ZIFF DAVIS, INC. 10-Q

Item 1. Financial Statements ZIFF DAVIS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited, in thousands except share and per share data) March 31, 2025 December 31, 2024 ASSETS Cash and cash equivalents $ 431,007 $ 505,880 Accounts receivable, net of allowances of $ 7,501 and $ 8,148 , respectively 517,863 660,223 Prepaid expenses and other current assets 123,449 105,966 Total current assets 1,072,319 1,272,069 Long-term investments 167,161 158,187 Property and equipment, net of accumulated depreciation of $ 389,984 and $ 361,710 , respectively 198,338 197,216 Intangible assets, net 416,066 425,749 Goodwill 1,598,605 1,580,258 Deferred income taxes 7,500 7,487 Other assets 55,886 63,368 TOTAL ASSETS $ 3,515,875 $ 3,704,334 LIABILITIES AND STOCKHOLDERS’ EQUITY Accounts payable and accrued expenses $ 463,518 $ 670,769 Income taxes payable, current 14,378 19,715 Deferred revenue, current 217,711 199,664 Other current liabilities 9,167 9,499 Total current liabilities 704,774 899,647 Long-term debt 864,829 864,282 Deferred revenue, noncurrent 5,645 5,504 Liability for uncertain tax positions 30,793 30,296 Deferred income taxes 44,473 46,018 Other noncurrent liabilities 43,996 47,705 TOTAL LIABILITIES 1,694,510 1,893,452 Commitments and contingencies (Note 8 ) Preferred stock, $ 0.01 par value. Authorized 1,000,000 and none issued — — Preferred stock - Series A, $ 0.01 par value. Authorized 6,000 ; total issued and outstanding zero — — Preferred stock - Series B, $ 0.01 par value. Authorized 20,000 ; total issued and outstanding zero — — Common stock, $ 0.01 par value. Authorized 95,000,000 ; total issued and outstanding 42,230,734 and 42,848,339 shares at March 31, 2025 and December 31, 2024, respectively 422 428 Additional paid-in capital 485,008 491,891 Retained earnings 1,406,715 1,401,034 Accumulated other comprehensive loss ( 70,780 ) ( 82,471 ) TOTAL STOCKHOLDERS’ EQUITY 1,821,365 1,810,882 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 3,515,875 $ 3,704,334 See Notes to Condensed Consolidated Financial Statements (Unaudited) -3- ZIFF DAVIS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited, in thousands except share and per share data) Three months ended March 31, 2025 2024 Total revenues $ 328,636 $ 314,485 Operating costs and expenses: Direct costs 47,208 45,887 Sales and marketing 127,680 117,000 Research, development, and engineering 15,876 17,774 General, administrative, and other related costs 46,910 49,510 Depreciation and amortization 55,832 48,453 Total operating costs and expenses 293,506 278,624 Income from operations 35,130 35,861 Interest expense, net ( 6,131 ) ( 1,769 ) Loss on sale of businesses — ( 3,780 ) Loss on investments, net — ( 10,705 ) Other loss, net ( 2,803 ) ( 104 ) Income before income tax expense and income (loss) from equity method investment 26,196 19,503 Income tax expense ( 8,587 ) ( 8,231 ) Income (loss) from equity method investment, net of tax 6,630 ( 645 ) Net income $ 24,239 $ 10,627 Net income per common share: Basic $ 0.57 $ 0.23 Diluted $ 0.56 $ 0.23 Weighted average shares outstanding: Basic 42,558,090 45,860,033 Diluted 44,167,069 45,955,365 See Notes to Condensed Consolidated Financial Statements (Unaudited) -4- ZIFF DAVIS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited, in thousands) Three months ended March 31, 2025 2024 Net income $ 24,239 $ 10,627 Other comprehensive income (loss), net of tax: Foreign currency translation adjustment 11,411 ( 6,530 ) Change in fair value on available-for-sale investments, net of tax expense of $ 88 and tax benefit of $ 19 for the three months ended March 31, 2025 and 2024, respectively 280 ( 63 ) Other comprehensive income (loss), net of tax 11,691 ( 6,593 ) Comprehensive income $ 35,930 $ 4,034 See Notes to Condensed Consolidated Financial Statements (Unaudited) -5- ZIFF DAVIS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited, in thousands) Three months ended March 31, 2025 2024 Cash flows from operating activities: Net income $ 24,239 $ 10,627 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 55,832 48,453 Non-cash operating lease costs 2,034 2,770 Share-based compensation 9,752 8,872 Provision for credit losses on accounts receivable 160 50 Deferred income taxes, net 548 ( 2,709 ) Loss on sale of businesses — 3,780 Changes in fair value of contingent consideration ( 1,803 ) — (Income) loss from equity method investments, net ( 6,630 ) 645 Loss on investments, net — 10,705 Other 912 1,278 Decrease (increase) in: Accounts receivable 143,721 55,365 Prepaid expenses and other current assets ( 17,709 ) ( 9,423 ) Other assets 7,252 ( 2,078 ) Increase (decrease) in: Accounts payable ( 210,857 ) ( 62,270 ) Deferred revenue 18,493 15,169 Accrued liabilities and other current liabilities ( 5,331 ) ( 5,676 ) Net cash provided by operating activities 20,613 75,558 Cash flows from investing activities: Purchases of property and equipment ( 25,619 ) ( 28,129 ) Acquisition of businesses, net of cash received ( 39,198 ) ( 44,524 ) Proceeds from sale of businesses, net of cash divested — 1,238 Other ( 12 ) ( 66 ) Net cash used in investing activities ( 64,829 ) ( 71,481 ) Cash flows from financing activities: Repurchase of common stock ( 34,900 ) ( 3,923 ) Deferred payments for acquisitions — ( 2,418 ) Other ( 106 ) 30 Net cash used in financing activities ( 35,006 ) ( 6,311 ) Effect of exchange rate changes on cash and cash equivalents 4,349 ( 599 ) Net change in cash and cash equivalents ( 74,873 ) ( 2,833 ) Cash and cash equivalents at beginning of period 505,880 737,612 Cash and cash equivalents at end of period $ 431,007 $ 734,779 See Notes to Condensed Consolidated Financial Statements (Unaudited) -6- ZIFF DAVIS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited, in thousands, except share amounts) Three months ended March 31, 2025 Common stock Additional paid-in Retained Accumulated other Total Stockholders’ Shares Amount capital earnings comprehensive loss Equity Balance, January 1, 2025 42,848,339 $ 428 $ 491,891 $ 1,401,034 $ ( 82,471 ) $ 1,810,882 Net income — — — 24,239 — 24,239 Other comprehensive income, net of tax expense of $ 88 — — — — 11,691 11,691 Issuance of restricted stock, net 132,395 1 ( 7,832 ) 3,528 — ( 4,303 ) Repurchase and retirement of common stock ( 750,000 ) ( 7 ) ( 8,693 ) ( 22,203 ) — ( 30,903 ) Share-based compensation — — 9,751 — — 9,751 Other, net — — ( 109 ) 117 — 8 Balance, March 31, 2025 42,230,734 $ 422 $ 485,008 $ 1,406,715 $ ( 70,780 ) $ 1,821,365 Three months ended March 31, 2024 Common stock Additional paid-in Retained Accumulated other Total Stockholders’ Shares Amount capital earnings comprehensive loss Equity Balance, January 1, 2024 46,078,464 $ 461 $ 472,201 $ 1,491,956 $ ( 71,620 ) $ 1,892,998 Net income — — — 10,627 — 10,627 Other comprehensive loss, inclusive of tax benefit of $ 19 — — — — ( 6,593 ) ( 6,593 ) Issuance of restricted stock, net 56,244 — ( 5,152 ) 1,229 — ( 3,923 ) Share-based compensation — — 8,872 — — 8,872 Other, net — — 5 26 — 31 Balance, March 31, 2024 46,134,708 $ 461 $ 475,926 $ 1,503,838 $ ( 78,213 ) $ 1,902,012 See Notes to Condensed Consolidated Financial Statements (Unaudited) -7- ZIFF DAVIS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. Basis of Presentation and Overview The accompanying Condensed Consolidated Financial Statements of Ziff Davis, Inc. 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. All intercompany accounts and transactions have been eliminated in consolidation. The accompanying interim Condensed Consolidated Financial Statements have been prepared in accordance with instructions for Form 10-Q and Article 10 of Regulation S-X issued by the Securities and Exchange Commission (“SEC”). The preparation of these Condensed Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the Condensed Consolidated Financial Statements, as well as the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. 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, 2024 filed with the SEC on February 25, 2025 and other filings with the SEC. The results of operations for this interim period are not necessarily indicative of the operating results that may be expected for the full year or for any future period. Description of Business Ziff Davis is a vertically focused digital media and internet company whose portfolio includes leading brands in technology, shopping, gaming and entertainment, health and wellness, connectivity, cybersecurity, and martech. Our business specializes in the technology, shopping, gaming and entertainment, healthcare, and connectivity markets, offering content, tools, and services to consumers and businesses, and provides internet-delivered cloud-based services to consumers and businesses including cybersecurity, privacy, and marketing technology. Reclassifications Certain prior year reported amounts have been reclassified to conform to the 2025 presentation. For the three months ended March 31, 2024, the Company reclassified depreciation and amortization of $ 1.2 million and $ 47.3 million from ‘Direct costs’ and ‘General, administrative, and other related costs’, respectively, to ‘Depreciation and amortization’ to conform with current period presentation. Significant Accounting Policies The significant accounting policies followed by the Company are set forth in Note 1 to the Company's consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2024. For the three months ended March 31, 2025, 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, 2024. Accounts Receivable, net Accounts receivable, net consisted of the following (in thousands): March 31, 2025 December 31, 2024 Settlement receivables, net $ 208,847 $ 296,553 Trade receivables, net 309,016 363,670 Accounts receivable, net $ 517,863 $ 660,223 Settlement receivables, net represent amounts due from third parties that are collected by the Company and passed through to our customers, net of a fee earned by the Company, related to services provided in the facilitation of gift card processing and program management. -8- ZIFF DAVIS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued Accounts Payable and Accrued Expenses Accounts payable and accrued expenses consisted of the following (in thousands): March 31, 2025 December 31, 2024 Accounts payable $ 140,909 $ 164,352 Settlement payables, net 252,706 408,747 Accrued employee related costs 27,356 55,800 Other accrued liabilities 42,547 41,870 Total Accounts payable and accrued expenses $ 463,518 $ 670,769 Settlement payables, net represent amounts owed to our customers related to services provided in the facilitation of gift card processing and program management whereby, as part of our services we collect from third-parties and pass through payment to our customers, net of a fee earned by the Company. Recent Accounting Pronouncements Recently issued applicable accounting pronouncements not yet adopted In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments in the update require public business entities on an annual basis to disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold of equal to or greater than 5% of the amount computed by multiplying pretax income by statutory income tax rate. The amendments also require that entities disclose on an annual basis information about the amount of income taxes paid disaggregated by federal, state, and foreign taxes and the amount of income taxes paid disaggregated by individual jurisdictions in which income taxes paid is equal to or greater than 5% of total income taxes paid. The amendments eliminate some of the previously required disclosures for all entities relating to estimates of the change in unrecognized tax benefits reasonably possible within twelve months. The amendments in this update are effective on a prospective basis for annual periods beginning after December 15, 2024. Early adoption is permitted. This update will result in the required additional disclosures being included in our consolidated financial statements, once adopted. In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expenses Disaggregation Disclosure (Subtopic 220-40) , which requires disaggregated disclosure of income statement expenses for public business entities. The amendments in this update do not change the expense captions an entity presents on the face of the income statement; rather, they require disaggregation of certain expense captions into specified categories, including but not limited to purchases of inventory, employee compensation, depreciation, amortization, and selling expenses. In January 2025, the FASB issued ASU 2025-01, Income Statements - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date . This update, as clarified by ASU 2025-01, is effective for annual reporting periods beginning after December 15, 2026, and for interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. This update will result in the required additional disclosures being included in our consolidated financial statements, once adopted. 2. Revenues The following describes the nature of the Company’s primary types of revenue. Advertising and Performance Marketing Advertising and performance marketing revenues are earned primarily from the delivery of advertising services and from marketing, performance marketing, and production services. Revenues from the delivery of advertising services are earned on websites and applications that are owned and operated by the Company and on those websites and applications that are part of the Company’s advertising network. Revenues are primarily earned by generating traffic to the Company’s websites, apps, and third-party platforms on which brands of the Company have a presence and monetize this traffic. The value provided to the customer is primarily derived from the provision of traffic the Company generates from its specific content within each vertical, as well as data obtained by the website or app traffic. Such revenues are generally recognized over the period in which the products or services are delivered. -9- ZIFF DAVIS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued The Company determines whether revenue should be reported on a gross or net basis by assessing whether the Company is acting as the principal or an agent in the transaction, respectively. The vast majority of the Company’s advertising and performance marketing revenue is recognized on a gross basis as the Company primarily acts as a “principal” as defined under ASC Topic 606, Revenue from Contracts with Customer (“ASC 606”). Revenues recognized on a gross basis are 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; and (ii) through the Company’s lead-generation business. 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 platforms. The Company also records revenue on a net basis with respect to the transfer of functional intellectual property through third-party gaming platforms and with respect to revenue earned from servicing client gift card programs. Subscription and Licensing Revenues from subscriptions are earned through (i) the granting of access to, or delivery of, data products or services to customers; (ii) usage-based fees, and (iii) reselling various third-party solutions, primarily through the Company’s email security line of business. Subscriptions cover video games and related content, health information, data, and other copyrighted material. Revenues are also earned from listing fees, subscriptions to online publications, and from other sources. Third-party solutions, along with the Company’s proprietary products, allow the Company to offer customers a variety of solutions to better meet the customer’s needs. 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. In instances where usage-based fees are charged, 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. Licensing revenues are earned 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. 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 the Company’s clients, revenues from the license of these assets are recognized at a point in time. Licensing revenues also include revenues from transactions involving the sale of perpetual software licenses, related software support, and maintenance. 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 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. The Company determines whether revenue should be reported on a gross or net basis by assessing whether the Company is acting as the principal or an agent in the transaction, respectively. The vast majority of the subscription and licensing revenue is recognized on a gross basis as the Company primarily acts as a “principal” as defined under ASC 606. The Company records revenue on a gross basis with respect to revenue generated from the resale of various third-party solutions, primarily through its email security line of business, because the Company has control of the specified good or service prior to transferring control to the customer. Other 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 those relating to 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. The Company determines whether revenue should be reported on a gross or net basis by assessing whether the Company is acting as the principal or an agent in the transaction, respectively. The majority of the Company’s other revenue is recognized on a gross basis as the Company primarily acts as a “principal” as defined under ASC 606. The Company records revenue on a net basis with respect to games sold on third-party platforms. -10- 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 March 31, 2025 (1) 2024 (1) Technology & Shopping Advertising and performance marketing $ 79,476 $ 65,907 Subscription and licensing 2,178 1,695 Other 36 1,665 Total Technology & Shopping revenues $ 81,690 $ 69,267 Gaming & Entertainment Advertising and performance marketing $ 24,371 $ 22,755 Subscription and licensing 13,646 13,885 Other 9 — Total Gaming & Entertainment revenues $ 38,026 $ 36,640 Health & Wellness Advertising and performance marketing $ 68,925 $ 64,447 Subscription and licensing 13,128 11,584 Other 3,733 3,947 Total Health & Wellness revenues $ 85,786 $ 79,978 Connectivity Advertising and performance marketing $ 2,468 $ 2,969 Subscription and licensing 49,662 46,303 Other 3,690 3,876 Total Connectivity revenues $ 55,820 $ 53,148 Cybersecurity & Martech Subscription and licensing $ 67,314 $ 75,452 Other — — Total Cybersecurity & Martech revenues $ 67,314 $ 75,452 Corporate $ — $ — Total Revenues $ 328,636 $ 314,485 (1) Amounts presented are net of inter-segment revenues. The Company recorded $ 84.1 million and $ 74.1 million of revenue for the three months ended March 31, 2025 and 2024, 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 an evaluation to determine if those arrangements should be accounted for as a single contract. 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 -11- ZIFF DAVIS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued transaction price. The Company’s contracts occasionally contain variable consideration, such as commissions that are recognized in the period of the commissionable event. Payment terms vary by type and location of customers and the services offered. The time between invoicing and when payment is due is generally not significant. Due to the nature of the services provided, there are no obligations for returns. Advertising and performance marketing revenues consist primarily of performance obligations that are satisfied over time, where the customer simultaneously receives and consumes the benefit of the services provided. In certain instances, the Company provides content to its advertising partners and receives a revenue share based on the terms of the agreement. Revenue is recognized based on delivery of services over the contract period for advertising. The Company believes that the methods described are a faithful depiction of the transfer of goods and services. Depending on individual contracts with customers, revenues from advertising and performance marketing revenues are recognized over time as distinct performance obligations are satisfied, including when: • Online display and video advertising in form of impressions, video views and other means is placed for viewing on the Company’s owned-and-operated properties and on third-party sites. • Commissions are earned upon the sale of an advertised product. • Qualified sales leads are delivered. • Visitor “clicks through” an advertisement. Subscription and licensing revenues are earned from (i) subscription services with performance obligations that are satisfied over time; and (ii) licensing arrangements that have standalone functionality with performance obligations satisfied at a point in time, where the customer simultaneously receives and consumes the benefit of the services provided regardless of whether the customer uses the services. The Company believes that the methods described are a faithful depiction of the transfer of goods and services. Depending on the individual contracts with the customer, revenues for subscription and licensing services are recognized over the contract period as distinct performance obligations are satisfied, including when: • 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. • Access is granted to data products and services. • Continuing access to the content on our websites and apps is provided. The Company has concluded the best measure of progress toward the complete satisfaction of the performance obligation delivered over the time 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. Other revenues consist primarily of performance obligations that are satisfied at a point in time at which control for goods and services is transferred to a customer. The Company believes that the methods described are a faithful depiction of the transfer of goods and services. Transaction Price Allocation to Future Performance Obligations As of March 31, 2025, the aggregate amount of transaction price that is allocated to future performance obligations was approximately $ 84.7 million and is expected to be recognized as follows: 51 % by December 31, 2025, 34 % by December 31, 2026, and 15 % thereafter. The amount disclosed does not include revenues related to performance obligations that are part of contracts with original expected durations of twelve months or less or portions of the contracts that remain subject to cancellations. Further, the disclosure does not include contracts for which the transaction price is a variable consideration that corresponds directly with the Company’s performance. 3. 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. -12- ZIFF DAVIS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued 2025 Acquisitions The Company completed two immaterial acquisitions during the three months ended March 31, 2025, paying the purchase price in cash in each transaction. Total consideration for all businesses acquired in 2025 was $ 41.3 million, or $ 40.0 million, net of cash acquired. Goodwill recognized associated with these acquisitions during the three months ended March 31, 2025 was $ 12.7 million, of which is $ 11.7 million is expected to be deductible for income tax purposes. Approximately $ 19.1 million of definite-lived intangibles were recorded in connection with the acquisition during the three months ended March 31, 2025, including $ 9.3 million of Customer relationships, net, $ 5.1 million of Trade names and trademarks, net, and $ 4.7 million of Other purchased intangibles, net. The initial accounting for 2025 acquisitions is incomplete due to the timing of available information and is subject to change. As of March 31, 2025, the Company has recorded provisional amounts for certain intangible assets (including customer relationships, trade names, and other purchased intangibles), preliminary acquisition date working capital, and related tax items. The Condensed Consolidated Statement of Operations reflects the results of operations of the 2025 acquisitions since the date of each respective acquisition. Net income contributed by these acquisitions was not separately identifiable due to the Company’s integration activities and is impracticable to provide. 2024 Acquisitions The Company completed the following acquisitions during the year ended December 31, 2024, paying a purchase price in cash in each transaction: (a) a purchase of 100 % of the equity interest in TDS Gift Cards (“TDS”), acquired on February 5, 2024, a digital gifting and branded payments platform, which is reported within our Technology & Shopping segment; (b) a purchase of 100 % of the equity interest in CNET Media, Inc. and certain related entities (“CNET”), acquired on September 12, 2024, a digital medial publication platform, which is reported within our Technology & Shopping segment; and two other immaterial acquisitions. The acquisition of TDS expanded 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 market’s most highly visible brands. The acquisition of CNET has allowed us to reach a wider audience that is attractive to advertisers in the technology space. Total consideration for all business acquired in 2024 was $ 364.9 million, or $ 218.9 million, net of cash acquired. -13- ZIFF DAVIS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued The following table summarizes the fair value amounts recognized for the assets acquired and liabilities assumed for our 2024 acquisitions (in thousands): Valuation TDS CNET (2) Assets and Liabilities Cash $ 142,957 $ — Accounts receivable and other current assets (1) 171,290 16,904 Intangible assets 108,340 100,500 Goodwill (1) 81,248 36,363 Deferred tax asset, noncurrent — 11,412 Other assets 203 655 Accounts payable and other current liabilities ( 290,161 ) ( 11,586 ) Deferred tax liability, noncurrent ( 25,442 ) — Other noncurrent liabilities ( 847 ) — Total $ 187,588 $ 154,248 (1) The fair value of the assets acquired includes accounts receivable of $ 170.7 million (including Settlement receivables, net of $ 166.8 million) related to TDS and $ 16.2 million related to CNET. (2) During the three months ended March 31, 2025, we recorded a measurement period adjustment of $( 1.2 ) million to Customer relationships, $ 0.7 million to Other purchased intangibles assets, $ 0.6 million to Accounts receivable and other current assets, $ 0.2 million to Accounts payable and other current liabilities, with corresponding adjustments to Goodwill. The accompanying Condensed Consolidated Statements of Operations reflects the results of operations of the 2024 acquisitions since the date of each respective acquisition. 4. Investments 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”). During the second quarter of 2024, the Company sold its remaining 1,034,295 shares of Consensus in the open market. As of December 31, 2024, the Company did not hold any shares of the common stock of Consensus. The Company accounted for its investment in Consensus at fair value under the fair value option, and the related fair value gains and losses were recognized in earnings. For the three months ended March 31, 2024, losses of $ 10.7 million were recorded in the Condensed Consolidated Statement of Operations. 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. This minority investment was made in the form of cash and shares of the Company’s common stock. The Company accounts for its investment in Xyla as an equity investment without a readily determinable fair value measured under the measurement alternative in accordance with ASC Topic 321, Investments — Equity Securities . As of March 31, 2025 and December 31, 2024, the investment in Xyla had a carrying value of $ 25.3 million, including transaction costs, and is included in ‘Long-term investments’ in the Condensed Consolidated Balance Sheets. -14- ZIFF DAVIS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued Investment in corporate debt security On April 12, 2022, the Company entered into an agreement with an entity to acquire 4 % convertible notes with an aggregate value of $ 15.0 million. On May 19, 2023, the Company entered into the Note Amendment Agreement (the “Amendment”) with respect to the same entity. The Amendment increased the interest rate on the convertible notes to 6 %, extended the maturity date, and subordinated all existing and future obligations, liabilities, and indebtedness of the entity to the entity’s senior creditor, as defined in the Amendment. This investment is included in ‘Long-term investments’ in the 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 March 31, 2025, both the carrying value and the maximum exposure of the Company’s investment in corporate debt securities was approximately $ 18.1 million, with a contractual maturity date that was more than one year but less than five years . As of December 31, 2024, both the carrying value and the maximum exposure of the Company’s investment in corporate debt securities was approximately $ 17.8 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, 2025 and December 31, 2024 were approximately $ 3.2 million and $ 2.8 million, respectively. There were no investments in an unrealized loss position as of March 31, 2025 and December 31, 2024. During the three months ended March 31, 2025 and 2024, 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 the OCV Fund I, LP (the “OCV Fund”). The Company recognizes its equity in the net earnings or losses relating to the investment in OCV Fund on a one-quarter lag due to the timing and availability of financial information from 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 March 31, 2025 and 2024, the Company recognized income (loss) from the equity method investment of $ 6.6 million and $( 0.6 ) million, net of tax expense (benefit), respectively. The income (loss) in the periods presented were primarily the result of gains and losses in the underlying investments. As of March 31, 2025, both the carrying value and the maximum exposure of the Company’s equity method investment was approximately $ 123.6 million. As of December 31, 2024, both the carrying value and the maximum exposure of the Company’s equity method investment was approximately $ 115.0 million. These equity securities are included within ‘Long-term investments’ in the 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 further capital. Finally, there are no call or put options, or other types of arrangements, which limit the Company’s ability to participate in losses and returns of the OCV Fund. 5. Fair Value Measurements The Company complies with the provisions of ASC 820, which defines fair value, provides a framework for measuring fair value and expands the disclosures required for fair value measurements of financial and non-financial assets and liabilities. ASC 820 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or a liability. As a basis for considering such assumptions, ASC 820 establishes a three-tier value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value. § Level 1 – Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. § Level 2 – Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. § Level 3 – Unobservable inputs which are supported by little or no market activity. -15- 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. Recurring Fair Value Measurements The Company’s money market funds are classified within Level 1. The Company values these Level 1 investments using quoted market prices. The fair value of the Company’s investment in Consensus common stock was determined using quoted market prices, which is Level 1 input. During the second quarter of 2024, the Company sold its remaining investments in Consensus common stock (see Note 4 - Investments ). The Company has an investment in a corporate debt security that does not have a readily determinable fair value because the acquired security is 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, 2025 and December 31, 2024, the fair value was determined based upon various probability-weighted scenarios which included discount rate assumptions between 9 % and 10 %, depending on the probability scenario. In addition, the determination of fair value included a conversion timeframe of approximately six months to two years , depending on the probability scenario, as of March 31, 2025 and as of December 31, 2024. 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 any of the inputs in isolation could result in a significantly lower or higher fair value measurement. As of March 31, 2025 and December 31, 2024, 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): March 31, 2025 Level 1 Level 2 Level 3 Fair Value Carrying Value Assets: Cash equivalents: Money market and other funds $ 104,489 $ — $ — $ 104,489 $ 104,489 Long-term investments: Investment in corporate debt securities — — 18,156 18,156 18,156 Total assets measured at fair value $ 104,489 $ — $ 18,156 $ 122,645 $ 122,645 Liabilities: Contingent consideration $ — $ — $ 1,031 $ 1,031 $ 1,031 Total liabilities measured at fair value $ — $ — $ 1,031 $ 1,031 $ 1,031 -16- ZIFF DAVIS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued December 31, 2024 Level 1 Level 2 Level 3 Fair Value Carrying Value Assets: Cash equivalents: Money market and other funds $ 85,833 $ — $ — $ 85,833 $ 85,833 Long-term investments: Investment in corporate debt securities — — 17,788 17,788 17,788 Total assets measured at fair value $ 85,833 $ — $ 17,788 $ 103,621 $ 103,621 Liabilities: Contingent consideration $ — $ — $ 2,834 $ 2,834 $ 2,834 Total liabilities measured at fair value $ — $ — $ 2,834 $ 2,834 $ 2,834 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 three months ended March 31, 2025 and 2024, 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): Three months ended March 31, 2025 2024 Contingent Consideration Arrangements Corporate Debt Securities Contingent Consideration Arrangements Corporate Debt Securities Balance as of January 1 $ 2,834 $ 17,788 $ 2,834 $ 15,699 Fair value adjustments (1) ( 1,803 ) 368 — ( 82 ) Balance as of March 31 $ 1,031 $ 18,156 $ 2,834 $ 15,617 (1) The fair value adjustments to the contingent consideration arrangements in the table above were recorded within ‘General, administrative, and other related costs’ in the Condensed Consolidated Statements of Operations during the three months ended March 31, 2025. 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, 2025 and 2024. Nonrecurring Fair Value Measurements The Company’s non-financial assets, such as goodwill, intangible assets, right-of-use assets, and property, plant and equipment, are adjusted to fair value only when an impairment is recognized. The Company’s financial assets, comprised of equity securities without readily determinable fair value, are adjusted to fair value when observable price changes are identified or due to impairment. Such fair value measurements are based predominately on Level 3 inputs. Other Fair Value Disclosures The fair value of the Company’s 4.625 % Senior Notes, 3.625 % Convertible Notes, and 1.75 % Convertible Notes (as defined in Note 7 — Debt ) was determined using quoted market prices or dealer quotes for instruments with similar maturities and other terms and credit ratings, which are Level 1 inputs. If such information is not available for the 1.75 % Convertible Notes and 3.625 % 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. -17- 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 (in thousands): March 31, 2025 December 31, 2024 Carrying Value Fair Value Carrying Value Fair Value 4.625 % Senior Notes $ 457,318 $ 416,334 $ 457,211 $ 420,935 1.75 % Convertible Notes $ 148,309 $ 140,256 $ 148,186 $ 139,976 3.625 % Convertible Notes $ 259,202 $ 244,727 $ 258,885 $ 259,200 6. Goodwill and Intangible Assets Goodwill The changes in carrying amounts of goodwill for the three months ended March 31, 2025 are as follows (in thousands): Technology & Shopping Gaming & Entertainment Health & Wellness Connectivity Cybersecurity & Martech Consolidated Balance as of January 1, 2025 $ 322,057 $ 68,301 $ 403,056 $ 256,942 $ 529,902 $ 1,580,258 Goodwill acquired (Note 3) — 11,743 945 — — 12,688 Purchase accounting adjustments (1) ( 244 ) 48 — — ( 115 ) ( 311 ) Foreign exchange translation ( 6 ) 260 415 1,491 3,810 5,970 Balance as of March 31, 2025 $ 321,807 $ 80,352 $ 404,416 $ 258,433 $ 533,597 $ 1,598,605 (1) Purchase accounting adjustments relate to measurement period adjustments to goodwill in connection with prior business acquisitions (see Note 3 — Business Acquisitions ). Goodwill as of each of March 31, 2025 and December 31, 2024 reflects accumulated impairment losses of $ 169.5 million in the Technology & Shopping reportable segment. Intangible Assets Subject to Amortization As of March 31, 2025, intangible assets subject to amortization relate primarily to the following (in thousands): Historical Cost Accumulated Amortization Net Trade names and trademarks $ 380,863 $ 230,311 $ 150,552 Customer relationships 846,617 638,012 208,605 Other purchased intangibles 427,073 370,164 56,909 Total $ 1,654,553 $ 1,238,487 $ 416,066 As of December 31, 2024, intangible assets subject to amortization relate primarily to the following (in thousands): Historical Cost Accumulated Amortization Net Trade names and trademarks $ 375,449 $ 222,430 $ 153,019 Customer relationships 836,254 620,926 215,328 Other purchased intangibles 421,128 363,726 57,402 Total $ 1,632,831 $ 1,207,082 $ 425,749 -18- ZIFF DAVIS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued Amortization expense, included in ‘Depreciation and amortization’ in our Condensed Consolidated Statements of Operations, was approximately $ 28.8 million and $ 26.3 million for the three months ended March 31, 2025 and 2024, respectively. 7. Debt Long-term debt consists of the following (in thousands): March 31, 2025 December 31, 2024 4.625 % Senior Notes $ 460,038 $ 460,038 1.75 % Convertible Notes 149,109 149,109 3.625 % Convertible Notes 263,147 263,147 Total Notes 872,294 872,294 Credit Agreement — — Less: Unamortized discount ( 5,333 ) ( 5,676 ) Deferred issuance costs (1) ( 2,132 ) ( 2,336 ) Total long-term debt $ 864,829 $ 864,282 (1) Includes $ 0.7 million and $ 0.7 million of carrying amount of deferred issuance costs on the 4.625 % Senior Notes as of March 31, 2025 and December 31, 2024, respectively, $ 0.8 million and $ 0.9 million of carrying amount of deferred issuance costs on the 1.75 % Convertible Notes as of March 31, 2025 and December 31, 2024, respectively, and $ 0.7 million and $ 0.7 million of carrying amount of deferred issuance costs on the 3.625 % Convertible Notes as of March 31, 2025 and December 31, 2024, respectively. As of March 31, 2025, the $ 149.1 million of principal of the 1.75 % Convertible Notes will mature in 2026, $ 263.1 million of principal of the 3.625 % Convertible Notes will mature in 2028, and $ 460.0 million of principal of the 4.625 % Senior Notes 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, as amended. 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 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. The 4.625 % Senior Notes mature on October 15, 2030, and are senior unsecured obligations of the Company which are guaranteed, jointly and severally, on an unsecured basis by certain of the Company’s existing and future domestic direct and indirect wholly-owned subsidiaries (collectively, the “Guarantors”). If the Company or any of its restricted subsidiaries acquires or creates a domestic restricted subsidiary, other than an Insignificant Subsidiary (as defined in the indenture pursuant to which the 4.625 % Senior Notes were issued (the “Indenture”)), after the issue date, or any Insignificant Subsidiary ceases to fit within the definition of Insignificant Subsidiary, such restricted subsidiary is required to unconditionally guarantee, jointly and severally, on an unsecured basis, the Company’s obligations under the 4.625 % Senior Notes. 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. 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. The discount and deferred issuance costs are being amortized, at an effective interest rate of 4.7 %, to interest expense through the maturity date. The Indenture contains covenants that restrict the Company’s ability to (i) pay dividends or make distributions on the Company’s common stock or repurchase the Company’s capital stock; (ii) make certain restricted payments; (iii) create liens or enter into sale and leaseback transactions; (iv) enter into transactions with affiliates; (v) merge or consolidate with another company; and (vi) transfer and sell assets. These covenants contain certain exceptions. Restricted payments are applicable only -19- ZIFF DAVIS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued 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 March 31, 2025. Cumulatively as of March 31, 2025, the Company 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, 2025 and March 31, 2024. 1.75 % Convertible Notes On November 15, 2019, the Company issued $ 550.0 million aggregate principal amount of 1.75 % convertible senior notes due November 1, 2026 (the “ 1.75 % Convertible Notes”). The Company received proceeds of $ 537.1 million in cash, net of purchasers’ discounts and commissions and other debt issuance costs. A portion of the net proceeds were used to pay off all amounts outstanding under the then-existing Credit Facility. The 1.75 % Convertible Notes bear interest at a rate of 1.75 % per annum, payable semiannually in arrears on May 1 and November 1 of each year, beginning on May 1, 2020. 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. On July 16, 2024, the Company exchanged approximately $ 400.9 million in aggregate principal amount of its 1.75 % Convertible Notes as part of the Exchange Transaction, as defined below. As of March 31, 2025, the remaining principal amount of the 1.75 % Convertible Notes was $ 149.1 million. Holders may surrender their 1.75 % Convertible Notes for conversion at any time prior to the close of business on the business day immediately preceding July 1, 2026 only under the following circumstances: (i) during any calendar quarter commencing after the calendar quarter ending on March 31, 2020 (and only during such calendar quarter), if the last reported sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding the calendar quarter is greater than 130 % of the applicable conversion price of the 1.75 % Convertible Notes on each such applicable trading day; (ii) during the five business day period following any 10 consecutive trading day period in which the trading price per $1,000 principal amount of 1.75 % Convertible Notes for each trading day of the measurement period was less than 98 % of the product of the last reported sale price of the Company’s common stock and the applicable conversion rate on each such trading day; or (iii) upon the occurrence of specified corporate events. On or after July 1, 2026, and prior to the close of business on the business day immediately preceding the maturity date, holders may convert all or any portion of their notes at any time, regardless of the foregoing circumstances. The 1.75 % Convertible Notes can be settled in cash, the Company’s common stock, or a combination of cash and the Company’s common stock, at $ 0.01 par value per share, at the Company’s election. The Company will settle conversions of the 1.75 % Convertible Notes by paying or delivering, as the case may be, cash, shares of the Company’s common stock or a combination thereof at the Company’s election. 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 March 31, 2025 and December 31, 2024, 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, 2025, 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 1,398,391 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), in certain circumstances, 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. 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. The 1.75 % Convertible Notes are the Company’s general senior unsecured obligations and rank: (i) senior in right of payment to any of the Company’s indebtedness that is expressly subordinated in right of payment to the 1.75 % Convertible Notes; (ii) equal in right of payment to the Company’s existing and future indebtedness that is not so subordinated; (iii) effectively junior to any of the Company’s secured indebtedness to the extent of the value of the assets securing such -20- ZIFF DAVIS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued indebtedness; and (iv) structurally junior to all existing and future indebtedness and other liabilities incurred by the Company’s subsidiaries. The following table provides the components of interest expense related to the 1.75 % Convertible Notes (in thousands): Three months ended March 31, 2025 2024 Contractual interest expense $ 652 $ 2,406 Amortization of discount and deferred issuance costs 123 470 Total interest expense related to 1.75 % Convertible Notes $ 775 $ 2,876 3.625 % Convertible Notes On July 16, 2024, the Company issued $ 263.1 million in aggregate principal amount of new 3.625 % Convertible Notes due 2028 (the “ 3.625 % Convertible Notes”) and paid an aggregate of approximately $ 135.0 million in cash in exchange for approximately $ 400.9 million in aggregate principal amount of the Company’s 1.75 % Convertible Notes (collectively, the “Exchange Transaction”) pursuant to separate, privately negotiated exchange agreements with certain holders of the 1.75 % Convertible Notes. The Exchange Transaction was accounted for as a debt modification, and accordingly, no gain or loss was recognized. In connection with the Exchange Transaction, the Company recognized an increase in the fair value of the conversion feature of the 3.625 % Convertible Notes compared to the fair value of the conversion feature of the 1.75 % Convertible Notes of $ 4.0 million, partially offset by an increase to deferred tax liabilities of $ 1.0 million, which is included in ‘Additional paid-in capital’ on the Condensed Consolidated Balance Sheets, and a corresponding reduction to the carrying value of the 3.625 % Convertible Notes. The discount and deferred issuance costs are being amortized to interest expense through the maturity date, at an effective interest rate of 4.2 %. The 3.625 % Convertible Notes bear interest at a rate of 3.625 % per annum on the principal amount thereof, payable semi-annually in arrears on September 1 and March 1 of each year, beginning on March 1, 2025, to the noteholders of record of the 3.625 % Convertible Notes as of the close of business on the immediately preceding August 15 and February 15, respectively. The 3.625 % Convertible Notes will mature on March 1, 2028, unless earlier converted or repurchased. The 3.625 % Convertible Notes can be settled in cash, the Company’s common stock, or a combination of cash and the Company’s common stock, at $ 0.01 par value per share, at the Company’s election. Holders may surrender their 3.625 % Convertible Notes for conversion at any time prior to the close of business on the business day immediately preceding December 1, 2027 only under the following circumstances: (i) during any calendar quarter commencing after the calendar quarter ending on September 30, 2024 (and only during such calendar quarter), if the last reported sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130 % of the applicable conversion price of the 3.625 % Convertible Notes on each such applicable trading day; (ii) during the 5 business day period following any 10 consecutive trading day period in which the trading price per $1,000 principal amount of 3.625 % Convertible Notes for each trading day of the measurement period was less than 98 % of the product of the last reported sale price of the Company’s common stock and the applicable conversion rate on each such trading day; or (iii) upon the occurrence of specified corporate events. On or after December 1, 2027, and prior to the close of business on the business day immediately preceding the maturity date, holders may convert all or any portion of their notes at any time, regardless of the foregoing circumstances, at an initial conversion rate of 10 shares of the Company’s common stock per $1,000 principal amount of 3.625 % Convertible Notes. The Company will settle conversions of the 3.625 % Convertible Notes by paying or delivering, as the case may be, cash, shares of the Company’s common stock or a combination thereof at the Company’s election. 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 March 31, 2025 and December 31, 2024, the market trigger conditions did not meet the conversion requirements of the 3.625 % Convertible Notes and, accordingly, the 3.625 % Convertible Notes are classified as long-term debt on our Condensed Consolidated Balance Sheets. As of March 31, 2025, the conversion rate of the 3.625 % Convertible Notes is 10 shares per $1,000 principal amount of the 3.625 % Convertible Notes (or 2,631,470 shares), which represents an initial conversion price of $ 100 per share. The conversion rate is subject to adjustment upon the occurrence of certain specified events as set forth in the indenture governing the 3.625 % Convertible Notes, but will not be adjusted for accrued and unpaid interest. In addition, upon the occurrence of a “Make-Whole Fundamental Change”, as defined in the 3.625 % Convertible Note Indenture, the Company will in certain -21- ZIFF DAVIS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued circumstances increase the conversion rate for a holder that elects to convert its 3.625 % Convertible Notes in connection with such a corporate event. The Company may not redeem the 3.625 % Convertible Notes prior to the maturity date, and no sinking fund is provided for the 3.625 % Convertible Notes. The 3.625 % Convertible Notes are the Company’s general senior unsecured obligations and rank: (i) senior in right of payment to any of the Company’s indebtedness that is expressly subordinated in right of payment to the 3.625 % Convertible Notes; (ii) equal in right of payment to the Company’s existing and future indebtedness that is not so subordinated; (iii) effectively junior to any of the Company’s secured indebtedness to the extent of the value of the assets securing such indebtedness; and (iv) structurally junior to all existing and future indebtedness and other liabilities incurred by the Company’s subsidiaries. The following table provides the components of interest expense related to the 3.625 % Convertible Notes (in thousands): Three months ended March 31, 2025 Coupon interest expense $ 2,385 Amortization of discount and debt issuance costs 317 Total interest expense related to 3.625 % Convertible Notes $ 2,702 Credit Agreement On April 7, 2021, the Company entered into a $ 100.0 million Credit Agreement (the “Credit Agreement”). Subject to certain conditions and approvals, the Company had the right, from time to time, to 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. On June 18, 2024, the Company entered into a New Lender Joinder Agreement and Eighth Amendment (the “Joinder and Amendment”) to the Credit Agreement. The Joinder and Amendment provides for, among other things, (i) an increase in the Aggregate Revolving Loan Commitment by an aggregate principal amount of $ 250.0 million for a total of $ 350.0 million, (ii) an extension of the scheduled maturity date from April 7, 2026 to the earlier of (x) June 18, 2027 or (y) under certain limited circumstances, August 2, 2026, (iii) a “credit spread adjustment” for SOFR-based borrowings of 0.10 % across all interest periods, (iv) the inclusion of limited conditionality borrowing mechanics with respect to certain borrowings and (v) certain other related amendments. At the Company’s option, amounts borrowed under the Credit Agreement 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 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 ranges from 0.50 % to 1.25 % and the applicable margin relating to any Term SOFR loan ranges 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. 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, 2025. -22- ZIFF DAVIS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued As of each March 31, 2025 and December 31, 2024, availability under the Credit Agreement was $ 348.9 million, net of letters of credit. 8. Commitments and Contingencies Commitments 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. Litigation 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. Any claims or regulatory actions against the Company and its affiliates, whether meritorious or not, could be time consuming and costly, and could divert significant operational resources. The outcomes of such matters are subject to inherent uncertainties, carrying the potential for unfavorable rulings that could include monetary damages and injunctive relief. The Company does not believe, based on current knowledge, that any such legal proceedings or claims, after giving effect to existing accrued liabilities, are likely to have a material adverse effect on the Company’s overall consolidated financial position, results of operations, or cash flows. However, depending on the amount and timing, an unfavorable resolution of some or all of these matters could have a material effect on the Company’s consolidated financial position, results of operations, or cash flows in a particular period. Although the Company cannot predict the outcome of legal or other proceedings with certainty, where there is at least a reasonable possibility that a loss may be incurred, GAAP requires us to disclose an estimate of the reasonably possible loss or range of loss or make a statement that such an estimate cannot be made. The Company follows a thorough process in which it seeks to estimate the reasonably possible loss or range of loss, and only if it is unable to make such an estimate does it conclude and disclose that an estimate cannot be made. The Company has not accrued for any material loss contingencies relating to these legal proceedings because materially unfavorable outcomes are not considered probable by management. It is the Company’s policy to expense as incurred legal fees related to various litigations. Non-Income Related Taxes The Company does not collect and remit sales and use, telecommunication, or similar taxes and fees in certain jurisdictions where the Company believes such taxes are not applicable or legally required. Several states and other taxing jurisdictions have presented or threatened the Company with assessments, alleging that the Company is required to collect and remit such taxes there. The Company is currently under audit or is subject to audit for indirect taxes in various states, municipalities, and foreign jurisdictions. The Company 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 $ 23.5 million and $ 25.2 million as of March 31, 2025 and December 31, 2024, respectively, which are included in ‘Accounts payable and accrued expenses’ and ‘Other noncurrent liabilities’ on the Condensed Consolidated Balance Sheets. It is reasonably possible that additional liabilities could be incurred resulting in additional expense, which could have a material impact to our financial results, however, as of March 31, 2025 any potential range of loss was not estimable. 9. Income Taxes 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 32.8 % and 42.2 % for the three months ended March 31, 2025 and 2024, respectively. The Company’s effective tax rate for the three months ended March 31, 2025 was impacted by a discrete tax expense of $ 1.8 million related to the vesting of share-based compensation resulting in a tax shortfall. 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. -23- ZIFF DAVIS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued As of March 31, 2025 and December 31, 2024, the Company had $ 30.8 million and $ 30.3 million, respectively, in liabilities for uncertain income tax positions on the Condensed Consolidated Balance Sheets. Accrued interest and penalties related to unrecognized tax benefits associated with uncertain tax positions are recognized in income tax expense in our Condensed Consolidated Statements 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 $ 3.4 million and $ 6.4 million as of March 31, 2025 and December 31, 2024, respectively. 10. Stockholders’ Equity On August 6, 2020, the Company’s Board of Directors (the “Board”) 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. On August 2, 2024, the Board authorized (i) an increase in its 2020 Program pursuant to which the Company may purchase up to an additional five million shares of the Company’s common stock (the “Additional Authorization”) and (ii) an extension of the expiration date of the share repurchase program from August 6, 2025 to August 2, 2029. As a result of the Additional Authorization, the aggregate number of shares of the Company’s common stock authorized for repurchase under the 2020 Program increased to up to 15 million shares of the Company’s common stock. During the three months ended March 31, 2025 and 2024, the Company repurchased 750,000 and zero shares, respectively, under the 2020 Program at an aggregate cost of approximately $ 30.9 million and zero , respectively (including excise tax). Cumulatively as of March 31, 2025, 9,508,692 shares were repurchased under the 2020 Program, at an aggregate cost of $ 614.5 million including excise tax. As a result of the repurchases, the number of shares of the Company’s common stock available for repurchase as of March 31, 2025 was 5,491,308 shares. Periodically, participants in the Company’s stock plans surrender to the Company shares of stock to pay the exercise price or to satisfy tax withholding obligations arising upon the exercise of stock options or the vesting of restricted stock. During the three months ended March 31, 2025 and 2024, the Company purchased and retired 103,228 and 58,237 shares, respectively, at an aggregate cost of approximately $ 4.3 million and $ 3.9 million, respectively, from plan participants for this purpose. 11. Share-Based Compensation The Company’s share-based compensation plans include the Ziff Davis, Inc. 2024 Equity Incentive Plan (the “2024 Plan”), the 2015 Stock Option Plan (the “2015 Plan”), and 2001 Employee Stock Purchase Plan (the “Purchase Plan”). Each plan is described below. Collectively, the 2015 Plan and 2024 Plan are referred to herein as “Plans.” As of March 31, 2025, 435,135 shares underlying options and 2,143,996 shares of restricted stock units were outstanding under the Plans. As of March 31, 2025, there were 1,946,971 additional shares underlying options, shares of restricted stock and other share-based awards available for grant under the 2024 Plan. Share-Based Compensation Expense The following table presents the effects of share-based compensation expense in the Condensed Consolidated Statements of Operations during the periods presented (in thousands): Three months ended March 31, 2025 2024 Direct costs $ 63 $ 61 Sales and marketing 986 758 Research, development, and engineering 790 1,090 General, administrative, and other related costs 7,913 6,963 Total share-based compensation expense $ 9,752 $ 8,872 -24- ZIFF DAVIS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued Restricted Stock and Restricted Stock Units The Company has awarded restricted stock and restricted stock units to its Board and senior staff pursuant to the 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, generally three or four years for senior staff (excluding market-based awards discussed below) and three to eight years for the Chief Executive Officer. The Company granted 641,935 and 347,275 shares of restricted stock units (excluding awards with market conditions below) (“RSUs”) during the three months ended March 31, 2025 and 2024, respectively. The Company has awarded certain key employees equity classified market-based restricted stock (“PSAs”) and equity classified market-based restricted stock units (“PSUs”) pursuant to the Plans. PSAs and PSUs granted prior to 2024 have vesting conditions that are based on specific stock price targets of the Company’s common stock. PSUs granted in 2024 and 2025 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 the market index over the respective performance periods. Performance periods for the PSUs granted in 2025 are two and three years. In each of 2024 and 2025, 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. The per share weighted average grant-date fair value of PSUs granted during the three months ended March 31, 2025 and 2024 was $ 38.80 and $ 87.17 , respectively. The assumptions used in determining the weighted-average fair values of PSUs granted during the periods presented are as follows: Three months ended March 31, 2025 2024 Underlying stock price at valuation date $ 38.19 $ 66.88 Expected volatility 34.5 % 32.9 % Risk-free interest rate 3.9 % 4.3 % Restricted stock award (“RSA”) and PSA activity for the three months ended March 31, 2025 is set forth below: RSAs PSAs Number of Shares Weighted Average Grant Date Fair Value Number of Shares Weighted Average Grant Date Fair Value Nonvested at January 1, 2025 54,829 $ 68.97 163,181 $ 36.27 Granted — $ — — $ — Vested ( 27,197 ) $ 68.97 — $ — Forfeited — $ — — $ — Nonvested at March 31, 2025 27,632 $ 68.97 163,181 $ 36.27 -25- ZIFF DAVIS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued Restricted stock unit (“RSU”) and PSU activity for the three months ended March 31, 2025 is set forth below: RSUs PSUs Number of Shares Weighted Average Grant Date Fair Value Number of Shares (1) Weighted Average Grant Date Fair Value Outstanding at January 1, 2025 652,227 $ 74.59 520,986 $ 82.73 Granted 641,935 $ 38.22 598,676 $ 38.80 Vested ( 212,651 ) $ 76.11 ( 22,972 ) $ 78.73 Forfeited ( 10,112 ) $ 71.53 ( 24,093 ) $ 79.35 Outstanding at March 31, 2025 1,071,399 $ 52.53 1,072,597 $ 58.19 (1) Represents the number of shares at 100% achievement. As of March 31, 2025, the Company had unrecognized share-based compensation cost of approximately $ 88.3 million associated with these RSAs, PSAs, RSUs, and PSUs. This cost is expected to be recognized over a weighted-average period of 0.8 years for RSAs and PSAs and 2.4 years for RSUs and PSUs. 12. Earnings Per Share The components of basic and diluted earnings per share are as follows (in thousands, except share and per share data): Three months ended March 31, 2025 2024 Basic Diluted Basic Diluted Numerator for basic and diluted net loss per common share: Net income $ 24,239 $ 24,239 $ 10,627 $ 10,627 Less: Net loss available to participating securities — — — — Plus: Convertible Notes interest expense (after-tax) — 582 — — Net income available to the Company’s common shareholders $ 24,239 $ 24,821 $ 10,627 $ 10,627 Denominator: Basic weighted-average outstanding shares of common stock 42,558,090 42,558,090 45,860,033 45,860,033 Dilutive effect of: Equity incentive plans — 210,588 — 95,332 Convertible debt — 1,398,391 — — Diluted weighted-average outstanding shares of common stock 42,558,090 44,167,069 45,860,033 45,955,365 Net income per share $ 0.57 $ 0.56 $ 0.23 $ 0.23 For the three months ended March 31, 2025 and 2024, there were 390,266 and 846,160 shares, respectively, of stock options and restricted stock excluded from the calculation of diluted shares as they were anti-dilutive due to the average stock price during the 2025 and 2024 periods. For the three months ended March 31, 2025 and 2024, 2,631,470 and 5,158,071 shares, respectively, 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. -26- ZIFF DAVIS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued 13. Segment Information The Company’s businesses are based on the organizational structure used by the chief operating decision maker (“CODM”). As described in its Annual Report on Form 10-K for the year ended December 31, 2024, the Company has five operating segments which are now presented as the following five reportable segments: 1) Technology & Shopping, 2) Gaming & Entertainment , 3) Health & Wellness, 4) Connectivity, and 5) Cybersecurity & Martech. Prior period segment information is presented on a comparable basis to conform to this new segment presentation with no effect on previously reported consolidated results. The accounting policies of the reportable segments are the same as those described in Note 2 — Basis of Presentation and Summary of Significant Accounting Policies included in the Company’s Form 10-K for the year ended December 31, 2024. The CODM does not use Balance Sheet information in connection with operating and investment decisions and as such that information is not presented. The CODM does use capital expenditures by reportable segment in connection with operating and investment decisions. Information on reportable segments revenues is as follows (in thousands): Three months ended March 31, 2025 2024 Revenue by reportable segment: Technology & Shopping $ 81,690 $ 69,267 Gaming & Entertainment 38,026 36,640 Health & Wellness 85,786 79,978 Connectivity 55,820 53,148 Cybersecurity & Martech 67,314 75,452 Total segment revenues 328,636 314,485 Corporate — — Total revenues $ 328,636 $ 314,485 The descriptions of significant reportable segment expenses shown in the following tables are as follows: • Salaries, benefits, and other employee expenses include employee compensation expenses for salaries, bonuses, benefits, payroll taxes, commissions, share-based compensation, severance costs, other related employee costs. • Cloud computing, software, and other related expenses include costs associated with cloud computing, software purchases, web hosting, database hosting, and other computer related costs. • Advertising and related marketing expenses include advertising relationships with an array of online service providers, marketing expenses, and other audience extension costs. • Partner payments include expense associated with revenue sharing arrangements, content fees, and royalties. • Professional and other third-party services include expenses for outside providers including freelancers, consultants, legal costs, and other professional services. -27- ZIFF DAVIS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued Significant reportable segment expenses are set forth in the tables below (in thousands): Three months ended March 31, 2025 Technology & Shopping Gaming & Entertainment Health & Wellness Connectivity Cybersecurity & Martech Total operating costs and expenses Salaries, benefits, and other employee expenses $ 33,949 $ 10,614 $ 25,641 $ 13,657 $ 17,216 $ 101,077 Cloud computing, software, and other related expenses 6,803 2,037 4,012 3,983 10,185 27,020 Advertising and marketing related expenses 12,308 2,068 9,019 1,562 4,773 29,730 Partner payments 944 6,739 9,879 211 5,725 23,498 Professional and other third-party services 5,698 1,089 2,074 4,572 4,488 17,921 Depreciation and amortization 22,405 2,618 12,928 7,380 10,387 55,718 Other 3,546 (1) 4,087 (2) 5,271 (3) 4,943 (4) 3,217 (5) 21,064 Total segment operating costs and expenses 85,653 29,252 68,824 36,308 55,991 276,028 Corporate (6) 17,478 Total operating costs and expenses $ 293,506 Three months ended March 31, 2024 Technology & Shopping Gaming & Entertainment Health & Wellness Connectivity Cybersecurity & Martech Total operating costs and expenses Salaries, benefits, and other employee expenses $ 28,965 $ 9,968 $ 28,306 $ 13,779 $ 19,326 $ 100,344 Cloud computing, software, and other related expenses 7,648 1,153 3,419 3,169 10,140 25,529 Advertising and marketing related expenses 10,687 1,520 9,456 1,462 5,299 28,424 Partner payments 2,428 5,938 8,110 190 4,957 21,623 Professional and other third-party services 4,778 1,122 2,023 3,110 4,121 15,154 Depreciation and amortization 17,914 2,392 13,399 7,001 7,741 48,447 Other 3,481 (1) 4,032 (2) 6,666 (3) 5,079 (4) 4,440 (5) 23,698 Total segment operating costs and expenses 75,901 26,125 71,379 33,790 56,024 263,219 Corporate (6) 15,405 Total operating costs and expenses $ 278,624 -28- ZIFF DAVIS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued (1) Other Technology & Shopping operating costs and expenses consist primarily of credit card processing fees, campaign fulfillment costs, travel and entertainment costs, office expenses, bad debt expense, contingent consideration changes, and certain allocated overhead expenses. (2) Other Gaming & Entertainment operating costs and expenses consist primarily of credit card processing fees, inventory-related costs, campaign fulfillment costs, travel and entertainment costs, office expenses, bad debt expense, contingent consideration changes, and certain allocated overhead expenses. (3) Other Health & Wellness operating costs and expenses consist primarily of app-store fees, credit card processing fees, campaign fulfillment costs, travel and entertainment costs, office expenses, bad debt expense, contingent consideration changes, and certain allocated overhead expenses. (4) Other Connectivity operating costs and expenses consist primarily of inventory-related costs, credit card processing fees, inventory related costs, campaign fulfillment costs, travel and entertainment costs, office expenses, bad debt expense, contingent consideration changes, and certain allocated overhead expenses. (5) Other Cybersecurity & Martech operating costs and expenses consist primarily of credit card processing fees, telecommunication backbone costs, travel and entertainment costs, office expenses, bad debt expense, contingent consideration changes, and certain allocated overhead expenses. (6) Corporate includes costs associated with general, administrative, and other expenses (including some depreciation and amortization) that are managed on a global basis and that are not directly attributed to any particular segment. Information on (loss) income from operations is set forth in the table below (in thousands). Three months ended March 31, 2025 2024 (Loss) income from operations by reportable segment: Technology & Shopping ( 3,963 ) ( 6,634 ) Gaming & Entertainment 8,774 10,515 Health & Wellness 16,962 8,599 Connectivity 19,512 19,358 Cybersecurity & Martech 11,323 19,428 Total segment operating income 52,608 51,266 Corporate (1) ( 17,478 ) ( 15,405 ) Income from operations $ 35,130 $ 35,861 (1) Corporate includes costs associated with general, administrative, and other expenses that are managed on a global basis and that are not directly attributable to any particular segment. Information on capital expenditures is set forth in the table below (in thousands). Three months ended March 31, 2025 2024 Capital expenditures: Technology & Shopping $ 3,606 $ 3,648 Gaming & Entertainment 1,737 2,257 Health & Wellness 9,376 8,483 Connectivity 5,235 6,843 Cybersecurity & Martech 5,485 6,918 Total from reportable segments 25,439 28,149 Corporate 180 ( 20 ) Total capital expenditures $ 25,619 $ 28,129 -29- ZIFF DAVIS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued 14. Supplemental Cash Flow Information Non-cash investing and financing activities were as follows (in thousands): Three months ended March 31, 2025 2024 Non-cash financing activity: Excise tax on share repurchases $ 196 $ — Supplemental data (in thousands): Three months ended March 31, 2025 2024 Interest paid $ 5,962 $ — Income taxes paid, net of refunds $ 8,717 $ 6,511 15. Accumulated Other Comprehensive Loss The following table summarizes the changes in accumulated other comprehensive income (loss) income, net of tax, for the three months ended March 31, 2025 (in thousands): Unrealized Gains on Investments Foreign Currency Translation Total Balance as of January 1, 2025 $ 2,112 $ ( 84,583 ) $ ( 82,471 ) Other comprehensive income, net of tax 280 11,411 11,691 Balance as of March 31, 2025 $ 2,392 $ ( 73,172 ) $ ( 70,780 ) There were no reclassifications out of accumulated other comprehensive loss for the three months ended March 31, 2025 and 2024, respectively. 16. Subsequent Events On July 31, 2023, the Company entered into an agreement to purchase $ 25.0 million of equity of OpenEvidence (formerly known as Xyla), an artificial intelligence company, for a minority ownership stake. This minority investment was made in the form of cash and 186,102 shares of the Company’s common stock. On April 24, 2025, we sold our minority interest in OpenEvidence for approximately $ 30 million in a combination of cash and the majority of the shares of our Common Stock that were issued in the initial transaction. -30-