EXHIBIT 99.1
j2 Global Reports Q2 2007 Results
LOS ANGELES—August 6, 2007—j2 Global Communications, Inc. [NASDAQGS:JCOM], the leading provider of outsourced, value-added messaging and communications services, today reported financial results for the second quarter ended June 30, 2007.
SECOND QUARTER 2007 RESULTS
Revenues for Q2 2007 increased 22% to $54.0 million compared to $44.3 million for Q2 2006.
Net earnings per diluted share, excluding non-cash stock-based compensation expense net of related tax benefit (“Non-GAAP EPS”), for Q2 2007 increased 29% to $0.36 compared to $0.28 in Q2 2006.
Net earnings for Q2 2007 were $17.1 million, a 29% increase compared to Q2 2006 net earnings of $13.2 million. Net earnings per diluted share rose 27% to $0.33 compared to Q2 2006 net earnings per diluted share of $0.26.
The Company ended the quarter with approximately $233 million in cash and investments.
Key financial results for second quarter 2007 versus second quarter 2006 are as follows:
Q2 2007 | Q2 2006 | % Increase | |
Revenues | $54.0 million | $44.3 million | 22% |
Non-GAAP EPS (1) | $0.36 | $0.28 | 29% |
Net Earnings (1) | $17.1 million | $13.2 million | 29% |
Net Earnings per Share (1) | $0.33 | $0.26 | 27% |
(1) Net earnings in Q2 2007 and 2006 are based upon an estimated annual effective tax rate of approximately 30% and 28%, respectively. For the full year 2006 the tax rate was approximately 27%.
“We are pleased that our net earnings growth exceeded our revenue growth by seven percentage points,” said Scott Turicchi, co-president. “This resulted principally from increased DID-based subscription revenues combined with lower cost of revenues and general and administrative expense as a percentage of revenues. We delivered these results while increasing our spend on research and development and the testing of new marketing programs.”
BUSINESS OUTLOOK
“We are delighted with this quarter’s rate of customer growth, particularly because we are in the process of implementing a price change for our domestic individual eFax® service,” said Hemi Zucker, co-president and chief operating officer. “We are also pleased to report that during the quarter the growth in our voice service customer base exceeded our expectations as we enhanced our personnel and marketing programs for these services.”
Q3 2007 Estimates
For the third quarter of 2007, j2 Global anticipates revenues to approximate $56.0 million to $57.5 million and Non-GAAP EPS to approximate $0.36 to $0.37. This earnings estimate assumes an estimated annual effective tax rate for 2007 of approximately 30% and 51.2 million diluted shares. The Company also expects to incur SFAS 123(R) (expensing for stock-based compensation) expense, net of taxes, for the quarter of approximately $0.02 per diluted share.
A summary of this Q3 2007 financial guidance is set forth in the table below:
Q3 2007 | |
Revenues | $56.0 million– $57.5 million |
Non-GAAP EPS (1) | $0.36– $0.37 |
(1) Per share guidance is based upon an estimated annual effective tax rate of approximately 30% and fully diluted shares of 51.2 million.
Fiscal Year 2007 Estimates
The Company reaffirms its previous revenue guidance of between $217 million and $229 million for fiscal 2007.
The Company also reaffirms its previous Non-GAAP EPS guidance for the year of between $1.35 and $1.45.
Additionally, the Company expects SFAS 123(R), net of taxes, to impact annual earnings by between $0.07 and $0.09 per diluted share.
The foregoing estimates are based on an estimated annual effective tax rate of approximately 30% and 51.2 million diluted shares.
About j2 Global Communications
Founded in 1995, j2 Global Communications, Inc. provides outsourced, value-added messaging and communications services to individuals and businesses around the world. j2 Global’s network spans greater than 2,900 cities in 42 countries on five continents. The Company offers faxing and voicemail solutions, document management
solutions, Web-initiated conference calling, and unified-messaging and communications services. j2 Global markets its services principally under the brand names eFax®, j2®, jConnect®, JFAX™, eFax Corporate®, Fax.com™, Onebox®, Electric Mail®, jBlast®, eFax Broadcast™, eVoice®, PaperMaster®, Consensus™, M4 Internet® and Protofax®. As of December 31, 2006, j2 Global had achieved 11 consecutive fiscal years of revenue growth and 5 consecutive fiscal years of positive and growing operating earnings. For more information about j2 Global, please visit www.j2global.com.
Contacts:
Jeff Adelman
j2 Global Communications, Inc.
323-372-3617
press@j2global.com
Kari Garcia
Comm Strategies
949-459-9696, ext. 244
pr@commstrategies.com
“Safe Harbor” Statement Under the Private Securities Litigation Reform Act of 1995: Certain statements in this Press Release are “forward-looking statements” within the meaning of The Private Securities Litigation Act of 1995, particularly those contained in the “2007 Estimates” portion (and specifically Q3 and fiscal year 2007 estimates). These forward-looking statements are based on management’s current expectations or beliefs and are subject to numerous assumptions, risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. These factors and uncertainties include, among other items: Subscriber growth and retention; protection of the Company’s proprietary technology or infringement by the Company of intellectual property of others; the risk of adverse changes in the U.S. or international regulatory environments surrounding unified messaging and telecommunications, including but not limited to the imposition of additional taxation or regulatory-related fees; and the numerous other factors set forth in j2 Global’s filings with the Securities and Exchange Commission (“SEC”). For a more detailed description of the risk factors and uncertainties affecting j2 Global, refer to the 2006 Annual Report on Form 10-K filed by j2 Global on March 12, 2007, and the other reports filed by j2 Global from time-to-time with the SEC, each of which is available at www.sec.gov. The financial estimates provided in the “Business Outlook” portion of this press release (and specifically Q3 and fiscal year 2007 estimates) are based on limited information available to the Company at this time, which is subject to change. Although management’s expectations may change after the date of this press release, the Company undertakes no obligation to revise or update these financial estimates.
j2 GLOBAL COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED, IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
THREE MONTHS ENDED JUNE 30, | SIX MONTHS ENDED JUNE 30, | |||||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
Revenues | ||||||||||||||||
Subscriber | $ | 52,613 | $ | 42,671 | $ | 102,906 | $ | 83,233 | ||||||||
Other | 1,367 | 1,595 | 5,215 | 3,051 | ||||||||||||
Total revenue | 53,980 | 44,266 | 108,121 | 86,284 | ||||||||||||
Cost of revenues (including stock-based compensation of $140 and $322 for the three and six months of 2007, respectively, and $97 and $206 for the three and six months of 2006, respectively) | 10,232 | 9,289 | 21,222 | 18,299 | ||||||||||||
Gross profit | 43,748 | 34,977 | 86,899 | 67,985 | ||||||||||||
Operating expenses: | ||||||||||||||||
Sales and marketing (including stock-based compensation of $264 and $542 for the three and six months of 2007, respectively, and $275 and $540 for the three and six months of 2006, respectively) | 9,672 | 7,493 | 18,452 | 14,357 | ||||||||||||
Research, development and engineering (including stock-based compensation of $184 and $357 for the three and six months of 2007, respectively, and $153 and $263 for the three and six months of 2006, respectively) | 2,976 | 1,944 | 5,689 | 3,836 | ||||||||||||
General and administrative (including stock-based compensation of $1,114 and $2,211 for the three and six months of 2007, respectively, and $1,139 and $2,079 for the three and six months of 2006, respectively) | 8,950 | 8,350 | 18,775 | 16,250 | ||||||||||||
Total operating expenses | 21,598 | 17,787 | 42,916 | 34,443 | ||||||||||||
Operating earnings | 22,150 | 17,190 | 43,983 | 33,542 | ||||||||||||
Interest and other income, net | 2,398 | 1,080 | 4,123 | 2,336 | ||||||||||||
Earnings before income taxes | 24,548 | 18,270 | 48,106 | 35,878 | ||||||||||||
Income tax expense | 7,470 | 5,071 | 14,589 | 10,368 | ||||||||||||
Net earnings | $ | 17,078 | $ | 13,199 | $ | 33,517 | $ | 25,510 | ||||||||
Basic net earnings per share | $ | 0.35 | $ | 0.27 | $ | 0.68 | $ | 0.52 | ||||||||
Diluted net earnings per share | $ | 0.33 | $ | 0.26 | $ | 0.66 | $ | 0.50 | ||||||||
Basic weighted average shares outstanding | 49,108,309 | 49,349,536 | 48,966,111 | 49,299,933 | ||||||||||||
Diluted weighted average shares outstanding | 51,007,561 | 51,186,073 | 50,844,416 | 51,056,246 |
j2 GLOBAL COMMUNICATIONS, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED, IN THOUSANDS)
JUNE 30, | DECEMBER 31, | |||||||
2007 | 2006 | |||||||
ASSETS | ||||||||
Cash and cash equivalents | $ | 108,147 | $ | 95,605 | ||||
Short-term investments | 114,455 | 83,498 | ||||||
Accounts receivable, net | 12,984 | 11,989 | ||||||
Prepaid expenses and other | 4,155 | 4,779 | ||||||
Deferred income taxes | 2,643 | 2,643 | ||||||
Total current assets | 242,384 | 198,514 | ||||||
Long-term investments | 10,455 | 12,493 | ||||||
Property and equipment, net | 19,407 | 18,951 | ||||||
Goodwill | 31,135 | 30,954 | ||||||
Other purchased intangibles, net | 23,114 | 21,400 | ||||||
Deferred income taxes | 5,614 | 5,406 | ||||||
Other assets | 412 | 442 | ||||||
TOTAL ASSETS | $ | 332,521 | $ | 288,160 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
Accounts payable and accrued expenses | $ | 14,827 | $ | 17,117 | ||||
Income taxes payable | 3,125 | 4,511 | ||||||
Deferred revenue | 14,209 | 11,530 | ||||||
Current portion of long-term debt | 3 | 149 | ||||||
Total current liabilities | 32,164 | 33,307 | ||||||
Accrued income taxes | 27,971 | — | ||||||
Other | 87 | 112 | ||||||
Total liabilities | 60,222 | 33,419 | ||||||
Total stockholders’ equity | 272,299 | 254,741 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 332,521 | $ | 288,160 |
j2 GLOBAL COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED, IN THOUSANDS)
SIX MONTHS ENDED JUNE 30, | ||||||||
2007 | 2006 | |||||||
Cash flows from operating activities: | ||||||||
Net earnings | $ | 33,517 | $ | 25,510 | ||||
Adjustments to reconcile net earnings to net cash | ||||||||
provided by operating activities: | ||||||||
Depreciation and amortization | 4,570 | 3,960 | ||||||
Stock-based compensation | 3,549 | 3,088 | ||||||
Tax benefit of stock option exercises and vested restricted stock | 3,699 | 1,036 | ||||||
Excess tax benefits on stock option exercises | (2,943 | ) | (941 | ) | ||||
Deferred income taxes | (208 | ) | (879 | ) | ||||
Loss on disposal of fixed assets | 194 | — | ||||||
Decrease (increase) in: | ||||||||
Accounts receivable | (922 | ) | (577 | ) | ||||
Prepaid expenses and other | 632 | 379 | ||||||
Other assets | 114 | (294 | ) | |||||
(Decrease) increase in: | ||||||||
Accounts payable and accrued expenses | (3,061 | ) | 564 | |||||
Income taxes payable | (1,381 | ) | (1,078 | ) | ||||
Deferred revenue | 2,663 | 2,625 | ||||||
Accrued income taxes | 9,373 | — | ||||||
Other | (24 | ) | 102 | |||||
Net cash provided by operating activities | 49,772 | 33,495 | ||||||
Cash flows from investing activities: | ||||||||
Net purchases of available-for-sale investments | (34,575 | ) | (25,635 | ) | ||||
Net redemptions of held-to-maturity investments | 5,656 | 25,864 | ||||||
Purchases of property and equipment | (3,035 | ) | (4,045 | ) | ||||
Acquisition of business, net of cash received | (87 | ) | (504 | ) | ||||
Purchase of intangible assets | (3,066 | ) | (1,867 | ) | ||||
Proceeds from sale of property and equipment | — | 10 | ||||||
Net cash used in investing activities | (35,107 | ) | (6,177 | ) | ||||
Cash flows from financing activities: | ||||||||
Repurchases of common stock and restricted stock | (10,220 | ) | — | |||||
Issuance of common stock under employee stock | ||||||||
purchase plan | 132 | 283 | ||||||
Exercise of stock options | 4,672 | 658 | ||||||
Excess tax benefits on stock option exercises | 2,943 | 941 | ||||||
Repayments of long-term debt | (147 | ) | (323 | ) | ||||
Net cash (used in) provided by financing activities | (2,620 | ) | 1,559 | |||||
Effect of exchange rate changes on cash and cash equivalents | 497 | 1,762 | ||||||
Net Increase in cash and cash equivalents | 12,542 | 30,639 | ||||||
Cash and cash equivalents, beginning of period | 95,605 | 36,301 | ||||||
Cash and cash equivalents, end of period | $ | 108,147 | $ | 66,940 |
j2 GLOBAL COMMUNICATIONS, INC.
UNAUDITED RECONCILIATION OF MODIFIED NET EARNINGS
THREE MONTHS ENDED JUNE 30, 2007 AND 2006
(UNAUDITED, IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
Modified net earnings are GAAP net earnings with the following modifications (i) elimination of stock-based compensation expense for 2007 and 2006 and (ii) elimination of income tax expense associated with stock-based compensation expense. Modified net earnings and modified net earnings per share are not meant as a substitute for measures determined under GAAP, but are solely for informational purposes. The following table illustrates and reconciles the GAAP net earnings with the aforementioned exclusions. The Company believes that this non-GAAP financial information provides a useful measure of operating performance.
THREE MONTHS ENDED JUNE 30, 2007 | THREE MONTHS ENDED JUNE 30, 2006 | |||||||||||||||||||||||
Reported | Non-GAAP Entries | Non-GAAP | Reported | Non-GAAP Entries | Non-GAAP | |||||||||||||||||||
Revenues | ||||||||||||||||||||||||
Subscriber | $ | 52,613 | $ | — | $ | 52,613 | $ | 42,671 | $ | — | $ | 42,671 | ||||||||||||
Other | 1,367 | — | 1,367 | 1,595 | — | 1,595 | ||||||||||||||||||
Total revenue | 53,980 | — | 53,980 | 44,266 | — | 44,266 | ||||||||||||||||||
Cost of revenues (1) | 10,232 | (140 | ) (1) | 10,092 | 9,289 | (97 | ) (1) | 9,192 | ||||||||||||||||
Gross profit | 43,748 | 140 | 43,888 | 34,977 | 97 | 35,074 | ||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||
Sales and marketing (1) | 9,672 | (264 | ) (1) | 9,408 | 7,493 | (275 | ) (1) | 7,218 | ||||||||||||||||
Research, development and engineering (1) | 2,976 | (184 | ) (1) | 2,792 | 1,944 | (153 | ) (1) | 1,791 | ||||||||||||||||
General and administrative (1) | 8,950 | (1,114 | ) (1) | 7,836 | 8,350 | (1,139 | ) (1) | 7,211 | ||||||||||||||||
Total operating expenses | 21,598 | (1,562 | ) | 20,036 | 17,787 | (1,567 | ) | 16,220 | ||||||||||||||||
Operating earnings | 22,150 | 1,702 | 23,852 | 17,190 | 1,664 | 18,854 | ||||||||||||||||||
Other income and expenses: | ||||||||||||||||||||||||
Interest and other income, net | 2,398 | — | 2,398 | 1,080 | — | 1,080 | ||||||||||||||||||
Total other income and expenses: | 2,398 | — | 2,398 | 1,080 | — | 1,080 | ||||||||||||||||||
Earnings before income taxes | 24,548 | 1,702 | 26,250 | 18,270 | 1,664 | 19,934 | ||||||||||||||||||
Income tax expense (2) | 7,470 | 518 | (2) | 7,988 | 5,071 | 535 | (2) | 5,606 | ||||||||||||||||
Net earnings | $ | 17,078 | $ | 1,184 | $ | 18,262 | $ | 13,199 | $ | 1,129 | $ | 14,328 | ||||||||||||
Diluted net earnings per share | $ | 0.33 | $ | 0.36 | $ | 0.26 | $ | 0.28 | ||||||||||||||||
Diluted weighted average shares outstanding | 51,007,561 | 51,225,457 | 51,186,073 | 51,489,786 | ||||||||||||||||||||
(1) Stock-based compensation and related payroll | ||||||||||||||||||||||||
tax and employee compensation expenses | ||||||||||||||||||||||||
Cost of revenues | $ | (140 | ) | $ | (97 | ) | ||||||||||||||||||
Sales and marketing | (264 | ) | (275 | ) | ||||||||||||||||||||
Research, development and engineering | (184 | ) | (153 | ) | ||||||||||||||||||||
General and administrative | (1,114 | ) | (1,139 | ) | ||||||||||||||||||||
$ | (1,702 | ) | $ | (1,664 | ) | |||||||||||||||||||
(2) Income tax adjustment, net impact of the items above | 518 | 535 |