BuzzFeed, Inc. (NASDAQ:BZFD) Q4 2023 Earnings Call Transcript March 25, 2024
BuzzFeed, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Thank you for standing by and welcome to BuzzFeed, Inc.’s Fourth Quarter 2023 Earnings Conference Call. At this time, all participants are on a listen-only mode. I would now like to hand the call over to SVP, Investor Relations, Amita Tomkoria. Please, go ahead.
Amita Tomkoria: Thank you. Hi, everyone, welcome to BuzzFeed, Inc.’s Fourth Quarter 2023 Earnings Conference Call. I’m Amita Tomkoria, Senior Vice President of Investor Relations. And joining me today are CEO, Jonah Peretti; and CFO, Matt Omer. 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 2023 annual report on Form 10-K to be filed with the SEC and our 2023 quarterly reports on Form 10-Q. Any forward-looking statements that we make on this call are based on assumptions as of today and we undertake no obligation to update these statements as a result of new information 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 Jonah.
Jonah Peretti: Thank you, Amita. Good afternoon, everyone, and thank you for joining us today. At BuzzFeed, the way we pursue our mission to spread truth, 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. By embracing new technologies, pioneering new formats and innovating to create new ways to bring our content to life, we have built some of the most iconic brands on the Internet. Our early teams are responsible for much of the foundational work establishing social media. It is now commonplace, but when we started, it wasn’t the norm for our content to be share — for content to be shareable, relatable, identity firming and purpose-built to connect people into fandoms and affinity groups based on shared passion.
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. By empowering these same core tenets of identity, fandom and shareability, I believe we have a tremendous opportunity in front of us to build the defining media company for the AI era. To capitalize on this opportunity, we have aggressively refocused our business around our iconic brands, BuzzFeed, HuffPost, Tasty, First We Feast and Hot Ones, which combined continued to lead the industry in Q4 in terms of time spent according to Comscore. Our owned and operated websites and apps, where we have more control over monetization, our most scalable, highest-margin, tech-led revenue streams, programmatic advertising and affiliate commerce.
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Q&A Session
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With this as a backdrop, I would like to share some important and exciting updates on our business. We continue to operate in a period of unprecedented change for digital media. The 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. Our acquisition of Complex in 2021 coincided with the downturn in the advertising market. So instead of being able to close bigger, bundled portfolio deals, each of our brands ended up competing against each other for the available smaller opportunities. The sale marks an inflection point for BuzzFeed, Inc., as we refocus our business around scalable, high-margin, tech-led revenue streams. Complex was an asset that drive revenues predominantly from the lower-margin businesses, custom branded video content and events.
Following the sale, the majority of our revenue is now generated through programmatic advertising and affiliate commerce, both capital-efficient, high-margin, scalable businesses that leverage our existing tech infrastructure and have less exposure to the market and secular headwinds that we have experienced over the last several quarters. 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. 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, Tasty, First We Feast and Hot Ones was approximately 44% as compared to a 40% gross margin for the combined business, including Complex, a difference of 400 basis points. Turning to our financial results for our continuing operations, excluding Complex. Fourth quarter revenues were $76 million, down 26% year-over-year, in line with our revised outlook provided last month. We aren’t satisfied with this performance, and 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. First year revenues were $253 million, also down — full year revenues were $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 both Q4 and the full year, adjusted EBITDA remained relatively stable year-over-year despite significant top line pressure, which reflects the cost saving initiatives we implemented throughout 2023. I think it is worthwhile to outline the current dynamics impacting our revenue performance as well as some of the strategic decisions we have made to adapt in this environment. First, digital publishers continue to be impacted by intense competition for audience time between the largest platforms. 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.
Second, in a tough market for digital advertising, our clients have often had to forego custom-branded advertising campaigns. This has resulted in lower demand for custom-branded video products and experiential events. 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. To address these headwinds, we have made strategic organizational changes that I’m 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, where we have a loyal, highly-engaged audience with more control over 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 and tech that make our teams and our clients more efficient. Second, we are moving away from branded video to focus on our most scalable, tech-led and highest margin revenue line, specifically programmatic advertising and affiliate commerce. Together, these businesses drove more than $130 million in revenue in 2023. Divesting Complex was a significant step in this direction since branded video drove the majority of Complex revenue. This was also some of our lowest margin revenue, positioning us to improve profitability as a result. 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, HuffPost, Tasty, First We Feast and Hot Ones. This includes operating with a much leaner direct sales team as we leverage our existing tech infrastructure to drive programmatic advertising revenue. 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. 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. This is driven by strong and differentiated IP across BuzzFeed, HuffPost, Tasty, First We Feast and Hot Ones.
And each has a trusted and established brand identity. For BuzzFeed, it is pop culture, entertainment and curating 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 young people and deep 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. For HuffPost, it’s breaking news coverage and audience-centric stories for a massive, direct to front page audience. The brand is also reaching its audience in new ways with expanded shopping content and two new podcasts, both of which have opened up new sources of advertising revenue.
