Earnings Call
Ziff Davis, Inc. (ZD)
Earnings Call Transcript - ZD Q2 2022
Operator, Operator
Good day, ladies and gentlemen, and welcome to Ziff Davis Second Quarter 2022 Earnings Call. My name is Paul, and I will be the operator assisting you today. At this time, all participants are in 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.
Bret Richter, CFO
Thank you. Good morning, everyone, and welcome to the Ziff Davis Investor Conference Call for Q2 2022. As the operator mentioned, I am Bret Richter, Chief Financial Officer of Ziff Davis; and I'm 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'll 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 investor@ziffdavis.com. 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 slideshow for this 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.
Vivek Shah, CEO
Thank you, Bret, and good morning, everyone. We continue to skillfully navigate the difficult and challenging operating environment with the strategy of producing near-term earnings growth, while positioning the company for an eventful macroeconomic recovery. We grew pro forma adjusted EBITDA in Q2 by 5%, a repeat of last quarter's performance, which is particularly noteworthy given the strength of last year's second quarter. Remember, Ziff Davis grew its revenues in Q2 2021 by 42%, making it one of the biggest growth quarters in our company's history. We also posted 12% adjusted non-GAAP pro forma EPS growth in Q2 2022, which was clearly ahead of our expectations. Our company has always been bottom-line-oriented, but it's at times like these that we are particularly adept at margin management. In fact, while our revised guidance lowers the midpoint of estimated revenues for the year, we're maintaining the midpoint of our adjusted EPS estimate of $6.67. Advertising revenues declined 5% in Q2, which is consistent with the 4% decline we saw in Q1. As we said last quarter, we expected to see a continuation of the pressures in the ad market, while also lapping last year's very strong revenues. While we increased the number of advertisers year-over-year by over 100, we saw about $10,000 less in spend per advertiser reflecting, in part, a consistent reduction in budgets for many of our advertising clients. But I've also learned, in my nearly 30 years in the media business, that budgets can be restored as quickly as they are reduced. And the key to managing in this environment is to strengthen your ad products and capabilities. And that's precisely what we're doing by developing new branded content offerings, live commerce video solutions, and custom short-form videos on social platforms, to just name a few. It's also important to view our ad business by category as we're seeing different dynamics in different sectors. Our gaming businesses grew ad revenues low double digits, which continued the momentum we experienced in the first quarter, when IGN posted its best ad revenue quarter in its history. RetailMeNot was flat in the second quarter, which we take as a very positive sign given that it's being compared to a quarter last year and we're still benefiting from a strong online retail environment. Our health businesses grew ad revenues by mid-single digits in the quarter, with the direct-to-provider part of our pharma business growing double digits as our flagship MedPage property continues to shine, while our direct-to-consumer pharma and pregnancy businesses experienced a single-digit decline with some DTC pharma campaign delays and pandemic-related supply chain challenges, notably baby formula. The main drag on our ad revenue growth comes from the tech category, which saw a double-digit decrease. The tech category sits at the nexus of the issues roiling the global economy, including supply chain disruption, inflation, rising interest rates, geopolitical uncertainty, and the strengthening dollar. It's therefore not surprising that as our technology clients experience challenges, they will pare back their advertising expenditures, but we've used this as a cyclical dynamic, not a secular challenge, and continue to realize the benefits of having category diversification in our advertising business, subscription revenues by 11% in the second quarter. Our connectivity businesses, led by Ookla, and our Martech businesses, led by Moz, continue to perform well, with strong double-digit growth supported by organic growth and the benefit of acquisitions. Our Ekahau unit just launched its new Sidekick 2, a product for the next tri-band generation of Wi-Fi. We believe this will be a nice catalyst for growth in the second half of the year. Also, our Speedtest app has now been installed on over 600 million unique devices worldwide, an astonishing statistic. After two years as a virtual event, MozCon returned to being in-person in Seattle in July. MozCon is a premier search engine optimization conference convening SEO experts, data scientists, content publishers, and digital marketers from across the globe. Our Cybersecurity business continued its overhaul of its sales and marketing, including new leadership, and pivoted to a channel-first model as we look to set a foundation for future growth. It was a mid-single-digit decliner on an FX-adjusted basis in the quarter. Our organic revenues declined by 5% in the second quarter, and by 3% when adjusting for FX. We had an unusually difficult comp as our organic growth in the second quarter of 2021 was 20%, and total revenue growth was 42%. I'll also add that excluding our tech ad business and FX, we were effectively flat organically, which we view as a sign of resilience in a difficult market. Notwithstanding the organic revenue decline, we were still able to grow adjusted EBITDA by 5% and expand our adjusted EBITDA margins by 100 basis points to 35%. Most notably, our adjusted non-GAAP pro forma EPS grew by over 12% as compared with Q2 last year. With the prospects of a second-half economic recovery quickly diminishing, we have revised our guidance for the full-year. At this point, we feel we have to assume that the second half of the year will look much like Q2, with the higher end of our revised guidance contemplating a stronger Q4 given the more favorable comp that it represents. Remember, last year's Q4 was our lowest growth quarter. Given our expense management, our new midpoint assumes about 6% adjusted EBITDA growth and over 9% adjusted EPS growth. As I said at the outset, our midpoint adjusted non-GAAP EPS guidance matches that of our original guidance. All things considered, if we exit the year with that kind of bottom line growth then I think we'll be very satisfied with the manner in which we've dealt with a series of challenging headwinds. Longer-term, we feel very confident in the quality of our portfolio and the opportunities in both the advertising and subscription parts of our business. While we are currently facing advertising headwinds, pandemic-related supply chain disruptions will ease at some point. We feel that we operate in some of the most attractive advertising verticals, count some of the best companies as longtime advertisers on our properties, and offer ad and performance marketing solutions that provide clear ROI. On the subscription side, we believe that SMBs are underserved in the cybersecurity market and are also being priced out of paid media. We also believe that our broadband analytics and data are unmatched at a time when our digital world demands more connectivity and bandwidth. These needs continue to inform our strategy and expansion plan. And while we are being careful about our spending, we will continue to fund innovation and development. With $850 million of cash and investments on our balance sheet and a gross leverage ratio of 2.3 times, we continue to have a great deal of capacity to deploy capital for acquisitions. In June, we closed the acquisition of Lose It!, a weight loss and nutrition management app and food log-in database that is a top five Apple iOS app in health and fitness. It also represents our ongoing effort at building consumer, subscription, and ecommerce revenues alongside DailyOM and BabyCenter courses in our health & wellness vertical. Also, a couple of weeks ago, Ookla acquired CellRebel, a nice tuck-in that brings new datasets and data visualization capabilities to our already robust lineup of network measurement offerings. We are being very selective right now on our M&A activities believing that the best opportunities may well be in front of us. We believe we will be rewarded for our patience and discipline. Our pipeline consists of acquisitions that would fit into our existing platforms and those that would create a new one for us. We have increased our hurdle rates internally given the current market environment. And while I know there is a lot of talk about when sellers will perpetuate, we're having a number of productive conversations right now and remain optimistic about the opportunities to put our shareholders' capital to work. Let me provide you with a brief update on our ESG efforts. In March, shortly after we released Ziff Davis' inaugural ESG report, we committed to setting emissions reduction targets with a science-based targets initiative known as SPTI. SPTI is considered the gold standard of emission reduction targets and is the first step in setting a long-term net-zero goal. We are in the process of working on our strategy and targets, and plan to submit them to SPTI for validation in the coming months. We also continue to leverage our platforms to address social issues and inequities. Let me provide just one example. In 2020, our gaming business Humble Bundle launched their Black Game Developer Fund, which invests a million dollars annually in black independent game makers providing them funding and ongoing guidance around the development and marketing of their games. To date, more than 30 diverse game developers have been signed to the fund. Moreover, one of the first games to receive funding will be published by Humble games in early 2023. This success story truly embodies our approach to stakeholder capitalism and our focus on profits and purpose. With that, let me hand the call back to Bret.
Bret Richter, CFO
Thank you, Vivek. Let's discuss our financial results. Our earnings release reflects both our GAAP and non-GAAP financial results for Q2 2022. Our earnings release also reflects pro forma adjustments for the impact of various 2021 asset dispositions. Explanations for and reconciliations of these adjustments are provided in the release. As you may recall from our previous earnings calls, our U.K. Voice assets were sold in February 2021. And we completed the sale of our B2B backup business in September 2021. The results related to these divestitures are reflected in our year-to-date 2021 financials through their respective date of sale. And the results of our B2B backup business are reflected in our Q2 2021 results through its dataset. However, these divestitures do not impact the presentation of our Q2 or year-to-date 2022 results. On October 7, 2021, we completed the spin-off of Consensus. Our year-to-date and Q2 2021 GAAP income statement reflects the financial activity related to Consensus in discontinued operations. We will focus our discussion today and my commentary will primarily relate to our Q2 pro forma non-GAAP financial results from continuing operations, which exclude the contributions from the Consensus business and exclude the contributions from our domestic businesses for the portion of the Q2 2021 period that they were owned by Ziff Davis. Now let's review the summary of our quarterly financial results. We reported pro forma revenue from continuing operations of $337.4 million for the second quarter as compared with $330 million for the prior-year period, reflecting growth of 2.2%. The strength of the U.S. dollar and the decline in the value of certain foreign currencies negatively impacted this growth rate. And if the comparable 2021 currency values would apply to our 2022 Q2 results, revenue growth would have been approximately 3.8%. Pro forma adjusted EBITDA from continuing operations was $118 million for Q2 2022 as compared with $112.1 million for the prior-year period, reflecting growth of 5.3%. Our adjusted EBITDA margin for the quarter was 35%. We reported second quarter pro forma adjusted non-GAAP earnings per diluted share of $1.58. This figure reflects a 12.1% increase as compared with our Q2 2021 pro forma non-GAAP results. On slides five and six, we have provided performance summaries for our two primary sources of revenue, advertising and subscription. As you can see on slide five, and as discussed earlier by Vivek, Q2 pro forma advertising revenue declined by 5% as compared with the prior-period, however, advertising revenue has grown 8% during the last 12 months, and again, this was impacted by negative trends in the foreign currency markets. Our net advertising revenue retention and annual trailing 12 months statistic that we update quarterly was approximately 100%. Net advertising revenue retention compares advertising revenue generated by a defined group of advertisers in one trailing 12 months period to advertising revenue generated by these advertisers in the prior comparable period. As defined in this slide, in the second quarter, Ziff Davis had just over 2,000 advertisers with the average quarterly revenue per subscriber of nearly $94,000. In Q2 2022, we again reported a year-over-year increase in our number of advertisers as well as a year-over-year decline in revenue per advertiser. We experienced pullbacks and delays from a number of our large advertisers, while recent acquisitions advertisers generally had a lower spend per advertiser. Slide six depicts our subscription revenue performance. Q2 2022 pro forma subscription revenue grew 11% as compared with last year and was again negatively impacted by foreign exchange. Subscription revenues have grown 15% during the last 12 months. The table on the bottom of slide six includes subscription metrics for the last six quarters. Please note that we continue to evolve these metrics and have provided details for average quarterly revenue per subscriber and removed our prior monthly average revenue per subscriber metric. We believe this presentation compares more clearly with our quarterly subscription revenue results. And sequentially, our average monthly revenue per subscriber decreased by $6.21, to $57.64. The primary driver of this decline was the inclusion of one month of our recent acquisition, Lose It!, which is characterized by a significant number of monthly subscribers at a significantly lower average revenue than the average of our other subscription businesses. Our overall churn rate decreased 30 basis points from Q1 2022 to 2.92% with sequential improvements at both the TSE and Cyber and Martech divisions. Additionally, the company's Q2 2022 other revenues grew 45% year-over-year to $10.6 million driven by our Humble Bundle publishing business. Slide seven provides quarterly pro forma revenue growth rates delineated by organic and total revenue growth. Revenues from businesses owned for at least a full 12 months are included in organic revenue, while acquired revenues relate to businesses we've owned for less than 12 months. For the last 12 months, total revenue growth was 12%, again, in part reflecting FX headwinds, and while second quarter organic growth reflects a 5% decline or minus 3% adjusted for FX, this is compared with our 2021 second quarter during which organic growth was 20%. Turning to our balance sheet, please refer to slide eight. Our balance sheet continues to be extremely strong. As of the end of Q2 2022, we had $648 million of cash and cash equivalents and more than $200 million of short and long-term investments. We also have significant leverage capacity, both on a gross and net leverage basis. We continue to be committed to keeping gross leverage at or below three times adjusted EBITDA and we are currently well within this metric with Q2 2022 gross leverage of 2.3 times trailing 12 months adjusted EBITDA. At quarter end, our net leverage was 0.9 times and only 0.5 times if you include the value of our financial investments. During Q2 2022, we completed a complex transaction to further de-leverage our balance sheet by monetizing $2.3 million of our Consensus cloud solution shares. As we have discussed on prior calls to the extent completed prior to the first anniversary of the spin-off, we had the opportunity to monetize these shares on a tax-free basis. However, this can only be achieved through very specific transaction steps, and the tax-free monetization would require us to exchange the shares for certain outstanding Ziff Davis securities. Our ability to consider different transaction structures was further limited by our status as an affiliate of Consensus, which was primarily related to our 19.9% ownership stake. In light of these considerations, during the second quarter, we completed a successful debt-for-equity exchange transaction, resulting in Ziff Davis realizing approximately $90 million of value in respect of 2.3 million of our Consensus shares. In Q2 2022, we began to apply the value of these Consensus shares towards the repurchase of our 4.625% senior notes, a step that qualified as a key element of the tax-free monetization. As of the end of the second quarter, we deployed $18.2 million of this value to retire $21.5 million of principal value of our senior notes. Through the beginning of August, we applied an additional $71.5 million of this value towards these repurchases, retiring an additional $80 million of the senior notes. We believe the repurchases of these notes at a discount to par reflects an accretive transaction for the company, reducing our gross leverage and future cash interest expense while providing us with additional financial flexibility. We are operating in a challenging macroeconomic environment, and we will continue to prioritize the health of our balance sheet. However, we believe we have the flexibility to continue to pursue various capital allocation alternatives in an effort to enhance shareholder value. To this end, during Q2 2022, we deployed nearly $13 million of cash to repurchase approximately 182,000 shares of our common stock at an average price of less than $70. As a result of these various transactions thus far in 2022, we have deployed capital to repurchase approximately $156 million par value of our 4.625% senior notes and more than $71 million of our common shares. Turning to guidance, as Vivek noted, we are revising the 2022 guidance range that we presented in February. And if you refer to slide 10, the details of this revised range are presented. Our revised guidance primarily reflects our recognition that macroeconomic pressures will more than likely persist through the balance of 2022. The new midpoint of our guidance reflects reductions of approximately 6% in revenue and adjusted non-GAAP EBITDA. However, this midpoint also reflects our expectation of maintaining the midpoint of our original adjusted non-GAAP EPS guidance despite our lower adjusted non-GAAP EBITDA expectation. This is attributable to a number of factors including higher year-to-date other income, lower year-to-date capital expenditures, lower interest expense, reflecting our year-to-date bond repurchases, a lower effective tax rate, and a lower fully diluted share count than initially anticipated. We believe that this expectation of strong year-over-year earnings growth is notable given all the factors we have discussed today. Following our business outlook slides are our supplemental materials including reconciliation statements for the various non-GAAP measures to their nearest GAAP equivalent. This section includes GAAP reconciliation on slide 13 that reflects free cash flow from continuing operations. Our Q2 2022 year-to-date free cash flow was $138.6 million. This slide also reflects the company's free cash flow from continuing and discontinued operations for the six months ending June 30, 2021. Please note that this figure reflects contributions from both the recently disposed B2B backup and U.K. Voice assets through their disposal dates as well as Consensus and as a result is not comparable to our current continuing operations. Overall, we are pleased with our Q2 2022 performance having achieved growth in a number of key financial metrics in a challenging environment. And while we anticipate that the business environment is likely to remain challenging, we are looking forward to the balance of 2022.
Operator, Operator
And with that, I would now ask the operator to join us and instruct you on how to queue for questions. Thank you. We will now be conducting a question-and-answer session. In the interest of time, we ask that you please limit yourself to one question. The first question is coming from Shyam Patil from Susquehanna. Shyam, your line is live.
Shyam Patil, Analyst
Hey, guys, thank you. I had a couple of questions. Vivek, in your prepared remarks, you talked about strengthening ad products, and you gave a few areas where you guys are doing that. I was wondering if you could just talk about that a bit more, maybe some specifics around exactly what you guys are doing in those areas. And then on M&A, I know it's always hard to time deals, and you guys always have a very robust pipeline, but I'm just curious, do you think that you'll be able to deploy more capital, say, over the next 12 months than you would have otherwise been able to do in a better macro, just curious on kind of how you see the ability to close deals with asset price volatility? Thank you.
Vivek Shah, CEO
Good morning, Shyam, and thank you for your question. I'll begin with your inquiry regarding the advertising business. I want to emphasize that we are witnessing strong growth across several categories. The gaming and health sectors remain robust, and we're pleased with RetailMeNot's stability. However, we are facing challenges primarily in the technology vertical due to cyclical issues. Notably, while our display advertising is growing, the performance marketing segment, particularly impacted by the tech sector, has experienced some declines. Despite this, we are focusing on developing our performance marketing solutions because, ultimately, return on ad spend and investment are crucial for our advertising business and our brand. We plan to enhance our performance marketing solutions, especially by integrating video, which has traditionally been tech-focused. This is the time to strengthen our capabilities. Regarding M&A, I want to point out that year-to-date, our capital deployment is on par with last year's, reflecting our continued activity in this area. As I highlighted earlier, we’re enthusiastic about what Lose It! and CellRebel contribute strategically to our operations. We target acquisitions across seven platforms: technology, shopping, connectivity, gaming, health, cybersecurity, and Martech. All these platforms are actively pursuing clear acquisition targets. Additionally, we continuously look for new platforms at the corporate level. The overall activity is strong, and we feel well-capitalized. For the past decade, we've been reacting to the market, but now we're sensing a shift, with the market moving towards us. While it's difficult to predict the exact timing for capital deployment, we are seeing increased activity and a positive shift in tone, which excites us. We have built our company over the last ten years in a challenging market for buyers, and we believe a rotation is currently occurring. We're eager to enhance our earnings growth, strengthen our balance sheet, and utilize it effectively.
Shyam Patil, Analyst
Thank you.
Operator, Operator
Thank you. And the next question is coming from Rishi Jaluria from RBC. Rishi, your line is live.
Rishi Jaluria, Analyst
Wonderful, thanks, guys, for taking my questions. Just wanted to maybe ask about Moz and drill a little bit more into that; Vivek, we were just at MozCon a couple weeks ago, and I think the big thing that surprised me is just the size of some of the customers there, I mean there were some really big customers that were using Moz and seem to really love the product. Can you maybe talk a little bit about how the Moz business, specifically, is doing, and how we should be thinking about that business going forward, especially just given how competitive this market is? And then, maybe just for Bret, in terms of the macro assumptions in guidance, are you assuming things kind of stay the same as they are right now, or are you assuming that there's further macro deterioration? I mean, we just saw the inflation print this morning, obviously not very pretty, so it seems to think that macro might get worse from here. Maybe if you could just help put a little bit of a finer point on the assumptions that would be helpful? Thank you, guys.
Vivek Shah, CEO
Rishi, thank you for the questions, and thank you for attending MozCon. And it's often great to see these things in person to get a real sense of the power of the brands we operate and the community's embrace of those brands. And I think that's what you saw in Seattle. It's interesting with Moz, when we acquired Moz we knew we had a company in a very important space, search engine optimization that had a really storied position but, as a business, wasn't really delivering any profitability. And as we often do in situations like that, our immediate focus was how do we extract margin, how do we extract earnings from the business. And that was job one, which has been accomplished and done. And the trick with doing that is, obviously, not damaging the brand itself, and not damaging what makes it attractive to the marketplace. And that was done as well. And you saw that live and in person, the Moz brand is as strong as it's ever been. We think the SEO space has room for multiple players, there are multiple good solutions in this space including Moz. We continue to believe that it will continue to grow and is growing for us organically with margin expansion, and will grow across the enterprise, for sure, which we have our stat product, but we do have a fair amount of SMB customer base as well that you may not see at the MozCon. MozCon typically attracts larger companies, but we have a fairly robust small and medium enterprise portion of the business. So, we like where we are in SEO. And I'd be remiss to not also add email, because I think email and SEO are both earned media. And I think the distinction between earned and paid media is simply this; particularly for SMB, is they're getting priced out of paid search, they're getting priced out of social; those platforms are becoming harder and harder for them to extract ROI. But email, building a list, getting into the inbox, SEO, building natural search ranking is a far more efficient, possibly controllable way for SMBs to drive customer acquisition. So, I think the combination of those businesses, which form most of the Moz group we're excited for. And we think, particularly in a market like this where there may be a lot of focus on expenditure, particularly on the marketing side, efficient marketing technology software may be the choice for customers.
Bret Richter, CFO
Great, thank you, Rishi. I guess the way I'd characterize how we think about it is with a number of points. First of all, when we spoke in May, we highlighted the fact that we saw a lot of pressure in the first quarter. And even at that time, we anticipated seeing some of that pressure in the second quarter. But the back half of our year was a little bit more optimistic, looking toward stabilization, if not some improvement. I think the most significant factor in us revising our guidance is that we are not expecting stabilization in the second half. And while our guidance reflects a range which, by its very nature, provides some room for certain factors being variable, we're also not projecting a significant further downturn from here. That said, Q3, Q4 is a relatively short period, it's about six months. In putting this together, we have noted 90 more days of performance data, we've had significantly more customer dialogues, we've observed behavioral changes from certain of our customers and seeing some delays and pullbacks. We've gotten some positive indications for late in the year. Of course, tying that to our first-half dialogues, where we had some positive indications and those indications changed have to be a consideration. But in revising this guidance, we created a range that we think we can perform within and we're comfortable with the guidance we put forward.
Rishi Jaluria, Analyst
All right, that's really helpful. Thank you, guys.
Operator, Operator
Thank you. And the next question is coming from Will Power from Baird. Will, your line is live.
Will Power, Analyst
Okay, great. Yes, no, a couple of questions. First one probably for Vivek, I mean it's great to get some of the breakdown within advertising, and nice to see some of it strengthen in healthcare, and gaming, in particular. I'd love to get your perspective on visibility into the second half of the year for those particular verticals. I know, normally, you have good lead times within pharma, but those areas where you think you can continue to grow, maybe even double digits in the second half. So, just any more color or confidence on what you're going to see there would be great.
Vivek Shah, CEO
It can be challenging to analyze each category since there are various dynamics at play. However, I can say that the comparisons from last year are becoming more favorable. Last year's second quarter saw exceptional performance with a 42% overall revenue growth and 20% organic growth. When considering a two-year perspective, things start to align better. Specifically, in the second half, particularly in Q4, we should remember that organic growth in Q4 last year was just 2%, so we anticipate a more favorable comparison this time. If retail environments improve, we could see an increase there as well. We believe that some supply chain issues, especially in hardware, consumer electronics, and devices, which have impacted our tech business, should start to ease. Additionally, challenges related to baby formula and delays in direct-to-consumer pharmaceuticals could also become less pressing. Regarding gaming, the timing of game releases is crucial, and it appears that Q4 will be busier than Q3 in terms of launches, which are closely tied to gaming and theatrical film releases. Thus, I don't want to give a definitive answer about gaming trends specifically between Q3 and Q4. Ultimately, much depends on how our clients decide to proceed in the short term. If they continue to focus on cost-cutting and short-term goals, there isn't much we can influence. That's the reality we face. Nonetheless, we are preparing for that possibility while still aiming to generate earnings and cash flow, strengthen our balance sheet, and look for M&A opportunities, as this cyclical situation affects others too; many may struggle to cope in the same way we can.
Will Power, Analyst
Okay, that's helpful. For my second question, regarding the subscription business, it seems like you're still seeing strength in Ookla and Moz, among other areas. I'm curious about the macro perspective across your subscription portfolio. Are there specific areas that are facing negative impacts? Also, when considering the decline in ARPU for subscriptions, I may have missed it in your prepared remarks. Was there a shift in the mix, or is there anything specific you can highlight regarding that change in ARPU?
Vivek Shah, CEO
I'll let Bret take ARPU in a second, but to answer your question on the macroeconomic pressures or dynamics on the subscription business. We're not seeing that as much to be honest with you. So, as I've said, we've had a number of our subscription businesses continue to perform well. And I would say that the business where we are not seeing growth, which is in our Cybersecurity suite of subscription offerings, I view those as micro issues. And I believe that we are on a path to addressing those issues, which I've talked about in the past, which are sales and marketing issues and shifting to a channel-first approach. And then some issues on the consumer VPN piece of this and some of the competitive realities, but a lot of those again I think is how we can execute, how we can run these businesses for both growth and profitability, shift to a more balanced approach. Historically, it's been profit, profit, profit, and not a lot of focus on growth. They are very sticky, by the way, particularly on the B2B cybersecurity part of the business. We don't really lose customers, but we are not winning customers. And we need to orient ourselves to doing exactly that. So, I would not characterize at this moment the subscription business feeling the macroeconomic pressures that the advertising businesses are. I wouldn't characterize that; doesn't mean it can't happen, but I think right now we are seeing the issues there as more micro on the ARPU.
Bret Richter, CFO
Yes, and well, on ARPU we did make a comment in our prepared remarks, but I definitely think it's worth repeating. So, I appreciate the question. In both our advertising and our subscription metrics, these metrics are an attempt to reflect the business in three kinds of keys ways; the customers we serve, the revenue they produce, and the retention rates that we can track. That's a positive. What's challenging in reporting these metrics quarter-to-quarter is that a business that's focused on and partly driven by M&A in its DNA, using our capital to grow the business through M&A in addition to organically, these metrics are often at risk of an impact. Earlier this year, we did an acquisition in our health & wellness business lifecycle marketing which was characterized by a higher number of advertisers per advertising dollar at a lower spend per advertiser and that impacted those metrics on our last call. This quarter we closed an acquisition also in health & wellness for a company called Lose It!, which is characterized by a high number of customers at a single-digit average revenue per month. So, again, you see a quarter by quarter change in this trend that's more impacted by M&A than by almost any other activity in the business. There are certain other activities in the business which certain of our sectors contributing more contributing less in any given quarter in these metrics and we did highlight some of that in our prepared remarks, but I would just caution if not ask to focus quarter to quarter that these metrics can be impacted by our M&A activity.
Will Power, Analyst
Yes, that's helpful. Thank you.
Operator, Operator
Thank you. The next question is coming from Joe Goodwin from JMP Securities. Joe, your line is live.
Joe Goodwin, Analyst
Thank you for taking my questions. Vivek, regarding the cybersecurity business, I know you have been implementing changes over the past two to three quarters. Are you starting to see any positive results or highlights from these efforts?
Vivek Shah, CEO
Yes, we definitely are. First, I want to mention that we are launching an endpoint detection and response solution for our customers. EDR is widely adopted in large enterprises but not as much in small and medium-sized businesses. We believe this will help us capture more business and increase our share of wallet. The product is currently in beta, and we plan to fully launch it in January 2023, which we are excited about. Additionally, our advanced email security product is highly competitive and offers strong protection against phishing, malware, and other threats. We've also added important features with advanced analytics. Inspired eLearning, which focuses on security awareness training, will support 17 languages by the end of the year, aiding our multinational customers and expansion outside the U.S. There’s a lot happening on the product side that we’re enthusiastic about. We are also undergoing a complete overhaul of our sales and marketing organization. We have a strong leader focused on channel sales, which we view as a significant opportunity. Our new chief revenue officer and his team have made key hires, and we feel confident about our channel-first strategy. While there are challenges, building a subscription business takes time. We are optimistic about where we can go next year. It's a scalable business with strong profitability, and we need to ensure it is on a growth trajectory, as this will greatly enhance its valuation profile.
Joe Goodwin, Analyst
Thank you for that. Vivek, where are you currently focusing the majority of your efforts in the business? Are you looking into mergers and acquisitions, or what would you say is your primary area of focus?
Vivek Shah, CEO
Look, I'm focused on all of it, right. So, there's obviously managing the existing business and generating the kind of earnings growth that that we experienced in this quarter, and the kind of earnings and growth that we are guiding to for the year, 9% EPS growth doesn't just happen in an environment like this with the pressures we have. So, I think there's a fair amount of time managing these businesses and working with our leadership teams in the business units to make sure that they can both perform from a bottom line point of view, but really set themselves up nicely for an eventual recovery. That is a critical part of my time and I think the organization's time. At the same time, and we view this as part of what we do is the acquisition program and being involved as I always am, and always has been around all the activity that's going on. So, that's not new, and certainly gleaning into that. And then, the last piece, I would just say is that continuing to look for talent to bring into the organization, not everyone is as well positioned as we are. This is an opportunity for us to bring talent into our company. And we've done it in a few places. We're going to continue to do it. We have a great new Head of our shopping business. As I said, we have a great new Chief Revenue Officer within the Viper Cybersecurity group. So, we're going to continue to look for great leadership.
Joe Goodwin, Analyst
Great. Thank you.
Operator, Operator
Thank you. The next question is coming from Jon Tanwanteng from CJS Securities. Jon, your line is live.
Stefanos Crist, Analyst
Hey, good morning. This is Stefanos Crist calling in for Jon, thanks for taking our questions. Just a quick one, can you just give us the underlying share count assumptions in your guidance and if that includes share repurchases?
Vivek Shah, CEO
Sure. On a go-forward basis, through the back end of the year, share repurchases is absolutely a potential allocation of capital, but we don't project share repurchases into the figures that we're using for our guidance. We repurchased shares through the second quarter, we talked about that our scripting and gave the numbers, we have capital to allocate towards that. The other thing I would just point to is that if you're doing math, relating the balance of this year to 2021, there was activity in the third quarter of 2021, when we retired our 3.25% convert. So, just make sure we pay attention to that bridge between that share count and the current share count, but looking at fully diluted shares as they stand today would be at least our baseline assumption through the back half of the year pending further allocation of capital towards that pool.
Stefanos Crist, Analyst
Perfect. Thanks so much.
Operator, Operator
Thank you. And the next question is coming from Shane O'Brien from William Blair. Shane, your line is live.
Jim Breen, Analyst
Thanks. Not quite the name, but close enough. Can you guys talk about the cash flow dynamics here, obviously, year-to-date were down almost $100 million year-over-year? How do you think about that the back half of the year and sort of what are the biggest factors there? Thanks.
Vivek Shah, CEO
Okay, that's a great question. And thank you for giving us the opportunity to highlight this because it's important. Our 2021 cash flow statement does not reflect the split between continuing and discontinued operations and does not reflect the pro forma effect of the absence of the business that we disposed of in 2021. So, in looking at that comparison, we're comparing effectively two different businesses. We do provide some incremental disclosures on 2021, but that is not a continuing Op, so that cash flow includes Consensus's cash flow. We've actually had strong cash flow year-to-date on a conversion basis. We've tried to highlight on these calls that we look at cash flow over the longer-term, at least a 12-month period. In any given 90-day period, there're impacts of specific elements but more importantly, the timing of working capital. We're not a company that looks to make sure that payments and receipts are balanced on the last day of the quarter, if checks go out or in between the 31st and the first of the next month, it'll impact our quarterly cash flow. So, I think it's important to take a 12-month view, but not compare to the 2021 results, which reflect businesses we no longer own.
Jim Breen, Analyst
Great. So, at the current run rate you are around 280, that seemed like a fair assessment for cash flow, EBITDA somewhere high 200s?
Vivek Shah, CEO
Now, again, we don't guide to a specific cash flow metric, and cash flow is timing-sensitive, we were essentially targeting this company to reach on the order of a 60% conversion rate to EBITDA, but likely a little bit below that at this time. And cash flow tends to be weighted to the first quarter is very big, given the fact that there's seasonality in our fourth-quarter cash flow. So, the fact that there's, I'm sorry, there's seasonality in our fourth-quarter revenue, which is collected in the first quarter with regards to cash flow. So, multiplying that number by two would not necessarily factor in the seasonal dynamics of this aspect of our business.
Jim Breen, Analyst
Perfect, thanks.
Operator, Operator
Thank you. And there are no other questions in the queue at this time. I would now like to hand the call back to Bret Richter for any closing remarks.
Bret Richter, CFO
Great, thank you very much, Paul. We appreciate you all joining us today for our Q2 2022 earnings call. We also appreciate this a pretty busy day in the earnings market. So, thank you for your attention. We plan to issue a press release next week regarding investment conferences. We plan to participate in during the month of September. And as always, we hope to see some of you there. Thank you, and have a great rest of the day.
Operator, Operator
Thank you, ladies and gentlemen. This does conclude today's conference. You may disconnect your lines at this time and have a wonderful day. Thank you for your participation.