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Item 1A. Risk Factors

2021-03-01 compared with 2020-03-02 · 144 added, 112 removed, 602 unchanged (30% of the section changed)

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In that event, the market price of our common stock will likely decline and you may lose part or all of your investment.

Risk Factors Summary

The following is a summary of the principal risks that could adversely affect our business, operations and financial results.

Risks Related To Our Business

• Acquisitions and investments in our business play a significant role in our growth.

• Acquisitions may disrupt our operations and harm our operating results.

• The majority of our revenue within the Digital Media business is derived from short-term advertising arrangements, and our Digital Media business may lose or be unable to attract advertisers if it cannot develop, commission or acquire compelling content, if it cannot attract users to mobile offerings or if advertisers’ marketing budgets are cut or reduced.

• We face risks associated with system failures, security breaches and other technological issues.

• COVID-19 pandemic and related governmental response could negatively affect our business, operations and financial performance.

• We face risks associated with political instability and volatility in the economy.

• Our cloud fax services constitute a significant percentage of our revenue.

• Our business is highly dependent on our billing systems functioning properly, and we face risks associated with card declines and merchant standards imposed by card companies.

• The markets in which we operate are highly competitive, and we may not be successful in growing our brands or revenue.

• We face potential liability for various types of legal claims, and we may be engaged in legal proceedings that could cause us to incur unforeseen expenses and could divert significant operational resources and our management’s time and attention.

• We face risks associated with changes in our tax rates, changes in tax treatment of companies engaged in e-commerce, the adoption of new U.S.

or international tax legislation, assessments or audits by taxing authorities and potential exposure to additional tax liabilities (including with respect to sales and use, telecommunications or similar taxes).

• We may be subject to risks from international operations, including risks associated with currency fluctuations and foreign exchange controls, the United Kingdom’s decision to end its membership in the European Union and other adverse changes in global financial markets, including unforeseen global crises such as war, strife, strikes, global health pandemics.

• We may be found to infringe the intellectual property rights of others, and we may be unable to adequately protect of our own intellectual property rights.

• Our business is dependent on the supply of services and other business requirements from other companies.

• Our business is dependent on our retention of our executive officers, senior management and our ability to hire and retain key personnel.

• Our level of indebtedness could adversely affect our financial flexibility and our competitive position, and we require significant cash to service our debt and fund our capital requirements.

• We are exposed to risk if we cannot maintain or adhere to our internal controls and procedures.

• We face risks associated with our Convertible Notes, including the possibility of changes in interest deductions, triggering of the conditional conversion feature, lack of funds to settle conversions or repurchase notes, use of particular accounting methods, and imposition of restrictions on future debt.

• Our businesses depend in part on attracting visitors to our websites from search engines.

Risks Related To Our Industries

• We are subject to laws and regulations worldwide, changes to which could increase our costs and individually or in the aggregate adversely affect our business.

These may in turn subject us to claims, judgments, monetary liabilities and other remedies, and to limitations on our business practices.

• We operate across many different markets and may be exposed to a variety of government and private actions or self-regulatory developments regarding data privacy and security.

• Data privacy and security regulations such as the GDPR and the CCPA impose significant compliance costs and expose us to substantial risks, particularly with respect to health data or other sensitive data.

• Developments in the healthcare industry and associated regulations could adversely affect our business, including our Everyday Health Group set of brands.

• Our business could suffer if providers of broadband internet access services block, impair or degrade our services.

• Our business could suffer if we cannot obtain or retain numbers, are prohibited from obtaining local numbers or are limited to distributing local numbers to only certain customers.

• Rate increases by regulated carriers could require us to either raise the retail prices of our offerings and lose customers or reduce our profit margins.

• Our business faces risks associated with advertisement blocking technologies and advertising click fraud.

• The industries in which we operate are undergoing rapid technological changes and we may not be able to keep up.

Risks Related To Our Stock

• Features of the Convertible Notes and Senior Notes may delay or prevent an otherwise beneficial attempt to take over our company.

• Conversions of the Convertible Notes will dilute the ownership interest of our existing stockholders, including holders who had previously converted their Convertible Notes.

• We are a holding company and our operations are conducted through, and substantially all of our assets held by, subsidiaries, which are subject to restrictions on their ability to pay dividends to us to fund our dividends and interest payments and other holding company expenses.

• Future sales of our common stock may negatively affect our stock price.

• Anti-takeover provisions could negatively impact our stockholders.

• Our stock price may be volatile or may decline, due to various reasons, including variations between actual results and investor expectations, industry and regulatory changes, introduction of new services by our competitors, developments with respect to IP rights, geopolitical events such as war, threat of war or terrorist actions, and global health pandemics, among others.

Risks Related To Our Business

Acquisitions and investments in our business have historically played a significant role in our growth and we anticipate that they will continue to do so.

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Some of these factors include budget constraints of our advertisers, cancellations or delays of projects by our advertisers, the cyclical and discretionary nature of advertising spending, general economic, internet-related and media industry conditions, as well as extraordinary events.

Further, our inability to produce “live events” for an indefinite period of time due to the COVID-19 pandemic may result in a reduction of spending or loss of current or potential advertisers.

The state of the global economy and availability of capital has impacted and could further impact the advertising spending patterns of existing and potential advertisers.

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In our Digital Media business, if we are unable to prove that our advertising and sponsorship solutions provide an attractive return on investment for our customers, our financial results could be harmed.

Our ability to grow revenue from our Digital Media business will be dependent on our ability to demonstrate to marketers that their marketing campaigns with us provide a meaningful return on investment (“ROI”) relative to offline and other online opportunities.

Our ability to grow revenue from our Digital Media business is dependent on our ability to demonstrate to marketers that their marketing campaigns with us provide a meaningful return on investment (“ROI”) relative to offline and other online opportunities.

Certain of the marketing campaigns with respect to our Digital Media business are designed such that the revenues received are based entirely upon the ROI delivered for customers.

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If we are unable to maintain sophisticated marketing and communications solutions that provide value to our customers or demonstrate our ability to provide value to our customers, our financial results will be harmed.

Our fax services constitute a significant percentage of our revenue.

Currently, fax-to-email revenue constitutes approximately 23% of our consolidated revenues.

The success of our business is therefore dependent upon the continued use of fax as a messaging medium and/or our ability to diversify our service offerings and derive more revenue from other services, such as voice, online backup, email, unified messaging solutions and services related to our Digital Media business.

If the demand for online fax-to-email as a messaging medium decreases, and we are unable to replace lost revenues from decreased usage or cancellation of our fax services with a proportional increase in our customer base or with revenues from our other services, our business, financial condition, operating results and cash flows could be materially and adversely affected.

We believe that one of the attractive features of our eFax® and similar products is that fax signatures are a generally accepted method of executing contracts.

There are ongoing efforts by governmental and non-governmental entities to create a universally accepted method for electronically signing documents.

Widespread adoption of so-called “digital signatures” could reduce demand for our fax services and, as a result, could have a material adverse effect on our business, prospects, financial condition, operating results and cash flows.

Political instability and volatility in the economy may adversely affect segments of our customers, which may result in decreased usage and advertising levels, customer acquisition and customer retention rates and, in turn, could lead to a decrease in our revenues or rate of revenue growth.

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This may result in decreased cloud services subscription and/or usage revenues and decreased advertising, e-commerce or other revenues, which may adversely impact our revenues and profitability.

The COVID-19 pandemic and related governmental response could negatively affect our business, operations and financial performance.

In March 2020, the World Health Organization declared the COVID-19 outbreak as a pandemic.

The impact of the COVID-19 pandemic has had a negative effect on the global economy, disrupting the financial markets and creating increasing volatility and overall uncertainty.

Among other things, the COVID-19 pandemic has resulted in travel bans around the world, declarations of states of emergency, stay- or shelter-at-home requirements, business and school closures and manufacturing restrictions.

In addition, the COVID-19 pandemic has contributed to (i) increased unemployment and decreased consumer confidence and business generally;

(ii) sudden and significant declines, and significant increases in volatility, in financial and capital markets;

(iii) increased spending on our business continuity efforts, which has required and may further require that we cut costs or investments in other areas;

and (iv) heightened cybersecurity, information security and operational risks as a result of work-from-home arrangements.

We have adjusted certain aspects of our operations to protect our employees and customers while still seeking to meet customers’ needs for our vital cloud internet services and digital media services.

We cannot predict at this time the extent to which the COVID-19 pandemic could negatively affect our business, operations and financial performance.

The extent of any continued or future adverse effects of the COVID-19 pandemic will depend on future developments, which are highly uncertain and outside our control, including the scope and duration of the pandemic, the direct and indirect impact of the pandemic on our employees, customers, counterparties and service providers, as well as other market participants, and actions taken by governmental authorities and other third parties in response to the pandemic.

Nonetheless, we believe that it is likely that our business, operations and financial performance will continue to be adversely affected until the pandemic subsides and the U.S.

and worldwide economies begin to recover.

Further, the COVID-19 pandemic may also have the effect of heightening many of the other risks described in this section entitled “Risk Factors” or in the “Risk Factors” section of any subsequent Quarterly Report on Form 10-Q.

Even after the pandemic subsides, it is possible that the U.S, and other major economies continue to experience a prolonged recession, which we expect would materially and adversely affect our business, operations and financial performance.

Our cloud fax services constitute a significant percentage of our revenue.

Currently, cloud fax revenue constitutes approximately 22% of our consolidated revenues.

The success of our business is therefore dependent upon the continued use of fax as a messaging medium and/or our ability to diversify our service offerings and derive more revenue from other services, such as cybersecurity, SMB enablement solutions and services related to our Digital Media business.

If the demand for cloud fax decreases, and we are unable to replace lost revenues from decreased usage or cancellation of our cloud fax services with a proportional increase in our customer base or with revenues from our other services, our business, financial condition, operating results and cash flows could be materially and adversely affected.

We believe that one of the attractive features of our eFax® and similar products is that fax signatures are a generally accepted method of executing contracts and a method of transmitting confidential information in a secure manner especially in the healthcare field in the United States.

There are ongoing efforts by governmental and non-governmental entities to create a universally accepted method for electronically signing documents.

Our growth will depend on our ability to develop, strengthen, and protect our brands, and these efforts may be costly and have varying degrees of success.

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Strengthening our current brands and launching competitive new brands will be critical to achieving widespread commercial acceptance of our products and services.

This will require our continued focus on active marketing, the costs of which have been increasing and may continue to increase.

This will require our continued focus on active marketing, the costs of which have been increasing and may continue

In addition, substantial initial investments may be required to launch new brands and expand existing brands to cover new geographic territories and technology fields.

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Our Digital Media business faces significant competition from online media companies as well as from social networking sites, mobile application, traditional print and broadcast media, general purpose and search engines and various e-commerce sites.

Several of our competitors offer an integrated variety of internet products, advertising services, technologies, online services and content.

We compete against these and other companies to attract and retain users, advertisers and developers.

Our Cloud Services business faces competition from cloud software services and applications across several categories including secured communications, cybersecurity and marketing technology.

Several of our competitors offer an integrated variety of software and internet products, advertising services, technologies, online services and content.

We compete against these and other companies to attract and retain subscribers, users, advertisers and developers.

We also compete with social media and networking sites which are attracting a substantial and increasing share of users and users’ online time, and may continue to attract an increasing share of online advertising dollars.

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Further, emerging start-ups may be able to innovate and provide new products and services faster than we can.

In addition, competitors may consolidate with each other or collaborate, and new

competitors may enter the market.

In addition, competitors may consolidate with each other or collaborate, and new competitors may enter the market.

Some of the competitors for our Cloud Services business in international markets have a substantial competitive advantage over us because they have dominant market share in their territories, are owned by local telecommunications providers, have greater brand recognition, are focused on a single market, are more familiar with local tastes and preferences, or have greater regulatory and operational flexibility due to the fact that we may be subject to both U.S.

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To date, we have not entered into foreign currency hedging transactions to control or minimize these risks.

Changes in our tax rates, changes in tax treatment of companies engaged in e-commerce, the adoption of new U.S.

or international tax legislation, or exposure to additional tax liabilities may adversely impact our financial results.

We are a U.S.-based multinational company subject to taxes in the U.S.

and numerous foreign jurisdictions, including Ireland, where a number of our subsidiaries are organized.

Our provision for income taxes is based on a jurisdictional mix of earnings, statutory tax rates and enacted tax rules, including transfer pricing.

Due to economic and political conditions, tax rates in various jurisdictions may be subject to significant change.

As a result, our future effective tax rates could be affected by changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, or changes in tax laws or their interpretation.

These changes may adversely impact our effective tax rate and harm our financial position and results of operations.

We are subject to examination by the U.S.

Internal Revenue Service (“IRS”) and other domestic and foreign tax authorities and government bodies.

We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our income tax and other tax reserves.

If our reserves are not sufficient to cover these contingencies, such inadequacy could materially adversely affect our business, prospects, financial condition, operating results, and cash flows.

In addition, due to the global nature of the internet, it is possible that various states or foreign countries might attempt to impose additional or new regulation on our business or levy additional or new sales, income or other taxes relating to our activities.

Tax authorities at the international, federal, state and local levels are currently reviewing the appropriate treatment of companies engaged in e-commerce.

New or revised international, federal, state or local tax regulations or court decisions may subject us or our customers to additional sales, income and other taxes.

For example, the European Union, certain member states, and other countries, as well as states within the United States, have proposed or enacted taxes on online advertising and marketplace service revenues.

The application of existing, new or revised taxes on our business, in particular, sales taxes, VAT and similar taxes would likely increase the cost of doing business online and decrease the attractiveness of selling products over the internet.

The application of these taxes on our business could also create significant increases in internal costs necessary to capture data and collect and remit taxes.

Any of these events could have a material adverse effect on our business, financial condition, and operating results.

Moreover, we are currently under or subject to examination for indirect taxes in various states, municipalities and foreign jurisdictions.

We currently have a $22.5 million reserve established for these matters.

If a material indirect tax liability associated with prior periods were to be recorded, for which there is not a reserve, it could materially affect our financial results for the period in which it is recorded.

Furthermore, much of our Digital Media e-commerce revenue comes from arrangements in which we are paid by retailers to promote their digital product and service offers on our sites.

Certain states have implemented regulations that require retailers to collect and remit sales taxes on sales made to residents of such states if a publisher, such as us, that facilitated that sale is a resident of such state.

Paid retailers in our marketplace that do not currently have sales tax nexus in any state that subsequently passes similar regulations and in which we have operations, employees or contractors now or in the future, may significantly alter the manner in which they pay us, cease paying us for sales we facilitate for that retailer in such state, or cease using our marketplace, each of which could adversely impact our business, financial condition, and operating results.

We may be subject to risks from international operations.

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We have only limited experience in marketing and operating our services in certain international markets.

Moreover, we have in some cases experienced and expect to continue to experience in some cases higher costs as a percentage of revenues in

connection with establishing and providing services in international markets versus in the U.S.

Moreover, we have in some cases experienced and expect to continue to experience in some cases higher costs as a percentage of revenues in connection with establishing and providing services in international markets versus in the U.S.

In addition, certain international markets may be slower than the U.S.

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Competition for these people is intense, and there can be no assurance that we can retain our key employees or that we can attract, assimilate or retain other highly qualified technical, sales and managerial personnel in the future.

We are exposed to risk if we cannot maintain or adhere to our internal controls and procedures.

We have established and continue to maintain, assess and update our internal controls and procedures regarding our business operations and financial reporting.

Our internal controls and procedures are designed to provide reasonable assurances regarding our business operations and financial reporting.

However, because of the inherent limitations in this process, internal controls and procedures may not prevent or detect all errors or misstatements.

To the extent our internal controls are inadequate or not adhered to by our employees, our business, financial condition and operating results could be materially adversely affected.

If we are not able to maintain internal controls and procedures in a timely manner, or without adequate compliance, we may be unable to accurately report our financial results or prevent fraud and may be subject to sanctions or investigations by regulatory authorities such as the SEC or NASDAQ.

Any such action or restatement of prior-period financial results as a result could harm our business or investors’ confidence in J2 Global, and could cause our stock price to fall.

Changes in our tax rates, changes in tax treatment of companies engaged in e-commerce, the adoption of new U.S.

or international tax legislation, or exposure to additional tax liabilities may adversely impact our financial results.

We are a U.S.-based multinational company subject to taxes in the U.S.

and numerous foreign jurisdictions, including Ireland, where a number of our subsidiaries are organized.

Our provision for income taxes is based on a jurisdictional mix of earnings, statutory tax rates and enacted tax rules, including transfer pricing.

Due to economic and political conditions, tax rates in various jurisdictions may be subject to significant change.

These changes may adversely impact our effective tax rate and harm our financial position and results of operations.

On December 22, 2017, the U.S.

enacted the Tax Cuts and Jobs Act (“Tax Act” or “2017 Tax Act”) and all adjustments to the 2017 estimates were incorporated into our financial results in 2018.

There continues to be a risk that states or foreign jurisdictions may amend their tax laws in response to the Tax Act, which could have a material impact on our future results.

We are subject to examination of our income tax returns by the U.S.

Internal Revenue Service (“IRS”) and other domestic and foreign tax authorities.

We are currently under audit by the IRS for tax years 2012 through 2016 and the California Franchise Tax Board (“FTB”) for tax years 2012, 2013, 2015 and 2016.

The FTB has agreed to suspend its audit for 2012 and 2013 pending the outcome of the IRS audit for such tax years.

However, the FTB has commenced the initial information gathering state of the 2015 and 2016 audit period.

We are also under audit or review by other state and foreign taxing authorities for various periods.

Our future income tax returns are likely to become the subject of audits by these or other taxing authorities.

We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our income tax reserves and expense.

If our reserves are not sufficient to cover these contingencies, such inadequacy could materially adversely affect our business, prospects, financial condition, operating results, and cash flows.

Tax authorities at the international, federal, state and local levels are currently reviewing the appropriate treatment of companies engaged in e-commerce.

New or revised international, federal, state or local tax regulations or court decisions may subject us or our customers to additional sales, income and other taxes.

For example, Congress is considering various approaches to legislation that would require companies engaged in e-commerce to collect sales taxes on internet revenue and a growing number of U.S.

states and certain foreign jurisdictions have adopted or are considering proposals to impose obligations on remote sellers and online marketplaces to collect taxes on their behalf.

Additionally, the U.S.

Supreme Court ruling in South Dakota v.

Wayfair, Inc., No.17-494 reversed a longstanding precedent that remote sellers are not required to collect state and local sales taxes.

We cannot predict the effect of these and other attempts to impose sales, income or other taxes on e-commerce.

The application of these taxes on our business could also create significant increases in internal costs necessary to capture data and collect and remit taxes.

Any of these events could have a material adverse effect on our business, financial condition, and operating results.

Moreover, we are currently under audit for indirect taxes in various states, municipalities and foreign jurisdictions.

We currently have a $21.2 million reserve established for these matters.

Furthermore, much of our Digital Media e-commerce revenue comes from arrangements in which we are paid by retailers to promote their digital product and service offers on our sites.

Our level of indebtedness could adversely affect our financial flexibility and our competitive position.

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• limit our ability to borrow additional funds for working capital, capital expenditures, acquisitions, debt service requirements, execution of our business strategy or other general corporate purposes.

In addition, (i) the indenture governing the 6.0% Senior Notes of our subsidiary, J2 Cloud Services, LLC (“J2 Cloud Services”) and (ii) the Credit Agreement, dated as of January 7, 2019 (as amended, the “MUFG Credit Facility”), by and among J2 Cloud Services, the lenders from time to time party thereto and MUFG Union Bank, N.A., as sole lead arranger and as administrative agent, contain, and the agreements evidencing or governing other future indebtedness may contain, restrictive covenants that may limit our ability to engage in activities that may be in our long-term best interests.

In addition, the indenture governing the 4.625% Senior Notes of our subsidiary contains, and the agreements evidencing or governing other future indebtedness may contain, restrictive covenants that may limit our ability to engage in activities that may be in our long-term best interests.

Our failure to comply with those covenants could result in an event of default which, if not cured or waived, could result in the acceleration of all of our indebtedness.

The indenture governing the 6.0% Senior Notes and MUFG Credit Facility contain a number of restrictive covenants that impose significant operating and financial restrictions and may limit our ability to plan for or react to market conditions, meet capital needs or make acquisitions, or otherwise restrict our activities or business plans.

The indenture governing the 4.625% Senior Notes contains a number of restrictive covenants that impose significant operating and financial restrictions and may limit our ability to plan for or react to market conditions, meet capital needs or make acquisitions, or otherwise restrict our activities or business plans.

These include restrictions on our ability to:

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• make investments or certain other restricted payments;

• sell assets;

• enter into transactions with affiliates;

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• effect a consolidation or merger.

A breach of the covenants under the indenture governing the 6.0% Senior Notes or under the MUFG Credit Facility could result in an event of default.

Such a default may allow the creditors to accelerate the related indebtedness and may result in the acceleration of any other indebtedness to which a cross-acceleration or cross-default provision applies.

In the event our lenders (including under the MUFG Credit Facility) or the holders of our 6.0% Senior Notes accelerate the repayment of our borrowings, we and our subsidiaries may not have sufficient assets to repay that indebtedness or our other indebtedness.

A breach of the covenants under the indenture governing the 4.625% Senior Notes could result in an event of default.

Such a default may allow the note holders to accelerate the Senior Notes and may result in the acceleration of any other indebtedness to which a cross-acceleration or cross-default provision applies.

In the event the holders of our 4.625% Senior Notes accelerate the repayment of our borrowings, we and our subsidiaries may not have sufficient assets to repay that indebtedness or our other indebtedness.

We are exposed to risk if we cannot maintain or adhere to our internal controls and procedures.

We have established and continue to maintain, assess and update our internal controls and procedures regarding our business operations and financial reporting.

Our internal controls and procedures are designed to provide reasonable assurances regarding our business operations and financial reporting.

However, because of the inherent limitations in this process, internal controls and procedures may not prevent or detect all errors or misstatements.

To the extent our internal controls are inadequate or not adhered to by our employees, our business, financial condition and operating results could be materially adversely affected.

Any such action or restatement of prior-period financial results as a result could harm our business or investors’ confidence in J2 Global, and could cause our stock price to fall.

To service our debt and fund our other capital requirements, we will require a significant amount of cash, and our ability to generate cash will depend on many factors beyond our control.

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We cannot ensure that we will generate cash flow from operations, or that future borrowings will be available, in an amount sufficient to enable us to pay our debt or to fund our other liquidity needs.

If our cash flows and capital resources are insufficient to fund our debt service obligations, we could face substantial liquidity problems and could be forced to reduce or delay investments and capital expenditures or to dispose of material assets or

operations, seek additional indebtedness or equity capital or restructure or refinance our indebtedness.

We may not be able to effect any such alternative measures on commercially reasonable terms or at all and, even if successful, those alternative actions may not allow us to meet our scheduled debt service obligations.

The indenture governing the 6.0% Senior Notes and the MUFG Credit Facility restrict our ability to dispose of assets and may also restrict our ability to raise indebtedness or equity capital to be used to repay other indebtedness when it becomes due.

We may not be able to consummate those dispositions or to obtain proceeds in an amount sufficient to meet any debt service obligations then due.

Our inability to generate sufficient cash flows to satisfy our debt obligations, or to refinance our indebtedness on commercially reasonable terms, or at all, would materially and adversely affect our financial position and results of operations.

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Holders of the 3.25% convertible senior notes due June 15, 2029 (the “3.25% Convertible Notes”) will have the right to require us to repurchase their 3.25% Convertible Notes on each of June 15, 2021 and June 15, 2024 and upon the occurrence of a fundamental change (as defined in the indenture governing the 3.25% Convertible Notes), in each case, at a repurchase price equal to 100% of the principal amount of the 3.25% Convertible Notes to be repurchased, plus accrued and unpaid interest, if any.

Holders of the Senior Notes also have the right to require our subsidiary, J2 Cloud Services, to repurchase the Senior Notes upon the occurrence of a change in control (as defined in the indenture governing the Senior Notes) at a repurchase price equal to 101% of the principal amount of the Senior Notes to be repurchased, plus accrued and unpaid interest, if any.

Holders of the Senior Notes also have the right to require us to repurchase the Senior Notes upon the occurrence of a change in control (as defined in the indenture governing the Senior Notes) at a repurchase price equal to 101% of the principal amount of the Senior Notes to be repurchased, plus accrued and unpaid interest, if any.

Holders of our 1.75% convertible senior notes due November 1, 2026 (the “1.75% Convertible Notes,” and together with the 3.25% Convertible Notes, the “Convertible Notes”) also will have the right to require us to repurchase their 1.75% Convertible Notes upon the occurrence of a fundamental change (as defined in the indenture governing the 1.75% Convertible Notes) at a repurchase price equal to 100% of the principal amount of the 1.75% Convertible Notes to be repurchased, plus accrued and unpaid interest, if any.

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In addition, even if holders do not elect to convert their Convertible Notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.

The conditional conversion feature of the 3.25% Convertible Notes was triggered for the quarter ended December 31, 2019 and, unless our stock price decreases, it is reasonably likely that it will be triggered in subsequent quarters.

The conditional conversion feature of the 3.25% Convertible Notes was triggered for the quarter ended December 31, 2020 and it is reasonably likely that it will be triggered in subsequent quarters.

If J2 elects to convert all or a portion of the 3.25% Convertible Notes into shares of the Company’s common stock, our common stock will be diluted which could adversely affect our stock price.

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The United Kingdom’s decision to end its membership in the European Union and other adverse changes in global financial markets could materially and adversely impact our results of operations, financial condition and cash flows.

In June 2016, a majority of voters in the United Kingdom elected to withdraw from the European Union (“EU”) in a national referendum (“BREXIT”), and on January 31, 2020 the United Kingdom exited the EU and, on December 31, 2020, the transition period under the withdrawal agreement between the U.K.

and the EU ended.

The results of the United Kingdom’s BREXIT have caused, and may continue to cause, volatility in global stock markets, currency exchange rate fluctuations and global economic uncertainty.

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Taxing authorities may successfully assert that we should have collected, or in the future should collect sales and use, telecommunications or similar taxes, and we could be subject to liability with respect to past or future tax, which could adversely affect our operating results.

We do not collect and remit sales and use, telecommunications, or similar taxes in all jurisdictions in which we have sales, based on our belief that such taxes are not applicable or legally required.

Several states and other taxing jurisdictions have presented or threatened us with assessments, alleging that we are required to collect and remit such taxes there.

Supreme Court ruling in South Dakota v.

Wayfair, Inc., No.

17-494 reversed existing constitutional precedent that remote sellers are not required to collect and remit such taxes.

The Company is evaluating the impact of the ruling.

We believe we remit state and local sales and use tax, excise, utility user, and ad valorem taxes, fees and surcharges or other similar obligations in all relevant jurisdictions in which we generate sales, based on our understanding of the applicable laws in those jurisdictions.

Such tax, fees and surcharge laws and rates vary greatly by jurisdiction, and the application of such taxes to e-commerce businesses, such as ours, is a complex and evolving area.

The jurisdictions where we have sales may apply more rigorous enforcement efforts or take more aggressive positions in the future that could result in greater tax liability.

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If this were to occur and we were to be held liable for someone’s use of our service for unauthorized calling or text messaging mobile users, the financial penalties could cause a material adverse effect on our operations and harm our business reputation.

Also, in the U.S., the Communications Assistance to Law Enforcement Act (“CALEA”) requires telecommunications carriers to be capable of performing wiretaps and recording other call identifying information.

In September 2005, the FCC released an order defining telecommunications carriers that are subject to CALEA obligations as facilities-based broadband internet access providers and Voice-over-Internet-Protocol (“VoIP”) providers that interconnect with the public switched telephone network.

As a result of this definition, we do not believe that J2 Global is subject to CALEA.

However, if the category of service providers to which CALEA applies broadens to also include information services, that change may impact our operations.

Also, in the U.S., the Communications Assistance to Law Enforcement Act (“CALEA”) requires any telecommunications carriers to be capable of performing wiretaps and recording other call identifying information in cooperation with law enforcement.

In September 2005, the FCC expanded the definition of “telecommunications carriers” to include facilities-based broadband internet access providers and Voice-over-Internet-Protocol (“VoIP”) providers that interconnect with the public switched telephone network.

As a result of this definition, J2 Global’s VoIP offerings are subject to CALEA, which has impacted our operations.

We are subject to a variety of new and existing laws and regulations which could subject us to claims, judgments, monetary liabilities and other remedies, and to limitations on our business practices.

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In addition, the timing and extent of any enforcement by the FTC with regard to the native advertising practices by the Company, or others, could reduce the revenue we generate from this line of business.

The UK similarly has issued guidelines on native advertising in the UK Code of Non-broadcast Advertising and Direct & Promotional Marketing (“CAP Code”) and is regulated, in part, by the Advertising Standards Authority.

The Company believes it is compliant with the requirements of the CAP Code on our current practices and offerings and will continue to monitor the effect of these and other related governmental regulations.

As of May 25, 2018, certain data transfers from and between the European Union (“EU”) are subject to the GDPR.

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The European Court of Justice invalidated the EU-U.S.

Although U.S.

It is also unclear whether the United Kingdom (“UK”) will offer a similar program to Privacy Shield now that the UK has left the EU.

Additionally, other countries that relied on the EU-U.S.

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are no longer valid based on the European Court of Justice ruling.

We cannot predict how or if this issue will be resolved nor can we evaluate any potential liability at this time.

Although U.S.

and EU policymakers approved a new framework known as “Privacy Shield” that would allow companies like us to continue to rely on some form of a safe harbor for the transfer of certain data from the EU to the U.S., on July 16, 2020, the Court of Justice of the European Union issued a judgment declaring as “invalid” the European Commission’s Decision (EU) 2016/1250 on the adequacy of the protection provided by the EU-U.S.

Privacy Shield, rendering it invalid.

We cannot predict how or if these issues will be resolved nor can we evaluate any potential liability at this time.

The Company has put into place various alternative frameworks and grounds on which to rely in order to be in compliance with relevant law for the transfer of data from overseas locations to the U.S.

including reviewing Company’s data collection process, procedures and putting into place Data Processing Agreements with vendors, partners and other third parties.

including reviewing Company’s data collection process, procedures and putting into place Data Processing Agreements that incorporate Standard Contractual Clauses as well as supplementary measures with vendors, partners and other third parties.

Some independent data regulators have adopted the position that other forms of compliance are also invalid though the legal grounds for these findings remain unclear at this time.

We cannot predict at this time whether the alternative grounds that J2 Global continues to implement will be found to be consistent with relevant laws nor can we evaluate what, if any, potential liability may be at this time.

On June 28, 2018, the California legislature enacted the CCPA, which took effect on January 1, 2020 and will be enforceable starting July 1, 2020.

On June 28, 2018, the California legislature enacted the CCPA, which took effect on January 1, 2020 and became enforceable starting July 1, 2020.

The CCPA, which covers business that obtain or access personal information on California resident consumers, grants consumers enhanced privacy rights and control over their personal information and imposes significant requirements on covered companies with respect to consumer data privacy rights.

The CCPA provides consumers with the right to opt out of the sale of their personal information including the requirement to include a “Do Not Sell” link on our websites and applications that sell personal data of California resident consumers.

Based on the draft implementation regulations released by the California Attorney General in October 2019, we believe we have implemented such links where necessary and our privacy policies have been updated and posted on our websites.

There is currently no industry consensus on the applicability of the CCPA “Do Not Sell” right on the targeted advertising activities of our Digital Media business.

Until the California Attorney General provides final implementing regulations, we cannot predict the impact to our Digital Media business, if any.

Other states are proposing similar

privacy laws and if those are passed, our Company may be subject to additional requirements and restrictions that could have an impact on our business.

Based on the final implementation regulations released by the California Attorney General in August 2020, we believe we have implemented such links where necessary, we action consumer opt outs and other subject rights when requested, and our privacy policies have been updated and posted on our websites.

We are continuing to evaluate the impact to our business, if any.

In addition, in November 2020 California voters adopted the California Privacy Rights Act (“CPRA”) that amends the CCPA, including creating a new agency to implement and enforce the law.

The CPRA will take effect on January 1, 2023 and is subject to a number of required rule-makings.

Until that rule-making is complete, we cannot fully evaluate the impact of the CPRA on our businesses.

Other states are proposing similar privacy laws and if those are passed, our Company may be subject to additional requirements and restrictions that could have an impact on our business.

Further, failure or perceived failure by us to comply with our policies, applicable requirements, or industry self-regulatory principles related to the collection, use, sharing, or security of personal information, or other privacy, data-retention or data protection matters could result in a loss of user confidence in us, damage to our brands, and ultimately in a loss of users and advertising partners, which could adversely affect our business.

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We also use such information to work with our advertisers to more effectively target ads to relevant users and consumers, which ads command a higher rate.

Many of our users voluntarily provide us with demographic and other information when they register for one of our service or properties.

Many of our users voluntarily provide us with demographic and other information when they register for one of our services or properties.

In order for our Everyday Health Group brands to deliver marketing and communications solutions to pharmaceutical and medical device companies, health insurers, hospital systems, and other customers, we rely on data provided by our users.

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Similarly, exercise of the “Do Not Sell” right under the CCPA limits a business’ ability to monetize certain personal information collected online.

The CPRA will require businesses to treat “Do Not Track” and other similar “global privacy control” browser settings as opt outs from the sale of a user’s personal information.

These laws and regulations could have a significant impact on the operation of our advertising and data businesses.

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This could cause our net revenues to decline and adversely affect our operating results.

and foreign governments have enacted or considered or are considering legislation or regulations that could significantly restrict our ability to collect, augment, analyze, use and share anonymous data, which could increase our costs and reduce our revenue.

and foreign governments have enacted or considered or are considering legislation or regulations that could significantly restrict our ability to collect, augment, analyze, use and share deidentified or anonymous data, which could increase our costs and reduce our revenue.

We operate across many different markets both domestically and internationally which may subject us to cybersecurity, privacy, data security and data protection laws with uncertain interpretations as well as impose conflicting obligations on us.

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Any of these events could have a material adverse effect on our business, prospects, financial condition, operating results and cash flows.

The GDPR imposes significant compliance costs and exposes the Company to substantial risks.

The GDPR and the CCPA impose significant compliance costs and exposes the Company to substantial risks.

The EU has traditionally imposed more strict obligations under data privacy laws and regulations.

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The GDPR harmonizes EU data privacy laws and contains significant obligations and requirements that have resulted in a greater compliance burden with respect to our operations and data use in Europe, which will continue to increase our costs.

The CCPA similarly contains significant obligations and requirements that have resulted in a greater compliance burden with respect to our operations and data usage of California residents, which will continue to increase our costs.

Additionally, government authorities will have more power to enforce compliance and impose substantial penalties for any failure to comply.

In addition, individuals have the right to compensation under the GDPR.

In the event the Company fails to maintain compliance, the Company could be exposed to material damages, costs and/or fines if an EU government authority or EU resident commenced an action.

In addition, individuals have the right to compensation under the GDPR, and individuals may have the right to file a class action under the CCPA in certain circumstances.

In the event the Company fails to maintain compliance, the Company could be exposed to material damages, costs and/or fines if an EU government authority, an EU resident, the California Attorney General or a California resident commenced an action.

Failure to comply or maintain compliance could cause considerable harm to us and our reputation (including requiring notification to customers, regulators, and/or the media), cause a loss of confidence in our products and services, and deter current and potential customers from using our services.

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State attorneys general may also take similar action based on their state’s consumer protection statutes.

Any increase or change in regulation of advertising and promotion in the healthcare industry could make it more difficult for us to generate and grow our advertising and sponsorship revenues.

Any increase or change in regulation of

advertising and promotion in the healthcare industry could make it more difficult for us to generate and grow our advertising and sponsorship revenues.

In addition, the practice of most healthcare professions requires licensing under applicable state law and state laws may further prohibit business entities from practicing medicine, which is referred to as the prohibition against the corporate practice of medicine.

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Many of these providers offer products and services that directly compete with ours.

On January 4, 2018, the FCC released an order that largely repeals rules that the FCC had in place which prevented broadband internet access providers from degrading or otherwise disrupting a broad range of services provisioned over consumers’ and enterprises’ broadband internet access lines.

The FCC’s January 4, 2018 Order is not yet effective and there are efforts in Congress to prevent the Order from becoming effective.

Additionally, a number of state attorneys general have filed an appeal of the FCC’s January 4, 2018 Order and others may also appeal the Order.

A number of states have either passed legislation, adopted state executive agency policies or are in the process of adopting legislation that would prevent broadband internet access providers from blocking, degrading and otherwise impairing consumers’ and internet applications service providers’ broadband internet access services.

We cannot predict whether the FCC’s January 4, 2018 Order will become effective, whether it will withstand appeal, or whether states have the authority to adopt legislation and executive policies that may conflict with the FCC’s January 4, 2018 Order.

Many of the largest providers of broadband services have publicly stated that they will not degrade or disrupt their customers’ use of applications and services, like ours.

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Broadband internet access providers may also attempt to charge us or our customers additional fees to access services like ours that may result in the loss of customers and revenue, decreased profitability, or increased costs to our retail offerings that may make our services less competitive.

We cannot predict the potential impact of the FCC’s January 4, 2018 Order on us at this time nor can we evaluate the potential impact at this time.

Our business could suffer if we cannot obtain or retain numbers, are prohibited from obtaining local numbers or are limited to distributing local numbers to only certain customers.

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The fundamental change purchase features of the Convertible Notes and the change of control features of the Senior Notes may delay or prevent an otherwise beneficial attempt to take over our company.

The terms of the Convertible Notes require us to offer to purchase the Convertible Notes for cash in the event of a fundamental change (as defined in the indenture governing the 3.25% Convertible Notes and the indenture governing the 1.75% Convertible Notes), and the terms of the Senior Notes require our subsidiary, J2 Cloud Services, to offer to repurchase the Senior Notes for cash in the event of a change of control (as defined in the indenture governing the Senior Notes).

The terms of the Convertible Notes require us to offer to purchase the Convertible Notes for cash in the event of a fundamental change (as defined in the indenture governing the 3.25% Convertible Notes and the indenture governing the 1.75% Convertible Notes), and the terms of the Senior Notes require us to offer to repurchase the Senior Notes for cash in the event of a change of control (as defined in the indenture governing the Senior Notes).

These features may have the effect of delaying or preventing a takeover of our company that would otherwise be beneficial to investors.

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Accordingly, our ability to pay dividends on our stock, service our debt, including the Convertible Notes and fund other holding company expenses depends on the results of operations of our subsidiaries and upon the ability of such subsidiaries to provide us with cash, whether in the form of dividends, loans or otherwise.

In addition, dividends, loans or other distributions to us from such subsidiaries are subject to contractual and other restrictions and are subject to other business considerations.

J2 Cloud Services, is subject to restrictions on dividends in its existing indenture with respect to the Senior Notes and in the MUFG Credit Facility.

The Senior Notes indenture generally prohibits dividends except out of a basket of 50% of cumulative net income (as defined in the Senior Notes indenture) and proceeds from equity offerings, although it permits any dividends if J2 Cloud Services’ pro forma leverage ratio (as calculated as required by the Senior Notes indenture) is less than 3.0 to 1.

The MUFG Credit Facility generally prohibits dividends (as long as commitments from the lenders or amounts remain outstanding thereunder), except when certain conditions are met, including conditions relating to J2 Cloud Services’ total leverage ratio and EBITDA and the condition that J2 Cloud Services must have at least $25 million in cash and cash equivalents on its balance sheet after giving effect to such dividend.

While J2 Cloud Services is currently in compliance with such covenants, its ability to comply with such covenants is subject to conditions outside its control.

If we cannot obtain cash from our subsidiaries, we may not be able to pay dividends on our stock, pay interest on the Convertible Notes and fund other operating company expenses without additional sources of cash.

Dividends, loans or other distributions to us from such subsidiaries could be subject to future contractual and other restrictions.

Future sales of our common stock may negatively affect our stock price.

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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-K

Item 1A. Risk Factors