Good afternoon and welcome to BuzzFeed Inc's First Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we'll conduct the question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this call will be recorded. I would now like to introduce BuzzFeed's SVP of Investor Relations, Amita Tomkoria.

Hi, everyone. Welcome to BuzzFeed Inc's first quarter 2022 earnings conference call. I'm Amita Tomkoria, SVP of Investor Relations. Joining us today are Founder and CEO, Jonah Peretti; 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 quarterly report on form 10-Q 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 may present both GAAP and non-GAAP financial measures. 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 GAAP to non-GAAP measures is included in today's earnings press release. The press release and an investor presentation are available on our website at investors.buzzfeed.com. And now, I'll pass the call over to Jonah.

Hello everyone and thank you for joining today. I'm incredibly proud of all our team has accomplished in the first quarter. We completed the unification of the sales, business and admin teams across BuzzFeed and Complex Networks. We demonstrated agility across our editorial, video and news teams in serving rapidly evolving audience and consumer preferences. And we delivered Q1 revenue and adjusted EBITDA in line with our margin outlook led by robust performance in our content business. We generated revenues of $92 million representing year-over-year growth of 26%. With the introduction of lightweight video products and the acquisition of Complex Networks, our content business is stronger than ever and we are achieving immediate monetization of new content format. Complex Networks is celebrating its 20th anniversary this year. With this acquisition, we are now offering advertisers a wider range of branded content opportunities, helping them lean into platform shifts and positioning us to drive stronger revenue growth through our content business. Q1 also marked the one year anniversary of the HuffPost acquisition. The business continues to perform incredibly well with Q1 revenues and engagement both growing strongly year-over-year. Looking ahead, we expect Q2 revenues to surpass $100 million for the first time in our history. This has nearly doubled the level of Q2 2020, a significant accomplishment in just two years driven by the efficient integration of our recent acquisitions. Last quarter, I spoke about how we were entering another period of evolution in digital media. User engagement data from analyst surveys and third-party tracking points to the fact that short form vertical video has clearly emerged as the fastest growing content format for young audiences with TikTok rapidly gaining share relative to traditional platforms. As the major tech companies like Meta and Google make investments to compete, they have reported…

Thank you, Jonah. I'm excited to walk you through our financial results today. Our investments in audience-driven strategies with the highest potential for long-term growth and monetization are yielding excellent results. And we believe we are increasingly well positioned to deliver attractive returns on these investments. We delivered first quarter results in line with our March outlook for both revenue and adjusted EBITDA. Revenues grew 26% year-over-year to $91.6 million driven by robust double-digit growth in our Content business. Reported revenue growth was at the low end of our guidance range of approximately 30% driven by a change from growth to net revenue accounting for the Complex creator program. With this change, the accounting treatment for creator revenues across Buzzfeed and Complex are now consistent. Without this change year-over-year, revenue growth would have been 30%. As a compliment for our revenue reporting, we also measure audience time spent across our owned and operated properties and third-party platforms. Overall time spent declined 4% year-over-year in the first quarter as expected. This was driven primarily by declines on third-party platforms as audience consumption patterns continue to favor short form vertical video formats, such as TikTok and Reels, which are not captured in our time spent metric. Time spent on our owned and operated properties was also impacted as these platforms capture an increasing share of audience time. As a reminder, this metric reflects time spent on our owned and operated websites and apps, YouTube and Apple News as reported by Comscore and Facebook as reported by Facebook. This metric does not capture time spent on TikTok, Instagram, Snapchat, or Twitter. Although we are not yet able to leverage industry standard reporting to measure audience time spent on newer formats like TikTok and Reels, we monetize this consumption through our content business by…

Thank you. [Operator Instructions] And our first question comes from the line of John Blackledge with Cowen.

Great, thanks. Two questions. First, please you just kind of touched on it, but could you talk about the advertising environment that you're seeing thus far in the second quarter given the different macro cross currents? And, maybe like, which industry verticals are kind of leading pullback or pause and spend? And then second question on the vertical video initiative, any way to kind of frame potential revenue contribution from that emerging segment in 2022, and how are the margins for short-form video relative to kind of other forms of content creation that BuzzFeed does? Thank you.

Thanks, John. So, I would say on our advertising business, as you know, it’s comprised of both direct sales and programmatic revenues, and it is the scaled advertising business. On the direct sales side, our team has really done a great job of navigating the current market. Travel and financial services were two areas where we saw strength in Q1. And then although CPG and retail were slower to start, we have seen trends improve in both categories into Q2. We have also seen a lot of momentum in Q2 in entertainment and auto. And then obviously the flip side for us has been tech, where our partners are being impacted by the broader supply chain disruptions. On the programmatic business, we are seeing more of an impact for macro factors especially given kind of the seasonal uplifts that we would tend to see from Q1 to Q2 being dampened. However, we do have the benefit of being cross platform and having a diversified advertising model across both programmatic and direct. The other area I would add for Q2 is with the unified go-to-market strategy across BuzzFeed, Tasty, HuffPost, and Complex. We do see the opportunity to achieve greater scale and hopefully drive stronger margin contribution over time. On your second question, as it relates to vertical video, I would say that it is one of the products that are considered in our content revenue line. And so what we do see, which is one of the trends that you’re seeing in Q1 is that H1 will continue to be pressured by the mix shift toward content away from commerce. We do however, expect H2 to show margin improvements from the cost synergies that we announced in Q1 as a result of the integration of the Complex business sales and admin teams, and that we also expect easing comps in the back half of the year. So, we are expecting seasonal improvement sequentially as we move through the quarters as a result of the improving operating leverage related to our fixed cost infrastructure.

Okay. Great.

Just one quick note on short-form video, it is advantageous in the sense that it is not a eight-minute, 12-minute video, like what you might produce on YouTube. And so it is less expensive to make branded content in short-form vertical video that still reaches large audiences and has a big impact. So, of course, it’s an emerging area than emerging platform Reels, and I mean, TikTok and Reels and Shorts are relatively new. But the encouraging part of it is it’s a good form of communication. It doesn’t require massive production in order to make an effective video that reaches millions of people.

Okay. That makes sense. Thank you.

Thank you. Our next question comes from the line of Jason Kreyer with Craig-Hallum.

Great. Thank you. So, you’ve had a lot of content that you discussed at your new fronts a couple weeks ago. Just curious if you can highlight the feedback that you’ve heard from advertisers, just as you have conversations coming out of that presentation?

Yes, we heard from a lot of advertisers that were very excited about upshots and the ability to do branded content and vertical video across multiple platforms. It was also the data work with Lighthouse was also very well received. A lot of clients are looking for new first party data solutions, looking for contextual advertising opportunities. There’s a big reset in the industry that is requiring advertisers to work with trusted brands that have first party data. So that was a great opportunity for us to tell that story and let advertisers know how much we’re doing there. And then the creator trend is a big trend. And one of the pain points for advertisers and clients is how to work with a really fragmented field of influencers and creators? And how do you know which ones to work with? And so the expansion of that combined with Lighthouse and vertical video solutions was really a synergistic combination. They know they can come to us, and get vertical video made by creators with really strong data. And that combined is something that is more than the sum of its parts. So it was it was a good opportunity. And then I would just say more broadly, the – just seeing the Complex team and the BuzzFeed team on stage together, seeing the way we’re working together, seeing the way that Tasty and First We Feast are launching a food festival together that there’s just a lot we can do now that we’re integrated now that we’re all one team we’ve integrated the business, and augmented back office. We got the Lighthouse capability across all of the Complex properties and the teams together building together, creating together that that was something that I think open the eyes up to a lot of the advertising community that you read a news article about an acquisition, but seeing it in action and is a different feeling, which was a great milestone for us.

And then you’ve talked a lot already about this transition to short-form video, but I just wanted to take a step back and maybe understand the progress that was made in the quarter. If you can give any detail on these platforms that you’re working with, maybe where some of them are a little bit further ahead of the curve, where you’re more instrumental in helping them create path to monetization, and then this may be more for Felicia, but I think there’s going to be a period of time where that pivot from long-form to short-form creates a little bit of a hole that needs to be filled. At what point should we start to maybe come out the other side, and see more of a return to growth on content as you build up that short-form expertise?

Yes, so we really feel like this is history repeating itself when you look at five years ago and the rise of Tasty that was built on very short-form in feed video, when Facebook was launching video, and that was new on Facebook, it was more about growth for them. They didn’t really monetize it. We had to build content solutions, branded content product placement in order to generate revenue there, it feels very similar now with TikTok and then Shorts, and Reels on Instagram and Facebook, they’re launching these new products to make sure that TikTok doesn’t take share from them or too much share from them. It’s more – it’s less focused on monetization. It’s more focused on growth and audience growth. That means we need to figure out the monetization ourselves, which is why we launched UpShots, which is why the content revenue line is so important for us on new platforms. New platforms, favor branded content, native advertising, and we’ve done that for many years now, when we see a new platform that's growing. Once TikTok, Facebook, Google start to really focus on more scalable advertising solutions, they will bring, the rev share and commerce revenue lines onto those platforms. And so for us, it's really a matter of how do we navigate the shift in the strategy, these platforms, where right now they're less revenue focused. They're also sharing less revenue. We can take control of our business by doing branded content native advertising. And we know, we expect in the next six months to two years, it's hard to predict exactly we're going to start seeing the shifts, towards rev share and commerce models advertising and commerce models. And so we're staying very close to them. We're having high level conversations up and down the organization of these platforms. And when that shift happens, we will, likely be in beta partners with them, the way we have been in the past and start building out the advertising in commerce lines. And that's how it's worked in the past. And it seems like we're seeing a lot of pattern recognition on this that it will work that way with this new short form vertical video formats.

And to add to Jonah, I mean, in looking at Q1 2022 content was the key driver of our revenue growth at plus 65% year-over-year. And while the Complex networks was a primary driver of that BuzzFeed standalone had also increased from a year-over-year perspective, reflecting the change in mix of content, right, which was one of the items we had discussed in terms of offering more late, lightweight, native branded products as part of our overall portfolio. So we do feel confident with the introduction of Complex, as well as all of the BuzzFeed, Inc. products that we do have a scale its content business that can offer a wide array of products, both from lightweight to premium content to our advertisers. And so in Q2, we do expect content to continue to lead the growth for Q2, which really highlights our diversified business model. And we do feel confident in being able to successfully navigate the market shifts we are seeing. The only item, I will note is that with Q2, we do note that as content revenues do increase as a percentage of total that is our lowest margin. And so that will have some impact as it relates to our adjusted EBITDA numbers in our, that are reflected in our Q2 guidance.

Thank you one more for you, Felicia. The change in revenue recognition that hit Q1 by about four percentage points, should we assume a similar headwind to the Q2 guide that you provided in other words? Should we assume that revenue would've been around 4% better than the low 20% you guided?

I would say the way to think about the gross versus net is that very similar to our traditional advertising seasonality that we have disclosed previously as it relates to Q1 and its percentage of total revenue that would be a good guide in thinking about the impact that the gross versus net has had on Q2. And we also have disclosed in our queue, both the pro forma as well as the impact of the gross versus net recognition in our filing.

Great. Thank you.

Thank you. And our next question comes from the line of Brent Navon with Bank of America.

Thanks and good afternoon. Just want to circle back to the advertising market and just given the volatility right now. What's, I guess the current visibility that you have into these advertising trends and, some of the commentary about the verticals where it seemed like tech might have gotten, tech got worse, but maybe financials improved, anything just from month-to-month on a consolidated basis on, how advertising has trended from, March to April to May would be helpful?

Yes. So I would say in terms of direct sales, we did see recovery as it related to CPG in retail, in Q2 with very strong book dollars. And we did see new verticals really showing increases in overall, we're looking at visibility as it is today in terms of our total book dollars across the, the business and feel good in terms of the guidance that we're sharing for Q2, as it relates to the performance of advertising. I think the big headwind, which is also a bit of a tailwind is in being able to look across the platforms themselves and having a robust programmatic offering. In 2021, there was this seasonal uplift that everybody saw in terms of advertising CPMs across the market. And so we are seeing a softening of those CPMs across the programmatic space.

Got it. Now that's helpful. And just as a follow up, I guess, bigger picture, I think one of the, strategic rationales of, you going public was to consolidate some of these subscale brands into BuzzFeed. And obviously the market conditions have, drastically changed from an industry and just from a general macro and I'm curious, how you guys view your position in the market right now, given all these changes.

So Hey, Brent thanks for the question. So I think the changes in the market haven't had a huge effect on us, in the sense that valuations are relative. And if the market is down, that means there's more attractive acquisition opportunities out there of companies that are going to be looking for exits, especially the subscale digital media companies, because they realize that it's takes a lot of investment up front to build a commerce business, an events business, a programmatic ad tech, all the different pieces you need to build a diversified model. And so having that built out already and being able to plug in additional brands into that and audiences into that is, something that creates a lot of value. And so we can share in that value with that acquisition target. I think in some cases there, the fact that some of the private digital media companies are still private and we're public. It gives us a head start and we can, navigate through a chopping market get in a position where we have, a strong platform and be acquisitive, not just this year, but in years to come and be further along than a lot of the competitors in our space.

Got it. Thanks. Thanks so much for the color.

Thank you. I'll now turn the call back over to Founder and CEO, Jonah Peretti for any closing remarks.

Thanks everyone for joining the call today. We look forward to seeing you at upcoming investor conferences and events over the next few weeks. Thanks

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. And you may now disconnect.