BuzzFeed, Inc. Q4 FY2023 earnings call

• Sold Complex for $114 million, refocusing on scalable, high-margin, tech-led revenue streams like programmatic advertising and affiliate commerce.
• Prioritizing owned and operated websites/apps, leveraging AI for content engagement and team efficiency.
• Reorganizing sales team by brand, reducing centralized costs to direct resources to individual brands.
• Highlighting segments: BuzzFeed for pop culture, HuffPost for breaking news, Tasty for food creators with 5 billion views in 2023, and First We Feast expanding Hot Ones IP with premium sponsorships and new product launches.

For the continuing operations excluding Complex, fourth quarter revenues were $76 million, down 26% year-over-year. Full year revenues were $253 million, also down 26% year-over-year. Advertising revenues declined 25% year-over-year, with programmatic advertising seeing a 11% year-over-year decline (partially offset by growth on owned and operated properties) and direct sales more acutely impacted. Content revenues declined 34% year-over-year due to fewer branded content advertisers. Commerce and other revenues were $16.7 million, down 8% year-over-year. Gross margin on revenues from continuing operations across BuzzFeed, HuffPost, Tasty, First We Feast, and Hot Ones was approximately 44% compared to 40% including Complex, a difference of 400 basis points.

• Q1 2024 revenues expected in the range of $42 million to $44 million, down 20% to 23% YOY.
• Adjusted EBITDA loss expected in the range of $10 million to $12 million, an improvement of approximately $7 million year-over-year at the midpoint.
• Focus on high-margin programmatic and affiliate commerce, expect to become cash-profitable business in 2024.

• Dependence on third-party platforms for traffic, with referral traffic from third-party platforms declining.
• Uncertainty in digital advertising market leading to lower demand for custom-branded content.
• Macro economic environment impacting client budgets and spending.

Q: Can you talk about how we might and when we might see the impact of AI showing up in the numbers?

A: AI will enhance programmatic and affiliate by enabling better contextual advertising and personalized shopping. AI can understand content for improved contextual ad alignment and personalize shopping recommendations. There are also potential new business lines emerging with AI.

Q: How should we think about profitability relative to Q1 guidance, which is forecasting adjusted EBITDA losses?

A: Q1 adjusted EBITDA loss improvement is due to cumulative cost savings from 2023, with partial impact from recent restructuring. Q2 operating expenses expected to reflect ongoing cost structure.

Q: Does moving away from branded video mean no longer offering these types of products? Elaborate on the shift.

A: Branded video was high-cost and low-margin. Now focusing on strong IP with repeat viewership like Hot Ones and Tasty, which are scalable and have better margin. Divesting Complex helps move away from lower-margin custom-branded content.

Q: Discuss the nature of the potential UK licensing deal and its materiality.

A: In final stages of licensing BuzzFeed UK, Tasty UK, etc. IP owned, independent puts resources behind brands, earn share of go-forward revenues. Deal not closed yet, impact to be shared when closed.

Q: What does a potential TikTok ban mean for BuzzFeed and the role of social platforms?

A: TikTok sends little traffic to other properties. If banned, time spent may move to better-monetized platforms. Owned and operated platforms are key as they allow more control over monetization and benefit from tech investments like AI.

Q: How should we think about plans to address remaining debt on the balance sheet?

A: Sold Complex to reduce debt, paid down convertible note. Unsecured lenders have call option in Dec, but focus on high-margin businesses to improve balance sheet and become cash positive.

Q: Plans for executive team after departures?

A: Elevating Ken Blom to Chief Business Officer, with strong leadership team in place for next stage of building the company.