What changed in this filing

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Item 1. Financial Statements

2024-05-09 compared with 2023-11-09 · 380 added, 559 removed, 450 unchanged (68% of the section changed)

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

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

Cash and cash equivalents $ 734,779 $ 737,612

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Long-term debt 1,001,884 1,001,312

Deferred revenue, noncurrent 8,000 9,103

Income taxes payable, noncurrent 8,486 11,675

Deferred income taxes 65,261 45,503

Income taxes payable, noncurrent 8,486 8,486

Deferred revenue, noncurrent 7,172 8,169

Other long-term liabilities 78,882 82,721

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Authorized 95,000,000 ;

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

total issued and outstanding 46,134,708 and 46,078,464 shares at March 31, 2024 and December 31, 2023, respectively

Additional paid-in capital 475,926 472,201

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

Retained earnings 1,503,838 1,491,956

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

Three months ended

September 30,

Nine months ended

September 30,

2023 2022 2023 2022

Three months ended March 31,

Total revenues $ 314,485 $ 307,142

Operating costs and expenses:

Cost of revenues 55,526 52,603 148,677 144,707

Direct costs 47,067 45,730

Sales and marketing 117,000 115,920

Research, development, and engineering 17,774 17,914

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

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

General, administrative, and other related costs 96,783 101,263

Total operating costs and expenses 278,624 280,827

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

Income from operations 35,861 26,315

Interest expense, net ( 1,769 ) ( 4,480 )

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

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

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

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

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

Loss on sale of businesses ( 3,780 ) —

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

( 10,705 ) ( 20,345 )

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

Income (loss) from equity method investment, net

Gain on investments, net — 357

Other loss, net

( 104 ) ( 908 )

Net (loss) income

Income before income tax (expense) benefit and loss from equity method investment

Income tax (expense) benefit

( 8,231 ) 616

Net (loss) income per common share:

Loss from equity method investment, net of income taxes

( 645 ) ( 9,182 )

Net income (loss)

$ 10,627 $ ( 7,627 )

Net income (loss) per common share:

Basic $ 0.23 $ ( 0.16 )

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AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited, in thousands)

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

2023 2022 2023 2022

Net (loss) income

Three months ended March 31,

Net income (loss)

$ 10,627 $ ( 7,627 )

Other comprehensive loss, net of tax:

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustment ( 6,530 ) 3,713

Consensus separation adjustment — — — 4,056

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

309 ( 169 ) ( 80 ) ( 169 )

Other comprehensive loss, net of tax

Change in fair value on available-for-sale investments, net of tax benefit of $ 19 and tax expense of $ 109 for the three months ended March 31, 2024 and 2023, respectively

Other comprehensive income, net of tax

( 6,593 ) 4,037

Comprehensive loss

Comprehensive income (loss)

$ 4,034 $ ( 3,590 )

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(Unaudited, in thousands)

Nine months ended September 30,

Three months ended March 31,

Cash flows from operating activities:

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

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

Net income (loss) $ 10,627 $ ( 7,627 )

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

Depreciation and amortization 48,453 54,623

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Deferred income taxes, net ( 2,709 ) ( 7,442 )

Gain on extinguishment of debt — ( 11,505 )

Goodwill impairment on business 56,850 27,369

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

Loss on sale of businesses

Loss from equity method investments

Unrealized loss on short-term investments held at the reporting date, net 10,705 20,345

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

Gain on investments, net

Other 1,278 2,776

Decrease (increase) in:

Accounts receivable (includes $ 0 and $ 9,425 with related parties)

Accounts receivable

55,365 27,626

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Acquisition of businesses, net of cash received ( 44,524 ) ( 8,001 )

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

Purchases of equity investments ( 11,790 ) —

Proceeds from sale of equity investments — 3,174

Proceeds from sale of businesses, net of cash divested 1,238 —

Other ( 66 ) ( 3,947 )

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Cash flows from financing activities:

Payment of debt — ( 166,904 )

Proceeds from term loan — 112,286

Debt extinguishment costs — ( 756 )

Repurchase of common stock ( 3,923 ) ( 2,875 )

Issuance of common stock under employee stock purchase plan 4,725 5,235

Proceeds from exercise of stock options — 148

Deferred payments for acquisitions ( 2,418 ) ( 6,679 )

Other ( 53 ) ( 559 )

Net cash used in financing activities ( 6,311 ) ( 9,483 )

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(Unaudited, in thousands, except share amounts)

Three months ended September 30, 2023

Common stock Additional

paid-in Treasury stock Retained other comprehensive Total

Stockholders’

Shares Amount capital Shares Amount earnings loss Equity

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

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

Other comprehensive loss, net of tax expense of $ 93

— — — — — — ( 6,532 ) ( 6,532 )

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

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

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

Retirement of common stock ( 605,428 ) ( 6 ) ( 6,035 ) ( 605,428 ) 41,019 ( 34,978 ) — —

Share-based compensation — — 6,774 — — — — 6,774

Other, net — — ( 2 ) — — 14 — 12

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

Three months ended September 30, 2022

Common stock Additional

paid-in Treasury stock Retained other comprehensive Total

Stockholders’

Shares Amount capital Shares Amount earnings loss Equity

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

Net income — — — — — 18,185 — 18,185

Other comprehensive loss, net of tax expense of zero

— — — — — — ( 24,922 ) ( 24,922 )

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

Retirement of common stock ( 2,601 ) — ( 218 ) — — 18 — ( 200 )

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

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

Nine months ended September 30, 2023

Common stock Additional

paid-in Treasury stock Retained other comprehensive Total

Three months ended March 31, 2024

Common stock Additional paid-in

Retained Accumulated other

Stockholders’

Shares Amount capital Shares Amount earnings loss Equity

Shares Amount capital earnings comprehensive loss

Balance, January 1, 2024 46,078,464 $ 461 $ 472,201 $ 1,491,956 $ ( 71,620 ) $ 1,892,998

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

Net income — — — 10,627 — 10,627

Other comprehensive loss, net of tax benefit of $ 19

1 unchanged sentence

Issuance of restricted stock, net 56,244 — ( 5,152 ) 1,229 — ( 3,923 )

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

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

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

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

Share-based compensation — — 8,872 — — 8,872

Other, net — — 5 26 — 31

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

Nine months ended September 30, 2022

Common stock Additional

paid-in Treasury stock Retained other comprehensive Total

Balance, March 31, 2024 46,134,708 $ 461 $ 475,926 $ 1,503,838 $ ( 78,213 ) $ 1,902,012

Three months ended March 31, 2023

Common stock Additional paid-in

Retained Accumulated other

Stockholders’

Shares Amount capital Shares Amount earnings loss Equity

Shares Amount capital earnings comprehensive loss

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

Reclassification of the equity component of 1.75 % Convertible Notes to liability upon adoption of ASU 2020-06

— — — ( 7,627 ) — ( 7,627 )

Net loss — — — — — ( 3,714 ) — ( 3,714 )

Other comprehensive loss, net of tax expense of zero

Other comprehensive loss, net of tax expense of $ 109

— — — — 4,037 4,037

Issuance of restricted stock, net 16,647 — ( 3,336 ) 461 — ( 2,875 )

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

Repurchase of common stock — — — 736.536 ( 71,337 ) — — ( 71,337 )

Retirement of common stock ( 789,373 ) ( 7 ) ( 14,881 ) ( 736.536 ) 71,337 ( 61,657 ) — ( 5,208 )

Share-based compensation — — 8,402 — — 8,402

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

Other, net — — 66 1 — 67

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

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

See Notes to Condensed Consolidated Financial Statements (Unaudited)

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The accompanying Condensed Consolidated Financial Statements of Ziff Davis, Inc.

and its subsidiaries (“Ziff Davis”, the “Company”, “our”, “us”, or “we”), whether directly or indirectly wholly-owned, were prepared in accordance with U.S.

and its direct and indirect wholly-owned subsidiaries (“Ziff Davis”, the “Company”, “our”, “us”, or “we”), were prepared in accordance with U.S.

generally accepted accounting principles ("GAAP"), and all adjustments considered necessary for a fair presentation have been included.

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All normal recurring adjustments necessary for a fair presentation of these interim Condensed Consolidated Financial Statements were made.

This Quarterly Report on Form 10-Q should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the Securities and Exchange Commission ("SEC") on March 1, 2023 and other filings with the SEC.

This Quarterly Report on Form 10-Q should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the Securities and Exchange Commission ("SEC") on February 26, 2024 and other filings with the SEC.

The results of operations for this interim period are not necessarily indicative of the operating results for the full year or for any future period.

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Ziff Davis, Inc.

is a vertically focused digital media and internet company whose portfolio includes leading 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 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.

Impairment or Disposal of Long-Lived Assets

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

During the three months ended September 30, 2023 and 2022, and the nine months ended September 30, 2023 and 2022, the Company recorded an impairment of approximately $ 0.7 million, $ 0.2 million, $ 2.7 million, and $ 0.4 million, respectively, related to certain operating lease right-of-use assets and other definite-lived intangibles.

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

The impairment is presented in general and administrative expense on the Condensed Consolidated Statement of Operations.

is a vertically focused digital media and internet company whose portfolio includes brands in technology, shopping, gaming and entertainment, connectivity, health and wellness, cybersecurity, and martech.

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

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

Significant Accounting Policies

The accounting policies followed by the Company are set forth in Note 1 to the Company's consolidated financial statements included in its Form 10-K for the fiscal year ended December 31, 2023.

For the three months ended March 31, 2024, there have been no new or material changes to the significant accounting policies discussed in the Company’s Form 10-K for the fiscal year ended December 31, 2023.

Recent Accounting Pronouncements

Recently issued applicable accounting pronouncements not yet adopted

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

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

This update provides for optional financial reporting alternatives to reduce cost and complexities associated with accounting for contracts, hedging relationships, and other transactions affected by reference rate reform.

This update provides for optional financial reporting alternatives to reduce costs and complexities associated with accounting for contracts, hedging relationships, and other transactions affected by reference rate reform.

This update applies only to contracts, hedging relationships, and other transactions that reference London Interbank Offer Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform.

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

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

Reclassifications

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

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

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

ZIFF DAVIS, INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

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 on December 31, 2024 and for prospective interim periods within fiscal years beginning after December 15, 2024, on a retrospective basis.

Early adoption is permitted.

This update 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 on December 31, 2024.

Early adoption is permitted.

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

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

Digital Media

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

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

Advertising and Performance Marketing

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.

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(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, production services, and the management of client gift card programs.

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 primarily recognized over time.

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.

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 software, and other related services.

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.

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

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.

Cybersecurity and Martech

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’s Cybersecurity and Martech revenues consist of subscription and licensing revenues which primarily 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.

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

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

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

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.

The Company records revenue on a net basis with respect to revenue earned from servicing the client gift card programs.

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Disaggregated Revenues

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

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

2023 2022 2023 2022

Three months ended March 31,

Digital Media

Advertising $ 183,008 $ 186,921 $ 514,173 $ 546,186

Subscription 71,858 64,780 209,167 179,257

Advertising and performance marketing

$ 156,096 $ 156,082

Subscription and licensing

73,467 69,148

Other 9,489 8,981

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Cybersecurity and Martech

Subscription $ 73,051 $ 78,192 $ 219,263 $ 237,596

Subscription and licensing

$ 75,452 $ 73,016

Total Cybersecurity and Martech revenues $ 75,452 $ 73,016

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Total Revenues $ 314,485 $ 307,142

Timing of revenue recognition

Point in time $ 14,336 $ 14,417 $ 37,518 $ 32,602

Over time 326,649 327,456 936,625 961,695

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

The Company recorded $ 27.8 million and $ 32.2 million of revenue for the three months ended September 30, 2023 and 2022, respectively, and $ 140.9 million and $ 154.9 million of revenue for the nine months ended September 30, 2023 and 2022, respectively, which was previously included in the deferred revenue balance as of the beginning of each respective year.

Transaction Price Allocation to Future Performance Obligations

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

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

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

Business Acquisitions

The Company uses acquisitions as a strategy to grow its customer base by increasing its presence in new and existing markets, expand and diversify its service offerings, enhance its technology, and acquire skilled personnel.

2023 Acquisitions

The Company completed two immaterial Digital Media acquisitions during the nine months ended September 30, 2023, paying the purchase price in cash in each transaction.

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

The initial accounting for the 2023 acquisitions is incomplete due to timing of available information and is subject to change.

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

The Company recorded $ 74.1 million and $ 65.1 million of revenue for the three months ended March 31, 2024 and 2023, respectively, which was previously included in the deferred revenue balance as of the beginning of each respective year.

Performance Obligations

The Company may be a party to multiple concurrent contracts with the same customers, or a party or parties related to those customers.

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

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

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

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

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

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

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.

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

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

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.

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.

ZIFF DAVIS, INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Goodwill recognized associated with these acquisitions during the nine months ended September 30, 2023 was $ 6.3 million, all of which is expected to be deductible for income tax purposes.

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

2022 Acquisitions

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

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

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

and (c) four other immaterial Digital Media acquisitions.

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

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

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

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.

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

• Voice, email marketing, and search engine optimization as services are delivered.

• Consumer privacy services and data backup capabilities are provided.

• Security solutions, including email and endpoint are provided.

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, or when functional intellectual property is delivered 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 March 31, 2024, the aggregate amount of transaction price that is allocated to future performance obligations was approximately $ 44.1 million and is expected to be recognized as follows:

61 % by December 31, 2024, 30 % by December 31, 2025, and 9 % thereafter.

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.

Business Acquisitions

The Company uses acquisitions as a strategy to grow its customer base by increasing its presence in new and existing markets, expanding and diversifying its service offerings, enhancing its technology, and acquiring skilled personnel.

For the three months ended March 31, 2024, the Company recorded $ 7.5 million of incremental revenue from the businesses acquired during the first quarter of 2023 and 2024.

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

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

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

Assets and Liabilities Valuation

Accounts receivable $ 7,433

Prepaid expenses and other current assets 4,915

Property and equipment 369

Operating lease right-of-use assets, noncurrent 546

Trade names 12,838

Customer relationships 20,540

Other intangibles 18,165

Goodwill 93,827

Other long-term assets 11

Accounts payable and accrued expenses ( 4,656 )

Deferred revenue ( 21,332 )

Deferred tax liability ( 10,436 )

Other long-term liabilities ( 516 )

Total $ 121,704

The fair value of the assets acquired includes accounts receivable of $ 7.4 million, of which none is expected to be uncollectible.

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

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

Unaudited Pro Forma Financial Information for All 2022 Acquisitions

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, 2022.

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

2024 Acquisition

On February 5, 2024, we completed an acquisition of 100 % of the equity interest in TDS Gift Cards, a California-based digital gifting and branded payments platform, which is reported within our Digital Media segment and is expected to expand our ability to offer innovative shopping solutions to our merchant partners and broaden our capabilities to help facilitate commerce between consumers and some of the most highly visible brands.

Total consideration for this transaction was $ 187.5 million, or $ 44.5 million, net of cash acquired.

The following table summarizes the allocation of the preliminary purchase consideration for the acquisition of TDS Gift Cards as of March 31, 2024 (in thousands):

Assets and Liabilities

Accounts receivable and other current assets

Intangible assets

Accounts payable and other current liabilities

Deferred tax liability, noncurrent

Other noncurrent liabilities

The initial accounting for the 2024 acquisition is incomplete due to the timing of available information and is subject to change.

The Company has recorded provisional amounts as of March 31, 2024.

ZIFF DAVIS, INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

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

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

(unaudited) (unaudited)

Revenues $ 342,173 $ 1,010,600

Net income (loss)

$ 18,120 $ ( 3,801 )

Income (loss) per common share - Basic

$ 0.39 $ ( 0.08 )

Income (loss) per common share - Diluted

$ 0.39 $ ( 0.08 )

Investments consist primarily of equity and debt securities.

Investments in equity securities

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

The fair value of the assets acquired includes accounts receivable of $ 170.9 million, of which none is expected to be uncollectible.

None of the goodwill recognized is expected to be deductible for income tax purposes.

The preliminary amounts assigned to intangible assets by type for the acquisition during the three months ended March 31, 2024 are summarized in the table below (in thousands):

Gross Carrying Value Weighted average estimated life

Customer relationships $ 82,762 10 years

Trade names and trademarks 1,716 2 years

Other purchased intangibles 17,276 10 years

Total gross carrying value $ 101,754

The Condensed Consolidated Statement of Operations and the Condensed Consolidated Balance Sheet as of March 31, 2024, reflect the results of operations of the 2024 acquisition since the date of the acquisition.

2023 Acquisition

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

The Condensed Consolidated Statement of Operations since the date of the acquisition, reflect the results of operations of the 2023 acquisition.

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

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

Investments consist of equity and debt securities.

Investment in equity securities

On October 7, 2021, we completed the separation of our cloud fax business (the “Separation”) into an independent publicly traded company.

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

(“Consensus”).

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

As of September 30, 2023 and December 31, 2022, the carrying value of the investment in Consensus was $ 26.0 million and $ 58.4 million respectively, and are included in ‘Short-term investments’ in the Condensed Consolidated Balance Sheets.

As of each of March 31, 2024 and December 31, 2023, the Company held approximately 1.0 million shares of the common stock of Consensus.

As of March 31, 2024 and December 31, 2023, the carrying value of the investment in Consensus was $ 16.4 million and $ 27.1 million, respectively, and is included in ‘Short-term investments’ in the Condensed Consolidated Balance Sheets.

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

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

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

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

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

2023 2022 2023 2022

Net (losses) gains during the period

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

gains (losses) on securities sold during the period

During the three months ended March 31, 2024 and 2023, the Company sold zero and 52,393 shares, respectively, of common stock of Consensus in the open market.

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

Three months ended March 31,

Net losses during the period

$ ( 10,705 ) $ ( 19,988 )

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

gains on securities sold during the period — 357

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

$ ( 10,705 ) $ ( 20,345 )

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

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

(“Xyla”) for a minority ownership stake.

1 unchanged sentence

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

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

As of each of March 31, 2024 and December 31, 2023, the carrying value of the investment in Xyla was $ 25.3 million, including transaction costs, and is included in ‘Long-term investments’ in the Condensed Consolidated Balance Sheets.

ZIFF DAVIS, INC.

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Investment in corporate debt security

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

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

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

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

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

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

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

As of September 30, 2023, both the carrying value and the maximum exposure of the Company’s investment in corporate debt securities was approximately $ 15.5 million, with a contractual maturity date that is more than one year but less than five years.

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

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

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

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

As of March 31, 2024, 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 .

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 .

Cumulative gross unrealized gains on investment in corporate debt securities as of March 31, 2024 and December 31, 2023 were approximately $ 0.6 million and $ 0.7 million, respectively.

There were no investments in an unrealized loss position as of March 31, 2024 and December 31, 2023.

During the three months ended March 31, 2024 and 2023, the Company did not recognize any other-than-temporary impairment losses on its debt securities.

Equity method investment

On September 25, 2017, the Company entered into a commitment to invest in an investment fund (the “OCV Fund”).

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

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

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.

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

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

On September 25, 2017, the Company entered into a commitment to invest in OCV Fund I, LP (the “OCV Fund”).

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

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

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

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

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

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

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

As of September 30, 2023, both of the carrying value and the maximum exposure of the Company’s equity method investment was $ 99.4 million.

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

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

During the three months ended March 31, 2024 and 2023, the Company recognized a loss from equity method investment, net of income taxes of $ 0.6 million and $ 9.2 million, net of tax expense (benefit), respectively.

The losses in the periods presented were primarily the result of losses in the underlying investments.

As of March 31, 2024, both the carrying value and the maximum exposure of the Company’s equity method investment was approximately $ 99.0 million.

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.

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

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 any future capital 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 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

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

Fair Value Measurements

6 unchanged sentences

§ Level 3 – Unobservable inputs which are supported by little or no market activity.

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

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.

2 unchanged sentences

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

The Company’s investment in Consensus’ common stock for which the Company elected the fair value option, and the fair value of the Company’s investment in Consensus and subsequent fair value changes, are included in our assets and changes in fair value are recognized in earnings.

As the initial carrying value of the investment in Consensus was negative immediately following the Separation, the Company elected the fair value option under ASC 825-10-25 to support the initial recognition of the investment in Consensus at fair value and the negative book value was recorded as a gain at the date of Separation.

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

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

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

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

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

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

As of March 31, 2024 and December 31, 2023, our investment in Consensus common stock was remeasured at fair value based on Consensus’ closing stock price and had a balance of $ 16.4 million and $ 27.1 million, respectively, in the Condensed Consolidated Balance Sheets.

For the three months ended March 31, 2024 and 2023, the unrealized losses of $ 10.7 million and $ 20.3 million, respectively, were recorded in the Condensed Consolidated Statement of Operations.

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

The Company’s investment in certificates of deposit are classified within Level 2.

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

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 estimates and assumptions, including Level 3 inputs.

As of March 31, 2024 and December 31, 2023, 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 March 31, 2024 and as of December 31, 2023.

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

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

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

As of each of March 31, 2024 and December 31, 2023, 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):

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

March 31, 2024 Level 1 Level 2 Level 3 Fair Value Carrying Value

Cash equivalents:

Money market and other funds $ 272,847 $ — $ — $ 272,847 $ 272,847

Short-term investments:

Certificates of deposit

— 2,304 — 2,304 2,304

Short-term investments:

Consensus common stock 16,404 — — 16,404 16,404

4 unchanged sentences

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

ZIFF DAVIS, INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

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

9 unchanged sentences

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

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

For the three months ended March 31, 2024 and 2023, there were no transfers that occurred between levels.

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

Nine months ended September 30,

Three months ended March 31,

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

Balance as of January 1 $ 2,834 $ 15,699 $ 555 $ 15,586

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

Fair value adjustments (1)

— ( 82 ) — 433

Payments — — ( 2,919 ) —

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

(1) The fair value adjustments to the contingent consideration arrangements in the table above were recorded within ‘General and administrative’ on the Condensed Consolidated Statements of Operations during the three and nine months ended September 30, 2023 and 2022.

The fair value adjustments to the corporate debt securities in the table above were recorded within ‘Change in fair value on available-for-sale investments, net’ on the Condensed Consolidated Statements of Comprehensive (Loss) Income during the three and nine months ended September 30, 2023 and 2022.

Balance as of March 31 $ 2,834 $ 15,617 $ 555 $ 16,019

(1) The fair value adjustments to the corporate debt securities in the table above were recorded in ‘Change in fair value on available-for-sale investments, net’ in the Condensed Consolidated Statements of Comprehensive Income (Loss) during the three months ended March 31, 2024 and 2023.

Nonrecurring Fair Value Measurements

2 unchanged sentences

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

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

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

Other Fair Value Disclosures

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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.

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

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

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

Carrying Value Fair Value Carrying Value Fair Value

3 unchanged sentences

$ 544,986 $ 519,233 $ 544,516 $ 519,492

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Goodwill and Intangible Assets

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

The changes in carrying amounts of goodwill for the three months ended March 31, 2024 are as follows (in thousands):

Digital Media Cybersecurity and Martech Consolidated

Balance as of January 1, 2024

Goodwill acquired (Note 3 )

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

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

Purchase accounting adjustments (1)

Goodwill acquired (1)

85,900 — 85,900

Goodwill removed due to sale of businesses (2)

( 3,983 ) — ( 3,983 )

Foreign exchange translation ( 1,188 ) ( 2,166 ) ( 3,354 )

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

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

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

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

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

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

Balance as of March 31, 2024 $ 1,097,609 $ 527,019 $ 1,624,628

(1) Goodwill recognized in connection with the acquisition during the three months ended March 31, 2024 (see Note 3 — Business Acquisitions ).

(2) During the three months ended March 31, 2024, in a cash transaction, the Company sold an international asset at Digital Media within its shopping vertical, which resulted in $ 4.0 million of goodwill being removed in connection with this sale.

Goodwill as of each of March 31, 2024 and December 31, 2023 reflects accumulated impairment losses of $ 84.2 million in the Digital Media reportable segment.

Following an impairment in 2023 to a reporting unit within the Digital Media reportable segment, there was no excess of reporting unit fair value over the carrying amount.

As such, since this last impairment test, any further decrease in estimated fair value would result in an additional impairment charge to goodwill.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

As of March 31, 2024, this reporting unit had goodwill of approximately $ 79.2 million.

Intangible Assets Subject to Amortization

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

Weighted-Average

Period Historical

As of March 31, 2024, intangible assets subject to amortization relate primarily to the following (in thousands):

Cost Accumulated

Amortization Net

Trade names 10 years $ 265,406 $ 142,201 $ 123,205

Trade names and trademarks $ 349,490 $ 199,293 $ 150,197

Customer relationships

8 years 690,942 533,565 157,377

Other purchased intangibles 9 years 476,529 389,168 87,361

774,154 569,148 205,006

Other purchased intangibles 396,962 351,603 45,359

Total $ 1,520,606 $ 1,120,044 $ 400,562

(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.

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 years $ 261,614 $ 125,422 $ 136,192

Trade names and trademarks $ 347,895 $ 192,111 $ 155,784

Customer relationships

8 years 687,798 479,741 208,057

Other purchased intangibles 8 years 481,973 363,407 118,566

692,634 555,384 137,250

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

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

(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.

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

ZIFF DAVIS, INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Amortization expense, included in ‘General, administrative, and other related costs’ in our Condensed Consolidated Statements of Operations, was approximately $ 26.3 million and $ 33.3 million for the three months ended March 31, 2024 and 2023, respectively.

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

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

4.625 % Senior Notes

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Deferred issuance costs (1)

( 5,768 ) ( 6,263 )

Total long-term debt $ 1,001,884 $ 1,001,312

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

(1) Includes $ 5.0 million and $ 5.5 million of carrying amount of deferred issuance costs on the 1.75 % Convertible Notes as of March 31, 2024 and December 31, 2023, respectively, and $ 0.8 million and $ 0.8 million of carrying amount of deferred issuance costs on the 4.625 % Senior Notes as of March 31, 2024 and December 31, 2023, respectively.

As of March 31, 2024, $ 550.0 million of principal will mature in 2026 and $ 460.0 million of principal will mature in 2030.

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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The Company may redeem some or all of the 4.625 % Senior Notes at any time on or after October 15, 2025 at specified redemption prices plus accrued and unpaid interest, if any, up to, but excluding the redemption date.

Before October 15, 2023, and following certain equity offerings, the Company also may redeem up to 40 % of the 4.625 % Senior Notes at a price equal to 104.625 % of the principal amount, plus accrued and unpaid interest, if any, up to, but excluding the redemption date.

The Company may make such redemption only if, after such redemption, at least 50 % of the aggregate principal amount of the 4.625 % Senior Notes remains outstanding.

In addition, at any time prior to October 15, 2025, the Company may redeem some or all of the 4.625 % Senior Notes at a price equal to 100 % of the principal amount, plus accrued and unpaid interest, if any, to the redemption date, plus an applicable “make-whole” premium.

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Restricted payments are applicable only if the Company and subsidiaries designated as restricted subsidiaries have a net leverage ratio of greater than 3.5 to 1.0.

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

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

In addition, if such net leverage ratio is in excess of 3.5 to 1.0, the restriction on restricted payments is subject to various

ZIFF DAVIS, INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

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

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

Principal repurchased $ 105,135 $ 181,238

Aggregate purchase price $ 94,051 $ 167,661

Gain on repurchase (1)

$ 10,211 $ 12,060

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

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

exceptions, including the total aggregate amount not exceeding the greater of (A) $ 250 million and (B) 50.0 % of EBITDA for the most recently ended four fiscal quarter period ended immediately prior to such date for which internal financial statements are available.

The Company is in compliance with its debt covenants for the 4.625 % Senior Notes as of March 31, 2024.

Cumulatively as of March 31, 2024, the Company has repurchased approximately $ 290 million in aggregate principal of its 4.625 % Senior Notes.

There were no repurchases of 4.625 % Senior Notes during the three months ended March 31, 2024 and March 31, 2023.

1.75 % Convertible Notes

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

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

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

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

The Company paid its remaining obligation of approximately $ 0.7 million as of November 1, 2023.

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

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

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

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

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

As of September 30, 2023, the conversion rate is 9.3783 shares of the Company’s common stock for each $1,000 principal amount of 1.75 % Convertible Notes (or 5,158,071 shares), which represents a conversion price of approximately $ 106.63 per share of the Company’s common stock.

As of March 31, 2024 and December 31, 2023, the market trigger conditions did not meet the conversion requirements of the 1.75 % Convertible Notes and, accordingly, the 1.75 % Convertible Notes are classified as long-term debt on our Condensed Consolidated Balance Sheets.

As of March 31, 2024, the conversion rate is 9.3783 shares of the Company’s common stock for each $1,000 principal amount of 1.75 % Convertible Notes (or 5,158,071 shares), which represents a conversion price of approximately $ 106.63 per share of the Company’s common stock.

The conversion rate is subject to adjustment for certain events as set forth in the indenture governing the 1.75 % Convertible Notes, but will not be adjusted for accrued interest.

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

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

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

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

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

September 30, 2023 December 31, 2022

Principal amount of 1.75 % Convertible Notes

$ 550,000 $ 550,000

Carrying amount of debt issuance costs ( 5,952 ) ( 7,347 )

Net carrying amount of 1.75 % Convertible Notes

$ 544,048 $ 542,653

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

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

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

2023 2022 2023 2022

Three months ended March 31,

Contractual interest expense $ 2,406 $ 2,406

Amortization of debt issuance costs 466 456 1,395 1,400

Amortization of deferred issuance costs

Total interest expense related to 1.75 % Convertible Notes

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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.

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 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.

In connection with the issuance of the 1.75 % Convertible Notes, the Company incurred $ 12.9 million in 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 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 was netted with the equity component in additional paid-in capital at the issuance date.

Upon adoption of ASU 2020-06 using the modified retrospective approach, 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.

Credit Agreement

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

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

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.

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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.

The Credit Agreement is secured by an associated collateral agreement that provides for a lien on the majority of the Company’s assets and the assets of the guarantors, in each case, subject to customary exceptions.

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

As of March 31, 2024, there were no amounts outstanding under the Credit Agreement.

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 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 March 31, 2024.

ZIFF DAVIS, INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

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 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 September 30, 2023.

Debt-for-Equity Exchange

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

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

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

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

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

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

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

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

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

Dollar "Reference Rate" and (z) one month LIBOR plus 1.0 %, provided that the base rate for any term loan made under the Credit Agreement shall be greater of clause (x) and (y) above in each case.

During the three and nine months ended September 30, 2022, the Company borrowed approximately $ 22.3 million and $ 112.3 million, respectively, under the Facilities and completed the non-cash debt-for-equity exchange of 500,000 shares and 2,800,000 shares, respectively, of its common stock of Consensus to settle its obligation of $ 22.3 million and $ 112.3 million, respectively, outstanding aggregate principal amount of the Term Loan Facility plus an immaterial amount of interest.

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

Commitments and Contingencies

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.

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

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

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

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

2020-0819-VCL) asserting derivative claims for breach of fiduciary duty and related theories against directors of the Company and other third parties relating generally to the investment by the Company in OCV Fund I, L.P.

(the “Chancery Court Derivative Action”).

On November 17, 2020, the court entered an order allowing Orlando Police Pension Fund to intervene as a plaintiff in the case.

The parties reached an agreement to settle the lawsuit, which required court approval.

On July 29, 2021, the parties filed a stipulation of settlement that provided the terms of the settlement and began the settlement approval process with the Court.

On January 20, 2022 the court approved the settlement.

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.

The lead plaintiff appealed the dismissal.

On April 19, 2024, the Ninth Circuit Court of Appeals affirmed the dismissal.

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 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.

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.

7 unchanged sentences

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

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

The Company established reserves for these matters of $ 28.1 million as of each of March 31, 2024 and December 31, 2023, respectively, which are included in ‘Accounts payable’ and ‘Other long-term liabilities’ on the Condensed Consolidated Balance Sheet.

It is reasonably possible that additional liabilities could be incurred resulting in additional expense, which could have a material impact to our financial results.

The Company’s tax provision for interim periods is determined using an estimate of the Company’s annual effective tax rate adjusted for discrete interim period tax impacts.

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

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

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

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

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

The increase to

ZIFF DAVIS, INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

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

As of September 30, 2023 and December 31, 2022, the Company had $ 41.4 million and $ 40.4 million, respectively, in liabilities for uncertain income tax positions included within ‘Other long-term liabilities’ on the Condensed Consolidated Balance Sheets.

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

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

The Company’s prepaid taxes were $ 0.2 million and $ 3.2 million as of September 30, 2023 and December 31, 2022, respectively.

The Company’s tax provision for interim periods is determined using an estimate of the Company’s annual effective tax rate adjusted for discrete interim period tax impacts.

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

The Company’s effective tax rate was 42.2 % and ( 65.6 )% for the three months ended March 31, 2024 and 2023, respectively.

The Company’s effective tax rate for the three months ended March 31, 2024 was impacted disproportionately by the recognition of a valuation allowance against a portion of its U.S.

capital loss carryforwards, which resulted in a discrete tax charge of $ 3.2 million.

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

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

As of March 31, 2024 and December 31, 2023, the Company had $ 36.6 million and $ 36.1 million, respectively, in liabilities for uncertain income tax positions included in ‘Other long-term liabilities’ on the Condensed Consolidated Balance Sheets.

Accrued interest and penalties related to unrecognized tax benefits are recognized in income tax expense in our Condensed Consolidated Statement of Operations.

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

As of March 31, 2024 and December 31, 2023, the Company’s prepaid taxes were $ 3.4 million and $ 4.7 million, respectively.

Stockholders’ Equity

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

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 to execute repurchases under the 2020 Program.

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

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

Cumulatively as of September 30, 2023, 5,258,692 shares were repurchased under the 2020 Program, at an aggregate cost of $ 401.8 million (including excise tax).

As a result of the repurchases, the number of shares of the Company’s common stock available for purchase as of September 30, 2023 was 4,741,308 shares.

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

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

On August 16, 2022, the U.S.

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

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

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

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

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

During the three months ended March 31, 2024 and 2023, no shares were repurchased under the 2020 Program.

Cumulatively as of March 31, 2024, 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 March 31, 2024 was 4,741,308 shares.

During the three months ended March 31, 2024 and 2023, the Company purchased and retired 58,237 and 36,652 shares at an aggregate cost of approximately $ 3.9 million and $ 2.9 million, resp ectively, from plan participants for this purpose.

Share-Based Compensation

4 unchanged sentences

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

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

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

As of March 31, 2024, 435,135 shares underlying options and 726,367 shares of restricted stock units were outstanding under the 2015 Plan.

At March 31, 2024, there were 126,565 additional shares underlying options, shares of restricted stock and other share-based awards available for grant under the 2015 Plan.

ZIFF DAVIS, INC.

3 unchanged sentences

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

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

2023 2022 2023 2022

Cost of revenues $ 76 $ 63 $ 246 $ 289

Three months ended March 31,

Direct costs $ 61 $ 76

Sales and marketing 758 924

Research, development, and engineering 1,090 783

General and administrative 5,535 4,984 19,281 16,022

General, administrative, and other related costs 6,963 6,619

Total share-based compensation expense $ 8,872 $ 8,402

Restricted Stock

Restricted Stock and Restricted Stock Units

The Company has awarded restricted stock and restricted stock units to its Board of Directors and senior staff pursuant to certain share-based compensation plans.

Compensation expense resulting from restricted stock and restricted unit grants is measured at fair value on the date of grant and is recognized as share-based compensation expense over the applicable vesting period.

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 296,705 and 152,982 shares of restricted stock and restricted units (excluding awards with market conditions below) during the nine months ended September 30, 2023 and 2022, respectively.

The Company has awarded certain key employees market-based restricted stock and market-based restricted stock units pursuant to the 2015 Plan.

The market-based awards have vesting conditions that are based on specified stock price targets of the Company’s common stock.

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

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

The Company granted 347,275 and 271,614 shares of restricted stock units (excluding awards with market conditions below) (“RSUs”) during the three months ended March 31, 2024 and 2023, respectively.

The Company has awarded certain key employees market-based restricted stock (“PSAs”) and market-based restricted stock units (“PSUs”) pursuant to the 2015 Plan.

Market-based awards granted prior to 2024 have vesting conditions that are based on specified stock price targets of the Company’s common stock.

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

During the three months ended March 31, 2024, the Company awarded 308,970 equity classified PSUs that vest in shares of the Company’s stock ranging from 0 % to 200 % of the award based on the Company’s attainment of a relative Total Shareholder Return (“TSR”) target compared to the TSR of all listed companies in a market index over the respective one, two, and three-year performance periods.

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 and all listed companies in a market index achieving the relative TSR targets.

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

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

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

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

September 30, 2023 September 30, 2022

The per share weighted average grant-date fair value for the PSUs granted during the three months ended March 31, 2024 and 2023 were $ 87.17 and $ 70.07 , respectively.

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

The assumptions used in determining the weighted-average fair values of PSUs granted are as follows:

Three months ended March 31,

Underlying stock price at valuation date $ 66.88 $ 77.80

1 unchanged sentence

Risk-free interest rate 4.3 % 4.1 %

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

Shares Weighted-Average

Restricted stock award activity for the three months ended March 31, 2024 is set forth below:

Weighted Average

Nonvested at January 1, 2024 95,718 $ 70.17 163,181 $ 36.27

Vested ( 36,330 ) 70.92 — —

Canceled ( 322 ) $ 77.75

Nonvested at September 30, 2023

( 154 ) 77.75 — —

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

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

Nonvested at March 31, 2024

59,234 $ 69.69 163,181 $ 36.27

Restricted stock unit activity for the three months ended March 31, 2024 is set forth below:

Weighted Average Grant Date Fair Value

Number of Shares (1)

Weighted Average Grant Date Fair Value

Outstanding at January 1, 2024 506,425 $ 88.36 270,772 $ 77.09

1 unchanged sentence

Vested ( 114,635 ) 86.29 — —

Canceled ( 36,858 )

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

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

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

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

Employee Stock Purchase Plan

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

September 30, 2023 September 30, 2022

Risk-free interest rate

Expected term (in years)

Expected volatility

( 12,698 ) 82.28 ( 6,015 ) 75.96

Outstanding at March 31, 2024 726,367 $ 78.49 573,727 $ 82.53

(1) Represents the number of shares at 100% achievement.

As of March 31, 2024, the Company had unrecognized share-based compensation cost of approximately $ 84.1 million associated with these restricted stock awards and restricted stock units.

This cost is expected to be recognized over a weighted-average period of 1.8 years for RSAs and PSAs and 2.6 years for RSUs and PSUs.

ZIFF DAVIS, INC.

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

Three months ended September 30,

Basic Diluted Basic Diluted

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

Net (loss) income

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

Net income available to participating securities (1)

— — ( 4 ) ( 4 )

1.75 % Convertible Notes interest expense (after-tax)

Net (loss) income available to the Company’s common shareholders $ ( 30,971 ) $ ( 30,971 ) $ 18,181 $ 18,181

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

Diluted effect of:

Equity incentive plans

Convertible debt — — — —

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

Net (loss) income per share

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

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

Nine months ended September 30,

Basic Diluted Basic Diluted

Numerator for basic and diluted net loss per common share:

Three months ended March 31,

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

Net income (loss)

$ 10,627 $ ( 7,627 )

Net income available to participating securities (1)

1.75 % Convertible Notes interest expense (after-tax)

Net loss available to the Company’s common shareholders

Net income (loss) available to the Company’s common shareholders

$ 10,627 $ ( 7,627 )

4 unchanged sentences

Diluted weighted-average outstanding shares of common stock 45,955,365 46,987,249

Net loss per share

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

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

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

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

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

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

Net income (loss) per share:

Basic $ 0.23 $ ( 0.16 )

Diluted $ 0.23 $ ( 0.16 )

For the three months ended March 31, 2024 and 2023, there were 846,160 and 1,830,097 shares, respectively, of stock options and restricted stock excluded from the calculation of diluted shares as they were anti-dilutive primarily due to the average stock price during the 2024 period and the net loss during the 2023 period.

During each of the three months ended March 31, 2024 and 2023, 5,158,071 , shares related to convertible debt were excluded from diluted shares because they were anti-dilutive under the if-converted method for the diluted net income per share calculation of the convertible debt instrument.

Segment Information

2 unchanged sentences

Digital Media and Cybersecurity and Martech.

The accounting policies of the businesses are the same as those described in the Company’s Annual Report on Form 10-K filed with the SEC on March 1, 2023.

The accounting policies of the businesses are the same as those described in the Company’s Annual Report on Form 10-K filed with the SEC on February 26, 2024.

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

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

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

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

2023 2022 2023 2022

Three months ended March 31,

Revenue by reportable segment:

2 unchanged sentences

Elimination of inter-segment revenues (1)

( 19 ) ( 85 )

Total segment revenues 314,485 307,142

Total revenues $ 314,485 $ 307,142

7 unchanged sentences

Total operating costs and expenses 278,624 280,827

Operating (loss) income by reportable segment:

Digital Media operating (loss) income

Operating income by reportable segment:

Digital Media operating income

31,605 28,469

Cybersecurity and Martech operating income 19,409 11,603

Total segment operating (loss) income

Total segment operating income

51,014 40,072

1 unchanged sentence

( 15,153 ) ( 13,757 )

(Loss) income from operations

Income from operations

$ 35,861 $ 26,315

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

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

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

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

(1) Inter-segment revenues relate to the Digital Media reportable segment.

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

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

Supplemental Cash Flow Information

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

Nine months ended September 30,

Non-cash investing activity:

Property and equipment, accrued but unpaid $ 373 $ 184

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

Purchase of equity investments with common stock

Disposition of Consensus common stock (1)

$ — $ 112,286

Non-cash financing activity:

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

$ — $ 112,286

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

Supplemental data (in thousands):

Nine months ended September 30,

Three months ended March 31,

Interest paid $ — $ —

Income taxes paid, net of refunds $ 6,511 $ 5,329

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Accumulated Other Comprehensive (Loss) Income

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

Unrealized Gains (Losses) on Investments Foreign Currency Translation Total

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

Other comprehensive income (loss), net of tax

309 ( 6,841 ) ( 6,532 )

Balance as of September 30, 2023

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

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

The following table summarizes the changes in accumulated balances of other comprehensive loss (income), net of tax, for the three months ended March 31, 2024 (in thousands):

Unrealized Gains (Losses) on Investments Foreign Currency Translation Total

Balance as of January 1, 2024

$ 537 $ ( 72,157 ) $ ( 71,620 )

Other comprehensive loss, net of tax

( 63 ) ( 6,530 ) ( 6,593 )

Balance as of September 30, 2023

Balance as of March 31, 2024

$ 474 $ ( 78,687 ) $ ( 78,213 )

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

ZIFF DAVIS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued

Related Party Transactions

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

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

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

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

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.

In connection with the Separation, Ziff Davis and Consensus entered into several agreements that govern the relationship of the parties following the Separation, including a separation and distribution agreement, a transition services agreement, a tax matters agreement, an employee matters agreement, an intellectual property license agreement, and a stockholder and registration rights agreement.

The transition services agreement governs services including certain information technology services, finance and accounting services, and human resource and employee benefit services.

The agreed-upon charges for such services are generally intended to allow the providing company to recover all costs and expenses of providing such services, and nearly all such services were terminated without extension twelve months after the Separation.

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

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

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

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

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

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

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

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

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

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

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

There were no reclassifications out of accumulated other comprehensive loss for the three months ended March 31, 2024 and 2023, respectively.

Subsequent Event

On March 22, 2024, the Company’s Board of Directors approved the Ziff Davis, Inc.

2024 Equity Incentive Plan (the “2024 Plan”), subject to stockholders’ approval, to replace the 2015 Plan, which stockholders previously approved and which was set to expire on February 10, 2025, in accordance with its terms.

On May 7, 2024, at the Company’s annual meeting of stockholders, the 2024 Plan was approved by the stockholders of the Company and will expire on March 21, 2034, unless earlier terminated by the Board of Directors.

As a result, the 2015 Plan was terminated effective May 7, 2024.

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

What changed 10-Q

Item 1. Financial Statements