EX-99.1 2 exh99-1_16554.htm PRESS RELEASE DATED AUGUST 5, 2009 WWW.EXFILE.COM, INC. -- 888-775-4789 -- J2 GLOBAL COMMUNICATIONS, INC. -- EXHIBTI 99.1 TO FORM 8-K
 
EXHIBIT 99.1
 
j2 Global Reports Second Quarter 2009 Results
Record Quarterly Revenue and Non-GAAP EPS

 
LOS ANGELES—AUGUST 5, 2009—j2 Global Communications, Inc. [NASDAQGS:JCOM] today reported financial results for the second quarter ended June 30, 2009.

SECOND QUARTER 2009 RESULTS

Total revenues for Q2 2009 increased 3% to a new quarterly record of $62.5 million compared to $60.7 million in Q2 2008.

Subscriber revenues for Q2 2009 increased 3% to $61 million compared to $59.5 million in Q2 2008.

During Q2 2009, the Company improved its gross margin to 81.4% from 80.7% in Q2 2008 and its operating margin to 44.1% from 39.7% in Q2 2008.

Net earnings per diluted share on a Non-GAAP basis, which excludes share based compensation and a Q2 2009 impairment of auction rate and related securities, for Q2 2009 increased 20% to $0.48 compared to $0.40 in Q2 2008. SFAS 123(R) expense (expensing for share-based compensation) impacted Q2 2009 net earnings and net earnings per diluted share by approximately $2.0 million and $0.04, net of tax, respectively.

During Q2 2009, the Company recorded a non-recurring pre-tax impairment charge on auction rate and related securities of $9.2 million. This reduced net earnings and net earnings per diluted share by approximately $8.4 million and $0.19 net of tax, respectively.  As a result, GAAP earnings were $11.1 million and $16.7 million for Q2 2009 and Q2 2008 respectively.  GAAP net earnings per diluted share were $0.25 and $0.37 for Q2 2009 and Q2 2008, respectively.

Key financial results for second quarter 2009 versus second quarter 2008 are as follows:

 
Q2 2009
Q2 2008
% Change
Subscriber Revenues
$61.0 million
$59.5 million
3%
Total Revenues
$62.5 million
$60.7 million
3%
Non-GAAP Earnings
$21.6 million
$18.1 million
19%
Non-GAAP Net Earnings per Diluted Share (1)
$0.48
$0.40
20%
 
(1)  
The estimated effective tax rate was approximately 30% and 32% for Q2 2009 and Q2 2008, respectively.

 
 

 
“I am pleased with our continued execution against our business plan which emphasizes further improvement in our cost structure,” said Hemi Zucker, j2 Global’s chief executive officer. “The continued increase in our gross and operating margins, combined with our revenue growth, resulted in record quarterly non-GAAP operating income and earnings. In addition, we achieved record quarterly revenues and record six-month free cash flow. Our cash resources of nearly $200 million provide us ample financial flexibility to pursue multiple opportunities.”

BUSINESS OUTLOOK

For fiscal 2009, j2 Global maintains its anticipation of modest revenue and earnings growth (net of expenses related to share-based compensation and impairment charges for auction rate and related securities), inclusive of acquisitions, versus 2008 despite the ongoing global economic crisis. The Company remains well positioned to take advantage of changing customer and market conditions while continuing its focus on efficient marketing, optimizing its cost structure and deploying its cash resources into higher yielding investments such as acquisitions.


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 more than 3,300 cities in 46 countries on six 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 eFax®, eFax Corporate®, Onebox®, eVoice® and Electric Mail®. As of December 31, 2008, j2 Global had achieved 13 consecutive fiscal years of revenue growth and seven consecutive fiscal years of positive and growing operating earnings. For more information about j2 Global, please visit www.j2global.com.

Contact:
Jeff Adelman
j2 Global Communications, Inc.
323-372-3617
press@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 Act of 1995, particularly those contained in the “Business Outlook” portion regarding the Company’s expected fiscal 2009 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: Subscriber growth and retention; variability of 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
 
 
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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 2008 Annual Report on Form 10-K filed by j2 Global on February 25, 2009, 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 regarding the Company’s expected fiscal 2009 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 financial estimates.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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j2 GLOBAL COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED, IN THOUSANDS)
 
   
JUNE 30,
   
DECEMBER 31,
 
   
2009
   
2008
 
             
ASSETS
           
Cash and cash equivalents
  $ 192,576     $ 150,780  
Short-term investments
    21       14  
Accounts receivable,
               
   net of allowances of $3,104 and $2,896, respectively
    13,905       14,083  
Prepaid expenses and other current assets
    8,497       6,683  
Deferred income taxes
    2,958       2,958  
                 
Total current assets
    217,957       174,518  
                 
Long-term investments
    2,207       11,081  
Property and equipment, net
    16,551       18,938  
Goodwill
    81,151       72,783  
Other purchased intangibles, net
    38,526       36,791  
Deferred income taxes
    9,008       7,787  
Other assets
    109       142  
                 
TOTAL ASSETS
  $ 365,509     $ 322,040  
                 
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
               
Accounts payable and accrued expenses
  $ 17,675     $ 16,915  
Income taxes payable
    1,451       1,800  
Deferred revenue
    13,168       13,680  
                 
Total current liabilities
    32,294       32,395  
                 
Accrued income tax liability
    41,996       38,643  
Other long-term liabilities
    881       1,022  
                 
Total liabilities
    75,171       72,060  
                 
Commitments and contingencies
           
                 
Total stockholders' equity
    290,338       249,980  
                 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
  $ 365,509     $ 322,040  
 
 
 
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j2 GLOBAL COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED, IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
 
   
THREE MONTHS ENDED
JUNE 30,
   
SIX MONTHS ENDED
JUNE 30,
 
   
2009
   
2008
   
2009
   
2008
 
                         
Revenues
                       
Subscriber
  $ 61,049     $ 59,537     $ 120,689     $ 116,752  
Other
    1,415       1,140       2,166       2,573  
                                 
Total revenue
    62,464       60,677       122,855       119,325  
                                 
Cost of revenues (including share-based compensation of $331 and $612 for the three and six months of 2009, respectively, and $212 and $387 for the three and six months of 2008, respectively)
    11,600       11,725       22,992       23,356  
                                 
Gross profit
    50,864       48,952       99,863       95,969  
                                 
Operating expenses:
                               
Sales and marketing (including share-based compensation of $484 and $861 for the three and six months of 2009, respectively, and $328 and $666 for the three and six months of 2008, respectively)
    9,211       10,585       18,096       20,799  
Research, development and engineering (including share-based compensation of $221 and $417 for the three and six months of 2009, respectively, and $191 and $405 for the three and six months of 2008, respectively)
    2,880       3,011       5,823       6,158  
General and administrative (including share-based compensation of $1,870 and $3,311 for the three and six months of 2009, respectively, and $1,243 and $2,543 for the three and six months of 2008, respectively)
    11,209       11,292       21,915       22,449  
                                 
Total operating expenses
    23,300       24,888       45,834       49,406  
                                 
Operating earnings
    27,564       24,064       54,029       46,563  
                                 
Other-than-temporary impairment losses
    (9,193 )           (9,193 )      
                                 
Interest and other income, net
    315       563       457       1,891  
                                 
Earnings before income taxes
    18,686       24,627       45,293       48,454  
                                 
Income tax expense
    7,549       7,897       15,504       14,930  
                                 
Net earnings
  $ 11,137     $ 16,730     $ 29,789     $ 33,524  
                                 
                                 
Basic net earnings per common share
  $ 0.25     $ 0.38     $ 0.68     $ 0.73  
                                 
Diluted net earnings per common share
  $ 0.25     $ 0.37     $ 0.66     $ 0.71  
                                 
                                 
Basic weighted average shares outstanding
    43,762,333       44,142,748       43,695,076       45,700,933  
                                 
Diluted weighted average shares outstanding
    45,044,005       45,688,869       44,806,260       47,026,104  
 
 
 
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j2 GLOBAL COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED, IN THOUSANDS)
 
   
Six Months Ended June 30,
 
   
2009
   
2008
 
             
Cash flows from operating activities:
           
Net earnings
  $ 29,789     $ 33,524  
Adjustments to reconcile net earnings to net cash
               
provided by operating activities:
               
Depreciation and amortization
    7,363       6,340  
Share-based compensation
    5,201       4,001  
Excess tax benefits from share-based compensation
    (2,723 )     (443 )
Provision for doubtful accounts
    593       1,614  
Deferred income taxes
    (1,221 )     (1,062 )
Loss on disposal of fixed assets
    15       28  
Gain on trading securities
    (8 )      
Other-than-temporary impairment losses
    9,193        
Decrease (increase) in:
               
Accounts receivable
    (516 )     (1,134 )
Prepaid expenses and other current assets
    436       1,576  
Other assets
    33       46  
(Decrease) increase in:
               
Accounts payable and accrued expenses
    579       5,106  
Income taxes payable
    189       (616 )
Deferred revenue
    (777 )     (767 )
Accrued income tax liability
    3,354       3,067  
Other
    14       (29 )
Net cash provided by operating activities
    51,514       51,251  
                 
Cash flows from investing activities:
               
Sales of available-for-sale investments
          36,170  
Redemptions/Sales of held-to-maturity investments
          27,883  
Purchases of property and equipment
    (938 )     (1,265 )
Acquisition of businesses, net of cash received
    (11,910 )     (33,278 )
Proceeds from sale of assets
    1,011        
Purchases of intangible assets
    (2,272 )     (1,664 )
Net cash (used in) provided by investing activities
    (14,109 )     27,846  
                 
Cash flows from financing activities:
               
Repurchases of common stock
          (97,336 )
Repurchase of restricted stock
    (92 )     (82 )
Issuance of common stock under employee stock purchase plan
    61       112  
Exercise of stock options
    802       973  
Excess tax benefits from share-based compensation
    2,723       443  
Net cash provided by (used in) financing activities
    3,494       (95,890 )
                 
Effect of exchange rate changes on cash and cash equivalents
    897       1,357  
                 
Net increase (decrease) in cash and cash equivalents
    41,796       (15,436 )
Cash and cash equivalents at beginning of period
    150,780       154,220  
Cash and cash equivalents at end of period
  $ 192,576     $ 138,784  
 
 
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j2 GLOBAL COMMUNICATIONS, INC.
UNAUDITED RECONCILIATION OF MODIFIED NET EARNINGS
THREE MONTHS ENDED JUNE 30, 2009 AND 2008
(UNAUDITED, IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

Modified net earnings are GAAP net earnings with the following modifications (i) elimination of share-based compensation expense for 2009 and 2008; (ii) elimination of income tax expense associated with share-based compensation expense. (iii) elimination of other-than-temporary impairment losses (iv) elimination of income tax expense associated with other-than-temporary impairment losses.  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 are useful measures of operating performance because they exclude certain non-recurring transactions outside the ordinary course of the Company's business.
 
   
THREE MONTHS ENDED JUNE 30, 2009
   
THREE MONTHS ENDED JUNE 30, 2008
 
   
Reported
   
Non-GAAP Entries
   
Non-GAAP
   
Reported
   
Non-GAAP Entries
   
Non-GAAP
 
                                     
Revenues
                                   
  Subscriber   $ 61,049     $     $ 61,049     $ 59,537     $     $ 59,537  
  Other     1,415             1,415       1,140             1,140  
                                                 
  Total revenue     62,464             62,464       60,677             60,677  
                                                 
Cost of revenues (1)
    11,600       (331 )(1)     11,269       11,725       (212 )(1)     11,513  
                                                 
  Gross profit     50,864       331       51,195       48,952       212       49,164  
                                                 
Operating expenses:
                                               
  Sales and marketing (1)     9,211       (484 )(1)     8,727       10,585       (328 )(1)     10,257  
  Research, development and engineering (1)     2,880       (221 )(1)     2,659       3,011       (191 )(1)     2,820  
  General and administrative (1)     11,209       (1,870 )(1)     9,339       11,292       (1,243 )(1)     10,049  
                                                 
  Total operating expenses     23,300       (2,575 )     20,725       24,888       (1,762 )     23,126  
                                                 
Operating earnings
    27,564       2,906       30,470       24,064       1,974       26,038  
                                                 
Other-than-temporary impairment losses (3)
    (9,193 )     9,193  (3)                        
                                                 
Interest and other income, net
    315             315       563             563  
                                                 
Earnings before income taxes
    18,686       12,099       30,785       24,627       1,974       26,601  
                                                 
Income tax expense (2), (4)
    7,549       1,668  (2), (4)     9,217       7,897       562        8,459  
                                                 
Net earnings
  $ 11,137     $ 10,431     $ 21,568     $ 16,730     $ 1,412     $ 18,142  
                                                 
                                                 
                                                 
Diluted net earnings per share
  $ 0.25             $ 0.48     $ 0.37             $ 0.40  
                                                 
                                                 
Diluted weighted average shares outstanding
    45,044,005               45,044,005       45,688,869               45,688,869  
                                                 
                                                 
                                                 
  (1) Share-based compensation and related payroll                                          
      tax and employee compensation expenses                                                
         Cost of revenues           $ (331 )                   $ (212 )        
         Sales and marketing             (484 )                     (328 )        
         Research, development and engineering             (221 )                     (191 )        
         General and administrative             (1,870 )                     (1,243 )        
                                                 
            $ (2,906 )                   $ (1,974 )        
                                                 
  (2) Income tax adjustment, net impact of the items above     $ 892                       562          
                                                 
                                                 
  (3) Other-than-temporary impairment losses           $ 9,193                                  
                                                 
  (4) Income tax adjustment, net impact of the item above     $ 776                                  
                                                 
 
 
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j2 GLOBAL COMMUNICATIONS, INC.
UNAUDITED RECONCILIATION OF MODIFIED NET EARNINGS
SIX MONTHS ENDED JUNE 30, 2009 AND 2008
(UNAUDITED, IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

Modified net earnings are GAAP net earnings with the following modifications (i) elimination of share-based compensation expense for 2009 and 2008; (ii) elimination of income tax expense associated with share-based compensation expense. (iii) elimination of other-than-temporary impairment losses (iv) elimination of income tax expense associated with other-than-temporary impairment losses.  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 are useful measures of operating performance because they exclude certain non-recurring transactions outside the ordinary course of the Company's business.
 
   
SIX MONTHS ENDED JUNE 30, 2009
   
SIX MONTHS ENDED JUNE 30, 2008
 
   
Reported
   
Non-GAAP Entries
   
Non-GAAP
   
Reported
   
Non-GAAP Entries
   
Non-GAAP
 
                                     
Revenues
                                   
  Subscriber   $ 120,689     $     $ 120,689     $ 116,752     $     $ 116,752  
  Other     2,166             2,166       2,573             2,573  
                                                 
  Total revenue     122,855             122,855       119,325             119,325  
                                                 
Cost of revenues (1)
    22,992       (612 )(1)     22,380       23,356       (387 )(1)     22,969  
                                                 
  Gross profit     99,863       612       100,475       95,969       387       96,356  
                                                 
Operating expenses:
                                               
  Sales and marketing (1)     18,096       (861 )(1)     17,235       20,799       (666 )(1)     20,133  
  Research, development and engineering (1)     5,823       (417 )(1)     5,406       6,158       (405 )(1)     5,753  
  General and administrative (1)     21,915       (3,311 )(1)     18,604       22,449       (2,543 )(1)     19,906  
                                                 
  Total operating expenses     45,834       (4,589 )     41,245       49,406       (3,614 )     45,792  
                                                 
Operating earnings
    54,029       5,201       59,230       46,563       4,001       50,564  
                                                 
Other-than-temporary impairment losses (3)
    (9,193 )     9,193                               
                                                 
Interest and other income, net
    457             457       1,891             1,891  
                                                 
Earnings before income taxes
    45,293       14,394       59,687       48,454       4,001       52,455  
                                                 
Income tax expense (2), (4)
    15,504       2,346  (2), (4)     17,850       14,930       1,158        16,088  
                                                 
Net earnings
  $ 29,789     $ 12,048     $ 41,837     $ 33,524     $ 2,843     $ 36,367  
                                                 
                                                 
                                                 
Diluted net earnings per share
  $ 0.66             $ 0.93     $ 0.71             $ 0.77  
                                                 
                                                 
Diluted weighted average shares outstanding
    44,806,260               44,806,260       47,026,104               47,026,104  
                                                 
                                                 
                                                 
 (1) Share-based compensation and related payroll                                          
      tax and employee compensation expenses                                                
       Cost of revenues           $ (612 )                   $ (387 )        
       Sales and marketing             (861 )                     (666 )        
       Research, development and engineering             (417 )                     (405 )        
       General and administrative             (3,311 )                     (2,543 )        
                                                 
            $ (5,201 )                   $ (4,001 )        
                                                 
 (2) Income tax adjustment, net impact of the items above     $ 1,570                       1,158          
                                                 
                                                 
 (3) Other-than-temporary impairment losses           $ 9,193                                  
                                                 
 (4) Income tax adjustment, net impact of the item above     $ 776                                  

 
 
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j2 Global Communications, Inc.
Free Cash Flows
 
      Q1       Q2       Q3       Q4    
YTD
 
2009
                                     
Net cash provided by operating activities
    31,152       20,362                       51,514  
Less: Purchases of property and equipment
    (721 )     (217 )                     (938 )
Add: Excess tax benefit from share-based compensation
    5       2,718                       2,723  
      30,436       22,863                   53,299  
                                         
                                         
2008
                                       
Net cash provided by operating activities
    27,411       23,840       15,676       23,789       90,716  
Less: Purchases of property and equipment
    (469 )     (796 )     (937 )     (305 )     (2,507 )
Add: Excess tax benefit from share-based compensation
    239       204       212       910       1,565  
      27,181       23,248       14,951       24,394       89,774  
                                         
                                         
2007
                                       
Net cash provided by operating activities
    26,659       23,113       18,656       25,779       94,207  
Less: Purchases of property and equipment
    (529 )     (2,506 )     (2,940 )     (4,340 )     (10,315 )
Add: Excess tax benefit from share-based compensation
    2,163       780       517       1,271       4,731  
      28,293       21,387       16,233       22,710       88,623  

 
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