Document

GAAP earnings per diluted share(3) decreased 48.2% to $1.27 in Q4 2020 compared to $2.45 for Q4 2019 and GAAP net income decreased 52.8% to $58.1 million in Q4 2020 compared to $123.0 million for Q4 2019 primarily due to the recognition of a $53.7 million tax benefit in the fourth quarter of 2019 as the result of an intra-entity transfer as part of the reorganization of its international operating structure; no similar benefit was recognized in the fourth quarter of 2020.

J2 ended the quarter with approximately $340.8 million in cash, cash equivalents, and investments which included $742.7 million of net proceeds from the issuance of its 4.625% Senior Notes (and the related redemption of $694.6 million of the previously outstanding 6.0% Senior Notes of its subsidiary, J2 Cloud Services, LLC), the use of approximately $455 million during the quarter for current period acquisitions and approximately $9 million in connection with payment for prior year acquisitions. In addition, J2 deployed approximately $36 million with respect to its share repurchase program during the quarter.

Q4 2020

Q4 2019

% Change

Revenues

Cloud Services

$171.4 million

$169.3 million

1.2%

Digital Media

$297.9 million

$236.3 million

26.1%

Total Revenue: (1)

$469.2 million

$405.6 million

15.7%

Operating Income

$128.9 million

$110.2 million

17.0%

Net Cash Provided by Operating Activities

$124.1 million

$103.2 million

20.3%

Free Cash Flow (2)

$102.9 million

$82.1 million

25.3%

GAAP Earnings per Diluted Share (3)

$1.27

$2.45

(48.2)%

Adjusted Non-GAAP Earnings per Diluted Share (3) (4)

$3.11

$2.38

30.7%

GAAP Net Income

$58.1 million

$123.0 million

(52.8)%

Adjusted Non-GAAP Net Income

$138.7 million

$115.5 million

20.1%

Adjusted EBITDA (5)

$211.8 million

$176.3 million

20.1%

Adjusted EBITDA Margin (5)

45.1%

43.5%

3.7%

J2 ended the year with approximately $340.8 million in cash, cash equivalents, and investments which included $742.7 million of net proceeds from the issuance of its 4.625% Senior Notes (and the related redemption of $694.6 million of the previously outstanding 6.0% Senior Notes of its subsidiary, J2 Cloud Services, LLC), the use of approximately $482 million during the year for current year acquisitions and approximately $49 million in connection with payments for prior year acquisitions. In addition, J2 deployed approximately $265 million with respect of its share repurchase programs during the year.

2020

2019

% Change

Revenues

Cloud Services

$678.5 million

$661.8 million

2.5%

Digital Media

$811.1 million

$710.2 million

14.2%

Total Revenue: (1)

$1,489.6 million

$1,372.0 million

8.6%

Operating Income

$334.6 million

$277.1 million

20.8%

Net Cash Provided by Operating Activities

$480.1 million

$412.5 million

16.4%

Free Cash Flow (2)

$407.7 million

$350.4 million

16.4%

GAAP Earnings per Diluted Share (6)

$3.18

$4.39

(27.6)%

Adjusted Non-GAAP Earnings per Diluted Share (6) (7)

$8.18

$7.08

15.5%

GAAP Net Income

$150.7 million

$218.8 million

(31.1)%

Adjusted Non-GAAP Net Income

$380.7 million

$344.4 million

10.5%

Adjusted EBITDA (5)

$615.7 million

$550.2 million

11.9%

Adjusted EBITDA Margin (5)

41.3%

40.1%

3.0%

The Company has not reconciled the non-GAAP pro forma including 2021 revenue, Adjusted non-GAAP earnings per diluted share, and tax rate information included in this release to the most directly comparable GAAP measure because this cannot be done without unreasonable effort due to the variability with respect to costs related to acquisitions and taxation, which are potential adjustments to future earnings. We expect the variability of these items to have a potentially unpredictable and significant impact on our future GAAP financial results.


(1)						The revenues associated with each of the businesses may not foot precisely since each is presented independently.
(2)						Free cash flow is defined as net cash provided by operating activities, less purchases of property and equipment, plus contingent consideration. Free cash flow amounts are not meant as a substitute for GAAP, but are solely for informational purposes.
(3)						The estimated GAAP effective tax rates were approximately 24.8% for Q4 2020 and (43.2)% for Q4 2019. The estimated Adjusted non-GAAP effective tax rates were approximately 21.8% for Q4 2020 and 21.3% for Q4 2019.
(4)						Adjusted non-GAAP earnings per diluted share excludes certain non-GAAP items, as defined in the Reconciliation of GAAP to Adjusted non-GAAP Financial Measures, for the three months ended December 31, 2020 and 2019 totaled $1.84 and ($0.07) per diluted share, respectively.
(5)						Adjusted EBITDA is defined as earnings before interest; gain on sale of businesses; loss on investments, net; other (income) expense, net; income tax expense (benefit); net loss in earnings of equity method investments; depreciation and amortization; and the items used to reconcile EPS to Adjusted non-GAAP EPS, as defined in the Reconciliation of GAAP to Adjusted non-GAAP Financial Measures. Adjusted EBITDA amounts are not meant as a substitute for GAAP, but are solely for informational purposes.
(6)						The estimated GAAP effective tax rates were approximately 29.7% for 2020 and (9.7)% for 2019. The estimated Adjusted non-GAAP effective tax rates were approximately 21.8% for 2020 and 21.3% for 2019.
(7)						Adjusted non-GAAP earnings per diluted share excludes certain non-GAAP items, as defined in the Reconciliation of GAAP to Adjusted non-GAAP Financial Measures, for the twelve months ended December 31, 2020 and 2019 totaled $5.00 and $2.69 per diluted share, respectively.

J2 Global, Inc. (NASDAQ: JCOM) is a leading internet information and services company consisting of a portfolio of brands including IGN, Mashable, Humble Bundle, Speedtest, PCMag, RetailMeNot, Offers.com, Spiceworks, Everyday Health, BabyCenter and What To Expect in its Digital Media business and eFax, eVoice, iContact, Campaigner, Vipre, IPVanish and KeepItSafe in its Cloud Services business. J2 reaches in excess 240 million people per month across its brands. As of December 31, 2020, J2 had achieved 25 consecutive fiscal years of revenue growth. For more information about J2, please visit www.J2global.com.

“Safe Harbor” Statement Under the Private Securities Litigation Reform Act of 1995: Certain statements in this Press Release are “forward-looking statements” within the meaning of The Private Securities Litigation Reform Act of 1995, including those contained in Vivek Shah’s quote and the “Business Outlook” portion regarding the Company’s expected fiscal 2021 financial performance. These forward-looking statements are based on management’s current expectations or beliefs and are subject to numerous assumptions, risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. These factors and uncertainties include, among other items: the Company’s ability to grow non-fax revenues, profitability and cash flows; the Company’s ability to identify, close and successfully transition acquisitions; subscriber growth and retention; variability of the Company’s revenue based on changing conditions in particular industries and the economy generally; protection of the Company’s proprietary technology or infringement by the Company of intellectual property of others; the risk of adverse changes in the U.S. or international regulatory environments, including but not limited to the imposition or increase of taxes or regulatory-related fees; and the numerous other factors set forth in J2 Global’s filings with the Securities and Exchange Commission (“SEC”). For a more detailed description of the risk factors and uncertainties affecting J2 Global, refer to the 2019 Annual Report on Form 10-K filed by J2 Global on March 2, 2020, and the other reports filed by J2 Global from time-to-time with the SEC, each of which is available at www.sec.gov. The forward-looking statements provided in this press release, including those contained in Vivek Shah’s quote and in the “Business Outlook” portion regarding the Company’s expected fiscal 2021 financial performance are based on limited information available to the Company at this time, which is subject to change. Although management’s expectations may change after the date of this press release, the Company undertakes no obligation to revise or update these statements.

To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we use the following Adjusted non-GAAP financial measures: Adjusted non-GAAP net income, Adjusted non-GAAP earnings per diluted share, Adjusted EBITDA and free cash flow. The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.

We use these Adjusted non-GAAP financial measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons. Our management believes that these Adjusted non-GAAP financial measures provide meaningful supplemental information regarding our performance and liquidity by excluding certain expenses and expenditures that may not be indicative of our recurring core business operating results. We believe that both management and investors benefit from referring to these Adjusted non-GAAP financial measures in assessing our performance and when planning, forecasting, and analyzing future periods. These Adjusted non-GAAP financial measures also facilitate management’s internal comparisons to our historical performance and liquidity. We believe these Adjusted non-GAAP financial measures are useful to investors both because (1) they allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making and (2) they are used by our institutional investors and the analyst community to help them analyze the health of our business.


	December 31, 2020		December 31, 2019
ASSETS
Cash and cash equivalents	$	242,652	$	575,615
Short-term investments	663		—
Accounts receivable, net of allowances of $15,269 and $12,701, respectively	325,619		261,928
Prepaid expenses and other current assets	53,909		49,347

Total current assets	622,843		886,890
Long-term investments	97,495		100,079
Property and equipment, net	156,577		127,817
Operating lease right-of-use assets	105,845		125,822
Goodwill	1,867,430		1,633,033
Other purchased intangibles, net	741,569		556,553
Deferred income taxes, noncurrent	56,545		59,976
Other assets	17,027		15,676
TOTAL ASSETS	$	3,665,331	$	3,505,846

LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable and accrued expenses	$	230,651	$	238,059
Income taxes payable, current	31,753		17,758
Deferred revenue, current	190,644		162,855


Operating lease liabilities, current	32,211		26,927
Current portion of long-term debt	396,801		385,532


Other current liabilities	497		1,973
Total current liabilities	882,557		833,104
Long-term debt	1,182,220		1,062,929
Deferred revenue, noncurrent	14,440		12,744
Operating lease liabilities, noncurrent	99,177		104,070
Income taxes payable, noncurrent	11,675		11,675
Liability for uncertain tax positions	57,081		52,451
Deferred income taxes, noncurrent	162,700		107,453
Other long-term liabilities	44,463		10,228
TOTAL LIABILITIES	2,454,313		2,194,654
Commitments and contingencies	—		—
Preferred stock	—		—
Common stock	443		476
Additional paid-in capital	456,274		465,652

Retained earnings	809,107		891,526
Accumulated other comprehensive loss	(54,806)		(46,462)
TOTAL STOCKHOLDERS’ EQUITY	1,211,018		1,311,192
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	3,665,331	$	3,505,846


	Three Months Ended December 31,				Twelve Months Ended December 31,
	2020		2019		2020		2019
Total revenues	$	469,240	$	405,588	$	1,489,593	$	1,372,054

Cost of revenues (1)	60,027		64,328		231,782		237,323
Gross profit	409,213		341,260		1,257,811		1,134,731

Operating expenses:
Sales and marketing (1)	126,157		105,371		413,474		379,183
Research, development and engineering (1)	21,022		15,704		64,295		54,396
General and administrative (1)	133,148		109,940		445,431		424,072
Total operating expenses	280,327		231,015		923,200		857,651
Income from operations	128,886		110,245		334,611		277,080
Interest expense, net	66,096		18,921		131,975		69,546
Gain on sale of business	—		—		(17,122)		—
Loss on investments, net	—		2		20,991		47
Other (income) expense, net	(15,219)		5,232		(31,632)		7,889
Income before income taxes and net loss in earnings of equity method investment	78,009		86,090		230,399		199,598
Income tax expense (benefit)	19,382		(37,227)		68,393		(19,376)
Net loss in earnings of equity method investment	539		294		11,338		168
Net income	$	58,088	$	123,023	$	150,668	$	218,806

Basic net income per common share:
Net income attributable to J2 Global, Inc. common shareholders	$	1.30	$	2.54	$	3.24	$	4.52

Diluted net income per common share:
Net income attributable to J2 Global, Inc. common shareholders	$	1.27	$	2.45	$	3.18	$	4.39

Basic weighted average shares outstanding	44,504,222		47,626,833		46,308,825		47,647,397
Diluted weighted average shares outstanding	45,642,292		49,425,395		47,122,511		49,025,684

(1) Includes share-based compensation expense as follows:
Cost of revenues	$	122	$	135	$	535	$	525
Sales and marketing	319		335		1,454		1,547
Research, development and engineering	439		385		1,779		1,477
General and administrative	4,483		4,673		20,238		20,373
Total	$	5,363	$	5,528	$	24,006	$	23,922


	Twelve Months Ended December 31,
	2020		2019
Cash flows from operating activities:
Net income	$	150,668	$	218,806
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	228,737		232,032

Amortization of financing costs and discounts	28,476		14,038
Non-cash operating lease costs	17,686		21,419
Share-based compensation	24,006		23,922
Provision for doubtful accounts	13,283		13,134
Deferred income taxes, net	5,840		(63,444)
Loss on extinguishment of debt	37,969		—
Gain on sale of businesses	(17,122)		—
Lease asset impairments and other charges	12,121		—
Changes in fair value of contingent consideration	(80)		6,318
Foreign currency remeasurement gain	(34,646)		—


Loss on equity method investments	11,338		139
Loss on equity and debt investments	20,826		4,164
Decrease (increase) in:
Accounts receivable	(31,611)		(30,680)
Prepaid expenses and other current assets	3,046		(8,685)
Other assets	(3)		(4,083)
Increase (decrease) in:
Accounts payable and accrued expenses	2,184		(770)
Income taxes payable	6,489		(1,738)
Deferred revenue	4,720		6,844
Operating lease liabilities	(16,439)		(20,240)
Liability for uncertain tax positions	9,391		(453)
Other long-term liabilities	3,200		1,816
Net cash provided by operating activities	480,079		412,539
Cash flows from investing activities:

Distribution from equity method investment	—		10,288
Purchases of equity method investment	(32,340)		(29,584)
Purchase of equity investments	(843)		—


Purchases of property and equipment	(92,552)		(70,588)
Proceeds from sale of assets	507		—
Acquisition of businesses, net of cash received	(482,227)		(415,343)
Proceeds from sale of businesses, net of cash divested	24,353		—
Purchases of intangible assets	(3,118)		(46)
Net cash used in investing activities	(586,220)		(505,273)
Cash flows from financing activities:
Proceeds from issuance of long-term debt	750,000		550,000
Payment of note payable	(400)		—
Debt issuance cost	(7,272)		(12,862)
Payment of debt	(650,000)		(5,100)
Debt extinguishment costs	(29,250)		—
Proceeds from line of credit	—		185,000
Repayment of line of credit	—		(185,000)
Repurchase of common stock	(275,654)		(20,803)
Issuance of common stock under employee stock purchase plan	7,382		4,512
Exercise of stock options	1,619		5,274
Dividends paid	—		(43,918)
Deferred payments for acquisitions	(29,180)		(18,876)
Other	(1,878)		(1,532)

Non-GAAP net income is GAAP net income with the following modifications: (1) elimination of share-based compensation; (2) elimination of certain acquisition-related integration costs; (3) elimination of interest costs in excess of the coupon rate associated with the convertible notes and overlapping interest of senior notes prior to extinguishment; (4) elimination of amortization of patents and intangible assets that we acquired; (5) elimination of change in value on investment; (6) elimination of additional tax expense/benefit from prior years; (7) elimination of gain on sale of assets; (8) elimination of intra-entity transfers; (9) elimination of lease asset impairments and other charges; (10) elimination of leasehold improvement impairments; and (11) elimination of dilutive effect of the convertible debt.


	Three Months Ended December 31,
	2020		Per Diluted Share *		2019		Per Diluted Share *
Net income	$	58,088	$	1.27	$	123,023	$	2.45
Plus:
Share based compensation (1)	4,643		0.10		7,843		0.16
Acquisition related integration costs (2)	7,363		0.17		(824)		(0.02)
Interest costs (3)	40,133		0.90		5,198		0.11
Amortization (4)	37,862		0.85		30,399		0.64
Investments (5)	(2,158)		(0.05)		3,567		0.08
Tax expense (benefit) from prior years (6)	2,841		0.06		(10)		—
Sale of assets (7)	374		0.01		—		—
Intra-entity transfers (8)	(12,124)		(0.27)		(53,690)		(1.13)
Lease asset impairments and other charges (9)	1,708		0.04		—		—
Leasehold improvement impairments (10)	(3)		—		—		—
Convertible debt dilution (11)	—		0.03		—		0.07
Adjusted non-GAAP net income	$	138,727	$	3.11	$	115,506	$	2.38


	Twelve Months Ended December 31,
	2020		Per Diluted Share *		2019		Per Diluted Share *
Net income	$	150,668	$	3.18	$	218,806	$	4.39
Plus:
Share based compensation (1)	18,993		0.41		21,701		0.46
Acquisition related integration costs (2)	10,134		0.22		13,152		0.28
Interest costs (3)	54,062		1.17		10,367		0.22
Amortization (4)	127,260		2.75		130,547		2.74
Investments (5)	33,337		0.72		3,441		0.07
Tax expense from prior years (6)	7,757		0.17		62		—
Sale of assets (7)	(9,897)		(0.21)		—		—
Intra-entity transfers (8)	(25,440)		(0.55)		(53,690)		(1.13)
Lease asset impairments and other charges (9)	11,099		0.24		—		—
Leasehold improvement impairments (10)	2,774		0.06		—		—
Convertible debt dilution (11)	—		0.06		—		0.12
Adjusted non-GAAP net income	$	380,747	$	8.18	$	344,386	$	7.08


	Three Months Ended December 31,
	2020		2019
Cost of revenues	$	60,027	$	64,328
Plus:
Share based compensation (1)	(122)		(135)
Acquisition related integration costs (2)	(57)		(43)
Amortization (4)	(115)		(450)
Adjusted non-GAAP cost of revenues	$	59,733	$	63,700
Sales and marketing	$	126,157	$	105,371
Plus:
Share based compensation (1)	(319)		(335)
Acquisition related integration costs (2)	(1,117)		274
Lease asset impairments and other charges (9)	(76)		—
Leasehold improvement impairments (10)	(3)		—
Adjusted non-GAAP sales and marketing	$	124,642	$	105,310
Research, development and engineering	$	21,022	$	15,704
Plus:
Share based compensation (1)	(439)		(385)
Acquisition related integration costs (2)	(627)		48
Lease asset impairments and other charges (9)	(35)		—
Adjusted non-GAAP research, development and engineering	$	19,921	$	15,367
General and administrative	$	133,148	$	109,940
Plus:
Share based compensation (1)	(4,483)		(4,673)
Acquisition related integration costs (2)	(7,990)		801
Amortization (4)	(48,655)		(48,333)
Lease asset impairments and other charges (9)	(2,610)		—
Leasehold improvement impairments (10)	(23)		—
Adjusted non-GAAP general and administrative	$	69,387	$	57,735
Interest expense, net	$	66,096	$	18,921
Plus:

Interest costs (3)	(50,869)		(3,293)

Adjusted non-GAAP interest expense, net	$	15,227	$	15,628




Loss on investments, net	$	—	$	2


Adjusted non-GAAP loss on investments, net	$	—	$	2


Continued from previous page


Other (income) expense, net	$	(15,219)	$	5,232
Plus:
Acquisition related integration costs (2)	209		—
Investments (5)	—		(4,164)
Sale of assets (7)	(32)		—
Intra-entity transfers (8)	17,474		—
Lease asset impairments and other charges (9)	385		—
Adjusted non-GAAP other (income) expense, net	$	2,817	$	1,068



Income Tax Provision	$	19,382	$	(37,227)
Plus:
Share based compensation (1)	720		(2,315)
Acquisition related integration costs (2)	2,219		(256)
Interest costs (3)	10,736		(1,905)
Amortization (4)	10,908		18,384
Investments (5)	2,697		891
Tax (benefit) expense from prior years (6)	(2,841)		10
Sale of assets (7)	(342)		—
Intra-entity transfers (8)	(5,350)		53,690
Lease asset impairments and other charges (9)	628		—
Leasehold improvement impairments (10)	29		—
Adjusted non-GAAP income tax provision	$	38,786	$	31,272
Net loss in earnings of equity method investment	$	539	$	294
Plus:
Investments (5)	(539)		(294)
Adjusted non-GAAP net loss in earnings of equity method investment	$	—	$	—

Total adjustments	$	(80,639)	$	7,517

GAAP earnings per diluted share	$	1.27	$	2.45
Adjustments *	$	1.84	$	(0.07)
Adjusted non-GAAP earnings per diluted share	$	3.11	$	2.38

The Company discloses Adjusted non-GAAP Earnings Per Share (“EPS”) as a supplemental Non-GAAP financial performance measure, as it believes it is a useful metric by which to compare the performance of its business from period to period. The Company also understands that this Adjusted non-GAAP measure is broadly used by analysts, rating agencies and investors in assessing the Company’s performance. Accordingly, the Company believes that the presentation of this Adjusted non-GAAP financial measure provides useful information to investors.

Adjusted non-GAAP EPS is not in accordance with, or an alternative to, net income per share and may be different from Non-GAAP measures with similar or even identical names used by other companies. In addition, this Adjusted non-GAAP measure is not based on any comprehensive set of accounting rules or principles. This Adjusted non-GAAP measure has limitations in that it does not reflect all of the amounts associated with the Company’s results of operations determined in accordance with GAAP.


	Twelve Months Ended December 31,
	2020		2019
Cost of revenues	$	231,782	$	237,323
Plus:
Share based compensation (1)	(535)		(525)
Acquisition related integration costs (2)	(227)		(368)
Amortization (4)	(1,921)		(1,893)
Adjusted non-GAAP cost of revenues	$	229,099	$	234,537
Sales and marketing	$	413,474	$	379,183
Plus:
Share based compensation (1)	(1,454)		(1,547)
Acquisition related integration costs (2)	(1,803)		(2,870)
Lease asset impairments and other charges (9)	(76)		—
Leasehold improvement impairments (10)	(3)		—
Adjusted non-GAAP sales and marketing	$	410,138	$	374,766
Research, development and engineering	$	64,295	$	54,396
Plus:
Share based compensation (1)	(1,779)		(1,477)
Acquisition related integration costs (2)	(606)		(2,039)
Lease asset impairments and other charges (9)	(35)		—
Adjusted non-GAAP research, development and engineering	$	61,875	$	50,880
General and administrative	$	445,431	$	424,072
Plus:
Share based compensation (1)	(20,238)		(20,373)
Acquisition related integration costs (2)	(10,752)		(11,745)
Amortization (4)	(162,802)		(180,603)
Tax expense from prior years (6)	—		(104)

Lease asset impairments and other charges (9)	(14,801)		—
Leasehold improvement impairments (10)	(3,628)		—
Adjusted non-GAAP general and administrative	$	233,210	$	211,247
Interest expense, net	$	131,975	$	69,546
Plus:
Acquisition related integration costs (2)	—		27
Interest costs (3)	(68,961)		(10,121)

Adjusted non-GAAP interest expense, net	$	63,014	$	59,452



Continued from previous page

Gain on sale of businesses	$	(17,122)	$	—
Plus:
Sale of assets (7)	17,122		—
Adjusted non-GAAP gain on sale of businesses	$	—	$	—
Loss on investments, net	$	20,991	$	47
Plus:
Investments (5)	(20,825)		—
Sale of assets (7)	(165)		—
Adjusted non-GAAP loss on investments, net	$	1	$	47
Other (income) expense, net	$	(31,632)	$	7,889
Plus:
Acquisition related integration costs (2)	209		—
Investments (5)	—		(4,164)
Sale of assets (7)	618		—
Intra-entity transfers (8)	35,460		—
Lease asset impairments and other charges (9)	385		—
Adjusted non-GAAP other (income) expense, net	$	5,040	$	3,725




Income tax provision	$	68,393	$	(19,376)
Plus:
Share based compensation (1)	5,013		2,221
Acquisition related integration costs (2)	3,045		3,843
Interest costs (3)	14,899		(246)
Amortization (4)	37,463		51,949
Investments (5)	(1,174)		891
Tax (benefit) expense from prior years (6)	(7,757)		42
Sale of assets (7)	(7,678)		—
Intra-entity transfers (8)	(10,020)		53,690
Lease asset impairments and other charges (9)	3,428		—
Leasehold improvement impairments (10)	857		—
Adjusted non-GAAP income tax provision	$	106,469	$	93,014
Net loss in earnings of equity method investment	$	11,338	$	168
Plus:
Investments (5)	(11,338)		(168)
Adjusted non-GAAP net loss in earnings of equity method investment	$	—	$	—

Total adjustments	$	(230,079)	$	(125,580)

GAAP earnings per diluted share	$	3.18	$	4.39
Adjustments *	$	5.00	$	2.69
Adjusted non-GAAP earnings per diluted share	$	8.18	$	7.08

To supplement its condensed consolidated financial statements, which are prepared and presented in accordance with U.S. GAAP, the Company uses the following Non-GAAP financial measures: Adjusted EBITDA, Adjusted non-GAAP Net Income, and Adjusted non-GAAP Diluted EPS (collectively the “Non-GAAP financial measures”). The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with U.S. GAAP. The Company uses these Non-GAAP financial measures for financial and operational decision making and as a means to evaluate period-to-period comparisons. The Company believes that they provide useful information about core operating results, enhance the overall understanding of past financial performance and future prospects, and allow for greater transparency with respect to key metrics used by management in its financial and operational decision making.

(1) Share Based Compensation. The Company excludes stock-based compensation because it is non-cash in nature and because the Company believes that the Non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance. The Company further believes this measure is useful to investors in that it allows for greater transparency to certain line items in its financial statements. In addition, excluding this item from the Non-GAAP measures facilitates comparisons to historical operating results and comparisons to peers, many of which similarly exclude this item.

(2) Acquisition Related Integration Costs. The Company excludes certain acquisition and related integration costs such as adjustments to contingent consideration, severance, retention bonuses, severance, lease terminations, retention bonuses and other acquisition-specific items. The Company believes that the Non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance. In addition, excluding this item from the Non-GAAP measures facilitates comparisons to historical operating results and comparisons to peers, many of which similarly exclude this item.

(3) Interest Costs. In June 2014, the Company issued $402.5 million aggregate principal amount of 3.25% convertible senior notes and in November 2019, the Company issued $550.0 million aggregate principal amount of 1.75% convertible senior notes. In accordance with GAAP, the Company separately accounts for the value of the liability and equity features of its outstanding convertible senior notes in a manner that reflects the Company’s non-convertible debt borrowing rate. The value of the conversion features, reflected as a debt discount, is amortized to interest expense over time. Accordingly, the Company recognizes imputed interest expense on its 3.25% and 1.75% convertible senior notes of approximately 5.8% and 5.5%, respectively, in its income statement. The Company excludes the difference between the imputed interest expense and the coupon interest expense of 3.25% and 1.75%, respectively, because it is non-cash in nature and because the Company believes that the Non-GAAP financial measures excluding this item provide meaningful supplemental information regarding core operational performance. In addition, the Company has excluded two months of overlapping interest expense and loss on extinguishment in the fourth quarter of 2020 in connection with the 6.0% senior unsecured notes and the issuance of the 4.625% Senior Notes in October of 2020. The Company has determined excluding these items from the Non-GAAP measures facilitates comparisons to historical operating results and comparisons to peers, many of which similarly exclude this item.

(4) Amortization. The Company excludes amortization of patents and acquired intangible assets because it is non-cash in nature and because the Company believes that the Non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance. In addition, excluding this item from the Non-GAAP measures facilitates comparisons to historical operating results and comparisons to peers, many of which similarly exclude this item.

(6) Tax Expense/Benefit from Prior Years. The Company excludes certain income tax-related items in respect of income tax audit settlements and their related reversals of income tax reserves accounted for through ASC 740-10. The Company believes that the Non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance. In addition, excluding this item from the Non-GAAP measures facilitates comparisons to historical operating results.

(8) Intra-Entity Transfers. The Company excludes certain effects of intra-entity transfers to the extent the related tax asset or liability in the financial statement is not recovered or settled, respectively during the year. During December 2019, the Company entered into an intra-entity asset transfer that resulted in the recording of a tax benefit and related tax asset representing tax deductible amounts to be realized in future years which is expected to be recovered over a period of up to 20 years and related foreign currency fluctuations. The Company believes that the Non-GAAP financial measures excluding the cumulative future unrealized benefit of the assets transferred and including the tax benefit in the year of realization provides meaningful supplemental information regarding operational performance. In addition, excluding this item from the Non-GAAP measures facilitates comparisons to historical operating results.

The Company presents Adjusted non-GAAP Cost of Revenues, Adjusted non-GAAP Research, Development and Engineering, Adjusted non-GAAP Sales and Marketing, Adjusted non-GAAP General and Administrative, Adjusted non-GAAP Interest Expense, Adjusted non-GAAP Gain on Sale of Businesses, Adjusted non-GAAP Loss on Investments, Adjusted non-GAAP Other (Income) Expense, Adjusted non-GAAP Income Tax Provision and Adjusted non-GAAP Net Income because the Company believes that these provide useful information about our operating results and enhance the overall understanding of past financial performance and future prospects.


	Three Months Ended December 31,				Twelve Months Ended December 31,
	2020		2019		2020		2019

Net income	$	58,088	$	123,023	$	150,668	$	218,806
Plus:
Interest expense, net	66,096		18,921		131,975		69,546
Gain on sale of businesses	—		—		(17,122)		—
Loss on investments, net	—		2		20,991		47
Other (income) expense, net	(15,219)		5,232		(31,632)		7,889
Income tax expense (benefit)	19,382		(37,227)		68,393		(19,376)
Net loss in earnings of equity method investment	539		294		11,338		168
Depreciation and amortization	65,057		61,623		228,737		232,032
Reconciliation of GAAP to Adjusted non-GAAP financial measures:
Share-based compensation	5,363		5,528		24,006		23,922
Acquisition-related integration costs	9,791		(1,080)		13,388		17,022
Additional indirect tax expense from prior years	—		—		—		104
Lease asset impairments and other charges	2,721		—		14,912		—


Adjusted EBITDA	$	211,818	$	176,316	$	615,654	$	550,160

Adjusted EBITDA as calculated above represents earnings before interest, gain on sale of businesses, loss on investments, net, other (income) expense, net, income tax expense (benefit), net loss in earnings of equity method investments, depreciation and amortization and the items used to reconcile GAAP to Adjusted non-GAAP financial measures, including (1) share-based compensation; (2) certain acquisition-related integration costs; (3) additional indirect tax expense from prior years; and (4) lease asset impairments and other charges. We disclose Adjusted EBITDA as a supplemental Non-GAAP financial performance measure as we believe it is a useful metric by which to compare the performance of our business from period to period. We understand that measures similar to Adjusted EBITDA are broadly used by analysts, rating agencies and investors in assessing our performance. Accordingly, we believe that the presentation of Adjusted EBITDA provides useful information to investors.


	Q1		Q2		Q3		Q4		YTD
2020
Net cash provided by operating activities	$	102,036	$	139,591	$	114,382	$	124,070	$	480,079
Less: Purchases of property and equipment	(26,885)		(23,652)		(20,729)		(21,286)		(92,552)
Add: Contingent consideration*	20,054		—		49		99		20,202
Free cash flows	$	95,205	$	115,939	$	93,702	$	102,883	$	407,729

* Free Cash Flows of $95.2 million for Q1 2020, $93.7 million for Q3 2020 and $102.9 million for Q4 is before the effect of payments associated with certain contingent consideration associated with recent acquisitions.


	Q1		Q2		Q3		Q4		YTD
2019
Net cash provided by operating activities	$	116,854	$	95,357	$	97,096	$	103,232	$	412,539
Less: Purchases of property and equipment	(12,531)		(18,260)		(18,692)		(21,105)		(70,588)
Add: Contingent consideration*	—		8,698		(240)		—		8,458
Free cash flows	$	104,323	$	85,795	$	78,164	$	82,127	$	350,409

* Free Cash Flows of $85.8 million for Q2 2019 and $78.2 million for Q3 2019 is before the effect of payments associated with certain contingent consideration associated with recent acquisitions.

The Company discloses free cash flows as supplemental Non-GAAP financial performance measure, as it believes it is a useful metric by which to compare the performance of its business from period to period. The Company also understands that this Non-GAAP measure is broadly used by analysts, rating agencies and investors in assessing the Company’s performance. Accordingly, the Company believes that the presentation of this Non-GAAP financial measure provides useful information to investors.

Free cash flows is not in accordance with, or an alternative to, Cash Flows from Operating Activities, and may be different from Non-GAAP measures with similar or even identical names used by other companies. In addition, the Non-GAAP measure is not based on any comprehensive set of accounting rules or principles. This Non-GAAP measure has limitations in that it does not reflect all of the amounts associated with the Company’s results of operations determined in accordance with GAAP.


	Cloud		Digital
	Services		Media		Corporate		Total
Revenues
GAAP revenues	$	171,372	$	297,868	$	—	$	469,240

Gross profit
GAAP gross profit	$	133,318	$	275,895	$	—	$	409,213
Non-GAAP adjustments:
Share-based compensation	119		3		—		122
Acquisition related integration costs	57		—		—		57
Amortization	115		—		—		115
Adjusted non-GAAP gross profit	$	133,609	$	275,898	$	—	$	409,507

Operating profit
GAAP operating profit	$	60,615	$	85,571	$	(17,300)	$	128,886
Non-GAAP adjustments:
Share-based compensation	1,017		1,334		3,012		5,363
Acquisition related integration costs	337		8,116		1,338		9,791
Amortization	15,759		32,903		109		48,771

Lease asset impairment and other charges	—		2,721		—		2,721
Leasehold improvement impairments	—		26		—		26
Adjusted non-GAAP operating profit	$	77,728	$	130,671	$	(12,841)	$	195,558

Depreciation	5,639		10,621		—		16,260
Adjusted EBITDA	$	83,367	$	141,292	$	(12,841)	$	211,818

NOTE 1: Table above excludes certain intercompany allocations


	Cloud		Digital
	Services		Media		Corporate		Total
Revenues
GAAP revenues	$	169,296	$	236,290	$	2	$	405,588

Gross profit
GAAP gross profit	$	132,345	$	208,913	$	2	$	341,260
Non-GAAP adjustments:
Share-based compensation	133		2		—		135
Acquisition related integration costs	43		—		—		43
Amortization	450		—		—		450

Adjusted non-GAAP gross profit	$	132,971	$	208,915	$	2	$	341,888

Operating profit
GAAP operating profit	$	58,713	$	63,211	$	(11,679)	$	110,245
Non-GAAP adjustments:
Share-based compensation	1,211		1,146		3,171		5,528
Acquisition related integration costs	783		(1,863)		—		(1,080)
Amortization	19,531		28,663		589		48,783

Adjusted Non-GAAP operating profit	$	80,238	$	91,157	$	(7,919)	$	163,476

Depreciation	2,995		9,845		—		12,840
Adjusted EBITDA	$	83,233	$	101,002	$	(7,919)	$	176,316

NOTE 1: Table above excludes certain intercompany allocations
NOTE 2: Table above has been recast to remove the impact of certain expenses associated with the Corporate entity that were previously allocated to the Cloud Services and Digital Media businesses.


	Cloud		Digital
	Services		Media		Corporate		Total
Revenues
GAAP revenues	$	678,461	$	811,130	$	—	$	1,489,591

Gross profit
GAAP gross profit	$	524,200	$	733,658	$	(47)	$	1,257,811
Non-GAAP adjustments:
Share-based compensation	525		10		—		535
Acquisition related integration costs	227		—		—		227
Amortization	1,921		—		—		1,921
Adjusted non-GAAP gross profit	$	526,873	$	733,668	$	(47)	$	1,260,494

Operating profit
GAAP operating profit	$	250,306	$	139,807	$	(55,502)	$	334,611
Non-GAAP adjustments:
Share-based compensation	5,623		5,539		12,844		24,006
Acquisition related integration costs	606		11,289		1,493		13,388
Amortization	61,159		99,901		3,663		164,723

Lease asset impairment and other charges	—		14,912		—		14,912
Leasehold improvement impairments	—		3,631		—		3,631
Adjusted non-GAAP operating profit	$	317,694	$	275,079	$	(37,502)	$	555,271

Depreciation	18,595		41,788		—		60,383
Adjusted EBITDA	$	336,289	$	316,867	$	(37,502)	$	615,654

NOTE 1: Table above excludes certain intercompany allocations
NOTE 2: Table above has been recast to remove the impact of certain expenses associated with the Corporate entity that were previously allocated to the Cloud Services and Digital Media businesses.


	Cloud		Digital
	Services		Media		Corporate		Total
Revenues
GAAP revenues	$	661,835	$	710,211	$	8	$	1,372,054

Gross profit
GAAP gross profit	$	517,565	$	617,158	$	8	$	1,134,731
Non-GAAP adjustments:
Share-based compensation	516		9		—		525
Acquisition related integration costs	153		215		—		368
Amortization	1,893		—		—		1,893

Adjusted non-GAAP gross profit	$	520,127	$	617,382	$	8	$	1,137,517

Operating profit
GAAP operating profit	$	247,838	$	76,965	$	(47,723)	$	277,080
Non-GAAP adjustments:
Share-based compensation	3,796		5,016		15,110		23,922
Acquisition related integration costs	1,917		15,105		—		17,022
Amortization	69,386		110,623		2,487		182,496
Additional tax expense from prior years	104		—		—		104

Adjusted non-GAAP operating profit	$	323,041	$	207,709	$	(30,126)	$	500,624

Depreciation	11,585		37,951		—		49,536
Adjusted EBITDA	$	334,626	$	245,660	$	(30,126)	$	550,160

NOTE 1: Table above excludes certain intercompany allocations
NOTE 2: Table above has been recast to remove the impact of certain expenses associated with the Corporate entity that were previously allocated to the Cloud Services and Digital Media businesses.


	2020 (1)						2021 Range of Estimates (1)(3)
	Actual		Excluded Assets (2)		Non-GAAP Pro-Forma		Low		High
Revenue	$	1,490	$	(68)	$	1,422	$	1,630	$	1,676
Adjusted EBITDA	$	616	$	(26)	$	590	$	646	$	666
Adjusted non-GAAP EPS	$	8.18	$	(0.38)	$	7.80	$	8.93	$	9.27


Net cash (used in) provided by financing activities	(234,633)		456,695
Effect of exchange rate changes on cash and cash equivalents	7,811		2,180
Net change in cash and cash equivalents	(332,963)		366,141
Cash and cash equivalents at beginning of year	575,615		209,474
Cash and cash equivalents at end of year	$	242,652	$	575,615