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


For the quarterly period ended SeptemberJune 30, 20172022
OR
o☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
EXCHANGE ACT OF 1934


For the transition period from __________ to __________


Commission File Number: 0-25965

zd-20220630_g1.jpg
j2 GLOBAL,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.)
6922 Hollywood Boulevard, Suite 500
Los Angeles, California 90028114 5th Avenue New York, New York 10011 (212) 503-3500
(Address and telephone number of principal executive offices)
(323) 860-9200
(Registrant’s telephone number, including area code)


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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post 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 “accelerated“large accelerated filer,” “large accelerated“accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act). (Check one): 
Act.
Large accelerated filerý
ý
Accelerated filero
o
Non-Accelerated filero
o
Smaller reporting companyo☐
Emerging growth companyo
☐


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 o☐        No ý


AsThere were 47,191,454 shares outstanding of November 6, 2017, the registrant had 48,408,852 shares ofRegistrant’s common stock outstanding.
as of August 5, 2022.






j2 GLOBAL,ZIFF DAVIS, INC. AND SUBSIDIARIES
QUARTERLY REPORT
FOR THE QUARTER ENDED SEPTEMBERJUNE 30, 20172022


INDEX
PAGE
PAGE
3
4
5
6
8
710
3247
4560
4662
4763
4763
4763
4863
4863
4863
Item 6.  
64
4965



-2-


PART I.  FINANCIAL INFORMATION
Item 1.Financial Statements
Item 1.Financial Statements
j2 GLOBAL,
ZIFF DAVIS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands except share and per share data)
June 30, 2022December 31, 2021
ASSETS
Cash and cash equivalents$648,290 $694,842 
Short-term investments72,535 229,200 
Accounts receivable, net of allowances of $8,116 and $9,811, respectively (includes $6,152 and $9,272 due from related party, respectively)243,300 316,342 
Prepaid expenses and other current assets60,956 60,290 
Total current assets1,025,081 1,300,674 
Long-term investments128,460 122,593 
Property and equipment, net166,152 161,209 
Operating lease right-of-use assets48,565 55,617 
Trade names, net147,621 147,761 
Customer relationships, net248,522 275,451 
Goodwill1,603,340 1,531,455 
Other purchased intangibles, net140,597 149,513 
Deferred income taxes, noncurrent7,321 5,917 
Other assets27,436 20,090 
TOTAL ASSETS$3,543,095 $3,770,280 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable and accrued expenses$191,922 $226,621 
Income taxes payable, current4,027 3,151 
Deferred revenue, current194,522 185,571 
Operating lease liabilities, current24,867 27,156 
Current portion of long-term debt68,506 54,609 
Other current liabilities203 130 
Total current liabilities484,047 497,238 
Long-term debt1,033,695 1,036,018 
Deferred revenue, noncurrent9,246 14,839 
Operating lease liabilities, noncurrent43,634 53,708 
Income taxes payable, noncurrent11,675 11,675 
Liability for uncertain tax positions43,597 42,546 
Deferred income taxes88,217 108,982 
Other long-term liabilities34,788 37,542 
TOTAL LIABILITIES1,748,899 1,802,548 
Commitments and contingencies (Note 9)— — 
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 47,191,337 and 47,440,137 shares at June 30, 2022 and December 31, 2021, respectively.472 474 
Additional paid-in capital426,104 509,122 
Retained earnings1,451,316 1,515,358 
Accumulated other comprehensive loss(83,696)(57,222)
TOTAL STOCKHOLDERS’ EQUITY1,794,196 1,967,732 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY$3,543,095 $3,770,280 

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 June 30,Six Months Ended June 30,
2022202120222021
Total revenues$337,356 $341,293 $652,424 $652,950 
Cost of revenues (1)
46,004 48,785 92,104 92,637 
Gross profit291,352 292,508 560,320 560,313 
Operating expenses: 
Sales and marketing (1)
123,777 120,421 241,539 228,372 
Research, development and engineering (1)
19,721 17,705 38,148 37,380 
General and administrative (1)
101,967 111,698 204,184 224,996 
Goodwill impairment on business— 32,629 — 32,629 
Total operating expenses245,465 282,453 483,871 523,377 
Income from operations45,887 10,055 76,449 36,936 
Interest expense, net(6,956)(21,013)(18,466)(42,490)
Gain on sale of businesses— 823 — 2,802 
Unrealized loss on short-term investments(27,317)— (18,366)— 
Loss on investments, net(48,243)(16,677)(48,243)(16,677)
Other income (loss), net6,345 (816)8,744 (573)
(Loss) income from continuing operations before income taxes and (loss) income from equity method investment, net(30,284)(27,628)118 (20,002)
Income tax expense (benefit)10,051 (10,334)15,131 (17,218)
(Loss) income from equity method investment, net(6,101)(5,751)(6,886)18,519 
Net (loss) income from continuing operations(46,436)(23,045)(21,899)15,735 
Income from discontinued operations, net of income taxes— 38,762 — 77,905 
Net (loss) income$(46,436)$15,717 $(21,899)$93,640 
Net (loss) income per common share from continuing operations: 
Basic$(0.99)$(0.52)$(0.47)$0.35 
Diluted$(0.99)$(0.52)$(0.47)$0.33 
Net income per common share from discontinued operations:
Basic$— $0.87 $— $1.75 
Diluted$— $0.87 $— $1.65 
Net (loss) income per common share:
Basic$(0.99)$0.35 $(0.47)$2.10 
Diluted$(0.99)$0.35 $(0.47)$1.98 
Weighted average shares outstanding: 
Basic46,978,709 44,613,533 47,016,351 44,506,933 
Diluted46,978,709 44,613,533 47,016,351 47,130,979 
(1) Includes share-based compensation expense as follows:
Cost of revenues$142 $67 $226 $150 
Sales and marketing1,106 278 1,675 544 
Research, development and engineering852 458 1,481 876 
General and administrative5,603 5,066 11,038 10,029 
Total$7,703 $5,869 $14,420 $11,599 

September 30, 2017
December 31, 2016
ASSETS


Cash and cash equivalents$402,544

$123,950
Short-term investments—

60
Accounts receivable, net of allowances of $8,964 and $7,988, respectively187,482

199,871
Prepaid expenses and other current assets30,663

24,118
Current assets held for sale9,525

—
Total current assets630,214

347,999
Property and equipment, net71,333

68,094
Trade names, net106,713

115,853
Patent and patent licenses, net11,232

13,928
Customer relationships, net176,041

208,155
Goodwill1,107,988

1,122,810
Other purchased intangibles, net137,088

173,755
Deferred income taxes, non-current2,499

5,289
Other assets6,364

6,445
Non-current assets held for sale55,214
 —
TOTAL ASSETS$2,304,686

$2,062,328
LIABILITIES AND STOCKHOLDERS’ EQUITY




Accounts payable and accrued expenses$134,617

$178,071
Income taxes payable—

16,753
Deferred revenue, current86,782

80,384
Line of credit—
 178,817
Other current liabilities15
 64
Current liabilities held for sale4,436
 —
Total current liabilities225,850

454,089
Long-term debt999,198

601,746
Deferred revenue, non-current51
 1,588
Liability for uncertain tax positions48,740

46,537
Deferred income taxes, non-current40,915

40,357
Other long-term liabilities4,679

3,475
Non-current liabilities held for sale4,713

—
TOTAL LIABILITIES1,324,146

1,147,792
Commitments and contingencies—

—
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 47,623,709 and 47,443,716 shares, respectively476

474
Additional paid-in capital318,710

308,329
Retained earnings692,387

660,382
Accumulated other comprehensive loss(31,033)
(54,649)
TOTAL STOCKHOLDERS’ EQUITY980,540

914,536
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY$2,304,686

$2,062,328

See Notes to Condensed Consolidated Financial Statements

(Unaudited)

-4-
j2 GLOBAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited, in thousands except share and per share data)
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Total revenues$273,616
 $210,116
 $801,458
 $622,418
        
Cost of revenues (1)
42,371
 36,992
 126,339
 106,870
Gross profit231,245
 173,124
 675,119
 515,548
Operating expenses:   
    
Sales and marketing (1)
79,432
 46,425
 237,772
 143,155
Research, development and engineering (1)
12,431
 8,965
 35,737
 27,165
General and administrative (1)
76,425
 55,612
 232,118
 170,823
Total operating expenses168,288
 111,002
 505,627
 341,143
Income from operations
62,957
 62,122
 169,492
 174,405
Interest expense, net25,326
 10,436
 51,406
 30,971
Other (income) expense, net(3,890) (9,718) 660
 (9,805)
Income before income taxes41,521
 61,404
 117,426
 153,239
Income tax expense9,163
 15,835
 27,872
 43,958
Net income$32,358
 $45,569
 $89,554
 $109,281
        
Net income per common share:   
  
  
Basic$0.67
 $0.95
 $1.86
 $2.25
Diluted$0.66
 $0.94
 $1.81
 $2.24
Weighted average shares outstanding:   
  
  
Basic47,609,819
 47,310,011
 47,540,593
 47,775,798
Diluted48,521,082
 47,494,744
 48,745,680
 47,997,674
Cash dividends paid per common share$0.3850
 $0.3450
 $1.1250
 $1.0050
        
        
(1) Includes share-based compensation expense as follows:
       
Cost of revenues$120
 $116
 $357
 $314
Sales and marketing365
 423
 1,265
 1,388
Research, development and engineering296
 235
 815
 663
General and administrative3,782
 2,925
 11,303
 7,582
Total$4,563
 $3,699
 $13,740
 $9,947

See Notes to Condensed Consolidated Financial Statements


j2 GLOBAL,ZIFF DAVIS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(Unaudited, in thousands)
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Net (loss) income$(46,436)$15,717 $(21,899)$93,640 
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustment(24,265)3,256 (30,530)(5,168)
Consensus separation adjustment— — 4,056 — 
Other comprehensive (loss) income, net of tax(24,265)3,256 (26,474)(5,168)
Comprehensive (loss) income$(70,701)$18,973 $(48,373)$88,472 
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
        
Net income$32,358
 $45,569
 $89,554
 $109,281
Other comprehensive income (loss), net of tax:       
Foreign currency translation adjustment7,703
 (328) 23,616
 (9,566)
Change in fair value on available-for-sale investments, net of tax expense of zero for the three and nine months of 2017, respectively, and $1,378 and $1,440 for the three and nine months of 2016, respectively—
 (2,249) —
 (2,359)
Other comprehensive income (loss), net of tax7,703
 (2,577) 23,616
 (11,925)
Comprehensive income$40,061
 $42,992
 $113,170
 $97,356


See Notes to Condensed Consolidated Financial Statements (Unaudited)




-5-
j2 GLOBAL,

ZIFF DAVIS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
                                                          Six Months Ended June 30,
Cash flows from operating activities:20222021
Net (loss) income$(21,899)$93,640 
Adjustments to reconcile net (loss) income to net cash provided by operating activities: 
Depreciation and amortization118,943 130,226 
Amortization of financing costs and discounts1,398 14,058 
Non-cash operating lease costs5,913 6,714 
Share-based compensation14,420 12,363 
Provision for credit losses on accounts receivable(1,376)4,329 
Deferred income taxes, net(10,266)(11,853)
Gain on extinguishment of debt, net(1,393)— 
Gain on sale of businesses— (2,802)
Lease asset impairments and other charges168 7,829 
Goodwill impairment on business— 32,629 
Changes in fair value of contingent consideration(9)562 
Foreign currency remeasurement gain549 415 
Loss (income) from equity method investments6,886 (18,519)
Unrealized loss on short-term investments18,366 — 
Loss on investments, net48,243 16,677 
Decrease (increase) in: 
Accounts receivable (includes $8,351 and $0 with related parties)77,168 65,312 
Prepaid expenses and other current assets5,804 (7,720)
Operating lease right-of-use assets2,260 689 
Other assets(7,250)(701)
Increase (decrease) in: 
Accounts payable and accrued expenses(45,329)(23,438)
Income taxes payable8,825 (15,123)
Deferred revenue(11,882)2,499 
Operating lease liabilities(13,721)(14,218)
Liability for uncertain tax positions403 (3,567)
Other long-term liabilities(3,737)21 
Net cash provided by operating activities192,484 290,022 
Cash flows from investing activities: 
Proceeds from sale of available-for-sale investments— 663 
Investment in available-for-sale securities(15,000)— 
Purchases of equity method investment— (11,053)
Purchases of equity investments— (999)
Purchases of property and equipment(53,876)(57,766)
Proceeds from sale of assets— 6,033 
Acquisition of businesses, net of cash received(92,425)(89,489)
Net cash used in investing activities(161,301)(152,611)
Cash flows from financing activities: 
Payment of debt(72,853)(2,802)
Proceeds from term loan89,991 2,811 
Debt extinguishment costs(756)— 
Repurchase of common stock(76,345)(22,934)
Issuance of common stock under employee stock purchase plan5,235 4,232 
Exercise of stock options148 1,331 
-6-


 Nine Months Ended September 30,
 2017 2016
Cash flows from operating activities:   
Net income$89,554
 $109,281
Adjustments to reconcile net earnings to net cash provided by operating activities:   
Depreciation and amortization118,597
 88,569
Amortization of financing costs and discounts9,094
 7,224
Share-based compensation13,740
 9,947
Provision for doubtful accounts9,099
 9,072
Deferred income taxes, net3,859
 (2,328)
Loss on extinguishment of debt and related interest expense7,962
 —
Gain on sale of businesses(4,715) —
Decrease (increase) in:   
Accounts receivable4,711
 (7,631)
Prepaid expenses and other current assets(264) (663)
Other assets134
 (7,947)
Increase (decrease) in:   
Accounts payable and accrued expenses(49,324) (4,601)
Income taxes payable(26,359) (927)
Deferred revenue(75) (4,134)
Liability for uncertain tax positions1,554
 8,502
Other long-term liabilities1,429
 (11,824)
Net cash provided by operating activities178,996
 192,540
Cash flows from investing activities:   
Maturity of available-for-sale investments—
 145,005
Purchase of available-for-sale investments(5) (75,834)
Purchases of property and equipment(29,483) (17,447)
Acquisition of businesses, net of cash received(47,268) (91,401)
Proceeds from sale of businesses, net of cash divested33,508
 —
Purchases of intangible assets(1,320) (2,014)
Net cash used in investing activities(44,568) (41,691)
Cash flows from financing activities:   
Issuance of long-term debt, net636,598
 —
Payment of debt(255,000) —
Proceeds from line of credit, net44,981
 —
Repayment of line of credit(225,000) —
Repurchases of common stock and restricted stock(7,862) (56,083)
Issuance of common stock under employee stock purchase plan194
 191
Exercise of stock options1,108
 3,272
Dividends paid(54,346) (48,768)
Deferred payments for acquisitions(5,062) (18,939)
Other(45) 1,680
Net cash provided by (used in) financing activities135,566
 (118,647)
Effect of exchange rate changes on cash and cash equivalents8,600
 (2,169)
Net change in cash and cash equivalents278,594
 30,033
Cash and cash equivalents at beginning of period123,950
 255,530
Cash and cash equivalents at end of period$402,544
 $285,563
Deferred payments for acquisitions(7,094)(12,934)
Other(5)(1,294)
Net cash used in financing activities(61,679)(31,590)
Effect of exchange rate changes on cash and cash equivalents(16,056)(616)
Net change in cash and cash equivalents(46,552)105,205 
Cash and cash equivalents at beginning of period694,842 242,652 
Cash and cash equivalents at beginning of period associated with discontinued operations— 66,210 
Cash and cash equivalents at beginning of period associated with continuing operations694,842 176,442 
Cash and cash equivalents at end of period648,290 347,857 
Cash and cash equivalents at end of period associated with discontinued operations— 107,666 
Cash and cash equivalents at end of period associated with continuing operations$648,290 $240,191 


See Notes to Condensed Consolidated Financial Statements

(Unaudited)

-7-


ZIFF DAVIS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
Three and Six Months Ended June 30, 2021 and 2022
(Unaudited, in thousands, except share amounts)
Three Months Ended June 30, 2021
Accumulated
Common stockAdditional
paid-in		Retainedother comprehensiveTotal
Stockholders’
SharesAmountcapitalearningslossEquity
Balance, April 1, 202144,489,399 $445 $455,625 $882,071 $(63,230)$1,274,911 
Net income— — — 15,717 — 15,717 
Other comprehensive income, net of tax expense of zero— — — — 3,256 3,256 
Exercise of stock options30,234 — 887 — — 887 
Issuance of shares under employee stock purchase plan58,145 1 4,231 — — 4,232 
Exercise of 3.25% Convertible Note19,033 — — — — — 
Issuance of restricted stock, net198,579 2 (2)— — — 
Repurchase and retirement of common stock(87,155)(1)(5,570)(5,183)— (10,754)
Share based compensation— — 6,251 — — 6,251 
Balance, June 30, 202144,708,235 $447 $461,422 $892,605 $(59,974)$1,294,500 
Three Months Ended June 30, 2022
Accumulated
Common stockAdditional
paid-in		Retainedother comprehensiveTotal
Stockholders’
SharesAmountcapitalearningslossEquity
Balance, April 1, 202246,952,300 $470 $415,653 $1,508,802 $(59,431)$1,865,494 
Net loss— — — (46,436)— (46,436)
Other comprehensive loss, net of tax expense of zero— — — — (24,265)(24,265)
Issuance of shares under employee stock purchase plan76,741 1 5,234 — — 5,235 
Restricted stock issued, net354,407 3 (3)— — — 
Repurchase and retirement of common stock(192,111)(2)(2,483)(11,050)— (13,535)
Share based compensation— — 7,703 — — 7,703 
Balance, June 30, 202247,191,337 $472 $426,104 $1,451,316 $(83,696)$1,794,196 

-8-


Six months ended June 30, 2021
Accumulated
Common stockAdditional
paid-in		Retainedother comprehensiveTotal
Stockholders’
SharesAmountcapitalearningslossEquity
Balance, January 1, 202144,346,630 $443 $456,274 $809,107 $(54,806)$1,211,018 
Net income— — — 93,640 — 93,640 
Other comprehensive income, net of tax expense of zero— — — — (5,168)(5,168)
Exercise of stock options45,351 1 1,330 — — 1,331 
Issuance of shares under employee stock purchase plan58,145 1 4,231 — — 4,232 
Exercise of 3.25% Convertible Note19,033 — — — — — 
Vested restricted stock434,518 4 (4)— — — 
Repurchase and retirement of common stock(195,442)(2)(12,790)(10,142)— (22,934)
Share based compensation— — 12,363 — — 12,363 
Other, net— — 18 — — 18 
Balance, June 30, 202144,708,235 447 461,422 892,605 (59,974)1,294,500 
Six Months Ended June 30, 2022
Accumulated
Common stockAdditional
paid-in		Retainedother comprehensiveTotal
Stockholders’
SharesAmountcapitalearningslossEquity
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— — — (21,899)— (21,899)
Other comprehensive loss, net of tax expense of zero— — — — (30,530)(30,530)
Exercise of stock options5,439 — 148 — — 148 
Issuance of shares under employee stock purchase plan76,741 1 5,234 — — 5,235 
Restricted stock issued, net455,792 4 (4)— — — 
Repurchase and retirement of common stock(786,772)(7)(14,663)(61,675)— (76,345)
Share based compensation— — 14,420 — — 14,420 
Consensus separation adjustment— — — (3,915)4,056 141 
Other, net— — (16)11 — (5)
Balance, June 30, 202247,191,337 $472 $426,104 $1,451,316 $(83,696)$1,794,196 

See Notes to Condensed Consolidated Financial Statements (Unaudited)
-9-

ZIFF DAVIS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2017
(UNAUDITED)
1.Basis of Presentation

1.Basis of Presentation and Overview
j2 Global,
The accompanying Condensed Consolidated Financial Statements of Ziff Davis, Inc., together with and its subsidiaries (“j2 Global”Ziff Davis”, the “Company”, “our”, “us”, or the “Company”“we”), iswhether directly or indirectly wholly-owned, were prepared in accordance with U.S. generally accepted accounting principles ("GAAP"), and all adjustments considered necessary for a leading provider of Internet services. Through its Business Cloud Services Division, the Company provides cloud services to businesses of all sizes, from individuals to enterprises, and licenses its intellectual property (“IP”) to third parties. In addition, the Business Cloud Services Division includes j2 Cloud Connect, which primarily focuses on our voice and fax products. The Digital Media Division specializes in the technology, gaming, lifestyle markets and healthcare markets, reaching in-market buyers and influencers in both the consumer and business-to-business space.

The accompanying interim condensed consolidated financial statements include the accounts of j2 Global and its direct and indirect wholly-owned subsidiaries.fair presentation have been included. All intercompany accounts and transactions have been eliminated in consolidation.

The accompanying interim condensed consolidated financial statements are unaudited andCondensed 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”). Accordingly, they do not include allThe 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 informationdate of the Condensed Consolidated Financial Statements, as well as the reported amounts of revenues and note disclosures required by GAAP for complete financial statements althoughexpenses during the Company believes that the disclosures made are adequate to make that information not misleading. In the opinion of management, all adjustments (consisting ofreporting periods. Actual results could differ from those estimates. All normal recurring adjustments) consideredadjustments necessary for a fair presentation have been reflected inof these interim financial statements. It is suggested that these financial statementsCondensed Consolidated Financial Statements were made.
This Quarterly Report on Form 10-Q should be read in conjunction with the audited financial statements and the related notes theretoour Annual Report on Form 10-K for the year ended December 31, 2016 included in our Annual Report (Form 10-K)2021 filed with the SECSecurities and Exchange Commission ("SEC") on March 1, 2017. Accordingly, significant accounting policies15, 2022 and other disclosures normally provided have been omitted since such items are disclosed therein.
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
Use of Estimates

The preparation of consolidated financial statementsZiff Davis, Inc. is a vertically focused digital media and internet company whose portfolio includes leading brands in accordance with accounting principles generally acceptedtechnology, entertainment, shopping, health, cybersecurity, and martech. Our Digital Media business specializes in the United States of America (“GAAP”) requires managementtechnology, shopping, gaming, and healthcare markets, offering content, tools and services to make estimatesconsumers and assumptions that affect the reported amounts of assetsbusinesses. Our Cybersecurity and liabilities at the date of the financial statements,Martech business provides cloud-based subscription services to consumers and businesses including judgments about investment classifications,cybersecurity, privacy and the reported amounts of net revenue and expenses during the reporting period. We believe that our most significant estimates are those related to the valuation of assets acquired and liabilities assumedmarketing technology.
On October 7, 2021, in connection with the spin-off of its cloud fax business combinations, long-lived and intangible asset impairment, contingent consideration, income taxes and contingencies and allowances for doubtful accounts. On an ongoing basis, management evaluates its estimates based on historical experience and on various other factors thatdescribed further below, the Company believeschanged its name from J2 Global, Inc. to be reasonableZiff Davis, Inc. Additionally, starting October 8, 2021, the Company’s common stock began trading under the circumstances. Actualstock symbol “ZD.”
Discontinued Operations
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”). The Separation was achieved through the Company’s distribution of 80.1% of the shares of Consensus common stock to holders of J2 Global common stock as of the close of business on October 1, 2021, the record date for the distribution. The Company’s stockholders of record received one share of Consensus common stock for every three shares of J2 Global’s common stock. Ziff Davis, Inc., formerly J2 Global, Inc., retained a 19.9% interest in Consensus following the Separation (the “Investment in Consensus”). The accounting requirements for reporting the Company’s cloud fax business as a discontinued operation were met when the Separation was completed. Accordingly, the Condensed Consolidated Financial Statements reflect the results could materially differof the cloud fax business as a discontinued operation for all periods presented.Ziff Davis did not retain a controlling interest in Consensus.

On June 9, 2022, certain selling shareholders of Consensus executed an underwritten public offering pursuant to a registration statement filed by Consensus with the SEC for 2,000,000 shares of its common stock (including a 30-day option for the underwriters to purchase from those estimates.the selling shareholders an additional 300,000 shares at the public offering price less the underwriting discount). On June 10, 2022, the Company entered into a Fifth Amendment to its existing Credit Agreement, providing for the issuance of a senior secured term loan under the Credit Agreement (the “Term Loan Facility”), in an aggregate principal amount of approximately $90.0 million. During the three months ended June 30, 2022, the Company completed an exchange of 2,300,000 shares of its common stock of Consensus (the “Disposed Consensus Shares”) with the selling shareholders to settle the Company’s obligation to repay the $90.0 million outstanding aggregate principal amount of the Term Loan Facility plus related interest (the “Debt-for-Equity Exchange”) and the corresponding underwriting fees. Refer to Note 8 -

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ZIFF DAVIS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Debt for further discussion. As of June 30, 2022, the Company continues to hold 1.7 million shares of common stock of Consensus (the “Retained Consensus Shares”). The Investment in Consensus represents the investment into equity securities for which the Company elected the fair value option and subsequent fair value changes in the Consensus shares are included in the assets of and results from continuing operations. Refer to Note 4 - Investments and Note 5 - Discontinued Operations for additional information.

Allowances for Doubtful AccountsCredit Losses

j2 Global reservesThe Company maintains an allowance for receivablescredit losses on accounts receivable, which is recorded as an offset to accounts receivable and changes in such are classified as general and administrative expenses in the Condensed Consolidated Statements of Operations. The Company assesses collectability by reviewing accounts receivable on a collective basis where similar characteristics exist and on an individual basis when it may not be able to collect. These reservesidentifies specific customers with known disputes or collectability issues. In determining the amount of the allowance for credit losses, the Company’s Business Cloud Services segment are typically driven by the volume of credit card declines andCompany considers historical collectability based on past due invoices and are based on historical experience as well as an evaluation ofstatus. It also considers customer-specific information, current market conditions. These reserves for the Company’s Digital Media segment are typically driven by past due invoices based onconditions and reasonable and supportable forecasts of future economic conditions to inform adjustments to historical experience.loss data. On an ongoing basis, management evaluates the adequacy of these reserves.


Revenue Recognition


Business Cloud Services

The Company’s Business Cloud Services revenues substantially consist of monthly recurring subscription and usage-based fees, which are primarily paid in advance. In accordance with GAAP, the Company recognizes revenue when persuasive evidence of an arrangement exists, services have been provided, the sales price is fixed and determinable and collection is probable. The Company defers the portions of monthly, quarterly, semi-annually and annually recurring subscription and usage-based fees collected in advance and recognizes them in the period earned. Additionally, the Company defers and recognizes subscriber activation fees and related direct incremental costs over a subscriber’s estimated useful life.



Along with our numerous proprietary Business Cloud Services solutions,satisfies its obligation by transferring control of the goods or services to its customers in an amount that reflects the consideration to which the Company also generates revenues by reselling various third party solutions, primarily through our email security and online backup lines of business.  These third party solutions, along with our proprietary products, allow the Companyexpects to offer customers a variety of solutionsbe entitled in exchange for those goods or services. Refer to better meet their needs.  Note 2 - Revenues for additional details.

Principal vs. Agent

The Company determines whether reseller revenue should be reported on a gross or net basis by assessing whether the Company is acting as the principal or an agent in the transaction. If the Company is acting as the principal in a transaction, the Company reports revenue on a gross basis. If the Company is acting as an agent in a transaction, the Company reports revenue on a net basis. In determining whether the Company acts as the principal or an agent, the Company follows the accounting guidance under Topic 606 for principal-agent considerations and assesses: (i) if another party is involved in providing goods or services to the customer and (ii) whether the Company placescontrols the most weightspecified goods or services prior to transferring control to the customer.

Sales Taxes

The Company has made an accounting policy election to exclude from the measurement of the transaction price all taxes assessed by a governmental authority that are (i) both imposed on three factors: whether or notand concurrent with a specific revenue-producing transaction and (ii) collected by the Company (i)from a customer.

Investments

We account for our investments in debt securities in accordance with ASC Topic 320, Investments - Debt Securities (“ASC 320”). Our debt investments are typically comprised of corporate debt securities, which are classified as available-for-sale. Available-for-sale securities are carried at fair value with unrealized gains and losses included in other comprehensive income. All debt securities are accounted for on a specific identification basis.

The Company’s available-for-sale debt securities are carried at an estimated fair value with any unrealized gains or losses, net of taxes, included in accumulated other comprehensive loss on our Condensed Consolidated Balance Sheets. Available-for-sale debt securities with an amortized cost basis in excess of estimated fair value are assessed to determine what amount of that difference, if any, is caused by expected credit losses. Expected credit losses on available-for-sale debt securities are recognized in loss on investments, net on our Condensed Consolidated Statements of Operations, and any remaining unrealized losses, net of taxes, are included in accumulated comprehensive loss on our Condensed Consolidated Balance Sheets.

We account for investments in equity securities in accordance with ASC Topic 321, Investments - Equity Securities (“ASC 321”), which requires the accounting for equity investments, other than those accounted for under the equity method of accounting, generally be measured at fair value for equity securities with readily determinable fair values. Equity securities without a readily determinable fair value, which are not accounted for under the equity method of accounting, are measured at
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ZIFF DAVIS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
their cost, less impairment, if any, and adjusted for observable price changes arising from orderly transactions in the same or similar investment from the same issuer. Any unrealized gains or losses will be reported in current earnings.

We assess whether an other-than-temporary impairment loss on an investment has occurred due to declines in fair value or other market conditions. Refer to Note 4 - Investments for additional information.

The Retained Consensus Shares are equity securities accounted for at fair value under the fair value option, and the related fair value gains and losses are recognized in earnings. As the initial carrying value of the Retained Consensus Shares 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 Retained Consensus Shares at fair value and the negative book value was recorded as a gain at the date of Separation. The fair value of Consensus common stock is readily available as Consensus is a publicly traded company.

Variable Interest Entities (“VIEs”)

A VIE requires consolidation by the entity’s primary beneficiary. The Company evaluates its investments in entities in which it is involved to determine if the entity is a VIE and if so, whether it holds a variable interest and is the primary obligorbeneficiary. The Company has determined that it holds a variable interest in its investment as a limited partner in the arrangement, (ii)OCV Fund I, LP (“OCV Fund”, “OCV” or the “Fund”) and in Group Black, Inc. (“Group Black”). In determining whether the Company is deemed to be the primary beneficiary of the VIE, both of the following characteristics must be present:

a) the Company has latitudethe power to direct the activities of the VIE that most significantly impacts the VIEs economic performance (the power criterion); and

b) the Company has the obligation to absorb losses of the VIE, or the right to receive benefits of the VIE, that could potentially be significant to the VIE (the economic criterion).

The Company has concluded that, as a limited partner, although the obligations to absorb losses or the right to benefit from the gains is not insignificant, the Company does not have “power” over OCV because it does not have the ability to direct the significant decisions which impact the economics of OCV. The Company believes that the OCV general partner, as a single decision maker, holds the ability to make the decisions about the activities that most significantly impact the OCV Fund’s economic performance. As a result, the Company has concluded that it will not consolidate OCV, as it is not the primary beneficiary of the OCV Fund, and will account for this investment under the equity-method of accounting (see Note 4 - Investments).

OCV qualifies as an investment company under ASC Topic 946, Financial Services, Investment Companies (“ASC 946”). Under ASC Topic 323, Investments - Equity Method and Joint Ventures, an investor that holds investments that qualify for specialized industry accounting for investment companies in determining pricing and (iii) bears credit risk.accordance with ASC 946 should record its share of the earnings or losses, realized or unrealized, as reported by its equity method investees in the Condensed Consolidated Statements of Operations.


The Company records revenuerecognizes its equity in the net earnings or losses relating to the investment in OCV on a gross basis with respectone-quarter lag due to reseller revenue asthe 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 primary obligatorloss will be recorded in the arrangement,period in which the Company identifies the decline.

Ziff Davis has latitudevariable interests in determining pricingGroup Black. Group Black is a limited partnership and bears all credit riskis managed by its Board of Directors. As of June 30, 2022, the Company does not have voting rights in the investee and lacks the power and the ability to control or direct the significant economic operations of the investee. Ziff Davis is not a primary beneficiary and does not consolidate the entity under either the VIE model or the voting interest (“VOE”) model. Refer to Note 4 - Investments for additional detail.

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ZIFF DAVIS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Impairment or Disposal of Long-Lived Assets

The Company accounts for long-lived assets, which include property and equipment, operating lease right-of-use assets and identifiable intangible assets with finite useful lives (subject to amortization), in accordance with the provisions of ASC Topic. 360, Property, Plant, and Equipment (“ASC 360”), which requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability is measured by comparing the carrying amount of an asset to the expected undiscounted future net cash flows generated by the asset. If it is determined that the asset may not be recoverable, and if the carrying amount of an asset exceeds its estimated fair value, an impairment charge is recognized to the extent of the difference.

The Company assesses the impairment of identifiable definite-lived intangibles and long-lived assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors it considers important which could individually or in combination trigger an impairment include the following:

•Significant underperformance relative to expected historical or projected future operating results;

•Significant changes in the manner of our use of the acquired assets or the strategy for the Company’s overall business;

•Significant negative industry or economic trends;

•Significant decline in the Company’s stock price for a sustained period; and

•The Company’s market capitalization relative to net book value.

If the Company determined that the carrying value of definite-lived intangibles and long-lived assets may not be recoverable based upon the existence of one or more indicators of impairment, it would record an impairment equal to the excess of the carrying amount of the asset over its estimated fair value.

The Company assessed whether events or changes in circumstances have occurred that potentially indicate the carrying amount of definite-lived assets may not be recoverable. During the six months ended June 30, 2022, the Company did not have any events or circumstances indicating impairment of long-lived assets. During the three and six months ended June 30, 2022, Ziff Davis recorded an impairment of certain operating right-of use assets in the amount of $0.2 million. During the six months ended June 30, 2021, the Company recorded impairments of $7.8 million associated with our resellerits sublease tenants in default as a result of the economic effects of COVID-19. The impairment is presented in general and administrative expense on the Condensed Consolidated Statement of Operations.

The Company classifies its long-lived assets to be sold as held for sale in the period (i) it has approved and committed to a plan to sell the asset, (ii) the asset is available for immediate sale in its present condition, (iii) an active program partners.

j2 Global’s Business Cloud Services also include patent license revenues generated under license agreements that provide forto locate a buyer and other actions required to sell the payment of contractually determined fully paid-up or royalty-bearing license fees to j2 Global in exchange for the grant of non-exclusive, retroactive and future licenses to our intellectual property, including patented technology. Patent revenues may also consist of revenues generated fromasset have been initiated, (iv) the sale of patents. Patent license revenues arethe asset is probable and the transfer is expected to qualify for recognition as a sale within one year, (v) the asset is being actively marketed for sale at a price that is reasonable in relation to its current fair value, and (vi) it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. The Company initially measures a long-lived asset that is classified as held for sale at the lower of its carrying value or fair value less any costs to sell. Any loss resulting from this measurement is recognized when earned over the term of the license agreements. With regard to fully paid-up license arrangements, the Company recognizes as revenue in the period in which the license agreementheld for sale criteria are met. Conversely, gains are not recognized on the sale of a long-lived asset until the date of sale. Upon designation as an asset held for sale, the Company stops recording depreciation expense on the asset. The Company assesses the fair value of a long-lived asset less any costs to sell at each reporting period and until the asset is executedno longer classified as held for sale.

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ZIFF DAVIS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Business Combinations and Valuation of Goodwill and Intangible Assets

The Company applies the portionacquisition method of accounting for business combinations in accordance with GAAP and uses estimates and judgments to allocate the purchase price paid for acquisitions to the fair value of the payment attributableassets, including identifiable intangible assets and liabilities acquired. Such estimates may be based on significant unobservable inputs and assumptions such as, but not limited to, past usefuture revenue growth rates, gross and operating margins, customer attrition rates, royalty rates, discount rates and terminal growth rate assumptions. The Company uses established valuation techniques and may engage reputable valuation specialists to assist with the valuations. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. Fair values are subject to refinement for up to one year after the closing date of an acquisition as information relative to closing date fair values becomes available. Upon the conclusion of the intellectual property and amortizesmeasurement period, any subsequent adjustments are recorded to earnings.

Goodwill represents the remaining portion of such payments on a straight-line basis, or pro-rata revenue basis, as appropriate over the life of the licensed patent(s). With regard to royalty-bearing license arrangements, the Company recognizes revenues of license fees earned during the applicable period. With regard to patent sales, the Company recognizes as revenue in the period of the sale the amountexcess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in a business combination. Intangible assets resulting from the acquisitions of entities accounted for using the acquisition method of accounting are recorded at the estimated fair value of the assets acquired. Identifiable intangible assets are comprised of purchased customer relationships, trademarks and trade names, developed technologies and other intangible assets. Intangible assets subject to amortization are amortized over the period of estimated economic benefit ranging from one to twenty years and are included in general and administrative expenses on the Condensed Consolidated Statements of Operations. The Company evaluates its goodwill and indefinite-lived intangible assets for impairment pursuant to ASC Topic No. 350, Intangibles - Goodwill and Other (“ASC 350”), which provides that goodwill and other intangible assets with indefinite lives are not amortized but tested annually for impairment or more frequently if the Company believes indicators of impairment exist. In connection with the annual impairment test for goodwill, the Company has the option to perform a qualitative assessment in determining whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the Company determines that it was more likely than not that the fair value of the reporting unit is less than its carrying amount, it then it performs an impairment test of goodwill. The impairment test involves comparing the fair values of the applicable reporting units with their aggregate carrying values, including goodwill. The Company generally determines the fair value of its reporting units using the income approach methodology of valuation. If the carrying value of a reporting unit exceeds the patent(s) sold.reporting unit’s fair value, an impairment loss is recognized for the difference. In the second quarter of 2021, the Company recorded an impairment to goodwill associated with the plan to sell the Company’s B2B Backup business. No impairments to goodwill or other intangible assets were recorded during the six months ended June 30, 2022.


Contingent Consideration

Certain of the Company’s acquisition agreements include contingent earn-out arrangements, which are generally based on the achievement of future income thresholds or other metrics. The contingent earn-out arrangements are based upon the Company’s valuations of the acquired companies and reduce the risk of overpaying for acquisitions if the projected financial results are not achieved.

The Business Cloud Services business also generates revenues by licensing certain technology to third parties. These licensing revenuesfair values of these earn-out arrangements are recognized when earned in accordance with the termsincluded as part of the underlying agreement. Generally, revenue is recognizedpurchase price of the acquired companies on their respective acquisition dates. For each transaction, the Company estimates the fair value of contingent earn-out payments as part of the third party usesinitial purchase price and records the licensed technology overestimated fair value of contingent consideration as a liability on the period.

Digital Media

Condensed Consolidated Balance Sheets. The Company’s Digital Media revenues primarily consist of revenues generated from the sale of advertising campaignsCompany considers several factors when determining that are targeted to the Company’s proprietary websites and to those websites operated by third parties thatcontingent earn-out liabilities are part of the Digital Media business’s advertising network. Revenues for these advertising campaigns are recognizedpurchase price, including the following: (1) the valuation of our acquisitions is not supported solely by the initial consideration paid, and the contingent earn-out formula is a critical and material component of the valuation approach to determining the purchase price; and (2) the former shareholders of acquired companies that remain as earned, either when an ad is placed for viewing bykey employees receive compensation other than contingent earn-out payments at a visitor to the appropriate web page or when the visitor “clicks through” on the ad, depending upon the termsreasonable level compared with the individual advertiser.

Revenues for Digital Media business-to-business operations consist of lead-generation campaigns for IT vendors and are recognized as earned when the Company delivers the qualified leads to the customer.

j2 Global also generates Digital Media revenues through the license of certain assets to clients, for the clients’ use in their own promotional materials or otherwise. Such assets may include logos, editorial reviews, or other copyrighted material. Revenues under such license agreements are recognized when the assets are delivered to the client. Also, Digital Media revenues are generated through the license of certain speed testing technology which is recognized when delivered to the client through providing data services primarily to Internet Service Providers (“ISPs”) and wireless carriers which is recognized as earned over the term of the access period. The Digital Media business also generates other types of revenues, including business listing fees, subscriptions to online publications, and from other sources. Such other revenues are recognized as earned.

The Company determines whether Digital Media revenue should be reported on a gross or net basis by assessing whether the Company is acting as the principal or an agent in the transaction. If the Company is acting as the principal in a transaction, the Company reports revenue on a gross basis. If the Company is acting as an agent in a transaction, the Company reports revenue on a net basis. In determining whether the Company acts as the principal or an agent, the Company follows the accounting guidance for principal-agent considerations and the Company places the most weight on three factors: whether or not the Company (i) is the primary obligor in the arrangement, (ii) has latitude in determining pricing and (iii) bears credit risk.

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 Digital Media licensing program. 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.

Fair Value Measurements

j2 Global complies with the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) Topic No. 820, Fair Value Measurements and Disclosures (“ASC 820”), in measuring fair value and in disclosing fair value measurements. ASC 820 provides a framework for measuring fair value and expands the disclosures required for fair value measurements of financial and non-financial assets and liabilities.

As of September 30, 2017, the carrying value of cash and cash equivalents, short-term investments, accounts receivable, interest receivable, accounts payable, accrued expenses, interest payable, customer deposits and long-term debt are reflected in the financial statements at cost. With the exception of long-term debt, cost approximates fair value due to the short-term nature of such instruments. The fair valuecompensation of the Company’s outstanding debt was determined using the quoted market prices of debt instruments with similar terms and maturities, if available. As of the same dates, the carrying value of other long-term liabilities approximated fair value as the related interest rates approximate rates currently available to j2 Global.key employees. The contingent earn-out payments are not affected by employment termination.

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Property and Equipment
ZIFF DAVIS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Property and equipment are stated at cost. Equipment under capital leases is stated at the present value of the minimum lease payments. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets. The estimated useful lives of property and equipment range from 1 to 10 years. Fixtures, which are comprised primarily of leasehold improvements and equipment under capital leases, are amortized on a straight-line basis over their estimated useful lives or for leasehold improvements, the related lease term, if less.
The Company has capitalized certain internal use software and website development costs which are included in property and equipment. The estimated useful life of costs capitalized is evaluated for each specific project and ranges from 1 to 5 years.

Debt Issuance Costs and Debt Discount

j2 Global capitalizes costs incurred with borrowing and issuance of debt securities and records debt issuance costs and discounts as a reduction to the debt amount. These costs and discounts are amortized and included in interest expense over the life of the borrowing or term of the credit facility using the effective interest method.
Contingent Consideration

j2 Global measures theits contingent earn-out liabilities in connection with acquisitions at fair value on a recurring basis using significant unobservable inputs classified within Level 3 of the fair value hierarchy (see Note 6 - Fair Value Measurements)Measurements). The Company may use various valuation techniques depending on the terms and conditions of the contingent consideration including a Monte-Carlo simulation. This simulation uses a probability distribution for each significant input to produce hundreds or thousands of possible outcomes and the results are analyzed to determine probabilities of different outcomes occurring. Significant increases or decreases to these inputs in isolation would result in a significantly higher or lower liability with a higher liability capped by the contractual maximum of the contingent earn-out obligation. Ultimately, the liability will be equivalent to the amount paid, and the difference between the fair value estimate and the amount paid will be recorded in earnings. The amount paid that is less than or equal to the liability on the acquisition date is reflected as cash used in financing activities in our consolidated statementsCondensed Consolidated Statements of cash flows.Cash Flows. Any amount paid in excess of the liability on the acquisition date is reflected as cash used in operating activities.


j2 GlobalThe Company reviews and re-assesses the estimated fair value of contingent consideration on a quarterly basis, and the updated fair value could be materially different from the initial estimates or prior quarterly amounts. Changes in the estimated fair value of ourits contingent earn-out liabilities are reported in operating income, except for the time component of the present value calculation which is reported in interest expense. Adjustmentsand adjustments to the estimated fair value related to changes in all other unobservable inputs are reported in operating income.general and administrative expenses on the Condensed Consolidated Statements of Operations.



Income Taxes


Segment ReportingThe Company’s income is subject to taxation in both the U.S. and numerous foreign jurisdictions. Significant judgment is required in evaluating the Company’s tax positions and determining its provision for income taxes. During the ordinary course of business, there are many transactions and calculations for which the ultimate tax determination is uncertain. The Company establishes reserves for tax-related uncertainties based on estimates of whether, and the extent to which, additional taxes will be due. These reserves for tax contingencies are established when the Company believes that certain positions might be challenged despite the Company’s belief that its tax return positions are fully supportable. The Company adjusts these reserves in light of changing facts and circumstances, such as the outcome of a tax audit or lapse of a statute of limitations. The provision for income taxes includes the impact of reserve provisions and changes to reserves that are considered appropriate.


Accounting guidance establishes standardsThe Company accounts for income taxes in accordance with ASC Topic 740, Income Taxes (“ASC 740”), which requires that deferred tax assets and liabilities be recognized using enacted tax rates for the wayeffect of temporary differences between the book and tax basis of recorded assets and liabilities. ASC 740 also requires that public business enterprises report information aboutdeferred tax assets be reduced by a valuation allowance if it is more likely than not that some or all of the net deferred tax assets will not be realized. The valuation allowance is reviewed quarterly based upon the facts and circumstances known at the time. In assessing this valuation allowance, the Company reviews historical and future expected operating segmentsresults and other factors, including its recent cumulative earnings experience, expectations of future taxable income by taxing jurisdiction and the carryforward periods available for tax reporting purposes, to determine whether it is more likely than not that deferred tax assets are realizable.

ASC 740 provides guidance on the minimum threshold that an uncertain income tax benefit is required to meet before it can be recognized in their annual consolidatedthe financial statements and requiresapplies to all income tax positions taken by a company. ASC 740 contains a two-step approach to recognizing and measuring uncertain income tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that those enterprises report selected information about operating segments in interim financial reports. Accounting guidance also establishes standards forit is more likely than not that the position will be sustained on audit, including resolution of related disclosures about products and services, geographic areas and major customers.appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement. If it is not more likely than not that the benefit will be sustained on its technical merits, no benefit will be recorded. Uncertain income tax positions that relate only to timing of when an item is included on a tax return are considered to have met the recognition threshold. The Company operates as two segments: (1) Business Cloud Servicesrecognizes accrued interest and (2) Digital Media.penalties related to uncertain income tax positions in income tax expense on its Condensed Consolidated Statements of Operations.


ReclassificationsShare-Based Compensation


Certain prior year reported amounts have been reclassifiedWe account for share-based awards to conformemployees and non-employees in accordance with the provisions of ASC Topic 718, Compensation - Stock Compensation (“ASC 718”), which requirescompensation cost, measured at the grant date fair value, to be recognized over the employee’s requisite service period using the straight-line method. The measurement of share-based compensation expense is based on several criteria, including but not limited to the 2017 presentation.valuation model used and associated input factors, such as expected term of the award, stock price volatility, risk free interest rate, dividend rate and award

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ZIFF DAVIS, INC. AND SUBSIDIARIES
2.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
cancellation rate. These inputs are subjective and are determined using management’s judgment. If differences arise between the assumptions used in determining share-based compensation expense and the actual factors, which become known over time, we may change the input factors used in determining future share-based compensation expense. Any such changes could materially impact the results of operations in the period in which the changes are made and in periods thereafter. We estimate the vesting term based upon the historical exercise behavior of our employees.

Earnings Per Common Share (“EPS”)

On January 1, 2022, the Company adopted ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”) using the modified retrospective method. Following this adoption, the Company applies the if-converted method for the diluted net income per share calculation of convertible debt instruments. Prior to the adoption, the Company used the treasury stock method when calculating the potential dilutive effect of convertible debt instruments.

Recent Accounting Pronouncements

Recently issued applicable accounting pronouncements not yet adopted

In May 2014,March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards UpdateASU 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 (“ASU”LIBOR”) No. 2014-09, Revenue from Contracts with Customers, as a new Topic, Accounting Standards Codification (“ASC”) Topic 606. The new revenue recognition standard provides a five-step analysis of transactions to determine when and how revenue is recognized. The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expectsanother reference rate expected to be entitled in exchangediscontinued because of reference rate reform. The accommodations are available for those goods or services. all entities through December 31, 2022, with early adoption permitted. We are currently evaluating the effect the adoption of this update will have on our condensed consolidated financial statements and related disclosures.

Recently adopted accounting pronouncements

In August 2015,2020, the FASB issued ASU No. 2015-14, Revenue2020-06 Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40). The provisions of this update simplifies the accounting for convertible instruments by removing certain separation models in ASC 470-20, Debt - Debt with Conversion and Other Options, for convertible instruments. The convertible debt instruments will be accounted for as a single liability at the amortized cost if separation is no longer required unless (1) a convertible instrument contains features that require bifurcation as a derivative under ASC Topic 815, Derivatives and Hedging, or (2) a convertible debt instrument was issued at a substantial premium. Among other potential impacts, this change is expected to reduce reported noncash interest expense, increase reported net income, and result in a reclassification of certain conversion feature balance sheet amounts from Contracts with Customers: Deferralstockholders’ equity to liabilities. Similarly, the debt discount, that is equal to the carrying value of the Effective Date, which deferredembedded conversion feature upon issuance, will no longer be amortized into income as interest expense over the effective datelife of the new revenue standardinstrument. Additionally, ASU No. 2020-06 requires the use of the if-converted method to calculate the impact of convertible instruments on diluted earnings per share and include the effect of share settlement for periods beginning after December 15, 2016 to December 15, 2017, with earlyinstruments that may be settled in cash or shares, except for certain liability-classified share-based payment awards.

On January 1, 2022, the Company adopted ASU 2020-06 using the modified retrospective method. The cumulative effect of the changes made on the Condensed Consolidated Balance Sheet upon this adoption permitted but not earlier thanincreased the original effective date. carrying amount of the 1.75% Convertible Notes (as defined in Note 8 below) by approximately $85.9 million, increased retained earnings by approximately $23.4 million, reduced deferred tax liabilities by approximately $21.2 million and reduced additional paid-in capital by approximately $88.1 million.

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In March 2016,October 2021, the FASB issued Accounting Standards Update (“ASU 2016-08, Revenue from Contracts with Customers2021-08”), Business Combinations (Topic 606). This ASU is related to reporting revenue gross versus net, or principal versus agent considerations. This ASU is meant to clarify the guidance in ASU 2014-09, Revenue from Contracts with Customers, as it pertains to principal versus agent considerations. Specifically, the guidance addresses how entities should identify goods805): Accounting for Contract Assets and services being provided to a customer, the unit of account for a principal versus agent assessment, how to evaluate whether a good or service is controlled before being transferred to a customer, and how to assess whether an entity controls services performed by another party. In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing. This ASU is meant to clarify the guidance in FASB ASU 2014-09, RevenueContract Liabilities from Contracts with Customers. Specifically, the guidance addresses an entity’s identification of its performance obligationsThis update requires contract assets and contract liabilities acquired in a contract, as well as an entity’s evaluation of the nature of its promise to grant a license of intellectual property and whether or not that revenue is recognized over time or at a point in time. In May 2016, the FASB issued ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients. This ASU does not change the core principle of the guidance in Topic 606. Instead, the amendments provide clarifying guidance in a few narrow areas and add some practical expedients. In December 2016, the FASB issued 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers. The amendments in this ASU represent changes to clarify the Codification or to correct unintended application of guidance. This ASU must be applied retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption. The Company plans to adopt ASC 606 in the first quarter of 2018 using the modified retrospective method and will present the cumulative effect of applying the standard to all contracts not completed as of the adoption date. As of September 30, 2017, the Company is in the process of: (i) finalizing its review of customer contracts for its business segments and its assessment of the impact of the standard on these contracts; (ii) training internal stakeholders on the pending changes to revenue recognition policies; and (iii) assessing the need for appropriate changes to the Company’s business processes and controls to support revenue recognition and disclosures under the new standard. At this time, the Company anticipates that the primary change to its accounting policies for its customer contracts upon adopting ASC 606 will relate to the timing of when revenue is recognized. While revenue from certain contracts will continuecombination to be recognized at a point in time, revenue from other contracts may be required to be recognized over time. Currently,and measured by the Company expects changes in the revenue recognition for licensing and patents. The Company is still finalizing its assessment of customer contracts, including the specific dollar impact of any changes in recognition will haveacquirer on the Company’s consolidated financial statements. The Company expects to complete its implementation workacquisition date in time to adoptaccordance with ASC 606 for periods starting after December 31, 2017.



In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The amendments in this ASU modify how entities measure equity investments and present changes in the fair value of financial liabilities. Under the new guidance, entities will have to measure equity investments that do not result in consolidation and are not accounted under the equity method at fair value and recognize any changes in fair value in net income unless the investments qualify for the new practicality exception. A practicality exception will apply to those equity investments that do not have a readily determinable fair value and do not qualify for the practical expedient to estimate fair value under ASC 820, Fair Value Measurements, and as such these investments may be measured at cost.606. This ASU is effective for financial statements issued for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company does not expect the adoption of this ASU to have a material impact on our financial statements and related disclosures.

In February 2016, the FASB issued ASU No. 2016-02, Leases. This ASU establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company is currently evaluating the impact of this ASU on our financial statements. The Company currently has both capital and operating leases, both domestically and internationally, with varying expiration dates through 2025 in the aggregate amount of $65.9 million for the period ended September 30, 2017.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The amendments in this ASU replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. This ASU is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019. The adoption of this standard is not expected to have a material impact on our financial statements and related disclosures.

In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other than Inventory. The amendments in this ASU reduce the complexity in the accounting standards by allowing the recognition of current and deferred income taxes for an intra-entity asset transfer, other than inventory, when the transfer occurs. Historically, the income tax consequence was not recognized until the asset was sold to an outside party. This ASUupdate is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2017. Early2022, with early adoption is permitted.permitted, including in interim periods. The Company does not expectearly adopted ASU 2021-08 during the second quarter of 2022. An entity that early adopts in an interim period should apply the amendments (1) retrospectively to all business combinations for which the acquisition date occurs on or after the beginning of the fiscal year that includes the interim period of early application and (2) prospectively to all business combinations that occur on or after the date of initial application. Therefore, the adoption of this ASU 2021-08 was applied retrospectively to January 1, 2022. The adoption of ASU 2021-08 did not have a material impact on our condensed consolidated financial statements and related disclosures.


In January 2017,Reclassifications

Certain prior year reported amounts have been reclassified to conform to the FASB issued 2017-01, Business Combinations (Topic 805): Clarifying2022 presentation (see Note 2).

2.Revenues

Digital Media

Digital Media revenues are earned primarily from the Definitiondelivery of advertising services and from subscriptions to services and information.

Revenue is earned from the delivery of advertising services 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 Business. The amendments in this ASU providequalified sales lead is delivered, (iii) when a robust frameworkvisitor “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 recognized over time.

We also generate Digital Media subscription revenues through the license of certain assets to clients. Assets are licensed for clients’ use in determiningtheir 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 its software, and other related services. Revenue is recognized for these 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 setpoint in time depending on the nature of assetsthe 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 activitiesuse. 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
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recognized at the point in time that the hardware and software products are delivered and ownership is a business. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. Early adoption is permitted andtransferred to the standard should be applied prospectively. customer. Other service revenues are generally recognized over time as the services are performed.

The Company does not expectrecords revenue on a gross basis with respect to revenue generated (i) by the adoptionCompany 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 this ASU to havesubscription revenues which include subscription, usage-based and licensing fees, a material impact on our financial statementssignificant portion of which are paid in advance. The Company defers the portions of monthly, quarterly, semi-annual and related disclosures.annual fees collected in advance of the satisfaction of performance obligations and recognizes them in the period earned.


In January 2017, the FASB issued 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The amendments in this ASU simplify the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test and eliminating the requirement for a reporting unit with a zero or negative carrying amount to perform a qualitative assessment. Instead, under this pronouncement, an entity would perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unitAlong with its carrying amountnumerous proprietary Cybersecurity and would recognize an impairment changeMartech 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.

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Revenues from external customers classified by revenue source are as follows (in thousands). See Note 14 - Segment Information for additional information.
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Digital Media
Advertising(1)
$189,198 $198,385 $359,265 $375,673 
Subscription(1)
58,901 48,299 114,477 93,924 
Other(1)
10,601 7,293 19,785 11,253 
Total Digital Media revenues$258,700 $253,977 $493,527 $480,850 
Cybersecurity and Martech
Subscription$78,910 $87,608 $159,404 $172,510 
Total Cybersecurity and Martech revenues$78,910 $87,608 $159,404 $172,510 
Elimination of inter-segment revenues(254)(292)(507)(410)
Total Revenues$337,356 $341,293 $652,424 $652,950 
Timing of revenue recognition
Point in time$9,202 $11,097 $18,185 $17,062 
Over time328,154 330,196 634,239 635,888 
Total$337,356 $341,293 $652,424 $652,950 
(1) During the three and six months ended June 30, 2021, the Company reclassified approximately $1.5 million and $4.7 million of revenue from ‘Subscription’ to ‘Advertising’ and reclassified approximately $4.4 million and $6.5 million of revenue from ‘Subscription’ to ‘Other’ to conform with current period presentation. These reclassifications were made in order to separate games publishing revenue from traditional advertising revenue and to move job posting related revenue from subscriptions to advertising.

The Company has recorded $49.8 million and $46.2 million of revenue for the amount bythree months ended June 30, 2022 and 2021, respectively, and $122.7 million and $112.7 million of revenue for the six months ended June 30, 2022 and 2021, respectively, which was previously included in the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized is not to exceed the total amount of goodwill allocated to that reporting unit. In addition, income tax effects will be considered, if applicable. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted and should be adopted on a prospective basis. The Company does not expect the adoption of this ASU to have a material impact on our financial statements and related disclosures.

In February 2017, the FASB issued 2017-05, Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets. This ASU provides guidance which clarifies the scope and accounting for financial assets that meet the definition of an “in-substance nonfinancial asset” and defines the term, “in-substance nonfinancial asset.” In addition, this ASU also adds guidance for partial sales of nonfinancial assets. This ASU is effective for fiscal years beginning after December 15, 2017 and interim periods within those years. Early adoption is permitted and should be adopted retrospectively for all periods presented or retrospectively


with a cumulative-effect adjustment at the date of adoption. The Company does not expect the adoption of this ASU to have a material impact on our financial statements and related disclosures.

In March 2017, the FASB issued 2017-08, Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities. The amendments in this ASU shorten the amortization period for certain callable debt securities held at a premium. Specifically, the amendments require the premium to be amortized to the earliest call date. The amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. This ASU is effective for those fiscal years, beginning after December 15, 2018. Early adoption is permitted and should be adopted on a modified retrospective bases through a cumulative-effect directly to retained earningsdeferred revenue balance as of the beginning of each respective year.

As of June 30, 2022 and December 31, 2021, the periodCompany acquired $19.3 million and $9.5 million respectively, of adoption. deferred revenue in connection with the Company’s business acquisitions, which are subject to purchase accounting adjustments, as appropriate. Refer to Note 3 - Business Acquisitions for details.

Performance Obligations

We are often a party to multiple concurrent contracts with the same customer, or a party related to that customer. These situations require judgment to determine if those arrangements should be accounted for as a single contract. Consideration of both the form and the substance of the arrangement is required. The Company’s contracts with customers may include multiple performance obligations, including complex contracts when advertising and licensing services are sold together.

We determine the transaction price based on the amount to which we expect to be entitled in exchange for services provided. We include any fixed consideration within our contracts as part of the total transaction price. Our contracts occasionally contain some component of variable consideration, which is often immaterial and estimated. We do not include taxes assessed by a governmental authority that are (i) both imposed on and concurrent with a specific revenue-producing transaction and (ii) collected by us from the customer. The transaction price is allocated to each performance obligation based on its relative standalone selling price, which is determined at contract inception. In these instances, the Company determines its standalone selling prices based on the prices at which the Company separately sells each service.

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The Company doessatisfies its performance obligations within the Digital Media business upon delivery of services to its customers. In addition, the Company provides content to its advertising partners which the Company sells to its partners’ customer base and receives a revenue share based on the terms of the agreement.

The Company satisfies its performance obligations within the Cybersecurity and Martech business upon delivery of services to its customers. Payment terms vary by type and location of our customers and the services offered. The time between invoicing and when payment is due is not expect the adoption of this ASU to have a material impact on our financial statements and related disclosures.



In May 2017, the FASB issued 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting. The amendments in this ASU provide guidance about which changessignificant. Due to the terms or conditionsnature of share-based payment awardthe services provided, there are no obligations for returns.

Significant Judgments

Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require an entitysignificant judgment. Judgment is also required to apply modification accountingdetermine the standalone selling price for each distinct performance obligation.

Performance Obligations Satisfied Over Time

Our Digital Media business consists primarily of performance obligations that are satisfied over time. This was determined based on a review of the contracts and the nature of the services offered, where the customer simultaneously receives and consumes the benefit of the services provided. Satisfaction of these performance obligations is evidenced in Topic 718. Specifically, an entity should account for the effects of a modification unless all the following ways:

Advertising

•Website reporting by the Company, the customer, or a third-party contains the delivery evidence needed to satisfy the performance obligations within the advertising contract
•Successfully delivered leads are met: (1) The fair value (or calculated valueevidenced by either delivery reports from the Company’s internal lead management systems or intrinsic value, if such an alternative measurement methodthrough e-mail communication and/or other evidence of delivery showing acceptance of leads by the customer
•Commission is used)evidenced by direct site reporting from the affiliate or via direct confirmation from the customer

Subscription

•Evidence of delivery is contained in the Company’s systems or from correspondence with the customer which tracks when a customer accepts delivery of any assets, digital keys or download links

Revenue is recognized based on delivery of services over the contract period for advertising and on a straight-line basis over the contract period for subscriptions. We believe that the methods described are a faithful depiction of the modified award istransfer of goods and services.

Our Cybersecurity and Martech business consists primarily of performance obligations that are satisfied over time. This has been determined based on the same asfact that the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used)nature of services offered are subscription based where the customer simultaneously receives and consumes the benefit of the original award immediately beforeservices provided regardless of whether the original award is modified. Ifcustomer uses the modification does not affectservices or not. Depending on the individual contracts with the customer, revenue for these services are recognized over the contract period when any of the inputsfollowing materially distinct performance obligations are satisfied:

•Faxing capabilities are provided (included in discontinued operations through October 7, 2021)
•Voice, email marketing and search engine optimization as services are delivered
•Consumer privacy services and data backup capabilities are provided
•Security solutions, including email and endpoint are provided

The Company has concluded the best measure of progress toward the complete satisfaction of the performance obligation over time is a time-based measure. The Company recognizes revenue on a straight-line basis throughout the subscription period, or as usage occurs, and believes that the method used is a faithful depiction of the transfer of goods and services.

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Performance Obligations Satisfied at a Point in Time

The Company’s Digital Media business has technology subscriptions that have standalone functionality. As a result, they are considered to be functional intellectual property where the performance obligations are satisfied at a point in time. This is evidenced once a digital key is delivered to the valuation technique thatcustomer. Once the entity useskey is delivered to value the award,customer, the entity is not required to estimate the value immediately before and after the modification; (2) The vesting conditionscustomer has full control of the modified award aretechnology and the same asCompany has no further performance obligations. The Company has concluded that revenue is recognized once the vesting conditionsdigital key is delivered. The Company believes that this method is a faithful depiction of the transfer of goods and services.

Transaction Price Allocation to Future Performance Obligations

As of June 30, 2022, the aggregate amount of transaction price that is allocated to our performance obligations was approximately $27.5 million and is expected to be recognized as follows: 34% by December 31, 2022, 65% by December 31, 2023 and the rest thereafter. The amount disclosed does not include revenues related to performance obligations that are part of a contract with original award immediately before the original award is modified; and (3) The classificationexpected duration of 12 months or less or portions of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. This ASU is effective for those fiscal years, beginning after December 15, 2017. Early adoption is permitted and should be adopted on a prospective basis. The Company does not expect the adoption of this ASUcontract that remain subject to have a material impact on our financial statements and related disclosures.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 and enter into other jurisdictions.personnel.


The Company completed the following acquisitions during the first ninesix months of fiscal 2017,ended June 30, 2022, paying the purchase price in cash in each transaction: (a) an asseta share purchase of sFax,Lifecycle Marketing Group Limited, acquired on March 31, 2017, an Austin-based providerJanuary 21, 2022, a United Kingdom-based portfolio of mobile cloud faxing for health care;pregnancy and parenting brands, including Emma’s Diary and Health Professional Academy, reported within our Digital Media segment; (b) a share purchase of the entire issued capital of WeCloud AB,FitNow, Inc, acquired on June 12, 2017,2, 2022, a Swedish-basedMassachusetts-based provider of cloud-based Internet security services;weight loss products and support, reported within our Digital Media segment; and (c) an asset purchase of MyPhoneFax.com, acquired on June 30, 2017, a provider of online fax services; (d) an asset purchase of EZ Publishing (dba “StreamSend”), acquired on August 22, 2017, a provider of email marketing solutions; and (e) other2 immaterial acquisitions of online data backup, email marketing and email security businesses.Digital Media acquisitions.


The condensed consolidated statementCondensed Consolidated Statement of income,Operations since the date of each acquisition and balance sheetthe Condensed Consolidated Balance Sheets as of SeptemberJune 30, 2017,2022, reflect the results of operations of all 20172022 acquisitions. For the ninesix months ended SeptemberJune 30, 2017,2022, these acquisitions contributed $9.4$7.4 million to the Company’s revenues. Net income contributed by these acquisitions was not separately identifiable due to j2 Global’sthe Company’s integration activities and is impracticable to provide. Total consideration for these transactions was $58.4$107.1 million net of cash acquired and assumed liabilities and is subject to certain post-closing adjustments which may increase or decrease the final consideration paid.


The following table summarizes the preliminary allocation of the purchase consideration for theseall acquisitions as of June 30, 2022 (in thousands):

Assets and Liabilities2022 Acquisitions
Accounts receivable$6,703 
Prepaid expenses and other current assets897 
Property and equipment370 
Trade names11,902 
Customer relationship22,170 
Goodwill81,725 
Other intangibles16,830 
Other long-term assets11 
Accounts payable and accrued expenses(3,383)
Deferred revenue(19,274)
Deferred tax liability(10,485)
Other long-term liabilities(326)
 Total$107,140 

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Assets and LiabilitiesValuation
Accounts receivable$831
Property and equipment451
Trade names1,543
Customer relationships25,627
Other intangibles4,659
Goodwill31,253
Accounts payable and accrued expenses(1,475)
Deferred revenue(4,527)
 Total$58,362

During the nine months ended September 30, 2017, the purchase price accounting has been finalized for the following acquisitions: (i) Fonebox; and (ii) other immaterial fax, online data backup, email security and email marketing businesses. The initial accounting for all other 2017of the 2022 acquisitions is incomplete due to timing of available information and is subject to change, which may be significant. j2 Globalchange. The Company has recorded provisional amounts which may be based upon past acquisitions with similar attributes for certain intangible assets (including trade names, software and customer relationships), preliminary acquisition date working capital and related tax items.


DuringThe fair value of the nine months ended September 30, 2017, theassets acquired includes accounts receivable of $6.7 million, of which none is expected to be uncollectible. The Company recorded adjustments to prior period acquisitions due to the finalizationdid not acquire any other classes of purchase accounting in the Business Cloud Services segment which resulted inreceivables as a net decrease in goodwillresult of its acquisitions.


$(0.8) million. In addition, the Company recorded adjustments to the initial working capital related to prior period acquisitions in the Digital Media segment, which resulted in a net decrease in goodwill of $(1.5) million. Such adjustments had an immaterial impact to the amortization expense within the condensed consolidated statement of income for the nine months ended September 30, 2017.


Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired and represents intangible assets that do not qualify for separate recognition. Goodwill recognized associated with these acquisitions during the ninesix months ended SeptemberJune 30, 2017 is $31.32022 was $81.7 million, of which $23.6$1.2 million is expected to be deductible for income tax purposes.


During the six months ended June 30, 2022, the purchase price accounting has been finalized for the following 2021 acquisitions: DailyOM and SEOmoz. During the six months ended June 30, 2022, the Company also recorded adjustments to the initial working capital and to the purchase accounting of certain other prior period acquisitions due to the finalization of prior period acquisitions in the Digital Media business, which resulted in a net increase in goodwill of $1.8 million. In addition, the Company recorded adjustments to the initial working capital and to the purchase accounting of certain prior period acquisitions due to the finalization of prior period acquisitions in the Cybersecurity and Martech businesses which resulted in a net decrease in goodwill of $0.1 million. Such adjustments had an immaterial impact on the amortization expense within the Condensed Consolidated Statement of Operations for the six months ended June 30, 2022. Refer to Note 7 - Goodwill and Intangible Assets for additional information.
4.Investments

Unaudited Pro Forma Financial Information for All 2022 Acquisitions
Short-term investments consist
The following unaudited pro forma information is not necessarily indicative of certificatesthe Company’s consolidated results of deposits, which
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 stated at fair market value. estimates and exclude any savings or synergies that would have resulted from these business acquisitions had they occurred on January 1, 2021. 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.


The supplemental information on an unaudited pro forma financial basis presents the combined results of the Company and its 2022 acquisitions as if each acquisition had occurred on January 1, 2021 (in thousands, except per share amounts):
5.Assets Held for Sale

 Three Months Ended June 30,Six Months Ended June 30,
 2022202120222021
 (unaudited)(unaudited)(unaudited)(unaudited)
Revenues$343,275 $353,283 $668,309 $676,929 
Net (loss) income from continuing operations$(46,300)$(22,941)$(21,543)$15,778 
(Loss) income per common share from continuing operations - Basic$(0.99)$(0.51)$(0.46)$0.35 
(Loss) income per common share from continuing operations - Diluted$(0.99)$(0.51)$(0.46)$0.33 
2021

The Company classifies assets held for sale when management approvescompleted the following acquisitions during the six months ended June 30, 2021, paying the purchase price in cash in each transaction: (a) an asset purchase of DailyOM, acquired on April 30, 2021, a California-based provider of health and commits towellness digital media, content and learning business; (b) a formal planshare purchase of sale with the expectation the sale will be completed within one year. The net assetsSEOmoz, acquired on June 4, 2021, a Seattle-based provider of the business held for sale are then recorded at the lower of their current carrying value or the fair market value, less costs to sell.

During the third quarter 2017, the Company committed to a plan to sell Tea Leaves Health, LLC (“Tea Leaves”), a subsidiary within thesearch engine optimization solutions; and (c) 1 immaterial Digital Media segment, as it was determined to be a non-core asset. This determination resulted in a reclassificationacquisition.

The Condensed Consolidated Statement of assets held for sale onOperations since the condensed consolidateddate of each acquisition and balance sheet with a net carrying value of $55.6 million as of SeptemberJune 30, 2017.2021, reflect the results of operations of all 2021 acquisitions. For the six months ended June 30, 2021, these acquisitions contributed $5.8 million to the Company’s revenues. Net income from continuing operations contributed by these acquisitions was not separately identifiable due to the Company’s integration activities and is impracticable to provide. Total

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ZIFF DAVIS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
consideration for these transactions was $91.0 million, net of cash acquired and assumed liabilities and is subject to certain post-closing adjustments which may increase or decrease the final consideration paid.

The following table presents information related tosummarizes the assets and liabilities that were classifiedallocation of the purchase consideration for all acquisitions as held for sale in our condensed consolidated balance sheetsof June 30, 2021, including individually material acquisitions noted separately (in thousands):
Assets and LiabilitiesValuation
Accounts receivable$3,278 
Prepaid expenses and other current assets2,512 
Property and equipment1,838 
Operating lease right-of-use assets, noncurrent5,888 
Trade names10,007 
Customer relationship5,000 
Goodwill55,439
Other intangibles29,237 
Other long-term assets62 
Deferred tax asset231 
Accounts payable and accrued expenses(2,656)
Deferred revenue(7,048)
Operating lease liabilities, current(7,191)
Other current liabilities(14)
Deferred tax liability(4,122)
Other long-term liabilities(1,491)
Total$90,970 

Unaudited Pro Forma Financial Information for All 2021 Acquisitions

The following unaudited pro forma information is not necessarily indicative of the Company’s consolidated results of income 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, 2020. 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.

The supplemental information on an unaudited pro forma financial basis presents the combined results of the Company and its acquisitions during the three months and six months ended as June 30, 2021 as if each acquisition had occurred on January 1, 2020 (in thousands, except per share amounts):
 Three Months Ended June 30, 2021Six Months Ended June 30, 2021
 (unaudited)(unaudited)
Revenues$351,172 $680,194 
Net (loss) income from continuing operations$(22,156)$19,456 
(Loss) income per common share from continuing operations - Basic$(0.50)$0.44 
(Loss) income per common share from continuing operations - Diluted$(0.50)$0.41 

SEOmoz

On June 4, 2021, the Company acquired all the outstanding issued capital of SEOmoz at a purchase consideration of $67.0 million, net of cash acquired and assumed liabilities. SEOmoz is a provider of search engine optimization (“SEO”) solutions. The Consolidated Statement of Operations since the date of acquisition and balance sheet as of December 31, 2021, reflect the results of operations of SEOmoz. For both of the three and six months ended June 30, 2021, SEOmoz contributed
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ZIFF DAVIS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
  September 30, 2017
   
Accounts receivable, net $5,568
Prepaid expenses and other current assets 3,957
Property and equipment, net 1,734
Goodwill 36,312
Other intangible assets, net 10,859
Deferred income taxes, non-current 6,305
Other assets 4
Total assets held for sale $64,739
   
Accounts payable and accrued expenses $2,200
Deferred revenue, current 2,236
Deferred income taxes, non-current 4,709
Other long-term liabilities 4
Total liabilities held for sale $9,149
$3.3 million to the Company’s revenues. Net income from continuing operations contributed by SEOmoz since the acquisition date was not separately identifiable due to the Company’s integration activities and is impracticable to provide.


The following table summarizes the allocation of the purchase consideration for the SEOmoz acquisition (in thousands):
Assets and LiabilitiesValuation
Accounts receivable$3,278 
Prepaid expenses and other current assets2,512 
Property and equipment1,838 
Operating lease right of use asset5,888 
Trade names7,200 
Customer relationships5,000 
Goodwill41,192 
Other intangibles21,607 
Other long-term assets62 
Intercompany235 
Accounts payables and accrued expenses(2,656)
Other current liabilities(14)
Deferred revenue(7,048)
Operating lease liabilities, current(7,191)
Deferred tax liability(4,122)
Other long-term liabilities(785)
           Total$66,996 

The fair value of the assets acquired includes accounts receivable of $3.3 million. The gross amount due under contracts is $3.6 million, of which $0.3 million is expected to be uncollectible. The Company did not acquire any other classes of receivables as a result of its acquisitions.

Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired and represents intangible assets that do not qualify for separate recognition. Goodwill recognized in connection with this acquisition during the year ended December 31, 2021 is $41.2 million of which zero is expected to be deductible for income tax purposes.

Unaudited Pro Forma Financial Information for SEOmoz Acquisition

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 business been combined companies during the periods presented. These pro forma results are estimates and exclude any savings or synergies that would have resulted from this business acquisition had it occurred on January 1, 2020. This unaudited pro forma supplemental information includes incremental intangible asset amortization and other charges as a result of the SEOmoz acquisition, net of the related tax effects.

The supplemental information on an unaudited pro forma financial basis presents the combined results of the Company and SEOmoz as if the acquisition had occurred on January 1, 2020 (in thousands, except per share amounts):

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ZIFF DAVIS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
 Three Months Ended June 30, 2021Six Months Ended June 30, 2021
 (unaudited)(unaudited)
Revenues$349,473 $673,401 
Net (loss) income from continuing operations$(22,247)$18,767 
(Loss) income per common share from continuing operations - Basic$(0.50)$0.42 
(Loss) income per common share from continuing operations - Diluted$(0.50)$0.40 

4.Investments

Investments consist of equity and debt securities. There were no investments in an unrealized loss position as of June 30, 2022 and December 31, 2021.

Investment in equity securities

The following table summarizes the cumulative gross unrealized gains and losses and fair values for short-term investments accounted for at fair value under the fair value option, with the unrealized gains and losses reported within earnings on the Condensed Consolidated Statements of Operations (in thousands):

Initial Book ValueCumulative Gross
Unrealized
Gains		Cumulative Gross
Unrealized
Losses		Fair
Value
June 30, 2022
Investment in Consensus (equity securities)$(29,052)$101,587 $— $72,535 
Total$(29,052)$101,587 $— $72,535 
December 31, 2021    
Investment in Consensus (equity securities)$(69,290)$298,490 $— $229,200 
Total$(69,290)$298,490 $— $229,200 

During the three months ended June 30, 2022, the Company completed the non-cash Debt-For-Equity Exchange of 2,300,000 shares of its Investment in Consensus with a fair value as of March 31, 2022 of $138.3 million for the extinguishment of $90.0 million of the Company’s Term Loan Facility and related interest. During the three months ended June 30, 2022, the Company incurred the loss of $48.2 million, including underwriting costs, in connection with disposal of the Disposed Consensus Shares and, which is presented within ‘Loss on investment, net’ on our Condensed Consolidated Statements of Operations. As of June 30, 2022, the Company holds 1.7 million shares of the common stock of Consensus. During the three and six months ended June 30, 2022, the Company recognized an unrealized loss on the Retained Consensus Shares of $27.3 million and $18.4 million, respectively.

During the second quarter of 2021, the Company recorded a $16.7 million impairment loss on certain equity securities related to a decline in value due to a pending sales transaction of an investee. The Company was not expected to recover the recorded cost of these securities and thus reduced such amount to what the Company expected to receive as a result of the sale. The Company subsequently sold these equity securities during fiscal year 2021.

Investment in corporate debt securities

On April 12, 2022, the Company entered into an agreement to acquire 4% convertible notes with an aggregate value of $15.0 million, which upon conversion would represent an equity interest equal to at least 3%, on a fully converted basis.

This investment is included in ‘Long-term investments, net’ in our Condensed Consolidated Balance Sheets and is classified as available-for-sale and 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.
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ZIFF DAVIS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
The table below summarizes the carrying value and the maximum exposure of Company’s investment in corporate debt securities as of June 30, 2022 (in thousands):
June 30, 2022
Carrying valueMaximum exposure
Investment in corporate debt securities$15,000 $15,000 
The Company’s maximum exposure to loss is limited to its proportional ownership in the investee. In addition, the Company is not required to contribute capital in an aggregate amount in excess of its capital commitment.

The following table summarizes the gross unrealized gains and losses and fair values for investments classified as available-for-sale, with the unrealized gains and losses reported as a component of other comprehensive income (in thousands):
Amortized
Cost		Gross
Unrealized
Gains		Gross
Unrealized
Losses		Fair
Value
June 30, 2022    
Investment in corporate debt securities$15,000 $— $— $15,000 
Total$15,000 $— $— $15,000 

The Company determined that these debt securities were without a readily determinable fair value because these securities are privately held, not traded on any public exchanges and not an investment in a mutual fund or similar investment.

The following table summarizes the Company’s corporate debt securities designated as available-for-sale, classified by the contractual maturity date of the security (in thousands):
June 30, 2022December 31, 2021
Due within 1 year$— $— 
Due within more than 1 year but less than 5 years15,000 — 
Due within more than 5 years but less than 10 years— — 
Due 10 years or after— — 
Total$15,000 $— 

Equity method investment

On September 25, 2017, the Company committedentered into a commitment to invest $200 million (approximately 76.6% of equity) in an investment fund (the “Fund”). The primary purpose of the 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 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 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.

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ZIFF DAVIS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
The manager, OCV Management, LLC, and general partner of the Fund are entities with respect to which Richard S. Ressler, former Chairman of the Board of Directors (the “Board”) of the Company, is indirectly the majority equity holder. Mr. Ressler’s tenure with the Board ended as of May 10, 2022. As a limited partner in the Fund, prior to the settlement of certain litigation generally related to the Company’s investment in the Fund in January 2022, the Company paid an annual management fee to the manager equal to 2.0% of capital commitments. In addition, subject to the terms and conditions of the Fund’s limited partnership agreement, once the Company has received distributions equal to its invested capital, the Fund’s general partner would be entitled to a plancarried interest equal to sell20%. The Fund has a six year investment period, subject to certain exceptions. The commitment was approved by the Cambridge BioMarketing Group, LLC (“Cambridge”Audit Committee of the Board in accordance with the Company’s related-party transaction approval policy. At the time of the settlement of the litigation (see Note 9 – Commitments and Contingencies), a subsidiary within the Digital Media segment, as it was determined to be a non-core asset. On July 12, 2017, in a cash transaction, the Company sold Cambridgehad invested approximately $128.8 million in the Fund. In connection with the settlement of the litigation, among other terms, no further capital calls will be made in connection with the Company’s investment in the Fund, nor will any management fees be paid by the Company to the manager.As such, during the six months ended June 30, 2022, the Company received no capital call notices from the manager of the Fund. During the six months ended June 30, 2021, the Company received capital call notices from the manager of the Fund for $11.1 million, inclusive of certain management fees. Approximately $10.1 million was paid for capital call notices during the six months ended June 30, 2021. During both the six months ended June 30, 2022 and 2021, 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 June 30, 2022 and 2021, the Company recognized an investment loss of $6.1 million and $5.8 million, net of tax benefit, respectively. During the six months ended June 30, 2022 and 2021, the Company recognized an investment (loss) gain of $3.2$(6.9) million whichand $18.5 million, net of tax benefit (expense), respectively. The gain in fiscal 2021 was recordedprimarily the result of gains in other (income) expense, net.

the underlying investments. During the third quarter 2017,three months ended June 30, 2022 and 2021, the Company committed to a plan to sell j2 Australia Hosting Pty Ltd (dba “Web24”), a subsidiary withinrecognized expense for management fees of $0.8 million and $0.8 million, net of tax benefit, respectively, and for the Business Cloud Services segment, as it was determined to be a non-core asset. On September 1, 2017, in a cash transaction,six months ended June 30, 2022 and 2021, the Company sold Web24recognized expense for management fees of $1.5 million and $1.5 million, net of tax benefit, respectively.

The following table discloses the carrying amount for the Company’s equity method investment (in thousands). These equity securities are included within ‘Long-term investments’ in the Condensed Consolidated Balance Sheets.
June 30, 2022December 31, 2021
Equity securities$113,460 $122,593 
Maximum exposure to loss$113,460 $122,593 

As a gainlimited 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 capital in an aggregate amount in excess of $1.6 millionits capital commitment 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.

5.Discontinued Operations

Consensus Spin-Off

As further described in Note 1 - Basis of Presentation and Overview, on October 7, 2021, the Separation of the cloud fax business was recordedcompleted. The accounting requirements for reporting the Company’s cloud fax business as a discontinued operation were met when the Separation was completed as the Separation constituted a strategic shift that would have a major effect on the Company’s operations and financial results.Accordingly, the Condensed Consolidated Financial Statements reflect the results of the cloud fax business as a discontinued operation for the three and six months ended June 30, 2021. The Condensed Consolidated Statements of Operations report discontinued operations separate from continuing operations. The Condensed Consolidated Statements of Comprehensive (Loss) Income, Condensed Consolidated Statements of Cash Flows, and Condensed Consolidated Statements of Stockholders’ Equity combine continuing and discontinued operations.

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ZIFF DAVIS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
The key components of cash flows from discontinued operations were as follows (in thousands):
Six Months Ended June 30, 2021
Capital expenditures$8,010 
Depreciation and amortization$5,601 
Deferred taxes$(6,508)
In connection with the Separation, Ziff Davis and Consensus entered into several agreements that govern the relationship of the parties following the Separation, which are further discussed in other (income) expense, net.Note 16 - Related Party Transactions. Further, certain of the Company’s management and members of its board of directors resigned from the Company as of the date of distribution and joined Consensus. In addition, one of the Company’s members of senior management as of June 30, 2022 has served on the board of directors of Consensus since the date of distribution.




The key components of income from discontinued operations were as follows (in thousands):
Three Months Ended June 30, 2021Six Months Ended June 30, 2021
Revenues$87,751 $174,279 
Cost of revenues(14,554)(28,524)
Sales and marketing(13,681)(26,916)
Research, development and engineering(1,940)(3,616)
General and administrative(5,977)(12,025)
Interest expense and other(351)(199)
Income before income taxes51,248 102,999 
Income tax expense12,486 25,094 
Income from discontinued operations, net of income taxes$38,762 77,905 

6.Fair Value Measurements


j2 GlobalThe 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 the 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:
value.
l§Level 1 – Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
l§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.
l§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.


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 certificates of deposit are classified within Level 2. The Company values these Level 2 investments based on quoted market prices or model-driven valuations using significant inputs derived from or corroborated by observable market data.
The fair value of the Convertible Notes (see Note 8 - Long-Term Debt)long-term debt is determined using recent quoted market prices or dealer quotes for such securities,each of the Company’s instruments, which are Level 1 inputs. The fair value of our senior notes (8.0% senior unsecured notes atthe Company’s debt instruments was approximately $1.0 billion and $1.3 billion, as of June 30, 2022 and December 31, 2016 and 6.0% senior unsecured notes at September 30, 2017)2021, respectively (see Note 8 - Long-Term Debt)Debt).

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ZIFF DAVIS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
The Retained Consensus Shares are equity securities for which the Company elected the fair value option, and the fair value of the Retained Consensus Shares and subsequent fair value changes are included in our assets of and results from continuing operations, respectively. As of June 30, 2022 and December 31, 2021, the Company’s investment in Consensus common stock was remeasured at fair value based on Consensus’ closing stock price with a balance of $72.5 million and $229.2 million included on the Condensed Consolidated Balance Sheets, respectively. Unrealized loss of $27.3 million and $18.4 million were recorded on the Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2022, respectively. The fair value of the investment in Consensus is determined using quoted market prices, which is a Level 1 input.

The fair value of our 4.625% Senior Notes (as defined in Note 8 - Debt) was determined using quoted market prices or dealer quotes for instruments with similar maturities and other terms and credit ratings, which are Level 21 inputs. The fair value of the Credit Facility (as defined in Note 8 - Debt) approximated its carrying amount due to its variable interest rate, which approximated a market interest rate, and was considered a Level 2 input.

The investment in corporate debt at September 30, 2017 and December 31, 2016 was $1.2 billion and $792.2 million, respectively.

In addition, the Convertible Notes contain terms that may require the Company to pay contingent interest on the Convertible Notes whichsecurities is accounted for as a derivative withmeasured at fair value adjustments being recordedon our Condensed Consolidated Balance Sheets. Unrealized gains and losses are reported in other comprehensive income until realized. Corporate debt securities do 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 investment in corporate debt securities is classified as available-for-sale and is initially measured at its transaction price. The fair value of the corporate debt securities is determined primarily based in significant estimates and assumptions, including Level 3 inputs. As of June 30, 2022, the fair value of our investment in corporate debt securities approximates its carrying value due to interest expense. This derivative is fair valued using a binomial lattice convertible bond pricing model using historical and implied market information, which are Level 2 inputs.close proximity of the date of the investment to the reporting date. Refer to Note 4 - Investments for additional information.


The Company classifies its contingent consideration liability in connection with its 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 fairvaluation approaches used to value ofLevel 3 investments considers unobservable inputs in the contingent consideration liability was determined using option based approaches. This methodology was utilized because the distribution of payments is not symmetricmarket such as time to liquidity, volatility, dividend yield, and amounts are only payable upon certain earnings before interest, tax, depreciation and amortization (“EBITDA”) thresholds being reached. Such valuation approach included the Monte-Carlo simulation for the contingency since the financial metric driving the payments is path dependent.breakpoints. Significant increases or decreases in either of the inputs noted above in isolation would result in a significantly lower or higher fair value of measurement.
 

The following table presents the fair values, valuation techniques, unobservable inputs, and ranges of the Company’s financial liabilities categorized within Level 3. The weighted averages below are a product of the unobservable input and fair value of the contingent consideration arrangement as of June 30, 2022.


Valuation TechniqueUnobservable InputRangeWeighted Average
Contingent ConsiderationOption-Based ModelRisk free rateN/A1.9 %
Debt spread1.3% - 16.4%9.4 %
Present value factorN/A26.9 %
Discount rateN/A27.3 %
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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):
June 30, 2022Level 1Level 2Level 3Fair ValueCarrying Value
Assets:
Cash equivalents:
   Money market and other funds$98,920 $— $— $98,920 $98,920 
Investment in corporate debt securities— — 15,000 15,000 15,000 
Investment in Consensus72,535 — — 72,535 72,535 
Total assets measured at fair value$171,455 $— $15,000 $186,455 $186,455 
Liabilities:
Contingent consideration$— $— $3,047 $3,047 $3,047 
Debt1,015,010 — — 1,015,010 1,102,201 
Total liabilities measured at fair value$1,015,010 $— $3,047 $1,018,057 $1,105,248 
December 31, 2021Level 1Level 2Level 3Fair ValueCarrying Value
Assets:
Cash equivalents:
   Money market and other funds$144,255 $— $— $144,255 $144,255 
Investment in Consensus229,200 — — 229,200 229,200 
Total assets measured at fair value$373,455 $— $— $373,455 $373,455 
Liabilities:
Contingent consideration$— $— $5,775 $5,775 $5,775 
Debt1,345,311 — — 1,345,311 1,090,627 
Total liabilities measured at fair value$1,345,311 $— $5,775 $1,351,086 $1,096,402 
September 30, 2017Level 1 Level 2 Level 3 Fair Value
Assets:       
Cash equivalents:       
   Money market and other funds$127,751
 $—
 $—
 $127,751
Total assets measured at fair value$127,751
 $—
 $—
 $127,751
        
Liabilities:       
Contingent interest derivative$—
 $958
 $—
 $958
Total liabilities measured at fair value$—
 $958
 $—
 $958
        
December 31, 2016Level 1 Level 2 Level 3 Fair Value
Assets:       
Cash equivalents:       
   Money market and other funds$7,737
 $—
 $—
 $7,737
Certificates of deposit—
 60
 —
 60
Total assets measured at fair value$7,737
 $60
 $—
 $7,797
        
Liabilities:       
Contingent consideration$—
 $—
 $17,450
 $17,450
Contingent interest derivative—
 958
 —
 958
Total liabilities measured at fair value$—
 $958
 $17,450
 $18,408


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 ninesix months ended SeptemberJune 30, 2017,2022 and 2021, there were no transfers that have occurred between levels.


The following table presents a reconciliation of the Company’s Level 3 financial assets or liabilitiesrelated to our investment in corporate debt securities that are measured at fair value on a recurring basis (in thousands):
Level 3Affected line item in the Statement of Operations
Balance as of January 1, 2022$— 
Investment in corporate debt securities15,000 Not applicable
Balance as of June 30, 2022$15,000 

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 Level 3 Affected line item in the Statement of Income
Balance as of January 1, 2017$17,450
  
Contingent consideration—
  
Total fair value adjustments reported in earnings(600) General and administrative
Contingent consideration payments(16,850) Not applicable
Balance as of September 30, 2017$—
  
ZIFF DAVIS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
In connection with the acquisition of Salesify, on September 17, 2015, contingent consideration of up to an aggregate of $17.0 million may be payable upon achieving certain future income thresholds and had a fair value of zero and $0.6 million at September 30, 2017 and December 31, 2016, respectively.

During the nine months ended September 30, 2017, the Company recorded a decrease in the fair value of the contingent consideration of $0.6 million and reported such decrease in general and administrative expenses.



The following table presents a reconciliation of the Company’s derivative instrumentsLevel 3 financial liabilities related to contingent consideration that are measured at fair value on a recurring basis (in thousands):
Level 3Affected line item in the Statement of Operations
Balance as of January 1, 2022$5,775 
Contingent consideration200 
Total fair value adjustments reported in earnings(9)General and administrative
Contingent consideration payments(2,919)Not applicable
Balance as of June 30, 2022$3,047 

In connection with the Company’s other acquisition activity, contingent consideration of up to $3.0 million may be payable upon achieving certain future earnings before interest, taxes, depreciation and amortization (EBITDA), revenue, and/or unique visitor thresholds and had a combined fair value of $3.0 million and $5.8 million at June 30, 2022 and December 31, 2021, respectively. Due to the achievement of certain thresholds,$2.9 million and $5.8 million was paid during the six months ended June 30, 2022 and 2021, respectively.

 Amount Affected line item in the Statement of Income
Derivative Liabilities:   
Level 2:   
Balance as of January 1, 2017$958
  
Total fair value adjustments reported in earnings—
  
Balance as of September 30, 2017$958
�� 

Losses associated with other-than-temporary impairments are recorded as a component of other (income) expense. Gains and losses not associated with other-than-temporary impairments are recorded as a component of other comprehensive income. 

7.Goodwill and Intangible Assets


Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in a business combination and is assigned to the reporting unit that is expected to benefit from the synergies of the combination. Intangible assets resulting from the acquisitions of entities accounted for using the acquisition method of accounting are recorded at the estimated fair value of the assets acquired. Identifiable intangible assets are comprised of purchased customer relationships, trademarks and trade names, developed technologies and other intangible assets. The fair values of these identified intangible assets are based upon expected future cash flows or income, which take into consideration certain assumptions such as customer turnover, trade names and patent lives. These determinations are primarily based upon the Company’s historical experience and expected benefit of each intangible asset. If it is determined that such assumptions are not accurate, then the resulting change will impact the fair value of the intangible asset. Identifiable intangible assets are amortized over the period of estimated economic benefit, which ranges from one to 20twenty years.


The changes in carrying amounts of goodwill for the ninesix months ended SeptemberJune 30, 20172022 are as follows (in thousands):
Digital MediaCybersecurity and MartechConsolidated
Balance as of January 1, 2022$996,659 $534,796 $1,531,455 
Goodwill acquired (Note 3)81,725 — 81,725 
Purchase accounting adjustments(1)
1,773 (137)1,636 
Foreign exchange translation(2,584)(8,892)(11,476)
Balance as of June 30, 2022$1,077,573 $525,767 $1,603,340 
 Business Cloud Services Digital Media Consolidated
Balance as of January 1, 2017$559,152
 $563,658
 $1,122,810
Goodwill acquired (Note 3)31,253
 —
 31,253
Goodwill reclassified to noncurrent assets held for sale (1)
—
 (36,312) (36,312)
Goodwill written off related to sale of a business unit (2)(3)
(3,614) (17,815) (21,429)
Purchase accounting adjustments (4)
(766) (1,464) (2,230)
Foreign exchange translation13,811
 85
 13,896
Balance as of September 30, 2017$599,836
 $508,152
 $1,107,988

(1)During the third quarter 2017, the Company reclassified $36.3 million of goodwill to noncurrent assets held for sale in connection with Tea Leaves (see Note 5 - Assets Held for Sale).

(2) On July 12, 2017, in a cash transaction, the Company sold Cambridge which resulted in $17.8 million of goodwill being written off in connection with this sale (see Note 5 - Assets Held for Sale).

(3) On September 1, 2017, in a cash transaction, the Company sold Web24 which resulted in $3.6 million of goodwill being written off in connection with this sale (see Note 5 - Assets Held for Sale).

(4) Purchase accounting adjustments relate to measurement period adjustments to goodwill in connection with prior year business acquisitions (seeacquisitions. Refer to Note 3 - Business Acquisitions)Acquisitions.



Intangible Assets with Indefinite Lives:

Intangible assets are summarized as of September 30, 2017 and December 31, 2016 as follows (in thousands):
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ZIFF DAVIS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
 September 30,
2017		 December 31,
2016
Trade name$27,379
 $27,379
Other5,432
 5,432
Total$32,811
 $32,811


Intangible Assets Subject to Amortization:


As of SeptemberJune 30, 2017,2022, intangible assets subject to amortization relate primarily to the following (in thousands):
Weighted-Average
  Amortization
Period		Historical
Cost		Accumulated
Amortization		Net
Trade names10.0 years$260,802 $113,181 $147,621 
Customer relationships (1)
8.0 years690,343 441,821 248,522 
Other purchased intangibles8.8 years480,781 340,184 140,597 
Total$1,431,926 $895,186 $536,740 
 
Weighted-Average
  Amortization
Period
 
Historical
Cost
 
Accumulated
Amortization
 Net
Trade names11.5 years $127,525
 $48,191
 $79,334
Patent and patent licenses6.6 years 66,829
 55,597
 11,232
Customer relationships (1)
9.4 years 414,996
 236,186
 178,810
Other purchased intangibles5.2 years 196,157
 56,411
 139,746
Total  $805,507
 $396,385
 $409,122

(1) Historically, theThe Company has amortized itsamortizes customer relationship assets in a pattern that best reflects the pace inat 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, 2016,2021, intangible assets subject to amortization relate primarily to the following (in thousands):
Weighted-Average
  Amortization
Period
Historical
Cost		Accumulated
Amortization		Net
Trade names9.7 years$250,418 $102,657 $147,761 
Customer relationships (1)
8.1 years673,847 398,396 275,451 
Other purchased intangibles9.3 years467,028 317,515 149,513 
Total$1,391,293 $818,568 $572,725 
 
Weighted-Average
  Amortization
Period
 
Historical
Cost
 
Accumulated
Amortization
 Net
Trade names11.5 years $127,342
 $38,868
 $88,474
Patent and patent licenses6.6 years 65,605
 51,677
 13,928
Customer relationships (1)
9.6 years 390,930
 182,775
 208,155
Other purchased intangibles6.0 years 195,913
 27,590
 168,323
Total  $779,790
 $300,910
 $478,880

(1) Historically, theThe Company has amortized itsamortizes customer relationship assets in a pattern that best reflects the pace inat 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 55.0 years, despite the overall life of the asset.


Amortization expense, included in generalGeneral and administrative expense on our Condensed Consolidated Statements of Operations, approximated $31.7$41.8 million and $23.7$46.7 million for the three month periodmonths ended SeptemberJune 30, 20172022 and 2016,2021, respectively, and $94.3$83.0 million and $69.6$94.0 million for the nine month periodsix months ended SeptemberJune 30, 20172022 and 2016,2021, respectively. Amortization expense is estimated to approximate $174.8 million, $97.4 million, $53.3 million, $36.9 million

8.    Debt

The Company’s debt as of June 30, 2022 and $29.7 million for fiscal years 2017 throughDecember 31, 2021 respectively, and $111.3 million thereafter through the durationconsists of the amortization period.

following (in thousands):
June 30, 2022December 31, 2021
4.625% Senior Notes$565,173 $641,276 
1.75% Convertible Notes550,000 550,000 
Total Notes1,115,173 1,191,276 
Less: Unamortized discount(3,581)(91,593)
Deferred issuance costs(9,391)(9,056)
Total debt1,102,201 1,090,627 
Less: current portion(68,506)(54,609)
Total long-term debt, less current portion$1,033,695 $1,036,018 


8.    Long-Term Debt
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ZIFF DAVIS, INC. AND SUBSIDIARIES
6.0%NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
4.625% Senior Notes


On June 27, 2017, j2 Cloud Services, LLC (“j2 Cloud”) and j2 Cloud Co-Obligor (the “Co-Issuer” and together with j2 Cloud, the “Issuers”), wholly-owned subsidiaries ofOctober 7, 2020, the Company completed the issuance and sale of $650$750.0 million aggregate principal amount of their 6.0%its 4.625% senior notes due in 20252030 (the “6.0%“4.625% Senior Notes”) in a private placement offering exempt from the registration requirements of the Securities Act of 1933. j2 CloudThe Company received proceeds of $636.2$742.7 million after deducting the initial purchasers’ discounts, commissions and offering expenses and is presented as Long-term debt,expenses. The net of deferred issuance costs, on the condensed consolidated balance sheets as of September 30, 2017. The proceeds were used to redeem all of j2 Cloud’s 8.0% notesits outstanding 6.0% Senior Notes due in 2020,2025 and, to distribute sufficient net proceeds to j2 Global to pay off all amounts outstanding under its existing credit facility, with the remaining net proceeds to be usedwere available for general corporate purposes including acquisitions.which may include acquisitions and the repurchase or redemption of other outstanding indebtedness.

The 6.0% Senior NotesThese senior notes bear interest at a rate of 6.0%4.625% per annum, payable semi-annually in arrears on JanuaryApril 15 and JulyOctober 15 of each year, commencing on JanuaryApril 15, 2018.2021. The 6.0%4.625% Senior Notes mature on JulyOctober 15, 2025,2030, and are senior unsecured obligations of the IssuersCompany which are guaranteed, jointly and are guaranteedseverally, on an unsecured basis by certain of the Company’s existing and future domestic direct and indirect wholly-owned subsidiaries of j2 Cloud (as defined in(collectively, the Indenture agreement dated June 27, 2017, the “Indenture”“Guarantors”). If j2 Cloudthe Company or any of its restricted subsidiaries acquires or creates a domestic restricted subsidiary, other than an insignificant subsidiaryInsignificant Subsidiary (as defined in the Indenture)indenture pursuant to which the 4.625% Senior Notes were issued (the “Indenture”)), after the issue date, or any insignificant subsidiaryInsignificant Subsidiary ceases to fit within the definition of insignificant subsidiary,Insignificant Subsidiary, such restricted subsidiary is required to unconditionally guarantee, jointly and severally, on an unsecured basis, the Issuers’Company’s obligations under the 6.0%4.625% Senior Notes.


The IssuersCompany may redeem some or all of the 6.0%4.625% Senior Notes at any time on or after JulyOctober 15, 20202025 at specified redemption prices plus accrued and unpaid interest, if any, up to, but excluding the redemption date. Before JulyOctober 15, 2020, in connection with2023, and following certain equity offerings, the IssuersCompany also may redeem up to 35%40% of the 6.0%4.625% Senior Notes at a price equal to 106.000%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 JulyOctober 15, 2020,2025, the IssuersCompany may redeem some or all of the 6.0%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 indenture governingIndenture contains covenants that restrict the 6.0% Senior Notes contains certain restrictive and other covenants applicable to j2 Cloud and subsidiaries designated as restricted subsidiaries including, but not limitedCompany’s ability to (i) pay dividends or make distributions on j2 Cloud’s capitalthe Company’s common stock or repurchase j2 Cloud’sthe 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 includecontain certain exceptions. Violation of these covenants could result in a default which could result in the acceleration of outstanding amounts if such default is not cured or waived within the time periods outlined in the indenture. Restricted payments, specifically dividend payments are applicable only if j2 Cloudthe Company and subsidiaries designated as restricted subsidiaries hashave a net leverage ratio of greater than 3.03.5 to 1.0. In addition, if such net leverage ratio is in excess of 3.03.5 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 4 fiscal quarter period ended immediately prior to such date for which internal financial statements are permitted up to $75 million. These contractual provisions did not, as of September 30, 2017, restrict j2 Cloud’s ability to pay dividends to j2 Global, Inc.available. The companyCompany is in compliance with its debt covenants for the 4.625% Senior Notes as of SeptemberJune 30, 2017.2022.


During the three and six months ended June 30, 2022, the Company repurchased approximately $21.5 million and $76.1 million, respectively, in aggregate principal amount of the 4.625% Senior Notes for an aggregate purchase price of approximately $18.2 million and $73.6 million, respectively. For the three and six months ended June 30, 2022, the Company recognized a gain of approximately $3.1 million and gain of approximately $1.9 million, respectively, associated with the repurchase of the 4.625% Senior Notes, which is recorded within ‘Interest expense, net’ on our Condensed Consolidated Statements of Operations.

As of SeptemberJune 30, 2017,2022 and December 31, 2021, the estimated fair value of the 6.0%4.625% Senior Notes was approximately $680.1$482.5 million and $659.9 million, and was based on therecent quoted market prices of debt instruments with similar terms, credit rating and maturities offor the 6.0%4.625% Senior Notes which are Level 2 inputs (see1 inputs. Refer to Note 6 - Fair Value Measurements).Measurements.


8.0% Senior Notes

On August 1, 2017, j2 Cloud redeemed all of its outstanding $250 million 8.0% senior unsecured notes due in 2020 for $265 million, including a redemption premium and relevant accrued interest which resulted in a loss on extinguishment of $8.0 million recorded which was recorded in Interest expense, net. j2 Cloud has satisfactorily discharged its obligations to the holders of such notes.



3.25%1.75% Convertible Notes


On June 10, 2014, j2 GlobalNovember 15, 2019, the Company issued $402.5$550.0 million aggregate principal amount of 3.25%1.75% convertible senior notes due June 15, 2029November 1, 2026 (the “Convertible“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 3.25%1.75% per annum, payable semiannually in arrears on June 15May 1 and December 15November 1 of each year. Beginning with the six-month interest period commencingyear, beginning on June 15, 2021, the Company must pay contingent interest on the Convertible Notes during any six-month interest period if the trading price per $1,000 principal amount of the Convertible Notes for each of the five trading days immediately preceding the first day of such interest period equals or exceeds $1,300. Any contingent interest payable on theMay 1, 2020. The 1.75% Convertible Notes will be in addition to the regular interest payablemature on the Convertible Notes.November 1, 2026, unless earlier converted or repurchased.

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

Holders may surrender their 1.75% Convertible Notes for conversion at any time prior to the close of business on the business day immediately preceding the maturity dateJuly 1, 2026 only if one or more ofunder the following conditions is satisfied:circumstances: (i) during any calendar quarter commencing after the calendar quarter ending on September 30, 2014March 31, 2020 (and only during such calendar quarter), if the closinglast reported sale price of j2 Globalthe Company’s common stock for at least 20 trading days in(whether or not consecutive) during the period of 30 consecutive trading days ending on, and including, the last trading day of the calendar quarter immediately preceding the calendar quarter in which the conversion occurs is moregreater than 130% of the applicable conversion price of the 1.75% Convertible Notes on each such applicable trading day; (ii) during the five consecutive5 business day period following any ten10 consecutive trading day period in which the trading price for theper $1,000 principal amount of 1.75% Convertible Notes for each such trading day of the measurement period was less than 98% of the product of (a) the closinglast reported sale price of j2 Globalthe Company’s common stock on each such trading day and (b) the applicable conversion rate on each such trading day; or (iii) if j2 Global calls anyupon the occurrence of specified corporate events. On or all of the Convertible Notes for redemption, at any timeafter July 1, 2026, and prior to the close of business on the business day prior to the redemption date; (iv) upon the occurrence of specified corporate events; or (v) during either the period beginning on, and including, March 15, 2021 and ending on, but excluding, June 20, 2021 or the period beginning on, and including, March 15, 2029 and ending on, but excluding,immediately preceding the maturity date. j2 Globaldate, holders may convert all or any portion of their notes at any time, regardless of the foregoing circumstances. The Company will settle conversions of the 1.75% Convertible Notes by paying or delivering, as the case may be, cash, shares of j2 Globalthe Company common stock or a combination thereof at j2 Global’sthe Company’s election. The Company currently intends to satisfy its conversion obligation by paying and delivering a combination of cash and shares of the Company’s common stock, wherestock. Holders of the notes will have the right to require the Company to repurchase for cash will be usedall or any portion of their notes upon the occurrence of certain corporate events, subject to settle each $1,000certain conditions. As of principalJune 30, 2022 and December 31, 2021, the remainder, if any, will be settled viamarket trigger conditions did not meet the Company’s common stock.conversion requirements of the 1.75% Convertible Notes and, accordingly, the 1.75% Convertible Notes are classified as long-term debt on our Condensed Consolidated Balance Sheets.


For the three months ended SeptemberAs of June 30, 2017,2022, the conversion rate is 14.56459.3783 shares of j2 Globalthe Company’s common stock for each $1,000 principal amount of 1.75% Convertible Notes, which represents a conversion price of approximately $68.66$106.63 per share of j2 Globalthe Company’s common stock. The conversion rate is subject to adjustment for certain events as set forth in the indenture governing the 1.75% Convertible Notes, but will not be adjusted for accrued interest. In addition, following certain corporate events that occur on or prior to June 20, 2021, j2 Globalupon the occurrence of a “Make-Whole Fundamental Change” (as defined in the 1.75% Convertible Note Indenture), the Company will increase the conversion rate for a holder that elects to convert its 1.75% Convertible Notes in connection with such a corporate event.event in certain circumstances.


j2 GlobalThe Company may not redeem the 1.75% Convertible Notes prior to June 20, 2021. On or after June 20, 2021, j2 Global may redeem for cash all or part of the Convertible Notes at a redemption price equal to 100% of the principal amount of the Convertible Notes to be redeemed, plus accruedNovember 1, 2026, and unpaid interest to, but excluding, the redemption date. Nono sinking fund is provided for the 1.75% Convertible Notes.

Holders have the right to require j2 Global to repurchase for cash all or part of their Convertible Notes on each of June 15, 2021 and June 15, 2024 at a repurchase price equal to 100% of the principal amount of the Convertible Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the relevant repurchase date. In addition, if a fundamental change, as defined in the indenture governing the Convertible Notes, occurs prior to the maturity date, holders may require j2 Global to repurchase for cash all or part of their Convertible Notes at a repurchase price equal to 100% of the principal amount of the Convertible Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.


The 1.75% Convertible Notes are the Company’s general senior unsecured obligations and rank: (i) senior in right of payment to any of the Company’s future indebtedness that is expressly subordinated in right of payment to the 1.75% Convertible Notes; (ii) equal in right of payment to the Company’s existing and future unsecured indebtedness that is not so subordinated; (iii) effectively junior in right of payment to any of the Company’s secured indebtedness to the extent of the value of the assets securing such indebtedness; and (iv) structurally junior to all existing and future indebtedness (including trade payables)and other liabilities incurred by the Company’s subsidiaries.




Accounting for the 1.75% Convertible Notes


On January 1, 2022 the Company adopted ASU 2020-06using the modified retrospective method. As a result of this adoption, the Company de-recognized the remaining unamortized debt discount of $87.3 million on the 1.75% Convertible Notes and therefore no longer recognizes any amortization of debt discounts as interest expense. Refer to Note 1 - Basis of Presentation and Overview.

In accordanceconnection with ASC 470-20, Debt with Conversionthe issuance of the 1.75% Convertible Notes, the Company incurred $12.9 million of deferred issuance costs, which primarily consisted of the underwriters’ discount, legal and Other Options, convertible debt that can be settled for cash is required to be separated intoother professional service fees. Of the liability and equity component attotal deferred issuance with each component assigned a value. The value assignedcosts incurred, $10.1 million of such deferred issuance costs were attributable to the liability component is the estimated fair value, as of the issuance date, of similar debt without the conversion feature. The difference between the cash proceeds and estimated fair value of the liability component, representing the value of the conversion premium assigned to the equity component, isare recorded as a debt discount on the issuance date. This debt discount iswithin other assets and were being amortized to interest expense usingthrough the effective interest method overmaturity date. The remaining $2.8 million of the perioddeferred issuance costs were netted with the equity component in additional paid-in capital at the issuance date. Upon adoption of ASU 2020-06, the Company reclassified the $2.8 million from additional paid-in-capital to the long-term liability and recorded a cumulative adjustment to retained earnings for amortization from the issuance date through the first stated repurchase date on June 15, 2021.

j2 Global estimated the borrowing rates of similarJanuary 1, 2022 and will record amortization expense for these debt without the conversion feature at origination to be 5.79% for the Convertible Notes and determined the debt discount to be $59.0 million. As a result, a conversion premium after tax of $37.7 million was recorded in additional paid-in capital. The aggregate debt discount is amortized as interest expense over the period from the issuance datecosts through the first stated repurchase date on June 15, 2021, which management believes is the expected life of the Convertible Notes using an interest rate of 5.81%.maturity date. As of SeptemberJune 30, 2017,2022, the remaining period over which thetotal unamortized debt discount will be amortized is 3.7 years.deferred issuance costs were $8.3 million.


The 1.75% Convertible Notes are carried at face value less any unamortized debt discount (prior to adoption of ASU 2020-06) and debt issuance costs. The fair value of the 1.75% Convertible Notes at each balance sheet date is determined based on recent quoted market prices or dealer quotes for the 1.75% Convertible Notes, which are Level 1 inputs (see Note 6 - Fair
-34-

ZIFF DAVIS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Value Measurements)Measurements). If such information is not available, the fair value is determined using cash-flowcash flow models of the scheduled payments discounted at market interest rates for comparable debt without the conversion feature. As of SeptemberJune 30, 20172022 and December 31, 2016,2021, the estimated fair value of the 1.75% Convertible Notes was approximately $498.6$532.5 million and $516.8$685.4 million, respectively.


Long-term debtCredit Facility

On April 7, 2021, the Company entered into a $100.0 million Credit Agreement (the “Credit Agreement”). Subject to customary conditions, the Company may, from time to time, request increases in the commitments under the Credit Agreement in an aggregate amount up to $250.0 million, for a total aggregate commitment of up to $350.0 million. The final maturity of the Credit Facility will occur on April 7, 2026.

At the Company’s option, amounts borrowed under the Credit Agreement will bear interest at either (i) a base rate equal to the greater of (x) the Federal Funds Effective Rate (as defined in the Credit Agreement) in effect on such day plus 0.5% per annum, (y) the rate of interest per annum most recently announced by the Agent (as defined in the Credit Agreement) as its U.S. Dollar “Reference Rate” and (z) one month LIBOR plus 1.00% or (ii) a rate per annum equal to LIBOR divided by 1.00 minus the LIBOR Reserve Requirements (as defined in the Credit Agreement), in each case, plus an applicable margin. The applicable margin relating to any base rate loan will range from 0.50% to 1.25% and the applicable margin relating to any LIBOR loan will range from 1.50% to 2.25%, in each case, depending on the total leverage ratio of Septemberthe Company. The Company is permitted to make voluntary prepayments of the Credit Facility at any time without payment of a premium or penalty. As of June 30, 20172022 and December 31, 2016 consists2021, there were no amounts outstanding under the Credit Agreement.

Debt-for-Equity Exchange

On June 10, 2022 (the “Term Loan Funding Date”), the Company entered into a Fifth Amendment to its Credit Agreement with MUFG Union Bank, N.A, as administrative agent and collateral agent and the lenders party thereto to effectuate the Debt-for-Equity Exchange. The Fifth Amendment to the Credit Agreement provided for the Term Loan Facility in an aggregate principal amount of $90.0 million and certain other changes to the Credit Agreement. The Term Loan had a maturity date that was 60 days after the Term Loan Funding Date. The Term Loan Facility bore interest at a base rate equal to the greater of (x) the Federal Funds Effective Rate, as defined in the Credit Agreement, in effect on such day plus 0.5% per annum, (y) the rate of interest per annum most recently announced by the Agent, as defined in the Credit Agreement, as its U.S. Dollar "Reference Rate" and (z) one month LIBOR plus 1%, provided that the base rate for any term loan made under the Credit Agreement shall be greater of clause (x) and (y) above in each case.

During the three months ended June 30, 2022, the Company borrowed approximately $90.0 million under the Term Loan Facility and completed the Debt-for-Equity Exchange of 2,300,000 shares of its common stock of Consensus to settle its obligation to repay the $90.0 million outstanding aggregate principal amount of the following (in thousands):Term Loan Facility plus an immaterial amount of interest. The Company recorded a loss on extinguishment of debt related to the Debt-for-Equity Exchange of approximately $0.5 million during the three months ended June 30, 2022 which is presented within ‘Interest expense, net’ on our Condensed Consolidated Statements of Operations.

 September 30, 2017 December 31, 2016
Senior Notes:   
6.0% Senior Notes$638,958
 $—
8.0% Senior Notes—
 247,359
3.25% Convertible Notes368,224
 362,144
Less: Deferred issuance costs(7,984) (7,757)
Total debt999,198
 601,746
Less: current portion—
 —
Total long-term debt, less current portion$999,198
 $601,746

9.Commitments and Contingencies


Litigation


From time-to-time, j2 Globaltime to time, the Company and its affiliates are involved in litigation and other legal disputes or regulatory inquiries that arise in the ordinary course of business. Any claims or regulatory actions against j2 Globalthe Company and its affiliates, whether meritorious or not, could be time consuming and costly, and could divert significant operational resources. The outcomes of such matters are subject to inherent uncertainties, carrying the potential for unfavorable rulings that could include monetary damages and injunctive relief.

On February 17, 2011, Emmanuel Pantelakis (“Pantelakis”) filed suit against a j2 Global affiliate in the Ontario Superior Court of Justice (No. 11-50673), alleging that the j2 Global affiliate breached a contract relating to Pantelakis’s use of the Campaigner® service. The j2 Global affiliate filed a responsive pleading on March 23, 2011 and responses to undertakings on July 16, 2012. On November 6, 2012, Pantelakis filed a second amended statement of claim, reframing his lawsuit as a negligence action. The j2 Global affiliate filed an amended statement of defense on April 8, 2013. Discovery has closed.




On January 17, 2013, the Commissioner of the Massachusetts Department of Revenue (“Commissioner”) issued a notice of assessment to a j2 Global affiliate for sales and use tax for the period of July 1, 2003 through December 31, 2011. On July 22, 2014, the Commissioner denied the j2 Global affiliate’s application for abatement. On September 18, 2014, the j2 Global affiliate petitioned the Massachusetts Appellate Tax Board for abatement of the tax asserted in the notice of assessment (No. C325426). A trial was held on December 16, 2015. On May 18, 2017, the Appellate Board decided in favor of the Commonwealth of Massachusetts. The j2 Global affiliate has requested the findings of fact and conclusions of law from the Appellate Board.

On October 16, 2013, a j2 Global affiliate entered an appearance as a plaintiff in a multi-district litigation pending in the Northern District of Illinois (No. 1:12-cv-06286). In this litigation, Unified Messaging Solutions, LLC (“UMS”), a company with rights to assert certain patents owned by the j2 Global affiliate, has asserted five j2 Global patents against a number of defendants. While claims against some defendants have been settled, other defendants have filed counterclaims for, among other things, non-infringement, unenforceability, and invalidity of the patents-in-suit. On December 20, 2013, the Northern District of Illinois issued a claim construction opinion and, on June 13, 2014, entered a final judgment of non-infringement for the remaining defendants based on that claim construction. UMS and the j2 Global affiliate filed a notice of appeal to the Federal Circuit on June 27, 2014 (No. 14-1611). The appeal is pending.

On January 21, 2016, Davis Neurology, P.A.8, 2020, Jeffrey Garcia filed a putative class action lawsuit against two j2 Global affiliatesthe Company in the Circuit Court for the CountyCentral District of Pope, State of Arkansas (58-cv-2016-40)California (20-cv-06906), alleging violations of federal securities laws. The Company has moved to dismiss the TCPA.consolidated class action complaint. The case was ultimately removedcourt granted the motion to dismiss and the U.S. Districtplaintiff has filed an amended complaint. The Company has moved to dismiss the amended complaint. On August 8, 2022, the court granted the Company’s motion to dismiss the amended complaint without leave to amend.

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ZIFF DAVIS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
On September 24, 2020, International Union of Operating Engineers of Eastern Pennsylvania and Delaware filed an action lawsuit in the Delaware Court of Chancery (C.A. No. 2020-0819-VCL) asserting derivative claims for breach of fiduciary duty and related theories against directors of the EasternCompany and other third parties relating generally the investment by the Company in OCV Fund I, L.P. (the “Chancery Court Derivative Action”). On November 17, 2020, the court entered an order allowing Orlando Police Pension Fund to intervene as a plaintiff in the case. The parties have reached an agreement to settle the lawsuit, which requires court approval. On July 29, 2021, the parties filed a stipulation of settlement that provides the terms of the settlement and begins the settlement approval process with the Court. On January 20, 2022 the Court approved the settlement. Among other terms of the settlement, no further capital calls will be made in connection with the Company’s investment in OCV Fund I, L.P.

On December 11, 2020, Danning Huang filed a lawsuit in the District of Arkansas (the “EasternDelaware (20-cv-01687-LPS) asserting derivative claims against directors of the Company and other third parties. The lawsuit alleges violations of Section 14(a), Section 10(b), Section 20(a) and Rule 10b-5 of the Securities Exchange Act of 1934, as well as breach of fiduciary duty, unjust enrichment and abuse of control.

On March 24, 2021, Fritz Ringling filed a lawsuit in the District of Arkansas”) (No. 4:16-cv-00682). On June 6, 2016,Delaware (21-cv-00421-UNA) asserting substantially similar derivative claims, and on April 8, 2021, the j2district court consolidated the two actions under the caption In re J2 Global affiliates filed a motion for judgment onStockholder Derivative Litigation. No.: 20-cv-01687-LPS. As part of the pleadings. On March 20, 2017,settlement of the Eastern District of Arkansas dismissed all claimsChancery Court Derivative Action described above, the Company and its directors and officers intend to defend against the j2 Global affiliates. On April 17, 2017, Davis Neurology filed a notice of appeal to the Federal Circuit (No. 17-1820). remaining claims.

The appeal is pending.

j2 GlobalCompany does not believe, based on current knowledge, that the foregoing legal proceedings or claims, after giving effect to existing reserves,accrued liabilities, are likely to have a material adverse effect on the Company’s consolidated financial position, results of operations, or cash flows. However, depending on the amount and timing, an unfavorable resolution of some or all of these matters could have a material effect on j2 Global’sthe Company’s consolidated financial position, results of operations, or cash flows in a particular period.
The Company has not accrued for any material loss contingencies relating to these legal proceedings because materially unfavorable outcomes are not considered probable by management. It is the Company’s policy to expense as incurred legal fees related to various litigations.

Non-Income Related Taxes
As a provider of cloud services for business, the
The Company does not provide telecommunications services. Thus, it believes that its businesscollect and its users (by using the Company’s services) are generally not subject to variousremit sales and use, telecommunication, taxes. Moreover,or similar taxes and fees in certain jurisdictions where the Company generally doesbelieves such taxes are not believe that its business and its users (by using the Company’s services) are subject to other indirect taxes, such as sales, business tax and gross receipt tax. However, several state and municipal taxing authorities have challenged these beliefs and have and may continue to audit and assess the Company’s business and operations with respect to telecommunicationsapplicable or legally required. Several states and other indirect taxes.taxing jurisdictions have presented or threatened the Company with assessments, alleging that the Company is required to collect and remit such taxes there.
On February 24, 2016, President Obama signed into law H.R. 644, the “Trade Facilitation and Trade Enforcement Act of 2015”, which included a provision to permanently ban state and local authorities from imposing access or discriminatory taxes on the Internet. The new law allows “grandfathered” states and local authorities to continue their existing taxes on Internet access through June 2020.
The Company is currently under audit or is subject to audit for indirect taxes in severalvarious states, municipalities and municipalities including New York State, Massachusetts, and the City of Los Angeles. On March 3, 2017, the New York State Department of Taxation and Finance issuedforeign jurisdictions. The Company has a notice of assessment to a j2 Global affiliate$24.3 million reserve established for sales and use tax for the period of March 1, 2009 through February 28, 2014. The j2 Global affiliatethese matters. It is reviewing the Department’s notice of assessment. On August 8, 2017, the Ohio audit was concluded with immaterial changes. We have reserved for potential adjustments to our accrual of indirect taxesreasonably possible that may result from examinations by or any negotiated agreements with these tax authorities and we believe that the final outcome of these examinations or agreements will notadditional liabilities could be incurred resulting in additional expense, which could have a material effect onimpact to our results of operations. If events occur which indicate payment of these amounts is unnecessary, the reversal of the liabilities would result in the recognition of benefits in the period we determine the liabilities are no longer necessary. If our estimated indirect tax liabilities are less than the ultimate assessment, it would result in a further charge to expense.

financial results.


10.Income Taxes


The Company’s tax provision for interim periods is determined using an estimate of the Company’s annual effective tax rate.rate adjusted for discrete interim period tax impacts. Each quarter the Company updates its estimated annual effective tax rate and, if the estimate changes, makes a cumulative adjustment. j2 Global’s annual effective tax rate is normally lower than the 35% U.S. federal statutory rate and applicable apportioned state tax rates primarily due to anticipated earnings of the Company’s subsidiaries outside of the U.S. in jurisdictions where the Company’s effective tax rate is lower than in the U.S. The Company’s effective tax rate was 22.1%(33.2)% and 25.8%37.4% for the three months ended SeptemberJune 30, 20172022 and 2016,2021, respectively and 23.7%12,760.8% and 28.7%86.1% for the ninesix months ended SeptemberJune 30, 20172022 and 2016,2021, respectively. j2 Global does not provideThe Company’s effective tax rate for U.S. income taxes on the undistributed earningsthree and six months ended June 30, 2022 have been disproportionately impacted due to the size of the Company’s foreign operations becausediscrete book loss related to the Disposed Consensus Shares and Retained Consensus Shares. The net loss recorded for book purposes for the Investment in Consensus, excluding transaction costs resulted in no tax benefit. The loss is not subject to tax since the Company intendshas the ability to permanently reinvest such earnings in foreign jurisdictions and any determinationdispose of the amountinvestment in a tax-free manner based on guidance and requirements set out by the Internal Revenue Service. In addition, during the three months and six months ended June 30, 2021 the Company recognized a tax benefit for the release of unrecognizeda valuation allowance on deferred tax liabilityassets related to these earnings is not practicable. the impairment of certain investments and the goodwill impairment with no similar events for the period ending June 30, 2022.

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ZIFF DAVIS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
Income (loss) from continuing operations before income taxes included incomea loss from domestic operations of $13.7approximately $30.6 million and $57.2$52.1 million for the ninesix months ended SeptemberJune 30, 20172022 and 2016,2021, respectively, and income from foreign operations of $103.7$30.7 million and $96.0$32.1 million for the ninesix months ended SeptemberJune 30, 20172022 and 2016,2021, respectively.


As of SeptemberJune 30, 20172022 and December 31, 2016,2021, the Company had $48.7$43.6 million and $46.5$42.5 million, respectively, in liabilities for uncertain income tax positions.positions from continuing operations. Accrued interest and penalties related to unrecognized tax benefits are recognized in income tax expense on the Company’s consolidated statementCondensed Consolidated Statement of income.Operations.


Cash paid for income taxes net of refunds received for continuing operations was $46.6$15.4 million and $40.4$36.0 million for the ninesix months ended SeptemberJune 30, 20172022 and 2016,2021, respectively.


Certain taxes are prepaid during the year and, where appropriate, included within prepaid‘Prepaid expenses and other current assetsassets’ on the consolidated balance sheet.Condensed Consolidated Balance Sheet. The Company’s prepaid taxes were $9.2zero and $0.8 million and zero at SeptemberJune 30, 20172022 and December 31, 2016,2021, respectively.


Income Tax Audits:


The Company is under income taxin various stages of audit by the U.S. Internal Revenue Service (“IRS”) for its 2012 through 20142016 tax years. Additionally,On February 24, 2021, the Company was notifiedreceived a Notice of Deficiency for tax years 2012 through 2014 which disallowed certain deductions for domestic production. The Company disagrees with the Notice and filed a petition with the United States Tax Court on March 22, 2017 thatMay 24, 2021. As of June 30, 2022, the IRS will be auditing Everyday Health’s (“EVDY”) 2014 tax year. EVDYaudits are ongoing.

The Company is a subsidiary in the Digital Media segment.

j2 Global is under income tax audit by the California Franchise Tax Board (the “FTB”(“FTB”) for its tax years 2012, 2013, 2015, and 2013.2016. The FTB, however, has agreed to suspend its audit for 2012 and 2013 pending the outcome of the IRS audit for such tax years. As of June 30, 2022, the audits are ongoing.


The Company is under income tax audit byIn June 2019, the New York State Department of Taxation and Finance (“NYS”) notified the Company that it will commence an audit for tax year 2015. In April 2020, the NYS notified the Company that it will also commence an audit for tax years 2011 through 2013. On March 16, 2017,2016 and 2017. As of June 30, 2022, the Company was notified that NYS would be auditing its 2014 tax year.audits are ongoing.


The Company was notifiedconducts business on September 6, 2017 thata global basis and as a result, one or more of its subsidiaries files income tax returns in the Massachusetts DepartmentU.S. federal and in multiple state, local, and foreign tax jurisdictions. The Company’s U.S. federal income tax returns for years 2012 through 2016 are under various stages of Revenue would be auditingaudit by the IRS, as noted above. The Company is also under audit for various U.S. state and local tax purposes as noted above for its significant jurisdictions. With limited exception, the Company’s significant foreign tax jurisdictions are no longer subject to an income tax audit by the various tax authorities for tax years 2014 and 2015.prior to 2014.

It is reasonably possible that these audits may conclude in the next 12twelve months and that the uncertain tax positions the Company has recorded in relation to these tax years may change compared to the liabilities recorded for these periods. If the recorded uncertain tax positions are inadequate to cover the associated tax liabilities, the Company would be required to record additional tax expense in the relevant period, which could be material. If the recorded uncertain tax positions are adequate to cover the associated tax liabilities, the Company would be required to record any excess as a reduction in tax expense in the relevant period, which could be material. However, it is not currently possible to estimate the amount, if any, of such change.


11.Stockholders’ Equity


Common Stock Repurchase Program


In February 2012,On August 6, 2020, the Company’s Board of Directors approved a program authorizing the repurchase of up to five million10000000 shares of our common stock through February 20, 2013August 6, 2025 (the “2012“2020 Program”) which was subsequently extended through February 19, 2018. 



In July 2016,. The Company entered into certain Rule 10b5-1 trading plans during the years ended December 31, 2021 and 2020 to execute repurchases under the 2020 Program. During the three months ended June 30, 2022, the Company acquired and subsequently retired 935,231repurchased 182,247 shares at an aggregate cost of j2 Global common stock in connection with the acquisitionapproximately $12.7 million (including an immaterial amount of Integrated Global Concepts, Inc. As a result of the purchase of j2 Global common stock, the Company’s Board of Directors approved a reduction in the number of shares available for purchasecommission fees) under the 2012 Program by the same amount leaving 1,938,689 shares of j2 Global common stock available for purchase under this program.2020 Program. During the nine month periodsix months ended SeptemberJune 30, 2017, we2022, the Company repurchased zero736,536 shares at an aggregate cost of approximately $71.3 million (including an immaterial amount of commission fees) under this program.the 2020 Program. These shares were subsequently retired. Cumulatively at Septemberas of June 30, 2017, 2.1 million2022, 3,672,846 shares were repurchased at an aggregate cost of $58.6$296.9 million (including an immaterial amount of commission fees). under the 2020 Program. These shares were subsequently retired. As a result of the repurchases, the number of shares available for purchase as of June 30, 2022 is 6,327,154 shares of the Company’s common stock.

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

Periodically, participants in j2 Global’sthe Company’s stock plans surrender to the Company shares of j2 Global stock to pay the exercise price or to satisfy tax withholding obligations arising upon the exercise of stock options or the vesting of restricted stock. During the three month periodmonths ended SeptemberJune 30, 2017,2022 and 2021, the Company purchased 14,178and retired 9,864 and 87,155 shares, respectively, from plan participants for this purpose.During the six months ended June 30, 2022 and 2021, the Company purchased and retired 50,236 and 195,442 shares, respectively, from plan participants for this purpose.


Dividends
12.    Stock Based Compensation

The following is a summary of each dividend declared during fiscal year 2017 and 2016:
Declaration Date Dividend per Common Share Record Date Payment Date
February 10, 2016 $0.3250
 February 23, 2016 March 10, 2016
May 5, 2016 $0.3350
 May 18, 2016 June 2, 2016
August 2, 2016 $0.3450
 August 17, 2016 September 1, 2016
November 1, 2016 $0.3550
 November 18, 2016 December 5, 2016
February 9, 2017 $0.3650
 February 22, 2017 March 9, 2017
May 4, 2017 $0.3750
 May 19, 2017 June 2, 2017
August 2, 2017 $0.3850
 August 14, 2017 September 1, 2017

Future dividends are subject to Board approval.

12.Stock Options and Employee Stock Purchase Plan

j2 Global’sCompany’s share-based compensation plans include the 2007 Stock Plan (the “2007 Plan”), 2015 Stock Option Plan (the “2015 Plan”) and 2001 Employee Stock Purchase Plan (the “Purchase Plan”). Each plan is described below.


The 2007 Plan provides for the granting of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units and other share-based awards. 4,500,000 shares of j2 Globalthe Company’s common stock are authorized to be used for 2007 Plan purposes. Options under the 2007 Plan may be granted at exercise prices determined by the Board of Directors, provided that the exercise prices shall not be less than the fair market value of j2 Global’sthe Company’s common stock on the date of grant for incentive stock options and not less than 85% of the fair market value of j2 Global’sthe Company’s common stock on the date of grant for non-statutory stock options. As of SeptemberJune 30, 2017, 313,6752022, zero shares underlying options and 13,140zero shares of restricted stock units were outstanding under the 2007 Plan. The 2007 Plan terminated on February 14, 2017.


The 2015 Plan provides for the granting of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance share units and other share-based awards and is intended as a successor plan to the 2007 Stock Plan since no further grants will be made under the 2007 Stock Plan.awards. 4,200,000 shares of j2 Globalthe Company’s common stock are authorized to be used for 2015 Plan purposes. Options under the 2015 Plan may be granted at exercise prices determined by the Board of Directors, provided that the exercise prices shall not be less than the higher of the par value or 100% of the fair market value of j2 Global’sthe Company’s common stock subject to the option on the date the option is granted. As of SeptemberJune 30, 2017, 62,0002022, 435,135 shares underlying options and 29,660506,962 shares of restricted stock units were outstanding under the 2015 Plan.


All stock option grants are approved by “outside directors” within the meaning of Internal Revenue Code Section 162(m).


Stock Options
The following table represents stock option activity for the nine months ended September 30, 2017:
 Number of Shares Weighted-
Average
Exercise
Price		 Weighted-Average
Remaining
Contractual
Term (in years)		 Aggregate
Intrinsic
Value
Outstanding at January 1, 2017413,858
 $31.09
    
Granted—
 —
    
Exercised(38,183) 29.03
    
Canceled—
 —
    
Outstanding at September 30, 2017375,675
 $31.30
 3.3 $15,997,701
Exercisable at September 30, 2017338,475
 $27.33
 2.9 $15,754,785
Vested and expected to vest at September 30, 2017367,885
 $30.53
 3.3 $15,946,834

The total intrinsic values of options exercised during the nine months ended September 30, 2017 and 2016 were $2.1 million and $5.1 million, respectively.
The Company recognized $40,000 and $0.1 million of compensation expense related to stock options for the three months ended September 30, 2017 and 2016, respectively, and $0.1 million and $0.3 million for the nine months ended September 30, 2017 and 2016, respectively. As of September 30, 2017 and December 31, 2016, unrecognized stock compensation related to non-vested stock options granted under each of the share-based compensation plans approximated $0.5 million and $0.7 million, respectively. Unrecognized stock compensation expense related to non-vested stock options granted under these plans is expected to be recognized ratably over a weighted-average period of 2.6 years (i.e., the remaining requisite service period).

Fair Value Disclosure
j2 Global uses the Black-Scholes option pricing model to calculate the fair value of each option grant. The expected volatility is based on historical volatility of the Company’s common stock. The Company estimates the expected term based upon the historical exercise behavior of our employees. The risk-free interest rate is based on U.S. Treasury zero-coupon issues with a term equal to the expected term of the option assumed at the date of grant. The Company uses an annualized dividend yield based upon the per share dividends declared by its Board of Directors. Estimated forfeiture rates were 14.07% and 12.58% as of September 30, 2017 and 2016, respectively.

Restricted Stock and Restricted Stock Units
j2 Global has awarded restricted stock and restricted stock units to its Board of Directors and senior staff pursuant to certain share-based compensation plans. Compensation expense resulting from restricted stock and restricted unit grants is measured at fair value on the date of grant and is recognized as share-based compensation expense over the applicable vesting period. Beginning in fiscal year 2012, vestingVesting periods are approximately one year for awards to members of the Company’s Board of Directors, andfour or five years for senior staff (excluding market-based awards discussed below). and four to eight years for the Chief Executive Officer. The Company granted 132,117 and 90,286 shares of restricted stock and restricted units (excluding awards with market conditions below) during the six months ended June 30, 2022 and 2021, respectively.




Restricted Stock - Awards with Market Conditions

In May 2017,The Company has awarded certain key employees were granted market-based restricted stock awards.awards pursuant to the 2015 Plan. The market-based awards have vesting conditions that are based on specified stock price targets of the Company’s common stock. Market conditions were factored into the grant date fair value using a Monte Carlo valuation model, which utilized multiple input variables to determine the probability of the Company achieving the specified stock price targets with a 20 day20-day and 30-day lookback (trading days). Stock-based compensation expense related to an award with a market condition will be recognized over the requisite service period using the graded-vesting method regardless of whether the market condition is satisfied, provided that the requisite service period has been completed. During the ninesix months ended SeptemberJune 30, 20172022 and 2016,2021, the Company awarded 85,825100,193 and 106,78073,094 market-based restricted stock awards, respectively. The per share weighted average grant-date fair values of the market-based restricted stock awards granted during the ninesix months ended SeptemberJune 30, 20172022 and 2021 were $72.20.$87.11 and $94.40, respectively.


The weighted-average fair values of market-based restricted stock awards granted have been estimated utilizing the following assumptions:
June 30, 2022June 30, 2021
Underlying stock price at valuation date$99.32 $113.27 
Expected volatility36.7 %30.3 %
Risk-free interest rate1.8 %1.3 %
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ZIFF DAVIS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
 September 30, 2017
Underlying stock price at valuation date$91.17
Expected volatility29.0%
Risk-free interest rate2.17%


Restricted stock award activity for the ninesix months ended SeptemberJune 30, 20172022 is set forth below:
SharesWeighted-Average
Grant-Date
Fair Value
Shares 
Weighted-Average
Grant-Date
Fair Value
Nonvested at January 1, 2017705,015
 $41.40
Nonvested at January 1, 2022Nonvested at January 1, 2022383,963 $62.65 
Granted287,920
 61.29
Granted— — 
Vested(216,410) 45.27
Vested(61,073)80.67 
Canceled(1,850) 87.68
Canceled(1,605)93.75 
Nonvested at September 30, 2017774,675
 $47.60
Nonvested at June 30, 2022Nonvested at June 30, 2022321,285 $60.36 
  
Restricted stock unit award activity for the ninesix months ended SeptemberJune 30, 20172022 is set forth below:
Number of
Shares		Weighted-Average
Remaining
Contractual
Term (in years)		Aggregate
Intrinsic
Value
Outstanding at January 1, 2022360,743 
Granted232,310 
Vested(73,433)
Canceled(12,658)
Outstanding at a June 30, 2022506,962 2.9$37,783,878 
Vested and expected to vest at June 30, 2022506,962 2.9$37,783,878 
 Number of
Shares		 Weighted-Average
Remaining
Contractual
Term (in years)		 Aggregate
Intrinsic
Value
Outstanding at January 1, 201751,950
    
Granted11,100
    
Vested(13,570)    
Canceled(6,680)    
Outstanding at September 30, 201742,800
 1.9 $3,162,064
Vested and expected to vest at September 30, 201732,427
 1.7 $2,395,693


The Company recognized $4.4 million and $3.6 million of compensation expense related to restricted stock and restricted stock units for the three months ended September 30, 2017 and 2016, respectively, and $13.5 million and $9.6 million for the nine months ended September 30, 2017 and 2016, respectively. As of SeptemberJune 30, 20172022 and December 31, 2016,2021, the Company had unrecognized share-based compensation cost of approximately $46.7$52.9 million and $37.9$44.3 million, respectively, associated with these awards.restricted stock awards and restricted stock units. This cost is expected to be recognized over a weighted-average period of 3.7 years3.2 for restricted stock awards and 3.3 years3.9 for restricted stock units.




Employee Stock Purchase Plan

The Purchase Plan provides for the issuance of a maximum of two2 million shares of the Company’s common stock. Under the Purchase Plan, eligible employees can have up to 15% of their earnings withheld, up to certain maximums, to be used to purchase shares of j2 Globalthe Company’s common stock at certain plan-defined dates. The price of the j2 GlobalCompany’s common stock purchased under the Purchase Plan for the offering periods is equal to 95%85% of the lesser of the fair market value of the j2 Globala share of common stock atof the Company on the beginning or the end of the offering period.

The Company determined that a plan provision exists which allows for the more favorable of two exercise prices, commonly referred to as a “look-back” feature. The purchase price discount and the look-back feature cause the Purchase Plan to be compensatory and the Company to recognize compensation expense. The compensation cost is recognized on a straight-line basis over the requisite service period. The Company used the Black-Scholes option pricing model to calculate the estimated fair value of the purchase right issued under the ESPP. The expected volatility is based on historical volatility of the Company’s common stock. The risk-free interest rate is based on U.S. Treasury zero-coupon issues with a term equal to the expected term of the option assumed at the date of grant. The Company uses an annualized dividend yield based upon the per share dividends declared by its Board of Directors. Estimated forfeiture rates were 11.15% and 11.15% as of June 30, 2022 and 2021, respectively. The increase in forfeiture rate comes as a result of the Purchase Plan being offered to all employees regardless of employment location.

For the ninesix months ended SeptemberJune 30, 20172022 and 2016, 2,3732021, 76,741 and 2,99658,145 shares were purchased under the plan,Purchase Plan, respectively. Cash received upon the issuance of j2 Globalthe Company’s common stock under the Purchase Plan was $194,000$5.2 million and $191,000$4.2 million for the ninesix months ended SeptemberJune 30, 20172022 and 2016,2021, respectively. As of SeptemberJune 30, 2017, 1,624,1532022, 1,218,950 shares were available under the Purchase Plan for future issuance.


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ZIFF DAVIS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
The Company recognized $0.8 million and $0.7 million of compensation expense related to the Purchase Plan for the three months ended June 30, 2022 and 2021, respectively, and $1.5 million and $1.3 million for the six months ended June 30, 2022 and 2021, respectively.

The compensation expense related to the Purchase Plan has been estimated utilizing the following assumptions:
June 30, 2022June 30, 2021
Risk-free interest rate1.54 %0.02 %
Expected term (in years)0.50.5
Dividend yield0.00 %0.00 %
Expected volatility41.6 %29.5 %
Weighted average volatility41.6 %29.5 %

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ZIFF DAVIS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
13.Earnings Per Share
 
The components of basic and diluted earnings per share are as follows (in thousands, except share and per share data):
Three Months Ended June 30,
20222021
BasicDilutedBasicDiluted
Numerator for basic and diluted net income per common share:
Net loss from continuing operations$(46,436)$(46,436)$(23,045)$(23,045)
Net income available to participating securities (1)
— — — — 
1.75% Convertible Notes interest expense (after-tax) (2)
— — — — 
Net loss available to the Company’s common shareholders from continuing operations$(46,436)$(46,436)$(23,045)$(23,045)
Denominator:
Weighted-average outstanding shares of common stock46,978,709 46,978,709 44,613,533 44,613,533 
Dilutive effect of:
Equity incentive plans
— — — — 
Convertible debt (2)
— — — — 
Common stock and common stock equivalents46,978,709 46,978,709 44,613,533 44,613,533 
Net loss per share from continuing operations:$(0.99)$(0.99)$(0.52)$(0.52)

 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Numerator for basic and diluted net income per common share:       
Net income attributable to j2 Global, Inc. common shareholders$32,358
 $45,569
 $89,554
 $109,281
Net income available to participating securities (a)
(420) (718) (1,128) (1,610)
Net income available to j2 Global, Inc. common shareholders$31,938
 $44,851
 $88,426
 $107,671
Denominator:       
Weighted-average outstanding shares of common stock47,609,819
 47,310,011
 47,540,593
 47,775,798
Dilutive effect of:       
Equity incentive plans218,782
 184,733
 232,506
 208,974
Convertible debt (b)
692,481
 —
 972,581
 12,902
Common stock and common stock equivalents48,521,082
 47,494,744
 48,745,680
 47,997,674
Net income per share:       
Basic$0.67
 $0.95
 $1.86
 $2.25
Diluted$0.66
 $0.94
 $1.81
 $2.24

Six Months Ended June 30,
20222021
BasicDilutedBasicDiluted
Numerator for basic and diluted net income per common share:
Net (loss) income from continuing operations$(21,899)$(21,899)$15,735 $15,735 
Net loss available to participating securities (1)
— — (16)(16)
1.75% Convertible Notes interest expense (after-tax) (2)
— — — — 
Net (loss) income available to the Company’s common shareholders from continuing operations(21,899)(21,899)15,719 15,719 
Denominator:
Weighted-average outstanding shares of common stock47,016,351 47,016,351 44,506,933 44,506,933 
Dilutive effect of:
Equity incentive plans
— — — 123,708 
Convertible debt (2)
— — — 2,500,338 
Common stock and common stock equivalents47,016,351 47,016,351 44,506,933 47,130,979 
Net (loss) income per share from continuing operations:$(0.47)$(0.47)$0.35 $0.33 
(a)
Represents unvested share-based payment awards that contain certain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid).

(1)Represents unvested share-based payment awards that contain certain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid).
(b)
Represents the incremental shares issuable upon conversion of the Convertible Notes due June 15, 2029 by applying the treasury stock method when the average stock price exceeds the conversion price of the Convertible Notes (see Note 8 - Long Term Debt).

(2)Under the modified retrospective method of adoption of ASU 2020-06, the dilutive impact of convertible debt was calculated using the if-converted method for the three and six months ended June 30, 2022. The dilutive impact of convertible debt was calculated using the treasury stock method for the three and six months ended June 30, 2021 (see Note 8 - Debt).

For the three months ended SeptemberJune 30, 20172022 and 2016,2021, there were zero1,263,394 and 62,0001,187,395, respectively, stock options outstanding, respectively, which wereand restricted stock excluded from the computation of diluted earnings per share because the exercise pricescalculation as they were greater than the average market price of the common stock.anti-dilutive. For the ninesix months ended SeptemberJune 30, 20172022 and 2016,2021, there were 1,263,394 and zero, respectively, stock options and 62,000 options outstanding, respectively, which wererestricted stock excluded from the computation of diluted earnings per share becausecalculation as they were anti-
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ZIFF DAVIS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
dilutive. For the exercise pricesthree months ended June 30, 2022 and 2021, there were greater than5,158,071 and 10,292,182 shares, respectively, related to convertible debt excluded from the average market price ofcalculation as they were anti-dilutive. For the common stock.six months ended June 30, 2022 and 2021, there were 5,158,071 and zero shares, respectively, related to convertible debt excluded from the calculation as they were anti-dilutive.




14.Segment Information

14.    Segment Information

The Company’s business segmentsbusinesses are based on the organizationorganizational structure used by management for makingthe chief operating decision maker (“CODM”). The CODM views the Company as 2 businesses: Digital Media and investment decisionsCybersecurity and for assessing performance. j2 Global’s reportable business segments are: (i) Business Cloud Services and (ii) Digital Media.Martech.


The Company’s Business Cloud Services segment is driven primarily by subscription revenues thataccounting policies of the businesses are relatively higher margin, stable and predictable from quarter to quarter with some seasonal weaknessthe same as those described in the fourth quarter.Company’s Annual Report on Form 10-K filed with the SEC on March 15, 2021. The Business Cloud Services segment also includes the results of our IP licensing business, which can vary dramatically in both revenuesCompany evaluates performance based on revenue, gross margin and profitabilityprofit or loss from period to period. The Company’s Digital Media segment is driven primarily by advertising revenues, has relatively higher salesoperations before income taxes, not including nonrecurring gains and marketing expenselosses and has seasonal strength in the fourth quarter.foreign exchange gains and losses.

Information on reportable segments and reconciliation to consolidated income from operations is as follows (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Revenue by reportable segment:
Digital Media$258,700 $253,977 $493,527 $480,850 
Cybersecurity and Martech78,910 87,608 159,404 172,510 
Elimination of inter-segment revenues(254)(292)(507)(410)
Total segment revenues337,356 341,293 652,424 652,950 
Corporate(1)
— — — — 
Total revenues337,356 341,293 652,424 652,950 
Gross profit by reportable segment:
Digital Media$233,447 $228,698 $443,153 $434,759 
Cybersecurity and Martech58,263 63,895 117,656 125,754 
Elimination of inter-segment gross profit(358)(76)(489)(126)
Total segment gross profit291,352 292,517 560,320 560,387 
Corporate(1)
— (9)— (74)
Total gross profit291,352 292,508 560,320 560,313 
Direct costs by reportable segment(2):
Digital Media$188,824 $184,592 $366,410 $360,010 
Cybersecurity and Martech45,686 85,090 92,751 135,074 
Elimination of inter-segment direct costs(358)(76)(489)(126)
Total segment direct costs234,152 269,606 458,672 494,958 
Corporate(1)
11,304 12,847 25,199 28,419 
Total direct costs245,456 282,453 483,871 523,377 
Operating income by reportable segment:
Digital Media$44,623 $44,106 $76,743 $74,749 
Cybersecurity and Martech12,577 (21,195)24,905 (9,320)
Total segment operating income57,200 22,911 101,648 65,429 
Corporate(1)
(11,313)(12,856)(25,199)(28,493)
Income from operations$45,887 $10,055 $76,449 $36,936 
(1)Corporate includes costs associated with general and administrative and other expenses that are managed on a global basis and that are not directly attributable to any particular segment.

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ZIFF DAVIS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Revenues by segment:       
Business Cloud Services$145,787
 $143,342
 $432,039
 $423,941
Digital Media127,865
 66,819
 369,470
 198,613
Elimination of inter-segment revenues(36) (45) (51) (136)
Total revenues273,616
 210,116
 801,458
 622,418
        
Direct costs by segment(1):
       
Business Cloud Services89,662
 90,485
 261,515
 268,333
Digital Media115,499
 52,887
 350,467
 165,398
Direct costs by segment(1):
205,161
 143,372
 611,982
 433,731
        
Business Cloud Services operating income(2)
56,125
 52,857
 170,524
 155,608
Digital Media operating income12,366
 13,932
 19,003
 33,215
Segment operating income68,491
 66,789
 189,527
 188,823
        
Global operating costs(2)
5,534
 4,667
 20,035
 14,418
Income from operations$62,957
 $62,122
 $169,492
 $174,405
        
(1) Direct costs for each segment include cost of revenues and other operating expenses that are directly attributable to the segment, such as employee compensation expense, local sales and marketing expenses, engineering and network operations expense, depreciation and amortization and other administrative expenses.
(2) Global operating costs include general and administrative and other corporate expenses that are managed on a global basis and that are not directly attributable to any particular segment.
(2)Direct costs for each segment include other operating expenses that are directly attributable to the segment, such as employee compensation expense, local sales and marketing expenses, engineering and network operations expense, depreciation and amortization and other administrative expenses. For the three and six months ended June 30, 2021, goodwill impairment related to our B2B Backup business is also included within direct costs for Cybersecurity and Martech.


 September 30, 2017 December 31, 2016
Assets:   
Business Cloud Services$1,129,996
 $911,327
Digital Media (1)
1,084,970
 1,124,535
Total assets from reportable segments2,214,966
 2,035,862
Corporate89,720
 26,466
Total assets$2,304,686
 $2,062,328
(1) Assets of $64.7 million classified as held for sale were included within Digital Media at September 30, 2017.
    
 Nine Months Ended September 30,
 2017 2016
Capital expenditures:   
Business Cloud Services$5,399
 $6,251
Digital Media24,084
 11,196
Total from reportable segments29,483
 17,447
Corporate—
 —
Total capital expenditures$29,483
 $17,447
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Depreciation and amortization:       
Business Cloud Services$17,145
 $20,218
 $51,097
 $58,971
Digital Media22,227
 10,118
 67,500
 29,598
Total from reportable segments39,372
 30,336
 118,597
 88,569
Corporate—
 —
 —
 —
Total depreciation and amortization$39,372
 $30,336
 $118,597
 $88,569


The Company’s Business Cloud ServicesCODM does not use Balance Sheet and Cash Flow information in connection with operating and investment decisions other than as presented for Digital Media and Cybersecurity and Martech. Accordingly, the following segment consists of several services which have similar economic characteristics, including the nature of the servicesinformation is presented for Digital Media and their production processes, the type of customers, as well as the methods used to distribute these services.Cybersecurity and Martech.

June 30, 2022December 31, 2021
Assets:
Digital Media$2,062,499 $2,043,204 
Cybersecurity and Martech1,090,546 1,088,741 
Total assets from reportable segments3,153,045 3,131,945 
Corporate390,050 638,335 
Total assets$3,543,095 $3,770,280 
j2 Global groups its Business Cloud services into three main categories based on the similarities of these services: Cloud Connect, Cloud Services and Intellectual Property. Cloud Connect consists of our Fax and Voice services. Cloud Services consist of Backup, Email Security, Email Marketing and Web Hosting.
Six Months Ended June 30,
20222021
Capital expenditures
Digital Media$46,777 $38,047 
Cybersecurity and Martech7,098 11,709 
Total from reportable segments53,875 49,756 
Corporate1 — 
Capital expenditures of discontinued operations— 8,010 
Total capital expenditures$53,876 $57,766 

Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Depreciation and amortization:
Digital Media$47,543 $49,076 $93,664 $97,426 
Cybersecurity and Martech12,264 12,836 25,121 27,061 
Total from reportable segments59,807 61,912 118,785 124,487 
Corporate65 45 158 138 
Depreciation and amortization of discontinued operations— 2,779 — 5,601 
Total depreciation and amortization$59,872 $64,736 $118,943 $130,226 
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ZIFF DAVIS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
 Three Months Ended September 30, 2017 Nine Months Ended September 30, 2017
 Revenue Depreciation and Amortization Operating Income Revenue Depreciation and Amortization Operating Income
            
Cloud Connect
(Fax/Voice)
$96,882
 $7,001
 $44,663
 $286,163
 $18,964
 $133,958
Cloud Services47,693
 8,949
 11,947
 142,187
 28,330
 37,824
Intellectual Property1,212
 1,195
 (485) 3,689
 3,803
 (1,258)
   Total$145,787
 $17,145
 $56,125
 $432,039
 $51,097
 $170,524




 Three Months Ended September 30, 2016 Nine Months Ended September 30, 2016
 Revenue Depreciation and Amortization Operating Income Revenue Depreciation and Amortization Operating Income
            
Cloud Connect
(Fax/Voice)
$92,599
 $5,950
 $43,503
 $275,700
 $19,096
 $126,598
Cloud Services49,624
 12,826
 10,350
 144,853
 35,327
 31,974
Intellectual Property1,119
 1,442
 (996) 3,388
 4,548
 (2,964)
   Total$143,342
 $20,218
 $52,857
 $423,941
 $58,971
 $155,608

j2 GlobalThe Company maintains operations in the U.S., Canada, Ireland, Japanthe United Kingdom, India and other countries. Geographic information about the U.S. and all other countries for the reporting periods is presented below. Such information attributes revenues based on jurisdictions where revenues are reported (in thousands).

Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Revenues:
United States$286,757 $284,398 $550,232 $540,533 
Canada8,086 8,159 16,151 16,311 
Ireland7,732 9,342 16,544 19,055 
All other countries34,781 39,394 69,497 77,051 
Total$337,356 $341,293 $652,424 $652,950 

June 30, 2022December 31, 2021
Long-lived assets:
United States$677,416 $726,128 
All other countries
74,041 63,423 
Total$751,457 $789,551 

 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Revenues:       
United States$201,543
 $142,691
 $589,797
 $424,804
Canada19,312
 19,939
 58,064
 57,205
Ireland18,350
 18,068
 54,730
 54,517
All other countries34,411
 29,418
 98,867
 85,892
 $273,616
 $210,116
 $801,458
 $622,418

 September 30,
2017		 December 31,
2016
Long-lived assets:   
United States$394,102
 $453,053
All other countries88,088
 93,430
Total$482,190
 $546,483

15.Accumulated Other Comprehensive IncomeLoss


The following table summarizes the changes in accumulated balances of other comprehensive loss, net of tax, for the three months ended June 30, 2022 (in thousands):
Unrealized Gains (Losses) on InvestmentsForeign Currency TranslationTotal
Balance as of April 1, 2022$169 $(59,600)$(59,431)
Other comprehensive loss before reclassification— (24,265)(24,265)
Net current period other comprehensive loss— (24,265)(24,265)
Balance as of June 30, 2022$169 $(83,865)$(83,696)

The following table summarizes the changes in accumulated balances of other comprehensive income,loss, net of tax, for the threesix months ended SeptemberJune 30, 20172022 (in thousands):
Unrealized Gains (Losses) on InvestmentsForeign Currency TranslationTotal
Balance as of January 1, 2022$169 $(57,391)$(57,222)
Other comprehensive loss— (30,530)(30,530)
Consensus separation adjustment— 4,056 4,056 
Net current period other comprehensive loss— (26,474)(26,474)
Balance as of June 30, 2022$169 $(83,865)$(83,696)
 Unrealized Gains (Losses) on Investments Foreign Currency Translation Total
Beginning balance$—
 $(38,736) $(38,736)
     Other comprehensive income before reclassifications—
 7,703
 7,703
Net current period other comprehensive income—
 7,703
 7,703
Ending balance$—
 $(31,033) $(31,033)




The following table summarizes the changes inThere were no reclassifications out of accumulated balances of other comprehensive income,loss for the three and six months ended June 30, 2022. During the three and six months ended June 30, 2022, accumulated other comprehensive loss and other comprehensive loss were adjusted by approximately zero and $4.1 million, respectively, related to the subsequent accounting for the Separation.

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ZIFF DAVIS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - Continued
16.    Related Party Transactions

Consensus

In preparation for and in executing the Separation, the Company incurred transaction-related costs, some of which were or the Company expects to be, reimbursed by Consensus. These transaction costs primarily related to professional fees associated with preparation of regulatory filings and transaction execution and separation activities within finance, tax and legal functions. In connection with the Separation, Ziff Davis and Consensus entered into several agreements that govern the relationship of the parties following the Separation, including a separation and distribution agreement, a transition services agreement, a tax matters agreement, an employee matters agreement, an intellectual property license agreement, and a stockholder and registration rights agreement. The transition services agreement governs services including certain information technology services, finance and accounting services and human resource and employee benefit services. The agreed-upon charges for such services are generally intended to allow the providing company to recover all costs and expenses of providing such services and is expected to terminate no later than twelve months following the Separation. Amounts due from Consensus as of June 30, 2022 and December 31, 2021 were approximately $6.2 million and $9.3 million, respectively, related to reimbursement of certain costs pursuant to the transition services agreement, certain transaction related costs and other costs, and is included in ‘Accounts receivable’ within the Condensed Consolidated Balance Sheets. During the three and six months ended June 30, 2022, the Company recorded an offset to expense of approximately zero and $1.2 million, respectively, from Consensus related to certain items above within ‘General and administrative expenses’ within the Condensed Consolidated Statements of Operations. During the three and six months ended June 30, 2022, Consensus paid the Company approximately $11.5 million and $11.5 million, respectively, related to reimbursement of items described above.

Further, the Company assigned its lease of office space in Los Angeles, California to Consensus. Ziff Davis will remain the lessee under this lease and its obligations remain in place through October 7, 2022, after which time Consensus will take over the lease in full. During the three and six months ended June 30, 2022, the Company recorded an offset to lease expense of approximately $0.4 million and $0.9 million, respectively, related to this lease, however, Consensus paid the landlord directly (other than an immaterial amount of sublease payments from Ziff Davis to Consensus).

OCV

On September 25, 2017, the Company entered into a commitment to invest in the Fund. The manager, OCV Management, LLC, and general partner of the Fund are entities with respect to which Richard S. Ressler, former Chairman of the Board, is indirectly the majority equity holder. Mr. Ressler’s tenure with the Board ended as of May 10, 2022. After Mr. Ressler’s tenure with the Board ended, the Fund is no longer a related party and activity subsequent to this date is not included within the following disclosures. During the three and six months ended June 30, 2022 and 2021, the Company recognized expense for management fees of $0.8 million and $0.8 million, net of tax forbenefit, respectively, and $1.5 million and $1.5 million, net of tax benefit, respectively. During the ninesix months ended SeptemberJune 30, 2017 (in thousands):
 Unrealized Gains (Losses) on Investments Foreign Currency Translation Total
Beginning balance$—
 $(54,649) $(54,649)
     Other comprehensive income before reclassifications—
 23,616
 23,616
Net current period other comprehensive income—
 23,616
 23,616
Ending balance$—
 $(31,033) $(31,033)

16.Subsequent Events

On October 5, 2017,2021, the Company completedreceived capital call notices from the salemanagement of Tea Leaves,OCV Management, LLC for $11.1 million, inclusive of certain management fees. Approximately $10.1 million was paid for capital call notices during the six months ended June 30, 2021. In addition, subject to the terms and conditions of the Fund’s limited partnership agreement, once the Company has received distributions equal to its invested capital, the Fund’s general partner will be entitled to a subsidiarycarried interest equal to 20%. The Fund has a six year investment period, subject to certain exceptions. The commitment was approved by the Audit Committee of Everyday Health, Inc. within the Digital Media segment, for aBoard in accordance with the Company’s related-party transaction approval policy. In connection with the settlement of certain litigation generally related to the Company’s investment in the Fund (see Note 9 - Commitments and Contingencies), among other terms, no further capital calls were made during the six months ended June 30, 2022 or will be made in the future in connection with the Company’s investment in the Fund, nor will any future management fees be paid by the Company to the manager.

17.    Subsequent Event

During July and August of 2022, the Company repurchased an additional $80.0 million in aggregate principal amount of the 4.625% Senior Notes at an aggregate purchase price of approximately $90.0 million (subject to valuation) consisting of a combination of cash and various equity securities. The Company is currently determining the financial impact to the statement of operations which will be recorded in the fourth quarter 2017. The Company expects to record a gain from this transaction.$71.5 million.


On October 12, 2017, in a cash transaction including an earn-out, the Company acquired all the issued capital of Humble Bundle, Inc., a digital storefront for video games based in California.
-45-


On October 31, 2017, the Company’s Board of Directors approved a quarterly cash dividend of $0.3950 per share of j2 Global common stock payable on December 5, 2017 to all stockholders of record as of the close of business on November 17, 2017.






Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Information


In addition to historical information, we have also made forward-looking statements in this report. These statements are based on our estimates and assumptions and are subject to risks and uncertainties. Forward-looking statements include the information concerning our possible or assumed future results of operations. Forward-looking statements also include those preceded or followed by the words “anticipates,” “believes,” “estimates,” “hopes” or similar expressions. For those statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including but not limited to those discussed below, the risk factors discussed in Part II, Item 1A - “Risk Factors” of this Quarterly Report on Form 10-Q (if any) and in Part I, Item 1A - “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 20162021 (together, the “Risk Factors”), and the factors discussed in the section in this Quarterly Report on Form 10-Q entitled “Quantitative and Qualitative Disclosures About Market Risk.” Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s opinions only as of the date hereof. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements. Readers should carefully review the Risk Factors and the risk factors set forth in other documents we file from time to time with the SEC.
 
Some factors that could cause actual results to differ materially from those anticipated in these forward-looking statements include, but are not limited to, our ability and intention to:

◦Sustain growth or profitability, particularly in light of an uncertain U.S. or worldwide economy and the related impact on customer acquisition and retention rates, customer usage levels and credit and debit card payment declines;
◦Maintain and increase our Cloud Services customer base and average revenue per user;
◦Generate sufficient cash flow to make interest and debt payments and reinvest in our business, and pursue desired activities and businesses plans while satisfying restrictive covenants relating to debt obligations;
◦Acquire businesses on acceptable terms and successfully integrate and realize anticipated synergies from such acquisitions;
◦Continue to expand our businesses and operations internationally in the wake of numerous risks, including adverse currency fluctuations, difficulty in staffing and managing international operations, higher operating costs as a percentage of  revenues or the implementation of adverse regulations;
◦Maintain our financial position, operating results and cash flows in the event that we incur new or unanticipated costs or tax liabilities, including those relating to federal and state income tax and indirect taxes, such as sales, value-added and telecommunication taxes;
◦Accurately estimate the assumptions underlying our effective worldwide tax rate;
◦Continue to pay a comparable cash dividend on a quarterly basis;
◦Maintain favorable relationships with critical third-party vendors whose financial condition will not negatively impact the services they provide;
◦Create compelling digital media content causing increased traffic and advertising levels; additional advertisers or an increase in advertising spend; and effectively target digital media advertisements to desired audiences;
◦Manage certain risks inherent to our business, such as costs associated with fraudulent activity, system failure or network security breach; effectively maintaining and managing our billing systems; time and resources required to manage our legal proceedings; or adhering to our internal controls and procedures;
◦Compete with other similar providers with regard to price, service and functionality;
◦Cost-effectively procure, retain and deploy large quantities of telephone numbers in desired locations in the United States and abroad;
◦Achieve business and financial objectives in light of burdensome domestic and international telecommunications, Internet or other regulations including data privacy, security and retention;
◦Successfully manage our growth, including but not limited to our operational and personnel-related resources, and integration of newly acquired businesses;



◦Sustain growth or profitability, particularly in light of an uncertain U.S. or worldwide economy, including inflation, supply chain and other factors and their related impacts on customer acquisition and retention rates, customer usage levels, and credit and debit card payment declines;
◦Successfully adapt to technological changes and diversify services and related revenues at acceptable levels of financial return;
◦Successfully develop and protect our intellectual property, both domestically and internationally, including our brands, patents, trademarks and domain names, and avoid infringing upon the proprietary rights of others; and
◦Recruit and retain key personnel.

◦Maintain and increase our customer base and average revenue per user;
◦Generate sufficient cash flow to make interest and debt payments, reinvest in our business, and pursue desired activities and businesses plans while satisfying restrictive covenants relating to debt obligations;
◦Acquire businesses on acceptable terms and successfully integrate and realize anticipated synergies from such acquisitions;
◦Continue to expand our businesses and operations internationally in the wake of numerous risks, including adverse currency fluctuations, difficulty in staffing and managing international operations, higher operating costs as a percentage of revenues, or the implementation of adverse regulations;
◦Maintain our financial position, operating results and cash flows in the event that we incur new or unanticipated costs or tax liabilities, including those relating to federal and state income tax and indirect taxes, such as sales, value-added and telecommunication taxes;
◦Accurately estimate the assumptions underlying our effective worldwide tax rate;
◦Maintain favorable relationships with critical third-party vendors whose financial condition will not negatively impact the services they provide;
◦Create compelling digital media content causing increased traffic and advertising levels; additional advertisers or an increase in advertising spend; and effectively target digital media advertisements to desired audiences;
◦Manage certain risks inherent to our business, such as costs associated with fraudulent activity, system failure or security breach; effectively maintaining and managing our billing systems; time and resources required to manage our legal proceedings; liability for legal and other claims; or adhering to our internal controls and procedures;
◦Compete with other similar providers with regard to price, service, and functionality;
◦Achieve business and financial objectives in light of burdensome domestic and international telecommunications, internet or other regulations, including regulations related to data privacy, access, security, retention, and sharing;
◦Successfully manage our growth, including but not limited to our operational and personnel-related resources, and integration of newly acquired businesses;
◦Successfully adapt to technological changes and diversify services and related revenues at acceptable levels of financial return;
-47-


◦Successfully develop and protect our intellectual property, both domestically and internationally, including our brands, patents, trademarks and domain names, and avoid infringing upon the proprietary rights of others;
◦Recruit and retain key personnel; and
◦Realize the expected benefits of the cloud fax spin-off transaction or the sale of the B2B Backup business.
In addition, other factors that could cause actual results to differ materially from those anticipated in these forward-looking statements or materially impact our financial results could be materially impacted byinclude the risks associated with new accounting pronouncements.pronouncements, as well as those associated with natural disasters, public health crises, pandemics including the COVID-19 outbreak and other catastrophic events outside of our control, including as to COVID-19 the scope and duration of the pandemic, actions taken by governmental authorities in response to the pandemic, and the direct and indirect impact of the pandemic on our customers, third parties and us.


Overview


j2Ziff Davis, Inc. (formerly J2 Global, Inc.) was incorporated in 2014 as a Delaware corporation through the creation of a holding company structure. Our Cybersecurity and Martech businesses are operated by our wholly owned subsidiary, J2 Global Ventures, LLC. Prior to the spin-off of Consensus Cloud Solutions, Inc. (“Consensus”), our Cybersecurity and Martech businesses were operated by our former wholly owned subsidiary J2 Cloud Services, LLC (formerly J2 Cloud Services, Inc.), which was founded in 1995, and subsidiaries of J2 Cloud Services, LLC.
Ziff Davis, Inc., together with its subsidiaries (“j2 Global”Ziff Davis”, the “Company”“the Company”, “our”, “us” or “we”), is a leading provider of Internet services. Through our Business Cloud Services Division, we provide cloud services to businesses of all sizes, from individuals to enterprises,vertically focused digital media and license our intellectual property (“IP”) to third parties. In addition, the Business Cloud Services Division includes our j2 Cloud Connect business which primarily focuses on our voice and fax products. Theinternet company. Our Digital Media Divisionbusiness specializes in the technology, shopping, gaming, lifestyle and healthcare markets, reaching in-market buyersoffering content, tools and influencersservices to consumers and businesses. Our Cybersecurity and Martech business provides cloud-based subscription services to consumers and businesses including cybersecurity, privacy and marketing technology.

In February 2021, we sold certain Voice assets in both the consumerUnited Kingdom and business-to-business space.in September 2021, we sold our B2B Backup business. In October 2021 we completed the separation of our cloud fax business (the “Separation”) into an independent publicly traded company, Consensus.


Our Business Cloud Services Division generates revenues primarilyThe accounting requirements for reporting the Separation of Consensus as a discontinued operation were met when the Separation was completed on October 7, 2021. Accordingly, the accompanying Condensed Consolidated Financial Statements for all periods presented reflect the results of the Consensus business as a discontinued operation. Ziff Davis retained a 19.9% interest in Consensus following the Separation (the “Investment in Consensus”). Ziff Davis did not retain a controlling interest in Consensus. On June 10, 2022, the Company entered into a Fifth Amendment to its Credit Agreement with MUFG Union Bank, N.A., as administrative agent and collateral agent and the lenders party thereto to effectuate the debt-for equity exchange of the portion of the Investment in Consensus. The Fifth Amendment to the Credit Agreement (i) provided for the issuance of a senior secured term loan under the Credit Agreement, in an aggregate principal amount of $90.0 million (the “Term Loan Facility”) and (ii) certain other changes to the Credit Agreement. Refer to Note 8 - Debt in Item 1 of Part I of this Quarterly Report on Form 10-Q, which is incorporated by reference into this Part I Item 2 for additional information. During the three months ended June 30, 2022, the Company borrowed approximately $90.0 million under the Term Loan Facility and completed a non-cash exchange of 2.3 million shares of the Investment in Consensus with a carrying value of $138.3 million to settle its obligation to repay the $90.0 million outstanding aggregate principal amount of the Term Loan Facility plus related interest (the “Debt-for-Equity Exchange”). As of June 30, 2022, the Company holds 1.7 million shares of the common stock of Consensus. The Investment in Consensus represents an investment into equity securities for which the Company elected the fair value option and subsequent fair value changes in the Consensus shares are included in the assets of and results from customer subscription and usage fees and from IP licensing fees. continuing operations.

Our Digital Media Divisionbusiness generates revenues primarily from advertising and sponsorship,sponsorships, subscription and usage fees, performance marketing and licensing fees. Our Cybersecurity and Martech business generates revenues primarily from recurring fixed and variable usage-based subscription and licensing fees.

In addition to growing our businessesbusiness organically, on a regular basis we acquire businesses to grow our customer bases, expand and diversify our service offerings, enhance our technology andtechnologies, acquire skilled personnel.personnel and enter into new markets.

Our consolidated revenues are currently generated from threetwo basic business models, each with different financial profiles and variability. Our Business Cloud Services Division is driven primarily by subscription revenues that are relatively higher margin, stable and predictable from quarter to quarter with some seasonal weakness in the fourth quarter. The Business Cloud Services Division also includes the results of our IP licensing business, which can vary dramatically in both revenues and profitability from period to period. Our Digital Media Divisionbusiness is driven primarily by advertising revenues, has relatively higher sales and
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marketing expense and has seasonal strength in the fourth quarter. Our Cybersecurity and Martech business is driven primarily by subscription revenues with relatively stable and predictable margins from quarter to quarter. We continue to pursue additional acquisitions, which may include companies operating under business models that differ from those we operate under today. Such acquisitions could impact our consolidated profit margins and the variability of our revenues.
j2 Global was incorporated in 2014 as a Delaware corporation through the creation of a new holding company structure, and our Business Cloud Services segment, operated by our wholly-owned subsidiary, j2 Cloud Services, LLC (formerly j2 Cloud Services, Inc.), and its subsidiaries, was founded in 1995. We manage our operations through two business segments: Business Cloud Services and Digital Media. Information regarding revenue and operating income attributable to each of our reportable segments is included within Note 14 - Segment Information of the Notes to Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q.


Business Cloud Services Segment Performance Metrics


The following table sets forth certain key operating metrics for our Business Cloud Services segmentRevenues from external customers classified by revenue source are as of and forfollows (in thousands):

Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Digital Media
Advertising(1)
$189,198 $198,385 $359,265 $375,673 
Subscription(1)
58,901 48,299 114,477 93,924 
Other(1)
10,601 7,293 19,785 11,253 
Total Digital Media revenues$258,700 $253,977 $493,527 $480,850 
Cybersecurity and Martech
Subscription$78,910 $87,608 $159,404 $172,510 
Total Cybersecurity and Martech revenues$78,910 $87,608 $159,404 $172,510 
Elimination of inter-segment revenues(254)(292)(507)(410)
Total Revenues$337,356 $341,293 $652,424 $652,950 
(1) During the three and ninesix months ended SeptemberJune 30, 20172021, the Company reclassified approximately $1.5 million and 2016 (in thousands, except for percentages):$4.7 million of revenue from ‘Subscription’ to ‘Advertising’ and reclassified approximately $4.4 million and $6.5 million of revenue from ‘Subscription ’ to ‘Other’ to conform with current period presentation. These reclassifications were made in order to separate games publishing revenue from traditional advertising revenue and to move job posting related revenue from subscriptions to advertising.

We use certain metrics to generally assess the operational and financial performance of our businesses. We have changed these metrics effective January 1, 2022, and the following descriptions align with the metrics management now uses to monitor the performance of its various advertising and subscription-based businesses. For our advertising businesses, net advertising revenue retention is an indicator of our ability to retain the spend of our existing advertisers year over year, which we view as a reflection of the effectiveness of our advertising platform. Similarly, we monitor the number of our advertisers and the revenue per advertiser (as defined) as these metrics provide further details related to our reported revenue and contribute to certain of our business planning decisions.

For our subscription and licensing businesses, the number of subscribers that we serve is an indicator of our customer retention and growth. The average monthly revenue per subscriber and the churn rate also contribute to insights that contribute to certain of our business planning decisions.

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 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Subscriber revenues:       
Fixed$118,756
 $117,816
 $352,037
 $350,511
Variable25,808
 24,396
 76,277
 70,005
Total subscriber revenues$144,564
 $142,212
 $428,314
 $420,516
Other license revenues1,223
 1,130
 3,725
 3,425
Total revenues$145,787
 $143,342
 $432,039
 $423,941
        
Percentage of total subscriber revenues:       
Fixed82.1% 82.8% 82.2% 83.4%
Variable17.9% 17.2% 17.8% 16.6%
        
Total revenues:       
Number-based$96,703
 $92,396
 $285,630
 $274,955
Non-number-based49,084
 50,946
 146,409
 148,986
Total revenues$145,787
 $143,342
 $432,039
 $423,941
        
Average monthly revenue per Cloud Business Customer (ARPU) (1)(2)
$15.26
 $15.28
    
Cancel Rate(3)
2.2% 2.3%    


(1)
Quarterly ARPU is calculated using our standard convention of applying the average of the quarter’s beginning and ending base to the total revenue for the quarter. We believe ARPU provides investors an understanding of the average monthly revenues we recognize associated with each Cloud Business Customer. As ARPU varies based on fixed subscription fee and variable usage components, we believe it can serve as a measure by which investors can evaluate trends in the types of services, levels of services and the usage levels of those services across our Cloud Business Customer base.

(2)
Cloud Business Customers is defined as paying direct inward dialing numbers for fax and voice services, and direct and resellers’ accounts for other services.

(3)
Cancel Rate is defined as cancels of small and medium business and individual Cloud Business Customers with greater than four months of continuous service (continuous service includes Cloud Business Customers administratively canceled and reactivated within the same calendar month), and enterprise Cloud Business Customers beginning with their first day of service. Calculated monthly and expressed as an average over the three months of the quarter.


Digital Media Segment Performance Metrics

The following table sets forth certain key operating metrics for our Digital Media segmentadvertising business for the three months ended June 30, 2022 and 2021:
Three Months Ended June 30,
20222021
Net advertising revenue retention (1)
99.6 %111.2 %
Advertisers (2)
$2,016 1,913 
Quarterly revenue per advertiser (3)
$93,848 $103,704 
(1) Net advertising revenue retention equals (i) the trailing twelve month revenue recognized related to prior year advertisers in the current year period (excluding revenue from acquisitions during the stub period) divided by (ii) the trailing twelve month revenue recognized related to prior year advertisers in the prior year period (excluding revenue from acquisitions during the stub period). This excludes advertisers that generated less than $10,000 of revenue in the measurement period. Due to the aggregation of certain reporting systems related to the integration of acquisitions, retention data for the second quarter of 2021 reflects certain estimates.
(2) Excludes advertisers that spent less than $2,500 in the quarter within certain divisions.
(3) Represents total gross quarterly advertising revenues divided by advertisers as defined in footnote (2).

The following table sets forth certain key operating metrics for our Digital Media and Cybersecurity and Martech subscription and licensing businesses for the three months ended June 30, 2022 and 2021:
Three Months Ended June 30,
2022
2021 (excluding disposed assets)(1)
2021 (including disposed assets) (1)
Subscribers (in thousands) (2)
2,3932,3402,368
Average quarterly revenue per subscriber (3)
$57.64$53.17$57.32
Churn rate (4)
2.92%2.51%2.44%
(1) The metrics in the table above are shown exclusive and inclusive of the B2B Backup business that was sold during the third quarter of 2021. The metric of average monthly revenue per subscriber excluding disposed assets for the three and ninesix months ended SeptemberJune 30, 20172021 is considered a non-GAAP measure. The Company believes this provides useful information to allow for comparability of these metrics without disposed assets in both periods. The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and 2016 (in millions):presented in accordance with U.S. GAAP.
(2) Represents the quarterly average of the end of month subscriber counts for both the Digital Media and Cybersecurity and Martech businesses. Cybersecurity and Martech subscribers are defined as a direct customer, including customers who have paused but not cancelled their subscription. If the company provides services through a reseller or a partner and the Company does not have visibility into the number of underlying subscribers, the reseller or partner is counted as one subscriber.
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Visits1,394
 1,448
 4,148
 3,705
Page views5,872
 5,405
 17,313
 13,258
(3) Represents quarterly subscription revenues divided by customers in the table above.
Sources: Google Analytics(4) Churn rate is calculated as (i) the average revenue per subscription in the prior month multiplied by the number of cancellations in the current month, calculated at each business and Partner Platformsaggregated; divided by (ii) subscription revenue in the current month, calculated at each business and aggregated. For Ookla, this is calculated by taking the sum of the monthly revenue from the specific cancelled agreements.


Critical Accounting Policies and Estimates


In the ordinary course of business, we have made a number of estimates and assumptions relating to the reporting of results of operations and financial condition in the preparation of our financial statements. Actual results could differ significantly from those estimates under different assumptions and conditions. Our critical accounting policies are described in our 20162021 Annual Report on Form 10-K filed with the SEC on March 1, 2017.15, 2022. During the three and six months ended SeptemberJune 30, 2017,2022, there were no significant changes in our critical accounting policies and estimates. See Note 1 to the Condensed Consolidated Financial Statements for additional description of significant accounting policies of the Company.



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Results of Operations for the Three and NineSix Months Ended SeptemberJune 30, 20172022
Business Cloud Services Segment
Assuming a stable or improving economic environment,Digital Media

We expect revenue for fiscal year 2022 to be higher compared to the prior year driven by acquisitions and subject toorganic growth in certain of our risk factors, webusinesses. We expect the revenueDigital Media business to improve as we integrate our recent acquisitions and profitsover the longer term as included in the results of operations below inadvertising transactions continue to shift from offline to online, and we continue to expand our Business Cloud Services segment to be stable for the foreseeable future (excluding the impact of acquisitions).advertising platforms. The main focus of our Business Cloud Servicesplatform monetization programs is to provide relevant and useful advertising to visitors to our websites, provide meaningful content that informs and shapes purchase intent, and leverage our brand and editorial assets into subscription platforms. As a result, we expect to continue to take steps to improve the relevance of the ads displayed on our websites and those included within our advertising networks, and improve the effectiveness of our content in driving purchase decisions and subscriptions.

The operating margin we realize on revenues generated from ads placed on our websites is significantly higher than the operating margin we realize from revenues generated from those placed on third-party websites. Growth in advertising revenues from our websites has generally exceeded that from third-party websites. This trend has had a positive impact on our operating margins, and we expect that this will continue for the foreseeable future.

We expect acquisitions to remain an important component of our strategy and use of capital in this business; however, we cannot predict whether our current pace of acquisitions will remain the same within this business, especially in light of the current macroeconomic conditions. In a given period, we may close greater or fewer acquisitions than in prior periods or acquisitions of greater or lesser significance than in prior periods. Moreover, future acquisitions of businesses within this space, but with different business models, may impact Digital Media’s overall operating profit margins.

Cybersecurity and Martech

We expect 2022 revenue to be lower compared to the prior year driven by the divestitures of our B2B Backup business and Voice assets, partially offset by acquisitions and organic growth in certain of our businesses. The main focus of our Cybersecurity and Martech service offerings is to reduce or eliminate costs, increase sales and enhance productivity, mobility, business continuity and security of our customers as the technologies and devices they use evolve over time. As a result, we expect to continue to take steps to enhance our existing offerings and offer new services to continue to satisfy the evolving needs of our customers. Through our IP licensing operations, which are included in the Business Cloud Services segment, we seek to make our IP available for license to third parties, and we expect to continue to attempt to obtain additional IP through a combination of acquisitions and internal development in an effort to increase available licensing opportunities and related revenues.

We expect acquisitions to remain an important component of our strategy and use of capital in this segment;business; however, we cannot predict whether our current pace of acquisitions will remain the same within this segment.business, especially in light of the current macroeconomic conditions. In a given period, we may close greater or fewer acquisitions than in prior periods or acquisitions of greater or lesser significance than in prior periods. Moreover, future acquisitions of businesses within this segmentspace but with different business models, may impact the segment’sCybersecurity and Martech’ overall operating profit margins. Also, as IP licensing often involves litigation,

Consolidated

Based on the timing of licensing transactions is unpredictable and can and does vary significantly from periodtrends discussed above with respect to period. This variability can cause the overall segment’s financial results to materially vary from period to period.
Digital Media Segment
Assuming a stable or improving economic environment, and subject to our risk factors, we expect the revenue and profits in our Digital Media segmentand Cybersecurity and Martech businesses, we anticipate our consolidated revenue for fiscal year 2022 to improve over the next several quarters as we integrate our recent acquisitions and over the longer term as advertising transactions continue to shift from offline to online. However, we expect overall lower marginsbe in our Digital Media segment as the recent acquisition of Everyday Health currently operates at a lower level than our historical results. We expect that margins will trend back towards historical levels once the acquisition of Everyday Health is integrated into our existing cost structure and amortization expense is substantially realized. The main focus of our advertising programs is to provide relevant and useful advertising to visitors to our websites and those included within our advertising networks, reflecting our commitment to constantly improve their overall web experience. As a result, we expect to continue to take steps to improve the relevance of the ads displayed on our websites and those included within our advertising networks.

The operating margin we realize on revenues generated from ads placed on our websites is significantly higher than the operating margin we realize from revenues generated from those placed on third-party websites. Growth in advertising revenues from our websites has generally exceeded that from third-party websites. This trend has had a positive impact on our operating


margins, and we expect that this will continue for the foreseeable future. However, the trend in advertising spend is shifting to mobile devices and other newer advertising formats which generally experience lower margins than those from desktop computers and tablets. We expect this trend to continue to put pressure on our margins.
We expect acquisitions to remain an important component of our strategy and use of capital in this segment; however, we cannot predict whether our current pace of acquisitions will remain the same within this segment. In a given period, we may close greater or fewer acquisitions than in prior periods or acquisitions of greater or lesser significance than in prior periods. Moreover, future acquisitions of businesses within this segment but with different business models may impact the segment’s overall profit margins.
j2 Global Consolidated
We anticipate that the stable revenue trend in our Business Cloud Services segment combinedline with the improving revenue and profits in our Digital Media segment will result in overall improved revenue and profits for j2 Global on a consolidated basis, excluding the impact of any future acquisitions and revenues associated with licensing our IP which can vary dramatically from period to period.

prior year. We expect operating profit as a percentage of revenues to be generally decrease in the future primarily due to the fact that revenueconsistent with respect to our Digital Media segment (i) is increasing as a percentage of our revenue on a consolidated basis and (ii) has historically operated at a lower2021’s operating margin. Moreover, we expect lower overall margins as the recent acquisition of Everyday Health currently operates at a lower level as compared to our historical results. We expect that margins will trend back towards historical levels once the acquisition of Everyday Health is integrated into our existing cost structure and amortization expense is substantially realized.profit margins.


Revenues


(in thousands, except percentages)
 (in thousands, except percentages)Three Months Ended June 30,Percentage ChangeSix Months Ended June 30,Percentage Change
2022202120222021
Revenues$337,356 $341,293 (1)%$652,424 $652,950 0%
 Three Months Ended
September 30,		 
Percentage
Change
 Nine Months Ended
September 30,		 Percentage Change
 2017 2016   2017 2016  
Revenues$273,616 $210,116 30% $801,458 $622,418 29%


Our revenues consist of revenues from our Business Cloud Services segment and from our Digital Media segment. Business Cloud Servicesand Cybersecurity and Martech businesses. Digital Media revenues primarily consist of advertising revenues and subscriptions earned through the granting of access to, or delivery of, certain data products or services to customers, fees paid for generating business leads, and licensing and sale of editorial content
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and trademarks. Cybersecurity and Martech revenues primarily consist of revenues from “fixed” customer subscription revenues and “variable” revenues generated from actual usage of our services. We also generate Business Cloud Services revenues from IP licensing. Digital Media revenues primarily consist of advertising revenues, fees paid for generating business leads, and licensing and sale of editorial content and trademarks.


Our revenues in 2017 have increased overdecreased during the comparable three and nine month period of 2016six months ended June 30, 2022 primarily due to a combinationdeclines in parts of acquisitions and organic growth within both the Digital Media and Business Cloud Services segments.Cybersecurity and Martech businesses and the absence of revenues associated with recently divested businesses, partially offset by contributions from recently acquired businesses and organic growth in certain parts of both the Digital Media and Cybersecurity and Martech businesses. Revenue in the second quarter of 2021 and the first six months of 2021 included approximately $11.3 million and $23.9 million, respectively, of revenue from the divested B2B Backup business and Voice assets. Revenue in the second quarter of 2022 and the first six months of 2022 included approximately $26.2 million and $51.0 million, respectively, of revenue related to businesses acquired during the twelve months prior to the beginning of the respective period.


Cost of Revenues


(in thousands, except percentages)
(in thousands, except percentages)Three Months Ended June 30,Percentage ChangeSix Months Ended June 30,Percentage Change
2022202120222021
Cost of revenue$46,004 $48,785 (6)%$92,104 $92,637 (1)%
As a percent of revenue14 %14 %14 %14 %
 Three Months Ended
September 30,		 Percentage Change Nine Months Ended
September 30,		 Percentage Change
 2017 2016   2017 2016  
Cost of revenue$42,371 $36,992 15% $126,339 $106,870 18%
As a percent of revenue15% 18% 
 16% 17% 


Cost of revenues is primarily comprised of costs associated with data and voice transmission, numbers, network operations, customer service,content fees, editorial and production costs online processing fees and equipment depreciation.hosting costs. The increasedecrease in cost of revenues for the three and nine months ended SeptemberJune 30, 20172022 was primarily due to an increaseapproximately $4.1 million less in costs associated with businesses acquired in and subsequentof revenue related to the third quarter 2016 that resulted in additionalsale of the B2B Backup business, partially offset by higher media inventory and operations costs, including content fees, editorial and production costs and higher database hosting services. The decrease in cost of revenues for the six months ended June 30, 2022 was primarily due to approximately $9.4 million less in costs of revenue related to the sale of the B2B Back-up business offset by higher database hosting services, network and customer service costs, field operations costs and higher media inventory and operations costs, including content fees, editorial and production costs.




Operating Expenses


Sales and Marketing.


(in thousands, except percentages)
Three Months Ended
September 30,		 
Percentage
Change
 Nine Months Ended
September 30,		 Percentage Change
(in thousands, except percentages)(in thousands, except percentages)Three Months Ended June 30,Percentage ChangeSix Months Ended June 30,Percentage Change
2017 2016 2017 2016 2022202120222021
Sales and Marketing$79,432 $46,425 71% $237,772 $143,155 66%Sales and Marketing$123,777 $120,421 3%$241,539 $228,372 6%
As a percent of revenue29% 22% 
 30% 23% 
As a percent of revenue37 %35 %37 %35 %
 
Our sales and marketing costs consist primarily of Internet-basedinternet-based advertising, sales and marketing, personnel costs and other business development-related expenses. Our Internet-basedinternet-based advertising relationships consist primarily of fixed cost and performance-based (cost-per-impression, cost-per-click and cost-per-acquisition) advertising relationships with an array of online service providers. Advertising costcosts for the three months ended SeptemberJune 30, 20172022 was $35.7$67.9 million (primarily consistsconsisting of $24.1$28.2 million of third-party advertising costs and $10.4$26.8 million of personnel costs) compared to 2016 of $23.1$59.4 million (primarily consistsconsisting of $15.5 million third-party advertising costs and $6.2 million personnel costs). Advertising cost for the nine months ended September 30, 2017 was $101.7 million (primarily consists of $67.8$33.4 million of third-party advertising costs and $30.5$19.9 million of personnel costs) in the prior year period. Advertising costs for the six months ended June 30, 2022 was $128.0 million (primarily consisting of $55.4 million of third-party advertising costs and $49.6 million of personnel costs) compared to 2016 of $69.2$112.1 million (primarily consistsconsisting of $46.6$60.0 million of third-party advertising costs and $18.0$41.9 million of personnel costs).The in the prior year period. The increase in sales and marketing expenses forduring the three and ninesix months ended SeptemberJune 30, 2017 versus2022 from the prior comparable periods was primarily duefrom increased advertising costs related to increased personnel costsoutside sales commissions, professional and advertising associated with the acquisition of Everyday Health within the Digital Media segment, which was acquired in December 2016.consulting services and software licenses.


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Research, Development and Engineering.Engineering.


(in thousands, except percentages)
(in thousands, except percentages)Three Months Ended June 30,Percentage ChangeSix Months Ended June 30,Percentage Change
2022202120222021
Research, Development and Engineering$19,721 $17,705 11%$38,148 $37,380 2%
As a percent of revenue6 %5 %6 %6 %
 Three Months Ended
September 30,		 
Percentage
Change
 Nine Months Ended
September 30,		 Percentage Change
 2017 2016   2017 2016  
Research, Development and Engineering$12,431 $8,965 39% $35,737 $27,165 32%
As a percent of revenue5% 4% 
 4% 4% 


Our research, development and engineering costs consist primarily of personnel-related expenses. The increase in research, development and engineering costs for the three and nine months ended SeptemberJune 30, 2017 versus2022 compared to the prior comparable periodsyear period was primarily due to additional personnelan increase in engineering costs, associated with acquisitions withinbusiness intelligence and systems costs. The increase in research, development and engineering costs for the Business Cloud Servicessix months ended June 30, 2022 compared to the prior year period was primarily due to an increase in business intelligence and Digital Media segments and additional expenses for professional services.systems costs, partially offset by lower engineering costs.


General and Administrative.


(in thousands, except percentages)
(in thousands, except percentages)Three Months Ended June 30,Percentage ChangeSix Months Ended June 30,Percentage Change
2022202120222021
General and Administrative$101,967 $111,698 (9)%$204,184 $224,996 (9)%
As a percent of revenue30 %33 %31 %34 %
 Three Months Ended September 30, 
Percentage
Change
 Nine Months Ended September 30, Percentage Change
 2017 2016   2017 2016  
General and Administrative$76,425 $55,612 37% $232,118 $170,823 36%
As a percent of revenue28% 26% 
 29% 27% 


Our general and administrative costs consist primarily of personnel-related expenses, depreciation and amortization, changes in the fair value associated with contingent consideration, share-based compensation expense, bad debt expense, professional fees, severance and insurance costs. The increasedecrease in general and administrative expense forfrom the three and nine months ended September 30, 2017 versussecond quarter of 2021 to the prior comparable periodssecond quarter of 2022 was primarily due to additionala decrease in general management and finance costs, lower depreciation and amortization expense and the absence of intangible assets, personnelgeneral and administrative costs relating to businesses acquired in and subsequentrelated to the thirdB2B Backup business. The decrease in general and administrative expense from the first six months of 2021 to the first six months of 2022 was primarily due to a decrease in legal and finance costs, lower depreciation and amortization expense and the absence of general and administrative costs related to the B2B Backup business.

Goodwill impairment on business. Goodwill impairment was zero and $32.6 million for the three months ended June 30, 2022 and 2021, respectively, and zero and $32.6 million for the six months ended June 30, 2022 and 2021, respectively. The goodwill impairment during the three and six months ended June 30, 2021 was generated from the impairment of the B2B Backup business in the second quarter 2016, severance costs associated with acquisitions, and depreciation of fixed assets, and professional fees.2021.



Share-Based Compensation


The following table represents share-based compensation expense included in cost of revenues and operating expenses in the accompanying condensed consolidated statementsCondensed Consolidated Statements of incomeOperations for the three and ninesix months ended SeptemberJune 30, 20172022 and 20162021 (in thousands): 
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Cost of revenues$142 $67 $226 $150 
Operating expenses:
Sales and marketing1,106 278 1,675 544 
Research, development and engineering852 458 1,481 876 
General and administrative5,603 5,066 11,038 10,029 
Total$7,703 $5,869 $14,420 $11,599 

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 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Cost of revenues$120
 $116
 $357
 $314
Operating expenses:       
Sales and marketing365
 423
 1,265
 1,388
Research, development and engineering296
 235
 815
 663
General and administrative3,782
 2,925
 11,303
 7,582
Total$4,563
 $3,699
 $13,740
 $9,947


During the second quarter of 2017, the Company accelerated the vesting of certain shares held by employees which were surrendered to the Company to satisfy tax withholding obligations in connection with such employees’ restricted stock. The Company recognized share-based compensation of $1.4 million during the second quarter 2017 due to this vesting acceleration.

In connection with the announcement of Hemi Zucker’s resignation effective as of December 31, 2017, all outstanding and unvested stock options and time-based restricted shares, along with the tranche of performance-vesting restricted shares next scheduled to vest, will vest in full on January 1, 2018. As a result, the Company has accelerated the recognition of share-based compensation expense associated with these awards which is expected to impact the fourth quarter by approximately $4.1 million.

Non-Operating Income and Expenses


Interest expense, net.net. Our interest expense, net is generated primarily from interest expense due toon outstanding debt, partially offset by interest income earned on cash, cash equivalents and short and long-term investments. Interest expense, net was $25.3$7.0 million and $10.4$21.0 million for the three months ended SeptemberJune 30, 20172022 and 2016,2021, respectively, and $18.5 million and $42.5 million for the six months ended June 30, 2022 and 2021, respectively. Interest expense, net decreased during the three months ended June 30, 2022 primarily due to approximately $6.1 million less interest expense due to the redemption of our 3.25% Convertible Notes in August 2021, approximately $3.9 million less interest expense from the adoption of ASU 2020-06 during 2022, whereby we no longer amortize a debt discount on the 1.75% Convertible Notes and a $3.1 million gain associated with the repurchase of the 4.625% Senior Notes. Interest expense, net decreased during the six months ended June 30, 2022 primarily due to approximately $12.3 million less interest expense due to the redemption of our 3.25% Convertible Notes in August 2021, approximately $7.7 million less interest expense from the adoption of ASU 2020-06 during 2022 and a $1.9 million net gain associated with the repurchase of the 4.625% Senior Notes.

Gain on sale of businesses. Our gain on sale of businesses was generated primarily from the sale of certain Voice assets in the United Kingdom in the first quarter of 2021 with a subsequent adjustment in the second quarter of 2021. Gain on sale of businesses was zero and $0.8 million for the three months ended June 30, 2022 and 2021, respectively. Gain on sale of businesses was zero and $2.8 million for the six months ended June 30, 2022 and 2021, respectively.

Unrealized loss on short-term investment. Unrealized loss on short-term investment was $27.3 million and zero during the three months ended June 30, 2022 and 2021, respectively, and $18.4 million and zero during the six months ended June 30, 2022 and 2021, respectively. The unrealized loss recorded during the three and six months ended June 30, 2022 was due to the unrealized loss on our Investment in Consensus.

Loss on investments, net. Our loss on investments, net is generated from gains or losses from investments in equity and debt securities. Our loss on investments, net was $48.2 million and $16.7 million for the three months ended June 30, 2022 and 2021, respectively, and $48.2 million and $16.7 million for the six months ended June 30, 2022 and 2021, respectively. Our loss on investments, net increased overfor the three and six months ended June 30, 2022 versus the prior comparable period primarily duerelated to increased interest expense associated with the issuance of the $650 million 6.0% Senior Notes, the loss of $8.0 million on the extinguishment of the $250 million 8.0% Senior Notes and decreased interest income on cash, cash equivalents and investments. Interest expense, net was $51.4 million and $31.0 million for the nine months ended September 30, 2017 and 2016, respectively. Interest expense, net increased over the prior comparable period primarily due to increased interest expense associated with the issuance of the $650 million 6.0% Senior Notes and our line of credit borrowings, therealized loss on the extinguishmentsale of 2.3 million shares from our investment in Consensus resulting from the $250 million 8.0% Senior Notes and decreased interestdecrease in the quoted share price of Consensus.

Other income on cash, cash equivalents and investments.

Other (income) expense, net.(loss), net. Our other (income) expense,income (loss), net is generated primarily from miscellaneous items and gain or losses on foreign currency exchange and sale of investments.exchange. Other (income) expense,income (loss), net was $(3.9)$6.3 million and $(9.7)$(0.8) million for the three months ended SeptemberJune 30, 20172022 and 2016,2021, respectively, and $8.7 million and $(0.6) million for the six months ended June 30, 2022 and 2021, respectively. Other (income) expense,income (loss), net decreased overincreased for the prior comparable period due to a decrease in gains earned in the current period related to the sales of Cambridge BioMarketing Group, LLC (“Cambridge”)three and j2 Australia Hosting Pty Ltd (dba “Web24”)six months ended June 30, 2022 compared to the prior period gainyear periods due primarily to gains on sale of our strategic investment in Carbonite and a breakup fee associated our bid for Gawker Media Group. Other (income) expense, net was $0.7 million and $(9.8) million for the nine months ended September 30, 2017 and 2016, respectively. Other (income) expense, net decreased over the prior comparable period due to a decrease in gains earned in the current period related to the sales of Cambridge and Web24; partially offset by increased losses onforeign currency exchange compared to the prior period gain on sale of our strategic investment in Carbonite and a breakup fee associated our bid for Gawker Media Group.exchange.


Income Taxes


Our effective tax rate is based on pre-tax income, statutory tax rates, tax regulations (including those related to transfer pricing) and different tax rates in the various jurisdictions in which we operate. The tax bases of our assets and liabilities reflect our best estimate of the tax benefits and costs we expect to realize. When necessary, we establish valuation allowances to reduce our deferred tax assets to an amount that will more likely than not be realized. 




Provision for income taxes amounted to $9.2$10.1 million and $15.8$(10.3) million for the three months ended SeptemberJune 30, 20172022 and 2016,2021, respectively, and $27.9$15.1 million and $44.0$(17.2) million for the ninesix months ended SeptemberJune 30, 20172022 and 2016,2021, respectively. Our effective tax rate was 22.1%(33.2)% and 25.8%37.4% for the three months ended SeptemberJune 30, 20172022 and 2016,2021, respectively, and 23.7%12,760.8% and 28.7%86.1% for the ninesix months ended SeptemberJune 30, 20172022 and 2016,2021, respectively. Our effective tax rate for the three and six months ended June 30, 2022 has been disproportionately impacted due to the size of the discrete book loss related to the Disposed Consensus Shares and the Retained Consensus Shares. The net loss recorded for book purposes for the Investment in Consensus, excluding transaction costs, resulted in no tax benefit. The loss is not subject to tax since the Company has the ability to dispose of the investment in a tax-free manner based on guidance and requirements set out by the Internal Revenue Service.


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The decrease in our effective income tax rate for the three months and nine months ended SeptemberJune 30, 20172022 was primarily attributable to the following:


1.a decrease during 2017 in the valuation allowance for foreign tax credit carryforwards;

1.a decrease in our effective income tax rate during 2022 due to a loss recorded for book purposes for the Disposed Consensus Shares and Retained Consensus Shares that resulted in no tax benefit since the Company has the ability to dispose of the investment tax-free under certain guidelines; and
2.an increase in the portion of our income being taxed in foreign jurisdictions and subject to lower tax rates than in the U.S. (relative to income from U.S. domestic operations); partially offset by


3.an increase during 2017 in the amount of deemed distribution income (Subpart F) from our foreign subsidiaries.

2.a tax benefit recognized during the three months ended June 30, 2021 due to the recognition of a deferred tax asset related to goodwill impairment with no similar event in 2022; partially offset by

3.an increase in our effective income tax rate during 2022 for U.S. state and local taxes due to a greater portion of our income being subject to tax in the U.S.

The increase in our effective income tax rate for the six months ended June 30, 2022 was primarily attributable to the following:

1.an increase in our effective income tax rate during 2022 due to a loss recorded for book purposes for the Disposed Consensus Shares and Retained Consensus Shares that resulted in no tax benefit since the Company has the ability to dispose of the investment tax-free under certain guidelines; and

2.an increase in tax expense during 2022 due to a tax benefit recognized in 2021 for recognizing a deferred tax asset related to goodwill impairment with no similar events for the six months ended June 30, 2022; and
3.an increase in tax expense due to discrete tax benefits related to a reduction in our net reserve for uncertain tax positions recognized in 2021 with no similar events for the six months ended June 30, 2022; and

4.an increase in tax expense due to a tax benefit recognized for the release of a valuation allowance on deferred tax assets related to the impairment of certain U.S. investments with no similar events for the six months ended June 30, 2022; partially offset by

5.a decrease in tax expense during 2022 due to an increase in our U.S. deduction for foreign derived intangible income.

Significant judgment is required in determining our provision for income taxes and in evaluating our tax positions on a worldwide basis. We believe our tax positions, including intercompany transfer pricing policies, are consistent with the tax laws in the jurisdictions in which we conduct our business. Certain of these tax positions have in the past been, and are currently being, challenged, and this may have a significant impact on our effective tax rate if our tax reserves are insufficient.


SegmentEquity Method Investment

(Loss) income from equity method investment, net. (Loss) income from equity method investment, net is generated from our investment in the OCV Fund I, LP (the “Fund”) for which we receive annual audited financial statements. The investment in the Fund, including management fees, is presented net of tax and on a one-quarter lag due to the timing and availability of financial information from the Fund. 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.

The (loss) income from equity method investment, net was $(6.1) million and $(5.8) million net of tax benefit for the three months ended June 30, 2022 and 2021, respectively, and $(6.9) million and $18.5 million, for the six months ended June 30, 2022 and 2021, respectively. The decrease in income from equity method investment, net during the three and six months ended June 30, 2022 was primarily due to lower gains on the underlying investments. During the three and six months ended June 30, 2022 and 2021, the Company recognized expense for management fees of $0.8 million and $0.8 million, net of tax benefit, respectively, and $1.5 million and $1.5 million, net of tax benefit, respectively.

Digital Media and Cybersecurity and Martech Results

Our business segmentsbusinesses are based on the organization structure used by management for making operating and investment decisions and for assessing performance. Ourperformance and have been aggregated into two reportable business segments are:segments: (i) Business Cloud Services;Digital Media and (ii) Digital Media.Cybersecurity and Martech.
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We evaluate the performance of our operating segments based on segment revenues, including both external and intersegmentinter-business net sales, and segment operating income. We account for intersegmentinter-business sales and transfers based primarily on standard costs with reasonable mark-ups established between the segments.businesses. Identifiable assets by segmentbusiness are those assets used in the respective reportable segment’sbusiness’ operations. Corporate assets consist of cash and cash equivalents, deferred income taxes and certain other assets. All significant intersegmentinter-business amounts are eliminated to arrive at our consolidated financial results.
Revenues
Digital Media

The following table presents our revenues by source as a percentage of total revenues for the three and nine months ended September 30, 2017 and 2016:
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Business Cloud Services revenues:       
Fax and Voice35.4% 44.1% 35.7% 44.3%
Other17.9% 24.1% 18.2% 23.8%
Total Business Cloud Services revenues:53.3% 68.2% 53.9% 68.1%
Digital Media revenues:       
Media46.7% 31.8% 46.1% 31.9%
Total revenues100.0% 100.0% 100.0% 100.0%


Business Cloud Services
The following segmentfinancial results are presented for the three and nine months ended September 30, 2017 and 2016as follows (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Gross sales$258,700 $253,977 $493,527 $480,850 
Inter-business net sales(357)(216)(489)(284)
Net sales258,343 253,761 493,038 480,566 
Cost of revenues24,896 25,355 49,885 46,217 
Gross profit233,447 228,622 443,153 434,633 
Operating expenses188,824 184,516 366,410 359,884 
Operating income$44,623 $44,106 $76,743 $74,749 

 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
External net sales$145,787
 $143,342
 $432,039
 $423,941
Inter-segment net sales—
 —
 —
 —
Segment net sales145,787
 143,342
 432,039
 423,941
Cost of revenues30,112
 31,377
 89,144
 90,389
Gross profit115,675
 111,965
 342,895
 333,552
Operating expenses59,550
 59,108
 172,371
 177,944
Segment operating income$56,125
 $52,857
 $170,524
 $155,608

SegmentDigital Media’s net sales of $145.8$258.3 million for the three months ended SeptemberJune 30, 20172022 increased $2.4$4.6 million, or 1.7%1.8%, compared to the prior year period primarily due to business acquisitions and segmentorganic growth related to certain of our businesses. Digital Media’s net sales of $432.0$493.0 million for the ninesix months ended SeptemberJune 30, 20172022 increased $8.1$12.5 million, or 1.9%2.6%, fromcompared to the prior comparable periodsyear period primarily due to business acquisitions.acquisitions and organic growth related to certain of our businesses.
Segment
Digital Media’s gross profit of $115.7$233.4 million for the three months ended SeptemberJune 30, 20172022 increased $3.7$4.8 million, and segmentor 2.1%, compared to the prior year period primarily due to the increase in revenue. Digital Media’s gross profit of $342.9$443.2 million for the ninesix months ended SeptemberJune 30, 20172022 increased $9.3$8.5 million, fromor 2.0%, compared to the prior comparable periodsyear period primarily due to business acquisitions.the increase in revenue.
Segment
Digital Media’s operating expenses of $59.6$188.8 million for the three months ended SeptemberJune 30, 20172022 increased $0.4$4.3 million, and segmentor 2.3%, compared to the prior year period. Digital Media’s operating expenses of $172.4$366.4 million for the ninesix months ended SeptemberJune 30, 2017 decreased $(5.6)2022 increased $6.5 million, fromor 1.8%, compared to the prior comparable periodsyear period. The increase in the three and six months ended June 30, 2022 is primarily due to (a) lower amortization of intangible assets and transition service costsadditional expense associated with businesses acquired in and subsequent to the prior comparable periods; and (b) reduced miscellaneous general and administrative related fees. As a result of these factors, segment operating income of $56.1 million for the three months ended September 30, 2017 increased $3.3 million, or 6.2%, and segment operating income of $170.5 million for the nine months ended September 30, 2017 increased $14.9 million, or 9.6%, from the prior comparable periods. Our Business Cloud Services segment consists of several services which have similar economic characteristics,period including the nature of the services and their production processes, the type of customers, as well as the methods used to distribute these services.


We group these services into three main categories based on the similarities of these services: Cloud Connect, Other Cloud Services and Intellectual Property. Cloud Connect consists of our Fax and Voice services and Other Cloud Services consist of Backup, Email Security, Email Marketing and Web Hosting.
 Three Months Ended September 30, 2017 Nine Months Ended September 30, 2017
 Revenue Depreciation and Amortization Operating Income Revenue Depreciation and Amortization 
Operating Income(4)
            
Cloud Connect
 (Fax/Voice)
$96,882
 $7,001
 $44,663
 $286,163
 $18,964
 $133,958
Cloud Services47,693
 8,949
 11,947
 142,187
 28,330
 37,824
Intellectual Property1,212
 1,195
 (485) 3,689
 3,803
 (1,258)
   Total$145,787
 $17,145
 $56,125
 $432,039
 $51,097
 $170,524
 Three Months Ended September 30, 2016 Nine Months Ended September 30, 2016
 Revenue Depreciation and Amortization Operating Income Revenue Depreciation and Amortization 
Operating Income(4)
            
Cloud Connect
(Fax/Voice)		$92,599
 $5,950
 $43,503
 $275,700
 $19,096
 $126,598
Cloud Services49,624
 12,826
 10,350
 144,853
 35,327
 31,974
Intellectual Property1,119
 1,442
 (996) 3,388
 4,548
 (2,964)
   Total$143,342
 $20,218
 $52,857
 $423,941
 $58,971
 $155,608
Digital Media
 The following segment results are presented for the three and nine months ended September 30, 2017 and 2016 (in thousands):
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
External net sales$127,830
 $66,774
 $369,419
 $198,477
Inter-segment net sales35
 45
 51
 136
Segment net sales127,865
 66,819
 369,470
 198,613
Cost of revenues12,265
 5,615
 37,201
 16,482
Gross profit115,600
 61,204
 332,269
 182,131
Operating expenses103,234
 47,272
 313,266
 148,916
Segment operating income$12,366
 $13,932
 $19,003
 $33,215
Segment net sales of $127.9 million for the three months ended September 30, 2017 increased $61.0 million, or 91.4%, and segment net sales of $369.4 million for the nine months ended September 30, 2017 increased $170.9 million, or 86.0%, from the prior comparable periods primarily due to the acquisition of Everyday Health in December 2016.
Segment gross profit of $115.6 million for the three months ended September 30, 2017 increased $54.4 million, or 88.9%, and segment gross profit of $332.3 million for the nine months ended September 30, 2017 increased $150.1 million, or 82.4%, from the prior comparable periods primarily due to the acquisition of Everyday Health in December 2016.
Segment operating expenses of $103.2 million for the three months ended September 30, 2017 increased $56.0 million and segment operating expenses of $313.3 million for the nine months ended September 30, 2017 increased $164.4 million from the prior comparable periods primarily due to the acquisition of Everyday Health in December 2016 comprised primarily of(a) additional salary and related costs, marketing costs,including severance and amortization of intangible assets.(b) creative and selling costs.



As a result of these factors, segmentDigital Media’s operating income of $12.4$44.6 million for the three months ended SeptemberJune 30, 2017 decreased $(1.6)2022 increased $0.5 million, or (11.2)% and segment1.2%, compared to the prior year period. Digital Media’s operating income of $19.0$76.7 million for the ninesix months ended SeptemberJune 30, 2017 decreased $(14.2)2022 increased $2.0 million, or (42.8)%2.7%, compared to the prior year period.

Cybersecurity and Martech

The financial results are presented as follows (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Gross sales$78,910 $87,608 $159,404 $172,510 
Inter-business net sales103 (76)(18)(76)
Net sales79,013 87,532 159,386 172,434 
Cost of revenues20,750 23,637 41,730 46,680 
Gross profit58,263 63,895 117,656 125,754 
Operating expenses45,686 85,090 92,751 135,074 
Operating income (loss)$12,577 $(21,195)$24,905 $(9,320)
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Cybersecurity and Martech net sales of $79.0 million for the three months ended June 30, 2022 decreased $8.5 million, or 9.7%, compared to the prior year period primarily due to the sale of the B2B Backup business during the third quarter of 2021, partially offset by business acquisitions. Cybersecurity and Martech net sales of $159.4 million for the six months ended June 30, 2022 decreased $13.0 million, or 7.6%, compared to the prior year period primarily due to the sale of the B2B Backup business during the third quarter of 2021, partially offset by business acquisitions.

Cybersecurity and Martech gross profit of $58.3 million for the three months ended June 30, 2022 decreased $5.6 million, or 8.8%, compared to the prior year period primarily due to the sale of the B2B Backup business during the third quarter of 2021, partially offset by business acquisitions. Cybersecurity and Martech gross profit of $117.7 million for the six months ended June 30, 2022 decreased $8.1 million, or 6.4%, compared to the prior year period primarily due to the sale of the B2B Backup business during the third quarter of 2021, partially offset by business acquisitions.

Cybersecurity and Martech operating expenses of $45.7 million for the three months ended June 30, 2022 decreased $39.4 million, or 46.3%, compared to the prior year period primarily due to the sale of the B2B Backup business during the third quarter of 2021. Cybersecurity and Martech operating expenses of $92.8 million for the six months ended June 30, 2022 decreased $42.3 million, or 31.3%, compared to the prior year period primarily due to the sale of the B2B Backup business during the third quarter of 2021.

As a result of these factors, Cybersecurity and Martech operating income of $12.6 million for the three months ended June 30, 2022 increased $33.8 million, or 159.3%, from the prior comparable periods.period. Cybersecurity and Martech operating income of $24.9 million for the six months ended June 30, 2022 increased $34.2 million, or 367.2%, from the prior comparable period.

Liquidity and Capital Resources


Cash and Cash Equivalents and Investments


At SeptemberAs of June 30, 2017,2022, we had cash, cash equivalents and investments of $402.5$849.3 million compared to $124.0$1,046.6 million at December 31, 2016. The increase in2021. At June 30, 2022, cash, and investments resulted primarily from the issuance of long-term debt and cash from operations, partially offset by the repayment of the line of credit, business acquisitions, dividends and interest paid, and purchases of property and equipment. At September 30, 2017, cashequivalents and investments consisted of cash and cash equivalents of $402.5 million. We retain a substantial portion of our cash and$648.3 million, short-term investments in foreign jurisdictions for future reinvestment.equity securities of $72.5 million and long-term investments of $128.5 million. As of SeptemberJune 30, 2017,2022, cash, cash equivalents and investments held within domestic and foreign jurisdictions were $143.6$730.5 million and $258.9$118.8 million, respectively. If we were to repatriate funds held within foreign jurisdictions, we would incur U.S. income tax on the repatriated amount at the federal statutory rate of 35% and the state statutory rate where applicable, net of a credit for foreign taxes paid on such amounts.

On February 9,September 25, 2017, the Company declaredentered into a quarterly cash dividendcommitment to invest $200 million (approximately 76.6% of $0.3650 per share of common stock payable on March 9, 2017 to all stockholders of record asequity) in the “Fund”. The manager, OCV Management, LLC, and general partner of the closeFund are entities with respect to which Richard S. Ressler, former Chairman of business on February 22, 2017. On May 4, 2017, the Company’s Board of Directors approved a quarterly cash dividend(the “Board”) of $0.3750 per sharethe Company, is indirectly the majority equity holder. Mr. Ressler’s tenure with the Board of j2 Global common stock payable on June 2, 2017 to all stockholdersDirectors of recordthe Company ended as of May 10, 2022. As a limited partner in the closeFund, prior to the settlement of business on May 19, 2017. On August 2, 2017,certain litigation generally related to the Company’s investment in the Fund, in January 2022, the Company declared a quarterly cash dividendpaid an annual management fee to the manager equal to 2.0% of $0.3850 per share of j2 Global common stock payable on September 1, 2017capital commitments. In addition, subject to all stockholders of record asthe terms and conditions of the close of business on August 14, 2017. Future dividends areFund’s limited partnership agreement, once the Company has received distributions equal to its invested capital, the Fund’s general partner would be entitled to a carried interest equal to 20%. The Fund has a six year investment period, subject to certain exceptions. The commitment was approved by the Audit Committee of the Board approval.in accordance with the Company’s related-party transaction approval policy. At the time of the settlement of the litigation, the Company had invested approximately $128.8 million in the Fund. In connection with the settlement of the litigation, among other terms, no further capital calls will be made in connection with our investment in the Fund, nor will any management fees be paid by the Company to the manager.For more information related to the litigation, see Note 9 – Commitments and Contingencies in Item 1 of Part I of this Quarterly Report on Form 10-Q, which is incorporated by reference into this Part I Item 2 for additional information.


Financings

On June 27, 2017, j2 Cloud Services, LLC (“j2 Cloud”),10, 2022, we entered into a wholly-owned subsidiary of j2 Global, Inc., and j2 Cloud Co-Obligor, Inc., a wholly-owned subsidiary of j2 Cloud (the “Co-Issuer” and together with j2 Cloud,Fifth Amendment to our Credit Agreement, which provided for the “Issuers”) completed the issuance and sale of $650 millionTerm Loan Facility, in an aggregate principal amount of $90.0 million, which had a maturity date that was 60 days following the date of funding of the Term Loan Facility. During the three months ended June 30, 2022, the Company borrowed approximately $90.0 million under the Term Loan Facility and completed the Debt-for-Equity Exchange of 2,300,000 shares of common stock of
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Consensus to settle its 6.0% senior notes due 2025obligation to repay the $90.0 million outstanding aggregate principal amount of the Term Loan Facility plus related interest.

As of June 30, 2022 and December 31, 2021, there were no amounts drawn under the Credit Agreement.

During the six months ended June 30, 2022, the Company repurchased approximately $76.1 million in a private placement. The proceeds were used to redeem allaggregate principal amount of its j2 Cloud’s 8.0% notes duethe 4.625% Senior Notes for an aggregate purchase price of approximately $73.6 million.

Material Cash Requirements

Our long-term contractual obligations generally include our debt and related interest payments, noncancellable operating leases, holdback amounts in 2020, and to distribute sufficient net proceeds to j2 Global to pay off all amounts outstanding under its existing credit facility (as described further below),connection with the remaining net proceeds to be used for general corporate purposes, including acquisitions.

On December 5, 2016, j2 Global, Inc. entered into a Credit Agreement (the “Credit Agreement”) with MUFG Union Bank, N.A., as administrative agent, and certain other lenders from time to time party thereto (collectively, the “Lenders”). Pursuantbusiness acquisitions, commitments related to the Credit Agreement, the Lenders provided j2 with a credit facilitytransition tax on unrepatriated foreign earnings, incurred but not paid amounts of $225.0self-insurance as well as other commitments. As of June 30, 2022, we and our subsidiaries had outstanding $1.1 billion in aggregate principal amount of indebtedness, of which we repurchased $80.0 million (the “Credit Facility”), $180.0during July and August of 2022. As of June 30, 2022, our total minimum lease payments are $73.2 million, of which was drawn at closing of the Everyday Health acquisition and used to finance a portion of the cash considerationapproximately $25.8 million are due in the acquisition. Duringsucceeding twelve months. As of June 30, 2022, our liability for uncertain tax positions was $43.6 million. There were no material changes to our cash requirements during the prior quarter, the Company drew an additional $45.0 million. Onthree months ended June 27, 2017, the Company repaid the outstanding credit facility with cash received from its subsidiary, j2 Cloud, and terminated the Credit Agreement.30, 2022.

On June 27, 2017, j2 Cloud notified U.S. Bank National Association, as trustee (the “2012 Trustee”) under the indenture, dated as of July 26, 2012 (as amended, supplemented or otherwise modified, the “2012 Indenture”), between j2 Cloud and the 2012 Trustee, governing the 8.0% senior unsecured notes due 2020 (the “2020 Notes”) that j2 Cloud would redeem the 2020 Notes and pay the redemption premium equal to 102% of the principal amount on the 2020 Notes and to pay accrued and unpaid interest on the 2020 Notes effective August 1, 2017 (the “Redemption Amount”). On that same date, j2 Cloud deposited a portion of the cash proceeds from the issuance and sale of the 6.0% senior notes in an amount equal to the Redemption Amount with the 2012 Trustee for purposes of the payment of that amount on August 1, 2017. On August 1, 2017, j2 Cloud redeemed all of its outstanding $250 million 8.0% senior unsecured notes due in 2020 for $265 million, including a redemption premium and relevant accrued interest. As a result of the redemption, j2 Cloud has satisfactorily discharged its obligations to the holders of such notes.

In order to timely complete the Everyday Health acquisition, the Company borrowed $126.8 million from its non-US subsidiaries. During the third quarter 2017, the Company repaid its borrowings from its non-U.S. subsidiaries.


We currently anticipate that our existing cash and cash equivalents and short-term investment balances and cash generated from operations and the additional debt facilities described above will be sufficient to meet our anticipated needs for working capital, capital expenditure,expenditures and stock repurchases, and cash dividendsif any, for at least the next 12 months.




Cash Flows


Our Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2021 include the activity from the cloud fax business, which was separated from the Company on October 7, 2021. Refer to Note 5 – Discontinued Operations in Item 1 of Part I of this Quarterly Report on Form 10-Q, which is incorporated by reference into this Part I Item 2 for additional information. Our primary sources of liquidity are cash flows generated from operations, together with cash and cash equivalents and short-term investments.equivalents. Net cash provided by operating activities was $179.0$192.5 million and $192.5$290.0 million for the ninesix months ended SeptemberJune 30, 20172022 and 2016,2021, respectively. Our operating cash flows resulted primarily from cash received from our customers offset by cash payments we made to third parties for their services, employee compensation and interest payments associated with our debt. The decrease in our net cash provided by operating activities in 2017during the six months ended June 30, 2022 compared to 2016 was2021 period is attributable to lower earnings before non-cash adjustments, primarily attributable toas a result of the Separation, the timing and amount of collections from our customers and a decrease in accounts payable and accrued expenses including a $20.0 million payment of certain contingent compensation obligations of Everyday Health as well as a payment of contingent consideration of $20.0 million associated with the acquisition of Ookla;deferred revenue, partially offset by a decreaseincome on our investment in accounts receivable and increased depreciation and amortization. Ourthe Fund in 2021. Our cash and cash equivalents and short-term investments were $402.5$648.3 million and $124.0$694.8 million at SeptemberJune 30, 20172022 and December 31, 2016,2021, respectively.


Net cash used in investing activities was $(44.6)$161.3 million and $(41.7)$152.6 million for the ninesix months ended SeptemberJune 30, 20172022 and 2016,2021, respectively. For the nine months ended September 30, 2017, net cash used in investing activities was primarily attributable to business acquisitions, capital expenditures associated with the purchase of property and equipment and the purchase of intangible assets; partially offset by proceeds from the sale of businesses. For the nine months ended September 30, 2016, net cash used in investing activities was primarily attributable to business acquisitions, the purchase of available-for-sale investments, property and equipment and intangible assets; partially offset by the maturity of available-for-sale investments. The increase in our net cash used in investing activities in 2017during the six months ended June 30, 2022 compared to 2016 was2021 period is primarily lower maturity of investments; partially offset by reduced purchases of investments and additional purchases of property and equipment; partially offset by lowerrelated to our 2022 business acquisitions and proceeds from theour investment in available for sale of businesses.

Net cash provided by (used in) financing activities was $135.6 million and $(118.6) million for the nine months ended September 30, 2017 and 2016, respectively. For the nine months ended September 30, 2017, net cash provided by financing activities was primarily attributable to proceeds from the issuance of long-term debt, additional borrowings under our line of credit and exercise of stock options;securities, partially offset by the repaymentpurchase of an equity method investment in full of2021.

Net cash used in financing activities was $61.7 million and $31.6 million for the line of credit and other debt, dividends paid, repurchases of stock and business acquisitions. For the ninesix months ended SeptemberJune 30, 2016,2022 and 2021, respectively. The increase in the net cash used in financing activities wasduring the six months ended June 30, 2022 compared to 2021 period is primarily attributablerelated to share repurchases and repurchases of stock which includes the acquisition of Integrated Global Concepts, Inc., which held shares of j2 Global common stock, dividends paid, and business acquisitions;our 4.625% Senior Notes in 2022, partially offset by the exercise of stock options and excess tax benefit from share-based compensation. The change in net cash provided by financing activities in 2017 compared to 2016 was primarily attributable to the proceeds from the issuance of long-term debt; partially offset by the net payment associated with the payment in full of our line of credit and other debt.Term Loan Facility.


Stock Repurchase Program


In February 2012, the Company’sOn August 6, 2020, our Board of Directors approved a program authorizing the repurchase of up to fiveten million shares of our common stock through February 20, 2013August 6, 2025 (the “2012“2020 Program”) which was subsequently extended through February 19, 2018. During. In connection with the nine month periodauthorization, the Company entered into certain Rule 10b5-1 trading plans with a broker-dealer to facilitate the repurchase program.

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A summary of share repurchases under the 2020 Program during the three months ended SeptemberJune 30, 2017, we repurchased zero shares under this program. 2022 is as follows (in millions, except share and per share amounts):

Total number of shares repurchasedAggregate purchase priceAverage price paid per shareShares remaining under repurchase authorization as of June 30, 2022
182,247 $12.7 $69.42 6,327,154 

Cumulatively at SeptemberJune 30, 2017, 2.1 million2022, 3,672,846 shares were repurchased at an aggregate cost of $58.6$296.9 million (including an immaterial amount of commission fees). under the 2020 Program. These shares were subsequently retired.



Contractual Obligations and Commitments

The following table summarizes our contractual obligations and commitments as of September 30, 2017:
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Payments Due in
(in thousands)
Contractual Obligations 2017 2018 2019 2020 2021 Thereafter Total
Long-term debt - principal (a) $—
 $—
 $—
 $—
 $402,500
 $650,000
 $1,052,500
Long-term debt - interest (b) 6,541
 54,031
 52,081
 52,081
 45,541
 156,000
 366,275
Operating leases (c) 3,551
 14,077
 12,775
 9,550
 8,580
 17,387
 65,920
Capital leases (d) 4
 9
 —
 —
 —
 —
 13
Telecom services and co-location facilities (e) 2,712
 2,950
 886
 185
 14
 10
 6,757
Holdback payment (f) 2,782
 2,050
 —
 —
 —
 —
 4,832
Other (g) 187
 —
 —
 —
 —
 —
 187
Total  $15,777
 $73,117
 $65,742
 $61,816
 $456,635
 $823,397
 $1,496,484

(a)These amounts represent principal on long-term debt.
(b)These amounts represent interest on long-term debt.
(c)These amounts represent undiscounted future minimum rental commitments under noncancellable operating leases.
(d)These amounts represent undiscounted future minimum rental commitments under noncancellable capital leases.
(e)These amounts represent service commitments to various telecommunication providers.
(f)These amounts represent the holdback amounts in connection with certain business acquisitions.
(g)These amounts represent certain consulting and Board of Directors fee arrangements.

As of September 30, 2017, our liability for uncertain tax positions was $48.7 million. The future payments related to uncertain tax positions have not been presented in the table above due to the uncertainty of the amounts and timing of cash settlement with such authorities.

Off-Balance Sheet Arrangements

We are not party to any material off-balance sheet arrangements.



Item 3.Quantitative and Qualitative Disclosures About Market Risk


The following discussion of the market risks we face contains forward-looking statements. Forward-looking statements are subject to risks and uncertainties. Actual results could differ materially from those discussed in forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s opinions only as of the date hereof. j2 GlobalZiff Davis undertakes no obligation to revise or publicly release the results of any revision to these forward-looking statements. Readers should carefully review the risk factors described in this document and in the other documents incorporated by reference herein, including our Annual Report on Form 10-K for the year ended December 31, 20162021 as well as in other documents we file from time to time with the SEC, including the Quarterly Reports on Form 10-Q and any Current Reports on Form 8-K filed or to be filed by us in 2017.2022.


Interest Rate Risk


Our exposure to market risk for changes in interest rates relates primarily to our investment portfolio.portfolio and borrowings under our Credit Facility that bear variable market interest rates. The primary objectives of our investment activities are to preserve our principal while at the same time maximizing yields without significantly increasing risk. To achieve these objectives, we maintain our portfolio of cash equivalents and investments in a mix of instruments that meet high credit quality standards, as specified in our investment policy.policy or otherwise approved by the Board of Directors. Our cash and cash equivalents are not subject to significant interest rate risk due to the short maturities of these instruments. As of SeptemberJune 30, 2017,2022, the carrying value of our cash and cash equivalents approximated fair value. Our return on these investments is subject to interest rate fluctuations.


As of SeptemberJune 30, 2017, we had no investments in debt securities with effective maturities greater than one year. As of September 30, 20172022 and December 31, 2016,2021, we had cash and cash equivalent investments primarily in time deposits and money market funds with maturities of 90 days or less of $402.5$648.3 million and $124.0$694.8 million, respectively. We do not have interest rate risk on our outstanding long-term debt as these arrangements have fixed interest rates.


We cannot ensure that future interest rate movements will not have a material adverse effect on our future business, prospects, financial condition, operating results and cash flows. To date, we have not entered into interest rate hedging transactions to control or minimize certain of these risks.


Market Risk

In connection with the Separation, we retained an interest in Consensus, which was valued at approximately $72.5 million as of June 30, 2022, based upon the quoted market price of Consensus common stock. Our results of operations and financial condition have been and may be materially impacted by increases or decreases in the price of Consensus common stock, which is traded on the Nasdaq Global Select Market. The Company recorded a realized loss of approximately $48.2 million and an unrealized loss of approximately $27.3 million on its investment in Consensus during the six months ended June 30, 2022. The carrying value of our investment in Consensus at June 30, 2022 was $72.5 million, or approximately 2.0% of the Company’s consolidated total assets. A $2.00 increase or decrease in the share price of Consensus common stock would result in an unrealized gain or loss, respectively, of approximately $3.3 million.

Foreign Currency Risk


We conduct business in certain foreign markets, primarily in Canada, the United Kingdom, Australia, and the European Union. Our principal exposure to foreign currency risk relates to investment and inter-company debt in foreign subsidiaries that transact business in functional currencies other than the U.S. Dollar, primarily the Canadian Dollar, the British Pound Sterling, Australian Dollar, the Canadian Dollar, the Euro, the Hong Kong Dollar, the Japanese Yen, the New Zealand Dollar, and the Norwegian Kroner and the British Pound Sterling.Kroner. If we are unable to settle our short-term inter-company debts in a timely manner, we remain exposed to foreign currency fluctuations.
    
As we expand our international presence, we become further exposed to foreign currency risk by entering new markets with additional foreign currencies. The economic impact of currency exchange rate movements is often linked to variability in real growth, inflation, interest rates, governmental actions and other factors. These changes, if material, could cause us to adjust our financing and operating strategies.


As currency exchange rates change, translation of the income statements of the international businesses into U.S. Dollars affects year-over-year comparability of operating results, the impact of which is immaterial to the comparisons set forth in this Quarterly Report on Form 10-Q.

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Historically, we have not hedged translation risks because cash flows from international operations were generally reinvested locally; however, we may do so in the future. Our objective in managing foreign exchange risk is to minimize the potential exposure to changes that exchange rates might have on earnings, cash flows and financial position.


Foreign exchange losses forDuring the three months ended SeptemberJune 30, 20172022 and 2016 were $1.02021, foreign exchange gains (losses) amounted to $6.6 million and $0.3$(0.9) million, respectively, and forrespectively. During the ninesix months ended SeptemberJune 30, 20172022 and 2016 were $5.52021, foreign exchange gains (losses) amounted to $8.8 million and $1.2$(0.4) million, respectively. The increase in losses to our earnings in the current period were attributable to increased inter-company debt between periods in foreign subsidiaries that were in functional currencies other than the U.S. Dollar.


Cumulative translation adjustments, net of tax, included in other comprehensive income for the three months ended SeptemberJune 30, 20172022 and 20162021 were $7.7$(24.3) million and $(0.3)$3.3 million, respectively, and for the ninesix months ended SeptemberJune 30, 20172022 and 20162021 were $23.6$(30.5) million and $(9.6)$(5.2) million, respectively.respectively




We currently do not have derivative financial instruments for hedging, speculative or trading purposes and therefore are not subject to such hedging risk. However, we may in the future engage in hedging transactions to manage our exposure to fluctuations in foreign currency exchange rates.


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Item 4.Controls and Procedures


(a)Evaluation of Disclosure Controls and Procedures
Evaluation of Disclosure Controls and Procedures
 
The Company maintains disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to ensure that information required to be disclosed in the Company’s reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the principal executive officer and the principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.    


As of June 30, 2022, under the end of the period covered by this report, j2 Global’s management,supervision and with the participation of Nehemia Zucker, our principal executive officer,Chief Executive Officer (“CEO”) and R. Scott Turicchi, our principal financial officer,Chief Financial Officer (“CFO”), management carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon that evaluation, Mr. Zuckerour CEO and Mr. TuricchiCFO concluded that theseour disclosure controls and procedures were not effective as of the end of the period covered inby this Quarterly Report on Form 10-Q.10-Q due to a material weakness in internal control over financial reporting identified in our 2021 Form 10-K for the year ended December 31, 2021, as described below.

(b)Changes in Internal Controls


ThereDuring the year ended December 31, 2021, we determined that we did not design and maintain effective controls over the accounting for certain elements related to the Consensus Cloud Solutions, Inc. (“Consensus”) spin-off resulting in a material weakness. This material weakness is described in more detail in our Annual Report on Form 10-K for the year ended December 31, 2021.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis. As a result of the material weakness in internal control over financial reporting described above, management concluded that the Company’s internal control over financial reporting was not effective as of December 31, 2021.

Notwithstanding the conclusion that our disclosure controls and procedures were not effective as of the end of the period covered by this report, we believe that our condensed consolidated financial statements and other information contained in this quarterly report present fairly, in all material respects, our business, financial condition and results of operations for the interim periods presented.

Remediation Efforts and Status of the Material Weakness

To remediate the material weakness, our management is in the process of enhancing and revising the design of existing controls and procedures over our accounting for significant unusual transactions.These controls relate to the research, analysis and documentation supporting our management’s evaluations, judgments, and conclusions that are required in order to account for significant unusual transactions. We will enhance our approach to and the execution of the research, analysis, and documentation related to these matters. Our process of consulting third party experts will also be enhanced and we will continue to include outreach to and coordination with experts with the relevant knowledge and experience to assist our management with the evaluation of our accounting for significant unusual transactions.

We believe that these actions will remediate the material weakness. The material weakness will not be considered remediated, however, until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. We expect that the remediation of this material weakness will be completed no later than December 31, 2022.

Management’s Report on Internal Control over Financial Reporting

Other than in respect of the remediation activities undertaken in connection with the material weakness described above, there have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) which occurred during the third quarter ended SeptemberJune 30, 20172022 covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II.   OTHER INFORMATION


Item 1.Legal Proceedings


See discussion of legal proceedings in Note 9 – Commitments and Contingencies in Item 1 of the Notes to Financial Statements (PartPart I of this Quarterly Report on Form 10-Q, which is incorporated by reference into this Item 1) for information regarding certain legal proceedings in which we are involved.1 of Part II.
 
Item 1A. Risk Factors


In addition to the other information set forthThere has not been material change in this report, before deciding to invest in j2 Global or to maintain or increase your investment, you should carefully consider theour risk factors discussed in Part I, Item 1A “Risk Factors” insince filing of our Annual Report on Form 10-K for the year ended December 31, 2016 (the “10-K Risk Factors”) as well as in other documents we file from time to time with the SEC, including the Quarterly Reports on Form 10-Q and any Current Reports on Form 8-K filed or to be filed by us in 2017. If any of these risks occur, our business, prospects, financial condition, operating results and cash flows could be materially adversely affected. The 10-K Risk Factors are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations. There have been no material changes from the 10-K Risk Factors, except for the risks described in subsequently filed Quarterly Reports on Form 10-Q.2021.


Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
 
(a)Unregistered Sales of Equity Securities
Unregistered Sales of Equity Securities

None.
 
(b)Issuer Purchases of Equity Securities
Issuer Purchases of Equity Securities
 
Effective February 15, 2012, the Company’sOn August 6, 2020, our Board of Directors approved a program authorizing the repurchase of up to fiveten million shares of our common stock through February 20, 2013August 6, 2025 (the “2012“2020 Program”) which was subsequently extended through February 19, 2018.

. In July 2016, the Company acquired and subsequently retired 935,231 shares of j2 Global common stock in connection with the acquisition of Integrated Global Concepts, Inc. Asauthorization, the Company entered into certain Rule 10b5-1 trading plans with a result ofbroker-dealer to facilitate the purchase of j2 Global common stock, the Company’s Board of Directors approved a reduction in the number of shares available for purchase under the 2012 Program by the same amount leaving 1,938,689 shares of j2 Global common stock available for purchase under thisrepurchase program. During the nine month periodthree months ended SeptemberJune 30, 2017, we2022, 182,247 shares were repurchased zerounder the 2020 Program. These shares under this program. were subsequently retired.

Cumulatively, at Septemberas of June 30, 2017, 2.1 million2022, 3,672,846 shares were repurchased at an aggregate cost of $58.6$296.9 million (including an immaterial amount of commission fees). under the 2020 Program. These shares were subsequently retired. See Note 11 - Stockholders’ Equity in Item 1 of Part I of this Quarterly Report on Form 10-Q, which is incorporated by reference into this Item 1of Part II.

The following table details the repurchases that were made under and outside the 20122020 Program during the three months ended SeptemberJune 30, 2017:2022:
Period
Total Number of Shares
Purchased (1)
Average Price
Paid Per Share		Total Number of
Shares Purchased as Part of Publicly
Announced Plans or Program
Maximum Number of Shares That May Yet Be
Purchased Under the Plans or Program(2)
April 1, 2022 - April 30, 2022757 $94.92 — 6,509,401 
May 1, 2022 - May 31, 20228,721 $89.55 — 6,509,401 
June 1, 2022 - June 30, 2022182,633 $74.94 182,247 6,327,154 
Total192,111 182,247 6,327,154 
Period
Total Number of
Shares
Purchased (1)
 
Average Price
Paid Per Share
 
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Program
 
Maximum
Number of
Shares That
May Yet Be
Purchased
Under the
Plans or
Program
July 1, 2017 - July 31, 20171,620
 $84.67
 —
 1,938,689
August 1, 2017 - August 31, 201712,558
 $78.51
 —
 1,938,689
September 1, 2017 - September 30, 2017—
 $—
 —
 1,938,689
Total14,178
   —
 1,938,689
(1)
All shares purchased were surrendered to the Company to pay the exercise price and/or to satisfy tax withholding obligations in connection with employee stock options and/or the vesting of restricted stock issued to employees.


(1)Includes shares surrendered to the Company to pay the exercise price and/or to satisfy tax withholding obligations in connection with employee stock options and/or the vesting of restricted stock issued to employees.

(2)As of the last day of the applicable month.

Item 3.Defaults Upon Senior Securities

None.


Item 4.Mine Safety Disclosures

Not Applicable.


Item 5.Other Information

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None.


Item 6.Exhibits
Exhibit No.Description
3.1
3.2
31.1
3.3
Rule 13a-14(a)
3.4
10.1
Termination Agreement, dated April 25, 2022, by and between Ziff Davis, Inc. and Orchard Capital Corporation (5)
10.2
Employment Agreement between Ziff Davis, Inc. and Vivek Shah, effective as of June 13, 2022 (6)
10.3
Employment Agreement between Ziff Davis, Inc. and Bret Richter, effective as of June 13, 2022 (6)
10.4
Employment Agreement between Ziff Davis, Inc. and Jeremy D. Rossen, effective as of June 13, 2022 (6)
10.5
Fifth Amendment to the Credit Agreement, dated as of June 10, 2022, among Ziff Davis, Inc., the Guarantors, the lenders party to Amendment constituting Required Lender and all of the Term Lenders and MUFG UNION BANK, N.A. as administrative agent for the Lenders.
31.1
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.2002
31.2
31.2Rule 13a-14(a) Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.2002
32.1
32.1Section 1350 Certification of Principal Executive Officer of Periodic Financial Reports pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.2002, 18 U.S.C. Section 1350
32.2
32.2Section 1350 Certification of Principal Financial Officer of Periodic Financial Reports pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.2002, 18 U.S.C. Section 1350
101.INSInline XBRL Instance Document*
101101.SCHThe following financial information from j2 Global, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017, formattedInline XBRL Taxonomy Extension Schema Document
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document
101.LABInline XBRL Taxonomy Extension Label Linkbase Document
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets as of September 30, 2017 and December 31, 2016, (ii) Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2017 and 2016, (iii) Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2017 and 2016, (iv) Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2017 and 2016, and (v) the Notes to Condensed Consolidated Financial Statements.Exhibit 101)



*    This instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.
SIGNATURE(1)     Incorporated by reference to Ziff Davis’ Current Report on Form 8-K filed with the Commission on June 10, 2014.

(2)     Incorporated by reference to Ziff Davis’ Current Report on Form 8-K filed with the Commission on November 1, 2019.
(3)     Incorporated by reference to Ziff Davis’ Current Report on Form 8-K filed with the Commission on October 8, 2021.
(4)     Incorporated by reference to Ziff Davis’ Quarterly Report on Form 10-Q filed with the Commission on November 9, 2021.
(5)    Incorporated by reference to Ziff Davis’ Current Report on Form 8-K filed with the Commission on April 29, 2022.
(6)     Incorporated by reference to Ziff Davis’ Current Report on Form 8-K filed with the Commission on June 13, 2022.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
ZIFF DAVIS, INC.
(registrant)
Date:August 9, 2022j2 Global, Inc.By:/s/ VIVEK SHAH
Vivek Shah
Date:November 9, 2017By:/s/ NEHEMIA ZUCKER
Nehemia Zucker
Chief Executive Officer and a Director
(Principal Executive Officer)
Date:August 9, 2022By:/s/ BRET RICHTER
Date:November 9, 2017By:/s/ R. SCOTT TURICCHIBret Richter
R. Scott Turicchi
President and Chief Financial Officer
(Principal Financial Officer)
Date:August 9, 2022By:
Date:November 9, 2017By:/s/ STEVE P. DUNN
Steve P. Dunn
Chief Accounting Officer 



INDEX TO EXHIBITS


Exhibit NumberDescriptionChief Accounting Officer
(Principal Accounting Officer)
31.1
Rule 13a-14(a) Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2
Rule 13a-14(a) Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1
Section 1350 Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2
Section 1350 Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101
The following financial information from j2 Global, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets as of September 30, 2017 and December 31, 2016, (ii) Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2017 and 2016, (iii) Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2017 and 2016, (iv) Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2017 and 2016, and (v) the Notes to Condensed Consolidated Financial Statements.

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