Ziff Davis reports mixed Q2 2024 results, reaffirms full-year guidance

Ziff Davis, a vertically focused digital media and internet company, last week announced its financial results for the second quarter of 2024. The company reported a slight decline in revenue but reaffirmed its full-year guidance, signaling confidence in its strategic direction despite challenging market conditions.

According to the earnings report, Ziff Davis generated total revenues of $320.8 million for the quarter ended June 30, 2024, representing a 1.6% decrease compared to $326.0 million in the same period of 2023. This decline was primarily attributed to a $4.7 million decrease in advertising and performance marketing revenue in the Digital Media segment and a $4.1 million decrease in subscription and licensing revenue in the Cybersecurity and Martech segment.

Despite the revenue dip, Ziff Davis maintained a positive outlook for the remainder of the year. The company's CEO, Vivek Shah, emphasized the importance of recent acquisition activity in driving future growth. "Our recent acquisition activity gives us confidence that we are back on the path to steady and compounding growth," Shah stated during the earnings call.

One of the most significant developments announced alongside the earnings report was Ziff Davis' agreement to acquire CNET Media for approximately $150 million. This strategic move, expected to close pending customary conditions, aims to bolster Ziff Davis' position in the technology media space. The acquisition of CNET, a well-established digital media publication platform, is anticipated to complement Ziff Davis' existing portfolio of technology-focused brands.

In terms of financial performance, Ziff Davis reported adjusted EBITDA of $96.3 million for Q2 2024, down 9.8% from $106.7 million in the prior-year period. Adjusted diluted earnings per share (EPS) also saw a decrease, falling to $1.18 from $1.27 in Q2 2023, representing a 7.1% decline.

The company's balance sheet remained strong, with $687.2 million in cash and cash equivalents as of June 30, 2024. This solid financial position provides Ziff Davis with flexibility for future investments and acquisitions.

An important aspect of Ziff Davis' financial strategy was revealed in the form of a debt restructuring initiative. On July 16, 2024, shortly after the quarter's end, the company executed an exchange transaction involving its convertible notes. Ziff Davis issued $263.1 million in new 3.625% Convertible Notes due 2028 and used the proceeds, along with approximately $135.0 million in cash, to repurchase $400.9 million of its existing 1.75% Convertible Notes due 2026. This move is expected to optimize the company's debt structure and potentially reduce interest expenses in the coming years.

The Digital Media segment, which includes popular brands in technology, shopping, gaming, and entertainment, reported relatively flat revenues of $251.8 million for Q2 2024. While advertising and performance marketing revenue declined, this was partially offset by an increase in subscription and licensing revenue.

The Cybersecurity and Martech segment experienced a more pronounced decline, with revenues decreasing by 5.8% to $69.0 million. This downturn was primarily due to lower revenue from consumer privacy services within the company's cybersecurity business.

Despite these challenges, Ziff Davis reaffirmed its full-year 2024 guidance. The company expects total revenues between $1,411 million and $1,471 million, adjusted EBITDA between $500 million and $521 million, and adjusted diluted EPS between $6.43 and $6.77.

Ziff Davis also continued its share repurchase program, buying back 1.5 million shares during Q2 2024 at an aggregate cost of approximately $84.9 million. This demonstrates the company's confidence in its long-term value and commitment to returning capital to shareholders.

The company's management highlighted several strategic initiatives during the earnings call, including the integration of artificial intelligence (AI) into various products and services. For instance, Ziff Davis has implemented AI-powered features in its Downdetector service, IGN mobile app, and LUCID's voice food logging system.

Industry analysts have noted that Ziff Davis' performance reflects broader trends in the digital media and technology sectors. The challenges in advertising revenue are consistent with what other companies in the space have reported, largely due to ongoing economic uncertainties and shifts in advertiser spending patterns.

The acquisition of CNET and the continued focus on strategic M&A activities suggest that Ziff Davis is positioning itself for long-term growth in the digital media landscape. By expanding its portfolio of recognized brands and diversifying its revenue streams, the company aims to mitigate the impact of short-term market fluctuations.

As the digital media industry continues to evolve, companies like Ziff Davis face both opportunities and challenges. The integration of AI technologies, the pursuit of strategic acquisitions, and the optimization of financial structures are likely to play crucial roles in determining success in this competitive landscape.

In summary, Ziff Davis' Q2 2024 results present a mixed picture

Total revenue decreased by 1.6% year-over-year to $320.8 million

Adjusted EBITDA declined by 9.8% to $96.3 million

Adjusted diluted EPS fell by 7.1% to $1.18

The company reaffirmed its full-year 2024 guidance

Ziff Davis announced the acquisition of CNET for approximately $150 million

A debt restructuring initiative was executed, exchanging $400.9 million of existing notes for $263.1 million of new notes

The company continued its share repurchase program, buying back 1.5 million shares