BuzzFeed, Inc. Q2 FY2023 Earnings Call

Good day, ladies and gentlemen. Thank you for standing by. Welcome to BuzzFeed's Second Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. Please note that today's conference may be recorded. I will now hand the conference over to your speaker host, Amita Tomkoria, Senior Vice President of Investor Relations. Please go ahead.

Hi, everyone. Welcome to BuzzFeed Inc.'s second quarter 2023 earnings conference call. I'm Amita Tomkoria, Senior Vice President of Investor Relations. Joining me today are 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, our 2022 annual report on Form 10-K, our Q1 quarterly report on Form 10-Q, and in our Q2 quarterly report on Form 10-Q to be filed tomorrow. 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.

Thank you, Amita. Good afternoon, everyone, and thank you for joining us today. We are observing a change in the marketplace as consolidation and share increases among leading platforms have created challenges for digital content and publishing companies. Additionally, as Facebook and other significant tech platforms focus on vertical video, the traffic referrals from these platforms to our content have decreased. These factors have affected our monetization in the second quarter and into the third quarter. Consequently, we expect the revenue declines we experienced in Q2 to continue in Q3. To tackle this, we are concentrating on our strategy to drive traffic directly to our owned-and-operated properties by introducing new AI-assisted content formats to enhance engagement and provide innovative advertising opportunities to our clients. We are also rapidly expanding our creator networks to engage in the growth of vertical video and focusing on destination news content to increase our HuffPost front page audience. Although it will take time for these initiatives to yield significant monetization, we are making solid progress in implementing our transformation plans. The strategic and organizational changes discussed at our Investor Day in May have been fully put into action, placing a rich library of intellectual property and extensive owned-and-operated properties at the core of our operational model to create innovative, audience-driven content. We are effectively utilizing our trusted brands to attract a growing number of emerging internet creators, which allows us to scale our content output more quickly, and we have allocated resources to enhance engagement on our owned-and-operated properties through new AI-powered content formats. In this way, we are reducing our reliance on major tech platforms and leveraging our unique combination of voice and scale in a fragmented media environment. Our strong and distinctive intellectual property across BuzzFeed, Complex, Hot Ones, First We Feast, Tasty, and HuffPost features trusted and established brand identities. BuzzFeed offers pop culture, entertainment, and curation of the internet's best content using AI. Complex produces premium original content covering trending topics in sneakers, music, and cultural convergence. First We Feast explains the Hot Ones universe and builds intellectual property at the intersection of food and pop culture. Tasty engages emerging food creators and fosters community around cooking. HuffPost focuses on breaking news and audience-centric stories for a large direct front page audience. The brands we have established are valuable and difficult to duplicate. As a testament to this, we continue to lead the industry in Time Spent. According to Comscore, U.S. Gen Z and millennials spend significantly more time consuming our content than that of any other digital media company in our competitive set. With a streamlined sales team structure and an updated go-to-market strategy based on innovation, creators, AI, and cultural moments, we can now leverage our brands’ strengths more effectively to reaccelerate our growth and improve monetization compared to the broader U.S. digital advertising market. Firstly, we are prototyping new generative AI formats, including quizzes and chatbots. We doubled our production of AI-assisted content from the first quarter to the second quarter and expect to continue increasing output at a similar pace in the third quarter. Secondly, we are quickly expanding our creator programs to boost both revenue and content production. Building on the success of the BuzzFeed and Tasty creator programs, we've extended this approach to our other brands. We now have strong partnerships with over 180 creators who produce original content across our distribution channels, along with a much larger extended network of hundreds of creators across our brand portfolio. Together, creator-led content garnered hundreds of millions of views across our network in Q2. Thirdly, we are capitalizing on the fragmented media landscape as one of the few companies that can deliver culturally relevant moments at scale, something platforms or individual creators cannot match alone. These moments can be original or tied to broader pop culture events. Very few partners can provide both voice and scale in a single offering. BuzzFeed Inc. serves as a one-stop shop for significant cultural moments, whether related to the NBA playoffs or the latest episode of Hot Ones, enabling marketers to plan and advertise around them. In Q2, we introduced several new products in each of these areas across our brand portfolio, some of which I want to highlight today. Starting with BuzzFeed, which has always excelled in data-driven storytelling at the intersection of technology and media, providing the best content for our audiences. The editorial team continued to leverage AI in innovative ways to offer deeply engaging entertainment. Over the past six months, BuzzFeed has launched several new AI content formats, including personalized quizzes, chatbots, and multiplayer games, along with viral AI image collections. Notably, individual pieces of AI content have shown increased engagement, attracting more Time Spent and generating viral AI-inspired image posts across BuzzFeed.com, Instagram, and TikTok. A recent example is our post, 'Here's what Barbie's Dreamhouse would look like in each state,' which generated over 1 million views and went viral on TikTok and Reels by using AI to create unique images of fictional Barbie Dreamhouses tailored to different states. Overall, compared to Q1, views of our AI content and Time Spent have tripled, driven by higher content production, with our top 20 AI articles in Q2 generating more than double the Time Spent of our top 20 AI articles in Q1. Complex has also begun integrating AI to engage its audiences in novel ways, celebrating the 50th anniversary of hip hop with the brand's authoritative voice and extensive audience reach. Complex represents a comprehensive spectrum of convergence culture, making it one of the leading digital media brands for the elusive young male demographic. In Q2, Complex continued to celebrate this milestone with innovative AI collaborations, such as one with Sprite, enabling fans to create personalized mixtape album covers with AI’s assistance. Earlier this year, Complex launched its inaugural Creator program, inviting 18 diverse voices into the first Creator Class, promoting original creator-driven content for brands. Although it’s still in the early stages, advertisers are responding positively, with Uber collaborating with us and one of our creators, Ross Mac of Maconomics, to create original branded content focused on financial tips for Uber drivers. First We Feast reached a significant milestone in Q2 with the 300th episode of its popular YouTube series, Hot Ones. Since its inception in 2015, Hot Ones has attracted top celebrity guests, amassed over 25 billion minutes of viewing time, received multiple Emmy nominations, and set new standards for YouTube talk shows. In Q2, the show continued to capitalize on major cultural moments, like the NBA playoffs, delivering value to our audiences and clients. Hot Ones fans engaged with NBA playoffs through a collaboration with Google Pixel, the official sponsor of the NBA playoffs, which included a Hot Ones episode sponsored by Google Pixel, custom-branded social content crafted by our creative teams, and brand integrations featuring the Pixel phone across both Hot Ones and the Truth or Dab spin-off series. Now, regarding Tasty. Since its launch in 2015, Tasty has inspired internet users to cook through exciting recipes, current trends, and inclusive food stories reflecting the diverse identities of our audience. Currently, Tasty gathers over 1 billion cross-platform views each quarter, with audience engagement across platforms surpassing the competition, establishing it as the largest and most engaged food community online, according to Tubular Intelligence. Over the past year, Tasty has also become a leading platform for food creators, having onboarded 10 residents in its creator program to collaborate on new content. This residency has generated remarkable results, enabling creators to significantly grow their followings while fostering deeper engagement within the Tasty community. This success has led to a new Tasty TikTok talk series, Potatoes 100 Ways, hosted by one of Tasty's inaugural residents, Jeri Mobley. This series quickly gained traction with over 70 million views to date, along with securing a multi-episode sponsorship from Idahoan Potatoes. As we continue to expand our creator-led content, we are excited to introduce more innovative ways to connect creators and brands on our platform. In May, Tasty launched an AI-powered culinary companion called Botatouille, designed to transform the cooking, meal prep, and shopping experiences for Tasty's global chef community. Users are engaging with Botatouille more deeply than anticipated, having extensive discussions with the chef bot on various cooking challenges, such as meal planning and healthy cooking. HuffPost has been successful in engaging readers with destination news content in Q2. The brand's coverage of significant events, including high-profile departures at Fox and CNN, the tragic Titan submersible incident, and new developments in the Trump indictment and arraignment, drove substantial audience traffic throughout the quarter. HuffPost is also collaborating with 10 rising stars in its creator program to enhance its short-form vertical video content while preparing residents for careers as creators. Resident content has been showcased across HuffPost's social media since the program's launch last December. HuffPost has significantly increased its vertical video production. Across our array of premier brands and intellectual properties, we reach millions of young people daily who visit us directly for our content. As you’ve heard, our initiatives centered around AI, creators, and cultural moments are gaining real traction with audiences and clients alike, confirming that we are pursuing the right long-term strategy for growth and monetization. As we carry out our vision, we are dedicated to developing a business that delivers substantial margin expansion and generates strong cash flows over time. I appreciate our shareholders' support and am honored to work with our talented teams of creators, journalists, producers, and all our employees as we strive to continue leading the industry forward with unwavering dedication to our mission of spreading truth, joy, and creativity online. I will now pass the call over to Marcela to discuss our business performance and operational highlights.

Thank you, Jonah, and good afternoon, everyone. Let me start by recapping our Q2 revenue performance and discussing some of the trends we are seeing across the business. We delivered Q2 revenues in line with the guidance range we provided in May, a decline of 27% year-over-year. Advertising revenues came in below our expectations, pressured by increased competition for both audience time and ad dollars. We saw softness across the traditional sales verticals, including CPG, entertainment, and financial services. Tech was a bright spot in the quarter with year-over-year growth led by the partnership with Google Pixel that Jonah mentioned earlier. Retail also showed improvement in year-over-year trends versus Q1, a testament to our ability to deliver performance-based advertising solutions for large retailers in a down market by bundling our media and affiliate products. Content revenues outperformed our expectations, driven by higher-than-expected sales against our premium IP programming. Revenues from new creator-driven client partnerships, which I will share more on shortly, are also captured here. Commerce performed in line with expectations with year-over-year growth in our organic affiliate business for the fourth consecutive quarter. Overall commerce revenues declined year-over-year as we lapped last year's Metaverse experiential event, which we did not hold this year. Looking into Q3, the media environment remains challenged. We expect the year-over-year trends in overall revenue to be similar to Q2, as the headwinds we saw in advertising revenues persist and continue to offset the recent momentum in our content business and the return to growth in our commerce business. From the time we start engaging with the customers until the campaign is executed, it takes about six months. That being said, we are optimistic about the potential for our recent sales team reorganization and portfolio-wide go-to-market strategy to reaccelerate revenue growth over the coming quarters. Following the reorganization, our sales team kicked off a nationwide road show in May, meeting with more than 100 clients and representatives from the major advertising agencies to present BuzzFeed, Inc.'s vision for the future of digital media. And clients are responding positively. We have closed several deals anchored in one or more of our three pillars of AI, Creators, and Cultural Moments, which I will share more on shortly. Similarly, client excitement around Complex con is also building with pipeline activity up by a double-digit percentage when compared to the same period last year. Next, let me share some recent client wins in the areas of AI, creators, and cultural moments to illustrate how our focus on these areas are attracting premium brands across major advertising categories. So let's start with AI. As Jonah shared earlier, we have launched new AI-powered content formats across our brand portfolio. BuzzFeed's Infinity Quizzes continue to attract new brand sponsors in Q2. In partnership with leading mattress brand, Serta, BuzzFeed launched two new sponsored quizzes, a dream interpreter and a bedtime story generator. Both quizzes received overwhelmingly positive comments from BuzzFeed readers and saw above-average Time Spent compared to non-AI format. The audience click-through rate and engagement rate both exceeded the client's expectations. Complex also introduced its first AI product through a commercial partnership with Sprite to celebrate the 50th anniversary of Hip Hop. The Complex team developed an interactive website powered by GPT acting as an art director, this spot crafts a distinctive mixtape cover using original artwork created by the multidisciplinary Internet artist OseanWorld. The experience guides fun through its personalized hip hop journey while designing a unique mixtape cover in real-time. In Q2, Tasty began integrating AI to develop fresh content for home chefs. In May, Tasty introduced the first-of-its-kind culinary companion in Botatouille, an AI-powered chef bot, available exclusively in the Tasty app. Botatouille is designed to revolutionize the cooking, meal preparation, and shopping experience for Tasty's global community. The chef bot serves up dishes, meal plans, and grocery lists when users talk to the bot and ask for cooking advice or recipes. Botatouille integrates shoppable recipes powered by Walmart to make the cooking experience seamless for users. The audience excitement and engagement we are seeing around Botatouille is driving interest from new and existing clients looking for innovative ways to reach consumers. Now let's turn to Creators. Across our brands, we now have close partnerships with more than 180 creators, and we are continuing to grow rapidly. Following the success of BuzzFeed and Tasty's Creator programs in identifying, attracting, and developing emerging Internet creators, we have extended this model to our other brands, including BuzzFeed News, HuffPost, and Complex, and we expect to introduce First We Feast's inaugural Creator Class very soon. Our work with creators continues to validate our thesis that success for both creators and brands is best achieved when creator-driven content is paired with a strong IP and massive audience reach. While looking at views and engagement of the same content on Tasty channels versus the creator's own channels, the data consistently shows that creator content outperforms on our platform. This content is also attracting major advertisers looking to execute marketing campaigns rooted in innovation. As Jonah mentioned earlier, in Q2, our creators collaborated with the likes of Uber, State Farm, and Idahoan Potatoes, contributing to our better-than-expected content revenue performance in Q2. We are also experimenting with creator-led content in our commerce business. During Prime Day, we invited creators from across our brands to develop original shopping content for our audience. Content was distributed across our platform as well as through creators' individual channels. We saw an incredibly positive response from audiences and significantly higher performance from creator content published through our channels as compared to revenue from the same content on a creator's own channel. This highlights the power of creator content paired with our vast distribution network in driving both audience engagement and revenue. Now in terms of cultural moments. As Jonah mentioned earlier, Hot Ones recently celebrated its 300th episode. The most recent season featured A-list celebrities, including John Mulaney, Jennifer Lawrence, Melissa McCarthy, and Jason Sudeikis, with each episode reaching millions of viewers. In fact, Jennifer Lawrence's interview reached more than 100 million viewers across platforms. And on the back of its fervent audience, the show has also continued to attract major CPG brand sponsors such as Procter & Gamble and General Mills. Hot Ones fans also rallied around the NBA player through a deep partnership with the NBA player’s official sponsor, Google Pixel. Going beyond the traditional episode partnership to include custom social content and brand integrations across both Hot Ones and the Truth or Dab spin-off series. Similarly, Microsoft tapped into our audience reach across Tasty and First We Feast, trusting us with a media campaign to promote their Bing AI launch. And Activision Blizzard invested behind the latest installment of their video game franchise, Diablo, with an episode sponsorship of Hot Ones, a custom co-branded hot sauce, and limited merchandise. Before I wrap up, I want to briefly address our cash and liquidity circumstances. Against the backdrop of lingering macroeconomic uncertainty, diminishing returns from the major tech platforms, and a tighter digital ad market, we continue to be laser-focused on preserving cash. The fully executed restructuring plans we discussed with you last quarter have meaningfully reduced our go-forward cash cost structure. We also tapped into the public market via an at-the-market program through which we raised $800,000 in Q2. These initiatives have enabled us to access additional near-term liquidity in order to complete our restructuring program even amid the current revenue headwinds. And as we exit Q3, we expect to realize the full cash benefits of our restructuring program on an ongoing basis. Furthermore, as we execute against our AI and creator initiatives, we are building a content creation model that makes our creative teams more efficient and sustainably expands our output without increasing fixed costs. Thank you, everyone, for being here today. I will now hand it over to Felicia to discuss our financial results and outlook.

Thank you, Marcela. We delivered second quarter results in line with our guidance range for both revenue and adjusted EBITDA. Overall revenues for Q2 2023 declined 27% year-over-year to $77.9 million as expected and in line with Q1 trends. Performance by revenue line is as follows: Advertising revenues declined 33% year-over-year to $35.4 million, in line with first quarter trends as expected, as increased competition for both audience time and ad dollars contributed to lower demand and ongoing pricing pressure. Content revenues declined 22% year-over-year to $31.5 million, with year-over-year trends improving relative to Q1, driven by a higher number of branded content clients quarter-over-quarter. Last quarter, we introduced the KPIs to represent net branded content advertiser revenue retention, which is a function of both the number of clients we serve and the spend per retained clients. This metric reflects current period trailing 12-month branded content revenues as a percentage of prior period trailing 12-month revenues for branded content customers that spent a minimum of $250,000 in the prior period. Q2 retention was in line with Q1 trends. Commerce and other revenues declined 17% to $11 million, almost entirely driven by the metaverse experiential event ComplexLand in the year-ago quarter which did not repeat in Q2 2023. In terms of adjusted EBITDA, we were able to mitigate nearly all of the lower revenue year-on-year with successful execution against the cost actions we announced in April, delivering breakeven adjusted EBITDA in Q2, $2 million lower than Q2 2022. We also incurred charges that did not impact adjusted EBITDA. 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 $41 million, $9 million lower quarter-over-quarter, including approximately $8 million in payments related to the cost actions we announced in April. Furthermore, on a year-to-date basis, before restructuring payments, we achieved breakeven operating cash flow. Turning to audience engagement and Time Spent. In terms of audience Time Spent, we continue to report U.S. Time Spent across our owned-and-operated properties and third-party platforms according to Comscore. This metric is intended to be viewed in conjunction with our advertising revenue performance. In Q2, U.S. Time Spent as reported by Comscore declined 9% year-over-year to 96 million hours as we continue to face increased competition for audience time. However, we once again outpaced peer digital media companies in our competitive set by a significant margin. In terms of creator-led vertical video, ahead of scale monetization, we are continuing to build audience momentum around newer platforms and formats, including YouTube Shorts, Instagram Reels, and TikTok. In the second quarter, the use of our short-form content across platforms doubled year-over-year to reach a new quarterly record. Before I share our financial outlook for the third quarter, let me first provide some context. Starting with revenues. We expect the underlying year-over-year trends in both content and commerce revenues to remain consistent from Q2 to Q3. We expect further softness in advertising revenues relative to Q2 as lower client spending trends across our core sales verticals persist into Q3. Additionally, as Marcela discussed, from the time we start engaging with customers until the campaign is executed, it takes about six months. So although we are encouraged by client feedback and pipeline activity following last quarter's sales road shows, we do not anticipate a material impact on Q3 revenues. In terms of adjusted EBITDA, we have included the full benefit of the restructuring actions in our cost of revenue and operating expense assumptions for Q3. As a result, despite lower year-on-year revenues, we expect to drive year-on-year improvement in Q3 adjusted EBITDA and adjusted EBITDA margin. With that, I will turn to our financial outlook. For Q3 2023, we expect overall revenues in the range of $73 million to $78 million or 25% to 29% lower than the year-ago quarter. We expect adjusted EBITDA in the range of $1 million in losses to $4 million in profits, up approximately $5 million year-on-year at the midpoint. And finally, I just want to reiterate Marcela's remarks regarding cash and liquidity. We continue to be laser-focused on preserving cash. As we exit Q3, we expect to realize the full cash benefits of our restructuring on an ongoing basis. Thank you. I'll now hand it over to the operator so we can take your questions.

I'll now hand it over to Amita Tomkoria for any web or questions.

Great. Thank you. We have received several questions already, which I've gathered here. So we're going to go ahead and jump right in with the first question for Jonah on the topic of first-party data. Jonah, can you talk about how BuzzFeed is looking to leverage first-party data today? And what advantage this could pose in 2024 as cookies are deprecated.

Thank you for the question. In 2022, our first-party data solution, Lighthouse, served over 150 advertisers and generated more than 1 billion impressions. When our partners utilize Lighthouse for their media campaigns, they typically see significant results, achieving 2 to 5 times greater impact on key brand and business metrics. We're also observing positive developments with new AI models that enhance our understanding of the content on our site, allowing us to create improved contextual advertising opportunities that integrate well with Lighthouse, providing a favorable boost for better targeting in the long run. Overall, the main challenge posed by the elimination of third-party cookies will impact less recognized ad tech and generic companies. However, having strong brands with solid contextual alignment and the capability to leverage new AI technology will enable us to effectively target our advertisers. We are enthusiastic about how first-party data can enhance our business.

Great. Thank you. Our next question is around advertising revenues. Maybe Marcela, starting with you, with short-form content gaining traction yet again, how is that impacting the business? Can you share some thoughts on monetization in the second half and into 2024? And then could you also walk through some of the current trends in short-form ad adoption versus owned-and-operated advertising trends.

Thank you, Amita, for the question. I will begin by discussing what we observe regarding short-form content, and then I invite Felicia to share insights on advertising revenues and the current trends we are witnessing. We are pleased that major platforms have begun sharing monetization opportunities with publishing partners. As mentioned last quarter, we were among the first publishers chosen to join TikTok's Pulse Premiere program for vertical video monetization. This marks the first occasion that publishers can generate passive revenue from their organically published content on the platform, and we are proud to be part of this exclusive group of premium publishers. Additionally, we have already started monetizing short-form vertical videos by directly selling to advertisers through our creator-led branded content product, which we will expand for our clients. We are well positioned to continue monetizing this format, having achieved over 1 billion quarterly views on TikTok for the first time, and Tasty’s short-form vertical video content also exceeded 1 billion quarterly views in Q2. Felicia, would you like to address the second part of the question?

Thank you, Marcela. So in terms of overall advertising revenues, the vast majority of our revenue is still driven by our owned-and-operated properties across BuzzFeed.com, HuffPost.com, and the rest. Q2 advertising revenues ended in line with Q1 trends in terms of year-over-year, with the decline being driven by increased competition for both audience time and ad dollars, which contributed to lower demand and ongoing price pressure. However, we are pleased with the short-form momentum in terms of output and audience engagement. In the second quarter, views of our short-form content across platforms doubled year-over-year to reach a new quarterly record. We have begun to generate advertising revenues on YouTube and TikTok for vertical video, as Marcela discussed. However, we do anticipate it taking time to scale for generating sizable revenue contributions on a go-forward basis.

Thanks, Marcela. Thanks, Felicia. Our next question is on the topic of AI. Jonah, can you discuss some of the early feedback from AI usage? You mentioned how some of the work is pacing, but specifically, what are you seeing in terms of consumer engagement and also anything on cost benefits as well?

Sure, thank you. To summarize, when we consider AI as a major technology trend, we think about the industry's direction over the next one to five years. The emergence of generative AI technologies is set to significantly influence digital publishing and content. We're focused on aligning our business with this positive trend and are starting to see strong progress in our early projects. A key indicator of where we believe things are going can be found in our preliminary work, revealing our perspective on AI technology and its potential applications. We foresee increased personalization, customization, and interactivity. For instance, our BuzzFeed quizzes, which were already interactive, can now be infinitely interactive thanks to AI. This was the first offering we introduced, followed by chatbot games that enable users to engage in new types of conversations, resulting in our audience spending significantly more time with these games compared to static content. Additionally, AI-assisted imagery allows us to participate in cultural moments, like the Barbie Dreamhouse example I mentioned earlier. These innovations are enhancing our products, making them more vibrant and personal, and our audience has responded positively. In Tasty, we introduced the Botatouille app, which allows users to have interactive conversations about food ideas or tips, providing a more engaging experience compared to traditional food site searches. Complex launched an interactive Sprite album creation tool, and we've witnessed excitement from other brands about this type of interactivity, such as Serta's dream interpreting bot, and various other interactive content developed and launched with advertisers and partners. While it’s still early days, we’re learning how to create some effective solutions, but we need to build out our capabilities to scale and distribute more content experiences across our network. Regarding cost benefits, we are seeing improvements in workflow. Our programmers are utilizing copilot tools for enhanced coding efficiency. The sales team began using an internal tool we developed to match RFPs with our product offerings and quickly respond to clients. Recently, we were able to secure a deal in just 24 hours, a process that typically requires extensive collaboration and could take weeks. We matched the technology with client needs and then engaged creative teams to ensure the quality of our work exceeds previous standards without AI assistance. These are a few examples of how AI is impacting our operations. We are developing a content curation model that's more efficient and scalable than traditional media approaches. While we still have a long way to go, we are seeing promising early results and are committed to long-term development, believing that media is evolving in this direction. We see numerous opportunities to enhance our offerings, delight our users, and achieve greater productivity while maintaining the quality of service to our clients and audience through the utilization of copilots and other empowering tools.

Moving on maybe to the go-to-market strategy, Marcela, following the reorganization and some of the changes you guys discussed last quarter. Can you provide an update on how that's going in terms of sales productivity cross-sell trends? Any other impacts or improvements that you guys are seeing across the business?

Yes, sure. Thanks, Amita. As you may recall, we announced a restructuring in April. At that time, we also decided to reorganize the sales team. This restructuring/ reorganization of the sales team in the way that they were organized was finalized in May. This meant a reduction in layers and the organization of the teams around two mega verticals, products and services, with five underlying sales verticals. Right after that, the team engaged in nationwide roadshows, meeting with hundreds of clients and ad sales representatives. The response from clients has been positive, and we are seeing increased pipeline activity for the back half as well as positive momentum relative to Q1 in branded content. As a reminder, sales cycles take about five to six months. While we expect that it will be potentially reduced with AI in the future, as Jonah gave an example earlier, we are still managing through this timeline. We expect to start seeing the impact of the latest reorganization probably in Q4.

Great. Thank you, Marcela. And we have time for one final question on the financial outlook, Felicia. Back in May, you guys had shared an outlook for full-year profitability and expectations for high-teens adjusted EBITDA for the full year. Do you have an update on that? Or can you speak to how your expectations have changed, or not, since then?

Sure. Broadly speaking, last year, we saw compression through the year with top-line revenue being challenged in the back half and in Q4 specifically, which had a very muted typical seasonal lift that we would expect going into Q4 from a revenue perspective. As of today, we are expecting a return to normalized seasonality as it relates to the quarter-over-quarter lift from Q3 into Q4 compared to 2022 when we saw the muted seasonal lift in terms of revenue. As it relates to bottom line guide for Q3, we expect to drive a year-over-year improvement of $5 million at the midpoint on adjusted EBITDA. We will continue to drive additional OpEx savings through real estate and other non-headcount cost initiatives in the back half of this year.

Thank you.

All right. Thank you, everyone, for joining us today, and we look forward to speaking with many of you over the coming weeks. That's our call. Thanks.

Ladies and gentlemen, thank you for your participation today. This concludes today's program. You may now disconnect.