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, acquire skilled personnel and enter into other jurisdictions.

The Company completed the following acquisitions during the year ended December 31, 2016, paying the purchase price in cash for each transaction: (a) an asset purchase of VaultLogix, acquired on February 17, 2016, a Massachusetts-based provider of cloud data backup and storage for business clients; (b) a share purchase of the entire issued capital of Callstream Group Limited, acquired on March 3, 2016, a provider of cloud-based call management solutions to markets in the United Kingdom; (c) an asset purchase of Publicaster, acquired on April 1, 2016, a Maryland-based provider of email marketing services; (d) an asset purchase of SMTP, acquired on June 27, 2016, a Florida-based provider of cloud email services offering solutions ranging from sophisticated transactional email solutions to cost-effective Simple Mail Transfer Protocol (“SMTP”) relay services; (e) a share purchase of the entire issued capital of Integrated Global Concepts, Inc. (“IGC”), acquired on July 12, 2016, a Chicago-based provider of fax and voicemail services; (f) a share purchase of the entire issued capital of Front-safe A/S, acquired on July 15, 2016, a Denmark-based provider of cloud backup solutions; (g) an asset purchase of Fonebox Australia., acquired on October 18, 2016, an Australia-based provider of voice, call routing and virtual receptionist business; (h) a share purchase of all the outstanding shares of common stock of Everyday Health Inc. (“Everyday Health”), acquired on December 5, 2016, a New York-based provider of digital health and wellness solutions; and (i) other immaterial acquisitions of online data backup, email marketing, email security and digital media businesses.

The consolidated statement of income since the date of each acquisition and balance sheet, as of December 31, 2016, reflect the results of operations of all 2016 acquisitions. For the year ended December 31, 2016, these acquisitions contributed $52.9 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 $596.1 million, net of cash acquired and assumed liabilities and 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 all 2016 acquisitions (in thousands):



Assets and Liabilities ⁽¹⁾	Valuation

Accounts receivable	$	70,922
Other assets		11,730
Property and equipment		11,109
Trade names		5,866
Trademarks		70,300
Customer relationships		85,482
Other intangibles		91,264
Goodwill		333,190
Accounts payables and accrued expenses		(62,188	)
Deferred revenue		(6,904	)
Deferred tax liability		(14,503	)
Capital lease		(194	)
Total	$	596,074

⁽¹⁾ In connection with the purchase of IGC, the majority of the value was associated with the 935,231 shares of j2 Global common stock held by IGC. The value associated with these shares was recorded as a separate transaction from the fax business and has been excluded from the schedule above.

During 2016, the purchase price accounting has been finalized for the following acquisitions: (i) LiveVault, (ii) Salesify, (iii) VaultLogix (iv) Callstream Group Limited, (v) Publicaster (vi) SMTP (vii) Integrated Global Concepts, Inc. (viii) Front-safe A/S and (ix) other immaterial fax, online data backup and digital media businesses. The initial accounting for all other 2016 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.

During the year ended December 31, 2016, the Company recorded adjustments to prior period acquisitions primarily due to the finalization of the purchase accounting in the Business Cloud Services segment which resulted in a net increase in goodwill in the amount of $0.8 million. In addition, the Company recorded adjustments to the initial working capital related to prior period acquisitions and updated the purchase accounting of Offers.com in the Digital Media segment, which resulted in a net decrease in goodwill in the amount of $(5.0) million with a corresponding increase in trade names, net and other purchased intangibles, net (see Note 7 - Goodwill and Intangible Assets). Such adjustments had an immaterial impact to amortization expense within the Consolidated Statement of Income for the year ended December 31, 2016.

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, 2016 is $333.2 million, of which $102.4 million is expected to be deductible for income tax purposes.

IGC

The Company acquired the entire issued capital of IGC on July 12, 2016 for a cash purchase price of approximately $6.3 million (excluding amounts allocated to the Company’s purchase of its common stock described below), net of cash acquired and assumed liabilities and is subject to certain post-closing adjustments which may increase or decrease the final consideration paid.

At the date of acquisition, IGC held 935,231 of the Company’s common stock which the Company determined should be treated as a separate transaction from the acquired fax and voicemail businesses. In order to determine the amount of purchase consideration allocable to the fax and voicemail business and the Company’s common stock, the Company used a relative fair value approach and concluded that the amounts of consideration allocable to the fax and voicemail business and the Company’s common stock were $6.3 million and $51.5 million, respectively. See Note 11 - Stockholders’ Equity for further discussion regarding the Company’s common stock acquired in connection with the IGC business combination.

Everyday Health

On December 5, 2016, the Company acquired all the outstanding shares of common stock of Everyday Health, $0.01 par value per share, at a purchase consideration $493.7 million (net of cash acquired and assumed liabilities) or $10.50 per share in cash, and subject to certain post-closing adjustments which may increase or decrease the final consideration paid.

Everyday Health is a leading provider of digital health and marketing and communication solutions. Everyday Health attracts a large and engaged audience of consumers and healthcare professionals to its premier health and wellness properties and utilizes its data and analytics expertise to deliver highly personalized content experiences and efficient and effective marketing and engagement solutions. Everyday Health enables consumers to manage their daily health and wellness needs, healthcare professionals to stay informed and make better decisions for their patients, and marketers, health payers and providers to communicate and engage with consumers and healthcare professionals to drive better health outcomes. Everyday Health’s content and solutions are delivered through multiple channels, including desktop, mobile web, mobile phone and tablet applications, as well as video and social media.

The Company acquired Everyday Health to bring together two leading digital media companies with complimentary visions and platforms to engage and monetize audiences. The combined company will be well positioned to deliver compelling benefits to customers with content that connects, informs and empowers audiences. The Company’s Digital Media segment maintains leading positions in the technology, gaming and men's lifestyle verticals with strong and well-established brands. Everyday Health adds a new vertical and set of market-leading trusted health properties to the portfolio while diversifying the company’s audience mix.

The consolidated statement of income, since the date of acquisition, and balance sheet, as of December 31, 2016, reflect the results of operations Everyday Health. For the year ended December 31, 2016, Everyday Health contributed $23.2 million to the Company’s revenues. Net income contributed by Everyday Health was not separately identifiable due to j2 Global’s integration activities and is impracticable to provide.

The following table summarizes the allocation of the purchase consideration for the Everyday Health acquisition (in thousands):



Assets and Liabilities	Valuation

Cash	$	15,918
Accounts receivable		67,968
Other assets		11,168
Property and equipment		6,494
Trademarks		70,300
Customer relationships		45,500
Other intangibles		88,267
Goodwill		263,988
Accounts payables and accrued expenses		(59,091	)
Deferred revenue		(5,297	)
Deferred tax liability		(11,500	)
Total	$	493,715

The initial accounting for the Everyday Health acquisition is substantially complete but is subject to change, which may be significant. Actual amounts recorded upon the finalization of these items 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 the Everyday Health acquisition during the year ended December 31, 2016 is $264.0 million, of which $65.4 million is expected to be deductible for income tax purposes.

Pro Forma Financial Information for Everyday Health Acquisition

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 Everyday Health been combined companies during the periods presented. These pro forma results exclude any savings or synergies that would have resulted from the Everyday Health business acquisition had it occurred on January 1, 2015 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 Everyday Health acquisition, net of the related tax effects.

The supplemental information on an unaudited pro forma financial basis presents the combined results of j2 Global and Everyday Health as if the acquisition had occurred on January 1, 2015 (in thousands, except per share amounts):



	Year ended
	December 31, 2016		December 31, 2015
	(unaudited)		(unaudited)
Revenues	$	1,082,813	$	952,806
Net income	$	103,541	$	115,059
EPS - Basic	$	2.14	$	2.38
EPS - Diluted	$	2.13	$	2.35

Pro Forma Financial Information for All 2016 Acquisitions

The following unaudited pro forma supplemental information is based on estimates and assumptions, that 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, 2015 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 2016 acquisitions as if each acquisition had occurred on January 1, 2015 (in thousands, except per share amounts):



	Year ended
	December 31, 2016		December 31, 2015
	(unaudited)		(unaudited)
Revenues	$	1,102,510	$	1,009,169
Net income	$	108,822	$	11,817
EPS - Basic	$	2.25	$	2.31
EPS - Diluted	$	2.24	$	2.29

2015

The Company completed the following acquisitions during the year ended December 31, 2015, paying the purchase price in cash for each transaction: (a) a share purchase of the entire issued share capital of Firstway, acquired on February 11, 2015, an Ireland-based distributor of FaxBOX® digital fax services; (b) an asset purchase of Nuvotera (formerly known as Spam Soap), acquired on February 13, 2015, a California-based supplier of email security; (c) an asset purchase of EmailDirect, acquired on February 19, 2015, a California-based provider of email marketing services; (d) an asset purchase of SugarSync®, Inc., acquired on March 23, 2015, a California-based provider of online file backup, synchronization and sharing assets; (e) an asset purchase of Popfax, acquired on September 23, 2015, a France-based global provider of internet fax services; (f) a stock purchase of the entire capital stock of Salesify, acquired on September 17, 2015, a California-based based provider of lead generation solutions; (g) an asset purchase of LiveVault®, acquired on September 30, 2015, a California-based global provider of data backup and recovery services; (h) a membership interest purchase of the entire units of Offers.com, acquired on December 31, 2015, a Texas-based and is an online marketplace connecting millions of consumers with discounts from thousands of leading merchants; and (i) certain other immaterial acquisitions of fax, online data backup and email businesses.

The consolidated statement of income since the date of each acquisition and balance sheet, as of December 31, 2015, reflect the results of operations of all 2015 acquisitions. For the year ended December 31, 2015, these acquisitions contributed $52.4 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 $314.0 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 as follows (in thousands):



Assets and Liabilities	Valuation

Accounts receivable	$	14,935
Other assets		1,415
Property and equipment		5,769
Software		18,764
Trade names		22,602
Customer relationships		98,027
Other intangibles		1,873
Goodwill		172,593
Accounts payables and accrued expenses		(9,684	)
Deferred revenue		(10,764	)
Deferred tax liability		(1,316	)
Capital lease		(195	)
Total	$	314,019

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, 2015 is $172.6 million, of which $143.3 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 that 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, 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):



	Year ended
	December 31, 2015		December 31, 2014
	(unaudited)		(unaudited)
Revenues	$	823,904	$	744,388
Net income	$	159,408	$	126,196
EPS - Basic	$	3.29	$	2.64
EPS - Diluted	$	3.26	$	2.62

2014

The Company completed the following acquisitions during year ended December 31, 2014, paying the purchase price in cash for each transaction: (a) all of the shares of City Numbers, acquired on January 14, 2014, 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, acquired on January 23, 2014, an Iceland-based provider of cloud backup and recovery services for corporate and enterprise networks; (c) all of the shares of Livedrive®, acquired on February 6, 2014, a UK-based provider of online backup with added file sync features for professionals and individuals; (d) certain assets of Faxmate, acquired on February 7, 2014, a Brisbane-based provider of Internet fax; (e) all of the shares of Critical Software Ltd., acquired on March 31, 2014, a UK-based Email Security and Management company operating under the brand name iCritical^TM; (f) all of the shares of The Online Backup Company, acquired on May 6, 2014, a Scandinavia-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, acquired on June 3, 2014, a provider of research to IT buyers and leads to IT vendors; (h) asset purchase of Contactology, Inc., acquired on July 17, 2014, a North Carolina-based provider of email marketing services; (i) certain assets of Back Up My Info!, acquired on July 30, 2014, a New York-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, acquired on September 10, 2014, a Melbourne-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, acquired on September 30, 2014, a Philadelphia-based cloud email security and archiving solutions; (l) all of the units of Scene LLC (“Ookla”), acquired on December 1, 2014, a Washington-based leading provider of broadband and mobile speed testing; (m) all of the shares of NCSG Holding AB (“Stay Secure”), acquired on December 17, 2014, a Swedish-based provider of e-mail and web security services; (n) all of the shares of Comendo A/S, acquired on December 22, 2014, a Danish-based provider of e-mail security; (o) certain assets of TestudoData LLC, acquired on December 31, 2014, a Nevada-based provider of e-mail security; and (p) certain other immaterial acquisitions of fax, online data backup and application businesses.

The consolidated statement of income since the date of the each acquisitions 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 as follows (in thousands):



Assets and Liabilities	Valuation

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

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 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, 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	$	119,773	$	132,480
EPS - Basic	$	2.51	$	2.85
EPS - Diluted	$	2.49	$	2.81