What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-11-09 compared with 2021-08-09 · 357 added, 342 removed, 1017 unchanged (41% of the section changed)

Financial Statements

J2 GLOBAL, INC.

ZIFF DAVIS, INC.

AND SUBSIDIARIES

1 unchanged sentence

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

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Cash and cash equivalents $ 546,467 $ 242,652

3 unchanged sentences

Prepaid expenses and other current assets 73,457 53,909

Current assets held for sale 8,939 —

Total current assets 888,273 622,843

8 unchanged sentences

Other assets 19,901 17,027

Noncurrent assets held for sale 98,187 —

TOTAL ASSETS $ 3,830,657 $ 3,665,331

6 unchanged sentences

Other current liabilities 36 497

Current liabilities held for sale 8,793 —

Total current liabilities 1,028,397 882,557

6 unchanged sentences

Other long-term liabilities 44,259 44,463

Noncurrent liabilities held for sale 12,652 —

TOTAL LIABILITIES 2,461,398 2,454,313

10 unchanged sentences

Authorized 95,000,000 ;

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

total issued and outstanding 47,825,827 and 44,346,630 shares at September 30, 2021 and December 31, 2020, respectively.

Additional paid-in capital 508,493 456,274

4 unchanged sentences

See Notes to Condensed Consolidated Financial Statements

J2 GLOBAL, INC.

ZIFF DAVIS, INC.

AND SUBSIDIARIES

2 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

10 unchanged sentences

122,477 114,381 359,498 312,283

Goodwill impairment on business — — 32,629 —

Total operating expenses 283,809 223,716 849,742 642,873

1 unchanged sentence

Interest expense, net ( 19,862 ) ( 22,712 ) ( 62,832 ) ( 65,879 )

Gain on sale of businesses 823 — 2,802 —

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

(Loss) gain on sale of businesses ( 24,600 ) 17,122 ( 21,798 ) 17,122

Loss on investments, net — ( 156 ) ( 16,677 ) ( 20,991 )

Other income (expense), net ( 777 ) 9,059 ( 293 ) 2,183

Income before income taxes and income (loss) from equity method investment, net 23,621 59,900 82,997 66,468

Other income, net 1,660 14,230 1,367 16,413

Income before income taxes and (loss) income from equity method investment, net 53,339 85,922 136,336 152,390

Income tax expense 8,847 24,330 16,723 49,011

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

(Loss) income from equity method investment, net ( 1,923 ) ( 709 ) 16,596 ( 10,799 )

Net income $ 42,569 $ 60,883 $ 136,209 $ 92,580

12 unchanged sentences

See Notes to Condensed Consolidated Financial Statements

J2 GLOBAL, INC.

ZIFF DAVIS, INC.

AND SUBSIDIARIES

2 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Net income $ 42,569 $ 60,883 $ 136,209 $ 92,580

Other comprehensive income (loss), net of tax:

Other comprehensive loss, net of tax:

Foreign currency translation adjustment ( 11,101 ) ( 3,202 ) ( 16,269 ) ( 12,085 )

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.

Change in fair value on available-for-sale investments, net of tax expense of $ 37 for the three and nine months ended September 30, 2021, respectively, and $ 141 and $ 314 for the three and nine months ended September 30, 2020, respectively.

( 114 ) 8 ( 114 ) 553

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

Other comprehensive loss, net of tax ( 11,215 ) ( 3,194 ) ( 16,383 ) ( 11,532 )

Comprehensive income $ 31,354 $ 57,689 $ 119,826 $ 81,048

See Notes to Condensed Consolidated Financial Statements

J2 GLOBAL, INC.

ZIFF DAVIS, INC.

AND SUBSIDIARIES

1 unchanged sentence

(Unaudited, in thousands)

Six Months Ended

Nine Months Ended

September 30,

Cash flows from operating activities:

7 unchanged sentences

Deferred income taxes, net 2,537 7,815

Gain on sale of businesses ( 2,802 ) —

Loss (gain) on sale of businesses 21,798 ( 17,122 )

Lease asset impairments 9,410 9,786

18 unchanged sentences

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

Distribution from equity method investment 15,327 —

Purchases of equity method investment ( 22,249 ) ( 29,979 )

3 unchanged sentences

Acquisition of businesses, net of cash received ( 112,444 ) ( 27,156 )

Proceeds from sale of businesses, net of cash divested 48,876 24,353

Purchases of intangible assets ( 1,255 ) ( 2,902 )

2 unchanged sentences

Payment of debt ( 402,414 ) —

Proceeds from line of credit 2,811 —

Payment of note payable — ( 400 )

Proceeds from bridge loan 485,000 —

Repurchase of common stock ( 29,855 ) ( 238,905 )

3 unchanged sentences

Other ( 6,619 ) ( 1,377 )

Net cash used in financing activities ( 31,590 ) ( 101,542 )

Net cash provided by (used in) financing activities 39,837 ( 256,854 )

Effect of exchange rate changes on cash and cash equivalents ( 6,698 ) 446

3 unchanged sentences

See Notes to Condensed Consolidated Financial Statements

J2 GLOBAL, INC.

ZIFF DAVIS, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Three and Six Months Ended June 30, 2020 and 2021

Three and Nine Months Ended September 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

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

Net income (loss) — — — 60,883 — 60,883

1 unchanged sentence

— — — — ( 3,194 ) ( 3,194 )

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 19,893 — — — — —

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

Repurchase of shares — — — — — —

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

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

Other, net — — 116 — — 116

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

Common stock Additional

2 unchanged sentences

Shares Amount capital earnings loss Equity

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

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

Net income — — — 42,569 — 42,569

2 unchanged sentences

Exercise of stock options 23,250 — 1,549 — — 1,549

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

Exercise of 3.25 % Convertible Note

Redemption of 3.25 % Convertible Note including tax impact

3,031,817 31 44,192 — — 44,223

2 unchanged sentences

Share based compensation — — 6,755 — — 6,755

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

Other, net — — ( 2,389 ) 188 — ( 2,201 )

Balance, September 30, 2021 47,825,827 $ 478 $ 508,493 $ 931,477 $ ( 71,189 ) $ 1,369,259

Common stock Additional

9 unchanged sentences

Vested restricted stock 267,894 3 ( 3 ) — — —

Exercise of 3.25 % Convertible Note

Redemption of 3.25 % Convertible Note including tax impact

— — ( 12 ) — — ( 12 )

1 unchanged sentence

Share based compensation — — 18,643 — — 18,643

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

Other, net — $ — $ 116 $ — $ — $ 116

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

Common stock Additional

8 unchanged sentences

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

Exercise of 3.25 % Convertible Note

Redemption of 3.25 % Convertible Note including tax impact

3,050,850 31 44,191 — — 44,222

3 unchanged sentences

Other, net — — ( 2,371 ) 188 — ( 2,183 )

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

Balance, September 30, 2021 47,825,827 $ 478 $ 508,493 $ 931,477 $ ( 71,189 ) $ 1,369,259

See Notes to Condensed Consolidated Financial Statements

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2021

SEPTEMBER 30, 2021

Basis of Presentation

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

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

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

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

Description of Business

As of September 30, 2021, J2 Global, Inc., together with its subsidiaries (“J2 Global”, the “Company”, “our”, “us”, or “we”), was a leading provider of internet information and services.

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

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

On October 7, 2021, in connection with the spin-off of its cloud fax business described further below, the Company changed its name from J2 Global, Inc.

to Ziff Davis, Inc.

(“Ziff Davis”).

Additionally, starting October 8, 2021, the Company’s common stock began trading under the stock symbol “ZD.”

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

All intercompany accounts and transactions have been eliminated in consolidation.

5 unchanged sentences

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

Consensus, Inc.

On September 21, 2021, the Company announced that its Board of Directors approved its previously announced separation of the cloud fax business (the “Separation”) into an independent publicly traded company, Consensus Cloud Solutions, Inc.

(“Consensus”).

On October 7, 2021 (the “Distribution Date”), the Separation was completed and the Company transferred J2 Cloud Services, LLC to Consensus, Inc.

who in turn transferred non-fax assets and liabilities back to Ziff Davis such that Consensus was left with the cloud fax business.

The Separation was achieved through the Company’s distribution of 80.1 % of the shares of Consensus common stock to holders of J2 Global common stock as of the close of business on October 1, 2021, the record date for the distribution.

The Company’s stockholders of record received one share of Consensus common stock for every three shares of J2 Global’s common stock.

On October 8, 2021, Consensus began trading on Nasdaq under the stock symbol “CCSI”.

Ziff Davis, Inc.

(formerly J2 Global, Inc.) retained a 19.9 % interest in Consensus following the Separation.

Use of Estimates

The preparation of consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, including judgments about investment classifications and the reported amounts of net revenue and expenses during the reporting period.

The Company believes that its most significant estimates are those related to revenue recognition, valuation and impairment of investments, its assessment of ownership interests as variable interest entities and the related determination of consolidation, share-based compensation expense, fair value of assets acquired and liabilities assumed in connection with business combinations, long-lived and intangible asset impairment, contingent consideration, income taxes and contingencies and allowances for doubtful accounts.

and allowances for doubtful accounts.

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

1 unchanged sentence

Allowances for Doubtful Accounts

J2 Global maintains an allowance for credit losses for accounts receivable, which is recorded as an offset to accounts receivable and changes in such are classified as general and administrative expenses in the Condensed Consolidated Statements of Operations.

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

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

3 unchanged sentences

Revenue Recognition

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

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

Principal vs.

15 unchanged sentences

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

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

orderly transactions in the same or similar investment from the same issuer.

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

8 unchanged sentences

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

J2 believes that the OCV general partner, as a single decision maker, holds the ability to make the decisions about the activities that most significantly impact the OCV Fund’s economic performance.

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

As a result, the Company has concluded that it will not consolidate OCV, as it is not the primary beneficiary of the OCV Fund, and will account for this investment under the equity-method of accounting.

5 unchanged sentences

Impairment or Disposal of Long-Lived Assets

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

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

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

1 unchanged sentence

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

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

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.

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

During the three and nine months ended September 30, 2021, the Company recorded an impairment of certain operating right-of-use assets (see Note 10 - Leases).

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

(see Note 10 - Leases).

actively marketed for sale at a price that is reasonable in relation to its current fair value, and (vi) it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.

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

4 unchanged sentences

Business Combinations and Valuation of Goodwill and Intangible Assets

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

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

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

J2 Global uses established valuation techniques and may engage reputable valuation specialists to assist with the valuations.

The Company uses established valuation techniques and may engage reputable valuation specialists to assist with the valuations.

Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates.

6 unchanged sentences

The Company evaluates its goodwill and indefinite-lived intangible assets for impairment pursuant to FASB ASC Topic No.

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

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

3 unchanged sentences

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

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 second quarter of 2021, the Company recorded an impairment to goodwill associated with the plan to sell the Company’s B2B Backup business.

This sale closed during the third quarter of 2021 (see Note 6 – Dispositions).

No impairment was recorded in the third 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

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

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

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

1 unchanged sentence

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

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

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

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

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

and (2) the former shareholders of acquired companies that remain as key employees receive

compensation other than contingent earn-out payments at a reasonable level compared with the compensation of the Company’s other key employees.

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

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

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

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

2 unchanged sentences

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.

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

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

J2 Global reviews and re-assesses the estimated fair value of contingent consideration on a quarterly basis, and the updated fair value could be materially different from the initial estimates or prior quarterly amounts.

The Company reviews and re-assesses the estimated fair value of contingent consideration on a quarterly basis, and the updated fair value could be materially different from the initial estimates or prior quarterly amounts.

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

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

The Company’s income is subject to taxation in both the U.S.

and numerous foreign jurisdictions.

1 unchanged sentence

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

J2 Global establishes reserves for tax-related uncertainties based on estimates of whether, and the extent to which, additional taxes will be due.

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

These reserves for tax contingencies are established when the Company believes that certain positions might be challenged despite the Company’s belief that its tax return positions are fully supportable.

J2 Global adjusts these reserves in light of changing facts and circumstances, such as the outcome of a tax audit or lapse of a statute of limitations.

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

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

J2 Global accounts for income taxes in accordance with FASB ASC Topic No.

The Company accounts for income taxes in accordance with FASB ASC Topic No.

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

1 unchanged sentence

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

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

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

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

4 unchanged sentences

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

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

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

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

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

limitations on qualified charitable contributions and technical corrections to tax depreciation methods for qualified improvement property.

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

6 unchanged sentences

Share-Based Compensation

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

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

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

Accordingly, J2 Global measures share-based compensation expense at the grant date, based on the fair value of the award, and recognizes the expense over the employee’s requisite service period using the straight-line method.

Accordingly, the Company measures share-based compensation expense at the grant date, based on the fair value of the award, and recognizes the expense over the employee’s requisite service period using the straight-line method.

The measurement of share-based compensation expense is based on several criteria, including but not limited to the valuation model used and associated input factors, such as expected term of the award, stock price volatility, risk free interest rate, dividend rate and award cancellation rate.

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

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

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

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

50 unchanged sentences

Subscription revenues are recognized over time.

J2 Global generates Digital Media revenues through the license of certain assets to clients.

The Company generates Digital Media revenues through the license of certain assets to clients.

Assets are licensed for clients’ use in their own promotional materials or otherwise.

5 unchanged sentences

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

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

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

Revenue is recognized for these software transactions with multiple performance obligations after (i) the Company has had an approved contract and is committed to perform the respective obligations and (ii) the Company can identify and quantify each obligation and its respective selling price.

17 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

Digital Media 2021 2020 2021 2020

Advertising $ 196,888 $ 120,919 $ 371,012 $ 236,184

Subscription 54,168 41,720 105,049 87,148

Other 2,921 1,348 4,789 3,346

Advertising (a) $ 198,794 $ 138,441 $ 574,465 $ 380,188

Subscription and licensing (a) 52,010 44,423 145,935 121,028

Other (a) 11,625 3,920 22,880 12,246

Total Digital Media revenues $ 262,429 $ 186,784 $ 743,280 $ 513,462

Cloud Services

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

Subscription and licensing $ 182,087 $ 170,233 $ 528,699 $ 507,021

Other 92 15 267 69

7 unchanged sentences

Total $ 444,252 $ 356,976 $ 1,271,480 $ 1,020,353

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.

(a) The Company reclassified approximately $ 3.2 million and $ 8.8 million of revenue during the three and nine months ended September 30, 2020, respectively, from ‘Subscription and licensing’ to ‘Advertising’ and reclassified approximately $ 1.7 million and $ 6.7 million during the three and nine months ended September 30, 2020, respectively, from “Subscription and licensing’ to ‘Other’ to conform with current period presentation.

These reclassifications were made in order to separate games publishing revenue from traditional advertising revenue.

The Company has recorded $ 31.8 million and $ 29.0 million of revenue for the three months ended September 30, 2021 and 2020, respectively, and $ 161.2 million and $ 142.5 million of revenue for the nine months ended September 30, 2021 and 2020, respectively, which was previously included in the deferred revenue balance as of the beginning of each respective year.

As of September 30, 2021, the Company acquired $ 7.2 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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• Commission is evidenced by direct site reporting from the affiliate or via direct confirmation from the customer

Subscription and Licensing

• Evidence of delivery is contained in the Company’s systems or from correspondence with the customer which tracks when a customer accepts delivery of any assets, digital keys or download links

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

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

The Company completed the following acquisitions during the first nine 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.

(c) an asset purchase of Solutelia, LLC, acquired on July 15, 2021, a Colorado-based on-demand wireless telecommunications network monitoring and analysis, testing and optimization software business and related wireless telecommunications engineering services business;

(d) a stock purchase of Arthur L.

Davis Publishing, acquired on September 23, 2021, an Iowa-based digital nursing publication;

and (e) three immaterial Digital Media acquisitions.

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

For the nine months ended September 30, 2021, these acquisitions contributed $ 21.3 million to the Company’s revenues.

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

Total consideration for these transactions was $ 135.1 million net of cash acquired and assumed liabilities and is subject to certain post-closing adjustments which may increase or decrease the final consideration paid.

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Deferred revenue ( 7,192 )

Operating lease liabilities, noncurrent ( 7,191 )

Operating lease liabilities, current ( 7,191 )

Other current liabilities ( 14 )

Deferred tax liability ( 4,936 )

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Total $ 135,104

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.

During the nine months ended September 30, 2021, the purchase price accounting has been finalized for EDC Systems Inc (operating under the name “SRFax”), Inspired eLearning 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 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.

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 an immaterial adjustment in goodwill.

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

During the nine months ended September 30, 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 decrease in goodwill of $ 1.5 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.

Such adjustments had an immaterial impact on the amortization expense within the Condensed Consolidated Statement of Operations for the nine months ended September 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 six months ended June 30, 2021 is $ 53.0 million, of which $ 14.1 million is expected to be deductible for income tax purposes.

Goodwill recognized associated with these acquisitions during the nine months ended September 30, 2021 is $ 85.6 million, of which $ 44.1 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.

The following unaudited pro forma supplemental information is based on estimates and assumptions that the Company 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 the Company 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

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

Nine Months Ended

September 30,

(unaudited) (unaudited)

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Cost Impairment Adjustments Reported Amount

June 30, 2021

September 30, 2021

Equity securities $ 31,777 $ ( 16,677 ) $ ( 479 ) $ 14,621

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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:

During the first nine months of 2020, the Company recorded a loss on investments of $ 21.0 million, which consists primarily of the following:

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

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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.

At September 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):

June 30, 2021

September 30, 2021

Corporate debt securities $ — $ — $ — $ —

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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):

June 30, 2021 December 31, 2020

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

September 30, 2021 December 31, 2020

Due within 1 year $ — $ 663

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

In the first 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.

In the first nine months of 2021, the Company received capital call notices from the management of OCV Management, LLC for $ 21.2 million, inclusive of certain management fees, of which $ 21.2 million has been paid for the nine months ended September 30, 2021.

In the first nine months of 2020, the Company received capital call notices from the management of OCV Management, LLC for $ 31.0 million, inclusive of certain management fees, of which $ 30.0 million had been paid for the nine months ended September 30, 2020.

During the three and nine months ended September 30, 2021, the Company received distributions from OCV of $ 15.3 million and $ 15.3 million, respectively.

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 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.

During the three months ended September 30, 2021 and 2020, the Company recognized an investment loss of $( 1.9 ) million and $( 0.7 ) million, net of tax benefit, respectively, and during the nine months ended September 30, 2021 and 2020, the Company recognized an investment gain (loss) of $ 16.6 million and $( 10.8 ) million, net of tax (benefit) expense, respectively.

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

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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 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.

During the three months ended September 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 nine months ended September 30, 2021 and 2020, the Company recognized management fees of $ 2.3 million and $ 2.3 million, net of tax benefit, respectively.

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

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Equity method investment $ 96,097 $ 67,195

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

Assets-Held-For-Sale

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.

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

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.

As of September 30, 2021, the total gain recognized on the sale was $ 2.8 million which was recorded in (loss) 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 B2B Backup business met the held for sale criteria, and accordingly, the assets and liabilities were presented as held for sale on the Condensed Consolidated Statement of Operations at March 31, 2021 and June 30, 2021.

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):

June 30, 2021

Accounts receivable, net of allowance of $346

Prepaid expenses and other current assets 2,426

Property and equipment, net 10,161

Operating lease right-of-use assets 15,181

Trade names, net 3,886

Customer relationships, net 8,131

Goodwill 48,632

Other purchased intangibles, net 776

Deferred income taxes, noncurrent 11,326

Other assets 94

Total assets held for sale $ 107,126

Accounts payable and accrued expenses $ 2,720

Income taxes payable, current 155

Deferred revenue, current 2,650

Operating lease liabilities, current 2,875

Other current liabilities 393

Deferred revenue, noncurrent 4

Operating lease liabilities, noncurrent 11,915

Deferred income taxes, noncurrent 563

Other long-term liabilities 170

Total liabilities held for sale $ 21,445

During the second quarter of 2021, the Company received an offer to purchase the B2B Backup business and management determined that the fair value of the business less cost to sell was lower than its carrying amount.

As a result, the Company recorded an impairment to goodwill of $ 32.6 million during the second quarter of 2021, which was recorded in impairment of business on the Condensed Consolidated Statement of Operations (see Note 8 - Goodwill and Intangible Assets).

On September 17, 2021, in a cash transaction, the Company sold the B2B Backup business.

As of September 30, 2021, the total loss recognized on the sale was $ 24.6 million which was recorded in loss on sale of business on the Condensed Consolidated Statement of Operations.

Fair Value Measurements

J2 Global complies with the provisions of ASC 820, which defines fair value, provides a framework for measuring fair value and expands the disclosures required for fair value measurements of financial and non-financial assets and liabilities.

The Company complies with the provisions of ASC 820, which defines fair value, provides a framework for measuring fair value and expands the disclosures required for fair value measurements of financial and non-financial assets and liabilities.

ASC 820 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.

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

The fair value of long-term debt is determined using recent quoted market prices or dealer quotes

for each of the Company’s instruments, which are Level 1 inputs.

The fair value of the Company’s debt instruments at June 30, 2021 and December 31, 2020 was $ 2.3 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 September 30, 2021 and December 31, 2020 was $ 2.0 billion and $ 2.0 billion, respectively (see Note 9 - Debt).

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

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

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

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

Valuation Technique Unobservable Input Range Weighted Average

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Discount rate 27.3 % - 38.0 %

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

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

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

Cash equivalents:

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Contingent consideration payments ( 5,831 ) Not applicable

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.

Balance as of September 30, 2021 $ 9,296

In connection with the Company’s acquisition activity, contingent consideration of up to $ 14.9 million ma y be payable upon achieving certain revenue, and/or unique visitor thresholds and had a combined fair value of $ 9.3 million and $ 9.1 million at September 30, 2021 and December 31, 2020, respectively.

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

During the nine months ended September 30, 2021, the Company recorded a decrease in the fair value of the contingent consideration of $ 0.6 million and reported such decrease 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 six months ended June 30, 2021 are as follows (in thousands):

The changes in carrying amounts of goodwill for the nine months ended September 30, 2021 are as follows (in thousands):

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

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Goodwill acquired (Note 4) 41,152 — 41,152 44,400 85,552

Goodwill removed due to sale of a business (1)

— ( 1,339 ) ( 1,339 ) — ( 1,339 )

Goodwill reclassified to noncurrent assets held for sale (2)

Goodwill removed due to sale of businesses (1)

— ( 50,276 ) ( 50,276 ) — ( 50,276 )

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Foreign exchange translation ( 3,462 ) ( 3,890 ) ( 7,352 ) ( 430 ) ( 7,782 )

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

(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).

Balance as of September 30, 2021 $ 463,161 $ 412,735 $ 875,896 $ 985,436 $ 1,861,332

(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 and on September 17, 2021, the Company sold certain of its B2B Backup assets which resulted in $ 49.0 million of goodwill being removed in connection with the sale (see Note 6 - Dispositions).

(2) During the nine months ended September 30, 2021, the Company had an impairment to goodwill of $ 32.6 million in connection with certain B2B Backup assets.

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

Intangible Assets with Indefinite Lives:

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

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

September 30,

2021 December 31,

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Intangible Assets Subject to Amortization:

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

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

Weighted-Average

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

Amortization expense, included in general and administrative expense, approximated $ 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

Amortization expense, included in general and administrative expense, approximated $ 47.8 million and $ 41.2 million for the three months ended September 30, 2021 and 2020, respectively, and $ 144.3 million and $ 115.6 million for the nine months ended September 30, 2021 and 2020, respectively.

Amortization expense is estimated to approximate $ 43.8 million, $ 143.5 million, $ 123.2 million, $ 80.2 million and $ 75.1 million for the remaining three months of fiscal year 2021 through fiscal year 2025, respectively, and $ 143.6 million thereafter through the duration of the amortization period.

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

September 30, 2021 December 31, 2020

4.625 % Senior Notes

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3.25 % Convertible Notes

399,613 402,414

1.75 % Convertible Notes

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4.625 % Senior Notes

On October 7, 2020, J2 Global, Inc.

completed the issuance and sale of $ 750 million aggregate principal amount of its

4.625 % senior notes due 2030 (the“ 4.625 % Senior Notes”) in a private placement offering exempt from the registration requirements of the Securities Act of 1933.

On October 7, 2020, the Company completed the issuance and sale of $ 750 million aggregate principal amount of its 4.625 % senior notes due 2030 (the“ 4.625 % Senior Notes”) in a private placement offering exempt from the registration requirements of the Securities Act of 1933.

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

The 4.625 % Senior Notes are presented as long-term debt, net of deferred issuance costs, on the Consolidated Balance Sheets as of 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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The 4.625 % Senior Notes mature on October 15, 2030, and are senior unsecured obligations of the Company which are guaranteed, jointly and severally, on an unsecured basis by certain of the Company’s existing and future domestic direct and indirect wholly-owned subsidiaries (collectively, the “Guarantors”).

If J2 Global, Inc.

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

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

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

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These covenants contain certain exceptions.

Restricted payments are applicable only if J2 Global, Inc.

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

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).

Restricted payments are applicable only if the Company 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 September 30, 2021.

On September 24, 2021, the Company announced the commencement of a cash tender offer for up to a maximum aggregate amount of $ 90.0 million of its 4.625 % Senior Notes.

Accordingly, as of September 30, 2021, the Company has classified $ 83.3 million of its 4.625 % Senior Notes as short-term on its Condensed Consolidated Balance Sheet as of September 30, 2021.The remainder of the 4.625 % Senior Notes are presented as long-term debt, net of deferred issuance costs, on the Condensed Consolidated Balance Sheet as of September 30, 2021.

As of September 30, 2021 and December 31, 2020, the estimated fair value of the 4.625 % Senior Notes was approximately $ 797.9 million and $ 796.9 million, and was based on recent quoted market prices or dealer quotes for the 4.625 % Senior Notes which are Level 1 inputs (see Note 7 - Fair Value Measurements).

3.25 % Convertible Notes

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

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

Beginning with the six-month interest period commencing on June 15, 2021, the Company must pay contingent interest on the 3.25 % Convertible Notes during any six-month interest period if the trading price per $1,000 principal amount of the 3.25 % Convertible Notes for each of the five trading days immediately preceding the first day of such interest period equals or exceeds $ 1,300 .

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.

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.

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

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

Beginning with the six-month interest period commencing on June 15, 2021, the Company had to pay contingent interest on the 3.25 % Convertible Notes during any six-month interest period if the trading price per $1,000 principal amount of the 3.25 % Convertible Notes for each of the five trading days immediately preceding the first day of such interest period equaled or exceeded $ 1,300 .

Any contingent interest payable on the 3.25 % Convertible Notes would have been in addition to the regular interest payable on the 3.25 % Convertible Notes.

In connection with the spin-off of Consensus, the Company called its 3.25 % Convertible Notes for redemption and on August 2, 2021, the Company redeemed in full all of its outstanding 3.25 % Convertible Notes.

During the three and nine months ended September 30, 2021, the Company satisfied its conversion obligation by paying the principal of $ 399.6 million and $ 402.4 million, respectively, in cash and issued 3,031,817 and 3,050,850 shares of the Company’s common stock.

respectively (see Note 13 - Stockholders’ Equity).

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 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.

The fair value of the 3.25 % Convertible Notes at each balance sheet date was 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 was not available, the fair value was determined using cash-flow models of the scheduled payments discounted at market interest rates for comparable debt without the conversion feature.

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

1.75 % Convertible Notes

On November 15, 2019, J2 Global issued $ 550.0 million aggregate principal amount of 1.75 % convertible senior notes due November 1, 2026 (the “ 1.75 % Convertible Notes”).

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

On November 15, 2019, the Company issued $ 550.0 million aggregate principal amount of 1.75 % convertible senior notes due November 1, 2026 (the “ 1.75 % Convertible Notes”).

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

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

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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;

(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;

(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 the Company’s 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;

(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 the Company’s common stock and the applicable conversion rate on each such trading day;

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.

J2 Global will settle conversions of the 1.75 % Convertible Notes by paying or delivering, as the case may be, cash, shares of J2 Global common stock or a combination thereof at J2 Global’s election.

The Company currently intends to satisfy its conversion obligation by paying and delivering a combination of cash and shares of the Company’s common stock.

The Company will settle conversions of the 1.75 % Convertible Notes by paying or delivering, as the case may be, cash, shares of the Company’s common stock or a combination thereof at the Company’s election.

The Company currently intends to satisfy its conversion obligation by paying and delivering a combination of cash

and shares of the Company’s common stock.

Holders of the notes will have the right to require the Company to repurchase for cash all or any portion of their notes upon the occurrence of certain corporate events, subject to certain conditions.

During the 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.

During the third 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 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.

As of September 30, 2021, the conversion rate is 7.9864 shares of the Company’s 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 the Company’s common stock.

The conversion rate is subject to adjustment for certain events as set forth in the indenture governing the 1.75 % Convertible Notes, but will not be adjusted for accrued interest.

In addition, upon the occurrence of a “Make-Whole Fundamental Change” (as defined in the 1.75 % Convertible Note Indenture), J2 Global will increase the conversion rate for a holder that elects to convert its 1.75 % Convertible Notes in connection with such a corporate event in certain circumstances.

J2 Global may not redeem the 1.75 % Convertible Notes prior to November 1, 2026, and no sinking fund is provided for the 1.75 % Convertible Notes.

In addition, upon the occurrence of a “Make-Whole Fundamental Change” (as defined in the 1.75 % Convertible Note Indenture), the Company will increase the conversion rate for a holder that elects to convert its 1.75 % Convertible Notes in connection with such a corporate event in certain circumstances.

The Company may not redeem the 1.75 % Convertible Notes prior to November 1, 2026, and no sinking fund is provided for the 1.75 % Convertible Notes.

The 1.75 % Convertible Notes are the Company’s general senior unsecured obligations and rank:

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This debt discount is amortized to interest expense using the effective interest method over the period from the issuance date through the maturity date of November 1, 2026.

J2 Global estimated the borrowing rates of similar debt without the conversion feature at origination to be 5.5 % for the 1.75 % Convertible Notes and determined the debt discount to be $ 118.9 million.

The Company estimated the borrowing rates of similar debt without the conversion feature at origination to be 5.5 % for the 1.75 % Convertible Notes and determined the debt discount to be $ 118.9 million.

As a result, a conversion premium after tax of $ 88.1 million (net of $ 2.8 million of the deferred issuance costs) are recorded in additional paid-in capital.

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

As of September 30, 2021, the remaining period over which the unamortized debt discount will be amortized is 5.1 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.

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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.

As of September 30, 2021, the unamortized deferred issuance costs were $ 8.0 million.

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

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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.

As of September 30, 2021 and December 31, 2020, the estimated fair value of the 1.75 % Convertible Notes was approximately $ 692.9 million and $ 569.7 million, respectively.

Credit Facility and Bridge Loan

On April 7, 2021, the Company entered into a $ 100.0 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.

Subject to customary conditions, the Company may, from time to time, request increases in the commitments under the Credit Agreement in an aggregate amount up to $ 250.0 million, for a total aggregate commitment of up to $ 350.0 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.

On June 2, 2021, June 21, 2021, August 20, 2021 and September 16, 2021, the Company entered into First, Second, Third and Fourth Amendments (together the “Amendments”) to the Credit Agreement.

The Amendments (i) provided for the issuance of a senior secured term loan under the Credit Agreement, in an aggregate principal amount of $ 485.0 million (the “Bridge Loan Facility”), (ii) permitted the spin-off of the Company’s cloud fax business into a new publicly traded company, and (iii) provided for certain other changes to the Credit Agreement.

The Bridge Loan Facility bore 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 Facility until twelve months after the funding date of the Bridge Loan Facility, 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 Facility until repayment of the Bridge Loan Facility, either a base rate plus 3.00 % or a LIBOR rate plus 4.00 %.

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

As of September 30, 2021, the Company had drawn on the full amount of the Bridge Loan Facility with $ 485.0 million outstanding.

The proceeds of the Bridge Loan Facility were used to redeem the Company’s 3.25 % Convertible Notes.

As of September 30, 2021, the estimated fair value of the Bridge Loan Facility was $ 485.0 million.

Refer to Note 18 - Subsequent Events for information on the extinguishment of the Bridge Loan subsequent to September 30, 2021 in connection with the spin-off of the cloud fax business.

The Company was required to pay a funding fee of 0.50 % of the aggregate principal amount of Bridge Loan Facility 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

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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.

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

Office and equipment leases are typically for terms of three to five years and generally provide renewal options for terms up to an additional five years .

Some of the Company’s leases include options to terminate within one year.

For the first nine months of 2021, the Company recorded impairments of $ 9.4 million on its operating lease right of use assets primarily related to exiting certain lease space as the Company regularly evaluates its office space requirements in light more of its workforce working from home as part of a permanent “remote” or “partial remote” work model.

During the third quarter of 2020, the Company had also decided to exit and seek subleases for certain leased facilities in the Digital Media reportable segment primarily also due to work from home models.

The Company recorded a non-cash impairment charge of $ 9.8 million related to operating lease right-of-use assets for the affected facilities and an impairment charge of $ 3.6 million for associated property and equipment.

The impairments were determined by comparing the fair value of the impacted right-of-use asset to the carrying value of the asset as of the impairment measurement date, as required under ASC Topic 360, Property, Plant, and Equipment.

The fair value of the right-of-use asset was based on the estimated sublease income for the affected facilities taking into consideration the time it will take to obtain a sublease tenant, the applicable discount rate and the sublease rate which represent Level 3 unobservable inputs.

The impairments are presented in general and administrative expenses on the Condensed Consolidated Statements of Operations.

In certain agreements in which the Company leases office space where the Company is the tenant, it subleases the site to various other companies through a sublease agreement.

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

Three Months Ended June 30, Six Months Ended

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

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

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Operating leases

Operating lease right-of-use assets $ 88,331 $ 105,845

Operating lease right-of-use assets classified as assets held for sale 15,181 —

Total operating lease right-of-use assets $ 88,331 $ 105,845

Operating lease liabilities, current $ 31,636 $ 32,211

Operating lease liabilities, current classified as assets held for sale 2,875 —

Operating lease liabilities, noncurrent 84,519 99,177

Operating lease liabilities, noncurrent classified as assets held for sale 11,915 —

Total operating lease liabilities $ 116,155 $ 131,388

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

Six Months Ended

Nine Months Ended

September 30,

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

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Other supplemental operating lease information consists of the following:

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Operating leases:

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Weighted average discount rate 3.83 % 3.93 %

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

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

Operating Leases

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Present value of operating lease liabilities $ 116,155

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 sublease income for the three months ended September 30, 2021 and 2020 was $ 0.5 million and $ 0.4 million, respectively, and was $ 1.4 million and $ 2.2 million for the nine months ended September 30, 2021 and 2020, respectively.

Total estimated aggregate sublease income to be received in the future is $ 5.2 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.

For the first nine months of 2020, the Company recorded $ 2.1 million 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.

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Discount Rate

The majority of the J2 Global’s leases are discounted using the Company’s incremental borrowing rate as the rate implicit in the lease is not readily determinable.

The majority of the Company’s leases are discounted using the Company’s incremental borrowing rate as the rate implicit in the lease is not readily determinable.

Rates are obtained from various large banks to determine the appropriate incremental borrowing rate each quarter for collateralized loans with a maturity similar to the lease term.

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Commitments and Contingencies

From time to time, J2 Global and its affiliates are involved in litigation and other legal disputes or regulatory inquiries that arise in the ordinary course of business.

Any claims or regulatory actions against J2 Global and its affiliates, whether meritorious or not, could be time consuming and costly, and could divert significant operational resources.

From time to time, the Company and its affiliates are involved in litigation and other legal disputes or regulatory inquiries that arise in the ordinary course of business.

Any claims or regulatory actions against the Company and its affiliates, whether meritorious or not, could be time consuming and costly, and could divert significant operational resources.

The outcomes of such matters are subject to inherent uncertainties, carrying the potential for unfavorable rulings that could include monetary damages and injunctive relief.

On February 17, 2011, Emmanuel Pantelakis (“Pantelakis”) filed suit against a J2 Global affiliate in the Ontario Superior Court of Justice (No.

11-50673), alleging that the J2 Global affiliate breached a contract relating to Pantelakis’s use of the Campaigner service.

The J2 Global affiliate filed a responsive pleading on March 23, 2011 and responses to undertakings on July 16, 2012.

On November 6, 2012, Pantelakis filed a second amended statement of claim, reframing his lawsuit as a negligence action.

The J2 Global affiliate filed an amended statement of defense on April 8, 2013.

Discovery has closed, with the exception of one issue.

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

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

filed a putative class action lawsuit against two J2 Global affiliates in the Circuit Court for the County of Pope, State of Arkansas (58-cv-2016-40), alleging violations of the TCPA.

filed a putative class action lawsuit against two Company affiliates in the Circuit Court for the County of Pope, State of Arkansas (58-cv-2016-40), alleging violations of the TCPA.

The case was removed to the U.S.

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4:16-cv-00682).

On March 20, 2017, the District Court granted a motion for judgment on the pleadings filed by the J2 Global affiliates and dismissed all claims against the J2 Global affiliates.

On March 20, 2017, the District Court granted a motion for judgment on the pleadings filed by the Company affiliates and dismissed all claims against the Company affiliates.

On July 23, 2018, the Eighth Circuit Court of Appeals vacated the judgment and remanded to district court with instructions to return the case to state court.

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On April 1, 2019, the state court granted a motion for class certification filed by the plaintiff in 2016.

Because the prior removal to federal court had deprived the state court of jurisdiction, the J2 Global affiliates had not yet filed an opposition brief to the 2016 motion when the state court granted the motion.

The J2 Global affiliates appealed the order.

On July 15, 2019, the J2 Global affiliates removed the case to federal court pursuant to the Class Action Fairness Act of 2005.

Because the prior removal to federal court had deprived the state court of jurisdiction, the Company affiliates had not yet filed an opposition brief to the 2016 motion when the state court granted the motion.

The Company affiliates appealed the order.

On July 15, 2019, the Company affiliates removed the case to federal court pursuant to the Class Action Fairness Act of 2005.

On November 26, 2019 the court denied the Plaintiff’s motion to remand.

On December 20, 2019, the court granted the Plaintiff’s motion for leave to amend its complaint.

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

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

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.

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

On September 3, 2021, the court granted final approval of the class settlement.

On July 8, 2020, Jeffrey Garcia filed a putative class action lawsuit against the Company in the Central District of California (20-cv-06906), alleging violations of federal securities laws.

The Company has moved to dismiss the consolidated class action complaint.

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

J2 Global has moved to dismiss the amended complaint.

The Company 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.

2020-0819-VCL) asserting derivative claims for breach of fiduciary duty and related theories against directors of the Company and other third parties relating generally the investment by the Company in OCV Fund I, L.P.

(the “Chancery Court Derivative Action”).

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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.

and other third parties.

On December 11, 2020, Danning Huang filed a lawsuit in the District of Delaware (20-cv-01687-LPS) asserting derivative claims against directors of the Company and other third parties.

The lawsuit alleges violations of Section 14(a), Section 10(b), Section 20(a) and Rule 10b-5 of the Securities Exchange Act of 1934, as well as breach of fiduciary duty, unjust enrichment and abuse of control.

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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.

However, depending on the amount and timing, an unfavorable resolution of some or all of these matters could have a material effect on J2 Global’s consolidated financial position, results of operations, or cash flows in a particular period.

The Company has accrued approximately $ 4.5 million in connection with potential loss contingencies relating to certain of these legal proceedings because they are considered probable by management.

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

The Company does not believe, based on current knowledge, that the foregoing legal proceedings or claims, after giving effect to existing accrued liabilities, are likely to have a material adverse effect on the Company’s consolidated financial position, results of operations, or cash flows.

However, depending on the amount and timing, an unfavorable resolution of some or all of these matters could have a material effect on the Company’s consolidated financial position, results of operations, or cash flows in a particular period.

The Company has not accrued for any material loss contingencies relating to these legal proceedings because materially unfavorable outcomes are not considered probable by management.

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

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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 9.1 % 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.

The Company’s effective tax rate was 16.6 % and 28.3 % for the three months ended September 30, 2021 and 2020, respectively and 12.3 % and 32.2 % for the nine months ended September 30, 2021 and 2020, respectively.

The Company’s decreased rate during the three and nine months ended September 30, 2021 is primarily due to the recognition of a tax benefit from the disposition and impairment of the backup business to business unit and a reduction in our net reserve for uncertain tax positions with no similar events for the period ending September 30, 2020.

During the nine months ended September 30, 2020 the Company recognized an increase in tax expense related to establishing a valuation allowance on deferred tax assets related to the impairment of certain investments with no similar events for the period ending September 30, 2021.

During the three and nine months ended September 30, 2021, in connection with the redemption of the 3.25 % Convertible Notes, the Company recorded a reduction in its deferred tax liabilities and an increase in additional paid-in capital of approximately $ 44.2 million.

As the redemption of the 3.25 % Convertible Notes were settled in cash and equity for an amount in excess of the Company’s tax basis in the 3.25 % Convertible Notes, the deferred tax liability was reversed with an adjustment to additional-paid-in capital.

Prior to the redemption, the Company had a deferred tax liability on the 3.25 % Convertible Notes for cumulative book-tax temporary differences related to interest expense that resulted in the tax basis exceeding the financial statement carrying amount of the 3.25 % Convertible Notes.

Income (loss) before income taxes included income from domestic operations of $ 29.2 million and $ 32.2 million for the nine months ended September 30, 2021 and 2020, respectively, and income from foreign operations of $ 107.1 million and $ 120.2 million for the nine months ended September 30, 2021 and 2020, respectively.

As of September 30, 2021 and December 31, 2020, the Company had $ 54.2 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 $ 37.3 million and $ 8.9 million for the six months ended June 30, 2021 and 2020, respectively.

Cash paid for income taxes net of refunds received was $ 51.8 million and $ 33.5 million for the nine months ended September 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 zero and $ 3.0 million at June 30, 2021 and December 31, 2020, respectively.

The Company’s prepaid taxes were $ 12.6 million and $ 3.0 million at September 30, 2021 and December 31, 2020, respectively.

Income Tax Audits :

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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.

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

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

The FTB, however, has suspended its audit for 2012 and 2013 pending the outcome of the IRS audit for such tax years.

In August 2018, the FTB notified the Company that it will commence an audit of tax years 2015 and 2016.

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

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

As of September 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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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 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).

Periodically, participants in J2 Global’s stock plans surrender to the Company shares of J2 Global stock to pay the exercise price or to satisfy tax withholding obligations arising upon the exercise of stock options or the vesting of restricted stock.

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

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

Cumulatively at September 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.

In connection with the Consensus spin-off, the Company called its 3.25 % Convertible Notes for redemption and during the three and nine months ended September 30, 2021, the Company issued 3,031,817 and 3,050,850 shares of the Company’s common stock, respectively, in connection with that redemption (see Note 9 - Debt).

Periodically, participants in the Company’s stock plans surrender to the Company shares of stock to pay the exercise price or to satisfy tax withholding obligations arising upon the exercise of stock options or the vesting of restricted stock.

During the three month period ended September 30, 2021, the Company purchased 49,641 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 2007 Stock Plan (the “2007 Plan”), 2015 Stock Option Plan (the “2015 Plan”) and 2001 Employee Stock Purchase Plan (the “Purchase Plan”).

The Company’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.

4,500,000 shares of the Company’s 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 the Company’s common stock on the date of grant for incentive stock options and not less than 85 % of the fair market value of the Company’s common stock on the date of grant for non-statutory stock options.

As of September 30, 2021, 7,000 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.

4,200,000 shares of J2 Global common stock are authorized to be used for 2015 Plan purposes.

Options under the 2015 Plan may be granted at exercise prices determined by the Board of Directors, provided that the exercise prices shall not be less than the higher of the par value or 100 % of the fair market value of J2 Global’s common stock subject to the option on the date the option is granted.

As of June 30, 2021, 423,000 shares underlying options and 272,940 shares of restricted stock units were outstanding under the 2015 Plan.

4,200,000 shares of the Company’s common stock are authorized to be used for 2015 Plan purposes.

Options under the 2015 Plan may be granted at exercise prices determined by the Board of Directors, provided that the exercise prices shall not be less than the higher of the par value or 100 % of the fair market value of the Company’s common stock subject to the option on the date the option is granted.

As of September 30, 2021, 400,000 shares underlying options and 246,018 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 six months ended June 30, 2021:

The following table represents stock option activity for the nine months ended September 30, 2021:

Number of Shares Weighted-

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Exercised ( 68,601 ) 42.08

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).

Outstanding at September 30, 2021 407,000 $ 74.25 6.2 $ 25,385,630

Exercisable at September 30, 2021 157,000 $ 73.00 6.0 $ 9,988,130

Vested and expected to vest at September 30, 2021 346,640 $ 74.11 6.1 $ 21,668,058

The total intrinsic values of options exercised during the nine months ended September 30, 2021 and 2020 were $ 5.6 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 September 30, 2021 and 2020, respectively, and $ 0.6 million and $ 0.7 million for the nine months ended September 30, 2021 and 2020, respectively.

As of September 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 $ 5.1 million and $ 5.8 million, respectively.

Fair Value Disclosure

J2 Global uses the Black-Scholes option pricing model to calculate the fair value of each option grant.

The Company uses the Black-Scholes option pricing model to calculate the fair value of each option grant.

The expected volatility is based on historical volatility of the Company’s common stock.

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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 12.22 % and 11.52 % as of June 30, 2021 and 2020, respectively.

Estimated forfeiture rates were 12.4 % and 11.8 % as of September 30, 2021 and 2020, respectively.

Restricted Stock and Restricted Stock Units

J2 Global has awarded restricted stock and restricted stock units to its Board of Directors and senior staff pursuant to certain share-based compensation plans.

The Company has awarded restricted stock and restricted stock units to its Board of Directors and senior staff pursuant to certain share-based compensation plans.

Compensation expense resulting from restricted stock and restricted unit grants is measured at fair value on the date of grant and is recognized as share-based compensation expense over the applicable vesting period.

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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 Company 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.

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

During the 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.

During the nine months ended September 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 nine months ended September 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

September 30, 2021 September 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 six months ended June 30, 2021 is set forth below:

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

Shares Weighted-Average

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Canceled ( 3,277 ) 82.96

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:

Nonvested at September 30, 2021 395,366 $ 61.62

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

Shares Weighted-Average

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Vested ( 124,761 )

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.

Canceled ( 3,262 )

Outstanding at September 30, 2021 246,018 3.2 $ 33,610,979

Vested and expected to vest at September 30, 2021 170,143 2.5 $ 23,244,890

The Company recognized $ 5.7 million and $ 5.1 million of compensation expense related to restricted stock, restricted stock units and market-based awards for the three months ended September 30, 2021 and 2020, respectively, and $ 16.4 million and $ 16.4 million for the nine months ended September 30, 2021 and 2020, respectively.

As of September 30, 2021 and December 31, 2020, the Company had unrecognized share-based compensation cost of approximately $ 37.3 million and $ 38.6 million, respectively, associated with these awards.

This cost is expected to be recognized over a weighted-average period of 3.6 for awards and 4.1 for units.

Employee Stock Purchase Plan

The Purchase Plan provides for the issuance of a maximum of two million shares of the Company’s common stock.

Under the Purchase Plan, eligible employees can have up to 15 % of their earnings withheld, up to certain maximums, to be used to purchase shares of J2 Global common stock at certain plan-defined dates.

The price of the J2 Global common stock purchased under the Purchase Plan for the offering periods is equal to 85 % of the lesser of the fair market value of a share of common stock of the Company on the beginning or the end of the offering period.

J2 Global determined that a plan provision exists which allows for the more favorable of two exercise prices, commonly referred to as a “look-back” feature.

Under the Purchase Plan, eligible employees can have up to 15 % of their earnings withheld, up to certain maximums, to be used to purchase shares of the Company’s common stock at certain plan-defined dates.

The price of the Company’s common stock purchased under the Purchase Plan for the offering periods is equal to 85 % of the lesser of the fair market value of a share of common stock of the Company on the beginning or the end of the offering period.

The Company determined that a plan provision exists which allows for the more favorable of two exercise prices, commonly referred to as a “look-back” feature.

The purchase price discount and the look-back feature cause the Purchase Plan to be compensatory and the Company to recognize compensation expense.

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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 16.50 % as of June 30, 2021 and 2020, respectively.

Estimated forfeiture rates were 11.15 % and 16.50 % as of September 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 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.

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

Cash received upon the issuance of the Company’s common stock under the Purchase Plan was $ 4.2 million and $ 3.3 million for the nine months ended September 30, 2021 and 2020, respectively.

As of September 30, 2021, 1,346,794 shares were available under the Purchase Plan for future issuance.

The Company recognized $ 0.8 million and $ 0.5 million of compensation expense related to the Purchase Plan for the three months ended September 30, 2021 and 2020, respectively, and $ 2.1 million and $ 1.5 million for the nine months ended September 30, 2021 and 2020, respectively.

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

June 30, 2021 June 30, 2020

September 30, 2021 September 30, 2020

Risk-free interest rate 0.06 % 0.13 %

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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 June 30, 2021 Six Months Ended

Three Months Ended

September 30, Nine Months Ended

September 30,

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 $ 42,569 $ 60,883 $ 136,209 $ 92,580

Net income available to participating securities (a)

( 28 ) ( 89 ) ( 143 ) ( 477 )

Net income available to J2 Global, Inc.

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

Net income available to the Company’s common shareholders $ 42,541 $ 60,794 $ 136,066 $ 92,103

Weighted-average outstanding shares of common stock 46,738,073 46,279,515 45,258,819 46,914,750

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(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.

For the three months ended September 30, 2021 and 2020, there were zero and 423,000 options outstanding, respectively, and for the nine months ended September 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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Digital Media and Cloud Services.

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

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

(i) Digital Media;

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

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

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Digital Media $ 1,978,252 $ 2,088,397

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Total assets $ 3,830,657 $ 3,665,331

(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

Nine Months Ended

September 30,

Capital expenditures:

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Total capital expenditures $ 87,495 $ 71,266

Three Months Ended June 30, Six Months Ended

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

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Total depreciation and amortization $ 66,217 $ 59,612 $ 196,443 $ 163,680

J2 Global maintains operations in the U.S., Canada, Ireland, Japan and other countries.

The Company maintains operations in the U.S., Canada, Ireland, Japan and other countries.

Geographic information about the U.S.

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

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$ 444,252 $ 356,976 $ 1,271,480 $ 1,020,353

September 30,

2021 December 31, 2020

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46,815 54,073

$ 937,321 $ 972,198

(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.

Total $ 880,944 $ 972,198

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 June 30, 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 September 30, 2021 (in thousands):

Unrealized Gains (Losses) on Investments Foreign Currency Translation Total

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Ending balance $ 169 $ ( 71,358 ) $ ( 71,189 )

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):

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

Unrealized Gains (Losses) on Investments Foreign Currency Translation Total

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Ending balance $ 169 $ ( 71,358 ) $ ( 71,189 )

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

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

Subsequent Events

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).

Consensus, Inc.

On October 7, 2021, the Separation of Consensus into an independent publicly traded company was completed and the Company transferred J2 Cloud Service, LLC to Consensus, Inc.

who in turn transferred non-fax assets and liabilities back to Ziff Davis such that Consensus was left with the cloud fax business.

The Company’s stockholders of record received one share of Consensus common stock for every three shares of J2 Global’s common stock.

On October 8, 2021, Consensus began trading on Nasdaq under the stock symbol “CCSI”.

Ziff Davis, Inc.

(“Ziff Davis”) (formerly J2 Global, Inc.) retained a 19.9 % interest in Consensus following the Separation.

On October 7, 2021, in exchange for the equity interest in Consensus, Consensus paid Ziff Davis approximately $ 269.6 million of cash and issued $ 500.0 million of senior notes due 2028 to Ziff Davis and Ziff Davis exchanged such notes with the lenders under the Credit Agreement and Credit Agreement Amendments by and among the subsidiaries of Ziff Davis party thereto as guarantors, Citicorp North America Inc.

and MUFG Union Bank, N.A.

and MUFG Union Bank, N.A., as administrative agent for the lenders, in exchange for extinguishment of the $ 485.0 million of indebtedness outstanding under the Bridge Loan Facility (Refer to Note 9 - Debt).

Such lenders or their affiliates agreed to resell the 2028 notes to qualified institutional buyers in the United States pursuant to Rule 144A.

On October 8, 2021, Ziff Davis announced that it had accepted tender offers to purchase $ 83.3 million in aggregate principal of its 4.625 % Senior Notes for an aggregate purchase price of $ 90.0 million.

The tender offer expired on October 22, 2021.

Corporate Name Change

On October 7, 2021, in connection with the spin-off of its cloud fax business discussed above, the Company changed its name from J2 Global, Inc.

to Ziff Davis, Inc.

Starting October 8, 2021, the Company’s common stock began trading under the stock symbol “ZD.”

Leadership Changes

In connection with the Separation, each of Doug Bech, Stephen Ross and Pamela Sutton-Wallace resigned as members of the Company’s board of directors, effective as of immediately prior to the Separation, to serve as directors of Consensus.

Additionally, Scott Turicchi resigned as President and Chief Financial Officer, effective as of immediately prior to the effectiveness of the Separation.

Turicchi serves as Chief Executive Officer of Consensus.

On October 7, 2021, Steve Dunn was appointed the interim principal financial officer of Ziff Davis while Ziff Davis is engaging in a search process for a new chief financial officer.

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