Ziff Davis, Inc. (ZD) Earnings

Management highlights

- **Divestment and Capital Allocation** * Completed the sale of the connectivity business to Accenture for $1.2 billion at a 14.5x multiple of trailing 12 months adjusted EBITDA less capex, a transformative transaction that unlocks shareholder value. * YTD 2026, the company has deployed over $200 million to repurchase 4.5 million shares, reducing outstanding shares by nearly 11% in seven months. In Q2 2026 alone, 2.6 million shares were bought back for $121.5 million. * Post-transaction, ~$200 million will be used for related tax obligations, and $149 million in convertible debt maturing November 2026 will be repaid in cash, leaving the company with a strong net cash position. * Management will remain disciplined in capital allocation, exploring additional asset monetization opportunities and small-to-mid-market acquisitions that deliver strong risk-adjusted returns. - **Operational Growth Initiatives by Segment** * Tech and Shopping: Growing audiences via off-platform social (Instagram, Facebook, TikTok, YouTube), CTV and events, now generating meaningful affiliate commissions directly from social channels. CNET and PCMag rank among the most cited sources for major LLMs, driving demand from marketers for association with trusted, high-authority brands. * Gaming and Entertainment: IGN's game help tools grew traffic 11-30% YoY; IGN Live 2026 drew 10,000 in-person attendees and 300 million total global viewers. Women in Gaming expansion continued with U.S. and U.K. events. * Health and Wellness: MedPage achieved sequential Q2 revenue growth over Q1, and is expanding distribution via EHR-integrated newsletters at point of care. Healthy Careers added two major exclusive medical association job board partnerships. DTC advertising and subscription businesses are seeing strong growth from GLP-1 related promotional spend, with new GLP-1 support features added to the Lose It app. The hospital media network expanded with the addition of University of Pittsburgh Medical Center. * Cybersecurity and MarTech: IPVanish grew YoY for the 5th consecutive quarter driven by white-label partnership growth and strong customer additions. SMTP.com has delivered consistent double-digit growth. Symantec Labs, acquired Q3 2025, delivered steady growth in its first full year of ownership. - **Firm-Wide AI Initiative Progress** * AI is now the core of product development, and the share of AI-authored released code has doubled in one quarter, with a majority of new/updated code now AI-generated. The company is on track to have nearly all code AI-authored by end-2026, shifting engineering focus to architecture and innovation. * 24% more code was shipped in Q2 2026 than Q1 2026 with lower engineering headcount, with stable quality, delivering targeted operating leverage via lower per-feature delivery costs and expanded roadmap capacity without proportional resourcing increases.

Guidance

- Q3 2026 continuing operations revenue is expected to increase sequentially from Q2 2026, but decline low to mid single digits year-over-year. Adjusted EBITDA margin is expected to improve modestly compared to Q2 2026. - Q4 2026 performance is expected to improve from Q3 2026, with a lower year-over-year rate of revenue decline, while adjusted EBITDA margins will be slightly down year-over-year. - Adjusted diluted EPS is expected to continue benefiting from share count reduction from active buyback programs. - Annual non-GAAP tax rate, excluding connectivity sale related tax payments, is expected to remain in the 24% to 25% range. - Free cash flow conversion of adjusted EBITDA in H2 2026 will be negatively impacted by discrete professional fees and taxes related to the connectivity sale, but strong conversion is expected for continuing operations excluding these items. - The vast majority of connectivity transaction related tax payments are expected to be completed by the end of Q1 2027.

Segment performance

After the sale of the connectivity business, Ziff Davis has 4 reportable segments. Consolidated Q2 2026 continuing operations revenue was $286.7 million, a 2.7% year-over-year decline. Adjusted EBITDA was $76.8 million, a 3.7% YoY decline, with an adjusted EBITDA margin of 26.8%. 1. **Tech and Shopping**: Revenue declined 5% YoY (a meaningful improvement from the 13% Q1 2026 decline). Adjusted EBITDA rose more than 8% YoY, with improved adjusted EBITDA margins driven by 2025 cost savings initiatives. This segment contributed 35-40% of total continuing operations revenue. 2. **Gaming and Entertainment**: Revenue grew nearly 1% YoY, driven by a record quarter at Humble Bundle that offset IGN ad revenue declines. Adjusted EBITDA fell slightly YoY, with lower margins due to higher marketing and content costs for Humble Bundle. This segment contributed ~20% of total continuing operations revenue. 3. **Health and Wellness**: Revenue declined nearly 5% YoY, and adjusted EBITDA declined nearly 10% YoY, driven by lower HCP advertising revenue at MedPage. Adjusted EBITDA margins declined due to the revenue decline flow-through. This segment contributed ~22% of total continuing operations revenue. 4. **Cybersecurity and MarTech**: Both revenue and adjusted EBITDA grew nearly 1% YoY. Adjusted EBITDA margins improved slightly YoY, led by strong growth at flagship consumer cybersecurity IPVanish and double-digit growth at SMTP email delivery. This segment contributed ~18% of total continuing operations revenue. By revenue type: Advertising and performance marketing revenue declined 6% YoY, subscription and licensing revenue was flat, and other revenue more than doubled to +$3.7 million YoY driven by Symantec Labs contribution.

Risks & headwinds

- Traditional search referral traffic for Tech and Shopping properties is declining, driven by the growing prevalence of Google AI Overview (AIO) that now covers 50% of relevant queries, creating headwinds for on-platform traffic. - MedPage HCP advertising faces structural pressure from large pharma clients reducing spend and shifting spending to lower-cost AI-based platforms, which have increased available inventory in the historically tight HCP ad market. - IGN ad revenue is currently depressed due to weak video game market conditions and a limited slate of major new releases, though management expects improvement with the planned November 2026 launch of GTA 6. - Forward-looking statements are inherently subject to risks and uncertainties that could cause actual results to differ materially from expectations, with additional risks detailed in the company's SEC filings (10-K, 10-Q, 8-K, proxy statements).

Analyst Q&A

• Q: What is the current demand environment for MedPage HCP advertising, what AI expansion opportunities is the company pursuing, and what gaming ad revenue improvement can be expected from the back half 2026 blockbuster game slate? /

  A: MedPage HCP advertising grew sequentially in Q2 2026, and sequential growth is expected to continue through 2026. Structural pressure remains from large pharma cutting spend and shifting to lower-cost AI platforms, so the company is focused on expanding distribution via EHR-integrated content; it does not plan to compete as an AI medical chatbot. Strong DTC consumer advertising and subscription growth continues, driven by GLP-1 related promotional spend. The highly anticipated November 2026 launch of GTA 6 is expected to drive meaningful IGN ad revenue recovery. Humble Bundle has adopted AI-led platform redevelopment that will enable much faster feature rollout to drive future revenue growth.

• Q: What is Ziff Davis' current M&A strategy, and what data monetization opportunities exist in the cybersecurity and MarTech segment? /

  A: Ziff Davis will continue its long-standing programmatic acquisition strategy focused on small-to-mid-market businesses ($5 million to $50 million EBITDA) with trusted, established brands. The company maintains high valuation discipline and will remain patient, prioritizing per-share shareholder value creation; broad market fears around digital assets have created attractive acquisition opportunities. Cybersecurity does not collect or monetize user data as a zero-log VPN provider. MarTech and media businesses do hold interesting data assets, and the company is exploring opportunities to leverage these assets for additional monetization, including data licensing and product improvement.

• Q: How is Ziff Davis addressing ongoing traditional search traffic headwinds for Tech and Shopping, and how is it growing off-platform channels? /

  A: 50% of relevant queries now have Google AIO placements, up from 36% last quarter, driving continued search referral declines industry-wide. The company is offsetting this with growing off-platform engagement across social channels, native apps, email (a largely non-disintermediated channel), and video, so ad revenue declines are smaller than web traffic declines. Ziff Davis' leading brands are among the most cited sources for Google AIO and major LLMs, which has driven new advertiser demand for association with trusted, high-authority brands that stand out from low-quality AI content. This strong citation position is translating into new media partnership opportunities.

• Q: What is your view on peer acquirer Bending Spoons' market performance, and what is your strategy for AI content licensing? /

  A: Bending Spoons has a similar model of acquiring and improving durable digital brands, and its strong market multiple confirms Ziff Davis' view that its own portfolio of trusted leading brands is undervalued at current share prices. Ziff Davis' response to this undervaluation is continued aggressive share buybacks to unlock value. For AI content licensing, Ziff Davis will not sign RAG-focused training agreements that do not deliver fair compensation for the use of its copyrighted foundational content.