A month has gone by since the last earnings report for j2 Global, Inc. (JCOM - Free Report) . Shares have added about 1% in that time frame.
Will the recent positive trend continue leading up to its next earnings release, or is JCOM due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
j2 Global first-quarter 2018 adjusted earnings of $1.22 per share beat the Zacks Consensus Estimate by a couple of cents and increased 2.5% on a year-over-year basis.
Revenues came in at $280.6 million, up 10.2% year over year and ahead of the Zacks Consensus Estimate of $274.7 million.
Segment wise, total Cloud Service revenues increased 6% from the year-ago quarter to $149.5 million. Digital Media revenues amounted to $131.1 million, up 16% year over year.
The company’s total subscription revenues increased 16% year over year to hit a quarterly high of $178.7 million. Subscription revenues for the Digital Media segment more than doubled on a year-over-year basis to $29.3 million.
At the end of the quarter, the company had 500k paid subscribers for Humble Bundle, which it acquired in fourth quarter of 2017. Notably, subscriber growth for Humble Bundle increased 85% year over year.
The company also launched three games namely Staxel, Aegis Defenders and Them's Fightin' Herds in the quarter to boost its subscription business. The company’s Speedtest Intelligence service is also helping it boost subscription revenues of the Digital Media segment.
j2’s focus on expanding its cloud fax business more specifically for the healthcare market is yielding results. Notably, corporate fax revenues increased 6% in the quarter organically, driven largely by growth in the healthcare customer segment.
Gross margin contracted 144 basis points (bps) on a year-over-year basis to 83.1%.
Operating expenses increased 13.2% year over year to $139.4 million due to higher research, development and engineering expenses, sales & marketing expenses and general and administrative expenses, up 6.8%, 13% and 15.6%, respectively.
Operating margin contracted 280 bps to 33.4%.
Quarterly adjusted EBITDA (earnings before interest, tax, depreciation and amortization) rose 3% year over year to $102.7 million. Adjusted EBITDA margin of 36.6% contracted 249 bps.
Balance Sheet and Cash Flow
As of Mar 31, 2018, cash and cash equivalents were $331.37 billion, compared with $350.95 million at the end of previous quarter. Long-term debt during the period was $1 billion.
Cash flow from operations was $103.9 million in the first quarter, compared with $51.19 million at the end of the previous quarter.
Free cash flow was $90.7 million during the quarter.
The company reaffirmed its earlier guidance. Revenues are expected to be between $1.20 billion and $1.25 billion for 2018. Adjusted earnings per share for the period are anticipated between $5.95 and $6.25.
Additionally, it projects adjusted EBITDA in the band of $480-$505 million for the same time frame.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. There have been three revisions lower for the current quarter.
At this time, JCOM has a nice Growth Score of B, however its Momentum is doing a bit better with an A. The stock was also allocated a grade of B on the value side, putting it in the top 40% 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.
Based on our scores, the stock is more suitable for momentum investors than those looking for value and growth.
Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Interestingly, JCOM has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.