Ziff Davis, Inc.

will be flat, and more importantly, enter 2025 with strong momentum. This is important for the company, as this segment, which historically was run purely for profitability, is now positioned to grow organically and continue to deliver adjusted EBITDA margins in the mid-30s. We think the long-term shareholder value implications should be compelling, as we expect to achieve Rule of 40 growth in very valuable software categories like cybersecurity and marketing technology. Our cybersecurity group drove the growth in the quarter, with strength in Vypr's email security and endpoint EDR offerings and continuing improvements in VPN, which has been a material drag on the business for some time. As I said in the last quarter, we believe VPN will grow in Q4 of this year. Within our MarTech group, our email business continued a strong performance with double digit revenue growth in Q1. Our growth in email was driven by multiple factors, including strong customer retention, growing usage, and the go-to-market expansion I talked about in the last quarter. The last two years have been unusually quiet for us on the M&A front. However, the lack of deal volume should not be viewed as anything but an anomaly. Our M&A machine is very much active and focused. We maintain an active pipeline of off-market opportunities that are unique to Ziff Davis, and we believe we remain one of the first phone calls when business owners in our sectors consider a sale. Over the last two years, we have reviewed many opportunities, but we are very disciplined with the company's capital. We never do deals for the sake of doing deals, and as I look back on the many opportunities we have passed on, I have no regrets. As we look forward, we will continue to prioritize investments in the most durable, high-quality assets in our sectors. and we will seek to embrace the situations where we believe we have a unique ability to unlock value. We will not shy away from situations where we see an opportunity to turn around a challenged asset. At the same time, we will lean into acquisitions that represent growth at a reasonable price. While M&A remains our priority when it comes to capital allocation, We are conscious of the other options we have, including share buybacks. At our current price per share, we believe Ziff Davis is one of the most attractive buying opportunities in the market. And as a result, we expect to continue to pursue buybacks of our stock to take advantage of the dislocation between our trading price and the intrinsic value of our portfolio. Now let me shift to our AI enablement work. Throughout the organization, we continue to harness the power of artificial intelligence to develop new product experiences and create efficiencies across our operations. Moz launched two generative AI-powered features, domain search theme and keyword search intent. These features were designed to rapidly decode a website's core themes and strategic keywords providing SEO professionals with instant insights into a site's purpose and competitive positioning. Together, these tools should streamline SEO workflows, turning routine research into efficient, strategic operations that deliver deeper insights faster. Across some of our health properties, we have implemented AI-powered search functionality that should enhance site utility. This advanced search technology should not only improve the accuracy and relevance of search results, but also simplify the process for users to locate the information and opportunities they seek. By adeptly interpreting user queries, our AI powered search was designed to deliver a more effective and satisfying search experience, thereby boosting user engagement and experience on these platforms. Ekahau has implemented a leading AI-powered customer support assistant that enhances support by automating our ticket creation based on user-defined workflows. The system is designed to intelligently search for and suggest relevant documentation to resolve user issues swiftly. If issues persist, it can transition to generating support tickets, significantly streamlining the support process and enhancing user satisfaction. Our optimism about the transformative potential of AI across CIFF Davis remains steadfast. At the same time, we maintain our firm stance that AI companies must fully respect and adhere to our copyrights. This is essential to ensuring a mutually beneficial relationship between AI companies and publishers. In this regard, we are actively exploring licensing frameworks that effectively manage the utilization of publishers' content. Additionally, we are monitoring the volume and frequency of our content being scraped. This data will help facilitate licensing deals and ensure fair compensation for our copyrighted material. Now let me provide you with an update on our ESG efforts. In April, we released Ziff-Davis' 2023 ESG report, and separately Ziff-Davis' 2023 DEI report, both of which can be found on our website. The ESG report includes findings from our most recent greenhouse gas inventory, and I'm pleased to report that our 2023 Scope 1, 2, and 3 combined emissions represent a 38% decrease from 2022. This is substantial year-over-year progress and confirms that we are well on our way to meeting our validated science-based emissions reduction targets, which effectively commit us to cutting our emissions by 50% by 2030. The report also details how we've leveraged our platforms to help implement positive change in our communities and discusses our extensive data, privacy, security, and corporate governance practices. The DEI report provides an update on company demographics and our ongoing efforts to champion representation across Ziff Davis. Of note, in 2023, Ziff Davis increased the percentage of both managers and corporate leadership roles held by people of color, and we increased the percentage of senior leadership roles held by women as compared to the prior year. The report also includes the latest programs, policies, and actions we are taking to foster a workplace in which all can thrive. Needless to say, I'm incredibly proud of the work Zip Davis has done in this area, and I hope you'll take some time to review the reports. With that, let me hand the call back to Brett.

Thank you, Vivek. Let's discuss our financial results. Our earnings release reflects both our GAAP and adjusted financial results for Q1 2024. My commentary will primarily relate to our Q1 2024 adjusted financial results and the comparison to prior periods. Please see slide four for the summary of our financial results. Q1 2024 revenues were $314.5 million. as compared with revenue of $307.1 million for the prior year period, reflecting growth of 2.4%. Q1 2024 adjusted EBITDA was $100.8 million, as compared with $94.3 million for the prior year period, reflecting growth of 6.8%. Our adjusted EBITDA margin for the quarter was 32%, a 130 basis point improvement as compared with Q1 2023. We reported first quarter adjusted diluted EPS of $1.27, an increase of 15.5% as compared with the prior year period. Our Q1 performance reflects revenue growth in five of our verticals, technology, Gaming and entertainment, health and wellness, connectivity, and cybersecurity all contributed to the quarter's year-over-year revenue increase. Martech was essentially flat year-over-year. As Vivek noted, our core shopping business experienced a revenue decline, which was largely offset by the addition of TDS's results from the date of its acquisition. Slides 5 and 6 reflect performance summaries for our two primary sources of revenue. advertising and performance marketing, and subscription and licensing. Slide 5 reflects the company's advertising and performance marketing revenue results. Note that these figures include the TDS acquisition. Q1 2024 advertising and performance marketing revenue was flat as compared with the prior year period, while trailing 12-month advertising and performance marketing revenue declined by 3.5%. Our net advertising revenue retention, an annual trailing 12-month statistic, was 91.6% for Q1 2024, which is the highest level seen since Q4 2022. In the first quarter, Ziff Davis had more than 1,600 advertisers with an average quarterly revenue per advertiser of more than $95,000. This reflects fewer customers at a higher average revenue per customer as compared with the prior year period. Slide 6 depicts our subscription and licensing revenue. Q1 2024 subscription and licensing revenue grew 4.8% as compared with the prior year period, reflecting growth at Ookla, Viper, Lose It, Campaigner, and Humble Bundle, among others. Subscription and licensing revenue grew 3.2% during the last 12 months. As Vivek said, We very much value our subscription and licensing revenue for the diversification, predictability, and growth it represents. The table on the bottom of slide six includes subscription and licensing metrics for the last eight quarters. Sequentially, total subscription and licensing customers increased primarily reflecting growth in Lose It and Humble Bundle subscriptions. Our average quarterly revenue per subscriber was $44.55, essentially flat to the prior quarter. Our overall churn rate increased by 23 basis points from Q4 2023. This primarily reflects the timing and mix of revenues at UCLA. Q1 2024 other revenues increased by 5.7% year-over-year. Slide 7 provides quarterly organic and total revenue growth rates for the last eight quarters. The company includes revenue from an acquired business within the definition of organic revenue for the first month in which the company can compare that full month in the current year against the corresponding full month under its ownership in the prior year. Similarly, the company excludes revenue from divested assets beginning with the quarter of the disposal of the asset. as well as from the prior year's comparable period. In Q1, 2024, we divested two small businesses in our shopping vertical that serve the e-commerce marketplace in France, Maradou and Popeo. The results of these businesses are included in our Q1, 2024 financial results through the date of the divestiture. However, per the definition, The related revenue in 2023 and 2024 is excluded from the Q1 2024 organic growth calculation. As depicted on the slide, first quarter 2024 organic growth was flat, which represents an improvement as compared with the organic revenue decline in Q1 2023. Technology, gaming and entertainment, health and wellness, connectivity, and cybersecurity all generated organic growth for the quarter. Please refer to slide eight as we discuss our balance sheet. As of the end of Q1, 2024, we had $735 million of cash and cash equivalents and $156 million of short and long-term investments. We also have significant leverage capacity on both a gross and net leverage basis. As of the end of the first quarter, gross leverage was 2.1 times trailing 12 months adjusted EBITDA and our net leverage was 0.6 times and 0.2 times, including the value of our financial investments. The cash balance is net of the cash used for the acquisition of TDS. The TDS acquisition also included the acquisition of a negative net working capital position, which was factored into the net cash consideration paid at closing. Our strong balance sheet continues to be the foundation of our capital allocation strategy. With the acquisition of TDS in the first quarter, we have returned to using our balance sheet to support M&A investments. We will also continue to consider other capital allocation alternatives, and while we did not repurchase stock during the first quarter, we plan to resume stock repurchases during the second quarter. Turning to slide 10. We are reaffirming the fiscal year 2024 guidance range that we presented in February 2024. We expect Q2 to represent revenue growth similar to that of Q1 with an acceleration in revenue growth in Q3 and Q4. Q2 adjusted EBITDA margins are expected to be a bit below Q1 2024. reflecting our plan to continue to invest in our businesses to support the balance of their 2024 plans and certain other factors. Importantly, we plan to continue to focus on the creation of long-term shareholder value and not run the business to achieve short-term quarterly results. Following our business outlook slides are our supplemental materials, including reconciliation statements for the various non-GAAP measures to their nearest GAAP equivalent, Slide 14 includes a reconciliation of free cash flow. Q1 2024 free cash flow was $47.4 million. However, this figure includes a negative free cash flow of $39.1 million associated with TDS. As I mentioned previously, as an issuer of gift cards, TDS maintains a large working capital position. It also experiences seasonality. And while Q1 reflects significant working capital usage at TDS, we expect TDS to be a contributor to free cash flow on an annual basis. Excluding the impact of TDS, Q1 free cash flow was $86.5 million. Note that our semi-annual cash interest payments on our outstanding debt occur in Q2 and Q4, which will impact Q2 free cash flow. In addition, we plan to make significant cash tax payments in Q2 2024. Overall, we believe that Q1 2024, which reflects growth in revenue, adjusted EBITDA, and adjusted diluted EPS, was a solid start to 2024. And while we expect some softness in the second quarter, we have reaffirmed our guidance, which implies growth in all three of these metrics for the full year. Q1 also reflects the completion of our first acquisition of 2024. And we have maintained a very strong liquidity position to support our continued focus on M&A, as well as other capital allocation alternatives, including stock repurchases. We look forward to the rest of 2024. With that, I would now ask the operator to rejoin us to instruct you on how to queue for questions.

Thank you, we will now be conducting a question and answer session. In the interest of time, we ask that you please limit yourself to one question. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we begin. And the first question today is coming from Sham Patil from SIG. Sham, your line is live.