CTCT (MM)

j2 Global Inc. (JCOM) reported strong financial results for the fourth quarter of 2013. Net profit significantly outpaced the Zacks Consensus Estimate, whereas total revenue marginally missed the same. However, the top line surged significantly over the prior-year quarter.

More importantly, management provided an extremely strong outlook for fiscal 2014. As a result, in the aftermarket trade in Nasdaq, the stock price of j2 Global soared $9.16 (19.56%) to $56.

Additionally, the company’s board of directors declared a 2.9% sequential increase in its quarterly dividend, raising the figure to 26.25 cents per share from 25.5 cents. This is in sync with j2 Global’s streak of dividend increases for the last ten quarters. The new dividend rate implies a 13% year-over-year increase.

The board also extended the its one-year five million share repurchase program set to expire on Feb 20, 2014, by one more year.

Quarterly GAAP net income came in at $20.8 million or 44 cents per share compared with $30.2 million or 65 cents per share in the year-ago quarter. Fourth-quarter adjusted earnings per share stood at 77 cents, easily surpassing the Zacks Consensus Estimate of 69 cents.

Quarterly total revenue was approximately $138 million, up 35.3% year over year but slightly below the Zacks Consensus Estimate of $139 million.

j2 Global posted quarterly gross margin of 83.9% compared with 81.7% in the year-ago quarter. Operating expenses in the reported quarter were $65.3 million compared with $41.1 million in the prior-year quarter. Quarterly operating margin was 36.6% against 41.4% in the comparable quarter last year. Quarterly EBITDA stood at $65.6 million, up 26.9% year over year.

Churn rate, in the fourth quarter of 2013, was a record low of 2.17% compared with 2.2% in the year-ago quarter. Addition of net paid Dial in Demand (DID) was approximately 17,000 in fourth-quarter 2013, leading to a total net paid DID of a record-high 2.23 million as of Dec 31, 2013. Average revenue per user (ARPU) per DID was $12.75.

In 2013, j2 Global generated $193.3 million of cash from operations compared with $169.9 million in 2012. Free cash flow, in 2013, was $177.4 million compared with $166 million in 2012.

At the end of 2013, j2 Global had around $345.9 million in cash & marketable securities on its balance sheet compared with $323.7 million at the end of 2012. At the end of 2013, the company had $245.7 million of debt as against $245.2 million at the end of 2012. The debt-to-capitalization ratio was 0.26 against 0.29 at the end of 2012.

Financial Outlook

For fiscal 2013, management expects total revenue of $580–$600 million. Its mid-point of $590 million is well above the current Zacks Consensus Estimate of $549 million.  

Non-GAAP earnings per share (EPS) are expected in the $3.23–$3.47 range. Including around $0.03 per share of stock-based compensation expenses, the mid-point of non-GAAP EPS stands at $3.32, which is significantly above the current Zacks Consensus Estimate of $2.59. Non-GAAP effective tax rate is estimated between 27% and 29%.

Other Stocks to Consider

j2 Global currently has a Zacks Rank #3 (Hold). Other better-ranked stocks in the Internet/Application software industry include Model N Inc. (MODN), Constant Contact Inc. (CTCT) and E2open Inc. (EOPN). Currently, Model N has a Zacks Rank #1 (Strong Buy) while both Constant Contact and E2open have a Zacks Rank #2 (Buy).

 
CONSTANT CONTAC (CTCT): Free Stock Analysis Report
 
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J2 GLOBAL INC (JCOM): Free Stock Analysis Report
 
MODEL N INC (MODN): Free Stock Analysis Report
 
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