BuzzFeed, Inc. — Q2 2022 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2022. Figures below are in millions of dollars unless noted. BuzzFeed is a digital media company with advertising, content, and commerce revenue; it reports one operating segment. The prior-year comparison predates the December 2021 Complex Networks acquisition, limiting comparability.
Financial performance and liquidity
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | $106.8 | $89.1 | $198.3 | $161.8 |
| Operating loss | ($24.9) | ($0.4) | ($60.2) | ($16.9) |
| Net loss | ($23.6) | ($0.8) | ($68.1) | ($12.1) |
| Adjusted EBITDA | $2.1 | $5.6 | ($14.7) | $1.3 |
| Operating cash flow | Not provided for quarter | Not provided for quarter | ($3.8) | $15.3 |
Q2 revenue rose 20%, but cost of revenue increased 37% to $61.5 million. Gross profit before depreciation and amortization was approximately $45.2 million, or 42% of revenue, versus $44.2 million, or 50%, a year earlier. Six-month gross margin on the same basis was approximately 38% versus 46%. Q2 basic and diluted loss per share was $0.17; six-month loss per share was $0.50.
At June 30, cash and cash equivalents were $68.2 million, down from $79.7 million at year-end. Current assets were $189.5 million and current liabilities $100.5 million. The balance sheet reported debt of $149.4 million, including the net carrying value of convertible notes; principal outstanding was $150 million on the notes and $33.5 million on the revolver. Revolver capacity remaining was $1.0 million, with $15.5 million of letters of credit outstanding. The company reported compliance with its $25 million minimum unrestricted-cash covenant.
Changes and notable items
- Advertising revenue increased 11% in Q2 and 18% for the six-month period; Complex Networks contributed $7.8 million and $15.6 million, respectively, to owned-and-operated advertising revenue. Excluding Complex Networks, Q2 advertising revenue declined 5%, and advertising on third-party platforms fell 32%.
- Content revenue rose 66% in both periods, largely reflecting Complex Networks contributions of $12.9 million in Q2 and $25.0 million year to date, plus feature-film revenue growth.
- Commerce and other revenue declined 22% in Q2 and 24% year to date. Management cited lower Facebook-referred purchases, the unwind of pandemic-driven online shopping, and the timing of Amazon Prime Day.
- Reported expenses included an $8.2 million cumulative stock-compensation charge after the board waived a vesting condition on certain RSUs, and $3.5 million of Q2 restructuring costs. Six-month restructuring costs were $5.3 million. Adjusted EBITDA excludes these and other specified items.
- Time Spent, a company-defined audience-engagement measure, decreased 19% in Q2 and 11% year to date, primarily due to lower Facebook time spent; the measure excludes some platforms and is not standardized.
- Six-month cash used in investing was $9.5 million, including $6.6 million for internal-use software and $2.8 million of capital expenditures. Cash provided by financing was $3.1 million, including $5.0 million of revolver borrowings.
Outlook, risks, and contingencies
The filing provides no specific numerical revenue or earnings guidance. Management said cash on hand, operating cash flows, and available revolver borrowings should fund working capital and capital expenditures for at least 12 months, while noting additional capital might be needed and may not be available on acceptable terms.
Management identified inflation, rising interest rates, potential recession, foreign-exchange movements, changing platform traffic and advertising demand, and the continued slowdown in commerce as risks. The company recorded foreign-exchange losses of $3.3 million in Q2 and $3.5 million for the six months, primarily related to the Japanese yen and British pound. The $150 million convertible notes carry 8.5% stated interest, mature in December 2026, and have an initial conversion price of $12.50; early conversion can trigger cash interest make-whole payments.
A sustained share-price decline triggered a June 30 goodwill impairment test. Estimated reporting-unit fair value exceeded carrying value by only 6%; management recorded no impairment but cautioned that changed performance or assumptions could lead to a future charge. Disclosure controls and procedures were deemed ineffective at quarter-end due to unremediated material weaknesses in the close process, staffing and technical accounting, and control activities, including IT controls. Management said it was implementing remediation measures.
The company disclosed two mass arbitrations by 91 former employees over alleged inability to convert and sell shares after the business combination. The company sought to enjoin the arbitrations; the filing states it did not expect a material adverse effect. It also reported a lease guarantee with a maximum remaining exposure of $1.9 million and no recorded liability. Other ordinary-course legal matters were not expected to have a material adverse effect.
Investor verification priorities
- Track whether revenue growth excluding Complex Networks translates into improved margins and whether audience declines continue to pressure third-party advertising.
- Monitor cash burn, revolver availability, covenant headroom, and the company’s ability to meet debt and lease obligations.
- Assess the effects of RSU compensation, restructuring, acquisition integration, and other exclusions on recurring profitability and cash flow.
- Review the assumptions behind the goodwill valuation and any subsequent impairment indicators.
- Follow remediation and testing of the disclosed material weaknesses and the status and potential cost of the employee arbitrations.
- Consider potential dilution and market overhang from share sales, equity awards, and the convertible notes; the filing also says the CEO and affiliates held over 75% of voting power at June 30.