Ziff Davis, Inc.

Good day, ladies and gentlemen, and welcome to the Ziff Davis fourth quarter and year-end 2024 earnings conference call. My name is Paul and I will be the operator assisting you today. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. On this call will be Vivek Shah, CEO of Ziff Davis, and Brett Richter, Chief Financial Officer of Ziff Davis. I will now turn the call over to Brett Richter, Chief Financial Officer of Ziff Davis. Thank you. You may begin.

Thank you. Good morning, everyone, and welcome to the Ziff Davis Investor Conference call for Q4 and fiscal year 2024. As the operator mentioned, I am Brett Richter, Chief Financial Officer of Ziff Davis, and I'm joined by our Chief Executive Officer, Vivek Shah. A presentation is available for today's call. A copy of this presentation is available on our website. When you launch the webcast, there is a button on the viewer on the right-hand side which will allow you to expand the slides. If you have not received a copy of the press release, you may access it through our corporate website at www.ziffdavis.com. In addition, you'll be able to access the webcast from this site. After completing the formal presentation, we'll be conducting a Q&A. The operator will instruct you at that time regarding the procedures for asking questions. In addition, you can email questions to investor at ZiffDavis.com. Before we begin our prepared remarks, allow me to read the safe harbor language. As you know, this call and the webcast will include forward-looking statements. Such statements may involve risks and uncertainties that would cause actual results to differ materially from the anticipated results. Some of those risks and uncertainties include, but are not limited to, the risk factors that we have disclosed in our SEC filings, including our 10-K filings, recent 10-Q filings, various proxy statements in 8-K filings, as well as additional risk factors that we have included as part of the slideshow for the webcast. We refer you to discussions in those documents regarding safe harbor language, as well as forward-looking statements. In addition, following our business outlook slides are our supplemental materials. including reconciliation statements for non-GAAP measures to the nearest GAAP equivalent. Now let me turn the call over to Vivek for his remarks.

Thank you, Brett, and good morning, everyone. While we came up a bit short in Q4 against our admittedly sanguine estimates, we nonetheless grew our revenues by 5.9% and our adjusted diluted EPS by 10.7% in the quarter. Against those measures, it was our best revenue growth quarter of the year, and our highest level of free cash flow generation since the 2021 spinoff of ConsenSys. We just came up a touch short in a couple of parts of the business, adding up to roughly $10 million of revenues falling out of a quarter with nearly $413 million in total revenues. It's very unusual for us to miss our own estimates even slightly and very much view it as an anomaly. We were expecting some upside in our Humble Games portfolio as well as some bookings in our connectivity business, which simply did not materialize in Q4. But none of it diminishes our outlook for 2025. We plan to build on our 2024 full-year results, which included our highest revenues since 2021. Importantly, 2024 represented a return to bottom-line growth and outstanding free cash flow, which have long been the priorities of the company. Our outlook for 2025 reflects an acceleration of our revenue growth from 2024's 2.8% to a midpoint for 2025 of 5% and adjusted EBITDA growth improvement from 2.3% to 6%. We believe there is a meaningful disconnect between the current market value of the company and our strong underlying fundamentals. We're committed to addressing this. And we are hopeful that the new segment reporting structure that we are implementing will aid investors in gaining a better understanding and appreciation of the intrinsic value inherent in our business. We are transitioning from two to five reportable segments. And we believe this reporting structure better aligns with our strategy and will provide investors with greater transparency into the performance of our key businesses, specifically we are disaggregating the digital media segment into four reportable segments, technology and shopping, gaming and entertainment, health and wellness, and connectivity. The cybersecurity and MarTech segment will remain the same. The tech and shopping segment includes brands such as CNET, PCMag, Spiceworks, and RetailMeNot. The gaming and entertainment segment comprises IGN Entertainment and its subsidiary brands, including IGN, Gamer Network, and Humble Bundle. The health and wellness segment comprises the Everyday Health Group and its subsidiary brands, including Everyday Health, Baby Center, MedPage, and Lose It. The connectivity segment comprises Ookla and its subsidiary brands, including Speed Test, Down Detector, Root Metrics, and Echo Help. We have provided five years of historical revenue by segment. It's worthwhile spending some time to understand some of the trends and dynamics of each of these segments. Starting with tech and shopping, you can see a major spike in revenues in 2021 of 55%, which was a combination of M&A and a meaningful COVID bump. This segment, far more than any other, benefited from people staying home and shopping online. 2022 and 2023 were very challenging with tough comparisons and a rapidly deteriorating B2B lead gen business. Overall, the segment declined 25% over that two year period. The segment returned to nearly 10% growth in 2024 with ad growth in the tech category and the addition of CNET offset by some continued shopping and B2B headwinds. We believe this segment will be our strongest grower in 2025, especially on the bottom line with margin expansion in CNET, continued growth of our other consumer tech brands, and the focus on profitability in B2B. Gaming and entertainment has been a mid single digit grower for a number of years. While it's our smallest segment, It has one of the more balanced monetization models and has a great deal of potential to scale, particularly through acquisitions. IGN Entertainment is a leading brand in a growing category. The next two segments, health and wellness and connectivity, have long been our fastest growers. And while each slowed to nominal growth in 2024, we have many reasons to believe they will return to their more robust growth rates. Health and Wellness has so many exciting elements, including its Trusted Care Access Portfolio, which is the leading hospital media network, its fast-growing Lose It AI-driven weight loss and nutrition tracking app, and a pharma ad business that just experienced a promising 2025 upfront buying season and that should benefit from a strong drug pipeline. Connectivity is our most exciting business. and has been fully retooled in 2024 with an ambition to be a larger scaled enterprise. We undertook a major reorganization, which involved combining our Ookla and Ekahau business units to set ourselves up a long-term growth. We were willing to sacrifice near-term growth for long-term gains as we see this business as being the most valuable in our portfolio. We're also de-prioritizing the ad business within connectivity as well as some other non-core revenue streams to focus entirely on subscriptions and data. While there's been no reporting changes to the cybersecurity and MarTech segment, it is worth pointing out that while revenues declined almost 3% in 2024, this was an improvement over the almost 7% decline in 2023, and we maintained a 35% EBITDA margin through disciplined expense management. We believe this segment will return to growth in the second half of 2025. It was the only segment with declining revenue in 2024. And if we achieve our expectations in 2025, then we will have all five of our segments growing for the first time in a few years. Turning to our AI initiatives. Some of our innovations are receiving market recognition. Our AI-powered features in LoseIt particularly the voice and photo logging capabilities, were recently featured on CNN. The article specifically highlighted how our AI technology is transforming nutrition tracking, making it as simple as taking a photo of your meal. In addition, the AI job fit analyzer deployed by Health eCareers was recently showcased as an AWS case study. Healthy Careers has reported an 18% increase in engagement with their generative AI-powered job search functionality since Q3 2024, and they've seen a 30% uplift in job applications among users who engage with the AI tools. While there's been industry discussion about AI's potential impact on search traffic, I want to emphasize a few key points. Our business model is diversified well beyond traditional traffic monetization with traffic dependent ad revenues representing roughly 35% of our overall revenues. Second, within our traffic, search represents roughly 40% of our visits. Third, with respect to our search referrals, AI's presence remains limited. AI overviews results are present in just 12% of our top queries. Lastly, our analysis of year-over-year click-through rates, specifically comparing queries with similar positions that now include AI overviews, shows no material aggregate impact on performance. Given all of the attention and dialogue relating to DEI, I think it's important to reiterate that we view our programs and practices as being entirely value created. But because so much of the dialogue seems to suggest that DEI practices are about exclusion and unfair preferences, it's important at this moment that we be very clear about what DEI means at CIF Davis. At our company, DEI has always been about fairness, equal opportunity, and belonging. DEI is about finding the best talent, regardless of background or circumstances, and ensuring that all can thrive here. Our work is knowledge work, and DEI is about building our intellectual capital. We're also in the audience business, and therefore it's imperative that we maximize our appeal and reach across a diverse landscape. Simply put, DEI at SIF Davis helps us to drive the best possible business outcomes. With that, let me hand the call back to Brett.