EX-99.1 2 pressreleaseq32021.htm EX-99.1
Ziff Davis Reports Record Third Quarter 2021 Results & Reaffirms Full Year 2021 Guidance
NEW YORK, NY -- Ziff Davis, Inc. (formerly known as J2 Global, Inc.) (NASDAQ: ZD) today reported financial results for the third quarter ended September 30, 2021. On October 7, 2021, the Consensus business was spun-off as a separate public company (NASDAQ: CCSI). These third quarter results include Consensus, except where otherwise noted.
“There’s great enthusiasm and excitement at Ziff Davis as we embark on our new chapter,” said Vivek Shah, CEO of Ziff Davis. “Our portfolio of digital media and internet brands are very well-positioned to thrive in some of the highest-value verticals in the marketplace.”
THIRD QUARTER 2021 RESULTS
Q3 2021 quarterly revenues increased 24.5% to a Q3 record of $444.3 million as compared to $357.0 million for Q3 2020. On a pro-forma(6) basis, Q3 2021 quarterly revenues increased 27.7% to $434.7 million as compared to $340.3 million for Q3 2020.
Net cash provided by operating activities increased to $140.2 million as compared to $114.4 million for Q3 2020. Q3 2021 free cash flow(2) increased 17.9% to $110.5 million as compared to $93.7 million for Q3 2020.
GAAP earnings per diluted share(3) decreased to $0.88 in Q3 2021 compared to $1.31 for Q3 2020. Earnings decrease was primarily due a loss on the sale of the B2B Backup business unit of $19.2 million, net of tax.
Adjusted non-GAAP earnings per diluted share(3)(4) for the quarter increased 15.8% to $2.34 as compared to $2.02 for Q3 2020. On a pro-forma(6) basis, Adjusted non-GAAP earnings per diluted share(3)(4) for the quarter increased 16.4% to $2.27 as compared to $1.95 for Q3 2020.
GAAP net income decreased to $42.6 million as compared to $60.9 million for Q3 2020 primarily due to a loss on the sale of the B2B back-up business unit of $19.2 million, net of tax.
Adjusted non-GAAP net income increased by 17.4% to $110.2 million as compared to $93.9 million for Q3 2020. On a pro-forma(6) basis, Adjusted non-GAAP net income increased by 18.7% to $107.1 million as compared to $90.2 million for Q3 2020.
Adjusted EBITDA(5) for the quarter increased 13.6% to $175.1 million compared to $154.1 million for Q3 2020. On a pro-forma(6) basis, Adjusted EBITDA(5) for the quarter increased 16.0% to $170.8 million compared to $147.2 million for Q3 2020.
The company ended the quarter with approximately $657.2 million in cash, cash equivalents, and investments after deploying approximately $23.4 million during the quarter for current and prior year acquisitions.
Key unaudited financial results for Q3 2021 versus Q3 2020 are set forth in the following table (in millions, except per share amounts). Reconciliations of Adjusted non-GAAP earnings per diluted share, Adjusted EBITDA and free cash flow to their nearest comparable GAAP financial measures are attached to this Press Release.

The following table reflects Actual and Pro-Forma Results for the third quarter of 2021 (in millions). Pro-Forma Results below exclude Voice assets in Australia, New Zealand, and the United Kingdom that were sold in 2020 and 2021, respectively, and the Company’s B2B Backup business that was sold during the third quarter of 2021.

|  |  |  |  | Pro-Forma Results(6)
| Q3 2021 | Q3 2020 |  | % Change | Q3 2021 | Q3 2020 |  | % Change
Revenues |  |  |  |  |  |  |  |
Cloud Services | $182.1 | $170.2 |  | 7.0% | $172.5 | $153.6 |  | 12.3%
Digital Media | $262.2 | $186.7 |  | 40.4% | $262.2 | $186.7 |  | 40.4%
Total Revenue: (1) | $444.3 | $357.0 |  | 24.5% | $434.7 | $340.3 |  | 27.7%
Operating Income | $96.1 | $77.4 |  | 24.2% |  |  |  |
Net Cash Provided by Operating Activities | $140.2 | $114.4 |  | 22.6% |  |  |  |
Free Cash Flow (2) | $110.5 | $93.7 |  | 17.9% |  |  |  |
GAAP Earnings per Diluted Share (3) | $0.88 | $1.31 |  | (32.8)% |  |  |  |
Adjusted Non-GAAP Earnings per Diluted Share (3) (4) | $2.34 | $2.02 |  | 15.8% | $2.27 | $1.95 |  | 16.4%
GAAP Net Income | $42.6 | $60.9 |  | (30.0)% |  |  |  |
Adjusted Non-GAAP Net Income | $110.2 | $93.9 |  | 17.4% | $107.1 | $90.2 |  | 18.7%
Adjusted EBITDA (5) | $175.1 | $154.1 |  | 13.6% | $170.8 | $147.2 |  | 16.0%
Adjusted EBITDA Margin (5) | 39.4% | 43.2% |  | (3.8)% | 39.3% | 43.3% |  | (4.0)%

The following table reflects Actual and Pro-Forma Results for the nine months ended September 30, 2021 (in millions). Pro-Forma Results below exclude Voice assets in Australia, New Zealand, and the United Kingdom that were sold in 2020 and 2021, respectively, and the Company’s B2B Backup business that was sold during the third quarter of 2021.

| YTD | YTD |  |  | YTD Pro-Forma Results(6)
| Q3 2021 | Q3 2020 |  | % Change | Q3 2021 | Q3 2020 |  | % Change
Revenues |  |  |  |  |  |  |  |
Cloud Services | $528.8 | $507.1 |  | 4.3% | $495.3 | $452.8 |  | 9.4%
Digital Media | $742.7 | $513.3 |  | 44.7% | $742.7 | $513.3 |  | 44.7%
Total Revenue: (1) | $1,271.5 | $1,020.4 |  | 24.6% | $1,238.0 | $966.1 |  | 28.1%
Operating Income | $236.3 | $205.7 |  | 14.9% |  |  |  |
Net Cash Provided by Operating Activities | $430.3 | $356.0 |  | 20.9% |  |  |  |
Free Cash Flow (2) | $343.4 | $304.8 |  | 12.7% |  |  |  |
GAAP Earnings per Diluted Share (3) | $2.86 | $1.93 |  | 48.2% |  |  |  |
Adjusted Non-GAAP Earnings per Diluted Share (3) (4) | $6.92 | $5.13 |  | 34.9% | $6.68 | $4.87 |  | 37.2%
GAAP Net Income | $136.2 | $92.6 |  | 47.1% |  |  |  |
Adjusted Non-GAAP Net Income | $315.2 | $242.0 |  | 30.2% | $304.4 | $229.8 |  | 32.5%
Adjusted EBITDA (5) | $503.4 | $403.8 |  | 24.7% | $489.5 | $383.0 |  | 27.8%
Adjusted EBITDA Margin (5) | 39.6% | 39.6% |  | —% | 39.5% | 39.6% |  | (0.1)%

ZIFF DAVIS RESULTS AND BUSINESS OUTLOOK
The following table reflects Ziff Davis revenue, Adjusted EBITDA and Adjusted EBITDA margin, which excludes Consensus and the B2B Backup business and Voice assets (in millions).

| QTD | YTD
| Q3 2021 | Q3 2020 |  | % Change | Q3 2021 | Q3 2020 |  | % Change
Revenue | $345.6 | $256.3 |  | 34.8% | $974.6 | $720.5 |  | 35.3%
Adjusted EBITDA | $117.2 | $95.1 |  | 23.2% | $329.6 | $233.5 |  | 41.2%
Adjusted EBITDA Margin | 33.9% | 37.1% |  | (3.2)% | 33.8% | 32.4% |  | 1.4%

The Company reaffirms its guidance that was presented at its investor day on September 9, 2021 and provides Q4 2021 guidance below which reflects its pro forma position following the separation of Consensus (in millions, except per share amounts):

|  |  |  |  |  |  | Revenue | Adjusted EBITDA | Adjusted EPS |  |  |  |
FY 2021 Range of Estimates (A) |  |  |  |  | $1,375 - $1,389 | $484 - $492 |  |  |  |  |
Q4 2021 Range of Estimates (A) |  |  |  |  |  |  | $400 - $414 | $154 - $162 | $2.00 - $2.14 |  |  |  |

(A) Balances are in millions and represent pro forma 2021 results as if the spin-off of Consensus and the sales of the B2B Backup business and UK Voice assets had occurred on January 1, 2021.
The Company has not reconciled the non-GAAP Business Outlook for 2021 Adjusted EBITDA, Q4 2021 Adjusted EBITDA or Q4 2021 Adjusted non-GAAP EPS to the most directly comparable GAAP measure because this cannot be done without unreasonable effort due to the variability with respect to forecasted revenues and costs primarily related to acquisitions and taxation, which are potential adjustments to future earnings. We expect the variability of forecasted revenues and costs to have a potentially unpredictable and significant impact on our future GAAP financial results.
Notes:

(1) |  | The revenues associated with each of the businesses may not foot precisely since each is presented independently.
(2) |  | Free cash flow is defined as net cash provided by operating activities, less purchases of property and equipment, plus contingent consideration. Free cash flow amounts are not meant as a substitute for GAAP, but are solely for informational purposes.
(3) |  | The estimated GAAP effective tax rates were approximately 23.0% for Q3 2021 and 28.3% for Q3 2020. The estimated Adjusted non-GAAP effective tax rates were approximately 16.6% for Q3 2021 and 21.8% for Q3 2020.
(4) |  | Adjusted non-GAAP earnings per diluted share excludes certain non-GAAP items, as defined in the Reconciliation of GAAP to Adjusted non-GAAP Financial Measures, for the three months ended September 30, 2021 and 2020 totaled $1.46 and $0.71 per diluted share, respectively.
(5) |  | Adjusted EBITDA is defined as earnings before interest; gain on sale of businesses; goodwill impairment of business; loss on investments, net; other income (expense), net; income tax expense; income (loss) from equity method investment, net; depreciation and amortization; and the items used to reconcile EPS to Adjusted non-GAAP EPS, as defined in the Reconciliation of GAAP to Adjusted non-GAAP Financial Measures. Adjusted EBITDA amounts are not meant as a substitute for GAAP, but are solely for informational purposes.
(6) |  | Pro-forma figures are provided taking into consideration the sale of certain Voice assets in Australia, New Zealand, and the United Kingdom as well as the sale of the Company’s B2B Backup business as if they had occurred January 1, 2020.

About Ziff Davis (formerly J2 Global)
Ziff Davis, Inc. (NASDAQ: ZD) is a vertically focused digital media and internet company whose portfolio includes leading brands in technology, entertainment, shopping, health, cybersecurity, and martech. For more information, visit www.ziffdavis.com.
Contact:
Rebecca Wright
Ziff Davis, Inc.
800-577-1790
investor@ziffdavis.com
“Safe Harbor” Statement Under the Private Securities Litigation Reform Act of 1995: Certain statements in this Press Release are “forward-looking statements” within the meaning of The Private Securities Litigation Reform Act of 1995, including those contained in Vivek Shah’s quote and the “Business Outlook” portion regarding the Company’s expected fiscal 2021 financial performance. These forward-looking statements are based on management’s current expectations or beliefs and are subject to numerous assumptions, risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. These factors and uncertainties include, among other items: the Company’s ability to grow non-fax revenues, profitability and cash flows; the Company’s ability to identify, close and successfully transition acquisitions; subscriber growth and retention; variability of the Company’s revenue based on changing conditions in particular industries and the economy generally; protection of the Company’s proprietary technology or infringement by the Company of intellectual property of others; the risk of adverse changes in the U.S. or international regulatory environments, including but not limited to the imposition or increase of taxes or regulatory-related fees; and the numerous other factors set forth in Ziff Davis’s (formerly J2 Global, Inc.) filings with the Securities and Exchange Commission (“SEC”). For a more detailed description of the risk factors and uncertainties affecting Ziff Davis, refer to the 2020 Annual Report on Form 10-K filed by Ziff Davis on March 1, 2021, and the other reports filed by Ziff Davis from time-to-time with the SEC, each of which is available at www.sec.gov. The forward-looking statements provided in this press release, including those contained in Vivek Shah’s quote and in the “Business Outlook” portion regarding the Company’s expected fiscal 2021 financial performance are based on limited information available to the Company at this time, which is subject to change. Although management’s expectations may change after the date of this press release, the Company undertakes no obligation to revise or update these statements.
About Non-GAAP Financial Measures
To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we use the following Adjusted non-GAAP financial measures: Adjusted non-GAAP net income, Adjusted non-GAAP earnings per diluted share, Adjusted EBITDA and free cash flow. The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.
We use these Adjusted non-GAAP financial measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons. Our management believes that these Adjusted non-GAAP financial measures provide meaningful supplemental information regarding our performance and liquidity by excluding certain expenses and expenditures that may not be indicative of our recurring core business operating results. We believe that both management and investors benefit from referring to these Adjusted non-GAAP financial measures in assessing our performance and when planning, forecasting, and analyzing future periods. These Adjusted non-GAAP financial measures also facilitate management’s internal comparisons to our historical performance and liquidity. We believe these Adjusted non-GAAP financial measures are useful to investors both because (1) they allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making and (2) they are used by our institutional investors and the analyst community to help them analyze the health of our business.
For more information on these Adjusted non-GAAP financial measures, please see the appropriate GAAP to Adjusted non-GAAP reconciliation tables included within the attached Exhibit to this release.

ZIFF DAVIS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED, IN THOUSANDS)

| September 30, 2021 |  | December 31, 2020
ASSETS |  |  |
Cash and cash equivalents | $ | 546,467 |  |  | $ | 242,652 |
Short-term investments | — |  |  | 663 |
Accounts receivable, net of allowances of $14,417 and $16,018, respectively | 268,349 |  |  | 325,619 |
Prepaid expenses and other current assets | 73,457 |  |  | 53,909 |
Total current assets | 888,273 |  |  | 622,843 |
Long-term investments | 110,718 |  |  | 97,495 |
Property and equipment, net | 183,179 |  |  | 156,577 |
Operating lease right-of-use assets | 88,331 |  |  | 105,845 |
Goodwill | 1,861,332 |  |  | 1,867,430 |
Other purchased intangibles, net | 641,162 |  |  | 741,569 |
Deferred income taxes, noncurrent | 37,761 |  |  | 56,545 |
Other assets | 19,901 |  |  | 17,027 |
TOTAL ASSETS | $ | 3,830,657 |  |  | $ | 3,665,331 |
LIABILITIES AND STOCKHOLDERS’ EQUITY |  |  |
Accounts payable and accrued expenses | $ | 228,977 |  |  | $ | 230,651 |
Income taxes payable, current | 1,793 |  |  | 31,753 |
Deferred revenue, current | 197,901 |  |  | 190,644 |
Operating lease liabilities, current | 31,636 |  |  | 32,211 |
Current portion of long-term debt | 568,054 |  |  | 396,801 |
Other current liabilities | 36 |  |  | 497 |
Total current liabilities | 1,028,397 |  |  | 882,557 |
Long-term debt | 1,110,699 |  |  | 1,182,220 |
Deferred revenue, noncurrent | 15,189 |  |  | 14,440 |
Operating lease liabilities, noncurrent | 84,519 |  |  | 99,177 |
Income taxes payable, noncurrent | 11,675 |  |  | 11,675 |
Liability for uncertain tax positions | 54,178 |  |  | 57,081 |
Deferred income taxes, noncurrent | 112,482 |  |  | 162,700 |
Other long-term liabilities | 44,259 |  |  | 44,463 |
TOTAL LIABILITIES | 2,461,398 |  |  | 2,454,313 |
Commitments and contingencies | — |  |  | — |
Preferred stock | — |  |  | — |
Common stock | 478 |  |  | 443 |
Additional paid-in capital | 508,493 |  |  | 456,274 |
Retained earnings | 931,477 |  |  | 809,107 |
Accumulated other comprehensive loss | (71,189) |  |  | (54,806) |
TOTAL STOCKHOLDERS’ EQUITY | 1,369,259 |  |  | 1,211,018 |
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 3,830,657 |  |  | $ | 3,665,331 |

ZIFF DAVIS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED, IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)

| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2021 |  | 2020 |  | 2021 |  | 2020
Total revenues | $ | 444,252 |  |  | $ | 356,976 |  |  | $ | 1,271,480 |  |  | $ | 1,020,353 |
Cost of revenues (1) | 64,302 |  |  | 55,822 |  |  | 185,462 |  |  | 171,755 |
Gross profit | 379,950 |  |  | 301,154 |  |  | 1,086,018 |  |  | 848,598 |
Operating expenses: |  |  |  |  |  |  |
Sales and marketing (1) | 139,693 |  |  | 95,074 |  |  | 394,981 |  |  | 287,317 |
Research, development and engineering (1) | 21,639 |  |  | 14,261 |  |  | 62,634 |  |  | 43,273 |
General and administrative (1) | 122,477 |  |  | 114,381 |  |  | 359,498 |  |  | 312,283 |
Goodwill impairment on business | — |  |  | — |  |  | 32,629 |  |  | — |
Total operating expenses | 283,809 |  |  | 223,716 |  |  | 849,742 |  |  | 642,873 |
Income from operations | 96,141 |  |  | 77,438 |  |  | 236,276 |  |  | 205,725 |
Interest expense, net | (19,862) |  |  | (22,712) |  |  | (62,832) |  |  | (65,879) |
(Loss) gain on sale of businesses | (24,600) |  |  | 17,122 |  |  | (21,798) |  |  | 17,122 |
Loss on investments, net | — |  |  | (156) |  |  | (16,677) |  |  | (20,991) |
Other income, net | 1,660 |  |  | 14,230 |  |  | 1,367 |  |  | 16,413 |
Income before income taxes and (loss) income from equity method investment, net | 53,339 |  |  | 85,922 |  |  | 136,336 |  |  | 152,390 |
Income tax expense | 8,847 |  |  | 24,330 |  |  | 16,723 |  |  | 49,011 |
(Loss) income from equity method investment, net | (1,923) |  |  | (709) |  |  | 16,596 |  |  | (10,799) |
Net income | $ | 42,569 |  |  | $ | 60,883 |  |  | $ | 136,209 |  |  | $ | 92,580 |
Basic net income per common share: |  |  |  |  |  |  |
Net income attributable to common shareholders | $ | 0.91 |  |  | $ | 1.31 |  |  | $ | 3.01 |  |  | $ | 1.96 |
Diluted net income per common share: |  |  |  |  |  |  |
Net income attributable to common shareholders | $ | 0.88 |  |  | $ | 1.31 |  |  | $ | 2.86 |  |  | $ | 1.93 |
Basic weighted average shares outstanding | 46,738,073 |  |  | 46,279,515 |  |  | 45,258,819 |  |  | 46,914,750 |
Diluted weighted average shares outstanding | 48,582,585 |  |  | 46,309,072 |  |  | 47,565,062 |  |  | 47,620,308 |
(1) Includes share-based compensation expense as follows: |  |  |  |  |  |  |
Cost of revenues | $ | 108 |  |  | $ | 136 |  |  | $ | 357 |  |  | $ | 413 |
Sales and marketing | 427 |  |  | 321 |  |  | 1,160 |  |  | 1,135 |
Research, development and engineering | 613 |  |  | 425 |  |  | 1,690 |  |  | 1,340 |
General and administrative | 5,607 |  |  | 4,918 |  |  | 15,912 |  |  | 15,755 |
Total | $ | 6,755 |  |  | $ | 5,800 |  |  | $ | 19,119 |  |  | $ | 18,643 |

ZIFF DAVIS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED, IN THOUSANDS)

| Nine Months Ended September 30,
Cash flows from operating activities: | 2021 |  | 2020
Net income | $ | 136,209 |  |  | $ | 92,580 |
Adjustments to reconcile net income to net cash provided by operating activities: |  |  |
Depreciation and amortization | 196,443 |  |  | 163,680 |
Amortization of financing costs and discounts | 21,295 |  |  | 21,393 |
Non-cash operating lease costs | 8,366 |  |  | 15,686 |
Share-based compensation | 19,119 |  |  | 18,643 |
Provision for doubtful accounts | 7,934 |  |  | 9,508 |
Deferred income taxes, net | 2,537 |  |  | 7,815 |
(Loss) gain on sale of businesses | 21,798 |  |  | (17,122) |
Lease asset impairments | 9,410 |  |  | 9,786 |
Goodwill impairment on business | 32,629 |  |  | — |
Changes in fair value of contingent consideration | (567) |  |  | (243) |
Foreign currency remeasurement gain | 181 |  |  | (15,919) |
(Income) loss from equity method investments | (16,596) |  |  | 10,799 |
Loss on equity and debt investments | 16,677 |  |  | 20,826 |
Decrease (increase) in: |  |  |
Accounts receivable | 49,888 |  |  | 57,560 |
Prepaid expenses and other current assets | (10,610) |  |  | (3,279) |
Other assets | (2,378) |  |  | 543 |
Increase (decrease) in: |  |  |
Accounts payable and accrued expenses | (1,409) |  |  | (26,430) |
Income taxes payable | (37,863) |  |  | (496) |
Deferred revenue | 4,774 |  |  | (10,494) |
Operating lease liabilities | (19,346) |  |  | (12,857) |
Liability for uncertain tax positions | (2,903) |  |  | 7,746 |
Other long-term liabilities | (5,336) |  |  | 6,284 |
Net cash provided by operating activities | 430,252 |  |  | 356,009 |
Cash flows from investing activities: |  |  |
Proceeds on sale of available-for-sale investments | 663 |  |  | — |
Distribution from equity method investment | 15,327 |  |  | — |
Purchases of equity method investment | (22,249) |  |  | (29,979) |
Purchases of equity investments | (999) |  |  | (843) |
Purchases of property and equipment | (87,495) |  |  | (71,266) |
Acquisition of businesses, net of cash received | (112,444) |  |  | (27,156) |
Proceeds from sale of businesses, net of cash divested | 48,876 |  |  | 24,353 |
Proceeds from sale of assets | — |  |  | 507 |
Purchases of intangible assets | (1,255) |  |  | (2,902) |
Net cash used in investing activities | (159,576) |  |  | (107,286) |
Cash flows from financing activities: |  |  |
Payment of debt | (402,414) |  |  | — |
Payment of note payable | — |  |  | (400) |
Proceeds from bridge loan | 485,000 |  |  | — |
Repurchase of common stock | (29,855) |  |  | (238,905) |
Issuance of common stock under employee stock purchase plan | 4,232 |  |  | 3,303 |
Exercise of stock options | 2,880 |  |  | 952 |

Deferred payments for acquisitions | (13,387) |  |  | (20,427) |
Other | (6,619) |  |  | (1,377) |
Net cash provided by (used in) financing activities | 39,837 |  |  | (256,854) |
Effect of exchange rate changes on cash and cash equivalents | (6,698) |  |  | 446 |
Net change in cash and cash equivalents | 303,815 |  |  | (7,685) |
Cash and cash equivalents at beginning of period | 242,652 |  |  | 575,615 |
Cash and cash equivalents at end of period | $ | 546,467 |  |  | $ | 567,930 |

ZIFF DAVIS, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP FINANCIAL MEASURES
THREE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020
(UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Adjusted non-GAAP net income is GAAP net income with the following modifications: (1) elimination of share-based compensation; (2) elimination of certain acquisition related integration costs; (3) elimination of interest costs in excess of the coupon rate associated with outstanding debt; (4) elimination of amortization of patents and intangible assets that we acquired; (5) elimination of change in value on investment; (6) elimination of additional tax expense/benefit from prior years; (7) elimination of gain/loss on sale of assets; (8) elimination of intra-entity transfers; (9) elimination of lease asset impairments and other charges; (10) elimination of disposal related costs; (11) elimination of goodwill impairment on business and (12) elimination of dilutive effect of the convertible debt.

| Three Months Ended September 30,
| 2021 | Per Diluted Share * |  | 2020 | Per Diluted Share *
Net income | $ | 42,569 |  | $ | 0.88 |  |  | $ | 60,883 |  | $ | 1.31 |
Plus: |  |  |  |  |
Share based compensation (1) | 4,043 |  | 0.09 |  |  | 4,552 |  | 0.10 |
Acquisition related integration costs (2) | 2,908 |  | 0.06 |  |  | 1,177 |  | 0.03 |
Interest costs (3) | 2,774 |  | 0.06 |  |  | 4,784 |  | 0.10 |
Amortization (4) | 35,327 |  | 0.75 |  |  | 32,314 |  | 0.70 |
Investments (5) | 1,947 |  | 0.04 |  |  | 687 |  | 0.01 |
Tax expense from prior years (6) | — |  | — |  |  | 2,551 |  | 0.06 |
Sale of assets (7) | 19,249 |  | 0.41 |  |  | (9,936) |  | (0.21) |
Intra-entity transfers (8) | — |  | — |  |  | (13,447) |  | (0.29) |
Lease asset impairments and other charges (9) | 1,271 |  | 0.03 |  |  | 7,566 |  | 0.16 |
Leasehold improvement impairments (10) | — |  | — |  |  | 2,777 |  | 0.06 |
Disposal related costs (10) | 133 |  | — |  |  | — |  | — |
Convertible debt dilution (12) | — |  | 0.03 |  |  | — |  | — |
Adjusted non-GAAP net income | $ | 110,221 |  | $ | 2.34 |  |  | $ | 93,908 |  | $ | 2.02 |

* The reconciliation of net income per share from GAAP to Adjusted non-GAAP may not foot since each is calculated independently.

ZIFF DAVIS, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP FINANCIAL MEASURES
NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020
(UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Adjusted non-GAAP net income is GAAP net income with the following modifications: (1) elimination of share-based compensation; (2) elimination of certain acquisition related integration costs; (3) elimination of interest costs in excess of the coupon rate associated with outstanding debt; (4) elimination of amortization of patents and intangible assets that we acquired; (5) elimination of change in value on investment; (6) elimination of additional tax expense/benefit from prior years; (7) elimination of gain/loss on sale of assets; (8) elimination of intra-entity transfers; (9) elimination of lease asset impairments and other charges; (10) elimination of disposal related costs; (11) elimination of goodwill impairment on business and (12) elimination of dilutive effect of the convertible debt.

| Nine Months Ended September 30,
| 2021 | Per Diluted Share * |  | 2020 | Per Diluted Share *
Net income | $ | 136,209 |  | $ | 2.86 |  |  | $ | 92,580 |  | $ | 1.93 |
Plus: |  |  |  |  |
Share based compensation (1) | 10,668 |  | 0.23 |  |  | 14,350 |  | 0.31 |
Acquisition related integration costs (2) | 5,904 |  | 0.13 |  |  | 2,771 |  | 0.06 |
Interest costs (3) | 12,460 |  | 0.27 |  |  | 13,929 |  | 0.30 |
Amortization (4) | 105,827 |  | 2.32 |  |  | 89,398 |  | 1.91 |
Investments (5) | (5,008) |  | (0.11) |  |  | 35,495 |  | 0.75 |
Tax expense from prior years (6) | — |  | — |  |  | 4,916 |  | 0.11 |
Sale of assets (7) | 16,551 |  | 0.37 |  |  | (10,271) |  | (0.22) |
Intra-entity transfers (8) | — |  | — |  |  | (13,316) |  | (0.29) |
Lease asset impairments and other charges (9) | 7,816 |  | 0.17 |  |  | 9,391 |  | 0.20 |
Leasehold improvement impairments (10) | — |  | — |  |  | 2,777 |  | 0.06 |
Disposal related costs (10) | 178 |  | — |  |  | — |  | — |
Goodwill impairment on business (11) | 24,635 |  | 0.54 |  |  | — |  | — |
Convertible debt dilution (12) | — |  | 0.12 |  |  | — |  | 0.03 |
Adjusted non-GAAP net income | $ | 315,240 |  | $ | 6.92 |  |  | $ | 242,020 |  | $ | 5.13 |

* The reconciliation of net income per share from GAAP to Adjusted non-GAAP may not foot since each is calculated independently.

ZIFF DAVIS, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP FINANCIAL MEASURES
THREE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020
(UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Adjusted non-GAAP net income is GAAP net income with the following modifications: (1) elimination of share-based compensation; (2) elimination of certain acquisition related integration costs; (3) elimination of interest costs in excess of the coupon rate associated with outstanding debt; (4) elimination of amortization of patents and intangible assets that we acquired; (5) elimination of change in value on investment; (6) elimination of additional tax expense/benefit from prior years; (7) elimination of gain/loss on sale of assets; (8) elimination of intra-entity transfers; (9) elimination of lease asset impairments and other charges; (10) elimination of disposal related costs; (11) elimination of goodwill impairment on business and (12) elimination of dilutive effect of the convertible debt.

| Three Months Ended September 30, |
| 2021 |  | 2020 |
Cost of revenues | $ | 64,302 |  |  | $ | 55,822 |  |
Plus: |  |  |  |
Share based compensation (1) | (108) |  |  | (136) |  |
Acquisition related integration costs (2) | (209) |  |  | (60) |  |
Amortization (4) | (356) |  |  | (908) |  |
Adjusted non-GAAP cost of revenues | $ | 63,629 |  |  | $ | 54,718 |  |
Sales and marketing | $ | 139,693 |  |  | $ | 95,074 |  |
Plus: |  |  |  |
Share based compensation (1) | (427) |  |  | (321) |  |
Acquisition related integration costs (2) | (882) |  |  | (5) |  |
Adjusted non-GAAP sales and marketing | $ | 138,384 |  |  | $ | 94,748 |  |
Research, development and engineering | $ | 21,639 |  |  | $ | 14,261 |  |
Plus: |  |  |  |
Share based compensation (1) | (613) |  |  | (425) |  |
Acquisition related integration costs (2) | (597) |  |  | (5) |  |
Adjusted non-GAAP research, development and engineering | $ | 20,429 |  |  | $ | 13,831 |  |
General and administrative | $ | 122,477 |  |  | $ | 114,381 |  |
Plus: |  |  |  |
Share based compensation (1) | (5,607) |  |  | (4,918) |  |
Acquisition related integration costs (2) | (2,265) |  |  | (1,428) |  |
Amortization (4) | (48,093) |  |  | (39,995) |  |
Lease asset impairments and other charges (9) | (1,685) |  |  | (9,786) |  |
Leasehold improvement impairments (10) | — |  |  | (3,605) |  |
Disposal related costs (10) | (344) |  |  | — |  |
Adjusted non-GAAP general and administrative | $ | 64,483 |  |  | $ | 54,649 |  |
Interest expense, net | $ | (19,862) |  |  | $ | (22,712) |  |
Plus: |  |  |  |
Interest costs (3) | 4,007 |  |  | 6,140 |  |
Adjusted non-GAAP interest expense, net | $ | (15,855) |  |  | $ | (16,572) |  |
(Loss) gain on sale of businesses | $ | (24,600) |  |  | $ | 17,122 |  |
Plus: |  |  |  |
Sale of assets (7) | 24,600 |  |  | (17,122) |  |
Adjusted non-GAAP gain on sale of businesses | $ | — |  |  | $ | — |  |
Loss on investments, net | $ | — |  |  | $ | (156) |  |

Plus: |  |  |  |
Sale of assets (7) | — |  |  | 165 |  |
Adjusted non-GAAP loss on investments, net | $ | — |  |  | $ | 9 |  |
Other income (expense), net | $ | 1,660 |  |  | $ | 14,230 |  |
Plus: |  |  |  |
Sale of assets (7) | — |  |  | (211) |  |
Intra-entity transfers (8) | — |  |  | (16,421) |  |
Adjusted non-GAAP other income (expense), net | $ | 1,660 |  |  | $ | (2,402) |  |
Income tax provision | $ | 8,847 |  |  | $ | 24,330 |  |
Plus: |  |  |  |
Share based compensation (1) | 2,712 |  |  | 1,248 |  |
Acquisition related integration costs (2) | 1,045 |  |  | 321 |  |
Interest costs (3) | 1,233 |  |  | 1,356 |  |
Amortization (4) | 13,122 |  |  | 8,589 |  |
Investments (5) | (24) |  |  | 22 |  |
Tax benefit from prior years (6) | — |  |  | (2,551) |  |
Sale of assets (7) | 5,351 |  |  | (7,232) |  |
Intra-entity transfers (8) | — |  |  | (2,974) |  |
Lease asset impairments and other charges (9) | — |  |  | 2,220 |  |
Leasehold improvement impairments (10) | 414 |  |  | 828 |  |
Disposal related costs (10) | 211 |  |  | — |  |
Adjusted non-GAAP income tax provision | $ | 32,911 |  |  | $ | 26,157 |  |
Loss from equity method investment, net | $ | (1,923) |  |  | $ | (709) |  |
Plus: |  |  |  |
Investments (5) | 1,923 |  |  | 709 |  |
Adjusted non-GAAP income (loss) from equity method investment, net | $ | — |  |  | $ | — |  |
Total adjustments | $ | (67,652) |  |  | $ | (33,025) |  |
GAAP earnings per diluted share | $ | 0.88 |  |  | $ | 1.31 |  |
Adjustments * | $ | 1.46 |  |  | $ | 0.71 |  |
Adjusted non-GAAP earnings per diluted share | $ | 2.34 |  |  | $ | 2.02 |  |

* The reconciliation of net income per share from GAAP to Adjusted non-GAAP may not foot since each is calculated independently.
The Company discloses Adjusted non-GAAP Earnings Per Share (“EPS”) as a supplemental Non-GAAP financial performance measure, as it believes it is a useful metric by which to compare the performance of its business from period to period. The Company also understands that this Adjusted non-GAAP measure is broadly used by analysts, rating agencies and investors in assessing the Company’s performance. Accordingly, the Company believes that the presentation of this Adjusted non-GAAP financial measure provides useful information to investors.
Adjusted non-GAAP EPS is not in accordance with, or an alternative to, net income per share and may be different from Non-GAAP measures with similar or even identical names used by other companies. In addition, this Adjusted non-GAAP measure is not based on any comprehensive set of accounting rules or principles. This Adjusted non-GAAP measure has limitations in that it does not reflect all of the amounts associated with the Company’s results of operations determined in accordance with GAAP.

ZIFF DAVIS, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP FINANCIAL MEASURES
NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020
(UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Adjusted non-GAAP net income is GAAP net income with the following modifications: (1) elimination of share-based compensation; (2) elimination of certain acquisition related integration costs; (3) elimination of interest costs in excess of the coupon rate associated with outstanding debt; (4) elimination of amortization of patents and intangible assets that we acquired; (5) elimination of change in value on investment; (6) elimination of additional tax expense/benefit from prior years; (7) elimination of gain/loss on sale of assets; (8) elimination of intra-entity transfers; (9) elimination of lease asset impairments and other charges; (10) elimination of disposal related costs; (11) elimination of goodwill impairment on business and (12) elimination of dilutive effect of the convertible debt.

| Nine Months Ended September 30, |
| 2021 |  | 2020 |
Cost of revenues | $ | 185,462 |  |  | $ | 171,755 |  |
Plus: |  |  |  |
Share based compensation (1) | (357) |  |  | (413) |  |
Acquisition related integration costs (2) | (286) |  |  | (170) |  |
Amortization (4) | (1,301) |  |  | (1,806) |  |
Adjusted non-GAAP cost of revenues | $ | 183,518 |  |  | $ | 169,366 |  |
Sales and marketing | $ | 394,981 |  |  | $ | 287,317 |  |
Plus: |  |  |  |
Share based compensation (1) | (1,160) |  |  | (1,135) |  |
Acquisition related integration costs (2) | (1,696) |  |  | (686) |  |
Adjusted non-GAAP sales and marketing | $ | 392,125 |  |  | $ | 285,496 |  |
Research, development and engineering | $ | 62,634 |  |  | $ | 43,273 |  |
Plus: |  |  |  |
Share based compensation (1) | (1,690) |  |  | (1,340) |  |
Acquisition related integration costs (2) | (1,127) |  |  | 21 |  |
Adjusted non-GAAP research, development and engineering | $ | 59,817 |  |  | $ | 41,954 |  |
General and administrative | $ | 359,498 |  |  | $ | 312,283 |  |
Plus: |  |  |  |
Share based compensation (1) | (15,912) |  |  | (15,755) |  |
Acquisition related integration costs (2) | (5,050) |  |  | (2,762) |  |
Amortization (4) | (144,403) |  |  | (114,147) |  |
Sale of assets (7) | 490 |  |  |  |
Lease asset impairments and other charges (9) | (10,336) |  |  | (12,191) |  |
Leasehold improvement impairments (10) | — |  |  | (3,605) |  |
Disposal related costs (10) | (472) |  |  | — |  |
Adjusted non-GAAP general and administrative | $ | 183,815 |  |  | $ | 163,823 |  |
Interest expense, net | $ | (62,832) |  |  | $ | (65,879) |  |
Plus: |  |  |  |
Interest costs (3) | 16,503 |  |  | 18,092 |  |
Tax expense from prior years (6) | — |  |  | — |  |
Adjusted non-GAAP interest expense, net | $ | (46,329) |  |  | $ | (47,787) |  |
(Loss) gain on sale of businesses | $ | (21,798) |  |  | $ | 17,122 |  |
Plus: |  |  |  |
Sale of assets (7) | 22,288 |  |  | (17,122) |  |

Adjusted non-GAAP gain on sale of businesses | $ | 490 |  |  | $ | — |  |
Goodwill impairment on business | (32,629) |  |  | — |  |
Plus: |  |  |  |
Goodwill impairment on business (11) | 32,629 |  |  | — |  |
Adjusted non-GAAP goodwill impairment on business | $ | — |  |  | $ | — |  |
Loss on investments, net | $ | (16,677) |  |  | $ | (20,991) |  |
Plus: |  |  |  |
Investments (5) | 16,677 |  |  | 20,825 |  |
Sale of assets (7) | — |  |  | 165 |  |
Adjusted non-GAAP loss on investments, net | $ | — |  |  | $ | (1) |  |
Other income (expense), net | $ | 1,367 |  |  | $ | 16,413 |  |
Plus: |  |  |  |
Sale of assets (7) | 200 |  |  | (650) |  |
Intra-entity transfers (8) | — |  |  | (17,986) |  |
Adjusted non-GAAP other income (expense), net | $ | 1,567 |  |  | $ | (2,223) |  |
Income tax provision | $ | 16,723 |  |  | $ | 49,011 |  |
Plus: |  |  |  |
Share based compensation (1) | 8,451 |  |  | 4,293 |  |
Acquisition related integration costs (2) | 2,255 |  |  | 826 |  |
Interest costs (3) | 4,043 |  |  | 4,163 |  |
Amortization (4) | 39,877 |  |  | 26,555 |  |
Investments (5) | 5,089 |  |  | (3,871) |  |
Tax (benefit) expense from prior years (6) | — |  |  | (4,916) |  |
Sale of assets (7) | 5,447 |  |  | (7,336) |  |
Intra-entity transfers (8) | — |  |  | (4,670) |  |
Lease asset impairments and other charges (9) | 2,520 |  |  | 2,800 |  |
Leasehold improvement impairments (10) | — |  |  | 828 |  |
Disposal related costs (10) | 294 |  |  | — |  |
Goodwill impairment on business (11) | 7,994 |  |  | — |  |
Adjusted non-GAAP income tax provision | $ | 92,693 |  |  | $ | 67,683 |  |
Income (loss) from equity method investment, net | $ | 16,596 |  |  | $ | (10,799) |  |
Plus: |  |  |  |
Investments (5) | (16,596) |  |  | 10,799 |  |
Adjusted non-GAAP income (loss) from equity method investment, net | $ | — |  |  | $ | — |  |
Total adjustments | $ | (179,031) |  |  | $ | (149,440) |  |
GAAP earnings per diluted share | $ | 2.86 |  |  | $ | 1.93 |  |
Adjustments * | $ | 4.06 |  |  | $ | 3.20 |  |
Adjusted non-GAAP earnings per diluted share | $ | 6.92 |  |  | $ | 5.13 |  |

* The reconciliation of net income per share from GAAP to Adjusted non-GAAP may not foot since each is calculated independently.
The Company discloses Adjusted non-GAAP Earnings Per Share (“EPS”) as a supplemental Non-GAAP financial performance measure, as it believes it is a useful metric by which to compare the performance of its business from period to period. The Company also understands that this Adjusted non-GAAP measure is broadly used by analysts, rating agencies and investors in assessing the Company’s performance. Accordingly, the Company believes that the presentation of this Adjusted non-GAAP financial measure provides useful information to investors.
Adjusted non-GAAP EPS is not in accordance with, or an alternative to, net income per share and may be different from Non-GAAP measures with similar or even identical names used by other companies. In addition, this Adjusted non-GAAP measure

is not based on any comprehensive set of accounting rules or principles. This Adjusted non-GAAP measure has limitations in that it does not reflect all of the amounts associated with the Company’s results of operations determined in accordance with GAAP.

Non-GAAP Financial Measures
To supplement its condensed consolidated financial statements, which are prepared and presented in accordance with US GAAP, the Company uses the following Non-GAAP financial measures: Adjusted EBITDA, Adjusted non-GAAP Net Income, and Adjusted non-GAAP Diluted EPS (collectively the “Non-GAAP financial measures”). The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with U.S. GAAP. The Company uses these Non-GAAP financial measures for financial and operational decision making and as a means to evaluate period-to-period comparisons. The Company believes that they provide useful information about core operating results, enhance the overall understanding of past financial performance and future prospects, and allow for greater transparency with respect to key metrics used by management in its financial and operational decision making.
(1) Share Based Compensation. The Company excludes stock-based compensation because it is non-cash in nature and because the Company believes that the Non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance. The Company further believes this measure is useful to investors in that it allows for greater transparency to certain line items in its financial statements. In addition, excluding this item from the Non-GAAP measures facilitates comparisons to historical operating results and comparisons to peers, many of which similarly exclude this item.
(2) Acquisition Related Integration Costs. The Company excludes certain acquisition and related integration costs such as adjustments to contingent consideration, severance, lease terminations, retention bonuses and other acquisition-specific items. The Company believes that the Non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance. In addition, excluding this item from the Non-GAAP measures facilitates comparisons to historical operating results and comparisons to peers, many of which similarly exclude this item.
(3) Interest Costs. In June 2014, the Company issued $402.5 million aggregate principal amount of 3.25% convertible senior notes and in November 2019, the Company issued $550.0 million aggregate principal amount of 1.75% convertible senior notes. In accordance with GAAP, the Company separately accounts for the value of the liability and equity features of its outstanding convertible senior notes in a manner that reflects the Company’s non-convertible debt borrowing rate. The value of the conversion feature, reflected as a debt discount, is amortized to interest expense over time. Accordingly, the Company recognizes imputed interest expense on its 3.25% and 1.75% convertible senior notes of approximately 5.8% and 5.5%, respectively, in its statement of operations. The Company excludes the difference between the imputed interest expense and the coupon interest expense of 3.25% and 1.75%, respectively, because it is non-cash in nature and because the Company believes that the Non-GAAP financial measures excluding this item provide meaningful supplemental information regarding core operational performance. In addition, the Company has excluded the difference between the imputed and coupon interest expense associated with the 4.625% Senior Notes. The Company has determined excluding these items from the Non-GAAP measures facilitates comparisons to historical operating results and comparisons to peers, many of which similarly exclude this item.
(4) Amortization. The Company excludes amortization of patents and acquired intangible assets because it is non-cash in nature and because the Company believes that the Non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance. In addition, excluding this item from the Non-GAAP measures facilitates comparisons to historical operating results and comparisons to peers, many of which similarly exclude this item.
(5) Change in Value on Investments. The Company excludes the change in value on its investments. The Company believes that the Non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance. In addition, excluding this item from the Non-GAAP measures facilitates comparisons to historical operating results.
(6) Tax Expense/Benefit from Prior Years. The Company excludes certain income tax-related items in respect of income tax audit settlements and their related reversals of income tax reserves accounted for through ASC 740-10. The Company believes that the Non-GAAP financial measures excluding these items provide meaningful supplemental information regarding operational performance. In addition, excluding these items from the Non-GAAP measures facilitates comparisons to historical operating results.
(7) Gain (Loss) on Sale of Assets. The Company excludes the gain (loss) on sale of certain of its assets. The Company believes that the Non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance. In addition, excluding this item from the Non-GAAP measures facilitates comparisons to historical operating results.

(8) Intra-Entity Transfers. The Company excludes certain effects of intra-entity transfers to the extent the related tax asset or liability in the financial statement is not recovered or settled, respectively during the year. During December 2019, the Company entered into an intra-entity asset transfer that resulted in the recording of a tax benefit and related tax asset representing tax deductible amounts to be realized in future years which is expected to be recovered over a period of up to 20 years and related foreign currency fluctuations. The Company believes that the Non-GAAP financial measures excluding the cumulative future unrealized benefit of the assets transferred and including the tax benefit in the year of realization provides meaningful supplemental information regarding operational performance. In addition, excluding this item from the Non-GAAP measures facilitates comparisons to historical operating results.
(9) Lease Asset Impairments and Other Charges. The Company excludes lease asset impairments and other charges as they are non-cash in nature and because the Company believes that the Non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance. In addition, excluding this item from the Non-GAAP measures facilitates comparisons to historical operating results.
(10) Disposal related Costs. The Company excludes expenses associated with the disposal of certain businesses. The Company believes that the Non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance. In addition, excluding this item from the Non-GAAP measures facilitates comparisons to historical operating results.
(11) Goodwill Impairment on Business. The Company excludes the goodwill impairment on business because it is non-cash in nature and the Company believes that the Non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance. In addition, excluding this item from the Non-GAAP measures facilitates comparisons to historical operating results.
(12) Convertible Debt Dilution. The Company excludes convertible debt dilution from diluted EPS. The Company believes that the Non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance. In addition, excluding this item from the Non-GAAP measures facilitates comparisons to historical operating results.
The Company presents Adjusted non-GAAP Cost of Revenues, Adjusted non-GAAP Research, Development and Engineering, Adjusted non-GAAP Sales and Marketing, Adjusted non-GAAP General and Administrative, Adjusted non-GAAP Interest Expense, Adjusted Gain on Sale of Businesses, Adjusted non-GAAP Loss on Investments, Adjusted non-GAAP Other (Income) Expense, Adjusted non-GAAP Income Tax Provision, Adjusted non-GAAP (Income) Loss from Equity Method Investment, Net and Adjusted non-GAAP Net Income because the Company believes that these provide useful information about our operating results and enhance the overall understanding of past financial performance and future prospects.

Pro-Forma Financial Results
Key pro-forma financial results for the three and nine months ended September 30, 2021 and 2020, are set forth in the following table (in millions, except per share amounts). The financial results below reflect the Company’s results, on a pro-forma basis, taking into consideration the sale of certain Voice assets in Australia, New Zealand, and the United Kingdom as well as the sale of the Company’s B2B Backup business as if they had occurred January 1, 2020.

| Three Months Ended |  |  | Nine Months Ended
| Q3 2021 | Q3 2020 |  |  | Q3 2021 | Q3 2020
Total Revenues | $444.3 million | $357.0 million |  |  | $1,271.5 million | $1,020.4 million
Pro-Forma Revenue Adjustments | $(9.6) million | $(16.7) million |  |  | $(33.5) million | $(54.3) million
Pro-Forma Total Revenue: (1) | $434.7 million | $340.3 million |  |  | $1,238.0 million | $966.1 million
Adjusted Non-GAAP Earnings per Diluted Share (1) | $2.34 | $2.02 |  |  | $6.92 | $5.13
Pro-Forma Earnings per Diluted Share Adjustments | $(0.07) | $(0.07) |  |  | $(0.24) | $(0.26)
Adjusted Pro Forma Earnings per Diluted Share (1) | $2.27 | $1.95 |  |  | $6.68 | $4.87
GAAP Net Income | $42.6 million | $60.9 million |  |  | $136.2 million | $92.6 million
Pro-Forma Net Income Adjustments | $64.5 million | $29.3 million |  |  | $168.2 million | $137.2 million
Adjusted Pro-Forma Net Income | $107.1 million | $90.2million |  |  | $304.4 million | $229.8 million
Adjusted EBITDA (1) | $175.1 million | $154.1 million |  |  | $503.4 million | $403.8 million
Pro-Forma EBITDA Adjustments | $(4.3) million | $(6.9) million |  |  | $(13.9) million | $(20.8) million
Adjusted Pro-Forma EBITDA (1) | $170.8 million | $147.2 million |  |  | $489.5 million | $383.0 million
Adjusted EBITDA Margin (1) | 39.4% | 43.2% |  |  | 39.6% | 39.6%
Pro-Forma EBITDA Margin Adjustments | (0.1)% | 0.1% |  |  | (0.1)% | 0.1%
Adjusted Pro-Forma EBITDA Margin (1) | 39.3% | 43.3% |  |  | 39.5% | 39.6%

(1) Refer to the notes earlier in this Release.

ZIFF DAVIS, INC. AND SUBSIDIARIES
NET INCOME TO ADJUSTED EBITDA RECONCILIATION
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020
(UNAUDITED, IN THOUSANDS)
The following table sets forth a reconciliation of net income, the most directly comparable GAAP financial measure, to Adjusted EBITDA.

| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2021 |  | 2020 |  | 2021 |  | 2020
Net income | $ | 42,569 |  |  | $ | 60,883 |  |  | $ | 136,209 |  |  | $ | 92,580 |
Plus: |  |  |  |  |  |  |
Interest expense, net | 19,862 |  |  | 22,712 |  |  | 62,832 |  |  | 65,879 |
Loss (gain) on sale of businesses | 24,600 |  |  | (17,122) |  |  | 21,798 |  |  | (17,122) |
Loss on investments, net | — |  |  | 156 |  |  | 16,677 |  |  | 20,991 |
Other (income) expense, net | (1,660) |  |  | (14,230) |  |  | (1,367) |  |  | (16,413) |
Income tax expense | 8,847 |  |  | 24,330 |  |  | 16,723 |  |  | 49,011 |
(Income) loss from equity method investment, net | 1,923 |  |  | 709 |  |  | (16,596) |  |  | 10,799 |
Depreciation and amortization | 66,217 |  |  | 59,612 |  |  | 196,443 |  |  | 163,680 |
Reconciliation of GAAP to Adjusted non-GAAP financial measures: |  |  |  |  |  |  |
Share-based compensation | 6,755 |  |  | 5,800 |  |  | 19,119 |  |  | 18,643 |
Acquisition-related integration costs | 3,953 |  |  | 1,498 |  |  | 8,159 |  |  | 3,597 |
Lease asset impairments and other charges | 1,685 |  |  | 9,786 |  |  | 10,336 |  |  | 12,191 |
Disposal related costs | 345 |  |  | — |  |  | 472 |  |  | — |
Goodwill impairment on business | — |  |  | — |  |  | 32,629 |  |  | — |
Adjusted EBITDA | $ | 175,096 |  |  | $ | 154,134 |  |  | $ | 503,434 |  |  | $ | 403,836 |

Adjusted EBITDA as calculated above represents earnings before interest, gain on sale of businesses, goodwill impairment of business, loss on investments, net, other (income) expense, net, income tax expense, (income) loss from equity method investments, net, depreciation and amortization and the items used to reconcile GAAP to Adjusted non-GAAP financial measures, including (1) share-based compensation, (2) certain acquisition-related integration costs, and (3) lease asset impairments and other charges. We disclose Adjusted EBITDA as a supplemental Non-GAAP financial performance measure as we believe it is a useful metric by which to compare the performance of our business from period to period. We understand that measures similar to Adjusted EBITDA are broadly used by analysts, rating agencies and investors in assessing our performance. Accordingly, we believe that the presentation of Adjusted EBITDA provides useful information to investors.
Adjusted EBITDA is not in accordance with, or an alternative to, net income, and may be different from Non-GAAP measures used by other companies. In addition, Adjusted EBITDA is not based on any comprehensive set of accounting rules or principles. This Adjusted non-GAAP measure has limitations in that it does not reflect all of the amounts associated with the Company’s results of operations determined in accordance with GAAP.

ZIFF DAVIS, INC. AND SUBSIDIARIES
NON-GAAP FINANCIAL MEASURES
(UNAUDITED, IN THOUSANDS)

| Q1 |  | Q2 |  | Q3 |  | Q4 |  | YTD
2021 |  |  |  |  |  |  |  |  |
Net cash provided by operating activities | $ | 178,724 |  |  | $ | 111,298 |  |  | $ | 140,230 |  |  | $ | — |  |  | $ | 430,252 |
Less: Purchases of property and equipment | (26,269) |  |  | (31,497) |  |  | (29,729) |  |  | — |  |  | (87,495) |
Add: Contingent consideration* | — |  |  | 685 |  |  | — |  |  | — |  |  | 685 |
Free cash flows | $ | 152,455 |  |  | $ | 80,486 |  |  | $ | 110,501 |  |  | $ | — |  |  | $ | 343,442 |
| Q1 |  | Q2 |  | Q3 |  | Q4 |  | YTD
2020 |  |  |  |  |  |  |  |  |
Net cash provided by operating activities | $ | 102,036 |  |  | $ | 139,591 |  |  | $ | 114,382 |  |  | $ | 124,070 |  |  | $ | 480,079 |
Less: Purchases of property and equipment | (26,885) |  |  | (23,652) |  |  | (20,729) |  |  | (21,286) |  |  | (92,552) |
Add: Contingent consideration* | 20,054 |  |  | — |  |  | 49 |  |  | 99 |  |  | 20,202 |
Free cash flows | $ | 95,205 |  |  | $ | 115,939 |  |  | $ | 93,702 |  |  | $ | 102,883 |  |  | $ | 407,729 |
* Free Cash Flows of $80.5 million for Q2 2021, $95.2 million for Q1 2020, $93.7 million for Q3 2020 and $102.9 million for Q4 2020 is before the effect of payments associated with certain contingent consideration associated with recent acquisitions.

The Company discloses free cash flows as supplemental Non-GAAP financial performance measure, as it believes it is a useful metric by which to compare the performance of its business from period to period. The Company also understands that this Non-GAAP measure is broadly used by analysts, rating agencies and investors in assessing the Company’s performance. Accordingly, the Company believes that the presentation of this Non-GAAP financial measure provides useful information to investors.
Free cash flows is not in accordance with, or an alternative to, Cash Flows from Operating Activities, and may be different from Non-GAAP measures with similar or even identical names used by other companies. In addition, the Non-GAAP measure is not based on any comprehensive set of accounting rules or principles. This Non-GAAP measure has limitations in that it does not reflect all of the amounts associated with the Company’s results of operations determined in accordance with GAAP.

ZIFF DAVIS, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP FINANCIAL MEASURES
THREE MONTHS ENDED SEPTEMBER 30, 2021
(UNAUDITED, IN THOUSANDS)

| Cloud |  | Digital |  |  |  |
| Services |  | Media |  | Corporate |  | Total
Revenues |  |  |  |  |  |  |
GAAP revenues | $ | 182,090 |  |  | $ | 262,162 |  |  | $ | — |  |  | $ | 444,252 |
Gross profit |  |  |  |  |  |  |
GAAP gross profit | $ | 141,388 |  |  | $ | 238,562 |  |  | $ | — |  |  | $ | 379,950 |
Non-GAAP adjustments: |  |  |  |  |  |  |
Share-based compensation | 104 |  |  | 4 |  |  | — |  |  | 108 |
Acquisition related integration costs | 188 |  |  | 21 |  |  | — |  |  | 209 |
Amortization | 356 |  |  | — |  |  | — |  |  | 356 |
Adjusted non-GAAP gross profit | $ | 142,036 |  |  | $ | 238,587 |  |  | $ | — |  |  | $ | 380,623 |
Operating profit |  |  |  |  |  |  |
GAAP operating profit (loss) | $ | 61,685 |  |  | $ | 49,822 |  |  | $ | (15,366) |  |  | $ | 96,141 |
Non-GAAP adjustments: |  |  |  |  |  |  |
Share-based compensation | 1,451 |  |  | 2,125 |  |  | 3,179 |  |  | 6,755 |
Acquisition related integration costs | 3,511 |  |  | 416 |  |  | 26 |  |  | 3,953 |
Amortization | 11,040 |  |  | 37,333 |  |  | 77 |  |  | 48,450 |
Lease asset impairments and other charges | 1,033 |  |  | 652 |  |  | — |  |  | 1,685 |
Disposal related costs | — |  |  | — |  |  | 345 |  |  | 345 |
Adjusted non-GAAP operating profit (loss) | $ | 78,720 |  |  | $ | 90,348 |  |  | $ | (11,739) |  |  | $ | 157,329 |
Depreciation | 4,996 |  |  | 12,771 |  |  | — |  |  | 17,767 |
Adjusted EBITDA | $ | 83,716 |  |  | $ | 103,119 |  |  | $ | (11,739) |  |  | $ | 175,096 |
NOTE 1: Table above excludes certain intercompany allocations

ZIFF DAVIS, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP FINANCIAL MEASURES
THREE MONTHS ENDED SEPTEMBER 30, 2020
(UNAUDITED, IN THOUSANDS)

| Cloud |  | Digital |  |  |  |
| Services |  | Media |  | Corporate |  | Total
Revenues |  |  |  |  |  |  |
GAAP revenues | $ | 170,248 |  |  | $ | 186,728 |  |  | $ | — |  |  | $ | 356,976 |
Gross profit |  |  |  |  |  |  |
GAAP gross profit | $ | 131,827 |  |  | $ | 169,338 |  |  | $ | (11) |  |  | $ | 301,154 |
Non-GAAP adjustments: |  |  |  |  |  |  |
Share-based compensation | 133 |  |  | 3 |  |  | — |  |  | 136 |
Acquisition related integration costs | 60 |  |  | — |  |  | — |  |  | 60 |
Amortization | 908 |  |  | — |  |  | — |  |  | 908 |
Adjusted non-GAAP gross profit | $ | 132,928 |  |  | $ | 169,341 |  |  | $ | (11) |  |  | $ | 302,258 |
Operating profit |  |  |  |  |  |  |
GAAP operating profit (loss) | $ | 65,813 |  |  | $ | 26,027 |  |  | $ | (14,402) |  |  | $ | 77,438 |
Non-GAAP adjustments: |  |  |  |  |  |  |
Share-based compensation | 1,388 |  |  | 1,356 |  |  | 3,056 |  |  | 5,800 |
Acquisition related integration costs | 123 |  |  | 1,220 |  |  | 155 |  |  | 1,498 |
Amortization | 16,114 |  |  | 22,352 |  |  | 2,437 |  |  | 40,903 |
Lease asset impairments and other charges | — |  |  | 9,786 |  |  | — |  |  | 9,786 |
Adjusted non-GAAP operating profit (loss) | $ | 83,438 |  |  | $ | 60,741 |  |  | $ | (8,754) |  |  | $ | 135,425 |
Depreciation | 4,410 |  |  | 14,299 |  |  | — |  |  | 18,709 |
Adjusted EBITDA | $ | 87,848 |  |  | $ | 75,040 |  |  | $ | (8,754) |  |  | $ | 154,134 |
NOTE 1: Table above excludes certain intercompany allocations
NOTE 2: Table above has been recast to remove the impact of certain expenses associated with the Corporate entity that were previously allocated to the Cloud Services and Digital Media businesses.