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Item 8. Financial Statements and Supplementary Data

2023-03-01 compared with 2022-03-15 · 948 added, 968 removed, 1274 unchanged (60% of the section changed)

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Stockholders and Board of Directors

Shareholders and Board of Directors

Ziff Davis, Inc.

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We have audited the accompanying consolidated balance sheets of Ziff Davis, Inc.

(the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2021, and the related notes and financial statement schedule listed in the accompanying index (collectively referred to as the “consolidated financial statements”).

(the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022 , in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated March 14, 2022 expressed an adverse opinion thereon.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated March 1, 2023 expressed an unqualified opinion thereon.

Change in Accounting Method Related to Convertible Instruments

As discussed in Note 2 to the consolidated financial statements, the Company has changed its method of accounting for convertible instruments due to the adoption of Accounting Standards Update No.

2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entities Own Equity (Subtopic 815-40) effective January 1, 2022 under the modified retrospective approach.

Basis for Opinion

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Accounting for the Consensus Cloud Solutions, Inc.

As described in Notes 2 and 6 to the consolidated financial statements, on October 7, 2021, the Company completed the spin-off of Consensus Cloud Solutions, Inc.

(“Consensus”), a wholly owned subsidiary of the Company that was formed to hold certain assets and liabilities conducting the Company’s cloud fax business.

The spin-off transaction included the following accounting elements:

(i) a debt exchange with third-party lenders that resulted in a loss on extinguishment of existing debt, (ii) a reorganization of entities under common control and the distribution of 80.1% of Consensus common stock to the Company’s common stockholders, and (iii) the Company’s remaining 19.9% investment in Consensus common stock which resulted in a significant gain to reflect the 19.9% investment in Consensus at fair value.

The spin-off transaction resulted in the derecognition of the assets and liabilities of the cloud fax business and presentation of discontinued operations disclosures.

We identified the accounting for the spin-off transaction as a critical audit matter.

The accounting guidance surrounding the Company’s internal reorganization and disposal of Consensus was complex and required significant judgment by management, including the determination of:

(i) the loss on extinguishment related to the debt exchange, (ii) the initial carrying value of Consensus immediately prior to the distribution of the Consensus common stock to the Company’s common stockholders which resulted in significant adjustments to the Company’s retained earnings, and (iii) whether the Company would have significant influence over Consensus following the spin-off transaction and how to account for the Company’s remaining investment, which was particularly subjective due to the negative carrying value of Consensus immediately prior to the spin-off.

Auditing these elements involved especially challenging auditor judgment due to the nature and extent of audit effort required to address these matters, including the extent of specialized skill or knowledge needed.

The primary procedures we performed to address this critical audit matter included:

• Utilizing personnel with specialized skill and knowledge to assist in evaluating management’s technical accounting analysis relating to the Consensus spin-off by (i) evaluating the underlying terms of the agreements and (ii) assessing the appropriateness of conclusions reached by management.

• Recalculating the loss on extinguishment resulting from the debt exchange transaction.

• Verifying management’s determination of the initial carrying value of Consensus immediately prior to the spin-off and recalculating the fair value of the Company’s remaining investment in Consensus and the resulting gain.

• Testing information underling the Company’s allocation between continuing operations and discontinued operations.

Tax-Free Determination of the Consensus Cloud Solutions, Inc.

As described in Notes 2, 6 and 13 to the consolidated financial statements, on October 7, 2021, the Company completed the tax-free spin-off of Consensus.

As disclosed by management, the divestiture of Consensus is anticipated to qualify for U.S.

federal tax-free treatment under certain sections of the Internal Revenue Code (“Code”).

We identified the determination by management of the spin-off as a tax-free transaction for U.S.

federal income tax purposes to be a critical audit matter.

The determination of the Consensus transaction as tax-free requires management to make significant judgments about the interpretation of tax laws and regulations.

Auditing these elements involved especially complex auditor judgment due to the complexity of the interpretation and application of the Code and the extent of audit effort required to address these matters, including the need to involve personnel with specialized knowledge and skills.

The primary procedures we performed to address this critical audit matter included:

• Testing the design and operating effectiveness of certain internal controls related to management’s evaluation of the spin-off as tax-free for U.S.

federal income tax purposes.

• Utilizing tax professionals with specialized skills and knowledge to assist in evaluating the conclusions reached by management that the requirements were met to qualify the spin-off as tax free for U.S.

federal income tax purposes by:

• Evaluating the opinions from the Company’s outside legal counsel and external tax advisor that management utilized in forming their conclusions on U.S.

federal taxability of the spin-off, including certain interpretations of the Code and related statutes.

• Inspecting meeting minutes of the Board of Directors and its committees, income tax filings, support from external advisors, and contracts associated with the spin-off for corroborating or contradictory evidence.

• Obtaining written representations from management concerning management’s intent associated with future transactions that could affect U.S.

federal taxability.

• Obtaining representations made by Consensus management to the Company that it does not intend to cause any transactions that could affect the Company’s U.S.

federal taxability.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Goodwill Impairment Assessment - Digital Media Reporting Units

As described in Notes 2 and 9 to the consolidated financial statements, the Digital Media reportable segment goodwill balance was approximately $1.07 billion as of December 31, 2022.

During the year, the Company estimated the fair value of certain reporting units within the Digital Media reportable segment resulting from an interim goodwill impairment assessment.

Goodwill is tested for impairment at least annually or more frequently if there are certain events or changes in circumstances.

As a result of a goodwill impairment assessment, the Company recorded impairment of $27.4 million during the third quarter for one of the Digital Media reporting units.

The Company estimates the fair value of its reporting units using a weighting of fair values derived from an income approach and a market approach.

We identified the interim goodwill impairment assessment within certain Digital Media reporting units as a critical audit matter because of certain significant assumptions management makes as part of the assessment to estimate the fair value of the affected reporting units.

The income approach requires certain significant management assumptions in projecting future discounted cash flows, specifically revenue growth rates and discount rates.

The market approach requires certain judgments in selecting the appropriate peer companies and the valuation multiples.

Auditing revenue growth rates and discount rates as well as assessing the reasonableness of peer companies and valuation multiples involved especially challenging and subjective auditor judgment due to the nature and extent of audit effort required to address these matters, including the involvement of professionals with specialized skill or knowledge.

The primary procedures we performed to address this critical matter included:

• Evaluating the reasonableness of certain significant management assumptions used in the calculation of the fair value of the affected reporting units, including the revenue growth rate used in the projected future cash flows by comparing to prior period forecasts, historical operating performance, and publicly available industry information.

• Utilizing personnel with specialized knowledge and skill in valuation to assist in:

(i) testing the source information underlying the determination of the discount rate and the mathematical accuracy of the calculation, and (ii) evaluating the reasonableness of both the identified peer companies and valuation multiples used in the market approach by calculating indicated multiples and related quartiles and comparing those to the ones used by management’s valuation specialist.

/s/ BDO USA, LLP

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CONSOLIDATED BALANCE SHEETS

December 31, 2021 and 2020

(In thousands, except share amounts)

(In thousands, except share and per share amounts)

Cash and cash equivalents $ 652,793 $ 694,842

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Prepaid expenses and other current assets 68,319 60,290

Current assets, discontinued operations — 84,029

Total current assets 1,084,272 1,300,674

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Property and equipment, net 178,184 161,209

Operating lease right-of-use assets 55,617 80,133

Trade names, net 136,192 147,761

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Other assets 80,131 75,707

Other assets, discontinued operations — 483,522

TOTAL ASSETS $ 3,533,270 $ 3,770,280

LIABILITIES AND STOCKHOLDERS’ EQUITY

Accounts payable and accrued expenses $ 226,621 $ 197,855

Accounts payable $ 120,829 $ 130,978

Accrued employee related costs 42,178 54,616

Other accrued liabilities 39,539 41,027

Income taxes payable, current 19,712 3,151

Deferred revenue, current 187,904 185,571

Operating lease liabilities, current 27,156 29,634

Current portion of long-term debt — 54,609

Other current liabilities 22,286 27,286

Current liabilities, discontinued operations — 61,192

Total current liabilities 432,448 497,238

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Deferred revenue, noncurrent 9,103 14,839

Operating lease liabilities, noncurrent 53,708 73,628

Income taxes payable, noncurrent 11,675 11,675

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Other long-term liabilities 68,994 91,250

Long-term liabilities, discontinued operations — 38,237

TOTAL LIABILITIES 1,640,659 1,802,548

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CONSOLIDATED STATEMENTS OF OPERATIONS

Years Ended December 31, 2021, 2020 and 2019

(In thousands, except share and per share data)

Year ended December 31,

2022 2021 2020

Total revenues $ 1,390,997 $ 1,416,722 $ 1,158,829

Operating costs and expenses:

Cost of revenues (1)

195,554 188,053 178,403

Gross profit 1,228,669 980,426 863,132

Operating expenses:

Sales and marketing (1)

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Goodwill impairment on business 27,369 32,629 —

Total operating expenses 1,061,329 842,086 774,909

Total operating costs and expenses 1,192,056 1,249,382 1,020,489

Income from operations 198,941 167,340 138,340

Interest expense, net ( 33,842 ) ( 72,023 ) ( 56,188 )

Loss on debt extinguishment, net ( 5,274 ) — —

Gain (loss) on debt extinguishment, net 11,505 ( 5,274 ) —

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

Unrealized (loss) gain on short-term investments held at the reporting date, net ( 7,145 ) 298,490 —

Loss on investments, net ( 46,743 ) ( 16,677 ) ( 20,991 )

Unrealized gain on short-term investment 298,490 — —

Other income (expense), net 1,293 65 ( 2,305 )

Income from continuing operations before income taxes and income from equity method investment, net of income taxes 351,351 78,348 54,821

Income tax (benefit) expense ( 14,199 ) 38,350 13,760

Income (loss) from equity method investment, net of income taxes 35,845 ( 11,338 ) ( 168 )

Other income, net 8,437 1,293 65

Income from continuing operations before income tax (expense) benefit and changes from equity method investment 131,153 351,351 78,348

Income tax (expense) benefit ( 57,957 ) 14,199 ( 38,350 )

(Loss) income from equity method investment, net of income taxes ( 7,730 ) 35,845 ( 11,338 )

Net income from continuing operations 65,466 401,395 28,660

Income from discontinued operations, net of income taxes 95,319 122,008 177,913

(Loss) income from discontinued operations, net of income taxes ( 1,709 ) 95,319 122,008

Net income $ 63,757 $ 496,714 $ 150,668

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Diluted $ 1.39 $ 8.38 $ 0.61

Net income per common share from discontinued operations:

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

Basic $ ( 0.04 ) $ 2.08 $ 2.62

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Diluted 47,025,849 47,862,745 47,115,609

Cash dividends paid per common share $ — $ — $ 0.90

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

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Years Ended December 31, 2021, 2020 and 2019

(In thousands)

Year ended December 31,

2022 2021 2020

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Foreign currency translation adjustment ( 32,479 ) ( 21,268 ) ( 8,902 )

Consensus separation 18,966 — —

Consensus separation adjustment 4,056 18,966 —

Change in fair value on available-for-sale investments, net of tax expense (benefit) of $ 0 , $ 0 and $ 181 for the years ended December 31, 2022, 2021 and 2020, respectively

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CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended December 31, 2021, 2020 and 2019

(In thousands)

Year ended December 31,

2022 2021 2020

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Share-based compensation 26,601 25,248 24,006

Provision for doubtful accounts 8,738 13,283 13,134

Provision (benefit) for credit losses on accounts receivable ( 255 ) 8,738 13,283

Deferred income taxes, net ( 12,991 ) ( 13,433 ) 5,840

Loss on extinguishment of debt 14,024 37,969 —

(Gain) loss on extinguishment of debt ( 11,505 ) 14,024 37,969

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

Lease asset impairments and other charges 12,710 12,121 —

Goodwill impairment on business 27,369 32,629 —

Changes in fair value of contingent consideration ( 2,575 ) ( 1,223 ) ( 80 )

Foreign currency remeasurement gain 184 ( 34,646 ) —

(Income) loss from equity method investments, net ( 35,845 ) 11,338 139

(Gain) loss on equity and debt investments ( 281,527 ) 20,826 4,164

Loss (income) from equity method investments, net 7,730 ( 35,845 ) 11,338

Unrealized loss (gain) on short-term investments held at the reporting date 7,145 ( 298,490 ) —

Loss on investment, net 46,743 16,677 20,991

Other 945 13,180 ( 22,690 )

Decrease (increase) in:

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Prepaid expenses and other current assets 9,665 ( 15,650 ) 3,046

Operating lease right-of-use assets 3,739 15,267 8,711

Other assets ( 19,979 ) ( 3,824 ) ( 3 )

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

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

Distribution from equity method investment — 15,327 —

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Proceeds from divestiture of discontinued operations — 259,104 —

Net cash provided by (used in) investing activities 59,088 ( 586,220 ) ( 505,273 )

Net cash (used in) provided by investing activities ( 220,771 ) 59,088 ( 586,220 )

Cash flows from financing activities:

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( 756 ) ( 1,096 ) ( 29,250 )

Proceeds from line of credit — — 185,000

Repayment of line of credit — — ( 185,000 )

Proceeds from term loan 112,286 — —

Repurchase of common stock ( 78,291 ) ( 78,327 ) ( 275,654 )

Issuance of common stock under employee stock purchase plan 9,431 9,231 7,382

Exercise of stock options 2,939 1,619 5,274

Dividends paid — — ( 43,918 )

Proceeds from exercise of stock options 148 2,939 1,619

Deferred payments for acquisitions ( 16,116 ) ( 14,387 ) ( 29,180 )

Other ( 630 ) ( 4,060 ) ( 1,878 )

Net cash (used in) provided by financing activities ( 113,088 ) ( 234,633 ) 456,695

Net cash used in financing activities ( 140,832 ) ( 113,088 ) ( 234,633 )

Effect of exchange rate changes on cash and cash equivalents ( 16,890 ) ( 10,346 ) 7,811

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CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Years Ended December 31, 2021, 2020 and 2019

(in thousands, except share amounts)

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— — — — — — ( 8,344 ) ( 8,344 )

Dividends — — — — — ( 43,918 ) — ( 43,918 )

Exercise of stock options 42,740 — 1,619 — — — — 1,619

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— — ( 12 ) — — — — ( 12 )

Vested restricted stock 185,227 1 ( 1 ) — — — — —

Issuance of restricted stock, net 273,201 3 ( 3 ) — — — — —

Repurchase and retirement of common stock ( 3,742,869 ) ( 37 ) ( 42,530 ) — — ( 233,087 ) — ( 275,654 )

Share-based compensation — — 24,006 — — — — 24,006

Other, net — — 161 — — — — 161

Balance, December 31, 2020 44,346,630 $ 443 $ 456,274 — $ — $ 809,107 $ ( 54,806 ) $ 1,211,018

Net income — — — — — 496,714 — 496,714

Other comprehensive income, net of tax expense of $ 181

Other comprehensive income, net of tax expense of zero

— — — — — — ( 21,382 ) ( 21,382 )

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Issuance of shares under Employee Stock Purchase Plan 109,248 1 9,230 — — — — 9,231

Exercise of 3.25 % Convertible Note

— — ( 12 ) — — — — ( 12 )

Vested restricted stock 273,201 3 ( 3 ) — — — — —

Issuance of restricted stock, net 560,290 5 ( 5 ) — — — — —

Repurchase and retirement of common stock ( 697,657 ) ( 7 ) ( 26,275 ) ( 445,711 ) 47,741 ( 52,045 ) — ( 30,586 )

Repurchase of shares of common stock — — — 445,711 ( 47,741 ) — — ( 47,741 )

Share-based compensation — — 25,248 — — — — 25,248

Conversion shares issued as extinguishment cost to redeem 3.25 % Convertible Notes

3,050,850 31 431,921 — — — — 431,952

Redemption of 3.25 % Convertible Notes, net of tax

— — ( 390,526 ) — — — — ( 390,526 )

Consensus Separation — — — — — 261,394 18,966 280,360

Other, net — — 317 — — 188 — 505

Balance, December 31, 2021 47,440,137 $ 474 $ 509,122 — $ — $ 1,515,358 $ ( 57,222 ) $ 1,967,732

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

— — ( 88,137 ) — — 23,436 — ( 64,701 )

Net income — — — — — 63,757 — 63,757

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Issuance of shares under employee stock purchase plan 139,992 1 9,430 — — — — 9,431

Vested restricted stock 560,290 5 ( 5 ) — — — — —

Issuance of restricted stock, net 493,300 5 ( 6 ) — — — — ( 1 )

Repurchase and retirement of common stock ( 809,422 ) ( 7 ) ( 17,277 ) ( 736,536 ) 71,337 ( 61,007 ) — ( 6,954 )

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Share-based compensation — — 26,601 — — — — 26,601

Conversion shares issued as extinguishment cost to redeem 3.25 % Convertible Notes

3,050,850 31 431,921 — — — — 431,952

Reacquisition of 3.25 % Convertible Notes, net of tax

— — ( 390,526 ) — — — — ( 390,526 )

Consensus Separation — — — — — 261,394 18,966 280,360

Other, net — — 6 — — ( 3,920 ) 4,056 142

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021, 2020 and 2019

Ziff Davis, Inc., together with its subsidiaries (“Ziff Davis”, the “Company”, “our”, “us”, or “we”), is a leading provider of internet information and services.

Ziff Davis, Inc., together with its subsidiaries (“Ziff Davis”, the “Company”, “our”, “us”, or “we”), is a vertically focused digital media and internet company whose portfolio includes brands in technology, shopping, gaming and entertainment, connectivity, health, cybersecurity, and martech.

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

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to Ziff Davis, Inc.

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

(for certain events prior to October 7, 2021, the Company may be referred to as J2 Global).

Basis of Presentation and Summary of Significant Accounting Policies

(a) Principles of Consolidation

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of Ziff Davis and its direct and indirect wholly-owned subsidiaries.

All intercompany accounts and transactions have been eliminated in consolidation.

(b) Use of Estimates

Use of Estimates

The preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, including judgments about investment classifications and the reported amounts of net revenue and expenses during the reporting period.

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

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

Actual results could materially differ from those estimates.

In March 2020, the World Health Organization declared the outbreak of the novel coronavirus disease (“COVID-19”) as a pandemic.

The global impact of the COVID-19 pandemic has had a negative effect on the global economy, disrupting the financial markets and creating increasing volatility and overall uncertainty.

The full impact of the COVID-19 pandemic is unknown and cannot be reasonably estimated.

However, the Company has made appropriate accounting estimates based on the facts and circumstances available as of the reporting date.

To the extent there are differences between these estimates and the actual results, our consolidated financial statements could be materially affected.

Consensus, Inc.

Spin-Off and Discontinued Operations

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Ziff Davis, Inc.

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

On October 7, 2021, Consensus paid Ziff Davis approximately $ 259.1 million of cash in a distribution that is anticipated to be tax-free provided certain requirements are met, and issued $ 500.0 million of senior notes due 2028 to Ziff Davis, which Ziff Davis then exchanged with the lenders under the Credit Agreement and Credit Agreement Amendments by and among the subsidiaries of Ziff Davis party thereto as guarantors, Citicorp North America Inc.

retained a 19.9 % interest in Consensus following the Separation (the “Investment in Consensus”).

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

On October 7, 2021, Consensus paid Ziff Davis approximately $ 259.1 million of cash in a distribution that was anticipated to be tax-free provided certain requirements were met, and issued $ 500.0 million of senior notes due 2028 to Ziff Davis, which Ziff Davis then exchanged with the lenders under the Credit Agreement and Credit Agreement Amendments by and among the subsidiaries of Ziff Davis party thereto as guarantors, Citicorp North America Inc.

and MUFG Union Bank, N.A.

and MUFG Union Bank, N.A., as administrative agent for the lenders, for the extinguishment of indebtedness outstanding under the Bridge Loan Facility (see Note 10 - Debt).

and MUFG Union Bank, N.A., as administrative agent for the lenders, for the extinguishment of indebtedness outstanding under the Bridge Loan Facility.

Refer to Note 10 - Debt for additional details.

Such lenders or their affiliates agreed to resell the 2028 notes to qualified institutional buyers in the United States pursuant to Rule 144A.

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Ziff Davis did not retain a controlling interest in Consensus.

The Retained Consensus Shares are equity securities for which the Company elected the fair value option and subsequent fair value changes in the Retained Consensus Shares are included in the assets of and results from continuing operations as of and for the year ended December 31, 2021 (see Note 6 - Discontinued Operations and Dispositions).

(d) Allowances for Doubtful Accounts

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

During the year ended December 31, 2022, the Company entered into a Fifth Amendment and Sixth Amendment to its existing Credit Agreement, providing for the issuance of senior secured term loans under the Credit Agreement (the “Term Loan Facilities”), in an aggregate principal amount of approximately $ 112.3 million.

During the year ended December 31, 2022, the Company subsequently completed non-cash exchanges of 2,800,000 shares of its common stock of Consensus with the lenders under the Fifth and Sixth Amendments to settle the Company’s obligations of $ 112.3 million outstanding aggregate principal amount of the Term Loan Facilities plus related interest.

Refer to Note 10 - Debt for additional details.

As of December 31, 2022, the Company continues to hold approximately 1.1 million shares of common stock of Investment in Consensus.

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 5 - Investments and Note 6 - Discontinued Operations and Dispositions for additional information.

Allowances for Credit Losses

The Company maintains an allowance for credit losses on accounts receivable, which is recorded as a reduction to accounts receivable.

Changes in the allowance are classified as ‘General and administrative’ expenses in the Consolidated Statements of Operations.

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

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On an ongoing basis, management evaluates the adequacy of these reserves.

(e) Revenue Recognition

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

The rollforward of allowance for credit losses on Accounts receivable, net is as follows (in thousands):

Year ended December 31,

2022 2021 2020

Beginning balance $ 9,811 $ 11,552 $ 8,480

(Decreases) increases to bad debt expense

( 255 ) 3,107 5,315

Write-offs, net of recoveries ( 2,688 ) ( 4,848 ) ( 2,243 )

Ending balance $ 6,868 $ 9,811 $ 11,552

Revenue Recognition

Refer to Note 3 - Revenues for additional details.

Principal vs.

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If the Company is acting as an agent in a transaction, the Company reports revenue on a net basis.

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.

In determining whether the Company acts as the principal or an agent, the Company follows the accounting guidance under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers , for principal-agent considerations and assesses:

(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.

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

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.

(f) Fair Value Measurements

The Company complies with the provisions of Financial Accounting Standards Board (“FASB”) ASC Topic No.

820, Fair Value Measurements and Disclosures (“ASC 820”), in measuring fair value and in disclosing fair value measurements.

Fair Value Measurements

The Company complies with the provisions of FASB ASC Topic 820, Fair Value Measurements and Disclosures (“ASC 820”), in measuring fair value and in disclosing fair value measurements.

ASC 820 provides a framework for measuring fair value and expands the disclosures required for fair value measurements of financial and non-financial assets and liabilities.

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As of the same dates, the carrying value of other long-term liabilities approximated fair value as the related interest rates approximate rates currently available to the Company.

(g) Cash and Cash Equivalents

The Company considers cash equivalents to be only those investments that are highly liquid, readily convertible to cash and with maturities of three months or less at the purchase date.

(h) Investments

The Company accounts for its investments in debt securities in accordance with Financial Accounting Standards Board (“FASB”) ASC Topic No.

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

The Company’s debt investments are typically comprised of corporate debt securities, which it classifies as available-for-sale.

Cash and Cash Equivalents

The Company considers the balance of its investment in funds that substantially hold securities that mature within three months or less from the date the Company purchases these securities to be cash equivalents.

The carrying amount of cash and cash equivalents either approximates fair value due to the short-term maturity of these instruments or are at fair value.

The Company accounts for its investments in debt securities in accordance with ASC Topic 320, Investments - Debt Securities (“ASC 320”).

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

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

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

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

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

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

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

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

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

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

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

Investments classified as short-term are available to be converted into cash to fund current operations.

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

As the initial carrying value of the Retained Consensus Shares was negative immediately following the Separation, the Company elected the fair value option under ASC 825-10-25 to support the initial recognition of the Retained Consensus Shares at fair value and the negative book value of $ 69.3 million was recorded as a gain on the Consolidated Statement of Operations.

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

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

Any unrealized gains or losses will be reported within earnings on our Consolidated Statements of Operations.

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

Refer to Note 5 - Investments for additional information.

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

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

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

(i) Variable Interest Entities (“VIE”s)

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Variable Interest Entities (“VIE”s)

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

The Company evaluates its investments in entities in which it is involved to determine if the entity is a VIE and if so, whether it holds a variable interest and is the primary beneficiary.

The Company has determined that it holds a variable interest in its investment as a limited partner in the OCV Fund I, LP (“OCV Fund”, “OCV” or the “Fund”).

The Company has determined that it holds a variable interest in its investment as a limited partner in the OCV Fund I, LP (“OCV Fund”, “OCV” or the “Fund”), as well as, another independent corporation.

In determining whether the Company is deemed to be the primary beneficiary of the VIE, both of the following characteristics must be present:

a) the Company has the power to direct the activities of the VIE that most significantly impacts the VIEs economic performance (the power criterion);

a) the Company has the power to direct the activities of the VIE that most significantly impact the VIEs economic performance (the power criterion);

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

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

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

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

As a result, the Company has concluded that it will not consolidate OCV, as it is not the primary beneficiary of the OCV Fund, and will account for this investment under the equity-method of accounting (see Note 5 - Investments ).

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

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

Under ASC Topic 323, Investments - Equity Method and Joint Ventures , an investor that holds investments that qualify for specialized industry accounting for investment companies in accordance with ASC 946 should record its share of the earnings or losses, realized or unrealized, as reported by its equity method investees in the Consolidated Statements of Operations.

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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.

(j) Debt Issuance Costs and Debt Discount

Debt Issuance Costs and Debt Discount

The Company capitalizes costs incurred with borrowing and issuance of debt securities and records debt issuance costs and discounts as a reduction to the debt amount.

These costs and discounts are amortized and included in interest expense over the life of the borrowing using the effective interest method.

(k) Concentration of Credit Risk

All of the Company’s cash, cash equivalents and marketable securities are invested at major financial institutions primarily within the United States, Canada, United Kingdom and Ireland.

These institutions are required to invest the Company’s cash in accordance with the Company’s investment policy with the principal objectives being preservation of capital, fulfillment of liquidity needs and above market returns commensurate with preservation of capital.

Concentration of Credit Risk

The Company primarily invests its cash, cash equivalents and marketable securities with major financial institutions primarily within the United States, Canada, United Kingdom, and the European Union.

These investments are made in accordance with the Company’s investment policy with the principal objectives being preservation of capital, fulfillment of liquidity needs and above market returns commensurate with preservation of capital.

The Company’s investment policy also requires that investments in marketable securities be in only highly rated instruments, with limitations on investing in securities of any single issuer.

However, these investments are not insured against the possibility of a total or near complete loss of earnings or principal and are inherently subject to the credit risk related to the continued credit worthiness of the underlying issuer and general credit market risks.

At December 31, 2021, the Company’s cash and cash equivalents were maintained in accounts in qualifying financial institutions that are insured up to the limit determined by the applicable governmental agency.

These institutions are primarily in the United States and United Kingdom, however, the Company has accounts within several other countries including Australia, Austria, Canada, China, Denmark, France, Germany, Italy, Japan, New Zealand, Netherlands, Norway, and Sweden.

(l) Foreign Currency

At December 31, 2022, the Company’s cash and cash equivalents that were maintained in demand deposit accounts in qualifying financial institutions are insured up to the limit determined by the applicable governmental agency.

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Foreign Currency

Most of the Company’s foreign subsidiaries use the local currency of their respective countries as their functional currency.

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Net translation loss was $ 32.5 million, $ 21.3 million and $ 8.9 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Realized gains and losses from foreign currency transactions are recognized within other expense (income), net.

Realized gains and losses from foreign currency transactions are recognized within ‘Other income (loss), net’ on our Consolidated Statements of Operations.

Foreign exchange gains (losses) amounted to $ 8.2 million, $ 2.0 million and $( 3.1 ) million for the years ended December 31, 2022, 2021 and 2020, respectively.

(m) Property and Equipment

Property and Equipment

Property and equipment are stated at cost.

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Fixtures, which are comprised primarily of leasehold improvements and equipment under finance leases, are amortized on a straight-line basis over their estimated useful lives or for leasehold improvements, the related lease term, if less.

The Company has capitalized certain internal-use software and website development costs which are included in property and equipment.

The estimated useful life of costs capitalized is evaluated for each specific project and ranges from one to five years .

(n) Impairment or Disposal of Long-Lived and Intangible Assets

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

The Company has capitalized certain internal-use software and website development costs which are included in property and equipment and depreciated using a straight-line method over the estimated useful life which is evaluated for each specific project and is typically three years .

Impairment or Disposal of Long-Lived Assets

The Company accounts for long-lived assets, which include property and equipment, operating lease right-of-use assets and identifiable intangible assets with finite useful lives (subject to amortization), in accordance with the provisions of ASC Topic 360, Property, Plant, and Equipment (“ASC 360”), which requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Recoverability is measured by comparing the carrying amount of an asset to the expected undiscounted future net cash flows generated by the asset.

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

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

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

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

In the year ended December 31, 2021 and 2020, the Company recorded impairments of certain operating right-of-use assets and associated property and equipment (see Note 11 - Leases).

No impairment was recorded in fiscal year 2019.

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

During the years ended December 31, 2022, 2021 and 2020, 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 and associated property and equipment.

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 our Consolidated Statements of Operations.

Refer to Note 11 - Leases for additional details.

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

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

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The Company assesses the fair value of a long-lived asset less any costs to sell at each reporting period and until the asset is no longer classified as held for sale.

(o) Business Combinations and Valuation of Goodwill and Intangible Assets

Business Combinations and Valuation of Goodwill and Intangible Assets

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

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

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

350, Intangibles - Goodwill and Other (“ASC 350”), which provides that goodwill and other intangible assets with indefinite lives are not amortized but tested annually for impairment or more frequently if the Company believes indicators of impairment exist.

The Company evaluates its goodwill and indefinite-lived intangible assets for impairment pursuant to FASB ASC Topic 350, Intangibles - Goodwill and Other (“ASC 350”), which provides that goodwill and other intangible assets with indefinite lives are not amortized but tested annually for impairment or more frequently if the Company believes indicators of impairment exist.

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

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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 its plan to sell the B2B Backup business.

This sale closed during the third quarter of 2021 (see Note 6 - Discontinued Operations and Dispositions).

The Company performed the annual impairment test for goodwill for fiscal year 2021 on October 1 using a qualitative assessment primarily taking into consideration macroeconomic, industry and market conditions, overall financial performance and other relevant company-specific factors.

The qualitative assessment indicated that it was more likely than not that the fair value of the Company’s reporting units was greater than their carrying value.

The Company performed the annual impairment test for intangible assets with indefinite lives for fiscal 2021 using a qualitative assessment primarily taking into consideration macroeconomic, industry and market conditions, overall financial performance and any other relevant company-specific factors.

During the years ended December 31, 2022, 2021, and 2020 the Company recorded a goodwill impairment of $ 27.4 million, $ 32.6 million and zero , respectively.

Refer to Note 9 - Goodwill and Intangible Assets for additional details.

The Company performed the annual impairment test for intangible assets with indefinite lives for fiscal 2021 and 2020 using a qualitative assessment primarily taking into consideration macroeconomic, industry and market conditions, overall financial performance and any other relevant company-specific factors.

The Company concluded that there were no impairments in 2021 and 2020.

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

In addition, the COVID-19 pandemic could have an adverse impact on the Company’s consolidated financial results in 2022, and possibly longer.

As of December 31, 2021, there were no indications that the carrying value of goodwill and other intangible assets may not be recoverable.

However, a prolonged adverse impact of the COVID-19 pandemic on the Company’s consolidated financial results may require an impairment charge related to one or more of these assets in a future period.

No impairments to goodwill or other intangible assets were recorded during the years ended December 31, 2021, 2020, or 2019 as a result of COVID-19.

(p) Contingent Consideration

The Company did not perform an assessment in 2022, as there were no intangible assets with indefinite lives during 2022.

Contingent Consideration

Certain of the Company’s acquisition agreements include contingent earn-out arrangements, which are generally based on the achievement of future income thresholds or other metrics.

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For each transaction, the Company estimates the fair value of contingent earn-out payments as part of the initial purchase price and records the estimated fair value of contingent consideration as a liability on the Consolidated Balance Sheets.

The Company considers several factors when determining that contingent earn-out liabilities are part of the purchase price, including the following:

The Company considers several factors when determining that contingent earn-out liabilities are

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part of the purchase price, including the following:

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

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

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

(q) Self-Insurance Program

Self-Insurance Program

The Company provides health and dental insurance plans to certain of its employees through a self-insurance structure.

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Although management believes it has the ability to reasonably estimate losses related to claims, it is possible that actual results could differ from recorded self-insurance liabilities.

(r) Income Taxes

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The Company will benefit from the technical correction to tax depreciation related to qualified improvement property and has elected to defer income tax payments and employer side social security payments where eligible.

(s) Share-Based Compensation

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

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

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

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% 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.

Share-Based Compensation

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

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

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

Certain of these inputs are subjective and are determined using management’s judgment.

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

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

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

(t) Earnings Per Common Share (“EPS”)

EPS is calculated pursuant to the two-class method as defined in ASC Topic No.

260, Earnings per Share (“ASC 260”), which specifies that all outstanding unvested share-based payment awards that contain rights to nonforfeitable dividends or dividend equivalents are considered participating securities and should be included in the computation of EPS pursuant to the two-class method.

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

Earnings Per Common Share (“EPS”)

EPS is calculated pursuant to the two-class method as defined in ASC Topic 260, Earnings per Share (“ASC 260”), which specifies that all outstanding unvested share-based payment awards that contain rights to non-forfeitable dividends or dividend equivalents are considered participating securities and should be included in the computation of EPS pursuant to the two-class method.

Basic EPS is calculated by dividing net distributed and undistributed earnings allocated to common shareholders, excluding participating securities, by the weighted-average number of common shares outstanding.

The Company’s participating securities consist of its unvested share-based payment awards that contain rights to nonforfeitable dividends or dividend equivalents.

Diluted EPS includes the determinants of basic EPS and, in addition, reflects the impact of other potentially dilutive shares outstanding during the period.

The dilutive effect of participating securities is calculated under the more dilutive of either the treasury method or the two-class method.

(u) Research, Development and Engineering

The Company’s participating securities consist of its unvested share-based payment awards that contain rights to non-forfeitable dividends or dividend equivalents.

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.

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

Research, Development and Engineering

Research, development and engineering costs are expensed as incurred.

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Research, development and engineering expenditures were $ 74.1 million, $ 78.9 million and $ 57.1 million for the years ended December 31, 2022, 2021 and 2020, respectively.

(v) Segment Reporting

FASB ASC Topic No.

280, Segment Reporting (“ASC 280”), establishes standards for the way that public business enterprises report information about operating segments in their annual consolidated financial statements and requires that those enterprises report selected information about operating segments in interim financial reports.

ASC 280 also establishes standards for related disclosures about products and services, geographic areas and major customers.

Segment Reporting

ASC Topic 280, Segment Reporting (“ASC 280”), establishes standards for the way that public business enterprises report information about operating segments in their annual consolidated financial statements and requires that those enterprises report selected information about operating segments in interim financial reports.

ASC 280 also establishes standards for related

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disclosures about products and services, geographic areas and major customers.

The Company’s business segments are based on the organization structure used by the chief operating decision maker for making operating and investment decisions and for assessing performance.

In the fourth quarter of 2021, the Company changed its segment reporting as a result of the spin-off of its cloud fax business.

The Company has two reportable segments:

(i) Digital Media and (ii) Cybersecurity and Martech.

While this reporting change did not impact the Company's consolidated results, segment data has been recast to be consistent for all periods presented.

For additional information, see Note 18 - Segment Information.

(w) Advertising Costs

Refer to Note 18 - Segment Information for additional detail.

Advertising Costs

The Company incurs external advertising costs to promote its brands.

These costs primarily consist of expenses related to digital advertising on websites and apps of third parties, creative services, trade shows and similar events, marketing expenses, and marketing intelligence expenses.

Advertising costs are expensed as incurred.

Advertising costs for the years ended December 31, 2021, 2020 and 2019 was $ 243.7 million, $ 159.8 million and $ 115.7 million, respectively.

(x) Recent Accounting Pronouncements

In December 2019, the FASB issued ASU No.

2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes.

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

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

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

In January 2020, the FASB issued ASU No.

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

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

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

This ASU identifies two main areas for improvement:

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

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

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

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

In March 2020, the FASB issued ASU No.

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

For the years ended December 31, 2022, 2021 and 2020 external advertising costs were $ 128.8 million, $ 143.5 million and $ 96.0 million, respectively.

Recent Accounting Pronouncements

Recently adopted accounting pronouncements

In August 2020, the FASB issued ASU 2020-06.

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

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

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

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

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

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

The cumulative effect of the changes made on the Consolidated Balance Sheet upon this adoption increased the carrying amount of the 1.75 % Convertible Notes (as defined in Note 10 - Debt below) by approximately $ 85.9 million, increased retained earnings by approximately $ 23.4 million, reduced deferred tax liabilities by approximately $ 21.2 million and reduced additional paid-in capital by approximately $ 88.1 million.

The effect of the change on the earnings per share of the Company was an increase of $ 0.25 on each Basic and Diluted Net income per common share from continuing operations for the year ended December 31, 2022.

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805):

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

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

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

The Company early adopted ASU 2021-08 during the second quarter of 2022.

An entity that early adopts in an interim period should apply the amendments (1) retrospectively to all business combinations for which the acquisition date occurs on or after the beginning of the fiscal year that includes the interim period of early application and (2) prospectively to all business combinations that occur on or after the date of initial application.

Therefore, the adoption of ASU 2021-08 was applied retrospectively to January 1, 2022.

The adoption of ASU 2021-08 did not have a material impact on our consolidated financial statements and related disclosures.

Recently issued applicable accounting pronouncements not yet adopted

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

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

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

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

LIBOR is expected to phased out by 2021.

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

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

In August 2020, the FASB issued ASU No.

2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.

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

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

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

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

The Company does not expect the adoption of this standard to have a material impact on the Company’s consolidated financial statements.

In October 2020, the FASB issued ASU No.

2020-10, Codification Improvements.

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

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

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

Early adoption is permitted.

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

In January 2021, the FASB issued ASU No.

2021-01, Reference Rate Reform (Topic 848).

The amendments in this ASU clarify the scope of ASC 848 to include derivatives that are affected by a change in the interest rate used for discounting, margining, or contract price alignment that do not also reference LIBOR or another reference rate that is expected to be discontinued as a result of reference rate reform.

Similar to ASU 2020-04, the guidance is effective for all entities immediately upon issuance on January 7, 2021.

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

In October 2021, the FASB issued ASU No.

2021-08, Business Combinations (Topic 805) - Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, Revenue from Contracts with Customers.

This ASU should be applied prospectively to acquisitions occurring on or after the effective date of December 15, 2022, and early adoption is permitted.

The Company is currently evaluating the impacts of this guidance on the Company’s consolidated financial statements.

(y) Reclassifications

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

This update applies only to contracts, hedging relationships, and other transactions that reference London Interbank Offer Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform.

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

This update was later amended by ASU 2022-06.

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In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848):

Deferral of the Sunset Date of Topic 848 .

This update defers the expiration date of ASC Topic 848 from December 31, 2022 to December 31, 2024.

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

Reclassifications

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

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

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

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

(i) when an advertisement is placed for viewing;

(ii) when a qualified sales lead is delivered;

(iii) when a visitor “clicks through” on an advertisement;

or (iv) when commissions are earned upon the sale of an advertised product.

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

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

(i) when an advertisement is placed for viewing, (ii) when a qualified sales lead is delivered, (iii) when a visitor “clicks through” on an advertisement or (iv) when commissions are earned upon the sale of an advertised product.

Revenue from subscriptions is earned through the granting of access to, or delivery of, data products or services to customers.

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Subscription revenues are recognized over time.

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

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

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

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

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

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

Technology assets are also licensed to clients.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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Cybersecurity and Martech

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

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

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

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

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

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

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

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See Note 18 - Segment Information for additional information.

Years ended December 31,

Year ended December 31,

Digital Media 2022 2021 2020

Advertising (1)

$ 788,135 $ 838,075 $ 627,198

Subscription and licensing (1)

197,354 166,219 164,052

33,871 17,943 15,268

Subscription 244,694 197,354 166,219

Other 46,343 33,871 17,943

Total Digital Media revenues $ 1,079,172 $ 1,069,300 $ 811,360

Cybersecurity and Martech

Subscription and licensing $ 348,611 $ 347,697 $ 340,245

Subscription $ 312,626 $ 348,611 $ 347,697

Total Cybersecurity and Martech revenues $ 312,626 $ 348,611 $ 347,697

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Total $ 1,390,997 $ 1,416,722 $ 1,158,829

(1) The Company reclassified approximately $ 11.0 million and $ 15.5 million of revenue during the years ended December 31, 2020, and 2019, respectively, from ‘Subscription and licensing’ to ‘Advertising’ and reclassified approximately $ 9.5 million and $ 6.0 million of revenue during the years ended December 31, 2020, and 2019, respectively, from “Subscription and licensing’ to ‘Other’ to conform with current period presentation.

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

The Company has recorded $ 174.7 million and $ 153.0 million of revenue for the years ended December 31, 2022 and 2021, respectively, which was previously included in the deferred revenue balance as of the beginning of each respective year.

As of December 31, 2021 and 2020, the Company acquired $ 9.5 million and $ 21.9 million, respectively, of deferred revenue in connection with the Company’s business acquisitions (see Note 4 - Business Acquisitions) which are subject to purchase accounting adjustments, as appropriate.

As of December 31, 2022 and 2021, the Company acquired $ 21.5 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 4 - Business Acquisitions for additional details .

Performance Obligations

The Company’s contracts with customers may include multiple performance obligations.

For such arrangements, revenues are allocated to each performance obligation based on its relative standalone selling price.

The Company is often a party to multiple concurrent contracts with the same customer, or a party related to that customer.

These situations require judgment to determine if those arrangements should be accounted for as a single contract.

Consideration of both the form and the substance of the arrangement is required.

The Company’s contracts with customers may include multiple performance obligations, including complex contracts when advertising and licensing services are sold together.

The Company determines the transaction price based on the amount to which the Company expects to be entitled in exchange for services provided.

The Company includes any fixed consideration within its contracts as part of the total transaction price.

The Company’s contracts occasionally contain some component of variable consideration, which is often immaterial and estimated.

The Company does not include in the transaction price taxes assessed by a governmental authority that are (i) both imposed on and concurrent with a specific revenue-producing transaction and (ii) collected by us from the customer.

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

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

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

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

Significant Judgments

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Performance Obligations Satisfied Over Time

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

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

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

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

Subscription and Licensing

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

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

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

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

The Company’s Cybersecurity and Martech business consists primarily of performance obligations that are satisfied over time.

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

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

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

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

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

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• Security solutions, including email and endpoint are provided

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

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

• 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.

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Performance Obligations Satisfied at a Point in Time

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Existence of a Significant Financing Component in a Contract

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

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

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

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

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

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

Costs to Fulfill a Contract

Costs to Obtain a Contract

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

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Revenues Invoiced

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

The Company has applied the practical expedient for certain revenues streams to exclude the disclosure of the value of remaining performance obligations for the following types of contracts:

Contracts within an original expected term of one year or less,

Contracts for which the Company recognizes revenue in proportion to the amount it has the right to invoice for services performed.

Transaction Price Allocation to Future Performance Obligations

As of December 31, 2022, the aggregate amount of transaction price that is allocated to future performance obligations was approximately $ 21.2 million and is expected to be recognized as follows:

93 % by December 31, 2023 and 7 % by December 31, 2025.

The amount disclosed does not include revenues related to performance obligations that are part of a contract with original expected duration of 12 months or less or portions of the contract that remain subject to cancellations.

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Business Acquisitions

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

2022 Acquisitions

The Company completed the following acquisitions during the year ended December 31, 2022, paying the purchase price in cash in each transaction:

(a) a purchase of 100 % equity interests 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 purchase of 100 % equity interests 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) four other immaterial Digital Media acquisitions.

The Consolidated Statement of Operations since the date of each acquisition and balance sheet as of December 31, 2022, reflect the results of operations of all 2022 acquisitions.

For the year ended December 31, 2022, these acquisitions contributed $ 33.0 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 $ 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 allocation of the preliminary purchase consideration for all 2022 acquisitions as of December 31, 2022 (in thousands):

Assets and Liabilities Valuation

Accounts receivable $ 7,433

Prepaid expenses and other current assets 4,915

Property and equipment 369

Operating lease right-of-use assets, noncurrent 545

Trade names 12,839

Customer relationships 20,040

Goodwill 95,737

Other intangibles 18,166

Other long-term assets 11

Accounts payable and accrued expenses ( 6,221 )

Deferred revenue ( 21,474 )

Deferred tax liability ( 10,140 )

Other long-term liabilities ( 516 )

Total $ 121,704

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

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

The fair value of the assets acquired includes accounts receivable of $ 7.4 million, all of which is expected to be collectible.

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

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 year ended December 31, 2022 is $ 95.7 million, of which $ 1.2 million is expected to be deductible for income tax purposes.

During the year ended December 31, 2022, the purchase price accounting has been finalized for the following 2021 acquisitions:

DailyOM, SEOmoz, Solutelia, LLC, Arthur L.

Davis Publishing and four other immaterial Digital Media and Cybersecurity and Martech acquired businesses.

During the year ended December 31, 2022, the Company 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

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goodwill of $ 4.5 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 3 years as of December 31, 2022.

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 Consolidated Statements of Operations for the year ended December 31, 2022.

Refer to Note 9 - Goodwill and Intangible Assets for additional information.

Unaudited Pro Forma Financial Information for All 2022 Acquisitions

The following unaudited pro forma information is not necessarily indicative of the Company’s consolidated results of operations in future periods or the results that actually would have been realized had the Company and the acquired businesses been combined companies during the periods presented.

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

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

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

Year ended December 31,

Revenues $ 1,407,300 $ 1,461,178

Net income from continuing operations $ 64,877 $ 398,201

Income per common share from continuing operations - Basic $ 1.38 $ 8.67

Income per common share from continuing operations - Diluted $ 1.38 $ 8.31

2021 Acquisitions

The Company completed the following acquisitions during the year ended December 31, 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;

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acquired on December 13, 2021, a Washington-based mobile analytics firm;

and (f) four immaterial Digital Media acquisitions.

and (f) four other immaterial Digital Media acquisitions.

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

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Total consideration for these transactions was $ 160.4 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 2021 acquisitions, including individually material acquisitions noted separately (in thousands):

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The following table summarizes the allocation of the purchase consideration for all 2021 acquisitions as of December 31, 2021, including individually material acquisitions noted separately (in thousands):

Assets and Liabilities Valuation

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Trade names 16,349

Customer relationship 21,945

Customer relationships 21,945

Goodwill 97,032

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Total $ 160,449

During the year ended December 31, 2021, the purchase price accounting has been finalized for the following 2020 acquisitions:

RetailMeNot, Inc., Inspired eLearning, The Aberdeen Group, LLC and The Big Willow, Inc., and other immaterial Digital Media and Cybersecurity and Martech acquired businesses.

The initial accounting for all the 2021 acquisitions is incomplete due to timing of available information and is subject to change.

During the year ended December 31, 2021, the Company recorded adjustments to the initial working capital and to the purchase accounting due to the finalization of prior period acquisitions in the Digital Media business, which resulted in a net decrease in goodwill of $ 1.4 million.

In addition, the Company recorded adjustments to the initial working capital and to the purchase accounting due to the finalization of prior period acquisitions in the Cybersecurity and Martech businesses which resulted in a net increase in goodwill of $ 0.5 million (see Note 9 - Goodwill and Intangible Assets).

Such adjustments had an immaterial impact on the amortization expense within the Consolidated Statements of Operations for the year ended December 31, 2021.

The fair value of the assets acquired includes accounts receivable of $ 9.5 million.

The gross amount due under contracts is $ 9.9 million, of which $ 0.4 million is expected to be uncollectible.

The gross amount due under contracts is $ 9.9 million, of which $ 0.4 million was expected to be uncollectible.

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

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Unaudited Pro Forma Financial Information for All 2021 Acquisitions

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

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

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Net income from continuing operations $ 416,348 $ 33,351

EPS - Basic $ 9.06 $ 0.72

EPS - Diluted $ 8.69 $ 0.71

Income per common share from continuing operations - Basic $ 9.06 $ 0.72

Income per common share from continuing operations - Diluted $ 8.69 $ 0.71

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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 fair value of the assets acquired includes accounts receivable of $ 3.3 million.

The gross amount due under contracts is $ 3.6 million, of which $ 0.3 million is expected to be uncollectible.

The gross amount due under contracts is $ 3.6 million, of which $ 0.3 million was expected to be uncollectible.

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

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Goodwill recognized in connection with this acquisition during the year ended December 31, 2021 is $ 41.3 million of which zero is expected to be deductible for income tax purposes.

Such adjustments had an immaterial impact on the amortization expense within the Consolidated Statements of Operations for the year ended December 31, 2021.

Refer to Note 9 - Goodwill and Intangible Assets for additional information.

Unaudited Pro Forma Financial Information for SEOmoz Acquisition

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

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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):

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$ 406,281 $ 29,382

EPS - Basic $ 8.84 $ 0.63

EPS - Diluted $ 8.48 $ 0.62

Income per common share from continuing operations - Basic $ 8.84 $ 0.63

Income per common share from continuing operations - Diluted $ 8.48 $ 0.62

2020 Acquisitions

The Company completed the following acquisitions during the year ended December 31, 2020, paying the purchase price in cash in each transaction:

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Total $ 472,760

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During the year ended December 31, 2020, the Company recorded adjustments to prior period acquisitions due to changes in the initial working capital and related purchase accounting within the Cybersecurity and Martech businesses, which resulted in a net decrease in goodwill of $ 2.1 million.

In addition, the Company recorded adjustments to prior period acquisitions due to changes in the initial working capital and related purchase accounting within the Digital Media business, which resulted in a net increase in goodwill of $ 9.7 million (see Note 9 - Goodwill and Intangible Assets).

Such adjustments had an immaterial impact to amortization expense within the Consolidated Statements of Operations for the year ended December 31, 2020.

The fair value of the assets acquired includes accounts receivable of $ 46.1 million.

The gross amount due under contracts is $ 53.0 million, of which $ 6.9 million is expected to be uncollectible.

The gross amount due under contracts is $ 53.0 million, of which $ 6.9 million was expected to be uncollectible.

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

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acquisition which was in the process of being exited prior to the acquisition.

This line of business accounts for $ 0.1 million and $ 28.2 million of revenue in 2020 and 2019, respectively, which is included in the pro forma results below.

This line of business accounts for $ 0.1 million of revenue in 2020, respectively, which is included in the pro forma results below.

In addition, during 2020, the Company sold certain Voice assets in Australia and New Zealand.

This divestiture represented $ 8.4 million and $ 13.9 million of revenue during the 2020 and 2019 fiscal years, respectively.

This divestiture represented $ 8.4 million of revenue during the 2020 fiscal year.

This unaudited pro forma supplemental information includes incremental intangible asset amortization, income tax expense, and interest income 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 2020 acquisitions as if each acquisition had occurred on January 1, 2020 (in thousands, except per share amounts):

Year ended December 31,

December 31, 2020

Revenues $ 1,339,927

Net income from continuing operations $ 21,450

EPS - Basic $ 0.46 $ 0.24

EPS - Diluted $ 0.45 $ 0.23

Income per common share from continuing operations - Basic $ 0.46

Income per common share from continuing operations - Diluted $ 0.45

RetailMeNot, Inc.

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The multinational company operates digital savings websites and mobile applications connecting consumers, both online and in-store, to retailers that advertise with RMN.

The acquisition of RMN is expected to further increase retail sales generated by the Company and is believed to, when combined with the Company’s current commerce business and leveraging its editorial strengths, will drive even greater scale and margin expansion.

The Consolidated Statement of Operations since the date of acquisition and balance sheet as of December 31, 2020, reflect the results of operations of RetailMeNot, Inc.

3 unchanged sentences

since the acquisition date was not separately identifiable due to the Company’s integration activities and is impracticable to provide.

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

The following table summarizes the allocation of the purchase consideration for the RetailMeNot, Inc.

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Total $ 414,384

The fair value of the assets acquired includes accounts receivable of $ 40.5 million.

The gross amount due under contracts is $ 47.2 million, of which $ 6.7 million is expected to be uncollectible.

The fair value of the assets acquired included accounts receivable of $ 40.5 million.

The gross amount due under contracts was $ 47.2 million, of which $ 6.7 million was expected to be uncollectible.

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

Goodwill recognized in connection with this acquisition during the year ended December 31, 2020 is $ 169.6 million, of which $ 36.6 million is expected to be deductible for income tax purposes.

Goodwill recognized in connection with this acquisition during the year ended December 31, 2020 was $ 169.6 million, of which $ 36.6 million was expected to be deductible for income tax purposes.

Unaudited Pro Forma Financial Information for RetailMeNot, Inc.

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acquisition which was in the process of being exited prior to the acquisition.

This line of business accounts for $ 0.1 million and $ 28.2 million of revenue in 2020 and 2019, respectively, which is included in the pro forma results below.

In addition, during 2020, the Company sold certain Voice assets in Australia and New Zealand.

This divestiture represented $ 8.4 million and $ 13.9 million of revenue during the 2020 and 2019 fiscal years, respectively.

The supplemental information on an unaudited pro forma financial basis presents the combined results of the Company and RetailMeNot, Inc.

as if the acquisition had occurred on January 1, 2020 (in thousands, except per share amounts):

Year ended December 31,

Revenues $ 1,308,731 $ 1,267,847

Net income from continuing operations $ 23,395 $ 22,117

EPS - Basic $ 0.50 $ 0.46

EPS - Diluted $ 0.49 $ 0.44

The Company completed the following acquisitions during the year ended December 31, 2019, paying the purchase price with a combination of cash and note payable:

(a) an asset purchase of iContact, LLC, acquired on January 22, 2019, a North Carolina-based provider of email marketing solutions;

(b) a share purchase of the entire issued capital of Safe Send AS, acquired on March 29, 2019, a Norwegian-based provider of email security solutions;

and Cloak Holdings, LLC, acquired on April 2, 2019, a Texas-based provider in solutions for virtual private network (“VPN”) services;

(d) an asset purchase of OffsiteDataSync, Inc., acquired on July 1, 2019, a New York-based provider in backup and disaster recovery solutions;

(e) an asset and a share purchase of the entire issued capital of BabyCenter LLC, acquired on August 19, 2019, a California-based provider in digital parenting and pregnancy resources;

(f) a share purchase of the entire issued capital of Spiceworks, Inc., acquired on August 21, 2019, a Texas-based provider in digital media advertising solutions;

and (g) other immaterial acquisitions of online data backup, consumer privacy and protection, and digital media businesses.

The Consolidated Statement of Operations since the date of each acquisition and balance sheet as of December 31, 2019, reflect the results of operations of all 2019 acquisitions.

For the year ended December 31, 2019, these acquisitions contributed $ 126.3 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 $ 429.5 million, net of cash acquired and assumed liabilities and 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 2019 acquisitions, including individually material acquisitions noted separately (in thousands):

Assets and Liabilities Valuation

Accounts receivable $ 22,796

Prepaid expenses and other current assets 4,528

Property and equipment 4,625

Operating lease right of use asset 4,982

Trade names 10,773

Customer relationships 123,611

Goodwill 253,096

Trademarks 32,540

Other intangibles 48,446

Other long-term assets 660

Accounts payables and accrued expenses ( 31,292 )

Other current liabilities ( 516 )

Deferred revenue ( 27,953 )

Operating lease liabilities, current ( 1,768 )

Operating lease liabilities, noncurrent ( 3,215 )

Income taxes payable ( 762 )

Liability for uncertain tax positions ( 170 )

Deferred tax liability ( 10,229 )

Other long-term liabilities ( 635 )

Total $ 429,517

During the year ended December 31, 2019, the Company recorded adjustments to prior period acquisitions due to the finalization of the purchase accounting in the Cybersecurity and Martech business which resulted in a net increase in goodwill of $ 0.2 million.

In addition, the Company recorded adjustments to the initial working capital and to the purchase accounting due to the finalization of prior period acquisitions in the Digital Media business, which resulted in a net decrease in goodwill of $ 0.9 million (see Note 9 - Goodwill and Intangible Assets).

Such adjustments had an immaterial impact to amortization expense within the Consolidated Statement of Operations for the year ended December 31, 2019.

The fair value of the assets acquired includes accounts receivable of $ 22.8 million.

The gross amount due under contracts is $ 23.7 million, of which $ 0.9 million is expected to be uncollectible.

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

Goodwill recognized in connection with these acquisitions during the year ended December 31, 2019 is $ 253.1 million, of which $ 95.1 million is expected to be deductible for income tax purposes.

Unaudited Pro Forma Financial Information for All 2019 Acquisitions

These pro forma results are estimates and exclude any savings or synergies that would have resulted from these business acquisitions had they occurred on January 1, 2019.

The supplemental information on an unaudited pro forma financial basis presents the combined results of the Company and its 2019 acquisitions as if each acquisition had occurred on January 1, 2019 (in thousands, except per share amounts):

December 31, 2020

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Net income from continuing operations $ 23,395

EPS - Basic $ 0.73

EPS - Diluted $ 0.71

Highwinds Capital, Inc.

and Cloak Holdings, LLC

On April 2, 2019, the Company acquired all the outstanding issued capital of Highwinds Capital, Inc.

and Cloak Holdings, LLC (“Highwinds”) at a purchase consideration of $ 209.6 million, net of cash acquired and assumed liabilities.

Highwinds is a Texas-based provider in solutions of VPN services.

The Consolidated Statement of Operations since the date of acquisition and balance sheet as of December 31, 2019, reflect the results of operations of Highwinds.

For the year ended December 31, 2019, Highwinds contributed $ 53.0 million to the Company’s revenues.

Net income from continuing operations contributed by Highwinds 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 Highwinds acquisition (in thousands):

Assets and Liabilities Valuation

Accounts receivable $ 900

Prepaid expenses and other current assets 38

Property and equipment 307

Customer relationships 55,260

Other intangibles 13,110

Trademarks 24,740

Acquired technology 6,678

Other long-term assets 16

Goodwill 164,102

Accounts payable and accrued expenses ( 19,506 )

Deferred revenue ( 18,321 )

Liability for uncertain tax positions ( 170 )

Deferred tax liability ( 17,552 )

Total $ 209,602

The fair value of the assets acquired includes accounts receivable of $ 0.9 million.

The gross amount due under contracts is $ 1.0 million, of which $ 0.1 million is expected to be uncollectible.

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

Goodwill recognized in connection with this acquisition during the year ended December 31, 2019 is $ 164.1 million, of which $ 15.2 million is expected to be deductible for income tax purposes.

Unaudited Pro Forma Financial Information for Highwinds Acquisition

The following unaudited pro forma information is not necessarily indicative of the Company’s consolidated results of operations in future periods or the results that actually would have been realized had the Company and the acquired business been combined companies during the periods presented.

These pro forma results are estimates and exclude any savings or synergies that would have resulted from this business acquisition had it occurred on January 1, 2019.

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

The supplemental information on an unaudited pro forma financial basis presents the combined results of the Company and Highwinds as if the acquisition had occurred on January 1, 2019 (in thousands, except per share amounts):

December 31, 2019

Revenues $ 1,072,047

Net income from continuing operations $ 43,345

EPS - Basic $ 0.90

EPS - Diluted $ 0.88

BabyCenter LLC.

On April 19, 2019, the Company acquired all the outstanding issued capital of BabyCenter LLC.

(“BabyCenter”) at a purchase consideration of $ 71.5 million, net of cash acquired and assumed liabilities.

BabyCenter is a California-based provider in digital parenting and pregnancy resources.

The Consolidated Statement of Operations since the date of acquisition and balance sheet as of December 31, 2019, reflect the results of operations of Baby Center.

For the year ended December 31, 2019, BabyCenter contributed $ 19.2 million to the Company’s revenues.

Net income from continuing operations contributed by BabyCenter 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 BabyCenter acquisition (in thousands):

Assets and Liabilities Valuation

Accounts receivable $ 10,336

Prepaid expenses and other current assets 2,302

Property and equipment 262

Operating lease right-of-use assets, noncurrent 821

Customer relationships 14,500

Other intangibles 10,800

Trademarks 7,800

Other long-term assets 110

Goodwill 34,644

Accounts payable and accrued expenses ( 8,627 )

Income taxes payable ( 61 )

Deferred revenue ( 544 )

Operating lease liabilities, current ( 511 )

Operating lease liabilities, noncurrent ( 310 )

Total $ 71,522

The fair value of the assets acquired includes accounts receivable of $ 10.3 million.

The gross amount due under contracts is $ 10.5 million, of which $ 0.2 million is expected to be uncollectible.

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

Goodwill recognized in connection with this acquisition during the year ended December 31, 2019 is $ 34.6 million, of which $ 34.6 million is expected to be deductible for income tax purposes.

Unaudited Pro Forma Financial Information for BabyCenter Acquisition

The following unaudited pro forma information is not necessarily indicative of the Company’s consolidated results of operations in future periods or the results that actually would have been realized had the Company and the acquired business been combined companies during the periods presented.

These pro forma results are estimates and exclude any savings or synergies that would have resulted from this business acquisition had it occurred on January 1, 2019.

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

The supplemental information on an unaudited pro forma financial basis presents the combined results of the Company and BabyCenter as if the acquisition had occurred on January 1, 2019 (in thousands, except per share amounts):

December 31, 2019

Revenues $ 1,080,644

Net income from continuing operations $ 35,953

EPS - Basic $ 0.75

EPS - Diluted $ 0.73

Spiceworks, Inc.

On August 21, 2019, the Company acquired all the outstanding issued capital of Spiceworks, Inc.

(“Spiceworks”) at a purchase consideration of $ 60.8 million, net of cash acquired and assumed liabilities.

Spiceworks is a Texas-based provider of digital media advertising solutions.

The Consolidated Statement of Operations since the date of acquisition and balance sheet as of December 31, 2019, reflect the results of operations of Spiceworks.

For the year ended December 31, 2019, Spiceworks contributed $ 23.0 million to the Company’s revenues.

Net income from continuing operations contributed by Spiceworks 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 Spiceworks acquisition (in thousands):

Assets and Liabilities Valuation

Accounts receivable $ 10,406

Prepaid expenses and other current assets 1,986

Property and equipment 2,388

Operating lease right-of-use assets, noncurrent 4,161

Trade names 5,200

Customer relationships 27,200

Other intangibles 2,600

Non-competition agreements 680

Acquired technology 2,700

Deferred tax asset 8,752

Other long-term assets 504

Goodwill 4,149

Accounts payable and accrued expenses ( 2,214 )

Income taxes payable ( 164 )

Deferred revenue ( 3,344 )

Operating lease liabilities, current ( 1,256 )

Operating lease liabilities, noncurrent ( 2,905 )

Total $ 60,843

The fair value of the assets acquired includes accounts receivable of $ 10.4 million.

The gross amount due under contracts is $ 10.8 million, of which $ 0.4 million is expected to be uncollectible.

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

Goodwill recognized in connection with this acquisition during the year ended December 31, 2019 is $ 4.1 million, of which zero is expected to be deductible for income tax purposes.

Unaudited Pro Forma Financial Information for Spiceworks Acquisition

The following unaudited pro forma information is not necessarily indicative of the Company’s consolidated results of operations in future periods or the results that actually would have been realized had the Company and the acquired business been combined companies during the periods presented.

These pro forma results are estimates and exclude any savings or synergies that would have resulted from this business acquisition had it occurred on January 1, 2019.

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

The supplemental information on an unaudited pro forma financial basis presents the combined results of the Company and Spiceworks as if the acquisition had occurred on January 1, 2019 (in thousands, except per share amounts):

December 31, 2019

Revenues $ 1,089,648

Net income from continuing operations $ 36,711

EPS - Basic $ 0.76

EPS - Diluted $ 0.74

Income per common share from continuing operations - Basic $ 0.50

Income per common share from continuing operations - Diluted $ 0.49

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

As of December 31, 2022, future payments associated with long-term contractual obligations for holdback payments in connection with all business acquisitions are as follows (in thousands):

2023 $ 19,208

Investments consist of equity and debt securities.

The Company determined that certain equity 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.

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

Investment in equity securities

Investment in Consensus

As of December 31, 2022, the investment in equity securities consists of publicly traded common stock of Consensus.

During the year ended December 31, 2022, the Company completed the non-cash tax-free debt-for-equity exchanges of 2,800,000 shares of its Investment in Consensus for the extinguishment of $ 112.3 million of principal of the Company’s Term Loan Facilities, and related interest.

During the year ended December 31, 2022, the Company also sold 73,919 shares of common stock of Consensus in the open market.

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):

Year ended December 31,

Net (losses) gains during the period $ ( 53,888 ) $ 298,490

losses on securities sold during the period ( 46,743 ) —

Unrealized (losses) gains recognized during the period on short-term investments held at the reporting date $ ( 7,145 ) $ 298,490

As of the December 31, 2022 and 2021, the Company held approximately 1.1 million and 4.0 million shares, respectively, of the common stock of Consensus.

As of December 31, 2022 and 2021, the Investment in Consensus was $ 58.4 million and $ 229.2 million, respectively, and was recorded as a short-term investment on the Consolidated Balance Sheets.

Other investment

Prior to December 31, 2021, the Company owned certain equity securities without a readily determinable fair value, which it received as part of the consideration for the sale of the subsidiary in 2017.

These securities were privately held, not traded on any public exchanges and not an investment in a mutual fund or similar investment.

The Company elected to measure this investment at cost, less impairment, adjusted for subsequent observable price changes to estimate fair value.

The Company made a “reasonable effort” to identify any observable price changes for identical or similar investments with the issuer that were known and could be reasonably known.

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

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

In the first quarter of 2020, in a non-cash transaction of $ 18.3 million, the Company exchanged these shares of redeemable preferred stock that were previously classified as available-for-sale corporate debt securities for a new series of preferred stock, classified as equity securities without a readily determinable fair value.

The Company recognized a loss on exchange of $ 4.4 million, which is reflected in loss on investments, net in the Consolidated Statements of Operations.

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

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

Cost Impairment Adjustments Reported Amount

December 31, 2021

Equity securities $ 17,156 $ ( 16,677 ) $ ( 479 ) $ —

Total $ 17,156 $ ( 16,677 ) $ ( 479 ) $ —

December 31, 2020

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

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

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

Any changes in the carrying value of the equity securities were reported in current earnings as Gain (loss) on investment, net.

As part of the consideration for the sale of the subsidiary in 2017, the Company received shares of redeemable preferred stock that were classified as corporate debt securities and were accounted for as available-for-sale-securities.

During the year ended December 31, 2020, in a non-cash transaction of $ 18.3 million, the Company exchanged these shares of redeemable preferred stock that were previously accounted for as available-for-sale corporate debt securities for a new series of preferred stock, classified as equity securities without a readily determinable fair value.

The Company recognized a loss on exchange of $ 4.4 million in 2020, which is reflected in ‘Loss on investments, net’ in the Consolidated Statements of Operations.

During the year ended December 31, 2020, the Company recorded a $ 19.6 million impairment loss related to a decline in value associated with certain preferred stock primarily due to the recapitalization of the investee and overall market volatility.

The Company was not expected to recover the recorded cost of these securities and reduced such amount to what the Company received as a result of the recapitalization.

During the year ended December 31, 2021, the Company recorded a $ 16.7 million impairment loss on investments related to a decline in value due to a sales transaction of an investee.

The Company was not expected to recover the recorded cost of these securities and reduced such amount to what the Company received as a result of the sale.

During the year ended December 31, 2021, the Company sold the remaining investments with proceeds for $ 14.3 million and a realized loss of approximately $ 0.3 million.

At December 31, 2021, cumulative impairment losses on these securities were $ 40.5 million.

During the year ended December 31, 2020, the Company recorded a $ 19.6 million impairment loss related to a decline in value primarily due to the recapitalization of the investee and overall market volatility.

At December 31, 2020, cumulative impairment losses on these securities were $ 23.8 million.

The following table summarizes the 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 Statement of Operations (in thousands):

Initial Book Value Gross

The Company subsequently sold its remaining investments in these securities with proceeds of $ 14.3 million and a realized loss of

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

approximately $ 0.3 million.

As of December 31, 2021 and 2020, cumulative impairment losses on these securities were $ 40.5 million and $ 23.8 million, respectively.

The following table summarizes the historical cost and estimated fair values for the Company’s securities without a readily determinable fair value as of December 31, 2021 and 2020 (in thousands).

Impairment losses are included within Loss on investments, net in the Consolidated Statements of Operations.

As of December 31,

Cost $ 17,156 $ 50,384

Impairment ( 16,677 ) ( 19,605 )

Adjustments ( 479 ) ( 479 )

Reported amount $ — $ 30,300

Investment in corporate debt security

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.

This investment is included in ‘Long-term investments, net’ in our Consolidated Balance Sheets and is classified as available-for-sale.

This investment is 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 December 31, 2022 (in thousands):

December 31, 2022

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

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

Fair value Maximum exposure

Investment in corporate debt securities $ 15,586 $ 15,586

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

Cost Gross Unrealized

Gains Gross Unrealized

December 31, 2022

Corporate debt securities $ 511 $ 152 $ — $ 663

Total $ 511 $ 152 $ — $ 663

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

Investment in corporate debt securities $ 15,000 $ 586 $ — $ 15,586

December 31, 2021

Investment in corporate debt securities $ — $ — $ — $ —

December 31, 2020

Investment in corporate debt securities $ 511 $ 152 $ — $ 663

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):

December 31, 2021 December 31, 2020

Due within 1 year $ — $ —

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Total $ 15,586 $ —

Recognition and Measurement of Credit Loss of Debt Securities

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

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

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

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

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

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

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

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

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

As of December 31, 2022, 2021 and 2020, the Company did no t recognize any other-than-temporary impairment losses on its debt securities.

Equity method investment

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

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

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

As a limited partner in the Fund, prior to the settlement of certain litigation generally related to the Company’s investment in the Fund in January 2022, the Company paid an annual management fee to the manager equal to 2.0 % (reduced by 10 % each year beginning with the sixth year) of capital commitments.

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

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

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

1 unchanged sentence

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

At the time of the settlement of the litigation (see Note 12 - Commitments and Contingencies ), the Company had invested approximately $ 128.8 million in the Fund.

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

For more information related to the litigation, see Note 12.

During 2021, the Company received capital call notices from the management of OCV Management, LLC for $ 22.2 million inclusive of certain management fees, of which $ 22.2 million has been paid for the year ended December 31, 2021.

During the year ended December 31, 2022, the Company received no capital call notices from the manager of the Fund.

During the year ended 2021, the Company received capital call notices from the management of OCV Management, LLC for $ 22.2 million, inclusive of certain management fees, of which $ 22.2 million has been paid for the year ended December 31, 2021.

During 2020, the Company received capital call notices from the management of OCV Management, LLC for $ 32.9 million, inclusive of certain management fees, of which $ 31.9 million has been paid for the year ended December 31, 2020.

During the years ended December 31, 2021, 2020 and 2019, the Company received a distribution from OCV of $ 15.3 million, zero and $ 10.3 million respectively.

During the years ended December 31, 2022, 2021 and 2020, the Company received a distribution from OCV of zero , $ 15.3 million and zero , respectively.

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

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 years ended December 31, 2021, 2020, and 2019, the Company recognized an investment gain (loss) of $ 35.8 million, $( 11.3 ) million, and $( 0.2 ) million, net of tax expense (benefit), respectively.

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

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

During the years ended December 31, 2022, 2021, and 2020, the Company recognized (Loss) income from equity method investment, net of $( 7.7 ) million, $ 35.8 million, and $( 11.3 ) million, net of tax expense (benefit), respectively.

The gains and losses in 2022 and 2021 were primarily the result of gains and losses in the underlying investments.

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

In addition, the Company recognized an investment loss in fiscal 2020 in the amount of $ 4.3 million, net of tax benefit.

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December 31, 2022 December 31, 2021

Equity securities $ 122,593 $ 67,195

Maximum exposure to loss $ 122,593 $ 67,195

Carrying value Maximum exposure Carrying value Maximum exposure

Equity method investment $ 112,285 $ 112,285 $ 122,593 $ 122,593

As a limited partner, the Company’s maximum exposure to loss is limited to its proportional ownership in the partnership.

1 unchanged sentence

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.

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

Discontinued Operations and Dispositions

Consensus Spin-Off

On October 7, 2021, the Separation was completed and the Company transferred J2 Cloud Services, LLC to Consensus who in turn transferred non-fax assets and liabilities back to Ziff Davis such that Consensus was left with the cloud fax business.

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

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

Ziff Davis, Inc.

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

We did not retain a controlling interest in Consensus.

The Retained Consensus Shares are equity securities for which the Company elected the fair value option, and subsequent fair value changes are included in the assets of and results from continuing operations as of and for the year ended December 31, 2021.

At December 31, 2021, our investment in Consensus common stock was remeasured at fair value based on Consensus’ closing stock price, with an unrealized gain of approximately $ 298.5 million recorded in the Consolidated Statement of Operations and a balance of $ 229.2 million in the Consolidated Balance Sheet (See Note 5).

As further described in Note 2 - Basis of Presentation and Summary of Significant Accounting Policies , on October 7, 2021, the Separation of the cloud fax business was completed.

No gain or loss was recorded on the Separation in the Consolidated Statements of Operations.

Certain of the Company’s management and members of its board of directors resigned from the Company as of the Distribution Date and joined Consensus.

In addition, one of the Company’s members of its senior management as of December 31, 2021 serves on the board of directors of Consensus.

On October 7, 2021, Consensus paid Ziff Davis approximately $ 259.1 million of cash in a distribution that is anticipated to be tax-free provided certain requirements are met, and issued $ 500.0 million of senior notes due 2028 to Ziff Davis, which Ziff Davis then exchanged such notes with the lenders under the Credit Agreement and Credit Agreement Amendments by and among the subsidiaries of Ziff Davis party thereto as guarantors, Citicorp North America Inc.

and MUFG Union Bank, N.A.

and MUFG Union Bank, N.A., as administrative agent for the lenders, in exchange for extinguishment of indebtedness outstanding under the Bridge Loan Facility (see Note 10 - Debt).

and MUFG Union Bank, N.A., as administrative agent for the lenders, in exchange for extinguishment of indebtedness outstanding under the Bridge Loan Facility.

Refer to Note 10 - Debt for additional details.

Such lenders or their affiliates agreed to resell the 2028 notes to qualified institutional buyers in the United States pursuant to Rule 144A.

The Company incurred a net loss on extinguishment of approximately $ 8.8 million recorded within ‘Loss on Extinguishment of Debt’ component of ‘Income (loss) from discontinued operations, net of income taxes’ within the Consolidated Statements of Operations for the year ended December 31, 2021 (see Note 10).

The Company incurred a net loss on extinguishment of debt principal outstanding on the Bridge Loan Facility of approximately $ 8.8 million, which is recorded within ‘Gain (loss) on debt extinguishment, net’ component of ‘Income (loss) from discontinued operations, net of income taxes’ within the Consolidated Statements of Operations for the year ended December 31, 2021 (see note 10 - Debt ).

The divestiture of the cloud fax business was determined to qualify for US Federal tax-free treatment under certain sections of the Internal Revenue Code.

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 constitutes a strategic shift that will have a major effect on the Company’s operations and financial results.

Accordingly, the consolidated financial statements reflect the result of the cloud fax business as a discontinued operation for all periods presented.

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 consolidated financial statements reflect the results of the cloud fax business as a discontinued operation for the years ended December 31, 2021 and 2020.

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

The Consolidated Statements of Comprehensive Income, Consolidated Statements of Cash Flows, including Note 19 - Supplemental Cash Flow Information, and Consolidated Statements of Stockholders’ Equity combine continuing and discontinued operations.

The Consolidated Statements of Operations, Consolidated Statements of Comprehensive Income, Consolidated Statements of Cash Flows and Consolidated Statements of Stockholders’ Equity include the cloud fax activity for January 1, 2021 through October 7, 2021.

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

Years ended December 31,

2021 2020 2019

Year ended December 31,

Capital expenditures $ 15,252 $ 16,237

5 unchanged sentences

In preparation for and executing the Separation, the Company incurred $ 11.6 million, net of reimbursement from Consensus, in transaction-related costs including legal and accounting fees during the year ended December 31, 2021, which were recorded in ‘General and administrative expenses’ component of ‘Income (loss) from discontinued operations, net of income taxes’ within the Consolidated Statement of Operations.

These transaction costs primarily relate to professional fees associated with preparation of regulatory filings and transaction execution and separation activities within finance, tax and legal functions.

In connection with the Separation, Ziff Davis and Consensus entered into several agreements that govern the relationship of the parties following the Separation.

These agreements, as well as other activities related to Ziff Davis’s continuing involvement with Consensus are further discussed in Note 21 - Related Party Transactions.

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

These transaction costs primarily related to professional fees associated with preparation of regulatory filings and transaction execution and separation activities within finance, tax and legal functions.

In connection with the Separation, Ziff Davis and Consensus entered into several agreements that govern the relationship of the parties following the Separation, which are further discussed in Note 21 - Related Party Transactions .

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

The Company made an accounting policy election not to allocate interest to discontinued operations.

Interest expense included in discontinued operations relates to the 6.0 % Senior Notes issued by J2 Cloud Services, LLC and the Bridge Loan Facility, which was required to be repaid as part of the Separation.

Years ended December 31,

Interest expense included in discontinued operations relates to the 6.0 % Senior Notes (as defined in Note 10 - Debt ) issued by J2 Cloud Services, LLC and the Bridge Loan Facility (as defined in Note 10 - Debt ), which was required to be repaid as part of the Separation.

During the year ended December 31, 2022, the Company recorded $ 1.7 million in income tax expense within ‘Income (loss) from discontinued operations, net of income taxes’ within the Consolidated Statement of Operations related to the finalization of state tax returns related to the Separation.

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

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

Year ended December 31,

2022 2021 2020

6 unchanged sentences

Income before income taxes — 126,013 152,051

Income tax expense (benefit) 30,694 30,043 ( 33,136 )

Income from discontinued operations, net of income taxes $ 95,319 $ 122,008 $ 177,913

The following table summarizes the Balance Sheet as of December 31, 2020 (in thousands):

Cash and cash equivalents $ 66,210

Accounts receivable, net 16,071

Prepaid expenses and other current assets 1,748

Total current assets, discontinued operations 84,029

Property and equipment, net 25,053

Operating lease right-of-use assets 25,711

Trade names, net 29,350

Customer relationships, net 13,678

Goodwill 342,430

Other purchased intangibles, net 1,681

Deferred income taxes, noncurrent 44,350

Other non-current assets 1,269

Total assets, discontinued operations $ 567,551

Trade accounts payable and accrued expenses $ 32,795

Income taxes payable, current 1,307

Deferred revenue, current 24,512

Operating lease liabilities, current 2,578

Total current liabilities, discontinued operations 61,192

Deferred revenue, noncurrent 240

Operating lease liabilities, noncurrent 25,549

Liability for uncertain tax positions 3,993

Deferred income taxes, noncurrent 5,392

Other long-term liabilities 3,063

Total liabilities, discontinued operations $ 99,429

Income tax expense ( 1,709 ) ( 30,694 ) ( 30,043 )

(Loss) income from discontinued operations, net of income taxes $ ( 1,709 ) $ 95,319 $ 122,008

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.

During the year ended December 31, 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) gain on sale of businesses on the Consolidated Statement of Operations in the year ended December 31, 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 total gain recognized on the sale of these Voice assets was $ 2.8 million, which is presented in ‘(Loss) gain on sale of businesses’ on the Consolidated Statement of Operations in the year ended December 31, 2021.

During the year ended December 31, 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.

The business was 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 9 - Goodwill and Intangible Assets).

As a result, the Company recorded an impairment to goodwill of $ 32.6 million during the year ended December 31, 2021, which is presented in ‘Goodwill impairment on business” on the Consolidated Statement of Operations.

Refer to Note 9 - 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) gain on sale of businesses on the Consolidated Statement of Operations in the year ended December 31, 2021.

The total loss recognized on the sale of the B2B Backup business was $ 24.6 million, which is presented in ‘(Loss) gain on sale of businesses’ on the Consolidated Statement of Operations in the year ended December 31, 2021.

During the second quarter of 2020, the Company committed to a plan to sell certain Voice assets in Australia and New Zealand as they were determined to be non-core assets.

1 unchanged sentence

On August 31, 2020, in a cash transaction, the Company sold these Voice assets for a gain of $ 17.1 million which was recorded in gain on sale of businesses on the Consolidated Statement of Operations in the year ended December 31, 2020.

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

Fair Value Measurements

10 unchanged sentences

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

On October 7, 2021, we completed the Consensus separation and retained 19.9 % of the shares of Consensus common stock immediately following the Separation.

We did not retain a controlling interest in Consensus.

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

At December 31, 2021, our investment in Consensus common stock was remeasured at fair value based on Consensus’ closing stock price, with unrealized gains of $ 298.5 million recorded in the Consolidated Statement of Operations and a balance of $ 229.2 million in the Consolidated Balance Sheet.

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

At December 31, 2022 and 2021, our investment in Consensus common stock was remeasured at fair value based on Consensus’ closing stock price, with unrealized (losses) gains of $( 7.1 ) million and $ 298.5 million, respectively, recorded in the Consolidated Statement of Operations and a balance of $ 58.4 million and $ 229.2 million, respectively, in the Consolidated Balance Sheet.

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

The fair value of our 4.625 % Senior Notes and our 1.75 % Convertible Notes (as defined in Note 10 - Debt ) was determined using quoted market prices or dealer quotes for instruments with similar maturities and other terms and credit ratings, which are Level 1 inputs.

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

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

The fair value of our senior notes was determined using quoted market prices or dealer quotes for instruments with similar maturities and other terms and credit ratings, which are Level 2 inputs.

The fair value of the MUFG Credit Facility approximated its carrying amount due to its variable interest rate, which approximated a market interest rate, and was considered a Level 2 input.

The fair value of the Company’s debt instruments was $ 1.3 billion and $ 2.0 billion, at December 31, 2021 and December 31, 2020, respectively (see Note 10 - Debt).

In 2019, the Company entered into a $ 5.5 million note payable that was short-term in nature and associated with the quarter’s acquisition activity.

In the same year, the Company paid down $ 5.1 million of the outstanding note and in the third quarter of 2020, the balance of the note payable was paid in full.

The Company has investment in a corporate debt security that is measured at fair value on the Consolidated Balance Sheets.

Unrealized gains and losses are reported in other comprehensive income until realized.

These corporate debt securities do not have a readily determinable fair value because acquired securities are privately held, not traded on any public exchanges and not an investment in a mutual fund or similar investment.

The investment in corporate debt securities is classified as available-for-sale and is initially measured at its transaction price.

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

As of December 31, 2022, the fair value was determined based upon various probability-weighted scenarios and included assumptions of a 13 % discount rate and conversion in a range of 0.8 years - 1.3 years.

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

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

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

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

As of December 31, 2022, the contingent consideration was determined using a 100% probability of payout, without any other estimates applied.

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 December 31, 2021.

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

Valuation Technique Unobservable Input Range Weighted Average

8 unchanged sentences

Money market and other funds $ 312,010 $ — $ — $ 312,010 $ 312,010

Investment in corporate debt securities — — 15,586 15,586 15,586

Investment in Consensus 58,421 — — 58,421 58,421

1 unchanged sentence

Contingent consideration $ — $ — $ 555 $ 555 $ 555

Long-term debt 1,345,311 — — 1,345,311 1,090,627

Debt 939,319 — — 939,319 999,053

Total liabilities measured at fair value $ 939,319 $ — $ 555 $ 939,874 $ 999,608

2 unchanged sentences

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

Corporate debt securities — 663 — 663 663

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

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

Contingent consideration $ — $ — $ 5,775 $ 5,775 $ 5,775

Long-term debt 1,960,527 — — 1,960,527 1,579,021

Debt 1,345,311 — — 1,345,311 1,090,627

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

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

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 year ended December 31, 2021, there were no transfers that occurred between levels.

For the year ended December 31, 2020, the Company transferred the fair value of its long-term debt from Level 2 to Level 1.

The following tables 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):

Level 3 Affected line item in the Statement of Income

For the year ended December 31, 2022 and 2021, there were no transfers that occurred between levels.

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):

Level 3 Affected line item in the Statement of Operations

Balance as of January 1, 2022 $ —

Investment in corporate debt securities 15,586 Not applicable

Balance as of December 31, 2022

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):

Level 3 Affected line item in the Statement of Operations

Balance as of January 1, 2021

Contingent consideration 4,713

8 unchanged sentences

Due to the achievement of certain thresholds, $ 3.2 million and $ 2.1 million was paid during the years ended December 31, 2022 and 2021, respectively.

The Company recorded a net decrease of $ 1.9 million and $ 0.1 million during the years ended December 31, 2021 and 2020 respectively, in the fair value of the contingent consideration and reported such changes in general and administrative expenses.

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 9 - Goodwill and Intangible Assets for further information.

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

See Note 9 - Goodwill and Intangible Assets for further information.

Property and Equipment

Property and equipment, stated at cost, at December 31, 2021 and 2020 consisted of the following (in thousands):

Computers and related equipment $ 343,101 $ 317,013

Property and equipment, stated at cost, consists of the following (in thousands):

Computer hardware, software and related equipment $ 424,275 $ 343,101

Furniture and equipment 881 934

4 unchanged sentences

Depreciation and amortization expense was $ 76.7 million, $ 63.6 million and $ 60.6 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Total disposals of long-lived assets for the years ended December 31, 2021, 2020 and 2019 were $ 11.0 million, $ 0.9 million and $ 0.3 million, respectively.

Total disposals of long-lived assets was $ 0.2 million, $ 11.0 million and $ 0.9 million for the years ended December 31, 2022, 2021 and 2020, respectively.

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

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 .

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 years ended December 31, 2022 and 2021 are as follows (in thousands):

1 unchanged sentence

Balance as of January 1, 2021

$ 942,934 $ 582,066 $ 1,525,000

Goodwill acquired (Note 4) 55,704 41,328 97,032

1 unchanged sentence

— ( 50,277 ) ( 50,277 )

Goodwill impairment — ( 32,629 ) ( 32,629 )

Purchase accounting adjustments (2)

2 unchanged sentences

Balance as of December 31, 2021

Goodwill acquired (Note 4) 55,704 41,328 97,032

Goodwill removed due to sale of businesses (3)

$ 996,659 $ 534,796 $ 1,531,455

Goodwill acquired (Note 4) 95,737 — 95,737

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

— ( 32,629 ) ( 32,629 )

Purchase accounting adjustments (2)

2 unchanged sentences

Balance as of December 31, 2022 $ 1,065,989 $ 525,485 $ 1,591,474

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

(2) On August 31, 2020, in a cash transaction, the Company sold certain of its Voice assets in Australia and New Zealand which resulted in $ 4.8 million of goodwill being written off (see Note 6 - Discontinued Operations and Dispositions).

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

(4) During the year ended December 31, 2021, the Company had an impairment to goodwill of $ 32.6 million in connection with certain B2B Backup assets

The following table presents the gross carrying amount of goodwill and accumulated impairment charges as of December 31, 2021, and 2020.

December 31, 2021 December 31, 2020

Gross Carrying Amount Accumulated Impairment Charges Net Book Value Gross Carrying Amount Accumulated Impairment Charges Net Book Value

Cybersecurity and Martech $ 567,425 $ 32,629 $ 534,796 $ 582,066 $ — $ 582,066

Digital Media 996,659 — 996,659 942,934 — 942,934

Total Goodwill $ 1,564,084 $ 32,629 $ 1,531,455 $ 1,525,000 $ — $ 1,525,000

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

During the year ended December 31, 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 operating income 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, and the Company recorded an impairment of approximately $ 27.4 million during the year ended December 31, 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 a reasonable valuation approach 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.

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

During the year ended December 31, 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 year ended December 31, 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 December 31, 2022 and 2021 reflects accumulated impairment losses of $ 27.4 million and $ 32.6 million, respectively, in the Digital Media reportable segment and the Cybersecurity and Martech reportable segment, respectively.

Intangible Assets Subject to Amortization

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

7 unchanged sentences

Total $ 1,431,385 $ 968,570 $ 462,815

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

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

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

During the year ended December 31, 2021, the Company acquired SEOmoz (see Note 4 - Business Acquisitions).

The identified intangible assets were recognized as part of the acquisition and their respective estimated weighted average amortizations were as follows (in thousands):

Weighted-Average

Trade names 5.0 years $ 7,406

Customer relationships 5.2 years 5,000

Other purchased intangibles 5.0 years 22,777

Total $ 35,183

During the year ended December 31, 2021, the Company completed other acquisitions which were individually immaterial.

The identified intangible assets were recognized as part of all 2021 acquisitions and their respective estimated weighted average amortizations were as follows (in thousands):

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

During the year ended December 31, 2022, the Company completed acquisitions (see Note 4 - Business Acquisitions ) which were individually immaterial.

The identified intangible assets were recognized as part of all 2022 acquisitions and their respective estimated weighted average amortizations were as follows as of December 31, 2022 (in thousands):

Weighted-Average

Carrying Value

Trade names 9.6 years $ 12,423

12 unchanged sentences

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

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

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

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

3 unchanged sentences

Total expected amortization expense $ 462,815

Amortization expense was $ 185.7 million, $ 156.4 million and $ 173.8 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Long-term debt as of December 31, 2021 and 2020 consists of the following (in thousands):

Amortization expense, included in General and administrative expense on our Consolidated Statements of Operations, approximated $ 156.7 million, $ 185.7 million, and $ 156.4 million for the years ended December 31, 2022, 2021 and 2020, respectively.

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

Long-term debt consists of the following (in thousands):

4.625 % Senior Notes

2 unchanged sentences

1.75 % Convertible Notes

550,000 550,000

Total Notes 1,010,038 1,191,276

Paycheck Protection Program Loan — 910

Unamortized discount ( 2,764 ) ( 91,593 )

3 unchanged sentences

Total long-term debt, less current portion $ 999,053 $ 1,036,018

At December 31, 2021, future principal payments for debt are as follows (in thousands):

Years Ended December 31,

At December 31, 2022, future principal and interest payments for debt are as follows (in thousands):

Principal Interest

2023 $ — $ 30,902

2024 — 30,902

2025 — 30,902

2026 550,000 30,902

2027 — 21,276

Thereafter 460,038 63,830

$ 1,010,038 $ 208,714

Interest expense was $ 37.1 million, $ 79.6 million and $ 58.1 million for the years ended December 31, 2022, 2021 and 2020, respectively.

5 unchanged sentences

On October 7, 2020, J2 Cloud redeemed all of its outstanding $ 650.0 million 6.0 % Senior Notes due in 2025 for $ 694.6 million, including an early redemption premium of $ 29.2 million and accrued and unpaid interest of $ 15.4 million.

The Company recorded a loss on extinguishment of $ 38.0 million which is recorded in interest expense, net within discontinued operations in the Consolidated Statements of Operations.

The Company recorded a loss on extinguishment of $ 38.0 million which is recorded in ‘Interest expense and other’ within (Loss) income from discontinued operations, net of income taxes on our Consolidated Statements of Operations.

Refer to Note 6 - Discontinued Operations and Dispositions for additional details.

4.625 % Senior Notes

1 unchanged sentence

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

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

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

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

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

The 4.625 % Senior Notes mature on October 15, 2030, and are senior unsecured obligations of the Company which are guaranteed, jointly and severally, on an unsecured basis by certain of the

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

Company’s existing and future domestic direct and indirect wholly-owned subsidiaries (collectively, the “Guarantors”).

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

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In addition, at any time prior to October 15, 2025, the Company may redeem some or all of the 4.625 % Senior Notes at a price equal to 100 % of the principal amount, plus accrued and unpaid interest, if any, to the redemption date, plus an applicable “make-whole” premium.

The discount and deferred issuance costs are being amortized, at an effective interest rate of 4.7 %, to interest expense through the maturity date.

The Indenture contains covenants that restrict the Company’s ability to (i) pay dividends or make distributions on the Company’s common stock or repurchase the Company’s capital stock;

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These covenants contain certain exceptions.

Restricted payments are applicable only if the Company and subsidiaries designated as restricted subsidiaries has a net leverage ratio of greater than 3.5 to 1.0.

Restricted payments are applicable only if the Company and subsidiaries designated as restricted subsidiaries have a net leverage ratio of greater than 3.5 to 1.0.

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

The Company is in compliance with its debt covenants as of December 31, 2021 and 2020.

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

On October 8, 2021, Ziff Davis announced that it had accepted tender offers to purchase $ 83.3 million in aggregate principal of its 4.625 % Senior Notes for an aggregate purchase price of $ 90.0 million.

The tender offer expired on October 22, 2021.

As such, the Company recognized a loss of approximately $ 7.4 million associated with the tender of the 4.625 % Senior Notes, which was recorded within ‘Loss on extinguishment of debt’ within the Statements of Operations.

Further, during the year ended December 31, 2021, the Company repurchased an additional $ 25.4 million in aggregate principal amount of the 4.625 % Senior Notes for a purchase price of approximately $ 26.0 million.

The Company recognized a loss of $ 0.6 million associated with the repurchase of the 4.625 % Senior Notes, which was recorded within ‘Loss on extinguishment of debt’ within the Consolidated Statements of Operations.

During January 2022, the Company repurchased an additional $ 54.6 million in aggregate principal amount of the 4.625 % Senior Notes (see Note 23 - Subsequent Events).

As of December 31, 2021 and 2020, the estimated fair value of the 4.625 % Senior Notes was approximately $ 659.9 million and $ 796.9 million, respectively, and was based on recent quoted market prices or dealer quotes for the 4.625 % Senior Notes which are Level 1 inputs (see Note 7 - Fair Value Measurements).

As such, the Company recognized a loss of approximately $ 7.4 million associated with the tender of the 4.625 % Senior Notes during the year ended December 31, 2021, which is presented in ‘Gain (loss) on debt extinguishment, net’ on the Consolidated Statements of Operations.

R epurchases of 4.625 % Senior Notes on the open market (excluding those from a tender offer) were as follows (in thousands):

Year ended December 31,

Principal repurchased $ 181,238 $ 25,391

Aggregate purchase price $ 167,661 $ 26,035

(Gain) loss on repurchase (1)

$ ( 12,060 ) $ 644

(1) Presented within ‘Gain (loss) on debt extinguishment, net’ on the Consolidated Statements of Operations.

As of December 31, 2022 and 2021, the estimated fair value of the 4.625 % Senior Notes was approximately $ 390.9 million and $ 659.9 million, respectively, and was based on recent quoted market prices or dealer quotes for the 4.625 % Senior Notes which are Level 1 inputs.

Refer to Note 7 - Fair Value Measurements for additional details.

The following table provides additional information on the 4.625 % Senior Notes (in thousands):

Principal amount of 4.625 % Senior Notes

$ 460,038 $ 641,276

Unamortized discount ( 2,764 ) ( 4,259 )

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Net carrying amount of 4.625 % Senior Notes

$ 456,400 $ 635,678

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

The following table provides the components of interest expense related to 4.625 % Senior Notes (in thousands):

Year ended December 31,

2022 2021 2020

Coupon interest expense $ 24,500 $ 33,899 $ 8,094

Non-cash amortization of discount on 4.625 % Senior Notes

Amortization of debt issuance costs 109 66 29

Total interest expense related to 4.625 % Senior Notes

$ 24,942 $ 34,494 $ 8,226

3.25 % Convertible Notes

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

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

During the year ended December 31, 2021, the Company satisfied its conversion obligation by paying the principal of $ 402.4 million in cash and issued 3,050,850 shares of the Company’s common stock (see Note 14 - Stockholders’ Equity).

The redemption of the liability component of the 3.25 % Convertible Notes, resulted in a gain of approximately $ 2.8 million during the year ended December 31, 2021 within ‘Loss on debt extinguishment, net’ in the Consolidated Statement of Operations.

In connection with the Separation, the Company redeemed in full all of its outstanding 3.25 % Convertible Notes.

Refer to Note 14 - Stockholders’ Equity for additional details.

The redemption of the liability component of the 3.25 % Convertible Notes, resulted in a gain of approximately $ 2.8 million during the year ended December 31, 2021 within ‘Gain (loss) on debt extinguishment, net’ on our Consolidated Statement of Operations.

The reacquisition of the equity component of the 3.25 % Convertible Notes resulted in a reduction of stockholders’ equity of approximately $ 390.5 million, net of tax.

During the fourth quarter of 2020, the last reported sale price of the Company’s common stock exceeded 130 % of the conversion price for at least 20 trading days in the period of 30 consecutive trading days ending on, and including, the last trading day of the quarter.

As a result, the 3.25 % Convertible Notes were convertible at the option of the holder during the quarter beginning January 1, 2021 and ending March 31, 2021.

Since as of December 31, 2020, the Company intended to settle the principal amount in cash, the net carrying amount of the 3.25 % Convertible Notes was classified within current liabilities on the Consolidated Balance Sheet as of December 31, 2020.

Accounting for the 3.25 % Convertible Notes

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

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

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

This debt discount is amortized to interest expense using the effective interest method over the period from the issuance date through the first stated repurchase date.

The Company estimated the borrowing rates of similar debt without the conversion feature at origination to be 5.79 % for the 3.25 % Convertible Notes and determined the debt discount to be $ 59.0 million.

As a result, a conversion premium after tax of $ 37.7 million was recorded in additional paid-in capital.

The aggregate debt discount is amortized as interest expense over the period from the issuance date through the first stated repurchase date on June 15, 2021 which management believed was the expected life of the 3.25 % Convertible Notes using an interest rate of 5.81 %.

As of December 31, 2020, the remaining period over which the unamortized debt discount will be amortized was 0.5 years.

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

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

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

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

As of December 31, 2020, the if-converted value of the 3.25 % Convertible Notes exceeded the principal amount by $ 173.3 million.

The following table provides additional information related to the 3.25 % Convertible Notes (in thousands):

Additional paid-in capital $ — $ 37,688

Principal amount of 3.25 % Convertible Notes

$ — $ 402,414

Unamortized discount of the liability component — ( 4,644 )

Carrying amount of debt issuance costs — ( 855 )

Net carrying amount of 3.25 % Convertible Notes

$ — $ 396,915

The following table provides the components of interest expense related to the 3.25 % Convertible Notes (in thousands):

2021 2020 2019

Cash interest expense (coupon interest expense) $ 5,994 $ 13,080 $ 13,081

Year ended December 31,

Coupon interest expense $ 5,994 $ 13,080

Non-cash amortization of discount on 3.25 % Convertible Notes

4,645 9,717 9,171

Amortization of debt issuance costs 855 1,749

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$ 11,494 $ 24,546

The Company has recorded changes in fair value associated with the contingent interest feature of the 3.25 % Convertible Notes in interest expense for the years ended December 31, 2021, 2020, and 2019 of zero , zero , and $( 0.8 ) million, respectively (see Note 7 - Fair Value Measurements).

No changes in fair value associated with the contingent interest feature of the 3.25 % Convertible Notes in interest expense were recorded for the years ended December 31, 2021 and 2020, respectively.

Refer to Note 7 - Fair Value Measurements for additional details.

1.75 % Convertible Notes

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(i) during any calendar quarter commencing after the calendar quarter ending on March 31, 2020 (and only during such calendar quarter), if the last reported sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding the calendar quarter is greater than 130 % of the applicable conversion price of the 1.75 % Convertible Notes on each such applicable trading day;

(ii) during the five business day period following any 10 consecutive trading day period in which the trading price per $1,000 principal amount of 1.75 % Convertible Notes for each trading day of the measurement period was less than 98 % of the product of the last reported sale price of the Company’s common stock and the applicable conversion rate on each such trading day;

(ii) during the five business day period following any 10 consecutive trading day period in which the trading price per $1,000

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AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

principal amount of 1.75 % Convertible Notes for each trading day of the measurement period was less than 98 % of the product of the last reported sale price of the Company’s common stock and the applicable conversion rate on each such trading day;

or (iii) upon the occurrence of specified corporate events.

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Prior to the Separation, the conversion rate on the 1.75 % Convertible Notes was 7.9864 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 $ 125.21 per share of the Company’s common stock.

The Separation constituted an event under the 1.75 % Convertible Notes that required an adjustment and the conversion rate increased to 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 Separation constituted an event under the 1.75 % Convertible Notes that required an adjustment and the conversion rate increased to 9.3783 shares of the Company’s common stock for each $1,000 principal amount of 1.75 % Convertible Notes (or 5,158,071 shares), which represents a conversion price of approximately $ 106.63 per share of the Company’s common stock.

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

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

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

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

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

and (iv) structurally junior to all existing and future indebtedness and other liabilities incurred by the Company’s subsidiaries, including the then-existing 6.0 % Senior Notes due 2025.

and (iv) structurally junior to all existing and future indebtedness and other liabilities incurred by the Company’s subsidiaries.

Accounting for the 1.75 % Convertible Notes

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

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

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

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

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

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

As of December 31, 2021, the remaining period over which the unamortized debt discount will be amortized is 4.8 years.

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

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

Refer to Note 2 - Basis of Presentation and Summary of Significant Accounting Policie s for additional details.

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

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

Of the total deferred issuance costs incurred, $ 10.1 million of such deferred issuance costs were attributable to the liability component and are being amortized, at an effective interest rate of 5.5 %, to interest expense through the maturity date.

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

As of December 31, 2021, the unamortized deferred issuance costs were $ 7.7 million.

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

Upon adoption of ASU 2020-06, the Company reclassified the $ 2.8 million from additional paid-in-capital to 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.

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 7 - Fair Value Measurements ).

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As of December 31, 2022 and December 31, 2021, the estimated fair value of the 1.75 % Convertible Notes was approximately $ 548.4 million and $ 685.4 million, respectively.

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

The following table provides additional information related to the 1.75 % Convertible Notes (in thousands):

7 unchanged sentences

The following table provides the components of interest expense related to the 1.75 % Convertible Notes (in thousands):

Cash interest expense (coupon interest expense) $ 9,625 $ 9,653

Year Ended December 31,

Coupon interest expense $ 9,776 $ 9,625 $ 9,653

Non-cash amortization of discount on 1.75 % Convertible Notes

3 unchanged sentences

$ 11,634 $ 26,136 $ 25,314

Credit Facility and Bridge Loan

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

At the time of adoption, the Company de-recognized the remaining unamortized debt discount.

No amortization of debt discount was recorded during the year ended December 31, 2022.

Credit Agreement

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

1 unchanged sentence

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

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

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

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

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

The Credit Agreement is secured by an associated collateral agreement that provides for a lien on the majority of the Company’s assets and the assets of the guarantors, in each case, subject to customary exceptions.

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

The Credit Agreement contains financial maintenance covenants, including (i) a maximum total leverage ratio as of the last date of any fiscal quarter not to exceed 4.00 :1.00 for the Company and its restricted subsidiaries and (ii) a minimum interest coverage ratio as of the last date of any fiscal quarter not less than 3.00 :1.00 for the Company and its restricted subsidiaries.

The Credit Agreement also contains restrictive covenants that limit, among other things, the Company’s and its restricted subsidiaries’ ability to incur additional indebtedness, create, incur or assume liens, consolidate, merge, liquidate or dissolve, pay dividends or make other distributions or other restricted payments, make or hold any investments, enter into certain transactions with affiliates, sell assets other than on terms specified by the Credit Agreement, amend the terms of certain other indebtedness and organizational documents and change their lines of business and fiscal years, in each case, subject to customary exceptions.

The Credit Agreement also sets forth customary events of default, including, among other things, the failure to make timely payments under the Credit Facility, the failure to satisfy certain covenants, cross-default and cross-acceleration to other material debt for borrowed money, the occurrence of a change of control and specified events of bankruptcy and insolvency.

The Company is in compliance with its debt covenants for the Credit Agreement as of December 31, 2022.

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

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

The Amendments (i) provided for the

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

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

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

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

The Company incurred approximately $ 5.1 million in costs and interest associated with the Bridge Loan Facility recorded within ‘Interest expense’ component of ‘Income (loss) from discontinued operations, net of income taxes’ within the Consolidated Statements of Operations for the year ended December 31, 2021

The Company incurred approximately $ 6.3 million ($ 5.2 million in the third quarter of 2021 and $ 1.1 million in the fourth quarter of 2021) in costs and interest associated with the Bridge Loan Facility recorded within ‘Interest and other expense’ component of ‘Income (loss) from discontinued operations, net of income taxes’ within the Consolidated Statements of Operations for the year ended December 31, 2021.

In connection with the spin-off of Consensus, the Company drew the full amount of the Bridge Loan Facility and used the proceeds of the Bridge Loan Facility to redeem the 3.25 % Convertible Notes and a portion of the 4.625 % Senior Notes.

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Such lenders or their affiliates agreed to resell the 2028 notes to qualified institutional buyers in the United States pursuant to Rule 144A.

The Company incurred a net loss on extinguishment of approximately $ 8.8 million recorded within ‘Gain (loss) on debt extinguishment, net’ component of ‘Income (loss) from discontinued operations, net of income taxes’ within the Consolidated Statements of Operations for the year ended December 31, 2021.

On June 10, 2022 (the “Term Loan Funding Date”), the Company entered into a Fifth 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 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 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 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.

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.

As of December 31, 2022, the Company recorded a loss on extinguishment of debt of approximately $ 0.6 million, related to the debt-for-equity exchanges, which is presented within ‘Gain (loss) on debt extinguishment, net’ on our Consolidated Statements of Operations.

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

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

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

During the year ended 2021, the Company recorded impairments of $ 12.7 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.

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

During the year ended December 31, 2022, the Company recorded impairments of $ 1.0 million on its operating lease right-of-use assets primarily related to exiting certain lease spaces within Digital Media and Cybersecurity and Martech.

During the year ended December 31, 2021, the Company recorded impairments of $ 12.7 million on its operating lease right of use assets within Digital Media and Cybersecurity and Martech 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.

During the year ended December 31, 2020, the Company had also decided to exit and seek subleases for certain leased facilities in the Digital Media reportable segment primarily also due to work from home models.

The Company recorded a non-cash impairment charge of $ 12.1 million related to operating lease right-of-use assets for the affected facilities and an impairment charge of $ 3.6 million for associated property and equipment.

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

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

1 unchanged sentence

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

Finance leases are not material to the Company’s consolidated financial statements and are therefore not included in the disclosures.

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

Years ended December 31,

Operating lease cost $ 31,396 $ 38,421

Short-term lease cost 2,754 1,031

Total lease cost $ 34,150 $ 39,452

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

December 31, 2021 December 31, 2020

Operating leases

Operating right-of-use assets are included in ‘Other assets’ on the Consolidated Balance Sheets.

Operating lease liabilities are included in ‘Other current liabilities’ and ‘Other noncurrent liabilities’, respectively, on the Consolidated Balance Sheets as follows (in thousands):

Operating lease right-of-use assets $ 40,640 $ 55,617

Total operating lease right-of-use assets $ 55,617 $ 80,133

Operating lease liability, current $ 27,156 $ 29,634

Operating lease liabilities, current $ 22,153 $ 27,156

Operating lease liabilities, noncurrent 33,996 53,708

Total operating lease liabilities $ 56,149 $ 80,864

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

Years ended December 31,

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

Operating cash flows from operating leases $ 27,798 $ 27,402

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

Operating leases $ 9,850 $ 31,148

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

Year ended December 31,

Operating lease cost $ 17,656 $ 31,396

Short-term lease cost (1)

Total lease cost $ 18,783 $ 34,150

(1) The Company made an election to account for a short-term lease payments on a straight-line basis over the term of the lease.

Other supplemental operating lease information consists of the following:

December 31, 2021 December 31, 2020

Operating leases:

1 unchanged sentence

Weighted average discount rate 3.08 % 3.48 %

Maturities of operating lease liabilities as of December 31, 2021 were as follows (in thousands):

Operating Leases

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

As of December 31, 2022, maturities of operating lease liabilities were as follows (in thousands):

2023 $ 23,000

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

Finance leases are not material to the Company’s consolidated financial statements.

Significant Judgments

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

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

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

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

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On July 8, 2020, Jeffrey Garcia filed a putative class action lawsuit against the Company in the Central District of California (20-cv-06096), alleging violations of federal securities laws.

The Company has moved to dismiss the consolidated class action complaint.

The court granted the motion to dismiss and the plaintiff has filed an amended complaint.

The Company has moved to dismiss the amended complaint.

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.

2020-0819-VCL) asserting derivative claims for breach of fiduciary duty and related theories against directors of the Company and other third parties relating generally the investment by the Company in OCV Fund I, L.P.

The court appointed a lead plaintiff.

The Company moved to dismiss the consolidated class action complaint.

The court granted the motion to dismiss and the lead plaintiff filed an amended complaint.

The Company moved to dismiss the amended complaint.

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

The lead plaintiff has filed a notice of appeal.

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

2020-0819-VCL) asserting derivative claims for breach of fiduciary duty and related theories against directors of the Company and other third parties relating generally to the investment by the Company in OCV Fund I, L.P.

(the “Chancery Court Derivative Action”).

On November 17, 2020, the court entered an order allowing Orlando Police Pension Fund to intervene as a plaintiff in the case.

The parties have reached an agreement to settle the lawsuit, which requires court approval.

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

On January 20, 2022 the Court approved the settlement (See Note 23 - Subsequent Events).

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

The parties reached an agreement to settle the lawsuit, which required court approval.

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

On January 20, 2022 the Court approved the settlement.

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

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

2 unchanged sentences

20-cv-01687-LPS.

On January 21, 2022, a stipulation of partial dismissal was filed in the consolidated action following approval 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.

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 in the other actions.

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

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The Company is currently under audit or is subject to audit for indirect taxes in various states, municipalities and foreign jurisdictions.

The Company has a $ 24.0 million reserve established for these matters.

The Company has a $ 25.5 million and $ 24.0 million reserve established for these matters as of December 31, 2022 and 2021, respectively, which is included within ‘Accounts payable and accrued expenses’ and ‘Other long-term liabilities’ on the Consolidated Balance Sheet.

It is reasonably possible that additional liabilities could be incurred resulting in additional expense, which could have a material impact to our financial results.

The continuing operations provision for income tax consisted of the following (in thousands):

Years Ended December 31,

The continuing operations income tax (expense) benefit consisted of the following (in thousands):

Year ended December 31,

2022 2021 2020

7 unchanged sentences

Total deferred 12,991 21,447 ( 307 )

Total provision $ ( 14,199 ) $ 38,350 $ 13,760

Income tax (expense) benefit from continuing operations $ ( 57,957 ) $ 14,199 $ ( 38,350 )

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

A reconciliation of the statutory federal income tax rate with the Company’s continuing operations effective income tax rate is as follows:

Years Ended December 31,

Year ended December 31,

2022 2021 2020

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Effective tax rates 44.2 % ( 4.0 ) % 48.9 %

The effective tax rate for continuing operations the year ended December 31, 2021 differs from the federal statutory rate primarily due to a book-tax difference related to the $ 298.5 million of book income recognized related to the Company’s shares held in Consensus stock.

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

Additional reasons the effective tax rate differs from the federal statutory tax rate include the impact of a decrease in the net reserve for uncertain tax positions during 2021 and a reduction in the valuation allowance on deferred tax assets related to realized and unrealized capital losses.

The effective tax rate for continuing operations for the year ended December 31, 2022 differs from the federal statutory rate primarily due to a book-tax difference related to the loss recognized for accounting purposes related to the Company’s shares held in Consensus stock.

The Company recognized a deferred tax liability resulting in tax expense of $ 13.4 million on the outside basis difference between the book basis exceeding the tax basis of the Investment in Consensus on October 7, 2022 due to future disposals of the shares being subject to tax based on guidance and requirements set out by the Internal Revenue Service.

Additional reasons the effective tax rate differs from the federal statutory tax rate is due to income earned in the United States also being subject to income taxes in various state jurisdictions with statutory tax rates that can range from 2.5 percent to 11.5 percent.

This increase in the effective income tax rate is offset by a decrease in the net reserve for uncertain tax positions during 2022 and a tax benefit claimed in the United States related to a deduction for foreign-derived intangible income.

The decrease in the reserve for uncertain tax positions is primarily due to the lapse of the statute of limitations for U.S.

tax reserves.

The effective tax rate for continuing operations for 2021 differs from the federal statutory rate primarily due to a book-tax difference related to the $ 298.5 million of book income recognized related to the Company’s shares held in Consensus stock.

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

Additionally, the Company recorded a decrease in the net reserve for uncertain tax positions during 2021 and a reduction in the valuation allowance on deferred tax assets related to realized and unrealized capital losses.

The decrease in the reserve for uncertain tax positions is primarily due to the lapse of the statute of limitations for U.S.

tax reserves.

The reduction in the valuation allowance is primarily due to an increase in unrealized capital gains on investments held by the Company which can provide a source of capital gain income in future years to realize the benefit of the capital losses.

The effective tax rate for continuing operations for 2020 differs from the federal statutory rate primarily due to the Company recording a net increase in the reserve for uncertain tax positions during 2020 and recording a valuation allowance for a capital loss recognized due to the sale of assets related to its Voice business unit in Australia and New Zealand and the impairment of certain U.S.

The effective tax rate for 2019 differs from the federal statutory rate primarily due to a net increase in the reserve for uncertain tax positions related to prior years and the impacts of the jurisdictional mix of income and disallowance of certain losses and expenses.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

Deferred tax assets and liabilities result from differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities.

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Deferred tax assets:

Net operating loss carryforwards $ 28,393 $ 21,134

Net operating loss and other carryforwards $ 19,513 $ 28,393

Tax credit carryforwards 4,222 2,801

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Share-based compensation expense 3,885 3,545

Impairment of investments — 6,714

Operating lease liabilities 16,756 21,771

Basis difference in fixed assets 14,642 —

Deferred revenue 2,994 4,331

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Basis difference in property and equipment $ — $ ( 8,337 )

Operating lease right-of-use assets ( 14,008 ) ( 16,696 )

Basis difference in intangible assets ( 101,797 ) ( 117,244 )

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Net deferred tax liabilities $ ( 70,484 ) $ ( 103,065 )

The Company had approximately $ 65.1 million and $ 72.6 million in deferred tax assets from continuing operations as of December 31, 2021 and 2020, respectively, related primarily to net operating loss carryforwards, basis difference in intangible assets including differences related to intra-entity transfers, tax credit carryforwards and accrued expenses treated differently between its financial statements and its tax returns.

The Company had approximately $ 80.8 million and $ 81.8 million in deferred tax assets from continuing operations as of December 31, 2022 and 2021, respectively, related primarily to net operating loss, operating lease liabilities, interest expense and capital loss carryforwards, tax credit carryforwards, capitalized research and development expenses and accrued expenses treated differently between its financial statements and its tax returns.

Based on the weight of available evidence, the Company assesses whether it is more likely than not that some portion or all of a deferred tax asset will not be realized.

2 unchanged sentences

The Company had a valuation allowance on deferred tax assets from continuing operations of $ 1.7 million and $ 1.8 million as of December 31, 2022 and 2021, respectively.

The valuation allowance decreased $ 6.5 million as a result of the release of valuation allowance related to the impairment and sales of investments that would result in a capital loss in the year of sale.

The deduction for the capital losses would be limited to other capital gains recognized during the year.

A $ 6.3 million valuation allowance was recorded in 2020 related to these items.

During 2021, the Company recognized unrealized capital gains at its investments that provided a sufficient source of future income to be more likely than not to realize the deferred tax assets related to capital losses.

As of December 31, 2021, the Company had federal net operating loss carryforwards (“NOLs”) of $ 37.2 million , after considering substantial restrictions on the utilization of these NOLs due to “ownership changes”, as defined in the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”).

The valuation allowance related to net operating loss and capital loss carryforward in certain foreign jurisdictions decreased $ 0.1 million primarily as a result of re-measurement due to tax rate changes.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

The rollforward of the valuation allowance on the deferred tax assets from continuing operations is as follows (in thousands):

Year ended December 31,

2022 2021 2020

Beginning balance $ 1,812 $ 8,262 $ 563

Charges to costs and expenses

Write-offs and recoveries ( 113 ) ( 6,628 ) ( 1,757 )

Ending balance $ 1,699 $ 1,812 $ 8,262

As of December 31, 2022, the Company had federal net operating loss carryforwards (“NOLs”) of $ 22.8 million, after considering substantial restrictions on the utilization of these NOLs due to “ownership changes”, as defined in the Internal Revenue Code of 1986, as amended.

The Company estimates that all of the above-mentioned federal NOLs will be available for use before their expiration.

$ 36.7 million of NOLs for losses incurred prior to January 1, 2018 expire through the year 2037 and $ 0.5 million of the NOLs carry forward indefinitely depending on the year the loss was incurred.

As of December 31, 2021 and 2020, the Company has interest expense limitation carryovers of $ 23.3 million and $ 0 , respectively, which last indefinitely.

The Company also has federal capital loss limitation carryforwards as of December 31, 2021 and 2020 of $ 28.7 million and $ 0 , respectively that begin to expire in 2031.

$ 20.7 million of the NOLs expire through the year 2037 and $ 2.1 million of the NOLs carry forward indefinitely depending on the year the loss was incurred.

As of December 31, 2022 and 2021, the Company’s deferred tax assets include interest expense limitation carryovers of $ 6.4 million and $ 23.3 million, respectively, which last indefinitely.

The Company also has federal capital loss limitation carryforwards as of December 31, 2022 and 2021 of $ 24.1 million and $ 28.7 million, respectively that begin to expire in 2031.

In addition, as of December 31, 2022 and 2021, we had available state research and development tax credit carryforwards of $ 3.5 million and $ 5.1 million, respectively, which last indefinitely.

The Company has no foreign tax credit carryforwards as of December 31, 2021 and 2020.

The Company had no foreign tax credit carryforwards as of December 31, 2022 and 2021.

The Company has not provided for deferred taxes on approximately $ 307.8 million of undistributed earnings from foreign subsidiaries as of December 31, 2022.

The Company has not provided for any additional deferred taxes with respect to items such as foreign withholding taxes, state income tax or foreign exchange gain or loss that would be due when cash is actually repatriated to the U.S.

The Company has not provided any additional deferred taxes with respect to items such as foreign withholding taxes, state income tax or foreign exchange gain or loss that would be due when cash is actually repatriated to the U.S.

because those foreign earnings are considered permanently reinvested in the business or may be remitted substantially free of any additional taxes.

Because of the various avenues in which to repatriate the earnings, the determination of the amount of the unrecognized deferred tax liability related to the undistributed earnings if eventually remitted is not practicable.

Cash paid for income taxes net of refunds received for continuing operations and discontinued operations was $ 61.2 million, $ 45.0 million and $ 45.9 million for the year ended December 31, 2021, 2020 and 2019, respectively.

Certain tax payments are prepaid during the year and included within prepaid expenses and other current assets on the Consolidated Balance Sheet.

The Company’s prepaid tax payments were $ 0.8 million and $ 3.0 million at December 31, 2021 and 2020, respectively.

Income from continuing operations before income taxes included income from domestic operations of $ 279.7 million , $( 2.0 ) million and $ 1.4 million for the years ended December 31, 2021, 2020 and 2019, respectively, and income from foreign operations of $ 71.7 million, $ 80.4 million and $ 53.4 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Because of the various avenues in which to repatriate the earnings, it is not practicable to determine the amount of the unrecognized deferred tax liability related to the undistributed earnings if eventually remitted.

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

The Company’s prepaid taxes were $ 3.2 million and $ 0.8 million at December 31, 2022 and 2021, respectively.

Income (loss) from continuing operations before income taxes included income from domestic operations of $ 71.8 million, $ 279.7 million , $( 2.0 ) million for the years ended December 31, 2022, 2021 and 2020, respectively, and income from foreign operations of $ 59.4 million, $ 71.7 million and $ 80.4 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Uncertain Income Tax Positions

7 unchanged sentences

As of December 31, 2020, the total amount of unrecognized tax benefits for continuing operations was $ 46.0 million, of which $ 44.9 million, if recognized, would affect the Company’s effective tax rate.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

The aggregate changes in the balance of unrecognized tax benefits, which excludes interest and penalties, for 2022, 2021 and 2020, is as follows (in thousands):

Years Ended December 31,

Year ended December 31,

2022 2021 2020

6 unchanged sentences

Ending balance $ 34,208 $ 39,527 $ 46,032

The Company includes interest and penalties related to unrecognized tax benefits within the provision for income taxes.

As of December 31, 2021, 2020 and 2019, the total amount of interest and penalties accrued was $ 5.7 million, $ 7.2 million, and $ 5.0 million, respectively, which is classified as a liability for uncertain tax positions on the Consolidated Balance Sheets.

The Company includes interest and penalties related to unrecognized tax benefits within ‘Income tax expense’ on the Consolidated Statements of Operations.

As of December 31, 2022, 2021 and 2020, the total amount of interest and penalties accrued was $ 6.3 million, $ 5.7 million, $ 7.2 million, respectively, which is classified as a liability for uncertain tax positions on the Consolidated Balance Sheets.

In connection with the liability for unrecognized tax benefits, the Company recognized interest and penalty expense (benefit) in 2022, 2021 and 2020 of $ 0.7 million, $( 1.5 ) million and $ 2.8 million, respectively.

8 unchanged sentences

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

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

The Company disagrees with the Notice and has filed a petition with the United States Tax Court on May 24, 2021 and has continued to work with the IRS to reach a conclusion.

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

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

The Company responded to the inquiries from the FTB.

The tax years remain open pending the outcome of the IRS audit for such tax years.

As of December 31, 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.

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

The tax years remain open pending the outcome of the IRS audit for such tax years.

On October 2022, the Company signed an additional extension of the statute of limitations for tax years 2015 to 2017 to September 2023.

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

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

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

If the recorded uncertain tax positions are adequate to cover the associated tax liabilities, the Company would be required to record any excess as reduction in tax expense in the relevant period, which could be material.

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

If the recorded uncertain tax positions were

ZIFF DAVIS, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

adequate to cover the associated tax liabilities, the Company would be required to record any excess as reduction in tax expense in the relevant period, which could be material.

However, it is not currently possible to estimate the amount, if any, of such change.

Stockholders’ Equity

Common Stock Repurchase Program

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

Prior to 2018, there were 2,873,920 shares available under the 2012 Program.

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

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

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

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

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

On August 6, 2020, the Company’s Board of Directors approved a program authorizing the repurchase of up to ten million shares of our common stock through August 6, 2025 (the “2020 Program”) in addition to the five million shares repurchased under the 2012 Program.

The Company entered into a Rule 10b5-1 trading plan and during the years ended December 31, 2021 and December 31, 2020, the Company repurchased 445,711 and 2,490,599 shares, respectively, at an aggregate cost of $ 47.7 million and $ 177.8 million, respectively, (including an immaterial amount of commission fees) under the 2020 Program, which were subsequently retired.

During January 2022, the Company repurchased 554,289 shares at an aggregate cost of $ 58.7 million (including an immaterial amount of commission fees) under the 2020 Program (see Note 23 - Subsequent Events).

As a result of the Company’s share repurchase programs, the number of shares available for purchase as of December 31, 2021 is 7,063,690 shares of the Company’s common stock.

In connection with the Consensus spin-off, the Company called its 3.25 % Convertible Notes for redemption and during the year ended December 31, 2021, the Company issued 3,050,850 shares of the Company’s common stock, respectively, in connection with that redemption (see Note 10 - Debt).

During the year ended December 31, 2020, the Company repurchased 1,140,819 shares at an aggregate cost of $ 87.5 million under the 2012 Program, which were subsequently retired in the same year.

As of December 31, 2020, all of the available shares were repurchased under the 2012 Program.

On August 6, 2020, the Company’s Board of Directors approved a program authorizing the repurchase of up to ten million shares of the Company’s 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, 2022, 2021 and 2020 to execute repurchases under the 2020 Program.

During the years ended December 31, 2022, 2021 and 2020, the Company repurchased 736,536 , 445,711 and 2,490,599 shares, respectively, at an aggregate cost of $ 71.3 million, $ 47.7 million and $ 177.8 million, respectively (including an immaterial amount of commission fees) under the 2020 Program.

These shares were subsequently retired.

Cumulatively as of December 31, 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.

As a result of the repurchases, the number of shares of the Company’s common stock available for purchase as of December 31, 2022 was 6,327,154 shares.

In connection with the Separation, the Company called its 3.25 % Convertible Notes for redemption and during the year ended December 31, 2021, the Company issued 3,050,850 shares of the Company’s common stock in connection with that redemption (see Note 10 - Debt ).

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 years ended December 31, 2021, December 31, 2020 and December 31, 2019, the Company purchased and retired 251,946 , 111,451 and 71,077 shares, respectively, from plan participants for this purpose.

No dividends were declared in during fiscal years 2021 and 2020.

The following is a summary of each dividend declared during fiscal year 2019:

Declaration Date Dividend per Common Share Record Date Payment Date

February 6, 2019 $ 0.4450 February 25, 2019 March 12, 2019

May 2, 2019 $ 0.4550 May 20, 2019 June 4, 2019

Future dividends are subject to Board approval.

Based on the significant number of current investment opportunities within the Company’s portfolio of businesses and the historic returns from prior investments, the Board of Directors suspended dividend payments for the foreseeable future.

During the years ended December 31, 2022, 2021 and 2020, the Company purchased and retired 72,886 , 251,946 and 111,451 shares, respectively, at an aggregate cost of approximately $ 7.0 million, $ 30.6 million and $ 10.4 million, respectively, from plan participants for this purpose.

Stock Based Compensation

The Company’s share-based compensation plans include the 2007 Stock Plan (the “2007 Plan”), 2015 Stock Option Plan (the “2015 Plan”) and 2001 Employee Stock Purchase Plan (the “Purchase Plan”).

The Company’s share-based compensation plans include the 2015 Stock Option Plan (the “2015 Plan”) and 2001 Employee Stock Purchase Plan (the “Purchase Plan”).

Each plan is described below.

The 2007 Plan provides for the granting of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units and other share-based awards.

4,500,000 shares of the Company’s common stock are authorized to be used for 2007 Plan purposes.

Options under the 2007 Plan may be granted at exercise prices determined by the Board of Directors, provided that the exercise prices shall not be less than the fair market value of the Company’s common stock on the date of grant for incentive stock options and not less than 85 % of the fair market value of the Company’s common stock on the date of grant for non-statutory stock options.

As of December 31, 2021, 5,439 shares underlying options and zero shares of restricted units were outstanding under the 2007 Plan.

The 2007 Plan terminated on February 14, 2017.

The 2015 Plan provides for the granting of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance share units and other share-based awards.

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As of December 31, 2022, 435,135 shares underlying options and 464,354 shares of restricted stock units were outstanding under the 2015 Plan.

In connection with the Consensus separation and pursuant to the anti-dilution provisions of the 2007 Plan and the 2015 Plan, the number of shares underlying each stock-based award outstanding as of the date of the Separation was multiplied by a factor of approximately 1.09 and the related exercise price for the stock options was divided by a factor of approximately 1.09 , which was intended to preserve the intrinsic value of the awards prior to the Separation.

Further, the price targets for the Company’s market-based restricted stock awards were reduced by $ 21.41 .

At December 31, 2022, there were 1,496,619 additional shares underlying options, shares of restricted stock and other share-based awards available for grant under the 2015 Plan.

In connection with the Separation and pursuant to the anti-dilution provisions of the 2015 Plan, the number of shares underlying each stock-based award outstanding as of the date of the Separation was multiplied by a factor of approximately 1.09 and the related exercise price for the stock options was divided by a factor of approximately 1.09 , which was intended to preserve the intrinsic value of the awards prior to the Separation.

Further, the price targets for the Company’s market-based restricted stock units were reduced by $ 21.41 .

These adjustments to the Company’s equity compensation awards did not result in additional compensation expense.

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Stock options generally expire after 10 years and vest over a 5-year period.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

All stock option grants are approved by “outside directors” within the meaning of Internal Revenue Code Section 162(m).

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Options outstanding at January 1, 2020

Exercised ( 189,436 ) 32.39

Options outstanding at December 31, 2019 518,341 $ 65.77

518,341 $ 65.77

Exercised ( 42,740 ) 23.11

Options outstanding at December 31, 2020

475,601 $ 69.61

Exercised ( 70,776 ) 41.63

2 unchanged sentences

Options outstanding at December 31, 2021

440,574 $ 68.45

Granted — $ —

Exercised ( 5,439 ) $ 27.15

Canceled — $ —

Options outstanding at December 31, 2022

435,135 $ 68.97 5.0 $ 4,407,918

Exercisable at December 31, 2022 217,567 $ 68.97 5.0 $ 2,203,954

Vested and expected to vest at December 31, 2022

(1) As noted above, in connection with the Consensus separation and pursuant to the anti-dilution provisions of the 2007 Plan and the 2015 Plan, the number of shares underlying each stock option outstanding as of the date of the Separation was multiplied by a factor of approximately 1.09 and the related exercise price for the stock options was divided by a factor of approximately 1.09 , which was intended to preserve the intrinsic value of the awards prior to the Separation.

396,185 $ 68.97 5.0 $ 4,013,353

(1) As noted above, in connection with the Consensus separation and pursuant to the anti-dilution provisions of the 2015 Plan, the number of shares underlying each stock option outstanding as of the date of the Separation was multiplied by a factor of approximately 1.09 and the related exercise price for the stock options was divided by a factor of approximately 1.09 , which was intended to preserve the intrinsic value of the awards prior to the Separation.

The total intrinsic values of options exercised during the years ended December 31, 2022, 2021 and 2020 was $ 0.4 million, $ 5.8 million and $ 3.0 million, respectively.

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Options Outstanding Exercisable Options

Exercise Prices Number Outstanding December 31, 2021 Weighted

$ 27.15 5,439 0.17 years $ 27.15 5,439 $ 27.15

68.97 435,135 6.00 years 68.97 163,175 68.97

$ 27.15 - $ 68.97

Exercise Price Number Outstanding December 31, 2022 Weighted

$ 68.97 435,135 5.0 years $ 68.97 217,567 $ 68.97

At December 31, 2021, there were 1,709,569 additional shares underlying options, shares of restricted stock and other share-based awards available for grant under the 2015 Plan.

As of December 31, 2022, there was $ 3.9 million of total unrecognized compensation expense related to nonvested share-based compensation options granted under the 2015 Plan.

That expense is expected to be recognized ratably over a weighted average period of 3.0 years (i.e., the remaining requisite service period).

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Fair Value Disclosure

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The Company uses an annualized dividend yield based upon the per share dividends declared by its Board of Directors.

There were no dividends declared during the years ended December 31, 2022, 2021 and 2020.

Estimated forfeiture rates were 13.0 %, 12.4 % and 13.0 % as of December 31, 2022, 2021 and 2020, respectively.

2 unchanged sentences

Compensation expense resulting from restricted stock and restricted unit grants is measured at fair value on the date of grant and is recognized as share-based compensation expense over the applicable vesting period.

Vesting periods are approximately one year for awards to members of the Company’s Board of Directors, four or five years for senior staff (excluding market-based awards discussed below) and eight years for the Chief Executive Officer.

The Company granted 154,022 , 246,251 and 129,786 shares of restricted stock and restricted units (excluding awards with market conditions below) during the years ended December 31, 2022, 2021 and 2020, respectively.

Restricted Stock and Restricted Stock Units with Market Conditions

The Company has awarded certain key employees market-based restricted stock awards pursuant to the 2015 Plan.

The Company has awarded certain key employees market-based restricted stock and market-based restricted stock units 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.

1 unchanged sentence

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 years ended December 31, 2021, 2020, and 2019 the Company awarded 73,094 , 82,112 , and 74,051 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 years ended December 31, 2021, 2020 and 2019 were $ 94.40 , $ 70.99 and $ 69.99 , respectively.

The weighted-average fair values of market-based restricted stock awards granted have been estimated utilizing the following assumptions:

December 31, 2021 December 31, 2020 December 31, 2019

During the years ended December 31, 2022, 2021, and 2020 the Company awarded 100,193 , 73,094 and 82,112 market-based restricted stock units, respectively.

The per share weighted average grant-date fair values of the market-based restricted stock units granted during the years ended December 31, 2022, 2021 and 2020 were $ 87.11 , $ 94.40 and $ 70.99 , respectively.

The weighted-average fair values of market-based restricted stock units granted have been estimated utilizing the following assumptions:

2022 2021 2020

Underlying stock price at valuation date $ 99.32 $ 113.27 $ 91.17

1 unchanged sentence

Risk-free interest rate 1.8 % 1.3 % 0.7 %

Restricted stock award activity for the years ended December 31, 2021, 2020 and 2019 is set forth below:

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

Restricted stock activity for the years ended December 31, 2022, 2021 and 2020 is set forth below:

Shares Weighted-Average

Nonvested at January 1, 2020

1,105,059 $ 64.76

Granted 1,268 98.63

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Nonvested at December 31, 2020

Granted 1,268 98.63

820,566 $ 62.66

Vested ( 435,529 ) 60.52

Canceled ( 33,194 ) 83.23

Adjustment due to Consensus Separation (1)

Nonvested at December 31, 2021

383,963 $ 62.66

Vested ( 67,762 ) 80.64

Canceled ( 4,920 ) 84.77

Adjustment due to Consensus Separation (1)

Nonvested at December 31, 2022 311,281 $ 59.90

(1) As noted above, in connection with the Consensus separation and pursuant to the anti-dilution provisions of the 2007 Plan and the 2015 Plan, the number of shares underlying each restricted stock award outstanding as of the date of the Separation was multiplied by a factor of approximately 1.09 and the market condition stock price target for marked-based restricted stock awards was also adjusted.

(1) As noted above, in connection with the Consensus separation and pursuant to the anti-dilution provisions of the 2015 Plan, the number of shares underlying each restricted stock award outstanding as of the date of the Separation was multiplied by a factor of approximately 1.09 and the market condition stock price target for marked-based restricted stock awards was also adjusted.

ZIFF DAVIS, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

Restricted stock unit activity for the years ended December 31, 2022, 2021 and 2020 is set forth below:

9 unchanged sentences

Canceled ( 60,201 )

Adjustment due to Consensus Separation (1)

Outstanding at December 31, 2021

2 unchanged sentences

Canceled ( 35,081 )

Adjustment due to Consensus Separation (1)

Outstanding at December 31, 2022 464,354 2.61 $ 36,730,401

Vested and expected to vest at December 31, 2022 334,674 2.12 $ 26,472,675

(1) As noted above, in connection with the Consensus separation and pursuant to the anti-dilution provisions of the 2007 Plan and the 2015 Plan, the number of shares underlying each restricted stock unit outstanding as of the date of the Separation was multiplied by a factor of approximately 1.09 and the market condition stock price target for marked-based restricted stock units was also adjusted.

As of December 31, 2021, the Company had unrecognized share-based compensation cost of $ 44.3 million associated with these awards.

This cost is expected to be recognized over a weighted-average period of 3.51 for awards and 3.9 for units.

(1) As noted above, in connection with the Consensus separation and pursuant to the anti-dilution provisions of the 2015 Plan, the number of shares underlying each restricted stock unit outstanding as of the date of the Separation was multiplied by a factor of approximately 1.09 and the market condition stock price target for marked-based restricted stock units was also adjusted.

As of December 31, 2022, the Company had unrecognized share-based compensation cost of $ 40.1 million associated with these restricted stock and restricted stock units.

This cost is expected to be recognized over a weighted-average period of 2.8 years for restricted stock and 3.4 years for restricted stock units.

The total fair value of restricted stock and restricted stock units vested during the years ended December 31, 2022, 2021 and 2020 was $ 12.4 million, $ 68.1 million and $ 18.6 million, respectively.

The actual tax benefit realized for the tax deductions from the vesting of restricted stock awards and units totaled $ 9.5 million, $ 2.1 million and $ 2.4 million, respectively, for the years ended December 31, 2021, 2020 and 2019.

Share-based compensation is recognized on dividends paid related to nonvested restricted stock not expected to vest, which amounted to approximately zero , zero and $ 0.1 million for the years ended December 31, 2021, 2020, and 2019, respectively.

The actual tax benefit realized for the tax deductions from the vesting of restricted stock and restricted stock units totaled $ 2.8 million, $ 9.5 million and $ 2.1 million, respectively, for the years ended December 31, 2022, 2021 and 2020.

Employee Stock Purchase Plan

3 unchanged sentences

On February 2, 2018, the Company approved an amendment to the Company’s Amended and Restated 2001 Employee Stock Purchase Plan, to be effective May 1, 2018, such that (i) the purchase price for each offering period shall be 85 % of the lesser of the fair market value of a share of common stock of the Company (a “Share”) on the beginning or the end of the offering period, rather than 95 % of the fair market value of a Share at the end of the offering period, and (ii) each offering period will be six months , rather than three months .

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

The Company determined that a plan provision exists which allows for the more favorable of two exercise prices, commonly referred to as a “look-back” feature.

11 unchanged sentences

As of December 31, 2022, 1,155,699 shares were available under the Purchase Plan for future issuance.

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

December 31, 2021 December 31, 2020 December 31, 2019

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

2022 2021 2020

Risk-free interest rate 1.17 % 0.05 % 0.73 %

2 unchanged sentences

Expected volatility 40.7 % 35.0 % 25.3 %

Weighted average volatility 35.00 % 25.33 % 24.63 %

Defined Contribution 401(k) Savings Plan

3 unchanged sentences

For the years ended December 31, 2022, 2021 and 2020, the Company made contributions of $ 5.1 million, $ 4.8 million, and $ 3.3 million, respectively, to these 401(k) Savings Plans.

ZIFF DAVIS, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

Earnings Per Share

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

Years Ended December 31,

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

Year ended December 31,

2022 2021 2020

3 unchanged sentences

( 20 ) ( 326 ) ( 120 )

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

Net income available to the Company’s common shareholders from continuing operations $ 65,446 $ 401,069 $ 28,540

Weighted-average outstanding shares of common stock 45,893,928 46,308,825 47,647,397

Dilutive effect of:

Basic weighted-average outstanding shares of common stock 46,954,558 45,893,928 46,308,825

Effect of dilution:

Equity incentive plans 71,291 311,585 7,537

1 unchanged sentence

— 1,657,232 799,247

Common stock and common stock equivalents 47,862,745 47,115,609 49,025,684

Diluted weighted-average outstanding shares of common stock 47,025,849 47,862,745 47,115,609

Net income per share from continuing operations:

1 unchanged sentence

Diluted $ 1.39 $ 8.38 $ 0.61

Weighted-average shares excluded from diluted weighted-average shares outstanding:

Anti-dilutive stock options and restricted stock — — —

Anti-dilutive convertible debt 5,158,071 — —

(1) Represents unvested share-based payment awards that contain certain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid).

(2) Represents the incremental shares issuable upon conversion of the 3.25 % Convertible Notes due June 15, 2029 (subsequently redeemed in full) and 1.75 % Convertible Notes due November 1, 2026 by applying the treasury stock method when the average stock price exceeds the conversion price of the Convertible Notes (see Note 10 - Debt).

For the years ended December 31, 2021, 2020 and 2019, there were zero options outstanding, respectively, which were excluded from the computation of diluted earnings per share because the exercise prices were greater than the average market price of the common stock.

(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 year ended December 31, 2022.

The dilutive impact of convertible debt was calculated using the treasury stock method for the years ended December 31, 2021 and 2020 (see Note 10 - Debt ).

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:

Cybersecurity and Martech and Digital Media.

In connection with the spin-off of the cloud fax business, the Company revised its reportable segments to reflect how the CODM views the business for making operating and investment decisions and for assessing performance.

Prior to the spin-off, the Company had three reportable segments:

(i) Fax and Martech;

(ii) Voice, Backup, Security, and Consumer Privacy and Protection;

and (iii) Digital Media.

Following the spin-off, the Company has two reportable segments:

(i) Digital Media and (ii) Cybersecurity and Martech.

The Company’s Digital Media business is driven primarily by advertising revenues, has relatively higher sales and marketing expense and has seasonal strength in the fourth quarter.

The Company’s Cybersecurity and Martech business is driven primarily by subscription revenues with relatively stable and predictable margins from quarter to quarter.

The accounting policies of the businesses are the same as those described in Note 2 - Basis of Presentation and Summary of Significant Accounting Policies.

The Company evaluates performance based on revenue, gross margin and profit or loss from operations before income taxes, not including nonrecurring gains and losses and foreign exchange gains and losses.

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

The Company evaluates performance based on revenue and profit or loss from operations.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

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

Years Ended December 31,

7 unchanged sentences

Total revenues $ 1,390,997 $ 1,416,722 $ 1,158,829

Gross profit by reportable segment:

Operating costs and expenses by reportable segment (2) :

Digital Media 880,240 851,807 672,280

Cybersecurity and Martech (3)

Elimination of inter-segment gross profit ( 824 ) ( 229 ) ( 300 )

Total segment gross profit 1,228,764 980,473 863,124

Corporate (1)

262,426 338,464 294,765

Total gross profit 1,228,669 980,426 863,132

Direct costs by reportable segment (2) :

Digital Media 757,053 594,807 540,193

Cybersecurity and Martech 225,740 193,883 187,283

Elimination of inter-segment direct costs ( 824 ) ( 229 ) ( 300 )

Total segment direct costs 981,969 788,461 727,176

Elimination of inter-segment operating expenses ( 801 ) ( 1,189 ) ( 229 )

Total segment operating expenses 1,141,865 1,189,082 966,816

Corporate (1)(3)

50,191 60,300 53,673

Total direct costs 1,061,329 842,086 774,909

Total operating costs and expenses 1,192,056 1,249,382 1,020,489

Operating income by reportable segment:

1 unchanged sentence

Cybersecurity and Martech operating income (3)

50,200 10,147 52,932

Total segment operating income 249,132 227,640 192,012

1 unchanged sentence

( 50,191 ) ( 60,300 ) ( 53,672 )

Total income from continuing operations $ 167,340 $ 138,340 $ 88,223

Income from operations $ 198,941 $ 167,340 $ 138,340

(1) Corporate includes costs associated with general and administrative and other expenses that are managed on a global basis and that are not directly attributable to any particular segment.

(2) Direct costs for each segment include other operating expenses that are directly attributable to the segment, such as employee compensation expense, local sales and marketing expenses, engineering and network operations expense, depreciation and amortization and other administrative expenses.

(3) Beginning in the third quarter of 2020, certain expenses associated with Corporate that were previously allocated to the Digital Media business and Cybersecurity and Martech business for shared costs incurred by Corporate were no longer allocated.

Table above has been recast to remove the impact of certain expenses associated with Corporate that were previously allocated to the Digital Media and Cybersecurity and Martech businesses.

The CODM does not use Balance Sheet and Cash Flow information in connection with operating and investment decisions other than as presented for Digital Media and Cybersecurity and Martech.

(2) Operating expenses for each segment include cost of sales and 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 twelve months ended December 31, 2021, goodwill impairment related to our B2B Backup business is also included within operating costs and expenses for Cybersecurity and Martech.

For the twelve months ended December 31, 2022, the Company had an impairment to goodwill within operating costs and expenses for Digital Media.

(3) For the year ended December 31, 2021, approximately $ 19.2 million of general and administrative costs were reflected as Corporate operating costs and expenses in the Company’s December 31, 2021 Form 10-K, however, should have been reflected as an operating cost for the Cybersecurity and Martech reportable segment.

The Company reclassified these costs in the table above as an operating cost for the Cybersecurity and Martech reportable segment and as a reduction of operating costs for Corporate, as well as the resulting impact in operating income (loss) for Cybersecurity and Martech and Corporate.

The reclassification has no impact on consolidated operating income (loss) from continuing operations for the year ended December 31, 2021.

The CODM does not use Balance Sheet information in connection with operating and investment decisions and as such that information is not presented.

The CODM does use capital expenditures by reportable segment in connection with operating and investment decisions.

Accordingly, the following segment information is presented for Digital Media and Cybersecurity and Martech.

Digital Media $ 2,043,204 $ 2,088,397

Cybersecurity and Martech 1,088,741 905,847

Total assets from reportable segments 3,131,945 2,994,244

Corporate 638,335 103,536

Assets of discontinued operations — 567,551

Total assets $ 3,770,280 $ 3,665,331

ZIFF DAVIS, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

Year ended December 31,

2022 2021 2020

4 unchanged sentences

Corporate 11 — —

Capital expenditures of discontinued operations — 15,252 16,237

Total capital expenditures $ 106,154 $ 113,740 $ 92,552

4 unchanged sentences

Corporate 28 288 3,658

Depreciation and amortization of

discontinued operations — 9,010 22,759

Total depreciation and amortization $ 233,400 $ 258,303 $ 228,737

3 unchanged sentences

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

Years ended December 31,

Year ended December 31,

2022 2021 2020

United States $ 1,181,936 $ 1,187,207 $ 958,833

Canada 33,227 29,770 30,327

Ireland 37,906 32,403 48,729

All other countries 209,061 229,515 199,996

All foreign countries 229,515 199,996 207,328

Total $ 1,390,997 $ 1,416,722 $ 1,158,829

2021 December 31,

Long-lived assets, excluding goodwill and other intangible assets are as follows (in thousands):

Long-lived assets:

2 unchanged sentences

Total $ 218,824 $ 216,826

Supplemental Cash Flows Information

Cash paid for interest on outstanding debt during the years ended December 31, 2021, 2020 and 2019 was $ 54.5 million, $ 106.0 million, and $ 55.4 million, respectively, which is the primary contributor for total cash paid for interest.

Cash paid for income taxes net of refunds received was $ 61.2 million, $ 45.0 million, and $ 45.9 million during the years ended December 31, 2021, 2020 and 2019, respectively.

During the years ended December 31, 2021, 2020 and 2019, the Company recorded the tax benefit from the exercise of stock options and restricted stock as a reduction of its income tax liability of $ 11.3 million, $ 2.9 million, and $ 4.8 million, respectively.

During the year ended December 31, 2021, in a non-cash transaction, the Company exchanged the senior notes due 2028 provided by Consensus with the lenders under the Credit Agreement and Credit Agreement Amendments by and among the subsidiaries of Ziff Davis party thereto as guarantors, Citicorp North America Inc.

and MUFG Union Bank, N.A.

and MUFG Union Bank, N.A., as administrative agent for the lenders, in exchange for the extinguishment of the indebtedness outstanding of $ 485.0 million under the Bridge Loan Facility (see Note 10 - Debt).

During the year ended December 31, 2021, the Company issued 3,050,850 shares of the Company’s common stock under the redemption of the 3.25 % Convertible Notes at a price of approximately $ 390.5 million, net of tax (See Note 14 - Stockholder’s Equity),

In the first quarter of 2020, in a non-cash transaction of $ 18.3 million, the Company exchanged shares of redeemable preferred stock that were previously classified as available-for-sale corporate debt securities for a new series of preferred stock, classified as equity securities without a readily determinable fair value (see Note 5 - Investments).

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

Supplemental Cash Flow Information

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

Year ended December 31,

2022 2021 (1)

Non-cash investing activity:

Property and equipment, accrued but unpaid $ 150 $ 50 $ 3,154

Right-of-use assets acquired in exchange for operating lease obligations $ 4,130 $ 9,850 $ 31,148

Exchange of corporate debt securities (2)

$ — $ — $ 18,326

Disposition of Investment in Consensus (3)

$ 112,286 $ — $ —

Non-cash financing activity:

Debt principal settled in exchange for Investment in Consensus (3)

$ 112,286 $ — $ —

Debt principal settled in exchange for Consensus senior notes due 2028 $ — $ 485,000 $ —

Conversion shares issued as extinguishment cost to redeem 3.25 % Convertible Notes

$ — $ 431,952 $ —

Reacquisition of 3.25 % Convertible Notes, net of tax

$ — $ 390,526 $ —

(1) Combines continuing and discontinued operations.

(2) During the year ended December 31, 2020, the Company exchanged shares of redeemable preferred stock that were previously classified as available-for-sale corporate debt securities for a new series of preferred stock, classified as equity securities without a readily determinable fair value.

Refer to Note 5 - Investments for additional details.

(3) During the year ended December 31, 2022, 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):

Year ended December 31,

2022 2021 2020

Interest paid $ 36,168 $ 54,479 $ 105,962

Income taxes paid, net of refunds $ 59,543 $ 61,162 $ 45,046

Operating cash outflows related to lease liabilities were as follows (in thousands):

Year ended December 31,

2022 2021 2020

Operating cash outflows related to lease liabilities $ 26,921 $ 27,798 $ 27,402

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

Accumulated Other Comprehensive Income

6 unchanged sentences

Other comprehensive income (loss) before reclassifications ( 114 ) ( 21,268 ) ( 21,382 )

Consensus separation — 18,966 18,966

Net current period other comprehensive income (loss) ( 114 ) ( 2,302 ) ( 2,416 )

Balance as of December 31, 2021

$ 169 $ ( 57,391 ) $ ( 57,222 )

Other comprehensive loss before reclassifications 272 ( 32,479 ) ( 32,207 )

Consensus separation — 18,966 18,966

Consensus separation adjustment — 4,056 4,056

Net current period other comprehensive loss 272 ( 28,423 ) ( 28,151 )

2 unchanged sentences

Details about Accumulated Other Comprehensive Loss Components Amount Reclassified from Accumulated Other Comprehensive Loss Affected Line Item in the Statements of Operations

For the years ending December 31,

For the year ending December 31,

2022 2021 2020

4 unchanged sentences

Related Party Transactions

In preparation for and in executing the Separation, the Company incurred approximately $ 23.3 million (excluding costs associated with the debt exchange noted below) of transaction-related costs, before reimbursement by Consensus.

During the year ended December 31, 2021, Ziff Davis received or expects to receive approximately $ 11.7 million (excluding the reimbursement of a portion of the debt exchange noted below) from Consensus resulting in net transaction costs of $ 11.6 million.

As of December 31, 2022, the Company holds approximately 1.1 million shares of the common stock of Consensus, representing approximately 5 % of the Consensus outstanding common stock.

The Company determined that Consensus is no longer a related party after September 30, 2022.

Related party transactions with Consensus through September 30, 2022 are included within the disclosures below.

In preparation for and in executing the Separation, the Company incurred transaction-related costs, some of which were reimbursed by Consensus, of approximately $ 23.3 million (excluding costs associated with the debt exchange noted below), before reimbursement by Consensus.

During the year ended December 31, 2021, Ziff Davis received or expected to receive approximately $ 11.7 million (excluding the reimbursement of a portion of the debt exchange noted below) from Consensus resulting in net transaction costs of $ 11.6 million.

These net transaction-related costs were recorded in ‘General and administrative expenses’ component of ‘Income (loss) from discontinued operations, net of income taxes’ within the Consolidated Statement of Operations.

Consensus also reimbursed Ziff Davis for certain costs associated with the debt exchange in connection with the Separation totaling $ 7.5 million, which was recorded as an offset to the loss on extinguishment of debt on the Consolidated Statement of Operations.

During the year ended December 31, 2021, Consensus also reimbursed Ziff Davis for certain costs associated with the debt exchange in connection with the Separation totaling $ 7.5 million, which was recorded as an offset to the loss on extinguishment of debt on the Consolidated Statement of Operations.

In addition, Consensus paid the Company approximately $ 8.5 million subsequent to the Separation due to excess cash held at the Separation date net of other related items pursuant to the Separation and Distribution Agreement.

In connection with the Separation, Ziff Davis and Consensus entered into several agreements with Consensus that govern the relationship of the parties following the Separation, including a separation and distribution agreement, a transition services agreement, a tax matters agreement, an employee matters agreement, an intellectual property license agreement, and a stockholder and registration rights agreement (the “Agreements”).

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

In connection with the Separation, Ziff Davis and Consensus entered into several agreements that govern the relationship of the parties following the Separation, including a separation and distribution agreement, a transition services agreement, a tax matters agreement, an employee matters agreement, an intellectual property license agreement, and a stockholder and registration rights agreement.

The transition services agreement governs services including certain information technology services, finance and accounting services and human resource and employee benefit services.

The agreed-upon charges for such services are generally intended to allow the providing company to recover all costs and expenses of providing such services and is expected to terminate no later than twelve months following the Separation.

During the year ended December 31, 2021, the Company recorded an offset to expense of approximately $ 2.1 million from Consensus related to the transition services agreement within ‘General and administrative expenses’ within the Consolidated Statements of Operations.

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.

During the years ended December 31, 2022 and 2021, the Company recorded an offset to expense of approximately $ 1.2 million and $ 2.1 million, respectively, from Consensus related to the transition services agreement within ‘General and administrative expenses’ within the Consolidated Statements of Operations.

Further, the Company assigned its lease of office space in Los Angeles, California to Consensus.

Ziff Davis will remain the lessee under this lease and its obligations remain through October 7, 2022, after which time Consensus will take over the lease in full.

During the year ended December 31, 2021, the Company recorded an offset to lease expense of approximately $ 0.5 million related to this lease, however, Consensus paid the landlord directly and not Ziff Davis.

Amounts due from Consensus as of December 31, 2021 was $ 9.3 million, comprised of $ 2.1 million related to services provided under the transition services agreement and $ 7.2 million related to reimbursement of certain transaction related costs and other reimbursements, and is included in within ‘Accounts receivable’ within the Consolidated Balance Sheet.

On September 25, 2017, the Board of the Company authorized the Company’s entry into a commitment to invest $ 200 million in the Fund over several years at a fairly ratable rate.

Ziff Davis remained the lessee under this lease and its obligations remained through October 7, 2022, after which time Consensus took over the lease in full.

During the years ended December 31, 2022 and 2021, the Company recorded an offset to lease expense of approximately $ 1.5 million and $ 0.5 million, respectively, related to this lease, however, Consensus paid the landlord directly and not Ziff Davis.

Amounts due from Consensus as of December 31, 2021 was $ 9.3 million (comprised of $ 2.1 million related to services provided under the transition services agreement and $ 7.2 million related to reimbursement of certain transaction related costs and other reimbursements), and is included in within ‘Accounts receivable’ within the Consolidated Balance Sheets.

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

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

Ressler, Chairman of the Board of Directors of the Company, is indirectly the majority equity holder.

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

The Fund has a six year investment period, subject to certain exceptions.

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

Quarterly Results (unaudited)

The following tables contain selected unaudited Statements of Operations information for each quarter of 2021 and 2020 (in thousands, except share and per share data).

The Company believes that the following information reflects all normal recurring adjustments necessary for a fair presentation of the information for the periods presented.

The operating results for any quarter are not necessarily indicative of results for any future period.

Year Ended December 31, 2021

Revenues $ 408,628 $ 355,145 $ 341,293 $ 311,656

Gross profit 362,910 305,447 292,508 267,804

Net income (loss) from continuing operations 383,612 2,050 ( 23,046 ) 38,779

(Loss) income from discontinued operations, net of income taxes ( 23,106 ) 40,520 38,762 39,143

$ 360,506 $ 42,570 $ 15,716 $ 77,922

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

Basic $ 8.02 $ 0.04 $ ( 0.52 ) $ 0.87

Diluted $ 7.90 $ 0.04 $ ( 0.52 ) $ 0.83

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

Basic $ ( 0.48 ) $ 0.87 $ 0.87 $ 0.88

Diluted $ ( 0.48 ) $ 0.83 $ 0.81 $ 0.84

Net income per common share:

Basic $ 7.54 $ 0.91 $ 0.35 $ 1.75

Diluted $ 7.43 $ 0.88 $ 0.33 $ 1.67

Weighted average shares outstanding:

Basic 47,778,545 46,738,073 44,613,533 44,399,149

Diluted 48,514,588 48,582,585 47,528,902 46,731,872

Year Ended December 31, 2020

Revenues $ 384,055 $ 273,012 $ 250,356 $ 251,406

Gross profit 337,896 230,726 207,201 204,603

Net income from continuing operations 41,962 14,127 1,665 ( 29,094 )

Earnings from discontinued operations, net of income taxes 16,126 46,756 36,436 22,690

Net income (loss) $ 58,088 $ 60,883 $ 38,101 $ ( 6,404 )

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

Basic $ 0.94 $ 0.30 $ 0.04 $ ( 0.61 )

Diluted $ 0.92 $ 0.30 $ 0.04 $ ( 0.61 )

Net income per common share from discontinued operations:

Basic $ 0.36 $ 1.01 $ 0.77 $ 0.47

Diluted $ 0.35 $ 1.01 $ 0.76 $ 0.46

Net income (loss) per common share:

Basic $ 1.30 $ 1.31 $ 0.81 $ ( 0.13 )

Diluted $ 1.27 $ 1.31 $ 0.80 $ ( 0.13 )

Weighted average shares outstanding:

Basic 44,504,222 46,279,515 46,850,944 47,620,774

Diluted 45,642,292 46,309,072 47,437,555 47,620,774

Subsequent Events

The Company completed a purchase of Lifecycle Marketing, acquired January 21, 2022, a UK-based portfolio of pregnancy and parenting brands, including Emma’s Diary and Health Professional Academy.

The initial accounting for this acquisition is incomplete due to the timing of available information and purchase accounting information is still being compiled and is not available for disclosure.

During January 2022, the Company repurchased an additional $ 54.6 million in aggregate principal amount of the 4.625 % Senior Notes.

During January 2022, the Company repurchased 554,289 shares at an aggregate cost of $ 58.7 million (including an immaterial amount of commission fees) under the 2020 Program.

During January 2022, the Court in the Chancery Court Derivative Action approved a settlement of the litigation.

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

Ressler, former Chairman of the Board of Directors of the Company, is indirectly the majority equity holder.

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

During the years ended December 31, 2022, 2021, and 2020, the Company recognized expense for management fees of $ 1.5 million, $ 3.0 million, and $ 3.0 million, net of tax benefit, respectively.

During the years ended 2021 and 2020, the Company received capital call notices from the management of OCV Management, LLC for $ 22.2 million and $ 32.9 million, inclusive of certain management fees, of which $ 22.2 million and $ 31.9 million had been paid as of the end of each respective year.

In connection with the settlement of certain litigation generally related to the Company’s investment in the Fund (see Note 12 - Commitments and Contingencies ), among other terms, no further capital calls were made during 2022 or will be made in the future in connection with the Company’s investment in the Fund, nor will any management fees be paid by the Company to the manager.

During the years ended December 31, 2022, 2021 and 2020, the Company received a distribution from OCV of zero , $ 15.3 million, and zero respectively.

Changes In And Disagreements With Accountants On Accounting And Financial Disclosure

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-K

Item 8. Financial Statements and Supplementary Data