Good day, and thank you for standing by. Welcome to the BuzzFeed Inc. First Quarter 2024 Earnings Conference Call. [Operator Instructions]. I would now like to hand the conference over to your speaker today, Amita Tomkoria, Head of Investor Relations.

Hello, everyone, and welcome to BuzzFeed Inc. First Quarter 2024 Earnings Conference Call. I'm Amita Tomkoria, Senior Vice President of Investor Relations. 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 and our Q1 2024 quarterly report on Form 10-Q 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 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. Our flagship BuzzFeed brand continues to be the leading player in digital media with vastly more time spent than other widely known digital and legacy properties like Box, Bustle, People, Vanity Fair and Vogue, according to ComScore. As I outlined last month in my annual letter to shareholders, BuzzFeed is leaning into AI to extend this leadership position and build the defining media company for the AI era. Over the past few months, we have made progress towards realizing this vision and have stabilized the business by selling complex, strengthening our balance sheet with more cash and less debt. Implementing a cash -- like a cost savings plan to reduce the size of our central teams and direct more dedicated resources to our individual brands. Organizing our business around our most scalable, high-margin tech-led revenue streams in programmatic advertising and affiliate commerce. In doing so, we completed the biggest step in our transformation, which was to refocus the company on our owned and operated sites and apps and away from platform-dependent models of distribution. We are now starting to see the impact of that shift. Our business evolved from one that was reliant on Facebook and third-party social platforms for audience traffic to now having the majority of our users come directly to our owned and operated sites and apps. Today, direct traffic referrals are our largest source of traffic. In Q1, 90% of audience time spent with our content was on our owned and operated properties. Even more promising, we are pulling the right levers and starting to see that audience grow. In Q1, direct traffic across BuzzFeed web and app properties grew 3% versus Q4. This shift also means that we have to change how…

Thank you, Jonah. We closed the first quarter with great momentum in our business, some of which Jonah already touched on. Before I discuss our Q1 financial performance in more detail, let me recap some highlights from across the business. We delivered Q1 revenue and adjusted EBITDA in line with our March outlook, generating a $7 million improvement in adjusted EBITDA year-over-year despite a $10 million year-over-year decline in revenue. Our flagship property, buzzfeed.com saw modest growth in direct traffic, up 3% versus Q4, a positive signal that traffic trends are beginning to stabilize as we complete the transition from being a Facebook-dependent business to one that drives traffic directly to our own and operated platforms. Programmatic advertising revenues across BuzzFeed and HuffPost websites and apps grew year-over-year from the third consecutive quarter. Last month, we completed the restructuring program we announced in February, which is expected to yield approximately $23 million in annualized compensation cost savings. We paid down a significant portion of our outstanding debt, resulting in lower go-forward interest expense obligations and we increased our cash balance by approximately $26 million quarter-over-quarter to $62 million, including restricted cash. This was driven by the proceeds from the sale of Complex, which closed in February. As a result, we are well positioned to navigate the ongoing headwinds facing publishers and digital media at large sustainably and profitably. Moving on to our first quarter results. As a reminder, all financials and comparables presented here are on a continuing operations basis, which excludes Complex. Overall, revenues for Q1 2024 declined 18% year-over-year to $44.8 million, in line with our March outlook. Performance by revenue line was as follows: Advertising revenues declined 22% year-over-year to $21.4 million, driven by ongoing pressure on our direct sales channel and lower monetization on third-party platforms.…

Thanks. I've gathered a bunch of questions here that we've received offline during the call. So, we'll get right into it. Jonah, maybe starting with you on the commerce business, you spoke a little bit about Retail Media Networks as it relates to your affiliate business and some of the retail partnerships that you have with Retail Media Networks continuing to show strong growth. What's the opportunity for BuzzFeed to leverage first-party data and the engaged audience that you have to attract some of these dollars?

Thanks, Amita. Yes, the retail media networks are a big opportunity for us. We see a lot of opportunity in that space. Just to take a step back, as I mentioned earlier, our model for commerce is a bit different than a lot of our peers. We really focus on product discovery. People come to BuzzFeed for all kinds of things, entertainment, and useful information. And sometimes while they're there, they start discovering the shopping content and buy things. Other times, they might come there because they want to shop, but they want to shop for fun. They're not doing research on a particular product they might want to buy. It's much more about discovery, finding something you know existed, being inspired to buy something new. And so, driving emotional responses in the buying process, finding new products, finding something for yourself, you didn't know you needed. Finding something that solves the problem that you have in your life, that are amazing writers have known as a common problem that people have and have suggested a bunch of interesting products to solve that. All of that is what drives our transactions and our shopping business. And so, as a result, we're able to capture a lot of really rich first-party data because we see what are people responding to. For example, we have data on shoppers that are looking for particular categories. We have data about shoppers that is more generational, or what kinds of other content. Are they reading? Are they parents? Are they Gen Z, are they millennials? And then we have these amazing partnerships with the largest retailers in the world, Amazon, Walmart, Target, and others, where that new product discovery can be -- is very easy to transact on and when you find something on one…

Thank you. Matt, maybe turning to you because you discussed the ComScore time spent trends and also some of what you're seeing on O&O, can you talk about any green shoots specifically that you're seeing with respect to content initiatives that are driving O&O traffic and that might point us toward a potential return to growth over the next period of time?

Yes. Yes. Thanks for the question. I think, unfortunately, overall time spent continues to be pressured by the lower BuzzFeed referral traffic. However, we are seeing green shoots with respect to our direct audience. So, for example, our BuzzFeed, web and app direct traffic grew 3% quarter-over-quarter. We're also seeing deeper engagement among our most loyal audience. Example, the number of paid us per web visitor has grown for 4 consecutive months since December. And really just looking to build on this momentum in Q1 with a focus on audience loyalty and new content in the pipeline to help drive time spent.

And maybe back to you, Jonah. You and Matt both referenced the sale of Complex, and just now that that's behind you guys, how do you think about the brand portfolio as it stands today? Are you thinking about additional asset sales? Or maybe you can talk about sort of the role of each brand in the portfolio at this stage?

Sure. So, we have really amazing assets, and it's exciting that we continue to see inbound interest in our brands. It speaks to the strong reputation we've built around each of our brands in the marketplace, both with audiences and advertisers. And we'll continue to be opportunistic in order to put our business in the strongest position to benefit from the work we're doing in AI and this next generation of more interactive content that we are very excited about. I think when you look at the programmatic and affiliate revenue lines, which are -- we really see as core, both HuffPost and BuzzFeed have really have great audiences and brands and dynamics to drive programmatic and affiliate revenues. We're seeing a lot of strength in programmatic across both of those properties. And although HuffPost is newer to the affiliate commerce, the large engaged audience, and an audience that's a bit more affluent, has really helped that business grow on HuffPost. And so, we think the core programming and affiliate revenue lines, really BuzzFeed and HuffPost are really helping drive that. We also think these brands are poised to benefit from our work in AI. And so, we're excited to see additional leverage added to those businesses. Another thing that I think is important, which I talked about previously, it's just having -- putting more power in the hands of GMs and brand managers to make sure that each of our brands can operate very entrepreneurially and achieve their full potential. We try to provide support from centralized services but in a very lightweight way, that is cost-effective and then allow each brand to really control their own destiny and be able to drive value that way. And then part of that is bringing employees back to the office in a very deliberate way to foster collaboration and continue to work with our advisers to optimize our balance sheet and to evaluate assets, and to make the smartest deals for the company moving forward.

And then in terms of monetization, as you guys lean into programmatic, can you speak to some of the benefits that you've seen materialize so far? And maybe just how you expect that to translate from an overall revenue perspective and an EBITDA cash perspective over the longer-term?

Yes, I can take that. One thing I noticed or noted that this was our third consecutive quarter of programmatic revenue growth across our largest O&O properties, BuzzFeed and HuffPost. So, it's important to note as we lap the deprecation of Facebook incident articles and the closure of BuzzFeed News. We expect this overall programmatic advertising revenues return to modest year-over-year growth in Q2. I mean, it's good to remind that programmatic advertising is our largest and the highest -- largest and highest margin revenue stream. And so, as we continue to scale this revenue, the return to business growth, we do expect to drive improved EBITDA trends as well. And you're seeing some of that in the Q2 guide approaching breakeven despite the revenue pressures in other parts of the business. Q2 savings, again, from the restructure are fully offsetting the revenue pressure that we're seeing.

And maybe just to follow on from that, like speaking of the restructuring, can you talk about how you're looking to drive or how you're thinking about margin expansion and cash generation kind of over the course of the balance of the year?

Yes. I mean, as I touched on earlier, the restructuring program, as a reminder, that's driven approximately $23 million annualized savings, a meaningful reduction to our cash cost structure. And another important consideration is as we -- with our strategy to focus on our higher-margin programmatic and affiliate revenues, a greater percentage of our costs are going to be related to our compensation-related expenses for the creation of our editorial content, which are more fixed in nature. This will result in higher margin expansion and cash generation as we continue to experience a seasonal lift in our revenues.

And our final question just on the topic, Jonah, the Google cookies deprecation and the kind of shifting time line around that. Has the delay changed any conversations that you guys are having with advertisers, and as the industry now obviously has more time to prepare. Does this, from your perspective, reduce the risk of signal loss that might pressure by otherwise pressure CPM? Can you maybe give us your perspective on that?

Sure. It's nice to have more time, although we felt ready for the change. The biggest impact for this change will be the short-term period once it's rolled out of adjustment. And we've seen that with other changes like this, where it takes a bit for everyone to update and change their strategies, and then quickly using other approaches you can achieve revenue that's on par with what you were seeing previously. I think we feel very good about the way we have -- particularly with this first-party data focus on our owned and operated properties to be able to provide really excellent ad targeting. One of the reasons that brands like to partner with BuzzFeed is that we have the ability to reliably target key audience demographics, so people who are travel access or parents or people who are shopping, or people who have certain passions or interests, and we could do that all within a brand-safe environment of trusted content. And we also have an audience that, for lack of a better word, has a pulse. They buy things, they share content, they comment, they engage. And so, having audiences that are really proactive and take action, I think, is really valuable for anyone who might be interested in having someone buy a product of theirs or share a product or talk about their products. So, all of that really plays to our strength. And a little bit more in the weeds, we do have many initiatives that help our first-party data be used to mitigate any potential downside risk from cookie depreciation. So logged-in user testing, we've partnered with LiveRamp and see that a log-in user has a 35% increase in CPMs when they're authenticated. UID partners with the Trade Desk Universal ID has seen 4% of our users is authenticated. Sales outreach to increase sales efforts around contextual positioning. We have some other things on the sales side. Our ad product road map includes product enhancements and contextual positioning, and LLMs, using LLMs to understand contextual audiences even better. I think when -- particularly with these advances in AI, it's possible for an AI to actually read all of our content, and increasingly to be able to do that multimodal and then be able to suggest what ad placements or contextual ad placements would make the most sense. And that's all pretty new. If you think back to the sort of early era of magazines where all these niche magazines were launching so that you could advertise just to people who are in the hiking, people who are into running, and people are in the fishing, and all of that kind of work that was done to spin up publications to create contextual environments for advertising. Now you can do that in a dynamic automated AI-powered way. And so, I think a lot of the advancements in that space are going to offset or more than offset some of the impacts of the cookie depreciation.

Great. Thank you. That wraps our live Q&A session for today. Thanks, Jonah. Thanks, Matt. And thank you all for joining us on the call today. Operator, I'll hand it over to you.

Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.