What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-08-09 compared with 2021-05-10 · 343 added, 255 removed, 1016 unchanged (37% of the section changed)

4 unchanged sentences

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

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

Cash and cash equivalents $ 347,857 $ 242,652

45 unchanged sentences

Authorized 95,000,000 ;

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

total issued and outstanding 44,708,236 and 44,346,630 shares at June 30, 2021 and December 31, 2020, respectively.

Additional paid-in capital 461,422 456,274

9 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2021 2020 2021 2020

Total revenues $ 429,044 $ 330,984 $ 827,228 $ 663,377

13 unchanged sentences

Gain on sale of businesses 823 — 2,802 —

Goodwill impairment on business ( 32,629 ) — ( 32,629 ) —

Loss on investments, net ( 16,677 ) ( 3 ) ( 16,677 ) ( 20,835 )

3 unchanged sentences

Income (loss) from equity method investment, net ( 5,752 ) ( 5,821 ) 18,519 ( 10,090 )

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

Net income (loss) per common share:

Net income $ 15,717 $ 38,101 $ 93,640 $ 31,697

Net income per common share:

Basic $ 0.35 $ 0.81 $ 2.10 $ 0.67

15 unchanged sentences

Three Months Ended

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

Other comprehensive loss, net of tax:

June 30, Six Months Ended

2021 2020 2021 2020

Net income $ 15,717 $ 38,101 $ 93,640 $ 31,697

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustment 3,256 ( 169 ) ( 5,168 ) ( 8,883 )

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

Change in fair value on available-for-sale investments, net of tax expense of zero for the three and six months ended June 30, 2021 and 2020, respectively.

— ( 163 ) — 545

Other comprehensive income (loss), net of tax 3,256 ( 332 ) ( 5,168 ) ( 8,338 )

Comprehensive income $ 18,973 $ 37,769 $ 88,472 $ 23,359

See Notes to Condensed Consolidated Financial Statements

3 unchanged sentences

(Unaudited, in thousands)

Three Months Ended

Six Months Ended

Cash flows from operating activities:

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

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

Net income $ 93,640 $ 31,697

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

Depreciation and amortization 130,226 104,068

6 unchanged sentences

Lease asset impairments 7,829 2,141

Goodwill impairment on business 32,629 —

Changes in fair value of contingent consideration 562 ( 232 )

15 unchanged sentences

Cash flows from investing activities:

Proceeds on sale of available-for-sale investments 663 —

Purchases of equity method investment ( 11,053 ) ( 26,523 )

3 unchanged sentences

Acquisition of businesses, net of cash received ( 89,489 ) ( 19,349 )

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

Purchases of intangible assets — ( 23 )

1 unchanged sentence

Cash flows from financing activities:

Payment of debt ( 2,802 ) —

Proceeds from line of credit 2,811 —

Repurchase of common stock ( 22,934 ) ( 88,469 )

Issuance of common stock under employee stock purchase plan 4,232 3,303

Exercise of stock options 1,331 952

10 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Three Months Ended March 31, 2020 and 2021

Three and Six Months Ended June 30, 2020 and 2021

(unaudited, in thousands, except share amounts)

3 unchanged sentences

Shares Amount capital earnings loss Equity

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

Net income (loss) — — — 38,101 — 38,101

Other comprehensive income, net of tax expense of $ 173

— — — — ( 332 ) ( 332 )

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 70,505 1 ( 1 ) — — —

Repurchase and retirement of common stock ( 344,931 ) ( 3 ) ( 4,983 ) ( 20,517 ) — ( 25,503 )

Repurchase of shares — — — — — —

Share based compensation — — 6,530 — — 6,530

Balance, June 30, 2020 46,892,691 469 $ 467,267 $ 850,232 $ ( 54,800 ) $ 1,263,168

Common stock Additional

paid-in Retained other comprehensive Total

Stockholders’

Shares Amount capital earnings loss Equity

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

Net income — — — 15,717 — 15,717

Other comprehensive income, net of tax expense of $ 0

— — — — 3,256 3,256

Exercise of stock options 30,234 — 887 — — 887

Issuance of shares under employee stock purchase plan 58,145 1 4,231 — — 4,232

Exercise of 3.25 % Convertible Note

19,033 — — — — —

Vested restricted stock 198,579 2 ( 2 ) — — —

Repurchase and retirement of common stock ( 87,155 ) ( 1 ) ( 5,570 ) ( 5,183 ) — ( 10,754 )

Share based compensation — — 6,251 — — 6,251

Balance, June 30, 2021 44,708,235 $ 447 $ 461,422 $ 892,605 $ ( 59,974 ) $ 1,294,500

Common stock Additional

paid-in Retained other comprehensive Total

Stockholders’

Shares Amount capital earnings loss Equity

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

Net loss — — — ( 6,404 ) — ( 6,404 )

Other comprehensive income, net of tax expense of zero

Net income — — — 31,697 — 31,697

Other comprehensive income, net of tax expense of $ 0

— — — — ( 8,338 ) ( 8,338 )

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

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

Vested restricted stock 248,001 3 ( 3 ) — — —

Exercise of 3.25 % Convertible Note

— — ( 12 ) — — ( 12 )

Repurchase and retirement of common stock ( 1,105,463 ) ( 10 ) ( 16,099 ) ( 72,360 ) — ( 88,469 )

Share based compensation — — 12,843 — — 12,843

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

Balance, June 30, 2020 46,892,691 $ 469 $ 467,267 $ 850,232 $ ( 54,800 ) $ 1,263,168

Common stock Additional

4 unchanged sentences

Net income — — — 93,640 — 93,640

Other comprehensive income, net of tax expense of zero

Other comprehensive income, net of tax expense of $ 0

— — — — ( 5,168 ) ( 5,168 )

Exercise of stock options 45,351 1 1,330 — — 1,331

Issuance of shares under employee stock purchase plan 58,145 1 4,231 — — 4,232

Exercise of 3.25 % Convertible Note

19,033 — — — — —

Vested restricted stock 434,518 4 ( 4 ) — — —

2 unchanged sentences

Other, net — — 18 — — 18

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

Balance, June 30, 2021 44,708,235 $ 447 $ 461,422 $ 892,605 $ ( 59,974 ) $ 1,294,500

See Notes to Condensed Consolidated Financial Statements

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2021

JUNE 30, 2021

Basis of Presentation

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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 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.

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

No impairment was recorded in the second quarter of 2020, other than an immaterial impairment associated with a sublease.

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

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.

In the second quarter of 2021, the Company recorded an impairment to goodwill associated with the plan to sell the Company’s B2B Backup business (see Note 6 – Assets Held for Sale).

No impairment was recorded in the second quarter of 2020.

In the first quarter of 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

11 unchanged sentences

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 Condensed 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.

26 unchanged sentences

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.

During the second quarter of 2021, the Company received approval from the SBA to forgive the entire amount of the outstanding PPP Loan.

The amount forgiven 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.

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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.

36 unchanged sentences

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

6 unchanged sentences

Three Months Ended

June 30, Six Months Ended

Digital Media 2021 2020 2021 2020

5 unchanged sentences

Subscription $ 175,268 $ 167,040 $ 346,605 $ 336,788

Other 91 18 183 54

Total Cloud Services revenues $ 175,359 $ 167,058 $ 346,788 $ 336,842

6 unchanged sentences

Total $ 429,044 $ 330,984 $ 827,228 $ 663,377

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.

The Company has recorded $ 50.5 million and $ 45.0 million of revenue for the three months ended June 30, 2021 and 2020, respectively, and $ 129.4 million and $ 113.5 million of revenue for the six months ended June 30, 2021 and 2020, respectively, which was previously included in the deferred revenue balance as of the beginning of each respective year.

As of June 30, 2021, the Company acquired $ 5.7 million in 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 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.

The Company completed the following acquisitions during the first six months of fiscal 2021, paying the purchase price in cash in each transaction:

(a) an asset purchase of DailyOM, acquired on April 30, 2021, a California-based-based provider of health and wellness digital media, content and learning business;

(b) a share purchase of SEOmoz, acquired on June 4, 2021, a Seattle-based provider of search engine optimization (“SEO”) solutions;

and (c) an immaterial Digital Media acquisition.

The Condensed Consolidated Statement of Operations since the date of each acquisition and balance sheet as of June 30, 2021, reflect the results of operations of all 2021 acquisitions.

For the six months ended June 30, 2021, these acquisitions contributed $ 5.8 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 $ 91.8 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.

Assets and Liabilities Valuation

Accounts receivable $ 3,953

Prepaid expenses and other current assets 1,569

Property and equipment 1,838

Operating lease right-of-use assets, noncurrent 5,888

Trade names 11,514

Customer relationship 5,000

Goodwill 53,013

Other intangibles 29,801

Deferred tax asset 230

Accounts payable and accrued expenses ( 2,207 )

Deferred revenue ( 5,664 )

Operating lease liabilities, noncurrent ( 7,191 )

Deferred tax liability ( 4,238 )

Other long-term liabilities ( 1,726 )

Total $ 91,780

During the six months ended June 30, 2021, the purchase price accounting has been finalized for EDC Systems Inc.

(operating under the name “SRFax”) and other immaterial Digital Media and Cloud Services businesses.

The initial accounting for the 2021 acquisitions are 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 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.

During the six months ended June 30, 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 $ 2.6 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 six months ended June 30, 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 three months ended March 31, 2021 is zero , of which zero is expected to be deductible for income tax purposes.

Goodwill recognized associated with these acquisitions during the six months ended June 30, 2021 is $ 53.0 million, of which $ 14.1 million is expected to be deductible for income tax purposes.

Pro Forma Financial Information for All 2021 Acquisitions

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

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

These pro forma results exclude any savings or synergies that would have resulted from these business acquisitions had they occurred on January 1, 2020.

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

The supplemental information on an unaudited pro forma financial basis presents the combined results of J2 Global and its 2021 acquisitions as if each acquisition had occurred on January 1, 2020 (in thousands, except per share amounts):

Six Months Ended

(unaudited) (unaudited)

Revenues $ 856,052 $ 698,299

Net income $ 95,335 $ 32,803

EPS - Basic $ 2.14 $ 0.69

EPS - Diluted $ 2.02 $ 0.67

Investments consist of equity and debt securities.

9 unchanged sentences

Cost Impairment Adjustments Reported Amount

March 31, 2021

June 30, 2021

Equity securities $ 31,779 $ ( 16,677 ) $ ( 479 ) $ 14,623

3 unchanged sentences

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

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

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.

During the second quarter of 2021, the Company recorded a $ 16.7 million impairment loss on investments related to a decline in value due to a pending sales transaction of an investee.

The Company is not expected to recover the recorded cost of these securities and has reduced such amount to what the Company expects to receive as a result of the sale.

During the first six months of 2020, the Company recorded a loss on investments of $ 20.8 million, which consists of the following:

an impairment loss of $ 19.6 million due to changes in the investee’s capital structure and overall market volatility;

a loss on exchange of redeemable preferred stock, in the amount of $ 4.4 million, that that was previously classified as available-for-sale corporate debt securities for a new series of preferred stock classified as equity securities;

partially offset by

a recognized gain of $ 3.2 million due to the Company’s purchase of preferred stock for $ 0.8 million.

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

At June 30, 2021, cumulative impairment losses on these securities were $ 40.5 million.

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

March 31, 2021

June 30, 2021

Corporate debt securities $ — $ — $ — $ —

3 unchanged sentences

Total $ 511 $ 152 $ — $ 663

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 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):

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

Due within 1 year $ — $ 663

12 unchanged sentences

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.

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.

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

As of 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.

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;

8 unchanged sentences

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 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.

In the first six months of 2021, the Company received capital call notices from the management of OCV Management, LLC for $ 11.1 million, inclusive of certain management fees, of which $ 10.1 million has been paid for the six months ended June 30, 2021.

In the first six months of 2020, the Company received capital call notices from the management of OCV Management, LLC for $ 26.5 million, inclusive of certain management fees, of which $ 26.5 million had been paid for the six months ended June 30, 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 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.

During the three months ended June 30, 2021 and 2020, the Company recognized an investment loss of $( 5.8 ) million and $( 5.8 ) million, net of tax benefit, respectively, and during the six months ended June 30, 2021 and 2020, the Company recognized an investment gain (loss) $ 18.5 million and $( 10.1 ) million, net of tax (benefit) expense, respectively.

The fiscal 2021 gain was primarily the result of gains in the underlying investments.

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 the amount of $ 3.1 million, net of tax benefit.

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.

During the three months ended June 30, 2021 and 2020, the Company recognized management fees of $ 0.8 million and $ 0.8 million, net of tax benefit, respectively, and for the six months ended June 30, 2021 and 2020, the Company recognized management fees of $ 1.5 million and $ 1.5 million, net of tax benefit, respectively.

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

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

Equity method investment $ 102,773 $ 67,195

4 unchanged sentences

Assets-Held-For-Sale

The Company classifies assets-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 certain Voice assets in the United Kingdom as they were determined to be non-core assets.

Such assets are recorded within the Voice, Backup, Security, and CPP reportable segment.

On February 9, 2021, in a cash transaction, the Company 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.

On February 9, 2021, in a cash transaction, the Company sold the Voice assets.

As of June 30, 2021, the total gain recognized on the sale was $ 2.8 million which was recorded in gain on sale of businesses on the Condensed Consolidated Statement of Operations.

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.

During the second quarter of 2021, the Company received an offer to purchase the B2B Backup business.

Management has determined that the fair value of the business less cost to sell is lower than its carrying amount.

As a result, the Company recorded an impairment to goodwill of $ 32.6 million which was recorded in impairment of business on the Condensed Consolidated Statement of Operations (see Note 8 - Goodwill and Intangible Assets).

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

June 30, 2021

Accounts receivable, net of allowance of $346

Prepaid expenses and other current assets 2,426

9 unchanged sentences

Accounts payable and accrued expenses $ 2,720

Income taxes payable, current 155

Deferred revenue, current 2,650

3 unchanged sentences

Operating lease liabilities, noncurrent 11,915

Deferred income taxes, noncurrent 563

Other long-term liabilities 170

11 unchanged sentences

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).

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 June 30, 2021 and December 31, 2020 was $ 2.3 billion and $ 2.0 billion, respectively (see Note 9 - Debt).

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

5 unchanged sentences

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.

The weighted averages below are a product of the unobservable input and fair value of the contingent consideration arrangement as of June 30, 2021.

Valuation Technique Unobservable Input Range Weighted Average

4 unchanged sentences

Discount rate 38.0 %

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):

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

T he 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):

June 30, 2021 Level 1 Level 2 Level 3 Fair Value Carrying Value

Cash equivalents:

19 unchanged sentences

Contingent consideration payments ( 5,828 ) Not applicable

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.

Balance as of June 30, 2021 $ 5,582

In connection with the Company’s acquisition activity, contingent consideration of up to $ 5.8 million may be payable upon achieving certain revenue, and/or unique visitor thresholds and had a combined fair value of $ 5.6 million and $ 9.1 million at June 30, 2021 and December 31, 2020, respectively.

Due to the achievement of certain thresholds, $ 5.8 million was paid in the first six months of 2021.

During the six months ended June 30, 2021, the Company recorded an increase in the fair value of the contingent consideration of $ 0.6 million and reported such increase in general and administrative expenses.

Goodwill and Intangible Assets

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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 three months ended March 31, 2021 are as follows (in thousands):

The changes in carrying amounts of goodwill for the six months ended June 30, 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 written off related to sale of a business (1)

Goodwill acquired (Note 4) 39,519 — 39,519 13,494 53,013

Goodwill removed due to sale of a business (1)

— ( 1,339 ) ( 1,339 ) — ( 1,339 )

1 unchanged sentence

— ( 48,632 ) ( 48,632 ) — ( 48,632 )

Goodwill impairment (3)

— ( 32,629 ) ( 32,629 ) — ( 32,629 )

Purchase accounting adjustments (4)

1 unchanged sentence

Foreign exchange translation ( 1,861 ) ( 817 ) ( 2,678 ) ( 276 ) ( 2,954 )

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).

Balance as of June 30, 2021 $ 463,129 $ 415,655 $ 878,784 $ 958,755 $ 1,837,539

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

(2) During the six months ended June 30, 2021, the Company reclassified $ 48.6 million of goodwill to noncurrent assets held for sale in connection with certain B2B Backup assets.

(see Note 6 - Assets Held for Sale).

(3) During the second quarter of 2021, the Company had an impairment to goodwill of $ 32.6 million in connection with certain B2B Backup assets (see Note 6 - Assets Held for Sale).

(4) 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 March 31, 2021 and December 31, 2020 as follows (in thousands):

Intangible assets are summarized as of June 30, 2021 and December 31, 2020 as follows (in thousands):

2021 December 31,

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Intangible Assets Subject to Amortization:

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

As of June 30, 2021, intangible assets subject to amortization relate primarily to the following (in thousands):

Weighted-Average

22 unchanged sentences

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 $ 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

Amortization expense, included in general and administrative expense, approximated $ 48.0 million and $ 35.6 million for the three months ended June 30, 2021 and 2020, respectively, and $ 96.5 million and $ 74.4 million for the six months ended June 30, 2021 and 2020, respectively.

Amortization expense is estimated to approximate $ 93.3 million, $ 146.6 million, $ 125.9 million, $ 79.3 million and $ 74.2 million for the remaining six months of fiscal year 2021 through fiscal year 2025, respectively, and $ 138.0 million thereafter through the duration of the amortization period.

The Company’s debt as of June 30, 2021 and December 31, 2020 consists of the following (in thousands):

June 30, 2021 December 31, 2020

4.625 % Senior Notes

7 unchanged sentences

Paycheck Protection Program Loan — 910

Bridge Loan 2,811 —

Unamortized discount ( 100,405 ) ( 112,798 )

8 unchanged sentences

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 4.625 % Senior Notes are presented as long-term debt, net of deferred issuance costs, on the Consolidated Balance Sheets as of June 30, 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.

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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).

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 June 30, 2021.

As of June 30, 2021 and December 31, 2020, the estimated fair value of the 4.625 % Senior Notes was approximately $ 778.4 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

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Any contingent interest payable on the 3.25 % Convertible Notes will be in addition to the regular interest payable on the 3.25 % Convertible Notes.

Holders may surrender their 3.25 % Convertible Notes for conversion at any time prior to the close of business on the business day immediately preceding the maturity date only if one or more of the following conditions is satisfied:

(i) during any calendar quarter commencing after the calendar quarter ending on September 30, 2014 (and only during such calendar quarter), if the closing sale price of J2 Global common stock for at least 20 trading days in the period of 30 consecutive trading days ending on the last trading day of the calendar quarter immediately preceding the calendar quarter in which the conversion occurs is more than 130 % of the applicable conversion price of the 3.25 % Convertible Notes on each such trading day;

(ii) during the five consecutive business day period following any ten consecutive trading day period in which the trading price for the 3.25 % Convertible Notes for each such trading day was less than 98 % of the product of (a) the closing sale price of J2 Global common stock on each such trading day and (b) the applicable conversion rate on each such trading day;

(iii) if J2 Global calls any or all of the 3.25 % Convertible Notes for redemption, at any time prior to the close of business on the business day prior to the redemption date;

(iv) upon the occurrence of specified corporate events;

or (v) during either the period beginning on, and including, March 15, 2021 and ending on, but excluding, June 20, 2021 or the period beginning on, and including, March 15, 2029 and ending on, but excluding, the maturity date.

J2 Global will settle conversions of the 3.25 % Convertible Notes by paying or delivering, as the case may be, cash, shares of J2 Global common stock or a combination thereof at J2 Global’s election.

The Company currently intends to satisfy its conversion obligation by paying and delivering a combination of cash and shares of the Company’s common stock, where cash will be used to settle each $1,000 of principal and the remainder, if any, will be settled via shares of the Company’s common stock.

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.

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.

In addition, following certain corporate events that occur on or prior to June 20, 2021, J2 Global will increase the conversion rate for a holder that elects to convert its 3.25 % Convertible Notes in connection with such a corporate event.

J2 Global may not redeem the 3.25 % Convertible Notes prior to June 20, 2021.

On or after June 20, 2021, J2 Global may redeem for cash all or part of the 3.25 % Convertible Notes at a redemption price equal to 100 % of the principal amount of the 3.25 % Convertible Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.

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.

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 March 31, 2021.

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

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

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

(iii) effectively junior in right of payment 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 (including trade payables) incurred by the Company’s subsidiaries.

Accounting for the 3.25 % Convertible Notes

In accordance with ASC 470-20, Debt with Conversion and Other Options, convertible debt that can be settled for cash is required to be separated into the liability and equity component at issuance, with each component assigned a value.

The value assigned to the liability component is the estimated fair value, as of the issuance date, of similar debt without the conversion feature.

The difference between the cash proceeds and estimated fair value of the liability component, representing the value of the conversion premium assigned to the equity component, is recorded as a debt discount on the issuance date.

This debt discount is amortized to interest expense using the effective interest method over the period from the issuance date through the first stated repurchase date on June 15, 2021.

J2 Global estimated the borrowing rates of similar debt without the conversion feature at origination to be 5.79 % for the 3.25 % Convertible Notes and determined the debt discount to be $ 59.0 million.

As a result, a conversion premium after tax of $ 37.7 million was recorded in additional paid-in capital.

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 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.

During the second quarter of 2021, certain holders exercised their conversion option on the 3.25 % Convertible Notes due in 2029.

The Company satisfied its conversion obligation by paying the principal of $ 2.8 million in cash and issued 19,033 shares of J2 Global common stock (see Note 13 - Stockholders’ Equity).

During the second quarter of 2021, the Company announced plans to separate into two independent publicly traded companies, J2 Global, Inc.

and Consensus Cloud Solutions, Inc.

(“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 Notes due 2029 for redemption and on August 2, 2021, the Company redeemed in full all of its outstanding 3.25 % convertible notes due in 2029.

The Company satisfied its conversion obligation by paying the principal of $ 399.6 million in cash and issued 3,031,817 shares of J2 Global common stock (see Note 18 - Subsequent Events).

As of June 30, 2021, the conversion rate was 14.7632 shares of J2 Global common stock for each $1,000 principal amount of 3.25 % Convertible Notes, which represented a conversion price of approximately $ 67.74 per share of J2 Global common stock.

The conversion rate was 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.

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

The fair value of the 3.25 % Convertible Notes at each balance sheet date is determined based on recent quoted market prices or dealer quotes for the 3.25 % Convertible Notes, which are Level 1 inputs (see Note 7 - Fair Value Measurements).

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 3.25 % Convertible Notes was approximately $ 682.0 million and $ 593.1 million, respectively.

As of June 30, 2021 and December 31, 2020, the estimated fair value of the 3.25 % Convertible Notes was approximately $ 815.1 million and $ 593.1 million, respectively.

1.75 % Convertible Notes

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Holders may surrender their 1.75 % Convertible Notes for conversion at any time prior to the close of business on the business day immediately preceding July 1, 2026 only under the following circumstances:

(i) during any calendar quarter commencing after the calendar quarter ending on March 31, 2020 (and only during such calendar quarter), if the last reported sale price of J2 Global common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding the calendar quarter is greater than 130 % of the applicable conversion price of the 1.75 % Convertible Notes on each such applicable trading day;

greater than 130 % of the applicable conversion price of the 1.75 % Convertible Notes on each such applicable trading day;

(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;

upon the occurrence of specified corporate events.

or (iii) 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.

2 unchanged sentences

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 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.

During the second 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 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.

As of June 30, 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.

14 unchanged sentences

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

As of June 30, 2021, the remaining period over which the unamortized debt discount will be amortized is 5.3 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 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.

As of June 30, 2021, the unamortized deferred issuance costs were $ 8.3 million.

The 1.75 % Convertible Notes are carried at face value less any unamortized debt discount and issuance costs.

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).

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

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

As of June 30, 2021 and December 31, 2020, the estimated fair value of the 1.75 % Convertible Notes was approximately $ 706.4 million and $ 569.7 million, respectively.

Credit Facility and Bridge Loan

On April 7, 2021, the Company entered into a $ 100 million Credit Agreement (the “Credit Agreement”).

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.

On June 2, 2021, the Company entered into a First Amendment (the “Amendment”) to the Credit Agreement, dated April 7, 2021.

The Amendment (i) provides for the issuance of a senior secured term loan under the Existing Credit Agreement, in an aggregate principal amount of $ 405,000,000 (the “Bridge Loan”), (ii) permits the spin-off of a portion of the Company’s cloud services business into a new publicly traded company, and (iii) provides for certain other changes to the Credit Agreement.

The Bridge Loan shall bear interest at a rate per annum equal to (i) initially upon funding of the loan, either a base rate plus 2.00 %, or a LIBOR rate plus 3.00 %, (ii) from six months after the funding date of the Bridge Loan until twelve months after the funding date of the Bridge Loan, either a base rate plus 2.50 %, or a LIBOR rate plus 3.50 %, and (iii) from twelve months after the funding date of the Bridge Loan until repayment of the Bridge Loan, either a base rate plus 3.00 % or a LIBOR rate plus 4.00 %.

The Bridge Loan will mature on the date that is 364 days after the funding date of the Bridge Loan, with two automatic extensions, each for an additional three months , if SEC approval of the spin-off transaction is still outstanding.

The proceeds of the Bridge Loan Facility will be used to redeem J2’s 3.25 % convertible senior notes due 2029.

J2 is required to pay a funding fee of 0.50 % of the aggregate principal amount of Bridge Loans made on the funding date thereof, as well as a duration fee of 0.25 % of the aggregate principal amount of outstanding Bridge Loans on the sixth month anniversary of the funding of the Bridge Loans, and a fee of 0.50 % of the aggregate principal amount of outstanding Bridge Loans on each of the nine-month, twelve-month and fifteen-month anniversaries of the funding of the Bridge Loans.

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.

Through the acquisition of certain businesses in 2020, the Company acquired $ 0.9 million of outstanding debt originating from the Paycheck Protection Program.

During the second quarter of 2021, the Company received approval from the SBA to forgive the entire amount of the outstanding PPP loans, which was subsequently forgiven in full.

J2 Global leases certain facilities and equipment under non-cancelable operating and finance leases which expire at various dates through 2031.

4 unchanged sentences

The components of lease expense were as follows (in thousands):

Three Months Ended

Three Months Ended June 30, Six Months Ended

2021 2020 2021 2020

Operating lease cost $ 10,889 $ 9,114 $ 17,837 $ 16,218

2 unchanged sentences

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

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

Operating leases

8 unchanged sentences

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

Three Months Ended

Six Months Ended

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

3 unchanged sentences

Other supplemental operating lease information consists of the following:

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

Operating leases:

1 unchanged sentence

Weighted average discount rate 3.85 % 3.93 %

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

Maturities of operating lease liabilities as of June 30, 2021 were as follows (in thousands):

Operating Leases

4 unchanged sentences

Present value of operating lease liabilities $ 127,360

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

Total sublease income for the three months ended June 30, 2021 and 2020 was $ 0.5 million and $ 1.0 million, respectively, and was $ 0.9 million and $ 1.8 million for the six months ended June 30, 2021 and 2020, respectively.

Total estimated aggregate sublease income to be received in the future is $ 5.8 million.

For the first six months of 2021 and 2020, the Company recorded impairments of $ 7.8 million and $ 2.1 million, respectively, associated with its sublease tenants in default as a result of the economic effects of COVID-19.

The impairment is presented in general and administrative expense on the Condensed Consolidated Statement of Operations.

Significant Judgments

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Discovery has closed, with the exception of one issue.

There is an anticipated trial date of September 2021.

On July 8, 2021, an agreement was reached to settle the matter by an immaterial amount.

On January 21, 2016, Davis Neurology, P.A.

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On May 21, 2020, the court denied J2 Global affiliates’ motion to dismiss.

On August 11, 2020, the court approved an opt-in class notice.

Notice has not yet been issued and the J2 Global affiliates have moved to decertify the class.

On December 2, 2020, the parties provided notice to the court that they have reached a tentative settlement in the matter, and on February 18, 2021, the parties filed a motion for preliminary approval of the class settlement, certification of a settlement class and for permission to disseminate notice.

On 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, which was granted on May 11, 2021.

The notice is in the process of being distributed.

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.

1 unchanged sentence

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.

2020-0819-VCL) asserting derivative claims against directors of J2 Global, Inc.

and other third parties.

J2 Global has moved to dismiss the amended complaint.

On September 24, 2020, International Union of Operating Engineers of Eastern Pennsylvania and Delaware filed an action lawsuit in the Delaware Court of Chancery (C.A.

2020-0819-VCL) asserting derivative claims for breach of fiduciary duty and related theories against directors of J2 Global, Inc.

and other third parties relating generally the investment by the Company in OCV Fund I, L.P.

(the “Chancery Court Derivative Action”).

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.

The parties have reached an agreement to settle the lawsuit, which requires court approval.

On July 29, 2021, the parties filed a stipulation of settlement that provides the terms of the settlement and begins the settlement approval process with the Court.

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.

1 unchanged sentence

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.

On March 24, 2021, Fritz Ringling filed a lawsuit in the District of Delaware (21-cv-00421-UNA) asserting substantially similar derivative claims, and on April 8, 2021, the district court consolidated the two actions under the caption In re J2 Global Stockholder Derivative Litigation.

20-cv-01687-LPS.

As part of the settlement of the Chancery Court Derivative Action described above, J2 Global and its directors and officers intend to defend against the remaining claims.

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.

2 unchanged sentences

It is the Company’s policy to expense as incurred legal fees related to various litigations.

Credit Agreement

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

3 unchanged sentences

The Company has a $ 25.4 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 its financial results.

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

The Company’s effective tax rate was 9.1 % and 26.7 % for the three months ended June 30, 2021 and 2020, respectively and 9.5 % and 37.1 % for the six months ended June 30, 2021 and 2020, respectively.

The Company’s decreased rate during the three months and six months ended June 30, 2021 is primarily due to the recognition of a deferred tax asset from the impairment of the B2B Backup business unit and a discrete tax benefit recognized related to a reduction in our net reserve for uncertain tax positions with no similar events for the period ending June 30, 2020.

Income (loss) before income taxes included income from domestic operations of $ 5.8 million and $( 2.5 ) million for the six months ended June 30, 2021 and 2020, respectively, and income from foreign operations of $ 77.2 million and $ 69.0 million for the six months ended June 30, 2021 and 2020, respectively.

As of June 30, 2021 and December 31, 2020, the Company had $ 53.5 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 $ 7.4 million and $ 6.6 million for the three months ended March 31, 2021 and 2020, respectively.

Cash paid for income taxes net of refunds received was $ 37.3 million and $ 8.9 million for the six months ended June 30, 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 $ 3.0 million and $ 3.0 million at March 31, 2021 and December 31, 2020, respectively.

The Company’s prepaid taxes were zero and $ 3.0 million at June 30, 2021 and December 31, 2020, respectively.

Income Tax Audits :

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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.

The Company disagrees with the Notice and filed a petition to appeal on May 24, 2021.

As of June 30, 2021, the audits are ongoing.

Subsequent to June 30, 2021, the Company paid a previously settled amount

for certain tax issues in connection with tax years 2015 and 2016.

The amount paid was within the reserve established for this matter.

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 March 31, 2021, the audits are ongoing.

As of June 30, 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 March 31, 2021, the audits are ongoing.

As of June 30, 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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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.

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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.

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

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

The Company entered into a Rule 10b5-1 trading plan and during the six month period ended June 30, 2021, the Company repurchased no shares under this program.

Cumulatively at June 30, 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 second quarter of 2021, certain holders of the 3.25 % Convertible Notes due in 2029 exercised their conversion option.

The Company satisfied its conversion obligation by paying the principal of $ 2.8 million in cash and issued 19,033 shares of J2 Global common stock (see Note 9 - Debt).

During the three month period ended June 30, 2021, the Company purchased 87,155 shares from plan participants for this purpose.

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

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Stock Options and Employee Stock 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”).

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”).

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 June 30, 2021, 7,250 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.

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

As of June 30, 2021, 423,000 shares underlying options and 272,940 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 three months ended March 31, 2021:

The following table represents stock option activity for the six months ended June 30, 2021:

Number of Shares Weighted-

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Exercised ( 45,351 ) 29.34

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.

Outstanding at June 30, 2021 430,250 $ 73.85 6.3 $ 27,405,745

Exercisable at June 30, 2021 180,250 $ 72.22 5.9 $ 11,775,745

Vested and expected to vest at June 30, 2021 363,615 $ 73.64 6.2 $ 23,239,725

The total intrinsic values of options exercised during the six months ended June 30, 2021 and 2020 were $ 4.0 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 June 30, 2021 and 2020, respectively, and $ 0.4 million and $ 0.4 million for the six months ended June 30, 2021 and 2020, respectively.

As of June 30, 2021 and December 31, 2020, unrecognized stock compensation related to non-vested stock options granted under each of the share-based compensation plans approximated $ 5.3 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 4.5 years (i.e., the remaining requisite service period).

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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 12.23 % and 11.57 % as of March 31, 2021 and 2020, respectively.

Estimated forfeiture rates were 12.22 % and 11.52 % as of June 30, 2021 and 2020, respectively.

Restricted Stock and Restricted Stock Units

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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

J2 Global has awarded certain key employees market-based restricted stock awards pursuant to the 2015 Plan.

The market-based awards have vesting conditions that are based on specified stock price targets of the Company’s common stock.

Restricted Stock and Restricted Stock Units with Market Conditions

J2 Global has awarded certain key employees market-based restricted stock and restricted stock units pursuant to the 2015 Plan.

The market-based shares have vesting conditions that are based on specified stock price targets of the Company’s common stock.

Market conditions were factored into the grant date fair value using a Monte Carlo valuation model, which utilized multiple input variables to determine the probability of the Company achieving the specified stock price targets with a 20-day and 30-day lookback (trading days).

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 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:

March 31, 2021 March 31, 2020

During the six months ended June 30, 2021 and 2020, the Company awarded 73,094 and 82,112 market-based shares, respectively.

The per share weighted average grant-date fair values of the market-based shares granted during the six months ended June 30, 2021 and 2020 were $ 94.40 and $ 70.99 , respectively.

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

June 30, 2021 June 30, 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 three months ended March 31, 2021 is set forth below:

Restricted stock award activity for the six months ended June 30, 2021 is set forth below:

Shares Weighted-Average

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Canceled ( 2,067 ) 82.38

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:

Nonvested at June 30, 2021 484,205 $ 61.62

Restricted stock unit award activity for the six months ended June 30, 2021 is set forth below:

Shares Weighted-Average

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Vested ( 100,224 )

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.

Outstanding at June 30, 2021 272,940 3.4 $ 37,542,897

Vested and expected to vest at June 30, 2021 182,186 2.8 $ 25,059,725

The Company recognized $ 5.4 million and $ 5.7 million of compensation expense related to restricted stock, restricted stock units and market-based awards for the three months ended June 30, 2021 and 2020, respectively, and $ 10.7 million and $ 11.3 million for the six months ended June 30, 2021 and 2020, respectively.

As of June 30, 2021 and December 31, 2020 , the Company had unrecognized share-based compensation cost of approximately $ 43.8 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 4.3 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 11.15 % and 5.80 % as of March 31, 2021 and 2020, respectively.

Estimated forfeiture rates were 11.15 % and 16.50 % as of June 30, 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 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.

For the six months ended June 30, 2021 and 2020, 58,145 and 53,694 shares were purchased under the Purchase Plan, respectively.

Cash received upon the issuance of J2 Global common stock under the Purchase Plan was $ 4.2 million and $ 3.3 million for the six months ended June 30, 2021 and 2020, respectively.

As of June 30, 2021, 0 shares were available under the Purchase Plan for future issuance.

The Company recognized $ 0.7 million and $ 0.6 million of compensation expense related to the Purchase Plan for the three months ended June 30, 2021 and 2020, respectively, and $ 1.3 million and $ 1.1 million for the six months ended June 30, 2021 and 2020, respectively.

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

March 31, 2021 March 31, 2020

June 30, 2021 June 30, 2020

Risk-free interest rate 0.02 % 0.1 %

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The components of basic and diluted earnings per share are as follows (in thousands, except share and per share data):

Three Months Ended

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

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

Three Months Ended June 30, 2021 Six Months Ended

2021 2020 2021 2020

Numerator for basic and diluted net income per common share:

Net income attributable to J2 Global, Inc.

common shareholders $ 15,717 $ 38,101 $ 93,640 $ 31,697

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

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

Net income available to participating securities (a)

( 15 ) ( 178 ) ( 100 ) ( 221 )

Net income available to J2 Global, Inc.

common shareholders $ 15,702 $ 37,923 $ 93,540 $ 31,476

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Dilutive effect of:

Equity incentive plans (b)

Convertible debt (b)(c)

Equity incentive plans

138,714 — 123,708 20,037

Convertible debt (b)

2,776,655 586,611 2,500,338 1,023,521

Common stock and common stock equivalents 47,528,902 47,437,555 47,130,979 48,279,417

Net income (loss) per share:

Net income per share:

Basic $ 0.35 $ 0.81 $ 2.10 $ 0.67

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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) 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.

(b) Represents the incremental shares issuable upon conversion of the 3.25 % Convertible Notes due June 15, 2029 (subsequently redeemed in full) 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 and six months ended June 30, 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

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Three Months Ended

June 30, Six Months Ended

2021 2020 2021 2020

Revenue by reportable segment:

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Corporate (1)

( 9 ) ( 37 ) ( 74 ) ( 36 )

Total gross profit $ 365,707 $ 274,182 $ 706,068 $ 547,444

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(2) Direct costs for each segment include other operating expenses that are directly attributable to the segment, such as employee compensation expense, local sales and marketing expenses, engineering and network operations expense, depreciation and amortization and other administrative expenses.

(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.

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.

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

Table above has been recast to remove the impact of certain expenses associated with Corporate 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

June 30, 2021 December 31, 2020

Digital Media $ 1,957,615 $ 2,088,397

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Total assets $ 3,703,366 $ 3,665,331

(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

(1) Assets of $ 107.1 million, which were classified as held for sale, were included within Cloud Services at June 30, 2021 (see Note 6 - Assets Held For Sale).

Six Months Ended

Capital expenditures:

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Total capital expenditures $ 57,766 $ 50,537

Three Months Ended

Three Months Ended June 30, Six Months Ended

2021 2020 2021 2020

Depreciation and amortization:

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Three Months Ended

June 30, Six Months Ended

2021 2020 2021 2020

United States $ 328,531 $ 261,157 $ 580,602 $ 531,466

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$ 937,321 $ 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.

(1) Long-lived assets of $ 38.1 million, which were classified as assets held for sale, were included within the schedule above at June 30, 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 March 31, 2021 (in thousands):

The following table summarizes the changes in accumulated balances of other comprehensive income (loss), net of tax, for the three months ended June 30, 2021 (in thousands):

Unrealized Gains (Losses) on Investments Foreign Currency Translation Total

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

Other comprehensive income (loss) — ( 8,424 ) ( 8,424 )

Net current period other comprehensive income (loss) — ( 8,424 ) ( 8,424 )

Other comprehensive income — 3,256 3,256

Net current period other comprehensive income — 3,256 3,256

Ending balance $ 283 $ ( 60,257 ) $ ( 59,974 )

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

The following table summarizes the changes in accumulated balances of other comprehensive income (loss), net of tax, for the six months ended June 30, 2021 (in thousands):

Unrealized Gains (Losses) on Investments Foreign Currency Translation Total

Beginning balance $ 283 $ ( 55,089 ) $ ( 54,806 )

Other comprehensive loss — ( 5,168 ) ( 5,168 )

Net current period other comprehensive loss — ( 5,168 ) ( 5,168 )

Ending balance $ 283 $ ( 60,257 ) $ ( 59,974 )

There were no reclassifications out of accumulated other comprehensive loss for the three and six months ended June 30, 2021.

Subsequent Events

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.

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.

On July 15, 2021, in a cash transaction, the Company acquired certain assets of Solutelia, LLC, a Colorado-based on-demand wireless telecommunications network monitoring and analysis, testing and optimization software business and related wireless telecommunications engineering services business.

On August 2, 2021, the Company called and redeemed in full all of its outstanding 3.25 % Convertible Notes due 2029.

The Company satisfied its conversion obligation by paying the principal of $ 399.6 million in cash and issued 3,031,817 shares of J2 Global common stock (see Note 9 - Debt).

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