BuzzFeed(US:BZFD)2022-11-13 16:00PART I: FINANCIAL INFORMATION Item 1: Financial Statements (unaudited) This section presents BuzzFeed's unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2022 Condensed Consolidated Balance Sheets As of September 30, 2022, total assets decreased to $618.0 million from $637.2 million, while total liabilities increased to $320.3 million from $262.3 million, leading to a decline in stockholders' equity Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2022 (Unaudited) | Dec 31, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $59,136 | $79,733 | | Total current assets | $182,654 | $251,659 | | Total assets | $617,979 | $637,214 | | Total current liabilities | $110,325 | $94,146 | | Total liabilities | $320,264 | $262,333 | | Total stockholders' equity | $297,715 | $372,587 | Condensed Consolidated Statements of Operations For Q3 2022, revenue increased 15% to $103.7 million, but total costs and expenses grew 34% to $121.8 million, widening the net loss to $26.9 million Q3 & Nine Months Statement of Operations (in thousands, except per share) | Metric | Q3 2022 | Q3 2021 | Nine Months 2022 | Nine Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $103,733 | $90,096 | $302,051 | $251,848 | | Loss from operations | $(18,085) | $(881) | $(78,271) | $(17,817) | | Net loss attributable to BuzzFeed, Inc. | $(26,856) | $(3,786) | $(95,515) | $(15,735) | | Net loss per share (Basic & Diluted) | $(0.19) | $(0.20) | $(0.69) | $(0.90) | Condensed Consolidated Statements of Cash Flows For the nine months ended September 30, 2022, the company used $7.9 million in cash from operating activities, a significant shift from $10.9 million provided in 2021, with reduced cash from financing activities Cash Flow Summary for Nine Months Ended Sep 30 (in thousands) | Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(7,897) | $10,898 | | Net cash used in investing activities | $(13,774) | $(4,900) | | Net cash provided by financing activities | $3,105 | $34,277 | | Net (decrease) increase in cash | $(20,597) | $39,471 | Notes to Condensed Consolidated Financial Statements The notes detail the Complex Networks acquisition, COVID-19 impact on commerce, revenue disaggregation, debt, and the adoption of ASC 842, recognizing $77.8 million in right-of-use assets and $96.0 million in lease liabilities - The company's revenue is primarily derived from advertising, content, and commerce, operating as a single reportable segment33 - The COVID-19 pandemic initially boosted online commerce revenue in 2020, but growth decelerated in 2021 and 2022 as consumer behavior shifted back to in-store shopping38 - On January 1, 2022, the company adopted the new lease accounting standard ASC 842, recording right-of-use assets of $77.8 million and lease liabilities of $96.0 million49 - In Q3 2022, the company recorded a non-cash impairment charge of $2.2 million related to its former corporate headquarters, which was subleased during the quarter158 Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q3 2022 financial performance, noting a 15% revenue increase to $103.7 million, but Adjusted EBITDA declined to negative $2.4 million due to higher operating expenses Results of Operations Q3 2022 revenue increased 15% YoY to $103.7 million, primarily from 45% Content revenue growth due to the Complex Networks acquisition, while total costs and expenses rose 34% to $121.8 million, resulting in an $18.1 million operating loss Revenue by Type (in thousands) | Revenue Type | Q3 2022 | Q3 2021 | % Change | | :--- | :--- | :--- | :--- | | Advertising | $50,404 | $50,240 | 0% | | Content | $38,416 | $26,483 | 45% | | Commerce and other | $14,913 | $13,373 | 12% | | Total revenue | $103,733 | $90,096 | 15% | - The 45% increase in Content revenue was largely driven by the acquisition of Complex Networks, which contributed $13.6 million of content revenue in Q3 2022200 - Cost of revenue increased by 25% in Q3 2022, primarily due to $8.8 million in increased costs related to Complex Networks and a $5.6 million increase in other costs of sales204 - General and administrative expenses rose 37% in Q3 2022, driven by increased stock-based compensation ($2.4 million), rent from Complex Networks ($1.5 million), public company insurance costs ($1.4 million), and professional fees ($1.1 million)209 Non-GAAP Financial Measure Adjusted EBITDA for Q3 2022 was negative $2.4 million, a significant downturn from positive $6.0 million in Q3 2021, attributed to higher operating costs, restructuring, and transaction expenses Reconciliation of Net Loss to Adjusted EBITDA (in thousands) | Metric | Q3 2022 | Q3 2021 | Nine Months 2022 | Nine Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Net loss | $(26,993) | $(3,582) | $(95,140) | $(15,696) | | Adjusted EBITDA | $(2,396) | $5,992 | $(17,067) | $7,307 | Liquidity and Capital Resources As of September 30, 2022, BuzzFeed had $59.1 million in cash, a $50.0 million revolving credit facility with $1.0 million remaining capacity, and $150.0 million in unsecured convertible notes due 2026 - Cash and cash equivalents totaled $59.1 million at September 30, 2022, down from $79.7 million at December 31, 2021234 - The company has a $50.0 million revolving credit facility with $33.5 million in outstanding borrowings and $1.0 million in remaining borrowing capacity as of September 30, 2022238240 - The company has $150.0 million of unsecured convertible notes due 2026, bearing interest at 8.50% per annum241 Item 3: Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks include foreign currency exchange risk from international operations, interest rate risk on its variable-rate credit facility, and equity investment risk - The company is exposed to foreign currency fluctuations, particularly from the British pound, Japanese yen, and Canadian dollar, which could negatively affect reported revenue and results270 - Interest rate risk exists due to the variable interest component on the Revolving Credit Facility, which may become more material with rising inflation and interest rates271 Item 4: Controls and Procedures Management concluded that disclosure controls and procedures were ineffective as of September 30, 2022, due to material weaknesses in internal control over financial reporting, including a lack of formalized controls and insufficient public company experience - Management identified material weaknesses in internal control over financial reporting related to: (a) lack of formalized controls and segregation of duties, (b) insufficient staff with public company experience, and (c) deficiencies in control activities, including IT general controls275 - Due to these material weaknesses, the Chief Executive Officer and Chief Financial Officer concluded that disclosure controls and procedures were not effective as of September 30, 2022278 PART II: OTHER INFORMATION Item 1: Legal Proceedings The company is involved in mass arbitrations by former employees regarding stock conversion and a class action lawsuit alleging Video Privacy Protection Act violations, but does not expect a material adverse financial effect - In March 2022, 91 former employees initiated mass arbitrations alleging they were harmed by an inability to sell shares on the first day of trading post-business combination283 - On October 28, 2022, the Delaware Court of Chancery granted the company's motion to permanently enjoin the employee arbitration claims284 - A putative class action complaint was filed in September 2022 against HuffPost, alleging violations of the federal Video Privacy Protection Act related to sharing user data with Facebook285 Item 1A: Risk Factors Key risks include adverse macroeconomic conditions, potential need for additional capital, stock price declines from large share sales, and the risk of Nasdaq delisting - Adverse macroeconomic conditions, including potential recession and inflation, could negatively affect demand for advertising and content, impacting business results287288 - A significant portion of outstanding shares are no longer restricted from resale, which could cause the market price of Class A common stock to drop if sold in large quantities296297 - The company faces a risk of being delisted from Nasdaq if its stock price fails to meet the minimum bid price requirement, which could limit liquidity and subject the stock to 'penny stock' rules304305 - The company's multi-class stock structure concentrates over 75% of voting power with CEO Jonah Peretti, limiting other stockholders' influence307308 Other Items (Items 2, 3, 4, 5, 6) This section confirms no information to report for unregistered sales of equity securities, defaults upon senior securities, mine safety disclosures, or other material information, and lists filed exhibits - There were no unregistered sales of equity securities, defaults upon senior securities, or other material information to report under Items 2, 3, 4, and 5316317318319