Investors Presentation. Third Quarter 2017 Results November 2, 2017

Transcription

1 Investors Presentation Third Quarter 2017 Results November 2, 2017

2 Safe Harbor for Forward-Looking Statements Certain statements in this presentation are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, particularly those regarding our 2017 Financial Guidance. Such forwardlooking statements are subject to numerous assumptions, risks and uncertainties that could cause actual results to differ materially from those described in those statements. Readers should carefully review the Risk Factors slide of this presentation. These forward-looking statements are based on management s expectations or beliefs as of November 2, 2017 and as well as those set forth in our Annual Report on Form 10-K filed by us on March 1, 2017 with the Securities and Exchange Commission ( SEC ) and the other reports we file from time-to-time with the SEC. We undertake no obligation to revise or publicly release any updates to such statements based on future information or actual results. Such forward-looking statements address the following subjects, among others: Future operating results Ability to acquire businesses on acceptable terms and integrate and recognize synergies from acquired businesses Deployment of cash and investment balances to grow the company Subscriber growth, retention, usage levels and average revenue per account Cloud service and digital media growth and continued demand for fax services International growth New products, services, features and technologies Corporate spending including stock repurchases Intellectual property and related licensing revenues Liquidity and ability to repay or refinance indebtedness Network capacity, coverage, reliability and security Regulatory developments and taxes All information in this presentation speaks as of November 2, 2017 and any redistribution or rebroadcast of this presentation after that date is not intended and will not be construed as updating or confirming such information. 2

3 Risk Factors The following factors, among others, could cause our business, prospects, financial condition, operating results and cash flows to be materially adversely affected: Inability to sustain growth or profitability, particularly in light of an uncertain U.S. and worldwide economy and the related impact on customer acquisition, retention and usage levels, advertising spend and credit and debit card payment declines Reduced use of fax services due to increased use of , scanning or widespread adoption of digital signatures or otherwise Inability to acquire businesses on acceptable terms or successfully integrate and realize anticipated synergies Failure to offer compelling digital media content causing reduced traffic and advertising levels; loss of advertisers or reduction in advertising spend; increased prevalence or effectiveness of advertising blocking technologies; inability to monetize handheld devices and handheld traffic supplanting monetized traffic; and changes by our vendors or partners that impact our traffic or publisher audience acquisition and/or monetization New or unanticipated costs or tax liabilities, including those relating to federal and state income tax and indirect taxes, such as sales, value-added and telecommunications taxes Inability to manage certain risks inherent to our business, such as fraudulent activity, system failure or a security breach Competition from others with regard to price, service, content and functionality Inadequate intellectual property (IP) protection, expiration or invalidity of key patents, violations of 3rd party IP rights or inability or significant delay in monetizing IP Inability to continue to expand our business and operations internationally Inability to maintain required services on acceptable terms with financially stable telecom, co-location and other critical vendors; and inability to obtain telephone numbers in sufficient quantities on acceptable terms and in desired locations Level of debt limiting availability of cash flow to reinvest in the business; inability to repay or refinance debt when due; and restrictive covenants relating to debt imposing operating and financial restrictions on business activities or plans Inability to maintain and increase our cloud services customer base or average revenue per user Enactment of burdensome telecommunications, Internet, advertising, health care or other regulations, or being subject to existing regulations Inability to adapt to technological change and diversify services & related revenues at acceptable levels of financial return Loss of services of executive officers and other key employees Other factors set forth in our Annual Report on Form 10-K filed by us on March 1, 2017 with the Securities and Exchange Commission ( SEC ) and the other reports we file from time-to-time with the SEC 3

4 Q Results

5 2017 Q3 Accomplishments Record Q3 17 Consolidated Results Q3 Results: All-time quarterly record Revenue $274M EBITDA (1)(2) $111M, FCF (1)(2) $57M, and Adjusted EPS (1)(2) $1.34 Q3 17 Revenue up $63M or 30% vs. prior year, EBITDA (1)(2) up $16M or 17% vs. prior year $400M+ in cash and cash equivalents as of September Cloud Segment Q3 17 Revenue of $146M, up $2M or 1.7% vs. prior year Revenue growth in constant currencies is higher by 2.3% EBITDA margin (1)(2)(3) of 51.5% Cancel Rate 2.2%, improved vs. prior year Digital Media Segment Q3 17 Revenue of $128M up $67M or +91% vs. prior year Q3 17 EBITDA (1)(2) up $16M or 67% vs. prior year (1) Figures are Adjusted Non-GAAP. (2) See slides for a GAAP reconciliation of revenue, earnings per diluted share, free cash flow, and EBITDA. (3) EBITDA margin defined as EBITDA divided by Revenue 5

6 j2 Global Consolidated

7 Q Results vs. Prior Year ($ in thousands) Total Cloud by Unit Cloud Connect (Fax/Voice) Cloud Services IP Licensing Total Cloud Q Q Q Q Q Q Q Q Revenues $ 92,599 $ 96,882 $ 49,625 $ 47,693 $ 1,119 $ 1,212 $ 143,341 $ 145,787 Adj. Non-GAAP Gross Profit (1) 76,876 79,936 35,423 35,243 1,116 1, , ,391 Adj. Non-GAAP Operating Profit (1)(2) $ 49,122 $ 51,283 $ 22,670 $ 20,810 $ 446 $ 710 $ 72,239 $ 72,803 Adjusted EBITDA (1)(2) $ 50,521 $ 52,450 $ 23,674 $ 21,876 $ 446 $ 710 $ 74,641 $ 75,036 Adjusted EBITDA % 55% 54% 48% 46% 40% 59% 52.1% 51.5% By Segment Total Cloud Digital Media j2 Global Inc. j2 Global (3) Q Q Q Q Q Q Q Q Revenues $ 143,341 $ 145,787 $ 66,774 $ 127,829 $ 0 $ 0 $ 210,116 $ 273,616 30% Adj. Non-GAAP Gross Profit (1) 113, ,391 61, , , ,955 33% Adj. Non-GAAP Operating Profit (1)(2) $ 72,239 $ 72,803 $ 21,048 $ 34,674 ($ 3,137) ($ 3,750) $ 90,149 $ 103,727 15% Adjusted EBITDA (1)(2) $ 74,641 $ 75,036 $ 23,917 $ 40,063 ($ 3,137) ($ 3,750) $ 95,421 $ 111,349 17% Adjusted EBITDA % 52% 51% 36% 31% na na 45% 41% QoQ Adjusted Net Income $ 60,657 $ 65,211 8% EPS (1) : Adj. Non-GAAP $ 1.25 $ % GAAP $ 0.94 $ % (1) See slides for a GAAP reconciliation of revenue, adjusted non-gaap gross profit, adjusted non-gaap operating profit, adjusted EBITDA and adjusted earnings per diluted share for the Company as a whole and by segment. (2) Includes Allocation from Cloud Connect to Cloud Services of $1.9M in Q3 17 and $1.7M in Q3 16 (3) The Consolidated j2 Global data may not foot as each segment is calculated independently 7

8 Business Cloud Services

9 Q Cloud Connect (Fax/Voice) Highlights Q3 17 all-time high Cloud Connect Revenue of $97M, +5% vs. Q3 16 Q3 17 Fax Revenue of $80M, continues to grow versus Q3 16 All-time high Fax Revenue in Q3 17, up 3.5% vs. prior year Voice Revenue of $17M, grew 10% vs. Q3 16 Corporate Fax Revenue continues to grow, up 7% vs Q3 16 Successfully completed integration of Fax87 Corporate Fax Revenue (1) growth since 2013 CAGR since 2013 ~9% Organic CAGR 4%+ Positioning API growth for fax Strong demand in compliance-oriented verticals (Health, Pharma, Legal, Finance) (1) Figures reported in constant currencies (2) Chart indexed to the year

10 Q Cloud Backup Highlights Q3 17 Revenue of $28M International Revenue grew by 5% EBITDA (1)(2) continues to be ~ 50% Successfully launched endpoint data protection services in EU Cancel rate favorable vs. prior year driven by KeepItSafe and Livedrive Acquired and integrated backupsonline in Europe Cloud Backup Revenue (3) growth since 2013 Revenue CAGR ~96% EBITDA margin has improved over the period from high 20s to ~50% (1) Figures are Adjusted Non-GAAP (2) See slides for a GAAP reconciliation of revenue and EBITDA. (3) Figures reported in constant currencies (4) Chart indexed to the year

11 Q Security & Marketing Highlights Security Fus Strong organic growth, sequential quarterly growth of ~7.2% topline, driven by Europe Q3 17 Revenue of $11.4M, EBITDA (1)(2) of ~$4M Strong new business sales in Excel Micro after McAfee migrations Ongoing investment in the Fus product roadmap features and packages Nordics acquisition WeCloud integration on track Marketing Campaigner Q3 17 Revenue of $7.7M, YTD Revenue is up 17% vs. prior year Campaigner continues to enhance it digital marketing product suite Launching new landing page functionality and enhancing dynamic content features ARPA (2) up 17% vs Q3 16 (1) Figures are Adjusted Non-GAAP (2) ARPA defined as Average Revenue per Account per month 11

12 Digital Media

13 Q Digital Media Highlights Digital media business demonstrating strong fundamentals Q3 17 Revenue of $128M, up 91% vs. Q3 16 Q3 17 EBITDA (1)(2) of $40M, up 67% vs. Q3 16 Total multi-platform visits 1.4B (3)(4) Ookla passes 300MM app install (3) milestone The addition of 16M+ mobile app installs in Q3 17 (28% YOY growth) brought Speedtest s app installs to 300M lifetime installs (3) App installs across other platforms, such as Chrome, Windows and Mac OS grew 115% YoY (3) Mobile tests hit a quarterly record high of 600M for Q3 17 Commerce Revenue grew 34% vs. Q Shopping clicks to our merchant partners reached a quarterly record high of 36.3M, a 39% increase YOY or over 10M click increase YoY (3) Lead by YoY increases in merchant clicks of 50% at Offers.com, 92% at IGN.com, 40% at PCMag.com and 39% at Askmen.com (3) International commerce is starting to accelerate, Revenue up 462% through Q3 17 vs. prior year (1) Figures are Adjusted Non-GAAP (2) See slides for GAAP reconciliation of revenue and EBITDA (3) Google Analytics and Affiliate Partner platforms (4) Snap had a change in programming strategy designed to maximize advertising supply; excluding Snap, visits were up 18% YoY 13

14 Q Digital Media Highlights IGN s continues to expand video programming and distribution partnerships IGN and Disney premiered The IGN Show on Disney XD in July 30 half-hour episodes of video game content and event coverage IGN has extended its partnership with Facebook Facebook commissioned six original video series from IGN for the launch of Facebook's Watch platform The show lineup includes mid-form featurettes with themes such as cosplay makeovers, original stop motion animation, making-of, and video game previews IGN broadcast 13 hours of live programming from San Diego Comic-Con The content generated 68.7 million video views for the week of the event, with a peak concurrent live viewership of 118k users (1) IGN partnered with Twitter for the event, where almost 8 million users tuned in to watch the show (2) Everyday Health and WhatToExpect continue to launch new products and features EverydayHealth launched it s first affiliate commerce program, re-launched its Data-Enabled TV (DETV) product and signed a data licensing agreement that allows access to first party data segments WhatToExpect partnered with International Medical Corps on #BumpDay promotions to raise awareness for maternal health care on the 3rd annual #BumpDay, media coverage drove over 250M impressions on social networks, up over 100% YoY (1)(2) WhatToExpect launched a new community platform providing sponsors with high quality, contextual inventory resulting in -driven traffic growth (45% YoY) WhatToExpect began scaling its commerce business in Q3, growing Revenue 200% from Q3 16, including the launch of a new Baby Products section and expanded Mom Deals offering (1) Google Analytics and Partner Platforms (2) Twitter 14

15 2017 Financial Guidance

16 Reconfirming 2017 Guidance Revenues $1,107M - $1,147M Adjusted Non-GAAP EPS (1)(2) $ $6.00 (1) Figures are adjusted Non-GAAP. (2) Adjusted earnings per diluted share excludes share-based compensation, amortization of acquired intangibles and the impact of any currently anticipated items, in each case net of tax. It is anticipated that the effective tax rate for 2017 (excluding certain expenses that may not be indicative of our recurring core business operating results) will be between 28% and 30% 16

17 21 Years of Service Hemi has served j2 in various roles during his tenure Joined j2 Global in 1996 and has dedicated over 21 years of service to the organization In 1999, served as CFO during j2 s IPO, then from 2001 as CMO until 2003 Prior to being named CEO in 2008, served as Co-President and Chief Operating Officer Career Accomplishments Successfully led and steered j2 through dot.com bubble ( 00) and financial crisis ( 08) Diversified company from a domestic fax provider to a global diversified internet company 21 years of consecutive revenue growth Strong Growth CAGR (2001-LTM Q3) 158 Acquisitions Revenue 24% Stock Price 29% Adj. EBITDA 46% 2,300 employees in 14 countries 17

18 Supplemental Information

19 Financial Metrics: Consolidated j2 Global Consolidated Q1 Q2 Q3 Q4 Q1 Q2 Q3 Revenue by Segment ---(Thousands)---I Cloud Revenues $138,139 $142,460 $143,342 $142,998 $141,544 $144,709 $145,787 Digital Media Revenues $62,363 $69,340 $66,774 $108,840 $113,125 $128,465 $127,829 Total Revenues $200,502 $211,800 $210,116 $251,837 $254,669 $273,174 $273,616 Diluted EPS GAAP $0.61 $0.69 $0.94 $0.89 $0.52 $0.63 $0.66 Adjusted Non-GAAP (1) $1.05 $1.21 $1.25 $1.49 $1.19 $1.33 $1.34 I--(millions)--I Cash & Investment $394.5 $407.2 $378.9 $124.0 $187.5 $330.8 $402.5 Free Cash Flow (2) $68.5 $63.5 $53.2 $82.7 $61.5 $71.1 $56.8 Adjusted EBITDA (3) $86.7 $97.5 $95.4 $116.5 $99.5 $110.2 $111.3 (1) See slide for a reconciliation of Non-GAAP earnings and EPS to GAAP net income and diluted GAAP EPS (2) See slide 21 for a definition of Free Cash Flow and reconciliation to net cash provided by operating activities (3) See slide 21 for a definition of adjusted EBITDA and reconciliation to Net Income 19

20 Financial & Other Metrics Cloud & Media Revenue by Type Q1 Q2 Q3 Q4 Q1 Q2 Q3 Fixed Subscriber Revenues $115,496 $117,199 $117,816 $117,885 $115,726 $117,556 $118,755 Variable Subscriber Revenues $21,453 $24,156 $24,396 $23,944 $24,606 $25,863 $25,808 Subscriber Revenues $136,949 $141,355 $142,212 $141,830 $140,332 $143,419 $144,563 Other Licenses Revenues (1) $1,191 $1,105 $1,130 $1,168 $1,212 $1,291 $1,223 Total Cloud Revenues $138,139 $142,460 $143,342 $142,998 $141,544 $144,709 $145,787 Revenue - DID vs. Non-DID (in Thousands) I Total Cloud DID Based Revenues $89,967 $92,592 $92,396 $92,787 $93,438 $95,490 $96,702 Non-DID Based Revenues $48,173 $49,868 $50,946 $50,211 $48,106 $49,220 $49,084 Total Cloud Revenues $138,139 $142,460 $143,342 $142,998 $141,544 $144,709 $145,787 Cloud Services Customers (2) 3,074 3,081 3,108 3,109 3,116 3,141 3,175 Average Monthly Revenue/Customers (3) $15.00 $15.31 $15.32 $15.21 $15.03 $15.28 $15.26 Cancel Rate (4) 2.22% 2.23% 2.28% 2.15% 2.27% 2.10% 2.22% Media Q1 Q2 Q3 Q4 Q1 Q2 Q3 Digital Media Traffic (5) Visits 1,096,332 1,159,925 1,448,339 1,287,501 1,401,666 1,352,200 1,394,177 Views 3,637,100 4,215,216 5,405,305 4,805,816 5,386,097 6,054,062 5,872,437 (1) Cloud Services revenue includes IP Licensing revenue (2) Cloud Services Customers are defined as paying DIDs for Fax & Voice services and direct and resellers accounts for other services (3) Quarterly ARPU is calculated using our standard convention of applying the average of the quarter s beginning and ending customer base to the total revenue of the quarter (4) User cancel rate, also called user churn, is defined as cancellation of service by Cloud Business customers with greater than 4 months of continuous service (continuous service includes Cloud Business customers that are administratively cancelled and reactivated within the same calendar month). User cancel rate is calculated monthly and expressed here as an average over the three months of the quarter. (5) Digital Media Traffic figures based on Google Analytics & Partner Platforms 20

21 GAAP Reconciliation Free Cash Flow & Adjusted EBITDA ($ in millions) Free Cash Flow (1) Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Net cash provided by operating activities $ $ $ $ $ $ $ Less: Purchases of property and equipment ($4.321) ($4.865) ($8.261) ($7.299) ($9.660) ($9.285) ($10.538) Add: Excess tax benefit (deficit) from share-based compensation $0.264 $0.833 $0.974 $0.200 $0.000 $0.000 $0.000 Add: Contingent Consideration $8.000 $0.000 $0.000 $0.000 $ $ $0.000 Free cash flow $ $ $ $ $ $ $ Adjusted EBITDA (2) Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Net income $ $ $ $ $ $ $ Plus: Other expense (income), net $0.126 ($0.213) ($9.718) ($0.438) $0.323 $1.592 $0.521 Interest expense (income), net $ $ $ $ $ $ $ Income tax expense $ $ $ $ $9.422 $9.287 $9.163 Depreciation and amortization $ $ $ $ $ $ $ Share-based compensation and associated payroll tax expense $2.809 $3.439 $3.699 $3.703 $3.614 $5.562 $4.563 Acquisition-related integration costs $2.595 $3.952 ($0.736) $ $8.613 $5.800 $4.761 Additional indirect tax expense from prior years $0.750 $0.150 $0.000 ($1.900) $0.000 $3.007 $0.000 Sales of business $0.000 $0.000 $0.000 $0.000 $0.000 $0.000 ($4.715) Adjusted EBITDA $ $ $ $ $ $ $ (1) Free Cash Flow is defined as net cash provided by operating activities, less purchases of property, plant and equipment, plus excess tax benefits (deficiency) from share based compensation. Free Cash Flow amounts are not meant as a substitute for GAAP, but are solely for informational purposes (2) Adjusted EBITDA is defined as net income plus interest and other expense, net; income tax expense; depreciation and amortization and the items used to reconcile GAAP to Adjusted Non-GAAP EPS. Adjusted EBITDA amounts are not meant as a substitute for GAAP, but are solely for informational purposes 21

22 GAAP Reconciliation Q3 Adjusted Non-GAAP Earnings & EPS ($ in thousands) Three Months Ended September 30, Cost of revenues $ 42,371 $ 36,992 Plus: Share based compensation (1 ) (120) (116) Amortization (3 ) (590) (1,334) Adjusted non-gaap cost of revenues $ 41,661 $ 35,542 Sales and marketing $ 79,432 $ 46,425 Plus: Share based compensation (1 ) (365) (423) Acquisition related integration costs (2 ) (1,212) (409) Adjusted non-gaap sales and marketing $ 77,855 $ 45,593 Research, development and engineering $ 12,431 $ 8,965 Plus: Share based compensation (1 ) (296) (235) Acquisition related integration costs (2 ) (1,026) (51) Adjusted non-gaap research, development and engineering $ 11,109 $ 8,679 General and administrative $ 76,425 $ 55,612 Plus: Share based compensation (3 ) (3,782) (2,925) Acquisition related integration costs (2 ) (2,219) 1,196 Amortization (3 ) (31,160) (23,730) Tax expense from prior years (5 ) Adjusted non-gaap general and administrative $ 39,264 $ 30,153 Adjusted Non-GAAP net income is not meant as a substitute for GAAP, and is defined as GAAP net income with the following modifications: 1) Elimination of shared-based compensation expense and associated payroll taxes 2) Elimination of certain acquisition-related integration costs 3) Elimination of amortization of patents and intangible assets that we acquired 22

23 GAAP Reconciliation Q3 Adjusted Non-GAAP Earnings & EPS (continued) ($ in thousands) Three Months Ended September 30, Other (income) expense, net $ (3,890) $ (9,718) Plus: Acquisition related integration costs (2 ) (304) - Sale of investments (6 ) - 7,540 Sale of businesses (7 ) 4,715 - Adjusted non-gaap other (income) expense, net $ 521 $ (2,178) Income Tax Provision $ 9,163 $ 15,835 Plus: Share based compensation (1 ) 1,075 1,039 Acquisition related integration costs (2 ) 3,188 (148) Interest costs (3 ) 3, Amortization (4 ) 9,224 8,999 Tax expense from prior years (5 ) Sale of investments (6 ) - (2,866) Sale of businesses (7 ) (1,561) - Adjusted non-gaap income tax provision $ 24,425 $ 23,176 Total adjustments $ (32,852) $ (15,086) GAAP earnings per diluted share $ 0.66 $ 0.94 Adjustments * $ 0.68 $ 0.32 Adjusted non-gaap earnings per diluted share $ 1.34 $ 1.25 Adjusted Non-GAAP net income is not meant as a substitute for GAAP, and is defined as GAAP net income with the following modifications: 1) Elimination of shared-based compensation expense and associated payroll taxes 2) Elimination of certain acquisition-related integration costs 3) Elimination of interest costs in excess of the coupon rate associated with the convertible notes 4) Elimination of amortization of patents and intangible assets that we acquired 5) Elimination of additional tax or indirect tax related (expense) benefit from prior years 6) Elimination of gain on sale of Investments 7) Elimination of gain on sale of businesses * Reconciliation of Net Income per share from GAAP to Adjusted Non-GAAP Net Income Per Share may not foot because each is calculated independently 23

24 GAAP Reconciliation Q Adjusted EBITDA ($ in thousands) Cloud Cloud IP Digital Connect Services Licensing Media j2 Global, Inc. Total Revenues GAAP revenues $ 96,882 $ 47,693 $ 1,212 $ 127,829 $ - $ 273,616 Gross profit GAAP gross profit $ 79,805 $ 34,664 $ 1,212 $ 115,564 $ - $ 231,245 Non-GAAP adjustments: Share-based compensation Amortization Adjusted non-gaap gross profit $ 79,936 $ 35,243 $ 1,212 $ 115,564 $ - $ 231,955 Operating profit GAAP operating profit $ 44,363 $ 12,282 $ (485) $ 12,330 $ (5,533) $ 62,957 Non-GAAP adjustments: Share-based compensation 1, ,158 1,783 4,563 Acquisition related integration costs ,348-4,457 Amortization 5,834 7,883 1,195 16,838-31,750 Adjusted non-gaap operating profit $ 51,283 $ 20,810 $ 710 $ 34,674 $ (3,750) $ 103,727 Depreciation 1,167 1,066-5,389-7,622 Adjusted EBITDA $ 52,450 $ 21,876 $ 710 $ 40,063 $ (3,750) $ 111,349 24

25 GAAP Reconciliation Q Adjusted EBITDA ($ in thousands) Cloud Cloud IP Digital Connect Services Licensing Media j2 Global, Inc. Total Revenues GAAP revenues $ 92,599 $ 49,624 $ 1,119 $ 66,774 $ - $ 210,116 Gross profit GAAP gross profit $ 76,652 $ 34,197 $ 1,116 $ 61,159 $ - $ 173,124 Non-GAAP adjustments: Share-based compensation Amortization 127 1, ,334 Adjusted non-gaap gross profit $ 76,876 $ 35,423 $ 1,116 $ 61,159 $ - $ 174,574 Operating profit GAAP operating profit $ 43,543 $ 10,354 $ (996) $ 13,887 $ (4,666) $ 62,122 Non-GAAP adjustments: Share-based compensation ,529 3,699 Acquisition related integration costs (801) - (736) Amortization 4,552 11,821 1,442 7,249-25,064 Adjusted non-gaap operating profit $ 49,122 $ 22,670 $ 446 $ 21,048 $ (3,137) $ 90,149 Depreciation 1,399 1,004-2,869-5,272 Adjusted EBITDA $ 50,521 $ 23,674 $ 446 $ 23,917 $ (3,137) $ 95,421 25

26