j2 Global(US:ZD)2024-02-26 21:08Revenue Streams and Business Models - Ziff Davis' Digital Media business generates revenue from advertising, subscriptions, performance marketing, and licensing fees, with advertising being the primary driver[17] - The Cybersecurity and Martech business generates revenue primarily from customer subscription and usage fees, with stable and predictable margins[17] - Humble Bundle generates revenue from monthly subscriptions, product bundles, and individual product sales, with each transaction contributing to charity[34] - RetailMeNot connects retail partners with national and international brands, offering promotional media solutions like mobile coupons and cash back offers[30] - Everyday Health Group provides digital content and information services for health and wellness consumers, including interactive guides and self-assessment tools[43] - Health eCareers connects healthcare professionals with jobs across the United States, contracting with thousands of healthcare employers[49] - VIPRE Security Group and MOZ Group operate under Ziff Davis' Cybersecurity and Martech business, offering SaaS solutions for security and marketing technology[55] - The company's MOZ Group offers email marketing, SEO tools, and communication services under brands like Campaigner, iContact, and MOZ Pro[60][61][62] Acquisitions and Investments - Ziff Davis has deployed approximately $3.0 billion on more than 80 acquisitions globally from 2012 through 2023[19] - The company has made more than 80 acquisitions between 2012 and 2023, including two during 2023[82] - The company recognized a total gain of $2.8 million from the sale of Voice assets in the UK, recorded under 'Loss on sale of businesses' for the year ended December 31, 2021[547] - The company recorded an impairment of approximately $32.6 million related to the B2B Backup business in 2021, based on an offer to purchase the business[572] Financial Performance and Metrics - Total revenues for the year ended December 31, 2023 were $1,364,028 thousand, with Digital Media contributing $1,072,971 thousand and Cybersecurity and Martech contributing $291,209 thousand[277] - Net advertising revenue retention for the Digital Media business was 87.1% for the three months ended December 31, 2023, down from 92.0% in the same period in 2022[279] - The company had 3,266 thousand customers in the Digital Media and Cybersecurity and Martech subscription businesses for the three months ended December 31, 2023, with an average quarterly revenue per customer of $44.77[281] - Depreciation expense for the year ended December 31, 2023 was $92.1 million, up from $76.7 million in 2022 and $63.6 million in 2021[565] - Goodwill as of December 31, 2023 reflects accumulated impairment losses of $84.2 million in the Digital Media reportable segment[573] - Expected amortization expenses for intangible assets subject to amortization at December 31, 2023 are $325,406 thousand, with $90,774 thousand expected in 2024[576] - The company's total assets measured at fair value were $383,736 thousand as of December 31, 2023, with $15,699 thousand classified as Level 3 investments[557] - Long-term debt as of December 31, 2023, totaled $1,001,312 thousand, compared to $999,053 thousand in 2022[577] - Interest expense for 2023 was $41.6 million, up from $37.1 million in 2022 and $79.6 million in 2021[577] - Future principal and interest payments for debt total $1,010,038 thousand in principal and $177,812 thousand in interest[577] - The company issued $750.0 million in 4.625% Senior Notes in 2020, with net proceeds of $742.7 million used for debt redemption and general corporate purposes[578] - The 4.625% Senior Notes mature on October 15, 2030, with interest payable semi-annually at a rate of 4.625% per annum[579] - Research and development expenditures were $68.9 million in 2023, down from $74.1 million in 2022 and $78.9 million in 2021[74] - The company had approximately 4,200 employees as of December 31, 2023, with nearly half based outside the U.S.[81] - The company's 3.25% Convertible Notes, issued in 2014, bear interest at 3.25% per annum and are due June 15, 2029[588] - The company repurchased $290.0 million in aggregate principal of its 4.625% Senior Notes cumulatively as of December 31, 2023[586] - The company recognized a loss of $7.4 million associated with the tender of the 4.625% Senior Notes during the year ended December 31, 2021[584] - The company repurchased $181,238 thousand in principal of 4.625% Senior Notes in 2022, resulting in a gain of $12,060 thousand[585] - The company's total interest expense related to 4.625% Senior Notes was $21,555 thousand in 2023, down from $24,942 thousand in 2022[587] - The company redeemed all outstanding 3.25% Convertible Notes, resulting in a gain of $2.8 million and a reduction of stockholders' equity of $390.5 million in 2021[589] - The company recorded $7.7 million of interest expense related to additional interest on the 1.75% Convertible Notes in 2023[592] - The company's total interest expense related to 1.75% Convertible Notes was $19,232 thousand in 2023, up from $11,634 thousand in 2022[599] - The company adopted ASU 2020-06, de-recognizing $87.3 million of unamortized debt discount on the 1.75% Convertible Notes[600] - The company entered into a $100.0 million Credit Agreement in 2021, with the option to increase commitments up to $350.0 million[602] - As of December 31, 2023, there were no amounts outstanding under the Credit Agreement[603] - The company's Credit Agreement includes a maximum total leverage ratio of 4.00:1.00 and a minimum interest coverage ratio of 3.00:1.00 as of the last date of any fiscal quarter[604] - The company entered into a Bridge Loan Facility with an aggregate principal amount of $485.0 million, which bore interest at varying rates depending on the time period[606][607] - The company incurred approximately $6.3 million in costs and interest associated with the Bridge Loan Facility in 2021[607] - The company recorded a net loss on extinguishment of approximately $8.8 million related to the Bridge Loan Facility in 2021[608] - The company entered into a Term Loan Facility with an aggregate principal amount of $90.0 million in 2022, which was settled through a non-cash debt-for-equity exchange[609] - The company entered into a Term Loan Two Facility with an aggregate principal amount of approximately $22.3 million in 2022, which was also settled through a non-cash debt-for-equity exchange[610] - The company recorded a loss on extinguishment of debt of approximately $0.6 million in 2022 related to debt-for-equity exchanges[612] - The company recorded impairments of $2.2 million, $1.0 million, and $12.7 million on its operating lease right of use assets in 2023, 2022, and 2021, respectively[614] - The company's operating lease liabilities totaled $32.4 million in 2023, down from $56.1 million in 2022[615] - Total sublease income for 2023 was $6.0 million, compared to $6.8 million in 2022 and $2.0 million in 2021[618] - Total estimated future sublease income is $7.2 million[618] - Present value of operating lease liabilities as of December 31, 2023, is $32.4 million[617] - Total lease payments for operating leases amount to $34.1 million, with imputed interest of $1.7 million[617] - Maturities of operating lease liabilities for 2024 are $16.95 million[617] Risks and Challenges - The company faces risks related to acquisitions, including potential disruptions to operations and challenges in integrating new businesses[102][109] - The majority of the company's Digital Media revenue comes from short-term advertising arrangements, which are vulnerable to advertiser budget cuts[102] - The company is exposed to risks from unauthorized use of its content and intellectual property infringement by generative AI developers and users[102] - The company has identified risks associated with data privacy regulations, including GDPR, CCPA, and CDPA, which impose significant compliance costs[105] - The company's business is highly dependent on attracting visitors to its websites from search engines[102] - Majority of Digital Media revenue comes from short-term advertising arrangements, with agreements typically lasting one year or less and subject to termination without penalty[112] - Digital Media business relies on aggregating compelling content, with increasing demand for high-quality video and mobile-specific content, potentially requiring substantial payments to third-party providers[113] - Digital Media business must demonstrate attractive ROI for advertisers, with significant resources invested in research, analytics, and campaign effectiveness capabilities[114] - System failures, security breaches, or technological risks could disrupt services, harm reputation, and lead to significant liability[115] - Cybersecurity threats, including AI-based risks, pose challenges to the security and availability of IT systems and data[117] - Generative AI technologies could reduce online traffic, infringe intellectual property, and harm business operations[120] - Tax rate changes, new tax legislation, or exposure to additional tax liabilities could adversely impact financial results[122] - Weakened global and U.S. economic conditions may lead to decreased usage, advertising levels, and customer retention rates, impacting revenue growth[127] - Rising interest rates could increase the cost of debt and negatively affect the company's competitive position[129] - Climate change may adversely impact the company's business locations, customer and vendor locations, and critical systems, potentially leading to operational disruptions, increased costs, and employee turnover[130] - The company operates in highly competitive markets with competitors possessing greater resources, larger customer bases, and lower pricing, which may reduce revenue and operating profits[131] - The Digital Media business faces competition from online media, social networking sites, mobile apps, traditional media, search engines, generative AI, and e-commerce platforms[132] - The Cybersecurity and Martech business competes with cloud software services in secured communications, cybersecurity, and marketing technology[132] - Competitors offering integrated software, internet products, advertising services, and content pose challenges in attracting and retaining subscribers, users, advertisers, partners, and developers[133] - Social media and networking sites are increasingly capturing user attention and online advertising dollars, intensifying competition[133] - The IRS private letter ruling and related tax opinions may be invalid, potentially exposing the company and its stockholders to significant U.S. federal income tax liability[141] Tax and Financial Reserves - The company established reserves for non-income related taxes of $28.1 million and $25.5 million as of December 31, 2023 and 2022, respectively[629] - The company's income tax expense for continuing operations was $(24.1 million), $(58.0 million), and $14.2 million for the years ended December 31, 2023, 2022, and 2021, respectively[630] - The company's effective tax rate for continuing operations was 32.2%, 44.2%, and (4.0)% for the years ended December 31, 2023, 2022, and 2021, respectively[632] - The company had deferred tax assets of $76.9 million and $80.8 million as of December 31, 2023 and 2022, respectively[639] - The company had a valuation allowance on deferred tax assets of $1.7 million as of December 31, 2023 and 2022[640] - The company had federal net operating loss carryforwards of $9.1 million as of December 31, 2023[641] - The company had federal capital loss limitation carryforwards of $21.8 million as of December 31, 2023[642] - The company had undistributed earnings from foreign subsidiaries of $272.4 million as of December 31, 2023[643] - The company's prepaid taxes were $4.7 million and $3.2 million at December 31, 2023 and 2022, respectively[644] - The company's income from domestic operations was $25.8 million, $71.8 million, and $279.7 million for the years ended December 31, 2023, 2022, and 2021, respectively[645] Market Reach and User Engagement - IGN Entertainment reaches more than 325 million monthly users across 35 platforms and has over 50 million social and YouTube followers[33] - Ookla's Speedtest platform has completed over 50 billion tests to date, with more than 11 million tests initiated daily[36]