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j2 Global Tops Q2 Earnings and Rev

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Yesterday, after the closing bell, j2 Global Inc. (JCOM - Free Report) reported strong financial results for the second quarter of 2013, with record high quarterly revenues, EBITDA, free cash flow and record low churn rate. Management seems more confident about 2013 as it has provided a strong financial outlook.

Additionally, the board of directors of j2 Global has increased its quarterly dividend by 3.1% sequentially from 24 cents per share to 24.75 cents per share, maintaining its streak of dividend increases for eighth consecutive quarters. The new dividend rate implies a 24% increase compared with the dividend in the second quarter of 2012.

The solid performance was primarily attributed to j2 Global’s diversification of cloud business, installation of a media business and initiation of the intellectual property program. As a result, in the after market trade on NASDAQ, the stock price of j2 Global was up $1.96 (4.17%) to $49.  

Quarterly GAAP net income came in at $36 million or 77 cents per share compared with $31.2 million or 67 cents per share in the year-ago quarter. Second-quarter adjusted earnings per share came in at 79 cents, easily surpassing the Zacks Consensus Estimate of 72 cents. Quarterly total revenue was approximately $141.4 million, up 58% year over year and well above the Zacks Consensus Estimate of $130 million.

j2 Global posted quarterly gross margin of 84% compared with 81.9% in the year-ago quarter. Operating expenses in the reported quarter were $66.1 million compared with $33.3 million in the prior-year quarter. Quarterly operating margin was 37.2% compared with 44.7% in the comparable quarter last year. Quarterly EBITDA was $66.4 million, up 39.8% year over year.

Churn rate, in the second quarter of 2013, was 2.21% compared with 2.3% in the year-ago quarter. Addition of net paid DID (Dial in Demand) was approximately 34,000 in second-quarter 2013, leading to a total net paid DID of a record-high 2.19 million as of Jun 30, 2013.

In the second quarter of 2013, j2 Global generated $69 million of cash from operations compared with $46.4 million in the year-ago quarter. Free cash flow, in the reported quarter, was $66.2 million compared with $45.6 million in the prior-year quarter.

At the end of second-quarter 2013, j2 Global had around $352.9 million in cash & marketable securities on its balance sheet compared with $343.6 million at the end of 2012. At the end of second-quarter 2013, the company had $245.4 million of debt as compared to $245.2 million at the end of 2012. The debt-to-capitalization ratio increased to 0.28 as compared to 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 $2.78 - $2.98. Non-GAAP effective tax rate is estimated in the range of 25 - 27%.

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 eGain Corp. (EGAN - Free Report) , Geeknet Inc. and Telecommunication Systems Inc. . All these stocks currently have a Zacks Rank #1 (Strong Buy). 

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