Ziff Davis, Inc. Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Engaged outside advisers to evaluate potential value unlock opportunities for shareholders.
• Enhanced segment reporting to 5 reportable segments in FY2024 for better investor insight.
• Q3 2025 revenues grew nearly 3% (5th consecutive quarter), adjusted diluted EPS up 7% via increased share buybacks.
• 3 of 5 segments grew revenue in Q3. Leveraged AI to enhance products (HALO in Health & Wellness, IMAGINE in Gaming & Entertainment).
• Closed 7 acquisitions in first 9 months of 2025, repurchased ~3.6 million shares YTD, deploying ~$109M of free cash flow.

Segment Performance

• Tech & Shopping: Revenue dropped 2% in Q3 with adjusted EBITDA down 12%, primarily due to the wind-down of game publishing activities. Excluding games, CNET grew led by licensing, new awards, video capabilities, and Best Buy partnership.
• Gaming & Entertainment: Revenues were ~4% lower YOY, but Humble Bundle had its best quarter, subscription revenues up 5%. Events like San Diego Comic-Con and Gamescom were highlights.
• Health & Wellness: Revenue grew 13% YOY and adjusted EBITDA 18%, balanced across subscription and display. Lucid app saw strong subscription growth.
• Connectivity: Revenue up 2% YOY, YTD up 7%. Speedtest Certified launched in September with strong global demand, second product planned for Q4.
• Cybersecurity & Martech: Revenue grew 2% YOY, driven by Cybersecurity (VPN, cloud backup) and acquisition of Semantic Labs.

Guidance

• Reaffirmed FY2025 guidance range, but anticipates FY2025 total revenues and adjusted diluted EPS in the lower half of the range, with adjusted EBITDA closer to the lower end. Fourth quarter is seasonally the largest revenue quarter.

Risks

• Market risks and uncertainties disclosed in SEC filings, including risk factors in 10-K, 10-Q, proxy statements. Potential for actual results to differ from forward-looking statements.

Question and Answer

Q: Robert Coolbrith asked about valuation disconnect and inbound interest in the company.

A: Vivek Shah stated the valuation disconnect is the widest ever, all divisions are under consideration, and advisers have been engaged to evaluate potential transactions.

Q: Cory Carpenter inquired about the strategic review and AI traffic impact.

A: Vivek Shah said no properties are off-limits, considering all options; AI overviews are in 29% of queries, and search volatility is being monitored.

Q: Shyam Patil asked about preference in M&A and company direction.

A: Vivek Shah mentioned preference is to unlock value, considering sales, spinoffs; capital allocation includes buybacks, M&A, and new value unlock opportunities.

Q: Ross Sandler asked about timing of for-sale and display growth expectations.

A: Bret Richter noted advertising growth in Q4 expected low single-digit, lapping CNET acquisition in Q4.

Q: Rishi Jaluria asked about M&A opportunities in dislocated properties.

A: Vivek Shah said continuing acquisitions with $70M spent YTD, balancing between buybacks and acquisitions.

Q: Ygal Arounian asked about M&A in new verticals and AI licensing.

A: Vivek Shah stated looking for leadership brands, active in AI licensing, blocking AI bots, and joined RSL for licensing standards.

Q: Chris Kuntarich asked about spinoff and growth profile.

A: Vivek Shah emphasized focus on cash-on-cash returns, committed to EPS compounding, no change in core formula.