Segment Information

The Company’s business segments are based on the organization structure used by management for making operating and investment decisions and for assessing performance. j2 Global’s reportable business segments are: (i) Cloud Services and (ii) Digital Media.

The Company’s Cloud Services segment is driven primarily by subscription revenues that are relatively higher margin, stable and predictable from quarter to quarter with some seasonal weakness in the fourth quarter. The Cloud Services segment also includes the results of our IP licensing business, which can vary dramatically in both revenues and profitability from period to period. The Company’s Digital Media segment is driven primarily by advertising revenues, has relatively higher sales and marketing expense and has seasonal strength in the fourth quarter.

Information on reportable segments and reconciliation to consolidated income from operations is as follows (in thousands):



	Three Months Ended June 30,					Six Months Ended June 30,
	2018		2017			2018			2017
Revenues by segment:
Cloud Services	$	150,297	$	144,709		$	299,781		$	286,254
Digital Media	137,591		128,474			268,752			241,605
Elimination of inter-segment revenues	—		(9		)	(24		)	(16		)
Total segments revenues	287,888		273,174			568,509			527,843
Corporate	1		—			3			—
Total revenues	287,889		273,174			568,512			527,843

Direct costs by segment⁽¹⁾:
Cloud Services	92,115		86,610			184,709			171,854
Digital Media	134,378		118,335			268,960			234,968
Direct costs by segment⁽¹⁾	226,493		204,945			453,669			406,822

Cloud Services operating income⁽²⁾	58,182		58,099			115,072			114,400
Digital Media operating income	3,213		10,139			(208		)	6,637
Segment operating income	61,395		68,238			114,864			121,037

Global operating costs⁽²⁾	7,012		9,678			14,323			14,502
Income from operations	$	54,383	$	58,560		$	100,541		$	106,535

⁽¹⁾ Direct costs for each segment include cost of revenues and other operating expenses that are directly attributable to the segment, such as employee compensation expense, local sales and marketing expenses, engineering and network operations expense, depreciation and amortization and other administrative expenses.
⁽²⁾ Global operating costs include general and administrative and other corporate expenses that are managed on a global basis and that are not directly attributable to any particular segment.



	June 30, 2018		December 31, 2017
Assets:
Cloud Services	$	1,084,652	$	1,078,577
Digital Media	1,226,521		1,317,113
Total assets from reportable segments	2,311,173		2,395,690
Corporate	169,486		57,403
Total assets	$	2,480,659	$	2,453,093

	Six Months Ended June 30,
	2018		2017
Capital expenditures:
Cloud Services	$	6,611	$	2,804
Digital Media	21,947		16,141
Total from reportable segments	28,558		18,945
Corporate	—		—
Total capital expenditures	$	28,558	$	18,945



	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
Depreciation and amortization:
Cloud Services	$	14,812	$	17,189	$	29,190	$	33,953
Digital Media	28,056		22,714		55,170		45,272
Total from reportable segments	42,868		39,903		84,360		79,225
Corporate	989		—		2,115		—
Total depreciation and amortization	$	43,857	$	39,903	$	86,475	$	79,225

j2 Global maintains operations in the U.S., Canada, Ireland, Japan and other countries. Geographic information about the U.S. and all other countries for the reporting periods is presented below. Such information attributes revenues based on jurisdictions where revenues are reported (in thousands).



	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
Revenues:
United States	$	218,996	$	202,493	$	428,072	$	388,255
Canada	18,528		19,351		38,150		38,752
Ireland	17,013		18,479		34,114		36,380
All other countries	33,352		32,851		68,176		64,456
	$	287,889	$	273,174	$	568,512	$	527,843



	June 30, 2018		December 31, 2017
Long-lived assets:
United States	$	463,582	$	452,143
All other countries	69,629		80,571
Total	$	533,211	$	532,714