j2 Global (JCOM) Q3 Earnings Beat Estimates, Revenues Up Y/Y

j2 Global JCOM reported third-quarter 2019 adjusted earnings of $1.70 per share, beating the Zacks Consensus Estimate by a penny. The figure also grew 11.1% year over year.

Revenues were up 17.6% year over year to $344.1 million, comfortably surpassing the consensus mark of $332 million.

Average monthly revenue per customer decreased 9.4% to $14.15. Cancel rate was 2.4%, up from 2.2% reported in the year-ago quarter.

Top-Line Details

Revenues from Cloud Services (49.7% of revenues) increased 14% from the year-ago quarter to $171.2 million.

Subscriber revenues (99.9% of Cloud Services revenues) grew 14.1% to $171 million, driven by 15.2% growth in fixed subscriber revenues (83% of Subscriber revenues). Variable subscriber revenues (17% of Subscriber revenues) climbed 8.8% year over year. Other licenses revenues (0.1% of Cloud Services revenues) declined 5% to $0.2 million in the reported quarter.

j2 Global, Inc. Price, Consensus and EPS Surprise

j2 Global, Inc. Price, Consensus and EPS Surprise

j2 Global, Inc. price-consensus-eps-surprise-chart | j2 Global, Inc. Quote

Moreover, DID-based revenues edged down 1.7% to $97.2 million. Non-DID revenues surged 44.4% year over year to $73.9 million.

Digital Media revenues (50.3% of revenues) were $173 million, up 21.3% year over year.

At the end of the reported quarter, j2 Global had 4,039 Cloud Services customers compared with 3,204 at the end of the year-ago quarter.

Operating Details

Adjusted gross margin contracted 120 basis points (bps) on a year-over-year basis to 82.3%. Cloud Services’ adjusted gross margin shrank 190 bps to 38.8%. Digital Media adjusted gross margin expanded 70 bps to 43.5%.

Adjusted sales & marketing and general & administrative expenses flared up 19.6% and 24.8%, respectively, on a year-over-year basis. However, research, development & engineering expenses declined 2%.

Adjusted EBITDA margin shrank 150 bps to 39.2%. Cloud Services adjusted EBITDA margin contracted 120 bps on a year-over-year basis. Also, Digital Media adjusted EBITDA margin contracted 20 bps.

Adjusted operating margin descended 190 bps to 35.3%. Cloud Services and Digital Media adjusted operating margin contracted 130 bps and 60 bps, respectively, on a year-over-year basis.

Balance Sheet and Cash Flow

As of Sep 30, 2019, j2 Global had approximately $94.6 million in cash and cash equivalents compared with $155.5 million as of Jun 30, 2019.

Long-term debt as of Sep 30 was $1.15 billion higher than $1.12 billion as of Jun 30.

Cash flow from operations was $99.5 million compared with $95.4 million in the previous quarter.
 
Free cash flow was $80.5 million compared with $85.8 million in the prior quarter.

2019 Guidance Reiterated

j2 Global still expects revenues between $1.33 billion and $1.37 billion for 2019.

Additionally, the company continues to expect adjusted EBITDA of $540-$556 million.

Adjusted earnings are anticipated between $6.95 and $7.15 per share.

Zacks Rank & Stocks to Consider

Currently, j2 Global has a Zacks Rank #3 (Hold).

Itron ITRI, Digital Turbine APPS and Dropbox DBX are some better-ranked stocks in the broader computer and technology sector. While Itron sports a Zacks Rank #1 (Strong Buy), both Digital Turbine and Dropbox carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

While both Itron and Digital Turbine are set to report quarterly results on Nov 4, Dropbox is scheduled to report on Nov 7.

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