BuzzFeed Q2 2023 Earnings Call Transcript

There are 5 speakers on the call.

Operator

Ladies and gentlemen, thank you for standing by. Welcome to Buzzfeed's Second Quarter 2023 Earnings Conference Call. At this time, all participants are in listen only mode. After the speakers' presentation, there will be a question and answer session. Please note that today's conference may be recorded.

Operator

I will now hand the conference over to your speaker host, Amita Tomkoya, Senior Vice President of Investor Relations. Please go ahead.

Speaker 1

Hi, everyone. Welcome to Buzzfeed, Inc. 2nd Quarter 2023 Earnings Conference Call. I'm Amita Tomcoria, Senior Vice President of Investor Relations. Joining me today are Founder and CEO, Jonah Peretti President, Marcella Martin and CFO, Felicia Della Fortuna.

Speaker 1

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 2022 Annual Report on Form 10 ks, our Q1 quarterly report on Form 10 Q and in our Q2 quarterly report on Form 10 Q to be filed tomorrow. 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 strength and performance of our business to establish budgets and to develop operational goals for managing our business.

Speaker 1

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.

Speaker 2

Thank you, Amita. Good afternoon, everyone, and thank you for joining us today. We continue to see a shift in the marketplace As consolidation and share gains across the biggest platforms have presented headwinds for digital content and publishing companies. Further, as Facebook and other major tech platforms continue to prioritize vertical video, traffic referrals from these These dynamics have impacted monetization in Q2 and into Q3. As a result, we expect the year on year revenue declines we saw in Q2 to persist in Q3.

Speaker 2

To address this, we are laser focused on our strategy to drive Traffic directly to our owned and operated properties by introducing new AI assisted content formats to increase engagement and offer innovative advertising Our clients rapidly expanding our creator network to participate in the rise of vertical video and prioritizing destination news content to Grow our Huff Post front page audience. Though it will take time for these initiatives to translate into scaled monetization, we are making good progress The strategic and organizational changes we discussed at our Investor Day in May have been fully executed, Putting our rich library of IP and scaled owned and operated properties at the center of our operating model to create innovative audience driven content. We are successfully leveraging our trusted brands to attract a growing number of emerging Internet creators in order to more rapidly scale our content output. And we have prioritized resources aimed at growing engagement on our owned and operated properties through new AI powered content formats. In doing so, we are reducing our dependence on the major tech platforms and leaning into our rare combination of voice and scale in a fragmented media We have strong and differentiated IP across Buzzfeed, Complex, Hot Ones, First Beef Feast, Tasty and Huff Post, each with a trusted and established brand identity.

Speaker 2

For Buzzfeed, it's pop culture, entertainment and curating the best of the Internet using AI to shift content delivery and distribution. For Complex, it is delivering premium original content that covers the latest trends of For First Sweet Feast, it is explaining the Hot Ones universe and building more IP at the intersection of food and pop culture. For Tasty, it is attracting emerging food creators and leveraging the social platforms to build community around cooking. For HuffPost, It's breaking news coverage and audience centric stories for a massive direct front page audience. The brands we have built are valuable and hard to replicate.

Speaker 2

As a testament to that, we continue to lead the industry in terms of time spent. U. S. Gen Z and millennials spend vastly more consuming our content than that of any other digital media company in our competitive set according to comScore. With a streamlined sales With a streamlined sales team structure and a revamped go to market strategy that is anchoring In order to reaccelerate our growth and close the gap in monetization versus the broader U.

Speaker 2

S. Digital advertising market. First, we are Prototyping new generative AI formats including quizzes and chatbots. We doubled our output of AI assisted content from Q1 to Q2 and we expect to We are rapidly expanding our creator programs to increase both revenue and content output. Building on the success of the Buzzfeed and Tasty creator programs, we have expanded this model to our other brands.

Speaker 2

We now have close partnerships with more than 180 creators who We published original content across our distribution channels and we work with a much larger extended network of hundreds of creators across our brand portfolio. Collectively, creator led content drove 100 of millions of views across our network in Q2. And third, we are taking advantage of Moments can be homegrown or they can be part of the broader pop culture calendar. Berry Suite partners can deliver voice and scale together in one package. Buzzfeed Inc.

Speaker 2

Is a one stop shop for big moments in culture, whether it's the NBA playoffs or the latest episode of Hot Ones that marketers Can plan for and advertise around. In Q2, across our brand portfolio, we launched several new products in each of these areas, a few of which I want to highlight on today's call. Starting with Buzzfeed. Buzzfeed has always been the leader in data driven storytelling, operating at the intersection of technology and media to curate the best of the Internet for our audiences. In Q2, the editorial team continued to Content formats including new personalized quizzes, chatbots and multiplayer games and viral AI image collections.

Speaker 2

Even more exciting, when we look at individual pieces of AI content, we see increased engagement, more time spent and AI inspired image posts that have gone viral across buzzfeed.com, Instagram and TikTok. One such example is our recent post, here's what Barbie's dream house would look like in each state, which capitalized on audience excitement around the Barbie film premier using AI to generate unique images of The post saw over 1,000,000 views and went viral on TikTok and Reels. More broadly, as compared to Q1, Views of our AI content and time spent have both increased threefold, driven by higher content output. And the new content is also driving higher engagement quarter over quarter. Our top 20 AI articles published in Q2 generated more than twice the time spent when compared to our top 20 AI articles in Q1.

Speaker 2

Complex also began integrating AI to engage their audiences in new ways, Leaning into the brand's authoritative voice and audience reach to celebrate the 50th anniversary of hip hop. From print to digital to streaming to experiential, Complex represents the past, present and future of Convergent's culture. As one of the leading digital media brands For the hard to reach young male demographic, according to Comscore, Complex attracts loyal audiences with obsessions that range from sneakers to streetwear to sports to hip hop. In Q2, Complex continued to celebrate the 50th anniversary of hip hop with experimental AI work in partnership with Sprite. This innovative collaboration allows fans to generate a personalized mixtape album cover with the help of AI.

Speaker 2

Earlier this year, Complex launched its first Creator program welcoming 18 diverse voices to the inaugural creator class, providing exciting opportunities to deliver original creator driven content on behalf of brands. Although it's still early, this content is resonating with advertisers. In fact, Uber is set to team up with us and one of our creators, Ross Mac of Maconomics to develop original branded content around financial tips for Uber drivers. First We Feast, our food and pop culture brand celebrated a huge milestone in Q2, airing the 300th episode of its hit YouTube interview show Hot Ones. Since 2015, Hot Ones has attracted the biggest celebrity guests, garnered more than 25,000,000,000 minutes watch, Received multiple Emmy nominations and broken new ground for YouTube endemic talk shows.

Speaker 2

In Q2, The show continues to monetize major cultural moments like the NBA playoffs to deliver our audiences and clients. Hot Ones fans rallied around the NBA playoffs through a collaboration with NBA playoffs official sponsor Google Pixel. The partnership went deep into the Hot Ones universe to include a Hot Ones episode sponsored by Google Pixel, custom branded social content designed by our creative team and brand integrations featuring the Pixel phone across both Hot Ones and the Truth OR DAB spin off series. Turning to Tasty. Since its launch in 2015, Tasty has taught The Internet how to cook through inspiring recipes, cutting edge trends and inclusive food stories that reflect the wide identities of our audience.

Speaker 2

Today, Tasty garners over 1,000,000,000 cross platform views each quarter and audience engagement across platforms continues to surpass the competition, making it the largest and most engaged food community on the Internet according to Tubular Intelligence. Over the past year, Tasty has also emerged As a leading platform for food creators. Today, the TC Creator program has onboarded 10 residents to develop new content in collaboration with the brand. The residency has produced incredible results, helping creators to grow their audiences substantially while also driving deeper engagement with the Tasty community. This success led to new Tasty TikTok series, Potatoes 100 Ways, held by one of Tasty's inaugural residents, Jerry Mobley.

Speaker 2

This series rapidly gained an audience following earning more than 70,000,000 views to date and securing a multi episode sponsorship from Idaho Ian Potatoes. As we continue to ramp our creator led content, we're excited to introduce even more ways to bring creators and brands together on our platform. In May, Tasty introduced a first of its kind culinary companion in Batatouille, an AI powered chef bot designed to revolutionize the cooking, meal prep and shopping And users are engaging more deeply than we expected. They're having long conversations with Basatouille asking The Chef's boss to help solve their daily cookie challenges from meal planning to healthy cooking to ingredient inspiration. HubSpot continued to engage readers with destination news content in Q2.

Speaker 2

The brand's breaking news coverage from the high profile departures At Fox and CNN to the tragic events of the Titan submersible to new developments in the Trump indictment and arraignment drove massive audience traffic during the quarter. HuffPost is also working with 10 rising stars as part of its own creator program to collaborate on editorial content in order to Scale the brand's short form vertical video offering while preparing the residents for careers as creators. Exponentially. Across our portfolio of premium brands and IT, we reach millions of young people every day to visit us directly to enjoy our content. And as you've heard, our initiatives around AI, creators and cultural moments Are gaining real momentum with audiences and clients alike, validation that we are pursuing the right long term strategy for growth and monetization.

Speaker 2

As we execute against our vision, we are committed to building a business that delivers significant margin expansion and generate strong cash flows over time. I'm grateful for the support of our shareholders and honored to work alongside our talented teams of creators, journalists, producers and all our employees I'll now hand the call off to Marcella to discuss our business performance and operational highlights. Marcella?

Speaker 3

Thank you, Joanna, and good afternoon, everyone. Let me start by recapping our Q2 revenue performance and discussing some of We delivered Q2 revenues in line with the guidance range we provided in Maine, We saw softness across the traditional sales verticals, including CVG, Entertainment and Financial Services. Tech was a bright spot in the quarter with year over year growth led by the partnership with Google Pixel that Jonna mentioned earlier. Retail also showed improvement In year over year trends versus Q1, a testament to our ability to deliver performance based advertising solutions for large retailers in a down market by bundling our media and affiliate products. Content revenues outperformed our expectations, driven by higher than expected sales against our premium IP programming.

Speaker 3

Revenues from new creator driven client partnerships, which I will share more on shortly are also captured here. Commerce performed in line with expectations with year over year growth in Our organic affiliate business for the 4th consecutive quarter. Overall, commerce revenues declined year over year as we lapped last challenged. We expect the year over year trends in overall revenue to be similar to Q2 as The headwinds we saw in advertising revenues persist and continue to offset the recent momentum in our content business and the return to growth in our commerce business. From the time we start engaging with the customers until the campaign is executed, It takes about 6 months.

Speaker 3

That being said, we are optimistic about the potential for our recent sales team reorganization and portfolio Weibo to market strategy to reaccelerate revenue growth over the coming quarters. Following the reorganization, our sales team kicked off a nationwide roadshow in May, meeting with more than 100 clients and representatives from the major advertising agencies to present Buzzfeed Inc. Vision for the future of digital media. And clients are responding positively. We have closed several deals anchored in 1 or more of our 3 pillars or AI, creators and cultural moments, which I will share more on shortly.

Speaker 3

Similarly, client excitement around complex Next, let me share some recent client wins in the areas of AI, creators and cultural moments to illustrate how our focus on these areas are So let's start with AI. As Jonas shared earlier, we have launched new AI powered content formats across our brand portfolio. Buzzfeed's Infinity quizzes continue to attract new brand sponsors in Q2. In partnership with leading mattress brand Serta, Buzzfeed launched 2 new sponsor quizzes, a dream interpreter and a bedtime story generator. Both quizzes received overwhelming positive comments from Buzzfeed readers and saw above average time spent compared to non AI formats.

Speaker 3

Complex also introduced its 1st AI product through a commercial partnership with Sprite to celebrate the 50th anniversary of hip hop. The Complex team developed an interactive website powered by GPT. Acting as an Art Director, this bot crafts A distinctive mixed tape cover using original artwork created by the multidisciplinary Internet artist Ocean World. The experience guides funds through a personalized hip hop journey, while designing a unique mixtape cover in real time. In Q2, Tasty began integrating AI to develop fresh content for home chefs.

Speaker 3

In May, Tasty introduced a first of its kind culinary companion in Botatouille, an AI powered chef bot. Available exclusively in the Tasty app, Botatoo is designed to revolutionize the cooking, meal preparation and shopping experience for Tasty's global community. The Chefs'Bot serves up dishes, VotoTUI integrates shoppable recipes powered by Walmart to make the cooking experience seamless for users. The audience excitement and engagement we are seeing around Botatooie is driving interest from new and existing clients looking for innovative ways to reach consumers. Now let's turn to creators.

Speaker 3

Across our brands, we now have closed partnerships with more than 180 creators, and we are continuing to grow rapidly. Following the success of Buzzfeed and Tasty's creator programs In identifying, attracting and developing emerging Internet creators, we have extended this model to our other brands including Buzzfeed, half post and complex, and we expect to introduce 1st We Feast inaugural creator class very soon. Our work with creators continue to validate our thesis that success for both creators and brands It's best achieved when creator driven content is paired with a strong IP and massive audience reach. When looking at views and engagements of the same content on Tasty channels versus the creator's own channels, The data consistently shows that creator content outperforms on our platform. This content is also attracting major advertising Looking to execute sorry, major advertisers looking to execute marketing campaigns rooted in innovation.

Speaker 3

As Jonah mentioned earlier, in Q2, our creators collaborated with the likes of Uber, State Farm and Ideal Hang Potatoes, contributing to our better than expected content revenue performance in Q2. We are also experimenting with creator led content in our commerce business. During Prime Day, we invited creator creators from across our brands to develop original shopping content for our audience. Content was distributed across our platform as well as through creator individual channels. We saw an incredibly positive response from audiences and significantly higher performance from creator content published through our channels as compared to revenue from the same content on a creator's own channel.

Speaker 3

This highlights the power of creator Content pair with our vast distribution network in driving both audience engagement and revenue. Now in terms of cultural moments. As Jonna mentioned earlier, Hot Ones recently celebrated its 300th episode. The most recent season featured A List celebrities, including Joe Mulaney, Jennifer Lawrence, Melissa McCarthy and Jason Sudeikis, with each episode reaching millions of viewers. In fact, Jennifer Lawrence interview reached more than 100,000,000 viewers across platforms.

Speaker 3

And off the back of its fervent audience following, the show has also continued to attract major CPG brands sponsors such as Procter and Gamble and General Mills. Hot Ones funds also rallied around the NBA playoffs through a deep partnership with the NBA Playoffs official sponsor Google Pixel, going beyond the traditional episode partnership to include custom social Content and brand integrations across both Hot Ones and the Truth or DAB spin off series. Similarly, Microsoft tapped into our audience reach across Tasty and First We Feast, trusting us with the media campaign to promote their Bing AI launch. An Activision Blizzard invested behind the latest 10th Pulse release of their video game franchise, Diablo, with an episode sponsorship of Hot Ones, a custom co branded hot sauce and a limited merchandise. Before I wrap up, I want to briefly address our cash and liquidity circumstances.

Speaker 3

Against the backdrop of lingering macroeconomic uncertainty, Diminishing returns from the major tech platforms and a tighter digital ad market, we continue to be laser focused on preserving cash. The fully executed restructuring plans we discussed with you last quarter have meaningfully reduced our go forward cash cost structure. We also tapped into the Public Markets Vienna at the market program through which we raised $800,000 in Q2. These initiatives have enabled us to access additional near term liquidity in order to complete our restructuring program even amid the current revenue headwinds. And as we exit Q3, we expect to realize the full cash benefits of our restructuring program on an ongoing basis.

Speaker 3

Further, as we execute against our AI and creators initiative, We are building a content creation model that makes our creative teams more efficient and sustainably Thank you, everyone, for being here today. I will now

Speaker 4

Thank you, Marcella. We delivered 2nd quarter results in line with our guidance range for both revenue and adjusted EBITDA. Overall revenues for Q2 2023 declined 27% year over year to $77,900,000 as expected and in line with Q1 trends. Performance by revenue line is as follows. Advertising revenues declined 33% year over year to 35 point $4,000,000 in line with 1st quarter trends as expected as increased competition for both audience time and ad dollars have contributed to lower demand and ongoing Pricing pressure.

Speaker 4

Content revenues declined 22% year over year to $31,500,000 with year over year trends improving relative to Q1 driven by a higher number of branded content clients quarter over quarter. Last quarter, we introduced the KPIs to represent net branded content advertiser revenue retention, which is a function of both the number of clients we serve and the spend per retained client. This metric reflects current period trailing 12 month branded content revenues as The percentage of prior period trailing 12 month revenues for branded content customers that spent a minimum of $250,000 in the prior period. Q2 retention was in line with Q1 trends. Commerce and other revenues declined 17% to $11,000,000 almost entirely driven by the metaverse experiential event complex land in the year ago quarter, which did not repeat in Q2 2023.

Speaker 4

In terms of adjusted EBITDA, we were able to mitigate nearly all of the lower revenue year on year with successful execution against the cost actions we announced in April, delivering breakeven adjusted EBITDA in Q2, dollars 2,000,000 lower than the Q2 2022. We also incurred charges that did not impact adjusted EBITDA. A full reconciliation of our GAAP to non GAAP measures can be found in today's We ended the quarter with cash and cash equivalents of approximately $50,000,000 lower quarter over quarter, including approximately $8,000,000 in payments related to the cost actions we announced in April. Further, on a year to date basis before restructuring payments, we achieved breakeven operating cash flow. Turning to audience engagement and time spent.

Speaker 4

In terms of audience time spent, we continue to report U. S. Time spent across our owned and operated properties and third party platforms according to Comscore. This metric is intended to be viewed in conjunction with our advertising revenue In Q2, U. S.

Speaker 4

Time spent as reported by Comscore declined 9% year over year to 96,000,000 hours In terms of creator led vertical video, ahead of scaled monetization, we are continuing to build audience momentum around newer Forms and formats, including YouTube Shorts, Instagram Reels and TikTok. In the second quarter, views of our short form content across Before I share our financial outlook for the Q3, let me first provide some content. Starting with revenues. We expect the underlying year over year trends in both content and commerce revenues to remain consistent from Q2 to Q3. We expect further softness in advertising revenues relative to Q2 as lower client spending trends Across our core sales verticals persist into Q3.

Speaker 4

Additionally, as Marcella discussed, from the time we start engaging with customers until the campaign is executed, It takes about 6 months. So although we are encouraged by client feedback and pipeline activity following last quarter's sales roadshows, we do not anticipate a material In terms of adjusted EBITDA, we have included the full benefit of the restructuring actions in our For Q3 2023, we expect overall revenues in the range of $73,000,000 We expect adjusted EBITDA in the range of $1,000,000 in losses to $4,000,000 in profits, up approximately $5,000,000 year on year at the midpoint. And finally, I just want to reiterate Marcella's remarks regarding cash and liquidity. We continue to be laser focused on preserving cash. As we exit Q3, we expect to realize the full cash benefits of our restructuring on an ongoing basis.

Speaker 4

Thank you. I'll now hand it over to the operator so we can take your questions.

Operator

Thank you. I'll now hand it over to Amita Samkar for any web or

Speaker 1

Already, which I've gathered here, so we're going to go ahead and jump right in with the first question For Jonah, on the topic of first party data, Jonah, can you talk about how Buzzfeed is looking to leverage first

Speaker 2

Yes, thanks for the question. So in 2022, our first party data solution known as Lighthouse It has served more than 150 advertisers and delivered over 1,000,000,000 impressions. And when we when our partners use Lighthouse, It drives really meaningful results. On average, when partners use life of our first party data targeting The power of their media campaigns, they generate 2 to 5 times higher impact across the brand and business metrics that matter most. We also are seeing encouraging signs with new AI models that are enabling us to Better understand all of the content on the pages of our site and use that to create better contextual advertising opportunities and having that Flow into Lighthouse is a nice tailwind for improved targeting over the long haul.

Speaker 2

And I think overall the Biggest challenge for cookies going away will be for sort of the nameless, ad tech and brandless types of companies. But Having strong brands with really strong contextual alignment and the ability to apply new AI technology It's something that will allow us to do a really great job of targeting for our advertisers. So we're excited about the way that first party data can be applied to our business.

Speaker 1

Great. Thank you. Our next question is around advertising revenues. Maybe Marcela, starting with you. With short form content gaining traction yet again, how is that impacting the business?

Speaker 1

Can you share some thoughts on Monetization in the second half and into 2024. And then could you also walk through some of the current Trends in short form ad adoption versus owned and operated advertising trends.

Speaker 3

Sure. Thank you, Amita, for the question. So I'm going to start Giving some information about what we see in regards to short form and then maybe Felicia you can jump in to talk a little bit about advertising revenues and the trends that we see. So in terms of short form, we are excited that the major platforms Have already taken the first step to share monetization with publishing partners. And as we discussed last quarter, We were selected as one of the first publishers to participate in TikTok's Pulse Premier vertical video monetization program for publishers.

Speaker 3

So this is the first time that publishers will be able to earn passive revenue from organically published content on the platform. And Buzzfeed is one of a select group of premium publishers invited to participate. So we are quite happy about that. And we have already been monetizing short form vertical video by selling directly to advertisers via creator led branded content product, As you have also heard earlier on the call, which we will continue to scale for our clients. And last, I mean, I would like to We are well positioned to continue to monetize short form formats.

Speaker 3

We surpassed 1,000,000,000 quarterly views on TikTok for the first time And Tasty's short form vertical video content surpassed 1,000,000,000 quarterly views yet again in Q2. So, Felicia, do you want to go on the second part of the question?

Speaker 4

Thank you, Marcella. So in terms of overall advertising revenues, the vast majority of our revenue is still driven by our owned and operated properties across buzzfeed. Comhuffpost.com and the rest. Q2 advertising revenues ended in line with Q1 trends in terms of year over year with the declines being driven by increased competition for both audience time and ad dollars, which contributed to both lower demand and ongoing price pressure. However, we are pleased with the short form momentum in terms of output and audience engagement.

Speaker 4

In the Q2, views of our short form content Cross platforms doubled year over year to reach a new quarterly record, and we have begun to generate advertising revenues on YouTube and Tik Talk for vertical video, as Marcella discussed. However, we do anticipate it taking time to scale, for generating sizable revenue contributions on a go

Speaker 1

Thanks, Marcella. Thanks, Felicia. Our next question is on the topic of AI. Jonah, can you discuss Some of the early feedback from AI usage, you mentioned some of the how some of the work is pacing, but specifically what are you seeing in terms of consumer engagement and also anything on cost benefits as well.

Speaker 2

Sure. Thanks. So I think To take a step back, when we think about AI, like any major technology trend, we try to think where is the industry headed over the next Year, 2 years, 3 years, 5 years, and with these new generative AI technologies, it's clear there's going to be a lot of impact on digital publishing and content. And so building towards that future and aligning our business with that Positive trend is something that we're very focused on. And so we're starting to see some really strong project Progress for our early work and I think a good way to understand where we think things are headed is to look at the work we've done so far.

Speaker 2

And you can start to get a sense of how we're seeing this AI technology and what we think it's good for. So A kind of peek into where things are headed, a lot more personalization, customization and interactivity. So Buzzfeed's Quizzes were already interactive, but now with AI they're infinitely interactive. And so that was the first product we launched. Then we expanded to chatbot games, where you could create new kinds of conversational interfaces that we found, our audience really, really love, And we'd spend 2, 3, 4 times more time interacting with the chatbot game than with a static piece of content.

Speaker 2

And then AI assisted imagery that allows us to participate in big cultural moments like the Barbie Dreamhouse example I mentioned earlier on the call. And so those are examples of just new things we can do that enhance our products and make our products more vibrant, more personal and have really worked well with our audience. On Tasty, you can see we added the Batatouille To our app, the Bot Patui bot to our app, where you can have free form conversations With this thought about what kind of food might cheer up your friend or what kind of things you can cook with a particular ingredient you have in your fridge or tips or suggestions for making food better. And it's just a more engaging way of interacting compared to Search that you would find on a traditional food site. I mentioned before Complex launched this interactive Sprite Album creation tool and we've seen other brands Who have gotten excited about this new kind of interactivity like a dream interpreting bought for Serta and other kinds of interactive types of content that advertisers and partners have paid us to co develop with them and launch and distribute with them.

Speaker 2

It's still pretty early and I feel like we've figured out how to bake some good cakes, but we still have Build out the bakery that can scale this and make more content experiences like this widely distributed across our network. And you also asked about cost benefits. So in terms of cost benefits, one of the big areas we're seeing is in workflow. So our programmers are Using CoPilot tools to be more efficient in their coding, the sales and business team has just recently Started to use an in house tool that we developed that allows them to take RFPs, match them to our product set and turnaround a response to a client. In one case, recently we turned around some response and won a deal In 24 hours when ordinarily that process would have required bringing lots of teams together and having lots of meetings and Maybe a couple of weeks of work, we were able to turn it around in a day.

Speaker 2

And all of this is using the technology for what it's good for, which is, For example, out of the dozens of products we have, matching it with the ERP and what the client might want. And then we bring in creative teams To brainstorm and add that human element to make sure the quality of the work is even better than it would have been had we not had this AI assisted process. And so, those are just a few examples. And I think when you look at both AI and creators, it's helping us build a content curation model that Can be more efficient and more scalable than the traditional models in media. And it is a long road and we're seeing a lot of early Seth, but we're building this for a longer time horizon, because we feel strongly that This is where media is headed and that there's a lot of ways to enhance the products that we're building to delight our users More and also to find more efficiencies where we can have much more output with the same amount of labor by having co pilots and other tools that give our people super Our to be able to make more and create more, do more and serve our clients better and serve our audience better, because of these AI tools that are assisting them.

Speaker 1

Thank you, Jonah. And then so moving on maybe to the go to market strategy, Marcella, Following the reorganization and some of the changes you guys discussed last quarter, can you provide an update on how that's going in terms of Sales productivity, cross sell trends, any other impacts or improvements that you guys are seeing across the business?

Speaker 3

Yes, sure. Thanks, Amita. As you may recall, we announced a restructuring in April. And at that time, we also decided to reorganize the Sales team. And this restructuring or reorganization of the sales team in the way that they were organized, it was finalized or completed in May.

Speaker 3

So what this restructuring meant for that team was a reduction on layers and the organization of the teams around 2 mega verticals, products and services with 5 underlying sales verticals. And right after that, the team engaged in nationwide roadshows, meeting with Hundreds of clients and outside representatives. And so far, the response from clients has been positive. And we are seeing increased Pipeline activity for the back half as well as the positive momentum related relative to Q1 in branded content. And as a reminder for the audience, sales cycle, it takes about 5 to 6 months.

Speaker 3

So While we expect that it will be potentially reduced with the use of AI in the future, as John gave an example earlier, We are still managing through this time line and we expect to start seeing the impact and effects of the latest reorganization probably in Q4.

Speaker 1

Great. Thank you, Marcella. And we have time for one final question on the financial for high teens adjusted EBITDA for the full year. Do you have an update on that? Or can you speak To how your expectations have changed or not since then?

Speaker 4

Sure. So broadly speaking, last year we saw compression through the year With top line revenue being challenged in the back half and in Q4 specifically, which had a very muted typical seasonal lift that we would expect going into Q4 from a revenue perspective. As of today, we are expecting a return to normalized seasonality as it relates to the quarter over quarter lift from Q3 into Q4 as compared to 2022 when we saw the muted seasonal lift in terms of revenue. As it relates to bottom line Guide for Q3, we expect to drive a year over year improvement of $5,000,000 at the midpoint on adjusted EBITDA, And we will continue to drive additional OpEx savings through real estate and other non headcount cost initiatives in the back half of this year. Thank you.

Speaker 2

All right. Thank you everyone for joining us today, and we look forward to speaking with many of you over the coming weeks. That's our call. Thanks.

Operator

Ladies and gentlemen, thank you for your participation today. This concludes today's program. You may now disconnect.

Speaker 4

Everyone else has left the call. Everyone else, it looks

Earnings Conference Call
BuzzFeed Q2 2023
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