ZD - NASDAQ

Good day, ladies and gentlemen, and welcome to the

Thank you. Good morning, everyone, and welcome to the

Thank you, Bret, and good morning, everyone. We're very pleased with our second quarter results, which exceeded expectations, with revenues growing nearly 10% and adjusted EBITDA growing nearly 12% year-over-year. This was our strongest quarter of revenue growth since 2021, and in that sense, we delivered truly breakthrough results and it also represents the fourth consecutive quarter of revenue growth for

Thank you, Vivek. Let's discuss our financial results. Our earnings release reflects both our GAAP and adjusted non-GAAP financial results for Q2 2025. My commentary will primarily relate to our Q2 2025 adjusted financial results and the comparison to prior periods. Please see Slide 4 for the summary of our financial results. Q2 2025 revenues were $352.2 million as compared with revenues of $320.8 million for the prior year period, reflecting growth of nearly 10%. Q2 2025 adjusted EBITDA was $107.7 million as compared with $96.3 million for the prior year period, reflecting growth of nearly 12%. Our adjusted EBITDA margin for the quarter was 30.6%. We reported second quarter adjusted diluted EPS of $1.24 as compared with $1.18 in Q2 of 2024, reflecting growth of more than 5%. This increase reflects higher adjusted EBITDA and lower fully diluted shares outstanding. This was partially offset by a number of factors, the largest of which related to changes in certain foreign exchange rates, which drove an increase in other loss net for the quarter that reduced our Q2 2025 EPS by approximately $0.10 per diluted share. Our second quarter financial results reflect significant growth and it's worth repeating Vivek's observation that this quarter reflects the company's highest level of quarterly total revenue growth since 2021. And while a portion of this growth was contributed by recently acquired businesses, the quarter also reflects positive total organic growth, including organic growth from contributions from our Gaming & Entertainment, Health & Wellness and Connectivity segments. Certain brands within Technology & Shopping and Cybersecurity & Martech contributed to organic revenue growth as well. We are very pleased with these results and the progress we have made through the first half of 2025. We believe that these results reflect the diversity and resiliency of our revenue streams and highlight the ability of our businesses to navigate the demands of their respective business environments and collectively grow revenues while continuing to meet our overall profitability goals. Slide 5 reflects performance summaries for our 2 primary sources of revenue, advertising and performance marketing and subscription and licensing. Both of these revenue sources grew significantly in the second quarter of 2025. Q2 2025 advertising and performance marketing grew 15.5% as compared with the prior year period, while subscription and licensing revenues grew by 5%. Q2 2025 other revenues declined by $2.2 million year-over-year, primarily reflecting a decline in the contribution from our Humble Games Publishing business. Slides 6 through 10 reflect the Q2 financial results of each of our reportable segments, which Vivek discussed in some detail already. But again, 4 of our 5 segments grew revenue in Q2 2025, while Cybersecurity & Martech's revenue declined by less than 1% as compared with the prior year period. All 5 of our segments delivered significant adjusted EBITDA growth during the second quarter. Please refer to Slide 11 to discuss our balance sheet. As of the end of Q2 2025, we had $457 million of cash and cash equivalents and $140 million of long-term investments. We also have significant leverage capacity on both a gross and net leverage basis. As of June 30, 2025, gross leverage was 1.7x trailing 12 months adjusted EBITDA, and our net leverage was 0.8x and 0.5x, including the value of our financial investments. During the second quarter, we closed 3 small acquisitions to expand the product portfolios of our Health & Wellness and Cybersecurity & Martech businesses. We anticipate that during the balance of 2025, we will continue to be an active and disciplined acquirer of companies and assets that we believe will enhance the ability of our existing businesses to serve their respective markets. Overall, during the first half of 2025, we deployed more than $50 million of cash for acquisitions. And during the third quarter, we have already closed the transaction to further diversify the product offering of our Martech business. During the first quarter call, we noted our intent to continue to repurchase our common stock. And since the beginning of the second quarter, we have repurchased nearly 1.4 million

[Operator Instructions] And the first question today is coming from Shyam Patil from Susquehanna.

Nice quarter. I had 1 question I guess for Vivek. With the increased segment level disclosures that you guys are providing, what are you guys hoping to communicate to the market, especially regarding the intrinsic value versus the current public market valuation?

Yes. No, look, thanks for the question. And look, I think we're absolutely hoping that investors take the time to assess each of the 5 segments. So as I noted, 4 of them collectively grew 13%, but unpacking that, we've got 3 of the segments growing double digits, one high-single digit and the 1 that didn't grow, Cyber & Martech, we believe, will grow. So I think just there are differing levels of growth and margin profiles, the adjusted EBITDA similarly collectively grew 12%, but the segments grew from a range of 5% to 24%. So each of these is worth spending time on. And I think more broadly, as they -- as investors kind of peel the onion and study the company, we hope they appreciate a few things: that we have a pharma commercialization and consumer health platform that's growing double digits. That's the Health & Wellness segment. We've got a data-as-a-service business with all kinds of AI tailwinds, also growing double digits. And that's the Connectivity business. We've got a platform at the center of the fastest-growing entertainment category, which is video games, and that's the Gaming & Entertainment segment. And then finally, we have a software unit that pointed to growth with the Cybersecurity business of scale with great margins and organic growth now. And we've got an intent-driven Tech & Shopping portfolio which has got great EBITDA growth as well. And so it can -- I know at times, it can feel like a lot, but I do think that if investors spend time studying the various elements, I think you come to a pretty compelling investment opportunity. And I'd also say to our sell-side and buy-side analysts, I think if you could go through some of the parts valuation exercise, I think that would be revealing. So look, I know it's only been -- it's been relatively new. We're only a couple of quarters into the new segment reporting. It takes a while, I think, for this kind of information to get digested. And by the way being very responsive to the market, this is something that shareholders have been asking for, for some time. And so we're pleased to be able to provide it, and we hope that it brings more insight into, as you say, the intrinsic value of the company.

Your next question is coming from Cory Carpenter from JPMorgan.

I had 2, I think both for you, Vivek. Maybe just to start, if you could update us on trends you're seeing broadly in the ad market. Last time we talked 3 months ago, of course, there was a lot of disruption going on around Liberation Day. And then secondly, good to see you back in double-digit growth. Just maybe how are you thinking about the sustainability of the trends you saw this quarter and Vivek, could you just remind us of how you think about the right long-term growth and margin framework for the company?

Yes. Thanks, Cory. So the ad business grew a little over 15%. With the new segment disclosure, you can kind of see the composition by category. So Health & Wellness is 42% of the ad business; the Shopping & Tech is kind of another 40%, but Shopping is about 21%, Tech is about 19%. So you get a sense of where that break is, and then Gaming is about 16%. So in order, I guess, of importance, what I would say is Health is very strong. Great drug pipeline, high-teens growth. We feel very good about this category near term, long term. Shopping was down a touch, but that's mostly the Offers brand. So I wouldn't say that's a reflection of necessarily market and the Offers brand is a brand that we put into the managed decline category. So we feel reasonably good about where retail sits. Tech was strong. And yes, CNET was obviously a major contributor in our equation, but consumer tech generally outside of CNET is strong and B2B is improving. It's still declining, just to be very clear, but it's declining less than we thought, which is really good. And then Gaming, it's kind of up mid-teens. So as I like to do when I talk about the advertising market, I do like to break it down by category because I think it is -- it does operate categorically versus in aggregate, but generally feeling really good about that. With respect to your thoughts, question around long-term growth, look, I think our mindset hasn't changed, which is we expect to be a double-digit total growth company from a revenue point of view, roughly half organic, roughly half inorganic. Those delineations are always funny because of the way in which we do organic and inorganic calculations. You can have a business that you've acquired that is growing significantly organically and that we put into our inorganic category. So put aside, I'd say roughly 50-50 double-digit growth and then mid-30s margin. So I don't think that's changed. I think that's been the way we've been thinking about the business for some time, as you know. That hasn't been what we accomplished over the last little bit, but we're both glad to be back there. And that's where we expect to be long term.

Your next question is coming from Ross Sandler from Barclays.

Just had a question on the incremental EBITDA margin. So specifically, it looks like given the new segment breakdown, which thank you very much for that, looks like Tech and Health, your 2 biggest ad revenue pools, both growing solid but had margin contraction in 2Q. So could you just unpack, some of that's probably onetime kind of acquisition-related costs or are there other things dragging that down? And then more broadly, how do you view -- now that we're growing organically across the board, how do you view the incremental margin and how that might flow through in the future?

Yes. No, Ross, I would say that I can't point to anything specifically around any changes in the cost structure of the business. And so a lot of this is when you divide our company, which is relatively small, into 5 pieces, I think you can see some lumpiness because similarly, Gaming & Entertainment's EBITDA grew 24%, right? So I often say, like it's better to look at these things on a multiple quarter basis to really get a sense of what the true kind of EBITDA margin is for these segments. So I wouldn't say that there's anything in specific in any of these businesses that I would point to that speaks to kind of a structural change in the margin profile of the business. Bret, I don't know if you...

I think that's right. I think we do get to sort of the math of relatively small numbers when you take 1% of the revenue item in a single quarter. In any given quarter, you have mix dynamics, you have campaign dynamics, you have one-off dynamics, you have investment dynamics. They could be for people, they could be in -- with vendors. So I think it's more important, as Vivek said, to keep that lens pretty wide and compare it to our overall expectations of achieving sort of mid-30s adjusted EBITDA margins. And in any given 3- month period, you're going to see some variability. M&A is also a factor as we -- in different divisions, in as we mentioned, Tech & Shopping, CNET, whatnot. So...

And then just overall, as a company, obviously, on a year-over-year basis, we have seen some margin expansion in the quarter. There was 1 thing as I was thinking about this in Tech & Shopping we have this PC game investment business where we've been investing in games. That is a business that we are essentially sunsetting. That has actually been a drag. So that might be something there, but that's being sunset. And so that might be 1 small piece on the Tech & Shopping but again small...

Small piece in dollars to move -- you could be within about 1 point of margin.

Your next question is coming from Ygal Arounian from Citi.

I guess -- sorry, I may have missed if there was commentary on this on -- because I just jumped on a little bit late. I think there's been a lot more talk this quarter than we've heard even over the past few so it feels like there's an acceleration of the trends around agentic AI -- or sorry, not agentic AI, but AI overviews and search and the distribution of traffic across the open web. And I know you guys talked before about how you're positioned there and a lot of your traffic coming directly to you guys. And maybe just an update on what you're seeing there and how you're feeling? And then I guess at the same time, if you can just talk about your approach with LLMs and if that's changed at all; how you're thinking about that.

Yes. No, no. Thank you. So look, I'll reiterate Ygal, what I shared last quarter, which is 35% of the company's total revenues are ads on our O&O web traffic, and about 40% of that comes from search. So that gives everyone kind of an understanding of kind of order of magnitude. And I think when you multiply those numbers together, you come to the conclusion that we are different than a lot of other businesses that one might compare them -- compare us to. I mean, look, there's no doubt we're experiencing a bunch of search engine result page volatility, but we've been talking about zero-click search probably for a decade, which is why we're not leveraged to SEO, we generate a ton of non-web engagement. And frankly, so much of our revenues are not actually traffic based. And I think this is the most important aspect to understand. We are not a programmatic ads business. I mean that is less than $50 million of our annual revenue or programmatic ads. And so that's just something I think to reiterate. And look, I listed a number of examples of how we monetize our brands, right, IGN Live, the parenting and pregnancy clinical studies business, keep partnerships like Best Buy, Spiceworks software. That's just a few. I could go on and on. But it's a far more dynamic and diversified business model that, again, I think as investors dig into the company with our new segment reporting, we'll recognize that I think we've given a little bit too much oxygen to this topic when we're talking about our business. And by the way, a significant portion of our adjusted EBITDA, Connectivity and Cyber & Martech is not part of this AI search narrative at all. With respect to your question on licensing and relationships with large language model owners and operators, obviously, we continue our lawsuit against OpenAI. We feel it's important that we protect our IP and ensure that we get fair compensation. We think our content is valuable. We know it's valuable. It's been scraped an awful lot and we should get compensated for that by AI systems. And so -- but at the same time, I mean, look we want to partner with AI companies going forward. We are continuing many dialogues around arrangements and partnerships so that we can get a fair value exchange. The other thing we did, as you might have seen, is as of the first of July, we commenced blocking of known AI bots at the CDN level with partners like Cloudflare to prevent unauthorized access. And the reason we did that was up until this point, up until that point, we were using robots.txt, and the problem with robots.txt, as we've come to see, is that it's a directive that bots can and have chosen to ignore. So -- so blocking these bots at the CDN level is certainly more effective. And we think that's important, too. So I think through the combination of activities, we think we can move the dialogue into a more constructive and productive place.

Okay. Great. And then I want to follow up on the moment of influence product and it sounds new and interesting. And maybe talk about the go-to-market approach there a little bit more, what that opportunity is and expand a little bit more on what you're seeing so far from advertisers.

Yes. No. So we have built, and it's a proprietary AI-based essentially data management platform. We're ingesting all sorts of signals across all of our touch points. It goes into a system that, based on what a marketer's targets and goals are, then spits out essentially the who, who should you be targeting, when and then where and executing campaigns that run on our properties, on our properties' content on social platforms, video platforms and then more broadly on the open web. And so in many ways, it's limitless inventory against a fairly large signal capture. Our go-to market, however, is not a product that would be sold at a corporate level.

Your next question is coming from Robert Coolbrith from Evercore ISI.

Just wanted to ask within Health & Wellness, it seemed like you had a pretty notable sort of uptick in -- not so much spend per advertising customer, but the participation of advertising customers. So just wondering if there's anything you can talk through in terms of the trends and what we maybe expect over the next couple of quarters, just given that we don't have a ton of historical data. But just anything on the trends there that really sort of lifted advertiser participation. I think that your growth in advertising customers was maybe up, I want to say 14% year-over-year. So notable acceleration there.

Yes. No. Thank you for the question. And I think, look, I think part of why we're seeing a larger advertiser count is that while pharma is the core of what Health & Wellness really does do and pharma commercialization in the market is very strong, we have been looking to expand more broadly to more Health & Wellness brands or brands that have a health or wellness marketing component or target. And so I think we've had success doing that. And brands like theSkimm have been really helpful in helping us expand our base. And so that -- part of what that business is looking to do is to diversify. Look, the pharma category is fantastic. I think it's a real competitive advantage, and it's one that we like a lot. It doesn't mean we couldn't -- we shouldn't participate in other related and adjacent categories. And as you know, overall, just societally the focus on Health & Wellness and longevity. That's another big driver. There are just so many longevity brands and solutions out there. So I think, demographically, we're kind of well aligned, I think, with brands like theSkimm I think we do really well in those categories. So I think it's really -- there's a bunch here to like. The other thing is, I'll point out that our Lose It! property, which is a subscription-based property, has started to accept advertising for the free customers that we have that are pretty substantial. Again, a pretty good market, right? These are people who are interested in calorie tracking and meal logging and weight loss and fitness and so that opens up a lot of other interesting advertising opportunities.

Great. Just a follow-up also on Connectivity. Almost the reverse dynamic, you're -- I think you had an inflection in your quarterly revenue per customer there that was fairly pronounced. If you could just talk through some of the trends there as well.

Yes. That's a funny one. I'll tell you what. This is an example of creating a set of common metrics across 5 divisions that aren't always common as we just pointed out. And so this is a little bit of a different animal where you have a combination of high price point customers on the Speedtest Intelligence side matched with lower price point customers on the Ekahau side. And so sometimes that has a little bit to do with mix and it's a computed metric more than a managed metric, if I'm going to be honest with you. So it's not something I've even looked at. It would be something that I'd have to probably go in and do a little bit of gathering, which we can do and look at. But overall, I think what it probably points to is we're seeing a lot more growth out of Speedtest Intelligence and RootMetrics and the businesses that are at a higher price point. Ekahau is growing, but it's not growing yet at the rate that we'd like it to grow, and that is that I'm excited for. It's not showing up yet. It's probably more of a 2026 event, but the WiFi 7 router refresh will be a really interesting tailwind for this business, but it's not playing out yet.

Thank you. There are no other questions in queue at this time. I would now like to hand the call back to Bret Richter for any closing remarks.

Thank you very much, Tom, and thank you, everyone, for participating in today's call. We look forward to our ongoing dialogue with you in the balance of the year. Have a great day.