Ziff Davis Q3 2026 Earnings Call Transcript

Quartr
Provided by Quartr
November 6, 2026

Key Takeaways

  • Negative Sentiment: Q3 continuing-operations revenue fell 5.6% year over year to $289.3 million, while adjusted EBITDA declined 16% to $82.2 million and margin contracted to 28.4% from 31.9%. For Q4, management expects revenue to decline low to mid-single digits year over year and adjusted EBITDA margin to be lower than a year ago, though adjusted EPS is expected to rise slightly.
  • Negative Sentiment: Organic Google referrals fell about 37% year over year, accelerating the pressure on digital media traffic; management said it is not planning on a search recovery. Ziff Davis content appeared in Google AI features roughly 2.7 billion times, but executives acknowledged a gap between that usage and monetization, with licensing and other revenue opportunities still being pursued.
  • Positive Sentiment: The company repurchased $92 million of stock in Q3 and has bought back 5.5 million shares year to date, reducing shares outstanding by nearly 14%. It ended the quarter with $1.5 billion in cash and investments and $535 million more cash than debt, supporting further buybacks and selective investments.
  • Neutral Sentiment: Operating trends were mixed: Tech and Shopping’s year-over-year revenue decline narrowed for a third consecutive quarter to just under 4%, and Humble Bundle posted record Q3 revenue, while Health and Wellness revenue fell 9.5% and Cybersecurity & Martech fell 4.6%. Management cited social commerce, product initiatives, and AI-driven efficiencies as offsets, and expects year-end headcount to be down about 10%.
AI Generated. May Contain Errors.
Earnings Conference Call
Ziff Davis Q3 2026
00:00 / 00:00

Transcript Sections

Skip to Participants
Operator

Good day, ladies and gentlemen, and welcome to the Ziff Davis third quarter 2026 earnings conference call. My name is Mike, and I will be the operator assisting you today. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. On this call will be Vivek Shah, CEO of Ziff Davis, and Bret Richter, Chief Financial Officer of Ziff Davis. I will now turn the call over to Bret Richter, Chief Financial Officer of Ziff Davis. Thank you. You may begin.

Bret Richter
Bret Richter
CFO at Ziff Davis

Thank you. Good morning, everyone, and welcome to the Ziff Davis Investor Conference Call for the third quarter of fiscal year 2026. As the operator mentioned, I am Bret Richter, Chief Financial Officer of Ziff Davis, and I am joined by our Chief Executive Officer, Vivek Shah. A presentation is available for today's call. This presentation and our earnings release are available on our website, www.ziffdavis.com. You can also access the webcast from this site. When you launch the webcast, there is a button on the viewer on the right-hand side which will allow you to expand the slides. After completing the presentation, we will be conducting a Q&A. The operator will provide instructions regarding the procedures for asking questions. In addition, you can email questions to investor@ziffdavis.com. Before we begin our prepared remarks, allow me to read the safe harbor language.

Bret Richter
Bret Richter
CFO at Ziff Davis

As you may know, this call and the webcast will include forward-looking statements. Such statements may involve risks and uncertainties that could cause actual results to differ materially from the anticipated results. Some of those risks and uncertainties include, but are not limited to, the risk factors we have disclosed in our SEC filings, including our 10-K filings, recent 10-Q filings, various proxy statements and 8-K filings, as well as additional risks and uncertainties that we have included as part of the slideshow for the webcast. We refer you to discussions in those documents regarding safe harbor language and forward-looking statements. In addition, our slides include reconciliation statements for non-GAAP measures to their nearest GAAP equivalent. Now let me turn the call over to Vivek for his remarks.

Vivek Shah
Vivek Shah
CEO at Ziff Davis

Thank you, Bret, and good morning, everyone. We delivered third quarter results that were broadly in line with the expectations we set during our second quarter call. Revenues and adjusted EBITDA grew sequentially, and our adjusted EBITDA margin improved by 160 basis points as compared to the last quarter. While the headwinds facing our businesses persist, we are encouraged by our sequential growth as we continue to focus on ways to create value for our shareholders. Year to date, we have deployed more than a quarter billion dollars to repurchase our stock at attractive valuations and have reduced our shares outstanding by nearly 14%. We continue to maintain a strong balance sheet, exiting the third quarter with $1.5 billion of cash and investments and a net cash position in excess of half a billion dollars.

Vivek Shah
Vivek Shah
CEO at Ziff Davis

We continue to be careful and opportunistic capital allocators, while also considering monetization opportunities to unlock value for our shareholders. As I've said before, we see our portfolio as dynamic, and every decision we take is measured against its impact on value per share. Now I'd like to share some observations about our four operating segments. Tech and shopping revenues declined less than 4% year-over-year, consistent with our goal for revenue trends to improve each quarter through year-end. This is the third straight quarter the rate of decline narrowed, from 18% in Q4 2025 to 13% in Q1, 5% in Q2, and just under 4% in Q3. We anticipate this improving trend will continue into the fourth quarter, which is historically the largest quarter of the year for tech and shopping.

Vivek Shah
Vivek Shah
CEO at Ziff Davis

Our social commerce efforts continue to ramp nicely, and we relaunched the RetailMeNot app in the third quarter as a loyalty-first experience built around guaranteed cashback, verified promo codes, and extensive product deals. Signed-in monthly users more than doubled, and app commissions reached a 2026 high in September, up 25% year-over-year. While our tech and shopping brands continue to face the strongest search traffic headwinds in our portfolio, we've been able to counter those pressures by expanding our ad surfaces, building direct audiences, and leveraging our trust and authority to our benefit. Gaming and entertainment revenues declined about 2% year-over-year, with lower advertising revenues at IGN being offset by growth in our Humble Bundle storefront. The gaming ad market has been weak due to a light slate in the run-up to this month's launch of GTA VI.

Vivek Shah
Vivek Shah
CEO at Ziff Davis

We expect the slate to improve going into next year, which should support the gaming ad market in 2027. While the ad market for IGN has been soft, it continues to lead at the biggest events in the industry. At San Diego Comic-Con, IGN led media outlets with a record 196 million video views, up 65% year-over-year. At Gamescom, the industry's largest international showcase, IGN once again was the official production and media partner, creating week-long programming, including live streams localized in German, Chinese, and Japanese. The Humble business has been growing its volume of bundle offerings, including expanding into tabletop games and comics, delivering a record third quarter in revenue. Our charitable giving grew along with revenue, bringing our total cumulative gross donations to over $280 million. In health and wellness, revenues declined 9.5% against a relatively strong third quarter last year.

Vivek Shah
Vivek Shah
CEO at Ziff Davis

The year-over-year drop was due primarily to lower healthcare professional-focused advertising at MedPage Today, whereas we noted last quarter, we're seeing spend shift to some emerging platforms. However, as we expected, MedPage grew sequentially over Q2, and we expect this sequential growth to continue through the end of the year. Consumer pharma advertising was stronger in Q3, with continued momentum in GLP-1 promotion for both diabetes and weight loss indications. Importantly, our consumer pharma commercialization business expanded its healthcare media network with the addition of a long-term exclusive contract with Harvard Health Publishing, which will join our existing roster of world-class partners, including the Cleveland Clinic, Mayo Clinic, and University of Pittsburgh Medical Center, which was added earlier this year.

Vivek Shah
Vivek Shah
CEO at Ziff Davis

Our continuing medical education business, PRIME, received the prominent industry award, Best in Class Outcomes, at the 2026 Alliance Industry Summit Annual Meeting for a transformative initiative addressing critical healthcare gaps in underserved populations. At Lose It!, we introduced The Lab, a new premium offering that pairs our AI-powered food logging with health metrics and nutrition insights, giving members a more personalized view of their progress and giving us a stronger upsell path within our subscription base. In Cybersecurity & Martech, revenues declined 4.6% due primarily to weakness in our SEO tools and email marketing businesses. Other Martech businesses performed well in the quarter. SMTP.com, our API-based email delivery platform, supporting marketing newsletter and transactional use cases, continues to grow at a double-digit rate, as does Semantic Labs, which helps subscription businesses acquire customers efficiently online.

Vivek Shah
Vivek Shah
CEO at Ziff Davis

In cybersecurity, our consumer businesses, led by the IPVanish brand, continue to deliver strong growth. That momentum reflects a balanced go-to-market approach across direct-to-consumer and partner channels, along with continued product improvement. In October, we added a next-generation antivirus to IPVanish, bringing more of consumers' privacy and security needs together in a single service. Turning to our AI initiatives. Last quarter, I noted that the majority of the new or updated code we release is written by AI. Today, more than 90% of pull requests across the product and engineering teams are written by AI. The result is a lower cost per feature delivered and a leaner cost base, with the capacity to support a broader product roadmap without growing headcount at the same pace. Increasingly, AI is showing up in what our customers experience, from AI-assisted shopping search on RetailMeNot's app to AI-powered nutrition insights at Lose It!.

Vivek Shah
Vivek Shah
CEO at Ziff Davis

Beyond engineering, we're applying AI across operations, customer support, and sales, where we're seeing gains in throughput. More broadly, we're very focused on efficiency and margin improvements at the company, and by the end of the year, we estimate headcount will be down 10%. While AI has helped improve our operating efficiency, the disruption of search traffic by Google and LLMs has been a clear business headwind. Organic Google referrals to our properties declined approximately 37% year-over-year in the third quarter. Last year, the Q3 drop in referrals was approximately 23%, making the two-year drop over 50%. There are differences in categories. As I noted, tech and shopping experience shopper drops than gaming and entertainment, for instance. Google has also started to share a statistic called AI impressions, which measures how many times a link to a page was shown inside generative AI features.

Vivek Shah
Vivek Shah
CEO at Ziff Davis

Across our digital media sites, our content was cited in AI Overviews and AI Mode responses roughly 2.7 billion times in the quarter, nearly 10x the clicks those same sites received from Google Search. It's clear that our content has significant value to users, even though we're seeing a major reduction in referral traffic from search. As such, we'll continue to focus on extracting appropriate value for an intellectual property wherever it's used, while continuing to diversify our revenues beyond search traffic. Looking ahead, we believe Ziff Davis is in a strong financial position with a substantial cash balance, strong underlying free cash flow generation, and four profitable segments built on trusted category-leading brands.

Vivek Shah
Vivek Shah
CEO at Ziff Davis

We will stay disciplined and patient, opportunistically buying back our stock and pursuing acquisitions where we believe the potential returns are compelling, continuing to adapt our businesses to how our audiences find and engage with our high-quality content. We believe this approach positions us well to keep creating value for shareholders. With that, let me hand the call back to Bret.

Bret Richter
Bret Richter
CFO at Ziff Davis

Thank you, Vivek. Let's discuss our financial results. Our earnings release reflects both our GAAP and adjusted financial results for Q3 2026. My commentary will primarily relate to our Q3 2026 adjusted financial results for continuing operations and their comparisons to the relevant prior period. Our results from continuing operations in prior periods exclude the results of the Connectivity division, the sale of which was completed in Q2 2026. Please see slide four for the summary of our Q3 2026 financial results. Q3 2026 revenues were $289.3 million, as compared with revenues of $306.5 million for Q3 2025. Q3 2026 adjusted EBITDA was $82.2 million, as compared with $97.8 million for the prior year period. Our adjusted EBITDA margin for the quarter was 28.4%, compared with an adjusted EBITDA margin of 31.9% in Q3 2025.

Bret Richter
Bret Richter
CFO at Ziff Davis

As Vivek noted, these results are broadly in line with the Q3 2026 expectations we provided on our earnings call last quarter. Q3 2026 adjusted diluted EPS was $1.39, compared to $1.40 in the prior year period, reflecting in part our active share repurchase activity. Slide five reflects performance summaries for our two primary sources of revenue, advertising and performance marketing, and subscription and licensing. Q3 2026 advertising and performance marketing revenues declined 7.7% compared to the prior year period, while subscription and licensing revenues were lower by 2.7%. Other revenues were up almost 30%, increasing by $1 million year over year in Q3 2026, due in part to the contribution of Semantic Labs and our Martech group. Slides six through nine reflect the Q3 financial results of each of our four reportable segments.

Bret Richter
Bret Richter
CFO at Ziff Davis

Tech and shopping adjusted EBITDA margins declined year over year due in part to a revenue mix shift related to the shift of traffic from organic web towards social media. However, Q3 2026 margins were slightly improved as compared with Q2 2026. Gaming and entertainment adjusted EBITDA margins were lower year over year due to several factors, including revenue mix and an increase in custom event and activation programs, which generally have lower margins than traditional display and video. Health and wellness adjusted EBITDA margins were lower, primarily reflecting lower revenues, due in particular to the drop in pharma advertising at our professional businesses that Vivek noted earlier. In our Cybersecurity and Martech segment, adjusted EBITDA margins were down only slightly from the prior year period. Please refer to slide 10 as we review our balance sheet.

Bret Richter
Bret Richter
CFO at Ziff Davis

As of the end of Q3 2026, we had $1.4 billion of cash and cash equivalents and approximately $100 million of long-term investments. As of September 30, 2026, gross leverage was 2.5x trailing 12 months adjusted EBITDA, and our cash and cash equivalents exceeded our outstanding debt balances by $535 million. In the third quarter, we paid approximately $55 million of the approximately $200 million in tax obligations related to the Connectivity transaction, and we expect the vast majority of the remaining payments to be settled by the end of the first quarter of 2027. As we noted last quarter, we are exploring ways to positively impact our aggregate tax obligations, including through the use of investment tax credits. Earlier this month, we satisfied the maturity of our 1.75% coupon convertible notes, paying approximately $150 million, including accrued interest.

Bret Richter
Bret Richter
CFO at Ziff Davis

Our next significant outstanding debt maturity is in March 2028. Slide 11 shows the historic change in our share count since the end of 2022. During the third quarter of 2026, we continued to deploy capital through share buybacks, repurchasing 1.7 million shares under a 10b5-1 plan. We deployed $92 million related to share repurchases in the quarter. Since the start of 2026, we have repurchased 5.5 million shares, reducing the share count year to date by nearly 14%. The total amount currently available for repurchase under our board's current buyback authorization is approximately 6 million shares. We spent $7 million related to prior period acquisitions during the third quarter of 2026. Year to date, we have deployed a total of $16.2 million to support our M&A activities.

Bret Richter
Bret Richter
CFO at Ziff Davis

We have ample cash at present to deploy in support of our capital allocation priorities, but we remain disciplined about valuation. As Vivek noted, we continue to seek opportunities to add businesses at attractive prices, which we believe offer the potential for strong risk-weighted cash-on-cash returns. Now I'd like to offer some insight related to our current financial performance expectations for the fourth quarter of 2026. Revenues in Q4 are expected to increase sequentially by a double-digit percentage and decline low to mid-single digits year over year. This should reflect a year-over-year rate of decline that is similar to, if not better than, the decline we experienced in Q3 2026. Our adjusted EBITDA margin percentage is expected to increase sequentially, but is expected to decline as compared with the prior year period to the low to mid-30s.

Bret Richter
Bret Richter
CFO at Ziff Davis

We expect adjusted diluted EPS to be up slightly year over year, reflecting the benefit of the year-over-year reduction in shares outstanding due to our active buyback program. Turning now to our supplemental information, slide 14 provides a summary of our adjusted results from continuing operations for each quarter and the full year 2025, as well as the first three quarters of 2026. Slides 15 through 18 show reconciliation statements for the various non-GAAP measures to the nearest GAAP equivalents. Slide 19 includes a reconciliation of free cash flow from continuing and discontinued operations. Free cash flow in the third quarter of 2026 was negative $100.1 million, down from positive $108.2 million in Q3 2025. Note that the prior period figure includes the Connectivity business.

Bret Richter
Bret Richter
CFO at Ziff Davis

As we noted last quarter, our conversion rate of adjusted EBITDA to free cash flow in the second half of 2026 is being negatively impacted by estimated tax payments, professional fees, and certain other items associated with the sale of the Connectivity business. During the third quarter of 2026, these items reduced our free cash flow by approximately $90 million and by approximately $100 million on a year-to-date basis. Excluding these items, trailing 12 months transaction adjusted free cash flow, a supplemental measure which we reconcile in our earnings release and presentation, was $208.5 million. Excluding these and similar discrete items, going forward, we expect continued strong LTM free cash flow conversion of our adjusted EBITDA. As we manage through the continued transition of the digital media landscape and the impacts of AI, protecting our profitability is a priority for us.

Bret Richter
Bret Richter
CFO at Ziff Davis

As Vivek discussed earlier, we believe that we can achieve this in part through our use of AI across the organization. However, we are also employing disciplined cost management throughout our businesses, including targeted spending cuts and increased operating efficiencies. This is in part why our margins improved sequentially this quarter, and we plan to maintain this disciplined approach going forward. As we look ahead to the end of the year and into 2027, our primary financial objectives remain unchanged: maintaining strong profitability, generating robust free cash flow, targeting investments to improve our growth trajectory, and working to highlight and realize the intrinsic value of our portfolio. With that, I will now ask the operator to rejoin us to instruct you on how to queue for questions.

Operator

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

Shyam Patil
Analyst at SIG

Okay, good morning, Vivek and Bret. Thanks for taking my questions. I have a couple. The first one, Vivek, could you talk a little bit more as to why drops in your traffic aren't resulting in correspondingly large drops in revenue? Then I have a follow-up.

Vivek Shah
Vivek Shah
CEO at Ziff Davis

Yeah, no, so it's a great question. As we said, organic Google traffic was down 37% in the quarter, but then company revenues were down a little under 6%, which is a reminder that not all of the businesses in our portfolio rely on Google traffic. We have subscription businesses, we have app businesses, we have newsletter businesses, and so the portfolio continues to be fairly diversified, even with the disposition of Connectivity. That's something to remind folks, which is, Connectivity was a large and growing business within our portfolio that had very little exposure to Google Search. Even with its disposition, we still maintain a pretty diversified portfolio.

Vivek Shah
Vivek Shah
CEO at Ziff Davis

And what I'd also say is that even where Google traffic has been most important and where it's been most impacted, and tech and shopping would be at the top of that list, we have narrowed the decline three quarters in a row from -16% to under 4%. Then obviously, as we go forward, we start to lap some of those earlier quarters. I think that's evidence that the offsets that we've talked about in the past are working. Social commerce, video, licensing, the RetailMeNot app, which I talked about in the prepared remarks, direct audiences. Look, I think our position is we're not planning on a search recovery, and in fact, are operating with the view that referrals are going to continue to come down. But I think we're managing that as well as you can.

Shyam Patil
Analyst at SIG

Thank you. That's very helpful. You also mentioned something very interesting on the call. You said that, I believe you said something like, your content is mentioned almost 3 billion times in AI Overviews and AI Mode, which obviously points to the tremendous value of your content. Just wondering, how do you plan to, or how do you think you guys can extract more monetary value from that over time?

Vivek Shah
Vivek Shah
CEO at Ziff Davis

Yeah, look, so that statistic is new. It comes from Google Search Console. So this comes from Google, and it's a really useful statistic for the reasons you just said, which is the citation number and the AI impressions number does demonstrate how relevant our content is to AI answers, both to Google in terms of locating and using sources, and then obviously the user being on the other end of the query or the search. As we know, Google is seeing a significant growth in their query volume. I believe this is their print or in their last call, I think query volume is at a five-year high. So the user is on the other side of that. Our content is an incredibly important input. Monetizing that relevance is the priority.

Vivek Shah
Vivek Shah
CEO at Ziff Davis

Simply, we remain open to signing licensing deals, which would be a method in which we can extract value out of the use of our content within these systems. I do think our litigation with OpenAI will bring clarity around this area and subject, and that hopefully can move things along. At the same time, look, I think that it is the fact that we are so well-cited shows our trust, and marketers are increasingly factoring AI visibility into the media partners they pick. So that is sort of a more near-term and direct connection between the relevance. But look, we need to get value for our contributions. So I think the great news is that, as you would expect, brands like ours and content like ours do well within these systems. But yes, there is a gap between usage and monetization.

Shyam Patil
Analyst at SIG

Thank you, Vivek. Thank you, Bret.

Vivek Shah
Vivek Shah
CEO at Ziff Davis

Thank you.

Operator

Our next questioner is Ron Josey with Citi.

Jake Hallac
Jake Hallac
Analyst at Citi

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

Vivek Shah
Vivek Shah
CEO at Ziff Davis

Historically, it is very good. I think what has happened is, just to maybe expand a little bit on the dynamics, as I think you may know, GTA has been delayed multiple times. I think one of the things that has happened is other IP kind of does not want to compete with it. As it delayed, it delayed, so I think the entire gaming slate was pretty weak for the last year, more than the last year. The theory and the hope and the expectation ultimately is that with GTA being launched, and that is now a hard launch and we are talking in a couple of weeks, that more IP will come out, and as more IP comes out, there is more marketing support for that IP.

Vivek Shah
Vivek Shah
CEO at Ziff Davis

The issue we have at IGN generally is a demand issue, it is not a supply issue, meaning, yes, there are I should point this out. The single largest property from a search referral point of view is actually IGN, but it is also amongst the properties that has held up well because a lot of its search referral is around game help, which is very maps heavy, so game maps. That is a very hard thing to necessarily replicate, so we do get a lot of direct traffic. The other thing I will point out, just in terms of the IGN monetization model, is it is more heavily video, vertical video, and social video than it is even web traffic. It is ironic that even though the Google referrals hold up there, a lot of the monetization is around video content, which is not Google Search related.

Vivek Shah
Vivek Shah
CEO at Ziff Davis

This does become a demand issue. It is not a supply side challenge, which is what we have had more in tech and shopping. Look, it is always hard to predict. I would say that it is probably more into 2027. I think you are going to start seeing, and there are dates now on a bunch of IP that we can point to, and as those games launch, those will unlock marketing dollars.

Jake Hallac
Jake Hallac
Analyst at Citi

Thanks. That's helpful. Just a quick one on the AI initiatives that you highlighted. Can you just talk to us about what you're seeing in productivity and product velocity, and then how you're thinking about balancing reinvestment with letting that leverage flow through to margin into 2027? Thanks.

Vivek Shah
Vivek Shah
CEO at Ziff Davis

Yeah, no, listen, it's a great question. You take a step back, having done something like 90 acquisitions over the years at Ziff Davis, we have accumulated a fair amount of tech debt. We view the role of AI in eradicating that debt as being pretty exciting, and we're seeing it. I'll use Humble as a great example. We are days away from relaunching the Humble platform, which needed it. There are elements into the platform that interfered with conversions and customer experience that we think the new platform will address and help ultimately accelerate growth. This had been, frankly, a multi-year project that, in a matter of months, has been brought to completion, actually kind of restarted and done within a matter of months.

Vivek Shah
Vivek Shah
CEO at Ziff Davis

From my point of view, this tech debt exists in different pockets at different levels within different businesses, but our ability to address that debt, which then allows us to speed features and product development, and the speeding of features and product development should generate top-line growth, new ways in which we can engage with audiences and customers, new products. At the same time, look, I think we want some portion of that to address the margin challenges that we have. Bret talked a little bit about that in his prepared remarks, but we are very focused on margin expansion within the company. We have made a little bit of progress in Q3, but we need to make more. So, I think it's a mix. I think it's how do we leverage AI for efficiencies? I mentioned we're going to exit the year with 10% less headcount.

Vivek Shah
Vivek Shah
CEO at Ziff Davis

That's not all AI, I won't say that, but it's a good portion of what we're working on. So look, I think it's a mix. I think it's a case-by-case assessment.

Jake Hallac
Jake Hallac
Analyst at Citi

All right. Thanks a lot, Vivek.

Vivek Shah
Vivek Shah
CEO at Ziff Davis

Thank you.

Operator

We now have Rishi Jaluria with RBC.

Rishi Jaluria
Rishi Jaluria
Analyst at RBC

Oh, wonderful. Hey, Vivek. Thanks so much for taking my questions. Maybe I want to start with continuing on the SEO versus AI search. You're showing, look, I think we all see the industry-wide issues that are going on with SEO. At the same time, you're clearly getting a good amount of mix with AI Overviews-driven traffic. Maybe can you talk about, number one, how should we be thinking about that mix shift dynamic, and is there an element in which overall kind of impressions actually starts to go a little bit more favorable to you because of how much AI referrals, AI Overviews is kind of working in your favor?

Rishi Jaluria
Rishi Jaluria
Analyst at RBC

And maybe just number two, can you talk about, you talked a little bit about some of the vertical video and all that kind of stuff, but where are you seeing the most traction from off-platform monetization to help offset some of those headwinds? I've got a quick follow-up.

Vivek Shah
Vivek Shah
CEO at Ziff Davis

Yeah, no, look, so I think in previous calls, we gave a framework where we said something like roughly a third of revenues depended on web traffic, and search was roughly 40% of that traffic. We're not updating that split every quarter, and it's changed because obviously with Connectivity, the sale of Connectivity pushes it up mechanically because that wasn't really web-driven. But lower search referrals have pushed it back down, but I guess the direction is the same. It's all about developing new ad surfaces and monetization. I would say that two areas in particular have been green shoots. So social platforms in general, both for vertical video, but also for affiliate commerce. That's been a more recent unlock. So vertical video has been an important part, particularly IGN's business model that we're bringing to other of the digital media businesses and seeing some early success there.

Vivek Shah
Vivek Shah
CEO at Ziff Davis

But what is new, generally speaking, this comes more out of our tech and shopping business, is leveraging social platforms for commerce, for affiliate commerce. Historically, we were very web-dependent for affiliate commerce, and now social presents itself. Obviously, we're trying to stimulate growth within the app experience at RetailMeNot. So I think those things are quite interesting. Then the other thing to just point out is growth in kind of the non-advertising portions of our business. That's where a Lose It! becomes important, and that's where a Humble becomes important, and that's where an IPVanish becomes important. And those businesses are doing well in this market environment. So, look, I mean, I think that we've got a number of different irons in the fire, which I think is important, and we're seeing green shoots in some of them.

Vivek Shah
Vivek Shah
CEO at Ziff Davis

So this is a little bit of a balancing act as we continue to see. Look, I do continue to believe search referrals will go down. That is what we're seeing. We obviously see, I gave in my prepared remarks, an acceleration in that decline. So we're planning around that. I think as we manage these other pieces, both the diversification in business models, but also the diversification within monetization and audience on the media side, I think we get through this reasonably well.

Rishi Jaluria
Rishi Jaluria
Analyst at RBC

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

Vivek Shah
Vivek Shah
CEO at Ziff Davis

Yeah, no, look, we are very excited. So the main subscription businesses, Lose It! By the way, you will see something in the quarterly statistics around subscribers, just to be clear. Lose It! used to sell what they called lifetime subscriptions. It was one price, a higher price point that was meant to exceed LTV. We have suspended that practice, and so we are no longer selling lifetime subscriptions in any meaningful way, if at all. I think, from our point of view, building a renewable base is important, and extending LTV by bringing in features like AI logging and The Lab. And just to explain that, so logging is one of the main issues with all of these types of apps. Creating an ability to take a picture and log instead of typing in, we think is a big improvement in the user experience and reduces friction.

Vivek Shah
Vivek Shah
CEO at Ziff Davis

And when you reduce friction and you make it easy for people to log, they are going to continue to log. So as we are seeing improved logging, we are seeing improved retention, at which point LTVs go up. So that is one. Two, what The Lab is designed to do is essentially be an AI-driven nutritionist in your pocket, where now that you have done logging, we are able to use our database, we are able to understand how other customers are experiencing different consumption, able to bring in other sort of health metric data into the app from maybe other third parties to start to give you more of a nutritionist-type experience where you are getting insight and you are getting advice. Those are all examples of, again, using AI technology to improve the experience, improving the experience to drive LTV. When we drive LTV, it opens up our marketing allowable so we can start to spend.

Vivek Shah
Vivek Shah
CEO at Ziff Davis

We have stopped spending into Lose It! subscriptions, almost entirely relying on organic. You need to kind of, I think, to drive growth, need to invest in marketing. So that is kind of how that all works on the consumer side. And look, I do think we are excited for what that is, and a lot of the challenges within that segment are on the professional side. They really are not on the consumer side. So I mentioned Lose It!, but there is also on the pharma commercialization side, on the consumer side, we are seeing real positive signs. And the Harvard Health deal, which I mentioned, is a big deal for us. And so we now represent Cleveland Clinic, Mayo Clinic, Harvard, University of Pittsburgh Medical Center. These are titans within the healthcare ecosystem, and we are their exclusive advertising monetization partners, and so we look to expand that too.

Rishi Jaluria
Rishi Jaluria
Analyst at RBC

Very helpful. Thank you.

Vivek Shah
Vivek Shah
CEO at Ziff Davis

Thank you.

Operator

Our next questioner is Robert Coolbrith with Evercore.

Robert Coolbrith
Robert Coolbrith
Analyst at Evercore

Great. Thanks very much. I think others in the category have established that non-session-based revenue could potentially get up to around half of total revenue, with similar business mix. I just wonder if you could maybe talk to that, where you are on that curve today in terms of efforts to diversify the revenue streams, maybe get away from session-based revenue, and where you think that could go. I have a couple follow-ups. Thank you.

Vivek Shah
Vivek Shah
CEO at Ziff Davis

Well, Rob. I mean, it's sort of what I was talking about with Rishi Jaluria, which is, we've said in the past, like a third of the revenue depends on web traffic. We're a little bit different, I think, than other players in that we have a lot of non-media, non-traffic businesses. I mentioned a bunch of those. Look, I think that that's a little bit of a difference in what we're doing. I think what I think the majority of even our web businesses are today not traffic dependent. I think we've been diversified, and we've been that way for a while. Again, I think it's the way I would look at it is, it's social, so that's Instagram, Facebook, Snap, TikTok. It's YouTube, which is an incredibly important platform. It's inbox, so by that I mean email.

Vivek Shah
Vivek Shah
CEO at Ziff Davis

There may be notifications and messaging elements as well. There's app, so meaning mobile app. There's browser extension even, which we have within our shopping business. These are like when we sort of talk about non-web, or what you refer to as non-sessions, I think those are the panoply of things in which all of our brands are at various levels of success and adoption.

Robert Coolbrith
Robert Coolbrith
Analyst at Evercore

Got it. The mitigation playbook, which you're rolling out, sounds like quite successfully. Are there areas where that hasn't been fully deployed, where there could be an opportunity to do more, or areas maybe where, frankly, because of demographics or other factors, you just haven't felt the need yet to deploy that mitigation playbook?

Vivek Shah
Vivek Shah
CEO at Ziff Davis

No, absolutely. I mean, I would tell you that if you go across the portfolio, in each of the segments, I feel like each segment is strongest in one of those, and the real opportunity here is to make all segments strong in all of those. We have a lot of effort around knowledge sharing, playbook sharing, and making sure, and even moving people around to bring some velocity to where we see performance gaps. We do see performance gaps, to be perfectly honest. To me, that's the opportunity, is to close those performance gaps so that the businesses that have figured out, for instance, how to leverage social platforms for commerce, that's really only happening in one business. We have some businesses that or in one segment. We have some businesses that are doing some smart, interesting custom content work.

Vivek Shah
Vivek Shah
CEO at Ziff Davis

But again, not happening in other places. So look, the good news is that the opportunities exist. I'm not known for my patience, and so, what we need to do is move things along, and we are doing concrete things within the company to do that.

Bret Richter
Bret Richter
CFO at Ziff Davis

And maybe I'll just add, I mean, the mitigation playbook goes beyond the revenue diversification within advertising. I mean, we were a business prior to the Connectivity sale that was approaching 50% subscription and licensing revenue. And subscription and licensing revenue is still material for the overall enterprise. We made the determination to execute on the Connectivity transaction as a play in the mitigation playbook, overall mitigation of the value of the company in the public markets, and to recapture a gap between trading value and intrinsic value. Our capital allocation strategy and investing our stock is part of the mitigation playbook. I think we have a lot of tools, and of course, Vivek, the other aspect in the mitigation playbook is managing the bottom half of the income statement and our expenses. So, I mean, I think we have a lot of actions that are underway.

Bret Richter
Bret Richter
CFO at Ziff Davis

We're obviously fighting some of these broad pressures in the market for traditional web and traditional traffic, but we're running a lot of different plays.

Robert Coolbrith
Robert Coolbrith
Analyst at Evercore

One last one for you. Just wanted to ask on any impressions you have around iOS 26, some of the changes made there in the Safari browser. Do you view those as a potential opportunity? Do advertisers need to spend more time, money with endemic websites directly, versus using programmatic audience extension, given some of the changes we're seeing in the market? Thank you.

Vivek Shah
Vivek Shah
CEO at Ziff Davis

Yeah, I mean, even without the iOS change, I think generally we're seeing more of an interest in aligning with trusted brands, in contextual content. This is where I think a lot of marketers want the strong AI visibility players to align with, because there's a different issue, which is how much AI slop is in the ecosystem that is getting essentially monetized with programmatic ads. So even when you get away from maybe some of the difficulties that the iOS change will create around behavioral advertising and targeting, I also think there's just an environmental question that a lot of marketers have, which is, "Hey, where are my ads running and what is it against?" And that's always existed, I guess, in digital advertising, but I think becomes more acute.

Vivek Shah
Vivek Shah
CEO at Ziff Davis

Generally speaking, yes, I do think that aligning with trusted brands and creating programs that are well beyond spots and dots on web pages, which is a lot of what we do within CNET as the market leader in tech, and IGN as a market leader in gaming and Everyday Health as a market leader in health and in pharma. I mean, that's what we attempt to do, and I do think that can only help.

Robert Coolbrith
Robert Coolbrith
Analyst at Evercore

Got it. Thank you very much.

Vivek Shah
Vivek Shah
CEO at Ziff Davis

Thank you.

Operator

We now hear from Brian Nowak with JPMorgan.

Analyst at JPMorgan

Hey, guys. This is [Jason] for Brian. Appreciate you taking the question. Just wondering, I guess you kind of touched on it, but as you evaluate kind of the potential value-creating opportunities across the portfolio, what factors are kind of most important to continue investing in that business, pursuing a transaction, or maybe taking a different approach? Thanks.

Vivek Shah
Vivek Shah
CEO at Ziff Davis

Yeah, thanks for asking the question. Look, the Connectivity sale, I think, demonstrated that we are going to act when the market undervalues a business, and I think the market is undervaluing all of the businesses collectively, and then the businesses individually. We will continue to evaluate opportunities, and really, it is kind of simple. Every decision is measured against sort of the impact on our share price, right? This is value per share, and we saw that the Connectivity transaction had a meaningful impact on ZD's stock price. Look, we are open to dialogue. We are going to do things as long as it creates value, but what we are not going to do is do it to get cash. We do not need cash right now, but we do need share value growth.

Vivek Shah
Vivek Shah
CEO at Ziff Davis

To me, I am, and we are, acutely focused on the per-share price of ZD, and if we believe a transaction has a positive impact on that, we will entertain that transaction.

Analyst at JPMorgan

That's helpful. Thank you.

Operator

We now have Stephen Ju with UBS.

Stephen Ju
Stephen Ju
Analyst at UBS

Okay, thanks guys. Hi, Vivek. Hi, Bret. So, I was thinking.

Vivek Shah
Vivek Shah
CEO at Ziff Davis

Welcome

Stephen Ju
Stephen Ju
Analyst at UBS

Yeah, thank you. I was wondering if you can help us think through, because it feels like some of the structural pressures on the business should be coming off, because as painful as some of the declines from Google Search traffic has been in the past, it sounds like that has largely de-indexed as a contributor. So, even if it continues to decline, it's not going to affect you as meaningfully going into the future. So that's, I guess, one vector to think about. And then, I guess among sort of the advertising verticals that you have, can you talk about some of the pressures that you might have seen in the background and where that ends up six months, 12 months from now?

Stephen Ju
Stephen Ju
Analyst at UBS

Because, I mean, bring up the gaming and entertainment segment, I think nobody wants to be there ahead of GTA, but it seems like the sector itself had probably a lot of rationalization in terms of content development over the last several years, so maybe there's less marketers there. Can you talk about, on a vertical by vertical basis, where you are in terms of that vertical-specific rationalization, and then where we are on the path to start seeing the total dollars in advertising start to recover there? Thanks.

Vivek Shah
Vivek Shah
CEO at Ziff Davis

Yeah, no, it's great, and I'm glad you asked to do it vertical by vertical, because often that's the most productive way to start to think about our company. I'll start with tech and shopping. As I said, the loss is narrowing, so your calculation is right that the challenges should start to mitigate and the opportunities to start to add up and get to a positive growth perspective. I'm not going to be in the prediction business right now or quarter to quarter in our commentary, but again, the direction there, I think, looks pretty good. On the gaming and entertainment side, as you just rightly pointed out, it's a little bit of a sector issue, and how much more content rationalization and how is the underlying health of the video game industry going to play out is a big factor on the gaming and entertainment piece.

Vivek Shah
Vivek Shah
CEO at Ziff Davis

If you're on the side of, "Hey, things are going to start to improve going into 2027," that'll be good. If you say, "Hey, there's another year or another few quarters of rationalization," look, we're going to still be muddling as we're doing right now. I think on the health and wellness side, for us, it's actually, there, we've got a little bit of a structural issue on the MedPage side, where clearly, we're losing share, and that's not because physician engagement is low. Physician engagement with MedPage remains really strong, and we're doing things to expand into new distribution channels, things like getting integrated in EHRs at point of care, but there, we're seeing some competitive tension. Having said all of that, the consumer pharma side of it looks very good. So I think it's an interplay between those two things, right?

Vivek Shah
Vivek Shah
CEO at Ziff Davis

Can consumer pharma outrun what's happening on the direct provider side? And obviously lose it in some of the other non-pharma businesses. Look, I think that the way I would characterize it all, without making a prediction as to when the inflection point is directionally everything seems in the right direction, but nothing's up, right, in aggregate. And we obviously understand that, and we're doing everything we can to point the company back to growth.

Stephen Ju
Stephen Ju
Analyst at UBS

Thank you.

Vivek Shah
Vivek Shah
CEO at Ziff Davis

Thank you.

Operator

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

Bret Richter
Bret Richter
CFO at Ziff Davis

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

Operator

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

Executives
Analysts
    • Shyam Patil
      Analyst at SIG
    • Jake Hallac
      Analyst at Citi
    • Rishi Jaluria
      Analyst at RBC
    • Robert Coolbrith
      Analyst at Evercore
    • Analyst at JPMorgan
    • Stephen Ju
      Analyst at UBS
Powered by Quartr