What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-03-15 compared with 2021-03-01 · 947 added, 744 removed, 1295 unchanged (57% of the section changed)

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Stockholders and Board of Directors

J2 Global, Inc.

Los Angeles, California

Ziff Davis, Inc.

New York, New York

Opinion on the Consolidated Financial Statements

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

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

We have audited the accompanying consolidated balance sheets of Ziff Davis, Inc.

(the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2021, and the related notes and financial statement schedule listed in the accompanying index (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021 , in conformity with accounting principles generally accepted in the United States of America.

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

Change in Accounting Method Related to Leases

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

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated March 14, 2022 expressed an adverse opinion thereon.

Basis for Opinion

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

Accounting for Acquisitions

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

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

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

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

Accounting for the Consensus Cloud Solutions, Inc.

As described in Notes 2 and 6 to the consolidated financial statements, on October 7, 2021, the Company completed the spin-off of Consensus Cloud Solutions, Inc.

(“Consensus”), a wholly owned subsidiary of the Company that was formed to hold certain assets and liabilities conducting the Company’s cloud fax business.

The spin-off transaction included the following accounting elements:

(i) a debt exchange with third-party lenders that resulted in a loss on extinguishment of existing debt, (ii) a reorganization of entities under common control and the distribution of 80.1% of Consensus common stock to the Company’s common stockholders, and (iii) the Company’s remaining 19.9% investment in Consensus common stock which resulted in a significant gain to reflect the 19.9% investment in Consensus at fair value.

The spin-off transaction resulted in the derecognition of the assets and liabilities of the cloud fax business and presentation of discontinued operations disclosures.

We identified the accounting for the spin-off transaction as a critical audit matter.

The accounting guidance surrounding the Company’s internal reorganization and disposal of Consensus was complex and required significant judgment by management, including the determination of:

(i) the loss on extinguishment related to the debt exchange, (ii) the initial carrying value of Consensus immediately prior to the distribution of the Consensus common stock to the Company’s common stockholders which resulted in significant adjustments to the Company’s retained earnings, and (iii) whether the Company would have significant influence over Consensus following the spin-off transaction and how to account for the Company’s remaining investment, which was particularly subjective due to the negative carrying value of Consensus immediately prior to the spin-off.

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

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

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

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

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

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

Accounting for Income Taxes

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

The Company is a U.S.

based multinational entity subject to taxes in the U.S.

and multiple foreign jurisdictions.

The provision for income taxes is based on a jurisdictional mix of earnings, statutory tax rates and enacted tax rules.

We identified the accounting for income taxes as a critical audit matter.

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

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

• Utilizing personnel with specialized skill and knowledge to assist in evaluating management’s technical accounting analysis relating to the Consensus spin-off by (i) evaluating the underlying terms of the agreements and (ii) assessing the appropriateness of conclusions reached by management.

• Recalculating the loss on extinguishment resulting from the debt exchange transaction.

• Verifying management’s determination of the initial carrying value of Consensus immediately prior to the spin-off and recalculating the fair value of the Company’s remaining investment in Consensus and the resulting gain.

• Testing information underling the Company’s allocation between continuing operations and discontinued operations.

Tax-Free Determination of the Consensus Cloud Solutions, Inc.

As described in Notes 2, 6 and 13 to the consolidated financial statements, on October 7, 2021, the Company completed the tax-free spin-off of Consensus.

As disclosed by management, the divestiture of Consensus is anticipated to qualify for U.S.

federal tax-free treatment under certain sections of the Internal Revenue Code (“Code”).

We identified the determination by management of the spin-off as a tax-free transaction for U.S.

federal income tax purposes to be a critical audit matter.

The determination of the Consensus transaction as tax-free requires management to make significant judgments about the interpretation of tax laws and regulations.

Auditing these elements involved especially complex auditor judgment due to the complexity of the interpretation and application of the Code and the extent of audit effort required to address these matters, including the need to involve personnel with specialized knowledge and skills.

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

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

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

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

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

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

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

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

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

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

jurisdictional tax rates.

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

• Testing the design and operating effectiveness of certain internal controls related to management’s evaluation of the spin-off as tax-free for U.S.

federal income tax purposes.

• Utilizing tax professionals with specialized skills and knowledge to assist in evaluating the conclusions reached by management that the requirements were met to qualify the spin-off as tax free for U.S.

federal income tax purposes by:

• Evaluating the opinions from the Company’s outside legal counsel and external tax advisor that management utilized in forming their conclusions on U.S.

federal taxability of the spin-off, including certain interpretations of the Code and related statutes.

• Inspecting meeting minutes of the Board of Directors and its committees, income tax filings, support from external advisors, and contracts associated with the spin-off for corroborating or contradictory evidence.

• Obtaining written representations from management concerning management’s intent associated with future transactions that could affect U.S.

federal taxability.

• Obtaining representations made by Consensus management to the Company that it does not intend to cause any transactions that could affect the Company’s U.S.

federal taxability.

/s/ BDO USA, LLP

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March 14, 2022

J2 GLOBAL, INC.

ZIFF DAVIS, INC.

AND SUBSIDIARIES

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Short-term investments 229,200 663

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

Accounts receivable, net of allowances of $ 9,811 and $ 11,552 , respectively (includes $ 9,272 and $ 0 due from related party, respectively)

316,342 309,549

Prepaid expenses and other current assets 60,290 52,160

Current assets, discontinued operations — 84,029

Total current assets 1,300,674 622,843

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Other purchased intangibles, net 149,513 174,792

Deferred income taxes, noncurrent 56,545 59,976

Deferred income taxes 5,917 12,195

Other assets 20,090 15,759

Other assets, discontinued operations — 483,522

TOTAL ASSETS $ 3,770,280 $ 3,665,331

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Other current liabilities 130 494

Current liabilities, discontinued operations — 61,192

Total current liabilities 497,238 882,555

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Liability for uncertain tax positions 42,546 53,089

Deferred income taxes, noncurrent 162,700 107,453

Deferred income taxes 108,982 157,308

Other long-term liabilities 37,542 41,400

Long-term liabilities, discontinued operations — 38,237

TOTAL LIABILITIES 1,802,548 2,454,313

Commitments and contingencies — —

Commitments and contingencies (Note 12) — —

Preferred stock, $ 0.01 par value.

Authorized 1,000,000.00 and none issued

Preferred stock - Series A, $ 0.01 par value.

Authorized 6,000 ;

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

total issued and outstanding zero

Preferred stock - Series B, $ 0.01 par value.

Authorized 20,000 ;

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

total issued and outstanding zero

Common stock, $ 0.01 par value.

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

Authorized 95,000,000 ;

total issued and outstanding 47,440,137 and 44,346,630 shares at December 31, 2021 and 2020, respectively.

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See Notes to Consolidated Financial Statements

J2 GLOBAL, INC.

ZIFF DAVIS, INC.

AND SUBSIDIARIES

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456,777 418,579 402,597

Goodwill impairment on business 32,629 — —

Total operating expenses 1,061,329 842,086 774,909

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Interest expense, net ( 72,023 ) ( 56,188 ) ( 26,886 )

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

Loss on debt extinguishment, net ( 5,274 ) — —

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

Loss on investments, net ( 16,677 ) ( 20,991 ) ( 4,211 )

Unrealized gain on short-term investment 298,490 — —

Other income (expense), net 1,293 65 ( 2,305 )

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

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

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

Income from continuing operations before income taxes and income from equity method investment, net of income taxes 351,351 78,348 54,821

Income tax (benefit) expense ( 14,199 ) 38,350 13,760

Income (loss) from equity method investment, net of income taxes 35,845 ( 11,338 ) ( 168 )

Net income from continuing operations 401,395 28,660 40,893

Income from discontinued operations, net of income taxes 95,319 122,008 177,913

Net income $ 496,714 $ 150,668 $ 218,806

Net income per common share from continuing operations:

Basic $ 8.74 $ 0.62 $ 0.85

Diluted $ 8.38 $ 0.61 $ 0.83

Net income per common share from discontinued operations:

Basic $ 2.08 $ 2.62 $ 3.69

Diluted $ 1.99 $ 2.58 $ 3.57

Net income per common share:

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See Notes to Consolidated Financial Statements

J2 GLOBAL, INC.

ZIFF DAVIS, INC.

AND SUBSIDIARIES

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Foreign currency translation adjustment ( 21,268 ) ( 8,902 ) ( 1,626 )

Consensus separation 18,966 — —

Change in fair value on available-for-sale investments, net of tax expense (benefit) of $ 0 , $ 181 and $ 149 for the years ended December 31, 2021, 2020 and 2019, respectively

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See Notes to Consolidated Financial Statements

J2 GLOBAL, INC.

ZIFF DAVIS, INC.

AND SUBSIDIARIES

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Loss on extinguishment of debt 14,024 37,969 —

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

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

Lease asset impairments and other charges 12,710 12,121 —

Goodwill impairment on business 32,629 — —

Changes in fair value of contingent consideration ( 1,223 ) ( 80 ) 6,318

Foreign currency remeasurement gain 184 ( 34,646 ) —

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

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

(Income) loss from equity method investments, net ( 35,845 ) 11,338 139

(Gain) loss on equity and debt investments ( 281,527 ) 20,826 4,164

Decrease (increase) in:

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Increase (decrease) in:

Accounts payable and accrued expenses 2,184 ( 770 ) ( 35,220 )

Accounts payable and accrued expenses (includes $ 17,635 , $ 0 and $ 0 with related parties)

22,262 2,184 ( 770 )

Income taxes payable ( 21,783 ) 6,489 ( 1,738 )

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Cash flows from investing activities:

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

Distribution from equity method investment 15,327 — 10,288

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Purchase of equity investments ( 999 ) ( 1,246 ) —

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

Proceeds from sale of equity investments 14,330 — —

Purchases of property and equipment ( 113,740 ) ( 92,552 ) ( 70,588 )

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Purchases of intangible assets ( 78 ) ( 3,118 ) ( 46 )

Net cash used in investing activities ( 586,220 ) ( 505,273 ) ( 406,613 )

Proceeds from divestiture of discontinued operations 259,104 — —

Net cash provided by (used in) investing activities 59,088 ( 586,220 ) ( 505,273 )

Cash flows from financing activities:

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Payment of note payable — ( 400 ) —

Proceeds from bridge loan 485,000 — —

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

Payment of debt ( 512,388 ) ( 650,000 ) ( 5,100 )

Debt extinguishment costs ( 29,250 ) — —

Debt extinguishment costs (includes reimbursement of $ 7,500 , $ 0 and $ 0 with related parties)

( 1,096 ) ( 29,250 ) —

Proceeds from line of credit — — 185,000

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Cash and cash equivalents at beginning of year 242,652 575,615 209,474

Cash and cash equivalents at beginning of year associated with discontinued operations 66,210 51,141 73,952

Cash and cash equivalents at beginning of year associated with continuing operations 176,442 524,474 135,522

Cash and cash equivalents at end of year 694,842 242,652 575,615

Cash and cash equivalents at end of year associated with discontinued operations — 66,210 51,141

Cash and cash equivalents at end of year associated with continuing operations $ 694,842 $ 176,442 $ 524,474

See Notes to Consolidated Financial Statements

J2 GLOBAL, INC.

ZIFF DAVIS, INC.

AND SUBSIDIARIES

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Balance, January 1, 2019 48,082,800 $ 481 $ 354,210 ( 600,000 ) $ ( 42,543 ) $ 769,575 $ ( 45,979 ) $ 1,035,744

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

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

Other comprehensive income, net of tax benefit of $ 460

Other comprehensive income, net of tax expense of $ 149

— — — — — — ( 483 ) ( 483 )

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

Equity portion of 1.75 % convertible debt

— — 88,138 — — — — 88,138

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

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

Exchange of Series B preferred stock 10,530 — — — — — — —

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

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— — — — — — ( 8,344 ) ( 8,344 )

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

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

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

Equity portion of 1.75 % convertible debt

Exercise of 3.25 % Convertible Note

— — ( 12 ) — — — — ( 12 )

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

Other, net — — 161 — — — — 161

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

Net income — — — — — 496,714 — 496,714

Other comprehensive income, net of tax expense of $ 181

Other comprehensive income, net of tax expense of zero

— — — — — — ( 21,382 ) ( 21,382 )

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Issuance of shares under Employee Stock Purchase Plan 109,248 1 9,230 — — — — 9,231

Exercise of 3.25 % Convertible Note

— — ( 12 ) — — — — ( 12 )

Vested restricted stock 560,290 5 ( 5 ) — — — — —

Repurchase and retirement of common stock ( 697,657 ) ( 7 ) ( 26,275 ) ( 445,711 ) 47,741 ( 52,045 ) — ( 30,586 )

Repurchase of shares of common stock — — — 445,711 ( 47,741 ) — — ( 47,741 )

Share based compensation — — 25,248 — — — — 25,248

Conversion shares issued as extinguishment cost to redeem 3.25 % Convertible Notes

3,050,850 31 431,921 — — — — 431,952

Reacquisition of 3.25 % Convertible Notes, net of tax

— — ( 390,526 ) — — — — ( 390,526 )

Consensus Separation — — — — — 261,394 18,966 280,360

Other, net — — 317 — — 188 — 505

1 unchanged sentence

See Notes to Consolidated Financial Statements

J2 GLOBAL, INC.

ZIFF DAVIS, INC.

AND SUBSIDIARIES

1 unchanged sentence

DECEMBER 31, 2021, 2020 and 2019

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

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

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

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

The Company’s Cybersecurity and Martech business provides cloud-based subscription services to consumers and businesses including 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.

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

Basis of Presentation and Summary of Significant Accounting Policies

(a) Principles of Consolidation

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

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

All intercompany accounts and transactions have been eliminated in consolidation.

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

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

Spin-Off and Discontinued Operations

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 Service, LLC to Consensus 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 (the “Retained Consensus Shares”).

On October 7, 2021, Consensus paid Ziff Davis approximately $ 259.1 million of cash in a distribution that is anticipated to be tax-free provided certain requirements are met, and issued $ 500.0 million of senior notes due 2028 to Ziff Davis, which Ziff Davis then exchanged 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, for the extinguishment of indebtedness outstanding under the Bridge Loan Facility (see Note 10 - Debt).

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

The accounting requirements for reporting the Company’s cloud fax business as a discontinued operation were met when the Separation was completed.

Accordingly, the consolidated financial statements reflect the results of the cloud fax business as a discontinued operation for all periods presented.

Ziff Davis did not retain a controlling interest in Consensus.

The Retained Consensus Shares are equity securities for which the Company elected the fair value option and subsequent fair value changes in the Retained Consensus Shares are included in the assets of and results from continuing operations as of and for the year ended December 31, 2021 (see Note 6 - Discontinued Operations and Dispositions).

(d) Allowances for Doubtful Accounts

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 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.

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On an ongoing basis, management evaluates the adequacy of these reserves.

(d) Revenue Recognition

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

(e) Revenue Recognition

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.

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

(e) Fair Value Measurements

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

(f) Fair Value Measurements

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

820, Fair Value Measurements and Disclosures (“ASC 820”), in measuring fair value and in disclosing fair value measurements.

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The fair value of the Company’s outstanding debt was determined using the quoted market prices of debt instruments with similar terms and maturities when available.

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

(f) Cash and Cash Equivalents

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

(g) Investments

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

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

(g) Cash and Cash Equivalents

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

(h) Investments

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

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

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

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

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

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

(h) Variable Interest Entities (“VIE”)

Investments classified as short-term are available to be converted into cash to fund current operations.

The Retained Consensus Shares are equity securities accounted for at fair value under the fair value option, and the related fair value gains and losses are recognized in earnings.

As the initial carrying value of the Retained Consensus Shares was negative immediately following the Separation, the Company elected the fair value option under ASC 825-10-25 to support the initial recognition of the Retained Consensus Shares at fair value and the negative book value of $ 69.3 million was recorded as a gain on the Consolidated Statement of Operations.

The fair value of Consensus common stock is readily available as Consensus is a publicly traded company.

(i) Variable Interest Entities (“VIE”s)

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

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

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

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 (see Note 5 - Investments).

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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.

(i) Debt Issuance Costs and Debt Discount

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

(j) Debt Issuance Costs and Debt Discount

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

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

(j) Derivative Instruments

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

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

(k) Concentration of Credit Risk

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

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

These institutions are required to invest the Company’s cash in accordance with the Company’s investment policy with the principal objectives being preservation of capital, fulfillment of liquidity needs and above market returns commensurate with preservation of capital.

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At December 31, 2021, the Company’s cash and cash equivalents were maintained in accounts in qualifying financial institutions that are insured up to the limit determined by the applicable governmental agency.

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

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

(l) Foreign Currency

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

Most of the Company’s foreign subsidiaries use the local currency of their respective countries as their functional currency.

Assets and liabilities are translated at exchange rates prevailing at the balance sheet dates.

Revenues, costs and expenses are translated into U.S.

Revenues and expenses are translated into U.S.

Dollars at average exchange rates for the period.

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Property and equipment are stated at cost.

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

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

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

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

The estimated useful lives of property and equipment range from one to ten years .

Fixtures, which are comprised primarily of leasehold improvements and equipment under finance leases, are amortized on a straight-line basis over their estimated useful lives or for leasehold improvements, the related lease term, if less.

The Company has capitalized certain internal-use software and website development costs which are included in property and equipment.

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

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

(n) Impairment or Disposal of Long-Lived and Intangible Assets

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

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.

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The Company assesses the impairment of identifiable definite-lived intangibles and long-lived assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable.

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

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

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

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

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

• Significant negative industry or economic trends;

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If the Company determined that the carrying value of definite-lived intangibles and long-lived assets may not be recoverable based upon the existence of one or more of the above indicators of impairment, it would record an impairment equal to the excess of the carrying amount of the asset over its estimated fair value.

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

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

No impairment was recorded in fiscal year 2019 or 2018.

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

In the year ended December 31, 2021 and 2020, the Company recorded impairments of certain operating right-of-use assets and associated property and equipment (see Note 11 - Leases).

No impairment was recorded in fiscal year 2019.

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

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

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

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

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

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, future revenue growth rates, gross and operating margins, customer attrition rates, royalty rates, discount rates and terminal growth rate assumptions.

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.

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Identifiable intangible assets are comprised of purchased customer relationships, trademarks and trade names, developed technologies and other intangible assets.

Intangible assets subject to amortization are amortized over the period of estimated economic benefit ranging from one to 20 years and are included in general and administrative expenses on the Consolidated Statements of Operations.

The Company evaluates our goodwill and indefinite-lived intangible assets for impairment pursuant to FASB ASC Topic No, 350, Intangibles - Goodwill and Other (“ASC 350”), which provides that goodwill and other intangible assets with indefinite lives are not amortized but tested for impairment annually or more frequently if J2 Global believes indicators of impairment exist.

Intangible assets subject to amortization are amortized over the period of estimated economic benefit ranging from one to twenty years and are included in general and administrative expenses on the Consolidated Statements of Operations.

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

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

If the Company determines that it was more likely than not that the fair value of the reporting unit is less than its carrying amount, then it performs the impairment test upon goodwill.

If the Company determines that it was more likely than not that the fair value of the reporting unit is less than its carrying amount, it then it performs an impairment test of goodwill.

The impairment test involves comparing the fair values of the applicable reporting units with their aggregate carrying values, including goodwill.

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

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

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

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

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

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

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

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

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

This sale closed during the third quarter of 2021 (see Note 6 - Discontinued Operations and Dispositions).

The Company performed the annual impairment test for goodwill for fiscal year 2021 on October 1 using a qualitative assessment primarily taking into consideration macroeconomic, industry and market conditions, overall financial performance and other relevant company-specific factors.

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

The Company performed the annual impairment test for intangible assets with indefinite lives for fiscal 2021 using a qualitative assessment primarily taking into consideration macroeconomic, industry and market conditions, overall financial performance and any other relevant company-specific factors.

The Company concluded that there were no impairments in 2021, 2020 and 2019.

In the first quarter of 2021, the Company aligned the annual impairment assessment date for the Cybersecurity and Martech business from September 30 to October 1, as it determined this date is preferable, and concluded this was not a material change in accounting principle.

In addition, the COVID-19 pandemic could have an adverse impact on the Company’s consolidated financial results in 2022, and possibly longer.

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(p) Contingent Consideration

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

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.

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

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

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

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 Consolidated Balance Sheets.

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;

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

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

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

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

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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 amounts.

Changes in the estimated fair value of our contingent earn-out liabilities and adjustments to the estimated fair value related to changes in all other unobservable inputs are reported in general and administrative expenses on the Consolidated Statements of Operations.

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 amounts.

Changes in the estimated fair value of its contingent earn-out liabilities and adjustments to the estimated fair value related to changes in all other unobservable inputs are reported in general and administrative expenses on the Consolidated Statements of Operations.

(q) Self-Insurance Program

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

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

The Company has secured reinsurance in the form of a two tiered stop-loss coverage that limits the exposure arising from any claims made.

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(r) Income Taxes

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.

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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 are recognized using enacted tax rates for the effect of temporary differences between the book and tax basis of recorded assets and liabilities.

GAAP also requires that deferred tax assets are reduced by a valuation allowance if it is more likely than not that some or all of the net deferred tax assets will not be realized.

ASC 740 also requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some or all of the net deferred tax assets will not be realized.

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.

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

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.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The amount forgiven did not have a significant impact to the Company’s financial statements.

The Company does not believe these provisions have a significant impact to our current and deferred income tax balances.

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

(s) Share-Based Compensation

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

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.

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

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

(t) Earnings Per Common Share (“EPS”)

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

Research, development and engineering expenditures were $ 78.9 million, $ 57.1 million and $ 44.7 million for the years ended December 31, 2021, 2020 and 2019, respectively.

(v) Segment Reporting

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The Company’s business segments are based on the organization structure used by the chief operating decision maker for making operating and investment decisions and for assessing performance.

The chief operating decision maker views the Company in two businesses:

Cloud Services and Digital Media.

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

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

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

and (iii) Digital Media.

In the fourth quarter of 2021, the Company changed its segment reporting as a result of the spin-off of its cloud fax business.

The Company has two reportable segments:

(i) Digital Media and (ii) Cybersecurity and Martech.

While this reporting change did not impact the Company's consolidated results, segment data has been recast to be consistent for all periods presented.

For additional information, see Note 18 - Segment Information.

(w) Advertising Costs

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(x) Recent Accounting Pronouncements

In June 2016, the FASB issued ASU No.

2016-13, Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments.

The amendments in this ASU replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.

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

In November 2018, the FASB issued ASU No.

2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses.

The amendments in this ASU align the implementation date for nonpublic entities’ annual financial statements with the implementation date for their interim financial statements.

In addition, the amendment clarifies that receivables arising from operating leases are not within the scope of Subtopic 326-20;

instead impairment of receivables arising from operating leases should be accounted for in accordance with Topic 842:

In April 2019, the FASB issued ASU No.

2019-04, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825 Financial Instruments.

The amendments in this ASU further clarify certain aspects of ASU No.

In May 2019, the FASB issued ASU No.

2019-05, Financial Instruments - Credit Losses (Topic 326):

Targeted Transition Relief.

The amendments in this ASU provide transition relief for ASU No.

2016-13 by providing an option to irrevocably elect the fair value option for certain financial assets measured at an amortized cost basis.

In November 2019, the FASB issued ASU No.

2019-10, Financial Instruments - Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842):

Effective Dates.

This ASU clarifies the effective dates of each related standards update and staggers such dates among filers and other types of entities.

Also in November 2019, the FASB issued ASU No.

2019-11, Codification Improvements to Topic 326, Financial Instruments - Credit Losses.

This ASU clarifies or addresses certain aspects of Update 2016-13.

Specifically, it addresses (1) expected recoveries for purchased financial assets with credit deterioration;

(2) transition relief for troubled debt restructuring;

(3) disclosures related to accrued interest variables;

(4) financial assets secured by collateral maintenance provisions;

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

In February 2020, the FASB issued ASU No.

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

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

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

2016-02, Leases (Topic 842).

This ASU codifies SEC Staff Accounting Bulletin No.

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

In August 2018, the FASB issued ASU No.

2018-13, Fair Value Measurement (Topic 820):

Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement.

The amendments in this ASU remove, add, and modify certain disclosures.

The ASU removes the following disclosure requirements from Topic 820:

(1) the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy;

(2) the policy for timing of transfers between levels;

(3) the valuation process for Level 3 fair value measurements;

and (4) certain other requirements for nonpublic entities.

The ASU adds the following disclosure requirements:

(1) the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and (2) the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements.

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

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

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

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

In December 2019, the FASB issued ASU No.

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

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

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

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

In January 2020, the FASB issued ASU No.

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

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

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

In March 2020, the FASB issued ASU No.

2020-03, Codification Improvements to Financial Instruments.

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

(1) fair value option disclosures;

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

(3) disclosures for depository and lending institutions;

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

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

(6) interaction of Topic 842 and Topic 326;

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

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

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

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

In March 2020, the FASB issued ASU No.

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

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

The Company does not expect the adoption of this standard to have a material impact on the Company’s consolidated financial statements.

In October 2020, the FASB issued ASU No.

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

adoption is permitted.

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

Early adoption is permitted.

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

In January 2021, the FASB issued ASU No.

2021-01, Reference Rate Reform (Topic 848).

The amendments in this ASU clarify the scope of ASC 848 to include derivatives that are affected by a change in the interest rate used for discounting, margining, or contract price alignment that do not also reference LIBOR or another reference rate that is expected to be discontinued as a result of reference rate reform.

Similar to ASU 2020-04, the guidance is effective for all entities immediately upon issuance on January 7, 2021.

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

In October 2021, the FASB issued ASU No.

2021-08, Business Combinations (Topic 805) - Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, Revenue from Contracts with Customers.

This ASU should be applied prospectively to acquisitions occurring on or after the effective date of December 15, 2022, and early adoption is permitted.

The Company is currently evaluating the impacts of this guidance on the Company’s consolidated financial statements.

(y) Reclassifications

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Digital Media

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

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

Revenue is earned from the delivery of advertising services on the Company’s owned and operated websites and on those websites that are part of Digital Media’s advertising network.

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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.

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These assets are recognized over the term of the access period.

The Digital Media business also generates revenue from other sources which includes marketing and production services.

The Digital Media business also generates revenue from other sources which include marketing and production services.

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.

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

Cloud Services

The Company’s Cloud Services revenues substantially consist of monthly recurring subscription and usage-based fees, which are primarily paid in advance by credit card.

Cybersecurity and Martech

The Company’s Cybersecurity and Martech revenues substantially consist of recurring subscription and usage-based fees, which are primarily paid in advance by credit card.

The Company defers the portions of monthly, quarterly, semi-annually and annually recurring subscription and usage-based fees collected in advance of the satisfaction of performance obligations and recognizes them in the period earned.

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

Along with its numerous proprietary Cybersecurity and Martech solutions, the Company also generates revenues by reselling various third-party solutions, primarily through its email security line of business.

These third-party solutions, along with the Company’s proprietary products, allow it to offer customers a variety of solutions to better meet the customer’s needs.

The Company records revenue on a gross basis with respect to reseller revenue because the Company has control of the specified good or service prior to transferring control to the customer.

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

The change in accounting principle in the first quarter of 2018 resulted in an adjustment to the Company’s retained earnings of $ 1.6 million (see Consolidated Statements of Stockholders’ Equity).

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

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Advertising (1)

Subscription 186,718 185,559 138,689

$ 838,075 $ 627,198 $ 531,191

Subscription and licensing (1)

197,354 166,219 164,052

33,871 17,943 15,268

Total Digital Media revenues $ 1,069,300 $ 811,360 $ 710,511

Cloud Services

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

Other 448 1,021 694

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

Cybersecurity and Martech

Subscription and licensing $ 348,611 $ 347,697 $ 340,245

Total Cybersecurity and Martech revenues $ 348,611 $ 347,697 $ 340,245

Corporate $ — $ 1 $ 8

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

Elimination of inter-segment revenues ( 1,189 ) ( 229 ) ( 300 )

Total Revenues $ 1,416,722 $ 1,158,829 $ 1,050,464

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Total $ 1,416,722 $ 1,158,829 $ 1,050,464

(1) The Company reclassified approximately $ 11.0 million and $ 15.5 million of revenue during the years ended December 31, 2020, and 2019, respectively, from ‘Subscription and licensing’ to ‘Advertising’ and reclassified approximately $ 9.5 million and $ 6.0 million of revenue during the years ended December 31, 2020, and 2019, 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 and to move job posting related revenue from subscriptions to advertising.

The Company has recorded $ 153.0 million, and $ 135.5 million of revenue for the years ended December 31, 2021 and 2020, respectively, which was previously included in the deferred revenue balance as of the beginning of each respective year.

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In addition, the Company provides content to its advertising partners which the Company sells to its partners’ customer base and receives a revenue share based on the terms of the agreement.

The Company satisfies its performance obligations within the Cloud Services business upon delivery of services to its customers.

The Company satisfies its performance obligations within the Cybersecurity and Martech business upon delivery of services to its customers.

Payment terms vary by type and location of our customers and the services offered.

The term between invoicing and when payment is due is not significant.

The time between invoicing and when payment is due is not significant.

Due to the nature of the services provided, there are no obligations for returns.

Significant Judgments

In determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment.

Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment.

Judgment is also required to determine the standalone selling price for each distinct performance obligation.

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• Commission is evidenced by direct site reporting from the affiliate or via direct confirmation from the customer

• 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 product, digital keys or download links

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

The Company has concluded revenue is recognized based on delivery of services over the contract period for advertising and on a straight-line basis over the contract period for subscriptions.

The Company believes that the methods described are a faithful depiction of the transfer of goods and services.

The Company’s Cloud Services business consists primarily of performance obligations that are satisfied over time.

This has been determined based on the fact that the nature of services offered are subscription based and include fax, voice, backup, security, CPP, and email marketing products where the customer simultaneously receives and consumes the benefit of the services provided regardless of whether the customer uses the services or not.

The Company’s Cybersecurity and Martech business consists primarily of performance obligations that are satisfied over time.

This has been determined based on the fact that the nature of services offered are subscription based where the customer simultaneously receives and consumes the benefit of the services provided regardless of whether the customer uses the services or not.

Depending on the individual contracts with the customer, revenue for these services are recognized over the contract period when any of the following materially distinct performance obligations are satisfied:

• Faxing capabilities are provided

• Voice services are delivered

• Email Marketing services are delivered

• Consumer privacy services are provided

• Faxing capabilities are provided (included in discontinued operations through October 7, 2021)

• Voice, email marketing and search engine optimization as services are delivered

• Consumer privacy services and data backup capabilities are provided

• Security solutions, including email and endpoint are provided

• Data backup capabilities are provided

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

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The Company completed the following acquisitions during the year ended December 31, 2021, paying the purchase price in cash in each transaction:

(a) an asset purchase of EDC Systems Inc.

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

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

(a) an asset purchase of DailyOM, acquired on April 30, 2021, a California-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;

(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;

(e) a stock purchase of Root Wireless, Inc.

acquired on December 13, 2021, a Washington-based mobile analytics firm;

and (f) four immaterial Digital Media acquisitions.

The Consolidated Statement of Operations since the date of each acquisition and balance sheet as of December 31, 2021, reflect the results of operations of all 2021 acquisitions.

For the year ended December 31, 2021, these acquisitions contributed $ 39.9 million to the Company’s revenues.

Net income from continuing operations 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 $ 160.4 million, net of cash acquired and assumed liabilities and is subject to certain post-closing adjustments which may increase or decrease the final consideration paid.

The following table summarizes the allocation of the purchase consideration for all 2021 acquisitions, including individually material acquisitions noted separately (in thousands):

Assets and Liabilities Valuation

Accounts receivable $ 9,513

Prepaid expenses and other current assets 1,655

Property and equipment 2,188

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

Trade names 16,349

Customer relationship 21,945

Goodwill 97,032

Other intangibles 38,894

Other long-term assets 62

Deferred tax asset 230

Accounts payable and accrued expenses ( 5,863 )

Deferred revenue ( 9,491 )

Operating lease liabilities, current ( 7,191 )

Other current liabilities ( 14 )

Deferred tax liability ( 9,237 )

Other long-term liabilities ( 1,511 )

Total $ 160,449

During the year ended December 31, 2021, the purchase price accounting has been finalized for the following 2020 acquisitions:

RetailMeNot, Inc., Inspired eLearning, The Aberdeen Group, LLC and The Big Willow, Inc., and other immaterial Digital Media and Cybersecurity and Martech acquired businesses.

The initial accounting for all the 2021 acquisitions is incomplete due to timing of available information and is subject to change.

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 year ended December 31, 2021, the Company recorded adjustments to the initial working capital and to the purchase accounting due to the finalization of prior period acquisitions in the Digital Media business, which resulted in a net decrease in goodwill of $ 1.4 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 Cybersecurity and Martech businesses which resulted in a net increase in goodwill of $ 0.5 million (see Note 9 - Goodwill and Intangible Assets).

Such adjustments had an immaterial impact on the amortization expense within the Consolidated Statements of Operations for the year ended December 31, 2021.

The fair value of the assets acquired includes accounts receivable of $ 9.5 million.

The gross amount due under contracts is $ 9.9 million, of which $ 0.4 million is expected to be uncollectible.

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

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

Goodwill recognized associated with these acquisitions during the year ended December 31, 2021 is $ 97.0 million, of which $ 42.1 million is expected to be deductible for income tax purposes.

Unaudited Pro Forma Financial Information for All 2021 Acquisitions

The following unaudited pro forma 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 are estimates and 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 the Company and its 2021 acquisitions as if each acquisition had occurred on January 1, 2020 (in thousands, except per share amounts):

Year ended December 31,

Revenues $ 1,482,323 $ 1,267,280

Net income from continuing operations $ 416,348 $ 33,351

EPS - Basic $ 9.06 $ 0.72

EPS - Diluted $ 8.69 $ 0.71

On June 4, 2021, the Company acquired all the outstanding issued capital of SEOmoz at a purchase consideration of $ 67.0 million, net of cash acquired and assumed liabilities.

SEOmoz is a provider of search engine optimization (“SEO”) solutions.

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

For the year ended December 31, 2021, SEOmoz contributed $ 25.6 million to the Company’s revenues.

Net income from continuing operations contributed by SEOmoz since the acquisition date was not separately identifiable due to the Company’s integration activities and is impracticable to provide.

The following table summarizes the allocation of the purchase consideration for the SEOmoz acquisition (in thousands):

Assets and Liabilities Valuation

Accounts receivable $ 3,278

Prepaid expenses and other current assets 1,547

Property and equipment 1,845

Operating lease right of use asset 5,888

Trade names 7,406

Customer relationships 5,000

Goodwill 41,329

Other intangibles 22,777

Other long-term assets 62

Accounts payables and accrued expenses ( 2,655 )

Other current liabilities ( 14 )

Deferred revenue ( 6,398 )

Operating lease liabilities, current ( 7,191 )

Deferred tax liability ( 5,327 )

Other long-term liabilities ( 550 )

Total $ 66,997

The fair value of the assets acquired includes accounts receivable of $ 3.3 million.

The gross amount due under contracts is $ 3.6 million, of which $ 0.3 million is expected to be uncollectible.

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

Goodwill recognized in connection with this acquisition during the year ended December 31, 2021 is $ 41.3 million of which zero is expected to be deductible for income tax purposes.

Unaudited Pro Forma Financial Information for SEOmoz Acquisition

The following unaudited pro forma information is not necessarily indicative of the Company’s consolidated results of operations in future periods or the results that actually would have been realized had the Company and the acquired business been combined companies during the periods presented.

These pro forma results are estimates and exclude any savings or synergies that would have resulted from this business acquisition had it occurred on January 1, 2020.

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

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

Year ended December 31,

Revenues $ 1,438,099 $ 1,207,910

Net income from continuing operations

$ 406,281 $ 29,382

EPS - Basic $ 8.84 $ 0.63

EPS - Diluted $ 8.48 $ 0.62

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

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

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

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

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

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

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

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

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

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

For the year ended December 31, 2020, these acquisitions contributed $ 54.6 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.

Net income from continuing operations 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 $ 472.8 million, net of cash acquired and assumed liabilities and subject to certain post-closing adjustments which may increase or decrease the final consideration paid.

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

The following table summarizes the allocation of the purchase consideration for all 2020 acquisitions, including individually material acquisitions noted separately (in thousands):

Assets and Liabilities Valuation

19 unchanged sentences

Total $ 472,760

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

Highwinds Capital, Inc.

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

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

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

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

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

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

Such adjustments

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

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

The fair value of the assets acquired includes accounts receivable of $ 46.1 million.

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Goodwill recognized in connection with these acquisitions during the year ended December 31, 2020 is $ 202.9 million, of which $ 55.0 million is expected to be deductible for income tax purposes.

Unaudited Pro Forma Financial Information for All 2020 Acquisitions

The following unaudited pro forma information is not necessarily indicative of the Company’s consolidated results of operations in future periods or the results that actually would have been realized had the Company and the acquired businesses been combined companies during the periods presented.

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

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

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

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

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

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

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

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

Year ended December 31,

Revenues $ 1,339,927 $ 1,306,479

Net income from continuing operations $ 21,450 $ 11,773

EPS - Basic $ 0.46 $ 0.24

EPS - Diluted $ 0.45 $ 0.23

RetailMeNot, Inc.

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

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

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

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

1 unchanged sentence

contributed $ 47.6 million to the Company’s revenues.

Net income contributed by RetailMeNot, Inc.

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

Net income from continuing operations contributed by RetailMeNot, Inc.

since the acquisition date was not separately identifiable due to the Company’s integration activities and is impracticable to provide.

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

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

Pro Forma Financial Information for RetailMeNot, Inc.

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

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

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

Unaudited Pro Forma Financial Information for RetailMeNot, Inc.

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

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

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

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

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

(unaudited) (unaudited)

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

Net income $ 140,880 $ 190,709

EPS - Basic $ 3.03 $ 3.94

EPS - Diluted $ 2.98 $ 3.83

Pro Forma Financial Information for All 2020 Acquisitions

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

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

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

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

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

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

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

(unaudited) (unaudited)

Year ended December 31,

Revenues $ 1,308,731 $ 1,267,847

Net income $ 140,534 $ 178,654

Net income from continuing operations $ 23,395 $ 22,117

EPS - Basic $ 0.50 $ 0.46

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For the year ended December 31, 2019, these acquisitions contributed $ 126.3 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.

Net income from continuing operations 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 $ 429.5 million, net of cash acquired and assumed liabilities and subject to certain post-closing adjustments which may increase or decrease the final consideration paid.

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

The following table summarizes the allocation of the purchase consideration for all 2019 acquisitions, including individually material acquisitions noted separately (in thousands):

Assets and Liabilities Valuation

19 unchanged sentences

Total $ 429,517

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

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

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

5 unchanged sentences

Goodwill recognized in connection with these acquisitions during the year ended December 31, 2019 is $ 253.1 million, of which $ 95.1 million is expected to be deductible for income tax purposes.

Pro Forma Financial Information for All 2019 Acquisitions

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

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

Unaudited Pro Forma Financial Information for All 2019 Acquisitions

The following unaudited pro forma information is not necessarily indicative of the Company’s consolidated results of operations in future periods or the results that actually would have been realized had the Company and the acquired businesses been combined companies during the periods presented.

These pro forma results are estimates and exclude any savings or synergies that would have resulted from these business acquisitions had they occurred on January 1, 2019.

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

(unaudited) (unaudited)

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

December 31, 2019

Revenues $ 1,152,542

Net income $ 211,303 $ 104,710

Net income from continuing operations $ 35,203

EPS - Basic $ 0.73

EPS - Diluted $ 0.71

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

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

(b) an asset purchase of Line2, Inc., acquired on June 18, 2018, a California-based provider of voice solutions;

(c) a share purchase of all the membership interests of Mosaik Solutions, LLC, acquired on June 18, 2018, a Tennessee-based provider of mobile coverage data and network intelligence for mobile operators and network-dependent enterprises;

(d) a share purchase of DemandShore Solutions Private Limited, acquired on July 19, 2018, an India-based provider of software and other solutions to sales and marketing professionals;

(e) a share purchase of DW PRIME Holdings, Inc., acquired on August 20, 2018, a Florida-based accredited provider of continuing medical education for medical professionals;

(f) a share purchase of The Communicator Corporation Limited, acquired on September 25, 2018, an United Kingdom-based provider of email marketing services;

(g) a share purchase of Ekahau Inc., acquired on October 10, 2018, a Virginia-based provider of solutions for enterprise Wi-Fi network design, troubleshooting, and optimization;

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

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

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

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

Total consideration for these transactions was $ 324.7 million, net of cash acquired and assumed liabilities and subject to certain post-closing adjustments which may increase or decrease the final consideration paid.

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

Highwinds Capital, Inc.

and Cloak Holdings, LLC

On April 2, 2019, the Company acquired all the outstanding issued capital of Highwinds Capital, Inc.

and Cloak Holdings, LLC (“Highwinds”) at a purchase consideration of $ 209.6 million, net of cash acquired and assumed liabilities.

Highwinds is a Texas-based provider in solutions of VPN services.

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

For the year ended December 31, 2019, Highwinds contributed $ 53.0 million to the Company’s revenues.

Net income from continuing operations contributed by Highwinds since the acquisition date was not separately identifiable due to the Company’s integration activities and is impracticable to provide.

The following table summarizes the allocation of the purchase consideration for the Highwinds acquisition (in thousands):

Assets and Liabilities Valuation

2 unchanged sentences

Property and equipment 307

Trade names 33,750

Customer relationships 55,260

Goodwill 194,282

Other intangibles 13,110

Trademarks 24,740

Acquired technology 6,678

Other long-term assets 16

Goodwill 164,102

Accounts payable and accrued expenses ( 19,506 )

Deferred revenue ( 18,321 )

Liability for uncertain tax positions ( 170 )

Deferred tax liability ( 17,552 )

Total $ 209,602

The fair value of the assets acquired includes accounts receivable of $ 0.9 million.

The gross amount due under contracts is $ 1.0 million, of which $ 0.1 million is expected to be uncollectible.

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

Goodwill recognized in connection with this acquisition during the year ended December 31, 2019 is $ 164.1 million, of which $ 15.2 million is expected to be deductible for income tax purposes.

Unaudited Pro Forma Financial Information for Highwinds Acquisition

These pro forma results are estimates and exclude any savings or synergies that would have resulted from this business acquisition had it occurred on January 1, 2019.

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

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

December 31, 2019

Revenues $ 1,072,047

Net income from continuing operations $ 43,345

EPS - Basic $ 0.90

EPS - Diluted $ 0.88

BabyCenter LLC.

On April 19, 2019, the Company acquired all the outstanding issued capital of BabyCenter LLC.

(“BabyCenter”) at a purchase consideration of $ 71.5 million, net of cash acquired and assumed liabilities.

BabyCenter is a California-based provider in digital parenting and pregnancy resources.

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

For the year ended December 31, 2019, BabyCenter contributed $ 19.2 million to the Company’s revenues.

Net income from continuing operations contributed by BabyCenter since the acquisition date was not separately identifiable due to the Company’s integration activities and is impracticable to provide.

The following table summarizes the allocation of the purchase consideration for the BabyCenter acquisition (in thousands):

Assets and Liabilities Valuation

Accounts receivable $ 10,336

Prepaid expenses and other current assets 2,302

Property and equipment 262

Operating lease right-of-use assets, noncurrent 821

Customer relationships 14,500

Other intangibles 10,800

Trademarks 7,800

Other long-term assets 110

Goodwill 34,644

Accounts payable and accrued expenses ( 8,627 )

Income taxes payable ( 61 )

Deferred revenue ( 544 )

Operating lease liabilities, current ( 511 )

Operating lease liabilities, noncurrent ( 310 )

Total $ 71,522

The fair value of the assets acquired includes accounts receivable of $ 10.3 million.

The gross amount due under contracts is $ 10.5 million, of which $ 0.2 million is expected to be uncollectible.

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

Goodwill recognized in connection with this acquisition during the year ended December 31, 2019 is $ 34.6 million, of which $ 34.6 million is expected to be deductible for income tax purposes.

Unaudited Pro Forma Financial Information for BabyCenter Acquisition

These pro forma results are estimates and exclude any savings or synergies that would have resulted from this business acquisition had it occurred on January 1, 2019.

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

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

December 31, 2019

Revenues $ 1,080,644

Net income from continuing operations $ 35,953

EPS - Basic $ 0.75

EPS - Diluted $ 0.73

Spiceworks, Inc.

On August 21, 2019, the Company acquired all the outstanding issued capital of Spiceworks, Inc.

(“Spiceworks”) at a purchase consideration of $ 60.8 million, net of cash acquired and assumed liabilities.

Spiceworks is a Texas-based provider of digital media advertising solutions.

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

For the year ended December 31, 2019, Spiceworks contributed $ 23.0 million to the Company’s revenues.

Net income from continuing operations contributed by Spiceworks since the acquisition date was not separately identifiable due to the Company’s integration activities and is impracticable to provide.

The following table summarizes the allocation of the purchase consideration for the Spiceworks acquisition (in thousands):

Assets and Liabilities Valuation

Accounts receivable $ 10,406

Prepaid expenses and other current assets 1,986

Property and equipment 2,388

Operating lease right-of-use assets, noncurrent 4,161

Trade names 5,200

Customer relationships 27,200

Other intangibles 2,600

Non-competition agreements 680

Acquired technology 2,700

Deferred tax asset 8,752

Accounts payables and accrued expenses ( 10,864 )

Other long-term assets 504

Goodwill 4,149

Accounts payable and accrued expenses ( 2,214 )

Income taxes payable ( 164 )

Deferred revenue ( 3,344 )

Finance lease ( 956 )

Income tax payable ( 1,458 )

Deferred tax liability ( 22,990 )

Other long-term liabilities ( 5,410 )

Operating lease liabilities, current ( 1,256 )

Operating lease liabilities, noncurrent ( 2,905 )

Total $ 60,843

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

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

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

In addition, the Company recorded adjustments to the initial working capital related to prior period acquisitions in the Digital Media business, which resulted in a net increase in goodwill of $ 0.2 million.

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

The fair value of the assets acquired includes accounts receivable of $ 10.4 million.

2 unchanged sentences

Goodwill recognized in connection with these acquisitions during the year ended December 31, 2018 is $ 194.3 million, of which $ 38.3 million is expected to be deductible for income tax purposes.

Pro Forma Financial Information for All 2018 Acquisitions

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

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

During 2017, the Company sold Cambridge BioMarketing Group, LLC (“Cambridge”), a subsidiary within the Digital Media business;

j2 Australia Hosting Pty Ltd (dba “Web24”), a subsidiary within the Cloud Services business;

and Tea Leaves, a subsidiary within the Digital Media business.

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

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

(unaudited) (unaudited)

Goodwill recognized in connection with this acquisition during the year ended December 31, 2019 is $ 4.1 million, of which zero is expected to be deductible for income tax purposes.

Unaudited Pro Forma Financial Information for Spiceworks Acquisition

These pro forma results are estimates and exclude any savings or synergies that would have resulted from this business acquisition had it occurred on January 1, 2019.

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

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

December 31, 2019

Revenues $ 1,089,648

Net income $ 121,727 $ 123,378

Net income from continuing operations $ 36,711

EPS - Basic $ 0.76

1 unchanged sentence

Investments consist of equity and debt securities.

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

The Company determined that certain equity securities were without a readily determinable fair value because these securities are privately held, not traded on any public exchanges and not an investment in a mutual fund or similar investment.

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

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

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

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

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

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

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

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

The Company made a “reasonable effort” to identify any observable price changes for identical or similar investments with the issuer that were known and could be reasonably known.

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

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

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

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

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

These equity securities are included within ‘Long-term investments’ in the Consolidated Balance Sheets.

Cost Impairment Adjustments Reported Amount

5 unchanged sentences

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

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

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

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

During the year ended December 31, 2021, the Company recorded a $ 16.7 million impairment loss on investments related to a decline in value due to a sales transaction of an investee.

The Company was not expected to recover the recorded cost of these securities and reduced such amount to what the Company received as a result of the sale.

During the year ended December 31, 2021, the Company sold the remaining investments with proceeds for $ 14.3 million and a realized loss of approximately $ 0.3 million.

At December 31, 2021, cumulative impairment losses on these securities were $ 40.5 million.

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

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

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

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

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

The following table summarizes the gross unrealized gains and losses and fair values for short-term investments accounted for at fair value under the fair value option, with the unrealized gains and losses reported within earnings on the Statement of Operations (in thousands):

Initial Book Value Gross

December 31, 2021

Corporate debt securities $ 511 $ 152 $ — $ 663

Investment in Consensus (equity securities) $ ( 69,290 ) $ 298,490 $ — $ 229,200

Total $ ( 69,290 ) $ 298,490 $ — $ 229,200

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

December 31, 2020

1 unchanged sentence

Total $ 511 $ 152 $ — $ 663

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

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

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

December 31, 2021 December 31, 2020

10 unchanged sentences

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

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

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

Available-for-sale debt securities with an amortized cost basis in excess of estimated fair value are assessed to determine what amount of that difference, if any, is caused by expected credit losses.

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

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

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

As of December 31, 2019

Less than 12 Months 12 Months or Greater Total

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

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

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

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

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

As of December 31, 2021, 2020 and 2019, the Company did no t recognize any other-than-temporary impairment losses on its debt securities.

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Ressler, Chairman of the Board of Directors (the “Board”) of the Company, is indirectly the majority equity holder and a related party.

As a limited partner in the Fund, the Company will pay an annual management fee to the manager equal to 2.0 % (reduced by 10 % each year beginning with the sixth year) of capital commitments.

As a limited partner in the Fund, prior to the settlement of certain litigation generally related to the Company’s investment in the Fund in January 2022, the Company paid an annual management fee to the manager equal to 2.0 % (reduced by 10 % each year beginning with the sixth year) of capital commitments.

In addition, subject to the terms and conditions of the Fund’s limited partnership agreement, once the Company has received distributions equal to its invested capital, the Fund’s general partner would be entitled to a carried interest equal to 20 %.

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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 connection with the settlement of the litigation, among other terms, no further capital calls will be made in connection with the Company’s investment in the Fund, nor will any management fees be paid by the Company to the manager.

For more information related to the litigation, see Note 12.

During 2021, the Company received capital call notices from the management of OCV Management, LLC for $ 22.2 million inclusive of certain management fees, of which $ 22.2 million has been paid for the year ended December 31, 2021.

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

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

During the years ended December 31, 2021, 2020 and 2019, the Company received a distribution from OCV of $ 15.3 million, zero and $ 10.3 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 years ended December 31, 2020, 2019, and 2018, the Company recognized a net loss in earnings of its equity method investment of $ 11.3 million, $ 0.2 million, and $ 4.1 million, net of tax benefit, respectively.

During the years ended December 31, 2021, 2020, and 2019, the Company recognized an investment gain (loss) of $ 35.8 million, $( 11.3 ) million, and $( 0.2 ) million, net of tax expense (benefit), respectively.

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

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

2 unchanged sentences

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

These equity securities are included within ‘Long-term investments’ in the Consolidated Balance Sheets.

December 31, 2021 December 31, 2020

4 unchanged sentences

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.

Sale of Assets

Discontinued Operations and Dispositions

Consensus Spin-Off

On October 7, 2021, the Separation was completed and the Company transferred J2 Cloud Services, LLC to Consensus 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.

Ziff Davis, Inc.

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

We did not retain a controlling interest in Consensus.

The Retained Consensus Shares are equity securities for which the Company elected the fair value option, and subsequent fair value changes are included in the assets of and results from continuing operations as of and for the year ended December 31, 2021.

At December 31, 2021, our investment in Consensus common stock was remeasured at fair value based on Consensus’ closing stock price, with an unrealized gain of approximately $ 298.5 million recorded in the Consolidated Statement of Operations and a balance of $ 229.2 million in the Consolidated Balance Sheet (See Note 5).

No gain or loss was recorded on the Separation in the Consolidated Statements of Operations.

Certain of the Company’s management and members of its board of directors resigned from the Company as of the Distribution Date and joined Consensus.

In addition, one of the Company’s members of its senior management as of December 31, 2021 serves on the board of directors of Consensus.

On October 7, 2021, Consensus paid Ziff Davis approximately $ 259.1 million of cash in a distribution that is anticipated to be tax-free provided certain requirements are met, and issued $ 500.0 million of senior notes due 2028 to Ziff Davis, which Ziff Davis then 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 indebtedness outstanding under the Bridge Loan Facility (see Note 10 - Debt).

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

The Company incurred a net loss on extinguishment of approximately $ 8.8 million recorded within ‘Loss on Extinguishment of Debt’ component of ‘Income (loss) from discontinued operations, net of income taxes’ within the Consolidated Statements of Operations for the year ended December 31, 2021 (see Note 10).

The divestiture of the cloud fax business was determined to qualify for US Federal tax-free treatment under certain sections of the Internal Revenue Code.

The accounting requirements for reporting the Company’s cloud fax business as a discontinued operation were met when the Separation was completed as the Separation constitutes a strategic shift that will have a major effect on the Company’s operations and financial results.

Accordingly, the consolidated financial statements reflect the result of the cloud fax business as a discontinued operation for all periods presented.

The Consolidated Balance Sheets and Consolidated Statements of Operations report discontinued operations separate from continuing operations.

The Consolidated Statements of Comprehensive Income, Consolidated Statements of Cash Flows (including Note 19 - Supplemental Cash Flow Information) and Consolidated Statements of Stockholders’ Equity combine continuing and discontinued operations.

The Consolidated Statements of Operations, Consolidated Statements of Comprehensive Income, Consolidated Statements of Cash Flows and Consolidated Statements of Stockholders’ Equity include the cloud fax activity for January 1, 2021 through October 7, 2021.

The key components of cash flows from discontinued operations were as follows (in thousands):

Years ended December 31,

2021 2020 2019

Capital expenditures $ 15,252 $ 16,237 $ 6,996

Depreciation and amortization $ 9,010 $ 11,759 $ 10,270

Loss on debt extinguishment $ 8,750 $ 37,969 $ —

Amortization of financing costs and discounts $ — $ 1,171 $ 1,428

Foreign currency remeasurement gain $ — $ 31,537 $ —

Deferred taxes $ 8,015 $ 5,534 $ ( 55,931 )

In preparation for and executing the Separation, the Company incurred $ 11.6 million, net of reimbursement from Consensus, in transaction-related costs including legal and accounting fees during the year ended December 31, 2021, which were recorded in ‘General and administrative expenses’ component of ‘Income (loss) from discontinued operations, net of income taxes’ within the Consolidated Statement of Operations.

These transaction costs primarily relate to professional fees associated with preparation of regulatory filings and transaction execution and separation activities within finance, tax and legal functions.

In connection with the Separation, Ziff Davis and Consensus entered into several agreements that govern the relationship of the parties following the Separation.

These agreements, as well as other activities related to Ziff Davis’s continuing involvement with Consensus are further discussed in Note 21 - Related Party Transactions.

The key components of income from discontinued operations were as follows (in thousands).

The Company made an accounting policy election not to allocate interest to discontinued operations.

Interest expense included in discontinued operations relates to the 6.0 % Senior Notes issued by J2 Cloud Services, LLC and the Bridge Loan Facility, which was required to be repaid as part of the Separation.

Years ended December 31,

2021 2020 2019

Revenues $ 270,248 $ 330,764 $ 321,590

Cost of revenues ( 44,306 ) ( 53,379 ) ( 49,991 )

Sales and marketing ( 40,980 ) ( 47,116 ) ( 51,522 )

Research, development and engineering ( 5,814 ) ( 7,146 ) ( 9,745 )

General and administrative ( 39,279 ) ( 26,852 ) ( 21,475 )

Interest expense and other ( 13,856 ) ( 44,220 ) ( 44,080 )

Income before income taxes 126,013 152,051 144,777

Income tax expense (benefit) 30,694 30,043 ( 33,136 )

Income from discontinued operations, net of income taxes $ 95,319 $ 122,008 $ 177,913

The following table summarizes the Balance Sheet as of December 31, 2020 (in thousands):

Cash and cash equivalents $ 66,210

Accounts receivable, net 16,071

Prepaid expenses and other current assets 1,748

Total current assets, discontinued operations 84,029

Property and equipment, net 25,053

Operating lease right-of-use assets 25,711

Trade names, net 29,350

Customer relationships, net 13,678

Goodwill 342,430

Other purchased intangibles, net 1,681

Deferred income taxes, noncurrent 44,350

Other non-current assets 1,269

Total assets, discontinued operations $ 567,551

Trade accounts payable and accrued expenses $ 32,795

Income taxes payable, current 1,307

Deferred revenue, current 24,512

Operating lease liabilities, current 2,578

Total current liabilities, discontinued operations 61,192

Deferred revenue, noncurrent 240

Operating lease liabilities, noncurrent 25,549

Liability for uncertain tax positions 3,993

Deferred income taxes, noncurrent 5,392

Other long-term liabilities 3,063

Total liabilities, discontinued operations $ 99,429

B2B Back-up and Voice Asset Sales

The Company completed the following dispositions that did not meet the criteria for discontinued operations

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 were recorded within the Cybersecurity and Martech reportable segment.

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

The total gain recognized on the sale of these Voice assets was $ 2.8 million which was recorded in (loss) gain on sale of businesses on the Consolidated Statement of Operations in the year ended December 31, 2021.

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 Consolidated Statement Balance Sheets at March 31, 2021 and June 30, 2021.

The business is recorded within the Cybersecurity and Martech reportable segment.

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 Consolidated Statement of Operations (see Note 9 - Goodwill and Intangible Assets).

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

The total loss recognized on the sale of the B2B Backup business was $ 24.6 million which was recorded in (loss) gain on sale of businesses on the Consolidated Statement of Operations in the year ended December 31, 2021.

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

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

reportable segment.

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

Such assets were recorded within the Cybersecurity and Martech reportable segment.

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 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.

On October 7, 2021, we completed the Consensus separation and retained 19.9 % of the shares of Consensus common stock immediately following the Separation.

We did not retain a controlling interest in Consensus.

The Retained Consensus Shares are equity securities for which the Company elected the fair value option, and the fair value of our retained shares and subsequent fair value changes are included in our assets of and results from continuing operations, respectively.

At December 31, 2021, our investment in Consensus common stock was remeasured at fair value based on Consensus’ closing stock price, with unrealized gains of $ 298.5 million recorded in the Consolidated Statement of Operations and a balance of $ 229.2 million in the Consolidated Balance Sheet.

The fair value of the investment in Consensus is determined using the quoted market prices, which is a Level 1 input.

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

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

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

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

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

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

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

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

The fair value of the Company’s debt instruments was $ 1.3 billion and $ 2.0 billion, at December 31, 2021 and December 31, 2020, respectively (see Note 10 - Debt).

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

16 unchanged sentences

Money market and other funds $ 144,255 $ — $ — $ 144,255 $ 144,255

Corporate debt securities — 663 — 663 663

Investment in Consensus 229,200 — — 229,200 229,200

Total assets measured at fair value $ 373,455 $ — $ — $ 373,455 $ 373,455

11 unchanged sentences

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

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

For the year ended December 31, 2021, there were no transfers that occurred between levels.

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

Amount Affected line item in the Statement of Income

Derivative Liabilities:

Balance as of January 1, 2019 $ 768

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

Balance as of December 31, 2019 $ —

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

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

9 unchanged sentences

Balance as of December 31, 2021

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

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

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

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

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

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

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

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

Balance as of January 1, 2019 $ 20,846

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

Balance as of December 31, 2019 $ 22,047

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

Balance as of December 31, 2020 $ —

In connection with the Company’s other acquisition activity, contingent consideration of up to $ 14.9 million may be payable upon achieving certain future earnings before interest, taxes, depreciation and amortization (EBITDA), revenue, and/or unique visitor thresholds and had a combined fair value of $ 5.8 million and $ 5.0 million at December 31, 2021 and 2020, respectively.

Due to the achievement of certain thresholds, $ 2.1 million and $ 37.6 million was paid during the years ended December 31, 2021 and 2020, respectively.

The Company recorded a net decrease of $ 1.9 million and $ 0.1 million during the years ended December 31, 2021 and 2020 respectively, in the fair value of the contingent consideration and reported such changes in general and administrative expenses.

Property and Equipment

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If it is determined that such assumptions are not accurate, then the resulting change will impact the fair value of the intangible asset.

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

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

The changes in carrying amounts of goodwill for the years ended December 31, 2021 and 2020 are as follows (in thousands):

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

Digital Media Cybersecurity and Martech Consolidated

Balance as of January 1, 2020 $ 755,161 $ 557,940 $ 1,313,101

Goodwill acquired (Note 4) 177,951 24,950 202,901

Goodwill removed due to sale of businesses (2)

— ( 4,751 ) ( 4,751 )

Purchase accounting adjustments (1)

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Goodwill acquired (Note 4) 55,704 41,328 97,032

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

Goodwill removed due to sale of businesses (3)

— ( 50,277 ) ( 50,277 )

Goodwill impairment (4)

— ( 32,629 ) ( 32,629 )

Purchase accounting adjustments (1)

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Balance as of December 31, 2021 $ 996,659 $ 534,796 $ 1,531,455

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

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

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

Intangible Assets with Indefinite Lives:

Trade names $ 27,460 $ 27,379

Other 4,329 4,306

Total $ 31,789 $ 31,685

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

(3) 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 - Discontinued Operations and Dispositions).

(4) During the year ended December 31, 2021, the Company had an impairment to goodwill of $ 32.6 million in connection with certain B2B Backup assets

The following table presents the gross carrying amount of goodwill and accumulated impairment charges as of December 31, 2021, and 2020.

December 31, 2021 December 31, 2020

Gross Carrying Amount Accumulated Impairment Charges Net Book Value Gross Carrying Amount Accumulated Impairment Charges Net Book Value

Cybersecurity and Martech $ 567,425 $ 32,629 $ 534,796 $ 582,066 $ — $ 582,066

Digital Media 996,659 — 996,659 942,934 — 942,934

Total Goodwill $ 1,564,084 $ 32,629 $ 1,531,455 $ 1,525,000 $ — $ 1,525,000

Intangible Assets Subject to Amortization:

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Trade names 9.7 years $ 250,418 $ 102,657 $ 147,761

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

Customer relationships (1)

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Total $ 1,391,293 $ 818,568 $ 572,725

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

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

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

(see Note 4 - Business Acquisitions).

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

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.

During the year ended December 31, 2021, the Company acquired SEOmoz (see Note 4 - Business Acquisitions).

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

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Total $ 35,183

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

During the year ended December 31, 2021, the Company completed other acquisitions which were individually immaterial.

The identified intangible assets were recognized as part of all 2021 acquisitions and their respective estimated weighted average amortizations were as follows (in thousands):

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Weighted-Average

Period Historical

Cost Accumulated

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Trade names 10.0 years $ 247,189 $ 88,636 $ 158,553

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

Customer relationships (1)

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Total $ 1,496,714 $ 799,854 $ 696,860

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

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

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

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.

Expected amortization expenses for intangible assets subject to amortization at December 31, 2021 are as follows (in thousands):

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Amortization expense was $ 185.7 million, $ 156.4 million and $ 173.8 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Long-Term Debt

Long-term debt as of December 31, 2021 and 2020 consists of the following (in thousands):

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$ 641,276 $ 750,000

4.625 % Senior Notes

Convertible Notes:

3.25 % Convertible Notes

402,414 402,500

1.75 % Convertible Notes

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Deferred issuance costs ( 9,056 ) ( 11,505 )

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

Total debt 1,090,627 1,579,021

current portion ( 54,609 ) ( 396,801 )

Total long-term debt, less current portion $ 1,036,018 $ 1,182,220

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

At December 31, 2021, future principal payments for debt are as follows (in thousands):

Years Ended December 31,

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

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

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

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

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

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

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

Principal amount of 6 % Senior Notes

Unamortized discount ( 8,425 )

Debt issuance costs ( 1,466 )

Net carrying amount of 6 % Senior Notes

On October 7, 2020, J2 Cloud redeemed all of its outstanding $ 650.0 million 6.0 % Senior Notes due in 2025 for $ 694.6 million, including an early redemption premium of $ 29.2 million and accrued and unpaid interest of $ 15.4 million.

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

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 $ 750.0 million aggregate principal amount of its 4.625 % senior notes due 2030 (the “ 4.625 % Senior Notes”) in a private placement offering exempt from the registration requirements of the Securities Act of 1933.

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

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

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

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

The 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.

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

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

If J2 Global, Inc.

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

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

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

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, up to, but excluding the redemption date.

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

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These covenants contain certain exceptions.

Restricted payments are applicable only if J2 Global, Inc.

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

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

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

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

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

Restricted payments are applicable only if the Company and subsidiaries designated as restricted subsidiaries has a net leverage ratio of greater than 3.5 to 1.0.

In addition, if such net leverage ratio is in excess of 3.5 to 1.0, the restriction on restricted payments is subject to various exceptions, including the total aggregate amount not 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 December 31, 2021 and 2020.

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.

As such, the Company recognized a loss of approximately $ 7.4 million associated with the tender of the 4.625 % Senior Notes, which was recorded within ‘Loss on extinguishment of debt’ within the Statements of Operations.

Further, during the year ended December 31, 2021, the Company repurchased an additional $ 25.4 million in aggregate principal amount of the 4.625 % Senior Notes for a purchase price of approximately $ 26.0 million.

The Company recognized a loss of $ 0.6 million associated with the repurchase of the 4.625 % Senior Notes, which was recorded within ‘Loss on extinguishment of debt’ within the Consolidated Statements of Operations.

During January 2022, the Company repurchased an additional $ 54.6 million in aggregate principal amount of the 4.625 % Senior Notes (see Note 23 - Subsequent Events).

As of December 31, 2021 and 2020, the estimated fair value of the 4.625 % Senior Notes was approximately $ 659.9 million and $ 796.9 million, respectively, and was based on recent quoted market prices or dealer quotes for the 4.625 % Senior Notes which are Level 1 inputs (see Note 7 - Fair Value Measurements).

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

Principal amount of 4.625 % Senior Notes

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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”).

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 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.

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

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

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

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

(iv) upon the occurrence of specified corporate events;

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

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

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

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 year ended December 31, 2021, the Company satisfied its conversion obligation by paying the principal of $ 402.4 million in cash and issued 3,050,850 shares of the Company’s common stock (see Note 14 - Stockholders’ Equity).

The redemption of the liability component of the 3.25 % Convertible Notes, resulted in a gain of approximately $ 2.8 million during the year ended December 31, 2021 within ‘Loss on debt extinguishment, net’ in the Consolidated Statement of Operations.

The reacquisition of the equity component of the 3.25 % Convertible Notes resulted in a reduction of stockholders’ equity of approximately $ 390.5 million, net of tax,

During the fourth quarter of 2020, the last reported sale price of the Company’s common stock exceeded 130 % of the conversion price for at least 20 trading days in the period of 30 consecutive trading days ending on, and including, the last trading day of the quarter.

As a result, the 3.25 % Convertible Notes were convertible at the option of the holder during the quarter beginning January 1, 2021 and ending March 31, 2021.

As a result, the 3.25 % Convertible Notes are convertible at the option of the holder during the quarter beginning January 1, 2021 and ending March 31, 2021.

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

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

The conversion rate is subject to adjustment for certain events as set forth in the indenture governing the 3.25 % Convertible Notes, but will not be adjusted for accrued interest.

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

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

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

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

Holders have the right to require J2 Global to repurchase for cash all or part of their 3.25 % Convertible Notes on each of June 15, 2021 and June 15, 2024 at a repurchase price equal to 100 % of the principal amount of the 3.25 % Convertible Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the relevant repurchase date.

In addition, if a fundamental change, as defined in the indenture governing the 3.25 % Convertible Notes, occurs prior to the maturity date, holders may require J2 Global to repurchase for cash all or part of their 3.25 % Convertible Notes at a repurchase price equal to 100 % of the principal amount of the 3.25 % Convertible Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

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

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

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

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

(iii) effectively junior in right of payment to any of the Company’s secured indebtedness to the extent of the value of the assets securing such indebtedness;

and (iv) structurally junior to all existing and future indebtedness (including trade payables) incurred by the Company’s subsidiaries.

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

Accounting for the 3.25 % Convertible Notes

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

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

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

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

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

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

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

As of December 31, 2020, the remaining period over which the unamortized debt discount will be amortized is 0.5 years.

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

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

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

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

As of December 31, 2020, the remaining period over which the unamortized debt discount will be amortized was 0.5 years.

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

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

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

Additional paid-in capital $ — $ 37,688

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$ — $ 396,915

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

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

2021 2020 2019

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$ 11,494 $ 24,546 $ 23,852

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

The Company has recorded changes in fair value associated with the contingent interest feature of the 3.25 % Convertible Notes in interest expense for the years ended December 31, 2021, 2020, and 2019 of zero , zero , and $( 0.8 ) million, respectively (see Note 7 - Fair Value Measurements).

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.

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

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.

The 1.75 % Convertible Notes bear interest at a rate of 1.75 % per annum, payable semiannually in arrears on May 1 and November 1 of each year, beginning on May 1, 2020.

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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 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.

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As of December 31, 2021 and December 31, 2020, the market trigger conditions did not meet the conversion requirements of the 1.75 % Convertible Notes and, accordingly, the 1.75 % Convertible Notes are classified as long-term debt on the Consolidated Balance Sheets.

As of December 31, 2020, the initial conversion rate is 7.9864 shares of J2 Global common stock for each $1,000 principal amount of 1.75 % Convertible Notes, which represents a conversion price of approximately $ 125.21 per share of J2 Global common stock.

The conversion rate is subject to adjustment for certain events as set forth in the indenture governing the

1.75 % Convertible Notes, but will not be adjusted for accrued interest.

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

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.

Prior to the Separation, the conversion rate on the 1.75 % Convertible Notes was 7.9864 shares of the Company’s common stock for each $1,000 principal amount of 1.75 % Convertible Notes, which represents a conversion price of approximately $ 125.21 per share of the Company’s common stock.

The Separation constituted an event under the 1.75 % Convertible Notes that required an adjustment and the conversion rate increased to 9.3783 shares of the Company’s common stock for each $1,000 principal amount of 1.75 % Convertible Notes, which represents a conversion price of approximately $ 106.63 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), 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:

(i) senior in right of payment to any of the Company’s indebtedness that is expressly subordinated in right of payment to the 1.75 % Convertible Notes;

(ii) equal in right of payment to the Company’s existing and future indebtedness that is not so subordinated, including its existing 3.25 % Convertible Notes due 2029;

(ii) equal in right of payment to the Company’s existing and future indebtedness that is not so subordinated, including its then-existing 3.25 % Convertible Notes due 2029;

(iii) effectively junior to any of the Company’s secured indebtedness to the extent of the value of the assets securing such indebtedness;

and (iv) structurally junior to all existing and future indebtedness and other liabilities incurred by the Company’s subsidiaries, including the former 6.0 % Senior Notes due 2025.

and (iv) structurally junior to all existing and future indebtedness and other liabilities incurred by the Company’s subsidiaries, including the then-existing 6.0 % Senior Notes due 2025.

Accounting for the 1.75 % Convertible Notes

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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.

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

The unamortized balance, as of December 31, 2020, was $ 8.9 million.

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

As of December 31, 2021, the unamortized deferred issuance costs were $ 7.7 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 December 31, 2021 and December 31, 2020, the estimated fair value of the 1.75 % Convertible Notes was approximately $ 685.4 million and $ 569.7 million, respectively.

The following table provides additional information related to our 1.75 % Convertible Notes (in thousands):

The following table provides additional information related to the 1.75 % Convertible Notes (in thousands):

Additional paid-in capital $ 88,138 $ 88,138

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$ 454,949 $ 438,480

The following table provides the components of interest expense related to our 1.75 % Convertible Notes (in thousands):

The following table provides the components of interest expense related to the 1.75 % Convertible Notes (in thousands):

Cash interest expense (coupon interest expense) $ 9,625 $ 9,653

Non-cash amortization of discount on 1.75 % Convertible Notes

15,338 14,563

Amortization of debt issuance costs 1,173 1,098

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$ 26,136 $ 25,314

MUFG Credit Facility

On October 7, 2020, the Company terminated the Credit Agreement (see Note 12 - Commitments and Contingencies).

During the year ended December 31, 2019, the Company drew down $ 185.0 million and repaid $ 185.0 million under its MUFG Credit Facility.

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

As of December 31, 2019, these debt issuance costs, net of amortization, were $ 0.3 million.

The related interest expense was zero and $ 3.4 million for the years ended December 31, 2020 and 2019, respectively.

Paycheck Protection Program Loan

Through the acquisition of The Aberdeen Group, LLC and The Big Willow, Inc., the Company acquired $ 0.9 million of outstanding debt originating from the Paycheck Protection Program (see Note 4 - Business Combinations).

As of December 31, 2020, the outstanding balance approximated fair value.

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

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, 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, 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.

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.

The Company incurred approximately $ 5.1 million in costs and interest associated with the Bridge Loan Facility recorded within ‘Interest expense’ component of ‘Income (loss) from discontinued operations, net of income taxes’ within the Consolidated Statements of Operations for the year ended December 31, 2021

In connection with the spin-off of Consensus, the Company drew the full amount of the Bridge Loan Facility and used the proceeds of the Bridge Loan Facility to redeem the 3.25 % Convertible Notes and a portion of the 4.625 % Senior Notes.

On October 7, 2021, Consensus issued $ 500.0 million of senior notes due 2028 to Ziff Davis, which Ziff Davis then 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 the extinguishment of the indebtedness outstanding under the Bridge Loan Facility.

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

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.

During 2020, the Company decided to exit and seek subleases for certain leased facilities in the Digital Media reportable segment primarily due to a permanent “remote” or “partial remote” work model for a significant number of employees arising from the COVID-19 pandemic.

During the year ended 2021, the Company recorded impairments of $ 12.7 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 of more of its workforce working from home as part of a permanent “remote” or “partial remote” work model.

During the year ended 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 $ 12.1 million related to operating lease right-of-use assets for the affected facilities and an impairment charge of $ 3.6 million for associated property and equipment.

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

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

The impairment is presented in general and administrative expenses on the Consolidated Statements of Operations .

No impairment was recorded in 2019 or 2018.

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 impairments are presented in general and administrative expenses on the 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.

The Company adopted the new lease standard and related amendments as of January 1, 2019 using the optional transition method.

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

Finance leases are not material to the Company’s consolidated financial statements and are therefore not included in the disclosures.

Upon adoption of ASC 842, the Company recorded approximately $ 72.0 million of right-of-use assets and approximately $ 75.0 million of operating lease liabilities.

The components of lease expense, recorded in cost of revenues and general and administrative expenses on the Consolidated Statements of Operations, were as follows for the year ended (in thousands):

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

Years ended December 31,

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Present value of operating lease liabilities $ 80,864

Rental expense for operating leases classified under ASC 840 for the year ended December 31, 2018 was $ 21.0 million and was predominantly recorded within general and administrative expenses.

Total sublease income for the years ended December 31, 2021, 2020 and 2019 was $ 2.0 million, $ 2.6 million, and $ 3.5 million, respectively.

Total estimated aggregate sublease income to be received in the future is $ 7.0 million.

In 2020, the Company recorded $ 2.1 million of impairment associated with one of its sublease tenants in default as a result of the economic effects of COVID-19.

In 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 expenses on the 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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The Company does not include option periods unless the Company determined it is reasonably certain of exercising the option at inception or when a triggering event occurs.

Practical Expedients

As a practical expedient, the Company has not separated lease components from nonlease components for its real property operating leases.

Certain of the Company’s leases contain nonlease components such as maintenance and certain utility costs.

In addition, the Company elected and applied the available transition practical expedients upon adoption.

By electing these practical expedients, the Company did:

• not reassess whether expired or existing contracts contain leases under the new definition of a lease;

• not reassess lease classification for expired or existing leases;

• not reassess whether previously capitalized initial direct costs would qualify for capitalization under Topic 842.

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.

There is an anticipated trial date of September 2021.

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

filed a putative class action 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.

The case was removed to the U.S.

District Court for the Eastern District of Arkansas (No.

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 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.

On January 29, 2019, after further appeals were exhausted, the case was remanded to the Arkansas state court.

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.

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

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

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

On July 8, 2020, Jeffrey Garcia filed a putative class action lawsuit against J2 Global in the Central District of California (20-cv-06906), alleging violations of federal securities laws.

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

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

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

and other third parties.

On 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.

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

(the “Chancery Court Derivative Action”).

On November 17, 2020, the court entered an order allowing Orlando Police Pension Fund to intervene as a plaintiff in the case.

The lawsuit alleges violations of breach of fiduciary duty and usurpation of corporate opportunity.

J2 Global and its directors and officers intend to defend against the lawsuit.

On December 11, 2020, Danning Huang filed a lawsuit in the District of Delaware (20-cv-01687-LPS) asserting derivative claims against directors of J2 Global, Inc.

and other third parties.

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

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

On January 20, 2022 the Court approved the settlement (See Note 23 - Subsequent Events).

Among other terms of the settlement, no further capital calls will be made in connection with the Company’s investment in OCV Fund I, L.P.

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.

J2 Global and its directors and officers intend to defend against the lawsuit.

J2 Global does not believe, based on current knowledge, that the foregoing legal proceedings or claims, after giving effect to existing accrued liabilities, are likely to have a material adverse effect on the Company’s consolidated financial position, results of operations, or cash flows.

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

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

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

20-cv-01687-LPS.

On January 21, 2022, a stipulation of partial dismissal was filed in the consolidated action following approval 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.

Credit Agreement

On January 7, 2019, J2 Cloud Services, LLC entered into a Credit Agreement (the “Credit Agreement”) with certain lenders from time to time party thereto (collectively, the “Lenders”) and MUFG Union Bank, N.A., as sole lead arranger and as administrative agent for the Lenders (the “Agent”).

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

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

The proceeds of the MUFG Credit Facility were intended to be used for working capital and general corporate purposes of J2 Cloud and its subsidiaries, including to finance certain permitted acquisitions and capital expenditures in accordance with the terms of the Credit Agreement.

On October 7, 2020, the Company terminated the Credit Agreement.

Non-Income Related Taxes

The Company does not collect and remit sales and use, telecommunication, or similar taxes in certain jurisdictions where the Company believes that such taxes are not applicable or legally required.

The Company does not collect and remit sales and use, telecommunication, or similar taxes and fees in certain jurisdictions where the Company believes such taxes are not applicable or legally required.

Several states and other taxing jurisdictions have presented or threatened the Company with assessments, alleging that the Company is required to collect and remit such taxes there.

The Company is currently under audit or is subject to audit for indirect taxes in various states, municipalities and foreign jurisdictions.

The Company has a $ 22.5 million reserve established for these matters which is included in other long-term liabilities and accounts payable and accrued expenses on the Consolidated Balance Sheet at December 31, 2020.

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

The provision for income tax consisted of the following (in thousands):

The Company has a $ 24.0 million reserve established for these matters.

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

The continuing operations provision for income tax consisted of the following (in thousands):

Years Ended December 31,

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Total provision $ ( 14,199 ) $ 38,350 $ 13,760

A reconciliation of the statutory federal income tax rate with J2 Global’s effective income tax rate is as follows:

A reconciliation of the statutory federal income tax rate with the Company’s continuing operations effective income tax rate is as follows:

Years Ended December 31,

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Valuation allowance ( 1.7 ) 9.9 0.2

Intra-entity tax benefit — ( 26.9 ) —

Impact on deferred taxes of enacted tax law and rate changes ( 0.5 ) 3.3 ( 1.3 )

Contingent liabilities — 0.6 2.4

Unrecognized loss on intercompany sale — — 1.9

Tax credits and incentives ( 1.5 ) ( 7.2 ) ( 9.2 )

Mark-to market on investment in Consensus ( 18.0 ) — —

Return to provision adjustments 0.5 2.4 0.2

Executive compensation 0.7 2.7 5.3

Other ( 0.4 ) ( 0.2 ) ( 0.4 )

Effective tax rates ( 4.0 ) % 48.9 % 25.1 %

The effective tax rate for the year ended December 31, 2020 differs from the federal statutory rate primarily due recording a valuation allowance on deferred tax assets related to realized and unrealized capital losses.

In addition, the Company recorded a net increase in the reserve for uncertain tax positions during 2020.

The effective tax rate for 2019 differs from the federal statutory rate primarily due to a tax benefit recognized as a result of an intra-entity asset transfer.

In December 2019, the Company completed an intra-entity asset transfer between two of its foreign subsidiaries as part of the reorganization of its international operating structure.

The transfer caused the recognition of a net tax benefit for $ 53.7 million and a corresponding deferred tax asset.

Additionally, the jurisdictional mix of income and disallowance of certain losses and expenses caused further differences from the federal statutory rate.

The effective tax rate for 2018 differs from the federal statutory rate primarily due to impacts of the jurisdictional mix of income and disallowance of certain losses and expenses.

The effective tax rate for continuing operations the year ended December 31, 2021 differs from the federal statutory rate primarily due to a book-tax difference related to the $ 298.5 million of book income recognized related to the Company’s shares held in Consensus stock.

The income is not subject to tax since the Company has the ability to dispose of the investment in a tax-free manner based on guidance and requirements set out by the Internal Revenue Service.

Additional reasons the effective tax rate differs from the federal statutory tax rate include the impact of a decrease in the net reserve for uncertain tax positions during 2021 and a reduction in the valuation allowance on deferred tax assets related to realized and unrealized capital losses.

The decrease in the reserve for uncertain tax positions is primarily due to the lapse of the statute of limitations for U.S.

tax reserves.

The reduction in the valuation allowance is primarily due to an increase in unrealized capital gains on investments held by the Company which can provide a source of capital gain income in future years to realize the benefit of the capital losses.

The effective tax rate for continuing operations for 2020 differs from the federal statutory rate primarily due to the Company recording a net increase in the reserve for uncertain tax positions during 2020 and recording a valuation allowance for a capital loss recognized due to the sale of assets related to its Voice business unit in Australia and New Zealand and the impairment of certain U.S.

The effective tax rate for 2019 differs from the federal statutory rate primarily due to a net increase in the reserve for uncertain tax positions related to prior years and the impacts of the jurisdictional mix of income and disallowance of certain losses and expenses.

Deferred tax assets and liabilities result from differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities.

Temporary differences and carryforwards which give rise to deferred tax assets and liabilities are as follows (in thousands):

Temporary differences and carryforwards which give rise to deferred tax assets and liabilities from continuing operations are as follows (in thousands):

Years Ended December 31,

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Basis difference in intangible assets ( 117,244 ) ( 129,301 )

Unrealized gains on investments ( 11,291 ) —

Prepaid insurance ( 3,121 ) ( 2,703 )

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Net deferred tax liabilities $ ( 103,065 ) $ ( 145,113 )

The Company had approximately $ 77.0 million and $ 78.9 million in deferred tax assets as of December 31, 2020 and 2019, respectively, related primarily to net operating loss carryforwards, basis difference in intangible assets including differences related to intra-entity transfers, tax credit carryforwards and accrued expenses treated differently between its financial statements and its tax returns.

The Company had approximately $ 65.1 million and $ 72.6 million in deferred tax assets from continuing operations as of December 31, 2021 and 2020, respectively, related primarily to net operating loss carryforwards, basis difference in intangible assets including differences related to intra-entity transfers, tax credit carryforwards and accrued expenses treated differently between its financial statements and its tax returns.

Based on the weight of available evidence, the Company assesses whether it is more likely than not that some portion or all of a deferred tax asset will not be realized.

If necessary, J2 Global records a valuation allowance sufficient to reduce the deferred tax asset to the amount that is more likely that not to be realized.

If necessary, the Company records a valuation allowance sufficient to reduce the deferred tax asset to the amount that is more likely than not to be realized.

The deferred tax assets should be realized through future operating results and the reversal of temporary differences.

The Company had a valuation allowance on deferred tax assets of $ 8.3 million and $ 0.6 million as of December 31, 2020 and 2019, respectively.

The valuation allowance increased $ 7.7 million as a result of impairment and sales of investments that would result in a capital loss in the year of sale.

The Company had a valuation allowance on deferred tax assets from continuing operations of $ 1.8 million and $ 8.3 million as of December 31, 2021 and 2020, respectively.

The valuation allowance decreased $ 6.5 million as a result of the release of valuation allowance related to the impairment and sales of investments that would result in a capital loss in the year of sale.

The deduction for the capital losses would be limited to other capital gains recognized during the year.

A $ 6.3 million valuation allowance was recorded in 2020 related to these items.

During 2021, the Company recognized unrealized capital gains at its investments that provided a sufficient source of future income to be more likely than not to realize the deferred tax assets related to capital losses.

As of December 31, 2021, the Company had federal net operating loss carryforwards (“NOLs”) of $ 37.2 million , after considering substantial restrictions on the utilization of these NOLs due to “ownership changes”, as defined in the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”).

J2 Global currently estimates that all of the above-mentioned federal NOLs will be available for use before their expiration.

$ 59.7 million of NOLs for losses incurred prior to January 1, 2018 expire through the year 2037.

The NOLs for losses incurred after January 1, 2018 of $ 0.5 million have an indefinite carryforward period.

Additionally, the Company has foreign NOLs of $ 5.8 million as of December 31, 2020 in various foreign jurisdictions which generally have an indefinite carryforward period.

As of December 31, 2020 and 2019, the Company had no foreign tax credit carryforward.

In addition, as of December 31, 2020 and 2019, the Company had state research and development tax credits of $ 9.1 million and $ 3.2 million, respectively, which can be carried forward indefinitely.

The Company has not provided deferred taxes on approximately $ 454.5 million of undistributed earnings from foreign subsidiaries as of December 31, 2020.

The Company has not provided any additional deferred taxes with respect to items such as foreign withholding taxes, state income tax or foreign exchange gain or loss that would be due when cash is actually repatriated to the U.S.

The Company estimates that all of the above-mentioned federal NOLs will be available for use before their expiration.

$ 36.7 million of NOLs for losses incurred prior to January 1, 2018 expire through the year 2037 and $ 0.5 million of the NOLs carry forward indefinitely depending on the year the loss was incurred.

As of December 31, 2021 and 2020, the Company has interest expense limitation carryovers of $ 23.3 million and $ 0 , respectively, which last indefinitely.

The Company also has federal capital loss limitation carryforwards as of December 31, 2021 and 2020 of $ 28.7 million and $ 0 , respectively that begin to expire in 2031.

In addition, as of December 31, 2021 and 2020, we had available state research and development tax credit carryforwards of $ 5.1 million and $ 9.1 million, respectively, which last indefinitely.

The Company has no foreign tax credit carryforwards as of December 31, 2021 and 2020.

The Company has not provided for deferred taxes on approximately $ 322.8 million of undistributed earnings from foreign subsidiaries as of December 31, 2021.

The Company has not provided for any additional deferred taxes with respect to items such as foreign withholding taxes, state income tax or foreign exchange gain or loss that would be due when cash is actually repatriated to the U.S.

because those foreign earnings are considered permanently reinvested in the business or may be remitted substantially free of any additional taxes.

Because of the various avenues in which to repatriate the earnings, the determination of the amount of the unrecognized deferred tax liability related to the undistributed earnings if eventually remitted is not practicable.

Cash paid for income taxes net of refunds received for continuing operations and discontinued operations was $ 61.2 million, $ 45.0 million and $ 45.9 million for the year ended December 31, 2021, 2020 and 2019, respectively.

Certain tax payments are prepaid during the year and included within prepaid expenses and other current assets on the Consolidated Balance Sheet.

The Company’s prepaid tax payments were $ 0.8 million and $ 3.0 million at December 31, 2021 and 2020, respectively.

Income before income taxes included income from domestic operations of $ 47.3 million, $ 81.6 million and $ 19.9 million for the years ended December 31, 2020, 2019 and 2018, respectively, and income from foreign operations of $ 183.1 million, $ 118.0 million and $ 157.7 million for the years ended December 31, 2020, 2019 and 2018, respectively.

Income from continuing operations before income taxes included income from domestic operations of $ 279.7 million , $( 2.0 ) million and $ 1.4 million for the years ended December 31, 2021, 2020 and 2019, respectively, and income from foreign operations of $ 71.7 million, $ 80.4 million and $ 53.4 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Uncertain Income Tax Positions

4 unchanged sentences

The Company classifies gross interest and penalties and unrecognized tax benefits that are not expected to result in payment or receipt of cash within one year as non-current liabilities in the Consolidated Balance Sheets.

As of December 31, 2020, the total amount of unrecognized tax benefits was $ 49.1 million, of which $ 46.0 million, if recognized, would affect the Company’s effective tax rate.

As of December 31, 2019, the total amount of unrecognized tax benefits was $ 46.7 million, of which $ 43.9 million, if recognized, would affect the Company’s effective tax rate.

As of December 31, 2018, the total amount of unrecognized tax benefits was $ 51.3 million, of which $ 46.8 million, if recognized would affect the Company’s effective tax rate.

As of December 31, 2021, the total amount of unrecognized tax benefits for continuing operations was $ 39.5 million, of which $ 35.6 million , if recognized, would affect the Company’s effective tax rate.

As of December 31, 2020, the total amount of unrecognized tax benefits for continuing operations was $ 46.0 million, of which $ 44.9 million, if recognized, would affect the Company’s effective tax rate.

As of December 31, 2019, the total amount of unrecognized tax benefits for continuing operations was $ 43.7 million, of which $ 42.7 million, if recognized, would affect the Company’s effective tax rate.

The aggregate changes in the balance of unrecognized tax benefits, which excludes interest and penalties, for 2021, 2020 and 2019, is as follows (in thousands):

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As of December 31, 2021, 2020 and 2019, the total amount of interest and penalties accrued was $ 5.7 million, $ 7.2 million, and $ 5.0 million, respectively, which is classified as a liability for uncertain tax positions on the Consolidated Balance Sheets.

In connection with tax matters, the Company recognized interest and penalty expense (benefit) in 2020, 2019 and 2018 of $ 2.3 million, $( 1.8 ) million and $ 1.2 million, respectively.

In connection with the liability for unrecognized tax benefits, the Company recognized interest and penalty expense (benefit) in 2021, 2020 and 2019 of $( 1.5 ) million, $ 2.8 million, and $ 2.6 million, respectively.

Uncertain income tax positions are reasonably possible to significantly change during the next 12 months as a result of completion of income tax audits and expiration of statutes of limitations.

At this point it is not possible to provide an estimate of the amount, if any, of significant changes in reserves for uncertain income tax positions as a result of the completion of income tax audits that are reasonably possible to occur in the next 12 months.

In addition, the Company cannot currently estimate the

amount of, if any, uncertain income tax positions which will be released in the next 12 months as a result of expiration of statutes of limitations due to ongoing audits.

In addition, the Company cannot currently estimate the amount of, if any, uncertain income tax positions which will be released in the next 12 months as a result of expiration of statutes of limitations due to ongoing audits.

As a result of ongoing federal, state and foreign income tax audits (discussed below), it is reasonably possible that the Company’s entire reserve for uncertain income tax positions for the periods under audit will be released.

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

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

The Company disagrees with the Notice and has filed a petition with the United States Tax Court on May 24, 2021.

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

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

It is reasonably possible that these audits may conclude in the next 12 months and that the uncertain tax positions the Company has recorded in relation to these tax years may change compared to the liabilities recorded for these periods.

We conduct business on a global basis and as a result, one or more of our subsidiaries files income tax returns in the U.S.

federal and in multiple state, local, and foreign tax jurisdictions.

As noted previously, our U.S.

federal income tax returns for years 2012 through 2016 are under various stages of audit by the IRS.

We are also under audit for various U.S.

state and local tax purposes as noted above for our significant jurisdictions.

With limited exception, our significant foreign tax jurisdictions are no longer subject to an income tax audit by the various tax authorities for tax years prior to 2014.

It is reasonably possible that these audits may conclude in the next twelve 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.

If the recorded uncertain tax positions are inadequate to cover the associated tax liabilities, the Company would be required to record additional tax expense in the relevant period, which could be material.

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Stockholders’ Equity

Preferred Stock Exchange

In November 2014, the Company provided holders of the Company’s Series A Preferred Stock (“J2 Series A Stock”) and the Company’s Series B Preferred Stock (“J2 Series B Stock”) an exchange right in which shares may be exchanged for J2 common stock.

The exchange right associated with the shares of J2 Series A Stock provided that such shares were immediately exercisable at an exchange ratio of 20.4319 shares of J2 common stock per share of J2 Series A Stock (the “Series A Exchange Ratio”).

Both holders of the J2 Series A Stock exercised this exchange right which resulted in the issuance of 235,665 shares of J2 common stock.

The exchange right associated with the vested shares of the J2 Series B Stock is exercisable during specified exchange periods at an exchange ratio of 31.8094 shares of J2 common stock per share of J2 Series B Stock (the “Series B Exchange Ratio”).

Holders of vested J2 Series B Stock exercised this exchange right which resulted in the issuance of zero , zero and 10,530 shares of J2 common stock during fiscal years 2020, 2019, and 2018 respectively.

In connection with the exercise of the exchange right and the resulting extinguishment of the J2 Series A Stock, the Company recorded the difference between the carrying value of the Series A and the fair value of the J2 common stock exchanged within retained earnings as a preferred stock dividend.

In connection with the exercise of the exchange right associated with J2 Series B Stock, the Company recognized incremental fair value in the amount of $ 6.3 million and recorded additional share-based compensation in the amount of zero , zero and $ 1.9 million for the years ended December 31, 2020, 2019 and 2018, respectively.

As of December 31, 2018, all incremental fair value associated with the exchange right of J2 Series B Stock had been recognized.

The Series B Exchange Ratio is adjusted in the event of a subdivision of the outstanding J2 common stock or J2 Series B Stock, a declaration of a dividend payable in shares of J2 common stock or J2 Series B Stock, a declaration of a dividend payable in a form other than shares in an amount that has a material effect on the value of shares of J2 common stock or J2 Series B Stock, a combination or consolidation of the outstanding J2 common stock or J2 Series B Stock into a lesser number of shares of J2 common stock or J2 Series B Stock, respectively, specified changes in control, a recapitalization, a reclassification, or a similar occurrence, the Company shall adjust the Series B Exchange Ratio as it deems appropriate in its sole discretion.

Common Stock Repurchase Program

In February 2012, the Company’s Board of Directors approved a program authorizing the repurchase of up to five million shares of J2 Global common stock through February 20, 2013 (the “2012 Program”) which was subsequently extended through February 20, 2021.

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

As a result of the purchase of J2 Global common stock, the Company’s Board of Directors approved a reduction in the number of shares available for purchase under the 2012 Program by the same amount.

In November 2018 and May 2019, the Company entered into a Rule 10b5-1 trading plan with a broker to facilitate the repurchase program.

600,000 shares were repurchased in 2018 at an aggregate cost of $ 42.5 million and were subsequently retired in March 2019.

During the year ended December 31, 2019, the Company repurchased 197,870 shares at an aggregate cost of $ 16.0 million which were subsequently retired in the same year.

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

Prior to 2018, there were 2,873,920 shares available under the 2012 Program.

In November 2018 and May 2019, the Company entered into Rule 10b5-1 trading plans with a broker to facilitate the repurchase program.

600,000 shares were repurchased under the share repurchase program in 2018 at an aggregate cost of $ 42.5 million and were subsequently retired in March 2019.

During the year ended December 31, 2019, the Company repurchased 197,870 shares at an aggregate cost of $ 16.0 million which were subsequently retired in the same year.

During the year ended December 31, 2020, the Company repurchased 1,140,819 shares under this program at an aggregate cost of $ 87.5 million, which were subsequently retired in the same year.

As of December 31, 2020, all of the available shares were repurchased under the 2012 Program at an aggregate cost of $ 204.6 million (including an immaterial amount of commission fees).

On August 6, 2020, the Company’s Board of Directors approved a program authorizing the repurchase of up to ten million shares of our common stock through August 6, 2025 (the “2020 Program”) in addition to the five million shares repurchased under the 2012 Program.

During the year ended December 31, 2020, the Company entered into a Rule 10b5-1 trading plan and repurchased 2,490,599 shares at an aggregate cost of $ 177.8 million (including an immaterial amount of commission fees) under the 2020 Program, which were subsequently retired.

As a result of the Company’s share repurchase programs, the number of shares available for purchase is 7,509,401 shares of J2 Global common stock.

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

During the year ended December 31, 2020, the Company purchased 111,451 shares from plan participants for this purpose.

The Company entered into a Rule 10b5-1 trading plan and during the years ended December 31, 2021 and December 31, 2020, the Company repurchased 445,711 and 2,490,599 shares, respectively, at an aggregate cost of $ 47.7 million and $ 177.8 million, respectively, (including an immaterial amount of commission fees) under the 2020 Program, which were subsequently retired.

During January 2022, the Company repurchased 554,289 shares at an aggregate cost of $ 58.7 million (including an immaterial amount of commission fees) under the 2020 Program (see Note 23 - Subsequent Events).

As a result of the Company’s share repurchase programs, the number of shares available for purchase as of December 31, 2021 is 7,063,690 shares of the Company’s common stock.

In connection with the Consensus spin-off, the Company called its 3.25 % Convertible Notes for redemption and during the year ended December 31, 2021, the Company issued 3,050,850 shares of the Company’s common stock, respectively, in connection with that redemption (see Note 10 - 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 years ended December 31, 2021, December 31, 2020 and December 31, 2019, the Company purchased and retired 251,946 , 111,451 and 71,077 shares, respectively, from plan participants for this purpose.

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

The following is a summary of each dividend declared during fiscal year 2019:

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Future dividends are subject to Board approval.

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

Stock Options and Employee Stock Purchase Plan

J2 Global’s share-based compensation plans include the 2015 Stock Plan and the 2001 Employee Stock Purchase Plan.

Stock Based Compensation

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.

(a) The 2015 Stock Option Plan

In May 2015, J2 Global’s Board of Directors adopted the J2 Global, Inc.

2015 Stock Option Plan (the “2015 Plan”).

The 2015 Plan provides for the grant of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance share units and other share-based awards.

4,200,000 shares of

common stock are authorized to be used for 2015 Plan purposes.

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

At December 31, 2020, 2019 and 2018, options to purchase 175,601 , 163,741 and 298,577 shares of common stock were exercisable under and outside of the 2015 Plan, at weighted average exercise prices of $ 60.35 , $ 45.94 , and $ 32.15 , respectively.

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 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 December 31, 2021, 5,439 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 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 December 31, 2021, 435,135 shares underlying options and 360,743 shares of restricted stock units were outstanding under the 2015 Plan.

In connection with the Consensus separation and pursuant to the anti-dilution provisions of the 2007 Plan and the 2015 Plan, the number of shares underlying each stock-based award outstanding as of the date of the Separation was multiplied by a factor of approximately 1.09 and the related exercise price for the stock options was divided by a factor of approximately 1.09 , which was intended to preserve the intrinsic value of the awards prior to the Separation.

Further, the price targets for the Company’s market-based restricted stock awards were reduced by $ 21.41 .

These adjustments to the Company’s equity compensation awards did not result in additional compensation expense.

Stock based compensation awards that were held by Consensus employees were terminated and replaced with awards issued under the Consensus stock compensation plan (including under the Purchase Plan).

Stock-based compensation expense through the Separation date for Consensus employees is included in results from discontinued operations.

Stock Options

At December 31, 2021, 2020 and 2019, options to purchase 168,614 , 175,601 and 163,741 shares of common stock were exercisable under and outside of the 2015 Plan, at weighted average exercise prices of $ 67.62 , $ 60.35 , $ 45.94 , respectively.

Stock options generally expire after 10 years and vest over a 5-year period.

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

Stock Options

Stock option activity for the years ended December 31, 2021, 2020 and 2019 is summarized as follows:

Number of Shares Weighted-Average

Number of Shares

Weighted-Average

Exercise Price

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Options outstanding at January 1, 2019 707,777 $ 56.84

Granted 400,000 75.03

Exercised ( 189,436 ) 32.39

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Exercised ( 70,776 ) 41.63

Adjustment due to Consensus Separation (1)

35,749 $ 68.25

Options outstanding at December 31, 2021 440,574 $ 68.45 5.93 $ 18,683,104

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Vested and expected to vest at December 31, 2021 440,574 $ 68.45 5.93 $ 18,683,104

For the years ended December 31, 2020, 2019 and 2018, J2 Global granted zero , zero and 400,000 options, respectively, to purchase shares of common stock pursuant to the 2015 Plan.

These stock options vest 20 % per year and expire 10 years from the date of grant.

The per share weighted-average grant-date fair values of stock options granted during the period ended December 31, 2018 was $ 19.39 .

(1) As noted above, in connection with the Consensus separation and pursuant to the anti-dilution provisions of the 2007 Plan and the 2015 Plan, the number of shares underlying each stock option outstanding as of the date of the Separation was multiplied by a factor of approximately 1.09 and the related exercise price for the stock options was divided by a factor of approximately 1.09 , which was intended to preserve the intrinsic value of the awards prior to the Separation.

The total intrinsic values of options exercised during the years ended December 31, 2021, 2020 and 2019 was $ 5.8 million, $ 3.0 million, and $ 10.4 million, respectively.

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68.97 435,135 6.00 years 68.97 163,175 68.97

67.35 23,000 4.35 years 67.35 23,000 67.35

75.03 400,000 7.00 years 75.03 100,000 75.03

$ 27.15 - $ 68.97

440,574 5.93 years $ 68.45 168,614 $ 67.62

As discussed in Note 14, “Stockholders’ Equity”, the Company provided holders of J2 Series B Stock an exchange right in which J2 Series B Stock may be exchanged for J2 common stock during specified exchange periods.

At December 31, 2021, there were 1,709,569 additional shares underlying options, shares of restricted stock and other share-based awards available for grant under the 2015 Plan.

The Company recognized $ 0.9 million, $ 0.9 million and $ 0.9 million of compensation expense related to stock options for the years ended December 31, 2020, 2019 and 2018, respectively.

As of December 31, 2021, there was $ 4.8 million of total unrecognized compensation expense related to nonvested share-based compensation options granted under the 2015 Plan.

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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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Estimated forfeiture rates were 12.4 %, 13.0 % and 13.9 % as of December 31, 2021, 2020 and 2019, respectively.

The weighted-average fair values of stock options granted have been estimated utilizing the following assumptions:

Years ended December 31,

2020 2019 2018

Risk-free interest rate — % — % 2.4 %

Expected term (in years) 0.0 0.0 6.7

Dividend yield — % — % 2.2 %

Expected volatility — % — % 29.2 %

Weighted average volatility — % — % 29.2 %

Restricted Stock and Restricted Stock Units

J2 Global has awarded restricted stock and restricted stock units to its Board of Directors and senior staff pursuant to the 2015 Plan.

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.

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

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

The Company granted 246,251 , 129,786 and 117,566 shares of restricted stock and restricted units (excluding awards with market conditions below) during the years ended December 31, 2021, 2020 and 2019, respectively.

On May 7, 2020, the Board of Directors approved the contract modification of an insignificant number of shares of restricted stock awards whereby selected participants waived their right to receive dividends with respect to outstanding and unvested restricted shares under their restricted stock agreements.

There was no incremental compensation cost as a result of the modification.

Restricted Stock - Awards with Market Conditions

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

Restricted Stock and Restricted Stock Units with Market Conditions

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

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

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Risk-free interest rate 1.3 % 0.7 % 2.5 %

The Company recognized $ 21.2 million, $ 21.7 million and $ 26.4 million, respectively of compensation expense related to its restricted stock, restricted stock units, and market-based restricted stock.

As of December 31, 2020, the Company had unrecognized share-based compensation cost of $ 38.6 million associated with these awards.

This cost is expected to be recognized over a weighted-average period of 4.2 years for awards and 4.5 years for units.

The total fair value of restricted stock and restricted stock units vested during the years ended December 31, 2020, 2019 and 2018 was $ 18.6 million, $ 12.7 million and $ 9.7 million, respectively.

The actual tax benefit realized for the tax deductions from the vesting of restricted stock awards and units totaled $ 2.1 million, $ 2.4 million and $ 2.4 million, respectively, for the years ended December 31, 2020, 2019 and 2018.

Share-based compensation is recognized on dividends paid related to nonvested restricted stock not expected to vest, which amounted to approximately zero , $ 0.1 million and $ 0.1 million for the years ended December 31, 2020, 2019, and 2018, respectively.

Restricted stock award activity for the years ended December 31, 2021, 2020 and 2019 is set forth below:

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Nonvested at December 31, 2020 820,566 $ 62.66

Granted 1,268 98.63

Vested ( 435,529 ) 60.52

Canceled ( 33,194 ) 83.23

Adjustment due to Consensus Separation (1)

Nonvested at December 31, 2021 383,963 $ 41.45

(1) As noted above, in connection with the Consensus separation and pursuant to the anti-dilution provisions of the 2007 Plan and the 2015 Plan, the number of shares underlying each restricted stock award outstanding as of the date of the Separation was multiplied by a factor of approximately 1.09 and the market condition stock price target for marked-based restricted stock awards was also adjusted.

Restricted stock unit activity for the years ended December 31, 2021, 2020 and 2019 is set forth below:

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Canceled ( 60,201 )

Adjustment due to Consensus Separation (1)

Outstanding at December 31, 2021 360,743 2.71 $ 39,991,969

Vested and expected to vest at December 31, 2021 360,743 2.71 $ 39,991,969

Employee Stock Purchase Plan (“ESPP”)

In May of 2001, J2 Global established the J2 Global, Inc.

2001 Employee Stock Purchase Plan, as amended (the “Purchase Plan”), which provides for the issuance of a maximum of 2,000,000 shares of common stock.

Under the Purchase Plan, eligible employees can have up to 15 % of their earnings withheld, up to certain maximums, to be used to purchase shares

of J2 Global’s common stock at certain plan-defined dates.

The price of the common stock purchased under the Purchase Plan for the offering periods is equal to 95 % of the fair market value of the common stock at the end of the offering period.

(1) As noted above, in connection with the Consensus separation and pursuant to the anti-dilution provisions of the 2007 Plan and the 2015 Plan, the number of shares underlying each restricted stock unit outstanding as of the date of the Separation was multiplied by a factor of approximately 1.09 and the market condition stock price target for marked-based restricted stock units was also adjusted.

As of December 31, 2021, the Company had unrecognized share-based compensation cost of $ 44.3 million associated with these awards.

This cost is expected to be recognized over a weighted-average period of 3.51 for awards and 3.9 for units.

The total fair value of restricted stock and restricted stock units vested during the years ended December 31, 2021, 2020 and 2019 was $ 68.1 million, $ 18.6 million and $ 12.7 million, respectively.

The actual tax benefit realized for the tax deductions from the vesting of restricted stock awards and units totaled $ 9.5 million, $ 2.1 million and $ 2.4 million, respectively, for the years ended December 31, 2021, 2020 and 2019.

Share-based compensation is recognized on dividends paid related to nonvested restricted stock not expected to vest, which amounted to approximately zero , zero and $ 0.1 million for the years ended December 31, 2021, 2020, and 2019, respectively.

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 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 the common stock on the beginning or the end of the offering period.

On February 2, 2018, the Company approved an amendment to the Company’s Amended and Restated 2001 Employee Stock Purchase Plan, to be effective May 1, 2018, such that (i) the purchase price for each offering period shall be 85 % of the lesser of the fair market value of a share of common stock of the Company (a “Share”) on the beginning or the end of the offering period, rather than 95 % of the fair market value of a Share at the end of the offering period, and (ii) each offering period will be six months , rather than three months .

J2 Global performed an analysis of the Amendment terms and 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 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.

The compensation cost is recognized on a straight-line basis over the requisite service period.

The Company recognized $ 2.0 million, $ 1.3 million and $ 0.7 million of compensation expense related to the Purchase Plan for the years ended December 31, 2020, 2019 and 2018, respectively.

The Company used the Black-Scholes option pricing model to calculate the estimated fair value of the purchase right issued under the ESPP.

The Company used the Black-Scholes option pricing model to calculate the estimated fair value of the purchase right issued under the Purchase Plan.

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

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Estimated forfeiture rates were 11.15 %, 11.15 % and 5.80 % as of December 31, 2021, 2020, and 2019, respectively.

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

During 2021, 2020 and 2019, 109,248 , 118,629 and 66,413 shares, respectively were purchased under the Purchase Plan at price ranging from $ 72.92 to $ 97.84 per share during 2021.

Cash received upon the issuance of the Company’s common stock under the Purchase Plan was $ 9.2 million, $ 7.4 million and $ 4.5 million for the years ended December 31, 2021, 2020 and 2019, respectively.

As of December 31, 2021, 1,295,691 shares were available under the Purchase Plan for future issuance.

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

December 31, 2021 December 31, 2020 December 31, 2019

Risk-free interest rate 0.05 % 0.73 % 2.31 %

Expected term (in years) 0.5 0.5 0.5

Dividend yield 0.00 % 0.00 % 1.02 %

Expected volatility 35.00 % 25.33 % 24.63 %

Weighted average volatility 35.00 % 25.33 % 24.63 %

Defined Contribution 401(k) Savings Plan

J2 Global has several 401(k) Savings Plans that qualify under Section 401(k) of the Internal Revenue Code.

The Company has several 401(k) Savings Plans that qualify under Section 401(k) of the Internal Revenue Code.

Eligible employees may contribute a portion of their salary through payroll deductions, subject to certain limitations.

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Numerator for basic and diluted net income per common share:

Net income attributable to J2 Global, Inc.

common shareholders $ 150,668 $ 218,806 $ 128,687

Net income from continuing operations $ 401,395 $ 28,660 $ 40,893

Net income available to participating securities (1)

( 326 ) ( 120 ) ( 379 )

Net income available to J2 Global, Inc.

common shareholders $ 150,036 $ 215,310 $ 126,802

Net income available to the Company’s common shareholders from continuing operations $ 401,069 $ 28,540 $ 40,514

Weighted-average outstanding shares of common stock 45,893,928 46,308,825 47,647,397

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Common stock and common stock equivalents 47,862,745 47,115,609 49,025,684

Net income per share:

Net income per share from continuing operations:

Basic $ 8.74 $ 0.62 $ 0.85

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

(2) Represents the incremental shares issuable upon conversion of the 3.25 % Convertible Notes due June 15, 2029 and 1.75 % Convertible Notes due November 1, 2026 by applying the treasury stock method when the average stock price exceeds the conversion price of the Convertible Notes (see Note 10 - Long Term Debt).

(2) 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 10 - Debt).

For the years ended December 31, 2021, 2020 and 2019, there were zero options outstanding, respectively, which were excluded from the computation of diluted earnings per share because the exercise prices were greater than the average market price of the common stock.

Segment Information

The Company’s businesses are based on the organizational structure used by the chief operating decision maker (“CODM”) for making operating and investment decisions and for assessing performance.

The Company’s businesses are based on the organizational structure used by the chief operating decision maker (“CODM”).

The CODM views the Company as two businesses:

Cloud Services and Digital Media.

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

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

Cybersecurity and Martech and Digital Media.

In connection with the spin-off of the cloud fax business, the Company revised its reportable segments to reflect how the CODM views the business for making operating and investment decisions and for assessing performance.

Prior to the spin-off, the Company had three reportable segments:

(i) Fax and Martech;

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

and (iii) Digital Media.

In connection with the Highwinds Capital, Inc.

and Cloak Holdings, LLC acquisition in the second quarter of 2019 (see Note 4 - Business Acquisitions), the Company renamed its Voice, Backup and Security reportable segment to include its newly acquired consumer privacy and protection business, now the Voice, Backup, Security and Consumer Privacy and Protection segment.

The Company’s Cloud Services business is driven primarily by subscription revenues that are relatively higher margin, stable and predictable from quarter to quarter with minor seasonal weakness in the fourth quarter.

The Company’s Digital Media business is driven primarily by advertising and subscription revenues, has relatively higher sales and marketing expense and has seasonal strength in the fourth quarter.

Following the spin-off, the Company has two reportable segments:

(i) Digital Media and (ii) Cybersecurity and Martech.

The Company’s Digital Media business is driven primarily by advertising revenues, has relatively higher sales and marketing expense and has seasonal strength in the fourth quarter.

The Company’s Cybersecurity and Martech business is driven primarily by subscription revenues with relatively stable and predictable margins from quarter to quarter.

The accounting policies of the businesses are the same as those described in Note 2 - Basis of Presentation and Summary of Significant Accounting Policies.

The Company evaluates performance based on revenue, gross margin and profit or loss from operations before income taxes, not including nonrecurring gains and losses and foreign exchange gains and losses.

Information on reportable segments and reconciliation to consolidated income from operations is as follows (in thousands):

Information on reportable segments and reconciliation to consolidated income from continuing operations is as follows (in thousands):

Years Ended December 31,

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Revenue by reportable segment:

Fax and Martech (1)

$ 386,276 $ 378,444 $ 360,479

Voice, Backup, Security, and CPP (1)

292,185 283,391 237,496

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

Digital Media $ 1,069,300 $ 811,360 $ 710,511

Cybersecurity and Martech 348,611 347,697 340,245

Elimination of inter-segment revenues ( 1,189 ) ( 229 ) ( 300 )

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Gross profit by reportable segment:

Fax and Martech (1)

320,714 318,677 311,534

Voice, Backup, Security, and CPP (1)

203,486 198,888 164,287

Cloud Services Total 524,200 517,565 475,821

Digital Media 974,546 733,887 617,458

Cybersecurity and Martech 255,042 246,815 245,966

Elimination of inter-segment gross profit ( 824 ) ( 229 ) ( 300 )

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Corporate (1)

( 95 ) ( 47 ) 8

Total gross profit 1,228,669 980,426 863,132

Direct costs by reportable segment (2) :

Fax and Martech (1)(4)

116,923 119,574 125,963

Voice, Backup, Security, and CPP (1)(4)

158,074 150,451 113,666

Cloud Services Total 274,997 270,025 239,629

Digital Media 757,053 594,807 540,193

594,807 540,193 483,167

Cybersecurity and Martech 225,740 193,883 187,283

Elimination of inter-segment direct costs ( 824 ) ( 229 ) ( 300 )

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Total direct costs 1,061,329 842,086 774,909

923,200 857,651 761,941

Operating income by reportable segment:

Fax and Martech 203,791 199,103 185,571

Voice, Backup, Security, and CPP 45,412 48,437 50,621

Cloud Services Total 249,203 247,540 236,192

Digital Media 139,080 77,265 47,288

Digital Media operating income 217,493 139,080 77,265

Cybersecurity and Martech operating income 29,302 52,932 58,683

Total segment operating income 246,795 192,012 135,948

1 unchanged sentence

( 79,455 ) ( 53,672 ) ( 47,725 )

Total income from operations $ 334,611 $ 277,080 $ 244,280

(1) The Company reclassified certain intercompany revenue and expenses in 2019 and 2018 for Cloud Services in order to better align with a stand-alone presentation.

Total income from continuing operations $ 167,340 $ 138,340 $ 88,223

(1) Corporate includes costs associated with general and administrative and other expenses that are managed on a global basis and that are not directly attributable to any particular segment.

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

(4) Table above has been recast to remove the impact of certain expenses associated with the Corporate entity that were previously allocated to the Cloud Services and Digital Media businesses.

The CODM does not use Balance Sheet and Cash Flow information in connection with operating and investment decisions other than as presented for Cloud Services and Digital Media.

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

Cloud Services $ 1,473,398 $ 1,466,969

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

Table above has been recast to remove the impact of certain expenses associated with Corporate that were previously allocated to the Digital Media and Cybersecurity and Martech businesses.

The CODM does not use Balance Sheet and Cash Flow information in connection with operating and investment decisions other than as presented for Digital Media and Cybersecurity and Martech.

Accordingly, the following segment information is presented for Digital Media and Cybersecurity and Martech.

Digital Media $ 2,043,204 $ 2,088,397

Total assets from Cloud Services and Digital Media 3,561,795 3,027,993

Cybersecurity and Martech 1,088,741 905,847

Total assets from reportable segments 3,131,945 2,994,244

Corporate 638,335 103,536

Assets of discontinued operations — 567,551

Total assets $ 3,770,280 $ 3,665,331

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Capital expenditures:

Cloud Services $ 32,859 $ 21,826 $ 13,832

Digital Media $ 80,877 $ 59,693 $ 48,736

Total capital expenditures from Cloud Services and Digital Media 92,552 70,562 56,379

Cybersecurity and Martech 32,863 32,859 21,826

Total from reportable segments 113,740 92,552 70,562

Corporate — — 26

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Depreciation and amortization:

Cloud Services $ 79,754 $ 80,970 $ 60,754

Digital Media $ 193,661 $ 145,321 $ 148,575

Total depreciation and amortization from Cloud Services and Digital Media 225,075 229,545 183,597

Cybersecurity and Martech 64,354 79,758 80,970

Total from reportable segments 258,015 225,079 229,545

Corporate 288 3,658 2,487

Total depreciation and amortization $ 258,303 $ 228,737 $ 232,032

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

The Company maintains operations in the U.S., Canada, Ireland, the United Kingdom, India and other countries.

Geographic information about the U.S.

and all other countries for the reporting periods is presented below.

Such information attributes revenues based on markets where revenues are reported (in thousands).

Such information attributes revenues based on jurisdictions where revenues are reported (in thousands).

Years ended December 31,

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All other countries 158,382 137,823 128,272

All foreign countries 229,515 199,996 207,328

Total $ 1,416,722 $ 1,158,829 $ 1,050,464

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Cash paid for income taxes net of refunds received was $ 61.2 million, $ 45.0 million, and $ 45.9 million during the years ended December 31, 2021, 2020 and 2019, respectively.

During the years ended December 31, 2020, 2019 and 2018, J2 Global recorded the tax benefit from the exercise of stock options and restricted stock as a reduction of its income tax liability of $ 2.9 million, $ 4.8 million and $ 3.3 million, respectively.

During the years ended December 31, 2021, 2020 and 2019, the Company recorded the tax benefit from the exercise of stock options and restricted stock as a reduction of its income tax liability of $ 11.3 million, $ 2.9 million, and $ 4.8 million, respectively.

During the year ended December 31, 2021, in a non-cash transaction, the Company exchanged the senior notes due 2028 provided by Consensus 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 the extinguishment of the indebtedness outstanding of $ 485.0 million under the Bridge Loan Facility (see Note 10 - Debt).

During the year ended December 31, 2021, the Company issued 3,050,850 shares of the Company’s common stock under the redemption of the 3.25 % Convertible Notes at a price of approximately $ 390.5 million, net of tax (See Note 14 - Stockholder’s Equity),

In the first quarter of 2020, in a non-cash transaction of $ 18.3 million, the Company exchanged shares of redeemable preferred stock that were previously classified as available-for-sale corporate debt securities for a new series of preferred stock, classified as equity securities without a readily determinable fair value (see Note 5 - Investments).

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Balance as of January 1, 2019 $ ( 1,418 ) $ ( 44,561 ) $ ( 45,979 )

Other comprehensive loss before reclassifications ( 1,418 ) ( 15,471 ) ( 16,889 )

Net current period other comprehensive loss ( 1,418 ) ( 15,471 ) ( 16,889 )

Balance as of December 31, 2018 $ ( 1,418 ) $ ( 44,561 ) $ ( 45,979 )

Other comprehensive income (loss) before reclassifications 1,143 ( 1,626 ) ( 483 )

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Balance as of December 31, 2020 $ 283 $ ( 55,089 ) $ ( 54,806 )

Other comprehensive loss before reclassifications ( 114 ) ( 21,268 ) ( 21,382 )

Consensus separation — 18,966 18,966

Net current period other comprehensive loss ( 114 ) ( 2,302 ) ( 2,416 )

Balance as of December 31, 2021 $ 169 $ ( 57,391 ) $ ( 57,222 )

The following table provides details about reclassifications out of accumulated other comprehensive loss for the years ended December 31, 2021, 2020, and 2019.

6 unchanged sentences

Total reclassifications for the period $ ( 151 ) $ 698 $ — Net income

Related Party Transactions

In preparation for and in executing the Separation, the Company incurred approximately $ 23.3 million (excluding costs associated with the debt exchange noted below) of transaction-related costs, before reimbursement by Consensus.

During the year ended December 31, 2021, Ziff Davis received or expects to receive approximately $ 11.7 million (excluding the reimbursement of a portion of the debt exchange noted below) from Consensus resulting in net transaction costs of $ 11.6 million.

These net transaction-related costs were recorded in ‘General and administrative expenses’ component of ‘Income (loss) from discontinued operations, net of income taxes’ within the Consolidated Statement of Operations.

Consensus also reimbursed Ziff Davis for certain costs associated with the debt exchange in connection with the Separation totaling $ 7.5 million, which was recorded as an offset to the loss on extinguishment of debt on the Consolidated Statement of Operations.

In addition, Consensus paid the Company approximately $ 8.5 million subsequent to the Separation due to excess cash held at the Separation date net of other related items pursuant to the Separation and Distribution Agreement.

In connection with the Separation, Ziff Davis and Consensus entered into several agreements with Consensus that govern the relationship of the parties following the Separation, including a separation and distribution agreement, a transition services agreement, a tax matters agreement, an employee matters agreement, an intellectual property license agreement, and a stockholder and registration rights agreement (the “Agreements”).

The transition services agreement governs services including certain information technology services, finance and accounting services and human resource and employee benefit services.

The agreed-upon charges for such services are generally intended to allow the providing company to recover all costs and expenses of providing such services and is expected to terminate no later than twelve months following the Separation.

During the year ended December 31, 2021, the Company recorded an offset to expense of approximately $ 2.1 million from Consensus related to the transition services agreement within ‘General and administrative expenses’ within the Consolidated Statements of Operations.

Further, the Company assigned its lease of office space in Los Angeles, California to Consensus.

Ziff Davis will remain the lessee under this lease and its obligations remain through October 7, 2022, after which time Consensus will take over the lease in full.

During the year ended December 31, 2021, the Company recorded an offset to lease expense of approximately $ 0.5 million related to this lease, however, Consensus paid the landlord directly and not Ziff Davis.

Amounts due from Consensus as of December 31, 2021 was $ 9.3 million, comprised of $ 2.1 million related to services provided under the transition services agreement and $ 7.2 million related to reimbursement of certain transaction related costs and other reimbursements, and is included in within ‘Accounts receivable’ within the Consolidated Balance Sheet.

On September 25, 2017, the Board of the Company authorized the Company’s entry into a commitment to invest $ 200 million in the Fund over several years at a fairly ratable rate.

The manager, OCV, and general partner of the Fund are entities with respect to which Richard S.

Ressler, Chairman of the Board of Directors of the Company, is indirectly the majority equity holder.

In addition, subject to the terms and conditions of the Fund’s limited partnership agreement, once the Company has received distributions equal to its invested capital, the Fund’s general partner will be entitled to a carried interest equal to 20 %.

The Fund has a six year investment period, subject to certain exceptions.

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

Quarterly Results (unaudited)

The following tables contain selected unaudited Statements of Operations information for each quarter of 2021 and 2020 (in thousands, except share and per share data).

J2 Global believes that the following information reflects all normal recurring adjustments necessary for a fair presentation of the information for the periods presented.

The Company believes that the following information reflects all normal recurring adjustments necessary for a fair presentation of the information for the periods presented.

The operating results for any quarter are not necessarily indicative of results for any future period.

2 unchanged sentences

Gross profit 362,910 305,447 292,508 267,804

Net income (loss) from continuing operations 383,612 2,050 ( 23,046 ) 38,779

(Loss) income from discontinued operations, net of income taxes ( 23,106 ) 40,520 38,762 39,143

$ 360,506 $ 42,570 $ 15,716 $ 77,922

Net income (loss) per common share from continuing operations:

Basic $ 8.02 $ 0.04 $ ( 0.52 ) $ 0.87

Diluted $ 7.90 $ 0.04 $ ( 0.52 ) $ 0.83

Net (loss) income per common share from discontinued operations:

Basic $ ( 0.48 ) $ 0.87 $ 0.87 $ 0.88

Diluted $ ( 0.48 ) $ 0.83 $ 0.81 $ 0.84

Net income per common share:

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Gross profit 337,896 230,726 207,201 204,603

Net income (1)

123,023 30,745 32,589 32,449

Net income per common share:

Net income from continuing operations 41,962 14,127 1,665 ( 29,094 )

Earnings from discontinued operations, net of income taxes 16,126 46,756 36,436 22,690

Net income (loss) $ 58,088 $ 60,883 $ 38,101 $ ( 6,404 )

Net income (loss) per common share from continuing operations:

Basic $ 0.94 $ 0.30 $ 0.04 $ ( 0.61 )

Diluted $ 0.92 $ 0.30 $ 0.04 $ ( 0.61 )

Net income per common share from discontinued operations:

Basic $ 0.36 $ 1.01 $ 0.77 $ 0.47

Diluted $ 0.35 $ 1.01 $ 0.76 $ 0.46

Net income (loss) per common share:

Basic $ 1.30 $ 1.31 $ 0.81 $ ( 0.13 )

Diluted $ 1.27 $ 1.31 $ 0.80 $ ( 0.13 )

Weighted average shares outstanding:

1 unchanged sentence

Diluted 45,642,292 46,309,072 47,437,555 47,620,774

(1) The increase in the Company’s net income in the fourth quarter of 2019 is primarily driven by the tax benefit recognized as a result of an intra-entity asset transfer (see Note 13 - Income Taxes).

Subsequent Events

In February 2021, the Company committed to a plan to sell certain Voice assets in the United Kingdom as they were determined to be non-core assets.

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

On February 9, 2021, in a cash transaction, the Company completed the sale of these assets.

Also in February 2021, the Company’s Board of Directors approved the exploration of strategic alternatives for the Company’s B2B Backup business.

The Company completed a purchase of Lifecycle Marketing, acquired January 21, 2022, a UK-based portfolio of pregnancy and parenting brands, including Emma’s Diary and Health Professional Academy.

The initial accounting for this acquisition is incomplete due to the timing of available information and purchase accounting information is still being compiled and is not available for disclosure.

During January 2022, the Company repurchased an additional $ 54.6 million in aggregate principal amount of the 4.625 % Senior Notes.

During January 2022, the Company repurchased 554,289 shares at an aggregate cost of $ 58.7 million (including an immaterial amount of commission fees) under the 2020 Program.

During January 2022, the Court in the Chancery Court Derivative Action approved a settlement of the litigation.

Among other terms of the settlement, no further capital calls will be made in connection with the Company’s investment in OCV Fund I, L.P.

Changes In And Disagreements With Accountants On Accounting And Financial Disclosure

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data