Good day, ladies and gentlemen, and welcome to Ziff Davis Second Quarter 2023 Earnings Call. My name is Paul, and I will be the operator assisting you today. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. On this call will be Vivek Shah, CEO of Ziff Davis, and Bret Richter, Chief Financial Officer of Ziff Davis. I will now turn the call over to Bret Richter, Chief Financial Officer of Ziff Davis. Thank you. You may begin.

Thank you. Good morning and welcome to the Ziff Davis investor conference call for Q2 2023. As the operator mentioned, I am Bret Richter, Chief Financial Officer of Ziff Davis, and I am joined by our Chief Executive Officer, Vivek Shah. A presentation is available for today's call. A copy of this presentation is available on our website. When you launch the webcast, there is a button on the viewer on the right-hand side, which will allow you to expand the slides. If you have not received a copy of the press release, you may access it through our corporate website at www.ziffdavis.com. In addition, you will be able to access the webcast from this site. After completing the formal presentation, we'll be conducting a Q&A. The operator will instruct you at that time regarding the procedures for asking questions. In addition, you can email questions to [email protected]. Before we begin our prepared remarks, allow me to read the safe harbor language. As you know, this call and the webcast will include forward-looking statements. Such statements may involve risks and uncertainties that would cause actual results to differ materially from the anticipated results. Some of those risks and uncertainties include, but are not limited to, the risk factors that we have disclosed in our SEC filings, including our 10-K filings, recent 10-Q filings, various proxy statements and 8-K filings, as well as additional risk factors that we have included as part of the slide show for the webcast. We refer you to discussions in those documents regarding Safe Harbor language, as well as forward-looking statements. Now, let me turn the call over to Vivek for his remarks.

Good morning, everyone. Our second quarter financial results came in ahead of expectations, and we are increasingly optimistic about a stronger second half. We're also very enthusiastic about our recently announced strategic partnership with Xyla, which we believe will accelerate AI enablement across our portfolio. More on that later. Let me provide some perspective on the second quarter. As expected, results for a great deal of resemblance to last quarters. Our revenue decline was dominated by ongoing challenges in our technology vertical. The tech ad category continues to be mired in a cyclical downturn, but we're seeing signs of recovery and remain optimistic about a stronger fourth quarter, which is historically the largest quarter for tech ads. Once again, we saw solid growth from both our connectivity and health and wellness verticals. Connectivity revenue growth reflected healthy demand for both our core data products and related services, as well as Ekahau's Wi-Fi network planning and optimization software. In health and wellness, we continue to see growth in pharma advertising, as the buying cycle has returned to its pre-pandemic cadence, and the drug launch pipeline remains strong. Also, our Lose It! weight loss app is generating record revenues. In gaming, we were happy to see IGN's return to growth, which we're hopeful will carry into the second half. Humble Games is expecting to release a number of new titles in the second half, which should also help with gaming growth. In shopping, retail did not grow again in the quarter and is on a nice glide path as we approach the fourth quarter, where nearly a third of the business's revenues are generated. We're also close to resolving the technical issues that have created growth challenges for Offers.com. In Cybersecurity and Martech, we believe that we have found the bottom, with Q2 revenues a tick ahead of Q1, and with a view towards revenues in the second half consistent with the first. We once again saw year-over-year organic growth in our email marketing business in Q2, offset by declines in VPN. We expect email to continue growing in the second half, coupled with an easing of declines in our VPN business, and modest growth across the rest of our cybersecurity business. Overall, our view is that the second half will reflect recovery and sequential improvement, but we're watching closely for any signs of a hard landing with respect to the broader economy. As you know, we expect to generate growth organically and through acquisitions. We continue to be very judicious and selective with our capital. We acquired a small tuck-in called Mom Media for our parenting and pregnancy unit in the quarter, and continue to assess a number of opportunities. The M&A environment is still sluggish generally, and we believe that the market will pick up once there is clarity on the broader economic environment. Market uncertainty has created increasingly divergent views on valuation, creating a chilling effect on deal making. As we've described on our last two calls, we have been very busy experimenting with and exploring AI applications across our company. Our work led us to Dr. Daniel Nadler, one of the world's most successful AI entrepreneurs. His last company, Kensho, sold five years ago in what was a record valuation for an AI company. He formed Xyla in late 2021 to be at the forefront of the development of large language models across accuracy-critical domains. The strategic partnership we announced this week with Xyla should not only allow us to accelerate AI opportunities across our portfolio, but it should also push our boundaries and allow us to re-imagine entirely new business models by combining the strengths of both businesses: Ziff Davis' authoritative brands and proprietary data with Xyla's AI technology and expertise, focused on high-value domains. The first initiative in the partnership will be to integrate Xyla's OpenEvidence technology into the Everyday Health Group, with the mission of turning medical information into medical knowledge for healthcare professionals. OpenEvidence was the first medical AI platform to score above 90% on the U.S. medical licensing examination. With OpenEvidence, healthcare professionals access and analyze vast amounts of medical information, published research and clinical trial data, assisting them in making informed decisions to improve patient outcomes. OpenEvidence technology should drive enhanced and personalized engagement with healthcare professionals as part of Everyday Health Group's physician-focused MedPage Today, a trusted digital source for clinical news coverage across medical specialties. While the health vertical is where we're starting, we signed a long-term collaboration agreement with Xyla that establishes a framework for us to rapidly define, develop and deploy AI at brands and businesses across our portfolio. We see meaningful potential in several of our businesses and markets and look forward to working with Xyla to pursue them. We're also excited to be a shareholder in Xyla, joining a very impressive roster of Xyla investors, including Jim Breyer, Brian Sheth, and Ken Moelis. Xyla is a Mayo Clinic Platform Accelerate company. Dr. Nadler has many options when it comes to choosing partners, so his decision to work with us is a strong vote of confidence in our company and our potential. I'm particularly gratified that he chose to take a bulk of our Xyla investment in ZD shares, making him a valued and an important ZD shareholder. Beyond the strategic partnership, we've continued to make meaningful progress against specific AI opportunities across the company. The first is enhancing the value proposition of our proprietary data to deliver predictive analytics and insights. This past May, in our connectivity business, we launched a new AI-enabled product feature within Ekahau Insights called Optimizer, an entirely new way for Ekahau customers to manage their wireless networks. Optimizer automatically detects port configurations and provides step-by-step recommendations, leveraging machine learning-derived insights drawn from our proprietary data that significantly increases Wi-Fi performance and reliability. Optimizer has been rolled out to all of Ekahau's customers worldwide and can be used for ongoing health checks and performance optimization of any Wi-Fi system. The second area of opportunity is creating new conversational experiences across our consumer-facing brands. In July, we launched our first conversational experience for users on IGN. IGN's Legend of Zelda: Tears of the Kingdom game guide now offers registered users access to an AI chatbot that can answer their questions about the game. The chatbot is trained on IGN's original editorial game guide content, so users can be confident that they're getting accurate and helpful information from the authoritative experts in gaming. And the third area of opportunity is increasing our content velocity and gaining efficiencies in our content production process. As mentioned, our editorial teams have integrated generative AI across multiple steps in the editorial workflow to produce more high-quality content with a human plus artificial intelligence approach. For example, we leveraged AI for content tagging thousands of pages, saving significant hours of time. There's been a lot of investor interest in the impact of AI on search traffic. We've been analyzing organic traffic trends from Bing after it implemented generative AI into its search experience. While Bing has a relatively lower search market share, they have the first generative search experience in wide circulation, so it is worth studying. Our organic traffic from Bing increased by 60% year-over-year from March to June. According to industry estimates, year-over-year total visit growth for Bing was only 19%. In other words, the number of visitors to our websites increased at a rate three times that of Bing's traffic overall, indicating that generative search has had a very positive impact on traffic referrals. This provides some early positive signals supporting our perspective that while generative AI probabilistic responses are well positioned to respond to users' fact-based or how-to queries, they do not fully resolve user search intent when seeking an expert's experience or perspective. This preliminary data also positively confirms Google's perspective that their new search generative experience is a jumping-off point for exploring the web, versus the final destination, enabling users to go deeper to learn about a topic. Importantly, I believe the major search operators have always understood that when copyrighted content is used, there must be compensation for the rights owners. In search, that compensation has come in the form of referral traffic, and we believe that must continue as search evolves. However, we strongly believe that non-search AI platforms will also need to compensate rights holders for their content. We fully support industry efforts in securing that compensation and have recently joined the News/Media Alliance and are considering other industry efforts to address the clear infringement of our copyrights. Fundamentally, we believe both of these statements to be true: AI has the transformational potential to create meaningful value for Ziff Davis, and that AI companies must respect our copyrights. Finally, let me provide you with an update on our ESG efforts. I'm happy to announce that just a few weeks ago we received validation of our emissions reduction targets from the Science-Based Targets initiative. SBTi defines and promotes best practices in near-term science-based target setting, and we now have comprehensive Scope 1, 2, and 3 emission reduction targets in place, committing to cut our emissions in half by 2030. We will be working with our facilities teams, building managers, and suppliers over the next several years to ensure we meet these targets. It's also worth noting that Ziff Davis submitted the CDP Climate Change Questionnaire last month for the first time. CDP supports companies to measure and manage their risks and opportunities on climate change and in doing so, has created a system that has resulted in meaningful engagement on environmental issues worldwide. Our engagement with and commitment to SBTi and CDP are key elements in Ziff Davis setting out on a net zero decarbonization trajectory while maximizing transparency and accountability throughout. With that, I'll hand the call back to Bret to discuss our financial results.

Thank you, Vivek. Let's discuss our financial results. Our earnings release reflects both our GAAP and adjusted financial results for Q2 2023. We will focus our discussion today, and my commentary will primarily relate to our Q2 2023 adjusted financial results, and comparisons to prior periods. Our second quarter financial results include revenue of $326 million for the second quarter of 2023, as compared with revenue of $337.4 million for the 2022 comparable period, reflecting a decline of 3.4%. FX did not have a meaningful impact on the second quarter's year-over-year results. Q2 2023 adjusted EBITDA was $106.7 million, as compared with $118 million for the prior-year period, reflecting a decline of 9.6%. Our adjusted EBITDA margin for the quarter was 32.7%, a 200 basis points sequential increase. We reported second quarter adjusted diluted EPS of $1.27. Our technology business performance continues to weigh on the company's overall performance, and this vertical was the most significant contributor to our year-over-year revenue decline. However, overall, Q2 2023 was better than our expectations, and we believe we are building momentum going into the second half of 2023. Advertising revenue declined by 7% in Q2 2023 as compared with the prior-year period. This performance was also heavily impacted by the challenges within tech; excluding our technology vertical, the year-over-year advertising revenue decline would have been 2%. Trailing 12-month advertising revenue declined by 8%. In our non-tech businesses, we have seen some stabilization in the overall advertising market, and strength in certain of our verticals, including our consumer health business. We expect our second half advertising revenue to meaningfully improve as compared with the first half, supporting our overall expectations for a stronger second half 2023 performance. Our net advertising revenue retention, an annual trailing 12-month statistic measured quarterly, was approximately 90% for Q2 2023, which reflects the year-over-year decline in advertising revenue. During the second quarter, Ziff Davis served 1,924 advertisers, with an average quarterly revenue per advertiser of more than $90,000. In terms of subscription revenue performance, Q2 2023 subscription revenue grew 3% compared with the prior-year period and 4% during the last 12 months, excluding the contribution from certain businesses that were divested in 2021. The summary on the bottom of the slide includes subscription metrics for the last six quarters. We had nearly 3.2 million subscribers in Q2 2023. The significant increase on a year-over-year basis primarily reflects the inclusion of Lose It! subscribers for a full quarter in 2023 versus a partial quarter in 2022. There were sequential gains within Humble Bundle and Lose It!, offset in part by a modest reduction in cybersecurity subscribers. Our subscriber metrics have been adjusted to reflect greater transparency into a reseller relationship in our cybersecurity and Martech business, enabling us to identify the underlying subscribers served through this relationship. Historically, we have reflected this reseller as a single subscriber in these metrics. These metrics now reflect the underlying subscribers served by this reseller. Certain other adjustments were also made to subscribers in the cybersecurity and Martech business to further conform to the company's subscriber definition. Please note that the historical subscriber metrics have been recast to conform with the current quarter's data. Our Q2 2023 average quarterly revenue per subscriber was $44.51. This metric reflects the inclusion of a full quarter of Lose It! subscribers as compared with the prior-year period, which only included a partial quarter. Overall, the June 2022 acquisition of Lose It! has significantly raised our number of subscribers and lowered our average quarterly revenue per subscriber compared with the periods prior to the acquisition. Our overall churn rate increased 18 basis points from Q1 2023. The company's Q2 2023 other revenues declined approximately 9% year-over-year, primarily reflecting lower Humble Bundle publishing revenue, which was offset in part by higher Ekahau hardware sales, among other smaller factors. Our Humble Bundle publishing revenue is highly dependent on the timing of game releases. We expect a stronger release calendar in the second half of 2023. Revenues from businesses owned for at least a full 12 months are included in organic revenue, while acquired revenue relates to businesses we've owned for less than 12 months. Second quarter 2023 organic revenue declined 6%, consistent with Q1 2023. This decline reflects the business unit performance trends discussed earlier. Turning to our balance sheet, as of the end of Q2 2023, we had $679 million of cash and cash equivalents and $150 million of short and long-term investments. We also have a significant leverage capacity, both on a gross and net leverage basis. During the quarter, we repurchased 980,000 shares of our common stock for a cost of approximately $63.9 million. In July, we repurchased an additional 105,000 shares of our common stock at an aggregate cost of $7.5 million. We have more than 5 million remaining shares authorized under our stock repurchase program, and we will continue to be opportunistic regarding future stock repurchases. We continue to remain active in sourcing and evaluating transactions and manage a robust deal pipeline. The uncertainty in the current macro environment has had a chilling effect on M&A activity across the market. We are patient, and we will continue to exercise the discipline that has been a hallmark of our acquisition program. On our last call, we shared that we were exploring strategic alternatives for our B2B business. While we do not have a specific update to share at this time, we remain engaged in active exploration. We continue to believe that we are well positioned both operationally and financially to execute upon our M&A strategy. We will support this strategy with capital allocation when we identify transactions that we believe will generate long-term value creation for our stakeholders. We are also nimble and well-capitalized, and when the right opportunities arise, we believe that we can act decisively. We are reaffirming the fiscal 2023 guidance range that we originally presented in February 2023. While certain of our businesses continue to be challenged by the macroeconomic environment, such as our technology business, we are beginning to see stabilization in many of our other businesses. As we noted on our February call, our 2023 guidance reflects the carryforward impact of our 2022 results and an expectation that the macro-economy will stabilize during the second half of 2023. This view has not changed, and our first half of 2023 performance is consistent with this outlook. We continue to expect a stronger second half of 2023, and we expect Q3 to reflect an improvement in our rate of organic growth. Assuming we realize this expectation, second half 2023 revenues would reflect approximately 55% of total 2023 revenues, with approximately 30% of the 2023 revenue in the fourth quarter, again, consistent with our original expectation. We continue to invest in areas of our business where we see an opportunity for growth. We expect adjusted EBITDA margins in the third quarter of 2023 to move closer to those experienced in Q3 2022, and for the fourth quarter to be our strongest quarter, reflecting the annual seasonal strength in certain of our businesses. As we stated last quarter, in the event we consummate a transaction involving our B2B technology business, we would anticipate adjusting our guidance. Following our business outlook slides are certain supplemental materials, including reconciliation statements for the various non-GAAP measures to their nearest GAAP equivalent. This section includes a reconciliation that reflects free cash flow. Year-to-date 2023 free cash flow was approximately $100 million. Year-to-date 2023 free cash flow reflects lower adjusted EBITDA as compared with the 2022 comparable period, similar CapEx, lower net cash interest, and higher cash taxes. Changes in working capital negatively impacted year-to-date free cash flow in 2023, as compared with 2022, and the change in working capital contributed to free cash flow. As I noted on our fiscal year 2022 earnings call in February, we recently transitioned to a new company-wide financial ERP system, and as expected, this transition has impacted our regular timing of receipts and payments. We expect to continue to progress back towards our normal cadence of working capital during the coming months. Overall, we are pleased with our Q2 2023 results. We are excited by our recent strategic transaction with Xyla and believe that we are positioning ourselves to take advantage of the power of artificial intelligence tools and capabilities. Our profitable businesses continue to produce cash to strengthen our balance sheet and provide incremental capital for our capital allocation strategy, including in support of our recent stock repurchases. We will continue to thoughtfully and patiently deploy this capital to enhance long-term shareholder value.

Thank you. The first question is from Shweta Khajuria from Evercore ISI. Shweta, you can go ahead.

Thank you for taking my questions. Vivek, you mentioned that you're seeing signs of recovery and hoping for a strong fourth quarter. Could you point to a few things that you're seeing now that gives you more confidence? What specifically were you referring to? And then, the second question I have is your partnership with Xyla, and you pointed to some examples from integrating it in Everyday Health to increasing content velocity, conversational opportunities, as well as data and analytics. How should we think about the impact of all this on your business - on your P&L, and whether it is cost savings or revenue generating opportunities? Thank you.

Of course. Thanks, Shweta. So, to answer your first question about reasons for us to feel that the tide is turning and to be optimistic about the second half, I point to a few things. So first is continued growth out of connectivity and the greatly improved pharma advertising market. These are dynamics that we're experiencing in the first half, and we believe will carry into the second half. As I also pointed out, RetailMeNot is growing, and we believe that will continue, and obviously, the fourth quarter, as I mentioned, is all important. I think overall, e-commerce trends seem to be in our favor. We have a number of important Humble Game releases that are slated for Q3 and Q4, which we believe will be beneficial from an overall year-over-year growth point of view. The email business continues to grow, and we're seeing some real flattening in the cybersecurity business. And then, of course, we have easier comps, particularly in the fourth quarter. So, I think that combination gives us confidence around our views of the second half. With respect to your question on Xyla specifically, what I will say is the Xyla partnership is really all about revenue generation. And so, maybe I'll just unpack a little bit of what we intend to do at the outset. So Xyla has created a service called OpenEvidence, which is a service for physicians that allows physicians to access and have a personal reader across 35 million pieces of medical literature. OpenEvidence allows physicians to make very specific queries that can be patient-based to then essentially read the medical literature and distillate in a format and in a way that can be used in the provision of care. It is a game changer. The integration of that into MedPage, which does largely news as a tool and utility, could be significant in how often we reach physicians. So integrating a tool like OpenEvidence, free to physicians, that monetizes through advertising is a significant part of our health business, and we believe this will then have an impact. As for timing, we're just getting started. It's not something we're writing into our 2023 guidance, but longer-term, we feel very bullish about the potential.

Okay. Thank you, Vivek.

Thank you. The next question is coming from Cory Carpenter from JPMorgan. Cory, your line is live.

Hi. Thanks for the questions. Vivek, your comments on the Bing referral traffic increase were pretty interesting. Just curious, is there a way to frame how much of your traffic comes from non-branded search or what you think you'd be exposed to changes in search traffic? And then for Bret, could you talk about what drove the 200 basis points of sequential margin expansion in Q2? I think that was above your guide for closer to flat margins. Thank you.

Thanks, Cory. The reason we wanted to share the Bing analysis is that it's really the only current real-world experiment in terms of how a generative search engine could be different. I am pleased to see the volume of referrals we're getting out of Bing in a generative experience is significantly better than it was prior to the integration of AI into their experience. In terms of traffic composition, we don't report out all of the pieces. What I can say though is, I know there's a lot of investor focus on search traffic. As a company, it is one source of traffic. We have a significant amount of app traffic, direct traffic, and email traffic. So, I'll point out that we're not just search. We have always been diversified because we've always understood that search algorithm changes all the time.

I don't know if I'd point to anything specific with regards to that. I think part of the answer is to step back and widen the lens. While we try to manage the company to within 90-day spreads less focus on a quarterly basis, as we progress through the year, we do try to give some guidance. It's not necessarily to the last percentage point. If you look across our businesses, factors that impacted that were the type and the mix of revenue, some delayed spending in certain areas. We continue to invest in other areas, and maybe the other answer is lots of small pieces across a fairly diverse P&L adding up.

That's helpful. Thank you both.

Thank you. The next question is coming from Ross Sandler from Barclays. Ross, your line is live.

Hello. Great. Thanks, guys. Vivek, just a follow-up on the SEO topic. Google just started adding more referral links in the search generative experience. So just have you seen any evidence of the same kind of uptick? I know it's pretty early days, but anything you can comment on that. And then, stepping back on the broader topic of AI and AI co-pilots, so we've heard from some of our other companies that have implemented these data co-pilots that their engineering departments have been able to become 30% to 50% more productive than how they operated before using tools to write code. So if we look at Ziff Davis and maybe look at one of the editorial departments at one of your brands, how much do you think that these tools could improve system-wide productivity, and how do you guys plan to measure that improvement? Thanks a lot.

Thank you, Ross. So, maybe I'll start with your first question around our experience with Google referrals. Year-to-date and in the quarter are up nicely. Whether or not I can point to that being the volume from Labs-based experience, I don't know. It could be a contributing factor. With respect to your point on productivity gains, I will say that for our engineering and development organizations, the same dynamics around productivity are very relevant to our company too. I would argue that that is possibly as meaningful as the question you're asking regarding editorial productivity. It's about velocity and volume and making sure that we are complete in any units of content, still early for me to put a statistic out for you, but that's how we think of it. It allows us to create new ways to engage, and that to me is more exciting than productivity gains that may allow us to increase some output. We're obviously looking at all of it, but my bias right now is primarily around the revenue generation related to the kind of experiences and tools we think we can build into our brands.

That's helpful. Thank you both.

Thank you. The next question is coming from Shyam Patil from SIG. Shyam, your line is live.

Hi, guys. In the past, you have talked about sustainable long-term growth in the mid-teens, and I think you said half of that being organic. Obviously right now, there's some choppiness in the macro, but is that still kind of how you're thinking about growth over the long term? And then, second question, Vivek, you talked about the AI chatbot for gaming. I think you said Tears of the Kingdom. It sounds really interesting. Do you have any additional color on just how this is performing engagement, how you expect to monetize this, and do you feel like within the gaming space, you have a substantial moat around things like this? Do you feel like your offerings are unique here, or are there other potential competitors that can do this as well? Thank you.

Shyam, thank you for the question. With respect to the first part, in terms of our target growth rates, you're right. They are unchanged, mid-teens, roughly half organic, half inorganic, mid-30s margin. That is how we think about the company and that's how we think about our longer-term models. Obviously, the last handful of quarters has not achieved those expectations, but these are long-term expectations. In our history, we have had periods where we've exceeded those. A broader timeframe, we've done this historically and intend to continue to do so. With respect to the gaming question, game guides and game advice and game health are of particular strength for IGN, largely due to our reputation and the math we have that are quite unique. We integrated a very important small acquisition, which is Map Genie, which brings a series of maps for all of these games along with video tutorial and tech space tutorials. The combination of video text and map is significant. So, the chatbot allows you to ask questions and access this information repository, which is really important for gamers, leading to return frequency and ad loads.

Great. Thank you guys.

Thank you. The next question is coming from Ygal Arounian from Citigroup. Ygal, your line is live.

Hi, good morning, guys. A couple of AI questions from me as well. I want to go back to the point about trading off traffic for content and the point about the compensation rights. Could you expand on that a little bit? Are you implying that if you continue to get traffic or you're getting better traffic from search or the generative AI search experience, whether these copyright issues that we're hearing about from some publishers, including you, about using their content for parameters to train the LLMs, that's more acceptable in that trade-off? How do you think about that? And then, you talk a lot about how AI is going to help improve a lot of the products. We haven't touched much about the advertising product itself specifically. Wanted to get your take on that as well, if that's an area where you see potential improvements?

Yes, Ygal, great question. I’ll start with your question around search and compensation and rights. Ziff has existed for a long time, well before AI, where publishers early in the days of search were trying to understand if search engines had the right to crawl content, to index content, and display headlines. The determination has been that it is a fair value exchange if you crawl our content and we get traffic from it. So, if that value exchange continues within search experiences, I think that would be fair. But search operators are not the only ones who have developed large language models that are predicated on content from companies like ours. It is those companies that, in my opinion, need to express what they believe the fair value exchange needs to be, absent traffic or other forms of compensation. It really requires licensing fees. We believe those entities need to work with our industry to resolve that. With respect to your question around using AI to improve ad product and ad performance, it has not been our focus. I suspect what will happen is that ad tech firms that create a lot of the instrumentation in the market will start to innovate and offer tools for better ad performance. We're not monetizing ad inventory linked to AI-consumer facing products, but AI improving efficacy, targeting, messaging, and creative optimization is not our top priority because market participants are developing those solutions.

Okay. Thanks.

I'll take that. We have discussed capital allocation strategies. Our capital allocation strategy is four-pronged. First and foremost, feed the business with the capital it needs from an operating and capital expenditure standpoint. Second, keep a healthy balance sheet, which we've built significantly over the last couple of years. Third, return capital to shareholders, and fourth, our M&A program. In this quarter, we shifted over $70 million in our buyback program. We believe the stock's attractive. Our activity in the last quarter pointed towards that. But we anticipate greater activity in the M&A market. It's been several quarters with nothing changing regarding our acquisition program. The last 12 months have made it harder to get deals closed. There are disconnects between buyers and sellers regarding expected growth rates and value. We have capital to deploy and intend to deploy it.

Wonderful. Thanks so much for taking my question. I want to go a little bit more on the Xyla investment and the strategy there. Xyla, obviously, has strength in the healthcare vertical, seems like a great fit with Everyday Health. Is the strategy beyond this to work with Xyla to bring this verticalized AI to other parts of your business, or would you also work with some kind of off-the-shelf LLMs out there and integrate that with your data, allowing perhaps consumer-side people to query against it, right? How do you think about the broader generative AI strategy, especially with all these different models out there, as well as the partnership with Xyla?

It's a great question, Rishi, and you nailed it. Our intent is to work with Xyla on a verticalized basis across the company. Daniel Nadler is an incredible AI mind. The evidence is, not only is the medical AI the best medical AI in the market, it is the best AI, period. It is game-changing. We start to think about leveraging Xyla with Ookla and MOZ and RetailMeNot together. We start to get very excited. Having depth in multiple verticals with proprietary datasets and audiences makes us unique. I think it's why Xyla chose to work with us.

It's important to unpack some of the financial elements of the deal because this deal is multi-layered, and each layer interplays with the other. Not only did we invest in Xyla for reasons Vivek outlined, we aligned incentives because by using an element of our stock, Xyla's investors have become ZD investors. There is an alignment that puts the companies on a path to work together to achieve value, a vote of confidence in Ziff Davis. We view these elements of the deal as together more than the sum of the parts.

Wonderful. Thank you so much, guys.

Thank you. The next question is coming from Jon Tanwanteng from CJS Securities. Jon, your line is live.

Hi. Good morning. Just another question on Xyla. How do you evaluate the investment into it? Was it on the same metrics as you do with your traditional M&A, or was it kind of a different animal given that it's going to be more of an integration into a whole business?

Yes, it is a good question. The valuation of Xyla is a function of its last round, and our view is to consider its impact on the operating performance of our company. The ultimate value of the investment is also part of this conversation. It is both pieces where we think of Xyla as a driver of value, revenue, and earnings within the context of ZD in health and other verticals.

Okay. Great. And then, at a high level, it was great to hear that Bing data. Is there any reason to believe that might change significantly as models evolve, whereas automated content generation proliferates, number one. And then number two, have you seen any use of your data being scraped by AI companies without benefit to you, and how easy is it to find that evidence, even if it is out there?

Yes. There is evidence; many LLMs use common crawl. We are a significant data source in common crawl, not by our choice. Our data is being used, the public data, not internal MOZ data. We have clear visibility into LLMs and our public web data being used, with discussions needed with those using it without compensation. I don't think search is a destination. I think general search gets more search, and that generates more traffic and that's what we've seen. Search is a vibrant source of traffic, but there are many sources of traffic, and we continue to seek many sources. We're well aware that search algorithm changes all the time.

Got it. Great. Thank you.

Thank you, Paul. We appreciate you all joining us today for our Q2 2023 earnings call. We expect to continue our conference participation in the fall, and we'll post our plans as they become available on our Investor Relations website. And again, thanks for joining, and have a great day.

Thank you. This does conclude today's conference. You may disconnect your lines at this time and have a wonderful day. Thank you for your participation.