Q1 2024 Ziff Davis Inc Earnings Call

Thanks for holding we appreciate your time and patience. Please stay on the line and we'll be back in just a moment.

[music].

Operator: Thank you for waiting. Your patience is appreciated. Please hold the line, and we'll be right back with you. Thank you for holding. We look forward to talking with you soon. Please hold the line, and we'll be right back with you. Thank you.

Speaker Change: Good day, ladies and gentlemen, and welcome to the Ziff Davis first quarter 'twenty 'twenty four earnings conference call.

Operator: Good day, ladies and gentlemen, and welcome to the Ziff Davis first quarter 2024 earnings conference 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. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. 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.

Paul: My name is Paul and I will be the operator, assisting you today.

Paul: At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation.

Paul: If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.

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

Paul: I'll now turn the call over to Bret Richter, Chief Financial Officer of Ziff Davis. Thank you you may begin.

Bret Richter: Thank you. Good morning, everyone, and welcome to the Ziff Davis Investor Conference Call for Q1 2024. As the operator mentioned, I am Bret Richter, Chief Financial Officer of Ziff Davis, and I am joined by our Chief Executive Officer, Vivek Shah. A presentation is available for today's call. A copy of this presentation is available on our website. When you launch the webcast, there is a button in the viewer on the right-hand side, which will allow you to expand a slide.

Bret Richter: Thank you good morning, everyone and welcome to the Ziff Davis Investor Conference call for Q1 2024.

Bret Richter: If you have not received a copy of the press release, you may access it through our corporate website at www.ziffdavis.com. In addition, you'll be able to access the webcast from this site. After completing the formal presentation, we'll be conducting a Q&A. The operator will instruct you at that time regarding the procedures for asking questions. In addition, you can email questions to investor@Ziff Davis dot com.

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

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

Bret Richter: If you have not received a copy of the press release, you may access it through our corporate website at Www Dot Ziff Davis Dot com.

Bret Richter: In addition, you'll be able to access the webcast from this site.

Bret Richter: After completing the formal presentation, we'll be conducting a Q&A.

Bret Richter: The operator will instruct you at that time regarding the procedures for asking questions. In addition, you can email questions to Investor <unk> Ziff Davis Dot com.

Bret Richter: Before we begin our prepared remarks, allow me to read the safe harbor line. As you know, this call and the webcast will include forward-looking statements. Such statements may involve risks and uncertainties that could cause actual results to differ materially from those anticipated. Some of those risks and uncertainties include, but are not limited to, the risk factors that we have disclosed in our SEC filings, including our 10-K filings, recent 10-Q filings, various proxy statements, and 8-K filings, as well as additional risk factors that we have included as part of the slideshow for the webcast. We refer you to discussions in those documents regarding safe harbor language, as well as forward-looking statements. Now, I turn the call over to Vivek for his remarks.

Speaker Change: Before we begin our prepared remarks allow me to read the safe Harbor language.

Speaker Change: As you know this call and the webcast will include forward looking statements such statements may involve risks and uncertainties that could cause actual results to differ materially from the anticipated results.

Speaker Change: Some of those risks and uncertainties include but are not limited to the risk factors that we have disclosed in our SEC filings, including our 10-K filings recent 10-Q filings various proxy statements and 8-K filings as well as additional risk factors that we've included as part of the slideshow for the webcast.

Speaker Change: We refer you to discussions in those documents regarding safe Harbor language as well as forward looking statements.

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

Vivek Shah: Thank you, Bret, and good morning, everyone. Our first quarter financial results are some of the company's strongest since the second quarter of 2022. After six quarters of flat or declining revenues, we're happy to report revenue growth of 2.4% in the quarter. We're particularly pleased that subscription and licensing revenues continue to grow. On a trailing 12-month basis, subscription and licensing now represent over 42% of the company's revenues, providing valuable diversification, predictability, and growth.

Vivek Shah: Thank you Brett and good morning, everyone.

Vivek Shah: Our first quarter financial results are some of the company's strongest since the second quarter of 2022.

Vivek Shah: After six quarters of flat or declining revenues, we're happy to report revenue growth of two 4% in the quarter.

Vivek Shah: We're particularly pleased that subscription and licensing revenues continue to grow on a trailing 12 month basis subscription and licensing now represent over 42% of the company's revenues, providing valuable diversification predictability and growth.

Vivek Shah: It's a good start to what we expect will be a rebound year for the company.

Vivek Shah: It's a good start to what we expect will be a rebound year for the company. We see very encouraging signs of organic growth in a number of areas in our business, as well as increasingly interesting capital allocation choices. While we still have businesses facing headwinds, they are largely isolated and navigable.

Vivek Shah: We see very encouraging signs of organic growth in a number of areas in our business as well as increasingly interesting cap.

Vivek Shah: Capital allocation choices.

Vivek Shah: While we still have business is facing headwinds they are largely isolated and navigable.

Vivek Shah: Last quarter, I said I believed 2024 would represent an inflection point, and we're now clearly headed in the right direction. With the exception of our shopping business, every one of our digital media verticals grew in Q1. Overall, the digital media segment grew by a little over two percent. Most notably, our tech media vertical grew by high single digits in the first quarter, which is a sharp turnaround from the large declines we experienced over the past two years.

Vivek Shah: Last quarter I said I believe 2024 would represent an inflection point and we're now clearly headed in the right direction.

Vivek Shah: Okay.

Vivek Shah: With the exception of our shopping business every one of our digital media verticals grew in Q1.

Vivek Shah: Overall, the digital media segment grew by a little over 2%.

Vivek Shah: Most notably our tech media vertical grew by high single digits in the first quarter, which is a sharp turnaround from the large declines we experienced over the past two years.

Vivek Shah: I wanted to single out Mashable, which had traffic up 56% over the last year. At the same time, PCMag's affiliate commerce revenues were particularly strong in the quarter, and our Spiceworks B2B business is stabilized. Our gaming and entertainment vertical had a nice quarter growing mid-single digit. In an indication of IGN's leadership in the gaming industry, we announced we would be holding a three-day fan and industry event in L.A. called IGN Live to help fill the void created by the cancellation of E3.

Vivek Shah: I wanted to single out Mashable with traffic up 56% over the last year.

Vivek Shah: At the same time P. C. Max affiliate Commerce revenues were particularly strong in the quarter and our Spice works B to B business stabilizing.

Vivek Shah: Our gaming and entertainment vertical had a nice quarter growing mid single digits.

Vivek Shah: And an indication of IGN leadership in the gaming industry, we announced we will be holding a three day fan and industry event in L. A called IGN lives to help fill the void created by the cancellation of <unk> three.

Vivek Shah: The industry and fan response has been terrific.

Vivek Shah: The industry and fan response has been terrific, further cementing our position as a leader in the gaming and entertainment industry. Notwithstanding a pause in marketing from a major pharma advertiser, our health and wellness vertical had another solid growth quarter. And it's worth remembering that this part of our business has had a string of consecutive growth quarters. In January, the Cleveland Clinic launched the Cleveland Clinic Diet app, featuring what we believe to be state-of-the-art food and fitness tracking, in partnership with our FitNow development team, the producers of our Luzit app.

Vivek Shah: Further cementing our position as a leader in the gaming and entertainment industry.

Vivek Shah: Notwithstanding a pause in marketing from a major pharma advertiser or health and wellness vertical had another solid growth quarter.

Vivek Shah: And it's worth remembering that this part of our business has had a string of consecutive growth quarters.

Vivek Shah: In January the Cleveland Clinic launched the Cleveland Clinic diet App.

Vivek Shah: Preaching what we believe to be state of the art food and fitness tracking and partnership with our fit now development team the producers of our lucid app.

Vivek Shah: The Lose It app itself achieved record Q1 revenue bookings. Our shopping business represents the sole blemish in our digital media segment. We experienced a mid-single-digit revenue decline, even with the benefit of an acquisition in the quarter, while traffic has declined on our shopping sites, including RetailMeNot. The major challenges relate to adverse changes with two important partners. One is a distribution partner who has reduced their distribution of our coupon code, and the other is a large merchant who has cut their commission rate. The former is likely to not improve, but we expect that at some point, the latter will. The performance and difficult near-term outlook for shopping are contrary to the expectations we had for the business this year.

Vivek Shah: The lose it app itself achieved record Q1 revenue bookings.

Vivek Shah: Our shopping business represents the sole blemish in our digital media segment.

Vivek Shah: We experienced a mid single digit revenue decline, even with the benefit of an acquisition in the quarter.

Vivek Shah: While traffic has declined at our shopping sites, including Retailmenot.

Vivek Shah: The major challenges relate to adverse changes with two important partners.

Vivek Shah: One as a distribution partner, who has reduced their distribution of our coupon codes and the other is a large merchant who was cut their commission rates.

Vivek Shah: The former is likely to not improve but we expect that at some point the latter will.

Vivek Shah: The performance in difficult near term outlook for shopping are contrary to the expectations. We had for the business this year.

Vivek Shah: Thankfully the strength of the balance of our portfolio is offsetting these challenges and we believe shopping will be pointed back to growth before long.

Vivek Shah: Thankfully, the strength of the balance of our portfolio is offsetting these challenges, and we believe shopping will be pointed back to growth before long. Our connectivity business continued its steady growth, and we launched new SaaS offerings called Ekahau Measure and MeasurePlus, addressing customer demand. We've seen strong initial results with these new products, representing 20% of Ekahau software sales in Q1. We also launched the new Speed Test Insights portal to help our customers make more informed business decisions based on the depth and breadth of proprietary data collected by

Vivek Shah: Our connectivity business continued its steady growth and we launched new SaaS offerings called ACA, how measure and measure plus addressing customer demand.

Vivek Shah: We've seen strong initial results with these new products, representing 20% of ACA, how software sales in Q1.

Vivek Shah: We also launched the new speed test insights portal to help our customers make more informed business decisions based on the depth and breadth of proprietary data collected by Oklahoma.

Vivek Shah: Our cyber security and Martech segment was a bright spot in the quarter.

Vivek Shah: Our Cybersecurity and Martech segment was a bright spot in the, After a year when it declined nearly 7%, the segment grew 3.3%, all organic. We did have a few timing benefits in the quarter, but we're confident that for the year we will be flat, and more importantly, enter 2025 with strong momentum. This is important for the company, as this segment, which historically was run purely for profitability, is now positioned to grow organically and continue to deliver adjusted EBITDA margins in the mid-30s.

Vivek Shah: After a year when it declined nearly 7% the segment grew 3.3% all organically.

Vivek Shah: We did have a few timing benefits in the quarter, but we're confident that for the year will be flat and more importantly enter 2025 with strong momentum.

Vivek Shah: This is important for the company as this segment, which historically was run purely for profitability is now positioned to grow organically and continue to deliver adjusted EBITDA margins in the mid thirties.

Vivek Shah: We think the long term shareholder value implications should be compelling as we expect to achieve rule of 40 growth and very valuable software categories like cyber security and marketing technology.

Vivek Shah: We think the long-term shareholder value implications should be compelling as we expect to achieve Rule of 40 growth in very valuable software categories like cyber security and marketing technology. Our cybersecurity group drove the growth in the quarter. Your strength in Viper's email security and endpoint EDR offerings and continuing improvements in VPN, which has been a material drag on the business for some time. As I said in the last quarter, we believe VPN will grow in Q4 of this year.

Vivek Shah: Our cyber security group drove the growth in the quarter strength in Vipers email security and endpoint Edr offerings and continuing improvements in VPN.

Vivek Shah: Which has been a material drag on the business for some time.

Vivek Shah: As I said in the last quarter, we believe VPN will grow in Q4 of this year.

Vivek Shah: Within our Martech group, our email business continued its strong performance with double digit revenue growth in Q1.

Vivek Shah: Within our MarkTech group, our email business continued a strong performance with double-digit revenue growth in Q1. Our growth in email was driven by multiple factors, including strong customer retention, growing use, and the go-to-market expansion I talked about in the last quarter. The last two years have been unusually quiet for us on the M&A front.

Vivek Shah: Our growth in email was driven by multiple factors, including strong customer retention.

Vivek Shah: Growing usage.

Vivek Shah: And the go to market expansion I talked about in the last quarter.

Vivek Shah: The last two years have been unusually quiet for us on the M&A front.

Vivek Shah: However, the lack of deal volume should not be viewed as anything but an anomaly. Our M&A machine is very active and focused. We maintain an active pipeline of off-market opportunities that are unique to Ziff Davis, and we believe we remain one of the first phone calls when business owners in our sectors consider a sale. Over the last two years, we have reviewed many opportunities. But we are very disciplined with the company's capital. We never do deals for the sake of doing deals, and as I look back on the many opportunities we have passed on, I have no regrets.

Vivek Shah: However, the lack of deal volume should not be viewed as anything but an anomaly.

Vivek Shah: Our M&A machine is very much active and focused.

Vivek Shah: We maintain an active pipeline of off market opportunities that are unique to Ziff Davis and we believe we remain one of the first phone calls with business owners and our sectors consider a sale.

Vivek Shah: Over the last two years, we have reviewed many opportunities.

Vivek Shah: But we are very disciplined with the company's capital.

Vivek Shah: We never do deals for the sake of doing deals and as I look back on the many opportunities we have passed on I have no regrets.

Vivek Shah: As we look forward, we will continue to prioritize investments in the most durable, high-quality assets in our sector, and we will seek to embrace the situations where we believe we have a unique ability to unlock value. We will not shy away from situations where we see an opportunity to turn around a challenged asset. At the same time, we will lean into acquisitions that represent growth at a reasonable price. While M&A remains our priority when it comes to capital allocation, we are conscious of the other options we have, including share buybacks. At our current price for the share, we believe Zip Davis is one of the most attractive buying opportunities in the market.

Vivek Shah: As we look forward, we will continue to prioritize investments in the most durable high quality assets in our sectors.

Vivek Shah: And we will seek to embrace the situations, where we believe we have a unique ability to unlock value.

Vivek Shah: We will not shy away from situations, where we see an opportunity to turnaround.

Vivek Shah: Challenged asset.

Vivek Shah: At the same time, we will lean into acquisitions that represent growth at a reasonable price.

Vivek Shah: While M&A remains our priority when it comes to capital allocation, we are conscious of the other options, we have including share buybacks.

Vivek Shah: At our current price per share we believe Ziff Davis is one of the most attractive buying opportunities in the market and as a result, we expect to continue to pursue buybacks of our stock to take advantage of the dislocation between our trading price and the intrinsic value of our portfolio.

Vivek Shah: And as a result, we expect to continue to pursue buybacks of our stock to take advantage of the dislocation between our trading price and the intrinsic value of our portfolio. Now, let me shift to our AI enablement. Throughout the organization, we continue to harness the power of artificial intelligence, develop new product experiences, and create efficiencies across our operations. Moz launched two generative AI-powered features, domain search theme, and Keyword Searching Ted. These features are designed to rapidly decode a website's core themes and strategic keywords, providing SEO professionals with instant insights into a site's purpose and competitive position.

Vivek Shah: Now, let me shift to our AI enablement work.

Vivek Shah: Throughout the organization, we continue to harness the power of artificial intelligence developed new product experiences and create efficiencies across our operations.

Vivek Shah: Mars launched to generative AI powered features.

Vivek Shah: The main search theme.

Vivek Shah: And keyword search intent.

Vivek Shah: These features were designed to rapidly Dakota websites core themes and strategic keywords, providing S. C O professionals with instant insights into our sites purpose.

Vivek Shah: And competitive positioning.

Vivek Shah: Together these tools should streamline SCO workflows, turning routine researched into efficient strategic operations that deliver deeper insights faster.

Vivek Shah: Together, these tools should streamline SEO work, turning routine research into efficient strategic operations that deliver deeper insights faster. Across some of our health properties, we have implemented AI-powered search functionality. That should enhance site utility. This advanced search technology should improve the accuracy and relevance of search results but also simplify the process for users to locate the information and opportunities they seek. By adeptly interpreting user queries, our AI-powered search is designed to deliver a more effective and satisfying search experience, thereby boosting user engagement and experience on these platforms.

Vivek Shah: Across some of our health properties, we have implemented AI powered search functionality that should enhance site utility.

Vivek Shah: This advanced search technology should not only improve the accuracy and relevance of search results.

Vivek Shah: But also simplify the process for users to locate the information and opportunities they seek.

Vivek Shah: By a definitely interpreting user queries, our AI powered search was designed to deliver a more effective and satisfying search experience, thereby boosting user engagement and experience on these platforms.

Vivek Shah: Echo how has implemented a leading AI powered customer support assistant.

Vivek Shah: ECHAO has implemented a leading AI-powered customer support assistance that enhances support by automating our ticket creation based on user-defined workflows. The system is designed to intelligently search for and suggest relevant documentation to resolve user issues swiftly. If issues persist, it can transition to generating support tickets.

Vivek Shah: That enhance the support by automating our ticket creation based on user defined workflows.

Vivek Shah: The system is designed to intelligently search for and suggest relevant documentation to resolve user issues swiftly.

Vivek Shah: If issues persist it can transition to generating support tickets significantly streamlining the support process and enhancing user satisfaction.

Vivek Shah: Significantly streamlining the support process and enhancing user satisfaction. Our optimism about the transformative potential of AI across Ziff Davis remains steadfast. At the same time, we maintain our firm stance that AI companies must fully respect and adhere to our copyright. This is essential to ensuring a mutually beneficial relationship between AI companies and the public. In this regard, we are actively exploring licensing frameworks that effectively manage the utilization of publishers' content. Additionally, we are monitoring the volume and frequency of our content being scraped. This data will help facilitate licensing deals and ensure fair compensation for our copyrighted material.

Vivek Shah: Our optimism about the transformative potential of AI across if Davis remains steadfast.

Vivek Shah: At the same time, we maintain our firm stance that AI companies must fully respect and adhere to our copyrights.

Vivek Shah: This is essential to ensuring a mutually beneficial relationship between AI companies and.

Vivek Shah: And publishers.

Vivek Shah: In this regard we are actively exploring licensing frameworks that effectively manage the utilization of publishers content.

Vivek Shah: Additionally, we are monitoring the volume and frequency of our content being scraped.

Vivek Shah: This data will help facilitate licensing deals and ensure fair compensation.

Vivek Shah: For our copyrighted material.

Vivek Shah: Now let me provide you with an update on our ESG efforts.

Vivek Shah: Now, let me provide you with an update on our ESG efforts. In April, we released Ziff Davis' 2023 ESG report and, separately, Ziff Davis's 2023 DEI report, both of which can be found on our website. The ESG report includes findings from our most recent greenhouse gas inventory, and I'm pleased to report that our 2023, Scope 1, 2, and 3 combined emissions represent a 38% decrease from 2022. This is substantial year-over-year progress and confirms that we are well on our way to meeting our validated science-based emissions reduction target, which effectively commits us to cutting our emissions by 50% by 2030.

Vivek Shah: In April we released Ziff Davis' 20, twenty-three ESG report and.

Vivek Shah: And separately Ziff Davis is 'twenty twenty-three D. I report both of which can be found on our website.

Vivek Shah: The ESG report includes findings from our most recent greenhouse gas inventory.

Vivek Shah: And I'm pleased to report that our 'twenty twenty-three scope, one two and three combined emissions.

Vivek Shah: Representing a 38% decrease from 2022.

Vivek Shah: This is substantial year over year progress and confirms that we are well on our way to meeting our validated science based emissions reduction targets, which effectively commit us to come out cutting our emissions by 50% by 2030.

Vivek Shah: The report also details how we've leveraged our platforms to help implement positive change in our communities and.

Vivek Shah: The report also details how we've leveraged our platforms to help implement positive change in our communities and discusses our extensive data, privacy, security, and corporate governance practices. The DEI report provides an update on company demographics and our ongoing efforts to champion representation across Ziff Davis. Of note, in 2023, Ziff Davis increased the percentage of both managers and corporate leadership roles held by people of color, and we increased the percentage of senior leadership roles held by women as compared to the prior year.

Vivek Shah: And discusses our extensive data privacy security and corporate governance practices.

Vivek Shah: The D. I report provides an update on company demographics, and our ongoing efforts to champion representation across Ziff Davis.

Vivek Shah: Of note in 2023, Ziff Davis increased the percentage of both managers.

Vivek Shah: And corporate leadership roles held by people of color and we increased the percentage of senior leadership roles held by women as compared to the prior year.

Vivek Shah: The report also includes the latest programs policies and actions, we're taking to foster a workplace in which all can thrive.

Vivek Shah: The report also includes the latest programs, policies, and actions we are taking to foster a workplace in which all can thrive. Needless to say, I'm incredibly proud of the work Ziff Davis has done in this area, and I hope you'll take some time to review the report. With that, I'll hand the call back to Bret. Thank you, Vivek.

Vivek Shah: Needless to say I'm incredibly proud of the work Ziff Davis has done in this area and I Hope you will take some time to review the reports.

Vivek Shah: With that let me hand, the call back to Bret.

Bret Richter: Thank you, Vivek. Let's discuss our financial results. Our earnings release reflects both our gap and adjusted financial results for Q1-2024. My commentary will primarily relate to our Q1-2024 adjusted financial results and the comparison to prior periods.

Bret Richter: Thank you Vivek, let's discuss our financial results our earnings release reflects both our GAAP and adjusted financial results for Q1 2024.

Bret Richter: My commentary will primarily relate to our Q1 2024 adjusted financial results and the comparison to prior periods.

Bret Richter: Please see slide four for the summary of our financial results.

Bret Richter: Please see slide four for the summary of our financial results. Q1 2024 revenues were $314.5 million, as compared with revenue of $307.1 million for the prior year period, reflecting growth of 2.4%. Q1 2024 adjusted EBITDA was $100.8 million, as compared with $94.3 million for the prior year period, reflecting growth of 6.8%. Our adjusted EBITDA margin for the quarter was 32%, a 130 basis point improvement as compared with Q

Bret Richter: Q1, 2024 revenues were $314 $5 million as compared with revenue of $307 $1 million for the prior year period, reflecting growth of 2.4%.

Bret Richter: Q1, 2024, adjusted EBITDA was $100.8 million as compared with $94.3 million for the prior year period, reflecting growth of six 8% our adjusted EBITDA margin for the quarter was 32% a 130 basis point improvement as compared with Q1.

Bret Richter: One 2023.

Bret Richter: We reported first quarter adjusted diluted EPS of $1.27, an increase of 15.5% as compared with the prior year period. Our Q1 performance reflects revenue growth in five of our verticals; technology, gaming, and entertainment, health and wellness, connectivity, and cyber security all contributed to the quarter's year-over-year revenue increase. However, Martech was essentially flat year-over-year.

Bret Richter: We reported first quarter adjusted diluted EPS of $1.27, an increase of 15.5% as compared with the prior year period.

Bret Richter: Our Q1 performance reflects revenue growth in five of our verticals technology gaming and entertainment health and wellness connectivity and cyber security all contributed to the quarter's year over year revenue increase Martech was essentially flat year over year as Vivek noted our core shopping business.

Bret Richter: As Vivek noted, our core shopping business experienced a revenue decline, which was largely offset by the addition of TDS's results from the date of its acquisition. Slides five and six reflect performance summaries for our two primary sources of revenue, advertising and performance marketing, and subscription and licensing. Slide 5 reflects the company's advertising and performance marketing revenue results. Note that these figures include the TDS acquisition.

Bret Richter: <unk> the revenue decline, which was largely offset by the addition of Tds as results from the date of its acquisition.

Bret Richter: Slides five and six of what performance summaries for our two primary sources of revenue advertising in performance marketing and subscription and licensing.

Bret Richter: Slide five reflects the company's advertising in performance marketing revenue results.

Bret Richter: Note that these figures include the Tds acquisition.

Bret Richter: In Q1 2024, advertising and performance marketing revenue was flat as compared with the prior year period, while trailing 12-month advertising and performance marketing revenue declined by 3.5%. Our net advertising revenue retention, an annual trailing 12-month statistic, was 91.6% for Q1 2024, which is the highest level seen since Q4 2022. In the first quarter, Ziff Davis had more than 1,600 advertisers with an average quarterly revenue per advertiser of more than $9

Bret Richter: Q1, 2020 for advertising in performance marketing revenue was flat as compared with the prior year period, while trailing 12 month advertising in performance marketing revenue declined by 3.5%.

Bret Richter: Our net advertising revenue retention of annual trailing 12 months statistic was 91, 6% for Q1 2024, which is the highest level seen since Q4 2022.

Bret Richter: In the first quarter Ziff Davis had more than 1600 advertisers with an average quarterly revenue per advertiser of more than $95000.

Bret Richter: This reflects fewer customers at a higher average revenue per customer as compared with the prior year period. Slide 6 depicts our subscription and licensing revenue. In Q1, 2004, subscription and licensing revenue grew 4.8% as compared with the prior year period, reflecting growth at Ucla, Viper, Luzit, campaigner, and Humble Bundle, among others. Subscription and licensing revenue grew 3.2% during the last 12 months.

Bret Richter: This reflects fewer customers at a higher average revenue per customer as compared with the prior year period.

Bret Richter: Slide six depicts our subscription and licensing revenue.

Bret Richter: Q1, 2020 for subscription and licensing revenue grew 4.8% as compared with the prior year period, reflecting growth at Uccle Viper lose at campaigner and humble bundle among others.

Bret Richter: Subscription and licensing revenue grew three 2% during the last 12 months.

Bret Richter: As Vivek said, we very much value our subscription and licensing revenue for the diversification, predictability, and growth it represents. The table on the bottom of slide six includes subscription and licensing metrics for the last eight quarters. sequentially, total subscription and licensing customers increased, primarily reflecting growth in Lose It and Humble Bundle subscriptions. Our average quarterly revenue per subscriber was $44.55, essentially flat to the prior quarter. Our overall churn rate increased by 23 basis points from Q4 2023.

Bret Richter: As Vivek said, we very much value, our subscription and licensing revenue for the diversification predictability and growth it represents.

Bret Richter: The table on the bottom of slide six includes subscription and licensing metrics for the last eight quarters.

Bret Richter: Sequentially total subscription and licensing customers increased primarily reflecting growth in lose it and humble bundle subscriptions.

Bret Richter: Our average quarterly revenue per subscriber was $44.55 essentially flat to the prior quarter.

Bret Richter: Our overall churn rate increased by 23 basis points from Q4 2023. This primarily reflects the timing and mix of revenues.

Bret Richter: This primarily reflects the timing and mix of revenues at OOP. In Q1 2024, other revenues increased by 5.7% year over year. Slide 7 provides quarterly organic and total revenue growth rates for the last eight quarters. The company includes revenue from an acquired business within the definition of organic revenue for the first month in which the company can compare that full month in the current year against the corresponding full month under its ownership in the prior year.

Bret Richter: Q1, 2024, other revenues increased by five 7% year over year.

Bret Richter: Slide seven provides quarterly organic and total revenue growth rates for the last eight quarters.

Bret Richter: The company includes revenue from an acquired business within the definition of organic revenue for the first month in which the company can compare that full months in the current year against the corresponding full months under its ownership in the prior year Sim.

Bret Richter: Similarly, the company excludes revenue from divested assets, beginning with the quarter of the disposal of the asset.

Bret Richter: As well as from the prior year's comparable period in.

Bret Richter: Similarly, the company excludes revenue from divested assets beginning with the quarter of the disposal of the asset, as well as from the prior year's comparable period. In Q1 2024, we divested two small businesses in our shopping vertical that serve the e-commerce marketplace in France, Maradu and Popayo.

Bret Richter: In Q1, 2024, we divested two small businesses in our shopping vertical that serve the e-commerce marketplace in France, My redo and Pope.

Bret Richter: The results of these businesses are included in our Q1 2024 financial results through the date of the divestiture. However.

Bret Richter: The results of these businesses are included in our Q1 2024 financial results through the date of the divestiture. However, per definition, related revenue in 2023 and 2024 is excluded from the Q1 2024 Organic Growth Calculation. As depicted on the slide, first quarter 2024 organic growth was flat, which represents an improvement as compared with the organic revenue decline in Q1 2023. Technology, gaming, and entertainment, health and wellness, connectivity, and cybersecurity all generated organic growth for the quarter.

Bret Richter: However per the definition the related revenue in 2023, and 2024 is excluded from the Q1 2020 for organic growth calculation as depicted on the slide first quarter 2024 organic growth was flat, which represents an improvement as compared with the organic revenue.

Bret Richter: Decline in Q1, 2023 technology gaming and entertainment health and wellness connectivity and cyber security all generated organic growth for the quarter.

Bret Richter: Please refer to slide eight as we discuss our balance sheet.

Bret Richter: Please refer to slide 8 as we discuss our balance sheet. As of the end of Q1, 2024, we had $735 million of cash and cash equivalents and $156 million of short and long-term investments. We also have significant leverage capacity on both a gross and net leverage basis. As of the end of the first quarter, gross leverage was 2.1 times trailing 12 months adjusted EBITDA, and our net leverage was 0.6 times and 0.2 times, including the value of our financial investment.

Bret Richter: As of the end of Q1, 2024, we had $735 million of cash and cash equivalents and $156 million of short and long term investments. We also have significant leverage capacity on both a gross and net leverage basis.

Bret Richter: As of the end of the first quarter gross leverage was two one times trailing 12 months adjusted EBITDA and our net leverage was 0.6 times in 0.2 times, including the value of our financial investments.

Bret Richter: The cash balances net of the cash used for the acquisition of T. D. S. The Tds acquisition also included the acquisition of a negative net working capital position, which was factored into the net cash consideration paid at closing.

Bret Richter: The cash balance is net of the cash used for the acquisition of TDS. The TDS acquisition also included the acquisition of a negative net working capital position, which was factored into the net cash consideration paid at closing.

Bret Richter: Our strong balance sheet continues to be the foundation of our capital allocation strategy. With the acquisition of TDS in the first quarter, we have returned to using our balance sheet to support M&A investments. We will also continue to consider other capital allocation alternatives. And while we did not repurchase stock during the first quarter, we plan to resume stock repurchases during the second. Turning to slide 10.

Bret Richter: Our strong balance sheet continues to be the foundation of our capital allocation strategy with the acquisition of Tds and the first quarter, we have returned to using our balance sheet to support M&A investments.

Bret Richter: We will also continue to consider other capital allocation alternatives and while we did not repurchase stock during the first quarter, we plan to resume stock repurchases during the second quarter.

Bret Richter: Turning to slide 10.

Bret Richter: We are reaffirming the fiscal year 2024 guidance range that we presented in February 2024.

Bret Richter: We are reaffirming the fiscal year 2024 guidance range that we presented in February 2024. We expect Q2 to represent revenue growth similar to that of Q1, with an acceleration in revenue growth in Q3 and Q4. Q2 adjusted EBITDA margins are expected to be a bit below Q1 2024, reflecting our plan to continue to invest in our businesses to support the balance of their 2024 plans and certain other factors. Importantly, we plan to continue to focus on the creation of long-term shareholder value and not run the business to achieve short-term quarterly results.

Bret Richter: We expect Q2 to represent revenue growth similar to that of Q1 with an acceleration in revenue growth in Q3 and Q4.

Bret Richter: Following our Business Outlook slides are our supplemental materials, including reconciliation statements for the various non-GAAP measures to their nearest GAAP equivalent. Slide 14 includes a reconciliation of free cash flow. Q1 2024 free cash flow was $47.4 million. However, this figure includes a negative free cash flow of $39.1 million associated with TDS. As I mentioned previously, as an issuer of gift cards, TDS maintains a large working capital position and it

Operator: And while Q1 reflects significant working capital usage of TDS, we expect TDS to be a contributor to free cash flow on an annual basis, excluding the impact of TDS, Q1 free cash flow was $86.5 million. Note that our semi-annual cash interest payments on our outstanding debt occur in Q2 and Q4, which will impact Q2 free cash flow. In addition, we plan to make significant cash tax payments in Q2, 2000. Overall, we believe that Q1 2024, which reflects growth in revenue, adjusted EBITDA, and adjusted diluted EPS, was a solid start to 2024.

Operator: And while Q1 reflects significant working capital usage of Tds, We expect TD has to be a contributor to free cash flow on an annual basis.

Operator: Excluding the impact of Tds Q1, free cash flow was $86 $5 million.

Operator: Note that our semiannual cash interest payments on our outstanding debt occur in Q2, and Q4, which will impact Q2 free cash flow. In addition, we plan to make significant cash tax payments in Q2 2024.

Operator: Overall, we believe that Q1, 2024, which reflects growth in revenue adjusted EBITDA and adjusted diluted EPS was a solid start to 2024.

Operator: And while we expect some softness in the second quarter, we have reaffirmed our guidance, which implies growth in all three of these metrics for the full year. Q1 also reflects the completion of our first acquisition in 2024, and we have maintained a very strong liquidity position to support our continued focus on M&A, as well as other capital allocation alternatives, including stock repurchase. We look forward to the rest of 2020. With that, I would now ask the operator to rejoin us to instruct you on how to queue for questions.

Operator: And while we expect some softness in the second quarter, we have reaffirmed our guidance, which implies growth in all three of these metrics for the full year.

Operator: Q1 also reflects the completion of our first acquisition of 2024, and we have maintained a very strong liquidity position to support our continued focus on M&A as well as other capital allocation alternatives, including stock repurchases. We look forward to the rest of 2024.

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

Speaker Change: Thank you we will now be conducting a question and answer session in the interest of time, we ask that you. Please limit yourself to one question if you would.

Operator: Thank you. We will now be conducting a question and answer session. In the interest of time, we ask that you please limit yourself to one question.

Operator: If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key.

Speaker Change: We'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue you.

Operator: You May press star two if he would like to remove yourself from the queue.

Operator: For participants using speaker equipment that may be necessary to pick up your handset before pressing the star keys, one moment. Please while we begin.

Operator: One moment, please, while we begin. And the first question today is coming from Shyam Patil from SIG. Shyam, your line is live. Hi, this is Daniel on behalf of Shyam.

Daniel: And the first question today is coming from Sham Patil from Sig Xiaomi Your line is live.

Daniel: Hi, This is Neil on for Sean Thanks for taking our question. So on the Mashable traffic growth number and you mentioned in the prepared remarks could you talk a bit more about what's going well there and how are you able to boost traffic by that much in the quarter. Thanks.

Daniel: Yeah. So great question look I think a lot of it is a very tuned content strategy I think the editorial team. There is doing a really nice job diversified traffic sources search social direct.

Vivek Shah: Yeah, no, so great question. Look, I think a lot of it is a very well-tuned content strategy. I think the editorial team there is doing a really nice job of diversified traffic, sources, search, social, direct, and even traffic between properties. And so that was good to see. PCMag as well. So, across the board, traffic is actually quite good. And it's something we obviously watch very closely. We get asked a lot about what's happening in search with respect to AI. And again, the traffic story at the company continues to be positive.

Vivek Shah: Eaton traffic between properties and so that was good to see PC Mag as well so across the board traffic is actually quite quite good.

Vivek Shah: It's something we obviously watch very closely we get asked a lot about what's happening in search with respect to AI and again the traffic story at the company continues to be positive.

Speaker Change: Great. Thanks.

Vivek Shah: Yeah.

Vivek Shah: Thank you. The next question is coming from Egal Iranian from Citigroup.

Operator: Thank you. The next question is coming from Ygal Arounian from Citigroup. Ygal Arounian is here live.

Ygal Arounian: Your line is live.

Ygal Arounian: Hey, good morning, guys. Maybe to start, you know, giving some of the incremental news around licensing with Gen AI and Vivek. You spoke about it a little bit, but any more call you could share on, you know, how you think about those negotiations, broader partnerships versus licensing fees, and how to think about timing around when some of those things might play out.

Operator: Yes.

Ygal Arounian: Hey, good morning, guys.

Ygal Arounian: Maybe to start.

Ygal Arounian: Given some of the incremental news around licensing with.

Ygal Arounian: Around Gen AI in a.

Ygal Arounian: Vivek you spoke about it a little bit but.

Ygal Arounian: And any more color you could share on on.

Ygal Arounian: How you think about those negotiations.

Ygal Arounian: Broader partnerships versus licensing fees in.

Ygal Arounian: How to think about timing around when some of those things might play out.

Speaker Change: Yeah No sure. So look I think we are.

Vivek Shah: Yeah, no, sure. So look, I think we are very encouraged to see marketplace movement relating to large language models and content owners. And so for us, it seems to be an indication of a growing consensus that there needs to be compensation. So that, to me, is a great sign.

Vivek Shah: Very encouraged to see marketplace movement.

Vivek Shah: <unk>, two large language models and content owners and so on.

Vivek Shah: For us it seems to be an indication of a growing consensus that there needs to be compensation. So that to me I think is a great sign and we are seeing.

Vivek Shah: We're seeing arrangements and agreements.

Vivek Shah: And we're seeing arrangements and agreements announced almost daily. We are in active dialogue. I would say that we're being thoughtful and patient as we pursue these relationships because, to your point, the value extraction can be multiple. It can be direct licensing fees.

Vivek Shah: <unk> announced almost daily.

Vivek Shah: Our inactive dialogue I would say that we're being thoughtful and patient as we pursue these relationships because to your point the value extraction can be multiple it can be direct licensing fees it can be.

Vivek Shah: It can be, Traffic is a value that, as you know, at least when you think about search engines, that is the trade that we content providers find ourselves in, which is the right to crawl our content in exchange for traffic. And then other considerations, other developments, and ways to sort of enhance and accelerate AI Enablement. So all of that is on the table. Obviously, we have nothing specific to announce. However, today, the dialogue is strong. I put this into the category of possibly the second mouse gets the cheese.

Vivek Shah: Traffic and traffic is a value that is you know at least when you think about search engine that is the trade that we content providers find ourselves in which is the right to crawl our content in exchange for traffic and then other considerations other developments in ways to sort of enhance.

Vivek Shah: And accelerate AI enablement. So all of that is on the table. Obviously, we have nothing specific to announce today. The dialogue is strong I put this into the category of.

Vivek Shah: Possibly the second mouse gets the cheese, and so I'd, rather be patient and understand the market a little bit more before we make commitments that become the framework by which we work with all of the all of that and so I think you know we're willing to be patient care to have the market I think crystallize a little bit better.

Vivek Shah: And so I'd rather be patient and understand the market a little bit more before we make commitments that become the framework by which we work with all of the LLFs. And so I think, you know, we're willing to be patient here to have the market, I think, crystallize a little bit better. As I also said, I think for us, we have a good understanding of how our content and the tokens represented by our content have been used in the foundational model and what was done through Common Crawl.

Vivek Shah: As I also said I think for US we have a good understanding.

Vivek Shah: Of how our content and the tokens represented by our content had been used in the foundational model.

Vivek Shah: And what was done through common crawl now as we look at retrieval augment to generation drag.

Vivek Shah: Now, as we look at retrieval augmented generation, you know, drag, having an understanding of how frequently various LLMs are hitting our content is an active part of our process right now. We want to have a really clear sense of who's actually pulling in what when, and that, I think, will also inform those discussions.

Vivek Shah: Having an understanding of how frequently.

Vivek Shah: Various llm's are hitting our content is an active part of our process right now we want to have a really clear sense of who's actually pulling in what when.

Vivek Shah: That I think will also inform those discussions.

Speaker Change: Okay helpful.

Unknown Attendee: Unknown Attendee. I hope it will be interesting to see how all that plays out. I'm sure there's going to be a lot there in the coming months and beyond. Maybe then just to go to the advertising market, you know, because, first of all, we've seen a really strong ad market, at least for just looking at earnings in one queue. Looks like some of those improvements are coming through. I know you guys always talk about how you have different verticals, and, you know, each one is somewhat independent of the other.

Vivek Shah: Interesting to see how all that plays out I'm sure there's going to be a lot there in the coming months and beyond.

Unknown Attendee: Maybe then just go to the App.

Unknown Attendee: Advertising market.

Unknown Attendee: There's always the well first of all we stand out really strong AD market at least preferred just looking at earnings in <unk>.

Unknown Attendee: Looks like some of those improvements are coming through I know you guys always talk about.

Unknown Attendee: The verticals in.

Unknown Attendee: Each one is somewhat independent of the other but what are you seeing from the AD market more broadly.

Unknown Attendee: But what are you seeing from the ad market more broadly with some of the ups and downs you're seeing? How should we think about how all that might translate or play out over the course of the year? Look, I think Q1

Unknown Attendee: Some of the ups and downs Youre seeing how should we think about how all that might translate to play out over the course of the year.

Vivek Shah: Look, I think the Q1 dynamics are very encouraging. I start with tech because tech has been, as you know, a source of drag and challenge for us for some time. So the fact that it grew and, I think arguably, probably had the highest growth rate of any of the ad verticals within the company was a good sign. Now, the comp is easier, and I'll fully admit that, but I'd rather be up than what we've been dealing with in the tech vertical.

Unknown Attendee: Look I think the Q1.

Vivek Shah: Dynamics are very encouraging and I start with tech because <unk> has been as you know a source of drag and challenge for us for some time. So the fact that it grew and I think arguably probably had the highest growth rate of any of the AD verticals within the company was a good sign now the comp is easier.

Vivek Shah: And so I will fully admit that but I'd rather be up than what we've been dealing with in the tech vertical. So that was a very positive sign and we feel encouraged about what that means for the balance of the year gaming entertainment continues to be strong.

Vivek Shah: So that was a very positive sign, and we feel encouraged about what that means for the balance of the year. Gaming entertainment continues to be strong. We feel very good about the vertical and the timing of game releases, which is a big driver of that business, but we're doing very well with consumer packaged goods as well. I would say in health and wellness that has been a steady grower throughout, and that has been a source of positive news for the company.

Vivek Shah: We feel very good about the vertical and sort of the timing of.

Vivek Shah: You know sort of game releases, which is a big driver of that business, but we're doing very well with consumer packaged goods as well.

Vivek Shah: For a long time now, we did have a single very large pharma marketer pause campaigns across the board that affects us like it does everyone else in the space. But we feel very confident that, over time, that's going to get unpaused. And so that's more about strategy and leadership change at that particular marketer, in shopping, and that's not, I don't think, a retail sector statement. I think it's very specific things relating to our business, some of which I think we've got a very good handle on in terms of how to resolve, some of which I think is just a headwind we're going to have to deal with.

Vivek Shah: I would say in health and wellness that has been a steady grower throughout that has been a source of of positive news for the company for a long time now we did have a single very large pharma marketer.

Vivek Shah: Pause campaigns across the board that affects us like it does everyone else in the space, but we feel very confident that over time, that's going to get unpoliced and so that's more about strategy and leadership change at that particular marketer.

Vivek Shah: As I said the challenge for us.

Vivek Shah: In the quarter was in shopping and that's not I don't think a retail sector statement I think it's very specific things relating to our business some of which I think we've got a very good handle on in terms of how to resolve some of which I think is just a headwind we're going to have to deal with but that's been the category that was the surprise as I said in my prepared.

Vivek Shah: But that's the category that was a surprise, as I said in my prepared remarks. It wasn't something we were anticipating, but it's also not something we don't think we can manage. So look, the other thing I will say, because everyone focuses on percentages, you have to recall that for us, at least on the downside in prior periods, we also didn't fall like many in the various verticals I'm discussing. And so if the decline wasn't as pronounced, the rebound may not be as pronounced, which is something I think is important for me to share. And so this is sometimes worth looking at over a multi-year period.

Vivek Shah: Paired remarks, it wasn't something we were anticipating but it's also not something we don't think we can manage so look the other thing I will say because everyone focuses on percentages you have to recall that for us at least on the downside in prior periods. We also didn't fall like many in the various verticals in which I'll discuss.

Vivek Shah: And so if the decline wasn't as pronounced the rebound may not be as pronounced which is something I think important.

Vivek Shah: Four for me to share and so this is sometimes worth looking at <unk>.

Vivek Shah: Over a multiyear period.

Speaker Change: Thanks, so much.

Speaker Change: Thank you.

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

Vivek Shah: Thank you. The next question is coming from Rishi <unk> from RBC Rishi.

Rishi Nitya Jaluria: Your line is live.

Rishi Nitya Jaluria: Hey, Thanks. This is rich calling non variation today. Thanks for taking my question I was just kind of wondering can we peel back a little bit on the shopping just in terms of like what dynamics, you're seeing going on in that business and just kind of maybe some of the actions or steps, you're taking to try and turn that around and in the near term. Thanks.

Rishi Nitya Jaluria: Hey, thanks. This is Rich Poland on for Rishi today.

Vivek Shah: Thanks for taking my question. I was just kind of wondering, can we peel back a little bit on retail just in terms of like what dynamics you're seeing going on in that business and just kind of maybe some of the actions or steps you're taking to try and turn that around in the near term? Thanks.

Vivek Shah: Yeah, so there have been basically three factors that have produced challenges for us in Q1. First was a distribution Partnership where our coupon codes and deal information were being syndicated by a distributor. It was working very, very well. The distributor made a strategic change in how they were sourcing coupon codes. So what was a source of real upside last year, sort of reversed itself. And, you know, look, those things happen.

Speaker Change: Yeah, so they've been basically three factors.

Vivek Shah: That produced challenge for Us in Q1 first was in.

Vivek Shah: A distribution partnership where our coupon codes and deal information, we're being syndicated by a distributor. It was working very very well the distributor made a strategic change in how they were sourcing coupon codes and so what was a source of real upside last year sort of reversed itself.

Vivek Shah: And you know if those things happen we're in the in the market looking for new distribution partnerships, but that was a fairly significant hit for us surprising in Q1. The second one has to do with a merchant that cut commission rates now this happens and my instruction to the team is.

Vivek Shah: We're in the market looking for new distribution partnerships, but that was a fairly significant hit for us, surprising in Q1. The second one has to do with a merchant that cut commission rates. Now, this happens, and my instruction to the team is that when that happens, the merchant needs to feel the impact of that decision. You can't continue to drive the same volume of sales if they're cutting their commission. So it'll become a double whammy. It's one, the revenue loss from the commission cut, and then we design our system to reduce the amount of volume they're getting. What that will mean is that later in the year, they will likely return.

Vivek Shah: That when that happens the merchant needs to feel the.

Vivek Shah: The impact of that decision you can't continue to drive the same volume of sales if they're cutting their commission. So it will become a double whammy. Its one the revenue loss from the commission cut and then we are designing our system to reduce the amount of volume they're getting what that will mean is that later in the year.

Vivek Shah: They likely return and they return at the higher commission rates because they see a relationship between what they're what they're willing to pay us for transactions commissions and what we're willing to send them that to me is important to maintain the integrity of our pricing and our value proposition. So we'll take that hit in that that's the second piece and then the lag.

Vivek Shah: And they return at the higher commission rate because they see a relationship between what they're willing to pay us for transactions and commissions and what we're willing to send them. That, to me, is important to maintain the integrity of our pricing and our value proposition. So we'll take that hit, and that's the second piece. And then the last piece is that there's been some volatility in search. Now, Google recently released a major algorithm update that was designed to basically combat a lot of non-savings retail coupon code property that we're trying to compete with coupon terms where retail may not and other coupon and savings brands reside.

Vivek Shah: Last piece is there's been some volatility in search now Google recently this week <unk> released the major algorithm update that was designed to basically come out a lot of non savings retail coupon code property that we're trying to compete with coupon code terms.

Vivek Shah: Where retail may not and other coupon code and savings brands reside that should presumably be a benefit for us because we had been seeing non coupon code brands starting to rank it against firms that are traditionally our strong terms. So those are.

Vivek Shah: That should presumably be a benefit for us because we have been seeing non-coupon code brands starting to rank against terms that are traditionally our strong terms. So those are the mix of things that are going on. You know, again, I think I look at it as certainly a surprise, but we've got a playbook. We know what we're going to do, and we're optimistic going into the second half of the year, when shopping is most important, that we'll be better positioned than we were in Q1.

Vivek Shah: The mix of things that are going on.

Vivek Shah: You know again, I think I look at it as certainly a surprise, but we've got a playbook. We know we're going to do and we're optimistic going into the second half of the year, where frankly shopping is most important that will be better positioned than we were in Q1.

Speaker Change: Thanks, Vivek that's Super helpful. And then as we just think about the capital allocation side I think he referenced it as some interesting choices. So I guess just anything to call out there that stood out in terms of what youre thinking about in terms of capital allocation.

Bret Richter: Thanks, Vivek, that's super helpful. And then, as we just think about the capital allocation side, I think you referenced it as some interesting choices. I guess just anything to call out there that stood out in terms of what you're thinking about in terms of capital allocation. Thanks, or I'll take that.

Vivek Shah: Sure I'll take that I think first and foremost we have not wavered from our capital allocation strategy.

Bret Richter: I'll take that. First and foremost, I think we have not wavered from our capital allocation strategy. It starts with our healthy balance sheet, which is precious and we need to maintain. And of our alternatives for capital allocation, we've been consistent, and we stand by this M&A, attractive M&A, value accretive M&A, and strategic M&A is our preferred capital allocation alternative. It shouldn't be lost that in our first quarter, we did our first deal of 24 and our first sort of meaningful deal for an extended period of time, and we remain active. I don't need to reiterate all of Vivek's comments and our prepared remarks, but we are consistent across that dialogue.

Bret Richter: It starts with our healthy balance sheet, which we is precious and we need to maintain.

Bret Richter: And of our alternatives for capital allocation, we've been consistent and we standby this M&A M&A attractive M&A value accretive M&A strategic.

Bret Richter: Strategic M&A is our preferred capital allocation alternative it shouldnt be lost that in our first quarter. We did our first deal of 24, and our first sort of a meaningful deal.

Bret Richter: The extended period of time and we remain active.

Bret Richter: To reiterate all of <unk> comments in our prepared remarks.

Bret Richter: But we are consistent across that dialogue. We also believe in the importance and the power of stock repurchases. We dedicated a significant portion of our free cash flow generation in 2023 towards stock repurchases. We didn't participate in the first quarter of what goes into that dynamic including.

Bret Richter: We also believe in the importance and the power of stock repurchases. We dedicated a significant portion of our free cash flow generation in 2023 towards stock repurchases, although we didn't participate in the first quarter.

Bret Richter: A lot goes into that dynamic, including the timing of our windows when we can purchase. We look back at what happened in the back part of the first quarter and maybe missed an opportunity, but where we stand right now with the stock at these levels, we're going to look to be a purchaser of the stock in the near term. Great, thank you. Thank you. The next question is coming from Danny Pfeiffer from J.P. Morgan. Tani Yerlina

Danny Pfeiffer: The timing of our Windows when we can purchase we look back at what happened in the back part of the first quarter and maybe missed opportunity, but where we stand right now with the stock at these levels and we're going to look to be a purchaser of the stock in the near term.

Danny Pfeiffer: Great. Thank you.

Bret Richter: Thank you. The next question is coming from Danny Pfeiffer from J P. Morgan Stanley Your line is lives.

Operator: Thank you. The next question is coming from Danny Pfeiffer from J.P. Morgan. Danny, your line is live. Hey guys, thanks for the question.

Danny Pfeiffer: Hey, guys. Thanks for the questions for the first and second half re acceleration revenue Europe can you maybe unpack some of those underlying assumptions there and maybe your kind of your outlook on advertising or subscription mix has changed.

Danny Pfeiffer: And then on the second on the <unk> adjusted EBIT margin outlook can you maybe unpack some of those investments that you're making.

Danny Pfeiffer: Yeah, I think first and foremost we put out guidance.

Danny Pfeiffer: Yeah, I think, you know, first and foremost, we put out guidance in February. We're now at our first quarter call and reiterating that guidance. That guidance is for a full year. We're not managing the company to hit quarterly numbers.

Danny Pfeiffer: In February we're now at our first quarter call and reiterated that guidance that guidance is for a full year. We're.

Danny Pfeiffer: We're not managing the company in.

Danny Pfeiffer: Quarterly numbers of course, we manage the company on a daily basis, but not in 90 days sprints.

Bret Richter: Of course, we manage the company on a daily basis, but not in 90-day sprints. A lot goes into the dynamic of the first half and second half. We highlighted on our call in February that there was a little bit of a first half and second half story. I think Q1 is consistent with that. And the couple of comments we provided with regard to Q2 are also consistent with that. Two things.

Bret Richter: A lot goes into the dynamic of the first half second half we highlighted on our call in February that there was a little bit of a first half second half story I think Q1 is consistent with that in the couple of comments. We provided with regards to Q2 were also consistent with that too.

Bret Richter: Two things one.

Bret Richter: <unk>.

Bret Richter: One, the success the business had early in 2024 is diverse. We're seeing it in a lot of places. A number of our properties are performing well. A number of our properties are improving on an ongoing trend. Whether they're continuing growth that we saw in 2023 or reducing declines, like in our Cyber Martech business, we're seeing positives across the board. The challenges we're seeing are concentrated, and we have to sort of manage through that. When we look to the back half of the year, it's continued growth in our businesses that are performing. It's narrowing declines in a business like Cyber Martech that was on that trend through 2023 and in the beginning of 2024.

Bret Richter: The success of the business had early in 2024 is diverse we're seeing.

Bret Richter: A lot of places a number of our properties are performing well a number of our properties are improving trend, whether they're continuing growth that we saw in 2023 or reducing declines like in our cyber more tech business were seeing positives across the board. The challenges. We're seeing are concentrated and we have to sort of.

Bret Richter: To manage through that.

Bret Richter: When we look to the back half of the year. It's continued growth in our businesses that are performing it's narrowing declines.

Bret Richter: A business like cyber Martech, that's been on that trend through 2023 and at the beginning of 2024, there is a little bit of calendar <unk> and some of our businesses in particular and humble games.

Bret Richter: There's a little bit of calendarization in some of our businesses, in particular Humble Games. Vivek did note that we're looking towards some improvements in the areas that we've seen pressure on in the near term. And all of that sort of feeds in, of course; we had a partial quarter of TDS in the first quarter, and we'll have a full quarter of TDS's contribution throughout the year. And that business does have some late-year weight to it, like a number of our businesses. So all those things factor in.

Bret Richter: Vivek did note that we're looking towards some improvements in the areas that we've seen pressure in the near term and all of that sort of feeds and of course, we have a portion of a partial quarter of GTS in the first quarter and we'll have a full quarter of tvs's contribution throughout the year in that business does have some late year wait to it like a number of our businesses.

Bret Richter: So all of those things factor in we obviously have to perform we update our numbers a lot of things need to happen.

Bret Richter: We obviously have to perform. We have to hit our numbers. A lot of things need to happen. You know, I'm sure things will happen over the next handful of months that we didn't anticipate, but, you know, that's the plan. With regard to Q2, we have a lot of businesses that do a lot of things, and we don't time certain of our investments in order to manage 90-day numbers. In providing context and color, we thought it important to point out a couple of things with regard to Q2 to sort of... give some transparency on our trajectory.

Bret Richter: I am sure will things will happen over the next handful of months that we didn't anticipate but that's the plan with regards to Q2, we have a lot of businesses that do a lot of things and we don't time certain of our investments in order to manage 90 day numbers.

Bret Richter: And providing context and color we thought it important to point out a couple of things with regards to Q2 to sort of.

Bret Richter: We did have some timing benefits in Q1, which don't carry over into Q2. We had some partial pressures in Q1, which we may see more fully in Q2 before those turn around. But again, overall, maintaining our view of the whole year and that plan for the year is a healthy plan. [inaudible]

Bret Richter: Give some transparency on our trajectory and we did have some.

Bret Richter: Timing benefits in Q1, which don't carry into Q2, we had some partial pressures in Q1, which we may see more fully in Q2 before those turnaround, but again overall, maintaining our view of the whole year and.

Bret Richter: That plan for the year is that healthy plan.

Bret Richter: Okay.

Bret Richter: Breath is.

Vivek Shah: You know, one aspect of the company that could be underappreciated or not focused enough on is the subscription and licensing part of the business. You know, so in Q1, it was about half the company's revenue, and on a trailing 12 month basis, it's about 42%. So it's obviously a material and growing part of our equation. And then as you look at its performance, it's been very steady.

Bret Richter: One aspect of the company.

Vivek Shah: That could be underappreciated or not focused enough on is the subscription and licensing part of the business.

Vivek Shah: So in Q1, it was about half the company's revenue on a trailing 12 month basis, it's about 42%. So it's obviously.

Vivek Shah: Material and growing part of our equation and then as you look at its performance, it's been very steady and so a steady organically growing proposition and it's across the board. So we have subscription and licensing revenues in both segments and our digital media segment with lose it with humble bundle.

Vivek Shah: And so a steady organically growing proposition, and it's across the board. So we in our digital media segment, with Lose It, with Humble Bundle, and a couple of other properties, Ookla, Ekahau, in cybersecurity and martech, it's, you know, it's Viper, it's, it's our VPN business. It's our martech business, and most of those businesses are now growing. And the ones that aren't, they are on their path. And so that, to me, I think is very important because we always have a view of the company is having or wanting to have and are focused on having a balanced business model and monetization formula, the combination of advertising and subscription.

Vivek Shah: A couple of other properties Uccle, ACA, Hal and cyber security and Martech.

Vivek Shah: <unk>, it's our VPN business.

Vivek Shah: Our martech business and most of those businesses are now growing and the ones that arent. They are on their path to it and so that to me I think is very important because we have always viewed the company as having or wanting to have and focused on having a.

Vivek Shah: Balanced business model and monetization formula the combination of advertising and subscription. So I just don't want that piece loss and the dialogue, we get a lot and we get asked a lot about advertising because advertising has been obviously a challenge and is still.

Vivek Shah: So I just don't want that piece lost in the dialogue. We get a lot, and we get asked a lot about advertising because advertising has obviously been a challenge and is still, you know, half the company's revenue, but the other half is doing quite well.

Vivek Shah: The company's revenue, but the other half is doing quite well.

Speaker Change: That's helpful. Thanks.

Speaker Change: Thank you.

Vivek Shah: Thank you and once again, ladies and gentlemen that we'll be star one on your phone if you wish to ask a question and we remind everyone in the interest of time to limit yourself to one question Thats Star One if you wish to ask a question today and the next question is coming from Jon <unk> from CJS Securities John Your line.

Operator: Thank you. And once again, ladies and gentlemen, it will be star number one on your phone. If you wish to ask a question, and we remind everyone, in the interest of time, to limit yourself to one question, that's star number one.

Operator: The size.

Operator: If you wish to ask a question today, the next question is coming from John Tanwanteng from CJS Securities. John, your line is live.

Operator: Hi, Good morning, it's Pete Lucas for Jon I'll be another one of those to ask about the ads.

Jonathan E. Tanwanteng: <unk> has been strong for large players like Google and Facebook largely credited to AI and algorithm improvements are you seeing any share shift in AD dollars away from your content based platforms and is there any impact on the end.

Jonathan E. Tanwanteng: Any update on the impact of AI and how it drives traffic or in Peru improves click through purchase rates on your properties.

Jonathan E. Tanwanteng: Yeah, no very good question. So on the first one in terms of shifting of dollars no in fact, obviously with the advertising.

Jonathan E. Tanwanteng: Hi, good morning. It's Pete Lucas for John.

Jonathan E. Tanwanteng: I'll be another one of those to ask about ads. Performance has been strong for large players like Google and Facebook, largely credited to AI and algorithm improvement. Are you seeing any share shift and add dollars away from your content based platforms? And is there any impact on the impact of AI and how it drives traffic or improves click through purchase rates on your property?

Pete Lucas: Business, improving we're seeing dollars coming back into our platforms again the issues, we're having in the retail and shopping sector are very I think specific to us and some of the challenges that that I just enumerated I think that with respect to the traffic question.

Vivek Shah: Yeah, no, very good question. So on the first one, in terms of the shifting of dollars, no, in fact, obviously, with the advertising business improving, we're seeing dollars coming back into our platforms. Again, the issues we're having in the retail and shopping sector are very, I think, specific to us and some of the challenges that I just enumerated. I think that with respect to the traffic question, what I will say is this: you know, we've analyzed this in the past, and we continue to watch.

Vivek Shah: And what I will say is this you know we've analyzed this in the past we continue to watch being as an interesting realized case or what a search engine with.

Vivek Shah: Bing is an interesting real-life case of what a search engine with GAI built into the value proposition and product means. Our Bing referrals continue to grow in excess of Bing's overall traffic growth and query volume.

Vivek Shah: With G AI built into the value proposition and product means are being referrals continue to grow in excess of things overall traffic growth and query volume and then with respect to Google search generative experience, which as you know is still in labs, which means it's not in full circulation. The instance.

Vivek Shah: With which.

Vivek Shah: And then with respect to Google's search generative experience, which, as you know, is still in labs, which means it's not in full circulation, the instances with which there is a GAI, a search generative response continues to go down with respect to the queries for which we rank and get traffic. And that goes back to Google, for more than a decade, has had this dynamic of zero-click searches, right? Searches that don't result in a click because they result in an immediate answer. Think sports scores, stock, prices, weather.

Vivek Shah: There is a G AI search generative.

Vivek Shah: Uh huh.

Vivek Shah: Response continues to go down with respect to the queries for which we rank and get traffic and that goes back to ultimately Google.

Vivek Shah: <unk> for more than a decade has had this dynamic is zero click searches REIT searches that don't result in a click because they result in an immediate answer think sports scores and stock prices whether.

Vivek Shah: That's not where we rank, and that's not where our content is seeking an audience. As you get into more complicated and complex queries with more complicated and complex answers and a deeper research process, that's where we specialize. And I think that's where we're not seeing any of the potential dislocation or the zero-click activity, whether AI or non-AI related. So I'd say, again, from a traffic point of view, I don't look at AI as being, it's something we watch, but we haven't seen negative effects.

Vivek Shah: That's not where we rank and that's not where our content is seeking to get audience as you get into more complicated and complex queries with more complicated and complex answers and a deeper research process, that's where we specialize and I think that's where we're not seeing.

Vivek Shah: Any of the potential dislocation of the zero click.

Vivek Shah: Activity, whether AI or not AI related so I'd say again I think from a from a from a traffic point of view I don't look at AI as as being it's something we watch, but we haven't seen negative effects and then I think from an AD point of view, we ourselves are leveraging AI within our.

Vivek Shah: And then, from an advertising point of view, we ourselves are leveraging AI within our ad targeting within our properties to enhance performance as well. So the degree to which we can use AI to yield better outcomes is, I think, as important for us as it is for any seller of advertising in the market.

Vivek Shah: Within our AD targeting within our properties to enhance performance as well so the degree to which we can use AI.

Vivek Shah: To yield better outcomes.

Vivek Shah: I think is as important for us as it is for any seller of advertising in the market.

Speaker Change: Very helpful. Thanks.

Vivek Shah: Very helpful, thanks.

Chain Lee: Thank you. The next question is coming from a chain Lee from Evercore ISI.

Operator: Thank you. The next question is coming from Jane Lee from EBCOR ISI. Jane, your line is live.

Jane Lee: Your line is live.

Jane Lee: Great. Thanks for taking the question I have a question on maybe a higher level on the M&A.

Jane Lee: Great. Thanks for taking the time to answer the question. I have a question on maybe a higher level on M&A. You guys, I think you guys have been previously leaning more into bolt-ons in your verticals where you can gain synergies. Just given your cash position and the M&A environment today, are you looking at a broader range of opportunities and perhaps, you know, bigger opportunities? Are there any kind of new verticals where you see opportunities that you would consider building up a new exposure in? Thanks.

Jane Lee: You guys. I think you guys have been previously more than any into like bolt ons in any of our verticals, where you can gain synergies.

Jane Lee: Just given your cash position and the M&A environment. Today are you looking at a broader range of opportunities and perhaps bigger opportunities is there any kind of new verticals, where you see.

Jane Lee: You would consider building up at new exposure in thanks.

Speaker Change: Yes, I mean look I think we have always thought of M&A.

Vivek Shah: Yeah, I mean, look, I think we have always thought of M&A really through both lenses. So we have seven verticals, seven platforms for acquisitions, as you know, we have all seven of those verticals and the individuals who work there. At the same time, adding new verticals is something we have done multiple times in the past, whether it's the shopping vertical, you know, the connectivity vertical, the health vertical, and those. When we do new verticals, they're larger deals.

Vivek Shah: <unk> really through both both lenses. So we have seven vertical seven platforms for acquisitions as you know.

Vivek Shah: We have all seven of those verticals in the individuals who work there continually sourcing deals and opportunities that Ken from which we can extract value by by placing them onto those platforms.

Vivek Shah: That is always been kind of the center of the bullseye.

Vivek Shah: At the same time, adding new verticals is something we have done multiple times in the past whether it's the shopping vertical.

Vivek Shah: The connectivity vertical the health vertical and those when we do new verticals. They are larger deals and so the answer to your question is.

Vivek Shah: And so the answer to your question is, Yes, we are looking at both opportunities within our seven verticals and opportunities to add an eighth vertical. I just wouldn't say that's new. I don't think that's a function of what we presently have on the balance sheet or what our debt capacity is. Obviously, it's quite robust right now, probably as robust as it's ever been.

Vivek Shah: Yes, we are looking at both opportunities within our seven verticals and opportunities to add an eighth vertical I just wouldn't say that's new.

Vivek Shah: That's a function of what we presently have on the balance sheet or what our debt capacity is obviously, it's quite robust right now probably as robust as it's ever been but I don't think that changes our mindset I think what I would say.

Vivek Shah: But I don't think that changes our mindset. I think what I will say is that what we've been dealing with in either scenario are valuation gaps. And that's what we've been dealing with. And I don't think we're alone. I think the marketplace has spoken to this, and the statistics around deals done, etc. We've all seen them.

Vivek Shah: Is that what we've been dealing with in either scenario, our valuation gap and that's what we've been dealing with and I don't think we're alone I think the marketplace has spoken to this in the statistics around deals done et cetera, we've all seen them, but we do see that gap closing, we find our conversations to be more constructed we think.

Vivek Shah: But we do see that gap closing. We find our conversations to be more constructive. We think that our patience has been, and will be rewarded. And I know I say that every quarter, but until you know, until you see it, you're not going to feel it, but we feel good about that. And so look, I think that right now, we're in a position to do both, right? They're not either or, by the way, they can be an end. So look, I think we're excited for the opportunities, and we're excited to hopefully be in a position to be talking about some of them once they're, you know, once we get something done. Unknown Speaker

Vivek Shah: Our patients has been will be rewarded and I know I say that every quarter, but until you know until you see it right.

Vivek Shah: You're not going to feel it but we feel good about that and so look I think that right now.

Vivek Shah: We're in a position.

Vivek Shah: Possibly to do both right theyre not either or by the way, they're they can be in and so look I think we're excited for the opportunities and we're excited to hopefully be in a position to be talking about some of them went there once we get something done.

Bret Richter: And the only thing I'd add to that and this... is at risk of gross oversimplification.

Speaker Change: And the only thing I'd add to that and this.

Bret Richter: is at risk of gross oversimplification is that every M&A deal needs a thesis. Every M&A deal needs to answer one fundamental question, which is, why are we the right future owner of this asset? And that can come in a number of different ways. There can be revenue opportunities, there could be product enhancements, there could be market expansion, and there could be hard cost synergies. Those could be within our verticals and within our businesses; they could be a new vertical. But if we can't... Answer those two fundamental questions.

Speaker Change: As at risk of a gross over simplification is that every M&A deal needs that thesis.

Bret Richter: Every M&A deal needs to answer one fundamental question, which is why are we the right future owner of this asset and that can come in a number of different ways. It can be revenue opportunities that the product enhancements that can be market expansion that could be hard hard cost synergies those could be within our verticals and within our businesses there can be a new vertical but if.

Bret Richter: We can't.

Bret Richter: Answer those two fundamental elements, what's the thesis and why are we the right future owner of this business.

Bret Richter: What's the thesis, and why are we the right future owner of this business? It's probably not the right... Thanks a ton.

Bret Richter: It's probably not the right deal.

Speaker Change: Awesome, Thanks, a ton.

Bret Richter: Thank you. The next question is coming from John <unk> from Wedbush John Your line is live.

Operator: Thank you. The next question is coming from John Katsingris from Wedbush. John, your line is live. Hi, thanks, this is Jon Kipfinger on behalf of Dan Ives.

Jon Kipfinger: Hi, Thanks. This is John <unk> on for Dan I could we talked a little further and any color you can give on what types of conversations you are having a consumer tech side of the business, how do you see that appetite and demand going forward. Thanks.

Jon Kipfinger: You know look I think on the consumer tax side of the business. One I will just say as a vertical it has historically been kind of the original vertical of Ziff Davis. So it has.

John Katsingris: You know, look, I think on the consumer tech side of the business, one, I will just say, as a vertical, it is historically the kind of original vertical of Ziff Davis. So it has a lot of sort of normative import here, I guess.

Jon Kipfinger: A lot of.

Jon Kipfinger: Sort of normative import here I guess, but more importantly, I think that you know.

Speaker Change: The fact that we are I think come out of what has been a fairly punishing period of time.

Vivek Shah: But more importantly, I think that the fact that we have come out of what has been a fairly punishing period of time is really great. So the consumer tech business is quite strong. The B2B tech business, which I know you didn't ask about, but we put them all together, is stable. We're very excited. Kate Gutman just joined us to oversee PCMag, Mashable, Lifehacker, and Spiceworks, which is the tech media division. She's a very experienced and capable executive out of Gannett. So we've got great leadership in place, great brands, opportunities to potentially add to our portfolio of brands over time and grow the ones we have. So we're committed to the space.

Vivek Shah: Really great. So the consumer Tech business is quite strong the beta <unk> Tec business, which I know you didn't ask about but we put them all together.

Vivek Shah: Is stable, we're very excited Kate Gutman just joined us.

Vivek Shah: To oversee PC Mag Mashable life factor in Spice works, which is the Tech media division very experienced and capable executive out of that so we've got great leadership in place great brands opportunities to potentially add to our portfolio of brands over time grow the ones we have so.

Vivek Shah: We're committed to the space.

Vivek Shah: Yeah.

Speaker Change: Thank you.

Vivek Shah: Thank you and there are no other questions at this time I would like to hand, the call back to Bret Richter now for any closing remarks.

Operator: Thank you. And there were no other questions at this time. I would like to hand the call back to Bret Richter now for any closing remarks.

Bret Richter: Thank you very much Paul we appreciate everybody joining us today for our Q1 2024 earnings call.

Bret Richter: Thank you very much, Paul. We appreciate everybody joining us today for our Q1 2024 earnings call. Our upcoming conference participation is again on our website. We have events coming up, and we hope to see some of you there. We appreciate all your attention and your investment. Thank you. Have a great day.

Operator: Thank you. This does conclude today's conference. You may disconnect at this time and have a wonderful day. Thank you for your participation.

Operator: Our upcoming conference participation again is on our website, we have events coming up but we hope to see some of you there.

Operator: We appreciate all your attention and your investment thank you.

Operator: You have a great day.

Operator: Okay.

Operator: Goodbye this dose.

Operator: This does conclude today's conference you may disconnect at this time and have a wonderful day. Thank you for your participation.