Ziff Davis, Inc. (ZD) Q3 2026 Earnings Call Transcript

Operator: Good day, ladies and gentlemen, and welcome to the Ziff Davis Third Quarter 26 Earnings Conference Call. My name is Mike, I will be the operator assisting you today. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press 0. On this call will be Vivek R. Shah, CEO of Ziff Davis, and Bret Richter, chief financial officer of Ziff Davis. I will now turn the call over to Bret Richter, chief financial officer of Ziff Davis.

Bret Richter: Thank you.

Operator: You may begin.

Bret Richter: Thank you. Good morning, everyone. And welcome to the Ziff Davis Investor Conference Call for the Third Quarter of Fiscal Year 26. As the operator mentioned, I am Bret Richter, chief financial officer of Ziff Davis. And I am joined by our chief executive officer, Vivek R. Shah. A presentation is available for today's call. This presentation and our earnings release are available on our website www.ziffdavis.com. You can also access the webcast from this site. When you launch the webcast, there is a button on the viewer on the right hand side, which will allow you to expand the slides. After completing the presentation, we will be conducting a Q&A. The operator will provide instructions regarding the procedures for asking questions. In addition, you can email questions to investor@ZiffDavis.com. Before we begin our prepared remarks, allow me to read the safe harbor language. As you may know, this call and the webcast will include forward looking statements. Such statements may involve risks and uncertainties that could cause actual results to differ materially from the anticipated results. Some of those risks and uncertainties include, but are not limited to, the risk factors we have disclosed in our SEC filings, including our 10-K filings, recent 10-Q filings, various proxy statements and 8-K filings, as well as additional risk and uncertainties that we have included as part of the slideshow for the webcast. We refer you to discussions in those documents regarding safe harbor language and forward looking statements. In addition, our slides include reconciliation statements for non GAAP measures to their nearest GAAP equivalent. Now let me turn the call over to Vivek for his remarks.

Vivek R. Shah: Thank you, Bret, and good morning, everyone. We delivered third quarter results that were broadly in line with the expectations we set. During our second quarter call. Revenues and adjusted EBITDA grew sequentially and our adjusted EBITDA margin improved by 160 basis points as compared to the last quarter. So while the headwinds facing our businesses persist, we are encouraged by our sequential growth as we continue to focus on ways to create value for our shareholders. Year to date, we have deployed more than $0.02 $5 billion to repurchase our stock at attractive valuations. And have reduced our shares outstanding by nearly 14%. We continue to maintain a strong balance sheet, exiting the third quarter with $1.5 billion of cash and investments and a net cash position in excess of $5 billion continue to be careful and opportunistic capital allocators, while also considering monetization opportunities to unlock value for our shareholders. As I have said before, we see our portfolio as dynamic and every decision we take is measured against its impact on value, per share. Now I would like to share some observations about our 4 operating segments. Tech and Shopping revenues declined less than 4% year over year, consistent with our goal for revenue trends to improve each quarter through year end. This is the third straight quarter the rate of decline narrowed. From 18% in Q4 25 to 13% in Q1, 5% in Q2, and just under 4% in Q3. We anticipate this improving trend will continue into the fourth quarter. Which is historically the largest quarter of the year for Tech and Shopping. Our social commerce efforts continue to ramp nicely. And we relaunched the RetailMeNot app in the third quarter as a loyalty first experience built around guaranteed cashback verified promo codes, and extensive product deals. Signed in monthly users are more than doubled, and app commissions reached a 26 high in September up 25% year over year. While our tech and shopping brands continue to face the strongest search traffic headwinds in our portfolio, we have been able to counter those pressures by expanding our ad surfaces building direct audiences, and leveraging our trust authority to our benefit. Gaming entertainment revenues declined about 2% year over year. With lower advertising revenues at IGN being offset by growth in our Humble Bundle storefront. The gaming ad market has been weak, due to a light slate in the run up to this month's launch of GTA 6. We expect the slate to improve going into next year, which should support the gaming ad market in 2027. While the ad market for IGN has been soft, it continues to lead at the biggest events in the industry. At San Diego Comic Con, IGN led media outlets with a record 196 million video views up 65% year over year. At Gamescom, the industry's largest international showcase, IGN once again was the official production and media partner creating weeklong programming, including live streams localized in German, Chinese, and Japanese. The humble business has been growing its volume of bundled offerings, including expanding into tabletop games and comics delivering a record third quarter in revenue. Our charitable giving grew along with revenue, bringing our total cumulative gross donations to over $280 million. In health and wellness, revenues declined 9.5% against a relatively strong third quarter last year, The year over year drop was due primarily to lower health care professional focused advertising at MedPage today, whereas we noted last quarter, we are seeing spending shift to some emerging platforms. However, as we expected, MedPage grew sequentially over Q2, and we expect the sequential growth to continue through the end of the year. Consumer pharma advertising was stronger in Q3 with continued momentum in GLP 1 promotion for both diabetes and weight loss indications. Importantly, our consumer pharma commercialization business expanded its health care media network, with the addition of a long term exclusive contract with Harvard Health Publishing which will join our existing roster of world class partners, including the Cleveland Clinic, Mayo Clinic, and University of Pittsburgh Medical Center, which was added earlier this year. Our continuing medical education business, Prime, received the Prominent Industry Award best in class outcomes at the 26 Alliance Industry Summit annual meeting for a transformative initiative addressing critical health care gaps in underserved populations. At Lose It!, we introduced the lab. A new premium offering that pairs our AI powered food logging health metrics and nutrition insights. Giving members a more personalized view of their progress and giving us a stronger upsell path within our subscription base. In cybersecurity and Martech, revenues declined 4.6% due primarily to weakness in our SEO tools and email marketing businesses. Other Martech businesses performed well in the quarter. SMTP.com, our API based email delivery platform, supporting marketing newsletter and transactional use cases, continues to grow at a double digit rate as does Semantic Labs which helps subscription businesses acquire customers efficiently online. In cybersecurity, our consumer businesses led by the IPVanish brand continued to deliver strong growth, That momentum reflects a balanced go to market approach across direct to consumer and partner channels. Along with continued product improvement. In October, we added a next generation antivirus to IPVanish. Bringing more of consumers' privacy and security needs together in a single service. Turning to our AI initiatives. Last quarter, I noted that the majority of the new or updated code we release is written by 90% of pull requests across the product and engineering teams are written by AI. The result is a lower cost per feature delivered and a leaner cost base, with the capacity to support a broader product road map without growing headcount at the same pace. Increasingly, AI is showing up in what our customers experience, from AI assisted shopping search on RetailMeNot's app to AI powered nutrition insights at Lose It!. Beyond engineering, we are applying AI across operations, customer support, and sales where we are seeing gains in throughput. More broadly, we are very focused on efficiency and margin improvements at the company, And by the end of the year, we estimate headcount will be down 10%. While AI has helped improve our operating efficiency, the disruption of search traffic by Google, and LLMs has been a clear business headwind. Organic Google referrals to our properties declined approximately 37% year over year in the third quarter. Last year, the Q3 drop in referrals was approximately 23%. Making the 2-year drop over 50%. There are differences in categories. As I noted, tech and shopping experience shopper drops than gaming and entertainment, for instance. Google has also started to share a statistic called AI Impressions. Which measures how many times a link to a page was shown inside generative AI features. Across our digital media sites, our content was cited in AI overview and AI mode responses roughly 2.7 billion times in the quarter. nearly 10x the clicks those same sites received from Google Search. it is clear that our has significant value to users even though we are seeing a major reduction in referral traffic from search. As such, we will continue to focus on extracting appropriate value for intellectual property wherever it is used while continuing to diversify our revenues beyond search traffic. Looking ahead, we believe Ziff Davis is in a strong financial position with a substantial cash balance strong underlying free cash flow generation and 4 profitable segments built on trusted category leading brands. We will stay disciplined and patient opportunistically buying back our stock and pursuing acquisitions where we believe the potential returns are compelling, continuing to adapt our businesses to how our audiences find and engage with our high quality content. We believe this approach positions us well to keep creating value for shareholders. And with that, let me hand the call back to Bret.

Bret Richter: Thank you, Vivek. Let's discuss our financial results. Our earnings release reflects both our GAAP and adjusted financial results for Q3 26. My commentary will primarily relate to our Q3 26 adjusted financial results for continuing operations and their comparisons to the relevant prior period. Our results from continuing operations in prior periods exclude the results of the connectivity division, the sale of which was completed in Q2 2 thousand 26. Please see slide 4 for the summary of our Q3 2 thousand 26 financial results. Q3 26 revenues were $289 million as compared with revenues of $307 million for Q3 2 thousand 25. Q3 2 thousand 26 adjusted EBITDA was $82.2 million as compared with $97.8 million for the prior year period. Our adjusted EBITDA margin for the quarter was 28.4%, compared with an adjusted EBITDA margin of 31.9% in Q3 25. As Vivek noted, these results are broadly in line with the Q3 2 thousand 26 expectations we provided on our earnings call last quarter. Q3 26 adjusted diluted EPS was $1.39 compared to $1.40 in the prior year period. Reflecting in part our active share repurchase activity. Slide 5 reflects performance summaries for our 2 primary sources of revenue. Advertising and performance marketing and subscription and licensing. Q3 2 thousand 26 advertising and performance revenues declined 7.7%. Compared to the prior year period, while and licensing revenues were lower by 2.7%. Other revenues were up almost 30% increasing by $1 million year over year in Q3 2 thousand 26 due in part to the contribution of Semantic Labs and our Martech Group. Slides 6 through 9 reflect the Q3 financial results of each of our 4 reportable segments. Tech and Shopping adjusted EBITDA margins declined year over year due in part to a revenue mix shift related to the shift of traffic from organic web towards social media. However, Q3 2 thousand 26 margins were slightly improved as compared with Q2 26. Gaming and entertainment adjusted EBITDA margins were lower year over year due to several factors, including revenue mix and an increase in custom event and activation programs, which generally have lower margins than traditional display and video. Health and wellness adjusted EBITDA margins were lower primarily reflecting lower revenues, due in particular to the drop in pharma advertising at our professional businesses that Vivek noted earlier. And in our cybersecurity and Martech segment, adjusted EBITDA margins were down only slightly from the prior year period. Please refer to Slide 10 as we review our balance sheet. As of the end of Q3 26, we had $1.4 billion of cash and cash equivalents and approximately $100 million of long term investments. As of September 30, 2026, gross leverage was 2.5x trailing 12 months adjusted EBITDA, and our cash and cash equivalents exceeded our outstanding debt balances by $535 million. In the third quarter, we paid approximately $55 million of the approximately $200 million in tax obligations related to the Connectivity transaction. And we expect the vast majority of the remaining payments to be settled by the end of the first quarter of 2 thousand 27. As we noted last quarter, we are exploring ways to positively impact our aggregate tax obligations, including through the use of investment tax credits. Earlier this month, we satisfied the maturity of our 1.75% coupon convertible notes, paying $150 million including accrued interest. Our next significant outstanding debt maturity is in March 2028. Slide 11 shows the historic change in our share count since the end of 2022. During the third quarter of 26, we continued to deploy capital through share buybacks, repurchasing 1.7 million shares under a 10b5-1 plan. We deployed $92 million related to share repurchases in the quarter. Since the start of 2026, we have repurchased 5.5 million shares, reducing the share count year to date by nearly 14%. The total amount currently available for repurchase under our board's current buyback authorization is approximately 6 million shares. We spent $7 million related to prior period acquisitions during the third quarter of 26. And year to date, we have deployed a total of $16 million to support our M&A activities. Have ample cash at present to deploy in support of our capital allocation priorities, but we remain disciplined about valuation. As Vivek noted, we continue to seek opportunities to add businesses that attract prices, which we believe offer the potential for strong risk weighted cash on cash returns. Now I would like to offer some insight related to our current financial performance expectations for the fourth quarter of 26. Revenues in Q4 are expected to increase sequentially by a double digit percentage and decline low to mid single digits year over year. This should reflect the year over year rate of decline that is similar to, if not better than, the decline we experienced in Q3 26. Our adjusted EBITDA margin percentage is expected to increase sequentially but is expected to decline as compared with the prior year period to the low to mid thirties. We expect adjusted diluted EPS to be up slightly year over year reflecting the benefit of the year over year reduction in shares outstanding due to our active buyback program. Turning now to our supplemental information, Slide 14 provides a summary of our adjusted results from continuing operations through each quarter and the full year 2025 as well as the first 3 quarters of 26. Slides 15 through 18 show reconciliation statements for the various non GAAP measures to the nearest GAAP equivalents. Slide 19 includes a reconciliation of free cash flow from continuing and discontinued operations. Free cash flow in the third quarter of 26 was negative $100 million down from positive $108 million in Q3 2 thousand 25. Note that the prior period figure includes the connectivity business. As we noted last quarter, our conversion rate of adjusted to free cash flow in the second half of 26 is being negatively impacted by estimated tax payments, professional fees, and certain other items associated with the sale of the connectivity business. During the third quarter of 26, these items reduced our free cash flow by approximately $90 million by approximately $100 million on a year to date basis. Excluding these items, trailing 12 months transact transaction adjusted free cash flow, a supplemental measure which we reconcile in our earnings release and presentation, was $209 million Excluding these and similar discrete items, going forward, we expect continued strong LTM free cash flow conversion of our adjusted EBITDA. As we manage through the continued transition of the digital media and the impacts of AI, protecting our profitability is a priority for us. As Vivek discussed earlier, we believe that we can achieve this in part through our use of AI across the organization. However, we are also employing disciplined cost management throughout our businesses, including targeted spending cuts and increased operating efficiencies. This is in part why our margins improved sequentially this quarter and we plan to maintain this disciplined approach going forward. As we look ahead to the end of the year and into 2027, our primary financial objectives remain unchanged. Maintaining strong profitability, generating robust free cash flow, targeting investments to improve our growth trajectory, and working to highlight and realize the intrinsic value of our portfolio. And with that, I will now ask the operator to rejoin us to instruct you on how to queue for questions.

Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate your line is in the question key. You may press 2 if you would like to remove yourself from the queue. For participants using speaker equipment, it may be to pick up your handset before pressing the star key. 1 moment, please. While we begin. Okay. Our first questioner is Shyam Patil. With SIG.

Shantel: Hey. Good morning, Vivek and Bret. Thanks for taking my questions. I have a couple. The first 1, Vivek, could you talk a little bit more as to why drops in your traffic are not resulting in correspondingly large drops? In revenue? And then I have a follow-up.

Vivek R. Shah: Yeah. No. So it. it is a great question. So, as we said, organic Google traffic was down 37% in the quarter, but then company revenues were down a little under 6%, which is a reminder that not all of the businesses in our portfolio rely on Google traffic. Have subscription businesses. We have app businesses. We have newsletter businesses. And so the portfolio continues to be fairly diversified. Even with the disposition of connectivity. that is something to remind folks, which is connectivity was a large and growing business within our portfolio, that had very little exposure, to Google Search. But even with its disposition, we still maintain a pretty diversified portfolio. What I would also say is that even where Google traffic has been most important and where it is been most impacted in tech and shopping, would be at the top of that list, We have narrowed the decline 3 quarters in a row from -16% to under 4%. And then obviously, as we go forward, we start to lap some of those earlier quarters. And so I think that is evidence that the offsets that we have talked about in the past are working. Social commerce, video, licensing, the RetailMeNot app, which I talked about in the prepared remarks, direct audiences. And so, look, I think our position is we are not planning on a search recovery. and, in fact, are operating with the view that referrals are gonna continue to come down. But I think we are managing that as well as you can.

Shantel: Thank you. That. that is very helpful. And you also mentioned something, very interesting on the call. You said that believe you said something like your content is mentioned almost 3 billion times in AI overviews and AI mode. Which, you know, obviously, you know, points to the tremendous value of your content. Just wondering, how do you plan to. Or how do you think you guys can extract more monetary value from that over time.

Vivek R. Shah: Yeah. Look, so that statistic is new. It comes from Google's Google Search Console. So this comes from Google. And it is a really useful statistic for the reasons you just said, which is the citation number and the AI impression number, does demonstrate how relevant our content is to AI Answers both to Google in terms of you know, locating and using sources and then, obviously, the user being on the other end of the query or the search. And as we know, Google is seeing a significant growth in their query volume, I believe it is. This is the their print or their in their last call, I think query volume is at a 5-year high. So the user is on the other side of that. Our content is an incredibly important input. You know, monetizing that relevance is the priority. And so you know, simply, we remain open to signing licensing deals. Which would be a method in which we can extract value out of the use of our content within these systems. I do think our litigation with OpenAI will bring clarity around this area and subject, and that hopefully can move things along. At the same time, look, I think that it is the fact that we are so well cited, shows our trust, and marketers are in increasingly factoring AI visibility into kind of the media partners they pick. So that is sort of a more near-term and kind of direct connection between the relevance. But look, we need to get value for our contributions. And so I think the great news is that you know, as you would expect, brands like ours and content like ours do well within these systems. But, yes, there is a gap. Between usage and monetization.

Shantel: Thank you, Vivek. Thank you, Bret.

Operator: Thank you. Our next questioner is Ronald Josey. With Citi.

Ronald Josey: Hi. This is James Hallock on for Ronald. Thanks for taking our questions. First, on gaming and entertainment, Humble continues to perform well. Revenue per customer was up And with GTA launching in a couple of weeks, curious how you are thinking about IGN advertising and Humble through the fourth quarter and what does a strong blockbuster window historically do for that segment?

Vivek R. Shah: Historically, it is very good. And I think what is happened is just to you know, maybe expand a little bit on the dynamics. As I think you may know, GTA has been delayed multiple times. I think 1 of the things that has happened is other IP kind of does not want to compete with it And so as it delayed, it delayed. And so I think the entire gaming slate was pretty weak for the last year, more than the last year. And so the theory and the hope and the expectation ultimately is that with GTA being launched, and that is now a hard launch and it is, you know, we are talking in a in a couple of weeks, that more IP will come out. And as more IP comes out, there is more marketing support for that IP. So the issue we have at IGN generally is a demand issue. it is not a supply issue, meaning, yes, there are-- so I should point this out. The single largest property from a search referral point of view is actually IGN. But it is also amongst the properties that is held up well because a lot of its search referral is around game help, which is very maps heavy, so game maps. that is a very hard thing to necessarily replicate. So we do get a lot of direct traffic. Other thing I will point out just in terms of the IGN monetization model is it is more heavily video vertical video, and social video than it is even web traffic. So it is ironic that even though the Google referrals hold up there, a lot of the monetization is around is around video content, which is not Google search related. And so this does become a demand issue. it is not a supply side challenge, which is what we have had more in tech and shopping and so, look, I. You know, it is always hard to predict. I would say that it is probably more into 2027. I think you are gonna start seeing, and there are dates now on a bunch of IP, that we can point to. And as those games launch, those will unlock marketing dollars.

Ronald Josey: Thanks. That. that is helpful. And then just a quick 1 on the AI. Initiatives that you highlighted. Can you just talk to us about what you are seeing in productivity and in product velocity? And then how you are thinking about balancing reinvestment with letting that leverage flow through to margin into 27? Thanks.

Vivek R. Shah: Yeah. No, listen, it is a great question. And, you know, you take a step back, You know, having done something like 90 acquisitions, over the years at Ziff Davis, we have accumulated a fair amount of tech debt. And we view the role of AI in eradicating that debt as being pretty exciting. And we are seeing it. I will use Humble as a great example, We are days away from relaunching the Humble platform which needed it. There are elements into the platform that interfered with conversions and customer experience that we think the new platform will address and help ultimately accelerate growth. This had been frankly, a multiyear project that in a matter of months has been brought to completion, actually kind of restarted and done within a matter of months. And so from my point of view, this you know, tech that exists in different pockets at different know, at different levels within different businesses. But our ability to address that debt then allows us to speed features and product development. And the speeding of features and product development should generate top line growth you know, new ways in which we can engage with audiences and customers, new products. At the same time, look. I think we want some portion of that to address the margin challenges that we have. Bret talked a little bit about that in his prepared remarks, but we are very focused on margin expansion within the company. We have made a little bit of progress in Q3, but we need to make more. So I think it is a mix. I think it is how do we leverage AI, for efficiencies, I mentioned, you know, we are gonna exit the year with 10% less headcount. that is not all AI. I will not say that, but it is a good portion of what we are working on. So, look, I think it is a mix. I think it is a case by case. Assessment. Alright. Thanks a lot, Vivek.

Operator: Thank you. We now have Rishi Jaluria with RBC.

Rishi Jaluria: Oh, wonderful. Hey, Vivek. Hey, Bret. Thanks so much for taking my questions. Maybe I wanna start with, you know, continuing on the SEO versus you know, AI search. You are you are you are showing. Look. I think we all see the industry wide issues that are going on with SEO. The same time, you are you are clearly getting a good amount of, mix with AI overview driven traffic. You know, maybe can you talk about, number 1, how should we be thinking about that mix shift dynamic, and is there an element in which know, overall kind of impressions actually starts to go a little bit more favorable to you because of you know, how much AI referrals, AI overview, is kinda working in your favor. And maybe just number 2, can you talk about. You know, you talked a little bit about some of the vertical video and all that kind of stuff, but where are you seeing the most traction from off platform monetization to help offset some of those headwinds? And I have got a quick follow-up.

Vivek R. Shah: Yeah. No. Look. So, you know, I think we. You know, in previous calls, we gave a framework where we said something like a roughly a third of revenues depended on web traffic, and search was roughly 40% of that traffic and we. We are not updating that split every quarter, and it is changed because obviously, with connectivity, that. The sale of connectivity pushes it up mechanically because that was not really web driven. But you know, lower search referrals have pushed it back down, but I guess the direction is the same. You know, it is all about developing new ad surfaces and monetization. And I would say that, you know, 2 areas in particular have been green shoots. So social platforms in general, both for vertical video but also for affiliate commerce. that is been a more recent unlock. So vertical video has been you know, an important part, particularly IGN's business model that we are bringing to other of the digital media businesses and seeing some early success there, But what is new, generally speaking, this comes more out of our tech and shopping business, is leveraging social platforms for commerce, for affiliate commerce. Historically, we were very web dependent for affiliate commerce, and now social presents itself. Obviously, we are trying to we are trying to stimulate growth within the app experience at RetailMeNot. I think those things are quite interesting. And then the other thing to just point out is you know, growth in kind of the nonadvertising portions of our business. that is where a Lose It! becomes important, and that is where a humble becomes important, and that is where an IPVanish becomes important. And those businesses are doing well in this market environment. So look, I mean, I think that you know, we have got a number of different irons in the fire. Which I think is important. And we are seeing green shoots in some of them. And so this is a, you know, this is a little bit of a balancing as we continue to see. And, look, I do continue to believe search referrals will go down. That is what we are seeing. We obviously see. I gave in my prepared remarks, an acceleration in that decline. So we are gonna. We are planning around that. And I think as we manage these other pieces, both the diversification and business models, but also the within monetization and audience on the media side I think we get through this reasonably well.

Rishi Jaluria: Got it. No. Thanks, Vivek. that is really helpful. Maybe just on the health and wellness side. You know, I think we can we can all tell there is there is clearly a lot of maybe disruptive, but maybe, you know, additive potential for the health care industry as a result of AI. You talked a little bit about, kind of the drop in subscription, customers. And some of the higher ARPU areas in health and wellness. Can you maybe talk a little bit about you know, kind of what. what is what is kind of going on there, and where are their opportunities? You know, you have mentioned leveraging AI and Lose It!, but maybe to double down on the transformational potential of AI in health care, especially to the provider side of the equation. Maybe can you just walk us through your efforts there? Thanks.

Vivek R. Shah: Yeah. No. Look. We are very excited. So the main subscription business is Lose It!, by the way, that you will see something in the quarterly statistics around subscribers, just to be clear. Lose it used to sell what they called lifetime subscriptions. It was 1 price, a higher price point that was meant to exceed LTV. We have suspended that practice. And so we are no longer selling lifetime subscriptions in any meaningful way if at all. I think for from our point of view, building a renewable base is important and extending LTV by bringing in features like AI logging and, the lab. And just so just to explain that. So logging is 1 of the main issues with all of these types of apps. Creating a ability to take a picture and log instead of typing we think, is a big improvement in the user experience and you know, reduces friction. And when you reduce friction and you make it easy for people to log, they are gonna continue to log. So as we are seeing improved logging, we are seeing improved retention at which point LTVs go up. So that is 1. 2, what the lab is designed to do is essentially be an AI driven nutritionist in your pocket where now that you have done logging we are able to use our database. We are able to understand how other customers are experiencing different consumption. Able to bring in, you know, other sort of health metric data into the app for maybe other third parties to start to give you more of a nutritionist type experience where you are getting insight and you are getting advice. Those are all examples of again, using AI technology to improve the experience, improving the experience to drive LTV. When we drive LTV, it opens up our marketing allowable so we could start to spend. We have stopped spending into lose it subscriptions. Almost entirely relying on organic. You need to kinda I think, to drive growth, need to invest in marketing. So that is kind of how that all works on the consumer side. Look, I do think we are excited for what that is, and a lot of the challenges within that segment are on the professional side. They really are not on the consumer side. So I mentioned Lose It!, but there is also on the on the pharma commercialization side, on the consumer side, you know, we are seeing real positive signs, and the Harvard Health deal, which I mentioned, is a big deal for us. And so we now represent Cleveland Clinic, Mayo Clinic, Harvard, you know, University of Pittsburgh Medical Center. These are titans. Within the health care ecosystem, and where they are exclusive advertising monetization partners. And so we look to expand that too.

Rishi Jaluria: Very helpful. Thank you.

Operator: Thank you. Our next questioner is Robert Coolbrith with Evercore.

Robert Coolbrith: Great. Thanks very much. I think, yeah, others in the category of established that, you know, non session based revenue could potentially get up to around half of total revenue, sort of similar business mix. So just wonder if you could maybe talk to that, where you are in that curve today in terms of efforts to diversify the revenue streams, maybe get away you know, session based revenue, and where you think that could go? And I have a couple of follow ups.

Vivek R. Shah: cannot. Well, yeah, Robert. So, I mean, it is what I was talking about with Rishi, which is, you know, we have said in the past, like, a third of the revenue depends on web traffic. So we are we are a little bit different, I think, than other players in that we have a lot of non-sort-of-media, nontraffic businesses. You know, I mentioned a bunch of those. So, look, I think that is a little bit of a difference in what we are doing. And then I think. What I think, you know, the majority of even our web businesses are today not traffic. Dependent. So I think we have been diversified, and we have been that way for a while. And, again, I think it is the way I would look at it is it is social. So that is, you know, Instagram, Facebook, Snap, TikTok, it is YouTube. Which is an incredibly important platform. it is inbox. So by that, I mean email. There may be notifications and messaging. Elements as well there is app. So meaning mobile app. there is browser extension even, which we have within our shopping business. These are. Like, when we when we sort of talk about non web or what you refer to as non sessions, I think those are the panoply of things in which all of our brands are at various levels of success and adoption.

Robert Coolbrith: Got it. The. You know, the mitigation playbook which you are you are rolling out, it sounds like quite successfully. Yeah. There are areas where that has not been fully deployed, where there could be an to do more or areas maybe where frankly because of you know, demographics or, you know, other factors you just have not felt the need yet to deploy that mitigation playbook?

Vivek R. Shah: No, absolutely. I mean, I would tell you that if you go across the portfolio, in each of the segments, I feel like each segment is strongest in 1 of those. And the real opportunity here is to make all segments strong in all of those. And so we have a lot of effort around knowledge sharing, playbook sharing, and making sure and even moving people around to bring some of. To bring some velocity. To where we see performance gaps. And we do see performance gaps, to be perfectly honest. But to me, that is the opportunity is to close those performance gaps so that you know, the businesses that have figured out, for instance, how to leverage social platforms for commerce, that is really only happening in 1 business. You know? And then we have some businesses that. Or in 1 segment. We have some businesses that are doing some smart, interesting custom content work. Again, not happening in other places. So look. The good news is that the opportunities exist. I am not known for my patients, and so, you know, what we need to do is move things along and we are doing concrete things within the company to do that.

Bret Richter: And maybe I will just add. I mean, the mitigation playbook goes beyond the revenue diversification within advertising. I mean, we were a business prior to the connectivity sale that was approaching 50% subscription and licensing revenue. We. You know, part of the this. And subscription licensing revenue is still material for the overall enterprise. Made the determination to execute on the connectivity transaction as a play in the mitigation playbook. Overall, mitigation of the value of the company in the public markets and to recapture a gap between trading value and intrinsic value. Our capital allocation strategy and investing our stock is part of the mitigation playbook. I think, you know, we have a lot of tools, and, of course, Vivek, that the other aspect of the mitigation playbook is managing the bottom half of the income statement and our and our expenses. So, I mean, I think we have a lot of actions that are underway. Obviously, fighting some of these broad pressures in the market for traditional web and traditional traffic. But you know, we are running a lot of different plays.

Robert Coolbrith: Yeah. 1 last 1 for you. Just wanted to ask on any impression you have around I o. IOS 26, some of the changes made there in the Safari browser. Do you do you view those as a potential opportunity? Do advertisers need to spend more time, money with endemic websites directly versus using programmatic audience extension given some of the changes we are seeing in the market. Thank you.

Vivek R. Shah: Yeah. I mean, even without the, the iOS change, I think, generally, we are seeing more of an interest in aligning with trusted brands, in contextual content. This is where I think a lot of marketers want the strong AI visibility players to align with because there is a different issue, which is how much AI slop is in the ecosystem that is getting that is getting essentially monetized with programmatic ads. So even when you get away from maybe some of the difficulties that the iOS change will create around behavioral advertising and targeting. I also think there is just a environmental question that a lot of marketers have, which is, hey. Where are my ads running, and what is it against? And, you know, that is always existed, I guess, in digital advertising, but I think becomes more acute. So generally speaking, yes, I do think that aligning with trusted brands and creating programs that are well beyond spots and dots on web pages, which is a lot of what we do within CNET as a. As the market leader in tech and IGN as a market leader in gaming and health and. You know, everyday health as a market leader in health and in pharma, that is what we attempt to do, and I do think that can only help.

Robert Coolbrith: Got it. Thank you very much.

Operator: Thank you. We now hear from Cory Carpenter. With JPMorgan.

Cory Carpenter: Hey, guys. This is Cory Carpenter on for Brian. Appreciate you taking the question. Wondering, I guess you kinda touched on it, but as you evaluate kinda the potential value creating opportunities, across the portfolio, You know, what factors are kinda most important, you know, to continue investing in the business, pursuing a transaction, or maybe taking a different approach? Thanks.

Vivek R. Shah: Yeah. No. Thanks for asking the question. Look. The connectivity sale I think, demonstrated that we are gonna act when the market undervalues a business and I think the market is undervaluing all of the businesses collectively and then and then the businesses individually. So we will continue to evaluate opportunities and really it is kind of simple. Every decision is measured against sort of the impact on our share price. Rishi? So this is value per share. And we saw that the connectivity transaction had a meaningful impact. On ZD's stock price. And so, you know, look, I we are open to dialogue. Gonna do things as long as it creates value, but what we are not gonna do is do it to get cash. We do not need cash right now. But we do need share value growth. So to me, I am and we are acutely focused on the per share price of ZD. And if we believe a transaction has a positive impact on that, we will entertain that transaction.

Cory Carpenter: that is helpful. Thank you.

Operator: We now have Christopher Kuntarich. With UBS.

Steven Ju: K. Thanks, guys. Hi, Vivek. Hi, Bret.

Vivek R. Shah: So I was thinking Welcome. Yeah.

Steven Ju: Thank you. I was wondering if you can help us think through because it feels like some of the structural pressures on the business you know, should be coming off because as painful as some of the declines from Google search traffic has been in the past, it sounds like that has largely deindexed as a contributor. So even if it continues to decline, it is not gonna need to affect you as meaningfully going into the future. So that is, I guess, 1 vector to think about. And then I guess among sort of the. At the advertising verticals that you have, you know, so can you talk about some of the pressures that you might have seen in the background and you know, where that ends up know, 6 months, 12 months from now? Because, I mean, bring up the gaming and entertainment segment. I think nobody wants to be there ahead of GTA, but it seems like the sector itself had probably a lot of rationalization and terms of content development over the last several years, so maybe there is less marketers there. So can you come up. Talk about, you know, on a vertical by vertical basis, like, where you are in terms of that vertical specific rationalization, and then where we are on the path to start seeing the total dollars and advertising start to recover that. Thanks.

Vivek R. Shah: Yeah. No. it is great. And I am I am glad you asked to do it vertical by vertical because often that is the most productive way to start to think about our company. So I will start with tech and shopping. As I said, you know, the loss is narrowing, so your calculation is right that the, you know, the challenges should start to mitigate and the opportunities to start to act. To start to, add up and get to a positive growth perspective. I am not in the. I am not gonna be in the prediction business right now or quarter to quarter in our commentary. But, again, the direction there, I think, looks pretty good. On the gaming and entertainment side, as I. As you just rightly pointed out, a little bit of a sector issue, and, you know, how much more content rationalization and how is the underlying health of the video game industry gonna play out is a big factor on the game and entertainment piece. If you are on the side of hey. Things are gonna start to improve going into 2027. That will be good. If you say, hey. there is another year or another few quarters of rationalization, look. We are gonna still be, you know, muddling as we are doing right now. Think on the health and wellness side, for us, it is actually there that is. We have got a little bit of a structural issue on the MedPage side where clearly, we are getting. You know, we are losing share. And you know, that is not because physician engagement is low. Physician engagement with MedPage remains really strong, but. And we are doing things to expand into new distribution channels, things like, you know, getting integrated in EHRs at point of care. But there, we are seeing some competitive tension. Having said all of that, the pharma side of it, look, The consumer pharma side of it looks very good. I think it is an interplay between those 2 things. Can consumer pharma outrun what is happening on the direct to provider side? And then, obviously, lose it and some of the other non pharma businesses. So, look, I think that the way I would characterize it all without making a prediction as to when the inflection point is directionally everything seems in the right direction, but nothing's up. Rishi, in aggregate. And that you know, we are we are we are. We obviously understand that. And we are doing everything we can to point the company back to growth.

Steven Ju: Thank you.

Operator: Thank you. With no remaining questions in the queue, I will turn the floor back over to your call hosts for closing remarks.

Vivek R. Shah: Thank you, Mike. And of course, thanks everybody for your continued interest, your continued investment, and for joining us today on our call. We look forward to wrapping up 2026 heading into 2027. Engaging with you in this interim period, and then hosting you all again when we announce our year end results. Thank you.

Operator: This does conclude today's conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation. Goodbye.