Segment and Geographic Information

3 Months Ended

Mar. 31, 2020

Segments, Geographical Areas [Abstract]

Segment Information

In accordance with ASC Topic 280, Segment Reporting: (Topic 280), the Company’s businesses are based on the organizational structure used by the chief operating decision maker (“CODM”) for making operating and investment decisions and for assessing performance. The CODM views the Company as two businesses: Cloud Services and Digital Media. However, in accordance with the aggregation criteria within ASC Topic 280, J2 Global’s operating segments have been aggregated into three reportable segments: (i) Fax and Martech (formerly Email Marketing); (ii) Voice, Backup, Security, and Consumer Privacy and Protection; and (iii) Digital Media. In connection with the Highwinds Capital, Inc. and Cloak Holdings, LLC acquisition in the second quarter of 2019, the Company renamed its Voice, Backup and Security reportable segment to include its newly acquired consumer privacy and protection business, now the Voice, Backup, Security and Consumer Privacy and Protection segment.

The Company’s Cloud Services business is driven primarily by subscription revenues that are relatively higher margin, stable and predictable from quarter to quarter with some seasonal weakness in the fourth quarter. The Company’s Digital Media business is driven primarily by advertising and subscription revenues, has relatively higher sales and marketing expense and has seasonal strength in the fourth quarter.

The accounting policies of the businesses are the same as those described in the Company’s Annual Report on Form 10-K filed with the SEC on March 2, 2020. The Company evaluates performance based on revenue, gross margin and profit or loss from operations before income taxes, not including nonrecurring gains and losses and foreign exchange gains and losses.

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


	Three Months Ended March 31,
	2020		2019
Revenue by reportable segment:
Fax and Martech	$	94,667	$	93,283
Voice, Backup, Security, and CPP	75,117		58,962
Cloud Services Total	169,784		152,245

Digital Media	162,691		147,683
Elimination of inter-segment revenues	(83)		(36)
Total segment revenues	332,392		299,892
Corporate ⁽¹⁾	1		1
Total revenues	$	332,393	$	299,893

Gross profit by reportable segment:
Fax and Martech	$	82,166	$	78,719
Voice, Backup, Security, and CPP	49,258		41,043
Cloud Services Total	131,424		119,762

Digital Media	141,920		129,153
Elimination of inter-segment gross profit	(83)		(36)
Total segment gross profit	273,261		248,879
Corporate ⁽¹⁾	1		1
Total gross profit	$	273,262	$	248,880

Direct costs by reportable segment ⁽²⁾:
Fax and Martech	$	31,714	$	34,102
Voice, Backup, Security, and CPP	43,976		27,127
Cloud Services Total	75,690		61,229

Digital Media	136,968		130,167
Elimination of inter-segment direct costs	(83)		(36)
Total segment direct costs	212,575		191,360
Corporate ⁽¹⁾	5,440		6,658
Total direct costs⁽²⁾	$	218,015	$	198,018

Operating income by reportable segment:
Fax and Martech	$	50,452	$	44,617
Voice, Backup, Security, and CPP	5,282		13,916
Cloud Services Total	55,734		58,533

Digital Media	4,952		(1,014)
Total segment operating income	60,686		57,519
Corporate⁽¹⁾	(5,439)		(6,657)
Total income from operations	$	55,247	$	50,862

⁽¹⁾ Corporate includes costs associated with general and administrative and other expenses that are managed on a global basis and that are not directly attributable to any particular segment.
⁽²⁾Direct costs for each segment include 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.

The CODM does not use Balance Sheet and Cash Flow information in connection with operating and investment decisions other than as presented for Cloud Services and Digital Media. Accordingly, the following segment information is presented for Cloud Services and Digital Media.


	March 31, 2020		December 31, 2019
Assets:
Cloud Services	$	1,405,497	$	1,466,969
Digital Media	1,462,212		1,561,024
Total assets from Cloud Services and Digital Media	2,867,709		3,027,993
Corporate	501,184		477,853
Total assets	$	3,368,893	$	3,505,846


	Three Months Ended March 31,
	2020		2019
Capital expenditures:
Cloud Services	$	11,248	$	3,502
Digital Media	15,637		9,029
Total capital expenditures from Cloud Services and Digital Media	26,885		12,531
Corporate	—		—
Total capital expenditures	$	26,885	$	12,531


	Three Months Ended March 31,
	2020		2019
Depreciation and amortization:
Cloud Services	$	20,839	$	13,349
Digital Media	32,556		35,179
Total depreciation and amortization from Cloud Services and Digital Media	53,395		48,528
Corporate	585		681
Total depreciation and amortization	$	53,980	$	49,209

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 March 31,
	2020		2019
Revenues:
United States	$	270,309	$	231,343
Canada	16,570		17,053
Ireland	13,003		15,623
All other countries	32,511		35,874
	$	332,393	$	299,893


	March 31, 2020		December 31, 2019
Long-lived assets:
United States	$	688,360	$	701,580
All other countries	78,504		76,927
Total	$	766,864	$	778,507