What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2021-03-01 compared with 2020-03-02 · 834 added, 590 removed, 1205 unchanged (54% of the section changed)

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Shareholders and Board of Directors

Stockholders and Board of Directors

J2 Global, Inc.

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We have audited the accompanying consolidated balance sheets of J2 Global, Inc.

(the “Company”) as of December 31, 2019 and 2018, the related consolidated statements of income and comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2019, and the related notes and financial statement schedule listed in the accompanying index (collectively referred to as the “consolidated financial statements”).

(the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of operations and comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2020, and the related notes and schedule listed in the accompanying index (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020 , in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company's internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated March 1, 2021, expressed an unqualified opinion thereon.

Change in Accounting Method Related to Leases and Revenue

As discussed in Notes 2 and 11 to the consolidated financial statements, the Company changed its method for accounting for leases as a result of the adoption of Accounting Standards Codification (“ASC”) 842, Leases effective January 1, 2019 under the modified retrospective approach.

As discussed in Notes 2 and 3 to the consolidated financial statements, the Company has changed its method for accounting for revenue from contracts with customers effective January 1, 2018 as a result of adopting ASC 606, Revenue from Contract with Customers.

The Company adopted this new revenue standard using a modified retrospective approach.

Change in Accounting Method Related to Leases

As discussed in Note 11 to the consolidated financial statements, the Company changed its method for accounting for leases as a result of the adoption of Accounting Standards Codification (“ASC”) 842, Leases effective January 1, 2019 under the modified retrospective approach.

Basis for Opinion

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The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial

statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

(1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Accounting for Acquisitions

As described in Notes 2 and 4 to the consolidated financial statements, the Company completed acquisitions for the aggregate purchase consideration of approximately $429.5 million during the year ended December 31, 2019.

Certain of these acquisitions included a significant amount of identified intangible assets and goodwill, specifically (i) iContact, LLC, (ii) Highwinds Capital, Inc.

and Cloak Holdings, LLC, (iii) BabyCenter LLC, and (iv) Spiceworks, Inc.

Management was required to determine fair values of the identifiable assets and liabilities at the acquisition date.

As described in Note 4 to the consolidated financial statements, the Company completed the acquisition of RetailMeNot, Inc., an online coupon business, for the purchase consideration of approximately $414.4 million, net of cash during the year ended December 31, 2020.

This acquisition included a significant amount of intangible assets and goodwill, requiring management to determine fair values of the identifiable assets and liabilities at the acquisition date.

We identified management’s judgments used to determine the fair value of identifiable intangible assets related to certain acquisitions as a critical audit matter.

The Company’s determination of fair values of certain identifiable intangible assets is complex and included management’s judgments over significant unobservable inputs and assumptions utilized including revenue growth rates, gross margins, royalty rates, discount rates and terminal growth rate assumptions.

The Company’s determination of fair values of certain identifiable intangible assets is complex and included management’s judgments over significant unobservable inputs and assumptions utilized including revenue growth rates, royalty rates, discount rates and customer attrition rates.

Auditing these elements involved especially challenging auditor judgment due to the nature and extent of audit effort required to address these matters, including the extent of specialized skill or knowledge needed.

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• Assessing the design and testing operating effectiveness of certain controls over the development of significant assumptions used to determine the fair values of certain identifiable intangible assets, and controls over the selection of the valuation models used by management.

Assessing the reasonableness of significant unobservable inputs and assumptions used by management through:

(i) assessing cash flow projections used against prior acquisitions of similar businesses, (ii) evaluating historical performance of the target entity, (iii) performing sensitivity analysis and evaluating potential effect of changes in certain assumptions to evaluate the effect of changes in assumptions on the fair value calculation.

• Assessing the reasonableness of significant unobservable inputs and assumptions used by management through evaluating revenue growth rates and customer attrition against the historical performance of the target entity, certain acquisitions, and similar business units of the Company.

• Utilizing personnel with specialized knowledge and skill in valuation to assist in:

(i) assessing cash flow projections used against guideline companies, (ii) assessing the appropriateness of valuation models used, and (iii) evaluating the reasonableness of certain significant assumptions incorporated into the various valuation models, including royalty rates, discount rates and terminal growth rate assumptions and comparing the resulting value to management’s calculations for reasonableness.

(i) assessing the appropriateness of valuation models used, (ii) evaluating the reasonableness of certain significant assumptions incorporated into the various valuation models, including royalty rates, discount rates and customer attrition rates, and (iii) performing sensitivity analysis and evaluating the potential effect of changes in certain critical assumptions on the fair value calculations.

Accounting for Income Taxes

As described in Note 13 to the consolidated financial statements, total tax benefit for the year ended December 31, 2019 was $19.4 million and the net deferred income tax liability balance as of December 31, 2019 was $47.5 million.

As described in Note 13 to the consolidated financial statements, the income tax expense for the year ended December 31, 2020 was $68.4 million and the net deferred income tax liability balance as of December 31, 2020 was $106.2 million.

The Company is a U.S.

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The Company’s tax provision included the following areas of complexity:

(i) the global legal structure, (ii) the pervasive impact of the Tax Cuts and Jobs Act and the application of the resulting tax law given the uncertainty over the interpretation of certain provisions as proposed for which there is a significant amount of pending guidance and a limited body of precedence, and (iii) the tax impact associated with significant acquisitions.

(i) the calculation methods and the global legal structure, (ii) the large volume of new and pending tax guidance, including the CARES Act provisions, as well as the pervasive impact of the Tax Cuts and Jobs Act (“TCJA”) and the application of the resulting tax law given the uncertainty over the interpretation of certain provisions as proposed for which there is a significant amount of pending guidance and a limited body of precedence, and (iii) the tax impact associated with the significant acquisition of RetailMeNot, Inc.

The primary procedures we performed to address this critical audit matter included:

Agreeing certain amounts used in the consolidated income tax provision calculation to the accounting records and to the related disclosures.

Utilizing domestic and international tax specialists to assist in the following procedures:

• Testing the design and operating effectiveness of certain internal controls related to management’s accounting for income taxes, including controls over:

(i) the calculation of significant components of the income tax provision, (ii) the completeness and accuracy of identifying changes in domestic and foreign tax law and accurate interpretation and inclusion in the tax provision calculation and applicable disclosures, and (iii) the calculation of the significant acquisition’s deferred tax balances and tax related acquisition accounting adjustments, including the completeness and accuracy of the tax basis in acquired assets and liabilities.

• Utilizing domestic and international personnel with specialized knowledge and skill in taxation to assist in the following procedures:

• Evaluating the appropriateness and consistency of management’s methods and estimates used to calculate the consolidated income tax provision.

Evaluating management’s judgments, assumptions and documentation, including relevant accounting policies and information obtained by management from third-party tax specialists, pertaining to certain complex and material components of the consolidated income tax provision.

Evaluating the appropriateness of management’s application of new and updated regulatory and legislative guidance in the U.S., Canada and the United Kingdom, as well as the reasonableness of management’s interpretation and application of new tax provisions in the U.S.

for which there is pending guidance and a limited body of precedence.

Testing mathematical accuracy and computation of the consolidated income tax provision by re-performing or independently calculating significant portions of the consolidated tax provision and reviewing relevant source documents supporting deferred tax assets and liabilities.

Agreeing material portions of the consolidated income tax provision to the trial balances, relevant source documents and applicable enacted U.S.

• Evaluating management’s judgments and assumptions pertaining to complex and material components of the consolidated income tax provision by reviewing documentation of relevant accounting policies and information obtained by management from third-party tax specialists.

• Evaluating the appropriateness of management’s application of new and updated regulatory and legislative guidance in the U.S., Canada, Ireland and the United Kingdom, as well as the reasonableness of management’s interpretation and application of new tax provisions in the U.S.

and significant foreign jurisdictions for which there is pending guidance and a limited body of precedence.

• Testing mathematical accuracy and computation of the consolidated income tax provision by recalculating significant components of the consolidated tax provision and reviewing relevant source documents supporting deferred tax assets and liabilities.

Agreeing material components of the consolidated income tax provision to the trial balances, relevant source documents, and applicable enacted U.S.

jurisdictional tax rates.

Assessing the reasonableness of management’s judgments used and testing the computation of the income tax provision at the acquisition date for significant acquisitions by reviewing relevant source documents supporting deferred tax assets and liabilities and re-performing or independently calculating the significant portions of the acquirees’ tax provisions.

Agreeing material portions of the acquirees’ tax provisions to the trial balances as of the acquisition date, and relevant source documents, including the valuations used for the purchase price allocation and the applicable tax rates.

• Assessing the reasonableness of management’s judgments and testing the computational accuracy of the income tax balances related to acquired assets and liabilities in the significant acquisition by recalculating and agreeing significant components of the tax computations to the opening balance sheet and to relevant source documents, including the valuation used for the purchase price allocation and the applicable tax rates.

/s/ BDO USA, LLP

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Cash and cash equivalents $ 242,652 $ 575,615

Short-term investments 663 —

Accounts receivable, net of allowances of $ 16,018 and $ 12,701 , respectively

325,619 261,928

Prepaid expenses and other current assets 53,909 49,347

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Customer relationships, net 377,194 238,502

Goodwill 1,867,430 1,633,033

Other purchased intangibles, net 176,473 180,022

Deferred income taxes, noncurrent 56,545 59,976

Other assets 17,027 15,676

TOTAL ASSETS $ 3,665,331 $ 3,505,846

LIABILITIES AND STOCKHOLDERS’ EQUITY

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Preferred stock - Series A, $ 0.01 par value.

Authorized 6,000 at December 31, 2019 and 2018, respectively;

total issued and outstanding is zero and zero at December 31, 2019 and 2018, respectively.

Authorized 6,000 ;

total issued and outstanding is zero at December 31, 2020 and 2019, respectively.

Preferred stock - Series B, $ 0.01 par value.

Authorized 20,000 at December 31, 2019 and 2018, respectively;

total issued and outstanding is zero and zero at December 31, 2019 and 2018, respectively.

Authorized 20,000 ;

total issued and outstanding is zero at December 31, 2020 and 2019, respectively.

Common stock, $ 0.01 par value.

Authorized 95,000,000 at December 31, 2020 and 2019;

total issued 47,654,929 and 48,082,800 shares at December 31, 2019 and 2018, respectively;

total outstanding 47,654,929 and 47,482,800 shares at December 31, 2019 and 2018, respectively.

total issued and outstanding 44,346,630 and 47,654,929 shares at December 31, 2020 and 2019, respectively.

Additional paid-in capital 456,274 465,652

Treasury stock, at cost (zero and 600,000 shares, respectively, at December 31, 2019 and 2018, respectively).

Retained earnings 809,107 891,526

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AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

CONSOLIDATED STATEMENTS OF OPERATIONS

Years Ended December 31, 2020, 2019 and 2018

(In thousands, except share and per share data)

2020 2019 2018

Total revenues $ 1,489,593 $ 1,372,054 $ 1,207,295

Cost of revenues (1)

231,782 237,323 201,074

Gross profit 1,257,811 1,134,731 1,006,221

Operating expenses:

Sales and marketing (1)

413,474 379,183 338,304

Research, development and engineering (1)

64,295 54,396 48,370

General and administrative (1)

445,431 424,072 375,267

Total operating expenses 923,200 857,651 761,941

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Interest expense, net 131,975 69,546 61,987

Other expense (income), net

Gain on sale of business ( 17,122 ) — —

Loss on investments, net 20,991 4,211 73

Other (income) expense , net ( 31,632 ) 3,725 4,633

Income before income taxes and net loss in earnings of equity method investment 230,399 199,598 177,587

Income tax (benefit) expense

Income tax expense (benefit) 68,393 ( 19,376 ) 44,760

Net loss in earnings of equity method investment 11,338 168 4,140

Net income $ 150,668 $ 218,806 $ 128,687

Net income per common share:

Basic $ 3.24 $ 4.52 $ 2.64

Diluted $ 3.18 $ 4.39 $ 2.59

Weighted average shares outstanding:

Basic 46,308,825 47,647,397 47,950,746

Diluted 47,122,511 49,025,684 48,927,791

Cash dividends paid per common share $ — $ 0.90 $ 1.68

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

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

See Notes to Consolidated Financial Statements

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(In thousands)

Other comprehensive (loss) income, net of tax:

2020 2019 2018

Net income $ 150,668 $ 218,806 $ 128,687

Other comprehensive loss, net of tax:

Foreign currency translation adjustment ( 8,902 ) ( 1,626 ) ( 15,471 )

Change in fair value on available-for-sale investments, net of tax expense (benefit) of $149, ($460) and zero for the years ended 2019, 2018 and 2017, respectively

Other comprehensive (loss) income, net of tax

Change in fair value on available-for-sale investments, net of tax expense (benefit) of $ 181 , $ 149 and $( 460 ) for the years ended December 31, 2020, 2019 and 2018, respectively

558 1,143 ( 1,418 )

Other comprehensive loss, net of tax ( 8,344 ) ( 483 ) ( 16,889 )

Comprehensive income $ 142,324 $ 218,323 $ 111,798

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(In thousands)

2020 2019 2018

Cash flows from operating activities:

Adjustments to reconcile net earnings to net cash provided by operating activities:

Net income $ 150,668 $ 218,806 $ 128,687

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization 228,737 232,032 187,174

Amortization of financing costs and discounts 28,476 14,038 11,385

Amortization of operating lease assets

Non-cash operating lease costs 17,686 21,419 —

Share-based compensation 24,006 23,922 28,093

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Deferred income taxes, net 5,840 ( 63,444 ) 25,050

Loss on extinguishment of debt and related interest expense

Loss on extinguishment of debt 37,969 — —

Gain on sale of businesses ( 17,122 ) — —

Lease asset impairments and other charges 12,121 — —

Changes in fair value of contingent consideration ( 80 ) 6,318 18,944

Foreign currency remeasurement gain ( 34,646 ) — —

Loss on equity method investments 11,338 139 10,506

Impairment loss on equity securities

Loss on equity and debt investments 20,826 4,164 —

Decrease (increase) in:

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Prepaid expenses and other current assets 3,046 ( 8,685 ) 2,211

Other assets ( 3 ) ( 4,083 ) 2,391

Increase (decrease) in:

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Purchases of equity method investment ( 31,937 ) ( 29,584 ) ( 36,635 )

Purchase of equity investments ( 1,246 ) — —

Purchases of available-for-sale investments — — ( 500 )

Purchases of property and equipment ( 92,552 ) ( 70,588 ) ( 56,379 )

Proceeds from sale of assets 507 — —

Acquisition of businesses, net of cash received ( 482,227 ) ( 415,343 ) ( 312,430 )

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Cash flows from financing activities:

Issuance of long-term debt

Proceeds from issuance of long-term debt 750,000 550,000 —

Payment of note payable ( 400 ) — —

Debt issuance cost ( 7,272 ) ( 12,862 ) —

Payment of debt ( 650,000 ) ( 5,100 ) ( 2,204 )

Debt extinguishment costs ( 29,250 ) — —

Proceeds from line of credit — 185,000 —

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Deferred payments for acquisitions ( 29,180 ) ( 18,876 ) ( 3,558 )

Net cash provided by (used in) financing activities

Other ( 1,878 ) ( 1,532 ) 450

Net cash (used in) provided by financing activities ( 234,633 ) 456,695 ( 131,362 )

Effect of exchange rate changes on cash and cash equivalents 7,811 2,180 ( 4,821 )

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(in thousands, except share amounts)

Treasury stock

other comprehensive

Common stock Additional

paid-in Treasury stock Retained other comprehensive Total

Stockholders’

income/(loss)

Shares Amount capital Shares Amount earnings income/(loss) Equity

Balance, January 1, 2018 47,854,510 $ 479 $ 325,854 — $ — $ 723,062 $ ( 29,090 ) $ 1,020,305

Other comprehensive income, net of tax expense of zero

Cumulative effect of change in accounting principle — — — — — 1,599 — 1,599

Net income — — — — — 128,687 — 128,687

Other comprehensive income, net of tax benefit of $ 460

— — — — — — ( 16,889 ) ( 16,889 )

Dividends — — — — — ( 82,573 ) — ( 82,573 )

Exercise of stock options 67,898 1 1,539 — — — — 1,540

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Balance, December 31, 2018 48,082,800 $ 481 $ 354,210 ( 600,000 ) $ ( 42,543 ) $ 769,575 $ ( 45,979 ) $ 1,035,744

Cumulative effect of change in accounting principle

Other comprehensive income, net of tax benefit $460

Net income — — — — — 218,806 — 218,806

Other comprehensive income, net of tax expense of $ 149

— — — — — — ( 483 ) ( 483 )

Dividends — — — — — ( 43,918 ) — ( 43,918 )

Exercise of stock options 189,436 2 5,272 — — — — 5,274

Issuance of shares under Employee Stock Purchase Plan 66,413 1 4,511 — — — — 4,512

Equity portion of 1.75 % convertible debt

— — 88,138 — — — — 88,138

Vested restricted stock 185,227 1 ( 1 ) — — — — —

Repurchase and retirement of common stock ( 868,947 ) ( 9 ) ( 10,334 ) 600,000 42,543 ( 53,003 ) — ( 20,803 )

Exchange of Series B preferred stock

Repurchase of shares

Share based compensation — — 23,856 — — 66 — 23,922

Balance, December 31, 2019 47,654,929 $ 476 $ 465,652 — $ — $ 891,526 $ ( 46,462 ) $ 1,311,192

Other comprehensive income, net of tax expense $149

Net income — — — — — 150,668 — 150,668

Other comprehensive income, net of tax expense of $ 181

— — — — — — ( 8,344 ) ( 8,344 )

Exercise of stock options 42,740 — 1,619 — — — — 1,619

Issuance of shares under Employee Stock Purchase Plan 118,629 1 7,381 — — — — 7,382

Equity portion of 1.75% convertible debt

Exercise of 3.25 % Convertible Note

— — ( 12 ) — — — — ( 12 )

Vested restricted stock 273,201 3 ( 3 ) — — — — —

Repurchase and retirement of common stock ( 3,742,869 ) ( 37 ) ( 42,530 ) — — ( 233,087 ) — ( 275,654 )

Repurchase of shares

Retirement of treasury stock

Share based compensation — — 24,006 — — — — 24,006

Other, net — — 161 — — — — 161

Balance, December 31, 2020 44,346,630 $ 443 $ 456,274 — $ — $ 809,107 $ ( 54,806 ) $ 1,211,018

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DECEMBER 31, 2020, 2019 and 2018

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 services to consumers and businesses and license our intellectual property (“IP”) to third parties.

In addition, the Cloud Services business includes fax, voice, backup, security, consumer privacy and protection (“CPP”), and email marketing products.

Our Digital Media business specializes in the technology, gaming, broadband, business to business (“B2B”), healthcare, and international markets, offering content, tools and services to consumers and businesses.

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

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

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

Basis of Presentation and Summary of Significant Accounting Policies

Principles of Consolidation

(a) Principles of Consolidation

The accompanying consolidated financial statements include the accounts of J2 Global and its direct and indirect wholly-owned subsidiaries.

All intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

(b) Use of Estimates

The preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, including judgments about investment classifications and the reported amounts of net revenue and expenses during the reporting period.

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Actual results could materially differ from those estimates.

Allowances for Doubtful Accounts

J2 Global reserves for receivables it may not be able to collect.

The reserves for the Company’s 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.

These reserves for the Company’s Digital Media business are typically driven by past due invoices based on historical experience.

In March 2020, the World Health Organization declared the outbreak of the novel coronavirus disease (“COVID-19”) as a pandemic.

The global 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.

The full impact of the COVID-19 pandemic is unknown and cannot be reasonably estimated.

However, the Company has made appropriate accounting estimates based on the facts and circumstances available as of the reporting date.

To the extent there are differences between these estimates and the actual results, our consolidated financial statements could be materially affected.

J2 Global maintains 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.

The Company assesses collectability by reviewing accounts receivable on a collective basis where similar characteristics exist and on an individual basis when it identifies specific customers with known disputes or collectability issues.

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

It also considers 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.

Revenue Recognition

Accounting Standard Codification (“ASC”) Topic 605, Revenue Recognition (“Topic 605”)

Prior to the transition to ASC 606 on January 1, 2018, J2 Global recognized revenue when persuasive evidence of an arrangement existed, services have been provided, the sales price was fixed and determinable and collection was probable.

Principal vs.

The Company determined whether revenue should have been reported on a gross or net basis by assessing whether the Company is acting as the principal or an agent in the transaction.

If the Company was acting as the principal in a transaction, the Company reported revenue on a gross basis.

If the Company was acting as an agent in a transaction, the Company reported revenue on a net basis.

In determining whether the Company acted as the principal or an agent, the Company followed the accounting guidance under Topic 605 for principal-agent considerations and placed the most weight on three factors:

whether or not the Company (i) was the primary obligor in the arrangement, (ii) had latitude in determining pricing and (iii) bore credit risk.

ASC Topic 606, Revenue from Contracts with Customers (“Topic 606”, “ASC 606” or the “new revenue standard”)

Following the transition to ASC 606, J2 Global recognizes revenue when the Company satisfies its obligation by transferring control of the goods or services to its customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services (see Note 3 - Revenues).

(d) Revenue Recognition

J2 Global recognizes revenue when the Company satisfies its obligation by transferring control of the goods or services to its customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services (see Note 3 - Revenues).

Principal vs.

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The Company has made an accounting policy election to exclude from the measurement of the transaction price all taxes assessed by a governmental authority that are (i) both imposed on and concurrent with a specific revenue-producing transaction and (ii) collected by the Company from a customer.

Fair Value Measurements

(e) Fair Value Measurements

J2 Global complies with the provisions of Financial Accounting Standards Board (“FASB”) ASC Topic No.

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ASC 820 provides a framework for measuring fair value and expands the disclosures required for fair value measurements of financial and non-financial assets and liabilities.

As of December 31, 2019 , the carrying values of cash and cash equivalents, accounts receivable, interest receivable, accounts payable, accrued expenses, interest payable, customer deposits and long-term debt are reflected in the financial statements at cost.

The carrying values of cash and cash equivalents, accounts receivable, interest receivable, accounts payable, accrued expenses, interest payable, customer deposits and long-term debt are reflected in the financial statements at cost.

With the exception of certain investments and long-term debt, cost approximates fair value due to the short-term nature of such instruments.

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As of the same dates, the carrying value of other long-term liabilities approximated fair value as the related interest rates approximate rates currently available to J2 Global.

Cash and Cash Equivalents

(f) Cash and Cash Equivalents

J2 Global considers cash equivalents to be only those investments that are highly liquid, readily convertible to cash and with maturities of three months or less at the purchase date.

J2 Global accounts for its investments in debt securities in accordance with ASC Topic No.

(g) Investments

J2 Global accounts for its investments in debt securities in accordance with Financial Accounting Standards Board (“FASB”) ASC Topic No.

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

Debt investments are typically comprised of corporate debt securities.

J2 Global determines the appropriate classification of its investments at the time of acquisition and evaluates such determination at each balance sheet date.

Trading securities are those investments that the Company intends 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 J2 Global does not intend to hold to maturity and can be sold.

The Company’s debt investments are typically comprised of corporate debt securities, which it classifies as available-for-sale.

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

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

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.

The Company accounts for its investments in equity securities in accordance with ASC Topic No.

321, Investments - Equity Securities (“ASC 321”) which requires the accounting for equity investments (other than those accounted for using the equity method of accounting) generally be measured at fair value for equity securities with readily determinable fair values.

For equity securities without a readily determinable fair value that are not accounted for by the equity method, the Company measures the equity security using cost, less impairment, if any, and plus or minus observable price changes arising from orderly transactions

in the same or similar investment from the same issuer.

Any unrealized gains or losses will be reported in current earnings (see Note 5 - Investments).

Variable Interest Entities (“VIE”)

The Company assesses whether an other-than-temporary impairment loss on an investment has occurred due to declines in fair value or other market conditions (see Note 5 - Investments).

(h) Variable Interest Entities (“VIE”)

A VIE requires consolidation by the entity’s primary beneficiary.

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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).

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

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

J2 believes 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.

The Company recognizes its 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 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.

Debt Issuance Costs and Debt Discount

(i) Debt Issuance Costs and Debt Discount

J2 Global capitalizes costs incurred with borrowing and issuance of debt securities and records debt issuance costs and discounts as a reduction to the debt amount.

These costs and discounts are amortized and included in interest expense over the life of the borrowing using the effective interest method.

Debt issuance costs associated with entering into a $ 200.0 million credit facility (the “MUFG Credit Facility”) with MUFG Union Bank (see Note 10 - Long-Term Debt), a credit facility that was subsequently reduced to $ 100.0 million , are recorded on the consolidated balance sheets as an asset and amortized and included in interest expense over the contractual term of the credit agreement.

Derivative Instruments

(j) Derivative Instruments

J2 Global currently holds an embedded derivative instrument related to contingent interest in connection with its 3.25 % Convertible Notes issued on June 10, 2014.

This embedded derivative instrument is carried at fair value with changes recorded to interest expense (see Note 7 - Fair Value Measurements).

Concentration of Credit Risk

(k) Concentration of Credit Risk

All of the Company’s cash, cash equivalents and marketable securities are invested at major financial institutions primarily within the United States, United Kingdom and Ireland.

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These institutions are primarily in the United States and United Kingdom, however, the Company has accounts within several other countries including Australia, Austria, China, Denmark, France, Germany, Italy, Japan, New Zealand, Netherlands, Norway, and Sweden.

Foreign Currency

(l) Foreign Currency

Some of J2 Global’s foreign subsidiaries use the local currency of their respective countries as their functional currency.

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Gains and losses resulting from translation are recorded as a component of accumulated other comprehensive income/(loss).

Net translation (loss)/gain was $( 1.6 ) million , $( 15.5 ) million and $ 25.6 million for the years ended December 31, 2019 , 2018 and 2017 , respectively.

Net translation loss was $ 8.9 million, $ 1.6 million and $ 15.5 million for the years ended December 31, 2020, 2019 and 2018, respectively.

Realized gains and losses from foreign currency transactions are recognized within other expense (income), net.

Foreign exchange losses amounted to $ 4.0 million , $ 2.3 million and $ 5.8 million for the years ended December 31, 2019 , 2018 and 2017 , respectively.

Property and Equipment

Foreign exchange gains (losses) amounted to $ 28.5 million, $( 4.0 ) million and $( 2.3 ) million for the years ended December 31, 2020, 2019 and 2018, respectively.

(m) Property and Equipment

Property and equipment are stated at cost.

Equipment under finance leases is stated at the present value of the minimum lease payments.

Depreciation is calculated using the straight-line method over the estimated useful lives of the assets.

Depreciation is calculated using the straight-line method over the estimated useful lives of the assets and is recorded in cost of revenues and general and administrative expenses on the Consolidated Statements of Operations.

The estimated useful lives of property and equipment range from 1 to 10 years.

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The estimated useful life of costs capitalized is evaluated for each specific project and ranges from 1 to 5 years.

Impairment or Disposal of Long-Lived Assets

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

(n) 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.

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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.

J2 Global assessed whether events or changes in circumstances have occurred that potentially indicate the carrying amount of long-lived assets may not be recoverable.

The Company assesses 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.

Factors it consider important which could individually or in combination trigger an impairment review include the following:

• Significant underperformance relative to expected historical or projected future operating results;

• Significant changes in the manner of our use of the acquired assets or the strategy for J2 Global’s overall business;

• Significant negative industry or economic trends;

• Significant decline in the Company’s stock price for a sustained period;

• The Company’s market capitalization relative to net book value.

If the Company 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, it would record an impairment equal to the excess of the carrying amount of the asset over its estimated fair value.

J2 Global assessed whether events or changes in circumstances have occurred that potentially indicate the carrying amount of definite-lived assets may not be recoverable.

In the year ended December 31, 2020, the Company recorded impairments of certain operating right-of-use assets and associated property and equipment (see Note 11 - Leases).

No impairment was recorded in fiscal year 2019 or 2018.

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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

J2 Global applies the acquisition method of accounting for business combinations in accordance with GAAP, which requires the Company 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.

(o) Business Combinations and Valuation of Goodwill and Intangible Assets

J2 Global applies the acquisition method of accounting for business combinations in accordance with GAAP and uses 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.

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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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 1 to 20 years.

In accordance with FASB ASC Topic No.

350, Intangibles - Goodwill and Other (“ASC 350”), goodwill and other intangible assets with indefinite lives are not amortized but tested annually for impairment or more frequently if J2 Global believes indicators of impairment exist.

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.

The Company evaluates 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 J2 Global believes indicators of impairment exist.

In connection with the annual impairment test for goodwill, the Company has 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.

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

In accordance with ASC 350, the Company performed the annual impairment test for goodwill for fiscal year 2019 using a qualitative assessment primarily taking into consideration macroeconomic, industry and market conditions, overall financial performance and any other relevant company-specific events.

In addition, it performed a quantitative assessment for its data backup reporting unit for which no impairment was found.

The Company performed the annual impairment test for goodwill for fiscal year 2020 using a qualitative assessment primarily taking into consideration macroeconomic, industry and market conditions, overall financial performance and any other relevant company-specific events.

The qualitative assessment indicated that it was more likely than not that the fair value of the Company’s reporting units was greater than their carrying value, other than the Backup reporting unit.

As a result, it performed a quantitative assessment on its Backup reporting unit which resulted in no impairment.

Further, due to a prolonged decrease in the Company’s share price, the Company performed a market capitalization reconciliation over all reporting units, in conjunction with the backup quantitative assessment, to further support there was no impairment related to the Backup reporting unit.

The Company performed the annual impairment test for intangible assets with indefinite lives for fiscal 2020 using a qualitative assessment primarily taking into consideration macroeconomic, industry and market conditions, overall financial performance and any other relevant company-specific events.

J2 Global concluded that there were no impairments in 2020, 2019 and 2018.

Contingent Consideration

J2 Global measures the contingent earn-out liabilities in connection with acquisitions at fair value on a recurring basis using significant unobservable inputs classified within Level 3 of the fair value hierarchy (see Note 7 - Fair Value Measurements).

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

In addition, the COVID-19 pandemic could have an adverse impact on the Company’s consolidated financial results in 2021, and possibly longer.

As of December 31, 2020, there were no indications that the carrying value of goodwill and other intangible assets may not be recoverable.

However, a prolonged adverse impact of the COVID-19 pandemic on the Company’s consolidated financial results may require an impairment charge related to one or more of these assets in a future period.

No impairments to goodwill or other intangible assets were recorded during the years ended December 31, 2020, 2019, or 2018 as a result of COVID-19.

(p) Contingent Consideration

Certain of J2 Global’s acquisition agreements include contingent earn-out arrangements, which are generally based on the achievement of future income thresholds or other metrics.

The contingent earn-out arrangements are based upon the Company’s valuations of the acquired companies and reduce the risk of overpaying for acquisitions if the projected financial results are not achieved.

The fair values of these earn-out arrangements are included as part of the purchase price of the acquired companies on their respective acquisition dates.

For each transaction, the Company estimates the fair value of contingent earn-out payments as part of the initial purchase price and record the estimated fair value of contingent consideration as a liability on the Consolidated Balance Sheets.

J2 Global considers several factors when determining that contingent earn-out liabilities are part of the purchase price, including the following:

(1) the valuation of our acquisitions is not supported solely by the initial consideration paid, and the contingent earn-out formula is a critical and material component of the valuation approach to determining the purchase price;

and (2) the former shareholders of acquired companies that remain as key employees receive compensation other than contingent earn-out payments at a reasonable level compared with the compensation of the Company’s other key employees.

The contingent earn-out payments are not affected by employment termination.

J2 Global measures its contingent earn-out liabilities in connection with acquisitions at fair value on a recurring basis using significant unobservable inputs classified within Level 3 of the fair value hierarchy (see Note 7 - Fair Value Measurements).

The Company may use various valuation techniques depending on the terms and conditions of the contingent consideration including a Monte-Carlo simulation.

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J2 Global reviews and re-assesses 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 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.

Self-Insurance Program

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.

(q) Self-Insurance Program

J2 Global provides health and dental insurance plans to certain of its employees through a self-insurance structure.

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Although management believes it has the ability to reasonably estimate losses related to claims, it is possible that actual results could differ from recorded self-insurance liabilities.

(r) Income Taxes

J2 Global’s income is subject to taxation in both the U.S.

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J2 Global accounts 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.

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

In assessing this valuation allowance, J2 Global reviews historical and future expected operating results and other factors, including its recent cumulative earnings experience, expectations of future taxable income by taxing jurisdiction and the carryforward periods available for tax reporting purposes, to determine whether it is more likely than not that deferred tax assets are realizable.

ASC 740 provides guidance on the minimum threshold that an uncertain income tax benefit is required to meet before it can be recognized in the financial statements and applies to all income tax positions taken by a company.

GAAP provides guidance on the minimum threshold that an uncertain income tax benefit is required to meet before it can be recognized in the financial statements and applies to all income tax positions taken by a company.

ASC 740 contains a two-step approach to recognizing and measuring uncertain income tax positions.

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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.

J2 Global recognized accrued interest and penalties related to uncertain income tax positions in income tax expense on its consolidated statements of income.

Share-Based Compensation

J2 Global recognized accrued interest and penalties related to uncertain income tax positions in income tax expense on its Consolidated Statements of Operations.

In addition, on March 27, 2020, the “Coronavirus Aid, Relief and Economic Security (“CARES”) Act” was enacted into law providing for changes to various tax laws that impact business.

The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations, and technical corrections to tax depreciation methods for qualified improvement property.

The CARES Act also appropriated funds for the Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”) loans that are forgivable in certain situations to promote continued employment, as well as Economic Injury Disaster Loans to provide liquidity to small businesses harmed by COVID-19.

The Company did not directly seek to borrow any funds under the program.

However, as a result of an acquisition that closed during the quarter ended December 31, 2020, the Company assumed outstanding PPP loans that had started the process of being forgiven prior to the closing of the acquisition.

The amount of the outstanding loan did not have a significant impact to our financial statements.

We do not believe these provisions have a significant impact to our current and deferred income tax balances.

The Company will benefit from the technical correction to tax depreciation related to qualified improvement property and has elected to defer income tax payments and employer side social security payments where eligible.

(s) Share-Based Compensation

J2 Global accounts for share-based awards to employees and non-employees in accordance with the provisions of FASB ASC Topic No.

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

Earnings Per Common Share (“EPS”)

(t) Earnings Per Common Share (“EPS”)

EPS is calculated pursuant to the two-class method as defined in ASC Topic No.

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The dilutive effect of participating securities is calculated under the more dilutive of either the treasury method or the two-class method.

Research, Development and Engineering

(u) Research, Development and Engineering

Research, development and engineering costs are expensed as incurred.

Costs for software development incurred subsequent to establishing technological feasibility, in the form of a working model, are capitalized and amortized over their estimated useful lives.

Segment Reporting

(v) Segment Reporting

FASB ASC Topic No.

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and (iii) Digital Media.

Advertising Costs

(w) Advertising Costs

Advertising costs are expensed as incurred.

Advertising costs for the years ended December 31, 2020, 2019 and 2018 was $ 163.7 million, $ 158.2 million and $ 149.7 million, respectively.

Recent Accounting Pronouncements

In February 2016, the FASB issued Accounting Standard Update (“ASU”) No.

2016-02, Leases.

This ASU establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months.

Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement.

This ASU and all the related amendments are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.

A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available.

In July 2018, the FASB issued ASU No.

2018-10, Codification Improvements to Topic 842, Leases.

This ASU is meant to clarify the guidance in ASU No.

2016-02, Leases.

This ASU does not change the core principle of the guidance in Topic 842.

Instead, the amendments provide clarifying guidance in a few narrow areas.

In July 2018, the FASB issued ASU No.

2018-11, Leases (Topic 842):

Targeted Improvements.

This ASU provides another transition method for entities who have not yet adopted the new leasing standard by allowing entities to initially apply the new standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption.

In addition, this ASU provides a practical expedient to lessors to not separate nonlease components from the associated lease components similar to the expedient that is afforded to lessees.

However, the lessor practical expedient is limited to circumstances in which the nonlease component or components otherwise would be accounted for under the new revenue guidance and both (1) the timing and pattern of transfer are the same for the nonlease component(s) and associated lease component and (2) the lease component, if accounted for separately, would be classified as an operating lease.

In December 2018, the FASB issued ASU No.

2018-20, Leases (Topic 842):

Narrow-Scope Improvements for Lessors.

This ASU amends guidance related to sales taxes and other similar taxes collected from lessees, certain lessor costs, and recognition of variable payments for

contracts with lease and nonlease components.

The ASU provides for an accounting policy election for lessors similar to that provided in ASU 2016-12;

it clarifies that costs excluded from the consideration in a contract that are paid directly to a third party by a lessor and reimbursed by the lessee are lessor costs to be accounted for as vendor payments;

requires lessors to exclude from variable payments and, thus from lease revenue, lessor costs paid by a lessee directly to a third party;

and clarifies the accounting by lessors for variable payments that relate to both a lease component and a nonlease component.

The Company has adopted the new lease standard and related amendments in the first quarter of 2019 using the optional transition method.

Results for reporting periods beginning after the adoption date are presented under Topic 842, while prior period amounts are not adjusted and continue to be reported in accordance with the Company’s historic accounting under ASC 840 (see Note 11 - Leases).

(x) Recent Accounting Pronouncements

In June 2016, the FASB issued ASU No.

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(4) financial assets secured by collateral maintenance provisions;

and (6) conforming Amendment to Subtopic 805-20.

Each of the ASUs previously mentioned are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.

The Company expects to adopt these ASUs January 1, 2020 using the modified retrospective method and does not expect the adoption to have a material impact on its financial statements and related disclosures.

The Company continues to review the analysis performed to determine the effects of adoption and believes the most significant change relates to its available-for-sale debt securities.

and (5) a conforming Amendment to Subtopic 805-20.

In February 2020, the FASB issued ASU No.

2018-02, Income Statement - Reporting Comprehensive Income (Topic 220):

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.

The amendments in this ASU allow reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the U.S.

federal tax legislation, the Tax Cuts and Jobs Act of 2017 (“2017 Tax Act”).

Consequently, the amendments eliminate the stranded tax effects resulting from the 2017 Tax Act and will improve the usefulness of information reported to financial statement users.

However, because the amendments only relate to the reclassification of the income tax effects of the 2017 Tax Act, the underlying guidance that requires that the effect of a change in tax laws or rates to be included in income from continuing operations is not affected.

This ASU is effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years.

Early adoption is permitted and should be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S.

federal corporate income tax rate in the 2017 Tax Act is recognized.

The Company has adopted this ASU in the first quarter of 2019 and has determined that there is no impact on its financial statements and related disclosures.

In June 2018, the FASB issued ASU No.

2018-07, Compensation - Stock Compensation (Topic 718):

Improvements to Nonemployee Share-Based Payment Accounting.

The amendments in this ASU expand the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees.

The amendments specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards.

The amendments also clarify that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under Topic 606, Revenue from Contracts with Customers.

This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year.

The Company has adopted this ASU on a prospective basis in the first quarter of 2019 and has determined there to be no impact on its financial statements and related disclosures.

In July 2018, the FASB issued ASU No.

2018-09, Codification Improvements.

The amendments in this ASU clarify certain aspects of the guidance related to:

reporting comprehensive income, debt modification and extinguishment, income taxes related to stock compensation, income taxes related to business combinations, derivatives and hedging, fair value measurements, brokers and dealers liabilities, and plan accounting.

This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018.

The Company has adopted this ASU on a modified-retrospective basis in the first quarter of 2019 and has determined there to be no impact on its financial statements and related disclosures.

2020-02, Financial Instruments - Credit Losses (Topic 326) and Leases (Topic 842):

Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No.

119 and Update to SEC Section on Effective Date Related to Accounting Standards Update No.

2016-02, Leases (Topic 842).

This ASU codifies SEC Staff Accounting Bulletin No.

The Company has adopted these ASUs in the first quarter of 2020 using the modified retrospective method and has determined there is an immaterial impact on its financial statements and related disclosures.

In August 2018, the FASB issued ASU No.

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For certain unobservable inputs, disclosure of other quantitative information may be more appropriate if the entity determines that other quantitative information would be a more reasonable and rational method to reflect the distribution of unobservable inputs used to develop Level 3 fair value measurements.

The ASU modifies disclosure requirements in Topic 820 relating to timing of liquidation of an investee’s assets, the disclosure of the date when restrictions from redemption might lapse, the intention of the measurement uncertainty disclosure, and certain other requirements for nonpublic entities.

This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019.

The Company is currently evaluating the effect of this ASU on its financial statements and related disclosures.

In August 2018, the FASB issued ASU No.

2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40):

Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract.

The amendments in this ASU align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software).

The amendments in this ASU require an entity (customer) in a hosting arrangement that is a service to (1) determine which implementation costs to capitalize as an asset related to the service contract and which costs to expense;

(2) expense the capitalized implementation costs of a hosting arrangement that is a service contract over the term of the hosting arrangement;

(3) apply the existing impairment guidance to the capitalized implementation costs as if the costs were long-lived assets;

(4) present the expense related to the capitalized implementation costs in the same line item in the statement of income as the fees associated with the hosting element (service) of the arrangement and classify payments for capitalized implementation costs in the statement of cash flows in the same manner as payments made for fees associated with the hosting arrangements;

and (5) present the capitalized implementation costs in the statement of financial position in the same line item that a prepayment for the fees of the associated hosting arrangement would be presented.

This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019.

The Company has adopted this ASU on a prospective basis in the fourth quarter of 2019 and has determined there to not be a material impact on its financial statements.

The Company has hosting arrangements that are service contracts related to the implementation of various internally-used software solutions.

The deferred implementation costs are classified as other assets on the consolidated balance sheet and the amortization is classified as general and administrative expenses on the consolidated statement of income.

In July 2019, the FASB issued ASU No.

2019-07, Codification Updates to SEC Sections:

Amendments to SEC Paragraphs Pursuant to SEC Final Rule Releases No.

33-10532, Disclosure Update and Simplification, and Nos.

33-10231 and 33-10442, Investment Company Reporting Modernization, and Miscellaneous Updates.

This ASU is effective upon release.

The Company has adopted this ASU on a prospective basis in the third quarter of 2019 and has determined there to be no impact on its financial statements and related disclosures.

The ASU modifies disclosure requirements in Topic 820 relating to timing of

liquidation of an investee’s assets, the disclosure of the date when restrictions from redemption might lapse, the intention of the measurement uncertainty disclosure, and certain other requirements for nonpublic entities.

The Company has adopted this ASU in the first quarter of 2020 and has determined there to be an impact on its disclosures (see Note 7 - Fair Value Measurements).

In December 2019, the FASB issued ASU No.

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The amendments in this ASU simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740.

The amendments also improve the consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance.

The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance.

This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020.

Early adoption is permitted.

The Company is currently evaluating the effect of this ASU on its financial statements and related disclosures.

The Company expects to adopt this ASU on January 1, 2021 and does not expect the adoption to have a material effect on its financial statements or disclosures.

In January 2020, the FASB issued ASU No.

2020-01, Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815):

Clarifying the Interactions between Topic 321,

Topic 323, and Topic 815.

2020-01, Investments - Equity Securities (Topic 321), Investment - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815):

Clarifying the Interactions between Topic 321, Topic 323, and Topic 815.

The amendments in this ASU clarify certain interactions between the guidance to account for certain equity securities under Topic 321, the guidance to account for investments under the equity method of accounting in Topic 323, and the accounting for certain forward contracts and purchased options under Topic 815.

This ASU identifies two main areas for improvement (1) accounting for certain equity securities upon the application or discontinuation of the equity method of accounting and (2) scope considerations for forward contracts and purchased options on certain securities.

This ASU identifies two main areas for improvement:

(1) accounting for certain equity securities upon the application or discontinuation of the equity method of accounting and (2) scope considerations for forward contracts and purchased options on certain securities.

The amendment states, as it is related to the first area of improvement, that an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting for the purposes of applying the measurement alternative in accordance with Topic 321 immediately before applying or upon discontinuing the equity method.

The amendment also states, as it is related to forward contracts and purchased options on certain securities, an entity should consider certain criteria to determine the accounting for those forward contracts and purchased options.

The amendment also states, as it is relates to forward contracts and purchased options on certain securities, an entity should consider certain criteria to determine the accounting for those forward contracts and purchased options.

This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020.

The Company expects to adopt this ASU on January 1, 2021 and does not expect the adoption to have a material effect on its financial statements or disclosures.

In March 2020, the FASB issued ASU No.

2020-03, Codification Improvements to Financial Instruments.

The amendments in this ASU clarify or address seven areas of improvement:

(1) fair value option disclosures;

(2) applicability of the portfolio exception in Topic 820 to nonfinancial items;

(3) disclosures for depository and lending institutions;

(4) cross-reference to line-of-credit or revolving-debt arrangements guidance in Subtopic 470-50;

(5) cross-reference to net asset value practical expedient in Subtopic 820-10;

(6) interaction of Topic 842 and Topic 326;

and (7) interaction of Topic 326 and Subtopic 860-20.

This ASU is effective for certain issues upon adoption and others in 2020.

The Company has adopted this ASU in the first quarter of 2020 and has determined there is no impact on its financial statements and related disclosures.

In March 2020, the FASB issued ASU No.

2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting.

The amendments in this ASU provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met.

The amendments in this ASU apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform.

LIBOR is expected to phased out by 2021.

The amendments in this ASU are effective as of March 12, 2020 through December 31, 2022.

The Company is currently evaluating the effect of this ASU on its financial statements and related disclosures.

Reclassifications

In August 2020, the FASB issued ASU No.

2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.

The amendments in this ASU reduce the number of accounting models for convertible debt instruments and convertible preferred stock in order to simplify the accounting for convertible instruments and reduce complexity.

In addition, it amends the guidance for scope exception surrounding derivatives for contracts in an entity’s own equity.

In each case, the related guidance surrounding EPS has also been amended.

The amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2021.

The Company is currently evaluating the effect of this ASU on its financial statements and related disclosures.

In October 2020, the FASB issued ASU No.

2020-10, Codification Improvements.

The amendments in this ASU improve the consistency of the codification and reorganize the guidance into appropriate sections providing less opportunities for disclosures to be missed.

The amendments in this update do not change GAAP and are not expected to result in a significant change in practice.

The amendments in this ASU are effective for fiscal years beginning after December 15, 2020.

adoption is permitted.

The Company is currently evaluating the effect of this ASU on its financial statements and related disclosures.

(y) Reclassifications

Certain prior year reported amounts have been reclassified to conform with the 2020 presentation.

Digital Media

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

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

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 are 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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Hardware product and related software performance obligations, such as an operating system or firmware, are highly interdependent and interrelated and are accounted for as a bundled performance obligation.

The revenues for this bundled performance obligation are generally recognized at the

point in time that the hardware and software products are delivered and ownership is transferred to the customer.

The revenues for this bundled performance obligation are generally recognized at the point in time that the hardware and software products are delivered and ownership is transferred to the customer.

Other service revenues are generally recognized over time as the services are performed.

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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.

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

These third-party solutions, along with the Company’s proprietary products, allow it 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.

J2 Global’s Cloud Services also include 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.

The Company adopted ASU 2014-09 and its related standard updates in January 2018 using a modified-retrospective approach with the cumulative effect of initially applying the standard recognized at the date of application in retained earnings.

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Revenues from external customers classified by revenue source are as follows (in thousands).

See Note 18, “Segment Information” for additional information.

Years ended December 31,

Digital Media 2020 2019 2018

Advertising $ 616,197 $ 515,702 $ 468,325

Subscription 186,718 185,559 138,689

8,445 9,250 2,360

Total Digital Media revenues $ 811,360 $ 710,511 $ 609,374

Cloud Services

Subscription $ 678,013 $ 660,814 $ 597,281

Other 448 1,021 694

Total Cloud Services revenues $ 678,461 $ 661,835 $ 597,975

Corporate $ 1 $ 8 $ 6

Elimination of inter-business revenues ( 229 ) ( 300 ) ( 60 )

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Point in time $ 27,685 $ 32,983 $ 4,752

The Company has recorded $ 122.7 million and $ 80.0 million of revenue for the years ended December 31, 2019 and 2018 , respectively, which was previously included in the contract liability balance as of the beginning of each respective year.

As of December 31, 2019 , the Company acquired $ 28.0 million of deferred revenue in connection with the Company’s business acquisitions (see Note 4 - Business Acquisitions) which are subject to purchase accounting adjustments.

Over time 1,461,908 1,339,071 1,202,543

Total $ 1,489,593 $ 1,372,054 $ 1,207,295

The Company has recorded $ 157.4 million and $ 122.7 million of revenue for the years ended December 31, 2020 and 2019, respectively, which was previously included in the deferred revenue balance as of the beginning of each respective year.

As of December 31, 2020 and 2019, the Company acquired $ 22.4 million and $ 28.0 million, respectively, of deferred revenue in connection with the Company’s business acquisitions (see Note 4 - Business Acquisitions) which are subject to purchase accounting adjustments, as appropriate.

Performance Obligations

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• Security solutions, including email and endpoint are provided

Online data Backup capabilities are provided

• Data backup capabilities are provided

The Company has concluded that the best measure of progress toward the complete satisfaction of the performance obligation over time is a time-based measure.

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For those customers with amortization periods determined to be greater than one year, the Company capitalizes and amortizes the expenses over the period of benefit.

In addition, the Company partners with various affiliates in order to generate a portion of its revenue for certain lines of business.

The commissions earned by the Company’s affiliates are incentive based and are paid on the acquisition of new customers in a given period.

For those customers with amortization periods determined to be greater than one year, the Company capitalizes and amortizes the expenses over the period of benefit.

Revenues Invoiced

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The Company uses acquisitions as a strategy to grow its customer base by increasing its presence in new and existing markets, expand and diversify its service offerings, enhance its technology, and acquire skilled personnel.

The Company completed the following acquisitions during the year ended December 31, 2020, paying the purchase price in cash in each transaction:

(a) an asset purchase of EDC Systems Inc.

(operating under the name “SRFax”), acquired on February 18, 2020, a Canadian-based provider of fax solutions;

(b) a share purchase of the entire issued capital of RetailMeNot, Inc.

acquired on October 28, 2020, a Texas-based provider of marketing solutions;

(c) a share purchase of the entire issued capital of Inspired eLearning, LLC, acquired on November 2, 2020, a Texas-based platform for cybersecurity awareness and compliance training;

(d) a share purchase of the entire issued capital of The Aberdeen Group, LLC and The Big Willow, Inc., acquired on November 20, 2020, a Massachusetts-based provider in digital marketing solutions;

and (e) other immaterial acquisitions of email marketing, security and digital media businesses.

The Consolidated Statement of Operations since the date of each acquisition and balance sheet as of December 31, 2020, reflect the results of operations of all 2020 acquisitions.

For the year ended December 31, 2020, these acquisitions contributed $ 61.9 million to the Company’s revenues.

Net income contributed by these acquisitions was not separately identifiable due to J2 Global’s integration activities and is impracticable to provide.

Total consideration for these transactions was $ 497.8 million, net of cash acquired and assumed liabilities and subject to certain post-closing adjustments which may increase or decrease the final consideration paid.

The following table summarizes the allocation of the purchase consideration for all 2020 acquisitions (in thousands):

Assets and Liabilities Valuation

Accounts receivable $ 46,332

Prepaid expenses and other current assets 9,105

Property and equipment 2,248

Operating lease right of use asset 10,644

Trade names 67,670

Customer relationships 222,582

Goodwill 218,745

Other intangibles 56,802

Other long-term assets 685

Deferred tax asset 992

Accounts payables and accrued expenses ( 29,073 )

Deferred revenue ( 22,436 )

Operating lease liabilities, current ( 4,520 )

Long-term debt ( 910 )

Operating lease liabilities, noncurrent ( 13,104 )

Income taxes payable ( 3,297 )

Liability for uncertain tax positions ( 1,576 )

Deferred tax liability ( 53,870 )

Other long-term liabilities ( 9,269 )

Total $ 497,750

During 2020, the purchase price accounting has been finalized for the following acquisitions:

Highwinds Capital, Inc.

and Cloak Holdings, LLC, OffsiteDataSync, Inc., BabyCenter LLC, Spiceworks, Inc., and immaterial digital media and consumer privacy and protection businesses.

The initial accounting for all 2020 acquisitions is incomplete due to timing of available information and are subject to change, which may be significant.

J2 Global has recorded provisional amounts which may be based upon past acquisitions with similar attributes for certain intangible assets (including trade names, software and customer relationships), preliminary acquisition date working capital and related tax items.

During the year ended December 31, 2020, the Company recorded adjustments to prior period acquisitions due to changes in the initial working capital and related purchase accounting within the Voice, Backup, Security and CPP businesses, which resulted in a net decrease in goodwill of $ 2.1 million.

In addition, the Company recorded adjustments to prior period acquisitions due to changes in the initial working capital and related purchase accounting within the Digital Media business, which resulted in a net increase in goodwill of $ 9.7 million (see Note 9 - Goodwill and Intangible Assets).

Such adjustments

had an immaterial impact to amortization expense within the Consolidated Statements of Operations for the year ended December 31, 2020.

The fair value of the assets acquired includes accounts receivable of $ 46.3 million.

The gross amount due under contracts is $ 53.2 million, of which $ 6.9 million is expected to be uncollectible.

The Company did not acquire any other classes of receivables as a result of its acquisitions.

Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired and represents intangible assets that do not qualify for separate recognition.

Goodwill recognized in connection with these acquisitions during the year ended December 31, 2020 is $ 218.7 million, of which $ 70.8 million is expected to be deductible for income tax purposes.

RetailMeNot, Inc.

On October 28, 2020, the Company acquired all the outstanding issued capital of RetailMeNot, Inc.

at a purchase consideration of $ 414.4 million, net of cash acquired and assumed liabilities.

RetailMeNot, Inc.

(“RMN”) is a leading savings destination that influences purchase decisions through the power of savings and coupons.

The multinational Company operates digital savings websites and mobile applications connecting consumers, both online and in-store, to retailers that advertise with RMN.

The acquisition of RMN is expected to further increase retail sales and is believed to, if combined with the Company’s current commerce business and leveraging its editorial strengths, can drive even greater scale and margin expansion.

The Consolidated Statement of Operations since the date of acquisition and balance sheet as of December 31, 2020, reflect the results of operations of RetailMeNot, Inc.

For the year ended December 31, 2020, RetailMeNot, Inc.

contributed $ 47.6 million to the Company’s revenues.

Net income contributed by RetailMeNot, Inc.

was not separately identifiable due to J2 Global’s integration activities and is impracticable to provide.

The following table summarizes the allocation of the purchase consideration for the RetailMeNot, Inc.

acquisition (in thousands):

Assets and Liabilities Valuation

Accounts receivable $ 40,525

Prepaid expenses and other current assets 7,367

Property and equipment 587

Operating lease right of use asset 10,313

Trade names 62,940

Customer relationships 198,840

Goodwill 169,581

Other intangibles 42,610

Other long-term assets 494

Deferred tax asset 605

Accounts payables and accrued expenses ( 24,526 )

Deferred revenue ( 11,175 )

Operating lease liabilities, current ( 4,029 )

Operating lease liabilities, noncurrent ( 13,085 )

Income taxes payable ( 3,308 )

Liability for uncertain tax positions ( 1,576 )

Deferred tax liability ( 52,504 )

Other long-term liabilities ( 9,275 )

Total $ 414,384

The fair value of the assets acquired includes accounts receivable of $ 40.5 million.

The gross amount due under contracts is $ 47.2 million, of which $ 6.7 million is expected to be uncollectible.

The Company did not acquire any other classes of receivables as a result of its acquisitions.

Goodwill recognized in connection with this acquisition during the year ended December 31, 2020 is $ 169.6 million, of which $ 36.6 million is expected to be deductible for income tax purposes.

Pro Forma Financial Information for RetailMeNot, Inc.

The following unaudited pro forma supplemental information is based on estimates and assumptions that J2 Global believes are reasonable.

However, this information is not necessarily indicative of the Company’s consolidated results of operations in future periods or the results that actually would have been realized had J2 Global and the acquired businesses been combined companies during the periods presented.

These pro forma results exclude any savings or synergies that would have resulted from these business acquisitions had they occurred on January 1, 2019 and do not take into consideration the exiting of any acquired lines of business.

The Company acquired a line of business, through the RetailMeNot, Inc.

acquisition which was in the process of being exited prior to the acquisition.

This line of business accounts for $ 0.1 million and $ 28.2 million of revenue in 2020 and 2019, respectively, which is included in the pro forma results below.

In addition, during 2020, the Company sold certain Voice assets in Australia and New Zealand.

This divestiture represented $ 8.4 million and $ 13.9 million of revenue during the 2020 and 2019 fiscal years, respectively.

This unaudited pro forma supplemental information includes incremental intangible asset amortization, income tax expense, and interest income as a result of the acquisitions, net of the related tax effects.

The supplemental information on an unaudited pro forma financial basis presents the combined results of J2 Global and RetailMeNot, Inc.

as if the acquisition had occurred on January 1, 2019 (in thousands, except per share amounts):

(unaudited) (unaudited)

Revenues $ 1,639,495 $ 1,589,437

Net income $ 140,880 $ 190,709

EPS - Basic $ 3.03 $ 3.94

EPS - Diluted $ 2.98 $ 3.83

Pro Forma Financial Information for All 2020 Acquisitions

The following unaudited pro forma supplemental information is based on estimates and assumptions that J2 Global believes are reasonable.

The Company acquired a line of business, through the RetailMeNot, Inc.

acquisition which was in the process of being exited prior to the acquisition.

This line of business accounts for $ 0.1 million and $ 28.2 million of revenue in 2020 and 2019, respectively, which is included in the pro forma results below.

In addition, during 2020, the Company sold certain Voice assets in Australia and New Zealand.

This divestiture represented $ 8.4 million and $ 13.9 million of revenue during the 2020 and 2019 fiscal years, respectively.

The supplemental information on an unaudited pro forma financial basis presents the combined results of J2 Global and its 2020 acquisitions as if each acquisition had occurred on January 1, 2019 (in thousands, except per share amounts):

(unaudited) (unaudited)

Revenues $ 1,671,955 $ 1,633,861

Net income $ 140,534 $ 178,654

EPS - Basic $ 3.02 $ 3.69

EPS - Diluted $ 2.97 $ 3.59

The Company completed the following acquisitions during the year ended December 31, 2019, paying the purchase price with a combination of cash and note payable:

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and (g) other immaterial acquisitions of online data backup, consumer privacy and protection, and digital media businesses.

The consolidated statement of income since the date of each acquisition and balance sheet as of December 31, 2019 , reflect the results of operations of all 2019 acquisitions.

The Consolidated Statement of Operations since the date of each acquisition and balance sheet as of December 31, 2019, reflect the results of operations of all 2019 acquisitions.

For the year ended December 31, 2019, these acquisitions contributed $ 126.3 million to the Company’s revenues.

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The following table summarizes the allocation of the purchase consideration for all 2019 acquisitions (in thousands):

Assets and Liabilities

Assets and Liabilities Valuation

Accounts receivable $ 22,796

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Operating lease right of use asset 4,982

Trade names 10,773

Customer relationships 123,611

Goodwill 253,096

Trademarks 32,540

Other intangibles 48,446

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Other long-term liabilities ( 635 )

During 2019 , the purchase price accounting has been finalized for the following acquisitions:

(i) Mosaik Solutions, LLC;

(ii) DemandShore Solutions Private Limited;

(iii) DW PRIME Holdings, Inc.;

(iv) The Communicator Corporation Limited;

(v) Ekahau Inc.;

(vi) iContact, LLC;

(vii) Safe Send AS;

and (viii) other immaterial backup and digital media businesses.

The initial accounting for all other 2019 acquisitions is incomplete and subject to change, which may be significant.

Total $ 429,517

During the year ended December 31, 2019, the Company recorded adjustments to prior period acquisitions due to the finalization of the purchase accounting in the Fax and Martech business which resulted in a net increase in goodwill of $ 0.2 million.

In addition, the Company recorded adjustments to the initial working capital and to the purchase accounting due to the finalization of prior period acquisitions in the Digital Media business, which resulted in a net decrease in goodwill of $ 0.9 million (see Note 9 - Goodwill and Intangible Assets).

Such adjustments had an immaterial impact to amortization expense within the consolidated statement of income for the year ended December 31, 2019 .

Such adjustments had an immaterial impact to amortization expense within the Consolidated Statement of Operations for the year ended December 31, 2019.

The fair value of the assets acquired includes accounts receivable of $ 22.8 million.

The gross amount due under contracts is $ 23.7 million, of which $ 0.9 million is expected to be uncollectible.

The Company did not acquire any other classes of receivables as a result of its acquisitions.

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The following unaudited pro forma supplemental information is based on estimates and assumptions that J2 Global believes are reasonable.

However, this information is not necessarily indicative of the Company’s consolidated results of income in future periods or the results that actually would have been realized had J2 Global and the acquired businesses been combined companies during the periods presented.

These pro forma results exclude any savings or synergies that would have resulted from these business acquisitions had they occurred on January 1, 2018.

This unaudited pro forma supplemental information includes incremental intangible asset amortization and other charges as a result of the acquisitions, net of the related tax effects.

The supplemental information on an unaudited pro forma financial basis presents the combined results of J2 Global and its 2019 acquisitions as if each acquisition had occurred on January 1, 2018 (in thousands, except per share amounts):

(unaudited) (unaudited)

Revenues $ 1,474,132 $ 1,427,914

Net income $ 211,303 $ 104,710

EPS - Basic $ 4.36 $ 2.15

EPS - Diluted $ 4.24 $ 2.11

The Company completed the following acquisitions during the year ended December 31, 2018 , paying the purchase price in cash in each transaction:

The Company completed the following acquisitions during the year ended December 31, 2018, paying the purchase price in cash for each transaction:

(a) a share purchase of the entire issued capital of ThreatTrack Security Holdings, Inc., acquired on January 26, 2018, a Florida-based provider of cybersecurity solutions;

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and (h) other immaterial acquisitions of digital health and data analysis businesses.

The consolidated statement of income since the date of each acquisition and balance sheet as of December 31, 2018 , reflect the results of operations of all 2018 acquisitions.

The Consolidated Statement of Operations since the date of each acquisition and balance sheet, as of December 31, 2018, reflect the results of operations of all 2018 acquisitions.

For the year ended December 31, 2018, these acquisitions contributed $ 56.2 million to the Company’s revenues.

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The following table summarizes the allocation of the purchase consideration for all 2018 acquisitions (in thousands):

Assets and Liabilities

Assets and Liabilities Valuation

Accounts receivable 11,321

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Property and equipment 4,755

Trade names 33,750

Customer relationships 66,516

Goodwill 194,282

Trademarks 3,285

Other intangibles 84,907

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Finance lease ( 956 )

Income taxes payable

Income tax payable ( 1,458 )

Deferred tax liability ( 22,990 )

Other long-term liabilities ( 5,410 )

Total $ 340,199

(1) Cash contains an immaterial amount of restricted cash associated with a pre-acquisition relationship with a vendor.

The entire balance has been released during the third quarter of 2018.

During the year ended December 31, 2018 , the Company recorded adjustments to prior period acquisitions due to the finalization of the purchase accounting in the Voice, Backup, Security and CPP business (CPP established in 2019) which resulted in a net decrease in goodwill of $ 1.0 million .

In addition, the Company recorded adjustments to the initial working capital related to prior period acquisitions in the Digital Media business, which resulted in a net increase in goodwill of $ 0.2 million (see Note 9 - Goodwill and Intangible Assets).

Such adjustments had an immaterial impact to amortization expense within the consolidated statement of income for the year ended December 31, 2018 .

During the year ended December 31, 2018, the Company recorded adjustments to prior period acquisitions primarily due to the finalization of the purchase accounting in the Voice, Backup, Security and CPP business (CPP established in 2019) which resulted in a net decrease in goodwill of $ 1.0 million.

Such adjustments had an immaterial impact to amortization expense within the Consolidated Statement of Operations for the year ended December 31, 2018.

The fair value of the assets acquired includes accounts receivable of $ 15.5 million.

The gross amount due under contracts is $ 11.6 million, of which $ 0.3 million is expected to be uncollectible.

The Company did not acquire any other classes of receivables as a result of its acquisitions.

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The following unaudited pro forma supplemental information is based on estimates and assumptions, that J2 Global believes are reasonable.

These pro forma results exclude any savings or synergies that would have resulted from these business acquisitions had they occurred on January 1, 2017 and do not take into consideration the exiting of any acquired lines of business.

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These divestitures represented $ 22.7 million of revenue within the 2017 fiscal year.

This unaudited pro forma supplemental information includes incremental intangible asset amortization and other charges as a result of the acquisitions, net of the related tax effects.

The supplemental information on an unaudited pro forma financial basis presents the combined results of J2 Global and its 2018 acquisitions as if each acquisition had occurred on January 1, 2017 (in thousands, except per share amounts):

(unaudited) (unaudited)

Revenues $ 1,264,544 $ 1,218,530

Net income $ 121,727 $ 123,378

EPS - Basic $ 2.50 $ 2.56

EPS - Diluted $ 2.45 $ 2.50

The Company completed the following acquisitions during the year ended December 31, 2017 , paying the purchase price in cash for each transaction:

(a) an asset purchase of sFax, acquired on March 31, 2017, an Austin-based provider of mobile cloud faxing for health care;

(b) a share purchase of the entire issued capital of WeCloud AB, acquired on June 12, 2017, a Swedish-based provider of cloud-based internet security services;

(d) an asset purchase of EZ Publishing (dba “StreamSend”), acquired on August 22, 2017, a provider of email marketing solutions;

(e) a share purchase of all the issued capital of Humble Bundle Inc., acquired on October 13, 2017, a digital storefront for video games based in California;

(f) an asset purchase of blackfriday.com, acquired on November 7, 2017, an online solution that markets popular Black Friday ads that are centrally located connecting shoppers with retailers;

(g) a share purchase of all the issued capital of OnTargetJobs, Inc., acquired on December 4, 2017, a provider of online recruitment solutions for job seekers and employers in North America;

(h) a share purchase of all the issued capital of Mashable Inc., acquired on December 5, 2017, a global, multi-platform media and entertainment company providing tech, digital culture and entertainment content around the globe;

and (i) other immaterial acquisitions of online data backup, email marketing and email security businesses.

The consolidated statement of income since the date of each acquisition and balance sheet, as of December 31, 2017 , reflect the results of operations of all 2017 acquisitions.

For the year ended December 31, 2017 , these acquisitions contributed $ 34.7 million to the Company’s revenues.

Net income contributed by these acquisitions was not separately identifiable due to J2 Global’s integration activities and is impracticable to provide.

Total consideration for these transactions was $ 203.9 million , net of cash acquired and assumed liabilities and subject to certain post-closing adjustments which may increase or decrease the final consideration paid.

The following table summarizes the allocation of the purchase consideration for all 2017 acquisitions (in thousands):

Assets and Liabilities

Accounts receivable

Prepaid expenses and other current assets

Property and equipment

Customer relationships

Other intangibles

Deferred tax asset

Accounts payables and accrued expenses

Deferred revenue

Deferred tax liability

During the year ended December 31, 2017 , the Company recorded adjustments to prior period acquisitions primarily due to the finalization of the purchase accounting in the Fax and Martech business as well as the Voice, Backup, Security and CPP business (CPP established in 2019) which resulted in net decreases in goodwill of $ 0.7 million and $ 25.0 thousand , respectively.

In addition, the Company recorded adjustments to the initial working capital related to prior period acquisitions in the Digital Media business, which resulted in a net decrease in goodwill in the amount of $ 4.7 million .

Such adjustments had an immaterial impact to amortization expense within the consolidated statement of income for the year ended December 31, 2017 .

Goodwill recognized in connection with these acquisitions during the year ended December 31, 2017 is $ 121.8 million , of which $ 34.7 million is expected to be deductible for income tax purposes.

Investments consist of equity and debt securities.

The Company determined the equity securities that were received as part of the consideration for the sale of Tea Leaves Health, LLC (“Tea Leaves”) in fiscal year 2017 are without a readily determinable fair value because these securities are privately held, not traded on any public exchanges and not an investment in a mutual fund or similar investment.

As a result, Management has elected to alternatively measure this investment at cost, less impairment, adjusted for subsequent observable price changes to estimate fair value.

The Company will make a “reasonable effort” to identify any observable price changes for identical or similar investments with the issuer that are known and can be reasonable known.

Any changes in the carrying value of the equity securities will be reported in earnings as a (gain) loss on investment.

In addition, the Company determined that the shares of redeemable preferred stock that were also received as part of the consideration for the sale Tea Leaves are corporate debt securities and are classified as available-for-sale-securities.

These debt securities were subsequently exchanged in a non-cash transaction in the first quarter of 2020.

Furthermore, the COVID-19 pandemic had an adverse impact on the global financial markets.

A prolonged adverse impact of the COVID-19 pandemic could result in a decline in the equity and debt securities estimated fair value and, thus, a resulting charge to earnings in a future period.

The following table summarizes the gross unrealized losses and estimated fair values for the Company’s securities without a readily determinable fair value (in thousands):

Reported Amount

Cost Impairment Adjustments Reported Amount

December 31, 2020

Equity securities $ 50,384 $ ( 19,605 ) $ ( 479 ) $ 30,300

Total $ 50,384 $ ( 19,605 ) $ ( 479 ) $ 30,300

December 31, 2019

Equity securities $ 34,977 $ ( 4,164 ) $ ( 3,678 ) $ 27,135

During the year ended December 31, 2019 , the Company recorded a $ 4.2 million impairment loss related to a portion of its equity securities without a readily determinable fair market value which is reflected in other expense (income), net in the consolidated statements of operations.

During the year ended December 31, 2018 , the Company recorded an unrealized loss to earnings because an observable price for a similar instrument was observed in the market at an amount that was below the original carrying price of the investment.

Total $ 34,977 $ ( 4,164 ) $ ( 3,678 ) $ 27,135

In the first quarter of 2020, in a non-cash transaction of $ 18.3 million, the Company exchanged shares of redeemable preferred stock that were previously classified as available-for-sale corporate debt securities (identified in the table below) for a new series of preferred stock, classified as equity securities without a readily determinable fair value.

The Company recognized a loss on exchange of $ 4.4 million, which is reflected in loss on investments, net in the Consolidated Statements of Operations.

During the year ended December 31, 2020, the Company recorded a $ 19.6 million impairment loss related to a decline in value primarily due to the recapitalization of the investee and overall market volatility.

During the year ended December 31, 2019, the Company recorded a $ 4.2 million impairment loss related to a decline in overall market volatility.

At December 31, 2020, cumulative impairment losses on these securities were $ 23.8 million.

The impairment losses are recorded in loss on investments, net on the Consolidated Statements of Operations.

The following table summarizes the gross unrealized gains and losses and fair values for investments classified as available-for-sale (in thousands):

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Corporate debt securities $ 511 $ 152 $ — $ 663

Total $ 511 $ 152 $ — $ 663

December 31, 2019

Corporate debt securities $ 23,256 $ 112 $ ( 698 ) $ 22,670

Total $ 23,256 $ 112 $ ( 698 ) $ 22,670

At December 31, 2020, the Company’s available-for-sale debt securities are carried at fair value, with the unrealized gains and losses reported as a component of other comprehensive income.

The following table summarizes J2 Global’s corporate debt securities designated as available-for-sale, classified by the contractual maturity date of the security (in thousands):

December 31, 2019

December 31, 2018

December 31, 2020 December 31, 2019

Due within 1 year $ 663 $ —

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Due 10 years or after — —

Recognition and Measurement of Other-Than-Temporary Impairment of Debt Securities

Regardless of the classification of the debt securities as available-for-sale or held-to-maturity, the Company has assessed each position for impairment.

J2 Global regularly reviews and evaluates each investment that has an unrealized loss.

An unrealized loss exists when the current fair value of an individual security is less than its amortized cost basis.

Unrealized losses that are determined to be temporary in nature are recorded, net of tax, in accumulated other comprehensive income for available-for-sale securities.

Factors considered in determining whether a loss is temporary include:

the length of time and the extent to which fair value has been below cost;

the severity of the impairment;

the cause of the impairment and the financial condition and near-term prospects of the issuer;

activity in the market of the issuer which may indicate adverse credit conditions;

the Company’s ability and intent to hold the investment for a period of time sufficient to allow for any anticipated recovery.

J2 Global’s review for impairment generally entails:

identification and evaluation of investments that have indications of possible impairment;

analysis of individual investments that have fair values less than amortized cost, including consideration of the length of time the investment has been in an unrealized loss position and the expected recovery period;

discussion of evidential matter, including an evaluation of factors or triggers that could cause individual investments to qualify as having an other-than-temporary impairment and those that would not support an other-than-temporary impairment;

documentation of the results of these analyses, as required under business policies;

information provided by third-party valuation experts.

For these debt securities, a critical component of the evaluation for other-than-temporary impairments is the identification of credit impairment, where management does not expect to receive cash flows sufficient to recover the entire amortized cost basis of the security.

Credit impairment is assessed using a combination of a discounted cash flow model that estimates the cash flows on the underlying securities and a market comparable method, where the security is valued based upon indications from the secondary market of what discounts buyers demand when purchasing similar securities.

The cash flow model incorporates actual cash flows from the securities through the current period and then projects the remaining cash flows using relevant interest rate curves over the remaining term.

These cash flows are discounted using a number of assumptions, some of which include prevailing implied credit risk premiums, incremental credit spreads and illiquidity risk premiums, among others.

Securities that have been identified as other-than-temporarily impaired are written down to their current fair value.

For debt securities that are intended to be sold or that management believes it more-likely-than-not that it will be required to sell prior to recovery, the full impairment is recognized immediately in earnings.

For available-for-sale and held-to-maturity debt securities that management has no intent to sell and believes that it more-likely-than-not that it will not be required to sell prior to recovery, only the credit loss component of the impairment is recognized in earnings, while the rest of the fair value impairment is recognized in other comprehensive income.

The credit loss component recognized in earnings is identified as the amount of principal cash flows not expected to be received over the remaining term of the security.

The following tables present gross unrealized losses and fair values for those investments that were in an unrealized loss position as of December 31, 2019 and 2018 , aggregated by investment category and the length of time that individual securities have been in a continuous loss position (in thousands):

As of December 31, 2019

Less than 12 Months

12 Months or Greater

Unrealized Loss

Corporate debt securities

Total $ 663 $ 22,670

Recognition and Measurement of Credit Loss of Debt Securities

The Company adopted ASU 2016-13, Financial Instrument-Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments in the first quarter of 2020.

ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss model which requires the use of forward-looking information to calculate credit loss estimates.

This ASU also eliminates the concept of other-than-temporary impairment and requires credit losses related to available-for-sale debt securities to be recorded through an allowance for credit losses rather than a reduction in the amortized cost basis of the securities.

These changes will result in the earlier recognition of credit losses, if any.

The following tables present gross unrealized losses and fair values for those investments that were in an unrealized loss position as of 2019, aggregated by investment category and the length of time that individual securities have been in a continuous loss position (in thousands).

There were no investments in an unrealized loss position as of December 31, 2020.

As of December 31, 2019

Less than 12 Months

12 Months or Greater

Unrealized Loss

Less than 12 Months 12 Months or Greater Total

Fair Value Unrealized Loss Fair Value Unrealized Loss Fair Value Unrealized Loss

Corporate debt securities $ — $ — $ 22,047 $ ( 698 ) $ 22,047 $ ( 698 )

As of December 31, 2019 , 2018 and 2017 , the Company did not recognize any other-than-temporary impairment losses on its debt securities.

Total $ — $ — $ 22,047 $ ( 698 ) $ 22,047 $ ( 698 )

As of December 31, 2020, 2019 and 2018, the Company did no t recognize any other-than-temporary impairment losses on its debt securities.

On September 25, 2017, the Company entered into a commitment to invest $ 200 million (approximately 76.6 % of equity) in the OCV Fund.

The total expected commitment to the OCV Fund is expected to be approximately $300 million .

The primary purpose of the Fund is to provide a limited number of select investors with the opportunity to realize long-term appreciation from public and private companies, with a particular focus on the technology and life science industries.

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During 2020, the Company received capital call notices from the management of OCV Management, LLC for $ 32.9 million inclusive of certain management fees, of which $ 31.9 million has been paid for the year ended December 31, 2020.

During 2019, the Company received a distribution from OCV of $ 10.3 million .

During 2019, the Company received capital call notices from the management of OCV Management, LLC for $ 29.6 million inclusive of certain management fees, of which $ 29.6 million has been paid for the year ended December 31, 2019.

During 2019, the Company received a distribution from OCV of $ 10.3 million.

The Company recognizes its 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 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.

During the years ended December 31, 2019 , 2018 , and 2017 the Company recognized a net investment loss of $ 0.2 million , $ 4.1 million , and zero , net of tax benefit, respectively, inclusive of management fees.

The loss is presented in the Company’s consolidated statement of income as loss from equity investments, net.

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.

During the years ended December 31, 2020, 2019, and 2018, the Company recognized a net loss in earnings of its equity method investment of $ 11.3 million, $ 0.2 million, and $ 4.1 million, net of tax benefit, respectively.

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

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.

The following table discloses the carrying amount for the Company’s equity method investment (in thousands):

December 31, 2019

December 31, 2018

December 31, 2020 December 31, 2019

Equity securities $ 67,195 $ 50,274

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Finally, there are no call or put options, or other types of arrangements, which limit the Company’s ability to participate in losses and returns of the Fund.

Assets Held for Sale and Subsequently Disposed

During the second quarter 2017, the Company committed to a plan to sell Cambridge BioMarketing Group, LLC (“Cambridge”), a subsidiary within the Digital Media business, as it was determined to be a non-core asset.

On July 12, 2017, in a cash transaction, the Company sold Cambridge for a loss of $ 0.9 million which was recorded in other expense (income), net.

During the third quarter 2017, the Company committed to a plan to sell j2 Australia Hosting Pty Ltd (dba “Web24”), a subsidiary within the Cloud Services business, as it was determined to be a non-core asset.

On September 1, 2017, in a cash transaction, the Company sold Web24 for a gain of $ 1.6 million which was recorded in other expense (income), net.

During the third quarter 2017, the Company committed to a plan to sell Tea Leaves, a subsidiary within the Digital Media business, as it was determined to be a non-core asset.

On October 5, 2017, in a transaction consisting of a combination of cash and various equity securities, the Company sold Tea Leaves for a gain of $ 27.0 million which was recorded in other expense (income), net.

Sale of Assets

During the second quarter of 2020, the Company committed to a plan to sell certain Voice assets in Australia and New Zealand as they were determined to be non-core assets.

Such assets were recorded within the Voice, Backup, Security, and CPP

reportable segment.

On August 31, 2020, in a cash transaction, the Company sold these Voice assets for a gain of $ 17.1 million which was recorded in gain on sale of businesses on the Consolidated Statement of Operations.

Fair Value Measurements

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The Company values these Level 1 investments using quoted market prices.

The fair value of long-term debt is determined using recent quoted market prices or dealer quotes for each of the Company’s instruments, which are Level 1 inputs.

Certain of the Company’s debt securities are classified within Level 2.

The Company values these Level 2 investments based on model-driven valuations using significant inputs derived from or corroborated by observable market data.

The fair value of our senior notes is determined using quoted market prices or dealer quotes for instruments with similar maturities and other terms and credit ratings, which are Level 2 inputs.

The fair value of the MUFG Credit Facility approximates

its carrying amount due to its variable interest rate, which approximates a market interest rate, and is considered a Level 2 input.

The fair value of long-term debt was $ 1.8 billion and $ 1.1 billion , at December 31, 2019 and December 31, 2018 , respectively (see Note 10 - Long-Term Debt).

The fair value of our senior notes was determined using quoted market prices or dealer quotes for instruments with similar maturities and other terms and credit ratings in 2019, which are Level 2 inputs.

The fair value of the MUFG Credit Facility approximated its carrying amount due to its variable interest rate, which approximated a market interest rate, and was considered a Level 2 input.

The fair value of the Company’s debt instruments was $ 2.0 billion and $ 1.8 billion, at December 31, 2020 and December 31, 2019, respectively (see Note 10 - Long-Term Debt).

In addition, the 3.25 % Convertible Notes contain terms that may require the Company to pay contingent interest on the 3.25 % Convertible Notes which is accounted for as a derivative with fair value adjustments being recorded to interest expense (see Note 10 - Long Term Debt).

The fair value of this derivative is determined using a binomial lattice convertible bond pricing model using historical and implied market information, which are Level 2 inputs.

In the second quarter of 2019, the Company entered into a $ 5.5 million note payable that was short-term in nature and associated with the quarter’s acquisition activity.

In the third quarter of 2019, the Company paid down $ 5.1 million of the outstanding note.

As of December 31, 2019 , the carrying value of the note payable approximates fair value and is classified within Level 2.

In 2019, the Company entered into a $ 5.5 million note payable that was short-term in nature and associated with the quarter’s acquisition activity.

In the same year, the Company paid down $ 5.1 million of the outstanding note and in the third quarter of 2020, the balance of the note payable was paid in full.

The Company classifies its contingent consideration liability in connection with acquisitions within Level 3 because factors used to develop the estimated fair value are unobservable inputs, such as volatility and market risks, and are not supported by market activity.

The fair value of the contingent consideration liability was determined using option based approaches.

This methodology was utilized because the distribution of payments is not symmetric and amounts are only payable upon certain earnings before interest, tax, depreciation and amortization (“EBITDA”) and certain other thresholds being reached.

Such valuation approach included a Monte-Carlo simulation for the contingency since the financial metric driving the payments is path dependent.

For similar reasons, certain of the Company’s available-for-sale debt securities are classified within Level 3.

The fair value of these debt securities was derived using a hybrid approach consisting of two scenarios and subsequent allocation among each of the outstanding securities.

Both scenarios consider unobservable inputs in the market such as time to liquidity, volatility, dividend yield, and breakpoints.

Significant increases or decreases in either of the inputs noted above in isolation would result in a significantly lower or higher fair value measurement.

For similar reasons, certain of the Company’s available-for-sale debt securities were classified within Level 3.

The valuation approaches used to value Level 3 investments considers unobservable inputs in the market such as time to liquidity, volatility, dividend yield and breakpoints.

Significant increases or decreases in either of the inputs in isolation would result in a significantly lower or higher fair value measurement.

The following table presents the fair values, valuation techniques, unobservable inputs, and ranges of the Company’s financial liabilities categorized within Level 3.

The weighted averages below are a product of the unobservable input and fair value of the contingent consideration arrangement as of December 31, 2020.

Valuation Technique Unobservable Input Range Weighted Average

Contingent Consideration Option-Based Model Risk free rate 1.9 %

Debt spread 0.0 % - 33.5 %

Probabilities 5.0 % - 100.0 %

Present value factor 3.6 % - 3.9 %

Discount rate 28.6 %

The following tables present the fair values of the Company’s financial assets or liabilities that are measured at fair value on a recurring basis (in thousands):

December 31, 2019

December 31, 2020 Level 1 Level 2 Level 3 Fair Value Carrying Value

Cash equivalents:

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Contingent consideration $ — $ — $ 9,094 $ 9,094 $ 9,094

Long-term debt 1,960,527 — — 1,960,527 1,579,021

Total liabilities measured at fair value $ 1,960,527 $ — $ 9,094 $ 1,969,621 $ 1,588,115

December 31, 2018

December 31, 2019 Level 1 Level 2 Level 3 Fair Value Carrying Value

Cash equivalents:

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Contingent consideration $ — $ — $ 37,887 $ 37,887 $ 37,887

Contingent interest derivative

Long-term debt — 1,833,062 — 1,833,062 1,448,461

Total liabilities measured at fair value $ — $ 1,833,062 $ 37,887 $ 1,870,949 $ 1,486,348

At the end of each reporting period, management reviews the inputs to the fair value measurements of financial and non-financial assets and liabilities to determine when transfers between levels are deemed to have occurred.

For the year ended December 31, 2020, the Company transferred the fair value of its long-term debt from Level 2 to Level 1.

For the year ended December 31, 2019, there were no transfers that occurred between levels.

For the year ended December 31, 2018 , $ 20.8 million of the Company’s debt securities were transferred from Level 2 investments to Level 3.

The following table presents a reconciliation of the Company’s derivative instruments (in thousands):

Affected line item in the Statement of Income

Amount Affected line item in the Statement of Income

Derivative Liabilities:

Balance as of January 1, 2019 $ 768

Total fair value adjustments reported in earnings

Interest expense, net

Balance as of December 31, 2018

Total fair value adjustments reported in earnings

Interest expense, net

Total fair value adjustments reported in earnings ( 768 ) Interest expense, net

Balance as of December 31, 2019 $ —

The following tables presents a reconciliation of the Company’s Level 3 financial liabilities related to contingent consideration that are measured at fair value on a recurring basis (in thousands):

Affected line item in the Statement of Income

Level 3 Affected line item in the Statement of Income

Balance as of January 1, 2019 $ 50,035

Contingent consideration 5,079

Total fair value adjustments reported in earnings

General and administrative

Contingent consideration payments

Not Applicable

Total fair value adjustments reported in earnings 6,318 General and administrative

Contingent consideration payments ( 23,545 ) Not Applicable

Balance as of December 31, 2019 $ 37,887

Contingent consideration 8,932

Total fair value adjustments reported in earnings

General and administrative

Contingent consideration payments

Not Applicable

Total fair value adjustments reported in earnings ( 80 ) General and administrative

Contingent consideration payments ( 37,645 ) Not Applicable

Balance as of December 31, 2020 $ 9,094

In connection with the acquisition of Humble Bundle, on October 13, 2017, contingent consideration of up to an aggregate of $ 40.0 million may be payable upon achieving certain future EBITDA thresholds and had a fair value of $ 20.0 million and $ 40.0 million at December 31, 2019 and December 31, 2018 , respectively.

Due to the Company’s achievement of certain EBITDA targets for the year ended December 31, 2018 and the amended contingent consideration agreement, $ 20.0 million was paid in the second quarter of 2019 and an additional $ 20.0 million remains payable and is classified as a current liability on the consolidated balance sheet.

In connection with the acquisition of Ekahau Inc., on October 10, 2018, contingent consideration of up to an aggregate of $ 15.0 million may be payable upon achieving certain future revenue thresholds and had a fair value of $ 9.1 million and $ 3.7 million at December 31, 2019 and December 31, 2018 , respectively.

In connection with the acquisition of Humble Bundle, on October 13, 2017, contingent consideration of up to an aggregate of $ 40.0 million may be payable upon achieving certain future EBITDA thresholds and had a fair value of zero and $ 20.0 million at December 31, 2020 and December 31, 2019, respectively.

Due to the Company’s achievement of certain EBITDA targets for the year ended December 31, 2019 and 2018 and the amended contingent consideration agreement, $ 20.0 million and $ 20.0 million was paid during the year ended December 31, 2020 and 2019, respectively.

In connection with the acquisition of Ekahau Inc., on October 10, 2018, contingent consideration of up to an aggregate of $ 15.0 million may be payable upon achieving certain future revenue thresholds and had a fair value of zero and $ 9.1 million at December 31, 2020 and December 31, 2019, respectively.

Due to the achievement of certain thresholds, $ 9.1 million was paid during the year ended December 31, 2020.

In connection with the Company’s other acquisition activity, contingent consideration of up to $ 23.3 million may be payable upon achieving certain future EBITDA, revenue, and/or unique visitor thresholds and had a combined fair value of $ 9.1 million and $ 8.8 million at December 31, 2020 and December 31, 2019, respectively.

Due to the achievement of certain thresholds, $ 8.6 million was paid during the year ended December 31, 2020.

In the third quarter of 2019, $ 0.3 million was no longer considered contingent in connection with a prior year acquisition.

As a result, the amount was removed from contingent consideration and reclassified to accrued expenses on the consolidated balance sheet.

During the year ended December 31, 2019 , the Company recorded a net increase in the fair value of the contingent consideration of $ 6.3 million and reported such increase in general and administrative expenses.

During the year ended December 31, 2020, the Company recorded a net decrease in the fair value of the contingent consideration of $ 0.1 million and reported such decrease in general and administrative expenses.

The following tables presents a reconciliation of the Company’s Level 3 financial assets related to certain available-for-sale debt securities that are measured at fair value on a recurring basis (in thousands):

Balance as of January 1, 2019 $ 20,846

Transfer in to Level 3

Balance as of December 31, 2018

Total fair value adjustments reported in other comprehensive income 1,201

Balance as of December 31, 2019 $ 22,047

Exchange of available-for-sale corporate debt securities (Note 5) ( 22,047 )

Balance as of December 31, 2020 $ —

Property and Equipment

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Leasehold improvements 9,010 17,374

362,466 354,119

Accumulated depreciation and amortization ( 205,889 ) ( 226,302 )

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Total disposals of long-lived assets for the years ended December 31, 2020, 2019 and 2018 were $ 0.9 million, $ 0.3 million and $ 0.4 million, respectively.

The disposals during 2017 were primarily related to the sale of Cambridge, Web24, and Tea Leaves (see Note 6 - Assets Held for Sale and Subsequently Disposed).

Goodwill and Intangible Assets

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.

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 and is assigned to the reporting unit that is expected to benefit from the synergies of the 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.

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Identifiable intangible assets are amortized over the period of estimated economic benefit, which ranges from one to 20 years.

During 2018, the Company separated certain reporting units held within the Cloud Services business (See Note 18 - Segment Information).

As a result, the Company allocated goodwill to its new reporting units using a relative fair value approach.

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

The changes in carrying amounts of goodwill for the years ended December 31, 2020 and 2019 are as follows (in thousands):

Fax and Martech

Voice, Backup, Security and CPP

Total Cloud Services

Digital Media

Fax and Martech Voice, Backup, Security and CPP Total Cloud Services Digital Media Consolidated

Balance as of January 1, 2019 $ 366,270 $ 300,718 $ 666,988 $ 713,388 $ 1,380,376

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Purchase Accounting Adjustments (1)

177 — 177 ( 858 ) ( 681 )

Foreign exchange translation ( 331 ) 73 ( 258 ) 500 242

Allocation to new reportable segments

Balance as of December 31, 2019 $ 397,788 $ 480,084 $ 877,872 $ 755,161 $ 1,633,033

Goodwill acquired (Note 4) 21,738 19,056 40,794 177,951 218,745

Goodwill written off related to sale of a business (2)

— ( 4,751 ) ( 4,751 ) — ( 4,751 )

Purchase accounting adjustments (1)

— ( 2,130 ) ( 2,130 ) 9,721 7,591

Foreign exchange translation 5,945 6,766 12,711 101 12,812

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(1) Purchase accounting adjustments relate to adjustments to goodwill in connection with prior year business acquisitions (see Note 4 - Business Acquisitions).

(2) On August 31, 2020, in a cash transaction, the Company sold certain of its Voice assets in Australia and New Zealand which resulted in $ 4.8 million of goodwill being written off (see Note 6 - Sale of Assets).

Intangible assets are summarized as of December 31, 2020 and 2019 as follows (in thousands):

Intangible Assets with Indefinite Lives:

Trade names $ 27,460 $ 27,379

Other 4,329 4,306

Total $ 31,789 $ 31,685

Intangible Assets Subject to Amortization:

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Weighted-Average

Patent and patent licenses

Cost Accumulated

Amortization Net

Trade names 10.0 years $ 260,715 $ 100,273 $ 160,442

Patent and patent licenses 5.5 years 67,980 66,964 1,016

Customer relationships (1)

Other purchased intangibles

8.0 years 848,875 471,681 377,194

Other purchased intangibles 4.3 years 436,352 265,224 171,128

Total $ 1,613,922 $ 904,142 $ 709,780

(1) Historically, the Company has amortized its customer relationship assets in a pattern that best reflects the pace in which the assets’ benefits are consumed.

This pattern results in a substantial majority of the amortization expense being recognized in the first four to five years , despite the overall life of the asset.

During the year ended December 31, 2020, the Company acquired RetailMeNot, Inc.

(see Note 4 - Business Acquisitions).

The identified intangible assets were recognized as part of the acquisition and their respective estimated weighted average amortizations were as follows (in thousands):

Weighted-Average

Trade names 10.0 years $ 62,940

Customer relationships 7.0 years 198,840

Other purchased intangibles 3.0 years 42,610

Total $ 304,390

During the year ended December 31, 2020, the Company completed acquisitions which were individually immaterial.

The identified intangible assets were recognized as part of all 2020 acquisitions and their respective estimated weighted average amortizations were as follows (in thousands):

Weighted-Average

Trade names 9.7 years $ 67,670

Customer relationships 6.9 years 222,582

Other purchased intangibles 3.3 years 56,802

Total $ 347,054

As of December 31, 2019, intangible assets subject to amortization relate primarily to the following (in thousands):

Weighted-Average

Patent and patent licenses

Cost Accumulated

Amortization Net

Trade names 10.2 years $ 193,202 $ 82,552 $ 110,650

Patent and patent licenses 6.5 years 67,921 63,143 4,778

Customer relationships (1)

Other purchased intangibles

8.5 years 630,730 392,228 238,502

Other purchased intangibles 4.3 years 383,195 212,257 170,938

Total $ 1,275,048 $ 750,180 $ 524,868

(1) Historically, the Company has amortized its customer relationship assets in a pattern that best reflects the pace in which the assets’ benefits are consumed.

This pattern results in a substantial majority of the amortization expense being recognized in the first four to five years , despite the overall life of the asset.

During the year ended December 31, 2019 , the Company completed acquisitions which were individually immaterial.

The identified intangible assets recognized as part of these acquisition and their respective estimated weighted average amortizations were as follows (in thousands):

Weighted-Average

Customer relationships

Other purchased intangibles

Expected amortization expenses for intangible assets subject to amortization at December 31, 2020 are as follows (in thousands):

2021 $ 181,679

Thereafter 152,319

Total expected amortization expense $ 709,780

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Long-Term Debt

Long-term debt as of December 31, 2020 and 2019 consists of the following (in thousands):

6.0 % Senior Notes

$ — $ 650,000

4.625 % Senior Notes

Convertible Notes:

3.25 % Convertible Notes

402,414 402,500

1.75 % Convertible Notes

550,000 550,000

Total Notes 1,702,414 1,602,500

Paycheck Protection Program Loan 910 —

Unamortized discount ( 112,798 ) ( 139,981 )

Deferred issuance costs ( 11,505 ) ( 14,058 )

Total long-term debt $ 1,579,021 $ 1,448,461

Current portion ( 396,801 ) ( 385,532 )

Total long-term debt, less current portion $ 1,182,220 $ 1,062,929

At December 31, 2020, future principal payments for debt were as follows (in thousands):

Years Ended December 31,

2021 $ 402,414

Thereafter 1,300,000

Interest expense was $ 133.8 million, $ 70.2 million and $ 63.5 million for the years ended December 31, 2020, 2019 and 2018, respectively.

6.0 % Senior Notes

On June 27, 2017, J2 Cloud Services, LLC (“J2 Cloud”) and J2 Cloud Co-Obligor, Inc.

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J2 Cloud received proceeds of $ 636.5 million, after deducting the initial purchasers’ discounts, commissions and offering expenses.

The 6.0% Senior Notes are presented as long-term debt, net of deferred issuance costs, on the condensed consolidated balance sheets as of December 31, 2019 .

The proceeds were used to redeem all of

J2 Cloud’s 8.0% notes due in 2020, and to distribute sufficient net proceeds to J2 Global to pay off all amounts outstanding under its existing 2016 credit facility, with the remaining net proceeds to be used for general corporate purposes, including acquisitions.

The 6.0% Senior Notes bear interest at a rate of 6.0% per annum, payable semi-annually in arrears on January 15 and July 15 of each year, commencing on January 15, 2018.

The 6.0% Senior Notes mature on July 15, 2025 , and are senior unsecured obligations of the Issuers which are guaranteed on an unsecured basis by certain subsidiaries of J2 Cloud (as defined in the Indenture agreement dated June 27, 2017, the “Indenture”).

If J2 Cloud or any of its restricted subsidiaries acquires or creates a domestic restricted subsidiary, other than an insignificant subsidiary (as defined in the Indenture), after the issue date, or any insignificant subsidiary ceases to fit within the definition of insignificant subsidiary, such restricted subsidiary is required to unconditionally guarantee, jointly and severally, on an unsecured basis, the Issuers’ obligations under the 6.0% Senior Notes.

The Issuers may redeem some or all of the 6.0% Senior Notes at any time on or after July 15, 2020 at specified redemption prices plus accrued and unpaid interest, if any, to, but excluding the redemption date.

Before July 15, 2020, in connection with certain equity offerings, the Issuers also may redeem up to 35% of the 6.0% Senior Notes at a price equal to 106.0% of the principal amount, plus accrued and unpaid interest, if any, to, but excluding the redemption date.

In addition, at any time prior to July 15, 2020, the Issuers may redeem some or all of the 6.0% Senior Notes at a price equal to 100% of the principal amount, plus accrued and unpaid interest, if any, to the redemption date, plus an applicable “make-whole” premium.

The Indenture contains certain restrictive and other covenants applicable to J2 Cloud and subsidiaries designated as restricted subsidiaries including, but not limited to, restrictions on (i) paying dividends or making distributions on J2 Cloud’s membership interests or repurchasing J2 Cloud’s membership interests;

(ii) making certain restricted payments;

(iii) creating liens or entering into sale and leaseback transactions;

(iv) entering into transactions with affiliates;

(v) merging or consolidating with another company;

and (vi) transferring and selling assets.

These covenants include certain exceptions.

Violation of these covenants could result in a default which could result in the acceleration of outstanding amounts if such default is not cured or waived within the time periods outlined in the Indenture.

Restricted payments, specifically dividend payments, are applicable only if J2 Cloud and subsidiaries designated as restricted subsidiaries has a leverage ratio of greater than 3.0 to 1.0.

In addition, if such leverage ratio is in excess of 3.0 to 1.0, the restriction on restricted payments is subject to various exceptions, including an exception for the payment of restricted payments up to $75 million.

These contractual provisions did not, as of December 31, 2019 , restrict J2 Cloud’s ability to pay dividends to J2 Global, Inc.

The company is in compliance with its debt covenants as of December 31, 2019 .

As of December 31, 2019 and December 31, 2018 , the estimated fair value of the 6.0% Senior Notes was approximately $ 689.8 million and $ 645.5 million , respectively, and was based on the quoted market prices of debt instruments with similar terms, credit rating and maturities of the 6.0% Senior Notes which are Level 2 inputs (see Note 7 - Fair Value Measurements).

The 6.0 % Senior Notes were presented as long-term debt, net of deferred issuance costs, on the Consolidated Balance Sheet as of December 31, 2019.

The 6.0 % Senior Notes bore interest at a rate of 6.0 % per annum, payable semi-annually in arrears on January 15 and July 15 of each year.

On October 7, 2020, the Company redeemed all of its outstanding $ 650 million 6.0 % Senior Notes due in 2025 for $ 694.6 million, including an early redemption premium of $ 29.2 million and accrued and unpaid interest of $ 15.4 million.

The Company recorded a loss on extinguishment of $ 38.0 million which is recorded in interest expense, net in the Consolidated Statements of Operations.

As of December 31, 2019, the estimated fair value of the 6.0 % Senior Notes was approximately $ 689.8 million, and was based on quoted market prices or dealer quotes for the 6.0 % Senior Notes which are Level 1 inputs (see Note 7 - Fair Value Measurements).

The following table provides additional information related to our 6 % Senior Notes (in thousands):

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4.625 % Senior Notes

On August 1, 2017, J2 Cloud redeemed all of its outstanding $ 250 million 8.0% senior unsecured notes due in 2020 for $ 265 million , including a redemption premium and relevant accrued interest which resulted in a loss on extinguishment of $ 8.0 million recorded which was recorded in Interest expense, net.

On October 7, 2020, J2 Global, Inc.

completed the issuance and sale of $ 750 million aggregate principal amount of its 4.625 % senior notes due 2030 (the “ 4.625 % Senior Notes”) in a private placement offering exempt from the registration requirements of the Securities Act of 1933.

The Company received proceeds of $ 742.7 million after deducting the initial purchasers’ discounts, commissions and offering expenses.

The 4.625 % Senior Notes are presented as long-term debt, net of deferred issuance costs, on the Consolidated Balance Sheets as of December 31, 2020.

The net proceeds were used to redeem all of its outstanding 6.0 % Senior Notes due in 2025 and, to the extent any proceeds remain thereafter, for general corporate purposes which may include acquisitions and the repurchase or redemption of other outstanding indebtedness.

The 4.625 % Senior Notes bear interest at a rate of 4.625 % per annum, payable semi-annually in arrears on April 15 and October 15 of each year, commencing on April 15, 2021.

The 4.625 % Senior Notes mature on October 15, 2030, and are senior unsecured obligations of the Company which are guaranteed, jointly and severally, on an unsecured basis by certain of the Company’s existing and future domestic direct and indirect wholly-owned subsidiaries (collectively, the “Guarantors”).

If J2 Global, Inc.

or any of its restricted subsidiaries acquires or creates a domestic restricted subsidiary, other than an Insignificant Subsidiary (as defined in the indenture pursuant to which the 4.625 % Senior Notes were issued (the “Indenture”)), after the issue date, or any Insignificant Subsidiary ceases to fit within the definition of Insignificant Subsidiary, such restricted subsidiary is required to unconditionally guarantee, jointly and severally, on an unsecured basis, the Company’s obligations under the 4.625 % Senior Notes.

The Company may redeem some or all of the 4.625 % Senior Notes at any time on or after October 15, 2025 at specified redemption prices plus accrued and unpaid interest, if any, to, but excluding the redemption date.

Before October 15, 2023, and following certain equity offerings, the Company also may redeem up to 40 % of the 4.625 % Senior Notes at a price equal to 104.625 % of the principal amount, plus accrued and unpaid interest, if any, to, but excluding the redemption date.

The Company may make such redemption only if, after such redemption, at least 50 % of the aggregate principal amount of the 4.625 % Senior Notes remains outstanding.

In addition, at any time prior to October 15, 2025, the Company may redeem some or all of the 4.625 % Senior Notes at a price equal to 100 % of the principal amount, plus accrued and unpaid interest, if any, to the redemption date, plus an applicable “make-whole” premium.

The Indenture contains covenants that restrict the Company’s ability to (i) pay dividends or make distributions on the Company’s common stock or repurchase the Company’s capital stock;

(ii) make certain restricted payments;

(iii) create liens or enter into sale and leaseback transactions;

(iv) enter into transactions with affiliates;

(v) merge or consolidate with another company;

and (vi) transfer and sell assets.

These covenants contain certain exceptions.

Restricted payments are applicable only if J2 Global, Inc.

and subsidiaries designated as restricted subsidiaries has a net leverage ratio of greater than 3.5 to 1.0.

In addition, if such net leverage ratio is in excess of 3.5 to 1.0, the restriction on restricted payments is subject to various exceptions, including the total aggregate amount not to exceed the greater of (A) $ 250 million and (B) 50.0 % of EBITDA for the most recently ended four fiscal quarter period ended immediately prior to such date for which internal financial statements are available.

The Company is in compliance with its debt covenants as of December 31, 2020.

As of December 31, 2020, the estimated fair value of the 4.625 % Senior Notes was approximately $ 796.9 million, and was based on recent quoted market prices or dealer quotes for the 4.625 % Senior Notes which are Level 1 inputs (see Note 7 - Fair Value Measurements).

The following table provides additional information on our 4.625 % Senior Notes (in thousands):

Principal amount of 4.625 % Senior Notes

Unamortized discount ( 5,523 )

Debt issuance costs ( 1,761 )

Net carrying amount of 4.625 % Senior Notes

3.25 % Convertible Notes

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”).

J2 Global received proceeds of $ 391.4 million in cash, net of purchasers’ discounts and commissions.

The net proceeds were available for general corporate purposes.

The 3.25 % Convertible Notes bear interest at a rate of 3.25 % per annum, payable semiannually in arrears on June 15 and December 15 of each year.

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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.

As a result, the 3.25 % Convertible Notes were convertible at the option of the holder during the quarter beginning January 1, 2020 and ending March 31, 2020.

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.

Since the Company currently intends to settle the principal amount in cash, the net carrying amount of the 3.25% Convertible Notes is classified within current liabilities on the consolidated balance sheet as of December 31, 2019.

Since the Company currently intends to settle the principal amount in cash, the net carrying amount of the 3.25 % Convertible Notes is classified within current liabilities on the Consolidated Balance Sheet as of December 31, 2020 and December 31, 2019.

As of December 31, 2020, the conversion rate is 14.7632 shares of J2 Global common stock for each $1,000 principal amount of Convertible Notes, which represents a conversion price of approximately $ 67.74 per share of J2 Global common stock.

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In addition, if a fundamental change, as defined in the indenture governing the 3.25 % Convertible Notes, occurs prior to the maturity date, holders may require J2 Global to repurchase for cash all or part of their 3.25 % Convertible Notes 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 to, but excluding, the fundamental change repurchase date.

As a result of the Holders’ repurchase option on June 15, 2021, the net carrying value of the 3.25 % Convertible Notes is classified within current liabilities on the Consolidated Balance Sheet as of December 31, 2020.

The 3.25 % Convertible Notes are the Company’s general senior unsecured obligations and rank:

(i) senior in right of payment to any of the Company’s future indebtedness that is expressly subordinated in right of payment to the 3.25% Convertible

(i) senior in right of payment to any of the Company’s future indebtedness that is expressly subordinated in right of payment to the 3.25 % Convertible Notes;

(ii) equal in right of payment to the Company’s existing and future unsecured indebtedness that is not so subordinated;

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As of December 31, 2020 and 2019, the estimated fair value of the 3.25 % Convertible Notes was approximately $ 593.1 million and $ 583.6 million, respectively.

As of December 31, 2019 and 2018 , the if-converted value of our 3.25% Convertible Notes exceeded the principal amount of $ 402.5 million by $ 154.3 million and $ 8.0 million , respectively.

As of December 31, 2020 and 2019, the if-converted value of our 3.25 % Convertible Notes exceeded the principal amount by $ 173.3 million and $ 154.3 million, respectively.

The following table provides additional information related to our 3.25 % Convertible Notes (in thousands):

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Principal amount of 3.25 % Convertible Notes

$ 402,414 $ 402,500

Unamortized discount of the liability component ( 4,644 ) ( 14,363 )

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Net carrying amount of 3.25 % Convertible Notes

$ 396,915 $ 385,532

The following table provides the components of interest expense related to our 3.25 % Convertible Notes (in thousands):

2020 2019 2018

Cash interest expense (coupon interest expense) $ 13,080 $ 13,081 $ 13,081

Non-cash amortization of discount on 3.25 % Convertible Notes

9,717 9,171 8,655

Amortization of debt issuance costs 1,749 1,600 1,462

Total interest expense related to 3.25 % Convertible Notes

The Company has recorded changes in fair value associated with the contingent interest feature of the 3.25% Convertible Notes in interest expense for the years ended December 31, 2019 , 2018 , and 2017 of $( 0.8 ) million , zero , and $( 0.2 ) million , respectively (see Note 7 - Fair Value Measurements).

$ 24,546 $ 23,852 $ 23,198

The Company has recorded changes in fair value associated with the contingent interest feature of the 3.25 % Convertible Notes in interest expense for the years ended December 31, 2020, 2019, and 2018 of zero , $( 0.8 ) million, and zero , respectively (see Note 7 - Fair Value Measurements).

1.75 % Convertible Notes

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J2 Global received proceeds of $ 537.1 million in cash, net of purchasers’ discounts and commissions and other debt issuance costs.

The net proceeds were used to pay off all amounts outstanding under the MUFG Credit Facility (see Note 12 - Commitments and Contingencies).

A portion of the net proceeds were used to pay off all amounts outstanding under the MUFG Credit Facility (see Note 12 - Commitments and Contingencies).

The 1.75 % Convertible Notes bear interest at a rate of 1.75 % per annum, payable semiannually in arrears on May 1 and November 1 of each year, beginning on May 1, 2020.

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J2 Global will settle conversions of the 1.75 % Convertible Notes by paying or delivering, as the case may be, cash, shares of J2 Global common stock or a combination thereof at J2 Global’s election.

The Company currently intends to satisfy its conversion obligation by paying and delivering a combination of cash and shares of the Company’s common stock, where cash will be used to settle each $1,000 of principal and the remainder, if any, will be settled via shares of the Company’s common stock.

The Company currently intends to satisfy its conversion obligation by paying and delivering a combination of cash and shares of the Company’s common stock.

Holders of the notes will have the right to require the Company to repurchase for cash all or any portion of their notes upon the occurrence of certain corporate events, subject to certain conditions.

As of December 31, 2019, the market trigger conditions have not been met.

Therefore, the net carrying amount of the 1.75% Convertible Notes are classified as long-term debt on the consolidated balance sheets.

The initial conversion rate is 7.9864 shares of J2 Global common stock for each $1,000 principal amount of 1.75% Convertible Notes, which represents an initial conversion price of approximately $ 125.21 per share of J2 Global common stock.

The conversion rate is subject to adjustment for certain events as set forth in the indenture governing the 1.75% Convertible Notes, but will not be adjusted for accrued interest.

As of December 31, 2020 and December 31, 2019, the market trigger conditions did not meet the conversion requirements of the 1.75 % Convertible Notes and, accordingly, the 1.75 % Convertible Notes are classified as long-term debt on the Consolidated Balance Sheets.

As of December 31, 2020, the initial conversion rate is 7.9864 shares of J2 Global common stock for each $1,000 principal amount of 1.75 % Convertible Notes, which represents a conversion price of approximately $ 125.21 per share of J2 Global common stock.

The conversion rate is subject to adjustment for certain events as set forth in the indenture governing the

1.75 % Convertible Notes, but will not be adjusted for accrued interest.

In addition, upon the occurrence of a “Make-Whole Fundamental Change” (as defined in the 1.75 % Convertible Note Indenture), J2 Global will increase the conversion rate for a holder that elects to convert its 1.75 % Convertible Notes in connection with such a corporate event in certain circumstances.

As of December 31, 2019 , the conversion rate is 7.9864 shares of J2 Global common stock for each $1,000 principal amount of 1.75% Convertible Notes, which represents a conversion price of approximately $ 125.21 per share of J2 Global common stock.

J2 Global may not redeem the 1.75 % Convertible Notes prior to November 1, 2026, and no sinking fund is provided for the 1.75 % Convertible Notes.

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(iii) effectively junior to any of the Company’s secured indebtedness to the extent of the value of the assets securing such indebtedness;

and (iv) structurally junior to all existing and future indebtedness and other liabilities incurred by the Company’s subsidiaries, including the existing 6% Senior Notes due 2025.

and (iv) structurally junior to all existing and future indebtedness and other liabilities incurred by the Company’s subsidiaries, including the former 6.0 % Senior Notes due 2025.

Accounting for the 1.75 % Convertible Notes

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This debt discount is amortized to interest expense using the effective interest method over the period from the issuance date through the maturity date of November 1, 2026.

J2 Global estimated the borrowing rates of similar debt without the conversion feature at origination to be 5.5% for the

1.75% Convertible Notes and determined the debt discount to be $ 118.9 million .

J2 Global estimated the borrowing rates of similar debt without the conversion feature at origination to be 5.5 % for the 1.75 % Convertible Notes and determined the debt discount to be $ 118.9 million.

As a result, a conversion premium after tax of $ 88.1 million (net of $ 2.8 million of the deferred issuance costs) are recorded in additional paid-in capital.

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If such information is not available, the fair value is determined using cash-flow models of the scheduled payments discounted at market interest rates for comparable debt without the conversion feature.

As of December 31, 2019 , the estimated fair value of the 1.75% Convertible Notes was approximately $ 559.6 million .

As of December 31, 2020 and December 31, 2019, the estimated fair value of the 1.75 % Convertible Notes was approximately $ 569.7 million and $ 559.6 million, respectively.

The following table provides additional information related to our 1.75 % Convertible Notes (in thousands):

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Principal amount of 1.75 % Convertible Notes

$ 550,000 $ 550,000

Unamortized discount of the liability component ( 102,631 ) ( 117,193 )

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Net carrying amount of 1.75 % Convertible Notes

$ 438,480 $ 422,820

The following table provides the components of interest expense related to our 1.75 % Convertible Notes (in thousands):

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Total interest expense related to 1.75 % Convertible Notes

$ 25,314 $ 3,014

MUFG Credit Facility

On October 7, 2020, the Company terminated the Credit Agreement (see Note 12 - Commitments and Contingencies).

During the year ended December 31, 2019, the Company drew down $ 185.0 million and repaid $ 185.0 million under its MUFG Credit Facility.

The Company has capitalized the total of $ 0.4 million in debt issuance costs, which are being amortized to interest expense over the life of the MUFG Credit Facility.

The Company had capitalized the total of $ 0.4 million in debt issuance costs, which were being amortized to interest expense over the life of the MUFG Credit Facility.

As of December 31, 2019, these debt issuance costs, net of amortization, were $ 0.3 million.

The related interest expense was $ 3.4 million and zero for the years ended December 31, 2019 and 2018 , respectively.

See Note 12, “Commitments and Contingencies” for additional information.

Long-term debt as of December 31, 2019 and 2018 consists of the following (in thousands):

6.0% Senior Notes

Convertible Notes:

3.25% Convertible Notes

1.75% Convertible Notes

Unamortized discount

Deferred issuance costs

Total long-term debt

Current portion

Total long-term debt, less current portion

At December 31, 2019 , future principal payments for debt were as follows (in thousands):

Years Ended December 31,

Interest expense was $ 70.2 million , $ 63.5 million and $ 59.2 million for the years ended December 31, 2019 , 2018 and 2017 , respectively.

The related interest expense was zero and $ 3.4 million for the years ended December 31, 2020 and 2019, respectively.

Paycheck Protection Program Loan

Through the acquisition of The Aberdeen Group, LLC and The Big Willow, Inc., the Company acquired $ 0.9 million of outstanding debt originating from the Paycheck Protection Program (see Note 4 - Business Combinations).

As of December 31, 2020, the outstanding balance approximated fair value.

J2 Global leases certain facilities and equipment under non-cancelable operating and finance leases which expire at various dates through 2031.

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Some of the Company’s leases include options to terminate within one year.

During 2020, the Company decided to exit and seek subleases for certain leased facilities in the Digital Media reportable segment primarily due to a permanent “remote” or “partial remote” work model for a significant number of employees arising from the COVID-19 pandemic.

The Company recorded a non-cash impairment charge of $ 12.1 million related to operating lease right-of-use assets for the affected facilities and an impairment charge of $ 3.6 million for associated property and equipment.

The impairment was determined by comparing the fair value of the impacted right-of-use asset to the carrying value of the asset as of the impairment measurement date, as required under ASC Topic 360, Property, Plant, and Equipment.

The fair value of the right-of-use asset was based on the estimated sublease income for the affected facilities taking into consideration the time it will take to obtain a sublease tenant, the applicable discount rate and the sublease rate which represents Level 3 unobservable inputs.

The impairment is presented in general and administrative expenses on the Consolidated Statements of Operations .

No impairment was recorded in 2019 or 2018.

In certain agreements in which the Company leases office space where the Company is the tenant, it subleases the site to various other companies through a sublease agreement.

As of December 31, 2019 , the Company leased approximately 43,000 square feet of office space for its global headquarters in Los Angeles, California under a lease that expired on January 31, 2020.

In April 2019, the Company entered into a new lease to relocate its global headquarters.

Upon the lease commencement date in December 2019, the Company recorded $ 29.0 million of right-of-use assets after considering prepaid rent and $ 28.8 million of operating lease liabilities.

The Company has adopted the new lease standard and related amendments as of January 1, 2019 using the optional transition method.

The Company adopted the new lease standard and related amendments as of January 1, 2019 using the optional transition method.

Finance leases are not material to the Company’s consolidated financial statements and are therefore not included in the disclosures.

Upon adoption of ASU 2016-02 and its related Updates, the Company recorded approximately $ 72.0 million of right-of-use assets and approximately $ 75.0 million of operating lease liabilities.

The components of lease expense were as follows for the year ended (in thousands):

December 31, 2019

Upon adoption of ASC 842, the Company recorded approximately $ 72.0 million of right-of-use assets and approximately $ 75.0 million of operating lease liabilities.

The components of lease expense, recorded in cost of revenues and general and administrative expenses on the Consolidated Statements of Operations, were as follows for the year ended (in thousands):

Years ended December 31,

Operating lease cost $ 42,025 $ 23,681

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Supplemental balance sheet information related to leases was as follows (in thousands):

December 31, 2019

December 31, 2020 December 31, 2019

Operating leases

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Supplemental cash flow information related to leases was as follows (in thousands):

December 31, 2019

Years ended December 31,

Cash paid for amounts included in the measurement of lease liabilities:

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Other supplemental operating lease information consists of the following:

December 31, 2020 December 31, 2019

Operating leases:

Weighted average remaining lease term

Weighted average remaining lease term 5.2 years 5.9 years

Weighted average discount rate 3.93 % 3.95 %

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Operating Leases

2021 $ 34,636

Thereafter 38,447

Total lease payments $ 159,606

1 unchanged sentence

Present value of operating lease liabilities $ 131,388

Rental expense for operating leases classified under ASC 840 for the years ended December 31, 2018 and 2017 was $ 21.0 million and $ 15.3 million , respectively and was predominantly recorded within general and administrative expenses.

As of December 31, 2018, future minimum lease payments under non-cancelable operating leases (with initial or remaining lease terms in excess of one year) are as follows (in thousands):

Lease Payments

Total minimum lease payments

Rental expense for operating leases classified under ASC 840 for the year ended December 31, 2018 was $ 21.0 million and was predominantly recorded within general and administrative expenses.

Total sublease income for the years ended December 31, 2020, 2019 and 2018 was $ 2.6 million, $ 3.5 million and $ 2.8 million, respectively.

Total estimated aggregate sublease income to be received in the future is $ 4.5 million.

In 2020, the Company recorded $ 2.1 million of impairment associated with one of its sublease tenants in default as a result of the economic effects of COVID-19.

The impairment is presented in general and administrative expenses on the Consolidated Statement of Operations.

Significant Judgments

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The majority of the J2 Global’s leases are discounted using the Company’s incremental borrowing rate as the rate implicit in the lease is not readily determinable.

Rates are obtained from various large banks to determine the appropriate incremental borrowing rate each quarter for collateralized loans with a maturity similar to the lease term.

The lease term is generally the minimum noncancelable period of the lease.

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Discovery has closed, with the exception of one issue.

There is an anticipated trial date of February 2021.

There is an anticipated trial date of September 2021.

On January 21, 2016, Davis Neurology, P.A.

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On December 20, 2019, the court granted the Plaintiff’s motion for leave to amend its complaint.

The J2 Global affiliates have moved to dismiss the amended pleading.

On May 21, 2020, the court denied J2 Global affiliates’ motion to dismiss.

On August 11, 2020, the court approved an opt-in class notice.

Notice has not yet been issued and the J2 Global affiliates have moved to decertify the class.

On December 2, 2020, the parties provided notice to the Court that they have reached a tentative settlement in the matter, and on February 18, 2021, the parties filed a motion for preliminary approval of the class settlement, certification of a settlement class and for permission to disseminate notice.

On July 8, 2020, Jeffrey Garcia filed a putative class action lawsuit against J2 Global in the Central District of California (20-cv-06906), alleging violations of federal securities laws.

J2 Global has moved to dismiss the consolidated class action complaint.

On September 24, 2020, International Union of Operating Engineers of Eastern Pennsylvania and Delaware filed a lawsuit in the Delaware Court of Chancery (C.A.

2020-0819-VCL) asserting derivative claims against directors of J2 Global, Inc.

and other third parties.

On November 17, 2020, the court entered an order allowing Orlando Police Pension Fund to intervene as a plaintiff in the case.

The lawsuit alleges violations of breach of fiduciary duty and usurpation of corporate opportunity.

J2 Global and its directors and officers intend to defend against the lawsuit.

On December 11, 2020, Danning Huang filed a lawsuit in the District of Delaware (20-cv-01687-LPS) asserting derivative claims against directors of J2 Global, Inc.

and other third parties.

The lawsuit alleges violations of Section 14(a), Section 10(b), Section 20(a) and Rule 10b-5 of the Securities Exchange Act of 1934, as well as breach of fiduciary duty, unjust enrichment and abuse of control.

J2 Global and its directors and officers intend to defend against the lawsuit.

J2 Global does not believe, based on current knowledge, that the foregoing legal proceedings or claims, after giving effect to existing accrued liabilities, are likely to have a material adverse effect on the Company’s consolidated financial position, results of operations, or cash flows.

However, depending on the amount and timing, an unfavorable resolution of some or all of these matters could have a material effect on J2 Global’s consolidated financial position, results of operations, or cash flows in a particular period.

The Company has not accrued for any material loss contingencies relating to these legal proceedings because materially unfavorable outcomes are not considered probable by management.

The Company has accrued approximately $ 4.5 million in connection with potential loss contingencies relating to these legal proceedings because they are considered probable by management.

It is the Company’s policy to expense as incurred legal fees related to various litigations.

Credit Agreements

On December 5, 2016, J2 Global entered into a Credit Agreement (the “2016 Credit Agreement”) with MUFG Union Bank, N.A., as administrative agent, and certain other lenders from time to time party thereto (collectively, the “2016 Lenders”).

Pursuant to the 2016 Credit Agreement, the 2016 Lenders provided J2 Global with a credit facility of $225.0 million.

On June 27, 2017, the Company paid off the entire line of credit of $ 225.0 million , in addition to interest and miscellaneous fees of $ 0.5 million and terminated the 2016 Credit Agreement.

Credit Agreement

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”).

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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.

At J2 Cloud’s option, amounts borrowed under the Credit Agreement will bear interest at either (i) a base rate equal to the greatest of (x) the Federal Funds Effective Rate (as defined in the Credit Agreement) in effect on such day plus 1/2 of 1% per annum, (y) the rate of interest per annum most recently announced by the Agent as its U.S.

Dollar “Reference Rate” and (z) one month LIBOR plus 1.00% or (ii) a rate per annum equal to LIBOR divided by 1.00 minus the LIBOR Reserve Requirements (as defined in the Credit Agreement), in each case, plus an applicable margin.

The applicable margin relating to any base rate loan will range from 0.50% to 1.50% and the applicable margin relating to any LIBOR loan will range from 1.50% to 2.50%, in each case, depending on the total leverage ratio of J2 Cloud.

The final maturity of the MUFG Credit Facility will occur on January 7, 2024.

J2 Cloud is permitted to make voluntary prepayments of the MUFG Credit Facility at any time without payment of a premium or penalty.

The obligations under the MUFG Credit Facility and certain cash management are and will be fully and unconditionally guaranteed by certain of J2 Cloud’s existing and subsequently acquired or organized direct and indirect domestic subsidiaries pursuant to a guarantee agreement and secured by a lien on the equity interests of certain of J2 Cloud’s foreign subsidiaries.

The Credit Agreement contains financial maintenance covenants, including (i) a maximum total leverage ratio as of the last date of any fiscal quarter not to exceed 3.00:1.00 for J2 Cloud and its restricted subsidiaries;

(ii) a maximum total leverage ratio as of the last date of any fiscal quarter not to exceed 3.25:1.00 for J2 and its restricted subsidiaries;

and (iii) a minimum EBITDA of not less than $50.0 million for any fiscal quarter for J2 Cloud and its restricted subsidiaries.

The Credit Agreement also contains restrictive covenants that limit, among other things, J2 Cloud’s and its restricted subsidiaries’ ability to incur additional indebtedness, create, incur or assume liens, consolidate, merge, liquidate or dissolve, pay dividends or make other distributions or other restricted payments, make or hold any investments, enter into certain transactions with affiliates, sell assets other than on terms specified by the Credit Agreement, amend the terms of certain other indebtedness and organizational documents and change their lines of business and fiscal years, in each case, subject to customary exceptions.

The Credit Agreement also sets forth customary events of default, including, among other things, the failure to make timely payments under the MUFG Credit Facility, the failure to satisfy certain covenants, cross-default and cross-acceleration to other material debt for borrowed money, the occurrence of a change of control and specified events of bankruptcy and insolvency.

The proceeds of the MUFG Credit Facility were 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.

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

Non-Income Related Taxes

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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.

The Company has 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 materially impact our financial results.

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.

The Company’s effective tax rates for 2019 , 2018 and 2017 were ( 9.7 )% , 25.2 % and 30.3 % , respectively.

The provision for income tax consisted of the following (in thousands):

Years Ended December 31,

2020 2019 2018

Federal $ 20,943 $ 23,306 $ 17,233

State 5,223 4,774 ( 617 )

Foreign 36,387 15,988 3,094

Total current 62,553 44,068 19,710

Federal ( 6,173 ) ( 1,903 ) 16,083

State 694 ( 5,620 ) 2,965

Foreign 11,319 ( 55,921 ) 6,002

Total deferred 5,840 ( 63,444 ) 25,050

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Years Ended December 31,

2020 2019 2018

Statutory tax rate 21 % 21 % 21 %

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Valuation allowance 3.7 0.2 0.2

IRC Section 199 deductions

Intra-entity tax benefit — ( 26.9 ) —

The 2017 Tax Act - provisional transition tax

Impact on deferred taxes of enacted tax law and rate changes 1.1 ( 1.3 ) 0.1

1 unchanged sentence

Unrecognized loss on intercompany sale — — 1.9

Other ( 0.5 ) ( 0.5 ) 1.9

Effective tax rates 29.7 % ( 9.7 ) % 25.2 %

The effective tax rate for the year ended December 31, 2019 differs from the federal statutory rate primarily due to a tax benefit recognized as a result of an intra-entity asset transfer.

The effective tax rate for the year ended December 31, 2020 differs from the federal statutory rate primarily due recording a valuation allowance on deferred tax assets related to realized and unrealized capital losses.

In addition, the Company recorded a net increase in the reserve for uncertain tax positions during 2020.

The effective tax rate for 2019 differs from the federal statutory rate primarily due to a tax benefit recognized as a result of an intra-entity asset transfer.

In December 2019, the Company completed an intra-entity asset transfer between two of its foreign subsidiaries as part of the reorganization of its international operating structure.

2 unchanged sentences

The effective tax rate for 2018 differs from the federal statutory rate primarily due to impacts of the jurisdictional mix of income and disallowance of certain losses and expenses.

The effective tax rate for 2017 differs from the federal statutory rate primarily as a result of the 2017 Tax Act.

Deferred tax assets and liabilities result from differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities.

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Deferred revenue 1,334 —

State taxes 5,124 3,206

Other 12,045 9,958

85,331 79,505

valuation allowance ( 8,307 ) ( 608 )

5 unchanged sentences

Convertible debt ( 65,192 ) ( 65,217 )

Other ( 2,925 ) ( 663 )

Total deferred tax liabilities ( 183,179 ) ( 126,374 )

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The deferred tax assets should be realized through future operating results and the reversal of temporary differences.

The Company had a valuation allowance on deferred tax assets of $ 8.3 million and $ 0.6 million as of December 31, 2020 and 2019, respectively.

The valuation allowance increased $ 7.7 million as a result of impairment and sales of investments that would result in a capital loss in the year of sale.

The deduction for the capital losses would be limited to other capital gains recognized during the year.

As of December 31, 2020, the Company had federal net operating loss carryforwards (“NOLs”) of $ 60.2 million, after considering substantial restrictions on the utilization of these NOLs due to “ownership changes”, as defined in the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”).

2 unchanged sentences

The NOLs for losses incurred after January 1, 2018 of $ 0.5 million have an indefinite carryforward period.

Additionally, the Company has foreign NOLs of $ 5.8 million as of December 31, 2020 in various foreign jurisdictions which generally have an indefinite carryforward period.

As of December 31, 2020 and 2019, the Company had no foreign tax credit carryforward.

In addition, as of December 31, 2019 and 2018 , the Company had state research and development tax credits of $ 3.2 million and $ 4.6 million , respectively, which last indefinitely.

In addition, as of December 31, 2020 and 2019, the Company had state research and development tax credits of $ 9.1 million and $ 3.2 million, respectively, which can be carried forward indefinitely.

The Company has not provided deferred taxes on approximately $ 454.5 million of undistributed earnings from foreign subsidiaries as of December 31, 2020.

We have not provided any additional deferred taxes with respect to items such as foreign withholding taxes, state income tax or foreign exchange gain or loss that would be due when cash is actually repatriated to the U.S.

The Company has not provided any additional deferred taxes with respect to items such as foreign withholding taxes, state income tax or foreign exchange gain or loss that would be due when cash is actually repatriated to the U.S.

because those foreign earnings are considered permanently reinvested in the business or may be remitted substantially free of any additional taxes.

1 unchanged sentence

Certain tax payments are prepaid during the year and included within prepaid expenses and other current assets on the Consolidated Balance Sheet.

The Company’s prepaid tax payments were $ 3.7 million and zero at December 31, 2019 and 2018 , respectively.

The Company’s prepaid tax payments were $ 3.0 million and $ 3.7 million at December 31, 2020 and 2019, respectively.

Income before income taxes included income from domestic operations of $ 47.3 million, $ 81.6 million and $ 19.9 million for the years ended December 31, 2020, 2019 and 2018, respectively, and income from foreign operations of $ 183.1 million, $ 118.0 million and $ 157.7 million for the years ended December 31, 2020, 2019 and 2018, respectively.

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Years Ended December 31,

2020 2019 2018

Beginning balance $ 46,703 $ 51,271 $ 45,012

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Increases related to tax positions taken in the current year 4,299 4,069 3,751

Settlements ( 5,627 ) ( 5,831 ) —

Decreases related to expiration of statute of limitations — ( 650 ) —

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As of December 31, 2020, 2019 and 2018, the total amount of interest and penalties accrued was $ 8.1 million, $ 5.8 million and $ 8.4 million, respectively, which is classified as a liability for uncertain tax positions on the Consolidated Balance Sheets.

In connection with tax matters, the Company recognized interest and penalty (benefit) expense in 2019 , 2018 and 2017 of $( 1.8 ) million , $ 1.2 million and $ 2.1 million , respectively.

In connection with tax matters, the Company recognized interest and penalty expense (benefit) in 2020, 2019 and 2018 of $ 2.3 million, $( 1.8 ) million and $ 1.2 million, respectively.

Uncertain income tax positions are reasonably possible to significantly change during the next 12 months as a result of completion of income tax audits and expiration of statutes of limitations.

At this point it is not possible to provide an estimate of the amount, if any, of significant changes in reserves for uncertain income tax positions as a result of the completion of income tax audits that are reasonably possible to occur in the next 12 months.

In addition, the Company cannot currently estimate the amount of, if any, uncertain income tax positions which will be released in the next 12 months as a result of expiration of statutes of limitations due to ongoing audits.

In addition, the Company cannot currently estimate the

amount of, if any, uncertain income tax positions which will be released in the next 12 months as a result of expiration of statutes of limitations due to ongoing audits.

As a result of ongoing federal, state and foreign income tax audits (discussed below), it is reasonably possible that the Company’s entire reserve for uncertain income tax positions for the periods under audit will be released.

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In August 2018, the FTB notified the Company that it will commence an audit of tax years 2015 and 2016.

As of December 31, 2019, the audit is ongoing.

As of December 31, 2020, the audits are ongoing.

In June 2019, the New York State Department of Taxation and Finance (“NYS”) notified the Company that it will commence an audit for tax year 2015.

In September 2019, the Company was notified by the French Tax Authorities that the audit of the 2011 to 2016 tax years has been concluded with no adjustments.

In April 2020, the NYS notified the Company that it will also commence an audit for tax years 2016 and 2017.

As of December 31, 2020, the audits are ongoing.

It is reasonably possible that these audits may conclude in the next 12 months and that the uncertain tax positions the Company has recorded in relation to these tax years may change compared to the liabilities recorded for these periods.

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The exchange right associated with the vested shares of the J2 Series B Stock is exercisable during specified exchange periods at an exchange ratio of 31.8094 shares of J2 common stock per share of J2 Series B Stock (the “Series B Exchange Ratio”).

Holders of vested J2 Series B Stock exercised this exchange right which resulted in the issuance of zero and 10,530 shares of J2 common stock during fiscal years 2019 and 2018 , respectively.

Holders of vested J2 Series B Stock exercised this exchange right which resulted in the issuance of zero , zero and 10,530 shares of J2 common stock during fiscal years 2020, 2019, and 2018 respectively.

In connection with the exercise of the exchange right and the resulting extinguishment of the J2 Series A Stock, the Company recorded the difference between the carrying value of the Series A and the fair value of the J2 common stock exchanged within retained earnings as a preferred stock dividend.

In connection with the exercise of the exchange right associated with J2 Series B Stock, the Company recognized incremental fair value in the amount of $6.3 million and recorded additional share-based compensation in the amount of zero and $1.9 million for the years ended December 31, 2019 and 2018 , respectively.

In connection with the exercise of the exchange right associated with J2 Series B Stock, the Company recognized incremental fair value in the amount of $ 6.3 million and recorded additional share-based compensation in the amount of zero , zero and $ 1.9 million for the years ended December 31, 2020, 2019 and 2018, respectively.

As of December 31, 2018, all incremental fair value associated with the exchange right of J2 Series B Stock had been recognized.

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Common 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 J2 Global common stock through February 20, 2013 (the “2012 Program”) which was subsequently extended through February 20, 2021 (see Note 22 - Subsequent Events).

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.

In November 2018 and May 2019, the Company entered into a Rule 10b5-1 trading plan with a broker to facilitate the repurchase program.

600,000 shares were repurchased under the share repurchase program in 2018 at an aggregate cost of $ 42.5 million and were subsequently retired in March 2019.

During the year ended December 31, 2019 , the Company repurchased 197,870 shares under this program at an aggregate cost of $ 16.0 million which were subsequently retired in the same year.

No shares were repurchased under the share repurchase program for the year ended December 31, 2017.

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 a result of the Company’s share repurchase program, the number of shares available for purchase under the 2012 Program is 1,140,819 shares of J2 Global common stock available for purchase under this program.

600,000 shares were repurchased in 2018 at an aggregate cost of $ 42.5 million and were subsequently retired in March 2019.

During the year ended December 31, 2019, the Company repurchased 197,870 shares at an aggregate cost of $ 16.0 million which were subsequently retired in the same year.

During the year ended December 31, 2020, the Company repurchased 1,140,819 shares at an aggregate cost of $ 87.5 million which were subsequently retired in the same year.

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 entered into a Rule 10b5-1 trading plan and 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.

Periodically, participants in J2 Global’s stock plans surrender to the Company shares of J2 Global stock to pay the exercise price or to satisfy tax withholding obligations arising upon the exercise of stock options or the vesting of restricted stock.

During the year ended December 31, 2020, the Company purchased 111,451 shares from plan participants for this purpose.

The following is a summary of each dividend declared during fiscal year 2019 and 2018 :

Declaration Date

Dividend per Common Share

February 2, 2018

February 22, 2018

March 9, 2018

August 8, 2018

August 20, 2018

September 4, 2018

October 29, 2018

November 19, 2018

December 5, 2018

February 6, 2019

February 25, 2019

March 12, 2019

The following is a summary of each dividend declared during fiscal year 2019:

Declaration Date Dividend per Common Share Record Date Payment Date

February 6, 2019 $ 0.4450 February 25, 2019 March 12, 2019

May 2, 2019 $ 0.4550 May 20, 2019 June 4, 2019

Future dividends are subject to Board approval.

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Stock Options and Employee Stock Purchase Plan

J2 Global’s share-based compensation plans include the 2007 Stock Plan, the 2015 Stock Plan and the 2001 Employee Stock Purchase Plan.

J2 Global’s share-based compensation plans include the 2015 Stock Plan and the 2001 Employee Stock Purchase Plan.

Each plan is described below.

The 2007 Stock Option Plan and the 2015 Stock Option Plan

In October 2007, J2 Global’s Board of Directors adopted the J2 Global, Inc.

2007 Stock Option Plan (the “2007 Plan”).

The 2007 Plan provides for the granting of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units and other share-based awards.

The number of authorized shares of common stock that may be used for 2007 Plan purposes is 4,500,000 .

Options under the 2007 Plan may be granted at exercise prices determined by the Board of Directors, provided that the exercise prices shall not be less than the fair market value of J2 Global’s common stock on the date of grant for incentive stock options and not less than 85 % of the fair market value of J2 Global’s common stock on the date of grant for non-statutory stock options.

The 2007 Plan terminated on February 14, 2017.

(a) The 2015 Stock Option Plan

In May 2015, J2 Global’s Board of Directors adopted the J2 Global, Inc.

2015 Stock Option Plan (the “2015 Plan”).

The 2015 Plan provides for the grant of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance share units and other share-based awards and is intended as a successor plan to the 2007 Stock Plan since no further grants will be made under the 2007 Stock Plan.

4,200,000 shares of common

stock are authorized to be used for 2015 Plan purposes.

4,200,000 shares of

common stock are authorized to be used for 2015 Plan purposes.

Options under the 2015 Plan may be granted at exercise prices determined by the Board of Directors, provided that the exercise prices shall not be less than the higher of the par value or 100 % of the fair market value of J2 Global’s common stock subject to the option on the date the option is granted.

At December 31, 2019 , 2018 and 2017 , options to purchase 163,741 , 298,577 and 361,875 shares of common stock were exercisable under and outside of the 2015 Plan and the 2007 Plan combined, at weighted average exercise prices of $ 45.94 , $ 32.15 , and $ 29.92 , respectively.

At December 31, 2020, 2019 and 2018, options to purchase 175,601 , 163,741 and 298,577 shares of common stock were exercisable under and outside of the 2015 Plan, at weighted average exercise prices of $ 60.35 , $ 45.94 , and $ 32.15 , respectively.

Stock options generally expire after 10 years and vest over a 5-year period.

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Stock option activity for the years ended December 31, 2020, 2019 and 2018 is summarized as follows:

Number of Shares

Weighted-Average

Number of Shares Weighted-Average

Exercise Price

Weighted-Average Remaining Contractual Life (In Years)

Weighted-Average Remaining Contractual Life (In Years) Aggregate Intrinsic Value

Options outstanding at January 1, 2018 375,675 $ 31.30

Granted 400,000 75.03

Exercised ( 67,898 ) 22.68

Options outstanding at December 31, 2018 707,777 $ 56.84

Exercised ( 189,436 ) 32.39

Options outstanding at December 31, 2019 518,341 $ 65.77

Exercised ( 42,740 ) 23.11

Options outstanding at December 31, 2020 475,601 $ 69.61 6.2 $ 13,355,721

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Vested and expected to vest at December 31, 2020 393,281 $ 68.47 6.0 $ 11,490,350

For the years ended December 31, 2019 , 2018 and 2017 , J2 Global granted zero , 400,000 and zero options, respectively, to purchase shares of common stock pursuant to the 2015 Plan.

For the years ended December 31, 2020, 2019 and 2018, J2 Global granted zero , zero and 400,000 options, respectively, to purchase shares of common stock pursuant to the 2015 Plan.

These stock options vest 20 % per year and expire 10 years from the date of grant.

The per share weighted-average grant-date fair values of stock options granted during the period ended December 31, 2018 was $ 19.39 .

There were no stock options granted during the years 2019 and 2017.

The total intrinsic values of options exercised during the years ended December 31, 2020, 2019 and 2018 was $ 3.0 million, $ 10.4 million, and $ 3.8 million, respectively.

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Cash received from options exercised under all share-based payment arrangements for the years ended December 31, 2020, 2019 and 2018 was $ 1.6 million, $ 5.3 million and $ 1.5 million, respectively.

The actual tax benefit realized for the tax deductions from option exercises under the share-based payment arrangements totaled $ 2.4 million , $ 0.9 million and $ 0.7 million , respectively, for the years ended December 31, 2019 , 2018 and 2017 .

The actual tax benefit realized for the tax deductions from option exercises under the share-based payment arrangements totaled $ 0.7 million, $ 2.4 million and $ 0.9 million, respectively, for the years ended December 31, 2020, 2019 and 2018, respectively.

The following table summarizes information concerning outstanding and exercisable options as of December 31, 2020:

Options Outstanding

Exercisable Options

Exercise Prices

Number Outstanding December 31, 2019

Options Outstanding Exercisable Options

Exercise Prices Number Outstanding December 31, 2020 Weighted

$ 29.34 45,351 0.36 years $ 29.34 45,351 $ 29.34

29.53 7,250 1.17 years 29.53 7,250 29.53

67.35 23,000 4.35 years 67.35 23,000 67.35

75.03 400,000 7.00 years 75.03 100,000 75.03

$ 29.34 - $ 75.03

475,601 6.15 years $ 69.61 175,601 $ 60.35

As discussed in Note 14, “Stockholders’ Equity”, the Company provided holders of J2 Series B Stock an exchange right in which J2 Series B Stock may be exchanged for J2 common stock during specified exchange periods.

The Company determined that such exchange right represents a grant under the 2007 Plan for the year ended December 31, 2014, and accordingly, reduced the awards available under the 2007 Plan.

At December 31, 2019 , there were 2,196,968 additional shares underlying options, shares of restricted stock and other share-based awards available for grant under the 2015 Plan, and no additional shares are available for grant under or outside of the 2007 Plan.

At December 31, 2020, there were 2,019,350 additional shares underlying options, shares of restricted stock and other share-based awards available for grant under the 2015 Plan.

The Company recognized $ 0.9 million, $ 0.9 million and $ 0.9 million of compensation expense related to stock options for the years ended December 31, 2020, 2019 and 2018, respectively.

As of December 31, 2019 , there was $ 6.8 million of total unrecognized compensation expense related to nonvested share-based compensation options granted under the 2015 Plan and the 2007 Plan.

As of December 31, 2020, there was $ 5.8 million of total unrecognized compensation expense related to nonvested share-based compensation options granted under the 2015 Plan.

That expense is expected to be recognized ratably over a weighted average period of 5.00 years (i.e., the remaining requisite service period).

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The expected volatility is based on historical volatility of the Company’s common stock.

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

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

The risk-free interest rate is based on U.S.

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Years ended December 31,

2020 2019 2018

Risk-free interest rate — % — % 2.4 %

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Restricted Stock and Restricted Stock Units

J2 Global has awarded restricted stock and restricted stock units to its Board of Directors and senior staff pursuant to the 2007 Plan and the 2015 Plan.

J2 Global has awarded restricted stock and restricted stock units to its Board of Directors and senior staff pursuant to the 2015 Plan.

Compensation expense resulting from restricted stock and restricted unit grants is measured at fair value on the date of grant and is recognized as share-based compensation expense over the applicable vesting period.

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The Company granted 129,786 , 117,566 and 376,799 shares of restricted stock and restricted units (excluding awards with market conditions below) during the years ended December 31, 2020, 2019 and 2018, respectively.

On May 7, 2020, the Board of Directors approved the contract modification of an insignificant number of shares of restricted stock awards whereby selected participants waived their right to receive dividends with respect to outstanding and unvested restricted shares under their restricted stock agreements.

There was no incremental compensation cost as a result of the modification.

Restricted Stock - Awards with Market Conditions

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The weighted-average fair values of market-based restricted stock awards granted have been estimated utilizing the following assumptions:

December 31, 2019

December 31, 2018

December 31, 2017

December 31, 2020 December 31, 2019 December 31, 2018

Underlying stock price at valuation date $ 91.17 $ 84.58 $ 82.11

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The actual tax benefit realized for the tax deductions from the vesting of restricted stock awards and units totaled $ 2.1 million, $ 2.4 million and $ 2.4 million, respectively, for the years ended December 31, 2020, 2019 and 2018.

In accordance with ASC 718, share-based compensation is recognized on dividends paid related to nonvested restricted stock not expected to vest, which amounted to approximately $ 0.1 million , $ 0.1 million and $ 0.1 million for the years ended December 31, 2019 , 2018 , and 2017 , respectively.

Share-based compensation is recognized on dividends paid related to nonvested restricted stock not expected to vest, which amounted to approximately zero , $ 0.1 million and $ 0.1 million for the years ended December 31, 2020, 2019, and 2018, respectively.

Restricted stock award activity for the years ended December 31, 2020, 2019 and 2018 is set forth below:

Weighted-Average

Shares Weighted-Average

Nonvested at January 1, 2018 605,566 $ 51.57

Granted 830,256 63.55

Vested ( 157,972 ) 61.29

Canceled ( 70,839 ) 74.84

Nonvested at December 31, 2018 1,207,011 $ 64.82

Granted 187,773 79.00

Vested ( 172,884 ) 73.65

Canceled ( 116,841 ) 72.58

Nonvested at December 31, 2019 1,105,059 $ 64.76

Granted 1,268 98.63

Vested ( 264,172 ) 70.25

Canceled ( 21,589 ) 79.34

Nonvested at December 31, 2020 820,566 $ 62.66

Restricted stock unit activity for the years ended December 31, 2020, 2019 and 2018 is set forth below:

Weighted-Average

Life (in Years)

Shares Weighted-Average

Life (in Years) Aggregate

Outstanding at January 1, 2018 38,400

Granted 20,044

Vested ( 11,540 )

Canceled ( 5,673 )

Outstanding at December 31, 2018 41,231

Granted 3,844

Vested ( 12,343 )

Canceled ( 11,858 )

Outstanding at December 31, 2019 20,874

Granted 210,630

Vested ( 9,029 )

Canceled ( 12,691 )

Outstanding at December 31, 2020 209,784 3.5 $ 20,493,799

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2001 Employee Stock Purchase Plan, as amended (the “Purchase Plan”), which provides for the issuance of a maximum of 2,000,000 shares of common stock.

Under the Purchase Plan, eligible employees can have up to 15 % of their earnings withheld, up to certain maximums, to be used to purchase shares of J2 Global’s common stock at certain plan-defined dates.

Under the Purchase Plan, eligible employees can have up to 15 % of their earnings withheld, up to certain maximums, to be used to purchase shares

of J2 Global’s common stock at certain plan-defined dates.

The price of the common stock purchased under the Purchase Plan for the offering periods is equal to 95 % of the fair market value of the common stock at the end of the offering period.

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The compensation cost is recognized on a straight-line basis over the requisite service period.

The Company recognized $ 1.3 million , $ 0.7 million and zero of compensation expense related to the Purchase Plan for the years ended December 31, 2019 , 2018 and 2017 , respectively.

The Company recognized $ 2.0 million, $ 1.3 million and $ 0.7 million of compensation expense related to the Purchase Plan for the years ended December 31, 2020, 2019 and 2018, respectively.

The Company used the Black-Scholes option pricing model to calculate the estimated fair value of the purchase right issued under the ESPP.

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The Company uses an annualized dividend yield based upon the per share dividends declared by its Board of Directors.

Estimated forfeiture rates were 5.80 % , 1.96 % and zero as of December 31, 2019 , 2018 , and 2017 , respectively.

Estimated forfeiture rates were 11.15 %, 5.80 % and 1.96 % as of December 31, 2020, 2019, and 2018, respectively.

During 2020, 2019 and 2018, 118,629 , 66,413 and 33,262 shares, respectively were purchased under the Purchase Plan at price ranging from $ 61.51 to $ 62.82 per share during 2020.

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The Company may make annual contributions at its sole discretion to these plans.

For the years ended December 31, 2019 , 2018 and 2017 , the Company incurred expenses of $ 3.7 million , $ 3.6 million and $ 3.0 million , respectively, for contributions to these 401(k) Savings Plans.

For the years ended December 31, 2020, 2019 and 2018, the Company made contributions of $ 3.5 million, $ 3.7 million and $ 3.6 million, respectively, to these 401(k) Savings Plans.

Earnings Per Share

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Years Ended December 31,

2020 2019 2018

Numerator for basic and diluted net income per common share:

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common shareholders $ 150,668 $ 218,806 $ 128,687

Net income available to participating securities (a)

Net income available to participating securities (1)

( 632 ) ( 3,496 ) ( 1,885 )

Net income available to J2 Global, Inc.

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Equity incentive plans 25,232 78,076 146,906

Convertible debt (b)

Convertible debt (2)

788,454 1,300,211 830,139

Common stock and common stock equivalents 47,122,511 49,025,684 48,927,791

Net income per share:

Basic $ 3.24 $ 4.52 $ 2.64

Diluted $ 3.18 $ 4.39 $ 2.59

(1) Represents unvested share-based payment awards that contain certain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid).

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Segment Information

In accordance with ASC Topic 280, Segment Reporting:

(Topic 280), the Company’s businesses are based on the organizational structure used by the chief operating decision maker (“CODM”) for making operating and investment decisions and for assessing performance.

The Company’s businesses are based on the organizational structure used by the chief operating decision maker (“CODM”) for making operating and investment decisions and for assessing performance.

The CODM views the Company as two businesses:

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and Cloak Holdings, LLC acquisition in the second quarter of 2019 (see Note 4 - Business Acquisitions), the Company renamed its Voice, Backup and Security reportable segment to include its newly acquired consumer privacy and protection business, now the Voice, Backup, Security and Consumer Privacy and Protection segment.

The Company’s 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

The Company’s 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.

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

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Years Ended December 31,

2020 2019 2018

Revenue by reportable segment:

Fax and Martech (1)

$ 386,276 $ 378,444 $ 360,479

Voice, Backup, Security, and CPP (1)

292,185 283,391 237,496

Cloud Services Total 678,461 661,835 597,975

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Fax and Martech (1)

320,714 318,677 311,534

Voice, Backup, Security, and CPP (1)

203,486 198,888 164,287

Cloud Services Total 524,200 517,565 475,821

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Fax and Martech (1)(4)

116,923 119,574 125,963

Voice, Backup, Security, and CPP (1)(4)

158,074 150,451 113,666

Cloud Services Total 274,997 270,025 239,629

Digital Media (4)

594,807 540,193 483,167

Elimination of inter-segment direct costs ( 229 ) ( 300 ) ( 60 )

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Corporate (2)

53,625 47,733 39,205

Total direct costs (3)

923,200 857,651 761,941

Operating income by reportable segment:

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Corporate (2)

( 53,672 ) ( 47,725 ) ( 39,200 )

Total income from operations $ 334,611 $ 277,080 $ 244,280

(1) The Company reclassified certain intercompany revenue and expenses in 2019 and 2018 for Cloud Services in order to better align with a stand-alone presentation.

(2) Corporate includes costs associated with general and administrative and other expenses that are managed on a global basis and that are not directly attributable to any particular segment.

In addition, in fiscal year 2018, the Company determined certain patent assets and related income and expenses associated with Advanced Messaging Technologies, Inc.

should be reclassified from Cloud Services to Corporate.

(3) Direct costs for each segment include other operating expenses that are directly attributable to the segment, such as employee compensation expense, local sales and marketing expenses, engineering and network operations expense, depreciation and amortization and other administrative expenses.

(4) Table above has been recast to remove the impact of certain expenses associated with the Corporate entity that were previously allocated to the Cloud Services and Digital Media businesses.

The CODM does not use Balance Sheet and Cash Flow information in connection with operating and investment decisions other than as presented for Cloud Services and Digital Media.

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Corporate 103,536 477,853

Total assets $ 3,665,331 $ 3,505,846

2020 2019 2018

Capital expenditures:

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Total depreciation and amortization $ 228,737 $ 232,032 $ 187,174

(1) In fiscal year 2018, the Company determined certain patent assets and related income and expenses associated with Advanced Messaging Technologies, Inc.

should be reclassified from Cloud Services to Corporate.

J2 Global maintains operations in the U.S., Canada, Ireland, Japan and other countries.

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Years ended December 31,

2020 2019 2018

United States $ 1,215,281 $ 1,100,298 $ 924,051

Canada 70,073 67,518 73,742

Ireland 55,917 59,009 69,291

All other countries 148,322 145,229 140,211

Total $ 1,489,593 $ 1,372,054 $ 1,207,295

2020 December 31,

Long-lived assets:

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All other countries 54,073 76,927

Total $ 972,198 $ 778,507

Supplemental Cash Flows Information

Cash paid for interest during the years ended December 31, 2019 , 2018 and 2017 was $ 55.4 million , $ 54.0 million and $ 35.8 million , respectively, substantially all of which related to interest on outstanding debt and foreign taxes.

Cash paid for interest on outstanding debt during the years ended December 31, 2020, 2019 and 2018 was $ 106.0 million, $ 55.4 million and $ 54.0 million, respectively, which is the primary contributor for total cash paid for interest.

Cash paid for income taxes net of refunds received was $ 45.0 million, $ 45.9 million and $ 37.6 million during the years ended December 31, 2020, 2019 and 2018, respectively.

During the years ended December 31, 2020, 2019 and 2018, J2 Global recorded the tax benefit from the exercise of stock options and restricted stock as a reduction of its income tax liability of $ 2.9 million, $ 4.8 million and $ 3.3 million, respectively.

In the first quarter of 2020, in a non-cash transaction of $ 18.3 million, the Company exchanged shares of redeemable preferred stock that were previously classified as available-for-sale corporate debt securities for a new series of preferred stock, classified as equity securities without a readily determinable fair value (see Note 5 - Investments).

Accumulated Other Comprehensive Income

The following table summarizes the changes in accumulated balances of other comprehensive loss (income), net of tax, for the years ended December 31, 2020, 2019, and 2018 (in thousands):

Unrealized Gains (Losses) on Investments

Foreign Currency Translation

Unrealized Gains (Losses) on Investments Foreign Currency Translation Total

Balance as of January 1, 2018 $ — $ ( 29,090 ) $ ( 29,090 )

Other comprehensive income before reclassifications

Net current period other comprehensive income

Balance as of December 31, 2017

Other comprehensive loss before reclassifications ( 1,418 ) ( 15,471 ) ( 16,889 )

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Balance as of December 31, 2019 $ ( 275 ) $ ( 46,187 ) $ ( 46,462 )

There were zero reclassifications out of accumulated other comprehensive loss (income) for the years ended December 31, 2019 , 2018 , and 2017 .

Other comprehensive income (loss) before reclassifications 558 ( 8,902 ) ( 8,344 )

Net current period other comprehensive income (loss) 558 ( 8,902 ) ( 8,344 )

Balance as of December 31, 2020 $ 283 $ ( 55,089 ) $ ( 54,806 )

The following table provides details about reclassifications out of accumulated other comprehensive loss for the years ended December 31, 2020, 2019, and 2018.

Details about Accumulated Other Comprehensive Loss Components Amount Reclassified from Accumulated Other Comprehensive Loss Affected Line Item in the Statements of Operations

For the years ending December 31,

2020 2019 2018

Unrealized loss on available-for-sale investments $ 698 $ — $ — Loss on investments, net

698 — — Income before income taxes

— — — Income tax expense

Total reclassifications for the period $ 698 $ — $ — Net Income

Quarterly Results (unaudited)

The following tables contain selected unaudited statement of income information for each quarter of 2019 and 2018 (in thousands, except share and per share data).

The following tables contain selected unaudited Statements of Operations information for each quarter of 2020 and 2019 (in thousands, except share and per share data).

J2 Global believes that the following information reflects all normal recurring adjustments necessary for a fair presentation of the information for the periods presented.

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Year Ended December 31, 2020

Net income (1)

Revenues $ 469,240 $ 356,976 $ 330,984 $ 332,393

Gross profit 409,213 301,154 274,182 273,262

58,088 60,883 38,101 ( 6,404 )

Net income per common share:

Basic $ 1.30 $ 1.31 $ 0.81 $ ( 0.13 )

Diluted $ 1.27 $ 1.31 $ 0.80 $ ( 0.13 )

Weighted average shares outstanding

Basic 44,504,222 46,279,515 46,850,944 47,620,774

Diluted 45,642,292 46,309,072 47,437,555 47,620,774

Year Ended December 31, 2019

Revenues $ 405,588 $ 344,141 $ 322,432 $ 299,893

Gross profit 341,260 282,425 262,166 248,880

Net income (1)

123,023 30,745 32,589 32,449

Net income per common share:

Basic $ 2.54 $ 0.63 $ 0.67 $ 0.67

Diluted $ 2.45 $ 0.62 $ 0.66 $ 0.66

Weighted average shares outstanding

Basic 47,626,833 47,673,211 47,727,786 47,560,749

Diluted 49,425,395 49,064,272 49,102,879 48,509,181

(1) The increase in the Company’s net income in the fourth quarter of 2019 is primarily driven by the tax benefit recognized as a result of an intra-entity asset transfer (see Note 13 - Income Taxes).

Subsequent Events

On February 10, 2020, the Company announced that it extended the Company’s share repurchase program set to expire February 20, 2020 by an additional year.

In February 2021, the Company committed to a plan to sell certain Voice assets in the United Kingdom as they were determined to be non-core assets.

Such assets are recorded within the Voice, Backup, Security, and CPP reportable segment.

On February 9, 2021, in a cash transaction, the Company completed the sale of these assets.

Also in February 2021, the Company’s Board of Directors approved the exploration of strategic alternatives for the Company’s B2B Backup business.

Changes In And Disagreements With Accountants On Accounting And Financial Disclosure

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 8. Financial Statements and Supplementary Data