Discontinued Operations and Dispositions

9 Months Ended

Sep. 30, 2022

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations and Dispositions

Consensus Spin-off

As further described in Note 1 - Basis of Presentation and Overview, on October 7, 2021, the Separation of the cloud fax business was completed. The accounting requirements for reporting the Company’s cloud fax business as a discontinued operation were met when the Separation was completed as the Separation constituted a strategic shift that would have a major effect on the Company’s operations and financial results. Accordingly, the Condensed Consolidated Financial Statements reflect the results of the cloud fax business as a discontinued operation for the three and nine months ended September 30, 2021. The Condensed Consolidated Statements of Operations report discontinued operations separate from continuing operations. The Condensed Consolidated Statements of Comprehensive (Loss) Income, Condensed Consolidated Statements of Cash Flows (including Note 15 - Supplemental Cash Flow Information), and Condensed Consolidated Statements of Stockholders’ Equity combine continuing and discontinued operations.

The key components of cash flows from discontinued operations were as follows (in thousands):


	Nine Months Ended September 30, 2021

Capital expenditures	$	15,252
Depreciation and amortization	$	8,941

Deferred taxes	$	5,306

In connection with the Separation, Ziff Davis and Consensus entered into several agreements that govern the relationship of the parties following the Separation, which are further discussed in Note 17 - Related Party Transactions. Further, certain of the Company’s management and members of its board of directors resigned from the Company as of the date of distribution and joined Consensus. In addition, one of the Company’s members of senior management as of September 30, 2022 has served on the board of directors of Consensus since the date of distribution.

The key components of income from discontinued operations were as follows (in thousands):


	Three Months Ended September 30, 2021		Nine Months Ended September 30, 2021
Revenues	$	89,107	$	263,386
Cost of revenues	(14,605)		(43,129)
Sales and marketing	(13,116)		(40,032)
Research, development and engineering	(2,019)		(5,635)
General and administrative	(8,237)		(20,262)
Interest expense and other	(3,818)		(4,017)
Income before income taxes	47,312		150,311
Income tax expense	(11,512)		(36,606)
Income from discontinued operations, net of income taxes	$	35,800	$	113,705

B2B Back-up and Voice Asset Sales

The Company completed the following dispositions that did not meet the criteria for discontinued operations.

During the first quarter of 2021, the Company committed to a plan to sell certain Voice assets in the United Kingdom as they were determined to be non-core assets. Such assets were recorded within the Cybersecurity and Martech reportable segment. On February 9, 2021, in a cash transaction, the Company sold the Voice assets. The total gain recognized on the sale of these Voice assets was $2.8 million which was recorded in loss on sale of businesses on the Condensed Consolidated Statement of Operations in the nine months ended September 30, 2021.

During the first quarter of 2021, the Company committed to a plan to sell its B2B Backup business as it was determined to be a non-core business. The B2B Backup business met the held for sale criteria, and accordingly, the assets and liabilities were presented as held for sale on the Consolidated Statement Balance Sheets at March 31, 2021 and June 30, 2021. The business is recorded within the Cybersecurity and Martech reportable segment. During the second quarter of 2021, the Company received an offer to purchase the B2B Backup business and management determined that the fair value of the business less cost to sell was lower than its carrying amount. As a result, the Company recorded an impairment to goodwill of $32.6 million during the second quarter of 2021, which was recorded in impairment of business on the Consolidated Statement of Operations (see Note 7 - Goodwill and Intangible Assets). On September 17, 2021, in a cash transaction, the Company sold the B2B Backup business. The total loss recognized on the sale of the B2B Backup business was $24.6 million which was recorded in loss on sale of businesses on the Condensed Consolidated Statement of Operations in the three and nine months ended September 30, 2021.