J2 GLOBAL COMMUNICATIONS INC 8-K (Events or Changes Between Quarterly Reports) 2009-02-20
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
FORM 8-K CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) February 19, 2009
j2 Global Communications, Inc.
(Exact name of registrant as specified in its charter) Delaware (State or other jurisdiction of incorporation or organization) 0-25965 (Commission File Number) 6922 Hollywood Blvd. Suite 500 Los Angeles, California 90028 (Address of principal executive offices) (323) 860-9200 (Registrant's telephone number, including area code) Not Applicable (Former name or former address, if changed since last report) 51-0371142 (IRS Employer Identification No.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): o o o o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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ITEM 2.02 and 7.01. Results of Operations and Financial Condition and Regulation FD Disclosure On February 19, 2009, j2 Global Communications, Inc. issued a press release announcing its financial results for the fourth quarter and year ended December 31, 2008. The press release also contains information regarding the Company’s expected financial performance for fiscal year 2009. A copy of the press release is furnished as Exhibit 99.1 to this Form 8-K. Also on February 19, 2009, j2 Global hosted its fiscal 2008 earnings conference call and Webcast. Via the Webcast, the Company presented its February 2009 Investor Presentation, which contains a summary of j2 Global’s financial results for the fiscal year ended December 31, 2008; information regarding the Company’s expected financial performance for fiscal year 2009; and certain other financial and operating information regarding j2 Global. A copy of this presentation is furnished as Exhibit 99.2 to this Form 8-K. NOTE: This information is being furnished under both Item 2.02 (Results of Operations and Financial Condition) and Item 7.01 (Regulation FD Disclosure) of Form 8-K and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
ITEM 9.01. Financial Statements and Exhibits. (c) Exhibits EXHIBIT NUMBER 99.1 99.2
DESCRIPTION Press Release dated February 19, 2009. February 2009 Investor Presentation.
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
j2 Global Communications, Inc. (Registrant) Date: February 19, 2009 By: /s/ Kathleen M. Griggs Kathleen M. Griggs Chief Financial Officer
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INDEX TO EXHIBITS EXHIBIT NUMBER 99.1 99.2 DESCRIPTION Press Release dated February 19, 2009. February 2009 Investor Presentation.
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EXHIBIT 99.1
j2 Global Reports 2008 Year End Results
EPS Increases 17% versus 2007; Subscriber Revenues Up 12% LOS ANGELES—February 19, 2009—j2 Global Communications, Inc. [NASDAQGS:JCOM] today reported financial results for the fourth quarter and year ended December 31, 2008. ANNUAL RESULTS Subscriber revenues for fiscal year 2008 increased 12% to $237 million compared to $212 million in fiscal year 2007. Total revenues for fiscal year 2008 increased 9% to $242 million compared to $221 million in fiscal year 2007. Net earnings per diluted share for 2008 increased 17% to $1.58 compared to $1.35 for 2007. SFAS 123(R) (expensing for stock-based compensation) expense impacted 2008 earnings and net earnings per diluted share by approximately $5.7 million (approximately $8.0 million pre-tax) and $0.12, respectively. During fiscal year 2008, the Company increased its gross and operating margins to 81% and 41%, respectively, from 80% and 39%, respectively, in fiscal year 2007. The Company ended the year with approximately $162 million in cash and investments as compared to $230 million as of December 31, 2007. Fiscal year 2008 year-end cash and investments reflect approximately $151 million of cash utilized during 2008 to complete our five million share repurchase program and four acquisitions. Key financial results for fiscal year 2008 versus fiscal year 2007 are as follows: 2008 Subscriber Revenues $237 million Total Revenues $242 million (1) Net Earnings per Diluted Share $1.58 (1) For fiscal 2008 and fiscal 2007 the tax rate was approximately 29% and 28%, respectively. FOURTH QUARTER 2008 RESULTS Subscriber revenues for Q4 2008 increased 8% to $60 million compared to $55 million in Q4 2007. Total revenues for Q4 2008 increased 7% to $61 million compared to $57 million in Q4 2007. Net earnings per diluted share for Q4 2008 increased 32% to $0.45 compared to $0.34 in Q4 2007. SFAS 123(R) (expensing for stock-based compensation) expense impacted Q4 2008 earnings and net earnings per diluted share by approximately $1.4 million (approximately $2.0 million pre-tax) and $0.04, respectively. 2007 $212 million $221 million $1.35 % Change 12% 9% 17%
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During Q4 2008, the Company increased its gross and operating margins to 81% and 43%, respectively, from 80% and 37%, respectively, in Q4 2007. Key financial results for fourth quarter 2008 versus fourth quarter 2007 are as follows: Q4 2008 Q4 2007 % Change Subscriber Revenues $60 million $55 million 8% Total Revenues $61 million $57 million 7% (1) Net Earnings per Diluted Share $0.45 $0.34 32% (1) The Q4 2008 and Q4 2007 tax rate was approximately 25% and 28%, respectively. The Q4 2008 tax rate reflects recognition during the quarter of $1.8 million in federal and state research and development tax credits. “We are pleased with our execution of the three primary goals we articulated going into the year,” said Hemi Zucker, j2 Global’s chief executive officer. “We improved our margins through continued focus on cost containment, grew our revenue while maintaining our headcount and deployed a portion of our cash more effectively through stock repurchases and acquisitions.” BUSINESS OUTLOOK For fiscal 2009, j2 Global anticipates modest revenue and earnings growth (net of expenses related to stock-based compensation), inclusive of acquisitions, despite the ongoing global economic crisis. The Company remains well positioned to take advantage of changing customer and market conditions while continuing its focus on efficient marketing, optimizing its cost structure and deploying its cash resources into higher yielding investments such as acquisitions. 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 more than 3,000 cities in 46 countries on six continents. The Company offers Internet fax, voice and email solutions. j2 Global markets its services principally under the brand names eFax®, eFax Corporate®, Onebox®, eVoice® and Electric Mail®. As of December 31, 2008, j2 Global had achieved 13 consecutive fiscal years of revenue growth and seven consecutive fiscal years of positive and growing operating earnings. For more information about j2 Global, please visit www.j2global.com. Contact: Jeff Adelman j2 Global Communications, Inc. 323-372-3617 [email protected]
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“Safe Harbor” Statement Under the Private Securities Litigation Reform Act of 1995: Certain statements in this Press Release are “forwardlooking statements” within the meaning of The Private Securities Litigation Act of 1995, particularly those contained in the “Business Outlook” portion regarding the Company’s expected fiscal 2009 financial performance). 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; variability of revenue based on changing conditions in particular industries and the economy generally; 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 messaging and communications, including but not limited to the imposition or increase of taxes 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 2007 Annual Report on Form 10-K filed by j2 Global on February 25, 2008, 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 forward-looking statements provided in this press release and particularly those contained in the “Business Outlook” portion regarding the Company’s expected fiscal 2009 financial performance 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 statements.
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j2 GLOBAL COMMUNICATIONS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS) DECEMBER 31, 2008 ASSETS Cash and cash equivalents Short-term investments Accounts receivable, net of allowances of $2,896 and $1,378, respectively Prepaid expenses and other current assets Deferred income taxes Total current assets Long-term investments Property and equipment, net Goodwill Other purchased intangibles, net Deferred income taxes Other assets TOTAL ASSETS $ DECEMBER 31, 2007
$
150,780 14 14,083 6,683 2,958 174,518 11,081 18,938 72,783 36,791 7,787 142 322,040
$
154,220 54,297 15,365 5,061 1,724 230,667 21,241 23,511 39,452 29,220 6,113 205
$
350,409
LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable and accrued expenses Income taxes payable Deferred revenue Total current liabilities Accrued income tax liability Other long-term liabilities Total liabilities Commitments and contingencies Stockholders' Equity: Preferred stock Common stock Additional paid-in capital Treasury stock Retained earnings Accumulated other comprehensive income (loss) Total stockholders' equity TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$
16,915 1,800 13,680 32,395 38,643 1,022 72,060 —
$
17,516 4,649 14,708 36,873 30,863 59 67,795 —
— 523 131,185 (112,671) 234,843 (3,900) 249,980 $ 322,040 $
— 543 121,503 (4,662) 162,281 2,949 282,614 350,409
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j2 GLOBAL COMMUNICATIONS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) THREE MONTHS ENDED DECEMBER 31, 2008 2007 (UNAUDITED) (UNAUDITED) Revenues Subscriber Other Total revenue Cost of revenues (including share-based compensation of $255 and $901 for the three and twelve months of 2008, respectively, and $177 and $668 for the three and twelve months of 2007, respectively) Gross profit Operating expenses: Sales and marketing (including share-based compensation of $313 and $1,268 for the three and twelve months of 2008, respectively, and $342 and $1,187 for the three and twelve months of 2007, respectively) Research, development and engineering (including share-based compensation of $183 and $803 for the three and twelve months of 2008, respectively, and $228 and $771 for the three and twelve months of 2007, respectively) General and administrative (including share-based compensation of $1,243 and $5,014 for the three and twelve months of 2008, respectively, and $1,368 and $4,788 for the three and twelve months of 2007, respectively) Total operating expenses Operating earnings Interest and other income, net Earnings before income taxes Income tax expense Net earnings $ $ 59,622 1,014 60,636 $ 55,394 1,436 56,830 TWELVE MONTHS ENDED DECEMBER 31, 2008 2007
$
236,841 4,672 241,513
$
212,329 8,368 220,697
11,224 49,412
11,597 45,233
46,250 195,263
43,987 176,710
9,683
10,098
41,270
38,768
2,851
3,099
12,031
11,833
10,668 23,202 26,210 673 26,883 6,607 20,276 $
10,866 24,063 21,170 2,314 23,484 6,628 16,856 $
44,028 97,329 97,934 4,219 102,153 29,591 72,562 $
39,683 90,284 86,426 9,035 95,461 27,000 68,461
Basic net earnings per common share Diluted net earnings per common share
$ $
0.47 0.45
$ $
0.35 0.34
$ $
1.63 1.58
$ $
1.40 1.35
Basic weighted average shares outstanding Diluted weighted average shares outstanding
43,578,619 44,717,716
48,652,001 50,268,781
44,609,174 45,937,506
48,953,483 50,762,007
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j2 GLOBAL COMMUNICATIONS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) FOR THE YEAR ENDED DECEMBER 31, 2008 2007 Cash flows from operating activities: Net earnings Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization Share-based compensation Tax benefit of vested restricted stock Tax benefit of stock option exercises Excess tax benefits from share-based compensation Provision for doubtful accounts Deferred income taxes (Gain) loss on disposal of fixed assets Changes in assets and liabilities, net of effects of business combinations: Decrease (increase) in: Accounts receivable Prepaid expenses and other current assets Other assets Increase (decrease) in: Accounts payable and accrued expenses Income taxes payable Deferred revenue Accrued income tax liability Other Net cash provided by operating activities Cash flows from investing activities: Net purchases of available-for-sale investments Sales of available-for-sale investments Purchases of held-to-maturity investments Redemptions/Sales of held-to-maturity investments Purchases of property and equipment Acquisition of businesses, net of cash received Purchases of intangible assets Proceeds from sale of property and equipment Net cash provided by (used in) investing activities Cash flows from financing activities: Repurchases of common stock and restricted stock Issuance of common stock under employee stock purchase plan Exercise of stock options Excess tax benefits from share-based compensation Repayments of long-term debt Net cash used in financing activities Effect of exchange rate changes on cash and cash equivalents Net (decrease) increase in cash and cash equivalents Cash and cash equivalents, beginning of year Cash and cash equivalents, end of year $ $ 72,562 $ 68,461
13,177 7,986 720 1,309 (1,565) 2,815 (2,908) (6)
10,134 7,414 673 5,654 (4,731) 780 212 229
(1,809) 1,821 46 (994) (7,662) (2,118) 7,399 (57) 90,716
(3,886) (133) (201) (2,580) 3,345 2,991 5,898 (53) 94,207
— 36,170 — 27,881 (2,507) (42,825) (3,818) 25 14,926
(311,003) 279,088 (26,498) 78,954 (10,315) (11,165) (6,038) — (6,977)
(108,492) 183 1,829 1,565 — (104,915) (4,167) (3,440) 154,220 150,780 $
(42,427) 266 7,700 4,731 (153) (29,883) 1,268 58,615 95,605 154,220
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Investor Presentation (Based upon Fourth Quarter 2008 Results) February 19, 2009
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Safe Harbor for Forward-Looking Statements
Certain statements in this presentation constitute “forw ard-looking statements” w ithin the meaning of the Private Securities Litigation Reform Act of 1995, particularly those contained in the slide “2009 Assumptions/Guidance.” These forw ard-looking statements are based on management’s current expectations or beliefs as of February 19, 2009 and are subject to numerous assumptions, risks and uncertainties that could cause actual results to differ materially from those described in the forw ard-looking statements. We undertake no obligation to revise or publicly release the results of any revision to these forw ard-looking statements. Readers should carefully review the risk factors described in this presentation. Such statements address the follow ing subjects: Future operating results Global economic conditions Subscriber grow th, retention and usage levels Fax and voice service grow th New products, services and features Corporate spending Liquidity Netw ork capacity, coverage and security Regulatory developments Taxes
All information in this presentation speaks as of February 19, 2009 and any
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EXHIBIT 99.2
Investor Presentation (Based upon Fourth Quarter 2008 Results) February 19, 2009
1
Safe Harbor for Forward-Looking Statements
Certain statements in this presentation constitute “forw ard-looking statements” w ithin the meaning of the Private Securities Litigation Reform Act of 1995, particularly those contained in the slide “2009 Assumptions/Guidance.” These forw ard-looking statements are based on management’s current expectations or beliefs as of February 19, 2009 and are subject to numerous assumptions, risks and uncertainties that could cause actual results to differ materially from those described in the forw ard-looking statements. We undertake no obligation to revise or publicly release the results of any revision to these forw ard-looking statements. Readers should carefully review the risk factors described in this presentation. Such statements address the follow ing subjects: Future operating results Global economic conditions Subscriber grow th, retention and usage levels Fax and voice service grow th New products, services and features Corporate spending Liquidity Netw ork capacity, coverage and security Regulatory developments Taxes
All information in this presentation speaks as of February 19, 2009 and any distribution of this presentation after that date is not intended and will not be construed as updating or confirming such information.
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Safe Harbor for Forward-Looking Statements
Certain statements in this presentation constitute “forw ard-looking statements” w ithin the meaning of the Private Securities Litigation Reform Act of 1995, particularly those contained in the slide “2009 Assumptions/Guidance.” These forw ard-looking statements are based on management’s current expectations or beliefs as of February 19, 2009 and are subject to numerous assumptions, risks and uncertainties that could cause actual results to differ materially from those described in the forw ard-looking statements. We undertake no obligation to revise or publicly release the results of any revision to these forw ard-looking statements. Readers should carefully review the risk factors described in this presentation. Such statements address the follow ing subjects: Future operating results Global economic conditions Subscriber grow th, retention and usage levels Fax and voice service grow th New products, services and features Corporate spending Liquidity Netw ork capacity, coverage and security Regulatory developments Taxes
All information in this presentation speaks as of February 19, 2009 and any distribution of this presentation after that date is not intended and will not be construed as updating or confirming such information.
2
Risk Factors
The follow ing factors, among others, could cause our business, prospects, financial condition, operating results and cash flow s to be materially adversely affected: Inability to sustain grow th in our customer base, revenue or profitability, particularly in light of the uncertain U.S. or w orldw ide economy and the related impact on customer acquisitions, cancelations and credit card payment declines Competition in price, quality, features and geographic coverage Higher than expected tax rates or exposure to additional tax liability Inability to obtain telephone numbers in sufficient quantities on acceptable terms in desired locations Enactment of burdensome telecommunications or Internet regulations including increased taxes or fees Reduced use of fax services due to increased use of email, scanning or w idespread adoption of digital signatures Inadequate intellectual property protection or violations of third party intellectual property rights System failures or breach of system or netw ork security and resulting harm to our reputation Inability to adapt to technological change, or third party development of new technologies superior to ours Loss of services of executive officers and other key employees Inability to maintain existing or enter into new supplier and marketing relationships on acceptable terms Other factors set forth in our Annual Report on Form 10-K filed on 02/25/2008 and the other reports filed by us from time to time w ith the Securities and Exchange Commission
3
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Risk Factors
The follow ing factors, among others, could cause our business, prospects, financial condition, operating results and cash flow s to be materially adversely affected: Inability to sustain grow th in our customer base, revenue or profitability, particularly in light of the uncertain U.S. or w orldw ide economy and the related impact on customer acquisitions, cancelations and credit card payment declines Competition in price, quality, features and geographic coverage Higher than expected tax rates or exposure to additional tax liability Inability to obtain telephone numbers in sufficient quantities on acceptable terms in desired locations Enactment of burdensome telecommunications or Internet regulations including increased taxes or fees Reduced use of fax services due to increased use of email, scanning or w idespread adoption of digital signatures Inadequate intellectual property protection or violations of third party intellectual property rights System failures or breach of system or netw ork security and resulting harm to our reputation Inability to adapt to technological change, or third party development of new technologies superior to ours Loss of services of executive officers and other key employees Inability to maintain existing or enter into new supplier and marketing relationships on acceptable terms Other factors set forth in our Annual Report on Form 10-K filed on 02/25/2008 and the other reports filed by us from time to time w ith the Securities and Exchange Commission
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Messaging/Communications as a Service
All brand names and logos are trademarks of j2 Global Communications, Inc. or its affiliates in the U.S. and/or internationally.
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Messaging/Communications as a Service
All brand names and logos are trademarks of j2 Global Communications, Inc. or its affiliates in the U.S. and/or internationally.
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Core j2 Global Assets
11.6+ M Subscribed Telephone Numbers (DIDs) 1.2+ M Paid DIDs Global Advanced Messaging Network
3,100+ cities in 46 countries on 6 continents 19.8M+ unique DIDs worldwide in inventory
Intellectual Property
57 issued patents and licensing programs designed to monetize the portfolio Protection of brands and marks Programs designed to effectively collect evidence to prosecute junk faxers
Expertise
Effective customer acquisition strategies and Web marketing Breadth, depth and management of a complex network & architecture Successful acquisition and integration of 21 businesses in 7 countries
Strong Financial Position
13 consecutive years of Revenue growth 7 consecutive years of positive and growing Operating Earnings $88M of Free Cash Flow (FY 2008) $162M of cash & investments to fund growth/ Nominal debt related to holdback ( as of 12/31/08)
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Core j2 Global Assets
11.6+ M Subscribed Telephone Numbers (DIDs) 1.2+ M Paid DIDs Global Advanced Messaging Network
3,100+ cities in 46 countries on 6 continents 19.8M+ unique DIDs worldwide in inventory
Intellectual Property
57 issued patents and licensing programs designed to monetize the portfolio Protection of brands and marks Programs designed to effectively collect evidence to prosecute junk faxers
Expertise
Effective customer acquisition strategies and Web marketing Breadth, depth and management of a complex network & architecture Successful acquisition and integration of 21 businesses in 7 countries
Strong Financial Position
13 consecutive years of Revenue growth 7 consecutive years of positive and growing Operating Earnings $88M of Free Cash Flow (FY 2008) $162M of cash & investments to fund growth/ Nominal debt related to holdback ( as of 12/31/08)
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Subscriber Acquisition
Individuals
Targeted marketing (search, online media and radio) Sold through: eFax.com, eVoice.com, Onebox.com, PhonePeople.com, Fax.com, j2.com and other brand Websites Use of proprietary Life Cycle Management Advertising, Up-selling, and Calling-Party-Pays revenue supports the Free base
Small to Mid-Sized Businesses (SMBs)
Sold through: eFax Corporate, Onebox Receptionist and eVoice Receptionist Websites Supported by Chat and Telesales groups in U.S. and Europe (in multiple languages) Self-service Web-based broadcast fax engine at jblast.com Outsourced email, spam & virus protection and archiving Use of proprietary Life Cycle Management (i.e. feature up-sell)
Enterprise (SMEs)/Large Enterprise/Government
Direct sales force in U.S. and Europe Marketed through Web and traditional direct selling methods Designed for > 150 DID accounts
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Subscriber Acquisition
Individuals
Targeted marketing (search, online media and radio) Sold through: eFax.com, eVoice.com, Onebox.com, PhonePeople.com, Fax.com, j2.com and other brand Websites Use of proprietary Life Cycle Management Advertising, Up-selling, and Calling-Party-Pays revenue supports the Free base
Small to Mid-Sized Businesses (SMBs)
Sold through: eFax Corporate, Onebox Receptionist and eVoice Receptionist Websites Supported by Chat and Telesales groups in U.S. and Europe (in multiple languages) Self-service Web-based broadcast fax engine at jblast.com Outsourced email, spam & virus protection and archiving Use of proprietary Life Cycle Management (i.e. feature up-sell)
Enterprise (SMEs)/Large Enterprise/Government
Direct sales force in U.S. and Europe Marketed through Web and traditional direct selling methods Designed for > 150 DID accounts
6
Paid Subscription Drivers
Eight Drivers for Paid DID Additions
Subscribers coming directly to the Company’s Websites/Telesales
Brand awareness driven by demand-generation programs and “word of mouth” Search engine discovery Accounts for over 40% of monthly paid DID signups
Free-to-Paid subscriber upgrades
Life Cycle Management
eFax Corporate SMB sales
Hybrid Website and human interaction (i.e. Telesales)
Direct SME/Enterprise/Government
Through the outside Corporate Sales team
Direct domestic marketing spend for paid subscribers
Targeted marketing program across various media
International marketing programs Cross-sell
Offer additional services to existing customers
Acquisitions
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Paid Subscription Drivers
Eight Drivers for Paid DID Additions
Subscribers coming directly to the Company’s Websites/Telesales
Brand awareness driven by demand-generation programs and “word of mouth” Search engine discovery Accounts for over 40% of monthly paid DID signups
Free-to-Paid subscriber upgrades
Life Cycle Management
eFax Corporate SMB sales
Hybrid Website and human interaction (i.e. Telesales)
Direct SME/Enterprise/Government
Through the outside Corporate Sales team
Direct domestic marketing spend for paid subscribers
Targeted marketing program across various media
International marketing programs Cross-sell
Offer additional services to existing customers
Acquisitions
7
Financial Highlights
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Financial Highlights
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GAAP Results
$ Q4 2008 Margin $ FY 2008 Margin
GAAP Revenues Gross Profit/Margin (1) Operating Profit/Margin (1) GAAP EPS (2) Free Cash Flow (3) Cash and Investments
$60.6M $49.4M 81.5% $26.2M 43.2% $0.45 Per Share $25.4M $162M
$241.5M $195.3M 80.9% $97.9M 40.6%
$1.58 Per Share $88.2M $162M
(1) (2) (3)
Includes SFAS 123(R) non-cash compensation expense. Includes SFAS 123(R) non-cash compensation expense, net of tax benefit. Tax rates for Q4 and full year are 24.6% and 29.0% respectively. See slide 19 for computation of free cash flow.
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GAAP Results
$ Q4 2008 Margin $ FY 2008 Margin
GAAP Revenues Gross Profit/Margin (1) Operating Profit/Margin (1) GAAP EPS (2) Free Cash Flow (3) Cash and Investments
$60.6M $49.4M 81.5% $26.2M 43.2% $0.45 Per Share $25.4M $162M
$241.5M $195.3M 80.9% $97.9M 40.6%
$1.58 Per Share $88.2M $162M
(1) (2) (3)
Includes SFAS 123(R) non-cash compensation expense. Includes SFAS 123(R) non-cash compensation expense, net of tax benefit. Tax rates for Q4 and full year are 24.6% and 29.0% respectively. See slide 19 for computation of free cash flow.
9
Accomplishments & Outlook
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Accomplishments & Outlook
10
2008 Review
Fax DIDs increased to ~1,050,000 Multiple pricing programs working well Expanded network to 46 countries and 3,100+ cities Acquired Mijanda brands and customer base Strong Corporate Sales 24 wins in 2008 of large customers
Fax Services
Aggressive ROI based management of advertising campaigns Headwind on usage revenue and retention rates as economy weakened Strength of USD hurt international revenues in Q3 and Q4
2009 Outlook
Leverage j2’s corporate advantages
Purchasers seeking established, profitable, trusted and well capitalized providers
Increased focus on Canada and top European countries Continuing multiple pricing programs serving multiple segments Leveraging analytics and experience to further optimize advertising spend Fax indexing/other service enhancements to be fully rolled out Continuing lighter than average usage and retention in a weak economy Continuing focus on M&A
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2008 Review
Fax DIDs increased to ~1,050,000 Multiple pricing programs working well Expanded network to 46 countries and 3,100+ cities Acquired Mijanda brands and customer base Strong Corporate Sales 24 wins in 2008 of large customers
Fax Services
Aggressive ROI based management of advertising campaigns Headwind on usage revenue and retention rates as economy weakened Strength of USD hurt international revenues in Q3 and Q4
2009 Outlook
Leverage j2’s corporate advantages
Purchasers seeking established, profitable, trusted and well capitalized providers
Increased focus on Canada and top European countries Continuing multiple pricing programs serving multiple segments Leveraging analytics and experience to further optimize advertising spend Fax indexing/other service enhancements to be fully rolled out Continuing lighter than average usage and retention in a weak economy Continuing focus on M&A
11
2008 Review
Voice Services
Voice DIDs grew 127% from ~80,000 to ~190,000; grew to ~10% of j2 revenue Began international marketing efforts; introduced eReceptionist brand in Europe Speech-to-text deployed in the US Increased Telesales staff and expanded CS support Continued cross-selling to Fax customer base Acquired Phone People (j2’s largest voice acquisition)
2009 Outlook
Extend market leadership position with organic and M&A growth Continue to refine user experience and value proposition One-click cross-sells between fax and voice customers Testing additional enhanced features Refine brand strategy to expand market size Localize to support additional European languages and markets Customer service efficiency and enhancements
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2008 Review
Voice Services
Voice DIDs grew 127% from ~80,000 to ~190,000; grew to ~10% of j2 revenue Began international marketing efforts; introduced eReceptionist brand in Europe Speech-to-text deployed in the US Increased Telesales staff and expanded CS support Continued cross-selling to Fax customer base Acquired Phone People (j2’s largest voice acquisition)
2009 Outlook
Extend market leadership position with organic and M&A growth Continue to refine user experience and value proposition One-click cross-sells between fax and voice customers Testing additional enhanced features Refine brand strategy to expand market size Localize to support additional European languages and markets Customer service efficiency and enhancements
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Other Businesses
Email
Successfully completed acquisition of Mailwise (hygiene provider) Cross-sell of Electric Mail services to Mailwise customers Integration of Mailwise nearing completion Currently evaluating additional M&A opportunities
Patent Licensing
Patents out of reexamination in late 2008/early 2009 Opportunity to create new licensing programs and proceed with stayed litigation
Advertising/Broadcast Fax
Impact of weakening economy Expect softness to continue Only 2% of j2’s revenue
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Other Businesses
Email
Successfully completed acquisition of Mailwise (hygiene provider) Cross-sell of Electric Mail services to Mailwise customers Integration of Mailwise nearing completion Currently evaluating additional M&A opportunities
Patent Licensing
Patents out of reexamination in late 2008/early 2009 Opportunity to create new licensing programs and proceed with stayed litigation
Advertising/Broadcast Fax
Impact of weakening economy Expect softness to continue Only 2% of j2’s revenue
13
2008
Achieved revenues and above range EPS targets Successfully managed cost structure for all departments
j2 Operations
Revenues grew 9.4% while employee headcount was kept flat with 12/31/07 Increased operational efficiencies steadily throughout the year Margins at an all time high in Q4 Improved gross margins by 1.9% from 79.6% to 81.5% Improved operating margins by 5.9% from 37.3% to 43.2%
Effective deployment of cash through acquisitions and stock buyback Acquired 4 companies across multiple services
2009
Continue to enhance and expand on 2008 operational excellence Active pipeline of M&A opportunities – leverage j2’s acquisition and integration expertise Continue to leverage j2’s talent pool Effective advertising programs with increased ROI focus Prudent management of capital expenditures
14
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2008
Achieved revenues and above range EPS targets Successfully managed cost structure for all departments
j2 Operations
Revenues grew 9.4% while employee headcount was kept flat with 12/31/07 Increased operational efficiencies steadily throughout the year Margins at an all time high in Q4 Improved gross margins by 1.9% from 79.6% to 81.5% Improved operating margins by 5.9% from 37.3% to 43.2%
Effective deployment of cash through acquisitions and stock buyback Acquired 4 companies across multiple services
2009
Continue to enhance and expand on 2008 operational excellence Active pipeline of M&A opportunities – leverage j2’s acquisition and integration expertise Continue to leverage j2’s talent pool Effective advertising programs with increased ROI focus Prudent management of capital expenditures
14
2009 Outlook
15
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2009 Outlook
15
2009 Assumptions/Guidance
Economy
2009 worse than 2008; 4 Quarters of GDP contraction; global recession; increasing unemployment; bottom not yet reached Stronger USD relative to GBP and Euro
Operational View
Continuing focus on optimizing margins and free cash flow Decrease in usage revenue and retention rates Shifting Mix to lower MARPU DIDs (Corporate, Voice and secondary Fax brands) Increased Investment in IP M&A/higher yielding investments for our cash
Other Items
Lower Other Income due to falling interest rates Modestly higher share count/higher SFAS 123(R) expense Tax rate assumed to be ~ 30.5%
Modest Increase in Revenues and Non-GAAP EPS
16
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2009 Assumptions/Guidance
Economy
2009 worse than 2008; 4 Quarters of GDP contraction; global recession; increasing unemployment; bottom not yet reached Stronger USD relative to GBP and Euro
Operational View
Continuing focus on optimizing margins and free cash flow Decrease in usage revenue and retention rates Shifting Mix to lower MARPU DIDs (Corporate, Voice and secondary Fax brands) Increased Investment in IP M&A/higher yielding investments for our cash
Other Items
Lower Other Income due to falling interest rates Modestly higher share count/higher SFAS 123(R) expense Tax rate assumed to be ~ 30.5%
Modest Increase in Revenues and Non-GAAP EPS
16
Supplemental Information
17
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Supplemental Information
17
Metrics
2007 Q1
Fixed Subscriber Revenues Variable Subscriber Revenues Subscriber Revenues Other Revenues To tal Revenues DID - Ba sed Revenues Non-DID Based Revenues Total Revenues Subscriber Revenues/To tal Revenues DID - Ba sed/Total Revenues % Fixed Subscriber Revenues % Variable Subscriber Revenues Paid DIDs (1) (2) Avera ge Mo nthly Revenue/DID Cancel Ra te (3) Free DIDs Avera ge Mo nthly Revenue/DID Total DID Inventory (MM) Cities Co vered Countries Co vered $37,757 12,536 $50,293 3,848 $54,141 $48,684 5,457 $54,141 92.9% 89.9% 75.1% 24.9% 930,273 $17.16 3.0%
2008 Q3
$41,362 12,667 $54,029 1,717 $55,746 $52,204 3,542 $55,746 96.9% 93.6% 76.6% 23.4% 1,017,985 $16.80 3.0%
Q2
$39,643 12,970 $52,613 1,367 $53,980 $50,929 3,051 $53,980 97.5% 94.3% 75.3% 24.7% 972,599 $17.26 2.8%
Q4
Total
Q1
$44,260 12,956 $57,216 1,433 $58,649 $55,301 3,348 $58,649 97.6% 94.3% 77.4% 22.6% 1,098,650 $16.30 2.8%
Q2
$46,593 12,943 $59,536 1,140 $60,676 $57,551 3,125 $60,676 98.1% 94.8% 78.3% 21.7% 1,162,872 $16.29 2.9%
Q3
$47,481 12,985 $60,466 1,086 $61,552 $58,440 3,112 $61,552 98.2% 94.9% 78.5% 21.5% 1,198,950 $15.87 3.0%
Q4
Total
$43,336 $162,098 12,057 50,231 $55,393 1,437 $56,830 212,329 8,368 220,697
$48,125 $186,459 11,497 50,382 $59,622 1,014 $60,636 236,841 4,673 241,513
$53,473 $205,290 3,357 15,407 $56,830 220,697 97.5% 94.1% 78.2% 21.8% 1,063,698 $16.44 2.7% 96.2% 93.0% 76.3% 23.7%
$57,691 $228,983 2,944 12,529 $60,636 241,512 98.3% 95.1% 80.7% 19.3% 1,236,079 $15.05 3.1% 98.1% 94.8% 78.7% 21.3%
10,355,815 10,671,519 10,706,503 10,874,104 $0.05 $0.05 $0.06 $0.07 16.9 2,884 40 17.0 2,933 42 17.1 2,950 42 17.2 3,024 42
10,098,143 10,233,875 10,357,506 10,362,771 $0.08 $0.07 $0.07 $0.06 17.4 3,084 44 17.5 3,126 45 17.3 3,137 46 19.8 3,135 46
Cash & Investment Free Cash Flow(4)
(millio ns) (millio ns)
$210.3 $26.1
$233.1 $20.6
$239.8 $15.7
$229.8 $21.4 $83.9
$181.3 $26.9
$149.9 $23.0
$151.8 $12.8
$161.9 $25.4 $88.2
(1)
Paid DIDs reflect a reserv e for the net imp act o f price increase, d atab ase upgrades an d datab ase clean up. DIDs also reflect reserves taken in con jun ction with asset acquisitio ns fo r anticipated product mig ratio n an d/or price increase. (3) Cancel Rate is d efin ed as in dividual cu stomer DIDs with greater th an 4 months of continuou s service (co n tinuou s service includes cu stomer DIDs wh ich are administratively cancelled
(2)
and reactivated with in the same calen dar month), and DIDs related to enterp rise customers beginning with their first day of service. Cancel rate is calculated mo nth ly and expressed h ere as an averag e over the th ree months of the quarter. Free Cash Flow is net cash provided by operating activities, less p urchases of property and eq uipment. See slide 19 for computation of free cash flow. Quarterly revenues for 2007 and Q1 20 08 have been reclassified between fixed, variable and other revenue and between DID based and non-DID b ased revenue. This reclassificatio n is related to revised reven ue classification for a j2 subsid iary , it does not impact total revenues for the quarter.
(4)
18
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Metrics
2007 Q1
Fixed Subscriber Revenues Variable Subscriber Revenues Subscriber Revenues Other Revenues To tal Revenues DID - Ba sed Revenues Non-DID Based Revenues Total Revenues Subscriber Revenues/To tal Revenues DID - Ba sed/Total Revenues % Fixed Subscriber Revenues % Variable Subscriber Revenues Paid DIDs (1) (2) Avera ge Mo nthly Revenue/DID Cancel Ra te (3) Free DIDs Avera ge Mo nthly Revenue/DID Total DID Inventory (MM) Cities Co vered Countries Co vered $37,757 12,536 $50,293 3,848 $54,141 $48,684 5,457 $54,141 92.9% 89.9% 75.1% 24.9% 930,273 $17.16 3.0%
2008 Q3
$41,362 12,667 $54,029 1,717 $55,746 $52,204 3,542 $55,746 96.9% 93.6% 76.6% 23.4% 1,017,985 $16.80 3.0%
Q2
$39,643 12,970 $52,613 1,367 $53,980 $50,929 3,051 $53,980 97.5% 94.3% 75.3% 24.7% 972,599 $17.26 2.8%
Q4
Total
Q1
$44,260 12,956 $57,216 1,433 $58,649 $55,301 3,348 $58,649 97.6% 94.3% 77.4% 22.6% 1,098,650 $16.30 2.8%
Q2
$46,593 12,943 $59,536 1,140 $60,676 $57,551 3,125 $60,676 98.1% 94.8% 78.3% 21.7% 1,162,872 $16.29 2.9%
Q3
$47,481 12,985 $60,466 1,086 $61,552 $58,440 3,112 $61,552 98.2% 94.9% 78.5% 21.5% 1,198,950 $15.87 3.0%
Q4
Total
$43,336 $162,098 12,057 50,231 $55,393 1,437 $56,830 212,329 8,368 220,697
$48,125 $186,459 11,497 50,382 $59,622 1,014 $60,636 236,841 4,673 241,513
$53,473 $205,290 3,357 15,407 $56,830 220,697 97.5% 94.1% 78.2% 21.8% 1,063,698 $16.44 2.7% 96.2% 93.0% 76.3% 23.7%
$57,691 $228,983 2,944 12,529 $60,636 241,512 98.3% 95.1% 80.7% 19.3% 1,236,079 $15.05 3.1% 98.1% 94.8% 78.7% 21.3%
10,355,815 10,671,519 10,706,503 10,874,104 $0.05 $0.05 $0.06 $0.07 16.9 2,884 40 17.0 2,933 42 17.1 2,950 42 17.2 3,024 42
10,098,143 10,233,875 10,357,506 10,362,771 $0.08 $0.07 $0.07 $0.06 17.4 3,084 44 17.5 3,126 45 17.3 3,137 46 19.8 3,135 46
Cash & Investment Free Cash Flow(4)
(millio ns) (millio ns)
$210.3 $26.1
$233.1 $20.6
$239.8 $15.7
$229.8 $21.4 $83.9
$181.3 $26.9
$149.9 $23.0
$151.8 $12.8
$161.9 $25.4 $88.2
(1) (2) (3)
Paid DIDs reflect a reserv e for the net imp act o f price increase, d atab ase upgrades an d datab ase clean up. DIDs also reflect reserves taken in con jun ction with asset acquisitio ns fo r anticipated product mig ratio n an d/or price increase. Cancel Rate is d efin ed as in dividual cu stomer DIDs with greater th an 4 months of continuou s service (co n tinuou s service includes cu stomer DIDs wh ich are administratively cancelled
and reactivated with in the same calen dar month), and DIDs related to enterp rise customers beginning with their first day of service. Cancel rate is calculated mo nth ly and expressed h ere as an averag e over the th ree months of the quarter. Free Cash Flow is net cash provided by operating activities, less p urchases of property and eq uipment. See slide 19 for computation of free cash flow. Quarterly revenues for 2007 and Q1 20 08 have been reclassified between fixed, variable and other revenue and between DID based and non-DID b ased revenue. This reclassificatio n is related to revised reven ue classification for a j2 subsid iary , it does not impact total revenues for the quarter.
(4)
18
Computation of Free Cash Flow
($ in millions)
Q 1 '07 Net cash from operating activities P urch. of property & equipment Free Cash Flow
(1)
Q 2 '07 $23.113 (2.506) $20.607
Q 3 '07 $18.656 (2.940) $15.716
Q 4 '07 $25.779 (4.340) $21.439
Q 1 '08 $27.411 (0.469) $26.942
Q 2 '08 $23.840 (0.796) $23.044
Q 3 '08 $13.738 (0.937) $12.801
Q 4 '08 $25.727 (0.305) $25.422
$26.659 (0.529) $26.130
(1)
Net cash prov ided by operating activ ities, less purchases of property & equipment. Free Cash Flow amounts are not meant as a substitute f or GAAP, but are solely f or inf ormational purposes.
19
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Computation of Free Cash Flow
($ in millions)
Q 1 '07 Net cash from operating activities P urch. of property & equipment Free Cash Flow
(1)
Q 2 '07 $23.113 (2.506) $20.607
Q 3 '07 $18.656 (2.940) $15.716
Q 4 '07 $25.779 (4.340) $21.439
Q 1 '08 $27.411 (0.469) $26.942
Q 2 '08 $23.840 (0.796) $23.044
Q 3 '08 $13.738 (0.937) $12.801
Q 4 '08 $25.727 (0.305) $25.422
$26.659 (0.529) $26.130
(1)
Net cash prov ided by operating activ ities, less purchases of property & equipment. Free Cash Flow amounts are not meant as a substitute f or GAAP, but are solely f or inf ormational purposes.
19
Usage of Corporate and Web High Volume Users
20
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Usage of Corporate and Web High Volume Users
20
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
FORM 8-K CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) February 19, 2009
j2 Global Communications, Inc.
(Exact name of registrant as specified in its charter) Delaware (State or other jurisdiction of incorporation or organization) 0-25965 (Commission File Number) 6922 Hollywood Blvd. Suite 500 Los Angeles, California 90028 (Address of principal executive offices) (323) 860-9200 (Registrant's telephone number, including area code) Not Applicable (Former name or former address, if changed since last report) 51-0371142 (IRS Employer Identification No.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): o o o o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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ITEM 2.02 and 7.01. Results of Operations and Financial Condition and Regulation FD Disclosure On February 19, 2009, j2 Global Communications, Inc. issued a press release announcing its financial results for the fourth quarter and year ended December 31, 2008. The press release also contains information regarding the Company’s expected financial performance for fiscal year 2009. A copy of the press release is furnished as Exhibit 99.1 to this Form 8-K. Also on February 19, 2009, j2 Global hosted its fiscal 2008 earnings conference call and Webcast. Via the Webcast, the Company presented its February 2009 Investor Presentation, which contains a summary of j2 Global’s financial results for the fiscal year ended December 31, 2008; information regarding the Company’s expected financial performance for fiscal year 2009; and certain other financial and operating information regarding j2 Global. A copy of this presentation is furnished as Exhibit 99.2 to this Form 8-K. NOTE: This information is being furnished under both Item 2.02 (Results of Operations and Financial Condition) and Item 7.01 (Regulation FD Disclosure) of Form 8-K and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
ITEM 9.01. Financial Statements and Exhibits. (c) Exhibits EXHIBIT NUMBER 99.1 99.2
DESCRIPTION Press Release dated February 19, 2009. February 2009 Investor Presentation.
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
j2 Global Communications, Inc. (Registrant) Date: February 19, 2009 By: /s/ Kathleen M. Griggs Kathleen M. Griggs Chief Financial Officer
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INDEX TO EXHIBITS EXHIBIT NUMBER 99.1 99.2 DESCRIPTION Press Release dated February 19, 2009. February 2009 Investor Presentation.
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EXHIBIT 99.1
j2 Global Reports 2008 Year End Results
EPS Increases 17% versus 2007; Subscriber Revenues Up 12% LOS ANGELES—February 19, 2009—j2 Global Communications, Inc. [NASDAQGS:JCOM] today reported financial results for the fourth quarter and year ended December 31, 2008. ANNUAL RESULTS Subscriber revenues for fiscal year 2008 increased 12% to $237 million compared to $212 million in fiscal year 2007. Total revenues for fiscal year 2008 increased 9% to $242 million compared to $221 million in fiscal year 2007. Net earnings per diluted share for 2008 increased 17% to $1.58 compared to $1.35 for 2007. SFAS 123(R) (expensing for stock-based compensation) expense impacted 2008 earnings and net earnings per diluted share by approximately $5.7 million (approximately $8.0 million pre-tax) and $0.12, respectively. During fiscal year 2008, the Company increased its gross and operating margins to 81% and 41%, respectively, from 80% and 39%, respectively, in fiscal year 2007. The Company ended the year with approximately $162 million in cash and investments as compared to $230 million as of December 31, 2007. Fiscal year 2008 year-end cash and investments reflect approximately $151 million of cash utilized during 2008 to complete our five million share repurchase program and four acquisitions. Key financial results for fiscal year 2008 versus fiscal year 2007 are as follows: 2008 Subscriber Revenues $237 million Total Revenues $242 million (1) Net Earnings per Diluted Share $1.58 (1) For fiscal 2008 and fiscal 2007 the tax rate was approximately 29% and 28%, respectively. FOURTH QUARTER 2008 RESULTS Subscriber revenues for Q4 2008 increased 8% to $60 million compared to $55 million in Q4 2007. Total revenues for Q4 2008 increased 7% to $61 million compared to $57 million in Q4 2007. Net earnings per diluted share for Q4 2008 increased 32% to $0.45 compared to $0.34 in Q4 2007. SFAS 123(R) (expensing for stock-based compensation) expense impacted Q4 2008 earnings and net earnings per diluted share by approximately $1.4 million (approximately $2.0 million pre-tax) and $0.04, respectively. 2007 $212 million $221 million $1.35 % Change 12% 9% 17%
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During Q4 2008, the Company increased its gross and operating margins to 81% and 43%, respectively, from 80% and 37%, respectively, in Q4 2007. Key financial results for fourth quarter 2008 versus fourth quarter 2007 are as follows: Q4 2008 Q4 2007 % Change Subscriber Revenues $60 million $55 million 8% Total Revenues $61 million $57 million 7% (1) Net Earnings per Diluted Share $0.45 $0.34 32% (1) The Q4 2008 and Q4 2007 tax rate was approximately 25% and 28%, respectively. The Q4 2008 tax rate reflects recognition during the quarter of $1.8 million in federal and state research and development tax credits. “We are pleased with our execution of the three primary goals we articulated going into the year,” said Hemi Zucker, j2 Global’s chief executive officer. “We improved our margins through continued focus on cost containment, grew our revenue while maintaining our headcount and deployed a portion of our cash more effectively through stock repurchases and acquisitions.” BUSINESS OUTLOOK For fiscal 2009, j2 Global anticipates modest revenue and earnings growth (net of expenses related to stock-based compensation), inclusive of acquisitions, despite the ongoing global economic crisis. The Company remains well positioned to take advantage of changing customer and market conditions while continuing its focus on efficient marketing, optimizing its cost structure and deploying its cash resources into higher yielding investments such as acquisitions. 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 more than 3,000 cities in 46 countries on six continents. The Company offers Internet fax, voice and email solutions. j2 Global markets its services principally under the brand names eFax®, eFax Corporate®, Onebox®, eVoice® and Electric Mail®. As of December 31, 2008, j2 Global had achieved 13 consecutive fiscal years of revenue growth and seven consecutive fiscal years of positive and growing operating earnings. For more information about j2 Global, please visit www.j2global.com. Contact: Jeff Adelman j2 Global Communications, Inc. 323-372-3617 [email protected]
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“Safe Harbor” Statement Under the Private Securities Litigation Reform Act of 1995: Certain statements in this Press Release are “forwardlooking statements” within the meaning of The Private Securities Litigation Act of 1995, particularly those contained in the “Business Outlook” portion regarding the Company’s expected fiscal 2009 financial performance). 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; variability of revenue based on changing conditions in particular industries and the economy generally; 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 messaging and communications, including but not limited to the imposition or increase of taxes 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 2007 Annual Report on Form 10-K filed by j2 Global on February 25, 2008, 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 forward-looking statements provided in this press release and particularly those contained in the “Business Outlook” portion regarding the Company’s expected fiscal 2009 financial performance 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 statements.
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j2 GLOBAL COMMUNICATIONS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS) DECEMBER 31, 2008 ASSETS Cash and cash equivalents Short-term investments Accounts receivable, net of allowances of $2,896 and $1,378, respectively Prepaid expenses and other current assets Deferred income taxes Total current assets Long-term investments Property and equipment, net Goodwill Other purchased intangibles, net Deferred income taxes Other assets TOTAL ASSETS $ DECEMBER 31, 2007
$
150,780 14 14,083 6,683 2,958 174,518 11,081 18,938 72,783 36,791 7,787 142 322,040
$
154,220 54,297 15,365 5,061 1,724 230,667 21,241 23,511 39,452 29,220 6,113 205
$
350,409
LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable and accrued expenses Income taxes payable Deferred revenue Total current liabilities Accrued income tax liability Other long-term liabilities Total liabilities Commitments and contingencies Stockholders' Equity: Preferred stock Common stock Additional paid-in capital Treasury stock Retained earnings Accumulated other comprehensive income (loss) Total stockholders' equity TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$
16,915 1,800 13,680 32,395 38,643 1,022 72,060 —
$
17,516 4,649 14,708 36,873 30,863 59 67,795 —
— 523 131,185 (112,671) 234,843 (3,900) 249,980 $ 322,040 $
— 543 121,503 (4,662) 162,281 2,949 282,614 350,409
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j2 GLOBAL COMMUNICATIONS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) THREE MONTHS ENDED DECEMBER 31, 2008 2007 (UNAUDITED) (UNAUDITED) Revenues Subscriber Other Total revenue Cost of revenues (including share-based compensation of $255 and $901 for the three and twelve months of 2008, respectively, and $177 and $668 for the three and twelve months of 2007, respectively) Gross profit Operating expenses: Sales and marketing (including share-based compensation of $313 and $1,268 for the three and twelve months of 2008, respectively, and $342 and $1,187 for the three and twelve months of 2007, respectively) Research, development and engineering (including share-based compensation of $183 and $803 for the three and twelve months of 2008, respectively, and $228 and $771 for the three and twelve months of 2007, respectively) General and administrative (including share-based compensation of $1,243 and $5,014 for the three and twelve months of 2008, respectively, and $1,368 and $4,788 for the three and twelve months of 2007, respectively) Total operating expenses Operating earnings Interest and other income, net Earnings before income taxes Income tax expense Net earnings $ $ 59,622 1,014 60,636 $ 55,394 1,436 56,830 TWELVE MONTHS ENDED DECEMBER 31, 2008 2007
$
236,841 4,672 241,513
$
212,329 8,368 220,697
11,224 49,412
11,597 45,233
46,250 195,263
43,987 176,710
9,683
10,098
41,270
38,768
2,851
3,099
12,031
11,833
10,668 23,202 26,210 673 26,883 6,607 20,276 $
10,866 24,063 21,170 2,314 23,484 6,628 16,856 $
44,028 97,329 97,934 4,219 102,153 29,591 72,562 $
39,683 90,284 86,426 9,035 95,461 27,000 68,461
Basic net earnings per common share Diluted net earnings per common share
$ $
0.47 0.45
$ $
0.35 0.34
$ $
1.63 1.58
$ $
1.40 1.35
Basic weighted average shares outstanding Diluted weighted average shares outstanding
43,578,619 44,717,716
48,652,001 50,268,781
44,609,174 45,937,506
48,953,483 50,762,007
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j2 GLOBAL COMMUNICATIONS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) FOR THE YEAR ENDED DECEMBER 31, 2008 2007 Cash flows from operating activities: Net earnings Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization Share-based compensation Tax benefit of vested restricted stock Tax benefit of stock option exercises Excess tax benefits from share-based compensation Provision for doubtful accounts Deferred income taxes (Gain) loss on disposal of fixed assets Changes in assets and liabilities, net of effects of business combinations: Decrease (increase) in: Accounts receivable Prepaid expenses and other current assets Other assets Increase (decrease) in: Accounts payable and accrued expenses Income taxes payable Deferred revenue Accrued income tax liability Other Net cash provided by operating activities Cash flows from investing activities: Net purchases of available-for-sale investments Sales of available-for-sale investments Purchases of held-to-maturity investments Redemptions/Sales of held-to-maturity investments Purchases of property and equipment Acquisition of businesses, net of cash received Purchases of intangible assets Proceeds from sale of property and equipment Net cash provided by (used in) investing activities Cash flows from financing activities: Repurchases of common stock and restricted stock Issuance of common stock under employee stock purchase plan Exercise of stock options Excess tax benefits from share-based compensation Repayments of long-term debt Net cash used in financing activities Effect of exchange rate changes on cash and cash equivalents Net (decrease) increase in cash and cash equivalents Cash and cash equivalents, beginning of year Cash and cash equivalents, end of year $ $ 72,562 $ 68,461
13,177 7,986 720 1,309 (1,565) 2,815 (2,908) (6)
10,134 7,414 673 5,654 (4,731) 780 212 229
(1,809) 1,821 46 (994) (7,662) (2,118) 7,399 (57) 90,716
(3,886) (133) (201) (2,580) 3,345 2,991 5,898 (53) 94,207
— 36,170 — 27,881 (2,507) (42,825) (3,818) 25 14,926
(311,003) 279,088 (26,498) 78,954 (10,315) (11,165) (6,038) — (6,977)
(108,492) 183 1,829 1,565 — (104,915) (4,167) (3,440) 154,220 150,780 $
(42,427) 266 7,700 4,731 (153) (29,883) 1,268 58,615 95,605 154,220
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Investor Presentation (Based upon Fourth Quarter 2008 Results) February 19, 2009
1
Safe Harbor for Forward-Looking Statements
Certain statements in this presentation constitute “forw ard-looking statements” w ithin the meaning of the Private Securities Litigation Reform Act of 1995, particularly those contained in the slide “2009 Assumptions/Guidance.” These forw ard-looking statements are based on management’s current expectations or beliefs as of February 19, 2009 and are subject to numerous assumptions, risks and uncertainties that could cause actual results to differ materially from those described in the forw ard-looking statements. We undertake no obligation to revise or publicly release the results of any revision to these forw ard-looking statements. Readers should carefully review the risk factors described in this presentation. Such statements address the follow ing subjects: Future operating results Global economic conditions Subscriber grow th, retention and usage levels Fax and voice service grow th New products, services and features Corporate spending Liquidity Netw ork capacity, coverage and security Regulatory developments Taxes
All information in this presentation speaks as of February 19, 2009 and any
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EXHIBIT 99.2
Investor Presentation (Based upon Fourth Quarter 2008 Results) February 19, 2009
1
Safe Harbor for Forward-Looking Statements
Certain statements in this presentation constitute “forw ard-looking statements” w ithin the meaning of the Private Securities Litigation Reform Act of 1995, particularly those contained in the slide “2009 Assumptions/Guidance.” These forw ard-looking statements are based on management’s current expectations or beliefs as of February 19, 2009 and are subject to numerous assumptions, risks and uncertainties that could cause actual results to differ materially from those described in the forw ard-looking statements. We undertake no obligation to revise or publicly release the results of any revision to these forw ard-looking statements. Readers should carefully review the risk factors described in this presentation. Such statements address the follow ing subjects: Future operating results Global economic conditions Subscriber grow th, retention and usage levels Fax and voice service grow th New products, services and features Corporate spending Liquidity Netw ork capacity, coverage and security Regulatory developments Taxes
All information in this presentation speaks as of February 19, 2009 and any distribution of this presentation after that date is not intended and will not be construed as updating or confirming such information.
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Safe Harbor for Forward-Looking Statements
Certain statements in this presentation constitute “forw ard-looking statements” w ithin the meaning of the Private Securities Litigation Reform Act of 1995, particularly those contained in the slide “2009 Assumptions/Guidance.” These forw ard-looking statements are based on management’s current expectations or beliefs as of February 19, 2009 and are subject to numerous assumptions, risks and uncertainties that could cause actual results to differ materially from those described in the forw ard-looking statements. We undertake no obligation to revise or publicly release the results of any revision to these forw ard-looking statements. Readers should carefully review the risk factors described in this presentation. Such statements address the follow ing subjects: Future operating results Global economic conditions Subscriber grow th, retention and usage levels Fax and voice service grow th New products, services and features Corporate spending Liquidity Netw ork capacity, coverage and security Regulatory developments Taxes
All information in this presentation speaks as of February 19, 2009 and any distribution of this presentation after that date is not intended and will not be construed as updating or confirming such information.
2
Risk Factors
The follow ing factors, among others, could cause our business, prospects, financial condition, operating results and cash flow s to be materially adversely affected: Inability to sustain grow th in our customer base, revenue or profitability, particularly in light of the uncertain U.S. or w orldw ide economy and the related impact on customer acquisitions, cancelations and credit card payment declines Competition in price, quality, features and geographic coverage Higher than expected tax rates or exposure to additional tax liability Inability to obtain telephone numbers in sufficient quantities on acceptable terms in desired locations Enactment of burdensome telecommunications or Internet regulations including increased taxes or fees Reduced use of fax services due to increased use of email, scanning or w idespread adoption of digital signatures Inadequate intellectual property protection or violations of third party intellectual property rights System failures or breach of system or netw ork security and resulting harm to our reputation Inability to adapt to technological change, or third party development of new technologies superior to ours Loss of services of executive officers and other key employees Inability to maintain existing or enter into new supplier and marketing relationships on acceptable terms Other factors set forth in our Annual Report on Form 10-K filed on 02/25/2008 and the other reports filed by us from time to time w ith the Securities and Exchange Commission
3
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Risk Factors
The follow ing factors, among others, could cause our business, prospects, financial condition, operating results and cash flow s to be materially adversely affected: Inability to sustain grow th in our customer base, revenue or profitability, particularly in light of the uncertain U.S. or w orldw ide economy and the related impact on customer acquisitions, cancelations and credit card payment declines Competition in price, quality, features and geographic coverage Higher than expected tax rates or exposure to additional tax liability Inability to obtain telephone numbers in sufficient quantities on acceptable terms in desired locations Enactment of burdensome telecommunications or Internet regulations including increased taxes or fees Reduced use of fax services due to increased use of email, scanning or w idespread adoption of digital signatures Inadequate intellectual property protection or violations of third party intellectual property rights System failures or breach of system or netw ork security and resulting harm to our reputation Inability to adapt to technological change, or third party development of new technologies superior to ours Loss of services of executive officers and other key employees Inability to maintain existing or enter into new supplier and marketing relationships on acceptable terms Other factors set forth in our Annual Report on Form 10-K filed on 02/25/2008 and the other reports filed by us from time to time w ith the Securities and Exchange Commission
3
Messaging/Communications as a Service
All brand names and logos are trademarks of j2 Global Communications, Inc. or its affiliates in the U.S. and/or internationally.
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Messaging/Communications as a Service
All brand names and logos are trademarks of j2 Global Communications, Inc. or its affiliates in the U.S. and/or internationally.
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Core j2 Global Assets
11.6+ M Subscribed Telephone Numbers (DIDs) 1.2+ M Paid DIDs Global Advanced Messaging Network
3,100+ cities in 46 countries on 6 continents 19.8M+ unique DIDs worldwide in inventory
Intellectual Property
57 issued patents and licensing programs designed to monetize the portfolio Protection of brands and marks Programs designed to effectively collect evidence to prosecute junk faxers
Expertise
Effective customer acquisition strategies and Web marketing Breadth, depth and management of a complex network & architecture Successful acquisition and integration of 21 businesses in 7 countries
Strong Financial Position
13 consecutive years of Revenue growth 7 consecutive years of positive and growing Operating Earnings $88M of Free Cash Flow (FY 2008) $162M of cash & investments to fund growth/ Nominal debt related to holdback ( as of 12/31/08)
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Core j2 Global Assets
11.6+ M Subscribed Telephone Numbers (DIDs) 1.2+ M Paid DIDs Global Advanced Messaging Network
3,100+ cities in 46 countries on 6 continents 19.8M+ unique DIDs worldwide in inventory
Intellectual Property
57 issued patents and licensing programs designed to monetize the portfolio Protection of brands and marks Programs designed to effectively collect evidence to prosecute junk faxers
Expertise
Effective customer acquisition strategies and Web marketing Breadth, depth and management of a complex network & architecture Successful acquisition and integration of 21 businesses in 7 countries
Strong Financial Position
13 consecutive years of Revenue growth 7 consecutive years of positive and growing Operating Earnings $88M of Free Cash Flow (FY 2008) $162M of cash & investments to fund growth/ Nominal debt related to holdback ( as of 12/31/08)
5
Subscriber Acquisition
Individuals
Targeted marketing (search, online media and radio) Sold through: eFax.com, eVoice.com, Onebox.com, PhonePeople.com, Fax.com, j2.com and other brand Websites Use of proprietary Life Cycle Management Advertising, Up-selling, and Calling-Party-Pays revenue supports the Free base
Small to Mid-Sized Businesses (SMBs)
Sold through: eFax Corporate, Onebox Receptionist and eVoice Receptionist Websites Supported by Chat and Telesales groups in U.S. and Europe (in multiple languages) Self-service Web-based broadcast fax engine at jblast.com Outsourced email, spam & virus protection and archiving Use of proprietary Life Cycle Management (i.e. feature up-sell)
Enterprise (SMEs)/Large Enterprise/Government
Direct sales force in U.S. and Europe Marketed through Web and traditional direct selling methods Designed for > 150 DID accounts
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Subscriber Acquisition
Individuals
Targeted marketing (search, online media and radio) Sold through: eFax.com, eVoice.com, Onebox.com, PhonePeople.com, Fax.com, j2.com and other brand Websites Use of proprietary Life Cycle Management Advertising, Up-selling, and Calling-Party-Pays revenue supports the Free base
Small to Mid-Sized Businesses (SMBs)
Sold through: eFax Corporate, Onebox Receptionist and eVoice Receptionist Websites Supported by Chat and Telesales groups in U.S. and Europe (in multiple languages) Self-service Web-based broadcast fax engine at jblast.com Outsourced email, spam & virus protection and archiving Use of proprietary Life Cycle Management (i.e. feature up-sell)
Enterprise (SMEs)/Large Enterprise/Government
Direct sales force in U.S. and Europe Marketed through Web and traditional direct selling methods Designed for > 150 DID accounts
6
Paid Subscription Drivers
Eight Drivers for Paid DID Additions
Subscribers coming directly to the Company’s Websites/Telesales
Brand awareness driven by demand-generation programs and “word of mouth” Search engine discovery Accounts for over 40% of monthly paid DID signups
Free-to-Paid subscriber upgrades
Life Cycle Management
eFax Corporate SMB sales
Hybrid Website and human interaction (i.e. Telesales)
Direct SME/Enterprise/Government
Through the outside Corporate Sales team
Direct domestic marketing spend for paid subscribers
Targeted marketing program across various media
International marketing programs Cross-sell
Offer additional services to existing customers
Acquisitions
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Paid Subscription Drivers
Eight Drivers for Paid DID Additions
Subscribers coming directly to the Company’s Websites/Telesales
Brand awareness driven by demand-generation programs and “word of mouth” Search engine discovery Accounts for over 40% of monthly paid DID signups
Free-to-Paid subscriber upgrades
Life Cycle Management
eFax Corporate SMB sales
Hybrid Website and human interaction (i.e. Telesales)
Direct SME/Enterprise/Government
Through the outside Corporate Sales team
Direct domestic marketing spend for paid subscribers
Targeted marketing program across various media
International marketing programs Cross-sell
Offer additional services to existing customers
Acquisitions
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Financial Highlights
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Financial Highlights
8
GAAP Results
$ Q4 2008 Margin $ FY 2008 Margin
GAAP Revenues Gross Profit/Margin (1) Operating Profit/Margin (1) GAAP EPS (2) Free Cash Flow (3) Cash and Investments
$60.6M $49.4M 81.5% $26.2M 43.2% $0.45 Per Share $25.4M $162M
$241.5M $195.3M 80.9% $97.9M 40.6%
$1.58 Per Share $88.2M $162M
(1) (2) (3)
Includes SFAS 123(R) non-cash compensation expense. Includes SFAS 123(R) non-cash compensation expense, net of tax benefit. Tax rates for Q4 and full year are 24.6% and 29.0% respectively. See slide 19 for computation of free cash flow.
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GAAP Results
$ Q4 2008 Margin $ FY 2008 Margin
GAAP Revenues Gross Profit/Margin (1) Operating Profit/Margin (1) GAAP EPS (2) Free Cash Flow (3) Cash and Investments
$60.6M $49.4M 81.5% $26.2M 43.2% $0.45 Per Share $25.4M $162M
$241.5M $195.3M 80.9% $97.9M 40.6%
$1.58 Per Share $88.2M $162M
(1) (2) (3)
Includes SFAS 123(R) non-cash compensation expense. Includes SFAS 123(R) non-cash compensation expense, net of tax benefit. Tax rates for Q4 and full year are 24.6% and 29.0% respectively. See slide 19 for computation of free cash flow.
9
Accomplishments & Outlook
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Accomplishments & Outlook
10
2008 Review
Fax DIDs increased to ~1,050,000 Multiple pricing programs working well Expanded network to 46 countries and 3,100+ cities Acquired Mijanda brands and customer base Strong Corporate Sales 24 wins in 2008 of large customers
Fax Services
Aggressive ROI based management of advertising campaigns Headwind on usage revenue and retention rates as economy weakened Strength of USD hurt international revenues in Q3 and Q4
2009 Outlook
Leverage j2’s corporate advantages
Purchasers seeking established, profitable, trusted and well capitalized providers
Increased focus on Canada and top European countries Continuing multiple pricing programs serving multiple segments Leveraging analytics and experience to further optimize advertising spend Fax indexing/other service enhancements to be fully rolled out Continuing lighter than average usage and retention in a weak economy Continuing focus on M&A
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2008 Review
Fax DIDs increased to ~1,050,000 Multiple pricing programs working well Expanded network to 46 countries and 3,100+ cities Acquired Mijanda brands and customer base Strong Corporate Sales 24 wins in 2008 of large customers
Fax Services
Aggressive ROI based management of advertising campaigns Headwind on usage revenue and retention rates as economy weakened Strength of USD hurt international revenues in Q3 and Q4
2009 Outlook
Leverage j2’s corporate advantages
Purchasers seeking established, profitable, trusted and well capitalized providers
Increased focus on Canada and top European countries Continuing multiple pricing programs serving multiple segments Leveraging analytics and experience to further optimize advertising spend Fax indexing/other service enhancements to be fully rolled out Continuing lighter than average usage and retention in a weak economy Continuing focus on M&A
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2008 Review
Voice Services
Voice DIDs grew 127% from ~80,000 to ~190,000; grew to ~10% of j2 revenue Began international marketing efforts; introduced eReceptionist brand in Europe Speech-to-text deployed in the US Increased Telesales staff and expanded CS support Continued cross-selling to Fax customer base Acquired Phone People (j2’s largest voice acquisition)
2009 Outlook
Extend market leadership position with organic and M&A growth Continue to refine user experience and value proposition One-click cross-sells between fax and voice customers Testing additional enhanced features Refine brand strategy to expand market size Localize to support additional European languages and markets Customer service efficiency and enhancements
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2008 Review
Voice Services
Voice DIDs grew 127% from ~80,000 to ~190,000; grew to ~10% of j2 revenue Began international marketing efforts; introduced eReceptionist brand in Europe Speech-to-text deployed in the US Increased Telesales staff and expanded CS support Continued cross-selling to Fax customer base Acquired Phone People (j2’s largest voice acquisition)
2009 Outlook
Extend market leadership position with organic and M&A growth Continue to refine user experience and value proposition One-click cross-sells between fax and voice customers Testing additional enhanced features Refine brand strategy to expand market size Localize to support additional European languages and markets Customer service efficiency and enhancements
12
Other Businesses
Successfully completed acquisition of Mailwise (hygiene provider) Cross-sell of Electric Mail services to Mailwise customers Integration of Mailwise nearing completion Currently evaluating additional M&A opportunities
Patent Licensing
Patents out of reexamination in late 2008/early 2009 Opportunity to create new licensing programs and proceed with stayed litigation
Advertising/Broadcast Fax
Impact of weakening economy Expect softness to continue Only 2% of j2’s revenue
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Other Businesses
Successfully completed acquisition of Mailwise (hygiene provider) Cross-sell of Electric Mail services to Mailwise customers Integration of Mailwise nearing completion Currently evaluating additional M&A opportunities
Patent Licensing
Patents out of reexamination in late 2008/early 2009 Opportunity to create new licensing programs and proceed with stayed litigation
Advertising/Broadcast Fax
Impact of weakening economy Expect softness to continue Only 2% of j2’s revenue
13
2008
Achieved revenues and above range EPS targets Successfully managed cost structure for all departments
j2 Operations
Revenues grew 9.4% while employee headcount was kept flat with 12/31/07 Increased operational efficiencies steadily throughout the year Margins at an all time high in Q4 Improved gross margins by 1.9% from 79.6% to 81.5% Improved operating margins by 5.9% from 37.3% to 43.2%
Effective deployment of cash through acquisitions and stock buyback Acquired 4 companies across multiple services
2009
Continue to enhance and expand on 2008 operational excellence Active pipeline of M&A opportunities – leverage j2’s acquisition and integration expertise Continue to leverage j2’s talent pool Effective advertising programs with increased ROI focus Prudent management of capital expenditures
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2008
Achieved revenues and above range EPS targets Successfully managed cost structure for all departments
j2 Operations
Revenues grew 9.4% while employee headcount was kept flat with 12/31/07 Increased operational efficiencies steadily throughout the year Margins at an all time high in Q4 Improved gross margins by 1.9% from 79.6% to 81.5% Improved operating margins by 5.9% from 37.3% to 43.2%
Effective deployment of cash through acquisitions and stock buyback Acquired 4 companies across multiple services
2009
Continue to enhance and expand on 2008 operational excellence Active pipeline of M&A opportunities – leverage j2’s acquisition and integration expertise Continue to leverage j2’s talent pool Effective advertising programs with increased ROI focus Prudent management of capital expenditures
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2009 Outlook
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2009 Outlook
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2009 Assumptions/Guidance
Economy
2009 worse than 2008; 4 Quarters of GDP contraction; global recession; increasing unemployment; bottom not yet reached Stronger USD relative to GBP and Euro
Operational View
Continuing focus on optimizing margins and free cash flow Decrease in usage revenue and retention rates Shifting Mix to lower MARPU DIDs (Corporate, Voice and secondary Fax brands) Increased Investment in IP M&A/higher yielding investments for our cash
Other Items
Lower Other Income due to falling interest rates Modestly higher share count/higher SFAS 123(R) expense Tax rate assumed to be ~ 30.5%
Modest Increase in Revenues and Non-GAAP EPS
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2009 Assumptions/Guidance
Economy
2009 worse than 2008; 4 Quarters of GDP contraction; global recession; increasing unemployment; bottom not yet reached Stronger USD relative to GBP and Euro
Operational View
Continuing focus on optimizing margins and free cash flow Decrease in usage revenue and retention rates Shifting Mix to lower MARPU DIDs (Corporate, Voice and secondary Fax brands) Increased Investment in IP M&A/higher yielding investments for our cash
Other Items
Lower Other Income due to falling interest rates Modestly higher share count/higher SFAS 123(R) expense Tax rate assumed to be ~ 30.5%
Modest Increase in Revenues and Non-GAAP EPS
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Supplemental Information
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Supplemental Information
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Metrics
2007 Q1
Fixed Subscriber Revenues Variable Subscriber Revenues Subscriber Revenues Other Revenues To tal Revenues DID - Ba sed Revenues Non-DID Based Revenues Total Revenues Subscriber Revenues/To tal Revenues DID - Ba sed/Total Revenues % Fixed Subscriber Revenues % Variable Subscriber Revenues Paid DIDs (1) (2) Avera ge Mo nthly Revenue/DID Cancel Ra te (3) Free DIDs Avera ge Mo nthly Revenue/DID Total DID Inventory (MM) Cities Co vered Countries Co vered $37,757 12,536 $50,293 3,848 $54,141 $48,684 5,457 $54,141 92.9% 89.9% 75.1% 24.9% 930,273 $17.16 3.0%
2008 Q3
$41,362 12,667 $54,029 1,717 $55,746 $52,204 3,542 $55,746 96.9% 93.6% 76.6% 23.4% 1,017,985 $16.80 3.0%
Q2
$39,643 12,970 $52,613 1,367 $53,980 $50,929 3,051 $53,980 97.5% 94.3% 75.3% 24.7% 972,599 $17.26 2.8%
Q4
Total
Q1
$44,260 12,956 $57,216 1,433 $58,649 $55,301 3,348 $58,649 97.6% 94.3% 77.4% 22.6% 1,098,650 $16.30 2.8%
Q2
$46,593 12,943 $59,536 1,140 $60,676 $57,551 3,125 $60,676 98.1% 94.8% 78.3% 21.7% 1,162,872 $16.29 2.9%
Q3
$47,481 12,985 $60,466 1,086 $61,552 $58,440 3,112 $61,552 98.2% 94.9% 78.5% 21.5% 1,198,950 $15.87 3.0%
Q4
Total
$43,336 $162,098 12,057 50,231 $55,393 1,437 $56,830 212,329 8,368 220,697
$48,125 $186,459 11,497 50,382 $59,622 1,014 $60,636 236,841 4,673 241,513
$53,473 $205,290 3,357 15,407 $56,830 220,697 97.5% 94.1% 78.2% 21.8% 1,063,698 $16.44 2.7% 96.2% 93.0% 76.3% 23.7%
$57,691 $228,983 2,944 12,529 $60,636 241,512 98.3% 95.1% 80.7% 19.3% 1,236,079 $15.05 3.1% 98.1% 94.8% 78.7% 21.3%
10,355,815 10,671,519 10,706,503 10,874,104 $0.05 $0.05 $0.06 $0.07 16.9 2,884 40 17.0 2,933 42 17.1 2,950 42 17.2 3,024 42
10,098,143 10,233,875 10,357,506 10,362,771 $0.08 $0.07 $0.07 $0.06 17.4 3,084 44 17.5 3,126 45 17.3 3,137 46 19.8 3,135 46
Cash & Investment Free Cash Flow(4)
(millio ns) (millio ns)
$210.3 $26.1
$233.1 $20.6
$239.8 $15.7
$229.8 $21.4 $83.9
$181.3 $26.9
$149.9 $23.0
$151.8 $12.8
$161.9 $25.4 $88.2
(1)
Paid DIDs reflect a reserv e for the net imp act o f price increase, d atab ase upgrades an d datab ase clean up. DIDs also reflect reserves taken in con jun ction with asset acquisitio ns fo r anticipated product mig ratio n an d/or price increase. (3) Cancel Rate is d efin ed as in dividual cu stomer DIDs with greater th an 4 months of continuou s service (co n tinuou s service includes cu stomer DIDs wh ich are administratively cancelled
(2)
and reactivated with in the same calen dar month), and DIDs related to enterp rise customers beginning with their first day of service. Cancel rate is calculated mo nth ly and expressed h ere as an averag e over the th ree months of the quarter. Free Cash Flow is net cash provided by operating activities, less p urchases of property and eq uipment. See slide 19 for computation of free cash flow. Quarterly revenues for 2007 and Q1 20 08 have been reclassified between fixed, variable and other revenue and between DID based and non-DID b ased revenue. This reclassificatio n is related to revised reven ue classification for a j2 subsid iary , it does not impact total revenues for the quarter.
(4)
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Metrics
2007 Q1
Fixed Subscriber Revenues Variable Subscriber Revenues Subscriber Revenues Other Revenues To tal Revenues DID - Ba sed Revenues Non-DID Based Revenues Total Revenues Subscriber Revenues/To tal Revenues DID - Ba sed/Total Revenues % Fixed Subscriber Revenues % Variable Subscriber Revenues Paid DIDs (1) (2) Avera ge Mo nthly Revenue/DID Cancel Ra te (3) Free DIDs Avera ge Mo nthly Revenue/DID Total DID Inventory (MM) Cities Co vered Countries Co vered $37,757 12,536 $50,293 3,848 $54,141 $48,684 5,457 $54,141 92.9% 89.9% 75.1% 24.9% 930,273 $17.16 3.0%
2008 Q3
$41,362 12,667 $54,029 1,717 $55,746 $52,204 3,542 $55,746 96.9% 93.6% 76.6% 23.4% 1,017,985 $16.80 3.0%
Q2
$39,643 12,970 $52,613 1,367 $53,980 $50,929 3,051 $53,980 97.5% 94.3% 75.3% 24.7% 972,599 $17.26 2.8%
Q4
Total
Q1
$44,260 12,956 $57,216 1,433 $58,649 $55,301 3,348 $58,649 97.6% 94.3% 77.4% 22.6% 1,098,650 $16.30 2.8%
Q2
$46,593 12,943 $59,536 1,140 $60,676 $57,551 3,125 $60,676 98.1% 94.8% 78.3% 21.7% 1,162,872 $16.29 2.9%
Q3
$47,481 12,985 $60,466 1,086 $61,552 $58,440 3,112 $61,552 98.2% 94.9% 78.5% 21.5% 1,198,950 $15.87 3.0%
Q4
Total
$43,336 $162,098 12,057 50,231 $55,393 1,437 $56,830 212,329 8,368 220,697
$48,125 $186,459 11,497 50,382 $59,622 1,014 $60,636 236,841 4,673 241,513
$53,473 $205,290 3,357 15,407 $56,830 220,697 97.5% 94.1% 78.2% 21.8% 1,063,698 $16.44 2.7% 96.2% 93.0% 76.3% 23.7%
$57,691 $228,983 2,944 12,529 $60,636 241,512 98.3% 95.1% 80.7% 19.3% 1,236,079 $15.05 3.1% 98.1% 94.8% 78.7% 21.3%
10,355,815 10,671,519 10,706,503 10,874,104 $0.05 $0.05 $0.06 $0.07 16.9 2,884 40 17.0 2,933 42 17.1 2,950 42 17.2 3,024 42
10,098,143 10,233,875 10,357,506 10,362,771 $0.08 $0.07 $0.07 $0.06 17.4 3,084 44 17.5 3,126 45 17.3 3,137 46 19.8 3,135 46
Cash & Investment Free Cash Flow(4)
(millio ns) (millio ns)
$210.3 $26.1
$233.1 $20.6
$239.8 $15.7
$229.8 $21.4 $83.9
$181.3 $26.9
$149.9 $23.0
$151.8 $12.8
$161.9 $25.4 $88.2
(1) (2) (3)
Paid DIDs reflect a reserv e for the net imp act o f price increase, d atab ase upgrades an d datab ase clean up. DIDs also reflect reserves taken in con jun ction with asset acquisitio ns fo r anticipated product mig ratio n an d/or price increase. Cancel Rate is d efin ed as in dividual cu stomer DIDs with greater th an 4 months of continuou s service (co n tinuou s service includes cu stomer DIDs wh ich are administratively cancelled
and reactivated with in the same calen dar month), and DIDs related to enterp rise customers beginning with their first day of service. Cancel rate is calculated mo nth ly and expressed h ere as an averag e over the th ree months of the quarter. Free Cash Flow is net cash provided by operating activities, less p urchases of property and eq uipment. See slide 19 for computation of free cash flow. Quarterly revenues for 2007 and Q1 20 08 have been reclassified between fixed, variable and other revenue and between DID based and non-DID b ased revenue. This reclassificatio n is related to revised reven ue classification for a j2 subsid iary , it does not impact total revenues for the quarter.
(4)
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Computation of Free Cash Flow
($ in millions)
Q 1 '07 Net cash from operating activities P urch. of property & equipment Free Cash Flow
(1)
Q 2 '07 $23.113 (2.506) $20.607
Q 3 '07 $18.656 (2.940) $15.716
Q 4 '07 $25.779 (4.340) $21.439
Q 1 '08 $27.411 (0.469) $26.942
Q 2 '08 $23.840 (0.796) $23.044
Q 3 '08 $13.738 (0.937) $12.801
Q 4 '08 $25.727 (0.305) $25.422
$26.659 (0.529) $26.130
(1)
Net cash prov ided by operating activ ities, less purchases of property & equipment. Free Cash Flow amounts are not meant as a substitute f or GAAP, but are solely f or inf ormational purposes.
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Computation of Free Cash Flow
($ in millions)
Q 1 '07 Net cash from operating activities P urch. of property & equipment Free Cash Flow
(1)
Q 2 '07 $23.113 (2.506) $20.607
Q 3 '07 $18.656 (2.940) $15.716
Q 4 '07 $25.779 (4.340) $21.439
Q 1 '08 $27.411 (0.469) $26.942
Q 2 '08 $23.840 (0.796) $23.044
Q 3 '08 $13.738 (0.937) $12.801
Q 4 '08 $25.727 (0.305) $25.422
$26.659 (0.529) $26.130
(1)
Net cash prov ided by operating activ ities, less purchases of property & equipment. Free Cash Flow amounts are not meant as a substitute f or GAAP, but are solely f or inf ormational purposes.
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Usage of Corporate and Web High Volume Users
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Usage of Corporate and Web High Volume Users
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