All right, good morning, everybody. So, I'm Stephen Ju with the UBS U.S. Internet Team. Sitting to my left is Mr. Bret Richter, who serves as the CFO of Ziff Davis. So, Bret, welcome to Scottsdale.
Yeah, thanks for having us.
Yeah, thanks for joining us. So, I guess, starting way at the top, for those who might not be as familiar with Ziff Davis, could you start by giving us a quick overview of the company and provide us with a current sort of state of the union, if you will?
Sure. Well, first and foremost, we always welcome new interested parties to anyone out there who's just learning. Ziff Davis is a company with a long rich history. We could date our brand and our brand name back a century to the old Ziff Davis. Our company was started a couple of decades ago, in a business that was, you know, primarily providing eFax services. And a little over a dozen years ago, started to diversify the business by investing in internet-based digital media and software and subscription data assets. About four years ago, we spun off that legacy business, rebranded our business Ziff Davis, and it was almost a rebirth at the end of 2021. Our business serves communities around the globe with digital media content, software, and database services.
We have structured our business into five divisions, which, as of February of this year, and we'll talk more about it, are now five reportable segments. We have our tech and shopping business, which houses brands like PCMag, CNET, RetailMeNot, serving, you know, primarily consumer communities and facilitating e-commerce and partnering with brands to help market and sell their services. We have a gaming and entertainment business, which has two parts: IGN Entertainment, which is one of the largest gaming, if not the largest gaming online digital gaming community in the world, and Humble Bundle, which, again, facilitates commerce between providers of games, software, books, to that overlapping entertainment, digital entertainment gaming community. We have Everyday Health, which is our health and wellness business.
Everyday Health serves the consumer marketplace, the professional and provider marketplace, and the pregnancy and parenting marketplace to developing highly authoritative content, partnering with brands, primarily pharma, to connect those communities. Excuse me. We have our connectivity business, which, under the brands of Ookla and Ekahau, serve the broadband community on a global basis. Subscription, licensing, data services, primarily serving enterprises, governments, carriers, and an increasingly broader set of participants in the broadband community. And then our cybersecurity and MarTech services, which, again, subscription and licensing business, serving marketing services communities, helping facilitate connectivity between brands and their customers. And cybersecurity, both consumer privacy and small and medium enterprise cybersecurity services. What's common throughout all of our businesses is not only are they digital, internet-based, often global, but we have a very strong economic and profit motive.
We, while we are passionate about the communities we serve, and ensure that our products and services meet the needs of those communities, we do so in a way that we try, and there's a little bit of feedback coming through the mic. Hopefully, that's not too bad on mine. We do it in a way to strive for profit, cash flow, and profitable growth. That financial discipline, that financial model runs through almost everything we do, including our M&A program. So, as a total growth company, not only do we seek to manage our various businesses and assets to achieve growth within their various spheres of influence, but we recycle our cash flow into an M&A program that's been used over the last dozen years to build this company.
Got it. All right. So, I think as you built out this portfolio of assets, I think you've publicly announced, or at least acknowledged that you're working with external advisors to evaluate ways to unlock value. So, I think this includes a potential spinoff of some of the assets, and certainly, I would imagine that inbound interest has definitely picked up, you know, following the now, like what you've articulated as the five-segment disclosure. So, from your seat, as the CFO, what are the key things that you're trying to solve for?
It's a great question. I can make this overly simple and say essentially what we're solving for is what we believe a proper reflection of the intrinsic value of our businesses in the public share price.
Yeah.
We're, you know, again very, very conscious of the pressure the stock's been under over the last couple of years. We're well aware of, you know, some of the concerns and dynamics that might have resulted in that pressure, but in our estimation, we feel there's a gap between the intrinsic value of our businesses and the per share price. One thing that we've done in the last several years to sort of react to that and view it as an opportunity is we've significantly increased the allocation of capital to our stock buyback program.
Yeah.
As opposed to our other opportunities for allocating capital. Capital allocation, again, is one of our kind of core philosophies and core principles. It starts with a sort of a perspective that's only four things that we can do with our investable capital, which we generate through our free cash flow. And when we think about intrinsic value, one of the things that we anchor to and take in view of that is our ability to generate cash. And, the company has consistently done that. So, if we're generating cash, we can reinvest that cash in our businesses, which we believe we do.
There are times where maybe we've pulled back on investment in order to achieve one of our many goals of sort of maintaining margin, maintaining our adjusted EBITDA, maintaining our adjusted earnings, and maintaining our cash flow in a period where we've seen some top-line pressure. But we do believe that we ensure that our businesses get the OpEx and CapEx they need to pursue the opportunities that they believe they have within the communities they serve. We can continue to enhance our balance sheet. That's sort of pillar two in capital allocation. We believe we've done that. We have a significant amount of cash on our balance sheet. We have what we believe to be a very manageable leverage level. We've set a sort of guideline principle for the company of never having over three times gross debt. We're nowhere near that.
Pillar two is our balance sheet. Pillar three is return to capital to shareholders, whether it be, you know, our stock buyback principally, historically back, prior to my participation in the company, the company paid a dividend. Again, this is a common theme the company's had an extended period of time. Pillar four, which we believe is a has been an extraordinary effective tool in that we've used to build our businesses and establish the five divisions that I described before, is M&A.
Yeah.
And in the last couple of years, we've had a higher degree of capital allocation to our stock buyback program than our M&A program. And that reflects a lot of things, including, just, you know, various dynamics in the M&A market at any given point in time. But the share price is still low. We believe there's intrinsic value. So, our primary goal is to unlock that value.
Gotcha. All right. So, there's an underlying sort of conglomerate discount, if you want to put it that way, for Ziff Davis here. So, I guess, you know, and individually, each division should command a higher multiple versus the consolidated, right? So, you know, are there one or two segments that you feel like there's, like, the gap is just outrageous and, you know, intrinsic value versus what the public market's perception is? Is there anything you want to highlight as being particularly egregious?
I think the first thing I respond to in answering that question is we took a major step in February of this year.
Yeah.
Of changing our public reporting, moving from two reportable segments to five reportable segments. Historically, our cyber and MarTech business, given the nature of its subscription and licensing revenue, had been a reportable segment. You could look back several years going really to 2022 post the spinoff of Consensus Cloud Solutions, which occurred in the fall of 2021. Again, just this predates my time, but an example of the company using financial mechanisms to unlock value. We believe that spinoff unlocked a tremendous amount of value.
Yeah.
You know, at the time of the spinoff, Consensus was trading at almost $2 billion. And I don't believe that, the broad community of observers of Ziff Davis had attributed that kind of value.
Yeah.
To Consensus Cloud Solutions at the time. But again, predates my participation in the company, but shows our historic approach. We look at various measures of how our stock may be valued, keeping in mind that it's valued by the market.
Yeah.
We don't trade, you know, we don't trade the stock, others trade the stock. But you can look at implied multiples and whatnot. And when you look at the multiple, whether it be of adjusted EBITDA, whether you look at cash flow, you can, it's relatively low. In fact.
Yeah.
We think very, very low. Within that, there's probably a blend because we have certain businesses that have been performing well, if not very well, and core principles, multiples, you know, among other things, are a function of growth.
Yeah.
So, if you look at certain of our businesses like health and wellness and connectivity that have been exhibiting growth, particularly, you know, strong growth this year, you might imagine that those are implied higher multiples in some of our other businesses. So, your question's a little hard to answer.
Yeah.
In that we don't know what multiple the public market's attributing to each of our businesses, whether they be of our five divisions or businesses within our five divisions. But what we were hoping was that by moving to five reportable segments and that by providing further insight into the financial characteristics of each of our divisions, both their historical financial performance, revenue, growth, their margins, their mix of revenue. So, each of our businesses, you can now see the split between advertising and performance marketing, subscription and licensing, and to a small degree of other revenue in each, understand the financial characteristics of each. Maybe certain of our outside constituents would start to take a view.
Yeah.
On a sum-of-the-parts basis or a similar basis of what each of those parts might be worth, and to the extent a conglomerate discount exists, and we're certainly aware of the concept, whether that discount is too extreme, whether that discount is fair, and we had some of that, and over the course of the last, you know, three quarters or so, new conversations, new interest from various public market participants, but what also happened was, we saw an influx of connections to us by private market participants.
Yeah.
Questioning whether or not we would consider transacting on any of the assets, and our view is that to the extent a large enough gap exists, it's something that we should consider. Frankly, as fiduciaries, it's something we have to consider.
Yeah.
So, we wanted to do that in a formal way. We engaged advisors to respond to some specific interest, and we'll see where the path takes us.
Gotcha. Touched on health and wellness, right? That's now putting together, you know, double-digit revenue growth with high 30s, you know, EBITDA margins. So, you know, what does this business look like in a steady state? I imagine most of that is probably the Everyday Health asset that you just called out earlier.
It's a big. It's certainly a part of it. I think maybe just widen the lens on Everyday, the business overall is branded Everyday Health.
Yeah.
There's also our business within it called Everyday Health, which serves the consumer health community. Everyday Health has a wonderful position in the marketplace because it has the ability to connect, primarily pharma advertisers with the communities they want to connect to.
Yeah.
We connect through various of our underlying brands and services to consumer health, professional health, and the pregnancy and parenting community. Our ability to generate impressions between the communities that are served by our digital properties and pharma advertisers, as well as other advertisers, you know, for instance, you know, in our pregnancy and parenting community, there's a lot of consumer baby strollers.
Yeah.
Thank you. It is not, but pharma health is a big part of it. Pharma commercialization is core to that community. We believe Everyday Health has a very special place in that ecosystem by being able to connect to so many different communities within health, in so many different ways. Within Everyday Health, consumer health, under our Everyday Health brand, but also we have applications that allow consumers to engage in their own health journeys.
Yeah.
And manage their own health outcomes, which is a rapidly accelerating and emerging aspect of the health community. Lose It is a great example of that.
Yeah.
Lose It is a digital subscription weight loss application that helps consumers manage their health journey. Again, subscription revenue.
Yeah.
Versus revenue that relies on payments from the brands that we serve. Within our professional services, we reach providers. We reach providers in many ways. We reach providers with information that is specific, research, authoritative, and relevant to you know the journey they're on, the information they seek. We provide services to those providers through our prime business. We educate them with continuing medical education. We actually connect providers to potential employers and hospitals in the communities they serve. And then our pregnancy and parenting community has two of the most recognizable brands in pregnancy, What to Expect and BabyCenter.com. And you know as anyone's been on that journey, it's seeking information with authoritative content is critical as you try to manage you know that aspect of life.
So, we believe, you know, that the, what our Everyday Health Group is, is well positioned to continue to capitalize on very important trends in the health community. Pharma's connectivity with consumers, pharma's connectivity with providers, authoritative, researched information.
Yeah.
As consumers try to more actively engage with their providers, get better educated, and manage their own journeys.
Yeah. I guess authoritative, that is the key, right? So, I assume, you know, the traffic and impressions and everything else that you're serving, given the revenue growth is going up and to the right, that has been sustained.
You can, I mean, you can see the numbers.
Yeah.
I think we did. One of the things that is also relevant across all of our businesses is diversification.
Yeah.
I think one of the, maybe it's always hard for me to get into a third-party observer's mind, but I think one of the aspects of Ziff Davis that is underappreciated is the diversity by the way that we make revenue.
Yeah.
Of course, it creates a degree of complexity.
Yeah.
Complexity can create a little bit of barrier in terms of understanding certain of the dynamics of the business. You know, whether it be health, whether it be, gaming, our ability to reach and generate impressions in so many different ways.
Yeah.
Both on our owned properties, through our partner sites, through the key partners that our health and wellness business works with, or the Mayo Clinic and the Cleveland Clinic.
Yeah.
We can reach communities in so many different ways that it allows us to not rely on any single source or revenue stream.
Yeah.
To any significant degree.
I think you mentioned IGN and CNET and these other sites. I mean, they were always the most authoritative sites for whether it was gaming content or consumer electronics, review content, et cetera.
It is, it's another core principle of the companies, to the extent we can.
Yeah.
To have those leading brands in any of the spaces that, you know, we operate in. It was one of the principal drivers of our acquisition of CNET.
Yeah.
In 2024 and the ability for us to bring together our PCMag community, not to mention our Mashable community, our Lifehacker community that serves that consumer technology space with CNET. We rebranded each of those, the CNET group, on a go-to-market basis.
Yeah.
Again, we just slapped the one-year anniversary of that acquisition in September. We, being a leading brand in the space, we think ultimately is a winning factor.
Yeah. Gotcha. Switching gears a little bit to cyber, the cybersecurity and the MarTech vertical, or segment, that returned to revenue growth in the third quarter. So, you know, what are the things that need to go right over the next 12 to 18 months, you know, for that segment to consistently deliver, you know, what we hope will be positive growth and margin expansion?
Sure. It's a great question. I think importantly, there's a number of different businesses and brands under cybersecurity and MarTech, and I joined the company in 2021, and it was the source of some of our revenue decline and organic pressure, partly because often when we do an acquisition, we take a view of shrink to grow, where we look at, we acquire a business that maybe has not been performing to an optimal level. Maybe it has not been run with that balance of growth and profit motive that we believe is ingrained in our DNA. Maybe there are certain revenue streams within those businesses that should be sunset, and that's our shrink to grow and whatnot, and maybe there's a change in the go-to-market overall, and we saw some of that in the cybersecurity MarTech business.
Since it's been a reportable segment, going all the way back to 2021, you can see the improvement in the lower rate of decline that the segment reported. In fact, returned to growth in the last quarter. Thank you for pointing that out. Two principal parts of cybersecurity and MarTech, there's cybersecurity. Our VIPRE business serves endpoint, email, security awareness training, cybersecurity solutions to small and medium enterprises around the globe. That's good business.
Yeah.
And is, you know, been performing incrementally well over this period of time. The other part of our cybersecurity business is our consumer privacy business or our VPN business. That business has been performing strongly and much more strongly in 2025 than it had been going back into 2021 and 2022.
Yeah.
A bunch of different dynamics in that business on how we connect to potential customers of our VPN services, whether it be the affiliate marketplace, whether we're selling through the App Store, and we're selling, you know, how do we generate subscriptions. I think it's an important point because, and my guess is we're gonna get to it, one of the overlying questions for Ziff Davis is search and traffic and whatnot. This is a subscription and licensing revenue business.
Yeah.
We make that distinction in almost revenue recognition, subscription and revenue recognized over time. License is often revenue recognized point in time, and we have a different mix. But this is not an advertising revenue business. And, you know, in fact, 40%+ of our overall revenue is subscription and advertising. And I think that's an important aspect and maybe an under misunderstood or misunderappreciated aspect of Ziff Davis. Our MarTech businesses, you know, help facilitate connectivity between brands and the communities that they're marketing to. We do that through email. We do that through SEO. You know, primarily, and, you know, various products and services under that. It's been a mix.
Yeah.
Of different performances of different businesses and brands within that segment over time. In 2024, email was probably our strongest performer, helping brands get into email boxes. This year, there's a little bit of change in some of the algorithms and getting into consumer mailboxes. And we've seen some pressure in that business, just as VPN has been performing better. But overall, with a very small but a little bit smattering of M&A, we've been able to bring that business back to growth. And all along, and again, this goes back to core principles. I think the first question you asked me, margin, profit, cash flow.
Yeah. Gotcha. You did bring up the subscription part of it, and that business is now expected to deliver, I guess, low to mid-single-digit growth this year. So, you know, can you talk about the drivers of that growth, from a business perspective?
Yeah. It's bringing that balance of allowing the brands that are performing well to get the capital they need to, you know, to grow and expand and managing some of the challenges the other brands had. Also within subscription and marketing, we have a couple of brands that we're almost in managed decline. And, you know, it's a really small part of our business, but, you know, to the extent we're not investing in these businesses, we're running them for cash flow.
Right.
And whatnot. There's no secret sauce, you know, to the extent, like an email, there's an impact in a 12-month period, you know, maybe we lap it, maybe, you know, we sort of tweak our business to reposition ourselves in the marketplace to overcome it. But I think the overall mix of revenue in that business has reached more of a steady state.
Yeah.
Versus a high single-digit decline to a mid-single-digit decline to a low single-digit decline, and, you know, it's really just serving those communities.
Okay. Is there any sort of halo benefits that we might wanna talk about? Because you have all of these consumer brands, you have inherent traffic because people are coming to look at that content. So, have you, I assume that you've optimized the different properties so that you are putting traffic through to your subscription properties and where there's a transaction to be had.
It's certainly having been doing this for decades. I'm not sure I've ever seen any business fully optimized.
Yeah. Got it.
There's always opportunity to be better. And, again, that's incumbent upon us as leaders to pursue those.
Yeah.
Our, you know, to the extent that our businesses can work together, you know, they do. You know, we communicate as a leadership team. We look for opportunities. Macro, you know, changes that affect multiple businesses are addressed on a company-wide basis. But often we, you know, and in fact, we're set up this way in a highly decentralized way. Our brands, our businesses are set up to pursue their opportunities sort of independently of sort of a corporate mandate.
Yeah.
We think that decentralizing principle is powerful and frankly overall important to our overall enterprise to that end. It goes back maybe just connecting to one of your other questions.
Mm-hmm.
Each of our five divisions has a president. Each of our five divisions has finance leadership. Each of our five divisions has technologists. They are set up to operate independently.
Right.
To the extent though, and there's a lot of changes, you know, with AI and there's a lot of changes in the search ecosystem, macro patterns we address, you know, globally.
Yeah. So let's talk about how traffic patterns are switching around in the internet. I think probably every five years, decade, we have to think about traffic switch and consumers choosing to go to different places to start their journey, right? So we've gone from Google to search, and now we have to think about another mode, with ChatGPT and the LLM. So I think, on a third quarter earnings call, you talked about, I think, 35% of the revenue is, you know, web traffic dependent, and roughly half of that is coming from search. So I don't know, that's 17%-18% of total revenue. So should we expect that percentage to come, continue to come down over time? It seems like it should, but, you know.
It's a hard question to answer for two reasons. One, I think there are multiple dynamics that underlie that. The first is, you know, we start with a business that, as you noted, is not entirely search dependent. We are not a programmatic advertising business. We are not just monetizing impressions in the programmatic marketplace. In fact, 40%+ of our business is subscription and licensing. Another handful of percentage is what we call other revenue.
Yeah.
which, you know, are sort of discrete transactions, including in the case of our connectivity business, some hardware sales. And within our 50%+ of our revenue, what we call advertising and performance marketing is very much a mix, you know, including, you know, we have a gift card business. We have affiliate commerce businesses. We generate revenue direct from brands and providers by connecting them to members of the health provider community through continuing medical education. And you appropriately cite the figures that we cited to try to scale the relationship of Ziff Davis's overall revenue.
Mm-hmm.
To what has become an important, but, you know, emerging dialogue in, you know, the digital media, the digital content marketplace. Ultimately, what that percentage ends up is will depend not only on the performance of the portions of our business that are not exposed.
Yeah.
To that, as well as the proportions of our business that, as you noted, do relate to search, but also our M&A program and how that business changes over time.
Yeah.
I. Connectivity of various questions that we've said today, to the extent we execute a transaction.
Yeah.
On one of our businesses, that percentage can change significantly.
Yeah.
Depending on one way or another, depending on which business it is. So that's hard to measure. I think the important message from our point, and by no means do we dismiss the unknown that's associated with changes in the search marketplace. And by the way, the search marketplace, as you rightfully point out, has been changing for decades.
Yeah.
And in fact, one of the things that we deal with is not necessarily, you know, the AI portion, but just the constant change in the Google search algorithm.
Yeah.
Which seems to change much more rapidly in our current period of time than it has been historically, which can disrupt businesses positively or negatively at every given update. So what we wanna emphasize is we believe this is the size of that exposure relative to our enterprise today.
Yeah.
And it goes back to the extent that risk is manifest in the view of a multiple, what is the appropriate balance of that risk relative to, our overall enterprise? And is that overall multiple, the right multiple, considering all the other factors?
Got it. You touched on this a little bit earlier in terms of capital allocation and the discipline there. You've been very active in the buybacks.
Mm-hmm.
I think you repurchased about 3.6 million shares year to date, and I think you've deployed about 80% of 85% of your free cash flow.
Year to date.
Year to date. Yeah. So, and you also closed seven acquisitions, so.
We did.
You, you're pretty busy.
Mm-hmm.
So, you know, how are you weighing, you know, the incremental dollars, you know, whether that goes to buybacks versus M&A? And I guess, you know, heading into next year, and I guess in this environment, you know, are you seeing an increased amount of assets, I guess, come into market and I guess anticipating getting more busy business?
In the four plus years, you know, almost four years I didn't quite cross over yet that I've been with Ziff Davis, there's never been sort of a dearth of opportunity.
Yeah.
We use the metaphor of the funnel for as it relates to M&A. The top of the funnel always seems to be full. The challenge in any M&A transaction is, can you get through the bottom of the funnel? and while there's a lot of details that go into there, ultimately it's just price between buyer and seller.
Yeah.
And we're disciplined buyers. There's no more important success factor in M&A than price. And, you know, you could pay relatively high prices for relatively great assets. You could pay lower prices for good assets. And we do both because really what we're trying to do is enhance the ability of our existing businesses to serve the communities that they're seeking to serve. We did seven acquisitions this year. None of them are particularly large.
Yeah.
Some of them are actually quite small, and therefore we've actually deployed less than $70 million of capital into M&A in 2025 versus the more than $100 million of capital that we deployed for stock buybacks. It's a balance.
Yeah.
It goes back to the first question or the second question I think you asked me. What are we trying to achieve? Increase in per share value.
Yeah. Got it. All right. So I think we are almost out of time, but one last question here. We're sitting here 12 months from now, you know, December of 2026, and we're sitting back here at the conference. So what do you think we're gonna be talking about in terms of what you've been able to accomplish over the trailing 12 months?
I wish I knew.
Yeah.
No, but what I do know is what we are out seeking to do. What we're seeking to do is, create value for our shareholders through, you know, a disciplined approach to, serving the important communities we serve. To the extent that we can achieve that through transactional activity, whether it be deploying our own capital or highlighting value of a certain number of assets, we will do that. But ultimately, we create value by creating value within our businesses.
Yes.
That's what we're seeking to do. Improve performance, you know, and allow our businesses to achieve their respective goals.
Gotcha. We'll leave it there, Bret. Thank you very much for joining us.
Thank you for having me.
All right.