What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-08-04 compared with 2023-05-10 · 317 added, 188 removed, 621 unchanged (45% of the section changed)

4 unchanged sentences

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

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

Cash and cash equivalents $ 679,090 $ 652,793

15 unchanged sentences

Accrued employee related costs 33,659 42,178

Other accrued liabilities 52,702 39,539

Income taxes payable, current 11,052 19,712

Deferred revenue, current 188,725 187,904

Accrued liabilities and other current liabilities 64,439 61,825

Other current liabilities 22,760 22,286

Total current liabilities 436,043 432,448

1 unchanged sentence

Deferred revenue, noncurrent 8,303 9,103

Income taxes payable, noncurrent 8,486 11,675

Deferred income taxes 58,198 79,007

12 unchanged sentences

Authorized 95,000,000 ;

total issued and outstanding 47,286,093 and 47,269,446 shares at March 31, 2023 and December 31, 2022, respectively.

total issued and outstanding 46,402,143 and 47,269,446 shares at June 30, 2023 and December 31, 2022, respectively.

Additional paid-in capital 448,920 439,681

Treasury stock, at cost ( zero and zero shares, at June 30, 2023 and December 31, 2022, respectively).

Retained earnings 1,492,879 1,537,830

7 unchanged sentences

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

Three months ended March 31,

Three months ended June 30, Six months ended June 30,

2023 2022 2023 2022

Total revenues $ 326,016 $ 337,356 $ 633,158 $ 652,424

7 unchanged sentences

Interest expense, net ( 10,483 ) ( 9,569 ) ( 14,963 ) ( 19,859 )

Loss on debt extinguishment, net — ( 1,220 )

Unrealized (loss) gain on short-term investments held at the reporting date, net ( 20,345 ) 8,951

Gain on investments, net 357 —

Gain on debt extinguishment, net — 2,613 — 1,393

Unrealized loss on short-term investments held at the reporting date, net ( 3,196 ) ( 27,317 ) ( 23,541 ) ( 18,366 )

(Loss) gain on investments, net — ( 48,243 ) 357 ( 48,243 )

Other (loss) income, net ( 1,503 ) 6,345 ( 2,411 ) 8,744

Income before income taxes and loss from equity method investment, net 939 30,402

Income tax benefit (expense) 616 ( 5,080 )

Income (loss) before income taxes and loss from equity method investment, net 23,713 ( 30,284 ) 24,652 118

Income tax expense ( 6,461 ) ( 10,051 ) ( 5,845 ) ( 15,131 )

Loss from equity method investment, net ( 573 ) ( 6,101 ) ( 9,755 ) ( 6,886 )

Net (loss) income $ ( 7,627 ) $ 24,537

Net (loss) income per common share:

Net income (loss) $ 16,679 $ ( 46,436 ) $ 9,052 $ ( 21,899 )

Net income (loss) per common share:

Basic $ 0.36 $ ( 0.99 ) $ 0.19 $ ( 0.47 )

8 unchanged sentences

(Unaudited, in thousands)

Three months ended March 31,

Net (loss) income $ ( 7,627 ) $ 24,537

Three months ended June 30, Six months ended June 30,

2023 2022 2023 2022

Net income (loss) $ 16,679 $ ( 46,436 ) $ 9,052 $ ( 21,899 )

Other comprehensive (loss) income, net of tax:

1 unchanged sentence

Consensus separation adjustment — — — 4,056

Change in fair value on available-for-sale investments, net of tax expense of $ 109 for the three months ended March 31, 2023

Change in fair value on available-for-sale investments, net of tax benefit of $ 239 and $ 130 for the three and six months ended June 30, 2023, respectively.

( 713 ) — ( 389 ) —

Other comprehensive income (loss), net of tax 1,755 ( 24,265 ) 5,792 ( 26,474 )

5 unchanged sentences

(Unaudited, in thousands)

Three months ended March 31,

Six months ended June 30,

Cash flows from operating activities:

Net (loss) income $ ( 7,627 ) $ 24,537

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

Net income (loss) $ 9,052 $ ( 21,899 )

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

Depreciation and amortization 111,479 118,943

3 unchanged sentences

Deferred income taxes, net ( 18,330 ) ( 10,266 )

Loss on extinguishment of debt — 1,220

Gain on extinguishment of debt — ( 1,393 )

Loss from equity method investments 9,755 6,886

Unrealized gain (loss) on short-term investments held at the reporting date, net 20,345 ( 8,951 )

Gain on investments, net ( 357 ) —

Unrealized loss on short-term investments held at the reporting date, net 23,541 18,366

(Gain) loss on investments, net ( 357 ) 48,243

Other 3,834 2,106

12 unchanged sentences

Acquisition of businesses, net of cash received ( 9,492 ) ( 92,425 )

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

Proceeds from sale of equity investments 3,174 —

3 unchanged sentences

Payment of debt — ( 72,853 )

Proceeds from term loan — 89,991

Debt extinguishment costs — ( 756 )

Repurchase of common stock ( 62,678 ) ( 76,345 )

Issuance of common stock under employee stock purchase plan 4,724 5,235

Proceeds from exercise of stock options — 148

11 unchanged sentences

(Unaudited, in thousands, except share amounts)

Three months ended March 31, 2023

Three months ended June 30, 2023

Common stock Additional

paid-in Retained other comprehensive Total

paid-in Treasury stock Retained other comprehensive Total

Stockholders’

Shares Amount capital earnings loss Equity

Shares Amount capital Shares Amount earnings loss Equity

Balance, April 1, 2023 47,286,093 $ 473 $ 444,813 — $ — $ 1,530,665 $ ( 81,336 ) $ 1,894,615

Net income — — — — — 16,679 — 16,679

Other comprehensive loss, net of tax expense of $ 239

— — — — — — 1,755 1,755

Issuance of restricted stock, net 9,370 — ( 430 ) — — 73 — ( 357 )

Issuance of shares under employee stock purchase plan 87,098 1 4,724 — — — — 4,725

Repurchase of common stock — — — 980,418 ( 63,900 ) — — ( 63,900 )

Retirement of common stock ( 980,418 ) ( 10 ) ( 9,353 ) ( 980,418 ) 63,900 ( 54,537 ) — —

Share-based compensation — — 9,217 — — — — 9,217

Other, net — — ( 51 ) — — ( 1 ) — ( 52 )

Balance, June 30, 2023 46,402,143 $ 464 $ 448,920 — — $ 1,492,879 $ ( 79,581 ) $ 1,862,682

Three months ended June 30, 2022

Common stock Additional

paid-in Treasury stock Retained other comprehensive Total

Stockholders’

Shares Amount capital Shares Amount earnings loss Equity

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

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

Other comprehensive loss, net of tax expense of zero

— — — — — — ( 24,265 ) ( 24,265 )

Issuance of restricted stock, net 354,407 3 ( 3 ) — — — — —

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

Repurchase of common stock — — — 182,247 ( 12,652 ) — — ( 12,652 )

Retirement of common stock ( 192,111 ) ( 2 ) ( 2,483 ) ( 182,247 ) 12,652 ( 11,050 ) — ( 883 )

Share-based compensation — — 7,703 — — — — 7,703

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

Six months ended June 30, 2023

Common stock Additional

paid-in Treasury stock Retained other comprehensive Total

Stockholders’

Shares Amount capital Shares Amount earnings loss Equity

Balance, January 1, 2023 47,269,446 $ 473 $ 439,681 — $ — $ 1,537,830 $ ( 85,373 ) $ 1,892,611

2 unchanged sentences

— — — — — — 5,792 5,792

Vested restricted stock 53,299 — — — — —

Repurchase and retirement of common stock ( 36,652 ) — ( 3,336 ) 461 — ( 2,875 )

Issuance of restricted stock, net 26,017 — ( 3,766 ) — — 534 — ( 3,232 )

Issuance of shares under employee stock purchase plan 87,098 1 4,724 — — — — 4,725

Repurchase of common stock — — — 980,418 ( 63,900 ) — — ( 63,900 )

Retirement of common stock ( 980,418 ) ( 10 ) ( 9,353 ) ( 980,418 ) 63,900 ( 54,537 ) — —

Share-based compensation — — 17,619 — — — — 17,619

Other, net — — 15 — — — — 15

Balance, March 31, 2023 47,286,093 $ 473 $ 444,813 $ 1,530,665 $ ( 81,336 ) $ 1,894,615

Three months ended March 31, 2022

Balance, June 30, 2023 46,402,143 $ 464 $ 448,920 — — $ 1,492,879 $ ( 79,581 ) $ 1,862,682

Six months ended June 30, 2022

Common stock Additional

paid-in Retained other comprehensive Total

paid-in Treasury stock Retained other comprehensive Total

Stockholders’

Shares Amount capital earnings loss Equity

Shares Amount capital Shares Amount earnings loss Equity

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

1 unchanged sentence

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

Net income — — — 24,537 — 24,537

Net loss — — — — — ( 21,899 ) — ( 21,899 )

Other comprehensive loss, net of tax expense of zero

— — — — — — ( 30,530 ) ( 30,530 )

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

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

Repurchase and retirement of common stock ( 594,661 ) ( 5 ) ( 12,180 ) ( 50,625 ) — ( 62,810 )

Issuance of restricted stock, net 455,792 4 ( 4 ) — — — — —

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

Repurchase of common stock — — — 736,536 ( 71,337 ) — — ( 71,337 )

Retirement of common stock ( 786,772 ) ( 7 ) ( 14,663 ) ( 736,536 ) 71,337 ( 61,675 ) — ( 5,008 )

Share-based compensation — — 14,420 — — — — 14,420

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

Other, net — — ( 16 ) — — ( 3,904 ) 4,056 136

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

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

See Notes to Condensed Consolidated Financial Statements (Unaudited)

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

During the three months ended March 31, 2023 and 2022, the Company recorded an impairment of approximately $ 1.8 million and zero , respectively, primarily related to certain operating lease right-of-use assets.

During the three months ended June 30, 2023 and 2022, and the six months ended June 30, 2023 and 2022, the Company recorded an impairment of approximately $ 0.2 million, $ 0.2 million, $ 2.0 million, and $ 0.2 million, respectively, related to certain operating lease right-of-use assets and other definite-lived intangibles.

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.

1 unchanged sentence

Recent Accounting Pronouncements

Recently issued applicable accounting pronouncements not yet adopted

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

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

Three months ended March 31,

Three months ended June 30, Six months ended June 30,

2023 2022 2023 2022

Digital Media

12 unchanged sentences

Total $ 326,016 $ 337,356 $ 633,158 $ 652,424

The Company has recorded $ 65.1 million and $ 73.1 million of revenue for the three months ended March 31, 2023 and 2022, respectively, which was previously included in the deferred revenue balance as of the beginning of each respective year.

The Company has recorded $ 30.3 million and $ 49.8 million of revenue for the three months ended June 30, 2023 and 2022, respectively, and $ 95.4 million and $ 122.7 million of revenue for the six months ended June 30, 2023 and 2022, respectively, which was previously included in the deferred revenue balance as of the beginning of each respective year.

Transaction Price Allocation to Future Performance Obligations

As of March 31, 2023, the aggregate amount of transaction price that is allocated to future performance obligations was approximately $ 15.8 million and is expected to be recognized as follows:

85 % by December 31, 2023 and 15 % by December 31, 2025.

As of June 30, 2023, the aggregate amount of transaction price that is allocated to future performance obligations was approximately $ 15.6 million and is expected to be recognized as follows:

60 % by December 31, 2023, 38 % by December 31, 2025, and 2 % thereafter.

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

2 unchanged sentences

2023 Acquisitions

The Company completed an immaterial Digital Media acquisition during the three months ended March 31, 2023, paying the purchase price in cash.

The Condensed Consolidated Statement of Operations since the date of the acquisition and the Condensed Consolidated Balance Sheets as of March 31, 2023, reflect the results of operations of the 2023 acquisition.

The initial accounting for the 2023 acquisition 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 Company completed two immaterial Digital Media acquisitions during the six months ended June 30, 2023, paying the purchase price in cash in each transaction.

The Condensed Consolidated Statement of Operations since the date of each acquisition and the Condensed Consolidated Balance Sheets as of June 30, 2023, reflect the results of operations of the 2023 acquisitions.

The initial accounting for the 2023 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 and customer relationships), preliminary acquisition date working capital, and related tax items.

ZIFF DAVIS, INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Goodwill recognized associated with this acquisition during the three months ended March 31, 2023 was $ 3.8 million, all of which is expected to be deductible for income tax purposes.

Approximately $ 4.2 million of definite-lived intangibles were recorded in connection with the acquisition during the three months ended March 31, 2023.

Goodwill recognized associated with these acquisitions during the six months ended June 30, 2023 was $ 6.6 million, all of which is expected to be deductible for income tax purposes.

Approximately $ 7.2 million of definite-lived intangibles were recorded in connection with the acquisitions during the six months ended June 30, 2023.

2022 Acquisitions

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

The Company completed the following acquisitions during the six months ended June 30, 2022, paying the purchase price in cash in each transaction:

(a) a purchase of 100 % of 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;

and (b) two other immaterial Digital Media acquisitions.

During the three months ended March 31, 2023, the purchase price accounting was finalized for these acquisitions.

(b) a purchase of 100 % of 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) two other immaterial Digital Media acquisitions.

During the six months ended June 30, 2023, the purchase price accounting was finalized for these acquisitions.

The Condensed Consolidated Statement of Operations since the date of each acquisition reflects the results of operations of all 2022 acquisitions.

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

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

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

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

Total consideration for these transactions was $ 107.1 million, net of cash acquired and assumed liabilities.

The following table summarizes the allocation of the purchase consideration for all 2022 acquisitions as of March 31, 2022 (in thousands):

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

Assets and Liabilities Valuation

3 unchanged sentences

Trade names 11,902

Customer relationship 9,216

Goodwill 24,156

Customer relationships 22,170

Other intangibles 16,830

Goodwill 81,725

Other long-term assets 11

2 unchanged sentences

Deferred tax liability ( 10,485 )

Other long-term liabilities ( 326 )

Total $ 107,140

1 unchanged sentence

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

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

Goodwill recognized associated with these acquisitions during the six months ended June 30, 2022 was $ 81.7 million, of which $ 1.2 million is expected to be deductible for income tax purposes.

Unaudited Pro Forma Financial Information for All 2022 Acquisitions

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

The supplemental information on an unaudited pro forma financial basis presents the combined results of the Company and its acquisitions during the three months ended March 31, 2022 as if each acquisition had occurred on January 1, 2022 (in thousands, except per share amounts):

Three months ended

March 31, 2022

The supplemental information on an unaudited pro forma financial basis presents the combined results of the Company and its acquisitions during the three and six months ended June 30, 2022 as if each acquisition had occurred on January 1, 2022 (in thousands, except per share amounts):

Three months ended June 30, 2022 Six months ended June 30, 2022

(unaudited) (unaudited)

Revenues $ 343,275 $ 668,309

6 unchanged sentences

(“Consensus”).

Following the Separation, the Company retained shares of Consensus common stock and as of March 31, 2023 and December 31, 2022, the Company held approximately 1.0 million and 1.1 million shares, respectively, of the common stock of Consensus.

As of March 31, 2023 and December 31, 2022, the carrying value of the investment in Consensus was $ 35.3 million and $ 58.4 million, respectively, and was included in ‘Short-term investments’ in the Condensed Consolidated Balance Sheets.

Following the Separation, the Company retained shares of Consensus common stock and as of June 30, 2023 and December 31, 2022, the Company held approximately 1.0 million and 1.1 million shares, respectively, of the common stock of Consensus.

As of June 30, 2023 and December 31, 2022, the carrying value of the investment in Consensus was $ 32.1 million and $ 58.4 million, respectively, and was included in ‘Short-term investments’ in the Condensed Consolidated Balance Sheets.

The Company accounts for its investment in Consensus at fair value under the fair value option, and the related fair value gains and losses are recognized in earnings.

During the three months ended March 31, 2023, the Company sold 52,393 shares of common stock of Consensus in the open market.

Gains (losses) on equity securities were recorded in ‘Unrealized (loss) gain on short-term investments held at the reporting date, net’ in the Condensed Consolidated Statements of Operations’ consisted of the following (in thousands):

Three months ended March 31,

Net (losses) gains during the period $ ( 19,988 ) $ 8,951

gains on securities sold during the period 357 —

Unrealized (losses) gains recognized during the period on short-term investments held at the reporting date, net $ ( 20,345 ) $ 8,951

During the three months ended June 30, 2022, the Company completed the non-cash tax-free debt-for-equity exchange of 2,300,000 shares of its common stock of Consensus for the extinguishment of $ 90.0 million of principal of the Company’s Term Loan Facility (as defined in Note 7 - Debt ), and related interest.

During the three and six months ended June 30, 2023, the Company sold zero and 52,393 shares of common stock of Consensus in the open market.

Losses on equity securities were recorded in ‘Unrealized loss on short-term investments held at the reporting date, net’ in the Condensed Consolidated Statements of Operations consisted of the following (in thousands):

Three months ended June 30, Six months ended June 30,

2023 2022 2023 2022

Net losses during the period $ ( 3,196 ) $ ( 75,560 ) $ ( 23,184 ) $ ( 66,609 )

(losses) gains on securities sold during the period — ( 48,243 ) 357 ( 48,243 )

Unrealized losses recognized during the period on short-term investments held at the reporting date, net $ ( 3,196 ) $ ( 27,317 ) $ ( 23,541 ) $ ( 18,366 )

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.

On May 19, 2023, the Company entered into the Note Amendment Agreement (the “Amendment”) with respect to the same entity.

The Amendment increased the interest rate on the convertible notes to 6 %, extended the maturity date, and subordinated all existing and future obligations, liabilities and indebtedness of the entity to the entity’s senior creditor, as defined in the Amendment.

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

The investment was 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.

As of March 31, 2023, both the carrying value and the maximum exposure of the Company’s investment in corporate debt securities was approximately $ 16.0 million, with a contractual maturity date that is more than one year but less than five years.

As of June 30, 2023, both the carrying value and the maximum exposure of the Company’s investment in corporate debt securities was approximately $ 15.1 million, with a contractual maturity date that is more than one year but less than five years.

As of December 31, 2022, both of the carrying value and the maximum exposure of the Company’s equity method investment in corporate debt securities was approximately $ 15.6 million.

Cumulative gross unrealized gains of investment in corporate debt securities as of March 31, 2023 and December 31, 2022 was approximately $ 1.0 million and $ 0.6 million, respectively.

There were no investments in an unrealized loss position as of March 31, 2023 and December 31, 2022.

As of March 31, 2023 and December 31, 2022, 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 in an investment fund (the “OCV Fund”).

The primary purpose of the OCV Fund is to provide a limited number of select investors with the opportunity to realize long-

Cumulative gross unrealized gains on investment in corporate debt securities as of June 30, 2023 and December 31, 2022 was approximately $ 0.1 million and $ 0.6 million, respectively.

ZIFF DAVIS, INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

term appreciation from public and private companies, with a particular focus on the technology and life science industries.

There were no investments in an unrealized loss position as of June 30, 2023 and December 31, 2022.

As of June 30, 2023 and December 31, 2022, 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 in an investment fund (the “OCV Fund”).

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

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

2 unchanged sentences

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

During both the three months ended March 31, 2023 and 2022, the Company received no distributions from OCV.

During both the six months ended June 30, 2023 and 2022, the Company received no distributions from OCV.

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

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

During the three months ended March 31, 2023 and 2022, the Company recognized a loss from equity method investment of $ 9.2 million and $ 0.8 million, net of tax benefit, respectively.

The loss during the three months ended March 31, 2023 was primarily the result of losses in the underlying investments and the loss during the three months ended March 31, 2022 was related to management fee expense.

During the three months ended March 31, 2023 and 2022, the Company recognized expense for management fees of zero and $ 0.8 million, respectively, net of tax benefit.

As of March 31, 2023, both of the carrying value and the maximum exposure of the Company’s equity method investment was $ 100.0 million.

During the three months ended June 30, 2023 and 2022, the Company recognized a loss from equity method investment of $ 0.6 million and $ 6.1 million, net of tax benefit, respectively.

During the six months ended June 30, 2023 and 2022, the Company recognized a loss from equity method investment of $ 9.8 million and $ 6.9 million, net of tax benefit, respectively.

The losses during the three months ended June 30, 2023 and 2022 and during the six months ended June 30, 2023 and 2022 were primarily the result of losses in the underlying investments and the loss during the three and six months ended June 30, 2022 in connection with management fee expense.

The Company did not recognize management fee expense in 2023.

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

As of June 30, 2023, both of the carrying value and the maximum exposure of the Company’s equity method investment was $ 99.3 million.

As of December 31, 2022, both of the carrying value and the maximum exposure of the Company’s equity method investment was $ 112.3 million.

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

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

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

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

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

The Company has investment in a corporate debt security that does 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 fair value of the corporate debt securities is determined primarily based on significant estimates and assumptions, including Level 3 inputs.

As of March 31, 2023 and December 31, 2022, the fair value was determined based upon various probability-weighted scenarios and included an assumption of a 13 % discount rate as of March 31, 2023 and December 31, 2022, respectively, and a conversion timeframe of approximately one-year.

As of June 30, 2023 and December 31, 2022, the fair value was determined based upon various probability-weighted scenarios which included discount rate assumptions between 12 % - 13 %, depending on the probability scenario.

In addition, the determination of fair value included a conversion timeframe of one to three years , depending on probability scenario, as of June 30, 2023 and approximately one-year as of December 31, 2022.

The fair value of the Company’s 4.625 % Senior Notes and 1.75 % Convertible Notes (as defined in Note 7 - 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.

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

As of March 31, 2023 and December 31, 2022, the contingent consideration was determined using a 100% probability of payout, without any other estimates applied.

As of June 30, 2023 and December 31, 2022, the contingent consideration was determined using a 100% probability of payout at the maximum amount, without any other estimates applied.

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

March 31, 2023 Level 1 Level 2 Level 3 Fair Value Carrying Value

June 30, 2023 Level 1 Level 2 Level 3 Fair Value Carrying Value

Cash equivalents:

2 unchanged sentences

Certificates of deposit — 3,753 — 3,753 3,753

Investment in Consensus 35,259 — — 35,259 35,259

Consensus common stock 32,063 — — 32,063 32,063

Long-term investments:

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Short-term investments:

Investment in Consensus 58,421 — — 58,421 58,421

Consensus common stock 58,421 — — 58,421 58,421

Long-term investments:

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

For the three months ended March 31, 2023 and 2022, 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):

Three months ended

For the six months ended June 30, 2023 and 2022, 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 contingent consideration arrangements and investment in corporate debt securities that are measured at fair value on a recurring basis (in thousands):

Six months ended June 30,

Contingent Consideration Arrangements Corporate Debt Securities Contingent Consideration Arrangements Corporate Debt Securities

2 unchanged sentences

Fair value adjustments (1)

Balance as of March 31 $ 555 $ 16,019 $ 10,087 $ —

(1) The fair value adjustments to the contingent consideration arrangements in the table above were recorded within ‘General and administrative’ on the Condensed Consolidated Statements of Operations during the three months ended March 31, 2023 and 2022.

The fair value adjustments to the corporate debt securities in the table above were recorded within ‘Change in fair value on available-for-sale investments, net’ on the Condensed Consolidated Statements of Comprehensive (Loss) Income during the three months ended March 31, 2023 and 2022.

— ( 519 ) ( 9 ) —

Payments — — ( 2,919 ) —

Balance as of June 30 $ 3,389 $ 15,067 $ 3,047 $ 15,000

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.

4 unchanged sentences

Goodwill and Intangible Assets

The changes in carrying amounts of goodwill for the three months ended March 31, 2023 are as follows (in thousands):

The changes in carrying amounts of goodwill for the six months ended June 30, 2023 are as follows (in thousands):

Digital Media Cybersecurity and Martech Consolidated

1 unchanged sentence

Goodwill acquired (Note 3 )

6,555 — 6,555

Purchase accounting adjustments (1)

( 72 ) — ( 72 )

Foreign exchange translation 247 1,692 1,939

Balance as of March 31, 2023 $ 1,070,891 $ 526,793 $ 1,597,684

Balance as of June 30, 2023 $ 1,072,719 $ 527,177 $ 1,599,896

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

Goodwill as of March 31, 2023 and December 31, 2022 reflects accumulated impairment losses of $ 27.4 million and $ 27.4 million, respectively, in the Digital Media reportable segment.

Goodwill as of June 30, 2023 and December 31, 2022 reflects accumulated impairment losses of $ 27.4 million and $ 27.4 million, respectively, in the Digital Media reportable segment.

Intangible Assets Subject to Amortization

As of March 31, 2023, intangible assets subject to amortization relate primarily to the following (in thousands):

As of June 30, 2023, intangible assets subject to amortization relate primarily to the following (in thousands):

Weighted-Average

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

Amortization expense, included in General and administrative expense on the Condensed Consolidated Statements of Operations, was approximately $ 33.3 million and $ 41.2 million for the three months ended March 31, 2023 and 2022, respectively.

Amortization expense, included in General and administrative expense on the Condensed Consolidated Statements of Operations, was approximately $ 35.3 million and $ 41.8 million for the three months ended June 30, 2023 and 2022, respectively, and $ 68.6 million and $ 83.0 million for the six months ended June 30, 2023 and 2022.

ZIFF DAVIS, INC.

2 unchanged sentences

Long-term debt consists of the following (in thousands):

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

4.625 % Senior Notes

7 unchanged sentences

Total long-term debt $ 1,000,178 $ 999,053

As of March 31, 2023, $ 550.0 million of principal will mature in 2026 and $ 460.0 million of principal will mature in 2030.

As of June 30, 2023, $ 550.0 million of principal will mature in 2026 and $ 460.0 million of principal will mature in 2030.

4.625 % Senior Notes

19 unchanged sentences

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

The Company is in compliance with its debt covenants for the 4.625 % Senior Notes as of March 31, 2023.

The Company is in compliance with its debt covenants for the 4.625 % Senior Notes as of June 30, 2023.

ZIFF DAVIS, INC.

2 unchanged sentences

Repurchases of 4.625 % Senior Notes on the open market were as follows (in thousands):

Three months ended March 31, 2022

Three months ended June 30, 2022 Six months ended June 30, 2022

Principal repurchased $ 21,494 $ 76,103

Aggregate purchase price $ 18,245 $ 73,610

Gain (loss) on repurchase (1)

Gain on repurchase (1)

$ 3,069 $ 1,849

(1) Presented within ‘Gain (loss) on debt extinguishment, net” on the Condensed Consolidated Statements of Operations.

Cumulatively as of March 31, 2023, the Company repurchased approximately $ 290.0 million in aggregate principal of its 4.625 % Senior Notes.

Cumulatively as of June 30, 2023, the Company repurchased approximately $ 290 million in aggregate principal of its 4.625 % Senior Notes.

1.75 % Convertible Notes

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

Under certain conditions set forth in the indenture, the 1.75 % Convertible Notes bear additional interest of 0.50 % per annum payable semiannually in arrears on May 1 and November 1 of each year, beginning on May 1, 2021.

During the three and six months ended June 30, 2023, the Company recorded an additional $ 7.4 million of interest expense related to the 1.75 % Convertible Notes for such additional interest that accumulated through June 30, 2023.

On August 1, 2023, $ 7.0 million of this interest obligation was paid by the Company to the trustee under the indenture for the 1.75 % Convertible Notes which will be payable to holders of record in August 2023.

The Company will record additional interest of approximately $ 0.3 million in the third quarter of 2023 and the Company will pay its remaining obligation of approximately $ 0.7 million on November 1, 2023.

As of August 1, 2023, the Company has complied with the conditions set forth in the indenture.

As such, the cumulative $ 7.7 million interest expense will be non-recurring.

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

6 unchanged sentences

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

As of March 31, 2023 and December 31, 2022, the market trigger conditions did not meet the conversion requirements of the 1.75 % Convertible Notes and, accordingly, the 1.75 % Convertible Notes are classified as long-term debt on our Condensed Consolidated Balance Sheets.

As of March 31, 2023, the conversion rate is 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.

As of June 30, 2023 and December 31, 2022, the market trigger conditions did not meet the conversion requirements of the 1.75 % Convertible Notes and, accordingly, the 1.75 % Convertible Notes are classified as long-term debt on our Condensed Consolidated Balance Sheets.

As of June 30, 2023, the conversion rate is 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.

In addition, upon the occurrence of a “Make-Whole Fundamental Change” (as defined in the 1.75 % Convertible Note Indenture), the Company will increase the conversion rate for a holder that elects to convert its 1.75 % Convertible Notes in connection with such a corporate event in certain circumstances.

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

The Company may not redeem the 1.75 % Convertible Notes prior to November 1, 2026, and no sinking fund is provided for the 1.75 % Convertible Notes.

4 unchanged sentences

and (iv) structurally junior to all existing and future indebtedness and other liabilities incurred by the Company’s subsidiaries.

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

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 5 - Fair Value Measurements ).

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

As of March 31, 2023 and December 31, 2022, the estimated fair value of the 1.75 % Convertible Notes was approximately $ 540.2 million and $ 548.4 million, respectively.

Refer to Note 5 - Fair Value Measurements.

The following table provides additional information related to the 1.75 % Convertible Notes (in thousands):

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

Principal amount of 1.75 % Convertible Notes

4 unchanged sentences

The following table provides the components of interest expense related to the 1.75 % Convertible Notes (in thousands):

Three months ended March 31,

Coupon interest expense $ 2,406 $ 2,406

Three months ended June 30, Six months ended June 30,

2023 2022 2023 2022

Contractual interest expense $ 9,810 $ 2,557 $ 12,216 $ 4,963

Amortization of debt issuance costs 463 451 929 944

17 unchanged sentences

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 March 31, 2023, there were no amounts outstanding under the Credit Agreement.

As of June 30, 2023, there were no amounts outstanding under the Credit Agreement.

ZIFF DAVIS, INC.

4 unchanged sentences

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 March 31, 2023.

The Company is in compliance with its debt covenants for the Credit Agreement as of June 30, 2023.

Debt-for-Equity Exchange

On June 10, 2022, 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 issuance of senior secured term loans under the Credit Agreement (the “Term Loan Facility”), in an aggregate principal amount of $ 90.0 million.

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

The Term Loan Facility bore interest at a base rate equal to the greater of (x) the Federal Funds Effective Rate, as defined in the Credit Agreement, in effect on such day plus 0.5 % per annum, (y) the rate of interest per annum most recently announced by the Agent, as defined in the Credit Agreement, as its U.S.

Dollar "Reference Rate" and (z) one month LIBOR plus 1 %, provided that the base rate for any term loan made under the Credit Agreement shall be greater of clause (x) and (y) above in each case.

During the three and six months ended June 30, 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.

During the three and six months ended June 30, 2022, the Company recorded a loss on extinguishment of debt of approximately $ 0.5 million and $ 0.5 million, respectively, related to the debt-for-equity exchange, which is presented within ‘Gain (loss) on debt extinguishment, net’ on our Condensed Consolidated Statements of Operations.

Commitments and Contingencies

17 unchanged sentences

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.

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - 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.

7 unchanged sentences

It is the Company’s policy to expense as incurred legal fees related to various litigations.

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Non-Income Related Taxes

2 unchanged sentences

The Company is currently under audit or is subject to audit for indirect taxes in various states, municipalities and foreign jurisdictions.

The Company has $ 25.5 million and $ 24.0 million reserve established for these matters as of March 31, 2023 and December 31, 2022, respectively, which is included within ‘Accounts payable’ and ‘Other long-term liabilities’ on the Company’s Condensed Consolidated Balance Sheet.

The Company established reserves for these matters of $ 25.5 million and $ 24.0 million as of June 30, 2023 and December 31, 2022, respectively, which are included within ‘Accounts payable’ and ‘Other long-term liabilities’ on the Company’s Condensed 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.

1 unchanged sentence

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

The Company’s effective tax rate was ( 65.6 )% and 16.7 % for the three months ended March 31, 2023 and 2022, respectively.

The Company’s effective tax rate for the three months ended March 31, 2023 was impacted disproportionately due to the unrealized loss on the Company’s investment in Consensus, net of the gain on investment, during the first quarter of 2023, which resulted in a discrete tax benefit of approximately $ 5.0 million.

Additionally, the Company recognized a discrete tax benefit of approximately $ 1.0 million related to the release of reserves for uncertain tax positions.

Conversely, during the three months ended March 31, 2022, the unrealized gain on the Company’s investment in Consensus resulted in no tax expense recognized.

The gain was not subject to tax since the Company had the ability at that time to dispose of the investment in a tax-free manner based on guidance and requirements set out by the Internal Revenue Service, within the one-year anniversary of the Separation.

As of March 31, 2023 and December 31, 2022, the Company had $ 39.8 million and $ 40.4 million, respectively, in liabilities for uncertain income tax positions included within ‘Other long-term liabilities’ on the Condensed Consolidated Balance Sheets.

The Company’s effective tax rate was 27.2 % and ( 33.2 )% for the three months ended June 30, 2023 and 2022, respectively and 23.7 % and 12,760.8 % for the six months ended June 30, 2023 and 2022, respectively.

The Company’s effective tax rate for the three and six months ended June 30, 2023 was impacted due to the unrealized loss on the Company’s investment in Consensus, which resulted in a discrete tax benefit of approximately $ 0.8 million and $ 5.8 million during the three and six months ended June 30, 2023, respectively.

Conversely, during the three and six months ended June 30, 2022, the unrealized loss on the Company’s investment in Consensus resulted in no tax benefit recognized.

The loss was not subject to tax since the Company had the ability at that time to dispose of the investment in a tax-free manner based on guidance and requirements set out by the Internal Revenue Service, within the one-year anniversary of the Separation.

As of June 30, 2023 and December 31, 2022, the Company had $ 40.3 million and $ 40.4 million, respectively, in liabilities for uncertain income tax positions included within ‘Other long-term liabilities’ on the Condensed Consolidated Balance Sheets.

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

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

The Company’s prepaid taxes were $ 0.8 million and $ 3.2 million as of March 31, 2023 and December 31, 2022, respectively.

The Company had a current portion of income taxes payable of $ 16.9 million and $ 19.7 million as of March 31, 2023 and December 31, 2022, respectively, included within ‘Accounts payable’ on the Condensed Consolidated Balance Sheets.

The Company had a long-term portion of income taxes payable of $ 11.7 million and $ 11.7 million as of March 31, 2023 and December 31, 2022, respectively, included within ‘Other long-term liabilities’ on the Condensed Consolidated Balance Sheets.

Stockholders’ Equity

On August 6, 2020, the Company’s Board of Directors approved a program authorizing the repurchase of up to ten million shares of our common stock through August 6, 2025 (the “2020 Program”).

The Company entered into certain Rule 10b5-1 trading plans during the years ended December 31, 2021 and 2020 to execute repurchases under the 2020 Program.

During the three months ended March 31, 2023 and 2022, the Company repurchased zero and 554,289 shares, respectively, at an aggregate cost of approximately zero and $ 58.7 million, respectively, (including an immaterial amount of commission fees) under the 2020 Program.

These shares were subsequently retired.

Cumulatively as of March 31, 2023, 3,672,846 shares were repurchased at an aggregate cost of $ 296.9 million (including an immaterial amount of commission fees) under the 2020 Program.

These shares were subsequently retired.

As a result of the repurchases, the number of shares available for purchase as of March 31, 2023 is 6,327,154 shares of the Company’s common stock.

Periodically, participants in the Company’s stock plans surrender to the Company shares of stock to pay the exercise price or to satisfy tax withholding obligations arising upon the exercise of stock options or the vesting of restricted stock.

During the three months ended March 31, 2023 and 2022, the Company purchased and retired 36,652 and 40,372 shares at an aggregate cost of approximately $ 2.9 million and $ 4.1 million , respectively, from plan participants for this purpose.

The Company’s prepaid taxes were $ 1.0 million and $ 3.2 million as of June 30, 2023 and December 31, 2022, respectively.

ZIFF DAVIS, INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Stockholders’ Equity

On August 6, 2020, the Company’s Board of Directors approved a program authorizing the repurchase of up to ten million shares of our common stock through August 6, 2025 (the “2020 Program”).

The Company entered into certain Rule 10b5-1 trading plans to execute repurchases under the 2020 Program.

During the three months ended June 30, 2023 and 2022, the Company repurchased 980,418 and 182,247 shares, respectively, under the 2020 Program, at an aggregate cost of approximately $ 63.9 million and $ 12.7 million, respectively (including excise tax).

During the six months ended June 30, 2023 and 2022, the Company repurchased 980,418 and 736,536 shares, respectively, under the 2020 Program, at an aggregate cost of approximately $ 63.9 million and $ 71.3 million, respectively (including excise tax).

Cumulatively as of June 30, 2023, 4,653,264 shares were repurchased under the 2020 Program, at an aggregate cost of $ 360.8 million (including excise tax).

As a result of the repurchases, the number of shares of the Company’s common stock available for purchase as of June 30, 2023 was 5,346,736 shares.

During July 2023, the Company repurchased 105,428 shares of its common stock under the 2020 Program, at an aggregate cost of approximately $ 7.5 million (including excise tax).

As of August 4, 2023, there were 5,241,308 shares of the Company’s common stock available for purchase under the 2020 Program.

The Company accounts for share repurchases on a trade date basis by allocating cost in excess of par value between retained earnings and additional paid-in capital.

The repurchased shares are constructively retired and returned to an authorized but unissued status.

On August 16, 2022, the U.S.

government enacted the Inflation Reduction Act of 2022, which imposed a 1.0% excise tax on share repurchases made after December 31, 2022.

As a result, the Company accrued excise tax in connection with the share repurchases it completed during the three and six months ended June 30, 2023.

During the three months ended June 30, 2023 and 2022, the Company purchased and retired 5,223 and 9,864 shares at an aggregate cost of approximately $ 0.4 million and $ 0.9 million, resp ectively, from plan participants for this purpose.

During the six months ended June 30, 2023 and 2022, the Company purchased and retired 41,875 and 50,236 shares at an aggregate cost of approximately $ 3.2 million and $ 5.0 million , respectively, from plan participants for this purpose.

Share-Based Compensation

4 unchanged sentences

Options under the 2015 Plan may be granted at exercise prices determined by the Board of Directors, provided that the exercise prices shall not be less than the higher of the par value or 100 % of the fair market value of the Company’s common stock subject to the option on the date the option is granted.

As of March 31, 2023, 435,135 shares underlying options and 848,874 shares of restricted stock units were outstanding under the 2015 Plan.

As of June 30, 2023, 435,135 shares underlying options and 849,826 shares of restricted stock units were outstanding under the 2015 Plan.

At June 30, 2023, there were 1,043,255 additional shares underlying options, shares of restricted stock and other share-based awards available for grant under the 2015 Plan.

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Share-Based Compensation Expense

The following table presents the effects of share-based compensation expense in the Condensed Consolidated Statements of Operations during the periods presented (in thousands):

Three months ended March 31,

Three months ended June 30, Six months ended June 30,

2023 2022 2023 2022

Cost of revenues $ 94 $ 142 $ 170 $ 226

2 unchanged sentences

General and administrative 7,127 5,603 13,746 11,038

Total share-based compensation $ 8,402 $ 6,717

As of March 31, 2023, the Company had unrecognized share-based compensation cost of approximately $ 66.2 million associated with these restricted stock awards and restricted stock units.

This cost is expected to be recognized over a weighted-average period of 2.6 for restricted stock awards and 4.2 for restricted stock units.

Total share-based compensation expense $ 9,217 $ 7,703 $ 17,619 $ 14,420

Restricted Stock

2 unchanged sentences

Vesting periods are approximately one year for awards to members of the Company’s Board of Directors, four or five years for senior staff (excluding market-based awards discussed below) and four to eight years for the Chief Executive Officer.

The Company granted 271,614 and 112,324 shares of restricted stock and restricted units (excluding awards with market conditions below) during the three months ended March 31, 2023 and 2022, respectively.

The Company granted 291,159 and 132,117 shares of restricted stock and restricted units (excluding awards with market conditions below) during the six months ended June 30, 2023 and 2022, respectively.

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.

Market conditions were factored into the grant date fair value using a Monte Carlo valuation model, which utilized multiple input variables to determine the probability of the Company achieving the specified stock price targets with a 20 -days and 30 -day lookback (trading days).

Stock-based compensation expense related to an award with a market condition will be recognized over the requisite service period using the graded-vesting method regardless of whether the market condition is satisfied, provided that the requisite service period has been completed.

During the three months ended March 31, 2023, the Company awarded 167,606 market-based restricted stock units at stock price targets ranging from $ 83.61 to $ 103.76 per share.

During the three months ended March 31, 2022, the Company awarded 100,193 market-based restricted stock units at stock price targets ranging from $ 107.97 to $ 138.73 per share.

The per share weighted average grant-date fair values of the market-based restricted stock units granted during the three months ended March 31, 2023 and 2022 were $ 70.07 and $ 87.11 , respectively.

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Share-based compensation expense related to an award with a market condition will be recognized over the requisite service period using the graded-vesting method regardless of whether the market condition is satisfied, provided that the requisite service period has been completed.

During the six months ended June 30, 2023, the Company awarded 167,606 market-based restricted stock units at stock price targets ranging from $ 83.61 to $ 103.76 per share.

During the six months ended June 30, 2022, the Company awarded 100,193 market-based restricted stock units at stock price targets ranging from $ 107.97 to $ 138.73 per share.

The per share weighted average grant-date fair values of the market-based restricted stock units granted during the six months ended June 30, 2023 and 2022 were $ 70.07 and $ 87.11 , respectively.

The weighted-average fair values of market-based restricted stock units granted have been estimated utilizing the following assumptions:

March 31, 2023 March 31, 2022

June 30, 2023 June 30, 2022

Underlying stock price at valuation date $ 77.80 $ 99.32

1 unchanged sentence

Risk-free interest rate 4.1 % 1.8 %

Restricted stock award activity for the three months ended March 31, 2023 is set forth below:

Restricted stock award activity for the six months ended June 30, 2023 is set forth below:

Shares Weighted-Average

1 unchanged sentence

Vested ( 47,484 ) $ 78.37

Nonvested at March 31, 2023

Nonvested at June 30, 2023

263,797 $ 57.71

Restricted stock unit activity for the three months ended March 31, 2023 is set forth below:

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Restricted stock unit activity for the six months ended June 30, 2023 is set forth below:

Shares Weighted-Average

4 unchanged sentences

Canceled ( 5,401 )

Outstanding at March 31, 2023 848,874 3.4 $ 66,508,434

Vested and expected to vest at March 31, 2023 705,218 3.2 $ 54,788,467

Outstanding at June 30, 2023 849,826 3.2 $ 59,538,810

Vested and expected to vest at June 30, 2023 710,196 2.9 $ 49,756,330

As of June 30, 2023, the Company had unrecognized share-based compensation cost of approximately $ 58.9 million associated with these restricted stock awards and restricted stock units.

This cost is expected to be recognized over a weighted-average period of 2.2 years for restricted stock awards and 3.0 years for restricted stock units.

Employee Stock Purchase Plan

The Purchase Plan provides for the issuance of a maximum of two million shares of the Company’s common stock.

Under the Purchase Plan, eligible employees can have up to 15 % of their earnings withheld, up to certain maximums, to be used to purchase shares of the Company’s common stock at certain plan-defined dates.

The price of the Company’s common stock purchased under the Purchase Plan for the offering periods is equal to 85 % of the lesser of the fair market value of a share of common stock of the Company on the beginning or the end of the offering period.

The Company determined that a plan provision exists which allows for the more favorable of two exercise prices, commonly referred to as a “look-back” feature.

The purchase price discount and the look-back feature cause the Purchase Plan to be compensatory and the Company to recognize compensation expense.

The compensation cost is recognized on a straight-line basis over the requisite service period.

The Company used the Black-Scholes option pricing model to calculate the estimated fair value of the purchase right issued under the Purchase Plan.

The expected volatility is based on historical volatility of the Company’s common stock.

The risk-free interest rate is based on U.S.

Treasury zero-coupon issues with a term equal to the expected term of the option assumed at the date of grant.

The Company uses an annualized dividend yield based upon the per share dividends declared by its Board of Directors.

Estimated forfeiture rates were 12.7 % and 11.2 % as of June 30, 2023 and 2022, respectively.

For the six months ended June 30, 2023 and 2022, 87,098 and 76,741 shares were purchased under the Purchase Plan, respectively at a price of $ 54.25 and $ 68.22 per share, respectively.

As of June 30, 2023, 1,068,601 shares were available under the Purchase Plan for future issuance.

The shared-based compensation expense related to the Purchase Plan has been estimated utilizing the following weighted-average assumptions:

June 30, 2023 June 30, 2022

Risk-free interest rate

Expected term (in years)

Expected volatility

35.8 % 41.6 %

ZIFF DAVIS, INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

(Loss) Earnings Per Share

Earnings Per Share

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

Three months ended March 31,

Three months ended June 30,

Basic Diluted Basic Diluted

Numerator for basic and diluted net (loss) income per common share:

Net (loss) income $ ( 7,627 ) $ ( 7,627 ) $ 24,537 $ 24,537

Numerator for basic and diluted net income (loss) per common share:

Net income (loss) $ 16,679 $ 16,679 $ ( 46,436 ) $ ( 46,436 )

Net income available to participating securities (1)

5 unchanged sentences

Equity incentive plans

Convertible debt — — — —

Diluted weighted-average outstanding shares of common stock 46,798,800 46,798,800 46,978,709 46,978,709

Net income (loss) per share $ 0.36 $ 0.36 $ ( 0.99 ) $ ( 0.99 )

(1) Represents unvested share-based payment awards that contain certain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid).

Six months ended June 30,

Basic Diluted Basic Diluted

Numerator for basic and diluted net income (loss) per common share:

Net income (loss) $ 9,052 $ 9,052 $ ( 21,899 ) $ ( 21,899 )

Net income available to participating securities (1)

( 2 ) ( 2 ) — —

1.75 % Convertible Notes interest expense (after-tax)

Net income (loss) available to the Company’s common shareholders $ 9,050 $ 9,050 $ ( 21,899 ) $ ( 21,899 )

Basic weighted-average outstanding shares of common stock 46,892,504 46,892,504 47,016,351 47,016,351

Diluted effect of:

Equity incentive plans

Convertible debt — — — —

Diluted weighted-average outstanding shares of common stock 46,892,504 46,892,504 47,016,351 47,016,351

Net (loss) income per share $ ( 0.16 ) $ ( 0.16 ) $ 0.52 $ 0.51

Net income (loss) per share $ 0.19 $ 0.19 $ ( 0.47 ) $ ( 0.47 )

(1) Represents unvested share-based payment awards that contain certain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid).

For the three months ended March 31, 2023 and March 31, 2022, there were 1,830,097 and zero shares, respectively, of stock options and restricted stock excluded from the calculation of diluted shares as they were anti-dilutive.

For the three months ended March 31, 2023, there were 5,158,071 shares related to convertible debt excluded from the calculation as they were anti-dilutive.

For the three months ended March 31, 2022, these shares were included in diluted shares because they were dilutive under the if-converted method for the diluted net income per share calculation of convertible debt instruments.

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

For the three months ended June 30, 2023 and 2022, there were 1,548,331 and 1,263,394 shares, respectively, of stock options and restricted stock excluded from the calculation of diluted shares as they were anti-dilutive primarily due to the average stock price during the 2023 period and the net loss during the 2022 period.

For the six months ended June 30, 2023 and 2022, there were 1,548,331 and 1,263,394 shares, respectively, of stock options and restricted stock excluded from the calculation of diluted shares as they were anti-dilutive primarily due to the average stock price during the 2023 period and the net loss during the 2022 period.

For the three and six months ended June 30, 2023 and 2022, 5,158,071 shares related to convertible debt were excluded from diluted shares because they were anti-dilutive under the if-converted method for the diluted net income per share calculation of convertible debt instruments.

Segment Information

4 unchanged sentences

The Company evaluates performance based on revenue and profit or loss from operations.

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

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

Three months ended March 31,

Three months ended June 30, Six months ended June 30,

2023 2022 2023 2022

Revenue by reportable segment:

2 unchanged sentences

Elimination of inter-segment revenues ( 50 ) ( 254 ) ( 135 ) ( 507 )

Total segment revenues 307,142 315,068

Corporate (1)

Total revenues $ 326,016 $ 337,356 $ 633,158 $ 652,424

16 unchanged sentences

(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.

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Supplemental Cash Flow Information

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

Three months ended March 31,

Six months ended June 30,

Non-cash investing activity:

1 unchanged sentence

Right-of-use assets acquired in exchange for operating lease obligations $ 311 $ 2,673

Disposition of Consensus common stock (1)

Non-cash financing activity:

Debt principal settled in exchange for Consensus common stock (1)

(1) During the three and six months ended June 30, 2022, the Company disposed $ 138.3 million of its investment in Consensus common stock in exchange for $ 90.0 million of debt and recorded $ 48.2 million of Loss on investment, net.

Supplemental data (in thousands):

Three months ended March 31,

Six months ended June 30,

Interest paid $ 15,443 $ 19,264

Income taxes paid, net of refunds $ 29,966 $ 15,436

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Accumulated Other Comprehensive (Loss) Income

The following table summarizes the changes in accumulated balances of other comprehensive loss (income), net of tax, for the three months ended March 31, 2023 (in thousands):

The following table summarizes the changes in accumulated balances of other comprehensive loss (income), net of tax, for the three months ended June 30, 2023 (in thousands):

Unrealized Gains (Losses) on Investments Foreign Currency Translation Total

Balance as of April 1, 2023 $ 765 $ ( 82,101 ) $ ( 81,336 )

Other comprehensive income ( 713 ) 2,468 1,755

Balance as of June 30, 2023 $ 52 $ ( 79,633 ) $ ( 79,581 )

The following table summarizes the changes in accumulated balances of other comprehensive loss (income), net of tax, for the six months ended June 30, 2023 (in thousands):

Unrealized Gains (Losses) on Investments Foreign Currency Translation Total

Balance as of January 1, 2023 $ 441 $ ( 85,814 ) $ ( 85,373 )

Other comprehensive income ( 389 ) 6,181 5,792

Balance as of March 31, 2023 $ 765 $ ( 82,101 ) $ ( 81,336 )

There were no reclassifications out of accumulated other comprehensive loss for the three months ended March 31, 2023 and 2022, respectively.

Balance as of June 30, 2023 $ 52 $ ( 79,633 ) $ ( 79,581 )

There were no reclassifications out of accumulated other comprehensive loss for the three and six months ended June 30, 2023 and 2022, respectively.

Related Party Transactions

As of March 31, 2023 and December 31, 2022, the Company held approximately 1.0 million and 1.1 million shares of the common stock of Consensus, respectively, representing approximately 5 % of the Consensus outstanding common stock.

As of June 30, 2023 and December 31, 2022, the Company held approximately 1.0 million and 1.1 million shares of the common stock of Consensus, respectively, representing approximately 5 % of the Consensus outstanding common stock.

The Company determined that Consensus was no longer a related party after September 30, 2022.

Related party transactions with Consensus through September 30, 2022 are included within the disclosures below.

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

In preparation for and in executing the Separation, the Company incurred transaction-related costs, some of which were, reimbursed by Consensus.

3 unchanged sentences

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 three months ended March 31, 2022, the Company recorded an offset to expense of approximately $ 1.2 million from Consensus related to the transition services agreement within ‘General and administrative expenses’ within the Condensed Consolidated Statements of Operations.

During the three and six months ended June 30, 2022, the Company recorded an offset to expense of approximately zero and $ 1.2 million, respectively, from Consensus related to the transition services agreement within ‘General and administrative expenses’ within the Condensed Consolidated Statements of Operations.

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

Further, the Company assigned its lease of office space in Los Angeles, California to Consensus.

Ziff Davis remained the lessee under this lease and its obligations remained in place through October 7, 2022, after which time Consensus took over the lease in full.

During the three months ended March 31, 2022, the Company recorded an offset to lease expense of approximately $ 0.4 million related to this lease, however, Consensus paid the landlord directly (other than an immaterial amount of sublease payments from Ziff Davis to Consensus).

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

OCV is considered a related party because it is an investment that is accounted for by the equity method.

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

During the three months ended March 31, 2023 and 2022, the Company recognized expense for management fees of zero and $ 0.8 million, net of tax benefit, respectively.

During both the three months ended March 31, 2023 and 2022, the Company received no distributions from OCV.

During the three months ended June 30, 2023 and 2022, the Company recognized expense for management fees of zero and $ 0.8 million.

During the six months ended June 30, 2023 and 2022, the Company recognized expense for management fees of zero and $ 1.5 million, net of tax benefit, respectively.

During both the six months ended June 30, 2023 and 2022, the Company received no distributions from OCV.

Subsequent Event

On July 31, 2023, the Company made a minority investment in Xyla, Inc., an artificial intelligence company, for $ 25 million in the form of cash and shares of the Company’s common stock.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements