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01/11 04:07
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call summary indicates steady growth across various segments, with a notable 35% increase in free cash flow. The Q&A section highlights management's openness to strategic opportunities, including potential divestitures and M&A, which suggests proactive capital allocation. Despite some uncertainties around AI impacts and market dynamics, the company's strong cash generation and shareholder return plans, including stock repurchases, support a positive outlook. Given the market cap, the stock price is likely to see a moderate positive movement of 2% to 8% over the next two weeks.
Revenue Q3 2025 revenues were $363.7 million, as compared with revenues of $353.6 million for the prior year period, reflecting growth of nearly 3%. The growth was driven by three of the five reportable segments, including a return to growth for the Cybersecurity & Martech segment.
Adjusted EBITDA Q3 2025 adjusted EBITDA was $124.1 million, as compared with $124.7 million for the prior year period, reflecting a decline of less than 1%. The decline was influenced by factors such as the wind-down of the games publishing business and timing of certain expenses in the Cybersecurity & Martech segment.
Adjusted Diluted EPS Q3 2025 adjusted diluted EPS was $1.76, up from $1.64 in Q3 2024, reflecting growth of more than 7%. This increase was partly due to share repurchases, which reduced the adjusted weighted average fully diluted shares by nearly 3.3 million shares or 7.5%.
Tech & Shopping Revenue Revenue dropped 2% in Q3 2025, with adjusted EBITDA down 12%. This was primarily driven by the continued wind-down of the games publishing activities, which had a negative year-over-year revenue swing of $6.9 million. Excluding game publishing, the segment grew in both revenues and adjusted EBITDA.
Gaming & Entertainment Revenue Revenues were about 4% lower year-over-year, with adjusted EBITDA growth of nearly 3%. The decline in revenue was attributed to the timing of title releases, while year-to-date revenues are up approximately 2%.
Health & Wellness Revenue Revenue grew 13% year-over-year in Q3 2025, with adjusted EBITDA growth of 18%. The growth was balanced across subscription, display, and performance marketing revenue, driven by pharma commercialization programs and digital health solutions like the Lucid app.
Connectivity Revenue Revenue grew 2% year-over-year in Q3 2025. The growth was impacted by the timing of several deals shifting into Q4, but year-to-date revenues are up 7%. Investments in new product development also influenced the results.
Cybersecurity & Martech Revenue Revenue grew 2% year-over-year in Q3 2025. Growth was driven by strong performance in consumer VPN and consumer cloud backup, although adjusted EBITDA declined by approximately $500,000 due to timing issues.
Advertising and Performance Marketing Revenue Q3 2025 advertising and performance marketing revenue grew 5.9% year-over-year, driven by strong performance in various segments.
Subscription and Licensing Revenue Q3 2025 subscription and licensing revenue grew by 2% year-over-year, reflecting steady growth across the company's offerings.
Free Cash Flow Q3 2025 free cash flow was $108.2 million, 35% higher than the prior year period. This increase highlights the company's ability to generate significant cash flow, which supports its stock repurchase program and M&A activities.
Speedtest Certified: Launched in September, it provides a localized Wi-Fi certification program targeting enterprise verticals under the Speedtest brand. It has strong global demand and certified its first customer in October.
New Connectivity Product: Planned for Q4 launch, it leverages Ekahau's core capabilities for network validation, diagnostics, troubleshooting, and continuous connectivity testing. Target customers include ISP technicians and IT organizations.
HALO: An AI platform launched in Health & Wellness to identify and target high-intent audiences, maximizing campaign ROI. Early client response has been strong.
IMAGINE: A cognitive AI platform launched in Gaming & Entertainment, combining cultural intelligence with predictive audience modeling. Currently in private beta with a full rollout planned for early 2026.
Cybersecurity & Martech: Revenue grew 2% in Q3, driven by strong performance in consumer VPN and cloud backup. Acquired Semantic Labs, a customer acquisition platform for SaaS.
Health & Wellness: Achieved 13% revenue growth and 18% adjusted EBITDA growth in Q3. Growth balanced across subscription, display, and performance marketing revenue.
Gaming & Entertainment: Q3 revenues were 4% lower year-over-year, but adjusted EBITDA grew nearly 3%. Humble Bundle had its best quarter of the year, with subscription revenues up 5%.
AI Integration: AI is being used to enhance products and improve operational efficiency. For example, 80% of user-submitted coupon codes in the Shopping business are now processed automatically with AI.
Segment Reporting: Enhanced segment-level reporting from 2 to 5 segments, providing better financial insights and encouraging investor engagement.
Shareholder Value Evaluation: Engaged outside advisers to evaluate potential transactions to unlock shareholder value. No final decisions yet, but the company is open to maintaining its current profitable structure.
Stock Repurchase: Repurchased 3.6 million shares in 2025, deploying $109 million, representing 85% of year-to-date free cash flow.
Tech & Shopping Segment: Revenue dropped 2% in Q3, with adjusted EBITDA down 12%, primarily due to the wind-down of game publishing activities. This segment faces challenges from the negative revenue impact of amortization exceeding revenue in game publishing, which significantly affects adjusted EBITDA.
Gaming & Entertainment Segment: Revenues were 4% lower year-over-year, with lumpy revenue patterns due to the timing of title releases. This creates unpredictability in financial performance.
Connectivity Division: Adjusted EBITDA margin was impacted by the timing of contracts and investments in product development, cloud services, and sales expenses for new products. These investments are ahead of revenue generation, creating short-term financial strain.
Cybersecurity & Martech Segment: Adjusted EBITDA declined by approximately $500,000 due to timing issues of certain expenses, despite revenue growth. This indicates operational inefficiencies or challenges in expense management.
Games Publishing Business: Significant decline in revenues, with negative net revenue reported due to amortization exceeding revenue. This has a high contribution margin impact on adjusted EBITDA.
Stock Valuation: The company believes its stock is undervalued, reflecting a disconnect between market cap and intrinsic value. This could impact investor confidence and capital raising efforts.
Fiscal Year 2025 Guidance: Anticipated financial performance metrics are expected to fall within the lower half or end of the guidance range, indicating potential underperformance relative to initial expectations.
Revenue Guidance: Ziff Davis reaffirmed its fiscal year 2025 guidance range but anticipates key financial metrics (revenues, adjusted EBITDA, and adjusted diluted EPS) to fall within the lower half of the guidance range. Adjusted EBITDA is expected to be closer to the lower end of the range. The fourth quarter is expected to be the seasonally largest revenue quarter.
Segment-Specific Projections: The Connectivity division expects revenue growth to accelerate in Q4 due to timing benefits, underlying pipeline strength, and new product introductions. Cybersecurity & Martech segment returned to growth in Q3 and anticipates continued momentum, particularly in consumer VPN and cloud backup. Gaming & Entertainment is on track for revenue growth in Q4, driven by the seasonally important period.
New Product Launches: The Connectivity division launched Speedtest Certified in September and plans to launch another product in Q4 targeting Internet service provider technicians and IT organizations. Early interest in these products has been promising.
AI Integration: Ziff Davis launched two AI-driven platforms: HALO in Health & Wellness to target high-intent audiences and IMAGINE in Gaming & Entertainment for predictive audience modeling. IMAGINE is in private beta with a full rollout planned for early 2026.
Capital Allocation: The company plans to continue its active stock repurchase program and pursue M&A opportunities that generate attractive cash-on-cash returns. It has repurchased 3.6 million shares year-to-date and plans to utilize a 10b5-1 Plan for further repurchases.
Share Buyback Program: Ziff Davis increased its share buybacks to capitalize on the current valuation disconnect in the price of its stock. Year-to-date, the company has repurchased 3 million shares, deploying $109 million or close to 85% of its year-to-date free cash flow. Through today's date, more than 3.6 million shares have been repurchased since the start of 2025. The company has nearly 2.75 million shares remaining under its stock repurchase authorization and plans to utilize a 10b5-1 Plan to continue repurchasing shares.
The earnings call summary indicates steady growth across various segments, with a notable 35% increase in free cash flow. The Q&A section highlights management's openness to strategic opportunities, including potential divestitures and M&A, which suggests proactive capital allocation. Despite some uncertainties around AI impacts and market dynamics, the company's strong cash generation and shareholder return plans, including stock repurchases, support a positive outlook. Given the market cap, the stock price is likely to see a moderate positive movement of 2% to 8% over the next two weeks.
The earnings call reveals strong financial performance across most segments, with notable revenue growth and positive adjusted EBITDA figures. The Q&A section addresses potential concerns, such as margin contraction, with management providing reasonable explanations. The company's proactive approach to AI and legal actions against OpenAI, alongside new product developments, also supports a positive outlook. Despite some uncertainties, the overall sentiment is positive, with strong growth in key areas and reaffirmed guidance, suggesting a likely stock price increase of 2% to 8% over the next two weeks.
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