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 j2 Reports Third Quarter 2017 Results
   Thursday, November 02, 2017 4:15:06 PM ET

--Announces Twenty-Fifth Consecutive Quarterly Dividend Increase

j2 Global, Inc. (JCOM ) today reported financial results for the third quarter ended September 30, 2017 and announced that its Board of Directors has declared an increased quarterly cash dividend of $0.3950 per share.

THIRD QUARTER 2017 RESULTS

-- Q3 2017 quarterly revenues increased 30.2% to an all-time record of $273.6 million compared to $210.1 million for Q3 2016.

-- GAAP earnings per diluted share(2) decreased 29.8% to $0.66 in Q3 2017 compared to $0.94 for Q3 2016. The decrease over the prior comparable period is primarily attributed to the increase in interest expense associated with issuance of the $650 million 6.0% Senior Notes due in 2025, the loss on the extinguishment of the $250 million 8.0% Senior Notes and the increased amortization expense associated with acquisitions, most notably Everyday Health.



-- Adjusted non-GAAP earnings per diluted share(2)(3) for the quarter increased 7.2% to $1.34 compared to $1.25 for Q3 2016.

-- GAAP net income decreased by 28.9% to $32.4 million compared to $45.6 million for Q3 2016. The decrease over the prior comparable period is primarily attributed to the increase in interest expense associated with issuance of the $650 million 6.0% Senior Notes due in 2025, the loss on the extinguishment of the $250 million 8.0% Senior Notes and the increased amortization expense associated with acquisitions, most notably Everyday Health.

-- Adjusted EBITDA(4) for the quarter increased 16.7% to $111.3 million compared to $95.4 million for Q3 2016.

j2 ended the quarter with approximately $402.5 million in cash and investments after deploying approximately $31.2 million during the quarter for acquisitions and j2’s regular quarterly dividend.

Key financial results for Q3 2017 versus Q3 2016 are set forth in the following table (in millions, except per share amounts). Reconciliations of Adjusted non-GAAP earnings per diluted share, Adjusted EBITDA and free cash flow to their nearest comparable GAAP financial measures are attached to this Press Release.

                                             
---------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
                                           Q3 2017                Q3 2016               % Change
---------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Revenues                                                        
---------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
  Cloud Services                                          $144.6 million         $142.2 million              1.7%
---------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
  Digital Media                                           $127.8 million          $66.8 million              91.3%
---------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
  IP Licensing                                             $1.2 million           $1.1 million               9.1%
---------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Total Revenue:                                            $273.6 million         $210.1 million              30.2%
---------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Operating Income                                           $63.0 million          $62.1 million              1.4%
---------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Net Cash Provided by Operating Activities                  $67.3 million          $60.5 million              11.2%
---------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Free Cash Flow (1)                                         $56.8 million          $53.2 million              6.8%
---------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
GAAP Earnings per Diluted Share (2)                            $0.66                  $0.94                 (29.8)%
---------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Adjusted Non-GAAP Earnings per Diluted Share (2) (3)           $1.34                  $1.25                  7.2%
---------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
GAAP Net Income                                            $32.4 million          $45.6 million             (28.9)%
---------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Non-GAAP Net Income                                        $65.2 million          $60.7 million              7.4%
---------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Adjusted EBITDA (4)                                       $111.3 million          $95.4 million              16.7%
---------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Adjusted EBITDA Margin (4)                                     40.7%                  45.4%                 (4.7)%
---------------------------------------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
                                                                                                    

"I am very happy to report another quarter of record revenues totaling more than $273 million, a 30.2% increase over the same quarter last year," said Hemi Zucker, CEO of j2. "I am also very pleased with our operating results as management was very focused on the integration of Everyday Health and a number of smaller acquisitions as well as divesting several business units that did not fit into j2’s long-term plans. Finally, I want to thank all my friends and colleagues at j2 for the past 21 years of excellence. I know Vivek Shah will continue to build on this momentum as j2 is extremely well-positioned to continue its long history of profitable growth."

"I would like to congratulate Hemi on his many years of success in building j2 into a global company with more than $1 billion in trailing twelve months revenues and a multi-billion dollar market capitalization," said Scott Turicchi, President and CFO of j2. "It has been a pleasure for me to work so closely with him for the past 17 years and all of us at j2 wish him all the success in the future."

BUSINESS OUTLOOK

For fiscal 2017, the Company reaffirms its previously revised estimates that it will achieve revenues between $1.107 billion and $1.147 billion. In addition, the Company is reaffirming its Adjusted non-GAAP earnings per diluted share of between $5.60 and $6.00.

Adjusted non-GAAP earnings per diluted share for 2017 excludes share-based compensation of between $21 and $23 million, amortization of acquired intangibles and the impact of any currently unanticipated items, in each case net of tax. The increase in share-based compensation is due to the recent announcement of Hemi’s retirement and the acceleration of equity which is expected to impact the fourth quarter by approximately $4.1 million.

It is anticipated that the Non-GAAP effective tax rate for 2017 (exclusive of the release of reserves for uncertain tax positions) will be between 28% and 30%.

The Company has not reconciled the Adjusted non-GAAP earnings per diluted share and tax rate guidance included in this release to the most directly comparable GAAP measure because this cannot be done without unreasonable effort due to the variability with respect to costs related to acquisitions and taxation, which are potential adjustments to future earnings. We expect the variability of these items to have a potentially unpredictable and significant impact on our future GAAP financial results.

DIVIDEND

j2’s Board of Directors approved a quarterly cash dividend of $0.3950 per common share, a $0.01, or 2.6% increase versus last quarter’s dividend. This is j2’s twenty-fifth consecutive quarterly dividend increase since its first quarterly dividend in September 2011. The dividend will be paid on December 5, 2017 to all shareholders of record as of the close of business on November 17, 2017. Future dividends will be subject to Board approval.

Notes:

  (1)   Free cash flow is defined as net cash provided by operating
                                              activities, less purchases of property, plant and equipment, plus
                                              excess tax benefit from share-based compensation. Free cash flow
                                              amounts are not meant as a substitute for GAAP, but are solely for
                                              informational purposes.
                                               
                     (2)                      The estimated GAAP effective tax rates were approximately 22.1% for
                                              Q3 2017 and 25.8% for Q3 2016. The estimated Adjusted non-GAAP
                                              effective tax rates were approximately 27.3% for Q3 2017 and 27.7%
                                              for Q3 2016.
                                               
                     (3)                      For Q3 2017, Adjusted non-GAAP earnings per diluted share excludes
                                              share-based compensation, certain acquisition-related integration
                                              costs, interest costs in excess of the coupon rate associated with
                                              convertible notes, amortization of acquired intangibles, additional
                                              tax expense from prior years, certain gains associated with the sale
                                              of businesses and diluted effect of convertible debt, in each case
                                              net of tax, totaling $0.68 per diluted share. For Q3 2016, Adjusted
                                              non-GAAP earnings per diluted share excludes share-based
                                              compensation, certain acquisition-related integration costs,
                                              interest costs in excess of the coupon rate associated with
                                              convertible notes, amortization of acquired intangibles, additional
                                              tax expense (benefit) from prior years and sale of investments, in
                                              each case net of tax, totaling $0.32 per diluted share.
                                               
                     (4)                      Adjusted EBITDA is defined as earnings before interest and other
                                              expense, net; income tax expense; depreciation and amortization; and
                                              the items used to reconcile EPS to Adjusted non-GAAP EPS referred to
                                              in Note (3) above. Adjusted EBITDA amounts are not meant as a
                                              substitute for GAAP, but are solely for informational purposes.

About j2 Global

j2 Global, Inc. (JCOM ) provides Internet services through two segments: Business Cloud Services and Digital Media. The Business Cloud Services segment offers Internet fax, virtual phone, unified communications, hosted email, email marketing, online backup and CRM solutions. It markets its services principally under the brand names eFax (R), eVoice (R), Onebox (R), FuseMail (R), Campaigner (R), KeepItSafe (R), Livedrive(R) and LiveVault(R), and operates a messaging network spanning 50 countries on six continents. The Digital Media segment offers technology, gaming, lifestyle and healthcare content through its digital properties, which include PCMag, IGN, AskMen, Speedtest, Offers, ExtremeTech, Geek, Toolbox, Techbargains, emedia, Salesify, Everyday Health and others. As of December 31, 2016, j2 had achieved 21 consecutive fiscal years of revenue growth. For more information about j2, please visit www.j2global.com.

"Safe Harbor" Statement Under the Private Securities Litigation Reform Act of 1995: Certain statements in this Press Release are "forward-looking statements" within the meaning of The Private Securities Litigation Reform Act of 1995, particularly those contained in Hemi Zucker’s quote and the "Business Outlook" portion regarding the Company’s expected fiscal 2017 financial performance. These forward-looking statements are based on management’s current expectations or beliefs and are subject to numerous assumptions, risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. These factors and uncertainties include, among other items: the Company’s ability to grow non-fax revenues, profitability and cash flows; the Company’s ability to identify, close and successfully transition acquisitions; subscriber growth and retention; variability of the Company’s revenue based on changing conditions in particular industries and the economy generally; protection of the Company’s proprietary technology or infringement by the Company of intellectual property of others; the risk of adverse changes in the U.S. or international regulatory environments, including but not limited to the imposition or increase of taxes or regulatory-related fees; and the numerous other factors set forth in j2 Global’s filings with the Securities and Exchange Commission ("SEC"). For a more detailed description of the risk factors and uncertainties affecting j2 Global, refer to the 2016 Annual Report on Form 10-K filed by j2 Global on March 1, 2017, and the other reports filed by j2 Global from time-to-time with the SEC, each of which is available at www.sec.gov. The forward-looking statements provided in this press release and particularly those contained in Hemi Zucker’s quote and the "Business Outlook" portion regarding the Company’s expected fiscal 2017 financial performance are based on limited information available to the Company at this time, which is subject to change. Although management’s expectations may change after the date of this press release, the Company undertakes no obligation to revise or update these statements.

About non-GAAP Financial Measures

To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we use the following Adjusted non-GAAP financial measures: Adjusted non-GAAP net income, Adjusted non-GAAP earnings per diluted share, Adjusted EBITDA and free cash flow. The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.

We use these Adjusted non-GAAP financial measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons. Our management believes that these Adjusted non-GAAP financial measures provide meaningful supplemental information regarding our performance and liquidity by excluding certain expenses and expenditures that may not be indicative of our recurring core business operating results. We believe that both management and investors benefit from referring to these Adjusted non-GAAP financial measures in assessing our performance and when planning, forecasting, and analyzing future periods. These Adjusted non-GAAP financial measures also facilitate management’s internal comparisons to our historical performance and liquidity. We believe these Adjusted non-GAAP financial measures are useful to investors both because (1) they allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making and (2) they are used by our institutional investors and the analyst community to help them analyze the health of our business.

For more information on these Adjusted non-GAAP financial measures, please see the appropriate GAAP to Adjusted non-GAAP reconciliation tables included within the attached Exhibit to this release.

                                                                                                                   
                                                                                j2 GLOBAL, INC. AND SUBSIDIARIES
                                                                              CONDENSED CONSOLIDATED BALANCE SHEETS
                                                                                    (UNAUDITED, IN THOUSANDS)
                                                                                                                                                           
                                                                                                        September 30, 2017                                           December 31, 2016
                                                                                              ---------------------------------------                     ---------------------------------------
                                 ASSETS                                                        
Cash and cash equivalents                                                                           $   402,544                                                 $   123,950
Short-term investments                                                                           --                                                          60
Accounts receivable, net of allowances of $8,964 and $7,988,                                            187,482                                                     199,871
respectively
Prepaid expenses and other current assets                                                                30,663                                                      24,118
Current assets held for sale                                                                              9,525                           --  
                                                                                              --------------------------------------                      --------------------------------------
Total current assets                                                                                    630,214                                                     347,999
                                                                                                                                                           
Property and equipment, net                                                                              71,333                                                      68,094
Goodwill                                                                                              1,107,988                                                   1,122,810
Other purchased intangibles, net                                                                        431,074                                                     511,691
Deferred income taxes, non-current                                                                        2,499                                                       5,289
Other assets                                                                                              6,364                                                       6,445
Non-current assets held for sale                                                                         55,214                           --  
                                                                                              --------------------------------------                      --------------------------------------
   TOTAL ASSETS                                                                                     $ 2,304,686                              $ 2,062,328  
                                                                                              ======= ========= ====================                      ======= ========= ====================
                                                                                                                                                           
     LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable and accrued expenses                                                               $   134,617                                                 $   178,071
Income taxes payable                                                                             --                                                      16,753
Deferred revenue, current                                                                                86,782                                                      80,384
Line of credit                                                                                   --                                                     178,817
Other current liabilities                                                                                    15                                                          64
Current liabilities held for sale                                                                         4,436                           --  
                                                                                              --------------------------------------                      --------------------------------------
Total current liabilities                                                                               225,850                                                     454,089
                                                                                                                                                           
Long-term debt                                                                                          999,198                                                     601,746
Deferred revenue, non-current                                                                                51                                                       1,588
Liability for uncertain tax positions                                                                    48,740                                                      46,537
Deferred income taxes, non-current                                                                       40,915                                                      40,357
Other long-term liabilities                                                                               4,679                                                       3,475
Non-current liabilities held for sale                                                                     4,713                           --  
                                                                                              --------------------------------------                      --------------------------------------
   TOTAL LIABILITIES                                                                                  1,324,146                                1,147,792  
                                                                                              --------------------------------------                      --------------------------------------
                                                                                                                                                           
Common stock                                                                                                476                                                         474
Additional paid-in capital                                                                              318,710                                                     308,329
Retained earnings                                                                                       692,387                                                     660,382
Accumulated other comprehensive loss                                                                    (31,033 )                                                   (54,649 )
                                                                                              --------------------------------------                      --------------------------------------
   TOTAL STOCKHOLDERS’ EQUITY                                                980,540                                  914,536  
                                                                                              --------------------------------------                      --------------------------------------
   TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY                            $ 2,304,686                              $ 2,062,328  
                                                                                              ======= ========= ====================                      ======= ========= ====================
                                                                                                                                                                             
                                                                                                                                                                             
                                                                                                                                 j2 GLOBAL, INC. AND SUBSIDIARIES
                                                                                                                            CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                                                                                                                     (UNAUDITED, IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
                                                                                                                                                                
                                                                                                                           Three Months Ended                                                                                                Nine Months Ended
                                                                                                                              September 30,                                                                                                    September 30,
                                                                                       ------------------------------------------------------------------------------------                            -------------------------------------------------------------------------------------
                                                                                                      2017                                 2016                                                    2017                                  2016
                                                                                       -----------------------------------                     -----------------------------------                     -----------------------------------                     ------------------------------------
Total revenues                                                                             $ 273,616                                               $ 210,116                                               $ 801,458                                                $ 622,418
                                                                                                                                                                                                                                                                
Cost of revenues (1)                                                                          42,371                               36,992                              126,339                               106,870  
                                                                                       ----------------------------------                      ----------------------------------                      ----------------------------------                      -----------------------------------
   Gross profit                                                                              231,245                              173,124                              675,119                               515,548  
                                                                                       ----------------------------------                      ----------------------------------                      ----------------------------------                      -----------------------------------
                                                                                                                                                                                                                                                                
Operating expenses:
   Sales and marketing (1)                                                                    79,432                                                  46,425                                                 237,772                                                  143,155
   Research, development and engineering (1)                                                  12,431                                                   8,965                                                  35,737                                                   27,165
   General and administrative (1)                                                             76,425                               55,612                              232,118                               170,823  
                                                                                       ----------------------------------                      ----------------------------------                      ----------------------------------                      -----------------------------------
   Total operating expenses                                                                  168,288                              111,002                              505,627                               341,143  
                                                                                       ----------------------------------                      ----------------------------------                      ----------------------------------                      -----------------------------------
Income from operations                                                                        62,957                                                  62,122                                                 169,492                                                  174,405
   Interest expense, net                                                                      25,326                                                  10,436                                                  51,406                                                   30,971
   Other (income) expense, net                                                                (3,890 )                                                (9,718 )                                                   660                                (9,805 )
                                                                                       ----------------------------------                      ----------------------------------                      ----------------------------------                      -----------------------------------
Income before income taxes                                                                    41,521                                                  61,404                                                 117,426                                                  153,239
Income tax expense                                                                             9,163                               15,835                               27,872                                43,958  
                                                                                       ----------------------------------                      ----------------------------------                      ----------------------------------                      -----------------------------------
Net income                                                                                 $  32,358                            $  45,569                            $  89,554                             $ 109,281  
                                                                                       ===== ======= ====================                      ===== ======= ====================                      ===== ======= ====================                      ====== ======= ====================
                                                                                                                                                                                                                                                                
Basic net income per common share:
   Net income attributable to j2 Global, Inc. common shareholders                          $    0.67                            $    0.95                            $    1.86                             $    2.25  
                                                                                       ===== ======= ====================                      ===== ======= ====================                      ===== ======= ====================                      ====== ======= ====================
                                                                                                                                                                                                                                                                
Diluted net income per common share:
   Net income attributable to j2 Global, Inc. common shareholders                          $    0.66                            $    0.94                            $    1.81                             $    2.24  
                                                                                       ===== ======= ====================                      ===== ======= ====================                      ===== ======= ====================                      ====== ======= ====================
                                                                                                                                                                                                                                                                
Basic weighted average shares outstanding                                                 47,609,819                                              47,310,011                                              47,540,593                                               47,775,798
Diluted weighted average shares outstanding                                               48,521,082                                              47,494,744                                              48,745,680                                               47,997,674
                                                                                                                                                                                                                                                                
(1) Includes share-based compensation expense as follows:
Cost of revenues                                                                           $     120                                               $     116                                               $     357                                                $     314
Sales and marketing                                                                              365                                                     423                                                   1,265                                                    1,388
Research, development and engineering                                                            296                                                     235                                                     815                                                      663
General and administrative                                                                     3,782                                2,925                               11,303                                 7,582  
                                                                                       ----------------------------------                      ----------------------------------                      ----------------------------------                      -----------------------------------
Total                                                                                      $   4,563                            $   3,699                            $  13,740                             $   9,947  
                                                                                       ===== ======= ====================                      ===== ======= ====================                      ===== ======= ====================                      ====== ======= ====================
                                                                                                                                                                                                                                                                               
                                                                                                                                                                                                                                                                               
                                                                         j2 GLOBAL, INC. AND SUBSIDIARIES
                                                                  CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                                
                   (UNAUDITED, IN THOUSANDS)                                                                        Nine Months Ended September 30,
                                                                                    -----------------------------------------------------------------------------------------------
                                                                                                    2017                                   2016
                                                                                    -------------------------------------                     -------------------------------------
Cash flows from operating activities:
   Net income                                                                             $  89,554                                                 $ 109,281
Adjustments to reconcile net earnings to net cash provided by
operating activities:
   Depreciation and amortization                                                            118,597                                                    88,569
   Amortization of financing costs and discounts                                              9,094                                                     7,224
   Share-based compensation                                                                  13,740                                                     9,947
   Provision for doubtful accounts                                                            9,099                                                     9,072
   Deferred income taxes, net                                                                 3,859                                                    (2,328 )
   Loss on extinguishment of debt and related interest expense                                7,962                                            --
   Gain on sale of businesses                                                                (4,715 )                                          --
Decrease (increase) in:
   Accounts receivable                                                                        4,711                                                    (7,631 )
   Prepaid expenses and other current assets                                                   (264 )                                                    (663 )
   Other assets                                                                                 134                                                    (7,947 )
Increase (decrease) in:
   Accounts payable and accrued expenses                                                    (49,324 )                                                  (4,601 )
   Income taxes payable                                                                     (26,359 )                                                    (927 )
   Deferred revenue                                                                             (75 )                                                  (4,134 )
   Liability for uncertain tax positions                                                      1,554                                                     8,502
   Other long-term liabilities                                                                1,429                                (11,824 )
                                                                                    ------------------------------------                      ------------------------------------
Net cash provided by operating activities                                                   178,996                                192,540  
                                                                                    ------------------------------------                      ------------------------------------
Cash flows from investing activities:
   Maturity of available-for-sale investments                                        --                                                   145,005
   Purchase of available-for-sale investments                                                    (5 )                                                 (75,834 )
   Purchases of property and equipment                                                      (29,483 )                                                 (17,447 )
   Acquisition of businesses, net of cash received                                          (47,268 )                                                 (91,401 )
   Proceeds from sale of businesses, net of cash divested                                    33,508                                            --
   Purchases of intangible assets                                                            (1,320 )                                                  (2,014 )
                                                                                    ------------------------------------                      ------------------------------------
Net cash used in investing activities                                                       (44,568 )                                                 (41,691 )
                                                                                    ------------------------------------                      ------------------------------------
Cash flows from financing activities:
   Issuance of long-term debt, net                                                          636,598                                            --
   Payment of debt                                                                         (255,000 )                                          --
   Proceeds from line of credit, net                                                         44,981                                            --
   Repayment of line of credit                                                             (225,000 )                                          --
   Repurchases of common and restricted stock                                                (7,862 )                                                 (56,083 )
   Issuance of stock, net of costs                                                            1,302                                                     3,463
   Dividends paid                                                                           (54,346 )                                                 (48,768 )
   Deferred payments for acquisitions                                                        (5,062 )                                                 (18,939 )
   Other                                                                                        (45 )                                                   1,680  
                                                                                    ------------------------------------                      ------------------------------------
Net cash provided by (used) in financing activities                                         135,566                               (118,647 )
                                                                                    ------------------------------------                      ------------------------------------
Effect of exchange rate changes on cash and cash equivalents                                  8,600                                 (2,169 )
                                                                                    ------------------------------------                      ------------------------------------
Net change in cash and cash equivalents                                                     278,594                                                    30,033
Cash and cash equivalents at beginning of period                                            123,950                                255,530  
                                                                                    ------------------------------------                      ------------------------------------
Cash and cash equivalents at end of period                                                $ 402,544                              $ 285,563  
                                                                                    ======= ======= ====================                      ======= ======= ====================
                                                                                                                                                               
                                                                                                                                                               
                                                                                                                            j2 GLOBAL, INC. AND SUBSIDIARIES
                                                                                                             RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP FINANCIAL MEASURES
                                                                                                                 THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016
                                                                                                                   (UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                              
Non-GAAP net income is GAAP net income with the following
modifications, net of tax: (1) elimination of share-based
compensation and the associated payroll tax expense; (2)
elimination of certain acquisition-related integration costs; (3)
elimination of interest costs in excess of the coupon rate
associated with the convertible notes; (4) elimination of
amortization of patents and intangible assets that we acquired;
(5) elimination of additional tax or indirect tax related
(expense) benefit from prior years; (6) elimination of gain on
sale of investments; (7) elimination of gain on sale of
businesses; and (8) elimination of dilutive effect of the
convertible debt.
                                                                   
                                                                   
                                                                                                                                                             Three Months Ended September 30,
                                                                  ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                            2017                                  Per Diluted                      2016                                Per Diluted
                                                                                                                                                       Share *                                                                                                    Share *
                                                                  ------------------------------------------------------   -------------------- -----------------                        ----------------------------------   -------------------- ----------------------------------
Net income                                                                           $         32,358                              $    0.66                                $  45,569                              $    0.94
Plus:
   Share based compensation (1)                                                                 3,488                                                      0.07                                    2,660                                                      0.06
   Acquisition related integration costs (2)                                                    1,573                                                      0.03                                     (588 )                                                   (0.01 )
   Interest costs (3)                                                                           8,603                                                      0.18                                    1,623                                                      0.03
   Amortization (4)                                                                            22,526                                                      0.47                                   16,065                                                      0.34
   Tax expense from prior years (5)                                                              (184 )                                                   (0.00 )                         --                                            --
   Sale of investments (6)                                                             --                                            --                                   (4,674 )                                                   (0.10 )
   Sale of businesses (7)                                                                      (3,154 )                                                   (0.07 )                         --                                            --
   Convertible debt dilution (8)                                    --                                   0.01                           --                         --
                                                                  -------------------- -------------- --------------------                                                               ------------------------------------
Adjusted non-GAAP net income                                                         $         65,210                              $    1.34                                $  60,655                              $    1.25
                                                                  ==================== ============== ====================                                                               ======= ======= ====================
                                                                   
                                                                   
                                                                                                                                                              Nine Months Ended September 30,
                                                                  ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                            2017                                  Per Diluted                                         2016                                Per Diluted
                                                                                                                                                       Share *                                                                                                    Share *
                                                                  ------------------------------------------------------   -------------------- -----------------                        ----------------------------------   -------------------- ----------------------------------
Net income                                                                           $         89,554                                                 $    1.81                                $ 109,281                                                 $    2.24
Plus:
   Share based compensation (1)                                                                 9,241                                                      0.19                                    7,232                                                      0.15
   Acquisition related integration costs (2)                                                   12,464                                                      0.26                                    3,777                                                      0.08
   Interest costs (3)                                                                          11,898                                                      0.25                                    4,318                                                      0.09
   Amortization (4)                                                                            65,891                                                      1.38                                   51,705                                                      1.08
   Tax expense from prior years (5)                                                             1,875                                                      0.04                                       53                                            --
   Sale of investments (6)                                                             --                                            --                                   (4,675 )                                                   (0.10 )
   Sale of businesses (7)                                                                      (3,154 )                                                   (0.07 )                         --                                            --
   Convertible debt dilution (8)                                    --                                   0.04                           --                         --
                                                                  -------------------- -------------- --------------------                                                               ------------------------------------
Adjusted non-GAAP net income                                                         $        187,769                              $    3.85                                $ 171,691                              $    3.50
                                                                  ==================== ============== ====================                                                               ======= ======= ====================
                                                                                                                                                                                                                                                                    
                                                                                                                                                                                                                                                                    
                                                         
                                                                      j2 GLOBAL, INC. AND SUBSIDIARIES
                                                       RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP FINANCIAL MEASURES
                                                               THREE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016
                                                             (UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                                                              
Non-GAAP net income is GAAP net income with the following
modifications: (1) elimination of share-based compensation and the
associated payroll tax expense; (2) elimination of certain
acquisition-related integration costs; (3) elimination of interest
costs in excess of the coupon rate associated with the convertible
notes; (4) elimination of amortization of patents and intangible
assets that we acquired; (5) elimination of additional tax or
indirect tax related (expense) benefit from prior years; (6)
elimination of gain on sale of investments; (7) elimination of
gain on sale of businesses; and (8) elimination of dilutive effect
of the convertible debt.
                                                                              
                                                                                                            Three Months Ended September 30,
                                                                             -----------------------------------------------------------------------------------------------
                                                                                             2017                                   2016
                                                                             -------------------------------------                     -------------------------------------
Cost of revenues                                                                   $  42,371                                                 $  36,992
Plus:
   Share based compensation (1)                                                         (120 )                                                    (116 )
   Amortization (4)                                                                     (590 )                                                  (1,334 )
                                                                             ------------------------------------                      ------------------------------------
Adjusted non-GAAP cost of revenues                                                 $  41,661                              $  35,542  
                                                                             ======= ======= ====================                      ======= ======= ====================
                                                                                                                                        
Sales and marketing                                                                $  79,432                                                 $  46,425
Plus:
   Share based compensation (1)                                                         (365 )                                                    (423 )
   Acquisition related integration costs (2)                                          (1,212 )                                                    (409 )
                                                                             ------------------------------------                      ------------------------------------
Adjusted non-GAAP sales and marketing                                              $  77,855                              $  45,593  
                                                                             ======= ======= ====================                      ======= ======= ====================
                                                                                                                                        
Research, development and engineering                                              $  12,431                                                 $   8,965
Plus:
   Share based compensation (1)                                                         (296 )                                                    (235 )
   Acquisition related integration costs (2)                                          (1,026 )                                                     (51 )
                                                                             ------------------------------------                      ------------------------------------
Adjusted non-GAAP research, development and engineering                            $  11,109                              $   8,679  
                                                                             ======= ======= ====================                      ======= ======= ====================
                                                                                                                                        
General and administrative                                                         $  76,425                                                 $  55,612
Plus:
   Share based compensation (1)                                                       (3,782 )                                                  (2,925 )
   Acquisition related integration costs (2)                                          (2,219 )                                                   1,196
   Amortization (4)                                                                  (31,160 )                                                 (23,730 )
                                                                             ------------------------------------                      ------------------------------------
Adjusted non-GAAP general and administrative                                       $  39,264                              $  30,153  
                                                                             ======= ======= ====================                      ======= ======= ====================
                                                                                                                                        
Interest expense, net                                                              $  25,326                                                 $  10,436
Plus:
   Interest costs (3)                                                                (11,755 )                                                  (1,940 )
                                                                             ------------------------------------                      ------------------------------------
Adjusted non-GAAP interest expense, net                                            $  13,571                              $   8,496  
                                                                             ======= ======= ====================                      ======= ======= ====================
                                                                                                                                        
Other (income) expense, net                                                        $  (3,890 )                                               $  (9,718 )
Plus:
   Acquisition related integration costs (2)                                            (304 )                                          --
   Sale of investments (6)                                                    --                                                     7,540
   Sale of businesses (7)                                                              4,715                         --  
                                                                             ------------------------------------                      ------------------------------------
Adjusted non-GAAP other (income) expense, net                                      $     521                              $  (2,178 )
                                                                             ======= ======= ====================                      ======= ======= ====================
                                                                                                                                        
Income tax provision                                                               $   9,163                                                 $  15,835
Plus:
   Share based compensation (1)                                                        1,075                                                     1,039
   Acquisition related integration costs (2)                                           3,188                                                      (148 )
   Interest costs (3)                                                                  3,152                                                       317
   Amortization (4)                                                                    9,224                                                     8,999
   Tax expense from prior years (5)                                                      184                                            --
   Sale of investments (6)                                                    --                                                    (2,866 )
   Sale of businesses (7)                                                             (1,561 )                                          --  
                                                                             ------------------------------------                      ------------------------------------
Adjusted non-GAAP income tax provision                                             $  24,425                              $  23,176  
                                                                             ======= ======= ====================                      ======= ======= ====================
                                                                                                                                        
Total adjustments                                                                  $ (32,852 )                                               $ (15,086 )
                                                                                                                                        
GAAP earnings per diluted share                                                    $    0.66                                                 $    0.94
   Adjustments *                                                                   $    0.68                                                 $    0.32
Adjusted non-GAAP earnings per diluted share                                       $    1.34                                                 $    1.25

* The reconciliation of net income per share from GAAP to Adjusted non-GAAP may not foot since each is calculated independently.

The Company discloses Adjusted non-GAAP Earnings Per Share ("EPS") as a supplemental Non-GAAP financial performance measure, as it believes it is a useful metric by which to compare the performance of its business from period to period. The Company also understands that this Adjusted non-GAAP measure is broadly used by analysts, rating agencies and investors in assessing the Company’s performance. Accordingly, the Company believes that the presentation of this Adjusted non-GAAP financial measure provides useful information to investors.

Adjusted non-GAAP EPS is not in accordance with, or an alternative to, net income per share and may be different from Non-GAAP measures with similar or even identical names used by other companies. In addition, this Adjusted non-GAAP measure is not based on any comprehensive set of accounting rules or principles. This Adjusted non-GAAP measure has limitations in that it does not reflect all of the amounts associated with the Company’s results of operations determined in accordance with GAAP.

                                                         
                                                                      j2 GLOBAL, INC. AND SUBSIDIARIES
                                                       RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP FINANCIAL MEASURES
                                                                NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016
                                                             (UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                                                              
Non-GAAP net income is GAAP net income with the following
modifications: (1) elimination of share-based compensation and the
associated payroll tax expense; (2) elimination of certain
acquisition-related integration costs; (3) elimination of interest
costs in excess of the coupon rate associated with the convertible
notes; (4) elimination of amortization of patents and intangible
assets that we acquired; (5) elimination of additional tax or
indirect tax related (expense) benefit from prior years; (6)
elimination of gain on sale of investments; (7) elimination of
gain on sale of businesses; and (8) elimination of dilutive effect
of the convertible debt.
                                                                              
                                                                                                             Nine Months Ended September 30,
                                                                             -----------------------------------------------------------------------------------------------
                                                                                             2017                                   2016
                                                                             -------------------------------------                     -------------------------------------
Cost of revenues                                                                   $ 126,339                                                 $ 106,870
Plus:
   Share based compensation (1)                                                         (357 )                                                    (314 )
   Acquisition related integration costs (2)                                            (195 )                                          --
   Amortization (4)                                                                   (2,348 )                                                  (3,890 )
                                                                             ------------------------------------                      ------------------------------------
Adjusted non-GAAP cost of revenues                                                 $ 123,439                              $ 102,666  
                                                                             ======= ======= ====================                      ======= ======= ====================
                                                                                                                                        
Sales and marketing                                                                $ 237,772                                                 $ 143,155
Plus:
   Share based compensation (1)                                                       (1,265 )                                                  (1,388 )
   Acquisition related integration costs (2)                                          (3,684 )                                                  (1,534 )
                                                                             ------------------------------------                      ------------------------------------
Adjusted non-GAAP sales and marketing                                              $ 232,823                              $ 140,233  
                                                                             ======= ======= ====================                      ======= ======= ====================
                                                                                                                                        
Research, development and engineering                                              $  35,737                                                 $  27,165
Plus:
   Share based compensation (1)                                                         (815 )                                                    (663 )
   Acquisition related integration costs (2)                                          (1,850 )                                                     (50 )
                                                                             ------------------------------------                      ------------------------------------
Adjusted non-GAAP research, development and engineering                            $  33,072                              $  26,452  
                                                                             ======= ======= ====================                      ======= ======= ====================
                                                                                                                                        
General and administrative                                                         $ 232,118                                                 $ 170,823
Plus:
   Share based compensation (1)                                                      (11,303 )                                                  (7,582 )
   Acquisition related integration costs (2)                                         (10,507 )                                                  (4,226 )
   Amortization (4)                                                                  (94,095 )                                                 (69,654 )
   Tax expense from prior years (5)                                                   (3,007 )                                                    (900 )
                                                                             ------------------------------------                      ------------------------------------
Adjusted non-GAAP general and administrative                                       $ 113,206                              $  88,461  
                                                                             ======= ======= ====================                      ======= ======= ====================
                                                                                                                                        
Interest expense, net                                                              $  51,406                                                 $  30,971
Plus:
   Interest costs (3)                                                                (16,644 )                                                  (5,739 )
                                                                             ------------------------------------                      ------------------------------------
Adjusted non-GAAP interest expense, net                                            $  34,762                              $  25,232  
                                                                             ======= ======= ====================                      ======= ======= ====================
                                                                                                                                        
Other (income) expense, net                                                        $     660                                                 $  (9,805 )
Plus:
   Acquisition related integration costs (2)                                          (2,938 )                                          --
   Tax benefit from prior years (5)                                           --                                                       811
   Sale of investments (6)                                                    --                                                     7,540
   Sale of businesses (7)                                                              4,715                         --  
                                                                             ------------------------------------                      ------------------------------------
Adjusted non-GAAP other (income) expense, net                                      $   2,437                              $  (1,454 )
                                                                             ======= ======= ====================                      ======= ======= ====================
                                                                                                                                        
Income tax provision                                                               $  27,872                                                 $  43,958
Plus:
   Share based compensation (1)                                                        4,499                                                     2,715
   Acquisition related integration costs (2)                                           6,710                                                     2,033
   Interest costs (3)                                                                  4,746                                                     1,421
   Amortization (4)                                                                   30,552                                                    21,839
   Tax expense from prior years (5)                                                    1,132                                                        36
   Sale of investments (6)                                                    --                                                    (2,865 )
   Sale of businesses (7)                                                             (1,561 )                                          --  
                                                                             ------------------------------------                      ------------------------------------
Adjusted non-GAAP income tax provision                                             $  73,950                              $  69,137  
                                                                             ======= ======= ====================                      ======= ======= ====================
                                                                                                                                        
Total adjustments                                                                  $ (98,215 )                                               $ (62,410 )
                                                                                                                                        
GAAP earnings per diluted share                                                    $    1.81                                                 $    2.24
   Adjustments *                                                                   $    2.04                                                 $    1.26
Adjusted non-GAAP earnings per diluted share                                       $    3.85                                                 $    3.50

* The reconciliation of net income per share from GAAP to Adjusted non-GAAP may not foot since each is calculated independently.

The Company discloses Adjusted non-GAAP Earnings Per Share ("EPS") as a supplemental Non-GAAP financial performance measure, as it believes it is a useful metric by which to compare the performance of its business from period to period. The Company also understands that this Adjusted non-GAAP measure is broadly used by analysts, rating agencies and investors in assessing the Company’s performance. Accordingly, the Company believes that the presentation of this Adjusted non-GAAP financial measure provides useful information to investors.

Adjusted non-GAAP EPS is not in accordance with, or an alternative to, net income per share and may be different from Non-GAAP measures with similar or even identical names used by other companies. In addition, this Adjusted non-GAAP measure is not based on any comprehensive set of accounting rules or principles. This Adjusted non-GAAP measure has limitations in that it does not reflect all of the amounts associated with the Company’s results of operations determined in accordance with GAAP.

Non-GAAP Financial Measures

To supplement its condensed consolidated financial statements, which are prepared and presented in accordance with US GAAP, the Company uses the following Non-GAAP financial measures: Adjusted EBITDA, Adjusted non-GAAP net income, and Adjusted non-GAAP diluted EPS (collectively the "Non-GAAP financial measures"). The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with U.S. GAAP. The Company uses these Non-GAAP financial measures for financial and operational decision making and as a means to evaluate period-to-period comparisons. The Company believes that they provide useful information about core operating results, enhance the overall understanding of past financial performance and future prospects, and allow for greater transparency with respect to key metrics used by management in its financial and operational decision making.

(1) Share Based Compensation. The Company excludes stock-based compensation because it is non-cash in nature and because the Company believes that the Non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance. The Company further believes this measure is useful to investors in that it allows for greater transparency to certain line items in its financial statements. In addition, excluding this item from the Non-GAAP measures facilitates comparisons to historical operating results and comparisons to peers, many of which similarly exclude this item.

(2) Acquisition Related Integration Costs. The Company excludes certain acquisition and related integration costs such as severance, lease terminations, retention bonuses and other acquisition-specific items. The Company believes that the Non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance. In addition, excluding this item from the Non-GAAP measures facilitates comparisons to historical operating results and comparisons to peers, many of which similarly exclude this item.

(3) Interest Costs. In June 2014, the Company issued $402.5 million aggregate principal amount of 3.25% convertible senior notes. In accordance with GAAP, the Company separately accounts for the value of the liability and equity features of its outstanding convertible senior notes in a manner that reflects the Company’s non-convertible debt borrowing rate. The value of the conversion feature, reflected as a debt discount, is amortized to interest expense over time. Accordingly, the Company recognizes imputed interest expense on its convertible senior notes of approximately 5.8% in its income statement. The Company excludes the difference between the imputed interest expense and the coupon interest expense of 3.25% because it is non-cash in nature and because the Company believes that the Non-GAAP financial measures excluding this item provide meaningful supplemental information regarding core operational performance. In addition, the Company has excluded 3 days of overlapping interest expense in June and the month of July in connection with the 8.0% senior unsecured notes and deferred issuance costs associated with the repayment of the line of credit. The Company has determined excluding these items from the Non-GAAP measures facilitates comparisons to historical operating results and comparisons to peers, many of which similarly exclude this item.

(4) Amortization. The Company excludes amortization of patents and acquired intangible assets because it is non-cash in nature and because the Company believes that the Non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance. In addition, excluding this item from the Non-GAAP measures facilitates comparisons to historical operating results and comparisons to peers, many of which similarly exclude this item.

(5) Tax (Expense) Benefit from Prior Years. The Company excludes certain income tax-related items in respect of income tax audit settlements and their related FIN 48 accrual reversals. The Company believes that the Non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance. In addition, excluding this item from the Non-GAAP measures facilitates comparisons to historical operating results.

(6) Gain on Sale of Investment. The company excludes the gain on sale of its strategic equity investment in Carbonite, Inc. The company believes that the Non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance. In addition, excluding this item from the Non-GAAP measures facilitates comparisons to historical operating results.

(7) Gain on Sale of Businesses. The company excludes the gain on sale of its businesses of Cambridge BioMarketing LLC and Web24. The company believes that the Non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance. In addition, excluding this item from the Non-GAAP measures facilitates comparisons to historical operating results.

(8) Convertible Debt Dilution. The Company excludes convertible debt dilution from diluted EPS. The Company believes that the Non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance. In addition, excluding this item from the Non-GAAP measures facilitates comparisons to historical operating results.

The Company presents Adjusted non-GAAP Cost of Revenues, Adjusted non-GAAP Research, Development and Engineering, Adjusted non-GAAP Sales and Marketing, Adjusted non-GAAP General and Administrative, Adjusted non-GAAP Interest Expense, Adjusted non-GAAP Other Expense (Income), Adjusted non-GAAP Income Tax Provision and Adjusted non-GAAP Net Income because the Company believes that these provide useful information about our operating results and enhance the overall understanding of past financial performance and future prospects.

                                                                                                                                                                     
                                                                                                                                     j2 GLOBAL, INC. AND SUBSIDIARIES
                                                                                                                               NET INCOME TO ADJUSTED EBITDA RECONCILIATION
                                                                                                                          THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016
                                                                                                                                         (UNAUDITED, IN THOUSANDS)
 
The following table sets forth a reconciliation of Adjusted EBITDA
to net income, the most directly comparable GAAP financial measure.
                                                                                                                                                                                                             
                                                                                                                       Three Months Ended September 30,                                                                                     Nine Months Ended September 30,
                                                                                        -----------------------------------------------------------------------------------------------                     ----------------------------------------------------------------------------------------------
                                                                                                        2017                                   2016                                                      2017                                  2016
                                                                                        -------------------------------------                     -------------------------------------                     ------------------------------------                     -------------------------------------
Net income                                                                                    $  32,358                                                 $  45,569                                                $  89,554                                                 $ 109,281
Plus:
   Interest expense, net                                                                         25,326                                                    10,436                                                   51,406                                                    30,971
   Other expense (income), net                                                                      521                                                    (9,718 )                                                  2,438                                                    (9,805 )
   Income tax expense                                                                             9,163                                                    15,835                                                   27,872                                                    43,958
   Depreciation and amortization                                                                 39,372                                                    30,336                                                  118,597                                                    88,569
Reconciliation of GAAP to Adjusted non-GAAP financial measures:
   Share-based compensation and the associated payroll tax expense                                4,563                                                     3,699                                                   13,740                                                     9,947
   Acquisition-related integration costs                                                          4,761                                                      (736 )                                                 19,174                                                     5,810
   Additional indirect tax expense from prior years                                      --                                            --                                                    3,007                                                       900
   Sale of businesses                                                                            (4,715 )                                          --                                                   (4,715 )                                          --
                                                                                                                                                                                                             
                                                                                        -------------------------------------                     -------------------------------------                     ------------------------------------                     -------------------------------------
Adjusted EBITDA                                                                               $ 111,349                              $  95,421                             $ 321,073                              $ 279,631  
                                                                                        ======= ======= ====================                      ======= ======= ====================                      ====== ======= ====================                      ======= ======= ====================

Adjusted EBITDA as calculated above represents earnings before interest and other expense, net, income tax expense, depreciation and amortization and the items used to reconcile GAAP to Adjusted non-GAAP financial measures, including (1) share-based compensation, (2) certain acquisition-related integration costs, (3) additional indirect tax expense from prior years and (4) certain gains on sale of businesses. We disclose Adjusted EBITDA as a supplemental Non-GAAP financial performance measure as we believe it is a useful metric by which to compare the performance of our business from period to period. We understand that measures similar to Adjusted EBITDA are broadly used by analysts, rating agencies and investors in assessing our performance. Accordingly, we believe that the presentation of Adjusted EBITDA provides useful information to investors.

Adjusted EBITDA is not in accordance with, or an alternative to, net income, and may be different from Non-GAAP measures used by other companies. In addition, Adjusted EBITDA is not based on any comprehensive set of accounting rules or principles. This Adjusted non-GAAP measure has limitations in that it does not reflect all of the amounts associated with the Company’s results of operations determined in accordance with GAAP.

                                                                                                                                                                                                                
                                                                                                                                                          j2 GLOBAL, INC. AND SUBSIDIARIES
                                                                                                                                                             NON-GAAP FINANCIAL MEASURES
                                                                                                                                                              (UNAUDITED, IN THOUSANDS)
                                                                                                                                                                                                                                                                                                                 
                                                                                     Q1                                                     Q2                                                        Q3                                                            Q4                                                           YTD
                                                                      --------------------------------                     -------------------------------------                     -------------------------------------                     --------------------------------------------                     ------------------------------------
                      2017
------------------------------------------------
Net cash provided by operating activities                               $ 51,191                                                 $  60,464                                                 $  67,341                                                 $ --                                                $ 178,996
Less: Purchases of property and equipment                                 (9,660 )                                                  (9,285 )                                                 (10,538 )                                                 --                                                  (29,483 )
Add: Contingent consideration*                                            20,000                                 19,950                         --                                --                                39,950  
                                                                      -------------------------------                      ------------------------------------                      ------------------------------------                      -------------------------------------------                      -----------------------------------
Free cash flows                                                         $ 61,531                              $  71,129                              $  56,803                              $ --                             $ 189,463  
                                                                      === ====== ====================                      ======= ======= ====================                      ======= ======= ====================                      ======= ============== ====================                      ====== ======= ====================
                                                                                                                                                                                                                                                                                                                 
* Free cash flows of $61.5 million for Q1 2017 and $71.1 million for
Q2 2017 is before the effect of payments associated with certain
contingent consideration associated with recent acquisitions.
                                                                                                                                                                                                                                                                                                                 
                                                                                     Q1                                                     Q2                                                        Q3                                                            Q4                                                           YTD
                                                                      --------------------------------                     -------------------------------------                     -------------------------------------                     --------------------------------------------                     ------------------------------------
                      2016
------------------------------------------------
Net cash provided by operating activities                               $ 64,524                                                 $  67,528                                                 $  60,488                                                 $         89,847                                                $ 282,387
Less: Purchases of property and equipment                                 (4,321 )                                                  (4,865 )                                                  (8,261 )                                                         (7,299 )                                                (24,746 )
Add: Contingent consideration*                                             8,000                                            --                                            --                                                   --                                                    8,000
Add: Excess tax benefit share-based compensation                             264                                    833                                    974                                           200                                 2,271  
                                                                      -------------------------------                      ------------------------------------                      ------------------------------------                      -------------------------------------------                      -----------------------------------
Free cash flows                                                         $ 68,467                              $  63,496                              $  53,201                              $         82,748                             $ 267,912  
                                                                      === ====== ====================                      ======= ======= ====================                      ======= ======= ====================                      ======= ============== ====================                      ====== ======= ====================
                                                                                                                                                                                                                                                                                                                 
* Free cash flows of $68.5 million for Q1 2016 is before the effect
of payments associated with certain contingent consideration
associated with recent acquisitions. Amounts reflected were adjusted
from previously disclosed periods in order to be comparable to the
current period.

The Company discloses Free Cash Flows as supplemental Non-GAAP financial performance measure, as it believes it is a useful metric by which to compare the performance of its business from period to period. The Company also understands that this Non-GAAP measure is broadly used by analysts, rating agencies and investors in assessing the Company’s performance. Accordingly, the Company believes that the presentation of this Non-GAAP financial measure provides useful information to investors.

Free Cash Flows is not in accordance with, or an alternative to, Cash Flows from Operating Activities, and may be different from Non-GAAP measures with similar or even identical names used by other companies. In addition, the Non-GAAP measure is not based on any comprehensive set of accounting rules or principles. This Non-GAAP measure has limitations in that it does not reflect all of the amounts associated with the Company’s results of operations determined in accordance with GAAP.

 
                                                                                                                                                                           j2 GLOBAL, INC. AND SUBSIDIARIES
                                                                                                                                                            RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP FINANCIAL MEASURES
                                                                                                                                                                         THREE MONTHS ENDED SEPTEMBER 30, 2017
                                                                                                                                                                               (UNAUDITED, IN THOUSANDS)
                                                                                                                                                                                                                                              
                                                                              Cloud                                                  Cloud                                                   IP                                                      Digital
                                                                             Connect                                               Services                                               Licensing                                                   Media                                                    j2 Global, Inc.                                            Total
                                                              -------------------------------------                     -------------------------------                     -------------------------------------                     -------------------------------------                     --------------------------------------------                     ----------------------
Revenues
GAAP revenues                                                       $  96,882                                            $ 47,693                                                 $   1,212                                                 $ 127,829                                                 $ --                                                    $    273,616
                                                                                                                                                                                                                                                                                                                                                                  
Gross profit
GAAP gross profit                                                   $  79,805                                            $ 34,664                                                 $   1,212                                                 $ 115,564                                                 $ --                                                    $    231,245
Non-GAAP adjustments:
   Share-based compensation                                               102                                                  18                                            --                                            --                                                   --                                                             120
   Amortization                                                            29                              561                         --                         --                                --                                          590
                                                              ------------------------------------                      ------------------------------                      ------------------------------------                      ------------------------------------                      -------------------------------------------                      ----------------------
Adjusted non-GAAP gross profit                                      $  79,936                                            $ 35,243                                                 $   1,212                                                 $ 115,564                                                 $ --                                                    $    231,955
                                                                                                                                                                                                                                                                                                                                                                  
Operating profit
GAAP operating profit                                               $  44,363                                            $ 12,282                                                 $    (485 )                                               $  12,330                                                 $         (5,533 )                                                  $     62,957
Non-GAAP adjustments:
   Share-based compensation                                             1,086                                                 536                                            --                                                     1,158                                                            1,783                                                           4,563
   Acquisition related integration costs                       --                                                 109                                            --                                                     4,348                                                   --                                                           4,457
   Amortization                                                         5,834                            7,883                                  1,195                                 16,838                                --                                       31,750
                                                              ------------------------------------                      ------------------------------                      ------------------------------------                      ------------------------------------                      -------------------------------------------                      ----------------------
Adjusted non-GAAP operating profit                                  $  51,283                                            $ 20,810                                                 $     710                                                 $  34,674                                                 $         (3,750 )                                                  $    103,727
                                                                                                                                                                                                                                                                                                                                                                  
   Depreciation                                                         1,167                            1,066                         --                                  5,389                                --                                        7,622
                                                              ------------------------------------                      ------------------------------                      ------------------------------------                      ------------------------------------                      -------------------------------------------                      ----------------------
Adjusted EBITDA                                                     $  52,450                         $ 21,876                              $     710                              $  40,063                              $         (3,750 )                                                  $    111,349
                                                              ======= ======= ====================                      == ====== ====================                      ======= ======= ====================                      ======= ======= ====================                      ======= ============== ====================                      ========== ==========
                                                                                                                                                                                                                                                                                                                                                                  
NOTE: Table above excludes certain intercompany allocations
 
 
                                                                                                                                                                                  j2 GLOBAL, INC. AND SUBSIDIARIES
                                                                                                                                                                   RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP FINANCIAL MEASURES
                                                                                                                                                                                THREE MONTHS ENDED SEPTEMBER 30, 2016
                                                                                                                                                                                      (UNAUDITED, IN THOUSANDS)
                                                                                                                                                                                                                                              
                                                                           Cloud                                                  Cloud                                                      IP                                                      Digital
                                                                          Connect                                               Services                                                  Licensing                                                   Media                                                    j2 Global, Inc.                                                   Total
                                                              -------------------------------                     -------------------------------------                     -------------------------------------                     -------------------------------------                     --------------------------------------------                     ------------------------------------
Revenues
GAAP revenues                                                  $ 92,599                                                 $  49,624                                                 $   1,119                                                 $  66,774                                                 $ --                                                $ 210,116
                                                                                                                                                                                                                                                                                                                                                                  
Gross profit
GAAP gross profit                                              $ 76,652                                                 $  34,197                                                 $   1,116                                                 $  61,159                                                 $ --                                                $ 173,124
Non-GAAP adjustments:
   Share-based compensation                                          97                                                        19                                            --                                            --                                                   --                                                      116
   Amortization                                                     127                                  1,207                         --                         --                                --                                 1,334  
                                                              ------------------------------                      ------------------------------------                      ------------------------------------                      ------------------------------------                      -------------------------------------------                      -----------------------------------
Adjusted non-GAAP gross profit                                 $ 76,876                                                 $  35,423                                                 $   1,116                                                 $  61,159                                                 $ --                                                $ 174,574
                                                                                                                                                                                                                                                                                                                                                                  
Operating profit
GAAP operating profit                                          $ 43,543                                                 $  10,354                                                 $    (996 )                                               $  13,887                                                 $         (4,666 )                                              $  62,122
Non-GAAP adjustments:
   Share-based compensation                                         962                                                       495                                            --                                                       713                                                            1,529                                                    3,699
   Acquisition related integration costs                             65                                            --                                            --                                                      (801 )                                                 --                                                     (736 )
   Amortization                                                   4,552                                 11,821                                  1,442                                  7,249                                --                                25,064  
                                                              ------------------------------                      ------------------------------------                      ------------------------------------                      ------------------------------------                      -------------------------------------------                      -----------------------------------
Adjusted non-GAAP operating profit                             $ 49,122                                                 $  22,670                                                 $     446                                                 $  21,048                                                 $         (3,137 )                                              $  90,149
                                                                                                                                                                                                                                                                                                                                                                  
   Depreciation                                                   1,399                                  1,004                         --                                  2,869                                --                                 5,272  
                                                              ------------------------------                      ------------------------------------                      ------------------------------------                      ------------------------------------                      -------------------------------------------                      -----------------------------------
Adjusted EBITDA                                                $ 50,521                              $  23,674                              $     446                              $  23,917                              $         (3,137 )                                              $  95,421  
                                                              == ====== ====================                      ======= ======= ====================                      ======= ======= ====================                      ======= ======= ====================                      ======= ============== ====================                      ====== ======= ====================
                                                                                                                                                                                                                                                                                                                                                                  
NOTE: Table above excludes certain intercompany allocations

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SOURCE: j2 Global, Inc."> <Property FormalName="PrimaryTwitterHandle" Value="@j2global

j2 Global, Inc. 
Laura Hinson, 800-577-1790 
press@j2.com


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