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Item 7. Management’s Discussion and Analysis

2024-02-26 compared with 2023-03-01 · 226 added, 245 removed, 214 unchanged (69% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion of our financial condition and results of operations should be read in conjunction with our audited consolidated financial statements and the related notes included elsewhere in this Annual Report on Form 10-K.

In addition to historical information, the following Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements.

These forward-looking statements involve risks, uncertainties and assumptions.

The actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including but not limited to those discussed in Part I, Item 1A “Risk Factors” in this Annual Report on Form 10-K.

Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s opinions only as of the date hereof.

We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements, except as required by law.

Readers should carefully review the Risk Factors and the risk factors set forth in other documents we file from time to time with the SEC.

These forward-looking statements are based on our estimates and assumptions and are subject to risks and uncertainties.

Forward-looking statements include the information concerning our possible or assumed future results of operations.

Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including but not limited to those discussed in the section titled “Cautionary Note on Forward Looking Information” and in Part I, Item 1A “Risk Factors” in this Annual Report on Form 10-K.

Ziff Davis, Inc.

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

Our Digital Media business specializes in the technology, shopping, gaming and entertainment, and healthcare markets, offering content, tools and services to consumers and businesses.

Our Digital Media business specializes in the technology, shopping, gaming and entertainment, connectivity, and healthcare markets, offering content, tools, and services to consumers and businesses.

Our Cybersecurity and Martech business provides cloud-based subscription services to consumers and businesses including cybersecurity, privacy, and marketing technology.

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Ziff Davis did not retain a controlling interest in Consensus.

On June 10, 2022, the Company entered into a Fifth Amendment to its Credit Agreement and on September 15, 2022, the Company entered into a Sixth Amendment to its Credit Agreement, each with MUFG Union Bank, N.A., as administrative agent and collateral agent and the lenders party thereto, to effectuate two debt-for equity exchanges of portions of the Investment in Consensus.

The Fifth Amendment to the Credit Agreement provided for the issuance of a senior secured term loan under the Credit Agreement, in an aggregate principal amount of $90.0 million (the “Term Loan Facility”) and the Sixth Amendment to the Credit Agreement provided for the issuance of a senior secured term loan under the Credit Agreement, in an aggregate principal amount of $22.3 million (the “Term Loan Two Facility”).

Both amendments provided for certain other changes to the Credit Agreement.

Refer to Note 10 - Debt in Part II Item 8 of this Annual Report on Form 10-K for additional information.

During June 2022, the Company borrowed approximately $90.0 million under the Term Loan Facility and completed a non-cash exchange of 2.3 million shares of the Investment in Consensus to settle its obligation of $90.0 million outstanding aggregate principal amount of the Term Loan Facility plus related interest.

During September 2022, the Company borrowed approximately $22.3 million under the Term Loan Two Facility and completed a non-cash exchange of 0.5 million shares of the Investment in Consensus to settle its obligation of $22.3 million outstanding aggregate principal amount of the Term Loan Two Facility plus related interest.

As of December 31, 2022, the Company holds approximately 1.1 million shares of the common stock of Consensus.

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

Revenue Overview

Our consolidated revenues are currently generated primarily from two basic business models, each with different financial profiles and variability.

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In addition to growing our business organically, on a regular basis we acquire businesses to grow our customer bases, expand and diversify our service offerings, enhance our technologies, acquire skilled personnel, and enter into new markets.

We continue to pursue additional

acquisitions, which may include companies operating under business models that differ from those we operate under today.

We continue to pursue additional acquisitions, which may include companies operating under business models that differ from those we operate under today.

Such acquisitions could impact our consolidated profit margins and the variability of our revenues.

Performance Metrics

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

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Advertising $ 747,254 $ 788,135 $ 838,075

Subscription 244,694 197,354 166,219

Subscription and licensing

283,473 244,694 197,354

Other 42,244 46,343 33,871

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Total Revenues $ 1,364,028 $ 1,390,997 $ 1,416,722

Performance Metrics

We use certain metrics to generally assess the operational and financial performance of our businesses.

We have changed these metrics effective January 1, 2022, and the following descriptions align with the metrics management now uses to monitor the performance of its various advertising and subscription-based businesses.

For our advertising businesses, net advertising revenue retention is an indicator of our ability to retain the spend of our existing advertisers year over year, which we view as a reflection of the effectiveness of our advertising platform.

Similarly, we monitor the number of our advertisers and the revenue per advertiser, as defined below, as these metrics provide further details related to our reported revenue and contribute to certain of our business planning decisions.

For our subscription and licensing businesses, the number of subscribers that we serve is an indicator of our customer retention and growth.

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 operating metrics for our Digital Media advertising business for the three months ended December 31, 2022 and 2021 (in millions):

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

Three months ended December 31,

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

For our subscription and licensing businesses, the number of subscribers that we serve is an indicator of our customer retention and growth.

The average monthly revenue per customer 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 and Cybersecurity and Martech subscription and licensing businesses for the three months ended December 31, 2023 and 2022:

Three months ended December 31,

Subscribers (in thousands) (1)

Average quarterly revenue per subscriber (2)

2023 2022 (4)

Customers (in thousands) (1)

Average quarterly revenue per customer (2)

$ 44.77 $ 44.69

Churn rate (3)

2.86 % 4.02 %

(1) Represents the quarterly average of the end of month subscriber counts for both the Digital Media and Cybersecurity and Martech businesses.

Cybersecurity and Martech subscribers are defined as a direct customer, including customers who have paused but not cancelled their subscription.

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.

(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,

(1) Represents the quarterly average of the end of month customer counts for both the Digital Media and Cybersecurity and Martech businesses.

Resellers without visibility into the number of underlying customers served by the reseller are counted as one customer.

(2) Represents quarterly gross subscription and licensing revenues divided by customers as defined in footnote (1).

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

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

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) Certain prior period key performance metrics in the table above have been adjusted for our Cybersecurity and Martech segment as a result of gaining greater transparency on a reseller relationship enabling us to identify the underlying customers and for our Digital Media segment to remove certain subscribers who have paused their subscription for more than one month and to include certain subscribers that are within the estimated active usage period of a lifetime subscription.

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

Three months ended December 31, 2022

Customers (in thousands)

Average quarterly revenue per customer

Churn rate 0.21 %

Critical Accounting Policies and Estimates

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Revenue Recognition

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.

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

(i) when an advertisement is placed for viewing, (ii) when a qualified sales lead is delivered, (iii) when a visitor “clicks through” on an advertisement;

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

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

Subscriptions cover video games and related content, health information, data and other copyrighted material.

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

Revenues are also earned from listing fees, subscriptions to online publications, and from other sources.

Subscription revenues are recognized over time.

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

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

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

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

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

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

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.

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

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

Revenues from software license performance obligations are generally recognized upfront at the point in time that the software is made available to the customer to download and use.

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

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

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

Hardware product and related software performance obligations, such as an operating system or firmware, are highly interdependent and interrelated and are accounted for as a bundled performance obligation.

The revenues for this bundled performance obligation are generally recognized at the point in time that the hardware and software products are delivered and ownership is transferred to the customer.

Other service revenues are generally recognized over time as the services are performed.

Our Digital Media business generates revenues from advertising and sponsorships, subscriptions, performance marketing, and licensing fees.

This business also generates revenues from the sale of display and video advertising;

customer clicks to online merchants, and commissions on sales attributed to clicks to online merchants;

the sale of content, including advertising, data, and lead generation information to clients;

and the sale of subscription services to consumers and businesses.

Our Cybersecurity and Martech business generates revenues primarily from customer subscription and usage fees.

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

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

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

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

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

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

The Company’s contracts occasionally contain some component of variable consideration, such as commissions that are recognized in the period of the commissionable event.

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

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

The Digital Media business also has licensing arrangements that have standalone functionality.

As a result, they are considered to be functional intellectual property where the performance obligations are satisfied at a point in time.

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

The Company recognizes revenue on a straight-line basis throughout the subscription period, or as usage occurs for services outside of the subscription.

The Company determines whether revenue should be reported on a gross or net basis by assessing whether the Company is acting as the principal or an agent in the transaction, respectively.

The Company records revenue on a gross basis with respect to revenue generated (i) by the Company serving online display and video advertising across its owned and operated web properties, on third-party sites, or on unaffiliated advertising networks;

(ii) through the Company’s lead-generation business;

and (iii) through the Company’s subscriptions.

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

Cybersecurity and Martech

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

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

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

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

and (iii) through the Company’s subscriptions, including the resale of various third-party solutions, primarily through its email security line of business.

The Company records revenue on a gross basis with respect to reseller revenue because the Company has control of the specified good or service prior to transferring control to the customer.

Impairment or Disposal of Long-lived Assets

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

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

If it is determined that the asset may not be recoverable, and if the carrying amount of an asset exceeds its estimated fair value, an impairment charge is recognized to the extent of the difference.

The Company assesses the impairment of identifiable definite-lived intangibles and long-lived assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable.

Factors it considers important which could individually or in combination trigger an impairment include the following:

• Significant underperformance relative to expected historical or projected future operating results;

• Significant changes in the manner of our use of the acquired assets or the strategy for the Company’s overall business;

• Significant negative industry or economic trends;

• Significant decline in the Company’s stock price for a sustained period;

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

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

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

During the years ended December 31, 2022 and 2021, the Company did not have any events or circumstances indicating impairment of long-lived assets, other than the recording of an impairment of certain operating right-of-use assets and associated property and equipment.

Refer to Note 11 - Leases to the Notes to Consolidated Financial Statements included in Part II Item 8 of this Annual Report on Form 10-K.

No impairment was recorded for the year ended 2020.

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

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

Any loss resulting from this measurement is recognized in the period in which the held for sale criteria are met.

Conversely, gains are not recognized on the sale of a long-lived asset until the date of sale.

Upon designation as an asset held for sale, the Company stops recording depreciation expense on the asset.

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

Business Combinations and Valuation of Goodwill and Intangible Assets

Business Combinations

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

Such estimates may be based on significant unobservable inputs and assumptions such as, but not limited to, future revenue growth rates, gross and operating margins, customer attrition rates, royalty rates, discount rates and terminal growth rate assumptions.

The Company uses established valuation techniques and may engage reputable valuation specialists to assist with the valuations.

Such estimates are complex because of the judgement required in determining these values.

The determination of purchase price and the fair value of monetary assets acquired and liabilities assumed is typically the least complex aspect of the Company’s accounting for business combinations due to inherently lower level of judgement required.

Due to the higher degree of complexity associated with the valuation of acquired intangible assets, the Company may obtain the assistance of reputable valuation specialists in the allocation of purchase price to the identifiable intangible assets acquired.

The valuation of identifiable intangible assets may be based on significant unobservable inputs and assumptions such as, but not limited to, future revenue growth rates, gross and operating margins, customer attrition rates, royalty rates, discount rates, and terminal growth rate assumptions.

Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates.

Fair values are subject to refinement for up to one year after the closing date of an acquisition as information relative to closing date fair values becomes available.

Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings.

Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in a business combination.

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

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

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

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

We use our best estimates and assumptions to accurately assign the useful lives of the acquired intangible assets subject to amortization, which are amortized over the period of estimated economic benefit.

Fair values are subject to refinement for up to one year after the closing date of an acquisition as information relevant to closing date fair values becomes available.

Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings.

Goodwill and Indefinite-Lived Intangible Assets

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

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

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

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If the carrying value of a reporting unit exceeds the reporting unit’s fair value, an impairment loss is recognized for the difference.

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

No goodwill impairment was recognized during the year ended December 31, 2020.

During the years ended December 31, 2023, 2022, and 2021, the Company recorded a goodwill impairment of $56.9 million, $27.4 million and $32.6 million, respectively.

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.

Refer to Note 9 — Goodwill and Intangible Assets to the Notes to Consolidated Financial Statements included in Part II Item 8 of this Annual Report on Form 10-K.

Following the impairment during the year ended December 31, 2023, there was no excess of fair value over the carrying value at the reporting unit, so any decrease in estimated fair value that exceeds the carrying value, would result in an additional impairment charge to goodwill.

As of December 31, 2023, this reporting unit had goodwill of approximately $79.2 million.

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.

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

The Company concluded that there were no impairments in 2021.

The Company did not perform an assessment in 2022 and 2023, as there were no intangible assets with indefinite lives during 2022 and 2023.

Long-lived Assets

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

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

If it is determined that the asset may not be recoverable, and if the carrying amount of an asset exceeds its estimated fair value, an impairment charge is recognized to the extent of the difference.

In addition, the Company reviews the useful lives of its long-lived assets whenever events or changes in circumstances indicate that these lives may be changed.

Recent Accounting Pronouncements

See Note 2 - Basis of Presentation and Summary of Significant Accounting Policies to the Notes to Consolidated Financial Statements included in Part II Item 8 of this Annual Report on Form 10-K for a description of recent accounting pronouncements and the Company’s expectations of the impact on its consolidated financial position and results of operations.

See Note 2 — Basis of Presentation and Summary of Significant Accounting Policies to the Notes to Consolidated Financial Statements included in Part II Item 8 of this Annual Report on Form 10-K for a description of recent accounting pronouncements and the Company’s expectations of their impact on its consolidated financial position and results of operations.

Results of Operations for the Years Ended December 31, 2023 and 2022

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We expect acquisitions to remain an important component of our strategy and use of capital in this business;

however, we cannot predict whether our current pace of acquisitions will remain the same within this business, especially in light of the current macroeconomic conditions.

In a given period, we may close greater or fewer acquisitions than in prior periods or acquisitions of greater or lesser significance than in prior periods.

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

however, for a number of reasons, including macroeconomic conditions, in a given period, we may close greater or fewer acquisitions than in prior periods or acquisitions of greater or lesser significance than in prior periods.

Moreover, future acquisitions of businesses with different business models, may impact Digital Media’s overall operating profit margins.

Cybersecurity and Martech

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We expect acquisitions to remain an important component of our strategy and use of capital in this business;

however, we cannot predict whether our current pace of acquisitions will remain the same within this business, especially in light of the current macroeconomic conditions.

In a given period, we may close greater or fewer acquisitions than in prior periods or acquisitions of greater or lesser significance than in prior periods.

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

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

Results of Operations

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Operating costs and expenses:

Cost of revenues 14 13

Sales and marketing 36 35

Research, development, and engineering

General and administrative 29 32

General, administrative, and other related costs

Goodwill impairment on business 4 2

Total operating expenses 86 88

Total operating costs and expenses

Income from operations

Interest expense, net (1) (2)

Gain (loss) on debt extinguishment, net 1 —

Loss on sale of businesses — (2)

Gain on debt extinguishment, net

Unrealized (loss) gain on short-term investments held at the reporting date, net (2) (1)

Loss on investments, net (3) (1)

Other income, net 1 —

Income from continuing operations before income tax (expense) benefit and changes from equity method investment 10 25

Income tax (expense) benefit (4) 1

(Loss) income from equity method investment, net (1) 3

Net income from continuing operations 5 29

Income from discontinued operations, net of income taxes — 6

Gain (loss) on investments, net

Other (loss) income, net

Income from continuing operations before income taxes and income (loss) equity method investment, net

Income tax expense

Income (loss) from equity method investment, net

Net income 3% 5%

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Revenues $ 1,364,028 $ 1,390,997 (2)%

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

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 subscription and licensing revenues 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 for the year ended December 31, 2022 compared to the prior period primarily due to the absence in 2022 of approximately $33.5 million of revenue from 2021 related to the divested B2B Backup business and Voice assets and declines in certain parts of the Digital Media and Cybersecurity and Martech businesses.

These declines were partially offset by $50.4 million of revenue contributed by businesses acquired in 2021, net of their contribution in 2021, $33.1 million of revenue contributed by businesses acquired in 2022 and organic growth within certain other parts of the Digital Media and Cybersecurity and Martech businesses.

Our revenues decreased for the year ended December 31, 2023 compared to the prior period primarily due to the $40.5 million decline in advertising revenue in our Digital Media business and $21.3 million decline in subscription revenue in our Cybersecurity and Martech business, partially offset by an increase of $39.3 million in subscription revenue in the Digital Media business.

Included in the revenue during the year ended December 31, 2023 was $21.3 million of incremental revenue contributed by businesses acquired during 2022 and $3.0 million of revenue contributed by businesses acquired in 2023.

These revenue declines were offset in part by organic revenue growth in certain of our businesses.

Revenue from an acquired business becomes 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.

Cost of Revenues

Year ended December 31, Percent change

(in thousands, except percentages) 2023 2022 2023 v.

Cost of revenue $ 195,554 $ 188,053 4.0%

$ 197,292 $ 195,554 0.9%

As a percent of revenue 14.5% 14.1%

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

The increase in cost of revenues for the year ended December 31, 2022 compared to the prior period was primarily due to a $12.2 million increase associated with newly acquired businesses and advertising inventory costs in other Digital Media businesses, a $6.7 million increase in field operations, and a $3.6 million increase in costs associated with outside services, partially offset by approximately $12.8 million less in cost of revenues related to the sale of the B2B Backup business.

Operating Expenses

Direct costs are primarily comprised of costs associated with content fees, production costs, royalty fees, and hosting costs.

The increase in direct costs for the year ended December 31, 2023 compared to the prior period was primarily due to an $8.5 million increase in web hosting and database hosting fees, partially offset by a $3.5 million decrease in royalty fees and a $2.8 million decrease in content fees and similar costs.

Sales and Marketing

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As a percent of revenue 35.7% 35.3%

Our sales and marketing costs consist primarily of internet-based advertising, sales and marketing, personnel costs, and other business development-related expenses.

Sales and marketing costs consist primarily of internet-based advertising, sales and marketing, personnel costs, and other business development-related expenses.

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 for the year ended December 31, 2022 compared to the prior period was primarily due to approximately $4.9 million lower sales and marketing expense from the absence of those costs related to the B2B Backup business.

The decrease in sales and marketing expenses during the year ended December 31, 2023 compared to the prior period was primarily due to $5.9 million lower marketing expenses, partially offset by $2.4 million higher travel related costs.

Research, Development, and Engineering

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Research, Development, and Engineering

$ 68,860 $ 74,093 (7.1)%

As a percent of revenue 5.0% 5.3%

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

The decrease in research, development and engineering costs for the year ended December 31, 2022 compared to the prior period was primarily due to a decrease in engineering costs as more costs were capitalized in 2022 than in 2021, and the absence of engineering costs related to the B2B Backup business.

General and Administrative

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

The decrease in research, development, and engineering costs for the year ended December 31, 2023 compared to the prior period was primarily due to $3.6 million lower personnel-related costs due primarily to an increase in capitalized costs related to the nature of projects in 2023 as compared with projects in 2022.

General, Administrative, and Other Related Costs

Year ended December 31, Percent change

(in thousands, except percentages) 2023 2022 2023 v.

General and Administrative $ 404,263 $ 456,777 (11.5)%

General, Administrative, and Other Related Costs

$ 421,050 $ 404,263 4.2%

As a percent of revenue 30.9% 29.1%

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 year ended December 31, 2022 compared to the prior period was primarily due to $15.6 million lower depreciation and amortization expense related to intangibles becoming fully amortized, $12.6 million of lower office rent expense, $8.6 million of lower legal and consulting fees, $6.2 million of lower personnel related expenses, the absence of $3.6 million of general, and administrative costs related to the B2B Backup business sold in September 2021, and $3.4 million of lower bad debt expenses.

General, administrative, and other related 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 increase in general, administrative, and other related costs for the year ended December 31, 2023 compared to the prior period was primarily due to $12.9 million higher personnel related expenses related in part to higher share-based compensation expense, salaries, and bonus expense, and $2.9 million higher depreciation and amortization expense.

Goodwill Impairment on Business

Our goodwill impairment during the years ended December 31, 2022 and 2021 was $27.4 million and $32.6 million, respectively.

Our goodwill impairment in 2022 was generated from the impairment in the Digital Media reportable segment.

Our goodwill impairment in 2021 was generated from the impairment in the Cybersecurity and Martech reportable segment.

Goodwill impairment on business was $56.9 million and $27.4 million for the years ended December 31, 2023 and 2022, respectively.

The goodwill impairment during all periods was related to reporting units within the Digital Media reportable segment.

Refer to Note 9 — Goodwill and Intangible Assets to the Notes to Consolidated Financial Statements included in Part II Item 8 of this Annual Report on Form 10-K for further details.

Share-Based Compensation

The following table represents share-based compensation expense included in operating costs and expenses in the accompanying Consolidated Statements of Operations for the years ended December 31, 2022 and 2021 (in thousands):

Share-Based Compensation Expense

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

Year ended December 31,

Cost of revenues $ 341 $ 306

Sales and marketing 2,686 3,083

Research, development, and engineering

General and administrative 20,674 20,551

Total $ 26,601 $ 24,129

administrative, and other related costs

25,727 20,674

Total share-based compensation expense $ 31,920 $ 26,601

Non-Operating Income and Expenses

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Interest expense, net $ (20,031) $ (33,842) (40.8)%

Gain (loss) on debt extinguishment, net 11,505 (5,274) (318.1) %

Loss on sale of businesses — (21,798) (100.0) %

Unrealized (loss) gain on short-term investments held at the reporting date, net (7,145) 298,490 (102.4) %

Loss on investments, net (46,743) (16,677) 180.3 %

Other income, net 8,437 1,293 552.5 %

Total non-operating (expense) income $ (67,788) $ 184,011 (136.8) %

Gain on debt extinguishment, net

— 11,505 (100.0)%

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

(28,495) (7,145) 298.8%

Gain (loss) on investments, net

357 (46,743) (100.8)%

Other (loss) income, net

(9,468) 8,437 (212.2)%

Total non-operating expense

$ (57,637) $ (67,788) (15.0)%

Interest expense, net .

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

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 $20.0 million and $33.8 million for the years ended December 31, 2023 and 2022, respectively.

Interest expense, net decreased in 2022 compared to 2021 primarily due to approximately $11.5 million less interest expense due to the redemption of our 3.25% Convertible Notes in August 2021, approximately $15.7 million less interest expense from the adoption of ASU 2020-06 during 2022, and approximately $9.5 million less interest expense from the 4.625% Senior Notes related to a lower principal balance over the period due to the repurchase of a portion of the outstanding 4.625% Senior Notes throughout 2022.

Gain (loss) on debt extinguishment, net.

Gain on debt extinguishment, net of $11.5 million in 2022 related primarily to the repurchases of 4.625% Senior Notes.

Loss on debt extinguishment, net of $5.3 million in 2021 related primarily to the tender of the 4.625% Senior Notes during the fourth quarter of 2021, partially offset by a gain on extinguishment of the 3.25% Convertible Notes during 2021.

Loss on sale of businesses.

Loss on sale of businesses was $21.8 million in 2021.

The loss on the sale of businesses during 2021 was due to the loss on the sale of the B2B Backup business, partially offset by a gain on the sale of certain Voice assets in the United Kingdom in the first quarter of 2021 with a subsequent adjustment in the second quarter of 2021.

The Company did not sell any businesses in 2022.

See Note 6 - Discontinued Operations and Dispositions to the Notes to Consolidated Financial Statements included in Part II Item 8 of this Annual Report on Form 10-K for further details.

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

Unrealized loss on short-term investment held at the reporting date was $7.1 million in 2022 and unrealized gain on short-term investment held at the reporting date was $298.5 million in 2021.

The unrealized (loss) gain recorded in 2022 and 2021 primarily represents the effect of our Investment in Consensus.

Loss on investments, net.

Loss on investments, net is generated from gains or losses from investments in equity securities.

Loss on investments, net was $46.7 million and $16.7 million for the years ended December 31, 2022 and 2021, respectively.

Loss on investment, net increased in 2022 compared to 2021 primarily due to the net realized loss on the disposition of 2.9 million shares from our Investment in Consensus during 2022 resulting from the decrease in the quoted share price of Consensus during 2022.

Other income, net .

Other income, net is generated primarily from miscellaneous items and gain or losses on currency exchange.

Other income, net was $8.4 million and $1.3 million in 2022 and 2021, respectively.

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

Interest expense, net decreased during the year ended December 31, 2023 compared to the prior period primarily due to higher interest income as a result of higher interest rates.

The increase in interest income was partially offset by additional non-recurring interest on the 1.75% Convertible Notes at a rate of 0.50% per annum.

See Note 10 — Debt to the Notes to Consolidated Financial Statements included in Part II Item 8 of this Annual Report on Form 10-K for further details.

Gain on debt extinguishment, net.

Gain on debt extinguishment, net was zero and $11.5 million during the years ended December 31, 2023 and 2022, respectively.

Gain on debt extinguishment, net of $11.5 million in 2022 related primarily 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 $28.5 million and $7.1 million during the years ended December 31, 2023 and 2022, respectively.

The unrealized loss recorded in 2023 and 2022 represents the change in fair value of our investment in Consensus common stock.

Gain (loss) on investments, net.

Gain (loss) on investments, net is generated from gains or losses from investments in equity and debt securities.

Gain (loss) on investments, net was $0.4 million and $(46.7) million for the years ended December 31, 2023 and 2022, respectively.

Gain (loss) on investment, net recorded in 2023 and 2022 was related to the disposition of Consensus common stock.

Other (loss) income, net .

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

Other (loss) income, net was $(9.5) million and $8.4 million in 2023 and 2022, respectively.

The decrease in 2023 compared to 2022 was primarily attributable to changes in gains or losses on foreign currency and a reserve established on a receivable from a buyer of a previously disposed business.

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.

The tax bases of our assets and liabilities reflect our best estimate of the tax benefits and costs we expect to realize.

The tax bases of our assets and liabilities reflect

our best estimate of the tax benefits and costs we expect to realize.

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

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The Company estimates that all of the above-mentioned federal NOLs will be available for use before their expiration.

$20.7 million of the NOLs expire through the year 2037 and $2.1 million of the NOLs carry forward indefinitely depending on the year the loss was incurred.

As of December 31, 2022 and 2021, the Company had interest expense limitation carryovers of $6.4 million and $23.3 million, respectively, which last indefinitely.

The Company also had federal capital loss limitation carryforwards as of December 31, 2022 and 2021 of $24.1 million and $28.7 million, respectively, that begin to expire in 2031.

In addition, as of December 31, 2022 and 2021, the Company had available state research and development tax credit carryforwards of $3.5 million and $5.1 million, respectively, which last indefinitely.

The Company had no foreign tax credit carryforwards as of December 31, 2022 and 2021.

Income tax expense was $58.0 million in 2022 compared to income tax benefit of $14.2 million in 2021.

$7.5 million of the NOLs expire through the year 2037 depending on the year the loss was incurred and $1.6 million of the NOLs carry forward indefinitely.

As of December 31, 2023, the Company had interest expense limitation carryovers of $1.9 million, which last indefinitely.

The Company also had federal capital loss limitation carryforwards as of December 31, 2023 of $21.8 million that begin to expire in 2026.

In addition, as of December 31, 2023, the Company had available state research and development tax credit carryforwards of $5.4 million, which last indefinitely.

The Company had no foreign tax credit carryforwards as of December 31, 2023.

Income tax expense was $24.1 million and $58.0 million in 2023 and 2022, respectively.

Our effective tax rates for 2023 and 2022 were 32.2% and 44.2%, respectively.

The increase in our annual effective income tax rate in 2022 from 2021 was primarily attributable to the following:

an increase in our effective income tax rate during 2022 due to recognizing a deferred tax liability related to the Investment in Consensus resulting in a tax expense of $13.4 million;

an increase in our tax expense due to a lower net reduction in our reserves in 2022 as compared to 2021 for uncertain tax positions, primarily due to the lapse of the statute of limitations in certain jurisdictions;

an increase in our effective income tax rate during 2022 for U.S.

state and local taxes due to a greater portion of our income being subject to tax in the U.S.;

The decrease in our annual effective income tax rate in 2023 compared to prior period was primarily attributable to the following:

a decrease in our effective income tax rate due to tax expense of $13.4 million recognized during 2022 for recording a deferred tax liability related to our investment in Consensus common stock with no similar item occurring during 2023;

a decrease in our effective income tax rate during 2023 due to a higher net reduction in our reserves as compared to 2022 for uncertain tax positions, primarily due to the lapse of the statute of limitations in certain jurisdictions;

partially offset by

a decrease in our effective income tax rate during 2022 due to recognizing a tax benefit for a deferred tax asset related to goodwill impairment.

an increase in our effective income tax rate during 2023 due to the goodwill impairment recognized for book purposes with no corresponding tax benefit recognized.

In order to provide additional understanding in connection with our foreign taxes, the following represents the statutory and effective tax rate by significant foreign country:

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The effective tax rate can differ from the statutory tax rate when a company can exempt some income from tax, claim tax credits, or due to the effect of book-tax differences that do not reverse and discrete items.

Significant judgment is required in determining our provision for income taxes and in evaluating our tax positions on a worldwide basis.

We believe our tax positions, including intercompany transfer pricing policies, are consistent with the tax laws

in the jurisdictions in which we conduct our business.

Judgment is required in determining our provision for income taxes and in evaluating our tax positions on a worldwide basis.

We believe our tax positions, including intercompany transfer pricing policies, are consistent with the tax laws in the jurisdictions in which we conduct our business.

Certain of these tax positions have in the past been, and are currently being, challenged, and this may have a significant impact on our effective tax rate if our tax reserves are insufficient.

The Organization for Economic Co-operation and Development (“OECD”) established a Pillar Two Framework that was supported by over 130 countries worldwide.

On December 15, 2022, the European Union (“EU”) Member States adopted the EU’s Pillar Two Directive, which generally provides for a minimum effective tax rate of 15% with effective dates of January 1, 2024 and January 1, 2025, for different aspects of the directive.

A significant number of other countries are also implementing similar legislation.

The Company is continuing to evaluate the impact on future periods of the Pillar Two Framework and pending legislative adoption by additional individual countries in which we operate.

Although we are unable to predict when and how the Pillar Two Framework will be enacted into law, based on the countries in which we operate, the Company does not believe that the adoption of the Pillar Two Framework will have a material effect on our liability for corporate taxes and our consolidated effective tax rate.

Equity Method Investment

(Loss) income from equity method investment, net.

(Loss) income from equity method investment, net is generated from our investment in the OCV Fund I, LP (the “Fund”) for which we receive annual audited financial statements.

Loss from equity method investment, net.

Loss from equity method investment was generated from our investment in the OCV Fund I, LP (the “OCV Fund”) for which we receive annual audited financial statements.

The investment in the OCV Fund is presented net of tax and on a one-quarter lag due to the timing and availability of financial information from OCV.

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

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

The decrease in Loss from equity method investment, net in 2022 was primarily due to the decrease in value of the underlying investment.

Income from equity method investment, net during 2021 was primarily a result of a gain on the underlying investments.

During the years ended December 31, 2022 and 2021, the Company recognized management fee expenses of $1.5 million and $3.0 million, net of tax benefit, respectively.

Loss from equity method investment, net was $9.3 million and $7.7 million, net of tax benefit for the years ended December 31, 2023 and 2022, respectively.

The increase in loss from equity method investment, net in 2023 was primarily due to a larger decline in the value of the underlying investments.

Digital Media and Cybersecurity and Martech Results

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Digital Media

The financial results are presented for the following fiscal years (in thousands):

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

Year ended December 31,

External sales $ 1,078,391 $ 1,068,476

Inter-business sales 781 824

Total sales 1,079,172 1,069,300

External revenue $ 1,072,819 $ 1,078,391

Inter-business revenue 152 781

Total revenue 1,072,971 1,079,172

Operating costs and expenses 931,980 880,240

Operating income

Digital Media’s net sales of $1.1 billion in 2022 increased $9.9 million, or 0.9% compared to the prior comparable period primarily due to $33.1 million from businesses acquired in 2022 and $31.1 million from businesses acquired in 2021, net of their contribution in 2021, partially offset by organic decline in certain other businesses.

Digital Media’s operating costs and expenses of $880.2 million in 2022 increased $28.4 million from the prior comparable period primarily due to a goodwill impairment of $27.4 million recorded in 2022.

$ 140,991 $ 198,932

Digital Media’s net sales of $1.1 billion in 2023 decreased $5.6 million, or 0.5% compared to 2022 primarily due to an organic decline in certain businesses, offset in part by $21.3 million of incremental revenue during 2023 contributed by businesses acquired in 2022 and organic growth in certain other businesses.

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 $932.0 million in 2023 increased $51.7 million, or 5.9%, compared to 2022 primarily due to an increase of $29.5 million in goodwill impairment recognized during 2023 compared to 2022 and higher general and administrative and sales and marketing expenses.

As a result of these factors, Digital Media’s operating income of $141.0 million in 2023 decreased $57.9 million, or 29.1%, from 2022.

Cybersecurity and Martech

The financial results are presented for the following fiscal years (in thousands):

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

Year ended December 31,

External sales $ 312,606 $ 348,246

Inter-business sales 20 365

Total sales 312,626 348,611

External revenue $ 291,209 $ 312,606

Inter-business revenue — 20

Total revenue 291,209 312,626

Operating costs and expenses

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$ 43,058 $ 50,200

(1) For the year ended December 31, 2021, approximately $19.2 million of general and administrative costs were reflected as Corporate operating costs and expenses in the Company’s December 31, 2021 Form 10-K, however, should have been reflected as an operating cost for the Cybersecurity and Martech reportable segment.

The Company reclassified these costs in the table above as an operating cost for the Cybersecurity and Martech reportable segment, as well as the resulting impact in operating income for Cybersecurity and Martech.

Cybersecurity and Martech’s net sales of $312.6 million in 2022 decreased $35.6 million, or 10.2%, from the prior comparable period primarily due to the absence of approximately $33.5 million of revenue from the B2B Backup business, which was sold during the third quarter of 2021, and organic decline in certain other businesses during 2022, partially offset by $19.3 million of revenue from the business acquired in 2021, net of its contribution in 2021.

Cybersecurity and Martech operating costs and expenses of $262.4 million in 2022 decreased $76.0 million from the prior comparable period primarily due to a $32.6 million goodwill impairment in 2021 that did not recur, the absence of $22.1 million of costs from the B2B Backup business that was sold during the third quarter of 2021, lower sales and marketing expense, lower general and administrative expenses, and lower depreciation and amortization expense.

As a result of these factors, Cybersecurity and Martech operating income of $50.2 million in 2022 increased $40.1 million, or 394.7%, from 2021.

Cybersecurity and Martech’s net sales of $291.2 million in 2023 decreased $21.4 million, or 6.8%, compared to 2022 primarily due to the organic decline in certain businesses during the year.

Cybersecurity and Martech operating costs and expenses of $248.2 million in 2023 decreased $14.3 million, or 5.4%, compared to 2022 primarily due to lower sales and marketing expenses and lower general and administrative expenses.

As a result of these factors, Cybersecurity and Martech operating income of $43.1 million in 2023 decreased $7.1 million, or 14.2%, from 2022.

Liquidity and Capital Resources

Cash and Cash Equivalents and Investments

As of December 31, 2022, we had cash, cash equivalents, and investments of $839.1 million compared to $1.0 billion as of December 31, 2021.

As of December 31, 2022, cash, cash equivalents, and investments consisted of (in millions):

Our primary sources of liquidity and capital resources are cash flows from operations and debt financing.

We continue to invest in the development and expansion of our operations using available cash flows from operations.

Ongoing investments include, but are not limited to, improvements in our offerings, investments in new products and services, acquisitions, and continued investments in sales and marketing.

We also use cash flows from operations to service our debt obligations and the repurchase of our shares.

Cash, Cash Equivalents and Investments

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

Cash and cash equivalents $ 737,612 $ 652,793

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Cash, cash equivalents and investments $ 905,627 $ 839,085

Our investments consist of equity and debt securities as of December 31, 2022 and equity securities as of December 31, 2021.

For financial statement presentation, we classify our debt securities primarily as short- and long-term based upon their maturity dates.

As of December 31, 2022 and 2021 cash, cash equivalents, and investments held within domestic and foreign jurisdictions were as follows (in millions):

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

Cash, cash equivalents and investments held in domestic jurisdictions $ 742,010 $ 671,587

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For information on short-term and long-term investments of the Company, refer to Note 5 — Investments to the Notes to Consolidated Financial Statements included in Part II Item 8 of this Annual Report on Form 10-K.

On January 7, 2019, the Company entered into a Credit Agreement (the “Credit Agreement”) with certain lenders from time to time party thereto (collectively, the “Lenders”) and MUFG Union Bank, N.A., as sole lead arranger and as administrative agent for the Lenders (the “Agent”).

On October 7, 2020, the Company terminated the Credit Agreement.

On November 15, 2019, the Company issued $550.0 million aggregate principal amount of 1.75% Convertible Notes and received net proceeds of $537.1 million in cash, net of initial purchasers’ discounts, commissions, and other debt issuance costs.

A portion of the net proceeds were used to pay off all amounts then outstanding under the MUFG Credit Facility, with the remainder to be used for general corporate purposes including acquisitions.

On October 7, 2020, the Company issued $750 million aggregate principal amount of 4.625% Senior Notes due 2030.

A portion of the proceeds were used to fund the redemption of the outstanding aggregate principal amount of the 6.0% Senior Notes previously issued by one of our subsidiaries and to pay the redemption premium due in respect of such redemption and accrued and unpaid interest.

The net proceeds were used to redeem all of its outstanding 6.0% Senior Notes due in 2025 and, the remaining net proceeds were available for general corporate purposes which may include acquisitions or the redemption of other outstanding indebtedness.

On November 15, 2019, the Company issued $550.0 million aggregate principal amount of 1.75% convertible senior notes due November 1, 2026 (the “1.75% Convertible Notes”).

Prior to the spin-off of Consensus, the conversion rate on the 1.75% Convertible Notes was 7.9864 shares of the Company’s common stock for each $1,000 principal amount of 1.75% Convertible Notes, which represents a conversion price of approximately $125.21 per share of the Company’s common stock.

The spin-off constituted an event under the 1.75% Convertible Notes that required an adjustment and the conversion rate increased to 9.3783 shares of the Company’s common stock for each $1,000 principal amount of 1.75% Convertible Notes (or 5,158,071 shares), which represents a conversion price of approximately $106.63 per share of the Company’s common stock.

As of December 31, 2022 and December 31, 2023, the market trigger conditions did not meet the conversion requirements of the 1.75% Convertible Notes and, consequently, none of the 1.75% Convertible Notes have been converted.

The Company may not redeem the 1.75% Convertible Notes prior to November 1, 2026.

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

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

On June 2, 2021, June 21, 2021, August 20, 2021.

and September 16, 2021, the Company entered into First, Second, Third and Fourth Amendments (together the “Amendments”) to the Credit Agreement.

The Amendments (i) provided for the issuance of a senior secured term loan under the Credit Agreement, in an aggregate principal amount of $485.0 million (the “Bridge Loan Facility”), (ii) permitted the spin-off of the Company’s cloud fax business into a new publicly traded company, and (iii) provided for certain other changes to the Credit Agreement.

On June 2, 2021, June 21, 2021, August 20, 2021, and September 16, 2021, the Company entered into First, Second, Third and Fourth Amendments (together the “Amendments”) to the Credit Agreement.

The Amendments (i) provided for the

issuance of a senior secured term loan under the Credit Agreement, in an aggregate principal amount of $485.0 million (the “Bridge Loan Facility”), (ii) permitted the spin-off of the Company’s cloud fax business into a new publicly traded company, and (iii) provided for certain other changes to the Credit Agreement.

In connection with the spin-off of Consensus, the Company drew the full amount of the Bridge Loan Facility and used the proceeds of the Bridge Loan Facility to redeem the 3.25% Convertible Notes.

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The tender offer expired on October 22, 2021.

On June 10, 2022, the Company entered into a Fifth Amendment to the Credit Agreement, which provided for the Term Loan Facility, in an aggregate principal amount of $90.0 million, which had a maturity date that was 60 days following the date of funding of the Term Loan Facility.

On September 15, 2022, the Company entered into a Sixth Amendment to its existing Credit Agreement, which provided for the Term Loan Two Facility in an aggregate principal amount of approximately $22.3 million.

During the year ended December 31, 2022, the Company completed a non-cash exchange of 2.8 million shares of its common stock of Consensus with the lenders under the Fifth and the Sixth Amendments to settle the Company’s obligations of $112.3 million outstanding aggregate principal amount of the Term Loan Facility and Term Loan Two Facility plus related interest.

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

On June 10, 2022, the Company entered into a Fifth Amendment to the Credit Agreement, which provided for the issuance of a senior secured term loan in an aggregate principal amount of $90.0 million (the “Term Loan Facility”), which had a maturity date that was 60 days following the date of funding of the Term Loan Facility.

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

During the year ended December 31, 2022, the Company completed non-cash exchanges of 2.8 million shares of its common stock of Consensus with the lenders under the Fifth and the Sixth Amendments to settle the Company’s obligations of $112.3 million outstanding aggregate principal amount of the Term Loan Facility and Term Loan Two Facility plus related interest.

During the year ended December 31, 2022, the Company repurchased approximately $181.2 million in aggregate principal amount of the 4.625% Senior Notes for an aggregate purchase price of approximately $167.7 million.

No repurchases of 4.625% Senior Notes were effectuated during the year ended December 31, 2023.

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

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, holdback payments in connection with certain business acquisitions, and other obligations.

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

These long-term contractual obligations extend through 2031.

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

As of December 31, 2022, our total minimum lease payments are $59.3 million, of which approximately $23.0 million are due in the succeeding twelve months.

As of December 31, 2023, our total future minimum lease payments are $34.1 million, of which approximately $16.9 million future minimum lease payments are due in the succeeding twelve months.

As of December 31, 2023, our liability for uncertain tax positions was $36.1 million.

We currently anticipate that our existing cash and cash equivalents and cash generated from operations 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.

The following information regarding the Consolidated Statements of Cash Flows combine continuing and discontinued operations for the years ended December 31, 2022 and 2021.

The Consolidated Statements of Cash Flows for the year ended December 31, 2021 includes the activity from the cloud fax business through the date of Separation on October 7, 2021.

Refer to Note 6 - Discontinued Operations and Dispositions to the Notes to the Consolidated Financial Statements included in Part II Item 8 of this Annual Report on Form 10-K, for additional information.

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

In the ordinary course of business, the Company enters into commitments including those related to cloud computing, information technology, security, and information and document management.

The Company also has revenue sharing arrangements with annual minimum guarantees based upon third-party website advertising metrics and other contractual provisions.

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 share repurchases, if any, for at least the next 12 months.

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

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Net cash provided by operating activities $ 319,962 $ 336,444 $ (16,482)

Net cash (used in) provided by investing activities $ (220.8) $ 59.1 $ (279.9)

Net cash used in investing activities

$ (127,408) $ (220,771) $ 93,363

Net cash used in financing activities $ (114,791) $ (140,832) $ 26,041

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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 $180.1 million decrease in net cash provided by operating activities in 2022 compared to 2021 was primarily related to lower earnings before non-cash adjustments, primarily as a result of the Separation and other divested businesses that occurred in 2021, timing of payments to our vendors, decrease in operating lease liabilities, and net decrease in collections from our customers due to timing year over year.

The $16.5 million decrease in net cash provided by operating activities in 2023 compared to 2022 was primarily related to the timing and amount of cash receipts in ‘Accounts Receivable’, lower earnings before non-cash adjustments, an increase in prepaid expenses, and higher income tax payments during 2023, partially offset by the timing of payments in ‘Accounts Payable’.

Investing Activities

The $279.9 million decrease in net cash provided by investing activities in 2022 compared to 2021 was primarily related to the absence of proceeds of $259.1 million from the Separation and the absence of $48.9 million from the sale of businesses that occurred in 2021 that did not recur, partially offset by lower cash used for acquisition of businesses and purchases of property, plant and equipment.

The $93.4 million decrease in net cash used in investing activities in 2023 compared to 2022 was primarily related to lower cash used on business acquisitions during 2023 compared to 2022 and our investment in available-for-sale securities during 2022, which did not recur in 2023, partially offset by current period investment in equity securities without readily determinable fair value.

Financing Activities

The $27.7 million increase in net cash used in financing activities in 2022 compared to 2021 was primarily related to lower proceeds from debt borrowings, net of repayments.

The $26.0 million decrease in net cash used in financing activities in 2023 compared to 2022 was primarily related to the absence of repurchases of our 4.625% Senior Notes, which occurred during 2022;

partially offset by 1) higher cash used on share repurchases in 2023, and 2) the absence of term loan proceeds during 2023.

Stock Repurchase Program

Effective February 15, 2012, the Company’s Board approved a program authorizing the repurchase of up to five million shares of our common stock through February 20, 2013 (the “2012 Program”), which was subsequently extended through February 20, 2021.

Prior to 2020, the Company repurchased 3,859,181 shares under the 2012 Program at an aggregate cost of $117.1 million.

The repurchased shares were subsequently retired.

There were 1,140,819 shares available under the 2012 program as of January 1, 2020.

During the year ended December 31, 2020, the Company repurchased 1,140,819 shares at an aggregate cost of $87.5 million which were subsequently retired in the same year.

As of December 31, 2020, the Company had repurchased all of the available shares under the 2012 Program at an aggregated cost of $204.6 million (including an immaterial amount of commission fees).

On August 6, 2020, the Board approved a program authorizing the repurchase of up to ten million shares of our common stock through August 6, 2025 (the “2020 Program”) in addition to the five million shares repurchased under the 2012 Program.

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

In 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 years ended December 31, 2022, December 31, 2021, and December 31, 2020, the Company repurchased 736,536, 445,711 and 2,490,599 shares, respectively, at an aggregate cost of $71.3 million, $47.7 million and $177.8 million, respectively, (including an immaterial amount of commission fees) under the 2020 Program, which were subsequently retired.

During the years ended December 31, 2023, December 31, 2022, and December 31, 2021, the Company repurchased 1,585,846, 736,536 and 445,711 shares (which were subsequently retired) respectively, at an aggregate cost of $104.9 million, $71.3 million, and $47.7 million, respectively (including an immaterial amount of commission fees) under the 2020 Program.

Refer to Note 14 — Stockholders’ Equity to the Notes to Consolidated Financial Statements included in Part II Item 8 of this Annual Report on Form 10-K for further details.

As a result of the Company’s share repurchases, the number of shares of the Company’s common stock available for purchase as of December 31, 2022 is 6,327,154 shares.

As a result of the repurchases, the number of shares of the Company’s common stock available for purchase as of December 31, 2023 is 4,741,308 shares.

A summary of share repurchases under the 2020 Program during the year ended December 31, 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 December 31, 2023

1,585,846 $104,919 4,741,308

(1) Excludes the impact of excise taxes.

Cumulatively at December 31, 2023, 5,258,692 shares were repurchased, under the 2020 Program, at an aggregate cost of $401.8 million (including excise tax).

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

What changed 10-K

Item 7. Management’s Discussion and Analysis