Summary of Ziff Davis Conference Call Company Overview - Ziff Davis is a digital media and internet company with a portfolio of content and ad-supported brands, subscription-supported software brands, and subscription-supported data businesses [4][5] - The company has a history of growth through systematic acquisitions over the past 15 years [4] Financial Performance and Strategic Initiatives - Approximately 60% of Ziff Davis's revenue comes from advertising, with the remainder from subscriptions and licensing [4] - The company is currently exploring value-creating opportunities, including potential divestitures, due to a perceived disconnect between its market valuation and intrinsic value [5][8] - Ziff Davis is trading at roughly three to four times EBITDA, despite having strong growth and margins [7][8] Segment Performance - **Health and Wellness**: This is the largest segment, showing a 13% top-line growth in Q3 and 18% adjusted EBITDA growth. The segment benefits from a robust pharma market and digital commercialization trends [11][12] - **Connectivity**: The Ookla business, which includes Speedtest, is undergoing a reset with new leadership and is expected to return to growth, projecting a low double-digit growth rate for the upcoming year [13][14] - **Cybersecurity and MarTech**: The cybersecurity segment, including Viper and IPVanish, is returning to growth, although it has taken longer than expected [15] - **Tech and Shopping**: This segment experienced a decline in Q3, primarily due to winding down a part of the business, but is expected to stabilize [15][16] - **Gaming and Entertainment**: This segment is characterized by volatility due to game release cycles but remains a strong brand with IGN Entertainment [17] AI and Market Trends - Ziff Davis generates about one-third of its revenue from web traffic, with search-related revenue accounting for mid-teens percentage of total revenue [23] - The company is observing increased search volume driven by AI, but also significant volatility in search rankings, which impacts traditional publishers [24][25] - Ziff Davis is focused on maintaining trust in content quality amidst the rise of AI-generated content [26] Product Development and Innovation - Ziff Davis is integrating AI into its products, such as the Lose It app, which uses visual technology for food logging, enhancing user engagement and retention [28][29] - The company is developing AI-based insight and ad platforms, leveraging audience signals for market research and ad targeting [30][34] Capital Allocation and M&A Strategy - Ziff Davis prioritizes M&A, having closed seven deals in the current year, while also investing heavily in stock buybacks [41][42] - The company is selective in M&A to ensure cash flow generation aligns with risk-reward profiles [41] - Recent investments in connectivity products aim to expand market presence and address customer needs [43][45] Conclusion - Ziff Davis is actively exploring ways to unlock value within its portfolio while maintaining a focus on growth through both organic and inorganic means. The company is optimistic about its segments, particularly health and wellness, and is strategically investing in AI and product development to enhance its market position [38][39][40]

Ziff Davis ( ZD ) is a business that is reliant on tuck-in acquisitions to drive topline growth, as organic growth has been hard to come by. The market appears to be highly concerned about theAn individual investor primarily focused on undercovered companies, with up to 100 companies on my watchlist. My areas include technology, software, electronics and the energy transition. I have been investing my personal capital for over 7 years in a broad range of companies globally. Through my years of analyzing cou ...

Revenue Performance - Total revenues for the three months ended September 30, 2025, were $363.7 million, an increase from $353.6 million in the same period of 2024, representing a growth of 2.9%[180] - Total revenues for Q3 2025 were $363.7 million, a 2.9% increase from $353.6 million in Q3 2024; revenues for the nine months ended September 30, 2025, were $1,044.6 million, up 5.6% from $988.9 million in the same period of 2024[200] - Revenues for the three months ended September 30, 2025, increased by 2.9% to $363,711,000 compared to $353,580,000 in 2024, while revenues for the nine months increased by 5.6% to $1,044,556,000 from $988,865,000[200] Segment Performance - The Technology & Shopping segment generated $85.2 million in revenues for Q3 2025, a decrease of 1.1% compared to $87.1 million in Q3 2024[180] - The Health & Wellness segment saw revenues rise to $102.3 million in Q3 2025, up 12.5% from $90.8 million in Q3 2024[180] - Subscription and licensing revenues for the Cybersecurity & Martech segment totaled $69.1 million in Q3 2025, slightly down from $70.0 million in Q3 2024[180] - The Connectivity segment's total revenues were $57.2 million in Q3 2025, an increase from $55.9 million in Q3 2024, reflecting a growth of 2.2%[180] - Gaming & Entertainment segment had 514,000 customers in Q3 2025, up from 484,000 in Q3 2024, while average revenue per customer decreased slightly to $30.49 from $30.60[188] - Health & Wellness segment reported 1,902,000 customers in Q3 2025, an increase from 1,731,000 in Q3 2024, with average revenue per customer declining to $7.17 from $7.38[188] - Connectivity segment saw customer growth to 25,000 in Q3 2025 from 24,000 in Q3 2024, with average revenue per customer increasing to $1,988 from $1,972[188] - Cybersecurity & Martech segment had 1,232,000 customers in Q3 2025, down from 1,251,000 in Q3 2024, while average revenue per customer increased to $56.13 from $55.99[188] Cost and Expenses - Direct costs for Q3 2025 were $53.2 million, a 3.9% increase from $51.2 million in Q3 2024, representing 14.6% of revenues compared to 14.5% in the prior year[203] - Sales and marketing expenses increased by 8.2% to $137.8 million in Q3 2025 from $127.4 million in Q3 2024, accounting for 37.9% of revenues[204] - Research, development, and engineering costs for Q3 2025 were $15.4 million, a slight increase of 1.0% from $15.3 million in Q3 2024, representing 4.2% of revenues[206] - General, administrative, and other related costs for Q3 2025 were $53.996 million, a 3.0% increase from $52.417 million in Q3 2024, maintaining 14.8% of revenues[207] - Depreciation and amortization for Q3 2025 was $57.319 million, an 11.6% increase from $51.351 million in Q3 2024, representing 15.8% of revenues[208] Goodwill and Impairments - The company recorded a goodwill impairment of approximately $17.6 million in Q3 2025 due to a decline in fair value of a reporting unit within the Cybersecurity & Martech segment[192] - Goodwill impairment for Q3 2025 was $17.6 million, significantly lower than $85.3 million in Q3 2024, related to the Cybersecurity & Martech segment[210] Tax and Interest Expenses - Income tax expense for Q3 2025 was $12.8 million, compared to $(12.5) million in Q3 2024, resulting in an effective tax rate of 139.8%[216] - Interest expense, net for Q3 2025 was $(6.496) million, a 61.4% increase from $(4.024) million in Q3 2024, with total non-operating expenses rising by 189.7% to $(19.286) million[211] Cash Flow and Financing - Cash, cash equivalents, and investments totaled $622.9 million as of September 30, 2025, down from $664.1 million as of December 31, 2024[252] - Net cash provided by operating activities for the nine months ended September 30, 2025, was $215.986 million, a decrease of $16.096 million compared to the prior period[260] - Net cash used in investing activities decreased by $148.2 million to $116.371 million for the nine months ended September 30, 2025, primarily due to lower cash used on business acquisitions[262] - Net cash used in financing activities decreased by $211.6 million to $111.466 million for the nine months ended September 30, 2025, due to the absence of cash outflows related to the settlement of the 1.75% Convertible Notes[263] - The Company repurchased a total of 3,011,405 shares at an aggregate cost of $109.854 million during the nine months ended September 30, 2025, with 3,229,903 shares remaining under repurchase authorization[265] - Cumulatively, as of September 30, 2025, the Company repurchased 11,770,097 shares at an aggregate cost of $693.5 million[266] Strategic Outlook - The company anticipates continued growth despite potential economic challenges, including inflation and supply chain disruptions[172] - The company anticipates that acquisitions will remain a key component of its strategy, although the number and significance of future acquisitions may vary due to macroeconomic conditions[198] - The Company expects the One Big Beautiful Bill Act to reduce current income tax liabilities and increase deferred tax liabilities, though it does not anticipate a material impact on its effective tax rate[218] - The company plans to continue enhancing existing offerings and exploring acquisitions as part of its growth strategy, while monitoring macroeconomic conditions[198]

Financial Data and Key Metrics Changes - Q3 2025 revenues were $363.7 million, reflecting growth of nearly 3% compared to $353.6 million in Q3 2024 [16] - Adjusted EBITDA for Q3 2025 was $124.1 million, a slight decline of less than 1% from $124.7 million in the prior year [17] - Adjusted diluted EPS increased by more than 7% to $1.76 from $1.64 in Q3 2024, driven by share buybacks [17][25] Business Line Data and Key Metrics Changes - Tech and shopping revenue dropped 2% in Q3, with adjusted EBITDA down 12%, primarily due to the wind down of game publishing activities [8][20] - Health and wellness segment saw a 13% year-over-year revenue growth and 18% adjusted EBITDA growth, marking high watermarks for the division [10] - Cybersecurity and martech revenue grew 2% in Q3, driven by strong performance in consumer VPN and cloud backup [12] Market Data and Key Metrics Changes - Connectivity division delivered 2% year-over-year revenue growth, with year-to-date revenues up 7% [11] - Gaming and entertainment revenues were about 4% lower year-over-year, but adjusted EBITDA grew nearly 3% [9] - Advertising and performance marketing revenues grew 5.9% year-over-year, while subscription and licensing revenues grew by 2% [18] Company Strategy and Development Direction - The company is evaluating potential opportunities to unlock shareholder value, engaging outside advisors for this purpose [5][6] - There is a focus on maximizing value for shareholders while maintaining a profitable and growing business structure [6][7] - The company aims to continue its acquisition program while also engaging in share buybacks to capitalize on perceived valuation disconnects [15][23] Management's Comments on Operating Environment and Future Outlook - Management noted that the disconnect between the current market value and intrinsic value is at its widest, prompting a strategic review [31] - The company remains optimistic about its performance despite industry headwinds, particularly in segments like health and wellness [55] - Management anticipates that fiscal year 2025 results will fall within the lower half of the guidance range, with Q4 expected to be the largest revenue quarter [24] Other Important Information - The company has significant cash reserves of $503.4 million and long-term investments of $119.6 million, with a gross leverage of 1.7x trailing 12 months adjusted EBITDA [22] - Year-to-date free cash flow was $261.2 million, indicating strong cash generation capabilities [25] - The company has repurchased over 3.6 million shares since the start of 2025, deploying $109 million in share buybacks [23] Q&A Session Summary Question: What are the thoughts on valuation disconnects? - Management believes the disconnect between current and intrinsic value is at its widest, with interest from strategic and private equity investors [31][32] Question: Are there any properties considered off-limits for divesting? - Management stated that nothing is off the table, but exploring opportunities for select units is likely to be more value-accretive than considering the entire company [38][39] Question: How is the company positioned regarding AI search impacts? - Management indicated that the company is well-positioned and insulated from fluctuations in search traffic, with only 17.5% of revenue exposure coming from search [40] Question: What is the outlook for advertising growth in Q4? - Management expects subscription growth to outpace advertising growth in Q4, with some softness in product launches impacting advertising [58] Question: What are the M&A opportunities in the current market? - Management sees potential for aggressive acquisitions of smaller dislocated properties, balancing share buybacks and acquisitions [65][66] Question: Is there a shift towards targeting different growth profiles in M&A? - Management emphasized a continued focus on cash-on-cash returns and free cash flow, without signaling a change in their acquisition strategy [81][83]

Financial Data and Key Metrics Changes - Q3 2025 revenues were $363.7 million, reflecting growth of nearly 3% compared to $353.6 million in the prior year period [16] - Adjusted EBITDA for Q3 2025 was $124.1 million, a slight decline of less than 1% from $124.7 million in the prior year [17] - Adjusted diluted EPS increased by more than 7% to $1.76 from $1.64 in Q3 2024, aided by share buybacks [17][25] Business Line Data and Key Metrics Changes - Tech and shopping revenue dropped 2% in Q3, with adjusted EBITDA down 12%, primarily due to the wind down of game publishing activities [8][20] - Health and wellness segment saw a 13% year-over-year revenue growth and 18% adjusted EBITDA growth, marking high watermarks for the division [10] - Cybersecurity and martech revenue grew 2% in Q3, driven by strong performance in consumer VPN and cloud backup [12] Market Data and Key Metrics Changes - Year-to-date revenues in gaming and entertainment were up approximately 2%, with Q3 being Humble Bundle's best quarter of the year [9] - Connectivity division delivered 2% year-over-year revenue growth, with year-to-date revenues up 7% [11] - Advertising and performance marketing grew 5.9% year-over-year, while subscription and licensing revenues grew by 2% [18] Company Strategy and Development Direction - The company is evaluating potential opportunities to unlock shareholder value, engaging outside advisors for this purpose [5][6] - The focus remains on maximizing value for shareholders while continuing to operate the current profitable business structure [6] - The company is committed to a disciplined acquisition program and has closed seven acquisitions in the first nine months of 2025 [22][23] Management's Comments on Operating Environment and Future Outlook - Management noted that the disconnect between the current market value and intrinsic value of the company is at its widest [31] - The company anticipates fiscal year 2025 total revenues and adjusted diluted EPS to be within the lower half of its guidance range [24] - Management expressed optimism about the performance of various segments despite broader industry headwinds [56] Other Important Information - The company has significant cash reserves of $503.4 million and long-term investments of $119.6 million, with a gross leverage of 1.7 times trailing 12 months adjusted EBITDA [22] - Free cash flow for Q3 2025 was $108.2 million, 35% higher than the prior year period [25] Q&A Session Summary Question: Insights on valuation disconnect - Management acknowledged the valuation disconnect and noted that the recent segment-level reporting has attracted interest from strategic and private equity investors [30][32] Question: Strategic review and potential divestitures - Management stated that no specific properties are off-limits and that they are open to exploring opportunities for select units [38][39] Question: Impact of AI reviews on traffic - Management indicated that the company is well-positioned against fluctuations in search traffic, with only 17.5% of total revenue being web traffic dependent [40] Question: M&A opportunities and market dynamics - Management expressed interest in acquiring smaller dislocated properties and emphasized the balance between share buybacks and acquisitions [65] Question: Future growth and business model considerations - Management confirmed a preference for acquiring leadership brands and emphasized the importance of cash-on-cash returns in their investment strategy [81][82]

Financial Data and Key Metrics Changes - In Q3 2025, revenues increased to $363.7 million, up nearly 3% from $353.6 million in the prior year [16] - Adjusted EBITDA for Q3 2025 was $124.1 million, a slight decline of less than 1% from $124.7 million year-over-year [17] - Adjusted diluted EPS rose by more than 7% to $1.76 from $1.64 in Q3 2024, aided by share buybacks that reduced the weighted average diluted shares by 7.5% [17][25] Business Line Data and Key Metrics Changes - Tech and shopping revenue fell by 2% in Q3, with adjusted EBITDA down 12%, primarily due to the wind down of game publishing activities [8][19] - Health and wellness segment saw a 13% year-over-year revenue growth and 18% adjusted EBITDA growth, marking high watermarks for the division [10] - Cybersecurity and martech revenue grew by 2% in Q3, driven by strong performance in consumer VPN and cloud backup [12] Market Data and Key Metrics Changes - The connectivity division achieved 2% year-over-year revenue growth, with year-to-date revenues up 7% [11] - Gaming and entertainment revenues were approximately 4% lower year-over-year, but adjusted EBITDA grew nearly 3% [9] - Advertising and performance marketing revenues grew by 5.9% year-over-year, while subscription and licensing revenues increased by 2% [18] Company Strategy and Development Direction - The company is evaluating potential opportunities to unlock shareholder value, having engaged outside advisors for this purpose [4][5] - There is a focus on maximizing value for shareholders while maintaining a profitable and growing business structure [5][26] - The company is committed to a disciplined acquisition strategy, having closed seven acquisitions in the first nine months of 2025 [22][23] Management's Comments on Operating Environment and Future Outlook - Management noted that the disconnect between the current market value and intrinsic value of the company is at its widest [29] - The company anticipates fiscal year 2025 total revenues and adjusted diluted EPS to be within the lower half of its guidance range [24] - Management expressed optimism about the performance of various segments despite broader industry headwinds [39] Other Important Information - The company has significant cash reserves of $503.4 million and long-term investments of $119.6 million, with a gross leverage of 1.7 times trailing 12 months adjusted EBITDA [22] - Free cash flow for Q3 2025 was $108.2 million, representing a 35% increase year-over-year [25] - The company plans to continue its stock repurchase program, having repurchased 3 million shares year-to-date [23] Q&A Session Summary Question: Insights on valuation disconnect - Management acknowledged the valuation disconnect and noted that the recent segment-level disclosures have attracted interest from strategic and private equity investors [28][29] Question: Strategic review and potential divestitures - Management stated that no specific properties are off-limits for divestiture, but exploring opportunities for select units is likely to be more value-accretive [31] Question: Impact of AI on traffic and revenue - Management indicated that the company is well-positioned against fluctuations in search traffic, with only 35% of total revenue dependent on web traffic [32] Question: Future M&A opportunities - Management expressed optimism about acquiring smaller properties that may not have weathered recent market changes as well as continuing to buy back shares [44][45] Question: Philosophical shift in acquisitions - Management clarified that the focus remains on cash-on-cash returns and that there is no change in the overall approach to acquisitions [51]

Financial Performance - Q3 2025 revenues increased to $363.7 million, a 2.9% increase compared to $353.6 million in Q3 2024[18] - Adjusted EBITDA decreased slightly by 0.5%, from $124.7 million in Q3 2024 to $124.1 million in Q3 2025[15] - Adjusted diluted EPS increased by 7.3%, from $1.64 in Q3 2024 to $1.76 in Q3 2025[20] Revenue Breakdown - Advertising and Performance Marketing revenue increased by 5.9%, from $194 million in Q3 2024 to $205 million in Q3 2025[23] - Subscription and Licensing revenue increased by 2.0%, from $147 million in Q3 2024 to $150 million in Q3 2025[25] Segment Performance - Technology & Shopping segment revenue decreased by 2.2%, from $87.1 million in Q3 2024 to $85.2 million in Q3 2025[29] - Gaming & Entertainment segment revenue decreased by 4.3%, from $49.7 million in Q3 2024 to $47.6 million in Q3 2025[34] - Health & Wellness segment revenue increased by 12.7%, from $90.8 million in Q3 2024 to $102.3 million in Q3 2025[40] - Connectivity segment revenue increased by 2.2%, from $56.0 million in Q3 2024 to $57.2 million in Q3 2025[46] - Cybersecurity & Martech segment revenue increased by 2.0%, from $70.0 million in Q3 2024 to $71.4 million in Q3 2025[52] Financial Guidance - The company reaffirms its full-year 2025 revenue guidance of $1.442 billion to $1.502 billion, representing a midpoint year-over-year increase of 5.0%[63] - The company reaffirms its full-year 2025 Adjusted EBITDA guidance of $505 million to $542 million, representing a midpoint year-over-year increase of 6.0%[63] - The company reaffirms its full-year 2025 Adjusted diluted EPS guidance of $6.64 to $7.28, representing a midpoint year-over-year increase of 5.1%[63]

Core Insights - Ziff Davis reported quarterly earnings of $1.76 per share, matching the Zacks Consensus Estimate and showing an increase from $1.64 per share a year ago [1] - The company posted revenues of $363.71 million for the quarter ended September 2025, which was 1.58% below the Zacks Consensus Estimate, but an increase from $353.58 million year-over-year [2] - Ziff Davis shares have declined approximately 38.6% year-to-date, contrasting with a 15.6% gain in the S&P 500 [3] Earnings Performance - The company has surpassed consensus EPS estimates three times over the last four quarters [1] - Ziff Davis has exceeded consensus revenue estimates twice in the last four quarters [2] Future Outlook - The company's earnings outlook will be crucial for stock performance, with current consensus EPS estimates at $2.75 for the upcoming quarter and $6.88 for the current fiscal year [7] - The Zacks Rank for Ziff Davis is currently 3 (Hold), indicating expected performance in line with the market [6] Industry Context - The Internet - Software industry, to which Ziff Davis belongs, is currently ranked in the top 35% of over 250 Zacks industries, suggesting a favorable outlook compared to lower-ranked industries [8]

Core Insights - Ziff Davis reported Q3 CY2025 revenue of $363.7 million, which was a 2.9% year-on-year increase but fell short of analyst expectations of $365.7 million [1][7] - The company's full-year revenue guidance is set at $1.47 billion at the midpoint, aligning closely with analyst estimates [1][7] - Non-GAAP profit per share was $1.76, which is 1.4% below the consensus estimate of $1.78 [1][7] Company Overview - Ziff Davis, originally founded in 1927 as a technology publisher, now operates a portfolio of digital media brands and subscription services across various sectors including technology, shopping, gaming, healthcare, and cybersecurity [4] Revenue Growth - The company achieved $1.46 billion in revenue over the past 12 months, indicating a struggle to increase demand as this figure is close to its revenue five years ago [5][6] - Ziff Davis's annualized revenue growth of 3.1% over the last two years is above its five-year trend, although the recent results were disappointing [8] Financial Performance - Adjusted EBITDA for Q3 was $124.1 million, missing analyst estimates of $131.2 million, with a margin of 34.1% [7] - Operating margin improved to 7.8%, up from -8.3% in the same quarter last year, while free cash flow margin increased to 29.7% from 22.7% [7] - Market capitalization stands at $1.37 billion [7]

Financial Performance - Q3 2025 revenues increased by 2.9% to $363.7 million compared to $353.6 million in Q3 2024[6] - Income from operations rose 197.0% to $28.4 million, significantly improving from a loss of $(29.3) million in Q3 2024[6] - Net loss decreased to $(3.6) million from $(48.6) million in Q3 2024, marking a 92.6% improvement[6] - Adjusted EBITDA for Q3 2025 was $124.1 million, slightly down by 0.5% from $124.7 million in Q3 2024[6] - Adjusted net income for the quarter was $71.5 million, a decrease of 0.8% compared to $72.1 million in Q3 2024[6] - Free cash flow increased by 35.0% to $108.2 million from $80.1 million in Q3 2024[6] - Total revenues for the three months ended September 30, 2025, were $363.711 million, an increase from $353.580 million in the same period of 2024, representing a growth of 3.2%[18] - Net income for the nine months ended September 30, 2025, was $46.984 million, compared to a net loss of $1.040 million in the same period of 2024[20] Cost Management - Operating costs and expenses for the three months ended September 30, 2025, totaled $335.283 million, a decrease from $382.884 million in the same period of 2024, reflecting a reduction of 12.4%[18] - The company incurred a goodwill impairment of $17.579 million for the three months ended September 30, 2025, compared to $85.273 million in the same period of 2024[18] - Share-based compensation for the three months ended September 30, 2025, amounted to $12,197 thousand, compared to $10,161 thousand in the same period of 2024[31] - Sales and marketing expenses decreased to $(133,762) from $(127,418) year-over-year, indicating a focus on cost management[39][42] - Research, development, and engineering costs were reduced to $(14,077) from $(15,255), reflecting efficiency improvements[39][42] - General, administrative, and other related costs decreased to $(38,733) from $(52,417), showcasing effective expense control measures[39][42] - Depreciation and amortization expenses were reported at $(26,124), down from $(51,351) in the prior year, indicating a reduction in asset-related costs[39][42] Guidance and Projections - The company reaffirmed its 2025 revenue guidance range of $1,442 million to $1,502 million[8] - Adjusted EBITDA guidance for 2025 is set between $505 million and $542 million[8] - Adjusted diluted EPS is projected to be between $6.64 and $7.28 for 2025[8] Cash Flow and Investments - Cash flows from operating activities for the nine months ended September 30, 2025, were $215.986 million, slightly down from $232.082 million in the same period of 2024[20] - Total cash and cash equivalents at the end of the period were $503.368 million, down from $386.122 million at the end of September 2024[20] - The company spent $85.888 million on property and equipment purchases in the nine months ended September 30, 2025, compared to $79.476 million in the same period of 2024[20] - Free cash flow for the year-to-date 2025 was $130,098, with net cash provided by operating activities totaling $215,986[50] Adjustments and Non-GAAP Measures - The adjusted effective tax rate is calculated based on the GAAP effective tax rate with adjustments for non-GAAP adjustments to net income[29] - For the three months ended September 30, 2025, the adjusted net income was $71,470, with an adjusted effective tax rate of approximately 25.2%[39] - Total non-GAAP adjustments for the quarter amounted to $24,015, indicating significant adjustments made to reconcile GAAP to non-GAAP financial measures[39][42] - For the nine months ended September 30, 2025, the adjusted net income was $172,042, with an adjusted effective tax rate of approximately 24.6%[44] - The total non-GAAP adjustments for the same period amounted to $69,066 in share-based compensation and $27,292 in transaction and integration charges[44] Investment and Credit Management - The company reported a provision for credit losses on investments of $17.566 million for the nine months ended September 30, 2025, compared to no provision in the same period of 2024[20] - The company reported a provision for credit losses on investments of $(17,566), reflecting a cautious approach to credit risk management[39][42]