Key Metrics Investors Should Watch Ahead of BZFD’s Feb 28 Update

BuzzFeed, Inc. (BZFD) has enjoyed significant success as a digital media powerhouse, leveraging its content across various platforms, both owned and in partnership with others. However, the company's trajectory appears to have shifted, signaling a departure from its former glory.

In recent years, digital publishers have been grappling with tough industry conditions, a sluggish advertising market, dwindling social media referrals, and the looming threat of Artificial Intelligence (AI). That said, BZFD stands as a prime example, embodying the hurdles faced by digital publishers amid these challenges.

The deterioration of BZFD’s digital empire has become increasingly prominent in the public eye in recent years, marked by multiple rounds of cost-cutting measures and workforce reductions through layoffs.

Following its Initial Public Offering (IPO) in 2021, BZFD witnessed a drastic decline in its share price. Moreover, last year April, BZFD made headlines by closing its prestigious news arm, BuzzFeed News, which once boasted extensive global coverage and a large team.

On top of it, the company’s third-quarter earnings revealed a sharp 29.3% year-over-year drop in its top line and reported a loss of $13.93 million. Its advertising revenue dipped 35.3% year-over-year to $32.59 million, while its revenue from content witnessed a 31.7% year-over-year decline, reaching $26.25 million.

Additionally, the time spent by the audience engaging with BZFD’s content across its owned and operated sites decreased 19% year-over-year, totaling 92 million hours. Meanwhile, during the same quarter, its adjusted EBITDA came in at $3.07 million versus an adjusted EBITDA loss of $2.40 million in the prior-year quarter. As of September 30, 2023, BZFD’s cash and cash equivalents stood at $42.47 million.

Nevertheless, despite the dimmed third-quarter performance, Jonah Peretti, BZFD’s Founder & CEO, emphasized that the company is poised for a year-over-year improvement in adjusted EBITDA for both the fourth quarter and the entire fiscal year. Peretti further highlighted BZFD’s commitment to safeguard its liquidity position by establishing a sustainable long-term model for content creation.

BFZD recently announced the closing of its sale of Complex to NTWRK and its plans to trim its remaining workforce by 16%. This news sparked significant investor enthusiasm, with BZFD's share skyrocketing over 80% during pre-market trading last week Thursday.

BZFD completed the sale of Complex to NTWRK in a transaction valued at $108.60 million in cash. The agreement, inclusive of an extra $5.70 million designated for the utilization of BZFD's New York offices and associated severance expenses, signifies a strategic pivot for the media entity and underscores its commitment to streamlining operations and prioritizing its flagship brands, namely BuzzFeed, HuffPost, First We Feast (including Hot Ones), and Tasty.

Furthermore, the company unveiled a strategic cost-cutting initiative featuring a planned workforce reduction of 16%. This bold move is projected to deliver around $23 million in annualized compensation cost savings.

The company's restructuring details, scheduled to be shared on Wednesday, February 28, 2024, aim to trim centralized costs and drive the organization toward a leaner, more adaptable, and more profitable future. In addition, the cash proceeds generated from the sale of Complex have been designated for various financial strategies aimed at bolstering BZFD’s balance sheet and enhancing liquidity.

These strategies encompass redeeming $30.90 million of the company's convertible notes maturing in 2026, fully repaying a $35.50 million revolving credit facility, funding the forthcoming strategic restructuring, and optimizing working capital.

The company expects its revenue for the fiscal fourth quarter to be between $73 million and $78 million, while adjusted EBITDA on a continuing operations basis is projected to be between $15 million and $20 million.

Bottom Line

BZFD has navigated a tumultuous period marked by significant setbacks and strategic modifications. Once celebrated as a digital media powerhouse, the company has faced declining revenues, workforce reductions, and a substantial drop in its share price following its IPO.

However, it might be premature to adopt an entirely bearish outlook on the company’s shares. BZFD’s recent developments, including the sale of Complex and restructuring plans, are a clear signal to investors that the company can make critical adjustments and enhance its business model for the betterment of the shareholders.

Additionally, BZFD's focus on improving adjusted EBITDA and liquidity and implementing cost-cutting measures demonstrates a commitment to financial stability and future growth.

As BZFD moves forward with its restructuring plans and strategic initiatives, it aims to streamline operations, prioritize flagship brands, and bolster its financial position to adapt to evolving market dynamics and pursue long-term success. Furthermore, CEO Peretti anticipates that these changes will expedite BZFD's integration of AI to foster innovation and introduce interactive content formats.

To that end, given the company’s restructuring details set to be disclosed on February 28, it might be advantageous for investors to monitor the stock and wait for a more favorable entry point.