Ziff Davis Misses Its Own Estimates, Promises ‘Significant’ M&A
Ziff Davis missed its own forecasts for the fourth quarter, which it called an “anomaly.”
“It was our best revenue growth quarter of the year and our highest level of free cash flow generation since the 2021 spinoff of Consensus; we just came up a touch short in a couple of parts of the business, adding up to roughly ten million of revenues, falling out of a quarter with nearly $413 million in total revenues, very unusual for us to miss our own estimates, even slightly,” Chief Executive Officer Vivek Shah said on today’s earnings call. “We were expecting some upside in our Humble Games portfolio as well as some bookings in our Connectivity business, but simply did not materialize in Q4.”
Shah noted that the company returned to bottom line growth and “outstanding free cash flow” and those trends should continue in 2025. Ziff Davis also changed its reporting structure, breaking down from two to five segments: Technology & Shopping, Gaming & Entertainment, Health & Wellness, Connectivity and Cybersecurity & Martech.
M&A on the Horizon
Expect M&A from Ziff Davis coming up.
“We continue to pursue transactions of various sizes across all of our businesses, and we look forward to a significant level of M&A activity in 2025 and beyond,” CFO Bret Richter said on the call.
Shah said last year was “healthy” from an M&A perspective, deploying $225 million in 2024 and after almost no activity in 2023.
“It’s worth noting that things are happening—the pipeline right now is very active, and so our hope is that 2025 will be at least consistent in terms of capital deployment for M&A versus 2024,” Shah said. “If we see great brands that have some struggle from a financial point of view, that’s where you’re going to see us strike. So look, we have the cash, as we pointed out, we have the borrowing capacity… it’s a balance between, we have been patient. But we’re also impatient, in some ways, to really get some of these things across the finish line and I mean all optimistic about it.”
Search Algorithm Impact & Diversification
Addressing concerns about declines in traffic driven by search algorithms, Shah emphasized that the company’s business model is well-diversified beyond traditional traffic monetization.
- Traffic-dependent ad revenue represents roughly 35% of total revenue
- Search traffic accounts for approximately 40% of total visits
- AI-driven search results remain limited, with AI overviews appearing in just 12% of the company’s top queries
- Year-over-year click-through rate analysis shows no material impact from AI-generated search results
Key Financial Figures (Year-over-Year Comparison)
- Revenue increased 5.9% to $413 million
- Income from operations decreased to $78.5 million compared to $80.7 million
- Net income increased 1% to $64 million compared: net income per diluted share increased to $1.43 compared to $1.29
- Advertising and performance marketing revenue rose nearly 11% to $258 million
- Ziff Davis ended the quarter with approximately $664 million in cash, cash equivalents and investments after deploying about $6.4 million for acquisitions
- Revenue guidance for 2025 of $1.44 billion to $1.5 billion, up 2.9% to 7.2%
Technology & Shopping and Health & Wellness represent the largest portions of revenue with 26% each, or about $362 million for the year. The former grew 9.5% from a year earlier and the latter 0.1%. That’s followed by Cybersecurity & Martech with 20%, or about $284 million for the year, down 2.6% from a year earlier. The company expects Cybersecurity & Martech to return to growth in the second half of this year.
Ziff Davis has had some issues with advertising and said to expect “mid single digit ad growth outlook at our midpoint, [which] is prudent given the experience we’ve had the last couple of years,” Shah said.
