j2 Global (JCOM) Q2 Earnings Beat Estimates, Revenues Up

j2 Global JCOM reported second-quarter 2019 adjusted earnings of $1.60 per share, beating the Zacks Consensus Estimate by 8 cents. The figure also grew 6.7% year over year.

Revenues were up 12% year over year to $322.4 million, comfortably surpassing the consensus mark of $318 million.

Average monthly revenue per customer decreased 10.7% to $14.01. Cancel rate was 2.5%, up from 2% reported in the year-ago quarter.

Shares fell 2.7% to close at $79.72 on Aug 7, following the results. j2 Global shares have returned 14.9% compared with the industry’s rally of 29.1% on a year-to-date basis.

Year-to-date Performance

 

Top-Line Details

Revenues from Cloud Services (52.5% of revenues) increased 12.5% from the year-ago quarter to $169.1 million.

Subscriber revenues (99.9% of Cloud Services revenues) climbed 12.5% to $168.9 million, driven by 13.5% growth in fixed subscriber revenues (83.1% of Subscriber revenues). Variable subscriber revenues (16.9% of Subscriber revenues) increased 7.8% year over year. Other licenses revenues (0.1% of Cloud Services revenues) skyrocketed 31.2% to $0.2 million in the reported quarter.

Moreover, DID-based revenues edged down 1.1% to $97.4 million. Non-DID revenues surged 38.5% year over year.

Digital Media revenues (47.5% of revenues) were $153.3 million, up 11.4% year over year.

At the end of the reported quarter, j2 Global had 4,015 Cloud Services customers compared with 3,197 at the end of the year-ago quarter.

Operating Details

Adjusted gross margin contracted 220 basis points (bps) on a year-over-year basis to 81.5%. Cloud Services’ adjusted gross margin shrunk 50 bps to 41.3%. Digital Media contracted 170 bps to 40.2%.

Adjusted sales & marketing, research & development, and general & administrative expenses flared up 7.3%, 8% and 13.4%, respectively, on a year-over-year basis.

Adjusted EBITDA margin shrunk 60 bps to 38.8%. Cloud Services adjusted EBITDA margin expanded 10 bps on a year-over-year basis. However, Digital Media adjusted EBITDA margin advanced 60 bps.

Adjusted operating margin descended 100 bps to 35.1%. Cloud Services adjusted operating margin expanded 10 bps, while that of Digital Media contracted 100 bps.

Balance Sheet and Cash Flow

As of Jun 30, 2019, j2 Global had approximately $155.5 million in cash and cash equivalents compared with $226.6 million as of Mar 31, 2019.

As of Jun 30, 2019, long-term debt was $1.12 billion higher than $1.02 billion as of Mar 31, 2019.

Cash flow from operations was $95.4 million compared with $116.9 million in the previous quarter.
 
Free cash flow was $85.8 million compared with $104.3 million in the prior quarter.

2019 Guidance Reiterated

j2 Global still expects revenues between $1.33 billion and $1.37 billion for 2019.

Additionally, the company still expects adjusted EBITDA in the $540-$556 million range.

Adjusted earnings are anticipated between $6.95 per share and $7.15 per share.

Zacks Rank & Stocks to Consider

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

Some better-ranked stocks in the broader computer & technology sector include Fortinet FTNT, Chegg CHGG and Cirrus Logic CRUS. All three stocks sport a Zacks Rank #1 (Strong Buy), currently. You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for CDW, Chegg and Cirrus Logic is 15.5%, 30% and 15%, respectively.

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