What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-11-09 compared with 2023-08-04 · 295 added, 224 removed, 714 unchanged (42% of the section changed)

4 unchanged sentences

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

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

Cash and cash equivalents $ 660,624 $ 652,793

37 unchanged sentences

Authorized 95,000,000 ;

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

total issued and outstanding 45,984,858 and 47,269,446 shares at September 30, 2023 and December 31, 2022, respectively

Additional paid-in capital 462,812 439,681

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

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

Retained earnings 1,426,979 1,537,830

7 unchanged sentences

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

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

Three months ended

September 30,

Nine months ended

September 30,

2023 2022 2023 2022

5 unchanged sentences

General and administrative 99,269 95,658 302,481 299,842

Goodwill impairment on business 56,850 27,369 56,850 27,369

Total operating costs and expenses 354,304 312,839 922,252 888,814

Income from operations 38,895 45,887 65,210 76,449

(Loss) income from operations ( 13,319 ) 29,034 51,891 105,483

Interest expense, net ( 2,817 ) ( 8,560 ) ( 17,780 ) ( 28,419 )

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

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 )

Unrealized (loss) gain on short-term investments held at the reporting date, net ( 6,019 ) 4,201 ( 29,560 ) ( 14,165 )

Gain (loss) on investments, net — 471 357 ( 47,772 )

Other (loss) income, net ( 3,571 ) 4,218 ( 5,982 ) 12,962

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

(Loss) income before income taxes and income (loss) from equity method investment, net

( 25,726 ) 39,476 ( 1,074 ) 39,594

Income tax expense ( 5,335 ) ( 18,100 ) ( 11,180 ) ( 33,231 )

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

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

Net income (loss) per common share:

Income (loss) from equity method investment, net

90 ( 3,191 ) ( 9,665 ) ( 10,077 )

Net (loss) income

$ ( 30,971 ) $ 18,185 $ ( 21,919 ) $ ( 3,714 )

Net (loss) income per common share:

Basic $ ( 0.67 ) $ 0.39 $ ( 0.47 ) $ ( 0.08 )

6 unchanged sentences

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited, in thousands)

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

Three months ended September 30, Nine months ended September 30,

2023 2022 2023 2022

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

Other comprehensive (loss) income, net of tax:

Net (loss) income

$ ( 30,971 ) $ 18,185 $ ( 21,919 ) $ ( 3,714 )

Other comprehensive loss, net of tax:

Foreign currency translation adjustment ( 6,841 ) ( 24,753 ) ( 660 ) ( 55,283 )

Consensus separation adjustment — — — 4,056

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.

Change in fair value on available-for-sale investments, net of tax expense of $ 93 and benefit of $ 37 for the three and nine months ended September 30, 2023, respectively

309 ( 169 ) ( 80 ) ( 169 )

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

Comprehensive (loss) income $ 18,434 $ ( 70,701 ) $ 14,844 $ ( 48,373 )

Other comprehensive loss, net of tax

( 6,532 ) ( 24,922 ) ( 740 ) ( 51,396 )

Comprehensive loss

$ ( 37,503 ) $ ( 6,737 ) $ ( 22,659 ) $ ( 55,110 )

See Notes to Condensed Consolidated Financial Statements (Unaudited)

3 unchanged sentences

(Unaudited, in thousands)

Six months ended June 30,

Nine months ended September 30,

Cash flows from operating activities:

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

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

Net loss $ ( 21,919 ) $ ( 3,714 )

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization 167,333 174,880

4 unchanged sentences

Gain on extinguishment of debt — ( 11,505 )

Goodwill impairment on business 56,850 27,369

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

Loss from equity method investments 9,665 10,077

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

Purchases of equity investments ( 11,790 ) —

Proceeds from sale of equity investments 3,174 —

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(Unaudited, in thousands, except share amounts)

Three months ended June 30, 2023

Three months ended September 30, 2023

Common stock Additional

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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

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

Net loss — — — — — ( 30,971 ) — ( 30,971 )

Other comprehensive loss, net of tax expense of $ 93

1 unchanged sentence

Issuance of restricted stock, net 2,041 — ( 265 ) — — 35 — ( 230 )

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

Issuance of common stock, net 186,102 2 13,420 — — — — 13,422

Repurchase of common stock — — — 605,428 ( 41,019 ) — — ( 41,019 )

2 unchanged sentences

Other, net — — ( 2 ) — — 14 — 12

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

Three months ended June 30, 2022

Balance, September 30, 2023 45,984,858 $ 460 $ 462,812 — $ — $ 1,426,979 $ ( 86,113 ) $ 1,804,138

Three months ended September 30, 2022

Common stock Additional

2 unchanged sentences

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 )

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

Net income — — — — — 18,185 — 18,185

Other comprehensive loss, net of tax expense of zero

1 unchanged sentence

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

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 ( 2,601 ) — ( 218 ) — — 18 — ( 200 )

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

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

Six months ended June 30, 2023

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

Nine months ended September 30, 2023

Common stock Additional

3 unchanged sentences

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

Net income — — — — — 9,052 — 9,052

Other comprehensive loss, net of tax expense of $ 130

Net loss — — — — — ( 21,919 ) — ( 21,919 )

Other comprehensive loss, net of tax benefit of $ 37

— — — — — — ( 740 ) ( 740 )

1 unchanged sentence

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

Issuance of common stock, net 186,102 2 13,420 — — — — 13,422

Repurchase of common stock — — — 1,585,846 ( 104,919 ) — — ( 104,919 )

2 unchanged sentences

Other, net — — 13 — — 14 — 27

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

Six months ended June 30, 2022

Balance, September 30, 2023 45,984,858 $ 460 $ 462,812 — $ — $ 1,426,979 $ ( 86,113 ) $ 1,804,138

Nine months ended September 30, 2022

Common stock Additional

15 unchanged sentences

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

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

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

See Notes to Condensed Consolidated Financial Statements (Unaudited)

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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 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.

During the three months ended September 30, 2023 and 2022, and the nine months ended September 30, 2023 and 2022, the Company recorded an impairment of approximately $ 0.7 million, $ 0.2 million, $ 2.7 million, and $ 0.4 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

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

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848):

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

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Deferral of the Sunset Date of Topic 848 .

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

This update defers the expiration date of Accounting Standards Codification (“ASC”) Topic 848 from December 31, 2022 to December 31, 2024.

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

Reclassifications

Certain prior year reported amounts have been reclassified to conform with 2023 presentation.

Certain prior year reported amounts have been reclassified to conform with the 2023 presentation.

ZIFF DAVIS, INC.

2 unchanged sentences

Digital Media

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

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

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

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

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

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

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

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

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

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

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

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

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

Three months ended September 30, Nine months ended September 30,

2023 2022 2023 2022

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Total $ 340,985 $ 341,873 $ 974,143 $ 994,297

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.

The Company recorded $ 27.8 million and $ 32.2 million of revenue for the three months ended September 30, 2023 and 2022, respectively, and $ 140.9 million and $ 154.9 million of revenue for the nine months ended September 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 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.

As of September 30, 2023, the aggregate amount of transaction price that is allocated to future performance obligations was approximately $ 32.5 million and is expected to be recognized as follows:

13 % by December 31, 2023, 84 % between January 1, 2024 and December 31, 2025, and 3 % thereafter.

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

Business Acquisitions

1 unchanged sentence

2023 Acquisitions

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 Company completed two immaterial Digital Media acquisitions during the nine months ended September 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 September 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.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

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.

Goodwill recognized associated with these acquisitions during the nine months ended September 30, 2023 was $ 6.3 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 nine months ended September 30, 2023.

2022 Acquisitions

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

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

(a) a 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;

(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.

and (c) four other immaterial Digital Media acquisitions.

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

For the nine months ended September 30, 2022, these acquisitions contributed $ 19.6 million to the Company’s revenues.

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

Total consideration for these transactions was $ 121.7 million, net of cash acquired and assumed liabilities.

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

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

Assets and Liabilities Valuation

2 unchanged sentences

Property and equipment 369

Operating lease right-of-use assets, noncurrent 546

Trade names 12,838

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

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.

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

Unaudited Pro Forma Financial Information for All 2022 Acquisitions

5 unchanged sentences

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 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

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

Three months ended September 30, 2022 Nine months ended September 30, 2022

(unaudited) (unaudited)

Revenues $ 342,173 $ 1,010,600

Net income $ ( 46,300 ) $ ( 21,543 )

Income per common share - Basic $ ( 0.99 ) $ ( 0.46 )

Income per common share - Diluted $ ( 0.99 ) $ ( 0.46 )

Net income (loss)

$ 18,120 $ ( 3,801 )

Income (loss) per common share - Basic

$ 0.39 $ ( 0.08 )

Income (loss) per common share - Diluted

$ 0.39 $ ( 0.08 )

Investments consist primarily of equity and debt securities.

Investment in equity securities

Investments in equity securities

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

(“Consensus”).

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.

Following the Separation, the Company retained shares of Consensus common stock and as of September 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 September 30, 2023 and December 31, 2022, the carrying value of the investment in Consensus was $ 26.0 million and $ 58.4 million respectively, and are 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 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,

During the three and nine months ended September 30, 2022, the Company completed the non-cash tax-free debt-for-equity exchanges of 500,000 and 2,800,000 shares, respectively, of its common stock of Consensus for the extinguishment of $ 22.3 million and $ 112.3 million, respectively of principal of the Company’s Term Loan Facilities (as defined in Note 7 - Debt ), and related interest.

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

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 September 30, Nine months ended September 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 )

Net (losses) gains during the period

$ ( 6,019 ) $ 4,672 $ ( 29,203 ) $ ( 61,937 )

gains (losses) on securities sold during the period

— 471 357 ( 47,772 )

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

$ ( 6,019 ) $ 4,201 $ ( 29,560 ) $ ( 14,165 )

On July 31, 2023, the Company entered into an agreement to purchase $ 25.0 million of equity of Xyla, Inc.

(“Xyla”) for a minority ownership stake.

This minority investment was made in the form of cash and shares of the Company’s common stock.

The Company accounts for its investment in Xyla as an equity investment without a readily determinable fair value measured under the measurement alternative in accordance with ASC Topic 321, Investments - Equity Securities .

As of September 30, 2023, the investment in Xyla has a carrying value of $ 25.3 million, including transaction costs, and is included in ‘Long-term investments’ in the Condensed Consolidated Balance Sheets.

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

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 April 12, 2022, the Company entered into an agreement with an entity and acquired 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.

2 unchanged sentences

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 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 September 30, 2023, both the carrying value and the maximum exposure of the Company’s investment in corporate debt securities was approximately $ 15.5 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 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.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

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.

Cumulative gross unrealized gains on investment in corporate debt securities as of September 30, 2023 and December 31, 2022 was approximately $ 0.5 million and $ 0.6 million, respectively.

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

As of September 30, 2023 and December 31, 2022, the Company did not recognize any other-than-temporary impairment losses on its debt securities.

Equity method investment

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

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

During both the nine months ended September 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 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.

During the three months ended September 30, 2023 and 2022, the Company recognized a gain (loss) from equity method investment of $ 0.1 million and $( 3.2 ) million, net of tax benefit, respectively.

During the nine months ended September 30, 2023 and 2022, the Company recognized a loss from equity method investment of $ 9.7 million and $ 10.1 million, net of tax benefit, respectively.

The losses during the three months ended September 30, 2022 and during the nine months ended September 30, 2023 and 2022 were primarily the result of losses in the underlying investments and the loss during the three and nine months ended September 30, 2022 also included management fee expense.

The Company did not recognize management fee expense in 2023 as a result of the settlement of certain litigation in 2022 whereby no further management fees would be paid by the Company to the manager of the OCV Fund.

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

As of September 30, 2023, both of the carrying value and the maximum exposure of the Company’s equity method investment was $ 99.4 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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Finally, there are no call or put options, or other types of arrangements, which limit the Company’s ability to participate in losses and returns of the Fund.

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Fair Value Measurements

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

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Recurring Fair Value Measurements

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

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

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.

If such information is not available for the 1.75 % Convertible Notes, the fair value is determined using cash-flow models of the scheduled payments discounted at market interest rates for comparable debt without the conversion feature.

As of September 30, 2023 and December 31, 2022, the fair value was determined based upon various probability-weighted scenarios which included discount rate assumptions between 12 % and 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 September 30, 2023 and approximately one-year as of December 31, 2022.

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

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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 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.

As of September 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.

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

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):

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

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

Cash equivalents:

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Contingent consideration $ — $ — $ 3,389 $ 3,389 $ 3,389

4.625 % Senior Notes

399,658 — — 399,658 456,596

1.75 % Convertible Notes

515,625 — — 515,625 543,582

Total liabilities measured at fair value $ — $ — $ 3,389 $ 3,389 $ 3,389

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

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

7 unchanged sentences

Contingent consideration $ — $ — $ 555 $ 555 $ 555

4.625 % Senior Notes

390,908 — — 390,908 456,400

1.75 % Convertible Notes

548,411 — — 548,411 542,653

Total liabilities measured at fair value $ — $ — $ 555 $ 555 $ 555

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

For the six months ended June 30, 2023 and 2022, there were no transfers that occurred between levels.

For the nine months ended September 30, 2023 and 2022, there were no transfers that occurred between levels.

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

The following table presents a reconciliation of the Company’s Level 3 financial assets related to our 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,

Nine months ended September 30,

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

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Payments — — ( 2,919 ) —

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

(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 and six months ended June 30, 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 and six months ended June 30, 2023 and 2022.

Balance as of September 30 $ 3,389 $ 15,469 $ 1,106 $ 15,000

Nonrecurring Fair Value Measurements

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.

The Company’s financial assets, comprised of equity securities without readily determinable fair value, are adjusted to fair value when observable price changes are identified or due to impairment.

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

See Note 1 - Basis of Presentation for further information on intangible assets and right-of-use assets impairment charges recorded in the three and nine months ended September 30, 2023 and 2022.

See Note 7 - Goodwill and Intangible Assets for further information on a goodwill impairment charge recorded in the three and nine months ended September 30, 2023 and 2022.

Other Fair Value Disclosures

The following table presents the carrying value and the fair value of financial instruments measured at fair value only for disclosure purposes:

September 30, 2023 December 31, 2022

Carrying Value Fair Value Carrying Value Fair Value

4.625 % Senior Notes

$ 456,695 $ 389,022 $ 456,400 $ 390,908

1.75 % Convertible Notes

$ 544,048 $ 508,832 $ 542,653 $ 548,411

ZIFF DAVIS, INC.

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Goodwill and Intangible Assets

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

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

Digital Media Cybersecurity and Martech Consolidated

2 unchanged sentences

6,258 — 6,258

Goodwill impairment ( 56,850 ) — ( 56,850 )

Purchase accounting adjustments (1)

1 unchanged sentence

Foreign exchange translation ( 644 ) ( 503 ) ( 1,147 )

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

Balance as of September 30, 2023 $ 1,014,681 $ 524,982 $ 1,539,663

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

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.

During the three and nine months ended September 30, 2023 and 2022, the Company reassessed the fair value of certain reporting units within the Digital Media reportable segment as a result of a forecasted reduction in revenue and EBITDA in the reporting unit, as well as an increase in interest rates and market volatility that would affect the Company’s assumptions on its discount rate.

Based on the quantitative fair value test in each period, the carrying value of the reporting unit exceeded its fair value, and the Company recorded an impairment of approximately $ 56.9 million during the three and nine months ended September 30, 2023, and approximately $ 27.4 million during the three and nine months ended September 30, 2022.

Following the impairment during the three and nine months ended September 30, 2022, the reporting unit had goodwill of approximately $ 86.9 million and the carrying value approximated its fair value.

Following the impairment during the three and nine months ended September 30, 2023, the reporting unit had goodwill of approximately $ 79.2 million and there is no excess of reporting unit fair value over the carrying amount, so any further decrease in estimated fair value would result in an additional impairment charge to goodwill.

Changes in market conditions, and key assumptions made in future quantitative assessments, including expected cash flows, competitive factors and discount rates, could negatively impact the results of future impairment testing and could result in the recognition of an impairment charge.

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

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

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

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

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

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

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

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

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

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

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

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

Goodwill as of September 30, 2023 and December 31, 2022 reflects accumulated impairment losses of $ 84.2 million and $ 27.4 million, respectively, in the Digital Media reportable segment.

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Intangible Assets Subject to Amortization

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

As of September 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 $ 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.

Amortization expense, included in General and administrative expense on the Condensed Consolidated Statements of Operations, was approximately $ 33.0 million and $ 36.3 million for the three months ended September 30, 2023 and 2022, respectively, and $ 100.0 million and $ 119.3 million for the nine months ended September 30, 2023 and 2022, respectively.

ZIFF DAVIS, INC.

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

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

4.625 % Senior Notes

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Total long-term debt $ 1,000,743 $ 999,053

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

As of September 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

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

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

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

ZIFF DAVIS, INC.

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

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

Three months ended September 30, 2022 Nine months ended September 30, 2022

Principal repurchased $ 105,135 $ 181,238

2 unchanged sentences

$ 10,211 $ 12,060

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

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

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

Cumulatively as of September 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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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.

During the three and nine months ended September 30, 2023, the Company recorded $ 0.3 million and $ 7.7 million of interest expense related to the 1.75 % Convertible Notes for such additional interest.

In August 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 was paid to holders of record in August 2023.

The Company paid its remaining obligation of approximately $ 0.7 million as of 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.

As such, the cumulative $ 7.7 million interest expense was 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:

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

As of June 30, 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.

As of September 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 September 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.

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

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

Principal amount of 1.75 % Convertible Notes

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

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

Three months ended September 30, Nine months ended September 30,

2023 2022 2023 2022

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

Subject to customary conditions, the Company may, from time to time, request increases in the commitments under the Credit Agreement in an aggregate amount up to $ 250.0 million, for a total aggregate commitment of up to $ 350.0 million.

Subject to certain conditions and approvals, the Company may, from time to time, request increases in the commitments under the Credit Agreement in an aggregate amount up to $ 250.0 million, for a total aggregate commitment of up to $ 350.0 million.

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

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

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

ZIFF DAVIS, INC.

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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 June 30, 2023.

The Company is in compliance with its debt covenants for the Credit Agreement as of September 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.

On June 10, 2022 (the “Term Loan Funding Date”), the Company entered into a Fifth Amendment to its Credit Agreement with MUFG Union Bank, N.A, as administrative agent and collateral agent and the lenders party thereto to effectuate a 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.

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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.

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

The Sixth Amendment to the Credit Agreement provided for the Term Loan Two Facility (together with the Term Loan Facility, the “Facilities”) in an aggregate principal amount of approximately $ 22.3 million and certain other changes to the Credit Agreement.

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

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

Dollar "Reference Rate" and (z) one month LIBOR plus 1.0 %, 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 nine months ended September 30, 2022, the Company borrowed approximately $ 22.3 million and $ 112.3 million, respectively, under the Facilities and completed the non-cash debt-for-equity exchange of 500,000 shares and 2,800,000 shares, respectively, of its common stock of Consensus to settle its obligation of $ 22.3 million and $ 112.3 million, respectively, outstanding aggregate principal amount of the Term Loan Facility plus an immaterial amount of interest.

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

Commitments and Contingencies

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

The lead plaintiff has filed a notice of appeal and appeal briefs have been filed.

The lead plaintiff has filed a notice of appeal and the matter is pending on appeal.

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

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

6 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.

11 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 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.

The Company recognizes a liability for these matters when it is probable that an obligation exists and the amount can be reasonably estimated based on all relevant information that is available at each reporting period.

The Company established reserves for these matters of $ 25.5 million and $ 25.5 million as of September 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 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 $ 1.0 million and $ 3.2 million as of June 30, 2023 and December 31, 2022, respectively.

The Company’s effective tax rate was ( 20.7 )% and 45.9 % for the three months ended September 30, 2023 and 2022, respectively and ( 1,040.8 )% and 83.9 % for the nine months ended September 30, 2023 and 2022, respectively.

The Company’s effective tax rate for the three and nine months ended September 30, 2023 was disproportionately impacted by the goodwill impairment of $ 56.9 million.

No corresponding tax benefit was recorded on the impairment charge since it entirely related to excess financial statement goodwill with no tax basis.

During the three and nine months ended September 30, 2022 the Company’s effective tax rate was impacted due to the Company recording a deferred tax liability and corresponding tax expense of $ 11.3 million related to its investment in Consensus since the Company did not dispose of the shares within the one-year anniversary of the Separation.

The increase to

ZIFF DAVIS, INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

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

As of September 30, 2023 and December 31, 2022, the Company had $ 41.4 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 $ 0.2 million and $ 3.2 million as of September 30, 2023 and December 31, 2022, respectively.

Stockholders’ Equity

1 unchanged sentence

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.

During the three months ended September 30, 2023 and 2022, the Company repurchased 605,428 and zero shares, respectively, under the 2020 Program, at an aggregate cost of approximately $ 41.0 million and zero , respectively (including excise tax).

During the nine months ended September 30, 2023 and 2022, the Company repurchased 1,585,846 and 736,536 shares, respectively, under the 2020 Program, at an aggregate cost of approximately $ 104.9 million and $ 71.3 million, respectively (including excise tax).

Cumulatively as of September 30, 2023, 5,258,692 shares were repurchased under the 2020 Program, at an aggregate cost of $ 401.8 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 September 30, 2023 was 4,741,308 shares.

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.

2 unchanged sentences

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.

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

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 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.

During the three months ended September 30, 2023 and 2022, the Company purchased and retired 9,479 and 2,601 shares at an aggregate cost of approximately $ 0.2 million and $ 0.2 million, resp ectively, from plan participants for this purpose.

During the nine months ended September 30, 2023 and 2022, the Company purchased and retired 51,354 and 52,837 shares at an aggregate cost of approximately $ 3.5 million and $ 5.2 million , respectively, from plan participants for this purpose.

Share-Based Compensation

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

As of June 30, 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.

As of September 30, 2023, 435,135 shares underlying options and 818,106 shares of restricted stock units were outstanding under the 2015 Plan.

At September 30, 2023, there were 1,069,488 additional shares underlying options, shares of restricted stock and other share-based awards available for grant under the 2015 Plan.

ZIFF DAVIS, INC.

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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 June 30, Six months ended June 30,

Three months ended September 30, Nine months ended September 30,

2023 2022 2023 2022

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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 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 granted 296,705 and 152,982 shares of restricted stock and restricted units (excluding awards with market conditions below) during the nine months ended September 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.

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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.

During the nine months ended September 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 nine months ended September 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 nine months ended September 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:

June 30, 2023 June 30, 2022

September 30, 2023 September 30, 2022

Underlying stock price at valuation date $ 77.80 $ 99.32

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Risk-free interest rate 4.1 % 1.8 %

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

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

Shares Weighted-Average

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Vested ( 51,154 ) $ 72.40

Nonvested at June 30, 2023

Canceled ( 322 ) $ 77.75

Nonvested at September 30, 2023

259,805 $ 48.82

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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

Term (in years) Aggregate

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

Outstanding at January 1, 2023 464,354

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Canceled ( 36,858 )

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.

Outstanding at September 30, 2023 818,106 $ 52,105,171

Vested and expected to vest at September 30, 2023 749,680 $ 47,747,103

As of September 30, 2023, the Company had unrecognized share-based compensation cost of approximately $ 53.2 million associated with these restricted stock awards and restricted stock units.

This cost is expected to be recognized over a weighted-average period of 2.1 years for restricted stock awards and 2.5 years for restricted stock units.

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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.

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

For the nine months ended September 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 September 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

September 30, 2023 September 30, 2022

Risk-free interest rate

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

Three months ended June 30,

Three months ended September 30,

Basic Diluted Basic Diluted

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

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

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

Net (loss) income

$ ( 30,971 ) $ ( 30,971 ) $ 18,185 $ 18,185

Net income available to participating securities (1)

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Diluted weighted-average outstanding shares of common stock 46,062,097 46,062,097 46,871,897 46,871,897

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

Net (loss) income per share

$ ( 0.67 ) $ ( 0.67 ) $ 0.39 $ 0.39

(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,

Nine months ended September 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)

Numerator for basic and diluted net loss per common share:

$ ( 21,919 ) $ ( 21,919 ) $ ( 3,714 ) $ ( 3,714 )

Net income available to participating securities (1)

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 )

Net loss available to the Company’s common shareholders

$ ( 21,919 ) $ ( 21,919 ) $ ( 3,714 ) $ ( 3,714 )

Basic weighted-average outstanding shares of common stock 46,612,660 46,612,660 46,967,671 46,967,671

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Diluted weighted-average outstanding shares of common stock 46,612,660 46,612,660 46,967,671 46,967,671

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

Net loss per share

$ ( 0.47 ) $ ( 0.47 ) $ ( 0.08 ) $ ( 0.08 )

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

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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.

For the three months ended September 30, 2023 and 2022, there were 1,512,611 and 1,278,330 shares, respectively, of stock options and restricted stock excluded from the calculation of diluted shares as they were anti-dilutive primarily due to the net loss during the 2023 period and the average stock price during the 2022 period.

For the nine months ended September 30, 2023 and 2022, there were 1,512,611 and 1,278,330 shares, respectively, of stock options and restricted stock excluded from the calculation of diluted shares as they were anti-dilutive primarily due to the net loss during each period.

For the three and nine months ended September 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

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

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

Three months ended September 30, Nine months ended September 30,

2023 2022 2023 2022

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Total operating costs and expenses 354,304 312,839 922,252 888,814

Operating income by reportable segment:

Digital Media operating income 36,716 44,623 65,185 76,743

Operating (loss) income by reportable segment:

Digital Media operating (loss) income

( 12,905 ) 27,317 52,280 104,060

Cybersecurity and Martech operating income 12,510 13,830 37,630 38,735

Total segment operating income 50,233 57,200 90,305 101,648

Total segment operating (loss) income

( 395 ) 41,147 89,910 142,795

Corporate (1)

( 12,924 ) ( 12,113 ) ( 38,019 ) ( 37,312 )

Income from operations $ 38,895 $ 45,887 $ 65,210 $ 76,449

(Loss) income from operations

$ ( 13,319 ) $ 29,034 $ 51,891 $ 105,483

(1) Corporate includes costs associated with general and administrative and other expenses that are managed on a global basis and that are not directly attributable to any particular segment.

(2) Operating expenses for each segment include cost of sales and other operating expenses that are directly attributable to the segment, such as employee compensation expense, local sales and marketing expenses, engineering and network operations expense, depreciation and amortization, and other administrative expenses.

For the three and nine months ended September 30, 2023 and 2022, the Company had an impairment to goodwill within operating costs and expenses for Digital Media.

ZIFF DAVIS, INC.

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

Six months ended June 30,

Nine months ended September 30,

Non-cash investing activity:

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Right-of-use assets acquired in exchange for operating lease obligations $ 1,282 $ 4,130

Purchase of equity investments with common stock

Disposition of Consensus common stock (1)

$ — $ 112,286

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.

$ — $ 112,286

(1) During the nine months ended September 30, 2022, the Company disposed $ 160.1 million of its investment in Consensus common stock in exchange for $ 112.3 million of debt and recorded $ 47.8 million of Loss on investment, net.

Supplemental data (in thousands):

Six months ended June 30,

Nine months ended September 30,

Interest paid $ 22,395 $ 20,718

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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 June 30, 2023 (in thousands):

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

Balance as of July 1, 2023 $ 52 $ ( 79,633 ) $ ( 79,581 )

Other comprehensive income (loss), net of tax

309 ( 6,841 ) ( 6,532 )

Balance as of September 30, 2023

$ 361 $ ( 86,474 ) $ ( 86,113 )

The following table summarizes the changes in accumulated balances of other comprehensive loss, net of tax, for the nine months ended September 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 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 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.

Other comprehensive loss, net of tax

( 80 ) ( 660 ) ( 740 )

Balance as of September 30, 2023

$ 361 $ ( 86,474 ) $ ( 86,113 )

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

ZIFF DAVIS, INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Related Party Transactions

As of September 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.

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

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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 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.

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

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

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

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 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.

During both of the three months ended September 30, 2023 and 2022, the Company recognized expense for management fees of zero .

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

As a result of the settlement of certain litigation in 2022, no further management fees will be paid by the Company to the manager of the OCV Fund.

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

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