Ziff Davis (ZD) 4 Aug 232023 Q2 Earnings call transcript

Good day, ladies and gentlemen, and welcome to Ziff Davis Second Quarter 2023 Earnings Call. My name is Paul, and I will be the operator assisting you today. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions]

be Chief CEO Davis. Financial will and Ziff call Richter, Bret Officer this Vivek of Shah, Davis, On of Ziff

will Davis. call Financial the now Bret I Chief Richter, over Officer you. Thank to Ziff of turn

You may begin.

the you. conference Davis call Thank investor XXXX. Ziff welcome QX morning and Good to for

Bret mentioned, Chief Officer Executive Vivek Chief Shah. of joined Ziff the operator Richter, am our As Davis, by I am Financial and I Officer,

website. presentation available the is A today's you is there available webcast, for our right-hand viewer side, on this presentation A which you copy is on slides. will call. the When the button the launch allow of a expand to on

If may have press received through the at of release, access www.ziffdavis.com. you you a our not copy it corporate website

will from operator The the time be the formal procedures access questions. the completing for you that this After instruct we'll to be a webcast presentation, asking regarding you at able addition, conducting site. will Q&A. In

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our me begin remarks, we allow the to safe language. prepared Before harbor read

As will statements include actual the and results. to uncertainties and differ forward-looking the would results that anticipated webcast you involve risks Such materially may statements. from call know, this cause

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Vivek, let me to for remarks. his turn Now, call the over

everyone. Good morning,

about are second with enablement Xyla, later. financial of portfolio. in ahead across AI a very our on We're our which recently expectations, quarter also partnership and increasingly we second believe we accelerate strategic about enthusiastic came will More stronger announced results half. Our that optimistic

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quarters. great to a deal of for last resemblance results expected, As

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to the discuss to financial that, call back With hand Bret, results. I'll our

you, Thank Vivek.

Let's discuss our results. financial

QX, release earnings GAAP adjusted and for results reflects financial XXXX. our both Our

our our commentary prior and to and financial We adjusted QX, discussion comparisons will will relate periods. XXXX to focus today, primarily results, my

revenue $XXX second summary Slide for XXXX, X.X%. impact million second on reported did as reflecting results. the million for of second of XXXX X, $XXX.X comparable the a the have period, of with quarter We quarter a meaningful the not revenue year-over-year compared quarter's financial results. our FX of of decline reflects

adjusted EBITDA with million, reflecting compared decline $XXX of was period, X.X%. the $XXX.X as for XXXX a QX, million prior-year

was $X.XX. adjusted margin sequential EBITDA diluted We quarter points a XXX XX.X%, the reported of quarter EPS second adjusted for increase. Our basis

on weigh and to performance Our was company's decline. continues significant vertical the our to year-over-year technology contributor revenue overall most this the business performance,

second expectations, we momentum believe overall, than the XXXX going into building we QX, better are However, and was half of XXXX. our

revenue, been and we have the subscription. X% Slides also as of vertical, was, would On for our two X, QX, primary declined sources within and the revenue impacted advertising This Slide advertising by X%. performance X our summaries revenue in advertising excluding by performance performance. heavily Advertising the X company's have technology presents prior-year XXXX period. challenges revenue compared year-over-year with the tech, decline provided

Trailing by overall advertising XX-month including in verticals, businesses, declined we advertising some of certain and revenue our in non-tech market, the have our X%. consumer strength business. health our stabilization seen In

expect a stronger the for second supporting We meaningfully half to second revenue half our as advertising our first half, compared expectations performance. with overall improved, XXXX

an net statistic quarterly approximately Our the trailing which XXXX, was in QX, reflects measured XX-month retention, advertising revenue revenue. year-over-year for decline annual XX% advertising

during second slide, an served the quarterly $XX,XXX. X,XXX more Ziff in the average defined of advertisers, advertiser with revenue Davis than quarter, per As

bottom The six depicts X% contribution subscription XXXX. last as compared the revenue from period, QX, quarters. XXXX table Slide X%, last that the X, on subscription the Slide our certain and XX excluding for months, prior-year businesses, metrics grew performance. divested the X revenue subscription includes the were in of during with

in in We It! subscribers a Lose of increase versus gains partial significant The million were Humble and quarter Bundle XXXX, subscribers XXXX. primarily for year-over-year on offset had XXXX. subscribers. the reflects in modest nearly by There reduction a a QX, basis Lose quarter It!, in full inclusion part sequential within X.X in a cybersecurity

been have to we the in a as single our enabling adjusted into reseller metrics. underlying this us Historically, reflected subscriber metrics business, greater Martech have to reflect reseller cybersecurity transparency subscribers relationship subscriber Our through these a this identify relationship. in and served

this have by business Martech also metrics reseller. to to definition. subscribers metrics cybersecurity reflect and other with Please that made note, the company's adjustments subscriber the underlying were subscriber quarter's conform in the conform data. the to Certain These served recast been now further current the subscribers to historical

quarter. quarterly the Lose a with significantly Lose acquisition lowered This the which Overall, acquisition. our subscriber, of subscribers, and of of to prior raised quarterly XXXX compared the with metric was of Our included full the partial subscriber inclusion $XX.XX. number revenue our revenue as the prior-year quarter average June QX, periods has XXXX a It! as per reflects It! average compared subscribers period, only per

revenue, approximately XX lower XXXX factors. higher other partly QX, declined Humble Our The X% primarily increased smaller Ekahau overall QX, amongst was from company's Bundle revenues churn publishing sales, hardware rate basis year-over-year, points other by reflecting XXXX. offset which

dependent Our of Humble releases. Bundle timing publishing revenue on is, highly game the

release half We a of the calendar XXXX. expect stronger in second

the revenue, X, XX businesses owned, included Slide to owned for quarterly rates while growth acquired revenue quarters. XX a for months, at last provides least less businesses organic XX in organic to Revenues we've and are than from full relates, revenue months. total

Second quarter trends XXXX discussed X%, This organic business the unit decline XXXX. declined with QX, consistent performance earlier. revenue reflects,

please to Slide refer Turning to our X. balance sheet,

end short long-term XXXX, of million we of QX, As equivalents, $XXX of cash million of $XXX the and cash had and and investments.

on gross both and also basis. a leverage net leverage We significant a have capacity,

stock, cost for the XXX,XXX approximately During million. we quarter, common of our $XX.X a of repurchased shares

additional aggregate an our million. $X.X XXX,XXX of of repurchased we at July, cost shares common an stock, In

shares than we have continue future to stock opportunistic repurchase will and X We under more to million with program, stock authorized be our regard remaining repurchases.

leverage our quarter stock repurchase second ratios activity. reflect recent Our

the quarter, value of end excited Xyla, and if As the financial X.X X.X include very Vivek times our our in recent X.X that of was months of investments. adjusted trailing and was discussed our times, EBITDA, the leverage we times gross net leverage about. XX you are transaction a investment second

our closed historic during pregnancy acknowledge pace As business influencer second the We parenting a Everyday low. quarter, our Media, and space. focused on Group acquired noted, that Mom reflects, network, Vivek events of and current acquisitions Health an the

not has however, M&A program, changed. Our

The has very sourcing in We environment, manage transactions, and in deal evaluating current continue macro across and market. M&A on chilling pipeline. to the a we robust a uncertainty active the remain had effect activity

to and that we acquisition continue the has are exercise, program. a discipline our We patient, hallmark been will of

for call, On our alternatives business. we our we exploring that shared strategic last BXB were

at in have this do remain share we specific a time, While we not exploration. update to active engaged

continue upon operationally financially and both believe We well execute to positioned that strategy. we M&A to are our

creation will we will opportunities right we when with believe and believe the act and we support arise, we allocation, our that We're when we this stakeholders. decisively. for And can value transactions long-term capital strategy that nimble identify also well-capitalized, generate

Turning to Slide XX.

in fiscal guidance February XXXX that the reaffirming are We presented XXXX. range we originally

number to our our to by stabilization certain as of technology in see macroeconomic our the businesses. challenged are other environment While businesses continue such be we a beginning business, of

impact that half our half has guidance the As we XXXX noted on not our changed, XXXX during the our XXXX with February this results, call, stabilize first macro-economy our expectation and carryforward of reflects will performance is, an the of of consistent view outlook. second XXXX. and This

of expect growth. half stronger our and to XXXX, reflect in of improvement continue We to expect we an second rate organic a QX,

consistent XXXX approximately XXXX Assuming the reflect XXXX would we realize expectation. the of quarter, this revenues, approximately expectation, with revenues, half XX% total XX% of revenue second in our again, original fourth with

areas in to of for our invest continue we where We growth. see opportunity business,

to the experienced our in XXXX, closer quarter EBITDA move quarter, margins our strength be annual of the to adjusted certain of quarter in for strongest the QX fourth businesses. and XXXX, to reflecting third expect We seasonal in those

involving last a to stated guidance. we technology were adjusting we event BXB in As consummate our quarter, would the we anticipate business, our transaction,

our Following various outlook GAAP statements measures certain materials slides are including for supplemental nearest non-GAAP business to equivalent. reconciliation their the

working year-to-date to in capital XXXX, flow. cash with cash negatively free capital Year-to-date $XXX lower change similar and a in flow the reflects, free as Year-to-date with includes and as XXXX, reconciliation the section free EBITDA cash cash free lower million. cash contributed higher XXXX flow working Changes on CapEx, interest, XXXX was reflects free cash taxes. that, comparable in flow. Slide compared XXXX XX period, This approximately flow cash adjusted net impacted compared

expected, on year As financial new system our payments. XXXX impacted February, I a this in recently noted earnings fiscal receipts as timing transition regular ERP our call we of has company-wide to and transitioned and

coming working during capital We to progress QX, cadence results. months. of continue are expect XXXX we towards our pleased Overall, with the normal to our back

of tools are intelligence strategic excited and Xyla, artificial to are advantage believe with capabilities. our by and the recent positioning of that power We take transaction ourselves we

to repurchases. our in incremental continue businesses strategy, profitable cash, Our allocation support capital our provide and recent including to our sheet, for stock capital strengthen balance of produce

We shareholder patiently thoughtfully, in this continue order enhance will to and to capital, long-term deploy value.

you us, ask would I that, how instruct to questions. operator now With the to on to queue rejoin for

[Operator you. your Thank coming from Evercore question Khajuria Instructions] And is the live. first from Shweta, Shweta is line ISI.

and were confidence? things more Vivek, questions. gives signs Thank to from well - And pointed a it some all seeing you're specifically for seeing the you're for to What now hoping opportunities? of we opportunities, mentioned this in a to? cost second question your velocity, fourth should you analytics. increasing is P&L, you strong savings is taking Thank you I partnership How then, your business and the Xyla, you as have Everyday few you on about that or recovery, quarter. you to my that Could that you. generating referring point conversational data and and content of as it integrating whether your on revenue examples Health think with impact

Of course. Thanks, Shweta.

about answer to for us question to I first that turning point to and tide a about few So, be feel second the your things. is the half, to optimistic reasons

are is, improved dynamics So and half. of second the into growth carry pharma advertising out believe connectivity, the will we're and we just first that in the continued market. first greatly experiencing These half

mentioned, the we quarter, As out, obviously, believe fourth as pointed I growing, will also that I important. is continue, RetailMeNot and and, is all

to trends our in favor. overall, think seem I be so, And e-commerce

of from beneficial some an the number business. we're that for QX, will grow, business and cybersecurity continues overall important Game and year-over-year QX slated are email The we a releases have seeing point be flattening in growth We view. real to believe Humble which of

we particularly have comps, and course, do fourth quarter. then, so of I easier in And - the think,

the Xyla will I what your is that gives partnership on really views I half. So, respect us think combination specifically, is our around say Xyla confidence to second of about question generation. revenue all With the

I'll bit outset. we maybe a little to the of intend so, just what And at do unpack

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of volume enormous ability and the of and understand process. individual is The medical really beyond discovery to any single

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is so, largely physician-based into reach, our significant how which And that news reach integration - often them. think as that of the how tool how many and as we know and how utility physicians that in - brand you a often MedPage, we be we does you could

prescribing in because audience year. the tool you in integrating are most of United in past, the and is scripts pharmaceutical the single hundreds that, you've to So a to advertising, as a media which physicians, billions sit the this of like monetize me, MedPage through valuable will on say be me physicians, and physicians heard a today free States, that have world million

in ability have is and to we which part physician down this is believe detailing, engage the significantly. is And significant and old engagement has business, see Digital health a of so a will significant, practice pharma digitally rep as impact. to it the physicians then our an to sales send matters, of come a

started. think getting I timing, for we're just As

feel something bullish think into we but about it's we're very not guidance, XXXX longer So, I the potential. writing term,

you, Vivek. Thank Okay.

Thank you.

you. from Thank next Carpenter JPMorgan. question is Cory your is The Cory, coming line from live.

comments Hi. interesting. referral Vivek, traffic Thanks increase on were for your Bing the questions. pretty the

about you. traffic of in to frame exposed you'd non-branded from XXX sequential search be could XQ? traffic. much for to there talk comes margin the in Bret, of your I And was Just then curious, you you margins. drove that search or expansion is above Thank what how what guide changes flat for points think way your closer basis to a think

Thanks, Cory.

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of that there require dynamics so, the we traffic. have diversification a And

your that. regards point anything do for thanks to I if Cory, question. Yes, I'd specific know don't with

the the lens. that I think answer part is widening really stepping and back of just to

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both. That's helpful. Thank you

you. Thank

Barclays. is is question Ross The your line you. coming from live. from next Ross, Sandler Thank

guys. adding Thanks, Google just generative on topic. Hello. links referral a started follow-up the Vivek, experience. more just in the SEO search Great.

these have you kind it's AI of of the pretty AI days, comment on so co-pilots have and engineering And any heard operated So the anything more using able can from of stepping to companies early write I topic you but their we've tools same that other then, data departments evidence just co-pilots, become been productive on back implemented know some they to have to that. our broader before seen how that XX% code. of uptick? XX% than

So if we look do your think improvement? that at productivity, you Ziff Thanks Davis and departments maybe tools measure look improve that at much one at how and do guys these one lot. how a could of the of editorial plan system-wide you brands, to

Thank Ross. you,

your around quarter first So, with Google and referrals nicely. maybe and I'll are Google the up in start with referrals, our year-to-date experience question

or point can volume Labs-based know. experience, whether I coming that the through Now, not no, being the that's to don't I

good think Search, in I a we're which is just always Google thing. up

a factor. on say the for experience. It's too just to track. could it you can't contributing to that impossible really is. be us probably early I generative It it's So, tell

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which editorial so that that that the can the as possibly meaningful there, you're would is so, dynamics side, what asking, question on into. in the And turn same certainly as I is and argue fact, applies

the as units velocity, how with you me to terms in about value will in OpenEvidence things we're of making about And creating and going we're potentially game-changers though, for still but me there are What it's me and that for think can tell as me, Xyla I creating a I of interaction, kind with to it. so, are early about instance user put that's to to of of more volume, out content, for excite with kind then AI and that it's order we have you, the complete statistic MedPage. experiences that be Those of we and audiences sure of on that that the propositions it's generally AI. about it's will in any we say

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Thank from Shyam, next is you. your question line coming The Shyam Patil live. from is SIG.

talked but thinking over AI for still about macro, how chatbot of Hi, about that is you talked the growth you're and guys the And kind gaming. have the about of organic. in guys. Obviously you that Vivek, long-term the kind some growth past, right the half long-term? In of in then, the you question, sustainable second being mid-teens, think I said there's now, choppiness

Do this, said you how on is interesting. It Kingdom. the sounds and Tears any moat have Do you think you this additional performing do like I engagement, here, just, expect unique offerings things within your there feel monetize how space, that color you you are this? are or really feel - around like well? of other substantial gaming competitors like as do the can Thank a this have you. potential you to

for Shyam, question. thank the you

expectations, target that's think what in about handful you're the our That how long-term and those our but are we how first roughly about think rates are are, expectations. with growth not of these longer-term is achieved to of So, company Obviously, inorganic, unchanged, respect margin. terms we mid-XXs the organic, half last mid-teens, models. They half the has part, right. quarters

exceeded we've had And where as have you history, we periods know in our it.

aperture. a So, I think timeframe, and if over we the broader opened look

advice is game strength reputation. this continue We gaming not health question, and lot that respect that to to our a particular to so. just guides has and and done historically the our game game intention do of do I say what with and IGN have would With is it's to for it

unique. the we lot it to do But with a have, math quite that are has that

years of video which Map some ago, small to you acquisition, is did moat as need brings we all of - integrate tutorial, well we has a these really very this series be for alongside which part that but improved games Genie, So, tutorials. space of tech important a as maps

combination think map, is and great. text the of So, video I

in that of ask certain information, think the another repository all gamers. questions that of a And for is so access way just in really chatbot mining this information. to that, to allows essentially you is which way It's we important adding

is lot traffic is direct It So, we is game this IGN think for of people, do It the source come directly type a significant. it largest of to health. of traffic.

look, mean again, this so there revenue. to more using that that access ad loads is if ad an that leads we're And a advertising return what better dwell example more to is where to time load, tool allows frequency gamers to leads essentially yes, leads I and

Thank Great. guys. you

you. Thank

you. Citigroup. from Thank Arounian line is Ygal The Ygal, question next is live. coming your from

here just how using experience me well. - that the a that to about Hi, like continue for go parameters point - point some trade-off little in content. could that trading about good the that? of you other or whether traffic, getting I rights is the get or the - LLMs, morning publishers issues, you on if that's that of more Are you traffic back then want some you hearing expand guys think teach from and implying these as off on compensation publishers also, better from - the search search questions do content guys. about acceptable about And of their whether including A bit. couple AI AI about generative to traffic to you to that copyright there kind of you're these, we're

talk area you help we the improvements? then, potential that's specifically. AI And a improve to a lot a wanted been - advertising haven't about see where heard touched products about if on lot an the you've And advertising, going of to as is so tools get that lot how that well, product much take your AI with we've about itself you

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is coming question is next The you. Rishi, Thank your line from from Jaluria Rishi live. RBC.

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Hi. Good morning.

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