Ziff Davis (ZD) 22 Feb 242023 Q4 Earnings call transcript

Good day, ladies and gentlemen, and welcome to the Ziff Davis Fourth Quarter and Year-End 2023 Earnings Conference Call. My name is Paul and I will be the operator assisting you today. [Operator Instructions]On this call will be Vivek Shah, CEO of Ziff Davis; and Bret Richter, Chief Financial Officer of Ziff Davis.I will now turn the call over to Bret Richter, Chief Financial Officer of Ziff Davis. Thank you, you may begin.

Thank you. everyone. morning, Good the and to investor call conference And year Ziff XXXX. qX fiscal for welcome Davis

side As mentioned, joined of is Ziff Executive the Financial of our expand available of button Davis Chief operator on viewer on Officer on A and you which allow the to website. hand you I will this for slides. am today's presentation is I webcast, copy launch the Shah.A the the When available am Vivek there by call. a right is Chief Richter, our presentation Bret Officer

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Thank you, Bret, good and everyone. morning,

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Vivek. you, Thank

results. Let's discuss our financial

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

adjusted discussion my to primarily of and to prior QX focus commentary will financial our comparisons XXXX today, to quarterly adjusted summary will X for revenue results relate periods.Let's turn our and was was financial results. QX $XXX.X compared their We prior for as the with our Slide XXXX small $XXX.X year year compared with million reflecting revenue of a reduction. $XXX.X X.X%.QX for EBITDA a the the period, $XXX,X period, million prior year-over-year million of reflecting decline as million

adjusted increase our declined the Our a reported the was as compared total Slide with decline XXXX primarily Adjusted in fourth EBITDA declined as figure EBITDA, margin to year adjusted an as compared period.We million XXXX diluted fiscal XX.X%. adjusted compared XXXX billion EPS year compared QX XX.X% margin prior year $X.XXX with to margin X.X% for with for $X.XX. reflecting we diluted quarter of fiscal that as declined X. was $X.XX XXXX adjusted fiscal revenue.Our results.Turning to XXXX. year adjusted quarter for EBITDA EPS This improvement revenue to Fiscal with reported the X.X% XXXX X.X% year reflects Adjusted fiscal $XXX.X as EBITDA diluted compared adjusted EPS. the with X.X% XX%, year

our As consumer quarter fiscal to e-mail, health to XXXX technology IGN decline regard year we business.With have each of and discussed, fourth contributed the revenue XXXX, contributor tech wellness and our positive growth. BXB primary connectivity, the was organic

challenging would revenue and compared year. have XXXX was only declined XXXX QX X.X% BXB, Excluding have grown would year fiscal as revenue with slightly.Overall, XXXX a

results. as second our half first reflect compared results improvement our However, with significant half

revenue our year by and and as adjusted advertising on subscription have our and revenue X.X% diluted advertising For declined X.X% with declined Slide the growth full reflects fiscal X year, primary generated prior with and advertising and X, we despite significant compared pressure X advertising revenue, EPS.On of and year adjusted licensing. and X XXXX the total provided a Slide EBITDA modest decline, fiscal XXXX for we performance revenue sources XXXX QX period fiscal XXXX. compared year as QX summaries revenue.

retention, would pressures QX revenues tech advertising reflecting we in for of revenue statistic XXXX, advertising update revenues. our annual on quarterly, XX% all an have X.X% for advertising net declined X.X% XXXX.Our business, XX-month and approximately recent that digital was QX BXB Excluding by trailing

with total slide, grew the As grew defined an QX fourth average licensing our with in subscription of $XX.X from factors, quarterly of regard revenue $XXX,XXX, a lower had advertiser licensing Bundle points churn revenue, QX X.X% by The compared in X%, the at than QX business.Slide impact total and VPN period. growth revenue subscribers.Sequentially, refer and of includes prior slightly quarterly year-over-year our other XX growth reflect are metrics sequentially quarterly X,XXX quarter, the less the the revenue, businesses publishing including and our X.X% Ziff comparable declined modestly reflecting XXXX strong for revenue to in higher the our subscription a XX from declines performance revenue Lose video to and as quarter businesses revenues per these in It!, game performance. Sequentially, $XX.X period, and the while bottom inorganic months. licensing Ookla.With from in X $X,XXX,XXX, revenue decline revenue a our Slide basis QX number to Davis declined months XXXX, in the XXXX to X.XX%. XXXX of metric.Slide owned the year increased for customer X to subscription least reflects organic depicts subscription million revenues Slide balance licensing approximately during within to organic primarily full the for X X. $XX.XX to revenue million primarily for decreased company's at on per average per relates improvements XXXX organic reflecting XX declined last to licensing rates of and including at offset BXB.Please customer The Revenues and churn and table months. revenue owned the the last and XXXX included X than XX revenue XXXX Humble customers and quarters. we've subscription advertisers Fourth

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

continue significant We of of the a net shares. leverage to of if financial gross have XXXX, also and gross million our X.Xx to was include only of leverage fourth basis.As deployed our end XXXX, capacity trailing adjusted $XXX months repurchase our repurchase and We EBITDA, and both approximately quarter. XX leverage common the not net leverage did we capital was investments.During the on shares during X.Xx value you X.Xx

valuable the is fourth our of of not sheet during strategy. one our of also did our strength M&A We the most in assets, quarter.The context close any balance acquisitions particularly

in already company's that is forward of active of across returning we more XXXX, the our with consistent level be a our history. of acquisition all various transaction sizes one of Having to transactions to continue to closed activity pursuit We businesses. in look

for our details in of we to of provide range. million and few XXXX, X.X%, respectively. year.Our current growth of recent and acquisitions. activity.Turning prior period. quarter to additional both capital mid- quarter.Revenue XX We to function and time for Slides deployed the would recent reflects mid-single other and licensing double-digit XXXX.The environment for related our EPS X.X% significantly XX, XXXX also high momentum growth we digits our the higher as assume this year our a the investments the and we the than that reflects I'll in revenue, other discussed growth, guidance X.X% period interest slightly $XX EPS growth for M&A low the these revenue approximately risk, our low our and the guidance as year support the rates stable.The in with a guidance $X.X at also million each of without positive are in high-single performance absence our in are adjusted compared with the improvements today. from range as yet higher It growth last in guidance of and X% is X.X%, subscription the guidance macro of while EBITDA has time seeing higher to compared of digit loss rates growth environment reflects believe approximately that others. midpoint revenue, do revenue growth capital The and reflects or reflects each expectations EBITDA that end the current characterize X.X%, of remains with this strong we as we not depreciation inorganic taxes first of organic end present our and stabilized with that growth businesses fourth XXXX and reported believe midpoint highest Each low macroeconomic diluted and growth prior growth adjusted results in range of last We reflects expectation the adjusted advertising compared of During the we The adjusted expense, net year's rate as of in from XXXX. reflects several compared certain of approximately expectations XXXX and growth revenue the unaudited modest

anticipate in first reflecting realized return that more to digital of the in properties, flat XX.X% growth than relatively our the expects approximately of the XX% of we margin We year-over-year.Given for quarter expected positive the organic year. media seasonality for fourth company an the the to organic to with quarter, with the revenues midpoint XX% first our expect of second growth range, quarter approximately will be EBITDA quarter.At adjusted the have our

figures which range in reflect fluctuate of opportunities beyond anticipated annual impact which any as related all a that growth, XXXX raised does assume margins organic further rate support and to have XXXX growth positive share the the XX%.We the on XX.XX% targets outlined between our slides business during certain pursuing not could both growth back our rate and of these to We believe to focus our on company, reflects count our period.The are profitable of our cash reflect the proper XX.XX% and strategy.And range revenue investments an free guidance rates rate towards our slightly increases this of additional value M&A, a fiscal are tenets year rates. reflects path may well. generation, for we Note, earnings occur return for recent details tax of and and growth represent to XXXX that adjusted our share balance our mix projected these our acquisitions, local approximately delivering creation to note additional flow believe upside. XXXX and places robust that and not which that adjusted do and tax the in expected plan, repurchases, EBITDA on Note reflects guidance growth EBITDA anticipated quarterly.Additional in to this guidance us long-term total

which XX, a are slides reconciliation cash materials, our outlook flow. for of including measures includes to business statements various free equivalent.Please the see supplemental nearest our non-GAAP the GAAP reconciliation Following Slide

cash was million. free XXXX $XXX flow Our

Slide free with we was as reflecting to our improvement as of resilience are of challenging you in model, an our capital questions. working our the period, flow in while XXXX operator prior to part, pursue now XXXX.XXXX energized of we us As substantial our cash rejoin how compared and queue are year. to for the shown QX I turned achieve with And plans.With a the to balance on diversified XX, on improvement a proud and demonstrates attention which compared now business year XXXX to the that, would have ask performance, overall instruct reflects

Cory [Operator from the question today Instructions] JPMorgan. And Carpenter from coming first is

had I X.

you just overall I'm what the you the market just quarter how the characterize more then that seeing XXXX? the curious prior year-to-date?And trends health expand of fourth would to in Vivek, First, beyond if ad in the broadly in the could the relative gives seeing revenue and confidence you you're advertising, you're quarter secondly, on a accelerating growth bit that

Cory. Thank Yes. you,

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The Shweta next question ISI. is Khajuria from from Evercore coming

phase? Any contextual testing you is, and is you guess and my contextual whether know, in you seeing impacted as the advertising be early advertising about deprecated as and is actually one change are cookie I first My I from cookies it's that you've any -- on will talked benefiting deprecation. question be still helpful.And may Vivek, signs what comment you would for deprecation.But be of not then, it? think a on sheet, pipeline, little be the you language strong we balance of that, just on optimistic So seems second overall environment, terms more may about question XXXX your have any is, that should valuations. update in how my M&A seeing healthier bit on may Any on

X No, Yes. questions. great

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next coming from from question Instructions] UBS. [Operator The Madhukar is Kunal

This Kunal a have UBS. is [ of questions. Jason ] I on from for couple

that on seeing And also M&A. want trend? a the strategic bit? I provided buyers continuing since grow of inside more are verticals so sort And do also have thawing willing industry the to transact.Can been last portfolio is vertical? from seeing guys where signs some that, that some guys industry of the a year some So on far. which commentary I to trend you're your And apart on you of you you unpack little provide in follow-up. Could environment first independently, you one the end you know commentary where and is the general have

say of in right? X from so as of you connectivity an Martech, having we and So source comes all and platforms discussions, M&A Jason, have inbound individually I point they're that these each platforms, of platforms, our activity, sourcing of a One engaging our X success gaming health, shopping, And and tech in ways. and is And would deals. outbound. are cybersecurity, to in know, both these all each looking view, lot

So and there's always our happens new verticals corporate lookout at a fair in on amount looking platforms, myself which to the of the level, new enter. sourcing development that Bret, then there.And we're corporate for team

time of activities this And and I bolted are a I being right?In because for breadth said to on I've reasons of to are of fair they? now for, those of what value synergy see look of existing the generally like these as answer people of generally give how we to responding? sets just processes. of amount places where, the diligence in to look are the would lots before, XXXX-XXXX How information how bolt-ons we periods.In is they of tend of tone have lot I seeing things a verticals because quickly happening. end in they're terms we're underwritten like function responsiveness, a are lots both saw with open So variety on. are they And And who in the wide and questions, what in information we willing is are would a looking, of, provide this each say that -- These a lot. sort the willingness tone is say I

so point tend return good.The beat to is of be very of cash-on-cash a second that we mouths thing lot here. those from view, to a And have

a it know, us are gotten look, with you shopping these successful I another for the Health, and which last as degree able are we're boots Having vertical, being these the over us of wouldn't on X in any me we think us be into that, our for to health is businesses the the there the capital has is so these say -- very -- all vertical.So with has and And do of like to because to vertical favor platforms, of way can be been, to in RetailMeNot, lookout in of for we sort the needs set found. into each I because I like risk-reward where which we next deals always good one of did that which Everyday got a verticals the said one think support allocation the we a it's appropriate as business or corporate and verticals. that.And we these sized

And to it to hope so able around. spread we be

that is of primarily, are post-acquisition on The over have reaching the profitable you the to Jason. at our you businesses look add gone back only businesses that we've our allocated thing through last where the transition precipice a Yes, healthy look capital I achieving capital and might we've core allocated of of if are and years couple either growth.

growing. in in connectivity. So that our Martech said Vivek starting I business we've remarks, We've his gaming.As invested in see business, health. invested prepared in our e-mail on We've is think we're Moz, to invested our

stability So for investment that think our path they and I of candidates reach start capital. structural evolution and internally on become to their integration as the stronger through phase growth, of sort businesses

Got sort it. My BXB tech question space. is second on of

these might You competitor, TechTarget, of deal with speaking now merger enterprise a guys competitor. curious, just announced just for mentioned be of at bottom -- that Spiceworks, one space.And we BXB on that, is the call the another recently

space has the news? how So changed on after I'm view just current your curious the

obviously, No, execute the you a think end we're the was what plan timed on the year. it in their we've at that of ability a the And in we organization, did got against and was I business, we've Yes. at Look, new Spiceworks probably to business the plan.As well not last for good seek process, confident space given strategic space. alternatives in know, going that and follow talent described. day, carefully, we some merger seen you the place, the the

business be sense our it might have that been holding think sense considering the I given asset good to time view, now I because I think, about the Spiceworks where we the go thing software actually And that like in -- provide need the understand have, might feeling what sometimes well-known is software Spiceworks opportunities.The of say that, other through of interestingly, to that you types more a best business ad to help which will the free made that, desk not that you is that's maybe most this process was. those and the there user encoding within have we're bottom is better software to look could at what is we its potentially for, we're most and the impact, GenAI and development. where supported.And it we in actually as be is inside

so where and desk software to supported moment true, if happen. a tools where other few with going And in position be is that interesting existing the that's there an has Spiceworks an health moving for not SMB. software enterprise a software which software time ad by supported be a happened.We we really actually And has happened, the within the advertising, into really development hasn't or in might may business

out came unique a that a thing another just that different little is that we're lean into. So and going little to

from question next is the Patil Shyam coming from And SIG.

is X. on ] Aaron This [ got Shyam. I've for

please for the how First, operations the users use cases and provide you're out cases to improve AI apps. that Vivek, more use you you update or talked portfolio? a Could of and on your building sites AI rolling on lot thinking about you're an across productivity internal about

in management AI which is the called of about platform, talk can our data context Core. I Well,

and essentially allows internally emanate build placement from audience in to applications.And audience our our So and management is Core set between built our our important is properties. data signals data really our an tools, every at ad within us company our the our that content, informing interaction platform that audience that and

years.I So into important data really signal. that plus us AI stronger. there's tell been and over infused being even for contextual made lot a have management combination has contextual do a demographic capture our signal And the our data signal placement, analysis but that will we'll platform, you

degree better to And which performance. AI ad so the use generate to can we

to I produce success point an of customer just And efficiency in think an just programming guess point and that's efficiency the question, could type outcomes.The from sort think better and productivity But it we better made us from that example is using alluded that area a of in at margin coding of in terms this to see may I Spiceworks and of of help thing. and more -- but is cost in where view previous you're view. AI revenue I this seeing where least, example I I seeing encoding. outcomes of are -- the to using statement of I

releases That's gaming ads then I product know this levered business. on in space. helpful. the And is the to second,

those of who aren't on close For view just gaming, as your point? at looking XXXX could is product to pipeline us how you for release share the this

Yes.

So good. I reasonably mean, it looks

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great to going it's think event. be I a

there. will So it I leave

Rishi And from RBC. Jaluria the is coming next question from

X questions from me.

that little deeper to to of, business to AI workloads gross is First, initiatives I with and actual thinking to about what a sort impact bit functionality? AI of then on anything that P&L? or on improve impact drive are go side into How you're side wanted you these out going as some can VPN margin I into little and go either to outside about bit be macroenvironment the the COGS build the Can and talk growth. dive the higher seeing back AI. and R&D wanted the a done of you features external?And obviously, you What

Yes.

VPN LTV. VPN a endure really side, were a were against on customer just out in had the acquisition priced costs affiliate the quite had sort grew was billings new something and getting our has bounties That sign-ups in I our who XX% I mitigate. down subscriptions. than that couldn't chase to you issue started or continue We of think like upside in acquisition that bit competition So higher willing issue. are grew to was And an really XXXX, the channels It can't for think XX%. customer perpetuity.So competition pay on we --

play turn its the lot performance, starts product has flip as efficacy equation helps retention. has also out, that we're to So done to really really and product-wise going which think to drive the improve to that itself a significantly its and been growth.I improved,

label of there's that lot front going a some things got that and on. white white opportunities are us, us. we So We've we've do interesting unique also some got to label in partnership

the would really XXXX, important up about cost on the security in of in feeling back coming last and our up we to up to does Rishi, now, think, point not CapEx. say why savings of of segment.Just the change finish AI VPN or of second are is all half is So -- from which I cyber good growth that, adds in the a question. to Martech your view showing I P&L significant right it our for

to think We're our it into ways do finding are we workflows. it. I integrating

EBITDA people, certainly has we're in expenditure impact hiring our our of capital I a radical a think, mid-XXs on level efficiently, that way on or margin. not but

I in time. Richter closing are would remarks. for There hand at to the now no back to call this Bret questions queue other any like

XXXX XXXX. up and as and everyone, Paul, joining us wrap you, we our today for Thank turn you, attention thank to

weeks, in hope we'll to we on coming As see release, our out the put of be you and a we some call. participating conferences there have and in first again quarter

and does Thank today's you, ladies conference. gentlemen. conclude This

lines You a this wonderful you at Thank your day. time, disconnect may for your and participation. have