j2 Global (JCOM) Q4 Earnings Beat Estimates, Revenues Up Y/Y

j2 Global JCOM reported fourth-quarter 2019 adjusted earnings of $2.38 per share, beating the Zacks Consensus Estimate by 0.4% and growing 12.8% year over year.

Revenues were up 17.2% year over year to $405.6 million, comfortably surpassing the consensus mark by 3.7%.

Average monthly revenue per customer decreased 9.9% to $13.96. Cancel rate was 2.4%, up from 2.1% reported in the year-ago quarter.

Top-Line Details

Revenues from Cloud Services (41.7% of revenues) increased 14.3% from the year-ago quarter to $169.3 million.

Subscriber revenues (99.9% of Cloud Services revenues) rose 14.3% year over year to $169.1 million, driven by 18% growth in fixed subscriber revenues (84.7% of Subscriber revenues). Variable subscriber revenues (15.3% of Subscriber revenues) declined 2.6% year over year to $25.9. Other licenses revenues (0.1% of Cloud Services revenues) decreased 4.4% to $0.2 million in the reported quarter.

j2 Global, Inc. Price, Consensus and EPS Surprise

j2 Global, Inc. Price, Consensus and EPS Surprise

j2 Global, Inc. price-consensus-eps-surprise-chart | j2 Global, Inc. Quote

 

Moreover, DID-based revenues edged down 0.3% to $96.7 million. Non-DID revenues surged 42.1% year over year to $72.6 million.

Digital Media revenues (58.3% of revenues) were $236.3 million, up 19.4% year over year.

At the end of the reported quarter, j2 Global had 4,036 Cloud Services customers compared with 3,165 at the end of the year-ago quarter.

Operating Details

Adjusted gross margin expanded 30 basis points (bps) on a year-over-year basis to 84.3%. Cloud Services’ adjusted gross margin shrank 190 bps to 32.8%. Digital Media adjusted gross margin expanded 220 bps to 51.5%.

Adjusted sales & marketing, general & administrative and research, development & engineering expenses flared up 20.3%, 22.4% and 23%, respectively, on a year-over-year basis.

Adjusted EBITDA margin shrank 110 bps to 43.5%. Cloud Services adjusted EBITDA margin contracted 200 bps on a year-over-year basis. However, Digital Media adjusted EBITDA margin expanded 120 bps.

Adjusted operating margin descended 100 bps to 40.3%. While Cloud Services adjusted operating margin contracted 200 bps on a year-over-year basis, Digital Media operating margin expanded 100 bps.

Balance Sheet and Cash Flow

As of Dec 31, 2019, j2 Global had approximately $575.6 million in cash and cash equivalents compared with $94.6 million as of Sep 30.

Long-term debt, as of Dec 31, was $1.45 billion, higher than $1.15 billion as of Sep 30.

Free cash flow was $82.1 million compared with $80.5 million in the prior quarter.

2020 Guidance

j2 Global expects revenues between $1.47 billion and $1.51 billion for 2020.

Additionally, the company continues to expect adjusted EBITDA of $575-$595 million.

Adjusted earnings are anticipated between $7.36 and $7.66 per share.

For the Cloud Services segment, revenue growth is expected to be roughly 5% year over year. Adjusted EBITDA margin is expected to be unchanged at approximately 50%.

For the Digital Media segment, revenue growth is expected to be more than 10% year over year. Adjusted EBITDA margin is expected to be approximately 34%.

Zacks Rank & Stocks to Consider

Currently, j2 Global has a Zacks Rank #3 (Hold).

Applied Materials AMAT, Alteryx AYX and Five9 FIVN are some better-ranked stocks in the broader computer and technology sector. While Five9 has a Zacks Rank #2 (Buy), both Applied Materials and Alteryx sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Applied Materials, Alteryx and Five9 are set to report quarterly results on Feb 12, 13 and 19, respectively.

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