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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________________________________________
FORM 10-Q
______________________________________________________________
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2023
OR
oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from      to
Commission file number: 001-39877
______________________________________________________________
BuzzFeed, Inc.
(Exact Name of Registrant as Specified in Its Charter)
______________________________________________________________
Delaware85-3022075
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
229 West 43rd Street New York, New York
10036
(Address of principal executive offices)(Zip Code)
(646) 397-2039
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A Common Stock, $0.0001 par value per shareBZFDThe Nasdaq Stock Market LLC
Redeemable warrants, each whole warrant exercisable for one share of Class A Common Stock at an exercise price of $11.50 per shareBZFDWThe Nasdaq Stock Market LLC
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated fileroAccelerated filerx
Non-accelerated fileroSmaller reporting companyx
Emerging growth companyx
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes o No x
As of May 8, 2023, there were 133,444,050 shares of the registrant’s Class A common stock outstanding, 6,675,517 shares of the registrant’s Class B common stock outstanding and no shares of the registrant’s Class C common stock outstanding.


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BUZZFEED, INC.
TABLE OF CONTENTS
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this Quarterly Report on Form 10-Q may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which statements involve substantial risks and uncertainties. Our forward-looking statements include, but are not limited to, statements regarding our management team’s expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “affect,” “anticipate,” “believe,” “can,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “forecast,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “will,” “would”, and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward looking statements include all matters that are not historical facts. Forward-looking statements in this Quarterly Report on Form 10-Q may include, for example, statements about:
anticipated trends, growth rates, and challenges in our business and in the markets in which we operate;
demand for products and services and changes in traffic;
changes in the business and competitive environment in which we operate;
developments and projections relating to our competitors and the digital media industry;
the impact of national and local economic and other conditions and developments in technology, each of which could influence the levels (rate and volume) of our advertising, the growth of our business, and the implementation of our strategic initiatives;
poor quality broadband infrastructure in certain markets;
technological developments including artificial intelligence;
our success in retaining or recruiting, or changes required in, officers, key employees or directors;
our business, operations, and financial performance, including expectations with respect to our financial and business performance and the benefits of our restructuring, including financial projections and business metrics, and any underlying assumptions thereunder, future business plans and initiatives, and growth opportunities;
our future capital requirements and sources and uses of cash, including, but not limited to, our ability to obtain additional capital in the future, any impacts of bank failures or issues in the broader United States (“U.S.”) financial system, any restrictions imposed by our debt facilities, and any restrictions on our ability to access our cash and cash equivalents;
expectations regarding future acquisitions, partnerships, or other relationships with third parties;
developments in the law and government regulation, including, but not limited to, revised foreign content and ownership regulations;
the anticipated impacts of current global supply chain disruptions, further escalation of tensions between Russia and Western countries and the related sanctions and geopolitical tensions, as well as further escalation of trade tensions between the U.S. and China; the inflationary environment; the tight labor market; the continued impact of the COVID-19 pandemic and evolving strains of COVID-19; and other macroeconomic factors on our business and the actions we may take in the future in response thereto;
our ability to maintain the listing of our Class A common stock and warrants on the Nasdaq Stock Market LLC; and
other factors detailed under the section entitled “Risk Factors” herein and in our Annual Report on Form 10-K for the year ended December 31, 2022.
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The forward-looking statements contained in this Quarterly Report on Form 10-Q are based on current expectations and beliefs concerning future developments and their potential effects on us. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described under the section entitled “Risk Factors” herein and in our Annual Report on Form 10-K for the year ended December 31, 2022. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. There may be additional risks that we consider immaterial or which are unknown. It is not possible to predict or identify all such risks. We do not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
This Quarterly Report on Form 10-Q contains estimates and information concerning our industry, our business, and the market for our products and services, including our general expectations of our market position, market growth forecasts, our market opportunity, and size of the markets in which we participate, that are based on industry publications, surveys, and reports that have been prepared by independent third parties. This information involves a number of assumptions and limitations, and you are cautioned not to give undue weight to these estimates. Although we have not independently verified the accuracy or completeness of the data contained in these industry publications, surveys, and reports, we believe the publications, surveys, and reports are generally reliable, although such information is inherently subject to uncertainties and imprecision. The industry in which we operate is subject to a high degree of uncertainty and risk due to a variety of factors, including, but not limited to, those described in the section entitled “Risk Factors” herein and in our Annual Report on Form 10-K for the year ended December 31, 2022. These and other factors could cause results to differ materially from those expressed in these publications and reports.
Investors and others should note that we may announce material business and financial information to our investors using our investor relations website (https://investors.buzzfeed.com), U.S. Securities and Exchange Commission (“SEC”) filings, webcasts, press releases, and conference calls. We use these mediums to communicate with investors and the general public about our company, our products and services, and other issues. It is possible that the information that we make available may be deemed to be material information. We therefore encourage investors, the media, and others interested in our company to review the information that we post on our investor relations website.
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PART I: FINANCIAL INFORMATION
ITEM 1: Financial Statements (unaudited)
BUZZFEED, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
March 31, 2023
(Unaudited)
December 31,
2022
Assets
Current assets
Cash and cash equivalents$49,947 $55,774 
Accounts receivable (net of allowance for doubtful accounts of $2,229 as at March 31, 2023 and $1,879 as at December 31, 2022)
72,363 116,460 
Prepaid expenses and other current assets24,270 26,373 
Total current assets146,580 198,607 
Property and equipment, net16,446 17,774 
Right-of-use assets61,615 66,581 
Capitalized software costs, net20,348 19,259 
Intangible assets, net117,532 121,329 
Goodwill91,632 91,632 
Prepaid expenses and other assets15,138 14,790 
Total assets$469,291 $529,972 
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable$27,198 $29,329 
Accrued expenses21,992 26,357 
Deferred revenue6,445 8,836 
Accrued compensation18,294 31,052 
Current lease liabilities22,667 23,398 
Other current liabilities5,176 3,900 
Total current liabilities101,772 122,872 
Noncurrent lease liabilities54,269 59,315 
Debt152,281 152,253 
Derivative liability1,185 180 
Warrant liabilities988 395 
Other liabilities430 403 
Total liabilities310,925 335,418 
Commitments and contingencies
Stockholders’ equity
Class A Common stock, $0.0001 par value; 700,000 shares authorized; 133,258 and 126,387 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively
14 13 
Class B Common stock, $0.0001 par value; 20,000 shares authorized; 6,676 and 6,678 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively
1 1 
Class C Common stock, $0.0001 par value; 10,000 shares authorized; 0 and 6,478 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively
 1 
Additional paid-in capital717,191 716,233 
Accumulated deficit(559,190)(523,063)
Accumulated other comprehensive loss(2,669)(1,968)
Total BuzzFeed, Inc. stockholders’ equity155,347 191,217 
Noncontrolling interests3,019 3,337 
Total stockholders’ equity158,366 194,554 
Total liabilities and stockholders’ equity$469,291 $529,972 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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BUZZFEED, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited) (In thousands, except per share amounts)
Three Months Ended March 31,
20232022
Revenue$67,153 $91,558 
Costs and Expenses
Cost of revenue, excluding depreciation and amortization47,344 60,818 
Sales and marketing15,301 17,803 
General and administrative22,002 32,562 
Research and development3,819 7,192 
Depreciation and amortization8,405 8,481 
Total costs and expenses96,871 126,856 
Loss from operations(29,718)(35,298)
Other income, net620 862 
Interest expense, net(5,418)(4,789)
Change in fair value of warrant liabilities(593)(3,416)
Change in fair value of derivative liability(1,005)(1,575)
Loss before income taxes (36,114)(44,216)
Income tax provision147 350 
Net loss(36,261)(44,566)
Net income attributable to the redeemable noncontrolling interest 164 
Net (loss) income attributable to noncontrolling interests(260)164 
Net loss attributable to BuzzFeed, Inc.$(36,001)$(44,894)
Net loss per Class A, Class B and Class C common share:
Basic$(0.26)$(0.33)
Diluted$(0.26)$(0.33)
Weighted average common shares outstanding:
Basic140,704136,425
Diluted140,704136,425
The accompanying notes are an integral part of these condensed consolidated financial statements.
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BUZZFEED, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited) (In thousands)
Three Months Ended March 31,
20232022
Net loss$(36,261)$(44,566)
Other comprehensive loss
Foreign currency translation adjustment(759)(103)
Other comprehensive loss(759)(103)
Comprehensive loss(37,020)(44,669)
Comprehensive income attributable to the redeemable noncontrolling interest 164 
Comprehensive (loss) income attributable to noncontrolling interests(260)164 
Foreign currency translation adjustment attributable to noncontrolling interests(58) 
Comprehensive loss attributable to BuzzFeed, Inc.$(36,702)$(44,997)
The accompanying notes are an integral part of these condensed consolidated financial statements.
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BUZZFEED, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited) (In thousands)
Three Months Ended March 31, 2023
Common Stock –
Class A
Common Stock –
Class B
Common Stock –
Class C
Additional paid-in
capital
Accumulated
deficit
Accumulated
other
comprehensive
loss
Total
BuzzFeed, Inc.
stockholders’
equity
Noncontrolling
interests
Total
stockholders’
equity
SharesAmountSharesAmountSharesAmount
Balance at January 1, 2023126,387 $13 6,678 $1 6,478 $1 $716,233 $(523,063)$(1,968)$191,217 $3,337 $194,554 
Cumulative effect of accounting change (see Note 2)— — — — — — — (126)— (126)— (126)
Net loss— — — — — — — (36,001)— (36,001)(260)(36,261)
Stock-based compensation— — — — — — 1,122 — — 1,122  1,122 
Issuance of common stock in connection with share-based plans512 — — — — — 29 — — 29 — 29 
Shares withheld for employee taxes(121)— — — — — (193)— — (193)— (193)
Other comprehensive loss— — — — — — — — (701)(701)(58)(759)
Conversion of Class B common stock to Class A common stock2 — (2)— — — — — — — — — 
Conversion of Class C common stock to Class A common stock6,478 1 — — (6,478)(1)— — — — — — 
Balance at March 31, 2023133,258 $14 6,676 $1  $ $717,191 $(559,190)$(2,669)$155,347 $3,019 $158,366 
Three Months Ended March 31, 2022
Common Stock –
Class A
Common Stock –
Class B
Common Stock –
Class C
Additional
paid-in
capital
Accumulated
deficit
Accumulated
other
comprehensive
loss
Total
BuzzFeed, Inc.
stockholders’
equity
Noncontrolling
interests
Total
stockholders’
equity
SharesAmountSharesAmountSharesAmount
Balance at January 1, 2022116,175$11 12,397$1 6,478$1 $695,869 $(322,106)$(3,233)$370,543 $2,044 $372,587 
Net (loss) income(44,894)(44,894)164(44,730)
Stock-based compensation3,9403,9403,940
Issuance of common stock upon exercise of stock options4111358359359
Other comprehensive loss(103)(103)(103)
Conversion of Class B common stock to Class A common stock103(103)
Balance at March 31, 2022116,689$12 12,294$1 6,478$1 $700,167 $(367,000)$(3,336)$329,845 $2,208 $332,053 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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BUZZFEED, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (In thousands)
Three Months Ended March 31,
20232022
Operating activities:
Net loss$(36,261)$(44,566)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization8,405 8,481 
Unrealized (gain) loss on foreign currency(958)142 
Stock based compensation1,122 3,940 
Change in fair value of warrants593 3,416 
Change in fair value of derivative liability1,005 1,575 
Amortization of debt discount and deferred issuance costs1,345 1,154 
Deferred income tax(21)507 
Provision for doubtful accounts223 574 
Unrealized gain on investment (1,260)
Gain on disposition of assets (175) 
Non-cash lease expense5,034 4,690 
Changes in operating assets and liabilities:
Accounts receivable43,837 44,227 
Prepaid expenses and other current assets and prepaid expenses and other assets1,979 2,864 
Accounts payable(95)(5,741)
Accrued compensation(12,772)(10,117)
Accrued expenses, other current liabilities and other liabilities (5,183)(4,688)
Lease liabilities(5,862)(5,517)
Deferred revenue(2,395)1,461 
Cash (used in) provided by operating activities(179)1,142 
Investing activities:
Capital expenditures(402)(2,369)
Capitalization of internal-use software(3,974)(3,553)
Proceeds from sale of asset175  
Cash used in investing activities(4,201)(5,922)
Financing activities:
Proceeds from exercise of stock options29 358 
Payment for shares withheld for employee taxes (193) 
Payment on Revolving Credit Facility(1,317) 
Deferred reverse recapitalization costs (585)
Cash used in financing activities(1,481)(227)
Effect of currency translation on cash and cash equivalents34 (186)
Net decrease in cash and cash equivalents(5,827)(5,193)
Cash and cash equivalents at beginning of period55,774 79,733 
Cash and cash equivalents at end of period$49,947 $74,540 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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BUZZFEED, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (Tabular amounts in thousands, except per share amounts)
1. Description of the Business
BuzzFeed, Inc. (referred to herein, collectively with its subsidiaries, as “BuzzFeed” or the “Company”) is a premier digital media company for the most diverse, most online, and most socially connected generations the world has ever seen. Across food, news, pop culture and commerce, our brands drive conversation and inspire what audiences watch, read, and buy now — and into the future. The Company’s portfolio of iconic, globally-loved brands includes BuzzFeed, HuffPost, Tasty, Complex Networks, and First We Feast. BuzzFeed derives its revenue primarily from advertising, content, and commerce and other sold to leading brands. The Company has one reportable segment.
On December 3, 2021, we consummated a business combination (the “Business Combination”) with 890 5th Avenue Partners, Inc. (“890”), certain wholly-owned subsidiaries of 890, and BuzzFeed, Inc., a Delaware corporation (“Legacy BuzzFeed”). In connection with the Business Combination, we acquired 100% of the membership interests of CM Partners, LLC. CM Partners, LLC, together with Complex Media, Inc., is referred to herein as “Complex Networks.” Following the closing of the Business Combination, 890 was renamed “BuzzFeed, Inc.”
Additionally, pursuant to subscription agreements entered into in connection with the entry into the merger agreement pursuant to which the Business Combination was consummated, the Company issued, and certain investors purchased, $150.0 million aggregate principal amount of unsecured convertible notes due 2026 concurrently with the closing of the Business Combination (the “Notes”).
Liquidity
As a digital media company, the Company is subject to certain inherent risks and uncertainties associated with the development of its business. To date, substantially all of the Company’s efforts have been devoted to the growth of its owned and operated properties and portfolio of brands. This includes the Company’s proprietary technology infrastructure, advertising solutions, content creation tools, and more. The Company has invested in the recruitment of key management and technical staff and has acquired certain businesses. These investments have historically been funded by raising outside capital, and as a result of these efforts, the Company has generally incurred significant losses and used net cash outflows from operations since inception — and it may continue to incur such losses and use net cash outflows for the foreseeable future until such time it reaches scale of profitability without needing to rely on funding from outside capital to sustain its operations.
In order to execute its growth strategy, the Company has historically relied on outside capital through the issuance of equity, debt, and borrowings under financing arrangements (collectively “outside capital”). The Company may continue to rely on outside capital for the foreseeable future. While the Company believes it will eventually reach a scale of profitability to sustain its operations, there can be no assurance it will be able to achieve such profitability or do so in a manner that does not necessitate its continued reliance on outside capital.
As of the date the condensed consolidated financial statements were issued (the “issuance date”), the presence of the following risks and uncertainties associated with the Company’s financial condition may adversely affect our ability to sustain its operations over the next twelve months beyond the issuance date.
Since its inception, the Company has generally incurred significant losses and used net cash flows from operations to grow its owned and operated properties and portfolio of brands. During the three months ended March 31, 2023, the Company incurred a net loss of $36.3 million and used net cash flows from its operations of $0.2 million. Additionally, as of March 31, 2023, the Company had unrestricted cash and cash equivalents of $49.9 million available to fund its operations, $2.3 million available under the Company’s $50.0 million revolving loan and standby letter of credit facility agreement (the “Revolving Credit Facility”) (see Note 9 herein for additional details), and an accumulated deficit of $559.2 million.
The Company expects to continue to be impacted by the challenging U.S. and global macroeconomic environment, which could adversely impact its ability to grow revenue over the next twelve months beyond the issuance date.
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The Company continues to be affected by its ongoing efforts to integrate Complex Networks and sales execution against the combined brand portfolio, which may result in the incurrence of unexpected expenses or the inability to realize in anticipated benefits and synergies over the next twelve months beyond the issuance date.
The Company is required to remain in compliance with certain covenants required by the Revolving Credit Facility, which, among others, require it to maintain a minimum of $25.0 million of unrestricted cash at all times and limit, under prescribed circumstances, its ability to incur additional indebtedness, pay dividends, hold unpermitted investments or make material changes to the business. While the Company was in compliance with the financial covenants under the Revolving Credit Facility as of March 31, 2023, and it expects to remain in compliance throughout twelve months beyond the issuance date, the Company may be unable to remain in compliance with one or more of these covenants if it is unable to generate net cash inflows from operations or, if necessary, secure additional outside capital. In the event the Company is unable to remain in compliance with one or more of the aforementioned covenants, and it is unable to secure a waiver or forbearance, the lender may, at its discretion, exercise any and all of its existing rights and remedies, which may include, among others, accelerating repayment of the outstanding borrowings and/or asserting its rights in the assets securing the loan.
Due to the risks and uncertainties described above, the Company continues to carefully evaluate its liquidity position. The Company recognizes the significant challenge of maintaining sufficient liquidity to sustain its operations or remain in compliance with one or more of the covenants required by the Revolving Credit Facility, for the next twelve months beyond the issuance date. However, notwithstanding its liquidity position as of the issuance date, and while it is difficult to predict its future liquidity requirements with certainty, the Company currently expects it will be able to generate sufficient liquidity to fund its operations over the next twelve months beyond the issuance date.
In response to the risks and uncertainties described above, the Company may plan to secure additional outside capital over the next twelve months beyond the issuance date. While the Company has historically been successful in its ability to secure outside capital, as of the issuance date, the Company had no firm commitments of additional outside capital. The Company can provide no assurance it will be able to continue to secure outside capital in the future or do so on terms that are acceptable to it. Furthermore, the Company also plans to continue to closely monitor its cash flow forecast and, if necessary, it will implement certain incremental cost savings to preserve its liquidity beyond those that were implemented through the restructuring activities that occurred during fiscal year 2022 and 2023 (see Note 19 herein for additional details) or through the reduction of its real estate footprint. While the Company currently expects it will be able to generate sufficient liquidity to fund its operations for the next twelve months beyond the issuance date, it can provide no assurance it will successfully generate such liquidity, or if necessary, secure additional outside capital or implement incremental cost savings.
COVID-19
In March 2020, the World Health Organization declared the viral strain of COVID-19 a global pandemic and recommended containment and mitigation measures worldwide. The spread of COVID-19 and the resulting economic contraction resulted in increased business uncertainty and significantly impacted the Company’s business and results of operations. While the extent of the impact has generally decreased, the Company continues to monitor the status, and respond to the effects of, the COVID-19 pandemic and its impact on the Company’s business. Future developments regarding COVID-19 continue to be uncertain and difficult to predict. There can be no assurances that future impacts related to COVID-19, including new variants, or other global pandemics will not adversely impact our business, results of operations, financial condition and cash flows in future periods.
2. Summary of Significant Accounting Policies
Basis of Financial Statements and Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (the “SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been omitted pursuant to such rules and regulations. As such, the accompanying condensed consolidated financial statements and these related notes should be read in conjunction with the Company’s consolidated financial statements and related notes as of and for the year
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ended December 31, 2022, as disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.
The condensed consolidated financial statements include all normal recurring adjustments that, in the opinion of management, are necessary to present fairly the results for the interim periods presented. Interim results are not necessarily indicative of the results for the full year ended December 31, 2023.
The condensed consolidated financial statements include the accounts of BuzzFeed, Inc., and its wholly-owned and majority-owned subsidiaries, and any variable interest entities for which the Company is the primary beneficiary. All intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported results of operations during the reporting period. Due to the use of estimates inherent in the financial reporting process actual results could differ from those estimates.
Key estimates and assumptions relate primarily to revenue recognition, fair values of intangible assets acquired in business combinations, valuation allowances for deferred income tax assets, allowance for doubtful accounts, fair value of the derivative liability, fair values used for stock-based compensation in periods prior to the Business Combination, useful lives of fixed assets, and capitalized software costs.
Recently Adopted Accounting Pronouncements
The Company, an emerging growth company (“EGC”) has elected to take advantage of the benefits of the extended transition period provided for in Section 7(a)(2)(B) of the Securities Act, as amended, for complying with new or revised accounting standards which allows the Company to defer adoption of certain accounting standards until those standards would otherwise apply to private companies.
In June 2016, the Financial Accounting Standards Board issued Accounting Standards Update 2016-13, Financial Instruments — Credit Losses (Topic 326), which changes the impairment model for most financial assets, including accounts receivable, and replaces the existing incurred loss impairment model with an expected loss methodology, which will result in more timely recognition of credit losses. The guidance is effective for the Company for interim and annual periods beginning after December 15, 2022, with early adoption permitted. Effective January 1, 2023, the Company adopted this standard using a modified retrospective transition approach, which required a cumulative effect adjustment to the balance sheet as of January 1, 2023. The adoption of this standard did not have a material impact to our condensed consolidated financial statements.
Accounting Pronouncements Not Yet Adopted
None.
3. Acquisitions and Dispositions
Complex Networks Acquisition
On December 3, 2021, in conjunction with the Business Combination, the Company completed the acquisition of 100% of the members’ interests of Complex Networks, a publisher of online media content targeting Millennial and Gen Z consumers (the “Complex Networks Acquisition”).
The following table summarizes the fair value of consideration exchanged as a result of the Complex Networks Acquisition:
Cash consideration(1)
$197,966
Share consideration(2)
96,200
Total consideration$294,166
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_________________________________
(1)Includes the cash purchase price of $200.0 million adjusted for certain closing specified liabilities as specified in the Complex Networks Acquisition purchase agreement.
(2)Represents 10,000,000 shares of our Class A common stock at a price of $9.62 per share, which is based on the closing stock price of our Class A common stock on the date on which the Business Combination was consummated.
The following table summarizes the determination of the fair value of identifiable assets acquired and liabilities assumed in connection with the Complex Networks Acquisition. During the year ended December 31, 2022, the Company finalized the fair value of assets acquired and liabilities assumed. Measurement period adjustments were reflected during the year ended December 31, 2022, which is the period in which the adjustments occurred. The adjustments resulted from new information obtained about facts and circumstances that existed as of the acquisition date.
PreliminaryMeasurement
Period
Adjustments
Final
Cash$2,881  $2,881 
Accounts receivable22,581 11 22,592 
Prepaid and other current assets17,827 281 18,108 
Property and equipment332 (15)317 
Intangible assets119,100  119,100 
Goodwill189,391 (909)188,482 
Accounts payable(2,661) (2,661)
Accrued expenses(12,319)(803)(13,122)
Accrued compensation(12,867)349 (12,518)
Deferred revenue(5,855)(48)(5,903)
Deferred tax liabilities(22,776)1,134 (21,642)
Other liabilities(1,468) (1,468)
Total consideration for Complex Networks$294,166 $ $294,166 
The table below indicates the estimated fair value of each of the identifiable intangible assets:
Asset Fair ValueWeighted Average
Useful Life (Years)
Trademarks & tradenames97,000 15
Customer relationships17,000 4
Developed technology5,100 3
The fair values of the intangible assets were estimated using Level 3 inputs. The fair value of trademarks and trade names was determined using the relief from royalty method, the fair value of customer relationships was determined using the multi-period excess earnings approach, and the fair value of acquired technology was determined using the replacement cost approach. The excess of purchase consideration over the fair value of net tangible and identifiable intangible assets acquired resulted in $188.5 million of goodwill, which is primarily attributed to workforce and synergies, and is not deductible for tax purposes.
Goodwill Impairment
The Company reviews goodwill for impairment annually as of October 1 and more frequently if events or changes in circumstances indicate an impairment may exist (a “triggering event”). As of March 31, 2023, the Company had $91.6 million of goodwill recorded on its condensed consolidated balance sheet. During the year ended December 31, 2022, the Company recorded a $102.3 million non-cash goodwill impairment charge driven by a sustained decline in share price that pushed our market capitalization below the carrying value of our stockholders’ equity. The Company concluded there were no new impairment triggering events as of and for the three months ended March 31, 2023.
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4. Revenue Recognition
Disaggregated Revenue
The table below presents the Company’s revenue disaggregated based on the nature of its arrangements. Management uses these categories of revenue to evaluate the performance of its businesses and to assess its financial results and forecasts.
Three Months Ended March 31,
20232022
Advertising$34,248 $48,668 
Content21,618 32,279 
Commerce and other11,287 10,611 
Total$67,153 $91,558 
The following table presents the Company’s revenue disaggregated by geography:
Three Months Ended March 31,
20232022
Revenue:
United States$62,601 $83,100 
International4,552 8,458 
Total$67,153 $91,558 
Contract Balances
The timing of revenue recognition, billings and cash collections can result in billed accounts receivable, unbilled receivables (contract assets), and deferred revenues (contract liabilities). The payment terms and conditions within the Company’s contracts vary by type, but the substantial majority require that customers pay for their services on a monthly or quarterly basis, as the services are being provided. When the timing of revenue recognition differs from the timing of payments made by customers, the Company recognizes either unbilled revenue (performance precedes the billing date) or deferred revenue (customer payment is received in advance of performance). The Company has determined its contracts generally do not include a significant financing component.
The Company’s contract assets are presented in Prepaid and other current assets on the accompanying condensed consolidated balance sheets and totaled $8.1 million and $12.1 million at March 31, 2023 and December 31, 2022, respectively. These amounts relate to revenue recognized during the respective period that is expected to be invoiced and collected in future periods.
The Company’s contract liabilities, which are recorded in Deferred revenue on the accompanying condensed consolidated balance sheets, are expected to be recognized as revenues during the succeeding twelve-month period. Deferred revenue totaled $6.4 million and $8.8 million at March 31, 2023 and December 31, 2022, respectively.
The amount of revenue recognized during the three months ended March 31, 2023 that was included in the deferred revenue balance as of December 31, 2022 was $2.9 million.
Transaction Price Allocated to Remaining Performance Obligations
The Company has certain licensing contracts with minimum guarantees and terms extending beyond one year. Revenue to be recognized related to the remaining performance obligations was $1.3 million at March 31, 2023 and is expected to be recognized over the next two years. This amount does not include: (i) contracts with an original expected duration of one year or less, such as advertising contracts; (ii) variable consideration in the form of sales-based royalties; or (iii) variable consideration allocated entirely to wholly unperformed performance obligations.
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For each contract, the Company estimates whether it will be subject to variable consideration under the terms of the contract and includes its estimate of variable consideration, subject to constraint, in the transaction price based on the expected value method when it is deemed probable of being realized based on historical experience and trends. The Company updates its estimate of the transaction price each reporting period and the effect of variable consideration on the transaction price is recognized as an adjustment to revenue on a cumulative catch-up basis.
5. Fair Value Measurements
The Company’s financial assets and liabilities that are measured at fair value on a recurring basis are summarized below:
March 31, 2023
Level 1Level 2Level 3Total
Assets:
Cash equivalents:
Money market funds$25,017 $ $ $25,017 
Total$25,017 $ $ $25,017 
Liabilities:
Derivative liability$ $ $1,185 $1,185 
Other non-current liabilities:
Public Warrants978   978 
Private Warrants 10  10 
Total$978 $10 $1,185 $2,173 
December 31, 2022
Level 1Level 2Level 3Total
Assets:
Cash equivalents:
Money market funds$1,154 $ $ $1,154 
Total$1,154 $ $ $1,154 
Liabilities:
Derivative liability$ $ $180 $180 
Other non-current liabilities:
Public Warrants384384
Private Warrants1111
Total$384 $11 $180 $575 
The Company’s investments in money market funds are measured at amortized cost, which approximates fair value.
The Company’s warrant liability as of March 31, 2023 and December 31, 2022 includes public and private warrants that were originally issued by 890, but which were assumed by the Company as part of the closing of the Business Combination (the “Public Warrants” and “Private Warrants,” respectively), which are recorded on the balance sheet at fair value. The carrying amount is subject to remeasurement at each balance sheet date. With each remeasurement, the carrying amount is adjusted to fair value, with the change in fair value recognized in the Company’s condensed consolidated statements of operations and comprehensive loss.
The Public Warrants are publicly traded under the symbol “BZFDW”, and the fair value of the Public Warrants at a specific date is determined by the closing price of the Public Warrants as of that date. As such, the Public Warrants are classified within Level 1 of the fair value hierarchy. The closing price of the Public Warrants was $0.10 and $0.04 as of March 31, 2023 and December 31, 2022, respectively.
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As of March 31, 2023 and December 31, 2022, Level 3 instruments consisted of the Company’s derivative liability related to the Notes. Fair value measurements categorized within Level 3 are sensitive to changes in the assumptions or methodologies used to determine fair value, and such changes could result in a significant increase or decrease in the fair value. To measure the fair value of the derivative liability, the Company compared the calculated value of the Notes with the indicated value of the host instrument, defined as the straight-debt component of the Notes. The difference between the value of the straight-debt host instrument and the fair value of the Notes resulted in the value of the derivative liability. The value of the straight-debt host instrument was estimated based on a binomial lattice model, excluding the conversion option and the make-whole payment upon conversion.
The following table provides quantitative information regarding the significant unobservable inputs used by the Company related to the derivative liability:
March 31, 2023December 31, 2022
Term (in years)3.73.9
Risk-free rate3.74 %4.11 %
Volatility94.1 %76.6 %
The following table represents the activity of the Level 3 instruments:
Derivative Liability
Balance as of December 31, 2022$180 
Change in fair value of derivative liability1,005 
Balance as of March 31, 2023$1,185 
There were no transfers between fair value measurement levels during the three months ended March 31, 2023.
Equity Investment
For equity investments in entities that the Company does not exercise significant influence over, if the fair value of the investment is not readily determinable, the investment is accounted for at cost, and adjusted for subsequent observable price changes. If the fair value of the investment is readily determinable, the investment is accounted for at fair value. The Company reviews equity investments without readily determinable fair values at each period end to determine whether they have been impaired.
As of March 31, 2023 and December 31, 2022, the Company had an investment in equity securities of a privately-held company without a readily determinable fair value. The total carrying value of the investment, included in Prepaid and other assets on the condensed consolidated balance sheets, was $3.6 million as of March 31, 2023 and December 31, 2022, respectively.
6. Property and Equipment, net
Property and equipment, net consisted of the following:
March 31, 2023December 31, 2022
Leasehold improvements$50,711 $50,688 
Furniture and fixtures6,158 6,069 
Computer equipment5,898 5,629 
Video equipment792 792 
Total63,559 63,178 
Less: Accumulated depreciation(47,113)(45,404)
Net Carrying Value$16,446 $17,774 
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Depreciation totaled $1.7 million and $2.5 million for the three months ended March 31, 2023 and 2022, respectively, included in Depreciation and amortization expense.
7. Capitalized Software Costs, net
Capitalized software costs, net consisted of the following:
March 31, 2023December 31, 2022
Website and internal-use software$79,845 $75,871 
Less: Accumulated amortization(59,497)(56,612)
Net Carrying Value$20,348 $19,259 
The Company capitalized $4.0 million and $3.6 million for the three months ended March 31, 2023 and 2022, respectively, included in Capitalized software costs. The Company amortized $2.9 million and $2.2 million for the three months ended March 31, 2023 and 2022, respectively, included in Depreciation and amortization expense.
8. Intangible Assets, net
The following table presents the detail of intangible assets for the periods presented and the weighted average remaining useful lives:
March 31, 2023December 31, 2022
Weighted-
Average
Remaining
Useful Lives
(in years)
Gross
Carrying
Value
Accumulated
Amortization
Net Carrying
Value
Weighted-
Average
Remaining
Useful Lives
(in years)
Gross Carrying
Value
Accumulated
Amortization
Net Carrying Value
Acquired Technology1$10,600 $6,163 $4,437 2$10,600 $5,279 $5,321 
Trademarks and Trade Names14111,000 10,606 100,394 14111,000 8,756 102,244 
Trademarks and Trade NamesIndefinite1,368 — 1,368 Indefinite1,368 — 1,368 
Customer Relationships317,000 5,667 11,333 317,000 4,604 12,396 
Total$139,968 $22,436 $117,532 $139,968 $18,639 $121,329 
With respect to intangible assets, the Company amortized $3.8 million and $3.8 million for the three months ended March 31, 2023 and 2022, respectively, included in Depreciation and amortization expense.
Estimated future amortization expense as of March 31, 2023 is as follows (in thousands):
Remainder of 2023$11,388 
202413,438 
202511,296 
20267,400 
20277,400 
Thereafter65,242 
Total$116,164 
9. Debt
Revolving Credit Facility
On December 30, 2020, the Company entered into a three-year, $50.0 million, revolving loan and standby letter of credit facility agreement (i.e., the Revolving Credit Facility). The Revolving Credit Facility provides for the issuance of up to $15.5 million of standby letters of credit and aggregate borrowings under the Revolving Credit Facility are generally
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limited to 95% of qualifying investment grade accounts receivable and 90% of qualifying non-investment grade accounts receivable, subject to adjustment at the discretion of the lenders. The $15.5 million of standby letters of credit were issued during the three months ended March 31, 2021 in favor of certain of the Company’s landlords. The Revolving Credit Facility was amended and restated in connection with the closing of the Business Combination to, among other things, add the Company and certain other entities as guarantors. The Revolving Credit Facility was further amended and restated on December 15, 2022 to, among other things, extend the maturity date until December 30, 2025, replace the London Inter-Bank Offered Rate (LIBOR) rate with the Secured Overnight Financing Rate (“SOFR”) rate, and provide for an early termination fee of between 0.5% and 2% of the maximum facility loan amount. The Company incurred $0.2 million of debt issuance fees associated with the December 15, 2022 amendment. On May 10, 2023, the parties to the Revolving Credit Facility entered into a joinder agreement adding one of the Company’s Canadian subsidiaries as a borrower under the Revolving Credit Facility, granting the lenders under the Revolving Credit Facility a lien on that subsidiary’s collateral, and including that subsidiary's receivables in the calculation of the borrowing base under the Revolving Credit Facility.
The Revolving Credit Facility includes covenants that, among other things, require the Company to maintain at least $25.0 million of unrestricted cash at all times and limit, under prescribed circumstances, the ability of the Company to incur additional indebtedness, pay dividends, hold unpermitted investments, or make material changes to the business. The Company was in compliance with the financial covenants under such facility as of March 31, 2023.
Borrowings under the Revolving Credit Facility bear interest at the SOFR rate, subject to a floor rate of 0.75%, plus a margin of 3.75% to 4.25%, depending on the level of the Company’s utilization of the facility (8.49% at March 31, 2023), and subject to a monthly minimum utilization of $15.0 million. The facility also includes an unused commitment fee of 0.375%.
The Company had outstanding borrowings of $32.2 million and $33.5 million at March 31, 2023 and December 31, 2022, respectively. The Company had outstanding letters of credit of $15.5 million under the Revolving Credit Facility at March 31, 2023 and December 31, 2022, and the total unused borrowing capacity was $2.3 million and $1.0 million as of March 31, 2023 and December 31, 2022, respectively.
As of March 31, 2023 and December 31, 2022, the Company had $0.3 million and $0.4 million, respectively, of costs in connection with the issuance of debt included in Prepaid and other assets in the condensed consolidated balance sheet.
Convertible Notes
In June 2021, in connection with the entry into the merger agreement pursuant to which Business Combination was consummated, the Company entered into subscription agreements with certain investors to sell $150.0 million aggregate principal amount of unsecured convertible notes due 2026 (i.e., the Notes). In connection with closing of the the Business Combination, the Company issued, and those investors purchased, the Notes. The Notes bear interest at a rate of 8.50% per annum, payable semi-annually, are convertible into approximately 12,000,000 shares of our Class A common stock (or, at the Company’s election, a combination of cash and our Class A common stock), at an initial conversion price of $12.50, and mature on December 3, 2026.
The Company may, at its election, force conversion of the Notes after December 3, 2024 (i.e., after the third anniversary of the issuance of the Notes), subject to a holder’s prior right to convert and the satisfaction of certain other conditions, if the volume-weighted average trading price of our Class A common stock is greater than or equal to 130% of the conversion price for more than 20 trading days during a period of 30 consecutive trading days, which has yet to occur. In the event that a holder of the Notes elects to convert its Notes after the one year anniversary, and prior to the three-year anniversary, of the issuance of the Notes (i.e., between December 3, 2022 and December 3, 2024), the Company will be obligated to pay an amount equal to: (i) from the one year anniversary of the issuance of the Notes to the two year anniversary of the issuance of the Notes, an amount in cash equal to 18 month’s interest declining ratably on a monthly basis to 12 month’s interest on the aggregate principal amount of the Notes so converted and (ii) from the two year anniversary of the issuance of the Notes to the three year anniversary of the issuance of the Notes, an amount equal to 12 month’s interest declining ratably on a monthly basis to zero month’s interest, in each case, on the aggregate principal amount of the Notes so converted. Without limiting a holder’s right to convert the Notes at its option, interest will cease to accrue on the Notes during any period in which the Company would otherwise be entitled to force conversion of the Notes, but is not permitted to do so solely due to the failure of a trading volume condition specified in the indenture governing the Notes.
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Each holder of a Note will have the right to cause the Company to repurchase for cash all or a portion of the Notes held by such holder (i) at any time after the third anniversary of the date on which the Business Combination was consummated, at a price equal to par plus accrued and unpaid interest; or (ii) at any time upon the occurrence of a fundamental change (as defined in the indenture governing the Notes), at a price equal to 101% of par plus accrued and unpaid interest.
The indenture governing the Notes includes restrictive covenants that, among other things, limit the Company’s ability to incur additional debt or liens, make restricted payments or investments, dispose of significant assets, transfer intellectual property, or enter into transactions with affiliates.
In accounting for the Notes, the Company bifurcated a derivative liability representing the conversion option, with a fair value at issuance of $31.6 million. To measure the fair value of the derivative liability, the Company compared the calculated value of the Notes with the indicated value of the host instrument, defined as the straight-debt component of the Notes. The difference between the value of the straight-debt host instrument and the fair value of the Notes resulted in the value of the derivative liability. The value of the straight-debt host instrument was estimated based on a binomial lattice model, excluding the conversion option and the make-whole payment upon conversion. The derivative liability is remeasured at each reporting date with the resulting gain or loss recorded in Change in fair value of derivative liability within the condensed consolidated statements of operations.
Interest expense on the Notes is recognized at an effective interest rate of 15% and totaled $4.5 million and $4.3 million for the three months ended March 31, 2023 and 2022, respectively, of which amortization of the debt discount and issuance costs comprised $1.4 million and $1.2 million for the three months ended March 31, 2023 and 2022, respectively.
The net carrying amount of the Notes as of March 31, 2023 and December 31, 2022 was:
March 31, 2023December 31, 2022
Principal outstanding$150,000 $150,000 
Unamortized debt discount and issuance costs(29,907)(31,252)
Net carrying value$120,093 $