j2 Global JCOM reported second-quarter 2020 adjusted earnings of $1.71 per share, which beat the Zacks Consensus Estimate by 17.1% and increased 6.9% year over year.

Revenues were up 2.7% year over year to $331 million, beating the consensus mark by 5.2%.

Average monthly revenue per customer decreased 2.5% year over year to $13.66. Cancel rate was 2.2%, down 30 basis points (bps) year over year.

Top-Line Details

Revenues from Cloud Services (50.5% of revenues) decreased 1.2% from the year-ago quarter to $167.1 million.
 

Subscriber revenues (100% of Cloud Services revenues) fell 1.1% year over year to $167 million, primarily attributed to 8% decline in variable-subscriber revenues (15.7% of Subscriber revenues), which totaled $26.3 million. Fixed-subscriber revenues (84.3% of Subscriber revenues) climbed 0.3% year over year to $140.8 million.

Moreover, DID-based revenues slid 2.5% year over year to $95 million. Non-DID revenues inched up0.4% year over year to $72.1 million.

Digital Media revenues (49.5% of revenues) were $163.9 million, up 6.9% year over year.

At the end of the reported quarter, j2 Global had 4,076 Cloud Services customers compared with 4,015 at the end of the year-ago quarter.

Operating Details

Adjusted gross margin expanded 150 bps on a year-over-year basis to 83%. Cloud Services’ adjusted gross margin shrank 250 bps to 38.8%. Digital Media adjusted gross margin expanded 410 bps to 44.3%.

Adjusted sales & marketing, general & administrative, and research, development & engineering expenses flared up 4.5%, 13.6% and 1.8%, respectively, on a year-over-year basis.

Adjusted EBITDA margin expanded 130 bps on a year-over-year basis to 40.1%. Cloud Services adjusted EBITDA margin increased 40 bps on a year-over-year basis. However, Digital Media adjusted EBITDA margin declined 60 bps.

Adjusted operating margin expanded 80 bps year over year to 35.9%. While Cloud Services adjusted operating margin contracted 230 bps, Digital Media adjusted operating margin expanded 290 bps on a year-over-year basis.

Balance Sheet and Cash Flow

As of Jun 30, 2020, j2 Global had $616.8 million in cash and cash equivalents compared with $526.6 million as of Mar 31, 2020.

Long-term debt as of Jun 30, 2020 was $1.07 billion, lower than $1.46 billion as of Mar 31, 2020.

Free cash flow was $115.9 million, up 35.1% year over year.

Moreover, the company approved a new share-repurchase program under which j2 Global can purchase up to 10 million shares in the public market or in off-market transactions through Aug 6, 2025.

Guidance

For 2020, j2 Global now expects revenues between $1.380 billion and $1.400 billion. Adjusted EBITDA is expected between $556 million and $570 million. Moreover, adjusted non-GAAP earnings are expected between $7.17 and $7.41 per share.

Zacks Rank & Stocks to Consider

Currently, j2 Global has a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector are Agilent A, Analog Devices ADI and Baozun BZUN. All three stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Agilent, Analog Devices and Baozun are set to report their quarterly results on Aug 18, 19 and 21, respectively.

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