BuzzFeed, Inc. — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023. Unaudited consolidated results; dollar figures below are in millions unless stated otherwise. BuzzFeed operates one reportable segment and earns revenue primarily from advertising, content, and commerce.
Financial performance
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $73.3 | $103.7 | $218.4 | $302.1 |
| Operating loss | $(6.8) | $(18.1) | $(56.6) | $(78.3) |
| Net loss | $(13.9) | $(27.0) | $(78.0) | $(95.1) |
| Adjusted EBITDA (non-GAAP) | $3.1 | $(2.4) | $(17.3) | $(17.1) |
| Operating cash flow | Not provided separately | Not provided separately | $(2.4) | $(7.9) |
- Q3 revenue declined 29% year over year. Advertising fell 35% to $32.6 million, content fell 32% to $26.3 million, and commerce and other fell 3% to $14.5 million. For the first nine months, revenue declined 28%.
- Q3 gross profit was approximately $33.5 million, or 46% of revenue, compared with $42.7 million, or 41%, a year earlier. Nine-month gross margin was approximately 37%, versus 39%.
- Q3 operating margin improved to approximately negative 9% from negative 17%; net margin improved to approximately negative 19% from negative 26%. Q3 adjusted EBITDA turned positive, but the nine-month adjusted EBITDA loss was broadly unchanged year over year.
- Cash and cash equivalents were $42.5 million at September 30, down from $55.8 million at December 31, 2022. Current assets were $127.6 million and current liabilities $107.8 million.
- Debt was $157.1 million on the balance sheet, comprising the net carrying value of convertible notes and revolving borrowings. Revolver borrowings were $33.8 million; only $0.7 million of additional borrowing capacity remained. The $150 million notes carry 8.5% stated interest and mature in December 2026.
- Nine-month investing cash outflow was $11.5 million, including $10.9 million capitalized internal-use software spending. Financing cash inflow was $0.9 million. Cash declined by $13.3 million during the period.
Changes and management commentary
- Management attributed weaker advertising to lower demand, fewer programmatic impressions, and lower pricing. In Q3, per-impression advertising revenue declined 24%, reflecting 17% fewer impressions and 7% lower pricing. Management expected pricing and impression declines to continue in the near term.
- Content revenue was pressured by fewer branded-content advertisers, lower spending in certain client sectors, and the timing of feature-film deliveries. The company anticipated the reduced advertiser count would continue to weigh on year-over-year content revenue.
- Reported Time Spent was 91.9 million hours in Q3, down 19% year over year; the company changed its measure in 2023 to exclude Facebook. Branded-content advertiser revenue retention was 59%, versus 80% a year earlier.
- Cost reductions helped lower operating expenses. A workforce reduction of approximately 15% was announced in April 2023; the company recorded $9.7 million of restructuring costs in the first nine months.
- Management said it currently expects sufficient liquidity to fund operations for 12 months beyond the financial-statement issuance date, but emphasized significant uncertainty and no assurance. It may seek additional capital and consider further cost savings or footprint reductions; there were no firm outside-capital commitments apart from the conditional ATM program.
Liquidity, risks, and unusual matters
- The revolving facility requires at least $25 million of unrestricted cash at all times. BuzzFeed reported covenant compliance at September 30, with $42.5 million cash, but warned that cash generation or access to capital could affect future compliance. A breach without waiver could permit acceleration and enforcement against collateral.
- The revolver had permitted overadvances of up to $7.4 million during specified periods through December 31, 2023, at higher margins; the company reported an approximately 9% implied rate at September 30. The facility matures December 30, 2025.
- Q3’s sustained share-price decline triggered a goodwill impairment test. Management found reporting-unit fair value exceeded carrying value by more than 10% and recorded no impairment. The assessment depends on estimates and assumptions; future impairment remains possible. Goodwill was $91.6 million and intangible assets $109.9 million.
- The company sold 2.07 million shares under its ATM offering through September 30 at an average $0.52 per share, receiving $0.9 million net. 11.20 million shares remained available, creating potential dilution.
- Nasdaq had notified the company that its stock had traded below the $1 minimum bid requirement; the initial compliance deadline was November 27, 2023. A delisting could impair liquidity and access to capital and may trigger a cash repurchase offer for the convertible notes at 101% of principal plus accrued interest.
- BuzzFeed disclosed a VPPA class action and thousands of individual arbitration demands concerning alleged disclosure of viewing information through tracking pixels. Claimants seek $2,500 per alleged violation, among other relief; the company moved to dismiss the lawsuit, and the demands had not yet become arbitration claims. The filing does not provide a clear estimate of potential exposure.
- Management concluded disclosure controls and procedures were not effective as of September 30 due to unremediated material weaknesses involving the close process, technical-accounting support, and IT general controls.
- Macroeconomic weakness, advertising demand, traffic and platform referrals, interest rates, capital availability, dilution, legal proceedings, and the ability to maintain Nasdaq listing are material risks identified in the filing.
Key facts for investors to verify
- Whether revenue declines in advertising and branded content persist, and whether the Q3 adjusted EBITDA improvement is sustainable.
- Cash burn, ATM proceeds and dilution, remaining borrowing capacity, and headroom above the $25 million minimum-cash covenant.
- Compliance with the revolver’s covenants and terms after the temporary overadvance period, including borrowing costs and maturity obligations.
- Nasdaq bid-price compliance and any resulting listing transfer or convertible-note repurchase obligation.
- Developments in the VPPA lawsuit and arbitration demands, and any changes to loss estimates or contingencies.
- Progress in remediating material weaknesses and the assumptions supporting the goodwill impairment assessment.