It has been about a month since the last earnings report for j2 Global (JCOM - Free Report) . Shares have added about 1.3% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is j2 Global due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
J2 Global Beats on Q2 Earnings, Revenues Rise Y/Y
J2 Global reported second-quarter 2020 adjusted earnings of $1.71 per share, which beat the Zacks Consensus Estimate by 17.1% and increased 6.9% year over year.
Revenues were up 2.7% year over year to $331 million, beating the consensus mark by 5.2%.
Average monthly revenue per customer decreased 2.5% year over year to $13.66. Cancel rate was 2.2%, down 30 basis points (bps) year over year.
Revenues from Cloud Services (50.5% of revenues) decreased 1.2% from the year-ago quarter to $167.1 million.
Subscriber revenues (100% of Cloud Services revenues) fell 1.1% year over year to $167 million, primarily attributed to 8% decline in variable-subscriber revenues (15.7% of Subscriber revenues), which totaled $26.3 million. Fixed-subscriber revenues (84.3% of Subscriber revenues) climbed 0.3% year over year to $140.8 million.
Moreover, DID-based revenues slid 2.5% year over year to $95 million. Non-DID revenues inched up0.4% year over year to $72.1 million.
Digital Media revenues (49.5% of revenues) were $163.9 million, up 6.9% year over year.
At the end of the reported quarter, J2 Global had 4,076 Cloud Services customers compared with 4,015 at the end of the year-ago quarter.
Adjusted gross margin expanded 150 bps on a year-over-year basis to 83%. Cloud Services’ adjusted gross margin shrank 250 bps to 38.8%. Digital Media adjusted gross margin expanded 410 bps to 44.3%.
Adjusted sales & marketing, general & administrative, and research, development & engineering expenses flared up 4.5%, 13.6% and 1.8%, respectively, on a year-over-year basis.
Adjusted EBITDA margin expanded 130 bps on a year-over-year basis to 40.1%. Cloud Services adjusted EBITDA margin increased 40 bps on a year-over-year basis. However, Digital Media adjusted EBITDA margin declined 60 bps.
Adjusted operating margin expanded 80 bps year over year to 35.9%. While Cloud Services adjusted operating margin contracted 230 bps, Digital Media adjusted operating margin expanded 290 bps on a year-over-year basis.
Balance Sheet and Cash Flow
As of Jun 30, 2020, J2 Global had $616.8 million in cash and cash equivalents compared with $526.6 million as of Mar 31, 2020.
Long-term debt as of Jun 30, 2020 was $1.07 billion, lower than $1.46 billion as of Mar 31, 2020.
Free cash flow was $115.9 million, up 35.1% year over year.
Moreover, the company approved a new share-repurchase program under which J2 Global can purchase up to 10 million shares in the public market or in off-market transactions through Aug 6, 2025.
For 2020, J2 Global now expects revenues between $1.380 billion and $1.400 billion. Adjusted EBITDA is expected between $556 million and $570 million. Moreover, adjusted non-GAAP earnings are expected between $7.17 and $7.41 per share.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month. The consensus estimate has shifted 8.33% due to these changes.
At this time, j2 Global has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, j2 Global has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.