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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the quarterly period ended September 30, 2023
OR
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the transition period from __________ to __________

Commission File Number: 0-25965
ZD_Blue.jpg
ZIFF DAVIS, INC.
(Exact name of registrant as specified in its charter)
Delaware47-1053457
(State or other jurisdiction(I.R.S. Employer
of incorporation or organization)Identification No.)
114 5th Avenue New York, New York 10011 (212) 503-3500
(Address and telephone number of principal executive offices)


Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 par valueZDNasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes ý    No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes ý    No  o   
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ýAccelerated fileroNon-Accelerated fileroSmaller reporting company
Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes        No ý

There were 45,984,753 shares outstanding of the Registrant’s common stock as of November 3, 2023.




ZIFF DAVIS, INC. AND SUBSIDIARIES 
QUARTERLY REPORT
QUARTER ENDED SEPTEMBER 30, 2023

INDEX 
   PAGE
 
    
  
  
  
  
  
    
 
    
 
    
 
    
   
 
    
 
    
 
    
 
    
 
    
 
    
 
    
 
Item 6.  
    
  
    

-2-



PART I.  FINANCIAL INFORMATION
Item 1.Financial Statements
ZIFF DAVIS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands except share and per share data)
September 30, 2023December 31, 2022
ASSETS
Cash and cash equivalents$660,624 $652,793 
Short-term investments29,797 58,421 
Accounts receivable, net of allowances of $7,388 and $6,868, respectively
291,485 304,739 
Prepaid expenses and other current assets81,757 68,319 
Total current assets1,063,663 1,084,272 
Long-term investments 140,167 127,871 
Property and equipment, net of accumulated depreciation of $308,368 and $255,586, respectively
186,165 178,184 
Intangible assets, net367,943 462,815 
Goodwill1,539,663 1,591,474 
Deferred income taxes8,573 8,523 
Other assets77,053 80,131 
TOTAL ASSETS$3,383,227 $3,533,270 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable$127,818 $120,829 
Accrued employee related costs37,011 42,178 
Other accrued liabilities47,219 39,539 
Income taxes payable, current4,985 19,712 
Deferred revenue, current182,741 187,904 
Other current liabilities19,724 22,286 
Total current liabilities419,498 432,448 
Long-term debt1,000,743 999,053 
Deferred revenue, noncurrent8,000 9,103 
Income taxes payable, noncurrent8,486 11,675 
Deferred income taxes51,098 79,007 
Other long-term liabilities91,264 109,373 
TOTAL LIABILITIES1,579,089 1,640,659 
Commitments and contingencies (Note 8)
Preferred stock, $0.01 par value. Authorized 1,000,000 and none issued
  
Preferred stock - Series A, $0.01 par value. Authorized 6,000; total issued and outstanding zero
  
Preferred stock - Series B, $0.01 par value. Authorized 20,000; total issued and outstanding zero
  
Common stock, $0.01 par value. Authorized 95,000,000; total issued and outstanding 45,984,858 and 47,269,446 shares at September 30, 2023 and December 31, 2022, respectively
460 473 
Additional paid-in capital 462,812 439,681 
Treasury stock, at cost (zero and zero shares, at September 30, 2023 and December 31, 2022, respectively)
  
Retained earnings1,426,979 1,537,830 
Accumulated other comprehensive loss(86,113)(85,373)
TOTAL STOCKHOLDERS’ EQUITY1,804,138 1,892,611 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY$3,383,227 $3,533,270 

See Notes to Condensed Consolidated Financial Statements (Unaudited)
-3-



ZIFF DAVIS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands except share and per share data)

Three months ended
September 30,
Nine months ended
September 30,
2023202220232022
Total revenues$340,985 $341,873 $974,143 $994,297 
Operating costs and expenses:
Cost of revenues55,526 52,603 148,677 144,707 
Sales and marketing125,062 119,474 360,916 361,013 
Research, development, and engineering17,597 17,735 53,328 55,883 
General and administrative99,269 95,658 302,481 299,842 
Goodwill impairment on business56,850 27,369 56,850 27,369 
Total operating costs and expenses354,304 312,839 922,252 888,814 
(Loss) income from operations(13,319)29,034 51,891 105,483 
Interest expense, net(2,817)(8,560)(17,780)(28,419)
Gain on debt extinguishment, net 10,112  11,505 
Unrealized (loss) gain on short-term investments held at the reporting date, net(6,019)4,201 (29,560)(14,165)
Gain (loss) on investments, net 471 357 (47,772)
Other (loss) income, net(3,571)4,218 (5,982)12,962 
(Loss) income before income taxes and income (loss) from equity method investment, net
(25,726)39,476 (1,074)39,594 
Income tax expense(5,335)(18,100)(11,180)(33,231)
Income (loss) from equity method investment, net
90 (3,191)(9,665)(10,077)
Net (loss) income
$(30,971)$18,185 $(21,919)$(3,714)
Net (loss) income per common share:
Basic$(0.67)$0.39 $(0.47)$(0.08)
Diluted$(0.67)$0.39 $(0.47)$(0.08)
Weighted average shares outstanding: 
Basic46,062,097 46,871,897 46,612,660 46,967,671 
Diluted46,062,097 46,871,897 46,612,660 46,967,671 


 See Notes to Condensed Consolidated Financial Statements (Unaudited)
-4-



ZIFF DAVIS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited, in thousands)
Three months ended September 30,Nine months ended September 30,
2023202220232022
Net (loss) income
$(30,971)$18,185 $(21,919)$(3,714)
Other comprehensive loss, net of tax:
Foreign currency translation adjustment(6,841)(24,753)(660)(55,283)
Consensus separation adjustment   4,056 
Change in fair value on available-for-sale investments, net of tax expense of $93 and benefit of $37 for the three and nine months ended September 30, 2023, respectively
309 (169)(80)(169)
Other comprehensive loss, net of tax
(6,532)(24,922)(740)(51,396)
Comprehensive loss
$(37,503)$(6,737)$(22,659)$(55,110)

See Notes to Condensed Consolidated Financial Statements (Unaudited)

-5-



ZIFF DAVIS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
                                                          Nine months ended September 30,
Cash flows from operating activities:20232022
Net loss$(21,919)$(3,714)
Adjustments to reconcile net loss to net cash provided by operating activities: 
Depreciation and amortization167,333 174,880 
Non-cash operating lease costs7,248 9,043 
Share-based compensation24,393 20,806 
Provision for credit losses on accounts receivable2,296 (1,142)
Deferred income taxes, net(25,658)(13,552)
Gain on extinguishment of debt (11,505)
Goodwill impairment on business56,850 27,369 
Changes in fair value of contingent consideration (2,305)
Loss from equity method investments9,665 10,077 
Unrealized loss on short-term investments held at the reporting date, net29,560 14,165 
(Gain) loss on investments, net(357)47,772 
Other5,113 2,320 
Decrease (increase) in: 
Accounts receivable (includes $0 and $9,425 with related parties)
11,043 85,121 
Prepaid expenses and other current assets(10,059)3,177 
Other assets(7,961)(8,667)
Increase (decrease) in: 
Accounts payable1,955 (11,445)
Deferred revenue(6,820)(25,400)
Accrued liabilities and other current liabilities(14,839)(23,781)
Net cash provided by operating activities227,843 293,219 
Cash flows from investing activities: 
Purchases of property and equipment(82,476)(80,767)
Acquisition of businesses, net of cash received(9,492)(104,094)
Investment in available-for-sale securities (15,000)
Purchases of equity investments(11,790) 
Proceeds from sale of equity investments3,174  
Other(4,154) 
Net cash used in investing activities(104,738)(199,861)
Cash flows from financing activities: 
Payment of debt (166,904)
Proceeds from term loan 112,286 
Debt extinguishment costs (756)
Repurchase of common stock(107,341)(76,545)
Issuance of common stock under employee stock purchase plan4,725 5,235 
Proceeds from exercise of stock options 148 
Deferred payments for acquisitions(14,141)(14,734)
Other(53)(559)
Net cash used in financing activities(116,810)(141,829)
Effect of exchange rate changes on cash and cash equivalents1,536 (24,454)
Net change in cash and cash equivalents7,831 (72,925)
Cash and cash equivalents at beginning of period652,793 694,842 
Cash and cash equivalents at end of period$660,624 $621,917 
See Notes to Condensed Consolidated Financial Statements (Unaudited)
-6-



ZIFF DAVIS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited, in thousands, except share amounts)

Three months ended September 30, 2023
Accumulated
Common stockAdditional
paid-in
Treasury stockRetainedother comprehensiveTotal
Stockholders’
SharesAmountcapitalSharesAmountearningslossEquity
Balance, July 1, 202346,402,143 $464 $448,920  $ $1,492,879 $(79,581)$1,862,682 
Net loss— — — — — (30,971)— (30,971)
Other comprehensive loss, net of tax expense of $93
— — — — — — (6,532)(6,532)
Issuance of restricted stock, net2,041 — (265)— — 35 — (230)
Issuance of common stock, net186,102 2 13,420 — — — — 13,422 
Repurchase of common stock— — — 605,428 (41,019)— — (41,019)
Retirement of common stock(605,428)(6)(6,035)(605,428)41,019 (34,978)—  
Share-based compensation— — 6,774 — — — — 6,774 
Other, net— — (2)— — 14 — 12 
Balance, September 30, 202345,984,858 $460 $462,812  $ $1,426,979 $(86,113)$1,804,138 

Three months ended September 30, 2022
Accumulated
Common stockAdditional
paid-in
Treasury stockRetainedother comprehensiveTotal
Stockholders’
SharesAmountcapitalSharesAmountearningslossEquity
Balance, July 1, 202247,191,337 $472 $426,104  $ $1,451,316 $(83,696)$1,794,196 
Net income— — — — — 18,185 — 18,185 
Other comprehensive loss, net of tax expense of zero
— — — — — — (24,922)(24,922)
Issuance of restricted stock, net1,171 — — — — — — — 
Retirement of common stock(2,601)— (218)— — 18 — (200)
Share-based compensation— — 6,386 — — — — 6,386 
Balance, September 30, 202247,189,907 $472 $432,272  $ $1,469,519 $(108,618)$1,793,645 

-7-



Nine months ended September 30, 2023
Accumulated
Common stockAdditional
paid-in
Treasury stockRetainedother comprehensiveTotal
Stockholders’
SharesAmountcapitalSharesAmountearningslossEquity
Balance, January 1, 202347,269,446 $473 $439,681  $ $1,537,830 $(85,373)$1,892,611 
Net loss— — — — — (21,919)— (21,919)
Other comprehensive loss, net of tax benefit of $37
— — — — — — (740)(740)
Issuance of restricted stock, net28,058 — (4,031)— — 569 — (3,462)
Issuance of shares under employee stock purchase plan87,098 1 4,724 — — — — 4,725 
Issuance of common stock, net186,102 2 13,420 — — — — 13,422 
Repurchase of common stock— — — 1,585,846 (104,919)— — (104,919)
Retirement of common stock(1,585,846)(16)(15,388)(1,585,846)104,919 (89,515)—  
Share-based compensation— — 24,393 — — — — 24,393 
Other, net— — 13 — — 14 — 27 
Balance, September 30, 202345,984,858 $460 $462,812  $ $1,426,979 $(86,113)$1,804,138 

Nine months ended September 30, 2022
Accumulated
Common stockAdditional
paid-in
Treasury stockRetainedother comprehensiveTotal
Stockholders’
SharesAmountcapitalSharesAmountearningslossEquity
Balance, January 1, 202247,440,137 $474 $509,122 $ $ $1,515,358 $(57,222)$1,967,732 
Reclassification of the equity component of 1.75% Convertible Notes to liability upon adoption of ASU 2020-06
— — (88,137)— — 23,436 — (64,701)
Net loss— — — — — (3,714)— (3,714)
Other comprehensive loss, net of tax expense of zero
— — — — — — (55,452)(55,452)
Issuance of restricted stock, net456,963 4 (4)— — — —  
Issuance of shares under employee stock purchase plan76,741 1 5,234 — — — — 5,235 
Repurchase of common stock— — — 736.536 (71,337)— — (71,337)
Retirement of common stock(789,373)(7)(14,881)(736.536)71,337 (61,657)— (5,208)
Share-based compensation— — 20,806 — — — — 20,806 
Exercise of stock options5,439 — 148 — — — — 148 
Other, net— — (16)— — (3,904)4,056 136 
Balance, September 30, 202247,189,907 $472 $432,272  $ $1,469,519 $(108,618)$1,793,645 
See Notes to Condensed Consolidated Financial Statements (Unaudited)
-8-


ZIFF DAVIS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1.Basis of Presentation and Overview
The accompanying Condensed Consolidated Financial Statements of Ziff Davis, Inc. and its subsidiaries (“Ziff Davis”, the “Company”, “our”, “us”, or “we”), whether directly or indirectly wholly-owned, were prepared in accordance with U.S. generally accepted accounting principles ("GAAP"), and all adjustments considered necessary for a fair presentation have been included. All intercompany accounts and transactions have been eliminated in consolidation.
The accompanying interim Condensed Consolidated Financial Statements have been prepared in accordance with instructions for Form 10-Q and Article 10 of Regulation S-X issued by the Securities and Exchange Commission (“SEC”). The preparation of these Condensed Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the Condensed Consolidated Financial Statements, as well as the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. All normal recurring adjustments necessary for a fair presentation of these interim Condensed Consolidated Financial Statements were made.
This Quarterly Report on Form 10-Q should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the Securities and Exchange Commission ("SEC") on March 1, 2023 and other filings with the SEC.
The results of operations for this interim period are not necessarily indicative of the operating results for the full year or for any future period.
Description of Business
Ziff Davis, Inc. is a vertically focused digital media and internet company whose portfolio includes leading brands in technology, shopping, gaming and entertainment, connectivity, health, cybersecurity, and martech. The Company’s Digital Media business specializes in the technology, shopping, gaming and entertainment, connectivity, and healthcare markets, offering content, tools and services to consumers and businesses. The Company’s Cybersecurity and Martech business provides cloud-based subscription services to consumers and businesses including cybersecurity, privacy, and marketing technology.
 Impairment or Disposal of Long-Lived Assets
The Company assesses whether events or changes in circumstances have occurred that potentially indicate the carrying amount of definite-lived assets may not be recoverable. During the three months ended September 30, 2023 and 2022, and the nine months ended September 30, 2023 and 2022, the Company recorded an impairment of approximately $0.7 million, $0.2 million, $2.7 million, and $0.4 million, respectively, related to certain operating lease right-of-use assets and other definite-lived intangibles. The Company regularly evaluates its office space requirements in light of more of its workforce working from home as part of a permanent “remote” or “partial remote” work model. The impairment is presented in general and administrative expense on the Condensed Consolidated Statement of Operations.
Recent Accounting Pronouncements
In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This update provides for optional financial reporting alternatives to reduce cost and complexities associated with accounting for contracts, hedging relationships, and other transactions affected by reference rate reform. This update applies only to contracts, hedging relationships, and other transactions that reference London Interbank Offer Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform. The accommodations were available for all entities through December 31, 2022, with early adoption permitted. This update was later amended by ASU 2022-06.
In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848. This update defers the expiration date of Accounting Standards Codification (“ASC”) Topic 848 from December 31, 2022 to December 31, 2024. We are currently evaluating the effect the adoption of this update will have on our condensed consolidated financial statements and related disclosures.
Reclassifications
Certain prior year reported amounts have been reclassified to conform with the 2023 presentation.

-9-


ZIFF DAVIS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
2.Revenues
Digital Media
Digital Media revenues are earned primarily from the delivery of advertising services and subscriptions to services and information.
Revenue from the delivery of advertising services is earned on websites that are owned and operated by us and on those websites that are part of Digital Media’s advertising network. Depending on the individual contracts with the customer, revenue for these services is recognized over the contract period when any of the following performance obligations are satisfied: (i) when an advertisement is placed for viewing, (ii) when a qualified sales lead is delivered, (iii) when a visitor “clicks through” on an advertisement or (iv) when commissions are earned upon the sale of an advertised product.
Revenue from subscriptions is earned through the granting of access to, or delivery of, data products or services to customers. Subscriptions cover video games and related content, health information, data, and other copyrighted material. Revenues under such agreements are recognized over the contract term for use of the service. Revenues are also earned from listing fees, subscriptions to online publications, and from other sources. Subscription revenues are primarily recognized over time. Revenues related to the provision of access to historical data for certain services are recorded at the time of delivery.
We also generate Digital Media subscription revenues through the license of certain assets to clients. Assets are licensed for clients’ use in their own promotional materials or otherwise and may include logos, editorial reviews, or other copyrighted material. Revenues under such license agreements are recognized over the contract term for use of the asset. In instances when technology assets are licensed to our clients, revenues from the license of these assets are recognized over the term of the access period.
The Digital Media business also generates revenue from other sources which include marketing and production services. Such other revenues are generally recognized over the period in which the products or services are delivered.
We also generate Digital Media revenues from transactions involving the sale of perpetual software licenses, related software support, and maintenance, hardware used in conjunction with software, and other related services. Revenue is recognized for software transactions with multiple performance obligations after (i) the contract has been approved and we are committed to perform the respective obligations and (ii) we can identify and quantify each obligation and its respective selling price. Once the respective performance obligations have been identified and quantified, revenue will be recognized when the obligations are met, either over time or at a point in time depending on the nature of the obligation.
Revenues from software license performance obligations are generally recognized upfront at the point in time that the software is made available to the customer to download and use. Revenues for related software support and maintenance performance obligations are related to technical support provided to customers as needed and unspecified software product upgrades, maintenance releases, and patches during the term of the support period when they are available. We are obligated to make the support services available continuously throughout the contract period. Therefore, revenues for support contracts are generally recognized ratably over the contractual period the support services are provided. Hardware product and related software performance obligations, such as an operating system or firmware, are highly interdependent and interrelated and are accounted for as a bundled performance obligation. The revenues for this bundled performance obligation are generally recognized at the point in time that the hardware and software products are delivered and ownership is transferred to the customer. Other service revenues are generally recognized over time as the services are performed.
The Company records revenue on a gross basis with respect to revenue generated (i) by the Company serving online display and video advertising across its owned and operated web properties, on third-party sites, or on unaffiliated advertising networks; (ii) through the Company’s lead-generation business; and (iii) through the Company’s subscriptions. The Company records revenue on a net basis with respect to revenue paid to the Company by certain third-party advertising networks who serve online display and video advertising across the Company’s owned-and-operated web properties and certain third-party sites.
Cybersecurity and Martech
The Company’s Cybersecurity and Martech revenues substantially consist of subscription revenues which include subscription and usage-based fees, a significant portion of which are paid in advance. The Company defers the portions of monthly, quarterly, semi-annual, and annual fees collected in advance of the satisfaction of performance obligations and recognizes them in the period earned.
-10-


ZIFF DAVIS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Along with its numerous proprietary Cybersecurity and Martech solutions, the Company also generates subscription revenues by reselling various third-party solutions, primarily through its email security line of business. These third-party solutions, along with the Company’s proprietary products, allow it to offer customers a variety of solutions to better meet the customer’s needs. The Company records revenue on a gross basis with respect to reseller revenue because the Company has control of the specified good or service prior to transferring control to the customer.
Revenues from external customers classified by revenue source are as follows (in thousands).
Three months ended September 30,Nine months ended September 30,
2023202220232022
Digital Media
Advertising$183,008 $186,921 $514,173 $546,186 
Subscription71,858 64,780 209,167 179,257 
Other13,085 12,195 31,692 31,980 
Total Digital Media revenues$267,951 $263,896 $755,032 $757,423 
Cybersecurity and Martech
Subscription$73,051 $78,192 $219,263 $237,596 
Total Cybersecurity and Martech revenues$73,051 $78,192 $219,263 $237,596 
Elimination of inter-segment revenues(17)(215)(152)(722)
Total Revenues$340,985 $341,873 $974,143 $994,297 
Timing of revenue recognition
Point in time$14,336 $14,417 $37,518 $32,602 
Over time326,649 327,456 936,625 961,695 
Total$340,985 $341,873 $974,143 $994,297 
The Company recorded $27.8 million and $32.2 million of revenue for the three months ended September 30, 2023 and 2022, respectively, and $140.9 million and $154.9 million of revenue for the nine months ended September 30, 2023 and 2022, respectively, which was previously included in the deferred revenue balance as of the beginning of each respective year.
Transaction Price Allocation to Future Performance Obligations
As of September 30, 2023, the aggregate amount of transaction price that is allocated to future performance obligations was approximately $32.5 million and is expected to be recognized as follows: 13% by December 31, 2023, 84% between January 1, 2024 and December 31, 2025, and 3% thereafter. The amount disclosed does not include revenues related to performance obligations that are part of contracts with original expected durations of twelve months or less or portions of the contracts that remain subject to cancellations.

3.Business Acquisitions
The Company uses acquisitions as a strategy to grow its customer base by increasing its presence in new and existing markets, expand and diversify its service offerings, enhance its technology, and acquire skilled personnel.
2023 Acquisitions
The Company completed two immaterial Digital Media acquisitions during the nine months ended September 30, 2023, paying the purchase price in cash in each transaction.
The Condensed Consolidated Statement of Operations since the date of each acquisition and the Condensed Consolidated Balance Sheets as of September 30, 2023, reflect the results of operations of the 2023 acquisitions. The initial accounting for the 2023 acquisitions is incomplete due to timing of available information and is subject to change. The Company has recorded provisional amounts which may be based upon past acquisitions with similar attributes for certain intangible assets (including trade names and customer relationships), preliminary acquisition date working capital, and related tax items.
-11-


ZIFF DAVIS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Goodwill recognized associated with these acquisitions during the nine months ended September 30, 2023 was $6.3 million, all of which is expected to be deductible for income tax purposes. Approximately $7.2 million of definite-lived intangibles were recorded in connection with the acquisitions during the nine months ended September 30, 2023.
2022 Acquisitions
The Company completed the following acquisitions during the nine months ended September 30, 2022, paying the purchase price in cash in each transaction: (a) a purchase of 100% of equity interests of Lifecycle Marketing Group Limited, acquired on January 21, 2022, a United Kingdom-based portfolio of pregnancy and parenting brands, including Emma’s Diary and Health Professional Academy, reported within our Digital Media segment; (b) a purchase of 100% of equity interests of FitNow, Inc, acquired on June 2, 2022, a Massachusetts-based provider of weight loss products and support, reported within our Digital Media segment; and (c) four other immaterial Digital Media acquisitions. During the nine months ended September 30, 2023, the purchase price accounting was finalized for these acquisitions.
The Condensed Consolidated Statement of Operations since the date of each acquisition reflects the results of operations of all 2022 acquisitions. For the nine months ended September 30, 2022, these acquisitions contributed $19.6 million to the Company’s revenues. Net income contributed by these acquisitions was not separately identifiable due to the Company’s integration activities and is impracticable to provide. Total consideration for these transactions was $121.7 million, net of cash acquired and assumed liabilities.
The following table summarizes the allocation of the purchase consideration for all 2022 acquisitions as of September 30, 2022 (in thousands):
Assets and LiabilitiesValuation
Accounts receivable$7,433 
Prepaid expenses and other current assets4,915 
Property and equipment369 
Operating lease right-of-use assets, noncurrent546 
Trade names12,838 
Customer relationships20,540 
Other intangibles18,165 
Goodwill93,827 
Other long-term assets11 
Accounts payable and accrued expenses(4,656)
Deferred revenue(21,332)
Deferred tax liability(10,436)
Other long-term liabilities(516)
Total$121,704 
The fair value of the assets acquired includes accounts receivable of $7.4 million, of which none is expected to be uncollectible. The Company did not acquire any other classes of receivables as a result of its acquisitions.
Goodwill recognized associated with these acquisitions during the nine months ended September 30, 2022 was $93.8 million, of which $1.2 million is expected to be deductible for income tax purposes.
Unaudited Pro Forma Financial Information for All 2022 Acquisitions
The following unaudited pro forma information is not necessarily indicative of the Company’s consolidated results of operations in future periods or the results that actually would have been realized had the Company and the acquired businesses been combined companies during the periods presented. These pro forma results are estimates and exclude any savings or synergies that would have resulted from these business acquisitions had they occurred on January 1, 2022. This unaudited pro forma supplemental information includes incremental intangible asset amortization and other charges as a result of the acquisitions, net of the related tax effects.
-12-


ZIFF DAVIS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
The supplemental information on an unaudited pro forma financial basis presents the combined results of the Company and its acquisitions during the three and nine months ended September 30, 2022 as if each acquisition had occurred on January 1, 2022 (in thousands, except per share amounts):
 Three months ended September 30, 2022Nine months ended September 30, 2022
 (unaudited)(unaudited)
Revenues$342,173 $1,010,600 
Net income (loss)
$18,120 $(3,801)
Income (loss) per common share - Basic
$0.39 $(0.08)
Income (loss) per common share - Diluted
$0.39 $(0.08)

4.Investments
Investments consist primarily of equity and debt securities.
Investments in equity securities
On October 7, 2021, the Company completed the separation of its cloud fax business (the “Separation”) into an independent publicly traded company, Consensus Cloud Solutions, Inc. (“Consensus”). Following the Separation, the Company retained shares of Consensus common stock and as of September 30, 2023 and December 31, 2022, the Company held approximately 1.0 million and 1.1 million shares, respectively, of the common stock of Consensus. As of September 30, 2023 and December 31, 2022, the carrying value of the investment in Consensus was $26.0 million and $58.4 million respectively, and are included in ‘Short-term investments’ in the Condensed Consolidated Balance Sheets. The Company accounts for its investment in Consensus at fair value under the fair value option, and the related fair value gains and losses are recognized in earnings.
During the three and nine months ended September 30, 2022, the Company completed the non-cash tax-free debt-for-equity exchanges of 500,000 and 2,800,000 shares, respectively, of its common stock of Consensus for the extinguishment of $22.3 million and $112.3 million, respectively of principal of the Company’s Term Loan Facilities (as defined in Note 7 - Debt), and related interest. During the three and nine months ended September 30, 2023, the Company sold zero and 52,393 shares, respectively, of common stock of Consensus in the open market.
Losses on equity securities were recorded in ‘Unrealized (loss) gain on short-term investments held at the reporting date, net’ in the Condensed Consolidated Statements of Operations consisted of the following (in thousands):
Three months ended September 30,Nine months ended September 30,
2023202220232022
Net (losses) gains during the period
$(6,019)$4,672 $(29,203)$(61,937)
Less: gains (losses) on securities sold during the period
 471 357 (47,772)
Unrealized (losses) gains recognized during the period on short-term investments held at the reporting date, net
$(6,019)$4,201 $(29,560)$(14,165)
On July 31, 2023, the Company entered into an agreement to purchase $25.0 million of equity of Xyla, Inc. (“Xyla”) for a minority ownership stake. This minority investment was made in the form of cash and shares of the Company’s common stock. The Company accounts for its investment in Xyla as an equity investment without a readily determinable fair value measured under the measurement alternative in accordance with ASC Topic 321, Investments - Equity Securities. As of September 30, 2023, the investment in Xyla has a carrying value of $25.3 million, including transaction costs, and is included in ‘Long-term investments’ in the Condensed Consolidated Balance Sheets.
-13-


ZIFF DAVIS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Investment in corporate debt security
On April 12, 2022, the Company entered into an agreement with an entity and acquired 4% convertible notes with an aggregate value of $15.0 million. On May 19, 2023, the Company entered into the Note Amendment Agreement (the “Amendment”) with respect to the same entity. The Amendment increased the interest rate on the convertible notes to 6%, extended the maturity date, and subordinated all existing and future obligations, liabilities, and indebtedness of the entity to the entity’s senior creditor, as defined in the Amendment. This investment is included in ‘Long-term investments, net’ in the Condensed Consolidated Balance Sheets and is classified as available-for-sale. The investment was initially measured at its transaction price and subsequently remeasured at fair value, with unrealized gains and losses reported as a component of other comprehensive income.
As of September 30, 2023, both the carrying value and the maximum exposure of the Company’s investment in corporate debt securities was approximately $15.5 million, with a contractual maturity date that is more than one year but less than five years. As of December 31, 2022, both of the carrying value and the maximum exposure of the Company’s equity method investment in corporate debt securities was approximately $15.6 million. Cumulative gross unrealized gains on investment in corporate debt securities as of September 30, 2023 and December 31, 2022 was approximately $0.5 million and $0.6 million, respectively.
 There were no investments in an unrealized loss position as of September 30, 2023 and December 31, 2022.
As of September 30, 2023 and December 31, 2022, the Company did not recognize any other-than-temporary impairment losses on its debt securities.
Equity method investment
On September 25, 2017, the Company entered into a commitment to invest in an investment fund (the “OCV Fund”). The primary purpose of the OCV Fund is to provide a limited number of select investors with the opportunity to realize long-term appreciation from public and private companies, with a particular focus on the technology and life science industries. The general activities of the OCV Fund is to buy, sell, hold, and otherwise invest in securities of every kind and nature and rights and options with respect thereto, including, without limitation, stock, notes, bonds, debentures, and evidence of indebtedness; to exercise all rights, powers, privileges, and other incidents of ownership or possession with respect to securities held or owned by the OCV Fund; to enter into, make, and perform all contracts and other undertakings; and to engage in all activities and transactions as may be necessary, advisable, or desirable to carry out the foregoing.
During both the nine months ended September 30, 2023 and 2022, the Company received no distributions from OCV.
The Company recognizes its equity in the net earnings or losses relating to the investment in OCV on a one-quarter lag (including management fees) due to the timing and availability of financial information from OCV. If the Company becomes aware of a significant decline in value that is other-than-temporary, the loss will be recorded in the period in which the Company identifies the decline.
During the three months ended September 30, 2023 and 2022, the Company recognized a gain (loss) from equity method investment of $0.1 million and $(3.2) million, net of tax benefit, respectively. During the nine months ended September 30, 2023 and 2022, the Company recognized a loss from equity method investment of $9.7 million and $10.1 million, net of tax benefit, respectively. The losses during the three months ended September 30, 2022 and during the nine months ended September 30, 2023 and 2022 were primarily the result of losses in the underlying investments and the loss during the three and nine months ended September 30, 2022 also included management fee expense. The Company did not recognize management fee expense in 2023 as a result of the settlement of certain litigation in 2022 whereby no further management fees would be paid by the Company to the manager of the OCV Fund. During the three and nine months ended September 30, 2022, the Company recognized expense for management fees of zero and $1.5 million, respectively, net of tax benefit.
As of September 30, 2023, both of the carrying value and the maximum exposure of the Company’s equity method investment was $99.4 million. As of December 31, 2022, both of the carrying value and the maximum exposure of the Company’s equity method investment was $112.3 million. These equity securities are included within ‘Long-term investments’ in the Condensed Consolidated Balance Sheets.
As a limited partner, the Company’s maximum exposure to loss is limited to its proportional ownership in the partnership. In addition, the Company is not required to contribute any future capital and any expected losses will not be in excess of the capital account. Finally, there are no call or put options, or other types of arrangements, which limit the Company’s ability to participate in losses and returns of the Fund.

-14-


ZIFF DAVIS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
5.Fair Value Measurements
The Company complies with the provisions of ASC 820, which defines fair value, provides a framework for measuring fair value and expands the disclosures required for fair value measurements of financial and non-financial assets and liabilities. ASC 820 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or a liability. As a basis for considering such assumptions, ASC 820 establishes a three-tier value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value.
§Level 1 – Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
§Level 2 – Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
§Level 3 – Unobservable inputs which are supported by little or no market activity.
The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
Recurring Fair Value Measurements
The Company’s money market funds are classified within Level 1. The Company values these Level 1 investments using quoted market prices.
The Company’s investment in Consensus’ common stock for which the Company elected the fair value option, and the fair value of the Company’s investment in Consensus and subsequent fair value changes, are included in our assets and changes in fair value are recognized in earnings. As the initial carrying value of the investment in Consensus was negative immediately following the Separation, the Company elected the fair value option under ASC 825-10-25 to support the initial recognition of the investment in Consensus at fair value and the negative book value was recorded as a gain at the date of Separation. The fair value of the investment in Consensus is determined using quoted market prices, which is a Level 1 input.
The Company has investment in a corporate debt security that does not have a readily determinable fair value because acquired securities are privately held, not traded on any public exchanges and not an investment in a mutual fund or similar investment. The fair value of the corporate debt securities is determined primarily based on significant estimates and assumptions, including Level 3 inputs. As of September 30, 2023 and December 31, 2022, the fair value was determined based upon various probability-weighted scenarios which included discount rate assumptions between 12% and 13%, depending on the probability scenario. In addition, the determination of fair value included a conversion timeframe of one to three years, depending on probability scenario, as of September 30, 2023 and approximately one-year as of December 31, 2022.
The Company classifies its contingent consideration liability in connection with acquisitions within Level 3 because factors used to develop the estimated fair value are unobservable inputs, such as volatility and market risks, and are not supported by market activity. The valuation approaches used to value Level 3 investments considers unobservable inputs in the market such as time to liquidity, volatility, dividend yield, and breakpoints. Significant increases or decreases in either of the inputs in isolation would result in a significantly lower or higher fair value measurement. As of September 30, 2023 and December 31, 2022, the contingent consideration was determined using a 100% probability of payout at the maximum amount, without any other estimates applied.
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ZIFF DAVIS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
The following tables present the fair values of the Company’s financial assets or liabilities that are measured at fair value on a recurring basis (in thousands):
September 30, 2023Level 1Level 2Level 3Fair ValueCarrying Value
Assets:
Cash equivalents:
Money market and other funds$288,610 $ $ $288,610 $288,610 
Short-term investments:
Certificates of deposit 3,753  3,753 3,753 
Consensus common stock26,044   26,044 26,044 
Long-term investments:
Investment in corporate debt securities  15,469 15,469 15,469 
Total assets measured at fair value$314,654 $3,753 $15,469 $333,876 $333,876 
Liabilities:
Contingent consideration$ $ $3,389 $3,389 $3,389 
Total liabilities measured at fair value$ $ $3,389 $3,389 $3,389 
December 31, 2022Level 1Level 2Level 3Fair ValueCarrying Value
Assets:
Cash equivalents:
Money market and other funds$312,010 $ $ $312,010 $312,010 
Short-term investments:
Consensus common stock58,421   58,421 58,421 
Long-term investments:
Investment in corporate debt securities  15,586 15,586 15,586 
Total assets measured at fair value$370,431 $ $15,586 $386,017 $386,017 
Liabilities:
Contingent consideration$ $ $555 $555 $555 
Total liabilities measured at fair value$ $ $555 $555 $555 
At the end of each reporting period, management reviews the inputs to the fair value measurements of financial and non-financial assets and liabilities to determine when transfers between levels are deemed to have occurred. For the nine months ended September 30, 2023 and 2022, there were no transfers that occurred between levels.
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ZIFF DAVIS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
The following table presents a reconciliation of the Company’s Level 3 financial assets related to our contingent consideration arrangements and investment in corporate debt securities that are measured at fair value on a recurring basis (in thousands):
Nine months ended September 30,
20232022
Contingent Consideration ArrangementsCorporate Debt SecuritiesContingent Consideration ArrangementsCorporate Debt Securities
Balance as of January 1$555 $15,586 $5,775 $ 
Fair value at date of acquisition2,834  555 15,000 
Fair value adjustments (1)
 (117)(2,305) 
Payments  (2,919) 
Balance as of September 30$3,389 $15,469 $1,106 $15,000 
(1)The fair value adjustments to the contingent consideration arrangements in the table above were recorded within ‘General and administrative’ on the Condensed Consolidated Statements of Operations during the three and nine months ended September 30, 2023 and 2022. The fair value adjustments to the corporate debt securities in the table above were recorded within ‘Change in fair value on available-for-sale investments, net’ on the Condensed Consolidated Statements of Comprehensive (Loss) Income during the three and nine months ended September 30, 2023 and 2022.
Nonrecurring Fair Value Measurements
The Company’s non-financial assets, such as goodwill, intangible assets, right-of-use assets, and property, plant and equipment, are adjusted to fair value only when an impairment is recognized. The Company’s financial assets, comprised of equity securities without readily determinable fair value, are adjusted to fair value when observable price changes are identified or due to impairment. Such fair value measurements are based predominately on Level 3 inputs. See Note 1 - Basis of Presentation for further information on intangible assets and right-of-use assets impairment charges recorded in the three and nine months ended September 30, 2023 and 2022. See Note 7 - Goodwill and Intangible Assets for further information on a goodwill impairment charge recorded in the three and nine months ended September 30, 2023 and 2022.
Other Fair Value Disclosures
The fair value of the Company’s 4.625% Senior Notes and 1.75% Convertible Notes (as defined in Note 7 - Debt) was determined using quoted market prices or dealer quotes for instruments with similar maturities and other terms and credit ratings, which are Level 1 inputs. If such information is not available for the 1.75% Convertible Notes, the fair value is determined using cash-flow models of the scheduled payments discounted at market interest rates for comparable debt without the conversion feature.
The following table presents the carrying value and the fair value of financial instruments measured at fair value only for disclosure purposes:
September 30, 2023December 31, 2022
Carrying ValueFair ValueCarrying ValueFair Value
4.625% Senior Notes
$456,695 $389,022 $456,400 $390,908 
1.75% Convertible Notes
$544,048 $508,832 $542,653 $548,411 

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ZIFF DAVIS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
6.Goodwill and Intangible Assets
Goodwill
The changes in carrying amounts of goodwill for the nine months ended September 30, 2023 are as follows (in thousands):
Digital MediaCybersecurity and MartechConsolidated
Balance as of January 1, 2023$1,065,989 $525,485 $1,591,474 
Goodwill acquired (Note 3)
6,258  6,258 
Goodwill impairment(56,850) (56,850)
Purchase accounting adjustments (1)
(72) (72)
Foreign exchange translation(644)(503)(1,147)
Balance as of September 30, 2023$1,014,681 $524,982 $1,539,663 
(1)Purchase accounting adjustments relate to measurement period adjustments to goodwill in connection with prior business acquisitions.
During the three and nine months ended September 30, 2023 and 2022, the Company reassessed the fair value of certain reporting units within the Digital Media reportable segment as a result of a forecasted reduction in revenue and EBITDA in the reporting unit, as well as an increase in interest rates and market volatility that would affect the Company’s assumptions on its discount rate. Based on the quantitative fair value test in each period, the carrying value of the reporting unit exceeded its fair value, and the Company recorded an impairment of approximately $56.9 million during the three and nine months ended September 30, 2023, and approximately $27.4 million during the three and nine months ended September 30, 2022. Following the impairment during the three and nine months ended September 30, 2022, the reporting unit had goodwill of approximately $86.9 million and the carrying value approximated its fair value. Following the impairment during the three and nine months ended September 30, 2023, the reporting unit had goodwill of approximately $79.2 million and there is no excess of reporting unit fair value over the carrying amount, so any further decrease in estimated fair value would result in an additional impairment charge to goodwill. Changes in market conditions, and key assumptions made in future quantitative assessments, including expected cash flows, competitive factors and discount rates, could negatively impact the results of future impairment testing and could result in the recognition of an impairment charge.
In each period, the fair value of the reporting unit was determined using an equal weighting of an income approach that was based on the discounted estimated future cash flows of the reporting unit and a market approach that uses the guideline public company approach. We believe the combination of these approaches provides an appropriate valuation because it incorporates the expected cash generation of the reporting unit in addition to how a third-party market participant would value the reporting unit. As the business is assumed to continue in perpetuity, the discounted future cash flows include a terminal value. Determining fair value using a discounted estimated future cash flow analysis requires the exercise of significant judgment with respect to several items, including the amount and timing of expected future cash flows and appropriate discount rates. The expected cash flows used in the discounted cash flow analyses were based on the most recent forecast for the reporting unit. For years beyond the forecast period, the estimates were based, in part, on forecasted growth rates. The discount rate the Company used represents the estimated weighted average cost of capital, which reflects the overall level of inherent risk involved in its reporting unit operations and the rate of return a market participant would expect to earn. Determining fair value using a market approach considers multiples of financial metrics based on trading multiples of a selected peer group of companies. From the comparable companies, a representative market multiple is determined, which is applied to financial metrics to estimate the fair value of the reporting unit.
During the three months ended September 30, 2022, the Company realigned two reporting units within the Digital Media reportable segment. The Company re-allocated goodwill between the two identified reporting units based upon the relative fair value of the respective reporting units. Immediately before and immediately following this change in reporting units, the Company performed a quantitative fair value assessment using the income approach and market approach noted above, and each of these reporting units exceeded their respective carrying values and, therefore, there was no impairment to goodwill.
Goodwill as of September 30, 2023 and December 31, 2022 reflects accumulated impairment losses of $84.2 million and $27.4 million, respectively, in the Digital Media reportable segment.

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ZIFF DAVIS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Intangible Assets Subject to Amortization
As of September 30, 2023, intangible assets subject to amortization relate primarily to the following (in thousands):
Weighted-Average
  Amortization
Period
Historical
Cost
Accumulated
Amortization
Net
Trade names10 years$265,406 $142,201 $123,205 
Customer relationships (1)
8 years690,942 533,565 157,377 
Other purchased intangibles9 years476,529 389,168 87,361 
Total$1,432,877 $1,064,934 $367,943 
(1)The Company amortizes customer relationship assets in a pattern that best reflects the pace at which the asset’s benefits are consumed. This pattern results in a substantial majority of the amortization expense being recognized in the first 4 to 5 years, despite the overall life of the asset.
As of December 31, 2022, intangible assets subject to amortization relate primarily to the following (in thousands):
Weighted-Average
  Amortization
Period
Historical
Cost
Accumulated
Amortization
Net
Trade names10 years$261,614 $125,422 $136,192 
Customer relationships (1)
8 years687,798 479,741 208,057 
Other purchased intangibles8 years481,973 363,407 118,566 
Total$1,431,385 $968,570 $462,815 
(1)The Company amortizes customer relationship assets in a pattern that best reflects the pace at which the asset’s benefits are consumed. This pattern results in a substantial majority of the amortization expense being recognized in the first 4 to 5 years, despite the overall life of the asset.
Amortization expense, included in General and administrative expense on the Condensed Consolidated Statements of Operations, was approximately $33.0 million and $36.3 million for the three months ended September 30, 2023 and 2022, respectively, and $100.0 million and $119.3 million for the nine months ended September 30, 2023 and 2022, respectively.

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ZIFF DAVIS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
7.Debt
Long-term debt consists of the following (in thousands):
September 30, 2023December 31, 2022
4.625% Senior Notes
$460,038 $460,038 
1.75% Convertible Notes
550,000 550,000 
Total Notes1,010,038 1,010,038 
Credit Agreement  
Less: Unamortized discount(2,540)(2,764)
Deferred issuance costs(6,755)(8,221)
Total long-term debt$1,000,743 $999,053 
As of September 30, 2023, $550.0 million of principal will mature in 2026 and $460.0 million of principal will mature in 2030.
4.625% Senior Notes
On October 7, 2020, the Company completed the issuance and sale of $750.0 million aggregate principal amount of its 4.625% senior notes due 2030 (the “4.625% Senior Notes”) in a private placement offering exempt from the registration requirements of the Securities Act of 1933. The Company received proceeds of $742.7 million after deducting the initial purchasers’ discounts, commissions and offering expenses. The net proceeds were used to redeem all of its outstanding 6.0% Senior Notes due in 2025 and, the remaining net proceeds were available for general corporate purposes which may include acquisitions and the repurchase or redemption of other outstanding indebtedness.
These senior notes bear interest at a rate of 4.625% per annum, payable semi-annually in arrears on April 15 and October 15 of each year, commencing on April 15, 2021. The 4.625% Senior Notes mature on October 15, 2030, and are senior unsecured obligations of the Company which are guaranteed, jointly and severally, on an unsecured basis by certain of the Company’s existing and future domestic direct and indirect wholly-owned subsidiaries (collectively, the “Guarantors”). If the Company or any of its restricted subsidiaries acquires or creates a domestic restricted subsidiary, other than an Insignificant Subsidiary (as defined in the indenture pursuant to which the 4.625% Senior Notes were issued (the “Indenture”)), after the issue date, or any Insignificant Subsidiary ceases to fit within the definition of Insignificant Subsidiary, such restricted subsidiary is required to unconditionally guarantee, jointly and severally, on an unsecured basis, the Company’s obligations under the 4.625% Senior Notes.
The Company may redeem some or all of the 4.625% Senior Notes at any time on or after October 15, 2025 at specified redemption prices plus accrued and unpaid interest, if any, up to, but excluding the redemption date. Before October 15, 2023, and following certain equity offerings, the Company also may redeem up to 40% of the 4.625% Senior Notes at a price equal to 104.625% of the principal amount, plus accrued and unpaid interest, if any, up to, but excluding the redemption date. The Company may make such redemption only if, after such redemption, at least 50% of the aggregate principal amount of the 4.625% Senior Notes remains outstanding. In addition, at any time prior to October 15, 2025, the Company may redeem some or all of the 4.625% Senior Notes at a price equal to 100% of the principal amount, plus accrued and unpaid interest, if any, to the redemption date, plus an applicable “make-whole” premium. The discount and deferred issuance costs are being amortized, at an effective interest rate of 4.7%, to interest expense through the maturity date.
The Indenture contains covenants that restrict the Company’s ability to (i) pay dividends or make distributions on the Company’s common stock or repurchase the Company’s capital stock; (ii) make certain restricted payments; (iii) create liens or enter into sale and leaseback transactions; (iv) enter into transactions with affiliates; (v) merge or consolidate with another company; and (vi) transfer and sell assets. These covenants contain certain exceptions. Restricted payments are applicable only if the Company and subsidiaries designated as restricted subsidiaries have a net leverage ratio of greater than 3.5 to 1.0. In addition, if such net leverage ratio is in excess of 3.5 to 1.0, the restriction on restricted payments is subject to various exceptions, including the total aggregate amount not exceeding the greater of (A) $250 million and (B) 50.0% of EBITDA for the most recently ended four fiscal quarter period ended immediately prior to such date for which internal financial statements are available. The Company is in compliance with its debt covenants for the 4.625% Senior Notes as of September 30, 2023.
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ZIFF DAVIS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Repurchases of 4.625% Senior Notes on the open market were as follows (in thousands):
Three months ended September 30, 2022Nine months ended September 30, 2022
Principal repurchased$105,135 $181,238 
Aggregate purchase price$94,051 $167,661 
Gain on repurchase (1)
$10,211 $12,060 
(1)Presented within ‘Gain on debt extinguishment, net” on the Condensed Consolidated Statements of Operations.
Cumulatively as of September 30, 2023, the Company repurchased approximately $290 million in aggregate principal of its 4.625% Senior Notes.
1.75% Convertible Notes
On November 15, 2019, the Company issued $550.0 million aggregate principal amount of 1.75% convertible senior notes due November 1, 2026 (the “1.75% Convertible Notes”). The Company received proceeds of $537.1 million in cash, net of purchasers’ discounts and commissions and other debt issuance costs. A portion of the net proceeds were used to pay off all amounts outstanding under the then-existing Credit Facility. The 1.75% Convertible Notes bear interest at a rate of 1.75% per annum, payable semiannually in arrears on May 1 and November 1 of each year, beginning on May 1, 2020. The 1.75% Convertible Notes will mature on November 1, 2026, unless earlier converted or repurchased.
Under certain conditions set forth in the indenture, the 1.75% Convertible Notes bear additional interest of 0.50% per annum payable semiannually in arrears on May 1 and November 1 of each year, beginning on May 1, 2021. During the three and nine months ended September 30, 2023, the Company recorded $0.3 million and $7.7 million of interest expense related to the 1.75% Convertible Notes for such additional