What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-05-10 compared with 2020-11-09 · 378 added, 429 removed, 893 unchanged (47% of the section changed)

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(Unaudited, in thousands except share and per share data)

September 30, 2020 December 31, 2019

March 31, 2021 December 31, 2020

Cash and cash equivalents $ 371,971 $ 242,652

Short-term investments 663 663

Accounts receivable, net of allowances of $ 17,971 and $ 16,018 , respectively

1 unchanged sentence

Prepaid expenses and other current assets 52,386 53,909

Current assets held for sale 8,063 —

Total current assets 675,503 622,843

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Other assets 16,993 17,027

Noncurrent assets held for sale 127,591 —

TOTAL ASSETS $ 3,703,657 $ 3,665,331

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Other current liabilities 41 497

Current liabilities held for sale 9,502 —

Total current liabilities 867,534 882,557

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Other long-term liabilities 32,953 44,463

Noncurrent liabilities held for sale 12,813 —

TOTAL LIABILITIES 2,428,746 2,454,313

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Authorized 95,000,000 ;

total issued and outstanding 44,767,341 and 47,654,929 shares at September 30, 2020 and December 31, 2019, respectively.

total issued and outstanding 44,489,399 and 44,346,630 shares at March 31, 2021 and December 31, 2020, respectively.

Additional paid-in capital 455,625 456,274

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Three Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

Total revenues $ 398,185 $ 332,393

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Other (income) expense, net ( 622 ) 6,876

Income before income taxes and net loss (income) in earnings of equity method investment 85,922 41,224 152,390 113,508

Income before income taxes and (income) loss from equity method investment, net 59,377 6,568

Income tax expense 5,725 8,703

Net loss (income) in earnings of equity method investment 709 3,481 10,799 ( 126 )

Net income $ 60,883 $ 30,745 $ 92,580 $ 95,783

Net income per common share:

(Income) loss from equity method investment, net ( 24,270 ) 4,269

Net income (loss) $ 77,922 $ ( 6,404 )

Net income (loss) per common share:

Basic $ 1.75 $ ( 0.13 )

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AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited, in thousands)

Three Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

Net income $ 60,883 $ 30,745 $ 92,580 $ 95,783

Net income (loss) $ 77,922 $ ( 6,404 )

Other comprehensive loss, net of tax:

Foreign currency translation adjustment ( 8,424 ) ( 8,714 )

Change in fair value on available-for-sale investments, net of tax expense of $ 141 and $ 314 for the three and nine months ended September 30, 2020, respectively, and zero and $ 184 for the three and nine months ended September 30, 2019, respectively.

Change in fair value on available-for-sale investments, net of tax expense of zero for the three months ended March 31, 2021 and 2020, respectively.

Other comprehensive loss, net of tax ( 8,424 ) ( 8,006 )

Comprehensive income $ 57,689 $ 22,579 $ 81,048 $ 87,489

Comprehensive income (loss) $ 69,498 $ ( 14,410 )

See Notes to Condensed Consolidated Financial Statements

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(Unaudited, in thousands)

Nine Months Ended

September 30,

Three Months Ended

Cash flows from operating activities:

Net income $ 92,580 $ 95,783

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

Net income (loss) $ 77,922 $ ( 6,404 )

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation and amortization 65,492 53,980

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Gain on sale of businesses ( 1,979 ) —

Lease asset impairments and other charges 9,786 —

Lease asset impairments 1,086 —

Changes in fair value of contingent consideration 510 ( 240 )

Foreign currency remeasurement gain 655 7,801

Loss (income) on equity method investments 10,799 ( 166 )

(Income) loss from equity method investments ( 24,270 ) 4,269

Loss on equity and debt investments — 20,826

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Cash flows from investing activities:

Distribution from equity method investment — 10,288

Purchases of equity method investment ( 8,064 ) ( 22,840 )

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Purchases of property and equipment ( 26,269 ) ( 26,885 )

Acquisition of businesses, net of cash received ( 27,156 ) ( 411,349 )

Proceeds from sale of businesses 24,353 —

Proceeds from sale of assets — 226

Acquisition of businesses, net of cash received 385 ( 18,701 )

Proceeds from sale of businesses, net of cash divested 5,999 —

Purchases of intangible assets ( 8 ) ( 19 )

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Cash flows from financing activities:

Payment of note payable ( 400 ) ( 5,100 )

Proceeds from line of credit — 185,000

Repayment of line of credit — ( 57,000 )

Repurchase of common stock ( 12,179 ) ( 62,966 )

Issuance of common stock under employee stock purchase plan 3,303 1,995

Exercise of stock options 444 952

Dividends paid — ( 43,966 )

Deferred payments for acquisitions ( 7,853 ) ( 15,503 )

Other ( 551 ) ( 839 )

Net cash (used in) provided by financing activities ( 256,854 ) 46,852

Net cash used in financing activities ( 20,139 ) ( 78,356 )

Effect of exchange rate changes on cash and cash equivalents ( 310 ) ( 3,679 )

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CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Three and Nine Months Ended September 30, 2019 and 2020

Three Months Ended March 31, 2020 and 2021

(unaudited, in thousands, except share amounts)

Common stock Additional paid-in Treasury stock Retained other comprehensive Total Stockholders’

Shares Amount capital Shares Amount earnings loss Equity

Balance, July 1, 2019 47,765,869 $ 478 $ 365,687 — $ — $ 752,040 $ ( 46,107 ) $ 1,072,098

Net income — — — — — 30,745 — 30,745

Other comprehensive income, net of tax expense of zero

— — — — — — ( 8,166 ) ( 8,166 )

Vested restricted stock 26,989 — — — — — — —

Repurchase and retirement of common stock ( 206,923 ) ( 2 ) ( 2,160 ) — — ( 14,593 ) — ( 16,755 )

Share based compensation — — 6,446 — — — — 6,446

Balance, September 30, 2019 47,585,935 $ 476 $ 369,973 — $ — $ 768,192 $ ( 54,273 ) $ 1,084,368

Common stock Additional paid-in Treasury stock Retained other comprehensive Total Stockholders’

Shares Amount capital Shares Amount earnings loss Equity

Balance, July 1, 2020 46,892,691 $ 469 $ 467,267 — $ — $ 850,232 $ ( 54,800 ) $ 1,263,168

Net income — — — — — 60,883 — 60,883

Other comprehensive income, net of tax expense of $ 141

— — — — — — ( 3,194 ) ( 3,194 )

Vested restricted stock 19,893 — — — — — — —

Repurchase and retirement of common stock ( 2,145,243 ) ( 21 ) ( 21,442 ) — — ( 128,973 ) — ( 150,436 )

Share based compensation — — 5,800 — — — — 5,800

Other, net — — 116 — — — — 116

Balance, September 30, 2020 44,767,341 $ 448 $ 451,741 — $ — $ 782,142 $ ( 57,994 ) $ 1,176,337

Common stock Additional

paid-in Treasury stock Retained other comprehensive Total

paid-in Retained other comprehensive Total

Stockholders’

Shares Amount capital Shares Amount earnings loss Equity

Shares Amount capital earnings loss Equity

Balance, January 1, 2020 47,654,929 $ 476 $ 465,652 $ 891,526 $ ( 46,462 ) $ 1,311,192

Net income — — — — — 95,783 — 95,783

Other comprehensive income, net of tax expense of $ 184

— — — — — — ( 8,294 ) ( 8,294 )

Dividends ($ 0.9000 per share)

Net loss — — — ( 6,404 ) — ( 6,404 )

Other comprehensive income, net of tax expense of zero

— — — — ( 8,006 ) ( 8,006 )

Exercise of stock options 41,530 — 1,583 ( 631 ) — 952

Issuance of shares under employee stock purchase plan 32,154 — 1,995 — — — — 1,995

Vested restricted stock 177,496 2 ( 2 ) — — —

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Share based compensation — — 6,313 — — 6,313

Balance, September 30, 2019 47,585,935 $ 476 $ 369,973 — $ — $ 768,192 $ ( 54,273 ) $ 1,084,368

Balance, March 31, 2020 47,113,423 $ 471 $ 462,430 $ 832,648 $ ( 54,468 ) $ 1,241,081

Common stock Additional

paid-in Treasury stock Retained other comprehensive Total

paid-in Retained other comprehensive Total

Stockholders’

Shares Amount capital Shares Amount earnings loss Equity

Shares Amount capital earnings loss Equity

Balance, January 1, 2021 44,346,630 $ 443 $ 456,274 $ 809,107 $ ( 54,806 ) $ 1,211,018

Net income — — — 77,922 — 77,922

Other comprehensive income, net of tax expense of $ 314

Other comprehensive income, net of tax expense of zero

— — — — ( 8,424 ) ( 8,424 )

Exercise of stock options 15,117 — 444 — — 444

Issuance of shares under employee stock purchase plan 53,694 — 3,303 — — — — 3,303

Exercise of 3.25 % Convertible Note

— — ( 12 ) — — — — ( 12 )

Vested restricted stock 235,939 2 ( 2 ) — — —

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Other, net — — 17 — — 17

Balance, September 30, 2020 44,767,341 $ 448 $ 451,741 — $ — $ 782,142 $ ( 57,994 ) $ 1,176,337

Balance, March 31, 2021 44,489,399 $ 445 $ 455,625 $ 882,071 $ ( 63,230 ) $ 1,274,911

See Notes to Condensed Consolidated Financial Statements

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

MARCH 31, 2021

Basis of Presentation

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”), and healthcare 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.

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

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

The accompanying interim Condensed Consolidated Financial Statements include the accounts of J2 Global and its direct and indirect wholly-owned subsidiaries.

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The results of operations for this interim period are not necessarily indicative of the operating results for the full year or for any future period.

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 creating increasing volatility and overall uncertainty.

The Company began to experience modest adverse impacts of the COVID-19 pandemic in the second quarter of 2020 and these adverse impacts are expected to continue in the fourth quarter of 2020, and possibly longer.

Despite the modest adverse impacts, there are no indications that the COVID-19 pandemic has resulted in a material decline in the carrying value of assets, (except for equity method investments), or a material change in the estimate of any contingent amounts, recorded in the Company’s Condensed Consolidated Balance Sheet as of September 30, 2020.

However, there is uncertainty as to the full extent, duration and overall impact of the COVID-19 pandemic, which could result in an adverse material change in a future period to the Company’s results of operations, financial position or liquidity.

Use of Estimates

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On an ongoing basis, management evaluates its estimates based on historical experience and on various other factors that the Company believes to be reasonable under the circumstances.

Actual results could materially differ from those estimates.

Additionally, 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 Condensed Consolidated Financial Statements could be materially affected.

Actual results could materially differ from those estimates due to risks and uncertainties, including uncertainty in the current economic environment due to the novel coronavirus pandemic (“COVID-19”).

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.

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

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 Condensed 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.

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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.

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 Condensed 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.

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

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).

Variable Interest Entities (“VIE”)

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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.

In the third quarter of 2020, the Company recorded impairment of certain operating right-of-use assets and associated property and equipment.

(see Note 10 - Leases).

No impairment was recorded in the third quarter of 2019.

In the first quarter of 2021, the Company recorded impairment of certain operating right-of-use assets (see Note 10 - Leases).

No impairment was recorded in the first quarter of 2020.

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

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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.

J2 Global applies the acquisition method of accounting for business combinations in accordance with GAAP and uses estimates and judgments to allocate the purchase price paid for acquisitions to the fair value of the assets, including identifiable intangible assets, and liabilities acquired.

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

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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 1 to 20 years and are included in general and administrative expenses on the Condensed Consolidated Statements of Operations.

The Company evaluates its 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 annually for impairment 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 addition, the COVID-19 pandemic could have an adverse impact on the Company’s consolidated financial results in the fourth quarter of 2020, and possibly longer.

As of September 30, 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 COVID-19 related impairments were recorded in the third quarter of 2020 or 2019.

No impairments to goodwill or other intangible assets were recorded in the first quarter of 2021 or 2020.

In 2021, the Company changed the annual goodwill impairment assessment date for the Cloud Services business from September 30 to October 1, as it determined this date is preferable, and concluded this was not a material change in accounting principal.

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 records the estimated fair value of contingent consideration as a liability on the Condensed 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 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).

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Significant increases or decreases to these inputs in isolation would result in a significantly higher or lower liability with a higher liability capped by the contractual maximum of the contingent earn-out obligation.

Ultimately, the liability will be equivalent to the amount paid, and the difference between the fair value estimate and the amount paid will be recorded in earnings.

The amount paid that is less than or equal to the liability on the acquisition date is reflected as cash used in financing activities in its consolidated statements of cash flows.

Ultimately, the

liability will be equivalent to the amount paid, and the difference between the fair value estimate and the amount paid will be recorded in earnings.

The amount paid that is less than or equal to the liability on the acquisition date is reflected as cash used in financing activities in its Condensed Consolidated Statements of Cash Flows.

Any amount paid in excess of the liability on the acquisition date is reflected as cash used in operating activities.

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 quarterly amounts.

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

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

Changes in the estimated fair value of its contingent earn-out liabilities are reported in general and administrative expenses on the Condensed Consolidated Statements of Operations.

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

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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 operations.

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

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

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, increased limitations on qualified charitable contributions 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 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 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 seek to borrow any funds under the program.

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

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 the Company’s financial statements.

The Company does 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.

As further guidance is released regarding the CARES Act, we will record adjustments to our tax balances, as necessary.

Share-Based Compensation

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These inputs are subjective and are determined using management’s judgment.

If differences arise between the assumptions used in determining share-based

compensation expense and the actual factors, which become known over time, J2 Global may change the input factors used in determining future share-based compensation expense.

If differences arise between the assumptions used in determining share-based compensation expense and the actual factors, which become known over time, J2 Global may change the input factors used in determining future share-based compensation expense.

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

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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 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.

The Company adopted this ASU in the first quarter of 2021 and has identified no material effect on its financial statements or disclosures.

In January 2020, the FASB issued ASU No.

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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.

The Company adopted this ASU in the first quarter of 2021 and has identified no effect on its financial statements or disclosures.

In March 2020, the FASB issued ASU No.

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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 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.

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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.

The Company adopted this ASU in the first quarter of 2021 and has identified no effect on its financial statements or disclosures.

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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The Company records revenue on a gross basis with respect to revenue generated (i) by the Company serving online display and video advertising across its owned and operated web properties, on third-party sites or on unaffiliated advertising networks, (ii) through the Company’s lead-generation business and (iii) through the Company’s subscriptions.

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

The Company records revenue on a net basis with respect to revenue paid to the Company by certain third-party advertising networks who

serve online display and video advertising across the Company’s owned-and-operated web properties and certain third-party sites.

Cloud Services

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Three Months Ended

September 30, Nine Months Ended

September 30,

Digital Media 2021 2020

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Subscription $ 171,337 $ 169,748

Other 15 192 69 871

Total Cloud Services revenues $ 171,429 $ 169,784

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Total $ 398,185 $ 332,393

The Company has recorded $ 29.0 million and $ 20.5 million of revenue for the three months ended September 30, 2020 and 2019, respectively, and $ 142.5 million and $ 105.0 million of revenue for the nine months ended September 30, 2020 and 2019, respectively, which was previously included in the contract liability balance as of the beginning of each respective year.

As of September 30, 2020, the Company acquired $ 2.4 million of deferred revenue in connection with the Company’s business acquisitions (see Note 4 - Business Acquisitions) which are subject to purchase accounting adjustments.

The Company has recorded $ 78.8 million and $ 68.5 million of revenue for the three months ended March 31, 2021 and 2020, respectively, which was previously included in the deferred revenue balance as of the beginning of each respective year.

As of March 31, 2021, the Company acquired no deferred revenue in connection with the Company’s business acquisitions (see Note 4 - Business Acquisitions) which are subject to purchase accounting adjustments.

Performance Obligations

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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 first nine months of fiscal 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;

and (b) other immaterial acquisitions of Digital Media and Martech businesses.

The Condensed Consolidated Statement of Operations since the date of each acquisition and balance sheet as of September 30, 2020, reflect the results of operations of all 2020 acquisitions.

For the nine months ended September 30, 2020, these acquisitions contributed $ 5.9 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 $ 39.1 million, net of cash acquired and assumed liabilities and is 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 these acquisitions (in thousands):

Assets and Liabilities Valuation

Accounts receivable $ 875

Prepaid expenses and other current assets 91

Property and equipment 53

Operating lease right of use asset 113

Trade names 1,527

Customer relationships 10,681

Goodwill 23,817

Other intangibles 5,272

Accounts payable and accrued expenses ( 373 )

Deferred revenue ( 2,390 )

Operating lease liabilities, current ( 95 )

Operating lease liabilities, non-current ( 19 )

Deferred tax liability ( 405 )

Total $ 39,147

During the nine months ended September 30, 2020, the purchase price accounting has been finalized for 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 and subject to change, which may be significant.

The Company completed an immaterial media acquisition during the first three months of fiscal 2021, paying the purchase price in cash.

The Condensed Consolidated Statement of Operations since the date of the acquisition and balance sheet as of March 31, 2021, reflect the results of operations of the 2021 acquisition.

For the three months ended March 31, 2021, this acquisition contributed an immaterial amount to the Company’s revenues.

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

Total consideration for this transaction was $ 0.2 million, net of cash acquired and assumed liabilities and is subject to certain post-closing adjustments which may increase or decrease the final consideration paid.

During the three months ended March 31, 2021, the purchase price accounting has been finalized for immaterial digital media, consumer privacy and protection, email marketing, and fax businesses.

The initial accounting for the 2021 acquisition is incomplete and subject to change.

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 nine months ended September 30, 2020, the Company recorded adjustments to the initial working capital and to the purchase accounting due to the finalization of prior period acquisitions in 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 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 increase in goodwill of $ 9.7 million (see Note 8 - Goodwill and Intangible Assets).

Such adjustments had an immaterial impact on the amortization expense within the Condensed Consolidated Statement of Operations for the nine months ended September 30, 2020.

During the three months ended March 31, 2021, 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 increase in goodwill of $ 2.5 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 Voice, Backup, Security and CPP businesses which resulted in a net increase in goodwill of $ 0.3 million (see Note 8 - Goodwill and Intangible Assets).

Such adjustments had an immaterial impact on the amortization expense within the Condensed Consolidated Statement of Operations for the three months ended March 31, 2021.

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 associated with these acquisitions during the nine months ended September 30, 2020 is $ 23.8 million, of which $ 22.6 million is expected to be deductible for income tax purposes.

Goodwill recognized associated with these acquisitions during the three months ended March 31, 2021 is zero , of which zero is expected to be deductible for income tax purposes.

Investments consist of equity and debt securities.

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

Any changes in the carrying value of the equity securities will be reported in current earnings as loss on investments, net.

Any changes in the carrying value of the equity securities will be reported in current earnings as (gain) loss on investments, net.

In addition, the Company determined that the shares of redeemable preferred stock that were also received as part of the consideration for the sale of 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 has had an adverse impact on the global financial markets.

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Cost Impairment Adjustments Reported Amount

September 30, 2020

March 31, 2021

Equity securities $ 31,779 $ — $ ( 479 ) $ 31,300

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

In March 2020, a portion of the Company’s investment in equity securities declined in value primarily due to changes in the investee’s capital structure and overall market volatility.

During the three and nine months ended September 30, 2020, the Company recorded zero and $ 19.6 million of impairment loss on equity securities, respectively, which is reflected in loss on investments, net in the Condensed Consolidated Statements of Operations.

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, net in the Condensed Consolidated Statements of Operations.

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.

During the three and nine months ended September 30, 2020, the Company recognized a loss on exchange of zero and $ 4.4 million, respectively, which is reflected in loss on investments, net in the Condensed Consolidated Statements of Operations.

At September 30, 2020, the Company held preferred stock, which was purchased for $ 0.8 million in the first quarter of 2020.

During the three and nine months ended September 30, 2020, the Company recognized a gain of zero and $ 3.2 million, respectively, which is reflected in loss on investments, net in the Condensed Consolidated Statements of Operations.

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

At March 31, 2021, cumulative impairment losses on these securities were $ 23.8 million.

Impairment losses are recorded in loss on investments, net on the Condensed Consolidated Statements of Operations.

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

September 30, 2020

March 31, 2021

Corporate debt securities $ 511 $ 152 $ — $ 663

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Total $ 511 $ 152 $ — $ 663

At September 30, 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.

At March 31, 2021, 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):

September 30, 2020 December 31, 2019

March 31, 2021 December 31, 2020

Due within 1 year $ 663 $ 663

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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 though an allowance for credit losses rather than a reduction in amortized cost basis of the securities.

These changes will result in earlier recognition of credit losses.

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

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

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

The following table presents gross unrealized losses and fair values for those investments that were in an unrealized loss position as of December 31, 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 September 30, 2020.

As of December 31, 2019

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 )

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

As of September 30, 2020 and December 31, 2019, we did not recognize any credit losses related to debt securities.

There were no investments in an unrealized loss position as of March 31, 2021 or December 31, 2020.

As of March 31, 2021 and December 31, 2020, the Company did not recognize any credit losses related to 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 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.

life science industries.

The general activities of the OCV Fund is to buy, sell, hold and otherwise invest in securities of every kind and nature and rights and options with respect thereto, including, without limitation, stock, notes, bonds, debentures and evidence of indebtedness;

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

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

for $ 31.0 million, inclusive of certain management fees, of which $ 30.0 million has been paid for the nine months ended September 30, 2020.

In the first nine months of 2019, the Company received capital call notices from the management of OCV Management, LLC.

for $ 22.3 million, inclusive of certain management fees, of which $ 22.3 million had been paid for the nine months ended September 30, 2019.

During the nine months ended September 30, 2020 and 2019, the Company received distributions from OCV of zero and $ 10.3 million, respectively.

In the first three months of 2021, the Company received capital call notices from the management of OCV Management, LLC for $ 7.1 million, inclusive of certain management fees.

Of the outstanding balance, $ 8.1 million has been paid for the three months ended March 31, 2021.

In the first three months of 2020, the Company received capital call notices from the management of OCV Management, LLC for $ 22.8 million, inclusive of certain management fees, of which $ 22.8 million had been paid for the three months ended March 31, 2020.

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 three months ended September 30, 2020 and 2019, the Company recognized an investment loss (gain) of $ 0.7 million and $ 3.5 million, net of tax benefit (expense), respectively, and during the nine months ended September 30, 2020 and 2019, the Company recognized an investment loss (gain) of $ 10.8 million and $( 0.1 ) million, 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 $ 3.8 million, net of tax benefit.

The loss is presented in the Company’s Condensed Consolidated Statement of Operations as net loss (income) in earnings of equity method investment.

During the three months ended September 30, 2020 and 2019, the Company recognized management fees of $ 0.8 million and $ 0.8 million, net of tax benefit, respectively, and for the nine months ended September 30, 2020 and 2019, the Company recognized management fees of $ 2.3 million and $ 2.3 million, net of tax benefit, respectively.

During the three months ended March 31, 2021 and 2020, the Company recognized an investment (gain) loss of $( 24.3 ) million and $ 4.3 million, net of tax (expense) benefit, respectively.

The first quarter 2021 gain was primarily a result of a gain on the underlying investments.

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

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

The loss is presented in the Company’s Condensed Consolidated Statement of Operations as (income) loss from equity method investment, net.

During the three months ended March 31, 2021 and 2020, the Company recognized management fees of $ 0.8 million and $ 0.8 million, net of tax benefit, respectively.

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

September 30, 2020 December 31, 2019

March 31, 2021 December 31, 2020

Equity method investment $ 107,403 $ 67,195

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Assets Held For Sale

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.

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

On February 9, 2021, in a cash transaction, the Company sold the assets for a gain of $ 2.0 million which was recorded in gain on sale of businesses on the Condensed Consolidated Statement of Operations.

The Company classifies asset held for sale when management approves and commits to a formal plan of sale with the expectation the sale will be completed within one year.

The net assets of the business held for sale are then recorded at the lower of their current carrying value or the fair market value, less costs to sell.

During the first quarter of 2021, the Company committed to a plan to sell its B2B Backup business as it was determined to be a non-core business.

The business is recorded within the Voice, Backup, Security, and CPP reportable segment.

The following table presents information related to the assets and liabilities that were classified as held for sale in our Condensed Consolidated Balance Sheet (in thousands):

March 31, 2021

Accounts receivable, net $ 6,394

Prepaid expenses and other current assets 1,669

Property and equipment, net 9,280

Operating lease right-of-use assets 15,150

Trade names, net 3,886

Customer relationships, net 8,201

Goodwill 86,389

Other purchased intangibles, net 775

Deferred income taxes, noncurrent 3,814

Other assets 96

Total assets held for sale $ 135,654

Accounts payable and accrued expenses $ 3,670

Deferred revenue, current 2,749

Operating lease liabilities, current 2,648

Other current liabilities 435

Deferred revenue, noncurrent 7

Operating lease liabilities, noncurrent 12,566

Other long-term liabilities 240

Total liabilities held for sale $ 22,315

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.

The fair value of the Company’s debt instruments at March 31, 2021 and December 31, 2020 was $ 2.1 billion and $ 2.0 billion, respectively (see Note 9 - Debt).

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 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 the Company’s debt instruments at September 30, 2020 and December 31, 2019 was $ 1.6 billion and $ 1.8 billion, respectively (see Note 9 - Debt).

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 on 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.

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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 March 31, 2021.

Valuation Technique Unobservable Input Range Weighted Average

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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):

September 30, 2020 Level 1 Level 2 Level 3 Fair Value

March 31, 2021 Level 1 Level 2 Level 3 Fair Value Carrying Value

Cash equivalents:

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Contingent consideration $ — $ — $ 9,530 $ 9,530 $ 9,530

Debt 2,091,518 — — 2,091,518 1,586,331

Total liabilities measured at fair value $ 2,091,518 $ — $ 9,530 $ 2,101,048 $ 1,595,861

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

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

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

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Contingent consideration payments ( 72 ) Not applicable

Balance as of September 30, 2020 $ 8,352

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 approximately zero and $ 20.0 million at September 30, 2020 and December 31, 2019, respectively.

Due to the Company’s achievement of certain EBITDA targets for the years ended December 31, 2019 and 2018 and the amended contingent consideration agreement, $ 20.0 million was paid in the first nine months of 2020 and $ 20.0 million in fiscal 2019.

In connection with the Company’s other acquisition activity, contingent consideration of up to $ 22.5 million may be payable upon achieving certain future EBITDA, revenue, and/or unique visitor thresholds and had a combined fair value of $ 8.4 million and $ 8.8 million at September 30, 2020 and December 31, 2019, respectively.

Due to the achievement of certain thresholds, $ 8.3 million was paid in the first nine months of 2020.

During the nine months ended September 30, 2020, the Company recorded a decrease in the fair value of the contingent consideration of $ 0.2 million and reported such decrease in general and administrative expenses.

Balance as of March 31, 2021 $ 9,530

In connection with the Company’s acquisition activity, contingent consideration of up to $ 9.6 million may be payable upon achieving certain revenue, and/or unique visitor thresholds and had a combined fair value of $ 9.5 million and $ 9.1 million at March 31, 2021 and December 31, 2020, respectively.

Due to the achievement of certain thresholds, $ 0.1 million was paid in the first three months of 2021.

During the three months ended March 31, 2021, the Company recorded an increase in the fair value of the contingent consideration of $ 0.5 million and reported such increase in general and administrative expenses.

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.

The changes in carrying amounts of goodwill for the nine months ended September 30, 2020 are as follows (in thousands):

The changes in carrying amounts of goodwill for the three months ended March 31, 2021 are as follows (in thousands):

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

Balance as of January 1, 2021 $ 425,471 $ 499,025 $ 924,496 $ 942,934 $ 1,867,430

Goodwill acquired (Note 4) 21,950 — 21,950 1,867 23,817

Goodwill written off related to sale of a business (1)

— ( 1,339 ) ( 1,339 ) — ( 1,339 )

Goodwill reclassified to noncurrent assets held for sale (2)

— ( 86,389 ) ( 86,389 ) — ( 86,389 )

Purchase accounting adjustments (3)

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Foreign exchange translation ( 2,923 ) ( 1,635 ) ( 4,558 ) ( 189 ) ( 4,747 )

Balance as of September 30, 2020 $ 421,964 $ 472,845 $ 894,809 $ 766,737 $ 1,661,546

(1) 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 in connection with this sale (see Note 6 - Assets Held for Sale).

Balance as of March 31, 2021 $ 422,548 $ 409,916 $ 832,464 $ 945,281 $ 1,777,745

(1) On February 9, 2021, in a cash transaction, the Company sold certain of its Voice assets in the United Kingdom which resulted in $ 1.3 million of goodwill being written off in connection with this sale (see Note 6 - Assets Held for Sale).

(2) During the first quarter of 2021, the Company reclassified $ 86.4 million of goodwill to noncurrent assets held for sale in connection with certain B2B Backup assets (see Note 6 - Assets Held for Sale).

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

Intangible Assets with Indefinite Lives:

Intangible assets are summarized as of September 30, 2020 and December 31, 2019 as follows (in thousands):

September 30,

Intangible assets are summarized as of March 31, 2021 and December 31, 2020 as follows (in thousands):

2021 December 31,

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Intangible Assets Subject to Amortization:

As of September 30, 2020, intangible assets subject to amortization relate primarily to the following (in thousands):

As of March 31, 2021, intangible assets subject to amortization relate primarily to the following (in thousands):

Weighted-Average

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This pattern results in a substantial majority of the amortization expense being recognized in the first 4 to 5 years, despite the overall life of the asset.

Amortization expense, included in general and administrative expense, approximated $ 41.2 million and $ 50.4 million for the three months ended September 30, 2020 and 2019, respectively, and $ 115.6 million and $ 132.2 million for the nine months ended September 30, 2020 and 2019, respectively.

Amortization expense is estimated to approximate $ 41.9 million, $ 114.4 million, $ 68.7 million, $ 65.2 million and $ 34.3 million for the remaining three months of fiscal year 2020 through fiscal year 2024, respectively, and $ 103.4 million thereafter through the duration of the amortization period.

Amortization expense, included in general and administrative expense, approximated $ 48.5 million and $ 38.8 million for the three months ended March 31, 2021 and 2020, respectively.

Amortization expense is estimated to approximate $ 136.1 million, $ 134.7 million, $ 106.2 million, $ 77.7 million and $ 65.3 million for the remaining nine months of fiscal year 2021 through fiscal year 2025, respectively, and $ 137.8 million thereafter through the duration of the amortization period.

The Company’s debt as of March 31, 2021 and December 31, 2020 consists of the following (in thousands):

March 31, 2021 December 31, 2020

4.625 % Senior Notes

On June 27, 2017, J2 Cloud Services, LLC (“J2 Cloud”) and J2 Cloud Co-Obligor (the “Co-Issuer” and together with J2 Cloud, the “Issuers”), wholly-owned subsidiaries of the Company, completed the issuance and sale of $ 650 million aggregate principal amount of their 6.0 % senior notes due in 2025 (the “ 6.0 % Senior Notes”) in a private placement offering exempt from the registration requirements of the Securities Act of 1933.

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 Sheet as of September 30, 2020.

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.

The indenture pursuant to which the 6.0 % Senior Notes was issued (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;

(vi) transferring and selling assets.

These covenants include certain exceptions.

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 September 30, 2020, restrict J2 Cloud’s ability to pay dividends to J2 Global, Inc.

The Company is in compliance with its debt covenants as of September 30, 2020.

As of September 30, 2020 and December 31, 2019, the estimated fair value of the 6.0 % Senior Notes was approximately $ 676.2 million and $ 689.8 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).

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

A portion of the proceeds were deposited with the trustee under the Indenture in an amount sufficient to fund the redemption of the outstanding aggregate principal amount of the 6.0 % Senior Notes and to pay the redemption premium due in respect of such redemption and accrued and unpaid interest to, but excluding, the redemption date, which will be December 7, 2020 (see Note 18 - Subsequent Events).

In connection with that deposit, the Indenture restrictive covenants described above ceased to apply.

$ 750,000 $ 750,000

Convertible Notes:

3.25 % Convertible Notes

402,413 402,414

1.75 % Convertible Notes

550,000 550,000

Total Notes 1,702,413 1,702,414

Paycheck Protection Program Loan 910 910

Unamortized discount ( 106,411 ) ( 112,798 )

Deferred issuance costs ( 10,581 ) ( 11,505 )

Total debt 1,586,331 1,579,021

current portion ( 399,893 ) ( 396,801 )

Total long-term debt, less current portion $ 1,186,438 $ 1,182,220

4.625 % Senior Notes

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 March 31, 2021.

The net proceeds were used to redeem all of its outstanding 6.0 % Senior Notes due in 2025 and, remaining net proceeds were available 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 have 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 exceeding 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 March 31, 2021.

As of March 31, 2021 and December 31, 2020, the estimated fair value of the 4.625 % Senior Notes was approximately $ 760.3 million and $ 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).

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”).

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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.

During the first quarter of 2021, the last reported sale price of the Company’s common stock exceeded 130 % of the conversion price for at least 20 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 holders during the quarter beginning April 1, 2021 and ending June 30, 2021.

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 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 holders during the quarter beginning January 1, 2021 and ending March 31, 2021.

Since the Company intended to settle the principal amount in cash, the net carrying amount of the 3.25 % Convertible Notes was classified within current liabilities on the Condensed Consolidated Balance Sheet as of December 31, 2019.

During the third quarter of 2020, the last reported sale price of the Company’s common stock did not meet the conversion price threshold requirements of the 3.25 % Convertible Notes and, accordingly, the 3.25 % Convertible Notes are not currently convertible at the option of the holders.

As of September 30, 2020, the conversion rate is 14.7632 shares of J2 Global common stock for each $1,000 principal amount of 3.25 % Convertible Notes, which represents a conversion price of approximately $ 67.74 per share of J2 Global common stock.

As of March 31, 2021, the conversion rate is 14.7632 shares of J2 Global common stock for each $1,000 principal amount of 3.25 % Convertible Notes, which represents a conversion price of approximately $ 67.74 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 3.25 % Convertible Notes, but will not be adjusted for accrued interest.

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No sinking fund is provided for the 3.25 % Convertible Notes.

Holders have the right to require J2 Global to repurchase for cash all or part of their 3.25 % Convertible Notes on each of June 15, 2021 and June 15, 2024 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 relevant repurchase date.

to be repurchased, plus accrued and unpaid interest to, but excluding, the relevant repurchase date.

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 was classified within current liabilities on the Condensed Consolidated Balance Sheet as of September 30, 2020.

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

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The aggregate debt discount is amortized as interest expense over the period from the issuance date through the first stated repurchase date on June 15, 2021, which management believes is the expected life of the 3.25 % Convertible Notes using an interest rate of 5.81 %.

As of September 30, 2020, the remaining period over which the unamortized debt discount will be amortized is 0.7 years.

As of March 31, 2021, the remaining period over which the unamortized debt discount will be amortized is 0.2 years.

The 3.25 % Convertible Notes are carried at face value less any unamortized debt discount and debt issuance costs.

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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 September 30, 2020 and December 31, 2019, the estimated fair value of the 3.25 % Convertible Notes was approximately $ 461.0 million and $ 583.6 million, respectively.

As of March 31, 2021 and December 31, 2020, the estimated fair value of the 3.25 % Convertible Notes was approximately $ 682.0 million and $ 593.1 million, respectively.

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.

A portion of the net proceeds were used to pay off all amounts outstanding under the Credit Facility (see Note 11 - Commitments and Contingencies).

A portion of the net proceeds were used to pay off all amounts outstanding under the then-existing Credit Facility.

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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(ii) during the five business day period following any 10 consecutive trading day period in which the trading price per $1,000 principal amount of 1.75 % Convertible Notes for each trading day of the measurement period was less than 98 % of the product of the last reported sale price of J2 Global common stock and the applicable conversion rate on each such trading day;

or (iii) upon the occurrence of specified corporate events.

upon the occurrence of specified corporate events.

On or after July 1, 2026, and prior to the close of business on the business day immediately preceding the maturity date, holders may convert all or any portion of their notes at any time, regardless of the foregoing circumstances.

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.

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.

During the third quarter of 2020 and the fourth quarter of 2019, the last reported sale price of the Company’s common stock did not meet the conversion price threshold requirements of the 1.75 % Convertible Notes.

During the first quarter of 2021 and the fourth quarter of 2020, the last reported sale price of the Company’s common stock did not meet the conversion price threshold requirements of the 1.75 % Convertible Notes.

Therefore, the net carrying amount of the 1.75 % Convertible Notes is classified as long-term debt on the Condensed Consolidated Balance Sheets.

As of September 30, 2020, 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 an conversion price of approximately $ 125.21 per share of J2 Global common stock.

As of March 31, 2021, 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 an 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.

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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 6.0 % 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 then-existing 6.0 % Senior Notes due 2025.

Accounting for the 1.75 % Convertible Notes

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The aggregate debt discount is amortized as interest expense over the period from the issuance date through the maturity date of November 1, 2026, which management believes is the expected life of the 1.75 % Convertible Notes using an interest rate of 5.5 %.

As of September 30, 2020, the remaining period over which the unamortized debt discount will be amortized is 6.1 years.

As of March 31, 2021, the remaining period over which the unamortized debt discount will be amortized is 5.6 years.

In connection with the issuance of the 1.75 % Convertible Notes, the Company incurred $ 12.9 million of deferred issuance costs, which primarily consisted of the underwriters’ discount, legal and other professional service fees.

Of the total deferred issuance costs incurred, $ 10.1 million of such deferred issuance costs were attributable to the liability component and are recorded within other assets and are being amortized to interest expense through the maturity date.

The unamortized balance, as of September 30, 2020, was $ 9.2 million.

The unamortized balance, as of March 31, 2021, was $ 8.6 million.

The remaining $ 2.8 million of the deferred issuance costs were netted with the equity component in additional paid-in capital at the issuance date.

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The fair value of the 1.75 % Convertible Notes at each balance sheet date is determined based on recent quoted market prices or dealer quotes for the 1.75 % Convertible Notes, which are Level 1 inputs (see Note 7 - Fair Value Measurements).

As of September 30, 2020 and December 31, 2019, the estimated fair value of the 1.75 % Convertible Notes was approximately $ 490.2 million and $ 559.6 million, respectively.

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 March 31, 2021 and December 31, 2020, the estimated fair value of the 1.75 % Convertible Notes was approximately $ 648.3 million and $ 569.7 million, respectively.

Credit Facility

During the nine months ended September 30, 2020, the Company did not draw down any amounts under its Credit Facility.

The Company has capitalized a total of $ 0.4 million in debt issuance costs, which are being amortized to interest expense over the life of the Credit Facility.

As of September 30, 2020, these debt issuance costs, net of amortization, were $ 0.2 million.

The related interest expense was zero and $ 1.1 million for the three months ended September 30, 2020 and 2019, respectively, and was zero and $ 2.3 million for the nine months ended September 30, 2020 and 2019, respectively.

See Note 11, “Commitments and Contingencies” for additional information.

Long-term debt as of September 30, 2020 and December 31, 2019 consists of the following (in thousands):

September 30, 2020 December 31, 2019

6.0 % Senior Notes

$ 650,000 $ 650,000

Convertible Notes:

3.25 % Convertible Notes

402,414 402,500

1.75 % Convertible Notes

550,000 550,000

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

Unamortized discount 120,910 139,981

Deferred issuance costs 12,453 14,058

Total long-term debt 1,469,051 1,448,461

current portion 393,980 385,532

Total long-term debt, less current portion $ 1,075,071 $ 1,062,929

On April 7, 2021, the Company entered into a $ 100 million Credit Agreement (the “Credit Agreement”) (see Note 18 - Subsequent Events).

Subject to customary conditions, J2 may, from time to time, request increases in the commitments under the Credit Agreement in an aggregate amount up to $ 250 million, for a total aggregate commitment of up to $ 350 million.

The final maturity of the Credit Facility will occur on April 7, 2026.

Paycheck Protection Program Loan

Through the 2020 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.

As of March 31, 2021 and 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 the third quarter of 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.

The Company recorded a non-cash impairment charge of $ 9.8 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 Condensed Consolidated Statements of Operations .

No impairment was recorded in the third quarter of 2019.

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.

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Three Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

Operating lease cost $ 7,023 $ 7,104

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Supplemental balance sheet information related to leases was as follows (in thousands):

September 30, 2020 December 31, 2019

March 31, 2021 December 31, 2020

Operating leases

Operating lease right-of-use assets $ 85,342 $ 105,845

Operating lease right-of-use assets classified as assets held for sale 15,150 —

Total operating lease right-of-use assets $ 100,492 $ 105,845

Operating lease liabilities, current $ 30,330 $ 32,211

Operating lease liabilities, current classified as assets held for sale 2,648 —

Operating lease liabilities, noncurrent 80,465 99,177

Operating lease liabilities, noncurrent classified as assets held for sale 12,566 —

Total operating lease liabilities $ 126,009 $ 131,388

Supplemental cash flow information related to leases was as follows (in thousands):

Nine Months Ended

September 30,

Three Months Ended

Cash paid for amounts included in the measurement of lease liabilities:

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Other supplemental operating lease information consists of the following:

September 30, 2020 December 31, 2019

March 31, 2021 December 31, 2020

Operating leases:

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Weighted average discount rate 3.94 % 3.93 %

Maturities of operating lease liabilities as of September 30, 2020 were as follows (in thousands):

Maturities of operating lease liabilities as of March 31, 2021 were as follows (in thousands):

Operating Leases

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Present value of operating lease liabilities $ 126,009

Total sublease income for the three months ended September 30, 2020 and 2019 was $ 0.4 million and $ 0.9 million, respectively, and was $ 2.2 million and $ 2.4 million for the nine months ended September 30, 2020 and 2019, respectively.

Total sublease income for the three months ended March 31, 2021 and 2020 was $ 0.4 million and $ 0.8 million, respectively.

Total estimated aggregate sublease income to be received in the future is $ 4.3 million.

In the second quarter of 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 Condensed 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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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 intends to defend against the lawsuit.

J2 Global has moved to dismiss the consolidated class action complaint.

The court granted the motion to dismiss and the plaintiff has filed an amended 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.

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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.

On March 24, 2021, Fritz Ringling filed a lawsuit in the District of Delaware (21-cv-00421-UNA) asserting derivative claims against directors of J2 Global, Inc.

and other third parties.

The lawsuit alleges violations of Section 14(a) of the Securities Exchange Act of 1934, as well as breach of fiduciary duty and unjust enrichment.

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 certain of 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 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”).

Pursuant to the Credit Agreement, as amended in July and August 2019, the Lenders have provided J2 Cloud Services with a credit facility of $ 200.0 million (the “Credit Facility”) through December 31, 2020.

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

The proceeds of the 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.

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

On October 7, 2020, the Company provided notice of termination of the Credit Agreement (see Note 18 - Subsequent Events).

On April 7, 2021, the Company entered into a $ 100 million Credit Agreement (see Note 18 - Subsequent Events).

The final maturity of the Credit Facility will occur on April 7, 2026.

Non-Income Related Taxes

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The Company has a $ 23.7 million reserve established for these matters.

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

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

The Company’s tax provision for interim periods is determined using an estimate of the Company’s annual effective tax rate adjusted for discrete interim period tax impacts.

Each quarter the Company updates its estimated annual effective tax rate and, if the estimate changes, makes a cumulative adjustment.

The Company’s effective tax rate was 28.3 % and 17.0 % for the three months ended September 30, 2020 and 2019, respectively, and 32.2 % and 15.7 % for the nine months ended September 30, 2020 and 2019, respectively.

The Company’s increased rate during the nine months ended September 30, 2020 is primarily a result of an increase in tax expense to establish a valuation allowance on deferred tax assets related to the impairment of certain investments.

In addition, during the nine months ended September 30, 2019, the Company had a decrease in the effective rate as a result of a reduction in its reserve for uncertain tax positions with no similar event for the nine months ended September 30, 2020.

Income before income taxes included income from domestic operations of $ 32.2 million and $ 34.6 million for the nine months ended September 30, 2020 and 2019, respectively, and income from foreign operations of $ 120.2 million and $ 78.9 million for the nine months ended September 30, 2020 and 2019, respectively.

As of September 30, 2020 and December 31, 2019, the Company had $ 60.2 million and $ 52.5 million, respectively, in liabilities for uncertain income tax positions.

The Company’s effective tax rate was 9.6 % and 132.5 % for the three months ended March 31, 2021 and 2020, respectively.

The Company’s decreased rate during the three months ended March 31, 2021 is primarily a result of a tax benefit recognized related to the release of a valuation allowance on deferred tax assets related to the impairment of certain investments.

During the three months ended March 31, 2020, the Company had an increase in the effective rate as a result of recognizing tax expense related to establishing a valuation allowance on deferred tax assets related to the impairment of certain investments.

Income (loss) before income taxes included income from domestic operations of $ 19.5 million and $( 18.9 ) million for the three months ended March 31, 2021 and 2020, respectively, and income from foreign operations of $ 39.8 million and $ 25.5 million for the three months ended March 31, 2021 and 2020, respectively.

As of March 31, 2021 and December 31, 2020, the Company had $ 58.4 million and $ 57.1 million, respectively, in liabilities for uncertain income tax positions.

Accrued interest and penalties related to unrecognized tax benefits are recognized in income tax expense on the Company’s consolidated statement of operations.

Cash paid for income taxes net of refunds received was $ 33.5 million and $ 38.2 million for the nine months ended September 30, 2020 and 2019, respectively.

Cash paid for income taxes net of refunds received was $ 7.4 million and $ 6.6 million for the three months ended March 31, 2021 and 2020, respectively.

Certain taxes are prepaid during the year and, where appropriate, included within prepaid expenses and other current assets on the Condensed Consolidated Balance Sheet.

The Company’s prepaid taxes were zero and $ 3.7 million at September 30, 2020 and December 31, 2019, respectively.

The Company’s prepaid taxes were $ 3.0 million and $ 3.0 million at March 31, 2021 and December 31, 2020, respectively.

Income Tax Audits :

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Internal Revenue Service (“IRS”) for its 2012 through 2016 tax years.

As of September 30, 2020, the audits are ongoing.

On February 24, 2021, the Company received a notice of deficiency for tax years 2012 through 2014 which disallowed certain deductions for domestic production.

The Company has 90 days to respond to the notice.

The Company disagrees with the notice and plans to appeal.

As of March 31, 2021, the audits are ongoing.

J2 Global is under income tax audit by the California Franchise Tax Board (the “FTB”) for its tax years 2012 and 2013.

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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 September 30, 2020, the audits are ongoing.

As of March 31, 2021, 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 April 2020, the NYS notified the Company that it will also commence an audit for tax years 2016 and 2017.

As of September 30, 2020, the audits are ongoing.

As of March 31, 2021, 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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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 our common stock through February 20, 2013 (the “2012 Program”) which was subsequently extended through February 20, 2021.

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

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 Rule 10b5-1 trading plans 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 nine month period ended September 30, 2020, the Company repurchased 1,140,819 shares under this program at an aggregate cost of $ 87.5 million, which were subsequently retired.

Cumulatively at September 30, 2020, 4.1 million shares were repurchased at an aggregate cost of $ 204.6 million (including an immaterial amount of commission fees).

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

As a result of the acquired shares through acquisition and the purchase of J2 Global common stock through the Company’s share repurchase program, no shares remain available for purchase under the 2012 Program.

On August 6, 2020, the Company’s Board of Directors approved a program authorizing the repurchase of up to 10 million shares of our common stock through August 6, 2025 (the “2020 Program”).

During the nine month period ended September 30, 2020, the Company repurchased 2,000,000 shares under this program at an aggregate cost of $ 141.8 million, which were subsequently retired.

Cumulatively at September 30, 2020, 2,000,000 shares were repurchased at an aggregate cost of $ 141.8 million (including an immaterial amount of commission fees).

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 three month period ended September 30, 2020, the Company purchased 4,424 shares from plan participants for this purpose.

The following is a summary of each dividend declared during fiscal year 2020 and 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

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 under this program at an aggregate cost of $ 87.5 million, which were subsequently retired in the same year.

As of December 31, 2020, all 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.

The Company entered into a Rule 10b5-1 trading plan and during the three month period ended March 31, 2021, the Company repurchased no shares under this program.

Cumulatively at March 31, 2021, 2,490,599 shares were repurchased at an aggregate cost of $ 177.8 million (including an immaterial amount of commission fees) under the 2020 Program, which were subsequently retired.

During the three month period ended March 31, 2021, the Company purchased 108,287 shares from plan participants for this purpose.

No dividends were declared in during fiscal year 2021 and 2020.

Future dividends are subject to Board approval.

Based on the significant number of current investment opportunities within the Company’s portfolio of businesses and the historic returns from prior investments, the Board of Directors suspended dividend payments for the foreseeable future after the June 4, 2019 payment.

Stock Options and Employee Stock Purchase Plan

J2 Global’s share-based compensation plans include the 2007 Stock Plan (the “2007 Plan”), 2015 Stock Option Plan (the “2015 Plan”) and 2001 Employee Stock Purchase Plan (the “Purchase Plan”).

J2 Global’s share-based compensation plans include the 2015 Stock Option Plan (the “2015 Plan”) and 2001 Employee Stock Purchase Plan (the “Purchase Plan”).

Each plan is described below.

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.

4,500,000 shares of J2 Global common stock are authorized to be used for 2007 Plan purposes.

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.

As of September 30, 2020, 53,811 shares underlying options and zero shares of restricted units were outstanding under the 2007 Plan.

The 2007 Plan terminated on February 14, 2017.

The 2015 Plan provides for the granting 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 Plan since no further grants will be made under the 2007 Plan.

4,200,000 shares of J2 Global 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.

As of September 30, 2020, 423,000 shares underlying options and 215,965 shares of restricted stock units were outstanding under the 2015 Plan.

As of March 31, 2021, 423,000 shares underlying options and 305,377 shares of restricted stock units were outstanding under the 2015 Plan.

All stock option grants are approved by “outside directors” within the meaning of Internal Revenue Code Section 162(m).

Stock Options

The following table represents stock option activity for the nine months ended September 30, 2020:

The following table represents stock option activity for the three months ended March 31, 2021:

Number of Shares Weighted-

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Exercised ( 15,117 ) 29.34

Outstanding at September 30, 2020 476,811 $ 69.51 6.4 $ 2,187,385

Exercisable at September 30, 2020 176,811 $ 60.13 4.9 $ 2,187,385

Vested and expected to vest at September 30, 2020 394,131 $ 68.35 6.2 $ 2,187,385

The total intrinsic values of options exercised during the nine months ended September 30, 2020 and 2019 were $ 3.0 million and $ 8.0 million, respectively.

The Company recognized $ 0.2 million and $ 0.2 million of compensation expense related to stock options for the three months ended September 30, 2020 and 2019, respectively, and $ 0.7 million and $ 0.7 million for the nine months ended September 30, 2020 and 2019, respectively.

As of September 30, 2020 and December 31, 2019, unrecognized stock compensation related to non-vested stock options granted under each of the share-based compensation plans approximated $ 6.1 million and $ 6.8 million, respectively.

Outstanding at March 31, 2021 460,484 $ 70.93 6.1 $ 22,531,404

Exercisable at March 31, 2021 210,484 $ 66.06 5.3 $ 11,323,904

Vested and expected to vest at March 31, 2021 387,924 $ 70.16 6.0 $ 19,278,539

The total intrinsic values of options exercised during the three months ended March 31, 2021 and 2020 were $ 1.2 million and $ 3.0 million, respectively.

The Company recognized $ 0.2 million and $ 0.2 million of compensation expense related to stock options for the three months ended March 31, 2021 and 2020, respectively.

As of March 31, 2021 and December 31, 2020, unrecognized stock compensation related to non-vested stock options granted under each of the share-based compensation plans approximated $ 5.6 million and $ 5.8 million, respectively.

Unrecognized stock compensation expense related to non-vested stock options granted under these plans is expected to be recognized ratably over a weighted-average period of 4.8 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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The Company uses an annualized dividend yield based upon the per share dividends declared by its Board of Directors.

Estimated forfeiture rates were 11.80 % and 13.21 % as of September 30, 2020 and 2019, respectively.

Estimated forfeiture rates were 12.23 % and 11.57 % as of March 31, 2021 and 2020, respectively.

Restricted Stock and Restricted Stock Units

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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.

Vesting periods are approximately one year for awards to members of the Company’s Board of Directors, five years for senior staff (excluding market-based awards discussed below) and eight years for the Chief Executive Officer.

Vesting periods are approximately one year for awards to members of the Company’s Board of Directors, four or five years for senior staff (excluding market-based awards discussed below) and eight years for the Chief Executive Officer.

Restricted Stock - Awards with Market Conditions

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Stock-based compensation expense related to an award with a market condition will be recognized over the requisite service period using the graded-vesting method regardless of whether the market condition is satisfied, provided that the requisite service period has been completed.

During the nine months ended September 30, 2020 and 2019, the Company awarded 82,112 and 74,051 market-based restricted stock awards, respectively.

The per share weighted average grant-date fair values of the market-based restricted stock awards granted during the nine months ended September 30, 2020 and 2019 were $ 70.99 and $ 69.99 , respectively.

During the three months ended March 31, 2021 and 2020, the Company awarded 73,094 and 82,112 market-based restricted stock awards, respectively.

The per share weighted average grant-date fair values of the market-based restricted stock awards granted during the three months ended March 31, 2021 and 2020 were $ 94.40 and $ 70.99 , respectively.

The weighted-average fair values of market-based restricted stock awards granted have been estimated utilizing the following assumptions:

September 30, 2020 September 30, 2019

March 31, 2021 March 31, 2020

Underlying stock price at valuation date $ 113.27 $ 91.17

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Risk-free interest rate 1.3 % 0.7 %

Restricted stock award activity for the nine months ended September 30, 2020 is set forth below:

Restricted stock award activity for the three months ended March 31, 2021 is set forth below:

Shares Weighted-Average

Nonvested at January 1, 2021 820,566 $ 62.66

Granted 1,268 98.63

Vested ( 183,604 ) 66.10

Canceled ( 480 ) 83.26

Nonvested at September 30, 2020 833,471 $ 62.91

Restricted stock unit award activity for the nine months ended September 30, 2020 is set forth below:

Nonvested at March 31, 2021 636,482 $ 61.76

Restricted stock unit award activity for the three months ended March 31, 2021 is set forth below:

Shares Weighted-Average

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Vested ( 52,335 )

Canceled ( 5,297 )

Outstanding at September 30, 2020 215,965 3.8 $ 14,949,097

Vested and expected to vest at September 30, 2020 140,841 3.1 $ 9,748,995

The Company recognized $ 5.1 million and $ 5.9 million of compensation expense related to restricted stock, restricted stock units and market-based restricted stock for the three months ended September 30, 2020 and 2019, respectively, and $ 16.4 million and $ 16.7 million for the nine months ended September 30, 2020 and 2019, respectively.

As of September 30, 2020 and December 31, 2019, the Company had unrecognized share-based compensation cost of approximately $ 44.0 million and $ 46.1 million, respectively, associated with these awards.

Outstanding at March 31, 2021 305,377 3.9 $ 36,602,487

Vested and expected to vest at March 31, 2021 193,564 3.1 $ 23,200,612

The Company recognized $ 5.3 million and $ 5.6 million of compensation expense related to restricted stock, restricted stock units and market-based restricted stock for the three months ended March 31, 2021 and 2020, respectively.

As of March 31, 2021 and December 31, 2020, the Company had unrecognized share-based compensation cost of approximately $ 48.0 million and $ 38.6 million, respectively, associated with these awards.

This cost is expected to be recognized over a weighted-average period of 3.9 years for awards and 4.7 years for units.

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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 16.50 % and 0.78 % as of September 30, 2020 and 2019, respectively.

Estimated forfeiture rates were 11.15 % and 5.80 % as of March 31, 2021 and 2020, respectively.

The increase in forfeiture rate comes as a result of the Purchase Plan being offered to all employees regardless of employment location.

For the nine months ended September 30, 2020 and 2019, 53,694 shares and 32,154 shares were purchased under the Purchase Plan, respectively.

Cash received upon the issuance of J2 Global common stock under the Purchase Plan was $ 3.3 million and $ 2.0 million for the nine months ended September 30, 2020 and 2019, respectively.

As of September 30, 2020, 1,469,874 shares were available under the Purchase Plan for future issuance.

The Company recognized $ 0.5 million and $ 0.3 million of compensation expense related to the Purchase Plan for the three months ended September 30, 2020 and 2019, respectively, and $ 1.5 million and $ 1.0 million for the nine months ended September 30, 2020 and 2019, respectively.

For the three months ended March 31, 2021 and 2020, zero shares were purchased under the Purchase Plan, respectively.

Cash received upon the issuance of J2 Global common stock under the Purchase Plan was zero for the three months ended March 31, 2021 and 2020, respectively.

As of March 31, 2021, 1,404,939 shares were available under the Purchase Plan for future issuance.

The Company recognized $ 0.6 million and $ 0.5 million of compensation expense related to the Purchase Plan for the three months ended March 31, 2021 and 2020, respectively.

The compensation expense related to the Purchase Plan has been estimated utilizing the following assumptions:

September 30, 2020 September 30, 2019

March 31, 2021 March 31, 2020

Risk-free interest rate 0.09 % 1.57 %

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Three Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

Numerator for basic and diluted net income per common share:

Net income attributable to J2 Global, Inc.

Numerator for basic and diluted net income (loss) per common share:

Net income (loss) attributable to J2 Global, Inc.

common shareholders $ 77,922 $ ( 6,404 )

Net income available to participating securities (a)

( 89 ) ( 511 ) ( 477 ) ( 1,361 )

Net income available to J2 Global, Inc.

Net income (loss) available to participating securities (a)

Net income (loss) available to J2 Global, Inc.

common shareholders $ 77,834 $ ( 6,404 )

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Dilutive effect of:

Equity incentive plans 29,557 68,413 23,211 73,906

Convertible debt (b)

— 1,322,648 682,347 1,164,290

Equity incentive plans (b)

Convertible debt (b)(c)

Common stock and common stock equivalents 46,731,872 47,620,774

Net income per share:

Net income (loss) per share:

Basic $ 1.75 $ ( 0.13 )

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(a) Represents unvested share-based payment awards that contain certain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid).

(b) Represents the incremental shares issuable upon conversion of the 3.25 % Convertible Notes due June 15, 2029 and 1.75 % Convertible Notes due November 1, 2026 by applying the treasury stock method when the average stock price exceeds the conversion price of the Convertible Notes (see Note 9 - Debt).

For the three months ended September 30, 2020 and 2019, there were 423,000 and zero options outstanding, respectively, and for the nine months ended September 30, 2020 and 2019, there were zero options outstanding, respectively, which were excluded from the computation of diluted earnings per share because the exercise prices were greater than the average market price of the common stock.

(b) For the three months ended March 31, 2020, the Company reported a net loss attributable to common shareholders.

As a result, equity incentive awards of 40,074 and incremental shares of common stock issuable upon conversion of the 3.25 % and 1.75 % Convertible Notes of 1,460,431 and zero , respectively, were excluded from the calculation of diluted EPS.

(c) Represents the incremental shares issuable upon conversion of the 3.25 % Convertible Notes due June 15, 2029 and 1.75 % Convertible Notes due November 1, 2026 by applying the treasury stock method when the average stock price exceeds the conversion price of the Convertible Notes (see Note 9 - Debt).

For the three months ended March 31, 2021 and 2020, there were zero options outstanding, respectively, which were excluded from the computation of diluted earnings per share because the exercise prices were greater than the average market price of the common stock.

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:

Cloud Services and Digital Media.

Digital Media and Cloud Services.

However, in accordance with the aggregation criteria within ASC Topic 280, J2 Global’s operating segments have been aggregated into three reportable segments:

(i) Fax and Martech (formerly Email Marketing);

(i) Digital Media;

(ii) Voice, Backup, Security, and Consumer Privacy and Protection;

and (iii) Digital Media.

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.

and (iii) Fax and Martech.

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.

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 accounting policies of the businesses are the same as those described in the Company’s Annual Report on Form 10-K filed with the SEC on March 1, 2021.

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Three Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

Revenue by reportable segment:

Digital Media $ 226,874 $ 162,691

Cloud Services

Fax and Martech 100,376 94,667

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Cloud Services Total 171,429 169,784

Digital Media 186,784 172,992 513,462 474,034

Elimination of inter-segment revenues ( 118 ) ( 83 )

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Gross profit by reportable segment:

Digital Media $ 206,081 $ 141,920

Cloud Services

Fax and Martech 83,795 82,166

1 unchanged sentence

Cloud Services Total 134,465 131,424

Digital Media 169,394 149,516 457,963 408,360

Elimination of inter-segment gross profit ( 118 ) ( 83 )

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Corporate (1)

( 11 ) 3 ( 47 ) 6

Total gross profit $ 340,363 $ 273,262

Direct costs by reportable segment (2) :

Digital Media (3)

$ 175,428 $ 133,467

Cloud Services

Fax and Martech (3)

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Cloud Services Total 71,001 72,484

Digital Media (3)

143,312 144,023 410,109 402,349

Elimination of inter-segment direct costs ( 118 ) ( 83 )

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Operating income by reportable segment:

Digital Media $ 30,653 $ 8,453

Cloud Services

Fax and Martech 52,869 52,238

1 unchanged sentence

Cloud Services Total 63,464 58,940

Digital Media 26,082 5,493 47,854 6,011

Total segment operating income 94,117 67,393

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(3) Beginning in the third quarter of 2020, certain expenses associated with the Corporate entity that were previously allocated to the Cloud Services business and the Digital Media business for shared costs incurred by the Corporate entity were no longer allocated.

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.

Accordingly, the following segment information is presented for Cloud Services and Digital Media.

September 30, 2020 December 31, 2019

Cloud Services $ 1,481,866 $ 1,466,969

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 Digital Media and Cloud Services.

Accordingly, the following segment information is presented for Digital Media and Cloud Services.

March 31, 2021 December 31, 2020

Digital Media $ 1,975,836 $ 2,088,397

Total assets from Cloud Services and Digital Media 2,932,760 3,027,993

Cloud Services (1)

1,531,624 1,473,398

Total assets from Digital Media and Cloud Services 3,507,460 3,561,795

Corporate 196,197 103,536

Total assets $ 3,703,657 $ 3,665,331

Nine Months Ended

September 30,

(1) Assets of $ 135.7 million, which were classified as held for sale, were included within Cloud Services at March 31, 2021 (see Note 6 - Assets Held For Sale).

Three Months Ended

Capital expenditures:

Cloud Services $ 27,673 $ 17,216

Digital Media $ 16,819 $ 15,637

Total capital expenditures from Cloud Services and Digital Media 71,266 49,483

Cloud Services 9,450 11,248

Total capital expenditures from Digital Media and Cloud Services 26,269 26,885

Corporate — —

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Three Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

Depreciation and amortization:

Cloud Services $ 20,524 $ 24,605 $ 58,355 $ 58,445

Digital Media $ 48,350 $ 32,556

Total depreciation and amortization from Cloud Services and Digital Media 57,175 63,595 160,126 168,512

Cloud Services 17,047 20,839

Total depreciation and amortization from Digital Media and Cloud Services 65,397 53,395

Corporate 95 585

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Three Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

United States $ 322,968 $ 270,309

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$ 398,185 $ 332,393

September 30,

2021 December 31,

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All other countries

Total $ 672,539 $ 778,507

79,287 54,073

$ 923,396 $ 972,198

(1) Long-lived assets of $ 37.3 million, which were classified as assets held for sale, were included within the schedule above at March 31, 2021.

Accumulated Other Comprehensive Income

The following table summarizes the changes in accumulated balances of other comprehensive income (loss), net of tax, for the three months ended September 30, 2020 (in thousands):

Unrealized Gains (Losses) on Investments Foreign Currency Translation Total

Beginning balance $ 270 $ ( 55,070 ) $ ( 54,800 )

Other comprehensive income (loss) 8 ( 3,202 ) ( 3,194 )

Net current period other comprehensive income (loss) 8 ( 3,202 ) ( 3,194 )

Ending balance $ 278 $ ( 58,272 ) $ ( 57,994 )

The following table summarizes the changes in accumulated balances of other comprehensive income (loss), net of tax, for the nine months ended September 30, 2020 (in thousands):

The following table summarizes the changes in accumulated balances of other comprehensive income (loss), net of tax, for the three months ended March 31, 2021 (in thousands):

Unrealized Gains (Losses) on Investments Foreign Currency Translation Total

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Ending balance $ 283 $ ( 63,513 ) $ ( 63,230 )

The following table provides details about reclassifications out of accumulated other comprehensive loss for the three and nine months ended September 30, 2020 (in thousands):

Details about Accumulated Other Comprehensive Loss Components Amount Reclassified from Accumulated Other Comprehensive Loss Affected Line Item in the Statement of Operations

Three Months Ended

September 30, 2020 Nine Months Ended

September 30, 2020

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

There were no reclassifications out of accumulated other comprehensive loss for the three months ended March 31, 2021.

Subsequent Events

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

The total redemption payment will be $ 694.6 million, including an early redemption premium of $ 29.2 million and accrued and unpaid interest of $ 15.4 million.

In addition, on October 7, 2020, the Company provided notice of termination of its Credit Agreement dated as of January 7, 2019.

On October 28, 2020, the Company announced that it had completed its acquisition of leading savings destination RetailMeNot for approximately $ 420 million from Vericast, a premier marketing solutions company.

On November 2, 2020, in a cash transaction, the Company acquired all the issued capital of Inspired eLearning, a Texas-based platform for cybersecurity awareness and compliance training.

On April 7, 2021, J2 Global, Inc.

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

Pursuant to the Credit Agreement, the Lenders have provided J2 with a revolving credit facility of $ 100 million (the “Credit Facility”).

The final maturity of the Credit Facility will occur on April 7, 2026.

On April 19, 2021, the Company announced plans to separate into two independent publicly traded companies, J2 Global, Inc.

and Consensus, through a spin-off.

The transaction is subject to certain conditions, including, among others, obtaining final approval from J2’s Board of Directors, receipt of a favorable ruling with respect to the tax-free nature of the transaction for favorable income tax purposes and the effectiveness of a registration statement on Form 10.

In connection with its announcement of the proposed transaction, the Company has announced its intention to call its 3.25 % Convertible Senior Notes due 2029 for redemption, which may be redeemed at the option of the Company beginning June 2021 on certain terms as set forth in the indenture for the 3.25 % Convertible Senior Notes.

When and if the Company calls the 3.25 % Convertible Senior Notes for redemption, it will send a redemption notice in accordance with the terms of the indenture.

On April 30, 2021, in a cash transaction, the Company acquired certain assets of DailyOM, a California-based self-help e-learning platform covering fitness, meditation, relationships, spirituality, creativity, meal plans, recipes, and yoga.

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

What changed 10-Q

Item 1. Financial Statements