation					(2,104	)			(4,803	)
		Provision for doubtful accounts					3,544				1,810
		Deferred income taxes, net					(73	)			(780	)
		Gain on sale of available-for-sale investment					(42	)			(40	)
	Decrease (increase) in:
		Accounts receivable					2,199				5,691
		Prepaid expenses and other current assets					2,163				(3,151	)
		Other assets					354				37
	(Decrease) increase in:
		Accounts payable and accrued expenses					(5,814	)			(3,616	)
		Income taxes payable					(5,069	)			(320	)
		Deferred revenue					(1,546	)			364
		Liability for uncertain tax positions					(12,414	)			(1,213	)
		Other long-term liabilities					1,233				(84	)
Net cash provided by operating activities							97,610				91,806
Cash flows from investing activities:
		Maturity of certificate of deposit					65				14,520
		Purchase of certificates of deposit					(62	)			—
		Maturity of available-for-sale investments					56,095				51,929
		Purchases of available-for-sale investments					(57,465	)			(45,043	)
		Purchases of property and equipment					(6,955	)			(4,631	)
		Purchases of intangible assets					(866	)			(79,546	)
		Acquisition of business					(74,308	)			(3,899	)
		Proceeds from sale of assets					—				608
Net cash used in investing activities							(83,496	)			(66,062	)
Cash flows from financing activities:
		Issuance of long-term debt					—				402,500
		Debt issuance costs					—				(11,069	)
		Repurchases of stock					(2,302	)			(4,733	)
		Issuance of stock, net of costs					3,135				5,316
		Excess tax benefit from share-based compensation					2,104				4,803
		Dividends paid					(28,610	)			(25,302	)
		Acquisition of business					(3,883	)			(13,473	)
		Other					(180	)			(163	)
Net cash (used in) provided by financing activities							(29,736	)			357,879
Effect of exchange rate changes on cash and cash equivalents							(2,111	)			457
Net increase (decrease) in cash and cash equivalents							(17,733	)			384,080
Cash and cash equivalents at beginning of period							433,663				207,801
Cash and cash equivalents at end of period						$	415,930			$	591,881

j2 GLOBAL, INC.
RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP FINANCIAL MEASURES
THREE MONTHS ENDED JUNE 30, 2015 AND 2014
(UNAUDITED, IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
Non-GAAP net income is GAAP net income with the following modifications: (1) elimination of share-based compensation and the associated payroll tax expense; (2) elimination of certain acquisition-related integration costs and the impact of fair value adjustments to deferred revenue purchased in the Livedrive acquisition; (3) elimination of interest costs in excess of the coupon rate associated with the convertible notes; (4) IRS consulting fee; (5) elimination of amortization of patents and intangible assets that we acquired; (6) elimination of additional income tax (expense) benefit from prior years; and (7) elimination of income tax provision associated with the noted modifications.
						THREE MONTHS ENDED JUNE 30, 2015																									THREE MONTHS ENDED JUNE 30, 2014
												(2)												(6)														(2)						(6)
												Acquisition-						(4)						Additional														Acquisition-						Additional
									(1)			related			(3)			IRS						Tax Expense											(1)			related						Tax Expense
									Share-based			Integration			Interest			Consulting			(5)			(Benefit) from			Adjusted								Share-based			Integration			(5)			(Benefit) from			Adjusted
						GAAP			Compensation			Costs			Costs			Fee			Amortization			Prior Years			Non-GAAP				GAAP				Compensation			Costs			Amortization			Prior Years			Non-GAAP
Revenues						$	176,038		—			—			—			—			—			—			$	176,038			$	144,744			—			985			—			—			$	145,729
Cost of revenues							29,494		(91	)		27			—			—			(666	)		—				28,764				25,558			(27	)		—			(855	)		—			$	24,676
Operating expenses:
	Sales and marketing						40,421		(603	)		(230	)		—			—			—			—				39,588				35,329			(426	)		(41	)		—			—			$	34,862
	Research, development and engineering						8,969		(213	)		—			—			—			—			—				8,756				7,600			(222	)		—			—			—			$	7,378
	General and administrative						47,088		(2,261	)		(1,692	)		—			—			(17,568	)		(2,533	)			23,034				31,419			(1,288	)		(589	)		(11,435	)		—			$	18,107
Interest expense (income), net							10,881		—			—			(1,805	)		—			—			(472	)			8,604				5,682			—			(439	)		—			—			$	5,243
Other expense (income), net							88		—			—			—			—			—			—				88				(185	)		—			—			—			—			$	(185	)
Income tax provision (7)							181		945			717			497			5			4,935			11,887				19,167				4,292			696			649			3,982			5,487			$	15,106
Net income						$	38,916		2,223			1,178			1,308			(5	)		13,299			(8,882	)		$	48,037			$	35,049			1,267			1,405			8,308			(5,487	)		$	40,542
Net income per share attributable to j2 Global, Inc. common stockholders*:
	Basic					$	0.81		0.05			0.02			0.03			(0.00	)		0.28			(0.19	)		$	0.99			$	0.73			0.03			0.03			0.18			(0.12	)		$	0.85
	Diluted					$	0.80		0.05			0.02			0.03			(0.00	)		0.28			(0.19	)		$	0.99			$	0.73			0.03			0.03			0.18			(0.12	)		$	0.84

* The reconciliation of net income per share from GAAP to adjusted non-GAAP may not foot since each is calculated independently.
The Company discloses adjusted non-GAAP Earnings Per Share ("EPS") as supplemental non-GAAP financial performance measure, as it believes it is a useful metric by which to compare the performance of its business from period to period. The Company also understands that this adjusted non-GAAP measure is broadly used by analysts, rating agencies and investors in assessing the Company's performance. Accordingly, the Company believes that the presentation of this adjusted non-GAAP financial measure provides useful information to investors.
Adjusted non-GAAP EPS is not in accordance with, or an alternative to, net income per share and may be different from non-GAAP measures with similar or even identical names used by other companies. In addition, this adjusted non-GAAP measure is not based on any comprehensive set of accounting rules or principles. This adjusted non-GAAP measure has limitations in that it does not reflect all of the amounts associated with the Company's results of operations determined in accordance with GAAP.

j2 GLOBAL, INC.
RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP FINANCIAL MEASURES
SIX MONTHS ENDED JUNE 30, 2015 AND 2014
(UNAUDITED, IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
Non-GAAP net income is GAAP net income with the following modifications: (1) elimination of share-based compensation and the associated payroll tax expense; (2) elimination of certain acquisition-related integration costs and the impact of fair value adjustments to deferred revenue purchased in the Livedrive acquisition; (3) elimination of interest costs in excess of the coupon rate associated with the convertible notes; (4) IRS consulting fee; (5) elimination of amortization of patents and intangible assets that we acquired; (6) elimination of additional income tax (expense) benefit from prior years; and (7) elimination of income tax provision associated with the noted modifications.
						SIX MONTHS ENDED JUNE 30, 2015																											SIX MONTHS ENDED JUNE 30, 2014
													(2)												(6)															(2)						(6)
													Acquisition-						(4)						Additional															Acquisition-						Additional
										(1)			related			(3)			IRS						Income Tax												(1)			related						Income Tax
										Share-based			Integration			Interest			Consulting			(5)			Benefit from			Adjusted									Share-based			Integration			(5)			Benefit from			Adjusted
						GAAP				Compensation			Costs			Costs			Fee			Amortization			Prior Years			Non-GAAP					GAAP				Compensation			Costs			Amortization			Prior Years			Non-GAAP
Revenues						$	337,291			—			—			—			—			—			—			$	337,291				$	278,868			—			1,526			—			—			$	280,394
Cost of revenues							57,681			(174	)		—			—			—			(1,329	)		—				56,178					48,947			(181	)		—			(1,279	)		—			$	47,487
Operating expenses:
	Sales and marketing						78,011			(1,187	)		(715	)		—			—			—			—				76,109					68,288			(917	)		(60	)		—			—			$	67,311
	Research, development and engineering						17,415			(407	)		(80	)		—			—			—			—				16,928					14,814			(362	)		—			—			—			$	14,452
	General and administrative						93,588			(4,404	)		(4,634	)		—			204			(34,543	)		(3,651	)			46,560					60,397			(2,887	)		472			(21,395	)		(713	)		$	35,874
Interest expense (income), net							21,194			—			—			(3,584	)		—			—			(472	)			17,138					10,630			—			(439	)		—			—			$	10,191
Other expense (income), net							(696	)		—			—			—			—			—			—				(696	)				(505	)		—			—			—			—			$	(505	)
Income tax provision (7)							9,304			1,713			1,837			1,028			(45	)		10,260			11,769				35,866					12,483			1,520			365			7,413			6,849			$	28,630
Net income						$	60,794			4,459			3,592			2,556			(159	)		25,612			(7,646	)		$	89,208				$	63,814			2,827			1,188			15,261			(6,136	)		$	76,954
Net income per share attributable to j2 Global, Inc. common stockholders*:
	Basic					$	1.26			0.09			0.08			0.05			(0.00	)		0.54			(0.16	)		$	1.85				$	1.34			0.06			0.03			0.33			(0.12	)		$	1.62
	Diluted					$	1.25			0.09			0.08			0.05			(0.00	)		0.54			(0.16	)		$	1.84				$	1.33			0.06			0.03			0.33			(0.12	)		$	1.60

* The reconciliation of net income per share from GAAP to adjusted non-GAAP may not foot since each is calculated independently.
The Company discloses adjusted non-GAAP Earnings Per Share ("EPS") as supplemental non-GAAP financial performance measure, as it believes it is a useful metric by which to compare the performance of its business from period to period. The Company also understands that this adjusted non-GAAP measure is broadly used by analysts, rating agencies and investors in assessing the Company's performance. Accordingly, the Company believes that the presentation of this adjusted non-GAAP financial measure provides useful information to investors.
Adjusted non-GAAP EPS is not in accordance with, or an alternative to, net income per share and may be different from non-GAAP measures with similar or even identical names used by other companies. In addition, this adjusted non-GAAP measure is not based on any comprehensive set of accounting rules or principles. This adjusted non-GAAP measure has limitations in that it does not reflect all of the amounts associated with the Company's results of operations determined in accordance with GAAP.

j2 GLOBAL, INC.
NET INCOME TO EBITDA RECONCILIATION
THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2015 AND 2014
(UNAUDITED, IN THOUSANDS)
The following table sets forth a reconciliation of EBITDA to net income, the most directly comparable GAAP financial measure.
		THREE MONTHS ENDED JUNE 30,								SIX MONTHS ENDED JUNE 30,
		2015			2014					2015				2014
Net income		$	38,916		$	35,049				$	60,794			$	63,814
Plus:
Other expense (income), net			88			(185	)				(696	)			(505	)
Interest expense (income), net			10,881			5,682					21,194				10,630
Income tax expense			181			4,292					9,304				12,483
Depreciation and amortization			21,893			15,317					43,181				28,455
Reconciliation of GAAP to adjusted non-GAAP financial measures:
Share-based compensation and the associated payroll tax expense			3,168			1,963					6,173				4,347
Acquisition-related integration costs			1,895			1,615					5,429				1,114
Additional indirect tax expense from prior years			2,533			-					3,651				713
Fees associated with prior year audits			-			-					(204	)			-
EBITDA		$	79,555		$	63,733				$	148,826			$	121,051

EBITDA as calculated above represents earnings before interest and other expense, net, income tax expense, depreciation and amortization and the items used to reconcile GAAP to adjusted non-GAAP financial measures, including (1) share-based compensation, (2) certain acquisition-related integration costs and (3) additional indirect tax expense from prior years. We disclose EBITDA as a supplemental non-GAAP financial performance measure as we believe it is a useful metric by which to compare the performance of our business from period to period. We understand that measures similar to EBITDA are broadly used by analysts, rating agencies and investors in assessing our performance. Accordingly, we believe that the presentation of EBITDA provides useful information to investors.
EBITDA is not in accordance with, or an alternative to, net income, and may be different from non-GAAP measures used by other companies. In addition, EBITDA is not based on any comprehensive set of accounting rules or principles. This adjusted non-GAAP measure has limitations in that it does not reflect all of the amounts associated with the Company's results of operations determined in accordance with GAAP.

j2 GLOBAL, INC.
NON-GAAP FINANCIAL MEASURES
(UNAUDITED, IN THOUSANDS)
		Q1				Q2				Q3				Q4				YTD
2015
Net cash provided by operating activities		$	45,716			$	51,894			$	-			$	-			$	97,610
Less: Purchases of property and equipment			(2,401	)			(4,554	)			-				-				(6,955	)
Add: Excess tax benefit from share-based compensation			334				1,770				-				-				2,104
Add: IRS settlement*							5,753				-				-				5,753
Free cash flows		$	43,649			$	54,863			$	-			$	-			$	98,512
* Free cash flows of $54.9 million for Q2 2015 were before the effect of payments associated with taxes for prior periods under audit.
		Q1				Q2				Q3				Q4				YTD
2014
Net cash provided by operating activities		$	37,294			$	54,512			$	40,315			$	45,110			$	177,231
Less: Purchases of property and equipment			(2,936	)			(1,087	)			(3,124	)			(4,074	)			(11,221	)
Add: Excess tax benefit from share-based compensation			4,082				721				1,925				(1,216	)			5,512
Free cash flows		$	38,440			$	54,146			$	39,116			$	39,820			$	171,522

The Company discloses Free Cash Flows as supplemental non-GAAP financial performance measure, as it believes it is a useful metrics by which to compare the performance of its business from period to period. The Company also understands that this non-GAAP measure is broadly used by analysts, rating agencies and investors in assessing the Company's performance. Accordingly, the Company believes that the presentation of this non-GAAP financial measure provides useful information to investors.
Free Cash Flows is not in accordance with, or an alternative to, Cash Flows from Operating Activities, and may be different from non-GAAP measures with similar or even identical names used by other companies. In addition, the non-GAAP measure is not based on any comprehensive set of accounting rules or principles. This non-GAAP measure has limitations in that it does not reflect all of the amounts associated with the Company's results of operations determined in accordance with GAAP.

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