Ziff Davis, Inc. (NASDAQ: ZD) today reported preliminary unaudited financial results for the fourth quarter and year ended December 31, 2021.

“We had a strong finish to an exceptional year in which we posted fantastic results and executed on a transformational spin-off," said Vivek Shah, CEO of Ziff Davis. "We are excited by our growth prospects and the opportunities to continue to deploy our financial and human capital to generate value for our stakeholders."

FOURTH QUARTER 2021 HIGHLIGHTS

On October 7, 2021, Ziff Davis completed the separation of the cloud fax business to Consensus Cloud Solutions, Inc. (“Consensus”). As the spin-off occurred during the fourth quarter of 2021, Ziff Davis has classified Consensus as a discontinued operation in its financial statements for all periods. Results in this press release represent continuing operations, except for the Statement of Cash Flows, net cash provided by operating activities and free cash flow, which are on a combined continuing and discontinued operations basis.

Q4 2021 quarterly revenues increased 6.4% to $408.6 million compared to $384.1 million for Q4 2020. On a pro-forma⁽⁶⁾ basis, Q4 2021 quarterly revenues increased 10.4% to $408.6 million as compared to $370.1 million for Q4 2020.

GAAP net income per diluted share from continuing operations⁽³⁾ increased to $7.62 in Q4 2021 compared to $0.91 for Q4 2020. The earnings increase was primarily due to an unrealized gain on investment of $290 million to record our investment in Consensus ($6.03 per share, after tax).

Adjusted non-GAAP net income per diluted share from continuing operations⁽³⁾⁽⁴⁾ for the quarter decreased (3.1)% to $2.17 compared to $2.24 for Q4 2020. On a pro-forma⁽⁶⁾ basis, Adjusted non-GAAP net income per diluted share from continuing operations⁽³⁾⁽⁴⁾ for the quarter increased 0.5% to $2.17 as compared to $2.16 for Q4 2020.

GAAP net income from continuing operations increased to $370.0 million compared to $41.7 million for Q4 2020 primarily due to an unrealized gain on investment of $290 million to record our investment in Consensus.

Adjusted non-GAAP net income from continuing operations increased by 4.4% to $104.3 million as compared to $99.9 million for Q4 2020. On a pro-forma⁽⁶⁾ basis, Adjusted non-GAAP net income from continuing operations increased by 8.4% to $104.3 million as compared to $96.2 million for Q4 2020.

Adjusted EBITDA⁽⁵⁾ for the quarter increased 2.9% to $161.6 million compared to $157.1 million for Q4 2020. On a pro-forma⁽⁶⁾ basis, Adjusted EBITDA⁽⁵⁾ for the quarter increased 6.8% to $161.6 million compared to $151.3 million for Q4 2020.

Net cash provided by operating activities from continuing and discontinued operations was $85.3 million during Q4 2021 compared to $124.1 in Q4 2020. Q4 2021 free cash flow from continuing and discontinued operations⁽²⁾ was $59.1 million during Q4 2021 compared to $102.9 million in Q4 2020.

The company ended the quarter with approximately $1.05 billion in cash, cash equivalents, and investments after deploying approximately $29.7 million during the quarter for current and prior year acquisitions.

Key financial results for Q4 2021 versus Q4 2020 are set forth in the following table (in millions, except per share amounts). Reconciliations of Adjusted non-GAAP earnings per diluted share, Adjusted EBITDA and free cash flow to their nearest comparable GAAP financial measures are attached to this Press Release.

The following table reflects Actual and Pro Forma Results from Continuing Operations, except for Cash Provided by Operating Activities and Free Cash Flow which is on a combined basis of continuing operations and discontinued operations, for the fourth quarter of 2021 and 2020 (in millions, except per share amounts). Pro-Forma Results from Continuing Operations below excludes the operating results from Voice assets in Australia, New Zealand, and the United Kingdom that were sold in 2020 and 2021, respectively, and the Company’s B2B Backup business that was sold during the third quarter of 2021.

FULL YEAR 2021 HIGHLIGHTS

2021 revenues increased 22.3% to a record of $1.42 billion compared to $1.16 billion for 2020. On a pro-forma⁽⁶⁾ basis, 2021 revenues increased 26.8% to $1.38 billion as compared to $1.09 billion for 2020.

GAAP net income per diluted share⁽³⁾ from continuing operations increased to $8.09 in 2021 compared to $0.58 for 2020. The net income increase was primarily due to an unrealized gain on investment of $290 million to record our investment in Consensus. ($6.24 per share, after tax).

Adjusted non-GAAP net income per diluted share from continuing operations⁽³⁾⁽⁴⁾ for the year increased by 23.4% to $6.33 compared to $5.13 for 2020. On a pro-forma⁽⁶⁾ basis, Adjusted non-GAAP net income per diluted share from continuing operations⁽³⁾⁽⁴⁾ for the year increased 31.4% to $6.11 as compared to $4.65 for 2020.

GAAP net income from continuing operations increased to $387.5 million compared to $27.4 million for 2020 primarily due to an unrealized gain on investment of $290 million to record our investment in Consensus.

Adjusted non-GAAP net income from continuing operations increased by 22.5% to $292.7 million as compared to $238.9 million for 2020. On a pro-forma⁽⁶⁾ basis, Adjusted non-GAAP net income from continuing operations increased by 30.5% to $282.5 million as compared to $216.4 million for 2020.

Adjusted EBITDA⁽⁵⁾ for the year increased 23.3% to $498.7 million compared to $404.5 million for 2020. On a pro-forma⁽⁶⁾ basis, Adjusted EBITDA⁽⁵⁾ for the year increased 28.3% to $484.6 million compared to $377.7 million for 2020.

Net cash provided by operating activities from continuing and discontinued operations was $515.6 million during 2021 compared to $480.1 million in 2020. Free cash flow from continuing and discontinued operations⁽²⁾ was $402.5 million during 2021 compared to $407.7 million in 2020.

The following table reflects Actual and Pro-Forma Results from Continuing Operations, except for Cash Provided by Operating Activities and Free Cash Flow which is on a combined basis of continuing operations and discontinued operations for the twelve months ended December 31, 2021 and 2020 (in millions, except per share amounts). Pro-Forma Results from Continuing Operations below excludes the operating results from Voice assets in Australia, New Zealand, and the United Kingdom that were sold in 2020 and 2021, respectively, and the Company’s B2B Backup business that was sold during the third quarter of 2021.

ZIFF DAVIS GUIDANCE

The Company’s estimates for fiscal year 2022 are as follows (in millions, except per share amounts):

Adjusted non-GAAP net income per diluted share for 2022 excludes share-based compensation of between $24 million and $28 million, amortization of acquired intangibles and the impact of any currently unanticipated items, in each case net of tax.

It is anticipated that the non-GAAP effective tax rate for 2022 (exclusive of the release of reserves for uncertain tax positions) will be between 23.5% and 25%.

The Company has not reconciled the non-GAAP Business Outlook for 2022 Adjusted EBITDA or Adjusted non-GAAP Diluted EPS and tax rate information included in this release to the most directly comparable GAAP measure because this cannot be done without unreasonable effort due to the variability with respect to costs related to acquisitions and taxation, which are potential adjustments to future earnings. We expect the variability of these items to have a potentially unpredictable and significant impact on our future GAAP financial results.

About Ziff Davis

Ziff Davis, Inc. (NASDAQ: ZD) is a vertically focused digital media and internet company whose portfolio includes leading brands in technology, entertainment, shopping, health, cybersecurity, and martech. For more information, visit www.ziffdavis.com.

Preliminary Unaudited Results: These fourth quarter and full year 2020 and 2021 results are preliminary, unaudited, and subject to adjustments. In particular, due to the complexity of the October 7, 2021 spin-off of Consensus and the related transactions (including the debt-for-debt exchange), the presentation of the transaction's impact on the Company's financial statements (including the presentation of continuing and discontinued operations and the size of the gain associated with the retention of the 19.9% stake in Consensus) is still being finalized. Any change to the impact of the unrealized gain on investment of $290 million associated with the retention of the 19.9% stake in Consensus could be material to our GAAP net income from continuing operations. As a result of the foregoing, certain information provided herein is subject to change.

“Safe Harbor” Statement Under the Private Securities Litigation Reform Act of 1995: Certain statements in this Press Release are “forward-looking statements” within the meaning of The Private Securities Litigation Reform Act of 1995, including those contained in Vivek Shah’s quote and the “Business Outlook” portion regarding the Company’s expected fiscal 2022 financial performance. These forward-looking statements are based on management’s current expectations or beliefs and are subject to numerous assumptions, risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. These factors and uncertainties include, among other items: the Company’s ability to grow revenues, profitability and cash flows; the Company’s ability to identify, close and successfully transition acquisitions; subscriber growth and retention; variability of the Company’s revenue based on changing conditions in particular industries and the economy generally; protection of the Company’s proprietary technology or infringement by the Company of intellectual property of others; the risk of adverse changes in the U.S. or international regulatory environments, including but not limited to the imposition or increase of taxes or regulatory-related fees; and the numerous other factors set forth in Ziff Davis’ (formerly J2 Global, Inc.) filings with the Securities and Exchange Commission (“SEC”). For a more detailed description of the risk factors and uncertainties affecting Ziff Davis, refer to the 2020 Annual Report on Form 10-K filed by Ziff Davis on March 1, 2021, and the other reports filed by Ziff Davis from time-to-time with the SEC, each of which is available at www.sec.gov. The forward-looking statements provided in this press release, including those contained in Vivek Shah’s quote and in the “Business Outlook” portion regarding the Company’s expected fiscal 2022 financial performance are based on limited information available to the Company at this time, which is subject to change. Although management’s expectations may change after the date of this press release, the Company undertakes no obligation to revise or update these statements.

About non-GAAP Financial Measures

To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we use the following Adjusted non-GAAP financial measures: Adjusted non-GAAP and Pro Forma net income, Adjusted non-GAAP and Pro Forma net income per diluted share, Adjusted and Pro Forma EBITDA and free cash flow. The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.

We use these Adjusted non-GAAP financial measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons. Our management believes that these Adjusted non-GAAP financial measures provide meaningful supplemental information regarding our performance and liquidity by excluding certain expenses and expenditures that may not be indicative of our recurring core business operating results. We believe that both management and investors benefit from referring to these Adjusted non-GAAP financial measures in assessing our performance and when planning, forecasting, and analyzing future periods. These Adjusted non-GAAP financial measures also facilitate management’s internal comparisons to our historical performance and liquidity. We believe these Adjusted non-GAAP financial measures are useful to investors both because (1) they allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making and (2) they are used by our institutional investors and the analyst community to help them analyze the health of our business.

For more information on these Adjusted non-GAAP financial measures, please see the appropriate GAAP to Adjusted non-GAAP reconciliation tables included within the attached Exhibit to this release.

Adjusted non-GAAP net income is GAAP net income with the following modifications: (1) elimination of share-based compensation; (2) elimination of certain acquisition related integration costs; (3) elimination of interest costs in excess of the coupon rate associated with outstanding debt; (4) elimination of amortization of patents and intangible assets that we acquired; (5) elimination of change in value on investment; (6) elimination of additional tax expense/benefit from prior years; (7) elimination of gain/loss on sale of assets; (8) elimination of intra-entity transfers; (9) elimination of lease asset impairments and other charges; (10) elimination of leasehold improvement impairments; (11) elimination of disposal related costs; (12) elimination of goodwill impairment on business and (13) elimination of dilutive effect of the convertible debt.

Adjusted non-GAAP net income is GAAP net income with the following modifications: (1) elimination of share-based compensation; (2) elimination of certain acquisition related integration costs; (3) elimination of interest costs in excess of the coupon rate associated with outstanding debt; (4) elimination of amortization of patents and intangible assets that we acquired; (5) elimination of change in value on investment; (6) elimination of additional tax expense/benefit from prior years; (7) elimination of gain/loss on sale of assets; (8) elimination of intra-entity transfers; (9) elimination of lease asset impairments and other charges; (10) elimination of leasehold improvement impairments; (11) elimination of disposal related costs; (12) elimination of goodwill impairment on business and (13) elimination of dilutive effect of the convertible debt.

Adjusted non-GAAP net income is GAAP net income with the following modifications: (1) elimination of share-based compensation; (2) elimination of certain acquisition related integration costs; (3) elimination of interest costs in excess of the coupon rate associated with outstanding debt; (4) elimination of amortization of patents and intangible assets that we acquired; (5) elimination of change in value on investment; (6) elimination of additional tax expense/benefit from prior years; (7) elimination of gain/loss on sale of assets; (8) elimination of intra-entity transfers; (9) elimination of lease asset impairments and other charges; (10) elimination of leasehold improvement impairments; (11) elimination of disposal related costs; (12) elimination of goodwill impairment on business and (13) elimination of dilutive effect of the convertible debt.

The Company discloses Adjusted non-GAAP Earnings Per Share (“EPS”) as a supplemental Non-GAAP financial performance measure, as it believes it is a useful metric by which to compare the performance of its business from period to period. The Company also understands that this Adjusted non-GAAP measure is broadly used by analysts, rating agencies and investors in assessing the Company’s performance. Accordingly, the Company believes that the presentation of this Adjusted non-GAAP financial measure provides useful information to investors.

Adjusted non-GAAP EPS is not in accordance with, or an alternative to, net income per share and may be different from Non-GAAP measures with similar or even identical names used by other companies. In addition, this Adjusted non-GAAP measure is not based on any comprehensive set of accounting rules or principles. This Adjusted non-GAAP measure has limitations in that it does not reflect all of the amounts associated with the Company’s results of operations determined in accordance with GAAP.

Adjusted non-GAAP net income is GAAP net income with the following modifications: (1) elimination of share-based compensation; (2) elimination of certain acquisition related integration costs; (3) elimination of interest costs in excess of the coupon rate associated with outstanding debt; (4) elimination of amortization of patents and intangible assets that we acquired; (5) elimination of change in value on investment; (6) elimination of additional tax expense/benefit from prior years; (7) elimination of gain/loss on sale of assets; (8) elimination of intra-entity transfers; (9) elimination of lease asset impairments and other charges; (10) elimination of leasehold improvement impairments; (11) elimination of disposal related costs; (12) elimination of goodwill impairment on business and (13) elimination of dilutive effect of the convertible debt.