What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-08-04 compared with 2023-05-10 · 123 added, 83 removed, 191 unchanged (52% of the section changed)

19 unchanged sentences

◦ Maintain favorable relationships with critical third-party vendors whose financial condition will not negatively impact the services they provide;

◦ Create compelling digital media content causing increased traffic and advertising levels;

additional advertisers or an increase in advertising spend;

and effectively target digital media advertisements to desired audiences;

◦ Create compelling digital media content causing increased traffic and advertising levels and additional advertisers or an increase in advertising spend, and effectively target digital media advertisements to desired audiences;

◦ Manage certain risks inherent to our business, such as costs associated with fraudulent activity, system failure or security breach;

24 unchanged sentences

Revenues from 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

13 unchanged sentences

The average monthly revenue per subscriber and the churn rate also contribute to insights that contribute to certain of our business planning decisions.

The following table sets forth certain key operating metrics for our Digital Media advertising business for the three months ended March 31, 2023 and 2022:

Three months ended March 31,

The following table sets forth certain key operating metrics for our Digital Media advertising business for the three months ended June 30, 2023 and 2022:

Three months ended June 30,

Net advertising revenue retention (1)

7 unchanged sentences

(3) Represents total gross quarterly advertising revenues divided by advertisers as defined in footnote (2).

The following table sets forth certain key operating metrics for our Digital Media and Cybersecurity and Martech subscription and licensing businesses for the three months ended March 31, 2023 and 2022:

Three months ended March 31,

Three months ended June 30,

2023 2022 (4)

Subscribers (in thousands) (1)

5 unchanged sentences

If the company provides services through a reseller or a partner and the Company does not have visibility into the number of underlying subscribers, the reseller or partner is counted as one subscriber.

(2) Represents quarterly subscription revenues divided by customers in the table above.

(2) Represents quarterly subscription revenues divided by subscribers in the table above.

(3) Churn rate is calculated as (i) the average revenue per subscription in the prior month multiplied by the number of cancellations in the current month, calculated at each business and aggregated;

divided by (ii) subscription revenue in the current month, calculated at each business and aggregated.

For Ookla, the churn rate calculation included in consolidated churn rate calculation includes the sum of the monthly revenue from the specific cancelled agreements in the numerator.

For Ookla, the churn rate calculation included in the consolidated churn rate calculation includes the sum of the monthly revenue from the specific cancelled agreements in the numerator.

(4) Key operating metrics in prior periods in the table above have been adjusted for our Cybersecurity and Martech business as a result of gaining greater transparency on a reseller relationship enabling us to identify the underlying subscribers.

Further, additional adjustments have been made to subscribers in the Cybersecurity and Martech business to further conform to the Company’s subscriber definition.

The following table summarizes the adjustments made to previously reported amounts.

Three months ended

June 30, 2022

Subscribers (in thousands) 82

Average quarterly revenue per subscriber $ (1.95)

Churn rate 0.20 %

Critical Accounting Policies and Estimates

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Our critical accounting policies are described in our 2022 Annual Report on Form 10-K filed with the SEC on March 1, 2023.

During the three months ended March 31, 2023, there were no significant changes in our critical accounting policies and estimates.

During the three and six months ended June 30, 2023, there were no significant changes in our critical accounting policies and estimates.

See Note 1 - Basis of Presentation and Overview to the Notes to Condensed Consolidated Financial Statements included in Part I Item 1 of this Quarterly Report on Form 10-Q for additional description of significant accounting policies of the Company.

Results of Operations for the Three Months Ended March 31, 2023

Results of Operations for the Three and Six Months Ended June 30, 2023

Digital Media

16 unchanged sentences

Moreover, future acquisitions of businesses within this space but with different business models, may impact Cybersecurity and Martech’s overall operating profit margins.

(in thousands, except percentages) Three months ended March 31, Percentage Change

(in thousands, except percentages) Three months ended June 30, Percentage Change Six months ended June 30, Percentage Change

2023 2022 2023 2022

Revenues $ 326,016 $ 337,356 (3.4)% $ 633,158 $ 652,424 (3.0)%

Our revenues consist of revenues from our Digital Media business and Cybersecurity and Martech business.

Our revenues consist of revenues from our Digital Media business and our Cybersecurity and Martech business.

Digital Media revenues primarily consist of advertising revenues and subscriptions earned through the granting of access to, or delivery of, certain data products or services to customers, fees paid for generating business leads, and licensing and sale of editorial content and trademarks.

Cybersecurity and Martech revenues primarily consist of revenues from “fixed” customer subscription revenues and “variable” revenues generated from actual usage of our services.

Our revenues decreased during the three months ended March 31, 2023 compared to the 2022 period primarily due to declines in advertising revenue in our Digital Media business and subscription revenue in our Cybersecurity and Martech businesses, partially offset by a subscription revenue increase in the Digital Media business.

Included in revenue during the three months ended March 31, 2023, was $12.0 million of incremental revenue contributed by businesses acquired during 2022.

Our revenues decreased during the three months ended June 30, 2023 compared to the 2022 period primarily due to a $14.0 million decline in advertising revenue in our Digital Media business and a $5.7 million subscription revenue decline in our Cybersecurity and Martech business, partially offset by a $9.5 million increase in subscription revenue in the Digital Media business.

Our revenues decreased during the six months ended June 30, 2023 compared to the 2022 period primarily due to a $27.9 million decline in advertising revenue in our Digital Media business and a $13.0 million decline in subscription revenue in our Cybersecurity and Martech business, partially offset by an increase of $23.4 million in subscription revenue in the Digital Media business.

Included in revenue during the three and six months ended June 30, 2023 was $9.1 million and $21.1 million, respectively, of incremental revenue contributed by businesses acquired during 2022.

Cost of Revenues

(in thousands, except percentages) Three months ended March 31, Percentage Change

(in thousands, except percentages) Three months ended June 30, Percentage Change Six months ended June 30, Percentage Change

2023 2022 2023 2022

Cost of revenue $ 47,421 $ 46,004 3.1% $ 93,151 $ 92,104 1.1%

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Cost of revenues is primarily comprised of costs associated with content fees, production costs, and hosting costs.

The decrease in cost of revenues for the three months ended March 31, 2023, compared to the 2022 period was driven by the decline in revenue and is primarily due to a decrease in content fees, campaign fulfillment expenses, computer related expenses, and lower software purchases and license fees in the Digital Media business as well as a decrease in outside services fees and employee related expenses in the Cybersecurity and Martech business, partially offset by an increase associated with newly acquired businesses and advertising inventory costs in other Digital Media businesses.

The increase in cost of revenues for the three and six months ended June 30, 2023 compared to the 2022 period was primarily driven by higher advertising-related inventory costs in our Digital Media business, partially offset by lower content fulfillment and similar costs.

Sales and Marketing

(in thousands, except percentages) Three months ended March 31, Percentage Change

(in thousands, except percentages) Three months ended June 30, Percentage Change Six months ended June 30, Percentage Change

2023 2022 2023 2022

Sales and Marketing $ 119,934 $ 123,777 (3.1)% $ 235,854 $ 241,539 (2.4)%

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Our internet-based advertising relationships consist primarily of fixed cost and performance-based (cost-per-impression, cost-per-click and cost-per-acquisition) advertising relationships with an array of online service providers.

The decrease in sales and marketing expenses during the three months ended March 31, 2023 compared to the 2022 period was primarily due to a decrease in product development expenses and sales department related expenses.

The decrease in sales and marketing costs during the three months ended June 30, 2023, compared to the 2022 period was primarily due to a decrease in personnel-related expenses, lower expenses for outside services related to software development and lower revenue share costs.

The decrease in sales and marketing expenses during the six months ended June 30, 2023, compared to the 2022 period was primarily due to a decrease in personnel-related expenses and lower software-related costs.

Research, Development, and Engineering

(in thousands, except percentages) Three months ended March 31, Percentage Change

(in thousands, except percentages) Three months ended June 30, Percentage Change Six months ended June 30, Percentage Change

2023 2022 2023 2022

Research, Development, and Engineering $ 17,817 $ 19,721 (9.7)% $ 35,731 $ 38,148 (6.3)%

1 unchanged sentence

Our research, development, and engineering costs consist primarily of personnel-related expenses.

The decrease in research, development, and engineering costs for the three months ended March 31, 2023 compared to the 2022 period was primarily due to a decrease in engineering costs as more costs were capitalized in 2023 than in 2022.

The decrease in research, development, and engineering costs for the three months ended June 30, 2023, compared to the 2022 period was primarily due to lower engineering costs as more costs were capitalized in 2023 than in 2022.

The decrease in research, development, and engineering costs for the six months ended June 30, 2023, compared to the 2022 period was primarily due to lower personnel-related expenses and lower engineering costs as more costs were capitalized in 2023 than in 2022.

General and Administrative

(in thousands, except percentages) Three months ended March 31, Percentage Change

(in thousands, except percentages) Three months ended June 30, Percentage Change Six months ended June 30, Percentage Change

2023 2022 2023 2022

General and Administrative $ 101,949 $ 101,967 0.0% $ 203,212 $ 204,184 (0.5)%

1 unchanged sentence

Our general and administrative costs consist primarily of personnel-related expenses, depreciation and amortization, changes in the fair value associated with contingent consideration, share-based compensation expense, bad debt expense, professional fees, severance, and insurance costs.

The decrease in general and administrative expense for the three months ended March 31, 2023 compared to the 2022 period was primarily due to lower depreciation and amortization expense and lower office rental expense, offset by an increase in personnel-related expenses.

The decrease in general and administrative expense for the three months ended June 30, 2023, compared to the 2022 period was primarily due to lower depreciation and amortization expense, partially offset by an increase in personnel-related expenses.

The decrease in general and administrative expense for the six months ended June 30, 2023 compared to the 2022 period was primarily due to lower depreciation and amortization expense and non-income tax expense, partially offset by an increase in personnel-related expenses.

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

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Non-Operating Income and Expenses

The following table represents the components of non-operating income and expenses for the three months ended March 31, 2023 and 2022 (in thousands):

Three months ended March 31, Percentage Change

The following table represents the components of non-operating income and expenses for the three and six months ended June 30, 2023 and 2022 (in thousands):

Three months ended June 30, Percentage Change Six months ended June 30, Percentage Change

2023 2022 2023 2022

Interest expense, net $ (10,483) $ (9,569) 9.6 % $ (14,963) $ (19,859) (24.7) %

Loss on debt extinguishment, net — (1,220) (100.0) %

Unrealized (loss) gain on short-term investments held at the reporting date, net (20,345) 8,951 (327.3) %

Gain on investments, net 357 — 100.0 %

Gain on debt extinguishment, net — 2,613 (100.0) % — 1,393 (100.0) %

Unrealized loss on short-term investments held at the reporting date, net (3,196) (27,317) (88.3) % (23,541) (18,366) 28.2 %

(Loss) gain on investments, net — (48,243) 100.0 % 357 (48,243) 100.7 %

Other (loss) income, net (1,503) 6,345 (123.7) % (2,411) 8,744 (127.6) %

2 unchanged sentences

Interest expense is generated primarily from interest due on outstanding debt, partially offset by interest income generated from interest earned on cash, cash equivalents, and investments.

Interest expense, net was $4.5 million and $10.3 million for the three months ended March 31, 2023 and 2022, respectively.

Interest expense, net decreased during the three months ended March 31, 2023 compared to the 2022 period primarily due to higher interest income as a result of higher interest rates and a higher amount of cash and cash equivalents during the first quarter of 2023, compared to the first quarter of 2022, partially offset by approximately $1.7 million less interest expense from the 4.625% Senior Notes related to a lower principal balance over the period as the notes were repurchased.

Loss on debt extinguishment, net.

Loss on debt extinguishment, net was zero and $1.2 million during the three months ended March 31, 2023 and 2022, respectively.

The loss on debt extinguishment during the three months ended March 31, 2022 related to the repurchases of the 4.625% Senior Notes.

Unrealized (loss) gain on short-term investments held at the reporting date, net.

Unrealized loss on short-term investment held at the reporting date, net was $20.3 million during the three months ended March 31, 2023 compared to an unrealized gain of $9.0 million during the three months ended March 31, 2022.

The unrealized (loss) gain recorded in both periods represents the change in fair value of our investment in Consensus.

Gain on investments, net.

Gain on investments, net is generated from gains from investments in equity and debt securities.

Gain on investments, net was $0.4 million and zero for the three months ended March 31, 2023 and 2022, respectively.

Our gain on investments, net during the three months ended March 31, 2023 related to the sale of shares of Consensus stock on the open market during the first quarter of 2023.

Interest expense, net was $10.5 million and $9.6 million for the three months ended June 30, 2023 and 2022, respectively, and $15.0 million and $19.9 million for the six months ended June 30, 2023 and 2022, respectively.

Interest expense, net increased during the three months ended June 30, 2023, compared to the 2022 period primarily due to an additional non-recurring $7.4 million of interest expense on the 1.75% Convertible Notes at a rate of 0.50% per annum, that accumulated through June 30, 2023.

The increase was partially offset by higher interest income as a result of higher interest rates and a higher amount of cash and cash equivalents during the second quarter of 2023 compared to the second quarter of 2022, and approximately $1.2 million less interest expense from the 4.625% Senior Notes related to a lower principal balance over the period as a portion of the notes was repurchased.

Interest expense, net decreased during the six months ended June 30, 2023 compared to the 2022 period primarily due to higher interest income as a result of higher interest rates and a higher amount of cash and cash equivalents during the period and approximately $2.9 million less interest expense from the 4.625% Senior Notes related to a lower principal balance over the period as the notes were repurchased, partially offset by the additional non-recurring $7.4 million of interest expense on the 1.75% Convertible Notes at a rate of 0.50% per annum discussed above.

Gain on debt extinguishment, net.

Gain on debt extinguishment, net was zero and $2.6 million during the three months ended June 30, 2023 and 2022, respectively, and zero and $1.4 million during the six months ended June 30, 2023 and 2022, respectively.

The gain on debt extinguishment during the three and six months ended June 30, 2022 related to the repurchases of the 4.625% Senior Notes.

Unrealized loss on short-term investments held at the reporting date, net.

Unrealized loss on short-term investment held at the reporting date, net was $3.2 million and $27.3 million during the three months ended June 30, 2023 and 2022, respectively.

Unrealized loss on short-term investment held at the reporting date, net was $23.5 million and $18.4 million during the six months ended June 30, 2023 and 2022, respectively.

The unrealized loss recorded in all periods represents the change in fair value of our investment in Consensus Cloud Solutions, Inc.

(“Consensus”).

(Loss) gain on investments, net.

(Loss) gain on investments, net is generated from losses and gains from investments in equity and debt securities.

Loss on investments, net was zero and $48.2 million for the three months ended June 30, 2023 and 2022, respectively.

Gain on investments, net was $0.4 million for the six months ended June 30, 2023 and loss in investment, net was $48.2 million for the six months ended June 30, 2022.

Our (loss) gain on investments, net during all periods was related to the disposition of Consensus common stock.

Other (loss) income, net.

Other (loss) income, net is primarily from miscellaneous items and gains or losses on foreign currency exchange.

Other (loss) income, net was $(0.9) million and $2.4 million for three months ended March 31, 2023 and 2022, respectively.

The change was primarily attributable to changes in gains or losses on currency exchange.

Other (loss) income, net is generated primarily from miscellaneous items and gains or losses on foreign currency.

Other (loss) income, net was $(1.5) million and $6.3 million for the three months ended June 30, 2023 and 2022, respectively, and $(2.4) million and $8.7 million for six months ended June 30, 2023 and 2022, respectively.

The change was primarily attributable to changes in gains or losses on currency.

Our effective tax rate is based on pre-tax income, statutory tax rates, tax regulations (including those related to transfer pricing), and different tax rates in the various jurisdictions in which we operate.

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When necessary, we establish valuation allowances to reduce our deferred tax assets to an amount that will more likely than not be realized.

Provision for income taxes amounted to income tax benefit (expense) of $0.6 million and $(5.1) million for three months ended March 31, 2023 and 2022, respectively.

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

The decrease in our effective income tax rate for the three months ended March 31, 2023 compared to the 2022 period was primarily attributable to the following:

a decrease in our effective income tax rate during 2023 due to the unrealized loss on our investment in Consensus that resulted in a discrete tax benefit of approximately $5.0 million;

a decrease in our effective income tax rate during 2023 due to the release of reserves for uncertain tax positions with no similar event during the three months ended March 31, 2022;

Provision for income taxes amounted to income tax expense of $6.5 million and $10.1 million for the three months ended June 30, 2023 and 2022, respectively, and $5.8 million and $15.1 million for the six months ended June 30, 2023 and 2022, respectively.

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

The increase in our effective income tax rate for the three months ended June 30, 2023 compared to the 2022 period was primarily attributable to the following:

an increase in our effective income tax rate during the three months ended June 30, 2023 due to the larger unrealized loss on our investment in Consensus common stock during the three months ended June 30, 2022 that was not subject to tax since the Company had the ability at the time to dispose of the investment in a tax-free manner based on guidance and requirements set out by the Internal Revenue Service;

an increase in our effective income tax rate during the three months ended June 30, 2023 due to a decrease in the portion of our income being taxed in foreign jurisdictions and subject to lower tax rates than in the U.S.

The decrease in our effective income tax rate for the six months ended June 30, 2023 compared to the 2022 period was primarily attributable to the following:

a decrease in our effective income tax rate during 2023 due to the unrealized loss on our investment in Consensus common stock that resulted in a discrete tax benefit of approximately $5.8 million;

a decrease in our effective income tax rate during 2023 due to the release of reserves for uncertain tax positions with no similar event during the six months ended June 30, 2022;

partially offset by

8 unchanged sentences

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

Loss from equity method investment, net was $9.2 million and $0.8 million, net of tax benefit for the three months ended March 31, 2023 and 2022, respectively.

The increase in loss from equity method investment, net during the three months ended March 31, 2023 compared to the 2022 period was primarily due to a decrease in the value of the underlying investments.

Loss from equity method investment, net was $0.6 million and $6.1 million, net of tax benefit for the three months ended June 30, 2023 and 2022, respectively, and $9.8 million and $6.9 million, net of tax benefit for the six months ended June 30, 2023 and 2022, respectively.

The decrease in loss from equity method investment, net during the three months ended June 30, 2023 compared to the respective 2022 period was primarily due to less of a decline in the value of the underlying investments.

The increase in loss from equity method investment, net during the six months ended June 30, 2023 compared to the respective 2022 period was primarily due to a decrease in the value of the underlying investments.

Digital Media and Cybersecurity and Martech Results

8 unchanged sentences

The financial results are presented as follows (in thousands):

Three months ended March 31,

External sales $ 234,126 $ 234,695

Inter-business sales 85 132

Total sales 234,211 234,827

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

2023 2022 2023 2022

External revenue $ 252,820 $ 258,343 $ 486,946 $ 493,038

Inter-business revenue 50 357 135 489

Total revenue 252,870 258,700 487,081 493,527

Operating costs and expenses 216,154 214,077 421,896 416,784

Operating income $ 36,716 $ 44,623 $ 65,185 $ 76,743

Digital Media’s net sales of $234.1 million for the three months ended March 31, 2023 decreased $0.6 million, or 0.2%, compared to the 2022 period primarily due to an organic decline in certain businesses, offset by $12.0 million of incremental revenue during the three months ended March 31, 2023 contributed by businesses acquired in 2022.

The Company considers revenue from an acquired business to become organic revenue in the first month in which the Company can compare a full month in the current year against a full month under its ownership in a prior year.

Digital Media’s operating costs and expenses of $205.7 million for the three months ended March 31, 2023 increased $3.0 million, or 1.5%, compared to the 2022 period primarily due to higher software amortization expense.

As a result of these factors, Digital Media’s operating income of $28.5 million for the three months ended March 31, 2023 decreased $3.7 million, or 11.4%, compared to the 2022 period.

Digital Media’s net revenue of $252.8 million for the three months ended June 30, 2023 decreased $5.5 million, or 2.1%, compared to the 2022 period primarily due to an organic revenue decline in certain businesses, offset by $9.1 million of incremental revenue during the three months ended June 30, 2023 contributed by businesses acquired in 2022.

Digital Media’s net sales of $486.9 million for the six months ended June 30, 2023 decreased $6.1 million, or 1.2%, compared to the 2022 period primarily due to an organic decline in certain businesses, offset by $21.1 million of incremental revenue during the six months ended June 30, 2023, contributed by business acquired in 2022.

The Company considers revenue from an acquired business to become organic revenue in the first month in which the Company can compare that full month in the current year against the corresponding full month under its ownership in the prior year.

Digital Media’s operating costs and expenses of $216.2 million for the three months ended June 30, 2023 increased $2.1 million, or 1.0%, compared to the 2022 period primarily due to higher advertising costs.

Digital Media’s operating costs and expenses of $421.9 million for the six months ended June 30, 2023 increased $5.1 million, or 1.2%, compared to the 2022 period primarily due to higher advertising costs and personnel-related expenses.

As a result of these factors, Digital Media’s operating income of $36.7 million for the three months ended June 30, 2023 decreased $7.9 million, or 17.7%, compared to the 2022 period.

Digital Media’s operating income of $65.2 million for the six months ended June 30, 2023 decreased $11.6 million, or (15.1)%, compared to the 2022 period.

Cybersecurity and Martech

The financial results are presented as follows (in thousands):

Three months ended March 31,

External sales $ 73,016 $ 80,373

Inter-business sales — 121

Total sales 73,016 80,494

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

2023 2022 2023 2022

External revenue $ 73,196 $ 79,013 $ 146,212 $ 159,386

Inter-business revenue — (103) — 18

Total revenue 73,196 78,910 146,212 159,404

Operating costs and expenses 59,679 66,333 121,092 134,499

Operating income $ 13,517 $ 12,577 $ 25,120 $ 24,905

Cybersecurity and Martech’s net sales of $73.0 million for the three months ended March 31, 2023 decreased $7.4 million, or 9.2%, compared to the 2022 period primarily due to the organic decline in certain businesses during the three months ended March 31, 2023.

Cybersecurity and Martech’s operating costs and expenses of $61.4 million for the three months ended March 31, 2023 decreased $6.8 million, or 9.9%, compared to the 2022 period primarily due to lower sales and marketing expenses and lower general and administrative expenses, including lower depreciation and amortization expense.

As a result of these factors, Cybersecurity and Martech’s operating income of $11.6 million for the three months ended March 31, 2023 decreased $0.7 million, or 5.9%, from the 2022 period.

Cybersecurity and Martech’s net revenue of $73.2 million for the three months ended June 30, 2023 decreased $5.8 million, or 7.4%, compared to the 2022 period primarily due to the organic decline in certain businesses during the period.

Cybersecurity and Martech’s net sales of $146.2 million for the six months ended six months ended June 30, 2023 decreased $13.2 million, or (8.3)%, compared to the 2022 period primarily due to the organic decline in certain businesses during the period.

Cybersecurity and Martech’s operating costs and expenses of $59.7 million for the three months ended June 30, 2023 decreased $6.7 million, or 10.0%, compared to the 2022 period primarily due to lower sales and marketing expenses and lower general and administrative expenses, including lower depreciation and amortization expense.

Cybersecurity and Martech’s operating costs and expenses of $121.1 million for the six months ended June 30, 2023 decreased $13.4 million, or (10.0)% compared to the 2022 period primarily due to lower sales and marketing expenses and lower general and administrative expenses, including lower depreciation and amortization expense.

As a result of these factors, Cybersecurity and Martech’s operating income of $13.5 million for the three months ended June 30, 2023 increased $0.9 million, or 7.5%, from the 2022 period.

Cybersecurity and Martech’s operating income of $25.1 million for the six months ended June 30, 2023 increased $0.2 million, or 0.9%.

Liquidity and Capital Resources

1 unchanged sentence

Cash, cash equivalents, and investments consisted of (in thousands):

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

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

3 unchanged sentences

Cash, cash equivalents, and investments held within domestic and foreign jurisdictions were as follows (in thousands):

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

Cash, cash equivalents, and investments held in domestic jurisdiction $ 653,271 $ 671,587

2 unchanged sentences

For information on short-term and long-term investments of the Company, refer to Note 4 - Investments to the Notes to Condensed Consolidated Financial Statements included in Part I Item 1 of this Quarterly Report on Form 10-Q.

As of March 31, 2023 and December 31, 2022, there were no amounts drawn under the Credit Agreement.

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

No repurchases of 4.625% Senior Notes were effectuated during the three months ended March 31, 2023.

As of June 30, 2023 and December 31, 2022, there were no amounts drawn under the Credit Agreement.

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

No repurchases of 4.625% Senior Notes were effectuated during the six months ended June 30, 2023.

Material Cash Requirements

Ziff Davis’ long-term contractual obligations generally include its long-term debt, interest on long-term debt, lease payments on its property and equipment and holdback amounts in connection with certain business acquisitions.

As of March 31, 2023, we and our subsidiaries had outstanding $1.0 billion in aggregate principal amount of indebtedness.

As of March 31, 2023, our total future minimum lease payments are $54.3 million, of which approximately $22.1 million are due in

the succeeding twelve months.

There were no material changes to our cash requirements during the three months ended March 31, 2023.

As of June 30, 2023, we and our subsidiaries had outstanding $1.0 billion in aggregate principal amount of indebtedness.

As of June 30, 2023, our total future minimum lease payments are $49.6 million, of which approximately $21.9 million are due in the succeeding twelve months.

There were no material changes to our cash requirements during the three months ended June 30, 2023.

We currently anticipate that our existing cash and cash equivalents, cash generated from operations, and availability under our revolving credit facility, will be sufficient to meet our anticipated needs for working capital, capital expenditures, and stock repurchases, if any, for at least the next 12 months.

Our primary sources of liquidity are cash flows generated from operations, together with cash and cash equivalents.

The following table provides a summary of cash flows from operating, investing, and financing activities (in millions):

Three months ended March 31, Change

The following table provides a summary of cash flows from operating, investing, and financing activities (in thousands):

Six months ended June 30, Change

Net cash provided by operating activities $ 155,035 $ 192,484 $ (37,449)

3 unchanged sentences

Our operating cash flows resulted primarily from cash received from our customers offset by cash payments we made to third parties for their services, employee compensation, interest payments associated with our debt, and taxes.

The $1.2 million decrease in net cash provided by operating activities during the three months ended March 31, 2023 compared to the 2022 period was primarily related to a net decrease in collections from our customers due to timing, partially offset by the effect of timing of payments to our vendors and increase in deferred revenue balances.

The $37.4 million decrease in net cash provided by operating activities during the six months ended June 30, 2023 compared to the 2022 period was primarily related to a net decrease in collections from our customers due to timing and increase in prepaid expenses, partially offset by the effect of timing of payments to our vendors.

Investing Activities

The $19.8 million decrease in net cash used in investing activities during the three months ended March 31, 2023 compared to the 2022 period was primarily related to lower cash used on business acquisitions during the three months ended March 31, 2023 compared to the 2022 period.

The $96.0 million decrease in net cash used in investing activities during the six months ended June 30, 2023 compared to the 2022 period was primarily related to lower cash used on business acquisitions during the six months ended June 30, 2023 compared to the 2022 period and our investment in available-for-sale securities during the six months ended June 30, 2022, which did not recur in 2023 period.

Financing Activities

The $111.2 million decrease in net cash used in financing activities during the three months ended March 31, 2023 compared to the 2022 period was primarily related to repurchases of our 4.625% Senior Notes and repurchases of common stock on the open market during the three months ended March 31, 2022, both of which did not recur in 2023 period.

The $2.9 million increase in net cash used in financing activities during the six months ended June 30, 2023 compared to the 2022 period was primarily related to the absence of term loan proceeds during the 2023 period, partially offset by 1) the absence of repurchases of our 4.625% Senior Notes, which occurred during the six months ended June 30, 2022, and 2) lower cash used on share repurchases during the 2023 period compared to the 2022 period.

Stock Repurchase Program

1 unchanged sentence

In connection with the authorization, the Company entered into certain Rule 10b5-1 trading plans with a broker-dealer to facilitate the repurchase program.

During the three months ended March 31, 2023, no shares were repurchased under the 2020 Program.

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

A summary of share repurchases under the 2020 Program during the six months ended June 30, 2023 is as follows (in thousands, except share amounts):

Total number of shares repurchased Aggregate purchase price (1)

Shares remaining under repurchase authorization as of June 30, 2023

980,418 $63,900 5,346,736

(1) Includes the impact of excise taxes.

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

These shares were subsequently retired.

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 2. Management’s Discussion and Analysis