A month has gone by since the last earnings report for j2 Global . Shares have added about 12.4% 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 Q1 Earnings Meet Estimates, Revenues Rise Y/Y
j2 Global reported first-quarter 2020 adjusted earnings of $1.40 per share, which were in line with the Zacks Consensus Estimate and also the year-ago reported figure.
Revenues were up 10.8% year over year to $332.4 million, beating the consensus mark by 0.1%.
Average monthly revenue per customer decreased 13% year over year to $13.95. Cancel rate was 2.3%, up 10 basis points (bps) year over year.
Notably, j2 Global withdrew its previously-issued financial guidance for 2020 due to the adverse COVID-19 impact.
Top-Line Details
Revenues from Cloud Services (51.1% of revenues) increased 11.5% from the year-ago quarter to $169.8 million.
Subscriber revenues (100% of Cloud Services revenues) rose 11.8% year over year to $169.7 million, driven by 15.9% growth in fixed subscriber revenues (84.9% of Subscriber revenues). Variable subscriber revenues (15.1% of Subscriber revenues) declined 6.4% year over year to $25.7 million.
Moreover, DID-based revenues slid 0.6% year over year to $96.5 million. Non-DID revenues surged 32.8% year over year to $73.3 million.
Digital Media revenues (48.9% of revenues) were $162.6 million, up 10.1% year over year.
At the end of the reported quarter, j2 Global had 4,076 Cloud Services customers compared with 3,148 at the end of the year-ago quarter.
Operating Details
Adjusted gross margin contracted 80 bps on a year-over-year basis to 82.4%. Cloud Services’ adjusted gross margin shrank 40 bps to 39.7%. Digital Media adjusted gross margin declined 40 bps to 42.7%.
Adjusted sales & marketing, general & administrative, and research, development & engineering expenses flared up 13.8%, 18.6% and 22.2%, respectively, on a year-over-year basis.
Adjusted EBITDA margin fell 280 bps on a year-over-year basis to 35.1%. Cloud Services adjusted EBITDA margin contracted 150 bps on a year-over-year basis. Moreover, Digital Media adjusted EBITDA margin declined 160 bps.
Adjusted operating margin was down 350 bps year over year to 30.7%. Cloud Services and Digital Media adjusted operating margins contracted 200 bps and 180 bps on a year-over-year basis, respectively.
Balance Sheet and Cash Flow
As of Mar 31, 2020, j2 Global had $526.6 million in cash and cash equivalents compared with $575.6 million as of Dec 31, 2019.
Long-term debt as of Mar 31, 2020 was $1.46 billion, higher than $1.06 billion as of Dec 31, 2019.
Free cash flow was $95.2 million, down 8.7% year over year.
Outlook
For second-quarter 2020, j2 Global expects revenues to be slightly down on a year-over-year basis. Moreover, adjusted EBITDA and adjusted non-GAAP earnings are expected to be down in single-digit percentages from the year-ago quarter’s levels.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month. The consensus estimate has shifted -12.09% due to these changes.
VGM Scores
At this time, j2 Global has an average Growth Score of C, a grade with the same score on the momentum front. However, 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise j2 Global has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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Why Is j2 Global (JCOM) Up 12.4% Since Last Earnings Report?
A month has gone by since the last earnings report for j2 Global . Shares have added about 12.4% 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 Q1 Earnings Meet Estimates, Revenues Rise Y/Y
j2 Global reported first-quarter 2020 adjusted earnings of $1.40 per share, which were in line with the Zacks Consensus Estimate and also the year-ago reported figure.
Revenues were up 10.8% year over year to $332.4 million, beating the consensus mark by 0.1%.
Average monthly revenue per customer decreased 13% year over year to $13.95. Cancel rate was 2.3%, up 10 basis points (bps) year over year.
Notably, j2 Global withdrew its previously-issued financial guidance for 2020 due to the adverse COVID-19 impact.
Top-Line Details
Revenues from Cloud Services (51.1% of revenues) increased 11.5% from the year-ago quarter to $169.8 million.
Subscriber revenues (100% of Cloud Services revenues) rose 11.8% year over year to $169.7 million, driven by 15.9% growth in fixed subscriber revenues (84.9% of Subscriber revenues). Variable subscriber revenues (15.1% of Subscriber revenues) declined 6.4% year over year to $25.7 million.
Moreover, DID-based revenues slid 0.6% year over year to $96.5 million. Non-DID revenues surged 32.8% year over year to $73.3 million.
Digital Media revenues (48.9% of revenues) were $162.6 million, up 10.1% year over year.
At the end of the reported quarter, j2 Global had 4,076 Cloud Services customers compared with 3,148 at the end of the year-ago quarter.
Operating Details
Adjusted gross margin contracted 80 bps on a year-over-year basis to 82.4%. Cloud Services’ adjusted gross margin shrank 40 bps to 39.7%. Digital Media adjusted gross margin declined 40 bps to 42.7%.
Adjusted sales & marketing, general & administrative, and research, development & engineering expenses flared up 13.8%, 18.6% and 22.2%, respectively, on a year-over-year basis.
Adjusted EBITDA margin fell 280 bps on a year-over-year basis to 35.1%. Cloud Services adjusted EBITDA margin contracted 150 bps on a year-over-year basis. Moreover, Digital Media adjusted EBITDA margin declined 160 bps.
Adjusted operating margin was down 350 bps year over year to 30.7%. Cloud Services and Digital Media adjusted operating margins contracted 200 bps and 180 bps on a year-over-year basis, respectively.
Balance Sheet and Cash Flow
As of Mar 31, 2020, j2 Global had $526.6 million in cash and cash equivalents compared with $575.6 million as of Dec 31, 2019.
Long-term debt as of Mar 31, 2020 was $1.46 billion, higher than $1.06 billion as of Dec 31, 2019.
Free cash flow was $95.2 million, down 8.7% year over year.
Outlook
For second-quarter 2020, j2 Global expects revenues to be slightly down on a year-over-year basis. Moreover, adjusted EBITDA and adjusted non-GAAP earnings are expected to be down in single-digit percentages from the year-ago quarter’s levels.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month. The consensus estimate has shifted -12.09% due to these changes.
VGM Scores
At this time, j2 Global has an average Growth Score of C, a grade with the same score on the momentum front. However, 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise j2 Global has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.