Ziff Davis, Inc. (NASDAQ:ZD) is a vertically focused digital media and internet company with a diverse portfolio of brands spanning technology, shopping, gaming and entertainment, connectivity, health and wellness, cybersecurity, and martech. The company's impressive financial performance in 2023, marked by annual revenue of $1,364,028,000 and net income of $41,503,000, underscores its ability to navigate a challenging macroeconomic environment.

Business Overview

Ziff Davis' business model is anchored by two primary revenue streams: digital media and cybersecurity/martech. The digital media segment specializes in technology, shopping, gaming and entertainment, connectivity, and healthcare, offering content, tools, and services to consumers and businesses. The cybersecurity and martech segment provides cloud-based subscription and license services to consumers and businesses, including cybersecurity, privacy, and marketing technology.

Financials

In the first quarter of 2024, Ziff Davis reported revenues of $314,485,000, a 2.4% increase compared to the prior-year period. This growth was driven by a 4.8% increase in subscription and licensing revenue, which now accounts for over 42% of the company's total revenue on a trailing 12-month basis. The company's advertising and performance marketing revenue remained flat year-over-year. Ziff Davis' adjusted EBITDA for the quarter was $100,800,000, representing a 6.8% increase compared to the prior-year period, and the adjusted EBITDA margin expanded by 130 basis points to 32%.

The company's digital media segment generated $239,052,000 in revenue during the first quarter, a 2.1% increase compared to the prior-year period. This growth was primarily driven by $7,800,000 in incremental revenue from businesses acquired in 2023 and 2024, partially offset by organic declines in other areas. The technology, gaming and entertainment, health and wellness, connectivity, and cybersecurity verticals all contributed to the segment's year-over-year revenue increase, while the shopping vertical experienced a mid-single-digit decline.

Ziff Davis' cybersecurity and martech segment reported $75,452,000 in revenue, a 3.3% increase compared to the prior-year period. This growth was entirely organic, driven by strength in the company's email security and endpoint EDR offerings, as well as continued improvements in its VPN business, which had been a drag on the segment's performance.

Liquidity

The company's strong balance sheet, with $735,000,000 in cash and cash equivalents and $156,000,000 in short- and long-term investments as of March 31, 2024, provides ample flexibility for strategic acquisitions and other capital allocation initiatives. Ziff Davis' gross leverage ratio stood at 2.1x trailing 12-month adjusted EBITDA, and its net leverage ratio was 0.6x, or 0.2x including the value of its financial investments.

Outlook

Looking ahead, Ziff Davis has reaffirmed its fiscal year 2024 guidance, which implies growth in revenue, adjusted EBITDA, and adjusted diluted EPS for the full year. The company expects revenue growth in the second quarter to be similar to the first quarter, with an acceleration in growth during the third and fourth quarters. While the second quarter is expected to see some margin pressure as the company continues to invest in its businesses, Ziff Davis remains focused on the creation of long-term shareholder value rather than short-term quarterly results.

Conclusion

The company's diversified business model, strong financial position, and strategic investments in high-growth areas like cybersecurity and martech position Ziff Davis well for continued success. As the company navigates the evolving digital media landscape and explores new opportunities for expansion, investors can look forward to Ziff Davis' continued transformation into a leading vertically focused digital media and internet company.