j2 Global(US:ZD)2023-08-04 18:10Financial Data and Key Metrics Changes - The company reported revenue of $326 million for Q2 2023, a decline of 3.4% compared to $337.4 million in Q2 2022 [34] - Adjusted EBITDA for Q2 2023 was $106.7 million, down 9.6% from $118 million in the prior-year period, with an adjusted EBITDA margin of 32.7%, reflecting a 200 basis points sequential increase [35] - Adjusted diluted EPS for Q2 2023 was $1.27 [35] Business Line Data and Key Metrics Changes - Advertising revenue declined by 7% in Q2 2023 compared to the prior-year period, heavily impacted by challenges in the technology vertical; excluding this vertical, the decline would have been 2% [37] - Subscription revenue grew by 3% year-over-year in Q2 2023, with nearly 3.2 million subscribers, primarily due to the full quarter inclusion of Lose It! subscribers [40][41] - The overall churn rate increased by 18 basis points from Q1 2023 [45] Market Data and Key Metrics Changes - The technology vertical was the most significant contributor to the year-over-year revenue decline, while connectivity and health and wellness verticals showed solid growth [8][10] - The company observed stabilization in the overall advertising market in non-tech businesses, with expectations for meaningful improvement in the second half of 2023 [38] Company Strategy and Development Direction - The company announced a strategic partnership with Xyla to accelerate AI enablement across its portfolio, starting with the integration of Xyla's OpenEvidence technology into the Everyday Health Group [7][15] - The company aims to generate growth organically and through acquisitions, remaining selective with capital allocation [13][50] - The M&A environment is currently sluggish, but the company is actively sourcing and evaluating transactions [14][51] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for a stronger second half of 2023, citing growth in connectivity and pharma advertising markets as key drivers [7][64] - The company expects Q3 to reflect an improvement in organic growth rates, with approximately 55% of total 2023 revenues anticipated in the second half [56] Other Important Information - The company received validation of its emissions reduction targets from the Science-Based Targets initiative, committing to cut emissions in half by 2030 [30][31] - The company repurchased 980,000 shares for approximately $63.9 million during Q2 2023, with additional repurchases in July [47][48] Q&A Session Summary Question: Signs of recovery and confidence for the fourth quarter - Management pointed to growth in connectivity, improved pharma advertising, and e-commerce trends as reasons for optimism [64] Question: Impact of the partnership with Xyla on business - The partnership is focused on revenue generation, with the integration of OpenEvidence expected to significantly enhance engagement with physicians [66][70] Question: Traffic from non-branded search and margin expansion - Management noted that traffic comes from various sources, including app and direct traffic, and attributed margin expansion to revenue mix and delayed spending [75][78] Question: SEO and generative AI impact - Management observed an increase in Google referrals year-to-date, but could not confirm the impact of generative AI search experiences [81] Question: Long-term growth expectations - Management reaffirmed long-term growth targets of mid-teens, with half expected to be organic [87] Question: AI chatbot performance in gaming - Management highlighted the unique strengths of IGN in game guides and the potential for increased engagement through the AI chatbot [90] Question: Compensation rights and AI in advertising - Management emphasized the need for fair value exchanges in content usage and noted that improving ad performance through AI is not a primary focus [95][97]