J2 Global
Annual Report 2018

Plain-text annual report

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 FORM 10-KxANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2018ORoTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from to Commission File Number: 0-25965j2 GLOBAL, INC.(Exact name of registrant as specified in its charter)Delaware47-1053457(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)6922 Hollywood Boulevard, Suite 500, Los Angeles, California 90028, (323) 860-9200(Address and telephone number of principal executive offices)Securities registered pursuant to Section 12(b) of the Act:NoneSecurities registered pursuant to Section 12(g) of the Act:Common Stock, $0.01 par value(Title of class)Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.Yes xNo oIndicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.Yes oNo xIndicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934during 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 filingrequirements for the past 90 days. Yes xNo oIndicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 ofRegulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes xNo oIndicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and willnot be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K orany amendment to this Form 10-K. o Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or anemerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “small reporting company,” and “emerging growth company”in Rule 12b-2 of the Exchange Act.Large accelerated filer xAccelerated filer oNon-accelerated filer oSmaller reporting company oEmerging growth company o If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new orrevised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. oIndicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No x As of the last business day of the registrant’s most recently completed second fiscal quarter, the approximate aggregate market value of the commonstock held by non-affiliates, based upon the closing price of the common stock as quoted by the NASDAQ Global Select Market was $2,654,287,562. Sharesof common stock held by executive officers, directors and holders of more than 5% of the outstanding common stock have been excluded. Thisdetermination of affiliate status is not necessarily a conclusive determination for other purposes. As of February 26, 2019, the registrant had 48,756,145 shares of common stock outstanding. DOCUMENTS INCORPORATED BY REFERENCE: Portions of the definitive Proxy Statement to be delivered to stockholders in connection with the Annual Meeting of Stockholders to be held May 3,2019 are incorporated by reference into Part III of this Form 10-K. This Annual Report on Form 10-K includes 129 pages with the Index to Exhibits located on page 125. TABLE OF CONTENTS Page PART I. Item 1. Business3 Item 1A. Risk Factors11 Item 1B. Unresolved Staff Comments33 Item 2. Properties33 Item 3. Legal Proceedings33 Item 4. Mine Safety Disclosures34 PART II. Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of EquitySecurities35 Item 6. Selected Financial Data39 Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations40 Item 7A.Quantitative and Qualitative Disclosures About Market Risk58 Item 8.Financial Statements and Supplementary Data60 Item 9.Changes In and Disagreements with Accountants on Accounting and Financial Disclosure120 Item 9A.Controls and Procedures120 Item 9B.Other Information123 PART III. Item 10.Directors, Executive Officers and Corporate Governance123 Item 11.Executive Compensation123 Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters123 Item 13.Certain Relationships and Related Transactions, and Director Independence123 Item 14.Principal Accounting Fees and Services123 PART IV. Item 15.Exhibits and Financial Statement Schedules123 Item 16.Form 10-K Summary125-2-PART IItem 1. BusinessOverviewj2 Global, Inc., together with its subsidiaries (“j2 Global”, “our”, “us” or “we”), is a leading provider of internet services. Through our CloudServices business, we provide cloud services to consumers and businesses and license our intellectual property (“IP”) to third parties. In addition, the CloudServices business includes fax, voice, backup, security and email marketing products. Our Digital Media business specializes in the technology, gaming,broadband, business to business, healthcare, and international markets, offering content, tools and services to consumers and businesses.We were incorporated in 2014 as a Delaware corporation through the creation of a new holding company structure, and our Cloud Services business,operated by our wholly owned subsidiary, j2 Cloud Services, LLC (formerly j2 Cloud Services, Inc.), and its subsidiaries, was founded in 1995.Our Cloud Services business generates revenues primarily from customer subscription and usage fees and from IP licensing fees. Our Digital Mediabusiness generates revenues from advertising and sponsorships, subscription and usage fees, performance marketing and licensing fees.In addition to growing our business organically, on a regular basis we acquire businesses to grow our customer bases, expand and diversify ourservice offerings, enhance our technologies, acquire skilled personnel and enter into new markets.Our consolidated revenues are currently generated from three basic business models, each with different financial profiles and variability. Our CloudServices business is driven primarily by subscription revenues that are relatively higher margin, stable and predictable from quarter to quarter with someseasonal weakness in the fourth quarter. The Cloud Services business also includes the results of our IP licensing business, which can vary dramatically inboth revenues and profitability from period to period. Our Digital Media business is driven primarily by advertising revenues, has relatively higher sales andmarketing expense and has seasonal strength in the fourth quarter. We continue to pursue additional acquisitions, which may include companies operatingunder business models that differ from those we operate under today. Such acquisitions could impact our consolidated profit margins and the variability ofour revenues.Cloud ServicesWe believe that businesses of all sizes are increasingly purchasing cloud services to meet their communication, messaging, security, data backup,hosting, customer relationship management and other needs. Cloud-based services represent a model for delivering and consuming, independent of location,real time business technology services, resources and solutions over the internet. Their goal is to reduce or eliminate costs, increase sales and enhanceproductivity, mobility, business continuity and security. Our eFax®, MyFax® and sFax® online fax services enable users to receive faxes into their emailinboxes and to send faxes via the internet. eVoice® and Onebox® provide our customers a virtual phone system with various available enhancements.KeepItSafe®, LiveVault®, and Livedrive® enable our customers to securely back up their data and dispose of tape or other physical systems. Our FuseMail®service provides our customers email, encryption, archival and perimeter protection solutions, while Campaigner® provides our customers enhanced emailmarketing solutions. All of these services represent software-as-a-service solutions except online backup which represents both a software-as-a-servicesolution and an infrastructure-as-a-service solution. We believe these services represent more efficient and less expensive solutions than many existingalternatives, and provide increased security, privacy, flexibility and mobility.We generate substantially all of our Cloud Services revenues from “fixed” subscription revenues for basic customer subscriptions and, to a lesserextent, “variable” usage revenues generated from actual usage by our subscribers. Our online fax, virtual phone, email, customer relationship managementand online backup products have both a fixed and variable subscription component with the substantial majority of revenues derived from the fixed portion.In addition, the cost structures of all our Cloud Services are very similar in terms of fixed and variable components and include capital expenditures that arein proportion to revenue for each product offering. We also generate Cloud Services revenues from patent licensing. We categorize our Cloud Services andsolutions into two basic groups: number-based, which are services provided in whole or in part through a telephone number, and non-number-based, whichare our other cloud services for business.We market our Cloud Services offerings to a broad spectrum of prospective business customers including sole proprietors, small to medium-sizedbusinesses, enterprises and government organizations. Our marketing efforts include enhancing brand awareness; utilizing online advertising, search enginesand affiliate programs; and selling through both a telesales and direct sales force. We continuously seek to extend the number of distribution channelsthrough which we acquire paying customers and improve the cost and volume of customers obtained through our current channels.-3-We offer the following cloud services and solutions:FaxeFax® is a leading brand in the global online fax market. Various tiers of service provide increasing levels of features and functionality to soleproprietors, small and medium-sized businesses, and enterprises around the world. Our most popular services allow individuals to receive and send faxes asemail attachments. In addition to eFax®, we offer online fax services under a variety of alternative brands including sFax®, MyFax®, eFax Plus®, eFaxPro™, eFax Secure™, eFax Corporate™ and eFax Developer™.VoiceeVoice® is a virtual phone system that provides small and medium-sized businesses on-demand voice communications services, featuring a toll-freeor local company number, auto-attendant and menu tree. With these services, a subscriber can assign departmental and individual extensions that canconnect to multiple U.S. or Canadian numbers, including land-line and mobile phones and IP networks, and can enhance reachability through “findme/follow me” capabilities. These services also include advanced integrated voicemail for each extension, effectively unifying mobile, office and otherseparate voicemail services and improving efficiency by delivering voicemails in both native audio format and as transcribed text.Line2 is a cloud phone service which allows users to add a 2nd line to a mobile device. Line2 enables users to separate work and personal calls on asingle device and includes standard business phone service features such as SMS, MMS, auto attendant, call routing, call forwarding, voicemail, callqueue, toll-free and vanity numbers.Onebox® is a full-featured unified communications suite. It combines the features of many of our other branded services, plus added functionality,to provide a full virtual office. Onebox® includes a virtual phone system, hosted email, online fax, audio conferencing and web conferencing.BackupKeepItSafe® provides fully managed and monitored online backup and disaster recovery solutions for businesses, using its ISO-certified platform.By securing critical digital assets via the internet to highly secure data vaults, customers enjoy peace of mind knowing they have reliable and cost effectivebackups, and equally importantly rapid restores of the data that keeps their businesses operating. Furthermore, our solution for business continuity, backupand recovery will fully protect the customer’s physical, virtual and cloud resources. The software installs simply and provides full-server imaging and provenoff-site data recovery capabilities without costly investments. Company data is protected from human error, file corruption, ransomware and other harmfulfactors.LiveDrive®, which was acquired in February 2014, provides online backup and sync storage features for professionals and individuals. Thecustomers can access their files from anywhere at any time so long as they have access to the internet.LiveVault®, which was acquired in September 2015, provides cloud backup and recovery services. LiveVault® services include, among other items,offsite protection of data combined with local backup, web based access to protected data and a mirrored data center to ensure recoverability.SugarSync®, which was acquired in March 2015, provides online file backup, synchronization and sharing of all of a customer’s documents, photos,music and movies across all of the customer’s computers and mobile devices. The product is not dependent on any specific operating system or deviceplatforms.-4-SecurityVIPRE™ is a provider of modern security solutions purpose-built to protect people and business from costly and malicious threats. The softwareportfolio includes comprehensive endpoint and email security, along with threat intelligence for real-time malware analysis. VIPRE solutions deliver easy touse, comprehensive layered defense through cloud-based and server security with mobile interfaces that enable threat response.FuseMail® offers email security, email archiving and hosted email to businesses of all sizes around the world. These solutions are hosted offsite andseamlessly integrated into a customer’s existing email system. Email security offers multi-level spam and virus detection, works with almost any emailsystem, and deletes virus-infected emails while keeping the email message intact. Email continuity is a solution in which email systems are maintained evenwhen a mail server is down. Email archiving solutions provide for archiving of internal and external ingoing and outgoing emails, and indexing of all emailsto enable seamless search.Excel Micro™ is a Cloud Security distributor focusing on providing email security, web security, and endpoint protection. Their solutions areoffered to thousands of resellers in the United States who provide the product to their end customers.Email MarketingCampaigner® is a cloud-based email marketing solution to help small, medium and large businesses strengthen customer relationships and drivesales. Campaigner offers professional email campaign creation, advanced list management and segmentation tools, and targeted email autoresponders andworkflows. Campaigner also helps businesses increase the size of their mailing lists, comply with email regulations like CAN-SPAM and get more emails tomore inboxes.SMTP is our cloud-based solution for email delivery that enables our customers to begin using an email relay service. Using our SMTP platform,customers control all aspects of their email distribution and can review email campaign statistics through a dashboard. We have a team of experts that helpour customers’ setup and optimize the SMTP relay.IP LicensingWe hold a number of issued U.S. and foreign patents and other intellectual property rights. We seek to license some of these intellectual propertyrights to third parties in exchange for fees. We include the results of these activities within the Cloud Services business, exclusive of brand licensing by theDigital Media business.Global Network and OperationsOur Cloud Services business operates multiple physical Points of Presence (“POPs”) worldwide, a central data center in Los Angeles and a remotedisaster recovery facility. We connect our POPs to our central data centers via redundant, and often times diverse, Virtual Private Networks (“VPNs”) usingthe internet. Our network is designed to deliver value-added user applications, customer support and billing services for our customers anywhere in the worldand a local presence for customers from thousands of cities in 50 countries on six continents. We offer our services in all major metropolitan areas in theUnited States (“U.S.”), the United Kingdom (“U.K.”), Canada and such major cities as Berlin, Copenhagen, Madrid, Manila, Mexico City, Milan, Paris, Rome,Singapore, Sydney, Taipei, Tokyo, Vienna and Zurich. Our customers are located throughout the world.Customer Support ServicesOur Cloud Services customer service organization supports our cloud services customers through a combination of online self-help, emailcommunications, interactive chat sessions and telephone calls. Our internet-based online self-help tools enable customers to resolve simple issues on theirown, eliminating the need to speak or write to our customer service representatives. We use internal personnel and contracted third parties (on a dedicatedpersonnel basis) to answer our customer emails and telephone calls and to participate in interactive chat sessions.Our Cloud Services customer service organization provides email support seven days per week, 24 hours per day, to all subscribers. Payingsubscribers have access to live-operator telephone support seven days per week, 24 hours per day. Dedicated telephone support is provided for corporatecustomers 24 hours per day, seven days per week. Live sales and customer support services are available in various languages, including English, Spanish,Dutch, German, French, Japanese and Cantonese.-5-CompetitionOur Cloud Services business faces competition from, among others, online fax-providers, traditional fax machine or multi-function printercompanies, unified messaging/communications providers, telephone companies, voicemail providers, companies offering PBX systems and outsourced PBXsolutions, email providers, various data backup and hosting providers and customer relationship management solutions. Historically, our most popularsolutions have related to online faxing, including the ability of our customers to access faxes via email and our outbound desktop faxing capabilities. Thesesolutions compete primarily against traditional fax machine manufacturers, which are generally large and well-established companies, as well as publiclytraded and privately-held providers of fax servers and related software and outsourced fax services. Some of these companies may have greater financial andother resources than we do.We believe that the primary competitive factors determining our success in the market for our Cloud Services include financial strength andstability; pricing; reputation for reliability and security of service; intellectual property ownership; effectiveness of customer support; sign-up, service andsoftware ease-of-use; service scalability; customer messaging and branding; geographic coverage; scope of services; currency and payment methodacceptance; and local language sales, messaging and support.For more information regarding the competition that we face, please refer to the section entitled Risk Factors contained in Item 1A of this AnnualReport on Form 10-K.Digital MediaOur Digital Media business operates a portfolio of web properties and apps which includes IGN, Mashable, PC Mag, Humble Bundle, Speedtest,Offers, Black Friday, AskMen, MedPageToday, Everyday Health, What to Expect, among others. During 2018, our Digital Media web properties attractedapproximately 7.7 billion visits and 31.7 billion page views.Our properties provide trusted reviews of technology, gaming and lifestyle products and services; news and commentary related to their verticalmarkets; professional networking tools, targeted emails and white papers for IT professionals; speed testing for internet and mobile network connections;online deals and discounts for consumers; interactive tools and mobile applications that enable consumers to manage a broad array of health and wellnessneeds on a daily basis, including medical conditions, pregnancy, diet and fitness news; and tools and information for healthcare professionals to stay abreastof industry, legislative and regulatory developments in major medical specialties.Our Digital Media business generates revenues from the sale of display and video advertising; customer clicks to online merchants as well ascommissions on sales attributed to clicks to online merchants; business-to-business leads to IT vendors; the licensing of technology, data and otherintellectual material to clients; and the sale of subscription services to consumers and businesses.We believe competitive factors relating to attracting and retaining users include the ability to provide premium and exclusive content and the reach,effectiveness, and efficiency of our marketing services to attract consumers, advertisers, healthcare professionals and publishers. We continue to seekopportunities to acquire additional web properties, both within and outside of the technology, gaming, lifestyle, and healthcare verticals, with the goal ofmonetizing their audiences and content though application of our proprietary technologies and insight.Web PropertiesOur Digital Media properties and services include the following:TechnologyPCMag is an online resource for laboratory-based product reviews, technology news and buying guides. We operate one of the largest and oldestindependent testing facilities for consumer technology products. Founded in 1984, our lab produces more than 2,200 unbiased technology product andservice reviews annually. PCMag’s “Editor’s Choice” award is recognized globally as a trusted mark for buyers and sellers of technology products andservices.Mashable.com is a global media brand publishing premium content for individuals interested in technology and culture. Mashable is recognized asa trusted global brand and produces stories for more than a dozen platforms, including Snapchat, Twitter and Facebook.-6-Offers.com is a coupons & deals website featuring offers from more than 16,000 of the internet’s more popular stores and brands. Offers.com’sobjective is to help consumers find the best deals on the web. Additionally, Offers.com employs a process to verify that its coupon codes work, savingconsumers time and money.BlackFriday.com and BestBlackFriday.com are resources for shoppers to find the best deals and offers from retailers during the height of the holidayshopping season.Ookla provides customers fixed broadband and mobile network testing applications, data and analysis. Over ten million tests are actively initiatedby consumers each day across all of Ookla’s Speedtest platforms, with more than 17 billion completed to date. As a result, Ookla maintains comprehensiveanalytics on worldwide internet performance and accessibility. Ookla solutions have been adopted by a significant number of internet service providers andmobile carriers worldwide and have been translated into over 30 languages for use by thousands of businesses, governments, universities and tradeorganizations.Ekahau provides solutions for enterprise wireless network design and troubleshooting. More than 15,000 customers run their networks withEkahau’s Wi-Fi planning and measurement solutions, which design and manage superior wireless networks by minimizing network deployment time andensuring sufficient wireless coverage across the network.Downdetector offers real-time overviews of status information and outages for services and digital products that consumers use everyday.Downdetector aims to track any service that its users consider vital to their everyday lives, including (but not limited to) internet providers, mobile providers,airlines, public transport and other online services.Ziff Davis B2B provides digital content for buyers of information technology (IT) products and services, allowing IT vendors to identify, reach andinfluence corporate IT decision makers who are actively researching specific IT purchases.GamingIGN Entertainment is an internet media brand focused on the video game and entertainment enthusiast markets. IGN reaches more than 154 millionmonthly users and is followed by more than 11 million subscribers on YouTube and 30 million users on social platforms.HumbleBundle.com is a digital subscription and storefront for video games, ebooks, and software. Customers purchase monthly subscriptions,product bundles, and individual products through our website. In addition, raising money for charity is a core mission for Humble Bundle. Each product saletransaction at Humble Bundle results in a charitable contribution.HealthcareEveryday Health Group properties include a collection of content and tools for the consumer, and healthcare professional.Everyday Health ConsumerConsumer-focused properties include online content, interactive tools and applications designed to allow consumers to manage a broad array ofhealth and wellness needs on a daily basis. Everyday Health, our flagship brand, is a broad-based health information portal that provides consumers withtrusted and actionable health information intended to empower users to better manage their health and wellness. We operate the Mayo Clinic Diet digital program, a subscription-based plan for weight loss, and ultimately better health, developed by the weightloss experts at Mayo Clinic. Based on the bestselling book by the same name, the Mayo Clinic Diet digital program provides a step-by-step program to jump-start quick weight loss, achieve a goal weight and maintain it for life.What to Expect When You’re ExpectingWe operate the digital properties for the What to Expect brand, the leading pregnancy and parenting media resource. Based on the best-sellingpregnancy book, What to Expect When You’re Expecting, by author Heidi Murkoff, the What to Expect website and mobile applications contain content onconception planning and pregnancy, as well as information on newborns and toddlers.-7-Everyday Health Professional PropertiesFor healthcare professionals, we provide digital content that enables healthcare professionals to stay abreast of clinical, industry, legislative andregulatory developments across all major medical specialties. Our flagship professional property, MedPage Today, delivers breaking medical news in 34medical specialties and major public policy developments at the state and federal levels seven days a week. MedPage Today coordinates with approximately4,000 leading researchers and clinicians, as well as more than 300 academic medical centers, to aid in gathering in-depth information for articles. MedPageToday’s excellence has been recognized with awards from the American Society of Healthcare Business Editors, the National Institute for HealthcareManagement, the eHealthcare Leadership Awards, the Medical Marketing and Media Awards and the Web Health Awards. Additionally, MedPage Today wasnamed as a finalist for the Jesse M. Neal Award and the Gerald M. Loeb Award.PRIME Education provides accredited continuing medical education (“CME”) and continuing education (“CE”) programs to healthcareprofessionals. PRIME is nationally recognized for its healthcare outcomes research and its conduct of research-informed and other CME and CE programs invarious therapeutic areas. Display and Video AdvertisingWe sell online display and video advertising on our owned-and-operated web properties and on third party sites as well as targeted advertisingacross the internet through various unaffiliated third party digital advertising networks.We have contractual arrangements with advertisers either directly or through agencies. The terms of these contracts specify the price of theadvertising to be sold and the volume of advertisements that will be served over the course of a campaign.In addition to the contracts with advertisers and agencies, we have contractual arrangements with certain third party websites not owned by us andthird party advertising networks to deliver online display and video advertising to their websites or to third-party sites.Performance MarketingWe generate business-to-business leads for IT vendors through the marketing of content, including white papers and webinars, and offer additionallead qualification and nurturing services. On the consumer side, we generate clicks to online merchants by promoting deals and discounts on our webproperties.LicensingWe license our proprietary technology, data and intellectual property to third parties for various purposes. For instance, we will license the right touse PCMag’s “Editors’ Choice” logo and other copyrighted editorial content to businesses whose products have earned such distinction.SubscriptionsWe offer subscriptions to businesses for Speedtest Intelligence, which offers up-to-date insights into global fixed broadband and mobile performancedata. We offer subscriptions to consumers for our Mayo Clinic Diet program, PCMag Digital Edition and Humble Bundle.CompetitionCompetition in the digital media space is fierce and continues to intensify.Our digital media business competes with online publishers including CNET, GameSpot, WebMD, Vox and others as well as with portals,advertising networks, social media sites and other platforms, including Google, Facebook, Twitch and others. We believe that the primary competitive factorsdetermining our success in the market for our digital media include the reputation of brands as trusted sources of objective information and our ability toattract internet users and advertisers to our web properties.For more information regarding the competition that we face, please refer to the section entitled Risk Factors contained in Item 1A of this AnnualReport on Form 10-K.-8-Patents and Proprietary RightsWe regard the protection of our intellectual property rights as important to our success. We aggressively protect these rights by relying on acombination of patents, trademarks, copyrights, trade dress and trade secrets. We also enter into confidentiality and intellectual property assignmentagreements with employees and contractors, and nondisclosure agreements with parties with whom we conduct business in order to limit access to anddisclosure of our proprietary information.Through a combination of internal technology development and acquisitions, we have built a portfolio of numerous U.S. and foreign patents. Wegenerate licensing revenues from some of these patents. We are currently engaged in litigation to enforce several of our patents. For a more detaileddescription of the lawsuits in which we are involved, see Item 3. Legal Proceedings. We intend to continue to invest in patents, to aggressively protect ourpatent assets from unauthorized use and to generate patent licensing revenues from authorized users.Several of our U.S. patents have been reaffirmed through reexamination proceedings before the United States Patent and Trademark Office(“USPTO”). We have generated royalties from licensing certain of our patents and have enforced certain patents against companies using our patentedtechnology without our permission.We seek patents for inventions that may contribute to our business or technology sector. In addition, we have multiple pending U.S. and foreignpatent applications, covering components of our technology and in some cases technologies beyond those that we currently offer. Unless and until patentsare issued on the pending applications, no patent rights can be enforced.We have obtained patent licenses for certain technologies where such licenses are necessary or advantageous.We own and use a number of trademarks in connection with our services, including word and/or logo trademarks for eFax, MyFax, eFax Corporate,Sfax, eVoice, KeepItSafe, Fusemail, Onebox, PCMag, IGN, Everyday Health, AskMen, Humble Bundle, Mashable, Health eCareers, Ookla, Speedtest, andGeek.com, among others. Many of these trademarks are registered worldwide, and numerous trademark applications are pending around the world. We holdnumerous internet domain names, including “efax.com”, “efaxcorporate.com”, “myfax.com”, “fax.com”, “evoice.com”, “keepitsafe.com”, “fusemail.com”,“campaigner.com”, “onebox.com”, “pcmag.com”, “techbargains.com”, “ign.com”, “askmen.com”, “speedtest.net”, “offers.com”, “humblebundle.com”,“mashable.com”, “healthecareers.com”, and “geek.com”, among others. We have filed to protect our rights to our brands in certain alternative top-leveldomains such as “.org”, “.net”, “.biz”, “.info” and “.us”, among others.Like other technology-based businesses, we face the risk that we will be unable to protect our intellectual property and other proprietary rights, andthe risk that we will be found to have infringed the proprietary rights of others. For more information regarding these risks, please refer to the section entitledRisk Factors contained in Item 1A of this Annual Report on Form 10-K.Government RegulationWe are subject to a number of foreign and domestic laws and regulations that affect companies conducting business over the internet and, in somecases, using services of third-party telecommunications and internet service providers. These include, among others, laws and regulations addressing privacy,data storage, retention and security, freedom of expression, content, taxation, numbers, advertising and intellectual property. With respect to most of ourbusiness, we are not a regulated telecommunications provider in the U.S. For information about the risks we face with respect to governmental regulation,please see Item 1A of this Annual Report on Form 10-K entitled Risk Factors.SeasonalityOur Cloud Services revenues are impacted by the number of effective business days in a given period. We traditionally experience lower thanaverage Cloud Services usage and customer sign-ups in the fourth quarter. Revenues associated with our Digital Media operations are subject to seasonalfluctuations, becoming most active during the fourth quarter holiday period due to increased retail activity.-9-Research and DevelopmentThe markets for our services are evolving rapidly, requiring ongoing expenditures for research and development and timely introduction of newservices and service enhancements. Our future success will depend, in part, on our ability to enhance our current services, to respond effectively totechnological changes, attract and retain engineering talent, sell additional services to our existing customer base and introduce new services andtechnologies that address the increasingly sophisticated needs of our customers.We devote significant resources to develop new services and service enhancements. Our research, development and engineering expenditures were$48.4 million, $46.0 million and $38.0 million for the fiscal years ended December 31, 2018, 2017 and 2016, respectively. For more information regardingthe technological risks that we face, please refer to the section entitled Risk Factors contained in Item 1A of this Annual Report on Form 10-K.EmployeesAs of December 31, 2018, we had approximately 2,587 employees, the majority of whom are in the U.S.Our future success will depend, in part, on our ability to continue to attract, retain and motivate highly qualified technical, marketing andmanagement personnel. Approximately 70 of the editorial employees in our Digital Media business have elected to join a union. We chose to voluntarilyrecognize the union and have commenced negotiations on a collective bargaining agreement. None of our other employees are represented by any collectivebargaining unit or agreement. We have never experienced a work stoppage. We believe our relationship with our employees is good.Web Availability of ReportsThe Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filedpursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are filed with the Securities and ExchangeCommission (the “SEC”). The Company is subject to the informational requirements of the Exchange Act and files or furnishes reports, proxy statements andother information with the SEC. Such reports and other information filed by the Company with the SEC are available free of charge on the Company’swebsite at www.j2.com as soon as reasonably practicable after we file such reports with, or furnish them to, the SEC’s website. The information on our websiteis not part of this report. The SEC maintains an internet site that contains reports, proxy and information statements and other information regarding ourfilings we file electronically with the SEC at www.sec.gov.-10-Item 1A. Risk FactorsBefore deciding to invest in j2 Global or to maintain or increase your investment, you should carefully consider the risks described below inaddition to the other cautionary statements and risks described elsewhere in this Annual Report on Form 10-K and our other filings with the SEC, includingour subsequent reports on Forms 10-Q and 8-K. The risks and uncertainties described below are not the only ones we face. Additional risks anduncertainties not presently known to us or that we currently deem immaterial also may affect our business. If any of these known or unknown risks oruncertainties actually occurs, our business, prospects, financial condition, operating results and cash flows could be materially adversely affected. In thatevent, the market price of our common stock will likely decline and you may lose part or all of your investment.Risks Related To Our BusinessAcquisitions and investments in our business have historically played a significant role in our growth and we anticipate that they will continue to do so.We must acquire additional or invest in new or current businesses, products, services and technologies that complement or augment our serviceofferings and customer base in order to sustain our rate of growth. We may not successfully identify suitable acquisition candidates or investment strategies,manage disparate technologies, lines of business, personnel and corporate cultures, realize our business strategy or the expected return on our investment ormanage a geographically dispersed company. If we are unable to identify and execute on acquisitions or execute on our investment strategies, our revenues,business, prospects, financial condition, operating results and cash flows could suffer.We have made and expect to continue to make acquisitions that could disrupt our operations and harm our operating results.We intend to continue to develop new services, enhance existing services and expand our geographic presence through acquisitions of othercompanies, service lines, technologies and personnel.Acquisitions involve numerous risks, including the following:•Difficulties in integrating the operations, systems, technologies, products and personnel of the acquired businesses;•Difficulties in entering markets in which we have no or limited direct prior experience and where competitors in such markets may have strongermarket positions;•Diversion of management’s attention from normal daily operations of the business and the challenges of managing larger and more widespreadoperations resulting from acquisitions; and•The potential loss of key employees, customers, distributors, vendors and other business partners of the businesses we acquire.Acquisitions may also cause us to:•Use a substantial portion of our cash resources or incur debt;•Significantly increase our interest expense, leverage and debt service requirements if we incur additional debt to pay for an acquisition;•Assume liabilities;•Issue common stock that would dilute our current stockholders’ percentage ownership;•Record goodwill and intangible assets that are subject to impairment testing on a regular basis and potential periodic impairment charges;•Incur amortization expenses related to certain intangible assets; and•Become subject to intellectual property or other litigation.Mergers and acquisitions are inherently risky and subject to many factors outside of our control. We cannot give assurance that our previous orfuture acquisitions will be successful and will not materially adversely affect our business, operating results or financial condition. Failure to manage andsuccessfully integrate acquisitions could materially harm our business and operating results. In addition, our effective tax rate for future periods is uncertainand could be impacted by mergers and acquisitions.-11-The majority of our revenue within the Digital Media business is derived from short-term advertising arrangements and a reduction in spending by orloss of current or potential advertisers would cause our revenue and operating results to decline.In most cases, our agreements with advertisers have a term of one year or less and may be terminated at any time by the advertiser or by us withoutpenalty. Advertising agreements often provide that we receive payment based on “served” impressions but the online ad industry has started to shift so thatpayment will be made based on “viewable” impressions, and that change in basis could have a negative effect on available impressions thereby reducing ourrevenue potential. Accordingly, it is difficult to forecast display revenue accurately. In addition, our expense levels are based in part on expectations of futurerevenue. Moreover, we believe that advertising on the internet, as in traditional media, fluctuates significantly as a result of a variety of factors, many ofwhich are outside of our control. Some of these factors include budget constraints of our advertisers, cancellations or delays of projects by our advertisers, thecyclical and discretionary nature of advertising spending, general economic, internet-related and media industry conditions, as well as extraordinary events.The state of the global economy and availability of capital has impacted and could further impact the advertising spending patterns of existing and potentialadvertisers. Any reduction in spending by, or loss of, existing or potential advertisers would negatively impact our revenue and operating results. Further, wemay be unable to adjust our expenses and capital expenditures quickly enough to compensate for any unexpected revenue shortfall.If we are unable to develop, commission or acquire compelling content in our Digital Media business at acceptable prices, our expenses may increase,the number of visitors to our online properties may not grow as anticipated, or may decline, and/or visitors’ level of engagement with our websites maydecline, any of which could harm our operating results.Our future success depends in part on the ability of our Digital Media business to aggregate compelling content and deliver that content through ouronline properties. We believe that users will increasingly demand high-quality content and services including more video and mobile-specific content. Suchcontent and services may require us to make substantial payments to third parties if we are unable to develop content of our own. Our ability to maintain andbuild relationships with such third-party providers is critical to our success. In addition, as new methods for accessing the internet become available,including through alternative devices, we may need to enter into amended agreements with existing third-party providers to cover the new devices. We maybe unable to monetize the activity on these alternative devices including mobile devices which may supplant current traffic that we monetize. We may beunable to enter into new, or preserve existing, relationships with the third-parties whose content or services we seek to obtain. In addition, as competition forcompelling content increases both domestically and internationally, our third-party providers may increase the prices at which they offer their content andservices to us and potential providers may not offer their content or services to us at all, or may offer them on terms that are not agreeable to us. An increase inthe prices charged to us by third-party providers could harm our operating results and financial condition. Further, many of our content and services licenseswith third parties are non-exclusive. Accordingly, other media providers may be able to offer similar or identical content. This increases the importance of ourability to deliver compelling content and personalization of this content for users in order to differentiate our properties from other businesses. If we areunable to develop compelling content of our own, we may be required to engage freelance services or obtain licensed content which may not be at reasonableprices which could harm our operating results.Users are increasingly using mobile devices to access our content within our Digital Media business and if we are unsuccessful in attracting new users toour mobile offerings, and expanding the capabilities of our content and other offerings with respect to our mobile platforms, our net revenues coulddecline.Web usage and the consumption of digital content are increasingly shifting to mobile platforms such as smartphones and other connected devices.Visits to our mobile websites and applications have increased but if the percentage of visits to our mobile websites does not continue to grow or we areunable to effectively monetize our mobile content, net revenue will be impacted. In addition, we are less effective at monetizing digital content on ourmobile websites and applications compared to our desktop websites. The growth of our business depends in part on our ability to continue to adapt to themobile environment and to deliver compelling solutions to consumers and retailers through these new mobile marketing channels. In addition, our successon mobile platforms will be dependent on our interoperability with popular mobile operating systems that we do not control, and any changes in suchsystems that degrade our functionality or give preferential treatment to competitive services could adversely affect usage of our services through mobiledevices.-12-In our Digital Media business, if we are unable to prove that our advertising and sponsorship solutions provide an attractive return on investment forour customers, our financial results could be harmed. Our ability to grow revenue from our Digital Media business will be dependent on our ability to demonstrate to marketers that their marketingcampaigns with us provide a meaningful return on investment (“ROI”) relative to offline and other online opportunities. Certain of the marketing campaignswith respect to our Digital Media business are designed such that the revenues received are based entirely upon the ROI delivered for customers. Our DigitalMedia business has invested significant resources in developing its research, analytics and campaign effectiveness capabilities and expects to continue to doso in the future. Our ability, however, to demonstrate the value of advertising and sponsorship on Digital Media business properties will depend, in part, onthe sophistication of the analytics and measurement capabilities, the actions taken by our competitors to enhance their offerings, whether we meet the ROIexpectations of our customers and a number of other factors. If we are unable to maintain sophisticated marketing and communications solutions that providevalue to our customers or demonstrate our ability to provide value to our customers, our financial results will be harmed.Our fax services constitute a significant percentage of our revenue.Currently, fax-to-email revenue constitutes approximately 27% of our consolidated revenues. The success of our business is therefore dependentupon the continued use of fax as a messaging medium and/or our ability to diversify our service offerings and derive more revenue from other services, suchas voice, online backup, email, unified messaging solutions and services related to our Digital Media business. If the demand for online fax-to-email as amessaging medium decreases, and we are unable to replace lost revenues from decreased usage or cancellation of our fax services with a proportional increasein our customer base or with revenues from our other services, our business, financial condition, operating results and cash flows could be materially andadversely affected. We believe that one of the attractive features of our eFax® and similar products is that fax signatures are a generally accepted method of executingcontracts. There are ongoing efforts by governmental and non-governmental entities to create a universally accepted method for electronically signingdocuments. Widespread adoption of so-called “digital signatures” could reduce demand for our fax services and, as a result, could have a material adverseeffect on our business, prospects, financial condition, operating results and cash flows.A system failure, security breach or other technological risk could delay or interrupt service to our customers, harm our reputation or subject us tosignificant liability.Our operations are dependent on our network being free from interruption by damage from fire, earthquake, power loss, telecommunications failure,unauthorized entry, computer viruses, cyber-attacks or any other events beyond our control. Similarly, the operations of our partners and other third partieswith which we work are also susceptible to the same risks. There can be no assurance that our existing and planned precautions of backup systems, regulardata backups, security protocols and other procedures will be adequate to prevent significant damage, system failure or data loss and the same is true for ourpartners, vendors and other third parties on which we rely. We have experienced automated log in attempts to gain unauthorized access to customer accounts.To date, these events have not resulted in the material impairment of any business operations.Also, many of our services are web-based, and the amount of data we store for our users on our servers has been increasing. Despite theimplementation of security measures, our infrastructure, and that of our partners, vendors and other third parties, may be vulnerable to computer viruses,hackers or similar disruptive problems caused by our vendors, partners, other third parties, subscribers, employees or other internet users who attempt toinvade public and private data networks. As seen in the industries in which we operate and others, these activities have been, and will continue to be, subjectto continually evolving cybersecurity and technological risks. Further, in some cases we do not have in place disaster recovery facilities for certain ancillaryservices. Moreover, a significant portion of our operations relies heavily on the secure processing, storage and transmission of confidential and othersensitive data. For example, a significant number of our Cloud Services customers authorize us to bill their credit or debit card accounts directly for alltransaction fees charged by us. We rely on encryption and authentication technology to effect secure transmission of confidential information, includingcustomer credit and debit card numbers. Advances in computer capabilities, new discoveries in the field of cryptography or other developments may result ina compromise or breach of the technology used by us, our partners, vendors, or other third parties, to protect transaction and other confidential data.Any system failure or security breach that causes interruptions or data loss in our operations, our partners, vendors, or other third parties, or in the computersystems of our customers or leads to the misappropriation of our or our customers’ confidential information could result in a significant liability to us(including in the form of judicial decisions and/or settlements, regulatory findings and/or forfeitures, and other means), cause considerable harm to us and ourreputation (including requiring notification to customers, regulators, and/or the media), cause a loss of confidence in our products and services, and detercurrent and potential customers-13-from using our services. Our Board is briefed on cybersecurity risks and we implement cybersecurity risk management under our Board’s oversight. We usevendors to assist with cybersecurity risks, but these vendors may not be able to assist us adequately in preparing for or responding to a cybersecurity incident.We maintain insurance related to cybersecurity risks, but this insurance may not be sufficient to cover all of our losses from any breaches or other adverseconsequences related to a cybersecurity-event. Any of these events could have a material adverse effect on our business, prospects, financial condition,operating results and cash flows, or cause us to suffer other negative consequences. For example, we may incur remediation costs (such as liability for stolenassets or information, repairs of system damage, and incentives to customers or business partners in an effort to maintain relationships after an attack);increased cybersecurity protection costs (which may include the costs of making organizational changes, deploying additional personnel and protectiontechnologies, training employees, and engaging third party experts and consultants); lost revenues resulting from the unauthorized use of proprietaryinformation or the failure to retain or attract customers following an attack; litigation and legal risks (including regulatory actions by state and federalgovernmental authorities and non-U.S. authorities); increased insurance premiums; reputational damage that adversely affects customer or investorconfidence; and damage to the company’s competitiveness, stock price, and diminished long-term shareholder value.Political instability and volatility in the economy may adversely affect segments of our customers, which may result in decreased usage and advertisinglevels, customer acquisition and customer retention rates and, in turn, could lead to a decrease in our revenues or rate of revenue growth.Certain segments of our customers may be adversely affected by political instability and volatility in the general economy or renewed downturns.To the extent these customers’ businesses are adversely affected by political instability or volatility, their usage of our services and/or our customer retentionrates could decline. This may result in decreased cloud services subscription and/or usage revenues and decreased advertising, e-commerce or other revenues,which may adversely impact our revenues and profitability.Our growth will depend on our ability to develop, strengthen, and protect our brands, and these efforts may be costly and have varying degrees ofsuccess. Our brand recognition has significantly contributed to the success of our business. Strengthening our current brands and launching competitive newbrands will be critical to achieving widespread commercial acceptance of our products and services. This will require our continued focus on activemarketing, the costs of which have been increasing and may continue to increase. In addition, substantial initial investments may be required to launch newbrands and expand existing brands to cover new geographic territories and technology fields. Accordingly, we may need to spend increasing amounts ofmoney on, and devote greater resources to, advertising, marketing and other efforts to cultivate brand recognition and customer loyalty. In addition, we aresupporting an increasing number of brands, each of which requires its own investment of resources. Brand promotion activities may not yield increasedrevenues and, even if they do, increased revenues may not offset the expenses incurred. A failure to launch, promote, and maintain our brands, or theincurrence of substantial expenses in doing so, could have a material adverse effect on our business. Our brand recognition depends, in part, on our ability to protect our trademark portfolio and establish trademark rights covering new brands andterritories. Some regulators and competitors have taken the view that certain of our brands, such as eFax and eVoice, are descriptive or generic when appliedto the products and services offered by our Cloud Services business. Nevertheless, we have obtained U.S. and foreign trademark registrations for our brandnames, logos, and other brand identifiers, including, eFax and eVoice. If we are unable to obtain, maintain or protect trademark rights covering our brandsacross the territories in which they are or may be offered, the value of these brands may be diminished, competitors may be able to dilute, harm, or takeadvantage of our brand recognition and reputation, and our ability to attract subscribers may be adversely affected. We hold domain names relating to our brands, in the U.S. and internationally. The acquisition and maintenance of domain names are generallyregulated by governmental agencies and their designees. The regulation of domain names may change. Governing bodies may establish additional top-leveldomains, appoint additional domain name registrars or modify the requirements for holding domain names. As a result, we may be unable to acquire ormaintain all relevant domain names that relate to our brands. Furthermore, international rules governing the acquisition and maintenance of domain names inforeign jurisdictions are sometimes different from U.S. rules, and we may not be able to obtain all of our domains internationally. As a result of these factors,we may be unable to prevent third parties from acquiring domain names that are similar to, infringe upon or otherwise decrease the value of our brands,trademarks or other proprietary rights. In addition, failure to secure or maintain domain names relevant to our brands could adversely affect our reputationand make it more difficult for users to find our websites and services.-14-Increased numbers of credit and debit card declines in our business could lead to a decrease in our revenues or rate of revenue growth.A significant number of our paid Cloud Services subscribers and certain Digital Media subscribers pay for our services through credit and debitcards. Weakness in certain segments of the credit markets and in the U.S. and global economies could result in increased numbers of rejected credit and debitcard payments. We believe this could result in increased customer cancellations and decreased customer signups. Rejected credit or debit card payments,customer cancellations and decreased customer sign up may adversely impact our revenues and profitability.If our business experiences excessive fraudulent activity or cannot meet evolving credit card company merchant standards, we could incur substantialcosts and lose the right to accept credit cards for payment and our subscriber base could decrease significantly.A significant number of our paid Cloud Services subscribers and certain Digital Media subscribers authorize us to bill their credit card accountsdirectly for all service fees charged by us. If people pay for these services with stolen credit cards, we could incur substantial unreimbursed third-party vendorcosts. We also incur losses from claims that the customer did not authorize the credit card transaction to purchase our service. If the numbers of unauthorizedcredit card transactions become excessive, we could be assessed substantial fines for excess chargebacks and could lose the right to accept credit cards forpayment. In addition, we are subject to Payment Card Industry (“PCI”) data security standards, which require periodic audits by independent third parties toassess our compliance. PCI standards are a comprehensive set of requirements for enhancing payment account data security. Failure to comply with thesecurity requirements or rectify a security issue may result in fines or a restriction on accepting payment cards. Credit card companies may change thestandards required to utilize their services from time to time. If we are unable to meet these new standards, we could be unable to accept credit cards. Further,the law relating to the liability of providers of online payment services is currently unsettled and states may enact their own rules with which we may notcomply. Substantial losses due to fraud or our inability to accept credit card payments, which could cause our paid subscriber base to significantly decrease,could have a material adverse effect on our business, prospects, financial condition, operating results and cash flows.The markets in which we operate are highly competitive and our competitors may have greater resources to commit to growth, superior technologies,cheaper pricing or more effective marketing strategies. Also, we face significant competition for users, advertisers, publishers, developers anddistributors.For information regarding our competition, and the risks arising out of the competitive environment in which we operate, see the section entitledCompetition contained in Item 1 of this Annual Report on Form 10-K. In addition, some of our competitors include major companies with much greaterresources and significantly larger subscriber bases than we have. Some of these competitors offer their services at lower prices than we do. These companiesmay be able to develop and expand their network infrastructures and capabilities more quickly, adapt more swiftly to new or emerging technologies andchanges in customer requirements, take advantage of acquisition and other opportunities more readily and devote greater resources to the marketing and saleof their products and services than we can. There can be no assurance that additional competitors will not enter markets that we are currently serving and planto serve or that we will be able to compete effectively. Competitive pressures may reduce our revenue, operating profits or both.Our Digital Media business faces significant competition from online media companies as well as from social networking sites, mobile application,traditional print and broadcast media, general purpose and search engines and various e-commerce sites.Several of our competitors offer an integrated variety of internet products, advertising services, technologies, online services and content. Wecompete against these and other companies to attract and retain users, advertisers and developers. We also compete with social media and networking siteswhich are attracting a substantial and increasing share of users and users’ online time, and may continue to attract an increasing share of online advertisingdollars.In addition, several competitors offer products and services that directly compete for users with our Digital Media business offerings. Similarly, theadvertising networks operated by our competitors or by other participants in the display marketplace offer services that directly compete with our offeringsfor advertisers, including advertising exchanges, ad networks, demand side platforms, ad serving technologies and sponsored search offerings. We alsocompete with traditional print and broadcast media companies to attract advertising spending. Some of our existing competitors and possible entrants mayhave greater brand recognition for certain products and services, more expertise in a particular segment of the market, and greater operational, strategic,technological, financial, personnel, or other resources than we do. Many of our competitors have access to considerable financial and technical resources withwhich to compete aggressively, including by funding future growth and expansion and investing in acquisitions, technologies, and research anddevelopment. Further, emerging start-ups may be able to innovate and provide new-15-products and services faster than we can. In addition, competitors may consolidate with each other or collaborate, and new competitors may enter the market.Some of the competitors for our Cloud Services business in international markets have a substantial competitive advantage over us because they havedominant market share in their territories, are owned by local telecommunications providers, have greater brand recognition, are focused on a single market,are more familiar with local tastes and preferences, or have greater regulatory and operational flexibility due to the fact that we may be subject to both U.S.and foreign regulatory requirements.If our competitors are more successful than we are in developing and deploying compelling products or in attracting and retaining users, advertisers,publishers, developers, or distributors, our revenue and growth rates could decline.As a creator and a distributor of content over the internet, we face potential liability for legal claims based on the nature and content of the materialsthat we create or distribute. Users access health-related content through our Everyday Health properties, including information regarding particular medical conditions,diagnosis and treatment and possible adverse reactions or side effects from medications. If our content, or content we obtain from third parties, containsinaccuracies, it is possible that consumers who rely on that content or others may make claims against us with various causes of action. Although ourproperties contain terms and conditions, including disclaimers of liability, that are intended to reduce or eliminate our liability, third parties may claim thatthese online agreements are unenforceable. Our editorial and other quality control procedures may not be sufficient to ensure that there are no errors or omissions in our content offerings or toprevent such errors and omissions in content that is controlled by our partners. Even if potential claims do not result in liability to us, investigating anddefending against these claims could be expensive and time consuming and could divert management’s attention away from our operations. Inadequate intellectual property protections could prevent us from defending our proprietary technology and intellectual property.Our success depends, in part, upon our proprietary technology and intellectual property. We rely on a combination of patents, trademarks, tradesecrets, copyrights, contractual restrictions, and other confidentiality safeguards to protect our proprietary technology. However, these measures may provideonly limited protection and it may be costly and time-consuming to enforce compliance with our intellectual property rights. In some circumstances, we maynot have adequate, economically feasible or realistic options for enforcing our intellectual property and we may be unable to detect unauthorized use. Whilewe have a robust worldwide portfolio of issued patents and pending patent applications, there can be no assurance that any of these patents will not bechallenged, invalidated or circumvented, that we will be able to successfully police infringement, or that any rights granted under these patents will in factprovide a competitive advantage to us.In addition, our ability to register or protect our patents, copyrights, trademarks, trade secrets and other intellectual property may be limited in someforeign countries. As a result, we may not be able to effectively prevent competitors in these regions from utilizing our intellectual property, which couldreduce our competitive advantage and ability to compete in those regions and negatively impact our business.We also strive to protect our intellectual property rights by relying on federal, state and common law rights, as well as contractual restrictions. Wetypically enter into confidentiality and invention assignment agreements with our employees and contractors, and confidentiality agreements with partieswith whom we conduct business in order to limit access to, and disclosure and use of, our proprietary information. However, we may not be successful inexecuting these agreements with every party who has access to our confidential information or contributes to the development of our technology orintellectual property rights. Those agreements that we do execute may be breached, and we may not have adequate remedies for any such breach. Thesecontractual arrangements and the other steps we have taken to protect our intellectual property rights may not prevent the misappropriation or disclosure ofour proprietary information nor deter independent development of similar technology or intellectual property by others.Monitoring unauthorized use of the content on our websites and mobile applications, and our other intellectual property and technology, is difficultand costly. Our efforts to protect our proprietary rights and intellectual property may not have been and may not be adequate to prevent theirmisappropriation or misuse. Third parties from time to time copy content or other intellectual property or technology from our solutions withoutauthorization and seek to use it for their own benefit. We generally seek to address such unauthorized copying or use, but we have not always been successfulin stopping all unauthorized use of our content or other intellectual property or technology, and may not be successful in doing so in the future. Further, wemay not have-16-been and may not be able to detect unauthorized use of our technology or intellectual property, or to take appropriate steps to enforce our intellectualproperty rights.Companies that operate in the same industry as our Cloud Services and Digital Media businesses have experienced substantial litigation regardingintellectual property. Currently, we have pending patent infringement lawsuits, both offensive and defensive, against several companies in this industry.Furthermore, we may find it necessary or appropriate to initiate claims or litigation to enforce our intellectual property rights or determine the validity andscope of intellectual property rights claimed by others. This or any other litigation to enforce or defend our intellectual property rights may be expensive andtime-consuming, could divert management resources and may not be adequate to protect our business.We may be found to have infringed the intellectual property rights of others, which could expose us to substantial damages or restrict our operations.We have been and expect to continue to be subject to legal claims that we have infringed the intellectual property rights of others. The readyavailability of damages and royalties and the potential for injunctive relief have increased the costs associated with litigating and settling patentinfringement claims. In addition, we may be required to indemnify our resellers and users for similar claims made against them. Any claims, whether or notmeritorious, could require us to spend significant time, money, and other resources in litigation, pay damages and royalties, develop new intellectualproperty, modify, design around, or discontinue existing products, services, or features, or acquire licenses to the intellectual property that is the subject ofthe infringement claims. These licenses, if required, may not be available at all or have acceptable terms. As a result, intellectual property claims against uscould have a material adverse effect on our business, prospects, financial condition, operating results and cash flows. We may be subject to risks from international operations. As we continue to expand our business operations in countries outside the U.S., our future results could be materially adversely affected by a varietyof uncontrollable and changing factors including, among others, foreign currency exchange rates; political or social unrest or economic instability in aspecific country or region; trade protection measures and other regulatory requirements which may affect our ability to provide our services; difficulties instaffing and managing international operations; and adverse tax consequences, including imposition of withholding or other taxes on payments bysubsidiaries and affiliates. Any or all of these factors could have a material adverse impact on our future business, prospects, financial condition, operatingresults and cash flows. We have only limited experience in marketing and operating our services in certain international markets. Moreover, we have in some casesexperienced and expect to continue to experience in some cases higher costs as a percentage of revenues in connection with establishing and providingservices in international markets versus in the U.S. In addition, certain international markets may be slower than the U.S. in adopting the internet and/oroutsourced messaging and communications solutions and so our operations in international markets may not develop at a rate that supports our level ofinvestments.As we continue to grow our international operations, adverse currency fluctuations and foreign exchange controls could have a material adverse effecton our financial condition and results of operations. As we expand our international operations, we could be exposed to significant risks of currency fluctuations. In some countries outside the U.S., weoffer our services in the applicable local currency, including but not limited to 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, among others. As a result, fluctuations in foreign currencyexchange rates affect the results of our operations, which in turn may materially adversely affect reported earnings and the comparability of period to periodresults of operations. Changes in currency exchange rates may also affect the relative prices at which we and foreign competitors sell our services in the samemarket. In addition, changes in the value of the relevant currencies may affect the cost of certain items required in our operations. Furthermore, we maybecome subject to exchange control regulations, which might restrict or prohibit our conversion of other currencies into U.S. Dollars. We cannot assure youthat future exchange rate movements will not have a material adverse effect on our future business, prospects, financial condition, operating results and cashflows. To date, we have not entered into foreign currency hedging transactions to control or minimize these risks.-17-We may be engaged in legal proceedings that could cause us to incur unforeseen expenses and could divert significant operational resources and ourmanagement’s time and attention. From time to time, we are subject to litigation or claims or are involved in other legal disputes or regulatory inquiries, including in the areas ofpatent infringement and anti-trust, that could negatively affect our business operations and financial condition. Such disputes could cause us to incurunforeseen expenses, divert operational resources, occupy a significant amount of our management’s time and attention and negatively affect our businessoperations and financial condition. The outcomes of such matters are subject to inherent uncertainties, carrying the potential for unfavorable rulings thatcould include monetary damages and injunctive relief. We do not always have insurance coverage for defense costs, judgments, and settlements. We may alsobe subject to indemnification requirements with business partners, vendors, current and former officers and directors, and other third parties. Payments undersuch indemnification provisions may be material. For a more detailed description of certain lawsuits in which we are involved, see Item 3. Legal Proceedings. The successful operation of our business depends upon the supply of critical business elements and marketing relationships from other companies. We depend upon third parties for critical elements of our business, including technology, infrastructure, customer service and sales and marketingcomponents. We rely on private third-party providers for our internet, telecommunications, website traffic and other connections and for co-location of asignificant portion of our servers. In addition, we rely on third-party platforms to facilitate and provide access to products sold through our sites. Anydisruption in the services provided by any of these suppliers, any adverse change in access to their platforms or services or in their terms and conditions ofuse or services, or any failure by them to handle current or higher volumes of activity could have a material adverse effect on our business, prospects,financial condition, operating results and cash flows. To obtain new Cloud Services customers, we have marketing agreements with operators of leadingsearch engines and websites and employ the use of resellers to sell our products. These arrangements typically are not exclusive and do not extend over asignificant period of time. Failure to continue these relationships on terms that are acceptable to us or to continue to create additional relationships couldhave a material adverse effect on our business, prospects, financial condition, operating results and cash flows. Our business is highly dependent on our billing systems. A significant part of our revenues depends on prompt and accurate billing processes. Customer billing is a highly complex process, and our billingsystems must efficiently interface with third-party systems, such as those of credit card processing companies. Our ability to accurately and efficiently bill ourcustomers is dependent on the successful operation of our billing systems and the third-party systems upon which we rely, such as our credit card processor,and our ability to provide these third parties the information required to process transactions. In addition, our ability to offer new services or alternative-billing plans is dependent on our ability to customize our billing systems. Any failures or errors in our billing systems or procedures could impair our abilityto properly bill our current customers or attract and service new customers, and thereby could materially and adversely affect our business and financialresults.Our success depends on our retention of our executive officers, senior management and our ability to hire and retain key personnel. Our success depends on the skills, experience and performance of executive officers, senior management and other key personnel. The loss of theservices of one or more of our executive officers, senior managers or other key employees could have a material adverse effect on our business, prospects,financial condition, operating results and cash flows. Our future success also depends on our continuing ability to attract, integrate and retain highlyqualified technical, sales and managerial personnel. Competition for these people is intense, and there can be no assurance that we can retain our keyemployees or that we can attract, assimilate or retain other highly qualified technical, sales and managerial personnel in the future. We are exposed to risk if we cannot maintain or adhere to our internal controls and procedures. We have established and continue to maintain, assess and update our internal controls and procedures regarding our business operations andfinancial reporting. Our internal controls and procedures are designed to provide reasonable assurances regarding our business operations and financialreporting. However, because of the inherent limitations in this process, internal controls and procedures may not prevent or detect all errors or misstatements.To the extent our internal controls are inadequate or not adhered to by our employees, our business, financial condition and operating results could bematerially adversely affected. -18-If we are not able to maintain internal controls and procedures in a timely manner, or without adequate compliance, we may be unable to accuratelyreport our financial results or prevent fraud and may be subject to sanctions or investigations by regulatory authorities such as the SEC or NASDAQ. Anysuch action or restatement of prior-period financial results as a result could harm our business or investors’ confidence in j2 Global, and could cause our stockprice to fall.Our level of indebtedness could adversely affect our financial flexibility and our competitive position.Our level of indebtedness could have significant effects on our business. For example, it could:•make it more difficult for us to satisfy our obligations, including our current indebtedness and any other indebtedness we may incur in the future;•increase our vulnerability to adverse changes in general economic, industry and competitive conditions;•require us to dedicate a substantial portion of our cash flow from operations to make payments on our indebtedness, thereby reducing theavailability of our cash flow to fund working capital, capital expenditures, acquisitions and other elements of our business strategy and other generalcorporate purposes, including share repurchases and payment of dividends;•limit our flexibility in planning for, or reacting to, changes in our business and the industries in which we operate;restrict us from exploiting business opportunities;•place us at a competitive disadvantage compared to our competitors that have less indebtedness; and•limit our ability to borrow additional funds for working capital, capital expenditures, acquisitions, debt service requirements, execution of ourbusiness strategy or other general corporate purposes.In addition, (i) the indenture governing the 6.0% Senior Notes of our subsidiary, j2 Cloud Services, LLC (“j2 Cloud Services”) and (ii) the CreditAgreement, dated as of January 7, 2019 (the “MUFG Credit Facility”), by and among j2 Cloud Services, the lenders from time to time party thereto andMUFG Union Bank, N.A., as sole lead arranger and as administrative agent, contain, and the agreements evidencing or governing other future indebtednessmay contain, restrictive covenants that may limit our ability to engage in activities that may be in our long-term best interests. Our failure to comply withthose covenants could result in an event of default which, if not cured or waived, could result in the acceleration of all of our indebtedness.The indenture governing the 6.0% Senior Notes and MUFG Credit Facility contain a number of restrictive covenants that impose significantoperating and financial restrictions and may limit our ability to plan for or react to market conditions, meet capital needs or make acquisitions, or otherwiserestrict our activities or business plans. These include restrictions on our ability to:•incur additional indebtedness;•create liens;•engage in sale-leaseback transactions;•pay dividends or make distributions in respect of capital stock;•purchase or redeem capital stock;•make investments or certain other restricted payments;•sell assets;•enter into transactions with affiliates;•amend the terms of certain other indebtedness and organizational documents; or•effect a consolidation or merger.A breach of the covenants under the indenture governing the 6.0% Senior Notes or under the MUFG Credit Facility could result in an event ofdefault. Such a default may allow the creditors to accelerate the related indebtedness and may result in the acceleration of any other indebtedness to which across-acceleration or cross-default provision applies. In the event our lenders (including under the MUFG Credit Facility) or the holders of our 6.0% SeniorNotes accelerate the repayment of our borrowings, we and our subsidiaries may not have sufficient assets to repay that indebtedness or our otherindebtedness. To service our debt and fund our other capital requirements, we will require a significant amount of cash, and our ability to generate cash will dependon many factors beyond our control.Our ability to meet our debt service obligations and to fund working capital, capital expenditures, acquisitions and other elements of our businessstrategy and other general corporate purposes, including share repurchases and payment of dividends, will depend upon our future performance, which willbe subject to financial, business and other factors affecting our operations. To some extent, this is subject to general and regional economic, financial,competitive, legislative, regulatory and other factors-19-that are beyond our control. We cannot ensure that we will generate cash flow from operations, or that future borrowings will be available, in an amountsufficient to enable us to pay our debt or to fund our other liquidity needs.If our cash flows and capital resources are insufficient to fund our debt service obligations, we could face substantial liquidity problems and couldbe forced to reduce or delay investments and capital expenditures or to dispose of material assets or operations, seek additional indebtedness or equity capitalor restructure or refinance our indebtedness. We may not be able to effect any such alternative measures on commercially reasonable terms or at all and, evenif successful, those alternative actions may not allow us to meet our scheduled debt service obligations. The indenture governing the 6.0% Senior Notes andthe MUFG Credit Facility restrict our ability to dispose of assets and may also restrict our ability to raise indebtedness or equity capital to be used to repayother indebtedness when it becomes due. We may not be able to consummate those dispositions or to obtain proceeds in an amount sufficient to meet anydebt service obligations then due.Our inability to generate sufficient cash flows to satisfy our debt obligations, or to refinance our indebtedness on commercially reasonable terms, orat all, would materially and adversely affect our financial position and results of operations.We may not have the ability to raise the funds necessary to settle conversions of the Convertible Notes or to repurchase the Convertible Notes upon afundamental change or on a repurchase date or the Senior Notes upon a change in control, and our future debt may contain limitations on our ability topay cash upon conversion or repurchase of the Convertible Notes or the Senior Notes.Holders of the 3.25% convertible senior notes due June 15, 2029 (the “Convertible Notes”) will have the right to require us to repurchase theirConvertible Notes on each of June 15, 2021 and June 15, 2024 and upon the occurrence of a fundamental change (as defined in the indenture governing theConvertible Notes), in each case, at a repurchase price equal to 100% of the principal amount of the Convertible Notes to be repurchased, plus accrued andunpaid interest, if any. Holders of the Senior Notes also have the right to require our subsidiary, j2 Cloud Services, to repurchase the Senior Notes upon theoccurrence of a change in control (as defined in the indenture governing the Senior Notes) at a repurchase price equal to 101% of the principal amount of theSenior Notes to be repurchased, plus accrued and unpaid interest, if any. In addition, upon conversion of the Convertible Notes, unless we elect to deliversolely shares of our common stock to settle such conversion (other than paying cash in lieu of delivering any fractional share), we will be required to makecash payments in respect of the Convertible Notes being converted. It is our intention to satisfy our conversion obligation by paying and delivering acombination of cash and shares of our common stock, where cash will be used to settle each $1,000 of principal and the remainder, if any, will be settled viashares of our common stock. However, we may not have enough available cash or be able to obtain financing at the time we are required to make repurchasesof Convertible Notes or Senior Notes surrendered therefor or Convertible Notes being converted. In addition, our ability to repurchase the Convertible Notesor Senior Notes or to pay cash upon conversions of the Convertible Notes may be limited by law, by regulatory authority or by agreements governing ourfuture indebtedness. Our failure to repurchase Convertible Notes or Senior Notes at a time when the repurchase is required by the applicable indenture or topay any cash payable on future conversions of the Convertible Notes as required by the Convertible Notes indenture would constitute a default under theConvertible Notes indenture. A default under either indenture or the fundamental change or change of control itself could also lead to a default underagreements governing our future indebtedness. If the repayment of the related indebtedness were to be accelerated after any applicable notice or graceperiods, we may not have sufficient funds to repay the indebtedness and repurchase the Convertible Notes or the Senior Notes or make cash payments uponconversions of the Convertible Notes.The conditional conversion feature of the Convertible Notes, if triggered, may adversely affect our financial condition and operating results.In the event the conditional conversion feature of the Convertible Notes is triggered, holders of Convertible Notes will be entitled to convert theConvertible Notes at any time during specified periods at their option. If one or more holders elect to convert their Convertible Notes, unless we elect tosatisfy our conversion obligation by delivering solely shares of our common stock (other than paying cash in lieu of delivering any fractional share), wewould be required to settle a portion or all of our conversion obligation through the payment of cash, which could adversely affect our liquidity. In addition,even if holders do not elect to convert their Convertible Notes, we could be required under applicable accounting rules to reclassify all or a portion of theoutstanding principal of the notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.-20-Our interest deductions attributable to the Convertible Notes may be deferred, limited or eliminated under certain conditions.We believe that the Convertible Notes are subject to the IRS contingent payment debt instrument regulations. This conclusion is subject to complexfactual and legal uncertainty and is not binding on the IRS or the courts. If the IRS takes a contrary position and a court sustains the IRS’ position, our taxdeductions would be severely diminished with a resulting adverse effect on our cash flow and ability to service the Convertible Notes.The Company is subject to laws and regulations worldwide, changes to which could increase the Company’s costs and individually or in the aggregateadversely affect the Company’s business.The Company is subject to laws and regulations affecting its domestic and international operations in a number of areas. These U.S. and foreign lawsand regulations affect the Company’s activities in areas including, but not limited to, labor, advertising, digital content, consumer protection, real estate,billing, e-commerce, promotions, quality of services, telecommunications, mobile communications and media, television, intellectual property ownershipand infringement, tax, import and export requirements, anti-corruption, foreign exchange controls and cash repatriation restrictions, data privacy and datalocalization requirements, anti-competition, environmental, health and safety. Compliance with these laws, regulations and similar requirements may beonerous and expensive, and they may be inconsistent from jurisdiction to jurisdiction, further increasing the cost of compliance and doing business. Anysuch costs, which may rise in the future as a result of changes in these laws and regulations or in their interpretation, could individually or in the aggregatemake the Company’s products and services less attractive to the Company’s customers, delay the introduction of new products in one or more regions, orcause the Company to change or limit its business practices. The Company has implemented policies and procedures designed to ensure compliance withapplicable laws and regulations, but there can be no assurance that the Company’s employees, contractors, or agents will not violate such laws andregulations or the Company’s policies and procedures.The United Kingdom’s decision to end its membership in the European Union and other adverse changes in global financial markets could materiallyand adversely impact our results of operations, financial condition and cash flows.In June 2016, a majority of voters in the United Kingdom elected to withdraw from the European Union (“EU”) in a national referendum(“BREXIT”). The results of the United Kingdom’s BREXIT has caused, and may continue to cause, volatility in global stock markets, currency exchange ratefluctuations and global economic uncertainty. Although it is unknown what the terms of the United Kingdom’s future relationship with the EU will be, it ispossible that there will be higher tariffs or greater restrictions on imports and exports between the United Kingdom and the EU and increased regulatorycomplexities. The effects of BREXIT will depend on whether the United Kingdom and the EU are able to reach an agreement to retain United Kingdomaccess to EU markets either during a transitional period or on a permanent basis and, if so, the terms of those agreements. These measures could potentiallydisrupt our access to human capital and some of our target markets and jurisdictions in which we operate, and adversely change tax benefits or liabilities inthese or other jurisdictions. In addition, BREXIT could lead to legal uncertainty and potentially divergent national laws and regulations as the UnitedKingdom determines which EU laws to replace or replicate. Any of these effects of BREXIT, among others, and other adverse changes in global financialmarkets could have a materially adverse impact on our results of operations, financial condition, cash flows and could render us either unable to access globalfinancial markets or able to access these markets only at higher interest costs and with restrictive financial or other conditions.Changes in our tax rates, changes in tax treatment of companies engaged in e-commerce, the adoption of new U.S. or international tax legislation, orexposure to additional tax liabilities may adversely impact our financial results.We are a U.S.-based multinational company subject to taxes in the U.S. and numerous foreign jurisdictions, including Ireland, where a number of oursubsidiaries are organized. Our provision for income taxes is based on a jurisdictional mix of earnings, statutory tax rates and enacted tax rules, includingtransfer pricing. Due to economic and political conditions, tax rates in various jurisdictions may be subject to significant change. As a result, our futureeffective tax rates could be affected by changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred taxassets and liabilities, or changes in tax laws or their interpretation. These changes may adversely impact our effective tax rate and harm our financial positionand results of operations.On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (“Tax Act” or “2017 Tax Act”) and all adjustments to the 2017 estimates wereincorporated into our financial results in 2018. There continues to be a risk that states or foreign jurisdictions may amend their tax laws in response to the TaxAct, which could have a material impact on our future results.-21-We are subject to examination of our income tax returns by the U.S. Internal Revenue Service (“IRS”) and other domestic and foreign tax authorities.We are currently under audit by the IRS for tax years 2012 through 2016 and the California Franchise Tax Board (“FTB”) for tax years 2012, 2013, 2015 and2016. The FTB has agreed to suspend its audit for 2012 and 2013 pending the outcome of the IRS audit for such tax years. However, the FTB has commencedthe initial information gathering state of the 2015 and 2016 audit period. We are also under audit or review by other state and foreign taxing authorities forvarious periods. Our future income tax returns are likely to become the subject of audits by these or other taxing authorities. We regularly assess thelikelihood of adverse outcomes resulting from these examinations to determine the adequacy of our income tax reserves and expense. If our reserves are notsufficient to cover these contingencies, such inadequacy could materially adversely affect our business, prospects, financial condition, operating results, andcash flows.In addition, due to the global nature of the internet, it is possible that various states or foreign countries might attempt to impose additional or newregulation on our business or levy additional or new sales, income or other taxes relating to our activities. Tax authorities at the international, federal, stateand local levels are currently reviewing the appropriate treatment of companies engaged in e-commerce. New or revised international, federal, state or localtax regulations or court decisions may subject us or our customers to additional sales, income and other taxes. For example, Congress is considering variousapproaches to legislation that would require companies engaged in e-commerce to collect sales taxes on internet revenue and a growing number of U.S. statesand certain foreign jurisdictions have adopted or are considering proposals to impose obligations on remote sellers and online marketplaces to collect taxeson their behalf. Additionally, the U.S. Supreme Court ruling in South Dakota v. Wayfair, Inc., No.17-494 reversed a longstanding precedent that remotesellers are not required to collect state and local sales taxes. We cannot predict the effect of these and other attempts to impose sales, income or other taxes one-commerce. The application of existing, new or revised taxes on our business, in particular, sales taxes, VAT and similar taxes would likely increase the costof doing business online and decrease the attractiveness of selling products over the internet. The application of these taxes on our business could also createsignificant increases in internal costs necessary to capture data and collect and remit taxes. Any of these events could have a material adverse effect on ourbusiness, financial condition, and operating results.Moreover, we are currently under audit for indirect taxes in several states and municipalities. We currently have no material financial reservesestablished with respect to indirect taxes. If a material indirect tax liability associated with prior periods were to be recorded, it could materially affect ourfinancial results for the period in which it is recorded.Furthermore, much of our Digital Media e-commerce revenue comes from arrangements in which we are paid by retailers to promote their digitalproduct and service offers on our sites. Certain states have implemented regulations that require retailers to collect and remit sales taxes on sales made toresidents of such states if a publisher, such as us, that facilitated that sale is a resident of such state. Paid retailers in our marketplace that do not currently havesales tax nexus in any state that subsequently passes similar regulations and in which we have operations, employees or contractors now or in the future, maysignificantly alter the manner in which they pay us, cease paying us for sales we facilitate for that retailer in such state, or cease using our marketplace, eachof which could adversely impact our business, financial condition, and operating results.Taxing authorities may successfully assert that we should have collected, or in the future should collect sales and use, telecommunications or similartaxes, and we could be subject to liability with respect to past or future tax, which could adversely affect our operating results.We do not collect and remit sales and use, telecommunications, or similar taxes in all jurisdictions in which we have sales, based on our belief thatsuch taxes are not applicable or legally required. Several states and other taxing jurisdictions have presented or threatened us with assessments, alleging thatwe are required to collect and remit such taxes there. The recent U.S. Supreme Court ruling in South Dakota v. Wayfair, Inc., No. 17-494 reversed existingconstitutional precedent that remote sellers are not required to collect and remit such taxes. The Company is evaluating the impact of the ruling. Thejurisdictions where we have sales may apply more rigorous enforcement efforts or take more aggressive positions in the future that could result in greater taxliability. In addition, in the future we may also decide to engage in activities that would require us to pay sales and use, telecommunications, or similar taxesin new jurisdictions. Such tax assessments, penalties and interest or future requirements may materially adversely affect our business, financial condition andoperating results.-22-Risks Related To Our IndustriesOur services may become subject to burdensome regulation, which could increase our costs or restrict our service offerings. We believe that most of our cloud services are “information services” under the Telecommunications Act of 1996 and related precedent, or, if not“information services,” that we are entitled to other exemptions, meaning that we generally are not currently subject to U.S. telecommunications servicesregulation at both the federal and state levels. In connection with our Cloud Services business, we utilize data transmissions over public telephone lines andother facilities provided by third-party carriers. These transmissions are subject to foreign and domestic laws and regulation by the Federal CommunicationsCommission (the “FCC”), state public utility commissions and foreign governmental authorities. These regulations affect the availability of numbers, theprices we pay for transmission services, the administrative costs associated with providing our services, the competition we face from telecommunicationsservice providers and other aspects of our market. However, as messaging and communications services converge and as the services we offer expand, we maybecome subject to FCC or other regulatory agency regulation. It is also possible that a federal or state regulatory agency could take the position that ourofferings, or a subset of our offerings, are properly classified as telecommunications services or otherwise not entitled to certain exemptions upon which wecurrently rely. Such a finding could potentially subject us to fines, penalties or enforcement actions as well as liabilities for past regulatory fees and charges,retroactive contributions to various telecommunications-related funds, telecommunications-related taxes, penalties and interest. It is also possible that such afinding could subject us to additional regulatory obligations that could potentially require us either to modify our offerings in a costly manner, diminish ourability to retain customers, or discontinue certain offerings, in order to comply with certain regulations. Changes in the regulatory environment coulddecrease our revenues, increase our costs and restrict our service offerings. In many of our international locations, we are subject to regulation by theapplicable governmental authority. In the U.S., Congress, the FCC, and a number of states require regulated telecommunications carriers to contribute to federal and/or state UniversalService Funds (“USF”). Generally, USF is used to subsidize the cost of providing service to low-income customers and those living in high cost or rural areas.Congress, the FCC and a number of states are reviewing the manner in which a provider’s contribution obligation is calculated, as well as the types of entitiessubject to USF contribution obligations. If any of these reforms are adopted, they could cause us to alter or eliminate our non-paid services and to raise theprice of our paid services, which could cause us to lose customers. Any of these results could lead to a decrease in our revenues and net income and couldmaterially adversely affect our business, prospects, financial condition, operating results and cash flows. The Telephone Consumer Protection Act (the “TCPA”) and FCC rules implementing the TCPA, as amended by the Junk Fax Act, prohibit sendingunsolicited facsimile advertisements to telephone fax machines. The FCC, the Federal Trade Commission (“FTC”), or both may initiate enforcement actionagainst companies that send “junk faxes” and individuals also may have a private cause of action. Although entities that merely transmit facsimile messageson behalf of others are not liable for compliance with the prohibition on faxing unsolicited advertisements, the exemption from liability does not apply to faxtransmitters that have a high degree of involvement or actual notice of an illegal use and have failed to take steps to prevent such transmissions. We takesignificant steps to ensure that our services are not used to send unsolicited faxes on a large scale, and we do not believe that we have a high degree ofinvolvement in or notice of the use of our service to broadcast junk faxes. However, because fax transmitters do not enjoy an absolute exemption fromliability under the TCPA and related FCC and FTC rules, we could face inquiries from the FCC and FTC or enforcement actions by these agencies, or privatecauses of action, if someone uses our service for such impermissible purposes. If this were to occur and we were to be held liable for someone’s use of ourservice for transmitting unsolicited faxes, the financial penalties could cause a material adverse effect on our operations and harm our business reputation. Likewise, the TCPA also prohibits placing calls or sending text messages to mobile phones without “prior express consent” subject to limitedexceptions. Parties that solely enable calling or text messaging are only directly liable under the TCPA pursuant to federal common law vicarious liabilityprinciples. We take significant steps to ensure that users understand that they are responsible for how they use our technology including complying withrelevant federal and state law. However, because we do not enjoy absolute exemption from liability under the TCPA and related FCC and FTC rules, we couldface inquiries from the FCC and FTC or enforcement actions by these agencies, or private causes of action, if someone uses our service for such impermissiblepurposes. If this were to occur and we were to be held liable for someone’s use of our service for unauthorized calling or text messaging mobile users, thefinancial penalties could cause a material adverse effect on our operations and harm our business reputation.Also, in the U.S., the Communications Assistance to Law Enforcement Act (“CALEA”) requires telecommunications carriers to be capable ofperforming wiretaps and recording other call identifying information. In September 2005, the FCC released an order defining telecommunications carriersthat are subject to CALEA obligations as facilities-based broadband internet access providers and Voice-over-Internet-Protocol (“VoIP”) providers thatinterconnect with the public switched telephone network. As-23-a result of this definition, we do not believe that j2 Global is subject to CALEA. However, if the category of service providers to which CALEA appliesbroadens to also include information services, that change may impact our operations.We are subject to a variety of new and existing laws and regulations which could subject us to claims, judgments, monetary liabilities and otherremedies, and to limitations on our business practices.The application of existing domestic and international laws and regulations to us relating to issues such as defamation, pricing, advertising,taxation, promotions, billing, consumer protection, accessibility, content regulation, data privacy, intellectual property ownership and infringement, andaccreditation in many instances is unclear or unsettled. In addition, we will also be subject to any new laws and regulations directly applicable to ourdomestic and international activities. Further, the application of existing laws to us or our subsidiaries regulating or requiring licenses for certain businessesof our advertisers including, for example, distribution of pharmaceuticals, alcohol or other regulated substances, adult content, tobacco, or firearms, as well asinsurance and securities brokerage, and legal services, can be unclear. Internationally, we may also be subject to laws regulating our activities in foreigncountries and to foreign laws and regulations that are inconsistent from country to country. Our Digital Media and Cloud Services businesses utilizecontractors, freelancers and/or staff from third party outsourcers to provide content and other services. However, in the future, arrangements with suchindividuals may not be deemed appropriate by the relevant government authority, which could result in additional costs and expenses. We may incursubstantial liabilities for expenses necessary to defend such litigation or to comply with these laws and regulations, as well as potential substantial penaltiesfor any failure to comply. Compliance with these laws and regulations may also cause us to change or limit our business practices in a manner adverse to ourbusiness.The use of consumer data by online service providers and advertising networks is a topic of active interest among federal, state, and internationalregulatory bodies, and the regulatory environment is unsettled and evolving. Federal, state, and international laws and regulations govern the collection, use,retention, disclosure, sharing, and security of data that we receive from and about our users. Our privacy and cookie policies and practices concerning thecollection, use, and disclosure of user data are posted on our websites.A number of U.S. federal laws, including those referenced below, impact our business. The Digital Millennium Copyright Act (“DMCA”) isintended, in part, to limit the liability of eligible online service providers for listing or linking to third-party websites that include materials that infringecopyrights or other rights of others. Portions of the Communications Decency Act (“CDA”) are intended to provide statutory protections to online serviceproviders who distribute third-party content. We rely on the protections provided by both the DMCA and the CDA in conducting our business. If these orother laws or judicial interpretations are changed to narrow their protections, or if international jurisdictions refuse to apply similar provisions in foreignlawsuits, we will be subject to greater risk of liability, our costs of compliance with these regulations or to defend litigation may increase, or our ability tooperate certain lines of business may be limited. The Children’s Online Privacy Protection Act (“COPPA”) is intended to impose restrictions on the ability ofonline services to collect some types of information from children under the age of 13. In addition, the Providing Resources, Officers, and Technology toEradicate Cyber Threats to Our Children Act of 2008 (“PROTECT Act”) requires online service providers to report evidence of violations of federal childpornography laws under certain circumstances, as well as other federal, state or international laws and legislative efforts designed to protect children on theinternet may impose additional requirements on us. U.S. export control laws and regulations impose requirements and restrictions on exports to certainnations and persons and on our business.In certain instances, we may be subject to enhanced privacy obligations based on the type of information we store and process. While we believe weare in compliance with the relevant laws and regulations, we could be subject to enforcement actions, fines, forfeitures, and other adverse actions.The Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003 (the “CAN-SPAM Act”), which allows for penalties that runinto the millions of dollars, requires commercial emails to include identifying information from the sender and a mechanism for the receiver to opt out ofreceiving future emails. Several states have enacted additional, more restrictive and punitive laws regulating commercial email. Foreign legislation exists aswell, including Canada’s Anti-Spam Legislation and the European laws that have been enacted pursuant to the GDPR and European Union Directive2002/58/EC and its amendments. We use email as a significant means of communicating with our existing and potential users. We believe that our emailpractices comply with the requirements of the CAN-SPAM Act, state laws, and applicable foreign legislation. If we were ever found to be in violation of theselaws and regulations, or any other laws or regulations, our business, financial condition, operating results, and cash flows could be materially adverselyaffected.Many third-parties are examining whether the Americans with Disabilities Act (“ADA”) concept of public accommodation also extends to websitesand to mobile applications. Generally, some plaintiffs have argued that websites and mobile applications-24-are places of public accommodation under Title III of the ADA and, as such, must be equipped so that individuals with disabilities can navigate and make useof subject websites and mobile applications. The issue is currently under litigation and there is a split in the federal court of appeals circuits as to what theADA requires. Certain appellate circuits have found that websites standing alone are subject to the ADA and therefore must be accessible to people withdisabilities. Other circuits, including the Ninth Circuit, which has appellate jurisdiction over federal district courts in California and is where our company isheadquartered, have found that in order for websites to be places of public accommodation, and therefore subject to the ADA, there must be both a nexusbetween the website and the goods and services the website provides as well as a physical brick and mortar location for consumers. We cannot predict howthe ADA will ultimately be interpreted as applied to websites and mobile applications.We believe we are in compliance with relevant law. If the law changes or if certain courts with appellate jurisdiction outside of California attempt toexercise jurisdiction over us and find that our website and mobile applications must comply with the ADA, then any adjustments or requirements toimplement any changes prescribed by the ADA could result in increased costs to our business, we may become subject to injunctive relief, plaintiffs may beable to recover attorneys’ fees, and it is possible that, while the ADA does not provide for monetary damages, we become subject to such damages throughstate consumer protection or other laws. It is possible that these potential liabilities could cause a material adverse effect on our operations and harm ourbusiness reputation.Native advertising is an increasing part of our Digital Media business’s online advertising revenue. On December 22, 2015, the FTC issuedGuidelines and an Enforcement Policy Statement on native advertising, described by the FTC as, in part, ads which often “resemble the design, style, andfunctionality of the media in which they are disseminated.” The Company believes it is compliant with the requirements of these guidelines on our currentpractices and offerings. However, we will continue to monitor what effect this guideline and other related government regulations, and how the FTC enforcesit, could have on our native advertising and branded content business. In addition, the timing and extent of any enforcement by the FTC with regard to thenative advertising practices by the Company, or others, could reduce the revenue we generate from this line of business.As of May 25, 2018, certain data transfers from and between the European Union (“EU”) are subject to the GDPR. As discussed in more detail below,the GDPR prohibits data transfers from the EU to other countries outside of the EU, including the U.S., without appropriate security safeguards and practicesin place. Previously, for certain data transfers from and between the EU and the U.S., j2 Global, like many other companies, had relied on what is referred to asthe “EU-U.S. Safe Harbor,” in order to comply with privacy obligations imposed by EU countries. The European Court of Justice invalidated the EU-U.S. SafeHarbor. Although U.S. and EU policymakers approved a new framework known as “Privacy Shield” that would allow companies like us to continue to rely onsome form of a safe harbor for the transfer of certain data from the EU to the U.S., the Privacy Shield may not be adequate for all data transfers between the EUand U.S. It is also unclear whether the United Kingdom (“UK”) will offer a similar program to Privacy Shield if the UK leaves the EU. Additionally, othercountries that relied on the EU-U.S. Safe Harbor that were not part of the EU have also found that data transfers to the U.S. are no longer valid based on theEuropean Court of Justice ruling. We cannot predict how or if this issue will be resolved nor can we evaluate any potential liability at this time.The Company has put into place various alternative frameworks and grounds on which to rely in order to be in compliance with relevant law for thetransfer of data from overseas locations to the U.S. including reviewing Company’s data collection process, procedures and putting into place DataProcessing Agreements with vendors, partners and other third parties. Some independent data regulators have adopted the position that other forms ofcompliance are also invalid though the legal grounds for these findings remain unclear at this time. We cannot predict at this time whether the alternativegrounds that j2 Global continues to implement will be found to be consistent with relevant laws nor can we evaluate what, if any, potential liability may be atthis time.On June 28, 2018, the California legislature enacted the CCPA, which is scheduled to take effect on January 1, 2020. The CCPA, which coversbusiness that obtain or access personal information on California resident consumers, grants consumers enhanced privacy rights and control over theirpersonal information and imposes significant requirements on covered companies with respect to consumer data privacy rights. The Company is assessing theimpact of this law on its business and operations.Further, failure or perceived failure by us to comply with our policies, applicable requirements, or industry self-regulatory principles related to thecollection, use, sharing, or security of personal information, or other privacy, data-retention or data protection matters could result in a loss of user confidencein us, damage to our brands, and ultimately in a loss of users and advertising partners, which could adversely affect our business. Changes in these or anyother laws and regulations or the interpretation of them could increase our future compliance costs, limit the amount and type of data we can collect, transfer,share, or sell, make our products and services less attractive to our users, or cause us to change or limit our business practices. Further, any failure on our partto comply with any relevant laws or regulations may subject us to significant civil or criminal liabilities.-25-Moreover, our Everyday Health business may be subject to government oversight or regulation by Congress, the FDA, the U.S. Department of Healthand Human Services and state regulatory agencies. In addition, certain services provided by Everyday Health are also subject to private regulation bothdirectly by accrediting bodies and indirectly by industry codes followed by commercial supporters of CME and CE programs.If we are subject to burdensome laws or regulations or if we fail to adhere to the requirements of public or private regulations, our business, financialcondition and results of operations could suffer.Government and private actions or self-regulatory developments regarding internet privacy matters could adversely affect our ability to conduct ourbusiness.Our Digital Media business collects and sells data about its users’ online behavior and the revenue associated with this activity could be impactedby government regulation and enforcement, industry trends, self-regulation, technology changes, consumer behavior and attitude, and private action. Wealso use such information to work with our advertisers to more effectively target ads to relevant users and consumers, which ads command a higher rate.Many of our users voluntarily provide us with demographic and other information when they register for one of our service or properties. In order forour Everyday Health brand to deliver marketing and communications solutions to pharmaceutical companies, health insurers and hospital systems, we relyon data provided by our customers. We also purchase data from third-party sources to augment our user profiles and marketing databases so we are better ableto personalize content, enhance our analytical capabilities and better target our marketing programs. If changes in user sentiment regarding the sharing ofinformation results in a significant number of visitors to our websites and applications refusing to provide us with demographic information or informationabout their specific health interests, our ability to personalize content for our users and provide targeted marketing solutions would be impaired. If our userschoose to opt-out of having their data used for behavioral targeting, it would be more difficult for us to offer targeted marketing programs to our customers. We append data from third-party sources to augment our user profiles. If we are unable to acquire data from third-party sources for whatever reason,or if there is a marked increase in the cost of obtaining such data, our ability to personalize content and provide marketing solutions could be negativelyimpacted.The use of such consumer data by online service providers and advertising networks is a topic of active interest among federal, state, andinternational regulatory bodies, and the regulatory environment is unsettled. Federal, state, and international laws and regulations govern the collection, use,retention, disclosure, sharing and security of data that we receive from and about our users. Our privacy policies and practices concerning the collection, use,and disclosure of user data are posted on our websites.New and expanding “Do Not Track” regulations have recently been enacted or proposed that protect users’ right to choose whether or not to betracked online. These regulations seek, among other things, to allow consumers to have greater control over the use of private information collected online,to forbid the collection or use of online information, to demand a business to comply with their choice to opt out of such collection or use, and to place limitsupon the disclosure of information to third party websites. These laws and regulations could have a significant impact on the operation of our advertising anddata businesses. U.S. regulatory agencies have also placed an increased focus on online privacy matters and, in particular, on online advertising activities thatutilizes cookies or other tracking tools. Consumer and industry groups have expressed concerns about online data collection and use by companies, whichhas resulted in the release of various industry self-regulatory codes of conduct and best practice guidelines that are binding for member companies and thatgovern, among other things, the ways in which companies can collect, use and disclose user information, how companies must give notice of these practicesand what choices companies must provide to consumers regarding these practices.We may be required or otherwise choose to adopt Do Not Track mechanisms or self-regulation principles, in which case our ability to use ourexisting tracking technologies, to collect and sell user behavioral data, and permit their use by other third parties could be impaired. This could cause our netrevenues to decline and adversely affect our operating results.U.S. and foreign governments have enacted or considered or are considering legislation or regulations that could significantly restrict our ability tocollect, augment, analyze, use and share anonymous data, which could increase our costs and reduce our revenue. -26-We operate across many different markets both domestically and internationally which may subject us to cybersecurity, privacy, data security and dataprotection laws with uncertain interpretations as well as impose conflicting obligations on us.Cybersecurity, privacy, data security, and data protection laws are constantly evolving at the federal and state levels in the United States, as well asabroad. We are currently subject to such laws both at the federal and state levels in the U.S. as well as similar laws in a variety of international jurisdictions.The interpretation of these laws may be uncertain and may also impose confliction obligations on us. While we work to comply with all applicable law andrelevant “best practices” addressing cybersecurity, privacy, data security and data protection, this is an area of the law that is constantly evolving as are therelevant industry codes and threat matrix. Further it is possible that applicable law and “best practices” are interpreted in an inconsistent or conflictingmanner either by differing federal, state or international authorities or across the jurisdictions in which we operate. Any failure or perceived failure by us, ourpartners, our vendors, or third parties on which we rely could result in a significant liability to us (including in the form of judicial decisions and/orsettlements, regulatory findings and/or forfeitures, and other means), cause considerable harm to us and our reputation (including requiring notification tocustomers, regulators, and/or the media), cause a loss of confidence in our products and services, and deter current and potential customers from using ourservices. Any of these events could have a material adverse effect on our business, prospects, financial condition, operating results and cash flows.The GDPR imposes significant compliance costs and exposes the Company to substantial risks.The EU has traditionally imposed more strict obligations under data privacy laws and regulations. Individual EU member countries have haddiscretion with respect to their interpretation and implementation of EU data privacy laws, resulting in a variation of privacy standards from country tocountry. The GDPR harmonizes EU data privacy laws and contains significant obligations and requirements that have resulted in a greater complianceburden with respect to our operations and data use in Europe, which will continue to increase our costs. Additionally, government authorities will have morepower to enforce compliance and impose substantial penalties for any failure to comply. In addition, individuals have the right to compensation under theGDPR. In the event the Company fails to maintain compliance, the Company could be exposed to material damages, costs and/or fines if an EU governmentauthority or EU resident commenced an action. Failure to comply or maintain compliance could cause considerable harm to us and our reputation (includingrequiring notification to customers, regulators, and/or the media), cause a loss of confidence in our products and services, and deter current and potentialcustomers from using our services. Any of these events could have a material adverse effect on our business, prospects, financial condition, operating resultsand cash flows.We face potential liability related to the privacy and security of health-related information we collect from, or on behalf of, our consumers andcustomers. The privacy and security of information about the physical or mental health or condition of an individual is an area of significant focus in the U.S.because of heightened privacy concerns and the potential for significant consumer harm from the misuse of such sensitive data. We have procedures andtechnology in place intended to safeguard the information we receive from customers and users of our services from unauthorized access or use. The Privacy Standards and Security Standards under the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) establish a set ofbasic national privacy and security standards for the protection of individually identifiable health information by health plans, healthcare clearinghouses andcertain healthcare providers, referred to as “covered entities”, and the business associates with whom such covered entities contract for services. Notably,whereas HIPAA previously directly regulated only these covered entities, the Health Information Technology for Economic and Clinical Health Act of 2009(“HITECH”) makes certain of HIPAA’s Privacy and Security Standards directly applicable to covered entities’ business associates. As a result, businessassociates are now subject to significant civil and criminal penalties for failure to comply with applicable Privacy and Security Standards. Additionally,certain states have adopted comparable privacy and security laws and regulations, some of which may be more stringent than HIPAA. HIPAA directly applies to covered entities such as hospital clients of certain of our subsidiaries. Since these clients disclose protected healthinformation to our subsidiaries so that those subsidiaries can provide certain services to them, those subsidiaries are business associates of those clients. Inaddition, we may sign business associate agreements in connection with the provision of the products and services developed for other third parties or inconnection with certain of our other services that may transmit or store protected health information. Failure to comply with the requirements of HIPAA or HITECH or any of the applicable federal and state laws regarding patient privacy, identity theftprevention and detection, breach notification and data security may subject us to penalties, including-27-civil monetary penalties and, in some circumstances, criminal penalties or contractual liability under agreements with our customers and clients. Any failureor perception of failure of our products or services to meet HIPAA, HITECH and related regulatory requirements could expose us to risks of investigation,notification, litigation, penalty or enforcement, adversely affect demand for our products and services and force us to expend significant capital and otherresources to modify our products or services to address the privacy and security requirements of our clients and HIPAA and HITECH. Developments in the healthcare industry could adversely affect our business. A significant portion of Everyday Health’s advertising and sponsorship revenues is derived from the healthcare industry, including pharmaceutical,over-the-counter and consumer-packaged-goods companies, and could be affected by changes affecting healthcare spending. Industry changes affectinghealthcare spending could impact the market for these offerings. General reductions in expenditures by healthcare industry participants could result from,among other things: •government regulation or private initiatives that affect the manner in which healthcare industry participants interact with consumers and the generalpublic;•consolidation of healthcare industry participants;•reductions in governmental funding for healthcare; and•adverse changes in business or economic conditions affecting pharmaceutical companies or other healthcare industry participants. Even if general expenditures by industry participants remain the same or increase, developments in the healthcare industry may result in reducedspending in some or all of the specific market segments that we serve now or in the future. For example, use of our content offerings and the sale of ourproducts and services could be affected by: •changes in the design and provision of health insurance plans;•a decrease in the number of new drugs or pharmaceutical products coming to market; and•decreases in marketing expenditures by pharmaceutical companies as a result of governmental regulation or private initiatives that discourage orprohibit advertising or sponsorship activities by pharmaceutical companies. The healthcare industry has changed significantly in recent years, and we expect that significant changes to the healthcare industry will continue tooccur. However, the timing and impact of developments in the healthcare industry are difficult to predict. We cannot assure you that the demand for ourofferings will continue to exist at current levels or that we will have adequate technical, financial and marketing resources to react to changes in thehealthcare industry. Government regulation of healthcare creates risks and challenges with respect to our compliance efforts and our business strategies with our EverydayHealth brand. The healthcare industry is highly regulated and subject to changing political, legislative, regulatory and other influences. Existing and future lawsand regulations affecting the healthcare industry could create unexpected liabilities for us, cause us to incur additional costs and restrict our operations.Many healthcare laws are complex, and their application may not be clear. Our failure to accurately anticipate the application of these laws and regulations,or other failure to comply with such laws and regulations, could create liability for us. Even in areas where we are not subject to healthcare regulationdirectly, we may become involved in governmental actions or investigations through our relationships with customers that are regulated, and participation insuch actions or investigations, even if we are not a party and not the subject of an investigation, may cause us to incur significant expenses. For example, there are federal and state laws that govern patient referrals, physician financial relationships and inducements to healthcare providersand patients. The federal healthcare programs’ anti-kickback provisions prohibit any person or entity from willingly offering, paying, soliciting or receivinganything of value, directly or indirectly, to induce or reward, or in return for either the referral of patients covered by Medicare, Medicaid and other federalhealthcare programs or the leasing, purchasing, ordering or arranging for or recommending the lease, purchase or order of any item, good, facility or servicecovered by these programs. Many states also have similar anti-kickback laws that are not necessarily limited to items or services for which payment is madeby a federal healthcare program. Our sale of advertising and sponsorships to healthcare providers implicates these laws. However, we review our practices toensure that we comply with all applicable laws. The laws in this area are broad and we cannot determine precisely how they will be applied to our businesspractices. Any determination by a state or federal regulatory agency that any of our practices violate any of these laws could subject us to liability and requireus to change or terminate some portions of our business. -28-Further, we derive revenues from the sale of advertising and promotion of prescription and over-the-counter drugs. If the FDA or the FTC finds thatany of the information provided on our properties violates FDA or FTC regulations, they may take regulatory or judicial action against us and/or theadvertiser of that information. State attorneys general may also take similar action based on their state’s consumer protection statutes. Any increase or changein regulation of advertising and promotion in the healthcare industry could make it more difficult for us to generate and grow our advertising andsponsorship revenues.In addition, the practice of most healthcare professions requires licensing under applicable state law and state laws may further prohibit businessentities from practicing medicine, which is referred to as the prohibition against the corporate practice of medicine. Similar state prohibitions may exist withrespect to other licensed professions. We believe that we do not engage in the practice of medicine or any other licensed healthcare profession, or provide,through our properties, professional medical advice, diagnosis, treatment or other advice that is tailored in such a way as to implicate state licensing orprofessional practice laws. However, a state may determine that some portion of our business violates these laws and may seek to have us discontinue thoseportions or subject us to penalties or licensure requirements. Any determination that we are a healthcare provider and acted improperly as a healthcareprovider may result in liability to us.Our business could suffer if providers of broadband internet access services block, impair or degrade our services. Our business is dependent on the ability of our cloud services customers and visitors to our digital media properties to access our services andapplications over broadband internet connections. Internet access providers and internet backbone providers may be able to block, degrade or charge foraccess or bandwidth use of certain of our products and services, which could lead to additional expenses and the loss of users. Our products and servicesdepend on the ability of our users to access the internet. Use of our services and applications through mobile devices, such as smartphones and tablets, musthave a high-speed data connection. Broadband internet access services, whether wireless or landline, are provided by companies with significant marketpower. Many of these providers offer products and services that directly compete with ours.On January 4, 2018, the FCC released an order that largely repeals rules that the FCC had in place which prevented broadband internet accessproviders from degrading or otherwise disrupting a broad range of services provisioned over consumers’ and enterprises’ broadband internet access lines. TheFCC’s January 4, 2018 Order is not yet effective and there are efforts in Congress to prevent the Order from becoming effective. Additionally, a number ofstate attorneys general have filed an appeal of the FCC’s January 4, 2018 Order and others may also appeal the Order. A number of states have either passedlegislation, adopted state executive agency policies or are in the process of adopting legislation that would prevent broadband internet access providers fromblocking, degrading and otherwise impairing consumers’ and internet applications service providers’ broadband internet access services. We cannot predictwhether the FCC’s January 4, 2018 Order will become effective, whether it will withstand appeal, or whether states have the authority to adopt legislation andexecutive policies that may conflict with the FCC’s January 4, 2018 Order.Many of the largest providers of broadband services have publicly stated that they will not degrade or disrupt their customers’ use of applicationsand services, like ours. If such providers were to degrade, impair or block our services, it would negatively impact our ability to provide services to ourcustomers and likely result in lost revenue and profits, and we would incur legal fees in attempting to restore our customers’ access to our services. Broadbandinternet access providers may also attempt to charge us or our customers additional fees to access services like ours that may result in the loss of customersand revenue, decreased profitability, or increased costs to our retail offerings that may make our services less competitive. We cannot predict the potentialimpact of the FCC’s January 4, 2018 Order on us at this time nor can we evaluate the potential impact at this time.Our cloud services business is dependent on a small number of telecommunications carriers in each region and our inability to maintain agreements atattractive rates with such carriers may negatively impact our business. Our cloud services business substantially depends on the capacity, affordability, reliability and security of our network and services provided to usby our telecommunications suppliers. Only a small number of carriers in each region, and in some cases only one carrier, offer the number and networkservices we require. We purchase certain telecommunications services pursuant to short-term agreements that the providers can terminate or elect not torenew. As a result, any or all of our current carriers could discontinue providing us with service at rates acceptable to us, or at all, and we may not be able toobtain adequate replacements, which could materially and adversely affect our business, prospects, financial condition, operating results and cash flows. -29-Our business could suffer if we cannot obtain or retain numbers, are prohibited from obtaining local numbers or are limited to distributing localnumbers to only certain customers. The future success of our number-based cloud services business depends on our ability to procure large quantities of local numbers in the U.S. andforeign countries in desirable locations at a reasonable cost and offer our services to our prospective customers without restrictions. Our ability to procure anddistribute numbers depends on factors such as applicable regulations, the practices of telecommunications carriers that provide numbers, the cost of thesenumbers and the level of demand for new numbers. For example, several years ago the FCC conditionally granted petitions by Connecticut and California toadopt specialized “unified messaging” area codes, but neither state has adopted such a code. Adoption of a specialized area code within a state or nationcould harm our ability to compete in that state or nation if it materially affects our ability to acquire numbers for our operations or makes our services lessattractive due to the unavailability of numbers with a local geographic area. In addition, although we are the customer of record for all of our U.S. numbers, from time to time, certain U.S. telephone carriers inhibit our ability toport numbers or port our numbers away from us to other carriers. If a federal or regulatory agency determines that our customers should have the ability to portnumbers without our consent, we may lose customers at a faster rate than what we have experienced historically, potentially resulting in lower revenues. Also,in some foreign jurisdictions, under certain circumstances, our customers are permitted to port their numbers to another carrier. These factors could lead toincreased cancellations by our Cloud Services customers and loss of our number inventory. These factors may have a material adverse effect on our business,prospects, financial condition, operating results, cash flows and growth in or entry into foreign or domestic markets. In addition, future growth in our number-based cloud services subscriber base, together with growth in the subscriber bases of other providers ofnumber-based services, has increased and may continue to increase the demand for large quantities of numbers, which could lead to insufficient capacity andour inability to acquire sufficient numbers to accommodate our future growth. We may be subject to increased rates for the telecommunications services we purchase from regulated carriers which could require us to either raisethe retail prices of our offerings and lose customers or reduce our profit margins. The FCC adopted wide-ranging reforms to the system under which regulated providers of telecommunications services compensate each other forthe exchange of various kinds of traffic. While we are not a provider of regulated telecommunications services, we rely on such providers to offer our cloudservices to our customers. As a result of the FCC’s reforms, regulated providers of telecommunications services are determining how the rates they chargecustomers like us will change in order to comply with the new rules. It is possible that some or all of our underlying carriers will increase the rates we pay forcertain telecommunications services. Should this occur, the costs we incur to provide number-based cloud services may increase which may require us toincrease the retail price of our services. Increased prices could, in turn, cause us to lose customers, or, if we do not pass on such higher costs to our subscribers,our profit margins may decrease.New technologies have been developed that are able to block certain of our advertisements or impair our ability to serve interest-based advertisingwhich could harm our operating results.Technologies have been developed and are likely to continue to be developed that can block internet or mobile display advertising. Most of ourDigital Media business revenues are derived from fees paid by advertisers in connection with the display of advertisements or clicks on advertisements onweb pages or mobile devices. As a result, such technologies and tools are reducing the number of display advertisements that we are able to deliver or ourability to serve our interest-based advertising and this, in turn, could reduce our advertising revenue and operating results. Adoption of these types oftechnologies by more of our users could have a material impact on our revenues. We have implemented third party products to combat these ad-blockingtechnologies and are developing other strategies to address advertisement blocking. However, our efforts may not be successful to offset the potentialincreasing impact of these advertising blocking products.If we or our third-party service providers fail to prevent click fraud or choose to manage traffic quality in a way that advertisers find unsatisfactory,our profitability may decline.A portion of our display revenue comes from advertisers that pay for advertising on a price-per-click basis, meaning that the advertisers pay a feeevery time a user clicks on their advertising. This pricing model can be vulnerable to so-called “click fraud,” which occurs when clicks are submitted on adsby a user who is motivated by reasons other than genuine interest in the subject of the ad. We or our third-party service providers may be exposed to the riskof click fraud or other clicks or conversions that advertisers may perceive as undesirable. If fraudulent or other malicious activity is perpetrated by others andwe or our third--30-party service providers are unable to detect and prevent it, or choose to manage traffic quality in a way that advertisers find unsatisfactory, the affectedadvertisers may experience or perceive a reduced return on their investment in our advertising programs which could lead the advertisers to becomedissatisfied with our advertising programs and they might refuse to pay, demand refunds, or withdraw future business. Undetected click fraud could damageour brands and lead to a loss of advertisers and revenue.If we are unable to continue to attract visitors to our websites from search engines, then consumer traffic to our websites could decrease, which couldnegatively impact the sales of our products and services, our advertising revenue and the number of purchases generated for our retailers through ourDigital Media marketplace.We generate consumer traffic to our websites using various methods, including search engine marketing, or SEM, search engine optimization, orSEO, email campaigns and social media referrals. Our net revenues and profitability levels are dependent upon our continued ability to use a combination ofthese methods to generate consumer traffic to our websites in a cost-efficient manner. We have experienced and continue to experience fluctuations in searchresult rankings for a number of our websites. There can be no assurances that we will be able to grow or maintain current levels of consumer traffic.Our SEM and SEO techniques have been developed to work with existing search algorithms utilized by the major search engines. Major searchengines frequently modify their search algorithms. Changes in these algorithms could cause our websites to receive less favorable placements, which couldreduce the number of users who visit our websites. In addition, we use keyword advertising to improve our search ranking and to attract users to our sites. Ifwe fail to follow legal requirements regarding the use of keywords or search engine guidelines and policies properly, search engines may rank our contentlower in search results or could remove our content altogether from their indices.Any decline in consumer traffic to our websites could adversely impact the amount of ads that are displayed and the number of purchases wegenerate for our retailers, which could adversely affect our net revenues. An attempt to replace this traffic through other channels may require us to increaseour sales and marketing expenditures, which would adversely affect our operating results and which may not be offset by additional net revenues.The industries in which we operate are undergoing rapid technological changes and we may not be able to keep up. The industries in which we operate are subject to rapid and significant technological change. We cannot predict the effect of technological changeson our business. We expect that new services and technologies will emerge in the markets in which we compete. These new services and technologies may besuperior to the services and technologies that we use or these new services may render our services and technologies obsolete. Our future success will depend,in part, on our ability to anticipate and adapt to technological changes and evolving industry standards. We may be unable to obtain access to newtechnologies on acceptable terms or at all, and may therefore be unable to offer services in a competitive manner. Any of the foregoing risks could have amaterial adverse effect on our business, prospects, financial condition, operating results and cash flows. Increased cost of email transmissions could have a material adverse effect on our business. We rely on email for the delivery of certain cloud services. We also offer email security, encryption and archival services. If regulations or otherchanges in the industry lead to a charge associated with the sending or receiving of email messages, the cost of providing our services could increase and, ifsignificant, could materially adversely affect our business, prospects, financial condition, operating results and cash flows.Risks Related To Our StockThe fundamental change purchase feature of the Convertible Notes and the change of control features of the Senior Notes may delay or prevent anotherwise beneficial attempt to take over our company.The terms of the Convertible Notes require us to offer to purchase the Convertible Notes for cash in the event of a fundamental change (as defined inthe indenture governing the Convertible Notes), and the terms of the Senior Notes require our subsidiary, j2 Cloud Services, to offer to repurchase the SeniorNotes for cash in the event of a change of control (as defined in the indenture governing the Senior Notes). These features may have the effect of delaying orpreventing a takeover of our company that would otherwise be beneficial to investors.-31-Conversions of the Convertible Notes will dilute the ownership interest of our existing stockholders, including holders who had previously convertedtheir Convertible Notes.The conversion of some or all of the Convertible Notes will dilute the ownership interests of our existing stockholders. Any sales in the publicmarket of our common stock issuable upon such conversion could adversely affect prevailing market prices of our common stock. In addition, the existenceof the Convertible Notes may encourage short selling by market participants because the conversion of the Convertible Notes could depress the price of ourcommon stock.We are a holding company and our operations are conducted through, and substantially all of our consolidated assets are held by, our subsidiaries,which are subject to certain restrictions on their ability to pay dividends to us to fund dividends on our stock, pay interest on the Convertible Notes andfund other holding company expenses.We are a holding company. We conduct substantially all of our operations through our subsidiaries. A substantial portion of our consolidated assetsis held by our subsidiaries. Accordingly, our ability to pay dividends on our stock, service our debt, including the Convertible Notes and fund other holdingcompany expenses depends on the results of operations of our subsidiaries and upon the ability of such subsidiaries to provide us with cash, whether in theform of dividends, loans or otherwise.In addition, dividends, loans or other distributions to us from such subsidiaries are subject to contractual and other restrictions and are subject toother business considerations. j2 Cloud Services, is subject to restrictions on dividends in its existing indenture with respect to the Senior Notes and in theMUFG Credit Facility. The Senior Notes indenture generally prohibits dividends except out of a basket of 50% of cumulative net income (as defined in theindenture) and proceeds from equity offerings, although it permits any dividends if j2 Cloud Services’ pro forma leverage ratio (as calculated as required bythe indenture) is less than 3.0 to 1. The MUFG Credit Facility generally prohibits dividends (as long as commitments from the lenders or amounts remainoutstanding thereunder), except when certain conditions are met, including conditions relating to j2 Cloud Services’ total leverage ratio and EBITDA and thecondition that j2 Cloud Services must have at least $25 million in cash and cash equivalents on its balance sheet after giving effect to such dividend. Whilej2 Cloud Services is currently in compliance with such covenants, its ability to comply with such covenants is subject to conditions outside its control. If wecannot obtain cash from our subsidiaries, we may not be able to pay dividends on our stock, pay interest on the Convertible Notes and fund other operatingcompany expenses without additional sources of cash.Quarterly dividends may not continue, may not continue to grow or could decrease.We may not continue to issue quarterly dividends or we could decrease the amount of any future dividends or cease to increase the amount of anyfuture dividends. We paid our first quarterly dividend of $0.20 per share of common stock on September 19, 2011. We have declared increasing dividends ineach subsequent quarter. Future dividends are subject to Board approval. We cannot assure that the Company will continue to pay a dividend in the future orthe amount of any future dividends.Future sales of our common stock may negatively affect our stock price. As of February 26, 2019, substantially all of our outstanding shares of common stock were available for resale, subject to volume and manner of salelimitations applicable to affiliates under SEC Rule 144. Sales of a substantial number of shares of common stock in the public market or the perception ofsuch sales could cause the market price of our common stock to decline. These sales also might make it more difficult for us to issue equity securities in thefuture at a price that we think is appropriate, or at all. Anti-takeover provisions could negatively impact our stockholders. Provisions of Delaware law and of our certificate of incorporation and bylaws could make it more difficult for a third-party to acquire control of us.For example, we are subject to Section 203 of the Delaware General Corporation Law, which would make it more difficult for another party to acquire uswithout the approval of our Board of Directors. Additionally, our certificate of incorporation authorizes our Board of Directors to issue preferred stockwithout requiring any stockholder approval, and preferred stock could be issued as a defensive measure in response to a takeover proposal. These provisionscould make it more difficult for a third-party to acquire us even if an acquisition might be in the best interest of our stockholders.-32-Our stock price may be volatile or may decline.Our stock price and trading volumes have been volatile and we expect that this volatility will continue in the future due to factors, such as:•Assessments of the size of our subscriber base and our average revenue per subscriber, and comparisons of our results in these and other areas versusprior performance and that of our competitors;•Variations between our actual results and investor expectations;•Regulatory or competitive developments affecting our markets;•Investor perceptions of us and comparable public companies;•Conditions and trends in the communications, messaging and internet-related industries;•Announcements of technological innovations and acquisitions;•Introduction of new services by us or our competitors;•Developments with respect to intellectual property rights;•Conditions and trends in the internet and other technology industries;•Rumors, gossip or speculation published on public chat or bulletin boards;•General market conditions; and•Geopolitical events such as war, threat of war or terrorist actions.In addition, the stock market has from time to time experienced significant price and volume fluctuations that have affected the market prices for thecommon stocks of technology and other companies, particularly communications and internet companies. These broad market fluctuations have previouslyresulted in a material decline in the market price of our common stock. In the past, following periods of volatility in the market price of a particularcompany’s securities, securities class action litigation has often been brought against that company. We may become involved in this type of litigation in thefuture. Litigation is often expensive and diverts management’s attention and resources, which could have a material adverse effect on our business, prospects,financial condition, operating results and cash flows.Item 1B. Unresolved Staff CommentsNone.Item 2. PropertiesAs of December 31, 2018, we are leasing approximately 43,000 square feet of office space for our global headquarters in Los Angeles, Californiaunder a lease that expires on January 31, 2020. The Digital Media business is headquartered in New York City, where it leases approximately 43,000 squarefeet of office space pursuant to a lease that extends through May 2019; 80,000 square feet of office space pursuant to a lease that extends through October2023 in connection with the EveryDay Health acquisition and 39,000 square feet of office space in connection with the Mashable acquisition. Additionally,we have smaller leased offices throughout Asia, North America, Europe and Australia.All of our network equipment is housed either at our leased properties or at one of our multiple co-location facilities around the world. We believeour current facilities are generally in good operating condition and are sufficient to meet our needs for the foreseeable future.Item 3. Legal ProceedingsFrom time to time, j2 Global and its affiliates are involved in litigation and other legal disputes or regulatory inquiries that arise in the ordinarycourse of business. Any claims or regulatory actions against j2 Global and its affiliates, whether meritorious or not, could be time consuming and costly, andcould divert significant operational resources. The outcomes of such matters are subject to inherent uncertainties, carrying the potential for unfavorablerulings 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 aresponsive pleading on March 23, 2011 and responses to undertakings on July 16, 2012. On November 6, 2012, Pantelakis filed a second amended statementof claim, reframing his lawsuit as a negligence action. The j2 Global affiliate filed an amended statement of defense on April 8, 2013. Discovery has closed. Ajudicial pre-trial conference took place on September 27, 2018. There is an anticipated trial date of January 2020.-33-On January 17, 2013, the Commissioner of the Massachusetts Department of Revenue (“Commissioner”) issued a notice of assessment to a j2 Globalaffiliate 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’sapplication for abatement. On September 18, 2014, the j2 Global affiliate petitioned the Massachusetts Appellate Tax Board for abatement of the tax assertedin the notice of assessment (No. C325426). A trial was held on December 16, 2015. On May 18, 2017, the Appellate Board decided in favor of theCommonwealth of Massachusetts and the Company paid and expensed the tax assessment. The j2 Global affiliate has requested the findings of fact andconclusions of law from the Appellate Board.On January 21, 2016, Davis Neurology, P.A. filed a putative class action against two j2 Global affiliates in the Circuit Court for the County of Pope,State of Arkansas (58-cv-2016-40), alleging violations of the TCPA. The case was ultimately removed to the U.S. District Court for the Eastern District ofArkansas (the “Eastern District of Arkansas”) (No. 4:16-cv-00682). On June 6, 2016, the j2 Global affiliates filed a motion for judgment on the pleadings. OnMarch 20, 2017, the Eastern District of Arkansas dismissed all claims against the j2 Global affiliates. On July 23, 2018, the Eighth Circuit Court of Appealsvacated the judgment and remanded to district court with instructions to return the case to state court. The j2 Global affiliates have filed a petition forrehearing or rehearing en banc. On December 11, 2018, the Eight Circuit Court of Appeals denied the j2 Global affiliates’ petition for panel rehearing andpetition for rehearing en banc. On January 29, 2019, the case was remanded to the Arkansas state court.j2 Global does not believe, based on current knowledge, that the foregoing legal proceedings or claims, after giving effect to existing accruedliabilities, 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 timing, an unfavorable resolution of some or all of these matters could have a material effect on j2 Global’s consolidatedfinancial position, results of operations, or cash flows in a particular period.The Company has not accrued for any material loss contingencies relating to these legal proceedings because materially unfavorable outcomes arenot considered probable by management. It is the Company’s policy to expense as incurred legal fees related to various litigations.Item 4. Mine Safety DisclosuresNot applicable.-34-PART IIItem 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesMarket InformationOur common stock is traded on the NASDAQ Global Select Market under the symbol “JCOM”. The following table sets forth the high and lowclosing sale prices for our common stock for the periods indicated, as reported by the NASDAQ Global Select Market. High LowYear ended December 31, 2018 First Quarter84.50 72.17 Second Quarter91.00 77.11 Third Quarter90.07 79.44 Fourth Quarter81.65 65.47Year ended December 31, 2017 First Quarter86.96 81.42 Second Quarter91.17 80.86 Third Quarter85.85 72.08 Fourth Quarter78.96 72.17HoldersWe had 268 registered stockholders as of February 26, 2019. That number excludes the beneficial owners of shares held in “street” name or heldthrough participants in depositories.DividendsWe initiated a quarterly cash dividend program in August 2011 with a payment of $0.20 per share of common stock on September 19, 2011. Wehave paid an increasing quarterly cash dividend in each subsequent calendar quarter. The following is a summary of each dividend declared during fiscalyear 2018 and 2017:Declaration Date Dividend perCommon Share Record Date Payment DateFebruary 9, 2017 $0.3650 February 22, 2017 March 9, 2017May 4, 2017 $0.3750 May 19, 2017 June 2, 2017August 2, 2017 $0.3850 August 14, 2017 September 1, 2017October 31, 2017 $0.3950 November 17, 2017 December 5, 2017February 2, 2018 $0.4050 February 22, 2018 March 9, 2018May 3, 2018 $0.4150 May 18, 2018 June 1, 2018August 8, 2018 $0.4250 August 20, 2018 September 4, 2018October 29, 2018 $0.4350 November 19, 2018 December 5, 2018On February 6, 2019, the Company’s Board of Directors approved a quarterly cash dividend of $0.4450 per share of common stock payable onMarch 12, 2019 to all stockholders of record as of the close of business on February 25, 2019 (see Note 21 - Subsequent Events of the Notes to ConsolidatedFinancial Statements included elsewhere in this Annual Report on Form 10-K, which is incorporated herein by reference). Future dividends are subject toBoard approval.Recent Sales of Unregistered SecuritiesNot applicable.-35-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 ourcommon stock through February 20, 2013 (the “2012 Program”) which was subsequently extended through February 20, 2020 (see Note 21 - SubsequentEvents of the Notes to Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K, which is incorporated herein byreference). Cumulatively at December 31, 2018, we had repurchased 2.7 million shares under the 2012 Program at an aggregated cost of $101.1 million(including an immaterial amount of commission fees).In July 2016, the Company acquired and subsequently retired 935,231 shares of j2 Global common stock in connection with the acquisition ofIntegrated Global Concepts, Inc. (see Note 4 - Business Acquisitions of the Notes to Consolidated Financial Statements included elsewhere in this AnnualReport on Form 10-K, which is incorporated herein by reference). In December 2018, the Company acquired 600,000 shares of j2 Global common stock inconnection with the 2012 Program (see Note 13 - Stockholders’ Equity of the Notes to Consolidated Financial Statements included elsewhere in this AnnualReport on Form 10-K, which is incorporated herein by reference). As a result of the acquisition of j2 Global common stock through the Company’s businesscombinations and share repurchase program, the number of shares available for purchase under the 2012 Program is 1,338,689 shares of j2 Global commonstock as of December 31, 2018.The following table details the repurchases that were made under and outside the 2012 Program during the three months ended December 31, 2018:PeriodTotal Number ofSharesPurchased (1) Average PricePaid Per Share Total Number ofShares PurchasedasPart of PubliclyAnnounced PlansorPrograms MaximumNumber ofShares thatMay Yet BePurchasedUnder the Plans orProgramsOctober 1, 2018 - October 31, 20182,194 $74.77 — 1,938,689November 1, 2018 - November 30, 2018— $— — 1,938,689December 1, 2018 - December 31, 2018601,428 $70.89 600,000 1,338,689Total603,622 600,000 1,338,689(1) Includes shares surrendered to the Company to pay the exercise price and/or to satisfy tax withholding obligations in connection with employee stockoptions and/or the vesting of restricted stock issued to employees.Equity Compensation Plan InformationThe following table provides information as of December 31, 2018 regarding shares outstanding and available for issuance under j2 Global’sexisting equity compensation plans:Plan CategoryNumber ofSecuritiesto BeIssued UponExercise ofOutstandingOptions,Warrantsand Rights (a) Weighted-AverageExercise Price ofOutstandingOptions,Warrantsand Rights (b) Number ofSecuritiesRemainingAvailablefor FutureIssuanceUnder EquityCompensationPlans(ExcludingSecuritiesReflected inColumn (a)) (c)Equity compensation plans approved by security holders707,777 $56.84 3,860,697Equity compensation plans not approved by security holders— — — Total707,777 $56.84 3,860,697-36-The number of securities remaining available for future issuance includes 2,270,716 and 1,589,981 under our 2015 Stock Option Plan and 2001Employee Stock Purchase Plan, respectively. Please refer to Note 14 to the accompanying consolidated financial statements for a description of these Plans aswell as our 2007 Stock Option Plan, which terminated on February 14, 2017.Performance GraphThis performance graph shall not be deemed “filed” for purposes of Section 18 of the Exchange Act of 1934, or otherwise subject to the liabilitiesunder that Section and shall not be deemed to be incorporated by reference into any filing of j2 Global under the Securities Act of 1933, as amended, or theExchange Act.The following graph compares the cumulative total stockholder return for j2 Global, the NASDAQ Computer Index and an index of companies thatj2 Global has selected as its peer group in the cloud services for business space.j2 Global’s peer group index for 2018 and 2017 consists of IAC/InterActive Corp., TripAdvisor, Inc., LivePerson, Inc., LogMeIn, Inc., Zillow Group,Inc., Salesforce.com, Inc., Open Text Corp. and The Ultimate Software Group, Inc.Measurement points are December 31, 2013 and the last trading day in each of j2 Global’s fiscal quarters through the end of fiscal 2018. The graphassumes that $100 was invested on December 31, 2013 in j2 Global’s common stock and in each of the indices, and assumes reinvestment of any dividends.The stock price performance on the following graph is not necessarily indicative of future stock price performance.Measurement NASDAQPeerDatej2 GlobalComputer IndexGroup IndexDec-13100.00100.00100.00Mar-14100.61101.55103.71Jun-14102.24109.80108.30Sep-1499.26115.25105.61Dec-14124.55119.88104.36Mar-15131.92121.42114.56Jun-15136.45121.67117.43Sep-15142.29115.55112.54Dec-15165.24127.36125.83Mar-16123.79128.45116.10Jun-16126.98123.38127.02Sep-16133.88141.35121.07Dec-16164.28142.99114.22Mar-17168.52161.41130.11Jun-17170.90168.17139.48Sep-17148.50182.86146.69Dec-17150.82198.42157.56Mar-18158.62203.42179.56Jun-18174.02217.73202.75Sep-18166.52234.63231.49Dec-18139.60191.11198.22-37-[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]-38-Item 6. Selected Financial DataThe following selected consolidated financial data should be read in conjunction with our consolidated financial statements, the related notescontained in this Annual Report on Form 10-K and the information contained herein in Item 7, Management’s Discussion and Analysis of FinancialCondition and Results of Operations. Historical results are not necessarily indicative of future results. Years Ended December 31, 2018 2017 2016 2015 2014 (In thousands, except for share and per share amounts)Statement of Income Data: Revenues$1,207,295 $1,117,838 $874,255 $720,815 $599,030Cost of revenues201,074 172,313 147,100 122,958 105,989 Gross profit1,006,221 945,525 727,155 597,857 493,041Operating expenses: Sales and marketing338,304 330,296 206,871 159,009 141,967 Research, development and engineering48,370 46,004 38,046 34,329 30,680 General and administrative375,267 323,517 239,672 205,137 134,188 Total operating expenses761,941 699,817 484,589 398,475 306,835Income from operations244,280 245,708 242,566 199,382 186,206 Interest expense, net61,987 67,777 41,370 42,458 31,204 Other expense (income), net4,706 (22,035) (10,243) 5 (165)Income before income taxes177,587 199,966 211,439 156,919 155,167Income tax expense44,760 60,541 59,000 23,283 29,840Net loss in earnings of equity method investment4,140 — — — —Net income$128,687 $139,425 $152,439 $133,636 $125,327Less extinguishment of Series A preferred stock— — — — (991)Net income attributable to j2 Global, Inc. common shareholders$128,687 $139,425 $152,439 $133,636 $124,336 Net income per common share: Basic$2.64 $2.89 $3.15 $2.76 $2.60 Diluted$2.59 $2.83 $3.13 $2.73 $2.58Weighted average shares outstanding: Basic47,950,746 47,586,242 47,668,357 47,627,853 46,778,015 Diluted48,927,791 48,669,027 47,963,226 48,087,760 47,106,538Cash dividends declared per common share$1.68 $1.52 $1.36 $1.22 $1.10 2018 2017 2016 2015 2014 (In thousands)Balance Sheet Data: Cash and cash equivalents$209,474 $350,945 $123,950 $255,530 $433,663Working capital153,009 355,325 (106,090) 286,151 486,816Total assets2,560,830 2,453,093 2,062,328 1,783,719 1,705,202Other long-term liabilities51,068 31,434 3,475 18,228 22,416Total stockholders’ equity$1,035,744 $1,020,305 $914,536 $890,208 $820,235-39-Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations In addition to historical information, the following Management’s Discussion and Analysis of Financial Condition and Results of Operationscontains forward-looking statements. These forward-looking statements involve risks, uncertainties and assumptions. The actual results may differmaterially from those anticipated in these forward-looking statements as a result of many factors, including but not limited to those discussed in Part I, Item1A - “Risk Factors” in this Annual Report on Form 10-K. Readers are cautioned not to place undue reliance on these forward-looking statements, whichreflect management’s opinions only as of the date hereof. We undertake no obligation to revise or publicly release the results of any revision to theseforward-looking statements, except as required by law. Readers should carefully review the Risk Factors and the risk factors set forth in other documents wefile from time to time with the SEC.Overviewj2 Global, Inc., together with its subsidiaries (“j2 Global”, “the Company”, “our”, “us” or “we”), is a leading provider of internet services. Throughour Cloud Services business, we provide cloud services to consumers and businesses and license our intellectual property (“IP”) to third parties. In addition,the Cloud Services business includes fax, voice, backup, security and email marketing products. Our Digital Media business specializes in the technology,gaming, broadband, business to business, healthcare, and international markets offering content, tools and services to consumers and businesses.j2 Global was incorporated in 2014 as a Delaware corporation through the creation of a new holding company structure, and our Cloud Servicesbusiness, operated by our wholly owned subsidiary, j2 Cloud Services, LLC (formerly j2 Cloud Services, Inc.), and its subsidiaries, was founded in 1995. Wemanage our operations through two businesses: Cloud Services and Digital Media.Our Cloud Services business generates revenues primarily from customer subscription and usage fees and from IP licensing fees. Our Digital Mediabusiness generates revenues from advertising and sponsorships, subscription and usage fees, performance marketing and licensing fees.In addition to growing our business organically, on a regular basis we acquire businesses to grow our customer bases, expand and diversify ourservice offerings, enhance our technologies, acquire skilled personnel and enter into new markets.Our consolidated revenues are currently generated from three basic business models, each with different financial profiles and variability. Our CloudServices business is driven primarily by subscription revenues that are relatively higher margin, stable and predictable from quarter to quarter with someseasonal weakness in the fourth quarter. The Cloud Services business also includes the results of our IP licensing business, which can vary dramatically inboth revenues and profitability from period to period. Our Digital Media business is driven primarily by advertising revenues, has relatively higher sales andmarketing expense and has seasonal strength in the fourth quarter. We continue to pursue additional acquisitions, which may include companies operatingunder business models that differ from those we operate under today. Such acquisitions could impact our consolidated profit margins and the variability ofour revenues.-40-Cloud Services Performance MetricsThe following table sets forth certain key operating metrics for our Cloud Services business for the years ended December 31, 2018, 2017 and 2016(in thousands, except for percentages): Years Ended December 31, 2018 2017 2016Subscriber revenues: Fixed$488,948 $471,269 $468,395Variable108,333 102,928 93,950Total subscriber revenues597,281 574,197 562,345Other license revenues694 4,759 4,593Total revenues$597,975 $578,956 $566,938Percentage of total subscriber revenues: Fixed81.9% 82.1% 83.3%Variable18.1% 17.9% 16.7%Total revenues: Number-based$393,079 $384,929 $367,741Non-number-based204,896 194,027 199,197Total revenues$597,975 $578,956 $566,938 Average monthly revenue per Cloud Business Customer (ARPU) (1)(2)$15.61 $15.31 $15.21Cancel rate (3)2.1% 2.0% 2.1%(1) Quarterly ARPU is calculated using our standard convention of applying the average of the quarter’s beginning and ending base to the total revenuefor the quarter. We believe ARPU provides investors an understanding of the average monthly revenues we recognize associated with each CloudServices customer. As ARPU varies based on fixed subscription fee and variable usage components, we believe it can serve as a measure by whichinvestors can evaluate trends in the types of services, levels of services and the usage levels of those services across our Cloud Services customerbase.(2) Cloud Services customers are defined as paying direct inward dialing numbers for fax and voice services, and direct and resellers’ accounts for otherservices.(3) Cancel Rate is defined as cancels of small and medium businesses and individual Cloud Services customers with greater than four months ofcontinuous service (continuous service includes Cloud Services customers administratively canceled and reactivated within the same calendarmonth), and enterprise Cloud Services customers beginning with their first day of service. Calculated monthly and expressed as an average over thethree months of the quarter.Digital Media Performance MetricsThe following table sets forth certain key operating metrics for our Digital Media business for the years ended December 31, 2018, 2017 and 2016(in millions): Years Ended December 31, 2018 2017 2016Visits7,706 5,720 4,992Page views31,727 23,731 18,063Sources: Google Analytics and Partner Platforms-41-Critical Accounting Policies and EstimatesWe prepare our consolidated financial statements and related disclosures in accordance with U.S. generally accepted accounting principles(“GAAP”) and our discussion and analysis of our financial condition and operating results require us to make judgments, assumptions and estimates thataffect the amounts reported in our consolidated financial statements and accompanying notes. See Note 2, “Basis of Presentation and Summary of SignificantAccounting Policies” of the Notes to Consolidated Financial Statements in Part II, Item 8 of this Form 10-K which describes the significant accountingpolicies and methods used in the preparation of our consolidated financial statements. We base our estimates on historical experience and on various otherassumptions we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assetsand liabilities. Actual results may differ significantly from those estimates under different assumptions and conditions and may be material.We believe that our most critical accounting policies are those related to revenue recognition, valuation and impairment of investments, ourassessment of ownership interests as variable interest entities and the related determination of consolidation, share-based compensation expense, assetsacquired and liabilities assumed in connection with business combinations, long-lived and intangible asset impairment, contingent consideration, incometaxes and contingencies and allowance for doubtful accounts. We consider these policies critical because they are those that are most important to theportrayal of our financial condition and results and require management’s most difficult, subjective and complex judgments, often as a result of the need tomake estimates about the effect of matters that are inherently uncertain. Senior management has reviewed these critical accounting policies and relateddisclosures with the Audit Committee of the Company’s Board of Directors.Revenue RecognitionCloud ServicesThe Company’s Cloud Services revenues substantially consist of monthly recurring subscription and usage-based fees, the majority of which arepaid in advance by credit card. The Company defers the portions of monthly, quarterly, semi-annually and annually recurring subscription and usage-basedfees collected in advance of the satisfaction of performance obligations and recognizes them in the period earned.Along with our numerous proprietary Cloud Services solutions, the Company also generates revenues by reselling various third-party solutions,primarily through our security and online backup lines of business. These third-party solutions, along with our proprietary products, allow the Company tooffer customers a variety of solutions to better meet their needs. The Company records revenue on a gross basis with respect to reseller revenue because theCompany has control of the specified good or service prior to transferring control to the customer.j2 Global’s Cloud Services also includes patent license revenues generated under license agreements that provide for the payment of contractuallydetermined fully paid-up or royalty-bearing license fees to j2 Global in exchange for the grant of non-exclusive, retroactive and future licenses to ourintellectual property, including patented technology. Patent revenues may also consist of revenues generated from the sale of patents. Patent licensearrangements are evaluated to determine if they grant the customer a right to access the Company’s intellectual property which is generally recognized overthe life of the arrangement or a right to use the Company’s intellectual property which is generally recognized at the point in time the license is granted. Withregard to royalty-bearing license arrangements, the Company recognizes revenues of license fees earned during the applicable period. The Cloud Services business also generates revenues by licensing certain technology to third parties. Generally, revenue is recognized over time asthe third party uses the licensed technology over the period.Digital MediaDigital Media revenues are earned primarily from the delivery of advertising services and from subscriptions to services and information. Payment isreceived in arrears by check or wire and includes terms aligned with the industry standard of 90 days or less.Revenue is earned from the delivery of advertising services on the Company’s owned and operated websites and on those websites that are part ofDigital Media’s advertising network. Depending on the individual contracts with the customer, revenue for these services are recognized over the contractperiod when any of the following performance obligations are satisfied: (i)-42-when an advertisement is placed for viewing; (ii) when a qualified sales lead is delivered; (iii) when a visitor “clicks through” on an advertisement; or (iv)when commissions are earned upon the sale of an advertised product.Revenue from subscriptions is earned through the granting of access to, or delivery of, certain data products or services to customers. Subscriptionscover video games and related content, health information, data and other copyrighted material. Revenues under such agreements are recognized over thecontract term for use of the service. Revenues are also earned from listing fees, subscriptions to online publications, and from other sources. Subscriptionrevenues are recognized over time.j2 Global also generates Digital Media revenues through the license of certain assets to clients. Assets are licensed for clients’ use in their ownpromotional materials or otherwise. Such assets may include logos, editorial reviews, or other copyrighted material. Revenues under such license agreementsare recognized over the contract term for use of the asset. Technology assets are also licensed to clients. These assets are recognized over the term of theaccess period. The Digital Media business also generates revenue from other sources which had included marketing and production services. Such otherrevenues are generally recognized over the period in which the products or services are delivered. Revenues were no longer generated in 2018 from certainmarketing and production services as a result of the sale of certain Digital Media assets during 2017.j2 Global also generates Digital Media revenues from transactions involving the sale of perpetual software licenses, related software support andmaintenance, hardware used in conjunction with its software, and other related services. Revenue is recognized for these software transactions with multipleperformance obligations after (i) the Company has had an approved contract and is committed to perform the respective obligations and (ii) the Company canidentify and quantify each obligation and its respective selling price. Once the respective performance obligations have been identified and quantified,revenue will be recognized when the obligations are met, either over time or at a point in time depending on the nature of the obligation.Revenues from software license performance obligations are generally recognized upfront at the point in time that the software is made available tothe customer to download and use. Revenues for related software support and maintenance performance obligations are related to technical support providedto customers as needed and unspecified software product upgrades, maintenance releases and patches during the term of the support period when they areavailable. The Company is obligated to make the support services available continuously throughout the contract period. Therefore, revenues for supportcontracts are generally recognized ratably over the contractual period the support services are provided. Hardware product and related software performanceobligations, such as an operating system or firmware, are highly interdependent and interrelated and are accounted for as a bundled performance obligation.The revenues for this bundled performance obligation are generally recognized at the point in time that the hardware and software products are delivered andownership is transferred to the customer. Other service revenues are generally recognized over time as the services are performed.The Company records revenue on a gross basis with respect to revenue generated (i) by the Company serving online display and video advertisingacross its owned and operated web properties, on third-party sites or on unaffiliated advertising networks; (ii) through the Company’s lead-generationbusiness; and (iii) through the Company’s subscriptions. The Company records revenue on a net basis with respect to revenue paid to the Company bycertain third-party advertising networks who serve online display and video advertising across the Company’s owned-and-operated web properties andcertain third-party sites.Valuation and Impairment of InvestmentsWe account for our investments in debt securities in accordance with Financial Accounting Standards Board (“FASB”) ASC Topic No. 320,Investments - Debt Securities (“ASC 320”). Our debt investments are typically comprised of corporate debt securities. We determine the appropriateclassification of our investments at the time of acquisition and evaluate such determination at each balance sheet date. Trading securities are thoseinvestments that we intend to sell within a few hours or days and are carried at fair value, with unrealized gains and losses included in investment income.Available-for-sale debt securities are those investments we do not intend to hold to maturity and can be sold. Available-for-sale debt securities are carried atfair value with unrealized gains and losses included in other comprehensive income. Held-to-maturity securities are those investments which we have theability and intent to hold until maturity and are recorded at amortized cost. All debt securities are accounted for on a specific identification basis.We account for our investments in equity securities in accordance with ASC Topic No. 321, Investments - Equity Securities (“ASC 321”) whichrequires the accounting for equity investments (other than those accounted for using the equity method of accounting) generally be measured at fair value forequity securities with readily determinable fair values. For equity securities without a readily determinable fair value that are not accounted for by the equitymethod, we measure the equity security using cost, less impairment, if any, and plus or minus observable price changes arising from orderly transactions inthe same or similar investment from the same issuer. Any unrealized gains or losses will be reported in current earnings (see Note 5 - Investments of-43-the Notes to Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K, which is incorporated herein by reference).We assess whether an other-than-temporary impairment loss on an investment has occurred due to declines in fair value or other market conditions(see Note 5 - Investments of the Notes to Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K, which is incorporatedherein by reference).Variable Interest Entities (“VIE”)A VIE requires consolidation by the entity’s primary beneficiary. We evaluate our investments in entities in which we are involved to determine ifthe entity is a VIE and if so, whether we hold a variable interest and are the primary beneficiary. We have determined that we hold a variable interest in ourinvestment as a limited partner in the OCV Fund I, LP (“OCV Fund”, “OCV” or the “Fund”). In determining whether we are the primary beneficiary of theVIE, both of the following characteristics must be present:a) the Company has the power to direct the activities of the VIE that most significantly impacts the VIEs economic performance (the powercriterion); andb) the Company has the obligation to absorb losses of the VIE, or the right to receive benefits of the VIE, that could potentially be significant to theVIE (the economic criterion).We have concluded that, as a limited partner, although the obligations to absorb losses or benefit from the gains is not insignificant, we do not have“power” over OCV because we do not have the ability to direct the significant decisions which impact the economics of OCV. We believe that the OCVgeneral partner, as a single decision maker, holds the ability to make the decisions about the activities that most significantly impact the OCV Fund’seconomic performance. As a result, we have concluded that we will not consolidate OCV, as we are not the primary beneficiary of the OCV Fund, and willaccount for this investment under the equity-method of accounting. See Note 5, “Investments”, of the Notes to Consolidated Financial Statements includedelsewhere in this Annual Report on Form 10-K, which is incorporated herein by reference.We recognize our equity in the net earnings or losses relating to the investment in OCV on a one-quarter lag due to the timing and availability offinancial information from OCV. If we become aware of a significant decline in value, the loss will be recorded in the period in which we identify the decline.Share-Based Compensation Expense We comply with the provisions of FASB ASC Topic No. 718, Compensation - Stock Compensation (“ASC 718”). Accordingly, we measure share-based compensation expense at the grant date, based on the fair value of the award, and recognize the expense over the employee’s requisite service periodusing the straight-line method. The measurement of share-based compensation expense is based on several criteria including, but not limited to, the valuationmodel used and associated input factors, such as expected term of the award, stock price volatility, risk free interest rate, dividend rate and award cancellationrate. These inputs are subjective and are determined using management’s judgment. If differences arise between the assumptions used in determining share-based compensation expense and the actual factors, which become known over time, we may change the input factors used in determining future share-basedcompensation expense. Any such changes could materially impact our results of operations in the period in which the changes are made and in periodsthereafter. We elected to adopt the alternative transition method for calculating the tax effects of share-based compensation.Long-lived and Intangible Assets We account for long-lived assets in accordance with the provisions of FASB ASC Topic No. 360, Property, Plant, and Equipment (“ASC 360”),which addresses financial accounting and reporting for the impairment or disposal of long-lived assets.We assess the impairment of identifiable definite-lived intangibles and long-lived assets whenever events or changes in circumstances indicate thatthe carrying value may not be recoverable. Factors we consider important which could individually or in combination trigger an impairment review includethe following: .Significant underperformance relative to expected historical or projected future operating results;-44- .Significant changes in the manner of our use of the acquired assets or the strategy for our overall business; .Significant negative industry or economic trends; .Significant decline in our stock price for a sustained period; and .Our market capitalization relative to net book value.If we determined that the carrying value of definite-lived intangibles and long-lived assets may not be recoverable based upon the existence of oneor more of the above indicators of impairment, we would record an impairment equal to the excess of the carrying amount of the asset over its estimated fairvalue.We have assessed whether events or changes in circumstances have occurred that potentially indicate the carrying value of definite-lived intangiblesand long-lived assets may not be recoverable and noted no indicators of potential impairment for the years ended December 31, 2018, 2017 and 2016.Goodwill and Purchased Intangible Assets We evaluate our goodwill and indefinite-lived intangible assets for impairment pursuant to FASB ASC Topic No. 350, Intangibles - Goodwill andOther (“ASC 350”), which provides that goodwill and other intangible assets with indefinite lives are not amortized but tested for impairment annually ormore frequently if circumstances indicate potential impairment. In connection with the annual impairment test for goodwill, we have the option to perform aqualitative assessment in determining whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If we determinethat it was more likely than not that the fair value of the reporting unit is less than its carrying amount, then we perform the impairment test upon goodwill.The impairment test is performed by comparing a reporting unit’s fair value to its carrying value; if the fair value is less than its carrying value, impairment isindicated. In connection with the annual impairment test for intangible assets, we have the option to perform a qualitative assessment in determining whetherit is more likely than not that the fair value is less than its carrying amount, then we perform the impairment test upon intangible assets.In the fourth quarter of 2018, there was a change to our reporting units. As a result of this change, we allocated goodwill to our new reporting unitsusing a relative fair value approach. In addition, we completed an assessment of any potential goodwill impairment for all reporting units immediately beforeand after the reallocation and determined no impairment existed. Further, we completed the required impairment review for the years ended December 31,2017 and 2016 and noted no impairment. Consequently, no impairment charges were recorded.Contingent ConsiderationCertain of our acquisition agreements include contingent earn-out arrangements, which are generally based on the achievement of future incomethresholds. The contingent earn-out arrangements are based upon our valuations of the acquired companies and reduce the risk of overpaying for acquisitionsif the projected financial results are not achieved.The fair values of these earn-out arrangements are included as part of the purchase price of the acquired companies on their respective acquisitiondates. For each transaction, we estimate the fair value of contingent earn-out payments as part of the initial purchase price and record the estimated fair valueof contingent consideration as a liability on the consolidated balance sheets. We consider several factors when determining that contingent earn-outliabilities are part of the purchase price, including the following: (1) the valuation of our acquisitions is not supported solely by the initial considerationpaid, and the contingent earn-out formula is a critical and material component of the valuation approach to determining the purchase price; and (2) the formershareholders of acquired companies that remain as key employees receive compensation other than contingent earn-out payments at a reasonable levelcompared with the compensation of our other key employees. The contingent earn-out payments are not affected by employment termination.We measure our contingent earn-out liabilities in connection with acquisitions at fair value on a recurring basis using significant unobservableinputs classified within Level 3 of the fair value hierarchy (see Note 7 - Fair Value Measurements of the Notes to Consolidated Financial Statements includedelsewhere in this Annual Report on Form 10-K, which is incorporated herein by reference). We may use various valuation techniques depending on the termsand conditions of the contingent consideration including a Monte-Carlo simulation. This simulation uses probability distribution for each significant inputto produce hundreds or thousands of possible outcomes and the results are analyzed to determine probabilities of different outcomes occurring. Significant-45-increases or decreases to these inputs in isolation would result in a significantly higher or lower liability with a higher liability capped by the contractualmaximum of the contingent earn-out obligation. Ultimately, the liability will be equivalent to the amount paid, and the difference between the fair valueestimate and 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 cashused in financing activities in our consolidated statements of cash flows. Any amount paid in excess of the liability on the acquisition date is reflected ascash used in operating activities.We review and re-assess the estimated fair value of contingent consideration on a quarterly basis, and the updated fair value could be materiallydifferent from the initial estimates or prior quarterly amounts. Changes in the estimated fair value of our contingent earn-out liabilities are reported inoperating income. Adjustments to the estimated fair value related to changes in all other unobservable inputs are reported in operating income.Income Taxes We account for income taxes in accordance with FASB ASC Topic No. 740, Income Taxes (“ASC 740”), which requires that deferred tax assets andliabilities be recognized using enacted tax rates for the effect of temporary differences between the book and tax basis of recorded assets and liabilities. ASC740 also requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some or all of the net deferred tax assets willnot be realized. Our valuation allowance is reviewed quarterly based upon the facts and circumstances known at the time. In assessing this valuationallowance, we review historical and future expected operating results and other factors to determine whether it is more likely than not that deferred tax assetsare realizable.We are subject to income taxes in the U.S. (federal and state) and numerous foreign jurisdictions. Tax laws, regulations, and administrative practicesin various jurisdictions may be subject to significant change, with or without notice, due to economic, political, and other conditions, and significantjudgment is required in evaluating and estimating our provision and accruals for these taxes. There are many transactions that occur during the ordinarycourse of business for which the ultimate tax determination is uncertain. Our effective tax rates could be affected by numerous factors, such as intercompanytransactions, the relative amount of our foreign earnings, including earnings being lower than anticipated in jurisdictions where we have lower statutory ratesand higher than anticipated in jurisdictions where we have higher statutory rates, the applicability of special tax regimes, losses incurred in jurisdictions forwhich we are not able to realize the related tax benefit, changes in foreign currency exchange rates, entry into new businesses and geographies, changes toour existing businesses and operations, acquisitions (including integrations) and investments and how they are financed, changes in our stock price, changesin our deferred tax assets and liabilities and their valuation, and changes in the relevant tax, accounting, and other laws, regulations, administrative practices,principles, and interpretations. In addition, a number of countries are actively pursuing changes to their tax laws applicable to corporate multinationals, suchas the recently enacted the 2017 Tax Act. Finally, foreign governments may enact tax laws in response to the 2017 Tax Act that could result in furtherchanges to global taxation and materially affect our financial position and results of operations.On December 22, 2017, the United States enacted the 2017 Tax Act, which imposes a repatriation tax on accumulated earnings of foreignsubsidiaries, imposes a current tax on certain foreign earnings and lowers the general corporate income tax rate to 21%. In December 2017, the SEC staffissued SAB 118, which allows us to record provisional amounts during a measurement period not to extend beyond one year of the enactment date. We havecompleted our accounting for the tax effects of the 2017 Tax Act, including the repatriation tax, the net deferred tax remeasurement and the impact on ourunrealized tax benefits. None of the adjustments we made to our provisional amounts were material to our consolidated financial statements.Income Tax Contingencies We calculate current and deferred tax provisions based on estimates and assumptions that could differ from the actual results reflected in income taxreturns filed during the following year. Adjustments based on filed returns are recorded when identified in the subsequent year.ASC 740 provides guidance on the minimum threshold that an uncertain income tax position is required to meet before it can be recognized in thefinancial statements and applies to all tax positions taken by a company. ASC 740 contains a two-step approach to recognizing and measuring uncertainincome tax positions. The first step is to evaluate the income tax position for recognition by determining if the weight of available evidence indicates that itis more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is tomeasure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement. If it is not more likely than not that the benefitwill be sustained on its technical merits, no benefit will be recorded. Uncertain income tax positions that relate only to timing of when an item is included ona tax return are considered to have met the recognition threshold. We recognize accrued-46-interest and penalties related to uncertain income tax positions in income tax expense on our consolidated statement of income. On a quarterly basis, weevaluate uncertain income tax positions and establish or release reserves as appropriate under GAAP.As a multinational corporation, we are subject to taxation in many jurisdictions, and the calculation of our tax liabilities involves dealing withuncertainties in the application of complex tax laws and regulations in various taxing jurisdictions. Our estimate of the potential outcome of any uncertaintax issue is subject to management’s assessment of relevant risks, facts and circumstances existing at that time. Therefore, the actual liability for U.S. orforeign taxes may be materially different from our estimates, which could result in the need to record additional tax liabilities or potentially to reversepreviously recorded tax liabilities. In addition, we may be subject to examination of our tax returns by the U.S. Internal Revenue Service (“IRS”) and otherdomestic and foreign tax authorities.Non-Income Tax Contingencies The Company does not collect and remit sales and use, telecommunication, or similar taxes in all jurisdictions in which it has sales, based on theCompany’s belief that such taxes are not applicable or legally required. Several states and other taxing jurisdictions have presented or threatened theCompany with assessments, alleging that the Company is required to collect and remit such taxes there. The aggregate assessments at December 31, 2018were not material.The June 2018 U.S. Supreme Court ruling in South Dakota v. Wayfair, Inc., No. 17-494, along with the application of existing, new or future rulingsand laws, could have adverse effects on our business, prospects and operating results. There have been, and will continue to be, substantial ongoing costsassociated with complying with the various indirect tax requirements in the numerous markets in which we conduct or will conduct business.The Company is currently under audit or is subject to audit for indirect taxes in several states and municipalities. The Company has a $4.6 millionreserve established for these matters. It is reasonably possible that additional liabilities could be incurred resulting in additional expense, which could have amaterially impact on our financial results.Allowances for Doubtful Accounts We reserve for receivables we may not be able to collect. The reserves for our Cloud Services business are typically driven by the volume of creditcard declines and past due invoices and are based on historical experience as well as an evaluation of current market conditions. The reserves for our DigitalMedia business are typically driven by past due invoices based on historical experience. On an ongoing basis, management evaluates the adequacy of thesereserves.Recent Accounting PronouncementsSee Note 2, “Basis of Presentation and Summary of Significant Accounting Policies”, to our accompanying consolidated financial statements for adescription of recent accounting pronouncements and our expectations of their impact on our consolidated financial position and results of operations.Results of OperationsYears Ended December 31, 2018, 2017 and 2016Cloud ServicesAssuming a stable or improving economic environment, and, subject to our risk factors, we expect the revenue and profits as included in the resultsof operations below in our Cloud Services business to be stable for the foreseeable future (excluding the impact of acquisitions). The main focus of our CloudServices offerings is to reduce or eliminate costs, increase sales and enhance productivity, mobility, business continuity and security of our customers as thetechnologies 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 servicesto continue to satisfy the evolving needs of our customers. Through our IP licensing operations, which are included in the Cloud Services business, we seekto 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 andinternal 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 business; however, we cannot predict whetherour current pace of acquisitions will remain the same within this business. In a given period, we may-47-close greater or fewer acquisitions than in prior periods or acquisitions of greater or lesser significance than in prior periods. Moreover, future acquisitions ofbusinesses within this space but with different business models may impact Cloud Services’ overall profit margins. Also, as IP licensing often involveslitigation, the timing of licensing transactions is unpredictable and can and does vary significantly from period to period. This variability can cause theoverall business’s financial results to materially vary from period to period.Digital MediaAssuming a stable or improving economic environment, and, subject to our risk factors, we expect the revenue and profits in our Digital Mediabusiness to improve over the next several quarters as we integrate our recent acquisitions and over the longer term as advertising transactions continue toshift from offline to online. The main focus of our advertising programs is to provide relevant and useful advertising to visitors to our websites and thoseincluded within our advertising networks, reflecting our commitment to constantly improve their overall web experience. As a result, we expect to continueto 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 realizefrom 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, thetrend in advertising spend is shifting to mobile devices and other newer advertising formats which generally experience lower margins than those fromdesktop computers and tablets. We expect this trend to continue to put pressure on our margins.We expect acquisitions to remain an important component of our strategy and use of capital in this business; however, we cannot predict whetherour current pace of acquisitions will remain the same within this business. In a given period, we may close greater or fewer acquisitions than in prior periodsor acquisitions of greater or lesser significance than in prior periods. Moreover, future acquisitions of businesses within this space but with different businessmodels may impact Digital Media’s overall profit margins.j2 Global ConsolidatedWe anticipate that the stable revenue trend in our Cloud Services business combined with the improving revenue and profits in our Digital Mediabusiness will result in overall improved revenue and profits for j2 Global on a consolidated basis, excluding the impact of any future acquisitions which canvary dramatically from period to period.We expect operating profit as a percentage of revenues to generally decrease in the future primarily due to the fact that revenue with respect to ourDigital Media business (i) is increasing as a percentage of our revenue on a consolidated basis and (ii) has historically operated at a lower operating margin.-48-The following table sets forth, for the years ended December 31, 2018, 2017 and 2016, information derived from our statements of income as apercentage of revenues. This information should be read in conjunction with the accompanying financial statements and the Notes to Consolidated FinancialStatements included elsewhere in this Annual Report on Form 10-K. Years Ended December 31, 2018 2017 2016Revenues100% 100% 100%Cost of revenues17 15 17 Gross profit83 85 83Operating expenses: Sales and marketing28 30 24 Research, development and engineering4 4 4 General and administrative31 29 27 Total operating expenses63 63 55Income from operations20 22 28Interest expense, net5 6 5Other expense (income), net— (2) (1)Income before income taxes15 18 24Income tax expense4 5 7Net loss in earnings of equity method investment— — —Net income11% 12% 17%Revenues (in thousands, except percentages)2018 2017 2016 PercentageChange 2018versus 2017 PercentageChange 2017versus 2016Revenues$1,207,295 $1,117,838 $874,255 8% 28%Our revenues consist of revenues from our Cloud Services business and from our Digital Media business. Cloud Services revenues primarily consistof revenues from “fixed” customer subscription revenues and “variable” revenues generated from actual usage of our services. We also generate CloudServices revenues from IP licensing. Digital Media revenues primarily consist of advertising revenues, subscriptions earned through the granting of access to,or delivery of, certain data products or services to customers, fees paid for generating business leads, and licensing and sale of editorial content andtrademarks.Our revenues have increased over the past three years primarily due to a combination of acquisitions and organic growth within both the DigitalMedia and Cloud Services businesses.Cost of Revenues(in thousands, except percentages)2018 2017 2016 PercentageChange 2018versus 2017 PercentageChange 2017versus 2016Cost of revenue$201,074 $172,313 $147,100 17% 17%As a percent of revenue17% 15% 17% Cost of revenues is primarily comprised of costs associated with content fees, data and voice transmission, numbers, editorial and production costs,network operations, customer service, and online processing fees. The increase in cost of revenues for the year ended December 31, 2018 was primarily due toan increase in costs associated with businesses acquired in and subsequent to fiscal 2017 that resulted in additional content fees. The increase in cost ofrevenues for the year ended December 31, 2017 was primarily due to an increase in costs associated with businesses acquired in and subsequent to fiscal 2016that resulted in additional editorial and production costs.-49-Operating ExpensesSales and Marketing.(in thousands, except percentages)2018 2017 2016 PercentageChange 2018versus 2017 PercentageChange 2017versus 2016Sales and Marketing$338,304 $330,296 $206,871 2% 60%As a percent of revenue28% 30% 24% 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 andcost-per-acquisition) advertising relationships with an array of online service providers. Advertising cost for the years ended December 31, 2018, 2017 and2016 was $149.7 million (primarily consisting of $100.5 million of third-party advertising costs and $40.8 million of personnel costs), $143.3 million(primarily consisting of $95.4 million of third-party advertising costs and $41.0 million of personnel costs) and $96.8 million (primarily consisting of $64.8million of third-party advertising costs and $26.3 million of personnel costs), respectively. The increase in sales and marketing expenses from 2017 to 2018was primarily due to increased personnel costs and advertising associated with the businesses acquired in and subsequent to fiscal 2017. The increase in salesand marketing expenses from 2016 to 2017 was primarily due to increased personnel costs and advertising associated with the acquisition of EverydayHealth within the Digital Media business, which was acquired in December 2016.Research, Development and Engineering.(in thousands, except percentages)2018 2017 2016 PercentageChange 2018versus 2017 PercentageChange 2017versus 2016Research, Development and Engineering$48,370 $46,004 $38,046 5% 21%As a percent of revenue4% 4% 4% Our research, development and engineering costs consist primarily of personnel-related expenses. The increase in research, development andengineering costs from 2017 to 2018 was primarily due to personnel costs associated with acquisitions within the Cloud Service business. The increase inresearch, development and engineering costs from 2016 to 2017 was primarily due to personnel costs associated with acquisitions within the Cloud Serviceand Digital Media businesses. General and Administrative.(in thousands, except percentages)2018 2017 2016 PercentageChange 2018versus 2017 PercentageChange 2017versus 2016General and Administrative$375,267 $323,517 $239,672 16% 35%As a percent of revenue31% 29% 27% Our general and administrative costs consist primarily of personnel-related expenses, depreciation and amortization, changes in the fair valueassociated with contingent consideration, share-based compensation expense, bad debt expense, professional fees, severance and insurance costs. Theincrease in general and administrative expense from 2017 to 2018 was primarily due to additional amortization of intangible assets, increased depreciationexpense and personnel costs relating to acquisitions closed during 2017 and 2018. The increase in general and administrative expense from 2016 to 2017was primarily due to additional amortization of intangible assets and personnel costs relating to acquisitions closed during 2016 and 2015 and increaseddepreciation expense.-50-Share-Based CompensationThe following table represents share-based compensation expense included in cost of revenues and operating expenses in the accompanyingconsolidated statements of income for the years ended December 31, 2018, 2017 and 2016 (in thousands): Years Ended December 31, 2018 2017 2016Cost of revenues$510 $500 $436Operating expenses: Sales and marketing1,798 1,723 1,782 Research, development and engineering1,553 1,182 904 General and administrative24,232 19,332 10,528Total$28,093 $22,737 $13,650During the year ended December 31, 2017, the Company accelerated the vesting of certain shares held by employees which were surrendered to theCompany to satisfy tax withholding obligations in connection with such employees’ restricted stock. The Company recognized share-based compensation of$1.4 million for the year ended December 31, 2017 due to this vesting acceleration.In connection with Nehemia Zucker’s resignation as Chief Executive Officer effective as of December 31, 2017, all of his outstanding and unvestedstock options and time-based restricted shares, along with the tranche of performance-vesting restricted shares that was then next scheduled to vest, vested infull on December 29, 2017. As a result, the Company has accelerated the recognition of share-based compensation expense associated with these awardswhich impacted 2017 by approximately $5.1 million.Non-Operating Income and ExpensesInterest expense, net. Our interest expense, net is generated primarily from interest expense due to outstanding debt, partially offset by interestincome earned on cash, cash equivalents and investments. Interest expense, net was $62.0 million, $67.8 million, and $41.4 million for the years endedDecember 31, 2018, 2017 and 2016, respectively. The decrease from 2017 to 2018 was primarily due to decreased interest expense associated with the losson extinguishment of the $250 million 8.0% Senior Notes recognized in 2017. The increase from 2016 to 2017 was due to increased interest expenseassociated with the issuance of the $650 million 6.0% Senior Notes and our line of credit borrowings, the loss on the extinguishment of the $250 million8.0% Senior Notes and decreased interest income on cash, cash equivalents and investments.Other expense (income), net. Our other expense (income), net is generated primarily from miscellaneous items, gain or losses on currency exchangeand gains or losses on investments. Other expense (income), net was $4.7 million, $(22.0) million, and $(10.2) million for the years ended December 31,2018, 2017 and 2016, respectively. The change from 2017 to 2018 was attributable to gains earned in the prior period related to the sales of subsidiaries inour Digital Media and Cloud businesses. The change from 2016 to 2017 was attributable to an increase in gains earned related to the sales of subsidiaries inour Digital Media and Cloud businesses, partially offset by increased losses on currency exchange compared to the prior period as well as the sale of ourstrategic investment in Carbonite in the prior period, resulting in a gain on sale of $7.6 million, and a breakup fee received of $2.5 million in the prior periodassociated with the competitive bid for certain assets of Gawker Media.Income TaxesOur effective tax rate is based on pre-tax income, statutory tax rates, tax regulations (including those related to transfer pricing) and different taxrates 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 weexpect 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. On December 22, 2017, the United States enacted the 2017 Tax Act, which imposes a repatriation tax on accumulated earnings of foreignsubsidiaries, imposes a current tax on certain foreign earnings and lowers the general corporate income tax rate to 21%. In December 2017, the SEC staffissued Staff Accounting Bulletin No. 118 (SAB 118), which allows us to record provisional amounts during a measurement period not to extend beyond oneyear of the enactment date. We have completed our-51-accounting for the tax effects of the 2017 Tax Act, including the repatriation tax, the net deferred tax remeasurement and the impact on our unrealized taxbenefits. None of the adjustments we made to our provisional amounts were material to our consolidated financial statements.As of December 31, 2018, we had federal net operating loss carryforwards (“NOLs”) of $142.2 million after considering substantial restrictions onthe utilization of these NOLs due to “ownership changes”, as defined in the Internal Revenue Code of 1986, as amended. We estimate that all of the above-mentioned federal NOLs will be available for use before their expiration. These NOLs expire through the year 2036.As of December 31, 2018 and 2017, the Company had available unrecognized state research and development tax credits of $4.6 million and $2.3million, respectively, which last indefinitely.Income tax expense amounted to $44.8 million, $60.5 million and $59.0 million for the years ended December 31, 2018, 2017 and 2016,respectively. Our effective tax rates for 2018, 2017 and 2016 were 25.2%, 30.3% and 27.9%, respectively.The decrease in our annual effective income tax rate from 2017 to 2018 was primarily attributable to the following:1.a decrease during 2018 from the reduction in the U.S. federal statutory income tax rate from 35% to 21%, effective on January 1, 2018; partiallyoffset by:2.a decrease in the benefit for the portion of our income being taxed in foreign jurisdictions and subject to lower tax rates than in the U.S. (relative toincome from U.S. domestic operations); and3.an increase in tax expense during 2018 due to tax law changes requiring certain income earned by foreign subsidiaries to be included in the incomeof the U.S. shareholder.The increase in our annual effective income tax rate from 2016 to 2017 was primarily attributable to the following:1.an increase during 2017 in the transition tax due to the 2017 Tax Act; partially offset by:2.a decrease during 2017 in the valuation of deferred tax liabilities due to the decrease in the federal tax rate per the 2017 Tax Act; and3.a decrease during 2017 in the amount of deemed distribution income (Section 956) from our foreign subsidiaries.In order to provide additional understanding in connection with our foreign taxes, the following represents the statutory and effective tax rate bysignificant foreign country: Ireland United Kingdom CanadaStatutory tax rate 12.5% 19.0% 26.5%Effective tax rate (1) 4.6% 19.4% 26.6%(1) Effective tax rate excludes certain discrete items.The statutory tax rate is the rate imposed on taxable income for corporations by the local government in that jurisdiction. The effective tax ratemeasures the taxes paid as a percentage of pretax profit. The effective tax rate can differ from the statutory tax rate when a company can exempt some incomefrom tax, claim tax credits, or due to the effect of book-tax differences that do not reverse and discrete items.Significant judgment is required in determining our provision for income taxes and in evaluating our tax positions on a worldwide basis. We believeour 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 ourtax reserves are insufficient.-52-Equity Method InvestmentNet loss in earnings of equity method investment. Net loss in earnings of equity method investment is generated from our investment in the OCVFund for which we receive annual audited financial statements. The investment in the OCV Fund is presented net of tax and on a one-quarter lag due to thetiming and availability of financial information from OCV. If the Company becomes aware of a significant decline in value, the loss will be recorded in theperiod in which the Company identifies the decline.The net loss in earnings of equity method investment was $4.1 million and zero and zero, net of tax benefit for the year ended December 31, 2018,2017, and 2016 respectively. During the year ended December 31, 2018, 2017, and 2016 the Company recognized management fees of $4.5 million, zero,and zero, net of tax benefit, respectively.Cloud Services and Digital Media ResultsOur businesses are based on the organization structure used by management for making operating and investment decisions and for assessingperformance and have been aggregated into two businesses: (i) Cloud Services; and (ii) Digital Media.We evaluate the performance of our businesses based on revenues, including both external and interbusiness net sales, and operating income. Weaccount for interbusiness sales and transfers based primarily on standard costs with reasonable mark-ups established between the businesses. Identifiableassets by business are those assets used in the respective businesses operations. Corporate assets consist of cash and cash equivalents, deferred income taxesand certain other assets. All significant interbusiness amounts are eliminated to arrive at our consolidated financial results.Cloud ServicesThe following results are presented for fiscal years 2018, 2017 and 2016 (in thousands): 2018 2017 2016External net sales$597,975 $578,956 $566,938Inter-business net sales— — —Net sales597,975 578,956 566,938Cost of revenues122,154 118,746 120,562Gross profit475,821 460,210 446,376Operating expenses245,701 234,166 235,497Operating income$230,120 $226,044 $210,879Net sales of $598.0 million in 2018 increased $19.0 million, or 3.3%, from the prior comparable period primarily due to business acquisitions. Netsales of $579.0 million in 2017 increased $12.0 million, or 2.1%, from the prior comparable period primarily due to business acquisitions.Gross profit of $475.8 million in 2018 increased $15.6 million from 2017 and gross profit of $460.2 million in 2017 increased $13.8 million from2016 primarily due to an increase in net sales from acquisitions between the periods. The gross profit as a percentage of revenues for 2018 was consistent withthe previous comparable period. The gross profit as a percentage of revenues for 2017 was consistent with the previous comparable period.Operating expenses of $245.7 million in 2018 increased $11.5 million from 2017 primarily due to (a) additional expense associated with businessesacquired in and subsequent to the prior comparable period; and (b) an allocation of certain shared Corporate operating costs. Operating expenses of $234.2million in 2017 decreased $1.3 million from 2016 primarily due to lower depreciation and amortization.As a result of these factors, operating earnings of $230.1 million in 2018 increased $4.1 million, or 1.8%, from 2017, and operating earningsof $226.0 million in 2017 increased $15.2 million, or 7.2%, from 2016. Our Cloud Services business consists of several services which have similar economiccharacteristics, including the nature of the services and their production processes, the type of customers, as well as the methods used to distribute theseservices.-53-Digital Media The following results are presented for fiscal years 2018, 2017 and 2016 (in thousands): 2018 2017 2016External net sales$609,314 $538,882 $307,317Inter-business net sales60 57 146Net sales609,374 538,939 307,463Cost of revenues78,919 53,574 26,538Gross profit530,455 485,365 280,925Operating expenses489,019 437,297 230,225Operating income$41,436 $48,068 $50,700Net sales of $609.4 million in 2018 increased $70.4 million, or 13.1%, and net sales of $538.9 million increased $231.5 million, or 75.3%, from theprior comparable period primarily due to business acquisitions subsequent to the prior comparable period.Gross profit of $530.5 million in 2018 increased $45.1 million and gross profit of $485.4 million in 2017 increased $204.4 million from the priorcomparable period primarily due to an increase in net sales between the periods. Gross profit as a percentage of revenues in 2018 and 2017 was lower than theprior comparable period due to additional content fees; partially offset by a decrease in campaign fulfillment costs. Gross profit as a percentage of revenues in2017 and 2016 was consistent with the prior comparable periods.Operating expenses of $489.0 million in 2018 increased $51.7 million from the prior comparable period primarily due to (a) additional expenseassociated with businesses acquired in and subsequent to 2017 comprised primarily of salary and related costs, marketing costs, changes in fair value ofcontingent consideration and amortization of intangible assets; and (b) an allocation of certain shared Corporate operating costs. Operating expenses of$437.3 million in 2017 increased $207.1 million from the prior comparable period primarily due to (a) increased sales and marketing costs primarily due toadditional advertising and personnel costs associated with businesses acquired in and subsequent to 2016; and (b) amortization of intangible assets anddepreciation associated with business acquisitions subsequent to the prior comparable period.As a result of these factors, operating income of $41.4 million in 2018 decreased $6.6 million, or 13.8%, from 2017, and operating income of $48.1million in 2017 decreased $2.6 million, or 5.2%, from 2016.-54-Liquidity and Capital ResourcesCash and Cash Equivalents and InvestmentsAt December 31, 2018, we had cash and investments of $293.3 million compared to $408.7 million at December 31, 2017. The decrease in cash andinvestments resulted primarily from business acquisitions, dividends and interest paid, purchases of property and equipment, repurchase of common stockand purchase of equity method investments. At December 31, 2018, cash and investments consisted of cash and cash equivalents of $209.5 million and long-term investments of $83.8 million. Our investments consist of equity and debt securities. For financial statement presentation, we classify our debt securitiesprimarily as short- and long-term based upon their maturity dates. Short-term investments mature within one year of the date of the financial statements andlong-term investments mature one year or more from the date of the financial statements. We retain a substantial portion of our cash and investments inforeign jurisdictions for future reinvestment. As of December 31, 2018 cash and investments held within domestic and foreign jurisdictions were $177.3million and $116.0 million, respectively. As of December 31, 2017 cash and investments held within domestic and foreign jurisdictions were $271.2 millionand $137.5 million, respectively. The Company’s Board of Directors approved four quarterly cash dividends during the year ended December 31, 2018, totaling $1.68 per share ofcommon stock. On February 6, 2019, the Company’s Board of Directors approved a quarterly cash dividend of $0.4450 per share of common stock payableon March 12, 2019 to all stockholders of record as of the close of business on February 25, 2019. Future dividends are subject to Board approval.On January 7, 2019, j2 Cloud Services, LLC entered into a Credit Agreement (the “Credit Agreement”) with certain lenders from time to time partythereto (collectively, the “Lenders”) and MUFG Union Bank, N.A., as sole lead arranger and as administrative agent for the Lenders (the “Agent”). Pursuant tothe Credit Agreement, the Lenders have provided j2 with a credit facility of $100 million (the “Credit Facility”) expandable to $150 million. The proceedsfrom the Credit Facility are intended to be used for working capital and general corporate purposes of j2 Cloud and its subsidiaries, including to financecertain permitted acquisitions and capital expenditures in accordance with the terms of the Credit Agreement. As of March 1, 2019 the Credit Facility has notbeen drawn upon.On September 25, 2017, the Board of Directors of the Company authorized the Company’s entry into a commitment to invest $200 million in aninvestment fund (the “Fund”) over several years at a fairly ratable rate. The manager, OCV Management, LLC (“OCV”), and general partner of the Fund areentities with respect to which Richard S. Ressler, Chairman of the Board of Directors (the “Board”) of the Company, is indirectly the majority equity holder.As a limited partner in the Fund, the Company will pay an annual management fee to the manager equal to 2.0% (reduced by 10% each year beginning withthe sixth year) of capital commitments. In addition, subject to the terms and conditions of the Fund’s limited partnership agreement, once the Company hasreceived distributions equal to its invested capital, the Fund’s general partner will be entitled to a carried interest equal to 20%. The Fund has a six yearinvestment period, subject to certain exceptions. The commitment was approved by the Audit Committee of the Board in accordance with the Company’srelated-party transaction approval policy.During 2018, the Company received capital call notices from the management of OCV Management, LLC. for $36.8 million, inclusive of certainmanagement fees, of which $36.8 million has been paid for the year ended December 31, 2018.We currently anticipate that our existing cash and cash equivalents and cash generated from operations will be sufficient to meet our anticipatedneeds for working capital, capital expenditure, investment requirements, stock repurchases and cash dividends for at least the next 12 months.-55-Cash FlowsOur primary sources of liquidity are cash flows generated from operations, together with cash and cash equivalents. Net cash provided by operatingactivities was $401.3 million, $264.4 million and $282.4 million for the years ended December 31, 2018, 2017 and 2016, respectively. Our operating cashflows resulted primarily from cash received from our customers offset by cash payments we made to third parties for their services, employee compensationand interest payments associated with our debt. The increase in our net cash provided by operating activities in 2018 compared to 2017 was primarilyattributable to an increase in deferred income tax balances; partially offset by a decrease in income tax payable. In addition, the increase was due to adecrease in accounts receivable, an increase in depreciation and amortization, changes in the fair value of contingent consideration and an increase indeferred revenue. The decrease in our net cash provided by operating activities in 2017 compared to 2016 was primarily attributable to decrease in accountspayable and accrued expenses including a $20.0 million payment of certain contingent compensation obligations of Everyday Health as well as a payment ofcontingent consideration of $20.0 million associated with the acquisition of Ookla; an increase in deferred income tax balances and a decrease in income taxpayable and liability for uncertain tax positions; partially offset by an increase in depreciation and amortization, share-based compensation and increase inother long term liabilities. Our prepaid tax payments were zero and $6.0 million at December 31, 2018 and 2017, respectively. Our cash and cash equivalentsand short-term investments were $209.5 million, $350.9 million and $124.0 million at December 31, 2018, 2017 and 2016, respectively.Net cash used in investing activities was $(406.6) million, $(158.5) million and $(448.9) million for the years ended December 31, 2018, 2017 and2016, respectively. Net cash used in investing activities in 2018 was primarily attributable to business acquisitions, capital expenditures associated with thepurchase of property and equipment and purchases of equity method investments. Net cash used in investing activities in 2017 was primarily attributable tobusiness acquisitions, capital expenditures associated with the purchase of property and equipment and the purchase of intangible assets; partially offset byproceeds from the sale of businesses. Net cash used in investing activities in 2016 was primarily attributable to business acquisitions, purchase of available-for-sale investments, purchases of property and equipment and investments in intangible assets, partially offset by the sale of available-for-sale investments.Net cash (used in) provided by financing activities was $(131.4) million, $111.8 million and $41.2 million for the years ended December 31, 2018,2017 and 2016, respectively. Net cash (used in) provided by financing activities in 2018 was primarily attributable to dividends paid, repurchase of commonstock and business acquisitions. Net cash provided by financing activities in 2017 was primarily attributable to proceeds from the issuance of long-term debt,additional borrowings under our line of credit and exercise of stock options; partially offset by the repayment in full of the line of credit and other debt,dividends paid, repurchases of stock and business acquisitions. Net cash used in by financing activities in 2016 was primarily attributable to proceeds from aline of credit, exercise of stock options and excess tax benefit from share-based compensation, partially offset by dividends paid, deferred payments foracquisitions and the repurchase of stock.Stock Repurchase ProgramOn February 15, 2012, the Company’s Board of Directors authorized the repurchase of up to five million shares of our common stock throughFebruary 20, 2013 which was subsequently extended through February 20, 2020 (see Note 21 - Subsequent Events for discussion regarding the extension ofthe share repurchase program by an additional year). On November 29, 2018, the Company entered into a Rule 10b5-1 trading plan with a broker to facilitatethe repurchase of up to 600,000 of Common Stock at a specified price under a new stock repurchase program (see Note 13 - Stockholders’ Equity of the Notesto Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K).-56-Contractual Obligations and CommitmentsThe following table summarizes our contractual obligations and commitments as of December 31, 2018: Payment Due by Period (in thousands)Contractual Obligations 1 Year 2-3 Years 4-5 Years More than 5Years TotalLong-term debt - principal (a) $— $402,500 $— $650,000 $1,052,500Long-term debt - interest (b) 50,456 97,622 78,000 78,000 304,078Operating leases (c) 19,267 30,077 23,631 5,456 78,431Capital leases (d) 315 279 — — 594Telecom services and co-location facilities (e) 3,193 3,152 230 — 6,575Holdback payment (f) 2,495 3,236 — — 5,731Contingent consideration (g) 20,000 — — — 20,000Transition tax (h) — — — 11,675 11,675Self-Insurance (i) 9,912 — — — 9,912Other (j) 1,995 1,710 598 — 4,303Total $107,633 $538,576 $102,459 $745,131 $1,493,799________________________ (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 the contingent earn-out liabilities in connection with certain business acquisitions.(h)These amounts represent commitments related to the transition tax on unrepatriated foreign earnings. The Internal Revenue Service (“IRS”) hasissued guidance indicating that an overpayment of 2017 federal income tax will first be applied to unpaid transition tax with any excess applied tosubsequent tax years or refunded. As of December 31, 2018, the 2017 federal tax return overpayment was reclassified from taxes payable (short-termliability) to taxes payable (long-term liability). The December 31, 2018 balance sheet amount for the transition tax long-term obligation has beenreduced to reflect the 2017 federal overpayment.(i)These amounts represent health and dental insurance plans in connection to self-insurance.(j)These amounts primarily represent certain consulting and Board of Director fee arrangements, software license commitments and others.As of December 31, 2018, our liability for uncertain tax positions was $59.6 million. The future payments related to uncertain tax positions have notbeen presented in the table above due to the uncertainty of the amounts and timing of cash settlement with the taxing authorities.We have not presented contingent consideration associated with acquisitions (other than the $20.0 million in contingent consideration associatedwith the acquisition of Humble Bundle) in the table above due to the uncertainty of the amounts and the timing of cash settlements.Off-Balance Sheet ArrangementsWe are not party to any material off-balance sheet arrangements.-57-Item 7A. Quantitative and Qualitative Disclosures About Market RiskThe following discussion of the market risks we face contains forward-looking statements. Forward-looking statements are subject to risks anduncertainties. Actual results could differ materially from those discussed in the forward-looking statements. Readers are cautioned not to place unduereliance on these forward-looking statements, which reflect management’s opinions only as of the date hereof. j2 Global undertakes no obligation to reviseor publicly release the results of any revision to these forward-looking statements, except as required by law. Readers should carefully review the riskfactors described in this document as well as in other documents we file from time to time with the SEC, including the Quarterly Reports on Form 10-Q andany Current Reports on Form 8-K filed or to be filed by us in 2019.Interest Rate RiskOur exposure to market risk for changes in interest rates relates primarily to our investment portfolio. The primary objectives of our investmentactivities are to preserve our principal while at the same time maximizing yields without significantly increasing risk. To achieve these objectives, wemaintain our portfolio of cash equivalents and investments in a mix of instruments that meet high credit quality standards, as specified in our investmentpolicy or otherwise approved by the Board of Directors. Our cash and cash equivalents are not subject to significant interest rate risk due to the shortmaturities of these instruments. As of December 31, 2018, the carrying value of our cash and cash equivalents approximated fair value. Our return on theseinvestments is subject to interest rate fluctuations.As of December 31, 2018, we had investments in debt securities with effective maturities greater than one year of approximately $21.4 million. As ofDecember 31, 2018 and December 31, 2017, we had cash and cash equivalent investments primarily in money market funds with maturities of 90 days or lessof $209.5 million and $350.9 million, respectively. We do not have interest rate risk on our outstanding long-term debt as these arrangements have fixedinterest rates.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 RiskWe conduct business in certain foreign markets, primarily in Canada, Australia and the European Union. Our principal exposure to foreign currencyrisk relates to investment and inter-company debt in foreign subsidiaries that transact business in functional currencies other than the U.S. Dollar, primarilythe Australian Dollar, the Canadian Dollar, the Euro, the Hong Kong Dollar, the Japanese Yen, the New Zealand Dollar, the Norwegian Kroner and the BritishPound Sterling. If we are unable to settle our short-term intercompany 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 foreigncurrencies. The economic impact of currency exchange rate movements is often linked to variability in real growth, inflation, interest rates, governmentalactions 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-yearcomparability of operating results, the impact of which is immaterial to the comparisons set forth in this Annual Report on Form 10-K.Historically, we have not hedged translation risks because cash flows from international operations were generally reinvested locally; however, wemay 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 onearnings, cash flows and financial position.For the years ended December 31, 2018, 2017 and 2016, foreign exchange losses amounted to $2.3 million, $5.8 million and $0.7 million,respectively. The decrease in losses to our earnings in the current period were primarily attributable to decreased inter-company balances between the periodsin foreign subsidiaries that were in functional currencies other than the U.S. Dollar. Foreign exchange losses were not material to our earnings in 2018, 2017and 2016, respectively.Cumulative translation adjustments, net of tax, included in other comprehensive income for the years ended December 31, 2018, 2017 and 2016,was $(15.5) million, $25.6 million, and $(23.1) million respectively.-58-We currently do not have derivative financial instruments for hedging, speculative or trading purposes and therefore are not subject to such hedgingrisk. However, we may in the future engage in hedging transactions to manage our exposure to fluctuations in foreign currency exchange rates.-59-Item 8.Financial Statements and Supplementary DataREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMShareholders and Board of Directorsj2 Global, Inc.Los Angeles, CaliforniaOpinion on the Consolidated Financial StatementsWe have audited the accompanying consolidated balance sheets of j2 Global, Inc. (the “Company”) and subsidiaries as of December 31, 2018 and2017, the related consolidated statements of income and comprehensive income, stockholders’ equity, and cash flows for each of the three years in the periodended December 31, 2018, and the related notes and schedule (collectively referred to as the “consolidated financial statements”). In our opinion, theconsolidated financial statements present fairly, in all material respects, the financial position of the Company and subsidiaries at December 31, 2018 and2017, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2018, in conformity withaccounting principles generally accepted in the United States of America.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), theCompany's internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control - Integrated Framework(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated March 1, 2019, expressed anunqualified opinion thereon.Change in Accounting Method Related to RevenueAs discussed in Notes 2 and 3 to the consolidated financial statements, the Company has changed its method for accounting for revenue fromcontracts with customers effective January 1, 2018 as a result of adopting Accounting Standards Codification 606, Revenue from Contract with Customers.The Company adopted this new revenue standard using a modified retrospective approach.Basis for OpinionThese consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on theCompany’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to beindependent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities andExchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtainreasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to erroror fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts anddisclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made bymanagement, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis forour opinion./s/ BDO USA, LLPWe have served as the Company's auditor since 2014.Los Angeles, CaliforniaMarch 1, 2019-60-j2 GLOBAL, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETSDecember 31, 2018 and 2017(In thousands, except share amounts) 2018 2017ASSETS Cash and cash equivalents$209,474 $350,945Accounts receivable, net of allowances of $10,422 and $8,701, respectively221,615 234,195Prepaid expenses and other current assets29,242 35,287Total current assets460,331 620,427Long-term investments83,828 57,722Property and equipment, net98,813 79,773Trade names, net142,888 123,947Patent and patent licenses, net7,346 10,871Customer relationships, net191,208 193,606Goodwill1,380,376 1,196,611Other purchased intangibles, net185,026 157,327Other assets11,014 12,809TOTAL ASSETS$2,560,830 $2,453,093LIABILITIES AND STOCKHOLDERS’ EQUITY Accounts payable and accrued expenses$166,521 $169,837Income taxes payable, current12,915 —Deferred revenue, current127,568 95,255Other current liabilities318 10Total current liabilities307,322 265,102Long-term debt1,013,129 1,001,944Deferred revenue, noncurrent13,200 47Income taxes payable, noncurrent11,675 43,781Liability for uncertain tax positions59,644 52,216Deferred income taxes, noncurrent69,048 38,264Other long-term liabilities51,068 31,434TOTAL LIABILITIES1,525,086 1,432,788Commitments and contingencies— —Preferred stock - Series A, $0.01 par value. Authorized 6,000 at December 31, 2018 and 2017, respectively;total issued and outstanding is zero and zero at December 31, 2018 and 2017, respectively.— —Preferred stock - Series B, $0.01 par value. Authorized 20,000 at December 31, 2018 and 2017, respectively;total issued and outstanding is zero and zero at December 31, 2018 and 2017, respectively.— —Common stock, $0.01 par value. Authorized 95,000,000 at December 31, 2018 and 2017; total issued48,082,800 and 47,854,510 shares at December 31, 2018 and 2017, respectively; total outstanding 47,482,800and 47,854,510 shares at December 31, 2018 and 2017, respectively.481 479Additional paid-in capital354,210 325,854Treasury stock, at cost (600,000 and zero shares, respectively, at December 31, 2018 and 2017, respectively).(42,543) —Retained earnings769,575 723,062Accumulated other comprehensive loss(45,979) (29,090)TOTAL STOCKHOLDERS’ EQUITY1,035,744 1,020,305TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY$2,560,830 $2,453,093See Notes to Consolidated Financial Statements-61-j2 GLOBAL, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOMEYears Ended December 31, 2018, 2017 and 2016(In thousands, except share and per share data) 2018 2017 2016Total revenues$1,207,295 $1,117,838 $874,255 Cost of revenues (1)201,074 172,313 147,100Gross profit1,006,221 945,525 727,155Operating expenses: Sales and marketing (1)338,304 330,296 206,871Research, development and engineering (1)48,370 46,004 38,046General and administrative (1)375,267 323,517 239,672Total operating expenses761,941 699,817 484,589Income from operations244,280 245,708 242,566Interest expense, net61,987 67,777 41,370Other expense (income), net4,706 (22,035) (10,243)Income before income taxes and net loss in earnings of equity method investment177,587 199,966 211,439Income tax expense44,760 60,541 59,000Net loss in earnings of equity method investment4,140 — —Net income$128,687 $139,425 $152,439 Net income per common share: Basic$2.64 $2.89 $3.15Diluted$2.59 $2.83 $3.13Weighted average shares outstanding: Basic47,950,746 47,586,242 47,668,357Diluted48,927,791 48,669,027 47,963,226Cash dividends paid per common share$1.68 $1.52 $1.36 (1) Includes share-based compensation expense as follows: Cost of revenues$510 $500 $436Sales and marketing1,798 1,723 1,782Research, development and engineering1,553 1,182 904General and administrative24,232 19,332 10,528Total$28,093 $22,737 $13,650 See Notes to Consolidated Financial Statements-62-j2 GLOBAL, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMEYears Ended December 31, 2018, 2017 and 2016(In thousands) 2018 2017 2016 Net income$128,687 $139,425 $152,439Other comprehensive (loss) income, net of tax: Foreign currency translation adjustment(15,471) 25,559 (23,076)Change in fair value on available-for-sale investments, net of tax (benefit) expense of($460), zero and $1,495 for the years ended 2018, 2017 and 2016, respectively(1,418) — (2,449)Other comprehensive (loss) income, net of tax(16,889) 25,559 (25,525)Comprehensive income$111,798 $164,984 $126,914See Notes to Consolidated Financial Statements-63-j2 GLOBAL, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSYears Ended December 31, 2018, 2017 and 2016(In thousands) 2018 2017 2016Cash flows from operating activities: Net income$128,687 $139,425 $152,439Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization187,174 162,041 122,091Amortization of financing costs and discounts11,385 11,952 9,818Share-based compensation28,093 22,737 13,650Provision for doubtful accounts17,338 13,159 13,169Deferred income taxes, net25,050 (21,432) (13,779)Loss on extinguishment of debt and related interest expense— 7,962 —Gain on sale of businesses— (27,681) —Changes in fair value of contingent consideration18,944 2,300 4,850Gain on available-for-sale investment— — (7,716)Loss on equity investments10,506 — —Decrease (increase) in: Accounts receivable4,034 (37,546) (30,687)Prepaid expenses and other current assets2,211 4,001 (957)Other assets2,391 (2,712) (497)Increase (decrease) in: Accounts payable and accrued expenses(35,220) (34,116) 6,363Income taxes payable(29,042) 14,888 25,409Deferred revenue11,991 941 (4,213)Liability for uncertain tax positions7,694 4,936 10,620Other long-term liabilities10,089 3,564 (18,173)Net cash provided by operating activities401,325 264,419 282,387Cash flows from investing activities: Purchases of equity method investment(36,635) — —Maturity of investments— — 241,817Purchases of available-for-sale investments(500) (4) (80,918)Purchases of property and equipment(56,379) (39,595) (24,746)Acquisition of businesses, net of cash received(312,430) (174,951) (580,691)Proceeds from sale of businesses, net of cash divested— 58,300 —Purchases of intangible assets(669) (2,240) (4,321)Net cash used in investing activities(406,613) (158,490) (448,859)Cash flows from financing activities: Issuance of long-term debt, net— 636,485 —Payment of debt(2,204) (255,000) —Proceeds from line of credit, net— 44,981 178,710Repayment of line of credit— (225,000) —Repurchase of common stock(47,102) (9,850) (56,496)Issuance of common stock under employee stock purchase plan2,084 259 254Exercise of stock options1,540 1,108 3,570Dividends paid(81,679) (73,469) (65,835)Deferred payments for acquisitions(3,558) (7,637) (20,832)Other(443) (54) 1,779Net cash (used in) provided by financing activities(131,362) 111,823 41,150Effect of exchange rate changes on cash and cash equivalents(4,821) 9,243 (6,258)Net change in cash and cash equivalents(141,471) 226,995 (131,580)Cash and cash equivalents at beginning of year350,945 123,950 255,530Cash and cash equivalents at end of year$209,474 $350,945 $123,950See Notes to Consolidated Financial Statements-64-j2 GLOBAL, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITYYears Ended December 31, 2018, 2017 and 2016(in thousands, except share amounts) Accumulated Common stockAdditionalpaid-inTreasury stockRetainedothercomprehensiveTotalStockholders’ SharesAmountcapitalSharesAmountearningsincome/(loss)EquityBalance, January 1, 201647,950,677$479$292,064—$—$626,789$(29,124)$890,208Net income—————152,439—152,439Other comprehensive income, net of tax expense$1,495——————(25,525)(25,525)Dividends—————(65,835)—(65,835)Exercise of stock options142,87013,569————3,570Issuance of shares under Employee Stock PurchasePlan3,918—254————254Vested restricted stock270,0983(3)—————Repurchase and retirement of common stock(1,015,584)(10)(3,344)——(53,142)—(56,496)Exchange of Series B preferred stock91,7371(1)—————Share based compensation——13,519——131—13,650Excess tax benefit on share based compensation——2,271————2,271Balance, December 31, 201647,443,716$474$308,329—$—$660,382$(54,649)$914,536Net income—————139,425—139,425Other comprehensive income, net of tax of zero——————25,55925,559Dividends—————(73,469)—(73,469)Exercise of stock options38,18311,107————1,108Issuance of shares under Employee Stock PurchasePlan3,283—259————259Vested restricted stock397,7814(4)—————Repurchase and retirement of common stock(117,076)(1)(6,441)——(3,408)—(9,850)Exchange of Series B preferred stock88,6231(1)—————Share based compensation——22,605——132—22,737Balance, December 31, 201747,854,510$479$325,854—$—$723,062$(29,090)$1,020,305Cumulative effect of change in accountingprinciple—————1,599—1,599Net income—————128,687—128,687Other comprehensive income, net of tax benefit($460)——————(16,889)(16,889)Dividends—————(82,573)—(82,573)Exercise of stock options67,89811,539————1,540Issuance of shares under Employee Stock PurchasePlan33,262—2,084————2,084Vested restricted stock169,5122(2)—————Repurchase and retirement of common stock(52,912)(1)(3,230)——(1,328)—(4,559)Exchange of Series B preferred stock10,530———————Repurchase of shares———(600,000)(42,543)——(42,543)Share based compensation——27,965——128—28,093Balance, December 31, 201848,082,800$481$354,210(600,000)$(42,543)$769,575$(45,979)$1,035,744See Notes to Consolidated Financial Statements-65-j2 GLOBAL, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER 31, 2018, 2017 and 20161. The Companyj2 Global, Inc., together with its subsidiaries (“j2 Global”, the “Company”, “our”, “us”, or “we”), is a leading provider of internet services. Throughour Cloud Services business, we provide cloud services to consumers and businesses and license our intellectual property (“IP”) to third parties. In addition,the Cloud Services business includes fax, voice, backup, security and email marketing products. Our Digital Media business specializes in the technology,gaming, broadband, business to business (“B2B”), healthcare, and international markets, offering content, tools and services to consumers and businesses.2. Basis of Presentation and Summary of Significant Accounting Policies(a)Principles of ConsolidationThe accompanying consolidated financial statements include the accounts of j2 Global and its direct and indirect wholly-owned subsidiaries. Allintercompany accounts and transactions have been eliminated in consolidation.On August 10, 2016, j2 Cloud Services, Inc., a Delaware corporation and subsidiary of the Company, converted into a Delaware limited liabilitycompany which continues as j2 Cloud Services, LLC.On August 12, 2016, all of the equity interests in Ziff Davis, LLC, a Delaware limited liability company, and all of the equity interests in AdvancedMessaging Technologies, Inc., a Delaware corporation, held by j2 Cloud Services, LLC, a Delaware limited liability company, were distributed to j2 Global,the parent company of j2 Cloud Services, LLC.(b)Use of EstimatesThe 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 financialstatements, including judgments about investment classifications and the reported amounts of net revenue and expenses during the reporting period. TheCompany believes that its most significant estimates are those related to revenue recognition, valuation and impairment of investments, its assessment ofownership interests as variable interest entities and the related determination of consolidation, share-based compensation expense, assets acquired andliabilities assumed in connection with business combinations, long-lived and intangible asset impairment, contingent consideration, income taxes andcontingencies and allowance for doubtful accounts. On an ongoing basis, management evaluates its estimates based on historical experience and on variousother factors that the Company believes to be reasonable under the circumstances. Actual results could materially differ from those estimates.(c)Allowances for Doubtful Accountsj2 Global reserves for receivables it may not be able to collect. The reserves for the Company’s Cloud Services business are typically driven by thevolume of credit card declines and past due invoices and are based on historical experience as well as an evaluation of current market conditions. Thesereserves for the Company’s Digital Media business are typically driven by past due invoices based on historical experience. On an ongoing basis,management evaluates the adequacy of these reserves.(d)Revenue RecognitionAccounting Standard Codification (“ASC”) Topic 605, Revenue Recognition (“Topic 605”)j2 Global recognizes revenue when persuasive evidence of an arrangement exists, services have been provided, the sales price is fixed anddeterminable and collection is probable. -66-Principal vs. AgentThe Company determines whether revenue should be reported on a gross or net basis by assessing whether the Company is acting as the principal oran agent in the transaction. If the Company is acting as the principal in a transaction, the Company reports revenue on a gross basis. If the Company is actingas an agent in a transaction, the Company reports revenue on a net basis. In determining whether the Company acts as the principal or an agent, the Companyfollows the accounting guidance under Topic 605 for principal-agent considerations and places the most weight on three factors: whether or not theCompany (i) is the primary obligor in the arrangement, (ii) has latitude in determining pricing and (iii) bears credit risk.ASC Topic 606, Revenue from Contracts with Customers (“Topic 606”, “ASC 606” or the “new revenue standard”)j2 Global recognizes revenue when the Company satisfies its obligation by transferring control of the goods or services to its customers in anamount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services (see Note 3 - Revenues).Principal vs. AgentThe Company determines whether revenue should be reported on a gross or net basis by assessing whether the Company is acting as the principal oran agent in the transaction. If the Company is acting as the principal in a transaction, the Company reports revenue on a gross basis. If the Company is actingas an agent in a transaction, the Company reports revenue on a net basis. In determining whether the Company acts as the principal or an agent, the Companyfollows the accounting guidance under Topic 606 for principal-agent considerations and assesses: (i) if another party is involved in providing goods orservices to the customer and (ii) whether the Company controls the specified goods or services prior to transferring control to the customer.Sales TaxesThe Company has made an accounting policy election to exclude from the measurement of the transaction price all taxes assessed by agovernmental authority that are (i) both imposed on and concurrent with a specific revenue-producing transaction and (ii) collected by the Company from acustomer.(e)Fair Value Measurementsj2 Global complies with the provisions of Financial Accounting Standards Board (“FASB”) ASC Topic No. 820, Fair Value Measurements andDisclosures (“ASC 820”), in measuring fair value and in disclosing fair value measurements. ASC 820 provides a framework for measuring fair value andexpands the disclosures required for fair value measurements of financial and non-financial assets and liabilities.As of December 31, 2018, the carrying values of cash and cash equivalents, accounts receivable, interest receivable, accounts payable, accruedexpenses, interest payable, customer deposits and long-term debt are reflected in the financial statements at cost. With the exception of certain investmentsand long-term debt, cost approximates fair value due to the short-term nature of such instruments. The fair value of the Company’s outstanding debt wasdetermined using the quoted market prices of debt instruments with similar terms and maturities. As of the same dates, the carrying value of other long-termliabilities approximated fair value as the related interest rates approximate rates currently available to j2 Global.(f)Cash and Cash Equivalentsj2 Global considers cash equivalents to be only those investments that are highly liquid, readily convertible to cash and with maturities of threemonths or less at the purchase date.(g)Investmentsj2 Global accounts for its investments in debt securities in accordance with ASC Topic No. 320, Investments - Debt Securities (“ASC 320”). Debtinvestments are typically comprised of corporate debt securities. j2 Global determines the appropriate classification of its investments at the time ofacquisition and evaluates such determination at each balance sheet date. Trading securities are those investments that the Company intends to sell within afew hours or days and are carried at fair value, with unrealized gains and losses included in investment income. Available-for-sale debt securities are thoseinvestments j2 Global does not intend to hold to maturity and can be sold. Available-for-sale securities are carried at fair value with unrealized gains andlosses included in other comprehensive income. Held-to-maturity securities are those investments which the Company has the ability-67-and intent to hold until maturity and are recorded at amortized cost. All debt securities are accounted for on a specific identification basis.The Company accounts for its investments in equity securities in accordance with ASC Topic No. 321, Investments - Equity Securities (“ASC 321”)which requires the accounting for equity investments (other than those accounted for using the equity method of accounting) generally be measured at fairvalue for equity securities with readily determinable fair values. For equity securities without a readily determinable fair value that are not accounted for bythe equity method, the Company measures the equity security using cost, less impairment, if any, and plus or minus observable price changes arising fromorderly transactions in the same or similar investment from the same issuer. Any unrealized gains or losses will be reported in current earnings (see Note 5 -Investments).(h)Variable Interest Entities (“VIE”)A VIE requires consolidation by the entity’s primary beneficiary. The Company evaluates its investments in entities in which it is involved todetermine if the entity is a VIE and if so, whether it holds a variable interest and is the primary beneficiary. The Company has determined that it holds avariable interest in its investment as a limited partner in the OCV Fund I, LP (“OCV Fund”, “OCV” or the “Fund”). In determining whether the Company isdeemed to be the primary beneficiary of the VIE, both of the following characteristics must be present:a) the Company has the power to direct the activities of the VIE that most significantly impacts the VIEs economic performance (the powercriterion); andb) the Company has the obligation to absorb losses of the VIE, or the right to receive benefits of the VIE, that could potentially be significant to theVIE (the economic criterion).The Company has concluded that, as a limited partner, although the obligations to absorb losses or benefit from the gains is not insignificant, theCompany does not have “power” over OCV because it does not have the ability to direct the significant decisions which impact the economics of OCV. j2believes that the OCV general partner, as a single decision maker, holds the ability to make the decisions about the activities that most significantly impactthe OCV Fund’s economic performance. As a result, the Company has concluded that it will not consolidate OCV, as it is not the primary beneficiary of theOCV Fund, and will account for this investment under the equity-method of accounting. See Note 5, “Investments”.The Company recognizes its equity in the net earnings or losses relating to the investment in OCV on a one-quarter lag due to the timing andavailability of financial information from OCV. If the Company becomes aware of a significant decline in value, the loss will be recorded in the period inwhich the Company identifies the decline.(i)Debt Issuance Costs and Debt Discountj2 Global capitalizes costs incurred with borrowing and issuance of debt securities and records debt issuance costs and discounts as a reduction tothe 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 usingthe effective interest method.(j)Derivative Instrumentsj2 Global currently holds an embedded derivative instrument related to contingent interest in connection with its 3.25% Convertible Notes issuedon June 10, 2014. This embedded derivative instrument is carried at fair value with changes recorded to interest expense (see Note 7 - Fair ValueMeasurements). -68-(k)Concentration of Credit RiskAll of the Company’s cash, cash equivalents and marketable securities are invested at major financial institutions primarily within the United States,United Kingdom and Ireland. These institutions are required to invest the Company’s cash in accordance with the Company’s investment policy with theprincipal objectives being preservation of capital, fulfillment of liquidity needs and above market returns commensurate with preservation of capital. TheCompany’s investment policy also requires that investments in marketable securities be in only highly rated instruments, with limitations on investing insecurities of any single issuer. However, these investments are not insured against the possibility of a total or near complete loss of earnings or principal andare inherently subject to the credit risk related to the continued credit worthiness of the underlying issuer and general credit market risks. At December 31,2018, the Company’s cash and cash equivalents were maintained in accounts in qualifying financial institutions that are insured up to the limit determinedby the applicable governmental agency. These institutions are primarily in the United States and United Kingdom, however, the Company has accountswithin several other countries including Australia, Austria, China, Denmark, France, Germany, Italy, Japan, New Zealand, Netherlands, Norway, and Sweden.(l)Foreign CurrencySome of j2 Global’s foreign subsidiaries use the local currency of their respective countries as their functional currency. Assets and liabilities aretranslated at exchange rates prevailing at the balance sheet dates. Revenues, costs and expenses are translated into U.S. Dollars at average exchange rates forthe period. Gains and losses resulting from translation are recorded as a component of accumulated other comprehensive income/(loss). Net translation(loss)/gain was $(15.5) million, $25.6 million and $(23.1) million for the years ended December 31, 2018, 2017 and 2016, respectively. Realized gains andlosses from foreign currency transactions are recognized within other expense (income), net. Foreign exchange losses amounted to $2.3 million, $5.8 millionand $0.7 million for the years ended December 31, 2018, 2017 and 2016, respectively.(m)Property and EquipmentProperty and equipment are stated at cost. Equipment under capital leases is stated at the present value of the minimum lease payments. Depreciationis calculated using the straight-line method over the estimated useful lives of the assets. The estimated useful lives of property and equipment range from 1 to10 years. Fixtures, which are comprised primarily of leasehold improvements and equipment under capital leases, are amortized on a straight-line basis overtheir estimated useful lives or for leasehold improvements, the related lease term, if less. The Company has capitalized certain internal use software andwebsite development costs which are included in property and equipment. The estimated useful life of costs capitalized is evaluated for each specific projectand ranges from 1 to 5 years.(n)Impairment or Disposal of Long-Lived Assetsj2 Global accounts for long-lived assets, which include property and equipment and identifiable intangible assets with finite useful lives (subject toamortization), in accordance with the provisions of FASB ASC Topic No. 360, Property, Plant, and Equipment (“ASC 360”), which requires that long-livedassets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.Recoverability is measured by comparing the carrying amount of an asset to the expected undiscounted future net cash flows generated by the asset. If it isdetermined that the asset may not be recoverable, and if the carrying amount of an asset exceeds its estimated fair value, an impairment charge is recognizedto the extent of the difference.j2 Global assessed whether events or changes in circumstances have occurred that potentially indicate the carrying amount of long-lived assets maynot be recoverable. No impairment was recorded in fiscal year 2018, 2017 or 2016.The Company classifies its long-lived assets to be sold as held for sale in the period (i) it has approved and committed to a plan to sell the asset, (ii)the asset is available for immediate sale in its present condition, (iii) an active program to locate a buyer and other actions required to sell the asset have beeninitiated, (iv) the sale of the asset is probable, (v) the asset is being actively marketed for sale at a price that is reasonable in relation to its current fair value,and (vi) it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. The Company initially measures a long-lived assetthat is classified as held for sale at the lower of its carrying value or fair value less any costs to sell. Any loss resulting from this measurement is recognized inthe period in which the held for sale criteria are met. Conversely, gains are not recognized on the sale of a long-lived asset until the date of sale. Upondesignation as an asset held for sale, the Company stops recording depreciation expense on the asset. The Company assesses the fair value of a long-livedasset less any costs to sell at each reporting period and until the asset is no longer classified as held for sale.-69-(o)Goodwill and Intangible AssetsGoodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in a businesscombination. Intangible assets resulting from the acquisitions of entities accounted for using the purchase method of accounting are recorded at the estimatedfair value of the assets acquired. Identifiable intangible assets are comprised of purchased customer relationships, trademarks and trade names, developedtechnologies and other intangible assets. Intangible assets subject to amortization are amortized over the period of estimated economic benefit ranging from1 to 20 years. In accordance with FASB ASC Topic No. 350, Intangibles - Goodwill and Other (“ASC 350”), goodwill and other intangible assets withindefinite lives are not amortized but tested annually for impairment or more frequently if j2 Global believes indicators of impairment exist. In connectionwith the annual impairment test for goodwill, the Company has the option to perform a qualitative assessment in determining whether it is more likely thannot that the fair value of a reporting unit is less than its carrying amount. If the Company determines that it was more likely than not that the fair value of thereporting unit is less than its carrying amount, then it performs the impairment test upon goodwill. The impairment test involves comparing the fair values ofthe applicable reporting units with their aggregate carrying values, including goodwill. The Company generally determines the fair value of its reportingunits using the income approach methodology of valuation. If the carrying value of a reporting unit exceeds the reporting unit’s fair value, an impairmentloss is recognized for the difference. In accordance with ASC 350, the Company performed the annual impairment test for goodwill for fiscal year 2018 usinga qualitative assessment primarily taking into consideration macroeconomic, industry and market conditions, overall financial performance and any otherrelevant company-specific events. The Company performed the annual impairment test for intangible assets with indefinite lives for fiscal 2018 using aqualitative assessment primarily taking into consideration macroeconomic, industry and market conditions, overall financial performance and any otherrelevant company-specific events. j2 Global concluded that there were no impairments in 2018, 2017 and 2016.(p)Contingent Considerationj2 Global measures the contingent earn-out liabilities in connection with acquisitions at fair value on a recurring basis using significantunobservable inputs classified within Level 3 of the fair value hierarchy (see Note 7 - Fair Value Measurements). The Company may use various valuationtechniques depending on the terms and conditions of the contingent consideration including a Monte-Carlo simulation. This simulation uses a probabilitydistribution for each significant input to produce hundreds or thousands of possible outcomes and the results are analyzed to determine probabilities ofdifferent outcomes occurring. Significant increases or decreases to these inputs in isolation would result in a significantly higher or lower liability with ahigher 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 amount paid will be recorded in earnings. The amount paid that is less than or equal to the liability onthe acquisition date is reflected as cash used in financing activities in our consolidated statements of cash flows. Any amount paid in excess of the liabilityon the acquisition date is reflected as cash used in operating activities.j2 Global reviews and re-assesses the estimated fair value of contingent consideration on a quarterly basis, and the updated fair value could bematerially different from the initial estimates or prior amounts. Changes in the estimated fair value of our contingent earn-out liabilities are reported inoperating income. Adjustments to the estimated fair value related to changes in all other unobservable inputs are reported in operating income.(q)Self-Insurance Programj2 Global provides health and dental insurance plans to certain of its employees through a self-insurance structure. The Company has securedreinsurance in the form of a two tiered stop-loss coverage that limits the exposure arising from any claims made. Self-insurance claims filed and claimsincurred but not reported are accrued based on management’s estimate of the discounted ultimate costs for self-insured claims incurred using actuarialassumptions followed in the insurance industry and historical experience. Although management believes it has the ability to reasonably estimate lossesrelated to claims, it is possible that actual results could differ from recorded self-insurance liabilities.-70-(r)Income Taxesj2 Global’s income is subject to taxation in both the U.S. (federal and state) and numerous foreign jurisdictions. Significant judgment is required inevaluating the Company’s tax positions and determining its provision for income taxes. During the ordinary course of business, there are many transactionsand calculations for which the ultimate tax determination is uncertain. j2 Global establishes reserves for tax-related uncertainties based on estimates ofwhether, and the extent to which, additional taxes will be due. These reserves for tax contingencies are established when the Company believes that certainpositions might be challenged despite the Company’s belief that its tax return positions are fully supportable. j2 Global adjusts these reserves in light ofchanging facts and circumstances, such as the outcome of a tax audit or lapse of a statute of limitations. The provision for income taxes includes the impact ofreserve provisions and changes to reserves that are considered appropriate.j2 Global accounts for income taxes in accordance with FASB ASC Topic No. 740, Income Taxes (“ASC 740”), which requires that deferred taxassets and liabilities be recognized using enacted tax rates for the effect of temporary differences between the book and tax basis of recorded assets andliabilities. ASC 740 also requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some or all of the net deferredtax assets will not be realized. The valuation allowance is reviewed quarterly based upon the facts and circumstances known at the time. In assessing thisvaluation allowance, j2 Global reviews historical and future expected operating results and other factors, including its recent cumulative earnings experience,expectations of future taxable income by taxing jurisdiction and the carryforward periods available for tax reporting purposes, to determine whether it is morelikely than not that deferred tax assets are realizable.ASC 740 provides guidance on the minimum threshold that an uncertain income tax benefit is required to meet before it can be recognized in thefinancial statements and applies to all income tax positions taken by a company. ASC 740 contains a two-step approach to recognizing and measuringuncertain income tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates thatit is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step isto measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement. If it is not more likely than not that thebenefit will be sustained on its technical merits, no benefit will be recorded. Uncertain income tax positions that relate only to timing of when an item isincluded on a tax return are considered to have met the recognition threshold. j2 Global recognized accrued interest and penalties related to uncertain incometax positions in income tax expense on its consolidated statements of income.(s)Share-Based Compensationj2 Global accounts for share-based awards in accordance with the provisions of FASB ASC Topic No. 718, Compensation - Stock Compensation(“ASC 718”). Accordingly, j2 Global measures share-based compensation expense at the grant date, based on the fair value of the award, and recognizes theexpense over the employee’s requisite service period using the straight-line method. The measurement of share-based compensation expense is based onseveral criteria, including but not limited to the valuation model used and associated input factors, such as expected term of the award, stock price volatility,risk free interest rate, dividend rate and award cancellation rate. These inputs are subjective and are determined using management’s judgment. If differencesarise between the assumptions used in determining share-based compensation expense and the actual factors, which become known over time, j2 Global maychange the input factors used in determining future share-based compensation expense. Any such changes could materially impact the Company’s results ofoperations in the period in which the changes are made and in periods thereafter. The Company estimates the expected term based upon the historicalexercise behavior of our employees.j2 Global accounts for option grants to non-employees in accordance with FASB ASC Topic No. 505, Equity, whereby the fair value of such optionsis determined using the Black-Scholes option pricing model at the earlier of the date at which the non-employee’s performance is complete or a performancecommitment is reached.(t)Earnings Per Common Share (“EPS”)EPS is calculated pursuant to the two-class method as defined in ASC Topic No. 260, Earnings per Share (“ASC 260”), which specifies that alloutstanding unvested share-based payment awards that contain rights to nonforfeitable dividends or dividend equivalents are considered participatingsecurities and should be included in the computation of EPS pursuant to the two-class method.Basic EPS is calculated by dividing net distributed and undistributed earnings allocated to common shareholders, excluding participating securities,by the weighted-average number of common shares outstanding. The Company’s participating securities consist of its unvested share-based payment awardsthat contain rights to nonforfeitable dividends or dividend equivalents. Diluted-71-EPS includes the determinants of basic EPS and, in addition, reflects the impact of other potentially dilutive shares outstanding during the period. Thedilutive effect of participating securities is calculated under the more dilutive of either the treasury method or the two-class method.(u)Research, Development and EngineeringResearch, development and engineering costs are expensed as incurred. Costs for software development incurred subsequent to establishingtechnological feasibility, in the form of a working model, are capitalized and amortized over their estimated useful lives.(v)Segment ReportingFASB ASC Topic No. 280, Segment Reporting (“ASC 280”), establishes standards for the way that public business enterprises report informationabout operating segments in their annual consolidated financial statements and requires that those enterprises report selected information about operatingsegments in interim financial reports. ASC 280 also establishes standards for related disclosures about products and services, geographic areas and majorcustomers. The Company’s business segments are based on the organization structure used by the chief operating decision maker for making operating andinvestment decisions and for assessing performance. The chief operating decision maker views the Company in two businesses: Cloud Services and DigitalMedia. However, in accordance with the aggregation criteria within ASC Topic 280, j2 Global’s operating segments have been aggregated into threereportable segments: (i) Fax and Email Marketing; (ii) Voice, Backup, and Security; and (iii) Digital Media.(w)Advertising CostsAdvertising costs are expensed as incurred. Advertising costs for the years ended December 31, 2018, 2017 and 2016 was $149.7 million, $143.3million and $96.8 million, respectively.(x)Recent Accounting Pronouncements In May 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers, as a new Topic, Topic606. The new revenue recognition standard provides a five-step analysis of transactions to determine when and how revenue is recognized. The core principleis that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration towhich the entity expects to be entitled in exchange for those goods or services. The Company has adopted this ASU and other related ASUs as of January 1,2018 (the “adoption date”) using the cumulative effect method which applied to those contracts which were not completed as of the adoption date. Resultsfor reporting periods beginning after the adoption date are presented under Topic 606, while prior period amounts are not adjusted and continue to bereported in accordance with our historic accounting under ASC 605 as noted above (see Note 3 - Revenues).In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of FinancialAssets and Financial Liabilities. The amendments in this ASU modify how entities measure equity investments and present changes in the fair value offinancial liabilities. Under the new guidance, entities will have to measure equity investments that do not result in consolidation and are not accounted underthe equity method at fair value and recognize any changes in fair value in net income unless the investments qualify for the practical expedient exception.An entity may elect to measure an equity security without a readily determinable fair value that does not qualify for the practical expedient to estimate fairvalue under ASC 820, Fair Value Measurements, and as such these investments may be measured at cost. This ASU is effective for financial statements issuedfor fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company has adopted this ASU on a prospective basisin the first quarter of 2018 and has determined that investments within the scope of the standard will be recorded at fair value with changes in fair valuerecognized in earnings which may lead to increased volatility in other expense.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 aROU 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 statement. This ASU and all the related amendments are effective for fiscal yearsbeginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for lesseesfor capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, withcertain practical expedients available. In July 2018, the FASB issued ASU No. 2018-10, Codification Improvements to Topic 842, Leases. This ASU is meantto clarify the guidance in ASU No. 2016-02, Leases. This ASU does not change the core principle of-72-the guidance in Topic 842. Instead, the amendments provide clarifying guidance in a few narrow areas. In July 2018, the FASB issued ASU No. 2018-11,Leases (Topic 842): Targeted Improvements. This ASU provides another transition method for entities who have not yet adopted the new leasing standard byallowing entities to initially apply the new standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retainedearnings in the period of adoption. In addition, this ASU provides a practical expedient to lessors to not separate nonlease components from the associatedlease components similar to the expedient that is afforded to lessees. However, the lessor practical expedient is limited to circumstances in which thenonlease component or components otherwise would be accounted for under the new revenue guidance and both (1) the timing and pattern of transfer are thesame for the nonlease component(s) and associated lease component and (2) the lease component, if accounted for separately, would be classified as anoperating lease. In December 2018, the FASB issued ASU No. 2018-20, Leases (Topic 842): Narrow-Scope Improvements for Lessors. This ASU amendsguidance related to sales taxes and other similar taxes collected from lessees, certain lessor costs, and recognition of variable payments for contracts withlease and nonlease components. The ASU provides for an accounting policy election for lessors similar to that provided in ASU 2016-12; it clarifies thatcosts excluded from the consideration in a contract that are paid directly to a third party by a lessor and reimbursed by the lessee are lessor costs to beaccounted for as vendor payments; requires lessors to exclude from variable payments and, thus from lease revenue, lessor costs paid by a lessee directly to athird party; and clarifies the accounting by lessors for variable payments that relate to both a lease component and a nonlease component. The Company willadopt the new lease standard and related amendments as of January 1, 2019. The Company continues to review the analysis performed by its businesses todetermine the balance sheet impact as a result of adoption. The most significant changes relate to the recognition of new right-of-use assets and leaseliabilities on the balance sheet for operating leases. The Company expects to recognize right-of-use assets ranging from approximately $71 million to $78million, with corresponding lease liabilities. The accounting for finance leases will remain substantially unchanged.In addition, the Company has determined that it will elect and apply the available transition practical expedients upon adoption. By electing thesepractical expedients, the Company will:•not reassess whether expired or existing contracts contain leases under the new definition of a lease;•not reassess lease classification for expired or existing leases;•not reassess whether previously capitalized initial direct costs would qualify for capitalization under Topic 842;In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on FinancialInstruments. The amendments in this ASU replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expectedcredit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. This ASU is effective forfiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019. In November 2018, the FASB issued ASU No. 2018-19,Codification Improvements to Topic 326, Financial Instruments - Credit Losses. The amendments in this ASU align the implementation date for nonpublicentities’ annual financial statements with the implementation date for their interim financial statements. In addition, the amendment clarifies that receivablesarising from operating leases are not within the scope of Subtopic 326-20; instead impairment of receivables arising from operating leases should beaccounted for in accordance with Topic 842: Leases. This ASU is effective for fiscal years beginning after December 15, 2019, including interim periodswithin those fiscal years. The adoption of these ASUs is not expected to have a material impact on our financial statements and related disclosures.In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other than Inventory. The amendmentsin this ASU reduce the complexity in the accounting standards by allowing the recognition of current and deferred income taxes for an intra-entity assettransfer, other than inventory, when the transfer occurs. Historically, the income tax consequence was not recognized until the asset was sold to an outsideparty. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. Early adoption is permitted.The Company has adopted this ASU on a modified retrospective basis in the first quarter of 2018 through a cumulative-effect adjustment directly to retainedearnings and has determined that there is no impact on our financial statements and related disclosures as of January 1, 2018.In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. The amendments inthis ASU provide a robust framework to use in determining when a set of assets and activities is a business. This ASU is effective for fiscal years, and interimperiods within those fiscal years, beginning after December 15, 2017. Early adoption is permitted and the standard should be applied prospectively. TheCompany has adopted this ASU on a prospective basis in the first quarter of 2018 and has determined that there is no impact on our financial statements andrelated disclosures.-73-In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.The amendments in this ASU simplify the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test and eliminating therequirement for a reporting unit with a zero or negative carrying amount to perform a qualitative assessment. Instead, under this pronouncement, an entitywould perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and would recognizean impairment change for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized is not to exceed thetotal amount of goodwill allocated to that reporting unit. In addition, income tax effects will be considered, if applicable. This ASU is effective for fiscalyears, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted and should be adopted on a prospectivebasis. The Company has adopted this ASU on a prospective basis in the third quarter of 2018 and has determined there to be no impact on our financialstatements and related disclosures.In February 2018, the FASB issued ASU No. 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification ofCertain Tax Effects from Accumulated Other Comprehensive Income. The amendments in this ASU allow reclassification from accumulated othercomprehensive income to retained earnings for stranded tax effects resulting from the U.S. federal tax legislation, the Tax Cuts and Jobs Act of 2017 (“2017Tax Act”). Consequently, the amendments eliminate the stranded tax effects resulting from the 2017 Tax Act and will improve the usefulness of informationreported to financial statement users. However, because the amendments only relate to the reclassification of the income tax effects of the 2017 Tax Act, theunderlying guidance that requires that the effect of a change in tax laws or rates to be included in income from continuing operations is not affected. ThisASU is effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permittedand should be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federalcorporate income tax rate in the 2017 Tax Act is recognized. The adoption of this ASU is not expected to have a material impact on our financial statementsand related disclosures.In February 2018, the FASB issued ASU 2018-03, Technical Corrections and Improvements to Financial Instruments - Overall (Subtopic 825-10):Recognition and Measurement of Financial Assets and Financial Liabilities. The amendments in this ASU clarify certain aspects of the guidance issued inASU 2016-01, Financial Instruments - Overall. As is consistent with other clarifying standards, the amendments are not expected to have a significant effecton the current accounting practice. This ASU is effective for financial statements issued for fiscal years beginning after December 15, 2017, and interimperiods beginning after June 15, 2018. Public entities with fiscal years beginning between December 15, 2017 and June 15, 2018 are not required to adoptthese amendments until the interim period beginning after June 15, 2018. Early adoption is permitted and should be adopted in conjunction with ASU 2016-01. The Company has adopted this ASU on a prospective basis in the first quarter of 2018 and has determined that investments within the scope of thestandard will be recorded at fair value with changes in fair value recognized in earnings which may lead to increased volatility in other expense.In June 2018, the FASB issued ASU No. 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-BasedPayment Accounting. The amendments in this ASU expand the scope of Topic 718 to include share-based payment transactions for acquiring goods andservices from nonemployees. The amendments specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods orservices to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The amendments also clarify that Topic 718 does notapply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services tocustomers as part of a contract accounted for under Topic 606, Revenue from Contracts with Customers. This ASU is effective for fiscal years beginning afterDecember 15, 2018, including interim periods within that fiscal year. Early adoption is permitted. The adoption of this ASU is not expected to have amaterial impact on our financial statements and related disclosures.In July 2018, the FASB issued ASU No. 2018-09, Codification Improvements. The amendments in this ASU clarify certain aspects of the guidancerelated to: reporting comprehensive income, debt modification and extinguishment, income taxes related to stock compensation, income taxes related tobusiness combinations, derivatives and hedging, fair value measurements, brokers and dealers liabilities, and plan accounting. This ASU is effective for fiscalyears, and interim periods within those fiscal years, beginning after December 15, 2018. The adoption of this ASU is not expected to have a material impacton our financial statements and related disclosures.-74-In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the DisclosureRequirements for Fair Value Measurement. The amendments in this ASU remove, add, and modify certain disclosures. The ASU removes the followingdisclosure requirements from Topic 820: (1) the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy; (2) the policy fortiming of transfers between levels; (3) the valuation process for Level 3 fair value measurements; and (4) certain other requirements for nonpublic entities.The ASU adds the following disclosure requirements: (1) the changes in unrealized gains and losses for the period included in other comprehensive incomefor recurring Level 3 fair value measurements held at the end of the reporting period and (2) the range and weighted average of significant unobservableinputs used to develop Level 3 fair value measurements. For certain unobservable inputs, disclosure of other quantitative information may be moreappropriate if the entity determines that other quantitative information would be a more reasonable and rational method to reflect the distribution ofunobservable inputs used to develop Level 3 fair value measurements. The ASU modifies disclosure requirements in Topic 820 relating to timing ofliquidation of an investee’s assets, the disclosure of the date when restrictions from redemption might lapse, the intention of the measurement uncertaintydisclosure, and certain other requirements for nonpublic entities. This ASU is effective for fiscal years, and interim periods within those fiscal years,beginning after December 15, 2019. The Company is currently evaluating the effect of this ASU on our financial statements and related disclosures.In August 2018, the FASB issued ASU No. 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’sAccounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. The amendments in this ASU align therequirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizingimplementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software). The amendmentsin this ASU require an entity (customer) in a hosting arrangement that is a service to (1) determine which implementation costs to capitalize as an asset relatedto the service contract and which costs to expense; (2) expense the capitalized implementation costs of a hosting arrangement that is a service contract overthe term of the hosting arrangement; (3) apply the existing impairment guidance to the capitalized implementation costs as if the costs were long-lived assets;(4) present the expense related to the capitalized implementation costs in the same line item in the statement of income as the fees associated with the hostingelement (service) of the arrangement and classify payments for capitalized implementation costs in the statement of cash flows in the same manner aspayments made for fees associated with the hosting arrangements; and (5) present the capitalized implementation costs in the statement of financial positionin the same line item that a prepayment for the fees of the associated hosting arrangement would be presented. This ASU is effective for fiscal years, andinterim periods within those fiscal years, beginning after December 15, 2019. The Company is currently evaluating the effect of this ASU on our financialstatements and related disclosures.(y)ReclassificationsCertain prior year reported amounts have been reclassified to conform with the 2018 presentation.3. RevenuesDigital MediaDigital Media revenues are earned primarily from the delivery of advertising services, from subscriptions to services, data and information, and fromlicensing.Revenue is earned from the delivery of advertising services on the Company’s owned and operated websites and on those websites that are part ofDigital Media’s advertising network. Depending on the individual contracts with the customer, revenue for these services are recognized over the contractperiod when any of the following performance obligations are satisfied: (i) when an advertisement is placed for viewing; (ii) when a qualified sales lead isdelivered; (iii) when a visitor “clicks through” on an advertisement; or (iv) when commissions are earned upon the sale of an advertised product.Revenue from subscriptions is earned through the granting of access to, or delivery of, data products or services to customers. Subscriptions covervideo games and related content, health information, data and other copyrighted material. Revenues under such agreements are recognized over the contractterm for use of the service. Revenues are also earned from listing fees, subscriptions to online publications, and from other sources. Subscription revenues arerecognized over time.j2 Global generates Digital Media revenues through the license of certain assets to clients. Assets are licensed for clients’ use in their ownpromotional materials or otherwise. Such assets may include logos, editorial reviews, or other copyrighted material. Revenues under such license agreementsare recognized over the contract term for use of the asset. Technology assets are also licensed to clients. These assets are recognized over the term of theaccess period. The Digital Media business also generates-75-revenue from other sources which includes marketing and production services. Such other revenues are generally recognized over the period in which theproducts or services are delivered. Revenues are no longer generated in 2018 from certain marketing and production services as a result of the sale of certainDigital Media assets during 2017.j2 Global also generates Digital Media revenues from transactions involving the sale of perpetual software licenses, related software support andmaintenance, hardware used in conjunction with its software, and other related services. Revenue is recognized for these software transactions with multipleperformance obligations after (i) the Company has had an approved contract and is committed to perform the respective obligations and (ii) the Company canidentify and quantify each obligation and its respective selling price. Once the respective performance obligations have been identified and quantified,revenue will be recognized when the obligations are met, either over time or at a point in time depending on the nature of the obligation.Revenues from software license performance obligations are generally recognized upfront at the point in time that the software is made available tothe customer to download and use. Revenues for related software support and maintenance performance obligations are related to technical support providedto customers as needed and unspecified software product upgrades, maintenance releases and patches during the term of the support period when they areavailable. The Company is obligated to make the support services available continuously throughout the contract period. Therefore, revenues for supportcontracts are generally recognized ratably over the contractual period the support services are provided. Hardware product and related software performanceobligations, such as an operating system or firmware, are highly interdependent and interrelated and are accounted for as a bundled performance obligation.The revenues for this bundled performance obligation are generally recognized at the point in time that the hardware and software products are delivered andownership is transferred to the customer. Other service revenues are generally recognized over time as the services are performed.The Company records revenue on a gross basis with respect to revenue generated (i) by the Company serving online display and video advertisingacross its owned and operated web properties, on third-party sites or on unaffiliated advertising networks; (ii) through the Company’s lead-generationbusiness; and (iii) through the Company’s subscriptions. The Company records revenue on a net basis with respect to revenue paid to the Company bycertain third-party advertising networks who serve online display and video advertising across the Company’s owned-and-operated web properties andcertain third-party sites.Cloud ServicesThe Company’s Cloud Services revenues substantially consist of monthly recurring subscription and usage-based fees, which are primarily paid inadvance by credit card. The Company defers the portions of monthly, quarterly, semi-annually and annually recurring subscription and usage-based feescollected in advance of the satisfaction of performance obligations and recognizes them in the period earned.Along with our numerous proprietary Cloud Services solutions, the Company also generates revenues by reselling various third-party solutions,primarily through our security and online backup lines of business. These third-party solutions, along with our proprietary products, allow the Company tooffer customers a variety of solutions to better meet their needs. The Company records revenue on a gross basis with respect to reseller revenue because theCompany has control of the specified good or service prior to transferring control to the customer.j2 Global’s Cloud Services also include patent license revenues generated under license agreements that provide for the payment of contractuallydetermined fully paid-up or royalty-bearing license fees to j2 Global in exchange for the grant of non-exclusive, retroactive and future licenses to ourintellectual property, including patented technology. Patent revenues may also consist of revenues generated from the sale of patents. Patent licensearrangements are evaluated to determine if they grant the customer a right to access the Company’s intellectual property which is generally recognized overthe life of the arrangement or a right to use the Company’s intellectual property which is generally recognized at the point in time the license is granted. Withregard to royalty-bearing license arrangements, the Company recognizes revenues of license fees earned during the applicable period.The Cloud Services business also generates revenues by licensing certain technology to third parties. Generally, revenue is recognized over time asthe third party uses the licensed technology over the period.-76-The cumulative effect of the changes made to our consolidated balance sheet as of January 1, 2018 for the adoption of Topic 606 is as follows (inthousands): January 1, 2018 Adjustments due toASU No. 2014-09 December 31, 2017Balance Sheet Assets Accounts receivable, net$234,195 $— $234,195 Liabilities Deferred revenue, current93,656 (1,599) 95,255Deferred revenue, noncurrent47 — 47 Equity Retained earnings$724,661 $1,599 $723,062The following tables summarize the impact of adopting Topic 606 on the Company’s consolidated financial statements (in thousands): December 31, 2018 As Reported Adjustments Balances WithoutAdoption of ASC606Balance Sheet Assets Accounts receivable, net$221,615 $— $221,615 Liabilities Deferred revenue, current127,568 (5,455) 122,113Deferred revenue, noncurrent13,200 — 13,200 Equity Retained earnings$769,575 $5,455 $775,030 2018 As Reported Adjustments Amounts WithoutAdoption of ASC606Statement of Income Revenues Total revenues$1,207,295 $7,054 $1,214,349Expenses Total expenses1,078,608 — 1,078,608 Net income$128,687 $7,054 $135,741Diluted EPS impact$2.59 $0.14 $2.73-77-Revenues from external customers classified by revenue source are as follows (in thousands): Years Ended December 31,Digital Media2018 2017 2016Advertising$468,325 $455,647 $274,763Subscription138,689 70,794 32,700Other 2,360 12,498 —Total Digital Media revenues$609,374 $538,939 $307,463 Cloud Services Subscription$597,281 $574,197 $562,345Other694 4,759 4,593Total Cloud Services revenues$597,975 $578,956 $566,938 Corporate$6 $— $—Elimination of inter-business revenues(60) (57) (146)Total Revenues$1,207,295 $1,117,838 $874,255 Timing of revenue recognition Point in time$4,752 $22,559 $14,459Over time1,202,543 1,095,279 859,796Total$1,207,295 $1,117,838 $874,255The Company has recorded $80.0 million of revenue for the year ended December 31, 2018 which was previously included in the contract liabilitybalance as of the adoption date.As of December 31, 2018, the Company acquired $37.1 million of deferred revenue in connection with the Company’s business acquisitions (seeNote 4 - Business Acquisitions) which are subject to purchase accounting adjustments.Performance ObligationsThe Company’s contracts with customers may include multiple performance obligations. For such arrangements, revenues are allocated to eachperformance obligation based on its relative standalone selling price.The Company satisfies its performance obligations within the Digital Media business upon delivery of services to its customers. In addition, theCompany provides content to its advertising partners which the Company sells to its partners’ customer base and receives a revenue share based on the termsof the agreement.The Company satisfies its performance obligations within the Cloud Services business upon delivery of services to its customers. Payment termsvary by type and location of our customers and the services offered. The term between invoicing and when payment is due is not significant. Due to thenature of the services provided, there are no obligations for returns.Significant JudgmentsIn determining whether products and services are considered distinct performance obligations that should be accounted for separately versustogether may require significant judgment. Judgment is also required to determine the standalone selling price for each distinct performance obligation.-78-Performance Obligations Satisfied Over TimeThe Company’s Digital Media business consists primarily of performance obligations that are satisfied over time. This was determined based on areview of the contracts and the nature of the services offered, where the customer simultaneously receives and consumes the benefit of the services provided.Satisfaction of these performance obligations is evidenced in the following ways:Advertising•Website reporting by the Company, the customer, or a third-party contains the delivery evidence needed to satisfy the performance obligationswithin the advertising contract•Successfully delivered leads are evidenced by either delivery reports from the Company’s internal lead management systems or through e-mailcommunication and/or other evidence of delivery showing acceptance of leads by the customer•Commission is evidenced by direct site reporting from the affiliate or via direct confirmation from the customerSubscription•Evidence of delivery is contained in the Company’s systems or from correspondence with the customer which tracks when a customer acceptsdelivery of any product, digital keys or download linksThe Company has concluded revenue is recognized based on delivery of services over the contract period for advertising and on a straight-line basisover the contract period for subscriptions. The Company believes that the methods described are a faithful depiction of the transfer of goods and services.The Company’s Cloud Services business consists primarily of performance obligations that are satisfied over time. This has been determined basedon the fact that the nature of services offered are subscription based and include fax, voice, backup, security and email marketing products where thecustomer simultaneously receives and consumes the benefit of the services provided regardless of whether the customer uses the services or not. Dependingon the individual contracts with the customer, revenue for these services are recognized over the contract period when any of the following materially distinctperformance obligations are satisfied:•Faxing capabilities are provided•Voice services are delivered•Email Marketing services are delivered•Security solutions, including email and endpoint are provided•Online data Backup capabilities are providedThe Company has concluded that the best measure of progress toward the complete satisfaction of the performance obligation over time is a time-based measure. The Company recognizes revenue on a straight-line basis throughout the subscription period and believes that the method used is a faithfuldepiction of the transfer of goods and services.Performance Obligations Satisfied at a Point in TimeThe Company’s Digital Media business has technology subscriptions that have standalone functionality. As a result, they are considered to befunctional intellectual property where the performance obligations are satisfied at a point in time. This is evidenced once a digital key is delivered to thecustomer. Once the key is delivered to the customer, the customer has full control of the technology and the Company has no further performanceobligations. The Company has concluded that revenue is recognized once the digital key is delivered. The Company believes that this method is a faithfuldepiction of the transfer of goods and services.-79-Practical ExpedientsExistence of a Significant Financing Component in a ContractAs a practical expedient, the Company has not assessed whether a contract has a significant financing component because the Company expects atcontract inception that the period between payment by the customer and the transfer of promised goods or services by the Company to the customer will beone year or less. In addition, the Company has determined that the payment terms that the Company provides to its customers are structured primarily forreasons other than the provision of finance to the Company. The Company typically charges a single upfront amount for the services because other paymentterms would affect the nature of the risk assumed by the Company to provide service given the costs of the customer acquisition and the highly competitiveand commoditized nature of the business we operate which allows customers to easily move from one provider to another. This additional risk may make ituneconomical to provide the service.Costs to Fulfill a ContractThe Company’s revenues are primarily generated from customer contracts that are for one year or less. Costs primarily consist of incentivecompensation paid based on the achievements of sales targets in a given period for related revenue streams and are recognized in the month when the revenueis earned. Incentive compensation is paid on the issuance or renewal of the customer contract. As a practical expedient, for amortization periods which aredetermined to be one year or less, the Company expenses any incremental costs of obtaining the contract with a customer when incurred. For those customercontracts greater than one year, the Company capitalizes and amortizes the expenses over the period of benefit.Revenues InvoicedThe Company has applied the practical expedient for certain revenue streams to exclude the value of remaining performance obligations for (i)contracts with an original expected term of one year or less or (ii) contracts for which the Company recognizes revenue in proportion to the amount it has theright to invoice for services performed.4. Business AcquisitionsThe Company uses acquisitions as a strategy to grow its customer base by increasing its presence in new and existing markets, expand and diversifyits service offerings, enhance its technology, and acquire skilled personnel.The Company completed the following acquisitions during the year ended December 31, 2018, paying the purchase price in cash in eachtransaction: (a) a share purchase of the entire issued capital of ThreatTrack Security Holdings, Inc., acquired on January 26, 2018, a Florida-based provider ofcybersecurity solutions; (b) an asset purchase of Line2, Inc., acquired on June 18, 2018, a California-based provider of voice solutions; (c) a share purchase ofall the membership interests of Mosaik Solutions, LLC, acquired on June 18, 2018, a Tennessee-based provider of mobile coverage data and networkintelligence for mobile operators and network-dependent enterprises; (d) a share purchase of DemandShore Solutions Private Limited, acquired on July 19,2018, an India-based provider of software and other solutions to sales and marketing professionals; (e) a share purchase of DW PRIME Holdings, Inc.,acquired on August 20, 2018, a Florida-based accredited provider of continuing medical education for medical professionals; (f) a share purchase of TheCommunicator Corporation Limited, acquired on September 25, 2018, an United Kingdom-based provider of email marketing services; (g) a share purchaseof Ekahau Inc., acquired on October 10, 2018, a Virginia-based provider of solutions for enterprise Wi-Fi network design, troubleshooting, and optimization;and (h) other immaterial acquisitions of digital health and data analysis businesses.The consolidated statement of income since the date of each acquisition and balance sheet as of December 31, 2018, reflect the results of operationsof all 2018 acquisitions. For the year ended December 31, 2018, these acquisitions contributed $56.2 million to the Company’s revenues. Net incomecontributed by these acquisitions was not separately identifiable due to j2 Global’s integration activities and is impracticable to provide. Total considerationfor these transactions was $324.7 million, net of cash acquired and assumed liabilities and subject to certain post-closing adjustments which may increase ordecrease the final consideration paid.-80-The following table summarizes the allocation of the purchase consideration for all 2018 acquisitions (in thousands):Assets and LiabilitiesValuation Cash (1)$15,532Accounts receivable 11,321Prepaid expenses and other current assets 3,480Property and equipment 4,755Trade names 33,750Customer relationships 66,516Goodwill 194,282Trademarks 3,285Other intangibles 84,907Other long-term assets 341Deferred tax asset 821Accounts payables and accrued expenses (10,864)Deferred revenue (37,113)Capital lease (956)Income taxes payable (1,458)Deferred tax liability (22,990)Other long-term liabilities (5,410) Total$340,199(1) Cash contains an immaterial amount of restricted cash associated with a pre-acquisition relationship with a vendor. The entire balance has been releasedduring the third quarter of 2018.During 2018, the purchase price accounting has been finalized for the following acquisitions: (i) WeCloud AB; (ii) ThreatTrack Security Holdings,Inc.; (iii) Humble Bundle Inc.; (iv) blackfriday.com; (v) OnTargetJobs, Inc.; (vi) Line2, Inc.; (vii) Mashable Inc.; and (viii) other immaterial email security,digital marketing, data analysis, and digital health businesses. The initial accounting for all other 2018 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 certainintangible assets (including trade names, software and customer relationships), preliminary acquisition date working capital and related tax items.During the year ended December 31, 2018, the Company recorded adjustments to prior period acquisitions due to the finalization of the purchaseaccounting in the Cloud Services business which resulted in a net decrease in goodwill of $1.0 million. In addition, the Company recorded adjustments to theinitial working capital related to prior period acquisitions in the Digital Media business, which resulted in a net increase in goodwill of $0.2 million (seeNote 9 - Goodwill and Intangible Assets). Such adjustments had an immaterial impact to amortization expense within the consolidated statement of incomefor the year ended December 31, 2018.Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired and representsintangible assets that do not qualify for separate recognition. Goodwill recognized in connection with these acquisitions during the year ended December 31,2018 is $194.3 million, of which $38.3 million is expected to be deductible for income tax purposes.-81-Pro Forma Financial Information for All 2018 AcquisitionsThe following unaudited pro forma supplemental information is based on estimates and assumptions, that j2 Global believes are reasonable.However, this information is not necessarily indicative of the Company’s consolidated results of income in future periods or the results that actually wouldhave been realized had j2 Global and the acquired businesses been combined companies during the periods presented. These pro forma results exclude anysavings or synergies that would have resulted from these business acquisitions had they occurred on January 1, 2017 and do not take into consideration theexiting of any acquired lines of business. During 2017, the Company sold Cambridge BioMarketing Group, LLC (“Cambridge”), a subsidiary within theDigital Media business; j2 Australia Hosting Pty Ltd (dba “Web24”), a subsidiary within the Cloud Services business; and Tea Leaves, a subsidiary withinthe Digital Media business. These divestitures represented $22.7 million of revenue within the 2017 fiscal year. This unaudited pro forma supplementalinformation includes incremental intangible asset amortization and other charges as a result of the acquisitions, net of the related tax effects.The supplemental information on an unaudited pro forma financial basis presents the combined results of j2 Global and its 2018 acquisitions as ifeach acquisition had occurred on January 1, 2017 (in thousands, except per share amounts): Year ended December 31,2018 December 31,2017 (unaudited) (unaudited)Revenues$1,264,544 $1,218,530Net income$121,727 $123,378EPS - Basic$2.50 $2.56EPS - Diluted$2.45 $2.502017The Company completed the following acquisitions during the year ended December 31, 2017, paying the purchase price in cash in eachtransaction: (a) an asset purchase of sFax, acquired on March 31, 2017, an Austin-based provider of mobile cloud faxing for health care; (b) a share purchaseof the entire issued capital of WeCloud AB, acquired on June 12, 2017, a Swedish-based provider of cloud-based internet security services; (c) an assetpurchase of MyPhoneFax.com, acquired on June 30, 2017, a provider of online fax services; (d) an asset purchase of EZ Publishing (dba “StreamSend”),acquired on August 22, 2017, a provider of email marketing solutions; (e) a share purchase of all the issued capital of Humble Bundle Inc., acquired onOctober 13, 2017, a digital storefront for video games based in California; (f) an asset purchase of blackfriday.com, acquired on November 7, 2017, an onlinesolution that markets popular Black Friday ads that are centrally located connecting shoppers with retailers; (g) a share purchase of all the issued capital ofOnTargetJobs, Inc., acquired on December 4, 2017, a provider of online recruitment solutions for job seekers and employers in North America; (h) a sharepurchase of all the issued capital of Mashable Inc., acquired on December 5, 2017, a global, multi-platform media and entertainment company providingtech, digital culture and entertainment content around the globe; and (i) other immaterial acquisitions of online data backup, email marketing and emailsecurity businesses.The consolidated statement of income since the date of each acquisition and balance sheet as of December 31, 2017, reflect the results of operationsof all 2017 acquisitions. For the year ended December 31, 2017, these acquisitions contributed $34.7 million to the Company’s revenues. Net incomecontributed by these acquisitions was not separately identifiable due to j2 Global’s integration activities and is impracticable to provide. Total considerationfor these transactions was $203.9 million, net of cash acquired and assumed liabilities and subject to certain post-closing adjustments which may increase ordecrease the final consideration paid.-82-The following table summarizes the allocation of the purchase consideration for all 2017 acquisitions (in thousands):Assets and LiabilitiesValuation Accounts receivable$14,130Prepaid expenses and other current assets 10,243Property and equipment 6,411Trade names 20,610Customer relationships 61,307Goodwill 121,827Trademarks 1,373Other intangibles 36,998Deferred tax asset 405Accounts payables and accrued expenses (27,995)Deferred revenue (11,853)Deferred tax liability (29,534) Total$203,922During the year ended December 31, 2017, the Company recorded adjustments to prior period acquisitions due to the finalization of the purchaseaccounting in the Cloud Services business which resulted in a net decrease in goodwill of $0.8 million. In addition, the Company recorded adjustments to theinitial working capital related to prior period acquisitions in the Digital Media business, which resulted in a net decrease in goodwill of $4.7 million (seeNote 9 - Goodwill and Intangible Assets). Such adjustments had an immaterial impact to amortization expense within the consolidated statement of incomefor the year ended December 31, 2017.Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired and representsintangible assets that do not qualify for separate recognition. Goodwill recognized in connection with these acquisitions during the year ended December 31,2017 is $121.8 million, of which $34.7 million is expected to be deductible for income tax purposes.2016The Company completed the following acquisitions during the year ended December 31, 2016, paying the purchase price in cash for eachtransaction: (a) an asset purchase of VaultLogix, acquired on February 17, 2016, a Massachusetts-based provider of cloud data backup and storage forbusiness clients; (b) a share purchase of the entire issued capital of Callstream Group Limited, acquired on March 3, 2016, a provider of cloud-based callmanagement solutions to markets in the United Kingdom; (c) an asset purchase of Publicaster, acquired on April 1, 2016, a Maryland-based provider of emailmarketing services; (d) an asset purchase of SMTP, acquired on June 27, 2016, a Florida-based provider of cloud email services offering solutions rangingfrom sophisticated transactional email solutions to cost-effective Simple Mail Transfer Protocol (“SMTP”) relay services; (e) a share purchase of the entireissued capital of Integrated Global Concepts, Inc. (“IGC”), acquired on July 12, 2016, a Chicago-based provider of fax and voicemail services; (f) a sharepurchase of the entire issued capital of Front-safe A/S, acquired on July 15, 2016, a Denmark-based provider of cloud backup solutions; (g) an asset purchaseof Fonebox Australia, acquired on October 18, 2016, an Australia-based provider of voice, call routing and virtual receptionist business; (h) a share purchaseof all the outstanding shares of common stock of Everyday Health Inc. (“Everyday Health”), acquired on December 5, 2016, a New York-based provider ofdigital health and wellness solutions; and (i) other immaterial acquisitions of online data backup, email marketing, email security and digital mediabusinesses.The consolidated statement of income since the date of each acquisition and balance sheet, as of December 31, 2016, reflect the results of operationsof all 2016 acquisitions. For the year ended December 31, 2016, these acquisitions contributed $52.9 million to the Company’s revenues. Net incomecontributed by these acquisitions was not separately identifiable due to j2 Global’s integration activities and is impracticable to provide. Total considerationfor these transactions was $596.1 million, net of cash acquired and assumed liabilities and subject to certain post-closing adjustments which may increase ordecrease the final consideration paid.-83-The following table summarizes the allocation of the purchase consideration for all 2016 acquisitions (in thousands):Assets and Liabilities (1)Valuation Accounts receivable$70,922Prepaid expenses and other current assets 11,730Property and equipment 11,109Trade names 5,866Customer relationships 85,482Goodwill 333,190Trademarks 70,300Other intangibles 91,264Accounts payables and accrued expenses (62,188)Deferred revenue (6,904)Deferred tax liability (14,503)Capital lease (194) Total$596,074(1) In connection with the purchase of IGC, the majority of the value was associated with the 935,231 shares of j2 Global common stock held by IGC. Thevalue associated with these shares was recorded as a separate transaction from the fax business and has been excluded from the schedule above.During the year ended December 31, 2016, the Company recorded adjustments to prior period acquisitions primarily due to the finalization of thepurchase accounting in the Cloud Services business which resulted in a net increase in goodwill in the amount of $0.8 million. In addition, the Companyrecorded adjustments to the initial working capital related to prior period acquisitions and updated the purchase accounting of Offers.com in the DigitalMedia business, which resulted in a net decrease in goodwill in the amount of $5.0 million with a corresponding increase in trade names, net and otherpurchased intangibles, net. Such adjustments had an immaterial impact to amortization expense within the consolidated statement of income for the yearended December 31, 2016. Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired and representsintangible assets that do not qualify for separate recognition. Goodwill recognized in connection with these acquisitions during the year ended December 31,2016 is $333.2 million, of which $102.4 million is expected to be deductible for income tax purposes.IGCThe Company acquired the entire issued capital of IGC on July 12, 2016 for a cash purchase price of approximately $6.3 million (excludingamounts allocated to the Company’s purchase of its common stock described below), net of cash acquired and assumed liabilities and is subject to certainpost-closing adjustments which may increase or decrease the final consideration paid.At the date of acquisition, IGC held 935,231 of the Company’s common stock which the Company determined should be treated as a separatetransaction from the acquired fax and voicemail businesses. In order to determine the amount of purchase consideration allocable to the fax and voicemailbusiness and the Company’s common stock, the Company used a relative fair value approach and concluded that the amounts of consideration allocable tothe fax and voicemail business and the Company’s common stock were $6.3 million and $51.5 million, respectively. See Note 13 - Stockholders’ Equity forfurther discussion regarding the Company’s common stock acquired in connection with the IGC business combination.Everyday HealthOn December 5, 2016, the Company acquired all the outstanding shares of common stock of Everyday Health, $0.01 par value per share, at apurchase consideration $493.7 million (net of cash acquired and assumed liabilities) or $10.50 per share in cash.-84-Everyday Health is a leading provider of digital health and marketing and communication solutions. Everyday Health attracts a large and engagedaudience of consumers and healthcare professionals to its premier health and wellness properties and utilizes its data and analytics expertise to deliver highlypersonalized content experiences and efficient and effective marketing and engagement solutions. Everyday Health enables consumers to manage their dailyhealth and wellness needs, healthcare professionals to stay informed and make better decisions for their patients, and marketers, health payers and providersto communicate and engage with consumers and healthcare professionals to drive better health outcomes. Everyday Health’s content and solutions aredelivered through multiple channels, including desktop, mobile web, mobile phone and tablet applications, as well as video and social media.The Company acquired Everyday Health to bring together two leading digital media companies with complimentary visions and platforms toengage and monetize audiences. The combined company will be well positioned to deliver compelling benefits to customers with content that connects,informs and empowers audiences. The Company’s Digital Media business maintains leading positions in the technology, gaming, broadband, business tobusiness, and international verticals with strong and well-established brands. Everyday Health adds a new vertical and set of market-leading trusted healthproperties to the portfolio while diversifying the company’s audience mix.The consolidated statement of income, since the date of acquisition, and balance sheet, as of December 31, 2016, reflect the results of operationsEveryday Health. For the year ended December 31, 2016, Everyday Health contributed $23.2 million to the Company’s revenues. Net income contributed byEveryday Health was not separately identifiable due to j2 Global’s integration activities and is impracticable to provide.The following table summarizes the allocation of the purchase consideration for the Everyday Health acquisition (in thousands):Assets and LiabilitiesValuation Cash$15,918Accounts receivable 67,968Prepaid expenses and other current assets 11,168Property and equipment 6,494Customer relationships 45,500Goodwill 263,988Trademarks 70,300Other intangibles 88,267Accounts payables and accrued expenses (59,091)Deferred revenue (5,297)Deferred tax liability (11,500) Total$493,715Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired and representsintangible assets that do not qualify for separate recognition. Goodwill recognized in connection with the Everyday Health acquisition during the year endedDecember 31, 2016 is $264.0 million, of which $65.4 million is expected to be deductible for income tax purposes.Pro Forma Financial Information for Everyday Health AcquisitionThe following unaudited pro forma supplemental information is based on estimates and assumptions, which j2 Global believes are reasonable.However, this information is not necessarily indicative of the Company’s consolidated results of income in future periods or the results that actually wouldhave been realized had j2 Global and Everyday Health been combined companies during the periods presented. These pro forma results exclude any savingsor synergies that would have resulted from the Everyday Health business acquisition had it occurred on January 1, 2015 and do not take into considerationthe exiting of any acquired lines of business. This unaudited pro forma supplemental information includes incremental intangible asset amortization andother charges as a result of the Everyday Health acquisition, net of the related tax effects.-85-The supplemental information on an unaudited pro forma financial basis presents the combined results of j2 Global and Everyday Health as if theacquisition had occurred on January 1, 2015 (in thousands, except per share amounts): Year ended December 31,2016 December 31,2015 (unaudited) (unaudited)Revenues$1,082,813 $952,806Net income$103,541 $115,059EPS - Basic$2.14 $2.38EPS - Diluted$2.13 $2.35Pro Forma Financial Information for All 2016 AcquisitionsThe following unaudited pro forma supplemental information is based on estimates and assumptions, that j2 Global believes are reasonable.However, this information is not necessarily indicative of the Company’s consolidated results of income in future periods or the results that actually wouldhave been realized had j2 Global and the acquired businesses been combined companies during the periods presented. These pro forma results exclude anysavings or synergies that would have resulted from these business acquisitions had they occurred on January 1, 2015 and do not take into consideration theexiting of any acquired lines of business. This unaudited pro forma supplemental information includes incremental intangible asset amortization and othercharges as a result of the acquisitions, net of the related tax effects.The supplemental information on an unaudited pro forma financial basis presents the combined results of j2 Global and its 2016 acquisitions as ifeach acquisition had occurred on January 1, 2015 (in thousands, except per share amounts): Year ended December 31,2016 December 31,2015 (unaudited) (unaudited)Revenues$1,102,510 $1,009,169Net income$108,822 $111,817EPS - Basic$2.25 $2.31EPS - Diluted$2.24 $2.295. InvestmentsInvestments consist of equity and debt securities. The Company has adopted ASU 2016-01 during the first quarter 2018 (see Note 2 - Basis of Presentation and Summary of Significant AccountingPolicies) and determined that the equity securities that were received as part of the consideration for the sale of Tea Leaves Health, LLC (“Tea Leaves”) infiscal year 2017 are without a readily determinable fair value because these securities are privately held, not traded on any public exchanges and not aninvestment in a mutual fund or similar investment. As a result, management has elected to alternatively measure this investment at cost, less impairment,adjusted for subsequent observable price changes to estimate fair value. The Company will make a “reasonable effort” to identify any observable pricechanges for identical or similar investments with the issuer that are known are can be reasonably known. The adoption of ASU 2016-01 was done on aprospective basis and any changes in the carrying value of the equity securities will be reported in our current earnings as Other expense (income), net. Inaddition, the Company determined that the shares of redeemable preferred stock that were also received as part of the consideration for the sale of Tea Leavesare corporate debt securities and are classified as available-for-sale securities.-86-The following table summarizes the gross unrealized losses and estimated fair values for the Company’s securities without a readily determinablefair value (in thousands): Cost Impairment Adjustments Fair ValueDecember 31, 2018 Equity securities$34,977 $— $(3,678) $31,299Total$34,977 $— $(3,678) $31,299 December 31, 2017 Equity securities$34,977 $— $— $34,977Total$34,977 $— $— $34,977During the year ended December 31, 2018, the Company recorded an unrealized loss to earnings because an observable price for a similar instrumentwas observed in the market at an amount that was below the original carrying price of the investment (see Note 7 - Fair Value Measurements).The following table summarizes the gross unrealized gains and losses and fair values for investments classified as available-for-sale (in thousands): AmortizedCost GrossUnrealizedGains GrossUnrealizedLosses FairValueDecember 31, 2018 Corporate debt securities$23,256 $21 $(1,899) $21,378Total$23,256 $21 $(1,899) $21,378 December 31, 2017 Corporate debt securities$22,745 $— $— $22,745Total$22,745 $— $— $22,745At December 31, 2018, the Company’s available-for-sale debt securities are carried at fair value, with the unrealized gains and losses reported as acomponent of other comprehensive income.The following table summarizes j2 Global’s corporate debt securities designated as available-for-sale, classified by the contractual maturity date ofthe security (in thousands): December 31, 2018 December 31, 2017Due within 1 year$— $—Due within more than 1 year but less than 5 years21,378 22,745Due within more than 5 years but less than 10 years— —Due 10 years or after— —Total$21,378 $22,745-87-Recognition and Measurement of Other-Than-Temporary Impairment of Debt SecuritiesRegardless of the classification of the debt securities as available-for-sale or held-to-maturity, the Company has assessed each position forimpairment. j2 Global regularly reviews and evaluates each investment that has an unrealized loss. An unrealized loss exists when the current fair value of anindividual security is less than its amortized cost basis. Unrealized losses that are determined to be temporary in nature are recorded, net of tax, inaccumulated other comprehensive income for available-for-sale securities.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.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 hasbeen 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 debt 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 assessedusing a combination of a discounted cash flow model that estimates the cash flows on the underlying securities and a market comparable method, where thesecurity is valued based upon indications from the secondary market of what discounts buyers demand when purchasing similar securities. The cash flowmodel incorporates actual cash flows from the securities through the current period and then projects the remaining cash flows using relevant interest ratecurves over the remaining term. These cash flows are discounted using a number of assumptions, some of which include prevailing implied credit riskpremiums, 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 areintended to be sold or that management believes it more-likely-than-not that it will be required to sell prior to recovery, the full impairment is recognizedimmediately in earnings. For available-for-sale and held-to-maturity debt securities that management has no intent to sell and believes that it more-likely-than-not that it willnot 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 valueimpairment is recognized in other comprehensive income. The credit loss component recognized in earnings is identified as the amount of principal cashflows not expected to be received over the remaining term of the security.-88-The following tables present gross unrealized losses and fair values for those investments that were in an unrealized loss position as of December 31,2018 and 2017, aggregated by investment category and the length of time that individual securities have been in a continuous loss position (in thousands): As of December 31, 2018 Less than 12 Months 12 Months or Greater Total Fair Value Unrealized Loss Fair Value Unrealized Loss Fair Value Unrealized LossCorporate debtsecurities$20,846 $(1,899) $— $— $20,846 $(1,899)Total$20,846 $(1,899) $— $— $20,846 $(1,899) As of December 31, 2017 Less than 12 Months 12 Months or Greater Total Fair Value Unrealized Loss Fair Value Unrealized Loss Fair Value Unrealized LossCorporate debtsecurities$22,745 $— $— $— $22,745 $—Total$22,745 $— $— $— $22,745 $—As of December 31, 2018, 2017 and 2016, we did not recognize any other-than-temporary impairment losses.On September 25, 2017, the Company entered into a commitment to invest $200 million (approximately 66.7% of equity) in the OCV Fund. Thetotal expected commitment to the OCV Fund is expected to be approximately $300 million. The primary purpose of the Fund is to provide a limited numberof select investors with the opportunity to realize long-term appreciation from public and private companies, with a particular focus on the technology andlife science industries. The general activities of the OCV Fund is to buy, sell, hold and otherwise invest in securities of every kind and nature and rights andoptions with respect thereto, including, without limitation, stock, notes, bonds, debentures and evidence of indebtedness; to exercise all rights, powers,privileges and other incidents of ownership or possession with respect to securities held or owned by the OCV Fund; to enter into, make and perform allcontracts and other undertakings; and to engage in all activities and transactions as may be necessary, advisable or desirable to carry out the foregoing.The manager, OCV Management, LLC, and general partner of the Fund are entities with respect to which Richard S. Ressler, Chairman of the Boardof Directors (the “Board”) of the Company, is indirectly the majority equity holder and a related party. As a limited partner in the Fund, the Company willpay an annual management fee to the manager equal to 2.0% (reduced by 10% each year beginning with the sixth year) of capital commitments. In addition,subject to the terms and conditions of the Fund’s limited partnership agreement, once the Company has received distributions equal to its invested capital,the Fund’s general partner would be entitled to a carried interest equal to 20%. The Fund has a six year investment period, subject to certain exceptions. Thecommitment was approved by the Audit Committee of the Board in accordance with the Company’s related-party transaction approval policy.During 2018, the Company received capital call notices from the management of OCV Management, LLC. for $36.8 million, inclusive of certainmanagement fees, of which $36.8 million has been paid for the year ended December 31, 2018.The Company recognizes its equity in the net earnings or losses relating to the investment in OCV on a one-quarter lag due to the timing andavailability of financial information from OCV. If the Company becomes aware of a significant decline in value, the loss will be recorded in the period inwhich the Company identifies the decline.During the year ended December 31, 2018, 2017, and 2016 the Company recognized a net investment loss of $4.1 million, zero, and zero, net of taxbenefit, respectively, inclusive of management fees. During the year ended December 31, 2018, 2017, and 2016 the Company recognized management fees of$4.5 million, zero, and zero, net of tax benefit, respectively. The loss is presented in the Company’s consolidated statement of income as loss from equityinvestments, net.-89-The following table discloses the carrying amount for the Company’s equity method investment (in thousands): December 31, 2018 December 31, 2017Equity securities$31,151 $—Maximum exposure to loss$31,151 $—As a limited partner, the Company’s maximum exposure to loss is limited to its proportional ownership in the partnership. In addition, the Companyis not required to contribute capital in an aggregate amount in excess of its capital commitment and any expected losses will not be in excess of the CapitalAccount. Finally, there are no call or put options, or other types of arrangements, which limit the Company’s ability to participate in losses and returns of theFund. 6.Assets Held for SaleDuring the second quarter 2017, the Company committed to a plan to sell Cambridge BioMarketing Group, LLC (“Cambridge”), a subsidiary withinthe Digital Media business, as it was determined to be a non-core asset. On July 12, 2017, in a cash transaction, the Company sold Cambridge for a loss of$0.9 million which was recorded in other expense (income), net.During the third quarter 2017, the Company committed to a plan to sell j2 Australia Hosting Pty Ltd (dba “Web24”), a subsidiary within the CloudServices business, as it was determined to be a non-core asset. On September 1, 2017, in a cash transaction, the Company sold Web24 for a gain of $1.6million which was recorded in other expense (income), net.During the third quarter 2017, the Company committed to a plan to sell Tea Leaves, a subsidiary within the Digital Media business, as it wasdetermined to be a non-core asset. On October 5, 2017, in a transaction consisting of a combination of cash and various equity securities, the Company soldTea Leaves for a gain of $27.0 million which was recorded in other expense (income), net.7.Fair Value Measurementsj2 Global complies with the provisions of ASC 820, which defines fair value, provides a framework for measuring fair value and expands thedisclosures required for fair value measurements of financial and non-financial assets and liabilities. ASC 820 clarifies that 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 abasis for considering such assumptions, ASC 820 establishes a three-tier value hierarchy, which prioritizes the inputs used in the valuation methodologies inmeasuring fair value: §Level 1 – Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. §Level 2 – Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices foridentical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated byobservable market data for substantially the full term of the assets or liabilities. §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 whenmeasuring fair value.The Company’s money market funds are classified within Level 1. The Company values these Level 1 investments using quoted market prices.Certain of the Company’s debt securities are classified within Level 2. The Company values these Level 2 investments based on model-drivenvaluations using significant inputs derived from or corroborated by observable market data.The fair value of our senior notes is determined using quoted market prices or dealer quotes for instruments with similar maturities and other termsand credit ratings, which are Level 2 inputs. The fair value of long-term debt was $1.1 billion and $1.2 billion, at December 31, 2018 and December 31, 2017,respectively (see Note 10 - Long-Term Debt).-90-In addition, the Convertible Notes contain terms that may require the Company to pay contingent interest on the Convertible Notes which isaccounted for as a derivative with fair value adjustments being recorded to interest expense (see Note 10 - Long Term Debt). The fair value of this derivativeis determined 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 acquisitions within Level 3 because factors used to develop theestimated fair value are unobservable inputs, such as volatility and market risks, and are not supported by market activity. The fair value of the contingentconsideration liability was determined using option based approaches. This methodology was utilized because the distribution of payments is not symmetricand amounts are only payable upon certain earnings before interest, tax, depreciation and amortization (“EBITDA”) and certain other thresholds beingreached. Such valuation approach included a Monte-Carlo simulation for the contingency since the financial metric driving the payments is path dependent.For similar reasons, certain of the Company’s available-for-sale debt securities are classified within Level 3. The fair value of these debt securities was derivedusing a hybrid approach consisting of two scenarios and subsequent allocation among each of the outstanding securities. Both scenarios considerunobservable inputs in the market such as time to liquidity, volatility, dividend yield, and breakpoints. Significant increases or decreases in either of theinputs noted above in isolation would result in a significantly lower or higher fair value measurement.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 (inthousands):December 31, 2018Level 1 Level 2 Level 3 Fair ValueAssets: Cash equivalents: Money market and other funds$450 $— $— $450Corporate debt securities— 532 20,846 21,378Total assets measured at fair value$450 $532 $20,846 $21,828 Liabilities: Contingent consideration$— $— $50,035 $50,035Contingent interest derivative— 768 — 768Total liabilities measured at fair value$— $768 $50,035 $50,803 December 31, 2017Level 1 Level 2 Level 3 Fair ValueAssets: Cash equivalents: Money market and other funds$453 $— $— $453Corporate debt securities— 22,745 — 22,745Total assets measured at fair value$453 $22,745 $— $23,198 Liabilities: Contingent consideration$— $— $20,477 $20,477Contingent interest derivative— 768 — 768Total liabilities measured at fair value$— $768 $20,477 $21,245At the end of each reporting period, management reviews the inputs to measure the fair value measurements of financial and non-financial assets andliabilities to determine when transfers between levels are deemed to have occurred. During the fourth quarter of 2018, $20.8 million of the Company’s debtsecurities were transferred from Level 2 investments to Level 3. For the year ended 2017, there were no transfers that occurred between levels.-91-The following table presents a reconciliation of the Company’s derivative instruments (in thousands): Amount Affected line item in the Statement of IncomeDerivative Liabilities: Level 2: Balance as of January 1, 2017$958 Total fair value adjustments reported in earnings(190) Interest expense, netBalance as of December 31, 2017$768 Total fair value adjustments reported in earnings— Interest expense, netBalance as of December 31, 2018$768 The following tables presents a reconciliation of the Company’s Level 3 financial liabilities related to contingent consideration that are measured atfair value on a recurring basis (in thousands): Level 3 Affected line item in the Statement of IncomeBalance as of January 1, 2017$17,450 Contingent consideration17,577 Total fair value adjustments reported in earnings2,300 General and administrativeContingent consideration payments(16,850) Not ApplicableBalance as of December 31, 2017$20,477 Contingent consideration11,391 Total fair value adjustments reported in earnings18,944 General and administrativeContingent consideration payments(777) Not ApplicableBalance as of December 31, 2018$50,035 In connection with the acquisition of Humble Bundle, on October 13, 2017, contingent consideration of up to an aggregate of $40.0 million may bepayable upon achieving certain future EBITDA thresholds and had a fair value of $40.0 million and $19.7 million at December 31, 2018 and December 31,2017, respectively.In connection with the acquisition of blackfriday.com, on November 7, 2017, the Company achieved certain earnings targets and, as a result,contingent consideration of $0.8 million was paid to the seller during the first quarter of 2018 in connection with this acquisition. There are no furtherpayments pending related to this acquisition.In connection with the acquisition of bestblackfriday.com, on July 13, 2018, contingent consideration of up to an aggregate of $2.0 million may bepayable upon achieving a certain number of visitors and had a fair value of $1.5 million at December 31, 2018.In connection with the acquisition of DemandShore, on July 19, 2018, contingent consideration of up to an aggregate of$1.9 million may be payable upon achieving certain future EBITDA and revenue thresholds and had a fair value of $1.3 millionat December 31, 2018.In connection with the acquisition of DownDetector, on August 9, 2018, contingent consideration of up to an aggregateof $3.7 million may be payable upon achieving certain number of average monthly unique visitors thresholds and had a fair value of $3.6 million atDecember 31, 2018.In connection with the acquisition of Ekahau Inc., on October 10, 2018, contingent consideration of up to an aggregate of $15.0 million may bepayable upon achieving certain future revenue thresholds and had a fair value of $3.7 million at December 31, 2018.During the year ended December 31, 2018, the Company recorded a net increase in the fair value of the contingent consideration of $18.9million and reported such increase in general and administrative expenses.-92-The following tables presents a reconciliation of the Company’s Level 3 financial assets related to certain available-for-sale debt securities that aremeasured at fair value on a recurring basis (in thousands): Level 3 Affected line item in the Statement of IncomeBalance as of January 1, 2018$— Transfer in to Level 320,846 Balance as of December 31, 2018$20,846 8. Property and EquipmentProperty and equipment, stated at cost, at December 31, 2018 and 2017 consisted of the following (in thousands): 2018 2017Computers and related equipment$272,067 $215,631Furniture and equipment2,391 2,035Leasehold improvements14,706 16,163 289,164 233,829Less: Accumulated depreciation and amortization(190,351) (154,056) Total property and equipment, net$98,813 $79,773Depreciation and amortization expense was $41.3 million, $33.0 million and $26.8 million for the years ended December 31, 2018, 2017 and 2016,respectively.Total disposals of long-lived assets for the years ended December 31, 2018, 2017 and 2016 was $0.4 million, $4.0 million and zero, respectively.The disposals during 2017 were primarily related to the sale of Cambridge, Web24, and Tea Leaves (see Note 6 - Assets Held for Sale).9.Goodwill and Intangible AssetsGoodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in a businesscombination. Intangible assets resulting from the acquisitions of entities accounted for using the acquisition method of accounting are recorded at theestimated 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 uponthe Company’s historical experience and expected benefit of each intangible asset. If it is determined that such assumptions are not accurate, then theresulting 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.During 2018, the Company separated certain reporting units held within the Cloud Services business (See Note 17 - Segment Information). As aresult, the Company allocated goodwill to its new reporting units using a relative fair value approach. Further, the Company completed an assessment of anypotential goodwill impairment for all reporting units immediately before and after the reallocation and determined no impairment existed. Prior periodinformation has been retrospectively revised to reflect the Company’s new reportable segments.-93-The changes in carrying amounts of goodwill for the years ended December 31, 2018 and 2017 are as follows (in thousands): Fax and EmailMarketing Voice, Backup,and Security Total CloudServices Digital Media ConsolidatedBalance as of January 1, 2017$319,734 $239,418 $559,152 $563,658 $1,122,810Goodwill acquired (Note 4)22,724 11,311 34,035 87,792 121,827Goodwill written off related to sale of abusiness unit (1)(2)(3)— (3,614) (3,614) (54,127) (57,741)Purchase Accounting Adjustments (4)(741) (25) (766) (4,667) (5,433)Foreign exchange translation5,097 9,849 14,946 202 15,148Balance as of December 31, 2017$346,814 $256,939 $603,753 $592,858 $1,196,611Goodwill acquired (Note 4)5,561 67,817 73,378 120,904 194,282Purchase accounting adjustments (4)— (1,014) (1,014) 240 (774)Foreign exchange translation(2,146) (6,983) (9,129) (614) (9,743)Allocation to new reportable segments16,041 (16,041) — — —Balance as of December 31, 2018$366,270 $300,718 $666,988 $713,388 $1,380,376(1) On July 12, 2017, in a cash transaction, the Company sold Cambridge which resulted in $17.8 million of goodwill being written off in connection with thissale (see Note 6 - Assets Held for Sale).(2) On September 1, 2017, in a cash transaction, the Company sold Web24 which resulted in $3.6 million of goodwill being written off in connection with thissale (see Note 6 - Assets Held for Sale).(3) On October 5, 2017, in a cash and equity transaction, the Company sold Tea Leaves, which resulted in $36.3 million of goodwill being written off inconnection with this sale (see Note 6 - Assets Held for Sale).(4) Purchase accounting adjustments relate to adjustments to goodwill in connection with prior year business acquisitions (see Note 4 - BusinessAcquisitions).Intangible assets are summarized as of December 31, 2018 and 2017 as follows (in thousands):Intangible Assets with Indefinite Lives: 2018 2017Trade names$27,379 $27,379Other4,306 5,432Total$31,685 $32,811Intangible Assets Subject to Amortization: As of December 31, 2018, intangible assets subject to amortization relate primarily to the following (in thousands): Weighted-Average AmortizationPeriod HistoricalCost AccumulatedAmortization NetTrade names10.9 years $181,231 $65,722 $115,509Patent and patent licenses6.5 years 67,887 60,541 7,346Customer relationships (1)9.1 years 507,330 316,122 191,208Other purchased intangibles4.4 years 307,554 126,834 180,720Total $1,064,002 $569,219 $494,783(1) Historically, the Company has amortized its customer relationship assets in a pattern that best reflects the pace in which the assets’ benefits areconsumed. This pattern results in a substantial majority of the amortization expense being recognized in the first four to five years, despite the overall life ofthe asset.-94-As of December 31, 2017, intangible assets subject to amortization relate primarily to the following (in thousands): Weighted-Average AmortizationPeriod HistoricalCost AccumulatedAmortization NetTrade names11.2 years $147,997 $51,429 $96,568Patent and patent licenses6.6 years 67,724 56,853 10,871Customer relationships (1)8.9 years 447,070 253,464 193,606Other purchased intangibles4.8 years 218,628 66,733 151,895Total $881,419 $428,479 $452,940(1) Historically, the Company has amortized its customer relationship assets in a pattern that best reflects the pace in which the assets’ benefits areconsumed. This pattern results in a substantial majority of the amortization expense being recognized in the first four to five years, despite the overall life ofthe asset.During the year ended December 31, 2018, the Company completed acquisitions which were individually immaterial. The identified intangibleassets recognized as part of these acquisition and their respective estimated weighted average amortizations were as follows (in thousands): Weighted-Average AmortizationPeriod Fair ValueTrade names9.6 years $33,750Customer relationships10.6 years 66,516Trademark7.1 years 3,285Other purchased intangibles3.3 years 84,907Total $188,458Expected amortization expenses for intangible assets subject to amortization at December 31, 2018 are as follows (in thousands):Fiscal Year: 2019$145,855202095,104202167,486202240,447202332,135Thereafter113,756Total expected amortization expense$494,783Amortization expense was $145.9 million, $129.0 million and $95.3 million for the years ended December 31, 2018, 2017 and 2016, respectively.10. Long-Term Debt6.0% Senior NotesOn June 27, 2017, j2 Cloud Services, LLC (“j2 Cloud”) and j2 Cloud Co-Obligor, Inc. (the “Co-Issuer” and together with j2 Cloud, the “Issuers”),wholly-owned subsidiaries of the Company, completed the issuance and sale of $650 million aggregate principal amount of their 6.0% senior notes due in2025 (the “6.0% Senior Notes”) in a private placement offering exempt from the registration requirements of the Securities Act of 1933. j2 Cloud receivedproceeds of $636.5 million, after deducting the initial purchasers’ discounts, commissions and offering expenses. The 6.0% Senior Notes are presented aslong-term debt, net of deferred issuance costs, on the condensed consolidated balance sheets as of December 31, 2018. The proceeds were used to redeem allof-95-j2 Cloud’s 8.0% notes due in 2020, and to distribute sufficient net proceeds to j2 Global to pay off all amounts outstanding under its existing credit facility,with the remaining net proceeds to be used for general corporate purposes, including acquisitions. The 6.0% Senior Notes bear interest at a rate of 6.0% per annum, payable semi-annually in arrears on January 15 and July 15 of each year,commencing on January 15, 2018. The 6.0% Senior Notes mature on July 15, 2025, and are senior unsecured obligations of the Issuers which are guaranteedon an unsecured basis by certain subsidiaries of j2 Cloud (as defined in the Indenture agreement dated June 27, 2017, the “Indenture”). If j2 Cloud or any ofits restricted subsidiaries acquires or creates a domestic restricted subsidiary, other than an insignificant subsidiary (as defined in the Indenture), after theissue date, or any insignificant subsidiary ceases to fit within the definition of insignificant subsidiary, such restricted subsidiary is required tounconditionally guarantee, jointly and severally, on an unsecured basis, the Issuers’ obligations under the 6.0% Senior Notes.The Issuers may redeem some or all of the 6.0% Senior Notes at any time on or after July 15, 2020 at specified redemption prices plus accrued andunpaid interest, if any, to, but excluding the redemption date. Before July 15, 2020, in connection with certain equity offerings, the Issuers also may redeemup to 35% of the 6.0% Senior Notes at a price equal to 106.0% of the principal amount, plus accrued and unpaid interest, if any, to, but excluding theredemption date. In addition, at any time prior to July 15, 2020, the Issuers may redeem some or all of the 6.0% Senior Notes at a price equal to 100% of theprincipal amount, plus accrued and unpaid interest, if any, to the redemption date, plus an applicable “make-whole” premium.The Indenture contains certain restrictive and other covenants applicable to j2 Cloud and subsidiaries designated as restricted subsidiariesincluding, but not limited to, restrictions on (i) paying dividends or making distributions on j2 Cloud’s membership interests or repurchasing j2 Cloud’smembership interests; (ii) making certain restricted payments; (iii) creating liens or entering into sale and leaseback transactions; (iv) entering intotransactions with affiliates; (v) merging or consolidating with another company; and (vi) transferring and selling assets. These covenants include certainexceptions. Violation of these covenants could result in a default which could result in the acceleration of outstanding amounts if such default is not cured orwaived within the time periods outlined in the Indenture. Restricted payments, specifically dividend payments, are applicable only if j2 Cloud andsubsidiaries designated as restricted subsidiaries has a leverage ratio of greater than 3.0 to 1.0. In addition, if such leverage ratio is in excess of 3.0 to 1.0, therestriction on restricted payments is subject to various exceptions, including an exception for the payment of restricted payments up to $75 million. Thesecontractual provisions did not, as of December 31, 2018, restrict j2 Cloud’s ability to pay dividends to j2 Global, Inc. The company is in compliance with itsdebt covenants as of December 31, 2018.As of December 31, 2018 and December 31, 2017, the estimated fair value of the 6.0% Senior Notes was approximately $645.5 million and $684.1million, respectively, and was based on the quoted market prices of debt instruments with similar terms, credit rating and maturities of the 6.0% Senior Noteswhich are Level 2 inputs (see Note 7 - Fair Value Measurements).8.0% Senior NotesOn August 1, 2017, j2 Cloud redeemed all of its outstanding $250 million 8.0% senior unsecured notes due in 2020 for $265 million, including aredemption premium and relevant accrued interest which resulted in a loss on extinguishment of $8.0 million recorded which was recorded in Interestexpense, net.3.25% Convertible NotesOn 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 wereavailable for general corporate purposes. The Convertible Notes bear interest at a rate of 3.25% per annum, payable semiannually in arrears on June 15 andDecember 15 of each year. Beginning with the six-month interest period commencing on June 15, 2021, the Company must pay contingent interest on theConvertible 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 tradingdays immediately preceding the first day of such interest period equals or exceeds $1,300. Any contingent interest payable on the Convertible Notes will bein 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 precedingthe maturity date only if one or more of the following conditions is satisfied: (i) during any calendar quarter commencing after the calendar quarter ending onSeptember 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 of30 consecutive trading days ending on the last trading day of the calendar quarter immediately preceding the calendar quarter in which the conversion occursis more than 130% of the applicable conversion price of the Convertible Notes on each such trading day; (ii) during the five consecutive business day-96-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% ofthe 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 redemptiondate; (iv) upon the occurrence of specified corporate events; or (v) during either the period beginning on, and including, March 15, 2021 and ending on, butexcluding, June 20, 2021 or the period beginning on, and including, March 15, 2029 and ending on, but excluding, the maturity date. j2 Global will settleconversions 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’selection. The Company currently intends to satisfy its conversion obligation by paying and delivering a combination of cash and shares of the Company’scommon stock, where cash will be used to settle each $1,000 of principal and the remainder, if any, will be settled via shares of the Company’s commonstock.As of December 31, 2018, the conversion rate is 14.7014 shares of j2 Global common stock for each $1,000 principal amount of Convertible Notes,which represents a conversion price of approximately $68.02 per share of j2 Global common stock. The conversion rate is subject to adjustment for certainevents as set forth in the indenture governing the Convertible Notes, but will not be adjusted for accrued interest. In addition, following certain corporateevents 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 inconnection 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 theConvertible 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 ata repurchase price equal to 100% of the principal amount of the Convertible Notes to be repurchased, plus accrued and unpaid interest to, but excluding, therelevant 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 theConvertible 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’sfuture indebtedness that is expressly subordinated in right of payment to the Convertible Notes; (ii) equal in right of payment to the Company’s existing andfuture unsecured indebtedness that is not so subordinated; (iii) effectively junior in right of payment to any of the Company’s secured indebtedness to theextent 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 NotesIn accordance with ASC 470-20, Debt with Conversion and Other Options, convertible debt that can be settled for cash is required to be separatedinto the liability and equity component at issuance, with each component assigned a value. The value assigned to the liability component is the estimatedfair value, as of the issuance date, of similar debt without the conversion feature. The difference between the cash proceeds and estimated fair value of theliability component, representing the value of the conversion premium assigned to the equity component, is recorded as a debt discount on the issuancedate. This debt discount is amortized to interest expense using the effective interest method over the period from the issuance date through the first statedrepurchase 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 anddetermined 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. Theaggregate debt discount is amortized as interest expense over the period from the issuance date through the first stated repurchase date on June 15, 2021which management believes is the expected life of the Convertible Notes using an interest rate of 5.81%. As of December 31, 2018, the remaining period overwhich the unamortized debt discount will be amortized is 2.5 years.The Convertible Notes are carried at face value less any unamortized debt discount and debt issuance costs. The fair value of the Convertible Notesat 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 7- Fair Value Measurements). If such information is not available, the fair value is determined using cash-flow models of the scheduled payments discounted atmarket interest rates for comparable debt-97-without the conversion feature. As of December 31, 2018 and 2017, the estimated fair value of the Convertible Notes was approximately $457.0 million and$504.5 million, respectively.As of December 31, 2018 and 2017, the if-converted value of our Convertible Notes exceeded the principal amount of $402.5 million by $8.0million and $38.1 million, respectively.The following table provides additional information related to our Convertible Notes (in thousands): 2018 2017Additional paid-in capital$37,700 $37,700 Principal amount of Convertible Notes$402,500 $402,500Unamortized discount of the liability component23,534 32,189Carrying amount of debt issuance costs4,205 5,667Net carrying amount of Convertible Notes$374,761 $364,644The following table provides the components of interest expense related to our Convertible Notes (in thousands): 2018 2017 2016Cash interest expense (coupon interest expense)$13,081 $13,081 $13,081Non-cash amortization of discount on Convertible Notes8,655 8,167 7,707Amortization of debt issuance costs1,462 1,335 1,217Total interest expense related to Convertible Notes$23,198 $22,583 $22,005The Company has recorded additional interest expense associated with the contingent interest feature of the Convertible Notes for the years endedDecember 31, 2018, 2017, and 2016 of zero, $(0.2) million, and $(0.5) million, respectively (see Note 7 - Fair Value Measurements).Long-term debt as of December 31, 2018 and 2017 consists of the following (in thousands): 2018 2017Senior Notes: 6.0% Senior Notes$650,000 $650,0003.25% Convertible Notes402,500 402,500Less: Unamortized discount(33,191) (42,902)Deferred issuance costs(6,180) (7,654)Total long-term debt$1,013,129 $1,001,944Less: Current portion— —Total long-term debt, less current portion$1,013,129 $1,001,944At December 31, 2018, future principal payments for debt were as follows (in thousands):Years Ended December 31, 2019$—2020—2021402,5002022—2023—Thereafter650,000 $1,052,500-98-Interest expense was $63.5 million, $59.2 million and $42.7 million for the years ended December 31, 2018, 2017 and 2016, respectively.-99-11. Commitments and ContingenciesLitigationFrom time to time, j2 Global and its affiliates are involved in litigation and other legal disputes or regulatory inquiries that arise in the ordinarycourse of business. Any claims or regulatory actions against j2 Global and its affiliates, whether meritorious or not, could be time consuming and costly, andcould divert significant operational resources. The outcomes of such matters are subject to inherent uncertainties, carrying the potential for unfavorablerulings 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 aresponsive pleading on March 23, 2011 and responses to undertakings on July 16, 2012. On November 6, 2012, Pantelakis filed a second amended statementof claim, reframing his lawsuit as a negligence action. The j2 Global affiliate filed an amended statement of defense on April 8, 2013. Discovery has closed. Ajudicial pre-trial conference took place on September 27, 2018. There is an anticipated trial date of January 2020.On January 17, 2013, the Commissioner of the Massachusetts Department of Revenue (“Commissioner”) issued a notice of assessment to a j2 Globalaffiliate 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’sapplication for abatement. On September 18, 2014, the j2 Global affiliate petitioned the Massachusetts Appellate Tax Board for abatement of the tax assertedin the notice of assessment (No. C325426). A trial was held on December 16, 2015. On May 18, 2017, the Appellate Board decided in favor of theCommonwealth of Massachusetts and the Company paid and expensed the tax assessment. The j2 Global affiliate has requested the findings of fact andconclusions of law from the Appellate Board.On January 21, 2016, Davis Neurology, P.A. filed a putative class action against two j2 Global affiliates in the Circuit Court for the County of Pope,State of Arkansas (58-cv-2016-40), alleging violations of the TCPA. The case was ultimately removed to the U.S. District Court for the Eastern District ofArkansas (the “Eastern District of Arkansas”) (No. 4:16-cv-00682). On June 6, 2016, the j2 Global affiliates filed a motion for judgment on the pleadings. OnMarch 20, 2017, the Eastern District of Arkansas dismissed all claims against the j2 Global affiliates. On July 23, 2018, the Eighth Circuit Court of Appealsvacated the judgment and remanded to district court with instructions to return the case to state court. The j2 Global affiliates have filed a petition forrehearing or rehearing en banc. On December 11, 2018, the Eight Circuit Court of Appeals denied the j2 Global affiliates’ petition for panel rehearing andpetition for rehearing en banc. On January 29, 2019, the case was remanded to the Arkansas state court.j2 Global does not believe, based on current knowledge, that the foregoing legal proceedings or claims, after giving effect to existing accruedliabilities, 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 timing, an unfavorable resolution of some or all of these matters could have a material effect on j2 Global’s consolidatedfinancial position, results of operations, or cash flows in a particular period.The Company has not accrued for any material loss contingencies relating to these legal proceedings because materially unfavorable outcomes arenot considered probable by management. It is the Company’s policy to expense as incurred legal fees related to various litigations.Credit AgreementOn December 5, 2016, j2 Global entered into a Credit Agreement (the Credit Agreement) with MUFG Union Bank, N.A., as administrative agent, andcertain other lenders from time to time party thereto (collectively, the Lenders). Pursuant to the Credit Agreement, the Lenders provided j2 Global with acredit facility of $225.0 million. On June 27, 2017, the Company paid off the entire line of credit of $225.0 million, in addition to interest and miscellaneousfees of $0.5 million and terminated the Credit Agreement.On January 7, 2019 j2 Cloud Services, LLC entered into a $100.0 million credit facility (the “Credit Facility”) (see Note 21 - Subsequent Events).-100-Operating Leasesj2 Global leases certain facilities and equipment under non-cancelable operating leases which expire at various dates through 2026. Office andequipment leases are typically for terms of three to five years and generally provide renewal options for terms up to an additional five years. In most cases, theCompany expects leases that expire will be renewed or replaced by other leases with similar terms. Future minimum lease payments at December 31, 2018under non-cancelable operating leases (with initial or remaining lease terms in excess of one year) are as follows (in thousands): Lease PaymentsFiscal Year: 2019$19,267202016,196202113,881202212,654202310,977Thereafter5,456Total minimum lease payments$78,431Rental expense for the years ended December 31, 2018, 2017 and 2016 was $21.0 million, $15.3 million and $10.6 million, respectively.SubleaseTotal sublease income for the years ended December 31, 2018, 2017 and 2016 was $2.8 million and $0.7 million and $0.6 million, respectively.Total estimated aggregate sublease income to be received in the future is $8.6 million.Non-Income Related TaxesThe Company does not collect and remit sales and use, telecommunication, or similar taxes in all jurisdictions in which it has sales, based on theCompany’s belief that such taxes are not applicable or legally required. Several states and other taxing jurisdictions have presented or threatened theCompany with assessments, alleging that the Company is required to collect and remit such taxes there. The aggregate assessments at December 31, 2018were not material.The June 2018 U.S. Supreme Court ruling in South Dakota v. Wayfair, Inc., No. 17-494, along with the application of existing, new or future rulingsand laws could have adverse effects on our business, prospects and operating results. There have been, and will continue to be, substantial ongoing costsassociated with complying with the various indirect tax requirements in the numerous markets in which we conduct or will conduct business.The Company is currently under audit or is subject to audit for indirect taxes in several states and municipalities. The Company has a $4.6 millionreserve established for these matters. It is reasonably possible that additional liabilities could be incurred resulting in additional expense, which couldmaterially impact on our financial results.12.Income TaxesOn December 22, 2017, the United States enacted major tax reform legislation, commonly referred to as the Tax Cuts and Jobs Act (“Tax Act” or“2017 Tax Act”). The 2017 Tax Act imposes a repatriation tax on accumulated earnings of foreign subsidiaries, imposes a current tax on certain foreignearnings and lowers the general corporate income tax rate to 21%. In December 2017, the SEC staff issued Staff Accounting Bulletin No. 118, which allowsthe Company to record provisional amounts during a measurement period not to extend beyond one year of the enactment date. j2 Global has completed itsaccounting for the tax effects of the 2017 Tax Act, including the repatriation tax, the net deferred tax remeasurement and the impact on its unrecognized taxbenefits. None of the adjustments made to provisional amounts were material to its consolidated financial statements.Income tax expense amounted to $44.8 million, $60.5 million and $59.0 million for the years ended December 31, 2018, 2017 and 2016,respectively. The Company’s effective tax rates for 2018, 2017 and 2016 were 25.2%, 30.3% and 27.9%, respectively.-101-The provision for income tax consisted of the following (in thousands): Years Ended December 31, 2018 2017 2016Current: Federal$17,233 $55,804 $46,293State(617) 3,265 3,874Foreign3,094 22,904 22,612Total current19,710 81,973 72,779 Deferred: Federal16,083 (15,682) (6,822)State2,965 962 (330)Foreign6,002 (6,712) (6,627)Total deferred25,050 (21,432) (13,779)Total provision$44,760 $60,541 $59,000A reconciliation of the statutory federal income tax rate with j2 Global’s effective income tax rate is as follows: Years Ended December 31, 2018 2017 2016Statutory tax rate21 % 35 % 35 %State income taxes, net1.2 0.8 1.1Foreign rate differential(7.7) (16.1) (14.6)Foreign income inclusion1.5 7.2 9.4Foreign tax credit(1.4) (6.2) (5.5)Reserve for uncertain tax positions4.1 3.9 4.7Valuation allowance0.2 (0.9) (1.0)IRC Section 199 deductions— (1.6) (1.1)The 2017 Tax Act - provisional transition tax— 24.6 —The 2017 Tax Act - tax rate impact on deferred taxes— (16.1) —Contingent liabilities2.4 — —Unrecognized loss on intercompany sale1.9 — —Other2.0 (0.3) (0.1)Effective tax rates25.2 % 30.3 % 27.9 %The effective tax rate for the year ended December 31, 2018 differs from the federal statutory rate primarily due to impacts of the jurisdictional mixof income and the disallowance of certain losses and expenses. The effective tax rate for 2017 differs from the federal statutory rate primarily as a result of the2017 Tax Act. The effective tax rate for 2016 differs from the federal statutory rate primarily as a result of indefinitely invested earnings of the Company’sforeign operations.-102-Deferred tax assets and liabilities result from differences between the financial statement carrying amounts and the tax bases of existing assets andliabilities. Temporary differences and carryforwards which give rise to deferred tax assets and liabilities are as follows (in thousands): Years Ended December 31, 2018 2017Deferred tax assets: Net operating loss carryforwards$36,038 $29,317Tax credit carryforwards4,784 2,645Accrued expenses5,717 3,165Allowance for bad debt1,776 1,570Share-based compensation expense5,038 6,476Basis difference in fixed assets— 1,881Impairment of investments1,466 48Deferred revenue1,948 728State taxes2,097 1,777Other9,917 14,165 68,781 61,772Less: valuation allowance(44) (197)Total deferred tax assets$68,737 $61,575 Deferred tax liabilities: Basis difference in fixed assets$(6,568) $—Basis difference in intangible assets(96,869) (70,252)Prepaid insurance(2,149) (616)Convertible debt(31,994) (27,504)Other(205) (1,467)Total deferred tax liabilities(137,785) (99,839)Net deferred tax liabilities$(69,048) $(38,264)The Company had approximately $68.7 million and $61.6 million in deferred tax assets as of December 31, 2018 and 2017, respectively, relatedprimarily to net operating loss carryforwards, tax credit carryforwards and accrued expenses treated differently between its financial statements and its taxreturns. Based on the weight of available evidence, the Company assesses whether it is more likely than not that some portion or all of a deferred tax assetwill not be realized. If necessary, j2 Global records a valuation allowance sufficient to reduce the deferred tax asset to the amount that is more likely that notto be realized. The deferred tax assets should be realized through future operating results and the reversal of temporary differences.As of December 31, 2018, the Company had federal net operating loss carryforwards (“NOLs”) of $142.2 million, after considering substantialrestrictions on the utilization of these NOLs due to “ownership changes”, as defined in the Internal Revenue Code of 1986, as amended (the “InternalRevenue Code”). j2 Global currently estimates that all of the above-mentioned federal NOLs will be available for use before their expiration. These NOLsexpire through the year 2036.In addition, as of December 31, 2018 and 2017, the Company had state research and development tax credits of $4.6 million and $2.3 million,respectively, which last indefinitely.Certain tax payments are prepaid during the year and included within prepaid expenses and other current assets on the consolidated balance sheet.The Company’s prepaid tax payments were zero and $6.0 million at December 31, 2018 and 2017, respectively.Uncertain Income Tax PositionsTax positions are evaluated in a two-step process. The Company first determines whether it is more likely than not that a tax position will besustained upon examination. If a tax position meets the more-likely-than-not recognition threshold, it is then-103-measured to determine the amount of benefit to recognize in the financial statements. The tax position is measured as the largest amount of benefit that isgreater than 50% likely of being realized upon ultimate settlement. The Company classifies gross interest and penalties and unrecognized tax benefits thatare not expected to result in payment or receipt of cash within one year as non-current liabilities in the consolidated balance sheets.As of December 31, 2018, the total amount of unrecognized tax benefits was $51.3 million, of which $46.8 million, if recognized, would affect theCompany’s effective tax rate. As of December 31, 2017, the total amount of unrecognized tax benefits was $45.0 million, of which $39.8 million, ifrecognized, would affect the Company’s effective tax rate. As of December 31, 2016, the total amount of unrecognized tax benefits was $41.2 million, ofwhich $37.0 million, if recognized would affect the Company’s effective tax rate.The aggregate changes in the balance of unrecognized tax benefits, which excludes interest and penalties, for 2018, 2017 and 2016, is as follows (inthousands): Years Ended December 31, 2018 2017 2016Beginning balance$45,012 $41,218 $32,536Increases related to tax positions during a prior year2,508 — 2,082Decreases related to tax positions taken during a prior year— (401) —Increases related to tax positions taken in the current year3,751 7,223 6,703Settlements— (2,639) —Decreases related to expiration of statute of limitations— (389) (103)Ending balance$51,271 $45,012 $41,218The Company includes interest and penalties related to unrecognized tax benefits within the provision for income taxes. As of December 31, 2018,2017 and 2016, the total amount of interest and penalties accrued was $8.4 million, $7.2 million and $5.3 million, respectively, which is classified as non-current liabilities in the consolidated balance sheets. In connection with tax matters, the Company recognized interest and penalty expense in 2018, 2017and 2016 of $1.2 million, $2.1 million and $1.9 million, respectively.Uncertain income tax positions are reasonably possible to significantly change during the next 12 months as a result of completion of income taxaudits and expiration of statutes of limitations. At this point it is not possible to provide an estimate of the amount, if any, of significant changes in reservesfor uncertain income tax positions as a result of the completion of income tax audits that are reasonably possible to occur in the next 12 months. In addition,the Company cannot currently estimate the amount of, if any, uncertain income tax positions which will be released in the next 12 months as a result ofexpiration of statutes of limitations due to ongoing audits. As a result of ongoing federal, state and foreign income tax audits (discussed below), it isreasonably possible that the Company’s entire reserve for uncertain income tax positions for the periods under audit will be released. It is also reasonablypossible that the Company’s reserves will be inadequate to cover the entire amount of any such income tax liability.Income before income taxes included income from domestic operations of $19.9 million, $61.9 million and $84.8 million for the yearsended December 31, 2018, 2017 and 2016, respectively, and income from foreign operations of $157.7 million, $138.1 million and $126.6 million for theyears ended December 31, 2018, 2017 and 2016, respectively.Income Tax Audits:The Company is in various stages of audit by the U.S. Internal Revenue Service (“IRS”) for its 2012 through 2016 tax years.The Company is under audit by the California Franchise Tax Board (“FTB”) for tax years 2012 and 2013. The FTB, however, has agreed to suspendits audit for 2012 and 2013 pending the outcome of the IRS audit for such tax years. In August 2018, the FTB notified the Company that it will commence anaudit of tax years 2015 and 2016.The Company was under income tax audit by the New York State Department of Taxation and Finance (“NYS”) for tax years 2011 through 2014.During 2018, NYS concluded its audit of tax years 2011 through 2014. The Company was assessed an insignificant amount of income tax and interest, whichwas paid.-104-The Company is currently under audit by the French tax authorities for tax years 2011 to 2016. The Company has accrued a reserve for any potentialliability that may arise from this audit. The audit is in the final stages.It is reasonably possible that these audits may conclude in the next 12 months and that the uncertain tax positions the Company has recorded inrelation to these tax years may change compared to the liabilities recorded for these periods. If the recorded uncertain tax positions are inadequate to coverthe associated tax liabilities, the Company would be required to record additional tax expense in the relevant period, which could be material. If the recordeduncertain tax positions are adequate to cover the associated tax liabilities, the Company would be required to record any excess as reduction in tax expensein the relevant period, which could be material. However, it is not currently possible to estimate the amount, if any, of such change.13. Stockholders’ EquityPreferred Stock ExchangeIn November 2014, the Company provided holders of the Company’s Series A Preferred Stock (“j2 Series A Stock”) and the Company’s Series BPreferred Stock (“j2 Series B Stock”) an exchange right in which shares may be exchanged for j2 common stock. The exchange right associated with theshares of j2 Series A Stock provided that such shares were immediately exercisable at an exchange ratio of 20.4319 shares of j2 common stock per share of j2Series A Stock (the “Series A Exchange Ratio”). Both holders of the j2 Series A Stock exercised this exchange right which resulted in the issuance of 235,665shares of j2 common stock. The exchange right associated with the vested shares of the j2 Series B Stock is exercisable during specified exchange periods atan exchange ratio of 31.8094 shares of j2 common stock per share of j2 Series B Stock (the “Series B Exchange Ratio”). Holders of vested j2 Series B Stockexercised this exchange right which resulted in the issuance of 10,530 and 88,623 shares of j2 common stock during fiscal years 2018 and 2017, respectively.In connection with the exercise of the exchange right and the resulting extinguishment of the j2 Series A Stock, the Company recorded thedifference between the carrying value of the Series A and the fair value of the j2 common stock exchanged within retained earnings as a preferred stockdividend. In connection with the exercise of the exchange right associated with j2 Series B Stock, the Company recognized incremental fair value in theamount of $6.3 million and recorded additional share-based compensation in the amount of $1.9 million and $1.2 million for the years ended December 31,2018 and 2017, respectively. As of December 31, 2018, all incremental fair value associated with the exchange right of j2 Series B Stock has beenrecognized.The Series B Exchange Ratio is adjusted in the event of a subdivision of the outstanding j2 common stock or j2 Series B Stock, a declaration of adividend payable in shares of j2 common stock or j2 Series B Stock, a declaration of a dividend payable in a form other than shares in an amount that has amaterial effect on the value of shares of j2 common stock or j2 Series B Stock, a combination or consolidation of the outstanding j2 common stock or j2Series B Stock into a lesser number of shares of j2 common stock or j2 Series B Stock, respectively, specified changes in control, a recapitalization, areclassification, or a similar occurrence, the Company shall adjust the Series B Exchange Ratio as it deems appropriate in its sole discretion.Common Stock Repurchase ProgramIn February 2012, the Company’s Board of Directors approved a program authorizing the repurchase of up to five million shares of j2 Globalcommon stock through February 20, 2013 (the “2012 Program”) which was subsequently extended through February 20, 2020 (see Note 21 - SubsequentEvents). On November 29, 2018, the Company entered into a Rule 10b5-1 trading plan with a broker to facilitate the repurchase program. 600,000 shareswere repurchased under the share repurchase program for the year ended December 31, 2018 at an aggregate cost of $42.5 million. No shares were repurchasedunder the share repurchase program for the year ended December 31, 2017. Cumulatively at December 31, 2018, 2.7 million shares were repurchased at anaggregate cost of $101.1 million (including an immaterial amount of commission fees).In July 2016, the Company acquired and subsequently retired 935,231 shares of j2 Global common stock in connection with the acquisition ofIntegrated Global Concepts, Inc. (see Note 4 - Business Acquisitions).As a result of the acquisition of j2 Global common stock through the Company’s business combinations and share repurchase program, the numberof shares available for purchase under the 2012 Program is 1,338,689 shares of j2 Global common stock available for purchase under this program.-105-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 taxwithholding obligations arising upon the exercise of stock options or the vesting of restricted stock. During the year ended December 31, 2018, the Companypurchased 52,912 shares from plan participants for this purpose.Dividends The following is a summary of each dividend declared during fiscal year 2018 and 2017:Declaration Date Dividend per CommonShare Record Date Payment DateFebruary 9, 2017 $0.3650 February 22, 2017 March 9, 2017May 4, 2017 $0.3750 May 19, 2017 June 2, 2017August 2, 2017 $0.3850 August 14, 2017 September 1, 2017October 31, 2017 $0.3950 November 17, 2017 December 5, 2017February 2, 2018 $0.4050 February 22, 2018 March 9, 2018May 3, 2018 $0.4150 May 18, 2018 June 1, 2018August 8, 2018 $0.4250 August 20, 2018 September 4, 2018October 29, 2018 $0.4350 November 19, 2018 December 5, 2018On February 6, 2019, the Company’s Board of Directors declared a quarterly cash dividend of $0.4450 per share of common stock payable onMarch 12, 2019 to all stockholders of record as of the close of business on February 25, 2019 (see Note 21 - Subsequent Events). Future dividends will besubject to Board approval.14. Stock Options and Employee Stock Purchase Planj2 Global’s share-based compensation plans include the 2007 Stock Plan, the 2015 Stock Plan and the 2001 Employee Stock Purchase Plan. Eachplan is described below.(a)The 2007 Stock Option Plan and the 2015 Stock Option PlanIn October 2007, j2 Global’s Board of Directors adopted the j2 Global, Inc. 2007 Stock Option Plan (the “2007 Plan”). The 2007 Plan provides forthe granting of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units and other share-basedawards. The number of authorized shares of common stock that may be used for 2007 Plan purposes is 4,500,000. Options under the 2007 Plan may begranted 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’scommon 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 ofgrant for non-statutory stock options. The 2007 Plan terminated on February 14, 2017.In May 2015, j2 Global’s Board of Directors adopted the j2 Global, Inc. 2015 Stock Option Plan (the “2015 Plan”). The 2015 Plan provides for thegrant 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 underthe 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 atexercise 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 fairmarket value of j2 Global’s common stock subject to the option on the date the option is granted.At December 31, 2018, 2017 and 2016, options to purchase 298,577, 361,875 and 353,258 shares of common stock were exercisable under andoutside of the 2015 Plan and the 2007 Plan combined, at weighted average exercise prices of $32.15, $29.92, and $26.10, respectively. Stock optionsgenerally expire after 10 years and vest over a 5-year period.All stock option grants are approved by “outside directors” within the meaning of Internal Revenue Code Section 162(m). -106-Stock Options Stock option activity for the years ended December 31, 2018, 2017 and 2016 is summarized as follows: Number of Shares Weighted-AverageExercise Price Weighted-AverageRemainingContractual Life (InYears) AggregateIntrinsicValueOptions outstanding at January 1, 2016566,428 $29.74 Granted— — Exercised(142,870) 26.04 Canceled(9,700) 26.92 Options outstanding at December 31, 2016413,858 $31.09 Granted— — Exercised(38,183) 29.03 Canceled— — Options outstanding at December 31, 2017375,675 $31.30 Granted400,000 75.03 Exercised(67,898) 22.68 Canceled— — Options outstanding at December 31, 2018707,777 $56.84 5.8 $11,136,166Exercisable at December 31, 2018298,577 $32.15 1.5 $11,117,490Vested and expected to vest at December 31, 2018575,851 $52.68 5.1 $11,134,316For the years ended December 31, 2018, 2017 and 2016, j2 Global granted 400,000, zero and zero options, respectively, to purchase shares ofcommon stock pursuant to the 2015 Plan. These stock options vest 20% per year and expire 10 years from the date of grant.The per share weighted-average grant-date fair values of stock options granted during the period ended December 31, 2018 was $19.39. There wereno stock options granted during the years 2017 and 2016.The total intrinsic values of options exercised during the years ended December 31, 2018, 2017 and 2016 was $3.8 million,$2.1 million, and $5.6million, respectively. The total fair value of options vested during the years ended December 31, 2018, 2017 and 2016 was $0.1 million, $0.6 million and$0.6 million, respectively.Cash received from options exercised under all share-based payment arrangements for the years ended December 31, 2018, 2017 and 2016 was $1.5million, $1.1 million and $3.6 million, respectively. The actual tax benefit realized for the tax deductions from option exercises under the share-basedpayment arrangements totaled $0.9 million, $0.7 million and $1.9 million, respectively, for the years ended December 31, 2018, 2017 and 2016.-107-The following table summarizes information concerning outstanding and exercisable options as of December 31, 2018: Options Outstanding Exercisable OptionsRange ofExercise Prices Number OutstandingDecember 31, 2018 WeightedAverageRemainingContractualLife WeightedAverageExercisePrice NumberExercisableDecember 31,2018 WeightedAverageExercisePrice$17.19 20,000 0.18 years $17.19 20,000 $17.1921.67 50,040 0.35 years 21.67 50,040 21.6722.92 84,092 1.35 years 22.92 84,092 22.9225.09 2,600 3.36 years 25.09 2,600 25.0929.34 75,585 2.36 years 29.34 75,585 29.3429.53 9,710 3.17 years 29.53 9,710 29.5331.07 3,750 2.82 years 31.07 3,750 31.0767.35 62,000 2.51 years 67.35 52,800 67.3575.03 400,000 9.00 years 75.03 — —$17.19 - $75.03 707,777 5.82 years $56.84 298,577 $32.15As discussed in Note 13, “Stockholders’ Equity”, the Company provided holders of j2 Series B Stock an exchange right in which j2 Series B Stockmay be exchanged for j2 common stock during specified exchange periods. The Company determined that such exchange right represents a grant under the2007 Plan for the year ended December 31, 2014, and accordingly, reduced the awards available under the 2007 Plan. At December 31, 2018, there were2,270,716 additional shares underlying options, shares of restricted stock and other share-based awards available for grant under the 2015 Plan, and noadditional shares are available for grant under or outside of the 2007 Plan.The Company recognized $0.9 million, $0.4 million and $0.4 million of compensation expense related to stock options for the years endedDecember 31, 2018, 2017 and 2016, respectively. As of December 31, 2018, there was $6.9 million of total unrecognized compensation expense related tononvested share-based compensation options granted under the 2015 Plan and the 2007 Plan. That expense is expected to be recognized ratably over aweighted average period of 6.87 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 historicalvolatility of the Company’s common stock. The Company estimates the expected term based upon the historical exercise behavior of our employees. Therisk-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. TheCompany uses an annualized dividend yield based upon the per share dividends declared by its Board of Directors. Estimated forfeiture rates were 11.8%,14.3% and 12.7% as of December 31, 2018, 2017 and 2016, respectively.The weighted-average fair values of stock options granted have been estimated utilizing the following assumptions: Years Ended December 31, 2018 2017 2016Risk-free interest rate2.4% —% —%Expected term (in years)6.7 0.0 0.0Dividend yield2.2% —% —%Expected volatility29.2% —% —%Weighted average volatility29.2% —% —%-108-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 the 2007 Plan and the 2015Plan. 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 tomembers of the Company’s Board of Directors and five years for senior staff. The Company granted 850,300, 300,330 and 317,914 shares of restricted stockand restricted units during the years ended December 31, 2018, 2017 and 2016, respectively, and recognized $26.4 million, $22.2 million and $13.2 million,respectively of related compensation expense. As of December 31, 2018, the Company had unrecognized share-based compensation cost of $61.6 millionassociated with these awards. This cost is expected to be recognized over a weighted-average period of 5.5 years for awards and 3.3 years for units. The totalfair value of restricted stock and restricted stock units vested during the years ended December 31, 2018, 2017 and 2016 was $9.7 million, $15.1 million and$8.0 million, respectively. The actual tax benefit realized for the tax deductions from the vesting of restricted stock awards and units totaled $2.4 million,$2.3 million and $3.5 million, respectively, for the years ended December 31, 2018, 2017 and 2016. In accordance with ASC 718, share-based compensationis recognized on dividends paid related to nonvested restricted stock not expected to vest, which amounted to approximately $0.1 million, $0.1 million and$0.1 million for the years ended December 31, 2018, 2017 and 2016, respectively.During the year ended December 31, 2017, the Company accelerated the vesting of certain shares held by employees which were surrendered to theCompany to satisfy tax withholding obligations in connection with such employees’ restricted stock. The Company recognized share-based compensation of$1.4 million during the year ended December 31, 2017 due to this vesting acceleration.In connection with Nehemia Zucker’s resignation as Chief Executive Officer effective as of December 31, 2017, all of his outstanding and unvestedstock options and time-based restricted shares, along with the tranche of performance-vesting restricted shares that was then next scheduled to vest, vested infull on December 29, 2017. As a result, the Company accelerated the recognition of share-based compensation expense associated with these awards whichimpacted 2017 by approximately $5.1 million.Restricted Stock - Awards with Market Conditionsj2 Global has awarded certain key employees market-based restricted stock awards pursuant to the 2015 Plan. The market-based awards have vestingconditions that are based on specified stock price targets of the Company’s common stock. Market conditions were factored into the grant date fair valueusing a Monte Carlo valuation model, which utilized multiple input variables to determine the probability of the Company achieving the specified stockprice targets with a 20-day and 30-day lookback (trading days). Stock-based compensation expense related to an award with a market condition will berecognized over the requisite service period using the graded-vesting method regardless of whether the market condition is satisfied, provided that therequisite service period has been completed. During the years ended December 31, 2018, 2017, and 2016 the Company awarded 473,501, 85,825, and106,780 market-based restricted stock awards, respectively. The per share weighted average grant-date fair values of the market-based restricted stock awardsgranted during the years ended December 31, 2018, 2017 and 2016 were $52.95, $72.20 and $44.67, respectively.The weighted-average fair values of market-based restricted stock awards granted have been estimated utilizing the following assumptions: December 31, 2018 December 31, 2017 December 31, 2016Underlying stock price at valuation date$82.11 $91.17 $63.73Expected volatility28.4% 29% 29.8%Risk-free interest rate2.89% 2.17% 1.51%-109- Restricted stock award activity for the years ended December 31, 2018, 2017 and 2016 is set forth below: Shares Weighted-AverageGrant-DateFair ValueNonvested at January 1, 2016704,804 $39.08Granted296,414 41.27Vested(255,503) 31.27Canceled(40,700) 63.95Nonvested at December 31, 2016705,015 $41.40Granted289,230 61.34Vested(381,411) 39.71Canceled(7,268) 76.08Nonvested at December 31, 2017605,566 $51.57Granted830,256 63.55Vested(157,972) 61.29Canceled(70,839) 74.84Nonvested at December 31, 20181,207,011 $64.82 Restricted stock unit activity for the years ended December 31, 2018, 2017 and 2016 is set forth below: Number ofShares Weighted-AverageRemainingContractualLife (in Years) AggregateIntrinsicValueOutstanding at January 1, 201656,245 Granted21,500 Vested(14,595) Canceled(11,200) Outstanding at December 31, 201651,950 Granted11,100 Vested(16,370) Canceled(8,280) Outstanding at December 31, 201738,400 Granted20,044 Vested(11,540) Canceled(5,673) Outstanding at December 31, 201841,231 2.0 $2,860,607Vested and expected to vest at December 31, 201832,809 1.7 $2,276,290-110-Employee Stock Purchase Plan (“ESPP”) In May of 2001, j2 Global established the j2 Global, Inc. 2001 Employee Stock Purchase Plan, as amended (the “Purchase Plan”), which provides forthe issuance of a maximum of 2,000,000 shares of common stock. Under the Purchase Plan, eligible employees can have up to 15% of their earningswithheld, 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 stockpurchased 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.On February 2, 2018, the Company approved an amendment to the Company’s Amended and Restated 2001 Employee Stock Purchase Plan, to beeffective May 1, 2018, such that (i) the purchase price for each offering period shall be 85% of the lesser of the fair market value of a share of common stockof the Company (a “Share”) on the beginning or the end of the offering period, rather than 95% of the fair market value of a Share at the end of the offeringperiod, and (ii) each offering period will be six months, rather than three months.j2 Global performed an analysis of the Amendment terms and determined that a plan provision exists which allows for the more favorable of twoexercise prices, commonly referred to as a “look-back” feature. The purchase price discount and the look-back feature cause the Purchase Plan to becompensatory and the Company to recognize compensation expense. The compensation cost is recognized on a straight-line basis over the requisite serviceperiod. The Company recognized $0.7 million, zero and zero of compensation expense related to the Purchase Plan for the years ended December 31, 2018,2017 and 2016, respectively. The Company used the Black-Scholes option pricing model to calculate the estimated fair value of the purchase right issuedunder the ESPP. The expected volatility is based on historical volatility of the Company’s common stock. The risk-free interest rate is based on U.S. Treasuryzero-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 basedupon the per share dividends declared by its Board of Directors. Estimated forfeiture rates were 1.96% as of December 31, 2018.During 2018, 2017 and 2016, 33,262, 3,283 and 3,918 shares, respectively were purchased under the Purchase Plan at price ranging from $61.91 to$75.99 per share during 2018. As of December 31, 2018, 1,589,981 shares were available under the Purchase Plan for future issuance.15. Defined Contribution 401(k) Savings Planj2 Global has several 401(k) Savings Plans that qualify under Section 401(k) of the Internal Revenue Code. Eligible employees may contribute aportion of their salary through payroll deductions, subject to certain limitations. The Company may make annual contributions at its sole discretion to theseplans. For the years ended December 31, 2018, 2017 and 2016, the Company incurred expenses of $3.6 million, $3.0 million and $1.8 million, respectively,for contributions to these 401(k) Savings Plans.-111-16. Earnings Per Share The components of basic and diluted earnings per share are as follows (in thousands, except share and per share data): Years Ended December 31, 2018 2017 2016Numerator for basic and diluted net income per common share: Net income attributable to j2 Global, Inc. common shareholders$128,687 $139,425 $152,439Net income available to participating securities (a)(1,885) (1,792) (2,242)Net income available to j2 Global, Inc. common shareholders126,802 137,633 150,197Denominator: Weighted-average outstanding shares of common stock47,950,746 47,586,242 47,668,357Dilutive effect of: Equity incentive plans146,906 228,166 201,660Convertible debt (b)830,139 854,619 93,209Common stock and common stock equivalents48,927,791 48,669,027 47,963,226Net income per share: Basic$2.64 $2.89 $3.15Diluted$2.59 $2.83 $3.13(a) Represents unvested share-based payment awards that contain certain non-forfeitable rights to dividends or dividend equivalents (whether paid orunpaid)(b) Represents the incremental shares issuable upon conversion of the Convertible Notes due June 15, 2029 by applying the treasury stock method when theaverage stock price exceeds the conversion price of the Convertible Notes (see Note 10 - Long Term Debt)For the years ended December 31, 2018, 2017 and 2016, there were zero options outstanding, respectively, which were excluded from thecomputation of diluted earnings per share because the exercise prices were greater than the average market price of the common stock.-112-17. Segment InformationIn accordance with ASC Topic 280, Segment Reporting: (Topic 280), the Company’s businesses are based on the organizational structure used bythe chief operating decision maker (“CODM”) for making operating and investment decisions and for assessing performance. The CODM views the Companyas two businesses: Cloud Services and Digital Media. However, in accordance with the aggregation criteria within ASC Topic 280, j2 Global’s operatingsegments have now been aggregated into three reportable segments: (i) Fax and Email Marketing; (ii) Voice, Backup, and Security; and (iii) Digital Media.Prior period segment information has been retrospectively revised to reflect the Company’s new reportable segments. The Company’s Cloud Services business is driven primarily by subscription revenues that are relatively higher margin, stable and predictable fromquarter to quarter with some seasonal weakness in the fourth quarter. The Cloud Services business also includes the results of our IP licensing business, whichcan vary dramatically in both revenues and profitability from period to period. The Company’s Digital Media business is driven primarily by advertising andsubscription 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 Note 2 - Basis of Presentation and Summary of Significant AccountingPolicies. The Company evaluates performance based on revenue, gross margin and profit or loss from operations before income taxes, not includingnonrecurring gains and losses and foreign exchange gains and losses.-113-Information on reportable segments and reconciliation to consolidated income from operations is as follows (in thousands): Years Ended December 31, 2018 2017 2016Revenue by reportable segment: Fax and Email Marketing$360,479 $350,542 $328,531Voice, Backup, and Security237,496 228,414 238,407Cloud Services Total597,975 578,956 566,938 Digital Media609,374 538,939 307,463Elimination of inter-segment revenues(60) (57) (146)Total segment revenues1,207,289 1,117,838 874,255Corporate (1)6 — —Total revenues1,207,295 1,117,838 874,255 Gross profit by reportable segment: Fax and Email Marketing323,855 311,942 281,740Voice, Backup, and Security151,966 148,268 164,637Cloud Services Total475,821 460,210 446,377 Digital Media530,455 485,365 280,924Elimination of inter-segment gross profit(60) (50) (146)Total segment gross profit1,006,216 945,525 727,155Corporate5 — —Total gross profit1,006,221 945,525 727,155 Direct costs by reportable segment (2): Fax and Email Marketing128,898 135,157 125,067Voice, Backup, and Security116,803 99,009 110,431Cloud Services Total245,701 234,166 235,498 Digital Media489,019 437,297 230,224Elimination of inter-segment direct costs(60) (50) (146)Total segment direct costs734,660 671,413 465,576Corporate27,281 28,404 19,013Total direct costs761,941 699,817 484,589 Operating income by reportable segment: Fax and Email Marketing194,957 176,785 156,673Voice, Backup, and Security35,163 49,259 54,206Cloud Services Total (2)230,120 226,044 210,879 Digital Media41,436 48,068 50,700Total segment operating income271,556 274,112 261,579Corporate (1)(27,276) (28,404) (19,013)Total income from operations$244,280 $245,708 $242,566 (1) Corporate includes costs associated with general and administrative and other expenses that are managed on a global basis and that are not directlyattributable to any particular segment. In addition, the Company determined certain patent assets and related income and expenses associated withAdvanced Marketing Technologies, Inc. should be reclassified from the Cloud Services segment to Corporate resulting in an increase in expenses over theprior periods.(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.-114-The CODM does not use Balance Sheet and Cash Flow information in connection with operating and investment decisions other than as presentedfor Cloud Services and Digital Media. Accordingly, the following segment information is presented for Cloud Services and Digital Media. 2018 2017 Assets: Cloud Services$1,047,245 $1,078,577 Digital Media1,455,620 1,317,113 Total assets from Cloud Services and Digital Media2,502,865 2,395,690 Corporate57,965 57,403 Total assets$2,560,830 $2,453,093 2018 2017 2016Capital expenditures: Cloud Services$13,832 $7,031 $6,113Digital Media42,547 32,564 18,633Total capital expenditures from Cloud Services and Digital Media56,379 39,595 24,746Corporate— — —Total capital expenditures$56,379 $39,595 $24,746 Depreciation and amortization: Cloud Services$60,754 $68,436 $79,533Digital Media122,843 93,605 42,558Total depreciation and amortization from Cloud Services and Digital Media183,597 162,041 122,091Corporate3,577 — —Total depreciation and amortization$187,174 $162,041 $122,091j2 Global maintains operations in the U.S., Canada, Ireland, Japan and other countries. Geographic information about the U.S. and all other countriesfor the reporting periods is presented below. Such information attributes revenues based on markets where revenues are reported (in thousands). Years Ended December 31, 2018 2017 2016Revenues: United States$924,051 $830,800 $607,285Canada73,742 78,099 76,775Ireland69,291 74,430 71,340All other countries140,211 134,509 118,855Total$1,207,295 $1,117,838 $874,255 December 31, 2018 December 31, 2017Long-lived assets: United States$530,785 $452,143All other countries62,810 80,571Total$593,595 $532,714-115-18. Supplemental Cash Flows InformationCash paid for interest during the years ended December 31, 2018, 2017 and 2016 was $54.0 million, $35.8 million and $33.1 million, respectively,substantially all of which related to interest on outstanding debt and foreign taxes.Cash paid for income taxes net of refunds received was $37.6 million, $51.1 million and $37.4 million during the years ended December 31, 2018,2017 and 2016, respectively.The Company acquired property and equipment for $0.4 million, $0.3 million and $0.4 million during the years ended December 31, 2018, 2017and 2016, respectively, which had not been yet paid at the end of each such year. During the years ended December 31, 2018, 2017 and 2016, j2 Global recorded the tax benefit from the exercise of stock options and restricted stockas a reduction of its income tax liability of $3.3 million, $2.9 million and $5.4 million, respectively.In connection with the sale of Tea Leaves during the fourth quarter 2017, the Company received certain equity and debt securities as non-cashconsideration valued in the amount of $57.7 million for the year ended December 31, 2017 (see Note 5 - Investments).-116-19.Accumulated Other Comprehensive IncomeThe following table summarizes the changes in accumulated balances of other comprehensive (income) loss, net of tax, for the years endedDecember 31, 2018, 2017, and 2016 (in thousands): Unrealized Gains(Losses) onInvestments Foreign CurrencyTranslation TotalBalance as of January 1, 2016$2,449 $(31,573) $(29,124) Other comprehensive income (loss) before reclassifications744 (23,076) (22,332) Amounts reclassified from accumulated other comprehensive income(3,193) — (3,193)Net current period other comprehensive loss(2,449) (23,076) (25,525)Balance as of December 31, 2016$— $(54,649) $(54,649) Other comprehensive income before reclassifications— 25,559 25,559Net current period other comprehensive income— 25,559 25,559Balance as of December 31, 2017$— $(29,090) $(29,090) Other comprehensive loss before reclassifications(1,418) (15,471) (16,889)Net current period other comprehensive loss(1,418) (15,471) (16,889)Balance as of December 31, 2018$(1,418) $(44,561) $(45,979)The following table provides details about reclassifications out of accumulated other comprehensive (income) loss for the years ended December 31,2018, 2017, and 2016 (in thousands):Details about Accumulated Other Comprehensive(Income) Loss Components Amount Reclassified from Accumulated Other Comprehensive(Income) loss Affected Line Item in the Statement ofIncome Year Ended December31, 2018 Year Ended December31, 2017 Year EndedDecember 31, 2016 Unrealized gain on available-for-saleinvestments $— $— $(5,149) Other income, net — — (5,149) Income before income taxes — — 1,956 Income tax expense — — (3,193) Net incomeTotal reclassifications for the period $— $— $(3,193) Net income-117-20. Quarterly Results (unaudited)The following tables contain selected unaudited statement of income information for each quarter of 2018 and 2017 (in thousands, except share andper share data). j2 Global believes that the following information reflects all normal recurring adjustments necessary for a fair presentation of the informationfor the periods presented. The operating results for any quarter are not necessarily indicative of results for any future period. Year Ended December 31, 2018 FourthQuarter ThirdQuarter SecondQuarter FirstQuarter Revenues$346,059 $292,724 $287,889 $280,623Gross profit 290,097 243,507 240,140 232,478Net income 50,614 30,723 28,479 18,871 Net income per common share: Basic$1.04 $0.63 $0.59 $0.39Diluted$1.03 $0.61 $0.57 $0.38Weighted average shares outstanding Basic 47,967,014 48,009,953 47,951,326 47,873,007Diluted 48,505,023 49,279,217 49,218,521 48,706,717 Year Ended December 31, 2017 FourthQuarter ThirdQuarter SecondQuarter FirstQuarter Revenues$316,380 $273,616 $273,174 $254,669Gross profit 270,406 231,245 230,015 213,859Net income 49,871 32,358 31,376 25,820 Net income per common share: Basic$1.03 $0.67 $0.65 $0.54Diluted$1.02 $0.66 $0.63 $0.52Weighted average shares outstanding Basic 47,721,700 47,609,819 47,547,118 47,463,231Diluted 48,437,580 48,521,082 48,948,315 48,766,03121. Subsequent Events On January 7, 2019, j2 Cloud Services, LLC entered into a Credit Agreement (the “Credit Agreement”) with certain lenders from time to time partythereto (collectively, the “Lenders”) and MUFG Union Bank, N.A., as sole lead arranger and as administrative agent for the Lenders (the “Agent”). Pursuant tothe Credit Agreement, the Lenders have provided j2 with a credit facility of $100.0 million (the “Credit Facility”) expandable to $150 million. The proceedsfrom the Credit Facility are intended to be used for working capital and general corporate purposes of j2 Cloud and its subsidiaries, including to financecertain permitted acquisitions and capital expenditures in accordance with the terms of the Credit Agreement. As of March 1, 2019 the Credit Facility has notbeen drawn upon.On January 22, 2019, in a cash transaction, the Company acquired certain assets of iContact, LLC a North Carolina-based business providing emailmarketing solutions.On January 28, 2019, the Company received a capital call notice from the management of OCV Management, LLC. for approximately $1.1 millionwhich was paid on February 11, 2019. On February 4, 2019, the Company received a capital call notice from the management of OCV Management, LLC. forapproximately $7.7 million which was paid on February 25, 2019.-118-On February 6, 2019, the Company’s Board of Directors approved a quarterly cash dividend of $0.4450 per share of common stock payable onMarch 12, 2019 to all stockholders of record as of the close of business on February 25, 2019. The Company also announced that it extended the Company’sshare repurchase program set to expire February 20, 2019 by an additional year.-119-Item 9. Changes In And Disagreements With Accountants On Accounting And Financial DisclosureNone.Item 9A.Controls and Procedures(a) Evaluation of Disclosure Controls and ProceduresThe Company maintains disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) that are designed to ensure thatinformation required to be disclosed in the Company’s reports under the Exchange Act is recorded, processed, summarized and reported within the timeperiods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to theCompany’s management, including the principal executive officer and the principal financial officer, as appropriate, to allow timely decisions regardingrequired disclosure.As of the end of the period covered by this report, j2 Global’s management, with the participation of Vivek Shah, our principal executive officer, andR. Scott Turicchi, our principal financial officer, carried out an evaluation of the effectiveness of the design and operation of our disclosure controls andprocedures. Based upon that evaluation, Mr. Shah and Mr. Turicchi concluded that these disclosure controls and procedures were effective as of the end ofthe period covered in this Annual Report on Form 10-K.(b) Management’s Annual Report on Internal Control Over Financial Reportingj2 Global’s management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) for j2 Global. In order to evaluate the effectiveness of internal control over financial reporting, as required bySection 404 of the Sarbanes-Oxley Act, management has conducted an assessment, including testing, using the criteria in Internal Control – IntegratedFramework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) using the 2013 framework. Our system of internalcontrol over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financialstatements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control overfinancial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk thatcontrols may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Basedon its assessment, management has concluded that j2 Global’s internal control over financial reporting was effective as of December 31, 2018. Managementdid not assess the effectiveness ofinternal control over financial reporting of all the 2018 acquisitions (see Note 4 - Business Acquisitions) because of the timing of these acquisitions. Theseacquisitions combined constituted 13.2% of total assets as of December 31, 2018 and 4.7% of revenues for the year then ended. Our internal controls overfinancial reporting as of December 31, 2018 have been audited by BDO USA, LLP, an independent registered public accounting firm, as stated in theattestation report which is included herein.(c) Changes in Internal Control Over Financial ReportingThere have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934)which occurred during the fourth quarter of our fiscal year ended December 31, 2018 that has materially affected, or is reasonably likely to materially affect,our internal control over financial reporting.-120-(d) Report of Independent Registered Public Accounting FirmREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMShareholders and Board of Directorsj2 Global, Inc.Los Angeles, CaliforniaOpinion on Internal Control over Financial ReportingWe have audited j2 Global, Inc.’s (the “Company’s”) internal control over financial reporting as of December 31, 2018, based on criteria establishedin Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSOcriteria”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018, basedon the COSO criteria.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), theconsolidated balance sheets of the Company as of December 31, 2018 and 2017, and the related consolidated statements of income, comprehensive income,stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2018, and the related notes and schedule, and our reportdated March 1, 2019, expressed an unqualified opinion thereon.Basis for OpinionThe Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of theeffectiveness of internal control over financial reporting, included in the accompanying Item 9A, Management’s Annual Report on Internal Control overFinancial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are apublic accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securitieslaws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audit of internal control over financial reporting in accordance with the standards of the PCAOB. Those standards require that weplan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all materialrespects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, andtesting and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such otherprocedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.As indicated in the accompanying Item 9A, Management’s Annual Report on Internal Control over Financial Reporting, management’s assessmentof and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of all the 2018 acquisitions, which areincluded in the consolidated balance sheet of the Company as of December 31, 2018, and the related consolidated statements of income, comprehensiveincome, stockholders’ equity, and cash flows for the year then ended. These acquisitions combined constituted approximately 13.2% of total assets as ofDecember 31, 2018, and approximately 4.7% of revenues for the year then ended. Management did not assess the effectiveness of internal control overfinancial reporting of all the 2018 acquisitions because of the timing of these acquisitions. Our audit of internal control over financial reporting of theCompany also did not include an evaluation of the internal control over financial reporting of all the 2018 acquisitions.Definition and Limitations of Internal Control over Financial ReportingA company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’sinternal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded asnecessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of thecompany are being made only in accordance with authorizations of management and directors of the company; and (3) provide-121-reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have amaterial effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of anyevaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degreeof compliance with the policies or procedures may deteriorate./s/ BDO USA, LLPLos Angeles, CaliforniaMarch 1, 2019-122-Item 9B. Other InformationNone.PART IIIItem 10.Directors, Executive Officers and Corporate GovernanceThe information required by this item is incorporated by reference to the information to be set forth in our proxy statement (“2019 Proxy Statement”)for the 2019 annual meeting of stockholders to be filed with the SEC within 120 days after the end of our fiscal year ended December 31, 2018.Item 11. Executive CompensationThe information required by this item is incorporated by reference to the information to be set forth in our 2019 Proxy Statement.Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersThe information required by this item is incorporated by reference to the information to be set forth in our 2019 Proxy Statement.Item 13. Certain Relationships and Related Transactions, and Director IndependenceThe information required by this item is incorporated by reference to the information to be set forth in our 2019 Proxy Statement.Item 14. Principal Accounting Fees and ServicesThe information required by this item is incorporated by reference to the information to be set forth in our 2019 Proxy Statement.PART IVItem 15.Exhibits and Financial Statement Schedules(a) 1. Financial Statements.The following financial statements are filed as a part of this Annual Report on Form 10-K:Report of Independent Registered Public Accounting FirmConsolidated Balance SheetsConsolidated Statements of IncomeConsolidated Statements of Comprehensive IncomeConsolidated Statements of Stockholders’ EquityConsolidated Statements of Cash FlowsNotes to Consolidated Financial Statements2. Financial Statement Schedule The following financial statement schedule is filed as part of this Annual Report on Form 10-K: Schedule II-Valuation and Qualifying AccountsAll other schedules are omitted because they are not required or the required information is shown in the financial statements or notes thereto.-123-3. ExhibitsThe following exhibits are filed with this Annual Report on Form 10-K or are incorporated herein by reference as indicated below (numbered inaccordance with Item 601 of Regulation S-K). We shall furnish copies of exhibits for a reasonable fee (covering the expense of furnishing copies) uponrequest.Exhibit No.Exhibit Title2.1Agreement and Plan of Merger, dated as of October 21, 2016, by and among Everyday Health, Inc., Ziff Davis, LLC, Project EchoAcquisition Corp. and j2 Global, Inc. (13)3.1Amended and Restated Certificate of Incorporation of j2 Global, Inc., dated as of June 10, 2014 (8)3.2Second Amended and Restated By-Laws (12)4.1Specimen of Common Stock Certificate (6)4.2.1Indenture, dated as of July 26, 2012 (7)4.2.2First Supplemental Indenture, dated as of June 10, 2014 (8)4.2.3Indenture, dated as of June 10, 2014 (9)4.2.4First Supplemental Indenture, dated as of June 17, 2014 (10)4.3Indenture, dated as of June 27, 2017 (16)10.1j2 Global, Inc. 2007 Stock Option Plan (5)10.2j2 Global, Inc. 2015 Stock Option Plan (11)10.3Form of Restricted Stock Agreement Pursuant to j2 Global, Inc. 2015 Stock Option Plan (15)10.4Amended and Restated j2 Global, Inc. 2001 Employee Stock Purchase Plan (4)10.4.1Amendment to Amended and Restated j2 Global, Inc. 2001 Employee Stock Purchase Plan (17)10.5Letter Agreement, dated as of April 1, 2001, between j2 Global, Inc. and Orchard Capital Corporation (2)10.5.1Amendment to Letter Agreement, dated as of December 31, 2001, between j2 Global, Inc. and Orchard Capital Corporation (3)10.6Registration Rights Agreement, dated as of June 30, 1998, by and among JFAX Communications, Inc., the Delaware State Employees’Retirement Fund, the Declaration of Trust for Defined Benefit Plan of ICI American Holdings Inc., the Declaration of Trust for DefinedBenefit Plan of Zeneca Holdings Inc., the J.W. McConnell Family Foundation, DCJ Fund Investment Partners II, L.P., DLJ CapitalCorporation, GMT Partners, LLC, Orchard/JFAX Investors, L.L.C. and DLJ Private Equity Employees Fund, L.P. (1)10.7Credit Agreement, dated as of December 5, 2016, among j2 Global Inc., MUFG Union Bank, N.A., as Administrative Agent, and the lendersparty thereto (14)10.8Second Amended and Restated Limited Partnership Agreement, dated as of January 19, 2018, by and among OCV I GP, LLC and j2Global, Inc. (18)10.9Credit Agreement, dated as of January 7, 2019, among j2 Cloud Services, LLC, MUFG Union Bank, N.A., as Administrative Agent, andMUFG Union Bank, N.A., as Sole Lead Arranger (19)21.1List of subsidiaries of j2 Global, Inc.23.1Consent of Independent Registered Public Accounting Firm – BDO USA, LLP31.1Certification by Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2Certification by Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350 101.INSXBRL Instance Document101.SCHXBRL Taxonomy Extension Schema Document101.CALXBRL Taxonomy Extension Calculation Linkbase Document101.DEFXBRL Taxonomy Extension Definition Linkbase Document101.LABXBRL Taxonomy Extension Label Linkbase Document101.PREXBRL Taxonomy Extension Presentation Linkbase Document-124-____________________(1) Incorporated by reference to j2 Global’s Registration Statement on Form S-1 filed with the Commission on April 16, 1999,Registration No. 333-76477.(2) Incorporated by reference to j2 Global’s Annual Report on Form 10-K/A filed with the Commission on April 30, 2001.(3) Incorporated by reference to j2 Global’s Annual Report on Form 10-K filed with the Commission on April 1, 2002.(4) Incorporated by reference to j2 Global’s Current Report on Form 8-K filed with the Commission on May 3, 2006.(5) Incorporated by reference to Exhibit A to j2 Global’s Definitive Proxy Statement on Schedule 14A filed with the Commissionon September 18, 2007.(6) Incorporated by reference to j2 Global’s Current Report on Form 8-K filed with the Commission on December 7, 2011.(7) Incorporated by reference to j2 Global’s Current Report on Form 8-K filed with the Commission on July 27, 2012.(8) Incorporated by reference to j2 Global’s Current Report on Form 8-K filed with the Commission on June 10, 2014.(9) Incorporated by reference to j2 Global’s Registration Statement on Form S-3ASR filed with the Commission on June 10,2014, Registration No. 333-196640.(10) Incorporated by reference to j2 Global’s Current Report on Form 8-K filed with the Commission on June 17, 2014.(11) Incorporated by reference to Annex A to j2 Global’s Definitive Proxy Statement on Schedule 14A filed with the Commissionon March 26, 2015.(12) Incorporated by reference to j2 Global’s Current Registration Statement on Form S-8 filed with the Commission on May6, 2015.(13) Incorporated by reference to j2 Global’s Current Report on Form 8-K filed with the Commission on October 27, 2016.(14) Incorporated by reference to j2 Global’s Current Report on Form 8-K filed with the Commission on December 5, 2016.(15) Incorporated by reference to j2 Global’s Annual Report on Form 10-K filed with the Commission on March 1, 2017.(16) Incorporated by reference to j2 Global’s Current Report on Form 8-K filed with the Commission on June 27, 2017.(17) Incorporated by reference to j2 Global’s Current Report on Form 8-K filed with the Commission on February 8, 2018.(18) Incorporated by reference to j2 Global’s Current Report on Form 10-K filed with the Commission on March 1, 2018.(19) Incorporated by reference to j2 Global’s Current Report on Form 8-K filed with the Commission on January 9, 2019.Item 16.Form 10-K SummaryNone.-125-SIGNATUREPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signedon its behalf by the undersigned, thereunto duly authorized, on March 1, 2019. j2 Global, Inc. By:/s/ VIVEK SHAH Vivek Shah Chief Executive Officer (Principal Executive Officer)-126-Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of theRegistrant and in the capacities and on the dates indicated, in each case on March 1, 2019.Signature Title /s/ VIVEK SHAH Chief Executive Officer and a DirectorVivek Shah (Principal Executive Officer) /s/ R. SCOTT TURICCHI President and Chief Financial OfficerR. Scott Turicchi (Principal Financial Officer) /s/ STEVE P. DUNN Chief Accounting OfficerSteve P. Dunn /s/ RICHARD S. RESSLER Chairman of the Board and a DirectorRichard S. Ressler /s/ DOUGLAS Y. BECH DirectorDouglas Y. Bech /s/ ROBERT J. CRESCI DirectorRobert J. Cresci /s/ SARAH FAY DirectorSarah Fay /s/ JON MILLER DirectorJon Miller /s/ STEPHEN ROSS DirectorStephen Ross /s/ WILLIAM B. KRETZMER DirectorWilliam B. Kretzmer -127-SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS(In thousands)Description Balance atBeginningof Period Additions:Charged toCosts andExpenses Deductions:Write-offs (1)and recoveries Balanceat Endof PeriodYear Ended December 31, 2018: Allowance for doubtful accounts $8,701 $17,338 $(15,617) $10,422Deferred tax asset valuation allowance $197 $— $(153) $44Year Ended December 31, 2017: Allowance for doubtful accounts $7,988 $13,159 $(12,446) $8,701Deferred tax asset valuation allowance $12,028 $70 $(11,901) $197Year Ended December 31, 2016: Allowance for doubtful accounts $4,261 $13,168 $(9,441) $7,988Deferred tax asset valuation allowance $14,242 $339 $(2,553) $12,028______________________(1) Represents specific amounts written off that were considered to be uncollectible.-128-EXHIBIT 21.1 List of Subsidiaries ofj2 Global, Inc.j2 Global, Inc.'s principal affiliates as of December 31, 2018, are listed below. All other affiliates, if considered in the aggregate as a single affiliate, would notconstitute a significant subsidiary. Name State or Other Jurisdiction of Incorporation j2 Australia Cloud Connect Pty Ltd Australia j2 Global Australia Pty Ltd Australia j2 Global Canada, Inc. Canada j2 Global Denmark A/S Denmark Electric Mail (Ireland) Limited Ireland j2 Global Holdings Limited Ireland j2 Global Ireland Limited Ireland Ziff Davis Holdings Limited Ireland Ziff Davis Ireland Limited Ireland j2 Global (Netherlands) B.V. Netherlands NCSG Holding AB Sweden Stay Secure Sweden AB Sweden j2 Global UK Limited United Kingdom Livedrive Internet Limited United Kingdom Ziff Davis International Ltd. United Kingdom DW Prime Holdings Inc. Delaware, United States Ekahau, Inc. Delaware, United States Everyday Health, Inc. Delaware, United States Everyday Health Media, LLC Delaware, United States Humble Bundle, Inc. Delaware, United States IGN Entertainment, Inc. Delaware, United States j2 Cloud Services, LLC Delaware, United States j2 Web Services, Inc. Delaware, United States KeepItSafe, Inc. Delaware, United States Mashable, Inc. Delaware, United States Offers.com, LLC Delaware, United States OnTargetJobs, Inc. Delaware, United States SaleBuild, Inc. Delaware, United States ThreatTrack Security Holdings, Inc. Delaware, United States Ziff Davis, LLC Delaware, United States ThreatTrack Security, Inc. Florida, United States Prime Education, LLC Florida, United States MedPage Today, L.L.C. New Jersey, United States Excel Micro, LLC Pennsylvania, United States Ookla, LLC Washington, United States EXHIBIT 23.1 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMj2 Global, Inc.Los Angeles, CaliforniaWe hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-149641, 333-64986, 333-135340, 333-87504, 333-55402, 333-31064 and 333-203913) of j2 Global, Inc. of our reports dated March 1, 2019, relating to the consolidated financial statements andfinancial statement schedule, and the effectiveness of j2 Global, Inc.’s internal control over financial reporting, which appear in this Form 10-K./s/ BDO USA, LLPLos Angeles, CaliforniaMarch 1, 2019EXHIBIT 31.1CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICERPURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002I, Vivek Shah, certify that:1.I have reviewed this Annual Report on Form 10-K of j2 Global, Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others withinthose entities, particularly during the period in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles;(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s mostrecent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likelyto materially affect, the registrant’s internal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):(a)All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which arereasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internalcontrol over financial reporting. /s/ VIVEK SHAH Vivek Shah Dated:March 1, 2019Chief Executive Officer(Principal Executive Officer) EXHIBIT 31.2CERTIFICATION OF PRINCIPAL FINANCIAL OFFICERPURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002I, R. Scott Turicchi, certify that:1.I have reviewed this Annual Report on Form 10-K of j2 Global, Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others withinthose entities, particularly during the period in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles;(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s mostrecent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likelyto materially affect, the registrant’s internal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):(a)All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which arereasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internalcontrol over financial reporting. /s/ R. SCOTT TURICCHI R. Scott Turicchi Dated:March 1, 2019Chief Financial Officer(Principal Financial Officer) EXHIBIT 32.1 CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICERPURSUANT TO 18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with the Annual Report on Form 10-K of j2 Global, Inc. (the “Company”) for the year ended December 31, 2018 as filed with the Securities andExchange Commission on the date hereof (the “Report”), Vivek Shah, as Chief Executive Officer (Principal Executive Officer) of the Company, and R. ScottTuricchi, as Chief Financial Officer (Principal Financial Officer) of the Company, each hereby certifies, pursuant to 18 U.S.C. §1350, as adopted pursuant to§906 of the Sarbanes-Oxley Act of 2002, to the best of his knowledge, respectively, that:(1)The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended;and(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of theCompany. Dated:March 1, 2019By:/s/ VIVEK SHAH Vivek Shah Chief Executive Officer(Principal Executive Officer) Dated:March 1, 2019By:/s/ R. SCOTT TURICCHI R. Scott Turicchi Chief Financial Officer(Principal Financial Officer) A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to j2 Global, Inc. and will beretained by j2 Global, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

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