Toggle SGML Header (+)


Section 1: 10-Q (10-Q)

Document
false--12-31Q220190001084048104220001174700000.010.01950000009500000048082800477658694748280047765869P1Y2011201220122012201320132013201420142015201520152015201620162016000051200051200070001840000.010.016000200006000200006000000 0001084048 2019-01-01 2019-06-30 0001084048 2019-08-06 0001084048 2019-06-30 0001084048 2018-12-31 0001084048 us-gaap:SeriesAPreferredStockMember 2019-06-30 0001084048 us-gaap:SeriesAPreferredStockMember 2018-12-31 0001084048 us-gaap:SeriesBPreferredStockMember 2019-06-30 0001084048 us-gaap:SeriesBPreferredStockMember 2018-12-31 0001084048 us-gaap:ResearchAndDevelopmentExpenseMember 2019-01-01 2019-06-30 0001084048 2018-01-01 2018-06-30 0001084048 2018-04-01 2018-06-30 0001084048 2019-04-01 2019-06-30 0001084048 us-gaap:CostOfSalesMember 2018-04-01 2018-06-30 0001084048 us-gaap:GeneralAndAdministrativeExpenseMember 2018-04-01 2018-06-30 0001084048 us-gaap:CostOfSalesMember 2019-04-01 2019-06-30 0001084048 us-gaap:ResearchAndDevelopmentExpenseMember 2018-04-01 2018-06-30 0001084048 us-gaap:SellingAndMarketingExpenseMember 2019-04-01 2019-06-30 0001084048 us-gaap:ResearchAndDevelopmentExpenseMember 2018-01-01 2018-06-30 0001084048 us-gaap:CostOfSalesMember 2018-01-01 2018-06-30 0001084048 us-gaap:CostOfSalesMember 2019-01-01 2019-06-30 0001084048 us-gaap:GeneralAndAdministrativeExpenseMember 2019-04-01 2019-06-30 0001084048 us-gaap:SellingAndMarketingExpenseMember 2018-01-01 2018-06-30 0001084048 us-gaap:GeneralAndAdministrativeExpenseMember 2018-01-01 2018-06-30 0001084048 us-gaap:GeneralAndAdministrativeExpenseMember 2019-01-01 2019-06-30 0001084048 us-gaap:ResearchAndDevelopmentExpenseMember 2019-04-01 2019-06-30 0001084048 us-gaap:SellingAndMarketingExpenseMember 2019-01-01 2019-06-30 0001084048 us-gaap:SellingAndMarketingExpenseMember 2018-04-01 2018-06-30 0001084048 2018-06-30 0001084048 2017-12-31 0001084048 us-gaap:CommonStockMember 2018-01-01 2018-06-30 0001084048 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2017-12-31 0001084048 us-gaap:RetainedEarningsMember 2017-12-31 0001084048 us-gaap:AdditionalPaidInCapitalMember 2018-01-01 2018-06-30 0001084048 us-gaap:RetainedEarningsMember 2018-01-01 2018-06-30 0001084048 us-gaap:CommonStockMember 2018-06-30 0001084048 us-gaap:RetainedEarningsMember 2018-06-30 0001084048 us-gaap:TreasuryStockMember 2018-06-30 0001084048 us-gaap:AdditionalPaidInCapitalMember 2017-12-31 0001084048 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-01-01 2018-06-30 0001084048 us-gaap:CommonStockMember 2017-12-31 0001084048 us-gaap:TreasuryStockMember 2017-12-31 0001084048 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-06-30 0001084048 us-gaap:AdditionalPaidInCapitalMember 2018-06-30 0001084048 us-gaap:CommonStockMember 2018-03-31 0001084048 us-gaap:CommonStockMember 2018-04-01 2018-06-30 0001084048 us-gaap:AdditionalPaidInCapitalMember 2018-04-01 2018-06-30 0001084048 us-gaap:RetainedEarningsMember 2018-04-01 2018-06-30 0001084048 us-gaap:AdditionalPaidInCapitalMember 2018-03-31 0001084048 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-03-31 0001084048 2018-03-31 0001084048 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-04-01 2018-06-30 0001084048 us-gaap:RetainedEarningsMember 2018-03-31 0001084048 us-gaap:TreasuryStockMember 2018-03-31 0001084048 us-gaap:RetainedEarningsMember 2019-06-30 0001084048 us-gaap:CommonStockMember 2019-06-30 0001084048 us-gaap:TreasuryStockMember 2018-12-31 0001084048 us-gaap:CommonStockMember 2019-01-01 2019-06-30 0001084048 us-gaap:RetainedEarningsMember 2018-12-31 0001084048 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-12-31 0001084048 us-gaap:AdditionalPaidInCapitalMember 2019-01-01 2019-06-30 0001084048 us-gaap:RetainedEarningsMember 2019-01-01 2019-06-30 0001084048 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-06-30 0001084048 us-gaap:TreasuryStockMember 2019-06-30 0001084048 us-gaap:CommonStockMember 2018-12-31 0001084048 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-01-01 2019-06-30 0001084048 us-gaap:AdditionalPaidInCapitalMember 2019-06-30 0001084048 us-gaap:TreasuryStockMember 2019-01-01 2019-06-30 0001084048 us-gaap:AdditionalPaidInCapitalMember 2018-12-31 0001084048 us-gaap:TreasuryStockMember 2019-03-31 0001084048 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-04-01 2019-06-30 0001084048 us-gaap:CommonStockMember 2019-04-01 2019-06-30 0001084048 us-gaap:RetainedEarningsMember 2019-03-31 0001084048 2019-03-31 0001084048 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-03-31 0001084048 us-gaap:RetainedEarningsMember 2019-04-01 2019-06-30 0001084048 us-gaap:CommonStockMember 2019-03-31 0001084048 us-gaap:AdditionalPaidInCapitalMember 2019-04-01 2019-06-30 0001084048 us-gaap:AdditionalPaidInCapitalMember 2019-03-31 0001084048 srt:MinimumMember 2019-01-01 2019-06-30 0001084048 srt:MinimumMember us-gaap:PropertyPlantAndEquipmentOtherTypesMember 2019-01-01 2019-06-30 0001084048 srt:MaximumMember 2019-01-01 2019-06-30 0001084048 srt:MaximumMember us-gaap:PropertyPlantAndEquipmentOtherTypesMember 2019-01-01 2019-06-30 0001084048 jcom:OtherMember jcom:DigitalMediaSegmentMember 2019-01-01 2019-06-30 0001084048 us-gaap:AdvertisingMember jcom:DigitalMediaSegmentMember 2018-04-01 2018-06-30 0001084048 us-gaap:IntersegmentEliminationMember 2018-04-01 2018-06-30 0001084048 jcom:OtherMember jcom:BusinessCloudServicesSegmentMember 2018-04-01 2018-06-30 0001084048 us-gaap:TransferredAtPointInTimeMember 2019-01-01 2019-06-30 0001084048 us-gaap:TransferredOverTimeMember 2019-04-01 2019-06-30 0001084048 us-gaap:TransferredAtPointInTimeMember 2018-01-01 2018-06-30 0001084048 us-gaap:AdvertisingMember jcom:DigitalMediaSegmentMember 2018-01-01 2018-06-30 0001084048 jcom:BusinessCloudServicesSegmentMember 2019-01-01 2019-06-30 0001084048 jcom:BusinessCloudServicesSegmentMember 2018-04-01 2018-06-30 0001084048 jcom:OtherMember jcom:BusinessCloudServicesSegmentMember 2019-01-01 2019-06-30 0001084048 jcom:OtherMember jcom:DigitalMediaSegmentMember 2018-04-01 2018-06-30 0001084048 jcom:SubscriptionMember jcom:BusinessCloudServicesSegmentMember 2018-04-01 2018-06-30 0001084048 jcom:OtherMember jcom:BusinessCloudServicesSegmentMember 2018-01-01 2018-06-30 0001084048 jcom:OtherMember jcom:DigitalMediaSegmentMember 2018-01-01 2018-06-30 0001084048 us-gaap:TransferredOverTimeMember 2018-04-01 2018-06-30 0001084048 jcom:SubscriptionMember jcom:DigitalMediaSegmentMember 2018-04-01 2018-06-30 0001084048 jcom:DigitalMediaSegmentMember 2018-04-01 2018-06-30 0001084048 jcom:SubscriptionMember jcom:BusinessCloudServicesSegmentMember 2019-01-01 2019-06-30 0001084048 jcom:DigitalMediaSegmentMember 2019-01-01 2019-06-30 0001084048 jcom:BusinessCloudServicesSegmentMember 2018-01-01 2018-06-30 0001084048 us-gaap:TransferredAtPointInTimeMember 2018-04-01 2018-06-30 0001084048 jcom:SubscriptionMember jcom:DigitalMediaSegmentMember 2019-01-01 2019-06-30 0001084048 jcom:SubscriptionMember jcom:DigitalMediaSegmentMember 2018-01-01 2018-06-30 0001084048 jcom:OtherMember jcom:BusinessCloudServicesSegmentMember 2019-04-01 2019-06-30 0001084048 us-gaap:CorporateMember 2018-04-01 2018-06-30 0001084048 jcom:DigitalMediaSegmentMember 2018-01-01 2018-06-30 0001084048 us-gaap:IntersegmentEliminationMember 2018-01-01 2018-06-30 0001084048 jcom:SubscriptionMember jcom:DigitalMediaSegmentMember 2019-04-01 2019-06-30 0001084048 jcom:SubscriptionMember jcom:BusinessCloudServicesSegmentMember 2019-04-01 2019-06-30 0001084048 jcom:DigitalMediaSegmentMember 2019-04-01 2019-06-30 0001084048 us-gaap:AdvertisingMember jcom:DigitalMediaSegmentMember 2019-04-01 2019-06-30 0001084048 jcom:OtherMember jcom:DigitalMediaSegmentMember 2019-04-01 2019-06-30 0001084048 us-gaap:TransferredOverTimeMember 2019-01-01 2019-06-30 0001084048 jcom:SubscriptionMember jcom:BusinessCloudServicesSegmentMember 2018-01-01 2018-06-30 0001084048 us-gaap:AdvertisingMember jcom:DigitalMediaSegmentMember 2019-01-01 2019-06-30 0001084048 us-gaap:CorporateMember 2019-04-01 2019-06-30 0001084048 us-gaap:IntersegmentEliminationMember 2019-04-01 2019-06-30 0001084048 us-gaap:IntersegmentEliminationMember 2019-01-01 2019-06-30 0001084048 us-gaap:TransferredOverTimeMember 2018-01-01 2018-06-30 0001084048 jcom:BusinessCloudServicesSegmentMember 2019-04-01 2019-06-30 0001084048 us-gaap:CorporateMember 2018-01-01 2018-06-30 0001084048 us-gaap:CorporateMember 2019-01-01 2019-06-30 0001084048 us-gaap:TransferredAtPointInTimeMember 2019-04-01 2019-06-30 0001084048 us-gaap:TransferredAtPointInTimeMember 2019-01-01 2019-03-31 0001084048 2019-01-01 2019-03-31 0001084048 us-gaap:AccountingStandardsUpdate201409Member us-gaap:RetainedEarningsMember 2017-12-31 0001084048 jcom:A2019BusinessAcquisitionsMember us-gaap:OtherIntangibleAssetsMember 2019-06-30 0001084048 jcom:A2019BusinessAcquisitionsMember us-gaap:TradeNamesMember 2019-06-30 0001084048 jcom:A2019BusinessAcquisitionsMember us-gaap:TrademarksMember 2019-06-30 0001084048 jcom:A2019BusinessAcquisitionsMember us-gaap:CustomerRelationshipsMember 2019-06-30 0001084048 jcom:A2019BusinessAcquisitionsMember 2019-01-01 2019-06-30 0001084048 jcom:A2019BusinessAcquisitionsMember 2018-01-01 2018-06-30 0001084048 jcom:FaxandMartechMember 2019-01-01 2019-06-30 0001084048 2018-01-01 2018-12-31 0001084048 us-gaap:FairValueInputsLevel2Member 2018-12-31 0001084048 us-gaap:FairValueInputsLevel2Member 2019-06-30 0001084048 us-gaap:FairValueInputsLevel1Member 2019-06-30 0001084048 us-gaap:FairValueInputsLevel1Member 2018-12-31 0001084048 us-gaap:FairValueInputsLevel2Member us-gaap:MoneyMarketFundsMember 2018-12-31 0001084048 us-gaap:FairValueInputsLevel3Member 2018-12-31 0001084048 us-gaap:FairValueInputsLevel1Member us-gaap:CorporateDebtSecuritiesMember 2019-06-30 0001084048 us-gaap:CorporateDebtSecuritiesMember 2018-12-31 0001084048 us-gaap:MoneyMarketFundsMember 2018-12-31 0001084048 us-gaap:FairValueInputsLevel1Member us-gaap:MoneyMarketFundsMember 2018-12-31 0001084048 us-gaap:FairValueInputsLevel3Member us-gaap:CorporateDebtSecuritiesMember 2019-06-30 0001084048 us-gaap:FairValueInputsLevel3Member us-gaap:MoneyMarketFundsMember 2018-12-31 0001084048 us-gaap:FairValueInputsLevel2Member us-gaap:MoneyMarketFundsMember 2019-06-30 0001084048 us-gaap:FairValueInputsLevel3Member 2019-06-30 0001084048 us-gaap:FairValueInputsLevel1Member us-gaap:MoneyMarketFundsMember 2019-06-30 0001084048 us-gaap:FairValueInputsLevel3Member us-gaap:CorporateDebtSecuritiesMember 2018-12-31 0001084048 us-gaap:MoneyMarketFundsMember 2019-06-30 0001084048 us-gaap:FairValueInputsLevel2Member us-gaap:CorporateDebtSecuritiesMember 2019-06-30 0001084048 us-gaap:FairValueInputsLevel1Member us-gaap:CorporateDebtSecuritiesMember 2018-12-31 0001084048 us-gaap:FairValueInputsLevel3Member us-gaap:MoneyMarketFundsMember 2019-06-30 0001084048 us-gaap:CorporateDebtSecuritiesMember 2019-06-30 0001084048 us-gaap:FairValueInputsLevel2Member us-gaap:CorporateDebtSecuritiesMember 2018-12-31 0001084048 us-gaap:FairValueInputsLevel3Member 2019-01-01 2019-06-30 0001084048 jcom:OtherBusinessAcquisitionsMember 2019-01-01 2019-06-30 0001084048 jcom:HumbleBundleMember 2019-06-30 0001084048 jcom:OtherBusinessAcquisitionsMember 2019-06-30 0001084048 jcom:EkahauMember 2018-12-31 0001084048 jcom:EkahauMember 2019-06-30 0001084048 jcom:HumbleBundleMember 2018-12-31 0001084048 jcom:OtherBusinessAcquisitionsMember 2018-12-31 0001084048 jcom:HumbleBundleMember 2019-01-01 2019-06-30 0001084048 us-gaap:TradeNamesMember 2019-06-30 0001084048 us-gaap:OtherIntangibleAssetsMember 2018-12-31 0001084048 us-gaap:TradeNamesMember 2018-12-31 0001084048 us-gaap:OtherIntangibleAssetsMember 2019-06-30 0001084048 us-gaap:PatentsMember 2019-06-30 0001084048 us-gaap:TradeNamesMember 2019-06-30 0001084048 us-gaap:OtherIntangibleAssetsMember 2019-06-30 0001084048 us-gaap:CustomerRelationshipsMember 2019-06-30 0001084048 us-gaap:CustomerRelationshipsMember 2019-01-01 2019-06-30 0001084048 us-gaap:OtherIntangibleAssetsMember 2019-01-01 2019-06-30 0001084048 us-gaap:TradeNamesMember 2019-01-01 2019-06-30 0001084048 us-gaap:PatentsMember 2019-01-01 2019-06-30 0001084048 us-gaap:PatentsMember 2018-12-31 0001084048 us-gaap:OtherIntangibleAssetsMember 2018-12-31 0001084048 us-gaap:CustomerRelationshipsMember 2018-12-31 0001084048 us-gaap:TradeNamesMember 2018-12-31 0001084048 us-gaap:PatentsMember 2018-01-01 2018-12-31 0001084048 us-gaap:CustomerRelationshipsMember 2018-01-01 2018-12-31 0001084048 us-gaap:OtherIntangibleAssetsMember 2018-01-01 2018-12-31 0001084048 us-gaap:TradeNamesMember 2018-01-01 2018-12-31 0001084048 jcom:A2019BusinessAcquisitionsMember us-gaap:TrademarksMember 2019-01-01 2019-06-30 0001084048 jcom:A2019BusinessAcquisitionsMember us-gaap:OtherIntangibleAssetsMember 2019-01-01 2019-06-30 0001084048 jcom:A2019BusinessAcquisitionsMember us-gaap:TradeNamesMember 2019-01-01 2019-06-30 0001084048 jcom:A2019BusinessAcquisitionsMember us-gaap:CustomerRelationshipsMember 2019-01-01 2019-06-30 0001084048 us-gaap:RestrictedStockMember 2019-01-01 2019-06-30 0001084048 jcom:RestrictedPerformanceStockMember 2019-01-01 2019-06-30 0001084048 us-gaap:RestrictedStockUnitsRSUMember 2019-01-01 2019-06-30 0001084048 jcom:VoiceBackupSecurityandCPPMember 2019-01-01 2019-06-30 0001084048 jcom:DigitalMediaSegmentMember 2019-06-30 0001084048 jcom:DigitalMediaSegmentMember 2018-12-31 0001084048 jcom:FaxandMartechMember 2019-06-30 0001084048 jcom:FaxandMartechMember 2018-12-31 0001084048 jcom:BusinessCloudServicesSegmentMember 2019-06-30 0001084048 jcom:BusinessCloudServicesSegmentMember 2018-12-31 0001084048 jcom:VoiceBackupSecurityandCPPMember 2018-12-31 0001084048 jcom:VoiceBackupSecurityandCPPMember 2019-06-30 0001084048 jcom:A6SeniorNotesMember 2018-12-31 0001084048 us-gaap:ConvertibleDebtSecuritiesMember 2018-12-31 0001084048 us-gaap:LineOfCreditMember 2018-12-31 0001084048 us-gaap:LineOfCreditMember 2019-06-30 0001084048 jcom:A6SeniorNotesMember 2019-06-30 0001084048 us-gaap:ConvertibleDebtSecuritiesMember 2019-06-30 0001084048 jcom:A6SeniorNotesMember 2019-01-01 2019-06-30 0001084048 us-gaap:ConvertibleDebtSecuritiesMember 2019-01-01 2019-06-30 0001084048 2019-01-01 0001084048 us-gaap:LineOfCreditMember 2019-04-01 2019-06-30 0001084048 us-gaap:LineOfCreditMember 2019-01-01 2019-06-30 0001084048 us-gaap:InternalRevenueServiceIRSMember 2013-01-01 2013-12-31 0001084048 us-gaap:CaliforniaFranchiseTaxBoardMember 2016-01-01 2016-12-31 0001084048 us-gaap:NewYorkStateDivisionOfTaxationAndFinanceMember 2015-01-01 2015-12-31 0001084048 us-gaap:MinistryOfTheEconomyFinanceAndIndustryFranceMember 2013-01-01 2013-12-31 0001084048 us-gaap:MinistryOfTheEconomyFinanceAndIndustryFranceMember 2014-01-01 2014-12-31 0001084048 us-gaap:InternalRevenueServiceIRSMember 2015-01-01 2015-12-31 0001084048 us-gaap:CaliforniaFranchiseTaxBoardMember 2015-01-01 2015-12-31 0001084048 us-gaap:CaliforniaFranchiseTaxBoardMember 2012-01-01 2012-12-31 0001084048 us-gaap:InternalRevenueServiceIRSMember 2012-01-01 2012-12-31 0001084048 us-gaap:MinistryOfTheEconomyFinanceAndIndustryFranceMember 2015-01-01 2015-12-31 0001084048 us-gaap:MinistryOfTheEconomyFinanceAndIndustryFranceMember 2012-01-01 2012-12-31 0001084048 us-gaap:InternalRevenueServiceIRSMember 2016-01-01 2016-12-31 0001084048 us-gaap:MinistryOfTheEconomyFinanceAndIndustryFranceMember 2011-01-01 2011-12-31 0001084048 us-gaap:CaliforniaFranchiseTaxBoardMember 2013-01-01 2013-12-31 0001084048 us-gaap:MinistryOfTheEconomyFinanceAndIndustryFranceMember 2016-01-01 2016-12-31 0001084048 us-gaap:InternalRevenueServiceIRSMember 2014-01-01 2014-12-31 0001084048 jcom:A2012RepurchaseProgramMember 2019-06-30 0001084048 jcom:A2012RepurchaseProgramMember 2019-01-01 2019-06-30 0001084048 jcom:A2012RepurchaseProgramMember 2018-10-01 2018-12-31 0001084048 2018-02-02 2018-02-02 0001084048 2019-05-02 2019-05-02 0001084048 2018-10-29 2018-10-29 0001084048 2018-05-03 2018-05-03 0001084048 2018-08-08 2018-08-08 0001084048 2019-02-06 2019-02-06 0001084048 jcom:RestrictedPerformanceStockMember 2018-01-01 2018-06-30 0001084048 jcom:RestrictedPerformanceStockMember 2019-06-30 0001084048 jcom:RestrictedPerformanceStockMember 2018-06-30 0001084048 us-gaap:RestrictedStockMember 2019-06-30 0001084048 us-gaap:RestrictedStockMember 2018-12-31 0001084048 us-gaap:RestrictedStockUnitsRSUMember 2019-06-30 0001084048 us-gaap:RestrictedStockUnitsRSUMember 2018-12-31 0001084048 us-gaap:EmployeeStockOptionMember 2019-04-01 2019-06-30 0001084048 us-gaap:EmployeeStockOptionMember 2019-06-30 0001084048 jcom:RestrictedStockAndRestrictedStockUnitRsuMember 2019-01-01 2019-06-30 0001084048 jcom:RestrictedStockAndRestrictedStockUnitRsuMember 2018-12-31 0001084048 us-gaap:CommonStockMember jcom:A2001EmployeeStockPurchasePlanMember 2018-01-01 2018-06-30 0001084048 us-gaap:EmployeeStockOptionMember 2018-12-31 0001084048 us-gaap:CommonStockMember jcom:A2001EmployeeStockPurchasePlanMember 2019-04-01 2019-06-30 0001084048 us-gaap:CommonStockMember jcom:A2001EmployeeStockPurchasePlanMember 2019-06-30 0001084048 us-gaap:EmployeeStockOptionMember 2018-04-01 2018-06-30 0001084048 us-gaap:EmployeeStockOptionMember 2018-01-01 2018-06-30 0001084048 jcom:TwoThousandSevenStockPlanMember 2019-06-30 0001084048 us-gaap:CommonStockMember jcom:A2001EmployeeStockPurchasePlanMember 2019-01-01 2019-06-30 0001084048 us-gaap:EmployeeStockOptionMember 2019-01-01 2019-06-30 0001084048 jcom:RestrictedStockAndRestrictedStockUnitRsuMember 2019-06-30 0001084048 us-gaap:CommonStockMember jcom:A2001EmployeeStockPurchasePlanMember 2018-04-01 2018-06-30 0001084048 jcom:RestrictedStockAndRestrictedStockUnitRsuMember 2018-04-01 2018-06-30 0001084048 jcom:A2015StockOptionPlanMember 2019-06-30 0001084048 jcom:RestrictedStockAndRestrictedStockUnitRsuMember 2019-04-01 2019-06-30 0001084048 jcom:RestrictedStockAndRestrictedStockUnitRsuMember 2018-01-01 2018-06-30 0001084048 jcom:FaxandMartechMember 2019-04-01 2019-06-30 0001084048 jcom:FaxandMartechMember 2018-04-01 2018-06-30 0001084048 jcom:FaxandMartechMember 2018-01-01 2018-06-30 0001084048 us-gaap:OperatingSegmentsMember 2019-01-01 2019-06-30 0001084048 us-gaap:OperatingSegmentsMember 2019-04-01 2019-06-30 0001084048 jcom:VoiceBackupSecurityandCPPMember 2018-01-01 2018-06-30 0001084048 us-gaap:OperatingSegmentsMember 2018-01-01 2018-06-30 0001084048 jcom:VoiceBackupSecurityandCPPMember 2018-04-01 2018-06-30 0001084048 jcom:VoiceBackupSecurityandCPPMember 2019-04-01 2019-06-30 0001084048 us-gaap:OperatingSegmentsMember 2018-04-01 2018-06-30 0001084048 country:IE 2018-04-01 2018-06-30 0001084048 jcom:AllOtherCountriesMember 2019-01-01 2019-06-30 0001084048 country:IE 2019-04-01 2019-06-30 0001084048 jcom:AllOtherCountriesMember 2018-01-01 2018-06-30 0001084048 country:CA 2018-04-01 2018-06-30 0001084048 country:IE 2018-01-01 2018-06-30 0001084048 country:CA 2018-01-01 2018-06-30 0001084048 country:US 2019-01-01 2019-06-30 0001084048 jcom:AllOtherCountriesMember 2019-04-01 2019-06-30 0001084048 country:US 2018-04-01 2018-06-30 0001084048 country:IE 2019-01-01 2019-06-30 0001084048 jcom:AllOtherCountriesMember 2018-04-01 2018-06-30 0001084048 country:US 2019-04-01 2019-06-30 0001084048 country:CA 2019-01-01 2019-06-30 0001084048 country:CA 2019-04-01 2019-06-30 0001084048 country:US 2018-01-01 2018-06-30 0001084048 us-gaap:OperatingSegmentsMember 2018-12-31 0001084048 us-gaap:CorporateMember 2018-12-31 0001084048 us-gaap:OperatingSegmentsMember 2019-06-30 0001084048 us-gaap:CorporateMember 2019-06-30 0001084048 country:US 2019-06-30 0001084048 jcom:AllOtherCountriesMember 2018-12-31 0001084048 jcom:AllOtherCountriesMember 2019-06-30 0001084048 country:US 2018-12-31 0001084048 us-gaap:RevolvingCreditFacilityMember us-gaap:SubsequentEventMember 2019-07-01 0001084048 us-gaap:RevolvingCreditFacilityMember 2019-01-07 xbrli:pure iso4217:USD iso4217:USD xbrli:shares xbrli:shares


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the quarterly period ended June 30, 2019
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the transition period from __________ to __________

Commission File Number: 0-25965

j2 GLOBAL, INC.
(Exact name of registrant as specified in its charter)
Delaware
47-1053457
(State or other jurisdiction
(I.R.S. Employer
of incorporation or organization)
Identification No.)
6922 Hollywood Boulevard, Suite 500
Los Angeles, California 90028
(Address of principal executive offices)
(323) 860-9200
(Registrant’s telephone number, including area code)
 

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $0.01 par value
JCOM
NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes ý    No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes ý    No  o   
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
ý
Accelerated filer
o
Non-Accelerated filer
o
Smaller reporting company
Emerging growth company
 
 
 
 
 
 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes        No ý

As of August 6, 2019, the registrant had 48,917,254 shares of common stock outstanding.
 




J2 GLOBAL, INC. AND SUBSIDIARIES 
FOR THE QUARTER ENDED JUNE 30, 2019

INDEX 
 
 
 
PAGE
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 6.  
 
 
 
 
 
 
 
 
 
 

-2-



PART I.  FINANCIAL INFORMATION
Item 1.
Financial Statements
J2 GLOBAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands except share and per share data)

June 30, 2019

December 31, 2018
ASSETS



Cash and cash equivalents
$
155,476


$
209,474

Accounts receivable, net of allowances of $11,747 and $10,422, respectively
174,142


221,615

Prepaid expenses and other current assets
35,717


29,242

Total current assets
365,335


460,331

Long-term investments
104,002


83,828

Property and equipment, net
110,697


98,813

Operating lease right-of-use assets
66,922

 

Trade names, net
139,437


142,888

Patent and patent licenses, net
5,988


7,346

Customer relationships, net
233,414


191,208

Goodwill
1,589,704


1,380,376

Other purchased intangibles, net
182,753


185,026

Other assets
11,680


11,014

TOTAL ASSETS
$
2,809,932


$
2,560,830

LIABILITIES AND STOCKHOLDERS’ EQUITY





Accounts payable and accrued expenses
$
204,692


$
166,521

Income taxes payable, current
9,775


12,915

Deferred revenue, current
147,915


127,568

Operating lease liabilities, current
18,066

 

Other current liabilities
7,265

 
318

Total current liabilities
387,713


307,322

Long-term debt
1,119,438


1,013,129

Deferred revenue, noncurrent
15,508

 
13,200

Operating lease liabilities, noncurrent
53,079

 

Income taxes payable, noncurrent
11,675

 
11,675

Liability for uncertain tax positions
49,148


59,644

Deferred income taxes, noncurrent
81,550


69,048

Other long-term liabilities
19,723


51,068

TOTAL LIABILITIES
1,737,834


1,525,086

Commitments and contingencies



Preferred stock, $0.01 par value. Authorized 1,000,000 and none issued

 

Preferred stock - Series A, $0.01 par value. Authorized 6,000; total issued and outstanding zero



Preferred stock - Series B, $0.01 par value. Authorized 20,000; total issued and outstanding zero



Common stock, $0.01 par value. Authorized 95,000,000; total issued 47,765,869 and 48,082,800 shares at June 30, 2019 and December 31, 2018, respectively; total outstanding 47,765,869 and 47,482,800 shares at June 30, 2019 and December 31, 2018, respectively.
478


481

Additional paid-in capital
365,687


354,210

Treasury stock, at cost (zero and 600,000 shares, at June 30, 2019 and December 31, 2018, respectively).


(42,543
)
Retained earnings
752,040


769,575

Accumulated other comprehensive loss
(46,107
)

(45,979
)
TOTAL STOCKHOLDERS’ EQUITY
1,072,098


1,035,744

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
$
2,809,932


$
2,560,830

See Notes to Condensed Consolidated Financial Statements

-3-



J2 GLOBAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited, in thousands except share and per share data)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Total revenues
$
322,432

 
$
287,889

 
$
622,325

 
$
568,512

 
 
 
 
 
 
 
 
Cost of revenues (1)
60,266

 
47,749

 
111,279

 
95,894

Gross profit
262,166

 
240,140

 
511,046

 
472,618

Operating expenses:
 
 
 

 
 
 
 

Sales and marketing (1)
88,446

 
83,171

 
175,326

 
169,482

Research, development and engineering (1)
11,938

 
11,252

 
24,922

 
23,462

General and administrative (1)
105,168

 
91,334

 
203,322

 
179,133

Total operating expenses
205,552

 
185,757

 
403,570

 
372,077

Income from operations
56,614

 
54,383

 
107,476

 
100,541

Interest expense, net
17,335

 
15,502

 
33,354

 
31,254

Other (income) expense, net
(377
)
 
394

 
1,838

 
4,912

Income before income taxes and net (income) loss in earnings of equity method investment
39,656

 
38,487

 
72,284

 
64,375

Income tax expense
11,148

 
7,037

 
10,853

 
14,055

Net (income) loss in earnings of equity method investment
(4,081
)
 
2,971

 
(3,607
)
 
2,971

Net income
$
32,589

 
$
28,479

 
$
65,038

 
$
47,349

 
 
 
 
 
 
 
 
Net income per common share:
 
 
 

 
 

 
 

Basic
$
0.67

 
$
0.59

 
$
1.35

 
$
0.98

Diluted
$
0.66

 
$
0.57

 
$
1.32

 
$
0.95

Weighted average shares outstanding:
 
 
 

 
 

 
 

Basic
47,727,786

 
47,951,326

 
47,644,729

 
47,912,383

Diluted
49,102,879

 
49,218,521

 
48,806,492

 
48,962,835

 
 
 
 
 
 
 
 
(1) Includes share-based compensation expense as follows:
 
 
 
 
 
 
Cost of revenues
$
131

 
$
129

 
$
263

 
$
250

Sales and marketing
389

 
467

 
793

 
832

Research, development and engineering
361

 
355

 
719

 
788

General and administrative
5,981

 
6,116

 
10,173

 
11,617

Total
$
6,862

 
$
7,067

 
$
11,948

 
$
13,487

 
See Notes to Condensed Consolidated Financial Statements

-4-



J2 GLOBAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited, in thousands)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
 
 
 
 
 
 
 
 
Net income
$
32,589

 
$
28,479

 
$
65,038

 
$
47,349

Other comprehensive loss, net of tax:
 
 
 
 
 
 
 
Foreign currency translation adjustment
(1,177
)
 
(14,648
)
 
(686
)
 
(8,338
)
Change in fair value on available-for-sale investments, net of tax expense (benefit) of $7 and $184 for the three and six months ended June 30, 2019, respectively, and ($512) and ($512) for the three and six months ended June 30, 2018, respectively
(2
)
 
923

 
558

 
(1,577
)
Other comprehensive loss, net of tax
(1,179
)
 
(13,725
)
 
(128
)
 
(9,915
)
Comprehensive income
$
31,410

 
$
14,754

 
$
64,910

 
$
37,434


See Notes to Condensed Consolidated Financial Statements


-5-



J2 GLOBAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
                                                          
Six Months Ended June 30,
 
2019
 
2018
Cash flows from operating activities:
 
 
 
Net income
$
65,038

 
$
47,349

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

Depreciation and amortization
106,212

 
86,475

Amortization of financing costs and discounts
5,995

 
5,749

Amortization of operating lease assets
9,038

 

Share-based compensation
11,948

 
13,487

Provision for doubtful accounts
5,686

 
8,729

Deferred income taxes, net
3,908

 
453

Changes in fair value of contingent consideration
8,475

 
9,900

(Income) loss on equity investments
(4,765
)
 
7,614

Decrease (increase) in:
 
 
 

Accounts receivable
42,930

 
50,306

Prepaid expenses and other current assets
(3,277
)
 
649

Other assets
(1,233
)
 
2,252

Increase (decrease) in:
 
 
 

Accounts payable and accrued expenses
(12,452
)
 
(30,296
)
Income taxes payable
(3,810
)
 
(2,436
)
Deferred revenue
(3,292
)
 
4,637

Operating lease liabilities
(8,833
)
 

Liability for uncertain tax positions
(10,811
)
 
2,440

Other long-term liabilities
1,454

 
(1,015
)
Net cash provided by operating activities
212,211

 
206,293

Cash flows from investing activities:
 
 
 

Purchases of equity method investment
(14,668
)
 
(21,684
)
Purchases of available-for-sale investments

 
(500
)
Purchases of property and equipment
(30,791
)
 
(28,558
)
Acquisition of businesses, net of cash received
(266,000
)
 
(103,202
)
Purchases of intangible assets

 
(183
)
Net cash used in investing activities
(311,459
)
 
(154,127
)
Cash flows from financing activities:
 
 
 

Proceeds from line of credit
100,000

 

Repurchase of common stock
(3,807
)
 
(3,356
)
Issuance of common stock under employee stock purchase plan
1,995

 
135

Exercise of stock options
5,274

 
1,340

Dividends paid
(43,507
)
 
(39,897
)
Deferred payments for acquisitions
(14,269
)
 
(1,308
)
Other
(887
)
 
(138
)
Net cash provided by (used in) financing activities
44,799

 
(43,224
)
Effect of exchange rate changes on cash, cash equivalents and restricted cash
451

 
(2,120
)
Net change in cash, cash equivalents and restricted cash
(53,998
)
 
6,822

Cash, cash equivalents and restricted cash at beginning of period
209,474

 
350,945

Cash, cash equivalents and restricted cash at end of period
$
155,476

 
$
357,767

See Notes to Condensed Consolidated Financial Statements

-6-



J2 GLOBAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
Three and Six Months Ended June 30, 2018 and 2019
(unaudited, in thousands, except share amounts)

 
 
 
 
 
 
 
Accumulated
 
 
Common stock
Additional
paid-in
Treasury stock
Retained
other comprehensive
Total
Stockholders’
 
Shares
Amount
capital
Shares
Amount
earnings
income/(loss)
Equity
Balance, April 1, 2018
47,893,150

$
479

$
332,407


$

$
723,562

$
(25,280
)
$
1,031,168

Net income





28,479


28,479

Other comprehensive income, net of tax benefit of $512






(13,725
)
(13,725
)
Dividends ($0.4150 per share)





(20,452
)

(20,452
)
Exercise of stock options
32,329


746





746

Issuance of shares under Employee Stock Purchase Plan
930


71





71

Vested restricted stock
100,235

1

(1
)





Repurchase and retirement of common stock
(31,839
)

(1,848
)


(897
)

(2,745
)
Share based compensation


7,034



33


7,067

Balance, June 30, 2018
47,994,805

$
480

$
338,409


$

$
730,725

$
(39,005
)
$
1,030,609

 
 
 
 
 
 
 
Accumulated
 
 
Common stock
Additional
paid-in
Treasury stock
Retained
other comprehensive
Total
Stockholders’
 
Shares
Amount
capital
Shares
Amount
earnings
income/(loss)
Equity
Balance, April 1, 2019
47,661,015

$
477

$
358,932


$

$
742,173

$
(44,928
)
$
1,056,654

Net income





32,589


32,589

Other comprehensive income, net of tax expense of $7






(1,179
)
(1,179
)
Dividends ($0.4550 per share)





(22,208
)

(22,208
)
Exercise of stock options
500


15





15

Issuance of shares under Employee Stock Purchase Plan
32,154


1,995





1,995

Vested restricted stock
101,680

1

(1
)





Repurchase and retirement of common stock
(29,480
)

(2,086
)


(544
)

(2,630
)
Share based compensation


6,832



30


6,862

Balance, June 30, 2019
47,765,869

$
478

$
365,687


$

$
752,040

$
(46,107
)
$
1,072,098



-7-



 
 
 
 
 
 
 
Accumulated
 
 
Common stock
Additional
paid-in
Treasury stock
Retained
other comprehensive
Total
Stockholders’
 
Shares
Amount
capital
Shares
Amount
earnings
income/(loss)
Equity
Balance, January 1, 2018
47,854,510

$
479

$
325,854


$

$
723,062

$
(29,090
)
$
1,020,305

Cumulative effect of change in accounting principle





1,599


1,599

Net income





47,349


47,349

Other comprehensive income, net of tax benefit of $512






(9,915
)
(9,915
)
Dividends ($0.8200 per share)





(40,335
)

(40,335
)
Exercise of stock options
60,008


1,340





1,340

Issuance of shares under Employee Stock Purchase Plan
1,781


135





135

Vested restricted stock
118,287

1

(1
)





Repurchase and retirement of common stock
(39,781
)

(2,343
)


(1,013
)

(3,356
)
Share based compensation


13,424



63


13,487

Balance, June 30, 2018
47,994,805

$
480

$
338,409


$

$
730,725

$
(39,005
)
$
1,030,609

 
 
 
 
 
 
 
Accumulated
 
 
Common stock
Additional
paid-in
Treasury stock
Retained
other comprehensive
Total
Stockholders’
 
Shares
Amount
capital
Shares
Amount
earnings
income/(loss)
Equity
Balance, January 1, 2019
48,082,800

$
481

$
354,210

(600,000
)
$
(42,543
)
$
769,575

$
(45,979
)
$
1,035,744

Net income





65,038


65,038

Other comprehensive income, net of tax expense $184






(128
)
(128
)
Dividends ($0.9000 per share)





(43,966
)

(43,966
)
Exercise of stock options
156,038

2

5,272





5,274

Issuance of shares under Employee Stock Purchase Plan
32,154


1,995





1,995

Vested restricted stock
140,757

1

(1
)





Repurchase and retirement of common stock
(45,880
)

(3,287
)


(520
)

(3,807
)
Retirement of treasury stock
(600,000
)
(6
)
(4,385
)
600,000

42,543

(38,152
)


Share based compensation


11,883



65


11,948

Balance, June 30, 2019
47,765,869

$
478

$
365,687


$

$
752,040

$
(46,107
)
$
1,072,098


See Notes to Condensed Consolidated Financial Statements

-8-



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2019
(UNAUDITED)
1.
Basis of Presentation

J2 Global, Inc., together with its subsidiaries (“J2 Global”, the “Company”, “our”, “us”, or “we”), is a leading provider of internet services. Through our Cloud Services business, we provide cloud services to consumers and businesses and license our intellectual property (“IP”) to third parties. In addition, the Cloud Services business includes fax, voice, backup, security, consumer privacy and protection (“CPP”), and email marketing products. Our Digital Media business specializes in the technology, gaming, broadband, business to business (“B2B”), healthcare, and international markets, offering content, tools and services to consumers and businesses.
The accompanying interim condensed consolidated financial statements include the accounts of J2 Global and its direct and indirect wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

The accompanying interim condensed consolidated financial statements are unaudited and have been prepared in accordance with instructions for Form 10-Q and Article 10 of Regulation S-X issued by the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and note disclosures required by accounting principles generally accepted in the United States of America (“GAAP”) for complete financial statements although the Company believes that the disclosures made are adequate to make that information not misleading. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been reflected in these interim financial statements. It is suggested that these financial statements be read in conjunction with the audited financial statements and the related notes thereto for the year ended December 31, 2018 included in our Annual Report (Form 10-K) filed with the SEC on March 1, 2019. Accordingly, significant accounting policies and other disclosures normally provided have been omitted since such items are disclosed therein.
 
The results of operations for this interim period are not necessarily indicative of the operating results for the full year or for any future period.

Use of Estimates

The preparation of consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, including judgments about investment classifications and the reported amounts of net revenue and expenses during the reporting period. The Company believes that its most significant estimates are those related to revenue recognition, valuation and impairment of investments, its assessment of ownership interests as variable interest entities and the related determination of consolidation, share-based compensation expense, assets acquired and liabilities assumed in connection with business combinations, long-lived and intangible asset impairment, contingent consideration, income taxes and contingencies and allowances for doubtful accounts. On an ongoing basis, management evaluates its estimates based on historical experience and on various other factors that the Company believes to be reasonable under the circumstances. Actual results could materially differ from those estimates.

Allowances for Doubtful Accounts

J2 Global reserves for receivables it may not be able to collect. The reserves for the Company’s Cloud Services business are typically driven by the volume of credit card declines and past due invoices and are based on historical experience as well as an evaluation of current market conditions. The reserves for the Company’s Digital Media business are typically driven by past due invoices based on historical experience. On an ongoing basis, management evaluates the adequacy of these reserves.

Revenue Recognition

J2 Global recognizes revenue when the Company satisfies its obligation by transferring control of the goods or services to its customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services (see Note 3 - Revenues).

Principal vs. Agent

The Company determines whether revenue should be reported on a gross or net basis by assessing whether the Company is acting as the principal or an agent in the transaction. If the Company is acting as the principal in a transaction, the Company

-9-



reports revenue on a gross basis. If the Company is acting as an agent in a transaction, the Company reports revenue on a net basis. In determining whether the Company acts as the principal or an agent, the Company follows the accounting guidance under Topic 606 for principal-agent considerations and assesses: (i) if another party is involved in providing goods or services to the customer and (ii) whether the Company controls the specified goods or services prior to transferring control to the customer.

Sales Taxes

The Company has made an accounting policy election to exclude from the measurement of the transaction price all taxes assessed by a governmental authority that are (i) both imposed on and concurrent with a specific revenue-producing transaction and (ii) collected by the Company from a customer.

Fair Value Measurements

J2 Global complies with the provisions of the Financial Accounting Standards Board (“FASB”) ASC Topic No. 820, Fair Value Measurements and Disclosures (“ASC 820”), in measuring fair value and in disclosing fair value measurements. ASC 820 provides a framework for measuring fair value and expands the disclosures required for fair value measurements of financial and non-financial assets and liabilities.

As of June 30, 2019, the carrying value of cash and cash equivalents, accounts receivable, interest receivable, accounts payable, accrued expenses, interest payable, customer deposits and long-term debt are reflected in the financial statements at cost. With the exception of certain investments and long-term debt, cost approximates fair value due to the short-term nature of such instruments. The fair value of the Company’s outstanding debt was determined using the quoted market prices of available debt instruments with similar terms and maturities. As of the same dates, the carrying value of other long-term liabilities approximated fair value as the related interest rates approximate rates currently available to J2 Global.

Investments

The Company accounts for its investments in debt securities in accordance with ASC Topic No. 320, Investments - Debt Securities (“ASC 320”). Debt investments are typically comprised of corporate debt securities. J2 Global determines the appropriate classification of its investments at the time of acquisition and evaluates such determination at each balance sheet date. Trading securities are those investments that the Company intends to sell within a few hours or days and are carried at fair value, with unrealized gains and losses included in investment income. Available-for-sale debt securities are those investments J2 Global does not intend to hold to maturity and can be sold. Available-for-sale securities are carried at fair value with unrealized gains and losses included in other comprehensive income. Held-to-maturity securities are those investments which the Company has the ability and intent to hold until maturity and are recorded at amortized cost. All debt securities are accounted for on a specific identification basis.

The Company accounts for its investments in equity securities in accordance with ASC Topic No. 321, Investments - Equity Securities (“ASC 321”) which requires the accounting for equity investments (other than those accounted for using the equity method of accounting) generally be measured at fair value for equity securities with readily determinable fair values. For equity securities without a readily determinable fair value that are not accounted for by the equity method, the Company measures the equity security using cost, less impairment, if any, and plus or minus observable price changes arising from orderly transactions in the same or similar investment from the same issuer. Any unrealized gains or losses will be reported in current earnings (see Note 5 - Investments).

Variable Interest Entities (“VIE”)

A VIE requires consolidation by the entity’s primary beneficiary. The Company evaluates its investments in entities in which it is involved to determine if the entity is a VIE and if so, whether it holds a variable interest and is the primary beneficiary. The Company has determined that it holds a variable interest in its investment as a limited partner in the OCV Fund I, LP (“OCV Fund”, “OCV” or the “Fund”). In determining whether the Company is deemed to be the primary beneficiary of the VIE, both of the following characteristics must be present:

a) the Company has the power to direct the activities of the VIE that most significantly impacts the VIEs economic performance (the power criterion); and

b) the Company has the obligation to absorb losses of the VIE, or the right to receive benefits of the VIE, that could potentially be significant to the VIE (the economic criterion).


-10-



The Company has concluded that, as a limited partner, although the obligations to absorb losses or benefit from the gains is not insignificant, the Company does not have “power” over OCV because it does not have the ability to direct the significant decisions which impact the economics of OCV. J2 believes that the OCV general partner, as a single decision maker, holds the ability to make the decisions about the activities that most significantly impacts the OCV Fund’s economic performance. As a result, the Company has concluded that it will not consolidate OCV, as it is not the primary beneficiary of the OCV Fund, and will account for this investment under the equity-method of accounting. See Note 5, “Investments”.

OCV qualifies as an investment company under ASC 946 - Financial Services, Investment Companies (“ASC 946”). Under ASC Topic 323, Investments - Equity Method and Joint Ventures, an investor that holds investments that qualify for specialized industry accounting for investment companies in accordance with ASC 946 should record its share of the earnings or losses, realized or unrealized, as reported by its equity method investees in the Condensed Consolidated Statements of Income.

The Company recognizes its equity in the net earnings or losses relating to the investment in OCV on a one-quarter lag due to the timing and availability of financial information from OCV. If the Company becomes aware of a significant decline in value that is other-than-temporary, the loss will be recorded in the period in which the Company identifies the decline.

Debt Issuance Costs and Debt Discount

J2 Global capitalizes costs incurred with borrowing and issuance of debt securities and records debt issuance costs and discounts as a reduction to the debt amount. These costs and discounts are amortized and included in interest expense over the life of the borrowing using the effective interest method. Debt issuance costs associated with entering into the Credit Facility are recorded on the Condensed Consolidated Balance Sheets as an asset and amortized and included in interest expense over the contractual term of the Credit Agreement.

Property and Equipment

Property and equipment are stated at cost. Equipment under capital leases is stated at the present value of the minimum lease payments. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets. The estimated useful lives of property and equipment range from 1 to 10 years. Fixtures, which are comprised primarily of leasehold improvements and equipment under capital leases, are amortized on a straight-line basis over their estimated useful lives or for leasehold improvements, the related lease term, if less. The Company has capitalized certain internal use software and website development costs which are included in property and equipment. The estimated useful life of costs capitalized is evaluated for each specific project and ranges from 1 to 5 years.
 
Contingent Consideration

J2 Global measures the contingent earn-out liabilities in connection with acquisitions at fair value on a recurring basis using significant unobservable inputs classified within Level 3 of the fair value hierarchy (see Note 6 - Fair Value Measurements). The Company may use various valuation techniques depending on the terms and conditions of the contingent consideration including a Monte-Carlo simulation. This simulation uses a probability distribution for each significant input to produce hundreds or thousands of possible outcomes and the results are analyzed to determine probabilities of different outcomes occurring. Significant increases or decreases to these inputs in isolation would result in a significantly higher or lower liability with a higher liability capped by the contractual maximum of the contingent earn-out obligation. Ultimately, the liability will be equivalent to the amount paid, and the difference between the fair value estimate and the amount paid will be recorded in earnings. The amount paid that is less than or equal to the liability on the acquisition date is reflected as cash used in financing activities in our consolidated statements of cash flows. Any amount paid in excess of the liability on the acquisition date is reflected as cash used in operating activities.

J2 Global reviews and re-assesses the estimated fair value of contingent consideration on a quarterly basis, and the updated fair value could be materially different from the initial estimates or prior quarterly amounts. Changes in the estimated fair value of our contingent earn-out liabilities are reported in operating income. Adjustments to the estimated fair value related to changes in all other unobservable inputs are reported in operating income.


-11-



Self-Insurance Program

J2 Global provides health and dental insurance plans for certain of its employees through a self-insurance structure. The Company has secured reinsurance in the form of a two tiered stop-loss coverage that limits the exposure arising from any claims made. Self-insurance claims filed and claims incurred but not reported are accrued based on management’s estimate of the discounted ultimate costs for self-insured claims incurred using actuarial assumptions followed in the insurance industry and historical experience. Although management believes it has the ability to reasonably estimate losses related to claims, it is possible that actual results could materially differ from recorded self-insurance liabilities.

Segment Reporting

Accounting guidance establishes standards for the way that public business enterprises report information about operating segments in their annual consolidated financial statements and requires that those enterprises report selected information about operating segments in interim financial reports. Accounting guidance also establishes standards for related disclosures about products and services, geographic areas and major customers. The Company’s business segments are based on the organization structure used by the chief operating decision maker for making operating and investment decisions and for assessing performance. The chief operating decision maker views the Company in two businesses: Cloud Services and Digital Media. However, in accordance with the aggregation criteria within the accounting guidance, J2 Global’s operating segments have been aggregated into three reportable segments: (i) Fax and Martech (formerly Email Marketing); (ii) Voice, Backup, Security, and Consumer Privacy and Protection; and (iii) Digital Media.

Reclassifications

Certain prior year reported amounts have been reclassified to conform to the 2019 presentation.

2.    Recent Accounting Pronouncements
 
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The amendments in this ASU replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. This ASU is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019. In November 2018, the FASB issued ASU No. 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses. The amendments in this ASU align the implementation date for nonpublic entities’ annual financial statements with the implementation date for their interim financial statements. In addition, the amendment clarifies that receivables arising from operating leases are not within the scope of Subtopic 326-20; instead impairment of receivables arising from operating leases should be accounted for in accordance with Topic 842: Leases. This ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. In April 2019, the FASB issued ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825 Financial Instruments. The amendments in this ASU further clarify certain aspects of ASU No. 2016-13. For entities that have not yet adopted ASU No. 2016-13, this ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. In May 2019, the FASB issued ASU No. 2019-05, Financial Instruments - Credit Losses (Topic 326): Targeted Transition Relief. The amendments in this ASU provide transition relief for ASU No. 2016-13 by providing an option to irrevocably elect the fair value option for certain financial assets measured at an amortized cost basis. For entities that have not yet adopted ASU No. 2016-13, this ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The adoption of these ASUs is not expected to have a material impact on the Company’s financial statements and related disclosures.


-12-



In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. The amendments in this ASU remove, add, and modify certain disclosures. The ASU removes the following disclosure requirements from Topic 820: (1) the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy; (2) the policy for timing of transfers between levels; (3) the valuation process for Level 3 fair value measurements; and (4) certain other requirements for nonpublic entities. The ASU adds the following disclosure requirements: (1) the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and (2) the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. For certain unobservable inputs, disclosure of other quantitative information may be more appropriate if the entity determines that other quantitative information would be a more reasonable and rational method to reflect the distribution of unobservable inputs used to develop Level 3 fair value measurements. The ASU modifies disclosure requirements in Topic 820 relating to timing of liquidation of an investee’s assets, the disclosure of the date when restrictions from redemption might lapse, the intention of the measurement uncertainty disclosure, and certain other requirements for nonpublic entities. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company is currently evaluating the effect of this ASU on its financial statements and related disclosures.

In August 2018, the FASB issued ASU No. 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. The amendments in this ASU align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software). The amendments in this ASU require an entity (customer) in a hosting arrangement that is a service to (1) determine which implementation costs to capitalize as an asset related to the service contract and which costs to expense; (2) expense the capitalized implementation costs of a hosting arrangement that is a service contract over the term of the hosting arrangement; (3) apply the existing impairment guidance to the capitalized implementation costs as if the costs were long-lived assets; (4) present the expense related to the capitalized implementation costs in the same line item in the statement of income as the fees associated with the hosting element (service) of the arrangement and classify payments for capitalized implementation costs in the statement of cash flows in the same manner as payments made for fees associated with the hosting arrangements; and (5) present the capitalized implementation costs in the statement of financial position in the same line item that a prepayment for the fees of the associated hosting arrangement would be presented. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company is currently evaluating the effect of this ASU on its financial statements and related disclosures.

3.Revenues

Digital Media

Digital Media revenues are earned primarily from the delivery of advertising services, from subscriptions to services, data and information, and from licensing.

Revenue is earned from the delivery of advertising services on the Company’s owned and operated websites and on those websites that are part of Digital Media’s advertising network. Depending on the individual contracts with the customer, revenue for these services are recognized over the contract period when any of the following performance obligations are satisfied: (i) when an advertisement is placed for viewing, (ii) when a qualified sales lead is delivered, (iii) when a visitor “clicks through” on an advertisement or (iv) when commissions are earned upon the sale of an advertised product.

Revenue from subscriptions is earned through the granting of access to, or delivery of, data products or services to customers. Subscriptions cover video games and related content, health information, data and other copyrighted material. Revenues under such agreements are recognized over the contract term for use of the service. Revenues are also earned from listing fees, subscriptions to online publications, and from other sources. Subscription revenues are recognized over time.

J2 Global generates Digital Media revenues through the license of certain assets to clients. Assets are licensed for clients’ use in their own promotional materials or otherwise. Such assets may include logos, editorial reviews, or other copyrighted material. Revenues under such license agreements are recognized over the contract term for use of the asset. Technology assets are also licensed to clients. These assets are recognized over the term of the access period. The Digital Media business also generates revenue from other sources which include marketing and production services. Such other revenues are generally recognized over the period in which the products or services are delivered.


-13-



J2 Global also generates Digital Media revenues from transactions involving the sale of perpetual software licenses, related software support and maintenance, hardware used in conjunction with its software, and other related services. Revenue is recognized for these software transactions with multiple performance obligations after (i) the Company has had an approved contract and is committed to perform the respective obligations and (ii) the Company can identify and quantify each obligation and its respective selling price. Once the respective performance obligations have been identified and quantified, revenue will be recognized when the obligations are met, either over time or at a point in time depending on the nature of the obligation.

Revenues from software license performance obligations are generally recognized upfront at the point in time that the software is made available to the customer to download and use. Revenues for related software support and maintenance performance obligations are related to technical support provided to customers as needed and unspecified software product upgrades, maintenance releases and patches during the term of the support period when they are available. The Company is obligated to make the support services available continuously throughout the contract period. Therefore, revenues for support contracts are generally recognized ratably over the contractual period the support services are provided. Hardware product and related software performance obligations, such as an operating system or firmware, are highly interdependent and interrelated and are accounted for as a bundled performance obligation. The revenues for this bundled performance obligation are generally recognized at the point in time that the hardware and software products are delivered and ownership is transferred to the customer. Other service revenues are generally recognized over time as the services are performed.

The Company records revenue on a gross basis with respect to revenue generated (i) by the Company serving online display and video advertising across its owned and operated web properties, on third-party sites or on unaffiliated advertising networks, (ii) through the Company’s lead-generation business and (iii) through the Company’s subscriptions. The Company records revenue on a net basis with respect to revenue paid to the Company by certain third-party advertising networks who serve online display and video advertising across the Company’s owned-and-operated web properties and certain third-party sites.

Cloud Services

The Company’s Cloud Services revenues substantially consist of monthly recurring subscription and usage-based fees, which are primarily paid in advance by credit card. The Company defers the portions of monthly, quarterly, semi-annually and annually recurring subscription and usage-based fees collected in advance of the satisfaction of performance obligations and recognizes them in the period earned.

Along with our numerous proprietary Cloud Services solutions, the Company also generates revenues by reselling various third-party solutions, primarily through our email security and online backup lines of business. These third-party solutions, along with our proprietary products, allow the Company to offer customers a variety of solutions to better meet their needs. The Company records revenue on a gross basis with respect to reseller revenue because the Company has control of the specified good or service prior to transferring control to the customer.

J2 Global’s Cloud Services also include patent license revenues generated under license agreements that provide for the payment of contractually determined fully paid-up or royalty-bearing license fees to J2 Global in exchange for the grant of non-exclusive, retroactive and future licenses to our intellectual property, including patented technology. Patent revenues may also consist of revenues generated from the sale of patents. Patent license arrangements are evaluated to determine if they grant the customer a right to access the Company’s intellectual property which is generally recognized over the life of the arrangement or a right to use the Company’s intellectual property which is generally recognized at the point in time the license is granted. With regard to royalty-bearing license arrangements, the Company recognizes revenues of license fees earned during the applicable period. 

The Cloud Services business also generates revenues by licensing certain technology to third parties. Generally, revenue is recognized over time as the third party uses the licensed technology over the period.

The Company adopted ASU 2014-09 and its related standard updates in January 2018 using a modified-retrospective approach with the cumulative effect of initially applying the Update recognized at the date of application in retained earnings. The change in accounting principle in the first quarter of 2018 resulted in an adjustment to the Company’s retained earnings of $1.6 million (see Condensed Consolidated Statements of Shareholders’ Equity).

-14-




Revenues from external customers classified by revenue source are as follows (in thousands):
 
Three Months Ended June 30,
 
Six Months Ended June 30,
Digital Media
2019
 
2018
 
2019
 
2018
Advertising
$
109,961

 
$
106,251

 
$
215,561

 
$
207,824

Subscription
40,976

 
31,340

 
81,354

 
60,928

Other
2,422

 

 
4,127

 

Total Digital Media revenues
$
153,359

 
$
137,591

 
$
301,042

 
$
268,752

 
 
 
 
 
 
 
 
Cloud Services
 
 
 
 
 
 
 
Subscription
$
168,909

 
$
150,127

 
$
320,698

 
$
299,448

Other
223

 
170

 
679

 
333

Total Cloud Services revenues
$
169,132

 
$
150,297

 
$
321,377

 
$
299,781

 
 
 
 
 
 
 
 
Corporate
$
2

 
$
1

 
$
3

 
$
3

Elimination of inter-segment revenues
(61
)
 

 
(97
)
 
(24
)
Total Revenues
$
322,432

 
$
287,889

 
$
622,325

 
$
568,512

 
 
 
 
 
 
 
 
Timing of revenue recognition
 
 
 
 
 
 
 
Point in time (1)
$
7,139

 
$
866

 
$
13,944

 
$
1,941

Over time
315,293

 
287,023

 
608,381

 
566,571

Total
$
322,432

 
$
287,889

 
$
622,325

 
$
568,512


(1) The first quarter disclosure of $1.4 million in point in time revenue for the three months ended March 31, 2019 excluded $5.4 million of revenue; such revenue was presented as over time revenue. As a result, the timing of revenue recognition for the six months ended June 30, 2019 has been corrected in the table above. There is no change to the Company’s income from continuing operations or net income for the three months ended March 31, 2019 period.

The Company has recorded $31.3 million and $21.1 million of revenue for the three months ended June 30, 2019 and 2018, respectively, and $84.5 million and $56.9 million of revenue for the six months ended June 30, 2019 and 2018, respectively, which was previously included in the contract liability balance as of the beginning of the each respective year.

As of June 30, 2019, the Company acquired $26.3 million of deferred revenue in connection with the Company’s business acquisitions (see Note 4 - Business Acquisitions) which are subject to purchase accounting adjustments.

Performance Obligations

The Company’s contracts with customers may include multiple performance obligations. For such arrangements, revenues are allocated to each performance obligation based on its relative standalone selling price.

The Company satisfies its performance obligations within the Digital Media business upon delivery of services to its customers. In addition, the Company provides content to its advertising partners which the Company sells to its partners’ customer base and receives a revenue share based on the terms of the agreement.

The Company satisfies its performance obligations within the Cloud Services business upon delivery of services to its customers. Payment terms vary by type and location of our customers and the services offered. The term between invoicing and when payment is due is not significant. Due to the nature of the services provided, there are no obligations for returns.

Significant Judgments

In determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. Judgment is also required to determine the standalone selling price for each distinct performance obligation.

-15-




Performance Obligations Satisfied Over Time

The Company’s Digital Media business consists primarily of performance obligations that are satisfied over time. This was determined based on a review of the contracts and the nature of the services offered, where the customer simultaneously receives and consumes the benefit of the services provided. Satisfaction of these performance obligations is evidenced in the following ways:

Advertising

Website reporting by the Company, the customer, or a third-party contains the delivery evidence needed to satisfy the performance obligations within the advertising contract
Successfully delivered leads are evidenced by either delivery reports from the Company’s internal lead management systems or through e-mail communication and/or other evidence of delivery showing acceptance of leads by the customer
Commission is evidenced by direct site reporting from the affiliate or via direct confirmation from the customer

Subscription

Evidence of delivery is contained in the Company’s systems or from correspondence with the customer which tracks when a customer accepts delivery of any assets, digital keys or download links

The Company has concluded revenue is recognized based on delivery of services over the contract period for advertising and on a straight-line basis over the contract period for subscriptions. The Company believes that the methods described are a faithful depiction of the transfer of goods and services.

The Company’s Cloud Services business consists primarily of performance obligations that are satisfied over time. This has been determined based on the fact that the nature of services offered are subscription based and include fax, voice, backup, security, CPP, and email marketing products where the customer simultaneously receives and consumes the benefit of the services provided regardless of whether the customer uses the services or not. Depending on the individual contracts with the customer, revenue for these services are recognized over the contract period when any of the following materially distinct performance obligations are satisfied: 

Faxing capabilities are provided
Voice services are delivered
Email marketing services are delivered
Consumer privacy services are provided
Security solutions, including email and endpoint are provided
Online data backup capabilities are provided

The Company has concluded that the best measure of progress toward the complete satisfaction of the performance obligation over time is a time-based measure. The Company recognizes revenue on a straight-line basis throughout the subscription period and believes that the method used is a faithful depiction of the transfer of goods and services.

Performance Obligations Satisfied at a Point in Time

The Company’s Digital Media business has technology subscriptions that have standalone functionality. As a result, they are considered to be functional intellectual property where the performance obligations are satisfied at a point in time. This is evidenced once a digital key is delivered to the customer. Once the key is delivered to the customer, the customer has full control of the technology and the Company has no further performance obligations. The Company has concluded that revenue is recognized once the digital key is delivered. The Company believes that this method is a faithful depiction of the transfer of goods and services.


-16-



Practical Expedients

Existence of a Significant Financing Component in a Contract

As a practical expedient, the Company has not assessed whether a contract has a significant financing component because the Company expects at contract inception that the period between payment by the customer and the transfer of promised goods or services by the Company to the customer will be one year or less. In addition, the Company has determined that the payment terms that the Company provides to its customers are structured primarily for reasons other than the provision of finance to the Company. The Company typically charges a single upfront amount for the services because other payment terms would affect the nature of the risk assumed by the Company to provide service given the costs of the customer acquisition and the highly competitive and commoditized nature of the business we operate which allows customers to easily move from one provider to another. This additional risk may make it uneconomical to provide the service.

Costs to Fulfill a Contract

The Company’s revenues are primarily generated from customer contracts that are for one year or less. Costs primarily consist of incentive compensation paid based on the achievements of sales targets in a given period for related revenue streams and are recognized in the month when the revenue is earned. Incentive compensation is paid on the issuance or renewal of the customer contract. As a practical expedient, for amortization periods which are determined to be one year or less, the Company expenses any incremental costs of obtaining the contract with a customer when incurred. For those customers with amortization periods determined to be greater than one year, the Company capitalizes and amortizes the expenses over the period of benefit.

In addition, the Company partners with various affiliates in order to generate a portion of its revenue for certain lines of business. The commissions earned by the Company’s affiliates are incentive based and are paid based on the acquisition of new customers in a given period. For those customers with amortization periods determined to be greater than one year, the Company capitalizes and amortizes the expenses over the period of benefit.

Revenues Invoiced

The Company has applied the practical expedient for certain revenue streams to exclude the value of remaining performance obligations for (i) contracts with an original expected term of one year or less or (ii) contracts for which the Company recognizes revenue in proportion to the amount it has the right to invoice for services performed.

4.Business Acquisitions

The Company uses acquisitions as a strategy to grow its customer base by increasing its presence in new and existing markets, expand and diversify its service offerings, enhance its technology, and acquire skilled personnel.

The Company completed the following acquisitions during the first six months of fiscal 2019, paying the purchase price with a combination of cash and note payable: (a) an asset purchase of iContact, LLC, acquired on January 22, 2019, a North Carolina-based provider of email marketing solutions; (b) a share purchase of the entire issued capital of Safe Send AS, acquired on March 29, 2019, a Norwegian-based provider of email security solutions; (c) a share purchase of the entire issued capital of Highwinds Capital, Inc. and Cloak Holdings, LLC, acquired on April 2, 2019, a Texas-based provider in solutions for virtual private network (“VPN”) services; and (d) other immaterial acquisitions of online data backup and digital media businesses.

The condensed consolidated statement of income since the date of each acquisition and balance sheet as of June 30, 2019, reflect the results of operations of all 2019 acquisitions. For the six months ended June 30, 2019, these acquisitions contributed $26.8 million to the Company’s revenues. Net income contributed by these acquisitions was not separately identifiable due to J2 Global’s integration activities and is impracticable to provide. Total consideration for these transactions was $276.1 million, net of cash acquired and assumed liabilities and is subject to certain post-closing adjustments which may increase or decrease the final consideration paid.


-17-



The following table summarizes the allocation of the purchase consideration for these acquisitions (in thousands):
Assets and Liabilities
 
Valuation
Accounts receivable
$
1,583

Prepaid expenses and other current assets
 
199

Property and equipment
 
2,211

Trade names
 
3,548

Customer relationships
 
76,934

Goodwill
 
211,901

Trademarks
 
21,260

Other intangibles
 
15,452

Other long-term assets
 
75

Accounts payable and accrued expenses
 
(19,625
)
Deferred revenue
 
(26,344
)
Income taxes payable
 
(619
)
Liability for uncertain tax positions
 
(379
)
Deferred tax liability
 
(10,120
)
 Total
$
276,076



During the six months ended June 30, 2019, the purchase price accounting has been finalized for the following acquisitions: (i) Mosaik Solutions, LLC and (ii) The Communicator Corporation Limited. The initial accounting for all 2019 acquisitions is incomplete and subject to change, which may be significant. J2 Global has recorded provisional amounts which may be based upon past acquisitions with similar attributes for certain intangible assets (including trade names, software and customer relationships), preliminary acquisition date working capital and related tax items.

During the six months ended June 30, 2019, the Company recorded adjustments to prior period acquisitions due to the finalization of the purchase accounting in the Fax and Martech business which resulted in a net increase in goodwill of $0.1 million. In addition, the Company recorded adjustments to the initial working capital related to prior period acquisitions in the Digital Media business, which resulted in a net decrease in goodwill of $1.4 million (see Note 7 - Goodwill and Intangible Assets). Such adjustments had an immaterial impact on the amortization expense within the condensed consolidated statement of income for the six months ended June 30, 2019.

Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired and represents intangible assets that do not qualify for separate recognition. Goodwill recognized associated with these acquisitions during the six months ended June 30, 2019 is $211.9 million, of which $46.0 million is expected to be deductible for income tax purposes.

Pro Forma Financial Information for All 2019 Acquisitions

The following unaudited pro forma supplemental information is based on estimates and assumptions that J2 Global believes to be reasonable. However, this information is not necessarily indicative of the Company’s consolidated results of income in future periods or the results that actually would have been realized had J2 Global and the acquired businesses been combined companies during the periods presented. These pro forma results exclude any savings or synergies that would have resulted from these business acquisitions had they occurred on January 1, 2018. This unaudited pro forma supplemental information includes incremental intangible asset amortization and other charges as a result of the acquisitions, net of the related tax effects.


-18-



The supplemental information on an unaudited pro forma financial basis presents the combined results of J2 Global and its 2019 acquisitions as if each acquisition had occurred on January 1, 2018 (in thousands, except per share amounts):
 
Six Months Ended June 30,
 
2019
 
2018
 
(unaudited)
 
(unaudited)
Revenues
$
648,005

 
$
620,934

Net income
$
69,398

 
$
49,262

EPS - Basic
$
1.44

 
$
1.01

EPS - Diluted
$
1.40

 
$
0.99



5.Investments

Investments consist of equity and debt securities. 

The Company determined the equity securities that were received as part of the consideration for the sale of Tea Leaves Health, LLC (“Tea Leaves”) in fiscal year 2017 are without a readily determinable fair value because these securities are privately held, not traded on any public exchanges and not an investment in a mutual fund or similar investment. As a result, management has elected to alternatively measure this investment at cost, less impairment, adjusted for subsequent observable price changes to estimate fair value. The Company will make a “reasonable effort” to identify any observable price changes for identical or similar investments with the issuer that are known are can be reasonably known. Any changes in the carrying value of the equity securities will be reported in current earnings as Other expense, net. In addition, the Company determined that the shares of redeemable preferred stock that were also received as part of the consideration for the sale of Tea Leaves are corporate debt securities and are classified as available-for-sale securities.

The following table summarizes the gross unrealized gains and losses and estimated fair values for the Company’s securities without a readily determinable fair value (in thousands):
 
Cost
 
Impairment
 
Adjustments
 
Fair Value
June 30, 2019
 
 
 
 
 
 
 
Equity securities
$
34,977

 
$

 
$
(3,678
)
 
$
31,299

Total
$
34,977

 
$

 
$
(3,678
)
 
$
31,299

 
 
 
 
 
 
 
 
December 31, 2018
 
 
 
 
 
 
 
Equity securities
$
34,977

 
$

 
$
(3,678
)
 
$
31,299

Total
$
34,977

 
$

 
$
(3,678
)
 
$
31,299