EX-99.1 2 exh99-1_15340.htm PRESS RELEASE DATED AUGUST 6, 2007 WWW.EXFILE.COM, INC. -- J2 GLOBAL COMMUNICATIONS, INC. -- EXHIBIT 99.1 TO FORM 8-K
 
EXHIBIT 99.1
j2 Global Reports Q2 2007 Results
 
LOS ANGELES—August 6, 2007—j2 Global Communications, Inc. [NASDAQGS:JCOM], the leading provider of outsourced, value-added messaging and communications services, today reported financial results for the second quarter ended June 30, 2007.

SECOND QUARTER 2007 RESULTS

Revenues for Q2 2007 increased 22% to $54.0 million compared to $44.3 million for Q2 2006.

Net earnings per diluted share, excluding non-cash stock-based compensation expense net of related tax benefit (“Non-GAAP EPS”), for Q2 2007 increased 29% to $0.36 compared to $0.28 in Q2 2006.

Net earnings for Q2 2007 were $17.1 million, a 29% increase compared to Q2 2006 net earnings of $13.2 million. Net earnings per diluted share rose 27% to $0.33 compared to Q2 2006 net earnings per diluted share of $0.26.

The Company ended the quarter with approximately $233 million in cash and investments.

Key financial results for second quarter 2007 versus second quarter 2006 are as follows:

 
Q2 2007
Q2 2006
% Increase
Revenues
$54.0 million
$44.3 million
22%
Non-GAAP EPS (1)
$0.36
$0.28
29%
Net Earnings (1)
$17.1 million
$13.2 million
29%
Net Earnings per Share (1)
$0.33
$0.26
27%
(1) Net earnings in Q2 2007 and 2006 are based upon an estimated annual effective tax rate of approximately 30% and 28%, respectively. For the full year 2006 the tax rate was approximately 27%.
 
“We are pleased that our net earnings growth exceeded our revenue growth by seven percentage points,” said Scott Turicchi, co-president.  “This resulted principally from increased DID-based subscription revenues combined with lower cost of revenues and general and administrative expense as a percentage of revenues.  We delivered these results while increasing our spend on research and development and the testing of new marketing programs.”



BUSINESS OUTLOOK

“We are delighted with this quarter’s rate of customer growth, particularly because we are in the process of implementing a price change for our domestic individual eFax® service,” said Hemi Zucker, co-president and chief operating officer. “We are also pleased to report that during the quarter the growth in our voice service customer base exceeded our expectations as we enhanced our personnel and marketing programs for these services.”

Q3 2007 Estimates

For the third quarter of 2007, j2 Global anticipates revenues to approximate $56.0 million to $57.5 million and Non-GAAP EPS to approximate $0.36 to $0.37. This earnings estimate assumes an estimated annual effective tax rate for 2007 of approximately 30% and 51.2 million diluted shares.  The Company also expects to incur SFAS 123(R) (expensing for stock-based compensation) expense, net of taxes, for the quarter of approximately $0.02 per diluted share.

A summary of this Q3 2007 financial guidance is set forth in the table below:

 
Q3 2007
Revenues
$56.0 million– $57.5 million
Non-GAAP EPS (1)
$0.36– $0.37
(1) Per share guidance is based upon an estimated annual effective tax rate of approximately 30% and fully diluted shares of 51.2 million.

Fiscal Year 2007 Estimates

The Company reaffirms its previous revenue guidance of between $217 million and $229 million for fiscal 2007.

The Company also reaffirms its previous Non-GAAP EPS guidance for the year of between $1.35 and $1.45.

Additionally, the Company expects SFAS 123(R), net of taxes, to impact annual earnings by between $0.07 and $0.09 per diluted share.

The foregoing estimates are based on an estimated annual effective tax rate of approximately 30% and 51.2 million diluted shares.

About j2 Global Communications
Founded in 1995, j2 Global Communications, Inc. provides outsourced, value-added messaging and communications services to individuals and businesses around the world. j2 Global’s network spans greater than 2,900 cities in 42 countries on five continents. The Company offers faxing and voicemail solutions, document management
 

solutions, Web-initiated conference calling, and unified-messaging and communications services. j2 Global markets its services principally under the brand names eFax®, j2®, jConnect®, JFAX™, eFax Corporate®, Fax.com™, Onebox®, Electric Mail®, jBlast®, eFax Broadcast™, eVoice®, PaperMaster®, Consensus™, M4 Internet® and Protofax®. As of December 31, 2006, j2 Global had achieved 11 consecutive fiscal years of revenue growth and 5 consecutive fiscal years of positive and growing operating earnings. For more information about j2 Global, please visit www.j2global.com.

Contacts:
Jeff Adelman
j2 Global Communications, Inc.
323-372-3617
                                                    press@j2global.com

Kari Garcia
Comm Strategies
949-459-9696, ext. 244
pr@commstrategies.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 Act of 1995, particularly those contained in the “2007 Estimates” portion (and specifically Q3 and fiscal year 2007 estimates). 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: Subscriber growth and retention; 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 surrounding unified messaging and telecommunications, including but not limited to the imposition of additional taxation 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 2006 Annual Report on Form 10-K filed by j2 Global on March 12, 2007, 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 financial estimates provided in the “Business Outlook” portion of this press release (and specifically Q3 and fiscal year 2007 estimates) 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 financial estimates.
 

j2 GLOBAL COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED, IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
 
   
THREE MONTHS ENDED JUNE 30,
   
SIX MONTHS ENDED JUNE 30,
 
   
2007
   
2006
   
2007
   
2006
 
                         
Revenues
                       
Subscriber
  $
52,613
    $
42,671
    $
102,906
    $
83,233
 
Other
   
1,367
     
1,595
     
5,215
     
3,051
 
                                 
Total revenue
   
53,980
     
44,266
     
108,121
     
86,284
 
                                 
Cost of revenues (including stock-based compensation of $140 and $322 for the three and six months of 2007, respectively, and $97 and $206 for the three and six months of 2006, respectively)
   
10,232
     
9,289
     
21,222
     
18,299
 
                                 
Gross profit
   
43,748
     
34,977
     
86,899
     
67,985
 
                                 
Operating expenses:
                               
Sales and marketing (including stock-based compensation of $264 and $542 for the three and six months of 2007, respectively, and $275 and $540 for the three and six months of 2006, respectively)
   
9,672
     
7,493
     
18,452
     
14,357
 
Research, development and engineering (including stock-based compensation of $184 and $357 for the three and six months of 2007, respectively, and $153 and $263 for the three and six months of 2006, respectively)
   
2,976
     
1,944
     
5,689
     
3,836
 
General and administrative (including stock-based compensation of $1,114 and $2,211 for the three and six months of 2007, respectively, and $1,139 and $2,079 for the three and six months of 2006, respectively)
   
8,950
     
8,350
     
18,775
     
16,250
 
                                 
Total operating expenses
   
21,598
     
17,787
     
42,916
     
34,443
 
                                 
Operating earnings
   
22,150
     
17,190
     
43,983
     
33,542
 
                                 
Interest and other income, net
   
2,398
     
1,080
     
4,123
     
2,336
 
                                 
Earnings before income taxes
   
24,548
     
18,270
     
48,106
     
35,878
 
                                 
Income tax expense
   
7,470
     
5,071
     
14,589
     
10,368
 
                                 
Net earnings
  $
17,078
    $
13,199
    $
33,517
    $
25,510
 
                                 
                                 
Basic net earnings per share
  $
0.35
    $
0.27
    $
0.68
    $
0.52
 
                                 
Diluted net earnings per share
  $
0.33
    $
0.26
    $
0.66
    $
0.50
 
                                 
                                 
Basic weighted average shares outstanding
   
49,108,309
     
49,349,536
     
48,966,111
     
49,299,933
 
                                 
Diluted weighted average shares outstanding
   
51,007,561
     
51,186,073
     
50,844,416
     
51,056,246
 


j2 GLOBAL COMMUNICATIONS, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED, IN THOUSANDS)
 
   
JUNE 30,
   
DECEMBER 31,
 
   
2007
   
2006
 
             
ASSETS
           
Cash and cash equivalents
  $
108,147
    $
95,605
 
Short-term investments
   
114,455
     
83,498
 
Accounts receivable, net
   
12,984
     
11,989
 
Prepaid expenses and other
   
4,155
     
4,779
 
Deferred income taxes
   
2,643
     
2,643
 
                 
Total current assets
   
242,384
     
198,514
 
                 
Long-term investments
   
10,455
     
12,493
 
Property and equipment, net
   
19,407
     
18,951
 
Goodwill
   
31,135
     
30,954
 
Other purchased intangibles, net
   
23,114
     
21,400
 
Deferred income taxes
   
5,614
     
5,406
 
Other assets
   
412
     
442
 
                 
TOTAL ASSETS
  $
332,521
    $
288,160
 
                 
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
               
Accounts payable and accrued expenses
  $
14,827
    $
17,117
 
Income taxes payable
   
3,125
     
4,511
 
Deferred revenue
   
14,209
     
11,530
 
Current portion of long-term debt
   
3
     
149
 
                 
Total current liabilities
   
32,164
     
33,307
 
                 
Accrued income taxes
   
27,971
     
 
Other
   
87
     
112
 
                 
Total liabilities
   
60,222
     
33,419
 
                 
Total stockholders equity
   
272,299
     
254,741
 
                 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
  $
332,521
    $
288,160
 
 

j2 GLOBAL COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED, IN THOUSANDS)
 
   
SIX MONTHS ENDED JUNE 30,
 
   
2007
   
2006
 
             
Cash flows from operating activities:
           
          Net earnings
  $
33,517
    $
25,510
 
     Adjustments to reconcile net earnings to net cash
               
     provided by operating activities:
               
          Depreciation and amortization
   
4,570
     
3,960
 
          Stock-based compensation
   
3,549
     
3,088
 
          Tax benefit of stock option exercises and vested restricted stock
   
3,699
     
1,036
 
          Excess tax benefits on stock option exercises
    (2,943 )     (941 )
          Deferred income taxes
    (208 )     (879 )
          Loss on disposal of fixed assets
   
194
     
 
     Decrease (increase) in:
               
          Accounts receivable
    (922 )     (577 )
          Prepaid expenses and other
   
632
     
379
 
          Other assets
   
114
      (294 )
     (Decrease) increase in:
               
          Accounts payable and accrued expenses
    (3,061 )    
564
 
          Income taxes payable
    (1,381 )     (1,078 )
          Deferred revenue
   
2,663
     
2,625
 
          Accrued income taxes
   
9,373
     
 
          Other
    (24 )    
102
 
                 
          Net cash provided by operating activities
   
49,772
     
33,495
 
                 
Cash flows from investing activities:
               
          Net purchases of available-for-sale investments
    (34,575 )     (25,635 )
          Net redemptions of held-to-maturity investments
   
5,656
     
25,864
 
          Purchases of property and equipment
    (3,035 )     (4,045 )
          Acquisition of business, net of cash received
    (87 )     (504 )
          Purchase of intangible assets
    (3,066 )     (1,867 )
          Proceeds from sale of property and equipment
   
     
10
 
                 
          Net cash used in investing activities
    (35,107 )     (6,177 )
                 
Cash flows from financing activities:
               
          Repurchases of common stock and restricted stock
    (10,220 )    
 
          Issuance of common stock under employee stock
               
             purchase plan
   
132
     
283
 
          Exercise of stock options
   
4,672
     
658
 
          Excess tax benefits on stock option exercises
   
2,943
     
941
 
          Repayments of long-term debt
    (147 )     (323 )
                 
          Net cash (used in) provided by financing activities
    (2,620 )    
1,559
 
                 
Effect of exchange rate changes on cash and cash equivalents
   
497
     
1,762
 
                 
Net Increase in cash and cash equivalents
   
12,542
     
30,639
 
                 
Cash and cash equivalents, beginning of period
   
95,605
     
36,301
 
                 
Cash and cash equivalents, end of period
  $
108,147
    $
66,940
 


j2 GLOBAL COMMUNICATIONS, INC.
UNAUDITED RECONCILIATION OF MODIFIED NET EARNINGS
THREE MONTHS ENDED JUNE 30, 2007 AND 2006
(UNAUDITED, IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

Modified net earnings are GAAP net earnings with the following modifications (i) elimination of stock-based compensation expense for 2007 and 2006 and (ii) elimination of income tax expense associated with stock-based compensation expense. Modified net earnings and modified net earnings per share are not meant as a substitute for measures determined under GAAP, but are solely for informational purposes.  The following table illustrates and reconciles the GAAP net earnings with the aforementioned exclusions.  The Company believes that this non-GAAP financial information provides a useful measure of operating performance.
 
   
THREE MONTHS ENDED JUNE 30, 2007
   
THREE MONTHS ENDED JUNE 30, 2006
 
   
Reported
   
Non-GAAP Entries
   
Non-GAAP
   
Reported
   
Non-GAAP Entries
   
Non-GAAP
 
                                     
Revenues
                                   
Subscriber
  $
52,613
    $
    $
52,613
    $
42,671
    $
    $
42,671
 
Other
   
1,367
     
     
1,367
     
1,595
     
     
1,595
 
                                                 
Total revenue
   
53,980
     
     
53,980
     
44,266
     
     
44,266
 
                                                 
Cost of revenues (1)
   
10,232
      (140 ) (1)    
10,092
     
9,289
      (97 ) (1)    
9,192
 
                                                 
Gross profit
   
43,748
     
140
     
43,888
     
34,977
     
97
     
35,074
 
                                                 
Operating expenses:
                                               
Sales and marketing (1)
   
9,672
      (264 ) (1)    
9,408
     
7,493
      (275 ) (1)    
7,218
 
Research, development and engineering (1)
   
2,976
      (184 ) (1)    
2,792
     
1,944
      (153 ) (1)    
1,791
 
General and administrative (1)
   
8,950
      (1,114 ) (1)    
7,836
     
8,350
      (1,139 ) (1)    
7,211
 
                                                 
Total operating expenses
   
21,598
      (1,562 )    
20,036
     
17,787
      (1,567 )    
16,220
 
                                                 
Operating earnings
   
22,150
     
1,702
     
23,852
     
17,190
     
1,664
     
18,854
 
                                                 
Other income and expenses:
                                               
Interest and other income, net
   
2,398
     
     
2,398
     
1,080
     
     
1,080
 
                                                 
Total other income and expenses:
   
2,398
     
     
2,398
     
1,080
     
     
1,080
 
                                                 
Earnings before income taxes
   
24,548
     
1,702
     
26,250
     
18,270
     
1,664
     
19,934
 
                                                 
Income tax expense (2)
   
7,470
     
518
  (2)     
7,988
     
5,071
     
535
  (2)     
5,606
 
                                                 
Net earnings
  $
17,078
    $
1,184
    $
18,262
    $
13,199
    $
1,129
    $
14,328
 
                                                 
                                                 
                                                 
Diluted net earnings per share
  $
0.33
            $
0.36
    $
0.26
            $
0.28
 
                                                 
                                                 
Diluted weighted average shares outstanding
   
51,007,561
             
51,225,457
     
51,186,073
             
51,489,786
 
                                                 
                                                 
                                                 
(1) Stock-based compensation and related payroll
                                         
 tax and employee compensation expenses
                                         
Cost of revenues
          $ (140 )                   $ (97 )        
Sales and marketing
            (264 )                     (275 )        
Research, development and engineering
      (184 )                     (153 )        
General and administrative
            (1,114 )                     (1,139 )        
                                                 
            $ (1,702 )                   $ (1,664 )        
                                                 
(2) Income tax adjustment, net impact of the items above
     
518
                     
535