Business Acquisition

9 Months Ended

Sep. 30, 2015

Business Combinations [Abstract]

Business Acquisition

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 completed the following acquisitions during the first nine months of fiscal 2015, paying the purchase price in cash in each transaction: (a) a share purchase of the entire issued share capital of Firstway, an Ireland-based distributor of FaxBOX® digital fax services; (b) an asset purchase of Nuvotera (formerly known as Spam Soap), a California-based supplier of email security; (c) an asset purchase of EmailDirect, a California-based provider of email marketing services; (d) an asset purchase of SugarSync®, Inc., a California-based provider of online file backup, synchronization and sharing assets; (e) an asset purchase of Popfax, a France-based global provider of internet fax services; (f) a stock purchase of the entire capital stock of Salesify, a California-based based provider of lead generation solutions; (g) an asset purchase of LiveVault®, a California-based global provider of data backup and recovery services; and (h) other immaterial acquisitions primarily of fax and online data backup businesses.

The condensed consolidated statement of income, since the date of each acquisition, and balance sheet, as of September 30, 2015, reflect the results of operations of all 2015 acquisitions. For the nine months ended September 30, 2015, these acquisitions contributed $20.1 million to the Company's revenues. Net income contributed by these acquisitions was not separately identifiable due to j2 Global's integration activities and is impracticable to provide. Total consideration for these transactions was $265.6 million, net of cash acquired and assumed liabilities and is subject to certain post-closing adjustments which may increase or decrease the final consideration paid.

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

Assets and Liabilities	Valuation
Accounts receivable	$	7,721
Property and equipment	6,208
Other assets	998
Software	19,010
Trade names	24,436
Customer relationships	86,730
Other intangibles	923
Goodwill	136,768
Other accrued liabilities	(5,662		)
Deferred revenue	(9,922		)
Capital lease	(195		)
Deferred tax liability	(1,459		)
Total	$	265,556

During 2015, the purchase price accounting has been finalized for the following acquisitions: (i) Stay Secure, (ii) TestudoData LLC, (iii) Comendo A/S, (iv) Ookla, (v) Nuvotera, (vi) SugarSync® and (vii) other immaterial fax and online data backup businesses. The initial accounting for all other 2015 acquisitions is 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 acquisition date working capital and related tax items. In connection with the acquisition of Salesify, on September 17, 2015, contingent consideration of up to an aggregate of $17.0 million may be payable upon achieving certain future income thresholds and was determined to have a preliminary estimated fair value of $4.0 million which was recorded as an other long-term liability on the consolidated balance sheet as of September 30, 2015. 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 Level 3 measurement within the fair value hierarchy (see Note 5 - Fair Value Measurements). Actual amounts recorded upon finalization of the purchase accounting may differ materially from the information presented in this Quarterly Report on Form 10-Q.

During the nine months ended September 30, 2015, the Company recorded adjustments to prior period acquisitions primarily due to the finalization of the purchase accounting of Stay Secure and Comendo A/S in the Business Cloud Services segment which resulted in a net increase in goodwill in the amount of $9.8 million and a corresponding decrease in customer relationships, net. In addition, the Company recorded adjustments to the initial working capital related to prior period acquisitions and finalized the fair value of contingent consideration associated with the acquisition of Scene LLC ("Ookla") in the Digital Media segment, which resulted in a net decrease in goodwill in the amount of$(4.3) million (See Note 6 - Goodwill and Intangible Assets). Such adjustments had an immaterial impact to amortization expense within the condensed consolidated statement of income for the nine months ended September 30, 2015.

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 nine months ended September 30, 2015 is $136.8 million, of which $112.1 million is expected to be deductible for income tax purposes.

Pro Forma Financial Information for 2015 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, 2014 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 2015 acquisitions as if each acquisition had occurred on January 1, 2014 (in thousands, except per share amounts):

	Nine Months Ended September 30, 2015		Nine Months Ended September 30, 2014
	(unaudited)		(unaudited)
Revenues	$	581,869	$	515,936
Net Income	$	115,527	$	86,487
EPS - Basic	$	2.39	$	1.81
EPS - Diluted	$	2.38	$	1.80