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j2 Global Inc. (JCOM - Analyst Report) reported mixed financial results for the third quarter of 2013, with strong revenue growth and low churn rate. Management seems more confident about 2013 as it maintained a strong financial outlook.

Additionally, the company’s board of directors declared a 3% sequential increase in its quarterly dividend, bringing the figure to 25.5 cents per share from 24.75 cents. This is in continuation of j2 Global’s streak of dividend increases for the last nine consecutive quartersThe new dividend rate implies a 27.5% year-over-year increase.

Quarterly GAAP net income came in at $27.8 million or 59 cents per share compared with $31.7 million or 69 cents per share in the year-ago quarter. Third-quarter adjusted earnings per share stood at 60 cents, surpassing the Zacks Consensus Estimate of 56 cents. Quarterly total revenue was approximately $127.8 million, up 37% year over year but below the Zacks Consensus Estimate of $131 million.

j2 Global posted quarterly gross margin of 82.9% compared with 82.5% in the year-ago quarter. Operating expenses in the reported quarter were $66.7 million compared with $34.7 million in the prior-year quarter. Quarterly operating margin was 30.8% against 45.4% in the comparable quarter last year. Quarterly EBITDA was $52.8 million, up 5.6% year over year.

Churn rate, in the third quarter of 2013, was 2.27% compared with 2.28% in the year-ago quarter. Addition of net paid Dial in Demand (DID) was approximately 29,000 in third-quarter 2013, leading to a total net paid DID of a record-high 2.22 million as of Sep 30, 2013.

In the first nine months of 2013, j2 Global generated $134.9 million of cash from operations compared with $123.5 million in the year-ago quarter. Free cash flow, in the reported quarter, was $123.8 million compared with $12 million in the prior-year quarter. At the end of third-quarter 2013, j2 Global had around $307.2 million in cash & marketable securities on its balance sheet compared with $323.7 million at the end of 2012. At the end of third-quarter 2013, the company had $245.5 million of debt as against $245.2 million at the end of 2012. The debt-to-capitalization ratio was 0.28 versus 0.29 at the end of 2012.

Financial Outlook

For fiscal 2013, management expects total revenue of $510–$535 million, while non-GAAP EPS is expected in the range of $2.78–$2.98. Non-GAAP effective tax rate is estimated below 25%.

Other Stocks to Consider

j2 Global currently has a Zacks Rank #3 (Hold). Besides j2 Global, other stocks in the Internet/Application software industry that are currently performing well include, Inc. (SPRT - Snapshot Report), Constant Contact, Inc. (CTCT - Snapshot Report) and Responsys, Inc. . has a Zacks Rank #1 (Strong Buy) while Constant Contact and Responsys currently have a Zacks Rank #2 (Buy).

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