j2 Global, Inc. revenue growth decelerated to 8.0% in 2018 vs. 27.9% a year earliner
02/12/2019 • About j2 Global, Inc. (
$JCOM) • By InTwits
j2 Global, Inc. reported 2018 financial results today. Overall the company's long term financial model is characterised by the following facts:
- j2 Global, Inc. is a fast growth stock: 2018 revenue growth was 8.0%, 5 year revenue CAGR was 18.3% at 2018 ROIC 11.6%
- j2 Global, Inc. has low CAPEX intensity: 5 year average CAPEX/Revenue was 3.1%. At the same time it's a lot of higher than industry average of 7.4%.
- CAPEX is quite volatile: $56m in 2018, $40m in 2017, $25m in 2016, $17m in 2015, $12m in 2014
- In the last 5 years the company invested considerably less than D&A: $150m vs. $627m. In 2018 this situation was still the same: CAPEX was 56 while D&A was 187
- The company has business model with average profitability: ROIC is 11.6%
- It operates with medium-size leverage: Net Debt/EBITDA is 1.9x while industry average is -2.2x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue increased on 8.0%. Revenue growth showed acceleration in 18Q4 - it increased 9.4% YoY. During 2014-2018 Revenue growth topped in 2017 at 27.9%. Revenue decline was accompanies by EBITDA margin decline. EBITDA Margin decreased on 2.4 pp from 10.0% to 7.6% in 2018. EBITDA Margin declined at -1.6 pp per annum in the last 5 years.
Gross Margin decreased slightly on 1.2 pp from 84.6% to 83.3% in 2018. During the last 5 years Gross Margin topped in 2017 at 84.6%. SG&A as a % of Revenue increased slightly on 0.62 pp from 58.5% to 59.1% in 2018. SG&A as a % of Revenue followed a growing trend at 3.4 pp per annum in 2014-2018. Stock Based Compensation (SBC) as a % of Revenue showed almost no change in 2018. SBC as a % of Revenue grew at 0.45 pp per annum in the last 5 years.
Net Income margin decreased slightly on 1.8 pp from 12.5% to 10.7% in 2018. Net Income margin stuck to a declining trend at -2.7 pp per annum in the last 5 years. The efficient tax rate was 25.8% in 2018 while the average for the last five years was 24.2%.
Investments (CAPEX, working capital and M&A)
In 2018 the company had CAPEX/Revenue of 4.7%. J2 Global, Inc.'s CAPEX/Revenue increased on 2.3 pp from 2.4% in 2015 to 4.7% in 2018. It's average level of CAPEX/Revenue for the last three years was 3.7%. CAPEX as a % of Revenue grew at 0.65 pp per annum in 2014-2018.
Accounts receivable as a % of Revenue decreased on 2.6 pp from 21.0% to 18.4% in 2018.
j2 Global, Inc. has spent
$312m on M&A in 2018 which accounts for 25.9% of revenue.
Return on investment
The company operates at good ROE (12.3%) while ROIC is low (11.6%). ROIC decreased slightly on 1.2 pp from 12.9% to 11.6% in 2018. ROE decreased slightly on 1.9 pp from 14.2% to 12.3% in 2018.
Leverage (Debt)
Debt level is 1.9x Net Debt / EBITDA and 2.3x Debt / EBITDA. Net Debt / EBITDA jumped on 0.3x from 1.6x to 1.9x in 2018. Debt increased slightly on 1.1% while cash dropped on 40.3%. Net Debt/EBITDA grew at 0.3x per annum in the last 5 years.
The company has no short term refinancing risk: short term debt is zero.
Valuation and dividends
The company's trades at EV/EBITDA 11.5x and P/E 32.2x.
The company paid 63.7% of Net Income as dividends in 2018. Dividends grew on average at 9.5% per annum in the last 5 years).
Management team
The company's CEO Vivek Shah is a founder and has spent 1 year with the company. CEO total compensation was
$45,062,153 in 2018 which included
$1,000,000 salary. j2 Global, Inc.'s CFO R Scott Turicchi has spent 12 years with the company.
The company has 5.9% shares owned by insiders. Insider ownership didn't change in 2018.
The company has 2,587 employees. The number of employees increased on 4.0%. Average revenue per employee in 2018 was
$466,678 and it increased on 3.8%.
Financial and operational results
FY ended 12/31/2018
j2 Global, Inc. ($JCOM) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 599 | 721 | 874 | 1,118 | 1,207 | 8.0% |
| Gross Profit | 493 | 598 | 727 | 946 | 1,006 | 6.4% |
| SG&A | 276 | 364 | 447 | 654 | 714 | 9.1% |
| EBITDA | 249 | 293 | 365 | 408 | 431 | 5.8% |
| EBIT | 186 | 199 | 243 | 246 | 244 | -0.6% |
| Tax | 30 | 23 | 59 | 61 | 45 | -26.1% |
| Net Income | 125 | 134 | 152 | 139 | 129 | -7.7% |
| Stock Based Compensation | 3 | 7 | 11 | 23 | 28 | 23.6% |
Balance Sheet
|
|---|
| Cash | 434 | 256 | 124 | 351 | 209 | -40.3% |
| Accounts Receivable | 92 | 115 | 200 | 234 | 222 | -5.4% |
| Short Term Debt | 0 | 0 | 179 | 0 | 0 | |
| Long Term Debt | 593 | 592 | 602 | 1,002 | 1,013 | 1.1% |
Cash flow
|
|---|
| Capex | 12 | 17 | 25 | 40 | 56 | 42.4% |
| Dividends | 52 | 59 | 66 | 73 | 82 | 12.3% |
| Acquisitions | 245 | 303 | 581 | 175 | 312 | 78.6% |
Ratios
|
|---|
| Revenue growth | 15.0% | 20.3% | 21.3% | 27.9% | 8.0% | |
| EBITDA growth | 15.8% | 17.4% | 24.6% | 11.8% | 5.8% | |
|
|---|
| Gross Margin | 82.3% | 82.9% | 83.2% | 84.6% | 83.3% | -1.2% |
| EBITDA Margin | 41.6% | 40.6% | 41.7% | 36.5% | 35.7% | -0.7% |
| EBIT Margin | 31.1% | 27.7% | 27.7% | 22.0% | 20.2% | -1.7% |
| SG&A, % of revenue | 46.1% | 50.5% | 51.1% | 58.5% | 59.1% | 0.6% |
| SBC, % of revenue | 0.6% | 1.0% | 1.3% | 2.0% | 2.3% | 0.3% |
| Net Income Margin | 20.9% | 18.5% | 17.4% | 12.5% | 10.7% | -1.8% |
| CAPEX, % of revenue | 2.0% | 2.4% | 2.8% | 3.5% | 4.7% | 1.1% |
|
|---|
| ROIC | 15.2% | 13.4% | 14.7% | 12.9% | 11.6% | -1.2% |
| ROE | 16.1% | 15.6% | 16.6% | 14.2% | 12.3% | -1.9% |
| Net Debt/EBITDA | 0.6x | 1.2x | 1.8x | 1.6x | 1.9x | 0.3x |
People
|
|---|
| Insider ownership | 5.9% | 5.9% | 5.9% | 5.9% | 5.9% | 0.0% |
| Employees | 1,410 | 1,608 | 2,426 | 2,487 | 2,587 | 4.0% |
| Revenue/Employee, th. $ | 425 | 448 | 360 | 449 | 467 | 3.8% |
j2 Global, Inc. ($JCOM) key quoterly financial indicators
| mln. $ | 18Q1 | 18Q2 | 18Q3 | 18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 281 | 288 | 293 | 346 | | 10.2% | 5.4% | 7.0% | 9.4% |
| EBITDA | 89 | 98 | 103 | 141 | | 1.7% | -0.2% | 1.1% | 17.8% |
| Net Income | 19 | 28 | 31 | 51 | | -26.9% | -9.2% | -5.1% | 1.5% |
Balance Sheet
|
|---|
| Cash | 331 | 357 | 304 | 209 | | 76.8% | 8.0% | -24.6% | -40.3% |
| Short Term Debt | 0 | 0 | 0 | 0 | | -100.0% | -100.0% | | |
| Long Term Debt | 1,005 | 1,008 | 1,011 | 1,013 | | 66.3% | 1.1% | 1.1% | 1.1% |
Ratios
|
|---|
| Gross Margin | 82.8% | 83.4% | 83.2% | 83.8% | | -1.1% | -0.8% | -1.3% | -1.6% |
| EBITDA Margin | 31.6% | 34.1% | 35.3% | 40.7% | | -2.6% | -1.9% | -2.1% | 2.9% |
| Net Income Margin | 6.7% | 9.9% | 10.5% | 14.6% | | -3.4% | -1.6% | -1.3% | -1.1% |
Peers in Application Software
Below you can find j2 Global, Inc. benchmarking vs. other companies in Application Software industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| nFusz Inc ($FUSZ) | | | | | 433.3% |
| CloudCommerce Inc ($CLWD) | | -38.1% | 247.6% | 40.9% | 301.1% |
| Seven Stars Cloud Group, Inc. ($SSC) | | 134.7% | 663.8% | 310.3% | 161.7% |
| Aurora Mobile Limited ($JG) | | | | 304.9% | 150.8% |
| Intelligent Systems Corporation ($INS) | | 14.2% | 71.0% | 12.2% | 119.0% |
| |
|---|
| Median (151 companies) | -43.3% | 13.5% | 13.6% | 14.8% | 15.2% |
|---|
| j2 Global, Inc. ($JCOM) | | 20.3% | 21.3% | 27.9% | 8.0% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Skkynet Cloud Systems Inc ($SKKY) | 99.7% | 97.4% | 98.0% | 97.6% | 96.5% |
| hopTo Inc ($HPTO) | 91.8% | 87.8% | 95.9% | 98.2% | 95.4% |
| Aware, Inc. ($AWRE) | 75.4% | 87.2% | 90.3% | 94.6% | 92.3% |
| Alteryx, Inc. ($AYX) | 77.5% | 80.5% | 81.3% | 83.4% | 91.0% |
| Aspen Technology, Inc. ($AZPN) | 86.5% | 88.7% | 89.7% | 90.2% | 89.9% |
| |
|---|
| Median (150 companies) | 62.8% | 61.7% | 63.8% | 64.4% | 65.7% |
|---|
| j2 Global, Inc. ($JCOM) | 82.3% | 82.9% | 83.2% | 84.6% | 83.3% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Aspen Technology, Inc. ($AZPN) | 34.5% | 42.2% | 46.0% | 45.2% | 43.3% |
| ANSYS, Inc. ($ANSS) | 45.9% | 45.8% | 45.1% | 41.9% | 41.4% |
| Paycom Software, Inc. ($PAYC) | 15.1% | 19.5% | 35.1% | 34.4% | 35.9% |
| Adobe Inc. ($ADBE) | 17.5% | 25.9% | 31.2% | 34.2% | 35.3% |
| Intelligent Systems Corporation ($INS) | -51.1% | -54.5% | -5.4% | -12.8% | 33.6% |
| |
|---|
| Median (152 companies) | -10.3% | -10.7% | -5.3% | -4.2% | -3.3% |
|---|
| j2 Global, Inc. ($JCOM) | 41.6% | 40.6% | 41.7% | 36.5% | 35.7% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| TimefireVR Inc ($TFVR) | 0.0% | 350.5% | 4.3% | | 1,021.9% |
| MGT Capital Investments Inc ($MGTI) | 0.0% | 36.5% | 221.4% | 129.8% | 344.5% |
| Integrated Ventures Inc ($INTV) | | | | | 199.9% |
| ShotSpotter, Inc. ($SSTI) | | 18.3% | 28.9% | 27.1% | 24.3% |
| Ellie Mae, Inc. ($ELLI) | 12.3% | 20.6% | 16.7% | 21.1% | 19.4% |
| |
|---|
| Median (153 companies) | 2.8% | 2.7% | 3.0% | 2.3% | 2.4% |
|---|
| j2 Global, Inc. ($JCOM) | 2.0% | 2.4% | 2.8% | 3.5% | 4.7% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| InsPro Technologies Corp ($ITCC) | -558.9% | | | | 127.4% |
| Manhattan Associates, Inc. ($MANH) | 64.8% | 78.7% | 99.3% | 102.5% | 80.9% |
| Intuit Inc. ($INTU) | 34.2% | 23.7% | 52.1% | 72.6% | 66.8% |
| Aspen Technology, Inc. ($AZPN) | 133.4% | | | | 58.1% |
| Paycom Software, Inc. ($PAYC) | 16.7% | 30.5% | 75.4% | 51.1% | 47.5% |
| |
|---|
| Median (179 companies) | -14.4% | -13.1% | -9.8% | -11.8% | -10.4% |
|---|
| j2 Global, Inc. ($JCOM) | 15.2% | 13.4% | 14.7% | 12.9% | 11.6% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Upland Software, Inc. ($UPLD) | | | 16.4x | 115.6x | 16.7x |
| Nuance Communications, Inc. ($NUAN) | 7.9x | 5.7x | 5.3x | 7.1x | 15.2x |
| Asure Software Inc ($ASUR) | 3.4x | 4.5x | 3.6x | 9.5x | 14.5x |
| SS&C Technologies Holdings, Inc. ($SSNC) | 1.7x | 7.3x | 4.6x | 3.1x | 8.5x |
| Avaya Holdings Corp. ($AVYA) | | | | | 7.4x |
| |
|---|
| Median (69 companies) | -1.4x | -1.0x | -0.9x | -0.9x | -0.7x |
|---|
| j2 Global, Inc. ($JCOM) | 0.6x | 1.2x | 1.8x | 1.6x | 1.9x |
