Ziff Davis, Inc 10-Q for FY2023 Q2

Ziff Davis, Inc. (ZD)

10-Q 2023-08-04 For: 2023-06-30

Added on April 09, 2026

About this 10-Q

Ziff Davis, Inc filed this 10-Q on August 4, 2023, covering the quarter ended June 30, 2023 (FY2023 Q2).

Headline figures

Quarter ended June 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $326.02M; down 3.4% from $337.36M a year earlier
Net income: $16.68M; compared with a net loss of $46.44M a year earlier
Diluted EPS: $0.36; compared with -$0.99 a year earlier

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Delaware			47-1053457
(State or other jurisdiction			(I.R.S. Employer
of incorporation or organization)			Identification No.)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	ZD	Nasdaq Stock Market LLC


			PAGE

PART I.	FINANCIAL INFORMATION

	Item 1.	Financial Statements
		Condensed Consolidated Balance Sheets (Unaudited)	3
		Condensed Consolidated Statements of Operations (Unaudited)	4
		Condensed Consolidated Statements of Comprehensive (Loss) Income (Unaudited)	5
		Condensed Consolidated Statements of Cash Flows (Unaudited)	6
		Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)	7
		Notes to Condensed Consolidated Financial Statements (Unaudited)	9

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	40

	Item 4.	Controls and Procedures	41


PART II.	OTHER INFORMATION

	Item 1.	Legal Proceedings	42

	Item 1A.	Risk Factors	42

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	42

	Item 3.	Defaults Upon Senior Securities	43

	Item 4.	Mine Safety Disclosures	43

	Item 5.	Other Information	43

	Item 6.	Exhibits	44

		Signatures	45


	June 30, 2023		December 31, 2022
ASSETS
Cash and cash equivalents	$	679,090	$	652,793

Short-term investments	35,816		58,421
Accounts receivable, net of allowances of $7,511 and $6,868, respectively	285,909		304,739
Prepaid expenses and other current assets	74,044		68,319

Total current assets	1,074,859		1,084,272
Long-term investments	114,356		127,871
Property and equipment, net of accumulated depreciation of $296,223 and $255,586, respectively	192,380		178,184

Intangible assets, net	401,639		462,815


Goodwill	1,599,896		1,591,474

Deferred income taxes	8,561		8,523
Other assets	77,598		80,131
TOTAL ASSETS	$	3,469,289	$	3,533,270
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable	$	127,145	$	120,829
Accrued employee related costs	33,659		42,178
Other accrued liabilities	52,702		39,539
Income taxes payable, current	11,052		19,712
Deferred revenue, current	188,725		187,904






Other current liabilities	22,760		22,286
Total current liabilities	436,043		432,448
Long-term debt	1,000,178		999,053
Deferred revenue, noncurrent	8,303		9,103


Income taxes payable, noncurrent	8,486		11,675

Deferred income taxes	58,198		79,007
Other long-term liabilities	95,399		109,373
TOTAL LIABILITIES	1,606,607		1,640,659
Commitments and contingencies (Note 8)
Preferred stock, $0.01 par value. Authorized 1,000,000 and none issued	—		—
Preferred stock - Series A, $0.01 par value. Authorized 6,000; total issued and outstanding zero	—		—
Preferred stock - Series B, $0.01 par value. Authorized 20,000; total issued and outstanding zero	—		—
Common stock, $0.01 par value. Authorized 95,000,000; total issued and outstanding 46,402,143 and 47,269,446 shares at June 30, 2023 and December 31, 2022, respectively.	464		473
Additional paid-in capital	448,920		439,681
Treasury stock, at cost (zero and zero shares, at June 30, 2023 and December 31, 2022, respectively).	—		—
Retained earnings	1,492,879		1,537,830
Accumulated other comprehensive loss	(79,581)		(85,373)
TOTAL STOCKHOLDERS’ EQUITY	1,862,682		1,892,611
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	3,469,289	$	3,533,270


	Three months ended June 30,				Six months ended June 30,
	2023		2022		2023		2022
Total revenues	$	326,016	$	337,356	$	633,158	$	652,424
Operating costs and expenses:
Cost of revenues	47,421		46,004		93,151		92,104


Sales and marketing	119,934		123,777		235,854		241,539
Research, development, and engineering	17,817		19,721		35,731		38,148
General and administrative	101,949		101,967		203,212		204,184

Total operating costs and expenses	287,121		291,469		567,948		575,975
Income from operations	38,895		45,887		65,210		76,449
Interest expense, net	(10,483)		(9,569)		(14,963)		(19,859)

Gain on debt extinguishment, net	—		2,613		—		1,393

Unrealized loss on short-term investments held at the reporting date, net	(3,196)		(27,317)		(23,541)		(18,366)
(Loss) gain on investments, net	—		(48,243)		357		(48,243)
Other (loss) income, net	(1,503)		6,345		(2,411)		8,744
Income (loss) before income taxes and loss from equity method investment, net	23,713		(30,284)		24,652		118
Income tax expense	(6,461)		(10,051)		(5,845)		(15,131)
Loss from equity method investment, net	(573)		(6,101)		(9,755)		(6,886)
Net income (loss)	$	16,679	$	(46,436)	$	9,052	$	(21,899)







Net income (loss) per common share:
Basic	$	0.36	$	(0.99)	$	0.19	$	(0.47)
Diluted	$	0.36	$	(0.99)	$	0.19	$	(0.47)
Weighted average shares outstanding:
Basic	46,798,800		46,978,709		46,892,504		47,016,351
Diluted	46,798,800		46,978,709		46,892,504		47,016,351


	Six months ended June 30,
Cash flows from operating activities:	2023		2022
Net income (loss)	$	9,052	$	(21,899)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	111,479		118,943
Non-cash operating lease costs	5,924		5,913
Share-based compensation	17,619		14,420
Provision for credit losses on accounts receivable	1,819		(1,376)
Deferred income taxes, net	(18,330)		(10,266)
Gain on extinguishment of debt	—		(1,393)



Loss from equity method investments	9,755		6,886
Unrealized loss on short-term investments held at the reporting date, net	23,541		18,366
(Gain) loss on investments, net	(357)		48,243
Other	3,834		2,106
Decrease (increase) in:
Accounts receivable (includes $0 and $8,351 with related parties)	20,470		77,168
Prepaid expenses and other current assets	(13,038)		5,804
Other assets	(4,030)		(4,990)
Increase (decrease) in:
Accounts payable	(1,332)		(36,504)
Deferred revenue	(1,777)		(11,882)
Accrued liabilities and other current liabilities	(9,594)		(17,055)


Net cash provided by operating activities	155,035		192,484
Cash flows from investing activities:
Purchases of property and equipment	(55,250)		(53,876)
Acquisition of businesses, net of cash received	(9,492)		(92,425)

Investment in available-for-sale securities	—		(15,000)



Proceeds from sale of equity investments	3,174		—


Other	(3,753)		—


Net cash used in investing activities	(65,321)		(161,301)
Cash flows from financing activities:

Payment of debt	—		(72,853)


Proceeds from term loan	—		89,991
Debt extinguishment costs	—		(756)

Repurchase of common stock	(62,678)		(76,345)
Issuance of common stock under employee stock purchase plan	4,724		5,235
Proceeds from exercise of stock options	—		148
Deferred payments for acquisitions	(6,679)		(7,094)
Other	21		(5)


Net cash used in financing activities	(64,612)		(61,679)
Effect of exchange rate changes on cash and cash equivalents	1,195		(16,056)
Net change in cash and cash equivalents	26,297		(46,552)
Cash and cash equivalents at beginning of period	652,793		694,842


Cash and cash equivalents at end of period	$	679,090	$	648,290


	Three months ended June 30, 2023
											Accumulated
	Common stock			Additional paid-in		Treasury stock			Retained		other comprehensive		Total Stockholders’
	Shares	Amount		capital		Shares	Amount		earnings		loss		Equity
Balance, April 1, 2023	47,286,093	$	473	$	444,813	—	$	—	$	1,530,665	$	(81,336)	$	1,894,615
Net income	—	—		—		—	—		16,679		—		16,679
Other comprehensive loss, net of tax expense of $239	—	—		—		—	—		—		1,755		1,755

Issuance of restricted stock, net	9,370	—		(430)		—	—		73		—		(357)
Issuance of shares under employee stock purchase plan	87,098	1		4,724		—	—		—		—		4,725
Repurchase of common stock	—	—		—		980,418	(63,900)		—		—		(63,900)
Retirement of common stock	(980,418)	(10)		(9,353)		(980,418)	63,900		(54,537)		—		—
Share-based compensation	—	—		9,217		—	—		—		—		9,217
Other, net	—	—		(51)		—	—		(1)		—		(52)
Balance, June 30, 2023	46,402,143	$	464	$	448,920	—	—		$	1,492,879	$	(79,581)	$	1,862,682


	Three months ended June 30, 2022
											Accumulated
	Common stock			Additional paid-in		Treasury stock			Retained		other comprehensive		Total Stockholders’
	Shares	Amount		capital		Shares	Amount		earnings		loss		Equity
Balance, April 1, 2022	46,952,300	$	470	$	415,653	—	$	—	$	1,508,802	$	(59,431)	$	1,865,494
Net loss	—	—		—		—	—		(46,436)		—		(46,436)
Other comprehensive loss, net of tax expense of zero	—	—		—		—	—		—		(24,265)		(24,265)
Issuance of restricted stock, net	354,407	3		(3)		—	—		—		—		—
Issuance of shares under employee stock purchase plan	76,741	1		5,234		—	—		—		—		5,235

Repurchase of common stock	—	—		—		182,247	(12,652)		—		—		(12,652)
Retirement of common stock	(192,111)	(2)		(2,483)		(182,247)	12,652		(11,050)		—		(883)
Share-based compensation	—	—		7,703		—	—		—		—		7,703
Balance, June 30, 2022	47,191,337	$	472	$	426,104	—	—		$	1,451,316	$	(83,696)	$	1,794,196


	Six months ended June 30, 2023
											Accumulated
	Common stock			Additional paid-in		Treasury stock			Retained		other comprehensive		Total Stockholders’
	Shares	Amount		capital		Shares	Amount		earnings		loss		Equity
Balance, January 1, 2023	47,269,446	$	473	$	439,681	—	$	—	$	1,537,830	$	(85,373)	$	1,892,611
Net income	—	—		—		—	—		9,052		—		9,052
Other comprehensive loss, net of tax expense of $130	—	—		—		—	—		—		5,792		5,792

Issuance of restricted stock, net	26,017	—		(3,766)		—	—		534		—		(3,232)
Issuance of shares under employee stock purchase plan	87,098	1		4,724		—	—		—		—		4,725
Repurchase of common stock	—	—		—		980,418	(63,900)		—		—		(63,900)
Retirement of common stock	(980,418)	(10)		(9,353)		(980,418)	63,900		(54,537)		—		—
Share-based compensation	—	—		17,619		—	—		—		—		17,619
Other, net	—	—		15		—	—		—		—		15
Balance, June 30, 2023	46,402,143	$	464	$	448,920	—	—		$	1,492,879	$	(79,581)	$	1,862,682


	Six months ended June 30, 2022
												Accumulated
	Common stock			Additional paid-in		Treasury stock				Retained		other comprehensive		Total Stockholders’
	Shares	Amount		capital		Shares		Amount		earnings		loss		Equity
Balance, January 1, 2022	47,440,137	$	474	$	509,122	$	—	$	—	$	1,515,358	$	(57,222)	$	1,967,732
Reclassification of the equity component of 1.75% Convertible Notes to liability upon adoption of ASU 2020-06	—	—		(88,137)		—		—		23,436		—		(64,701)
Net loss	—	—		—		—		—		(21,899)		—		(21,899)
Other comprehensive loss, net of tax expense of zero	—	—		—		—		—		—		(30,530)		(30,530)
Issuance of restricted stock, net	455,792	4		(4)		—		—		—		—		—
Issuance of shares under employee stock purchase plan	76,741	1		5,234		—		—		—		—		5,235

Repurchase of common stock	—	—		—		736,536		(71,337)		—		—		(71,337)
Retirement of common stock	(786,772)	(7)		(14,663)		(736,536)		71,337		(61,675)		—		(5,008)
Share-based compensation	—	—		14,420		—		—		—		—		14,420
Exercise of stock options	5,439	—		148		—		—		—		—		148

Other, net	—	—		(16)		—		—		(3,904)		4,056		136
Balance, June 30, 2022	47,191,337	$	472	$	426,104	$	—	$	—	$	1,451,316	$	(83,696)	$	1,794,196


Assets and Liabilities	Valuation
Accounts receivable	$	6,703
Prepaid expenses and other current assets	897
Property and equipment	370

Trade names	11,902
Customer relationships	22,170

Other intangibles	16,830
Goodwill	81,725
Other long-term assets	11

Accounts payable and accrued expenses	(3,383)

Deferred revenue	(19,274)






Deferred tax liability	(10,485)
Other long-term liabilities	(326)
Total	$	107,140


	Three months ended June 30, 2022		Six months ended June 30, 2022

	(unaudited)		(unaudited)
Revenues	$	343,275	$	668,309
Net income	$	(46,300)	$	(21,543)
Income per common share - Basic	$	(0.99)	$	(0.46)
Income per common share - Diluted	$	(0.99)	$	(0.46)


			§			Level 1 – Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

			§			Level 2 – Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

			§			Level 3 – Unobservable inputs which are supported by little or no market activity.


June 30, 2023	Level 1		Level 2		Level 3		Fair Value		Carrying Value
Assets:
Cash equivalents:
Money market and other funds	$	304,914	$	—	$	—	$	304,914	$	304,914



Short-term investments:
Certificates of deposit	—		3,753		—		3,753		3,753




Consensus common stock	32,063		—		—		32,063		32,063
Long-term investments:
Investment in corporate debt securities	—		—		15,067		15,067		15,067
Total assets measured at fair value	$	336,977	$	3,753	$	15,067	$	355,797	$	355,797

Liabilities:
Contingent consideration	$	—	$	—	$	3,389	$	3,389	$	3,389
Debt:
4.625% Senior Notes	399,658		—		—		399,658		456,596
1.75% Convertible Notes	515,625		—		—		515,625		543,582
Total liabilities measured at fair value	$	915,283	$	—	$	3,389	$	918,672	$	1,003,567


	Digital Media		Cybersecurity and Martech		Consolidated
Balance as of January 1, 2023	$	1,065,989	$	525,485	$	1,591,474
Goodwill acquired (Note 3)	6,555		—		6,555


Purchase accounting adjustments (1)	(72)		—		(72)

Foreign exchange translation	247		1,692		1,939
Balance as of June 30, 2023	$	1,072,719	$	527,177	$	1,599,896


	Three months ended June 30,				Six months ended June 30,
	2023		2022		2023		2022
Digital Media
Advertising	$	175,083	$	189,198	$	331,165	$	359,265
Subscription	68,161		58,901		137,309		114,477
Other	9,626		10,601		18,607		19,785
Total Digital Media revenues	$	252,870	$	258,700	$	487,081	$	493,527

Cybersecurity and Martech
Subscription	$	73,196	$	78,910	$	146,212	$	159,404

Total Cybersecurity and Martech revenues	$	73,196	$	78,910	$	146,212	$	159,404


Elimination of inter-segment revenues	(50)		(254)		(135)		(507)
Total Revenues	$	326,016	$	337,356	$	633,158	$	652,424

Timing of revenue recognition
Point in time	$	11,661	$	9,202	$	23,182	$	18,185
Over time	314,355		328,154		609,976		634,239
Total	$	326,016	$	337,356	$	633,158	$	652,424


	Weighted-Average Amortization Period	Historical Cost		Accumulated Amortization		Net
Trade names	10 years	$	263,700	$	137,103	$	126,597
Customer relationships (1)	8 years	692,399		516,458		175,941
Other purchased intangibles	9 years	478,282		379,181		99,101
Total		$	1,434,381	$	1,032,742	$	401,639


	Weighted-Average Amortization Period	Historical Cost		Accumulated Amortization		Net
Trade names	10 years	$	261,614	$	125,422	$	136,192
Customer relationships (1)	8 years	687,798		479,741		208,057
Other purchased intangibles	8 years	481,973		363,407		118,566
Total		$	1,431,385	$	968,570	$	462,815


	June 30, 2023			June 30, 2022
Underlying stock price at valuation date	$	77.80		$	99.32
Expected volatility	32.0		%	36.7		%
Risk-free interest rate	4.1		%	1.8		%


	Three months ended June 30, 2022		Six months ended June 30, 2022
Principal repurchased	$	21,494	$	76,103
Aggregate purchase price	$	18,245	$	73,610
Gain on repurchase (1)	$	3,069	$	1,849


	June 30, 2023		December 31, 2022
Principal amount of 1.75% Convertible Notes	$	550,000	$	550,000
Less: Carrying amount of debt issuance costs	(6,418)		(7,347)
Net carrying amount of 1.75% Convertible Notes	$	543,582	$	542,653


	Shares	Weighted-Average Grant-Date Fair Value
Nonvested at January 1, 2023	311,281	$	59.90

Vested	(47,484)	$	78.37

Nonvested at June 30, 2023	263,797	$	57.71


	Number of Shares	Weighted-Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value
Outstanding at January 1, 2023	464,354
Granted	458,765
Vested	(67,892)
Canceled	(5,401)
Outstanding at June 30, 2023	849,826	3.2	$	59,538,810
Vested and expected to vest at June 30, 2023	710,196	2.9	$	49,756,330


	Unrealized Gains (Losses) on Investments		Foreign Currency Translation		Total
Balance as of April 1, 2023	$	765	$	(82,101)	$	(81,336)
Other comprehensive income	(713)		2,468		1,755


Balance as of June 30, 2023	$	52	$	(79,633)	$	(79,581)


	Three months ended June 30,
	2023	2022(4)
Subscribers (in thousands) (1)	3,175	2,475
Average quarterly revenue per subscriber (2)	$44.51	$55.69
Churn rate (3)	3.51%	3.12%


	Three months ended June 30, 2022
Subscribers (in thousands)	82
Average quarterly revenue per subscriber	$	(1.95)
Churn rate	0.20		%


(in thousands, except percentages)	Three months ended June 30,				Percentage Change	Six months ended June 30,				Percentage Change
	2023		2022			2023		2022
Revenues	$	326,016	$	337,356	(3.4)%	$	633,158	$	652,424	(3.0)%


	June 30, 2023		December 31, 2022
Cash, cash equivalents, and investments held in domestic jurisdiction	$	653,271	$	671,587
Cash, cash equivalents, and investments held in foreign jurisdiction	175,991		167,498
Cash, cash equivalents, and investments	$	829,262	$	839,085


	Six months ended June 30,				Change
	2023		2022		Change
Net cash provided by operating activities	$	155,035	$	192,484	$	(37,449)
Net cash used in investing activities	$	(65,321)	$	(161,301)	$	95,980
Net cash used in financing activities	$	(64,612)	$	(61,679)	$	(2,933)


Total number of shares repurchased	Aggregate purchase price(1)	Shares remaining under repurchase authorization as of June 30, 2023
980,418	$63,900	5,346,736


Period	Total Number of Shares Purchased(1)	Average Price Paid Per Share(2)		Total Number of Shares Purchased as Part of Publicly Announced Plans or Program	Maximum Number of Shares That May Yet Be Purchased Under the Plans or Program(3)
April 1, 2023 - April 30, 2023	534	$	67.73	—	6,327,154
May 1, 2023 - May 31, 2023	375,221	$	62.00	370,532	5,956,622
June 1, 2023 - June 30, 2023	609,886	$	66.11	609,886	5,346,736
Total	985,641			980,418	5,346,736


Exhibit No.						Description
3.1						Amended and Restated Certificate of Incorporation of J2 Global, Inc., dated as of June 10, 2014 (incorporated by reference to Exhibit 3.1 to Ziff Davis’ Current Report on Form 8-K filed on June 10, 2014. (File No. 0-25965))
3.2						Amendment to the Amended and Restated Certificate of Incorporation of J2 Global, Inc., dated as of September 5, 2019 (incorporated by reference to Exhibit 3.1 to Ziff Davis’ Current Report on Form 8-K filed with the Commission on November 1, 2019 (File 0-25965))
3.3						Certificate of Amendment to Amended and Restated Certificate of Incorporation of Ziff Davis, Inc. dated as of October 7, 2021 (incorporated by reference to Exhibit 3.1 to Ziff Davis’ Current Report on Form 8-K filed on October 8, 2021. (File No. 0-25965))
3.4						Sixth Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 to Ziff Davis’ Current Report on Form 8-K filed on May 10, 2023 (File No. 0-25965))



31.1						Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2						Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1						Certification of Principal Executive Officer of Periodic Financial Reports pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350
32.2						Certification of Principal Financial Officer of Periodic Financial Reports pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350
101.INS						Inline XBRL Instance Document*
101.SCH						Inline XBRL Taxonomy Extension Schema Document
101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document
101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document
101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document
104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)


		/s/ VIVEK SHAH
		Vivek Shah
Dated:	August 4, 2023	Chief Executive Officer and a Director (Principal Executive Officer)


		/s/ BRET RICHTER
		Bret Richter
Dated:	August 4, 2023	Chief Financial Officer (Principal Financial Officer)