Hello, and welcome to the BuzzFeed, Inc. Fourth Quarter 2022 Earnings Conference Call. Please note this event is being recorded. I would now like to turn the call over to Amita Tomkoria, Senior President, Investor Relations. Please go ahead.

Hi, everyone, and welcome to BuzzFeed, Inc.'s fourth quarter 2022 earnings conference call. Joining us today are our Founder and CEO, Jonah Peretti; President, Marcela Martin; and CFO, Felicia DellaFortuna. 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 and in our annual report on Form 10-K to be filed with the SEC. 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 will 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 in today's press release, along with our investor letter and investor presentation. And now I'll pass the call over to Jonah.

Thank you, Amita. Good afternoon, everyone, and thank you for joining us today. We continue to face a tough operating environment for digital media. However, our value proposition is consistently resonating in the marketplace. With iconic brands and a massive audience and a differentiated technology platform, we occupy a unique position in the ecosystem of audiences, creators, platforms, and advertisers. Our premium brand-safe content reaches millions of young people each day and appeals to hundreds of advertising clients, the biggest tech platforms, and emerging creators all looking to break through in a crowded market. We are a scale-diversified digital media company that is poised to capitalize on the future of the industry and deliver long-term value to shareholders. And we have a lot of exciting work underway, some of which I will share today. Before I turn to that, let me briefly discuss our performance. 2022 was a challenging year for our business, and we navigated the dual headwinds of a weakening digital ad environment and the ongoing shift to short-form vertical video while also integrating Complex Networks into the company. First, on the operating environment. Over the course of last year, many of our clients were forced to constrain ad budgets in order to navigate deteriorating macroeconomic conditions, which pressured year-over-year growth in our advertising and content revenues. In this operating environment, our global teams also worked to integrate Complex Networks into the business. While that integration resulted in meaningful cost synergies, we believe we have not yet reached our full revenue potential as a combined company. We have more work to do in order to overcome these challenges, which Marcela will speak to shortly. Turning to the ongoing shift to short-form vertical video, a year ago, at our first earnings call, I discussed the implications of the rapid rise of short-form vertical video on our business, namely as we shift focus to building large, highly engaged audiences around our short-form media content across the platforms. We made great progress in 2022. As a result of this shift in focus, we nearly doubled our output in terms of short-form vertical video across TikTok, Instagram, Reels, and YouTube Shorts. We continue to surpass 1 billion quarterly views on both Reels and Shorts, with multiple videos consistently earning millions of views each on par with premium globally recognized brands like the NFL and Louis Vuitton. Q4 viewership of short-form content across platforms more than tripled year-over-year. As I discussed before, it takes time to adjust to new content formats. Recently, we have seen certain platforms such as YouTube Shorts begin to open up opportunities for partners to monetize their short-form content on the platform. Although we are in the first stages of operationalizing this change, we expect this momentum to continue, which is why I believe we are driving the right strategic focus to position the business for long-term growth and monetization. In December, we made significant adjustments to our cost structure to focus on the platforms and formats with the highest potential for long-term monetization aligned with the weaker demand environment and to accelerate our progress on the integration of Complex Networks. Execution against our cost initiatives has allowed us to focus on the areas that I believe drive long-term growth across our combined portfolio of brands, specifically creators and artificial intelligence. I believe the future of digital media will be defined by the rise of creator-led and AI-powered content. As we have seen over the course of the past year, the rapid rise in popularity of content formats like Reels, TikTok, and Shorts have proven that audience consumption behavior continues to favor creator-led content. To capitalize on the audience momentum, we are building the premier creator platform to attract the next generation of Internet talent. This includes expanding our suite of technologies, tools, and resources to empower creators with an end-to-end content creation and monetization engine. We have supported creator-led publishers since BuzzFeed's inception with a proven track record as a discovery engine for the next generation of Internet creators. In fact, some of the biggest careers in media and culture have started at BuzzFeed and Complex. This commitment to creators has helped us develop a formidable competitive advantage in the marketplace. We are able to offer our trusted network of talent to advertisers who are struggling to navigate the world of influencers and creators. Our platform also allows creators to build a sustainable monetization engine with access to our massive audiences and best-in-class tools and resources. We've made great strides in growing our network of creators, which further strengthens our content flywheel with higher quality content that reaches a wider audience across more platforms and helps us capture deeper data and insights. BuzzFeed has always lived at the intersection of technology and creativity, and recent developments in artificial intelligence represent an opportunity to take this convergence to the next level. As the creative process becomes increasingly AI-enabled, we are continually looking to maximize the creativity of our writers, creators, and producers. We view AI as an exciting new creativity tool, one that humans can harness to open up new avenues for imagination, storytelling, and engagement, and explore new premium product offerings that will appeal to our clients and partners on the new frontier of media. Our work in this area is off to a good start. In 2023, you'll see AI-powered content move from an R&D phase to part of our core business, enhancing the quiz experience, informing our brainstorming, and personalizing and curating our content for our audience. I could not be more excited for us to explore these transformative new frontiers in digital media. As creator-led and AI-powered content continues to gain audience share, BuzzFeed is well positioned to both influence and benefit from these trends. We hope you will join our Virtual Investor Day on May 11, where we will have time to fully communicate what we are working on. Thank you. Now I'll hand the call over to Marcela.

Thank you, Jonah, and good afternoon everyone. I will recap our Q4 performance, including some of the actions we have taken to address the ongoing challenges we are facing. I also want to share with you the early stages we are driving through our focus on creator-led and technology-enabled content creation. We delivered Q4 results in line with the high end of our November guidance range for both top and bottom line. Q4 also marked the one-year anniversary of the Complex Networks acquisition. We made great progress with the integration in some areas, executing against our plans to realize the cost efficiencies of our broader scale as a combined company. However, as Jonah discussed, the fourth quarter revenue trends reflect some of the operational challenges that we are facing as well. Advertising and content revenue both declined year-over-year in the fourth quarter as further softening in the digital ad market more than offset the incremental revenue from Complex. Additionally, while each of our brands individually continues to resonate with clients in the marketplace, we have more work to do to fully realize the revenue benefits of the combined brand portfolio. The steps we took to combine the BuzzFeed and Complex sales teams have created operational challenges in bringing the combined portfolio to the market, which has negatively impacted our revenue performance, particularly in the fourth quarter alongside seasonally high revenues. As clients tightened budgets in the broader market downturn, we struggled to bundle the brands and cross-sell new products. These lingering challenges are contributing to Q1 revenue expectations lagging behind the broader U.S. digital advertising market in terms of year-over-year growth. To address this, as part of our broader reorganization in December, we made changes to the sales team structure to better leverage industry knowledge and drive increased focus by vertical. We also rolled out new training resources to allow the sales team to fully ramp up on new products and brands. We are evaluating opportunities to drive improved sales execution against the combined brand portfolio. In doing so, we look forward to bringing a more robust go-to-market strategy to our clients and partners that expands our portfolio of iconic and category-leading brands. And as Jonah alluded to, we also have some new initiatives underway, and we expect to share more on how these initiatives will contribute to overall revenue at our Investor Day in May. Turning to costs. We also took critical steps last year to ensure that we can continue investing in our long-term growth while preserving cash. The restructuring plan we announced in December has been fully executed, reducing our workforce by approximately 12%. This follows the consolidation of our New York real estate footprint, the voluntary reduction in workforce at BuzzFeed News, and the consolidation of Complex and BuzzFeed administrative teams. These 2022 actions all contributed significant cost savings. Moving forward, we also have an opportunity to drive margin improvement by further optimizing our product mix and cost structure. Even in a tight market, our value proposition is clearly and consistently resonating in the marketplace. We offer advertisers the opportunity to invest directly in high-quality content from trusted brands at Internet scale. Our portfolio of premium IP, shows, and content attracted some of the biggest advertisers from Nexus to Intel to Disney, looking to enter the cultural landscape. Moving forward, we believe we have an opportunity to further amplify our value proposition through our focus on creator-led and technology-enabled content creation. Before I wrap up, I want to share some of the early progress we have made in these new areas. Our work to build a premier creator platform is aimed at rapidly expanding our output of high-quality, brand-safe, creator-led content. The Tasty team, in particular, has made great strides in this area. Tasty is the world's largest food community on the Internet with tens of millions of followers across Facebook, Instagram, and TikTok. In 2022, Tasty made incredible progress in driving creator-led audience growth and executing creator-driven campaigns on behalf of our clients. The newly launched Tasty residency program drove incredible results for creators who grew their audiences by more than 40% across TikTok and Instagram through this program. The Tasty team also helped clients tap into the power of our creators to reach young audiences with innovative and resonant first platform marketing campaigns. In Q4, Tasty executed an initial vertical video recipe series on behalf of Snyder's of Hanover to drive usage of the clients' core pretzel products during the holiday season. The combination of content formats spoke directly to our massive millennial and Gen Z audiences, resulting in significant increases in brand awareness, brand preference message association, and recipe intent for our clients, far exceeding CPG industry benchmarks. As we continue to grow our creator network and ramp production of short-form vertical video, we expect to scale creator-led advertising and branded content solutions like this for our clients. We see opportunities to leverage new technologies like artificial intelligence to enhance the audience experience and open up new avenues for monetization. Our creative and technology teams have already begun to harness AI to develop new content formats. Last month, BuzzFeed introduced Infinity Quizzes to its community. BuzzFeed Quizzes have defined Internet culture since 2013, and this past year, our quizzes saw over 1 billion views from around the world. The integration of generative AI and the launch of Infinity Quizzes marked the biggest change to the format in a decade. Although it is still early, we are excited about the potential for this new format. The launch included an original quiz sponsored by Scotts Miracle-Gro that uses AI to identify your plant's soulmate. Our new AI quizzes have been met with a strong response from the community, delivering higher engagement and time spent relative to our traditional quiz format. We look forward to leveraging AI to bring more innovative brand-safe partnership opportunities like this to our clients. Infinity Quizzes are the first step in a larger effort to pioneer new forms of AI-powered creativity that delight and empower our writers, creators, and audience, and open up new advertising opportunities for our clients. As Jonah discussed, it takes time to ramp monetization of newer content formats, but we believe we are driving the right strategic focus in order to position the business for growth. We could not be more excited about our work around creators and AI and look forward to sharing much more with you, including how we are extending our business model to these new areas at our Virtual Investor Day on Thursday, May 11, 2023. Thank you, everyone. And now I will pass it on to Felicia, who will take you through the financial results and outlook.

Thank you, Marcela. We delivered fourth-quarter results in line with the high end of our guidance range for revenue and adjusted EBITDA. On a year-over-year basis, overall revenues for Q4 2022 declined 8% to $134.6 million as further softening in the ad environment more than offset the incremental revenues from the Complex acquisition. As a reminder, December marks the one-year anniversary of the acquisition of Complex Networks. As a result, year-over-year comparatives reflect approximately one month of Complex Network results in Q4 2021. Performance by business is as follows: Advertising revenues declined 27% year-over-year to $50.5 million, which was primarily the result of the ongoing pricing pressure on our owned and operated properties, driven by the broader macro environment as well as sustained declines in time spent on Facebook. Content revenues declined 9% year-over-year to $54.8 million, as the incremental revenues from Complex were more than offset by a weak digital advertising market and the operational challenges that Jonah and Marcela discussed earlier. Commerce and other revenues grew 76% to $29.3 million, benefiting primarily from our advised shopping and experiential events like ComplexCon in November. This revenue performance resulted in adjusted EBITDA of $17.6 million in the quarter. We also incurred charges that did not impact adjusted EBITDA, including a non-cash goodwill impairment charge of $102.3 million triggered by a decline in our stock price during the month of December. 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 $56 million. Turning to audience engagement and time spent. We continue to gain momentum in the quarter, generating billions of views of our short-form content in Q4 and tripling viewership year-over-year. This gives us further confidence that we are driving the right strategic focus to position the business for long-term growth and monetization. In terms of U.S. time spent across the business as recorded by Comscore, we delivered year-over-year growth in time spent on our owned and operated properties for the third consecutive quarter. Overall, time spent, however, declined 27% year-over-year to 135 million hours in the fourth quarter, driven by ongoing declines in Facebook traffic amid increased competition for audience attention. Turning to our outlook for the first quarter of 2023. Beginning in Q1 2023, year-over-year comparisons will fully reflect the Complex Networks acquisition in both years. Overall, quarter-to-date trends continue to point to a challenging operating environment in Q1, as the headwinds we have faced over the past year on reported time spent and monetization of newer formats persist. In line with typical advertising seasonality, we once again expect Q1 to be our smallest quarter in terms of revenues. On a full year basis, we expect the 2023 quarterly revenue profile to resemble 2021. We expect Q1 year-over-year trends in advertising revenues to carry over from Q4 2022. We expect year-over-year trends in content revenues to decelerate further relative to Q4 2022 as the macro environment continues to put pressure on the demand for brand new content, coinciding with the anniversary of the acquisition of Complex Networks. Additionally, as Marcela discussed, we are evaluating opportunities to increase overall sales execution with the combined brand portfolio, although we have not seen any revenue benefits from these changes in Q1. We expect e-commerce and other revenues to grow modestly year-over-year in Q1. In terms of adjusted EBITDA, we have historically generated losses in Q1. Although we expect to offset some of these forces with savings from our previously executed restructuring events and real estate consolidation, we do expect Q1 adjusted EBITDA losses to widen year-over-year as a result of the difficult macroeconomic environment and operational challenges. On an annualized basis, we expect the combination of our restructuring and real estate actions to drive significant cost savings. As of March 10, 2023, the majority of the company's cash and cash equivalent balances were held at Silicon Valley Bank. However, in a joint statement released by the U.S. Department of the Treasury, the Federal Reserve, and the Federal Deposit Insurance Corporation, the U.S. government reassured that all depositors will be fully protected. The company does not currently anticipate any disruption to its ongoing operations. With that, I will turn to our financial outlook. For Q1 2023, we expect overall revenue in the range of $61 million to $67 million, or 27% to 33% lower than the year-ago quarter. We expect this revenue decline in conjunction with the fully executed cost savings discussed earlier to result in adjusted EBITDA losses in the range of $18 million to $25 million. In 2022, we took multiple steps to adjust our cost structure in order to align with the weaker macro and digital advertising market backdrop. We continue to evaluate opportunities to drive efficiency across our business in order to preserve cash, improve execution, and therefore results while continuing to invest behind our long-term growth opportunities. We look forward to sharing much more with you at our Investor Day on Thursday, May 11. Thank you. And I'll now turn the call over to the operator so we can take your questions.

Today's first question comes from John Blackledge with TD Collins. Please go ahead.

Hi, good evening, thanks. A couple of questions. And I think you maybe just flush it out a little bit. But on the 1Q '23 top line guide, how should we think about the revenue trends at the three segments as we roll up the total revenue guide? And then the second question on Gen AI, when should we start to see the usage of the Gen AI technology rolled out at scale and across which products? I think you mentioned you started using it with the quiz content, but is it going to be used on any other content creation? And then a similar area, is BuzzFeed partnering with companies like OpenAI? Or do you guys have internal technologies that you're using? Or is it a mix of both? Any kind of color there would be helpful. Thank you.

So, as it relates to Q1 2023 revenue and each of the segments, we are seeing a continuation of the Q4 trends, especially as we anticipate a higher level of activity from clients in the back half of 2022, as they lost budgets for the start of 2023. Certain verticals such as CPG, retail, and tech platforms have also been impacted by the market softness, compounded by the challenges from the integration of the sales team. So, as I mentioned, we do expect trends in Q1 to align with Q4. As I noted, we have shown three consecutive quarters of improvement on owned and operated time spent, which represents the majority of our advertising revenues. However, we are faced with certain price concessions as you can see from the Q4 results. We anticipate content to decelerate year-over-year as that has been most impacted by the Complex integration, with Complex being a majority content provider, and branded content being most affected by the macro environment. With Commerce, we anticipate a similar trend in Q1 as we've seen outside, especially as we compare against the Facebook declines in referred traffic on our organic affiliate business. I also mentioned Commerce in Q4 had a one-time event in November with the addition of ComplexCon.

Yes. On the generative AI front, we have a tremendous amount of energy within the company building new products and new systems on top of generative AI. It's obviously very relevant to the type of business we are and has a lot of potential to enhance the creativity of our team and allow us to create things that wouldn't have been possible. We see something similar to what social media was a decade ago, which is a major new platform that we'll be able to build on for many years to come. We started with Quizzes, the Infinity Quizzes that Marcela mentioned in her remarks, where we upgraded the BuzzFeed Quiz from being able to have maybe 12 possible outcomes when you take a quiz to an infinite number of personalized outcomes. We've seen very strong time spent and positive user signals that people really love these new products. We also just yesterday at South by Southwest shared a new product that is a chatbot game, where you try to be an influencer, and a chatbot gives you feedback on your ideas about how you're going to build your influencer career and tells you how many followers and how much money you're making in that simulated influencer game. Again, we received very strong and positive feedback from that, both from the audience and people playing online. You asked whether we are partnering with OpenAI or using our internal technologies. We have a partnership with OpenAI and a great relationship with them, utilizing their APIs. Additionally, we are building some of our own systems. We're not developing our own large models, which is a costly endeavor, but we are using the data science and technology investments we've made over the years to find differentiated ways of integrating with these models. This allows us to leverage existing categorization of our content, utilize existing metrics like popularity of our content, and create better prompts to use in our CMS. This will enable our writers to create content using these AI-powered tools. I think that's the biggest change you'll see in the coming weeks and months. The first Infinity Quizzes we made were largely hand-crafted, requiring collaboration between the product team and the editorial team to put them together. However, now we have that technology embedded in our CMS so that every writer at the company will be able to use these tools to generate powered content. The scalability is just beginning, and instead of making a few quizzes as proof-of-concept or tests, it will become part of the normal workflow. I'm excited about the testing and learning process we excel at, which will allow our writers to experiment with various ideas and formats using these models. That is already in the rollout phase.

Thank you. Great color.

The next question comes from Jason Kreyer with Craig-Hallum. Please go ahead.

Thank you. I want to start by discussing short-form content. I know the first platform is now implementing monetization plans. As this unfolds during Q1, I’m interested in any key insights you might have from it. Do you feel more optimistic about your prospects for short-form content and the chance to address the monetization gap?

Yes. Thanks, Jason. Great question. It's obviously something that all the platforms are very focused on. As I said, I think on our previous call, the platforms ramped up short-form vertical video primarily due to the threat of TikTok, with more emphasis on audience share. Now they have all pivoted to care about revenue as well. YouTube was the first to operationalize Shorts and announced that they would provide monetization. The monetization works a bit differently. Instead of a share of pre-roll, it's a share of the ads that appear between the vertical videos, as monetization is more challenging with short videos. The revenue share is something that the platforms are using to incentivize sustainable content production, which is aligning with our expectations. We see a real inflection with our creator programs, and creator revenue is outpacing other revenue streams. This plays well with vertical video because one way to generate revenue through vertical video is to have creators produce videos on behalf of brands. We're seeing a lot of success with this, and our sales team is getting more skilled at selling those creative deals. Expanding our creator network and platform is our strategy for monetizing vertical video. Newer initiatives like AI also have potential in this space, especially as AI video is still in earlier stages compared to text and images. We believe that using AI to automate character production and other areas can create exciting opportunities.

Thanks, Jonah. And then just the longer-term role of AI for BuzzFeed. I mean, it certainly seems like there would be some long-term cost benefits, but just curious if you can lay out what the other benefits are that you see.

Yes. I think one of the benefits that I feel most strongly about is that AI is enabling almost a new medium for content creation. The Infinity Quizzes are a nice example. It used to be that a writer would write a few questions, define the logic for how those questions would produce results, and then create maybe eight or 12 different results for the user. Now, our writer still writes the questions, but they provide a prompt that defines how the results should be generated based on user input, allowing for an infinite number of personalized outputs. When we consider content personalization, traditionally, content personalization happened at the curation level, where the feed you see on Instagram or Facebook is organized algorithmically, but the content itself isn't personalized. Generative AI is paving the way for personalized content creation. Having a large content library, knowledge of audience interests, and trusted brands to create engaging content will leverage AI-powered personalization and content generation to provide a differentiated, engaging experience for audiences. Additionally, there will be opportunities for efficiency in producing content in ways that streamline our operations. Overall, there is a lot of focus on AI's potential to create new experiences and interactions that can revolutionize our approach.

Thanks for taking my question. Just circling back to your Q1 guidance and the broader macro, it just seems like the news is rapidly changing. I'm curious if the recent events with Silicon Valley Bank are having any disruptive impacts on your advertising business, or if there are any specific verticals that are noteworthy.

Thanks, Brent, for the question. So far, with the events that have occurred in the last 72 hours with Silicon Valley Bank, we have not yet seen any impact on our operations or from our customers. So far, business continues as usual. As for Q1, we have projected a revenue decline year-over-year. It's a result of the trends we saw starting in Q4 that continue to materialize in Q1. There is an impact related to macro conditions and some operational challenges that we have had. We took steps to better align our structure with market requirements, focusing on industry knowledge and verticals for our advertising efforts.

Got it. Did you build in any cushion for disruptions like we witnessed recently, or is it just a continuation of existing trends?

In our guidance, we based our estimates on historical performance, taking everything we are currently aware of into consideration and did not see any specific impacts that would adjust our overall revenue profile.

I don't foresee the Silicon Valley Bank situation having a significant impact on our business.

Okay. That’s good to hear regarding the advertising side and potentially worse scenarios. Regarding cost savings, do you see any further opportunities for cost reductions, or do you believe you have done enough to improve profitability?

Yes. The restructuring performed at the end of 2022 was dictated by market conditions and our operational needs. However, we are adaptable to change, both from an industry perspective and macro perspective. We will continue to focus on execution. Moving forward, we see opportunities to drive gross margin improvements throughout 2023 by further optimizing our product mix and cost structure.

This concludes the question-and-answer session. I would like to turn the conference back over to CEO Jonah Peretti for closing remarks.

Thanks, everyone, for joining us. We look forward to speaking with many of you in the coming weeks, and stay tuned for more information on our upcoming virtual Investor Day on Thursday, May 11. Thanks.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.