J2 Global Reports Third Quarter 2012 Results

DIVIDEND

j2’s Board of Directors has approved a quarterly cash dividend of $0.225 per common share, a 2.3% increase versus last quarter's dividend. This is j2’s fifth consecutive quarterly dividend increase and represents a 12.5% increase versus its first quarterly dividend in September, 2011. The dividend will be paid on November 26, 2012 to all shareholders of record as of the close of business on November 12, 2012. Future dividends will be subject to Board approval.

BUSINESS OUTLOOK

j2 is reaffirming its fiscal 2012 revenues guidance of between $345 million and $365 million. The Company is increasing its fiscal 2012 non-GAAP earnings per share guidance to now exceed, rather than equal, its 2011 results.

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

Founded in 1995, j2 Global, Inc. provides cloud services to individuals and businesses around the world. j2'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 CampaignerCRM™. As of December 31, 2011, j2 had achieved 16 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, 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)
		SEPTEMBER 30,				DECEMBER 31,
			2012				2011
ASSETS
	Cash and cash equivalents	$	287,514			$	139,359
	Short-term investments		143,628				38,513
	Accounts receivable,
	net of allowances of $3,831 and $3,404, respectively		25,332				19,071
	Prepaid expenses and other current assets		11,813				14,311
	Deferred income taxes		2,472				1,643
	Total current assets		470,759				212,897
	Long-term investments		38,687				43,077
	Property and equipment, net		13,938				14,438
	Goodwill		293,687				279,016
	Other purchased intangibles, net		101,560				98,067
	Deferred income taxes		4,256				3,160
	Other assets		2,321				516
	TOTAL ASSETS	$	925,208			$	651,171
LIABILITIES AND STOCKHOLDERS' EQUITY
	Accounts payable and accrued expenses	$	28,437			$	24,070
	Income taxes payable		4,014				1,510
	Deferred revenue		28,352				26,695
	Liability for uncertain tax positions		5,523				5,523
	Total current liabilities		66,326				57,798
	Long-term debt		245,081				—
	Liability for uncertain tax positions		31,092				24,554
	Deferred income taxes		11,305				12,102
	Other long-term liabilities		3,070				2,342
	Total liabilities		356,874				96,796
	Commitments and contingencies		—				—
	Stockholders' Equity:
	Preferred stock		—				—
	Common stock		451				554
	Additional paid-in capital		166,557				197,374
	Treasury stock		—				(112,671	)
	Retained earnings		404,862				472,595
	Accumulated other comprehensive loss		(3,536	)			(3,477	)
	Total stockholders' equity		568,334				554,375
	TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	925,208			$	651,171

j2 GLOBAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED, IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
			THREE MONTHS ENDED SEPTEMBER 30,								NINE MONTHS ENDED SEPTEMBER 30,
				2012				2011				2012				2011
Revenues
	Subscriber		$	89,466			$	85,622			$	262,362			$	243,788
	Other			3,780				405				7,001				1,299
	Total revenues			93,246				86,027				269,363				245,087
Cost of revenues (including share-based compensation of $199 and $633 for the three and nine months of 2012, respectively, and $246 and $736 for the three and nine months of 2011, respectively)				16,303				15,002				48,354				45,952
	Gross profit			76,943				71,025				221,009				199,135
Operating expenses:
	Sales and marketing (including share-based compensation of $390 and $1,117 for the three and nine months of 2012, respectively, and $350 and $1,049 for the three and nine months of 2011, respectively)			15,190				15,073				43,910				44,929
	Research, development and engineering (including share-based compensation of $111 and $344 for the three and nine months of 2012, respectively, and $110 and $367 for the three and nine months of 2011, respectively)			4,692				4,105				13,798				12,714
	General and administrative (including share-based compensation of $1,703 and $4,757 for the three and nine months of 2012, respectively, and $1,542 and $4,532 for the three and nine months of 2011, respectively)			14,784				15,403				43,387				44,037
	Total operating expenses			34,666				34,581				101,095				101,680
Operating earnings				42,277				36,444				119,914				97,455
Interest and other income (expense), net				(2,747	)			290				(2,657	)			262
Earnings before income taxes				39,530				36,734				117,257				97,717
Provision for income taxes				7,880				11,236				25,880				12,770
Net earnings			$	31,650			$	25,498			$	91,377			$	84,947
Basic net earnings per common share			$	0.69			$	0.55			$	1.97			$	1.84
Diluted net earnings per common share			$	0.69			$	0.54			$	1.96			$	1.81
Basic weighted average shares outstanding				45,002,565				45,993,328				45,590,160				45,498,763
Diluted weighted average shares outstanding				45,340,111				46,455,584				45,897,389				46,108,890

j2 GLOBAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED, IN THOUSANDS)
						NINE MONTHS ENDED SEPTEMBER 30,
							2012				2011
Cash flows from operating activities:
		Net earnings				$	91,377			$	84,947
	Adjustments to reconcile net earnings to net cash
	provided by operating activities:
		Depreciation and amortization					15,555				14,892
		Accretion and amortization of discount and premium of investments					1,090				600
		Amortization of financing costs and discounts					104				—
		Share-based compensation					6,816				6,672
		Excess tax benefit from share-based compensation					(1,016	)			(13,246	)
		Provision for doubtful accounts					3,520				4,963
		Deferred income taxes					(1,012	)			5,394
	Decrease (increase) in:
		Accounts receivable					(7,032	)			(7,074	)
		Prepaid expenses and other current assets					(951	)			3,811
		Other assets					(362	)			153
	(Decrease) increase in:
		Accounts payable and accrued expenses					168				(1,112	)
		Income taxes payable					7,112				8,885
		Deferred revenue					1,611				9,723
		Liability for uncertain tax positions					6,538				(9,668	)
		Other liabilities					(1	)			293
Net cash provided by operating activities							123,517				109,233
Cash flows from investing activities:
		Maturity of certificate of deposit					8,000				—
		Purchase of certificates of deposit					(34,674	)			(8,000	)
		Sales of available-for-sale investments					64,581				20,127
		Purchases of available-for-sale investments					(140,785	)			(50,192	)
		Purchases of property and equipment					(3,746	)			(5,075	)
		Purchases of intangible assets					(3,668	)			(2,616	)
		Acquisition of businesses, net of cash received					(25,108	)			(3,244	)
		Proceeds from sale of assets					—				4
Net cash used in investing activities							(135,400	)			(48,996	)
Cash flows from financing activities:
		Issuance of long-term debt					245,000				—
		Debt issuance costs					(1,342	)			—
		Repurchases of common stock and restricted stock					(60,261	)			(1,273	)
		Issuance of common stock under employee stock purchase plan					109				110
		Exercise of stock options					4,865				7,001
		Excess tax benefit from share-based compensation					1,016				13,246
		Dividends paid					(29,940	)			(9,463	)
Net cash provided by financing activities							159,447				9,621
Effect of exchange rate changes on cash and cash equivalents							591				(420	)
Net increase in cash and cash equivalents							148,155				69,438
Cash and cash equivalents at beginning of period							139,359				64,752
Cash and cash equivalents at end of period						$	287,514			$	134,190

j2 GLOBAL, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
THREE MONTHS ENDED SEPTEMBER 30, 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 share-based compensation expense and the associated payroll taxes; (2) elimination of certain acquisition and related exit costs; (3) elimination of additional income tax benefit from prior years; (4) elimination of a change to our liability of uncertain tax position due to expiration of statues of limitations; (5) elimination of taxes related to trade name sale and (6) elimination of income tax provision associated with share-based compensation and associated payroll taxes and certain acquisition and related exit costs.
					THREE MONTHS ENDED SEPTEMBER 30, 2012														THREE MONTHS ENDED SEPTEMBER 30, 2011
												(3)
												Additional													(2)			(4)			(5)
									(1)			Income Tax										(1)			Acquisition			Uncertain			Trade
									Share-based			Benefit from										Share-based			and Exit			Tax			Name
					GAAP				Compensation			Prior Years			Non-GAAP				GAAP			Compensation			Costs			Position			Sale			Non-GAAP
Cost of revenues						16,303			(199	)		—				16,104				15,002		(246	)		(27	)		—			—				14,729
Operating expenses:
	Sales and marketing					15,190			(390	)		—				14,800				15,073		(350	)		—			—			—				14,723
	Research, development and engineering					4,692			(111	)		—				4,581				4,105		(110	)		(68	)		—			—				3,927
	General and administrative					14,784			(1,717	)		—				13,067				15,403		(1,650	)		(17	)		—			—				13,736
Interest and other income (expense)						(2,747	)		—			—				(2,747	)			290		—			—			—			—				290
Income tax provision (6)					$	7,880			832			3,066			$	11,778			$	11,236		729			35			1,069			(3,892	)			9,177
Net earnings					$	31,650			1,585			(3,066	)		$	30,169			$	25,498		1,627			77			(1,069	)		3,892			$	30,025
Net earnings per share*:
	Basic				$	0.69			0.04			(0.07	)		$	0.66			$	0.55		0.04			0.00			(0.02	)		0.08			$	0.64
	Diluted				$	0.69			0.04			(0.07	)		$	0.65			$	0.54		0.03			0.00			(0.02	)		0.08			$	0.64
* The reconciliation of Net earnings per share from GAAP to Non-GAAP may not foot due to rounding.
The Company discloses non-GAAP Earnings Per Share (EPS) as supplemental non-GAAP financial performance measure, as it believes it is 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.
Non-GAAP EPS is not in accordance with, or an alternative to, Earnings Per Share and may be different from non-GAAP measures with similar or even identical names used by other companies. In addition, this non-GAAP measure is not based on any comprehensive set of accounting rules or principles. This non-GAAP measure has limitations in that they do not reflect all of the amounts associated with the Company's results of operations determined in accordance with GAAP.

j2 GLOBAL, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
NINE MONTHS ENDED SEPTEMBER 30, 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 gain on sale of certain investment; (5) elimination of additional income tax benefit from prior years; (6) elimination of a change to our liability of uncertain tax position due to expiration of statues of limitations; (7) elimination of taxes related to trade name sale and (8) elimination of income tax provision associated with the change in estimate of deferred revenue, share-based compensation and associated payroll taxes, certain acquisition and related exit costs and gain on sale of certain investment.
					NINE MONTHS ENDED SEPTEMBER 30, 2012																				NINE MONTHS ENDED SEPTEMBER 30, 2011
					GAAP				(2)Share-based Compensation			(3)Acquisition and Exit Costs			(4)Gain on Sale of Investment			(5) Additional Income Tax Benefit from Prior Years			Non-GAAP				GAAP			(1)Change in Estimate of Deferred Revenue			(2) Share-based Compensation			(3) Acquisition and Exit Costs			(6)Uncertain Tax Position			(7) Trade Name Sale			Non-GAAP
Revenues:
	Subscriber				$	262,362			—			—			—			—			$	262,362			$	243,788		$	10,325		—			—			—			—			$	254,113
Cost of revenues						48,354			(633	)		(6	)		—			—				47,715				45,952			—		(742	)		(366	)		—			—				44,844
Operating expenses:
	Sales and marketing					43,910			(1,117	)		(90	)		—			—				42,703				44,929			—		(1,055	)		(764	)		—			—				43,110
	Research, development and engineering					13,798			(344	)		(5	)		—			—				13,449				12,714			—		(372	)		(731	)		—			—				11,611
	General and administrative					43,387			(4,847	)		(48	)		—			—				38,492				44,037			—		(4,692	)		(1,421	)		—			—				37,924
Interest and other income (expense)						(2,657	)		—			—			(180	)		—				(2,837	)			262			—		—			—			—			—				262
Income tax provision (8)						25,880			2,275			34			(43	)		3,066				31,212				12,770			2,707		2,106			850			15,128			(3,892	)			29,669
Net earnings					$	91,377			4,666			115			(137	)		(3,066	)		$	92,955			$	84,947			7,618		4,755			2,432			(15,128	)		3,892			$	88,516
Net earnings per share*:
	Basic				$	1.97			0.10			0.00			0.00			(0.07	)		$	2.00			$	1.84			0.17		0.10			0.05			(0.33	)		0.08			$	1.91
	Diluted				$	1.96			0.10			0.00			0.00			(0.07	)		$	1.99			$	1.81			0.16		0.10			0.05			(0.33	)		0.08			$	1.89
* The reconciliation of Net earnings per share from GAAP to Non-GAAP may not foot due to rounding.
The Company discloses non-GAAP Earnings Per Share (EPS) as supplemental non-GAAP financial performance measure, as it believes it is 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.
Non-GAAP EPS is not in accordance with, or an alternative to, Earnings Per Share and may be different from non-GAAP measures with similar or even identical names used by other companies. In addition, this non-GAAP measure is not based on any comprehensive set of accounting rules or principles. This non-GAAP measure has limitations in that they do not reflect all of the amounts associated with the Company's results of operations determined in accordance with GAAP.

j2 GLOBAL, INC.
NET EARNINGS TO EBITDA RECONCILIATION
THREE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011
(UNAUDITED, IN THOUSANDS)
The following table sets forth a reconciliation of EBITDA to net earnings, the most directly comparable GAAP financial measure.
		THREE MONTHS ENDED SEPTEMBER 30,
		2012				2011
Net earnings		$	31,650			$	25,498
Fixed charges			3,760				41
Provision for income taxes			7,880				11,236
Depreciation and amortization and other non-cash items (1)			7,755				7,064
Non-recurring (gains) losses			(526	)			15
EBITDA		$	50,519			$	43,854
(1) Other non-cash items currently represent share-based compensation.
EBITDA is defined in the Indenture Agreement as earnings before fixed charges, taxes, depreciation and amortization and all other non-cash items and all non-recurring gains and losses. We disclose 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 EBITDA are broadly used by analysts, rating agencies and investors in assessing our performance. Accordingly, we believe that the presentation of EBITDA provides useful information to investors.
EBITDA is not in accordance with, or an alternative to, net earnings, and may be different from non-GAAP measures used by other companies. In addition, EBITDA 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.

j2 GLOBAL, INC.
NON-GAAP FINANCIAL MEASURES
(UNAUDITED, IN THOUSANDS)
		Q1				Q2				Q3				Q4				YTD
2012
Net cash provided by operating activities		$	38,942			$	46,382			$	38,193							$	123,517
Less: Purchases of property and equipment			(1,159	)			(1,631	)			(956	)							(3,746	)
Add: Excess tax benefit (deficit) from share-based compensation			286				821				(91	)							1,016
Free cash flows		$	38,069			$	45,572			$	37,146			$	-			$	120,787
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
The Company discloses non-GAAP Free Cash Flows as supplemental non-GAAP financial performance measure, as it believes it is a useful metrics 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 do not reflect all of the amounts associated with the Company's results of operations determined in accordance with GAAP.

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