Segment and Geographic Information | Segment Information The Company’s business segments are based on the organization structure used by management for making operating and investment decisions and for assessing performance. j2 Global’s operating segments have been aggregated into two reportable business segments: (i) Cloud Services and (ii) Digital Media. The Company’s Cloud Services segment is driven primarily by subscription revenues that are relatively higher margin, stable and predictable from quarter to quarter with some seasonal weakness in the fourth quarter. The Cloud Services segment also includes the results of our IP licensing business, which can vary dramatically in both revenues and profitability from period to period. The Company’s Digital Media segment is driven primarily by advertising revenues, has relatively higher sales and marketing expense and has seasonal strength in the fourth quarter. The accounting policies of the segments are the same as those described in Note 1 - Basis of Presentation. The Company evaluates performance based on gross margin and profit or loss from operations before income taxes, not including nonrecurring gains and losses and foreign exchange gains and losses. Information on reportable segments and reconciliation to consolidated income from operations is as follows (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2018 2017 2018 2017 Revenues by segment: Cloud Services $ 150,094 $ 145,787 $ 449,876 $ 432,039 Digital Media 142,655 127,865 411,407 369,470 Elimination of inter-segment revenues (27 ) (36 ) (51 ) (51 ) Total segments revenues 292,722 273,616 861,232 801,458 Corporate (2) 2 — 4 — Total revenues 292,724 273,616 861,236 801,458 Gross profit by segment: Cloud Services 118,326 115,675 356,427 342,895 Digital Media 125,206 115,600 359,745 332,269 Elimination of inter-segment gross profit (27 ) (30 ) (52 ) (45 ) Total segments gross profit 243,505 231,245 716,120 675,119 Corporate 2 — 4 — Total gross profit 243,507 231,245 716,124 675,119 Direct costs by segment (1) : Cloud Services 61,237 59,550 184,266 172,371 Digital Media 118,185 103,234 352,931 313,266 Elimination of inter-segment direct costs (27 ) (30 ) (52 ) (45 ) Total segments direct costs 179,395 162,754 537,145 485,592 Corporate (2) 7,056 5,534 21,382 20,035 Total direct costs 186,451 168,288 558,527 505,627 Cloud Services operating income (2) 57,089 56,125 172,161 170,524 Digital Media operating income 7,021 12,366 6,814 19,003 Segment operating income 64,110 68,491 178,975 189,527 Corporate (2) (7,053 ) (5,534 ) (21,379 ) (20,035 ) Income from operations $ 57,057 $ 62,957 $ 157,596 $ 169,492 (1) Direct costs for each segment include other operating expenses that are directly attributable to the segment, such as employee compensation expense, local sales and marketing expenses, engineering and network operations expense, depreciation and amortization and other administrative expenses. (2) Corporate includes costs associated with general and administrative and other expenses that are managed on a global basis and that are not directly attributable to any particular segment. In addition, the Company determined certain patent assets and related income and expenses associated with Advanced Messaging Technologies, Inc. should be reclassified from the Cloud Services segment to Corporate resulting in an increase in expenses over the prior periods. September 30, 2018 December 31, 2017 Assets: Cloud Services $ 1,020,839 $ 1,078,577 Digital Media 1,333,965 1,317,113 Total assets from reportable segments 2,354,804 2,395,690 Corporate 162,359 57,403 Total assets $ 2,517,163 $ 2,453,093 Nine Months Ended September 30, 2018 2017 Capital expenditures: Cloud Services $ 10,654 $ 5,399 Digital Media 34,274 24,084 Total from reportable segments 44,928 29,483 Corporate — — Total capital expenditures $ 44,928 $ 29,483 Three Months Ended September 30, Nine Months Ended September 30, 2018 2017 2018 2017 Depreciation and amortization: Cloud Services $ 15,046 $ 17,145 $ 44,236 $ 51,097 Digital Media 30,580 22,227 85,751 67,500 Total from reportable segments 45,626 39,372 129,987 118,597 Corporate 749 — 2,863 — Total depreciation and amortization $ 46,375 $ 39,372 $ 132,850 $ 118,597 j2 Global maintains operations in the U.S., Canada, Ireland, Japan and other countries. Geographic information about the U.S. and all other countries for the reporting periods is presented below. Such information attributes revenues based on jurisdictions where revenues are reported (in thousands). Three Months Ended September 30, Nine Months Ended September 30, 2018 2017 2018 2017 Revenues: United States $ 221,031 $ 201,543 $ 649,103 $ 589,797 Canada 18,353 19,312 56,503 58,064 Ireland 18,182 18,350 52,296 54,730 All other countries 35,158 34,411 103,334 98,867 $ 292,724 $ 273,616 $ 861,236 $ 801,458 September 30, December 31, Long-lived assets: United States $ 486,691 $ 452,143 All other countries 76,622 80,571 Total $ 563,313 $ 532,714 |