j2 Global (JCOM) Q1 Earnings Beat Estimates, Guidance Raised

j2 Global JCOM reported first-quarter 2019 adjusted earnings of $1.40 per share that beat the Zacks Consensus Estimate by 8 cents. The figure grew 14.8% year over year.

Revenues were up 1.8% year over year to $304.5 million that comfortably surpassed the consensus mark of $296 million. Average monthly revenue per customer increased 2.4% to $16.03. Cancel rate was 2.2%, flat year over year.

Based on the better-than-expected first-quarter results, j2 Global raised 2019 guidance.

Top-Line Details

Revenues from Cloud Services (50% of revenues) increased 1.8% from the year-ago quarter to $152.2 million.

Subscriber revenues (99.7% of Cloud Services revenues) climbed 1.7% to $151.8 million, driven by 2.9% growth in fixed subscriber revenues (81.9% of Subscriber revenues). Variable subscriber revenues (18.1% of Subscriber revenues) declined 3.5% year over year. Other licenses revenues (0.3% of Cloud Services revenues) skyrocketed 179.1% to $0.5 million in the reported quarter.

j2 Global, Inc. Price, Consensus and EPS Surprise

j2 Global, Inc. Price, Consensus and EPS Surprise | j2 Global, Inc. Quote

 

Digital Media revenues (50% of revenues) were $152.2 million, up 1.8% year over year. While DID-based revenues (63.8% of Digital Media revenues) declined 1.6%, non-DID revenues (36.2% of Digital Media revenues) increased 8.6% year over year.

At the end of the reported quarter, j2 Global had 3,148 Cloud Services customers compared with 3,185 at the end of the year-ago quarter.

Operating Details

Adjusted gross margin expanded 400 basis points (bps) on a year-over-year basis to 82%. Cloud Services adjusted gross margin contracted 30 bps, while that of Digital Media expanded 430 bps.

Adjusted sales & marketing, research & development, and general & administrative expenses increased 1.3%, 8.1% and 13.2%, respectively, on a year-over-year basis.

Adjusted EBITDA margin expanded 310 bps to 37.4%. Cloud Services adjusted EBITDA margin was flat year over year. However, Digital Media adjusted EBITDA margin expanded 290 bps.

Adjusted operating margin expanded 230 bps to 33.7%. Cloud Services adjusted operating margin contracted 10 bps, while that of Digital Media expanded 220 bps.

Balance Sheet and Cash Flow

As of Mar 31, 2019, j2 Global had approximately $226.6 million in cash and cash equivalents compared with $209.5 million as of Dec 31, 2018.

Long-term debt increased slightly on a sequential basis to $1.02 billion.

Cash flow from operations was $116.9 million compared with $103.9 million in the year-ago quarter.
 
Free cash flow increased 15% year over year to $104.3 million.

2019 Guidance Up

j2 Global now expects revenues between $1.33 billion and $1.37 billion (up from the previous guidance of $1.29-$1.33 billion) for 2019.

Additionally, the company projects adjusted EBITDA to be $540-$556 million (up from the previous guidance of $520-$540 million).

Adjusted earnings are now anticipated between $6.95 and $7.15 per share (up from the previous guidance of $6.65-$6.95 per share).

Zacks Rank & Other Stocks to Consider

j2 Global currently carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the same industry include MongoDB MDB, Kingdee International Software Group KGDEY and Upland Software UPLD. All three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for MongoDB, Kingdee and Upland is 8%, 28% and 20%, respectively.

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