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j2 Global (JCOM) Beats Q4 Earnings and Revenue Estimates

Zacks Equity Research

j2 Global, Inc. JCOM delivered fourth-quarter 2018 adjusted earnings of $2.11 per share, beating the Zacks Consensus Estimate by 8 cents. The figure grew 17.9% year over year.

Net sales in the quarter were up 9.4% year over year to $346.1 million and beat the Zacks Consensus Estimate of $344 million.  

Quarter Details

Revenues from Cloud Services increased marginally from the year-ago quarter to $148.1 million. Digital Media revenues were $198 million, up 16.8% year over year. The company’s total subscription revenues increased 1.4% year over year.

At the end of the quarter, the company had 3,165 cloud services customers. Average monthly revenue per customer increased 1.2% from the year-ago quarter to $15.49.

The company announced two acquisitions in the fourth quarter of 2018. The acquisitions include Ekahau and Castle Connolly.

j2 Global, Inc. Price, Consensus and EPS Surprise

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

Full-Year Details

For 2018, jCom recorded revenues of $1.2 billion compared with $1.11 billion in 2017. Earnings per share increased 12.6% year over year to $6.35.

Adjusted EBITDA was $489.5 million, up 5.7% year over year.

Full-year 2018 net cash provided by operations increased 51.8% year over year to $401.3 million and free cash flow increased from $264.8 million to $344.9 million.

Margins

Adjusted gross margin contracted 170 basis points (bps) on a year-over-year basis to 84%. Cloud Services adjusted gross margin contracted 260 bps while that of Digital Media declined to 36.2% from 48.4% in the year-ago quarter.

While adjusted sales and marketing expenses stayed flat in the reported quarter, research & development and general & administrative expenses increased 27.3% and 17.5%, respectively, year over year.

Adjusted EBITDA margin stayed flat at 44.6%. Cloud Services adjusted EBITDA margin contracted 240 bps from the year-ago quarter. However, Digital Media adjusted EBITDA margin expanded 180 bps.

Adjusted operating margin contracted 70 bps to 41.5%. Cloud Services adjusted operating margin contracted 250 bps while that of Digital Media increased 120 bps.

Balance Sheet and Cash Flow

As of Dec 31, 2018, the company had approximately $293.3 million in cash and investments after using $440 million during the quarter for acquisitions and regular quarterly dividend. Long-term debt stayed flat sequentially at $1.01 billion.

Cash flow from operations was $107.2 million in the reported quarter compared with $89.8 million in the third quarter.
 
Free cash flow increased 27.2% year over year to $95.8 million.

2019 Guidance

j2 Global expects revenues to be between $1.29 billion and $1.33 billion for 2019. Additionally, the company projects adjusted EBITDA in a band of $520 and $540 million.

Adjusted earnings are now anticipated between $6.65 and $6.95 per share.

The company announced its first open-market share buyback since 2012. Notably, 1.3 million shares are available under the buyback program.

Zacks Rank & Stocks to Consider

j2 Global currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the same sector include Jabil, Inc. JBL, MeetMe, Inc. MEET and Twilio Inc. TWLO. All the three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks Rank #1 stocks here.

Long-term earnings growth rate for Jabil, MeetMe and Twilio is projected to be 12%, 20% and 9%, respectively.

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