The accompanying interim condensed consolidated financial statementsCondensed Consolidated Financial Statements include the accounts of j2J2 Global and its direct and indirect wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

The accompanying interim condensed consolidated financial statementsCondensed Consolidated Financial Statements are unaudited and have been prepared in accordance with instructions for Form 10-Q and Article 10 of Regulation S-X issued by the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and note disclosures required by GAAPaccounting principles generally accepted in the United States of America (“GAAP”) for complete financial statements although the Company believes that the disclosures made are adequate to make that information not misleading. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been reflected in these interim financial statements. It is suggested that these financial statements be read in conjunction with the audited financial statements and the related notes thereto for the year ended December 31, 20162020 included in our Annual Report (Form 10-K) filed with the SEC on March 1, 2017.2021. Accordingly, significant accounting policies and other disclosures normally provided have been omitted since such items are disclosed therein.

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

The preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”)GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, including judgments about investment classifications and the reported amounts of net revenue and expenses during the reporting period. We believeThe Company believes that ourits most significant estimates are those related to revenue recognition, valuation and impairment of investments, its assessment of ownership interests as variable interest entities and the valuationrelated determination of consolidation, share-based compensation expense, fair value of assets acquired and liabilities assumed in connection with business combinations, long-lived and intangible asset impairment, contingent consideration, income taxes and contingencies and allowances for doubtful accounts. On an ongoing basis, management evaluates its estimates based on historical experience and on various other factors that the Company believes to be reasonable under the circumstances. Actual results could materially differ from those estimates.estimates due to risks and uncertainties, including uncertainty in the current economic environment due to the novel coronavirus pandemic (“COVID-19”).

j2J2 Global reservesmaintains an allowance for receivablescredit losses for accounts receivable, which is recorded as an offset to accounts receivable and changes in such are classified as general and administrative expenses in the Condensed Consolidated Statements of Operations. The Company assesses collectability by reviewing accounts receivable on a collective basis where similar characteristics exist and on an individual basis when it may not be able to collect. These reservesidentifies specific customers with known disputes or collectability issues. In determining the amount of the allowance for credit losses, the Company’s Business Cloud Services segment are typically driven by the volume of credit card declines andCompany considers historical collectability based on past due invoices and are based on historical experience as well as an evaluation ofstatus. It also considers customer-specific information, current market conditions. These reserves for the Company’s Digital Media segment are typically driven by past due invoices based onconditions and reasonable and supportable forecasts of future economic conditions to inform adjustments to historical experience.loss data. On an ongoing basis, management evaluates the adequacy of these reserves.

The Company determines whether reseller revenue should be reported on a gross or net basis by assessing whether the Company is acting as the principal or an 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 acting as 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 Company follows the accounting guidance under Topic 606 for principal-agent considerations and assesses: (i) if another party is involved in providing goods or services to the customer and (ii) whether the Company placescontrols the most weightspecified goods or services prior to transferring control to the customer.

The Company has made an accounting policy election to exclude from the measurement of the transaction price all taxes assessed by a governmental authority that are (i) both imposed on three factors: whether or notand concurrent with a specific revenue-producing transaction and (ii) collected by the Company (i)from a customer.

A VIE requires consolidation by the entity’s primary beneficiary. The Company evaluates its investments in entities in which it is involved to determine if the entity is a VIE and if so, whether it holds a variable interest and is the primary obligorbeneficiary. The Company has determined that it holds a variable interest in its investment as a limited partner in the arrangement, (ii)OCV Fund I, LP (“OCV Fund”, “OCV” or the “Fund”). In determining whether the Company is deemed to be the primary beneficiary of the VIE, both of the following characteristics must be present:

The Company records revenuehas concluded that, as a limited partner, although the obligation to absorb losses or the right to benefit from the gains is not insignificant, the Company does not have “power” over OCV because it does not have the ability to direct the significant decisions which impact the economics of OCV. J2 believes that the OCV general partner, as a single decision maker, holds the ability to make the decisions about the activities that most significantly impact the 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 the OCV 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 gross basis with respectone-quarter lag due to reseller revenue asthe timing and availability of financial information from OCV. If the Company becomes aware of a significant decline in value that is other-than-temporary, the primary obligatorloss will be recorded in the arrangement,period in which the Company identifies the decline.

The Company classifies its long-lived assets to be sold as held for sale in the period (i) it has latitudeapproved and committed to a plan to sell the asset, (ii) the asset is available for immediate sale in determining pricingits present condition, (iii) an active program to locate a buyer and bears all credit risk associated with our reseller program partners.

J2 Global applies the portionacquisition method of accounting for business combinations in accordance with GAAP and uses estimates and judgments to allocate the purchase price paid for acquisitions to the fair value of the payment attributableassets, including identifiable intangible assets, and liabilities acquired. Such estimates may be based on significant unobservable inputs and assumptions such as, but not limited to, past userevenue growth rates, gross margins, customer attrition rates, royalty rates, discount rates and terminal growth rate assumptions. J2 Global uses established valuation techniques and may engage reputable valuation specialists to assist with the valuations. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. Fair values are subject to refinement for up to one year after the closing date of an acquisition as information relative to closing date fair values becomes available. Upon the conclusion of the intellectual property and amortizesmeasurement period, any subsequent adjustments are recorded to earnings.

Goodwill represents the remaining portion of such payments on a straight-line basis, or pro-rata revenue basis, as appropriate over the life of the licensed patent(s). With regard to royalty-bearing license arrangements, the Company recognizes revenues of license fees earned during the applicable period. With regard to patent sales, the Company recognizes as revenue in the period of the sale the amountexcess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in a business combination. Intangible assets resulting from the acquisitions of entities accounted for using the acquisition method of accounting are recorded at the estimated fair value of the assets acquired. Identifiable intangible assets are comprised of purchased customer relationships, trademarks and trade names, developed technologies and other intangible assets. Intangible assets subject to amortization are amortized over the period of estimated economic benefit ranging from 1 to 20 years and are included in general and administrative expenses on the Condensed Consolidated Statements of Operations. The Company evaluates its goodwill and indefinite-lived intangible assets for impairment pursuant to FASB ASC Topic No. 350, Intangibles - Goodwill and Other (“ASC 350”), which provides that goodwill and other intangible assets with indefinite lives are not amortized but tested annually for impairment or more frequently if J2 Global believes indicators of impairment exist. In connection with the annual impairment test for goodwill, the Company has the option to perform a qualitative 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 the Company determines that it is more likely than not that the fair value of the reporting unit is less than its carrying amount, then it performs the impairment test upon goodwill. The impairment test involves comparing the fair values of the applicable reporting units with their aggregate carrying values, including goodwill. The Company generally determines the fair value of its reporting units using the income approach methodology of valuation. If the carrying value of a reporting unit exceeds the patent(s) sold.

Certain of J2 Global’s acquisition agreements include contingent earn-out arrangements, which are recognized when earned in accordance withgenerally based on the termsachievement of future income thresholds or other metrics. The contingent earn-out arrangements are based upon the Company’s valuations of the underlying agreement. Generally, revenue is recognized asacquired companies and reduce the third party usesrisk of overpaying for acquisitions if the licensed technology over the period.projected financial results are not achieved.

The Company’s Digital Media revenues primarily consistfair values of revenues generated fromthese earn-out arrangements are included as part of the salepurchase price of advertising campaignsthe acquired companies on their respective acquisition dates. For each transaction, the Company estimates the fair value of contingent earn-out payments as part of the initial purchase price and records the estimated fair value of contingent consideration as a liability on the Condensed Consolidated Balance Sheets. J2 Global considers several factors when determining that are targeted to the Company’s proprietary websites and to those websites operated by third parties thatcontingent earn-out liabilities are part of the Digital Media business’s advertising network. Revenues for these advertising campaigns are recognizedpurchase price, including the following: (1) the valuation of our acquisitions is not supported solely by the initial consideration paid, and the contingent earn-out formula is a critical and material component of the valuation approach to determining the purchase price; and (2) the former shareholders of acquired companies that remain as earned, either when an ad is placed for viewing bykey employees receive compensation other than contingent earn-out payments at a visitor to the appropriate web page or when the visitor “clicks through” on the ad, depending upon the termsreasonable level compared with the individual advertiser.

j2J2 Global reviews and re-assesses the estimated fair value of contingent consideration on a quarterly basis, and the updated fair value could be materially different from the initial estimates or prior quarterly amounts. Changes in the estimated fair value of ourits contingent earn-out liabilities are reported in operatinggeneral and administrative expenses on the Condensed Consolidated Statements of Operations.

J2 Global’s income exceptis subject to taxation in both the U.S. and numerous foreign jurisdictions. Significant judgment is required in evaluating the Company’s tax positions and determining its provision for income taxes. During the ordinary course of business, there are many transactions and calculations for which the ultimate tax determination is uncertain. J2 Global establishes reserves for tax-related uncertainties based on estimates of whether, and the extent to which, additional taxes will be due. These reserves for tax contingencies are established when the Company believes that certain positions might be challenged despite the Company’s belief that its tax return positions are fully supportable. J2 Global adjusts these reserves in light of changing 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 of reserve 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 tax assets and liabilities be recognized using enacted tax rates for the time componenteffect of temporary differences between the book and tax basis of recorded assets and liabilities. 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 present value calculation whichnet deferred tax assets will not be realized. The valuation allowance is reportedreviewed quarterly based upon the facts and circumstances known at the time. In assessing this valuation 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 more likely 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 interest expense. Adjustments to the estimated fair value related to changes in all other unobservable inputs are reported in operating income.

In addition, on March 27, 2020, the “Coronavirus Aid, Relief and Economic Security (CARES) Act” was enacted into law and provides for changes to various tax laws that impact businesses. The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating segmentsloss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations, increased limitations on qualified charitable contributions and technical corrections to tax depreciation methods for qualified improvement property.

The CARES Act also appropriated funds for the Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”) loans that are forgivable in interim financial reports. Accounting guidance also establishes standards for related disclosures about products and services, geographic areas and major customers.certain situations to promote continued employment, as well as Economic Injury Disaster Loans to provide liquidity to small businesses harmed by COVID-19. The Company operatesdid not seek to borrow any funds under the program. However, as two segments: (1) Business Cloud Servicesa result of an acquisition that closed during the quarter ended December 31, 2020, the Company assumed outstanding PPP loans that had started the process of being forgiven prior to the closing of the acquisition. The amount of the outstanding loan did not have a significant impact to the Company’s financial statements.

The Company does not believe these provisions have a significant impact to our current and (2) Digital Media.deferred income tax balances. The Company will benefit from the technical correction to tax depreciation related to qualified improvement property and has elected to defer income tax payments and employer side social security payments where eligible.

Certain prior year reported amounts have been reclassified to conform to the 20172021 presentation.

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers, as a new Topic, Accounting Standards Codification (“ASC”) Topic 606. The new revenue recognition standard provides a five-step analysis of transactions to determine when and how revenue is recognized. The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In August 2015,December 2019, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers: Deferral of2019-12, Income Taxes (Topic 740): Simplifying the Effective Date, which deferred the effective date of the new revenue standardAccounting for periods beginning after December 15, 2016 to December 15, 2017, with early adoption permitted but not earlier than the original effective date. In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606). This ASU is related to reporting revenue gross versus net, or principal versus agent considerations. This ASU is meant to clarify the guidance in ASU 2014-09, Revenue from Contracts with Customers, as it pertains to principal versus agent considerations. Specifically, the guidance addresses how entities should identify goods and services being provided to a customer, the unit of account for a principal versus agent assessment, how to evaluate whether a good or service is controlled before being transferred to a customer, and how to assess whether an entity controls services performed by another party. In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing. This ASU is meant to clarify the guidance in FASB ASU 2014-09, Revenue from Contracts with Customers. Specifically, the guidance addresses an entity’s identification of its performance obligations in a contract, as well as an entity’s evaluation of the nature of its promise to grant a license of intellectual property and whether or not that revenue is recognized over time or at a point in time. In May 2016, the FASB issued ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients. This ASU does not change the core principle of the guidance in Topic 606. Instead, the amendments provide clarifying guidance in a few narrow areas and add some practical expedients. In December 2016, the FASB issued 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers.Income Taxes. The amendments in this ASU represent changessimplify the accounting for income taxes by removing certain exceptions to clarify the Codification or to correct unintendedgeneral principles in Topic 740. The amendments also improve consistent application of guidance. This ASU must be applied retrospectively to each period presented or as a cumulative-effect adjustment asand simplify GAAP for other areas of the date of adoption.Topic 740 by clarifying and amending existing guidance. The Company plans to adopt ASC 606adopted this ASU in the first quarter of 2018 using the modified retrospective method2021 and will present the cumulativehas identified no material effect of applying the standard to all contracts not completed as of the adoption date. As of September 30, 2017, the Company is in the process of: (i) finalizingon its review of customer contracts for its business segments and its assessment of the impact of the standard on these contracts; (ii) training internal stakeholders on the pending changes to revenue recognition policies; and (iii) assessing the need for appropriate changes to the Company’s business processes and controls to support revenue recognition and disclosures under the new standard. At this time, the Company anticipates that the primary change to its accounting policies for its customer contracts upon adopting ASC 606 will relate to the timing of when revenue is recognized. While revenue from certain contracts will continue to be recognized at a point in time, revenue from other contracts may be required to be recognized over time. Currently, the Company expects changes in the revenue recognition for licensing and patents. The Company is still finalizing its assessment of customer contracts, including the specific dollar impact of any changes in recognition will have on the Company’s consolidated financial statements. The Company expects to complete its implementation work in time to adopt ASC 606 for periods starting after December 31, 2017.statements or disclosures.

In January 2016,2020, the FASB issued ASU No. 2016-01, Financial Instruments2020-01, Investments - Overall (Subtopic 825-10)Equity Securities (Topic 321), Investment - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815): RecognitionClarifying the Interactions between Topic 321, Topic 323, and Measurement of Financial Assets and Financial Liabilities.Topic 815. The amendments in this ASU modify how entities measureclarify certain interactions between the guidance to account for certain equity investments and present changes insecurities under Topic 321, the fair value of financial liabilities. Under the new guidance entities will have to measure equityaccount for investments that do not result in consolidation and are not accounted under the equity method at fair valueof accounting in Topic 323, and recognize any changes in fair value in net income unless the investments qualifyaccounting for certain forward contracts and purchased options under Topic 815. This ASU identifies two main areas for improvement: (1) accounting for certain equity securities upon the application or discontinuation of the equity method of accounting and (2) scope considerations for forward contracts and purchased options on certain securities. The amendment states, as it is related to the first area of improvement, that an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting for the new practicality exception. A practicality exception will applypurposes of applying the measurement alternative in accordance with Topic 321 immediately before applying or upon discontinuing the equity method. The amendment also states, as it is relates to forward contracts and purchased options on certain securities, an entity should consider certain criteria to determine the accounting for those equity investments that do not have a readily determinable fair valueforward contracts and do not qualify forpurchased options. The Company adopted this ASU in the practical expedient to estimate fair value under ASC 820, Fair Value Measurements,first quarter of 2021 and as such these investments may be measured at cost. This ASU is effective forhas identified no effect on its financial statements issued for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company does not expect the adoption of this ASU to have a material impact on our financial statements and relatedor disclosures.

In February 2016,March 2020, the FASB issued ASU No. 2016-02, Leases. This ASU establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning2020-04, Reference Rate Reform (Topic 848): Facilitation of the earliest comparative period presentedEffects of Reference Rate Reform on Financial Reporting. The amendments in the financial statements, withthis ASU provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain practical expedients available.criteria are met. The amendments in this ASU apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. LIBOR is expected to phased out by 2021. The amendments in this ASU are effective as of March 12, 2020 through December 31, 2022. The Company is currently evaluating the impacteffect of this ASU on our financial statements. The Company currently has both capital and operating leases, both domestically and internationally, with varying expiration dates through 2025 in the aggregate amount of $65.9 million for the period ended September 30, 2017.

In October 2016,August 2020, the FASB issued ASU 2016-16, Income Taxes (Topic 740)No. 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s own Equity (Subtopic 815-40): Intra-Entity Transfers of Assets Other than Inventory.Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The amendments in this ASU reduce the complexitynumber of accounting models for convertible debt instruments and convertible preferred stock in order to simplify the accounting standards by allowingfor convertible instruments and reduce complexity. In addition, it amends the recognition of current and deferred income taxesguidance for scope exception surrounding derivatives for contracts in an intra-entity asset transfer, other than inventory, when

In January 2017,October 2020, the FASB issued 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business.ASU No. 2020-10, Codification Improvements. The amendments in this ASU provideimprove the consistency of the codification and reorganize the guidance into appropriate sections providing less opportunities for disclosures to be missed. The amendments in this update do not change GAAP and are not expected to result in a robust framework to usesignificant change in determining when a set of assets and activities is a business. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. Early adoption is permitted and the standard should be applied prospectively. The Company does not expect the adoption of this ASU to have a material impact on our financial statements and related disclosures.

J2 Global also generates Digital Media revenues from transactions involving the sale of perpetual software licenses, related software support and maintenance, hardware used in conjunction with its software, and other related services. Revenue is recognized for these software transactions with multiple performance obligations after (i) the Company has had an approved contract and is committed to perform the respective obligations and (ii) the Company can identify and quantify each obligation and its respective selling price. Once the respective performance obligations have been identified and quantified, revenue will be adopted retrospectively for all periods presentedrecognized when the obligations are met, either over time or retrospectivelyat a point in time depending on the nature of the obligation.

The amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. This ASU is effective for those fiscal years, beginning after December 15, 2018. Early adoption is permitted and should be adoptedCompany records revenue on a modified retrospective basesgross basis with respect to revenue generated (i) by the Company serving online display and video advertising across its owned and operated web properties, on third-party sites or on unaffiliated advertising networks, (ii) through the Company’s lead-generation business and (iii) through the Company’s subscriptions. The Company records revenue on a cumulative-effect directlynet basis with respect to retained earningsrevenue paid to the Company by certain third-party advertising networks who

The Company has recorded $78.8 million and $68.5 million of revenue for the three months ended March 31, 2021 and 2020, respectively, which was previously included in the deferred revenue balance as of the beginning of each respective year.

The Company’s revenues are primarily generated from customer contracts that are for one year or less. Costs primarily consist of incentive compensation paid based on the achievements of sales targets in a given period for related revenue streams and are recognized in the month when the revenue is earned. Incentive compensation is paid on the issuance or renewal of the customer contract. As a practical expedient, for amortization periods which are determined to be one year or less, the Company expenses any incremental costs of obtaining the contract with a customer when incurred. For those customers with amortization periods determined to be greater than one year, the Company capitalizes and amortizes the expenses over the period of adoption. benefit.

The Company does not expecthas applied the adoptionpractical expedient for certain revenue streams to exclude the value of this ASU to have a material impact on our financial statements and related disclosures.

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

The Company completed the following acquisitionsan immaterial media acquisition during the first ninethree months of fiscal 2017,2021, paying the purchase price in cash in each transaction: (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 purchase of the entire issued capital of WeCloud AB, acquired on June 12, 2017, a Swedish-based provider of cloud-based Internet security services; (c) an asset purchase 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; and (e) other immaterial acquisitions of online data backup, email marketing and email security businesses.cash.

The condensed consolidated statementCondensed Consolidated Statement of income,Operations since the date of eachthe acquisition and balance sheet as of September 30, 2017,March 31, 2021, reflect the results of operations of all 2017 acquisitions.the 2021 acquisition. For the ninethree months ended September 30, 2017, these acquisitionsMarch 31, 2021, this acquisition contributed $9.4 millionan immaterial amount to the Company’s revenues. Net income contributed by these acquisitionsthis acquisition was not separately identifiable due to j2J2 Global’s integration activities and is impracticable to provide. Total consideration for these transactionsthis transaction was $58.4$0.2 million, net of cash acquired and assumed liabilities and is subject to certain post-closing adjustments which may increase or decrease the final consideration paid.