Q3 2023 BuzzFeed Inc Earnings Call

November 2, 2023

Yeah.

Good day and thank you for standing by welcome to the Buzzfeed, Inc. Third quarter 2023 earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone you will then hear an automated message advising.

Your hand is raised to withdraw your question. Please press star one one again please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker.

Korea Senior Vice President of Investor Relations. Please go ahead.

Hi, everyone welcome to Buzzfeed Inc's third quarter 2023 earnings Conference call I'm, Amit, Tom Korea, Senior Vice President Investor Relations. Joining me today are founder and CEO, Jonah Peretti, President Marcello Martin and CFO Felicia della Fortuna.

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, our 2022 annual report on Form 10-K, or Q1, and Q2 quarterly reports on Form 10-Q and in our Q3 quarterly report on Form 10-Q to be filed tomorrow.

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 or future events.

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

The use of non-GAAP financial measures allows us to measure the operational strength and 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 GAAP 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 Joanna.

Thank you Anita and good afternoon, everyone and thank you for joining US today, we continue to operate in an unprecedented environment for digital media last quarter I outlined some of the challenges facing digital media companies in the current platform ecosystem, namely that audience traffic referrals from the major platforms has diminished as they continue to prioritize their own vertical video for.

Thats amid intense competition for audience share.

As a direct impact on our ability to monetize content across our portfolio of brands.

As you've seen by now this has resulted in significant year over year revenue decline in Q3. However, Q3 also reflects the full benefit of the restructuring actions, we announced earlier this year as a result, we were able to deliver a profitable Q3, an improvement over Q2 and last year quarter, Despite lower revenues.

We have already taken significant.

Significant steps to combat the ongoing traffic and monetization challenges earlier. This year, we made a decision to re prioritize editorial and creative resources across the business to focus on the platforms and formats with the highest potential for long term monetization.

We also made changes to our sales organization to align with the weaker demand environment, reducing organizational layers to drive efficiency and improved sales execution with these changes in place we continue to be laser focused on driving traffic directly to our owned and operated websites and apps in order to reduce our dependence on the major tech platforms for audience traffic improved.

Monetization and pivot our business to adjust to the new realities of an alternate digital media landscape specifically.

Specifically, we continue to introduce new AI assisted content formats to increase engagement and offer innovative advertising opportunities for our clients.

Expand our creator network and creator driven advertising opportunities to participate in the rise of vertical video and prioritize destination news content to grow Huff post front page audience we.

<unk> strong and differentiated IP across Buzzfeed complex hotlines, firstly fees, Casey and huffpost, each with a trusted and established brand identity.

For Buffy is pop culture entertainment and creating the best of the Internet using AI to shift content delivery and distribution for complex. That's delivering premium original content that covers the latest trends sneakers music and convergence culture for first we feel it is expanding the hot ones universe and building more IP at the intersection of food in pop culture for Casey.

It's attracting emerging food creators and leveraging the social platforms to build community around cooking.

For us its breaking news coverage and audience centric story frame assets direct front page audience.

Across the brand portfolio, we continue to lead the industry in terms of time spent in Q3 U S. Gen Z and millennials once again spent vastly more time consuming our content from that of any other digital media company in our competitive set according to Comscore I will highlight a few of the specific areas where were gaining traction with direct audiences and clients alike in the areas of <unk>.

AI creators and destination news content, starting with Busby, mostly it has always been a leader in data driven storytelling operating at the intersection of technology and media to curate the best of the Internet for our audiences over the past several months the bulk of the <unk> team has launched multiple new AI powered content formats from interactive quizzes to chop.

Our games to AI assisted content posts in Q3 audience traffic to our original concept was more than 60% higher relative to our non AI content in both page views and time spent with our AI content grew versus Q2.

Our chatbot games like under the Influencer the cloud Queen will determine whether you have what it takes to make it in the world of Internet influencing and.

And <unk>, where players get their very own Napa, maybe to raise and bond with have driven particularly deep audience engagement with time spent per user growing by double digit percentage versus Q2.

Building on success of these games with our web and App based audiences in particular, the <unk> team is working to bring even more gaming content directly to the Buzzfeed mobile app.

Complex Tentpole content continued to perform strongly in Q3 attractive premium brand sponsors across complex as flagship Youtube series Sneaker shopping <unk> 360, with speedy and more Q3 viewership on the platform grew approximately 40% year over year, attracting a wide variety of sponsorships from brands such as <unk>.

And Honda.

And the complex team is preparing to host its eighth iteration of complex Con later this month, featuring artistic director Cactus plant flea market and a performance by Grammy Award, winning rapper and producer Kid Cudi.

We have ample welcomed thousands of fans over two days and long Beach, California has experienced some of the world's most influential artisan brands for an immersive culture defining weekend of style sneakers art food and music.

First we feast or food and pop culture ran kicked off season 'twenty two of hot ones with guests in sync.

The episode immediately went viral with multiple major news outlets covering the interview throughout the quarter. The show continued to drive millions of weekly viewers and attract premium brand sponsors such as core state farm at Disney.

Since 2015 Hot once has attracted the biggest celebrity guests garnered more than 25 billion minutes, what's received multiple Emmy nominations and broken new ground for Youtube endemic talk shows and fans can't get enough in Q3 first we launched the spinoff series heat heaters as well as its latest CPG offering.

<unk> Hot pockets.

As the hot ones IP continues to find success with new IP extension opportunities. It has become the blueprint not only for digital media, but also for any entertainment brands looking to break through the noise and create true impact with audiences and consumers.

Turning to tasty and Q3 tasty continued to introduce new collaborations between brands and its residents. Following the success of the TC tick Tock series potatoes, 100 ways.

Tell them by one of <unk> inaugural residents, Gary Mobley Tasty launched several new vertical video series featuring original content from tasty residents and offering new partnership opportunities for clients. <unk> also made great strides in introducing new content for its outpaced audience that also appeals to clients in Q3, <unk> teamed up with bush beans to launching new meal.

<unk> to tasty App users. The campaign included customer recipe content that reached the client's target audience and drove consideration for key products.

In Q3, Huffpost drove record audience traffic to its homepage and web app since joining the but since joining since joining the buzzfeed sincerely embarrassed sees more than two years ago, demonstrating the brand's consistency attracting loyal homepage in App audiences also in Q3 Huffpost Embassy studios launched a new.

<unk> in partnership with the Acas titles.

Am I doing it wrong, which landed in the top 1% of podcast on its first day.

Our first shopping content also continues to gain momentum driving robust double digit growth in <unk> year over year during both July and October Amazon Prime days.

Across our portfolio of premium brands and IP, we reached millions of young people every day, who visit us directly to enjoy our content.

And with a strategic and organizational changes we executed earlier. This year, we are well positioned to drive a year over year improvement in adjusted EBITDA in Q4 and for the full year.

And we are continuing to protect our liquidity position as we work towards building a sustainable long term model for content creation.

Before closing these remarks I would like to thank Felicia, Delaware tuna for the years that she devoted to growing Betsy Felicia has been a key executive on my team and we wish her all the best in her new endeavors.

I am honored to work alongside our talented teams of creators journalists producers and all our employees as we continue to lead the industry forward with an unwavering commitment to our mission to spread truth Joy and creativity on the Internet.

Ill hand, the call off to Marcellus to discuss our business performance and operational highlights.

Al.

Thank you Jennifer and good afternoon, everyone.

Let me start by discussing our Q3 revenue performance and sharing some of the trends we are seeing across the business.

We delivered Q3 revenues in line with the guidance range, we provided in August which represented a decline of 29% year over year.

As John discussed monetization continues to be impacted by share gain across the major tech platforms as they compete for all against time.

Advertising revenues are more closely related with traffic. Despite the progress we are making with newer formats like AI assisted content as John discussed earlier traditional formats, you still make up the large majority of the content that we published.

Result, overall time spent as reported by Comscore continues to be impacted by the competitive landscape in.

In Q3, we reported time spent declined 19% year over year.

This along with the ongoing price pressure related to a tighter digital AD market contributed to a 35% decline in advertising revenue.

Within the traditional sales vertical revenues across CPG Entertainment financial services and Tech continues to see softness while retail revenues grew modestly during the quarter.

Content revenues declined 32% year over year, primarily driven by a decline in the number of branded content advertisers as increased competition for other Tyson has contributed to lower demand for branded content.

And commerce revenues were relatively stable year over year half a million dollars or about 3% lower when compared to the year ago quarter.

From the time, we start engaging with customers something they companion is fully executed it takes about six months.

Recently, we have started to see some green shoots from our recent sales reorganization and portfolio go portfolio wide go to market strategy.

Audience momentum around AI powered content has just started to open up new monetization opportunities with clients.

For example, in Q3, Reno Tahoe tourists, who selected Buzzfeed to develop the multifaceted campaign that leverage the true power of <unk>.

See the scale AI technology and reached to inspire seasonal travel to the region.

Safety has also made strides in introducing new content for the cost base audience launching in App meal planner sponsored by Bush themes.

Client excitement around complex Con. It's also building in September complex announced it would welcome return returning title sponsors ebay is Poland tequila until you're back to complex come 2020.

Although it is early we are encouraged by these developments.

We have much more work to do in order to combat the monetization pressures we are facing in the current environment.

With the changes we made earlier this year to realign the sales team, we are better positioned now to drive the speed and efficiency and improved sales execution.

And if we continue to ramp up these new products and initiatives with clients. We are committed to building a content creation model that makes our creative teams Marty.

And sustainably expand our output without increasing fixed costs.

Before I wrap up I wanted to briefly address our liquidity position.

We ended the quarter with $42 million in cash and cash equivalents 1 million higher.

Quarter over quarter, despite one time restructuring payments made in the quarter.

Further the fully executed restructuring actions have driven a significant reduction in our go forward cash cost structure.

With our restructuring payments behind us in line and in line of sight.

The seasonal lift in Q4 revenues relatively to Q3, we are continuing to protect our cash position.

As always we continue to explore additional opportunities to reduce cash based expenses and improve our overall liquidity position.

I also want to thanks, Felicia for the hard work and efforts during her tenure at Buzzfeed and for creating succession with Mike Palmer.

<unk> has been a key member of the finance team for years now and I'm excited about working closely with him you will hear more about that in upcoming earnings calls.

Thank you everyone I will now hand, the call to Felicia to discuss our financial results and outlook.

Thank you Marcella, although we delivered third quarter results in line with our August outlook for both revenue and adjusted EBITDA the significant year over year declines in revenue reflect the ongoing monetization and traffic challenges we are facing.

Overall revenues for Q3, 2023 declined 29% year over year to $73 $3 million with performance by revenue line as follows.

Advertising revenues declined 35% year over year to $32 6 million as the ongoing competition for both AD dollars and audience time continue to pressure, both advertiser demand and pricing content revenues declined 32% year over year to $26 2 million driven primarily by its <expletive>.

And the number of branded content advertisers as well as the timing of feature film delivery and release relative to the year ago quarter.

Q3 branded content net revenue retention was slower as compared to Q2.

Commerce, and other revenues of $14 $5 million declined $5 million or 3% year over year.

In terms of adjusted EBITDA, we were able to mitigate all of the lower revenue year on year with successful execution against the cost actions, we announced in April delivering Q3, adjusted EBITDA profit of $3 million.

$5 million improvement versus the year ago period, we also incurred charges that did not impact adjusted EBITDA a full reconciliation of our GAAP 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 $42 million, one willing and higher quarter over quarter further on a year to date basis, we used $2 4 million in operating cash inclusive of approximately $10 million in one time restructuring payments.

Turning to our audience engagement and time spent.

In terms of audience time spent we continue to report U S time spent across our owned and operated properties and third party platforms. According to Comscore.

This metric is intended to be viewed in conjunction with our advertising revenue performance.

In Q3 U S time spent as reported by Comscore remained relatively consistent with Q2 in terms of total hours, but declined 19% year over year to 92 million hours as we continue to face increased competition for audience time.

However, we once again outpaced peer digital media companies in our competitive set by a significant margin.

In terms of creator led vertical video ahead of scales monetization, we are continuing to gain audience momentum around newer platforms and formats, including Youtube shorts, Instagram rails, and Tic Toc in the third quarter output reached a new quarterly high of more than 10000 short form videos and the use of this content surpassed.

$1 billion on each of Instagram tick tock and Youtube. These trends together with the audience momentum that Jonah Marcellus discussed around our AI powered formats provide further validation that we are prioritizing the right initiatives for long term growth and monetization.

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

Starting with revenues.

Last year against the backdrop of macroeconomic uncertainty we saw muted seasonal lift from Q3 to Q4 in terms of overall revenues, while we do not expect a full return to the historical trend our fourth quarter outlook does anticipate a modest improvement in quarter over quarter revenue lift as compared to last year.

From a year over year perspective, entering Q4, we continue to see overall see softness in overall audience traffic and ongoing price compression. Additionally, we expect the ongoing uncertainty in the macro environment to put pressure on advertiser demand.

As a result, we do expect year on year revenue trends similar to what we saw in Q3.

You heard earlier, we continue to be laser focused on driving direct audience traffic and improving sales execution as we work to combat the headwinds facing digital media companies in the current environment.

In terms of adjusted EBITDA. We have included the full benefit of the restructuring actions in our cost of revenue and operating expense assumptions for Q4. Additionally, we consolidated our real estate footprint in Los Angeles, which will contribute to lower quarter over quarter operating expenses in Q4 as compared to Q3. These actions together with <unk>.

Seasonally higher revenues are expected to yield year on year improvement in Q4, adjusted EBITDA and adjusted EBITDA margin with that I will turn to our financial outlook for Q4 2023, we expect overall revenues in the range of $99 million to $110 million or 18% to 27% lower than the year ago quarter, we expect.

Adjusted EBITDA in the range of $20 million to $30 million approximately $8 million higher year on year at the midpoint.

Four we move to Q&A I want to reiterate Jonah and Marcellus remarks around liquidity, we have taken significant steps this year to reduce our go forward cash cost structure and we are focused on continuing to protect our cash position as we navigate the ongoing shifts in the digital media.

Thank you I'll now hand, it over to the operator. So we can take your question certainly I would now like to turn the call back to <unk> to answer questions that have been submitted via the web.

Great. Thank you we have received several questions already which is gathered here. So we'll go ahead and jump right in John and maybe starting with you. So from a just a short form content perspective can you help us frame the Rev.

New opportunity or trajectory in terms of short form content, we've seen platforms like Youtube and meta make major strides in monetizing this content, but how does that trickle down to buzzfeed.

Yes. Thank you so the major tech platforms are in competition with one another to secure audience share around these newer vertical video formats.

Tick talk really.

Set off that competitive environment, where everyone was working to match them. Both in terms of short form content and and AIG.

Alrighty.

And the results of this competitive dynamic has been that they've been slow to monetize and less willing to share monetization with publishers.

Because it's hit their own monetization.

And shorter shorter videos.

Our are harder to monetize than the longer form content that was.

Traditionally more popular on Youtube, and especially Youtube, but also also Facebook.

We have great relationships with the platforms and we're encouraged by platforms like Youtube and Tic Toc, which has the shorts program in pulse Vermeer.

And we're beginning to share in the monetization of short form.

We've also taken steps to adapt to this major shift in the marketplace, specifically, we've realigned resources to focus on the fastest growing platforms and formats. So we can participate in the growth of vertical video with advertisers directly.

And Thats, one having advertiser relationships as one of the areas of strength that we have for monetizing this kind of video.

And so as we continue to introduce and scale, our AI and greater products with audiences. We're also packaging these products up for direct selling to marketers.

As we discussed we're also working to drive traffic directly to our owned and operated websites and apps to combat the monetization pressures we are experiencing across the third party platforms and we are seeing.

From consumers to get out of the sort of endless scrolling of short form algorithmically promoted vertical video that they see on the platforms to content, where they can spend more time.

On the bus each site and apps.

Whether it's AI content like chop out games or other kinds of content, where we're spending much more time with each piece of content.

Getting out of that the ADHD sort of scrolling behavior that sometimes can be a bit much for consumers.

And so we're seeing validation of our strategy and in terms of deeper engagement with Buzzfeed airpower content.

Strong viewership growth around our short form content, and then traction with clients and new product offerings like AI and creator growth in the front page of Av.

Of Huffpost, where we see a lot of strength, but.

But we still have more work to do to scale those those initiatives in these marketplace shifts are having a real.

Having an unprecedented impact on digital media companies and it will take time for these new initiatives to ramp up and scale and offset some of the traffic and monetization challenges reflected in our financial performance.

Great. Thank you for that and just maybe one more specifically on.

Third party monetization a couple of months ago Amazon announced.

But see it as one of its.

Our partners in terms of its sponsored product.

Advertising and I'm, just curious sort of from your perspective, why did Amazon chose Buzzfeed How's the partnership progressing and can you speak to the materiality or potential for for this asset monetization.

Sure. So first off we're thrilled to be selected as a trusted partner for Amazon sponsored products advertising initiatives.

Just announced in August so it's still early to.

To fully to fully.

Reap the benefits for both parties.

<unk> selected us for our scale and our audience reach.

And we have a long standing relationship with Amazon as it relates to affiliate and our commerce business.

The track record for driving meaningful GMB for them through our editorial shopping content.

So this is why many of the largest retailers from Walmart or target to wafer choose to partner with us to tap into this highly engaged motivated consumer audience and drive real world transactions and it really speaks to the strength of our affiliate model and driving conversion and also just that those audiences that are on our shopping content have.

A lot of.

Sure.

High engagement and a willingness to discover new things a trick transact and so that I think plays really well.

When it comes not just commerce, but also to new advertising and advertising partnerships.

Thank you.

Marissa, maybe moving on to you in terms of the relationship between revenue growth and cost growth.

Sort of looking into next year into 2024, how should we think about the relationship between revenue growth and cost growth.

Thank you Amit for the question.

So in terms of revenue I want to repeat the fact that we are operating in an unprecedented environment for you guys on media with ongoing challenges I'm trying a husky has explained as well.

And it's really hard to predict how the micro dynamics are going to unfold in 2024, and so we are very focused on what we can control.

That it is driving audience traffic directly to our owned and operated websites and apps scanning.

Gaming, our AI products and formats and improving execution on onsite.

So in doing so we are working to stem the declines in traffic and monetization and open up new sources of monetization with Michael.

And from a cost perspective for us.

Talking previous earnings calls, we have taken several steps in in 2020 to 'twenty, two 'twenty three to significantly reduce our operating expense and cash cost structure and our Q4 guidance reflects the full benefits of these actions and those those initiatives underway.

Previous NPV.

<unk> N Dcs are positioning us to enter 2024 with a much leaner cost structure year over year.

With flex and weaker demand environment and meet the challenges that we and many of our digital peers are facing these days.

Thank you Marcella.

So just to take a step back.

John maybe back to you.

In terms of some of the revenue dynamics that Marcellus just discussed as well as the service platform landscape that you discussed on the call earlier.

In your view is the business still positioned to capture revenue synergies from the.

The combined brand portfolio or can you share your kind of latest thoughts on that.

Yes, I mean, theres certainly a lot of changes and challenges in the digital media ecosystem right now that are being felt felt by companies across across our industry.

And I think.

The thing that really.

Separates us is that we have strong differentiated IP.

Each brand has a really distinct voice that resonates in the marketplace with both audiences and advertisers.

And we built a platform that allows us to plug assets in like like Hep post that make them profitable and grow traffic.

We're always open to opportunities to consider a range of options depending on what makes the most sense for for the business.

Overall.

I would say that in a market like this.

Very challenging to build new brands and to scale and build a brand that <unk>.

People will know and love widely that consumers will will will resonate with and say hey, I've heard of that brand I know that brand I love that brand I know I get from that brand.

And we have many brands that already have broad awareness and love from a wide range of different types of consumers and demographics and building that.

Really hard to do right now and so we feel very fortunate that.

We have these brands is part art part of our company and that there is.

A lot of strategic value as well as opportunity to to drive revenue from those from those brands even in even in a tough market.

So to pivot to liquidity each of the three of you.

Discuss liquidity on the call and maybe Marcella you can sort of elaborate on this but just given the revenue trends in the current sort of cash position. The company is it fair to say that the company is considering asset sales or other options to access additional liquidity or how would you sort of is there any.

More that you can share there.

Yes sure. Thank you for the question again, so let me first address liquidity.

So at the end of the quarter, we ended with cash on cost equivalent of approximately $42 million, which is a million dollars higher quarter over quarter. Despite one time restructuring payments of approximately $2 million.

Further on a year to date basis, we used $2 4 million in operating costs inclusive of approximately 10 million in one time restructuring payments.

And we have restructuring payments now behind us.

Exit Q2.

We expect to realize the full benefit of our restructuring program in Q4 on an ongoing basis.

And Additionally, I think we talked a little bit about this earlier as well that we have completed the consolidation of our.

Real estate footprint in Los Angeles that will help us to drive part of the reduction in quarter over quarter operating expenses and we are always looking.

Trying to continue to look for ways to reduce our cash cost structure and further optimize our liquidity overall liquidity position.

In terms of revenue last quarter and actually in this quarter. That's why do we discussed that the sales cycle is cloud.

About six months I would be pretty low.

But we have already started to see some green shoots from the changes that we have enacted.

In that the last restructuring of that in the face of organization with regards to the realignment and the go to market strategy.

And our AI and creator products are attracting interest in AD dollars from from clients.

John.

I mentioned earlier and we continue to be laser focused on improving direct traffic on combating the monetization Italians Jason that we are facing these days.

Alright, I think we have time for one last question.

Solution may be to touch on the guidance.

Based on your Q4, adjusted EBITDA guide it looks like you're now expecting full year profit.

Slightly below the guidance you had shared back in May.

What has changed since Investor day with respect to Bottomline expectation.

So lets Janet discussed audience traffic referrals from the major platforms have declined further as they continue to prioritize their own formats amid all of the intense competition for audience share and this has had a direct impact on our ability to monetize content across our portfolio of brands.

Additionally, as we've moved through the year, we've continue to face macro headwinds across advertising market vertical video audience consumption as well as the integration efforts.

And as a result, although we had initially assumed to return to more normalized seasonality in the back half these trends have impacted our back half despite the easing comps.

However, despite this pressure on top line revenues, we were able to deliver improvement to the bottom line in Q3 versus Q2 and versus the year ago quarter and entering Q4, our guidance assumes the full operating expense benefit of the cost actions. We did announce earlier. This year. So we do expect to deliver Q4 and full year adjusted EBITDA.

A year ago levels.

Thank you.

I would now like to.

And this concludes today's conference call. Thank you for participating you may now disconnect.

Yeah.

Everyone else has left the call.

It looks like no one else is going to join this call.

Goodbye.

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Raised to withdraw your question. Please press star one again, please be advised that today's conference is being recorded I would now like to hand, the conference over to your Speaker and Beta Tom Korea, Senior Vice President of Investor Relations. Please go ahead.

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.

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

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

A reconciliation of these GAAP 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 Joanna.

Thank you Amanda good afternoon, everyone and thank you for joining US today, we continue to operate in an unprecedented environment for digital media last quarter I outlined some of the challenges facing digital media companies in the current platform ecosystem, namely that audience traffic referrals from the major platforms has diminished as they continue to prioritize their own vertical video <unk>.

Mats amid intense competition for audience share.

As a direct impact on our ability to monetize content across our portfolio of brands.

We have already taken.

Organizationally layers to drive efficiency and improved sales execution with these changes in place we continue to be laser focused on driving traffic directly to our owned and operated websites and apps in order to reduce our dependence on the major tech platforms for audience traffic improve monetization and pivot our business to adjust to the new realities of an alternate digital media <unk>.

Okay.

Specifically, we continue to introduce new AI assisted content formats to increase engagement and offer innovative advertising opportunities for our clients.

Spanned our creator network and creator driven advertising opportunities to participate in the rise of vertical video and prioritize destination news content to grow Huff post front page audience.

We have strong and differentiated IP across Buzzfeed complex hotlines, firstly fees, Casey and huffpost, each with a trusted and established brand identity.

For Buffy is pop culture entertainment and creating the best of the Internet using AI to shift content delivery and distribution for complex that's delivering premium original content that covers the latest trends sneakers music and convergence culture.

First we feel it is expanding the hot ones universe and building more IP at the intersection of food in pop culture for tasty, it's attracting emerging food creators and leveraging the social platforms to build community around cooking.

For us its breaking news coverage and audience centric stories for a massive direct front page audience.

Across our brand portfolio, we continue to lead the industry in terms of time spent in Q3 U S. Gen Z and millennials once again spent vastly more time consuming our content to that of any other digital media company in our competitive set according to Comscore I will highlight a few of the specific areas, where we gained traction with direct audiences and clients alike in the areas of <unk>.

AI creators and destination news content, starting with Busby Busby. It has always been a leader in data driven storytelling.

Operating at the intersection of technology and media to curate the best of the Internet for our audiences over the past several months. The <unk> team has launched multiple new AI powered content formats from interactive quizzes to chop out games to AI assisted content posts in Q3 audience traffic to our original concept was more than 60%.

Higher relative to our non AI content.

Both page views and time spent with our AI content grew versus Q2.

Our chatbot games like under the Influencer the cloud Queen will determine whether you have what it takes to make it in the world of Internet influencing.

And net Bogacki, where players get their very own nappo baby to raise and bond with have driven particularly deep audience engagement with time spent per user growing by double digit percentage versus Q2.

Building on the success of these games with our web and App based audiences in particular, the Buzzfeed team is working to bring even more gaming content directly to the Buzzfeed mobile app.

And Honda.

The complex team is preparing to host its eighth iteration of complex Con later this month, featuring artistic director Cactus plant flea market and a performance by Grammy Award, winning rapper and producer Kid Cudi.

First we feast or food and pop culture ran kicked off season 'twenty two of hot ones with guests in sync.

<unk> Hot pockets.

Turning to tasty and Q3 tasty continued to introduce new collaborations between brands and its residents. Following the success of the TC tick Tock series potatoes, 100 ways.

Tell them by one of the Pcs inaugural residents Gary Mobley Tasty launched several new vertical video series featuring original content from tasty residents and offering new partnership opportunities for clients. <unk> also made great strides in introducing new content for its outpaced audience that also appeals to clients in Q3, <unk> teamed up with bush beans to launching new meal.

<unk> to tasty App users. The campaign included customer recipe content that reached the client's target audience and drove consideration for key products.

In Q3, Huffpost drove record audience traffic to its homepage and web app since joining the but since joining since joining the buzzfeed ciceronian buzzfeed more than two years ago, demonstrating the brand's consistency attracting loyal homepage in App audiences also in Q3 Huffpost Embassy studios launched a new pod.

<unk> in partnership with the Acas title.

Doing it wrong, which landed in the top 1% of podcast on its first day.

Our first shopping content also continues to gain momentum driving robust double digit growth in <unk> year over year. During both July and October Amazon Prime days across our portfolio of premium brands and IP, we reach millions of young people every day, who visit us directly to enjoy our content and with the strategic.

<unk> and organizational changes we executed earlier this year, we are well positioned to drive a year over year improvement in adjusted EBITDA in Q4 and for the full year.

And we are continuing to protect our liquidity position as we work towards building a sustainable long term model for content creation.

I am honored to work alongside our talented teams of creators journalists producers and all of our employees as we continue to lead the industry forward with an unwavering commitment to our mission to spread truth Joy and creativity on the Internet.

I'll now hand, the call off to Marcellus to discuss our business performance and operational highlights.

Thank you Jennifer and good afternoon, everyone.

Let me start by discussing our Q3 revenue performance on sharing some of the trends we are seeing across the business.

We delivered Q3 revenues in line with the guidance range, we provided in August which represented a decline of 29% year over year.

As John discussed monetization continues to be impacted by share gain across the major tech platforms as they compete for audience time.

Advertising revenues are more closely related with traffic.

The progress we are making with newer formats like AI assisted content as John discussed earlier traditional formats, you still make up the large majority of the content that we published.

As a result overall time spent as reported by Comscore continues to be impacted by the competitive landscape in.

In Q3, we reported time spent declined 19% year over year.

This along with the ongoing price pressure related to a tighter digital AD market contributed to a 35% decline in advertising revenue.

Within the traditional sales vertical revenues across CPG Entertainment financial services and Tech continues to see softness while retail revenues grew modestly during the quarter.

Content revenues declined 32% year over year, primarily driven by a decline in the number of branded content advertisers as increased competition for advertising dollars has contributed to lower demand for branded content.

And commerce revenues were relatively stable year over year half a million dollars or about 3% lower when compared to the year ago quarter.

From the time, we start engaging with customers something they companion is fully executed it takes about six months.

Recently, we have started to see some green shoots from our recent sales reorganization and portfolio loan portfolio wide go to market strategy.

Audience momentum around AI powered content has just started to open up new monetization opportunities with clients for.

For example in Q3, Reno Tahoe tourism selected bus seat to developed a multifaceted campaign that leverage the true power of bus fleet of scale AI technology and reached to inspire seasonal travel to the region.

Safety has also made strides in introducing new content 40 base audience.

And in up meal planner sponsored by Bush beams.

Client excitement around complex Con is also building in September complex announced it would welcomed return returning titled sponsors ebay is Poland Tequila and Toyota back to complex <unk> 2020.

Although it is early we are encouraged by these developments.

But we have much more work to do in order to combat the monetization pressures we are facing in the current environment.

With the changes we made earlier this year to realign the sales team, we are better positioned now to drive the speed and efficiency and improved sales execution.

And if we continue to ramp up these new products and initiatives with clients. We are committed to building a content creation model that makes our creative teams more efficient and sustainably expand our output without increasing fixed costs.

Before I wrap up I want to briefly address our liquidity position.

We ended the quarter with $42 million in cash and cash equivalents 1 million higher.

Quarter over quarter. These find onetime restructuring payments made in the quarter.

Further the fully executed restructuring actions have driven a significant reduction in our go forward cash cost structure.

With our restructuring payments behind us in line and in line of sight.

The seasonal lift in Q4 revenues relatively to Q3, we are continuing to protect our cash position.

As always we continue to explore additional opportunities to reduce cash based expenses and improve our overall liquidity position.

I also want to thanks, Felicia for the hard work and efforts during her tenure at Buzzfeed and for creating succession with Mike Omar.

That has been a key member of the finance team for years now and I'm excited about working closely with him you will hear more about that in upcoming earnings calls.

Thank you everyone I will now hand, the call to Felicia to discuss our financial results and outlook.

Thank you Marcella, although we delivered third quarter results in line with our August outlook for both revenue and adjusted EBITDA the significant year over year declines in revenue reflects the ongoing monetization and traffic challenges we are facing over.

Overall revenues for Q3, 2023 declined 29% year over year to $73 3 million with performance by revenue line as follows.

Advertising revenues declined 35% year over year to $32 6 million as the ongoing competition for both AD dollars and audience time continue to pressure, both advertiser demand and pricing.

<unk> revenues declined 32% year over year to $26 2 million driven primarily by a decline in the number of branded content advertisers as well as the timing of feature film delivery and release relative to the year ago quarter.

Q3 branded content net revenue retention was lower as compared to Q2.

Commerce and other revenues of $14 $5 million declined <unk> 5 million or 3% year over year.

We ended the quarter with cash and cash equivalents of approximately $42 million one whaling in higher quarter over quarter further on a year to date basis, we used $2 4 million in operating cash inclusive of approximately $10 million in one time restructuring payments.

Turning to audience engagement and time spent.

In terms of audience time spent we continue to report U S time spent across our owned and operated properties and third party platforms. According to Comscore.

This metric is intended to be viewed in conjunction with our advertising revenue performance.

However, we once again outpaced peer digital media companies in our competitive set by a significant margin.

In terms of creator led vertical video ahead of scales monetization, we are continuing to gain audience momentum around newer platforms and formats, including Youtube shorts, Instagram rails and picked up in the third quarter output reached a new quarterly high of more than 10000 short form videos and the use of this content surpassed.

$1 billion on each of Instagram tick tock and Youtube. These trends together with the audience momentum that Joan and Marcellus discussed around our AI powered formats provide further validation that we are prioritizing the right initiatives for long term growth and monetization before.

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

Starting with revenues.

As a result, we do expect year on year revenue trends similar to what we saw in Q3.

As you heard earlier, we continue to be laser focused on driving direct audience traffic and improving sales execution as we work to come back the headwinds facing digital media companies in the current environment.

Adjusted EBITDA in the range of $20 million to $30 million approximately $8 million higher year on year at the midpoint.

Before we move to Q&A I want to reiterate Jonah and Marcellus remarks around liquidity, we have taken significant steps this year to reduce our go forward cash cost structure and we are focused on continuing to protect our cash position as we navigate the ongoing shifts in the digital media ecosystem.

I'll now hand, it over to the operator, so we can take your question certainly I would now like to turn the call back to Amina to answer questions that have been submitted via the web.

Great. Thank you we have received several questions already which is gathered here. So we'll go ahead and jump right in general maybe starting with you.

So from a just a short form content perspective can you help us frame the revenue opportunity or trajectory in terms of short form content, we've seen platforms like Youtube and meta make major strides in monetizing this content, but how does that trickle down to buzzfeed.

Yes. Thank you so the major tech platforms are in competition with one another to secure audience share around these newer vertical video formats.

Ticked up really.

Set off that competitive environment, where everyone was working to match them. Both in terms of short form content and and AI.

Ability.

And the results of this competitive dynamic has been that they've been slow to monetize and less willing to share monetization with publishers.

In part because it's hit their own monetization.

And shorter shorter videos.

Our are harder to monetize than the longer form content that was traditionally more popular on Youtube and especially Youtube, but also also Facebook.

We have great relationships with the platforms and we're encouraged by platforms like Youtube and Tic Toc, which has the shorts program in pulse Premier.

And we are beginning to share in the monetization of short form.

And Thats, one having advertiser relationships as one of the areas of strength that we have for for monetizing this kind of video.

And so as we continue to introduce and scale, our AI and greater products with audiences. We're also packaging these products up for direct selling to marketers.

Interest from consumers to get out of the sort of endless scrolling of short form algorithmically promoted vertical video that they see on the platforms to content, where they can spend more time like on the Buzzfeed site and apps.

Whether it's AI content like chop out games or other kinds of content, where we are spending much more time with each piece of content.

Getting out of that the ADHD sort of scrolling behavior that sometimes can be a bit much for consumers.

And so we're seeing validation of our strategy and in terms of deeper engagement with Buzzfeed airpower content.

Strong viewership growth around our short form content, and then traction with clients and new product offerings like AI and creator growth in the front page of.

Of Huffpost, where we see a lot of strength, but.

But we still have more work to do to scale those those initiatives in these marketplace shifts are having a real.

Great. Thank you for that and just maybe one more specifically on.

Third party monetization a couple of months ago Amazon announced.

<unk> see it as one of it.

Our partners in terms of its sponsored products advertising and I'm, just curious sort of from your perspective, why did Amazon choose Buzzfeed How's the partnership progressing and can you speak to materiality or potential for for this asset monetization.

Sure. So first off we're thrilled to be selected as a trusted partner for Amazon sponsored products advertising initiative.

Just announced in August so it's still early.

Philly to fully.

Reap the benefits for both parties based.

They selected us for our scale and our audience reach.

And.

We have a longstanding relationship with Amazon as it relates to affiliate and our commerce business.

<unk> track record for driving meaningful GMB for them through our editorial shopping content.

And so this is why many of the largest retailers from Walmart target to wafer choose to partner with us to tap into this highly engaged motivated consumer audience and drive real world transactions and it really speaks to the strength of our affiliate model and driving conversion and also just that those audiences that are on our shopping content.

A lot of.

Very high engagement and a willingness to discover new things transact and so that I think plays really well.

When it comes not just commerce, but also to new advertising and advertising partnerships. Thank you.

Marissa, maybe moving on to you in terms of the relationship between revenue growth and cost growth.

Sort of looking into next year into 2024, how should we think about the relationship between revenue growth and cost growth.

Thank you Amit for part of the question.

So in terms of revenue I want to repeat the fact that we are operating in an unprecedented environment for you guys on media with ongoing challenges in China has explained as well.

And it's really hard to predict how the micro dynamics are going to unfold in 2024, and so we are very focused on what we can control.

That it is so.

Writing audience traffic directly to our owned and operated websites are now scaling our AI products and formats and improving execution on onsite.

So in doing so we are working to stem the declines in traffic and monetization and open up new sources of monetization with Michael Kors.

And from a cost perspective for us.

We have talking previous earnings calls, we have taken several steps in 2020 to 'twenty, two 'twenty three to significantly reduce our operating expense.

Cash cost of structure.

And our Q4 guidance reflects the full benefits of these actions and.

Most of those initiatives that we took in previous in previous years in D. C are positioning us to enter 2024 with a much leaner cost structure year over year that reflects a weaker demand environment and meet the challenges that we and many of our digital peers are facing these days.

Thank you Marcella.

So just to take a step back.

John maybe back to you.

In terms of some of the revenue dynamics that Marcellus just discussed as well as the service platform landscape that you discussed.

Discussed on the call earlier.

From true in your view is the business still positioned to capture revenue synergies from.

The combined brand portfolio or can you share your kind of latest thoughts on that.

Yes, I mean, theres certainly a lot of changes and challenges in the digital media ecosystem right now they are being felt felt by companies across across our industry.

And I think.

The thing that really.

Separates us is that we have strong differentiated IP.

Each brand has it really distinct voice that resonates in the marketplace with both audiences and advertisers.

And we built a platform that allows us to plug assets in like like Hep posts that make them profitable and grow traffic.

We're always open to opportunities to consider a range of options depending on what makes the most sense for the business.

Overall.

I would say that in a market like this.

Very challenging to build new brands and to scale and build a brand that.

People will know and love widely that consumers will will will resonate with and say hey, I have heard of that brand I know that brand I love that brand I know, what I get from that brand.

And we have many brands that already have broad awareness and love from a wide range of different types of consumers and demographics and building that.

Really hard to do right now and so we feel very fortunate that.

We have these brands is part art part of our company and that there is.

A lot of strategic value as well as opportunity to to drive revenue from those from those brands even in even in a tough market.

So to pivot to liquidity each of the three of you.

Discuss liquidity on the call.

Marcella you can sort of elaborate on this but just given the revenue trends in the current sort of cash position. The company is it fair to say that the company's considering asset sales or other options to access additional liquidity or how would you sort of is there anything more that you can share there.

Yes sure. Thank you for the question again, so let me first address liquidity.

So at the end of the quarter, we ended with cash cash equivalents of approximately $42 million, which is a million dollars higher quarter over quarter. Despite one time restructuring payments of approximately $2 million.

Further on a year to date basis, we used $2 4 million in operating costs inclusive of approximately $10 million in one time restructuring payments.

We have restructuring payments now behind us.

You said you can see we expect to realize the full cost benefit of our restructuring program in Q4 on an ongoing basis.

And Additionally, I think we talked a little bit about this earlier as well that we have completed the consolidation of our.

Our real estate footprint in Los Angeles that will help us to drive part of the reduction in quarter over quarter operating expenses.

And we are always looking.

I'm trying to continue to look for ways to reduce our cash cost structure and further optimize our liquidity or our liquidity position.

And in terms of revenue last quarter and actually in this quarter. That's why do we discussed that the sales cycle is that it's about six months I would be pretty low but.

But we have already started to see some green shoots from the changes that we have enacted.

In that the last restructuring of them deciding how conversation with regards to the realignment and they go to market strategy.

And our AI and creator products are attracting interest in AD dollars from from clients.

John.

I mentioned earlier and we continue to be laser focused on improving the next trough bacon combating the monetization of Italians juice that we are facing these days.

Alright, I think we have time for one last question.

Felicia maybe to touch on the guidance.

Based on your Q4, adjusted EBITDA guide it looks like Youre now expecting full year profit.

Slightly below the guidance you had shared back in May.

What has changed since Investor day with respect to bottom line expectations.

So let's discuss the audience traffic referrals from the major platforms have declined further as they continue to prioritize their own formats amid all of the intense competition for audience share and this has had a direct impact on our ability to monetize content across our portfolio of brands.

Additionally, as we've moved through the year, we've continue to face macro headwinds across advertising market vertical video audience consumption as well as the integration efforts and as a result, although we had initially assumed to return to more normalized seasonality in the back half these trends have impacted our back half despite the easing comps.

However, despite this pressure on top line revenues, we were able to deliver improvement to the bottom line in Q3 versus Q2 and versus the year ago quarter and entering Q4, our guidance assumes the full operating expense benefit of the cost actions, we announced earlier. This year. So we do expect to deliver Q4 and full year adjusted.

EBITDA above a year ago levels.

Thank you.

Okay, I would now like to.

And this concludes today's conference call. Thank you for participating you may now disconnect.

Q3 2023 BuzzFeed Inc Earnings Call

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