j2 Global(ZD) - 2022 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For Q4 2022, revenue was $396.7 million, a decline of 2.9% from $408.6 million in Q4 2021. Adjusted EBITDA grew by 4.1% to $168.3 million, with an adjusted EBITDA margin of 42.4% [16][17] - For the full year 2022, total revenue grew by 0.6% to $1.391 billion, while adjusted EBITDA increased by 4.6% to $507.2 million, resulting in a 36.5% adjusted EBITDA margin [17][22] Business Line Data and Key Metrics Changes - Advertising revenues declined by 8% in Q4 2022, with a 6% decline for the full year. The gaming vertical saw a mid-single-digit decline, while the shopping vertical, particularly RetailMeNot, experienced low single-digit growth [8][18] - Subscription revenues grew over 4% in Q4 2022, driven by strong performance in the connectivity business, which has seen double-digit growth [9][19] - Cybersecurity and MarTech businesses faced challenges, with a nearly 10% revenue decline in Q4 2022, primarily due to unfavorable foreign exchange rates [10][18] Market Data and Key Metrics Changes - The advertising market remains volatile, with significant challenges in the tech category, which saw double-digit declines. However, there are signs of stabilization in the health advertising sector, which constitutes 40% of advertising revenues [8][12] - The overall churn rate for subscriptions increased to 3.81%, reflecting various factors including promotional holiday bundles and higher VPN churn [19][46] Company Strategy and Development Direction - The company aims to focus on earnings, invest in organic growth, attract talent, and build a strong balance sheet for future acquisitions. The strategy includes reallocating resources to address underperforming segments [6][12] - The company is actively pursuing M&A opportunities across its seven platforms, emphasizing the importance of acquiring quality assets at fair prices [12][26] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism for 2023, anticipating a stabilization in the advertising market and potential revenue growth in the second half of the year. The company expects total revenue growth of about 1% for the full year, with challenges persisting in the first half [12][22] - The company is committed to managing costs while investing in growth opportunities, particularly in health and wellness, shopping, and cybersecurity sectors [10][30] Other Important Information - The company reported a strong balance sheet with over $800 million in cash and investments, and a gross debt to EBITDA ratio of two times [12][21] - The company is focused on ESG efforts, having committed to emissions reduction targets and receiving recognition for its initiatives [13] Q&A Session Summary Question: Trends observed in Q4 and early 2023 - Management noted slight growth in the shopping business and a lack of budget release in health advertising during Q4. They are cautiously optimistic about 2023, particularly in health advertising bookings [24][25] Question: M&A environment and opportunities - Management highlighted a robust pipeline of M&A activity across all platforms, focusing on acquiring great businesses at fair prices [26] Question: Bottom line pacing and OpEx growth - Management indicated that while they are investing in growth, they are also being thoughtful about spending, aiming for a balance between funding opportunities and managing costs [29][30] Question: Impact of generative AI on editorial content - Management believes generative AI can enhance content creation efficiency, but high-quality content will still require human involvement [39][41] Question: Subscription business performance - The connectivity segment continues to perform well, while challenges remain in the cybersecurity sector, particularly in customer acquisition for VPN services [45][46]