BuzzFeed Inc. Q1 2023 Earnings Call

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Noon and welcome to the Buzzfeed incorporated first quarter 20 twenty-three earnings conference call all participants will be in listen only mode.

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After today's presentation there'll be an opportunity to ask questions to ask a question you May Press Star then one on your telephone keypad to withdraw your question. Please press Star then too.

Please note this event is being recorded.

I would now like to turn the conference over to Amidah, Tom Korea, Senior Vice President Investor Relations. Please go ahead.

Hi, everyone welcome to best feed inks first quarter of 2023 earnings conference call.

South Korea, Senior Vice President of Investor Relations.

Joining us today, our founder and CEO , Jenna Parady, President Marcella, Martin and CFO Felicia <unk>.

Before we get started I would like to take this opportunity to remind you that our remarks today will include forward looking statements.

Actual results may differ materially from those contemplated by these forward looking statements.

Factors that could cause these results to differ materially are set forth in today's press release or 2022 annual report on Form 10-K N in our queue. One quarterly report on Form 10-Q.

Any forward looking statements that we make on this call are based on assumptions as of today and we undertake no obligation to update these statements as a result of new information our future events.

During this call we present, both GAAP and non-GAAP financial measures, including adjusted EBITDA and adjusted EBITDA margin they.

The use of non-GAAP financial measures allows us to measure at the operational strengthened performance of our business to establish budgets and to develop operational goals for managing our business.

We believe adjusted EBITDA and adjusted EBITDA margin are relevant and useful information for investors because they allow investors to view performance in a manner similar to the method used by our management.

A reconciliation of these gap to non-GAAP measures is included in today's earnings press release.

Please refer to our Investor Relations website to find today's press release, along with our Investor letter and now I'll pass the call over to Jonah.

You would need good afternoon, everyone and thank you for joining us today last quarter I hear my vision for the future of digital media, namely that content creation would be transformed by creators and a <unk> with a massive direct audience across our premium brand that IP portfolio. We are poised to benefit from these trends we have built trusted brands with a <unk>.

Fairness. It is the level of 100 year old company U S N Z and millennials spend vastly more time consuming our content, but not of any other digital media company in our competitive set according to Comscore.

These competitive advantages helps us carved out a strategic physician and the ecosystem of audiences advertisers platform and creators.

Biggest beneficiaries of the ship to the creator economy, and <unk> will be incumbents would recognise brand and scale distribution.

And two one are content team made great progress and launching new content format to a line with these trends.

On creator.

The next few years will be defined by creators partnering with the best media brands for credibility and community.

<unk> tasty is leaving this transformation and how media is made and distributed through the creation of program to give creators the tools and skills to drive large audiences.

Trader leg content has generated two times abused for video.

And more than 1 billion views on Instagram alone. This gives us the conviction to extend this model some more brands.

The results are amazing for everyone. When creator the media companies work together developed by P. Together collaborate on new format, the frame and jointly brain firm with analytics from the larger breastfeeding media network.

To build on the success, we are rapidly expanding our creator program to increase the revenue and content output.

<unk> recently welcome a new class of creator resident in earlier this year a complex launched its inaugural creator class.

Turning to our progress on artificial intelligence broadly speaking I believe the generative AI will begin to replace the majority of static content.

Audiences will begin to expect all content to be personalized interactive dynamic with embedded intelligence.

Format that were developed before the revolution and many of the format. The conventions of the media industry will need to be updated and adapted or begin to feel stale and outdated.

This is why Busby has been invested in AI powered content and watching new format like Infinity quizzes and chatbot game.

In the past two months, we've seen time span increased by more than 40% when he quiz is out of power compared to legacy Christmas.

And our first chatbot game under the influence there had an average time spent four times higher and time spent on static quizzes.

Looking ahead, we are rapidly prototyping, new generative AI format, including quizzes and Chatbots It will scale in the coming months.

We've also made significant strategic and organizational changes to position the business for longterm growth.

Last month, we completed a strategic reprioritization across the company in order to accelerate our progress in the areas of creators and AI and translate this exciting work into new revenue opportunities that will help us reaccelerate grow.

Specifically, we have significantly reduce our cost structure and a line resources with the format and platforms. We will we believe will propel our future growth.

Refocus our flagship Busby brand on entertainment and announced the closure of our platform dependent news brand, but she knew to focus on growing these significant direct audience that post and anchored our go forward strategy in the areas that we believe represent our biggest opportunities to drive longterm growth <unk>.

<unk>.

These changes.

In addition to the momentum we have built in growing audience reach and engagement around new platforms and format physician is to close the gap in monetization and accelerate our revenue growth.

We are committed to building the business that deliver significant margin expansion and generate strong pass those over time.

I am grateful for the support of our shareholders as we continue to transform our business in this new era of digital media and I'm honored to work alongside our talented teams are creators journalists producers and all our employees as we continue to leave the industry forward and an unwavering commitment to our mission to spread truth Joy and creativity.

On the Internet.

Thank you and I look forward to seeing you at our upcoming virtual Investor Day. This Thursday, I'll know hand, the call after Marcel it to discuss our business performance and operational highlights.

Thank you Jenna I'm good afternoon, everyone.

<unk> Q1 performance, including some of the progress that we have made and refocusing on Wednesdays airports too I love the full manipulation potential of our combined brand for for Ya.

I also wanted to share with you. The earlier results, we are driving to our focus on creator.

I'd like to start first with <unk> performance.

We deliver first quarter results in line with our guidance range for both revenue and adjusted EBITDA.

Q1 revenues declined 27% to 67 median driven by the ongoing she's still a short form <unk> continued self Smith in the brother digital advertising market I'm, the same execution challenges I outlined last quarter.

Looking ahead, we expect <unk> in terms of both revenue growth and adjusted EBITDA.

Felicia we provide more details shortly.

But at a high level in Q2, we expect to deliver a modest improvement in core advertiser.

<unk> advertising I'm content revenue trends ear already I'd relative to Q1.

In order to make sure that we're progress we will supplement at what time is spent reporting within you may take on revenue to attention.

Unless we execute against the cost savings plan that we have announced today, we are driving toy significantly nowhere fixed cost structure <unk> much of the bottom line impact from lower Q2 revenues and achieve full ear adjusted EBITDA proceed that ability.

As I mentioned over the last few months, we have made significant changes to our safety structure in order to improve execution.

Enabled <unk> and <unk> and bring the wider brand portfolio to market for our clients.

First we are now working <unk> with a centralized enablement and support teams set up to service all brands in the portfolio.

Taken we are driving increase focused on <unk>.

Such as C. B G retail entertainment Tech and financial services with either that bring strong industry knowledge and relationships.

Previously <unk>, what's driving maintained across the state is organization.

These new organization is structured will help us serve our customers more efficiently.

Alright, but we have please five coverage for new businesses and industries.

And finally by consolidating the teams on breaking down side knows we are accelerating the knowledge transfer across the bus feed Brian the complex advance.

With these changes we our position to drive further improvements any over yet trends in the back half of the year.

Now turning to our progress around creator and AI.

In Q1, we continue to be able to audience momentum and creator driven platforms like take took Instagram grills on Youtube short.

You want a viewer.

Viewership of our short form content across platforms continued to crowd.

And once again, we surpassed 1 billion views on each of Instagram Rios in Youtube shorts, respectively.

Safety expanded its creator foot. Please. Thank you one by welcoming a new castle safety residents and launching a new <unk> series called what date is 100 ways.

The serious has already earned more than 50 million views across its first two episodes.

These initiatives also continued to attract advertise has a month from household brands like combos and Mccormack.

In terms of Hey, I <unk> knew a I power content for a month are already driving deep engagement.

To hear from Jonah audience time to spend with our places and chat board games is meaningfully higher relative to our static content.

And although it is still early we are very encouraged by this momentum.

Audience is lovely interactivity personalization I'm sure ability of these content.

We have a much more in a store for our audiences in the coming weeks and months.

And we continue to build audience engagement around these new formats, we expect to translate this momentum into innovative products in partnership opportunities for our clients.

Before I wrap up I Wonder Ray today, my excitement for the future of <unk>, Inc. By leaning further into <unk>. We are on our way to building a content creation model that makes our creative teams more efficient and substantially expand our.

With without increasing fix cough.

We hope we will join us the Thursday at <unk> Beautiful Investor Day, where you will hear more from our extended leadership team, including our branch leaders in our head of sales on how this exciting work is expected to drive a longterm growth and profitability.

Thank you Felicia will now take you through our financial results and outlook.

Thank you Marcella, we delivered first quarter results in line with our guidance range for both revenue and adjusted EBITDA.

On a year over year basis overall revenues for Q1, 2023 has declined 27% to 67.2 million as expected driven by the ongoing shift toward short form creators of that content continues softness in the brighter digital advertising market and the status execution challenges Marcy.

Hello referenced earlier.

Four months by revenue line is as follows.

Advertising revenues declined 30 per cent. Your every year to 34.2 million in line with fourthquarter trends as expected, primarily driven by both pricing and demand pressures on are owned and operated properties.

Constant revenues declined 33 per cent year over year to 21.6 million with brand new content performance decelerating versus the fourth quarter as expected.

As a complement to our content revenues, we are introducing a K P. I to represent net branded content advertiser revenue retention, which is a function of both the number of clients. We first <unk> clients.

This metric reflects current period trailing 12th month frantic content revenue as a percentage of prior period.

Trailing 12 months revenues for Brandon contact customers, but spent the minimum of $250000 in the prior period.

<unk> last quarter of the steps we took the combined the best speed and complex sales team created operational challenges that negatively impacted our revenue performance in Q1.

And perhaps materialized in the form of lower revenue retention versus the prior year. However average spend per advertiser remains relatively consistent your over you.

Commerce and other revenues grew 6% to 11.3 million driven by evening comes and or organic is Sterling S. S N.

This revenue performance resulted in Q1, adjusted EBITDA loss of $22 million in the quarter, three and a half million lower year over here with the majority of the lower revenue here on your mitigated by the cost actions taken throughout 2022.

We also encourage charges that did not impact adjusted EBITDA, a full reconciliation of our gas to non-GAAP measures can be found in today's press release available on our Investor Relations website.

We ended the quarter with cash and cash equivalents of approximately 15 million.

Turning to audience engagement and time spent.

Terms with audience time spent we continue to report U S. <unk> unlimited upgraded property and third party platform. According to <unk>.

This metric it's intended to be viewed in conjunction with our advertising revenue performance.

As we have discussed in previous quarters audience time spent with our constant on Facebook has continued to decline driven by increased competition from Newark creator driven vertical video platforms for which time says it's not currently captured by Com score as.

As a result of these declines the advertising revenue Sweet January from Facebook or no longer materials for overall advertising revenue.

As of January 1st 2023, we have removed Facebook from her reported measure of time spent we will continue to report you as time spent according to Comscore, which reflects are owned and operated properties you tube and Apple news at.

As Jonah discussed earlier, the broader strategic reprioritization across the company has enabled us to align resources to the platform and format that represent the biggest opportunities for future growth and we believe this change in reporting methodology narrow lines with our go forward monetization strategy, mainly to increased focus on our own denominated crap.

30.

And Q1 U S time spent as reported by some sprite declines 3% year over year to 109 million hours.

Terms of creator left vertical video ahead of scales monetization, we are continuing to build audience momentum around Newark that partisan formats, including Youtube shorts, Instagram <unk> and can talk in the first quarter. We continued to grow viewership of a short part of the creator lead content generating billions abuse across platforms in Q1 <unk>.

That's further confidence that we're driving the right strategic focus to position the business from longterm growth and monetization.

Before I share financial outlook for the second quarter, Let me first provide some context.

Starting with revenues.

In the year ago quarter, Buzzfeed Studios delivered to feature films, which contributed to Q2 2022 contact remedies for Q2 2023, no. Some projects are scheduled for delivery in the corner.

Also in the year ago quarter Conference hosted a murder first experiential event known as complex plans. This event will not repeat in Q2 2023.

Including these year ago revenues, we expect Q2 euro for your trends can be improved modestly as compared to Q1.

In terms of adjusted EBITDA is Jonah Marcella discussed in April we took further steps to reduce our fixed cost structure and a line resources to the format and platforms that will propel our future growth. These stats together with our previously executed cross savings have conditioned us to mitigate the majority of the bottom line and.

<unk> from lower revenues and achieve breakeven adjusted EBITDA and Q2 with.

With that I will transfer financial outlook for Q2 2023, we expect overall revenues in the range of 76 to 81 million or 24% to 29% lower than the year ago quarter.

We expect this revenue decline in conjunction with the fully executed cost savings announced in mid April to results and adjusted EBITDA in the range of zero to 4 million.

And we expect to deliver full year 2023, adjusted EBITDA in the high teens millions.

As we leaned further into creators in AI, we see the opportunity to drive significant operating leverage and adjusted EBITDA margin improvement over time.

We look forward to sharing much more about our long term plans with you at first of all Investor day. Thank you and we look forward to taking your questions at our Investor Day. This Thursday.

The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

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