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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 June 30, 2024
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 approximately $46.00 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 filero
Non-accelerated filerxSmaller 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 August 9, 2024, there were 36,435,807 shares of the registrant’s Class A common stock outstanding, 1,358,714 shares of the registrant’s Class B common stock outstanding and no shares of the registrant’s Class C common stock outstanding.
1
BUZZFEED, INC.
TABLE OF CONTENTS
Page
2
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.
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 (some of which are beyond our control), uncertainties 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:
•developments relating to our competitors and the digital media industry, including overall demand of advertising in the markets in which we operate;
•demand for our products and services or changes in traffic or engagement with our brands and content;
•changes in the business and competitive environment in which we and our current and prospective partners and advertisers operate;
•macroeconomic factors including: adverse economic conditions in the United States (“U.S.”) and globally, including the potential onset of recession; current global supply chain disruptions; potential government shutdowns or a failure to raise the U.S. federal debt ceiling or to fund the federal government; the ongoing conflicts between Russia and Ukraine and between Israel and Hamas and any related sanctions and geopolitical tensions, and further escalation of trade tensions between the U.S. and China; the inflationary environment; high unemployment; high interest rates, currency fluctuations; and the competitive labor market;
•our future capital requirements, including, but not limited to, our ability to obtain additional capital in the future, to settle conversions of our unsecured convertible notes, repurchase the notes upon a fundamental change such as the delisting of our Class A common stock, or repay the notes in cash at their maturity, any restrictions imposed by, or commitments under, the indenture governing the notes or agreements governing any future indebtedness, and any restrictions on our ability to access our cash and cash equivalents;
•developments in the law and government regulation, including, but not limited to, revised foreign content and ownership regulations, and the outcomes of legal proceedings, regulatory disputes or governmental investigations to which we are subject;
•the benefits of our cost savings measures;
•our success divesting of companies, assets or brands we sell or in integrating and supporting the companies we acquire;
•technological developments including artificial intelligence;
•the impact of activist shareholder activity, including on our strategic direction;
•our success in retaining or recruiting, or changes required in, officers, other key employees or directors;
•use of content creators and on-camera talent and relationships with third parties managing certain of our branded operations outside of the U.S.;
•the security of our information technology (“IT”) systems or data;
•disruption in our service, or by our failure to timely and effectively scale and adapt our existing technology and infrastructure;
3
•our ability to maintain the listing of our Class A common stock and warrants on The Nasdaq Capital Market (“Nasdaq”); and
•other factors detailed under the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023, our Quarterly Report on Form 10-Q for the quarter ended March 31, 2024 and this Quarterly Report on Form 10-Q.
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” in our Annual Report on Form 10-K for the year ended December 31, 2023, our Quarterly Report on Form 10-Q for the quarter ended March 31, 2024 and this Quarterly Report on Form 10-Q. 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 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.
4
PART I: FINANCIAL INFORMATION
ITEM 1: Financial Statements (unaudited)
BUZZFEED, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars and shares in thousands, except per share amounts)
June 30, 2024
(Unaudited)		December 31,
2023
Assets
Current assets
Cash and cash equivalents$45,461 $35,637 
Accounts receivable (net of allowance for doubtful accounts of $1,066 as at June 30, 2024 and $1,424 as at December 31, 2023)
46,954 75,692 
Prepaid expenses and other current assets19,260 21,460 
Current assets of discontinued operations— — 
Total current assets111,675 132,789 
Property and equipment, net8,777 11,856 
Right-of-use assets38,058 46,715 
Capitalized software costs, net22,653 22,292 
Intangible assets, net25,166 26,665 
Goodwill57,562 57,562 
Prepaid expenses and other assets8,963 9,508 
Noncurrent assets of discontinued operations— 104,089 
Total assets$272,854 $411,476 
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable$16,556 $46,378 
Accrued expenses15,209 15,515 
Deferred revenue1,021 1,895 
Accrued compensation13,605 12,970 
Current lease liabilities23,326 21,659 
Current debt101,483 124,977 
Other current liabilities4,796 4,401 
Current liabilities of discontinued operations— — 
Total current liabilities175,996 227,795 
Noncurrent lease liabilities25,713 37,820 
Debt— 33,837 
Warrant liabilities1,075 406 
Other liabilities753 435 
Noncurrent liabilities of discontinued operations— — 
Total liabilities203,537 300,293 
Commitments and contingencies
Stockholders’ equity
Class A common stock, $0.0001 par value; 700,000 shares authorized; 35,879 and 35,035 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively
3 3 
Class B common stock, $0.0001 par value; 20,000 shares authorized; 1,359 and 1,368 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively
1 1 
Additional paid-in capital725,386 723,092 
Accumulated deficit(654,984)(611,768)
Accumulated other comprehensive loss(3,227)(2,500)
Total BuzzFeed, Inc. stockholders’ equity67,179 108,828 
Noncontrolling interests2,138 2,355 
Total stockholders’ equity69,317 111,183 
Total liabilities and stockholders’ equity$272,854 $411,476 
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
BUZZFEED, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, dollars and shares in thousands, except per share amounts)
Three Months Ended June 30,Six Months Ended June 30,
2024202320242023
Revenue$46,932 $62,128 $91,687 $117,036 
Costs and Expenses
Cost of revenue, excluding depreciation and amortization25,001 38,967 56,064 76,204 
Sales and marketing4,509 10,139 13,654 22,047 
General and administrative14,052 20,765 30,301 42,175 
Research and development2,721 3,351 5,951 6,479 
Depreciation and amortization4,863 5,328 10,744 11,030 
Total costs and expenses51,146 78,550 116,714 157,935 
Loss from continuing operations(4,214)(16,422)(25,027)(40,899)
Other income (expense), net2,168 (3,675)1,612 (3,055)
Interest expense, net(3,981)(3,942)(8,462)(7,729)
Change in fair value of warrant liabilities(632)395 (669)(198)
Change in fair value of derivative liability— 1,125 — 120 
Loss from continuing operations before income taxes (6,659)(22,519)(32,546)(51,761)
Income tax (benefit) provision(176)(37)506 110 
Net loss from continuing operations(6,483)(22,482)(33,052)(51,871)
Net loss from discontinued operations, net of tax(877)(5,354)(10,089)(12,226)
Net loss(7,360)(27,836)(43,141)(64,097)
Less: net income (loss) attributable to noncontrolling interests127 — 74 (260)
Net loss attributable to BuzzFeed, Inc.$(7,487)$(27,836)$(43,215)$(63,837)
Net loss from continuing operations attributable to holders of Class A and Class B common stock:
Basic and diluted$(6,610)$(22,482)$(33,126)$(51,611)
Net loss from continuing operations per Class A and Class B common share:
Basic and diluted$(0.18)$(0.63)$(0.90)$(1.46)
Weighted average common shares outstanding:
Basic and diluted37,00735,48736,79235,332
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
BUZZFEED, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited, in thousands)
Three Months Ended June 30,Six Months Ended June 30,
2024202320242023
Net loss$(7,360)$(27,836)$(43,141)$(64,097)
Other comprehensive loss
Foreign currency translation adjustment(681)57 (1,018)(702)
Other comprehensive (loss) income(681)57 (1,018)(702)
Comprehensive loss(8,041)(27,779)(44,159)(64,799)
Comprehensive income (loss) attributable to noncontrolling interests127 — 74 (260)
Foreign currency translation adjustment attributable to noncontrolling interests(131)(242)(291)(300)
Comprehensive loss attributable to BuzzFeed, Inc.$(8,037)$(27,537)$(43,942)$(64,239)
The accompanying notes are an integral part of these condensed consolidated financial statements.
7
BUZZFEED, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited, in thousands)
For the Three and Six Months Ended June 30, 2024
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, 202435,035 $3 1,368 $1 — $— $723,092 $(611,768)$(2,500)$108,828 $2,355 $111,183 
Net loss— — — — — — — (35,729)— (35,729)(53)(35,782)
Stock-based compensation— — — — — — 776 — — 776 — 776 
Issuance of common stock in connection with share-based plans45 — — — — — — — — — — — 
Shares withheld for employee taxes(1)— — — — — — — — — — — 
Other comprehensive loss— — — — — — — — (177)(177)(160)(337)
Balance at March 31, 202435,079 $3 1,368 $1 — $— $723,868 $(647,497)$(2,677)$73,698 $2,142 $75,840 
Net (loss) income— — — — — — — (7,487)— (7,487)127 (7,360)
Stock-based compensation— — — — — — 1,747 — — 1,747 — 1,747 
Issuance of common stock in connection with share-based plans883 — — — — — — — — — — — 
Shares withheld for employee taxes(92)— — — — — (229)— — (229)— (229)
Other comprehensive loss— — — — — — — — (550)(550)(131)(681)
Conversion of Class B common stock to Class A common stock9 — (9)— — — — — — — — — 
Balance at June 30, 202435,879 $3 1,359 $1 — $— $725,386 $(654,984)$(3,227)$67,179 $2,138 $69,317 
8
For the Three and Six Months Ended June 30, 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, 202331,597$3 1,670$1 1,620$— $716,244 $(523,063)$(1,968)$191,217 $3,337 $194,554 
Cumulative effect of accounting change———————(126)—(126)—(126)
Net loss———————(36,001)—(36,001)(260)(36,261)
Stock-based compensation——————1,122——1,122—1,122
Issuance of common stock in connection with share-based plans128—————29——29—29
Shares withheld for employee taxes(30)—————(193)——(193)—(193)
Other comprehensive loss————————(701)(701)(58)(759)
Conversion of Class C common stock to Class A common stock1,620$— —$— (1,620)———————
Balance at March 31, 202333,315$3 1,670$1 —$— $717,202 $(559,190)$(2,669)$155,347 $3,019 $158,366 
Net loss———————(27,836)—(27,836)—(27,836)
Stock-based compensation——————2,257——2,257—2,257
Issuance of common stock upon exercise of stock options423———————————
Shares withheld for employee taxes(13)—————(27)——(27)—(27)
Other comprehensive income (loss)————————299299(242)57
Issuance of common stock in connection with at-the-market offering, net of issuance costs429—————810——810—810
Balance at June 30, 202334,154$3 1,670$1 —$— $720,242 $(587,026)$(2,370)$130,850 $2,777 $133,627 
The accompanying notes are an integral part of these condensed consolidated financial statements.
9
BUZZFEED, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
Six Months Ended June 30,
20242023
Operating activities:
Net (loss)$(43,141)$(64,097)
Less: net (loss) from discontinued operations, net of tax10,089 12,226 
Net loss from continuing operations(33,052)(51,871)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization10,744 11,030 
Unrealized gain on foreign currency(482)(809)
Stock based compensation2,499 2,816 
Change in fair value of warrants669 198 
Change in fair value of derivative liability— (120)
Amortization of debt discount and deferred issuance costs2,606 2,307 
Deferred income tax(409)341 
Provision for doubtful accounts(358)(259)
Loss (gain) on investment— 3,590 
Gain on disposition of assets (350)(175)
Non-cash lease expense8,638 10,173 
Changes in operating assets and liabilities:
Accounts receivable30,330 45,871 
Prepaid expenses and other current assets and prepaid expenses and other assets1,584 1,653 
Accounts payable(29,083)9,889 
Accrued compensation696 (11,102)
Accrued expenses, other current liabilities and other liabilities 473 (11,302)
Lease liabilities(10,418)(11,822)
Deferred revenue(873)(2,488)
Cash used in operating activities from continuing operations(16,786)(2,080)
Cash used in operating activities from discontinued operations(8,917)(5,650)
Cash used in operating activities(25,703)(7,730)
Investing activities:
Capital expenditures(208)(471)
Capitalization of internal-use software(6,415)(7,676)
Proceeds from sale of asset350 175 
Cash used in investing activities from continuing operations(6,273)(7,972)
Cash provided by investing activities from discontinued operations108,575 — 
Cash provided by (used in) investing activities102,302 (7,972)
Financing activities:
Proceeds from exercise of stock options1 29 
Payment for shares withheld for employee taxes (230)(220)
Borrowings on Revolving Credit Facility— 2,128 
Payments on Revolving Credit Facility(33,837)(1,317)
Payment on Convertible Notes(31,233)— 
Proceeds from the issuance of common stock in connection with the at-the-market offering, net of issuance costs— 765 
Payment of early termination fee for Revolving Credit Facility(500)— 
Payment of deferred issuance costs(597)— 
Cash (used in) provided by financing activities(66,396)1,385 
Effect of currency translation on cash and cash equivalents(379)(162)
Net increase (decrease) in cash and cash equivalents9,824 (14,479)
Cash and cash equivalents at beginning of period35,637 55,774 
Cash and cash equivalents at end of period$45,461 $41,295 
The accompanying notes are an integral part of these condensed consolidated financial statements.
10
BUZZFEED, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, tabular amounts and shares 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 entertainment, news, food, pop culture and commerce, our brands drive conversation and inspire what audiences watch, read, and buy now — and into the future. The Company’s iconic, globally-loved brands include BuzzFeed, HuffPost, Tasty, and First We Feast (including Hot Ones). 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 consummation of the Business Combination, the Company issued, and certain investors purchased, $150.0 million aggregate principal amount of unsecured convertible notes due 2026 (the “Notes”) concurrently with the closing of the Business Combination. As a result of the sale of certain assets relating to the business of Complex Networks, as discussed within Note 19 herein (the “Disposition”), the Company repaid approximately $30.9 million of the Notes on March 7, 2024. The Company also repaid approximately $0.3 million of the Notes on June 21, 2024, leaving approximately $118.8 million aggregate principal amount of Notes outstanding as of June 30, 2024. Refer to Note 19 herein for additional details.
Liquidity and Going Concern
The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. (“U.S. GAAP”) on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. As of the date the accompanying condensed consolidated financial statements were issued (the “issuance date”), the significance of the following adverse conditions were evaluated in accordance with U.S. GAAP. The presence of the following risks and uncertainties associated with the Company’s financial condition may adversely affect the Company’s ability to sustain its operations over the next 12 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 its iconic brands. During the six months ended June 30, 2024, the Company incurred a net loss of $43.1 million (and a net loss of $33.1 million from continuing operations) and used net cash flows from its operations of $25.7 million (and net cash used in operating activities from continuing operations was $16.8 million). Additionally, as of June 30, 2024, the Company had unrestricted cash and cash equivalents of $45.5 million to fund its operations and an accumulated deficit of $655.0 million.
As described in Note 8 herein, the Company repaid approximately $30.9 million and $0.3 million of the Notes on March 7, 2024 and June 21, 2024, respectively, leaving approximately $118.8 million aggregate principal amount of Notes outstanding as of June 30, 2024. As described in Note 8 herein, each holder of a Note has the right under the indenture governing the Notes to require the Company to repurchase, for cash, all or a portion of the Notes held by such holder (i) at any time on or after December 3, 2024, at a repurchase price equal to the principal amount plus accrued and unpaid interest, or (ii) upon the occurrence of a fundamental change (as defined in the indenture) before the maturity date (i.e., December 3, 2026), at a repurchase price equal to 101% of the principal amount plus accrued and unpaid interest. Moreover, the Company will be required to repay the Notes, in cash, at their maturity, unless earlier converted, redeemed, or repurchased. In the event some or all of the holders of the Notes exercise their call rights, the Company currently does not have sufficient cash on hand or projected cash flows to fund the potential call. The Company’s failure to comply with the provisions of the indenture governing the Notes, including the Company’s failure to repurchase the Notes, as required by the indenture, could trigger an event of default under the indenture, which would allow the holders of Notes to accelerate the maturity of the Notes and require the Company to repay the Notes prior to their maturity. In addition, on
11
February 28, 2024, the Company amended the indenture governing the Notes to provide that, among other things, 95% of the net proceeds of future asset sales must be used to repay the Notes.
To address its capital needs, the Company may explore options to restructure its outstanding debt, and is working with advisors to optimize its condensed consolidated balance sheet. However, the Company can provide no assurance that it will generate sufficient cash inflows from operations, or that it will be successful in obtaining such new financing, or in optimizing its condensed consolidated balance sheet in a manner necessary to fund its obligations as they become due over the next 12 months beyond the issuance date. Additionally, the Company may implement incremental cost savings actions and pursue additional sources of outside capital to supplement its funding obligations as they become due, which may include additional offerings of its Class A common stock under the at-the-market offering (as described in Note 9 herein). As of the issuance date, no additional sources of outside capital have been secured or were deemed probable of being secured, other than the Company’s at-the-market-offering, which is subject to the conditions contained in the At-The-Market Offering Agreement dated June 20, 2023 with Craig-Hallum Capital Group LLC. The Company can provide no assurance it will successfully generate sufficient liquidity to fund its operations for the next 12 months beyond the issuance date, or if necessary, secure additional outside capital (including through the Company’s at-the-market-offering) or implement incremental cost savings.
Moreover, on an ongoing basis, the Company is evaluating strategic changes to its operations, including asset divestitures, restructuring, or the discontinuance of unprofitable lines of business. Any such transaction could be material to the Company’s business, financial condition and results of operations. The nature and timing of any such changes depend on a variety of factors, including, as of the applicable time: the Company’s available cash, liquidity and operating performance; its commitments and obligations; its capital requirements; limitations imposed under its credit arrangements; and overall market conditions. As of the issuance date, the Company continues to work with its external advisors to optimize its condensed consolidated balance sheet and evaluate its assets.
These uncertainties raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying condensed consolidated financial statements have been prepared on the basis that the Company will continue to operate as a going concern, which contemplates that it will be able to realize assets and settle liabilities and commitments in the normal course of business for the foreseeable future. Accordingly, the accompanying condensed consolidated financial statements do not include any adjustments that may result from the outcome of these uncertainties.
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 U.S. GAAP and applicable rules and regulations of the Securities and Exchange Commission regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with U.S. 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 ended December 31, 2023, as disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.
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, 2024.
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.
Reverse Stock Split
The Company held its 2024 annual meeting of stockholders on April 25, 2024 (the “2024 Annual Meeting”), and, at the 2024 Annual Meeting, the Company’s stockholders approved the grant of discretionary authority to the Company’s board of directors to (1) amend the Company’s Second Amended and Restated Certificate of Incorporation, as amended (the “Certificate of Incorporation”), to combine outstanding shares of each of the Company’s Class A common stock and the Company’s Class B common stock into a lesser number of outstanding shares of Class A common stock and Class B
12
common stock, as the case may be, at a specific ratio within a range of one-for-two (1-for-2) to a maximum of a one-for-twenty five (1-for-25), with the exact ratio to be determined by the Company’s board of directors in its sole discretion; and (2) effect such reverse stock split, if at all, within one year of the date the proposal was approved by the Company’s stockholders (i.e., by April 25, 2025).
The Company’s board of directors subsequently approved effecting a reverse stock split, effective as of May 6, 2024, and fixed a ratio for the reverse stock split at one-for-four (1-for-4). On April 26, 2024, the Company filed an amendment to the Certificate of Incorporation with the Secretary of State of the State of Delaware (the “Certificate of Amendment”). The Certificate of Amendment effected a reverse stock split of the Class A common stock and Class B common stock at a ratio of one-for-four (1-for-4) (the “Reverse Stock Split”), effective as of 12:01 a.m., Eastern Time, on May 6, 2024. The Class A common stock began trading on a split-adjusted basis on Nasdaq on May 6, 2024, under the existing symbol “BZFD,” but the security has a new CUSIP number of 12430A300. The Public Warrants (as defined in Note 4 herein) continued to be traded under the symbol “BZFDW” and the CUSIP identifier for Public Warrants remain unchanged.
As a result of the Reverse Stock Split, every four shares of the Company’s Class A common stock and the Company’s Class B common stock issued and outstanding immediately prior to the Reverse Stock Split were converted into one share of Class A common stock and Class B common stock, as the case may be, after the Reverse Stock Split. The Reverse Stock Split applied uniformly to all holders of Class A common stock and Class B common stock, and did not alter any stockholder’s percentage interest in the Company, except to the extent that the Reverse Stock Split would have resulted in some stockholders owning a fractional share. No fractional shares were issued in connection with the Reverse Stock Split, as all fractional shares were rounded up to the nearest whole share. Pursuant to the terms of the agreement governing the Public and Private Warrants, fractional shares of Class A common stock will not be issued upon exercise of a warrant, and if a holder of a warrant would be entitled to receive, upon the exercise thereof, a fractional interest in a share of Class A common stock, the Company will round down to the nearest whole number the number of shares of Class A Common Stock to be issued to such holder.
Unless otherwise noted, all shares of Class A common stock and Class B common stock, including shares of Class A common stock underlying the Public Warrants and Private Warrants (as defined in Note 4 herein), stock options, restricted stock units, and the Notes, shares of Class A common stock available for grant under the Company’s equity incentive plans, shares of Class A common stock sold and available for sale under the Company’s at-the-market offering, and all conversion ratios, exercise prices, and per share information with respect thereto in the condensed consolidated financial statements have been retroactively adjusted to reflect the one-for-four (1-for-4) Reverse Stock Split, as if the split occurred at the beginning of the earliest period presented in this Quarterly Report on Form 10-Q.
Discontinued Operations and Held for Sale
A business is classified as held for sale when management having the authority to approve the action commits to a plan to sell the business, the sale is probable to occur during the next 12 months at a price that is reasonable in relation to its current fair value, and when certain other criteria are met. A business classified as held for sale is recorded at the lower of (i) its carrying amount and (ii) estimated fair value less costs to sell. When the carrying amount of the business exceeds its estimated fair value less costs to sell, a loss is recognized and updated each reporting period as appropriate.
The results of operations of businesses classified as held for sale are reported as discontinued operations if the disposal represents a strategic shift that will have a major effect on the entity’s operations and financial results. When a business is identified for discontinued operations reporting: (i) results for prior periods are retrospectively reclassified as discontinued operations; (ii) results of operations are reported in a single line, net of tax, in the consolidated statement of operations; and (iii) assets and liabilities are reported as held for sale in the consolidated balance sheets in the period in which the business is classified as held for sale.
The Company concluded the assets of the Complex Networks business, excluding the First We Feast brand, met the criteria for classification for held for sale as of December 31, 2023. Additionally, the Company determined the disposal (i.e., the Disposition), which took place on February 21, 2024, represented a strategic shift that had a major effect on our operations and financial results. As such, the results of Complex Networks, excluding First We Feast, are presented as discontinued operations in the condensed consolidated statements of operations for all periods presented. Prior periods have been adjusted to conform to the current presentation. The assets of Complex Networks have been reflected as assets of discontinued operations in the condensed consolidated balance sheet for the year ended December 31, 2023. Refer to Note 19 herein for additional details.
13
Use of Estimates
The preparation of financial statements in conformity with U.S. 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, useful lives of fixed assets, and capitalized software costs.
Cash and Cash Equivalents and Restricted Cash
Financial instruments that potentially subject the Company to concentration of credit risk consist of cash and cash equivalents. The Company considers instruments with an original maturity of three months or less at the date of purchase to be cash equivalents. The Company’s cash and cash equivalents consist of demand deposits with financial institutions and investments in money market funds. Deposits held with these financial institutions may exceed the amount of insurance provided on such deposits. The associated risk of concentration is mitigated by banking with creditworthy institutions.
The Company classifies all cash the use of which is limited by contractual provisions as restricted cash. In the first quarter of 2024, the Company cash collateralized the $15.5 million letters of credit then-outstanding under the Revolving Credit Facility (as defined in Note 8 herein) in the amount of $17.1 million. As such, the $17.1 million was classified as restricted cash within the condensed consolidated balance sheet as of March 31, 2024. However, during the second quarter of 2024, the Company terminated the letters of credit outstanding under the Revolving Credit Facility and therefore the aforementioned $17.1 million is no longer classified as restricted cash as of June 30, 2024.
Accounting Pronouncements
The Company, an emerging growth company, 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.
Accounting Pronouncements Not Yet Adopted
In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures,” which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses, allowing financial statement users to better understand the components of a segment’s profit or loss to assess potential future cash flows for each reportable segment and the entity as a whole. The amendments expand a public entity’s segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”), clarifying when an entity may report one or more additional measures to assess segment performance, requiring enhanced interim disclosures, providing new disclosure requirements for entities with a single reportable segment, and requiring other new disclosures. The amendments are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, and early adoption is permitted. Although the ASU only requires additional disclosures about the Company’s single operating segment, the Company is currently evaluating the impact of adopting this guidance on the condensed consolidated financial statements.
In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” which is intended to enhance the transparency, decision usefulness, and effectiveness of income tax disclosures. The amendments in this ASU require a public entity to disclose a tabular tax rate reconciliation, using both percentages and currency, with specific categories. Public companies are also required to provide a qualitative description of the states and local jurisdictions that make up the majority of the effect of the state and local income tax category and the net amount of income taxes paid, disaggregated by federal, state and foreign taxes and also disaggregated by individual jurisdictions. The amendments also remove certain disclosures that are no longer considered cost beneficial. The amendments are effective prospectively for annual periods beginning after December 15, 2024, and early adoption and retrospective application are permitted. The Company is currently evaluating the impact of adopting this guidance on the condensed consolidated financial statements.
14
3. 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 June 30,Six Months Ended June 30,
2024202320242023
Advertising$23,814 $29,412 $45,237 $56,805 
Content11,369 21,739 24,476 37,990 
Commerce and other11,749 10,977 21,974 22,241 
Total$46,932 $62,128 $91,687 $117,036 
The following table presents the Company’s revenue disaggregated by geography:
Three Months Ended June 30,Six Months Ended June 30,
2024202320242023
Revenue:
United States$44,206 $57,685 $85,239 $108,250 
International2,726 4,443 6,448 8,786 
Total$46,932 $62,128 $91,687 $117,036 
Contract Balances
The timing of revenue recognition, billings and cash collections can result in billed accounts receivable, unbilled revenue (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 (when performance precedes the billing date) or deferred revenue (when 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 $6.2 million and $8.3 million as of June 30, 2024 and December 31, 2023, 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 12-month period. Deferred revenue totaled $1.0 million and $1.9 million as of June 30, 2024 and December 31, 2023, respectively.
The amount of revenue recognized during the six months ended June 30, 2024 that was included in the deferred revenue balance as of December 31, 2023 was $1.8 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 $3.0 million as of June 30, 2024 and is generally expected to be recognized over the next one to three 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.
15
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.
4. Fair Value Measurements
The Company’s financial assets and liabilities that are measured at fair value on a recurring basis are summarized below:
June 30, 2024
Level 1Level 2Level 3Total
Assets:
Cash equivalents:
Money market funds$16,339 $— $— $16,339 
Total$16,339 $— $— $16,339 
Liabilities:
Derivative liability$— $— $— $— 
Other non-current liabilities:
Public Warrants1,067 — — 1,067 
Private Warrants— 8 — 8 
Total$1,067 $8 $— $1,075 
December 31, 2023
Level 1Level 2Level 3Total
Assets:
Cash equivalents:
Money market funds$25,306 $— $— $25,306 
Total$25,306 $— $— $25,306 
Liabilities:
Derivative liability$— $— $— $— 
Other non-current liabilities:
Public Warrants402——402
Private Warrants—4—4
Total$402 $4 $— $406 
The Company’s investments in money market funds are measured at amortized cost, which approximates fair value.
The Company’s warrant liability as of June 30, 2024 and December 31, 2023 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 $0.11 and $0.04 as of June 30, 2024 and December 31, 2023, respectively.
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Historically, 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. As of December 31, 2023, the Company determined the fair value of the derivative liability was immaterial as (i) the closing share price of our Class A common stock was $1.00 as of December 29, 2023, and (ii) each holder of a Note will have the right to require the Company to repurchase, for cash, all or a portion of the Notes held by such holder at any time on or after December 3, 2024 (see Note 8 herein for additional details). The fair value of the embedded derivative continues to be immaterial as of June 30, 2024.
There were no transfers between fair value measurement levels during the three and six months ended June 30, 2024.
Equity Investment
For equity investments in entities over which the Company does not exercise significant influence, 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 June 30, 2024 and December 31, 2023, 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 $0.8 million as of both June 30, 2024 and December 31, 2023.
5. Property and Equipment, net
Property and equipment, net consisted of the following:
June 30, 2024December 31, 2023
Leasehold improvements$47,859 $49,007 
Furniture and fixtures3,414 3,910 
Computer equipment2,683 3,057 
Video equipment404 439 
Total54,360 56,413 
Less: Accumulated depreciation(45,583)(44,557)
Net Carrying Value$8,777 $11,856 
Depreciation totaled $1.6 million and $1.7 million for the three months ended June 30, 2024 and 2023, respectively, and $3.1 million and $3.4 million for the six months ended June 30, 2024 and 2023, respectively, included in depreciation and amortization expense.
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6. Capitalized Software Costs, net
Capitalized software costs, net consisted of the following:
June 30, 2024December 31, 2023
Website and internal-use software$87,062 $82,138 
Less: Accumulated amortization(64,409)(59,846)
Net Carrying Value$22,653 $22,292 
The Company capitalized $3.1 million and $3.7 million for the three months ended June 30, 2024 and 2023, respectively, and $6.4 million and $7.7 million for the six months ended June 30, 2024 and 2023, respectively, included in capitalized software costs, net. The Company amortized $2.6 million and $2.5 million for the three months ended June 30, 2024 and 2023, respectively, and $6.1 million and $5.4 million for the six months ended June 30, 2024 and 2023, respectively, included in depreciation and amortization expense.
7. Intangible Assets, net
The following table presents the detail of intangible assets for the periods presented and the weighted average remaining useful lives:
June 30, 2024December 31, 2023
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 Technology0$5,500 $5,500 $— 0$5,500 $5,271 $229 
Trademarks and Trade Names1228,550 5,656 22,894 1328,550 4,704 23,846 
Trademarks and Trade NamesIndefinite1,368 — 1,368 Indefinite1,368 — 1,368 
Customer Relationships12,550 1,646 904 22,550 1,328 1,222 
Total$37,968 $12,802 $25,166 $37,968 $11,303 $26,665 
With respect to intangible assets, the Company amortized $0.6 million and $1.1 million for the three months ended June 30, 2024 and 2023, respectively, and $1.5 million and $2.2 million for the six months ended June 30, 2024 and 2023, respectively, included in depreciation and amortization expense.
Estimated future amortization expense as of June 30, 2024 is as follows (in thousands):
Remainder of 2024$1,270 
20252,488 
20261,903 
20271,903 
20281,903 
Thereafter14,331 
Total$23,798 
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 June 30, 2024, the Company had $57.6 million of goodwill recorded on its condensed consolidated balance sheet. The Company concluded there were no impairment triggering events as of, and for, the three and six months ended June 30, 2024.
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8. 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, which was amended and restated on December 3, 2021 in connection with the closing of the Business Combination, further amended and restated on December 15, 2022, and amended on each of June 29, 2023 and September 26, 2023 (i.e., the Revolving Credit Facility). Among other things, the Revolving Credit Facility provided for the issuance of up to $15.5 million of standby letters of credit, which were issued during the three months ended March 31, 2021 in favor of certain of the Company’s landlords. The Company had outstanding letters of credit of $15.5 million under the Revolving Credit Facility at December 31, 2023 (none at June 30, 2024, as described below).
On February 21, 2024, in connection with the Disposition discussed within Note 19 herein, the Company terminated the Revolving Credit Facility, except for the $15.5 million in letters of credit outstanding. However, during the second quarter of 2024, the Company terminated the $15.5 million in letters of credit outstanding under the Revolving Credit Facility, resulting in the full termination of the Revolving Credit Facility.
Standby Letters of Credit
During the second quarter of 2024, the Company entered into an agreement with a financial institution for standby letters of credit in the amount of $15.5 million, which were issued during the second quarter of 2024 in favor of certain of the Company’s landlords and remain outstanding as of June 30, 2024.
Convertible Notes
In June 2021, in connection with the entry into the merger agreement pursuant to which the 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 the closing of the Business Combination, the Company issued, and those investors purchased, the Notes. The Notes are convertible into shares of our Class A common stock at a conversion price of approximately $50.00 and bear interest at a rate of 8.50% per annum, payable semi-annually. The Notes mature on December 3, 2026. As of June 30, 2024, the Notes were convertible into approximately 2,375,347 shares of our Class A common stock.
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 prior to December 3, 2024, the Company will be obligated to pay an amount in cash 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.
Each holder of a Note has the right under the indenture governing the Notes to require the Company to repurchase, for cash, all or a portion of the Notes held by such holder (i) at any time on or after December 3, 2024 (i.e., the third anniversary of the issuance of the Notes), at a repurchase price equal to the principal amount plus accrued and unpaid interest, or (ii) upon the occurrence of a fundamental change (as defined in the indenture) before the maturity date (i.e., December 3, 2026), at a repurchase price equal to 101% of the principal amount plus accrued and unpaid interest. In addition, a failure to comply with the provisions of the indenture governing our Notes could trigger an event of default under the indenture, which would allow the holders of Notes to accelerate the maturity of the Notes and require the Company to repay the Notes prior to their maturity. Moreover, the Company will be required to repay the Notes, in cash, at their maturity, unless earlier converted, redeemed, or repurchased.
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 specified intellectual property, or enter into transactions with affiliates. Additionally, on February 28, 2024, in connection
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with the Disposition, the indenture governing the Notes was amended to, among other things, provide that 95% of the net proceeds of future asset sales must be used to repay the Notes.
On March 7, 2024, in connection with the Disposition, the Company repaid approximately $30.9 million of the Notes. In connection with the repayment, the Company determined the modified debt terms were not substantially different from the original terms and applied modification accounting. The Company derecognized approximately 20.6% of the unamortized debt discount and issuance costs, which resulted in an approximately $4.9 million loss on partial debt extinguishment that was attributed to the discontinued operation. Additionally, on June 21, 2024, the Company repaid approximately $0.3 million of the Notes in connection with an asset sale (refer to Note 19 herein for additional details). As of June 30, 2024, there was approximately $118.8 million aggregate principal amount of Notes outstanding.
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. As of December 31, 2023, the Company determined the fair value of the derivative liability was immaterial as (i) the closing share price of our Class A common stock was $1.00 as of December 29, 2023, and (ii) each holder of a Note has the right to require the Company to repurchase, for cash, all or a portion of the Notes held by such holder at any time on or after December 3, 2024 (i.e., the third anniversary of the issuance of the Notes), at a repurchase price equal the principal amount plus accrued and unpaid interest. The fair value of the embedded derivative continues to be immaterial as of June 30, 2024.
Interest expense on the Notes is recognized at an effective interest rate of 16% and totaled $3.9 million and $3.8 million for the three months ended June 30, 2024 and 2023, respectively, and $7.5 million and $7.4 million for the six months ended June 30, 2024 and 2023, respectively, of which amortization of the debt discount and issuance costs comprised $1.4 million and $1.3 million for the three months ended June 30, 2024 and 2023, respectively, and $2.5 million and $2.3 million for the six months ended June 30, 2024 and 2023, respectively. The effective interest rate of 16% was remeasured in connection with the aforementioned modification accounting and assumes a maturity date of December 3, 2026.
The net carrying amount of the Notes as of June 30, 2024 and December 31, 2023 was:
June 30, 2024December 31, 2023
Principal outstanding$118,767 $150,000 
Unamortized debt discount and issuance costs(17,284)(25,023)
Net carrying value$101,483 $124,977 
The fair value of the Notes was approximately $92.6 million and $112.8 million as of June 30, 2024 and December 31, 2023, respectively. The fair value of the Notes was estimated using Level 3 inputs.
9. Stockholders’ Equity
Common Stock
The Company is authorized to issue 700,000,000 shares of Class A common stock, par value $0.0001 per share, 20,000,000 shares of Class B common stock, par value $0.0001 per share, and 10,000,000 shares of Class C common stock, par value $0.0001 per share. Each share of Class A common stock is entitled to one vote and each share of Class B common stock is entitled to fifty votes. Class C common stock is non-voting.
Preferred Stock
The Company is authorized to issue 50,000,000 shares of preferred stock, par value $0.0001 per share. The Company’s board of directors is authorized, without further stockholder approval, to issue such preferred stock in one or
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more series, to fix the voting rights, if any, designations, powers, preferences, the relative, participating, optional or other special rights and any qualifications, limitations and restrictions thereof, applicable to the shares of each series. There were no issued and outstanding shares of preferred stock as of June 30, 2024 or December 31, 2023.
Stock-Based Compensation
Stock Options
A summary of the stock option activity under the Company’s equity incentive plans is presented below:
Number of
Shares		Weighted
Average
Exercise
Price		Weighted
Average
Remaining
Term		Aggregate
Intrinsic
Value
Balance as of December 31, 2023845$24.98 1.71$— 
Granted7,213 2.18 — — 
Exercised— 3.00 — — 
Forfeited(94)6.26 — — 
Expired(517)22.83 — — 
Balance as of June 30, 20247,447$3.28 9.62$4,149 
Expected to vest at June 30, 20247,447$3.28 9.62$4,149 
Exercisable at June 30, 2024266$31.22 3.17$1 
As of June 30, 2024, the total share-based compensation costs not yet recognized related to unvested stock options was $10.2 million, which is expected to be recognized over the weighted-average remaining requisite service period of 1.6 years.
Restricted Stock Units
A summary of restricted stock unit (“RSU”) activity is presented below:
SharesWeighted Average Grant-
Date Fair Value
Outstanding as of December 31, 20232,190$3.74 
Granted826 1.22 
Vested(877)3.97 
Forfeited(457)3.57 
Outstanding as of June 30, 20241,682$2.44 
As of June 30, 2024, there were approximately $3.1 million of unrecognized compensation costs related to RSUs.
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Stock-Based Compensation Expense
The following table summarizes stock-based compensation expense included in the condensed consolidated statements of operations:
Three Months Ended June 30,Six Months Ended June 30,
2024202320242023
Cost of revenue, excluding depreciation and amortization$363 $214 $576 $524 
Sales and marketing61 245 201 445 
General and administrative1,209 1,606 1,547 2,136 
Research and development1
114 64 175 (289)
Total$1,747 $2,129 $2,499 $2,816 
________________________________
(1) The negative stock-based compensation expense for the six months ended June 30, 2023 for research and development was due to forfeitures.
RSUs settle into shares of common stock upon vesting. Upon the vesting of the RSUs, for certain employees, the Company net-settles the RSUs and withholds a portion of the shares to satisfy minimum statutory employee withholding tax requirements. Total payment of the employees’ tax obligations to the tax authorities is reflected as a financing activity within the condensed consolidated statements of cash flows.
At-The-Market Offering
On March 21, 2023, the Company filed a shelf registration statement on Form S-3 (the “Shelf Registration Statement”) under which the Company may, from time to time, sell securities in one or more offerings having an aggregate offering price of up to $150.0 million. The Shelf Registration Statement was declared effective as of April 5, 2023. On June 20, 2023, the Company entered into an At-The-Market Offering Agreement with Craig-Hallum Capital Group LLC pursuant to which the Company may, from time to time, sell up to 3,316,503 shares of its Class A common stock. As of June 30, 2024, the Company had sold, in the aggregate, 517,385 shares of its Class A common stock, at an average price of $2.08 per share, for aggregate net proceeds of $0.9 million after deducting commissions and offering expenses. The Company used the aggregate net proceeds for general corporate purposes, and the Company had 2,799,118 remaining shares available under the At-The-Market-Offering Agreement. In July 2024, the Company increased the size of the offering available under the At-The-Market-Offering Agreement. Refer to Note 20 herein for additional details.
10. Net Loss Per Share
Net loss per share is computed using the two-class method. Basic net loss per share is computed using the weighted average number of shares of common stock outstanding for the period. Diluted net loss per share reflects the effect of the assumed exercise of any stock options, the vesting of any restricted stock units, the exercise of any warrants (including the Public Warrants and the Private Warrants), the conversion of any convertible debt (including the Notes), and the conversion of any convertible preferred stock, in each case only in the periods in which such effect would have been dilutive.
For the three and six months ended June 30, 2024 and 2023, net loss per share amounts were the same for Class A and Class B common stock because the holders of each class are entitled to equal per share dividends. There were no shares of Class C common stock outstanding for any period presented.
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The table below presents the computation of basic and diluted net loss per share:
Three Months Ended June 30,Six Months Ended June 30,
2024202320242023
Numerator:
Net loss from continuing operations$(6,483)$(22,482)$(33,052)$(51,871)
Net loss from discontinued operations, net of tax(877)(5,354)(10,089)(12,226)
Less: net income (loss) attributable to noncontrolling interests127 — 74 (260)
Net loss attributable to holders of Class A and Class B common stock$