What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-05-10 compared with 2021-11-09 · 541 added, 755 removed, 619 unchanged (68% of the section changed)

4 unchanged sentences

(Unaudited, in thousands except share and per share data)

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

Cash and cash equivalents $ 629,030 $ 694,842

Short-term investments 238,151 229,200

Accounts receivable, net of allowances of $ 14,417 and $ 16,018 , respectively

Accounts receivable, net of allowances of $ 8,262 and $ 9,811 , respectively (includes $ 14,550 and $ 9,272 due from related party, respectively)

263,659 316,342

27 unchanged sentences

TOTAL LIABILITIES 1,797,677 1,802,548

Commitments and contingencies — —

Commitments and contingencies (Note 9) — —

Preferred stock, $ 0.01 par value.

8 unchanged sentences

Authorized 95,000,000 ;

total issued and outstanding 47,825,827 and 44,346,630 shares at September 30, 2021 and December 31, 2020, respectively.

total issued and outstanding 46,952,300 and 47,440,137 shares at March 31, 2022 and December 31, 2021, respectively.

Additional paid-in capital 415,653 509,122

3 unchanged sentences

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 3,663,171 $ 3,770,280

See Notes to Condensed Consolidated Financial Statements

See Notes to Condensed Consolidated Financial Statements (Unaudited)

ZIFF DAVIS, INC.

2 unchanged sentences

(Unaudited, in thousands except share and per share data)

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Three Months Ended March 31,

Total revenues $ 315,068 $ 311,657

9 unchanged sentences

102,217 113,298

Goodwill impairment on business — — 32,629 —

Total operating expenses 238,406 240,924

1 unchanged sentence

Interest expense, net ( 11,510 ) ( 21,477 )

(Loss) gain on sale of businesses ( 24,600 ) 17,122 ( 21,798 ) 17,122

Loss on investments, net — ( 156 ) ( 16,677 ) ( 20,991 )

Gain on sale of businesses — 1,979

Unrealized gain on short-term investments 8,951 —

Other income, net 2,399 243

Income before income taxes and (loss) income from equity method investment, net 53,339 85,922 136,336 152,390

Income tax expense 8,847 24,330 16,723 49,011

Income from continuing operations before income taxes and (loss) income from equity method investment, net 30,402 7,626

Income tax expense (benefit) 5,080 ( 6,884 )

(Loss) income from equity method investment, net ( 785 ) 24,270

Net income from continuing operations 24,537 38,780

Income from discontinued operations, net of income taxes — 39,142

Net income $ 24,537 $ 77,922

Net income per common share from continuing operations:

Basic $ 0.52 $ 0.87

Diluted $ 0.51 $ 0.83

Net income per common share from discontinued operations:

Diluted $ 0.84

Net income per common share:

10 unchanged sentences

Total $ 6,717 $ 5,730

See Notes to Condensed Consolidated Financial Statements

See Notes to Condensed Consolidated Financial Statements (Unaudited)

ZIFF DAVIS, INC.

2 unchanged sentences

(Unaudited, in thousands)

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Three Months Ended March 31,

Net income $ 24,537 $ 77,922

1 unchanged sentence

Foreign currency translation adjustment ( 6,265 ) ( 8,424 )

Change in fair value on available-for-sale investments, net of tax expense of $ 37 for the three and nine months ended September 30, 2021, respectively, and $ 141 and $ 314 for the three and nine months ended September 30, 2020, respectively.

( 114 ) 8 ( 114 ) 553

Consensus separation adjustment 4,056 —

Other comprehensive loss, net of tax ( 2,209 ) ( 8,424 )

Comprehensive income $ 22,328 $ 69,498

See Notes to Condensed Consolidated Financial Statements

See Notes to Condensed Consolidated Financial Statements (Unaudited)

ZIFF DAVIS, INC.

2 unchanged sentences

(Unaudited, in thousands)

Nine Months Ended

September 30,

Three Months Ended March 31,

Cash flows from operating activities:

5 unchanged sentences

Share-based compensation 6,717 6,113

Provision for doubtful accounts 7,934 9,508

Provision for credit losses on accounts receivable ( 1,032 ) 2,485

Deferred income taxes, net ( 3,745 ) ( 5,380 )

Loss (gain) on sale of businesses 21,798 ( 17,122 )

Lease asset impairments 9,410 9,786

Goodwill impairment on business 32,629 —

Loss on extinguishment of debt 1,220 —

Gain on sale of businesses — ( 1,979 )

Lease asset impairments and other charges — 1,086

Changes in fair value of contingent consideration 112 510

Foreign currency remeasurement gain 143 655

(Income) loss from equity method investments ( 16,596 ) 10,799

Loss on equity and debt investments 16,677 20,826

Loss (income) from equity method investments 785 ( 24,270 )

Unrealized gain on short-term investments ( 8,951 ) —

Decrease (increase) in:

Accounts receivable 49,888 57,560

Accounts receivable (includes $ 5,278 and $ 0 with related parties)

57,483 68,564

Prepaid expenses and other current assets 10,638 ( 2,481 )

Operating lease right-of-use assets 1,938 1,438

Other assets ( 7,541 ) 1,193

8 unchanged sentences

Cash flows from investing activities:

Proceeds on sale of available-for-sale investments 663 —

Distribution from equity method investment 15,327 —

Purchases of equity method investment — ( 8,064 )

3 unchanged sentences

Acquisition of businesses, net of cash received ( 28,136 ) 385

Proceeds from sale of businesses, net of cash divested 48,876 24,353

Purchases of intangible assets — ( 8 )

2 unchanged sentences

Payment of debt ( 54,609 ) —

Payment of note payable — ( 400 )

Proceeds from bridge loan 485,000 —

Debt extinguishment costs ( 756 ) —

Repurchase of common stock ( 62,810 ) ( 12,179 )

Issuance of common stock under employee stock purchase plan 4,232 3,303

Exercise of stock options 148 444

1 unchanged sentence

Other ( 5 ) ( 551 )

Net cash provided by (used in) financing activities 39,837 ( 256,854 )

Net cash used in financing activities ( 120,708 ) ( 20,139 )

Effect of exchange rate changes on cash and cash equivalents ( 2,977 ) ( 310 )

1 unchanged sentence

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 629,030 371,971

See Notes to Condensed Consolidated Financial Statements

Cash and cash equivalents at end of period associated with discontinued operations — 149,675

Cash and cash equivalents at end of period associated with continuing operations $ 629,030 $ 222,296

See Notes to Condensed Consolidated Financial Statements (Unaudited)

ZIFF DAVIS, INC.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Three and Nine Months Ended September 30, 2020 and 2021

(Unaudited, in thousands, except share amounts)

Common stock Additional

paid-in Retained other comprehensive Total

Stockholders’

Shares Amount capital earnings loss Equity

Balance, July 1, 2020 46,892,691 $ 469 $ 467,267 $ 850,232 $ ( 54,800 ) $ 1,263,168

Net income (loss) — — — 60,883 — 60,883

Other comprehensive income, net of tax expense of $ 141

— — — — ( 3,194 ) ( 3,194 )

Vested restricted stock 19,893 — — — — —

Repurchase and retirement of common stock ( 2,145,243 ) ( 21 ) ( 21,442 ) ( 128,973 ) — ( 150,436 )

Share based compensation — — 5,800 — — 5,800

Other, net — — 116 — — 116

Balance, September 30, 2020 44,767,341 $ 448 $ 451,741 $ 782,142 $ ( 57,994 ) $ 1,176,337

Common stock Additional

paid-in Retained other comprehensive Total

Stockholders’

Shares Amount capital earnings loss Equity

Balance, July 1, 2021 44,708,235 $ 447 $ 461,422 $ 892,605 $ ( 59,974 ) $ 1,294,500

Net income — — — 42,569 — 42,569

Other comprehensive income, net of tax expense of $ 37

— — — — ( 11,215 ) ( 11,215 )

Exercise of stock options 23,250 — 1,549 — — 1,549

Redemption of 3.25 % Convertible Note including tax impact

3,031,817 31 44,192 — — 44,223

Vested restricted stock 112,166 1 ( 1 ) — — —

Repurchase and retirement of common stock ( 49,641 ) ( 1 ) ( 3,035 ) ( 3,885 ) — ( 6,921 )

Share based compensation — — 6,755 — — 6,755

Other, net — — ( 2,389 ) 188 — ( 2,201 )

Balance, September 30, 2021 47,825,827 $ 478 $ 508,493 $ 931,477 $ ( 71,189 ) $ 1,369,259

Three months ended March 31, 2021

Common stock Additional

4 unchanged sentences

Net income — — — 77,922 — 77,922

Other comprehensive income, net of tax expense of $ 314

Other comprehensive loss, net of tax expense of $ 141

— — — — ( 8,424 ) ( 8,424 )

Exercise of stock options 15,117 — 444 — — 444

Issuance of shares under employee stock purchase plan 53,694 — 3,303 — — 3,303

Vested restricted stock 235,939 2 ( 2 ) — — —

Redemption of 3.25 % Convertible Note including tax impact

— — ( 12 ) — — ( 12 )

Repurchase and retirement of common stock ( 108,287 ) — ( 7,221 ) ( 4,958 ) — ( 12,179 )

1 unchanged sentence

Other, net — — 17 — — 17

Balance, September 30, 2020 44,767,341 $ 448 $ 451,741 $ 782,142 $ ( 57,994 ) $ 1,176,337

Balance, March 31, 2021 44,489,399 $ 445 $ 455,625 $ 882,071 $ ( 63,230 ) $ 1,274,911

Three months ended March 31, 2022

Common stock Additional

3 unchanged sentences

Balance, January 1, 2022 47,440,137 $ 474 $ 509,122 $ 1,515,358 $ ( 57,222 ) $ 1,967,732

Reclassification of the equity component of 1.75 % Convertible Notes to liability upon adoption of ASU 2020-06

— — ( 88,137 ) 23,436 — ( 64,701 )

Net income — — — 24,537 — 24,537

Other comprehensive income, net of tax expense of $ 37

Other comprehensive loss, net of tax expense of $ 0

— — — — ( 6,265 ) ( 6,265 )

Exercise of stock options 5,439 — 148 — — 148

Issuance of shares under employee stock purchase plan 58,145 1 4,231 — — 4,232

Redemption of 3.25 % Convertible Note including tax impact

3,050,850 31 44,191 — — 44,222

Vested restricted stock 101,385 1 ( 1 ) — — —

1 unchanged sentence

Share based compensation — — 6,717 — — 6,717

Consensus separation adjustment — — — ( 3,915 ) 4,056 141

Other, net — — ( 16 ) 11 — ( 5 )

Balance, September 30, 2021 47,825,827 $ 478 $ 508,493 $ 931,477 $ ( 71,189 ) $ 1,369,259

See Notes to Condensed Consolidated Financial Statements

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2021

Basis of Presentation

Balance, March 31, 2022 46,952,300 $ 470 $ 415,653 $ 1,508,802 $ ( 59,431 ) $ 1,865,494

See Notes to Condensed Consolidated Financial Statements (Unaudited)

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Basis of Presentation and Overview

The accompanying Condensed Consolidated Financial Statements of Ziff Davis, Inc.

and its subsidiaries (“Ziff Davis”, the “Company”, “our”, “us”, or “we”), whether directly or indirectly wholly-owned, were prepared in accordance with U.S.

generally accepted accounting principles ("GAAP"), and all adjustments considered necessary for a fair presentation have been included.

All intercompany accounts and transactions have been eliminated in consolidation.

The accompanying interim Condensed Consolidated Financial Statements have been prepared in accordance with instructions for Form 10-Q and Article 10 of Regulation S-X issued by the Securities and Exchange Commission (“SEC”).

The preparation of these Condensed Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions.

These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the Condensed Consolidated Financial Statements, as well as the reported amounts of revenues and expenses during the reporting periods.

Actual results could differ from those estimates.

All normal recurring adjustments necessary for a fair presentation of these interim Condensed Consolidated Financial Statements were made.

This Quarterly Report on Form 10-Q should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the Securities and Exchange Commission ("SEC") on March 15, 2022 and other filings with the SEC.

The results of operations for this interim period are not necessarily indicative of the operating results for the full year or for any future period.

Description of Business

As of September 30, 2021, J2 Global, Inc., together with its subsidiaries (“J2 Global”, the “Company”, “our”, “us”, or “we”), was a leading provider of internet information and services.

The Digital Media business specialized in the technology, shopping, gaming, and healthcare markets offering content, tools and services to consumers and businesses.

The Cloud Services business provided cloud-based subscription services to consumers and businesses including cloud fax, cybersecurity, privacy and marketing technology.

Ziff Davis, Inc.

is a vertically focused digital media and internet company whose portfolio includes leading brands in technology, entertainment, shopping, health, cybersecurity, and martech.

Our Digital Media business specializes in the technology, shopping, gaming, and healthcare markets, offering content, tools and services to consumers and businesses.

Our Cybersecurity and Martech business provides cloud-based subscription services to consumers and businesses including cybersecurity, privacy and marketing technology.

On October 7, 2021, in connection with the spin-off of its cloud fax business described further below, the Company changed its name from J2 Global, Inc.

to Ziff Davis, Inc.

(“Ziff Davis”).

Additionally, starting October 8, 2021, the Company’s common stock began trading under the stock symbol “ZD.”

The accompanying interim Condensed Consolidated Financial Statements include the accounts of the Company and its direct and indirect wholly-owned subsidiaries.

All intercompany accounts and transactions have been eliminated in consolidation.

The accompanying interim Condensed Consolidated Financial Statements are unaudited and have been prepared in accordance with instructions for Form 10-Q and Article 10 of Regulation S-X issued by the Securities and Exchange Commission (“SEC”).

Accordingly, they do not include all of the information and note disclosures required by accounting principles generally accepted in the United States of America (“GAAP”) for complete financial statements although the Company believes that the disclosures made are adequate to make that information not misleading.

In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been reflected in these interim financial statements.

It is suggested that these financial statements be read in conjunction with the audited financial statements and the related notes thereto for the year ended December 31, 2020, included in our Annual Report (Form 10-K) filed with the SEC on March 1, 2021.

Accordingly, significant accounting policies and other disclosures normally provided have been omitted since such items are disclosed therein.

The results of operations for this interim period are not necessarily indicative of the operating results for the full year or for any future period.

Consensus, Inc.

On September 21, 2021, the Company announced that its Board of Directors approved its previously announced separation of the cloud fax business (the “Separation”) into an independent publicly traded company, Consensus Cloud Solutions, Inc.

Discontinued Operations

On October 7, 2021, the Company completed the separation of its cloud fax business (the “Separation”) into an independent publicly traded company, Consensus Cloud Solutions, Inc.

(“Consensus”).

On October 7, 2021 (the “Distribution Date”), the Separation was completed and the Company transferred J2 Cloud Services, LLC to Consensus, Inc.

who in turn transferred non-fax assets and liabilities back to Ziff Davis such that Consensus was left with the cloud fax business.

The Separation was achieved through the Company’s distribution of 80.1 % of the shares of Consensus common stock to holders of J2 Global common stock as of the close of business on October 1, 2021, the record date for the distribution.

The Company’s stockholders of record received one share of Consensus common stock for every three shares of J2 Global’s common stock.

On October 8, 2021, Consensus began trading on Nasdaq under the stock symbol “CCSI”.

Ziff Davis, Inc., formerly J2 Global, Inc., retained a 19.9 % interest in Consensus following the Separation (the “Retained Consensus Shares”).

The accounting requirements for reporting the Company’s cloud fax business as a discontinued operation were met when the Separation was completed.

Accordingly, the Condensed Consolidated Financial Statements reflect the results of the cloud fax business as a discontinued operation for all periods presented.

Ziff Davis did not retain a controlling interest in Consensus.

The Retained Consensus Shares are equity securities for which the Company elected the fair value option and subsequent fair value changes in the Retained Consensus Shares are included in the assets of and results from continuing operations.

Refer to Note 4 - Investments and Note 5 - Discontinued Operations for additional information.

ZIFF DAVIS, INC.

(formerly J2 Global, Inc.) retained a 19.9 % interest in Consensus following the Separation.

Use of Estimates

The preparation of consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, including judgments about investment classifications and the reported amounts of net revenue and expenses during the reporting period.

The Company believes that its most significant estimates are those related to revenue recognition, valuation and impairment of investments, its assessment of ownership interests as variable interest entities and the related determination of consolidation, share-based compensation expense, fair value of assets acquired and liabilities assumed in connection with business combinations, long-lived and intangible asset impairment, contingent consideration, income taxes and contingencies

and allowances for doubtful accounts.

On an ongoing basis, management evaluates its estimates based on historical experience and on various other factors that the Company believes to be reasonable under the circumstances.

Actual results could materially differ from those estimates due to risks and uncertainties, including uncertainty in the current economic environment due to the novel coronavirus pandemic (“COVID-19”).

Allowances for Doubtful Accounts

The Company maintains an allowance for credit losses for accounts receivable, which is recorded as an offset to accounts receivable and changes in such are classified as general and administrative expenses in the Condensed Consolidated Statements of Operations.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Allowances for Credit Losses

The Company maintains an allowance for credit losses on accounts receivable, which is recorded as an offset to accounts receivable and changes in such are classified as general and administrative expenses in the Condensed Consolidated Statements of Operations.

The Company assesses collectability by reviewing accounts receivable on a collective basis where similar characteristics exist and on an individual basis when it identifies specific customers with known disputes or collectability issues.

3 unchanged sentences

Revenue Recognition

The Company recognizes revenue when the Company satisfies its obligation by transferring control of the goods or services to its customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services (see Note 3 - Revenues).

Refer to Note 2 - Revenues for additional details.

Principal vs.

5 unchanged sentences

The Company has made an accounting policy election to exclude from the measurement of the transaction price all taxes assessed by a governmental authority that are (i) both imposed on and concurrent with a specific revenue-producing transaction and (ii) collected by the Company from a customer.

The Company accounts for its investments in debt securities in accordance with ASC Topic No.

320, Investments - Debt Securities (“ASC 320”).

Debt investments are typically comprised of corporate debt securities, which it classifies as available-for-sale.

We account for our investments in debt securities in accordance with ASC Topic 320, Investments - Debt Securities (“ASC 320”) .

Our debt investments are typically comprised of corporate debt securities, which are classified as available-for-sale.

Available-for-sale securities are carried at fair value with unrealized gains and losses included in other comprehensive income.

All debt securities are accounted for on a specific identification basis.

The Company’s available-for-sale debt securities are carried at an estimated fair value with any unrealized gains or losses, net of taxes, included in accumulated other comprehensive loss in stockholders’ equity.

Available-for-sale debt securities with an amortized cost basis in excess of estimated fair value are assessed to determine what amount of that difference, if any, is caused by expected credit losses.

Expected credit losses on available-for-sale debt securities are recognized in loss on investments, net on our Condensed Consolidated Statements of Operations, and any remaining unrealized losses, net of taxes, are included in accumulated comprehensive loss in stockholders’ equity.

The Company accounts for its investments in equity securities in accordance with ASC Topic No.

321, Investments - Equity Securities (“ASC 321”) which requires the accounting for equity investments (other than those accounted for using the equity method of accounting) generally be measured at fair value for equity securities with readily determinable fair values.

For equity securities without a readily determinable fair value that are not accounted for by the equity method, the Company measures the equity security using cost, less impairment, if any, and plus or minus observable price changes arising from

orderly transactions in the same or similar investment from the same issuer.

Any unrealized gains or losses will be reported in current earnings (see Note 5 - Investments).

The Company assesses whether an other-than-temporary impairment loss on an investment has occurred due to declines in fair value or other market conditions (see Note 5 - Investments).

Variable Interest Entities (“VIE”)

We account for investments in equity securities in accordance with ASC Topic 321, Investments - Equity Securities (“ASC 321”) , which requires the accounting for equity investments, other than those accounted for under the equity method of accounting, generally be measured at fair value for equity securities with readily determinable fair values.

Equity securities without a readily determinable fair value, which are not accounted for under the equity method of accounting, are measured at their cost, less impairment, if any, and adjusted for observable price changes arising from orderly transactions in the same or similar investment from the same issuer.

Any unrealized gains or losses will be reported in current earnings.

We assess whether an other-than-temporary impairment loss on an investment has occurred due to declines in fair value or other market conditions.

Refer to Note 4 - Investments for additional information.

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

The Retained Consensus Shares are equity securities accounted for at fair value under the fair value option, and the related fair value gains and losses are recognized in earnings.

As the initial carrying value of the Retained Consensus Shares was negative immediately following the Separation, the Company elected the fair value option under ASC 825-10-25 to support the initial recognition of the Retained Consensus Shares at fair value and the negative book value was recorded as a gain at the date of Separation.

The fair value of Consensus common stock is readily available as Consensus is a publicly traded company.

Variable Interest Entities (“VIEs”)

A VIE requires consolidation by the entity’s primary beneficiary.

4 unchanged sentences

b) the Company has the obligation to absorb losses of the VIE, or the right to receive benefits of the VIE, that could potentially be significant to the VIE (the economic criterion).

The Company has concluded that, as a limited partner, although the obligation to absorb losses or the right to benefit from the gains is not insignificant, the Company does not have “power” over OCV because it does not have the ability to direct the significant decisions which impact the economics of OCV.

The Company has concluded that, as a limited partner, although the obligations to absorb losses or the right to benefit from the gains is not insignificant, the Company does not have “power” over OCV because it does not have the ability to direct the significant decisions which impact the economics of OCV.

The Company believes that the OCV general partner, as a single decision maker, holds the ability to make the decisions about the activities that most significantly impact the OCV Fund’s economic performance.

As a result, the Company has concluded that it will not consolidate OCV, as it is not the primary beneficiary of the OCV Fund, and will account for this investment under the equity-method of accounting.

See Note 5, “Investments”.

OCV qualifies as an investment company under ASC 946 - Financial Services, Investment Companies (“ASC 946”).

3 unchanged sentences

Impairment or Disposal of Long-Lived Assets

The Company accounts for long-lived assets, which include property and equipment, operating lease right-of-use assets and identifiable intangible assets with finite useful lives (subject to amortization), in accordance with the provisions of FASB ASC Topic No.

360, Property, Plant, and Equipment (“ASC 360”), which requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

1 unchanged sentence

If it is determined that the asset may not be recoverable, and if the carrying amount of an asset exceeds its estimated fair value, an impairment charge is recognized to the extent of the difference.

The Company assessed whether events or changes in circumstances have occurred that potentially indicate the carrying amount of long-lived assets may not be recoverable.

During the three and nine months ended September 30, 2021, the Company recorded an impairment of certain operating right-of-use assets (see Note 10 - Leases).

In the third quarter of 2020, the Company recorded impairment of certain operating right-of-use assets and associated property and equipment.

(see Note 10 - Leases).

actively marketed for sale at a price that is reasonable in relation to its current fair value, and (vi) it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

The Company assesses the impairment of identifiable definite-lived intangibles and long-lived assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable.

Factors it considers important which could individually or in combination trigger an impairment include the following:

• Significant underperformance relative to expected historical or projected future operating results;

• Significant changes in the manner of our use of the acquired assets or the strategy for the Company’s overall business;

• Significant negative industry or economic trends;

• Significant decline in the Company’s stock price for a sustained period;

• The Company’s market capitalization relative to net book value.

If the Company determined that the carrying value of definite-lived intangibles and long-lived assets may not be recoverable based upon the existence of one or more indicators of impairment, it would record an impairment equal to the excess of the carrying amount of the asset over its estimated fair value.

The Company assessed whether events or changes in circumstances have occurred that potentially indicate the carrying amount of definite-lived assets may not be recoverable.

During the three months ended March 31, 2022, we did not have any events or circumstances indicating impairment of long-lived assets.

During the three months ended March 31, 2021, Ziff Davis did not have any lease impairments.

The Company classifies its long-lived assets to be sold as held for sale in the period (i) it has approved and committed to a plan to sell the asset, (ii) the asset is available for immediate sale in its present condition, (iii) an active program to locate a buyer and other actions required to sell the asset have been initiated, (iv) the sale of the asset is probable, (v) the asset is being actively marketed for sale at a price that is reasonable in relation to its current fair value, and (vi) it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.

The Company initially measures a long-lived asset that is classified as held for sale at the lower of its carrying value or fair value less any costs to sell.

5 unchanged sentences

The Company applies the acquisition method of accounting for business combinations in accordance with GAAP and uses estimates and judgments to allocate the purchase price paid for acquisitions to the fair value of the assets, including identifiable intangible assets and liabilities acquired.

Such estimates may be based on significant unobservable inputs and assumptions such as, but not limited to, revenue growth rates, gross margins, customer attrition rates, royalty rates, discount rates and terminal growth rate assumptions.

Such estimates may be based on significant unobservable inputs and assumptions such as, but not limited to, future revenue growth rates, gross and operating margins, customer attrition rates, royalty rates, discount rates and terminal growth rate assumptions.

The Company uses established valuation techniques and may engage reputable valuation specialists to assist with the valuations.

2 unchanged sentences

Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings.

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in a business combination.

1 unchanged sentence

Identifiable intangible assets are comprised of purchased customer relationships, trademarks and trade names, developed technologies and other intangible assets.

Intangible assets subject to amortization are amortized over the period of estimated economic benefit ranging from 1 to 20 years and are included in general and administrative expenses on the Condensed Consolidated Statements of Operations.

Intangible assets subject to amortization are amortized over the period of estimated economic benefit ranging from one to twenty years and are included in general and administrative expenses on the Condensed Consolidated Statements of Operations.

The Company evaluates its goodwill and indefinite-lived intangible assets for impairment pursuant to FASB ASC Topic No.

1 unchanged sentence

In connection with the annual impairment test for goodwill, the Company has the option to perform a qualitative assessment in determining whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount.

If the Company determines that it is more likely than not that the fair value of the reporting unit is less than its carrying amount, then it performs the impairment test upon goodwill.

If the Company determines that it was more likely than not that the fair value of the reporting unit is less than its carrying amount, it then it performs an impairment test of goodwill.

The impairment test involves comparing the fair values of the applicable reporting units with their aggregate carrying values, including goodwill.

1 unchanged sentence

If the carrying value of a reporting unit exceeds the reporting unit’s fair value, an impairment loss is recognized for the difference.

In the second quarter of 2021, the Company recorded an impairment to goodwill associated with the plan to sell the Company’s B2B Backup business.

This sale closed during the third quarter of 2021 (see Note 6 – Dispositions).

No impairment was recorded in the third quarter of 2020.

In the first quarter of 2021, the Company changed the annual goodwill impairment assessment date for the Cloud Services business from September 30 to October 1, as it determined this date is preferable, and concluded this was not a material change in accounting principal.

No impairments to goodwill or other intangible assets were recorded during the three months ended March 31, 2022 and 2021, respectively.

Contingent Consideration

5 unchanged sentences

(1) the valuation of our acquisitions is not supported solely by the initial consideration paid, and the contingent earn-out formula is a critical and material component of the valuation approach to determining the purchase price;

and (2) the former shareholders of acquired companies that remain as key employees receive

compensation other than contingent earn-out payments at a reasonable level compared with the compensation of the Company’s other key employees.

and (2) the former shareholders of acquired companies that remain as key employees receive compensation other than contingent earn-out payments at a reasonable level compared with the compensation of the Company’s other key employees.

The contingent earn-out payments are not affected by employment termination.

The Company measures the contingent earn-out liabilities in connection with acquisitions at fair value on a recurring basis using significant unobservable inputs classified within Level 3 of the fair value hierarchy (see Note 7 - Fair Value Measurements).

The Company measures its contingent earn-out liabilities in connection with acquisitions at fair value on a recurring basis using significant unobservable inputs classified within Level 3 of the fair value hierarchy (see Note 6 - Fair Value Measurements ).

The Company may use various valuation techniques depending on the terms and conditions of the contingent consideration including a Monte-Carlo simulation.

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Significant increases or decreases to these inputs in isolation would result in a significantly higher or lower liability with a higher liability capped by the contractual maximum of the contingent earn-out obligation.

Ultimately, the liability will be equivalent to the amount paid, and the difference between the fair value estimate and the amount paid will be recorded in earnings.

The amount paid that is less than or equal to the liability on the acquisition date is reflected as cash used in financing activities in its Condensed Consolidated Statements of Cash Flows.

Ultimately, the liability will be equivalent to the amount paid, and the difference between the fair value estimate and amount paid will be recorded in earnings.

The amount paid that is less than or equal to the liability on the acquisition date is reflected as cash used in financing activities in our Condensed Consolidated Statements of Cash Flows.

Any amount paid in excess of the liability on the acquisition date is reflected as cash used in operating activities.

The Company reviews and re-assesses the estimated fair value of contingent consideration on a quarterly basis, and the updated fair value could be materially different from the initial estimates or prior quarterly amounts.

Changes in the estimated fair value of its contingent earn-out liabilities are reported in general and administrative expenses on the Condensed Consolidated Statements of Operations.

Changes in the estimated fair value of its contingent earn-out liabilities and adjustments to the estimated fair value related to changes in all other unobservable inputs are reported in general and administrative expenses on the Condensed Consolidated Statements of Operations.

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The Company’s income is subject to taxation in both the U.S.

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The provision for income taxes includes the impact of reserve provisions and changes to reserves that are considered appropriate.

The Company accounts for income taxes in accordance with FASB ASC Topic No.

740, Income Taxes (“ASC 740”), which requires that deferred tax assets and liabilities be recognized using enacted tax rates for the effect of temporary differences between the book and tax basis of recorded assets and liabilities.

The Company accounts for income taxes in accordance with FASB ASC Topic 740, Income Taxes (“ASC 740”), which requires that deferred tax assets and liabilities are recognized using enacted tax rates for the effect of temporary differences between the book and tax basis of recorded assets and liabilities.

ASC 740 also requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some or all of the net deferred tax assets will not be realized.

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Uncertain income tax positions that relate only to timing of when an item is included on a tax return are considered to have met the recognition threshold.

The Company recognized accrued interest and penalties related to uncertain income tax positions in income tax expense on its Condensed Consolidated Statements of Operations.

In addition, on March 27, 2020, the “Coronavirus Aid, Relief and Economic Security (CARES) Act” was enacted into law and provides for changes to various tax laws that impact businesses.

limitations on qualified charitable contributions and technical corrections to tax depreciation methods for qualified improvement property.

The Company recognizes accrued interest and penalties related to uncertain income tax positions in income tax expense on its Condensed Consolidated Statements of Operations.

In addition, on March 27, 2020, the “Coronavirus Aid, Relief and Economic Security (“CARES”) Act” was enacted into law providing for changes to various tax laws that impact business.

The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations, increased limitations on qualified charitable contributions and technical corrections to tax depreciation methods for qualified improvement property.

The CARES Act also appropriated funds for the Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”) loans that are forgivable in certain situations to promote continued employment, as well as Economic Injury Disaster Loans to provide liquidity to small businesses harmed by COVID-19.

The Company did not seek to borrow any funds under the program.

However, as a result of an acquisition that closed during the quarter ended December 31, 2020, the Company assumed outstanding PPP loans that had started the process of being forgiven prior to the closing of the acquisition.

During the second quarter of 2021, the Company received approval from the SBA to forgive the entire amount of the outstanding PPP Loan.

The amount forgiven did not have a significant impact to the Company’s financial statements.

The Company does not believe these provisions have a significant impact to our current and deferred income tax balances.

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Share-Based Compensation

The Company accounts for share-based awards to employees and non-employees in accordance with the provisions of FASB ASC Topic No.

718, Compensation - Stock Compensation (“ASC 718”).

Accordingly, the Company measures share-based compensation expense at the grant date, based on the fair value of the award, and recognizes the expense over the employee’s requisite service period using the straight-line method.

We account for share-based awards to employees and non-employees in accordance with the provisions of ASC Topic 718, Compensation - Stock Compensation (“ASC 718”), which requires compensation cost, measured at the grant date fair value, to be recognized over the employee’s requisite service period using the straight-line method.

The measurement of share-based compensation expense is based on several criteria, including but not limited to the valuation model used and associated input factors, such as expected term of the award, stock price volatility, risk free interest rate, dividend rate and award cancellation rate.

These inputs are subjective and are determined using management’s judgment.

If differences arise between the assumptions used in determining share-based compensation expense and the actual factors, which become known over time, the Company may change the input factors used in determining future share-based compensation expense.

Any such changes could materially impact the Company’s results of operations in the period in which the changes are made and in periods thereafter.

The Company estimates the expected term based upon the historical exercise behavior of its employees.

Reclassifications

Certain prior year reported amounts have been reclassified to conform to the 2021 presentation.

If differences arise between

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the assumptions used in determining share-based compensation expense and the actual factors, which become known over time, we may change the input factors used in determining future share-based compensation expense.

Any such changes could materially impact the results of operations in the period in which the changes are made and in periods thereafter.

We estimate the vesting term based upon the historical exercise behavior of our employees.

Earnings Per Common Share (“EPS”)

On January 1, 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 (“ASU 2020-06”) using the modified retrospective method.

Following this adoption, the Company applies the if-converted method for the diluted net income per share calculation of convertible debt instruments.

Prior to the adoption, the Company used the treasury stock method when calculating the potential dilutive effect of convertible debt instruments.

Recent Accounting Pronouncements

In December 2019, the FASB issued ASU No.

2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes.

The amendments in this ASU simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740.

The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance.

The Company adopted this ASU in the first quarter of 2021 and has identified no material effect on its financial statements or disclosures.

In January 2020, the FASB issued ASU No.

2020-01, Investments - Equity Securities (Topic 321), Investment - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815):

Clarifying the Interactions between Topic 321, Topic 323, and Topic 815.

The amendments in this ASU clarify certain interactions between the guidance to account for certain equity securities under Topic 321, the guidance to account for investments under the equity method of accounting in Topic 323, and the accounting for certain forward contracts and purchased options under Topic 815.

This ASU identifies two main areas for improvement:

(1) accounting for certain equity securities upon the application or discontinuation of the equity method of accounting and (2) scope considerations for forward contracts and purchased options on certain securities.

The amendment states, as it is related to the first area of improvement, that an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting for the purposes of applying the measurement alternative in accordance with Topic 321 immediately before applying or upon discontinuing the equity method.

The amendment also states, as it is relates to forward contracts and purchased options on certain securities, an entity should consider certain criteria to determine the accounting for those forward contracts and purchased options.

The Company adopted this ASU in the first quarter of 2021 and has identified no effect on its financial statements or disclosures.

In March 2020, the FASB issued ASU No.

2020-04, Reference Rate Reform (Topic 848):

Recently issued applicable accounting pronouncements not yet adopted

In October 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers .

This update requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606.

This update is effective for fiscal years and interim periods within those fiscal periods beginning after December 15, 2022, with early adoption permitted, including in interim periods.

This update should be applied prospectively.

We are currently evaluating the effect the adoption of this update will have on our condensed consolidated financial statements and related disclosures.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting .

The amendments in this ASU provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met.

The amendments in this ASU apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform.

LIBOR is expected to phased out by 2021.

The amendments in this ASU are effective as of March 12, 2020 through December 31, 2022.

The Company is currently evaluating the effect of this ASU on its financial statements and related disclosures.

In August 2020, the FASB issued ASU No.

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.

The amendments in this ASU reduce the number of accounting models for convertible debt instruments and convertible preferred stock in order to simplify the accounting for convertible instruments and reduce complexity.

In addition, it amends the guidance for scope exception surrounding derivatives for contracts in an entity’s own equity.

In each case, the related guidance surrounding EPS has also been amended.

The amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2021.

The Company is currently evaluating the effect of this ASU on its financial statements and related disclosures.

In October 2020, the FASB issued ASU No.

2020-10, Codification Improvements.

The amendments in this ASU improve the consistency of the codification and reorganize the guidance into appropriate sections providing less opportunities for disclosures to be missed.

The amendments in this update do not change GAAP and are not expected to result in a significant change in practice.

The amendments in this ASU are effective for fiscal years beginning after December 15, 2020.

The Company adopted this ASU in the first quarter of 2021 and has identified no effect on its financial statements or disclosures.

This update provides for optional financial reporting alternatives to reduce cost and complexities associated with accounting for contracts, hedging relationships, and other transactions affected by reference rate reform.

This update applies only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform.

The accommodations are available for all entities through December 31, 2022, with early adoption permitted.

We are currently evaluating the effect the adoption of this update will have on our consolidated financial statements and related disclosures.

Recently adopted accounting pronouncements

In August 2020, the FASB issued 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 .

The provisions of this update simplifies the accounting for convertible instruments by removing certain separation models in ASC 470-20, Debt - Debt with Conversion and Other Options , for convertible instruments.

The convertible debt instruments will be accounted for as a single liability at the amortized cost if separation is no longer required unless (1) a convertible instrument contains features that require bifurcation as a derivative under ASC Topic 815, Derivatives and Hedging, or (2) a convertible debt instrument was issued at a substantial premium.

Among other potential impacts, this change is expected to reduce reported noncash interest expense, increase reported net income, and result in a reclassification of certain conversion feature balance sheet amounts from stockholders’ equity to liabilities.

Similarly, the debt discount, that is equal to the carrying value of the embedded conversion feature upon issuance, will no longer be amortized into income as interest expense over the life of the instrument.

Additionally, ASU No.

2020-06 requires the use of the if-converted method to calculate the impact of convertible instruments on diluted earnings per share and include the effect of share settlement for instruments that may be settled in cash or shares, except for certain liability-classified share-based payment awards .

On January 1, 2022, the Company adopted ASU 2020-06 using the modified retrospective method.

The cumulative effect of the changes made on the Condensed Consolidated Balance Sheet upon this adoption increased the carrying amount of the 1.75 % Convertible Notes (as defined in Note 8 below) by approximately $ 85.9 million, increased retained earnings by approximately $ 23.4 million, reduced deferred tax liabilities by approximately $ 21.2 million and reduced additional paid-in capital by approximately $ 88.1 million.

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Reclassifications

Certain prior year reported amounts have been reclassified to conform to the 2022 presentation (see Note 2).

Digital Media

Digital Media revenues are earned primarily from the delivery of advertising services, from subscriptions to services and information.

Revenue is earned from the delivery of advertising services on the Company’s owned and operated websites and on those websites that are part of Digital Media’s advertising network.

Digital Media revenues are earned primarily from the delivery of advertising services and from subscriptions to services and information.

Revenue is earned from the delivery of advertising services on websites that are owned and operated by us and on those websites that are part of Digital Media’s advertising network.

Depending on the individual contracts with the customer, revenue for these services are recognized over the contract period when any of the following performance obligations are satisfied:

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Subscription revenues are recognized over time.

The Company generates Digital Media revenues through the license of certain assets to clients.

Assets are licensed for clients’ use in their own promotional materials or otherwise.

Such assets may include logos, editorial reviews, or other copyrighted material.

We also generate Digital Media subscription revenues through the license of certain assets to clients.

Assets are licensed for clients’ use in their own promotional materials or otherwise and may include logos, editorial reviews, or other copyrighted material.

Revenues under such license agreements are recognized over the contract term for use of the asset.

Technology assets are also licensed to clients.

These assets are recognized over the term of the access period.

In instances when technology assets are licensed to our clients, revenues from the license of these assets are recognized over the term of the access period.

The Digital Media business also generates revenue from other sources which include marketing and production services.

Such other revenues are generally recognized over the period in which the products or services are delivered.

The Company also generates Digital Media revenues from transactions involving the sale of perpetual software licenses, related software support and maintenance, hardware used in conjunction with its software, and other related services.

Revenue is recognized for these software transactions with multiple performance obligations after (i) the Company has had an approved contract and is committed to perform the respective obligations and (ii) the Company can identify and quantify each obligation and its respective selling price.

We also generate Digital Media revenues from transactions involving the sale of perpetual software licenses, related software support and maintenance, hardware used in conjunction with its software, and other related services.

Revenue is recognized for these software transactions with multiple performance obligations after (i) the contract has been approved and we are committed to perform the respective obligations and (ii) we can identify and quantify each obligation and its respective selling price.

Once the respective performance obligations have been identified and quantified, revenue will be recognized when the obligations are met, either over time or at a point in time depending on the nature of the obligation.

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Revenues for related software support and maintenance performance obligations are related to technical support provided to customers as needed and unspecified software product upgrades, maintenance releases and patches during the term of the support period when they are available.

The Company is obligated to make the support services available continuously throughout the contract period.

We are obligated to make the support services available continuously throughout the contract period.

Therefore, revenues for support contracts are generally recognized ratably over the contractual period the support services are provided.

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Other service revenues are generally recognized over time as the services are performed.

The Company records revenue on a gross basis with respect to revenue generated (i) by the Company serving online display and video advertising across its owned and operated web properties, on third-party sites or on unaffiliated advertising networks, (ii) through the Company’s lead-generation business and (iii) through the Company’s subscriptions.

(ii) through the Company’s lead-generation business;

and (iii) through the Company’s subscriptions.

The Company records revenue on a net basis with respect to revenue paid to the Company by certain third-party advertising networks who serve online display and video advertising across the Company’s owned-and-operated web properties and certain third-party sites.

Cloud Services

The Company’s Cloud Services revenues substantially consist of monthly recurring subscription and usage-based fees, which are primarily paid in advance by credit card.

The Company defers the portions of monthly, quarterly, semi-annually and annually recurring subscription and usage-based fees collected in advance of the satisfaction of performance obligations and recognizes them in the period earned.

Along with our numerous proprietary Cloud Services solutions, the Company also generates revenues by reselling various third-party solutions, primarily through our email security and online backup lines of business.

These third-party solutions, along with our proprietary products, allow the Company to offer customers a variety of solutions to better meet their needs.

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Cybersecurity and Martech

The Company’s Cybersecurity and Martech revenues substantially consist of subscription revenues which include subscription, usage-based and licensing fees, a significant portion of which are paid in advance.

The Company defers the portions of monthly, quarterly, semi-annual and annual fees collected in advance of the satisfaction of performance obligations and recognizes them in the period earned.

Along with its numerous proprietary Cybersecurity and Martech solutions, the Company also generates subscription revenues by reselling various third-party solutions, primarily through its email security line of business.

These third-party solutions, along with the Company’s proprietary products, allow it to offer customers a variety of solutions to better meet the customer’s needs.

The Company records revenue on a gross basis with respect to reseller revenue because the Company has control of the specified good or service prior to transferring control to the customer.

Revenues from external customers classified by revenue source are as follows (in thousands).

Three Months Ended

September 30, Nine Months Ended

September 30,

See Note 14 - Segment Information for additional information.

Three Months Ended March 31,

Digital Media

Advertising (a) $ 198,794 $ 138,441 $ 574,465 $ 380,188

Subscription and licensing (a) 52,010 44,423 145,935 121,028

Other (a) 11,625 3,920 22,880 12,246

Advertising (1)

$ 170,067 $ 177,288

Subscription (1)

55,576 45,625

Total Digital Media revenues $ 234,827 $ 226,874

Cloud Services

Subscription and licensing $ 182,087 $ 170,233 $ 528,699 $ 507,021

Other 92 15 267 69

Total Cloud Services revenues $ 182,179 $ 170,248 $ 528,966 $ 507,090

Cybersecurity and Martech

Subscription $ 80,494 $ 84,901

Total Cybersecurity and Martech revenues $ 80,494 $ 84,901

Corporate $ — $ —

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Total $ 315,068 $ 311,657

(a) The Company reclassified approximately $ 3.2 million and $ 8.8 million of revenue during the three and nine months ended September 30, 2020, respectively, from ‘Subscription and licensing’ to ‘Advertising’ and reclassified approximately $ 1.7 million and $ 6.7 million during the three and nine months ended September 30, 2020, respectively, from “Subscription and licensing’ to ‘Other’ to conform with current period presentation.

These reclassifications were made in order to separate games publishing revenue from traditional advertising revenue.

The Company has recorded $ 31.8 million and $ 29.0 million of revenue for the three months ended September 30, 2021 and 2020, respectively, and $ 161.2 million and $ 142.5 million of revenue for the nine months ended September 30, 2021 and 2020, respectively, which was previously included in the deferred revenue balance as of the beginning of each respective year.

As of September 30, 2021, the Company acquired $ 7.2 million in deferred revenue in connection with the Company’s business acquisitions (see Note 4 - Business Acquisitions) which are subject to purchase accounting adjustments.

(1) During the three months ended March 31, 2021, the Company reclassified approximately $ 3.2 million of revenue from ‘Subscription’ to ‘Advertising’ and reclassified approximately $ 2.1 million of revenue from ‘Subscription ’ to ‘Other’ to conform with current period presentation.

These reclassifications were made in order to separate games publishing revenue from traditional advertising revenue and to move job posting related revenue from subscriptions to advertising .

The Company has recorded $ 73.1 million and $ 66.5 million of revenue for the three months ended March 31, 2022 and 2021, respectively, which was previously included in the deferred revenue balance as of the beginning of each respective year.

As of March 31, 2022 and December 31, 2021, the Company acquired $ 1.7 million and $ 9.5 million respectively, of deferred revenue in connection with the Company’s business acquisitions, which are subject to purchase accounting adjustments, as appropriate.

Refer to Note 3 - Business Acquisitions for details.

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Performance Obligations

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In addition, the Company provides content to its advertising partners which the Company sells to its partners’ customer base and receives a revenue share based on the terms of the agreement.

The Company satisfies its performance obligations within the Cloud Services business upon delivery of services to its customers.

The Company satisfies its performance obligations within the Cybersecurity and Martech business upon delivery of services to its customers.

Payment terms vary by type and location of our customers and the services offered.

The term between invoicing and when payment is due is not significant.

The time between invoicing and when payment is due is not significant.

Due to the nature of the services provided, there are no obligations for returns.

Significant Judgments

In determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment.

Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment.

Judgment is also required to determine the standalone selling price for each distinct performance obligation.

Performance Obligations Satisfied Over Time

The Company’s Digital Media business consists primarily of performance obligations that are satisfied over time.

Our Digital Media business consists primarily of performance obligations that are satisfied over time.

This was determined based on a review of the contracts and the nature of the services offered, where the customer simultaneously receives and consumes the benefit of the services provided.

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• Commission is evidenced by direct site reporting from the affiliate or via direct confirmation from the customer

Subscription and Licensing

• Evidence of delivery is contained in the Company’s systems or from correspondence with the customer which tracks when a customer accepts delivery of any assets, digital keys or download links

The Company has concluded revenue is recognized based on delivery of services over the contract period for advertising and on a straight-line basis over the contract period for subscriptions.

The Company believes that the methods described are a faithful depiction of the transfer of goods and services.

The Company’s Cloud Services business consists primarily of performance obligations that are satisfied over time.

This has been determined based on the fact that the nature of services offered are subscription based and include fax, voice, backup, security, CPP, and email marketing products where the customer simultaneously receives and consumes the benefit of the services provided regardless of whether the customer uses the services or not.

Revenue is recognized based on delivery of services over the contract period for advertising and on a straight-line basis over the contract period for subscriptions.

We believe that the methods described are a faithful depiction of the transfer of goods and services.

Our Cybersecurity and Martech business consists primarily of performance obligations that are satisfied over time.

This has been determined based on the fact that the nature of services offered are subscription based where the customer simultaneously receives and consumes the benefit of the services provided regardless of whether the customer uses the services or not.

Depending on the individual contracts with the customer, revenue for these services are recognized over the contract period when any of the following materially distinct performance obligations are satisfied:

• Faxing capabilities are provided

• Voice services are provided

• Email marketing services are provided

• Consumer privacy services are provided

• Faxing capabilities are provided (included in discontinued operations through October 7, 2021)

• Voice, email marketing and search engine optimization as services are delivered

• Consumer privacy services and data backup capabilities are provided

• Security solutions, including email and endpoint are provided

• Online data backup capabilities are provided

The Company has concluded that the best measure of progress toward the complete satisfaction of the performance obligation over time is a time-based measure.

The Company recognizes revenue on a straight-line basis throughout the subscription period and believes that the method used is a faithful depiction of the transfer of goods and services.

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The Company has concluded the best measure of progress toward the complete satisfaction of the performance obligation over time is a time-based measure.

The Company recognizes revenue on a straight-line basis throughout the subscription period, or as usage occurs, and believes that the method used is a faithful depiction of the transfer of goods and services.

Performance Obligations Satisfied at a Point in Time

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The Company believes that this method is a faithful depiction of the transfer of goods and services.

Practical Expedients

Existence of a Significant Financing Component in a Contract

As a practical expedient, the Company has not assessed whether a contract has a significant financing component because the Company expects at contract inception that the period between payment by the customer and the transfer of promised goods or services by the Company to the customer will be one year or less.

In addition, the Company has determined that the payment terms that the Company provides to its customers are structured primarily for reasons other than the provision of finance to the Company.

The Company typically charges a single upfront amount for the services because other payment terms would affect the nature of the risk assumed by the Company to provide service given the costs of the customer acquisition and the highly competitive and commoditized nature of the business we operate which allows customers to easily move from one provider to another.

This additional risk may make it uneconomical to provide the service.

Costs to Fulfill a Contract

The Company’s revenues are primarily generated from customer contracts that are for one year or less.

Costs primarily consist of incentive compensation paid based on the achievements of sales targets in a given period for related revenue streams and are recognized in the month when the revenue is earned.

Incentive compensation is paid on the issuance or renewal of the customer contract.

As a practical expedient, for amortization periods which are determined to be one year or less, the Company expenses any incremental costs of obtaining the contract with a customer when incurred.

For those customers with amortization periods determined to be greater than one year, the Company capitalizes and amortizes the expenses over the period of benefit.

In addition, the Company partners with various affiliates in order to generate a portion of its revenue for certain lines of business.

The commissions earned by the Company’s affiliates are incentive based and are paid on the acquisition of new customers in a given period.

For those customers with amortization periods determined to be greater than one year, the Company capitalizes and amortizes the expenses over the period of benefit.

Revenues Invoiced

The Company has applied the practical expedient for certain revenue streams to exclude the value of remaining performance obligations for (i) contracts with an original expected term of one year or less or (ii) contracts for which the Company recognizes revenue in proportion to the amount it has the right to invoice for services performed.

Business Acquisitions

The Company uses acquisitions as a strategy to grow its customer base by increasing its presence in new and existing markets, expand and diversify its service offerings, enhance its technology, and acquire skilled personnel.

The Company completed the following acquisitions during the first nine months of fiscal 2021, paying the purchase price in cash in each transaction:

(a) an asset purchase of DailyOM, acquired on April 30, 2021, a California-based-based provider of health and wellness digital media, content and learning business;

(b) a share purchase of SEOmoz, acquired on June 4, 2021, a Seattle-based provider of search engine optimization (“SEO”) solutions;

(c) an asset purchase of Solutelia, LLC, acquired on July 15, 2021, a Colorado-based on-demand wireless telecommunications network monitoring and analysis, testing and optimization software business and related wireless telecommunications engineering services business;

(d) a stock purchase of Arthur L.

Davis Publishing, acquired on September 23, 2021, an Iowa-based digital nursing publication;

and (e) three immaterial Digital Media acquisitions.

The Condensed Consolidated Statement of Operations since the date of each acquisition and balance sheet as of September 30, 2021, reflect the results of operations of all 2021 acquisitions.

For the nine months ended September 30, 2021, these acquisitions contributed $ 21.3 million to the Company’s revenues.

The Company completed the following acquisitions during the three months ended March 31, 2022, paying the purchase price in cash in each transaction:

(a) a share purchase of Lifecycle Marketing Group Limited, acquired on January 21, 2022, a United Kingdom-based portfolio of pregnancy and parenting brands, including Emma’s Diary and Health Professional Academy, reported within our Digital Media segment;

and (b) two immaterial Digital Media acquisitions.

The Condensed Consolidated Statement of Operations since the date of each acquisition and the Condensed Consolidated Balance Sheets as of March 31, 2022, reflect the results of operations of all 2022 acquisitions.

For the three months ended March 31, 2022, these acquisitions contributed $ 2.1 million to the Company’s revenues.

Net income contributed by these acquisitions was not separately identifiable due to the Company’s integration activities and is impracticable to provide.

Total consideration for these transactions was $ 36.6 million net of cash acquired and assumed liabilities and is subject to certain post-closing adjustments which may increase or decrease the final consideration paid.

Assets and Liabilities Valuation

The following table summarizes the allocation of the purchase consideration for all 2022 acquisitions (in thousands):

2022 Acquisitions

Accounts receivable $ 4,615

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Property and equipment 307

Operating lease right-of-use assets, noncurrent 5,888

Trade names 2,302

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Other intangibles 3,439

Deferred tax asset 230

Other long-term assets 11

Accounts payable and accrued expenses ( 2,551 )

Deferred revenue ( 1,697 )

Operating lease liabilities, current ( 7,191 )

Other current liabilities ( 14 )

Deferred tax liability ( 3,390 )

Other long-term liabilities ( 1,726 )

Total $ 36,639

During the nine months ended September 30, 2021, the purchase price accounting has been finalized for EDC Systems Inc (operating under the name “SRFax”), Inspired eLearning and other immaterial Digital Media and Cloud Services businesses.

The initial accounting for the 2021 acquisitions are incomplete and subject to change.

The initial accounting for all of the 2022 acquisitions is incomplete due to timing of available information and is subject to change.

The Company has recorded provisional amounts which may be based upon past acquisitions with similar attributes for certain intangible assets (including trade names, software and customer relationships), preliminary acquisition date working capital and related tax items.

During the nine months ended September 30, 2021, the Company recorded adjustments to the initial working capital and to the purchase accounting due to the finalization of prior period acquisitions in the Digital Media business, which resulted in a net decrease in goodwill of $ 1.5 million.

In addition, the Company recorded adjustments to the initial working capital and to the purchase accounting due to the finalization of prior period acquisitions in the Voice, Backup, Security and CPP businesses which resulted in a net increase in goodwill of $ 0.5 million.

(see Note 8 - Goodwill and Intangible Assets).

Such adjustments had an immaterial impact on the amortization expense within the Condensed Consolidated Statement of Operations for the nine months ended September 30, 2021.

The fair value of the assets acquired includes accounts receivable of $ 4.6 million, of which none is expected to be uncollectible.

The Company did not acquire any other classes of receivables as a result of its acquisitions.

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired and represents intangible assets that do not qualify for separate recognition.

Goodwill recognized associated with these acquisitions during the nine months ended September 30, 2021 is $ 85.6 million, of which $ 44.1 million is expected to be deductible for income tax purposes.

Pro Forma Financial Information for All 2021 Acquisitions

The following unaudited pro forma supplemental information is based on estimates and assumptions that the Company believes to be reasonable.

However, this information is not necessarily indicative of the Company’s consolidated results of income in future periods or the results that actually would have been realized had the Company and the acquired businesses been combined companies during the periods presented.

These pro forma results exclude any savings or synergies that would have resulted from these business acquisitions had they occurred on January 1, 2020.

Goodwill recognized associated with these acquisitions during the three months ended March 31, 2022 was $ 24.2 million, of which $ 2.2 million is expected to be deductible for income tax purposes.

During the three months ended March 31, 2022, the purchase price accounting has been finalized for an immaterial Digital Media acquisition that was acquired in 2021.

During the three months ended March 31, 2022, the Company also recorded adjustments to the initial working capital and to the purchase accounting of certain other prior period acquisitions due to the finalization of prior period acquisitions in the Digital Media business, which resulted in a net increase in goodwill of $ 2.1 million.

In addition, the Company recorded adjustments to the initial working capital and to the purchase accounting of certain prior period acquisitions due to the finalization of prior period acquisitions in the Cybersecurity and Martech businesses which resulted in a net increase in goodwill of $ 2.0 million.

Such adjustments had an immaterial impact on the amortization expense within the Condensed Consolidated Statement of Operations for the three months ended March 31, 2022.

Refer to Note 7 - Goodwill and Intangible Assets for additional information.

Unaudited Pro Forma Financial Information for All 2022 Acquisitions

The following unaudited pro forma information is not necessarily indicative of the Company’s consolidated results of

operations in future periods or the results that actually would have been realized had the Company and the acquired businesses

been combined companies during the periods presented.

These pro forma results are estimates and exclude any savings or synergies that would have resulted from these business acquisitions had they occurred on January 1, 2021.

This unaudited pro forma supplemental information includes incremental intangible asset amortization and other charges as a result of the acquisitions, net of the related tax effects.

The supplemental information on an unaudited pro forma financial basis presents the combined results of the Company and its 2022 acquisitions as if each acquisition had occurred on January 1, 2021 (in thousands, except per share amounts):

Nine Months Ended

September 30,

Three Months Ended March 31,

(unaudited) (unaudited)

Revenues $ 316,154 $ 314,767

Net income $ 143,420 $ 95,036

Net income from continuing operations $ 24,815 $ 39,206

EPS - Basic $ 0.53 $ 0.88

EPS - Diluted $ 0.52 $ 0.84

Investments consist of equity and debt securities.

The Company determined the equity securities that were received as part of the consideration for the sale of Tea Leaves Health, LLC (“Tea Leaves”) in fiscal year 2017 are without a readily determinable fair value because these securities are privately held, not traded on any public exchanges and not an investment in a mutual fund or similar investment.

As a result, management has elected to alternatively measure this investment at cost, less impairment, adjusted for subsequent observable price changes to estimate fair value.

The Company will make a “reasonable effort” to identify any observable price changes for identical or similar investments with the issuer that are known are can be reasonably known.

Any changes in the carrying value of the equity securities will be reported in current earnings as (gain) loss on investments, net.

In addition, the Company determined that the shares of redeemable preferred stock that were also received as part of the consideration for the sale of Tea Leaves are corporate debt securities and are classified as available-for-sale securities.

These debt securities were subsequently exchanged in a non-cash transaction in the first quarter of 2020.

Furthermore, the COVID-19 pandemic has had an adverse impact on the global financial markets.

A prolonged adverse impact of the COVID-19 pandemic could result in a decline in the equity and debt securities estimated fair value and, thus, a resulting charge to earnings in a future period.

The following table summarizes the gross unrealized gains and losses and estimated fair values for the Company’s securities without a readily determinable fair value (in thousands):

Cost Impairment Adjustments Reported Amount

September 30, 2021

Equity securities $ 31,777 $ ( 16,677 ) $ ( 479 ) $ 14,621

Total $ 31,777 $ ( 16,677 ) $ ( 479 ) $ 14,621

December 31, 2020

Equity securities $ 50,384 $ ( 19,605 ) $ ( 479 ) $ 30,300

Total $ 50,384 $ ( 19,605 ) $ ( 479 ) $ 30,300

During the second quarter of 2021, the Company recorded a $ 16.7 million impairment loss on investments related to a decline in value due to a pending sales transaction of an investee.

The Company is not expected to recover the recorded cost of these securities and has reduced such amount to what the Company expects to receive as a result of the sale.

During the first nine months of 2020, the Company recorded a loss on investments of $ 21.0 million, which consists primarily of the following:

an impairment loss of $ 19.6 million due to changes in the investee’s capital structure and overall market volatility;

a loss on exchange of redeemable preferred stock, in the amount of $ 4.4 million, that that was previously classified as available-for-sale corporate debt securities for a new series of preferred stock classified as equity securities;

partially offset by

a recognized gain of $ 3.2 million due to the Company’s purchase of preferred stock for $ 0.8 million.

Impairment losses, including gains and losses, are recorded in loss on investments, net on the Condensed Consolidated Statements of Operations.

At September 30, 2021, cumulative impairment losses on these securities were $ 40.5 million.

The following table summarizes the gross unrealized gains and losses and fair values for investments classified as available-for-sale investments (in thousands):

September 30, 2021

Corporate debt securities $ — $ — $ — $ —

Investments consist of equity securities.

The company does not have available-for-sale investments as of March 31, 2022 and December 31, 2021.

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

The following table summarizes the cumulative gross unrealized gains and losses and fair values for short-term investments accounted for at fair value under the fair value option, with the unrealized gains and losses reported within earnings on the Condensed Consolidated Statements of Operations (in thousands):

Initial Book Value Cumulative Gross

Gains Cumulative Gross

March 31, 2022

Investment in Consensus (equity securities) $ ( 69,290 ) $ 307,441 $ — $ 238,151

Total $ ( 69,290 ) $ 307,441 $ — $ 238,151

December 31, 2021

Corporate debt securities $ 511 $ 152 $ — $ 663

Total $ 511 $ 152 $ — $ 663

The Company’s available-for-sale debt securities are carried at fair value, with the unrealized gains and losses reported as a component of other comprehensive income.

The following table summarizes the Company’s corporate debt securities designated as available-for-sale, classified by the contractual maturity date of the security (in thousands):

September 30, 2021 December 31, 2020

Due within 1 year $ — $ 663

Due within more than 1 year but less than 5 years — —

Due within more than 5 years but less than 10 years — —

Due 10 years or after — —

Investment in Consensus (equity securities) $ ( 69,290 ) $ 298,490 $ — $ 229,200

Total $ ( 69,290 ) $ 298,490 $ — $ 229,200

Recognition and Measurement of Credit Loss of Debt Securities

The Company adopted ASU 2016-13, Financial Instrument-Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments in the first quarter of 2020.

ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss model which requires the use of forward-looking information to calculate credit loss estimates.

This ASU also eliminates the concept of other-than-temporary impairment and requires credit losses related to available-for-sale debt securities to be recorded though an allowance for credit losses rather than a reduction in amortized cost basis of the securities.

These changes will result in earlier recognition of credit losses, if any.

The Company’s available-for-sale debt securities are carried at estimated fair value with any unrealized gains and losses, net of taxes, included in accumulated other comprehensive loss in stockholders’ equity.

Available- for-sale debt securities with an amortized cost basis in excess of estimated fair value are assessed to determine what amount of that difference, if any, is caused by expected credit losses.

Expected credit losses on available-for-sale debt securities are recognized in other (income) expense, net on our Condensed Consolidated Statements of Operations, and any remaining unrealized losses, net of taxes, are included in accumulated other comprehensive loss in stockholders’ equity.

There were no investments in an unrealized loss position as of December 31, 2020.

As of December 31, 2020, the Company did not recognize any credit losses related to debt securities.

On September 25, 2017, the Company entered into a commitment to invest $ 200 million (approximately 76.6 % of equity) in the OCV Fund.

There were no investments in an unrealized loss position as of March 31, 2022 and December 31, 2021.

On September 25, 2017, the Company entered into a commitment to invest $ 200 million (approximately 76.6 % of equity) in an investment fund (the “Fund”).

The primary purpose of the Fund is to provide a limited number of select investors with the opportunity to realize long-term appreciation from public and private companies, with a particular focus on the technology and life science industries.

The general activities of the OCV Fund is to buy, sell, hold and otherwise invest in securities of every kind and nature and rights and options with respect thereto, including, without limitation, stock, notes, bonds, debentures and evidence of indebtedness;

to exercise all rights, powers, privileges and other incidents of ownership or possession with respect to securities held or owned by the OCV Fund;

The general activities of the Fund is to buy, sell, hold and otherwise invest in securities of every kind and nature and rights and options with respect thereto, including, without limitation, stock, notes, bonds, debentures and evidence of indebtedness;

to exercise all rights, powers, privileges and other incidents of ownership or possession with respect to securities held or owned by the Fund;

to enter into, make and perform all contracts and other undertakings;

1 unchanged sentence

The manager, OCV Management, LLC, and general partner of the Fund are entities with respect to which Richard S.

Ressler, Chairman of the Board of Directors (the “Board”) of the Company, is indirectly the majority equity holder and a related party.

As a limited partner in the Fund, the Company will pay an annual management fee to the manager equal to 2.0 % (reduced by 10 % each year beginning with the sixth year) of capital commitments.

Ressler, former Chairman of the Board of Directors (the “Board”) of the Company, is indirectly the majority equity holder and a related party.

Ressler’s tenure with the Board ended as of May 10, 2022.

As a limited partner in the Fund, prior to the settlement of certain litigation generally related to the Company’s investment in the Fund in January 2022, the Company paid an annual management fee to the manager equal to 2.0 % of capital commitments.

In addition, subject to the terms and conditions of the Fund’s limited partnership agreement, once the Company has received distributions equal to its invested capital, the Fund’s general partner would be entitled to a carried interest equal to 20 %.

1 unchanged sentence

The commitment was approved by the Audit Committee of the Board in accordance with the Company’s related-party transaction approval policy.

In the first nine months of 2021, the Company received capital call notices from the management of OCV Management, LLC for $ 21.2 million, inclusive of certain management fees, of which $ 21.2 million has been paid for the nine months ended September 30, 2021.

In the first nine months of 2020, the Company received capital call notices from the management of OCV Management, LLC for $ 31.0 million, inclusive of certain management fees, of which $ 30.0 million had been paid for the nine months ended September 30, 2020.

During the three and nine months ended September 30, 2021, the Company received distributions from OCV of $ 15.3 million and $ 15.3 million, respectively.

The Company recognizes its equity in the net earnings or losses relating to the investment in OCV on a one-quarter lag due to the timing and availability of financial information from OCV.

At the time of the settlement of the litigation (see Note 9 – Commitments and Contingencies ), the Company had invested approximately $ 128.8 million in the Fund.

In connection with the settlement of the litigation, among other terms, no further capital calls will be made in connection with the Company’s investment in the Fund, nor will any management fees be paid by the Company to the manager.

As such, during the three months ended March 31, 2022, the Company received no capital call notices from the manager of the Fund.

During the three months ended March 31, 2021, the Company received capital call notices from the manager of the Fund for $ 7.1 million, inclusive of certain management fees.

Approximately $ 8.1 million was paid for capital call notices during the three months ended March 31, 2021.

During both the three months ended March 31, 2022 and 2021, the Company received no distributions from OCV.

The Company recognizes its equity in the net earnings or losses relating to the investment in OCV on a one-quarter lag (including management fees) due to the timing and availability of financial information from OCV.

If the Company becomes aware of a significant decline in value that is other-than-temporary, the loss will be recorded in the period in which the Company identifies the decline.

During the three months ended September 30, 2021 and 2020, the Company recognized an investment loss of $( 1.9 ) million and $( 0.7 ) million, net of tax benefit, respectively, and during the nine months ended September 30, 2021 and 2020, the Company recognized an investment gain (loss) of $ 16.6 million and $( 10.8 ) million, net of tax (benefit) expense, respectively.

The fiscal 2021 gain was primarily the result of gains in the underlying investments.

The fiscal 2020 loss was primarily a result of the impairment of two of its investments as a result of COVID-19 in the amount of $ 7.0 million, net of tax benefit.

In addition, The Company recognized an investment loss in the amount of $ 3.8 million, net of tax benefit.

The loss is presented in the Company’s Condensed Consolidated Statement of Operations as income (loss) from equity method investment, net.

During the three months ended September 30, 2021 and 2020, the Company recognized management fees of $ 0.8 million and $ 0.8 million, net of tax benefit, respectively, and for the nine months ended September 30, 2021 and 2020, the Company recognized management fees of $ 2.3 million and $ 2.3 million, net of tax benefit, respectively.

During the three months ended March 31, 2022 and 2021, the Company recognized an investment (loss) gain of $( 0.8 ) million and $ 24.3 million, net of tax benefit (expense), respectively.

The gain in 2021 was primarily the result of gains in the underlying investments.

During the three months ended March 31, 2022 and 2021, the Company recognized expense for management fees of $ 0.8 million and $ 0.8 million, net of tax benefit, respectively.

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

The following table discloses the carrying amount for the Company’s equity method investment (in thousands).

September 30, 2021 December 31, 2020

Equity method investment $ 96,097 $ 67,195

These equity securities are included within ‘Long-term investments’ in the Condensed Consolidated Balance Sheets.

March 31, 2022 December 31, 2021

Equity securities $ 121,552 $ 122,593

Maximum exposure to loss $ 121,552 $ 122,593

2 unchanged sentences

Finally, there are no call or put options, or other types of arrangements, which limit the Company’s ability to participate in losses and returns of the Fund.

During the first quarter of 2021, the Company committed to a plan to sell certain Voice assets in the United Kingdom as they were determined to be non-core assets.

Such assets were recorded within the Voice, Backup, Security, and CPP reportable segment.

On February 9, 2021, in a cash transaction, the Company sold the Voice assets.

As of September 30, 2021, the total gain recognized on the sale was $ 2.8 million which was recorded in (loss) gain on sale of businesses on the Condensed Consolidated Statement of Operations.

During the first quarter of 2021, the Company committed to a plan to sell its B2B Backup business as it was determined to be a non-core business.

The B2B Backup business met the held for sale criteria, and accordingly, the assets and liabilities were presented as held for sale on the Condensed Consolidated Statement of Operations at March 31, 2021 and June 30, 2021.

The business is recorded within the Voice, Backup, Security, and CPP reportable segment.

During the second quarter of 2021, the Company received an offer to purchase the B2B Backup business and management determined that the fair value of the business less cost to sell was lower than its carrying amount.

As a result, the Company recorded an impairment to goodwill of $ 32.6 million during the second quarter of 2021, which was recorded in impairment of business on the Condensed Consolidated Statement of Operations (see Note 8 - Goodwill and Intangible Assets).

On September 17, 2021, in a cash transaction, the Company sold the B2B Backup business.

As of September 30, 2021, the total loss recognized on the sale was $ 24.6 million which was recorded in loss on sale of business on the Condensed Consolidated Statement of Operations.

Discontinued Operations

Consensus Spin-Off

As further described in Note 1 - Basis of Presentation and Overview , on October 7, 2021, the Separation of the cloud fax business was completed.

The accounting requirements for reporting the Company’s cloud fax business as a discontinued operation were met when the Separation was completed as the Separation constituted a strategic shift that would have a major effect on the Company’s operations and financial results.

Accordingly, the Condensed Consolidated Financial Statements reflect the results of the cloud fax business as a discontinued operation for the three months ended March 31, 2021.

The Condensed Consolidated Balance Sheets and the Condensed Consolidated Statements of Operations report discontinued operations separate from continuing operations.

The Condensed Consolidated Statements of Comprehensive Income, Condensed Consolidated Statements of Cash Flows, and Condensed Consolidated Statements of Stockholders’ Equity combine continuing and discontinued operations.

The key components of cash flows from discontinued operations were as follows (in thousands):

Three Months Ended March 31, 2021

Capital expenditures $ 4,766

Depreciation and amortization $ 2,822

Deferred taxes $ 2,722

In connection with the Separation, Ziff Davis and Consensus entered into several agreements that govern the relationship of the parties following the Separation, which are further discussed in Note 16 - Related Party Transactions .

Further, certain of the Company’s management and members of its board of directors resigned from the Company as of the date of distribution and joined Consensus.

In addition, one of the Company’s members of senior management as of March 31, 2022 has served on the board of directors of Consensus since the date of distribution.

The key components of income from discontinued operations were as follows (in thousands):

Three Months Ended March 31, 2021

Revenues $ 86,528

Cost of revenues ( 13,970 )

Sales and marketing ( 13,235 )

Research, development and engineering ( 1,676 )

General and administrative ( 6,048 )

Interest expense and other 151

Income before income taxes 51,750

Income tax expense 12,608

Income from discontinued operations, net of income taxes $ 39,142

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Fair Value Measurements

10 unchanged sentences

The fair value of long-term debt is determined using recent quoted market prices or dealer quotes for each of the Company’s instruments, which are Level 1 inputs.

The fair value of the Company’s debt instruments at September 30, 2021 and December 31, 2020 was $ 2.0 billion and $ 2.0 billion, respectively (see Note 9 - Debt).

Certain of the Company’s debt securities are classified within Level 2.

The Company values these Level 2 investments based on model-driven valuations using significant inputs derived from or corroborated by observable market data.

The fair value of the Company’s debt instruments was approximately $ 1.2 billion and $ 1.3 billion, as of March 31, 2022 and December 31, 2021, respectively (see Note 8 - Debt ).

The Retained Consensus Shares are equity securities for which the Company elected the fair value option, and the fair value of the Retained Consensus Shares and subsequent fair value changes are included in our assets of and results from continuing operations, respectively.

As of March 31, 2022 and December 31, 2021, the Company’s investment in Consensus common stock was remeasured at fair value based on Consensus’ closing stock price with a balance of $ 238.2 million and $ 229.2 million included on the Condensed Consolidated Balance Sheets, respectively.

Unrealized gain of $ 9.0 million was recorded on the Condensed Consolidated Statements of Operations for the three months ended March 31, 2022.

The fair value of the investment in Consensus is determined using quoted market prices, which is a Level 1 input.

The fair value of our 4.625 % Senior Notes (as defined in Note 8 below) was determined using quoted market prices or dealer quotes for instruments with similar maturities and other terms and credit ratings, which are Level 1 inputs.

The fair value of the Credit Facility (as defined in Note 8 below) approximated its carrying amount due to its variable interest rate, which approximated a market interest rate, and was considered a Level 2 input.

The Company classifies its contingent consideration liability in connection with acquisitions within Level 3 because factors used to develop the estimated fair value are unobservable inputs, such as volatility and market risks, and are not supported by market activity.

For similar reasons, certain of the Company’s available-for-sale debt securities are classified within Level 3.

The valuation approaches used to value the Level 3 investments consider unobservable inputs in the market such as time to liquidity, volatility, dividend yield, and breakpoints.

The valuation approaches used to value Level 3 investments considers unobservable inputs in the market such as time to liquidity, volatility, dividend yield, and breakpoints.

Significant increases or decreases in either of the inputs in isolation would result in a significantly lower or higher fair value measurement.

The following table presents the fair values, valuation techniques, unobservable inputs, and ranges of the Company’s financial liabilities categorized within Level 3.

The weighted averages below are a product of the unobservable input and fair value of the contingent consideration arrangement as of September 30, 2021.

The weighted averages below are a product of the unobservable input and fair value of the contingent consideration arrangement as of March 31, 2022.

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Valuation Technique Unobservable Input Range Weighted Average

4 unchanged sentences

Discount rate 27.3 % - 38.0 %

The following tables present the fair values of the Company’s financial assets or liabilities that are measured at fair value on a recurring basis (in thousands):

September 30, 2021 Level 1 Level 2 Level 3 Fair Value Carrying Value

The following tables present the fair values of the Company’s financial assets or liabilities (in thousands):

March 31, 2022 Level 1 Level 2 Level 3 Fair Value Carrying Value

Cash equivalents:

Money market and other funds $ 38,483 $ — $ — $ 38,483 $ 38,483

Corporate debt securities — — — — —

Investment in Consensus 238,151 — — 238,151 238,151

Total assets measured at fair value $ 276,634 $ — $ — $ 276,634 $ 276,634

5 unchanged sentences

Money market and other funds $ 144,255 $ — $ — $ 144,255 $ 144,255

Corporate debt securities — 663 — 663 663

Investment in Consensus 229,200 — — 229,200 229,200

Total assets measured at fair value $ 373,455 $ — $ — $ 373,455 $ 373,455

2 unchanged sentences

Total liabilities measured at fair value $ 1,345,311 $ — $ 5,775 $ 1,351,086 $ 1,096,402

At the end of each reporting period, management reviews the inputs to the fair value measurements of financial and non-financial assets and liabilities to determine when transfers between levels are deemed to have occurred.

For the three months ended March 31, 2022 and 2021, there were no transfers that occurred between levels.

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

The following table presents a reconciliation of the Company’s Level 3 financial liabilities related to contingent consideration that are measured at fair value on a recurring basis (in thousands):

4 unchanged sentences

Contingent consideration payments — Not applicable

Balance as of September 30, 2021 $ 9,296

In connection with the Company’s acquisition activity, contingent consideration of up to $ 14.9 million ma y be payable upon achieving certain revenue, and/or unique visitor thresholds and had a combined fair value of $ 9.3 million and $ 9.1 million at September 30, 2021 and December 31, 2020, respectively.

Due to the achievement of certain thresholds, $ 5.8 million was paid in the first nine months of 2021.

During the nine months ended September 30, 2021, the Company recorded a decrease in the fair value of the contingent consideration of $ 0.6 million and reported such decrease in general and administrative expenses.

Balance as of March 31, 2022 $ 10,087

In connection with the Company’s other acquisition activity, contingent consideration of up to $ 10.1 million ma y be payable upon achieving certain future earnings before interest, taxes, depreciation and amortization (EBITDA), revenue, and/or unique visitor thresholds and had a combined fair value of $ 10.1 million and $ 5.8 million at March 31, 2022 and December 31, 2021, respectively.

Since certain thresholds were not achieved, there were no payments made during the three months ended March 31, 2022.

The Company recorded a net increase of $ 0.1 million during the three months ended March 31, 2022 in the fair value of the contingent consideration and reported such changes in General and administrative expenses.

Goodwill and Intangible Assets

5 unchanged sentences

If it is determined that such assumptions are not accurate, then the resulting change will impact the fair value of the intangible asset.

Identifiable intangible assets are amortized over the period of estimated economic benefit, which ranges from one to 20 years.

The changes in carrying amounts of goodwill for the nine months ended September 30, 2021 are as follows (in thousands):

Fax and Martech Voice, Backup, Security and CPP Total Cloud Services Digital Media Consolidated

Identifiable intangible assets are amortized over the period of estimated economic benefit, which ranges from one to twenty years .

The changes in carrying amounts of goodwill for the three months ended March 31, 2022 are as follows (in thousands):

Digital Media Cybersecurity and Martech Consolidated

Balance as of January 1, 2022 $ 996,659 $ 534,796 $ 1,531,455

Goodwill acquired (Note 3) 24,156 — 24,156

Goodwill removed due to sale of businesses (1)

— ( 50,276 ) ( 50,276 ) — ( 50,276 )

Goodwill impairment (2)

— ( 32,629 ) ( 32,629 ) — ( 32,629 )

Purchase accounting adjustments (1)

1 unchanged sentence

Foreign exchange translation ( 731 ) ( 1,975 ) ( 2,706 )

Balance as of September 30, 2021 $ 463,161 $ 412,735 $ 875,896 $ 985,436 $ 1,861,332

(1) On February 9, 2021, in a cash transaction, the Company sold certain of its Voice assets in the United Kingdom which resulted in $ 1.3 million of goodwill being removed in connection with this sale and on September 17, 2021, the Company sold certain of its B2B Backup assets which resulted in $ 49.0 million of goodwill being removed in connection with the sale (see Note 6 - Dispositions).

(2) During the nine months ended September 30, 2021, the Company had an impairment to goodwill of $ 32.6 million in connection with certain B2B Backup assets.

(3) Purchase accounting adjustments relate to measurement period adjustments to goodwill in connection with prior business acquisitions (see Note 4 - Business Acquisitions).

Intangible Assets with Indefinite Lives:

Intangible assets are summarized as of September 30, 2021 and December 31, 2020 as follows (in thousands):

September 30,

2021 December 31,

Trade names $ 27,412 $ 27,460

Other 4,317 4,329

Total $ 31,729 $ 31,789

Balance as of March 31, 2022 $ 1,022,223 $ 534,855 $ 1,557,078

(1) Purchase accounting adjustments relate to measurement period adjustments to goodwill in connection with prior business acquisitions.

Refer to Note 3 - Business Acquisitions .

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Intangible Assets Subject to Amortization:

As of September 30, 2021, intangible assets subject to amortization relate primarily to the following (in thousands):

As of March 31, 2022, intangible assets subject to amortization relate primarily to the following (in thousands):

Weighted-Average

3 unchanged sentences

Trade names 10.0 years $ 252,358 $ 108,274 $ 144,084

Patent and patent licenses 5.4 years 67,962 67,250 712

Customer relationships (1)

2 unchanged sentences

Total $ 1,403,397 $ 858,751 $ 544,646

(1) Historically, the Company has amortized its customer relationship assets in a pattern that best reflects the pace at which the asset’s benefits are consumed.

(1) The Company amortizes customer relationship assets in a pattern that best reflects the pace at which the asset’s benefits are consumed.

This pattern results in a substantial majority of the amortization expense being recognized in the first 4 to 5 years, despite the overall life of the asset.

4 unchanged sentences

Trade names 9.7 years $ 250,418 $ 102,657 $ 147,761

Patent and patent licenses 5.5 years 67,980 66,964 1,016

Customer relationships (1)

2 unchanged sentences

Total $ 1,391,293 $ 818,568 $ 572,725

(1) Historically, the Company has amortized its customer relationship assets in a pattern that best reflects the pace at which the asset’s benefits are consumed.

(1) The Company amortizes customer relationship assets in a pattern that best reflects the pace at which the asset’s benefits are consumed.

This pattern results in a substantial majority of the amortization expense being recognized in the first 4 to 5 years, despite the overall life of the asset.

Amortization expense, included in general and administrative expense, approximated $ 47.8 million and $ 41.2 million for the three months ended September 30, 2021 and 2020, respectively, and $ 144.3 million and $ 115.6 million for the nine months ended September 30, 2021 and 2020, respectively.

Amortization expense is estimated to approximate $ 43.8 million, $ 143.5 million, $ 123.2 million, $ 80.2 million and $ 75.1 million for the remaining three months of fiscal year 2021 through fiscal year 2025, respectively, and $ 143.6 million thereafter through the duration of the amortization period.

The Company’s debt as of September 30, 2021 and December 31, 2020 consists of the following (in thousands):

September 30, 2021 December 31, 2020

Amortization expense, included in General and administrative expense on our Condensed Consolidated Statements of Operations, approximated $ 41.2 million and $ 47.3 million for the three months ended March 31, 2022 and 2021, respectively.

The Company’s debt as of March 31, 2022 and December 31, 2021 consists of the following (in thousands):

March 31, 2022 December 31, 2021

4.625 % Senior Notes

1 unchanged sentence

1.75 % Convertible Notes

3.25 % Convertible Notes

1.75 % Convertible Notes

550,000 550,000

Total Notes 1,136,667 1,191,276

Paycheck Protection Program Loan — 910

Bridge Loan 485,000 —

Unamortized discount ( 3,809 ) ( 91,593 )

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Total long-term debt, less current portion $ 1,122,945 $ 1,036,018

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

4.625 % Senior Notes

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The Company received proceeds of $ 742.7 million after deducting the initial purchasers’ discounts, commissions and offering expenses.

The net proceeds were used to redeem all of its outstanding 6.0 % Senior Notes due in 2025 and, remaining net proceeds were available for general corporate purposes which may include acquisitions and the repurchase or redemption of other outstanding indebtedness.

The 4.625 % Senior Notes bear interest at a rate of 4.625 % per annum, payable semi-annually in arrears on April 15 and October 15 of each year, commencing on April 15, 2021.

The net proceeds were used to redeem all of its outstanding 6.0 % Senior Notes due in 2025 and, the remaining net proceeds were available for general corporate purposes which may include acquisitions and the repurchase or redemption of other outstanding indebtedness.

These senior notes bear interest at a rate of 4.625 % per annum, payable semi-annually in arrears on April 15 and October 15 of each year, commencing on April 15, 2021.

The 4.625 % Senior Notes mature on October 15, 2030, and are senior unsecured obligations of the Company which are guaranteed, jointly and severally, on an unsecured basis by certain of the Company’s existing and future domestic direct and indirect wholly-owned subsidiaries (collectively, the “Guarantors”).

If the Company or any of its restricted subsidiaries acquires or creates a domestic restricted subsidiary, other than an Insignificant Subsidiary (as defined in the indenture pursuant to which the 4.625 % Senior Notes were issued (the “Indenture”)), after the issue date, or any Insignificant Subsidiary ceases to fit within the definition of Insignificant Subsidiary, such restricted subsidiary is required to unconditionally guarantee, jointly and severally, on an unsecured basis, the Company’s obligations under the 4.625 % Senior Notes.

The Company may redeem some or all of the 4.625 % Senior Notes at any time on or after October 15, 2025 at specified redemption prices plus accrued and unpaid interest, if any, to, but excluding the redemption date.

Before October 15, 2023, and following certain equity offerings, the Company also may redeem up to 40 % of the 4.625 % Senior Notes at a price equal to 104.625 % of the principal amount, plus accrued and unpaid interest, if any, to, but excluding the redemption date.

The Company may redeem some or all of the 4.625 % Senior Notes at any time on or after October 15, 2025 at specified redemption prices plus accrued and unpaid interest, if any, up to, but excluding the redemption date.

The Company may make such redemption only if, after such redemption, at least 50 % of the aggregate principal amount of the 4.625 % Senior Notes remains outstanding.

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In addition, if such net leverage ratio is in excess of 3.5 to 1.0, the restriction on restricted payments is subject to various exceptions, including the total aggregate amount not exceeding the greater of (A) $ 250 million and (B) 50.0 % of EBITDA for the most recently ended four fiscal quarter period ended immediately prior to such date for which internal financial statements are available.

The Company is in compliance with its debt covenants as of September 30, 2021.

On September 24, 2021, the Company announced the commencement of a cash tender offer for up to a maximum aggregate amount of $ 90.0 million of its 4.625 % Senior Notes.

Accordingly, as of September 30, 2021, the Company has classified $ 83.3 million of its 4.625 % Senior Notes as short-term on its Condensed Consolidated Balance Sheet as of September 30, 2021.The remainder of the 4.625 % Senior Notes are presented as long-term debt, net of deferred issuance costs, on the Condensed Consolidated Balance Sheet as of September 30, 2021.

As of September 30, 2021 and December 31, 2020, the estimated fair value of the 4.625 % Senior Notes was approximately $ 797.9 million and $ 796.9 million, and was based on recent quoted market prices or dealer quotes for the 4.625 % Senior Notes which are Level 1 inputs (see Note 7 - Fair Value Measurements).

3.25 % Convertible Notes

On June 10, 2014, the Company issued $ 402.5 million aggregate principal amount of 3.25 % convertible senior notes due June 15, 2029 (the “ 3.25 % Convertible Notes”).

The 3.25 % Convertible Notes bore interest at a rate of 3.25 % per annum, payable semiannually in arrears on June 15 and December 15 of each year.

Beginning with the six-month interest period commencing on June 15, 2021, the Company had to pay contingent interest on the 3.25 % Convertible Notes during any six-month interest period if the trading price per $1,000 principal amount of the 3.25 % Convertible Notes for each of the five trading days immediately preceding the first day of such interest period equaled or exceeded $ 1,300 .

Any contingent interest payable on the 3.25 % Convertible Notes would have been in addition to the regular interest payable on the 3.25 % Convertible Notes.

In connection with the spin-off of Consensus, the Company called its 3.25 % Convertible Notes for redemption and on August 2, 2021, the Company redeemed in full all of its outstanding 3.25 % Convertible Notes.

During the three and nine months ended September 30, 2021, the Company satisfied its conversion obligation by paying the principal of $ 399.6 million and $ 402.4 million, respectively, in cash and issued 3,031,817 and 3,050,850 shares of the Company’s common stock.

respectively (see Note 13 - Stockholders’ Equity).

The 3.25 % Convertible Notes were carried at face value less any unamortized debt discount and debt issuance costs.

The fair value of the 3.25 % Convertible Notes at each balance sheet date was determined based on recent quoted market prices or dealer quotes for the 3.25 % Convertible Notes, which are Level 1 inputs (see Note 7 - Fair Value Measurements).

If such information was not available, the fair value was determined using cash-flow models of the scheduled payments discounted at market interest rates for comparable debt without the conversion feature.

As of September 30, 2021 and December 31, 2020, the estimated fair value of the 3.25 % Convertible Notes was approximately zero and $ 593.1 million, respectively.

The Company is in compliance with its debt covenants for the 4.625 % Senior Notes as of March 31, 2022.

During the three months ended March 31, 2022, the Company repurchased approximately $ 54.6 million in aggregate principal amount of the 4.625 % Senior Notes for an aggregate purchase price of approximately $ 55.4 million.

The Company recognized a loss of $ 1.2 million associated with the repurchase of the 4.625 % Senior Notes, which was recorded within ‘Interest expense’ within the Condensed Consolidated Statements of Operations.

As of March 31, 2022 and December 31, 2021, the estimated fair value of the 4.625 % Senior Notes was approximately $ 559.7 million and $ 659.9 million, and was based on recent quoted market prices for the 4.625 % Senior Notes which are Level 1 inputs.

Refer to Note 6 - Fair Value Measurements .

1.75 % Convertible Notes

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The 1.75 % Convertible Notes will mature on November 1, 2026, unless earlier converted or repurchased.

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Holders may surrender their 1.75 % Convertible Notes for conversion at any time prior to the close of business on the business day immediately preceding July 1, 2026 only under the following circumstances:

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On or after July 1, 2026, and prior to the close of business on the business day immediately preceding the maturity date, holders may convert all or any portion of their notes at any time, regardless of the foregoing circumstances.

The Company will settle conversions of the 1.75 % Convertible Notes by paying or delivering, as the case may be, cash, shares of the Company’s common stock or a combination thereof at the Company’s election.

The Company currently intends to satisfy its conversion obligation by paying and delivering a combination of cash

and shares of the Company’s common stock.

The Company will settle conversions of the 1.75 % Convertible Notes by paying or delivering, as the case may be, cash, shares of the Company common stock or a combination thereof at the Company’s election.

The Company currently intends to satisfy its conversion obligation by paying and delivering a combination of cash and shares of the Company’s common stock.

Holders of the notes will have the right to require the Company to repurchase for cash all or any portion of their notes upon the occurrence of certain corporate events, subject to certain conditions.

During the third quarter of 2021 and the fourth quarter of 2020, the last reported sale price of the Company’s common stock did not meet the conversion price threshold requirements of the 1.75 % Convertible Notes.

Therefore, the net carrying amount of the 1.75 % Convertible Notes is classified as long-term debt on the Condensed Consolidated Balance Sheets.

As of September 30, 2021, the conversion rate is 7.9864 shares of the Company’s common stock for each $1,000 principal amount of 1.75 % Convertible Notes, which represents an conversion price of approximately $ 125.21 per share of the Company’s common stock.

As of March 31, 2022 and December 31, 2021, the market trigger conditions did not meet the conversion requirements of the 1.75 % Convertible Notes and, accordingly, the 1.75 % Convertible Notes are classified as long-term debt on our Condensed Consolidated Balance Sheets.

As of March 31, 2022, the conversion rate is 9.3783 shares of the Company’s common stock for each $1,000 principal amount of 1.75 % Convertible Notes, which represents a conversion price of approximately $ 106.63 per share of the Company’s common stock.

The conversion rate is subject to adjustment for certain events as set forth in the indenture governing the 1.75 % Convertible Notes, but will not be adjusted for accrued interest.

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(i) senior in right of payment to any of the Company’s indebtedness that is expressly subordinated in right of payment to the 1.75 % Convertible Notes;

(ii) equal in right of payment to the Company’s existing and future indebtedness that is not so subordinated, including its existing 3.25 % Convertible Notes due 2029;

(ii) equal in right of payment to the Company’s existing and future indebtedness that is not so subordinated;

(iii) effectively junior to any of the Company’s secured indebtedness to the extent of the value of the assets securing such indebtedness;

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Accounting for the 1.75 % Convertible Notes

In accordance with ASC 470-20, Debt with Conversion and Other Options , convertible debt that can be settled for cash is required to be separated into the liability and equity component at issuance, with each component assigned a value.

The value assigned to the liability component is the effective fair value, as of the issuance date, of similar debt without the conversion feature.

The difference between the cash proceeds and estimated fair value of the liability component, representing the value of the conversion premium assigned to the equity component, is recorded as a debt discount on the issuance date.

This debt discount is amortized to interest expense using the effective interest method over the period from the issuance date through the maturity date of November 1, 2026.

The Company estimated the borrowing rates of similar debt without the conversion feature at origination to be 5.5 % for the 1.75 % Convertible Notes and determined the debt discount to be $ 118.9 million.

As a result, a conversion premium after tax of $ 88.1 million (net of $ 2.8 million of the deferred issuance costs) are recorded in additional paid-in capital.

The aggregate debt discount is amortized as interest expense over the period from the issuance date through the maturity date of November 1, 2026, which management believes is the expected life of the 1.75 % Convertible Notes using an interest rate of 5.5 %.

As of September 30, 2021, the remaining period over which the unamortized debt discount will be amortized is 5.1 years.

On January 1, 2022 the Company adopted ASU 2020-06 using the modified retrospective method.

As a result of this adoption, the Company de-recognized the remaining unamortized debt discount of $ 87.3 million on the 1.75 % Convertible Notes and therefore no longer recognizes any amortization of debt discounts as interest expense.

Refer to Note 1 - Basis of Presentation and Overview .

In connection with the issuance of the 1.75 % Convertible Notes, the Company incurred $ 12.9 million of deferred issuance costs, which primarily consisted of the underwriters’ discount, legal and other professional service fees.

Of the total deferred issuance costs incurred, $ 10.1 million of such deferred issuance costs were attributable to the liability component and are recorded within other assets and are being amortized to interest expense through the maturity date.

Of the total deferred issuance costs incurred, $ 10.1 million of such deferred issuance costs were attributable to the liability component and are recorded within other assets and were being amortized to interest expense through the maturity date.

The remaining $ 2.8 million of the deferred issuance costs were netted with the equity component in additional paid-in capital at the issuance date.

As of September 30, 2021, the unamortized deferred issuance costs were $ 8.0 million.

The 1.75 % Convertible Notes are carried at face value less any unamortized debt discount and issuance costs.

The fair value of the 1.75 % Convertible Notes at each balance sheet date is determined based on recent quoted market prices or dealer quotes for the 1.75 % Convertible Notes, which are Level 1 inputs (see Note 7 - Fair Value Measurements).

Upon adoption of ASU 2020-06, the Company reclassified the $ 2.8 million from additional paid-in-capital to the long-term liability and recorded a cumulative adjustment to retained earnings for amortization from the issuance date through January 1, 2022 and will record amortization expense for these debt issuance costs through the maturity date.

As of March 31, 2022, the total unamortized deferred issuance costs were $ 8.7 million.

The 1.75 % Convertible Notes are carried at face value less any unamortized debt discount (prior to adoption of ASU 2020-06) and issuance costs.

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Value Measurements ).

If such information is not available, the fair value is determined using cash flow models of the scheduled payments discounted at market interest rates for comparable debt without the conversion feature.

As of September 30, 2021 and December 31, 2020, the estimated fair value of the 1.75 % Convertible Notes was approximately $ 692.9 million and $ 569.7 million, respectively.

Credit Facility and Bridge Loan

As of March 31, 2022 and December 31, 2021, the estimated fair value of the 1.75 % Convertible Notes was approximately $ 627.0 million and $ 685.4 million, respectively.

Credit Facility

On April 7, 2021, the Company entered into a $ 100.0 million Credit Agreement (the “Credit Agreement”).

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The final maturity of the Credit Facility will occur on April 7, 2026.

On June 2, 2021, June 21, 2021, August 20, 2021 and September 16, 2021, the Company entered into First, Second, Third and Fourth Amendments (together the “Amendments”) to the Credit Agreement.

The Amendments (i) provided for the issuance of a senior secured term loan under the Credit Agreement, in an aggregate principal amount of $ 485.0 million (the “Bridge Loan Facility”), (ii) permitted the spin-off of the Company’s cloud fax business into a new publicly traded company, and (iii) provided for certain other changes to the Credit Agreement.

The Bridge Loan Facility bore interest at a rate per annum equal to (i) initially upon funding of the loan, either a base rate plus 2.00 %, or a LIBOR rate plus 3.00 %, (ii) from six months after the funding date of the Bridge Loan Facility until twelve months after the funding date of the Bridge Loan Facility, either a base rate plus 2.50 %, or a LIBOR rate plus 3.50 %, and (iii) from twelve months after the funding date of the Bridge Loan Facility until repayment of the Bridge Loan Facility, either a base rate plus 3.00 % or a LIBOR rate plus 4.00 %.

The Bridge Loan Facility was to mature on the date that is 364 days after the funding date of the Bridge Loan Facility, with two automatic extensions, each for an additional three months , if SEC approval of the spin-off transaction was still outstanding.

As of September 30, 2021, the Company had drawn on the full amount of the Bridge Loan Facility with $ 485.0 million outstanding.

The proceeds of the Bridge Loan Facility were used to redeem the Company’s 3.25 % Convertible Notes.

As of September 30, 2021, the estimated fair value of the Bridge Loan Facility was $ 485.0 million.

Refer to Note 18 - Subsequent Events for information on the extinguishment of the Bridge Loan subsequent to September 30, 2021 in connection with the spin-off of the cloud fax business.

The Company was required to pay a funding fee of 0.50 % of the aggregate principal amount of Bridge Loan Facility made on the funding date thereof, as well as a duration fee of 0.25 % of the aggregate principal amount of outstanding Bridge Loans on the sixth month anniversary of the funding of the Bridge Loans, and a fee of 0.50 % of the aggregate principal amount of outstanding Bridge Loans on each of the nine-month, twelve-month and fifteen-month anniversaries of the funding of the Bridge Loans.

Paycheck Protection Program Loan

Through the acquisition of certain businesses in 2020, the Company acquired $ 0.9 million of outstanding debt originating from the Paycheck Protection Program.

During the second quarter of 2021, the Company received approval from the SBA to forgive the entire amount of the outstanding PPP loans, which was subsequently forgiven in full.

The Company leases certain facilities and equipment under non-cancelable operating and finance leases which expire at various dates through 2031.

Office and equipment leases are typically for terms of three to five years and generally provide renewal options for terms up to an additional five years .

Some of the Company’s leases include options to terminate within one year.

For the first nine months of 2021, the Company recorded impairments of $ 9.4 million on its operating lease right of use assets primarily related to exiting certain lease space as the Company regularly evaluates its office space requirements in light more of its workforce working from home as part of a permanent “remote” or “partial remote” work model.

During the third quarter of 2020, the Company had also decided to exit and seek subleases for certain leased facilities in the Digital Media reportable segment primarily also due to work from home models.

The Company recorded a non-cash impairment charge of $ 9.8 million related to operating lease right-of-use assets for the affected facilities and an impairment charge of $ 3.6 million for associated property and equipment.

The impairments were determined by comparing the fair value of the impacted right-of-use asset to the carrying value of the asset as of the impairment measurement date, as required under ASC Topic 360, Property, Plant, and Equipment.

The fair value of the right-of-use asset was based on the estimated sublease income for the affected facilities taking into consideration the time it will take to obtain a sublease tenant, the applicable discount rate and the sublease rate which represent Level 3 unobservable inputs.

The impairments are presented in general and administrative expenses on the Condensed Consolidated Statements of Operations.

In certain agreements in which the Company leases office space where the Company is the tenant, it subleases the site to various other companies through a sublease agreement.

Finance leases are not material to the Company’s Condensed Consolidated Financial Statements and are therefore not included in the disclosures below.

The components of lease expense were as follows (in thousands):

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Operating lease cost $ 6,173 $ 16,888 $ 23,976 $ 33,106

Short-term lease cost 712 264 2,653 1,357

Total lease cost $ 6,885 $ 17,152 $ 26,629 $ 34,463

Supplemental balance sheet information related to leases was as follows (in thousands):

September 30, 2021 December 31, 2020

Operating leases

Operating lease right-of-use assets $ 88,331 $ 105,845

Total operating lease right-of-use assets $ 88,331 $ 105,845

Operating lease liabilities, current $ 31,636 $ 32,211

Operating lease liabilities, noncurrent 84,519 99,177

Total operating lease liabilities $ 116,155 $ 131,388

Supplemental cash flow information related to leases was as follows (in thousands):

Nine Months Ended

September 30,

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases $ 21,869 $ 21,764

Right-of-use assets obtained in exchange for lease obligations:

Operating leases $ 9,274 $ 7,968

Other supplemental operating lease information consists of the following:

September 30, 2021 December 31, 2020

Operating leases:

Weighted average remaining lease term 5.1 years 5.2 years

Weighted average discount rate 3.83 % 3.93 %

Maturities of operating lease liabilities as of September 30, 2021 were as follows (in thousands):

Operating Leases

2021 (remainder) $ 8,507

Thereafter 35,250

Total lease payments $ 131,513

Imputed interest 15,358

Present value of operating lease liabilities $ 116,155

Total sublease income for the three months ended September 30, 2021 and 2020 was $ 0.5 million and $ 0.4 million, respectively, and was $ 1.4 million and $ 2.2 million for the nine months ended September 30, 2021 and 2020, respectively.

Total estimated aggregate sublease income to be received in the future is $ 5.2 million.

For the first nine months of 2020, the Company recorded $ 2.1 million associated with its sublease tenants in default as a result of the economic effects of COVID-19.

The impairment is presented in general and administrative expense on the Condensed Consolidated Statement of Operations.

Significant Judgments

Discount Rate

The majority of the Company’s leases are discounted using the Company’s incremental borrowing rate as the rate implicit in the lease is not readily determinable.

Rates are obtained from various large banks to determine the appropriate incremental borrowing rate each quarter for collateralized loans with a maturity similar to the lease term.

The lease term is generally the minimum noncancelable period of the lease.

The Company does not include option periods unless the Company determined it is reasonably certain of exercising the option at inception or when a triggering event occurs.

Practical Expedients

As a practical expedient, the Company has not separated lease components from nonlease components for its real property operating leases.

Certain of the Company’s leases contain nonlease components such as maintenance and certain utility costs.

In addition, the Company elected and applied the available transition practical expedients upon adoption.

By electing these practical expedients, the Company did:

• not reassess whether expired or existing contracts contain leases under the new definition of a lease;

• not reassess lease classification for expired or existing leases;

• not reassess whether previously capitalized initial direct costs would qualify for capitalization under Topic 842.

At the Company’s option, amounts borrowed under the Credit Agreement will bear interest at either (i) a base rate equal to the greater of (x) the Federal Funds Effective Rate (as defined in the Credit Agreement) in effect on such day plus 0.5 % per annum, (y) the rate of interest per annum most recently announced by the Agent (as defined in the Credit Agreement) as its U.S.

Dollar “Reference Rate” and (z) one month LIBOR plus 1.00 % or (ii) a rate per annum equal to LIBOR divided by 1.00 minus the LIBOR Reserve Requirements (as defined in the Credit Agreement), in each case, plus an applicable margin.

The applicable margin relating to any base rate loan will range from 0.50 % to 1.25 % and the applicable margin relating to any LIBOR loan will range from 1.50 % to 2.25 %, in each case, depending on the total leverage ratio of the Company.

The Company is permitted to make voluntary prepayments of the Credit Facility at any time without payment of a premium or penalty.

As of March 31, 2022 and December 31, 2021, there were no amounts outstanding under the Credit Agreement.

Commitments and Contingencies

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The outcomes of such matters are subject to inherent uncertainties, carrying the potential for unfavorable rulings that could include monetary damages and injunctive relief.

On January 21, 2016, Davis Neurology, P.A.

filed a putative class action lawsuit against two Company affiliates in the Circuit Court for the County of Pope, State of Arkansas (58-cv-2016-40), alleging violations of the TCPA.

The case was removed to the U.S.

District Court for the Eastern District of Arkansas (No.

4:16-cv-00682).

On March 20, 2017, the District Court granted a motion for judgment on the pleadings filed by the Company affiliates and dismissed all claims against the Company affiliates.

On July 23, 2018, the Eighth Circuit Court of Appeals vacated the judgment and remanded to district court with instructions to return the case to state court.

On January 29, 2019, after further appeals were exhausted, the case was remanded to the Arkansas state court.

On April 1, 2019, the state court granted a motion for class certification filed by the plaintiff in 2016.

Because the prior removal to federal court had deprived the state court of jurisdiction, the Company affiliates had not yet filed an opposition brief to the 2016 motion when the state court granted the motion.

The Company affiliates appealed the order.

On July 15, 2019, the Company affiliates removed the case to federal court pursuant to the Class Action Fairness Act of 2005.

On November 26, 2019 the court denied the Plaintiff’s motion to remand.

On December 20, 2019, the court granted the Plaintiff’s motion for leave to amend its complaint.

On May 21, 2020, the court denied the Company affiliates’ motion to dismiss.

On February 18, 2021, the parties filed a motion for preliminary approval of the class settlement, certification of a settlement class and for permission to disseminate notice, which was granted on May 11, 2021.

On September 3, 2021, the court granted final approval of the class settlement.

On July 8, 2020, Jeffrey Garcia filed a putative class action lawsuit against the Company in the Central District of California (20-cv-06906), alleging violations of federal securities laws.

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On July 29, 2021, the parties filed a stipulation of settlement that provides the terms of the settlement and begins the settlement approval process with the Court.

On January 20, 2022 the Court approved the settlement.

Among other terms of the settlement, no further capital calls will be made in connection with the Company’s investment in OCV Fund I, L.P.

On December 11, 2020, Danning Huang filed a lawsuit in the District of Delaware (20-cv-01687-LPS) asserting derivative claims against directors of the Company and other third parties.

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As part of the settlement of the Chancery Court Derivative Action described above, the Company and its directors and officers intend to defend against the remaining claims.

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

The Company does not believe, based on current knowledge, that the foregoing legal proceedings or claims, after giving effect to existing accrued liabilities, are likely to have a material adverse effect on the Company’s consolidated financial position, results of operations, or cash flows.

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Each quarter the Company updates its estimated annual effective tax rate and, if the estimate changes, makes a cumulative adjustment.

The Company’s effective tax rate was 16.6 % and 28.3 % for the three months ended September 30, 2021 and 2020, respectively and 12.3 % and 32.2 % for the nine months ended September 30, 2021 and 2020, respectively.

The Company’s decreased rate during the three and nine months ended September 30, 2021 is primarily due to the recognition of a tax benefit from the disposition and impairment of the backup business to business unit and a reduction in our net reserve for uncertain tax positions with no similar events for the period ending September 30, 2020.

During the nine months ended September 30, 2020 the Company recognized an increase in tax expense related to establishing a valuation allowance on deferred tax assets related to the impairment of certain investments with no similar events for the period ending September 30, 2021.

During the three and nine months ended September 30, 2021, in connection with the redemption of the 3.25 % Convertible Notes, the Company recorded a reduction in its deferred tax liabilities and an increase in additional paid-in capital of approximately $ 44.2 million.

As the redemption of the 3.25 % Convertible Notes were settled in cash and equity for an amount in excess of the Company’s tax basis in the 3.25 % Convertible Notes, the deferred tax liability was reversed with an adjustment to additional-paid-in capital.

Prior to the redemption, the Company had a deferred tax liability on the 3.25 % Convertible Notes for cumulative book-tax temporary differences related to interest expense that resulted in the tax basis exceeding the financial statement carrying amount of the 3.25 % Convertible Notes.

Income (loss) before income taxes included income from domestic operations of $ 29.2 million and $ 32.2 million for the nine months ended September 30, 2021 and 2020, respectively, and income from foreign operations of $ 107.1 million and $ 120.2 million for the nine months ended September 30, 2021 and 2020, respectively.

As of September 30, 2021 and December 31, 2020, the Company had $ 54.2 million and $ 57.1 million, respectively, in liabilities for uncertain income tax positions.

Accrued interest and penalties related to unrecognized tax benefits are recognized in income tax expense on the Company’s consolidated statement of operations.

Cash paid for income taxes net of refunds received was $ 51.8 million and $ 33.5 million for the nine months ended September 30, 2021 and 2020, respectively.

The Company’s effective tax rate was 16.7 % and ( 90.3 )% for the three months ended March 31, 2022 and 2021, respectively.

The Company’s increased rate during the three months ended March 31, 2022 is primarily a result of a tax benefit recognized in 2021 for the release of a valuation allowance on deferred tax assets related to the impairment of certain investments with no similar events for the period ending March 31, 2022.

The increase in the Company’s effective tax rate was partially offset by a decrease due to a gain recorded for book purposes for the mark-to-market adjustment of the Retained Consensus Shares held as of March 31, 2022 that resulted in no tax expense.

The income is not subject to tax since the Company has the ability to dispose of the investment in a tax-free manner based on guidance and requirements set out by the Internal Revenue Service.

Income (loss) from continuing operations before income taxes included income from domestic operations of $ 15.6 million and $( 10.1 ) million for the three months ended March 31, 2022 and 2021, respectively, and income from foreign operations of $ 14.8 million and $ 17.7 million for the three months ended March 31, 2022 and 2021, respectively.

As of March 31, 2022 and December 31, 2021, the Company had $ 42.9 million and $ 42.5 million, respectively, in liabilities for uncertain income tax positions from continuing operations.

Accrued interest and penalties related to unrecognized tax benefits are recognized in income tax expense on the Company’s Condensed Consolidated Statement of Operations.

Cash paid for income taxes net of refunds received for continuing operations was $ 4.3 million and $ 5.5 million for the three months ended March 31, 2022 and 2021, respectively.

Certain taxes are prepaid during the year and, where appropriate, included within prepaid expenses and other current assets on the Condensed Consolidated Balance Sheet.

The Company’s prepaid taxes were $ 12.6 million and $ 3.0 million at September 30, 2021 and December 31, 2020, respectively.

The Company’s prepaid taxes were $ 0.6 million and $ 0.8 million at March 31, 2022 and December 31, 2021, respectively.

Income Tax Audits :

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On February 24, 2021, the Company received a Notice of Deficiency for tax years 2012 through 2014 which disallowed certain deductions for domestic production.

The Company disagrees with the Notice and filed a petition to appeal on May 24, 2021.

As of September 30, 2021, the audits are ongoing.

The Company is under income tax audit by the California Franchise Tax Board (the “FTB”) for its tax years 2012 and 2013.

The FTB, however, has suspended its audit for 2012 and 2013 pending the outcome of the IRS audit for such tax years.

In August 2018, the FTB notified the Company that it will commence an audit of tax years 2015 and 2016.

As of September 30, 2021, the audits are ongoing.

The Company disagrees with the Notice and filed a petition with the United States Tax Court on May 24, 2021.

As of March 31, 2022, the audits are ongoing.

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

The Company is under audit by the California Franchise Tax Board (“FTB”) for its tax years 2012, 2013, 2015, and 2016.

The FTB, however, has agreed to suspend its audit pending the outcome of the IRS audit for tax years 2012 and 2013.

As of March 31, 2022, the audits for tax years 2015 and 2016 are ongoing.

In June 2019, the New York State Department of Taxation and Finance (“NYS”) notified the Company that it will commence an audit for tax year 2015.

In April 2020, the NYS notified the Company that it will also commence an audit for tax years 2016 and 2017.

As of September 30, 2021, the audits are ongoing.

It is reasonably possible that these audits may conclude in the next 12 months and that the uncertain tax positions the Company has recorded in relation to these tax years may change compared to the liabilities recorded for these periods.

As of March 31, 2022, the audits are ongoing.

The Company conducts business on a global basis and as a result, one or more of its subsidiaries files income tax returns in the U.S.

federal and in multiple state, local, and foreign tax jurisdictions.

The Company’s U.S.

federal income tax returns for years 2012 through 2016 are under various stages of audit by the IRS, as noted above.

The Company is also under audit for various U.S.

state and local tax purposes as noted above for its significant jurisdictions.

With limited exception, the Company’s significant foreign tax jurisdictions are no longer subject to an income tax audit by the various tax authorities for tax years prior to 2014.

It is reasonably possible that these audits may conclude in the next twelve months and that the uncertain tax positions the Company has recorded in relation to these tax years may change compared to the liabilities recorded for these periods.

If the recorded uncertain tax positions are inadequate to cover the associated tax liabilities, the Company would be required to record additional tax expense in the relevant period, which could be material.

3 unchanged sentences

Common Stock Repurchase Program

In February 2012, the Company’s Board of Directors approved a program authorizing the repurchase of up to five million shares of the Company’s common stock through February 20, 2013 (the “2012 Program”) which was subsequently extended through February 20, 2021.

In November 2018 and May 2019, the Company entered into Rule 10b5-1 trading plans with a broker to facilitate the repurchase program.

600,000 shares were repurchased under the share repurchase program in 2018 at an aggregate cost of $ 42.5 million and were subsequently retired in March 2019.

During the year ended December 31, 2019, the Company repurchased 197,870 shares at an aggregate cost of $ 16.0 million which were subsequently retired in the same year.

During the year ended December 31, 2020, the Company repurchased 1,140,819 shares under this program at an aggregate cost of $ 87.5 million, which were subsequently retired in the same year.

As of December 31, 2020, all the available shares were repurchased under the 2012 Program at an aggregate cost of $ 204.6 million (including an immaterial amount of commission fees).

On August 6, 2020, the Company’s Board of Directors approved a program authorizing the repurchase of up to ten million shares of our common stock through August 6, 2025 (the “2020 Program”) in addition to the five million shares repurchased under the 2012 Program.

The Company entered into a Rule 10b5-1 trading plan and during the nine month period ended September 30, 2021, the Company repurchased no shares under this program.

Cumulatively at September 30, 2021, 2,490,599 shares were repurchased at an aggregate cost of $ 177.8 million (including an immaterial amount of commission fees) under the 2020 Program, which were subsequently retired.

In connection with the Consensus spin-off, the Company called its 3.25 % Convertible Notes for redemption and during the three and nine months ended September 30, 2021, the Company issued 3,031,817 and 3,050,850 shares of the Company’s common stock, respectively, in connection with that redemption (see Note 9 - Debt).

On August 6, 2020, the Company’s Board of Directors approved a program authorizing the repurchase of up to ten million shares of our common stock through August 6, 2025 (the “2020 Program”).

The Company entered into certain Rule 10b5-1 trading plans during the years ended December 31, 2021 and 2020 to execute repurchases under the 2020 Program.

During the three months ended March 31, 2022, the Company repurchased 554,289 shares at an aggregate cost of approximately $ 58.7 million (including an immaterial amount of commission fees) under the 2020 Program.

These shares were subsequently retired.

Cumulatively as of March 31, 2022, 3,490,599 shares were repurchased at an aggregate cost of $ 284.2 million (including an immaterial amount of commission fees) under the 2020 Program.

These shares were subsequently retired.

As a result of the repurchases, the number of shares available for purchase as of March 31, 2022 is 6,509,401 shares of the Company’s common stock.

Periodically, participants in the Company’s stock plans surrender to the Company shares of stock to pay the exercise price or to satisfy tax withholding obligations arising upon the exercise of stock options or the vesting of restricted stock.

During the three month period ended September 30, 2021, the Company purchased 49,641 shares from plan participants for this purpose.

No dividends were declared in during fiscal year 2021 and 2020.

During the three months ended March 31, 2022 and 2021, the Company purchased and retired 40,372 and 108,287 shares, respectively, from plan participants for this purpose.

No dividends were declared in the three months ended March 31, 2022 a nd 2021 .

Future dividends are subject to Board approval.

Based on the significant number of current investment opportunities within the Company’s portfolio of businesses and the historic returns from prior investments, the Board of Directors suspended dividend payments for the foreseeable future.

Stock Options and Employee Stock Purchase Plan

Based on the significant number of current investment opportunities within the Company’s portfolio of businesses and the historic returns from prior investments, the Board of Directors has suspended dividend payments for the foreseeable future.

Stock Based Compensation

The Company’s share-based compensation plans include the 2007 Stock Plan (the “2007 Plan”), 2015 Stock Option Plan (the “2015 Plan”) and 2001 Employee Stock Purchase Plan (the “Purchase Plan”).

2 unchanged sentences

4,500,000 shares of the Company’s common stock are authorized to be used for 2007 Plan purposes.

Options under the 2007 Plan may be granted at exercise prices determined by the Board of Directors, provided that the exercise prices shall not be less than the fair market value of the Company’s common stock on the date of grant for incentive stock options and not less than 85 % of the fair market value of the Company’s common stock on the date of grant for non-statutory stock options.

As of September 30, 2021, 7,000 shares underlying options and zero shares of restricted units were outstanding under the 2007 Plan.

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

stock on the date of grant for incentive stock options and not less than 85 % of the fair market value of the Company’s common stock on the date of grant for non-statutory stock options.

As of March 31, 2022, zero shares underlying options and zero shares of restricted stock units were outstanding under the 2007 Plan.

The 2007 Plan terminated on February 14, 2017.

2 unchanged sentences

Options under the 2015 Plan may be granted at exercise prices determined by the Board of Directors, provided that the exercise prices shall not be less than the higher of the par value or 100 % of the fair market value of the Company’s common stock subject to the option on the date the option is granted.

As of September 30, 2021, 400,000 shares underlying options and 246,018 shares of restricted stock units were outstanding under the 2015 Plan.

All stock option grants are approved by “outside directors” within the meaning of Internal Revenue Code Section 162(m).

Stock Options

The following table represents stock option activity for the nine months ended September 30, 2021:

Number of Shares Weighted-

Price Weighted-Average

Term (in years) Aggregate

Outstanding at January 1, 2021 475,601 $ 69.61

Exercised ( 68,601 ) 42.08

Outstanding at September 30, 2021 407,000 $ 74.25 6.2 $ 25,385,630

Exercisable at September 30, 2021 157,000 $ 73.00 6.0 $ 9,988,130

Vested and expected to vest at September 30, 2021 346,640 $ 74.11 6.1 $ 21,668,058

The total intrinsic values of options exercised during the nine months ended September 30, 2021 and 2020 were $ 5.6 million and $ 3.0 million, respectively.

The Company recognized $ 0.2 million and $ 0.2 million of compensation expense related to stock options for the three months ended September 30, 2021 and 2020, respectively, and $ 0.6 million and $ 0.7 million for the nine months ended September 30, 2021 and 2020, respectively.

As of September 30, 2021 and December 31, 2020, unrecognized stock compensation related to non-vested stock options granted under each of the share-based compensation plans approximated $ 5.1 million and $ 5.8 million, respectively.

Unrecognized stock compensation expense related to non-vested stock options granted under these plans is expected to be recognized ratably over a weighted-average period of 4.3 (i.e., the remaining requisite service period).

Fair Value Disclosure

The Company uses the Black-Scholes option pricing model to calculate the fair value of each option grant.

The expected volatility is based on historical volatility of the Company’s common stock.

The Company estimates the expected term based upon the historical exercise behavior of its employees.

The risk-free interest rate is based on U.S.

Treasury zero-coupon issues with a term equal to the expected term of the option assumed at the date of grant.

The Company uses an annualized dividend yield based upon the per share dividends declared by its Board of Directors.

Estimated forfeiture rates were 12.4 % and 11.8 % as of September 30, 2021 and 2020, respectively.

Restricted Stock and Restricted Stock Units

As of March 31, 2022, 435,135 shares underlying options and 503,994 shares of restricted stock units were outstanding under the 2015 Plan.

The Company has awarded restricted stock and restricted stock units to its Board of Directors and senior staff pursuant to certain share-based compensation plans.

1 unchanged sentence

Vesting periods are approximately one year for awards to members of the Company’s Board of Directors, four or five years for senior staff (excluding market-based awards discussed below) and eight years for the Chief Executive Officer.

Restricted Stock and Restricted Stock Units with Market Conditions

The Company has awarded certain key employees market-based restricted stock and restricted stock units pursuant to the 2015 Plan.

The market-based shares have vesting conditions that are based on specified stock price targets of the Company’s common stock.

The Company granted 112,324 and 74,834 shares of restricted stock and restricted units (excluding awards with market conditions below) during the three months ended March 31, 2022 and 2021, respectively.

The Company has awarded certain key employees market-based restricted stock awards pursuant to the 2015 Plan.

The market-based awards have vesting conditions that are based on specified stock price targets of the Company’s common stock.

Market conditions were factored into the grant date fair value using a Monte Carlo valuation model, which utilized multiple input variables to determine the probability of the Company achieving the specified stock price targets with a 20 -day and 30 -day lookback (trading days).

Stock-based compensation expense related to an award with a market condition will be recognized over the requisite service period using the graded-vesting method regardless of whether the market condition is satisfied, provided that the requisite service period has been completed.

During the nine months ended September 30, 2021 and 2020, the Company awarded 73,094 and 82,112 market-based shares, respectively.

The per share weighted average grant-date fair values of the market-based shares granted during the nine months ended September 30, 2021 and 2020 were $ 94.40 and $ 70.99 , respectively.

The weighted-average fair values of market-based shares granted have been estimated utilizing the following assumptions:

September 30, 2021 September 30, 2020

During the three months ended March 31, 2022 and 2021, the Company awarded 100,193 and 73,094 market-based restricted stock awards, respectively.

The per share weighted average grant-date fair values of the market-based restricted stock awards granted during the three months ended March 31, 2022 and 2021 were $ 87.11 and $ 94.40 , respectively.

The weighted-average fair values of market-based restricted stock awards granted have been estimated utilizing the following assumptions:

March 31, 2022 March 31, 2021

Underlying stock price at valuation date $ 99.32 $ 113.27

1 unchanged sentence

Risk-free interest rate 1.8 % 1.3 %

Restricted stock award activity for the nine months ended September 30, 2021 is set forth below:

Restricted stock award activity for the three months ended March 31, 2022 is set forth below:

Shares Weighted-Average

2 unchanged sentences

Canceled ( 777 ) 88.54

Nonvested at September 30, 2021 395,366 $ 61.62

Restricted stock unit award activity for the nine months ended September 30, 2021 is set forth below:

Nonvested at March 31, 2022 344,311 $ 38.38

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Restricted stock unit activity for the three months ended March 31, 2022 is set forth below:

Shares Weighted-Average

4 unchanged sentences

Canceled ( 7,557 )

Outstanding at September 30, 2021 246,018 3.2 $ 33,610,979

Vested and expected to vest at September 30, 2021 170,143 2.5 $ 23,244,890

The Company recognized $ 5.7 million and $ 5.1 million of compensation expense related to restricted stock, restricted stock units and market-based awards for the three months ended September 30, 2021 and 2020, respectively, and $ 16.4 million and $ 16.4 million for the nine months ended September 30, 2021 and 2020, respectively.

As of September 30, 2021 and December 31, 2020, the Company had unrecognized share-based compensation cost of approximately $ 37.3 million and $ 38.6 million, respectively, associated with these awards.

Outstanding at a March 31, 2022 503,194 3.1 $ 48,776,539

Vested and expected to vest at March 31, 2022 503,194 3.1 $ 48,699,115

As of March 31, 2022 and December 31, 2021, the Company had unrecognized share-based compensation cost of approximately $ 58.0 million and $ 44.3 million, respectively, associated with these awards.

This cost is expected to be recognized over a weighted-average period of 3.3 for awards and 4.1 for units.

Employee Stock Purchase Plan

The Purchase Plan provides for the issuance of a maximum of two million shares of the Company’s common stock.

Under the Purchase Plan, eligible employees can have up to 15 % of their earnings withheld, up to certain maximums, to be used to purchase shares of the Company’s common stock at certain plan-defined dates.

The price of the Company’s common stock purchased under the Purchase Plan for the offering periods is equal to 85 % of the lesser of the fair market value of a share of common stock of the Company on the beginning or the end of the offering period.

The Company determined that a plan provision exists which allows for the more favorable of two exercise prices, commonly referred to as a “look-back” feature.

The purchase price discount and the look-back feature cause the Purchase Plan to be compensatory and the Company to recognize compensation expense.

The compensation cost is recognized on a straight-line basis over the requisite service period.

The Company used the Black-Scholes option pricing model to calculate the estimated fair value of the purchase right issued under the ESPP.

The expected volatility is based on historical volatility of the Company’s common stock.

The risk-free interest rate is based on U.S.

Treasury zero-coupon issues with a term equal to the expected term of the option assumed at the date of grant.

The Company uses an annualized dividend yield based upon the per share dividends declared by its Board of Directors.

Estimated forfeiture rates were 11.15 % and 16.50 % as of September 30, 2021 and 2020, respectively.

The increase in forfeiture rate comes as a result of the Purchase Plan being offered to all employees regardless of employment location.

For the nine months ended September 30, 2021 and 2020, 58,145 and 53,694 shares were purchased under the Purchase Plan, respectively.

Cash received upon the issuance of the Company’s common stock under the Purchase Plan was $ 4.2 million and $ 3.3 million for the nine months ended September 30, 2021 and 2020, respectively.

As of September 30, 2021, 1,346,794 shares were available under the Purchase Plan for future issuance.

The Company recognized $ 0.8 million and $ 0.5 million of compensation expense related to the Purchase Plan for the three months ended September 30, 2021 and 2020, respectively, and $ 2.1 million and $ 1.5 million for the nine months ended September 30, 2021 and 2020, respectively.

The compensation expense related to the Purchase Plan has been estimated utilizing the following assumptions:

September 30, 2021 September 30, 2020

Risk-free interest rate 0.06 % 0.13 %

Expected term (in years) 0.5 0.5

Dividend yield 0.00 % 0.00 %

Expected volatility 35.62 % 23.95 %

Weighted average volatility 35.62 % 23.95 %

Earnings Per Share

The components of basic and diluted earnings per share are as follows (in thousands, except share and per share data):

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Three Months Ended March 31,

Basic Diluted Basic Diluted

Numerator for basic and diluted net income per common share:

Net income $ 42,569 $ 60,883 $ 136,209 $ 92,580

Net income available to participating securities (a)

Net income from continuing operations $ 24,537 $ 24,537 $ 38,780 $ 38,780

Net income available to participating securities (1)

( 11 ) ( 11 ) ( 44 ) ( 44 )

Net income available to the Company’s common shareholders $ 42,541 $ 60,794 $ 136,066 $ 92,103

1.75 % Convertible Notes interest expense (after-tax) (2)

Net income available to the Company’s common shareholders from continuing operations 24,526 26,712 38,736 38,736

Weighted-average outstanding shares of common stock 47,054,411 47,054,411 44,399,149 44,399,149

2 unchanged sentences

— 192,835 — 108,703

Convertible debt (b)

Convertible debt (2)

— 5,158,071 — 2,224,020

Common stock and common stock equivalents 47,054,411 52,405,317 44,399,149 46,731,872

Net income per share:

Basic $ 0.91 $ 1.31 $ 3.01 $ 1.96

Diluted $ 0.88 $ 1.31 $ 2.86 $ 1.93

(a) Represents unvested share-based payment awards that contain certain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid).

(b) Represents the incremental shares issuable upon conversion of the 3.25 % Convertible Notes due June 15, 2029 (subsequently redeemed in full) and 1.75 % Convertible Notes due November 1, 2026 by applying the treasury stock method when the average stock price exceeds the conversion price of the Convertible Notes (see Note 9 - Debt).

For the three months ended September 30, 2021 and 2020, there were zero and 423,000 options outstanding, respectively, and for the nine months ended September 30, 2021 and 2020, there were zero options outstanding, respectively, which were excluded from the computation of diluted earnings per share because the exercise prices were greater than the average market price of the common stock.

Net income per share from continuing operations:

$ 0.52 $ 0.51 $ 0.87 $ 0.83

(1) Represents unvested share-based payment awards that contain certain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid).

(2) Under the modified retrospective method of adoption of ASU 2020-06, the dilutive impact of convertible debt was calculated using the if-converted method for the three months ended March 31, 2022.

The dilutive impact of convertible debt was calculated using the treasury stock method for the three months ended March 31, 2021.

(see Note 8 - Debt ).

For the three months ended March 31, 2022 and 2021, there were zero options outstanding, respectively, which were excluded from the computation of diluted earnings per share because the exercise prices were greater than the average market price of the common stock.

For the three months ended March 31, 2022 and 2021, there were zero and zero potentially dilutive shares, respectively, which were excluded from the computation of diluted net income per share of common stock to common stockholders due to their anti-dilutive effect.

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Segment Information

The Company’s businesses are based on the organizational structure used by the chief operating decision maker (“CODM”) for making operating and investment decisions and for assessing performance.

The Company’s businesses are based on the organizational structure used by the chief operating decision maker (“CODM”).

The CODM views the Company as two businesses:

Digital Media and Cloud Services.

However, in accordance with the aggregation criteria within ASC Topic 280, the Company’s operating segments have been aggregated into three reportable segments:

(i) Digital Media;

(ii) Voice, Backup, Security, and Consumer Privacy and Protection;

and (iii) Fax and Martech.

The Company’s Digital Media business is driven primarily by advertising and subscription revenues, has relatively higher sales and marketing expense and has seasonal strength in the fourth quarter.

The Company’s Cloud Services business is driven primarily by subscription revenues that are relatively higher margin, stable and predictable from quarter to quarter with minor seasonal weakness in the fourth quarter.

Cybersecurity and Martech and Digital Media.

The accounting policies of the businesses are the same as those described in the Company’s Annual Report on Form 10-K filed with the SEC on March 15, 2021.

The Company evaluates performance based on revenue, gross margin and profit or loss from operations before income taxes, not including nonrecurring gains and losses and foreign exchange gains and losses.

Information on reportable segments and reconciliation to consolidated income from operations is as follows (in thousands):

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Information on reportable segments and reconciliation to income from operations is as follows (in thousands):

Three Months Ended March 31,

Revenue by reportable segment:

Digital Media $ 234,827 $ 226,874

Cloud Services

Fax and Martech 114,648 98,044 320,829 286,687

Voice, Backup, Security, and CPP 67,531 72,204 208,137 220,403

Cloud Services Total 182,179 170,248 528,966 507,090

Cybersecurity and Martech 80,494 84,901

Elimination of inter-segment revenues ( 253 ) ( 118 )

4 unchanged sentences

Digital Media $ 209,706 $ 206,081

Cloud Services

Fax and Martech 91,993 81,435 261,742 238,149

Voice, Backup, Security, and CPP 49,395 50,392 151,155 152,733

Cloud Services Total 141,388 131,827 412,897 390,882

Cybersecurity and Martech 59,393 61,907

Elimination of inter-segment gross profit ( 131 ) ( 118 )

1 unchanged sentence

Corporate (1)

— ( 11 ) ( 74 ) ( 47 )

Total gross profit 268,968 267,805

1 unchanged sentence

Digital Media $ 177,586 $ 175,428

$ 188,950 $ 143,312 $ 548,960 $ 410,109

Cloud Services

Fax and Martech (3)

42,057 28,614 107,109 89,121

Voice, Backup, Security, and CPP (3)

37,524 37,456 150,102 118,291

Cloud Services Total 79,581 66,070 257,211 207,412

Cybersecurity and Martech 47,065 50,042

Elimination of inter-segment direct costs ( 131 ) ( 118 )

Total segment direct costs 224,520 225,352

268,443 209,326 805,957 617,321

Corporate (1)

1 unchanged sentence

Total direct costs 238,415 240,924

$ 283,809 $ 223,716 $ 849,742 $ 642,873

Operating income by reportable segment:

Digital Media $ 32,120 $ 30,653

Cloud Services

Fax and Martech 49,936 52,821 154,633 149,028

Voice, Backup, Security, and CPP 11,871 12,936 1,053 34,442

Cloud Services Total 61,807 65,757 155,686 183,470

Cybersecurity and Martech 12,328 11,865

Total segment operating income 44,448 42,518

1 unchanged sentence

( 13,886 ) ( 15,637 )

Total income from operations $ 96,141 $ 77,438 $ 236,276 $ 205,725

Income from operations $ 30,562 $ 26,881

(1) Corporate includes costs associated with general and administrative and other expenses that are managed on a global basis and that are not directly attributable to any particular segment.

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

(2) Direct costs for each segment include other operating expenses that are directly attributable to the segment, such as employee compensation expense, local sales and marketing expenses, engineering and network operations expense, depreciation and amortization and other administrative expenses.

(3) Beginning in the third quarter of 2020, certain expenses associated with Corporate that were previously allocated to the Cloud Services business and the Digital Media business for shared costs incurred by Corporate were no longer allocated.

Table above has been recast to remove the impact of certain expenses associated with Corporate that were previously allocated to the Cloud Services and Digital Media businesses.

The CODM does not use Balance Sheet and Cash Flow information in connection with operating and investment decisions other than as presented for Digital Media and Cloud Services.

Accordingly, the following segment information is presented for Digital Media and Cloud Services.

September 30, 2021 December 31, 2020

The CODM does not use Balance Sheet and Cash Flow information in connection with operating and investment decisions other than as presented for Digital Media and Cybersecurity and Martech.

Accordingly, the following segment information is presented for Digital Media and Cybersecurity and Martech.

March 31, 2022 December 31, 2021

Digital Media $ 1,985,271 $ 2,043,204

Cloud Services

1,567,119 1,473,398

Total assets from Digital Media and Cloud Services 3,545,371 3,561,795

Cybersecurity and Martech 1,050,521 1,088,741

Total assets from reportable segments 3,035,792 3,131,945

Corporate 627,379 638,335

Total assets $ 3,663,171 $ 3,770,280

Nine Months Ended

September 30,

Three Months Ended March 31,

Capital expenditures

Digital Media $ 26,931 $ 16,819

Cloud Services 35,500 27,673

Total capital expenditures from Digital Media and Cloud Services 87,495 71,266

Cybersecurity and Martech 3,571 9,450

Total from reportable segments 30,502 26,269

Corporate — —

Total capital expenditures $ 30,502 $ 26,269

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Three Months Ended March 31,

Depreciation and amortization:

Digital Media $ 46,121 $ 48,350

Cloud Services 16,082 20,524 48,744 58,355

Total depreciation and amortization from Digital Media and Cloud Services 66,138 57,175 196,226 160,126

Cybersecurity and Martech 12,857 17,047

Total from reportable segments 58,978 65,397

Corporate 93 95

Total depreciation and amortization $ 59,071 $ 65,492

The Company maintains operations in the U.S., Canada, Ireland, Japan and other countries.

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

The Company maintains operations in the U.S., Canada, Ireland, the United Kingdom, India and other countries.

Geographic information about the U.S.

1 unchanged sentence

Such information attributes revenues based on jurisdictions where revenues are reported (in thousands).

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Three Months Ended March 31,

United States $ 263,475 $ 256,135

3 unchanged sentences

$ 315,068 $ 311,657

September 30,

2021 December 31, 2020

March 31, 2022 December 31, 2021

Long-lived assets:

3 unchanged sentences

Total $ 758,630 $ 789,551

Accumulated Other Comprehensive Income

The following table summarizes the changes in accumulated balances of other comprehensive income (loss), net of tax, for the three months ended September 30, 2021 (in thousands):

Unrealized Gains (Losses) on Investments Foreign Currency Translation Total

Beginning balance $ 283 $ ( 60,257 ) $ ( 59,974 )

Other comprehensive income ( 114 ) ( 11,101 ) ( 11,215 )

Net current period other comprehensive income ( 114 ) ( 11,101 ) ( 11,215 )

Ending balance $ 169 $ ( 71,358 ) $ ( 71,189 )

The following table summarizes the changes in accumulated balances of other comprehensive income (loss), net of tax, for the nine months ended September 30, 2021 (in thousands):

Accumulated Other Comprehensive Loss

The following table summarizes the changes in accumulated balances of other comprehensive income (loss), net of tax, for the three months ended March 31, 2022 (in thousands):

Unrealized Gains (Losses) on Investments Foreign Currency Translation Total

Beginning balance $ 169 $ ( 57,391 ) $ ( 57,222 )

Other comprehensive loss ( 114 ) ( 16,269 ) ( 16,383 )

Other comprehensive loss before reclassification — ( 6,265 ) ( 6,265 )

Consensus separation adjustment — 4,056 4,056

Net current period other comprehensive loss — ( 2,209 ) ( 2,209 )

Ending balance $ 169 $ ( 71,358 ) $ ( 71,189 )

There were no reclassifications out of accumulated other comprehensive loss for the three and nine months ended September 30, 2021.

Subsequent Events

Consensus, Inc.

On October 7, 2021, the Separation of Consensus into an independent publicly traded company was completed and the Company transferred J2 Cloud Service, LLC to Consensus, Inc.

who in turn transferred non-fax assets and liabilities back to Ziff Davis such that Consensus was left with the cloud fax business.

The Company’s stockholders of record received one share of Consensus common stock for every three shares of J2 Global’s common stock.

On October 8, 2021, Consensus began trading on Nasdaq under the stock symbol “CCSI”.

Balance as of March 31, 2022 $ 169 $ ( 59,600 ) $ ( 59,431 )

There were no reclassifications out of accumulated other comprehensive loss for the three months ended March 31, 2022.

During the three months ended March 31, 2022, accumulated other comprehensive loss and other comprehensive loss were adjusted by approximately $ 4.1 million related to the subsequent accounting for the Separation.

ZIFF DAVIS, INC.

(“Ziff Davis”) (formerly J2 Global, Inc.) retained a 19.9 % interest in Consensus following the Separation.

On October 7, 2021, in exchange for the equity interest in Consensus, Consensus paid Ziff Davis approximately $ 269.6 million of cash and issued $ 500.0 million of senior notes due 2028 to Ziff Davis and Ziff Davis exchanged such notes with the lenders under the Credit Agreement and Credit Agreement Amendments by and among the subsidiaries of Ziff Davis party thereto as guarantors, Citicorp North America Inc.

and MUFG Union Bank, N.A.

and MUFG Union Bank, N.A., as administrative agent for the lenders, in exchange for extinguishment of the $ 485.0 million of indebtedness outstanding under the Bridge Loan Facility (Refer to Note 9 - Debt).

Such lenders or their affiliates agreed to resell the 2028 notes to qualified institutional buyers in the United States pursuant to Rule 144A.

On October 8, 2021, Ziff Davis announced that it had accepted tender offers to purchase $ 83.3 million in aggregate principal of its 4.625 % Senior Notes for an aggregate purchase price of $ 90.0 million.

The tender offer expired on October 22, 2021.

Corporate Name Change

On October 7, 2021, in connection with the spin-off of its cloud fax business discussed above, the Company changed its name from J2 Global, Inc.

to Ziff Davis, Inc.

Starting October 8, 2021, the Company’s common stock began trading under the stock symbol “ZD.”

Leadership Changes

In connection with the Separation, each of Doug Bech, Stephen Ross and Pamela Sutton-Wallace resigned as members of the Company’s board of directors, effective as of immediately prior to the Separation, to serve as directors of Consensus.

Additionally, Scott Turicchi resigned as President and Chief Financial Officer, effective as of immediately prior to the effectiveness of the Separation.

Turicchi serves as Chief Executive Officer of Consensus.

On October 7, 2021, Steve Dunn was appointed the interim principal financial officer of Ziff Davis while Ziff Davis is engaging in a search process for a new chief financial officer.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Related Party Transactions

In preparation for and in executing the Separation, the Company incurred transaction-related costs, some of which were or the Company expects to be, reimbursed by Consensus.

These transaction costs primarily related to professional fees associated with preparation of regulatory filings and transaction execution and separation activities within finance, tax and legal functions.

In connection with the Separation, Ziff Davis and Consensus entered into several agreements that govern the relationship of the parties following the Separation, including a separation and distribution agreement, a transition services agreement, a tax matters agreement, an employee matters agreement, an intellectual property license agreement, and a stockholder and registration rights agreement.

The transition services agreement governs services including certain information technology services, finance and accounting services and human resource and employee benefit services.

The agreed-upon charges for such services are generally intended to allow the providing company to recover all costs and expenses of providing such services and is expected to terminate no later than twelve months following the Separation.

Amounts due from Consensus as of March 31, 2022 and December 31, 2021 was approximately $ 14.6 million and $ 9.3 million, respectively, related to reimbursement of certain costs pursuant to the transition services agreement, certain transaction related costs and other costs, and is included in ‘Accounts receivable’ within the Condensed Consolidated Balance Sheets.

During the three months ended March 31, 2022, the Company recorded an offset to expense of approximately $ 1.2 million from Consensus related to certain items above within ‘General and administrative expenses’ within the Condensed Consolidated Statements of Operations.

Further, the Company assigned its lease of office space in Los Angeles, California to Consensus.

Ziff Davis will remain the lessee under this lease and its obligations remain in place through October 7, 2022, after which time Consensus will take over the lease in full.

During the three months ended March 31, 2022, the Company recorded an offset to lease expense of approximately $ 0.4 million related to this lease, however, Consensus paid the landlord directly (other than an immaterial amount of sublease payments from Ziff Davis to Consensus).

On September 25, 2017, the Company entered into a commitment to invest in the Fund.

The manager, OCV Management, LLC, and general partner of the Fund are entities with respect to which Richard S.

Ressler, former Chairman of the Board, is indirectly the majority equity holder and a related party.

Ressler’s tenure with the Board ended as of May 10, 2022.

During the three months ended March 31, 2022 and 2021, the Company recognized expense for management fees of $ 0.8 million and $ 0.8 million, net of tax benefit, respectively.

During the three months ended March 31, 2021, the Company received capital call notices from the management of OCV Management, LLC for $ 7.1 million, inclusive of certain management fees.

Approximately $ 8.1 million was paid for capital call notices during the three months ended March 31, 2021.

In addition, subject to the terms and conditions of the Fund’s limited partnership agreement, once the Company has received distributions equal to its invested capital, the Fund’s general partner will be entitled to a carried interest equal to 20 %.

The Fund has a six year investment period, subject to certain exceptions.

The commitment was approved by the Audit Committee of the Board in accordance with the Company’s related-party transaction approval policy.

In connection with the settlement of certain litigation generally related to the Company’s investment in the Fund (see Note 9 - Commitments and Contingencies ), among other terms, no further capital calls were made during the three months ended March 31, 2022 or will be made in the future in connection with the Company’s investment in the Fund, nor will any future management fees be paid by the Company to the manager.

Subsequent Event

On April 12, 2022, the Company invested $ 15.0 million in Group Black, one of the largest collectives of Black-owned media and diverse creators.

In addition, the parties entered into a strategic partnership focused on creating, amplifying, and monetizing content from Black and diverse creators across Ziff Davis’ portfolio of media brands.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements