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J2 Global Reports First Quarter 2012 Results

DIVIDEND

The Company's Board of Directors has approved a quarterly cash dividend of $0.215 per common share, a 2.4% increase versus last quarter's dividend. This is the Company's third consecutive quarterly dividend increase. The dividend will be paid on May 30, 2012 to all shareholders of record as of the close of business on May 16, 2012. Future dividends will be subject to Board approval.

BUSINESS OUTLOOK

j2 Global is reaffirming its previously issued financial estimates for fiscal 2012 of revenues between $345 and $365 million and Non-GAAP net earnings per diluted share to be approximately the same as for 2011.

It is anticipated that the normalized tax rate for 2012 (exclusive of the release of reserves for uncertain tax positions) will be between 24% and 26%.

About j2 Global

Founded in 1995, j2 Global, Inc. provides cloud services to individuals and businesses around the world. j2 Global's network spans 49 countries on six continents. The Company offers Internet fax, voice and email solutions. j2 Global markets its services principally under the brand names eFax®, Onebox®, eVoice®, FuseMail®, Campaigner®, KeepItSafe® and LandslideCRM™. As of December 31, 2011, j2 Global had achieved 16 consecutive fiscal years of revenue growth. For more information about j2 Global, 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, particularly those contained in the “Business Outlook” portion regarding the Company's expected fiscal 2012 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 and retention; variability of 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 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 2011 Annual Report on Form 10-K filed by j2 Global on February 28, 2012, 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 2012 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, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED, IN THOUSANDS)
 
 
MARCH 31, DECEMBER 31,
2012   2011  
 
ASSETS
Cash and cash equivalents $ 135,682 $ 139,359
Short-term investments 29,072 38,513

Accounts receivable, net of allowances of $3,752 and $3,404, respectively

19,908 19,071
Prepaid expenses and other current assets 9,091 14,311
Deferred income taxes   2,203     1,643  
 
Total current assets 195,956 212,897
 
Long-term investments 28,593 43,077
Property and equipment, net 14,205 14,438
Goodwill 290,097 279,016
Other purchased intangibles, net 103,741 98,067
Deferred income taxes 4,690 3,160
Other assets   652     516  
 
TOTAL ASSETS $ 637,934   $ 651,171  
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses $ 23,224 $ 24,070
Income taxes payable 2,372 1,494
Deferred revenue 28,157 26,695
Liability for uncertain tax positions 5,523 5,523
Deferred income taxes   3     16  
 
Total current liabilities 59,279 57,798
 
Liability for uncertain tax positions 26,089 24,554
Deferred income taxes 10,154 12,102
Other long-term liabilities   2,175     2,342  
 
Total liabilities 97,697 96,796
 
Commitments and contingencies
 
Stockholders' Equity:
Preferred stock
Common stock 543 554
Additional paid-in capital 196,012 197,374
Treasury stock (112,671 ) (112,671 )
Retained earnings 457,458 472,595
Accumulated other comprehensive loss   (1,105 )   (3,477 )
 
Total stockholders' equity   540,237     554,375  
 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 637,934   $ 651,171  
 
 
j2 GLOBAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED, IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
   
 
THREE MONTHS ENDED MARCH 31,
2012   2011  
 
Revenues
Subscriber $ 84,825 $ 72,868
Other   1,827     516  
 
Total revenue 86,652 73,384
 
Cost of revenues (including share-based compensation of $242 and $244 for the three months of 2012 and 2011, respectively)   15,864     15,792  
 
Gross profit   70,788     57,592  
 
Operating expenses:
Sales and marketing (including share-based compensation of $375 and $348 for the three months of 2012 and 2011, respectively) 14,860 15,511
Research, development and engineering (including share-based compensation of $116 and $147 for the three months of 2012 and 2011, respectively) 4,489 4,772
General and administrative (including share-based compensation of $1,560 and $1,466 for the three months of 2012 and 2011, respectively) 13,829 14,242
   
 
Total operating expenses   33,178     34,525  
 
Operating earnings 37,610 23,067
 
Interest and other income (expense), net   (719 )   (327 )
 
Earnings before income taxes 36,891 22,740
 
Provision for income taxes   8,352     (8,195 )
 
Net earnings $ 28,539   $ 30,935  
 
 
Basic net earnings per common share $ 0.61   $ 0.69  
 
Diluted net earnings per common share $ 0.60   $ 0.66  
 
 
Basic weighted average shares outstanding   46,400,441     45,093,127  
 
Diluted weighted average shares outstanding   46,794,603     46,558,543  
 
 
j2 GLOBAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED, IN THOUSANDS)
             
 
THREE MONTHS ENDED MARCH 31,
2012   2011  
 
Cash flows from operating activities:

Net earnings

$ 28,539 $ 30,935
Adjustments to reconcile net earnings to net cash provided by operating activities:
 
Depreciation and amortization 4,926 5,109
Amortization of discount or premium of investments 319 102
Share-based compensation 2,280 2,205
Excess tax benefit from share-based compensation (286 ) (679 )
Provision for doubtful accounts 1,289 970
Deferred income taxes (3,498 ) (47 )
Decrease (increase) in:
Accounts receivable 936 (1,681 )
Prepaid expenses and other current assets (1,055 ) (687 )
Other assets 150 83
(Decrease) increase in:
Accounts payable and accrued expenses (4,488 ) (143 )
Income taxes payable 7,532 2,450
Deferred revenue 700 11,157
Liability for uncertain tax positions 1,536 (11,873 )
Other   62     252  
Net cash provided by operating activities   38,942     38,153  
 
Cash flows from investing activities:
Purchase of certificate of deposit (5,822 )
Sales of available-for-sale investments 45,164 3,600
Purchases of available-for-sale investments (15,537 ) (1,243 )
Purchases of property and equipment (1,159 ) (625 )
Purchases of intangible assets (900 ) (1,142 )
Acquisition of businesses, net of cash received   (18,843 )   324  
Net cash provided by investing activities   2,903     914  
 
Cash flows from financing activities:
Repurchases of common stock and restricted stock (40,273 ) (1,091 )
Issuance of common stock under employee stock purchase plan 29 38
Exercise of stock options 2,591 2,600
Excess tax benefit from share-based compensation 286 679
Dividends paid   (9,975 )    
Net cash (used in) provided by financing activities   (47,342 )   2,226  
 
Effect of exchange rate changes on cash and cash equivalents   1,820     871  
 
Net (decrease) increase in cash and cash equivalents (3,677 ) 42,164
Cash and cash equivalents at beginning of period   139,359     64,752  
Cash and cash equivalents at end of period $ 135,682   $ 106,916  
 
 
j2 GLOBAL, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
THREE MONTHS ENDED MARCH 31, 2012 AND 2011
(UNAUDITED, IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
                           
 

Non-GAAP net earnings are GAAP net earnings with the following modifications: (1) elimination of the impact to revenues resulting from a change in estimate of deferred revenue; (2) elimination of share-based compensation expense and the associated payroll taxes; (3) elimination of certain acquisition and related exit costs; (4) elimination of a change to our liability of uncertain tax position due to expiration of statues of limitations and a trade name sale and (5) elimination of income tax expense associated with the change in estimate of deferred revenue, shared-based compensation and associated payroll taxes and certain acquisition and related exit costs. Non-GAAP net earnings and non-GAAP 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-cash or non-ordinary course transactions.

 
 
 
THREE MONTHS ENDED MARCH 31, 2012 THREE MONTHS ENDED MARCH 31, 2011

(1)

(3)

Change in

(3)

(4)

(2)

Acquisition

 

Estimate of

(2)

Acquisition Uncertain
Share-based and Exit Deferred Share-based and Exit Tax
GAAP Compensation Costs Non-GAAP   GAAP Revenue Compensation Costs Position Non-GAAP
 
Revenues:
Subscriber $ 84,825 $ 84,825 $ 72,868 $ 10,325 $ 83,193
 
Cost of revenues 15,864 (242 ) (6 ) 15,616 15,792 (250 ) (321 ) 15,221
 
Operating expenses:
Sales and marketing 14,860 (375 ) (90 ) 14,395 15,511 (354 ) (740 ) 14,417
Research, development and engineering 4,489 (116 ) (5 ) 4,368 4,772 (152 ) (635 ) 3,985
General and administrative 13,829 (1,630 ) (48 ) 12,151 14,242 (1,497 ) (815 ) 11,930
 
Income tax provision (5) 8,352 733 34 9,119 (8,195 ) 2,707 682 648 14,059 9,901
 
Net earnings $ 28,539 1,630 115 $ 30,284 $ 30,935 7,618 1,571 1,863 (14,059 ) $ 27,928
 
Net earnings per share:
Basic $ 0.61 0.03 0.00 $ 0.64 $ 0.69 0.17 0.03 0.04 (0.31 ) $ 0.62
Diluted $ 0.60 0.03 0.00 $ 0.64 $ 0.66 0.16 0.03 0.04 (0.30 ) $ 0.60
 
 
j2 Global, Inc.
Free Cash Flows
(in Thousands)
         

Q1

Q2

Q3

Q4

YTD

2012

Net cash provided by operating activities $ 38,942 $ 38,942
Less: Purchases of property and equipment (1,159 ) (1,159 )
Add: Excess tax benefit from share-based compensation   286           286  
Free cash flows $ 38,069   $ -   $ -   $ -   $ 38,069  
 
 

2011

Net cash provided by operating activities $ 38,153 $ 42,398 $ 28,682 $ 41,515 $ 150,748
Less: Purchases of property and equipment (625 ) (1,860 ) (2,590 ) (1,769 ) (6,844 )
Add: Excess tax benefit from share-based compensation   679     1,443     11,124     315     13,561  
Free cash flows $ 38,207   $ 41,981   $ 37,216   $ 40,061   $ 157,465  




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