BuzzFeed, Inc. — 2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. This is a full-year report, not a standalone Q4 earnings release; fourth-quarter figures are not clearly provided in the filing text. Results include HuffPost from February 2021 and Complex Networks from December 3, 2021, so year-over-year comparisons reflect acquisitions.
Business context
BuzzFeed operates digital media brands including BuzzFeed, Tasty, BuzzFeed News, HuffPost and Complex Networks. It earns revenue from advertising, content and commerce. The company reported more than 100 million monthly viewers and nearly 800 million hours of audience time spent in 2021. Its reported Time Spent measure rose 6%, largely due to acquisitions; excluding HuffPost and Complex Networks, it declined 5%. The company says 65% of measured Time Spent occurred on third-party platforms.
Key financial metrics
| Metric | 2021 | 2020 | Change or context |
|---|---|---|---|
| Revenue | $397.6 million | $321.3 million | Up 24% |
| Advertising revenue | $205.8 million | $149.7 million | Up 37%; acquisitions contributed to growth |
| Content revenue | $130.2 million | $119.8 million | Up 9%, principally reflecting Complex Networks |
| Commerce and other revenue | $61.6 million | $51.8 million | Up 19%; management reported late-year purchase and referral-traffic weakness |
| Operating income (loss) | ($25.2 million) | $12.1 million | Operating margin declined from about 4% to about negative 6% |
| Net income | $25.9 million | $11.2 million | 2021 includes a $26.4 million income tax benefit and gains from fair-value changes |
| Net income attributable to BuzzFeed, Inc. | $24.7 million | $10.3 million | Not representative of operating performance alone |
| Adjusted EBITDA | $41.5 million | $30.8 million | Non-GAAP; excludes, among other items, stock compensation and transaction costs |
| Cash from operating activities | $0.8 million | $27.6 million | Down $26.8 million |
Cost of revenue increased 48% to $207.4 million, or 52% of revenue versus 44% in 2020. Total costs and expenses were 106% of revenue. The filing attributes expense increases to acquisitions, compensation and integration, public-company costs, and a $16.0 million stock-compensation catch-up when the Business Combination satisfied a liquidity condition for certain RSUs.
At December 31, 2021, cash and cash equivalents were $79.7 million, compared with $90.6 million a year earlier. Current assets were $251.7 million and current liabilities $94.1 million. Total liabilities were $262.3 million. Debt included $28.5 million outstanding under the revolving facility and $150.0 million principal of 8.5% convertible notes; the notes’ reported net carrying amount was $113.4 million after discount and issuance costs. Revolver availability was $5.4 million, and the facility requires at least $25.0 million of unrestricted cash. The company reported compliance with that covenant at year-end.
Investing activities used $208.0 million, including $189.9 million for acquisitions. Financing activities provided $181.8 million, primarily from the notes and Verizon’s $35.0 million investment. The company stated that cash, expected operating cash flows and available revolver capacity should cover working-capital and capital-expenditure needs for at least 12 months.
Material changes versus the prior comparable period
- Revenue increased 24%, but reported growth reflects the additions of HuffPost and Complex Networks. Advertising rose 37%; content rose 9%; commerce and other rose 19%.
- Operating results moved from $12.1 million of operating income to a $25.2 million operating loss. Operating costs rose faster than revenue, with cost of revenue and general and administrative expense increasing notably.
- Net income increased, but 2021’s result included a $26.4 million tax benefit and $31.5 million in combined gains from changes in fair value of warrant and derivative liabilities. These items are not equivalent to recurring operating earnings.
- Operating cash flow fell from $27.6 million to $0.8 million. Management cited film-production spending and costs related to the Complex Networks acquisition and public-company preparation.
- Cash used for acquisitions, new borrowings and the Business Combination substantially changed the balance sheet; goodwill and intangible assets were $194.9 million and $136.5 million, respectively, at year-end.
Outlook, risks and unusual items
- Outlook: The filing provides no formal numeric revenue or earnings guidance. Management expects Facebook-related impression declines and reduced Facebook-referred commerce purchases to continue into 2022 and negatively affect commerce revenue. It expects general and administrative and research and development expenses to rise in absolute dollars, while its strategy anticipates operating leverage if revenue growth accelerates.
- Acquisitions and restructuring: Complex Networks was acquired for approximately $294.2 million in cash and stock; it contributed $18.5 million of 2021 revenue. HuffPost contributed $30.3 million of revenue. A March 2022 restructuring was expected to result in about $1.7 million of pre-tax charges; a proposed BuzzFeed News voluntary buyout was subject to collective bargaining.
- Financial reporting controls: Management concluded disclosure controls were not effective at December 31, 2021. Material weaknesses remained in the financial close process, staffing and technical expertise, and control activities including IT general controls. A risk-assessment weakness was reported as remediated. Management did not provide an internal-control effectiveness assessment, citing the transition and resource constraints. The auditor opined that the financial statements were fairly presented, but was not engaged to audit internal controls.
- Business risks: Traffic and monetization depend substantially on third-party platforms, whose algorithms, policies and ad optimization can change. Other highlighted risks include advertising-market competition, privacy regulation, cybersecurity, COVID-19 and macroeconomic uncertainty, acquisition integration, and the company’s history of losses.
- Debt, dilution and governance: The notes carry 8.5% interest, mature in 2026 and are convertible at an initial $12.50 per share, potentially into about 12 million shares. Debt covenants restrict certain activities. Warrants are liabilities remeasured through earnings. The multi-class structure and voting agreements give the CEO and affiliates more than 65% of voting power, according to the filing.
- Commitments and contingencies: Future minimum operating lease payments were $121.8 million, before $31.5 million of expected sublease receipts. A lease guarantee had a $2.7 million maximum exposure at year-end, with no liability recorded. Management did not expect pending legal matters to have a material adverse effect.
Most important facts for investors to verify
- How much of revenue growth and audience engagement is organic, given the partial-year inclusion of HuffPost and Complex Networks and the 5% organic decline in Time Spent.
- Whether advertising impressions, Facebook referrals and commerce revenue stabilize or continue to weaken, particularly in 2022.
- Whether operating cash flow improves and the company maintains the $25.0 million minimum unrestricted-cash covenant with only $5.4 million of revolver availability at year-end.
- The sustainability of reported net income and Adjusted EBITDA after separating tax benefits, fair-value movements, stock compensation, transaction costs and other adjustments.
- Progress in remediating material weaknesses and the resulting reliability and timeliness of future financial reporting.
- The cash, interest, covenant and potential dilution implications of the convertible notes, warrants, equity awards and acquisition-related obligations.