Ziff Davis Reports Second Quarter 2022 Results & Revises Full Year 2022 Guidance

Ziff Davis, Inc. (NASDAQ: ZD) (“Ziff Davis”) today reported unaudited financial results for the second quarter ended June 30, 2022.

"We continue to skillfully navigate a difficult and challenging operating environment with a strategy of producing near-term earnings growth while positioning the company for an eventual macro-economic recovery," said Vivek Shah, Chief Executive Officer of Ziff Davis. "At the same time, we continue to strengthen our balance sheet as we seek acquisition opportunities that enhance our businesses and grow and diversify our revenue streams."

SECOND QUARTER 2022 RESULTS

On October 7, 2021, Ziff Davis completed the spin-off of its Consensus Cloud Solutions, Inc. (“Consensus”) business. Ziff Davis has classified Consensus as a discontinued operation in its financial statements for the three and six months ended June 30, 2021 results. Historical results in this press release represent continuing operations, except for the Statement of Cash Flows, net cash provided by operating activities and free cash flow during the three and six months ended June 30, 2021, which are on a combined continuing and discontinued operations basis.

Q2 2022 quarterly revenues decreased 1.1% to $337.4 million compared to $341.3 million for Q2 2021. On a pro-forma(1) basis, Q2 2022 quarterly revenues increased 2.2% to $337.4 million as compared to $330.0 million for Q2 2021.

GAAP net loss per diluted share from continuing operations(2) increased to $0.99 in Q2 2022 compared to $0.52 for Q2 2021. The net loss increase was primarily due to losses on our investment in Consensus.

Adjusted non-GAAP net income per diluted share from continuing operations(2)(3) for the quarter increased 5.3% to $1.58 as compared to $1.50 for Q2 2021. On a pro-forma(1) basis, Adjusted non-GAAP net income per diluted share from continuing operations(2)(3) for the quarter increased 12.1% to $1.58 compared to $1.41 for Q2 2021.

GAAP net loss from continuing operations increased to $46.4 million compared to $23.0 million for Q2 2021 primarily due to losses on our investment in Consensus.

Adjusted non-GAAP net income from continuing operations increased by 10.9% to $74.4 million as compared to $67.1 million for Q2 2021. On a pro-forma(1) basis, Adjusted non-GAAP net income from continuing operations increased by 17.7% to $74.4 million as compared to $63.2 million for Q2 2021.

Adjusted EBITDA(4) for the quarter increased 0.9% to $118.0 million compared to $117.0 million for Q2 2021. On a pro-forma(1) basis, Adjusted EBITDA(4) for the quarter increased 5.3% to $118.0 million compared to $112.1 million for Q2 2021.

Net cash provided by operating activities from continuing operations was $76.0 million in Q2 2022. Free cash flow from continuing operations(6) was $52.6 million in Q2 2022.

Ziff Davis ended the quarter with approximately $849.3 million in cash, cash equivalents, and investments after deploying during the quarter approximately $68.7 million for current and prior year acquisitions, approximately $18.2 million to repay $21.5 million of outstanding principal of its senior notes and approximately $12.7 million with respect to its share repurchase program.

Key unaudited financial results for Q2 2022 versus Q2 2021 are set forth in the following table (in millions, except per share amounts). Reconciliations of Adjusted non-GAAP net income per diluted share from continuing operations, Adjusted EBITDA and free cash flow from continuing operations to their nearest comparable GAAP financial measures are attached to this Press Release.

The following table reflects Actual and Pro-Forma Results from Continuing Operations for the second quarter of 2022 and 2021 (in millions, except per share amounts). Pro-Forma Results from Continuing Operations below excludes the operating results from the Company’s B2B Backup business that was sold in the third quarter of 2021.

 

QTD

QTD

 

Pro-Forma Results(1)

Q2 2022

Q2 2021

% Change

Q2 2022

Q2 2021

% Change

Revenues

 

 

 

 

 

 

Digital Media

$

258.4

 

$

253.8

 

1.8

%

$

258.4

 

$

253.8

 

1.8

%

Cybersecurity and Martech

$

79.0

 

$

87.5

 

(9.7

)%

$

79.0

 

$

76.2

 

3.7

%

Total revenue(5):

$

337.4

 

$

341.3

 

(1.1

)%

$

337.4

 

$

330.0

 

2.2

%

Income from operations

$

45.9

 

$

10.1

 

354.5

%

 

 

 

GAAP loss per diluted share from continuing operations(2)

$

(0.99

)

$

(0.52

)

90.4

%

 

 

 

Adjusted non-GAAP income per diluted share from continuing operations(2) (3)

$

1.58

 

$

1.50

 

5.3

%

$

1.58

 

$

1.41

 

12.1

%

GAAP net loss from continuing operations

$

(46.4

)

$

(23.0

)

101.7

%

 

 

 

Adjusted non-GAAP net income from continuing operations

$

74.4

 

$

67.1

 

10.9

%

$

74.4

 

$

63.2

 

17.7

%

Adjusted EBITDA(4)

$

118.0

 

$

117.0

 

0.9

%

$

118.0

 

$

112.1

 

5.3

%

Adjusted EBITDA margin(4)

 

35.0

%

 

34.3

%

0.7

%

 

35.0

%

 

34.0

%

1.0

%

Net cash provided by operating activities from continuing operations(6)

$

76.0

 

NA(7)

 

 

 

 

Free cash flow from continuing operations(6)

$

52.6

 

NA(7)

 

 

 

 

The following table reflects Actual and Pro-Forma Results from Continuing Operations for the six months ended June 30, 2022 and 2021 (in millions, except per share amounts). Pro-Forma Results from Continuing Operations below excludes the operating results from Voice assets in the United Kingdom and the Company’s B2B Backup business that were sold in 2021.

 

YTD

YTD

 

Pro-Forma Results(1)

Q2 2022

Q2 2021

% Change

Q2 2022

Q2 2021

% Change

Revenues

 

 

 

 

 

 

Digital Media

$

493.0

 

$

480.6

 

2.6

%

$

493.0

 

$

480.6

 

2.6

%

Cybersecurity and Martech

$

159.4

 

$

172.4

 

(7.5

)%

$

159.4

 

$

148.5

 

7.3

%

Total revenue(5):

$

652.4

 

$

653.0

 

(0.1

)%

$

652.4

 

$

629.1

 

3.7

%

Income from operations

$

76.4

 

$

36.9

 

107.0

%

 

 

 

GAAP (loss) income per diluted share from continuing operations(2)

$

(0.47

)

$

0.33

 

(242.4

)%

 

 

 

Adjusted non-GAAP income per diluted share from continuing operations(2) (3)

$

2.81

 

$

2.74

 

2.6

%

$

2.81

 

$

2.60

 

8.1

%

GAAP net (loss) income from continuing operations

$

(21.9

)

$

15.7

 

(239.5

)%

 

 

 

Adjusted non-GAAP net income from continuing operations

$

132.4

 

$

122.5

 

8.1

%

$

132.4

 

$

116.3

 

13.8

%

Adjusted EBITDA(4)

$

218.8

 

$

217.7

 

0.5

%

$

218.8

 

$

208.0

 

5.2

%

Adjusted EBITDA margin(4)

 

33.5

%

 

33.3

%

0.2

%

 

33.5

%

 

33.1

%

0.4

%

Net cash provided by operating activities from continuing operations(6)

$

192.5

 

NA(7)

 

 

 

 

Free cash flow from continuing operations(6)

$

138.6

 

NA(7)

 

 

 

 

ZIFF DAVIS GUIDANCE

The Company is revising its guidance for revenue, adjusted EBITDA and adjusted non-GAAP Diluted EPS for fiscal year 2022 as follows (in millions, except per share data):

 

Current Guidance

 

Revised FY 2022 Range of Estimates

 

Low

 

High

 

Low

 

High

Revenue

$

1,497

 

$

1,535

 

$

1,410

 

$

1,435

Adjusted EBITDA

$

538

 

$

555

 

$

507

 

$

519

Adjusted non-GAAP Diluted EPS

$

6.52

 

$

6.79

 

$

6.57

 

$

6.77

____________________

* Adjusted non-GAAP net income per diluted share for 2022 excludes share-based compensation of between $24 million and $28 million, amortization of acquired intangibles and the impact of any currently unanticipated items, in each case net of tax. It is anticipated that the non-GAAP effective tax rate for 2022 (exclusive of the release of reserves for uncertain tax positions) will be between 22.25% and 23.75%.

The Company has not reconciled the non-GAAP Business Outlook for 2022 Adjusted EBITDA or Adjusted non-GAAP Diluted EPS and the associated tax rate information included in this press release to the most directly comparable GAAP measure because this cannot be done without unreasonable effort due to the variability with respect to costs related to acquisitions and taxation, which are potential adjustments to future earnings. We expect the variability of these items to have a potentially unpredictable and significant impact on our future non-GAAP financial results.

Notes:

(1)

 

Pro-forma figures are provided taking into consideration the sale of certain Voice assets in the United Kingdom as well as the sale of the Company’s B2B Backup business as if they had occurred January 1, 2021.

(2)

 

The estimated GAAP effective tax rates were approximately (33.2)% for Q2 2022 and 37.4% for Q2 2021. The estimated Adjusted non-GAAP effective tax rates were approximately 22.7% for Q2 2022 and 22.3% for Q2 2021.

(3)

 

Adjusted non-GAAP net income per diluted share excludes certain non-GAAP items, as defined in the Reconciliation of GAAP to Adjusted non-GAAP financial measures, for the three months ended June 30, 2022 and 2021 which totaled $2.57 and $2.02 per diluted share, respectively.

(4)

 

Adjusted EBITDA is defined as net income from continuing operations before interest; gain on sale of businesses; loss on investments, net, unrealized gain (loss) on short-term investments, other income (expense), net; income tax expense (benefit); income (loss) from equity method investments, net; depreciation and amortization; and the items used to reconcile EPS to Adjusted non-GAAP EPS, as defined in the Reconciliation of GAAP to Adjusted non-GAAP financial measures. Adjusted EBITDA amounts are not meant as a substitute for GAAP, but are solely for informational purposes.

(5)

 

The revenues associated with each of the businesses may not foot precisely since each is presented independently.

(6)

 

Free cash flow from continuing operations is defined as net cash provided by operating activities from continuing operations, less purchases of property and equipment from continuing operations, plus contingent consideration from continuing operations. Free cash flow amounts are not meant as a substitute for GAAP, but are solely for informational purposes. There were no discontinued operations in 2022.

(7)

 

NA = Not available. The Company has not prepared net cash provided by operating activities from continuing operations and free cash flow from continuing operations for the second quarter of 2021. Net cash provided by operating activities from continuing and discontinued operations on a combined basis and free cash flow from continuing and discontinued operations on a combined basis for the three months ended June 30, 2021 was $111.3 million and $80.5 million, respectively. Free cash flow from continuing and discontinued operations is defined as net cash provided by operating activities from continuing and discontinued operations, less purchases of property and equipment from continuing and discontinued operations, plus contingent consideration from continuing and discontinued operations.

About Ziff Davis

Ziff Davis, Inc. (NASDAQ: ZD) is a vertically focused digital media and internet company whose portfolio includes leading brands in technology, entertainment, shopping, health, cybersecurity, and martech. For more information, visit www.ziffdavis.com.

“Safe Harbor” Statement Under the Private Securities Litigation Reform Act of 1995: Certain statements in this Press Release are “forward-looking statements” within the meaning of The Private Securities Litigation Reform Act of 1995, including those contained in Vivek Shah’s quote and the “Business Outlook” portion regarding the Company’s expected fiscal 2022 financial performance. These forward-looking statements are based on management’s current expectations or beliefs and are subject to numerous assumptions, risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. These factors and uncertainties include, among other items: the Company’s ability to grow advertising revenues, profitability and cash flows; the Company’s ability to make interest and debt payments; the Company’s ability to identify, close and successfully transition acquisitions; subscriber growth and retention; variability of the Company’s revenue based on changing conditions in particular industries and the economy generally; protection of the Company’s proprietary technology or infringement by the Company of intellectual property of others; the risk of losing critical third-party vendors or key personnel; the risks associated with fraudulent activity, system failure or a security breach; risks related to our ability to adhere to our internal controls and procedures; the risk of adverse changes in the U.S. or international regulatory environments, including but not limited to the imposition or increase of taxes or regulatory-related fees; the risk of liability for legal and other claims; and the numerous other factors set forth in Ziff Davis’s (formerly J2 Global, Inc.) filings with the Securities and Exchange Commission (“SEC”). For a more detailed description of the risk factors and uncertainties affecting Ziff Davis, refer to the 2021 Annual Report on Form 10-K filed by Ziff Davis on March 15, 2022, and the other reports filed by Ziff Davis from time-to-time with the SEC, each of which is available at www.sec.gov. The forward-looking statements provided in this press release, including those contained in Vivek Shah’s quote and in the “Business Outlook” portion regarding the Company’s expected fiscal 2022 financial performance are based on limited information available to the Company at this time, which is subject to change. Although management’s expectations may change after the date of this press release, the Company undertakes no obligation to revise or update these statements.

About Non-GAAP Financial Measures

To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we use the following Adjusted non-GAAP financial measures: Adjusted non-GAAP and Pro Forma net income, Adjusted non-GAAP and Pro Forma net income per diluted share, Adjusted and Pro Forma EBITDA and free cash flow. The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.

We use these Adjusted non-GAAP financial measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons. Our management believes that these Adjusted non-GAAP financial measures provide meaningful supplemental information regarding our performance and liquidity by excluding certain expenses and expenditures that may not be indicative of our recurring core business operating results. We believe that both management and investors benefit from referring to these Adjusted non-GAAP financial measures in assessing our performance and when planning, forecasting, and analyzing future periods. These Adjusted non-GAAP financial measures also facilitate management’s internal comparisons to our historical performance and liquidity. We believe these Adjusted non-GAAP financial measures are useful to investors both because (1) they allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making and (2) they are used by our institutional investors and the analyst community to help them analyze the health of our business.

For more information on these Adjusted non-GAAP financial measures, please see the appropriate GAAP to Adjusted non-GAAP reconciliation tables included within the attached Exhibit to this press release.

ZIFF DAVIS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED, IN THOUSANDS)

 

 

June 30, 2022

 

December 31, 2021

ASSETS

 

 

 

Cash and cash equivalents

$

648,290

 

 

$

694,842

 

Short-term investments

 

72,535

 

 

 

229,200

 

Accounts receivable, net of allowances

 

243,300

 

 

 

316,342

 

Prepaid expenses and other current assets

 

60,956

 

 

 

60,290

 

Total current assets

 

1,025,081

 

 

 

1,300,674

 

Long-term investments

 

128,460

 

 

 

122,593

 

Property and equipment, net

 

166,152

 

 

 

161,209

 

Operating lease right-of-use assets

 

48,565

 

 

 

55,617

 

Trade names, net

 

147,621

 

 

 

147,761

 

Customer relationships, net

 

248,522

 

 

 

275,451

 

Goodwill

 

1,603,340

 

 

 

1,531,455

 

Other purchased intangibles, net

 

140,597

 

 

 

149,513

 

Deferred income taxes, noncurrent

 

7,321

 

 

 

5,917

 

Other assets

 

27,436

 

 

 

20,090

 

TOTAL ASSETS

$

3,543,095

 

 

$

3,770,280

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

Accounts payable and accrued expenses

$

191,922

 

 

$

226,621

 

Income taxes payable, current

 

4,027

 

 

 

3,151

 

Deferred revenue, current

 

194,522

 

 

 

185,571

 

Operating lease liabilities, current

 

24,867

 

 

 

27,156

 

Current portion of long-term debt

 

68,506

 

 

 

54,609

 

Other current liabilities

 

203

 

 

 

130

 

Total current liabilities

 

484,047

 

 

 

497,238

 

Long-term debt

 

1,033,695

 

 

 

1,036,018

 

Deferred revenue, noncurrent

 

9,246

 

 

 

14,839

 

Operating lease liabilities, noncurrent

 

43,634

 

 

 

53,708

 

Income taxes payable, noncurrent

 

11,675

 

 

 

11,675

 

Liability for uncertain tax positions

 

43,597

 

 

 

42,546

 

Deferred income taxes

 

88,217

 

 

 

108,982

 

Other long-term liabilities

 

34,788

 

 

 

37,542

 

TOTAL LIABILITIES

 

1,748,899

 

 

 

1,802,548

 

Commitments and contingencies

 

 

 

 

 

Preferred stock

 

 

 

 

 

Common stock

 

472

 

 

 

474

 

Additional paid-in capital

 

426,104

 

 

 

509,122

 

Retained earnings

 

1,451,316

 

 

 

1,515,358

 

Accumulated other comprehensive loss

 

(83,696

)

 

 

(57,222

)

TOTAL STOCKHOLDERS’ EQUITY

 

1,794,196

 

 

 

1,967,732

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

$

3,543,095

 

 

$

3,770,280

 

ZIFF DAVIS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED, IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)

 

 

Three Months Ended June 30,

 

Six months ended June 30,

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Total revenues

$

337,356

 

 

$

341,293

 

 

$

652,424

 

 

$

652,950

 

Cost of revenues (1)

 

46,004

 

 

 

48,785

 

 

 

92,104

 

 

 

92,637

 

Gross profit

 

291,352

 

 

 

292,508

 

 

 

560,320

 

 

 

560,313

 

Operating expenses:

 

 

 

 

 

 

 

Sales and marketing (1)

 

123,777

 

 

 

120,421

 

 

 

241,539

 

 

 

228,372

 

Research, development and engineering (1)

 

19,721

 

 

 

17,705

 

 

 

38,148

 

 

 

37,380

 

General and administrative (1)

 

101,967

 

 

 

111,698

 

 

 

204,184

 

 

 

224,996

 

Goodwill impairment on business

 

 

 

 

32,629

 

 

 

 

 

 

32,629

 

Total operating expenses

 

245,465

 

 

 

282,453

 

 

 

483,871

 

 

 

523,377

 

Income from operations

 

45,887

 

 

 

10,055

 

 

 

76,449

 

 

 

36,936

 

Interest expense, net

 

(6,956

)

 

 

(21,013

)

 

 

(18,466

)

 

 

(42,490

)

Gain on sale of businesses

 

 

 

 

823

 

 

 

 

 

 

2,802

 

Loss on investments, net

 

(48,243

)

 

 

(16,677

)

 

 

(48,243

)

 

 

(16,677

)

Unrealized loss on short-term investments

 

(27,317

)

 

 

 

 

 

(18,366

)

 

 

 

Other income (loss), net

 

6,345

 

 

 

(816

)

 

 

8,744

 

 

 

(573

)

(Loss) income from continuing operations before income taxes and (loss) income from equity method investment, net

 

(30,284

)

 

 

(27,628

)

 

 

118

 

 

 

(20,002

)

Income tax expense (benefit)

 

10,051

 

 

 

(10,334

)

 

 

15,131

 

 

 

(17,218

)

(Loss) income from equity method investment, net

 

(6,101

)

 

 

(5,751

)

 

 

(6,886

)

 

 

18,519

 

Net (loss) income from continuing operations

 

(46,436

)

 

 

(23,045

)

 

 

(21,899

)

 

 

15,735

 

Income from discontinued operations, net of income taxes

 

 

 

 

38,762

 

 

 

 

 

 

77,905

 

Net (loss) income

$

(46,436

)

 

$

15,717

 

 

$

(21,899

)

 

$

93,640

 

 

 

 

 

 

 

 

 

Net (loss) income per common share from continuing operations:

 

 

 

 

 

 

 

Basic

$

(0.99

)

 

$

(0.52

)

 

$

(0.47

)

 

$

0.35

 

Diluted

$

(0.99

)

 

$

(0.52

)

 

$

(0.47

)

 

$

0.33

 

Net income per common share from discontinued operations:

 

 

 

 

 

 

 

Basic

$

 

 

$

0.87

 

 

$

 

 

$

1.75

 

Diluted

$

 

 

$

0.87

 

 

$

 

 

$

1.65

 

Net (loss) income per common share:

 

 

 

 

 

 

 

Basic

$

(0.99

)

 

$

0.35

 

 

$

(0.47

)

 

$

2.10

 

Diluted

$

(0.99

)

 

$

0.35

 

 

$

(0.47

)

 

$

1.98

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

Basic

 

46,978,709

 

 

 

44,613,533

 

 

 

47,016,351

 

 

 

44,506,933

 

Diluted

 

46,978,709

 

 

 

44,613,533

 

 

 

47,016,351

 

 

 

47,130,979

 

 

 

 

 

 

 

 

 

(1) Includes share-based compensation expense as follows:

 

 

 

 

 

 

 

Cost of revenues

$

142

 

 

$

67

 

 

$

226

 

 

$

150

 

Sales and marketing

 

1,106

 

 

 

278

 

 

 

1,675

 

 

 

544

 

Research, development and engineering

 

852

 

 

 

458

 

 

 

1,481

 

 

 

876

 

General and administrative

 

5,603

 

 

 

5,066

 

 

 

11,038

 

 

 

10,029

 

Total

$

7,703

 

 

$

5,869

 

 

$

14,420

 

 

$

11,599

 

 

 

 

 

 

 

 

 

ZIFF DAVIS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED, IN THOUSANDS)

 

 

Six Months Ended June 30,

 

 

2022

 

 

 

2021

 

Cash flows from operating activities:

 

 

 

Net (loss) income

$

(21,899

)

 

$

93,640

 

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

 

 

 

Depreciation and amortization

 

118,943

 

 

 

130,226

 

Amortization of financing costs and discounts

 

1,398

 

 

 

14,058

 

Non-cash operating lease costs

 

5,913

 

 

 

6,714

 

Share-based compensation

 

14,420

 

 

 

12,363

 

Provision for credit losses on accounts receivable

 

(1,376

)

 

 

4,329

 

Deferred income taxes, net

 

(10,266

)

 

 

(11,853

)

Gain on extinguishment of debt, net

 

(1,393

)

 

 

 

Gain on sale of businesses

 

 

 

 

(2,802

)

Lease asset impairments and other charges

 

168

 

 

 

7,829

 

Changes in fair value of contingent consideration

 

(9

)

 

 

562

 

Foreign currency remeasurement gain

 

549

 

 

 

415

 

Loss (income) from equity method investments

 

6,886

 

 

 

(18,519

)

Unrealized loss on short-term investments

 

18,366

 

 

 

 

Loss on investments, net

 

48,243

 

 

 

16,677

 

Decrease (increase) in:

 

 

 

Accounts receivable

 

77,168

 

 

 

65,312

 

Prepaid expenses and other current assets

 

5,804

 

 

 

(7,720

)

Operating lease right-of-use assets

 

2,260

 

 

 

689

 

Other assets

 

(7,250

)

 

 

(701

)

Increase (decrease) in:

 

 

 

Accounts payable and accrued expenses

 

(45,329

)

 

 

(23,438

)

Income taxes payable

 

8,825

 

 

 

(15,123

)

Deferred revenue

 

(11,882

)

 

 

2,499

 

Operating lease liabilities

 

(13,721

)

 

 

(14,218

)

Liability for uncertain tax positions

 

403

 

 

 

(3,567

)

Other long-term liabilities

 

(3,737

)

 

 

21

 

Net cash provided by operating activities

 

192,484

 

 

 

290,022

 

Cash flows from investing activities:

 

 

 

Proceeds from sale of available-for-sale investments

 

 

 

 

663

 

Purchases of equity method investment

 

 

 

 

(11,053

)

Investment in available-for-sale securities

 

(15,000

)

 

 

 

Purchases of property and equipment

 

(53,876

)

 

 

(57,766

)

Purchases of equity investments

 

 

 

 

(999

)

Proceeds from sale of assets

 

 

 

 

6,033

 

Acquisition of businesses, net of cash received

 

(92,425

)

 

 

(89,489

)

Net cash used in investing activities

 

(161,301

)

 

 

(152,611

)

Cash flows from financing activities:

 

 

 

Payment of debt

 

(72,853

)

 

 

(2,802

)

Debt issuance cost

 

 

 

 

 

Proceeds from term loan

 

89,991

 

 

 

2,811

 

Debt extinguishment costs

 

(756

)

 

 

 

Repurchase of common stock

 

(76,345

)

 

 

(22,934

)

Issuance of common stock under employee stock purchase plan

 

5,235

 

 

 

4,232

 

Exercise of stock options

 

148

 

 

 

1,331

 

Deferred payments for acquisitions

 

(7,094

)

 

 

(12,934

)

Other

 

(5

)

 

 

(1,294

)

Net cash used in financing activities

 

(61,679

)

 

 

(31,590

)

Effect of exchange rate changes on cash and cash equivalents

 

(16,056

)

 

 

(616

)

Net change in cash and cash equivalents

 

(46,552

)

 

 

105,205

 

Cash and cash equivalents at beginning of period

 

694,842

 

 

 

242,652

 

Cash and cash equivalents at beginning of period associated with discontinued operations

 

 

 

 

66,210

 

Cash and cash equivalents at beginning of period associated with continuing operations

 

694,842

 

 

 

176,442

 

Cash and cash equivalents at end of period

 

648,290

 

 

 

347,857

 

Cash and cash equivalents at end of period associated with discontinued operations

 

 

 

 

107,666

 

Cash and cash equivalents at end of period associated with continuing operations

$

648,290

 

 

$

240,191

 

ZIFF DAVIS, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP FINANCIAL MEASURES

THREE MONTHS ENDED JUNE 30, 2022 AND 2021

(UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

 

Adjusted non-GAAP net income from continuing operations is GAAP net income from continuing operations with the following modifications: (1) elimination of share-based compensation; (2) elimination of certain acquisition related integration costs; (3) elimination of certain interest costs; (4) elimination of amortization of patents and intangible assets that we acquired; (5) elimination of change in value of investments; (6) elimination of gain/loss on sale of assets; (7) elimination of lease asset impairments and other charges; (8) elimination of disposal related costs and (9) elimination of goodwill impairment on business.

 

 

Three months ended June 30,

 

 

2022

 

Per diluted share*

 

2021

 

Per diluted share*

Net loss from continuing operations

$

(46,436

)

$

(0.99

)

$

(23,045

)

$

(0.52

)

Plus:

 

 

 

 

Share based compensation (1)

 

6,798

 

 

0.14

 

 

3,815

 

 

0.09

 

Acquisition related integration costs (2)

 

2,627

 

 

0.06

 

 

872

 

 

0.02

 

Interest costs (3)

 

(2,226

)

 

(0.05

)

 

4,761

 

 

0.11

 

Amortization (4)

 

32,064

 

 

0.68

 

 

34,159

 

 

0.77

 

Investments (5)

 

80,485

 

 

1.71

 

 

18,490

 

 

0.41

 

Sale of assets (6)

 

 

 

 

 

(823

)

 

(0.02

)

Lease asset impairments and other charges (7)

 

808

 

 

0.02

 

 

4,665

 

 

0.10

 

Disposal related costs (8)

 

305

 

 

0.01

 

 

(421

)

 

(0.01

)

Goodwill impairment on business (9)

 

 

 

 

 

24,635

 

 

0.55

 

Adjusted non-GAAP net income from continuing operations

$

74,425

 

$

1.58

 

$

67,108

 

$

1.50

 

____________________

* The reconciliation of net income from continuing operations per diluted share from GAAP to Adjusted non-GAAP net income from continuing operations per share may not foot since each is calculated independently.

ZIFF DAVIS, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP FINANCIAL MEASURES

SIX MONTHS ENDED JUNE 30, 2022 AND 2021

(UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

 

Adjusted non-GAAP net income from continuing operations is GAAP net income from continuing operations with the following modifications: (1) elimination of share-based compensation; (2) elimination of certain acquisition related integration costs; (3) elimination of certain interest costs; (4) elimination of amortization of patents and intangible assets that we acquired; (5) elimination of change in value of investments; (6) elimination of gain/loss on sale of assets; (7) elimination of lease asset impairments and other charges; (8) elimination of disposal related costs; (9) elimination of goodwill impairment on business; and (10) elimination of dilutive effect of the convertible debt.

 

 

Six months ended June 30,

 

 

2022

 

Per diluted share*

 

2021

 

Per diluted share*

Net (loss) income from continuing operations

$

(21,899

)

$

(0.47

)

$

15,735

 

$

0.33

 

Plus:

 

 

 

 

Share based compensation (1)

 

11,676

 

 

 

 

7,104

 

 

0.16

 

Acquisition related integration costs (2)

 

3,827

 

 

0.08

 

 

2,492

 

 

0.06

 

Interest costs (3)

 

(1,220

)

 

(0.03

)

 

9,606

 

 

0.22

 

Amortization (4)

 

64,462

 

 

1.37

 

 

66,615

 

 

1.49

 

Investments (5)

 

72,318

 

 

1.53

 

 

(6,954

)

 

(0.16

)

Sale of assets (6)

 

 

 

 

 

(2,845

)

 

(0.06

)

Lease asset impairments and other charges (7)

 

2,066

 

 

0.05

 

 

6,082

 

 

0.14

 

Disposal related costs (8)

 

1,123

 

 

0.03

 

 

70

 

 

 

Goodwill impairment on business (9)

 

 

 

 

 

24,635

 

 

0.55

 

Convertible debt dilution (10)

 

 

 

 

 

 

 

0.01

 

Adjusted non-GAAP net income from continuing operations

$

132,353

 

$

2.81

 

$

122,540

 

$

2.74

 

____________________

* The reconciliation of net income from continuing operations per diluted share from GAAP to Adjusted non-GAAP net income from continuing operations per share may not foot since each is calculated independently.

ZIFF DAVIS, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP FINANCIAL MEASURES

THREE MONTHS ENDED JUNE 30, 2022 AND 2021

(UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

 

 

Three months ended June 30,

 

 

2022

 

 

 

2021

 

Cost of revenues

$

46,004

 

 

$

48,785

 

Plus:

 

 

 

Share based compensation(1)

 

(142

)

 

 

(68

)

Acquisition related integration costs(2)

 

(4

)

 

 

(36

)

Amortization(4)

 

(259

)

 

 

(348

)

Adjusted non-GAAP cost of revenues

$

45,599

 

 

$

48,333

 

 

 

 

 

Sales and marketing

$

123,777

 

 

$

120,421

 

Plus:

 

 

 

Share based compensation(1)

 

(1,106

)

 

 

(278

)

Acquisition related integration costs(2)

 

(1,219

)

 

 

23

 

Lease asset impairments and other charges(7)

 

(438

)

 

 

 

Adjusted non-GAAP sales and marketing

$

121,014

 

 

$

120,166

 

 

 

 

 

Research, development and engineering

$

19,721

 

 

$

17,705

 

Plus:

 

 

 

Share based compensation(1)

 

(851

)

 

 

(458

)

Acquisition related integration costs(2)

 

(195

)

 

 

(206

)

Adjusted non-GAAP research, development and engineering

$

18,675

 

 

$

17,041

 

 

 

 

 

General and administrative

$

101,967

 

 

$

111,698

 

Plus:

 

 

 

Share based compensation(1)

 

(5,604

)

 

 

(5,066

)

Acquisition related integration costs(2)

 

(2,013

)

 

 

(1,075

)

Amortization(4)

 

(41,642

)

 

 

(46,711

)

Lease asset impairments and other charges(7)

 

(641

)

 

 

(6,167

)

Disposal related costs(8)

 

(65

)

 

 

991

 

Adjusted non-GAAP general and administrative

$

52,002

 

 

$

53,670

 

 

 

 

 

Goodwill impairment on business

$

 

 

$

32,629

 

Plus:

 

 

 

Goodwill impairment on business(19)

 

 

 

 

(32,629

)

Adjusted non-GAAP goodwill impairment on business

$

 

 

$

 

 

 

 

 

Interest expense, net

$

(6,956

)

 

$

(21,013

)

Plus:

 

 

 

Interest costs (3)

 

(2,959

)

 

 

6,078

 

Adjusted non-GAAP interest expense, net

$

(9,915

)

 

$

(14,935

)

ZIFF DAVIS, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP FINANCIAL MEASURES - CONTINUED

THREE MONTHS ENDED JUNE 30, 2022 AND 2021

(UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

 

 

Three months ended June 30,

 

 

2022

 

 

 

2021

 

Gain on sale of businesses

$

 

 

$

823

 

Plus:

 

 

 

Sale of assets(6)

 

 

 

 

(823

)

Adjusted non-GAAP gain on sale of businesses

$

 

 

$

 

 

 

 

 

Loss on investment, net

$

(48,243

)

 

$

(16,677

)

Plus:

 

 

 

Investments(5)

 

48,243

 

 

 

16,677

 

Adjusted non-GAAP loss on investments, net

$

 

 

$

 

 

 

 

 

Unrealized loss on short-term investments

$

(27,317

)

 

$

 

Plus:

 

 

 

Investments(5)

 

27,317

 

 

 

 

Adjusted non-GAAP unrealized loss on short-term investments, net

$

 

 

$

 

 

 

 

 

Other income, net

$

6,345

 

 

$

(816

)

Plus:

 

 

 

Investments(5)

 

(174

)

 

 

 

Adjusted non-GAAP other income, net

$

6,171

 

 

$

(816

)

 

 

 

 

Income tax expense (benefit)

$

10,051

 

 

$

(10,334

)

Plus the tax effect of:

 

 

 

Share based compensation(1)

 

905

 

 

 

2,055

 

Acquisition related integration costs(2)

 

804

 

 

 

422

 

Interest costs(3)

 

(733

)

 

 

1,317

 

Amortization(4)

 

9,837

 

 

 

12,900

 

Investments(5)

 

1,002

 

 

 

3,938

 

Lease asset impairments and other charges(7)

 

271

 

 

 

1,502

 

Disposal related costs(8)

 

(240

)

 

 

(571

)

Goodwill impairment on business(19)

 

 

 

 

7,994

 

Adjusted non-GAAP income tax expense

$

21,897

 

 

$

19,224

 

 

 

 

 

Loss from equity method investment, net

$

(6,101

)

 

$

(5,751

)

Plus:

 

 

 

Investments(5)

 

6,101

 

 

 

5,751

 

Adjusted non-GAAP income from equity method investment, net

$

 

 

$

 

ZIFF DAVIS, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP FINANCIAL MEASURES - CONTINUED

THREE MONTHS ENDED JUNE 30, 2022 AND 2021

(UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

 

 

Three months ended June 30,

 

 

2022

 

 

 

2021

 

Total adjustments

$

(120,861

)

 

$

(90,153

)

 

 

 

 

GAAP Net income per diluted share from continuing operations

$

(0.99

)

 

$

(0.52

)

Adjustments *

$

2.57

 

 

$

2.02

 

Adjusted non-GAAP Net income per diluted share from continuing operations

$

1.58

 

 

$

1.50

 

____________________

* The reconciliation of Net income per share from GAAP to Adjusted non-GAAP may not foot since each is calculated independently.

The Company discloses Adjusted non-GAAP net income per diluted share (“Adjusted Diluted EPS”) as a supplemental Non-GAAP financial performance measure, as it believes it is a useful metric by which to compare the performance of its business from period to period. The Company also understands that an Adjusted Diluted EPS measure is broadly used by analysts, rating agencies and investors in assessing the Company’s performance. Accordingly, the Company believes that the presentation of Adjusted Diluted EPS provides useful information to investors.

Adjusted Diluted EPS is not in accordance with, or an alternative to, net income per diluted share from continuing operations and may be different from Non-GAAP measures with similar or even identical names used by other companies. In addition, Adjusted Diluted EPS is not based on any comprehensive set of accounting rules or principles. The Adjusted Diluted EPS measure has limitations in that it does not reflect all of the amounts associated with the Company’s results of operations determined in accordance with GAAP.

ZIFF DAVIS, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP FINANCIAL MEASURES

SIX MONTHS ENDED JUNE 30, 2022 AND 2021

(UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

 

 

Six months ended June 30,

 

 

2022

 

 

 

2021

 

Cost of revenues

$

92,104

 

 

$

92,637

 

Plus:

 

 

 

Share based compensation(1)

 

(226

)

 

 

(150

)

Acquisition related integration costs(2)

 

(54

)

 

 

(76

)

Amortization(4)

 

(538

)

 

 

(941

)

Adjusted non-GAAP cost of revenues

$

91,286

 

 

$

91,470

 

 

 

 

 

Sales and marketing

$

241,539

 

 

$

228,372

 

Plus:

 

 

 

Share based compensation(1)

 

(1,675

)

 

 

(544

)

Acquisition related integration costs(2)

 

(1,385

)

 

 

(814

)

Lease asset impairments and other charges(7)

 

(961

)

 

 

 

Adjusted non-GAAP sales and marketing

$

237,518

 

 

$

227,014

 

 

 

 

 

Research, development and engineering

$

38,148

 

 

$

37,380

 

Plus:

 

 

 

Share based compensation(1)

 

(1,480

)

 

 

(876

)

Acquisition related integration costs(2)

 

(413

)

 

 

(530

)

Adjusted non-GAAP research, development and engineering

$

36,255

 

 

$

35,974

 

 

 

 

 

General and administrative

$

204,184

 

 

$

224,996

 

Plus:

 

 

 

Share based compensation(1)

 

(11,038

)

 

 

(10,029

)

Acquisition related integration costs(2)

 

(3,114

)

 

 

(2,304

)

Amortization(4)

 

(82,865

)

 

 

(93,920

)

Lease asset impairments and other charges(7)

 

(1,783

)

 

 

(8,041

)

Disposal related costs(8)

 

(1,304

)

 

 

(129

)

Adjusted non-GAAP general and administrative

$

104,080

 

 

$

110,573

 

 

 

 

 

Goodwill impairment on business

 

 

 

$

32,629

 

Plus:

 

 

 

Goodwill impairment on business (10)

 

 

 

 

(32,629

)

Adjusted non-GAAP goodwill impairment on business

$

 

 

$

 

 

 

 

 

Interest expense, net

$

(18,466

)

 

$

(42,490

)

Plus:

 

 

 

Interest costs (3)

 

(1,618

)

 

 

12,495

 

Adjusted non-GAAP interest expense, net

$

(20,084

)

 

$

(29,995

)

ZIFF DAVIS, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP FINANCIAL MEASURES - CONTINUED

SIX MONTHS ENDED JUNE 30, 2022 AND 2021

(UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

 

 

Six months ended June 30,

 

 

2022

 

 

 

2021

 

Gain on sale of businesses

$

 

 

$

2,802

 

Plus:

 

 

 

Sale of assets(6)

 

 

 

 

(2,802

)

Adjusted non-GAAP gain on sale of businesses

$

 

 

$

 

 

 

 

 

Loss on investments, net

$

(48,243

)

 

$

(16,677

)

Plus:

 

 

 

Investments(5)

 

48,243

 

 

 

16,677

 

Adjusted non-GAAP loss on investments, net

$

 

 

$

 

 

 

 

 

Unrealized loss on short-term investments

$

(18,366

)

 

$

 

Plus:

 

 

 

Investments(5)

 

18,366

 

 

 

 

Adjusted non-GAAP unrealized loss on short-term investments, net

$

 

 

$

 

 

 

 

 

Other income (expense), net

$

8,744

 

 

$

(573

)

Plus:

 

 

 

Investments(5)

 

(174

)

 

 

 

Adjusted non-GAAP other income, net

$

8,570

 

 

$

(573

)

 

 

 

 

Income tax expense (benefit)

$

15,131

 

 

$

(17,218

)

Plus the tax effect of:

 

 

 

Share based compensation(1)

 

2,743

 

 

 

4,495

 

Acquisition related integration costs(2)

 

1,139

 

 

 

1,232

 

Interest costs(3)

 

(398

)

 

 

2,889

 

Amortization(4)

 

18,941

 

 

 

28,246

 

Investments(5)

 

1,003

 

 

 

5,112

 

Sale of assets(6)

 

 

 

 

44

 

Lease asset impairments and other charges(7)

 

678

 

 

 

1,959

 

Disposal related costs(8)

 

181

 

 

 

58

 

Goodwill impairment on business(10)

 

 

 

 

7,994

 

Adjusted non-GAAP income tax expense

$

39,418

 

 

$

34,811

 

 

 

 

 

(Loss) income from equity method investment, net

$

(6,886

)

 

$

18,519

 

Plus:

 

 

 

Investments(5)

 

6,886

 

 

 

(18,519

)

Adjusted non-GAAP income from equity method investment, net

$

 

 

$

 

ZIFF DAVIS, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP FINANCIAL MEASURES - CONTINUED

SIX MONTHS ENDED JUNE 30, 2022 AND 2021

(UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

 

 

Six months ended June 30,

 

 

2022

 

 

 

2021

 

Total adjustments

$

(154,252

)

 

$

(106,805

)

 

 

 

 

GAAP Net income per diluted share from continuing operations

$

(0.47

)

 

$

0.33

 

Adjustments *

$

3.28

 

 

$

2.41

 

Adjusted non-GAAP Net income per diluted share from continuing operations

$

2.81

 

 

$

2.74

 

____________________

* The reconciliation of Net income per share from GAAP to Adjusted non-GAAP may not foot since each is calculated independently.

The Company discloses Adjusted non-GAAP net income per diluted share (“Adjusted Diluted EPS”) as a supplemental Non-GAAP financial performance measure, as it believes it is a useful metric by which to compare the performance of its business from period to period. The Company also understands that an Adjusted Diluted EPS measure is broadly used by analysts, rating agencies and investors in assessing the Company’s performance. Accordingly, the Company believes that the presentation of Adjusted Diluted EPS provides useful information to investors.

Adjusted Diluted EPS is not in accordance with, or an alternative to, net income per diluted share from continuing operations and may be different from Non-GAAP measures with similar or even identical names used by other companies. In addition, Adjusted Diluted EPS is not based on any comprehensive set of accounting rules or principles. The Adjusted Diluted EPS measure has limitations in that it does not reflect all of the amounts associated with the Company’s results of operations determined in accordance with GAAP.

Non-GAAP Financial Measures

To supplement its condensed consolidated financial statements, which are prepared and presented in accordance with US generally accepted accounting principles (“GAAP”), the Company uses the following Non-GAAP financial measures: Adjusted EBITDA, Adjusted non-GAAP net income from continuing operations, and Adjusted Diluted EPS from continuing operations (collectively the “Non-GAAP financial measures”). The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with U.S. GAAP. The Company uses these non-GAAP financial measures for financial and operational decision making and as a means to evaluate period-to-period comparisons. The Company believes that they provide useful information about core operating results, enhance the overall understanding of past financial performance and future prospects, and allow for greater transparency with respect to key metrics used by management in its financial and operational decision making.

(1) Share Based Compensation. The Company excludes stock-based compensation because it is non-cash in nature and because the Company believes that the non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance. The Company further believes this measure is useful to investors in that it allows for greater transparency to certain line items in its financial statements. In addition, excluding this item from the non-GAAP measures facilitates comparisons to historical operating results and comparisons to peers, many of which similarly exclude this item.

(2) Acquisition Related Integration Costs. The Company excludes certain acquisition and related integration costs such as adjustments to contingent consideration, severance, lease terminations, retention bonuses and other acquisition-specific items. The Company believes that the Non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance. In addition, excluding this item from the non-GAAP measures facilitates comparisons to historical operating results and comparisons to peers, many of which similarly exclude this item.

(3) Interest Costs. In June 2014, the Company issued $402.5 million aggregate principal amount of 3.25% convertible senior notes and in November 2019, the Company issued $550.0 million aggregate principal amount of 1.75% convertible senior notes. For the three and six months ended June 30, 2021, the Company separately accounted for the value of the liability and equity features of its outstanding convertible senior notes in a manner that reflects the Company’s non-convertible debt borrowing rate. The value of the conversion feature, reflected as a debt discount, was amortized to interest expense over time. Accordingly, the Company recognized imputed interest expense on its 3.25% and 1.75% convertible senior notes of approximately 5.8% and 5.5%, respectively, in its statement of operations during the three and six months ended June 30, 2021. The Company excluded the difference between the imputed interest expense and the coupon interest expense of 3.25% and 1.75%, respectively, because it was non-cash in nature and because the Company believes that the non-GAAP financial measures excluding this item provide meaningful supplemental information regarding core operational performance. During 2022, the Company adopted ASU 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, whereby a portion of the convertible senior notes is no longer recorded in equity with a debt discount and amortization in interest expense. Therefore, no similar adjustment was made for the three and six months ended June 30, 2022. The Company has excluded the difference between the imputed and coupon interest expense associated with the 4.625% Senior Notes in each period presented. Further, for the three and six months ended June 30, 2022, the Company recorded a gain on extinguishment associated with the buy-back of its 4.625% Senior Notes, which is included within this Non-GAAP adjustment. The Company has determined excluding these items from the non-GAAP measures facilitates comparisons to historical operating results and comparisons to peers, many of which similarly exclude this item.

(4) Amortization. The Company excludes amortization of patents and acquired intangible assets because it is non-cash in nature and because the Company believes that the non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance. In addition, excluding this item from the non-GAAP measures facilitates comparisons to historical operating results and comparisons to peers, many of which similarly exclude this item.

(5) Change in Value on Investments. The Company excludes the change in value of its investments, which includes income (loss) from equity method investments, the unrealized gain (loss) on its investment in Consensus and other income (loss) on investments (including Consensus). The Company believes that the non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance as these items are not part of the Company’s core operations. In addition, excluding these items from the non-GAAP measures facilitates comparisons to historical operating results.

(6) Gain (Loss) on Sale of Assets. The Company excludes the gain (loss) on sale of certain of its assets. The Company believes that the non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance. In addition, excluding this item from the non-GAAP measures facilitates comparisons to historical operating results.

(7) Lease Asset Impairments and Other Charges. The Company excludes lease asset impairments and other charges as they are non-cash in nature and because the Company believes that the non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance. In addition, excluding this item from the non-GAAP measures facilitates comparisons to historical operating results.

(8) Disposal related Costs. The Company excludes expenses associated with the disposal of certain businesses. The Company believes that the non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance. In addition, excluding this item from the non-GAAP measures facilitates comparisons to historical operating results.

(9) Goodwill Impairment on Business. The Company excludes the goodwill impairment on business because it is non-cash in nature and the Company believes that the Non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance. In addition, excluding this item from the Non-GAAP measures facilitates comparisons to historical operating results.

(10) Convertible Debt Dilution. The Company excludes convertible debt dilution from diluted EPS. The Company believes that the Non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance. In addition, excluding this item from the Non-GAAP measures facilitates comparisons to historical operating results.

The Company presents Adjusted non-GAAP Cost of Revenues, Adjusted non-GAAP Research, Development and Engineering, Adjusted non-GAAP Sales and Marketing, Adjusted non-GAAP General and Administrative, Adjusted non-GAAP Interest Expense, Adjusted Gain on Sale of Businesses, Adjusted non-GAAP Loss on Investments, Adjusted non-GAAP Unrealized Loss on Short-term Investments, Adjusted non-GAAP Other (Income) Expense, Adjusted non-GAAP Income Tax benefit (expense), Adjusted non-GAAP (Income) Loss from Equity Method Investment, Net and Adjusted non-GAAP Net income because the Company believes that these provide useful information about our operating results and enhance the overall understanding of past financial performance and future prospects.

Pro-Forma Financial Results

Key pro-forma financial results for the three and six months ended June 30, 2022 and 2021, are set forth in the following table (in millions, except per share amounts). The financial results below reflect the Company’s results, on a pro-forma basis, taking into consideration the sale of certain Voice assets in the United Kingdom as well as the sale of the Company’s B2B Backup business as if they had occurred January 1, 2021.

 

Three months ended June 30,

 

Six months ended June 30,

 

2022

 

 

2021

 

 

 

2022

 

 

2021

 

Total Revenues

$

337.4

 

$

341.3

 

 

$

652.4

 

$

653.0

 

Pro-Forma Revenue Adjustments

$

 

$

(11.3

)

 

$

 

$

(23.9

)

Pro-Forma Total Revenue: (1)

$

337.4

 

$

330.0

 

 

$

652.4

 

$

629.1

 

 

 

 

 

 

 

Adjusted Non-GAAP Net Income per Diluted Share from Continuing Operations (1)

$

1.58

 

$

1.50

 

 

$

2.81

 

$

2.74

 

Pro-Forma Net Income per Diluted Share from Continuing Operations Adjustments

$

 

$

(0.09

)

 

$

 

$

(0.14

)

Adjusted Pro Forma Net Income per Diluted Share from Continuing Operations (1)

$

1.58

 

$

1.41

 

 

$

2.81

 

$

2.60

 

 

 

 

 

 

 

Adjusted Non-GAAP Net Income from Continuing Operations

$

74.4

 

$

67.1

 

 

$

132.4

 

$

122.5

 

Pro-Forma Net Income from Continuing Operations Adjustments

$

 

$

(3.9

)

 

$

 

$

(6.2

)

Adjusted Pro-Forma Net Income from Continuing Operations

$

74.4

 

$

63.2

 

 

$

132.4

 

$

116.3

 

 

 

 

 

 

 

Adjusted EBITDA (1)

$

118.0

 

$

117.0

 

 

$

218.8

 

$

217.7

 

Pro-Forma EBITDA Adjustments

$

 

$

(4.9

)

 

$

 

$

(9.7

)

Adjusted Pro-Forma EBITDA (1)

$

118.0

 

$

112.1

 

 

$

218.8

 

$

208.0

 

 

 

 

 

 

 

Adjusted EBITDA Margin (1)

 

35.0

%

 

34.3

%

 

 

33.5

%

 

33.3

%

Pro-Forma EBITDA Margin Adjustments

 

0.0

%

 

(0.3

)%

 

 

0.0

%

 

(0.2

)%

Adjusted Pro-Forma EBITDA Margin (1)

 

35.0

%

 

34.0

%

 

 

33.5

%

 

33.1

%

____________________
(1) Refer to the notes earlier in this Press Release.

ZIFF DAVIS, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP FINANCIAL MEASURES

THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021

(UNAUDITED, IN THOUSANDS)

 

The following table sets forth a reconciliation of Adjusted EBITDA to net (loss) income from continuing operations, the most directly comparable GAAP financial measure.

 

 

Three months ended June 30,

 

Six months ended June 30,

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Net (loss) income from continuing operations

$

(46,436

)

 

$

(23,045

)

 

$

(21,899

)

 

$

15,735

 

Plus:

 

 

 

 

 

 

 

Interest expense, net

 

6,956

 

 

 

21,013

 

 

 

18,466

 

 

 

42,490

 

Gain on sale of businesses

 

 

 

 

(823

)

 

 

 

 

 

(2,802

)

Unrealized loss on short-term investment

 

27,317

 

 

 

 

 

 

18,366

 

 

 

 

Loss on investments, net

 

48,243

 

 

 

16,677

 

 

 

48,243

 

 

 

16,677

 

Other (income) loss, net

 

(6,345

)

 

 

816

 

 

 

(8,744

)

 

 

573

 

Income tax expense (benefit)

 

10,051

 

 

 

(10,334

)

 

 

15,131

 

 

 

(17,218

)

Loss (income) from equity method investment, net

 

6,101

 

 

 

5,751

 

 

 

6,886

 

 

 

(18,519

)

Depreciation and amortization

 

59,872

 

 

 

61,955

 

 

 

118,943

 

 

 

124,625

 

Reconciliation of GAAP to Adjusted non-GAAP financial measures:

 

 

 

 

 

 

 

Share-based compensation

 

7,703

 

 

 

5,869

 

 

 

14,420

 

 

 

11,599

 

Acquisition-related integration costs

 

3,431

 

 

 

1,294

 

 

 

4,965

 

 

 

3,724

 

Lease asset impairments and other charges

 

1,079

 

 

 

6,167

 

 

 

2,744

 

 

 

8,041

 

Disposal related costs

 

65

 

 

 

(992

)

 

 

1,304

 

 

 

128

 

Goodwill impairment on business

 

 

 

 

32,629

 

 

 

 

 

 

32,629

 

Adjusted EBITDA

$

118,037

 

 

$

116,977

 

 

$

218,825

 

 

$

217,682

 

Adjusted EBITDA as calculated above represents net income from continuing operations before interest, gain on sale of businesses, unrealized gain on short-term investment, other (income) expense, net, income tax expense, (income) loss from equity method investments, net, depreciation and amortization and the items used to reconcile GAAP to Adjusted non-GAAP financial measures, including (1) share-based compensation, (2) certain acquisition-related integration costs, (3) lease asset impairments and other charges, (4) disposal related costs and (5) goodwill impairment on business. We disclose Adjusted EBITDA as a supplemental Non-GAAP financial performance measure as we believe it is a useful metric by which to compare the performance of our business from period to period. We understand that measures similar to Adjusted EBITDA are broadly used by analysts, rating agencies and investors in assessing our performance. Accordingly, we believe that the presentation of Adjusted EBITDA provides useful information to investors.

Adjusted EBITDA is not in accordance with, or an alternative to, net income from continuing operations, and may be different from non-GAAP measures used by other companies. In addition, Adjusted EBITDA is not based on any comprehensive set of accounting rules or principles. This Adjusted non-GAAP measure has limitations in that it does not reflect all of the amounts associated with the Company’s results of operations determined in accordance with GAAP.

ZIFF DAVIS, INC. AND SUBSIDIARIES

NON-GAAP FINANCIAL MEASURES

(UNAUDITED, IN THOUSANDS)

 

 

Q1

Q2

Q3

Q4

YTD

2022

 

 

 

 

 

Net cash provided by operating activities

$

116,511

 

$

75,973

 

$

$

$

192,484

 

Less: Purchases of property and equipment

 

(30,502

)

 

(23,374

)

 

 

 

(53,876

)

Add: Contingent consideration

 

 

 

 

 

 

 

 

Free cash flow

$

86,009

 

$

52,599

 

$

$

$

138,608

 

 

Q1

Q2

Q3

Q4

YTD

2021

 

 

 

 

 

Net cash provided by operating activities from continuing and discontinued operations

$

178,724

 

$

111,298

 

$

140,230

 

$

85,319

 

$

515,571

 

Less: Purchases of property and equipment

 

(26,269

)

 

(31,497

)

 

(29,729

)

 

(26,245

)

 

(113,740

)

Add: Contingent consideration(1)

 

 

 

685

 

 

 

 

 

 

685

 

Free cash flow from continuing and discontinued operations

$

152,455

 

$

80,486

 

$

110,501

 

$

59,074

 

$

402,516

 

____________________

(1) Free cash flows from continuing and discontinued operations of $80.5 million for Q2 2021 is before the effect of payments associated with certain contingent consideration related to acquisitions.

The Company discloses free cash flows from continuing and discontinued operations as supplemental non-GAAP financial performance measure, as it believes it is a useful metric by which to compare the performance of its business from period to period. The Company also understands that this non-GAAP measure is broadly used by analysts, rating agencies and investors in assessing the Company’s performance. Accordingly, the Company believes that the presentation of this non-GAAP financial measure provides useful information to investors.

Free cash flows from continuing and discontinued operations is not in accordance with, or an alternative to, Cash flows from operating activities, and may be different from non-GAAP measures with similar or even identical names used by other companies. In addition, the non-GAAP measure is not based on any comprehensive set of accounting rules or principles. This non-GAAP measure has limitations in that it does not reflect all of the amounts associated with the Company’s results of operations determined in accordance with GAAP.

ZIFF DAVIS, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP FINANCIAL MEASURES

THREE MONTHS ENDED JUNE 30, 2022

(UNAUDITED, IN THOUSANDS)

 

 

Digital

 

Cybersecurity

 

 

 

 

 

Media

 

and Martech

 

Corporate

 

Total

Revenues

 

 

 

 

 

 

 

GAAP revenues

$

258,343

 

$

79,013

 

$

 

 

$

337,356

Gross profit

 

 

 

 

 

 

 

GAAP gross profit

$

232,987

 

$

58,365

 

$

 

 

$

291,352

Non-GAAP adjustments:

 

 

 

 

 

 

 

Share-based compensation

 

24

 

 

118

 

 

 

 

 

142

Acquisition related integration costs

 

 

 

4

 

 

 

 

 

4

Amortization

 

 

 

259

 

 

 

 

 

259

Adjusted non-GAAP gross profit

$

233,011

 

$

58,746

 

$

 

 

$

291,757

 

 

 

 

 

 

 

 

Operating profit

 

 

 

 

 

 

 

Income (loss) from operations

$

44,162

 

$

13,023

 

$

(11,298

)

 

$

45,887

Non-GAAP adjustments:

 

 

 

 

 

 

 

Share-based compensation

 

3,306

 

 

1,389

 

 

3,008

 

 

 

7,703

Acquisition related integration costs

 

3,183

 

 

239

 

 

9

 

 

 

3,431

Amortization

 

32,734

 

 

9,103

 

 

64

 

 

 

41,901

Lease asset impairments and other charges

 

637

 

 

442

 

 

 

 

 

1,079

Disposal related costs

 

 

 

 

 

65

 

 

 

65

Adjusted non-GAAP operating profit (loss)

$

84,022

 

$

24,196

 

$

(8,152

)

 

$

100,066

Depreciation

 

14,811

 

 

3,160

 

 

 

 

 

17,971

Adjusted EBITDA

$

98,833

 

$

27,356

 

$

(8,152

)

 

$

118,037

____________________

Table above excludes certain intercompany allocations.

 

ZIFF DAVIS, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP FINANCIAL MEASURES

THREE MONTHS ENDED JUNE 30, 2021

(UNAUDITED, IN THOUSANDS)

 

 

Digital

 

Cybersecurity

 

 

 

 

 

Media

 

and Martech

 

Corporate

 

Total

Revenues

 

 

 

 

 

 

 

GAAP revenues

$

253,761

 

$

87,532

 

 

$

 

 

$

341,293

 

Gross profit

 

 

 

 

 

 

 

GAAP gross profit

$

228,622

 

$

63,895

 

 

$

(9

)

 

$

292,508

 

Non-GAAP adjustments:

 

 

 

 

 

 

 

Share-based compensation

 

2

 

 

66

 

 

 

 

 

 

68

 

Acquisition related integration costs

 

4

 

 

32

 

 

 

 

 

 

36

 

Amortization

 

 

 

348

 

 

 

 

 

 

348

 

Adjusted non-GAAP gross profit

$

228,628

 

$

64,341

 

 

$

(9

)

 

$

292,960

 

 

 

 

 

 

 

 

 

Operating profit

 

 

 

 

 

 

 

Income (loss) from operations

$

44,106

 

$

(21,195

)

 

$

(12,856

)

 

$

10,055

 

Non-GAAP adjustments:

 

 

 

 

 

 

 

Share-based compensation

 

1,784

 

 

1,047

 

 

 

3,038

 

 

 

5,869

 

Acquisition related integration costs

 

125

 

 

1,169

 

 

 

 

 

 

1,294

 

Amortization

 

37,483

 

 

9,531

 

 

 

45

 

 

 

47,059

 

Lease asset impairments and other charges

 

6,195

 

 

(28

)

 

 

 

 

 

6,167

 

Disposal related costs

 

 

 

 

 

 

(992

)

 

 

(992

)

Goodwill impairment on a business

 

 

 

32,629

 

 

$

 

 

 

32,629

 

Adjusted non-GAAP operating profit (loss)

$

89,693

 

$

23,153

 

 

$

(10,765

)

 

$

102,081

 

Depreciation

 

11,492

 

 

3,404

 

 

 

 

 

 

14,896

 

Adjusted EBITDA

$

101,185

 

$

26,557

 

 

$

(10,765

)

 

$

116,977

 

____________________

Table above excludes certain intercompany allocations.

 

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