ZIFF DAVIS, INC. 10-K

Item 9A. Controls and Procedures (a) Evaluation of Disclosure Controls and Procedures The Company maintains disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in the Company’s reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the principal executive officer and the principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. As of the end of the period covered by this report, J2 Global’s management, with the participation of Vivek Shah, our principal executive officer, and R. Scott Turicchi, our principal financial officer, carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon that evaluation, Mr. Shah and Mr. Turicchi concluded that these disclosure controls and procedures were effective as of the end of the period covered in this Annual Report on Form 10-K. (b) Management’s Annual Report on Internal Control Over Financial Reporting J2 Global’s management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) for J2 Global. In order to evaluate the effectiveness of internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act, management has conducted an assessment, including testing, using the criteria in Internal Control – Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) using the 2013 framework. Our system of internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Based on its assessment, management has concluded that J2 Global’s internal control over financial reporting was effective as of December 31, 2020. Management did not assess the effectiveness of internal control over financial reporting of all the 2020 acquisitions (see Note 4 - Business Acquisitions) because of the timing of these acquisitions. These acquisitions combined constituted 17.7% of total assets as of December 31, 2020 and 4.2% of revenues for the year then ended. Our internal controls over financial reporting as of December 31, 2020 have been audited by BDO USA, LLP, an independent registered public accounting firm, as stated in the attestation report which is included herein. (c) Changes in Internal Control Over Financial Reporting There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) which occurred during the fourth quarter of our fiscal year ended December 31, 2020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. -129- (d) Report of Independent Registered Public Accounting Firm REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Shareholders and Board of Directors J2 Global, Inc. Los Angeles, California Opinion on Internal Control over Financial Reporting We have audited J2 Global, Inc.’s (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 (the “COSO criteria”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of 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 and our report dated March 1, 2021, expressed an unqualified opinion thereon. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Item 9A, Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit of internal control over financial reporting in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. As indicated in the accompanying Item 9A, Management’s Annual Report on Internal Control over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of 2020 acquisitions, which are included in the consolidated balance sheets of the Company as of December 31, 2020, and the related consolidated statements of operations and comprehensive income, stockholders’ equity, and cash flows for the year then ended. These acquisitions combined constituted 17.7% of total assets as of December 31, 2020, and 4.2% of revenues for the year then ended. Management did not assess the effectiveness of internal control over financial reporting of the 2020 acquisitions because of the timing of these acquisitions. Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of the 2020 acquisitions. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to -130- permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ BDO USA, LLP Los Angeles, California March 1, 2021 -131- Item 9B. Other Information None. PART III Item 10. Directors, Executive Officers and Corporate Governance The information required by this item is incorporated by reference to the information to be set forth in our proxy statement (“2021 Proxy Statement”) for the 2021 annual meeting of stockholders to be filed with the SEC within 120 days after the end of our fiscal year ended December 31, 2020. Item 11. Executive Compensation The information required by this item is incorporated by reference to the information to be set forth in our 2021 Proxy Statement. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The information required by this item is incorporated by reference to the information to be set forth in our 2021 Proxy Statement. Item 13. Certain Relationships and Related Transactions, and Director Independence The information required by this item is incorporated by reference to the information to be set forth in our 2021 Proxy Statement. Item 14. Principal Accounting Fees and Services The information required by this item is incorporated by reference to the information to be set forth in our 2021 Proxy Statement. PART IV Item 15. Exhibits and Financial Statement Schedules (a) 1. Financial Statements. The following financial statements are filed as a part of this Annual Report on Form 10-K: Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets Consolidated Statements of Operations Consolidated Statements of Comprehensive Income Consolidated Statements of Stockholders’ Equity Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements 2. Financial Statement Schedule The following financial statement schedule is filed as part of this Annual Report on Form 10-K: Schedule II-Valuation and Qualifying Accounts All other schedules are omitted because they are not required or the required information is shown in the financial statements or notes thereto. -132- 3. Exhibits The following exhibits are filed with this Annual Report on Form 10-K or are incorporated herein by reference as indicated below (numbered in accordance with Item 601 of Regulation S-K). We shall furnish copies of exhibits for a reasonable fee (covering the expense of furnishing copies) upon request. -133- Exhibit No. Exhibit Title 3.1 Amended and Restated Certificate of Incorporation of J2 Global, Inc., dated as of June 10, 2014 (8) 3.1.1 Amendment to the Amended and Restated Certificate of Incorporation of J2 Global, Inc., dated as of September 5, 2019 (18) 3.2 Fourth Amended and Restated By-Laws (12) 4.1 Specimen of Common Stock Certificate (6) 4.2.1 Indenture, dated as of June 10, 2014 (9) 4.2.2 First Supplemental Indenture, dated as of June 17, 2014 (10) 4.3 Indenture, dated as of June 27, 2017 (14) 4.4 Indenture, dated as of November 15, 2019 (19) 4.5 Description of Registered Securities (22) 4.6 Indenture, dated as of October 7, 2020 (7) 4.7 Form of Waiver Regarding Restricted Stock Agreements (23) 10.1 J2 Global, Inc. 2007 Stock Option Plan (5) 10.2 J2 Global, Inc. 2015 Stock Option Plan (11) 10.3 Form of Restricted Stock Agreement Pursuant to J2 Global, Inc. 2015 Stock Option Plan (13) 10.4 Amended and Restated J2 Global, Inc. 2001 Employee Stock Purchase Plan (4) 10.4.1 Amendment to Amended and Restated J2 Global, Inc. 2001 Employee Stock Purchase Plan (15) 10.5 Letter Agreement, dated as of April 1, 2001, between J2 Global, Inc. and Orchard Capital Corporation (2) 10.5.1 Amendment to Letter Agreement, dated as of December 31, 2001, between J2 Global, Inc. and Orchard Capital Corporation (3) 10.6 Registration Rights Agreement, dated as of June 30, 1998, by and among JFAX Communications, Inc., the Delaware State Employees’ Retirement Fund, the Declaration of Trust for Defined Benefit Plan of ICI American Holdings Inc., the Declaration of Trust for Defined Benefit Plan of Zeneca Holdings Inc., the J.W. McConnell Family Foundation, DCJ Fund Investment Partners II, L.P., DLJ Capital Corporation, GMT Partners, LLC, Orchard/JFAX Investors, L.L.C. and DLJ Private Equity Employees Fund, L.P. (1) 10.7 Second Amended and Restated Limited Partnership Agreement, dated as of January 19, 2018, by and among OCV I GP, LLC and J2 Global, Inc. (16) 10.8 Credit Agreement, dated as of January 7, 2019, among J2 Cloud Services, LLC, MUFG Union Bank, N.A., as Administrative Agent, and MUFG Union Bank, N.A., as Sole Lead Arranger (17) 10.8.1 First Amendment to Credit Agreement, dated July 1, 2019 (20) 10.8.2 Second Amendment to Credit Agreement, dated August 16, 2019 (21) 21.1 List of subsidiaries of J2 Global, Inc. 23.1 Consent of Independent Registered Public Accounting Firm – BDO USA, LLP 31.1 Certification by Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2 Certification by Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1 Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350 101.INS XBRL Instance Document 101.SCH XBRL Taxonomy Extension Schema Document 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF XBRL Taxonomy Extension Definition Linkbase Document 101.LAB XBRL Taxonomy Extension Label Linkbase Document 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) -134- ____________________ (1) Incorporated by reference to J2 Global’s Registration Statement on Form S-1 filed with the Commission on April 16, 1999, Registration No. 333-76477. (2) Incorporated by reference to J2 Global’s Annual Report on Form 10-K/A filed with the Commission on April 30, 2001. (3) Incorporated by reference to J2 Global’s Annual Report on Form 10-K filed with the Commission on April 1, 2002. (4) Incorporated by reference to J2 Global’s Current Report on Form 8-K filed with the Commission on May 3, 2006. (5) Incorporated by reference to Exhibit A to J2 Global’s Definitive Proxy Statement on Schedule 14A filed with the Commission on September 18, 2007. (6) Incorporated by reference to J2 Global’s Current Report on Form 8-K filed with the Commission on December 7, 2011. (7) Incorporated by reference to J2 Global’s Current Report on Form 8-K filed with the Commission on October 7, 2020. (8) Incorporated by reference to J2 Global’s Current Report on Form 8-K filed with the Commission on June 10, 2014. (9) Incorporated by reference to J2 Global’s Registration Statement on Form S-3ASR filed with the Commission on June 10, 2014, Registration No. 333-196640. (10) Incorporated by reference to J2 Global’s Current Report on Form 8-K filed with the Commission on June 17, 2014. (11) Incorporated by reference to Annex A to j2 Global’s Definitive Proxy Statement on Schedule 14A filed with the Commission on March 26, 2015. (12) Incorporated by reference to J2 Global’s Current Report on Form 8-K filed with the Commission on May 11, 2020. (13) Incorporated by reference to J2 Global’s Annual Report on Form 10-K filed with the Commission on March 1, 2017. (14) Incorporated by reference to J2 Global’s Current Report on Form 8-K filed with the Commission on June 27, 2017. (15) Incorporated by reference to J2 Global’s Current Report on Form 8-K filed with the Commission on February 8, 2018. (16) Incorporated by reference to J2 Global’s Current Report on Form 10-K filed with the Commission on March 1, 2018. (17) Incorporated by reference to J2 Global’s Current Report on Form 8-K filed with the Commission on January 9, 2019. (18) Incorporated by reference to J2 Global’s Current Report on Form 8-K filed with the Commission on November 1, 2019. (19) Incorporated by reference to J2 Global’s Current Report on Form 8-K filed with the Commission on November 15, 2019. (20) Incorporated by reference to J2 Global’s Current Report on Form 8-K filed with the Commission on July 1, 2019. (21) Incorporated by reference to J2 Global’s Current Report on Form 8-K filed with the Commission on August 16, 2019. (22) Incorporated by reference to J2 Global’s Annual Report on Form 10-K filed with the Commission on March 2, 2020. (23) Incorporated by reference to J2 Global’s Current Report on Form 10-Q filed with the Commission on August 10, 2020. Item 16. Form 10-K Summary None. -135- SIGNATURE Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on March 1, 2021. J2 Global, Inc. By: /s/ VIVEK SHAH Vivek Shah Chief Executive Officer (Principal Executive Officer) -136- Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated, in each case on March 1, 2021. Signature Title /s/ VIVEK SHAH Chief Executive Officer and a Director Vivek Shah (Principal Executive Officer) /s/ R. SCOTT TURICCHI President and Chief Financial Officer R. Scott Turicchi (Principal Financial Officer) /s/ STEVE P. DUNN Chief Accounting Officer Steve P. Dunn /s/ RICHARD S. RESSLER Chairman of the Board and a Director Richard S. Ressler /s/ DOUGLAS Y. BECH Director Douglas Y. Bech /s/ SARAH FAY Director Sarah Fay /s/ JON MILLER Director Jon Miller /s/ STEPHEN ROSS Director Stephen Ross /s/ PAMELA SUTTON-WALLACE Director Pamela Sutton-Wallace /s/ SCOTT C. TAYLOR Director Scott C. Taylor /s/ WILLIAM B. KRETZMER Director William B. Kretzmer -137- SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS (In thousands) Description Balance at Beginning of Period Additions: Charged to Costs and Expenses Deductions: Write-offs (1) and recoveries Balance at End of Period Year Ended December 31, 2020: Allowance for doubtful accounts $ 12,701 $ 13,283 $ ( 9,966 ) $ 16,018 Deferred tax asset valuation allowance $ 608 $ 9,456 $ ( 1,757 ) $ 8,307 Year Ended December 31, 2019: Allowance for doubtful accounts $ 10,422 $ 13,134 $ ( 10,855 ) $ 12,701 Deferred tax asset valuation allowance $ 44 $ 595 $ ( 31 ) $ 608 Year Ended December 31, 2018: Allowance for doubtful accounts $ 8,701 $ 17,338 $ ( 15,617 ) $ 10,422 Deferred tax asset valuation allowance $ 197 $ — $ ( 153 ) $ 44 ______________________ (1) Represents specific amounts written off that were considered to be uncollectible. -138-