Ziff Davis: Weak Quarter, Debt Default, More Pain Ahead


Ziff Davis continues to dwindle away.  The company followed last week’s announcement of a debt default by posting depressing Q2 results:

  • Revenue of $16.5 million, down 29% year over year (down 18% excluding closed publications).
  • EBITDA of -$0.4 million, down from $1.9 million year over year.
  • $11.4 million of cash burned, leaving $10.8 million  (thus the default).

Digital revenue did increase 14% year over year, partially offsetting a startling 31% decline in print revenue.  The company does not disclose the absolute level of digital revenue, however, so we can safely assume it’s small.  Also, almost all the digital growth came in the small “game” sector: The consumer media business (tech) digital revenue only grew 2% (from 10Q).  The consumer media business still generates about a 10% EBITDA margin, but EBITDA in this division declined nearly $2.5 million year over year, so it’s probably headed for losses.

Fast forward a few years ahead.  It seems reasonable to assume that print revenue will go to zero, a process that may not even take a few years (Planning to renew your PC Magazine subscription?).  This will leave digital revenue, which is probably less than a third of the business.  Almost all of the growth in digital, meanwhile, is in the Game group, which had total revenue of only $5.5 million and an EBITDA loss of -$1.4 million).  Excluding closed publications, revenue for the Game group dropped 3% year over year.  Online revenue in this group jumped 81%, but given that the overall division shrank, online revenue must be tiny.

So this leaves a digital consumer-tech and game business generating perhaps $3-$5 million a quarter ($12-$20 million a year) and almost certainly losing money, plus a serious cash crunch.  New CEO Jason Young and team have even tougher times ahead.