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j2 Global (JCOM) Beats Q3 Earnings Estimates, Lags Revenues

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j2 Global, Inc. (JCOM - Free Report) delivered third-quarter fiscal 2018 adjusted earnings of $1.53 per share, beating the Zacks Consensus Estimate by 3 cents. The figure grew 14.2% year over year.

Net sales in the quarter were up 7% year over year to $292.7 million. However, the figure lagged the Zacks Consensus Estimate of $295 million  
Quarter Details

Revenues from Cloud Services increased 2.9% from the year-ago quarter to $150.1 million. Digital Media revenues were $142.6 million, up 11.6% year over year. The company’s total subscription revenues increased 14% year over year, driven by 94% growth in Digital Media revenues.

At the end of the quarter, the company had 3,204 cloud services customers. Average monthly revenue per customer increased 2.2% from the year-ago quarter to $15.61.

Adjusted gross margin contracted 130 basis points (bps) on a year-over-year basis to 83.5%. Cloud Services adjusted gross margin contracted 180 bps while that of Digital Media increased 50 bps.

The company also acquired five different business units in the quarter.

Adjusted EBITDA margin stayed flat at 40.7%. Cloud Services adjusted EBITDA margin contracted 180 bps from the year-ago quarter. However, Digital Media adjusted EBITDA margin expanded 110 bps.

Adjusted operating margin contracted 70 bps to 37.3%. Cloud Services adjusted operating margin contracted 180 bps while that of Digital Media increased 50 bps.

j2 Global, Inc. Price, Consensus and EPS Surprise

Balance Sheet and Cash Flow

As of Sep 30, 2018, the company had approximately $386 million in cash and investments after deploying approximately $113 million during the quarter for acquisitions and regular quarterly dividend. Long-term debt during the period was $1 billion.

Cash flow from operations was $89.8 million in the third quarter compared with $67.3 million in the year-ago quarter.
 
Free cash flow increased 29.3% year over year to $73.5 million.

Guidance

j2 Global reaffirmed its earlier guidance. Revenues are expected to be between $1.20 billion and $1.25 billion for 2018. Additionally, the company projects adjusted EBITDA in a band of $480 and $505 million.

Adjusted earnings are now anticipated between $6.16 and $6.46 per share.

Zacks Rank & Stocks to Consider

j2 Global currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the same sector include MeetMe, Inc. (MEET - Free Report) , Twitter, Inc. (TWTR - Free Report) and Upland Software, Inc. (UPLD - Free Report) . All the three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks Rank #1 stocks here.

Long-term earnings growth rate for MeetMe, Twitter and Upland Software is projected to be 20%, 22.05% and 20%, respectively.

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