What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-02-26 compared with 2023-03-01 · 630 added, 869 removed, 1353 unchanged (53% of the section changed)

1 unchanged sentence

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors

Ziff Davis, Inc.:

Opinion on the Consolidated Financial Statements

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

and subsidiaries (the Company) as of December 31, 2023, the related consolidated statement of operations, comprehensive income, cash flows, and stockholders’ equity for the year then ended, and the related notes (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023, and the results of its operations and its cash flows for the year then ended, in conformity with U.S.

generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 26, 2024 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matter

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

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

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

Sufficiency of audit evidence over revenue

As discussed in Notes 3 and 18 to the consolidated financial statements, the Company had $1,364,028 thousand in revenues for the year ended December 31, 2023, of which $1,072,971 thousand was within the Digital Media segment, and $291,209 thousand was within the Cyber Security and Martech segment.

Each of these categories of revenue has multiple discrete revenue streams that involve several information technology (IT) applications responsible for the initiation, processing, and recording of revenue transactions.

We identified the evaluation of the sufficiency of audit evidence over revenue as a critical audit matter.

Evaluating the sufficiency of audit evidence over revenue required subjective auditor judgment to determine the nature and extent of procedures to be performed due to the number of revenue streams, related revenue recognition processes, number of IT applications involved, and the need to involve IT professionals to assist with the performance of certain procedures.

The following are the primary procedures we performed to address this critical audit matter.

We applied auditor judgment to determine the nature and extent of procedures to be performed over revenue, including the determination of the revenue streams over which those procedures were performed.

For the revenue streams where procedures were performed, we evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s revenue processes.

We involved IT professionals with specialized skills and knowledge, who assisted in the identification and testing of certain IT systems and related controls that are used by the Company in its revenue recognition processes.

For certain revenue streams, we assessed the recorded revenue by selecting a sample of transactions and comparing the amounts recognized for consistency with underlying documentation, including agreements with customers and third-party data.

For other revenue streams, we performed a software-assisted data analysis to test relationships among certain revenue transactions.

We evaluated the sufficiency of audit evidence obtained over revenue by assessing the results of procedures performed, including the appropriateness of the nature and extent of such evidence.

We have served as the Company's auditor since 2023.

New York, New York

February 26, 2024

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Shareholders and Board of Directors

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Opinion on the Consolidated Financial Statements

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

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

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

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

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

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

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

Change in Accounting Method Related to Convertible Instruments

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

Critical Audit Matter

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

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

Goodwill Impairment Assessment - Digital Media Reporting Units

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

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

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

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

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

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

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

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

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

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

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

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

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

/s/ BDO USA, LLP

We have served as the Company's auditor since 2014.

We served as the Company's auditor from 2014 through 2023.

Los Angeles, California

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Short-term investments 27,109 58,421

Accounts receivable, net of allowances of $ 6,868 and $ 9,811 , respectively (includes $ 0 and $ 9,272 due from related party, respectively)

Accounts receivable, net of allowances of $ 6,871 and $ 6,868 , respectively

337,703 304,739

3 unchanged sentences

Property and equipment, net

Trade names, net 136,192 147,761

188,169 178,184

Trade names and trademarks, net 155,784 191,020

Customer relationships, net 137,250 208,057

Goodwill 1,591,474 1,531,455

Other purchased intangibles, net 32,372 63,738

Goodwill 1,546,065 1,591,474

Deferred income taxes 8,731 8,523

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Deferred revenue, current 184,549 187,904

Current portion of long-term debt — 54,609

Other current liabilities 15,890 22,286

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Operating costs and expenses:

Cost of revenues (1)

197,292 195,554 188,053

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68,860 74,093 78,874

General and administrative (1)

General, administrative, and other related costs

421,050 404,263 456,777

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

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

Loss on sale of businesses

— — ( 21,798 )

Unrealized (loss) gain on short-term investments held at the reporting date, net ( 28,495 ) ( 7,145 ) 298,490

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

Other income, net 8,437 1,293 65

Gain (loss) on investments, net

357 ( 46,743 ) ( 16,677 )

Other (loss) income, net

( 9,468 ) 8,437 1,293

Income from continuing operations before income tax (expense) benefit and changes from equity method investment 74,974 131,153 351,351

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Diluted 46,464,261 47,025,849 47,862,745

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

Cost of revenues $ 341 $ 306 $ 332

Sales and marketing 3,083 1,288 1,011

Research, development and engineering 2,503 1,984 1,396

General and administrative 20,674 20,551 19,781

Total $ 26,601 $ 24,129 $ 22,520

See Notes to Consolidated Financial Statements

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Net income $ 41,503 $ 63,757 $ 496,714

Other comprehensive loss, net of tax:

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustment 13,657 ( 32,479 ) ( 21,268 )

Consensus separation adjustment — 4,056 18,966

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

Change in fair value on available-for-sale investments, net of tax expense of $ 16 , $ 0 and $ 0 for the years ended December 31, 2023, 2022 and 2021, respectively

96 272 ( 114 )

Other comprehensive loss, net of tax ( 28,151 ) ( 2,416 ) ( 8,344 )

Other comprehensive income (loss), net of tax

13,753 ( 28,151 ) ( 2,416 )

Comprehensive income

$ 55,256 $ 35,606 $ 494,298

See Notes to Consolidated Financial Statements

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Depreciation and amortization 236,966 233,400 258,303

Amortization of financing costs and discounts 2,692 26,090 28,476

Non-cash operating lease costs 11,141 13,412 1,485

Share-based compensation 31,920 26,601 25,248

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

Provision for credit losses (benefit) on accounts receivable 2,809 ( 255 ) 8,738

Deferred income taxes, net ( 30,017 ) ( 12,991 ) ( 13,433 )

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

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

(Gain) loss on extinguishment of debt, net — ( 11,505 ) 14,024

Loss on sale of businesses — — 21,798

Goodwill impairment on business 56,850 27,369 32,629

Changes in fair value of contingent consideration ( 200 ) ( 2,575 ) ( 1,223 )

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

Loss (income) from equity method investments

9,329 7,730 ( 35,845 )

Unrealized loss (gain) on short-term investments held at the reporting date 28,495 7,145 ( 298,490 )

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

(Gain) loss on investment, net ( 357 ) 46,743 16,677

Other 5,159 3,637 39,270

2 unchanged sentences

Prepaid expenses and other current assets ( 8,700 ) 9,665 ( 15,650 )

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

Other assets ( 5,574 ) ( 16,240 ) 11,443

Increase (decrease) in:

Accounts payable and accrued expenses (includes $ 0 , $ 17,635 and $ 0 with related parties)

Accounts payable (includes $ 0 , $ 0 and $ 17,635 with related parties)

9,419 ( 20,246 ) 479

Income taxes payable 17,323 ( 21,783 ) 6,489

Deferred revenue ( 6,802 ) ( 20,962 ) 14,282

Operating lease liabilities ( 27,131 ) ( 30,581 ) ( 25,150 )

Liability for uncertain tax positions ( 2,167 ) ( 10,383 ) 9,391

Other long-term liabilities ( 3,891 ) ( 899 ) 3,200

Accrued liabilities and other current liabilities ( 26,608 ) ( 33,189 ) ( 41,863 )

Net cash provided by operating activities 319,962 336,444 516,536

Cash flows from investing activities:

Purchases of property and equipment ( 108,729 ) ( 106,154 ) ( 113,740 )

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

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Proceeds from sale of equity investments 3,174 4,527 14,330

Purchases of property and equipment ( 106,154 ) ( 113,740 ) ( 92,552 )

Proceeds from sale of assets — — 507

Acquisition of businesses, net of cash received ( 9,492 ) ( 104,094 ) ( 141,146 )

Proceeds from sale of businesses, net of cash divested — — 48,876

Purchases of intangible assets ( 50 ) ( 78 ) ( 3,118 )

Proceeds from divestiture of discontinued operations — — 259,104

Other ( 503 ) ( 50 ) ( 78 )

Net cash (used in) provided by investing activities ( 127,408 ) ( 220,771 ) 59,088

Cash flows from financing activities:

Proceeds from issuance of long-term debt — — 750,000

Payment of note payable — — ( 400 )

Proceeds from bridge loan — — 485,000

Debt issuance cost — — ( 7,272 )

Payment of debt — ( 166,904 ) ( 512,388 )

22 unchanged sentences

Common stock Additional

paid-in Treasury stock Retained other comprehensive Total

Retained Accumulated other

Stockholders’

Shares Amount capital Shares Amount earnings income/(loss) Equity

Shares Amount paid-in capital

earnings comprehensive loss

Balance, January 1, 2021

Net income — — — — — 150,668 — 150,668

Other comprehensive income, net of tax expense of $ 181

44,346,630 $ 443 $ 456,274 $ 809,107 $ ( 54,806 ) $ 1,211,018

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

Issuance of shares under Employee Stock Purchase Plan 118,629 1 7,381 — — — — 7,382

Equity portion of 3.25 % convertible debt

— — ( 12 ) — — — — ( 12 )

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

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

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

Other, net — — 161 — — — — 161

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

Net income — — — 496,714 — 496,714

2 unchanged sentences

Exercise of stock options 70,776 1 2,938 — — 2,939

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

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

Issuance of shares under employee stock purchase plan 109,248 1 9,230 — — 9,231

Repurchase and retirement of common stock

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

( 697,657 ) ( 7 ) ( 26,275 ) ( 52,045 ) — ( 78,327 )

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

12 unchanged sentences

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

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

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

Repurchase and retirement of common stock

( 809,422 ) ( 7 ) ( 17,277 ) ( 61,007 ) — ( 78,291 )

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

Other, net — — 6 ( 3,920 ) 4,056 142

Balance, December 31, 2022 47,269,446 $ 473 $ 439,681 $ 1,537,830 $ ( 85,373 ) $ 1,892,611

Net income — — — 41,503 — 41,503

Other comprehensive loss, net of tax expense of $ 16

— — — — 13,753 13,753

Issuance of restricted stock, net 47,274 — ( 6,220 ) 1,573 — ( 4,647 )

Issuance of shares under employee stock purchase plan 161,488 2 8,725 — — 8,727

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

Repurchase and retirement of common stock ( 1,585,846 ) ( 16 ) ( 15,388 ) ( 89,515 ) — ( 104,919 )

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

Share-based compensation — — 31,920 — — 31,920

6 unchanged sentences

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

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

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

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

21 unchanged sentences

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

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

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

6 unchanged sentences

Ziff Davis did not retain a controlling interest in Consensus.

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

During the year ended December 31, 2022, the Company entered into a Fifth Amendment and Sixth Amendment to its

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

existing Credit Agreement, providing for the issuance of senior secured term loans under the Credit Agreement (the “Term

Loan Facilities”), in an aggregate principal amount of approximately $ 112.3 million.

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

Refer to Note 10 — Debt for additional details.

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

As of December 31, 2023, the Company continues to hold approximately 1.0 million shares of the common stock of Consensus.

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

Refer to Note 5 — Investments and Note 6 — Discontinued Operations and Dispositions for additional information.

Reclassifications

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

The Company reclassified its trademarks as of December 31, 2022 from ‘other purchased intangibles’ to ‘trade names and trademarks’ to conform to current period presentation.

The trademarks totaled $ 54.8 million of carrying value as of December 31, 2022.

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

Cash and Cash Equivalents

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

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

Allowances for Credit Losses

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

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

Changes in the allowance are classified as ‘General, administrative, and other related costs’ in the Consolidated Statements of Operations.

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

6 unchanged sentences

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

(Decreases) increases to bad debt expense

Increases (decreases) to bad debt expense

2,809 ( 255 ) 3,107

1 unchanged sentence

Ending balance $ 6,871 $ 6,868 $ 9,811

Revenue Recognition

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

Refer to Note 3 - Revenues for additional details.

Principal vs.

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.

If the Company is acting as the principal in a transaction, the Company reports revenue on a gross basis.

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

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

(i) if another party is involved in providing goods or services to the customer, (ii) whether the Company controls the specified goods or services prior to transferring control to the customer and (iii) whether the Company has discretion on pricing.

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

The Company has made an accounting policy election to exclude from the measurement of the transaction price all taxes assessed by a governmental authority that are (i) both imposed on and concurrent with a specific revenue-producing transaction and (ii) collected by the Company from a customer.

Fair Value Measurements

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

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

The carrying values of cash and cash equivalents, accounts receivable, interest receivable, accounts payable, accrued expenses, interest payable, customer deposits, and long-term debt are reflected in the financial statements at cost.

With the exception of certain investments and long-term debt, cost approximates fair value due to the short-term nature of such instruments.

The fair value of the Company’s outstanding debt was determined using the quoted market prices of debt instruments with similar terms and maturities when available.

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

Cash and Cash Equivalents

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

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

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

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

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

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

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

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

1 unchanged sentence

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

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

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

in the same or similar investment from the same issuer.

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

4 unchanged sentences

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

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

Concentration of Credit Risk

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

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

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

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

As of December 31, 2023, the Company’s cash and cash equivalents that were maintained in demand deposit accounts in qualifying financial institutions are insured up to the limit determined by the applicable governmental agency.

Variable Interest Entities (“VIE”s)

2 unchanged sentences

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

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

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

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

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

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

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

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

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

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

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

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

Debt Issuance Costs and Debt Discount

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

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

Concentration of Credit Risk

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

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

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

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

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Foreign Currency

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

Assets and liabilities are translated at exchange rates prevailing at the balance sheet dates.

Revenues and expenses are translated into U.S.

Dollars at average exchange rates for the period.

Gains and losses resulting from translation are recorded as a component of accumulated other comprehensive income/(loss).

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

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

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

Fair Value Measurements

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

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

With the exception of certain investments and long-term debt, cost approximates fair value due to the short-term nature of such instruments.

The fair value of the Company’s outstanding debt was determined using the quoted market prices of debt instruments with similar terms and maturities when available.

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

Property and Equipment

Property and equipment are stated at cost.

Equipment under a finance lease is stated at the present value of the minimum lease payments.

Depreciation is calculated using the straight-line method over the estimated useful lives of the assets and is recorded in cost of revenues and general and administrative expenses on the Consolidated Statements of Operations.

Depreciation is calculated using the straight-line method over the estimated useful lives of the assets and is recorded in direct costs and general, administrative, and other related costs on the Consolidated Statements of Operations based on the function the underlying asset supports.

The estimated useful lives of property and equipment range from one to ten years .

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

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

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

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The Company determines if an arrangement is a lease at inception.

Operating lease right-of-use assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date.

As most of the Company’s leases do not provide an implicit rate, the Company uses the incremental borrowing rate based on the information available at commencement date of the lease in determining the present value of future payments.

The operating lease right-of-use asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred.

The lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.

Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.

Leases with an initial term of twelve months or less are not recorded on the balance sheet and the Company recognizes lease expense for these leases on a straight-line basis over the lease term.

There are lease agreements with lease and non-lease components, which are generally accounted for as a single lease component.

Impairment or Disposal of Long-Lived Assets

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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 assets may not be recoverable.

During the years ended December 31, 2022, 2021 and 2020, the Company did not have any events or circumstances indicating impairment of long-lived assets, other than the recording of an impairment of certain operating lease right-of-use assets and associated property and equipment.

The Company regularly evaluates its office space requirements in light of more of its workforce working from home as part of a permanent “remote” or “partial remote” work model.

The impairment is presented in general and administrative expense on our Consolidated Statements of Operations.

Refer to Note 11 - Leases for additional details.

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

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

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

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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.

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.

The Company’s Digital Media reportable segment is comprised of seven reporting units and the Cybersecurity and Martech reportable segment is comprised of two reporting units.

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, and other intangible assets, including developed technologies.

The fair values of these identified intangible assets are based upon expected future cash flows or income, which take into consideration certain assumptions such as customer turnover, trade names, and patent lives.

These determinations are primarily based upon the Company’s historical experience and expected benefit of each intangible asset.

If it is determined that such assumptions are not accurate, then the resulting change will impact the fair value of the intangible asset.

Trade names and trademarks are generally amortized on a straight-line basis with an estimated useful life ranging from two to twenty years.

The Company amortizes customer relationship assets in a pattern that best reflects the pace at which the asset’s benefits are consumed with useful lives ranging from three to sixteen years.

This pattern results in more amortization expense being recognized earlier in the useful life.

Other intangible assets subject to amortization are amortized over the period of estimated economic benefit ranging from one to ten years.

Amortization expense of definite-lived intangibles assets is included in general, administrative, and other related costs on the Consolidated Statements of Operations.

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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.

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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, 2021, and 2020 the Company recorded a goodwill impairment of $ 27.4 million, $ 32.6 million and zero , respectively.

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.

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

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

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

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

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.

Contingent Consideration

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

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

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part of the purchase price, including the following:

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

and (2) the former shareholders of acquired companies that remain as key employees receive compensation other than contingent earn-out payments at a reasonable level compared with the compensation of the Company’s other key employees.

The contingent earn-out payments are not affected by employment termination.

The Company measures its contingent earn-out liabilities in connection with acquisitions at fair value on a recurring basis using significant unobservable inputs classified within Level 3 of the fair value hierarchy (see Note 7 - Fair Value Measurements ).

The Company may use various valuation techniques depending on the terms and conditions of the contingent consideration, including a Monte-Carlo simulation.

This simulation uses a probability distribution for each significant input to produce hundreds or thousands of possible outcomes and the results are analyzed to determine probabilities of different outcomes occurring.

Significant increases or decreases to these inputs in isolation would result in a significantly higher or lower liability with a higher liability capped by the contractual maximum of the contingent earn-out obligation.

Ultimately, the liability will be equivalent to the amount paid, and the difference between the fair value estimate and amount paid will be recorded in earnings.

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

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

Self-Insurance Program

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

The Company has secured reinsurance in the form of a two tiered stop-loss coverage that limits the exposure arising from any claims made.

Self-insurance claims filed and claims incurred but not reported are accrued based on management’s estimate of the discounted ultimate costs for self-insured claims incurred using actuarial assumptions followed in the insurance industry and historical experience.

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

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

Debt Issuance Costs and Debt Discount

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

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

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

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

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

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

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

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

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

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

Revenue Recognition

Refer to Note 3 — Revenues for additional details.

Share-Based Compensation

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

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

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

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

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

The amount of share-based compensation expense recognized in the Consolidated Statements of Operations is net of estimated forfeitures.

The forfeiture rate is estimated at the grant date based on historical experience and revised, if necessary, in subsequent periods if actual forfeitures differ from the estimated rate.

The expense ultimately recorded is for the awards that vest.

Research, Development, and Engineering

Research, development, and engineering costs are expensed as incurred.

Costs for software development incurred during the application development stage are capitalized and amortized over their estimated useful lives.

Research, development, and engineering expenditures were $ 68.9 million, $ 74.1 million, and $ 78.9 million for the years ended December 31, 2023, 2022, and 2021, respectively.

Advertising Costs

The Company incurs external advertising costs to promote its brands.

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

Advertising costs are expensed as incurred.

For the years ended December 31, 2023, 2022, and 2021 external advertising costs were $ 120.8 million, $ 128.8 million, and $ 143.5 million, respectively.

Foreign Currency

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

Assets and liabilities are translated at exchange rates prevailing at the balance sheet dates.

Revenues and expenses are translated into U.S.

Dollars at average exchange rates for the period.

Gains and losses resulting from translation are recorded as a component of accumulated other comprehensive income/(loss).

Net translation income (loss) was $ 13.7 million, $( 32.5 ) million, and $( 21.3 ) million for the years ended December 31, 2023, 2022, and 2021, respectively.

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

Foreign exchange (losses) gains amounted to $( 3.9 ) million, $ 8.2 million, and $ 2.0 million for the years ended December 31, 2023, 2022 and 2021, respectively.

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

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These reserves for tax contingencies are established when the Company believes that certain positions might be challenged despite the Company’s belief that its tax return positions are fully supportable.

The Company adjusts these reserves in light of changing facts and circumstances, such as the outcome of a tax audit or lapse of a statute of limitations.

The Company adjusts these reserves in light of changing facts and circumstances, such as the outcome of a tax audit or lapse of a statute of

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

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

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

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

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

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

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

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

On August 16, 2022, the “Inflation Reduction Act” of 2022 (“IRA”) was signed into law.

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The Company does not believe that it will be subject to the CAMT as it is expected to be under the threshold of the average annual adjusted financial statement income.

Share-Based Compensation

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

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

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

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

Earnings Per Common Share (“EPS”)

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

On January 1, 2022, the Company adopted Accounting Standards Update (“ASU”) 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”) using the modified retrospective method.

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

Following this adoption, the Company applies the if-converted method for the diluted net income per share calculation of convertible debt instruments.

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

Research, Development and Engineering

Research, development and engineering costs are expensed as incurred.

Costs for software development incurred subsequent to establishing technological feasibility, in the form of a working model, are capitalized and amortized over their estimated useful lives.

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

Share Repurchases

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

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

In August 2022, the U.S.

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

As a result, the Company accrued excise tax in connection with the share repurchases it completed during year ended December 31, 2023.

Segment Reporting

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

ASC 280 also establishes standards for related

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

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

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

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

The Company has two reportable segments:

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Refer to Note 18 — Segment Information for additional detail.

Advertising Costs

The Company incurs external advertising costs to promote its brands.

Advertising costs are expensed as incurred.

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

Recent Accounting Pronouncements

Recently adopted accounting pronouncements

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Recently issued applicable accounting pronouncements not yet adopted

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This update was later amended by ASU 2022-06.

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

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

Reclassifications

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

In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements:

Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative.

The amendments in this update modify the disclosure or presentation requirements of a variety of Topics in the Codification.

Certain of the amendments represent clarifications to or technical corrections of the current requirements.

For entities subject to the SEC's existing disclosure requirements and entities required to file/furnish financial statements with or to the SEC in preparation for the sale of or for purposes of issuing securities that are not subject to contractual restrictions on transfer, the effective date for which each amendment will be the date on the SEC's removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited.

For all other entities, amendments will be effective two years later.

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

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures , which provides for enhanced disclosures about significant segment expenses.

In addition, the guidance enhances interim disclosure requirements, clarifies circumstances in which an entity can disclose multiple segment measures of profit or loss, provides new segment disclosure requirements for entities with a single reportable segment, and contains other disclosure requirements.

The purpose of the guidance is to enable investors to better understand an entity’s overall performance and assess potential future cash flows.

The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, on a retrospective basis.

Early adoption is permitted.

This ASU will likely result in us including the additional required disclosures when adopted.

We are currently evaluating the impact of these provisions and expect to adopt them for the year ended December 31, 2024.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures.

The amendments in the update require public business entities on an annual basis to disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold of equal to or greater than 5% of the amount computed by multiplying pretax income by statutory income tax rate.

The amendments also require that entities disclose on an annual basis information about the amount of income taxes paid disaggregated by federal, state, and foreign taxes and the amount of income taxes paid disaggregated by individual jurisdictions in which income taxes paid is equal to or greater than 5% of total income taxes paid.

The amendments eliminate some of the previously required disclosures for all entities relating to estimates of the change in unrecognized tax benefits reasonably possible within twelve months.

The amendments in this update are effective on a prospective basis for annual periods beginning after December 15, 2024.

Early adoption is permitted.

This ASU will result in the required additional disclosures being included in our consolidated financial statements, once adopted.

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, licensing, and subscriptions to services and information.

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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:

(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.

The Digital Media business also generates revenue from marketing, performance marketing, and production services.

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

Subscription and Licensing

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.

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

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

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

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.

Subscription revenues are primarily recognized over the contract term.

Revenues related to the provision of access to historical data for certain services are recorded at the time of delivery.

The Digital Media business also generates 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 that represent symbolic intellectual property, as defined in ASC 606, Revenue from Contracts with Customers .

Revenues under such license agreements are generally recognized over the contract term.

In instances when technology assets in the form of functional intellectual property are licensed to our clients, revenues from the license of these assets are recognized at a point in time.

Digital Media subscription and licensing revenues include revenues from transactions involving the sale of perpetual software licenses, related software support, and maintenance.

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.

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.

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

Revenues from related software support and maintenance are generally recognized ratably over the contractual period, because technical support, unspecified software product upgrades, maintenance releases, and patches are provided to customers on an as needed basis and they are available during the term of the support period.

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

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

Other revenues primarily include those from the sale of hardware used in conjunction with software described above, online course revenue, and game publishing revenue.

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.

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.

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Cybersecurity and Martech

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

The Company’s Cybersecurity and Martech revenues substantially consist of subscription revenues which include subscription 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.

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

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Principal vs.

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.

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

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.

Disaggregated Revenues

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

See Note 18 - Segment Information for additional information.

Year ended December 31,

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$ 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

Timing of revenue recognition

Point in time $ 46,770 $ 42,276 $ 27,685

Over time 1,344,227 1,374,446 1,131,144

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

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

The Company recorded $ 160.1 million and $ 174.7 million of revenue for the years ended December 31, 2023 and 2022, respectively, which was previously included in the deferred revenue balance as of the beginning of each respective year.

As of December 31, 2023 and 2022, the Company acquired $ 0.7 million and $ 21.5 million, respectively, of deferred revenue in connection with the Company’s business acquisitions, which are subject to purchase accounting adjustments, as appropriate.

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Performance Obligations

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

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

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 complex contracts when advertising and licensing services are sold together.

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, which is often immaterial and estimated.

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

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

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

The Company satisfies its performance obligations upon delivery of services to its customers.

Within the Digital Media business, the Company provides content to its advertising partners which the Company sells to its partners’ customer base and receives a revenue share based on the terms of the agreement.

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

In addition, the Company provides content to its advertising partners which the Company sells to its partners’ customer base and receives a revenue share based on the terms of the agreement.

The Company satisfies its performance obligations within the Cybersecurity and Martech business upon delivery of services to its customers.

Payment terms vary by type and location of our customers and the services offered.

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

Significant Judgments

Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment.

Judgment is also required to determine the standalone selling price for each distinct performance obligation.

Performance Obligations Satisfied Over Time

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

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

Satisfaction of these performance obligations is evidenced in the following ways:

• Website reporting by the Company, the customer, or a third-party contains the delivery evidence needed to satisfy the performance obligations within the advertising contract

• Successfully delivered leads are evidenced by either delivery reports from the Company’s internal lead management systems or through e-mail communication and/or other evidence of delivery showing acceptance of leads by the customer

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

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

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

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

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

The 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.

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

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

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

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

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

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Performance Obligations Satisfied at a Point in Time

The Company’s Digital Media business has technology subscriptions 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.

This is evidenced once a digital key is delivered to the customer.

Once the key is delivered to the customer, the customer has full control of the technology and the Company has no further performance obligations.

The Company has concluded that revenue is recognized once the digital key is delivered.

The Company believes that this method is a faithful depiction of the transfer of goods and services.

Practical expedients

Existence of a Significant Financing Component in a Contract

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

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

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

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

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

The Company recognizes revenue on a straight-line basis throughout the subscription period, or as usage occurs for services outside of the subscription, and believes that the method used is a faithful depiction of the transfer of goods and services.

Transaction Price Allocation to Future Performance Obligations

As of December 31, 2023, the aggregate amount of transaction price that is allocated to future performance obligations was approximately $ 48.7 million and is expected to be recognized as follows:

73 % by December 31, 2024 and 27 % 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.

Further, the disclosure does not include contracts for which the Company recognizes revenue in proportion to the amount it has the right to invoice for services performed.

Costs to Obtain a Contract

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The commissions earned by the Company’s affiliates are incentive based and are paid on the acquisition of new customers in a given period.

For those customers with amortization periods determined to be greater than one year, the Company capitalizes and amortizes the expenses over the period of benefit.

Revenues Invoiced

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

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

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

Transaction Price Allocation to Future Performance Obligations

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

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

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

For those customers with amortization periods determined to be greater than one year, the Company capitalizes and amortizes the incentive over the period of benefit.

As of December 31, 2023 and 2022, the Company capitalized approximately $ 14.9 million and $ 8.0 million, respectively, related to these costs and they are included in ‘Prepaid expenses and other current assets’ and ‘Other assets’ in the Consolidated Balance Sheets.

During the years ended December 31, 2023, 2022, and 2021, the Company recognized expense of $ 12.9 million, $ 15.4 million, and $ 18.0 million respectively, related to the amortization of capitalized costs to obtain a contract with a customer.

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Practical Expedients

Existence of a Significant Financing Component in a Contract

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

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

Business Acquisitions

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2023 Acquisitions

The Company completed two immaterial acquisitions during the year ended December 31, 2023, paying the purchase price in cash in each transaction.

The Consolidated Statement of Operations since the date of each acquisition and the balance sheet as of December 31, 2023, reflect the results of operations of all 2023 acquisitions.

Goodwill recognized associated with these acquisitions during the year ended December 31, 2023 was $ 6.5 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 year ended December 31, 2023.

During the year ended December 31, 2023, the Company recorded adjustments to the initial working capital and to the purchase accounting of certain prior period acquisitions due to the finalization of prior period acquisitions in the Digital Media business which resulted in a net decrease in goodwill of $ 0.1 million.

2022 Acquisitions

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

(a) a purchase of 100 % equity interests of Lifecycle Marketing Group Limited, acquired on January 21, 2022, a United Kingdom-based portfolio of pregnancy and parenting brands, including Emma’s Diary and Health Professional Academy, reported within our Digital Media segment;

(b) a purchase of 100 % equity interests of FitNow, Inc., acquired on June 2, 2022, a Massachusetts-based provider of weight loss products and support, reported within our Digital Media segment;

(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) four other immaterial Digital Media acquisitions.

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

Total consideration for these transactions was $ 121.7 million, net of cash acquired and assumed liabilities and is subject to certain post-closing adjustments which may increase or decrease the final consideration paid.

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

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

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Total $ 121,704

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

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

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

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

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

Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired and represents intangible assets that do not qualify for separate recognition.

Goodwill recognized associated with these acquisitions during the year ended December 31, 2022 is $ 95.7 million, of which $ 1.2 million is expected to be deductible for income tax purposes.

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

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

DailyOM, SEOmoz, Solutelia, LLC, Arthur L.

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

During the year ended December 31, 2022, the Company recorded adjustments to the initial working capital and to the purchase accounting of certain other prior period acquisitions due to the finalization of prior period acquisitions in the Digital Media business.

These measurement period adjustments resulted in a net increase in

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

During the year ended December 31, 2022, the Company recorded adjustments to the initial working capital and to the purchase accounting of prior period acquisitions due to the finalization of certain prior period acquisitions in the Digital Media business.

These measurement period adjustments resulted in a net increase in goodwill of $ 4.5 million, which included a $ 3.2 million increase in connection with the unfavorable contract liability for an acquired contract.

The unfavorable contract liability was expected to be accreted over 3 years as of December 31, 2022.

In addition, the Company recorded adjustments to the initial working capital and to the purchase accounting of certain prior period acquisitions in the Cybersecurity and Martech businesses which resulted in a net decrease in goodwill of $ 0.1 million.

Such adjustments had an immaterial impact on the amortization expense within the Consolidated Statements of Operations for the year ended December 31, 2022.

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

ZIFF DAVIS, INC.

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goodwill of $ 4.5 million, which included a $ 3.2 million increase in connection with the unfavorable contract liability for an acquired contract.

The unfavorable contract liability is expected to be accreted over 3 years as of December 31, 2022.

In addition, the Company recorded adjustments to the initial working capital and to the purchase accounting of certain prior period acquisitions due to the finalization of prior period acquisitions in the Cybersecurity and Martech businesses which resulted in a net decrease in goodwill of $ 0.1 million.

Such adjustments had an immaterial impact on the amortization expense within the Consolidated Statements of Operations for the year ended December 31, 2022.

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

Unaudited Pro Forma Financial Information for All 2022 Acquisitions

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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 year ended December 31, 2021 is $ 97.0 million, of which $ 42.1 million is expected to be deductible for income tax purposes.

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

Year ended December 31,

December 31, 2021

Revenues $ 1,482,323

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

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

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

In addition, the Company recorded adjustments to the initial working capital and to the purchase accounting due to the finalization of prior period acquisitions in the Cybersecurity and Martech businesses which resulted in a net increase in goodwill of $ 0.5 million.

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

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

Unaudited Pro Forma Financial Information for SEOmoz Acquisition

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

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

Year ended December 31,

Revenues $ 1,438,099 $ 1,207,910

Net income from continuing operations

$ 406,281 $ 29,382

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

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

2020 Acquisitions

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

(a) a share purchase of the entire issued capital of RetailMeNot, Inc.

acquired on October 28, 2020, a Texas-based provider of marketing solutions;

(b) a share purchase of the entire issued capital of Inspired eLearning, LLC, acquired on November 2, 2020, a Texas-based platform for cybersecurity awareness and compliance training;

(c) a share purchase of the entire issued capital of The Aberdeen Group, LLC and The Big Willow, Inc., acquired on November 20, 2020, a Massachusetts-based provider in digital marketing solutions;

and (d) other immaterial acquisitions of email marketing, security and digital media businesses.

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

For the year ended December 31, 2020, these acquisitions contributed $ 54.6 million to the Company’s revenues.

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

Total consideration for these transactions was $ 472.8 million, net of cash acquired and assumed liabilities and subject to certain post-closing adjustments which may increase or decrease the final consideration paid.

The following table summarizes the allocation of the purchase consideration for all 2020 acquisitions, including individually material acquisitions noted separately (in thousands):

Assets and Liabilities Valuation

Accounts receivable $ 46,138

Prepaid expenses and other current assets 9,105

Property and equipment 2,204

Operating lease right of use asset 10,644

Trade names 66,763

Customer relationships 214,347

Goodwill 202,901

Other intangibles 56,424

Other long-term assets 685

Deferred tax asset 992

Accounts payables and accrued expenses ( 28,979 )

Deferred revenue ( 21,918 )

Operating lease liabilities, current ( 4,520 )

Long-term debt ( 910 )

Operating lease liabilities, noncurrent ( 13,104 )

Income taxes payable ( 3,297 )

Liability for uncertain tax positions ( 1,576 )

Deferred tax liability ( 53,870 )

Other long-term liabilities ( 9,269 )

Total $ 472,760

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

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

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

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

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

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

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

Goodwill recognized in connection with these acquisitions during the year ended December 31, 2020 is $ 202.9 million, of which $ 55.0 million is expected to be deductible for income tax purposes.

Unaudited Pro Forma Financial Information for All 2020 Acquisitions

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

These pro forma results are estimates and exclude any savings or synergies that would have resulted from these business acquisitions had they occurred on January 1, 2020 and do not take into consideration the exiting of any acquired lines of business.

The Company acquired a line of business through the RetailMeNot, Inc.

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

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

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

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

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

The supplemental information on an unaudited pro forma financial basis presents the combined results of the Company and its 2020 acquisitions as if each acquisition had occurred on January 1, 2020 (in thousands, except per share amounts):

December 31, 2021

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Income per common share from continuing operations - Diluted $ 8.48

RetailMeNot, Inc.

On October 28, 2020, the Company acquired all the outstanding issued capital of RetailMeNot, Inc.

at a purchase consideration of $ 414.4 million, net of cash acquired and assumed liabilities.

RetailMeNot, Inc.

(“RMN”) is a leading savings destination that influences purchase decisions through the power of savings and coupons.

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

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

For the year ended December 31, 2020, RetailMeNot, Inc.

contributed $ 47.6 million to the Company’s revenues.

Net income from continuing operations contributed by RetailMeNot, Inc.

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

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

acquisition (in thousands):

Assets and Liabilities Valuation

Accounts receivable $ 40,525

Prepaid expenses and other current assets 7,367

Property and equipment 587

Operating lease right of use asset 10,313

Trade names 62,940

Customer relationships 198,840

Goodwill 169,581

Other intangibles 42,610

Other long-term assets 494

Deferred tax asset 605

Accounts payables and accrued expenses ( 24,526 )

Deferred revenue ( 11,175 )

Operating lease liabilities, current ( 4,029 )

Operating lease liabilities, noncurrent ( 13,085 )

Income taxes payable ( 3,308 )

Liability for uncertain tax positions ( 1,576 )

Deferred tax liability ( 52,504 )

Other long-term liabilities ( 9,275 )

Total $ 414,384

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

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

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

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

Unaudited Pro Forma Financial Information for RetailMeNot, Inc.

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

These pro forma results are estimates and exclude any savings or synergies that would have resulted from this business acquisition had it occurred on January 1, 2020 and do not take into consideration the exiting of any acquired lines of business.

The Company acquired a line of business, through the RetailMeNot, Inc.

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

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

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

December 31, 2020

Revenues $ 1,308,731

Net income from continuing operations $ 23,395

Income per common share from continuing operations - Basic $ 0.50

Income per common share from continuing operations - Diluted $ 0.49

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

Deferred Acquisition Payments

As of December 31, 2023, future payments associated with contractual obligations for holdback payments in connection with all business acquisitions are as follows (in thousands):

2024 $ 12,483

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Investment in equity securities

Investment in Consensus

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

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

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

Gains (losses) on equity securities recognized in ‘Unrealized gain (loss) on short-term investments held at the reporting date’ consisted of the following (in thousands):

Following the Separation, the Company retained shares of publicly traded common stock of Consensus.

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

As of December 31, 2023 and December 31, 2022, the carrying value of the investment in Consensus was $ 27.1 million and $ 58.4 million, respectively, and is included in ‘Short-term investments’ on the 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 year ended December 31, 2022, the Company completed the non-cash tax-free debt-for-equity exchanges of 2,800,000 shares of its common stock of Consensus for the extinguishment of $ 112.3 million of principal of the Company’s Term Loan Facilities (as defined in Note 10 — Debt ), and related interest.

During the years ended December 31, 2023 and December 31, 2022, the Company sold 52,393 shares and 73,919 shares, respectively, of common stock of Consensus in the open market.

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

Year ended December 31,

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

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

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

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

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

Other investment

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

Net losses during the period

$ ( 28,138 ) $ ( 53,888 )

gain (loss) on securities sold during the period

357 ( 46,743 )

Unrealized loss recognized during the period on short-term investments held at the reporting date

$ ( 28,495 ) $ ( 7,145 )

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

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 December 31, 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 Consolidated Balance Sheets.

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

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

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

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

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

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

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

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

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

Any changes in the carrying value of the equity securities were reported in current earnings as Loss on investment, net.

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

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

The Company subsequently sold its remaining investments in these securities with proceeds of $ 14.3 million and a realized loss of approximately $ 0.3 million.

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

ZIFF DAVIS, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

approximately $ 0.3 million.

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

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

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

As of December 31,

Cost $ 17,156 $ 50,384

Impairment ( 16,677 ) ( 19,605 )

Adjustments ( 479 ) ( 479 )

Reported amount $ — $ 30,300

Investment in corporate debt security

On April 12, 2022, the Company entered into an agreement with an entity to acquire 4 % convertible notes with an aggregate value of $ 15.0 million.

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

This investment is initially measured at its transaction price and subsequently remeasured at fair value, with unrealized gains and losses reported as a component of other comprehensive income.

The table below summarizes the carrying value and the maximum exposure of Company’s investment in corporate debt securities as of December 31, 2022 (in thousands):

December 31, 2022

Fair value Maximum exposure

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

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

Cost Gross Unrealized

Gains Gross Unrealized

December 31, 2022

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

December 31, 2021

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

December 31, 2020

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

The following table summarizes the Company’s corporate debt securities designated as available-for-sale, classified by the contractual maturity date of the security (in thousands):

Due within 1 year $ — $ —

Due within more than 1 year but less than 5 years 15,586 —

Due within more than 5 years but less than 10 years — —

Due 10 years or after — —

Total $ 15,586 $ —

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

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

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

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

The investment was initially measured at its transaction price and subsequently remeasured at fair value, with unrealized gains and losses reported as a component of other comprehensive income.

As of December 31, 2023, both the carrying value and the maximum exposure of the Company’s investment in corporate debt securities was approximately $ 15.7 million, with a contractual maturity date that was more than one year but less than five years .

As of December 31, 2022, both the carrying value and the maximum exposure of the Company’s investment in corporate debt securities was approximately $ 15.6 million, with a contractual maturity date that was more than one year but less than five years.

Cumulative gross unrealized gains on investment in corporate debt securities as of December 31, 2023 and 2022 was approximately $ 0.7 million and $ 0.6 million, respectively.

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

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

During the years ended December 31, 2023, 2022, and 2021, the Company did no t recognize any other-than-temporary impairment losses on its debt securities.

Equity method investment

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

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

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

to exercise all rights, powers, privileges and other incidents of ownership or possession with respect to securities held or owned by the OCV Fund;

to enter into, make and perform all contracts and other undertakings;

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

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

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

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

As a limited partner in the Fund, prior to the settlement of certain litigation generally related to the Company’s investment in the Fund in January 2022, the Company paid an annual management fee to the manager equal to 2.0 % of capital commitments.

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

The Fund has a six year investment period, subject to certain exceptions.

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

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

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

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

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

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

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

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

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

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During the years ended December 31, 2023, 2022, and 2021, the Company recognized (loss) income from equity method investment, net of $( 9.3 ) million, $( 7.7 ) million, and $ 35.8 million, net of tax expense (benefit), respectively.

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

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

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

During the years ended December 31, 2022, 2021, and 2020, the Company recognized management fees of $ 1.5 million, $ 3.0 million, and $ 3.0 million, net of tax benefit, respectively.

The following table discloses the carrying amount for the Company’s equity method investment (in thousands).

The gains and losses in the years presented were primarily the result of gains and losses in the underlying investments.

As of December 31, 2023, both the carrying value and the maximum exposure of the Company’s equity method investment was approximately $ 99.9 million.

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

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

December 31, 2022 December 31, 2021

Carrying value Maximum exposure Carrying value Maximum exposure

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

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

In addition, the Company is not required to contribute capital in an aggregate amount in excess of its capital commitment and any expected losses will not be in excess of the Capital Account.

Finally, there are no call or put options, or other types of arrangements, which limit the Company’s ability to participate in losses and returns of the Fund.

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

In addition, the Company is not required to contribute any further capital.

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 OCV Fund.

Discontinued Operations and Dispositions

7 unchanged sentences

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

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

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

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

The divestiture of the cloud fax business was determined to qualify for US Federal tax-free treatment under certain sections of the Internal Revenue Code based on various facts and assumptions, as well as certain representations, statements and undertakings of Ziff Davis and Consensus being accurate and/or complete .

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

The accounting requirements for reporting the Company’s cloud fax business as a discontinued operation were met when the Separation was completed as the Separation constituted a strategic shift that would have a major effect on the Company’s operations and financial results.

3 unchanged sentences

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

Year ended December 31,

December 31, 2021

Capital expenditures $ 15,252

1 unchanged sentence

Loss on debt extinguishment $ 8,750

Amortization of financing costs and discounts $ — $ 1,171

Foreign currency remeasurement gain $ — $ 31,537

Deferred taxes $ 8,015

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

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

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

3 unchanged sentences

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

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

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

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

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

Year ended December 31,

2022 2021 2020

Revenues $ — $ 270,248

Cost of revenues — ( 44,306 ) ( 53,379 )

Sales and marketing — ( 40,980 )

Research, development and engineering — ( 5,814 )

General and administrative — ( 39,279 ) ( 26,852 )

General, administrative, and other related costs

Interest expense and other — ( 13,856 )

4 unchanged sentences

The Company completed the following dispositions that did not meet the criteria for discontinued operations.

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

During the year ended December 31, 2021, the Company committed to a plan to sell certain Voice assets in the United Kingdom as they were determined to be non-core assets.

1 unchanged sentence

On February 9, 2021, in a cash transaction, the Company sold the Voice assets.

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

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

During the year ended December 31, 2021, the Company committed to a plan to sell its B2B Backup business as it was determined to be a non-core business.

5 unchanged sentences

On September 17, 2021, in a cash transaction, the Company sold the B2B Backup business.

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

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

Such assets were recorded within the Cybersecurity and Martech reportable segment.

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

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

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

Fair Value Measurements

7 unchanged sentences

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.

Recurring Fair Value Measurements

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

The Company values these Level 1 investments using quoted market prices.

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

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

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

At December 31, 2023 and 2022, our investment in Consensus common stock was remeasured at fair value based on Consensus’ closing stock price, with unrealized (losses) gains of $( 28.5 ) million and $( 7.1 ) million, respectively, recorded in the Consolidated Statement of Operations and a balance of $ 27.1 million and $ 58.4 million, respectively, in the Consolidated Balance Sheet.

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

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

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

The Company values these Level 2 investments based on model-driven valuations using significant inputs derived from or corroborated by observable market data.

The Company has investment in a corporate debt security that is measured at fair value on the Consolidated Balance Sheets.

Unrealized gains and losses are reported in other comprehensive income until realized.

These corporate debt securities do not have a readily determinable fair value because acquired securities are privately held, not traded on any public exchanges and not an investment in a mutual fund or similar investment.

The Company has investment in a corporate debt security that does not have a readily determinable fair value because the acquired securities are privately held, not traded on any public exchanges and not an investment in a mutual fund or similar investment.

The investment in corporate debt securities is classified as available-for-sale and is initially measured at its transaction price.

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

As of December 31, 2022, the fair value was determined based upon various probability-weighted scenarios and included assumptions of a 13 % discount rate and conversion in a range of 0.8 years - 1.3 years.

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

The valuation approaches used to value Level 3 investments considers unobservable inputs in the market such as time to liquidity, volatility, dividend yield, and breakpoints.

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

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

The following table presents the fair values, valuation techniques, unobservable inputs, and ranges of the Company’s financial liabilities categorized within Level 3.

The weighted averages below are a product of the unobservable input and fair value of the contingent consideration arrangement as of December 31, 2021.

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

As of December 31, 2023 and 2022, the fair value was determined based upon various probability-weighted scenarios which included discount rate assumptions between 13 % and 14 %, depending on the probability scenario.

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

ZIFF DAVIS, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

Valuation Technique Unobservable Input Range Weighted Average

Contingent Consideration Option-Based Model Risk free rate 1.9 % - 2.2 %

Debt spread 0.0 % - 74.7 %

Probabilities 10.0 % - 100.0 %

Present value factor 2.2 % - 26.9 %

Discount rate 27.3 % - 38.0 %

supported by market activity.

The valuation approaches used to value Level 3 investments considers unobservable inputs in the market such as time to liquidity, volatility, dividend yield, and breakpoints.

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

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

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

2 unchanged sentences

Money market and other funds $ 340,928 $ — $ — $ 340,928 $ 340,928

Short-term investments:

Consensus common stock 27,109 — — $ 27,109 27,109

Long-term investments:

Investment in corporate debt securities — — 15,699 15,699 15,699

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

Total assets measured at fair value $ 368,037 $ — $ 15,699 $ 383,736 $ 383,736

Contingent consideration $ — $ — $ 2,834 $ 2,834 $ 2,834

Debt 939,319 — — 939,319 999,053

Total liabilities measured at fair value $ — $ — $ 2,834 $ 2,834 $ 2,834

2 unchanged sentences

Money market and other funds $ 312,010 $ — $ — $ 312,010 $ 312,010

Investment in Consensus 229,200 — — 229,200 229,200

Short-term investments:

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

Long-term investments:

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

Total assets measured at fair value $ 370,431 $ — $ 15,586 $ 386,017 $ 386,017

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

Debt 1,345,311 — — 1,345,311 1,090,627

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 year ended December 31, 2023 and 2022, there were no transfers that occurred between levels.

ZIFF DAVIS, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

For the year ended December 31, 2022 and 2021, there were no transfers that occurred between levels.

The following table presents a reconciliation of the Company’s Level 3 financial assets related to our investment in corporate debt securities that are measured at fair value on a recurring basis (in thousands):

Level 3 Affected line item in the Statement of Operations

Balance as of January 1, 2022 $ —

Investment in corporate debt securities 15,586 Not applicable

Balance as of December 31, 2022

The following table presents a reconciliation of the Company’s Level 3 financial liabilities related to contingent consideration that are measured at fair value on a recurring basis (in thousands):

Level 3 Affected line item in the Statement of Operations

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):

Year ended December 31,

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

Balance as of January 1 $ 555 $ 15,586 $ 5,775 $ —

Contingent consideration 4,713

Total fair value adjustments reported in earnings ( 1,910 ) General and administrative

Contingent consideration payments ( 2,050 ) Not applicable

Balance as of December 31, 2021

Contingent consideration 555

Total fair value adjustments reported in earnings ( 2,575 ) General and administrative

Contingent consideration payments ( 3,200 ) Not applicable

Fair value at date of acquisition 2,834 — 555 15,000

Fair value adjustments (1)

( 200 ) 113 ( 2,575 ) 586

Payments ( 355 ) — ( 3,200 ) —

Balance as of December 31

In connection with the Company’s other acquisition activity, contingent consideration of up to $ 0.6 million may be payable upon achieving certain future earnings before interest, taxes, depreciation and amortization (EBITDA), revenue, and/or unique visitor thresholds and had a combined fair value of $ 0.6 million and $ 5.8 million at December 31, 2022 and 2021, respectively.

Due to the achievement of certain thresholds, $ 3.2 million and $ 2.1 million was paid during the years ended December 31, 2022 and 2021, respectively.

$ 2,834 $ 15,699 $ 555 $ 15,586

(1) The fair value adjustments to the contingent consideration arrangements in the table above were recorded within ‘General, administrative, and other related costs’ on the Consolidated Statements of Operations during the year ended December 31, 2023 and 2022.

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

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.

See Note 9 - Goodwill and Intangible Assets for further information.

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 9 - Goodwill and Intangible Assets for further information.

See Note 2 — Basis of Presentation for further information on intangible assets and right-of-use assets impairment charges recorded in the years ended December 31, 2023, 2022, and 2021.

See Note 9 — Goodwill and Intangible Assets for further information on a goodwill impairment charges recorded in the years ended December 31, 2023, 2022, and 2021.

Other Fair Value Disclosures

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

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.

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

Year ended December 31,

Carrying Value Fair Value Carrying Value Fair Value

4.625 % Senior Notes

$ 456,796 $ 405,408 $ 456,400 $ 390,908

1.75 % Convertible Notes

$ 544,516 $ 519,492 $ 542,653 $ 548,411

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

Property and Equipment

6 unchanged sentences

Total property and equipment, net $ 188,169 $ 178,184

Depreciation and amortization expense was $ 76.7 million, $ 63.6 million and $ 60.6 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Total disposals of long-lived assets was $ 0.2 million, $ 11.0 million and $ 0.9 million for the years ended December 31, 2022, 2021 and 2020, respectively.

ZIFF DAVIS, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

Depreciation expense was $ 92.1 million, $ 76.7 million, and $ 63.6 million for the years ended December 31, 2023, 2022, and 2021, respectively.

Total disposals of property and equipment, net was $ 0.0 million , $ 0.2 million, and $ 11.0 million for the years ended December 31, 2023, 2022, and 2021, respectively.

Goodwill and Intangible Assets

Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in a business combination and is assigned to the reporting unit that is expected to benefit from the synergies of the combination.

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

The Company’s Digital Media reportable segment is comprised of seven reporting units and the Cybersecurity and Martech reportable segment is comprised of two reporting units.

The changes in carrying amounts of goodwill for the years ended December 31, 2023 and 2022 are as follows (in thousands):

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Goodwill acquired (Note 4) 95,737 — 95,737

Goodwill removed due to sale of businesses (1)

— ( 50,277 ) ( 50,277 )

Goodwill impairment ( 27,369 ) — ( 27,369 )

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Balance as of December 31, 2023

(1) On February 9, 2021, in a cash transaction, the Company sold certain of its Voice assets in the United Kingdom which resulted in $ 1.3 million of goodwill being removed in connection with this sale and on September 17, 2021, the Company sold certain of its B2B Backup assets which resulted in $ 49.0 million of goodwill being removed in connection with the sale (see Note 6 - Discontinued Operations and Dispositions).

(2) Purchase accounting adjustments relate to measurement period adjustments to goodwill in connection with prior business acquisitions (see Note 4 - B usiness Acquisitions ).

During the year ended December 31, 2022, the Company reassessed the fair value of a reporting unit within the Digital Media reportable segment as a result of a forecasted reduction in revenue and operating income in that reporting unit, as well as an increase in interest rates and market volatility that would affect the Company’s assumptions on its discount rate.

Based on the quantitative fair value test, the carrying value of the reporting unit exceeded its fair value, and the Company recorded an impairment of approximately $ 27.4 million during the year ended December 31, 2022.

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

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

$ 1,016,880 $ 529,185 $ 1,546,065

(1) Purchase accounting adjustments relate to measurement period adjustments to goodwill in connection with prior business acquisitions (see Note 4 — Business Acquisitions ).

During the years ended December 31, 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 profitability in those reporting units, 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 that was tested exceeded its fair value, and the Company recorded an impairment of approximately $ 56.9 million during the year ended December 31, 2023, and approximately $ 27.4 million during the year ended December 31, 2022.

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 further 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.

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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.

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

Following the impairment, this reporting unit had goodwill of approximately $ 86.9 million and the carrying value approximated its fair value.

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During the year ended December 31, 2022, the Company realigned two reporting units within the Digital Media reportable segment.

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The fair value of the remaining reporting unit was determined using an equal weighting of an income approach and a market approach, and was in excess of the remaining carrying value of the reporting unit.

Goodwill as of December 31, 2022 and 2021 reflects accumulated impairment losses of $ 27.4 million and $ 32.6 million, respectively, in the Digital Media reportable segment and the Cybersecurity and Martech reportable segment, respectively.

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

Intangible Assets Subject to Amortization

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

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

These determinations are primarily based upon the Company’s historical experience and expected benefit of each intangible asset.

If it is determined that such assumptions are not accurate, then the resulting change will impact the fair value of the intangible asset.

Identifiable intangible assets are amortized over the period of estimated economic benefit, which ranges from one to twenty years .

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

Weighted-Average

Cost Accumulated

Amortization Net

Trade names 10.0 years $ 261,614 $ 125,422 $ 136,192

Trade names and trademarks

$ 347,895 $ 192,111 $ 155,784

Customer relationships

7.9 years 687,798 479,741 208,057

Other purchased intangibles 8.3 years 481,973 363,407 118,566

Total $ 1,431,385 $ 968,570 $ 462,815

(1) The Company amortizes customer relationship assets in a pattern that best reflects the pace at which the asset’s benefits are consumed.

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

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During the year ended December 31, 2022, the Company completed acquisitions (see Note 4 - Business Acquisitions ) which were individually immaterial.

The identified intangible assets were recognized as part of all 2022 acquisitions and their respective estimated weighted average amortizations were as follows as of December 31, 2022 (in thousands):

Weighted-Average

Carrying Value

Trade names 9.6 years $ 12,423

Customer relationships 7.3 years 18,714

Other purchased intangibles 2.4 years 17,567

692,634 555,384 137,250

Other purchased intangibles 379,703 347,331 32,372

Total $ 1,420,232 $ 1,094,826 $ 325,406

As of December 31, 2022, intangible assets subject to amortization relate primarily to the following (in thousands):

Weighted-Average

Period Historical

Cost Accumulated

Amortization Net

Trade names 9.7 years $ 250,418 $ 102,657 $ 147,761

Trade names and trademarks (1)

$ 360,170 $ 169,150 $ 191,020

Customer relationships

8.1 years 673,847 398,396 275,451

Other purchased intangibles 9.3 years 467,028 317,515 149,513

687,798 479,741 208,057

Other purchased intangibles (1)

383,417 319,679 63,738

Total $ 1,431,385 $ 968,570 $ 462,815

(1) The Company amortizes customer relationship assets in a pattern that best reflects the pace at which the asset’s benefits are consumed.

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

(1) The Company reclassified its trademarks as of December 31, 2022 from ‘other purchased intangibles’ to ‘trade names and trademarks’ to conform to current period presentation.

The trademarks totaled $ 54.8 million of carrying value as of December 31, 2022 ($ 98.5 million of historical cost and $ 43.7 million of accumulated amortization).

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Expected amortization expenses for intangible assets subject to amortization at December 31, 2023 are as follows (in thousands):

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Total expected amortization expense $ 325,406

Amortization expense, included in General and administrative expense on our Consolidated Statements of Operations, approximated $ 156.7 million, $ 185.7 million, and $ 156.4 million for the years ended December 31, 2022, 2021 and 2020, respectively.

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Amortization expense, included in ‘General, administrative, and other related costs’ on our Consolidated Statements of Operations was approximately $ 144.9 million, $ 156.7 million, and $ 185.7 million for the years ended December 31, 2023, 2022 and 2021, respectively.

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

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1.75 % Convertible Notes

550,000 550,000

Total Notes 1,010,038 1,010,038

Credit Agreement — —

Unamortized discount ( 2,463 ) ( 2,764 )

Deferred issuance costs ( 6,263 ) ( 8,221 )

Total debt 999,053 1,090,627

current portion — ( 54,609 )

Total long-term debt, less current portion $ 999,053 $ 1,036,018

Total long-term debt 1,001,312 999,053

At December 31, 2023, future principal and interest payments for debt are as follows (in thousands):

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4.625 % Senior Notes

On June 27, 2017, J2 Cloud Services, LLC (“J2 Cloud”) and J2 Cloud Co-Obligor, Inc.

(the “Co-Issuer” and together with J2 Cloud, the “Issuers”), wholly-owned subsidiaries of the Company, completed the issuance and sale of $ 650.0 million aggregate principal amount of their 6.0 % senior notes due in 2025 (the “ 6.0 % Senior Notes”) in a private placement offering exempt from the registration requirements of the Securities Act of 1933.

J2 Cloud received proceeds of $ 636.5 million, after deducting the initial purchasers’ discounts, commissions, and offering expenses.

The 6.0 % Senior Notes bore interest at a rate of 6.0 % per annum, payable semi-annually in arrears on January 15 and July 15 of each year.

On October 7, 2020, J2 Cloud redeemed all of its outstanding $ 650.0 million 6.0 % Senior Notes due in 2025 for $ 694.6 million, including an early redemption premium of $ 29.2 million and accrued and unpaid interest of $ 15.4 million.

The Company recorded a loss on extinguishment of $ 38.0 million which is recorded in ‘Interest expense and other’ within (Loss) income from discontinued operations, net of income taxes on our Consolidated Statements of Operations.

Refer to Note 6 - Discontinued Operations and Dispositions for additional details.

4.625 % Senior Notes

On October 7, 2020, the Company completed the issuance and sale of $ 750.0 million aggregate principal amount of its 4.625 % senior notes due 2030 (the “ 4.625 % Senior Notes”) in a private placement offering exempt from the registration requirements of the Securities Act of 1933.

The Company received proceeds of $ 742.7 million after deducting the initial purchasers’ discounts, commissions and offering expenses.

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

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

These senior notes bear interest at a rate of 4.625 % per annum, payable semi-annually in arrears on April 15 and October 15 of each year, commencing on April 15, 2021.

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As such, the Company recognized a loss of approximately $ 7.4 million associated with the tender of the 4.625 % Senior Notes during the year ended December 31, 2021, which is presented in ‘Gain (loss) on debt extinguishment, net’ on the Consolidated Statements of Operations.

R epurchases of 4.625 % Senior Notes on the open market (excluding those from a tender offer) were as follows (in thousands):

Repurchases of 4.625 % Senior Notes on the open market (excluding those from a tender offer) were as follows (in thousands):

Year ended December 31,

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

As of December 31, 2022 and 2021, the estimated fair value of the 4.625 % Senior Notes was approximately $ 390.9 million and $ 659.9 million, respectively, and was based on recent quoted market prices or dealer quotes for the 4.625 % Senior Notes which are Level 1 inputs.

Refer to Note 7 - Fair Value Measurements for additional details.

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

The following table provides additional information on the 4.625 % Senior Notes (in thousands):

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The following table provides the components of interest expense related to the 3.25 % Convertible Notes (in thousands):

Year ended December 31,

December 31, 2021

Coupon interest expense $ 5,994

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Total interest expense related to 3.25 % Convertible Notes

$ 11,494 $ 24,546

No changes in fair value associated with the contingent interest feature of the 3.25 % Convertible Notes in interest expense were recorded for the years ended December 31, 2021 and 2020, respectively.

Refer to Note 7 - Fair Value Measurements for additional details.

No changes in fair value associated with the contingent interest feature of the 3.25 % Convertible Notes in interest expense were recorded for the years ended December 31, 2021.

1.75 % Convertible Notes

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

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:

(i) during any calendar quarter commencing after the calendar quarter ending on March 31, 2020 (and only during such calendar quarter), if the last reported sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding the calendar quarter is greater than 130 % of the applicable conversion price of the 1.75 % Convertible Notes on each such applicable trading day;

(ii) during the five business day period following any 10 consecutive trading day period in which the trading price per $1,000

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 year ended December 31, 2023, the Company recorded $ 7.7 million of interest expense related to the 1.75 % Convertible Notes for such additional interest.

The Company paid $ 7.0 million of this interest obligation to the trustee under the indenture for the 1.75 % Convertible Notes in August 2023 and the remaining $ 0.7 million in November 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 was non-recurring.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

principal amount of 1.75 % Convertible Notes for each trading day of the measurement period was less than 98 % of the product of the last reported sale price of the Company’s common stock and the applicable conversion rate on each such trading day;

(ii) during the five business day period following any 10 consecutive trading day period in which the trading price per $1,000 principal amount of 1.75 % Convertible Notes for each trading day of the measurement period was less than 98 % of the product of the last reported sale price of the Company’s common stock and the applicable conversion rate on each such trading day;

or (iii) upon the occurrence of specified corporate events.

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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 December 31, 2022 and December 31, 2021, 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 the Consolidated Balance Sheets.

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

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

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

Accounting for the 1.75 % Convertible Notes

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

As a result of this adoption, the Company de-recognized the remaining unamortized debt discount of $ 87.3 million on the 1.75 % Convertible Notes and, therefore, no longer recognizes any amortization of debt discounts as interest expense.

Refer to Note 2 - Basis of Presentation and Summary of Significant Accounting Policie s for additional details.

In connection with the issuance of the 1.75 % Convertible Notes, the Company incurred $ 12.9 million of deferred issuance costs, which primarily consisted of the underwriters’ discount, legal and other professional service fees.

Of the total deferred issuance costs incurred, $ 10.1 million of such deferred issuance costs were attributable to the liability component and are being amortized, at an effective interest rate of 5.5 %, to interest expense through the maturity date.

The remaining $ 2.8 million of the deferred issuance costs were netted with the equity component in additional paid-in capital at the issuance date.

Upon adoption of ASU 2020-06, the Company reclassified the $ 2.8 million from additional paid-in-capital to long-term liability and recorded a cumulative adjustment to retained earnings for amortization from the issuance date through January 1, 2022 and will record amortization expense for these debt issuance costs through the maturity date.

The 1.75 % Convertible Notes are carried at face value less any unamortized debt discount (prior to adoption of ASU 2020-06) and issuance costs.

The fair value of the 1.75 % Convertible Notes at each balance sheet date is determined based on recent quoted market prices or dealer quotes for the 1.75 % Convertible Notes, which are Level 1 inputs (see Note 7 - Fair Value Measurements ).

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

As of December 31, 2022 and December 31, 2021, the estimated fair value of the 1.75 % Convertible Notes was approximately $ 548.4 million and $ 685.4 million, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

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

Additional paid-in capital $ — $ 88,137

Principal amount of 1.75 % Convertible Notes

$ 550,000 $ 550,000

Unamortized discount of the liability component — ( 87,334 )

Carrying amount of debt issuance costs ( 5,484 ) ( 7,347 )

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$ 544,516 $ 542,653

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

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Non-cash amortization of discount on 1.75 % Convertible Notes

— 15,338 14,563

Amortization of debt issuance costs 1,863 1,858 1,173

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At the time of adoption, the Company de-recognized the remaining unamortized debt discount.

No amortization of debt discount was recorded during the year ended December 31, 2022.

No amortization of debt discount was recorded during the years ended December 31, 2023 and December 31, 2022, respectively.

Accounting for the 1.75 % Convertible Notes

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

Of the total deferred issuance costs incurred, $ 10.1 million was attributable to the liability component and is being amortized, at an effective interest rate of 5.5 %, to interest expense through the maturity date.

The remaining $ 2.8 million of the deferred issuance costs were netted with the equity component in additional paid-in capital at the issuance date.

Credit Agreement

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.

At the Company’s option, amounts borrowed under the Credit Agreement will bear interest at either (i) a base rate equal to the greater of (x) the Federal Funds Effective Rate (as defined in the Credit Agreement) in effect on such day plus 0.5 % per annum, (y) the rate of interest per annum most recently announced by the Agent (as defined in the Credit Agreement) as its U.S.

Dollar “Reference Rate” and (z) one month LIBOR plus 1.00 % or (ii) a rate per annum equal to LIBOR divided by 1.00 minus the LIBOR Reserve Requirements (as defined in the Credit Agreement), in each case, plus an applicable margin.

The applicable margin relating to any base rate loan will range from 0.50 % to 1.25 % and the applicable margin relating to any LIBOR loan will range from 1.50 % to 2.25 %, in each case, depending on the total leverage ratio of the Company.

Dollar “Reference Rate” and (z) one month Term SOFR (as defined in the Credit Agreement) plus a credit spread adjustment plus 1.00 % or (ii) a rate per annum equal to Term SOFR plus a credit spread adjustment, in each case, plus an applicable margin.

The applicable margin relating to any base rate loan will range from 0.50 % to 1.25 % and the applicable margin relating to any Term SOFR loan will range from 1.50 % to 2.25 %, in each case, depending on the total leverage ratio of the Company.

The Company is permitted to make voluntary prepayments of the Credit Facility at any time without payment of a premium or penalty.

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The Credit Agreement contains financial maintenance covenants, including (i) a maximum total leverage ratio as of the last date of any fiscal quarter not to exceed 4.00 :1.00 for the Company and its restricted subsidiaries and (ii) a minimum interest coverage ratio as of the last date of any fiscal quarter not less than 3.00 :1.00 for the Company and its restricted subsidiaries.

The Credit Agreement also contains restrictive covenants that limit, among other things, the Company’s and its restricted subsidiaries’ ability to incur additional indebtedness, create, incur or assume liens, consolidate, merge, liquidate or dissolve, pay dividends or make other distributions or other restricted payments, make or hold any investments, enter into certain transactions with affiliates, sell assets other than on terms specified by the Credit Agreement, amend the terms of certain other indebtedness and organizational documents and change their lines of business and fiscal years, in each case, subject to customary exceptions.

The Credit Agreement also contains restrictive covenants that limit, among other things, the Company’s and its restricted subsidiaries’ ability to incur additional indebtedness, create, incur or assume liens, consolidate, merge, liquidate or dissolve, pay dividends or make other distributions or other restricted payments, make or hold certain investments, enter into certain transactions with affiliates, sell assets other than on terms specified by the Credit Agreement, amend the terms of certain other indebtedness and organizational documents and change their lines of business and fiscal years, in each case, subject to customary exceptions.

The Credit Agreement also sets forth customary events of default, including, among other things, the failure to make timely payments under the Credit Facility, the failure to satisfy certain covenants, cross-default and cross-acceleration to other material debt for borrowed money, the occurrence of a change of control and specified events of bankruptcy and insolvency.

The Company is in compliance with its debt covenants for the Credit Agreement as of December 31, 2023.

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

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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, respectively.

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

The Bridge Loan Facility bore interest at a rate per annum equal to (i) initially upon funding of the loan, either a base rate plus 2.00 %, or a LIBOR rate plus 3.00 %, (ii) from six months after the funding date of the Bridge Loan Facility until twelve months after the funding date of the Bridge Loan Facility, either a base rate plus 2.50 %, or a LIBOR rate plus 3.50 %, and (iii) from twelve months after the funding date of the Bridge Loan Facility until repayment of the Bridge Loan Facility, either a base rate plus 3.00 % or a LIBOR rate plus 4.00 %.

The Bridge Loan Facility was to mature on the date that is 364 days after the funding date of the Bridge Loan Facility, with two automatic extensions, each for an additional three months, if SEC approval of the spin-off transaction was still outstanding.

The Bridge Loan Facility was to mature on the date that was 364 days after the funding date of the Bridge Loan Facility, with two automatic extensions, each for an additional three months, if SEC approval of the spin-off transaction was still outstanding.

The Company was required to pay a funding fee of 0.50 % of the aggregate principal amount of Bridge Loan Facility made on the funding date thereof, as well as a duration fee of 0.25 % of the aggregate principal amount of outstanding Bridge Loans on the sixth month anniversary of the funding of the Bridge Loans, and a fee of 0.50 % of the aggregate principal amount of outstanding Bridge Loans on each of the nine-month, twelve-month and fifteen-month anniversaries of the funding of the Bridge Loans.

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During September 2022, the Company borrowed approximately $ 22.3 million under the Term Loan Two Facility and completed the non-cash debt-for-equity exchange of 500,000 shares of its common stock of Consensus to settle its obligation of $ 22.3 million outstanding aggregate principal amount of the Term Loan Two Facility plus an immaterial amount of interest.

As of December 31, 2022, the Company recorded a loss on extinguishment of debt of approximately $ 0.6 million, related to the debt-for-equity exchanges, which is presented within ‘Gain (loss) on debt extinguishment, net’ on our Consolidated Statements of Operations.

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The Company leases certain facilities and equipment under non-cancelable operating and finance leases which expire at various dates through 2031.

The Company leases certain facilities and equipment under non-cancelable operating leases which expire at various dates through 2031.

Office and equipment leases are typically for terms of three to five years and generally provide renewal options for terms up to an additional five years .

Some of the Company’s leases include options to terminate within one year.

During the year ended December 31, 2022, the Company recorded impairments of $ 1.0 million on its operating lease right-of-use assets primarily related to exiting certain lease spaces within Digital Media and Cybersecurity and Martech.

During the year ended December 31, 2021, the Company recorded impairments of $ 12.7 million on its operating lease right of use assets within Digital Media and Cybersecurity and Martech primarily related to exiting certain lease space as the Company regularly evaluates its office space requirements in light of more of its workforce working from home as part of a permanent “remote” or “partial remote” work model.

During the year ended December 31, 2020, the Company had also decided to exit and seek subleases for certain leased facilities in the Digital Media reportable segment primarily also due to work from home models.

The Company recorded a non-cash impairment charge of $ 12.1 million related to operating lease right-of-use assets for the affected facilities and an impairment charge of $ 3.6 million for associated property and equipment.

During the year ended December 31, 2023, 2022, and 2021, the Company recorded impairments of $ 2.2 million, $ 1.0 million, and $ 12.7 million, respectively on its operating lease right of use assets within Digital Media and Cybersecurity and Martech primarily related to exiting certain lease space as the Company regularly evaluates its office space requirements in light of more of its workforce working from home as part of a “remote” or “partial remote” work model.

The impairments were determined by comparing the fair value of the impacted right-of-use asset to the carrying value of the asset as of the impairment measurement date, as required under ASC 360, Property, Plant, and Equipment .

The fair value of the right-of-use asset was based on the estimated sublease income for the affected facilities taking into consideration the time it will take to obtain a sublease tenant, the applicable discount rate and the sublease rate which represent Level 3 unobservable inputs.

The impairments are presented in ‘General and administrative’ expenses on the Consolidated Statements of Operations.

The impairments are presented in ‘General, administrative, and other related costs’ on the Consolidated Statements of Operations.

In certain agreements in which the Company leases office space where the Company is the tenant, it subleases the site to various other companies through a sublease agreement.

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The components of lease expense are as follows (in thousands):

Year ended December 31,

Operating lease cost $ 15,065 $ 17,656

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Total estimated aggregate sublease income to be received in the future is $ 7.2 million.

In 2020, the Company recorded $ 2.1 million associated with its sublease tenants in default as a result of the economic effects of COVID-19.

The impairment is presented in general and administrative expenses on the Consolidated Statement of Operations.

Finance leases are not material to the Company’s consolidated financial statements.

Significant Judgments

Discount Rate

The majority of the Company’s leases are discounted using the Company’s incremental borrowing rate as the rate implicit in the lease is not readily determinable.

Rates are obtained from various large banks to determine the appropriate incremental borrowing rate each quarter for collateralized loans with a maturity similar to the lease term.

The lease term is generally the minimum noncancellable period of the lease.

The Company does not include option periods unless the Company determined it is reasonably certain of exercising the option at inception or when a triggering event occurs.

Commitments and Contingencies

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.

From time to time, the Company and its affiliates are involved in litigation and other legal disputes or regulatory inquiries that arise in the ordinary course of business.

4 unchanged sentences

The Company moved to dismiss the consolidated class action complaint.

The court granted the motion to dismiss and the lead plaintiff filed an amended complaint.

The court granted the motion to dismiss and the plaintiff filed an amended complaint.

The Company moved to dismiss the amended complaint.

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

The lead plaintiff has filed a notice of appeal.

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

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

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.

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On December 11, 2020, Danning Huang filed a lawsuit in the District of Delaware (20-cv-01687-LPS) asserting derivative claims against directors of the Company and other third parties.

2 unchanged sentences

20-cv-01687-LPS.

As part of the settlement of the Chancery Court Derivative Action described above, the Company and its directors and officers intend to defend against the remaining claims in the other actions.

As part of the settlement of the Chancery Court Derivative Action described above, the Company and its directors and officers intend to defend against the remaining claims in these other actions.

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The Company does not believe, based on current knowledge, that the foregoing legal proceedings or claims, after giving effect to existing accrued liabilities, are likely to have a material adverse effect on the Company’s consolidated financial position, results of operations, or cash flows.

4 unchanged sentences

The Company does not collect and remit sales and use, telecommunication, or similar taxes and fees in certain jurisdictions where the Company believes such taxes are not applicable or legally required.

Several states and other taxing jurisdictions have presented or threatened the Company with assessments, alleging that the Company is required to collect and remit such taxes there.

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

The Company has a $ 25.5 million and $ 24.0 million reserve established for these matters as of December 31, 2022 and 2021, respectively, which is included within ‘Accounts payable and accrued expenses’ and ‘Other long-term liabilities’ on the Consolidated Balance Sheet.

Several states and other taxing jurisdictions have presented or threatened the Company with assessments, alleging that 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 $ 28.1 million and $ 25.5 million as of December 31, 2023 and 2022, respectively, which are included within ‘Accounts payable’ and ‘Other long-term liabilities’ on the Consolidated Balance Sheet.

It is reasonably possible that additional liabilities could be incurred resulting in additional expense, which could have a material impact to our financial results.

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Tax credits and incentives ( 8.4 ) ( 5.0 ) ( 1.5 )

Impairment of goodwill

Mark-to market on investment in Consensus — 22.1 ( 18.0 )

Return to provision adjustments

( 5.1 ) 1.1 0.5

Executive compensation 2.4 1.5 0.7

1 unchanged sentence

Effective tax rates 32.2 % 44.2 % ( 4.0 ) %

The effective tax rate for continuing operations for the year ended December 31, 2023 differs from the federal statutory rate primarily due to the expense recognized for book purposes on the goodwill impairment related to one of the Company’s reporting units that resulted in no corresponding tax benefit and had a detrimental impact to the effective tax rate.

The detrimental impact to our effective tax rate was partially offset by a tax benefit recognized as a result of a decrease in the reserve for uncertain tax positions that was primarily due to the lapse of the statute of limitations.

The effective tax rate for continuing operations for the year ended December 31, 2022 differs from the federal statutory rate primarily due to a book-tax difference related to the loss recognized for accounting purposes related to the Company’s shares held in Consensus stock.

10 unchanged sentences

The reduction in the valuation allowance is primarily due to an increase in unrealized capital gains on investments held by the Company which can provide a source of capital gain income in future years to realize the benefit of the capital losses.

The effective tax rate for continuing operations for 2020 differs from the federal statutory rate primarily due to the Company recording a net increase in the reserve for uncertain tax positions during 2020 and recording a valuation allowance for a capital loss recognized due to the sale of assets related to its Voice business unit in Australia and New Zealand and the impairment of certain U.S.

The 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

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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.

Deferred tax assets and liabilities result from differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities.

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Deferred tax liabilities:

Basis difference in property and equipment $ — $ ( 8,337 )

Operating lease right-of-use assets ( 4,618 ) ( 14,008 )

2 unchanged sentences

Prepaid insurance ( 2,835 ) ( 2,744 )

Convertible debt — ( 21,972 )

Other ( 5,982 ) ( 8,639 )

1 unchanged sentence

Net deferred tax liabilities $ ( 36,772 ) $ ( 70,484 )

The Company had approximately $ 80.8 million and $ 81.8 million in deferred tax assets from continuing operations as of December 31, 2022 and 2021, respectively, related primarily to net operating loss, operating lease liabilities, interest expense and capital loss carryforwards, tax credit carryforwards, capitalized research and development expenses and accrued expenses treated differently between its financial statements and its tax returns.

The Company had approximately $ 76.9 million and $ 80.8 million in deferred tax assets, net of valuation allowances as of December 31, 2023 and 2022, respectively, related primarily to net operating loss, operating lease liabilities, interest expense and capital loss carryforwards, tax credit carryforwards, capitalized research and development expenses, and accrued expenses being treated differently between its financial statements and its tax returns.

Based on the weight of available evidence, the Company assesses whether it is more likely than not that some portion or all of a deferred tax asset will not be realized.

2 unchanged sentences

The Company had a valuation allowance on deferred tax assets from continuing operations of $ 1.7 million and $ 1.7 million as of December 31, 2023 and 2022, respectively.

The valuation allowance related to net operating loss and capital loss carryforward in certain foreign jurisdictions decreased $ 0.1 million primarily as a result of re-measurement due to tax rate changes.

ZIFF DAVIS, INC.

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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’s deferred tax assets include interest expense limitation carryovers of $ 6.4 million and $ 23.3 million, respectively, which last indefinitely.

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

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

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

The Company has not provided for deferred taxes on approximately $ 307.8 million of undistributed earnings from foreign subsidiaries as of December 31, 2022.

The Company has not provided any additional deferred taxes with respect to items such as foreign withholding taxes, state income tax or foreign exchange gain or loss that would be due when cash is actually repatriated to the U.S.

Approximately $ 7.5 million of the NOLs expire through 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’s deferred tax assets include interest expense limitation carryovers of $ 1.9 million, which last indefinitely.

The Company also has 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.

The Company has not provided for deferred taxes on approximately $ 272.4 million of undistributed earnings from foreign subsidiaries as of December 31, 2023 or with respect to items such as foreign withholding taxes, state income tax or foreign exchange gain or loss that would be due when cash is actually repatriated to the U.S.

because those foreign earnings are considered permanently reinvested in the business or may be remitted substantially free of any additional taxes.

Because of the various avenues in which to repatriate the earnings, it is not practicable to determine the amount of the unrecognized deferred tax liability related to the undistributed earnings if eventually remitted.

In addition, because of the various avenues in which to repatriate the earnings, it is not practicable to determine the amount of the unrecognized deferred tax liability related to the undistributed earnings if eventually remitted.

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

The Company’s prepaid taxes were $ 4.7 million and $ 3.2 million at December 31, 2023 and 2022, respectively.

Income (loss) from continuing operations before income taxes included income from domestic operations of $ 71.8 million, $ 279.7 million , $( 2.0 ) million for the years ended December 31, 2022, 2021 and 2020, respectively, and income from foreign operations of $ 59.4 million, $ 71.7 million and $ 80.4 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Income from continuing operations before income taxes included income from domestic operations of $ 25.8 million, $ 71.8 million, and $ 279.7 million for the years ended December 31, 2023, 2022, and 2021, respectively, and income from foreign operations of $ 49.2 million, $ 59.4 million, and $ 71.7 million for the years ended December 31, 2023, 2022, and 2021, respectively.

Uncertain Income Tax Positions

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Increases related to tax positions taken in the current year 744 819 4,675

Settlements — — ( 5,628 )

Decreases related to expiration of statute of limitations ( 4,989 ) ( 3,322 ) ( 9,117 )

1 unchanged sentence

The Company includes interest and penalties related to unrecognized tax benefits within ‘Income tax expense’ on the Consolidated Statements of Operations.

As of December 31, 2022, 2021 and 2020, the total amount of interest and penalties accrued was $ 6.3 million, $ 5.7 million, $ 7.2 million, respectively, which is classified as a liability for uncertain tax positions on the Consolidated Balance Sheets.

As of December 31, 2023, 2022, and 2021, the total amount of interest and penalties accrued was $ 7.1 million, $ 6.3 million, and $ 5.7 million, respectively, which is classified as a liability for uncertain tax positions on the Consolidated Balance Sheets.

In connection with the liability for unrecognized tax benefits, the Company recognized interest and penalty expense (benefit) in 2023, 2022, and 2021 of $ 0.7 million, $ 0.7 million, and $( 1.5 ) million, respectively.

4 unchanged sentences

It is also reasonably possible that the Company’s reserves will be inadequate to cover the entire amount of any such income tax liability.

Income Tax Audits:

The Company is in various stages of audit by the U.S.

Internal Revenue Service (“IRS”) for its 2012 through 2016 tax years.

On February 24, 2021, the Company received a Notice of Deficiency for tax years 2012 through 2014 which disallowed certain deductions for domestic production.

The Company disagrees with the Notice and has filed a petition with the United States Tax Court on May 24, 2021 and has continued to work with the IRS to reach a conclusion.

As of December 31, 2022, the audits are ongoing.

The Company is under audit by the California Franchise Tax Board (“FTB”) for its tax years 2012 and 2013.

The FTB, however, has agreed to suspend its audit for 2012 and 2013 pending the outcome of the IRS audit for such tax years.

In August 2018, the FTB notified the Company that it will commence an audit of tax years 2015 and 2016.

The Company responded to the inquiries from the FTB.

The tax years remain open pending the outcome of the IRS audit for such tax years.

As of December 31, 2022, the audits are ongoing.

In June 2019, the New York State Department of Taxation and Finance (“NYS”) notified the Company that it will commence an audit for tax year 2015.

In April 2020, the NYS notified the Company that it would also commence an audit for tax years 2016 and 2017.

The tax years remain open pending the outcome of the IRS audit for such tax years.

On October 2022, the Company signed an additional extension of the statute of limitations for tax years 2015 to 2017 to September 2023.

As of December 31, 2022, the audits are ongoing.

We conduct business on a global basis and as a result, one or more of our subsidiaries files income tax returns in the U.S.

federal and in multiple state, local, and foreign tax jurisdictions.

As noted previously, our U.S.

federal income tax returns for years 2012 through 2016 are under various stages of audit by the IRS.

We are also under audit for various U.S.

state and local tax purposes as noted above for our significant jurisdictions.

state and local tax purposes.

With limited exception, our significant foreign tax jurisdictions are no longer subject to an income tax audit by the various tax authorities for tax years prior to 2020.

1 unchanged sentence

If the recorded uncertain tax positions were inadequate to cover the associated tax liabilities, the Company would be required to record additional tax expense in the relevant period, which could be material.

If the recorded uncertain tax positions were

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adequate to cover the associated tax liabilities, the Company would be required to record any excess as reduction in tax expense in the relevant period, which could be material.

If the recorded uncertain tax positions were adequate to cover the associated tax liabilities, the Company would be required to record any excess as reduction in tax expense in the relevant period, which could be material.

However, it is not currently possible to estimate the amount, if any, of such change.

Stockholders’ Equity

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

During the year ended December 31, 2020, the Company repurchased 1,140,819 shares at an aggregate cost of $ 87.5 million under the 2012 Program, which were subsequently retired in the same year.

As of December 31, 2020, all of the available shares were repurchased under the 2012 Program.

In connection with the Separation, the Company called its 3.25 % Convertible Notes for redemption and during the year ended December 31, 2021, the Company issued 3,050,850 shares of the Company’s common stock in connection with that redemption (see Note 10 — Debt ).

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

The Company entered into certain Rule 10b5-1 trading plans during the years ended December 31, 2022, 2021 and 2020 to execute repurchases under the 2020 Program.

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

These shares were subsequently retired.

Cumulatively as of December 31, 2022, 3,672,846 shares were repurchased at an aggregate cost of $ 296.9 million (including an immaterial amount of commission fees) under the 2020 Program.

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

During the years ended December 31, 2023, 2022, and 2021, the Company repurchased 1,585,846 , 736,536 , and 445,711 shares, respectively, under the 2020 Program, at an aggregate cost of $ 104.9 million, $ 71.3 million, and $ 47.7 million, respectively (including excise tax).

Cumulatively as of December 31, 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 December 31, 2023 was 4,741,308 shares.

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

During the years ended December 31, 2022, 2021 and 2020, the Company purchased and retired 72,886 , 251,946 and 111,451 shares, respectively, at an aggregate cost of approximately $ 7.0 million, $ 30.6 million and $ 10.4 million, respectively, from plan participants for this purpose.

Stock Based Compensation

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During the years ended December 31, 2023, 2022 and 2021, the Company purchased and retired 69,622 , 72,886 , and 251,946 shares at an aggregate cost of approximately $ 4.6 million, $ 7.0 million, and $ 30.6 million, respectively, from plan participants for this purpose.

Share-Based Compensation

The Company’s share-based compensation plans include the 2015 Stock Option Plan (the “2015 Plan”) and 2001 Employee Stock Purchase Plan (the “Purchase Plan”).

4 unchanged sentences

As of December 31, 2023, 435,135 shares underlying options and 777,197 shares of restricted stock units were outstanding under the 2015 Plan.

At December 31, 2022, there were 1,496,619 additional shares underlying options, shares of restricted stock and other share-based awards available for grant under the 2015 Plan.

As of December 31, 2023, there were 1,072,913 additional shares underlying options, shares of restricted stock and other share-based awards available for grant under the 2015 Plan.

In connection with the Separation and pursuant to the anti-dilution provisions of the 2015 Plan, the number of shares underlying each stock-based award outstanding as of the date of the Separation was multiplied by a factor of approximately 1.09 and the related exercise price for the stock options was divided by a factor of approximately 1.09 , which was intended to preserve the intrinsic value of the awards prior to the Separation.

3 unchanged sentences

Stock-based compensation expense through the Separation date for Consensus employees is included in results from discontinued operations.

Share-Based Compensation Expense

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

Year ended December 31,

2023 2022 2021

$ 262 $ 341 $ 306

Sales and marketing 2,686 3,083 1,288

Research, development, and engineering 3,245 2,503 1,984

General, administrative, and other related costs

25,727 20,674 20,551

Total share-based compensation expense $ 31,920 $ 26,601 $ 24,129

Stock Options

At December 31, 2022, 2021 and 2020, options to purchase 217,567 , 168,614 and 175,601 shares of common stock were exercisable under and outside of the 2015 Plan, at weighted average exercise prices of $ 68.97 , $ 67.62 , $ 60.35 , respectively.

Stock options generally expire after 10 years and vest over a 5-year period.

As of December 31, 2023, 2022, and 2021, options to purchase 271,959 , 217,567 , and 168,614 shares of common stock were exercisable under and outside of the 2015 Plan, at weighted average exercise prices of $ 68.97 , $ 68.97 , $ 67.62 , respectively.

Stock options generally expire after 10 years and vest over a 5 to 8 year period.

All stock option grants are approved by “outside directors” within the meaning of Internal Revenue Code Section 162(m).

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All stock option grants are approved by “outside directors” within the meaning of Internal Revenue Code Section 162(m).

Stock option activity for the years ended December 31, 2023, 2022, and 2021 is summarized as follows:

6 unchanged sentences

Exercised ( 70,776 ) 41.63

Adjustment due to Consensus Separation (1)

35,749 $ 68.25

Options outstanding at December 31, 2021

1 unchanged sentence

Exercised ( 5,439 ) 27.15

Adjustment due to Consensus Separation (1)

35,749 $ 68.25

Options outstanding at December 31, 2022

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Exercisable at December 31, 2023

271,959 $ 68.97 4.0 $ —

Vested and expected to vest at December 31, 2023

1 unchanged sentence

(1) As noted above, in connection with the Consensus separation and pursuant to the anti-dilution provisions of the 2015 Plan, the number of shares underlying each stock option outstanding as of the date of the Separation was multiplied by a factor of approximately 1.09 and the related exercise price for the stock options was divided by a factor of approximately 1.09 , which was intended to preserve the intrinsic value of the awards prior to the Separation.

The total intrinsic values of options exercised during the years ended December 31, 2022, 2021 and 2020 was $ 0.4 million, $ 5.8 million and $ 3.0 million, respectively.

There were no stock option exercises in 2023.

The total intrinsic values of options exercised during the years ended December 31, 2022 and 2021 was $ 0.4 million and $ 5.8 million, respectively.

The total fair value of options vested during the years ended December 31, 2023, 2022, and 2021 was $ 1.0 million, $ 1.1 million, and $ 1.0 million, respectively.

Cash received from options exercised under all share-based payment arrangements for the years ended December 31, 2022, 2021 and 2020 was $ 0.1 million, $ 2.9 million and $ 1.6 million, respectively.

The actual tax benefit realized for the tax deductions from option exercises under the share-based payment arrangements totaled $ 0.3 million, $ 1.9 million and $ 0.7 million, respectively, for the years ended December 31, 2022, 2021 and 2020, respectively.

The following table summarizes information concerning outstanding and exercisable options as of December 31, 2022:

Options Outstanding Exercisable Options

Exercise Price Number Outstanding December 31, 2022 Weighted

$ 68.97 435,135 5.0 years $ 68.97 217,567 $ 68.97

Cash received from options exercised under all share-based payment arrangements for the years ended December 31, 2022 and 2021 was $ 0.1 million, and $ 2.9 million, respectively.

The actual tax benefit realized for the tax deductions from option exercises under the share-based payment arrangements totaled $ 0.3 million and $ 1.9 million, respectively, for the years ended December 31, 2022 and 2021, respectively.

As of December 31, 2023, there was $ 1.9 million of total unrecognized compensation expense related to nonvested share-based compensation options granted under the 2015 Plan.

That expense is expected to be recognized ratably over a weighted average period of 2.0 years (i.e., the remaining requisite service period).

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Fair Value Disclosure

5 unchanged sentences

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

There were no dividends declared during the years ended December 31, 2022, 2021 and 2020.

Estimated forfeiture rates were 13.0 %, 12.4 % and 13.0 % as of December 31, 2022, 2021 and 2020, respectively.

Restricted Stock and Restricted Stock Units

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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 154,022 , 246,251 and 129,786 shares of restricted stock and restricted units (excluding awards with market conditions below) during the years ended December 31, 2022, 2021 and 2020, respectively.

Restricted Stock and Restricted Stock Units with Market Conditions

The Company granted 305,549 , 154,022 , and 246,251 shares of restricted stock units (excluding awards with market conditions below) during the years ended December 31, 2023, 2022, and 2021, respectively.

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The Company has awarded certain key employees market-based restricted stock and market-based restricted stock units pursuant to the 2015 Plan.

1 unchanged sentence

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

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

During the years ended December 31, 2022, 2021, and 2020 the Company awarded 100,193 , 73,094 and 82,112 market-based restricted stock units, respectively.

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 years ended December 31, 2023, 2022, and 2021 the Company awarded 167,606 , 100,193 , and 73,094 market-based restricted stock units at stock price targets ranging from $ 83.61 to $ 103.76 per share.

The per share weighted average grant-date fair values of the market-based restricted stock units granted during the years ended December 31, 2023, 2022, and 2021 were $ 70.06 , $ 87.11 , and $ 94.40 , respectively.

4 unchanged sentences

Risk-free interest rate 4.1 % 1.8 % 1.3 %

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Restricted stock activity for the years ended December 31, 2022, 2021 and 2020 is set forth below:

Restricted stock award activity for the years ended December 31, 2023, 2022 and 2021 is set forth below:

Shares Weighted-Average

1 unchanged sentence

820,566 $ 62.66

Granted 1,268 98.63

Vested ( 435,529 ) 60.52

Canceled ( 33,194 ) 83.23

Adjustment due to Consensus Separation (1)

Nonvested at December 31, 2021

2 unchanged sentences

Canceled ( 4,920 ) 84.77

Adjustment due to Consensus Separation (1)

Nonvested at December 31, 2022

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Nonvested at December 31, 2023

258,899 $ 48.76

(1) As noted above, in connection with the Consensus separation and pursuant to the anti-dilution provisions of the 2015 Plan, the number of shares underlying each restricted stock award outstanding as of the date of the Separation was multiplied by a factor of approximately 1.09 and the market condition stock price target for marked-based restricted stock awards was also adjusted.

3 unchanged sentences

Restricted stock unit activity for the years ended December 31, 2023, 2022 and 2021 is set forth below:

Shares Weighted-Average

Life (in Years) Aggregate

Shares Aggregate

Outstanding at January 1, 2021

2 unchanged sentences

Canceled ( 60,201 )

Adjustment due to Consensus Separation (1)

Outstanding at December 31, 2021

2 unchanged sentences

Canceled ( 35,081 )

Adjustment due to Consensus Separation (1)

Outstanding at December 31, 2022

5 unchanged sentences

(1) As noted above, in connection with the Consensus separation and pursuant to the anti-dilution provisions of the 2015 Plan, the number of shares underlying each restricted stock unit outstanding as of the date of the Separation was multiplied by a factor of approximately 1.09 and the market condition stock price target for marked-based restricted stock units was also adjusted.

As of December 31, 2022, the Company had unrecognized share-based compensation cost of $ 40.1 million associated with these restricted stock and restricted stock units.

This cost is expected to be recognized over a weighted-average period of 2.8 years for restricted stock and 3.4 years for restricted stock units.

As of December 31, 2023, the Company had unrecognized share-based compensation cost of approximately $ 43.4 million associated with these restricted stock awards and restricted stock units.

This cost is expected to be recognized over a weighted-average period of 1.9 years for restricted stock awards and 2.4 years for restricted stock units.

The total fair value of restricted stock and restricted stock units vested during the years ended December 31, 2023, 2022, and 2021 was $ 11.3 million, $ 12.4 million, and $ 68.1 million, respectively.

3 unchanged sentences

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

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

On February 2, 2018, the Company approved an amendment to the Company’s Amended and Restated 2001 Employee Stock Purchase Plan, to be effective May 1, 2018, such that (i) the purchase price for each offering period shall be 85 % of the lesser of the fair market value of a share of common stock of the Company (a “Share”) on the beginning or the end of the offering period, rather than 95 % of the fair market value of a Share at the end of the offering period, and (ii) each offering period will be six months , rather than three months .

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

Employees are immediately vested in the shares purchased at the purchase date.

During 2023, 2022, and 2021, 74,390 , 139,992 , and 109,248 shares were purchased under the Purchase Plan, respectively, at a price ranging from $ 53.80 to $ 54.24 per share during 2023.

Cash received upon the issuance of the Company’s common stock under the Purchase Plan was $ 8.7 million, $ 9.4 million, and $ 9.2 million for the years ended December 31, 2023, 2022, and 2021, respectively.

As of December 31, 2023, 994,221 shares were available under the Purchase Plan for future issuance.

ZIFF DAVIS, INC.

3 unchanged sentences

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

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

The compensation cost is recognized on a straight-line basis over the requisite service period, or the six-month offering period.

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

4 unchanged sentences

Estimated forfeiture rates were 12.54 %, 11.83 %, and 11.15 % as of December 31, 2023, 2022, and 2021, respectively.

The increase in forfeiture rate comes as a result of the Purchase Plan being offered to all employees regardless of employment location.

During 2022, 2021 and 2020, 139,992 , 109,248 and 118,629 shares, respectively were purchased under the Purchase Plan at price ranging from $ 66.33 to $ 68.22 per share during 2022.

Cash received upon the issuance of the Company’s common stock under the Purchase Plan was $ 9.4 million, $ 9.2 million and $ 7.4 million for the years ended December 31, 2022, 2021, and 2020, respectively.

As of December 31, 2022, 1,155,699 shares were available under the Purchase Plan for future issuance.

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

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

2023 2022 2021

1 unchanged sentence

Expected term (in years) 0.5 0.5 0.5

Dividend yield 0.0 % 0.0 % 0.0 %

Expected volatility 38.3 % 40.7 % 35.0 %

18 unchanged sentences

Basic weighted-average outstanding shares of common stock 46,400,941 46,954,558 45,893,928

Effect of dilution:

Diluted effect of:

Equity incentive plans

63,320 71,291 311,585

Convertible debt (2)

8 unchanged sentences

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

(2) Under the modified retrospective method of adoption of ASU 2020-06, the dilutive impact of convertible debt was calculated using the if-converted method for the year ended December 31, 2022.

The dilutive impact of convertible debt was calculated using the treasury stock method for the years ended December 31, 2021 and 2020 (see Note 10 - Debt ).

(2) Under the modified retrospective method of adoption of ASU 2020-06, the dilutive impact of convertible debt was calculated using the if-converted method for the years ended December 31, 2023 and 2022.

The dilutive impact of convertible debt was calculated using the treasury stock method for the years ended December 31, 2021 (see Note 10 — Debt ).

Segment Information

1 unchanged sentence

The Company aggregates its operating segments into two reportable segments:

Cybersecurity and Martech and Digital Media.

Digital Media and Cybersecurity and Martech.

The accounting policies of the businesses are the same as those described in Note 2 — Basis of Presentation and Summary of Significant Accounting Policies.

10 unchanged sentences

Elimination of inter-segment revenues (1)

( 152 ) ( 801 ) ( 1,189 )

Total segment revenues

Corporate (1)

1,364,028 1,390,997 1,416,722

Total revenues

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

Operating costs and expenses by reportable segment (3) :

15 unchanged sentences

Income from operations $ 132,611 $ 198,941 $ 167,340

(1) Inter-segment revenues in the Digital Media reportable segment were $ 0.2 million, $ 0.8 million, and $ 0.8 million, for the years ended December 31, 2023, 2022, and 2021, respectively.

Inter-segment revenues in the Cybersecurity and Martech reportable segment were $ 0.0 million , $ 0.0 million, and $ 0.4 million, for the years ended December 31, 2023, 2022, and 2021, respectively.

(2) 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.

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

For the twelve months ended December 31, 2021, goodwill impairment related to our B2B Backup business is also included within operating costs and expenses for Cybersecurity and Martech.

For the twelve months ended December 31, 2022, the Company had an impairment to goodwill within operating costs and expenses for Digital Media.

For the twelve months ended December 31, 2023 and 2022, the Company had an impairment to goodwill within operating costs and expenses for Digital Media.

For the twelve months ended December 31, 2021, the Company had an impairment to goodwill within operating costs and expenses for Cybersecurity and Martech.

(4) 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.

48 unchanged sentences

Right-of-use assets acquired in exchange for operating lease obligations $ 1,597 $ 4,130 $ 9,850

Exchange of corporate debt securities (2)

Purchase of equity investments with common stock

$ 13,500 $ — $ —

Disposition of Investment in Consensus (3)

Disposition of Consensus common stock (2)

$ — $ 112,286 $ —

Non-cash financing activity:

Debt principal settled in exchange for Investment in Consensus (3)

Debt principal settled in exchange for Consensus common stock (2)

$ — $ 112,286 $ —

5 unchanged sentences

(1) Combines continuing and discontinued operations.

(2) During the year ended December 31, 2020, the Company exchanged shares of redeemable preferred stock that were previously classified as available-for-sale corporate debt securities for a new series of preferred stock, classified as equity securities without a readily determinable fair value.

Refer to Note 5 - Investments for additional details.

(2) During the year ended December 31, 2022, the Company disposed $ 160.1 million of its investment in Consensus in exchange for $ 112.3 million of debt and recorded $ 47.8 million of loss on investment, net.

15 unchanged sentences

Balance as of January 1, 2021

Other comprehensive income (loss) before reclassifications 558 ( 8,902 ) ( 8,344 )

Net current period other comprehensive income (loss) 558 ( 8,902 ) ( 8,344 )

$ 283 $ ( 55,089 ) ( 54,806 )

Other comprehensive loss before reclassifications

( 114 ) ( 21,268 ) ( 21,382 )

Consensus separation — 18,966 18,966

Net current period other comprehensive loss

( 114 ) ( 2,302 ) ( 2,416 )

Balance as of December 31, 2021

$ 169 $ ( 57,391 ) $ ( 57,222 )

Other comprehensive income (loss) before reclassifications

Consensus separation — 18,966 18,966

272 ( 32,479 ) ( 32,207 )

Consensus separation adjustment — 4,056 4,056

Net current period other comprehensive income (loss) 272 ( 28,423 ) ( 28,151 )

1 unchanged sentence

$ 441 $ ( 85,814 ) $ ( 85,373 )

Other comprehensive loss before reclassifications 272 ( 32,479 ) ( 32,207 )

Consensus separation adjustment — 4,056 4,056

Net current period other comprehensive loss 272 ( 28,423 ) ( 28,151 )

Other comprehensive income before reclassifications

96 13,657 13,753

Net current period other comprehensive income

96 13,657 13,753

Balance as of December 31, 2023

$ 537 $ ( 72,157 ) $ ( 71,620 )

The following table provides details about reclassifications out of accumulated other comprehensive loss for the years ended December 31, 2023, 2022, and 2021.

Details about Accumulated Other Comprehensive Loss Components Amount Reclassified from Accumulated Other Comprehensive Loss Affected Line Item in the Statements of Operations

Details about Accumulated Other Comprehensive Loss components

Amount reclassified from Accumulated Other Comprehensive Loss

Affected line item in the Statements of Operations

For the year ending December 31,

2 unchanged sentences

— — ( 151 ) Income before income taxes

— — — Income tax expense

Total reclassifications for the period $ — $ — $ ( 151 ) Net income

Related Party Transactions

As of December 31, 2022, the Company holds approximately 1.1 million shares of the common stock of Consensus, representing approximately 5 % of the Consensus outstanding common stock.

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

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

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.

2 unchanged sentences

During the year ended December 31, 2021, Ziff Davis received or expected to receive approximately $ 11.7 million (excluding the reimbursement of a portion of the debt exchange noted below) from Consensus resulting in net transaction costs of $ 11.6 million.

These net transaction-related costs were recorded in ‘General and administrative expenses’ component of ‘Income (loss) from discontinued operations, net of income taxes’ within the Consolidated Statement of Operations.

These net transaction-related costs were recorded in ‘General, administrative, and other related costs’ component of ‘Income (loss) from discontinued operations, net of income taxes’ within the Consolidated Statement of Operations.

During the year ended December 31, 2021, Consensus also reimbursed Ziff Davis for certain costs associated with the debt exchange in connection with the Separation totaling $ 7.5 million, which was recorded as an offset to the loss on extinguishment of debt on the Consolidated Statement of Operations.

6 unchanged sentences

The agreed-upon charges for such services are generally intended to allow the providing company to recover all costs and expenses of providing such services, and nearly all such services were terminated without extension twelve months after the Separation.

During the years ended December 31, 2022 and 2021, the Company recorded an offset to expense of approximately $ 1.2 million and $ 2.1 million, respectively, from Consensus related to the transition services agreement within ‘General and administrative expenses’ within the Consolidated Statements of Operations.

During the years ended December 31, 2022 and 2021, the Company recorded an offset to expense of approximately $ 1.2 million and $ 2.1 million, respectively, from Consensus related to the transition services agreement within ‘General, administrative, and other related costs’ within the Consolidated Statements of Operations.

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 through October 7, 2022, after which time Consensus took over the lease in full.

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 years ended December 31, 2022 and 2021, the Company recorded an offset to lease expense of approximately $ 1.5 million and $ 0.5 million, respectively, related to this lease, however, Consensus paid the landlord directly and not Ziff Davis.

Amounts due from Consensus as of December 31, 2021 was $ 9.3 million (comprised of $ 2.1 million related to services provided under the transition services agreement and $ 7.2 million related to reimbursement of certain transaction related costs and other reimbursements), and is included in within ‘Accounts receivable’ within the Consolidated Balance Sheets.

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

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

Ressler, former Chairman of the Board of Directors of the Company, is indirectly the majority equity holder.

Amounts due from Consensus as of December 31, 2021 were $ 9.3 million (comprised of $ 2.1 million related to services provided under the transition services agreement and $ 7.2 million related to reimbursement of certain transaction related costs and other reimbursements), and are included in within ‘Accounts receivable’ within the Consolidated Balance Sheets.

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 $ 200.0 million (approximately 76.6 % of equity) in the OCV Fund.

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

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

to exercise all rights, powers, privileges, and other incidents of ownership or possession with respect to securities held or owned by the OCV Fund;

to enter into, make and perform all contracts and other undertakings;

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

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

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

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

During the years ended December 31, 2022, 2021, and 2020, the Company recognized expense for management fees of $ 1.5 million, $ 3.0 million, and $ 3.0 million, net of tax benefit, respectively.

During the years ended 2021 and 2020, the Company received capital call notices from the management of OCV Management, LLC for $ 22.2 million and $ 32.9 million, inclusive of certain management fees, of which $ 22.2 million and $ 31.9 million had been paid as of the end of each respective year.

In connection with the settlement of certain litigation generally related to the Company’s investment in the Fund (see Note 12 - Commitments and Contingencies ), among other terms, no further capital calls were made during 2022 or will be made in the future in connection with the Company’s investment in the Fund, nor will any management fees be paid by the Company to the manager.

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

As a limited partner in the OCV Fund, prior to the settlement of certain litigation generally related to the Company’s investment in the OCV Fund in January 2022, the Company paid an annual management fee to the manager equal to 2.0 % of capital commitments.

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

The OCV Fund has a six year investment period, subject to certain exceptions.

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

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

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

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

During the year ended December 31, 2021, the Company received a distribution from OCV of $ 15.3 million.

Subsequent Event

On February 5, 2024, the Company completed an acquisition of 100 % of the equity interest of TDS Gift Cards, a digital gifting and branded payments platform.

After adjustment for net working capital liabilities, the Company paid approximately $ 48 million in cash.

The acquisition will be accounted for as a business combination under ASC 805, Business Combinations .

The Company is in the process of finalizing the accounting for this transaction and will complete the preliminary allocation of the purchase consideration to the assets acquired and liabilities assumed by the end of the first quarter of 2024.

Changes In And Disagreements With Accountants On Accounting And Financial Disclosure

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data