Document

Net cash provided by operating activities decreased to $111.3 million as compared to $139.6 million for Q2 2020. Q2 2021 free cash flow(2) decreased 30.6% to $80.5 million as compared to $115.9 million for Q2 2020. Free cash flow decreased primarily due to additional tax payments during Q2 2021 in comparison to the prior comparable period in the amount of $27.6 million. In addition, the Company experienced higher collections of receivables generated in Q4 2020 in Q1 2021 in comparison to collections in Q1 2020. Accordingly, a higher portion of collection activity from the prior year was collected in Q2 2020 related to Q4 receivables in comparison to the current quarter. Also, the Company had additional capital expenditures in comparison to the prior comparable period in the amount of approximately $7.8 million.

Key unaudited financial results for Q2 2021 versus Q2 2020 are set forth in the following table (in millions, except per share amounts). Reconciliations of Adjusted non-GAAP earnings per diluted share, Adjusted EBITDA and free cash flow to their nearest comparable GAAP financial measures are attached to this Press Release. The Pro-Forma Results below exclude Voice assets in Australia, New Zealand, and the United Kingdom that have been sold as well as the Company’s B2B Backup business which it expects to sell.


				Pro-Forma Results(6)
	Q2 2021	Q2 2020	% Change	Q2 2021	Q2 2020	% Change
Revenues
Cloud Services	$175.3	$167.1	4.9%	$163.9	$148.9	10.1%
Digital Media	$253.8	$163.9	54.8%	$253.8	$163.9	54.8%
Total Revenue: (1)	$429.0	$331.0	29.6%	$417.7	$312.8	33.5%
Operating Income	$94.3	$73.0	29.1%
Net Cash Provided by Operating Activities	$111.3	$139.6	(20.3)%
Free Cash Flow (2)	$80.5	$115.9	(30.6)%
GAAP Earnings per Diluted Share (3)	$0.33	$0.80	(58.7)%
Adjusted Non-GAAP Earnings per Diluted Share (3) (4)	$2.41	$1.71	40.9%	$2.32	$1.60	45.0%
GAAP Net Income	$15.7	$38.1	(58.7)%
Adjusted Non-GAAP Net Income	$107.9	$80.6	33.8%	$104.1	$75.5	37.9%
Adjusted EBITDA (5)	$172.0	$132.9	29.5%	$167.2	$125.7	33.0%
Adjusted EBITDA Margin (5)	40.1%	40.1%	—%	40.0%	40.2%	(0.2)%

The Company has not reconciled the non-GAAP Business Outlook 2021 Adjusted EBITDA, 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 forecasted revenues and costs primarily related to acquisitions and taxation, which are potential adjustments to future earnings, and the uncertainty as to when or if the B2B Backup Business will be sold. We expect the variability of forecasted revenues and costs to have a potentially unpredictable and significant impact on our future GAAP financial results.

Notes:


(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 9.1% for Q2 2021 and 26.7% for Q2 2020. The estimated Adjusted non-GAAP effective tax rates were approximately 22.7% for Q2 2021 and 21.8% for Q2 2020.
(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 June 30, 2021 and 2020 totaled $2.08 and $0.91 per diluted share, respectively.
(5)						Adjusted EBITDA is defined as earnings before interest; gain on sale of businesses; goodwill impairment of business; loss on investments, net; other income (expense), net; income tax expense; income (loss) from equity method investment, net; 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)						Pro-forma figures are provided taking into consideration the sale of certain Voice assets in Australia, New Zealand, and the United Kingdom as well as the expected sale of the Company’s B2B Backup business as if they had occurred January 1, 2020.

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, Ekahau, Everyday Health, BabyCenter and What To Expect in its Digital Media business and eFax, eVoice, Moz, iContact, Campaigner, Vipre and IPVanish in its Cloud Services business. J2 reaches in excess of 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 2020 Annual Report on Form 10-K filed by J2 Global on March 1, 2021, 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.

(UNAUDITED, IN THOUSANDS)


	June 30, 2021		December 31, 2020
ASSETS
Cash and cash equivalents	$	347,857	$	242,652

Short-term investments	—		663
Accounts receivable, net of allowances of $16,255 and $16,018, respectively	249,005		325,619
Prepaid expenses and other current assets	56,177		53,909

Current assets held for sale	8,939		—
Total current assets	661,978		622,843
Long-term investments	117,396		97,495
Property and equipment, net	171,645		156,577
Operating lease right-of-use assets	82,961		105,845
Goodwill	1,837,539		1,867,430
Other purchased intangibles, net	676,146		741,569
Deferred income taxes, noncurrent	40,755		56,545
Other assets	16,759		17,027
Noncurrent assets held for sale	98,187		—
TOTAL ASSETS	$	3,703,366	$	3,665,331

LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable and accrued expenses	$	198,220	$	230,651
Income taxes payable, current	11,471		31,753
Deferred revenue, current	193,531		190,644


Operating lease liabilities, current	30,818		32,211


Current portion of long-term debt	402,134		396,801
Other current liabilities	52		497
Current liabilities held for sale	8,793		—
Total current liabilities	845,019		882,557
Long-term debt	1,189,727		1,182,220
Deferred revenue, noncurrent	16,635		14,440

Operating lease liabilities, noncurrent	81,752		99,177
Income taxes payable, noncurrent	11,675		11,675
Liability for uncertain tax positions	53,515		57,081
Deferred income taxes, noncurrent	158,173		162,700
Other long-term liabilities	39,718		44,463
Noncurrent liabilities held for sale	12,652		—
TOTAL LIABILITIES	2,408,866		2,454,313
Commitments and contingencies	—		—
Preferred stock	—		—
Common stock	447		443
Additional paid-in capital	461,422		456,274

Retained earnings	892,605		809,107
Accumulated other comprehensive loss	(59,974)		(54,806)
TOTAL STOCKHOLDERS’ EQUITY	1,294,500		1,211,018
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	3,703,366	$	3,665,331

(UNAUDITED, IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Total revenues	429,044		$	330,984	827,228		663,377

Cost of revenues (1)	63,337		56,802		121,160		115,933
Gross profit	365,707		274,182		706,068		547,444

Operating expenses:
Sales and marketing (1)	134,103		92,805		255,288		192,243
Research, development and engineering (1)	19,644		13,606		40,995		29,012
General and administrative (1)	117,676		94,731		237,021		197,902
Total operating expenses	271,423		201,142		533,304		419,157
Income from operations	94,284		73,040		172,764		128,287
Interest expense, net	(21,403)		(22,196)		(42,970)		(43,167)
Gain on sale of businesses	823		—		2,802		—
Goodwill impairment on business	(32,629)		—		(32,629)		—
Loss on investments, net	(16,677)		(3)		(16,677)		(20,835)
Other income (expense), net	(777)		9,059		(293)		2,183
Income before income taxes and income (loss) from equity method investment, net	23,621		59,900		82,997		66,468
Income tax expense	2,152		15,978		7,876		24,681
Income (loss) from equity method investment, net	(5,752)		(5,821)		18,519		(10,090)
Net income	$	15,717	$	38,101	$	93,640	$	31,697

Basic net income per common share:
Net income attributable to J2 Global, Inc. common shareholders	$	0.35	$	0.81	$	2.10	$	0.67

Diluted net income per common share:
Net income attributable to J2 Global, Inc. common shareholders	$	0.33	$	0.80	$	1.98	$	0.65

Basic weighted average shares outstanding	44,613,533		46,850,944		44,506,933		47,235,859
Diluted weighted average shares outstanding	47,528,902		47,437,555		47,130,979		48,279,417

(1) Includes share-based compensation expense as follows:
Cost of revenues	$	117	$	143	$	249	$	277
Sales and marketing	371		416		732		814
Research, development and engineering	557		484		1,077		915
General and administrative	5,206		5,487		10,305		10,837
Total	$	6,251	$	6,530	$	12,363	$	12,843

(UNAUDITED, IN THOUSANDS)


	Six Months Ended June 30,
Cash flows from operating activities:	2021		2020
Net income	$	93,640	$	31,697
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	130,226		104,068

Amortization of financing costs and discounts	14,058		14,102
Non-cash operating lease costs	6,714		11,453
Share-based compensation	12,363		12,843
Provision for doubtful accounts	4,329		6,793
Deferred income taxes, net	(11,853)		2,752


Gain on sale of businesses	(2,802)		—
Lease asset impairments	7,829		—
Goodwill impairment on business	32,629		—
Changes in fair value of contingent consideration	562		(232)
Foreign currency remeasurement gain	415		(704)
(Income) loss from equity method investments	(18,519)		10,090
Loss on equity and debt investments	16,677		20,826
Decrease (increase) in:
Accounts receivable	65,312		63,675
Prepaid expenses and other current assets	(7,720)		(4,185)
Other assets	(701)		(300)
Increase (decrease) in:
Accounts payable and accrued expenses	(23,438)		(34,682)
Income taxes payable	(15,123)		7,376
Deferred revenue	2,499		(2,698)
Operating lease liabilities	(13,529)		(8,780)
Liability for uncertain tax positions	(3,567)		5,114
Other long-term liabilities	21		2,419
Net cash provided by operating activities	290,022		241,627
Cash flows from investing activities:
Proceeds on sale of available-for-sale investments	663		—

Purchases of equity method investment	(11,053)		(26,523)
Purchases of equity investments	(999)		(843)


Purchases of property and equipment	(57,766)		(50,537)
Acquisition of businesses, net of cash received	(89,489)		(19,349)

Proceeds from sale of assets	6,033		407
Purchases of intangible assets	—		(23)
Net cash used in investing activities	(152,611)		(96,868)
Cash flows from financing activities:

Payment of debt	(3,092)		—


Proceeds from line of credit	2,811		—

Repurchase of common stock	(22,934)		(88,469)
Issuance of common stock under employee stock purchase plan	4,232		3,303
Exercise of stock options	1,331		952
Dividends paid	(672)		—
Deferred payments for acquisitions	(12,934)		(16,296)
Other	(332)		(1,032)
Net cash used in financing activities	(31,590)		(101,542)

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 outstanding debt; (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 disposal related costs; (11) elimination of goodwill impairment on business and (12) elimination of dilutive effect of the convertible debt.


	Three Months Ended June 30,
	2021		Per Diluted Share *		2020		Per Diluted Share *
Net income	$	15,717	$	0.33	$	38,101	$	0.80
Plus:
Share based compensation (1)	2,576		0.06		4,990		0.11
Acquisition related integration costs (2)	988		0.02		498		0.01
Interest costs (3)	4,840		0.11		4,831		0.10
Amortization (4)	37,156		0.83		25,225		0.54
Investments (5)	18,490		0.41		9,714		0.21
Tax expense from prior years (6)	—		—		1,977		0.04
Sale of assets (7)	(823)		(0.02)		(137)		—
Intra-entity transfers (8)	—		—		(6,432)		(0.14)
Lease asset impairments and other charges (9)	4,896		0.11		1,826		0.04
Disposal related costs (10)	(619)		(0.01)		—		—
Goodwill impairment on business (11)	24,635		0.55		—		—
Convertible debt dilution (12)	—		0.02		—		0.01
Adjusted non-GAAP net income	$	107,856	$	2.41	$	80,593	$	1.71


	Six Months Ended June 30,
	2021		Per Diluted Share *		2020		Per Diluted Share *
Net income	$	93,640	$	1.98	$	31,697	$	0.65
Plus:
Share based compensation (1)	6,624		0.15		9,798		0.21
Acquisition related integration costs (2)	2,994		0.07		1,593		0.03
Interest costs (3)	9,685		0.22		9,146		0.19
Amortization (4)	70,499		1.58		57,083		1.21
Investments (5)	(6,954)		(0.16)		34,808		0.73
Tax expense from prior years (6)	—		—		2,365		0.05
Sale of assets (7)	(2,697)		(0.06)		(334)		(0.01)
Intra-entity transfers (8)	—		—		131		—
Lease asset impairments and other charges (9)	6,545		0.15		1,826		0.04
Disposal related costs (10)	44		—		—		—
Goodwill impairment on business (11)	24,635		0.55		—		—
Convertible debt dilution (12)	—		0.02		—		0.01
Adjusted non-GAAP net income	$	205,015	$	4.50	$	148,113	$	3.11


	Three Months Ended June 30,
	2021		2020
Cost of revenues	$	63,337	$	56,802
Plus:
Share based compensation (1)	(117)		(143)
Acquisition related integration costs (2)	(36)		(55)
Amortization (4)	(349)		(448)
Adjusted non-GAAP cost of revenues	$	62,835	$	56,156

Sales and marketing	$	134,103	$	92,805
Plus:
Share based compensation (1)	(371)		(416)
Acquisition related integration costs (2)	23		(167)
Adjusted non-GAAP sales and marketing	$	133,755	$	92,222

Research, development and engineering	$	19,644	$	13,606
Plus:
Share based compensation (1)	(557)		(484)
Acquisition related integration costs (2)	(206)		26
Adjusted non-GAAP research, development and engineering	$	18,881	$	13,148

General and administrative	$	117,676	$	94,731
Plus:
Share based compensation (1)	(5,206)		(5,487)
Acquisition related integration costs (2)	(1,075)		(605)
Amortization (4)	(47,893)		(35,439)

Lease asset impairments and other charges (9)	(6,472)		(2,406)
Disposal related costs (10)	992		—
Adjusted non-GAAP general and administrative	$	58,022	$	50,794

Interest expense, net	$	(21,403)	$	(22,196)
Plus:

Interest costs (3)	6,079		6,018

Adjusted non-GAAP interest expense, net	$	(15,324)	$	(16,178)

Gain on sale of businesses	$	823	$	—
Plus:
Sale of assets (7)	(823)		—
Adjusted non-GAAP gain on sale of businesses	$	—	$	—

Goodwill impairment on business	(32,629)		—
Plus:


Goodwill impairment on business (11)	32,629		—
Adjusted non-GAAP goodwill impairment on business	$	—	$	—

Loss on investments, net	$	(16,677)	$	(3)
Plus:
Investments (5)	16,677		—
Adjusted non-GAAP loss on investments, net	$	—	$	(3)

Other income (expense), net	$	(777)	$	9,059
Plus:
Sale of assets (7)	—		(181)
Intra-entity transfers (8)	—		(8,267)
Adjusted non-GAAP other income (expense), net	$	(777)	$	611

Income tax provision	$	2,152	$	15,978
Plus:
Share based compensation (1)	3,675		1,540
Acquisition related integration costs (2)	306		303
Interest costs (3)	1,239		1,187
Amortization (4)	11,086		10,662
Investments (5)	3,939		(3,893)
Tax benefit from prior years (6)	—		(1,977)
Sale of assets (7)	—		(44)
Intra-entity transfers (8)	—		(1,835)
Lease asset impairments and other charges (9)	1,576		580
Disposal related costs (10)	(373)		—
Goodwill impairment on business (11)	7,994		—
Adjusted non-GAAP income tax provision	$	31,594	$	22,501

Income (loss) from equity method investment, net	$	(5,752)	$	(5,821)
Plus:
Investments (5)	5,752		5,821
Adjusted non-GAAP income (loss) from equity method investment, net	$	—	$	—

Total adjustments	$	(92,139)	$	(42,492)

GAAP earnings per diluted share	$	0.33	$	0.80
Adjustments *	$	2.08	$	0.91
Adjusted non-GAAP earnings per diluted share	$	2.41	$	1.71

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.


	Six Months Ended June 30,
	2021		2020
Cost of revenues	$	121,160	$	115,933
Plus:
Share based compensation (1)	(249)		(277)
Acquisition related integration costs (2)	(76)		(110)
Amortization (4)	(945)		(898)
Adjusted non-GAAP cost of revenues	$	119,890	$	114,648

Sales and marketing	$	255,288	$	192,243
Plus:
Share based compensation (1)	(732)		(814)
Acquisition related integration costs (2)	(814)		(681)
Adjusted non-GAAP sales and marketing	$	253,742	$	190,748

Research, development and engineering	$	40,995	$	29,012
Plus:
Share based compensation (1)	(1,077)		(915)
Acquisition related integration costs (2)	(530)		26
Adjusted non-GAAP research, development and engineering	$	39,388	$	28,123

General and administrative	$	237,021	$	197,902
Plus:
Share based compensation (1)	(10,305)		(10,837)
Acquisition related integration costs (2)	(2,785)		(1,334)
Amortization (4)	(96,309)		(74,152)

Lease asset impairments and other charges (9)	(8,651)		(2,406)
Disposal related costs (10)	(127)		—
Adjusted non-GAAP general and administrative	$	118,844	$	109,173

Interest expense, net	$	(42,970)	$	(43,167)
Plus:

Interest costs (3)	12,495		11,952

Adjusted non-GAAP interest expense, net	$	(30,475)	$	(31,215)

Gain on sale of businesses	$	2,802	$	—
Plus:
Sale of assets (7)	(2,469)		—
Adjusted non-GAAP gain on sale of businesses	$	333	$	—
Goodwill impairment on business	(32,629)		—
Plus:


Goodwill impairment on business (11)	32,629		—
Adjusted non-GAAP goodwill impairment on business	$	—	$	—

Loss on investments, net	$	(16,677)	$	(20,835)
Plus:
Investments (5)	16,677		20,825
Adjusted non-GAAP loss on investments, net	$	—	$	(10)

Other income (expense), net	$	(293)	$	2,183
Plus:
Acquisition related integration costs (2)			—

Sale of assets (7)	(132)		(438)
Intra-entity transfers (8)	—		(1,565)
Adjusted non-GAAP other income (expense), net	$	(425)	$	180

Income tax provision	$	7,876	$	24,681
Plus:
Share based compensation (1)	5,739		3,045
Acquisition related integration costs (2)	1,211		506
Interest costs (3)	2,810		2,806
Amortization (4)	26,755		17,967
Investments (5)	5,112		(3,893)
Tax (benefit) expense from prior years (6)	—		(2,365)
Sale of assets (7)	96		(104)
Intra-entity transfers (8)	—		(1,696)
Lease asset impairments and other charges (9)	2,106		580
Disposal related costs (10)	83		—
Goodwill impairment on business (11)	7,994		—
Adjusted non-GAAP income tax provision	$	59,782	$	41,527

Income (loss) from equity method investment, net	$	18,519	$	(10,090)
Plus:
Investments (5)	(18,519)		10,090
Adjusted non-GAAP income (loss) from equity method investment, net	$	—	$	—

Total adjustments	$	(111,375)	$	(116,416)

GAAP earnings per diluted share	$	1.98	$	0.65
Adjustments *	$	2.52	$	2.46
Adjusted non-GAAP earnings per diluted share	$	4.50	$	3.11

To supplement its condensed consolidated financial statements, which are prepared and presented in accordance with US 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, 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 feature, 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 statement of operations. 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 the difference between the imputed and coupon interest expense associated with the 4.625% Senior Notes. 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 these items provide meaningful supplemental information regarding operational performance. In addition, excluding these items 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 Gain on Sale of Businesses, Adjusted non-GAAP Loss on Investments, Adjusted non-GAAP Other (Income) Expense, Adjusted non-GAAP Income Tax Provision, Adjusted non-GAAP (Income) Loss from Equity Method Investment, Net 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.


	Q2 2021	Q2 2020	% Change

Total Revenues	$429.0million	$331.0 million	29.6%
Pro-Forma Revenue Adjustments	$(11.3) million	$(18.2) million	(37.9)%



Pro-Forma Total Revenue: (1)	$417.7 million	$312.8 million	33.5%








Adjusted Non-GAAP Earnings per Diluted Share (1)	$2.41	$1.71	40.9%
Pro-Forma Earnings per Diluted Share Adjustments	$(0.09)	$(0.11)	(18.2)%
Adjusted Pro Forma Earnings per Diluted Share (1)	$2.32	$1.60	45.0%


GAAP Net Income	$15.7 million	$38.1 million	(58.7)%
Pro-Forma Net Income Adjustments	$21.2 million	$(2.4) million	(983.3)%
Adjusted Pro-Forma Net Income	$36.9 million	$35.7 million	3.4%

Adjusted EBITDA (1)	$172.0 million	$132.9 million	29.5%
Pro-Forma EBITDA Adjustments	$(4.8) million	$(7.2) million	(33.3)%
Adjusted Pro-Forma EBITDA (1)	$167.2 million	$125.7 million	33.0%

Adjusted EBITDA Margin (1)	40.1%	40.1%	—%
Pro-Forma EBITDA Margin Adjustments	(0.1)%	0.1%	(0.2)%
Adjusted Pro-Forma EBITDA Margin (1)	40.0%	40.2%	(0.2)%

The following table sets forth a reconciliation of Adjusted EBITDA to net income, the most directly comparable GAAP financial measure.


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Net income	$	15,717	$	38,101	$	93,640	$	31,697
Plus:
Interest expense, net	21,403		22,196		42,970		43,167
Gain on sale of businesses	(823)		—		(2,801)		—
Loss on investments, net	16,677		3		16,677		20,835
Other income (expense), net	777		(9,059)		292		(2,183)
Income tax expense	2,152		15,978		7,876		24,681
Income (loss) from equity method investment, net	5,752		5,821		(18,519)		10,090
Depreciation and amortization	64,734		50,088		130,226		104,068
Reconciliation of GAAP to Adjusted non-GAAP financial measures:
Share-based compensation	6,251		6,530		12,363		12,843
Acquisition-related integration costs	1,294		801		4,206		2,099

Lease asset impairments and other charges	6,472		2,406		8,651		2,406
Disposal related costs	(992)		—		127		—
Goodwill impairment on business	32,629		—		32,629		—
Adjusted EBITDA	$	172,043	$	132,865	$	328,337	$	249,703

Adjusted EBITDA as calculated above represents earnings before interest, gain on sale of businesses, goodwill impairment of business, loss on investments, net, other (income) expense, net, income tax expense, (income) loss from equity method investments, net, 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, and (3) 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.

(UNAUDITED, IN THOUSANDS)


	Q1		Q2		Q3		Q4		YTD
2021
Net cash provided by operating activities	$	178,724	$	111,298	$	—	$	—	$	290,022
Less: Purchases of property and equipment	(26,269)		(31,497)		—		—		(57,766)
Add: Contingent consideration*	—		685		—		—		685
Free cash flows	$	152,455	$	80,486	$	—	$	—	$	232,941




	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 $80.5 million for Q2 2021, $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.

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	$	175,283	$	253,761	$	—	$	429,044

Gross profit
GAAP gross profit	$	137,094	$	228,622	$	(9)	$	365,707
Non-GAAP adjustments:
Share-based compensation	115		2		—		117
Acquisition related integration costs	32		4		—		36
Amortization	349		—		—		349
Adjusted non-GAAP gross profit	$	137,590	$	228,628	$	(9)	$	366,209

Operating profit
GAAP operating profit	$	63,034	$	44,106	$	(12,856)	$	94,284
Non-GAAP adjustments:
Share-based compensation	1,429		1,784		3,038		6,251
Acquisition related integration costs	1,169		125		—		1,294
Amortization	10,713		37,483		45		48,241
Lease asset impairments and other charges	277		6,195		—		6,472
Disposal related costs	—		—		(992)		(992)

Adjusted non-GAAP operating profit	$	76,622	$	89,693	$	(10,765)	$	155,550

Depreciation	5,001		11,492		—		16,493
Adjusted EBITDA	$	81,623	$	101,185	$	(10,765)	$	172,043

NOTE 1: Table above excludes certain intercompany allocations


	Cloud		Digital
	Services		Media		Corporate		Total
Revenues
GAAP revenues	$	167,058	$	163,926	$	—	$	330,984

Gross profit
GAAP gross profit	$	127,631	$	146,588	$	(37)	$	274,182
Non-GAAP adjustments:
Share-based compensation	140		3		—		143
Acquisition related integration costs	55		—		—		55
Amortization	448		—		—		448
Adjusted non-GAAP gross profit	$	128,274	$	146,591	$	(37)	$	274,828

Operating profit
GAAP operating profit	$	64,857	$	19,840	$	(11,657)	$	73,040
Non-GAAP adjustments:
Share-based compensation	1,628		1,544		3,358		6,530
Acquisition related integration costs	37		764		—		801
Amortization	13,088		22,268		531		35,887
Lease asset impairments and other charges	—		2,406		—		2,406
Adjusted non-GAAP operating profit	$	79,610	$	46,822	$	(7,768)	$	118,664

Depreciation	3,904		10,297		—		14,201
Adjusted EBITDA	$	83,514	$	57,119	$	(7,768)	$	132,865

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.


	Current Guidance (A)				Revised 2021 Range of Estimates (A)(B)
	Low		High			Low		High
Revenue	$	1,676	$	1,700		$	1,722	$	1,742
Adjusted EBITDA	$	666	$	680		$	695	$	705
Adjusted non-GAAP EPS	$	9.27	$	9.51		$	9.57	$	9.73


Effect of exchange rate changes on cash and cash equivalents	(616)		(2,012)
Net change in cash and cash equivalents	105,205		41,205
Cash and cash equivalents at beginning of period	242,652		575,615
Cash and cash equivalents at end of period	$	347,857	$	616,820