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Discontinued Operations and Dispositions | 12 Months Ended
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Dec. 31, 2021
Discontinued Operations and Disposal Groups [Abstract] |
Discontinued Operations and Dispositions | Discontinued Operations and Dispositions Consensus Spin-Off On October 7, 2021, the Separation was completed and the Company transferred J2 Cloud Services, LLC to Consensus who in turn transferred non-fax assets and liabilities back to Ziff Davis such that Consensus was left with the cloud fax business. The Separation was achieved through the Company’s distribution of 80.1% of the shares of Consensus common stock to holders of J2 Global common stock as of the close of business on October 1, 2021, the record date for the distribution. The Company’s stockholders of record received one share of Consensus common stock for every three shares of J2 Global’s common stock. Ziff Davis, Inc. (formerly J2 Global, Inc.) retained a 19.9% interest in Consensus following the Separation. We did not retain a controlling interest in Consensus. The Retained Consensus Shares are equity securities for which the Company elected the fair value option, and subsequent fair value changes are included in the assets of and results from continuing operations as of and for the year ended December 31, 2021. At December 31, 2021, our investment in Consensus common stock was remeasured at fair value based on Consensus’ closing stock price, with an unrealized gain of approximately $298.5 million recorded in the Consolidated Statement of Operations and a balance of $229.2 million in the Consolidated Balance Sheet (See Note 5). No gain or loss was recorded on the Separation in the Consolidated Statements of Operations. Certain of the Company’s management and members of its board of directors resigned from the Company as of the Distribution Date and joined Consensus. In addition, one of the Company’s members of its senior management as of December 31, 2021 serves on the board of directors of Consensus. On October 7, 2021, Consensus paid Ziff Davis approximately $259.1 million of cash in a distribution that is anticipated to be tax-free provided certain requirements are met, and issued $500.0 million of senior notes due 2028 to Ziff Davis, which Ziff Davis then exchanged such notes with the lenders under the Credit Agreement and Credit Agreement Amendments by and among the subsidiaries of Ziff Davis party thereto as guarantors, Citicorp North America Inc. and MUFG Union Bank, N.A. and MUFG Union Bank, N.A., as administrative agent for the lenders, in exchange for extinguishment of indebtedness outstanding under the Bridge Loan Facility (see Note 10 - Debt). Such lenders or their affiliates agreed to resell the 2028 notes to qualified institutional buyers in the United States pursuant to Rule 144A. The Company incurred a net loss on extinguishment of approximately $8.8 million recorded within ‘Loss on Extinguishment of Debt’ component of ‘Income (loss) from discontinued operations, net of income taxes’ within the Consolidated Statements of Operations for the year ended December 31, 2021 (see Note 10). The divestiture of the cloud fax business was determined to qualify for US Federal tax-free treatment under certain sections of the Internal Revenue Code. The accounting requirements for reporting the Company’s cloud fax business as a discontinued operation were met when the Separation was completed as the Separation constitutes a strategic shift that will have a major effect on the Company’s operations and financial results. Accordingly, the consolidated financial statements reflect the result of the cloud fax business as a discontinued operation for all periods presented. The Consolidated Balance Sheets and Consolidated Statements of Operations report discontinued operations separate from continuing operations. The Consolidated Statements of Comprehensive Income, Consolidated Statements of Cash Flows (including Note 19 - Supplemental Cash Flow Information) and Consolidated Statements of Stockholders’ Equity combine continuing and discontinued operations. The Consolidated Statements of Operations, Consolidated Statements of Comprehensive Income, Consolidated Statements of Cash Flows and Consolidated Statements of Stockholders’ Equity include the cloud fax activity for January 1, 2021 through October 7, 2021. The key components of cash flows from discontinued operations were as follows (in thousands):
| Years ended December 31,
| 2021 |  | 2020 |  | 2019
Capital expenditures | $ | 15,252 |  |  | $ | 16,237 |  |  | $ | 6,996 |
Depreciation and amortization | $ | 9,010 |  |  | $ | 11,759 |  |  | $ | 10,270 |
Loss on debt extinguishment | $ | 8,750 |  |  | $ | 37,969 |  |  | $ | — |
Amortization of financing costs and discounts | $ | — |  |  | $ | 1,171 |  |  | $ | 1,428 |
Foreign currency remeasurement gain | $ | — |  |  | $ | 31,537 |  |  | $ | — |
Deferred taxes | $ | 8,015 |  |  | $ | 5,534 |  |  | $ | (55,931) |
In preparation for and executing the Separation, the Company incurred $11.6 million, net of reimbursement from Consensus, in transaction-related costs including legal and accounting fees during the year ended December 31, 2021, which were recorded in ‘General and administrative expenses’ component of ‘Income (loss) from discontinued operations, net of income taxes’ within the Consolidated Statement of Operations. These transaction costs primarily relate to professional fees associated with preparation of regulatory filings and transaction execution and separation activities within finance, tax and legal functions. In connection with the Separation, Ziff Davis and Consensus entered into several agreements that govern the relationship of the parties following the Separation. These agreements, as well as other activities related to Ziff Davis’s continuing involvement with Consensus are further discussed in Note 21 - Related Party Transactions. The key components of income from discontinued operations were as follows (in thousands). The Company made an accounting policy election not to allocate interest to discontinued operations. Interest expense included in discontinued operations relates to the 6.0% Senior Notes issued by J2 Cloud Services, LLC and the Bridge Loan Facility, which was required to be repaid as part of the Separation.
| Years ended December 31,
| 2021 |  | 2020 |  | 2019
Revenues | $ | 270,248 |  |  | $ | 330,764 |  |  | $ | 321,590 |
Cost of revenues | (44,306) |  |  | (53,379) |  |  | (49,991) |
Sales and marketing | (40,980) |  |  | (47,116) |  |  | (51,522) |
Research, development and engineering | (5,814) |  |  | (7,146) |  |  | (9,745) |
General and administrative | (39,279) |  |  | (26,852) |  |  | (21,475) |
Interest expense and other | (13,856) |  |  | (44,220) |  |  | (44,080) |
Income before income taxes | 126,013 |  |  | 152,051 |  |  | 144,777 |
Income tax expense (benefit) | 30,694 |  |  | 30,043 |  |  | (33,136) |
Income from discontinued operations, net of income taxes | $ | 95,319 |  |  | $ | 122,008 |  |  | $ | 177,913 |
The following table summarizes the Balance Sheet as of December 31, 2020 (in thousands):
|  |  | December 31, 2020
ASSETS |  |  |
Cash and cash equivalents |  |  | $ | 66,210 |
Accounts receivable, net |  |  | 16,071 |
Prepaid expenses and other current assets |  |  | 1,748 |
Total current assets, discontinued operations |  |  | 84,029 |
Property and equipment, net |  |  | 25,053 |
Operating lease right-of-use assets |  |  | 25,711 |
Trade names, net |  |  | 29,350 |
Customer relationships, net |  |  | 13,678 |
Goodwill |  |  | 342,430 |
Other purchased intangibles, net |  |  | 1,681 |
Deferred income taxes, noncurrent |  |  | 44,350 |
Other non-current assets |  |  | 1,269 |
Total assets, discontinued operations |  |  | $ | 567,551 |
LIABILITIES |  |  |
Trade accounts payable and accrued expenses |  |  | $ | 32,795 |
Income taxes payable, current |  |  | 1,307 |
Deferred revenue, current |  |  | 24,512 |
Operating lease liabilities, current |  |  | 2,578 |
Total current liabilities, discontinued operations |  |  | 61,192 |
Deferred revenue, noncurrent |  |  | 240 |
Operating lease liabilities, noncurrent |  |  | 25,549 |
Liability for uncertain tax positions |  |  | 3,993 |
Deferred income taxes, noncurrent |  |  | 5,392 |
Other long-term liabilities |  |  | 3,063 |
Total liabilities, discontinued operations |  |  | $ | 99,429 |
B2B Back-up and Voice Asset Sales The Company completed the following dispositions that did not meet the criteria for discontinued operations During the first quarter of 2021, the Company committed to a plan to sell certain Voice assets in the United Kingdom as they were determined to be non-core assets. Such assets were recorded within the Cybersecurity and Martech reportable segment. On February 9, 2021, in a cash transaction, the Company sold the Voice assets. The total gain recognized on the sale of these Voice assets was $2.8 million which was recorded in (loss) gain on sale of businesses on the Consolidated Statement of Operations in the year ended December 31, 2021. During the first quarter of 2021, the Company committed to a plan to sell its B2B Backup business as it was determined to be a non-core business. The B2B Backup business met the held for sale criteria, and accordingly, the assets and liabilities were presented as held for sale on the Consolidated Statement Balance Sheets at March 31, 2021 and June 30, 2021. The business is recorded within the Cybersecurity and Martech reportable segment. During the second quarter of 2021, the Company received an offer to purchase the B2B Backup business and management determined that the fair value of the business less cost to sell was lower than its carrying amount. As a result, the Company recorded an impairment to goodwill of $32.6 million during the second quarter of 2021, which was recorded in impairment of business on the Consolidated Statement of Operations (see Note 9 - Goodwill and Intangible Assets). On September 17, 2021, in a cash transaction, the Company sold the B2B Backup business. The total loss recognized on the sale of the B2B Backup business was $24.6 million which was recorded in (loss) gain on sale of businesses on the Consolidated Statement of Operations in the year ended December 31, 2021. During the second quarter of 2020, the Company committed to a plan to sell certain Voice assets in Australia and New Zealand as they were determined to be non-core assets. Such assets were recorded within the Cybersecurity and Martech reportable segment. On August 31, 2020, in a cash transaction, the Company sold these Voice assets for a gain of $17.1 million which was recorded in gain on sale of businesses on the Consolidated Statement of Operations in the year ended December 31, 2020.

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- Definition The entire disclosure related to a disposal group. Includes, but is not limited to, a discontinued operation, disposal classified as held-for-sale or disposed of by means other than sale or disposal of an individually significant component. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 360 -URI http://asc.fasb.org/topic&trid=2155823 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=2122178 + Details
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