Edgar Filing: J2 GLOBAL, INC.

Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

ACT OF 1934

For the quarterly period ended June 30, 2016

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number: 0-25965

j2 GLOBAL, INC.

(Exact name of registrant as specified in its charter)



Delaware	47-1053457
(State or other jurisdiction	(I.R.S. Employer
of incorporation or organization)	Identification No.)

6922 Hollywood Boulevard, Suite 500

Los Angeles, California 90028

(Address of principal executive offices)

(323) 860-9200

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act). (Check one):



Large accelerated filer ý	Accelerated filer o	Non-Accelerated filer o	Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No ý

As of August 4, 2016, the registrant had 48,011,989 shares of common stock outstanding.

j2 GLOBAL, INC.

FOR THE QUARTER ENDED JUNE 30, 2016

INDEX



			PAGE

PART I.	FINANCIAL INFORMATION

	Item 1.	Financial Statements
		Condensed Consolidated Balance Sheets (unaudited)	3
		Condensed Consolidated Statements of Income (unaudited)	4
		Condensed Consolidated Statements of Comprehensive Income (unaudited)	5
		Condensed Consolidated Statements of Cash Flows (unaudited)	6
		Notes to Condensed Consolidated Financial Statements (unaudited)	7

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	49

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	60

	Item 4.	Controls and Procedures	62


PART II.	OTHER INFORMATION

	Item 1.	Legal Proceedings	63

	Item 1A.	Risk Factors	63

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	63

	Item 3.	Defaults Upon Senior Securities	63

	Item 4.	Mine Safety Disclosures	63

	Item 5.	Other Information	63

	Item 6.	Exhibits	64

		Signature	65

-2-

PART I. FINANCIAL INFORMATION


Item 1.	Financial Statements

j2 GLOBAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, in thousands except share and per share data)



	June 30, 2016			December 31, 2015
ASSETS
Cash and cash equivalents	$	313,754		$	255,530
Short-term investments	50,915			79,655
Accounts receivable, net of allowances of $5,542 and $4,261, respectively	106,365			114,680
Prepaid expenses and other current assets	22,472			25,722
Deferred income taxes, current	—			7,218
Total current assets	493,506			482,805
Long-term investments	42,537			78,563
Property and equipment, net	60,053			57,442
Trade names, net	120,678			118,965
Patent and patent licenses, net	15,918			18,841
Customer relationships, net	190,380			197,319
Goodwill	840,946			807,661
Other purchased intangibles, net	17,270			17,516
Deferred income taxes, non-current	6,494			—
Other assets	5,369			4,607
TOTAL ASSETS	$	1,793,151		$	1,783,719
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses	$	106,512		$	114,384
Income taxes payable	4,147			5,589
Deferred revenue, current	74,558			76,104
Capital lease, current	29			214
Deferred income taxes, current	—			363
Total current liabilities	185,246			196,654
Long-term debt	596,813			592,037
Capital lease, non-current	79			148
Liability for uncertain tax positions	40,356			35,917
Deferred income taxes, non-current	42,352			43,989
Deferred revenue, non-current	4,788			6,538
Other long-term liabilities	5,124			18,228
TOTAL LIABILITIES	874,758			893,511
Commitments and contingencies	—			—
Preferred stock - Series A, $0.01 par value. Authorized 6,000; total issued and outstanding zero	—			—
Preferred stock - Series B, $0.01 par value. Authorized 20,000; total issued and outstanding zero	—			—
Common stock, $0.01 par value. Authorized 95,000,000; total issued and outstanding 48,099,943 and 47,950,677 shares, respectively	481			479
Additional paid-in capital	299,349			292,064
Retained earnings	657,035			626,789
Accumulated other comprehensive loss	(38,472		)	(29,124		)
TOTAL STOCKHOLDERS' EQUITY	918,393			890,208
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	1,793,151		$	1,783,719

See Notes to Condensed Consolidated Financial Statements

-3-

j2 GLOBAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited, in thousands except share and per share data)



	Three Months Ended June 30,					Six Months Ended June 30,
	2016			2015		2016			2015
Total revenues	$	211,800		$	176,038	$	412,302		$	337,291

Cost of revenues ⁽¹⁾	35,591			29,494		69,878			57,681
Gross profit	176,209			146,544		342,424			279,610
Operating expenses:
Sales and marketing ⁽¹⁾	48,617			40,421		96,729			78,011
Research, development and engineering ⁽¹⁾	9,213			8,969		18,201			17,415
General and administrative ⁽¹⁾	59,434			47,088		115,211			93,588
Total operating expenses	117,264			96,478		230,141			189,014
Income from operations	58,945			50,066		112,283			90,596
Interest expense, net	10,301			10,881		20,534			21,194
Other expense (income), net	(213		)	88		(87		)	(696		)
Income before income taxes	48,857			39,097		91,836			70,098
Income tax expense	15,087			181		28,123			9,304
Net income	$	33,770		$	38,916	$	63,713		$	60,794

Net income per common share:
Basic	$	0.69		$	0.81	$	1.31		$	1.26
Diluted	$	0.69		$	0.80	$	1.30		$	1.25
Weighted average shares outstanding:
Basic	48,055,783			47,537,597		48,011,250			47,480,315
Diluted	48,265,298			47,853,574		48,251,698			47,737,006
Cash dividends paid per common share	$	0.3350		$	0.3000	$	0.6600		$	0.5925

⁽¹⁾ Includes share-based compensation expense as follows:
Cost of revenues	$	103		$	91	$	198		$	174
Sales and marketing	434			603		965			1,187
Research, development and engineering	221			213		428			408
General and administrative	2,681			2,261		4,657			4,404
Total	$	3,439		$	3,168	$	6,248		$	6,173

See Notes to Condensed Consolidated Financial Statements

-4-

j2 GLOBAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited, in thousands)



	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015

Net Income	$	33,770		$	38,916		$	63,713		$	60,794
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment	(12,653		)	7,112			(9,238		)	(8,125		)
Unrealized gain (loss) on available-for-sale investments, net of tax expense (benefit) of $1,380 and ($61) for the three and six months of 2016, respectively, ($2,448) and ($2,616) for the three and six months of 2015.	2,251			(3,934		)	(110		)	(3,554		)
Other comprehensive income (loss), net of tax	(10,402		)	3,178			(9,348		)	(11,679		)
Comprehensive Income	$	23,368		$	42,094		$	54,365		$	49,115

See Notes to Condensed Consolidated Financial Statements

-5-

j2 GLOBAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)



	Six Months Ended June 30,
	2016			2015
Cash flows from operating activities:
Net Income	$	63,713		$	60,794
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	58,233			43,181
Accretion and amortization of discount and premium of investments	646			551
Amortization of financing costs and discounts	4,777			4,480
Share-based compensation	6,248			6,173
Excess tax benefits from share-based compensation	(1,097		)	(2,104		)
Provision for doubtful accounts	5,009			3,544
Deferred income taxes, net	(2,064		)	(73		)
Gain on sale of available-for-sale investment	(140		)	(42		)
Decrease (increase) in:
Accounts receivable	3,763			2,199
Prepaid expenses and other current assets	1,534			2,163
Other assets	(657		)	354
Increase (decrease) increase in:
Accounts payable and accrued expenses	(15,480		)	(5,814		)
Income taxes payable	2,034			(5,069		)
Deferred revenue	(2,699		)	(1,546		)
Liability for uncertain tax positions	4,440			(12,414		)
Other long-term liabilities	3,792			1,233
Net cash provided by operating activities	132,052			97,610
Cash flows from investing activities:
Maturity of certificates of deposit	—			65
Purchase of certificates of deposit	—			(62		)
Maturity of available-for-sale investments	112,631			56,095
Purchase of available-for-sale investments	(47,207		)	(57,465		)
Purchases of property and equipment	(9,186		)	(6,955		)
Acquisition of businesses, net of cash received	(76,725		)	(74,308		)
Purchases of intangible assets	(1,815		)	(866		)
Net cash used in investing activities	(22,302		)	(83,496		)
Cash flows from financing activities:
Repurchases of common stock and restricted stock	(3,356		)	(2,302		)
Issuance of common stock under employee stock purchase plan	123			126
Exercise of stock options	1,911			3,009
Dividends paid	(32,202		)	(28,610		)
Excess tax benefits from share-based compensation	1,097			2,104
Deferred payments for acquisitions	(16,550		)	(3,883		)
Other	(254		)	(180		)
Net cash used in financing activities	(49,231		)	(29,736		)
Effect of exchange rate changes on cash and cash equivalents	(2,295		)	(2,111		)
Net change in cash and cash equivalents	58,224			(17,733		)
Cash and cash equivalents at beginning of period	255,530			433,663
Cash and cash equivalents at end of period	$	313,754		$	415,930

See Notes to Condensed Consolidated Financial Statements

-6-

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2016

(UNAUDITED)


1.	Basis of Presentation

j2 Global, Inc., together with its subsidiaries ("j2 Global" or the "Company"), is a leading provider of Internet services. Through its Business Cloud Services Division, the Company provides cloud services to businesses of all sizes, from individuals to enterprises, and licenses its intellectual property ("IP") to third parties. In addition, the Business Cloud Services Division includes our j2 Cloud Connect, which is primarily focused on our number-based voice and fax services. The Digital Media Division specializes in the technology and gaming markets, reaching in-market buyers and influencers in both the consumer and business-to-business space.

The accompanying interim condensed consolidated financial statements include the accounts of j2 Global and its direct and indirect wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

The accompanying interim condensed consolidated financial statements are unaudited and have been prepared in accordance with instructions for Form 10-Q and Article 10 of Regulation S-X issued by the Securities and Exchange Commission ("SEC"). Accordingly, they do not include all of the information and note disclosures required by GAAP for complete financial statements although the Company believes that the disclosures made are adequate to make that information not misleading. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been reflected in these interim financial statements. It is suggested that these financial statements be read in conjunction with the audited financial statements and the related notes thereto for the year ended December 31, 2015 included in our Annual Report (Form 10-K) filed with the SEC on February 29, 2016. Accordingly, significant accounting policies and other disclosures normally provided have been omitted since such items are disclosed therein.

The results of operations for this interim period are not necessarily indicative of the operating results for the full year or for any future period.

Use of Estimates

The preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, including judgments about investment classifications, and the reported amounts of net revenue and expenses during the reporting period. We believe that our most significant estimates are those related to valuation and impairment of marketable securities, valuation of assets acquired and liabilities assumed in connection with business combinations, long-lived and intangible asset impairment, contingent consideration, income taxes and contingencies and allowances for doubtful accounts. On an ongoing basis, management evaluates its estimates based on historical experience and on various other factors that the Company believes to be reasonable under the circumstances. Actual results could materially differ from those estimates.

Allowances for Doubtful Accounts

j2 Global reserves for receivables it may not be able to collect. These reserves for the Company's Business Cloud Services segment are typically driven by the volume of credit card declines and past due invoices and are based on historical experience as well as an evaluation of current market conditions. These reserves for the Company's Digital Media segment are typically driven by past due invoices based on historical experience. On an ongoing basis, Management evaluates the adequacy of these reserves.

Debt Issuance Costs and Debt Discount

j2 Global capitalizes costs incurred with borrowing and issuance of debt securities and records debt issuance costs and discounts as a reduction to the debt amount. These costs and discounts are amortized and included in interest expense over the life of the borrowing or term of the credit facility using the effective interest method.

Contingent Consideration

j2 Global measures contingent earn-out liabilities in connection with acquisitions at fair value on a recurring basis using significant unobservable inputs classified within Level 3 of the fair value hierarchy (see Note 5 - Fair Value Measurements). The

-7-

Company may use various valuation techniques depending on the terms and conditions of the contingent consideration including a Monte-Carlo simulation. This simulation uses a probability distribution for each significant input to produce hundreds or thousands of possible outcomes and the results are analyzed to determine probabilities of different outcomes occurring. Significant increases or decreases to these inputs in isolation would result in a significantly higher or lower liability with a higher liability capped by the contractual maximum of the contingent earn-out obligation. Ultimately, the liability will be equivalent to the amount paid, and the difference between the fair value estimate and the amount paid will be recorded in earnings. The amount paid that is less than or equal to the liability on the acquisition date is reflected as cash used in financing activities in our consolidated statements of cash flows. Any amount paid in excess of the liability on the acquisition date is reflected as cash used in operating activities.

j2 Global reviews and re-assess the estimated fair value of contingent consideration on a quarterly basis, and the updated fair value could be materially different from the initial estimates or prior quarterly amounts. Changes in the estimated fair value of our contingent earn-out liabilities are reported in operating income, except for the time component of the present value calculation which is reported in interest expense.

Segment Reporting

Accounting guidance establishes standards for the way that public business enterprises report information about operating segments in annual consolidated financial statements and requires that those enterprises report selected information about operating segments in interim financial reports. Accounting guidance also establishes standards for related disclosures about products and services, geographic areas and major customers. The Company operates as two segments: (1) Business Cloud Services and (2) Digital Media.

Reclassifications

Certain prior year reported amounts have been reclassified to conform with the 2016 presentation.


2.	Recent Accounting Pronouncements

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, as a new Topic, Accounting Standards Codification (ASC) Topic 606. The new revenue recognition standard provides a five-step analysis of transactions to determine when and how revenue is recognized. The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers: Deferral of the Effective Date, which deferred the effective date of the new revenue standard for periods beginning after December 15, 2016 to December 15, 2017, with early adoption permitted but not earlier than the original effective date. This ASU must be applied retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption. The Company is continuing to evaluate the effect and methodology of adopting this new accounting guidance upon the Company's results of operations, cash flows and financial position.

In August 2014, the FASB issued ASU No. 2014-15, Disclosure of Uncertainties About an Entity's Ability to Continue as a Going Concern. The new standard provides guidance around management's responsibility to evaluate whether there is substantial doubt about an entity's ability to continue as a going concern and to provide related footnote disclosures. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. The adoption of this standard is not expected to have a material impact on our financial statements.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The amendments in this ASU modify how entities measure equity investments and present changes in the fair value of financial liabilities. Under the new guidance, entities will have to measure equity investments that do not result in consolidation and are not accounted under the equity method at fair value and recognize any changes in fair value in net income unless the investments qualify for the new practicality exception. A practicality exception will apply to those equity investments that do not have a readily determinable fair value and do not qualify for the practical expedient to estimate fair value under ASC 820, Fair Value Measurements, and as such these investments may be measured at cost. This ASU is effective for financial statements issued for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company is currently evaluating the impact of this ASU on our financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases. This ASU establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income

-8-

statement. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company is currently evaluating the impact of this ASU on our financial statements.

In March 2016, the FASB issued ASU 2016-06, Derivatives and Hedging (Topic 815). This ASU is related to the embedded derivative analysis for debt instruments with contingent call or put options. This ASU clarifies that an exercise contingency does not need to be evaluated to determine whether it relates only to interest rates or credit risk. Instead, the contingent put or call option should be evaluated for possible bifurcation as a derivative in accordance with the four-step decision sequence detailed in FASB ASC 815-15, without regard to the nature of the exercise contingency. This ASU is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted. The Company is currently evaluating the impact of this ASU on our financial statements.

In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606). This ASU is related to reporting revenue gross versus net, or principal versus agent considerations. This ASU is meant to clarify the guidance in ASU 2014-09, Revenue from Contracts with Customers, as it pertains to principal versus agent considerations. Specifically, the guidance addresses how entities should identify goods and services being provided to a customer, the unit of account for a principal versus agent assessment, how to evaluate whether a good or service is controlled before being transferred to a customer, and how to assess whether an entity controls services performed by another party. This ASU has the same effective date as the new revenue standard, which is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2017. The Company is evaluating the effect and methodology of adopting this new accounting guidance upon the Company's results of operations, cash flows and financial position.

In March 2016, the FASB issued ASU 2016-09, Compensation-Stock Compensation (Topic 718). This ASU is related to simplifications of employee share-based payment accounting. This pronouncement eliminates the APIC pool concept and requires that excess tax benefits and tax deficiencies be recorded in the income statement when awards are settled. The pronouncement also addresses simplifications related to statement of cash flows classification, accounting for forfeitures, and minimum statutory tax withholding requirements. This ASU is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted. The Company is currently evaluating the impact of this ASU on our financial statements.

In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing. This ASU is meant to clarify the guidance in FASB ASU 2014-09, Revenue from Contracts with Customers. Specifically, the guidance addresses an entity’s identification of its performance obligations in a contract, as well as an entity’s evaluation of the nature of its promise to grant a license of intellectual property and whether or not that revenue is recognized over time or at a point in time. This ASU has the same effective date as the new revenue standard, which is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2017. The Company is evaluating the effect and methodology of adopting this new accounting guidance upon the Company's results of operations, cash flows and financial position.

In May 2016, the FASB issued ASU 2016-11, Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815): Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting. This ASU rescinds SEC paragraphs pursuant to two SEC Staff Announcements at the March 3, 2016 Emerging Issues Task Force (EITF) meeting. Specifically, registrants should not rely on the following SEC Staff Observer comments upon adoption of Topic 606: 1) Revenue and Expense Recognition for Freight Services in Process, which is codified in paragraph 605-20-S99-2; 2) Accounting for Shipping and Handling Fees and Costs, which is codified in paragraph 605-45-S99-1; 3) Accounting for Consideration Given by a Vendor to a Customer (including Reseller of the Vendor's Products), which is codified in paragraph 605-50-S99-1; and 4) Accounting for Gas-Balancing Arrangements (i.e., use of the "entitlements method"), which is codified in paragraph 932-10-S99-5. This ASU becomes effective upon adoption of ASU 2014-09, which is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2017. The Company is currently evaluating the impact of this ASU on our financial statements.

In May 2016, the FASB issued ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients. This ASU does not change the core principle of the guidance in Topic 606. Instead, the amendments provide clarifying guidance in a few narrow areas and add some practical expedients to the guidance. This ASU has the same effective date as the new revenue standard, which is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2017. The Company is currently evaluating the impact of the pending adoption of this new standard on our financial statements.

-9-

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The amendments in this ASU replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. This ASU is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019. The Company is currently evaluating the impact of this ASU on our financial statements.


3.	Business Acquisitions

The Company uses acquisitions as a strategy to grow its customer base by increasing its presence in new and existing markets, expand and diversify its service offerings, enhance its technology, acquire skilled personnel and enter into other jurisdictions.

The Company completed the following acquisitions during the first six months of fiscal 2016, paying the purchase price in cash in each transaction: (a) an asset purchase of VaultLogix, acquired on February 17, 2016, a Massachusetts-based provider of cloud data backup and storage for business clients; (b) a share purchase of the entire issued capital of CallStream Group Limited, acquired on March 3, 2016, a provider of cloud-based call management solutions to markets in the United Kingdom; (c) an asset purchase of Publicaster, acquired on April 1, 2016, a Maryland-based provider of email marketing services; (d) an asset purchase of SMTP, acquired on June 27, 2016, a Florida-based provider of cloud email services offering solutions ranging from sophisticated transactional email solutions to cost-effective Simple Mail Transfer Protocol ("SMTP") relay services; and (e) other immaterial acquisitions of online data backup, email marketing and digital media businesses.

The condensed consolidated statement of income, since the date of each acquisition, and balance sheet, as of June 30, 2016, reflect the results of operations of all 2016 acquisitions. For the six months ended June 30, 2016, these acquisitions contributed $10.3 million to the Company's revenues. Net income contributed by these acquisitions was not separately identifiable due to j2 Global's integration activities and is impracticable to provide. Total consideration for these transactions was $78.7 million, net of cash acquired and assumed liabilities and is subject to certain post-closing adjustments which may increase or decrease the final consideration paid.

The following table summarizes the allocation of the purchase consideration for these acquisitions (in thousands):



Assets and Liabilities	Valuation
Accounts receivable	$	977
Property and equipment	1,114
Other assets	512
Software	2,257
Trade names	3,762
Customer relationships	29,295
Other intangibles	607
Goodwill	43,542
Other accrued liabilities	(1,236		)
Deferred revenue	(374		)
Deferred tax liability	(1,747		)
Total	$	78,709

During the first six months of 2016, the purchase price accounting has been finalized for the following acquisitions: (i) LiveVault, (ii) Salesify, (iii) CallStream Group Limited and (iv) other immaterial fax, online data backup and digital media businesses. The initial accounting for all other acquisitions is incomplete and subject to change, which may be significant. j2 Global has recorded provisional amounts which may be based upon past acquisitions with similar attributes for certain intangible assets (including trade names, software and customer relationships), preliminary acquisition date working capital and related tax items.

During the six months ended June 30, 2016, the Company recorded adjustments to prior period acquisitions due to the finalization of purchase accounting in the Business Cloud Services segment which resulted in a net increase in goodwill in the amount of $0.6 million. In addition, the Company recorded adjustments to the initial working capital related to prior period

-10-

acquisitions and updated the purchase accounting of Offers.com in the Digital Media segment, which resulted in a net decrease in goodwill in the amount of $(5.1) million with a corresponding increase in trade names, net and other purchased intangibles, net (See Note 6 - Goodwill and Intangible Assets). Such adjustments had an immaterial impact to the amortization expense within the Condensed Consolidated Statement of Income for the six months ended June 30, 2016.

Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired and represents intangible assets that do not qualify for separate recognition. Goodwill recognized associated with these acquisitions during the six months ended June 30, 2016 is $43.5 million, of which $31.7 million is expected to be deductible for income tax purposes.


4.	Investments

Short-term investments consist generally of corporate and governmental debt securities and certificates of deposits, which are stated at fair market value. Realized gains and losses of short and long-term investments are recorded using the specific identification method, average cost method or other method, as appropriate.

The following table summarizes j2 Global’s debt securities designated as available-for-sale, classified by the contractual maturity date of the security (in thousands):



	June 30, 2016		December 31, 2015
Due within 1 year	$	34,719	$	56,940
Due within more than 1 year but less than 5 years	42,233		78,248
Due within more than 5 years but less than 10 years	—		—
Due 10 years or after	304		315
Total	$	77,256	$	135,503

The following table summarizes the Company’s investments (in thousands):



	June 30, 2016		December 31, 2015
Available-for-sale	$	93,390	$	158,158
Certificates of deposit	62		60
Total	$	93,452	$	158,218

-11-

The following table summarizes the gross unrealized gains and losses and fair values for the Company's investments classified as available-for-sale investments as of June 30, 2016 and December 31, 2015 aggregated by major security type (in thousands):



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
June 30, 2016
Corporate debt securities	$	51,299	$	273	$	(2	)	$	51,570
Debt securities issued by the U.S. Treasury and other U.S. government corporations and agencies	19,213		14		(2		)	19,225
Debt securities issued by states of the United States and political subdivisions of the states	6,493		11		(43		)	6,461
Equity securities	12,612		3,522		—			16,134
Total	$	89,617	$	3,820	$	(47	)	$	93,390

December 31, 2015
Corporate debt securities	$	88,852	$	110	$	(213	)	$	88,749
Debt securities issued by the U.S. Treasury and other U.S. government corporations and agencies	40,715		—		(63		)	40,652
Debt securities issued by states of the United States and political subdivisions of the states	6,111		2		(10		)	6,103
Equity securities	18,536		4,118		—			22,654
Total	$	154,214	$	4,230	$	(286	)	$	158,158

At June 30, 2016 and December 31, 2015, corporate and governmental debt securities, which have fixed interest rates, and equity securities were recorded as available-for-sale. There have been no significant changes in the maturity dates and average interest rates for the Company's investment portfolio and debt obligations subsequent to June 30, 2016.

At June 30, 2016, the Company's available-for-sale securities are carried at fair value, with the unrealized gains and losses reported as a component of stockholders' equity.

Recognition and Measurement of Other-Than-Temporary Impairment

j2 Global regularly reviews and evaluates each investment that has an unrealized loss. An unrealized loss exists when the current fair value of an individual security is less than its amortized cost basis. Unrealized losses that are determined to be temporary in nature are recorded, net of tax, in accumulated other comprehensive income for available-for-sale securities.

Regardless of the classification of the securities, the Company has assessed each position for impairment.

Factors considered in determining whether a loss is temporary include:


•	the length of time and the extent to which fair value has been below cost;


•	the severity of the impairment;


•	the cause of the impairment and the financial condition and near-term prospects of the issuer;


•	activity in the market of the issuer which may indicate adverse credit conditions; and


•	the Company's ability and intent to hold the investment for a period of time sufficient to allow for any anticipated recovery.

-12-

j2 Global's review for impairment generally entails:


•	identification and evaluation of investments that have indications of possible impairment;


•	analysis of individual investments that have fair values less than amortized cost, including consideration of the length of time the investment has been in an unrealized loss position and the expected recovery period;


•	discussion of evidential matter, including an evaluation of factors or triggers that could cause individual investments to qualify as having an other-than-temporary impairment and those that would not support an other-than-temporary impairment;


•	documentation of the results of these analyses, as required under business policies; and


•	information provided by third-party valuation experts.

For these securities, a critical component of the evaluation for other-than-temporary impairments is the identification of credit impairment, where management does not expect to receive cash flows sufficient to recover the entire amortized cost basis of the security. Credit impairment is assessed using a combination of a discounted cash flow model that estimates the cash flows on the underlying securities and a market comparables method, where the security is valued based upon indications from the secondary market of what discounts buyers demand when purchasing similar securities. The cash flow model incorporates actual cash flows from the securities through the current period and then projects the remaining cash flows using relevant interest rate curves over the remaining term. These cash flows are discounted using a number of assumptions, some of which include prevailing implied credit risk premiums, incremental credit spreads and illiquidity risk premiums, among others.

Securities that have been identified as other-than-temporarily impaired are written down to their current fair value. For debt securities that are intended to be sold or that management believes it more-likely-than-not that will be required to sell prior to recovery, the full impairment is recognized immediately in earnings.

For available-for-sale securities that management has no intent to sell and believes that it more-likely-than-not will not be required to sell prior to recovery, only the credit loss component of the impairment is recognized in earnings, while the rest of the fair value impairment is recognized in other comprehensive income. The credit loss component recognized in earnings is identified as the amount of principal cash flows not expected to be received over the remaining term of the security.

-13-

The following tables present gross unrealized losses and fair values for those investments that were in an unrealized loss position as of June 30, 2016 and December 31, 2015, aggregated by investment category and the length of time that individual securities have been in a continuous loss position (in thousands):



	As of June 30, 2016
	Less than 12 Months					12 Months or Greater					Total
	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
Corporate debt securities	$	3,786	$	(2	)	$	—	$	—		$	3,786	$	(2	)
Debt securities issued by the U.S. Treasury and other U.S. government corporations and agencies	1,248		(2		)	—		—			1,248		(2		)
Debt securities issued by states of the United States and political subdivisions of the states	1,681		(43		)	—		—			1,681		(43		)
Total	$	6,715	$	(47	)	$	—	$	—		$	6,715	$	(47	)

	As of December 31, 2015
	Less than 12 Months					12 Months or Greater					Total
	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
Corporate debt securities	$	74,807	$	(212	)	$	1,000	$	(1	)	$	75,807	$	(213	)
Debt securities issued by the U.S. Treasury and other U.S. government corporations and agencies	38,004		(62		)	649		(1		)	38,653		(63		)
Debt securities issued by states of the United States and political subdivisions of the states	4,189		(10		)	—		—			4,189		(10		)
Total	$	117,000	$	(284	)	$	1,649	$	(2	)	$	118,649	$	(286	)

As of June 30, 2016 and December 31, 2015, we did not recognize any other-than-temporary impairment losses.


5.	Fair Value Measurements

j2 Global complies with the provisions of ASC 820, which defines fair value, provides a framework for measuring fair value and expands the disclosures required for fair value measurements of financial and non-financial assets and liabilities. ASC 820 clarifies that the fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or a liability. As a basis for considering such assumptions, ASC 820 establishes a three-tier value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:



	l	Level 1 – Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

	l	Level 2 – Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

	l	Level 3 – Unobservable inputs which are supported by little or no market activity.

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

-14-

The Company's money market funds and its marketable equity securities are classified within Level 1. The Company values these Level 1 investments using quoted market prices. The Company's debt investments, time deposits and commercial paper, all of which have counterparties with high credit ratings, are classified within Level 2. The Company values these Level 2 investments based on quoted market prices or model-driven valuations using significant inputs derived from or corroborated by observable market data.

The fair value of the Convertible Notes (See Note 7 - Long-Term Debt) is determined using recent quoted market prices or dealer quotes for such securities, which are Level 1 inputs. The fair value of the Senior Notes (See Note 7 - Long-Term Debt) is determined using quoted market prices or dealer quotes for instruments with similar maturities and other terms and credit ratings, which are Level 2 inputs. The fair value of long-term debt at June 30, 2016 and December 31, 2015 was $726.4 million and $790.5 million, respectively.

In addition, the Convertible Notes contain terms that may require the Company to pay contingent interest on the Convertible Notes which is accounted for as a derivative with fair value adjustments being recorded to interest expense. This derivative is fair valued using a binomial lattice convertible bond pricing model using historical and implied market information, which are Level 2 inputs.

The Company classifies its contingent consideration liability in connection with the acquisitions of Ookla and Salesify within Level 3 because factors used to develop the estimated fair value are unobservable inputs, such as volatility and market risks, and are not supported by market activity. The fair value of the contingent consideration liability was determined using option based approaches. This methodology was utilized because the distribution of payments is not symmetric and amounts are only payable upon certain earnings before interest, tax, depreciation and amortization ("EBITDA") thresholds being reached. Such valuation approach included the Monte-Carlo simulation for the contingency since the financial metric driving the payments is path dependent. Significant increases or decreases in either of the inputs noted above in isolation would result in a significantly lower or higher fair value of measurement.

-15-

The following tables present the fair values of the Company's financial assets or liabilities that are measured at fair value on a recurring basis (in thousands):



June 30, 2016	Level 1		Level 2		Level 3		Fair Value
Assets:
Cash equivalents:
Money market and other funds	$	46,177	$	—	$	—	$	46,177
Time deposits	—		1,177		—		1,177
Certificates of deposit	—		62		—		62
Equity securities	16,134		—		—		16,134
Debt securities issued by the U.S. Treasury and other U.S. government corporations and agencies	—		19,225		—		19,225
Debt securities issued by states of the U.S. and political subdivisions of the states	—		6,461		—		6,461
Corporate debt securities	—		51,570		—		51,570
Total assets measured at fair value	$	62,311	$	78,495	$	—	$	140,806

Liabilities:
Contingent consideration	$	—	$	—	$	15,400	$	15,400
Contingent interest derivative	—		1,450		—		1,450
Total liabilities measured at fair value	$	—	$	1,450	$	15,400	$	16,850

December 31, 2015	Level 1		Level 2		Level 3		Fair Value
Assets:
Cash equivalents:
Money market and other funds	$	46,867	$	—	$	—	$	46,867
Time deposits	—		3,004		—		3,004
Certificates of deposit	—		60		—		60
Equity securities	22,654		—		—		22,654
Debt securities issued by the U.S. Treasury and other U.S. government corporations and agencies	—		40,652		—		40,652
Debt securities issued by states of the U.S. and political subdivisions of the states	—		6,103		—		6,103
Corporate debt securities	—		88,749		—		88,749
Total assets measured at fair value	$	69,521	$	138,568	$	—	$	208,089

Liabilities:
Contingent consideration	$	—	$	—	$	30,600	$	30,600
Contingent interest derivative	—		1,450		—		1,450
Total liabilities measured at fair value	$	—	$	1,450	$	30,600	$	32,050

At the end of each reporting period, management reviews the inputs to the fair value measurements of financial and non-financial assets and liabilities to determine when transfers between levels are deemed to have occurred. For the six months ended June 30, 2016, there were no transfers that have occurred between levels.

-16-

The following table presents a reconciliation of the Company's Level 3 financial assets or liabilities that are measured at fair value on a recurring basis (in thousands):



	Level 3			Affected line item in the Statement of Income
Balance as of January 1, 2016	$	30,600
Total fair value adjustments reported in earnings	2,800			General and administrative
Contingent consideration payments	(18,000		)	Not applicable
Balance as of June 30, 2016	$	15,400

In connection with the acquisition of Ookla, on December 1, 2014, contingent consideration of up to an aggregate of $40.0 million may be payable upon achieving certain future income thresholds and had a fair value of $8.0 million and $25.0 million at June 30, 2016 and December 31, 2015, respectively. Due to the Company's achievement of certain earnings targets for the year ended December 31, 2015, $20.0 million ($17.0 million of contingent consideration and $3.0 million of compensation) was paid during the first quarter 2016 in connection with this acquisition.

In connection with the acquisition of Salesify, on September 17, 2015, contingent consideration of up to an aggregate of $17.0 million may be payable upon achieving certain future income thresholds and had a fair value of $7.4 million and $5.6 million at June 30, 2016 and December 31, 2015, respectively. Due to the Company's achievement of certain earnings targets for the year ended December 31, 2015, $1.0 million of contingent consideration was paid during the second quarter 2016 in connection with this acquisition.

The contingent consideration associated with both of these acquisitions has been reclassified to current liabilities, excluding $2.2 million which remains as other long-term liability on the consolidated balance sheet at June 30, 2016.

During the six months ended June 30, 2016, the Company recorded an increase in the fair value of the contingent consideration of $2.8 million and reported such increase in general and administrative expenses.

The following table presents a reconciliation of the Company's derivative instruments (in thousands):



	Amount		Affected line item in the Statement of Income
Derivative Liabilities:
Level 2:
Balance as of January 1, 2016	$	1,450
Total fair value adjustments reported in earnings	—
Balance as of June 30, 2016	$	1,450

Losses associated with other-than-temporary impairments are recorded as a component of other income (expenses). Gains and losses not associated with other-than-temporary impairments are recorded as a component of other comprehensive income.


6.	Goodwill and Intangible Assets

Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in a business combination. Intangible assets resulting from the acquisitions of entities accounted for using the acquisition method of accounting are recorded at the estimated fair value of the assets acquired. Identifiable intangible assets are comprised of purchased customer relationships, trademarks and trade names, developed technologies and other intangible assets. The fair values of these identified intangible assets are based upon expected future cash flows or income, which take into consideration certain assumptions such as customer turnover, trade names and patent lives. These determinations are primarily based upon the Company's historical experience and expected benefit of each intangible asset. If it is determined that such assumptions are not accurate, then the resulting change will impact the fair value of the intangible asset. Identifiable intangible assets are amortized over the period of estimated economic benefit, which ranges from one to 20 years.

-17-

The changes in carrying amounts of goodwill for the six months ended June 30, 2016 are as follows (in thousands):



	Business Cloud Services			Digital Media			Consolidated
Balance as of January 1, 2016	$	502,718		$	304,943		$	807,661
Goodwill acquired (Note 3)	43,542			—			43,542
Purchase accounting adjustments ⁽¹⁾	612			(5,130		)	(4,518		)
Foreign exchange translation	(5,624		)	(115		)	(5,739		)
Balance as of June 30, 2016	$	541,248		$	299,698		$	840,946

⁽¹⁾Purchase accounting adjustments relate to adjustments to goodwill in connection with prior year business acquisitions (See Note 3 - Business Acquisitions).

Intangible Assets with Indefinite Lives:

Intangible assets are summarized as of June 30, 2016 and December 31, 2015 as follows (in thousands):



	June 30, 2016		December 31, 2015
Trade name	$	27,379	$	27,379
Other	5,432		5,432
Total	$	32,811	$	32,811

Intangible Assets Subject to Amortization:

As of June 30, 2016, intangible assets subject to amortization relate primarily to the following (in thousands):



	Weighted-Average Amortization Period	Historical Cost		Accumulated Amortization		Net
Trade names	12.0 years	$	125,738	$	32,439	$	93,299
Patent and patent licenses	8.2 years	64,515		48,597		15,918
Customer relationships ⁽¹⁾	9.9 years	340,387		150,007		190,380
Other purchased intangibles	4.6 years	35,060		23,222		11,838
Total		$	565,700	$	254,265	$	311,435

⁽¹⁾ Historically, the Company has amortized its customer relationship assets in a pattern that best reflects the pace in which the asset's benefits are consumed. This pattern results in a substantial majority of the amortization expense being recognized in the first 4 to 5 years, despite the overall life of the asset.

As of December 31, 2015, intangible assets subject to amortization relate primarily to the following (in thousands):



	Weighted-Average Amortization Period	Historical Cost		Accumulated Amortization		Net
Trade names	12.0 years	$	117,753	$	26,167	$	91,586
Patent and patent licenses	8.3 years	64,258		45,417		18,841
Customer relationships ⁽¹⁾	9.4 years	313,909		116,590		197,319
Other purchased intangibles	4.2 years	33,088		21,004		12,084
Total		$	529,008	$	209,178	$	319,830

-18-

Amortization expense, included in general and administrative expense, approximated $24.8 million and $17.6 million for the three month periods ended June 30, 2016 and 2015, respectively, and $45.8 million and $34.6 million for the six month periods ended June 30, 2016 and 2015, respectively. Amortization expense is estimated to approximate $109.2 million, $66.4 million, $43.4 million, $29.1 million and $22.3 million for fiscal years 2016 through 2020, respectively, and $86.9 million thereafter through the duration of the amortization period.


7.	Long-Term Debt

8.0% Senior Notes

On July 26, 2012, the Company's subsidiary issued in a private offering exempt from the registration requirements of the Securities Act of 1933, as amended, $250 million aggregate principal amount of 8.0% senior unsecured notes (the "Senior Notes") due August 1, 2020. j2 Cloud Services, Inc. received proceeds of $245 million in cash, net of initial purchaser's discounts and commissions of $5 million. The net proceeds were available for general corporate purposes, including acquisitions. Interest is payable semi-annually on February 1 and August 1 of each year. j2 Cloud Services, Inc. has the option to call the Senior Notes in whole or in part after August 1, 2016, subject to certain premiums as defined in the indenture governing the Senior Notes plus accrued and unpaid interest. Upon a change in control, the holders may put the Senior Notes at 101% of the principal amount of the Senior Notes plus accrued and unpaid interest, if any, to the repurchase date. In connection with the issuance of the Convertible Notes (defined below), j2 Global, Inc. unconditionally guaranteed, on an unsecured basis, the obligations of j2 Cloud Services, Inc. under the Senior Notes.

The indenture governing the Senior Notes contains certain restrictive and other covenants applicable to j2 Cloud Services, Inc. and subsidiaries designated as restricted subsidiaries including, but not limited to, limitations on debt and disqualified or preferred stock, restricted payments, liens, sale and leaseback transactions, dividends and other payment restrictions, asset sales and transactions with affiliates. Restricted payments are applicable only if j2 Cloud Services, Inc. and subsidiaries designated as restricted subsidiaries has a pro forma leverage ratio of greater than 1.75 to 1.0. In addition, if such leverage ratio is in excess of 1.75 to 1.0, restricted payments are permitted up to $50 million. As of June 30, 2016, j2 Cloud Services, Inc. was in compliance with all such covenants. Violation of these covenants could result in a default which could result in the acceleration of outstanding amounts if such default is not cured or waived within the time periods outlined in the indenture.

As of June 30, 2016 and December 31, 2015, the estimated fair value of the Senior Notes was approximately $273.9 million and $262.2 million, respectively, and was based on the quoted market prices of debt instruments with similar terms, credit rating and maturities of the Senior Notes which are Level 2 inputs (see Note 5 - Fair Value Measurements).

3.25% Convertible Notes

On June 10, 2014, j2 Global issued $402.5 million aggregate principal amount of 3.25% convertible senior notes due June 15, 2029 (the "Convertible Notes"). j2 Global received proceeds of $391.4 million in cash, net of underwriters' discounts and commissions. The net proceeds were available for general corporate purposes. The Convertible Notes bear interest at a rate of 3.25% per annum, payable semiannually in arrears on June 15 and December 15 of each year. Beginning with the six-month interest period commencing on June 15, 2021, the Company must pay contingent interest on the Convertible Notes during any six-month interest period if the trading price per $1,000 principal amount of the Convertible Notes for each of the five trading days immediately preceding the first day of such interest period equals or exceeds $1,300. Any contingent interest payable on the Convertible Notes will be in addition to the regular interest payable on the Convertible Notes.

Holders may surrender their Convertible Notes for conversion at any time prior to the close of business on the business day immediately preceding the maturity date only if one or more of the following conditions is satisfied: (i) during any calendar quarter commencing after the calendar quarter ending on September 30, 2014 (and only during such calendar quarter), if the closing sale price of j2 Global common stock for at least 20 trading days in the period of 30 consecutive trading days ending on the last trading day of the calendar quarter immediately preceding the calendar quarter in which the conversion occurs is more than 130% of the applicable conversion price of the Convertible Notes on each such trading day; (ii) during the five consecutive business day period following any ten consecutive trading day period in which the trading price for the Convertible Notes for each such trading day was less than 98% of the product of (a) the closing sale price of j2 Global common stock on each such trading day and (b) the applicable conversion rate on each such trading day; (iii) if j2 Global calls any or all of the Convertible Notes for redemption, at any time prior to the close of business on the business day prior to the redemption date; (iv) upon the occurrence of specified corporate events; or (v) during either the period beginning on, and including, March 15, 2021 and ending on, but excluding, June

-19-

20, 2021 or the period beginning on, and including, March 15, 2029 and ending on, but excluding, the maturity date. j2 Global will settle conversions of Convertible Notes by paying or delivering, as the case may be, cash, shares of j2 Global common stock or a combination thereof at j2 Global's election. The Company currently intends to satisfy its conversion obligation by paying and delivering a combination of cash and shares of the Company's common stock, where cash will be used to settle each $1,000 of principal and the remainder, if any, will be settled via the Company's common stock.

As of June 30, 2016, the conversion rate is 14.4750 shares of j2 Global common stock for each $1,000 principal amount of Convertible Notes, which represents a conversion price of approximately $69.08 per share of j2 Global common stock. The conversion rate is subject to adjustment for certain events as set forth in the indenture governing the Convertible Notes, but will not be adjusted for accrued interest. In addition, following certain corporate events that occur on or prior to June 20, 2021, j2 Global will increase the conversion rate for a holder that elects to convert its Convertible Notes in connection with such a corporate event.

j2 Global may not redeem the Convertible Notes prior to June 20, 2021. On or after June 20, 2021, j2 Global may redeem for cash all or part of the Convertible Notes at a redemption price equal to 100% of the principal amount of the Convertible Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. No sinking fund is provided for the Convertible Notes.

Holders have the right to require j2 Global to repurchase for cash all or part of their Convertible Notes on each of June 15, 2021 and June 15, 2024 at a repurchase price equal to 100% of the principal amount of the Convertible Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the relevant repurchase date. In addition, if a fundamental change, as defined in the indenture governing the Convertible Notes, occurs prior to the maturity date, holders may require j2 Global to repurchase for cash all or part of their Convertible Notes at a repurchase price equal to 100% of the principal amount of the Convertible Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

The Convertible Notes are the Company's general senior unsecured obligations and rank: (i) senior in right of payment to any of the Company's future indebtedness that is expressly subordinated in right of payment to the Convertible Notes; (ii) equal in right of payment to the Company's existing and future unsecured indebtedness that is not so subordinated, including in respect of j2 Global's guarantee of the obligations of our subsidiary, j2 Cloud Services, Inc., with respect to its outstanding Senior Notes; (iii) effectively junior in right of payment to any of the Company's secured indebtedness to the extent of the value of the assets securing such indebtedness; and (iv) structurally junior to all existing and future indebtedness (including trade payables) incurred by the Company's subsidiaries.

Accounting for the Convertible Notes

In accordance with ASC 470-20, Debt with Conversion and Other Options, convertible debt that can be settled for cash is required to be separated into the liability and equity component at issuance, with each component assigned a value. The value assigned to the liability component is the estimated fair value, as of the issuance date, of similar debt without the conversion feature. The difference between the cash proceeds and estimated fair value of the liability component, representing the value of the conversion premium assigned to the equity component, is recorded as a debt discount on the issuance date. This debt discount is amortized to interest expense using the effective interest method over the period from the issuance date through the first stated repurchase date on June 15, 2021.

j2 Global estimated the borrowing rates of similar debt without the conversion feature at origination to be 5.79% for the Convertible Notes and determined the debt discount to be $59.0 million. As a result, a conversion premium after tax of $37.7 million was recorded in additional paid-in capital. The aggregate debt discount is amortized as interest expense over the period from the issuance date through the first stated repurchase date on June 15, 2021, which management believes is the expected life of the Convertible Notes using an interest rate of 5.81%. As of June 30, 2016, the remaining period over which the unamortized debt discount will be amortized is 5.0 years.

The Convertible Notes are carried at face value less any unamortized debt discount and debt issuance costs. The fair value of the Convertible Notes at each balance sheet date is determined based on recent quoted market prices or dealer quotes for the Convertible Notes, which are Level 1 inputs (see Note 5 - Fair Value Measurements). If such information is not available, the fair value is determined using cash-flow models of the scheduled payments discounted at market interest rates for comparable debt without the conversion feature. As of June 30, 2016 and December 31, 2015, the estimated fair value of the Convertible Notes was approximately $452.5 million and $528.3 million, respectively.

-20-

Long-term debt as of June 30, 2016 and December 31, 2015 consists of the following (in thousands):



	June 30, 2016			December 31, 2015
8% Senior Notes	$	247,048		$	246,750
3.25% Convertible Notes	358,234			354,436
Less: Deferred issuance costs ⁽¹⁾	(8,469		)	(9,149		)
Total long-term debt	596,813			592,037
Less: current portion	—			—
Total long-term debt, less current portion	$	596,813		$	592,037

⁽¹⁾The Company adopted ASU 2015-03 Interest - Imputation Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs during the first quarter of 2016 on a retrospective basis. At December 31, 2015, $9.1 million of deferred issuance costs were classified as a reduction of Long-term debt on our consolidated balance sheets.


8.	Commitments and Contingencies

Litigation

From time-to-time, j2 Global and its affiliates are involved in litigation and other disputes or regulatory inquiries that arise in the ordinary course of business. Any claims or regulatory actions against j2 Global and its affiliates, whether meritorious or not, could be time consuming and costly, and could divert significant operational resources. The outcomes of such matters are subject to inherent uncertainties, carrying the potential for unfavorable rulings that could include monetary damages and injunctive relief.

On February 17, 2011, Emmanuel Pantelakis ("Pantelakis") filed suit against a j2 Global affiliate in the Ontario Superior Court of Justice (No. 11-50673), alleging that the j2 Global affiliate breached a contract relating to Pantelakis's use of the Campaigner^® service. The j2 Global affiliate filed a responsive pleading on March 23, 2011 and responses to undertakings on July 16, 2012. On November 6, 2012, Pantelakis filed a second amended statement of claim, reframing his lawsuit as a negligence action. The j2 Global affiliate filed an amended statement of defense on April 8, 2013. Discovery is ongoing.

On January 17, 2013, the Commissioner of the Massachusetts Department of Revenue ("Commissioner") issued a notice of assessment to a j2 Global affiliate for sales and use tax for the period of July 1, 2003 through December 31, 2011. On July 22, 2014, the Commissioner denied the j2 Global affiliate's application for abatement. On September 18, 2014, the j2 Global affiliate petitioned the Massachusetts Appellate Tax Board for abatement of the tax asserted in the notice of assessment (No. C325426). A trial was held on December 16, 2015. The Massachusetts Appellate Tax Board has not yet rendered its decision.

On January 18, 2013, Paldo Sign and Display Co. ("Paldo") filed an amended complaint adding two j2 Global affiliates and a former employee as additional defendants in an existing putative class action pending in the U.S. District Court for the Northern District of Illinois ("Northern District of Illinois") (No. 1:13-cv-01896). The amended complaint alleged violations of the Telephone Consumer Protection Act ("TCPA"), the Illinois Consumer Fraud and Deceptive Business Practices Act ("ICFA"), and common law conversion, arising from an indirect customer's alleged use of a j2 Global affiliate's systems to send unsolicited facsimile transmissions. The j2 Global affiliates filed a motion to dismiss the ICFA and conversion claims, which was granted. The Northern District of Illinois also dismissed the former employee for lack of personal jurisdiction. On August 23, 2013, a second plaintiff, Sabon, Inc. ("Sabon"), was added. On March 7, 2016, the j2 Global affiliates moved for summary judgment on all remaining claims. The summary judgment motions are pending.

On August 28, 2013, Phyllis A. Huster ("Huster") filed suit in the Northern District of Illinois (No. 1:13-cv-06143) against two j2 Global affiliates and three other parties for correction of inventorship for nine j2 Global patents. Huster seeks, among other things, a declaration that she was an inventor of the patents-in-suit, an order directing the U.S. Patent & Trademark Office to substitute or add her as an inventor, and payment of at least half of defendants' earnings from licensing the patents-in-suit. On September 19, 2014, the Northern District of Illinois granted the defendants' motion to dismiss for improper venue and transferred the case to the U.S. District Court for the Northern District of Georgia ("Northern District of Georgia") (No. 1:14-cv-03304). Huster filed an amended complaint on February 11, 2015, which she corrected on February 12, 2015. The corrected amended complaint added various common law claims. On November 12, 2015, the Northern District of Georgia dismissed all claims against the j2 Global affiliates. On January 28, 2016, all remaining claims were dismissed on summary judgment. Huster filed a notice of

-21-

appeal to the U.S. Court of Appeals for the Federal Circuit ("Federal Circuit") on February 26, 2016 (No. 16-1639). The appeal is pending.

On October 16, 2013, a j2 Global affiliate entered an appearance as a plaintiff in a multi-district litigation pending in the Northern District of Illinois (No. 1:12-cv-06286). In this litigation, Unified Messaging Solutions, LLC ("UMS"), a company with rights to assert certain patents owned by the j2 Global affiliate, has asserted five j2 Global patents against a number of defendants. While claims against some defendants have been settled, other defendants have filed counterclaims for, among other things, non-infringement, unenforceability, and invalidity of the patents-in-suit. On December 20, 2013, the Northern District of Illinois issued a claim construction opinion and, on June 13, 2014, entered a final judgment of non-infringement for the remaining defendants based on that claim construction. UMS and the j2 Global affiliate filed a notice of appeal to the Federal Circuit on June 27, 2014 (No. 14-1611). The appeal is pending.

On June 23, 2014, Andre Free-Vychine ("Free-Vychine") filed a putative class action against two j2 Global affiliates in the Superior Court for the State of California, County of Los Angeles ("Los Angeles Superior Court") (No. BC549422). The complaint alleged two California statutory violations relating to late fees levied in certain eVoice® accounts. Free-Vychine sought, among other things, damages and injunctive relief on behalf of himself and a purported nationwide class of similarly situated persons. On August 26, 2014, Law Enforcement Officers, Inc. ("LEO") and IV Pit Stop, Inc. ("IV Pit Stop") filed a separate putative class action against the same j2 Global affiliates in Los Angeles Superior Court (No. BC555721). The complaint alleged three California statutory violations, negligence, breach of the implied covenant of good faith and fair dealing, and various other common law claims relating to late fees levied on any of the j2 Global affiliates' customers, including those with eVoice® and Onebox® accounts. LEO and IV Pit Stop sought, among other things, damages and injunctive relief on behalf of themselves and a purported nationwide class of similarly situated persons. On September 29, 2014, the Los Angeles Superior Court related and consolidated both cases for discovery purposes. On March 13, 2015, a third amended complaint was filed in the case brought by LEO, which no longer included IV Pit Stop as a plaintiff but added Christopher Dancel ("Dancel") as a plaintiff. On June 26, 2015, the case filed by Free-Vychine was dismissed pursuant to a settlement agreement. On October 7, 2015, the parties in the case brought by LEO and Dancel reached a tentative class-based settlement that remains subject to court approval.

j2 Global does not believe, based on current knowledge, that the foregoing legal proceedings or claims, after giving effect to existing reserves, are likely to have a material adverse effect on the Company's consolidated financial position, results of operations, or cash flows. However, depending on the amount and the timing, an unfavorable resolution of some or all of these matters could have a material affect on j2 Global's consolidated financial position, results of operations, or cash flows in a particular period. The Company has not accrued for loss contingencies relating to these legal proceedings because unfavorable outcomes are not considered probable by management.

The Company has not accrued for any material loss contingencies relating to these legal proceedings because unfavorable outcomes are not considered probable by management.

Non-Income Related Taxes

As a provider of cloud services for business, the Company does not provide telecommunications services. Thus, it believes that its business and its users (by using the Company's services) are generally not subject to various telecommunication taxes. Moreover, the Company generally does not believe that its business and its users (by using the Company's services) are subject to other indirect taxes, such as sales and use tax, business tax and gross receipt tax. However, several state and municipal taxing authorities have challenged these beliefs and have and may continue to audit and assess the Company's business and operations with respect to telecommunications and other indirect taxes.

On February 24, 2016, President Obama signed into law H.R. 644, the "Trade Facilitation and Trade Enforcement Act of 2015", which included a provision to permanently ban state and local authorities from imposing access or discriminatory taxes on the Internet. The new law allows "grandfathered" states and local authorities to continue their existing taxes on Internet access through June 2020.

The Company is currently under audit for indirect taxes in several states and municipalities. On February 27, 2013, the Office of Finance for the City of Los Angeles (the "Los Angeles Office of Finance") issued assessments to a j2 Global affiliate for business and communications taxes for the period of January 1, 2009 through December 31, 2012. On September 11, 2014, the Los Angeles Office of Finance issued revised assessments to a j2 Global affiliate increasing such affiliate's liability to the City of Los Angeles. On April 30, 2015, the Los Angeles Office of Finance Board of Review denied the j2 Global affiliate's request to abate the assessments. The j2 Global affiliate paid the assessments and requested the abatement of penalties associated with the assessments. In addition, the j2 Global affiliate is currently working with the Office of the City Attorney of the City of Los Angeles

-22-

to obtain a refund of the entire amount paid. For other jurisdictions, the Company currently has no reserves established for these matters, as the Company has determined that the liability is not probable and estimable. However, it is reasonably possible that such a liability could be incurred, which would result in additional expense, which could materially impact our financial results.


9.	Income Taxes

The Company's tax provision for interim periods is determined using an estimate of the Company's annual effective tax rate. Each quarter the Company updates its estimated annual effective tax rate and, if the estimate changes, makes a cumulative adjustment. j2 Global's annual effective tax rate is normally lower than the 35% U.S. federal statutory rate and applicable apportioned state tax rates primarily due to anticipated earnings of the Company's subsidiaries outside of the U.S. in jurisdictions where the Company's effective tax rate is lower than in the U.S. The Company's effective tax rate was 30.9% and 0.5% for the three months ended June 30, 2016 and 2015, respectively and 30.6% and 13.3% for the six months ended June 30, 2016 and 2015, respectively. j2 Global does not provide for U.S. income taxes on the undistributed earnings of the Company’s foreign operations because the Company intends to permanently reinvest such earnings in foreign jurisdictions and any determination of the amount of unrecognized deferred tax liability related to these earnings is not practicable. Income before income taxes included income from domestic operations of $40.3 million and $28.2 million for the six months ended June 30, 2016 and 2015, respectively, and income from foreign operations of $51.5 million and $41.9 million for the six months ended June 30, 2016 and 2015, respectively.

As of June 30, 2016 and December 31, 2015, the Company had $40.4 million and $35.9 million, respectively, in liabilities for uncertain income tax positions. Accrued interest and penalties related to unrecognized tax benefits are recognized in income tax expense on the Company's consolidated statement of income.

Cash paid for income taxes net of refunds received was $25.0 million and $26.9 million for the six months ended June 30, 2016 and 2015, respectively.

Certain taxes are prepaid during the year and included within prepaid expenses and other current assets on the consolidated balance sheet. The Company's prepaid taxes were $9.4 million and $11.6 million at June 30, 2016 and December 31, 2015, respectively.

Income Tax Audits:

In November, 2015, the U.S. Internal Revenue Service ("IRS") began its income tax audit of the Company's 2012 and 2013 tax years. In March 2016, the IRS expanded its income tax audit to include the Company's 2014 tax year.

j2 Global is under income tax audit by the California Franchise Tax Board (the "FTB") for its tax years 2012 and 2013. The FTB, however, has agreed to suspend its audit for 2012 and 2013 pending the outcome of the IRS audit for such tax years.

The Company is under income tax audit by the New York State Department of Taxation and Finance for tax years 2011 through 2013.

j2 Global was under income tax audit by the New York City Department of Finance ("NYC") for its tax years 2009 through 2011. In February 2016, j2 Global settled its NYC audit for approximately $26,000.

It is reasonably possible that these audits may conclude in the next 12 months and that the uncertain tax positions the Company has recorded in relation to these tax years may change compared to the liabilities recorded for these periods. If the recorded uncertain tax positions are inadequate to cover the associated tax liabilities, the Company would be required to record additional tax expense in the relevant period, which could be material. If the recorded uncertain tax positions are adequate to cover the associated tax liabilities, the Company would be required to record any excess as reduction in tax expense in the relevant period, which could be material. However, it is not currently possible to estimate the amount, if any, of such change.

-23-


10.	Stockholders’ Equity

Common Stock Repurchase Program

In February 2012, the Company’s Board of Directors approved a program authorizing the repurchase of up to five million shares of our common stock through February 20, 2013 (the "2012 Program") which was subsequently extended through February 20, 2017. During the six month period ended June 30, 2016, we repurchased zero shares under this program. Cumulatively at June 30, 2016, 2.1 million shares were repurchased at an aggregate cost of $58.6 million (including an immaterial amount of commission fees).

Periodically, participants in j2 Global's stock plans surrender to the Company shares of j2 Global stock to pay the exercise price or to satisfy tax withholding obligations arising upon the exercise of stock options or the vesting of restricted stock. During the three month period ended June 30, 2016, the Company purchased 24,314 shares from plan participants for this purpose.

Dividends

The following is a summary of each dividend declared during fiscal year 2016 and 2015:



Declaration Date	Dividend per Common Share		Record Date	Payment Date
February 10, 2015	$	0.2925	February 23, 2015	March 9, 2015
May 6, 2015	$	0.3000	May 19, 2015	June 3, 2015
August 3, 2015	$	0.3075	August 17, 2015	September 1, 2015
November 3, 2015	$	0.3150	November 17, 2015	December 3, 2015
February 10, 2016	$	0.3250	February 23, 2016	March 10, 2016
May 5, 2016	$	0.3350	May 18, 2016	June 2, 2016

Future dividends are subject to Board approval.


11.	Stock Options and Employee Stock Purchase Plan

j2 Global's share-based compensation plans include the Second Amended and Restated 1997 Stock Option Plan (the "1997 Plan"), 2007 Stock Plan (the "2007 Plan"), 2015 Stock Option Plan (the "2015 Plan") and 2001 Employee Stock Purchase Plan (the "Purchase Plan"). Each plan is described below.

The 1997 Plan terminated in 2007. A total of 12,000,000 shares of common stock were authorized to be used for 1997 Plan purposes. An additional 840,000 shares were authorized for issuance upon exercise of options granted outside the 1997 Plan. As of June 30, 2016, 45,498 shares underlying options and zero shares of restricted stock were outstanding under the 1997 Plan, all of which continue to be governed by the 1997 Plan.

The 2007 Plan provides for the granting of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units and other share-based awards. 4,500,000 shares of common stock are authorized to be used for 2007 Plan purposes. Options under the 2007 Plan may be granted at exercise prices determined by the Board of Directors, provided that the exercise prices shall not be less than the fair market value of j2 Global's common stock on the date of grant for incentive stock options and not less than 85% of the fair market value of j2 Global's common stock on the date of grant for non-statutory stock options. As of June 30, 2016, 378,170 shares underlying options and 32,590 shares of restricted stock were outstanding under the 2007 Plan.

The 2015 Plan provides for the granting of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance share units and other share-based awards and is intended as a successor plan to the 2007 Stock Plan since no further grants will be made under the 2007 Stock Plan. 4,200,000 shares of common stock are authorized to be used for 2015 Plan purposes. Options under the 2015 Plan may be granted at exercise prices determined by the Board of Directors, provided that the exercise prices shall not be less than the higher of the par value or 100% of the fair market value of j2 Global's common stock subject to the option on the date the option is granted. As of June 30, 2016, 62,000 shares underlying options and 12,750 shares of restricted stock units were outstanding under the 2015 Plan.

-24-

All stock option grants are approved by "outside directors" within the meaning of Internal Revenue Code Section 162(m).

Stock Options

The following table represents stock option activity for the six months ended June 30, 2016:



	Number of Shares		Weighted- Average Exercise Price		Weighted-Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value
Outstanding at January 1, 2016	566,428		$	29.74
Granted	—		—
Exercised	(71,058	)	26.38
Canceled	(9,700	)	26.92
Outstanding at June 30, 2016	485,670		$	30.29	4.0	$	16,228,340
Exercisable at June 30, 2016	421,570		$	26.00	3.4	$	15,721,070
Vested and expected to vest at June 30, 2016	471,653		$	29.29	3.9	$	16,185,217

The total intrinsic values of options exercised during the six months ended June 30, 2016 and 2015 were $2.5 million and $5.6 million, respectively.

The Company recognized $0.2 million and $0.5 million of compensation expense for the six months ended June 30, 2016 and 2015, respectively, related to stock options. As of June 30, 2016 and December 31, 2015, unrecognized stock compensation related to non-vested stock options granted under each of the share-based compensation plans approximated $0.8 million and $1.1 million, respectively. Unrecognized stock compensation expense related to non-vested stock options granted under these plans is expected to be recognized ratably over a weighted-average period of 3.2 years (i.e., the remaining requisite service period).

Fair Value Disclosure

j2 Global uses the Black-Scholes option pricing model to calculate the fair value of each option grant. The expected volatility is based on historical volatility of the Company's common stock. The Company estimates the expected term based upon the historical exercise behavior of our employees. The risk-free interest rate is based on U.S. Treasury zero-coupon issues with a term equal to the expected term of the option assumed at the date of grant. The Company uses an annualized dividend yield based upon the per share dividends declared by its Board of Directors. Estimated forfeiture rates were 12.33% and 13.42% as of June 30, 2016 and 2015, respectively.

Restricted Stock and Restricted Stock Units

j2 Global has awarded restricted stock and restricted stock units to its Board of Directors and senior staff pursuant to certain share-based compensation plans. Compensation expense resulting from restricted stock and restricted unit grants is measured at fair value on the date of grant and is recognized as share-based compensation expense over the applicable vesting period. Beginning in fiscal year 2012, vesting periods are approximately one year for awards to members of the Company's Board of Directors and five years for senior staff (excluding market-based awards discussed below).

-25-

Restricted Stock - Awards with Market Conditions

In May 2016, certain key employees were granted market-based restricted stock awards. The market-based awards have vesting conditions that are based on specified stock price targets of the Company's common stock. Market conditions were factored into the grant date fair value using a Monte Carlo valuation model, which utilized multiple input variables to determine the probability of the Company achieving the specified stock price targets with a 20 day lookback (trading days). Stock-based compensation expense related to an award with a market condition will be recognized over the requisite service period using the graded-vesting method regardless of whether the market condition is satisfied, provided that the requisite service period has been completed. During the six months ended June 30, 2016 and 2015, the Company awarded 106,780 and zero market-based restricted stock awards, respectively. The per share weighted average grant-date fair values of the market-based restricted stock awards granted during the six months ended June 30, 2016 were $44.67. There were no market-based restricted stock awards granted during 2015.

The weighted-average fair values of market-based restricted stock awards granted have been estimated utilizing the following assumptions:



	June 30, 2016
Underlying stock price at valuation date	$	63.73
Expected volatility	29.8		%
Risk-free interest rate	1.51		%

Restricted stock award activity for the six months ended June 30, 2016 is set forth below:



	Shares		Weighted-Average Grant-Date Fair Value
Nonvested at January 1, 2016	704,804		$	39.08
Granted	256,064		37.07
Vested	(120,915	)	46.09
Canceled	(21,500	)	68.71
Nonvested at June 30, 2016	818,453		$	36.64

Restricted stock unit award activity for the six months ended June 30, 2016 is set forth below:



	Number of Shares		Weighted-Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value
Outstanding at January 1, 2016	56,245
Granted	5,250
Vested	(8,755	)
Canceled	(7,400	)
Outstanding at June 30, 2016	45,340		1.8	$	2,864,128
Vested and expected to vest at June 30, 2016	36,329		1.6	$	2,294,908

The Company recognized $6.0 million and $5.7 million of compensation expense for the six months ended June 30, 2016 and 2015, respectively, related to restricted stock and restricted stock units. As of June 30, 2016 and December 31, 2015, the Company had unrecognized share-based compensation cost of approximately $42.3 million and $34.5 million, respectively, associated with these awards. This cost is expected to be recognized over a weighted-average period of 3.4 years for awards and 3.0 years for units.

-26-

Employee Stock Purchase Plan

The Purchase Plan provides for the issuance of a maximum of two million shares of the Company's common stock. Under the Purchase Plan, eligible employees can have up to 15% of their earnings withheld, up to certain maximums, to be used to purchase shares of j2 Global's common stock at certain plan-defined dates. The price of the common stock purchased under the Purchase Plan for the offering periods is equal to 95% of the fair market value of the common stock at the end of the offering period. For the six months ended June 30, 2016 and 2015, 1,920 and 2,104 shares were purchased under the plan, respectively. Cash received upon the issuance of common stock under the Purchase Plan was $123,000 and $126,000 for the six months ended June 30, 2016 and 2015, respectively. As of June 30, 2016, 1,628,524 shares were available under the Purchase Plan for future issuance.


12.	Earnings Per Share

The components of basic and diluted earnings per share are as follows (in thousands, except share and per share data):



	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
Numerator for basic and diluted net income per common share:
Net income attributable to j2 Global, Inc. common shareholders	$	33,770		$	38,916		$	63,713		$	60,794
Net income available to participating securities ^(a)	(494		)	(637		)	(905		)	(1,006		)
Net income available to j2 Global, Inc. common shareholders	$	33,276		$	38,279		$	62,808		$	59,788
Denominator:
Weighted-average outstanding shares of common stock	48,055,783			47,537,597			48,011,250			47,480,315
Dilutive effect of:
Equity incentive plans	209,515			315,977			221,095			256,691
Convertible debt ^(b)	—			—			19,353			—
Common stock and common stock equivalents	48,265,298			47,853,574			48,251,698			47,737,006
Net income per share:
Basic	$	0.69		$	0.81		$	1.31		$	1.26
Diluted	$	0.69		$	0.80		$	1.30		$	1.25


^(a)	Represents unvested share-based payment awards that contain certain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid).


^(b)	Represents the incremental shares issuable upon conversion of the Convertible Notes due June 15, 2029 by applying the treasury stock method when the average stock price exceeds the conversion price of the Convertible Notes (see Note 7 - Long Term Debt).

For the three months ended June 30, 2016 and 2015, there were 62,000 and zero options outstanding, respectively, which were excluded from the computation of diluted earnings per share because the exercise prices were greater than the average market price of the common shares. For the six months ended June 30, 2016 and 2015, there were 62,000 and 62,000 options outstanding, respectively, which were excluded from the computation of diluted earnings per share because the exercise prices were greater than the average market price of the common shares.

-27-

13.Segment Information

The Company's business segments are based on the organization structure used by management for making operating and investment decisions and for assessing performance. j2 Global's reportable business segments are: (i) Business Cloud Services and (ii) Digital Media.

Information on reportable segments and reconciliation to consolidated income from operations is presented below (in thousands):



	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
Revenues by segment:
Business Cloud Services	$	142,460		$	125,188		$	280,599		$	243,249
Digital Media	69,385			50,907			131,794			94,164
Elimination of inter-segment revenues	(45		)	(57		)	(91		)	(122		)
Total revenues	211,800			176,038			412,302			337,291

Direct costs by segment⁽¹⁾:
Business Cloud Services	89,987			72,858			177,849			143,901
Digital Media	57,835			40,986			112,511			80,075
Direct costs by segment⁽¹⁾:	147,822			113,844			290,360			223,976

Business Cloud Services operating income⁽²⁾	52,473			52,330			102,750			99,348
Digital Media operating income	11,550			9,921			19,283			14,089
Segment operating income	64,023			62,251			122,033			113,437

Global operating costs⁽²⁾⁽³⁾	5,078			12,185			9,750			22,841
Income from operations	$	58,945		$	50,066		$	112,283		$	90,596

⁽¹⁾ Direct costs for each segment include cost of revenues and other operating expenses that are directly attributable to the segment, such as employee compensation expense, local sales and marketing expenses, engineering and network operations expense, depreciation and amortization and other administrative expenses.
⁽²⁾ During 2016, the Company determined certain personnel and third-party costs were directly attributable to a particular segment. As a result, these costs were no longer classified as Global operating costs in 2016. If such costs in the prior period were classified consistent with the 2016 presentation, the operating income for the Business Cloud Services segment would have been $44.7 million and $86.7 million for the three and six months ended June 30, 2015, respectively. Global operating costs would have been $4.6 million and $10.2 million for the three and six month ended June 30, 2015, respectively.
⁽³⁾ Global operating costs include general and administrative and other corporate expenses that are managed on a global basis and that are not directly attributable to any particular segment.

-28-



	June 30, 2016		December 31, 2015
Assets:
Business Cloud Services	$	1,067,436	$	1,017,676
Digital Media	403,549		427,647
Total assets from reportable segments	1,470,985		1,445,323
Corporate	322,166		338,396
Total assets	$	1,793,151	$	1,783,719

	Six Months Ended June 30,
	2016		2015
Capital expenditures:
Business Cloud Services	$	2,087	$	3,477
Digital Media	7,099		3,296
Total from reportable segments	9,186		6,773
Corporate	—		182
Total capital expenditures	$	9,186	$	6,955



	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Depreciation and amortization:
Business Cloud Services	$	21,251	$	14,758	$	38,752	$	28,772
Digital Media	9,808		6,944		19,481		14,024
Total from reportable segments	31,059		21,702		58,233		42,796
Corporate	—		192		—		385
Total depreciation and amortization	$	31,059	$	21,894	$	58,233	$	43,181

The Company's Business Cloud Services segment consists of several services which have similar economic characteristics, including the nature of the services and their production processes, the type of customers, as well as the methods used to distribute these services.

j2 Global groups its Business Cloud services into three main categories based on the similarities of these services: Cloud Connect, Other Cloud Services and Intellectual Property. Cloud Connect consists of our Fax and Voice services. Other Cloud Services consist of Backup, Email Security, Email Marketing and Web Hosting.



	Three Months Ended June 30, 2016							Six Months Ended June 30, 2016
	Revenue		Depreciation and Amortization		Operating Income⁽⁴⁾			Revenue		Depreciation and Amortization		Operating Income⁽⁴⁾

Cloud Connect (Fax/Voice)	$	92,858	$	7,575	$	42,574		$	183,102	$	13,145	$	83,094
Cloud Services	48,509		12,184		10,650			95,228		22,501		21,624
Intellectual Property	1,093		1,492		(751		)	2,269		3,106		(1,968		)
Total	$	142,460	$	21,251	$	52,473		$	280,599	$	38,752	$	102,750

-29-



	Three Months Ended June 30, 2015							Six Months Ended June 30, 2015
	Revenue		Depreciation and Amortization		Operating Income⁽⁴⁾			Revenue		Depreciation and Amortization		Operating Income⁽⁴⁾

Cloud Connect (Fax/Voice)	$	89,273	$	5,709	$	45,549		$	175,477	$	10,979	$	88,563
Cloud Services	34,632		7,155		7,794			64,231		13,779		12,349
Intellectual Property	1,283		1,894		(1,013		)	3,541		4,014		(1,564		)
Total	$	125,188	$	14,758	$	52,330		$	243,249	$	28,772	$	99,348

⁽⁴⁾ During 2016, the Company determined certain personnel and third-party costs were directly attributable to a particular segment. As a result, these costs were no longer classified as Global operating costs in 2016. If such costs in the prior period were classified consistent with the 2016 presentation, the operating income for Cloud Connect and Other Cloud Services would have been $39.4 million and $6.3 million, respectively, for the three months ended June 30, 2015 and $79.0 million and $9.2 million, respectively, for the six months ended June 30, 2015.

j2 Global maintains operations in the U.S., Canada, Ireland, Japan and other countries. Geographic information about the U.S. and all other countries for the reporting periods is presented below. Such information attributes revenues based on jurisdictions where revenues are reported (in thousands).



	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Revenues:
United States	$	144,475	$	121,017	$	282,113	$	230,049
Canada	18,900		18,947		37,266		37,086
Ireland	18,595		10,820		36,449		20,755
All other countries	29,830		25,254		56,474		49,401
	$	211,800	$	176,038	$	412,302	$	337,291



	June 30, 2016		December 31, 2015
Long-lived assets:
United States	$	298,139	$	271,796
All other countries	138,971		105,477
Total	$	437,110	$	377,273


14.	Unrestricted Subsidiaries (unaudited)

As of June 30, 2016, the Company's Board of Directors had designated the following entities as "Unrestricted Subsidiaries" under the indenture governing j2 Cloud Services' Senior Notes:

Ziff Davis, LLC and subsidiaries

Advanced Messaging Technologies, Inc. and subsidiaries

The financial position and results of operations of these Unrestricted Subsidiaries are included in the Company's condensed consolidated financial statements.

-30-

As required by the indenture governing j2 Cloud Services' Senior Notes, information sufficient to ascertain the financial condition and results of operations excluding the Unrestricted Subsidiaries must be presented. Accordingly, the Company is presenting the following tables.

The financial position of the Unrestricted Subsidiaries as of June 30, 2016 and December 31, 2015 is as follows (in thousands):



	June 30, 2016			December 31, 2015
ASSETS
Cash and cash equivalents	$	51,896		$	16,482
Accounts receivable	63,354			79,283
Prepaid expenses and other current assets	5,405			5,437
Deferred income taxes, current	—			3,382
Total current assets	120,655			104,584
Property and equipment, net	27,444			25,353
Trade names, net	73,564			73,034
Patent and patent licenses, net	15,219			18,071
Customer relationships, net	59,132			68,317
Goodwill	299,697			304,943
Other purchased intangibles, net	7,886			7,810
Deferred income taxes, non-current	1,016			2,373
Other assets	3,027			—
Total assets	$	607,640		$	604,485
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses	$	73,118		$	88,580
Deferred revenue, current	7,633			6,554
Total current liabilities	80,751			95,134
Long-term debt	182,488			155,000
Deferred income taxes, non-current	7,435			11,270
Other long-term liabilities	2,734			13,546
Total liabilities	273,408			274,950
Additional paid-in capital	320,694			319,728
Retained earnings	15,271			11,552
Accumulated other comprehensive loss	(1,733		)	(1,745		)
Total stockholders' equity	334,232			329,535
Total liabilities and stockholders' equity	$	607,640		$	604,485

-31-

The results of operations of the Unrestricted Subsidiaries for the three and six months ended June 30, 2016 and 2015 is as follows (in thousands):



	Three Months Ended June 30,					Six Months Ended June 30,
	2016		2015			2016		2015
Revenues	$	69,385	$	51,103		$	131,842	$	95,524

Cost of revenues	5,560		5,017			10,871		9,371
Gross profit	63,825		46,086			120,971		86,153
Operating expenses:
Sales and marketing	27,244		19,182			53,705		36,844
Research, development and engineering	3,169		2,167			5,652		4,068
General and administrative	23,706		16,918			46,524		34,897
Total operating expenses	54,119		38,267			105,881		75,809
Income from operations	9,706		7,819			15,090		10,344
Interest expense, net	4,486		2,801			8,613		5,318
Other expense, net	315		(145		)	487		99
Income (loss) before income taxes	4,905		5,163			5,990		4,927
Income tax expense	1,691		2,878			2,271		3,197
Net income (loss)	$	3,214	$	2,285		$	3,719	$	1,730


15.	Accumulated Other Comprehensive Income

The following table summarizes the changes in accumulated balances of other comprehensive income, net of tax, for the three months ended June 30, 2016 (in thousands):



	Unrealized Gains (Losses) on Investments		Foreign Currency Translation			Total
Beginning balance	$	88	$	(28,158	)	$	(28,070	)
Other comprehensive income (loss) before reclassifications	2,207		(12,653		)	(10,446		)
Amounts reclassified from accumulated other comprehensive income	44		—			44
Net current period other comprehensive income (loss)	2,251		(12,653		)	(10,402		)
Ending balance	$	2,339	$	(40,811	)	$	(38,472	)

The following table summarizes the changes in accumulated balances of other comprehensive income, net of tax, for the six months ended June 30, 2016 (in thousands):



	Unrealized Gains (Losses) on Investments			Foreign Currency Translation			Total
Beginning balance	$	2,449		$	(31,573	)	$	(29,124	)
Other comprehensive income (loss) before reclassifications	(153		)	(9,238		)	(9,391		)
Amounts reclassified from accumulated other comprehensive income	43			—			43
Net current period other comprehensive income (loss)	(110		)	(9,238		)	(9,348		)
Ending balance	$	2,339		$	(40,811	)	$	(38,472	)

-32-

The following table provides details about reclassifications out of accumulated other comprehensive income for the three and six months ended June 30, 2016 (in thousands):



Details about Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Income						Affected Line Item in the Statement of Income
	Three Months Ended June 30, 2016			Six Months Ended June 30, 2016
Unrealized loss on available-for-sale investments	$	70		$	69		Other expense (income), net
	70			69			Income before income taxes
	(26		)	(26		)	Income tax expense
	44			43			Net income
Total reclassifications for the period	$	44		$	43		Net income


16.	Condensed Consolidating Financial Statements

In connection with the June 2014 Convertible Note issuance, j2 Global, Inc. entered into a supplemental indenture related to the Senior Notes, pursuant to which it fully and unconditionally guaranteed, on an unsecured basis, the full and punctual payment of the Senior Notes issued by its wholly owned subsidiary, j2 Cloud Services, Inc. j2 Cloud Services, Inc. is subject to restrictions on dividends in its existing indenture with respect to the Senior Notes. While substantially all of the Company's assets (other than the net cash proceeds from the issuance of the Convertible Notes) are owned directly or indirectly by j2 Cloud Services, Inc., those contractual provisions did not, as of June 30, 2014, meaningfully restrict j2 Cloud Services, Inc.'s ability to pay dividends to j2 Global, Inc.

The following condensed consolidating financial statements present, in separate columns, financial information for (i) j2 Global, Inc. (the "Parent") on a parent-only basis, (ii) j2 Cloud Services, Inc., (iii) the non-guarantor subsidiaries on a combined basis, (iv) the eliminations and reclassifications necessary to arrive at the information for the Company on a consolidated basis, and (v) the Company on a consolidated basis. The condensed consolidating financial statements are presented in accordance with the equity method. Under this method, the investments in subsidiaries are recorded at cost and adjusted for the Company's share of subsidiaries' cumulative results of operations, capital contributions, distributions and other equity changes. Intercompany charges (income) between the Parent and subsidiaries are recognized in the condensed consolidating financial statements during the period incurred and the settlement of intercompany balances is reflected in the condensed consolidating statement of cash flows based on the nature of the underlying transactions. Consolidating adjustments include consolidating and eliminating entries for investments in subsidiaries, intercompany activity and balances.

-33-

j2 GLOBAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEET

(Unaudited, in thousands except share and per share data)



June 30, 2016
BALANCE SHEET	j2 Global, Inc.		j2 Cloud Services, Inc.		Non-guarantor Subsidiaries		Consolidating Adjustments			j2 Global Consolidated
ASSETS
Cash and cash equivalents	$	74,197	$	39,655	$	199,902	$	—		$	313,754
Short-term investments	50,853		—		62		—			50,915
Accounts receivable, net	—		12,430		93,941		(6		)	106,365
Prepaid expenses and other current assets	10,097		2,151		15,340		(5,116		)	22,472
Intercompany receivable	144,488		172,564		—		(317,052		)	—
Total current assets	279,635		226,800		309,245		(322,174		)	493,506
Long-term investments	42,537		—		—		—			42,537
Property and equipment, net	—		7,064		52,989		—			60,053
Trade names, net	—		10,064		110,614		—			120,678
Patent and patent licenses, net	—		672		15,246		—			15,918
Customer relationships, net	—		867		189,513		—			190,380
Goodwill	—		56,296		784,650		—			840,946
Other purchased intangibles, net	—		4,223		13,047		—			17,270
Investment in subsidiaries	1,118,892		1,136,930		2		(2,255,824		)	—
Deferred income taxes, non-current	—		24,899		2,125		(20,530		)	6,494
Other assets	—		345		5,024		—			5,369
Total assets	$	1,441,064	$	1,468,160	$	1,482,455	$	(2,598,528	)	$	1,793,151
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses	$	3,927	$	30,087	$	72,504	$	(6	)	$	106,512
Income taxes payable	—		9,262		—		(5,115		)	4,147
Deferred revenue, current	—		19,582		54,976		—			74,558
Capital lease, current	—		—		29		—			29
Intercompany payable	135,078		—		181,974		(317,052		)	—
Total current liabilities	139,005		58,931		309,483		(322,173		)	185,246
Long-term debt	350,609		246,204		—		—			596,813

-34-



Capital lease, non-current	—		—			79			—			79
Liability for uncertain tax positions	—		40,356			—			—			40,356
Deferred income taxes, non-current	31,569		—			31,314			(20,531		)	42,352
Deferred revenue, non-current	—		3,120			1,668			—			4,788
Other long-term liabilities	1,486		657			2,981			—			5,124
Total liabilities	522,669		349,268			345,525			(342,704		)	874,758
Commitments and contingencies	—		—			—			—			—
Preferred stock - Series A, $0.01 par value	—		—			—			—			—
Preferred stock - Series B, $0.01 par value	—		—			—			—			—
Common stock, $0.01 par value	481		—			—			—			481
Additional paid-in capital - common	299,349		242,319			526,323			(768,642		)	299,349
Retained earnings	616,226		876,575			651,416			(1,487,182		)	657,035
Accumulated other comprehensive income (loss)	2,339		(2		)	(40,809		)	—			(38,472		)
Total stockholders' equity	918,395		1,118,892			1,136,930			(2,255,824		)	918,393
Total liabilities and stockholders' equity	$	1,441,064	$	1,468,160		$	1,482,455		$	(2,598,528	)	$	1,793,151

-35-

j2 GLOBAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEET

(Unaudited, in thousands except share and per share data)



December 31, 2015
BALANCE SHEET	j2 Global, Inc.		j2 Cloud Services, Inc.		Non-guarantor Subsidiaries			Consolidating Adjustments			j2 Global Consolidated
ASSETS
Cash and cash equivalents	$	55,516	$	9,975	$	190,039		$	—		$	255,530
Short-term investments	79,595		—		60			—			79,655
Accounts receivable, net	—		10,679		104,131			(130		)	114,680
Prepaid expenses and other current assets	6,887		8,500		14,319			(3,984		)	25,722
Deferred income taxes, current	—		3,316		4,413			(511		)	7,218
Intercompany receivable	117,000		174,127		—			(291,127		)	—
Total current assets	258,998		206,597		312,962			(295,752		)	482,805
Long-term investments	78,563		—		—			—			78,563
Property and equipment, net	—		6,557		50,885			—			57,442
Trade names, net	—		10,118		108,847			—			118,965
Patent and patent licenses, net	—		743		18,098			—			18,841
Customer relationships, net	—		1,193		196,126			—			197,319
Goodwill	—		56,296		751,365			—			807,661
Other purchased intangibles, net	—		4,218		13,298			—			17,516
Investment in subsidiaries	1,051,927		1,095,155		—			(2,147,082		)	—
Deferred income taxes, non-current	—		14,978		(14,978		)	—			—
Other assets	8,219		1,167		4,370			(9,149		)	4,607
Total assets	$	1,397,707	$	1,397,022	$	1,440,973		$	(2,451,983	)	$	1,783,719
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses	$	4,573	$	27,976	$	81,965		$	(130	)	$	114,384
Income taxes payable	—		9,573		—			(3,984		)	5,589
Deferred revenue, current	—		19,530		56,574			—			76,104
Capital lease, current	—		—		214			—			214
Deferred income taxes, current	511		—		363			(511		)	363
Intercompany payable	121,263		—		169,864			(291,127		)	—
Total current liabilities	126,347		57,079		308,980			(295,752		)	196,654
Long-term debt	354,437		246,749		—			(9,149		)	592,037

-36-



Capital lease, non-current	—		—		148			—			148
Liability for uncertain tax positions	—		35,917		—			—			35,917
Deferred income taxes, non-current	24,936		—		19,053			—			43,989
Deferred revenue, non-current	—		4,667		1,871			—			6,538
Other long-term liabilities	1,779		683		15,766			—			18,228
Total liabilities	507,499		345,095		345,818			(304,901		)	893,511
Commitments and contingencies	—		—		—			—			—
Preferred stock - Series A, $0.01 par value	—		—		—			—			—
Preferred stock - Series B, $0.01 par value	—		—		—			—			—
Common stock, $0.01 par value	479		—		—			—			479
Additional paid-in capital	292,064		238,631		524,031			(762,662		)	292,064
Retained earnings	595,216		813,058		602,935			(1,384,420		)	626,789
Accumulated other comprehensive income (loss)	2,449		238		(31,811		)	—			(29,124		)
Total stockholders' equity	890,208		1,051,927		1,095,155			(2,147,082		)	890,208
Total liabilities and stockholders' equity	$	1,397,707	$	1,397,022	$	1,440,973		$	(2,451,983	)	$	1,783,719

-37-

j2 GLOBAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF INCOME

(Unaudited, in thousands except share and per share data)



Three Months Ended June 30, 2016
	j2 Global, Inc.			j2 Cloud Services, Inc.			Non-guarantor Subsidiaries		Consolidating Adjustments			j2 Global Consolidated
Revenues:
Total revenues	$	—		$	66,254		$	166,079	$	(20,533	)	$	211,800

Cost of revenues	—			16,992			39,087		(20,488		)	35,591
Gross profit	—			49,262			126,992		(45		)	176,209
Operating expenses:
Sales and marketing	—			10,260			38,402		(45		)	48,617
Research, development and engineering	—			2,930			6,283		—			9,213
General and administrative	5,078			4,431			49,925		—			59,434
Total operating expenses	5,078			17,621			94,610		(45		)	117,264
Income (loss) from operations	(5,078		)	31,641			32,382		—			58,945
Equity earnings in subsidiaries	38,019			20,786			—		(58,805		)	—
Interest expense, net	1,591			5,193			3,517		—			10,301
Other expense (income), net	(300		)	(93		)	180		—			(213		)
Income before income taxes	31,650			47,327			28,685		(58,805		)	48,857
Income tax expense (benefit)	(2,120		)	9,308			7,899		—			15,087
Net income	$	33,770		$	38,019		$	20,786	$	(58,805	)	$	33,770

-38-

j2 GLOBAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF INCOME

(Unaudited, in thousands except share and per share data)



Three Months Ended June 30, 2015
	j2 Global, Inc.			j2 Cloud Services, Inc.			Non-guarantor Subsidiaries		Consolidating Adjustments			j2 Global Consolidated
Revenues:
Total revenues	$	—		$	56,547		$	129,217	$	(9,726	)	$	176,038

Cost of revenues	1			15,414			23,748		(9,669		)	29,494
Gross profit	(1		)	41,133			105,469		(57		)	146,544
Operating expenses:
Sales and marketing	—			10,512			29,966		(57		)	40,421
Research, development and engineering	2			3,763			5,204		—			8,969
General and administrative	3,538			9,011			34,539		—			47,088
Total operating expenses	3,540			23,286			69,709		(57		)	96,478
Income (loss) from operations	(3,541		)	17,847			35,760		—			50,066
Equity earnings in subsidiaries	45,530			26,742			—		(72,272		)	—
Interest expense, net	2,772			5,791			2,318		—			10,881
Other expense (income), net	(5		)	(28		)	121		—			88
Income before income taxes	39,222			38,826			33,321		(72,272		)	39,097
Income tax expense (benefit)	306			(6,704		)	6,579		—			181
Net income	$	38,916		$	45,530		$	26,742	$	(72,272	)	$	38,916

-39-

j2 GLOBAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF INCOME

(Unaudited, in thousands except share and per share data)



Six Months Ended June 30, 2016
	j2 Global, Inc.			j2 Cloud Services, Inc.			Non-guarantor Subsidiaries		Consolidating Adjustments			j2 Global Consolidated
Revenues:
Total revenues	$	—		$	122,639		$	321,645	$	(31,982	)	$	412,302

Cost of revenues	—			34,481			67,288		(31,891		)	69,878
Gross profit	—			88,158			254,357		(91		)	342,424
Operating expenses:
Sales and marketing	—			20,888			75,932		(91		)	96,729
Research, development and engineering	—			6,219			11,982		—			18,201
General and administrative	9,750			9,902			95,559		—			115,211
Total operating expenses	9,750			37,009			183,473		(91		)	230,141
Income (loss) from operations	(9,750		)	51,149			70,884		—			112,283
Equity earnings in subsidiaries	72,342			48,482			—		(120,824		)	—
Interest expense, net	3,462			10,425			6,647		—			20,534
Other expense (income), net	(209		)	(1,013		)	1,135		—			(87		)
Income before income taxes	59,339			90,219			63,102		(120,824		)	91,836
Income tax expense (benefit)	(4,374		)	17,877			14,620		—			28,123
Net income	$	63,713		$	72,342		$	48,482	$	(120,824	)	$	63,713

-40-

j2 GLOBAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF INCOME

(Unaudited, in thousands except share and per share data)



Six Months Ended June 30, 2015
	j2 Global, Inc.			j2 Cloud Services, Inc.		Non-guarantor Subsidiaries			Consolidating Adjustments			j2 Global Consolidated
Revenues:
Total revenues	$	—		$	111,166	$	245,652		$	(19,527	)	$	337,291

Cost of revenues	1			30,942		46,143			(19,405		)	57,681
Gross profit	(1		)	80,224		199,509			(122		)	279,610
Operating expenses:
Sales and marketing	—			20,292		57,841			(122		)	78,011
Research, development and engineering	2			7,618		9,795			—			17,415
General and administrative	7,717			15,861		70,010			—			93,588
Total operating expenses	7,719			43,771		137,646			(122		)	189,014
Income (loss) from operations	(7,720		)	36,453		61,863			—			90,596
Equity earnings in subsidiaries	71,782			50,283		—			(122,065		)	—
Interest expense, net	5,360			10,899		4,935			—			21,194
Other expense (income), net	(17		)	311		(990		)	—			(696		)
Income before income taxes	58,719			75,526		57,918			(122,065		)	70,098
Income tax expense (benefit)	(2,075		)	3,744		7,635			—			9,304
Net income	$	60,794		$	71,782	$	50,283		$	(122,065	)	$	60,794

-41-

j2 GLOBAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(Unaudited, in thousands except share and per share data)



Three Months Ended June 30, 2016
	j2 Global, Inc.		j2 Cloud Services, Inc.		Non-guarantor Subsidiaries			Consolidating Adjustments			j2 Global Consolidated

Net income	$	33,770	$	38,019	$	20,786		$	(58,805	)	$	33,770
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment	—		—		(12,653		)	—			(12,653		)
Unrealized gain (loss) on available-for-sale investments, net of tax expense (benefit)	2,251		—		—			—			2,251
Other comprehensive income (loss), net of tax	2,251		—		(12,653		)	—			(10,402		)
Comprehensive income	$	36,021	$	38,019	$	8,133		$	(58,805	)	$	23,368

-42-

j2 GLOBAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(Unaudited, in thousands except share and per share data)



Three Months Ended June 30, 2015
	j2 Global, Inc.			j2 Cloud Services, Inc.			Non-guarantor Subsidiaries		Consolidating Adjustments			j2 Global Consolidated

Net income	$	38,916		$	45,530		$	26,742	$	(72,272	)	$	38,916
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment, net of tax	—			—			7,112		—			7,112
Unrealized gain on available-for-sale investments, net of tax benefit	(267		)	(3,667		)	—		—			(3,934		)
Other comprehensive income (loss), net of tax	(267		)	(3,667		)	7,112		—			3,178
Comprehensive income	$	38,649		$	41,863		$	33,854	$	(72,272	)	$	42,094

-43-

j2 GLOBAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(Unaudited, in thousands except share and per share data)



Six Months Ended June 30, 2016
	j2 Global, Inc.			j2 Cloud Services, Inc.		Non-guarantor Subsidiaries			Consolidating Adjustments			j2 Global Consolidated

Net income	$	63,713		$	72,342	$	48,482		$	(120,824	)	$	63,713
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment, net of tax	—			—		(9,238		)	—			(9,238		)
Unrealized gain (loss) on available-for-sale investments, net of tax expense (benefit)	(110		)	—		—			—			(110		)
Other comprehensive loss, net of tax	(110		)	—		(9,238		)	—			(9,348		)
Comprehensive income	$	63,603		$	72,342	$	39,244		$	(120,824	)	$	54,365

-44-

j2 GLOBAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(Unaudited, in thousands except share and per share data)



Six Months Ended June 30, 2015
	j2 Global, Inc.		j2 Cloud Services, Inc.			Non-guarantor Subsidiaries			Consolidating Adjustments			j2 Global Consolidated

Net income	$	60,794	$	71,782		$	50,283		$	(122,065	)	$	60,794
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment, net of tax	—		—			(8,125		)	—			(8,125		)
Unrealized gain (loss) on available-for-sale investments, net of tax expense (benefit)	44		(3,598		)	—			—			(3,554		)
Other comprehensive income (loss), net of tax	44		(3,598		)	(8,125		)	—			(11,679		)
Comprehensive income	$	60,838	$	68,184		$	42,158		$	(122,065	)	$	49,115

-45-

j2 GLOBAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW

(Unaudited, in thousands except share and per share data)



Six Months Ended June 30, 2016
	j2 Global, Inc.			j2 Cloud Services, Inc.			Non-guarantor Subsidiaries			Consolidating Adjustments		j2 Global Consolidated
Net cash (used in) provided by operating activities	$	(695	)	$	25,755		$	106,992		$	—	$	132,052
Cash flows from investing activities:
Maturity of available-for-sale investments	112,631			—			—			—		112,631
Purchase of available-for-sale investments	(47,208		)	—			1			—		(47,207		)
Purchases of property and equipment	—			(542		)	(8,644		)	—		(9,186		)
Acquisition of businesses, net of cash received	—			—			(76,725		)	—		(76,725		)
Purchases of intangible assets	—			(104		)	(1,711		)	—		(1,815		)
Net cash (used in) provided by investing activities	65,423			(646		)	(87,079		)	—		(22,302		)
Cash flows from financing activities:
Repurchases of common and restricted stock	(3,356		)	—			—			—		(3,356		)
Issuance of common stock under employee stock purchase plan	2,034			—			(1,911		)	—		123
Exercise of stock options	—			—			1,911			—		1,911
Dividends paid	(32,202		)	—			—			—		(32,202		)
Excess tax benefits from share-based compensation	1,097			—			—			—		1,097
Deferred payments for acquisitions	—			(873		)	(15,677		)	—		(16,550		)
Other	—			—			(254		)	—		(254		)
Intercompany	(13,673		)	5,683			7,990			—		—
Net cash (used in) provided by financing activities	(46,100		)	4,810			(7,941		)	—		(49,231		)
Effect of exchange rate changes on cash and cash equivalents	53			(239		)	(2,109		)	—		(2,295		)
Net change in cash and cash equivalents	18,681			29,680			9,863			—		58,224
Cash and cash equivalents at beginning of period	55,516			9,975			190,039			—		255,530
Cash and cash equivalents at end of period	$	74,197		$	39,655		$	199,902		$	—	$	313,754

-46-

j2 GLOBAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW

(Unaudited, in thousands except share and per share data)



Six Months Ended June 30, 2015
	j2 Global, Inc.			j2 Cloud Services, Inc.			Non-guarantor Subsidiaries			Consolidating Adjustments		j2 Global Consolidated
Net cash provided by operating activities	$	(26,174	)	$	35,542		$	88,242		$	—	$	97,610
Cash flows from investing activities:
Maturity of certificates of deposit	—			65			—			—		65
Purchase of certificates of deposit	—			(62		)	—			—		(62		)
Maturity of available-for-sale investments	38,047			18,048			—			—		56,095
Purchase of available-for-sale investments	(37,734		)	(19,731		)	—			—		(57,465		)
Purchases of property and equipment	—			(496		)	(6,459		)	—		(6,955		)
Acquisition of businesses, net of cash received	—			(497		)	(73,811		)	—		(74,308		)
Purchases of intangible assets	—			291			(1,157		)	—		(866		)
Net cash (used in) provided by investing activities	313			(2,382		)	(81,427		)	—		(83,496		)
Cash flows from financing activities:
Repurchases of common stock and restricted stock	(2,302		)	—			—			—		(2,302		)
Issuance of common stock under employee stock purchase plan	126			—			—			—		126
Exercise of stock options	3,009			—			—			—		3,009
Dividends paid	(28,610		)	—			—			—		(28,610		)
Excess tax benefits from share-based compensation	2,104			—			—			—		2,104
Deferred payments for acquisitions	—			(656		)	(3,227		)	—		(3,883		)
Other	—			—			(180		)	—		(180		)
Intercompany	45,533			(60,376		)	14,843			—		—
Net cash (used in) provided by financing activities	19,860			(61,032		)	11,436			—		(29,736		)
Effect of exchange rate changes on cash and cash equivalents	(2		)	2,462			(4,571		)	—		(2,111		)
Net change in cash and cash equivalents	(6,003		)	(25,410		)	13,680			—		(17,733		)
Cash and cash equivalents at beginning of period	226,790			36,810			170,063			—		433,663
Cash and cash equivalents at end of period	$	220,787		$	11,400		$	183,743		$	—	$	415,930

-47-


17.	Subsequent Events

On July 12, 2016, in a cash transaction, the Company acquired certain assets of Dataprotect Cloud Limited, an Ireland- based provider of backup services.

On July 12, 2016, in a cash transaction, the Company acquired the entire issued capital of Integrated Global Concepts, Inc., a United States-based provider of fax services, which owned 935,231 shares of the Company's common stock. As a result, the Company's Board of Directors approved a reduction in the number of shares available for purchase under the Common Stock Repurchase Program by the same amount leaving 1,938,689 shares of Common Stock available for purchase under the program.

On July 15, 2016, in a cash transaction, the Company acquired all the entire issued capital of Frontsafe A/S, a Denmark based provider of backup services.

On August 2, 2016, the Company's Board of Directors approved a quarterly cash dividend of $0.3450 per share of common stock payable on September 1, 2016 to all stockholders of record as of the close of business on August 17, 2016.

-48-


Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Information

In addition to historical information, we have also made forward-looking statements in this report. These statements are based on our estimates and assumptions and are subject to risks and uncertainties. Forward-looking statements include the information concerning our possible or assumed future results of operations. Forward-looking statements also include those preceded or followed by the words "anticipates," "believes," "estimates," "hopes" or similar expressions. For those statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including but not limited to those discussed below, the risk factors discussed in Part II, Item 1A - "Risk Factors" of this Quarterly Report on Form 10-Q (if any) and in Part I, Item 1A - "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2015 (together, the "Risk Factors"), and the factors discussed in the section in this Quarterly Report on Form 10-Q entitled "Quantitative and Qualitative Disclosures About Market Risk." Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s opinions only as of the date hereof. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements. Readers should carefully review the Risk Factors and the risk factors set forth in other documents we file from time to time with the SEC.

Some factors that could cause actual results to differ materially from those anticipated in these forward-looking statements include, but are not limited to, our ability and intention to:


◦	Sustain growth or profitability, particularly in light of an uncertain U.S. or worldwide economy and the related impact on customer acquisition and retention rates, customer usage levels and credit and debit card payment declines;


◦	Maintain and increase our Cloud Services customer base and average revenue per user;


◦	Generate sufficient cash flow to make interest and debt payments and reinvest in our business, and pursue desired activities and businesses plans while satisfying restrictive covenants relating to debt obligations;


◦	Acquire businesses on acceptable terms and successfully integrate and realize anticipated synergies from such acquisitions;


◦	Continue to expand our businesses and operations internationally in the wake of numerous risks, including adverse currency fluctuations, difficulty in staffing and managing international operations, higher operating costs as a percentage of revenues or the implementation of adverse regulations;


◦	Maintain our financial position, operating results and cash flows in the event that we incur new or unanticipated costs or tax liabilities, including those relating to federal and state income tax and indirect taxes, such as sales, value-added and telecommunication taxes;


◦	Accurately estimate the assumptions underlying our effective worldwide tax rate;


◦	Continue to pay a comparable cash dividend on a quarterly basis;


◦	Maintain favorable relationships with critical third-party vendors whose financial condition will not negatively impact the services they provide;


◦	Create compelling digital media content causing increased traffic and advertising levels; additional advertisers or an increase in advertising spend; and effectively target digital media advertisements to desired audiences;


◦	Manage certain risks inherent to our business, such as costs associated with fraudulent activity, system failure or network security breach; effectively maintaining and managing our billing systems; time and resources required to manage our legal proceedings; or adhering to our internal controls and procedures;


◦	Compete with other similar providers with regard to price, service and functionality;


◦	Cost-effectively procure, retain and deploy large quantities of telephone numbers in desired locations in the United States and abroad;


◦	Achieve business and financial objectives in light of burdensome domestic and international telecommunications, Internet or other regulations including data privacy, security and retention;


◦	Successfully manage our growth, including but not limited to our operational and personnel-related resources, and integration of newly acquired businesses;


◦	Successfully adapt to technological changes and diversify services and related revenues at acceptable levels of financial return;


◦	Successfully develop and protect our intellectual property, both domestically and internationally, including our brands, patents, trademarks and domain names, and avoid infringing upon the proprietary rights of others; and


◦	Recruit and retain key personnel.

In addition, our financial results could be materially impacted by risks associated with new accounting pronouncements.

Overview

j2 Global, Inc., together with its subsidiaries ("j2 Global", the "Company", "our", "us" or "we"), is a leading provider of Internet services. Through our Business Cloud Services Division, we provide cloud services to businesses of all sizes, from individuals to enterprises, and license our intellectual property ("IP") to third parties. In addition, the Business Cloud Services Division includes our j2 Cloud Connect business which primarily focuses on our voice and fax products. Our Digital Media Division specializes in the technology and gaming markets, reaching in-market buyers and influencers in both the consumer and business-to-business spaces.

Our Business Cloud Services Division generates revenues primarily from customer subscription and usage fees and from IP licensing fees. Our Digital Media Division generates revenues from advertising, performance marketing and licensing fees.

In addition to growing our businesses organically, on a regular basis, we acquire businesses to grow our customer bases, expand and diversify our service offerings, enhance our technology and acquire skilled personnel.

Our consolidated revenues are currently generated from three basic business models, each with different financial profiles and variability. Our Business Cloud Services Division is driven primarily by subscription revenues that are relatively higher margin and stable and predictable from quarter-to-quarter with some seasonal weakness in the fourth quarter. The Business Cloud Services Division also includes the results of our IP licensing business, which can vary dramatically in both revenues and profitability from period-to-period. Our Digital Media Division is driven primarily by advertising revenues, has relatively higher sales and marketing expense and has seasonal strength in the fourth quarter. We continue to pursue additional acquisitions, which may include companies operating under business models that differ from those we operate under today. Such acquisitions could impact our consolidated profit margins and the variability of our revenues.

j2 Global was incorporated in 2014 as a Delaware corporation through the creation of a new holding company structure, and our Business Cloud Services segment, operated by our wholly-owned subsidiary, j2 Cloud Services, Inc., and its subsidiaries, was founded in 1995. We manage our operations through two business segments: Business Cloud Services and Digital Media. Information regarding revenue and operating income attributable to each of our reportable segments is included within Note 13 - Segment Information of the Notes to Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q.

-49-

Business Cloud Services Segment Performance Metrics

The following table sets forth certain key operating metrics for our Business Cloud Services segment as of and for the three and six months ended June 30, 2016 and 2015 (in thousands, except for percentages):



	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
Subscriber revenues:
Fixed	$	117,199		$	102,437		$	232,694		$	198,535
Variable	24,156			21,368			45,609			41,054
Total subscriber revenues	$	141,355		$	123,805		$	278,303		$	239,589
Other license revenues	1,105			1,383			2,296			3,660
Total revenues	$	142,460		$	125,188		$	280,599		$	243,249

Percentage of total subscriber revenues:
Fixed	82.9		%	82.7		%	83.6		%	82.9		%
Variable	17.1		%	17.3		%	16.4		%	17.1		%

Total revenues:
Number-based	$	92,592		$	88,946		$	182,559		$	174,723
Non-number-based	49,868			36,242			98,040			68,526
Total revenues	$	142,460		$	125,188		$	280,599		$	243,249

Average monthly revenue per Cloud Business Customer (APRU) ⁽¹⁾⁽²⁾	$	15.26		$	14.15
Cancel Rate⁽³⁾	2.2		%	1.9		%

⁽¹⁾

Quarterly ARPU is calculated using our standard convention of applying the average of the quarter's beginning and ending base to the total revenue for the quarter. We believe ARPU provides investors an understanding of the average monthly revenues we recognize associated with each Cloud Business Customer. As ARPU varies based on fixed subscription fee and variable usage components, we believe it can serve as a measure by which investors can evaluate trends in the types of services, levels of services and the usage levels of those services across our Cloud Business Customer base.


⁽²⁾	Cloud Business Customers is defined as paying direct inward dialing numbers for fax and voice services, and direct and resellers’ accounts for other services.

⁽³⁾

Cancel Rate is defined as cancels of small and medium business and individual Cloud Business Customers with greater than four months of continuous service (continuous service includes Cloud Business Customers administratively canceled and reactivated within the same calendar month), and enterprise Cloud Business Customers beginning with their first day of service. Calculated monthly and expressed as an average over the three months of the quarter.

Digital Media Segment Performance Metrics

The following table sets forth certain key operating metrics for our Digital Media segment for the three and six months ended June 30, 2016 and 2015 (in millions):



	Three Months Ended June 30,		Six Months Ended June 30,
	2016	2015	2016	2015
Visits	1,160	956	2,256	1,803
Page views	4,215	2,392	7,852	5,873

Sources: Google Analytics and Partner Platforms

-50-

Critical Accounting Policies and Estimates

In the ordinary course of business, we have made a number of estimates and assumptions relating to the reporting of results of operations and financial condition in the preparation of our financial statements. Actual results could differ significantly from those estimates under different assumptions and conditions. Our critical accounting policies are described in our 2015 Annual Report on Form 10-K filed with the SEC on February 29, 2016. During the three months ended June 30, 2016, there were no significant changes in our critical accounting policies and estimates.

Results of Operations for the Three and Six Months Ended June 30, 2016

Business Cloud Services Segment

Assuming a stable or improving economic environment, and, subject to our risk factors, we expect the revenue and profits as included in the results of operations below in our Business Cloud Services segment to continue for the foreseeable future (excluding the impact of acquisitions). The main focus of our Business Cloud Services offerings is to reduce or eliminate costs, increase sales and enhance productivity, mobility, business continuity and security of our customers as the technologies and devices they use evolve over time. As a result, we expect to continue to take steps to enhance our existing offerings and offer new services to continue to satisfy the evolving needs of our customers. Through our IP licensing operations, which are included in the Business Cloud Services segment, we seek to make our IP available for license to third parties, and we expect to continue to attempt to obtain additional IP through a combination of acquisitions and internal development in an effort to increase available licensing opportunities and related revenues.

We expect acquisitions to remain an important component of our strategy and use of capital in this segment; however, we cannot predict whether our current pace of acquisitions will remain the same within this segment. In a given period, we may close greater or fewer acquisitions than in prior periods or acquisitions of greater or lesser significance than in prior periods. Moreover, future acquisitions of businesses within this segment but with different business models may impact the segment's overall profit margins. Also, as IP licensing often involves litigation, the timing of licensing transactions is unpredictable and can and does vary significantly from period-to-period. This variability can cause the overall segment's financial results to materially vary from period-to-period.

Digital Media Segment

Assuming a stable or improving economic environment, and, subject to our risk factors, we expect the revenue and profits in our Digital Media segment to improve over the next several quarters as we integrate our recent acquisitions and over the longer term as advertising transactions continue to shift from offline to online. The main focus of our advertising programs is to provide relevant and useful advertising to visitors to our websites and those included within our advertising networks, reflecting our commitment to constantly improve their overall web experience. As a result, we expect to continue to take steps to improve the relevance of the ads displayed on our websites and those included within our advertising networks.

The operating margin we realize on revenues generated from ads placed on our websites is significantly higher than the operating margin we realize from revenues generated from those placed on third-party websites. Growth in advertising revenues from our websites has generally exceeded that from third-party websites. This trend has had a positive impact on our operating margins, and we expect that this will continue for the foreseeable future. However, the trend in advertising spend is shifting to mobile devices and other newer advertising formats which generally experience lower margins than those from desktop computers and tablets. We expect this trend to continue to put pressure on our margins.

j2 Global Consolidated

We anticipate that the stable revenue trend in our Business Cloud Services segment combined with the improving revenue and profits in our Digital Media segment will result in overall improved revenue and profits for j2 Global on a consolidated basis, excluding the impact of any future acquisitions and revenues associated with licensing our IP which can vary dramatically from period-to-period.

-51-

Revenues



(in thousands, except percentages)	Three Months Ended June 30,		Percentage Change	Six Months Ended June 30,		Percentage Change
	2016	2015		2016	2015
Revenues	$211,800	$176,038	20%	$412,302	$337,291	22%

Our revenues consist of revenues from our Business Cloud Services segment and from our Digital Media segment. Business Cloud Services revenues primarily consist of revenues from “fixed” customer subscription revenues and “variable” revenues generated from actual usage of our services. We also generate Business Cloud Services revenues from IP licensing. Digital Media revenues primarily consist of advertising revenues, fees paid for generating business leads, and licensing and sale of editorial content and trademarks.

Our revenues in 2016 have increased over the comparable three and six month period of 2015 primarily due to a combination of acquisitions and organic growth within both the Digital Media and Business Cloud Services segments.

Cost of Revenues



(in thousands, except percentages)	Three Months Ended June 30,		Percentage Change	Six Months Ended June 30,		Percentage Change
	2016	2015		2016	2015
Cost of revenue	$35,591	$29,494	21%	$69,878	$57,681	21%
As a percent of revenue	17%	17%		17%	17%

Cost of revenues is primarily comprised of costs associated with data and voice transmission, numbers, network operations, customer service, editorial and production costs, online processing fees and equipment depreciation. The increase in cost of revenues for the three and six months ended June 30, 2016 was primarily due to an increase in costs associated with businesses acquired in and subsequent to the second quarter 2015 that resulted in additional network and phone operations, editorial and production costs and depreciation.

Operating Expenses

Sales and Marketing.



(in thousands, except percentages)	Three Months Ended June 30,		Percentage Change	Six Months Ended June 30,		Percentage Change
	2016	2015		2016	2015
Sales and Marketing	$48,617	$40,421	20%	$96,729	$78,011	24%
As a percent of revenue	23%	23%		23%	23%

Our sales and marketing costs consist primarily of Internet-based advertising, sales and marketing, personnel costs and other business development-related expenses. Our Internet-based advertising relationships consist primarily of fixed cost and performance-based (cost-per-impression, cost-per-click and cost-per-acquisition) advertising relationships with an array of online service providers. Advertising cost for the three months ended June 30, 2016 was $22.6 million (primarily consists of $15.0 million of third-party advertising costs and $5.9 million of personnel costs) compared to 2015 of $16.7 million (primarily consists of $11.5 million third-party advertising costs and $5.2 million personnel costs). Advertising cost for the six months ended June 30, 2016 was $46.1 million (primarily consists of $31.1 million of third-party advertising costs and $11.8 million of personnel costs) compared to 2015 of $32.3 million (primarily consists of $21.5 million third-party advertising costs and $10.6 million personnel costs). The increase in sales and marketing expenses for the three and six months ended June 30, 2016 versus the prior comparable period was primarily due to increased personnel costs and advertising associated with acquisitions within the Business Cloud Services and Digital Media segments, most notably Offers.com, which was acquired in December 2015.

-52-

Research, Development and Engineering.



(in thousands, except percentages)	Three Months Ended June 30,		Percentage Change	Six Months Ended June 30,		Percentage Change
	2016	2015		2016	2015
Research, Development and Engineering	$9,213	$8,969	3%	$18,201	$17,415	5%
As a percent of revenue	4%	5%		4%	5%

Our research, development and engineering costs consist primarily of personnel-related expenses. The increase in research, development and engineering costs for the three and six months ended June 30, 2016 versus the prior comparable period was primarily due to additional personnel costs associated with acquisitions within the Business Cloud Services and Digital Media segments and additional expenses for professional services.

General and Administrative.



	Three Months Ended June 30,		Percentage Change	Six Months Ended June 30,		Percentage Change
	2016	2015		2016	2015
General and Administrative	$59,434	$47,088	26%	$115,211	$93,588	23%
As a percent of revenue	28%	27%		28%	28%

Our general and administrative costs consist primarily of personnel-related expenses, depreciation and amortization, changes in the fair value associated with contingent consideration, share-based compensation expense, bad debt expense, professional fees, taxes and insurance costs. The increase in general and administrative expense for the three and six months ended June 30, 2016 versus the prior comparable period was primarily due to additional amortization of intangible assets, an increase in the fair value associated with contingent consideration of certain acquisitions within the Digital Media segment, personnel costs relating to businesses acquired in and subsequent to the second quarter 2015 and bad debt expense; partially offset by a decrease in indirect taxes.

Share-Based Compensation

The following table represents share-based compensation expense included in cost of revenues and operating expenses in the accompanying condensed consolidated statements of income for the three months ended June 30, 2016 and 2015 (in thousands):



	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Cost of revenues	$	103	$	91	$	198	$	174
Operating expenses:
Sales and marketing	434		603		965		1,187
Research, development and engineering	221		213		428		408
General and administrative	2,681		2,261		4,657		4,404
Total	$	3,439	$	3,168	$	6,248	$	6,173

Non-Operating Income and Expenses

Interest expense, net. Our interest expense, net is generated primarily from interest expense due to outstanding debt; partially offset by interest income earned on cash, cash equivalents and short-term and long-term investments. Interest expense, net was $10.3 million and $10.9 million for the three months ended June 30, 2016 and 2015, respectively, and $20.5 million and $21.2 million for the six months ended June 30, 2016 and 2015, respectively. The decrease in interest expense, net for the three and six month period ended June 30, 2016 was primarily due to lower interest on transaction-based taxes and additional interest income.

-53-

Other expense (income), net. Our other expense (income), net is generated primarily from miscellaneous items and gain or losses on currency exchange and sale of investments. Other expense (income), net was $(0.2) million and $0.1 million for the three months ended June 30, 2016 and 2015, respectively, and $(0.1) million and $(0.7) million for the six months ended June 30, 2016 and 2015, respectively. The variance between the three and six months ended June 30, 2016 and 2015 was primarily due to gains or losses on currency exchanges.

Income Taxes

Our effective tax rate is based on pre-tax income, statutory tax rates, tax regulations (including those related to transfer pricing) and different tax rates in the various jurisdictions in which we operate. The tax bases of our assets and liabilities reflect our best estimate of the tax benefits and costs we expect to realize. When necessary, we establish valuation allowances to reduce our deferred tax assets to an amount that will more likely than not be realized.

Provision for income taxes amounted to $15.1 million and $0.2 million for the three months ended June 30, 2016 and 2015, respectively and $28.1 million and $9.3 million for the six months ended June 30, 2016, respectively. Our effective tax rate was 30.9% and 0.5% for the three months ended June 30, 2016 and 2015, respectively and 30.6% and 13.3% for the six months ended June 30, 2016 and 2015, respectively.

The increase in our effective income tax rate for the three months and six months ended June 30, 2016 was primarily attributable to the following:


1.	a reversal of uncertain tax positions resulting from a 2015 settlement with the Internal Revenue Service for our 2009 and 2010 tax years;


2.	an increase in the year over year amount accrued for our uncertain tax positions; and


3.	a decrease in the foreign tax credit generated for 2016.

Significant judgment is required in determining our provision for income taxes and in evaluating our tax positions on a worldwide basis. We believe our tax positions, including intercompany transfer pricing policies, are consistent with the tax laws in the jurisdictions in which we conduct our business. Certain of these tax positions have in the past been, and are currently being, challenged, and this may have a significant impact on our effective tax rate if our tax reserves are insufficient.

Segment Results

Our business segments are based on the organization structure used by management for making operating and investment decisions and for assessing performance. Our reportable business segments are: (i) Business Cloud Services; and (ii) Digital Media.

We evaluate the performance of our operating segments based on segment revenues, including both external and inter-segment net sales, and segment operating income. We account for inter-segment sales and transfers based primarily on standard costs with reasonable mark-ups established between the segments. Identifiable assets by segment are those assets used in the respective reportable segment's operations. Corporate assets consist of cash and cash equivalents, deferred income taxes and certain other assets. All significant inter-segment amounts are eliminated to arrive at our consolidated financial results.

-54-

Revenues

The following table presents our revenues by source as a percentage of total revenues for the three and six months ended June 30, 2016 and 2015:



	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Business Cloud Services revenues:
Fax and Voice	43.8	%	50.7	%	44.4	%	52.0	%
Other	23.5	%	20.4	%	23.6	%	20.1	%
Total Business Cloud Services revenues:	67.3	%	71.1	%	68.0	%	72.1	%
Digital Media revenues:
Media	32.7	%	28.9	%	32.0	%	27.9	%
Total revenues	100.0	%	100.0	%	100.0	%	100.0	%

Business Cloud Services

The following segment results are presented for the three and six months ended June 30, 2016 and 2015 (in thousands):



	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
External net sales	$	142,460	$	125,188	$	280,599	$	243,249
Inter-segment net sales	—		—		—		—
Segment net sales	142,460		125,188		280,599		243,249
Cost of revenues	30,030		24,477		59,011		48,310
Gross profit	112,430		100,711		221,588		194,939
Operating expenses	59,957		48,381		118,838		95,591
Segment operating income	$	52,473	$	52,330	$	102,750	$	99,348

Segment net sales of $142.5 million for the three months ended June 30, 2016 increased $17.3 million, or 13.8%, and segment net sales of $280.6 million for the six months ended June 30, 2016 increased $37.4 million, or 15.4%, from the prior comparable periods primarily due to business acquisitions.

Segment gross profit of $112.4 million for the three months ended June 30, 2016 increased $11.7 million and segment gross profit of $221.6 million for the six months ended June 30, 2016 increased $26.6 million from the prior comparable periods primarily due to business acquisitions.

Segment operating expenses of $60.0 million for the three months ended June 30, 2016 increased $11.6 million and segment operating expenses of $118.8 million for the six months ended June 30, 2016 increased $23.2 million from the prior comparable periods primarily due to (a) additional amortization of intangible assets and salary costs associated with businesses acquired in and subsequent to the prior comparable period; (b) additional business taxes; and (c) an increase in bad debt expense. As a result of these factors, segment operating income of $52.5 million for the three months ended June 30, 2016 increased $0.1 million, or 0.3%, and segment operating income of $102.8 million for the six months ended June 30, 2016 increased $3.4 million, or 3.4% from the prior comparable periods. Our Business Cloud Services segment consists of several services which have similar economic characteristics, including the nature of the services and their production processes, the type of customers, as well as the methods used to distribute these services.

-55-

We group these services into three main categories based on the similarities of these services: Cloud Connect, Other Cloud Services and Intellectual Property. Cloud Connect consists of our Fax and Voice services and Other Cloud Services consist of Backup, Email Security, Email Marketing and Web Hosting.



	Three Months Ended June 30, 2016							Six Months Ended June 30, 2016
	Revenue		Depreciation and Amortization		Operating Income⁽⁴⁾			Revenue		Depreciation and Amortization		Operating Income⁽⁴⁾

Cloud Connect (Fax/Voice)	$	92,858	$	7,575	$	42,574		$	183,102	$	13,145	$	83,094
Cloud Services	48,509		12,184		10,650			95,228		22,501		21,624
Intellectual Property	1,093		1,492		(751		)	2,269		3,106		(1,968		)
Total	$	142,460	$	21,251	$	52,473		$	280,599	$	38,752	$	102,750



	Three Months Ended June 30, 2015							Six Months Ended June 30, 2015
	Revenue		Depreciation and Amortization		Operating Income⁽⁴⁾			Revenue		Depreciation and Amortization		Operating Income⁽⁴⁾

Cloud Connect (Fax/Voice)	$	89,273	$	5,709	$	45,549		$	175,477	$	10,979	$	88,563
Cloud Services	34,632		7,155		7,794			64,231		13,779		12,349
Intellectual Property	1,283		1,894		(1,013		)	3,541		4,014		(1,564		)
Total	$	125,188	$	14,758	$	52,330		$	243,249	$	28,772	$	99,348

⁽⁴⁾ During 2016, the Company determined certain personnel and third-party costs were directly attributable to a particular segment. As a result, these costs were no longer classified as Global operating costs in 2016. If such costs in the prior period were classified consistent with the 2016 presentation, the operating income for Cloud Connect and Other Cloud Services would have been $39.4 million and $6.3 million, respectively, for the three months ended June 30, 2015 and $79.0 million and $9.2 million, respectively, for the six months ended June 30, 2015.

-56-

Digital Media

The following segment results are presented for the three and six months ended June 30, 2016 and 2015 (in thousands):



	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
External net sales	$	69,340	$	50,850	$	131,703	$	94,042
Inter-segment net sales	45		57		91		122
Segment net sales	69,385		50,907		131,794		94,164
Cost of revenues	5,560		5,017		10,867		9,371
Gross profit	63,825		45,890		120,927		84,793
Operating expenses	52,275		35,969		101,644		70,704
Segment operating income	$	11,550	$	9,921	$	19,283	$	14,089

Segment net sales of $69.4 million for the three months ended June 30, 2016 increased $18.5 million, or 36.3%, and segment net sales of $131.7 million for the six months ended June 30, 2016 increased $37.6 million, or 40.0%, from the prior comparable periods primarily due to organic growth supplemented by business acquisitions subsequent to the prior comparable periods which are not fully reflected in the prior comparable period results.

Segment gross profit of $63.8 million for the three months ended June 30, 2016 increased $17.9 million and segment gross profit of $120.9 million for the six months ended June 30, 2016 increased $36.1 million from the prior comparable periods primarily due to an increase in net sales between the period.

Segment operating expenses of $52.3 million for the three months ended June 30, 2016 increased $16.3 million and segment operating expenses of $101.6 million for the six months ended June 30, 2016 increased $30.9 million from the prior comparable periods primarily due to business acquisitions subsequent to the prior comparable period.

As a result of these factors, segment operating income of $11.6 million for the three months ended June 30, 2016 increased $1.6 million or 16.4% and segment operating income of $19.3 million for the six months ended June 30, 2016 increased $5.2 million or 36.9% from the prior comparable periods.

-57-

Liquidity and Capital Resources

Cash and Cash Equivalents and Investments

At June 30, 2016, we had cash and investments of $407.2 million compared to $413.7 million at December 31, 2015. The decrease in cash and investments resulted primarily from business acquisitions, dividends and interest paid, and repurchase of stock, partially offset by cash provided by operations and the exercise of stock options. At June 30, 2016, cash and investments consisted of cash and cash equivalents of $313.8 million, short-term investments of $50.9 million and long-term investments of $42.5 million. Our investments are comprised primarily of readily marketable corporate and governmental debt securities, money-market accounts and time deposits. For financial statement presentation, we classify our investments primarily as available-for-sale; thus, they are reported as short and long-term based upon their maturity dates. Short-term investments mature within one year of the date of the financial statements and long-term investments mature one year or more from the date of the financial statements. Short-term investments include restricted balances which the Company may not liquidate until maturity, generally within 12 months. Restricted balances included in short-term investments were $0.1 million at June 30, 2016. We retain a substantial portion of our cash and investments in foreign jurisdictions for future reinvestment. As of June 30, 2016, cash and investments held within foreign and domestic jurisdictions were $164.1 million and $243.1 million, respectively. If we were to repatriate funds held within foreign jurisdictions, we would incur U.S. income tax on the repatriated amount at the federal statutory rate of 35% and the state statutory rate where applicable, net of a credit for foreign taxes paid on such amounts.

On February 10, 2016, the Company's Board of Directors declared a quarterly cash dividend of $0.3250 per share of common stock payable on March 10, 2016 to all stockholders of record as of the close of business on February 23, 2016. On May 5, 2016, the Company's Board of Directors declared a quarterly cash dividend of $0.3350 per share of common stock payable on June 2, 2016 to all stockholders of record as of the close of business on May 18, 2016.

We currently anticipate that our existing cash and cash equivalents and short-term investment balances and cash generated from operations will be sufficient to meet our anticipated needs for working capital, capital expenditure, stock repurchases and cash dividends for at least the next 12 months.

Cash Flows

Our primary sources of liquidity are cash flows generated from operations, together with cash and cash equivalents and short-term investments. Net cash provided by operating activities was $132.1 million and $97.6 million for the six months ended June 30, 2016 and 2015, respectively. Our operating cash flows resulted primarily from cash received from our customers offset by cash payments we made to third parties for their services, employee compensation and interest payments associated with our debt. The increase in our net cash provided by operating activities in 2016 compared to 2015 was primarily attributable to increased depreciation and amortization, increased liability for uncertain tax positions and income tax payable; partially offset by a decrease in accounts payable and accrued expense balances. Certain taxes are prepaid during the year and are included within prepaid expenses and other current assets on the condensed consolidated balance sheet. Our prepaid taxes were $9.4 million and $11.6 million at June 30, 2016 and December 31, 2015, respectively. Our cash and cash equivalents and short-term investments were $364.7 million and $335.2 million at June 30, 2016 and December 31, 2015, respectively.

Net cash used in investing activities was $(22.3) million and $(83.5) million for the six months ended June 30, 2016 and 2015, respectively. For the six months ended June 30, 2016, net cash used in investing activities was primarily attributable to business acquisitions, the purchase of available-for-sale investments, property and equipment and intangible assets; partially offset by the maturity of available-for-sale investments. For the six months ended June 30, 2015, net cash used in investing activities was primarily attributable to business acquisitions, the purchase of available-for-sale investments, property and equipment and intangible assets; partially offset by the sale of available-for-sale investments. The decrease in our net cash used in investing activities in 2016 compared to 2015 was primarily attributable to additional sales of available-for-sale investments.

Net cash used in financing activities was $(49.2) million and $(29.7) million for the six months ended June 30, 2016 and 2015, respectively. For the six months ended June 30, 2016, net cash used in financing activities was primarily attributable to dividends paid, business acquisitions and repurchases of stock; partially offset by the exercise of stock options and excess tax benefit from share-based compensation. For the six months ended June 30, 2015, net cash used in financing activities was primarily attributable to dividends paid, business acquisition and repurchase of stock; partially offset by excess tax benefit from share-based compensation. The change in net cash used in financing activities in 2016 compared to 2015 was primarily attributable to additional deferred payments for acquisitions and dividends paid.

-58-

Stock Repurchase Program

In February 2012, the Company's Board of Directors approved a program authorizing the repurchase of up to five million shares of our common stock through February 20, 2013 (the "2012 Program") which was subsequently extended through February 20, 2017. During the six month period ended June 30, 2016, we repurchased zero shares under this program. Cumulatively at June 30, 2016, 2.1 million shares were repurchased at an aggregate cost of $58.6 million (including an immaterial amount of commission fees).

Contractual Obligations and Commitments

The following table summarizes our contractual obligations and commitments as of June 30, 2016:



	Payments Due in (in thousands)
Contractual Obligations	2016		2017		2018		2019		2020		Thereafter		Total
Long-term debt - principal (a)	$	—	$	—	$	—	$	—	$	250,000	$	402,500	$	652,500
Long-term debt - interest (b)	16,541		33,081		33,081		33,081		32,803		6,541		155,128
Operating leases (c)	5,063		9,349		8,854		7,434		4,603		13,040		48,343
Capital leases (d)	49		50		9		—		—		—		108
Telecom services and co-location facilities (e)	20,189		3,253		1,953		282		16		—		25,693
Holdback payment (f)	16,437		1,602		—		—		—		—		18,039
Other (g)	379		42		—		—		—		—		421
Total	$	58,658	$	47,377	$	43,897	$	40,797	$	287,422	$	422,081	$	900,232


(a)	These amounts represent principal on long-term debt.


(b)	These amounts represent interest on long-term debt.


(c)	These amounts represent undiscounted future minimum rental commitments under noncancellable operating leases.


(d)	These amounts represent undiscounted future minimum rental commitments under noncancellable capital leases.


(e)	These amounts represent service commitments to various telecommunication providers.


(f)	These amounts represent the holdback amounts in connection with certain business acquisitions.


(g)	These amounts represent certain consulting and Board of Directors fee arrangements, software license commitments and others.

As of June 30, 2016, our liability for uncertain tax positions was $40.4 million. The future payments related to uncertain tax positions have not been presented in the table above due to the uncertainty of the amounts and timing of cash settlement with such authorities.

We have not presented the contingent consideration in the table above due to the uncertainty of the amounts and the timing of cash settlements.

Off-Balance Sheet Arrangements

We are not party to any material off-balance sheet arrangements.

-59-


Item 3.	Quantitative and Qualitative Disclosures About Market Risk

The following discussion of the market risks we face contains forward-looking statements. Forward-looking statements are subject to risks and uncertainties. Actual results could differ materially from those discussed in forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's opinions only as of the date hereof. j2 Global undertakes no obligation to revise or publicly release the results of any revision to these forward-looking statements. Readers should carefully review the risk factors described in this document and in the other documents incorporated by reference herein, including our Annual Report on Form 10-K for the year ended December 31, 2015 as well as in other documents we file from time to time with the SEC, including the Quarterly Reports on Form 10-Q and any Current Reports on Form 8-K filed or to be filed by us in 2016.

Interest Rate Risk

Our exposure to market risk for changes in interest rates relates primarily to our investment portfolio. We maintain an investment portfolio of various holdings, types and maturities. The primary objectives of our investment activities are to preserve our principal while at the same time maximizing yields without significantly increasing risk. To achieve these objectives, we maintain our portfolio of cash equivalents and investments in a mix of instruments that meet high credit quality standards, as specified in our investment policy. Our cash and cash equivalents are not subject to significant interest rate risk due to the short maturities of these instruments. As of June 30, 2016, the carrying value of our cash and cash equivalents approximated fair value. Our return on these investments is subject to interest rate fluctuations.

Our short and long-term investments are comprised primarily of readily marketable corporate and governmental debt securities, corporate commercial paper, time deposits and certificates of deposits. Investments in fixed rate interest earning instruments carry a degree of interest rate risk. Fixed rate securities may have their fair market value adversely impacted due to a rise in interest rates. Our interest income is sensitive to changes in the general level of U.S. and foreign countries’ interest rates. Due in part to these factors, our future investment income may fall short of expectations due to changes in interest rates.

As of June 30, 2016, we had investments in debt securities with effective maturities greater than one year of approximately $42.5 million. Such investments had a weighted average yield of approximately 2.3%. As of June 30, 2016 and December 31, 2015, we had cash and cash equivalent investments primarily in money market funds with maturities of 90 days or less of $313.8 million and $255.5 million, respectively. Based on our cash and cash equivalents and short and long-term investment holdings as of June 30, 2016, an immediate 100 basis point decline in interest rates would decrease our annual interest income to approximately $3.1 million.

We cannot ensure that future interest rate movements will not have a material adverse effect on our future business, prospects, financial condition, operating results and cash flows. To date, we have not entered into interest rate hedging transactions to control or minimize certain of these risks.

Foreign Currency Risk

We conduct business in certain foreign markets, primarily in Canada, Australia and the European Union. Our principal exposure to foreign currency risk relates to investment and inter-company debt in foreign subsidiaries that transact business in functional currencies other than the U.S. Dollar, primarily the Australian Dollar, the Canadian Dollar, the Euro, the Hong Kong Dollar, the Japanese Yen, the New Zealand Dollar, the Norwegian Kroner and the British Pound Sterling. If we are unable to settle our short-term inter-company debts in a timely manner, we remain exposed to foreign currency fluctuations.

As we expand our international presence, we become further exposed to foreign currency risk by entering new markets with additional foreign currencies. The economic impact of currency exchange rate movements is often linked to variability in real growth, inflation, interest rates, governmental actions and other factors. These changes, if material, could cause us to adjust our financing and operating strategies.

As currency exchange rates change, translation of the income statements of the international businesses into U.S. Dollars affects year-over-year comparability of operating results, the impact of which is immaterial to the comparisons set forth in this Quarterly Report on Form 10-Q.

Historically, we have not hedged translation risks because cash flows from international operations were generally reinvested locally; however, we may do so in the future. Our objective in managing foreign exchange risk is to minimize the potential exposure to changes that exchange rates might have on earnings, cash flows and financial position.

-60-

Foreign exchange gains and (losses) were not material to our earnings, amounting to approximately $(0.1) million and $(0.1) million, for the three months ended June 30, 2016 and 2015, respectively, and $(0.9) million and $0.7 million, for the six months ended June 30, 2016 and 2015. Cumulative translation adjustments included in other comprehensive income amounted to approximately $(12.7) million and $7.1 million, net of tax, for the three months ended June 30, 2016 and 2015, respectively, and $(9.2) million and $(8.1) million, net of tax, for the six months ended June 30, 2016 and 2015, respectively.

We currently do not have derivative financial instruments for hedging, speculative or trading purposes and therefore are not subject to such hedging risk. However, we may in the future engage in hedging transactions to manage our exposure to fluctuations in foreign currency exchange rates.

-61-


Item 4.	Controls and Procedures


(a)	Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) that are designed to ensure that information required to be disclosed in the Company's reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to the Company's management, including the principal executive officer and the principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

As of the end of the period covered by this report, j2 Global's management, with the participation of Nehemia Zucker, our principal executive officer, and R. Scott Turicchi, our principal financial officer, carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon that evaluation, Mr. Zucker and Mr. Turicchi concluded that these disclosure controls and procedures were effective as of the end of the period covered in this Quarterly Report on Form 10-Q.


(b)	Changes in Internal Controls

There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) which occurred during the second quarter ended June 30, 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

-62-

PART II. OTHER INFORMATION


Item 1.	Legal Proceedings

See Note 8 – Commitments and Contingencies of the Notes to Financial Statements (Part I, Item 1) for information regarding certain legal proceedings in which we are involved.


Item 1A.	Risk Factors

In addition to the other information set forth in this report, before deciding to invest in j2 Global or to maintain or increase your investment, you should carefully consider the factors discussed in Part I, Item 1A "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2015 (the "10-K Risk Factors") as well as in other documents we file from time to time with the SEC, including the Quarterly Reports on Form 10-Q and any Current Reports on Form 8-K filed or to be filed by us in 2016. If any of these risks occur, our business, prospects, financial condition, operating results and cash flows could be materially adversely affected. The 10-K Risk Factors are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations. There have been no material changes from the 10-K Risk Factors, except for the risks described in subsequently filed Quarterly Reports on Form 10-Q.


Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds


(a)	Unregistered Sales of Equity Securities

None.


(b)	Issuer Purchases of Equity Securities

Effective February 15, 2012, the Company's Board of Directors approved a program authorizing the repurchase of up to five million shares of our common stock through February 20, 2013 (the "2012 Program") which was subsequently extended through February 20, 2017. During the six month period ended June 30, 2016, we repurchased zero shares under this program. Cumulatively at June 30, 2016, 2.1 million shares were repurchased at an aggregate cost of $58.6 million (including an immaterial amount of commission fees).

The following table details the repurchases that were made under and outside the 2012 Program during the three months ended June 30, 2016:



Period	Total Number of Shares Purchased (1)	Average Price Paid Per Share		Total Number of Shares Purchased as Part of a Publicly Announced Program	Maximum Number of Shares That May Yet Be Purchased Under the Publicly Announced Program
April 1, 2016 - April 30, 2016	—	$	—	—	2,873,920
May 1, 2016 - May 31, 2016	24,314	$	64.57	—	2,873,920
June 1, 2016 - June 30, 2016	—	$	—	—	2,873,920
Total	24,314			—	2,873,920


(1)	All shares purchased were surrendered to the Company to pay the exercise price and/or to satisfy tax withholding obligations in connection with employee stock options and/or the vesting of restricted stock issued to employees.


Item 3.	Defaults Upon Senior Securities

None.


Item 4.	Mine Safety Disclosures

Not Applicable.


Item 5.	Other Information

None.

-63-


Item 6.	Exhibits






31.1	Rule 13a-14(a) Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2	Rule 13a-14(a) Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1	Section 1350 Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2	Section 1350 Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101	The following financial information from j2 Global, Inc.'s Quarterly Report on Form 10-Q for the quarter ended June 30, 2016, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets as of June 30, 2016 and December 31, 2015, (ii) Condensed Consolidated Statements of Income for the three and six months ended June 30, 2016 and 2015, (iii) Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2016 and 2015, (iv) Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2016 and 2015, and (v) the Notes to Condensed Consolidated Financial Statements.

-64-

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



		j2 Global, Inc.



Date:	August 8, 2016	By:	/s/ NEHEMIA ZUCKER
			Nehemia Zucker
			Chief Executive Officer
			(Principal Executive Officer)




Date:	August 8, 2016	By:	/s/ R. SCOTT TURICCHI
			R. Scott Turicchi
			President and Chief Financial Officer
			(Principal Financial Officer)




Date:	August 8, 2016	By:	/s/ STEVE P. DUNN
			Steve P. Dunn
			Chief Accounting Officer

-65-

INDEX TO EXHIBITS



Exhibit Number	Description



31.1	Rule 13a-14(a) Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2	Rule 13a-14(a) Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1	Section 1350 Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2	Section 1350 Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101	The following financial information from j2 Global, Inc.'s Quarterly Report on Form 10-Q for the quarter ended June 30, 2016, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets as of June 30, 2016 and December 31, 2015, (ii) Condensed Consolidated Statements of Income for the three and six months ended June 30, 2016 and 2015, (iii) Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2016 and 2015, (iv) Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2016 and 2015, and (v) the Notes to Condensed Consolidated Financial Statements.

-66-