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J2 Global (JCOM) Beats on Q3 Earnings, Revenues Rise Y/Y

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J2 Global JCOM reported third-quarter 2020 adjusted earnings of $2.02 per share that beat the Zacks Consensus Estimate by 14.1%. Moreover, the figure increased 18.8% year over year.

Revenues of $331 million beat the consensus mark by 5.7% and increased 3.7% year over year.

Average monthly revenue per customer declined 1.2% year over year to $13.98. Cancel rate was 2.1%, down 30 basis points (bps) year over year.

Shares were up more than 5% in pre-market trading following the impressive results. J2 Global shares are down 26.9% year to date against the Zacks Internet Software industry’s rally of 74.1%.

Top-Line Details

Cloud Services (47.7% of revenues) revenues decreased 0.5% year over year to $170.2 million. At the end of the reported quarter, J2 Global had 4,041 Cloud Services customers, almost unchanged year over year.
 

j2 Global, Inc. Price, Consensus and EPS Surprise

 

j2 Global, Inc. Price, Consensus and EPS Surprise
j2 Global, Inc. Price, Consensus and EPS Surprise

j2 Global, Inc. price-consensus-eps-surprise-chart | j2 Global, Inc. Quote

 

Subscriber revenues (100% of Cloud Services revenues) fell 0.4% year over year, primarily attributed to 11.8% decline in variable-subscriber revenues (15.1% of Subscriber revenues). However, fixed-subscriber revenues (84.9% of Subscriber revenues) increased 1.9% year over year to $140.8 million.

Moreover, DID-based revenues inched up 0.8% year over year to $98 million. However, non-DID revenues declined 2.3% year over year to $72.2 million.

Digital Media revenues (52.3% of revenues) increased 8% year over year to $186.7 million.

Operating Details

Adjusted gross margin expanded 230 bps on a year-over-year basis to 84.7%. Cloud Services’ adjusted gross margin shrank 160 bps to 37.2%. However, Digital Media adjusted gross margin expanded 390 bps to 47.4%.

In terms of expenses, adjusted research, development & engineering as percentage of revenues increased 60 bps year over year. However, adjusted sales & marketing, and general & administrative expenses declined 100 bps and 90 bps, respectively.

Adjusted EBITDA margin expanded 400 bps on a year-over-year basis to 43.2%. Cloud Services’ adjusted EBITDA margin increased 20 bps on a year-over-year basis. Moreover, Digital Media’s adjusted EBITDA margin increased 550 bps.

Adjusted operating margin expanded 460 bps year over year to 39.9%. While Cloud Services’ adjusted operating margin contracted 10 bps, Digital Media’s adjusted operating margin expanded 450 bps on a year-over-year basis.

Balance Sheet and Cash Flow

As of Sep 30, 2020, J2 Global had $567.9 million in cash and cash equivalents compared with $616.8 million as of Jun 30, 2020.

Long-term debt, as of Sep 30, 2020, was $1.08 billion, higher than $1.07 billion as of Jun 30, 2020.

Free cash flow was $93.7 million, up 19.9% year over year but down 19.2% sequentially.

Moreover, the company repurchased shares worth $150 million in the reported quarter.

Guidance

For 2020, J2 Global now expects revenues between $1.447 billion and $1.462 billion, up from previous guidance of $1.380-$1.400 billion.

Adjusted EBITDA is expected between $595 million and $605 million, up from prior guidance of $556-$570 million.

Moreover, adjusted non-GAAP earnings are expected between $7.85 and $8 per share, better than previous guidance of $7.17-$7.41 per share.

Zacks Rank & Stocks to Consider

Currently, J2 Global has a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector are Advanced Energy Industries AEIS, Cambium Networks CMBM and NVIDIA NVDA. All three stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Both Advanced Energy and Cambium are set to report their quarterly results on Nov 5. NVIDIA is scheduled to report its earnings on Nov 18.

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