Q4 2023 BuzzFeed Inc Earnings Call
Okay.
Yeah.
Speaker Change: Thank you for standing by and welcome to the Buzzfeed, Inc. Fourth quarter 2023 earnings Conference call.
Speaker Change: At this time all participants are in a listen only mode.
Speaker Change: I would now like to hand, the call over to SVP Investor Relations, Amit Our South Korea. Please go ahead.
Speaker Change: Hi, everyone welcome to bus Feedings fourth quarter 2023 earnings Conference call I'm, Amit at South Korea's Senior Vice President of Investor Relations and joining me today are CEO, Jonah Peretti and CFO, Matt Omer.
Amit: 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.
Amit: Factors that could cause these results to differ materially are set forth in today's press release, our 2023 annual report on Form 10-K to be filed with the SEC and our 2023 quarterly reports on Form 10-Q.
Amit: 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.
Amit: During this call we present, both GAAP and non-GAAP financial measures, including adjusted EBITDA and adjusted EBITDA margin.
Amit: The use of non-GAAP financial measures allows us to measure the operational strength and performance of our business.
Amit: To establish budgets and to develop operational goals for managing our business.
Amit: 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.
Amit: A reconciliation of these GAAP to non-GAAP measures is included in today's earnings press release.
Amit: 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 Jenna.
Jenna: Thank you Anita good afternoon, everyone and thank you for joining us today.
Jenna: At Buzzfeed the way, we pursue our mission to spread truths joy and creativity on the Internet is as important as the mission itself. We've never been a conventional media company focused on just content output, we've always been as obsessed with the medium as we are with the message.
Jenna: By embracing new technologies pioneering new format and innovating to create new ways to bring our content to life. We have built some of the most iconic brands on the Internet.
Jenna: Our early teams responsible for much of the foundational work establishing social media.
Jenna: It is now commonplace.
Jenna: We started but when we started it wasn't the norm for our content to be sure for content to be Shareable relabel identity firming and purpose built to connect people in the fandom and affinity groups based on shared passion.
Jenna: And over the past 15 years, we've been part of this medium emerging maturing coming ubiquitous and inspiring media outlets as diverse as the New York Times and Mr. Beast.
Jenna: By empowering these same core tenants of identity fandom and share ability I believe we have a tremendous opportunity in front of us to build the defining media company for the AI era.
Jenna: To capitalize on.
Jenna: On this opportunity we have aggressively refocused our business around our iconic brands Buzzfeed Huff post tasty, firstly piece and hot ones, which combined continued to lead the industry in Q4.
Jenna: Terms.
Jenna: Time spent according to Comscore, our owned and operated websites and apps, where we have more control over monetization or more are most scale. Our most scalable highest margin tech led revenue streams chromatic advertising and affiliate commerce with this as a backdrop I would like to share some important and exciting updates on our.
Jenna: Business.
Jenna: We continue to operate in a period of unprecedented change for digital media.
Jenna: Last month, we announced the sale of complex for approximately two times 2023 revenue in an all cash deal that brought in $114 million for the company.
Jenna: Our acquisition of complex in 2021 coincided with the downturn in the advertising market.
Jenna: Instead of being able to close bigger bundled portfolio deals each of our brands ended up competing against each other for the available smaller opportunity.
Jenna: The sale marks an inflection point for Buzzfeed, Inc. As we refocus our business around scalable high margin <unk> revenue stream.
Jenna: Complex with an asset to drive revenues predominantly from lower margin businesses.
Jenna: <unk> branded video content and events.
Following the sale of the majority of our revenue is now generated through programmatic advertising and affiliate commerce, both capital efficient high margin scalable businesses that lever or that leverage our existing tech infrastructure and have less exposure to the market and secular headwinds that are of that.
Jenna: We have experienced over the last several quarters.
Jenna: Further selling complex has allowed us to restructure our business around our own sites and apps, where we can better control monetization and build amazing experiences for our audience.
Jenna: The sale proceeds also improved our liquidity, helping us reduce our debt and interest obligations and optimize working capital.
As a result, our company is now organized around the business lines that have historically been the most stable profitable and nimble in fact gross margin on revenues from continuing operations across Buzzfeed Huffpost hasty first we'd be hot one with approximately 44% as compared to a 40% gross margin for the combined.
Jenna: Business, including complex, a different 400 basis points.
Jenna: Turning to our financial results for our continuing operations, excluding complex fourth quarter revenues were four.
Jenna: Our $76 million down 26% year over year in line with our revised outlook outlook provided last month, we arent satisfied with this performance and have made changes to drive improvements in our performance, which I will discuss shortly.
We delivered fourth quarter adjusted EBITDA of $15 million also in line with our revised outlook.
Jenna: First year revenues were $253 million also down.
Jenna: Full year revenues.
$253 million also down 26% year over year, we generated an adjusted EBITDA loss of $5 million versus approximately breakeven adjusted EBITDA in the prior year for.
Jenna: For both Q4 and the full year adjusted EBITDA remained relatively stable year over year. Despite significant top line pressure, which reflects the cost savings initiatives, we implemented throughout 2023.
Speaker Change: I think it is worthwhile to outline the current dynamics impacting our revenue performance as well as some of the strategic decisions we've made to adapt in this environment.
Speaker Change: First digital publishers continue to be impacted by intense competition for audience time between the largest platform as these platforms try to retain users. They are sending less traffic to publishers, which has impacted our ability to drive advertising revenues based on audience time spent.
Speaker Change: Second in a tough market for digital advertising our clients are often had to forego custom branded advertising campaigns. This has resulted in lower demand for custom branded video products and experiential events and.
Speaker Change: And third with limited budgets partners want to go deeper with one brand with one specific target audience. They are also they are no longer looking for offerings from a collection of brands in this environment. Our brands ended up competing against one another for fewer opportunities.
Speaker Change: To address these headwinds we have made strategic organizational changes that I am excited to share with you today first in order to reduce our dependence on the major platforms for audience traffic, we are prioritizing new content initiatives on our owned and operated websites and apps.
Speaker Change: Where we have a loyal highly engaged audience with more control of our monetization specifically we are harnessing the power of AI to get more leverage on human creativity. This includes leaning into AI assisted content formats that are more engaging for our audience as well as AI tools intact that make our teams and our clients more efficient.
Speaker Change: Second we are moving away from branded video to focus on our most scalable tech led and highest margin revenue lines, specifically programmatic advertising and affiliate Commerce together these businesses drove more than a $130 million in revenue in 2023.
Speaker Change: Divesting complex was a significant step in this direction since branded video drove the majority of complex revenue.
Speaker Change: This was also some of our lowest margin revenue positioning us to improve profitability as a result.
Speaker Change: Third we are reorganizing our sales team by brand to enable this we implemented the restructuring program. We shared with you last month to reduce centralized costs and direct more dedicated resources to our individual brands Buzzfeed tasty Hershey piece the hotline.
This includes operating with a much leaner direct sales team as we leverage our existing tech infrastructure to drive programmatic advertising revenue.
Speaker Change: I am confident this is the right strategy for our business because it is centered on our leadership in the marketplace across our network of brands. We continue to lead the industry in terms of time spent.
Speaker Change: In Q4 audiences. Once again spent more time consuming our content than that of any other digital media company in our competitive set according to Comscore.
Speaker Change: This was driven by strong and differentiated IP across Buzzfeed, how post ADC <unk> and Heartland and each has a trusted and established brand identity for Buzzfeed It as pop culture Entertainment and creating the best of the Internet as we continue to innovate around new AI assisted formats and develop a more personalized experience, we see huge opportunity to reach even more.
Speaker Change: And people and deepen engagement with our loyal website and App based users in fact, among our App based audience. We grew time spent per page view quarter over quarter throughout 2023.
Speaker Change: For Hep post its breaking news coverage and audience centric story is very massive director front page audience for.
Speaker Change: The brand is also reaching its audience in new ways with expanded shopping content into new podcast, both of which have opened up new sources of advertising revenue.
Speaker Change: For tasty, it's building the next generation of food creators with more than $300 million Cross platform followers three times the size of the next closest competitor TC continues to lead the way in 2023 tasty drove impressive growth in viewership and it's it's.
Speaker Change: It's short form <unk> content up 25% year over year to reach 5 billion views across platform.
Speaker Change: <unk> has translated this momentum into new opportunities for brands to partner with us, including sponsorships of creator video series brand integrations with greater recipe content.
Speaker Change: An advertiser sponsored experiences to connect creators and food lovers in real life.
Speaker Change: For peace for first we feast it is expanding the hot ones universe and building more IP at the intersection of food in pop culture with over 30 billion minutes watched to date hotlines continues to attract premium.
Speaker Change: <unk> sponsorships with household names like stripe zelle and snickers. The franchises continued to build on its cultural relevance and serve the insatiable demand of it spans with spinoff series like heaters, and new CPG launches like hotlines pockets.
Speaker Change: Before I wrap up I want to reiterate my excitement for the future we have taken steps to stabilize our business. We are organized around our most profitable business lines and we are excited to continue building on this stronger foundation by innovating to create the future of media.
Speaker Change: More specifically, we have a tremendous opportunity in front of us to build the defining media company for the AI era, we have only begun to see the power of AI and transforming the way, we live and the way we work the way we interact the internet will be a vastly different place in a few years AI will emerge as an entirely new medium creativity will floor.
Speaker Change: And I believe Buzzfeed, Inc. Is at the forefront of that change we're already harnessing the capabilities of AI to be more creative and more efficient and while today. It is primarily a tool to adapt our existing businesses.
Speaker Change: I foresee entirely new businesses and revenue opportunities emerging as new technology evolve and we continue to learn from our own experimentation with AI I.
Speaker Change: I am excited to work alongside you our employees creators partners and shareholders to realize this vision and I look forward to sharing more in our annual letter to shareholders next month.
Speaker Change: I'll now hand, the call over to Matt to discuss our financial performance and outlook.
Matt Omer: Thank you Donna.
Matt Omer: I want to Echo John's remarks regarding the strength of our go forward business.
Matt Omer: With the sale complex behind us and our restructuring program nearly fully executed. We believe we are a stronger more stable and more profitable business.
We now have less exposure to declining lower margin branded video revenues.
Matt Omer: We have meaningfully reduced our go forward head count and cash cost structure.
Matt Omer: And as a result of paying down a significant portion of our debt. We've also reduced our go forward cash interest obligations.
Matt Omer: And while we still have work to do to address the traffic and revenue headwinds facing our business and digital publishers at large I believe we are significantly better positioned than our peers to navigate the way forward sustainably and profitably.
Matt Omer: Moving on to our fourth quarter results.
Matt Omer: As a reminder, all financials and comparable as presented here are on a continuing operations basis, which excludes complex.
Matt Omer: Overall revenues for Q4, 2023 declined 26% year over year to $75 7 million in line with the revised outlook, we provided last month for.
Matt Omer: For fourth by revenue line was as follows.
Matt Omer: Advertising revenues declined 25% year over year to $31 9 million predominantly driven by lower year over year direct sold revenues.
Matt Omer: Our direct sales channel has been more acutely impacted by current trends in the advertising market.
Matt Omer: Bundling our brands into a single portfolio proved challenging during a time in which many of our clients face uncertainty with respect to their own budgets and spending.
Matt Omer: Now by contrast trends in our programmatic advertising, which makes up the significant majority of our advertising revenues.
Matt Omer: A more moderate decline of 11% year over year in Q4.
Matt Omer: This was entirely driven by declines on third party platforms, which offset growth in programmatic revenues on our owned and operated properties.
Matt Omer: Advertising revenues are driven in large part by audience time spent with our content across platforms in.
Matt Omer: In conjunction with advertising revenues, we continued to report U S time spent across our owned and operated properties and third party platforms. According to Comscore.
Matt Omer: In Q4 U S time spent as reported by Comscore declined 12% year over year to 72 million hours, driven primarily by ongoing declines in referral traffic from third party platforms. However.
Matt Omer: However, we once again outpaced pure digital media companies in our competitive set.
Matt Omer: Content revenues declined 34% year over year to $27 million driven primarily by a decline in the number of branded content advertisers.
Matt Omer: Amid a tighter digital AD market, we have continued to experience lower demand for our custom branded content products, which are typically focus on top of funnel AD spend aimed at driving overall brand awareness.
Matt Omer: In Q4 branded content net revenue retention was lower year over year driven.
Matt Omer: While the trends I just described.
Matt Omer: Commerce and other revenues of $16 7 million declined $1 4 million or 8% in Europe.
Matt Omer: Nearly all of our commerce revenues are generated from commissions earned on transactions initiated from our editorial shopping content.
Matt Omer: We delivered fourth quarter adjusted EBITDA of $15 1 billion also in line with our February outlook.
Matt Omer: It is important to note that per U S. GAAP, we have not allocated any of the shared expenses to due to discontinued operations as a result, our fourth quarter and full year 2023. Adjusted EBITDA includes complex as portion of shared corporate expenses, which are significant.
Matt Omer: However, as Joe discussed earlier as a result of the sale complex the underlying profitability of our ongoing operations has already improved meaningfully.
Matt Omer: In 2023, the gross margin on revenues from continuing operations to across Buzzfeed post Tc in first three fees were approximately 44%.
Matt Omer: 40% margin business when including complex.
We ended the fourth quarter with cash and cash equivalents of approximately $36 million.
Matt Omer: And in February we closed the sale of complex in an all cash deal for approximately $114 million, including additional cash considerations.
Matt Omer: We used the sales proceeds to redeem $39 million of the Companys $150 million convertible note at par value plus accrued interest of 6 million.
Matt Omer: We eliminated the company's revolving credit facility by repaying it full for $35 5 million, which includes the outstanding balance plus accrued interest and certainties.
Matt Omer: And we will finance the strategic restructuring program, we announced last month estimated in the range of $2 $5 million to $4 million.
Matt Omer: The remaining cash proceeds will be retained for working capital optimization and general corporate purposes.
Matt Omer: As you can see we have already made meaningful strides in strengthening our balance sheet and improving overall liquidity and looking ahead as we lean into our highest margin revenue streams, we expect to make even more progress towards becoming a cash profitable businesses.
Matt Omer: For sure our financial outlook for the first quarter, let me provide some context.
Matt Omer: Starting with revenues.
Matt Omer: As I discussed earlier, our revenue performance reflects the challenges of a market with a bundled portfolio brands going to market that is.
Matt Omer: Bundled portfolio brands during a time in which our advertising partners have had a pullback or delay spending against the backdrop of prolonged uncertainty in the macroeconomic environment.
Matt Omer: As John outlined earlier, we have made some strategic and organizational shifts to adapt our business and drive revenue improvement in this environment.
Matt Omer: Specifically, we have refocused the business around our owned and operated websites and apps where trends in both time spent and revenue have performed better relative to the distributed networks we.
Matt Omer: We have prioritized, our most scalable and highest margin revenue streams programmatic advertising and affiliate commerce, which drove more than a $130 million in 2023 revenue and fared significantly better in Q4 in terms of year over year revenue trends relative to our direct sales channel in branded content business.
Matt Omer: And we've adopted a brand first go to market approach. This includes operating with a much leaner direct sales team as we leverage our existing tech and infrastructure to drive programmatic advertising.
Matt Omer: Each of our brands continue to resonate in the marketplace with a leadership position among its core audience and a differentiated value proposition for advertisers.
Matt Omer: So building on this we see an opportunity to drive improved revenue trends over time, and programmatic advertising and affiliate commerce as we bring our brands to market individually continued to introduce AI assisted formats to drive audience engagement on our owned and operated websites and apps, where we have much more control over monetization and deepen our relationships with our retail partners.
Matt Omer: In terms of adjusted EBITDA, Our Q1 outflow outlook reflects a partial benefit of our recently announced restructuring program.
Matt Omer: As a reminder, the program is expected to drive approximately $23 million of annualized compensation cost savings.
Matt Omer: We expect the program to be fully executed by the end of April.
Matt Omer: So looking ahead, we expect that our Q2 operating expenses will be much more representative of our ongoing cost structure.
Matt Omer: And from a year over year perspective, we expect to drive significant improvement in Q1 adjusted EBITDA, Despite the topline pressure.
Matt Omer: So with that I will turn to our financial outlook.
Matt Omer: All figures and comparable are presented on a continuing operations basis.
Matt Omer: For Q1, 2024, we expect overall revenues in the range of $42 million to $44 million or 20% to 23% lower than the year ago quarter.
Matt Omer: And we expect adjusted EBITDA losses in the range of $10 million to $12 million, an improvement of approximately $7 million year over year at the midpoint.
Matt Omer: Before I wrap up I want to highlight that the changes we have made specifically to prioritize our high margin programmatic and affiliate businesses and significantly reducing our cash cost structure have positioned us to build a much stronger balance sheet in 2020 forward and take meaningful steps to becoming a cash positive business.
Speaker Change: I'll hand, the call back to meet it so we can take questions.
Meet: Great. Thanks, Matt.
Speaker Change: We have received a bunch of questions ahead of the call and during the call, which I have gathered here. So we'll go ahead and get right into it.
Speaker Change: Joan on the first question is for you around the impact of AI and can you talk a little bit more about like how we might when we might see some of this impact showing up in the numbers. Yes. Thanks for the question. So the first impact of AI will be on our core business, which is programmatic and affiliate.
Speaker Change: Revenue lines in particular, what's so exciting about our programmatic and affiliate businesses as they are both highly scalable.
Speaker Change: Tech enabled revenue lines that are high margin and you can get a lot of leverage for applying additional technology to those to those business lines. If you look at.
Speaker Change: The recent developments in AI, particularly with Llm's, it's now possible to have a machine read all of our content and understand it and that's a huge difference.
Speaker Change: And the ability to actually understand our content means that opportunities for contextual advertising for programmatic are greatly enhanced.
Speaker Change: It wouldn't have been possible until very recently.
<unk>.
Speaker Change: To have someone who can.
Speaker Change: A person read all of our articles and pick the perfect add set contextually align with that article, but with AI actually able to understand the content of articles.
Speaker Change: That kind of alignment and contextual alignment of advertising as possible the same with shopping the ability.
Speaker Change: If everyone had their own personal shopper, who knows all the things that you've bought previously knows things youre browsing and interested in maybe.
Speaker Change: Fine and can make personalized recommendations to you that's something that we feel we'll be able to drive additional transactions in the future.
So those two big those are the two big areas, where we're seeing.
Speaker Change: AI apply to our existing business.
Speaker Change: But I think there are going to be new businesses that new business lines that haven't been invented yet as AI starts to power a new medium.
And I think we have a great opportunity at <unk> to help in that that new media.
Speaker Change: Sure.
Speaker Change: Content is will be possible that just wasn't possible before and and so to look at historical analogy. When television was a new media. The first thing that a lot of media companies. David is they put radio shows or prerecorded plays on television.
Speaker Change: Because that is the mistake that people tend to make when our medium is new.
Speaker Change: Look it on older medium and they say, okay. We can use this.
Two to sort of.
Distribute something that we're familiar we're all familiar with it turns out watching it play our radio show on television isn't the best use of television and quickly.
Speaker Change: The smart media companies figured out how to change the way they made content for TV, where there was closer to some people's faces quick cut scene changes all the things that we know about television programming today were invented during that period.
Speaker Change: I think thats similar thing is starting to happen right now with AI powered content.
Speaker Change: Where our teams are starting to create content that feels more alive that has intelligence embedded in it that can interact with people that can personalize.
Speaker Change: The experience for different for different people.
Speaker Change: And all of that is the very beginnings of what I think is a new medium and for content companies, particularly digital media content companies like like Buzzfeed that is going to be a huge driver of future growth as that that new medium starts to emerge and as we start to see the benefit of things that were never possible previously.
Speaker Change: Great. Thank you.
Speaker Change: Matt. The next question is for you on the topic of profitability. So you mentioned in your remarks, but seem to becoming a more profitable business on the other side of the complex transaction and just.
Speaker Change: How should we think about that relative to your Q1 guidance question, which is.
Matt Omer: Forecasting adjusted EBITDA losses can you just kind of step us through that yes, I mean so.
Matt Omer: You can see the immediate profitability impact by just looking at our full year 2023 results. So gross margin for continuing operations was 44% as compared to 40% of the consolidated business. When you include complex. So a difference of 400 basis points and in terms of Q1 guidance at the midpoint adjusted EBITDA is expected to be $7 million better year over year.
Matt Omer: This is despite lower year over year revenues, which reflects the cumulative impact of last years cost savings initiatives.
Matt Omer: But only a partial impact of our most recent restructuring again as a reminder, the recent restructuring is expected to drive approximately $23 million in annualized compensation cost savings and we expect the program to be executed by the end of April and so looking ahead, we expect that our Q2 operating expenses will be much more representative of our ongoing cost structure.
Matt Omer: It.
John I mean back to you.
John: In terms of branded video so you talked about moving away from branded video ads.
Source of revenue does that mean, what does that mean does that mean you will no longer offer these types of products to clients or can you just elaborate on that shift to that more.
Speaker Change: Yes, I think the biggest challenges with with <unk>.
Speaker Change: Branded video and I would say.
Speaker Change: The way we had previously operated with video.
Speaker Change: The one off video that is posted on our social platform for our video platform like Youtube.
Speaker Change: Is not a very scale.
Speaker Change: Scalable durable form of video production, where every single video needs to succeed on its on its own.
Speaker Change: And on the branded side, it's a lot of work to come up with some unique idea for every single.
Speaker Change: Branded integration that doesn't necessarily have a natural home or reason for someone to watch. It. So I don't think it's great from a margin standpoint from a time standpoint or are great for our clients.
Speaker Change: Really.
Speaker Change: We have put a lot of thought into this and to be smarter about how we make video.
Speaker Change: And so certainly.
Speaker Change: One form of making video is partnerships that we've done with streamers to make.
Speaker Change: <unk> films.
Speaker Change: Video.
Speaker Change: Cost millions of dollars to make but is really differentiated because of its unique IP.
Speaker Change: I think when we look at something like Hotlines Thats also very strong IP that we can extend into a whole bunch of different business lines from selling hotspots to sponsorships through product integration, but none of them are one off videos. It's a familiar format that repeat that audiences love and are expecting and that has natural.
Speaker Change: <unk> ways to integrate brands.
Speaker Change: So I think that is.
A great area to focus on where you have strong IP and repeat viewership like that.
Speaker Change: Casey, it's really about creators and the tasty brand plus creators is just incredibly powerful and we've seen food creators to be so excited to engage with us and partner with brands as well.
Speaker Change: So we're focused on really looking at how do we make video in a way that is sustainable and profitable.
Speaker Change: Lends itself to higher margin revenue.
Speaker Change: And is something that can scale better than the one off branded videos I think the divestiture of complex helps us move away from some of the high cost lower margin custom branded.
Speaker Change: Content a lot of a lot of the brands that transacted with a complex kind of wanted some totally unique type of of branded integration, where you'd be starting from zero in some cases in terms of building something.
Speaker Change: And I think that's pretty different from pasty and firstly feast.
Speaker Change: Which are also much more pop culture focused and really fit well with Buzzfeed buzz.
Speaker Change: Buzzfeed.
Speaker Change: One tasty Theyre, all pop culture brands that reach huge audiences and that have great contacts for brand integration that can be done in a way that is more scalable where youre not doing sort of agency type work of coming up with de Novo concepts for one off videos are limited series and things like that.
Speaker Change: So I think.
Speaker Change: Overall, we're we're being smarter, we're picking our spots we are.
Speaker Change: Made decisions that make us less dependent on the platforms.
Speaker Change: This is the type of video that also really helps us work strategically with clients.
Speaker Change: Entertainment clients and retail clients and other other partners, who can align with the great viewership and formats and IP that we're creating in video and get really great value working with us in a way that also is beneficial to our business and doesn't require.
Speaker Change: As much of a heavy lift to deliver for our clients.
Speaker Change: No.
Speaker Change: That's how we're thinking about it is the area of our business that is a bit more nuanced and we're trying to stay out of the middle area, but one off kind of high cost videos and focusing on.
Speaker Change: Studio business to our IP to creators all in ways that are <unk>.
Speaker Change: Maximize the scalability and an opportunity to integrate brands in a way that more seamless.
Speaker Change: And maybe continuing on from that you made several references to both hear programmatic advertising business and then your affiliate commerce business and sort of refocusing around those two revenue streams can you discuss some of the specific opportunities that you see in each of those areas and maybe on a related note also.
Speaker Change: You guys are thinking about google's rollout of cookie, deprecation, and where and how that might impact you or maybe how you guys are sort of getting in front of that.
Speaker Change: Yes, I mean, as I said earlier I love, our affiliate and programmatic businesses because they are very scalable high margin businesses that allow us to get leverage from tech investments and I think.
Speaker Change: With with AI being able to read and understand content, that's just going to add to those to those businesses at a very abstract level.
Speaker Change: Affiliate generates revenue from driving transactions, which means people taking action and our audience is very active and we are able to inspire a lot of action from our audience to transact.
Speaker Change: And so if you look just taking the programmatic are taking the affiliate business first we drive more than half a billion dollars in transactions on behalf of our retail partners.
Speaker Change: And that results in about $50 million and commerce revenues for us. So you can see it's driving significant CMV for our partners. It also a great business for us.
Speaker Change: And it is something that will benefit and does benefit from our tech investments.
Speaker Change: Some of those things might be a little more nuts, and bolts like being able to really do a great job featuring the products and the prices.
Speaker Change: Great post format and collections and gift guides and things like that our editorial and tech work and some of it is deeper machine learning recommendations and now with Gen. AI the ability to remix content and feature a bonus product for someone that might be a personalized selection for them and other other things there.
Speaker Change: Yes.
Speaker Change: We're just starting to imagine and that could extend far beyond that.
Speaker Change: So we really like to be in businesses that are that.
Speaker Change: The benefit from from our Tech investment and also benefit from new technology trends like Jan AI that will allow those businesses to get even more.
Speaker Change: Leverage six months on a year from now two years from now.
Speaker Change: Programmatic it's similar.
Speaker Change: If if affiliate is about <unk>.
Speaker Change: Transactions and getting paid to drive transactions programmatic is more about attention classically advertising is about selling the audiences tension.
Speaker Change: And programmatic is the most tech <unk>.
Speaker Change: Table, most scalable highest margin way of selling attention and we have.
Speaker Change: More time spent than anyone in our competitive set so we have a lot of attention that we can monetize through through programmatic.
Speaker Change: And I think.
Speaker Change: When I mentioned earlier how programmatic.
Speaker Change: It can be.
Speaker Change: Hence by more.
Speaker Change: More data.
Speaker Change: Particularly data around contextual.
Speaker Change: Alignment of advertisements and Thats something that we can do with advances.
Speaker Change: Advancement in AI, where we actually have machines that can understand our content in hand.
Speaker Change: It's almost hand select but at a massive scale how advertising.
Speaker Change: Should be placed.
Speaker Change: Maximize contextual alignment and conversions and things like that.
Speaker Change: Overall.
Speaker Change: AI also will help us get more audience to the site and spend more time on the site and we've seen the AI content drives more time spent than other forms of content because it's more alive more personalized more.
Speaker Change: Interactive and as we continue to push the envelope on that kind of work.
Speaker Change: There will be people spending even more time on our site, we expect and that will drive more opportunities for programmatic monetization to monetize that time and attention that people are spending.
Speaker Change: And so there is.
Speaker Change: A lot of excitement about sort of focusing on the next stage of the internet and how to build a really strong scalable business and commerce and advertising for the next stage of the Internet.
Speaker Change: And I think the cookies kind of represented earlier stage of the internet sort of the pre AI stage stage.
Speaker Change: A lot of the targeting that.
Speaker Change: And re targeting that FERC with cookies has been.
Speaker Change: You visit a retailer side and then they add for that product policy around the web everywhere you go in and that kind of vary.
Speaker Change: Basic form of re targeting that was very effective is going to be harder and harder to do as cookies get depreciated.
Speaker Change: But more interesting and more sophisticated forms of targeting that are based on AI based architectural alignment are going to start to replace that and I think you have already seen as Apple has changed there.
Speaker Change: The ability of FERC for targeting within apps, you already seen that companies have been able to adapt and evolve.
Speaker Change: Using new technologies that can perform as well as although differently than some of the older targeting technologies.
Speaker Change: Thank you.
Speaker Change: So maybe just switch gears a little bit Matt.
Matt Omer: Yes, we've seen some of the press reports around potential licensing deal for about <unk> in the UK could you just discuss the nature of that deal in.
Matt Omer: What we should know about it is it material.
Matt Omer: Just sort of recap that for US yes, yes sure.
The deal Hasnt closed yet so we will of course share more as soon as we're able to do so but briefly on the final stages of an agreement with the independent to license our buzzer UK tasty UK seasoned and Huffpost UK brands. This is very similar to the strategic partnership we announced last June between our Australia business and Bell <unk>.
Matt Omer: And digital so which employees that support revenue generation in the U K would move over to the independent and Buzzfeed would continue to own the IP, but we simply earn a share of the go forward revenues. So under the proposed license the independent would put its resources behind our brands across editorial and sales and offer a wider mix of products and media bundling.
Matt Omer: In terms of materiality again hasn't closed yet so we'll share more as soon as we can on the expected impact to our business.
Speaker Change: Got it.
And then John back to you just on the topic of tick talk obviously with a potential tick tock band looming like what does that mean for about CNN and maybe more broadly just with your renewed focus on the owned and operated platforms like how do you view the role of the social platforms, but it's future.
John: Yes, so tick tock.
John: Is obviously massive in terms of time spent.
John: They don't send much traffic out.
John: Two other.
John: Properties.
Don't get much audience from tick tock occasionally some some like Lincoln bio type stuff, but not much and they have been among the worst in terms of monetization.
John: So we've achieved tremendous scale on tick tock, but we've had to build our own monetization by.
John: Doing branded content and other other types of monetization that doesn't depend on platform revenue from Tictoc. So.
John: I would say.
John: Our preference would be.
John: R R.
John: At the market if tictoc is banned probably that will be.
John: Benefit Facebook Instagram snap other platforms and the time spent on tech talk would start to move to a lot of these other other platforms and some of those other platforms are better monetized.
John: Could could actually be a benefit to us.
John: And then it tick tock isn't band I think and continues I think.
John: We our hope is that they will.
John: Begin to to continue the maturation of their AD products and partnership ability so that they will.
John: Get closer to parity with other social platforms in terms of revenue for partners.
John: Either of those outcomes are okay, I would say the current the current state of affairs is not is not the best.
John: Where they.
John: Theres, just this ongoing and fierce battle between.
John: Between the social platforms and as a result, they've they've kind of stopped focusing as much on how to be good partners to the larger ecosystem.
John: Yes.
John: So that's the main thing and I guess in terms of roll off the roll off of platforms.
John: To me it feels very much in the interest of any platform that achieves enough strength and that has the security that they are in a strong position for them to partner with as many different types of content creators as possible to make sure that their ecosystem is really strong and that they're able to aggregate as broadly as possible.
John: And spend money with publishers and creators and have personal content and all the different kinds of content that people love.
John: And for Us.
John: We just don't want to be in a position where we're dependent on.
John: On any of the big Tech platform sort of making the right decisions and being a favorable friendly place for content companies. The recent history has not been great on that front.
John: But we have seen continued strength on our owned and operated platforms and even as as there has been decline in outbound traffic from Facebook.
John: <unk>.
John: Seen that the audience is spending more time.
With us and and the direct audiences are lot more valuable than.
John: Then people who are on an app clicking to see an article and then kind of clicking away and not spending as much time, and so we really want to.
John: Have the ability to to build amazing products and have an audience that spends as much time with us as possible. So that we can spreadsheets and dry and creativity and delight them and.
John: And then probably most importantly, having.
John: And owned and operated business is our owned and operated as the core of our business gives us the ability to get more tax leverage as we.
John: Great content developed technology and also benefit from new Technology Revolution.
John: Revolutions like like the explosion in Jan AI that will allow us to.
John: Continually evolve and improve and change our owned and operated in a way that we couldnt. If we were just.
John: Having content riding on top of someone else's platform.
Speaker Change: Great. Thank you so much.
Speaker Change: We've got a couple of time for a couple more questions here.
Speaker Change: Matt just pivoting to the debt piece of it in the balance sheet you talked about that.
Speaker Change: Use of proceeds following complex how should we think about plans to address what's still a significant amount of debt remaining on the company's balance sheet.
You said they touched on earlier the sale of complex really enabled us to meaningfully reduce our outstanding debt and interest obligations. So we again, we eliminated our rolling credit facility that was about $35 million and also pay down approximately 20% of the convertible note so roughly $31 million of the $150 million that was outstanding.
Speaker Change: As it relates to the balance of the convertible note.
Speaker Change: Unsecured lenders do have an option to call the debt in December of this year. However, we expect that we'll be able to work with them in advance of the date of the call option and in fact, when you look at the proceeds they agreed to a 31 roughly $31 million paydowns. So that we could direct more of the proceeds from the complex transaction towards underlying business.
Speaker Change: To fund the restructuring and optimize working capital.
Speaker Change: That said as part of the agreement. They do have claimed to 95% of proceeds from any future asset sales, if such asset sales occur, which obviously would further reduce the debt load, but more broadly discuss the changes we have made a prioritize our high margin programmatic and affiliate businesses and significantly reduce our cash cost structure.
Speaker Change: Positioned us better to build a much stronger balance sheet in 2024 and take meaningful steps to become a cash positive.
Speaker Change: And then John just a final question for you in terms of the executive team over the past few months there've been some departures, including President and do you have plans to re hire or kind of how are you thinking about the executive team.
John: Yes. Thanks for the question so I am confident in our go forward leadership team.
John: And I'm also really thrilled to share that we are elevating Ken Bloom, a leader with tremendous knowledge experience and perspective to the role of Chief business officer across all our brands.
John: He joins our new CFO, Matt Omer, and just progress our new publisher for Buzzfeed, Inc.
We got a great team and we are all very leaned in for this next stage of <unk>.
John: Building the company.
Speaker Change: Fantastic. Thank you John and thank you Matt. Thank you. So much thanks, everyone for joining us that wraps our Q&A session for today I will hand, the call back over to our operator, so we can wrap up.
Speaker Change: Thank you ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect.
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