Investments

Investments consist of certificates of deposits, equity and debt securities.

The Company has adopted ASU 2016-01 during the first quarter 2018 (see Note 2 - Recent Accounting Pronouncements) and determined that the equity securities that were received as part of the consideration for the sale of Tea Leaves Health, LLC (“Tea Leaves”) in fiscal year 2017 are without a readily determinable fair value because these securities are privately held, not traded on any public exchanges and not an investment in a mutual fund or similar investment. As a result, management has elected to alternatively measure this investment at cost, less impairment, adjusted for subsequent observable price changes to estimate fair value. The Company will make a “reasonable effort” to identify any observable price changes for identical or similar investments with the issuer that are known are can be reasonably known. The adoption of ASU 2016-01 was done on a prospective basis and any changes in the carrying value of the equity securities will be reported in our current earnings as Other expense, net. In addition, the Company determined that the shares of redeemable preferred stock that was also received as part of the consideration for the sale of Tea Leaves are corporate debt securities and are classified as available-for-sale securities.

The following table summarizes the Company’s investments (in thousands):



	March 31, 2018		December 31, 2017
Equity securities	$	44,702	$	34,977
Corporate debt securities	20,245		22,745
Total	$	64,947	$	57,722

The following table summarizes the gross unrealized gains and losses and estimated fair values for the Company’s securities without a readily determinable fair value (in thousands):



	Cost		Impairment	Adjustments		Fair Value
March 31, 2018
Equity securities	$	34,977	—	(3,678	)	$	31,299
Total	$	34,977	—	(3,678	)	$	31,299

December 31, 2017
Equity securities	$	34,977	—	—		$	34,977
Total	$	34,977	—	—		$	34,977

During the current period, the Company recorded an unrealized loss to earnings because an observable price for a similar instrument was observed in the market at an amount that was below the original carrying price of the investment (see Note 6 - Fair Value Measurements).

The following table summarizes the gross unrealized gains and losses and fair values for investments classified as available-for-sale investments (in thousands):



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
March 31, 2018
Corporate debt securities	$	22,745	$	—	$	(2,500	)	$	20,245
Total	$	22,745	$	—	$	(2,500	)	$	20,245

December 31, 2017
Corporate debt securities	$	22,745	$	—	$	—		$	22,745
Total	$	22,745	$	—	$	—		$	22,745

At March 31, 2018, the Company’s available-for-sale securities are carried at fair value, with the unrealized gains and losses reported as a component of stockholders’ equity.

The following table summarizes j2 Global’s corporate debt securities designated as available-for-sale, classified by the contractual maturity date of the security (in thousands):



	March 31, 2018		December 31, 2017
Due within 1 year	$	—	$	—
Due within more than 1 year but less than 5 years	20,245		22,745
Due within more than 5 years but less than 10 years	—		—
Due 10 years or after	—		—
Total	$	20,245	$	22,745

Recognition and Measurement of Other-Than-Temporary Impairment

Regardless of the classification of the securities as available-for-sale or held-to-maturity, the Company has assessed each position for impairment. j2 Global regularly reviews and evaluates each investment that has an unrealized loss. An unrealized loss exists when the current fair value of an individual security is less than its amortized cost basis. Unrealized losses that are determined to be temporary in nature are recorded, net of tax, in accumulated other comprehensive income for available-for-sale securities.

Factors considered in determining whether a loss is temporary include:


•	the length of time and the extent to which fair value has been below cost;


•	the severity of the impairment;


•	the cause of the impairment and the financial condition and near-term prospects of the issuer;


•	activity in the market of the issuer which may indicate adverse credit conditions; and


•	the Company’s ability and intent to hold the investment for a period of time sufficient to allow for any anticipated recovery.

j2 Global’s review for impairment generally entails:


•	identification and evaluation of investments that have indications of possible impairment;


•	analysis of individual investments that have fair values less than amortized cost, including consideration of the length of time the investment has been in an unrealized loss position and the expected recovery period;


•	discussion of evidential matter, including an evaluation of factors or triggers that could cause individual investments to qualify as having an other-than-temporary impairment and those that would not support an other-than-temporary impairment;


•	documentation of the results of these analyses, as required under business policies; and


•	information provided by third-party valuation experts.

For these securities, a critical component of the evaluation for other-than-temporary impairments is the identification of credit impairment, where management does not expect to receive cash flows sufficient to recover the entire amortized cost basis of the security. Credit impairment is assessed using a combination of a discounted cash flow model that estimates the cash flows on the underlying securities and a market comparables method, where the security is valued based upon indications from the secondary market of what discounts buyers demand when purchasing similar securities. The cash flow model incorporates actual cash flows from the securities through the current period and then projects the remaining cash flows using relevant interest rate curves over the remaining term. These cash flows are discounted using a number of assumptions, some of which include prevailing implied credit risk premiums, incremental credit spreads and illiquidity risk premiums, among others.

Securities that have been identified as other-than-temporarily impaired are written down to their current fair value. For debt securities that are intended to be sold or that management believes it more-likely-than-not that will be required to sell prior to recovery, the full impairment is recognized immediately in earnings.

For available-for-sale and held-to-maturity securities that management has no intent to sell and believes that it more-likely-than-not that it will not be required to sell prior to recovery, only the credit loss component of the impairment is recognized in earnings, while the rest of the fair value impairment is recognized in other comprehensive income. The credit loss component recognized in earnings is identified as the amount of principal cash flows not expected to be received over the remaining term of the security.

The following tables present gross unrealized losses and fair values for those investments that were in an unrealized loss position as of March 31, 2018 and December 31, 2017, aggregated by investment category and the length of time that individual securities have been in a continuous loss position (in thousands):



	As of March 31, 2018
	Less than 12 Months					12 Months or Greater				Total
	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Corporate debt securities	$	20,245	$	(2,500	)	$	—	$	—	$	20,245	$	(2,500	)
Total	$	20,245	$	(2,500	)	$	—	$	—	$	20,245	$	(2,500	)

	As of December 31, 2017
	Less than 12 Months					12 Months or Greater				Total
	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Corporate debt securities	$	22,745	$	—		$	—	$	—	$	22,745	$	—
Total	$	22,745	$	—		$	—	$	—	$	22,745	$	—

As of March 31, 2018 and December 31, 2017, we did not recognize any other-than-temporary impairment losses.

On September 25, 2017, the Company entered into a commitment to invest $200 million (approximately 66.7% of equity) in the OCV Fund. The total expected commitment to the OCV Fund is expected to be approximately $300 million. The primary purpose of the Fund is to provide a limited number of select investors with the opportunity to realize long-term appreciation from public and private companies, with a particular focus on the technology and life science industries. The general activities of the OCV Fund is to buy, sell, hold and otherwise invest in securities of every kind and nature and rights and options with respect thereto, including, without limitation, stock, notes, bonds, debentures and evidence of indebtedness; to exercise all rights, powers, privileges and other incidents of ownership or possession with respect to securities held or owned by the OCV Fund; to enter into, make and perform all contracts and other undertakings; and to engage in all activities and transactions as may be necessary, advisable or desirable to carry out the foregoing.

The manager and general partner of the Fund are entities with respect to which Richard S. Ressler, Chairman of the Board of Directors (the “Board”) of the Company, is indirectly the majority equity holder and a related party. As a limited partner in the Fund, the Company will pay an annual management fee to the manager equal to 2.0% (reduced by 10% each year beginning with the sixth year) of capital commitments. In addition, subject to the terms and conditions of the Fund’s limited partnership agreement, once the Company has received distributions equal to its invested capital, the Fund’s general partner would be entitled to a carried interest equal to 20%. The Fund has a six year investment period, subject to certain exceptions. The commitment was approved by the Audit Committee of the Board in accordance with the Company’s related-party transaction approval policy.

During the first quarter of 2018, the Company received capital call notices from the management of OCV Management, LLC. for $13.4 million, inclusive of certain management fees.

The following table discloses the carrying amount for the Company’s equity method investment (in thousands):



	March 31, 2018		December 31, 2017
Equity securities	$	13,403	$	—

As a limited partner, the Company’s maximum exposure to loss is $13.4 million and is limited to its proportional ownership in the partnership. In addition, the Company’s is not required to contribute capital in an aggregate amount in excess of its capital commitment and any expected losses will not be in excess of the Capital Account. Finally, there are no call or put options, or other types of arrangements, which limit the Company’s ability to participate in losses and returns of the Fund.