What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-11-09 compared with 2022-08-09 · 407 added, 327 removed, 1116 unchanged (40% of the section changed)

4 unchanged sentences

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

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Cash and cash equivalents $ 621,917 $ 694,842

16 unchanged sentences

Accounts payable and accrued expenses $ 212,926 $ 229,772

Income taxes payable, current 4,027 3,151

Deferred revenue, current 180,136 185,571

22 unchanged sentences

Authorized 95,000,000 ;

total issued and outstanding 47,191,337 and 47,440,137 shares at June 30, 2022 and December 31, 2021, respectively.

total issued and outstanding 47,189,907 and 47,440,137 shares at September 30, 2022 and December 31, 2021, respectively.

Additional paid-in capital 432,272 509,122

8 unchanged sentences

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

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

14 unchanged sentences

Interest expense, net ( 8,560 ) ( 14,490 ) ( 28,419 ) ( 56,980 )

Gain on sale of businesses — 823 — 2,802

Unrealized loss on short-term investments ( 27,317 ) — ( 18,366 ) —

Loss on investments, net ( 48,243 ) ( 16,677 ) ( 48,243 ) ( 16,677 )

Gain on debt extinguishment, net 10,112 — 11,505 —

Loss on sale of businesses, net — ( 24,600 ) — ( 21,798 )

Unrealized gain (loss) on short-term investments held at the reporting date, net 4,201 — ( 14,165 ) —

Gain (loss) on investments, net 471 — ( 47,772 ) ( 16,677 )

Other income (loss), net 4,218 107 12,962 ( 466 )

(Loss) income from continuing operations before income taxes and (loss) income from equity method investment, net ( 30,284 ) ( 27,628 ) 118 ( 20,002 )

Income (loss) from continuing operations before income taxes and (loss) income from equity method investment, net 39,476 6,027 39,594 ( 13,975 )

Income tax (expense) benefit ( 18,100 ) 2,665 ( 33,231 ) 19,883

(Loss) income from equity method investment, net ( 3,191 ) ( 1,923 ) ( 10,077 ) 16,596

Net (loss) income from continuing operations ( 46,436 ) ( 23,045 ) ( 21,899 ) 15,735

Net income (loss) from continuing operations 18,185 6,769 ( 3,714 ) 22,504

Income from discontinued operations, net of income taxes — 35,800 — 113,705

Net (loss) income $ ( 46,436 ) $ 15,717 $ ( 21,899 ) $ 93,640

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

Net income (loss) $ 18,185 $ 42,569 $ ( 3,714 ) $ 136,209

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

Basic $ 0.39 $ 0.14 $ ( 0.08 ) $ 0.50

3 unchanged sentences

Diluted $ — $ 0.74 $ — $ 2.39

Net (loss) income per common share:

Net income (loss) per common share:

Basic $ 0.39 $ 0.91 $ ( 0.08 ) $ 3.01

14 unchanged sentences

(Unaudited, in thousands)

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

Net (loss) income $ ( 46,436 ) $ 15,717 $ ( 21,899 ) $ 93,640

Net income (loss) $ 18,185 $ 42,569 $ ( 3,714 ) $ 136,209

Other comprehensive (loss) income, net of tax:

1 unchanged sentence

Consensus separation adjustment — — 4,056 —

Other comprehensive (loss) income, net of tax ( 24,265 ) 3,256 ( 26,474 ) ( 5,168 )

Change in fair value on available-for-sale investments, net of tax expense of $ — and $ — for the three and nine months ended September 30, 2022, respectively, and $ 37 for the three and nine months ended September 30, 2021, respectively.

( 169 ) ( 114 ) ( 169 ) ( 114 )

Other comprehensive loss, net of tax ( 24,922 ) ( 11,215 ) ( 51,396 ) ( 16,383 )

Comprehensive (loss) income $ ( 6,737 ) $ 31,354 $ ( 55,110 ) $ 119,826

4 unchanged sentences

(Unaudited, in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Cash flows from operating activities:

9 unchanged sentences

Gain on sale of businesses — 21,798

Lease asset impairments and other charges 168 7,829

Goodwill impairment on business 27,369 32,629

Changes in fair value of contingent consideration ( 2,305 ) ( 567 )

Foreign currency remeasurement gain 549 415

Loss (income) from equity method investments 10,077 ( 16,596 )

Unrealized loss on short-term investments 18,366 —

Unrealized gain (loss) on short-term investments held at the reporting date 14,165 —

Loss on investments, net 47,772 16,677

Other 269 9,591

Decrease (increase) in:

15 unchanged sentences

Investment in available-for-sale securities ( 15,000 ) —

Distribution from equity method investment — 15,327

Purchases of equity method investment — ( 22,249 )

1 unchanged sentence

Purchases of property and equipment ( 80,767 ) ( 87,495 )

Proceeds from sale of assets — 6,033

Acquisition of businesses, net of cash received ( 104,094 ) ( 112,444 )

Proceeds from sale of businesses, net of cash divested — 48,876

Purchases of intangible assets — ( 1,255 )

Net cash used in investing activities ( 199,861 ) ( 159,576 )

3 unchanged sentences

Debt extinguishment costs ( 756 ) —

Proceeds from bridge loan — 485,000

Repurchase of common stock ( 76,545 ) ( 29,855 )

3 unchanged sentences

Other ( 559 ) ( 6,619 )

Net cash used in financing activities ( 61,679 ) ( 31,590 )

Net cash (used in) provided by financing activities ( 141,829 ) 39,837

Effect of exchange rate changes on cash and cash equivalents ( 24,454 ) ( 6,698 )

10 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Three and Six Months Ended June 30, 2021 and 2022

Three and Nine Months Ended September 30, 2021 and 2022

(Unaudited, in thousands, except share amounts)

Three Months Ended June 30, 2021

Three Months Ended September 30, 2021

Common stock Additional

2 unchanged sentences

Shares Amount capital earnings loss Equity

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

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 zero

Other comprehensive loss, net of tax expense of $ 37

— — — — ( 11,215 ) ( 11,215 )

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

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

Exercise of 3.25 % Convertible Note

Redemption of 3.25 % Convertible Note including tax impact

3,031,817 31 44,192 — — 44,223

Issuance of restricted stock, net 198,579 2 ( 2 ) — — —

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

Balance, June 30, 2021 44,708,235 $ 447 $ 461,422 $ 892,605 $ ( 59,974 ) $ 1,294,500

Three Months Ended June 30, 2022

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 September 30, 2022

Common stock Additional

2 unchanged sentences

Shares Amount capital earnings loss Equity

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

Net loss — — — ( 46,436 ) — ( 46,436 )

Balance, July 1, 2022 47,191,337 $ 472 $ 426,104 $ 1,451,316 $ ( 83,696 ) $ 1,794,196

Net income — — — 18,185 — 18,185

Other comprehensive loss, net of tax expense of zero

— — — — ( 24,922 ) ( 24,922 )

Issuance of shares under employee stock purchase plan 76,741 1 5,234 — — 5,235

Restricted stock issued, net 354,407 3 ( 3 ) — — —

Issuance of restricted stock, net 1,171 — — — — —

Repurchase and retirement of common stock ( 2,601 ) — ( 218 ) 18 — ( 200 )

Share-based compensation — — 6,386 — — 6,386

Balance, June 30, 2022 47,191,337 $ 472 $ 426,104 $ 1,451,316 $ ( 83,696 ) $ 1,794,196

Six months ended June 30, 2021

Balance, September 30, 2022 47,189,907 $ 472 $ 432,272 $ 1,469,519 $ ( 108,618 ) $ 1,793,645

Nine months ended September 30, 2021

Common stock Additional

4 unchanged sentences

Net income — — — 136,209 — 136,209

Other comprehensive income, net of tax expense of zero

Other comprehensive loss, net of tax expense of $ 37

— — — — ( 16,383 ) ( 16,383 )

1 unchanged sentence

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

Exercise of 3.25 % Convertible Note

Redemption of 3.25 % Convertible Note including tax impact

3,050,850 31 44,191 — — 44,222

3 unchanged sentences

Other, net — — ( 2,371 ) 188 — ( 2,183 )

Balance, June 30, 2021 44,708,235 447 461,422 892,605 ( 59,974 ) 1,294,500

Six Months Ended June 30, 2022

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

Nine Months Ended September 30, 2022

Common stock Additional

10 unchanged sentences

Issuance of shares under employee stock purchase plan 76,741 1 5,234 — — 5,235

Restricted stock issued, net 455,792 4 ( 4 ) — — —

Issuance of restricted stock, net 456,963 4 ( 4 ) — — —

Repurchase and retirement of common stock ( 789,373 ) ( 7 ) ( 14,881 ) ( 61,657 ) — ( 76,545 )

Share-based compensation — — 20,806 — — 20,806

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

Other, net — — ( 16 ) ( 3,904 ) — ( 3,920 )

Balance, June 30, 2022 47,191,337 $ 472 $ 426,104 $ 1,451,316 $ ( 83,696 ) $ 1,794,196

Balance, September 30, 2022 47,189,907 $ 472 $ 432,272 $ 1,469,519 $ ( 108,618 ) $ 1,793,645

See Notes to Condensed Consolidated Financial Statements (Unaudited)

31 unchanged sentences

Ziff Davis did not retain a controlling interest in Consensus.

On June 9, 2022, certain selling shareholders of Consensus executed an underwritten public offering pursuant to a registration statement filed by Consensus with the SEC for 2,000,000 shares of its common stock (including a 30 -day option for the underwriters to purchase from the selling shareholders an additional 300,000 shares at the public offering price less the underwriting discount).

On June 9, 2022, the Company entered into an agreement with certain selling shareholders of Consensus who executed an underwritten public offering pursuant to a registration statement filed by Consensus with the SEC for 2,000,000 shares of its common stock (including a 30 -day option for the underwriters to purchase from the selling shareholders an additional 300,000 shares at the public offering price less the underwriting discount).

On June 10, 2022, the Company entered into a Fifth Amendment to its existing Credit Agreement, providing for the issuance of a senior secured term loan under the Credit Agreement (the “Term Loan Facility”), in an aggregate principal amount of approximately $ 90.0 million.

During the three months ended June 30, 2022, the Company completed an exchange of 2,300,000 shares of its common stock of Consensus (the “Disposed Consensus Shares”) with the selling shareholders to settle the Company’s obligation to repay the $ 90.0 million outstanding aggregate principal amount of the Term Loan Facility plus related interest (the “Debt-for-Equity Exchange”) and the corresponding underwriting fees.

Refer to Note 8 -

During June 2022, the Company subsequently completed a non-cash exchange of the 2,300,000 shares of its common stock of Consensus with the selling shareholders to settle the Company’s obligations of $ 90.0 million outstanding aggregate principal amount of the Term Loan Facility plus related interest and the corresponding underwriting fees.

ZIFF DAVIS, INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Debt for further discussion.

As of June 30, 2022, the Company continues to hold 1.7 million shares of common stock of Consensus (the “Retained Consensus Shares”).

The Investment in Consensus represents the investment into equity securities for which the Company elected the fair value option and subsequent fair value changes in the Consensus shares are included in the assets of and results from continuing operations.

On September 14, 2022, the Company entered into an agreement with certain selling shareholders of Consensus who executed an underwritten public offering pursuant to a registration statement filed by Consensus with the SEC for 500,000 shares of its common stock.

On September 15, 2022, the Company entered into a Sixth Amendment to its existing Credit Agreement, providing for the issuance of a senior secured term loan under the Credit Agreement (the “Term Loan Two Facility”, together with the Term Loan Facility, collectively, “Term Loan Facilities”), in an aggregate principal amount of approximately $ 22.3 million.

During September 2022, the Company subsequently completed a non-cash exchange of the 500,000 shares of its common stock of Consensus with the selling shareholders to settle the Company’s obligations of $ 22.3 million outstanding aggregate principal amount of the Term Loan Two Facility plus related interest and the corresponding underwriting fees.

Refer to Note 8 - Debt for further discussion.

As of September 30, 2022, the Company continues to hold approximately 1.2 million shares of common stock of Consensus (the “Retained Consensus Shares”).

The Investment in Consensus represents the investment in equity securities for which the Company elected the fair value option and subsequent fair value changes in the 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.

13 unchanged sentences

In determining whether the Company acts as the principal or an agent, the Company follows the accounting guidance under Topic 606 for principal-agent considerations and assesses:

(i) if another party is involved in providing goods or services to the customer and (ii) whether the Company controls the specified goods or services prior to transferring control to the customer.

(i) if another party is involved in providing goods or services to the customer, (ii) whether the Company controls the specified goods or services prior to transferring control to the customer and (iii) whether the Company has discretion on pricing.

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.

3 unchanged sentences

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

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

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 on our Condensed Consolidated Balance Sheets.

2 unchanged sentences

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

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

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.

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 within earnings on the Condensed Consolidated Statements of Operations.

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

18 unchanged sentences

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.

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Ziff Davis has variable interests in Group Black.

Group Black is a limited partnership and is managed by its Board of Directors.

As of June 30, 2022, the Company does not have voting rights in the investee and lacks the power and the ability to control or direct the significant economic operations of the investee.

As of September 30, 2022, the Company does not have voting rights in the investee and lacks the power and the ability to control or direct the significant economic operations of the investee.

Ziff Davis is not a primary beneficiary and does not consolidate the entity under either the VIE model or the voting interest (“VOE”) model.

Refer to Note 4 - Investments for additional detail.

ZIFF DAVIS, INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Impairment or Disposal of Long-Lived Assets

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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 six months ended June 30, 2022, the Company did not have any events or circumstances indicating impairment of long-lived assets.

During the three and six months ended June 30, 2022, Ziff Davis recorded an impairment of certain operating right-of use assets in the amount of $ 0.2 million.

During the six months ended June 30, 2021, the Company recorded impairments of $ 7.8 million associated with its sublease tenants in default as a result of the economic effects of COVID-19.

During the nine months ended September 30, 2022, the Company did not have any events or circumstances indicating impairment of long-lived assets, other than the recording of an impairment of certain operating lease right-of-use assets in the amount of $ 0.4 million.

During the nine months ended September 30, 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 of more of its workforce working from home as part of a permanent “remote” or “partial remote” work model.

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

24 unchanged sentences

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

The Company generally determines the fair value of its reporting units using the income approach methodology of valuation.

The Company generally determines the fair value of its reporting units using a mix of an income approach and a market approach.

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.

No impairments to goodwill or other intangible assets were recorded during the six months ended June 30, 2022.

The Company recorded a goodwill impairment of $ 27.4 million and zero for the three months ended September 30, 2022 and 2021, respectively, and $ 27.4 million and $ 32.6 million for the nine months ended September 30, 2022 and 2021, respectively.

Refer to Note 7 - Goodwill and Intangible Assets for further details.

Contingent Consideration

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

Share-Based Compensation

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

On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was signed into law.

The IRA included many climate and energy provisions and introduced a 15 percent corporate alternative minimum tax (“CAMT”) for taxpayers whose average annual adjusted financial statement income exceeds a certain threshold.

The IRA also enacted a one percent excise tax on stock repurchases made by publicly traded U.S.

corporations.

The CAMT and excise tax on stock repurchases are effective for tax years beginning after December 31, 2022.

The Company does not believe that it will be subject to the CAMT as it is expected to be under the threshold of the average annual adjusted financial statement income.

ZIFF DAVIS, INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

cancellation rate.

Share-Based Compensation

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

3 unchanged sentences

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.

On January 1, 2022, the Company adopted Accounting Standards Update (“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.

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Reclassifications

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

Certain prior year reported amounts have been reclassified to conform to the 2022 presentation.

Digital Media

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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.

ZIFF DAVIS, INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

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

See Note 14 - Segment Information for additional information.

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

1 unchanged sentence

Advertising $ 186,921 $ 198,794 $ 546,186 $ 574,465

$ 189,198 $ 198,385 $ 359,265 $ 375,673

Subscription 64,780 52,010 179,257 145,935

58,901 48,299 114,477 93,924

10,601 7,293 19,785 11,253

Other 12,195 11,625 31,980 22,880

Total Digital Media revenues $ 263,896 $ 262,429 $ 757,423 $ 743,280

8 unchanged sentences

Total $ 341,873 $ 355,144 $ 994,297 $ 1,008,094

(1) During the three and six months ended June 30, 2021, the Company reclassified approximately $ 1.5 million and $ 4.7 million of revenue from ‘Subscription’ to ‘Advertising’ and reclassified approximately $ 4.4 million and $ 6.5 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 $ 49.8 million and $ 46.2 million of revenue for the three months ended June 30, 2022 and 2021, respectively, and $ 122.7 million and $ 112.7 million of revenue for the six months ended June 30, 2022 and 2021, respectively, which was previously included in the deferred revenue balance as of the beginning of each respective year.

As of June 30, 2022 and December 31, 2021, the Company acquired $ 19.3 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.

The Company has recorded $ 32.2 million and $ 27.7 million of revenue for the three months ended September 30, 2022 and 2021, respectively, and $ 154.9 million and $ 140.4 million of revenue for the nine months ended September 30, 2022 and 2021, respectively, which was previously included in the deferred revenue balance as of the beginning of each respective year.

ZIFF DAVIS, INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

As of September 30, 2022 and December 31, 2021, the Company acquired $ 21.3 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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In these instances, the Company determines its standalone selling prices based on the prices at which the Company separately sells each service.

ZIFF DAVIS, INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

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

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• 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

ZIFF DAVIS, INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

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.

3 unchanged sentences

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 (included in discontinued operations through October 7, 2021)

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

1 unchanged sentence

• Security solutions, including email and endpoint are provided

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

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.

ZIFF DAVIS, INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Performance Obligations Satisfied at a Point in Time

6 unchanged sentences

Transaction Price Allocation to Future Performance Obligations

As of June 30, 2022, the aggregate amount of transaction price that is allocated to our performance obligations was approximately $ 27.5 million and is expected to be recognized as follows:

As of September 30, 2022, the aggregate amount of transaction price that is allocated to our performance obligations was approximately $ 24.0 million and is expected to be recognized as follows:

20 % by December 31, 2022, 78 % by December 31, 2023 and the rest thereafter.

2 unchanged sentences

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 six months ended June 30, 2022, paying the purchase price in cash in each transaction:

2022 Acquisitions

The Company completed the following acquisitions during the nine months ended September 30, 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;

(b) a share purchase of FitNow, Inc, acquired on June 2, 2022, a Massachusetts-based provider of weight loss products and support, reported within our Digital Media segment;

and (c) 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 June 30, 2022, reflect the results of operations of all 2022 acquisitions.

For the six months ended June 30, 2022, these acquisitions contributed $ 7.4 million to the Company’s revenues.

and (c) four immaterial Digital Media acquisitions.

The Condensed Consolidated Statement of Operations since the date of each acquisition and the Condensed Consolidated Balance Sheets as of September 30, 2022, reflect the results of operations of all 2022 acquisitions.

For the nine months ended September 30, 2022, these acquisitions contributed $ 19.6 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 $ 121.7 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.

The following table summarizes the preliminary allocation of the purchase consideration for all acquisitions as of June 30, 2022 (in thousands):

Assets and Liabilities 2022 Acquisitions

ZIFF DAVIS, INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

The following table summarizes the preliminary allocation of the purchase consideration for all 2022 acquisitions as of September 30, 2022 (in thousands):

Assets and Liabilities Valuation

Accounts receivable $ 7,433

1 unchanged sentence

Property and equipment 369

Operating lease right-of-use assets, noncurrent 546

Trade names 12,838

8 unchanged sentences

Total $ 121,704

ZIFF DAVIS, INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

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

3 unchanged sentences

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 six months ended June 30, 2022 was $ 81.7 million, of which $ 1.2 million is expected to be deductible for income tax purposes.

During the six months ended June 30, 2022, the purchase price accounting has been finalized for the following 2021 acquisitions:

DailyOM and SEOmoz.

During the six months ended June 30, 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 $ 1.8 million.

Goodwill recognized associated with these acquisitions during the nine months ended September 30, 2022 was $ 93.8 million, of which $ 1.2 million is expected to be deductible for income tax purposes.

During the nine months ended September 30, 2022, the purchase price accounting has been finalized for the following 2021 acquisitions:

DailyOM, SEOmoz, Solutelia, LLC, Arthur L.

Davis Publishing and two other immaterial Digital Media acquired businesses.

During the nine months ended September 30, 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.

These measurement period adjustments resulted in a net increase in goodwill of $ 4.9 million, which included a $ 3.2 million increase in connection with the unfavorable contract liability for an acquired contract.

The unfavorable contract liability is expected to be accreted over 4 years.

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 decrease in goodwill of $ 0.1 million.

Such adjustments had an immaterial impact on the amortization expense within the Condensed Consolidated Statement of Operations for the six months ended June 30, 2022.

Such adjustments had an immaterial impact on the amortization expense within the Condensed Consolidated Statement of Operations for the nine months ended September 30, 2022.

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

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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.

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

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):

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

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Revenues $ 342,173 $ 366,258 $ 1,010,600 $ 1,041,436

Net (loss) income from continuing operations $ ( 46,300 ) $ ( 22,941 ) $ ( 21,543 ) $ 15,778

(Loss) income per common share from continuing operations - Basic $ ( 0.99 ) $ ( 0.51 ) $ ( 0.46 ) $ 0.35

(Loss) income per common share from continuing operations - Diluted $ ( 0.99 ) $ ( 0.51 ) $ ( 0.46 ) $ 0.33

The Company completed the following acquisitions during the six months ended June 30, 2021, paying the purchase price in cash in each transaction:

(a) an asset purchase of DailyOM, acquired on April 30, 2021, a California-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 solutions;

and (c) one immaterial Digital Media acquisition.

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

For the six months ended June 30, 2021, these acquisitions contributed $ 5.8 million to the Company’s revenues.

Net income (loss) from continuing operations $ 18,120 $ 4,925 $ ( 3,801 ) $ 23,369

Income (loss) per common share from continuing operations - Basic $ 0.39 $ 0.11 $ ( 0.08 ) $ 0.52

Income (loss) per common share from continuing operations - Diluted $ 0.39 $ 0.10 $ ( 0.08 ) $ 0.49

2021 Acquisitions

The Company completed the following acquisitions during the nine months ended September 30, 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.

Net income from continuing operations 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 $ 134.3 million, net of cash acquired and assumed liabilities.

ZIFF DAVIS, INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

consideration for these transactions was $ 91.0 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.

The following table summarizes the allocation of the purchase consideration for all acquisitions as of June 30, 2021, including individually material acquisitions noted separately (in thousands):

The following table summarizes the allocation of the purchase consideration for all 2021 acquisitions as of September 30, 2021, including individually material acquisitions noted separately (in thousands):

Assets and Liabilities Valuation

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Deferred tax asset 231

Accounts payable and accrued expenses ( 2,656 )

Accounts payables and accrued expenses ( 2,891 )

Deferred revenue ( 7,806 )

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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 acquisitions during the three months and six months ended as June 30, 2021 as if each acquisition had occurred on January 1, 2020 (in thousands, except per share amounts):

Three Months Ended June 30, 2021 Six Months Ended June 30, 2021

The supplemental information on an unaudited pro forma financial basis presents the combined results of the Company and its acquisitions during the three months and nine months ended September 30, 2021 as if each acquisition had occurred on January 1, 2020 (in thousands, except per share amounts):

Three Months Ended September 30, 2021 Nine months ended September 30, 2021

(unaudited) (unaudited)

Revenues $ 374,202 $ 1,045,184

Net (loss) income from continuing operations $ ( 22,156 ) $ 19,456

(Loss) income per common share from continuing operations - Basic $ ( 0.50 ) $ 0.44

(Loss) income per common share from continuing operations - Diluted $ ( 0.50 ) $ 0.41

Net income from continuing operations $ 6,886 $ 25,490

Income per common share from continuing operations - Basic $ 0.15 $ 0.56

Income per common share from continuing operations - Diluted $ 0.14 $ 0.54

SEOmoz Acquisition

On June 4, 2021, the Company acquired all the outstanding issued capital of SEOmoz at a purchase consideration of $ 67.0 million, net of cash acquired and assumed liabilities.

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The Consolidated Statement of Operations since the date of acquisition and balance sheet as of December 31, 2021, reflect the results of operations of SEOmoz.

For both of the three and six months ended June 30, 2021, SEOmoz contributed

For the nine months ended September 30, 2021, SEOmoz contributed $ 14.4 million to the Company’s revenues.

Net income from continuing operations contributed by SEOmoz since the acquisition date was not separately identifiable due to the Company’s integration activities and is impracticable to provide.

ZIFF DAVIS, INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

$ 3.3 million to the Company’s revenues.

Net income from continuing operations contributed by SEOmoz since the acquisition date was not separately identifiable due to the Company’s integration activities and is impracticable to provide.

The following table summarizes the allocation of the purchase consideration for the SEOmoz acquisition (in thousands):

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Other long-term assets 62

Intercompany 235

Accounts payables and accrued expenses ( 2,421 )

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The supplemental information on an unaudited pro forma financial basis presents the combined results of the Company and SEOmoz as if the acquisition had occurred on January 1, 2020 (in thousands, except per share amounts):

Three Months Ended September 30, 2021 Nine months ended September 30, 2021

(unaudited) (unaudited)

Revenues $ 367,414 $ 1,028,545

Net income from continuing operations $ 6,610 $ 24,030

Income per common share from continuing operations - Basic $ 0.14 $ 0.53

Income per common share from continuing operations - Diluted $ 0.14 $ 0.51

ZIFF DAVIS, INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Three Months Ended June 30, 2021 Six Months Ended June 30, 2021

(unaudited) (unaudited)

Revenues $ 349,473 $ 673,401

Net (loss) income from continuing operations $ ( 22,247 ) $ 18,767

(Loss) income per common share from continuing operations - Basic $ ( 0.50 ) $ 0.42

(Loss) income per common share from continuing operations - Diluted $ ( 0.50 ) $ 0.40

Investments consist of equity and debt securities.

There were no investments in an unrealized loss position as of June 30, 2022 and December 31, 2021.

There were no investments in an unrealized loss position as of September 30, 2022 and December 31, 2021.

Investment in equity securities

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

June 30, 2022

Investment in Consensus (equity securities) $ ( 29,052 ) $ 101,587 $ — $ 72,535

Total $ ( 29,052 ) $ 101,587 $ — $ 72,535

December 31, 2021

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

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

During the three months ended June 30, 2022, the Company completed the non-cash Debt-For-Equity Exchange of 2,300,000 shares of its Investment in Consensus with a fair value as of March 31, 2022 of $ 138.3 million for the extinguishment of $ 90.0 million of the Company’s Term Loan Facility and related interest.

During the three months ended June 30, 2022, the Company incurred the loss of $ 48.2 million, including underwriting costs, in connection with disposal of the Disposed Consensus Shares and, which is presented within ‘Loss on investment, net’ on our Condensed Consolidated Statements of Operations.

As of June 30, 2022, the Company holds 1.7 million shares of the common stock of Consensus.

During the three and six months ended June 30, 2022, the Company recognized an unrealized loss on the Retained Consensus Shares of $ 27.3 million and $ 18.4 million, respectively.

Investment in Consensus

Investment in equity securities consists of publicly traded common stock of Consensus.

During the three and nine months ended September 30, 2022, the Company completed the non-cash debt-for-equity exchanges of 500,000 shares and 2,800,000 shares, respectively, of its Investment in Consensus for the extinguishment of $ 22.3 million and $ 112.3 million, respectively, of principal of the Company’s Term Loan Facilities, and related interest.

Gains (losses) on equity securities recognized in ‘Unrealized gain (loss) on short-term investments held at the reporting date’ consisted of the following (in thousands):

Three Months Ended September 30, 2022 Nine Months Ended September 30, 2022

Net gains (losses) during the period $ 4,672 $ ( 61,937 )

gains (losses) on securities sold during the period 471 ( 47,772 )

Unrealized gains (losses) recognized during the period on equity securities held at the reporting date $ 4,201 $ ( 14,165 )

As of September 30, 2022, the Company holds approximately 1.2 million shares of the common stock of Consensus.

Other investment

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

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Investment in corporate debt securities

On April 12, 2022, the Company entered into an agreement to acquire 4 % convertible notes with an aggregate value of $ 15.0 million, which upon conversion would represent an equity interest equal to at least 3 %, on a fully converted basis.

On April 12, 2022, the Company entered into an agreement with an entity to acquire 4 % convertible notes with an aggregate value of $ 15.0 million, which upon conversion would represent an equity interest equal to at least 3 %, on a fully converted basis, of the entity that issued the notes.

This investment is included in ‘Long-term investments, net’ in our Condensed Consolidated Balance Sheets and is classified as available-for-sale and initially measured at its transaction price and subsequently remeasured at fair value, with unrealized gains and losses reported as a component of other comprehensive income.

The table below summarizes the carrying value and the maximum exposure of Company’s investment in corporate debt securities as of September 30, 2022 (in thousands):

September 30, 2022

Carrying value Maximum exposure

Investment in corporate debt securities $ 15,000 $ 15,000

ZIFF DAVIS, INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

The table below summarizes the carrying value and the maximum exposure of Company’s investment in corporate debt securities as of June 30, 2022 (in thousands):

June 30, 2022

Carrying value Maximum exposure

Investment in corporate debt securities $ 15,000 $ 15,000

The Company’s maximum exposure to loss is limited to its proportional ownership in the investee.

1 unchanged sentence

The following table summarizes the gross unrealized gains and losses and fair values for investments classified as available-for-sale, with the unrealized gains and losses reported as a component of other comprehensive income (in thousands):

June 30, 2022

September 30, 2022

Investment in corporate debt securities $ 15,000 $ — $ — $ 15,000

Total $ 15,000 $ — $ — $ 15,000

The Company determined that these debt securities were 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.

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):

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Due within 1 year $ — $ —

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and to engage in all activities and transactions as may be necessary, advisable or desirable to carry out the foregoing.

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

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

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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 six months ended June 30, 2022, the Company received no capital call notices from the manager of the Fund.

During the six months ended June 30, 2021, the Company received capital call notices from the manager of the Fund for $ 11.1 million, inclusive of certain management fees.

Approximately $ 10.1 million was paid for capital call notices during the six months ended June 30, 2021.

During both the six months ended June 30, 2022 and 2021, the Company received no distributions from OCV.

As such, during the nine months ended September 30, 2022, the Company received no capital call notices from the manager of the Fund.

During the nine months ended September 30, 2021, the Company received capital call notices from the manager of the Fund for $ 21.2 million, inclusive of certain management fees.

Approximately $ 21.2 million was paid for capital call notices during the nine months ended September 30, 2021.

During both the nine months ended September 30, 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 June 30, 2022 and 2021, the Company recognized an investment loss of $ 6.1 million and $ 5.8 million, net of tax benefit, respectively.

During the six months ended June 30, 2022 and 2021, the Company recognized an investment (loss) gain of $( 6.9 ) million and $ 18.5 million, net of tax benefit (expense), respectively.

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

During the three months ended June 30, 2022 and 2021, the Company recognized expense for management fees of $ 0.8 million and $ 0.8 million, net of tax benefit, respectively, and for the six months ended June 30, 2022 and 2021, the Company recognized expense for management fees of $ 1.5 million and $ 1.5 million, net of tax benefit, respectively.

During the three months ended September 30, 2022 and 2021, the Company recognized an

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

investment loss of $ 3.2 million and $ 1.9 million, net of tax benefit, respectively.

During the nine months ended September 30, 2022 and 2021, the Company recognized an investment (loss) gain of $( 10.1 ) million and $ 16.6 million, net of tax benefit (expense), respectively.

The gains and losses were primarily the result of gains and losses in the underlying investments.

During the three months ended September 30, 2022, the Company recognized no expense for management fees, and during three months ended September 30, 2021, the Company recognized expense for management fees of $ 0.8 million, net of tax benefit.

During the nine months ended September 30, 2022 and 2021, the Company recognized expense for management fees of $ 1.5 million and $ 2.3 million, net of tax benefit, respectively.

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

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

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Equity securities $ 109,228 $ 122,593

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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.

Discontinued Operations

Discontinued Operations and Dispositions

Consensus Spin-off

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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 and six months ended June 30, 2021.

Accordingly, the Condensed Consolidated Financial Statements reflect the results of the cloud fax business as a discontinued operation for the three and nine months ended September 30, 2021.

The Condensed Consolidated Statements of Operations report discontinued operations separate from continuing operations.

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

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

The Condensed Consolidated Statements of Comprehensive (Loss) Income, Condensed Consolidated Statements of Cash Flows (including Note 15 - Supplemental Cash Flow Information ), 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):

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

Capital expenditures $ 15,252

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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 June 30, 2022 has served on the board of directors of Consensus since the date of distribution.

In addition, one of the Company’s members of senior management as of September 30, 2022 has served on the board of directors of Consensus since the date of distribution.

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

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

Three Months Ended June 30, 2021 Six Months Ended June 30, 2021

Three Months Ended September 30, 2021 Nine Months Ended September 30, 2021

Revenues $ 89,107 $ 263,386

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Income from discontinued operations, net of income taxes $ 35,800 $ 113,705

B2B Back-up and Voice Asset Sales

The Company completed the following dispositions that did not meet the criteria for discontinued operations.

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 Cybersecurity and Martech reportable segment.

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

The total gain recognized on the sale of these Voice assets was $ 2.8 million which was recorded in loss on sale of businesses on the Condensed Consolidated Statement of Operations in the nine months ended September 30, 2021.

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 Consolidated Statement Balance Sheets at March 31, 2021 and June 30, 2021.

The business is recorded within the Cybersecurity and Martech 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 Consolidated Statement of Operations (see Note 7 - Goodwill and Intangible Assets ).

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

The total loss recognized on the sale of the B2B Backup business was $ 24.6 million which was recorded in loss on sale of businesses on the Condensed Consolidated Statement of Operations in the three and nine months ended September 30, 2021.

Fair Value Measurements

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The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The Company’s money market funds are classified within Level 1.

The Company values these Level 1 investments using quoted market prices.

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 was approximately $ 1.0 billion and $ 1.3 billion, as of June 30, 2022 and December 31, 2021, respectively (see Note 8 - Debt ).

ZIFF DAVIS, INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

The Company’s money market funds are classified within Level 1.

The Company values these Level 1 investments using quoted market prices.

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 was approximately $ 0.9 billion and $ 1.3 billion, as of September 30, 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 June 30, 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 $ 72.5 million and $ 229.2 million included on the Condensed Consolidated Balance Sheets, respectively.

Unrealized loss of $ 27.3 million and $ 18.4 million were recorded on the Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2022, respectively.

As of September 30, 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 $ 54.9 million and $ 229.2 million included on the Condensed Consolidated Balance Sheets, respectively.

Unrealized gain (loss) of $ 4.2 million and $( 14.2 ) million were recorded on the Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2022, respectively.

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

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The fair value of the corporate debt securities is determined primarily based in significant estimates and assumptions, including Level 3 inputs.

As of June 30, 2022, the fair value of our investment in corporate debt securities approximates its carrying value due to close proximity of the date of the investment to the reporting date.

As of September 30, 2022, the fair value of our investment in corporate debt securities approximates its carrying value due to close proximity of the date of the investment to the reporting date.

Refer to Note 4 - Investments for additional information.

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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 June 30, 2022.

Valuation Technique Unobservable Input Range Weighted Average

Contingent Consideration Option-Based Model Risk free rate N/A 1.9 %

Debt spread 1.3 % - 16.4 %

Present value factor N/A 26.9 %

Discount rate N/A 27.3 %

ZIFF DAVIS, INC.

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

June 30, 2022 Level 1 Level 2 Level 3 Fair Value Carrying Value

September 30, 2022 Level 1 Level 2 Level 3 Fair Value Carrying Value

Cash equivalents:

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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 six months ended June 30, 2022 and 2021, there were no transfers that occurred between levels.

For the nine months ended September 30, 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 assets related to our investment in corporate debt securities that are measured at fair value on a recurring basis (in thousands):

2 unchanged sentences

Investment in corporate debt securities 15,000 Not applicable

Balance as of June 30, 2022 $ 15,000

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Balance as of September 30, 2022 $ 15,000

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):

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Contingent consideration payments ( 2,919 ) Not applicable

Balance as of June 30, 2022 $ 3,047

In connection with the Company’s other acquisition activity, contingent consideration of up to $ 3.0 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 $ 3.0 million and $ 5.8 million at June 30, 2022 and December 31, 2021, respectively.

Due to the achievement of certain thresholds,$ 2.9 million and $ 5.8 million was paid during the six months ended June 30, 2022 and 2021, respectively.

Balance as of September 30, 2022 $ 1,106

In connection with the Company’s other acquisition activity, contingent consideration of up to $ 1.1 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 $ 1.1 million and $ 5.8 million at September 30, 2022 and December 31, 2021, respectively.

Due to the achievement of certain thresholds, $ 2.9 million and $ 5.8 million was paid during the nine months ended September 30, 2022 and 2021, respectively.

The Company’s non-financial assets, such as goodwill, intangible assets, right-of-use assets and property, plant and equipment, are adjusted to fair value only when an impairment is recognized.

See Note 7 - Goodwill and Intangible Assets for further information.

Such fair value measurements are based predominately on Level 3 inputs.

See Note 7 - Goodwill and Intangible Assets for further information.

Goodwill and Intangible Assets

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 and is assigned to the reporting unit that is expected to benefit from the synergies of the combination.

Intangible assets resulting from the acquisitions of entities accounted for using the acquisition method of accounting are recorded at the estimated fair value of the assets acquired.

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

The fair values of these identified intangible assets are based upon expected future cash flows or income, which take into consideration certain assumptions such as customer turnover, trade names and patent lives.

These determinations are primarily based upon the Company’s historical experience and expected benefit of each intangible asset.

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 twenty years .

The changes in carrying amounts of goodwill for the six months ended June 30, 2022 are as follows (in thousands):

Goodwill is tested for impairment annually on October 1st at the reporting unit level, or more frequently if indicators of impairment exist, or if a decision is made to dispose of a business.

The Company’s Digital Media reportable segment is comprised of seven reporting units and the Cybersecurity and Martech reportable segment is comprised of two reporting units.

The changes in carrying amounts of goodwill for the nine months ended September 30, 2022 are as follows (in thousands):

Digital Media Cybersecurity and Martech Consolidated

1 unchanged sentence

Goodwill acquired (Note 3) 93,827 — 93,827

Purchase accounting adjustments (1)

1,773 ( 137 ) 1,636

Goodwill impairment ( 27,369 ) — ( 27,369 )

Purchase accounting adjustments (Note 3) 4,943 ( 137 ) 4,806

Foreign exchange translation ( 5,952 ) ( 16,810 ) ( 22,762 )

Balance as of June 30, 2022 $ 1,077,573 $ 525,767 $ 1,603,340

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

Refer to Note 3 - Business Acquisitions .

Balance as of September 30, 2022 $ 1,062,108 $ 517,849 $ 1,579,957

ZIFF DAVIS, INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

During the three months ended September 30, 2022, the Company reassessed the fair value of a reporting unit within the Digital Media reportable segment as a result of a forecasted reduction in revenue and EBITDA in that reporting unit, as well as an increase in interest rates and market volatility that would affect the Company’s assumptions on its discount rate.

Based on the quantitative fair value test, the carrying value of the reporting unit exceeded its fair value at September 30, 2022, and the Company recorded an impairment of approximately $ 27.4 million during the three months ended September 30, 2022.

The fair value of the reporting unit was determined using an equal weighting of an income approach that was based on the discounted estimated future cash flows of the reporting unit and a market approach that uses the guideline public company approach.

We believe the combination of these approaches provides an accurate valuation because it incorporates the expected cash generation of the reporting unit in addition to how a third-party market participant would value the reporting unit.

As the business is assumed to continue in perpetuity, the discounted future cash flows include a terminal value.

Determining fair value using a discounted estimated future cash flow analysis requires the exercise of significant judgment with respect to several items, including the amount and timing of expected future cash flows and appropriate discount rates.

The expected cash flows used in the discounted cash flow analyses were based on the most recent forecast for the reporting unit.

For years beyond the forecast period, the estimates were based, in part, on forecasted growth rates.

The discount rate the Company used represents the estimated weighted average cost of capital, which reflects the overall level of inherent risk involved in its reporting unit operations and the rate of return a market participant would expect to earn.

Determining fair value using a market approach considers multiples of financial metrics based on trading multiples of a selected peer group of companies.

From the comparable companies, a representative market multiple is determined, which is applied to financial metrics to estimate the fair value of the reporting unit.

Following the impairment, this reporting unit had goodwill of approximately $ 86.9 million and the carrying value approximated its fair value.

During the three months ended September 30, 2022, the Company realigned two reporting units within the Digital Media reportable segment.

The Company re-allocated goodwill between the two identified reporting units based upon the relative fair value of the respective reporting units.

Immediately before and immediately following this change in reporting units, the Company performed a quantitative fair value assessment using the income approach and market approach noted above, and each of these reporting units exceeded their respective carrying values and, therefore, there was no impairment to goodwill.

During the nine months ended September 30, 2021, the Company recorded an impairment of approximately $ 32.6 million related to the Company’s B2B Backup business (included in the Cybersecurity and Martech reportable segment).

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

The fair value of the business was determined based upon the offer price.

The fair value of the remaining reporting unit was determined using an equal weighting of an income approach and a market approach, and was in excess of the remaining carrying value of the reporting unit.

Goodwill as of September 30, 2022 and December 31, 2021 reflects accumulated impairment losses of $ 27.4 million and zero , respectively, in the Digital Media reportable segment and reflects accumulated impairment losses of $ 32.6 million and $ 32.6 million, respectively, in the Cybersecurity and Martech reportable segment.

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Intangible Assets Subject to Amortization

As of June 30, 2022, intangible assets subject to amortization relate primarily to the following (in thousands):

Intangible assets resulting from the acquisitions of entities accounted for using the acquisition method of accounting are recorded at the estimated fair value of the assets acquired.

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

These determinations are primarily based upon the Company’s historical experience and expected benefit of each intangible asset.

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 twenty years .

As of September 30, 2022, intangible assets subject to amortization relate primarily to the following (in thousands):

Weighted-Average

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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 on our Condensed Consolidated Statements of Operations, approximated $ 41.8 million and $ 46.7 million for the three months ended June 30, 2022 and 2021, respectively, and $ 83.0 million and $ 94.0 million for the six months ended June 30, 2022 and 2021, respectively.

The Company’s debt as of June 30, 2022 and December 31, 2021 consists of the following (in thousands):

June 30, 2022 December 31, 2021

Amortization expense, included in General and administrative expense on our Condensed Consolidated Statements of Operations, approximated $ 36.3 million and $ 46.6 million for the three months ended September 30, 2022 and 2021, respectively, and $ 119.3 million and $ 140.7 million for the nine months ended September 30, 2022 and 2021, respectively.

The Company’s debt as of September 30, 2022 and December 31, 2021 consists of the following (in thousands):

September 30, 2022 December 31, 2021

4.625 % Senior Notes

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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 for the 4.625 % Senior Notes as of June 30, 2022.

During the three and six months ended June 30, 2022, the Company repurchased approximately $ 21.5 million and $ 76.1 million, respectively, in aggregate principal amount of the 4.625 % Senior Notes for an aggregate purchase price of approximately $ 18.2 million and $ 73.6 million, respectively.

For the three and six months ended June 30, 2022, the Company recognized a gain of approximately $ 3.1 million and gain of approximately $ 1.9 million, respectively, associated with the repurchase of the 4.625 % Senior Notes, which is recorded within ‘Interest expense, net’ on our Condensed Consolidated Statements of Operations.

As of June 30, 2022 and December 31, 2021, the estimated fair value of the 4.625 % Senior Notes was approximately $ 482.5 million and $ 659.9 million, and was based on recent quoted market prices for the 4.625 % Senior Notes which are Level 1 inputs.

The Company is in compliance with its debt covenants for the 4.625 % Senior Notes as of September 30, 2022.

During the three and nine months ended September 30, 2022, the Company repurchased approximately $ 105.1 million and $ 181.2 million, respectively, in aggregate principal amount of the 4.625 % Senior Notes for an aggregate purchase price of approximately $ 94.1 million and $ 167.7 million, respectively.

For the three and nine months ended September 30, 2022, the Company recognized a gain of approximately $ 10.2 million and $ 12.1 million, respectively, associated with the repurchase of the 4.625 % Senior Notes, which is recorded within ‘Gain on debt extinguishment, net’ on our Condensed Consolidated Statements of Operations.

As of September 30, 2022 and December 31, 2021, the estimated fair value of the 4.625 % Senior Notes was approximately $ 378.3 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.

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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.

As of June 30, 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 June 30, 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.

As of September 30, 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 September 30, 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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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 June 30, 2022, the total unamortized deferred issuance costs were $ 8.3 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.

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 6 - Fair

As of September 30, 2022, the total unamortized deferred issuance costs were $ 7.8 million.

ZIFF DAVIS, INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Value Measurements ).

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.

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 June 30, 2022 and December 31, 2021, the estimated fair value of the 1.75 % Convertible Notes was approximately $ 532.5 million and $ 685.4 million, respectively.

As of September 30, 2022 and December 31, 2021, the estimated fair value of the 1.75 % Convertible Notes was approximately $ 513.6 million and $ 685.4 million, respectively.

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 Separation, 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 the Company issued 3,031,817 and 3,050,850 shares of the Company’s common stock during the three and nine months ended September 30, 2021, respectively (see Note 11 - Stockholders’ Equity ).

Credit Facility

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

As of June 30, 2022 and December 31, 2021, there were no amounts outstanding under the Credit Agreement.

As of September 30, 2022 and December 31, 2021, there were no amounts outstanding under the Credit Agreement.

Debt-for-Equity Exchange

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The Fifth Amendment to the Credit Agreement provided for the Term Loan Facility in an aggregate principal amount of $ 90.0 million and certain other changes to the Credit Agreement.

The Term Loan had a maturity date that was 60 days after the Term Loan Funding Date.

The Term Loan Facility had a maturity date that was 60 days after the Term Loan Funding Date.

The Term Loan Facility bore interest at 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 %, provided that the base rate for any term loan made under the Credit Agreement shall be greater of clause (x) and (y) above in each case.

During the three months ended June 30, 2022, the Company borrowed approximately $ 90.0 million under the Term Loan Facility and completed the Debt-for-Equity Exchange of 2,300,000 shares of its common stock of Consensus to settle its obligation to repay the $ 90.0 million outstanding aggregate principal amount of the Term Loan Facility plus an immaterial amount of interest.

The Company recorded a loss on extinguishment of debt related to the Debt-for-Equity Exchange of approximately $ 0.5 million during the three months ended June 30, 2022 which is presented within ‘Interest expense, net’ on our Condensed Consolidated Statements of Operations.

During June 2022, the Company borrowed approximately $ 90.0 million under the Term Loan Facility and completed the non-cash debt-for-equity exchange of 2,300,000 shares of its common stock of Consensus to settle its obligation of $ 90.0 million outstanding aggregate principal amount of the Term Loan Facility plus an immaterial amount of interest.

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

On September 15, 2022 (the “Term Loan Two Funding Date”), the Company entered into a Sixth Amendment to its Credit Agreement with MUFG Union Bank, N.A, as administrative agent and collateral agent and the lenders party thereto to effectuate the debt-for-equity exchange.

The Sixth Amendment to the Credit Agreement provided for the Term Loan Two Facility in an aggregate principal amount of approximately $ 22.3 million and certain other changes to the Credit Agreement.

The Term Loan Two Facility had a maturity date that was 60 days after the Term Loan Two Funding Date.

The Term Loan Two Facility bore interest at 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 %, provided that the base rate for any term loan made under the Credit Agreement shall be greater of clause (x) and (y) above in each case.

During September 2022, the Company borrowed approximately $ 22.3 million under the Term Loan Two Facility and completed the non-cash debt-for-equity exchange of 500,000 shares of its common stock of Consensus to settle its obligation of $ 22.3 million outstanding aggregate principal amount of the Term Loan Two Facility plus an immaterial amount of interest.

During the three and nine months ended September 30, 2022, the Company recorded a loss on extinguishment of debt of approximately $ 0.1 million and $ 0.6 million, respectively, related to the debt-for-equity exchanges, which is presented within ‘Gain on debt extinguishment, net’ on our Condensed Consolidated Statements of Operations.

Commitments and Contingencies

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On August 8, 2022, the court granted the Company’s motion to dismiss the amended complaint without leave to amend.

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

The plaintiff has filed the notice of appeal.

On September 24, 2020, International Union of Operating Engineers of Eastern Pennsylvania and Delaware filed an action lawsuit in the Delaware Court of Chancery (C.A.

11 unchanged sentences

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.

10 unchanged sentences

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 ( 33.2 )% and 37.4 % for the three months ended June 30, 2022 and 2021, respectively and 12,760.8 % and 86.1 % for the six months ended June 30, 2022 and 2021, respectively.

The Company’s effective tax rate for the three and six months ended June 30, 2022 have been disproportionately impacted due to the size of the discrete book loss related to the Disposed Consensus Shares and Retained Consensus Shares.

The net loss recorded for book purposes for the Investment in Consensus, excluding transaction costs resulted in no tax benefit.

The loss 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.

In addition, during the three months and six months ended June 30, 2021 the Company recognized a tax benefit for the release of a valuation allowance on deferred tax assets related to the impairment of certain investments and the goodwill impairment with no similar events for the period ending June 30, 2022.

The Company’s effective tax rate was 45.9 % and ( 44.2 )% for the three months ended September 30, 2022 and 2021, respectively and 83.9 % and 142.3 % for the nine months ended September 30, 2022 and 2021, respectively.

The Company’s effective tax rates for the three and nine months ended September 30, 2022 have been disproportionately impacted due to the size of the discrete book loss related to the Disposed Consensus Shares and Retained Consensus Shares.

The net loss recorded for book purposes for the Disposed Consensus Shares, excluding transaction costs resulted in no tax benefit because the loss was not subject to tax since the Company disposed of the investment in a tax-free manner based on guidance and requirements set out by the Internal Revenue Service, within the one-year anniversary of the Separation.

During the three months ended September 30, 2022, the Company recognized a tax charge of $ 11.3 million related to its Retained Consensus Shares due to recording a deferred tax liability as of September 30, 2022 as the Company did not dispose of the Retained Consensus Shares within the one-year anniversary of the Separation.

This increase to tax expense was partially offset by a tax benefit of $ 6.7 million for recording a deferred tax asset on the impairment of goodwill recorded during the three months ended September 30, 2022.

During the three months and nine months ended September 30, 2021, the Company recognized a tax benefit primarily due to the recognition of a tax benefit from the disposition and impairment of the B2B Back-up business, a reduction in the net reserve for uncertain tax positions and for the release of a valuation allowance on deferred tax assets related to the impairment of certain U.S.

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) from continuing operations before income taxes included a loss from domestic operations of approximately $ 0.3 million and $( 63.1 ) million for the nine months ended September 30, 2022 and 2021, respectively, and income from foreign operations of $ 39.3 million and $ 49.1 million for the nine months ended September 30, 2022 and 2021, respectively.

As of September 30, 2022 and December 31, 2021, the Company had $ 45.4 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.

ZIFF DAVIS, INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Income (loss) from continuing operations before income taxes included a loss from domestic operations of approximately $ 30.6 million and $ 52.1 million for the six months ended June 30, 2022 and 2021, respectively, and income from foreign operations of $ 30.7 million and $ 32.1 million for the six months ended June 30, 2022 and 2021, respectively.

As of June 30, 2022 and December 31, 2021, the Company had $ 43.6 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 $ 15.4 million and $ 36.0 million for the six months ended June 30, 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 zero and $ 0.8 million at June 30, 2022 and December 31, 2021, respectively.

The Company’s prepaid taxes were zero and $ 0.8 million at September 30, 2022 and December 31, 2021, respectively.

Income Tax Audits :

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

As of June 30, 2022, the audits are ongoing.

As of September 30, 2022, the audits are ongoing.

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 such tax years.

As of June 30, 2022, the audits are ongoing.

As of September 30, 2022, the audits 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 June 30, 2022, the audits are ongoing.

As of September 30, 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.

10 unchanged sentences

Stockholders’ Equity

Common Stock Repurchase Program

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 June 30, 2022, the Company repurchased 182,247 shares at an aggregate cost of approximately $ 12.7 million (including an immaterial amount of commission fees) under the 2020 Program.

During the six months ended June 30, 2022, the Company repurchased 736,536 shares at an aggregate cost of approximately $ 71.3 million (including an immaterial amount of commission fees) under the 2020 Program.

During the three months ended September 30, 2022, the Company repurchased zero shares under the 2020 Program.

During the nine months ended September 30, 2022, the Company repurchased 736,536 shares at an aggregate cost of approximately $ 71.3 million (including an immaterial amount of commission fees) under the 2020 Program.

These shares were subsequently retired.

Cumulatively as of June 30, 2022, 3,672,846 shares were repurchased at an aggregate cost of $ 296.9 million (including an immaterial amount of commission fees) under the 2020 Program.

Cumulatively as of September 30, 2022, 3,672,846 shares were repurchased at an aggregate cost of $ 296.9 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 June 30, 2022 is 6,327,154 shares of the Company’s common stock.

As a result of the repurchases, the number of shares available for purchase as of September 30, 2022 is 6,327,154 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 months ended September 30, 2022 and 2021, the Company purchased and retired 2,601 and 49,641 shares at an aggregate cost of approximately $ 0.2 million and $ 6.9 million , respectively, from plan participants for this purpose.

During the nine months ended September 30, 2022 and 2021, the Company purchased and retired 52,837 and 245,083 shares at an aggregate cost of approximately $ 5.2 million and $ 29.9 million , respectively, from plan participants for this purpose.

In connection with the Separation, 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 8 - Debt ).

ZIFF DAVIS, INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

During the three months ended June 30, 2022 and 2021, the Company purchased and retired 9,864 and 87,155 shares, respectively, from plan participants for this purpose.

During the six months ended June 30, 2022 and 2021, the Company purchased and retired 50,236 and 195,442 shares, respectively, from plan participants for this purpose.

Stock Based Compensation

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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 June 30, 2022, zero shares underlying options and zero shares of restricted stock units were outstanding under the 2007 Plan.

As of September 30, 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 June 30, 2022, 435,135 shares underlying options and 506,962 shares of restricted stock units were outstanding under the 2015 Plan.

As of September 30, 2022, 435,135 shares underlying options and 526,656 shares of restricted stock units were outstanding under the 2015 Plan.

Restricted Stock

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 four to eight years for the Chief Executive Officer.

The Company granted 132,117 and 90,286 shares of restricted stock and restricted units (excluding awards with market conditions below) during the six months ended June 30, 2022 and 2021, respectively.

The Company granted 152,982 and 91,163 shares of restricted stock and restricted units (excluding awards with market conditions below) during the nine months ended September 30, 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).

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 for 20 -days within a 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 six months ended June 30, 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 six months ended June 30, 2022 and 2021 were $ 87.11 and $ 94.40 , respectively.

During the nine months ended September 30, 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 nine months ended September 30, 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:

June 30, 2022 June 30, 2021

September 30, 2022 September 30, 2021

Underlying stock price at valuation date $ 99.32 $ 113.27

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Restricted stock award activity for the six months ended June 30, 2022 is set forth below:

Restricted stock award activity for the nine months ended September 30, 2022 is set forth below:

Shares Weighted-Average

2 unchanged sentences

Canceled ( 1,605 ) $ 93.75

Nonvested at June 30, 2022 321,285 $ 60.36

Restricted stock unit activity for the six months ended June 30, 2022 is set forth below:

Nonvested at September 30, 2022

316,527 $ 60.11

Restricted stock unit activity for the nine months ended September 30, 2022 is set forth below:

Shares Weighted-Average

4 unchanged sentences

Canceled ( 12,658 )

Outstanding at a June 30, 2022 506,962 2.9 $ 37,783,878

Vested and expected to vest at June 30, 2022 506,962 2.9 $ 37,783,878

As of June 30, 2022 and December 31, 2021, the Company had unrecognized share-based compensation cost of approximately $ 52.9 million and $ 44.3 million, respectively, associated with these restricted stock awards and restricted stock units.

Outstanding at September 30, 2022 526,656 2.6 $ 36,065,403

Vested and expected to vest at September 30, 2022 385,498 2.2 $ 26,398,925

As of September 30, 2022 and December 31, 2021, the Company had unrecognized share-based compensation cost of approximately $ 48.2 million and $ 44.3 million, respectively, associated with these restricted stock awards and restricted stock units.

This cost is expected to be recognized over a weighted-average period of 3.0 for restricted stock awards and 3.7 for restricted stock units.

11 unchanged sentences

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 11.15 % as of June 30, 2022 and 2021, 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 six months ended June 30, 2022 and 2021, 76,741 and 58,145 shares were purchased under the Purchase Plan, respectively.

Cash received upon the issuance of the Company’s common stock under the Purchase Plan was $ 5.2 million and $ 4.2 million for the six months ended June 30, 2022 and 2021, respectively.

As of June 30, 2022, 1,218,950 shares were available under the Purchase Plan for future issuance.

Estimated forfeiture rates were 11.15 % and 11.15 % as of September 30, 2022 and 2021, respectively.

For the nine months ended September 30, 2022 and 2021, 76,741 and 58,145 shares were purchased under the Purchase Plan, respectively.

Cash received upon the issuance of the Company’s common stock under the Purchase Plan was $ 5.2 million and $ 4.2 million for the nine months ended September 30, 2022 and 2021, respectively.

As of September 30, 2022, 1,218,950 shares were available under the Purchase Plan for future issuance.

ZIFF DAVIS, INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

The Company recognized $ 0.8 million and $ 0.7 million of compensation expense related to the Purchase Plan for the three months ended June 30, 2022 and 2021, respectively, and $ 1.5 million and $ 1.3 million for the six months ended June 30, 2022 and 2021, respectively.

The compensation expense related to the Purchase Plan has been estimated utilizing the following assumptions:

June 30, 2022 June 30, 2021

September 30, 2022 September 30, 2021

Risk-free interest rate

12 unchanged sentences

The components of basic and diluted earnings per share are as follows (in thousands, except share and per share data):

Three Months Ended June 30,

Three Months Ended September 30,

Basic Diluted Basic Diluted

Numerator for basic and diluted net income per common share:

Net loss from continuing operations $ ( 46,436 ) $ ( 46,436 ) $ ( 23,045 ) $ ( 23,045 )

Net income from continuing operations $ 18,185 $ 18,185 $ 6,769 $ 6,769

Net income available to participating securities (1)

( 4 ) ( 4 ) ( 4 ) ( 4 )

1.75 % Convertible Notes interest expense (after-tax) (2)

Net loss available to the Company’s common shareholders from continuing operations $ ( 46,436 ) $ ( 46,436 ) $ ( 23,045 ) $ ( 23,045 )

Net income available to the Company’s common shareholders from continuing operations $ 18,181 $ 18,181 $ 6,765 $ 6,765

Weighted-average outstanding shares of common stock 46,871,897 46,871,897 46,738,073 46,738,073

1 unchanged sentence

Equity incentive plans

— — — 332,532

Convertible debt (2)

— — — 1,511,980

Common stock and common stock equivalents 46,871,897 46,871,897 46,738,073 48,582,585

Net loss per share from continuing operations:

Net income per share from continuing operations:

$ 0.39 $ 0.39 $ 0.14 $ 0.14

Six Months Ended June 30,

Nine Months Ended September 30,

Basic Diluted Basic Diluted

1 unchanged sentence

Net (loss) income from continuing operations $ ( 3,714 ) $ ( 3,714 ) $ 22,504 $ 22,504

Net loss available to participating securities (1)

Net income available to participating securities (1)

— — ( 24 ) ( 24 )

11 unchanged sentences

(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 and six months ended June 30, 2022.

The dilutive impact of convertible debt was calculated using the treasury stock method for the three and six months ended June 30, 2021 (see Note 8 - Debt ).

For the three months ended June 30, 2022 and 2021, there were 1,263,394 and 1,187,395 , respectively, stock options and restricted stock excluded from the calculation as they were anti-dilutive.

For the six months ended June 30, 2022 and 2021, there were 1,263,394 and zero , respectively, stock options and restricted stock excluded from the calculation as they were anti-

(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 and nine months ended September 30, 2022.

The dilutive impact of convertible debt was calculated using the treasury stock method for the three and nine months ended September 30, 2021 (see Note 8 - Debt ).

For the three months ended September 30, 2022 and 2021, there were 1,278,330 and zero , respectively, stock options and restricted stock excluded from the calculation as they were anti-dilutive.

For the nine months ended September 30, 2022 and 2021, there were 1,278,330 and zero , respectively, stock options and restricted stock excluded from the calculation as they were anti-dilutive.

For the three months ended September 30, 2022 and 2021, there were 5,158,071 and zero shares, respectively, related to convertible debt excluded from the calculation as they were anti-dilutive.

For the nine months ended

ZIFF DAVIS, INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

For the three months ended June 30, 2022 and 2021, there were 5,158,071 and 10,292,182 shares, respectively, related to convertible debt excluded from the calculation as they were anti-dilutive.

For the six months ended June 30, 2022 and 2021, there were 5,158,071 and zero shares, respectively, related to convertible debt excluded from the calculation as they were anti-dilutive.

September 30, 2022 and 2021, there were 5,158,071 and zero shares, respectively, related to convertible debt excluded from the calculation as they were anti-dilutive.

Segment Information

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:

The Company aggregates its operating segments into two reportable segments:

Digital Media and Cybersecurity and Martech.

2 unchanged sentences

Information on reportable segments and reconciliation to income from operations is as follows (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

12 unchanged sentences

Corporate (1)

— ( 9 ) — ( 74 )

Total gross profit 289,270 305,446 849,590 865,759

Direct costs by reportable segment (2) :

Operating expenses by reportable segment (2) :

Digital Media 205,570 188,950 571,980 548,960

Cybersecurity and Martech 42,765 56,208 135,516 191,282

Elimination of inter-segment direct costs ( 358 ) ( 76 ) ( 489 ) ( 126 )

Total segment direct costs 234,152 269,606 458,672 494,958

Elimination of inter-segment operating expenses ( 212 ) ( 88 ) ( 701 ) ( 214 )

Total segment operating expenses 248,123 245,070 706,795 740,028

Corporate (1)

12,113 15,366 37,312 43,785

Total direct costs 245,456 282,453 483,871 523,377

Total operating expenses 260,236 260,436 744,107 783,813

Operating income by reportable segment:

9 unchanged sentences

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.

For the three and six months ended June 30, 2021, goodwill impairment related to our B2B Backup business is also included within direct costs for Cybersecurity and Martech.

(2) Operating expenses 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.

For the nine months ended September 30, 2021, goodwill impairment related to our B2B Backup business is also included within operating expenses for Cybersecurity and Martech.

For the three and nine months ended September 30, 2022, the Company had an impairment to goodwill within operating expenses for Digital Media.

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.

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Digital Media $ 2,014,843 $ 2,043,204

3 unchanged sentences

Total assets $ 3,433,068 $ 3,770,280

Six Months Ended June 30,

Nine Months Ended September 30,

Capital expenditures

5 unchanged sentences

Total capital expenditures $ 80,767 $ 87,495

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

13 unchanged sentences

Such information attributes revenues based on jurisdictions where revenues are reported (in thousands).

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

4 unchanged sentences

Total $ 341,873 $ 355,144 $ 994,297 $ 1,008,094

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Long-lived assets:

3 unchanged sentences

Total $ 713,890 $ 789,551

Supplemental Cash Flow Information

Non-cash investing and financing activities were as follows (in thousands):

Nine Months Ended September 30,

2022 2021 (1)

Non-cash investing activity:

Property and equipment, accrued but unpaid $ 184 $ 219

Right-of-use assets acquired in exchange for operating lease obligations $ 4,130 $ 9,274

Disposition of Investment in Consensus (2)

$ 112,286 $ —

Non-cash financing activity:

Debt principal settled in exchange for Investment in Consensus (2)

$ 112,286 $ —

(1) Combines continuing and discontinued operations.

(2) The Company disposed $ 160.1 million of its Investment in Consensus in exchange for $ 112.3 million of debt and recorded $ 47.8 million of loss on investment, net.

Supplemental data (in thousands):

Nine Months Ended September 30,

Interest paid $ 20,718 $ 29,467

Income taxes paid, net of refunds $ 31,632 $ 49,859

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Accumulated Other Comprehensive Loss

The following table summarizes the changes in accumulated balances of other comprehensive loss, net of tax, for the three months ended June 30, 2022 (in thousands):

The following table summarizes the changes in accumulated balances of other comprehensive loss, net of tax, for the three months ended September 30, 2022 (in thousands):

Unrealized Gains (Losses) on Investments Foreign Currency Translation Total

Balance as of April 1, 2022 $ 169 $ ( 59,600 ) $ ( 59,431 )

Other comprehensive loss before reclassification — ( 24,265 ) ( 24,265 )

Net current period other comprehensive loss — ( 24,265 ) ( 24,265 )

Balance as of June 30, 2022 $ 169 $ ( 83,865 ) $ ( 83,696 )

The following table summarizes the changes in accumulated balances of other comprehensive loss, net of tax, for the six months ended June 30, 2022 (in thousands):

Balance as of July 1, 2022 $ 169 $ ( 83,865 ) $ ( 83,696 )

Other comprehensive loss ( 169 ) ( 24,753 ) ( 24,922 )

Balance as of September 30, 2022 $ — $ ( 108,618 ) $ ( 108,618 )

The following table summarizes the changes in accumulated balances of other comprehensive loss, net of tax, for the nine months ended September 30, 2022 (in thousands):

Unrealized Gains (Losses) on Investments Foreign Currency Translation Total

1 unchanged sentence

Other comprehensive loss ( 169 ) ( 51,227 ) ( 51,396 )

Consensus separation adjustment — 4,056 4,056

Net current period other comprehensive loss — ( 26,474 ) ( 26,474 )

Balance as of June 30, 2022 $ 169 $ ( 83,865 ) $ ( 83,696 )

There were no reclassifications out of accumulated other comprehensive loss for the three and six months ended June 30, 2022.

During the three and six months ended June 30, 2022, accumulated other comprehensive loss and other comprehensive loss were adjusted by approximately zero and $ 4.1 million, respectively, related to the subsequent accounting for the Separation.

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Balance as of September 30, 2022 $ — $ ( 108,618 ) $ ( 108,618 )

There were no reclassifications out of accumulated other comprehensive loss for the three and nine months ended September 30, 2022.

During the three and nine months ended September 30, 2022, accumulated other comprehensive loss and other comprehensive loss were adjusted by approximately zero and $ 4.1 million, respectively, related to the subsequent accounting for the Separation.

Related Party Transactions

3 unchanged sentences

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 June 30, 2022 and December 31, 2021 were approximately $ 6.2 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 and six months ended June 30, 2022, the Company recorded an offset to expense of approximately zero and $ 1.2 million, respectively, from Consensus related to certain items above within ‘General and administrative expenses’ within the Condensed Consolidated Statements of Operations.

During the three and six months ended June 30, 2022, Consensus paid the Company approximately $ 11.5 million and $ 11.5 million, respectively, related to reimbursement of items described above.

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 nearly all such services were terminated without extension twelve months after the Separation.

Amounts due from Consensus as of September 30, 2022 and December 31, 2021 were approximately $ 1.2 million and $ 9.3 million, respectively, related to reimbursement of certain other costs pursuant to the transition services agreement, certain transaction related costs and other costs, and are included in ‘Accounts receivable’ within the Condensed Consolidated Balance Sheets.

During the three and nine months ended September 30, 2022, the Company recorded an offset to expense of approximately zero and $ 1.2 million, respectively, from Consensus related to certain items above within ‘General and administrative expenses’ within the Condensed Consolidated Statements of Operations.

During the three and nine months ended September 30, 2022, Consensus paid the Company approximately $ 7.2 million and $ 18.7 million, respectively, related to reimbursement of items described above.

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 and six months ended June 30, 2022, the Company recorded an offset to lease expense of approximately $ 0.4 million and $ 0.9 million, respectively, related to this lease, however, Consensus paid the landlord directly (other than an immaterial amount of sublease payments from Ziff Davis to Consensus).

As of September 30, 2022, Ziff Davis remained the lessee under this lease and its obligations remained in place through October 7, 2022, after which time Consensus would take over the lease in full.

During the three and nine months ended September 30, 2022, the Company recorded an offset to lease expense of approximately $ 0.5 million and $ 1.5 million, respectively, related to this lease, however, Consensus paid the landlord directly (other than an immaterial amount of sublease payments from Ziff Davis to Consensus).

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

On September 25, 2017, the Company entered into a commitment to invest in the Fund.

2 unchanged sentences

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

Ressler’s tenure with the Board ended, the Fund is no longer a related party and activity subsequent to this date is not included within the following disclosures.

During the three and six months ended June 30, 2022 and 2021, the Company recognized expense for management fees of $ 0.8 million and $ 0.8 million, net of tax benefit, respectively, and $ 1.5 million and $ 1.5 million, net of tax benefit, respectively.

During the six months ended June 30, 2021, the Company received capital call notices from the management of OCV Management, LLC for $ 11.1 million, inclusive of certain management fees.

Approximately $ 10.1 million was paid for capital call notices during the six months ended June 30, 2021.

During the three and nine months ended September 30, 2022 and 2021, the Company recognized expense for management fees of zero and $ 0.8 million, net of tax benefit, respectively, and $ 1.5 million and $ 2.3 million, net of tax benefit, respectively.

During the nine months ended September 30, 2021, the Company received capital call notices from the management of OCV Management, LLC for $ 21.2 million, inclusive of certain management fees.

Approximately $ 21.2 million was paid for capital call notices during the nine months ended September 30, 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 %.

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 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 six months ended June 30, 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

During July and August of 2022, the Company repurchased an additional $ 80.0 million in aggregate principal amount of the 4.625 % Senior Notes at an aggregate purchase price of approximately $ 71.5 million.

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 nine months ended September 30, 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.

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