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J2 Global Reports Third Quarter 2019 Results

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Achieves Record Third Quarter Revenues

J2 Global, Inc. (NASDAQ:JCOM) today reported financial results for the third quarter ended September 30, 2019.

"We're pleased with the acceleration in our growth and our strong results across the board," said Vivek Shah, CEO of J2 Global. "We're also excited by our four acquisitions, including BabyCenter and Spiceworks, across four different business units in the quarter."

THIRD QUARTER 2019 RESULTS

Q3 2019 quarterly revenues increased 17.6% to a third quarter record of $344.1 million compared to $292.7 million for Q3 2018.

Net cash provided by operating activities increased to $99.5 million compared to $87.8 million for Q3 2018. Q3 2019 free cash flow(1) increased 12.7% to $80.5 million compared to $71.5 million for Q3 2018 before the effects of payments associated with certain contingent consideration associated with our Media segment.

GAAP earnings per diluted share(3) increased 1.6% to $0.62 in Q3 2019 compared to $0.61 for Q3 2018.

Adjusted non-GAAP earnings per diluted share(3)(4) for the quarter increased 11.1% to a third quarter record of $1.70 compared to $1.53 for Q3 2018.

GAAP net income for Q3 2019 remained at $30.7 million as compared to Q3 2018.

Quarterly Adjusted EBITDA(5) increased 13.2% to $134.8 million compared to $119.1 million for Q3 2018.

J2 ended the quarter with approximately $191 million in cash and investments after deploying approximately $149 million during the quarter for acquisitions and approximately $16 million in respect of its share repurchase program.

Key financial results for Q3 2019 versus Q3 2018 are set forth in the following table (in millions, except per share amounts). Reconciliations of Adjusted non-GAAP earnings per diluted share, Adjusted EBITDA and free cash flow to their nearest comparable GAAP financial measures are attached to this Press Release.

 

Q3 2019

Q3 2018

% Change

Revenues

 

 

 

Cloud Services

$171.2 million

$150.1 million

14.0%

Digital Media

$173.0 million

$142.6 million

21.3%

Total Revenue: (1)

$344.1 million

$292.7 million

17.6%

Operating Income

$59.4 million

$57.1 million

4.0%

Net Cash Provided by Operating Activities

$99.5 million

$87.8 million

13.3%

Free Cash Flow (2)

$80.5 million

$71.5 million

12.7%

GAAP Earnings per Diluted Share (3)

$0.62

$0.61

1.6%

Adjusted Non-GAAP Earnings per Diluted Share (3) (4)

$1.70

$1.53

11.1%

GAAP Net Income

$30.7 million

$30.7 million

—%

Adjusted Non-GAAP Net Income

$82.8 million

$75.1 million

10.3%

Adjusted EBITDA (5)

$134.8 million

$119.1 million

13.2%

Adjusted EBITDA Margin (5)

39.2%

40.7%

(1.5)%

BUSINESS OUTLOOK

For fiscal 2019, the Company reaffirms its previously revised estimates that it will achieve revenues between $1.33 billion and $1.37 billion and Adjusted EBITDA between $540 million and $556 million. In addition, the Company is reaffirming its previously revised estimates that it will achieve Adjusted non-GAAP earnings per diluted share of between $6.95 and $7.15.

Adjusted non-GAAP earnings per diluted share for 2019 excludes share-based compensation of between $23 million and $27 million, amortization of acquired intangibles and the impact of any currently unanticipated items, in each case net of tax.

It is anticipated that the non-GAAP effective tax rate for 2019 (exclusive of the release of reserves for uncertain tax positions) will be between 20.5% and 22.5%.

The Company has not reconciled the Adjusted non-GAAP earnings per diluted share and tax rate guidance included in this release to the most directly comparable GAAP measure because this cannot be done without unreasonable effort due to the variability with respect to costs related to acquisitions and taxation, which are potential adjustments to future earnings. We expect the variability of these items to have a potentially unpredictable and significant impact on our future GAAP financial results.

Notes:

(1)

 

The revenues associated with each of the businesses may not foot precisely since each is presented independently.

(2)

 

Free cash flow is defined as net cash provided by operating activities, less purchases of property, plant and equipment. Free cash flow amounts are not meant as a substitute for GAAP, but are solely for informational purposes.

(3)

 

The estimated GAAP effective tax rates were approximately 17.0% for Q3 2019 and 22.9% for Q3 2018. The estimated Adjusted non-GAAP effective tax rates were approximately 21.7% for Q3 2019 and 20.8% for Q3 2018.

(4)

 

Adjusted non-GAAP earnings per diluted share excludes certain non-GAAP items, as defined in the Reconciliation of GAAP to Adjusted non-GAAP Financial Measures, for the three months ended September 30, 2019 and 2018 totaled $1.08 and $0.91 per diluted share, respectively.

(5)

 

Adjusted 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, as defined in the Reconciliation of GAAP to Adjusted non-GAAP Financial Measures. Adjusted EBITDA amounts are not meant as a substitute for GAAP, but are solely for informational purposes.

About J2 Global

J2 Global, Inc. (NASDAQ:JCOM) is a leading internet information and services company consisting of a portfolio of brands including IGN, Mashable, Humble Bundle, Speedtest, PCMag, Offers.com, Spiceworks, Everyday Health, BabyCenter and What To Expect in its Digital Media business and eFax, eVoice, iContact, Campaigner, Vipre, IPVanish and KeepItSafe in its Cloud Services business. J2 reaches over 180 million people per month across its brands. As of December 31, 2018, J2 had achieved 23 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, including those contained in Vivek Shah's quote and the "Business Outlook" portion regarding the Company's expected fiscal 2019 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 2018 Annual Report on Form 10-K filed by J2 Global on March 1, 2019, 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, including those contained in Vivek Shah's quote and in the "Business Outlook" portion regarding the Company's expected fiscal 2019 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 net income, Adjusted non-GAAP earnings per diluted share, Adjusted 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. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED, IN THOUSANDS)

 

September 30, 2019

 

December 31, 2018

ASSETS

 

 

 

Cash and cash equivalents

$

94,570

 

 

$

209,474

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