Business Acquisitions

The Company uses acquisitions as a strategy to grow its customer base by increasing its presence in new and existing markets, expand and diversify its service offerings, enhance its technology and acquire skilled personnel.

The Company has completed the following acquisitions during the year ending December 31, 2014, paying the purchase price in cash for each transaction: (a) all of the shares of City Numbers, a Birmingham, UK-based worldwide provider of inbound local, national and international toll free phone numbers in over 80 countries; (b) all of the shares and certain assets of Securstore, an Iceland-based provider of cloud backup and recovery services for corporate and enterprise networks; (c) all of the shares of Livedrive®, a UK-based provider of online backup with added file sync features for professionals and individuals; (d) certain assets of Faxmate, a Brisbane-based provider of Internet fax; (e) all of the shares of Critical Software Ltd., a UK-based Email Security and Management company operating under the brand name iCriticalTM; (f) all of the shares of The Online Backup Company, a Scandinavian-based provider of cloud backup, disaster recovery and file sharing solutions for corporate and enterprise networks; (g) all of the shares and certain assets of eMedia Communications LLC, a provider of research to IT buyers and leads to IT vendors; (h) asset purchase of Contactology, Inc., a North Carolina-based provider of email marketing services; (i) certain assets of Back Up My Info!, a NY-based company focusing primarily on backup supporting small to mid-sized businesses in a variety of industries around the world; (j) certain assets of Web24, a Melbourne, Australia- based company which offers domain name, web hosting, dedicated or shared servers and related services primarily to small and mid-sized businesses in Australia and elsewhere; (k) all of the units of Excel Micro, a Philadelphia-based cloud email security and archiving solutions; (l) all of the units of Scene LLC (“Ookla”), a Washington-based leading provider of broadband and mobile speed testing; (m) all of the shares of NCSG Holding AB (“Stay Secure”), a Swedish-based provider of e-mail and web security services; (n) all of the shares of Comendo A/S, a Danish-based provider of e-mail security; (p) certain assets of TestudoData LLC, a Nevada-based provider of e-mail security; and (q) certain other immaterial acquisitions of fax, online data backup and application businesses.

The consolidated statement of income, since the date of each acquisition, and balance sheet, as of December 31, 2014, reflect the results of operations of all 2014 acquisitions. For the year ended December 31, 2014, these acquisitions contributed $51.9 million to the Company's revenues. Net income contributed by these acquisitions was not separately identifiable due to j2 Global's integration activities. Total consideration for these transactions was $300.2 million, net of cash acquired and assumed liabilities and subject to certain post-closing adjustments.

The following table summarizes the allocation of the purchase consideration for these acquisitions (in thousands):



Assets and Liabilities	Valuation

Accounts receivable	$	18,024
Property and equipment		10,022
Other assets		5,500
Deferred tax asset		419
Software		9,836
Trade name		28,192
Customer relationship		98,498
Other intangibles		2,121
Goodwill		184,837
Deferred revenue		(29,182	)
Deferred tax liability		(12,328	)
Other accrued liabilities		(14,338	)
Capital lease		(1,361	)
Total	$	300,240

In connection with the acquisition of Ookla, acquired on December 1, 2014, contingent consideration of up to an aggregate of $40.0 million may be payable upon achieving certain future income thresholds and was determined to have a fair value of $15 million which was recorded as an other long-term liability on the consolidated balance sheet at December 31, 2014. The fair value of the contingent consideration was determined using options-based valuation approaches based on various inputs, including discount rates, volatility and market risk which are not readily observable in the market, representing a Level 3 measurement within the fair value hierarchy (see Note 5 - Fair Value Measurements). As of December 31, 2014, the Company has holdbacks of $45.3 million (including the contingent consideration related to Ookla) in connection with acquisitions recorded as current and long-term liabilities in the consolidated balance sheet. These holdbacks represent amounts to ensure that certain representations and warranties provided by the sellers are effective.

During 2014, the purchase price accounting has been finalized for the following acquisitions: (i) City Numbers, (ii) SecurStore, (iii) Faxmate and (iv) other immaterial fax, online data backup and application businesses. The initial accounting for all other 2014 acquisitions are incomplete and subject to change, which may be significant. j2 Global has recorded provisional amounts which may be based upon past acquisitions with similar attributes for certain intangible assets including trade names, software and customer relationships, preliminary working capital and related tax items. During the year ended December 31, 2014, the Company recorded final adjustments to the initial working capital related to prior period acquisitions, which resulted in a decrease to goodwill in the amount of $(1.0) million Actual amounts recorded upon finalization of the purchase accounting may differ materially from the information presented in this Annual Report on Form 10-K.

Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired and represents intangible assets that do not qualify for separate recognition. Goodwill recognized associated with these acquisitions during the year ended December 31, 2014 is $184.8 million, of which $89.4 million is expected to be deductible for income tax purposes.

Pro Forma Financial Information for 2014 Acquisitions

The following unaudited pro forma supplemental information is based on estimates and assumptions, which j2 Global believes are reasonable. However, this information is not necessarily indicative of the Company's consolidated financial position or results of income in future periods or the results that actually would have been realized had j2 Global and the acquired businesses been combined companies during the periods presented. These pro forma results exclude any savings or synergies that would have resulted from these business acquisitions had they occurred on January 1, 2013 and do not take into consideration the exiting of any acquired lines of business. This unaudited pro forma supplemental information includes incremental intangible asset amortization and other charges as a result of the acquisitions, net of the related tax effects.

The supplemental information on an unaudited pro forma financial basis presents the combined results of j2 Global and its 2014 acquisitions as if each acquisition had occurred on January 1, 2013 (in thousands, except per share amounts):



	Year ended
	December 31, 2014		December 31, 2013
	(unaudited)		(unaudited)
Revenues	$	672,701	$	626,906
Net income attributable to j2 Global, Inc. common shareholders	$	119,773	$	132,480
EPS - Basic	$	2.51	$	2.85
EPS - Diluted	$	2.49	$	2.81

2013

The Company acquired the following companies during fiscal 2013, in each case for cash: (a) IGN Entertainment, Inc. ("IGN"), an online publisher of video games, entertainment and men's lifestyle content; (b) MetroFax, Inc., a provider of online faxing services and advanced features; (c) Backup Connect BV, an online backup provider based in the Netherlands; (d) NetShelter, the largest community of technology publishers dedicated to consumer electronics, computing and mobile communications; (e) Email Protection Agency Limited, a UK-based provider of email security, email management and network security services; (f) TechBargains.com, the leading deal aggregation website for electronic products; and (g) certain other immaterial share and asset acquisitions in the Business Cloud Services segment.

The consolidated statement of income, since the date of each acquisition, and balance sheet, as of December 31, 2013, reflect the results of operations of all 2013 acquisitions. For the year ended December 31, 2013, these acquisitions contributed $98.1 million to the Company's revenues. Net income contributed by these acquisitions was not separately identifiable due to j2 Global's integration activities. Total consideration for these transactions was $147.7 million, net of cash acquired and assumed liabilities of $15.7 million and subject to certain post-closing adjustments.

The following table summarizes the allocation of the purchase consideration as follows (in thousands):



Assets and Liabilities	Valuation

Accounts receivable	$	24,658
Property and equipment		3,274
Other assets		2,703
Deferred tax asset		2,058
Software		3,031
Content		2,460
Trade name		18,581
Customer relationship		40,275
Advertiser Relationship		11,770
Other intangibles		168
Goodwill		54,472
Deferred revenue		(2,543	)
Other accrued liabilities		(13,162	)
Total	$	147,745

Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired and represents intangible assets that do not qualify for separate recognition. Goodwill recognized associated with these acquisitions during the year ended December 31, 2013 is $54.5 million, of which $36.6 million is expected to be deductible for income tax purposes.

Pro Forma Financial Information for 2013 Acquisitions

The following unaudited pro forma supplemental information is based on estimates and assumptions, which j2 Global believes are reasonable. However, this information is not necessarily indicative of the Company's consolidated financial position or results of income in future periods or the results that actually would have been realized had j2 Global and the acquired businesses been combined companies during the period presented. These pro forma results exclude any savings or synergies that would have resulted from these business acquisitions had they occurred on January 1 for the year ended December 31, 2012 and do not take into consideration the exiting of any acquired lines of business. This unaudited pro forma supplemental information includes incremental intangible asset amortization and other charges as a result of the acquisitions, net of the related tax effects.

The supplemental information on an unaudited pro forma financial basis presents the combined results of j2 Global and its 2013 acquisitions as if each acquisition had occurred on January 1, 2012 (in thousands, except per share amounts):



	Year ended
	December 31, 2013		December 31, 2012
	(unaudited)		(unaudited)
Revenues	$	545,952	$	470,190
Net income attributable to j2 Global, Inc. common shareholders	$	108,600	$	122,187
EPS - Basic	$	2.34	$	2.64
EPS - Diluted	$	2.31	$	2.62

2012

Ziff Davis

The Company acquired substantially all of the outstanding capital stock of Ziff Davis on November 9, 2012 for a cash purchase price of approximately $171.7 million, net of cash acquired and assumed liabilities of $28.8 million and subject to certain post-closing adjustments.

The consolidated statement of income, since the date of the acquisition, and balance sheet as of December 31, 2012 reflect the results of operations of Ziff Davis. For the year ended December 31, 2012, Ziff Davis contributed $9.7 million to the Company's revenues and $1.6 million to its net income.

The following table summarizes the allocation of the purchase consideration (including the portion allocable to the minority interest) as follows (in thousands):



Assets and Liabilities	Valuation

Accounts receivable	$	14,450
Property and equipment		842
Software		4,780
Other assets		1,283
Deferred tax asset		1,139
Trade name		37,730
Customer relationship		5,380
Advertiser relationship		14,500
Licensing relationships		4,910
Other intangibles		2,540
Goodwill		112,882
Deferred revenue		(2,188	)
Other accrued liabilities		(4,767	)
Deferred tax liability		(21,829	)
Total	$	171,652

Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired and represents intangible assets that do not qualify for separate recognition. Goodwill recognized associated with the acquisition of Ziff Davis during the year ended December 31, 2012 is $112.9 million, of which $12.9 million is expected to be deductible for income tax purposes.

Other 2012 Acquisitions

The consolidated statement of income, since the date of the applicable acquisitions, and balance sheet as of December 31, 2012 reflect the results of operations of all six 2012 acquisitions, including Ziff Davis as noted above. For the year ended December 31, 2012, the five acquisitions other than Ziff Davis (the "other acquisitions") contributed $16.9 million to the Company's revenues. Net income contributed by the other acquisitions was not separately identifiable due to j2 Global's integration activities. Total consideration for the other acquisitions was $32.9 million, net of cash acquired. The financial impact to j2 Global for each of the other acquisitions, individually and in the aggregate, is immaterial as of the date of each acquisition.

Pro Forma Financial Information for 2012 Acquisitions

The following unaudited pro forma supplemental information is based on estimates and assumptions, which j2 Global believes are reasonable. However, this information is not necessarily indicative of the Company's consolidated financial position or results of income in future periods or the results that actually would have been realized had j2 Global and the acquired businesses been combined companies during the period presented. These pro forma results exclude any savings or synergies that would have resulted from these business acquisitions had they occurred on January 1 for the year ended December 31, 2011 and do not take into consideration the exiting of any acquired lines of business. This unaudited pro forma supplemental information includes incremental intangible asset amortization and other charges as a result of the acquisitions, net of the related tax effects.

The supplemental information on an unaudited pro forma financial basis presents the combined results of j2 Global and its 2012 acquisitions as if each acquisition had occurred on January 1, 2011 (in thousands, except per share amounts):



	Year ended
	December 31, 2012		December 31, 2011
	(unaudited)		(unaudited)
Revenues	$	417,250	$	385,974
Net income attributable to j2 Global, Inc. common shareholders	$	120,210	$	114,889
EPS - Basic	$	2.60	$	2.47
EPS - Diluted	$	2.58	$	2.44