10-Q 1 zd-20230331.htm 10-Q zd-20230331
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the quarterly period ended March 31, 2023
OR
☐    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the transition period from __________ to __________

Commission File Number: 0-25965
ZD_Blue.jpg
ZIFF DAVIS, INC.
(Exact name of registrant as specified in its charter)
Delaware47-1053457
(State or other jurisdiction(I.R.S. Employer
of incorporation or organization)Identification No.)
114 5th Avenue New York, New York 10011 (212) 503-3500
(Address and telephone number of principal executive offices)


Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 par valueZDNasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes ý    No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes ý    No  o   
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ýAccelerated fileroNon-Accelerated fileroSmaller reporting company☐
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes ☐        No ý

There were 47,282,972 shares outstanding of the Registrant’s common stock as of May 5, 2023.



ZIFF DAVIS, INC. AND SUBSIDIARIES 
QUARTERLY REPORT
QUARTER ENDED MARCH 31, 2023

INDEX 
   PAGE
 
    
  
  
  
  
  
    
 
    
 
    
 
    
   
 
    
 
    
 
    
 
    
 
    
 
    
 
    
 
Item 6.  
    
  
    

-2-


PART I.  FINANCIAL INFORMATION
Item 1.Financial Statements
ZIFF DAVIS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands except share and per share data)
March 31, 2023December 31, 2022
ASSETS
Cash and cash equivalents$721,502 $652,793 
Short-term investments39,012 58,421 
Accounts receivable, net of allowances of $7,061 and $6,868, respectively
277,764 304,739 
Prepaid expenses and other current assets68,306 68,319 
Total current assets1,106,584 1,084,272 
Long-term investments 116,062 127,871 
Property and equipment, net of accumulated depreciation of $276,760 and $255,586, respectively
187,025 178,184 
Intangible assets, net433,310 462,815 
Goodwill1,597,684 1,591,474 
Deferred income taxes8,457 8,523 
Other assets77,946 80,131 
TOTAL ASSETS$3,527,068 $3,533,270 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable$143,966 $140,541 
Accrued employee related costs31,838 42,178 
Deferred revenue, current200,936 187,904 
Accrued liabilities and other current liabilities64,439 61,825 
Total current liabilities441,179 432,448 
Long-term debt999,617 999,053 
Deferred revenue, noncurrent8,861 9,103 
Deferred income taxes68,142 79,007 
Other long-term liabilities114,654 121,048 
TOTAL LIABILITIES1,632,453 1,640,659 
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 47,286,093 and 47,269,446 shares at March 31, 2023 and December 31, 2022, respectively.
473 473 
Additional paid-in capital 444,813 439,681 
Retained earnings1,530,665 1,537,830 
Accumulated other comprehensive loss(81,336)(85,373)
TOTAL STOCKHOLDERS’ EQUITY1,894,615 1,892,611 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY$3,527,068 $3,533,270 

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,
20232022
Total revenues$307,142 $315,068 
Operating costs and expenses:
Cost of revenues45,730 46,100 
Sales and marketing115,920 117,762 
Research, development, and engineering17,914 18,427 
General and administrative101,263 102,217 
Total operating costs and expenses280,827 284,506 
Income from operations26,315 30,562 
Interest expense, net(4,480)(10,290)
Loss on debt extinguishment, net— (1,220)
Unrealized (loss) gain on short-term investments held at the reporting date, net(20,345)8,951 
Gain on investments, net357 — 
Other (loss) income, net(908)2,399 
Income before income taxes and loss from equity method investment, net939 30,402 
Income tax benefit (expense)616 (5,080)
Loss from equity method investment, net(9,182)(785)
Net (loss) income $(7,627)$24,537 
Net (loss) income per common share:
Basic$(0.16)$0.52 
Diluted$(0.16)$0.51 
Weighted average shares outstanding: 
Basic46,987,249 47,054,411 
Diluted46,987,249 52,405,317 


 See Notes to Condensed Consolidated Financial Statements (Unaudited)
-4-


ZIFF DAVIS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(Unaudited, in thousands)
Three months ended March 31,
20232022
Net (loss) income$(7,627)$24,537 
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustment3,713 (6,265)
Consensus separation adjustment— 4,056 
Change in fair value on available-for-sale investments, net of tax expense of $109 for the three months ended March 31, 2023
324 — 
Other comprehensive income (loss), net of tax4,037 (2,209)
Comprehensive (loss) income$(3,590)$22,328 

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,
Cash flows from operating activities:20232022
Net (loss) income $(7,627)$24,537 
Adjustments to reconcile net (loss) income to net cash provided by operating activities: 
Depreciation and amortization54,623 59,071 
Non-cash operating lease costs2,933 2,392 
Share-based compensation8,402 6,717 
Provision for credit losses on accounts receivable441 (1,032)
Deferred income taxes, net(7,442)(3,745)
Loss on extinguishment of debt— 1,220 
Loss from equity method investments9,182 785 
Unrealized gain (loss) on short-term investments held at the reporting date, net20,345 (8,951)
Gain on investments, net(357)— 
Other2,776 868 
Decrease (increase) in: 
Accounts receivable (includes $0 and $5,278 with related parties)
27,626 57,483 
Prepaid expenses and other current assets(7,658)10,638 
Other assets(2,048)(5,603)
Increase (decrease) in: 
Accounts payable6,922 (22,501)
Deferred revenue12,085 3,061 
Accrued liabilities and other current liabilities(4,896)(8,429)
Net cash provided by operating activities115,307 116,511 
Cash flows from investing activities: 
Purchases of property and equipment(30,017)(30,502)
Acquisition of businesses, net of cash received(8,001)(28,136)
Proceeds from sale of equity investments3,174 — 
Other(3,947)— 
Net cash used in investing activities(38,791)(58,638)
Cash flows from financing activities: 
Payment of debt— (54,609)
Debt extinguishment costs— (756)
Repurchase of common stock(2,875)(62,810)
Proceeds from exercise of stock options— 148 
Deferred payments for acquisitions(6,679)(2,676)
Other71 (5)
Net cash used in financing activities(9,483)(120,708)
Effect of exchange rate changes on cash and cash equivalents1,676 (2,977)
Net change in cash and cash equivalents68,709 (65,812)
Cash and cash equivalents at beginning of period652,793 694,842 
Cash and cash equivalents at end of period$721,502 $629,030 

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, 2023
Accumulated
Common stockAdditional
paid-in		Retainedother comprehensiveTotal
Stockholders’
SharesAmountcapitalearningslossEquity
Balance, January 1, 202347,269,446 $473 $439,681 $1,537,830 $(85,373)$1,892,611 
Net income— — — (7,627)— (7,627)
Other comprehensive loss, net of tax expense of $109
— — — — 4,037 4,037 
Vested restricted stock53,299 — — — — — 
Repurchase and retirement of common stock(36,652)— (3,336)461 — (2,875)
Share-based compensation— — 8,402 — — 8,402 
Other, net— — 66 1 — 67 
Balance, March 31, 202347,286,093 $473 $444,813 $1,530,665 $(81,336)$1,894,615 

Three months ended March 31, 2022
Accumulated
Common stockAdditional
paid-in		Retainedother comprehensiveTotal
Stockholders’
SharesAmountcapitalearningslossEquity
Balance, January 1, 202247,440,137 $474 $509,122 $1,515,358 $(57,222)$1,967,732 
Reclassification of the equity component of 1.75% Convertible Notes to liability upon adoption of ASU 2020-06
— — (88,137)23,436 — (64,701)
Net income— — — 24,537 — 24,537 
Other comprehensive loss, net of tax expense of zero
— — — — (6,265)(6,265)
Exercise of stock options5,439 — 148 — — 148 
Vested restricted stock101,385 1 (1)— — — 
Repurchase and retirement of common stock(594,661)(5)(12,180)(50,625)— (62,810)
Share-based compensation— — 6,717 — — 6,717 
Other, net— — (16)(3,904)4,056 136 
Balance, March 31, 202246,952,300 $470 $415,653 $1,508,802 $(59,431)$1,865,494 
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 subsidiaries (“Ziff Davis”, the “Company”, “our”, “us”, or “we”), whether directly or indirectly wholly-owned, 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, 2022 filed with the Securities and Exchange Commission ("SEC") on March 1, 2023 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.
Description of Business
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 March 31, 2023 and 2022, the Company recorded an impairment of approximately $1.8 million and zero, respectively, primarily related to certain operating lease right-of-use assets. 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.
Recent Accounting Pronouncements
Recently issued applicable accounting pronouncements not yet adopted
In March 2020, the FASB issued 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 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. The accommodations were available for all entities through December 31, 2022, with early adoption permitted. This update was later amended by ASU 2022-06.
In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848. This update defers the expiration date of ASC Topic 848 from December 31, 2022 to December 31, 2024. We are currently evaluating the effect the adoption of this update will have on our condensed consolidated financial statements and related disclosures.
Reclassifications
Certain prior year reported amounts have been reclassified to conform with 2023 presentation.

-8-

ZIFF DAVIS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
2.Revenues
Digital Media
Digital Media revenues are earned primarily from the delivery of advertising services and from subscriptions to services and information.
Revenue is earned from the delivery of advertising services on websites that are owned and operated by us and on those websites that are part of Digital Media’s advertising network. Depending on the individual contracts with the customer, revenue for these services is recognized over the contract period when any of the following performance obligations are satisfied: (i) when an advertisement is placed for viewing, (ii) when a qualified sales lead is delivered, (iii) when a visitor “clicks through” on an advertisement or (iv) when commissions are earned upon the sale of an advertised product.
Revenue from subscriptions is earned through the granting of access to, or delivery of, data products or services to customers. Subscriptions cover video games and related content, health information, data, and other copyrighted material. Revenues under such agreements are recognized over the contract term for use of the service. Revenues are also earned from listing fees, subscriptions to online publications, and from other sources. Subscription revenues are primarily recognized over time. 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 its software, and other related services. Revenue is recognized for these software transactions with multiple performance obligations after (i) the contract has been approved and we are committed to perform the respective obligations and (ii) we can identify and quantify each obligation and its respective selling price. Once the respective performance obligations have been identified and quantified, revenue will be recognized when the obligations are met, either over time or at a point in time depending on the nature of the obligation.
Revenues from software license performance obligations are generally recognized upfront at the point in time that the software is made available to the customer to download and use. Revenues for related software support and maintenance performance obligations are related to technical support provided to customers as needed and unspecified software product upgrades, maintenance releases, and patches during the term of the support period when they are available. We are obligated to make the support services available continuously throughout the contract period. Therefore, revenues for support contracts are generally recognized ratably over the contractual period the support services are provided. Hardware product and related software performance obligations, such as an operating system or firmware, are highly interdependent and interrelated and are accounted for as a bundled performance obligation. The revenues for this bundled performance obligation are generally recognized at the point in time that the hardware and software products are delivered and ownership is transferred to the customer. Other service revenues are generally recognized over time as the services are performed.
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 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.
-9-

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. 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.
Revenues from external customers classified by revenue source are as follows (in thousands).
Three months ended March 31,
20232022
Digital Media
Advertising$156,082 $170,067 
Subscription69,148 55,576 
Other8,981 9,184 
Total Digital Media revenues$234,211 $234,827 
Cybersecurity and Martech
Subscription$73,016 $80,494 
Total Cybersecurity and Martech revenues$73,016 $80,494 
Elimination of inter-segment revenues(85)(253)
Total Revenues$307,142 $315,068 
Timing of revenue recognition
Point in time$11,522 $8,983 
Over time295,620 306,085 
Total$307,142 $315,068 
The Company has recorded $65.1 million and $73.1 million of revenue for the three months ended March 31, 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 March 31, 2023, the aggregate amount of transaction price that is allocated to future performance obligations was approximately $15.8 million and is expected to be recognized as follows: 85% by December 31, 2023 and 15% by December 31, 2025. The amount disclosed does not include revenues related to performance obligations that are part of a contract with original expected duration of twelve months or less or portions of the contract that remain subject to cancellations.

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.
2023 Acquisitions
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 and the Condensed Consolidated Balance Sheets as of March 31, 2023, reflect the results of operations of the 2023 acquisition. The initial accounting for the 2023 acquisition is incomplete due to timing of available information and is subject to change. The Company has recorded provisional amounts which may be based upon past acquisitions with similar attributes for certain intangible assets (including trade names, software and customer relationships), preliminary acquisition date working capital, and related tax items.
-10-

ZIFF DAVIS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
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.
2022 Acquisitions
The Company completed the following acquisitions during the three months ended March 31, 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; and (b) two other immaterial Digital Media acquisitions. During the three months ended March 31, 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 three months ended March 31, 2022, these acquisitions contributed $2.1 million to the Company’s revenues. Net income from continuing operations contributed by these acquisitions was not separately identifiable due to the Company’s integration activities and is impracticable to provide. Total consideration for these transactions was $36.6 million, net of cash acquired and assumed liabilities.
The following table summarizes the allocation of the purchase consideration for all 2022 acquisitions as of March 31, 2022 (in thousands):
Assets and LiabilitiesValuation
Accounts receivable$4,615 
Prepaid expenses and other current assets231 
Property and equipment307 
Trade names2,302 
Customer relationship9,216 
Goodwill24,156
Other intangibles3,439 
Other long-term assets11 
Accounts payable and accrued expenses(2,551)
Deferred revenue(1,697)
Deferred tax liability(3,390)
Total$36,639 
The fair value of the assets acquired includes accounts receivable of $4.6 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 three months ended March 31, 2022 was $24.2 million, of which $2.2 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.
-11-

ZIFF DAVIS, INC. AND SUBSIDIARIES
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 months ended March 31, 2022 as if each acquisition had occurred on January 1, 2022 (in thousands, except per share amounts):
 Three months ended
March 31, 2022
 (unaudited)
Revenues$316,154 
Net income $24,815 
Income per common share - Basic$0.53 
Income per common share - Diluted$0.52 

4.Investments
Investments consist primarily of equity and debt securities.
Investment in equity securities
On October 7, 2021, the Company completed the separation of its cloud fax business (the “Separation”) into an independent publicly traded company, Consensus Cloud Solutions, Inc. (“Consensus”). Following the Separation, the Company retained shares of Consensus common stock and as of March 31, 2023 and December 31, 2022, the Company held approximately 1.0 million and 1.1 million shares, respectively, of the common stock of Consensus. As of March 31, 2023 and December 31, 2022, the carrying value of the investment in Consensus was $35.3 million and $58.4 million, respectively, and was included in ‘Short-term investments’ in the Condensed Consolidated Balance Sheets. The Company accounts for its investment in Consensus at fair value under the fair value option, and the related fair value gains and losses are recognized in earnings. During the three months ended March 31, 2023, the Company sold 52,393 shares of common stock of Consensus in the open market.
Gains (losses) on equity securities were recorded in ‘Unrealized (loss) gain on short-term investments held at the reporting date, net’ in the Condensed Consolidated Statements of Operations’ consisted of the following (in thousands):
Three months ended March 31,
20232022
Net (losses) gains during the period$(19,988)$8,951 
Less: gains on securities sold during the period357 — 
Unrealized (losses) gains recognized during the period on short-term investments held at the reporting date, net$(20,345)$8,951 
Investment in corporate debt security
On April 12, 2022, the Company entered into an agreement with an entity to acquire 4% convertible notes with an aggregate value of $15.0 million. This investment is included in ‘Long-term investments, net’ in 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, 2023, both the carrying value and the maximum exposure of the Company’s investment in corporate debt securities was approximately $16.0 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 of investment in corporate debt securities as of March 31, 2023 and December 31, 2022 was approximately $1.0 million and $0.6 million, respectively.
 There were no investments in an unrealized loss position as of March 31, 2023 and December 31, 2022.
As of March 31, 2023 and December 31, 2022, 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-
-12-

ZIFF DAVIS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
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 three months ended March 31, 2023 and 2022, the Company received no distributions from OCV.
The Company recognizes its equity in the net earnings or losses relating to the investment in OCV on a one-quarter lag (including management fees) due to the timing and availability of financial information from OCV. If the Company becomes aware of a significant decline in value that is other-than-temporary, the loss will be recorded in the period in which the Company identifies the decline.
During the three months ended March 31, 2023 and 2022, the Company recognized a loss from equity method investment of $9.2 million and $0.8 million, net of tax benefit, respectively. The loss during the three months ended March 31, 2023 was primarily the result of losses in the underlying investments and the loss during the three months ended March 31, 2022 was related to management fee expense. During the three months ended March 31, 2023 and 2022, the Company recognized expense for management fees of zero and $0.8 million, respectively, net of tax benefit.
As of March 31, 2023, both of the carrying value and the maximum exposure of the Company’s equity method investment was $100.0 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.
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.

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.
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.
The Company’s money market funds are classified within Level 1. 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.
-13-

ZIFF DAVIS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
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 March 31, 2023 and December 31, 2022, the fair value was determined based upon various probability-weighted scenarios and included an assumption of a 13% discount rate as of March 31, 2023 and December 31, 2022, respectively, and a conversion timeframe of approximately one-year.
The fair value of the Company’s 4.625% Senior Notes and 1.75% Convertible Notes (as defined in Note 7 - Debt) was determined using quoted market prices or dealer quotes for instruments with similar maturities and other terms and credit ratings, which are Level 1 inputs. If such information is not available for the 1.75% Convertible Notes, the fair value is determined using cash-flow models of the scheduled payments discounted at market interest rates for comparable debt without the conversion feature.
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 March 31, 2023 and December 31, 2022, the contingent consideration was determined using a 100% probability of payout, 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, 2023Level 1Level 2Level 3Fair ValueCarrying Value
Assets:
Cash equivalents:
Money market and other funds$292,847 $— $— $292,847 $292,847 
Short-term investments:
Certificates of deposit— 3,753 — 3,753 3,753 
Investment in Consensus35,259 — — 35,259 35,259 
Long-term investments:
Investment in corporate debt securities— — 16,019 16,019 16,019 
Total assets measured at fair value$328,106 $3,753 $16,019 $347,878 $347,878 
Liabilities:
Contingent consideration$— $— $555 $555 $555 
Debt:
4.625% Senior Notes
399,203 399,203 456,498 
1.75% Convertible Notes
540,237 540,237 543,119 
Total liabilities measured at fair value$939,440 $— $555 $939,995 $1,000,172 

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ZIFF DAVIS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
December 31, 2022Level 1Level 2Level 3Fair ValueCarrying Value
Assets:
Cash equivalents:
Money market and other funds$312,010 $— $— $312,010 $312,010 
Short-term investments:
Investment in Consensus58,421 — — 58,421 58,421 
Long-term investments:
Investment in corporate debt securities— — 15,586 15,586 15,586 
Total assets measured at fair value$370,431 $— $15,586 $386,017 $386,017 
Liabilities:
Contingent consideration$— $— $555 $555 $555 
Debt:
4.625% Senior Notes
390,908 390,908 456,400 
1.75% Convertible Notes
548,411 548,411 542,653 
Total liabilities measured at fair value$939,319 $— $555 $939,874 $999,608 
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, 2023 and 2022, there were no transfers that occurred between levels.
The following table presents a reconciliation of the Company’s Level 3 financial assets related to our investment in corporate debt securities that are measured at fair value on a recurring basis (in thousands):
Three months ended
20232022
Contingent Consideration ArrangementsCorporate Debt SecuritiesContingent Consideration ArrangementsCorporate Debt Securities
Balance as of January 1$555 $15,586 $5,775 $— 
Fair value at date of acquisition— — 4,200 — 
Fair value adjustments (1)
— 433 112 — 
Balance as of March 31$555 $16,019 $10,087 $— 
(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 months ended March 31, 2023 and 2022. The fair value adjustments to the corporate debt securities in the table above were recorded within ‘Change in fair value on available-for-sale investments, net’ on the Condensed Consolidated Statements of Comprehensive (Loss) Income during the three months ended March 31, 2023 and 2022.

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

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ZIFF DAVIS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
6.Goodwill and Intangible Assets
Goodwill
The changes in carrying amounts of goodwill for the three months ended March 31, 2023 are as follows (in thousands):
Digital MediaCybersecurity and MartechConsolidated
Balance as of January 1, 2023$1,065,989 $525,485 $1,591,474 
Goodwill acquired (Note 3)3,849 — 3,849 
Purchase accounting adjustments (1)
513 — 513 
Foreign exchange translation540 1,308 1,848 
Balance as of March 31, 2023$1,070,891 $526,793 $1,597,684 
(1)Purchase accounting adjustments relate to measurement period adjustments to goodwill in connection with prior business acquisitions.
Goodwill as of March 31, 2023 and December 31, 2022 reflects accumulated impairment losses of $27.4 million and $27.4 million, respectively, in the Digital Media reportable segment.
Intangible Assets Subject to Amortization
As of March 31, 2023, intangible assets subject to amortization relate primarily to the following (in thousands):
Weighted-Average
  Amortization
Period		Historical
Cost		Accumulated
Amortization		Net
Trade names10 years$263,060 $130,986 $132,074 
Customer relationships (1)
8 years690,363 497,910 192,453 
Other purchased intangibles8 years482,501 373,718 108,783 
Total$1,435,924 $1,002,614 $433,310 
(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, 2022, intangible assets subject to amortization relate primarily to the following (in thousands):
Weighted-Average
  Amortization
Period
Historical
Cost		Accumulated
Amortization		Net
Trade names10 years$261,614 $125,422 $136,192 
Customer relationships (1)
8 years687,798 479,741 208,057 
Other purchased intangibles8 years481,973 363,407 118,566 
Total$1,431,385 $968,570 $462,815 
(1)The Company amortizes customer relationship assets in a pattern that best reflects the pace at which the asset’s benefits are consumed. This pattern results in a substantial majority of the amortization expense being recognized in the first 4 to 5 years, despite the overall life of the asset.
Amortization expense, included in General and administrative expense on the Condensed Consolidated Statements of Operations, was approximately $33.3 million and $41.2 million for the three months ended March 31, 2023 and 2022, respectively.

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ZIFF DAVIS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
7.Debt
Long-term debt consists of the following (in thousands):
March 31, 2023December 31, 2022
4.625% Senior Notes
$460,038 $460,038 
1.75% Convertible Notes
550,000 550,000 
Total Notes1,010,038 1,010,038 
Credit Agreement— — 
Less: Unamortized discount(2,690)(2,764)
Deferred issuance costs(7,731)(8,221)
Total long-term debt$999,617 $999,053 
As of March 31, 2023, $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.
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. 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. 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 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, 2023.
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ZIFF DAVIS, INC. AND SUBSIDIARIES
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 March 31, 2022
Principal repurchased$54,609 
Aggregate purchase price$55,365 
Gain (loss) on repurchase (1)
$(1,220)
(1)Presented within ‘Gain (loss) on debt extinguishment, net” on the Condensed Consolidated Statements of Operations.
Cumulatively as of March 31, 2023, the Company repurchased approximately $290.0 million in aggregate principal of its 4.625% Senior Notes.
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.
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 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. The Company currently intends to satisfy its conversion obligation by paying and delivering a combination of cash and shares of the Company’s common stock. 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, 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 March 31, 2023, the conversion rate is 9.3783 shares of the Company’s common stock for each $1,000 principal amount of 1.75% Convertible Notes (or 5,158,071 shares), which represents a conversion price of approximately $106.63 per share of the Company’s common stock. The conversion rate is subject to adjustment for certain events as set forth in the indenture governing the 1.75% Convertible Notes, but will not be adjusted for accrued interest. 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.
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 indebtedness; and (iv) structurally junior to all existing and future indebtedness and other liabilities incurred by the Company’s subsidiaries.
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ZIFF DAVIS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
The fair value of the 1.75% Convertible Notes at each balance sheet date is determined based on recent quoted market prices or dealer quotes for the 1.75% Convertible Notes, which are Level 1 inputs (see Note 5 - Fair Value Measurements). If such information is not available, the fair value is determined using cash-flow models of the scheduled payments discounted at market interest rates for comparable debt without the conversion feature. As of March 31, 2023 and December 31, 2022, the estimated fair value of the 1.75% Convertible Notes was approximately $540.2 million and $548.4 million, respectively. Refer to Note 5 - Fair Value Measurements.
The following table provides additional information related to the 1.75% Convertible Notes (in thousands):
March 31, 2023December 31, 2022
Principal amount of 1.75% Convertible Notes