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

·15-min read

NEW YORK, August 09, 2022--(BUSINESS WIRE)--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

)