EX-99.1 2 dex991.htm PRESS RELEASE Press Release

Exhibit 99.1

j2 Global Reports First Quarter 2010 Results

Achieves Record Quarterly Free Cash Flow;

Announces 10 Million Share Repurchase Program;

Announces FuseMail Acquisition

LOS ANGELES—May 4, 2010—j2 Global Communications, Inc. [NASDAQGS:JCOM] today reported financial results for the first quarter ended March 31, 2010, that its board of directors has approved a two year up to 10 million share repurchase program, and that it has acquired substantially all of the assets of FuseMail, LLC, an outsourced email provider.

FIRST QUARTER 2010 RESULTS

Total revenues for Q1 2010 were $60.3 million compared to $60.4 million in Q1 2009.

Subscriber revenues for Q1 2010 were $59.5 million compared to $59.6 million in Q1 2009.

During Q1 2010, the Company improved its gross margin to 83.0% from 81.1% in Q1 2009 and experienced operating margins of 40.6% compared to 43.8% in Q1 2009 due to planned increases in sales and marketing initiatives.

Net earnings per diluted share on a Non-GAAP basis, which excludes share based compensation and certain acquisition costs, for Q1 2010 was $0.44 compared to $0.45 in Q1 2009. GAAP net earnings per diluted share for Q1 2010 was $0.39 compared to $0.42 for Q1 2009.

Free cash flows for Q1 2010 were $34.2 million, or 57% of revenues, an increase of 13% over Q1 2009. Additionally, total deferred revenues for Q1 2010 were $12.6 million, an increase of $1.2 million over the prior quarter.

The Company ended the quarter with $264.4 million in cash and investments.

Key financial results for first quarter 2010 versus first quarter 2009 are as follows:

 

     Q1 2010    Q1 2009    % Change

Subscriber Revenues

   $ 59.5 million    $ 59.6 million    (0.2)%

Total Revenues

   $ 60.3 million    $ 60.4 million    (0.2)%

Non-GAAP Earnings per Diluted Share(1) (3)

     $0.44      $0.45    (2)%

GAAP Net Earnings per Diluted Share(2)

     $0.39      $0.42    (7)%

Free Cash Flow(4)

   $ 34.2 million    $ 30.4 million    13 %


(1)

The estimated effective tax rate was approximately 29% and 30% for Q1 2010 and Q1 2009, respectively.

(2)

The estimated effective tax rate was approximately 28% and 30% for Q1 2010 and Q1 2009, respectively.

(3)

Share-based compensation and acquisition costs impacted Q1 2010 net earnings per diluted share by approximately $0.05, net of tax. Share-based compensation impacted Q1 2009 net earnings per diluted share by approximately $0.04, net of tax.

(4)

Free cash flow is defined as net cash provided by operating activities, less purchases of property, plant and equipment, plus excess tax benefit (deficiency) from share-based compensation.

“I am pleased that during Q1 we achieved record quarterly free cash flow while at the same time executing on our plan to expand sales and marketing efforts,” said Hemi Zucker, j2 Global’s chief executive officer. “I am also encouraged by our higher organic net customer additions, reduced cancel rate and increasing deferred revenues. I am optimistic that with an improving economy, a strong acquisition pipeline and a solid business plan and operating strategy we continue to be well positioned to grow our Company while maintaining healthy profit margins.”

SHARE REPURCHASE PROGRAM

Under the share repurchase program, the Company may purchase in the public market or in off-market transactions up to 10 million shares at any time or times through April 30, 2012. The timing and amounts of any purchases will be determined by the Company from time to time, depending on market conditions and other factors it deems relevant.

FUSEMAIL ACQUISITION

The Company has acquired substantially all of the assets of FuseMail, LLC, a provider of outsourced email and email marketing services. Terms of the acquisition were not disclosed. The financial impact to j2 Global is not expected to be material.

BUSINESS OUTLOOK

For fiscal 2010, j2 Global reaffirms its targeted revenue growth of 5% with a range of 3% to 7% compared to fiscal year 2009 revenues. Net earnings, excluding 123R non-cash compensation expense, are expected to approximate non-GAAP earnings in 2009 as the Company intends to reinvest its incremental operating income in initiatives designed to accelerate growth in 2011 and beyond.

The range of anticipated revenues takes into account both organic growth and acquisition related growth within the context of current economic conditions.


About j2 Global Communications

Founded in 1995, j2 Global Communications, Inc. provides outsourced, value-added messaging and communications services to individuals and businesses around the world. With offices in eight cities worldwide, j2 Global's network spans more than 3,600 cities in 48 countries on six continents. The Company's websites appear in numerous languages, including Dutch, French, German, Spanish English and more. Payments are accepted in currencies that include the U.S. Dollar, British Pound, Canadian Dollar, Japanese Yen, Euro, Hong Kong Dollar and more. j2 Global provides live sales and customer service support in multiple languages, including English, Spanish, Dutch, German, French, Cantonese and more. j2 Global markets its services principally under the brands eFax®, eFax Corporate®, Onebox®, eVoice® and Electric Mail®. As of December 31, 2009, j2 Global had achieved 14 consecutive fiscal years of revenue growth and eight consecutive fiscal years of positive and growing operating earnings. For more information about j2 Global, please visit www.j2global.com.

Contact:

Jeff Adelman

j2 Global Communications, Inc.

323-372-3617

press@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 Act of 1995, particularly those contained in the “Business Outlook” portion regarding the Company’s expected fiscal 2010 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: Subscriber growth, retention and usage rates; variability of revenue based on changing conditions in particular industries and the economy generally; competition; network breaches or failures, development of new products or services, 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 surrounding messaging and communications, 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 2009 Annual Report on Form 10-K filed by j2 Global on February 23, 2010, 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 and particularly those contained in the “Business Outlook” portion regarding the Company’s expected fiscal 2010 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.


j2 GLOBAL COMMUNICATIONS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED, IN THOUSANDS)

 

     MARCH 31,
2010
   DECEMBER 31,
2009

ASSETS

     

Cash and cash equivalents

   $ 184,009    $ 197,411

Short-term investments

     38,385      31,381

Accounts receivable, net of allowances of $2,922 and $3,077, respectively

     11,644      11,928

Prepaid expenses and other current assets

     7,267      13,076

Deferred income taxes

     2,658      2,657
             

Total current assets

     243,963      256,453

Long-term investments

     41,959      14,887

Property and equipment, net

     11,860      13,366

Goodwill

     90,117      81,258

Other purchased intangibles, net

     41,578      39,091

Deferred income taxes

     8,827      8,717

Other assets

     365      229
             

TOTAL ASSETS

   $ 438,669    $ 414,001
             

LIABILITIES AND STOCKHOLDERS' EQUITY

     

Accounts payable and accrued expenses

   $ 16,564    $ 15,941

Income taxes payable

     18,642      1,563

Deferred revenue

     12,615      11,411
             

Total current liabilities

     47,821      28,915

Liability for uncertain tax positions

     32,209      46,820

Other long-term liabilities

     3,362      2,094
             

Total liabilities

     83,392      77,829

Commitments and contingencies

     —        —  

Total stockholders' equity

     355,277      336,172
             

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

   $ 438,669    $ 414,001
             


j2 GLOBAL COMMUNICATIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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

 

     THREE MONTHS ENDED
MARCH 31,
     2010    2009

Revenues

     

Subscriber

   $ 59,547    $ 59,640

Other

     733      751
             

Total revenue

     60,280      60,391

Cost of revenues (including share-based compensation of $329 and $281 for the three months of 2010 and 2009, respectively)

     10,266      11,392
             

Gross profit

     50,014      48,999
             

Operating expenses:

     

Sales and marketing (including share-based compensation of $491 and $377 for the three months of 2010 and 2009, respectively)

     11,152      8,885

Research, development and engineering (including share-based compensation of $220 and $196 for the three months of 2010 and 2009, respectively)

     2,909      2,943

General and administrative (including share-based compensation of $1,901 and $1,441 for the three months of 2010 and 2009, respectively)

     11,494      10,706
             

Total operating expenses

     25,555      22,534
             

Operating earnings

     24,459      26,465

Interest and other income, net

     192      142
             

Earnings before income taxes

     24,651      26,607

Income tax expense

     7,015      7,955
             

Net earnings

   $ 17,636    $ 18,652
             

Basic net earnings per common share

   $ 0.40    $ 0.43
             

Diluted net earnings per common share

   $ 0.39    $ 0.42
             

Basic weighted average shares outstanding

     44,250,521      43,627,071
             

Diluted weighted average shares outstanding

     45,421,180      44,728,911
             


j2 GLOBAL COMMUNICATIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED, IN THOUSANDS)

 

     THREE MONTHS ENDED
MARCH 31,
 
     2010      2009  

Cash flows from operating activities:

     

Net earnings

   $ 17,636       $ 18,652   

Adjustments to reconcile net earnings to net cash provided by operating activities:

     

Depreciation and amortization

     3,968         3,655   

Share-based compensation

     2,941         2,295   

Tax deficiency (excess tax benefits) from share-based compensation

     406         (5

Provision for doubtful accounts

     482         347   

Deferred income taxes

     (110      (440

Decrease (increase) in:

     

Accounts receivable

     (81      (146

Prepaid expenses and other current assets

     924         108   

Other assets

     16         8   

(Decrease) increase in:

     

Accounts payable and accrued expenses

     774         (1,482

Income taxes payable

     5,088         6,775   

Deferred revenue

     491         (339

Liability for uncertain tax positions

     1,527         1,727   

Other

     626         (3
                 

Net cash provided by operating activities

     34,688         31,152   
                 

Cash flows from investing activities:

     

Purchases of available-for-sale investments

     (33,875      —     

Purchases of property and equipment

     (86      (721

Acquisition of businesses, net of cash received

     (10,237      (11,905

Purchases of intangible assets

     (2,692      (423
                 

Net cash used in investing activities

     (46,890      (13,049
                 

Cash flows from financing activities:

     

Repurchases of common stock and restricted stock

     (613      (34

Issuance of common stock under employee stock purchase plan

     28         33   

Exercise of stock options

     327         42   

(Tax deficiency) excess tax benefits from share-based compensation

     (406      5   
                 

Net cash (used in) provided by financing activities

     (664      46   
                 

Effect of exchange rate changes on cash and cash equivalents

     (536      (717
                 

Net (decrease) increase in cash and cash equivalents

     (13,402      17,432   

Cash and cash equivalents at beginning of period

     197,411         150,780   
                 

Cash and cash equivalents at end of period

   $ 184,009       $ 168,212   
                 


j2 GLOBAL COMMUNICATIONS, INC.

UNAUDITED RECONCILIATION OF MODIFIED NET EARNINGS

THREE MONTHS ENDED MARCH 31, 2010 AND 2009

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

Modified net earnings are GAAP net earnings with the following modifications (1) elimination of share-based compensation expense for 2010 and 2009; (2) elimination of certain acquisition costs; (3) income tax expense associated with share-based compensation and certain acquisition costs.

Modified net earnings and modified net earnings per share are not meant as a substitute for measures determined under GAAP, but are solely for informational purposes. The following table illustrates and reconciles the GAAP net earnings with the aforementioned exclusions. The Company believes that this non-GAAP financial information are useful measures of operating performance because they exclude certain non-recurring transactions outside the ordinary course of the Company's business.

 

     THREE MONTHS ENDED MARCH 31, 2010    THREE MONTHS ENDED MARCH 31, 2009
     Reported    Non-GAAP Entries     Non-GAAP    Reported    Non-GAAP Entries     Non-GAAP

Revenues

               

Subscriber

   $ 59,547    $ —        $ 59,547    $ 59,640    $ —        $ 59,640

Other

     733      —          733      751      —          751
                                           

Total revenue

     60,280      —          60,280      60,391      —          60,391

Cost of revenues (1)

     10,266      (329 )(1)      9,937      11,392      (281 )(1)      11,111
                                           

Gross profit

     50,014      329        50,343      48,999      281        49,280
                                           

Operating expenses:

               

Sales and marketing (1)

     11,152      (491 )(1)      10,661      8,885      (377 )(1)      8,508

Research, development and engineering (1)

     2,909      (220 )(1)      2,689      2,943      (196 )(1)      2,747

General and administrative (1) (2)

     11,494      (2,031 )(1)(2)      9,463      10,706      (1,441 )(1)      9,265
                                           

Total operating expenses

     25,555      (2,742     22,813      22,534      (2,014     20,520
                                           

Operating earnings

     24,459      3,071        27,530      26,465      2,295        28,760

Interest and other income, net

     192      —          192      142      —          142
                                           

Earnings before income taxes

     24,651      3,071        27,722      26,607      2,295        28,902

Income tax expense (3)

     7,015      944 (3)      7,959      7,955      678 (3)      8,633
                                           

Net earnings

   $ 17,636    $ 2,127      $ 19,763    $ 18,652    $ 1,617      $ 20,269
                                           

Diluted net earnings per share

   $ 0.39      $ 0.44    $ 0.42      $ 0.45
                               

Diluted weighted average shares outstanding

     45,421,180        45,421,180      44,728,911        44,728,911
                               
(1)     Share-based compensation expense:                           

Cost of revenues

      $ (329         $ (281  

Sales and marketing

      $ (491         $ (377  

Research, development and engineering

      $ (220         $ (196  

General and administrative

      $ (1,901         $ (1,441  
                           
      $ (2,941         $ (2,295  
                           

(2)     Acquisition costs

   $ (130         $ —       
                           

(3)     Income tax adjustment, net impact of the items above

   $ 907            $ 678     

Share-based compensation expense

     37              —       
                           

Acquisition costs

   $ 944            $ 678     
                           


j2 Global Communications, Inc.

Free Cash Flows

 

     Q1     Q2     Q3     Q4     YTD  
2010           

Net cash provided by operating activities

   34,688            34,688   

Less: Purchases of property and equipment

   (86         (86

Add: Excess tax benefit (deficiency) from share-based compensation

   (406         (406
                              
   34,196      —        —        —        34,196   
                              
2009           

Net cash provided by operating activities

   31,152      20,362      26,469      23,850      101,833   

Less: Purchases of property and equipment

   (721   (217   (767   (1,546   (3,251

Add: Excess tax benefit from share-based compensation

   5      2,718      403      (63   3,063   
                              
   30,436      22,863      26,105      22,241      101,645   
                              
2008           

Net cash provided by operating activities

   27,411      23,840      15,676      23,789      90,716   

Less: Purchases of property and equipment

   (469   (796   (937   (305   (2,507

Add: Excess tax benefit from share-based compensation

   239      204      212      910      1,565   
                              
   27,181      23,248      14,951      24,394      89,774