Q4 2024 BuzzFeed Inc Earnings Call
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Speaker Change: Good day, and thank you for standing by. Welcome to the BuzzFeed Inc. Fourth Quarter, 2024 Earnings Conference Call. At this time, all participants are in listen-only mode.
Speaker Change: 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.
Speaker Change: We believe adjusted EBITDA and adjusted EBITDA margin are relevant and useful information for investors because they allowed investors to view performance in a manner similar to the method used by our management.
Speaker Change: A reconciliation of these GAAP to non-GAAP measures is included in today's earnings press release.
Speaker Change: Please refer to our Investor Relations website, you can find today's press release.
Jonathan: Now I'll pass the call over to Jonathan.
Speaker Change: Thank you good afternoon, everyone and thank you for joining us today.
Speaker Change: I'd like to begin with an update on where artificial intelligence is heading and the opportunity for our business over the past year. We've been pleased to see several companies release capable and affordable AI models, including open weight models that can be hosted freely we expect the proliferate the proliferation of powerful model and the reduction in cost of capacity to continue.
Speaker Change: <unk> for the foreseeable future given us the capabilities, we need to transform our business. We built our services. So that we can easily integrate new models with our data and application seamlessly switching the backend to the most current and affordable model. These developments support our strategy of building the application layer on top of AI models a place.
We're value and profits will increasingly flow.
Fundamentally AI as a new computing platform that enabled applications that weren't previously possible.
This continues a well known cycle in technology, where each computing platform gives birth to new applications mainframe computers enabled accounting software Pcs enabled word processors spreadsheets games and the mobile phone enabled apps like Instagram and Uber.
Most successful applications use the strengths of the computing platform to unlock value by creating totally new types of software that leverage those strengths.
Speaker Change: And we'll follow the same pattern and we are excited to build AI native applications that have the potential to transform our business and the market.
Speaker Change: Our initial steps to building an AI platforms only took us part of the way theyre, bringing increased efficiency to our existing publishing business. For example, our writers use AI to track online trends organize their research and packaged content freeing up more time for them to focus on human creativity, our advertisements are targeted more effectively.
Speaker Change: As our lighthouse product gets the benefit of AI actually understanding our content and delivering more contextually relevant placements.
Speaker Change: There are many examples like this but our publishing business remains human power because taste editorial judgment in human personality or what audiences want from media brands.
Speaker Change: We are excited about the ways core Buzzfeed is innovating and we will continue to look for new efficiencies in this very human business running it with an eye towards increased profitability. However, we also see potential for a new product that more fully leverages, new AI technology.
Speaker Change: We see an opportunity to make a new kind of social media App that is built from scratch to be AI need at Facebook.
Speaker Change: Facebook Instagram snap Pinterest and rabbit were all built over a decade ago, even tictoc is almost a decade old and all of them were designed before the explosion of generative AI capabilities. They bolted AI AI onto existing experience onto an existing experience, but we believe you can make something much better if you started from scratch.
Speaker Change: Existing social media platforms vision for AI is completely backwards. They use AI to takeaway People's Human agency manipulating people into spending hours passively is growing through feeds in the early days of social media almost everyone contributed content, but now most of the content is made by a small group of Influencers and professional creators.
Speaker Change: <unk> for attention by making increasingly extreme and emotionally charged content.
A recent study by the National Bureau of economic research found that the majority of respondents would prefer to live in a world where tick tock and Instagram did not exist.
Speaker Change: All of this is a problem for the big platforms, but an opportunity for US we know we can make social media fun again.
Speaker Change: We can get a higher percentage of people, creating and connect people instead of dividing them.
Speaker Change: We are hard at work building <unk> Island and are excited to be in private beta testing with users in Q2. Our goal is to convert 5% of Buzzfeed 34 million monthly users to beef island data from Comscore shows that user time spent on top social media services, including sites like Facebook Instagram right at this quarter in <unk>.
<unk> is well over 27 times higher than time spent with publishers and we hope this trend will hold true for VF Island, driven by its increased personalization in our activity.
Speaker Change: It also reflects the significant engagement increase up to 10 times higher when Buzzfeed users become community members and use our AI powered tools and content formats.
We are also building social and viral distribution into the platform to drive growth, which we believe could outpace the growth of our publishing business. The content on the platform will be entirely user generated with AI assistance, allowing it to scale in ways that are impossible for our other editorial businesses.
Speaker Change: We achieve our conversion and time spent targets we are modeling monetizing that in <unk> in the low double digits per year, approximately 50% of snap Pinterest and other small social media services by leveraging our existing AD platform and direct user revenue and given the above model, we would expect to produce positive EBITDA in the first.
Speaker Change: Full year post monetization and scaling quickly in subsequent years. While this is a bold new initiative with inherent risks. It represents a high upside opportunity. If successful we look forward to sharing more in future earnings calls.
Speaker Change: One final bit of context before the rest of the call.
Speaker Change: Development of Buzzfeed Island is only possible because of the increased efficiencies. We found in our core publishing business, allowing us to reallocate resources with minimal additional hiring AI assisted software development and productivity tools for our team will enable us to do more while still achieving significant cost savings relative to 2024.
Speaker Change: Our investment in <unk> is approximately $10 million, primarily focused on engineering. This is the efficiency that AI can bring but once we launch the island, we will be even more excited to show you the creativity it can unlock.
With that backdrop, I would like to share some updates on our business.
Speaker Change: Buzzfeed has improved its position in the marketplace over the past year, we have improved our fundamentals stabilize the business and streamlined operations achieving positive adjusted EBITDA for both Q4 and full year 2024, with full year EBITDA growth of $17 1 million or 146, 8%.
Speaker Change: We have also fortified our balance sheet entering 2025 with a cash balance that exceeds our remaining debt in 2024, we repaid a total of $153 8 million in debt, including $120 million of convertible debt and $33 8 million of other debt.
Speaker Change: These actions were made possible through strategic moves, including the divestiture of complex for $108 6 million plus seven plus $5 7 million in fees and the sale of first we feast for $82 5 million.
Speaker Change: Together these transactions largely recouped our initial cash investment in complex networks and first we feast, which we acquired in 2021 for approximately $198 million in cash and $2 5 million split adjusted shares of equity.
Speaker Change: With our debt load significantly reduced we've sharpened our focus on high margin Tech enabled revenue lines programmatic advertising and affiliate Commerce. These areas are not only driving adjusted EBITDA profitability, but are also allowing us to build more direct and valuable relationships with our audiences.
Speaker Change: As we enter 2025, we remain committed to strengthening our owned and operated platforms, increasing audience engagement and using AI responsibly to enhance our content and business operations.
Matt: Now I'll hand, the call over to Matt to discuss our financial performance and outlook.
Matt.
Matt: Thank you Jonathan.
I want to Echo John's remarks regarding the increased strength in our go forward business with two strong asset sales behind us and our restructuring complete we believe we are positioned to be more stable and more profitable business. As a reminder, all financial results are on a continuing operations basis, excluding complex networks and of course, we ceased.
Have meaningfully reduced our go forward head count and cash cost structure and as a result of paying down debt. We have also reduced our future cash interest expense.
Matt: We have made strides in strengthening our balance sheet and improving overall liquidity. Despite revenue declines in advertising and content, which are primarily driven by our direct sales channels comps and other revenues increased 23% year over year.
Matt: And as a reminder, the restructure announced in Q1 2024 significantly reduced our sales team contributing to declines in direct sold advertising and content compared to 2023 but aligning with our pivot toward programmatic advertising and affiliate commerce.
For the full year ended December 31, 2020 for advertising revenues declined 17% year over year to $94 4 million, reflecting a shift away from Drexel advertising over programmatic advertising remained relatively flat year over year at $64 9 million.
Matt: Content revenue declined 49% year over year to $33 9 million driven by a decrease in direct sold deals and fewer studio projects until the 'twenty four.
Matt: Commerce revenues increased by $11 6 million or 23%, reflecting strong affiliate commerce performance in key retail moments.
Matt: Affiliate Commerce increased 26% year over year to $59 6 million.
Matt: And we experienced our most successful Amazon Prime day to date in July 2024, with a strong double digit growth outpacing Amazon overall Prime day growth.
Matt: And our cost saving measures are in full effect.
Matt: Despite an overall revenue decline of $40 6 million or net loss from continuing operations improved by $21 8 million. Additionally.
Matt: Additionally, adjusted EBITDA improved by $17 1 million reinforcing that these cost saving initiatives are delivering results.
Matt: Now turning to our fourth quarter financial results for our continuing operations.
Overall, Q4 revenue was $56 2 million or down 19, 8% year over year, which was in line with our midpoint of our outlook.
Advertising revenue declined $6 $2 million, driven by a $6 $3 million decline in direct sold advertising.
Programmatic advertising, however remained relatively flat year over year at $18 $1 million in Q4.
<unk> revenues were $9 5 million down 59% year over year, which again was driven by a $10 $7 million decline in Drexel content and a $3 million decline in studio revenues as Q4 2023 included a feature film release.
<unk> revenues increased 39% or $6 million to $21 $3 million fueled by strong affiliate commerce activity.
Matt: And adjusted EBITDA for Q4, 2024 was $10 9 million compared to an adjusted EBITDA of $13 million in the fourth quarter of 2023, but in line with the high end of our outlook.
Matt: We ended the quarter with cash and cash equivalents of $38 6 million, an increase of $3 million relative to the year ago period.
Matt: And as a reminder, we repaid $88 $8 million of debt during December 2024, and approximately $5 million of interests.
Matt: And at the same time, we are seeing positive momentum across key audience engagement metrics, including time spent loyalty and engagement in.
Matt: In the fourth quarter of 2024 times spent increased to 79 million hours, a 10% increase from Q4 2023, and our flagship Brent Buzzfeed brand continues to lead the way in time spent among its competitive set reinforcing the company's strong tech optimization and engagement strategies.
And on our owned and operated websites in Q4 direct visits internal referrals and App page views accounted for 64% of U S traffic on <unk> dot com strengthening our audience connection and making us less dependent on distributed platform as an algorithm shifts.
Matt: <unk> Dot com saw a significant surge in direct traffic during the 'twenty 'twenty four presidential election cycle.
Matt: On October 24 direct traffic.
Matt: $69 7 million, it's second largest highest months of the year.
Loyalty and engagement trends also reflected positive momentum daily logged in users on <unk> Dot com were 144% higher than Q4, 2023, driven by Tech optimizations and.
Matt: And the percentage of oil users across Buzzfeed web and App. So those who returned more than once in a seven day period reached 48% the highest level in over two years.
Matt: Looking ahead, we remain focused on accelerating revenue growth and expanding profitability by leveraging our strengths and digital media first party audience engagement and scalable tech enabled businesses.
Matt: We believe that by continuing to invest in our core brands and their owned and operated sites improving monetization strategies and optimizing operational efficiencies. We are positioning <unk> for sustainable long term success.
Turning to our financial outlook.
Management team has established a policy of providing annual guidance moving forward in lieu of quarterly guidance. We believe short term guidance encourages a short term view and inhibits a meaningful focus on long term strategic initiatives that our company has taken to build up our business for long term success, which is in the interest of both our employees and shareholders.
I will share our 2025 financial outlook as a reminder, this guidance is on a continuing operations basis and includes our planned investment in <unk> for the year.
Matt: We expect overall revenues in the range of $195 million to $210 million or 3% to 10% higher than 2024 at the midpoint.
And we expect adjusted EBITDA in the range of $10 million to $20 million, an improvement of approximately $10 million year over year at the midpoint.
Matt: Thank you for joining us today I'll pass it back to our operator.
Matt: Thank you. This concludes today's conference call. Thank you for participating you may now disconnect.
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