What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2020-08-10 compared with 2020-05-11 · 125 added, 80 removed, 270 unchanged (43% of the section changed)

6 unchanged sentences

For those statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including but not limited to those discussed below, the risk factors discussed in Part II, Item 1A - “Risk Factors” of this Quarterly Report on Form 10-Q (if any) and in Part I, Item 1A - “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019 (together, the “Risk Factors”), and the factors discussed in the section in this Quarterly Report on Form 10-Q entitled “Quantitative and Qualitative Disclosures About Market Risk.” Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s opinions only as of the date hereof.

Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including but not limited to those discussed below, the risk factors discussed in Part II, Item 1A - “Risk Factors” of this Quarterly Report on Form 10-Q (if any), in Part II Item 1A - “Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 and in Part I, Item 1A - “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019 (together, the “Risk Factors”), and the factors discussed in the section in this Quarterly Report on Form 10-Q entitled “Quantitative and Qualitative Disclosures About Market Risk.” Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s opinions only as of the date hereof.

We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements.

48 unchanged sentences

Management is actively monitoring the global situation and will take further action to alter our operations as may be required by federal, foreign, state and local authorities or that we determine are otherwise necessary or appropriate under the circumstances.

While the disruption caused by the pandemic is currently expected to be temporary, there is uncertainty regarding its duration.

Therefore, we are continuing to assess the impact to our results of operations, financial position and

liquidity based on our current assessment of the situation which could change based on the spread of the disease and additional government action which could limit economic activity or cause for a slower reopening of the economy.

The full extent, duration and overall impact of the COVID-19 pandemic is currently unknown and depends on future developments that are uncertain and unpredictable.

Therefore, we are continuing to assess the impact to our results of

operations, financial position and liquidity based on our current assessment of the situation which could change based on the spread of the pandemic and additional government action which could limit economic activity or cause for a slower reopening of the economy.

Cloud Services Performance Metrics

3 unchanged sentences

We also use this metric, in conjunction with the cancel rate, to help provide a directional indicator of Cloud Services revenue and calculate the lifetime value of customers within each of our business units.

The following table sets forth certain key operating metrics for our Cloud Services business as of and for the three months ended March 31, 2020 and 2019 (in thousands, except for percentages):

The following table sets forth certain key operating metrics for our Cloud Services business as of and for the three and six months ended June 30, 2020 and 2019 (in thousands, except for percentages):

Three Months Ended

June 30, Six Months Ended

2020 2019 2020 2019

Subscriber revenues:

Fixed $ 144,818 $ 124,309

Variable 24,930 27,481

$ 140,755 $ 140,352 $ 282,241 $ 264,661

26,285 28,557 54,547 56,037

Total subscriber revenues $ 167,040 $ 168,909 $ 336,788 $ 320,698

11 unchanged sentences

Cancel Rate (4)

(1) The first quarter 2020 disclosure of $144.8 million in fixed subscriber revenue included $3.3 million of revenue which was subsequently determined to be variable subscriber revenue.

As a result, the fixed and variable subscriber revenue for the six months ended June 30, 2020 has been corrected in the table above.

(2) Quarterly ARPU is calculated using our standard convention of applying the average of the quarter’s beginning and ending base to the total revenue for the quarter.

12 unchanged sentences

Page views are measured each time a page on our websites is loaded in a browser.

The following table sets forth certain key operating metrics for our Digital Media business for the three months ended March 31, 2020 and 2019 (in millions):

The following table sets forth certain key operating metrics for our Digital Media business for the three and six months ended June 30, 2020 and 2019 (in millions):

Three Months Ended

Visits 2,145 1,807

June 30, Six Months Ended

2020 2019 2020 2019

2,359 1,618 4,504 3,425

Page views 7,786 6,492 15,533 13,579

Google Analytics and Partner Platforms

(1) Page views for the six months ended June 30, 2020 include an adjustment of 0.6 billion views not previously reported

Critical Accounting Policies and Estimates

2 unchanged sentences

Our critical accounting policies are described in our 2019 Annual Report on Form 10-K filed with the SEC on March 2, 2020.

During the three months ended March 31, 2020, there were no significant changes in our critical accounting policies and estimates.

Results of Operations for the Three Months Ended March 31, 2020

During the three months ended June 30, 2020, there were no significant changes in our critical accounting policies and estimates.

Results of Operations for the Three and Six Months Ended June 30, 2020

Cloud Services

Given the uncertainty of the current macroeconomic environment and the impact of the COVID-19 pandemic, we expect the revenue for the second quarter 2020 to be slightly down when compared to the second quarter 2019.

Due to these economic uncertainties, we are unable to forecast the impact on future profits at this time.

Given the uncertainty of the current macroeconomic environment and the impact of the COVID-19 pandemic, we expect the revenue for the remainder of fiscal year 2020 to be modestly lower compared to the prior-year comparable period.

The main focus of our Cloud Services offerings is to reduce or eliminate costs, increase sales and enhance productivity, mobility, business continuity and security of our customers as the technologies and devices they use evolve over time.

7 unchanged sentences

Digital Media

Due to these economic uncertainties, we are unable to forecast the impact on future profits at this time.

Given the uncertainty of the current macroeconomic environment and the impact of the COVID-19 pandemic, we expect the revenue for the remainder of fiscal year 2020 to be flat to slightly lower compared to the prior-year comparable period.

We expect the Digital Media business to improve as we integrate our recent acquisitions and over the longer term as advertising transactions continue to shift from offline to online, but these initiatives will be offset by the impact of COVID-19 in the near term.

11 unchanged sentences

J2 Global Consolidated

Given the uncertainty of the current macroeconomic environment, we are unable to forecast the future impact of COVID-19 on our business.

We anticipate our consolidated second quarter 2020 revenue will be slightly down when compared to our second quarter 2019.

Based on the trends discussed above with respect to our Cloud Services and Digital Media businesses, we anticipate our consolidated revenue for the remainder of fiscal year 2020 to be modestly lower compared to the prior-year comparable period.

We expect operating profit as a percentage of revenues to generally decrease in the future primarily due to the fact that revenue with respect to our Digital Media business (i) is increasing as a percentage of our revenue on a consolidated basis and (ii) has historically operated at a lower operating margin.

(in thousands, except percentages)

Three Months Ended March 31, Percentage Change

Three Months Ended

June 30, Percentage Change Six Months Ended

June 30, Percentage Change

2020 2019 2020 2019

Revenues $330,984 $322,432 3% $663,377 $622,325 7%

3 unchanged sentences

Digital Media revenues primarily consist of advertising revenues, subscriptions earned through the granting of access to, or delivery of, certain data products or services to customers, fees paid for generating business leads, and licensing and sale of editorial content and trademarks.

Our revenues in 2020 have increased over the comparable three month period of 2019 primarily due to a combination of acquisitions and organic growth;

Our revenues in 2020 have increased over the comparable three and six month periods of 2019 primarily due to a combination of acquisitions and organic growth;

partially offset by declines in certain areas of both the Digital Media and Cloud Services businesses.

1 unchanged sentence

(in thousands, except percentages)

Three Months Ended March 31, Percentage Change

Three Months Ended

June 30, Percentage Change Six Months Ended

June 30, Percentage Change

2020 2019 2020 2019

Cost of revenue $56,802 $60,266 (6)% $115,933 $111,279 4%

1 unchanged sentence

Cost of revenues is primarily comprised of costs associated with network operations, content fees, editorial and production costs, database hosting and online processing fees.

The increase in cost of revenues for the three months ended March 31, 2020 was primarily due to an increase in costs associated with businesses acquired in and subsequent to the first quarter 2019 that resulted in additional network operations costs, campaign fulfillment costs, processing fees and database hosting costs.

The decrease in cost of revenues for the three months ended June 30, 2020 was primarily due to a lower content fees, campaign fulfillment cost and other editorial and production costs;

partially offset by an increase in depreciation.

The increase in cost of revenues for the six months ended June 30, 2020 was primarily due to higher depreciation, database hosting, network operations and online processing fees;

partially offset by a decrease in content fees, campaign fulfillment cost and other editorial and production costs.

Operating Expenses

1 unchanged sentence

(in thousands, except percentages)

Three Months Ended March 31, Percentage Change

Three Months Ended

June 30, Percentage Change Six Months Ended

June 30, Percentage Change

2020 2019 2020 2019

Sales and Marketing $92,805 $88,446 5% $192,243 $175,326 10%

2 unchanged sentences

Our internet-based advertising relationships consist primarily of fixed cost and performance-based (cost-per-impression, cost-per-click and cost-per-acquisition) advertising relationships with an array of online service providers.

Advertising cost for the three months ended March 31, 2020 was $38.9 million (primarily consists of $27.3 million of third-party advertising costs and $11.9 million of personnel costs) compared to 2019 of $36.2 million (primarily consists of $25.2 million of third-party advertising costs and $9.8 million of personnel costs).

The increase in sales and marketing expenses for the three months ended March 31, 2020 versus the prior comparable period was primarily due to increased personnel costs, advertising and consulting fees associated with the acquisition of businesses acquired in and subsequent to the first quarter 2019 within the Digital Media and Cloud Services businesses.

Advertising cost for the three months ended June 30, 2020 was $33.9 million (primarily consists of $23.4 million of third-party advertising costs and $8.9 million of personnel costs) compared to 2019 of $38.5 million (primarily consists of $28.1 million of third-party advertising costs and $9.6 million of personnel costs).

Advertising cost for the six months ended June 30, 2020 was $72.8 million (primarily consists of $50.7 million of third-party advertising costs and $18.4 million of personnel costs) compared to 2019 of $74.7 million (primarily consists of $53.2 million of third-party advertising costs and $19.4 million of personnel costs).The increase in sales and marketing expenses for the three and six months ended June 30, 2020 versus the prior comparable periods was primarily due to increased personnel costs, partner revenue share, software licenses and consulting fees associated with the acquisition of businesses acquired in and subsequent to the second quarter 2019 within the Digital Media and Cloud Services businesses.

Research, Development and Engineering .

(in thousands, except percentages)

Three Months Ended March 31, Percentage Change

Three Months Ended

June 30, Percentage Change Six Months Ended

June 30, Percentage Change

2020 2019 2020 2019

Research, Development and Engineering $13,606 $11,938 14% $29,012 $24,922 16%

1 unchanged sentence

Our research, development and engineering costs consist primarily of personnel-related expenses.

The increase in research, development and engineering costs for the three months ended March 31, 2020 versus the prior comparable period was primarily due to an increase in costs associated with businesses acquired in and subsequent to the first quarter 2019.

The increase in research, development and engineering costs for the three and six months ended June 30, 2020 versus the prior comparable periods was primarily due to an increase in costs associated with businesses acquired in and subsequent to the second quarter 2019.

General and Administrative.

(in thousands, except percentages)

Three Months Ended March 31, Percentage Change

Three Months Ended

June 30, Percentage Change Six Months Ended

June 30, Percentage Change

2020 2019 2020 2019

General and Administrative $94,731 $105,168 (10)% $197,902 $203,322 (3)%

1 unchanged sentence

Our general and administrative costs consist primarily of personnel-related expenses, depreciation and amortization, changes in the fair value associated with contingent consideration, share-based compensation expense, bad debt expense, professional fees, severance and insurance costs.

The increase in general and administrative expense for the three months ended March 31, 2020 versus the prior comparable period was primarily due to additional amortization of intangible assets, increased depreciation expense, personnel costs relating to businesses acquired in and subsequent to the first quarter 2019;

partially offset by lower fair value adjustments associated with contingent consideration and reduced non-income taxes.

The decrease in general and administrative expense for the three months ended June 30, 2020 versus the prior comparable period was primarily due to decreased amortization of intangible assets.

The decrease in general and administrative expense for the six months ended June 30, 2020 versus the prior comparable period was primarily due to changes in the fair value of contingent consideration and decreased amortization of intangible assets;

partially offset by increased depreciation, costs relating to businesses acquired in and subsequent to the second quarter 2019, professional fees and non-income taxes.

Share-Based Compensation

The following table represents share-based compensation expense included in cost of revenues and operating expenses in the accompanying condensed consolidated statements of operations for the three months ended March 31, 2020 and 2019 (in thousands):

The following table represents share-based compensation expense included in cost of revenues and operating expenses in the accompanying Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2020 and 2019 (in thousands):

Three Months Ended

June 30, Six Months Ended

2020 2019 2020 2019

Cost of revenues $ 143 $ 131 $ 277 $ 263

7 unchanged sentences

Our interest expense, net is generated primarily from interest expense due to outstanding debt, partially offset by interest income earned on cash, cash equivalents and investments.

Interest expense, net was $21.0 million and $16.0 million for the three months ended March 31, 2020 and 2019, respectively.

Interest expense, net increased over the prior comparable period primarily due to the issuance of our 1.75% Convertible Senior Notes in the fourth quarter 2019.

Interest expense, net was $22.2 million and $17.3 million for the three months ended June 30, 2020 and 2019, respectively, and $43.2 million and $33.4 million for the six months ended June 30, 2020 and 2019, respectively.

Interest expense, net increased over the prior comparable periods primarily due to the issuance of our 1.75% Convertible Senior Notes in the fourth quarter 2019.

Loss on investments, net.

Our loss on investments, net is generated from gains or losses from investments in equity and debt securities.

Our loss on investments, net was $20.8 million and $13.0 thousand for the three months ended March 31, 2020 and 2019, respectively.

Our loss on investments, net increased for the three months ended March 31, 2020 versus the prior comparable period due to net losses realized on certain investments as the result of changes in the investee’s capital structure and overall market volatility.

Other expense, net .

Our other expense, net is generated primarily from miscellaneous items and gain or losses on currency exchange.

Other expense, net was $6.9 million and $2.2 million for the three months ended March 31, 2020 and 2019, respectively.

Other expense, net increased for the three months ended March 31, 2020 versus the prior comparable period primarily due to increased losses on currency exchange.

Our loss on investments, net was $3 thousand and $24 thousand for the three months ended June 30, 2020 and 2019, respectively, and $20.8 million and $38.0 thousand for the six months ended June 30, 2020 and 2019, respectively.

Our loss on investments, net for the three month ended June 30, 2020 was comparable to the prior period.

Our net loss on investments, net increased for the six months ended June 30, 2020 versus the prior comparable periods due to net losses realized on certain investments as the result of changes in the investee’s capital structure and overall market volatility.

Other (income) expense, net .

Our other (income) expense, net is generated primarily from miscellaneous items and gain or losses on currency exchange.

Other (income) expense, net was $(9.1) million and $(0.4) million for the three months ended June 30, 2020 and 2019, respectively, and $(2.2) million and $1.8 million for the six months ended June 30, 2020 and 2019, respectively.

Other (income) expense, net increased for the three and six months ended June 30, 2020 versus the prior comparable periods primarily due to reduced losses on currency exchange.

Our effective tax rate is based on pre-tax income, statutory tax rates, tax regulations (including those related to transfer pricing) and different tax rates in the various jurisdictions in which we operate.

1 unchanged sentence

When necessary, we establish valuation allowances to reduce our deferred tax assets to an amount that will more likely than not be realized.

Provision for income taxes amounted to $8.7 million and $(0.3) million for the three months ended March 31, 2020 and 2019, respectively.

Our effective tax rate was 132.5% and (0.9)% for the three months ended March 31, 2020 and 2019, respectively.

The increase in our effective income tax rate for the three months ended March 31, 2020 was primarily attributable to the following:

Provision for income taxes amounted to $16.0 million and $11.1 million for the three months ended June 30, 2020 and 2019, respectively, and $24.7 million and $10.9 million for the six months ended June 30, 2020 and 2019, respectively.

Our effective tax rate was 26.7% and 28.1% for the three months ended June 30, 2020 and 2019, respectively, and 37.1% and 15.0% for the six months ended June 30, 2020 and 2019, respectively.

The decrease in our effective income tax rate for the three months ended June 30, 2020 was primarily attributable to the following:

a decrease during 2020 due to similar discrete tax costs having a lesser impact to our effective income tax rate as a result of the increase in our pre-tax income;

a decrease in tax expense in 2020 due to a reduction in foreign income subject to U.S.

income tax (Global Intangible Low-Taxed Income or “GILTI”) as part of the Tax Cuts and Jobs Act of 2017;

partially offset by

an increase in tax expense during 2020 due to establishing a valuation allowance on deferred tax assets related to the impairment of certain investments;

an increase in tax expense due to discrete tax benefits related to a reduction in our net reserve for uncertain tax positions that was recorded for the three months ended March 31, 2019 with no similar events for the three months ended March 31, 2020;

a decrease in the benefit of a portion of our income being taxed in foreign jurisdictions and subject to lower tax rates than in the U.S.

The increase in our effective income tax rate for the six months ended June 30, 2020 was primarily attributable to the following:

an increase in tax expense during 2020 due to establishing a valuation allowance on deferred tax assets related to the impairment of certain investments;

an increase in tax expense due to discrete tax benefits related to a reduction in our net reserve for uncertain tax positions that was recorded for the six months ended June 30, 2019 with no similar events for the six months ended June 30, 2020;

a decrease in the benefit of a portion of our income being taxed in foreign jurisdictions and subject to lower tax rates than in the U.S.;

partially offset by

a decrease in tax expense due to an increased benefit from the Foreign-Derived Intangible Income deduction and other tax credits.

a decrease in tax expense in 2020 due to a reduction in foreign income subject to U.S.

income tax (GILTI) as part of the Tax Cuts and Jobs Act of 2017.

Significant judgment is required in determining our provision for income taxes and in evaluating our tax positions on a worldwide basis.

6 unchanged sentences

If the Company becomes aware of a significant decline in value that is other-than-temporary, the loss will be recorded in the period in which the Company identifies the decline.

The net loss in earnings of equity method investment was $4.3 million and $0.5 million, net of tax benefit for the three months ended March 31, 2020 and 2019, respectively.

The net loss (income) in earnings of equity method investment was $5.8 million and $(4.1) million, net of tax benefit (expense) for the three months ended June 30, 2020 and 2019, respectively, and $10.1 million and $(3.6) million for the six months ended June 30, 2020 and 2019, respectively.

The fiscal 2020 loss was primarily a result of the impairment of two of its investments as a result of COVID-19 in the amount of $7.0 million, net of tax benefit.

partially offset by investment income net of tax expense of $2.7 million.

During the three months ended March 31, 2020 and 2019, the Company recognized management fees of $0.8 million and $0.8 million, net of tax benefit, respectively.

In addition, the Company recognized an investment loss in fiscal 2020 in the amount of $3.1 million, net of tax benefit.

During the three months ended June 30, 2020 and 2019, the Company recognized management fees of $0.8 million and $0.8 million, net of tax benefit, respectively, and for the six months ended June 30, 2020 and 2019, the Company recognized management fees of $1.5 million and $1.5 million, net of tax benefit, respectively.

Cloud Services and Digital Media Results

8 unchanged sentences

Cloud Services

The following results are presented for the three months ended March 31, 2020 and 2019 (in thousands):

The following results are presented for the three and six months ended June 30, 2020 and 2019 (in thousands):

Three Months Ended

June 30, Six Months Ended

2020 2019 2020 2019

External net sales $ 167,058 $ 169,132 $ 336,842 $ 321,377

5 unchanged sentences

Operating income $ 61,979 $ 62,347 $ 117,713 $ 120,881

Cloud Services’ net sales of $169.8 million for the three months ended March 31, 2020 increased $17.5 million, or 11.5%, from the prior comparable period primarily due to business acquisitions.

Cloud Services’ gross profit of $131.4 million for the three months ended March 31, 2020 increased $11.7 million, or 9.7%, from the prior comparable period primarily due to business acquisitions.

Cloud Services’ operating expenses of $75.7 million for the three months ended March 31, 2020 increased $14.5 million from the prior comparable period primarily due to additional expense associated with businesses acquired in and subsequent to the prior comparable period including (a) additional salary and related costs;

and (b) additional amortization of intangible assets.

As a result of these factors, Cloud Services’ operating income of $55.7 million for the three months ended March 31, 2020 decreased $2.8 million, or 4.8% from the prior comparable period.

Cloud Services’ net sales of $167.1 million for the three months ended June 30, 2020 decreased $2.1 million, or 1.2%, from the prior comparable period due to the impact of the COVID-19 pandemic.

Net sales of $336.8 million for the six months ended June 30, 2020 increased $15.5 million, or 4.8%, from the prior comparable period primarily due to business acquisitions acquired in and subsequent to the second quarter 2019.

Cloud Services’ gross profit of $127.6 million for the three months ended June 30, 2020 decreased $4.9 million, or 3.7%, and gross profit of $259.1 million for the six months ended June 30, 2020 increased $6.8 million, or 2.7%, from the prior comparable periods primarily due to the impact of the COVID-19 pandemic.

Cloud Services’ operating expenses of $65.7 million for the three months ended June 30, 2020 decreased $4.5 million from the prior comparable period primarily due to lower amortization of intangible assets.

Operating expenses of $141.3 million for the six months ended June 30, 2020 increased $9.9 million from the prior comparable period primarily due to

expense associated with businesses acquired in and subsequent to the prior comparable period including (a) marketing and advertising costs;

(b) non-income taxes;

and (c) additional salary and related costs.

As a result of these factors, Cloud Services’ operating income of $62.0 million for the three months ended June 30, 2020 decreased $0.4 million, or 0.6%, and operating income of $117.7 million for the six months ended June 30, 2020 decreased $3.2 million, or 2.6%, from the prior comparable periods.

Digital Media

The following results are presented for the three months ended March 31, 2020 and 2019 (in thousands):

The following results are presented for the three and six months ended June 30, 2020 and 2019 (in thousands):

Three Months Ended

June 30, Six Months Ended

2020 2019 2020 2019

External net sales $ 163,926 $ 153,298 $ 326,534 $ 300,945

5 unchanged sentences

Operating income (loss) $ 16,820 $ 1,533 $ 21,772 $ 518

Digital Media’s net sales of $162.7 million for the three months ended March 31, 2020 increased $15.0 million, or 10.2%, from the prior comparable period primarily due to business acquisitions.

Digital Media’s gross profit of $141.9 million for the three months ended March 31, 2020 increased $12.8 million, or 9.9%, from the prior comparable period primarily due to business acquisitions.

Digital Media’s operating expenses of $137.0 million for the three months ended March 31, 2020 increased $6.8 million from the prior comparable period primarily due to additional expense associated with businesses acquired in and subsequent to the prior comparable period including (a) additional salary and related costs including severance;

(b) consulting fees;

and (c) advertising costs;

Digital Media’s net sales of $164.0 million for the three months ended June 30, 2020 increased $10.6 million, or 6.9%, from the prior comparable period due to business acquisitions.

Net sales of $326.7 million for the six months ended June 30, 2020 increased $25.6 million, or 8.5%, from the prior comparable period primarily due to business acquisitions.

Digital Media’s gross profit of $146.6 million for the three months ended June 30, 2020 increased $17.0 million, or 13.1%, and gross profit of $288.6 million for the six months ended June 30, 2020 increased $29.7 million, or 11.5%, from the prior comparable periods primarily due to business acquisitions.

Digital Media’s operating expenses of $129.8 million for the three months ended June 30, 2020 increased $1.7 million, and operating expenses of $266.8 million for the six months ended June 30, 2020 increased $8.5 million from the prior comparable periods primarily due to additional expense associated with businesses acquired in and subsequent to the prior comparable period including (a) additional salary and related costs including severance;

(b) marketing and advertising costs;

and (c) depreciation;

partially offset by (d) lower fair value adjustments associated with contingent consideration;

and (e) amortization of intangible assets.

As a result of these factors, Digital Media’s operating income of $5.0 million for the three months ended March 31, 2020 increased $6.0 million, or 588.4%, from the prior comparable period.

As a result of these factors, Digital Media’s operating income of $16.8 million for the three months ended June 30, 2020 increased $15.3 million or 997.2%, and operating income of $21.8 million for the six months ended June 30, 2020 increased $21.3 million, or 4,103.1%, from the prior comparable periods.

Liquid ity and Capital Resources

Cash and Cash Equivalents and Investments

At March 31, 2020, we had cash and investments of $624.6 million compared to $675.7 million at December 31, 2019.

The decrease in cash and investments resulted primarily from cash used in the repurchase of common stock, purchases of investments, property and equipment, and business acquisitions;

partially offset by cash provided from operations.

At March 31, 2020, cash and investments consisted of cash and cash equivalents of $526.6 million and long-term investments of $98.0 million.

At June 30, 2020, we had cash and investments of $710.9 million compared to $675.7 million at December 31, 2019.

The increase in cash and investments resulted primarily from cash provided from operations;

partially offset by cash used in the repurchase of common stock, purchases of property and equipment (including capitalized labor), investments and business acquisitions.

At June 30, 2020, cash and investments consisted of cash and cash equivalents of $616.8 million and long-term investments of $94.0 million.

Our investments consist of equity and debt securities.

1 unchanged sentence

Short-term investments mature within one year of the date of the financial statements and long-term investments mature one year or more from the date of the financial statements.

As of March 31, 2020, cash and investments held within domestic and foreign jurisdictions were $567.7 million and $56.9 million, respectively.

As of June 30, 2020, cash and investments held within domestic and foreign jurisdictions were $645.7 million and $65.2 million, respectively.

On January 7, 2019, J2 Cloud Services, LLC entered into a Credit Agreement (the “Credit Agreement”) with certain lenders from time to time party thereto (collectively, the “Lenders”) and MUFG Union Bank, N.A., as sole lead arranger and as administrative agent for the Lenders (the “Agent”).

2 unchanged sentences

The proceeds of the Credit Facility are intended to be used for working capital and general corporate purposes of J2 Cloud and its subsidiaries, including to finance certain permitted acquisitions and capital expenditures in accordance with the terms of the Credit Agreement.

As of March 31, 2020, there were no amounts outstanding under the Credit Facility.

As of June 30, 2020, there were no amounts outstanding under the Credit Facility.

On February 6, 2019, the Company’s Board of Directors approved a quarterly cash dividend of $0.4450 per share of J2 Global common stock payable on March 12, 2019 to all stockholders of record as of the close of business on February 25, 2019.

9 unchanged sentences

The commitment was approved by the Audit Committee of the Board in accordance with the Company’s related-party transaction approval policy.

In the first three months of 2020, the Company received capital call notices from the management of OCV Management, LLC.

for $22.8 million, inclusive of certain management fees, of which $22.8 million has been paid for the three months ended March 31, 2020.

In the first six months of 2020, the Company received capital call notices from the management of OCV Management, LLC.

for $26.5 million, inclusive of certain management fees, of which $26.5 million has been paid for the six months ended June 30, 2020.

We currently anticipate that our existing cash and cash equivalents and cash generated from operations will be sufficient to meet our anticipated needs for working capital, capital expenditures and stock repurchases, if any, for at least the next 12 months.

Our primary sources of liquidity are cash flows generated from operations, together with cash and cash equivalents.

Net cash provided by operating activities was $102.0 million and $116.9 million for the three months ended March 31, 2020 and 2019, respectively.

Net cash provided by operating activities was $241.6 million and $212.2 million for the six months ended June 30, 2020 and 2019, respectively.

Our operating cash flows resulted primarily from cash received from our customers offset by cash payments we made to third parties for their services, employee compensation and interest payments associated with our debt.

The decrease in our net cash provided by operating activities in 2020 compared to 2019 was attributable to a decrease in accounts payable and accrued expenses due to the timing of payments and an increase in prepaid and other current assets;

partially offset by a decrease in accounts receivables, higher uncertain tax positions and income taxes payable and increased deferred revenue.

Our cash and cash equivalents were $526.6 million and $575.6 million at March 31, 2020 and December 31, 2019, respectively.

Net cash used in investing activities was $69.1 million and $81.7 million for the three months ended March 31, 2020 and 2019, respectively.

For the three months ended March 31, 2020 and 2019, net cash used in investing activities was primarily due to capital expenditures associated with the purchase of property and equipment, the purchase of investments and business acquisitions.

The increase in our net cash provided by operating activities in 2020 compared to 2019 was attributable to a decrease in accounts receivables, higher uncertain tax positions and income taxes payable;

partially offset by a decrease in accounts payable and accrued expenses due to the timing of payments.

Our cash and cash equivalents were $616.8 million and $575.6 million at June 30, 2020 and December 31, 2019, respectively.

Net cash used in investing activities was $96.9 million and $311.5 million for the six months ended June 30, 2020 and 2019, respectively.

For the six months ended June 30, 2020 and 2019, net cash used in investing activities was primarily due to capital expenditures associated with the purchase of property and equipment (including capitalized labor), the purchase of investments and business acquisitions.

The decrease in our net cash used in investing activities in 2020 compared to 2019 was primarily due to fewer business acquisitions.

Net cash used in financing activities was $78.4 million and $19.3 million for the three months ended March 31, 2020 and 2019, respectively.

For the three months ended March 31, 2020, net cash used in financing activities was primarily due to repurchase of common stock and business acquisitions.

The change in net cash used in financing activities in 2020 compared to 2019 was primarily attributable repurchase of common stock and business acquisitions;

Net cash (used in) provided by financing activities was $(101.5) million and $44.8 million for the six months ended June 30, 2020 and 2019, respectively.

For the six months ended June 30, 2020, net cash used in financing activities was primarily due to repurchase of common stock and business acquisitions.

The change in net cash used in financing activities in

2020 compared to 2019 was primarily attributable repurchase of common stock and borrowing under the line of credit in 2019 that did not occur in 2020;

partially offset by lower dividend payments.

1 unchanged sentence

In February 2012, the Company’s Board of Directors approved a program authorizing the repurchase of up to five million shares of our common stock through February 20, 2013 (the “2012 Program”) which was subsequently extended through February 20, 2021.

During the three month period ended March 31, 2020, we repurchased 680,016 shares under this program.

Cumulatively at March 31, 2020, 3.6 million shares were repurchased at an aggregate cost of $172.6 million (including an immaterial amount of commission fees).

During the six month period ended June 30, 2020, we repurchased 1,000,000 shares under this program.

Cumulatively at June 30, 2020, 3.9 million shares were repurchased at an aggregate cost of $196.2 million (including an immaterial amount of commission fees).

In July 2016, the Company acquired and subsequently retired 935,231 shares of J2 Global common stock in connection with the acquisitions of Integrated Global Concepts, Inc.

1 unchanged sentence

As a result of the acquired shares through acquisition and the purchase of J2 Global common stock through the Company’s share repurchase program, the number of shares available for purchase under the 2012 Program is 140,819 shares of J2 Global common stock.

On August 6, 2020, the Company’s Board of Directors approved a program authorizing the repurchase of up to 10 million shares of the Company’s common stock through August 6, 2025 (see Note 18 - Subsequent Events of the Notes to the Condensed Consolidated Financial Statements).

Contractual Obligations and Commitments

The following table summarizes our contractual obligations and commitments as of March 31, 2020:

The following table summarizes our contractual obligations and commitments as of June 30, 2020:

Payments Due in

24 unchanged sentences

(k) These amounts represent certain consulting and Board of Directors fee arrangements, software license and implementation commitments and others.

As of March 31, 2020, our liability for uncertain tax positions was $54.1 million.

As of June 30, 2020, our liability for uncertain tax positions was $57.6 million.

The future payments related to uncertain tax positions have not been presented in the table above due to the uncertainty of the amounts and timing of cash settlement with such authorities.

4 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis