What changed in this filing

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Item 7. Management’s Discussion and Analysis

2021-03-01 compared with 2020-03-02 · 250 added, 194 removed, 332 unchanged (57% of the section changed)

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J2 Global, Inc., together with its subsidiaries (“J2 Global”, “the Company”, “our”, “us” or “we”), is a leading provider of internet services.

Through our Cloud Services business, we provide cloud-based subscription services to consumers and businesses and license our intellectual property (“IP”) to third parties.

In addition, the Cloud Services business includes fax, security, privacy, data backup, email marketing and voice products.

Our Digital Media business specializes in the technology, gaming, broadband, business to business, healthcare, and international markets offering content, tools and services to consumers and businesses.

J2 Global was incorporated in 2014 as a Delaware corporation through the creation of a new holding company structure, and our Cloud Services business, operated by our wholly owned subsidiary, J2 Cloud Services, LLC (formerly J2 Cloud Services, Inc.), and its subsidiaries, was founded in 1995.

Our Digital Media business specializes in the technology, shopping, gaming, and healthcare markets, offering content, tools and services to consumers and businesses.

Our Cloud Services business provides cloud-based subscription services to consumers and businesses including cloud fax, cybersecurity, privacy, and marketing technology.

We manage our operations through two businesses:

Cloud Services and Digital Media.

Our Cloud Services business generates revenues primarily from customer subscription and usage fees and from IP licensing fees.

Digital Media and Cloud Services.

Our Digital Media business generates revenues from advertising and sponsorships, subscription and usage fees, performance marketing and licensing fees.

Our Cloud Services business generates revenues primarily from customer subscription and usage fees.

In addition to growing our business organically, on a regular basis we acquire businesses to grow our customer bases, expand and diversify our service offerings, enhance our technologies, acquire skilled personnel and enter into new markets.

Our consolidated revenues are currently generated from three basic business models, each with different financial profiles and variability.

Our Cloud Services business is driven primarily by subscription revenues that are relatively higher margin, stable and predictable from quarter to quarter with some seasonal weakness in the fourth quarter.

The Cloud Services business also includes the results of our IP licensing business, which can vary dramatically in both revenues and profitability from period to period.

Our Digital Media business is driven primarily by advertising revenues, has relatively higher sales and marketing expense and has seasonal strength in the fourth quarter.

Our Cloud Services business is driven primarily by subscription revenues that are relatively higher margin, stable and predictable from quarter to quarter with minor seasonal weakness in the fourth quarter.

We continue to pursue additional acquisitions, which may include companies operating under business models that differ from those we operate under today.

Such acquisitions could impact our consolidated profit margins and the variability of our revenues.

J2 Global was incorporated in 2014 as a Delaware corporation through the creation of a holding company structure, and our Cloud Services business, operated by our wholly owned subsidiary, J2 Cloud Services, LLC (formerly J2 Cloud Services, Inc.), and its subsidiaries, was founded in 1995.

In March 2020, the World Health Organization declared the COVID-19 outbreak as a pandemic, and we anticipate our customers and our operations in all locations will be affected as the virus continues to proliferate and as a result of the governmental responses to the 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.

Given this disruption, volatility and uncertainty, our results may be adversely affected due to various factors affecting our performance.

The Company has 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.

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.

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.

Digital Media Performance Metrics

We use certain metrics to generally assess the operational and financial performance of our Digital Media business.

The number of visits is an important metric because it is an indicator of consumers’ level of engagement with our mobile applications, websites and other services.

We believe highly engaged consumers are more likely to participate in advertising programs and other activities that derive our multiple revenue streams.

We define a visit as a group of interactions by users with our mobile and desktop applications and websites.

A single visit can contain multiple page views and actions, and a single user can open multiple visits across domains, web browsers, desktop or mobile devices.

We measure visits with Google Analytics and through partner platform measures.

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 years ended December 31, 2020, 2019 and 2018 (in millions):

Years ended December 31,

2020 2019 2018

Visits 9,091 7,542 7,706

Page views 31,453 29,292 31,727

Google Analytics and Partner Platforms

Cloud Services Performance Metrics

We use certain metrics to generally assess the operational and financial performance of our Cloud Services business;

these metrics also serve as a baseline for (a) internal trends and (b) benchmarking against competitors.

The average monthly revenue per customer can be used as an analytical tool in determining the marginal economics of customer acquisition, which is particularly useful as we continue to focus on growing our higher-margin businesses.

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 for the years ended December 31, 2020, 2019 and 2018 (in thousands, except for percentages):

Years ended December 31,

2020 2019 2018

Subscriber revenues:

Fixed $ 571,630 $ 549,739 $ 488,948

Variable 106,383 111,075 108,333

Total subscriber revenues 678,013 660,814 597,281

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Percentage of total subscriber revenues:

Fixed 84.3 % 83.2 % 81.9 %

Variable 15.7 % 16.8 % 18.1 %

Total revenues:

Number-based $ 386,899 $ 388,334 $ 393,079

Non-number-based 291,562 273,501 204,896

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Average monthly revenue per Cloud Business Customer (ARPU) (1)(2)

$ 13.93 $ 14.54 $ 15.61

Cancel rate (3)

2.3 % 2.4 % 2.1 %

(1) 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.

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Calculated monthly and expressed as an average over the three months of the quarter.

Digital Media Performance Metrics

The following table sets forth certain key operating metrics for our Digital Media business for the years ended December 31, 2019 , 2018 and 2017 (in millions):

Years ended December 31,

Google Analytics and Partner Platforms

Critical Accounting Policies and Estimates

We prepare our consolidated financial statements and related disclosures in accordance with U.S.

generally accepted accounting principles (“GAAP”) and our discussion and analysis of our financial condition and operating results require us to

make judgments, assumptions and estimates that affect the amounts reported in our consolidated financial statements and accompanying notes.

generally accepted accounting principles (“GAAP”) and our discussion and analysis of our financial condition and operating results require us to make judgments, assumptions and estimates that affect the amounts reported in our consolidated financial statements and accompanying notes.

See Note 2, “Basis of Presentation and Summary of Significant Accounting Policies” of the notes to consolidated financial statements in Part II, Item 8 of this Form 10-K which describes the significant accounting policies and methods used in the preparation of our consolidated financial statements.

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Actual results may differ significantly from those estimates under different assumptions and conditions and may be material.

We believe that our most critical accounting policies are those related to revenue recognition, valuation and impairment of investments, our assessment of ownership interests as variable interest entities and the related determination of consolidation, share-based compensation expense, assets acquired and liabilities assumed in connection with business combinations, long-lived and intangible asset impairment, contingent consideration, income taxes and contingencies and allowance for doubtful accounts.

We believe that our most critical accounting policies are those related to revenue recognition, valuation and impairment of investments, our assessment of ownership interests as variable interest entities and the related determination of consolidation, share-based compensation expense, fair value of assets acquired and liabilities assumed in connection with business combinations, long-lived and intangible asset impairment, contingent consideration, income taxes and contingencies

and allowance for doubtful accounts.

We consider these policies critical because they are those that are most important to the portrayal of our financial condition and results and require management’s most difficult, subjective and complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.

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Revenue Recognition

Cloud Services

The Company’s Cloud Services revenues substantially consist of monthly recurring subscription and usage-based fees, the majority of which are paid in advance by credit card.

The Company defers the portions of monthly, quarterly, semi-annually and annually recurring subscription and usage-based fees collected in advance of the satisfaction of performance obligations and recognizes them in the period earned.

Along with our numerous proprietary Cloud Services solutions, the Company also generates revenues by reselling various third-party solutions, primarily through our security and data backup lines of business.

These third-party solutions, along with our proprietary products, allow the Company to offer customers a variety of solutions to better meet their needs.

The Company records revenue on a gross basis with respect to reseller revenue because the Company has control of the specified good or service prior to transferring control to the customer.

J2 Global’s Cloud Services also includes patent license revenues generated under license agreements that provide for the payment of contractually determined fully paid-up or royalty-bearing license fees to J2 Global in exchange for the grant of non-exclusive, retroactive and future licenses to our intellectual property, including patented technology.

Patent revenues may also consist of revenues generated from the sale of patents.

Patent license arrangements are evaluated to determine if they grant the customer a right to access the Company’s intellectual property which is generally recognized over the life of the arrangement or a right to use the Company’s intellectual property which is generally recognized at the point in time the license is granted.

With regard to royalty-bearing license arrangements, the Company recognizes revenues of license fees earned during the applicable period.

The Cloud Services business also generates revenues by licensing certain technology to third parties.

Generally, revenue is recognized over time as the third party uses the licensed technology over the period.

Digital Media

Digital Media revenues are earned primarily from the delivery of advertising services and from subscriptions to services and information.

Payment is received in arrears by check or wire and includes terms aligned with the industry standard of 90 days or less.

Revenue is earned from the delivery of advertising services on the Company’s owned and operated websites and on those websites that are part of Digital Media’s advertising network.

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Such other revenues are generally recognized over the period in which the products or services are delivered.

Revenues were no longer generated in 2018 from certain marketing and production services as a result of the sale of certain Digital Media assets during 2017.

J2 Global also generates Digital Media revenues from transactions involving the sale of perpetual software licenses, related software support and maintenance, hardware used in conjunction with its software, and other related services.

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The Company records revenue on a net basis with respect to revenue paid to the Company by certain third-party advertising networks who serve online display and video advertising across the Company’s owned-and-operated web properties and certain third-party sites.

Cloud Services

The Company’s Cloud Services revenues substantially consist of monthly recurring subscription and usage-based fees, the majority of which are paid in advance by credit card.

Along with our numerous proprietary Cloud Services solutions, the Company also generates revenues by reselling various third-party solutions, primarily through our email security and online backup lines of business.

These third-party solutions, along with our proprietary products, allow the Company to offer customers a variety of solutions to better meet the customer’s needs.

The Company records revenue on a gross basis with respect to reseller revenue because the Company has control of the specified good or service prior to transferring control to the customer.

Valuation and Impairment of Investments

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320, Investments - Debt Securities (“ASC 320”).

Our debt investments are typically comprised of corporate debt securities.

We determine the appropriate classification of our investments at the time of acquisition and evaluate such determination at each balance sheet date.

Trading securities are those investments that we intend to sell within a few hours or days and are carried at fair value, with unrealized gains and losses included in investment income.

Available-for-sale debt securities are those investments we do not intend to hold to maturity and can be sold.

Available-for-sale debt securities are carried at fair value with unrealized gains and losses included in other comprehensive income.

Held-to-maturity securities are those investments which we have the ability and intent to hold until maturity and are recorded at amortized cost.

Our debt investments are typically comprised of corporate debt securities, which we classify as available-for-sale.

Available-for-sale securities are carried at fair value with unrealized gains and losses included in other comprehensive income.

All debt securities are accounted for on a specific identification basis.

The Company’s available-for-sale debt securities are carried at an estimated fair value with any unrealized gains or losses, net of taxes, included in accumulated other comprehensive loss in stockholders’ equity.

Available-for-sale debt securities with an amortized cost basis in excess of estimated fair value are assessed to determine what amount of that difference, if any, is caused by expected credit losses.

Expected credit losses on available-for-sale debt securities are recognized in loss on investments, net on our Consolidated Statements of Operations, and any remaining unrealized losses, net of taxes, are included in accumulated comprehensive loss in stockholders’ equity.

We account for our investments in equity securities in accordance with ASC Topic No.

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b) the Company has the obligation to absorb losses of the VIE, or the right to receive benefits of the VIE, that could potentially be significant to the VIE (the economic criterion).

We have concluded that, as a limited partner, although the obligations to absorb losses or benefit from the gains is not insignificant, we do not have “power” over OCV because we do not have the ability to direct the significant decisions which impact the economics of OCV.

We have concluded that, as a limited partner, although the obligations to absorb losses or the right to benefit from the gains is not insignificant, we do not have “power” over OCV because we do not have the ability to direct the significant decisions which impact the economics of OCV.

We believe that the OCV general partner, as a single decision maker, holds the ability to make the decisions about the activities that most significantly impact the OCV Fund’s economic performance.

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OCV qualifies as an investment company under ASC 946 - Financial Services, Investment Companies (“ASC 946”).

Under ASC Topic 323, Investments - Equity Method and Joint Ventures, an investor that holds investments that qualify for specialized industry accounting for investment companies in accordance with ASC 946 should record its share of the earnings or losses, realized or unrealized, as reported by its equity method investees in the consolidated statements of income.

We recognize our equity in the net earnings or losses relating to the investment in OCV on a one-quarter lag due to the timing and availability of financial information from OCV.

If we become aware of a significant decline in value, the loss will be recorded in the period in which we identify the decline.

If we become aware of a significant decline in value that is other-than-temporary, the loss will be recorded in the period in which we identify the decline.

Share-Based Compensation Expense

We comply with the provisions of FASB ASC Topic No.

We account for share-based awards to employees and non-employees in accordance with the provisions of FASB ASC Topic No.

718, Compensation - Stock Compensation (“ASC 718”).

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Any such changes could materially impact our results of operations in the period in which the changes are made and in periods thereafter.

We elected to adopt the alternative transition method for calculating the tax effects of share-based compensation.

Long-lived and Intangible Assets

We account for long-lived assets in accordance with the provisions of FASB ASC Topic No.

360, Property, Plant, and Equipment (“ASC 360”), which addresses financial accounting and reporting for the impairment or disposal of long-lived assets.

The Company estimates the expected term based upon the historical exercise behavior of our employees.

Impairment or Disposal of Long-lived and Intangible Assets

J2 Global accounts for long-lived assets, which include property and equipment, operating lease right-of-use assets and identifiable intangible assets with finite useful lives (subject to amortization), in accordance with the provisions of FASB ASC Topic No.

360, Property, Plant, and Equipment (“ASC 360”), which requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Recoverability is measured by comparing the carrying amount of an asset to the expected undiscounted future net cash flows generated by the asset.

If it is determined that the asset may not be recoverable, and if the carrying amount of an asset exceeds its estimated fair value, an impairment charge is recognized to the extent of the difference.

We assess the impairment of identifiable definite-lived intangibles and long-lived assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable.

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If we determined that the carrying value of definite-lived intangibles and long-lived assets may not be recoverable based upon the existence of one or more of the above indicators of impairment, we would record an impairment equal to the excess of the carrying amount of the asset over its estimated fair value.

We have assessed whether events or changes in circumstances have occurred that potentially indicate the carrying value of definite-lived intangibles and long-lived assets may not be recoverable and noted no indicators of potential impairment for the years ended December 31, 2019, 2018 and 2017.

Business Combinations and Valuation of Goodwill and Purchased Intangible Assets

We apply the acquisition method of accounting for business combinations in accordance with GAAP, which requires us to make use of estimates and judgments to allocate the purchase price paid for acquisitions to the fair value of the assets, including identifiable intangible assets and liabilities acquired.

We have assessed whether events or changes in circumstances have occurred that potentially indicate the carrying amount of definite-lived intangibles and long-lived assets may not be recoverable.

In the year ended December 31, 2020, we recorded impairments of certain operating right-of-use assets and associated property and equipment (see Note 11 - Leases of the Notes to Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K, which is incorporated herein by reference).

No impairment was recorded for the years ended December 31, 2019, and 2018.

The Company classifies its long-lived assets to be sold as held for sale in the period (i) it has approved and committed to a plan to sell the asset, (ii) the asset is available for immediate sale in its present condition, (iii) an active program to locate a buyer and other actions required to sell the asset have been initiated, (iv) the sale of the asset is probable, (v) the asset is being actively marketed for sale at a price that is reasonable in relation to its current fair value, and (vi) it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.

The Company initially measures a long-lived asset that is classified as held for sale at the lower of its carrying value or fair value less any costs to sell.

Any loss resulting from this measurement is recognized in the period in which the held for sale criteria are met.

Conversely, gains are not recognized on the sale of a long-lived asset until the date of sale.

Upon designation as an asset held for sale, the Company stops recording depreciation expense on the asset.

The Company assesses the fair value of a long-lived asset less any costs to sell at each reporting period and until the asset is no longer classified as held for sale.

Business Combinations and Valuation of Goodwill and Intangible Assets

We apply the acquisition method of accounting for business combinations in accordance with GAAP and uses estimates and judgments to allocate the purchase price paid for acquisitions to the fair value of the assets, including identifiable intangible assets and liabilities acquired.

Such estimates may be based on significant unobservable inputs and assumptions such as, but not limited to, revenue growth rates, gross margins, customer attrition rates, royalty rates, discount rates and terminal growth rate assumptions.

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Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings.

Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in a business combination.

Intangible assets resulting from the acquisitions of entities accounted for using the acquisition method of accounting are recorded at the estimated fair value of the assets acquired.

Identifiable intangible assets are comprised of purchased customer relationships, trademarks and trade names, developed technologies and other intangible assets.

Intangible assets subject to amortization are amortized over the period of estimated economic benefit ranging from one to 20 years and are included in general and administrative expenses on the Consolidated Statements of Operations.

We evaluate our goodwill and indefinite-lived intangible assets for impairment pursuant to FASB ASC Topic No.

350, Intangibles - Goodwill and Other (“ASC 350”), which provides that goodwill and other intangible assets with indefinite lives are not amortized but tested for impairment annually or more frequently if circumstances indicate potential impairment.

In connection with the annual impairment test for goodwill, we have the option to perform a qualitative assessment in determining whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount.

If we determine that it was more likely than not that the fair value of the reporting unit is less than its carrying amount, then we perform the impairment test upon goodwill.

The impairment test is performed by comparing a reporting unit’s fair value to its carrying value;

if the fair value is less than its carrying value, impairment is indicated.

In connection with the annual impairment test for intangible assets, we have the option to perform a qualitative assessment in determining whether it is more likely than not that the fair value is less than its carrying amount, then we perform the impairment test upon intangible assets.

In the fourth quarter of 2018, there was a change to our reporting units.

As a result of this change, we allocated goodwill to our new reporting units using a relative fair value approach.

In addition, we completed an assessment of any potential goodwill impairment for all reporting units immediately before and after the reallocation and determined no impairment existed.

Further, we completed the required impairment review for the years ended December 31, 2019, 2018 and 2017 and noted no impairment.

Consequently, no impairment charges were recorded.

In connection with the annual impairment test for goodwill, we have the option to perform a qualitative assessment in determining whether it

is more likely than not that the fair value of a reporting unit is less than its carrying amount.

If we determine that it is more likely than not that the fair value of the reporting unit is less than its carrying amount, then we perform the impairment test upon goodwill.

The impairment test involves comparing the fair values of the applicable reporting units with their aggregate carrying values, including goodwill.

We generally determine the fair value of our reporting units using the income approach methodology of valuation.

If the carrying value of a reporting unit exceeds the reporting unit’s fair value, an impairment loss is recognized for the difference.

In 2020, we changed the annual goodwill impairment assessment date for the Digital Media business from December 31 to October 1, as we determined this date is preferable, and concluded this was not a material change in accounting principle.

Contingent Consideration

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We review and re-assess the estimated fair value of contingent consideration on a quarterly basis, and the updated fair value could be materially different from the initial estimates or prior quarterly amounts.

Changes in the estimated fair value of our contingent earn-out liabilities are reported in operating income.

Adjustments to the estimated fair value related to changes in all other unobservable inputs are reported in operating income.

Changes in the estimated fair value of our contingent earn-out liabilities and adjustments to the estimated fair value related to changes in all other unobservable inputs are reported in general and administrative expenses on the Consolidated Statements of Operations.

Our income is subject to taxation in both the U.S.

and numerous foreign jurisdictions.

Significant judgment is required in evaluating our tax positions and determining its provision for income taxes.

During the ordinary course of business, there are many transactions and calculations for which the ultimate tax determination is uncertain.

We establish reserves for tax-related uncertainties based on estimates of whether, and the extent to which, additional taxes will be due.

These reserves for tax contingencies are established when we believe that certain positions might be challenged despite our belief that our tax return positions are fully supportable.

We adjust these reserves in light of changing facts and circumstances, such as the outcome of a tax audit or lapse of a statute of limitations.

The provision for income taxes includes the impact of reserve provisions and changes to reserves that are considered appropriate.

We account for income taxes in accordance with FASB ASC Topic No.

740, Income Taxes (“ASC 740”), which requires that deferred tax assets and liabilities be recognized using enacted tax rates for the effect of temporary differences between the book and tax basis of recorded assets and liabilities.

ASC 740 also requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some or all of the net deferred tax assets will not be realized.

740, Income Taxes (“ASC 740”), which requires that deferred tax assets and liabilities are recognized using enacted tax rates for the effect of temporary differences between the book and tax basis of recorded assets and liabilities.

GAAP also requires that deferred tax assets are reduced by a valuation allowance if it is more likely than not that some or all of the net deferred tax assets will not be realized.

Our valuation allowance is reviewed quarterly based upon the facts and circumstances known at the time.

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Uncertain income tax positions that relate only to timing of when an item is included on a tax return are considered to have met the recognition threshold.

We recognize accrued interest and penalties related to uncertain income tax positions in income tax expense on our consolidated statement of income.

We recognize accrued interest and penalties related to uncertain income tax positions in income tax expense on our Consolidated Statements of Operations.

On a quarterly basis, we evaluate uncertain income tax positions and establish or release reserves as appropriate under GAAP.

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Therefore, the actual liability for U.S.

or foreign taxes may be materially different from our estimates, which could result in the need to record additional tax liabilities or potentially to reverse previously recorded tax liabilities.

or foreign taxes may be

materially different from our estimates, which could result in the need to record additional tax liabilities or potentially to reverse previously recorded tax liabilities.

In addition, we may be subject to examination of our tax returns by the U.S.

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Non-Income Tax Contingencies

The Company does not collect and remit sales and use, telecommunication, or similar taxes in certain jurisdictions where the Company believes that such taxes are not applicable or legally required.

Several states and other taxing jurisdictions have presented or threatened the Company with assessments, alleging that the Company is required to collect and remit such taxes there.

The Company is currently under audit or is subject to audit for indirect taxes in various states, municipalities and foreign jurisdictions.

The Company has a $21.2 million reserve established for these matters which is included in accounts payable and accrued expenses on the consolidated balance sheet at December 31, 2019.

We do not collect and remit sales and use, telecommunication, or similar taxes in certain jurisdictions where we believe 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.

We are currently under audit or is subject to audit for indirect taxes in various states, municipalities and foreign jurisdictions.

We have a $22.5 million reserve established for these matters which is included in other long-term liabilities and accounts payable and accrued expenses on the Consolidated Balance Sheet at December 31, 2020.

It is reasonably possible that additional liabilities could be incurred resulting in additional expense, which could have a materially impact on our financial results.

Allowances for Doubtful Accounts

We reserve for receivables we may not be able to collect.

The reserves for our Cloud Services business are typically driven by the volume of credit card declines and past due invoices and are based on historical experience as well as an evaluation of current market conditions.

The reserves for our Digital Media business are typically driven by past due invoices based on historical experience.

We maintain an allowance for credit losses for accounts receivable, which is recorded as an offset to accounts receivable and changes in such are classified as general and administrative expenses in the Consolidated Statements of Operations.

We assess collectability by reviewing accounts receivable on a collective basis where similar characteristics exist and on an individual basis when we identify specific customers with known disputes or collectability issues.

In determining the amount of the allowance for credit losses, we consider historical collectability based on past due status.

We also consider customer-specific information, current market conditions and reasonable and supportable forecasts of future economic conditions to inform adjustments to historical loss data.

On an ongoing basis, management evaluates the adequacy of these reserves.

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Years Ended December 31, 2020, 2019 and 2018

Cloud Services

Assuming a stable or improving economic environment, and, subject to our risk factors, we expect the revenue and profits as included in the results of operations below in our Cloud Services business to be stable for the foreseeable future (excluding the impact of acquisitions).

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.

As a result, we expect to continue to take steps to enhance our existing offerings and offer new services to continue to satisfy the evolving needs of our customers.

Through our IP licensing operations, which are included in the Cloud Services business, we seek to make our IP available for license to third parties, and we expect to continue to attempt to obtain additional IP through a combination of acquisitions and internal development in an effort to increase available licensing opportunities and related revenues.

We expect acquisitions to remain an important component of our strategy and use of capital in this business;

however, we cannot predict whether our current pace of acquisitions will remain the same within this business.

In a given period, we may close greater or fewer acquisitions than in prior periods or acquisitions of greater or lesser significance than in prior periods.

Moreover, future acquisitions of businesses within this space but with different business models may impact Cloud Services’ overall profit margins.

Also, as IP licensing often involves litigation, the timing of licensing transactions is unpredictable and can and does vary significantly from period to period.

This variability can cause the overall business’s financial results to materially vary from period to period.

Digital Media

Assuming a stable or improving economic environment, and, subject to our risk factors, we expect the revenue and profits in our Digital Media business to improve over the next several quarters as we integrate our recent acquisitions and over the longer term as advertising transactions continue to shift from offline to online.

We expect revenue for fiscal year 2021 to be higher compared to the prior-year due to the acquisition of RetailMeNot, subject to the continued risk of the COVID-19 pandemic.

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.

The main focus of our advertising programs is to provide relevant and useful advertising to visitors to our websites and those included within our advertising networks, reflecting our commitment to constantly improve their overall web experience.

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We expect acquisitions to remain an important component of our strategy and use of capital in this business;

however, we cannot predict whether our current pace of acquisitions will remain the same within this business.

In a given period, we may close greater or fewer acquisitions than in prior periods or acquisitions of greater or lesser significance than in prior periods.

however, we cannot predict whether our current pace of acquisitions will remain the same within this business, especially in light of the current macroeconomic conditions.

In a given period, we may close greater or fewer acquisitions than in prior periods or

acquisitions of greater or lesser significance than in prior periods.

Moreover, future acquisitions of businesses within this space but with different business models may impact Digital Media’s overall profit margins.

Cloud Services

Given the uncertainty of the current macroeconomic environment and the impact of the COVID-19 pandemic, we expect 2021 revenue to be higher compared to the prior-year.

As a result, we expect to continue to take steps to enhance our existing offerings and offer new services to continue to satisfy the evolving needs of our customers.

We expect acquisitions to remain an important component of our strategy and use of capital in this business;

however, we cannot predict whether our current pace of acquisitions will remain the same within this business, especially in light of the current macroeconomic conditions.

In a given period, we may close greater or fewer acquisitions than in prior periods or acquisitions of greater or lesser significance than in prior periods.

Moreover, future acquisitions of businesses within this space but with different business models may impact Cloud Services’ overall profit margins.

Also, as IP licensing often involves litigation, the timing of licensing transactions is unpredictable and can and does vary significantly from period to period.

This variability can cause the overall business’s financial results to materially vary from period to period.

J2 Global Consolidated

We anticipate that the stable revenue trend in our Cloud Services business combined with the improving revenue and profits in our Digital Media business will result in overall improved revenue and profits for J2 Global on a consolidated basis, excluding the impact of any future acquisitions which can vary dramatically from period to period.

Based on the trends discussed above with respect to our Cloud Services and Digital Media businesses, we anticipate our consolidated revenue for fiscal year 2021 to be higher 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.

The following table sets forth, for the years ended December 31, 2019 , 2018 and 2017 , information derived from our statements of income as a percentage of revenues.

The following table sets forth, for the years ended December 31, 2020, 2019 and 2018, information derived from our Statements of Operations as a percentage of revenues.

This information should be read in conjunction with the accompanying financial statements and the Notes to Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K.

Years ended December 31,

2020 2019 2018

Revenues 100% 100% 100%

Cost of revenues 16 17 17

Gross profit 84 83 83

Operating expenses:

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Interest expense, net 9 5 5

Other expense (income), net

Gain on sale of businesses (1) — —

Loss on investments, net 1 — —

Other (income) expense, net (2) — —

Income before income taxes and net loss in earnings of equity method investment 15 15 15

Income tax (benefit) expense

Income tax expense (benefit) 5 (1) 4

Net loss in earnings of equity method investment 1 — —

(in thousands, except percentages)

Percentage Change 2019 versus 2018

Percentage Change 2018 versus 2017

Our revenues consist of revenues from our Cloud Services business and from our Digital Media business.

Net income 10% 16% 11%

(in thousands, except percentages) 2020 2019 2018 Percentage Change 2020 versus 2019 Percentage Change 2019 versus 2018

Revenues $ 1,489,593 $ 1,372,054 $ 1,207,295 9% 14%

Our revenues consist of revenues from our Digital Media business and from our Cloud Services business.

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.

Cloud Services revenues primarily consist of revenues from “fixed” customer subscription revenues and “variable” revenues generated from actual usage of our services.

We also generate Cloud Services revenues from IP licensing.

Our revenues have increased over the past three years primarily due to a combination of acquisitions and organic growth within both the Digital Media and Cloud Services businesses.

Our revenues have increased over the past three years 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.

Cost of Revenues

(in thousands, except percentages)

Percentage Change 2019 versus 2018

Percentage Change 2018 versus 2017

(in thousands, except percentages) 2020 2019 2018 Percentage Change 2020 versus 2019 Percentage Change 2019 versus 2018

Cost of revenue $ 231,782 $ 237,323 $ 201,074 (2)% 18%

As a percent of revenue 16% 17% 17%

Cost of revenues is primarily comprised of costs associated with content fees, data and voice transmission, numbers, editorial and production costs, network operations, customer service, online processing fees and software licenses for resale.

The increase in cost of revenues for the year ended December 31, 2019 was primarily due to an increase in costs associated with businesses acquired in and subsequent to fiscal 2018 that resulted in additional campaign fulfillment, partner inventory, network

operations and customer service costs.

The increase in cost of revenues for the year ended December 31, 2018 was primarily due to an increase in costs associated with businesses acquired in and subsequent to fiscal 2017 that resulted in additional content fees.

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

The decrease in cost of revenues for the year ended December 31, 2020 was primarily due to lower content fees, campaign fulfillment cost, other editorial and production costs;

partially offset by an increase in depreciation and amortization The increase in cost of revenues for the year ended December 31, 2019 was primarily due to an increase in costs associated with businesses acquired in and subsequent to fiscal 2018 that resulted in additional campaign fulfillment, partner inventory, network operations and customer service costs.

Operating Expenses

Sales and Marketing.

(in thousands, except percentages)

Percentage Change 2019 versus 2018

Percentage Change 2018 versus 2017

(in thousands, except percentages) 2020 2019 2018 Percentage Change 2020 versus 2019 Percentage Change 2019 versus 2018

Sales and Marketing $ 413,474 $ 379,183 $ 338,304 9% 12%

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Research, Development and Engineering .

(in thousands, except percentages)

Percentage Change 2019 versus 2018

Percentage Change 2018 versus 2017

(in thousands, except percentages) 2020 2019 2018 Percentage Change 2020 versus 2019 Percentage Change 2019 versus 2018

Research, Development and Engineering $ 64,295 $ 54,396 $ 48,370 18% 12%

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

The increase in research, development and engineering costs from 2019 to 2020 was primarily due to an increase in costs associated with businesses acquired within the Digital Media business.

The increase in research, development and engineering costs from 2018 to 2019 was primarily due to personnel costs associated with acquisitions within the Digital Media business.

The increase in research, development and engineering costs from 2017 to 2018 was primarily due to personnel costs associated with acquisitions within the Cloud Service business.

General and Administrative.

(in thousands, except percentages)

Percentage Change 2019 versus 2018

Percentage Change 2018 versus 2017

(in thousands, except percentages) 2020 2019 2018 Percentage Change 2020 versus 2019 Percentage Change 2019 versus 2018

General and Administrative $ 445,431 $ 424,072 $ 375,267 5% 13%

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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 from 2018 to 2019 was primarily due to additional amortization of intangible assets, increased depreciation expense and personnel costs relating to acquisitions closed during 2018 and 2019.

The increase in general and administrative expense from 2019 to 2020 was primarily due to the recognition of lease asset impairments and additional depreciation due to leasehold impairments, legal settlements and increased professional fees;

partially offset by decreased amortization of intangible assets.

Share-Based Compensation

The following table represents share-based compensation expense included in cost of revenues and operating expenses in the accompanying consolidated statements of income for the years ended December 31, 2019 , 2018 and 2017 (in thousands):

The following table represents share-based compensation expense included in cost of revenues and operating expenses in the accompanying Consolidated Statements of Operations for the years ended December 31, 2020, 2019 and 2018 (in thousands):

Years ended December 31,

2020 2019 2018

Cost of revenues $ 535 $ 525 $ 510

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General and administrative 20,238 20,373 24,232

Total $ 24,006 $ 23,922 $ 28,093

Non-Operating Income and Expenses

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Interest expense, net was $132.0 million, $69.5 million, and $62.0 million for the years ended December 31, 2020, 2019 and 2018, respectively.

The increase from 2019 to 2020 was primarily due to increased interest expense associated with the issuance of our 1.75% Convertible Senior Notes in the fourth quarter 2019;

and the payment of certain prepayment penalties and write off of issuance costs in connection with the refinancing of our 6.0% Senior Notes and associated issuance of our 4.625% Senior Notes in the fourth quarter 2020.

The increase from 2018 to 2019 was primarily due to increased interest expense associated with our line of credit borrowings and issuance of our 1.75% Convertible Senior Notes in the fourth quarter 2019.

The decrease from 2017 to 2018 was primarily due to decreased interest expense associated with the loss on extinguishment recognized in 2017 following the redemption of our $250 million of 8.0% senior notes recognized in 2017.

Other expense (income), net .

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

Other expense (income), net was $7.9 million , $4.7 million , and $(22.0) million for the years ended December 31, 2019 , 2018 and 2017 , respectively.

The change from 2018 to 2019 was attributable to an impairment loss on equity securities and currency exchange losses.

The change from 2017 to 2018 was attributable to gains earned in the prior period related to the sales of subsidiaries in our Digital Media and Cloud businesses.

Gain on sale of businesses.

Our gain on sale of businesses is generated primarily from the sale of certain Voice assets in Australia and New Zealand in the third quarter of 2020.

Gain on sale of businesses was $17.1 million, zero, and zero for the years ended December 31, 2020, 2019 and 2018, respectively.

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 $21.0 million, $4.2 million, and $0.1 million for the years ended December 31, 2020, 2019 and 2018, respectively.

Our net loss on investments, net increased during fiscal year 2020 versus the prior comparable period due to net losses realized on certain investments as the result of the recapitalization of the investee and overall market volatility.

The increase from 2018 to 2019 was attributable to an impairment loss on equity securities.

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 $(31.6) million, $3.7 million, and $4.6 million for the years ended December 31, 2020, 2019 and 2018, respectively.

The change from 2019 to 2020 was attributable to currency exchange gains.

The change from 2018 to 2019 was attributable to currency exchange losses.

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.

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In addition, as of December 31, 2020 and 2019, we had available unrecognized state research and development tax credits of $9.1 million and $3.2 million, respectively, which last indefinitely.

Income tax (benefit) expense amounted to $(19.4) million , $44.8 million and $60.5 million for the years ended December 31, 2019 , 2018 and 2017 , respectively.

Income tax expense (benefit) amounted to $68.4 million, $(19.4) million and $44.8 million for the years ended December 31, 2020, 2019 and 2018, respectively.

Our effective tax rates for 2020, 2019 and 2018 were 29.7%, (9.7)% and 25.2%, respectively.

The decrease in our annual effective income tax rate from 2018 to 2019 was primarily attributable to the following:

a decrease during 2019 from an intra-entity transfer as part of the reorganization of our international operating structure resulting in recognition of $53.7 million tax benefit and corresponding deferred tax asset;

a decrease in tax expense during 2019 from an overall reduction in our net reserve for uncertain tax positions;

partially offset by:

The increase in our annual effective income tax rate from 2019 to 2020 was primarily attributable to the following:

An increase in tax expense during 2020 due to a $53.7 million tax benefit recognized in 2019 from an intra-entity transfer as part of the reorganization of our international operating structure resulting in the recognition of a deferred tax asset with no comparable event during 2020;

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

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domestic operations);

an increase in tax expense during 2020 due to recording valuation allowances on deferred tax assets related to capital loss carryovers.

The decrease in our annual effective income tax rate from 2018 to 2019 was primarily attributable to the following:

a decrease during 2018 from the reduction in the U.S.

federal statutory income tax rate from 35% to 21% effective on January 1, 2018;

a decrease during 2019 from an intra-entity transfer as part of the reorganization of our international operating structure resulting in recognition of a $53.7 million tax benefit and corresponding deferred tax asset;

a decrease in tax expense during 2019 from an overall reduction in our net reserve for uncertain tax positions;

partially offset by

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domestic operations).

an increase in tax expense during 2018 due to tax law changes requiring certain income earned by foreign subsidiaries to be included in the income of the U.S.

In order to provide additional understanding in connection with our foreign taxes, the following represents the statutory and effective tax rate by significant foreign country:

United Kingdom

Ireland United Kingdom Canada

Statutory tax rate 12.5% 19.0% 26.5%

Effective tax rate (1)

10.6% 19.2% 26.7%

(1) Effective tax rate excludes certain discrete items.

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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 $0.2 million , $4.1 million and zero , net of tax benefit for the years ended December 31, 2019 , 2018 , and 2017 respectively.

During the years ended December 31, 2019 , 2018 , and 2017 the Company recognized management fees of $3.0 million , $4.5 million and zero , net of tax benefit, respectively.

Cloud Services and Digital Media Results

The net loss in earnings of equity method investment was $11.3 million, $0.2 million and $4.1 million, net of tax benefit for the years ended December 31, 2020, 2019, and 2018, respectively.

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

In addition, the Company recognized an investment loss in fiscal 2020 in the amount of $4.3 million, net of tax benefit.

During the years ended December 31, 2020, 2019, and 2018 the Company recognized management fees of $3.0 million, $3.0 million and $4.5 million, net of tax benefit, respectively.

Digital Media and Cloud Services Results

Our businesses are based on the organization structure used by management for making operating and investment decisions and for assessing performance and have been aggregated into two businesses:

(i) Cloud Services;

and (ii) Digital Media.

(i) Digital Media;

and (ii) Cloud Services.

We evaluate the performance of our businesses based on revenues, including both external and interbusiness net sales, and operating income.

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All significant interbusiness amounts are eliminated to arrive at our consolidated financial results.

Digital Media

The following results are presented for fiscal years 2020, 2019 and 2018 (in thousands):

2020 2019 2018

External net sales $ 811,589 $ 710,811 $ 609,434

Inter-business net sales (229) (300) (60)

Net sales 811,360 710,511 609,374

Cost of revenues 77,473 93,053 78,919

Gross profit 733,887 617,458 530,455

Operating expenses 594,087 540,193 483,167

Operating income $ 139,800 $ 77,265 $ 47,288

Net sales of $811.4 million in 2020 increased $100.8 million, or 14.2%, and net sales of $710.5 million in 2019 increased $101.1 million, or 16.6%, from the prior comparable period primarily due to business acquisitions subsequent to the prior comparable periods.

Gross profit of $733.9 million in 2020 increased $116.4 million and gross profit of $617.5 million in 2019 increased $87.0 million from the prior comparable periods primarily due to an increase in net sales between the periods.

Gross profit as a percentage of revenues in 2020 and 2019 was higher due to lower content fees, campaign fulfillment cost, other editorial and production costs.

Gross profit as a percentage of revenues in 2019 and 2018 was consistent with the previous comparable period.

Operating expenses of $594.1 million in 2020 increased $53.9 million from the prior comparable period primarily due to additional expense associated with businesses acquired in and subsequent to 2019 comprised primarily of salary and related costs including severance and an increase in marketing costs.

Operating expenses of $540.2 million in 2019 increased $57.0 million from the prior comparable period primarily due to additional expense associated with businesses acquired in and subsequent to 2018 comprised primarily of salary and related costs, marketing costs and changes in fair value of contingent consideration and amortization of intangible assets.

As a result of these factors, operating income of $139.8 million in 2020 increased $62.5 million, or 80.9%, from 2019, and operating income of $77.3 million in 2019 increased $30.0 million, or 63.4%, from 2018.

Cloud Services

The following results are presented for fiscal years 2020, 2019 and 2018 (in thousands):

2020 2019 2018

External net sales $ 678,461 $ 661,835 $ 597,975

Inter-business net sales — — —

Net sales 678,461 661,835 597,975

Cost of revenues 154,261 144,270 122,154

Gross profit 524,200 517,565 475,821

Operating expenses 274,997 270,025 239,629

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The gross profit as a percentage of revenues for 2020 and 2019 was consistent with the previous comparable period.

Operating expenses of $275.0 million in 2020 increased $5.0 million from 2019 and was consistent with the previous comparable period.

Operating expenses of $270.0 million in 2019 increased $30.4 million from 2018 primarily due to (a) additional expense associated with businesses acquired in and subsequent to the prior comparable period;

and (b) an increase in marketing costs and amortization of intangible assets.

Operating expenses of $245.7 million in 2018 increased $11.5 million from 2017 primarily due to (a) additional expense associated with businesses acquired in and subsequent to the prior comparable period;

and (b) an allocation of certain shared Corporate operating costs.

As a result of these factors, operating earnings of $249.2 million in 2020 increased $1.7 million, or 0.7%, from 2019, and operating earnings of $247.5 million in 2019 increased $11.3 million, or 4.8%, from 2018.

Our Cloud Services business consists of several services which have similar economic characteristics, including the nature of the services and their production processes, the type of customers, as well as the methods used to distribute these services.

Digital Media

The following results are presented for fiscal years 2019 , 2018 and 2017 (in thousands):

External net sales

Inter-business net sales

Cost of revenues

Operating expenses

Operating income

Net sales of $710.5 million in 2019 increased $101.1 million , or 16.6% , and net sales of $609.4 million in 2018 increased $70.4 million , or 13.1% , from the prior comparable period primarily due to business acquisitions subsequent to the prior comparable periods.

Gross profit of $617.5 million in 2019 increased $87.0 million and gross profit of $530.5 million in 2018 increased $45.1 million from the prior comparable periods primarily due to an increase in net sales between the periods.

Gross profit as a percentage of revenues in 2019 and 2018 was consistent with the previous comparable period.

Gross profit as a percentage of revenues in 2018 and 2017 was lower than the prior comparable period due to additional content fees;

partially offset by a decrease in campaign fulfillment costs.

Operating expenses of $550.8 million in 2019 increased $61.8 million from the prior comparable period primarily due to (a) additional expense associated with businesses acquired in and subsequent to 2018 comprised primarily of salary and related costs, marketing costs, changes in fair value of contingent consideration and amortization of intangible assets;

and (b) an allocation of certain shared Corporate operating costs.

Operating expenses of $489.0 million in 2018 increased $51.7 million from the prior comparable period primarily due to (a) additional expense associated with businesses acquired in and subsequent to 2017 comprised primarily of salary and related costs, marketing costs, changes in fair value of contingent consideration and amortization of intangible assets;

and (b) an allocation of certain shared Corporate operating costs.

As a result of these factors, operating income of $66.6 million in 2019 increased $25.2 million , or 60.8% , from 2018 , and operating income of $41.4 million in 2018 decreased $6.6 million , or 13.8% , from 2017 .

Liquidity and Capital Resources

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At December 31, 2020, we had cash, cash equivalents, and investments of $340.8 million compared to $675.7 million at December 31, 2019.

The increase in cash, cash equivalents, and investments resulted primarily from the proceeds from the issuance of $550.0 million in aggregate principal amount of 1.75% Convertible Notes in the fourth quarter 2019, cash provided from operations, and distribution from an equity method investment;

partially offset by business acquisitions, dividends paid, repurchase of common stock, purchases of property and equipment and investments.

At December 31, 2019 , cash, cash equivalents, and investments consisted of cash and cash equivalents of $575.6 million and long-term investments of $100.1 million .

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

partially offset by the proceeds from the issuance of debt, cash provided from operations and proceeds from the sale of businesses.

At December 31, 2020, cash, cash equivalents, and investments consisted of cash and cash equivalents of $242.7 million, short-term investments of $0.7 million, and long-term investments of $97.5 million.

Our investments consist of equity and debt securities.

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As of December 31, 2019 cash, cash equivalents, and investments held within domestic and foreign jurisdictions were $604.7 million and $71.0 million, respectively.

At December 31, 2020, the Company had a net working capital deficit of approximately $259.7 million primarily due to cash outflows of $662.9 million related to business combinations and share repurchases during the second half of 2020.

In addition, the 3.25% Convertible Notes in the amount of $396.8 million are recorded as a current liability as of December 31, 2020 due to the Holders right to require the Company to repurchase for cash all or part of their 3.25% Convertible Notes on June 15, 2021.

However, due to the fact that the Convertible Notes are trading well above par, management has determined that the likelihood that the Holders will exercise this right is remote.

On October 7, 2020, the Company issued $750 million aggregate principal amount of 4.625% Senior Notes due 2030.

A portion of the proceeds were used to fund the redemption of the outstanding aggregate principal amount of the 6.0% Senior Notes previously issued by one of our subsidiaries and to pay the redemption premium due in respect of such redemption and accrued and unpaid interest.

The company expects to use the remainder of the net proceeds for general corporate purposes including acquisitions.

Subsequent to the year end, the Company is pursuing to reestablish a credit facility at the J2 Global, Inc.

level providing borrowings of $100.0 million expandable, subject to certain conditions, to $350.0 million.

The Company’s Board of Directors approved two quarterly cash dividends during the year ended December 31, 2019, totaling $0.900 per share of common stock.

2 unchanged sentences

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”).

Pursuant to the Credit Agreement, as amended in July and August, the Lenders provided J2 Cloud Services with a credit facility of $200.0 million (the “MUFG Credit Facility”) through December 31, 2020.

On November 15, 2019, the Company reduced its borrowing capacity from $200.0 million to $100.0 million .

The proceeds of the MUFG 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 December 31, 2019, zero was outstanding under the MUFG Credit Facility.

On October 7, 2020, the Company terminated the Credit Agreement.

On November 15, 2019, the Company issued $550.0 million aggregate principal amount of 1.75% Convertible Notes and received net proceeds of $537.1 million in cash, net of initial purchasers’ discounts, commissions and other debt issuance costs.

The net proceeds were used pay off all amounts outstanding under the MUFG Credit Facility.

The Company expects to use the remainder of the net proceeds for general corporate purposes including acquisitions.

A portion of the net proceeds were used pay off all amounts then outstanding under the MUFG Credit Facility, with the remainder to be used for general corporate purposes including acquisitions.

On June 10, 2014, J2 Global issued $402.5 million aggregate principal amount of 3.25% convertible senior notes due June 15, 2029 (the “3.25% Convertible Notes”).

During the fourth quarter of 2019, the last reported sale price of the Company’s common stock exceeded 130% of the conversion price for at least 20 trading days in the period of 30 consecutive trading days ending on, and including, the last trading day of the quarter.

During the fourth quarter of 2020, the last reported sale price of the Company’s common stock exceeded 130% of the conversion price for at least 20 trading days in the period of 30 consecutive trading days

ending on, and including, the last trading day of the quarter.

As a result, the 3.25% Convertible Notes are convertible at the option of the holder during the quarter beginning January 1, 2021 and ending March 31, 2021.

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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 increase in our net cash provided by operating activities in 2020 compared to 2019 was primarily attributable to a decrease in prepaid expenses and other current assets, increased income tax liabilities and uncertain tax positions.

The increase in our net cash provided by operating activities in 2019 compared to 2018 was primarily attributable to an increase in accounts payable and accrued expenses due to the timing of payments;

partially offset by an increase in accounts receivable, prepaid expenses and other current assets, higher tax payments, lower uncertain tax positions and reduced deferred revenue.

The increase in our net cash provided by operating activities in 2018 compared to 2017 was primarily attributable to an increase in deferred income tax balances;

partially offset by a decrease in income tax payable.

In addition, the increase in our net cash provided by operating activities was due to a decrease in accounts receivable, an increase in depreciation and amortization, changes in the fair value of contingent consideration and an increase in deferred revenue.

Our prepaid tax payments were $3.7 million and zero at December 31, 2019 and 2018 , respectively.

Our prepaid tax payments were $3.0 million and $3.7 million at December 31, 2020 and 2019, respectively.

Our cash and cash equivalents and short-term investments were $243.3 million, $575.6 million and $209.5 million at December 31, 2020, 2019 and 2018, respectively.

Net cash used in investing activities was $586.2 million, $505.3 million and $406.6 million for the years ended December 31, 2020, 2019 and 2018, respectively.

Net cash used in investing activities in 2019 was primarily attributable to business acquisitions, capital expenditures associated with the purchase of property and equipment and the purchase of investments;

partially offset by the distribution from an equity method investment.

Net cash used in investing activities in 2020 was primarily attributable to business acquisitions, capital expenditures associated with the purchase of property and equipment and the purchase of equity method investments;

partially offset by the proceeds from the sale of businesses.

Net cash provided by (used in) financing activities was $456.7 million , $(131.4) million and $111.8 million for the years ended December 31, 2019 , 2018 and 2017 , respectively.

partially offset by the distribution from an equity method investment.

Net cash (used in) provided by financing activities was $(234.6) million, $456.7 million and $(131.4) million for the years ended December 31, 2020, 2019 and 2018, respectively.

Net cash used in financing activities in 2020 was primarily attributable to the repayment of debt, repurchase of stock and business acquisitions;

partially offset by net proceeds from the issuance of our 4.625% Senior Notes and exercise of stock options.

Net cash provided by financing activities in 2019 was primarily attributable to net proceeds from the issuance of 1.75% Convertible Notes, proceeds from the line of credit and exercise of stock options;

partially offset by payment of the line of credit, dividends paid, repurchase of stock, business acquisitions and repayment of note payable.

Net cash used in financing activities in 2018 was primarily attributable to dividends paid, repurchase of common stock and business acquisitions.

Net cash provided by financing activities in 2017 was primarily attributable to proceeds from the issuance

of long-term debt, additional borrowings under our line of credit and exercise of stock options;

partially offset by the repayment in full of the line of credit and other debt, dividends paid, repurchases of stock and business acquisitions.

Stock Repurchase Program

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 which was subsequently extended through February 20, 2021 (see Note 22 - Subsequent Events of the Notes to Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K, which is incorporated herein by reference).

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

As a result of the purchase of J2 Global common stock, the Company’s Board of Directors approved a reduction in the number of shares available for purchase under the 2012 Program by the same amount.

During the year ended December 31, 2020 and 2019, we repurchased 1,140,819 and 197,870 shares under this program, respectively.

Cumulatively at December 31, 2019 , 2.9 million shares were repurchased at an aggregate cost of $117.1 million (including an immaterial amount of commission fees).

As of December 31, 2020, all of the available shares were repurchased under the 2012 Program at an aggregate cost of $204.6 million (including an immaterial amount of commission fees).

On August 6, 2020, the Company’s Board of Directors approved a program authorizing the repurchase of up to ten million shares of our common stock through August 6, 2025 (the “2020 Program”) in addition to the five million shares repurchased under the 2012 Program.

During the year ended December 31, 2020, the Company repurchased 2,490,599 shares at an aggregate cost of $177.8 million (including an immaterial amount of commission fees) under the 2020 Program, which were subsequently retired.

As a result of the Company’s share repurchase programs, the number of shares available for purchase is 7,509,401 shares of J2 Global common stock.

Contractual Obligations and Commitments

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Payment Due by Period (in thousands)

Contractual Obligations

More than 5 Years

Contractual Obligations 1 Year 2-3 Years 4-5 Years More than 5 Years Total

Long-term debt - principal (a) $ 402,414 $ 910 $ — $ 1,300,000 $ 1,703,324

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Telecom services and co-location facilities (e) 2,836 1,683 — — 4,519

Short-term note payable (f)

Holdback payment (g)

Contingent consideration (h)

Transition tax (i)

Self-Insurance (j)

These amounts represent principal on long-term debt.

These amounts represent interest on long-term debt.

These amounts represent undiscounted future minimum rental commitments under noncancellable operating leases and includes renewal options the Company has determined to be reasonably assured to exercise.

These amounts represent undiscounted future minimum rental commitments under noncancellable finance leases.

These amounts represent service commitments to various telecommunication providers.

These amounts represent short-term note payable.

These amounts represent the holdback amounts in connection with certain business acquisitions.

These amounts represent the contingent earn-out liabilities in connection with certain business acquisitions.

These amounts represent commitments related to the transition tax on unrepatriated foreign earnings reduced by the 2017 overpayment of US Federal Income Tax.

These amounts represent health and dental insurance plans in connection to self-insurance.

These amounts primarily represent certain consulting and Board of Director fee arrangements, software license commitments and others.

Holdback payment (f) 7,274 3,079 — — 10,353

Transition tax (g) — — 11,675 — 11,675

Self-Insurance (h) 21,557 479 — — 22,036

Other (i) 1,535 598 — — 2,133

Total $ 522,579 $ 154,116 $ 128,431 $ 1,521,510 $ 2,326,636

(a) These amounts represent principal on long-term debt.

(b) These amounts represent interest on long-term debt.

(d) These amounts represent undiscounted future minimum rental commitments under noncancellable finance leases.

(e) These amounts represent service commitments to various telecommunication providers.

(f) These amounts represent the holdback amounts in connection with certain business acquisitions.

(g) These amounts represent commitments related to the transition tax on unrepatriated foreign earnings reduced by the 2017 overpayment of US Federal Income Tax.

(h) These amounts represent health and dental insurance plans in connection to self-insurance.

(i) These amounts primarily represent certain consulting and Board of Director fee arrangements, software license commitments and others.

As of December 31, 2020, our liability for uncertain tax positions was $57.1 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 the taxing authorities.

We have not presented contingent consideration associated with acquisitions (other than contingent consideration which we have deemed as certain in terms of amount and timing) in the table above due to the uncertainty of the amounts and the timing of cash settlements.

We have not presented contingent consideration associated with acquisitions in the table above due to the uncertainty of the amounts and the timing of cash settlements.

We have also not presented our remaining commitment to OCV Management, LLC of approximately $94.5 million due to the uncertainty of timing of funding requests.

Off-Balance Sheet Arrangements

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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 7. Management’s Discussion and Analysis