Business Acquisition | 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, acquire skilled personnel and enter into other jurisdictions. The Company completed the following acquisitions during the year ended December 31, 2017 , paying the purchase price in cash in each transaction: (a) an asset purchase of sFax, acquired on March 31, 2017, an Austin-based provider of mobile cloud faxing for health care; (b) a share purchase of the entire issued capital of WeCloud AB, acquired on June 12, 2017, a Swedish-based provider of cloud-based internet security services; (c) an asset purchase of MyPhoneFax.com, acquired on June 30, 2017, a provider of online fax services; (d) an asset purchase of EZ Publishing (dba “StreamSend”), acquired on August 22, 2017, a provider of email marketing solutions; (e) a share purchase of all the issued capital of Humble Bundle Inc., acquired on October 13, 2017, a digital storefront for video games based in California; (f) an asset purchase of blackfriday.com, acquired on November 7, 2017, an online solution that markets popular Black Friday ads that are centrally located connecting shoppers with retailers; (g) a share purchase of all the issued capital of OnTargetJobs, Inc., acquired on December 4, 2017, a provider of online recruitment solutions for job seekers and employers in North America; (h) a share purchase of all the issued capital of Mashable Inc., acquired on December 5, 2017, a global, multi-platform media and entertainment company providing tech, digital culture and entertainment content around the globe; and (i) other immaterial acquisitions of online data backup, email marketing and email security businesses. The consolidated statement of income since the date of each acquisition and balance sheet as of December 31, 2017 , reflect the results of operations of all 2017 acquisitions. For the year ended December 31, 2017 , these acquisitions contributed $34.7 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 $203.9 million , net of cash acquired and assumed liabilities and subject to certain post-closing adjustments which may increase or decrease the final consideration paid. The following table summarizes the allocation of the purchase consideration for all 2017 acquisitions (in thousands): Assets and Liabilities Valuation Accounts receivable $ 14,130 Other assets 10,243 Property and equipment 6,411 Deferred tax asset 405 Trade names 20,610 Trademarks 1,373 Customer relationships 61,307 Other intangibles 36,998 Goodwill 121,827 Accounts payables and accrued expenses (27,995 ) Deferred revenue (11,853 ) Deferred tax liability (29,534 ) Total $ 203,922 During 2017, the purchase price accounting has been finalized for the following acquisitions: (i) Fonebox; (ii) Everyday Health Inc.; (iii) sFax; (iv) MyPhoneFax.com; (v) StreamSend; and (vi) other immaterial fax, online data backup, email security and email marketing businesses. The initial accounting for all other 2017 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 year ended December 31, 2017 , the Company recorded adjustments to prior period acquisitions due to the finalization of the purchase accounting in the Cloud Services segment which resulted in a net decrease in goodwill of $(0.8) million . In addition, the Company recorded adjustments to the initial working capital related to prior period acquisitions in the Digital Media segment, which resulted in a net decrease in goodwill of $(4.7) million (see Note 8 - Goodwill and Intangible Assets). Such adjustments had an immaterial impact to amortization expense within the Consolidated Statement of Income for the year ended December 31, 2017. 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 in connection with these acquisitions during the year ended December 31, 2017 is $121.8 million , of which $34.7 million is expected to be deductible for income tax purposes. 2016 The Company completed the following acquisitions during the year ended December 31, 2016, paying the purchase price in cash for each transaction: (a) an asset purchase of VaultLogix, acquired on February 17, 2016, a Massachusetts-based provider of cloud data backup and storage for business clients; (b) a share purchase of the entire issued capital of Callstream Group Limited, acquired on March 3, 2016, a provider of cloud-based call management solutions to markets in the United Kingdom; (c) an asset purchase of Publicaster, acquired on April 1, 2016, a Maryland-based provider of email marketing services; (d) an asset purchase of SMTP, acquired on June 27, 2016, a Florida-based provider of cloud email services offering solutions ranging from sophisticated transactional email solutions to cost-effective Simple Mail Transfer Protocol (“SMTP”) relay services; (e) a share purchase of the entire issued capital of Integrated Global Concepts, Inc. (“IGC”), acquired on July 12, 2016, a Chicago-based provider of fax and voicemail services; (f) a share purchase of the entire issued capital of Front-safe A/S, acquired on July 15, 2016, a Denmark-based provider of cloud backup solutions; (g) an asset purchase of Fonebox Australia, acquired on October 18, 2016, an Australia-based provider of voice, call routing and virtual receptionist business; (h) a share purchase of all the outstanding shares of common stock of Everyday Health Inc. (“Everyday Health”), acquired on December 5, 2016, a New York-based provider of digital health and wellness solutions; and (i) other immaterial acquisitions of online data backup, email marketing, email security and digital media businesses. The consolidated statement of income since the date of each acquisition and balance sheet, as of December 31, 2016 , reflect the results of operations of all 2016 acquisitions. For the year ended December 31, 2016 , these acquisitions contributed $52.9 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 $596.1 million , net of cash acquired and assumed liabilities and subject to certain post-closing adjustments which may increase or decrease the final consideration paid. The following table summarizes the allocation of the purchase consideration for all 2016 acquisitions (in thousands): Assets and Liabilities (1) Valuation Accounts receivable $ 70,922 Other assets 11,730 Property and equipment 11,109 Trade names 5,866 Trademarks 70,300 Customer relationships 85,482 Other intangibles 91,264 Goodwill 333,190 Accounts payables and accrued expenses (62,188 ) Deferred revenue (6,904 ) Deferred tax liability (14,503 ) Capital lease (194 ) Total $ 596,074 (1) In connection with the purchase of IGC, the majority of the value was associated with the 935,231 shares of j2 Global common stock held by IGC. The value associated with these shares was recorded as a separate transaction from the fax business and has been excluded from the schedule above. During the year ended December 31, 2016, the Company recorded adjustments to prior period acquisitions primarily due to the finalization of the purchase accounting in the Cloud Services segment which resulted in a net increase in goodwill in the amount of $0.8 million . In addition, the Company recorded adjustments to the initial working capital related to prior period acquisitions and updated the purchase accounting of Offers.com in the Digital Media segment, which resulted in a net decrease in goodwill in the amount of $(5.0) million with a corresponding increase in trade names, net and other purchased intangibles, net (see Note 8 - Goodwill and Intangible Assets). Such adjustments had an immaterial impact to amortization expense within the Consolidated Statement of Income for the year ended December 31, 2016. 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 in connection with these acquisitions during the year ended December 31, 2016 is $333.2 million , of which $102.4 million is expected to be deductible for income tax purposes. IGC The Company acquired the entire issued capital of IGC on July 12, 2016 for a cash purchase price of approximately $6.3 million (excluding amounts allocated to the Company’s purchase of its common stock described below), net of cash acquired and assumed liabilities and is subject to certain post-closing adjustments which may increase or decrease the final consideration paid. At the date of acquisition, IGC held 935,231 of the Company’s common stock which the Company determined should be treated as a separate transaction from the acquired fax and voicemail businesses. In order to determine the amount of purchase consideration allocable to the fax and voicemail business and the Company’s common stock, the Company used a relative fair value approach and concluded that the amounts of consideration allocable to the fax and voicemail business and the Company’s common stock were $6.3 million and $51.5 million , respectively. See Note 12 - Stockholders’ Equity for further discussion regarding the Company’s common stock acquired in connection with the IGC business combination. Everyday Health On December 5, 2016, the Company acquired all the outstanding shares of common stock of Everyday Health, $0.01 par value per share, at a purchase consideration $493.7 million (net of cash acquired and assumed liabilities) or $10.50 per share in cash, and subject to certain post-closing adjustments which may increase or decrease the final consideration paid. Everyday Health is a leading provider of digital health and marketing and communication solutions. Everyday Health attracts a large and engaged audience of consumers and healthcare professionals to its premier health and wellness properties and utilizes its data and analytics expertise to deliver highly personalized content experiences and efficient and effective marketing and engagement solutions. Everyday Health enables consumers to manage their daily health and wellness needs, healthcare professionals to stay informed and make better decisions for their patients, and marketers, health payers and providers to communicate and engage with consumers and healthcare professionals to drive better health outcomes. Everyday Health’s content and solutions are delivered through multiple channels, including desktop, mobile web, mobile phone and tablet applications, as well as video and social media. The Company acquired Everyday Health to bring together two leading digital media companies with complimentary visions and platforms to engage and monetize audiences. The combined company will be well positioned to deliver compelling benefits to customers with content that connects, informs and empowers audiences. The Company’s Digital Media segment maintains leading positions in the technology, gaming and men's lifestyle verticals with strong and well-established brands. Everyday Health adds a new vertical and set of market-leading trusted health properties to the portfolio while diversifying the company’s audience mix. The consolidated statement of income, since the date of acquisition, and balance sheet, as of December 31, 2016 , reflect the results of operations Everyday Health. For the year ended December 31, 2016 , Everyday Health contributed $23.2 million to the Company’s revenues. Net income contributed by Everyday Health was not separately identifiable due to j2 Global’s integration activities and is impracticable to provide. The following table summarizes the allocation of the purchase consideration for the Everyday Health acquisition (in thousands): Assets and Liabilities Valuation Cash $ 15,918 Accounts receivable 67,968 Other assets 11,168 Property and equipment 6,494 Trademarks 70,300 Customer relationships 45,500 Other intangibles 88,267 Goodwill 263,988 Accounts payables and accrued expenses (59,091 ) Deferred revenue (5,297 ) Deferred tax liability (11,500 ) Total $ 493,715 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 in connection with the Everyday Health acquisition during the year ended December 31, 2016 is $264.0 million , of which $65.4 million is expected to be deductible for income tax purposes. Pro Forma Financial Information for Everyday Health Acquisition The following unaudited pro forma supplemental information is based on estimates and assumptions, which j2 Global believes are reasonable. However, this information is not necessarily indicative of the Company’s consolidated financial position or results of income in future periods or the results that actually would have been realized had j2 Global and Everyday Health been combined companies during the periods presented. These pro forma results exclude any savings or synergies that would have resulted from the Everyday Health business acquisition had it occurred on January 1, 2015 and do not take into consideration the exiting of any acquired lines of business. This unaudited pro forma supplemental information includes incremental intangible asset amortization and other charges as a result of the Everyday Health acquisition, net of the related tax effects. The supplemental information on an unaudited pro forma financial basis presents the combined results of j2 Global and Everyday Health as if the acquisition had occurred on January 1, 2015 (in thousands, except per share amounts): Year ended December 31, 2016 December 31, 2015 (unaudited) (unaudited) Revenues $ 1,082,813 $ 952,806 Net income $ 103,541 $ 115,059 EPS - Basic $ 2.14 $ 2.38 EPS - Diluted $ 2.13 $ 2.35 Pro Forma Financial Information for All 2016 Acquisitions The following unaudited pro forma supplemental information is based on estimates and assumptions, that j2 Global believes are reasonable. However, this information is not necessarily indicative of the Company’s consolidated financial position or 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, 2015 and do not take into consideration the exiting of any acquired lines of business. 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. The supplemental information on an unaudited pro forma financial basis presents the combined results of j2 Global and its 2016 acquisitions as if each acquisition had occurred on January 1, 2015 (in thousands, except per share amounts): Year ended December 31, 2016 December 31, 2015 (unaudited) (unaudited) Revenues $ 1,102,510 $ 1,009,169 Net income $ 108,822 $ 111,817 EPS - Basic $ 2.25 $ 2.31 EPS - Diluted $ 2.24 $ 2.29 2015 The Company completed the following acquisitions during the year ended December 31, 2015, paying the purchase price in cash for each transaction: (a) a share purchase of the entire issued share capital of Firstway, acquired on February 11, 2015, an Ireland-based distributor of FaxBOX® digital fax services; (b) an asset purchase of Nuvotera (formerly known as Spam Soap), acquired on February 13, 2015, a California-based supplier of email security; (c) an asset purchase of EmailDirect, acquired on February 19, 2015, a California-based provider of email marketing services; (d) an asset purchase of SugarSync®, Inc., acquired on March 23, 2015, a California-based provider of online file backup, synchronization and sharing assets; (e) an asset purchase of Popfax, acquired on September 23, 2015, a France-based global provider of internet fax services; (f) a stock purchase of the entire capital stock of Salesify, acquired on September 17, 2015, a California-based based provider of lead generation solutions; (g) an asset purchase of LiveVault®, acquired on September 30, 2015, a California-based global provider of data backup and recovery services; (h) a membership interest purchase of the entire units of Offers.com, acquired on December 31, 2015, a Texas-based and is an online marketplace connecting millions of consumers with discounts from thousands of leading merchants; and (i) certain other immaterial acquisitions of fax, online data backup and email businesses. The consolidated statement of income since the date of each acquisition and balance sheet, as of December 31, 2015, reflect the results of operations of all 2015 acquisitions. For the year ended December 31, 2015, these acquisitions contributed $52.4 million to the Company’s revenues. Net income contributed by these acquisitions was not separately identifiable due to j2 Global’s integration activities. Total consideration for these transactions was $314.0 million , net of cash acquired and assumed liabilities and subject to certain post-closing adjustments. The following table summarizes the allocation of the purchase consideration as follows (in thousands): Assets and Liabilities Valuation Accounts receivable $ 14,935 Other assets 1,415 Property and equipment 5,769 Software 18,764 Trade names 22,602 Customer relationships 98,027 Other intangibles 1,873 Goodwill 172,593 Accounts payables and accrued expenses (9,684 ) Deferred revenue (10,764 ) Deferred tax liability (1,316 ) Capital lease (195 ) Total $ 314,019 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 in connection with these acquisitions during the year ended December 31, 2015 is $172.6 million , of which $143.3 million is expected to be deductible for income tax purposes. Pro Forma Financial Information for 2015 Acquisitions The following unaudited pro forma supplemental information is based on estimates and assumptions that j2 Global believes are reasonable. However, this information is not necessarily indicative of the Company’s consolidated financial position or 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 period presented. These pro forma results exclude any savings or synergies that would have resulted from these business acquisitions had they occurred on January 1, 2014 and do not take into consideration the exiting of any acquired lines of business. 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. The supplemental information on an unaudited pro forma financial basis presents the combined results of j2 Global and its 2015 acquisitions as if each acquisition had occurred on January 1, 2014 (in thousands, except per share amounts): Year ended December 31, 2015 December 31, 2014 (unaudited) (unaudited) Revenues $ 823,904 $ 744,388 Net income $ 159,408 $ 126,196 EPS - Basic $ 3.29 $ 2.64 EPS - Diluted $ 3.26 $ 2.62 |