8-K
Ziff Davis, Inc. (ZD)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) February 15, 2023
Ziff Davis, Inc.
(Exact name of registrant as specified in its charter)
| Delaware | 0-25965 | 47-1053457 |
|---|---|---|
| (State or other jurisdiction of incorporation or organization) | (Commission File Number) | (I.R.S. Employer Identification No.) |
114 5th Avenue, 15th Floor
New York, New York 10011
(Address of principal executive offices)
(212) 503-3500
(Registrant's telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
| 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 |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Item 2.02 Results of Operations and Financial Condition.
On February 15, 2023, Ziff Davis, Inc. (the “Company”) issued a press release (the “Press Release”) announcing its preliminary unaudited financial results for the fourth quarter and year ended December 31, 2022 and financial guidance for fiscal year 2023.
A copy of the Press Release is furnished as Exhibit 99.1 to this Form 8-K.
Item 7.01 Regulation FD Disclosure.
On February 16, 2023, at 8:30 a.m. Eastern Time, the Company will host its fourth quarter and year-end 2022 earnings conference call and Webcast. Via the Webcast, the Company will present portions of its February 2023 Investor Presentation, which contains a summary of the Company’s preliminary unaudited financial results for the fiscal quarter and fiscal year ended December 31, 2022, financial estimates for fiscal year 2023, and certain other financial and operating information regarding the Company. A copy of this presentation is furnished as Exhibit 99.2 to this Form 8-K.
NOTE: The information in this Item 7.01 is being furnished and shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended (the “Securities Act”) or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
| Exhibit<br><br>Number | Description |
|---|---|
| 99.1 | Press Release datedFebruary 15, 2023 |
| 99.2 | February 2023Investor Presentation |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
This Current Report on Form 8-K contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Such forward-looking statements are subject to numerous assumptions, risks and uncertainties that could cause actual results to differ materially from those described in such statements. Such forward-looking statements are based on management’s expectations or beliefs as of February 15, 2023. Factors that might cause such differences include, but are not limited to, a variety of economic, competitive, and regulatory factors, many of which are beyond the Company’s control and are described in the Company’s Annual Report on Form 10-K filed by the Company on March 15, 2022 with the Securities and Exchange Commission (the “SEC”) and the other reports the Company files from time to time with the SEC. The Company undertakes no obligation to revise or publicly release any updates to such statements based on future information or actual results.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Ziff Davis, Inc.<br><br>(Registrant) | |||
|---|---|---|---|
| Date: | February 16, 2023 | By: | /s/ Jeremy Rossen |
| Jeremy Rossen<br>Executive Vice President, General Counsel and Secretary |
Document
Ziff Davis Reports Fourth Quarter and Full Year 2022 Financial Results and Provides 2023 Guidance
NEW YORK, NY -- Ziff Davis, Inc. (NASDAQ: ZD) (“Ziff Davis”) today reported unaudited financial results for the fourth quarter and year ended December 31, 2022.
"Delivering bottom-line growth in Q4 and throughout 2022 is impressive given the challenges in the advertising market and the overall tech sector," said Vivek Shah, Chief Executive Officer of Ziff Davis. "While we've been judicious in our spending, we continue to confidently pursue organic growth and seek compelling investment choices for our capital."
FOURTH QUARTER 2022 RESULTS
On October 7, 2021, Ziff Davis completed the spin-off of its Consensus Cloud Solutions, Inc. (“Consensus”) business. Ziff Davis has classified Consensus as a discontinued operation in its financial statements for the three months and year ended December 31, 2021 results. Historical results in this press release represent continuing operations, except for the Statement of Cash Flows, Net cash provided by operating activities and Free cash flow, which are on a combined continuing and discontinued operations basis(1).
Q4 2022 quarterly revenues decreased 2.9% to $396.7 million compared to $408.6 million for Q4 2021.
Net income from continuing operations decreased to $69.2 million compared to $378.9 million for Q4 2021 primarily due to the unrealized gain on investment of $298.5 million recorded during the three months ended December 31, 2021 in connection with the Company’s investment in Consensus that did not recur.
Adjusted net income from continuing operations(2) increased by 0.9% to $106.0 million compared to $105.1 million for Q4 2021.
Net income per diluted share from continuing operations(3) decreased to $1.37 in Q4 2022 compared to $7.81 for Q4 2021. The decrease is primarily driven by the unrealized gain on investment of $298.5 million ($6.15 per share, after tax) recorded during the three months ended December 31, 2021 in connection with the Company’s investment in Consensus that did not recur.
Adjusted net income per diluted share from continuing operations(3)(4) (or “Adjusted diluted EPS”) for the quarter increased 3.7% to $2.26 compared to $2.18 for Q4 2021.
Adjusted EBITDA(5) for the quarter increased 4.1% to $168.3 million compared to $161.6 million for Q4 2021.
Net cash provided by operating activities from continuing and discontinued operations was $43.2 million in Q4 2022 compared to $86.3 million in Q4 2021. Free cash flow from continuing and discontinued operations(6) was $17.8 million in Q4 2022 compared to $60.0 million in Q4 2021.
Ziff Davis ended the quarter with approximately $839.1 million in cash, cash equivalents, and investments after deploying approximately $1.4 million during the quarter for prior year acquisitions. No funds were deployed in Q4 2022 for current year acquisitions.
Key unaudited financial results for Q4 2022 versus Q4 2021 are set forth in the following table (in millions, except per share amounts). Reconciliations of Adjusted net income per diluted share from continuing operations, Adjusted EBITDA and Free cash flow from continuing and discontinued operations(1) to their nearest comparable GAAP financial measures are presented in the attached schedules.
The following table reflects Actual Results from Continuing Operations, except for Cash provided by operating activities and Free Cash Flow, which are on a combined basis of continuing operations and discontinued operations(1), for the fourth quarter of 2022 and 2021 (in millions, except per share amounts).
| Actual Results | ||||
|---|---|---|---|---|
| Three months ended December 31, | ||||
| 2022 | ||||
| Revenues | ||||
| Digital Media | 321.7 | 325.7 | (1.2)% | |
| Cybersecurity and Martech | 75.0 | 82.9 | (9.5)% | |
| Total revenue (7) | 396.7 | 408.6 | (2.9)% | |
| Income from operations | 93.5 | 85.4 | 9.5% | |
| Operating income margin | 23.6% | 20.9% | 2.7% | |
| Net income from continuing operations | 69.2 | 378.9 | (81.7)% | |
| Adjusted net income from continuing operations | 106.0 | 105.1 | 0.9% | |
| Net income per diluted share from continuing operations (3) | 1.37 | 7.81 | (82.5)% | |
| Adjusted diluted EPS (3) (4) | 2.26 | 2.18 | 3.7% | |
| Adjusted EBITDA (5) | 168.3 | 161.6 | 4.1% | |
| Adjusted EBITDA margin (5) | 42.4% | 39.5% | 2.9% | |
| Net cash provided by operating activities from continuing and discontinued operations (6) | 43.2 | 86.3 | (49.9)% | |
| Free cash flow from continuing and discontinued operations (1)(6) | 17.8 | 60.0 | (70.3)% |
All values are in US Dollars.
FULL YEAR 2022 HIGHLIGHTS
2022 revenues decreased 1.8% to $1.39 billion compared to $1.42 billion for 2021. Excluding divested businesses(8), 2022 revenues increased 0.6% to $1.39 billion as compared to $1.38 billion for 2021.
Net income from continuing operations decreased to $65.5 million compared to $401.4 million for 2021 primarily due to an unrealized gain on investment of $298.5 million in the prior year recorded in connection with the Company’s investment in Consensus that did not recur.
Adjusted net income from continuing operations(2) increased by 5.0% to $312.6 million as compared to $297.7 million for 2021. Excluding divested businesses(8), Adjusted net income from continuing operations increased by 8.8% to $312.6 million as compared to $287.4 million for 2021.
Net income per diluted share(3) from continuing operations decreased to $1.39 in 2022 compared to $8.38 for 2021. The net income decrease was primarily due to an unrealized gain on investment of $298.5 million ($6.24 per share, after tax) in the prior year recorded in connection with the Company’s investment in Consensus that did not recur.
Adjusted diluted EPS(3)(4) for the year increased by 3.3% to $6.65 compared to $6.44 for 2021. Excluding divested businesses(8), Adjusted diluted EPS(3)(4) for the year increased 7.1% to $6.65 as compared to $6.21 for 2021.
Adjusted EBITDA(5) for the year increased 1.6% to $507.2 million compared to $499.0 million for 2021. Excluding divested businesses(8), Adjusted EBITDA(5) for the year increased 4.6% to $507.2 million compared to $484.9 million for 2021.
Net cash provided by operating activities from continuing and discontinued operations was $336.4 million during 2022 compared to $516.5 million in 2021. Free cash flow from continuing and discontinued operations(6) was $230.3 million during 2022 compared to $403.5 million in 2021.
The following table reflects Actual Results from Continuing Operations and Results from Continuing Operations excluding divested businesses, except for Cash provided by operating activities and Free Cash Flow, which are on a combined basis of continuing operations and discontinued operations, for the years ended December 31, 2022 and 2021 (in millions, except per share amounts). Results from Continuing Operations excluding divested businesses below exclude the operating results from Voice assets in the United Kingdom that were sold in February 2021 and the Company’s B2B Backup business that was sold in September 2021.
| Actual Results | Results excluding divested businesses(8) | ||||||
|---|---|---|---|---|---|---|---|
| Year ended December 31, | |||||||
| 2022 | 2021 | % Change | 2022 | 2021 | % Change | ||
| Revenues | |||||||
| Digital Media | $1,078.4 | 1,068.5 | 0.9% | $1,078.4 | $1,068.5 | 0.9% | |
| Cybersecurity and Martech | $312.6 | 348.2 | (10.2)% | $312.6 | $314.7 | (0.7)% | |
| Total revenue (7) | $1,391.0 | 1,416.7 | (1.8)% | $1,391.0 | $1,383.2 | 0.6% | |
| Income from operations | $198.9 | 167.3 | 18.9% | ||||
| Operating income margin | 14.3% | 11.8% | 2.5% | ||||
| Net income from continuing operations | $65.5 | 401.4 | (83.7)% | ||||
| Adjusted net income from continuing operations | $312.6 | 297.7 | 5.0% | $312.6 | $287.4 | 8.8% | |
| Net income per diluted share from continuing operations (3) | $1.39 | 8.38 | (83.4)% | ||||
| Adjusted diluted EPS (3) (4) | $6.65 | 6.44 | 3.3% | $6.65 | $6.21 | 7.1% | |
| Adjusted EBITDA (5) | $507.2 | 499.0 | 1.6% | $507.2 | $484.9 | 4.6% | |
| Adjusted EBITDA margin (5) | 36.5% | 35.2% | 1.3% | 36.5% | 35.1% | 1.4% | |
| Net cash provided by operating activities from continuing operations (6) | $336.4 | 516.5 | (34.9)% | ||||
| Free cash flow from continuing and discontinued operations (1)(6) | $230.3 | 403.5 | (42.9)% |
All values are in US Dollars.
ZIFF DAVIS GUIDANCE
The Company’ full year 2023 outlook is as follows (in millions, except per share data):
| 2022 Actual | 2023 Range of Estimates | Growth (Decline) | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| (unaudited) | Low | High | Low | High | ||||||
| Revenue | $ | 1,391.0 | $ | 1,350.0 | $ | 1,408.0 | (2.9) | % | 1.2 | % |
| Adjusted EBITDA | $ | 507.2 | $ | 479.0 | $ | 514.0 | (5.6) | % | 1.3 | % |
| Adjusted diluted EPS* | $ | 6.65 | $ | 6.02 | $ | 6.54 | (9.5) | % | (1.7) | % |
* Adjusted diluted EPS for 2023 excludes share based compensation ranging between $28 million and $30 million, amortization of acquired intangibles and the impact of any currently unanticipated items, in each case net of tax. It is anticipated that Adjusted effective tax rate for 2023 (exclusive of the release of reserves for uncertain tax positions) will be between 23.0% and 25.0%.
Notes:
| (1) | For the three months and year ended December 31, 2022, the Loss from discontinued operations, net of income taxes did not have an impact on Net cash provided by operating activities from continuing and discontinued operations. |
|---|---|
| (2) | Adjusted net income from continuing operations is Net income from continuing operations with modifications due to the items used to reconcile GAAP to non-GAAP financial measures, as defined further in this Press Release. |
| (3) | The estimated GAAP effective tax rates were approximately 27.0% and 1.6% for the three months ended December 31, 2022 and 2021, respectively, and 44.2% and (4.0)% for the years ended December 31, 2022 and 2021, respectively. The estimated Adjusted effective tax rates were approximately 23.2% and 23.2% for the three months ended December 31, 2022 and 2021, respectively, and 22.9% and 23.2% for the years ended December 31, 2022 and 2021, respectively. |
| (4) | Adjusted diluted EPS excludes certain non-GAAP items, as defined in the Reconciliation of GAAP to non-GAAP financial measures. For the three months ended December 31, 2022 and 2021, excluded non-GAAP items totaled $0.89 and $(5.63) per diluted share, respectively. For the years ended December 31, 2022 and 2021, excluded non-GAAP items totaled $5.26 and $(1.94) per diluted share, respectively. |
| (5) | Adjusted EBITDA is defined as net income from continuing operations before interest; gain on sale of businesses; loss on investments, net; unrealized gain (loss) on short-term investments held at the reporting date; other income (expense), net; income tax (expense) benefit; (loss) income from equity method investments, net; depreciation and amortization; and the items used to reconcile GAAP to non-GAAP financial measures, as defined in the Reconciliation of GAAP to Adjusted financial measures. Adjusted EBITDA margin is calculated by dividing Adjusted EBITDA by Revenue. Adjusted EBITDA and Adjusted EBITDA margin amounts are not meant as a substitute for financial information prepared in accordance with GAAP, but are solely for informational purposes. |
| (6) | Free cash flow from continuing and discontinued operations is defined as net cash provided by operating activities from continuing and discontinued operations, less purchases of property and equipment from continuing and discontinued operations, plus contingent consideration from continuing and discontinued operations. Free cash flow from continuing and discontinued operations amounts are not meant as a substitute for GAAP, but are solely for informational purposes. |
| (7) | The revenues associated with each of the businesses may not foot precisely since each is presented independently. |
| (8) | Excluding divested businesses figures are provided taking into consideration the sale of certain Voice assets in the United Kingdom in February 2021 as well as the sale of the Company’s B2B Backup business in September 2021 as if they had occurred in a prior period presented. |
About Ziff Davis
Ziff Davis, Inc. (NASDAQ: ZD) is a vertically focused digital media and internet company whose portfolio includes leading brands in technology, shopping, gaming and entertainment, connectivity, health, cybersecurity, and martech. For more information, visit www.ziffdavis.com.
Contact:
Rebecca Wright
Ziff Davis, Inc.
800-577-1790
investor@ziffdavis.com
“Safe Harbor” Statement Under the Private Securities Litigation Reform Act of 1995: Certain statements in this Press Release are “forward-looking statements” within the meaning of The Private Securities Litigation Reform Act of 1995, including those contained in Vivek Shah’s quote and the “Ziff Davis Guidance” portion regarding the Company’s expected fiscal 2023 financial performance. These forward-looking statements are based on management’s current expectations or beliefs and are subject to numerous assumptions, risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. These factors and uncertainties include, among other items: the Company’s ability to grow advertising revenues, profitability and cash flows; the Company’s ability to make interest and debt payments; the Company’s ability to identify, close and successfully transition acquisitions; subscriber growth and retention; variability of the Company’s revenue based on changing conditions in particular industries and the economy generally; protection of the Company’s proprietary technology or infringement by the Company of intellectual property of others; the risk of losing critical third-party vendors or key personnel; the risks associated with fraudulent activity, system failure or a security breach; risks related to our ability to adhere to our internal controls and procedures; the risk of adverse changes in the U.S. or international regulatory environments, including but not limited to the imposition or increase of taxes or regulatory-related fees; the risks related to supply chain disruptions, inflationary conditions and rising interest rates; the risk of liability for legal and other claims; and the numerous other factors set forth in Ziff Davis’ filings with the Securities and Exchange Commission (“SEC”). For a more detailed description of the risk factors and uncertainties affecting Ziff Davis, refer to the 2021 Annual Report on Form 10-K filed by Ziff Davis on March 15, 2022, and the other reports filed by Ziff Davis from time-to-time with the SEC, each of which is available at www.sec.gov. The forward-looking statements provided in this press release, including those contained in Vivek Shah’s quote and in the “Ziff Davis Guidance” portion regarding the Company’s expected fiscal 2022 financial performance are based on limited information available to the Company at this time, which is subject to change. Although management’s expectations may change after the date of this Press Release, the Company undertakes no obligation to revise or update these statements.
About Non-GAAP Financial Measures
To supplement our condensed consolidated financial statements, which are prepared and presented in accordance with U.S. generally accepted accounting principles (“GAAP”), we use the following non-GAAP financial measures: Revenues excluding divested businesses, Adjusted diluted EPS and Adjusted diluted EPS excluding divested business, Adjusted net income from continuing operations and Adjusted net income from continuing operations excluding divested businesses, Adjusted EBITDA and Adjusted EBITDA excluding divested businesses, Adjusted EBITDA margin and Adjusted EBITDA margin excluding divested businesses, and Free cash flow from continuing and discontinued operations. The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.
We use these non-GAAP financial measures for financial and operational decision making and as a means to evaluate period-to-period comparisons. We believe that these non-GAAP financial measures provide meaningful supplemental information regarding our performance and liquidity by excluding certain expenses and expenditures that may not be indicative of our recurring core business operating results. We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting, and analyzing future periods. These non-GAAP financial measures also facilitate management’s internal comparisons to our historical performance and liquidity. We believe these non-GAAP financial measures are useful to investors both because (1) they allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making and (2) they are used by our institutional investors and the analyst community to help them analyze the health of our business.
For more information on these non-GAAP financial measures, please see the appropriate GAAP to Adjusted reconciliation tables that are presented in the attached schedules.
ZIFF DAVIS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED, IN THOUSANDS)
| December 31, | ||||
|---|---|---|---|---|
| 2022 | 2021 | |||
| ASSETS | ||||
| Cash and cash equivalents | $ | 652,793 | $ | 694,842 |
| Short-term investments | 58,421 | 229,200 | ||
| Accounts receivable, net of allowances | 304,739 | 316,342 | ||
| Prepaid expenses and other current assets | 68,319 | 60,290 | ||
| Total current assets | 1,084,272 | 1,300,674 | ||
| Long-term investments | 127,871 | 122,593 | ||
| Property and equipment, net | 178,184 | 161,209 | ||
| Operating lease right-of-use assets | 40,640 | 55,617 | ||
| Trade names, net | 136,192 | 147,761 | ||
| Customer relationships, net | 208,057 | 275,451 | ||
| Goodwill | 1,591,474 | 1,531,455 | ||
| Other purchased intangibles, net | 118,566 | 149,513 | ||
| Deferred income taxes, noncurrent | 8,523 | 5,917 | ||
| Other assets | 39,491 | 20,090 | ||
| TOTAL ASSETS | $ | 3,533,270 | $ | 3,770,280 |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||
| Accounts payable and accrued expenses | $ | 202,546 | $ | 226,621 |
| Income taxes payable, current | 19,712 | 3,151 | ||
| Deferred revenue, current | 187,904 | 185,571 | ||
| Current portion of long-term debt | — | 54,609 | ||
| Operating lease liabilities, current | 22,153 | 27,156 | ||
| Other current liabilities | 133 | 130 | ||
| Total current liabilities | 432,448 | 497,238 | ||
| Long-term debt | 999,053 | 1,036,018 | ||
| Deferred revenue, noncurrent | 9,103 | 14,839 | ||
| Operating lease liabilities, noncurrent | 33,996 | 53,708 | ||
| Income taxes payable, noncurrent | 11,675 | 11,675 | ||
| Liability for uncertain tax positions | 40,379 | 42,546 | ||
| Deferred income taxes | 79,007 | 108,982 | ||
| Other long-term liabilities | 34,998 | 37,542 | ||
| TOTAL LIABILITIES | 1,640,659 | 1,802,548 | ||
| Common stock | 473 | 474 | ||
| Additional paid-in capital | 439,681 | 509,122 | ||
| Retained earnings | 1,537,830 | 1,515,358 | ||
| Accumulated other comprehensive loss | (85,373) | (57,222) | ||
| TOTAL STOCKHOLDERS’ EQUITY | 1,892,611 | 1,967,732 | ||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 3,533,270 | $ | 3,770,280 |
ZIFF DAVIS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED, IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
| Three months ended <br>December 31, | Year ended <br>December 31, | |||||||
|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | 2022 | 2021 | |||||
| Total revenues | $ | 396,700 | $ | 408,628 | $ | 1,390,997 | $ | 1,416,722 |
| Operating expenses: | ||||||||
| Cost of revenues (1) | 50,847 | 45,718 | 195,554 | 188,053 | ||||
| Sales and marketing (1) | 129,764 | 138,100 | 490,777 | 493,049 | ||||
| Research, development and engineering (1) | 18,210 | 21,875 | 74,093 | 78,874 | ||||
| General and administrative (1) | 104,421 | 117,541 | 404,263 | 456,777 | ||||
| Goodwill impairment on business | — | — | 27,369 | 32,629 | ||||
| Total operating expenses | 303,242 | 323,234 | 1,192,056 | 1,249,382 | ||||
| Income from operations | 93,458 | 85,394 | 198,941 | 167,340 | ||||
| Interest expense, net | (5,423) | (15,043) | (33,842) | (72,023) | ||||
| (Loss) gain on debt extinguishment, net | — | (5,274) | 11,505 | (5,274) | ||||
| Loss on sale of businesses, net | — | — | — | (21,798) | ||||
| Gain (loss) on investments, net | 1,029 | — | (46,743) | (16,677) | ||||
| Unrealized gain (loss) on short-term investments held at the reporting date, net | 7,020 | 298,490 | (7,145) | 298,490 | ||||
| Other (expense) income, net | (4,525) | 1,759 | 8,437 | 1,293 | ||||
| Income from continuing operations before income tax (expense) benefit and changes from equity method investment | 91,559 | 365,326 | 131,153 | 351,351 | ||||
| Income tax (expense) benefit | (24,726) | (5,684) | (57,957) | 14,199 | ||||
| Income (loss) from equity method investment, net | 2,347 | 19,249 | (7,730) | 35,845 | ||||
| Net income from continuing operations | 69,180 | 378,891 | 65,466 | 401,395 | ||||
| (Loss) income from discontinued operations, net of income taxes | (1,709) | (18,385) | (1,709) | 95,319 | ||||
| Net income | $ | 67,471 | $ | 360,506 | $ | 63,757 | $ | 496,714 |
| Net income per common share from continuing operations: | ||||||||
| Basic | $ | 1.47 | $ | 7.93 | $ | 1.39 | $ | 8.74 |
| Diluted | $ | 1.37 | $ | 7.81 | $ | 1.39 | $ | 8.38 |
| Net (loss) income per common share from discontinued operations: | ||||||||
| Basic | $ | (0.04) | $ | (0.38) | $ | (0.04) | $ | 2.08 |
| Diluted | $ | (0.03) | $ | (0.38) | $ | (0.04) | $ | 1.99 |
| Net income per common share: | ||||||||
| Basic | $ | 1.44 | $ | 7.54 | $ | 1.36 | $ | 10.81 |
| Diluted | $ | 1.34 | $ | 7.43 | $ | 1.36 | $ | 10.37 |
| Weighted average shares outstanding: | ||||||||
| Basic | 46,915,647 | 47,778,545 | 46,954,558 | 45,893,928 | ||||
| Diluted | 52,114,995 | 48,514,588 | 47,025,849 | 47,862,745 | ||||
| (1) Includes share-based compensation expense as follows: | ||||||||
| Cost of revenues | $ | 52 | $ | 86 | $ | 341 | $ | 306 |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Sales and marketing | 636 | 410 | 3,083 | 1,288 | ||||
| Research, development and engineering | 455 | 594 | 2,503 | 1,984 | ||||
| General and administrative | 4,652 | 5,037 | 20,674 | 20,551 | ||||
| Total | $ | 5,795 | $ | 6,127 | $ | 26,601 | $ | 24,129 |
ZIFF DAVIS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED, IN THOUSANDS)
| Year ended December 31, | ||||
|---|---|---|---|---|
| 2022 | 2021 | |||
| Cash flows from operating activities: | ||||
| Net income | $ | 63,757 | $ | 496,714 |
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||
| Depreciation and amortization | 233,400 | 258,303 | ||
| Amortization of financing costs and discounts | 2,692 | 26,090 | ||
| Non-cash operating lease costs | 13,412 | 1,485 | ||
| Share-based compensation | 26,601 | 25,248 | ||
| Provision for credit losses (benefit) on accounts receivable | (255) | 8,738 | ||
| Deferred income taxes, net | (12,991) | (13,433) | ||
| (Gain) loss on extinguishment of debt, net | (11,505) | 14,024 | ||
| Loss on sale of businesses | — | 21,798 | ||
| Goodwill impairment on business | 27,369 | 32,629 | ||
| Changes in fair value of contingent consideration | (2,575) | (1,223) | ||
| Loss (income) from equity method investments | 7,730 | (35,845) | ||
| Unrealized loss (gain) on short-term investments held at the reporting date | 7,145 | (281,527) | ||
| Loss on investment, net | 46,743 | — | ||
| Other | 945 | 12,894 | ||
| Decrease (increase) in: | ||||
| Accounts receivable | 14,948 | (18,050) | ||
| Prepaid expenses and other current assets | 9,665 | (15,650) | ||
| Operating lease right-of-use assets | 3,739 | 15,267 | ||
| Other assets | (19,979) | (3,824) | ||
| Increase (decrease) in: | ||||
| Accounts payable and accrued expenses | (37,569) | 22,262 | ||
| Income taxes payable | 17,323 | (21,783) | ||
| Deferred revenue | (20,962) | 14,282 | ||
| Operating lease liabilities | (27,131) | (30,581) | ||
| Liability for uncertain tax positions | (2,167) | (10,383) | ||
| Other long-term liabilities | (3,891) | (899) | ||
| Net cash provided by operating activities | 336,444 | 516,536 | ||
| Cash flows from investing activities: | ||||
| Purchases of property and equipment | (106,154) | (113,740) | ||
| Purchases of intangible assets | (50) | (78) | ||
| Acquisition of businesses, net of cash received | (104,094) | (141,146) | ||
| Proceeds from divestiture of discontinued operations | — | 259,104 | ||
| Proceeds from sale of available-for-sale investments | — | 663 | ||
| Investment in available-for-sale securities | (15,000) | — | ||
| Distribution from equity method investment | — | 15,327 | ||
| Purchases of equity method investment | — | (23,249) | ||
| Purchases of equity investments | — | (999) | ||
| Proceeds from sale of equity investments | 4,527 | 14,330 | ||
| Proceeds from sale of businesses, net of cash divested | — | 48,876 | ||
| Net cash (used in) provided by investing activities | (220,771) | 59,088 | ||
| Cash flows from financing activities: | ||||
| Payment of debt | (166,904) | (512,388) | ||
| Proceeds from term loan | 112,286 | — | ||
| Debt extinguishment costs | (756) | (1,096) | ||
| --- | --- | --- | --- | --- |
| Proceeds from bridge loan | — | 485,000 | ||
| Repurchase of common stock | (78,291) | (78,327) | ||
| Issuance of common stock under employee stock purchase plan | 9,431 | 9,231 | ||
| Proceeds from exercise of stock options | 148 | 2,939 | ||
| Deferred payments for acquisitions | (16,116) | (14,387) | ||
| Other | (630) | (4,060) | ||
| Net cash used in financing activities | (140,832) | (113,088) | ||
| Effect of exchange rate changes on cash and cash equivalents | (16,890) | (10,346) | ||
| Net change in cash and cash equivalents | (42,049) | 452,190 | ||
| Cash and cash equivalents at beginning of period | 694,842 | 242,652 | ||
| Cash and cash equivalents at beginning of period associated with discontinued operations | — | 66,210 | ||
| Cash and cash equivalents at beginning of period associated with continuing operations | 694,842 | 176,442 | ||
| Cash and cash equivalents at end of period | 652,793 | 694,842 | ||
| Cash and cash equivalents at end of period associated with discontinued operations | — | — | ||
| Cash and cash equivalents at end of period associated with continuing operations | $ | 652,793 | $ | 694,842 |
ZIFF DAVIS, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Adjusted net income from continuing operations is Net income from continuing operations with the following modifications: (1) elimination of share-based compensation; (2) elimination of certain acquisition, integration and other costs; (3) elimination of certain interest costs; (4) elimination of (gains) losses resulted from the extinguishment of debt; (5) elimination of amortization of patents and intangible assets that we acquired; (6) elimination of change in value of investments; (7) elimination of (gains) losses on sale of assets; (8) elimination of lease asset impairments and other charges; (9) elimination of disposal related costs; (10) elimination of goodwill impairment on business; and (11) elimination of dilutive effect of the convertible debt.
| Three months ended December 31, | ||||||||
|---|---|---|---|---|---|---|---|---|
| 2022 | Per diluted share* | 2021 | Per diluted share* | |||||
| Net income from continuing operations | $ | 69,180 | $ | 1.37 | $ | 378,891 | $ | 7.81 |
| Plus: | ||||||||
| Share-based compensation (1) | 6,044 | 0.13 | 4,302 | 0.09 | ||||
| Acquisition, integration and other costs (2) | 7,401 | 0.16 | 1,924 | 0.04 | ||||
| Interest costs, net (3) | 120 | — | 3,017 | 0.06 | ||||
| Loss on debt extinguishment (4) | — | — | 3,292 | 0.07 | ||||
| Amortization (5) | 28,696 | 0.61 | 28,581 | 0.59 | ||||
| Investments (6) | (6,210) | (0.13) | (316,722) | (6.59) | ||||
| Sale of assets (7) | — | — | (942) | (0.02) | ||||
| Lease asset impairments and other charges (8) | 559 | 0.01 | 2,619 | 0.05 | ||||
| Disposal related costs (9) | 395 | 0.01 | 135 | — | ||||
| Goodwill impairment on business (10) | (222) | — | (33) | — | ||||
| Convertible debt dilution (11) | — | 0.10 | — | 0.08 | ||||
| Adjusted net income from continuing operations | $ | 105,963 | $ | 2.26 | $ | 105,064 | $ | 2.18 |
* The reconciliation of Net income per diluted share from continuing operations to Adjusted diluted EPS may not foot since each is calculated independently.
ZIFF DAVIS, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Adjusted net income from continuing operations is Net income from continuing operations with the following modifications: (1) elimination of share-based compensation; (2) elimination of certain acquisition, integration and other costs; (3) elimination of certain interest costs; (4) elimination of (gains) losses resulted from the extinguishment of debt; (5) elimination of amortization of patents and intangible assets that we acquired; (6) elimination of change in value of investments; (7) elimination of (gains) losses on sale of assets; (8) elimination of lease asset impairments and other charges; (9) elimination of disposal related costs; (10) elimination of goodwill impairment on business; and (11) elimination of dilutive effect of the convertible debt.
| Year ended December 31, | ||||||||
|---|---|---|---|---|---|---|---|---|
| 2022 | Per diluted share* | 2021 | Per diluted share* | |||||
| Net income from continuing operations | $ | 65,466 | $ | 1.39 | $ | 401,395 | $ | 8.38 |
| Plus: | ||||||||
| Share based compensation (1) | 23,209 | 0.49 | 15,510 | 0.34 | ||||
| Acquisition, integration and other costs (2) | 13,278 | 0.28 | 6,672 | 0.14 | ||||
| Interest costs, net (3) | 374 | 0.01 | 15,477 | 0.33 | ||||
| (Gain) loss on debt extinguishment (4) | (9,094) | (0.19) | 3,292 | 0.07 | ||||
| Amortization (5) | 119,170 | 2.53 | 127,258 | 2.75 | ||||
| Investments (6) | 76,679 | 1.63 | (321,730) | (6.96) | ||||
| Sale of assets (7) | — | — | 15,462 | 0.33 | ||||
| Lease asset impairments and other charges (8) | 1,640 | 0.03 | 9,333 | 0.20 | ||||
| Disposal related costs (9) | 1,449 | 0.03 | 407 | 0.01 | ||||
| Goodwill impairment on business (10) | 20,414 | 0.43 | 24,602 | 0.53 | ||||
| Convertible debt dilution (11) | — | 0.02 | — | 0.32 | ||||
| Adjusted net income from continuing operations | $ | 312,585 | $ | 6.65 | $ | 297,678 | $ | 6.44 |
* The reconciliation of Net income per diluted share from continuing operations to Adjusted diluted EPS may not foot since each is calculated independently.
ZIFF DAVIS, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
| Three months ended December 31, | ||||
|---|---|---|---|---|
| 2022 | 2021 | |||
| Cost of revenues | $ | 50,847 | $ | 45,718 |
| Plus: | ||||
| Share-based compensation (1) | (52) | (86) | ||
| Acquisition, integration and other costs (2) | (245) | (96) | ||
| Amortization (5) | (221) | (250) | ||
| Adjusted cost of revenues | $ | 50,329 | $ | 45,286 |
| Sales and marketing | $ | 129,764 | $ | 138,100 |
| Plus: | ||||
| Share-based compensation (1) | (636) | (409) | ||
| Acquisition, integration and other costs (2) | (3,825) | (178) | ||
| Adjusted sales and marketing | $ | 125,303 | $ | 137,513 |
| Research, development and engineering | $ | 18,210 | $ | 21,875 |
| Plus: | ||||
| Share-based compensation (1) | (455) | (594) | ||
| Acquisition, integration and other costs (2) | (528) | (358) | ||
| Adjusted research, development and engineering | $ | 17,227 | $ | 20,923 |
| General and administrative | $ | 104,421 | $ | 117,541 |
| Plus: | ||||
| Share-based compensation(1) | (4,652) | (5,038) | ||
| Acquisition, integration and other costs (2) | (5,155) | (2,903) | ||
| Amortization (5) | (37,641) | (45,053) | ||
| Lease asset impairments and other charges (8) | (778) | (3,133) | ||
| Disposal related costs (9) | — | (136) | ||
| Investments (6) | — | (1,500) | ||
| Adjusted general and administrative | $ | 56,195 | $ | 59,778 |
| Interest expense, net | $ | (5,423) | $ | (15,043) |
| Plus: | ||||
| Interest costs, net (3) | 96 | 4,775 | ||
| Adjusted interest expense, net | $ | (5,327) | $ | (10,268) |
| Loss on debt extinguishment, net | $ | — | $ | (5,274) |
| Plus: | ||||
| Loss on debt extinguishment (4) | — | 4,527 | ||
| Adjusted loss on debt extinguishment, net | $ | — | $ | (747) |
ZIFF DAVIS, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES - CONTINUED
(UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
| Three months ended December 31, | ||||
|---|---|---|---|---|
| 2022 | 2021 | |||
| Gain on investment, net | $ | 1,029 | $ | — |
| Plus: | ||||
| Investments (6) | (1,029) | — | ||
| Adjusted gain on investment, net | $ | — | $ | — |
| Unrealized gain on short-term investments held at period end | $ | 7,020 | $ | 298,490 |
| Plus: | ||||
| Investments (6) | (7,020) | (298,490) | ||
| Adjusted unrealized gain on short-term investments held at period end, net | $ | — | $ | — |
| Other (expense) income, net | $ | (4,525) | $ | 1,759 |
| Plus: | ||||
| Acquisition, integration and other costs (2) | (195) | — | ||
| Sale of assets (7) | — | 857 | ||
| Disposal related costs (9) | 314 | — | ||
| Adjusted other (expense) income, net | $ | (4,406) | $ | 2,616 |
| Income tax expense | $ | (24,726) | $ | (5,684) |
| Plus the tax effect of: | ||||
| Share-based compensation (1) | 249 | (1,825) | ||
| Acquisition, integration and other costs (2) | (2,158) | (1,611) | ||
| Interest costs, net (3) | 23 | (1,758) | ||
| Loss on debt extinguishment, net | — | (1,235) | ||
| Amortization (5) | (9,163) | (16,722) | ||
| Investments (6) | 4,185 | (483) | ||
| Sale of assets (7) | — | (1,799) | ||
| Lease asset impairments and other charges (8) | (219) | (514) | ||
| Disposal related costs (9) | 81 | (1) | ||
| Goodwill impairment on business (10) | (223) | (33) | ||
| Adjusted income tax expense | $ | (31,951) | $ | (31,665) |
| Loss from equity method investment, net | $ | 2,347 | $ | 19,249 |
| Plus: | ||||
| Investments (6) | (2,347) | (19,249) | ||
| Adjusted loss from equity method investment, net | $ | — | $ | — |
ZIFF DAVIS, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES - CONTINUED
(UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
| Three months ended December 31, | ||||
|---|---|---|---|---|
| 2022 | 2021 | |||
| Total adjustments | $ | (36,782) | $ | 273,827 |
| Net income per diluted share from continuing operations | $ | 1.37 | $ | 7.81 |
| Adjustments * | $ | 0.89 | $ | (5.63) |
| Adjusted diluted EPS | $ | 2.26 | $ | 2.18 |
* The reconciliation of Net income per diluted share from continuing operations to Adjusted diluted EPS may not foot since each is calculated independently.
The Company discloses Adjusted diluted EPS as a supplemental non-GAAP financial performance measure, as it believes it is a useful metric by which to compare the performance of its business from period to period. The Company also understands that an Adjusted diluted EPS measure is broadly used by analysts, rating agencies and investors in assessing the Company’s performance. Accordingly, we believe that the presentation of Adjusted diluted EPS provides useful information to investors.
Adjusted diluted EPS is not in accordance with, or an alternative to, Net income per diluted share from continuing operations and may be different from non-GAAP measures with similar or even identical names used by other companies. In addition, Adjusted diluted EPS is not based on any comprehensive set of accounting rules or principles. The Adjusted diluted EPS measure has limitations in that it does not reflect all of the amounts associated with the Company’s results of operations determined in accordance with GAAP.
ZIFF DAVIS, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
| Year ended December 31, | ||||
|---|---|---|---|---|
| 2022 | 2021 | |||
| Cost of revenues | $ | 195,554 | $ | 188,053 |
| Plus: | ||||
| Share-based compensation (1) | (341) | (306) | ||
| Acquisition, integration and other costs (2) | (364) | (382) | ||
| Amortization(5) | (1,000) | (1,547) | ||
| Adjusted cost of revenues | $ | 193,849 | $ | 185,818 |
| Sales and marketing | $ | 490,777 | $ | 493,049 |
| Plus: | ||||
| Share-based compensation (1) | (3,083) | (1,288) | ||
| Acquisition, integration and other costs (2) | (6,293) | (1,824) | ||
| Adjusted sales and marketing | $ | 481,401 | $ | 489,937 |
| Research, development and engineering | $ | 74,093 | $ | 78,874 |
| Plus: | ||||
| Share-based compensation (1) | (2,503) | (1,984) | ||
| Acquisition, integration and other costs (2) | (1,199) | (1,457) | ||
| Adjusted research, development and engineering | $ | 70,391 | $ | 75,433 |
| General and administrative | $ | 404,263 | $ | 456,777 |
| Plus: | ||||
| Share-based compensation (1) | (20,674) | (20,551) | ||
| Acquisition, integration and other costs (2) | (9,570) | (6,987) | ||
| Amortization (5) | (156,922) | (185,855) | ||
| Investments (6) | — | (1,500) | ||
| Lease asset impairments and other charges (8) | (2,178) | (12,860) | ||
| Disposal related costs (9) | (1,328) | (607) | ||
| Adjusted general and administrative | $ | 213,591 | $ | 228,417 |
| Goodwill impairment on business | $ | 27,369 | $ | 32,629 |
| Plus: | ||||
| Goodwill impairment on business (10) | (27,369) | (32,629) | ||
| Adjusted goodwill impairment on business | $ | — | $ | — |
| Interest expense, net | $ | (33,842) | $ | (72,023) |
| Plus: | ||||
| Interest costs, net (3) | 433 | 21,278 | ||
| Adjusted interest expense, net | $ | (33,409) | $ | (50,745) |
| Gain (loss) on debt extinguishment, net | $ | 11,505 | $ | (5,274) |
| Plus: | ||||
| (Gain) loss on debt extinguishment (4) | (12,060) | 4,527 | ||
| Adjusted loss on debt extinguishment, net | $ | (555) | $ | (747) |
ZIFF DAVIS, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES - CONTINUED
(UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
| Year ended December 31, | ||||
|---|---|---|---|---|
| 2022 | 2021 | |||
| Gain on sale of businesses | $ | — | $ | (21,798) |
| Plus: | ||||
| Sale of assets (7) | — | 21,798 | ||
| Adjusted gain on sale of businesses | $ | — | $ | — |
| Loss on investments, net | $ | (46,743) | $ | (16,677) |
| Plus: | ||||
| Investments (6) | 46,743 | 16,677 | ||
| Adjusted loss on investments, net | $ | — | $ | — |
| Unrealized (loss) gain on short-term investments held at period end | $ | (7,145) | $ | 298,490 |
| Plus: | ||||
| Investments (6) | 7,145 | (298,490) | ||
| Adjusted unrealized (loss) gain on short-term investments held at period end, net | $ | — | $ | — |
| Other income, net | $ | 8,437 | $ | 1,293 |
| Plus: | ||||
| Investments (6) | (624) | — | ||
| Acquisition, integration and other costs (2) | (195) | — | ||
| Sale of assets (7) | — | 857 | ||
| Disposal related costs (9) | 203 | — | ||
| Adjusted other income, net | $ | 7,821 | $ | 2,150 |
| Income tax (expense) benefit | $ | (57,957) | $ | 14,199 |
| Plus the tax effect of: | ||||
| Share-based compensation (1) | (3,392) | (8,619) | ||
| Acquisition, integration and other costs (2) | (3,954) | (3,978) | ||
| Interest costs, net (3) | (60) | (5,802) | ||
| (Gain) loss on debt extinguishment, net (4) | 2,967 | (1,234) | ||
| Amortization (5) | (38,752) | (60,144) | ||
| Investments (6) | 15,686 | (5,572) | ||
| Sale of assets (7) | — | (7,193) | ||
| Lease asset impairments and other charges (8) | (538) | (3,527) | ||
| Disposal related costs (9) | (81) | (200) | ||
| Goodwill impairment on business (10) | (6,956) | (8,027) | ||
| Adjusted income tax expense | $ | (93,037) | $ | (90,097) |
| (Loss) income from equity method investment, net | $ | (7,730) | $ | 35,845 |
| Plus: | ||||
| Investments (6) | 7,730 | (35,845) | ||
| Adjusted (loss) income from equity method investment, net | $ | — | $ | — |
ZIFF DAVIS, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES - CONTINUED
(UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
| Year ended December 31, | ||||
|---|---|---|---|---|
| 2022 | 2021 | |||
| Total adjustments | $ | (247,119) | $ | 103,717 |
| Net income per diluted share from continuing operations | $ | 1.39 | $ | 8.38 |
| Adjustments * | $ | 5.26 | $ | (1.94) |
| Adjusted diluted EPS | $ | 6.65 | $ | 6.44 |
* The reconciliation of Net income per diluted share from continuing operations to Adjusted diluted EPS may not foot since each is calculated independently.
The Company discloses Adjusted diluted EPS as a supplemental non-GAAP financial performance measure, as it believes it is a useful metric by which to compare the performance of its business from period to period. The Company also understands that an Adjusted diluted EPS measure is broadly used by analysts, rating agencies and investors in assessing the Company’s performance. Accordingly, we believe that the presentation of Adjusted diluted EPS provides useful information to investors.
Adjusted diluted EPS is not in accordance with, or an alternative to, Net income per diluted share from continuing operations and may be different from non-GAAP measures with similar or even identical names used by other companies. In addition, Adjusted diluted EPS is not based on any comprehensive set of accounting rules or principles. The Adjusted diluted EPS measure has limitations in that it does not reflect all of the amounts associated with the Company’s results of operations determined in accordance with GAAP.
Non-GAAP Financial Measures
To supplement our condensed consolidated financial statements, which are prepared and presented in accordance with GAAP, we use the following non-GAAP financial measures: Revenues excluding divested businesses, Adjusted diluted EPS and Adjusted diluted EPS excluding divested business, Adjusted net income from continuing operations and Adjusted net income from continuing operations excluding divested businesses, Adjusted EBITDA and Adjusted EBITDA excluding divested businesses, Adjusted EBITDA margin and Adjusted EBITDA margin excluding divested businesses, and Free cash flow from continuing and discontinued operations (collectively the “non-GAAP financial measures”). The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with U.S. GAAP. We use these non-GAAP financial measures for financial and operational decision making and as a means to evaluate period-to-period comparisons. We believe that they provide useful information about core operating results, enhance the overall understanding of past financial performance and future prospects, and allow for greater transparency with respect to key metrics used by management in its financial and operational decision making.
Non-GAAP financial measures exclude the charges listed below. Excluding these charges from the non-GAAP measures facilitates comparisons to historical operating results and comparisons to peers, many of which exclude the similar items. We believe that non-GAAP financial measures excluding these items provide meaningful supplemental information regarding operational performance. We further believe these measures are useful to investors in that they allow for greater transparency of certain line items in the Company’s financial statements.
(1) Share-Based Compensation. We exclude stock-based compensation because it is non-cash in nature.
(2) Acquisition, Integration and Other costs. We exclude certain acquisition and related integration costs, including adjustments to contingent consideration, lease terminations, retention bonuses, other acquisition-specific items, and other costs, including severance.
(3) Interest Costs, Net. In June 2014, we issued $402.5 million aggregate principal amount of 3.25% convertible senior notes and in November 2019, we issued $550.0 million aggregate principal amount of 1.75% convertible senior notes. For the three months and year ended December 31, 2021, we separately accounted for the value of the liability and equity features of the outstanding convertible senior notes in a manner that reflects the Company’s non-convertible debt borrowing rate. The value of the conversion feature, reflected as a debt discount, was amortized to interest expense over time. Accordingly, we recognized imputed interest expense on our 3.25% and 1.75% convertible senior notes of approximately 5.8% and 5.5%, respectively, in the Company’s statement of operations during the three months and year ended December 31, 2021. We excluded the difference between the imputed interest expense and the coupon interest expense of 3.25% and 1.75%, respectively, because this difference was non-cash in nature and because we believe that the non-GAAP financial measures excluding this item provide meaningful supplemental information regarding core operational performance. During 2022, we adopted ASU 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, whereby a portion of the convertible senior notes is no longer recorded in equity with a debt discount and amortization in interest expense. Therefore, no similar adjustment was made for the three months and year ended December 31, 2022. We have also excluded the difference between the imputed and coupon interest expense associated with the 4.625% Senior Notes in each period presented.
(4) (Gain) loss on extinguishment of debt. We exclude gains and losses associated with extinguishment of debt. For the three months and year ended December 31, 2022, we recorded a gain on extinguishment associated with the repurchase of our 4.625% Senior Notes, which is included within this non-GAAP adjustment.
(5) Amortization. We exclude amortization of patents and acquired intangible assets because it is non-cash in nature.
(6) Change in Value on Investments. We exclude the change in value of our investments, which includes income (loss) from equity method investments, the unrealized gain (loss) on our investment in Consensus and other income (loss) on investments (including Consensus).
(7) Gain (Loss) on Sale of Assets. We exclude the gain (loss) on the sale of certain assets.
(8) Lease Asset Impairments and Other Charges. We exclude lease asset impairments and other charges as they are non-cash in nature.
(9) Disposal Related Costs. We exclude expenses associated with the disposal of certain businesses.
(10) Goodwill Impairment on Business. We exclude the goodwill impairment on business because it is non-cash in nature.
(11) Convertible Debt Dilution. We exclude convertible debt dilution from diluted earnings per share.
We present Adjusted cost of revenues, Adjusted sales and marketing, Adjusted research, development and engineering, Adjusted general and administrative, Adjusted goodwill impairment on business, Adjusted interest expense, net, Adjusted gain on sale of businesses, Adjusted interest expense, net, Adjusted (gain) loss on extinguishment of debt, net, Adjusted loss on investments, net, Adjusted unrealized loss on short-term investments held at period end, net, Adjusted Other income (expense), Adjusted income tax expense (benefit), Adjusted income (loss) from equity method investment, net and Adjusted net income because we believe that these provide useful information about our operating results and enhance the overall understanding of past financial performance and future prospects.
Financial Results Excluding Divested Businesses
Key financial results excluding divested businesses for the years ended December 31, 2022 and 2021, are set forth in the following table (in millions, except per share amounts). The financial results excluding divested businesses below reflect the Company’s results taking into consideration the sale of certain Voice assets in the United Kingdom as well as the sale of the Company’s B2B Backup business as if they had occurred in a prior period presented.
| Year ended December 31, | ||||
|---|---|---|---|---|
| 2022 | ||||
| Total Revenues | 1,391.0 | $1,416.7 | ||
| Revenue adjustments related to divested businesses | — | $(33.5) | ||
| Total Revenue excluding divested businesses (1) | 1,391.0 | $1,383.2 | ||
| Adjusted diluted EPS (1) | 6.65 | $6.44 | ||
| Adjusted diluted EPS adjustments related to divested businesses | — | $(0.23) | ||
| Adjusted diluted EPS excluding divested businesses (1) | 6.65 | $6.21 | ||
| Adjusted net income from continuing operations | 312.6 | $297.7 | ||
| Net income from continuing operations adjustments related to divested businesses | — | $(10.3) | ||
| Adjusted net income from continuing operations excluding divested businesses | 312.6 | $287.4 | ||
| Adjusted EBITDA (1) | 507.2 | $499.0 | ||
| EBITDA adjustments related to divested businesses | — | $(14.1) | ||
| Adjusted EBITDA excluding divested businesses (1) | 507.2 | $484.9 | ||
| Adjusted EBITDA margin (1) | 36.5% | 35.2% | ||
| EBITDA margin adjustments related to divested businesses | 0.0% | (0.1)% | ||
| Adjusted EBITDA margin excluding divested businesses (1) | 36.5% | 35.1% |
All values are in US Dollars.
(1)Refer to the notes earlier in this Press Release.
ZIFF DAVIS, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(UNAUDITED, IN THOUSANDS)
The following table sets forth a reconciliation of Adjusted EBITDA to Net income from continuing operations:
| Three months ended December 31, | Year ended <br>December 31, | |||||||
|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | 2022 | 2021 | |||||
| Net income from continuing operations | $ | 69,180 | $ | 378,891 | $ | 65,466 | $ | 401,395 |
| Plus: | ||||||||
| Interest expense, net | 5,423 | 15,043 | 33,842 | 72,023 | ||||
| Loss (gain) on debt extinguishment, net | — | 5,274 | (11,505) | 5,274 | ||||
| Loss on sale of businesses | — | — | — | 21,798 | ||||
| Unrealized (gain) loss on short-term investments held at the reporting date | (7,020) | (298,490) | 7,145 | (298,490) | ||||
| (Gain) loss on investments, net | (1,029) | — | 46,743 | 16,677 | ||||
| Other expense (income), net | 4,525 | (1,759) | (8,437) | (1,293) | ||||
| Income tax expense (benefit) | 24,726 | 5,684 | 57,957 | (14,199) | ||||
| Loss (income) from equity method investment, net | (2,347) | (19,249) | 7,730 | (35,845) | ||||
| Depreciation and amortization | 58,520 | 61,791 | 233,400 | 249,292 | ||||
| Reconciliation of GAAP to Non-GAAP financial measures: | ||||||||
| Share-based compensation | 5,795 | 6,127 | 26,601 | 24,129 | ||||
| Acquisition, integration and other costs | 9,753 | 3,535 | 17,426 | 10,650 | ||||
| Lease asset impairments and other charges | 778 | 3,133 | 2,178 | 12,860 | ||||
| Investments | — | 1,500 | — | 1,500 | ||||
| Disposal related costs | — | 135 | 1,328 | 606 | ||||
| Goodwill impairment on business | — | — | 27,369 | 32,629 | ||||
| Adjusted EBITDA | $ | 168,304 | $ | 161,615 | $ | 507,243 | $ | 499,006 |
Adjusted EBITDA as calculated above represents net income from continuing operations before interest, gain on sale of businesses, unrealized (gain) loss on short-term investments held at the reporting date, other (income) loss, net, income tax expense (benefit), loss (income) from equity method investments, net, depreciation and amortization and the items used to reconcile GAAP to Non-GAAP financial measures, including (1) share-based compensation, (2) certain acquisition, integration and other costs, (3) lease asset impairments and other charges, (4) disposal related costs and (5) goodwill impairment on business. We disclose Adjusted EBITDA as a supplemental non-GAAP financial performance measure as we believe it is a useful metric by which to compare the performance of our business from period to period. We understand that measures similar to Adjusted EBITDA are broadly used by analysts, rating agencies and investors in assessing our performance. Accordingly, we believe that the presentation of Adjusted EBITDA provides useful information to investors.
Adjusted EBITDA is not in accordance with, or an alternative to, net income from continuing operations, and may be different from non-GAAP measures used by other companies. In addition, Adjusted EBITDA is not based on any comprehensive set of accounting rules or principles. This Adjusted measure has limitations in that it does not reflect all of the amounts associated with the Company’s results of operations determined in accordance with GAAP.
ZIFF DAVIS, INC. AND SUBSIDIARIES
NON-GAAP FINANCIAL MEASURES
(UNAUDITED, IN THOUSANDS)
| 2022 | Q1 | Q2 | Q3 | Q4(1) | YTD(1) | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| Net cash provided by operating activities from continuing and discontinued operations | $ | 116,511 | $ | 75,973 | $ | 100,735 | $ | 43,225 | $ | 336,444 |
| Less: Purchases of property and equipment | (30,502) | (23,374) | (26,891) | (25,387) | (106,154) | |||||
| Free cash flow from continuing and discontinued operations | $ | 86,009 | $ | 52,599 | $ | 73,844 | $ | 17,838 | $ | 230,290 |
| 2021 | Q1 | Q2(2) | Q3 | Q4 | YTD | |||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Net cash provided by operating activities from continuing and discontinued operations | $ | 178,724 | $ | 111,298 | $ | 140,230 | $ | 86,284 | $ | 516,536 |
| Less: Purchases of property and equipment | (26,269) | (31,497) | (29,729) | (26,245) | (113,740) | |||||
| Add: Contingent consideration | — | 685 | — | — | 685 | |||||
| Free cash flow from continuing and discontinued operations | $ | 152,455 | $ | 80,486 | $ | 110,501 | $ | 60,039 | $ | 403,481 |
(1)For the three months and year ended December 31, 2022, the Loss from discontinued operations, net of income taxes did not have an impact on Net cash provided by operating activities from continuing and discontinued operations.
(2)Free cash flows from continuing and discontinued operations of $80.5 million for Q2 2021 is before the effect of payments associated with certain contingent consideration related to acquisitions.
The Company discloses Free cash flows from continuing and discontinued operations as supplemental non-GAAP financial performance measures, as it believes these are useful metrics by which to compare the performance of its business from period to period. The Company also understands that these non-GAAP measures are broadly used by analysts, rating agencies and investors in assessing the Company’s performance. Accordingly, we believe that the presentation of these non-GAAP financial measures provides useful information to investors.
Free cash flows from continuing and discontinued operations are not in accordance with, or an alternative to, Net cash provided by operating activities and Net cash provided by operating activities from continuing and discontinued operations, respectively, and may be different from non-GAAP measures with similar or even identical names used by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. These non-GAAP measures have limitations in that they do not reflect all of the amounts associated with the Company’s results of operations determined in accordance with GAAP.
ZIFF DAVIS, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(UNAUDITED, IN THOUSANDS)
| Three months ended December 31, 2022 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Digital | Cybersecurity | |||||||
| Media | and Martech | Corporate | Total | |||||
| Revenues | $ | 321,670 | $ | 75,030 | $ | — | $ | 396,700 |
| Operating profit | ||||||||
| Income (loss) from operations | $ | 95,015 | $ | 11,554 | $ | (13,111) | $ | 93,458 |
| Non-GAAP adjustments: | ||||||||
| Share-based compensation | 2,225 | 563 | 3,007 | 5,795 | ||||
| Acquisition, integration and other costs | 7,784 | 1,179 | 790 | 9,753 | ||||
| Amortization | 29,731 | 8,121 | 10 | 37,862 | ||||
| Lease asset impairments and other charges | 791 | (13) | — | 778 | ||||
| Adjusted operating profit (loss) | $ | 135,546 | $ | 21,404 | $ | (9,304) | $ | 147,646 |
| Depreciation | 16,630 | 4,028 | — | 20,658 | ||||
| Adjusted EBITDA | $ | 152,176 | $ | 25,432 | $ | (9,304) | $ | 168,304 |
Table above excludes certain intercompany allocations.
ZIFF DAVIS, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(UNAUDITED, IN THOUSANDS)
| Three months ended December 31, 2021 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Digital | Cybersecurity | |||||||
| Media | and Martech | Corporate | Total | |||||
| Revenues | $ | 325,747 | $ | 82,881 | $ | — | $ | 408,628 |
| Operating profit | ||||||||
| Income (loss) from operations | $ | 92,422 | $ | 9,492 | $ | (16,520) | $ | 85,394 |
| Non-GAAP adjustments: | ||||||||
| Share-based compensation | 2,178 | 1,227 | 2,722 | 6,127 | ||||
| Acquisition, integration and other costs | 855 | 1,473 | 1,207 | 3,535 | ||||
| Amortization | 32,746 | 12,486 | 71 | 45,303 | ||||
| Lease asset impairments and other charges | 3,666 | (533) | — | 3,133 | ||||
| Investments | — | — | 1,500 | 1,500 | ||||
| Disposal related costs | — | 84 | 51 | 135 | ||||
| Adjusted operating profit (loss) | $ | 131,867 | $ | 24,229 | $ | (10,969) | $ | 145,127 |
| Depreciation | 13,597 | 2,636 | 255 | 16,488 | ||||
| Adjusted EBITDA | $ | 145,464 | $ | 26,865 | $ | (10,714) | $ | 161,615 |
Table above excludes certain intercompany allocations.
ZIFF DAVIS, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(UNAUDITED, IN THOUSANDS)
| Year ended December 31, 2022 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Digital | Cybersecurity | |||||||
| Media | and Martech | Corporate | Total | |||||
| Revenues | $ | 1,078,391 | $ | 312,606 | $ | — | $ | 1,390,997 |
| Operating profit | ||||||||
| Income (loss) from operations | $ | 198,171 | $ | 50,960 | $ | (50,190) | $ | 198,941 |
| Non-GAAP adjustments: | ||||||||
| Share-based compensation | 10,433 | 4,280 | 11,888 | 26,601 | ||||
| Acquisition, integration and other costs | 14,121 | 2,111 | 1,194 | 17,426 | ||||
| Amortization | 122,869 | 35,025 | 28 | 157,922 | ||||
| Lease asset impairments and other charges | 1,631 | 547 | — | 2,178 | ||||
| Disposal related costs | 11 | — | 1,317 | 1,328 | ||||
| Goodwill impairment on a business | 27,369 | — | — | 27,369 | ||||
| Adjusted operating profit (loss) | $ | 374,605 | $ | 92,923 | $ | (35,763) | $ | 431,765 |
| Depreciation | 61,789 | 13,689 | — | 75,478 | ||||
| Adjusted EBITDA | $ | 436,394 | $ | 106,612 | $ | (35,763) | $ | 507,243 |
Table above excludes certain intercompany allocations.
ZIFF DAVIS, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(UNAUDITED, IN THOUSANDS)
| Year ended December 31, 2021 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Digital | Cybersecurity | |||||||
| Media | and Martech | Corporate | Total | |||||
| Revenues | $ | 1,068,476 | $ | 348,246 | $ | — | $ | 1,416,722 |
| Operating profit | ||||||||
| Income (loss) from operations | $ | 216,950 | $ | 10,769 | $ | (60,379) | $ | 167,340 |
| Non-GAAP adjustments: | ||||||||
| Share-based compensation | 7,734 | 4,481 | 11,914 | 24,129 | ||||
| Acquisition, integration and other costs | 3,449 | 5,968 | 1,233 | 10,650 | ||||
| Amortization | 144,621 | 42,493 | 288 | 187,402 | ||||
| Lease asset impairments and other charges | 12,229 | 631 | — | 12,860 | ||||
| Investments | — | — | 1,500 | 1,500 | ||||
| Disposal related costs | — | 84 | 522 | 606 | ||||
| Goodwill impairment on a business | — | 32,629 | — | 32,629 | ||||
| Adjusted operating profit (loss) | $ | 384,983 | $ | 97,055 | $ | (44,922) | $ | 437,116 |
| Depreciation | 49,151 | 12,484 | 255 | 61,890 | ||||
| Adjusted EBITDA | $ | 434,134 | $ | 109,539 | $ | (44,667) | $ | 499,006 |
Table above excludes certain intercompany allocations.
26
zdq42022earningspresenta
www.ziffdavis.com©2023 Ziff Davis. All rights reserved. FOURTH QUARTER AND FULL YEAR 2022 RESULTS February 15, 2023
2 Certain statements in this presentation are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, particularly those regarding our 2023 Financial Guidance. Such forward-looking statements are subject to numerous assumptions, risks and uncertainties that could cause actual results to differ materially from those described in those statements. These forward-looking statements are based on management’s expectations or beliefs as of February 15, 2023. Readers should carefully review the Risk Factors slide of this presentation, as well as the risk factors set forth in our Annual Report on Form 10-K filed by us on March 15, 2022 with the Securities and Exchange Commission (“SEC”) and the other reports we file from time to time with the SEC. We undertake no obligation to revise or publicly release any updates to such statements based on future information or actual results. Such forward-looking statements address the following subjects, among others: • Future operating results • Ability to acquire businesses on acceptable terms and integrate and recognize synergies from acquired businesses • Deployment of cash and investment balances to grow the company • Subscriber growth, retention, usage levels and average revenue per account • Digital media and cloud services growth • International growth • New products, services, features and technologies • Corporate spending including stock repurchases • Intellectual property and related licensing revenues • Liquidity and ability to repay or refinance indebtedness • Systems capacity, coverage, reliability and security • Regulatory developments and taxes All information in this presentation speaks as of February 15, 2023 and any redistribution or rebroadcast of this presentation after that date is not intended and will not be construed as updating or confirming such information. Capitalized terms not otherwise defined in this presentation have the meanings set forth in Ziff Davis' February 15, 2023 earnings press release. Third Party Information All third-party trademarks, including names, logos and brands, referenced by the Company in this presentation are property of their respective owners. All references to third-party trademarks are for identification purposes only and shall be considered nominative fair use under trademark law. Industry, Market and Other Data Certain information contained in this presentation concerning our industry and the markets in which we operate, including our general expectations and market position, market opportunity and market size, is based on reports from various sources. Because this information involves a number of assumptions and limitations, you are cautioned not to give undue weight to such information. We have not independently verified market data and industry forecasts provided by any of these or any other third-party sources referred to in this presentation. In addition, projections, assumptions and estimates of our future performance and the future performance of the industry in which we operate are necessarily subject to a high degree of uncertainty and risk due to a variety of factors. These and other factors could cause results to differ materially from those expressed in the estimates made by third parties and by us. Non-GAAP Financial information Included in this presentation are certain financial measures that are not calculated in accordance with U.S. generally accepted accounting principles ("GAAP") designed to supplement, and not substitute, Ziff Davis’ financial information presented in accordance with GAAP. The non- GAAP measures as defined by Ziff Davis may not be comparable to similar non-GAAP measures presented by other companies. The presentation of such measures, which may include adjustments to exclude unusual or non-recurring items, should not be construed as an inference that Ziff Davis’ future results or leverage will be unaffected by other unusual or non-recurring items. Please see the appendix to this presentation for how we define these non-GAAP measures, a discussion of why we believe they are useful to investors and certain limitations thereof, and reconciliations thereof to the most directly comparable GAAP measures. Results from Operations Excluding Divested Businesses Unless otherwise specified, all financial data and operating metrics presented herein for Ziff Davis are presented giving effect to the February 2021 divestiture of the Voice assets in the United Kingdom, as well as the September 2021 sale of the Company’s B2B Backup businesses, together, (the “Divested Businesses”), and the separation of Consensus Cloud Solutions, Inc. (“Consensus”) as described in the Form 10 filed by Consensus with the Securities and Exchange Commission, as if they had occurred prior to the periods presented. Safe Harbor for Forward-looking Statements
3 Some factors that could cause actual results to differ materially from those expressed or implied by the forward-looking statements contained in this presentation include, but are not limited to, our ability and intention to: • Manage certain risks inherent to our business, such as costs associated with fraudulent activity, system failure or security breach; effectively maintaining and managing our billing systems; time and resources required to manage our legal proceedings; liability for legal and other claims; or adhering to our internal controls and procedures; • Compete with other similar providers with regard to price, service, functionality; • Achieve business and financial objectives in light of burdensome domestic and international telecommunications, internet or other regulations, including regulations related to data privacy, access, security, retention, and sharing; • Successfully manage our growth, including but not limited to our operational and personnel-related resources, and integration of newly acquired businesses; • Successfully adapt to technological changes and diversify services and related revenues at acceptable levels of financial return; • Successfully develop and protect our intellectual property, both domestically and internationally, including our brands, patents, trademarks and domain names, and avoid infringing upon the proprietary rights of others; • Recruit and retain key personnel; • Realize the expected benefits of the cloud fax spin-off transaction or the sale of the B2B Backup business; and • Other factors set forth in our Annual Report on Form 10-K filed by us on March 15, 2022 with the SEC and the other reports we file from time to time with the SEC. • Sustain growth or profitability, particularly in light of an uncertain U.S. or worldwide economy, including inflation, supply chain and other factors and their related impact on customer acquisition and retention rates, customer usage levels, and credit and debit card payment declines; • Maintain and increase our customer base and average revenue per user; • Generate sufficient cash flow to make interest and debt payments, reinvest in our business, and pursue desired activities and businesses plans while satisfying restrictive covenants relating to debt obligations; • Acquire businesses on acceptable terms and successfully integrate and realize anticipated synergies from such acquisitions; • Continue to expand our businesses and operations internationally in the wake of numerous risks, including adverse currency fluctuations, difficulty in staffing and managing international operations, higher operating costs as a percentage of revenues, or the implementation of adverse regulations; • Maintain our financial position, operating results and cash flows in the event that we incur new or unanticipated costs or tax liabilities, including those relating to federal and state income tax and indirect taxes, such as sales, value-added and telecommunication taxes; • Accurately estimate the assumptions underlying our effective worldwide tax rate; • Maintain favorable relationships with critical third-party vendors whose financial condition will not negatively impact the services they provide; • Create compelling digital media content causing increased traffic and advertising levels; additional advertisers or an increase in advertising spend; and effectively target digital media advertisements to desired audiences; Risk Factors
4 Q4 2022 Consolidated Financial Snapshot (1) 1. See slides 14-18 for a GAAP reconciliation of Adjusted EBITDA and Adjusted Diluted EPS for the Company and by business.
5 FY 2022 Consolidated Financial Snapshot (1) 1. See slides 14-18 for a GAAP to non-GAAP reconciliation of Adjusted EBITDA and Adjusted Diluted EPS for the Company and by Business, and Slide 22-23 for key financial results excluding the Divested Businesses.
6 1. Figures exclude any intercompany eliminations; 2021 presentations included the elimination of intercompany revenues. 2. Net Advertising Revenue Retention = (Revenue Recognized by Prior Year Advertisers in Current Year Period (excluding revenue from acquisitions during the stub period)) / (Revenue Recognized by Prior Year Advertisers in Prior Year Period (excluding revenue from acquisitions during the stub period)). Excludes advertisers that generated less than $10,000 of revenue in the measurement period; combined retention is the weighted average net advertising revenue retention of the company. As a result of the aggregation of certain reporting systems related to the integration of several acquisitions, retention data for Q1 2021 and Q2 2021 reflects certain estimates. 3. Excludes advertisers that spent less than $2,500 in the quarter in either the Tech, Shopping, Entertainment or Health & Wellness business units. 4. Total gross quarterly advertising revenues divided by advertisers as defined in footnote (3). Advertising Performance Quarterly Advertising Metrics Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Net Revenue Retention (2) 103.7% 111.2% 114.1% 111.9% 106.6% 99.6% 94.1% 92.0% Advertisers (3) 1,705 1,913 1,908 2,198 1,950 2,016 1,953 2,044 Quarterly Revenue per Advertiser (4) $103,981 $103,704 $104,189 $119,932 $87,214 $93,848 $95,710 $118,370 2021 2022
7 1. Quarterly average of the month-end subscriber counts; inclusive of the Digital Media and Cybersecurity & Martech Businesses. A subscriber is defined a direct customer, including customers who have paused but not cancelled their subscription. If there is a reseller or a partner without visibility into the number of underlying subscribers, they are counted as one subscriber. 2. Total gross quarterly subscription revenues divided by customers as defined in footnote (1); 3. “Churn Rate” = A / B. A = (average revenue per subscription in the prior month) x (number of cancels in current month), calculated at each business and aggregated. B = subscription revenue in the current month, calculated at each business and aggregated. Churn rate is presented on a quarterly basis. For Ookla, this is calculated by taking the sum of the monthly revenue from the specific cancelled agreements. Subscription Performance Quarterly Subscription Metrics Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Subscribers (1) (in '000s) 2,332 2,340 2,290 2,206 2,131 2,393 3,050 3,032 Average Quarterly Revenue per Subscriber (2) $50.54 $53.17 $59.08 $60.89 $63.85 $57.64 $46.87 $46.33 Churn Rate (3) 2.75% 2.51% 2.99% 2.97% 3.22% 2.92% 3.55% 3.81% 2021 2022
8 1. Revenue from an acquired business becomes organic revenue in the first month in which the company can compare a full month in the current year against a full month under its ownership in a prior year (i.e., the 12 months measurement period for acquired revenue starts with the first full month under its ownership). Organic Growth (1) Year over Year Growth Rates Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Organic Revenue 9% 20% 12% 2% 10% (3%) (5%) (7%) (7%) (5%) Total Revenue 29% 42% 35% 10% 27% 5% 2% (1%) (3%) 1% 2021 2022
9 Ziff Davis Capital Structure 1. Reflects Ziff Davis’ retained stake in Consensus Cloud Solutions, Inc. 2. Reflects the face amount of the outstanding debt. ($ millions) December 31, 2022 Cash and Cash Equivalents $653 Short-term Investments (1) 58 Long-term Investments 128 Total Cash and Investments $839 4.625% High-Yield Notes $460 1.75% Convertible Notes 550 Total Gross Debt (2) $1,010 Multiple of FY22 Adj. EBITDA Gross Debt $1,010 2.0x Gross Debt less Cash $357 0.7x Gross Debt less Cash and Investments $171 0.3x
2023 FINANCIAL GUIDANCE
11 2023 Outlook (Forward-Looking Statements) 1. Does not include any assumed dilution from the outstanding 1.75% convertible notes Revenue at Midpoint Revenue Growth Advertising Low single-digit decline Subscriptions Low single-digit growth Other Mid single-digit growth Distribution of Revenues First Quarter ~20% of full year revenues Fourth Quarter ~30% of full year revenues Adjusted EBITDA at Midpoint Adjusted EBITDA Margin ~36% Corporate Non-GAAP Tax Rate 23.0 - 25.0% Share-Based Compensation $28MM - $30MM Diluted Share Count (1) 46.75MM - 47.25MM
12 2023 Guidance (Forward-Looking Statements) 1. Refer to slides 14-18 for examples of adjustments to Adjusted EBITDA and Adjusted Diluted EPS. Our annual guidance of Revenues, Adjusted EBITDA and Adjusted Diluted EPS (1) $ in MM, except for per share amounts Low Midpoint High Midpoint YoY % Increase vs 2022A Revenue $1,350 $1,379 $1,408 (0.9%) Adjusted EBITDA (1) $479 $497 $514 (2.0%) Adjusted Diluted EPS (1) $6.02 $6.28 $6.54 (5.6%) Ziff Davis FY 2023 Guidance Range
SUPPLEMENTAL INFORMATION
14 Q4 2022 Reconciliation of GAAP to Non-GAAP Financial Measures Note: Adjusted net income from continuing operations is Net income from continuing operations with the following modifications: (1) elimination of share-based compensation; (2) elimination of certain acquisition, integration and other costs; (3) elimination of certain interest costs; (4) elimination of (gains) losses resulted from the extinguishment of debt; (5) elimination of amortization of patents and intangible assets that we acquired; (6) elimination of change in value on investment; (7) elimination of (gains) losses on sale of assets; (8) elimination of lease asset impairments and other charges; (9) elimination of disposal related costs; (10) elimination of goodwill impairment on business; and (11) elimination of dilutive effect of the convertible debt $ in 000's 2021 2022 Cost of revenues 45,718$ 50,847$ Plus: Share-based compensation (1) (86) (52) Acquisition, integration and other costs (2) (96) (245) Amortization (5) (250) (221) Adjusted cost of revenues 45,286$ 50,329$ Sales and marketing 138,100$ 129,764$ Plus: Share-based compensation (1) (409) (636) Acquisition, integration and other costs (2) (178) (3,825) Adjusted sales and marketing 137,513$ 125,303$ Research, development and engineering 21,875$ 18,210$ Plus: Share-based compensation (1) (594) (455) Acquisition, integration and other costs (2) (358) (528) Adjusted research, development and engineering 20,923$ 17,227$ General and administrative 117,541$ 104,421$ Plus: Share-based compensation (1) (5,038) (4,652) Acquisition, integration and other costs (2) (2,903) (5,155) Amortization (5) (45,053) (37,641) Investments (6) (3,133) Lease asset impairments and other charges (8) (3,133) (778) Disposal related costs (9) (136) - Adjusted general and administrative 59,778$ 56,195$ Interest expense, net (15,043)$ (5,423)$ Plus: Interest costs, net (3) 4,775 96 Adjusted interest expense, net (10,268)$ (5,327)$ Loss (Gain) on debt extinguishment, net (5,274)$ -$ Plus: Loss (gain) on debt extinguishment (4) 4,527 - Adjusted loss on debt extinguishment, net (747)$ -$ Gain on investment, net -$ 1,029$ Plus: Investments (6) - (1,029) Adjusted gain on investments, net -$ -$ Unrealized gain (loss) on short-term investments held at period end 298,490$ 7,020$ Plus: Investments (6) (298,490) (7,020) Adjusted unrealized gain (loss) on short-term investments held at period end, net -$ -$ Other income (expense), net 1,759$ (4,525)$ Plus: Acquisition, integration and other costs (2) - (195) Sale of assets (7) 857 - Disposal related costs (9) - 314 Adjusted other income (expense), net 2,616$ (4,406)$ Income tax (expense) benefit (5,684)$ (24,726)$ Plus: Share-based compensation (1) (1,825) 249 Acquisition, integration and other costs (2) (1,611) (2,158) Interest costs, net (3) (1,758) 23 Loss on debt extinguishment, net (1,235) — Amortization (5) (16,722) (9,163) Investments (6) (483) 4,185 Sale of assets (7) (1,799) — Lease asset impairments and other charges (8) (514) (219) Disposal related costs (9) (1) 81 Goodwill impairment on business (10) (33) (223) Adjusted income tax expense (31,665)$ (31,951)$ Income (loss) from equity method investment, net 19,249$ 2,347$ Plus: Investments (6) (19,249) (2,347) Adjusted (loss) income from equity method investment, net -$ -$ Total adjustments 273,827$ (36,782)$ Net income per diluted share from continuing operations $7.81 $1.37 Adjustments * ($5.63) $0.89 Adjusted diluted EPS $2.18 $2.26 Three Months Ended December 31,
15 FY 2022 Reconciliation of GAAP to Non-GAAP Financial Measures Note: Adjusted net income from continuing operations is Net income from continuing operations with the following modifications: (1) elimination of share-based compensation; (2) elimination of certain acquisition, integration and other costs; (3) elimination of certain interest costs; (4) elimination of (gains) losses resulted from the extinguishment of debt; (5) elimination of amortization of patents and intangible assets that we acquired; (6) elimination of change in value on investment; (7) elimination of (gains) losses on sale of assets; (8) elimination of lease asset impairments and other charges; (9) elimination of disposal related costs; (10) elimination of goodwill impairment on business; and (11) elimination of dilutive effect of the convertible debt $ in 000's 2021 2022 Cost of revenues 188,053$ 195,554$ Plus: Share-based compensation (1) (306) (341) Acquisition, integration and other costs (2) (382) (364) Amortization (5) (1,547) (1,000) Adjusted cost of revenues 185,818$ 193,849$ Sales and marketing 493,049$ 490,777$ Plus: Share-based compensation (1) (1,288) (3,083) Acquisition, integration and other costs (2) (1,824) (6,293) Adjusted sales and marketing 489,937$ 481,401$ Research, development and engineering 78,874$ 74,093$ Plus: Share-based compensation (1) (1,984) (2,503) Acquisition, integration and other costs (2) (1,457) (1,199) Adjusted research, development and engineering 75,433$ 70,391$ General and administrative 456,777$ 404,263$ Plus: Share-based compensation (1) (20,551) (20,674) Acquisition, integration and other costs (2) (6,987) (9,570) Amortization (5) (185,855) (156,922) Investments (6) (1,500) - Lease asset impairments and other charges (8) (12,860) (2,178) Disposal related costs (9) (607) (1,328) Adjusted general and administrative 228,417$ 213,591$ Goodwill impairment on business 32,629$ 27,369$ Plus: Goodwill impairment on business (10) (32,629) (27,369) Adjusted goodwill impairment on business -$ -$ Interest expense, net (72,023)$ (33,842)$ Plus: Interest costs, net (3) 21,278 433 Adjusted interest expense, net (50,745)$ (33,409)$ Loss (Gain) on debt extinguishment, net (5,274)$ 11,505$ Plus: Loss (gain) on debt extinguishment (4) 4,527 (12,060) Adjusted loss on debt extinguishment, net (747)$ (555)$ Gain on sale of businesses (21,798)$ -$ Plus: Sale of assets (7) 21,798 - Adjusted gain on sale of businesses -$ -$ Gain on investment, net (16,677)$ (46,743)$ Plus: Investments (6) 16,677 46,743 Adjusted gain on investments, net -$ -$ Unrealized gain (loss) on short-term investments held at period end 298,490$ (7,145)$ Plus: Investments (6) (298,490) 7,145 Adjusted unrealized gain (loss) on short-term investments held at period end, net -$ -$ Other income (expense), net 1,293$ 8,437$ Plus: Acquisition, integration and other costs (2) - (195) Sale of assets (7) 857 - Disposal related costs (9) - 203 Adjusted other income (expense), net 2,150$ 7,821$ Income tax (expense) benefit 14,199$ (57,957)$ Plus: Share-based compensation (1) (8,619) (3,392) Acquisition, integration and other costs (2) (3,978) (3,954) Interest costs, net (3) (5,802) (60) Loss on debt extinguishment, net (1,234) 2,967 Amortization (5) (60,144) (38,752) Investments (6) (5,572) 15,686 Sale of assets (7) (7,193) - Lease asset impairments and other charges (8) (3,527) (538) Disposal related costs (9) (200) (81) Goodwill impairment on business (10) (8,027) (6,956) Adjusted income tax expense (90,097)$ (93,037)$ Income (loss) from equity method investment, net 35,845$ (7,730)$ Plus: Investments (6) (35,845) 7,730 Adjusted (loss) income from equity method investment, net -$ -$ Total adjustments 103,717$ (247,119)$ Net income per diluted share from continuing operations $8.38 $1.39 Adjustments * ($1.94) $5.26 Adjusted diluted EPS $6.44 $6.65 Year ended December 31,
16 GAAP Reconciliation – Free Cash Flow (1)(2) 1. Free cash flow from continuing and discontinued operations is defined as net cash provided by operating activities from continuing and discontinued operations, less purchases of property and equipment from continuing operations, plus contingent consideration from continuing and discontinued operations. 2. 2021 figures include the contribution from Consensus and the divested B2B Backup and Voice UK assets. $ in 000's Ziff Davis 2021 2022 2021 2022 Net cash provided by operating activities from continuing and discontinued operations 86,284$ 43,225$ 516,536$ 336,444$ Less: Purchases of property and equipment (26,245) (25,387) (113,740) (106,154) Add: Contingent consideration - - 685 - Free cash flow from continuing and discontinued operations (2) 60,039$ 17,838$ 403,481$ 230,290$ Three Months Ended December 31, Year Ended December 31,
17 GAAP Reconciliation – Adjusted EBITDA $ in 000's Ziff Davis 2021 2022 2021 2022 Net income from continuing operations 378,891$ 69,180$ 401,395$ 65,466$ Plus: Interest expense, net 15,043 5,423 72,023 33,842 Loss (gain) on debt extinguishment, net 5,274 - 5,274 (11,505) Loss on sale of businesses - - 21,798 - Unrealized (gain) loss on short-term investments held at the reporting date (298,490) (7,020) (298,490) 7,145 (Gain) loss on investments, net - (1,029) 16,677 46,743 Other (income) loss, net (1,759) 4,525 (1,293) (8,437) Income tax expense (benefit) 5,684 24,726 (14,199) 57,957 Loss (income) from equity method investment, net (19,249) (2,347) (35,845) 7,730 Depreciation and amortization 61,791 58,520 249,292 233,400 Reconciliation of GAAP to Non-GAAP financial measures: Share-based compensation 6,127 5,795 24,129 26,601 Acquisition-related integration costs 3,535 9,753 10,650 17,426 Lease Impairments and other charges 3,133 778 12,860 2,178 Investments 1,500 - 1,500 - Disposal related costs 135 - 606 1,328 Goodwill impairment on business - - 32,629 27,369 Adjusted EBITDA 161,615$ 168,304$ 499,006$ 507,243$ Three Months Ended December 31, Year Ended December 31,
18 NOTE: Table above excludes certain intercompany allocations Q4 2022 Reconciliation of GAAP to Adjusted EBITDA $ in 000's Revenues Revenues 321,670$ 75,030$ -$ 396,700$ Operating profit Income (loss) from operations 95,015$ 11,554$ (13,111)$ 93,458$ Non-GAAP adjustments: Share-based compensation 2,225 563 3,007 5,795 Acquisition, integration, and other costs 7,784 1,179 790 9,753 Amortization 29,731 8,121 10 37,862 Lease asset impairments and other charges 791 (13) - 778 Adjusted operating profit (loss) 135,546 21,404 (9,304) 147,646 Depreciation 16,630 4,028 - 20,658 Adjusted EBITDA 152,176$ 25,432$ (9,304)$ 168,304$ Digital Media Cybersecurity and Martech Corporate Total
19 NOTE: Table above excludes certain intercompany allocations Q4 2021 Reconciliation of GAAP to Adjusted EBITDA $ in 000's Revenues Revenues 325,747$ 82,881$ -$ 408,628$ Operating profit Income (loss) from operations 92,422$ 9,492$ (16,520)$ 85,394$ Non-GAAP adjustments: Share-based compensation 2,178 1,227 2,722 6,127 Acquisition, integration, and other costs 855 1,473 1,207 3,535 Amortization 32,746 12,486 71 45,303 Lease asset impairments and other charges 3,666 (533) - 3,133 Investments - - 1,500 1,500 Disposal related costs - 84 51 135 Adjusted operating profit (loss) 131,867$ 24,229$ (10,969)$ 145,127$ Depreciation 13,597 2,636 255 16,488 Adjusted EBITDA 145,464$ 26,865$ (10,714)$ 161,615$ Digital Media Cybersecurity and Martech Corporate Total
20 NOTE: Table above excludes certain intercompany allocations FY 2022 Reconciliation of GAAP to Adjusted EBITDA $ in 000's Revenues Revenues 1,078,391$ 312,606$ -$ 1,390,997$ Operating profit Income (loss) from operations 198,171$ 50,960$ (50,190)$ 198,941$ Non-GAAP adjustments: Share-based compensation 10,433 4,280 11,888 26,601 Acquisition related integration costs 14,121 2,111 1,194 17,426 Amortization 122,869 35,025 28 157,922 Lease asset impairments and other charges 1,631 547 - 2,178 Disposal related costs 11 - 1,317 1,328 Goodwill impairment on business 27,369 - - 27,369 Adjusted operating profit (loss) 374,605$ 92,923$ (35,763)$ 431,765$ Depreciation 61,789 13,689 - 75,478 Adjusted EBITDA 436,394$ 106,612$ (35,763)$ 507,243$ Corporate TotalDigital Media Cybersecurity and Martech
21 FY 2021 Reconciliation of GAAP to Adjusted EBITDA NOTE: Table above excludes certain intercompany allocations $ in 000's Revenues Revenues 1,068,476$ 348,246$ -$ 1,416,722$ Operating profit Income (loss) from operations 216,950$ 10,769$ (60,379)$ 167,340$ Non-GAAP adjustments: Share-based compensation 7,734 4,481 11,914 24,129 Acquisition related integration costs 3,449 5,968 1,233 10,650 Amortization 144,621 42,493 288 187,402 Lease asset impairments and other charges 12,229 631 - 12,860 Investments - 1,500 1,500 Disposal related costs - 84 522 606 Goodwill impairment on a business - 32,629 - 32,629 Adjusted operating profit (loss) 384,983$ 97,055$ (44,922)$ 437,116$ Depreciation 49,151 12,484 255 61,890 Adjusted EBITDA 434,134$ 109,539$ (44,667)$ 499,006$ Digital Media Cybersecurity and Martech Corporate Total
22 Quarterly Adjusted Income Statement Excluding the Divested Businesses $ in 000's (except for per share amounts) Q1'21 Q2'21 Q3'21 Q4'21 Q1'22 Q2'22 Q3'22 Q4'22 Advertising 177,288$ 198,385$ 198,794$ 263,608$ 170,067$ 189,198$ 186,921$ 241,949$ Subscriptions 117,937 124,591 135,488 134,451 136,070 137,811 142,972 140,467 Other 3,961 7,293 11,625 10,992 9,184 10,601 12,195 14,363 Less : Intercompany Eliminations (118) (292) (356) (423) (253) (254) (215) (79) Adjusted Revenues 299,068$ 329,977$ 345,551$ 408,628$ 315,068$ 337,356$ 341,873$ 396,700$ Cost of Revenues 37,906 44,306 45,797 45,286 45,687 45,599 52,233 50,329 Sales and Marketing 105,048 118,479 124,178 137,513 116,503 121,014 118,580 125,303 Research, Development and Engineering 18,679 16,764 18,319 20,923 17,580 18,675 16,910 17,227 General and Administrative 55,776 53,253 57,532 59,778 52,078 52,002 53,315 56,195 Adjusted Operating Income 81,659$ 97,175$ 99,725$ 145,128$ 83,220$ 100,066$ 100,835$ 147,646$ Add: Depreciation 14,244 14,899 15,613 16,487 17,568 17,971 19,279 20,658 Adjusted EBITDA 95,903$ 112,074$ 115,338$ 161,615$ 100,788$ 118,037$ 120,114$ 168,304$ Adjusted Net Income from continuing operations 53,066 63,230 66,085 105,064 57,928 74,425 74,269 105,963 Adjusted Diluted EPS excluding Divested Businesses $1.19 $1.41 $1.40 $2.18 $1.23 $1.58 $1.58 $2.26
23 Reconciliation of Financial Results Excluding the Divested Businesses $ in 000's (except for per share amounts) Q1'21 Q2'21 Q3'21 Q4'21 Q1'22 Q2'22 Q3'22 Q4'22 Revenues Stated Revenues 311,657$ 341,293$ 355,144$ 408,628$ 315,068$ 337,356$ 341,873$ 396,700$ Adjustments (12,589) (11,316) (9,593) - - - - - Total Adjusted Revenues 299,068$ 329,977$ 345,551$ 408,628$ 315,068$ 337,356$ 341,873$ 396,700$ Cost of Revenues Stated Cost of Revenues 43,137$ 48,333$ 49,062$ 45,286$ 45,685$ 45,599$ 52,233$ 50,329$ Adjustments (5,231) (4,027) (3,265) - - - - - Total Adjusted Cost of Revenues 37,906$ 44,306$ 45,797$ 45,286$ 45,685$ 45,599$ 52,233$ 50,329$ Sales and Marketing Stated Sales and Marketing 106,848$ 120,166$ 125,410$ 137,513$ 116,503$ 121,014$ 118,580$ 125,303$ Adjustments (1,800) (1,687) (1,232) - - - - - Total Adjusted Sales and Marketing 105,048$ 118,479$ 124,178$ 137,513$ 116,503$ 121,014$ 118,580$ 125,303$ Research, Development and Engineering Stated Research, Development and Engineering 18,933$ 17,041$ 18,534$ 20,923$ 17,580$ 18,675$ 16,910$ 17,227$ Adjustments (254) (277) (215) - - - - - Total Adjusted Research, Development and Engineering 18,679$ 16,764$ 18,319$ 20,923$ 17,580$ 18,675$ 16,910$ 17,227$ General and Administrative Stated General and Administrative 56,903$ 53,671$ 58,067$ 59,778$ 52,078$ 52,002$ 53,315$ 56,195$ Adjustments (1,127) (418) (535) - - - - - Total Adjusted General and Administrative 55,776$ 53,253$ 57,532$ 59,778$ 52,078$ 52,002$ 53,315$ 56,195$ Adjusted EBITDA Stated Adjusted EBITDA 100,705$ 116,977$ 119,709$ 161,615$ 100,788$ 118,037$ 120,114$ 168,304$ Adjustments (4,802) (4,903) (4,371) - - - - - Total Adjusted EBITDA 95,903$ 112,074$ 115,338$ 161,615$ 100,788$ 118,037$ 120,114$ 168,304$ Diluted EPS Stated Adjusted Non-GAAP Net Income per Diluted EPS 1.24$ 1.50$ 1.49$ 2.18$ 1.23$ 1.58$ 1.58$ 2.26$ Adjustments (0.05) (0.09) (0.09) - - - - - Total Adjusted Diluted EPS 1.19$ 1.41$ 1.40$ 2.18$ 1.23$ 1.58$ 1.58$ 2.26$