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. In our third quarter earnings release, we announced that

Thank you, Vivek. Let's discuss our financial results. Our earnings release reflects both our GAAP and adjusted non-GAAP financial results for Q3 2025. My commentary will primarily relate to our Q3 2025 adjusted financial results and the comparison to prior periods. Please see Slide 4 for the summary of our financial results. Q3 2025 revenues were $363.7 million, as compared with revenues of $353.6 million for the prior year period, reflecting growth of nearly 3%. Q3 2025 adjusted EBITDA was $124.1 million, as compared with $124.7 million for the prior year period, reflecting a decline of less than 1%. Our overall adjusted EBITDA margin was 34.1% in Q3 2025. We reported third quarter adjusted diluted EPS of $1.76, up from $1.64 in Q3 2024, reflecting growth of more than 7%. This increase is due in part to our share repurchases, which reduced third quarter 2025 adjusted weighted average fully diluted shares by nearly 3.3 million shares or 7.5% as compared with the prior period. Importantly, year-to-date, we have delivered growth in revenues, adjusted EBITDA and adjusted diluted EPS as well as a significant amount of free cash flow. 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 year-over-year in the third quarter of 2025. Q3 2025 advertising and performance marketing grew 5.9% as compared with the prior year period, while subscription and licensing revenues grew by 2%. Q3 2025 other revenues declined by $4.3 million year-over-year, reflecting the significant decline in revenues from our games publishing business, which more than offset growth from other products and services. Slide 6 through 10 reflect the Q3 financial results of each of our reportable segments. As Vivek noted, 3 of our 5 segments grew revenue in Q3 2025. With regard to adjusted EBITDA, while there are numerous factors that impact margins in each quarter at each business, I want to highlight a few significant items that impacted Q3 2025 adjusted EBITDA at Tech & Shopping, Connectivity and Cybersecurity & Martech. As we noted, the year-over-year performance of Tech & Shopping was negatively impacted by the performance of our games publishing business, which is in the process of being wound down. We report this revenue net of the amortization of our game publishing investments. And during the last 2 quarters, we reported negative net revenue for this business as this amortization exceeded revenue during the period. This quarter, we reported nearly $7 million less net revenue from publishing than we did during the third quarter of 2024, and this reduction flows through at a very high contribution margin to adjusted EBITDA. In the absence of this impact in Q3, Tech & Shopping would have had positive adjusted EBITDA growth for the quarter. Connectivity's Q3 2025 adjusted EBITDA margin was impacted by the timing of the contracts that Vivek highlighted in his remarks. However, it also reflects the investment we are making in Connectivity to support its anticipated growth. As Vivek mentioned, Connectivity has already launched 1 new exciting product to the market, with another product launch planned for Q4. Q3 2025 reflects our investments in product development, cloud services and sales expenses to support these new products ahead of revenue generation from them. Overall, we are excited about the prospects of these new products as we begin to head into next year. Finally, Cybersecurity & Martech adjusted EBITDA was primarily negatively impacted by the timing of certain expenses. In Q2 2025, Cyber & Martech delivered more than 5% year-over-year adjusted EBITDA growth despite a modest decline in revenues. This quarter, despite an increase in revenues compared with the prior year period, Cyber & Martech's adjusted EBITDA declined by approximately $500,000, primarily as a result of these timing issues. Please refer to Slide 11 to review our balance sheet. As of the end of the third quarter, we had $503.4 million of cash equivalents and $119.6 million of long-term investments. We also have significant leverage capacity on both a gross and net leverage basis. As of September 30, 2025, gross leverage was 1.7x trailing 12 months adjusted EBITDA, and our net leverage was 0.7x and 0.5x, including the value of our financial investments. During the third quarter, we closed 2 small acquisitions to expand the capabilities of our Connectivity and Cybersecurity & Martech businesses. In the first 9 months of 2025, we closed a total of 7 acquisitions across our businesses, and we invested a total of $67.3 million net of cash received to support our M&A program. We anticipate we will continue to be an active and disciplined acquirer as opportunities arise to add capabilities to our businesses in an accretive manner. Since our second quarter earnings call, we've repurchased 1.5 million shares of our common stock, with certain of these repurchases occurring during the month of October. Through the end of the third quarter of 2025, we repurchased 3 million shares, deploying $109 million or close to 85% of our year-to-date free cash flow. Overall, through today's date, we've repurchased more than 3.6 million shares since the start of 2025. We have nearly 2.75 million shares remaining under our stock repurchase authorization, and we continue to believe that the current trading level of our stock does not reflect the intrinsic value of our underlying businesses. Following this earnings call, we plan to utilize a 10b5-1 Plan to continue to repurchase our shares. Turning to Slide 13. We are reaffirming our fiscal year 2025 guidance range. As noted on prior calls, this is a broad range, which we set in February of 2025. And we currently anticipate our key fiscal year 2025 financial performance metrics of revenues, adjusted EBITDA and adjusted diluted EPS to fall within this range. As we have discussed today, the consolidated financial performance momentum that we experienced in the second quarter of 2025 did not broadly carry forward to our third quarter results. And while a number of our businesses continue to show strength, we currently anticipate fiscal year 2025 total revenues and adjusted diluted EPS to be within the lower half of our guidance range, with adjusted EBITDA expected to be closer to the lower end of our guidance range. Please note that the fourth quarter is typically our seasonally largest revenue quarter. Slide 20 includes a reconciliation of free cash flow. Q3 2025 free cash flow was $108.2 million, 35% higher than the prior year period. As of the end of Q3 2025, trailing 12 months free cash flow was $261.2 million. We believe that our ability to generate significant free cash flow is a clear indication of the intrinsic value of our businesses and highlights the disconnect we see in our share price. Overall, through the third quarter of 2025, we have delivered year-to-date growth in revenue, adjusted EBITDA and adjusted diluted EPS, as well as significant free cash flow. Based on our current expectations, we have maintained our expectation of delivering fiscal year 2025 results within our guidance range. And we plan to continue to dedicate our investable resources to our active stock repurchase program while pursuing attractive M&A opportunities. And as Vivek noted earlier, we remain committed to identifying and pursuing all opportunities that we believe offer strong prospects to enhance shareholder value, and we have taken tangible proactive steps to pursue certain of these opportunities. Although there is no assurance that the evaluation will result in any transactions, we are excited about the potential outcomes that may result from these efforts. With that, I will now ask the operator to rejoin us to host our Q&A.

[Operator Instructions] And your first question this morning is coming from Robert Coolbrith from Evercore ISI.

Congratulations on the results. Vivek, I know you have some opinions about where the valuation disconnects versus intrinsic value may be most acute. I wanted to ask if you'd be willing to share any thoughts there. And then secondly, I'd imagine you've had some inbound interest from time to time in the past. Is there something unique about this moment that makes this the right time to entertain that interest in a more significant way? Is the volume of interest where you think you could drive some competitive auction dynamics? Or have you gone some of these businesses to a place where you think an exit now makes more sense?

So Rob, thanks for the questions. And I should also thank you, I know in your last note after our last call, you did do a "sum of the parts" analysis, which is what we were looking for. And I think to answer your questions, I do think things changed at the beginning of this year when we, for the first time, broke out the company into 5 reportable segments, which gave the entire marketplace a real view into the different businesses and the different drivers, the different growth characteristics, margin profiles, et cetera. And so look, up until then, I think for a lot of people, they were just trying to feel around and estimate. We did that, as I said, with the public market in mind, with our current investors and prospective investors and with analysts in mind. But what it also did was just attract a lot of attention from strategics and sponsors. And so look, from our point of view, that -- I would say that that was different than maybe in the past. And so the decision to engage advisers at this point was really in response to the level of inbound interest. But I would also say that we're at a point where the disconnect between the current value of the company and we believe the intrinsic value of the company, the true value of the company in our own minds, is probably at the widest it's ever been. And so with respect to your question on specific businesses, look, we go into this with an open mind, with a goal of unlocking the maximum amount of value. And what I would say is that we believe every one of our divisions should command a multiple, each of them individually, higher than what is the current

Your next question is coming from Cory Carpenter from JPMorgan.

I had a follow-up to the strategic review and then one on AI overviews, if I could. Just, Vivek, kind of continuing on that theme, maybe what all is on the table here? It sounds like you think there's a disconnect across all divisions, but are there any properties that maybe you think of as core or off-limits in terms of divesting? And would you consider perhaps the whole company, if that was something that you were seeing interest in? And then on AI overview, some of the other publishers called out an impact this quarter on traffic just as that ramped up a little faster than expected. Curious to hear what you've seen there.

Thanks for the questions, Cory. So starting with: is anything off the table? No. We're, as I said, we're going in with an open mind. And so we don't have a specific preference. With respect to your question about the whole company, look, the inquiries have been about specific businesses, and we do believe that exploring opportunities for select units is likely to be far more value accretive than considering a transaction for the entire company. That said, look, to the extent we receive credible interest in the broader company, we have an obligation to evaluate any opportunity that could unlock meaningful value for shareholders. I think with respect to just the AI overviews and traffic, might be just worth sort of reiterating what I've said in the past in terms of our view that the company is pretty well positioned and insulated from fluctuations in search traffic. 35% of our total revenue is traffic -- is web traffic dependent, half of that coming from search, so roughly 17.5% revenue exposure. And in AI overviews specifically, AI overviews currently appear in 29% of the queries that drive the lion's share of our traffic, which is actually a tick-down. So the prevalence of AI overviews with respect to the queries that are valuable to us is relatively stable. What I will say, so I don't -- I'm not thinking as much about AI overview prevalence. I'm thinking more about search volatility. There have been a number of algorithm changes, and happening with pretty significant frequency, that's creating a fair amount of sort of rank volatility, which is different than, I think, the AI overviews piece. So that's something we're watching. I think there's a lot of experimentation going on right now in the Google search experience. And so we're feeling some of those chops and some of those bumps.

And your next question this morning is coming from Shyam Patil from SIG.

I guess you, as you mentioned, you've prepared the market for this kind of announcement just with your segment-level disclosures as well as some of your commentary in the past. I'm just curious, what do you prefer? And then maybe kind of a separate but related, like what do you think is more likely, selling pieces of the business, selling the whole company? And then if it is just selling off certain pieces, what's your value kind of creation and unlocking kind of thesis or philosophy going forward? Would it be we buy businesses, we sell them and then we use that cash to buy back stock or do further M&A? Just how do you just think about kind of those things kind of going forward as you kind of try to figure out what the business could look like over the next 3 to 5 years?

Shyam, all great questions. Look, I'll start with your question on preference. And my preference is whatever creates the most impactful and positive outcome for the per share price of

And Vivek, I might just add one short thought. I mean widening the lens. Our overall approach is to provide products and services to the communities we serve effectively and generate profits, cash flow and growth. And use that cash flow to ensure, one, we have a healthy balance sheet, and then allocate that capital to go back to that core philosophy of generating growing cash flows. There'll be times, and there have been times, in our journey where we shift that capital allocation to -- from M&A to share buyback. And now we're adding one more leg to the equation, we're considering other opportunities to unlock value. So I don't think overall the approach changed or sets a new course for the company. We're just reacting to where we are in the broad market.

Your next question is coming from Ross Sandler from Barclays.

Great. Vivek, I guess, a philosophical question. If we're at the peak of system-wide Google referral traffic hit for the broader open web, the broader industry, and revenue impact or revenue headwind for companies like

Yes. So Ross, it's an interesting question, and it actually reflects I think the dynamics that are existing in other businesses and not ours, right? So I think what I'm suggesting is this whole AI overview narrative really hasn't been relevant to our businesses. I mean take our Health & Wellness business for a moment. Close to 13% revenue growth in the quarter, year-to-date 12%, adjusted EBITDA up 18%. This business is doing exceedingly well. I mean it's sort of Exhibit A with respect to, I think, the nature of our businesses relative to maybe others in the marketplace. So I would say it maybe a little bit differently, which is we're demonstrating that, notwithstanding what seemed like large industry headwinds, our businesses are doing exceedingly well. So that's one thing, and I think it's possibly why we have had folks reach out on various parts of the company. I will also point out that 2 of the segments have nothing to do with Google, and that is Connectivity and the Cybersecurity & Martech segments. And as you know, within Cybersecurity & Martech businesses, our various businesses. So look, I think that -- and then even within Tech & Shopping, RetailMeNot has a different kind of dynamic. So I think maybe the issues relating to Google and search, while relevant to a few of our brands, may just not be that relevant to the rest. And so with that recognition in the marketplace, which is, "Wow, you know what, these businesses are built differently. They have different dynamics. The market -- the public market doesn't appreciate that, doesn't see that. We do." There's an opportunity here. And I think that's what's going on.

Ross, with regards to your second question. I think it's a fair observation too, and of course, we haven't provided that figure specifically. But looking at what might be implied for advertising in the fourth quarter, I think you said low single digit. I think first, I'd call out probably the most important factor is we'll be lapping the CNET acquisition in the fourth quarter. So we'll be comparing CNET year-over-year, while up to this point for the most part it's been a contributor. And Vivek highlighted a couple of things and I highlighted, that certain of our businesses, the momentum in second quarter didn't quite carry through. And just emphasize what Vivek just said, in other businesses like Health & Wellness, it certainly did. But a little soft product launch in the marketplace as it relates to gaming and advertising, some search volatility, which impacts Tech & Shopping. I think it's a fair observation that we'd be looking for subscription growth to outpace advertising growth in the fourth quarter.

Your next question is coming from Rishi Jaluria from RBC.

Wonderful. Look, I appreciate all the color and increased transparency. Definitely do agree stock seems very undervalued here, and anything that can release shareholder value is great. But I want to turn now to maybe the M&A opportunities. Because, Vivek, I mean, I think it's pretty clear from the way you're talking about the impact of AI search overviews and maybe AI search as a whole, that you seem to be -- your properties seem to be weathering this better than a lot of smaller properties. And maybe I want to think, where is there an opportunity for you to get really aggressive as an acquirer or a consolidator with some of these properties out there that don't have that scale, that don't have the platform, don't have the diversity and, quite candidly, don't have the experience of, as you alluded to, weathering all the different search algorithm changes that have happened over the past decade, and maybe more than that? Because it really feels like given where sentiment is today, and maybe we're at peak negativity on the AI search and media, that there really is just an opportunity for you to deploy a lot of capital right now and find some even smaller dislocated properties and really just kind of bring them in. Maybe walk us through how you're thinking about that, what sort of opportunities you see in the market?

Yes. No, listen, it's a great question. And I think all the following things can be true. We can be buyers of our shares, we can anticipate transactions to unlock value for our company, and then we can deploy capital in acquisitions. Because I agree with your view, which is 2 pieces, that we have built the platforms and approach that has worked and weathered the storm. Others may not have. And isn't that a buying opportunity? So for sure, we agree with that. And I'll point out that, look, we've deployed close to $70 million for acquisitions thus far this year, and that program is not slowing down at all. But there's also no question that a big share of our capital deployment has been going to buybacks. It continues to stand out as, frankly, the best option for our capital. I mean we could buy this, what we believe is an amazing company, at almost unbelievable multiples. And so we've continued to do that. I think through just to date, it's 3.6 million shares. It's a significant part of our shares outstanding. And that's going to continue. So look, I think that we're always balancing how we deploy our shareholders' capital in the right way against the realities of the per share price experience for our shareholders, and looking to find that balance in this process and going forward.

Your next question is coming from Ygal Arounian from Citi.

Maybe the M&A question from a different angle, as you kind of go through this process, if you're more willing to think a little bit more about expanding into new verticals or areas of sort of higher growth? And then on the AI side, maybe on licensing in particular, and I know there's a lot going on there. One of your competitors talked about sort of a marketplace model where, rather than an all-you-can-eat, sort of a pay-as-you-go. And it sounds like there's more interest for the LLMs to come to the table with the Cloudflare blocking. Just wanted to get an update on how things are going there on your approach.

Yes, 2 great questions, Ygal. So just on the M&A front, look, we've always had a preference for buying leadership brands. CNET, leadership brand in tech; IGN, leadership brand in gaming; RetailMeNot, leadership brand in shopping; Everyday Health, leadership brand in health, et cetera, et cetera. So I think we're always looking for brands that have leadership, because I will say that leadership brands can define their business models by demand and not supply. So much of the conversation is around supply because so much of the media business model has been around programmatic, which is a supply-driven business model, not a demand-driven business model. And so I think we're going to continue if we were to do things that look for businesses that enhance existing leadership or established leadership in new categories. With respect to AI licensing, so we are active, very active with AI licensing discussions and encouraged by sort of this growing market consensus that compensating content owners is just a reality and a necessity. Now we're not going to sign any deal that doesn't provide fair value exchange for our content because this is -- setting the right financial precedent is important for a sustainable model. As you pointed out, the CDN layer with Cloudflare and others, we continue to block AI bots. And I think sources do matter. I think if you have a garbage in, you're going to have a garbage out problem in these models. And so I encourage everyone to always look at the sources when you look at the answers. I think you'll be surprised now to see what some of the sources are, because as trusted sources of information block, like we and others are doing, it does create, I think, a quality problem. I'll also point out, we've joined RSL, which is Real Simple Licensing, which has a standard that has been set which essentially adds machine-readable licensing terms to our robots.txt and also the RSL Collective, which is kind of like ASCAP or BMI, where there's sort of a negotiated collective. All to say that I do have a fair amount of optimism that the future will represent a pretty interesting new business model for content that receives compensation from various AI systems and models. So I am confident in that. I just think that in the early goings of this, you kind of want to set the precedents right.

Your next question is coming from Chris Kuntarich from UBS.

Vivek, you've called out that the cash that was generated from the Consensus transaction, that was put towards 6 transactions. You were kind of talking in a previous response about going out and acquiring leadership brands. I guess in the event of a spinoff, should we be thinking about kind of the philosophical shift even further kind of on the margin towards targeting a different growth profile of business, maybe kind of expanding from leaders to emerging leaders and looking at something, again, with potentially higher growth profiles?

Yes. Look, it's a great question and it's one we talk about a lot, which is, in the end, how do we arrive at the returns profile? One of the challenges for us is that, look, I think in the end -- or one of the realities for us is that we really focus on cash-on-cash returns, not necessarily multiple expansion to drive valuation, right? So we've always said, look, we're just going to be an EPS compounder in double digits. We're not at that target right now, I understand that. But that is our goal and expectation. And so look, I think to do that, we really do price/earnings and cash flow. And it's sometimes hard with some things that are smaller and growthy for that to be inside of our portfolio and get any credit. And it may not have the same margin profile and free cash flow characteristics. And so I think we focus a lot on free cash flow, free cash flow yield. And to the degree to which it fits our formula, I think we'll do it. But what we're not signaling here is a change in our formula. I do really think that what we have done an exceedingly good job of is finding investment opportunities where we can unlock a fair amount of cash flow out of those businesses. So I wouldn't want to abandon that in whatever we do. And then whatever this journey -- wherever this journey takes us, I still think we're going to very much be committed to that approach.

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

Thank you, Tom, and thank you, everybody, for joining us today. We appreciate your time and investment in the company. We look forward to speaking with you over the next couple of months and during our fourth quarter call.