Summary of Ziff Davis (ZD) 2025 Conference Call Company Overview - **Company**: Ziff Davis (ZD) - **Date**: September 03, 2025 - **Key Speakers**: Vivek Shah (CEO), Dan Stone (President of Health and Wellness) Key Points Business Segmentation - Ziff Davis has restructured its business into five operating divisions to provide better insights to investors about its operations and growth characteristics [6][5][3] - The five segments include: 1. **Health and Wellness**: Focuses on pharma commercialization and digital health, with a 16% growth in the last quarter [12][35] 2. **Connectivity**: Anchored by Ookla Group, providing data and analytics for broadband networks, with a 14% growth [12][8] 3. **Tech and Shopping**: Includes brands like CNET and RetailMeNot, driving e-commerce and affiliate sales [8] 4. **Cybersecurity and Martech**: High recurring revenue with emerging growth characteristics [9] 5. **Gaming and Entertainment**: Anchored by IGN, the fastest-growing segment in the entertainment industry [9] Financial Performance - In Q2, Ziff Davis reported a 10% increase in revenues and a 12% increase in adjusted EBITDA, marking the strongest quarter in a while [11] - Four out of five segments experienced growth, with Health and Wellness and Connectivity being the standout performers [12][11] - The company anticipates mid-single-digit growth for the second half of the year, with Q4 expected to outperform Q3 seasonally [15] Impact of Generative AI - Approximately 35% of Ziff Davis's revenue is web traffic dependent, with 40% of that traffic coming from search [20] - The company has diversified its monetization models beyond web traffic, including performance marketing, subscriptions, and licensing [20] - The rise of zero-click searches has been a concern, but Ziff Davis has adapted by diversifying its engagement strategies [22][24] - The company is engaged in a lawsuit against OpenAI regarding copyright and trademark violations, emphasizing the need for fair compensation for content usage [31] Health and Wellness Segment Insights - The Health and Wellness segment generated approximately $380 million in revenue with a 37% EBITDA margin [36] - The segment targets three healthcare verticals: pharma commercialization, digital health and wellness, and provider services [36] - Ziff Davis has a unique position in the market by engaging both healthcare professionals and consumers [44] Mergers and Acquisitions Strategy - Ziff Davis has a disciplined approach to M&A, focusing on strong, durable brands that can adapt to technological shifts [80][82] - The company has a significant cash reserve of $600 million and a borrowing capacity of $700 million, providing ample opportunity for acquisitions [88] - The current market presents interesting buying opportunities due to fear surrounding digital media assets and AI's perceived threats [95] AI Utilization - Ziff Davis is leveraging AI to enhance customer-facing products and improve internal productivity [70][72] - The company has standardized AI training across its workforce, focusing on tools that meet data privacy and security concerns [70] - AI applications include customer engagement, ad copy testing, and audience profiling for pharma clients [49][50] Regulatory Environment - There are concerns about potential regulations around pharma advertising, but the company does not foresee significant impacts on its business [62][63] Additional Insights - The company emphasizes the importance of data as a competitive advantage, particularly in the context of AI [84] - Ziff Davis is committed to communicating its intrinsic value to the marketplace more effectively [67]

Financial Data and Key Metrics Changes - Q2 2025 revenues were $352.2 million, reflecting growth of nearly 10% compared to $320.8 million in the prior year period [23] - Adjusted EBITDA for Q2 2025 was $107.7 million, up nearly 12% from $96.3 million in the prior year [23] - Adjusted diluted EPS increased to $1.24 from $1.18 in 2024, reflecting growth of more than 5% [23] - Adjusted EBITDA margin for the quarter was 30.6% [23] - Free cash flow for Q2 2025 was $26.9 million, 7.5% higher than the prior year period [32] Business Line Data and Key Metrics Changes - Four of the five reportable segments grew in revenues in Q2 2025, with the Digital Media segment growing nearly 13% [8] - Tech and Shopping's revenues grew over 11%, with adjusted EBITDA growth of over 5% [9] - Gaming and Entertainment revenues grew nearly 8%, with adjusted EBITDA growth of almost 24% [10] - Health and Wellness revenues increased nearly 16%, with adjusted EBITDA up 11% [11] - Connectivity revenues were up over 14%, with adjusted EBITDA growth of over 12% [13] - Cybersecurity and Martech segment's revenue declined less than 1% but posted over 5% adjusted EBITDA growth [15] Market Data and Key Metrics Changes - Advertising and performance marketing revenues grew 15.5% year over year, while subscription and licensing revenues grew by 5% [25] - Other revenues declined by $2.2 million year over year, primarily due to a decline in the contribution from the Hungable Games publishing business [26] Company Strategy and Development Direction - The company is committed to repurchasing shares and has completed five tuck-in acquisitions in the first half of the year [7] - The focus remains on identifying and integrating durable high-quality assets while maintaining a disciplined approach to capital allocation [20] - The company aims for double-digit total revenue growth, with expectations of mid-30s adjusted EBITDA margins in the long term [51] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the Cybersecurity and Martech segment returning to growth in Q3 [8] - The company anticipates at least mid-single-digit revenue growth for both Q3 and Q4 2025, with Q4 potentially being stronger than Q3 [31] - Health and Wellness and Connectivity businesses are expected to be the largest contributors to second-half growth [31] Other Important Information - The company has a healthy balance sheet with $457 million in cash and cash equivalents and $140 million in long-term investments [27] - The company has repurchased nearly 1.4 million shares since the beginning of Q2 2025, totaling over $170 million since June 30, 2024 [29] Q&A Session Summary Question: What are you hoping to communicate to the market regarding intrinsic value versus current public market valuation? - Management hopes investors will assess each of the five segments, noting that four segments collectively grew 13% and that there are differing levels of growth and margin profiles [36][38] Question: Can you update us on trends in the ad market? - The ad business grew a little over 15%, with health and wellness being very strong and gaming up mid-teens [44][50] Question: Can you unpack the incremental EBITDA margin and any factors affecting it? - Management indicated that there are no specific changes in cost structure affecting margins, and advised looking at performance over multiple quarters for a clearer picture [55][60] Question: What are the trends in health and wellness advertising participation? - The increase in advertiser participation is attributed to expanding beyond pharma to include more health and wellness brands [80][82]