Recent Quotes View Full List My Watchlist Create Watchlist Indicators DJI Nasdaq Composite SPX Gold Crude Oil EL&P Market Index Markets Stocks ETFs Tools Overview News Currencies International Treasuries Ziff Davis Reports Fourth Quarter and Year End 2021 Preliminary Unaudited Results and Provides 2022 Guidance By: Ziff Davis, Inc. via Business Wire February 14, 2022 at 19:00 PM EST Ziff Davis, Inc. (NASDAQ: ZD) today reported preliminary unaudited financial results for the fourth quarter and year ended December 31, 2021. “We had a strong finish to an exceptional year in which we posted fantastic results and executed on a transformational spin-off," said Vivek Shah, CEO of Ziff Davis. "We are excited by our growth prospects and the opportunities to continue to deploy our financial and human capital to generate value for our stakeholders." FOURTH QUARTER 2021 HIGHLIGHTS On October 7, 2021, Ziff Davis completed the separation of the cloud fax business to Consensus Cloud Solutions, Inc. (“Consensus”). As the spin-off occurred during the fourth quarter of 2021, Ziff Davis has classified Consensus as a discontinued operation in its financial statements for all periods. Results in this press release represent continuing operations, except for the Statement of Cash Flows, net cash provided by operating activities and free cash flow, which are on a combined continuing and discontinued operations basis. Q4 2021 quarterly revenues increased 6.4% to $408.6 million compared to $384.1 million for Q4 2020. On a pro-forma(6) basis, Q4 2021 quarterly revenues increased 10.4% to $408.6 million as compared to $370.1 million for Q4 2020. GAAP net income per diluted share from continuing operations(3) increased to $7.62 in Q4 2021 compared to $0.91 for Q4 2020. The earnings increase was primarily due to an unrealized gain on investment of $290 million to record our investment in Consensus ($6.03 per share, after tax). Adjusted non-GAAP net income per diluted share from continuing operations(3)(4) for the quarter decreased (3.1)% to $2.17 compared to $2.24 for Q4 2020. On a pro-forma(6) basis, Adjusted non-GAAP net income per diluted share from continuing operations(3)(4) for the quarter increased 0.5% to $2.17 as compared to $2.16 for Q4 2020. GAAP net income from continuing operations increased to $370.0 million compared to $41.7 million for Q4 2020 primarily due to an unrealized gain on investment of $290 million to record our investment in Consensus. Adjusted non-GAAP net income from continuing operations increased by 4.4% to $104.3 million as compared to $99.9 million for Q4 2020. On a pro-forma(6) basis, Adjusted non-GAAP net income from continuing operations increased by 8.4% to $104.3 million as compared to $96.2 million for Q4 2020. Adjusted EBITDA(5) for the quarter increased 2.9% to $161.6 million compared to $157.1 million for Q4 2020. On a pro-forma(6) basis, Adjusted EBITDA(5) for the quarter increased 6.8% to $161.6 million compared to $151.3 million for Q4 2020. Net cash provided by operating activities from continuing and discontinued operations was $85.3 million during Q4 2021 compared to $124.1 in Q4 2020. Q4 2021 free cash flow from continuing and discontinued operations(2) was $59.1 million during Q4 2021 compared to $102.9 million in Q4 2020. The company ended the quarter with approximately $1.05 billion in cash, cash equivalents, and investments after deploying approximately $29.7 million during the quarter for current and prior year acquisitions. Key financial results for Q4 2021 versus Q4 2020 are set forth in the following table (in millions, except per share amounts). Reconciliations of Adjusted non-GAAP earnings per diluted share, Adjusted EBITDA and free cash flow to their nearest comparable GAAP financial measures are attached to this Press Release. The following table reflects Actual and Pro Forma Results from Continuing Operations, except for Cash Provided by Operating Activities and Free Cash Flow which is on a combined basis of continuing operations and discontinued operations, for the fourth quarter of 2021 and 2020 (in millions, except per share amounts). Pro-Forma Results from Continuing Operations below excludes the operating results from Voice assets in Australia, New Zealand, and the United Kingdom that were sold in 2020 and 2021, respectively, and the Company’s B2B Backup business that was sold during the third quarter of 2021. Pro-Forma Results(6) Q4 2021 Q4 2020 % Change Q4 2021 Q4 2020 % Change Revenues Digital Media $325.7 $297.9 9.3% $325.7 $297.9 9.3% Cybersecurity and Martech $82.9 $86.2 (3.8)% $82.9 $72.2 14.8% Total Revenue: (1) $408.6 $384.1 6.4% $408.6 $370.1 10.4% Income from Operations $85.4 $77.9 9.6% GAAP Income per Diluted Share from Continuing Operations (3) $7.62 $0.91 737.4% Adjusted Non-GAAP Income per Diluted Share from Continuing Operations (3) (4) $2.17 $2.24 (3.1)% $2.17 $2.16 0.5% GAAP Net Income from Continuing Operations $370.0 $41.7 787.3% Adjusted Non-GAAP Net Income from Continuing Operations $104.3 $99.9 4.4% $104.3 $96.2 8.4% Adjusted EBITDA (5) $161.6 $157.1 2.9% $161.6 $151.3 6.8% Adjusted EBITDA Margin (5) 39.5% 40.9% (1.4)% 39.5% 40.9% (1.4)% Net Cash Provided by Operating Activities from Continuing and Discontinued Operations $85.3 $124.1 (31.3)% Free Cash Flow from Continuing and Discontinued Operations (2) $59.1 $102.9 (42.6)% FULL YEAR 2021 HIGHLIGHTS 2021 revenues increased 22.3% to a record of $1.42 billion compared to $1.16 billion for 2020. On a pro-forma(6) basis, 2021 revenues increased 26.8% to $1.38 billion as compared to $1.09 billion for 2020. GAAP net income per diluted share(3) from continuing operations increased to $8.09 in 2021 compared to $0.58 for 2020. The net income increase was primarily due to an unrealized gain on investment of $290 million to record our investment in Consensus. ($6.24 per share, after tax). Adjusted non-GAAP net income per diluted share from continuing operations(3)(4) for the year increased by 23.4% to $6.33 compared to $5.13 for 2020. On a pro-forma(6) basis, Adjusted non-GAAP net income per diluted share from continuing operations(3)(4) for the year increased 31.4% to $6.11 as compared to $4.65 for 2020. GAAP net income from continuing operations increased to $387.5 million compared to $27.4 million for 2020 primarily due to an unrealized gain on investment of $290 million to record our investment in Consensus. Adjusted non-GAAP net income from continuing operations increased by 22.5% to $292.7 million as compared to $238.9 million for 2020. On a pro-forma(6) basis, Adjusted non-GAAP net income from continuing operations increased by 30.5% to $282.5 million as compared to $216.4 million for 2020. Adjusted EBITDA(5) for the year increased 23.3% to $498.7 million compared to $404.5 million for 2020. On a pro-forma(6) basis, Adjusted EBITDA(5) for the year increased 28.3% to $484.6 million compared to $377.7 million for 2020. Net cash provided by operating activities from continuing and discontinued operations was $515.6 million during 2021 compared to $480.1 million in 2020. Free cash flow from continuing and discontinued operations(2) was $402.5 million during 2021 compared to $407.7 million in 2020. The following table reflects Actual and Pro-Forma Results from Continuing Operations, except for Cash Provided by Operating Activities and Free Cash Flow which is on a combined basis of continuing operations and discontinued operations for the twelve months ended December 31, 2021 and 2020 (in millions, except per share amounts). Pro-Forma Results from Continuing Operations below excludes the operating results from Voice assets in Australia, New Zealand, and the United Kingdom that were sold in 2020 and 2021, respectively, and the Company’s B2B Backup business that was sold during the third quarter of 2021. Pro-Forma Results(6) 2021 2020 % Change 2021 2020 % Change Revenues Digital Media $1,068.5 $811.1 31.7% $1,068.5 $811.1 31.7% Cybersecurity and Martech $348.2 $347.7 0.1% $314.7 $279.6 12.6% Total Revenue: (1) $1,416.7 $1,158.8 22.3% $1,383.2 $1,090.7 26.8% Income from Operations $166.4 $136.6 21.8% GAAP Income per Diluted Share from Continuing Operations (3) $8.09 $0.58 1,294.8% Adjusted Non-GAAP Income per Diluted Share from Continuing Operations (3) (4) $6.33 $5.13 23.4% $6.11 $4.65 31.4% GAAP Net Income from Continuing Operations $387.5 $27.4 1,314.2% Adjusted Non-GAAP Net Income from Continuing Operations $292.7 $238.9 22.5% $282.5 $216.4 30.5% Adjusted EBITDA (5) $498.7 $404.5 23.3% $484.6 $377.7 28.3% Adjusted EBITDA Margin (5) 35.2% 34.9% 0.3% 35.0% 34.6% 0.4% Net Cash Provided by Operating Activities from Continuing and Discontinued Operations $515.6 $480.1 7.4% Free Cash Flow from Continuing and Discontinued Operations (2) $402.5 $407.7 (1.3)% ZIFF DAVIS GUIDANCE The Company’s estimates for fiscal year 2022 are as follows (in millions, except per share amounts): Revenue Adjusted EBITDA Adjusted Diluted EPS FY 2022 Range of Estimates $1,497-$1,535 $538-$555 $6.52-$6.79 Adjusted non-GAAP net income per diluted share for 2022 excludes share-based compensation of between $24 million and $28 million, amortization of acquired intangibles and the impact of any currently unanticipated items, in each case net of tax. It is anticipated that the non-GAAP effective tax rate for 2022 (exclusive of the release of reserves for uncertain tax positions) will be between 23.5% and 25%. The Company has not reconciled the non-GAAP Business Outlook for 2022 Adjusted EBITDA or Adjusted non-GAAP Diluted EPS and tax rate information included in this release to the most directly comparable GAAP measure because this cannot be done without unreasonable effort due to the variability with respect to costs related to acquisitions and taxation, which are potential adjustments to future earnings. We expect the variability of these items to have a potentially unpredictable and significant impact on our future GAAP financial results. Notes: (1) The revenues associated with each of the businesses may not foot precisely since each is presented independently. (2) Free cash flow is defined as net cash provided by operating activities from continuing operations, less purchases of property and equipment from continuing operations, plus contingent consideration from continuing operations. Free cash flow amounts are not meant as a substitute for GAAP, but are solely for informational purposes. (3) The estimated GAAP effective tax rates were approximately 1.4% for Q4 2021 and 30.8% for Q4 2020. The estimated Adjusted non-GAAP effective tax rates were approximately 23.1% for Q4 2021 and 22.8% for Q4 2020. (4) Adjusted non-GAAP net income per diluted share excludes certain non-GAAP items, as defined in the Reconciliation of GAAP to Adjusted non-GAAP Financial Measures, for the three months ended December 31, 2021 and 2020 totaled $(5.45) and $1.33 per diluted share, respectively. (5) Adjusted EBITDA is defined as net income from continuing operations before interest; gain on sale of businesses; goodwill impairment of business; loss on investments, net; other income (expense), net; income tax expense (benefit); income (loss) from equity method investment, net; depreciation and amortization; and the items used to reconcile EPS to Adjusted non-GAAP EPS, as defined in the Reconciliation of GAAP to Adjusted non-GAAP Financial Measures. Adjusted EBITDA amounts are not meant as a substitute for GAAP, but are solely for informational purposes. (6) Pro-forma figures are provided taking into consideration the sale of certain Voice assets in Australia, New Zealand, and the United Kingdom as well as the sale of the Company’s B2B Backup business as if they had occurred January 1, 2020. As a result of the separation of the Consensus business on October 7, 2021, a portion of Ziff Davis’ shared overhead costs were reduced. Ziff Davis estimates that it would have achieved additional savings of approximately $7 million and $9 million in 2021 and 2020, respectively, if Consensus was separated on January 1, 2020. About Ziff Davis Ziff Davis, Inc. (NASDAQ: ZD) is a vertically focused digital media and internet company whose portfolio includes leading brands in technology, entertainment, shopping, health, cybersecurity, and martech. For more information, visit www.ziffdavis.com. Preliminary Unaudited Results: These fourth quarter and full year 2020 and 2021 results are preliminary, unaudited, and subject to adjustments. In particular, due to the complexity of the October 7, 2021 spin-off of Consensus and the related transactions (including the debt-for-debt exchange), the presentation of the transaction's impact on the Company's financial statements (including the presentation of continuing and discontinued operations and the size of the gain associated with the retention of the 19.9% stake in Consensus) is still being finalized. Any change to the impact of the unrealized gain on investment of $290 million associated with the retention of the 19.9% stake in Consensus could be material to our GAAP net income from continuing operations. As a result of the foregoing, certain information provided herein is subject to change. “Safe Harbor” Statement Under the Private Securities Litigation Reform Act of 1995: Certain statements in this Press Release are “forward-looking statements” within the meaning of The Private Securities Litigation Reform Act of 1995, including those contained in Vivek Shah’s quote and the “Business Outlook” portion regarding the Company’s expected fiscal 2022 financial performance. These forward-looking statements are based on management’s current expectations or beliefs and are subject to numerous assumptions, risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. These factors and uncertainties include, among other items: the Company’s ability to grow revenues, profitability and cash flows; the Company’s ability to identify, close and successfully transition acquisitions; subscriber growth and retention; variability of the Company’s revenue based on changing conditions in particular industries and the economy generally; protection of the Company’s proprietary technology or infringement by the Company of intellectual property of others; the risk of adverse changes in the U.S. or international regulatory environments, including but not limited to the imposition or increase of taxes or regulatory-related fees; and the numerous other factors set forth in Ziff Davis’ (formerly J2 Global, Inc.) filings with the Securities and Exchange Commission (“SEC”). For a more detailed description of the risk factors and uncertainties affecting Ziff Davis, refer to the 2020 Annual Report on Form 10-K filed by Ziff Davis on March 1, 2021, and the other reports filed by Ziff Davis from time-to-time with the SEC, each of which is available at www.sec.gov. The forward-looking statements provided in this press release, including those contained in Vivek Shah’s quote and in the “Business Outlook” portion regarding the Company’s expected fiscal 2022 financial performance are based on limited information available to the Company at this time, which is subject to change. Although management’s expectations may change after the date of this press release, the Company undertakes no obligation to revise or update these statements. About non-GAAP Financial Measures To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we use the following Adjusted non-GAAP financial measures: Adjusted non-GAAP and Pro Forma net income, Adjusted non-GAAP and Pro Forma net income per diluted share, Adjusted and Pro Forma EBITDA and free cash flow. The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. We use these Adjusted non-GAAP financial measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons. Our management believes that these Adjusted non-GAAP financial measures provide meaningful supplemental information regarding our performance and liquidity by excluding certain expenses and expenditures that may not be indicative of our recurring core business operating results. We believe that both management and investors benefit from referring to these Adjusted non-GAAP financial measures in assessing our performance and when planning, forecasting, and analyzing future periods. These Adjusted non-GAAP financial measures also facilitate management’s internal comparisons to our historical performance and liquidity. We believe these Adjusted non-GAAP financial measures are useful to investors both because (1) they allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making and (2) they are used by our institutional investors and the analyst community to help them analyze the health of our business. For more information on these Adjusted non-GAAP financial measures, please see the appropriate GAAP to Adjusted non-GAAP reconciliation tables included within the attached Exhibit to this release. ZIFF DAVIS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED, IN THOUSANDS) December 31, 2021 December 31, 2020 ASSETS Cash and cash equivalents $ 694,842 $ 176,443 Short-term investments 229,200 663 Accounts receivable, net of allowances of $9,811 and $11,552, respectively 311,728 309,549 Prepaid expenses and other current assets 60,290 52,160 Current assets, discontinued operations 4,626 84,028 Total current assets 1,300,686 622,843 Long-term investments 122,593 97,495 Property and equipment, net 161,209 133,973 Operating lease right-of-use assets 55,617 103,534 Trade names, net 147,761 158,553 Customer relationships, net 275,451 363,515 Goodwill 1,524,429 1,507,098 Other purchased intangibles, net 149,512 156,821 Deferred income taxes, noncurrent 5,917 12,195 Other assets 20,090 15,760 Other assets, discontinued operations — 493,545 TOTAL ASSETS $ 3,763,265 $ 3,665,332 LIABILITIES AND STOCKHOLDERS’ EQUITY Accounts payable and accrued expenses $ 226,621 $ 197,855 Income taxes payable, current 3,143 30,447 Deferred revenue, current 185,571 166,132 Operating lease liabilities, current 27,156 31,267 Current portion of long-term debt 54,609 396,800 Other current liabilities 130 495 Current liabilities, discontinued operations — 59,559 Total current liabilities 497,230 882,555 Long-term debt 1,036,018 1,182,220 Deferred revenue, noncurrent 14,839 14,201 Operating lease liabilities, noncurrent 53,708 97,561 Income taxes payable, noncurrent 11,690 11,675 Liability for uncertain tax positions 42,546 53,089 Deferred income taxes, noncurrent 108,982 157,308 Other long-term liabilities 37,546 41,400 Long-term liabilities, discontinued operations — 14,304 TOTAL LIABILITIES 1,802,559 2,454,313 Commitments and contingencies — — Preferred stock, $0.01 par value. Authorized 1,000,000 and none issued — — Preferred stock - Series A, $0.01 par value. Authorized 6,000; total issued and outstanding zero — — Preferred stock - Series B, $0.01 par value. Authorized 20,000; total issued and outstanding zero — — Common stock, $0.01 par value. Authorized 95,000,000; total issued and outstanding 47,440,137 and 44,346,630 shares at December 31, 2021 and 2020, respectively. 474 443 Additional paid-in capital 506,405 456,274 Retained earnings 1,530,015 809,108 Accumulated other comprehensive loss (76,188 ) (54,806 ) TOTAL STOCKHOLDERS’ EQUITY 1,960,706 1,211,019 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 3,763,265 $ 3,665,332 ZIFF DAVIS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED, IN THOUSANDS) Three Months Ended December 31, Twelve Months Ended December 31, 2021 2020 2021 2020 Total revenues $ 408,628 $ 384,055 $ 1,416,722 $ 1,158,829 Cost of revenues (1) 45,718 46,159 188,053 178,403 Gross profit 362,910 337,896 1,228,669 980,426 Operating expenses: Sales and marketing (1) 138,100 114,610 493,049 366,359 Research, development and engineering (1) 21,875 19,038 78,874 57,148 General and administrative (1) 117,541 126,398 457,692 420,295 Goodwill impairment on business — — 32,629 — Total operating expenses 277,516 260,046 1,062,244 843,802 Income from operations 85,394 77,850 166,425 136,624 Interest expense, net (16,810 ) (20,836 ) (79,031 ) (56,188 ) Loss on debt extinguishment, net (4,527 ) — (4,527 ) — (Loss) gain on sale of businesses — — (21,798 ) 17,122 Loss on investments, net — — (16,677 ) (20,991 ) Unrealized gain on short-term investment 290,073 — 290,073 — Other income, net 1,759 4,034 1,293 65 Income from continuing operations before income taxes and income from equity method investment, net 355,889 61,048 335,758 76,632 Income tax (benefit) expense 5,156 18,781 (15,944 ) 37,929 Income (loss) from equity method investment, net 19,249 (539 ) 35,845 (11,338 ) Net income from continuing operations 369,982 41,728 387,547 27,365 (Loss) income from discontinued operations, net of income taxes (11,093 ) 16,360 107,550 123,303 Net income $ 358,889 $ 58,088 $ 495,097 $ 150,668 Net income per common share from continuing operations: Basic $ 7.74 $ 0.94 $ 8.44 $ 0.59 Diluted $ 7.62 $ 0.91 $ 8.09 $ 0.58 Net (loss) income per common share from discontinued operations: Basic $ (0.23 ) $ 0.37 $ 2.34 $ 2.65 Diluted $ (0.23 ) $ 0.36 $ 2.24 $ 2.61 Net income per common share: Basic $ 7.51 $ 1.30 $ 10.78 $ 3.24 Diluted $ 7.39 $ 1.27 $ 10.33 $ 3.18 Weighted average shares outstanding: Basic 47,778,545 44,504,222 45,893,928 46,308,825 Diluted 48,514,588 45,642,292 47,862,745 47,115,609 (1) Includes share-based compensation expense as follows: Cost of revenues $ 86 $ 77 $ 306 $ 332 Sales and marketing 410 218 1,288 1,011 Research, development and engineering 594 365 1,984 1,396 General and administrative 5,037 4,629 20,551 19,781 Total $ 6,127 $ 5,289 $ 24,129 $ 22,520 ZIFF DAVIS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED, IN THOUSANDS) Twelve Months Ended December 31, 2021 2020 Cash flows from operating activities: Net income $ 495,097 $ 150,668 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 258,303 228,737 Amortization of financing costs and discounts 25,873 28,476 Non-cash operating lease costs 1,485 17,686 Share-based compensation 25,247 24,006 Provision for doubtful accounts 8,738 13,283 Deferred income taxes, net (9,442 ) 5,840 Loss on extinguishment of debt 13,277 37,969 Loss (gain) on sale of businesses 21,798 (17,122 ) Lease asset impairments and other charges 12,710 12,121 Goodwill impairment on business 32,629 — Changes in fair value of contingent consideration (1,223 ) (80 ) Foreign currency remeasurement gain 184 (34,646 ) (Income) loss from equity method investments (35,845 ) 11,338 (Gain) loss on equity and debt investments (273,110 ) 20,826 Decrease (increase) in: Accounts receivable (18,050 ) (31,611 ) Prepaid expenses and other current assets (15,650 ) 3,046 Other assets (3,824 ) (3 ) Increase (decrease) in: Accounts payable and accrued expenses 13,662 2,184 Income taxes payable (23,974 ) 6,489 Deferred revenue 14,282 4,720 Operating lease liabilities (15,314 ) (16,439 ) Liability for uncertain tax positions (10,383 ) 9,391 Other long-term liabilities (899 ) 3,200 Net cash provided by operating activities 515,571 480,079 Cash flows from investing activities: Proceeds on sale of available-for-sale investments 663 — Distribution from equity method investment 15,327 — Purchases of equity method investment (23,249 ) (31,937 ) Purchase of equity investments (999 ) (1,246 ) Sale of equity investments 14,330 — Purchases of property and equipment (113,740 ) (92,552 ) Proceeds from sale of assets — 507 Acquisition of businesses, net of cash received (141,146 ) (482,227 ) Proceeds from sale of businesses, net of cash divested 48,876 24,353 Purchases of intangible assets (78 ) (3,118 ) Proceeds from divestiture of discontinued operations 259,104 — Net cash used in investing activities 59,088 (586,220 ) Cash flows from financing activities: Proceeds from issuance of long-term debt — 750,000 Payment of note payable — (400 ) Proceeds from bridge loan 485,000 — Debt issuance cost — (7,272 ) Payment of debt (510,197 ) (650,000 ) Debt extinguishment costs (1,073 ) (29,250 ) Repurchase of common stock (78,328 ) (275,654 ) Issuance of common stock under employee stock purchase plan 9,232 7,382 Exercise of stock options 2,939 1,619 Deferred payments for acquisitions (14,387 ) (29,180 ) Other (6,776 ) (1,878 ) Net cash (used in) provided by financing activities (113,590 ) (234,633 ) Effect of exchange rate changes on cash and cash equivalents (8,879 ) 7,811 Net change in cash and cash equivalents 452,190 (332,963 ) Cash and cash equivalents at beginning of year 242,652 575,615 Cash and cash equivalents at end of year $ 694,842 $ 242,652 ZIFF DAVIS, INC. AND SUBSIDIARIES RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP FINANCIAL MEASURES THREE MONTHS ENDED DECEMBER 31, 2021 AND 2020 (UNAUDITED, IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) Adjusted non-GAAP net income is GAAP net income with the following modifications: (1) elimination of share-based compensation; (2) elimination of certain acquisition related integration costs; (3) elimination of interest costs in excess of the coupon rate associated with outstanding debt; (4) elimination of amortization of patents and intangible assets that we acquired; (5) elimination of change in value on investment; (6) elimination of additional tax expense/benefit from prior years; (7) elimination of gain/loss on sale of assets; (8) elimination of intra-entity transfers; (9) elimination of lease asset impairments and other charges; (10) elimination of leasehold improvement impairments; (11) elimination of disposal related costs; (12) elimination of goodwill impairment on business and (13) elimination of dilutive effect of the convertible debt. Three Months Ended December 31, 2021 Per Diluted Share * 2020 Per Diluted Share * Net income from continuing operations $ 369,982 $ 7.62 $ 41,728 $ 0.91 Plus: Share based compensation (1) 4,302 0.09 4,233 0.10 Acquisition related integration costs (2) 1,924 0.04 7,727 0.17 Interest costs (3) 6,309 0.13 4,765 0.11 Amortization (4) 28,581 0.59 38,385 0.86 Investments (5) (307,739 ) (6.40 ) 1,713 0.04 Tax expense from prior years (6) — — 533 0.01 Sale of assets (7) (1,508 ) (0.03 ) 651 0.01 Intra-entity transfers (8) — — (1,856 ) (0.04 ) Lease asset impairments and other charges (9) 2,342 0.05 1,973 0.04 Leasehold improvement impairments (10) — — 61 — Disposal related costs (11) 135 — — — Goodwill impairment on business (12) (33 ) — — — Convertible debt dilution (13) — 0.08 — 0.02 Adjusted non-GAAP net income from continuing operations $ 104,295 $ 2.17 $ 99,913 $ 2.24 * The reconciliation of net income per share from GAAP to Adjusted non-GAAP may not foot since each is calculated independently. ZIFF DAVIS, INC. AND SUBSIDIARIES RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP FINANCIAL MEASURES TWELVE MONTHS ENDED DECEMBER 31, 2021 AND 2020 (UNAUDITED, IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) Adjusted non-GAAP net income is GAAP net income with the following modifications: (1) elimination of share-based compensation; (2) elimination of certain acquisition related integration costs; (3) elimination of interest costs in excess of the coupon rate associated with outstanding debt; (4) elimination of amortization of patents and intangible assets that we acquired; (5) elimination of change in value on investment; (6) elimination of additional tax expense/benefit from prior years; (7) elimination of gain/loss on sale of assets; (8) elimination of intra-entity transfers; (9) elimination of lease asset impairments and other charges; (10) elimination of leasehold improvement impairments; (11) elimination of disposal related costs; (12) elimination of goodwill impairment on business and (13) elimination of dilutive effect of the convertible debt. Twelve Months Ended December 31, 2021 Per Diluted Share * 2020 Per Diluted Share * Net income from continuing operations $ 387,547 $ 8.09 $ 27,365 $ 0.58 Plus: Share based compensation (1) 15,510 0.34 19,566 0.42 Acquisition related integration costs (2) 6,672 0.14 10,530 0.23 Interest costs (3) 18,769 0.41 18,497 0.40 Amortization (4) 127,258 2.75 124,247 2.68 Investments (5) (312,747 ) (6.77 ) 33,173 0.72 Tax expense from prior years (6) — — 5,448 0.12 Sale of assets (7) 14,896 0.32 (9,428 ) (0.20 ) Intra-entity transfers (8) — — (4,712 ) (0.10 ) Lease asset impairments and other charges (9) 9,793 0.21 11,390 0.25 Leasehold improvement impairments (10) — — 2,840 0.06 Disposal related costs (11) 407 0.01 — — Goodwill impairment on business (12) 24,602 0.53 — — Convertible debt dilution (13) — 0.30 — (0.03 ) Adjusted non-GAAP net income from continuing operations $ 292,707 $ 6.33 $ 238,916 $ 5.13 * The reconciliation of net income per share from GAAP to Adjusted non-GAAP may not foot since each is calculated independently. ZIFF DAVIS, INC. AND SUBSIDIARIES RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP FINANCIAL MEASURES THREE MONTHS ENDED DECEMBER 31, 2021 AND 2020 (UNAUDITED, IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) Adjusted non-GAAP net income is GAAP net income with the following modifications: (1) elimination of share-based compensation; (2) elimination of certain acquisition related integration costs; (3) elimination of interest costs in excess of the coupon rate associated with outstanding debt; (4) elimination of amortization of patents and intangible assets that we acquired; (5) elimination of change in value on investment; (6) elimination of additional tax expense/benefit from prior years; (7) elimination of gain/loss on sale of assets; (8) elimination of intra-entity transfers; (9) elimination of lease asset impairments and other charges; (10) elimination of leasehold improvement impairments; (11) elimination of disposal related costs; (12) elimination of goodwill impairment on business and (13) elimination of dilutive effect of the convertible debt. Three Months Ended December 31, 2021 2020 Cost of revenues $ 45,718 $ 46,159 Plus: Share based compensation (1) (86 ) (77 ) Acquisition related integration costs (2) (96 ) (57 ) Amortization (4) (251 ) (143 ) Adjusted non-GAAP cost of revenues $ 45,285 $ 45,882 Sales and marketing $ 138,100 $ 114,610 Plus: Share based compensation (1) (409 ) (218 ) Acquisition related integration costs (2) (178 ) (1,117 ) Lease asset impairments and other charges (9) — (76 ) Leasehold improvement impairments (10) — (3 ) Adjusted non-GAAP sales and marketing $ 137,513 $ 113,196 Research, development and engineering $ 21,875 $ 19,038 Plus: Share based compensation (1) (593 ) (364 ) Acquisition related integration costs (2) (357 ) (627 ) Lease asset impairments and other charges (9) — (35 ) Adjusted non-GAAP research, development and engineering $ 20,925 $ 18,012 General and administrative $ 117,541 $ 126,398 Plus: Share based compensation (1) (5,039 ) (4,629 ) Acquisition related integration costs (2) (2,903 ) (7,990 ) Amortization (4) (45,053 ) (46,875 ) Investments (5) (1,500 ) — Lease asset impairments and other charges (9) (3,134 ) (2,610 ) Leasehold improvement impairments (10) — (23 ) Disposal related costs (11) (135 ) (1 ) Adjusted non-GAAP general and administrative $ 59,777 $ 64,270 Interest expense, net $ (16,810 ) $ (20,836 ) Plus: Interest costs (3) 1,979 6,292 Adjusted non-GAAP interest expense, net $ (14,831 ) $ (14,544 ) Loss on debt extinguishment $ (4,527 ) $ — Plus: Interest costs (3) 7,323 — Adjusted non-GAAP loss on debt extinguishment $ 2,796 $ — (Loss) gain on sale of businesses $ — $ — Plus: Sale of assets (7) — — Adjusted non-GAAP (loss) gain on sale of businesses $ — $ — Unrealized gain on short-term investment $ 290,073 $ — Plus: Investments (5) (289,512 ) — Adjusted non-GAAP unrealized gain on short-term investment $ 561 $ — Other income (expense), net $ 1,759 $ 4,034 Plus: Acquisition related integration costs (2) — (208 ) Sale of assets (7) 290 — Intra-entity transfers (8) — (2,121 ) Lease asset impairments and other charges (9) — (385 ) Adjusted non-GAAP other income (expense), net $ 2,049 $ 1,320 Income tax expense $ 5,156 $ 18,781 Plus: Share based compensation (1) 1,825 1,055 Acquisition related integration costs (2) 1,610 1,857 Interest costs (3) 2,993 1,527 Amortization (4) 16,723 8,633 Investments (5) 478 (1,174 ) Tax benefit from prior years (6) — (533 ) Sale of assets (7) 1,798 (650 ) Intra-entity transfers (8) — (265 ) Lease asset impairments and other charges (9) 792 363 Disposal related costs (11) — (36 ) Goodwill impairment on business (12) 33 — Adjusted non-GAAP income tax expense $ 31,408 $ 29,558 Income (loss) from equity method investment, net $ 19,249 $ (539 ) Plus: Investments (5) (19,249 ) 539 Adjusted non-GAAP income (loss) from equity method investment, net $ — $ — Total adjustments $ 265,687 $ (58,185 ) GAAP net income per diluted share from continuing operations $ 7.62 $ 0.91 Adjustments * $ (5.45 ) $ 1.33 Adjusted non-GAAP net income per diluted share from continuing operations $ 2.17 $ 2.24 * The reconciliation of net income per share from GAAP to Adjusted non-GAAP may not foot since each is calculated independently. The Company discloses Adjusted non-GAAP Earnings Per Share (“EPS”) as a supplemental Non-GAAP financial performance measure, as it believes it is a useful metric by which to compare the performance of its business from period to period. The Company also understands that this Adjusted non-GAAP measure is broadly used by analysts, rating agencies and investors in assessing the Company’s performance. Accordingly, the Company believes that the presentation of this Adjusted non-GAAP financial measure provides useful information to investors. Adjusted non-GAAP EPS is not in accordance with, or an alternative to, net income per share and may be different from Non-GAAP measures with similar or even identical names used by other companies. In addition, this Adjusted non-GAAP measure is not based on any comprehensive set of accounting rules or principles. This Adjusted non-GAAP measure has limitations in that it does not reflect all of the amounts associated with the Company’s results of operations determined in accordance with GAAP. ZIFF DAVIS, INC. AND SUBSIDIARIES RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP FINANCIAL MEASURES TWELVE MONTHS ENDED DECEMBER 31, 2021 AND 2020 (UNAUDITED, IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) Adjusted non-GAAP net income is GAAP net income with the following modifications: (1) elimination of share-based compensation; (2) elimination of certain acquisition related integration costs; (3) elimination of interest costs in excess of the coupon rate associated with outstanding debt; (4) elimination of amortization of patents and intangible assets that we acquired; (5) elimination of change in value on investment; (6) elimination of additional tax expense/benefit from prior years; (7) elimination of gain/loss on sale of assets; (8) elimination of intra-entity transfers; (9) elimination of lease asset impairments and other charges; (10) elimination of leasehold improvement impairments; (11) elimination of disposal related costs; (12) elimination of goodwill impairment on business and (13) elimination of dilutive effect of the convertible debt. Twelve Months Ended December 31, 2021 2020 Cost of revenues $ 188,053 $ 178,403 Plus: Share based compensation (1) (306 ) (332 ) Acquisition related integration costs (2) (382 ) (227 ) Amortization (4) (1,548 ) (1,694 ) Adjusted non-GAAP cost of revenues $ 185,817 $ 176,150 Sales and marketing $ 493,049 $ 366,359 Plus: Share based compensation (1) (1,288 ) (1,011 ) Acquisition related integration costs (2) (1,824 ) (1,803 ) Lease asset impairments and other charges (9) — (76 ) Leasehold improvement impairments (10) — (3 ) Adjusted non-GAAP sales and marketing $ 489,937 $ 363,466 Research, development and engineering $ 78,874 $ 57,148 Plus: Share based compensation (1) (1,984 ) (1,396 ) Acquisition related integration costs (2) (1,457 ) (606 ) Lease asset impairments and other charges (9) — (35 ) Adjusted non-GAAP research, development and engineering $ 75,433 $ 55,111 General and administrative $ 457,692 $ 420,295 Plus: Share based compensation (1) (20,551 ) (19,781 ) Acquisition related integration costs (2) (7,469 ) (10,752 ) Amortization (4) (185,855 ) (156,377 ) Investments (5) (1,500 ) — Lease asset impairments and other charges (9) — (14,830 ) Leasehold improvement impairments (10) (12,988 ) (3,628 ) Disposal related costs (11) (607 ) (1 ) Adjusted non-GAAP general and administrative $ 228,722 $ 214,926 Goodwill impairment on business (32,629 ) — Plus: Goodwill impairment on business (12) 32,630 — Adjusted non-GAAP goodwill impairment on business $ 1 $ — Interest expense, net $ (79,031 ) $ (56,188 ) Plus: Interest costs (3) 18,482 24,384 Tax expense from prior years (6) — Adjusted non-GAAP interest expense, net $ (60,549 ) $ (31,804 ) Loss on debt extinguishment $ (4,527 ) $ — Plus: Interest costs (3) 7,323 — Adjusted non-GAAP loss on debt extinguishment $ 2,796 $ — (Loss) gain on sale of businesses $ (21,798 ) $ 17,122 Plus: Sale of assets (7) 22,088 (16,654 ) Adjusted non-GAAP (loss) gain on sale of businesses $ 290 $ 468 Loss on investments, net $ (16,677 ) $ (20,991 ) Plus: Investments (5) 16,677 20,826 Sale of assets (7) — — Adjusted non-GAAP loss on investments, net $ — $ (165 ) Unrealized gain on short-term investment $ 290,073 $ — Plus: Investments (5) (289,512 ) — Adjusted non-GAAP unrealized gain on short-term investment $ 561 $ — Other income (expense), net $ 1,293 $ 65 Plus: Acquisition related integration costs (2) — (209 ) Sale of assets (7) — (386 ) Intra-entity transfers (8) — (619 ) Lease asset impairments and other charges (9) (5,385 ) Adjusted non-GAAP other income (expense), net $ 1,293 $ (6,534 ) Income tax (benefit) expense $ (15,944 ) $ 37,929 Plus: Share based compensation (1) 8,619 2,954 Acquisition related integration costs (2) 4,460 2,649 Interest costs (3) 7,036 5,887 Amortization (4) 60,145 33,824 Investments (5) 5,567 (1,174 ) Tax (benefit) expense from prior years (6) — (5,448 ) Sale of assets (7) 7,192 (7,678 ) Intra-entity transfers (8) — (673 ) Lease asset impairments and other charges (9) — 3,164 Leasehold improvement impairments (10) 3,195 791 Disposal related costs (11) 200 — Goodwill impairment on business (12) 8,028 — Adjusted non-GAAP income tax (benefit) expense $ 88,498 $ 72,225 Income (loss) from equity method investment, net $ 35,845 $ (11,338 ) Plus: Investments (5) (35,845 ) 11,338 Adjusted non-GAAP income (loss) from equity method investment, net $ — $ — Total adjustments $ 94,840 $ (211,551 ) GAAP net income per diluted share from continuing operations $ 8.09 $ 0.58 Adjustments * $ (1.76 ) $ 4.55 Adjusted non-GAAP net income per diluted share from continuing operations $ 6.33 $ 5.13 * The reconciliation of net income per share from GAAP to Adjusted non-GAAP may not foot since each is calculated independently. The Company discloses Adjusted non-GAAP Earnings Per Share (“EPS”) as a supplemental Non-GAAP financial performance measure, as it believes it is a useful metric by which to compare the performance of its business from period to period. The Company also understands that this Adjusted non-GAAP measure is broadly used by analysts, rating agencies and investors in assessing the Company’s performance. Accordingly, the Company believes that the presentation of this Adjusted non-GAAP financial measure provides useful information to investors. Adjusted non-GAAP EPS is not in accordance with, or an alternative to, net income per share and may be different from Non-GAAP measures with similar or even identical names used by other companies. In addition, this Adjusted non-GAAP measure is not based on any comprehensive set of accounting rules or principles. This Adjusted non-GAAP measure has limitations in that it does not reflect all of the amounts associated with the Company’s results of operations determined in accordance with GAAP. Non-GAAP Financial Measures To supplement its condensed consolidated financial statements, which are prepared and presented in accordance with US GAAP, the Company uses the following Non-GAAP financial measures: Adjusted EBITDA, Adjusted non-GAAP Net Income from continuing operations, and Adjusted non-GAAP Diluted EPS from continuing operations (collectively the “Non-GAAP financial measures”). The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with U.S. GAAP. The Company uses these Non-GAAP financial measures for financial and operational decision making and as a means to evaluate period-to-period comparisons. The Company believes that they provide useful information about core operating results, enhance the overall understanding of past financial performance and future prospects, and allow for greater transparency with respect to key metrics used by management in its financial and operational decision making. (1) Share Based Compensation. The Company excludes stock-based compensation because it is non-cash in nature and because the Company believes that the Non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance. The Company further believes this measure is useful to investors in that it allows for greater transparency to certain line items in its financial statements. In addition, excluding this item from the Non-GAAP measures facilitates comparisons to historical operating results and comparisons to peers, many of which similarly exclude this item. (2) Acquisition Related Integration Costs. The Company excludes certain acquisition and related integration costs such as adjustments to contingent consideration, severance, lease terminations, retention bonuses and other acquisition-specific items. The Company believes that the Non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance. In addition, excluding this item from the Non-GAAP measures facilitates comparisons to historical operating results and comparisons to peers, many of which similarly exclude this item. (3) Interest Costs. In June 2014, the Company issued $402.5 million aggregate principal amount of 3.25% convertible senior notes and in November 2019, the Company issued $550.0 million aggregate principal amount of 1.75% convertible senior notes. In accordance with GAAP, the Company separately accounts for the value of the liability and equity features of its outstanding convertible senior notes in a manner that reflects the Company’s non-convertible debt borrowing rate. The value of the conversion feature, reflected as a debt discount, is amortized to interest expense over time. Accordingly, the Company recognizes imputed interest expense on its 3.25% and 1.75% convertible senior notes of approximately 5.8% and 5.5%, respectively, in its statement of operations. The Company excludes the difference between the imputed interest expense and the coupon interest expense of 3.25% and 1.75%, respectively, because it is non-cash in nature and because the Company believes that the Non-GAAP financial measures excluding this item provide meaningful supplemental information regarding core operational performance. In addition, the Company has excluded the difference between the imputed and coupon interest expense associated with the 4.625% Senior Notes. The Company has determined excluding these items from the Non-GAAP measures facilitates comparisons to historical operating results and comparisons to peers, many of which similarly exclude this item. (4) Amortization. The Company excludes amortization of patents and acquired intangible assets because it is non-cash in nature and because the Company believes that the Non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance. In addition, excluding this item from the Non-GAAP measures facilitates comparisons to historical operating results and comparisons to peers, many of which similarly exclude this item. (5) Change in Value on Investments. The Company excludes the change in value on its investments. The Company believes that the Non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance. In addition, excluding this item from the Non-GAAP measures facilitates comparisons to historical operating results. (6) Tax Expense/Benefit from Prior Years. The Company excludes certain income tax-related items in respect of income tax audit settlements and their related reversals of income tax reserves accounted for through ASC 740-10. The Company believes that the Non-GAAP financial measures excluding these items provide meaningful supplemental information regarding operational performance. In addition, excluding these items from the Non-GAAP measures facilitates comparisons to historical operating results. (7) Gain (Loss) on Sale of Assets. The Company excludes the gain (loss) on sale of certain of its assets. The Company believes that the Non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance. In addition, excluding this item from the Non-GAAP measures facilitates comparisons to historical operating results. (8) Intra-Entity Transfers. The Company excludes certain effects of intra-entity transfers to the extent the related tax asset or liability in the financial statement is not recovered or settled, respectively during the year. During December 2019, the Company entered into an intra-entity asset transfer that resulted in the recording of a tax benefit and related tax asset representing tax deductible amounts to be realized in future years which is expected to be recovered over a period of up to 20 years and related foreign currency fluctuations. The Company believes that the Non-GAAP financial measures excluding the cumulative future unrealized benefit of the assets transferred and including the tax benefit in the year of realization provides meaningful supplemental information regarding operational performance. In addition, excluding this item from the Non-GAAP measures facilitates comparisons to historical operating results. (9) Lease Asset Impairments and Other Charges. The Company excludes lease asset impairments and other charges as they are non-cash in nature and because the Company believes that the Non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance. In addition, excluding this item from the Non-GAAP measures facilitates comparisons to historical operating results. (10) Leasehold Improvement Impairments. The Company excludes leasehold improvement impairments as they are non-cash in nature and because the Company believes that the Non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance. In addition, excluding this item from the Non-GAAP measures facilitates comparisons to historical operating results. (11) Disposal related Costs. The Company excludes expenses associated with the disposal of certain businesses. The Company believes that the Non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance. In addition, excluding this item from the Non-GAAP measures facilitates comparisons to historical operating results. (12) Goodwill Impairment on Business. The Company excludes the goodwill impairment on business because it is non-cash in nature and the Company believes that the Non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance. In addition, excluding this item from the Non-GAAP measures facilitates comparisons to historical operating results. (13) Convertible Debt Dilution. The Company excludes convertible debt dilution from diluted EPS. The Company believes that the Non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance. In addition, excluding this item from the Non-GAAP measures facilitates comparisons to historical operating results. The Company presents Adjusted non-GAAP Cost of Revenues, Adjusted non-GAAP Research, Development and Engineering, Adjusted non-GAAP Sales and Marketing, Adjusted non-GAAP General and Administrative, Adjusted non-GAAP Interest Expense, Adjusted Gain on Sale of Businesses, Adjusted non-GAAP Loss on Investments, Adjusted non-GAAP Other (Income) Expense, Adjusted non-GAAP Income Tax Provision, Adjusted non-GAAP (Income) Loss from Equity Method Investment, Net and Adjusted non-GAAP Net Income because the Company believes that these provide useful information about our operating results and enhance the overall understanding of past financial performance and future prospects. Pro-Forma Financial Results Key pro-forma financial results for the three and twelve months ended December 31, 2021 and 2020, are set forth in the following table (in millions, except per share amounts). The financial results below exclude the operating results from continuing operations, on a pro-forma basis, of Voice assets in Australia, New Zealand, and the United Kingdom as well as the sale of the Company’s B2B Backup business as if they had occurred January 1, 2020. Three Months Ended Twelve Months Ended Q4 2021 Q4 2020 Q4 2021 Q4 2020 Total Revenues $408.6 million $384.1 million $1,416.7 million $1,158.8 million Pro-Forma Revenue Adjustments $— million $(14.0) million $(33.5) million $(68.1) million Pro-Forma Total Revenue: (1) $408.6 million $370.1 million $1,383.2 million $1,090.7 million Adjusted Non-GAAP Net Income per Diluted Share from Continuing Operations (1) $2.17 $2.24 $6.33 $5.13 Pro-Forma Net Income per Diluted Share from Continuing Operations Adjustments $— $(0.08) $(0.22) $(0.48) Adjusted Pro Forma Net Income per Diluted Share from Continuing Operations (1) $2.17 $2.16 $6.11 $4.65 GAAP Net Income from Continuing Operations $370.0 million $41.7 million $387.5 million $27.4 million Pro-Forma Net Income from Continuing Operations Adjustments $(265.7) million $54.5 million $(105.0) million $189.0 million Adjusted Pro-Forma Net Income from Continuing Operations $104.3 million $96.2 million $282.5 million $216.4 million Adjusted EBITDA (1) $161.6 million $157.1 million $498.7 million $404.5 million Pro-Forma EBITDA Adjustments $— million $(5.8) million $(14.1) million $(26.8) million Adjusted Pro-Forma EBITDA (1) $161.6 million $151.3 million $484.6 million $377.7 million Adjusted EBITDA Margin (1) 39.5% 40.9% 35.2% 34.9% Pro-Forma EBITDA Margin Adjustments 0.0% —% (0.2)% (0.3)% Adjusted Pro-Forma EBITDA Margin (1) 39.5% 40.9% 35.0% 34.6% (1) Refer to the notes earlier in this Release. ZIFF DAVIS, INC. AND SUBSIDIARIES NET INCOME TO ADJUSTED EBITDA RECONCILIATION THREE AND TWELVE MONTHS ENDED DECEMBER 31, 2021 AND 2020 (UNAUDITED, IN THOUSANDS) The following table sets forth a reconciliation of Adjusted EBITDA to net income from continuing operations, the most directly comparable GAAP financial measure. Three Months Ended December 31, Twelve Months Ended December 31, 2021 2020 2021 2020 Net income from continuing operations $ 369,982 $ 41,728 $ 387,547 $ 27,365 Plus: Interest expense, net 16,810 20,836 79,031 56,188 Loss on debt extinguishment 4,527 — 4,527 — Loss (gain) on sale of businesses — — 21,798 (17,122 ) Loss on investments, net — — 16,677 20,991 Unrealized gain on short-term investment (290,073 ) — (290,073 ) — Other income, net (1,759 ) (4,034 ) (1,293 ) (65 ) Income tax expense (benefit) 5,156 18,781 (15,944 ) 37,929 (Income) loss from equity method investment, net (19,249 ) 539 (35,845 ) 11,338 Depreciation and amortization 61,791 61,476 249,293 216,982 Reconciliation of GAAP to Adjusted non-GAAP financial measures: Share-based compensation 6,127 5,289 24,129 22,521 Acquisition-related integration costs 3,535 9,791 11,132 13,388 Lease asset impairments and other charges 3,133 2,721 12,988 14,940 Disposal related costs 135 — 606 — Investments 1,500 — 1,500 — Goodwill impairment on business — — 32,629 — Adjusted EBITDA $ 161,615 $ 157,127 $ 498,702 $ 404,455 Adjusted EBITDA as calculated above represents earnings before interest, gain on sale of businesses, goodwill impairment of business, loss on investments, net, other (income) expense, net, income tax expense, (income) loss from equity method investments, net, depreciation and amortization and the items used to reconcile GAAP to Adjusted non-GAAP financial measures, including (1) share-based compensation, (2) certain acquisition-related integration costs, and (3) lease asset impairments and other charges. We disclose Adjusted EBITDA as a supplemental Non-GAAP financial performance measure as we believe it is a useful metric by which to compare the performance of our business from period to period. We understand that measures similar to Adjusted EBITDA are broadly used by analysts, rating agencies and investors in assessing our performance. Accordingly, we believe that the presentation of Adjusted EBITDA provides useful information to investors. Adjusted EBITDA is not in accordance with, or an alternative to, net income, and may be different from Non-GAAP measures used by other companies. In addition, Adjusted EBITDA is not based on any comprehensive set of accounting rules or principles. This Adjusted non-GAAP measure has limitations in that it does not reflect all of the amounts associated with the Company’s results of operations determined in accordance with GAAP. ZIFF DAVIS, INC. AND SUBSIDIARIES NON-GAAP FINANCIAL MEASURES (UNAUDITED, IN THOUSANDS) Q1 Q2 Q3 Q4 YTD 2021 Net cash provided by operating activities from continuing and discontinued operations $ 178,724 $ 111,298 $ 140,230 $ 85,319 $ 515,571 Less: Purchases of property and equipment (26,269 ) (31,497 ) (29,729 ) (26,245 ) (113,740 ) Add: Contingent consideration* — 685 — — 685 Free cash flow from continuing and discontinued operations $ 152,455 $ 80,486 $ 110,501 $ 59,074 $ 402,516 Q1 Q2 Q3 Q4 YTD 2020 Net cash provided by operating activities from continuing and discontinued operations $ 102,036 $ 139,591 $ 114,382 $ 124,070 $ 480,079 Less: Purchases of property and equipment (26,885 ) (23,652 ) (20,729 ) (21,286 ) (92,552 ) Add: Contingent consideration* 20,054 — 49 99 20,202 Free cash flow from continuing and discontinued operations $ 95,205 $ 115,939 $ 93,702 $ 102,883 $ 407,729 * Free Cash Flows from Continuing and Discontinued Operations of $80.5 million for Q2 2021, $95.2 million for Q1 2020, $93.7 million for Q3 2020 and $102.9 million for Q4 2020 is before the effect of payments associated with certain contingent consideration associated with recent acquisitions. The Company discloses free cash flows as supplemental Non-GAAP financial performance measure, as it believes it is a useful metric by which to compare the performance of its business from period to period. The Company also understands that this Non-GAAP measure is broadly used by analysts, rating agencies and investors in assessing the Company’s performance. Accordingly, the Company believes that the presentation of this Non-GAAP financial measure provides useful information to investors. Free cash flows is not in accordance with, or an alternative to, Cash Flows from Operating Activities, and may be different from Non-GAAP measures with similar or even identical names used by other companies. In addition, the Non-GAAP measure is not based on any comprehensive set of accounting rules or principles. This Non-GAAP measure has limitations in that it does not reflect all of the amounts associated with the Company’s results of operations determined in accordance with GAAP. ZIFF DAVIS, INC. AND SUBSIDIARIES RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP FINANCIAL MEASURES THREE MONTHS ENDED DECEMBER 31, 2021 (UNAUDITED, IN THOUSANDS) Digital Cybersecurity Media and Martech Corporate Total Revenues GAAP revenues $ 325,747 $ 82,881 $ — $ 408,628 Gross profit GAAP gross profit $ 300,891 $ 62,028 $ (9 ) $ 362,910 Non-GAAP adjustments: Share-based compensation 4 81 — 85 Acquisition related integration costs 70 27 — 97 Amortization — 251 — 251 Adjusted non-GAAP gross profit $ 300,965 $ 62,387 $ (9 ) $ 363,343 Operating profit Income (loss) from operations $ 92,582 $ 9,333 $ (16,521 ) $ 85,394 Non-GAAP adjustments: Share-based compensation 2,179 1,226 2,722 6,127 Acquisition related integration costs 856 1,472 1,207 3,535 Amortization 32,746 12,235 72 45,053 Lease asset impairments and other charges 3,666 (533 ) — 3,133 Disposal related costs — 85 50 135 Investments — — 1,500 1,500 Adjusted non-GAAP operating profit (loss) $ 132,029 $ 23,818 $ (10,970 ) $ 144,877 Depreciation 13,508 3,230 — 16,738 Adjusted EBITDA $ 145,537 $ 27,048 $ (10,970 ) $ 161,615 NOTE 1: Table above excludes certain intercompany allocations ZIFF DAVIS, INC. AND SUBSIDIARIES RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP FINANCIAL MEASURES THREE MONTHS ENDED DECEMBER 31, 2020 (UNAUDITED, IN THOUSANDS) Digital Cybersecurity Media and Martech Corporate Total Revenues GAAP revenues $ 297,868 $ 86,187 $ — $ 384,055 Gross profit GAAP gross profit $ 275,895 $ 62,001 $ — $ 337,896 Non-GAAP adjustments: Share-based compensation 3 74 — 77 Acquisition related integration costs — 57 — 57 Amortization — 143 — 143 Adjusted non-GAAP gross profit $ 275,898 $ 62,275 $ — $ 338,173 Operating profit Income (loss) from operations $ 85,571 $ 9,579 $ (17,300 ) 77,850 Non-GAAP adjustments: Share-based compensation 1,334 943 3,012 5,289 Acquisition related integration costs 8,116 337 1,338 9,791 Amortization 32,903 14,007 109 47,019 Lease asset impairments and other charges 2,721 — — 2,721 Adjusted non-GAAP operating profit (loss) $ 130,645 $ 24,866 $ (12,841 ) $ 142,670 Depreciation 10,621 3,836 — 14,457 Adjusted EBITDA $ 141,266 $ 28,702 $ (12,841 ) $ 157,127 NOTE 1: Table above excludes certain intercompany allocations NOTE 2: Table above has been recast to remove the impact of certain expenses associated with the Corporate entity that were previously allocated to the Cybersecurity and Martech and Digital Media businesses. ZIFF DAVIS, INC. AND SUBSIDIARIES RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP FINANCIAL MEASURES TWELVE MONTHS ENDED DECEMBER 31, 2021 (UNAUDITED, IN THOUSANDS) Digital Cybersecurity Media and Martech Corporate Total Revenues GAAP revenues $ 1,068,476 $ 348,246 $ — $ 1,416,722 Gross profit GAAP gross profit $ 974,011 $ 254,742 $ (84 ) $ 1,228,669 Non-GAAP adjustments: Share-based compensation 14 292 — 306 Acquisition related integration costs 95 287 — 382 Amortization — 1,547 — 1,547 Adjusted non-GAAP gross profit $ 974,120 $ 256,868 $ (84 ) $ 1,230,904 Operating profit Income (loss) from operations $ 216,950 $ 9,435 $ (60,379 ) $ 166,006 Non-GAAP adjustments: Goodwill impairment on business — 32,629 — 32,629 Share-based compensation 7,734 4,481 11,914 24,129 Acquisition related integration costs 3,449 6,450 1,233 11,132 Amortization 144,621 40,946 288 185,855 Lease asset impairments and other charges 12,229 758 — 12,987 Disposal related costs — 85 522 607 Investments — — 1,500 1,500 Adjusted non-GAAP income (loss) from operations $ 384,983 $ 94,784 $ (44,922 ) $ 434,845 Depreciation 49,151 14,451 255 63,857 Adjusted EBITDA $ 434,134 $ 109,235 $ (44,667 ) $ 498,702 NOTE 1: Table above excludes certain intercompany allocations ZIFF DAVIS, INC. AND SUBSIDIARIES RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP FINANCIAL MEASURES TWELVE MONTHS ENDED DECEMBER 31, 2020 (UNAUDITED, IN THOUSANDS) Digital Cybersecurity Media and Martech Corporate Total Revenues GAAP revenues $ 811,130 $ 347,699 $ — $ 1,158,829 Gross profit GAAP gross profit $ 733,658 $ 246,815 $ (47 ) $ 980,426 Non-GAAP adjustments: Share-based compensation 10 321 — 331 Acquisition related integration costs — 227 — 227 Amortization — 1,695 — 1,695 Adjusted non-GAAP gross profit $ 733,668 $ 249,058 $ (47 ) $ 982,679 Operating profit Income (loss) from operations $ 139,807 $ 52,319 $ (55,502 ) $ 136,624 Non-GAAP adjustments: Share-based compensation 5,539 4,138 12,844 22,521 Acquisition related integration costs 11,289 606 1,493 13,388 Amortization 99,901 54,506 3,663 158,070 Lease asset impairments and other charges 14,912 28 — 14,940 Adjusted non-GAAP income (loss) from operations $ 271,448 $ 111,597 $ (37,502 ) $ 345,543 Depreciation 41,788 17,124 — 58,912 Adjusted EBITDA $ 313,236 $ 128,721 $ (37,502 ) $ 404,455 NOTE 1: Table above excludes certain intercompany allocations NOTE 2: Table above has been recast to remove the impact of certain expenses associated with the Corporate entity that were previously allocated to the Cybersecurity and Martech and Digital Media businesses. View source version on businesswire.com: https://www.businesswire.com/news/home/20220214005858/en/ Ziff Davis, Inc. (NASDAQ: ZD) today reported preliminary unaudited financial results for the fourth quarter and year ended December 31, 2021. Contacts Rebecca Wright Ziff Davis, Inc. 800-577-1790 investor@ziffdavis.com Data & News supplied by www.cloudquote.io Stock quotes supplied by Barchart Quotes delayed at least 20 minutes. By accessing this page, you agree to the following Privacy Policy and Terms and Conditions.
Ziff Davis Reports Fourth Quarter and Year End 2021 Preliminary Unaudited Results and Provides 2022 Guidance By: Ziff Davis, Inc. via Business Wire February 14, 2022 at 19:00 PM EST Ziff Davis, Inc. (NASDAQ: ZD) today reported preliminary unaudited financial results for the fourth quarter and year ended December 31, 2021. “We had a strong finish to an exceptional year in which we posted fantastic results and executed on a transformational spin-off," said Vivek Shah, CEO of Ziff Davis. "We are excited by our growth prospects and the opportunities to continue to deploy our financial and human capital to generate value for our stakeholders." FOURTH QUARTER 2021 HIGHLIGHTS On October 7, 2021, Ziff Davis completed the separation of the cloud fax business to Consensus Cloud Solutions, Inc. (“Consensus”). As the spin-off occurred during the fourth quarter of 2021, Ziff Davis has classified Consensus as a discontinued operation in its financial statements for all periods. Results in this press release represent continuing operations, except for the Statement of Cash Flows, net cash provided by operating activities and free cash flow, which are on a combined continuing and discontinued operations basis. Q4 2021 quarterly revenues increased 6.4% to $408.6 million compared to $384.1 million for Q4 2020. On a pro-forma(6) basis, Q4 2021 quarterly revenues increased 10.4% to $408.6 million as compared to $370.1 million for Q4 2020. GAAP net income per diluted share from continuing operations(3) increased to $7.62 in Q4 2021 compared to $0.91 for Q4 2020. The earnings increase was primarily due to an unrealized gain on investment of $290 million to record our investment in Consensus ($6.03 per share, after tax). Adjusted non-GAAP net income per diluted share from continuing operations(3)(4) for the quarter decreased (3.1)% to $2.17 compared to $2.24 for Q4 2020. On a pro-forma(6) basis, Adjusted non-GAAP net income per diluted share from continuing operations(3)(4) for the quarter increased 0.5% to $2.17 as compared to $2.16 for Q4 2020. GAAP net income from continuing operations increased to $370.0 million compared to $41.7 million for Q4 2020 primarily due to an unrealized gain on investment of $290 million to record our investment in Consensus. Adjusted non-GAAP net income from continuing operations increased by 4.4% to $104.3 million as compared to $99.9 million for Q4 2020. On a pro-forma(6) basis, Adjusted non-GAAP net income from continuing operations increased by 8.4% to $104.3 million as compared to $96.2 million for Q4 2020. Adjusted EBITDA(5) for the quarter increased 2.9% to $161.6 million compared to $157.1 million for Q4 2020. On a pro-forma(6) basis, Adjusted EBITDA(5) for the quarter increased 6.8% to $161.6 million compared to $151.3 million for Q4 2020. Net cash provided by operating activities from continuing and discontinued operations was $85.3 million during Q4 2021 compared to $124.1 in Q4 2020. Q4 2021 free cash flow from continuing and discontinued operations(2) was $59.1 million during Q4 2021 compared to $102.9 million in Q4 2020. The company ended the quarter with approximately $1.05 billion in cash, cash equivalents, and investments after deploying approximately $29.7 million during the quarter for current and prior year acquisitions. Key financial results for Q4 2021 versus Q4 2020 are set forth in the following table (in millions, except per share amounts). Reconciliations of Adjusted non-GAAP earnings per diluted share, Adjusted EBITDA and free cash flow to their nearest comparable GAAP financial measures are attached to this Press Release. The following table reflects Actual and Pro Forma Results from Continuing Operations, except for Cash Provided by Operating Activities and Free Cash Flow which is on a combined basis of continuing operations and discontinued operations, for the fourth quarter of 2021 and 2020 (in millions, except per share amounts). Pro-Forma Results from Continuing Operations below excludes the operating results from Voice assets in Australia, New Zealand, and the United Kingdom that were sold in 2020 and 2021, respectively, and the Company’s B2B Backup business that was sold during the third quarter of 2021. Pro-Forma Results(6) Q4 2021 Q4 2020 % Change Q4 2021 Q4 2020 % Change Revenues Digital Media $325.7 $297.9 9.3% $325.7 $297.9 9.3% Cybersecurity and Martech $82.9 $86.2 (3.8)% $82.9 $72.2 14.8% Total Revenue: (1) $408.6 $384.1 6.4% $408.6 $370.1 10.4% Income from Operations $85.4 $77.9 9.6% GAAP Income per Diluted Share from Continuing Operations (3) $7.62 $0.91 737.4% Adjusted Non-GAAP Income per Diluted Share from Continuing Operations (3) (4) $2.17 $2.24 (3.1)% $2.17 $2.16 0.5% GAAP Net Income from Continuing Operations $370.0 $41.7 787.3% Adjusted Non-GAAP Net Income from Continuing Operations $104.3 $99.9 4.4% $104.3 $96.2 8.4% Adjusted EBITDA (5) $161.6 $157.1 2.9% $161.6 $151.3 6.8% Adjusted EBITDA Margin (5) 39.5% 40.9% (1.4)% 39.5% 40.9% (1.4)% Net Cash Provided by Operating Activities from Continuing and Discontinued Operations $85.3 $124.1 (31.3)% Free Cash Flow from Continuing and Discontinued Operations (2) $59.1 $102.9 (42.6)% FULL YEAR 2021 HIGHLIGHTS 2021 revenues increased 22.3% to a record of $1.42 billion compared to $1.16 billion for 2020. On a pro-forma(6) basis, 2021 revenues increased 26.8% to $1.38 billion as compared to $1.09 billion for 2020. GAAP net income per diluted share(3) from continuing operations increased to $8.09 in 2021 compared to $0.58 for 2020. The net income increase was primarily due to an unrealized gain on investment of $290 million to record our investment in Consensus. ($6.24 per share, after tax). Adjusted non-GAAP net income per diluted share from continuing operations(3)(4) for the year increased by 23.4% to $6.33 compared to $5.13 for 2020. On a pro-forma(6) basis, Adjusted non-GAAP net income per diluted share from continuing operations(3)(4) for the year increased 31.4% to $6.11 as compared to $4.65 for 2020. GAAP net income from continuing operations increased to $387.5 million compared to $27.4 million for 2020 primarily due to an unrealized gain on investment of $290 million to record our investment in Consensus. Adjusted non-GAAP net income from continuing operations increased by 22.5% to $292.7 million as compared to $238.9 million for 2020. On a pro-forma(6) basis, Adjusted non-GAAP net income from continuing operations increased by 30.5% to $282.5 million as compared to $216.4 million for 2020. Adjusted EBITDA(5) for the year increased 23.3% to $498.7 million compared to $404.5 million for 2020. On a pro-forma(6) basis, Adjusted EBITDA(5) for the year increased 28.3% to $484.6 million compared to $377.7 million for 2020. Net cash provided by operating activities from continuing and discontinued operations was $515.6 million during 2021 compared to $480.1 million in 2020. Free cash flow from continuing and discontinued operations(2) was $402.5 million during 2021 compared to $407.7 million in 2020. The following table reflects Actual and Pro-Forma Results from Continuing Operations, except for Cash Provided by Operating Activities and Free Cash Flow which is on a combined basis of continuing operations and discontinued operations for the twelve months ended December 31, 2021 and 2020 (in millions, except per share amounts). Pro-Forma Results from Continuing Operations below excludes the operating results from Voice assets in Australia, New Zealand, and the United Kingdom that were sold in 2020 and 2021, respectively, and the Company’s B2B Backup business that was sold during the third quarter of 2021. Pro-Forma Results(6) 2021 2020 % Change 2021 2020 % Change Revenues Digital Media $1,068.5 $811.1 31.7% $1,068.5 $811.1 31.7% Cybersecurity and Martech $348.2 $347.7 0.1% $314.7 $279.6 12.6% Total Revenue: (1) $1,416.7 $1,158.8 22.3% $1,383.2 $1,090.7 26.8% Income from Operations $166.4 $136.6 21.8% GAAP Income per Diluted Share from Continuing Operations (3) $8.09 $0.58 1,294.8% Adjusted Non-GAAP Income per Diluted Share from Continuing Operations (3) (4) $6.33 $5.13 23.4% $6.11 $4.65 31.4% GAAP Net Income from Continuing Operations $387.5 $27.4 1,314.2% Adjusted Non-GAAP Net Income from Continuing Operations $292.7 $238.9 22.5% $282.5 $216.4 30.5% Adjusted EBITDA (5) $498.7 $404.5 23.3% $484.6 $377.7 28.3% Adjusted EBITDA Margin (5) 35.2% 34.9% 0.3% 35.0% 34.6% 0.4% Net Cash Provided by Operating Activities from Continuing and Discontinued Operations $515.6 $480.1 7.4% Free Cash Flow from Continuing and Discontinued Operations (2) $402.5 $407.7 (1.3)% ZIFF DAVIS GUIDANCE The Company’s estimates for fiscal year 2022 are as follows (in millions, except per share amounts): Revenue Adjusted EBITDA Adjusted Diluted EPS FY 2022 Range of Estimates $1,497-$1,535 $538-$555 $6.52-$6.79 Adjusted non-GAAP net income per diluted share for 2022 excludes share-based compensation of between $24 million and $28 million, amortization of acquired intangibles and the impact of any currently unanticipated items, in each case net of tax. It is anticipated that the non-GAAP effective tax rate for 2022 (exclusive of the release of reserves for uncertain tax positions) will be between 23.5% and 25%. The Company has not reconciled the non-GAAP Business Outlook for 2022 Adjusted EBITDA or Adjusted non-GAAP Diluted EPS and tax rate information included in this release to the most directly comparable GAAP measure because this cannot be done without unreasonable effort due to the variability with respect to costs related to acquisitions and taxation, which are potential adjustments to future earnings. We expect the variability of these items to have a potentially unpredictable and significant impact on our future GAAP financial results. Notes: (1) The revenues associated with each of the businesses may not foot precisely since each is presented independently. (2) Free cash flow is defined as net cash provided by operating activities from continuing operations, less purchases of property and equipment from continuing operations, plus contingent consideration from continuing operations. Free cash flow amounts are not meant as a substitute for GAAP, but are solely for informational purposes. (3) The estimated GAAP effective tax rates were approximately 1.4% for Q4 2021 and 30.8% for Q4 2020. The estimated Adjusted non-GAAP effective tax rates were approximately 23.1% for Q4 2021 and 22.8% for Q4 2020. (4) Adjusted non-GAAP net income per diluted share excludes certain non-GAAP items, as defined in the Reconciliation of GAAP to Adjusted non-GAAP Financial Measures, for the three months ended December 31, 2021 and 2020 totaled $(5.45) and $1.33 per diluted share, respectively. (5) Adjusted EBITDA is defined as net income from continuing operations before interest; gain on sale of businesses; goodwill impairment of business; loss on investments, net; other income (expense), net; income tax expense (benefit); income (loss) from equity method investment, net; depreciation and amortization; and the items used to reconcile EPS to Adjusted non-GAAP EPS, as defined in the Reconciliation of GAAP to Adjusted non-GAAP Financial Measures. Adjusted EBITDA amounts are not meant as a substitute for GAAP, but are solely for informational purposes. (6) Pro-forma figures are provided taking into consideration the sale of certain Voice assets in Australia, New Zealand, and the United Kingdom as well as the sale of the Company’s B2B Backup business as if they had occurred January 1, 2020. As a result of the separation of the Consensus business on October 7, 2021, a portion of Ziff Davis’ shared overhead costs were reduced. Ziff Davis estimates that it would have achieved additional savings of approximately $7 million and $9 million in 2021 and 2020, respectively, if Consensus was separated on January 1, 2020. About Ziff Davis Ziff Davis, Inc. (NASDAQ: ZD) is a vertically focused digital media and internet company whose portfolio includes leading brands in technology, entertainment, shopping, health, cybersecurity, and martech. For more information, visit www.ziffdavis.com. Preliminary Unaudited Results: These fourth quarter and full year 2020 and 2021 results are preliminary, unaudited, and subject to adjustments. In particular, due to the complexity of the October 7, 2021 spin-off of Consensus and the related transactions (including the debt-for-debt exchange), the presentation of the transaction's impact on the Company's financial statements (including the presentation of continuing and discontinued operations and the size of the gain associated with the retention of the 19.9% stake in Consensus) is still being finalized. Any change to the impact of the unrealized gain on investment of $290 million associated with the retention of the 19.9% stake in Consensus could be material to our GAAP net income from continuing operations. As a result of the foregoing, certain information provided herein is subject to change. “Safe Harbor” Statement Under the Private Securities Litigation Reform Act of 1995: Certain statements in this Press Release are “forward-looking statements” within the meaning of The Private Securities Litigation Reform Act of 1995, including those contained in Vivek Shah’s quote and the “Business Outlook” portion regarding the Company’s expected fiscal 2022 financial performance. These forward-looking statements are based on management’s current expectations or beliefs and are subject to numerous assumptions, risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. These factors and uncertainties include, among other items: the Company’s ability to grow revenues, profitability and cash flows; the Company’s ability to identify, close and successfully transition acquisitions; subscriber growth and retention; variability of the Company’s revenue based on changing conditions in particular industries and the economy generally; protection of the Company’s proprietary technology or infringement by the Company of intellectual property of others; the risk of adverse changes in the U.S. or international regulatory environments, including but not limited to the imposition or increase of taxes or regulatory-related fees; and the numerous other factors set forth in Ziff Davis’ (formerly J2 Global, Inc.) filings with the Securities and Exchange Commission (“SEC”). For a more detailed description of the risk factors and uncertainties affecting Ziff Davis, refer to the 2020 Annual Report on Form 10-K filed by Ziff Davis on March 1, 2021, and the other reports filed by Ziff Davis from time-to-time with the SEC, each of which is available at www.sec.gov. The forward-looking statements provided in this press release, including those contained in Vivek Shah’s quote and in the “Business Outlook” portion regarding the Company’s expected fiscal 2022 financial performance are based on limited information available to the Company at this time, which is subject to change. Although management’s expectations may change after the date of this press release, the Company undertakes no obligation to revise or update these statements. About non-GAAP Financial Measures To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we use the following Adjusted non-GAAP financial measures: Adjusted non-GAAP and Pro Forma net income, Adjusted non-GAAP and Pro Forma net income per diluted share, Adjusted and Pro Forma EBITDA and free cash flow. The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. We use these Adjusted non-GAAP financial measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons. Our management believes that these Adjusted non-GAAP financial measures provide meaningful supplemental information regarding our performance and liquidity by excluding certain expenses and expenditures that may not be indicative of our recurring core business operating results. We believe that both management and investors benefit from referring to these Adjusted non-GAAP financial measures in assessing our performance and when planning, forecasting, and analyzing future periods. These Adjusted non-GAAP financial measures also facilitate management’s internal comparisons to our historical performance and liquidity. We believe these Adjusted non-GAAP financial measures are useful to investors both because (1) they allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making and (2) they are used by our institutional investors and the analyst community to help them analyze the health of our business. For more information on these Adjusted non-GAAP financial measures, please see the appropriate GAAP to Adjusted non-GAAP reconciliation tables included within the attached Exhibit to this release. ZIFF DAVIS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED, IN THOUSANDS) December 31, 2021 December 31, 2020 ASSETS Cash and cash equivalents $ 694,842 $ 176,443 Short-term investments 229,200 663 Accounts receivable, net of allowances of $9,811 and $11,552, respectively 311,728 309,549 Prepaid expenses and other current assets 60,290 52,160 Current assets, discontinued operations 4,626 84,028 Total current assets 1,300,686 622,843 Long-term investments 122,593 97,495 Property and equipment, net 161,209 133,973 Operating lease right-of-use assets 55,617 103,534 Trade names, net 147,761 158,553 Customer relationships, net 275,451 363,515 Goodwill 1,524,429 1,507,098 Other purchased intangibles, net 149,512 156,821 Deferred income taxes, noncurrent 5,917 12,195 Other assets 20,090 15,760 Other assets, discontinued operations — 493,545 TOTAL ASSETS $ 3,763,265 $ 3,665,332 LIABILITIES AND STOCKHOLDERS’ EQUITY Accounts payable and accrued expenses $ 226,621 $ 197,855 Income taxes payable, current 3,143 30,447 Deferred revenue, current 185,571 166,132 Operating lease liabilities, current 27,156 31,267 Current portion of long-term debt 54,609 396,800 Other current liabilities 130 495 Current liabilities, discontinued operations — 59,559 Total current liabilities 497,230 882,555 Long-term debt 1,036,018 1,182,220 Deferred revenue, noncurrent 14,839 14,201 Operating lease liabilities, noncurrent 53,708 97,561 Income taxes payable, noncurrent 11,690 11,675 Liability for uncertain tax positions 42,546 53,089 Deferred income taxes, noncurrent 108,982 157,308 Other long-term liabilities 37,546 41,400 Long-term liabilities, discontinued operations — 14,304 TOTAL LIABILITIES 1,802,559 2,454,313 Commitments and contingencies — — Preferred stock, $0.01 par value. Authorized 1,000,000 and none issued — — Preferred stock - Series A, $0.01 par value. Authorized 6,000; total issued and outstanding zero — — Preferred stock - Series B, $0.01 par value. Authorized 20,000; total issued and outstanding zero — — Common stock, $0.01 par value. Authorized 95,000,000; total issued and outstanding 47,440,137 and 44,346,630 shares at December 31, 2021 and 2020, respectively. 474 443 Additional paid-in capital 506,405 456,274 Retained earnings 1,530,015 809,108 Accumulated other comprehensive loss (76,188 ) (54,806 ) TOTAL STOCKHOLDERS’ EQUITY 1,960,706 1,211,019 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 3,763,265 $ 3,665,332 ZIFF DAVIS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED, IN THOUSANDS) Three Months Ended December 31, Twelve Months Ended December 31, 2021 2020 2021 2020 Total revenues $ 408,628 $ 384,055 $ 1,416,722 $ 1,158,829 Cost of revenues (1) 45,718 46,159 188,053 178,403 Gross profit 362,910 337,896 1,228,669 980,426 Operating expenses: Sales and marketing (1) 138,100 114,610 493,049 366,359 Research, development and engineering (1) 21,875 19,038 78,874 57,148 General and administrative (1) 117,541 126,398 457,692 420,295 Goodwill impairment on business — — 32,629 — Total operating expenses 277,516 260,046 1,062,244 843,802 Income from operations 85,394 77,850 166,425 136,624 Interest expense, net (16,810 ) (20,836 ) (79,031 ) (56,188 ) Loss on debt extinguishment, net (4,527 ) — (4,527 ) — (Loss) gain on sale of businesses — — (21,798 ) 17,122 Loss on investments, net — — (16,677 ) (20,991 ) Unrealized gain on short-term investment 290,073 — 290,073 — Other income, net 1,759 4,034 1,293 65 Income from continuing operations before income taxes and income from equity method investment, net 355,889 61,048 335,758 76,632 Income tax (benefit) expense 5,156 18,781 (15,944 ) 37,929 Income (loss) from equity method investment, net 19,249 (539 ) 35,845 (11,338 ) Net income from continuing operations 369,982 41,728 387,547 27,365 (Loss) income from discontinued operations, net of income taxes (11,093 ) 16,360 107,550 123,303 Net income $ 358,889 $ 58,088 $ 495,097 $ 150,668 Net income per common share from continuing operations: Basic $ 7.74 $ 0.94 $ 8.44 $ 0.59 Diluted $ 7.62 $ 0.91 $ 8.09 $ 0.58 Net (loss) income per common share from discontinued operations: Basic $ (0.23 ) $ 0.37 $ 2.34 $ 2.65 Diluted $ (0.23 ) $ 0.36 $ 2.24 $ 2.61 Net income per common share: Basic $ 7.51 $ 1.30 $ 10.78 $ 3.24 Diluted $ 7.39 $ 1.27 $ 10.33 $ 3.18 Weighted average shares outstanding: Basic 47,778,545 44,504,222 45,893,928 46,308,825 Diluted 48,514,588 45,642,292 47,862,745 47,115,609 (1) Includes share-based compensation expense as follows: Cost of revenues $ 86 $ 77 $ 306 $ 332 Sales and marketing 410 218 1,288 1,011 Research, development and engineering 594 365 1,984 1,396 General and administrative 5,037 4,629 20,551 19,781 Total $ 6,127 $ 5,289 $ 24,129 $ 22,520 ZIFF DAVIS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED, IN THOUSANDS) Twelve Months Ended December 31, 2021 2020 Cash flows from operating activities: Net income $ 495,097 $ 150,668 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 258,303 228,737 Amortization of financing costs and discounts 25,873 28,476 Non-cash operating lease costs 1,485 17,686 Share-based compensation 25,247 24,006 Provision for doubtful accounts 8,738 13,283 Deferred income taxes, net (9,442 ) 5,840 Loss on extinguishment of debt 13,277 37,969 Loss (gain) on sale of businesses 21,798 (17,122 ) Lease asset impairments and other charges 12,710 12,121 Goodwill impairment on business 32,629 — Changes in fair value of contingent consideration (1,223 ) (80 ) Foreign currency remeasurement gain 184 (34,646 ) (Income) loss from equity method investments (35,845 ) 11,338 (Gain) loss on equity and debt investments (273,110 ) 20,826 Decrease (increase) in: Accounts receivable (18,050 ) (31,611 ) Prepaid expenses and other current assets (15,650 ) 3,046 Other assets (3,824 ) (3 ) Increase (decrease) in: Accounts payable and accrued expenses 13,662 2,184 Income taxes payable (23,974 ) 6,489 Deferred revenue 14,282 4,720 Operating lease liabilities (15,314 ) (16,439 ) Liability for uncertain tax positions (10,383 ) 9,391 Other long-term liabilities (899 ) 3,200 Net cash provided by operating activities 515,571 480,079 Cash flows from investing activities: Proceeds on sale of available-for-sale investments 663 — Distribution from equity method investment 15,327 — Purchases of equity method investment (23,249 ) (31,937 ) Purchase of equity investments (999 ) (1,246 ) Sale of equity investments 14,330 — Purchases of property and equipment (113,740 ) (92,552 ) Proceeds from sale of assets — 507 Acquisition of businesses, net of cash received (141,146 ) (482,227 ) Proceeds from sale of businesses, net of cash divested 48,876 24,353 Purchases of intangible assets (78 ) (3,118 ) Proceeds from divestiture of discontinued operations 259,104 — Net cash used in investing activities 59,088 (586,220 ) Cash flows from financing activities: Proceeds from issuance of long-term debt — 750,000 Payment of note payable — (400 ) Proceeds from bridge loan 485,000 — Debt issuance cost — (7,272 ) Payment of debt (510,197 ) (650,000 ) Debt extinguishment costs (1,073 ) (29,250 ) Repurchase of common stock (78,328 ) (275,654 ) Issuance of common stock under employee stock purchase plan 9,232 7,382 Exercise of stock options 2,939 1,619 Deferred payments for acquisitions (14,387 ) (29,180 ) Other (6,776 ) (1,878 ) Net cash (used in) provided by financing activities (113,590 ) (234,633 ) Effect of exchange rate changes on cash and cash equivalents (8,879 ) 7,811 Net change in cash and cash equivalents 452,190 (332,963 ) Cash and cash equivalents at beginning of year 242,652 575,615 Cash and cash equivalents at end of year $ 694,842 $ 242,652 ZIFF DAVIS, INC. AND SUBSIDIARIES RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP FINANCIAL MEASURES THREE MONTHS ENDED DECEMBER 31, 2021 AND 2020 (UNAUDITED, IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) Adjusted non-GAAP net income is GAAP net income with the following modifications: (1) elimination of share-based compensation; (2) elimination of certain acquisition related integration costs; (3) elimination of interest costs in excess of the coupon rate associated with outstanding debt; (4) elimination of amortization of patents and intangible assets that we acquired; (5) elimination of change in value on investment; (6) elimination of additional tax expense/benefit from prior years; (7) elimination of gain/loss on sale of assets; (8) elimination of intra-entity transfers; (9) elimination of lease asset impairments and other charges; (10) elimination of leasehold improvement impairments; (11) elimination of disposal related costs; (12) elimination of goodwill impairment on business and (13) elimination of dilutive effect of the convertible debt. Three Months Ended December 31, 2021 Per Diluted Share * 2020 Per Diluted Share * Net income from continuing operations $ 369,982 $ 7.62 $ 41,728 $ 0.91 Plus: Share based compensation (1) 4,302 0.09 4,233 0.10 Acquisition related integration costs (2) 1,924 0.04 7,727 0.17 Interest costs (3) 6,309 0.13 4,765 0.11 Amortization (4) 28,581 0.59 38,385 0.86 Investments (5) (307,739 ) (6.40 ) 1,713 0.04 Tax expense from prior years (6) — — 533 0.01 Sale of assets (7) (1,508 ) (0.03 ) 651 0.01 Intra-entity transfers (8) — — (1,856 ) (0.04 ) Lease asset impairments and other charges (9) 2,342 0.05 1,973 0.04 Leasehold improvement impairments (10) — — 61 — Disposal related costs (11) 135 — — — Goodwill impairment on business (12) (33 ) — — — Convertible debt dilution (13) — 0.08 — 0.02 Adjusted non-GAAP net income from continuing operations $ 104,295 $ 2.17 $ 99,913 $ 2.24 * The reconciliation of net income per share from GAAP to Adjusted non-GAAP may not foot since each is calculated independently. ZIFF DAVIS, INC. AND SUBSIDIARIES RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP FINANCIAL MEASURES TWELVE MONTHS ENDED DECEMBER 31, 2021 AND 2020 (UNAUDITED, IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) Adjusted non-GAAP net income is GAAP net income with the following modifications: (1) elimination of share-based compensation; (2) elimination of certain acquisition related integration costs; (3) elimination of interest costs in excess of the coupon rate associated with outstanding debt; (4) elimination of amortization of patents and intangible assets that we acquired; (5) elimination of change in value on investment; (6) elimination of additional tax expense/benefit from prior years; (7) elimination of gain/loss on sale of assets; (8) elimination of intra-entity transfers; (9) elimination of lease asset impairments and other charges; (10) elimination of leasehold improvement impairments; (11) elimination of disposal related costs; (12) elimination of goodwill impairment on business and (13) elimination of dilutive effect of the convertible debt. Twelve Months Ended December 31, 2021 Per Diluted Share * 2020 Per Diluted Share * Net income from continuing operations $ 387,547 $ 8.09 $ 27,365 $ 0.58 Plus: Share based compensation (1) 15,510 0.34 19,566 0.42 Acquisition related integration costs (2) 6,672 0.14 10,530 0.23 Interest costs (3) 18,769 0.41 18,497 0.40 Amortization (4) 127,258 2.75 124,247 2.68 Investments (5) (312,747 ) (6.77 ) 33,173 0.72 Tax expense from prior years (6) — — 5,448 0.12 Sale of assets (7) 14,896 0.32 (9,428 ) (0.20 ) Intra-entity transfers (8) — — (4,712 ) (0.10 ) Lease asset impairments and other charges (9) 9,793 0.21 11,390 0.25 Leasehold improvement impairments (10) — — 2,840 0.06 Disposal related costs (11) 407 0.01 — — Goodwill impairment on business (12) 24,602 0.53 — — Convertible debt dilution (13) — 0.30 — (0.03 ) Adjusted non-GAAP net income from continuing operations $ 292,707 $ 6.33 $ 238,916 $ 5.13 * The reconciliation of net income per share from GAAP to Adjusted non-GAAP may not foot since each is calculated independently. ZIFF DAVIS, INC. AND SUBSIDIARIES RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP FINANCIAL MEASURES THREE MONTHS ENDED DECEMBER 31, 2021 AND 2020 (UNAUDITED, IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) Adjusted non-GAAP net income is GAAP net income with the following modifications: (1) elimination of share-based compensation; (2) elimination of certain acquisition related integration costs; (3) elimination of interest costs in excess of the coupon rate associated with outstanding debt; (4) elimination of amortization of patents and intangible assets that we acquired; (5) elimination of change in value on investment; (6) elimination of additional tax expense/benefit from prior years; (7) elimination of gain/loss on sale of assets; (8) elimination of intra-entity transfers; (9) elimination of lease asset impairments and other charges; (10) elimination of leasehold improvement impairments; (11) elimination of disposal related costs; (12) elimination of goodwill impairment on business and (13) elimination of dilutive effect of the convertible debt. Three Months Ended December 31, 2021 2020 Cost of revenues $ 45,718 $ 46,159 Plus: Share based compensation (1) (86 ) (77 ) Acquisition related integration costs (2) (96 ) (57 ) Amortization (4) (251 ) (143 ) Adjusted non-GAAP cost of revenues $ 45,285 $ 45,882 Sales and marketing $ 138,100 $ 114,610 Plus: Share based compensation (1) (409 ) (218 ) Acquisition related integration costs (2) (178 ) (1,117 ) Lease asset impairments and other charges (9) — (76 ) Leasehold improvement impairments (10) — (3 ) Adjusted non-GAAP sales and marketing $ 137,513 $ 113,196 Research, development and engineering $ 21,875 $ 19,038 Plus: Share based compensation (1) (593 ) (364 ) Acquisition related integration costs (2) (357 ) (627 ) Lease asset impairments and other charges (9) — (35 ) Adjusted non-GAAP research, development and engineering $ 20,925 $ 18,012 General and administrative $ 117,541 $ 126,398 Plus: Share based compensation (1) (5,039 ) (4,629 ) Acquisition related integration costs (2) (2,903 ) (7,990 ) Amortization (4) (45,053 ) (46,875 ) Investments (5) (1,500 ) — Lease asset impairments and other charges (9) (3,134 ) (2,610 ) Leasehold improvement impairments (10) — (23 ) Disposal related costs (11) (135 ) (1 ) Adjusted non-GAAP general and administrative $ 59,777 $ 64,270 Interest expense, net $ (16,810 ) $ (20,836 ) Plus: Interest costs (3) 1,979 6,292 Adjusted non-GAAP interest expense, net $ (14,831 ) $ (14,544 ) Loss on debt extinguishment $ (4,527 ) $ — Plus: Interest costs (3) 7,323 — Adjusted non-GAAP loss on debt extinguishment $ 2,796 $ — (Loss) gain on sale of businesses $ — $ — Plus: Sale of assets (7) — — Adjusted non-GAAP (loss) gain on sale of businesses $ — $ — Unrealized gain on short-term investment $ 290,073 $ — Plus: Investments (5) (289,512 ) — Adjusted non-GAAP unrealized gain on short-term investment $ 561 $ — Other income (expense), net $ 1,759 $ 4,034 Plus: Acquisition related integration costs (2) — (208 ) Sale of assets (7) 290 — Intra-entity transfers (8) — (2,121 ) Lease asset impairments and other charges (9) — (385 ) Adjusted non-GAAP other income (expense), net $ 2,049 $ 1,320 Income tax expense $ 5,156 $ 18,781 Plus: Share based compensation (1) 1,825 1,055 Acquisition related integration costs (2) 1,610 1,857 Interest costs (3) 2,993 1,527 Amortization (4) 16,723 8,633 Investments (5) 478 (1,174 ) Tax benefit from prior years (6) — (533 ) Sale of assets (7) 1,798 (650 ) Intra-entity transfers (8) — (265 ) Lease asset impairments and other charges (9) 792 363 Disposal related costs (11) — (36 ) Goodwill impairment on business (12) 33 — Adjusted non-GAAP income tax expense $ 31,408 $ 29,558 Income (loss) from equity method investment, net $ 19,249 $ (539 ) Plus: Investments (5) (19,249 ) 539 Adjusted non-GAAP income (loss) from equity method investment, net $ — $ — Total adjustments $ 265,687 $ (58,185 ) GAAP net income per diluted share from continuing operations $ 7.62 $ 0.91 Adjustments * $ (5.45 ) $ 1.33 Adjusted non-GAAP net income per diluted share from continuing operations $ 2.17 $ 2.24 * The reconciliation of net income per share from GAAP to Adjusted non-GAAP may not foot since each is calculated independently. The Company discloses Adjusted non-GAAP Earnings Per Share (“EPS”) as a supplemental Non-GAAP financial performance measure, as it believes it is a useful metric by which to compare the performance of its business from period to period. The Company also understands that this Adjusted non-GAAP measure is broadly used by analysts, rating agencies and investors in assessing the Company’s performance. Accordingly, the Company believes that the presentation of this Adjusted non-GAAP financial measure provides useful information to investors. Adjusted non-GAAP EPS is not in accordance with, or an alternative to, net income per share and may be different from Non-GAAP measures with similar or even identical names used by other companies. In addition, this Adjusted non-GAAP measure is not based on any comprehensive set of accounting rules or principles. This Adjusted non-GAAP measure has limitations in that it does not reflect all of the amounts associated with the Company’s results of operations determined in accordance with GAAP. ZIFF DAVIS, INC. AND SUBSIDIARIES RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP FINANCIAL MEASURES TWELVE MONTHS ENDED DECEMBER 31, 2021 AND 2020 (UNAUDITED, IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) Adjusted non-GAAP net income is GAAP net income with the following modifications: (1) elimination of share-based compensation; (2) elimination of certain acquisition related integration costs; (3) elimination of interest costs in excess of the coupon rate associated with outstanding debt; (4) elimination of amortization of patents and intangible assets that we acquired; (5) elimination of change in value on investment; (6) elimination of additional tax expense/benefit from prior years; (7) elimination of gain/loss on sale of assets; (8) elimination of intra-entity transfers; (9) elimination of lease asset impairments and other charges; (10) elimination of leasehold improvement impairments; (11) elimination of disposal related costs; (12) elimination of goodwill impairment on business and (13) elimination of dilutive effect of the convertible debt. Twelve Months Ended December 31, 2021 2020 Cost of revenues $ 188,053 $ 178,403 Plus: Share based compensation (1) (306 ) (332 ) Acquisition related integration costs (2) (382 ) (227 ) Amortization (4) (1,548 ) (1,694 ) Adjusted non-GAAP cost of revenues $ 185,817 $ 176,150 Sales and marketing $ 493,049 $ 366,359 Plus: Share based compensation (1) (1,288 ) (1,011 ) Acquisition related integration costs (2) (1,824 ) (1,803 ) Lease asset impairments and other charges (9) — (76 ) Leasehold improvement impairments (10) — (3 ) Adjusted non-GAAP sales and marketing $ 489,937 $ 363,466 Research, development and engineering $ 78,874 $ 57,148 Plus: Share based compensation (1) (1,984 ) (1,396 ) Acquisition related integration costs (2) (1,457 ) (606 ) Lease asset impairments and other charges (9) — (35 ) Adjusted non-GAAP research, development and engineering $ 75,433 $ 55,111 General and administrative $ 457,692 $ 420,295 Plus: Share based compensation (1) (20,551 ) (19,781 ) Acquisition related integration costs (2) (7,469 ) (10,752 ) Amortization (4) (185,855 ) (156,377 ) Investments (5) (1,500 ) — Lease asset impairments and other charges (9) — (14,830 ) Leasehold improvement impairments (10) (12,988 ) (3,628 ) Disposal related costs (11) (607 ) (1 ) Adjusted non-GAAP general and administrative $ 228,722 $ 214,926 Goodwill impairment on business (32,629 ) — Plus: Goodwill impairment on business (12) 32,630 — Adjusted non-GAAP goodwill impairment on business $ 1 $ — Interest expense, net $ (79,031 ) $ (56,188 ) Plus: Interest costs (3) 18,482 24,384 Tax expense from prior years (6) — Adjusted non-GAAP interest expense, net $ (60,549 ) $ (31,804 ) Loss on debt extinguishment $ (4,527 ) $ — Plus: Interest costs (3) 7,323 — Adjusted non-GAAP loss on debt extinguishment $ 2,796 $ — (Loss) gain on sale of businesses $ (21,798 ) $ 17,122 Plus: Sale of assets (7) 22,088 (16,654 ) Adjusted non-GAAP (loss) gain on sale of businesses $ 290 $ 468 Loss on investments, net $ (16,677 ) $ (20,991 ) Plus: Investments (5) 16,677 20,826 Sale of assets (7) — — Adjusted non-GAAP loss on investments, net $ — $ (165 ) Unrealized gain on short-term investment $ 290,073 $ — Plus: Investments (5) (289,512 ) — Adjusted non-GAAP unrealized gain on short-term investment $ 561 $ — Other income (expense), net $ 1,293 $ 65 Plus: Acquisition related integration costs (2) — (209 ) Sale of assets (7) — (386 ) Intra-entity transfers (8) — (619 ) Lease asset impairments and other charges (9) (5,385 ) Adjusted non-GAAP other income (expense), net $ 1,293 $ (6,534 ) Income tax (benefit) expense $ (15,944 ) $ 37,929 Plus: Share based compensation (1) 8,619 2,954 Acquisition related integration costs (2) 4,460 2,649 Interest costs (3) 7,036 5,887 Amortization (4) 60,145 33,824 Investments (5) 5,567 (1,174 ) Tax (benefit) expense from prior years (6) — (5,448 ) Sale of assets (7) 7,192 (7,678 ) Intra-entity transfers (8) — (673 ) Lease asset impairments and other charges (9) — 3,164 Leasehold improvement impairments (10) 3,195 791 Disposal related costs (11) 200 — Goodwill impairment on business (12) 8,028 — Adjusted non-GAAP income tax (benefit) expense $ 88,498 $ 72,225 Income (loss) from equity method investment, net $ 35,845 $ (11,338 ) Plus: Investments (5) (35,845 ) 11,338 Adjusted non-GAAP income (loss) from equity method investment, net $ — $ — Total adjustments $ 94,840 $ (211,551 ) GAAP net income per diluted share from continuing operations $ 8.09 $ 0.58 Adjustments * $ (1.76 ) $ 4.55 Adjusted non-GAAP net income per diluted share from continuing operations $ 6.33 $ 5.13 * The reconciliation of net income per share from GAAP to Adjusted non-GAAP may not foot since each is calculated independently. The Company discloses Adjusted non-GAAP Earnings Per Share (“EPS”) as a supplemental Non-GAAP financial performance measure, as it believes it is a useful metric by which to compare the performance of its business from period to period. The Company also understands that this Adjusted non-GAAP measure is broadly used by analysts, rating agencies and investors in assessing the Company’s performance. Accordingly, the Company believes that the presentation of this Adjusted non-GAAP financial measure provides useful information to investors. Adjusted non-GAAP EPS is not in accordance with, or an alternative to, net income per share and may be different from Non-GAAP measures with similar or even identical names used by other companies. In addition, this Adjusted non-GAAP measure is not based on any comprehensive set of accounting rules or principles. This Adjusted non-GAAP measure has limitations in that it does not reflect all of the amounts associated with the Company’s results of operations determined in accordance with GAAP. Non-GAAP Financial Measures To supplement its condensed consolidated financial statements, which are prepared and presented in accordance with US GAAP, the Company uses the following Non-GAAP financial measures: Adjusted EBITDA, Adjusted non-GAAP Net Income from continuing operations, and Adjusted non-GAAP Diluted EPS from continuing operations (collectively the “Non-GAAP financial measures”). The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with U.S. GAAP. The Company uses these Non-GAAP financial measures for financial and operational decision making and as a means to evaluate period-to-period comparisons. The Company believes that they provide useful information about core operating results, enhance the overall understanding of past financial performance and future prospects, and allow for greater transparency with respect to key metrics used by management in its financial and operational decision making. (1) Share Based Compensation. The Company excludes stock-based compensation because it is non-cash in nature and because the Company believes that the Non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance. The Company further believes this measure is useful to investors in that it allows for greater transparency to certain line items in its financial statements. In addition, excluding this item from the Non-GAAP measures facilitates comparisons to historical operating results and comparisons to peers, many of which similarly exclude this item. (2) Acquisition Related Integration Costs. The Company excludes certain acquisition and related integration costs such as adjustments to contingent consideration, severance, lease terminations, retention bonuses and other acquisition-specific items. The Company believes that the Non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance. In addition, excluding this item from the Non-GAAP measures facilitates comparisons to historical operating results and comparisons to peers, many of which similarly exclude this item. (3) Interest Costs. In June 2014, the Company issued $402.5 million aggregate principal amount of 3.25% convertible senior notes and in November 2019, the Company issued $550.0 million aggregate principal amount of 1.75% convertible senior notes. In accordance with GAAP, the Company separately accounts for the value of the liability and equity features of its outstanding convertible senior notes in a manner that reflects the Company’s non-convertible debt borrowing rate. The value of the conversion feature, reflected as a debt discount, is amortized to interest expense over time. Accordingly, the Company recognizes imputed interest expense on its 3.25% and 1.75% convertible senior notes of approximately 5.8% and 5.5%, respectively, in its statement of operations. The Company excludes the difference between the imputed interest expense and the coupon interest expense of 3.25% and 1.75%, respectively, because it is non-cash in nature and because the Company believes that the Non-GAAP financial measures excluding this item provide meaningful supplemental information regarding core operational performance. In addition, the Company has excluded the difference between the imputed and coupon interest expense associated with the 4.625% Senior Notes. The Company has determined excluding these items from the Non-GAAP measures facilitates comparisons to historical operating results and comparisons to peers, many of which similarly exclude this item. (4) Amortization. The Company excludes amortization of patents and acquired intangible assets because it is non-cash in nature and because the Company believes that the Non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance. In addition, excluding this item from the Non-GAAP measures facilitates comparisons to historical operating results and comparisons to peers, many of which similarly exclude this item. (5) Change in Value on Investments. The Company excludes the change in value on its investments. The Company believes that the Non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance. In addition, excluding this item from the Non-GAAP measures facilitates comparisons to historical operating results. (6) Tax Expense/Benefit from Prior Years. The Company excludes certain income tax-related items in respect of income tax audit settlements and their related reversals of income tax reserves accounted for through ASC 740-10. The Company believes that the Non-GAAP financial measures excluding these items provide meaningful supplemental information regarding operational performance. In addition, excluding these items from the Non-GAAP measures facilitates comparisons to historical operating results. (7) Gain (Loss) on Sale of Assets. The Company excludes the gain (loss) on sale of certain of its assets. The Company believes that the Non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance. In addition, excluding this item from the Non-GAAP measures facilitates comparisons to historical operating results. (8) Intra-Entity Transfers. The Company excludes certain effects of intra-entity transfers to the extent the related tax asset or liability in the financial statement is not recovered or settled, respectively during the year. During December 2019, the Company entered into an intra-entity asset transfer that resulted in the recording of a tax benefit and related tax asset representing tax deductible amounts to be realized in future years which is expected to be recovered over a period of up to 20 years and related foreign currency fluctuations. The Company believes that the Non-GAAP financial measures excluding the cumulative future unrealized benefit of the assets transferred and including the tax benefit in the year of realization provides meaningful supplemental information regarding operational performance. In addition, excluding this item from the Non-GAAP measures facilitates comparisons to historical operating results. (9) Lease Asset Impairments and Other Charges. The Company excludes lease asset impairments and other charges as they are non-cash in nature and because the Company believes that the Non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance. In addition, excluding this item from the Non-GAAP measures facilitates comparisons to historical operating results. (10) Leasehold Improvement Impairments. The Company excludes leasehold improvement impairments as they are non-cash in nature and because the Company believes that the Non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance. In addition, excluding this item from the Non-GAAP measures facilitates comparisons to historical operating results. (11) Disposal related Costs. The Company excludes expenses associated with the disposal of certain businesses. The Company believes that the Non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance. In addition, excluding this item from the Non-GAAP measures facilitates comparisons to historical operating results. (12) Goodwill Impairment on Business. The Company excludes the goodwill impairment on business because it is non-cash in nature and the Company believes that the Non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance. In addition, excluding this item from the Non-GAAP measures facilitates comparisons to historical operating results. (13) Convertible Debt Dilution. The Company excludes convertible debt dilution from diluted EPS. The Company believes that the Non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance. In addition, excluding this item from the Non-GAAP measures facilitates comparisons to historical operating results. The Company presents Adjusted non-GAAP Cost of Revenues, Adjusted non-GAAP Research, Development and Engineering, Adjusted non-GAAP Sales and Marketing, Adjusted non-GAAP General and Administrative, Adjusted non-GAAP Interest Expense, Adjusted Gain on Sale of Businesses, Adjusted non-GAAP Loss on Investments, Adjusted non-GAAP Other (Income) Expense, Adjusted non-GAAP Income Tax Provision, Adjusted non-GAAP (Income) Loss from Equity Method Investment, Net and Adjusted non-GAAP Net Income because the Company believes that these provide useful information about our operating results and enhance the overall understanding of past financial performance and future prospects. Pro-Forma Financial Results Key pro-forma financial results for the three and twelve months ended December 31, 2021 and 2020, are set forth in the following table (in millions, except per share amounts). The financial results below exclude the operating results from continuing operations, on a pro-forma basis, of Voice assets in Australia, New Zealand, and the United Kingdom as well as the sale of the Company’s B2B Backup business as if they had occurred January 1, 2020. Three Months Ended Twelve Months Ended Q4 2021 Q4 2020 Q4 2021 Q4 2020 Total Revenues $408.6 million $384.1 million $1,416.7 million $1,158.8 million Pro-Forma Revenue Adjustments $— million $(14.0) million $(33.5) million $(68.1) million Pro-Forma Total Revenue: (1) $408.6 million $370.1 million $1,383.2 million $1,090.7 million Adjusted Non-GAAP Net Income per Diluted Share from Continuing Operations (1) $2.17 $2.24 $6.33 $5.13 Pro-Forma Net Income per Diluted Share from Continuing Operations Adjustments $— $(0.08) $(0.22) $(0.48) Adjusted Pro Forma Net Income per Diluted Share from Continuing Operations (1) $2.17 $2.16 $6.11 $4.65 GAAP Net Income from Continuing Operations $370.0 million $41.7 million $387.5 million $27.4 million Pro-Forma Net Income from Continuing Operations Adjustments $(265.7) million $54.5 million $(105.0) million $189.0 million Adjusted Pro-Forma Net Income from Continuing Operations $104.3 million $96.2 million $282.5 million $216.4 million Adjusted EBITDA (1) $161.6 million $157.1 million $498.7 million $404.5 million Pro-Forma EBITDA Adjustments $— million $(5.8) million $(14.1) million $(26.8) million Adjusted Pro-Forma EBITDA (1) $161.6 million $151.3 million $484.6 million $377.7 million Adjusted EBITDA Margin (1) 39.5% 40.9% 35.2% 34.9% Pro-Forma EBITDA Margin Adjustments 0.0% —% (0.2)% (0.3)% Adjusted Pro-Forma EBITDA Margin (1) 39.5% 40.9% 35.0% 34.6% (1) Refer to the notes earlier in this Release. ZIFF DAVIS, INC. AND SUBSIDIARIES NET INCOME TO ADJUSTED EBITDA RECONCILIATION THREE AND TWELVE MONTHS ENDED DECEMBER 31, 2021 AND 2020 (UNAUDITED, IN THOUSANDS) The following table sets forth a reconciliation of Adjusted EBITDA to net income from continuing operations, the most directly comparable GAAP financial measure. Three Months Ended December 31, Twelve Months Ended December 31, 2021 2020 2021 2020 Net income from continuing operations $ 369,982 $ 41,728 $ 387,547 $ 27,365 Plus: Interest expense, net 16,810 20,836 79,031 56,188 Loss on debt extinguishment 4,527 — 4,527 — Loss (gain) on sale of businesses — — 21,798 (17,122 ) Loss on investments, net — — 16,677 20,991 Unrealized gain on short-term investment (290,073 ) — (290,073 ) — Other income, net (1,759 ) (4,034 ) (1,293 ) (65 ) Income tax expense (benefit) 5,156 18,781 (15,944 ) 37,929 (Income) loss from equity method investment, net (19,249 ) 539 (35,845 ) 11,338 Depreciation and amortization 61,791 61,476 249,293 216,982 Reconciliation of GAAP to Adjusted non-GAAP financial measures: Share-based compensation 6,127 5,289 24,129 22,521 Acquisition-related integration costs 3,535 9,791 11,132 13,388 Lease asset impairments and other charges 3,133 2,721 12,988 14,940 Disposal related costs 135 — 606 — Investments 1,500 — 1,500 — Goodwill impairment on business — — 32,629 — Adjusted EBITDA $ 161,615 $ 157,127 $ 498,702 $ 404,455 Adjusted EBITDA as calculated above represents earnings before interest, gain on sale of businesses, goodwill impairment of business, loss on investments, net, other (income) expense, net, income tax expense, (income) loss from equity method investments, net, depreciation and amortization and the items used to reconcile GAAP to Adjusted non-GAAP financial measures, including (1) share-based compensation, (2) certain acquisition-related integration costs, and (3) lease asset impairments and other charges. We disclose Adjusted EBITDA as a supplemental Non-GAAP financial performance measure as we believe it is a useful metric by which to compare the performance of our business from period to period. We understand that measures similar to Adjusted EBITDA are broadly used by analysts, rating agencies and investors in assessing our performance. Accordingly, we believe that the presentation of Adjusted EBITDA provides useful information to investors. Adjusted EBITDA is not in accordance with, or an alternative to, net income, and may be different from Non-GAAP measures used by other companies. In addition, Adjusted EBITDA is not based on any comprehensive set of accounting rules or principles. This Adjusted non-GAAP measure has limitations in that it does not reflect all of the amounts associated with the Company’s results of operations determined in accordance with GAAP. ZIFF DAVIS, INC. AND SUBSIDIARIES NON-GAAP FINANCIAL MEASURES (UNAUDITED, IN THOUSANDS) Q1 Q2 Q3 Q4 YTD 2021 Net cash provided by operating activities from continuing and discontinued operations $ 178,724 $ 111,298 $ 140,230 $ 85,319 $ 515,571 Less: Purchases of property and equipment (26,269 ) (31,497 ) (29,729 ) (26,245 ) (113,740 ) Add: Contingent consideration* — 685 — — 685 Free cash flow from continuing and discontinued operations $ 152,455 $ 80,486 $ 110,501 $ 59,074 $ 402,516 Q1 Q2 Q3 Q4 YTD 2020 Net cash provided by operating activities from continuing and discontinued operations $ 102,036 $ 139,591 $ 114,382 $ 124,070 $ 480,079 Less: Purchases of property and equipment (26,885 ) (23,652 ) (20,729 ) (21,286 ) (92,552 ) Add: Contingent consideration* 20,054 — 49 99 20,202 Free cash flow from continuing and discontinued operations $ 95,205 $ 115,939 $ 93,702 $ 102,883 $ 407,729 * Free Cash Flows from Continuing and Discontinued Operations of $80.5 million for Q2 2021, $95.2 million for Q1 2020, $93.7 million for Q3 2020 and $102.9 million for Q4 2020 is before the effect of payments associated with certain contingent consideration associated with recent acquisitions. The Company discloses free cash flows as supplemental Non-GAAP financial performance measure, as it believes it is a useful metric by which to compare the performance of its business from period to period. The Company also understands that this Non-GAAP measure is broadly used by analysts, rating agencies and investors in assessing the Company’s performance. Accordingly, the Company believes that the presentation of this Non-GAAP financial measure provides useful information to investors. Free cash flows is not in accordance with, or an alternative to, Cash Flows from Operating Activities, and may be different from Non-GAAP measures with similar or even identical names used by other companies. In addition, the Non-GAAP measure is not based on any comprehensive set of accounting rules or principles. This Non-GAAP measure has limitations in that it does not reflect all of the amounts associated with the Company’s results of operations determined in accordance with GAAP. ZIFF DAVIS, INC. AND SUBSIDIARIES RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP FINANCIAL MEASURES THREE MONTHS ENDED DECEMBER 31, 2021 (UNAUDITED, IN THOUSANDS) Digital Cybersecurity Media and Martech Corporate Total Revenues GAAP revenues $ 325,747 $ 82,881 $ — $ 408,628 Gross profit GAAP gross profit $ 300,891 $ 62,028 $ (9 ) $ 362,910 Non-GAAP adjustments: Share-based compensation 4 81 — 85 Acquisition related integration costs 70 27 — 97 Amortization — 251 — 251 Adjusted non-GAAP gross profit $ 300,965 $ 62,387 $ (9 ) $ 363,343 Operating profit Income (loss) from operations $ 92,582 $ 9,333 $ (16,521 ) $ 85,394 Non-GAAP adjustments: Share-based compensation 2,179 1,226 2,722 6,127 Acquisition related integration costs 856 1,472 1,207 3,535 Amortization 32,746 12,235 72 45,053 Lease asset impairments and other charges 3,666 (533 ) — 3,133 Disposal related costs — 85 50 135 Investments — — 1,500 1,500 Adjusted non-GAAP operating profit (loss) $ 132,029 $ 23,818 $ (10,970 ) $ 144,877 Depreciation 13,508 3,230 — 16,738 Adjusted EBITDA $ 145,537 $ 27,048 $ (10,970 ) $ 161,615 NOTE 1: Table above excludes certain intercompany allocations ZIFF DAVIS, INC. AND SUBSIDIARIES RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP FINANCIAL MEASURES THREE MONTHS ENDED DECEMBER 31, 2020 (UNAUDITED, IN THOUSANDS) Digital Cybersecurity Media and Martech Corporate Total Revenues GAAP revenues $ 297,868 $ 86,187 $ — $ 384,055 Gross profit GAAP gross profit $ 275,895 $ 62,001 $ — $ 337,896 Non-GAAP adjustments: Share-based compensation 3 74 — 77 Acquisition related integration costs — 57 — 57 Amortization — 143 — 143 Adjusted non-GAAP gross profit $ 275,898 $ 62,275 $ — $ 338,173 Operating profit Income (loss) from operations $ 85,571 $ 9,579 $ (17,300 ) 77,850 Non-GAAP adjustments: Share-based compensation 1,334 943 3,012 5,289 Acquisition related integration costs 8,116 337 1,338 9,791 Amortization 32,903 14,007 109 47,019 Lease asset impairments and other charges 2,721 — — 2,721 Adjusted non-GAAP operating profit (loss) $ 130,645 $ 24,866 $ (12,841 ) $ 142,670 Depreciation 10,621 3,836 — 14,457 Adjusted EBITDA $ 141,266 $ 28,702 $ (12,841 ) $ 157,127 NOTE 1: Table above excludes certain intercompany allocations NOTE 2: Table above has been recast to remove the impact of certain expenses associated with the Corporate entity that were previously allocated to the Cybersecurity and Martech and Digital Media businesses. ZIFF DAVIS, INC. AND SUBSIDIARIES RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP FINANCIAL MEASURES TWELVE MONTHS ENDED DECEMBER 31, 2021 (UNAUDITED, IN THOUSANDS) Digital Cybersecurity Media and Martech Corporate Total Revenues GAAP revenues $ 1,068,476 $ 348,246 $ — $ 1,416,722 Gross profit GAAP gross profit $ 974,011 $ 254,742 $ (84 ) $ 1,228,669 Non-GAAP adjustments: Share-based compensation 14 292 — 306 Acquisition related integration costs 95 287 — 382 Amortization — 1,547 — 1,547 Adjusted non-GAAP gross profit $ 974,120 $ 256,868 $ (84 ) $ 1,230,904 Operating profit Income (loss) from operations $ 216,950 $ 9,435 $ (60,379 ) $ 166,006 Non-GAAP adjustments: Goodwill impairment on business — 32,629 — 32,629 Share-based compensation 7,734 4,481 11,914 24,129 Acquisition related integration costs 3,449 6,450 1,233 11,132 Amortization 144,621 40,946 288 185,855 Lease asset impairments and other charges 12,229 758 — 12,987 Disposal related costs — 85 522 607 Investments — — 1,500 1,500 Adjusted non-GAAP income (loss) from operations $ 384,983 $ 94,784 $ (44,922 ) $ 434,845 Depreciation 49,151 14,451 255 63,857 Adjusted EBITDA $ 434,134 $ 109,235 $ (44,667 ) $ 498,702 NOTE 1: Table above excludes certain intercompany allocations ZIFF DAVIS, INC. AND SUBSIDIARIES RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP FINANCIAL MEASURES TWELVE MONTHS ENDED DECEMBER 31, 2020 (UNAUDITED, IN THOUSANDS) Digital Cybersecurity Media and Martech Corporate Total Revenues GAAP revenues $ 811,130 $ 347,699 $ — $ 1,158,829 Gross profit GAAP gross profit $ 733,658 $ 246,815 $ (47 ) $ 980,426 Non-GAAP adjustments: Share-based compensation 10 321 — 331 Acquisition related integration costs — 227 — 227 Amortization — 1,695 — 1,695 Adjusted non-GAAP gross profit $ 733,668 $ 249,058 $ (47 ) $ 982,679 Operating profit Income (loss) from operations $ 139,807 $ 52,319 $ (55,502 ) $ 136,624 Non-GAAP adjustments: Share-based compensation 5,539 4,138 12,844 22,521 Acquisition related integration costs 11,289 606 1,493 13,388 Amortization 99,901 54,506 3,663 158,070 Lease asset impairments and other charges 14,912 28 — 14,940 Adjusted non-GAAP income (loss) from operations $ 271,448 $ 111,597 $ (37,502 ) $ 345,543 Depreciation 41,788 17,124 — 58,912 Adjusted EBITDA $ 313,236 $ 128,721 $ (37,502 ) $ 404,455 NOTE 1: Table above excludes certain intercompany allocations NOTE 2: Table above has been recast to remove the impact of certain expenses associated with the Corporate entity that were previously allocated to the Cybersecurity and Martech and Digital Media businesses. View source version on businesswire.com: https://www.businesswire.com/news/home/20220214005858/en/ Ziff Davis, Inc. (NASDAQ: ZD) today reported preliminary unaudited financial results for the fourth quarter and year ended December 31, 2021. Contacts Rebecca Wright Ziff Davis, Inc. 800-577-1790 investor@ziffdavis.com
Ziff Davis, Inc. (NASDAQ: ZD) today reported preliminary unaudited financial results for the fourth quarter and year ended December 31, 2021. “We had a strong finish to an exceptional year in which we posted fantastic results and executed on a transformational spin-off," said Vivek Shah, CEO of Ziff Davis. "We are excited by our growth prospects and the opportunities to continue to deploy our financial and human capital to generate value for our stakeholders." FOURTH QUARTER 2021 HIGHLIGHTS On October 7, 2021, Ziff Davis completed the separation of the cloud fax business to Consensus Cloud Solutions, Inc. (“Consensus”). As the spin-off occurred during the fourth quarter of 2021, Ziff Davis has classified Consensus as a discontinued operation in its financial statements for all periods. Results in this press release represent continuing operations, except for the Statement of Cash Flows, net cash provided by operating activities and free cash flow, which are on a combined continuing and discontinued operations basis. Q4 2021 quarterly revenues increased 6.4% to $408.6 million compared to $384.1 million for Q4 2020. On a pro-forma(6) basis, Q4 2021 quarterly revenues increased 10.4% to $408.6 million as compared to $370.1 million for Q4 2020. GAAP net income per diluted share from continuing operations(3) increased to $7.62 in Q4 2021 compared to $0.91 for Q4 2020. The earnings increase was primarily due to an unrealized gain on investment of $290 million to record our investment in Consensus ($6.03 per share, after tax). Adjusted non-GAAP net income per diluted share from continuing operations(3)(4) for the quarter decreased (3.1)% to $2.17 compared to $2.24 for Q4 2020. On a pro-forma(6) basis, Adjusted non-GAAP net income per diluted share from continuing operations(3)(4) for the quarter increased 0.5% to $2.17 as compared to $2.16 for Q4 2020. GAAP net income from continuing operations increased to $370.0 million compared to $41.7 million for Q4 2020 primarily due to an unrealized gain on investment of $290 million to record our investment in Consensus. Adjusted non-GAAP net income from continuing operations increased by 4.4% to $104.3 million as compared to $99.9 million for Q4 2020. On a pro-forma(6) basis, Adjusted non-GAAP net income from continuing operations increased by 8.4% to $104.3 million as compared to $96.2 million for Q4 2020. Adjusted EBITDA(5) for the quarter increased 2.9% to $161.6 million compared to $157.1 million for Q4 2020. On a pro-forma(6) basis, Adjusted EBITDA(5) for the quarter increased 6.8% to $161.6 million compared to $151.3 million for Q4 2020. Net cash provided by operating activities from continuing and discontinued operations was $85.3 million during Q4 2021 compared to $124.1 in Q4 2020. Q4 2021 free cash flow from continuing and discontinued operations(2) was $59.1 million during Q4 2021 compared to $102.9 million in Q4 2020. The company ended the quarter with approximately $1.05 billion in cash, cash equivalents, and investments after deploying approximately $29.7 million during the quarter for current and prior year acquisitions. Key financial results for Q4 2021 versus Q4 2020 are set forth in the following table (in millions, except per share amounts). Reconciliations of Adjusted non-GAAP earnings per diluted share, Adjusted EBITDA and free cash flow to their nearest comparable GAAP financial measures are attached to this Press Release. The following table reflects Actual and Pro Forma Results from Continuing Operations, except for Cash Provided by Operating Activities and Free Cash Flow which is on a combined basis of continuing operations and discontinued operations, for the fourth quarter of 2021 and 2020 (in millions, except per share amounts). Pro-Forma Results from Continuing Operations below excludes the operating results from Voice assets in Australia, New Zealand, and the United Kingdom that were sold in 2020 and 2021, respectively, and the Company’s B2B Backup business that was sold during the third quarter of 2021. Pro-Forma Results(6) Q4 2021 Q4 2020 % Change Q4 2021 Q4 2020 % Change Revenues Digital Media $325.7 $297.9 9.3% $325.7 $297.9 9.3% Cybersecurity and Martech $82.9 $86.2 (3.8)% $82.9 $72.2 14.8% Total Revenue: (1) $408.6 $384.1 6.4% $408.6 $370.1 10.4% Income from Operations $85.4 $77.9 9.6% GAAP Income per Diluted Share from Continuing Operations (3) $7.62 $0.91 737.4% Adjusted Non-GAAP Income per Diluted Share from Continuing Operations (3) (4) $2.17 $2.24 (3.1)% $2.17 $2.16 0.5% GAAP Net Income from Continuing Operations $370.0 $41.7 787.3% Adjusted Non-GAAP Net Income from Continuing Operations $104.3 $99.9 4.4% $104.3 $96.2 8.4% Adjusted EBITDA (5) $161.6 $157.1 2.9% $161.6 $151.3 6.8% Adjusted EBITDA Margin (5) 39.5% 40.9% (1.4)% 39.5% 40.9% (1.4)% Net Cash Provided by Operating Activities from Continuing and Discontinued Operations $85.3 $124.1 (31.3)% Free Cash Flow from Continuing and Discontinued Operations (2) $59.1 $102.9 (42.6)% FULL YEAR 2021 HIGHLIGHTS 2021 revenues increased 22.3% to a record of $1.42 billion compared to $1.16 billion for 2020. On a pro-forma(6) basis, 2021 revenues increased 26.8% to $1.38 billion as compared to $1.09 billion for 2020. GAAP net income per diluted share(3) from continuing operations increased to $8.09 in 2021 compared to $0.58 for 2020. The net income increase was primarily due to an unrealized gain on investment of $290 million to record our investment in Consensus. ($6.24 per share, after tax). Adjusted non-GAAP net income per diluted share from continuing operations(3)(4) for the year increased by 23.4% to $6.33 compared to $5.13 for 2020. On a pro-forma(6) basis, Adjusted non-GAAP net income per diluted share from continuing operations(3)(4) for the year increased 31.4% to $6.11 as compared to $4.65 for 2020. GAAP net income from continuing operations increased to $387.5 million compared to $27.4 million for 2020 primarily due to an unrealized gain on investment of $290 million to record our investment in Consensus. Adjusted non-GAAP net income from continuing operations increased by 22.5% to $292.7 million as compared to $238.9 million for 2020. On a pro-forma(6) basis, Adjusted non-GAAP net income from continuing operations increased by 30.5% to $282.5 million as compared to $216.4 million for 2020. Adjusted EBITDA(5) for the year increased 23.3% to $498.7 million compared to $404.5 million for 2020. On a pro-forma(6) basis, Adjusted EBITDA(5) for the year increased 28.3% to $484.6 million compared to $377.7 million for 2020. Net cash provided by operating activities from continuing and discontinued operations was $515.6 million during 2021 compared to $480.1 million in 2020. Free cash flow from continuing and discontinued operations(2) was $402.5 million during 2021 compared to $407.7 million in 2020. The following table reflects Actual and Pro-Forma Results from Continuing Operations, except for Cash Provided by Operating Activities and Free Cash Flow which is on a combined basis of continuing operations and discontinued operations for the twelve months ended December 31, 2021 and 2020 (in millions, except per share amounts). Pro-Forma Results from Continuing Operations below excludes the operating results from Voice assets in Australia, New Zealand, and the United Kingdom that were sold in 2020 and 2021, respectively, and the Company’s B2B Backup business that was sold during the third quarter of 2021. Pro-Forma Results(6) 2021 2020 % Change 2021 2020 % Change Revenues Digital Media $1,068.5 $811.1 31.7% $1,068.5 $811.1 31.7% Cybersecurity and Martech $348.2 $347.7 0.1% $314.7 $279.6 12.6% Total Revenue: (1) $1,416.7 $1,158.8 22.3% $1,383.2 $1,090.7 26.8% Income from Operations $166.4 $136.6 21.8% GAAP Income per Diluted Share from Continuing Operations (3) $8.09 $0.58 1,294.8% Adjusted Non-GAAP Income per Diluted Share from Continuing Operations (3) (4) $6.33 $5.13 23.4% $6.11 $4.65 31.4% GAAP Net Income from Continuing Operations $387.5 $27.4 1,314.2% Adjusted Non-GAAP Net Income from Continuing Operations $292.7 $238.9 22.5% $282.5 $216.4 30.5% Adjusted EBITDA (5) $498.7 $404.5 23.3% $484.6 $377.7 28.3% Adjusted EBITDA Margin (5) 35.2% 34.9% 0.3% 35.0% 34.6% 0.4% Net Cash Provided by Operating Activities from Continuing and Discontinued Operations $515.6 $480.1 7.4% Free Cash Flow from Continuing and Discontinued Operations (2) $402.5 $407.7 (1.3)% ZIFF DAVIS GUIDANCE The Company’s estimates for fiscal year 2022 are as follows (in millions, except per share amounts): Revenue Adjusted EBITDA Adjusted Diluted EPS FY 2022 Range of Estimates $1,497-$1,535 $538-$555 $6.52-$6.79 Adjusted non-GAAP net income per diluted share for 2022 excludes share-based compensation of between $24 million and $28 million, amortization of acquired intangibles and the impact of any currently unanticipated items, in each case net of tax. It is anticipated that the non-GAAP effective tax rate for 2022 (exclusive of the release of reserves for uncertain tax positions) will be between 23.5% and 25%. The Company has not reconciled the non-GAAP Business Outlook for 2022 Adjusted EBITDA or Adjusted non-GAAP Diluted EPS and tax rate information included in this release to the most directly comparable GAAP measure because this cannot be done without unreasonable effort due to the variability with respect to costs related to acquisitions and taxation, which are potential adjustments to future earnings. We expect the variability of these items to have a potentially unpredictable and significant impact on our future GAAP financial results. Notes: (1) The revenues associated with each of the businesses may not foot precisely since each is presented independently. (2) Free cash flow is defined as net cash provided by operating activities from continuing operations, less purchases of property and equipment from continuing operations, plus contingent consideration from continuing operations. Free cash flow amounts are not meant as a substitute for GAAP, but are solely for informational purposes. (3) The estimated GAAP effective tax rates were approximately 1.4% for Q4 2021 and 30.8% for Q4 2020. The estimated Adjusted non-GAAP effective tax rates were approximately 23.1% for Q4 2021 and 22.8% for Q4 2020. (4) Adjusted non-GAAP net income per diluted share excludes certain non-GAAP items, as defined in the Reconciliation of GAAP to Adjusted non-GAAP Financial Measures, for the three months ended December 31, 2021 and 2020 totaled $(5.45) and $1.33 per diluted share, respectively. (5) Adjusted EBITDA is defined as net income from continuing operations before interest; gain on sale of businesses; goodwill impairment of business; loss on investments, net; other income (expense), net; income tax expense (benefit); income (loss) from equity method investment, net; depreciation and amortization; and the items used to reconcile EPS to Adjusted non-GAAP EPS, as defined in the Reconciliation of GAAP to Adjusted non-GAAP Financial Measures. Adjusted EBITDA amounts are not meant as a substitute for GAAP, but are solely for informational purposes. (6) Pro-forma figures are provided taking into consideration the sale of certain Voice assets in Australia, New Zealand, and the United Kingdom as well as the sale of the Company’s B2B Backup business as if they had occurred January 1, 2020. As a result of the separation of the Consensus business on October 7, 2021, a portion of Ziff Davis’ shared overhead costs were reduced. Ziff Davis estimates that it would have achieved additional savings of approximately $7 million and $9 million in 2021 and 2020, respectively, if Consensus was separated on January 1, 2020. About Ziff Davis Ziff Davis, Inc. (NASDAQ: ZD) is a vertically focused digital media and internet company whose portfolio includes leading brands in technology, entertainment, shopping, health, cybersecurity, and martech. For more information, visit www.ziffdavis.com. Preliminary Unaudited Results: These fourth quarter and full year 2020 and 2021 results are preliminary, unaudited, and subject to adjustments. In particular, due to the complexity of the October 7, 2021 spin-off of Consensus and the related transactions (including the debt-for-debt exchange), the presentation of the transaction's impact on the Company's financial statements (including the presentation of continuing and discontinued operations and the size of the gain associated with the retention of the 19.9% stake in Consensus) is still being finalized. Any change to the impact of the unrealized gain on investment of $290 million associated with the retention of the 19.9% stake in Consensus could be material to our GAAP net income from continuing operations. As a result of the foregoing, certain information provided herein is subject to change. “Safe Harbor” Statement Under the Private Securities Litigation Reform Act of 1995: Certain statements in this Press Release are “forward-looking statements” within the meaning of The Private Securities Litigation Reform Act of 1995, including those contained in Vivek Shah’s quote and the “Business Outlook” portion regarding the Company’s expected fiscal 2022 financial performance. These forward-looking statements are based on management’s current expectations or beliefs and are subject to numerous assumptions, risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. These factors and uncertainties include, among other items: the Company’s ability to grow revenues, profitability and cash flows; the Company’s ability to identify, close and successfully transition acquisitions; subscriber growth and retention; variability of the Company’s revenue based on changing conditions in particular industries and the economy generally; protection of the Company’s proprietary technology or infringement by the Company of intellectual property of others; the risk of adverse changes in the U.S. or international regulatory environments, including but not limited to the imposition or increase of taxes or regulatory-related fees; and the numerous other factors set forth in Ziff Davis’ (formerly J2 Global, Inc.) filings with the Securities and Exchange Commission (“SEC”). For a more detailed description of the risk factors and uncertainties affecting Ziff Davis, refer to the 2020 Annual Report on Form 10-K filed by Ziff Davis on March 1, 2021, and the other reports filed by Ziff Davis from time-to-time with the SEC, each of which is available at www.sec.gov. The forward-looking statements provided in this press release, including those contained in Vivek Shah’s quote and in the “Business Outlook” portion regarding the Company’s expected fiscal 2022 financial performance are based on limited information available to the Company at this time, which is subject to change. Although management’s expectations may change after the date of this press release, the Company undertakes no obligation to revise or update these statements. About non-GAAP Financial Measures To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we use the following Adjusted non-GAAP financial measures: Adjusted non-GAAP and Pro Forma net income, Adjusted non-GAAP and Pro Forma net income per diluted share, Adjusted and Pro Forma EBITDA and free cash flow. The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. We use these Adjusted non-GAAP financial measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons. Our management believes that these Adjusted non-GAAP financial measures provide meaningful supplemental information regarding our performance and liquidity by excluding certain expenses and expenditures that may not be indicative of our recurring core business operating results. We believe that both management and investors benefit from referring to these Adjusted non-GAAP financial measures in assessing our performance and when planning, forecasting, and analyzing future periods. These Adjusted non-GAAP financial measures also facilitate management’s internal comparisons to our historical performance and liquidity. We believe these Adjusted non-GAAP financial measures are useful to investors both because (1) they allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making and (2) they are used by our institutional investors and the analyst community to help them analyze the health of our business. For more information on these Adjusted non-GAAP financial measures, please see the appropriate GAAP to Adjusted non-GAAP reconciliation tables included within the attached Exhibit to this release. ZIFF DAVIS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED, IN THOUSANDS) December 31, 2021 December 31, 2020 ASSETS Cash and cash equivalents $ 694,842 $ 176,443 Short-term investments 229,200 663 Accounts receivable, net of allowances of $9,811 and $11,552, respectively 311,728 309,549 Prepaid expenses and other current assets 60,290 52,160 Current assets, discontinued operations 4,626 84,028 Total current assets 1,300,686 622,843 Long-term investments 122,593 97,495 Property and equipment, net 161,209 133,973 Operating lease right-of-use assets 55,617 103,534 Trade names, net 147,761 158,553 Customer relationships, net 275,451 363,515 Goodwill 1,524,429 1,507,098 Other purchased intangibles, net 149,512 156,821 Deferred income taxes, noncurrent 5,917 12,195 Other assets 20,090 15,760 Other assets, discontinued operations — 493,545 TOTAL ASSETS $ 3,763,265 $ 3,665,332 LIABILITIES AND STOCKHOLDERS’ EQUITY Accounts payable and accrued expenses $ 226,621 $ 197,855 Income taxes payable, current 3,143 30,447 Deferred revenue, current 185,571 166,132 Operating lease liabilities, current 27,156 31,267 Current portion of long-term debt 54,609 396,800 Other current liabilities 130 495 Current liabilities, discontinued operations — 59,559 Total current liabilities 497,230 882,555 Long-term debt 1,036,018 1,182,220 Deferred revenue, noncurrent 14,839 14,201 Operating lease liabilities, noncurrent 53,708 97,561 Income taxes payable, noncurrent 11,690 11,675 Liability for uncertain tax positions 42,546 53,089 Deferred income taxes, noncurrent 108,982 157,308 Other long-term liabilities 37,546 41,400 Long-term liabilities, discontinued operations — 14,304 TOTAL LIABILITIES 1,802,559 2,454,313 Commitments and contingencies — — Preferred stock, $0.01 par value. Authorized 1,000,000 and none issued — — Preferred stock - Series A, $0.01 par value. Authorized 6,000; total issued and outstanding zero — — Preferred stock - Series B, $0.01 par value. Authorized 20,000; total issued and outstanding zero — — Common stock, $0.01 par value. Authorized 95,000,000; total issued and outstanding 47,440,137 and 44,346,630 shares at December 31, 2021 and 2020, respectively. 474 443 Additional paid-in capital 506,405 456,274 Retained earnings 1,530,015 809,108 Accumulated other comprehensive loss (76,188 ) (54,806 ) TOTAL STOCKHOLDERS’ EQUITY 1,960,706 1,211,019 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 3,763,265 $ 3,665,332 ZIFF DAVIS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED, IN THOUSANDS) Three Months Ended December 31, Twelve Months Ended December 31, 2021 2020 2021 2020 Total revenues $ 408,628 $ 384,055 $ 1,416,722 $ 1,158,829 Cost of revenues (1) 45,718 46,159 188,053 178,403 Gross profit 362,910 337,896 1,228,669 980,426 Operating expenses: Sales and marketing (1) 138,100 114,610 493,049 366,359 Research, development and engineering (1) 21,875 19,038 78,874 57,148 General and administrative (1) 117,541 126,398 457,692 420,295 Goodwill impairment on business — — 32,629 — Total operating expenses 277,516 260,046 1,062,244 843,802 Income from operations 85,394 77,850 166,425 136,624 Interest expense, net (16,810 ) (20,836 ) (79,031 ) (56,188 ) Loss on debt extinguishment, net (4,527 ) — (4,527 ) — (Loss) gain on sale of businesses — — (21,798 ) 17,122 Loss on investments, net — — (16,677 ) (20,991 ) Unrealized gain on short-term investment 290,073 — 290,073 — Other income, net 1,759 4,034 1,293 65 Income from continuing operations before income taxes and income from equity method investment, net 355,889 61,048 335,758 76,632 Income tax (benefit) expense 5,156 18,781 (15,944 ) 37,929 Income (loss) from equity method investment, net 19,249 (539 ) 35,845 (11,338 ) Net income from continuing operations 369,982 41,728 387,547 27,365 (Loss) income from discontinued operations, net of income taxes (11,093 ) 16,360 107,550 123,303 Net income $ 358,889 $ 58,088 $ 495,097 $ 150,668 Net income per common share from continuing operations: Basic $ 7.74 $ 0.94 $ 8.44 $ 0.59 Diluted $ 7.62 $ 0.91 $ 8.09 $ 0.58 Net (loss) income per common share from discontinued operations: Basic $ (0.23 ) $ 0.37 $ 2.34 $ 2.65 Diluted $ (0.23 ) $ 0.36 $ 2.24 $ 2.61 Net income per common share: Basic $ 7.51 $ 1.30 $ 10.78 $ 3.24 Diluted $ 7.39 $ 1.27 $ 10.33 $ 3.18 Weighted average shares outstanding: Basic 47,778,545 44,504,222 45,893,928 46,308,825 Diluted 48,514,588 45,642,292 47,862,745 47,115,609 (1) Includes share-based compensation expense as follows: Cost of revenues $ 86 $ 77 $ 306 $ 332 Sales and marketing 410 218 1,288 1,011 Research, development and engineering 594 365 1,984 1,396 General and administrative 5,037 4,629 20,551 19,781 Total $ 6,127 $ 5,289 $ 24,129 $ 22,520 ZIFF DAVIS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED, IN THOUSANDS) Twelve Months Ended December 31, 2021 2020 Cash flows from operating activities: Net income $ 495,097 $ 150,668 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 258,303 228,737 Amortization of financing costs and discounts 25,873 28,476 Non-cash operating lease costs 1,485 17,686 Share-based compensation 25,247 24,006 Provision for doubtful accounts 8,738 13,283 Deferred income taxes, net (9,442 ) 5,840 Loss on extinguishment of debt 13,277 37,969 Loss (gain) on sale of businesses 21,798 (17,122 ) Lease asset impairments and other charges 12,710 12,121 Goodwill impairment on business 32,629 — Changes in fair value of contingent consideration (1,223 ) (80 ) Foreign currency remeasurement gain 184 (34,646 ) (Income) loss from equity method investments (35,845 ) 11,338 (Gain) loss on equity and debt investments (273,110 ) 20,826 Decrease (increase) in: Accounts receivable (18,050 ) (31,611 ) Prepaid expenses and other current assets (15,650 ) 3,046 Other assets (3,824 ) (3 ) Increase (decrease) in: Accounts payable and accrued expenses 13,662 2,184 Income taxes payable (23,974 ) 6,489 Deferred revenue 14,282 4,720 Operating lease liabilities (15,314 ) (16,439 ) Liability for uncertain tax positions (10,383 ) 9,391 Other long-term liabilities (899 ) 3,200 Net cash provided by operating activities 515,571 480,079 Cash flows from investing activities: Proceeds on sale of available-for-sale investments 663 — Distribution from equity method investment 15,327 — Purchases of equity method investment (23,249 ) (31,937 ) Purchase of equity investments (999 ) (1,246 ) Sale of equity investments 14,330 — Purchases of property and equipment (113,740 ) (92,552 ) Proceeds from sale of assets — 507 Acquisition of businesses, net of cash received (141,146 ) (482,227 ) Proceeds from sale of businesses, net of cash divested 48,876 24,353 Purchases of intangible assets (78 ) (3,118 ) Proceeds from divestiture of discontinued operations 259,104 — Net cash used in investing activities 59,088 (586,220 ) Cash flows from financing activities: Proceeds from issuance of long-term debt — 750,000 Payment of note payable — (400 ) Proceeds from bridge loan 485,000 — Debt issuance cost — (7,272 ) Payment of debt (510,197 ) (650,000 ) Debt extinguishment costs (1,073 ) (29,250 ) Repurchase of common stock (78,328 ) (275,654 ) Issuance of common stock under employee stock purchase plan 9,232 7,382 Exercise of stock options 2,939 1,619 Deferred payments for acquisitions (14,387 ) (29,180 ) Other (6,776 ) (1,878 ) Net cash (used in) provided by financing activities (113,590 ) (234,633 ) Effect of exchange rate changes on cash and cash equivalents (8,879 ) 7,811 Net change in cash and cash equivalents 452,190 (332,963 ) Cash and cash equivalents at beginning of year 242,652 575,615 Cash and cash equivalents at end of year $ 694,842 $ 242,652 ZIFF DAVIS, INC. AND SUBSIDIARIES RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP FINANCIAL MEASURES THREE MONTHS ENDED DECEMBER 31, 2021 AND 2020 (UNAUDITED, IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) Adjusted non-GAAP net income is GAAP net income with the following modifications: (1) elimination of share-based compensation; (2) elimination of certain acquisition related integration costs; (3) elimination of interest costs in excess of the coupon rate associated with outstanding debt; (4) elimination of amortization of patents and intangible assets that we acquired; (5) elimination of change in value on investment; (6) elimination of additional tax expense/benefit from prior years; (7) elimination of gain/loss on sale of assets; (8) elimination of intra-entity transfers; (9) elimination of lease asset impairments and other charges; (10) elimination of leasehold improvement impairments; (11) elimination of disposal related costs; (12) elimination of goodwill impairment on business and (13) elimination of dilutive effect of the convertible debt. Three Months Ended December 31, 2021 Per Diluted Share * 2020 Per Diluted Share * Net income from continuing operations $ 369,982 $ 7.62 $ 41,728 $ 0.91 Plus: Share based compensation (1) 4,302 0.09 4,233 0.10 Acquisition related integration costs (2) 1,924 0.04 7,727 0.17 Interest costs (3) 6,309 0.13 4,765 0.11 Amortization (4) 28,581 0.59 38,385 0.86 Investments (5) (307,739 ) (6.40 ) 1,713 0.04 Tax expense from prior years (6) — — 533 0.01 Sale of assets (7) (1,508 ) (0.03 ) 651 0.01 Intra-entity transfers (8) — — (1,856 ) (0.04 ) Lease asset impairments and other charges (9) 2,342 0.05 1,973 0.04 Leasehold improvement impairments (10) — — 61 — Disposal related costs (11) 135 — — — Goodwill impairment on business (12) (33 ) — — — Convertible debt dilution (13) — 0.08 — 0.02 Adjusted non-GAAP net income from continuing operations $ 104,295 $ 2.17 $ 99,913 $ 2.24 * The reconciliation of net income per share from GAAP to Adjusted non-GAAP may not foot since each is calculated independently. ZIFF DAVIS, INC. AND SUBSIDIARIES RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP FINANCIAL MEASURES TWELVE MONTHS ENDED DECEMBER 31, 2021 AND 2020 (UNAUDITED, IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) Adjusted non-GAAP net income is GAAP net income with the following modifications: (1) elimination of share-based compensation; (2) elimination of certain acquisition related integration costs; (3) elimination of interest costs in excess of the coupon rate associated with outstanding debt; (4) elimination of amortization of patents and intangible assets that we acquired; (5) elimination of change in value on investment; (6) elimination of additional tax expense/benefit from prior years; (7) elimination of gain/loss on sale of assets; (8) elimination of intra-entity transfers; (9) elimination of lease asset impairments and other charges; (10) elimination of leasehold improvement impairments; (11) elimination of disposal related costs; (12) elimination of goodwill impairment on business and (13) elimination of dilutive effect of the convertible debt. Twelve Months Ended December 31, 2021 Per Diluted Share * 2020 Per Diluted Share * Net income from continuing operations $ 387,547 $ 8.09 $ 27,365 $ 0.58 Plus: Share based compensation (1) 15,510 0.34 19,566 0.42 Acquisition related integration costs (2) 6,672 0.14 10,530 0.23 Interest costs (3) 18,769 0.41 18,497 0.40 Amortization (4) 127,258 2.75 124,247 2.68 Investments (5) (312,747 ) (6.77 ) 33,173 0.72 Tax expense from prior years (6) — — 5,448 0.12 Sale of assets (7) 14,896 0.32 (9,428 ) (0.20 ) Intra-entity transfers (8) — — (4,712 ) (0.10 ) Lease asset impairments and other charges (9) 9,793 0.21 11,390 0.25 Leasehold improvement impairments (10) — — 2,840 0.06 Disposal related costs (11) 407 0.01 — — Goodwill impairment on business (12) 24,602 0.53 — — Convertible debt dilution (13) — 0.30 — (0.03 ) Adjusted non-GAAP net income from continuing operations $ 292,707 $ 6.33 $ 238,916 $ 5.13 * The reconciliation of net income per share from GAAP to Adjusted non-GAAP may not foot since each is calculated independently. ZIFF DAVIS, INC. AND SUBSIDIARIES RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP FINANCIAL MEASURES THREE MONTHS ENDED DECEMBER 31, 2021 AND 2020 (UNAUDITED, IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) Adjusted non-GAAP net income is GAAP net income with the following modifications: (1) elimination of share-based compensation; (2) elimination of certain acquisition related integration costs; (3) elimination of interest costs in excess of the coupon rate associated with outstanding debt; (4) elimination of amortization of patents and intangible assets that we acquired; (5) elimination of change in value on investment; (6) elimination of additional tax expense/benefit from prior years; (7) elimination of gain/loss on sale of assets; (8) elimination of intra-entity transfers; (9) elimination of lease asset impairments and other charges; (10) elimination of leasehold improvement impairments; (11) elimination of disposal related costs; (12) elimination of goodwill impairment on business and (13) elimination of dilutive effect of the convertible debt. Three Months Ended December 31, 2021 2020 Cost of revenues $ 45,718 $ 46,159 Plus: Share based compensation (1) (86 ) (77 ) Acquisition related integration costs (2) (96 ) (57 ) Amortization (4) (251 ) (143 ) Adjusted non-GAAP cost of revenues $ 45,285 $ 45,882 Sales and marketing $ 138,100 $ 114,610 Plus: Share based compensation (1) (409 ) (218 ) Acquisition related integration costs (2) (178 ) (1,117 ) Lease asset impairments and other charges (9) — (76 ) Leasehold improvement impairments (10) — (3 ) Adjusted non-GAAP sales and marketing $ 137,513 $ 113,196 Research, development and engineering $ 21,875 $ 19,038 Plus: Share based compensation (1) (593 ) (364 ) Acquisition related integration costs (2) (357 ) (627 ) Lease asset impairments and other charges (9) — (35 ) Adjusted non-GAAP research, development and engineering $ 20,925 $ 18,012 General and administrative $ 117,541 $ 126,398 Plus: Share based compensation (1) (5,039 ) (4,629 ) Acquisition related integration costs (2) (2,903 ) (7,990 ) Amortization (4) (45,053 ) (46,875 ) Investments (5) (1,500 ) — Lease asset impairments and other charges (9) (3,134 ) (2,610 ) Leasehold improvement impairments (10) — (23 ) Disposal related costs (11) (135 ) (1 ) Adjusted non-GAAP general and administrative $ 59,777 $ 64,270 Interest expense, net $ (16,810 ) $ (20,836 ) Plus: Interest costs (3) 1,979 6,292 Adjusted non-GAAP interest expense, net $ (14,831 ) $ (14,544 ) Loss on debt extinguishment $ (4,527 ) $ — Plus: Interest costs (3) 7,323 — Adjusted non-GAAP loss on debt extinguishment $ 2,796 $ — (Loss) gain on sale of businesses $ — $ — Plus: Sale of assets (7) — — Adjusted non-GAAP (loss) gain on sale of businesses $ — $ — Unrealized gain on short-term investment $ 290,073 $ — Plus: Investments (5) (289,512 ) — Adjusted non-GAAP unrealized gain on short-term investment $ 561 $ — Other income (expense), net $ 1,759 $ 4,034 Plus: Acquisition related integration costs (2) — (208 ) Sale of assets (7) 290 — Intra-entity transfers (8) — (2,121 ) Lease asset impairments and other charges (9) — (385 ) Adjusted non-GAAP other income (expense), net $ 2,049 $ 1,320 Income tax expense $ 5,156 $ 18,781 Plus: Share based compensation (1) 1,825 1,055 Acquisition related integration costs (2) 1,610 1,857 Interest costs (3) 2,993 1,527 Amortization (4) 16,723 8,633 Investments (5) 478 (1,174 ) Tax benefit from prior years (6) — (533 ) Sale of assets (7) 1,798 (650 ) Intra-entity transfers (8) — (265 ) Lease asset impairments and other charges (9) 792 363 Disposal related costs (11) — (36 ) Goodwill impairment on business (12) 33 — Adjusted non-GAAP income tax expense $ 31,408 $ 29,558 Income (loss) from equity method investment, net $ 19,249 $ (539 ) Plus: Investments (5) (19,249 ) 539 Adjusted non-GAAP income (loss) from equity method investment, net $ — $ — Total adjustments $ 265,687 $ (58,185 ) GAAP net income per diluted share from continuing operations $ 7.62 $ 0.91 Adjustments * $ (5.45 ) $ 1.33 Adjusted non-GAAP net income per diluted share from continuing operations $ 2.17 $ 2.24 * The reconciliation of net income per share from GAAP to Adjusted non-GAAP may not foot since each is calculated independently. The Company discloses Adjusted non-GAAP Earnings Per Share (“EPS”) as a supplemental Non-GAAP financial performance measure, as it believes it is a useful metric by which to compare the performance of its business from period to period. The Company also understands that this Adjusted non-GAAP measure is broadly used by analysts, rating agencies and investors in assessing the Company’s performance. Accordingly, the Company believes that the presentation of this Adjusted non-GAAP financial measure provides useful information to investors. Adjusted non-GAAP EPS is not in accordance with, or an alternative to, net income per share and may be different from Non-GAAP measures with similar or even identical names used by other companies. In addition, this Adjusted non-GAAP measure is not based on any comprehensive set of accounting rules or principles. This Adjusted non-GAAP measure has limitations in that it does not reflect all of the amounts associated with the Company’s results of operations determined in accordance with GAAP. ZIFF DAVIS, INC. AND SUBSIDIARIES RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP FINANCIAL MEASURES TWELVE MONTHS ENDED DECEMBER 31, 2021 AND 2020 (UNAUDITED, IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) Adjusted non-GAAP net income is GAAP net income with the following modifications: (1) elimination of share-based compensation; (2) elimination of certain acquisition related integration costs; (3) elimination of interest costs in excess of the coupon rate associated with outstanding debt; (4) elimination of amortization of patents and intangible assets that we acquired; (5) elimination of change in value on investment; (6) elimination of additional tax expense/benefit from prior years; (7) elimination of gain/loss on sale of assets; (8) elimination of intra-entity transfers; (9) elimination of lease asset impairments and other charges; (10) elimination of leasehold improvement impairments; (11) elimination of disposal related costs; (12) elimination of goodwill impairment on business and (13) elimination of dilutive effect of the convertible debt. Twelve Months Ended December 31, 2021 2020 Cost of revenues $ 188,053 $ 178,403 Plus: Share based compensation (1) (306 ) (332 ) Acquisition related integration costs (2) (382 ) (227 ) Amortization (4) (1,548 ) (1,694 ) Adjusted non-GAAP cost of revenues $ 185,817 $ 176,150 Sales and marketing $ 493,049 $ 366,359 Plus: Share based compensation (1) (1,288 ) (1,011 ) Acquisition related integration costs (2) (1,824 ) (1,803 ) Lease asset impairments and other charges (9) — (76 ) Leasehold improvement impairments (10) — (3 ) Adjusted non-GAAP sales and marketing $ 489,937 $ 363,466 Research, development and engineering $ 78,874 $ 57,148 Plus: Share based compensation (1) (1,984 ) (1,396 ) Acquisition related integration costs (2) (1,457 ) (606 ) Lease asset impairments and other charges (9) — (35 ) Adjusted non-GAAP research, development and engineering $ 75,433 $ 55,111 General and administrative $ 457,692 $ 420,295 Plus: Share based compensation (1) (20,551 ) (19,781 ) Acquisition related integration costs (2) (7,469 ) (10,752 ) Amortization (4) (185,855 ) (156,377 ) Investments (5) (1,500 ) — Lease asset impairments and other charges (9) — (14,830 ) Leasehold improvement impairments (10) (12,988 ) (3,628 ) Disposal related costs (11) (607 ) (1 ) Adjusted non-GAAP general and administrative $ 228,722 $ 214,926 Goodwill impairment on business (32,629 ) — Plus: Goodwill impairment on business (12) 32,630 — Adjusted non-GAAP goodwill impairment on business $ 1 $ — Interest expense, net $ (79,031 ) $ (56,188 ) Plus: Interest costs (3) 18,482 24,384 Tax expense from prior years (6) — Adjusted non-GAAP interest expense, net $ (60,549 ) $ (31,804 ) Loss on debt extinguishment $ (4,527 ) $ — Plus: Interest costs (3) 7,323 — Adjusted non-GAAP loss on debt extinguishment $ 2,796 $ — (Loss) gain on sale of businesses $ (21,798 ) $ 17,122 Plus: Sale of assets (7) 22,088 (16,654 ) Adjusted non-GAAP (loss) gain on sale of businesses $ 290 $ 468 Loss on investments, net $ (16,677 ) $ (20,991 ) Plus: Investments (5) 16,677 20,826 Sale of assets (7) — — Adjusted non-GAAP loss on investments, net $ — $ (165 ) Unrealized gain on short-term investment $ 290,073 $ — Plus: Investments (5) (289,512 ) — Adjusted non-GAAP unrealized gain on short-term investment $ 561 $ — Other income (expense), net $ 1,293 $ 65 Plus: Acquisition related integration costs (2) — (209 ) Sale of assets (7) — (386 ) Intra-entity transfers (8) — (619 ) Lease asset impairments and other charges (9) (5,385 ) Adjusted non-GAAP other income (expense), net $ 1,293 $ (6,534 ) Income tax (benefit) expense $ (15,944 ) $ 37,929 Plus: Share based compensation (1) 8,619 2,954 Acquisition related integration costs (2) 4,460 2,649 Interest costs (3) 7,036 5,887 Amortization (4) 60,145 33,824 Investments (5) 5,567 (1,174 ) Tax (benefit) expense from prior years (6) — (5,448 ) Sale of assets (7) 7,192 (7,678 ) Intra-entity transfers (8) — (673 ) Lease asset impairments and other charges (9) — 3,164 Leasehold improvement impairments (10) 3,195 791 Disposal related costs (11) 200 — Goodwill impairment on business (12) 8,028 — Adjusted non-GAAP income tax (benefit) expense $ 88,498 $ 72,225 Income (loss) from equity method investment, net $ 35,845 $ (11,338 ) Plus: Investments (5) (35,845 ) 11,338 Adjusted non-GAAP income (loss) from equity method investment, net $ — $ — Total adjustments $ 94,840 $ (211,551 ) GAAP net income per diluted share from continuing operations $ 8.09 $ 0.58 Adjustments * $ (1.76 ) $ 4.55 Adjusted non-GAAP net income per diluted share from continuing operations $ 6.33 $ 5.13 * The reconciliation of net income per share from GAAP to Adjusted non-GAAP may not foot since each is calculated independently. The Company discloses Adjusted non-GAAP Earnings Per Share (“EPS”) as a supplemental Non-GAAP financial performance measure, as it believes it is a useful metric by which to compare the performance of its business from period to period. The Company also understands that this Adjusted non-GAAP measure is broadly used by analysts, rating agencies and investors in assessing the Company’s performance. Accordingly, the Company believes that the presentation of this Adjusted non-GAAP financial measure provides useful information to investors. Adjusted non-GAAP EPS is not in accordance with, or an alternative to, net income per share and may be different from Non-GAAP measures with similar or even identical names used by other companies. In addition, this Adjusted non-GAAP measure is not based on any comprehensive set of accounting rules or principles. This Adjusted non-GAAP measure has limitations in that it does not reflect all of the amounts associated with the Company’s results of operations determined in accordance with GAAP. Non-GAAP Financial Measures To supplement its condensed consolidated financial statements, which are prepared and presented in accordance with US GAAP, the Company uses the following Non-GAAP financial measures: Adjusted EBITDA, Adjusted non-GAAP Net Income from continuing operations, and Adjusted non-GAAP Diluted EPS from continuing operations (collectively the “Non-GAAP financial measures”). The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with U.S. GAAP. The Company uses these Non-GAAP financial measures for financial and operational decision making and as a means to evaluate period-to-period comparisons. The Company believes that they provide useful information about core operating results, enhance the overall understanding of past financial performance and future prospects, and allow for greater transparency with respect to key metrics used by management in its financial and operational decision making. (1) Share Based Compensation. The Company excludes stock-based compensation because it is non-cash in nature and because the Company believes that the Non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance. The Company further believes this measure is useful to investors in that it allows for greater transparency to certain line items in its financial statements. In addition, excluding this item from the Non-GAAP measures facilitates comparisons to historical operating results and comparisons to peers, many of which similarly exclude this item. (2) Acquisition Related Integration Costs. The Company excludes certain acquisition and related integration costs such as adjustments to contingent consideration, severance, lease terminations, retention bonuses and other acquisition-specific items. The Company believes that the Non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance. In addition, excluding this item from the Non-GAAP measures facilitates comparisons to historical operating results and comparisons to peers, many of which similarly exclude this item. (3) Interest Costs. In June 2014, the Company issued $402.5 million aggregate principal amount of 3.25% convertible senior notes and in November 2019, the Company issued $550.0 million aggregate principal amount of 1.75% convertible senior notes. In accordance with GAAP, the Company separately accounts for the value of the liability and equity features of its outstanding convertible senior notes in a manner that reflects the Company’s non-convertible debt borrowing rate. The value of the conversion feature, reflected as a debt discount, is amortized to interest expense over time. Accordingly, the Company recognizes imputed interest expense on its 3.25% and 1.75% convertible senior notes of approximately 5.8% and 5.5%, respectively, in its statement of operations. The Company excludes the difference between the imputed interest expense and the coupon interest expense of 3.25% and 1.75%, respectively, because it is non-cash in nature and because the Company believes that the Non-GAAP financial measures excluding this item provide meaningful supplemental information regarding core operational performance. In addition, the Company has excluded the difference between the imputed and coupon interest expense associated with the 4.625% Senior Notes. The Company has determined excluding these items from the Non-GAAP measures facilitates comparisons to historical operating results and comparisons to peers, many of which similarly exclude this item. (4) Amortization. The Company excludes amortization of patents and acquired intangible assets because it is non-cash in nature and because the Company believes that the Non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance. In addition, excluding this item from the Non-GAAP measures facilitates comparisons to historical operating results and comparisons to peers, many of which similarly exclude this item. (5) Change in Value on Investments. The Company excludes the change in value on its investments. The Company believes that the Non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance. In addition, excluding this item from the Non-GAAP measures facilitates comparisons to historical operating results. (6) Tax Expense/Benefit from Prior Years. The Company excludes certain income tax-related items in respect of income tax audit settlements and their related reversals of income tax reserves accounted for through ASC 740-10. The Company believes that the Non-GAAP financial measures excluding these items provide meaningful supplemental information regarding operational performance. In addition, excluding these items from the Non-GAAP measures facilitates comparisons to historical operating results. (7) Gain (Loss) on Sale of Assets. The Company excludes the gain (loss) on sale of certain of its assets. The Company believes that the Non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance. In addition, excluding this item from the Non-GAAP measures facilitates comparisons to historical operating results. (8) Intra-Entity Transfers. The Company excludes certain effects of intra-entity transfers to the extent the related tax asset or liability in the financial statement is not recovered or settled, respectively during the year. During December 2019, the Company entered into an intra-entity asset transfer that resulted in the recording of a tax benefit and related tax asset representing tax deductible amounts to be realized in future years which is expected to be recovered over a period of up to 20 years and related foreign currency fluctuations. The Company believes that the Non-GAAP financial measures excluding the cumulative future unrealized benefit of the assets transferred and including the tax benefit in the year of realization provides meaningful supplemental information regarding operational performance. In addition, excluding this item from the Non-GAAP measures facilitates comparisons to historical operating results. (9) Lease Asset Impairments and Other Charges. The Company excludes lease asset impairments and other charges as they are non-cash in nature and because the Company believes that the Non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance. In addition, excluding this item from the Non-GAAP measures facilitates comparisons to historical operating results. (10) Leasehold Improvement Impairments. The Company excludes leasehold improvement impairments as they are non-cash in nature and because the Company believes that the Non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance. In addition, excluding this item from the Non-GAAP measures facilitates comparisons to historical operating results. (11) Disposal related Costs. The Company excludes expenses associated with the disposal of certain businesses. The Company believes that the Non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance. In addition, excluding this item from the Non-GAAP measures facilitates comparisons to historical operating results. (12) Goodwill Impairment on Business. The Company excludes the goodwill impairment on business because it is non-cash in nature and the Company believes that the Non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance. In addition, excluding this item from the Non-GAAP measures facilitates comparisons to historical operating results. (13) Convertible Debt Dilution. The Company excludes convertible debt dilution from diluted EPS. The Company believes that the Non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance. In addition, excluding this item from the Non-GAAP measures facilitates comparisons to historical operating results. The Company presents Adjusted non-GAAP Cost of Revenues, Adjusted non-GAAP Research, Development and Engineering, Adjusted non-GAAP Sales and Marketing, Adjusted non-GAAP General and Administrative, Adjusted non-GAAP Interest Expense, Adjusted Gain on Sale of Businesses, Adjusted non-GAAP Loss on Investments, Adjusted non-GAAP Other (Income) Expense, Adjusted non-GAAP Income Tax Provision, Adjusted non-GAAP (Income) Loss from Equity Method Investment, Net and Adjusted non-GAAP Net Income because the Company believes that these provide useful information about our operating results and enhance the overall understanding of past financial performance and future prospects. Pro-Forma Financial Results Key pro-forma financial results for the three and twelve months ended December 31, 2021 and 2020, are set forth in the following table (in millions, except per share amounts). The financial results below exclude the operating results from continuing operations, on a pro-forma basis, of Voice assets in Australia, New Zealand, and the United Kingdom as well as the sale of the Company’s B2B Backup business as if they had occurred January 1, 2020. Three Months Ended Twelve Months Ended Q4 2021 Q4 2020 Q4 2021 Q4 2020 Total Revenues $408.6 million $384.1 million $1,416.7 million $1,158.8 million Pro-Forma Revenue Adjustments $— million $(14.0) million $(33.5) million $(68.1) million Pro-Forma Total Revenue: (1) $408.6 million $370.1 million $1,383.2 million $1,090.7 million Adjusted Non-GAAP Net Income per Diluted Share from Continuing Operations (1) $2.17 $2.24 $6.33 $5.13 Pro-Forma Net Income per Diluted Share from Continuing Operations Adjustments $— $(0.08) $(0.22) $(0.48) Adjusted Pro Forma Net Income per Diluted Share from Continuing Operations (1) $2.17 $2.16 $6.11 $4.65 GAAP Net Income from Continuing Operations $370.0 million $41.7 million $387.5 million $27.4 million Pro-Forma Net Income from Continuing Operations Adjustments $(265.7) million $54.5 million $(105.0) million $189.0 million Adjusted Pro-Forma Net Income from Continuing Operations $104.3 million $96.2 million $282.5 million $216.4 million Adjusted EBITDA (1) $161.6 million $157.1 million $498.7 million $404.5 million Pro-Forma EBITDA Adjustments $— million $(5.8) million $(14.1) million $(26.8) million Adjusted Pro-Forma EBITDA (1) $161.6 million $151.3 million $484.6 million $377.7 million Adjusted EBITDA Margin (1) 39.5% 40.9% 35.2% 34.9% Pro-Forma EBITDA Margin Adjustments 0.0% —% (0.2)% (0.3)% Adjusted Pro-Forma EBITDA Margin (1) 39.5% 40.9% 35.0% 34.6% (1) Refer to the notes earlier in this Release. ZIFF DAVIS, INC. AND SUBSIDIARIES NET INCOME TO ADJUSTED EBITDA RECONCILIATION THREE AND TWELVE MONTHS ENDED DECEMBER 31, 2021 AND 2020 (UNAUDITED, IN THOUSANDS) The following table sets forth a reconciliation of Adjusted EBITDA to net income from continuing operations, the most directly comparable GAAP financial measure. Three Months Ended December 31, Twelve Months Ended December 31, 2021 2020 2021 2020 Net income from continuing operations $ 369,982 $ 41,728 $ 387,547 $ 27,365 Plus: Interest expense, net 16,810 20,836 79,031 56,188 Loss on debt extinguishment 4,527 — 4,527 — Loss (gain) on sale of businesses — — 21,798 (17,122 ) Loss on investments, net — — 16,677 20,991 Unrealized gain on short-term investment (290,073 ) — (290,073 ) — Other income, net (1,759 ) (4,034 ) (1,293 ) (65 ) Income tax expense (benefit) 5,156 18,781 (15,944 ) 37,929 (Income) loss from equity method investment, net (19,249 ) 539 (35,845 ) 11,338 Depreciation and amortization 61,791 61,476 249,293 216,982 Reconciliation of GAAP to Adjusted non-GAAP financial measures: Share-based compensation 6,127 5,289 24,129 22,521 Acquisition-related integration costs 3,535 9,791 11,132 13,388 Lease asset impairments and other charges 3,133 2,721 12,988 14,940 Disposal related costs 135 — 606 — Investments 1,500 — 1,500 — Goodwill impairment on business — — 32,629 — Adjusted EBITDA $ 161,615 $ 157,127 $ 498,702 $ 404,455 Adjusted EBITDA as calculated above represents earnings before interest, gain on sale of businesses, goodwill impairment of business, loss on investments, net, other (income) expense, net, income tax expense, (income) loss from equity method investments, net, depreciation and amortization and the items used to reconcile GAAP to Adjusted non-GAAP financial measures, including (1) share-based compensation, (2) certain acquisition-related integration costs, and (3) lease asset impairments and other charges. We disclose Adjusted EBITDA as a supplemental Non-GAAP financial performance measure as we believe it is a useful metric by which to compare the performance of our business from period to period. We understand that measures similar to Adjusted EBITDA are broadly used by analysts, rating agencies and investors in assessing our performance. Accordingly, we believe that the presentation of Adjusted EBITDA provides useful information to investors. Adjusted EBITDA is not in accordance with, or an alternative to, net income, and may be different from Non-GAAP measures used by other companies. In addition, Adjusted EBITDA is not based on any comprehensive set of accounting rules or principles. This Adjusted non-GAAP measure has limitations in that it does not reflect all of the amounts associated with the Company’s results of operations determined in accordance with GAAP. ZIFF DAVIS, INC. AND SUBSIDIARIES NON-GAAP FINANCIAL MEASURES (UNAUDITED, IN THOUSANDS) Q1 Q2 Q3 Q4 YTD 2021 Net cash provided by operating activities from continuing and discontinued operations $ 178,724 $ 111,298 $ 140,230 $ 85,319 $ 515,571 Less: Purchases of property and equipment (26,269 ) (31,497 ) (29,729 ) (26,245 ) (113,740 ) Add: Contingent consideration* — 685 — — 685 Free cash flow from continuing and discontinued operations $ 152,455 $ 80,486 $ 110,501 $ 59,074 $ 402,516 Q1 Q2 Q3 Q4 YTD 2020 Net cash provided by operating activities from continuing and discontinued operations $ 102,036 $ 139,591 $ 114,382 $ 124,070 $ 480,079 Less: Purchases of property and equipment (26,885 ) (23,652 ) (20,729 ) (21,286 ) (92,552 ) Add: Contingent consideration* 20,054 — 49 99 20,202 Free cash flow from continuing and discontinued operations $ 95,205 $ 115,939 $ 93,702 $ 102,883 $ 407,729 * Free Cash Flows from Continuing and Discontinued Operations of $80.5 million for Q2 2021, $95.2 million for Q1 2020, $93.7 million for Q3 2020 and $102.9 million for Q4 2020 is before the effect of payments associated with certain contingent consideration associated with recent acquisitions. The Company discloses free cash flows as supplemental Non-GAAP financial performance measure, as it believes it is a useful metric by which to compare the performance of its business from period to period. The Company also understands that this Non-GAAP measure is broadly used by analysts, rating agencies and investors in assessing the Company’s performance. Accordingly, the Company believes that the presentation of this Non-GAAP financial measure provides useful information to investors. Free cash flows is not in accordance with, or an alternative to, Cash Flows from Operating Activities, and may be different from Non-GAAP measures with similar or even identical names used by other companies. In addition, the Non-GAAP measure is not based on any comprehensive set of accounting rules or principles. This Non-GAAP measure has limitations in that it does not reflect all of the amounts associated with the Company’s results of operations determined in accordance with GAAP. ZIFF DAVIS, INC. AND SUBSIDIARIES RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP FINANCIAL MEASURES THREE MONTHS ENDED DECEMBER 31, 2021 (UNAUDITED, IN THOUSANDS) Digital Cybersecurity Media and Martech Corporate Total Revenues GAAP revenues $ 325,747 $ 82,881 $ — $ 408,628 Gross profit GAAP gross profit $ 300,891 $ 62,028 $ (9 ) $ 362,910 Non-GAAP adjustments: Share-based compensation 4 81 — 85 Acquisition related integration costs 70 27 — 97 Amortization — 251 — 251 Adjusted non-GAAP gross profit $ 300,965 $ 62,387 $ (9 ) $ 363,343 Operating profit Income (loss) from operations $ 92,582 $ 9,333 $ (16,521 ) $ 85,394 Non-GAAP adjustments: Share-based compensation 2,179 1,226 2,722 6,127 Acquisition related integration costs 856 1,472 1,207 3,535 Amortization 32,746 12,235 72 45,053 Lease asset impairments and other charges 3,666 (533 ) — 3,133 Disposal related costs — 85 50 135 Investments — — 1,500 1,500 Adjusted non-GAAP operating profit (loss) $ 132,029 $ 23,818 $ (10,970 ) $ 144,877 Depreciation 13,508 3,230 — 16,738 Adjusted EBITDA $ 145,537 $ 27,048 $ (10,970 ) $ 161,615 NOTE 1: Table above excludes certain intercompany allocations ZIFF DAVIS, INC. AND SUBSIDIARIES RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP FINANCIAL MEASURES THREE MONTHS ENDED DECEMBER 31, 2020 (UNAUDITED, IN THOUSANDS) Digital Cybersecurity Media and Martech Corporate Total Revenues GAAP revenues $ 297,868 $ 86,187 $ — $ 384,055 Gross profit GAAP gross profit $ 275,895 $ 62,001 $ — $ 337,896 Non-GAAP adjustments: Share-based compensation 3 74 — 77 Acquisition related integration costs — 57 — 57 Amortization — 143 — 143 Adjusted non-GAAP gross profit $ 275,898 $ 62,275 $ — $ 338,173 Operating profit Income (loss) from operations $ 85,571 $ 9,579 $ (17,300 ) 77,850 Non-GAAP adjustments: Share-based compensation 1,334 943 3,012 5,289 Acquisition related integration costs 8,116 337 1,338 9,791 Amortization 32,903 14,007 109 47,019 Lease asset impairments and other charges 2,721 — — 2,721 Adjusted non-GAAP operating profit (loss) $ 130,645 $ 24,866 $ (12,841 ) $ 142,670 Depreciation 10,621 3,836 — 14,457 Adjusted EBITDA $ 141,266 $ 28,702 $ (12,841 ) $ 157,127 NOTE 1: Table above excludes certain intercompany allocations NOTE 2: Table above has been recast to remove the impact of certain expenses associated with the Corporate entity that were previously allocated to the Cybersecurity and Martech and Digital Media businesses. ZIFF DAVIS, INC. AND SUBSIDIARIES RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP FINANCIAL MEASURES TWELVE MONTHS ENDED DECEMBER 31, 2021 (UNAUDITED, IN THOUSANDS) Digital Cybersecurity Media and Martech Corporate Total Revenues GAAP revenues $ 1,068,476 $ 348,246 $ — $ 1,416,722 Gross profit GAAP gross profit $ 974,011 $ 254,742 $ (84 ) $ 1,228,669 Non-GAAP adjustments: Share-based compensation 14 292 — 306 Acquisition related integration costs 95 287 — 382 Amortization — 1,547 — 1,547 Adjusted non-GAAP gross profit $ 974,120 $ 256,868 $ (84 ) $ 1,230,904 Operating profit Income (loss) from operations $ 216,950 $ 9,435 $ (60,379 ) $ 166,006 Non-GAAP adjustments: Goodwill impairment on business — 32,629 — 32,629 Share-based compensation 7,734 4,481 11,914 24,129 Acquisition related integration costs 3,449 6,450 1,233 11,132 Amortization 144,621 40,946 288 185,855 Lease asset impairments and other charges 12,229 758 — 12,987 Disposal related costs — 85 522 607 Investments — — 1,500 1,500 Adjusted non-GAAP income (loss) from operations $ 384,983 $ 94,784 $ (44,922 ) $ 434,845 Depreciation 49,151 14,451 255 63,857 Adjusted EBITDA $ 434,134 $ 109,235 $ (44,667 ) $ 498,702 NOTE 1: Table above excludes certain intercompany allocations ZIFF DAVIS, INC. AND SUBSIDIARIES RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP FINANCIAL MEASURES TWELVE MONTHS ENDED DECEMBER 31, 2020 (UNAUDITED, IN THOUSANDS) Digital Cybersecurity Media and Martech Corporate Total Revenues GAAP revenues $ 811,130 $ 347,699 $ — $ 1,158,829 Gross profit GAAP gross profit $ 733,658 $ 246,815 $ (47 ) $ 980,426 Non-GAAP adjustments: Share-based compensation 10 321 — 331 Acquisition related integration costs — 227 — 227 Amortization — 1,695 — 1,695 Adjusted non-GAAP gross profit $ 733,668 $ 249,058 $ (47 ) $ 982,679 Operating profit Income (loss) from operations $ 139,807 $ 52,319 $ (55,502 ) $ 136,624 Non-GAAP adjustments: Share-based compensation 5,539 4,138 12,844 22,521 Acquisition related integration costs 11,289 606 1,493 13,388 Amortization 99,901 54,506 3,663 158,070 Lease asset impairments and other charges 14,912 28 — 14,940 Adjusted non-GAAP income (loss) from operations $ 271,448 $ 111,597 $ (37,502 ) $ 345,543 Depreciation 41,788 17,124 — 58,912 Adjusted EBITDA $ 313,236 $ 128,721 $ (37,502 ) $ 404,455 NOTE 1: Table above excludes certain intercompany allocations NOTE 2: Table above has been recast to remove the impact of certain expenses associated with the Corporate entity that were previously allocated to the Cybersecurity and Martech and Digital Media businesses. 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Ziff Davis, Inc. (NASDAQ: ZD) today reported preliminary unaudited financial results for the fourth quarter and year ended December 31, 2021.