Fourth Quarter Revenues up 44%; Sports Monthly Active Users up 253% Year-Over-Year, Reaching Top Four Among Sports Properties

NEW YORK–(BUSINESS WIRE)–The Arena Group Holdings, Inc. (NYSE American: AREN) (“The Arena Group”), a tech-powered media company with 35 owned and operated properties and more than 200 brands including Sports Illustrated, TheStreet, Inc. (“TheStreet”) and HubPages, Inc. (“HubPages”) operating on a single technology platform, today announced financial results for the three and twelve months ended December 31, 2021.

2021 Financial and Operational Highlights

  • For the fourth quarter of 2021, total revenue increased 44% to $61.2 million from $42.4 million in the prior year period.
  • Full-year total revenue increased 48% to $189.1 million, compared to $128.0 million in 2020.
  • Quarterly gross profit percentage improved to 56%, as compared to 37% in the fourth quarter of 2020.
  • Net loss improved to $19.1 million compared to a net loss $22.0 million in the fourth quarter of 2020. Net loss remained relatively flat year-over-year at $89.9 million for fiscal 2021 as compared to $89.2 million for fiscal 2020.
  • Non-cash charges represent 76% of our current year net loss of $89.9 million.
  • Adjusted EBITDA* improved to a positive $1.1 million for the fourth quarter of 2021 as compared to a loss of $2.1 million for the fourth quarter of 2020. Adjusted EBITDA* improved to a loss of $12.1 million for fiscal year 2021 as compared to a loss of $23.2 million for fiscal 2020.

*This press release includes reference to non-GAAP financial measures. Please see the heading “Use of Non-GAAP Financial Measures” below for a more complete explanation.

Management Commentary

Chairman and Chief Executive Officer of The Arena Group Ross Levinsohn said, “2021 was a watershed year for our Company, our employees, partners and stockholders with record revenue growth, operational efficiency, a national listing of our common stock on the NYSE American and transformative acquisitions. It was also a year of important investment, as we developed, streamlined, and validated our technology stack and our strategic approach, establishing a scalable platform for profitable growth. Due in large part to this strategy, we have clearly proven our ability to drive revenue and audience growth and expand revenue streams, leading to margin expansion across all our properties. Our momentum in Q1 of 2022 has accelerated, with further growth across almost every sector and we are well positioned to continue to expand with our new lifestyle vertical, anchored by the popular brands established by AMG Parade (which is anticipated to close shortly). Our highly efficient, data driven, technology-powered media platform is now proven and operating at scale, with significant room for expansion both organically and inorganically. We continue to add highly relevant content to our platform, leveraging brand recognition, strong audience development capabilities and a unified backend system driving efficiency and margins to create value for our partners across our ecosystem.”

“We believe fiscal 2022 will be a year of continued growth,” added Levinsohn. “We have reached the tipping point with our technology. The investments to build this platform are largely behind us, and incremental revenue will disproportionately fall to the bottom-line. We have recruited an experienced, focused team, grown our capital base and expect to show a positive adjusted EBITDA during 2022. Our objective is to establish five verticals by the end of 2022. Upon closing the AMG Parade acquisition, we will have three verticals, with multiple opportunities for at least two more. This added scale opens the door to new revenue opportunities, such as the launch of our commerce initiatives, audio/podcast and video offerings and plans to enter both the NFT and Metaverse businesses in this year.”

Recent Business Highlights

  • The Company signed a non-binding letter of intent to acquire AMG Parade, a premium multimedia content company reaching more than 250 million people each month with lifestyle, celebrity, food, health & wellness, sports, and outdoor verticals including the Parade Media, AMG/Parade Sports, Relish, Spry Living and other lifestyle and outdoor brands. The Company expects to complete the acquisition shortly.
  • In the first quarter of fiscal 2022, The Arena Group uplisted its common stock to the NYSE American under the symbol “AREN.” Simultaneous with the uplisting, the Company completed an underwritten public offering of 4,181,603 shares of its common stock, which included the partial exercise of the underwriter’s overallotment, at a public offering price of $8.25 per share. This resulted in net proceeds to The Arena Group of $31.5 million, after deducting underwriting discounts and commissions and other offering expenses.
  • In February 2022, the Company recorded more than 111 million unique visitors, according to ComScore. The Arena Group reached the #34 spot in the U.S. rankings, up 40 spots from February 2021, and its sports vertical, led by Sports Illustrated, reached #4 in the sports category. In February 2022, the Sports Illustrated Media Group reached more than 86 million digital users, more than tripling year-over-year.
  • “The Arena Group ‘Playbook,’” our plan to feature premium content and expert analysis, as well as audience and editorial strategies designed to efficiently deliver robust experiences to audiences across platforms, has driven significant recent growth for Sports Illustrated, The Spun, TheStreet and PetHelpful, with plans to roll out across additional properties and publisher partners in the coming year.
  • Sports Illustrated now has the #1 share of voice on Facebook among sports publishers for linked stories, according to data from CrowdTangle.
  • Since the departure of Jim Cramer from TheStreet in October 2021, The Arena Group has grown users at the financial site by 249% to more than 17 million monthly unique visitors, according to ComScore data recently released in February 2022 and has seen its engagements at Facebook grow by more than 520% year-over-year for the first two months of 2022, according to data from ListenFirst.

Financial Results for the Three Months Ended December 31, 2021 Compared to the Three Months Ended December 31, 2020

Revenue was $61.2 million for the fourth quarter of fiscal 2021, an increase of 44% compared to $42.4 million in the fourth quarter of fiscal 2020. The increase was primarily due to a 50% increase in total digital revenue to $33.3 million in the fourth quarter of 2021, which included an $11.5 million, or 97%, increase in digital advertising revenue. Digital advertising growth was driven by higher traffic across all of our properties in the fourth quarter of fiscal 2021 as compared to the prior year. In addition, total print revenue increased 38% to $27.9 million in the fourth quarter of fiscal 2021 from $20.2 million in the fourth quarter of fiscal 2020, primarily driven by a 56% increase in print subscription revenue reflecting the successful drive to increase subscribers in the fourth quarter of 2020 and the diminishing effect of acquisition accounting adjustments on the subscribers that existed when we began operating the Sports Illustrated media business.

Gross profit more than doubled in the fourth quarter of fiscal 2021 to $34.2 million, representing a 56% gross profit percentage as compared to a gross profit of $15.7 million, representing a 37% gross profit percentage for the fourth quarter of 2020. Cost of revenue only increased by 1% in the fourth quarter of fiscal 2021 even with a 44% increase in revenue period-over-period, reflecting a high gross profit from our growing digital revenue.

Total operating expenses were $51.1 million in the fourth quarter of 2021 compared to $31.2 million in the fourth quarter of 2020. The increase was due to an increase in circulation costs of $9.2 million reflecting the campaign to increase Sports Illustrated subscription in the fourth quarter of 2020 and stock-based compensation of $5.4 million with the remaining expenses attributable to increased investment in audience development, data analytics and technology personnel.

Net loss improved to $19.1 million for the fourth quarter of 2021 as compared to $22.0 million in the prior year period. The fourth quarter of 2021 included $18.5 million of non-cash charges as compared to $16.2 million of non-cash charges in the fourth quarter of the prior year.

Adjusted EBITDA for the fourth quarter of fiscal 2021 was $1.1 million, compared to a loss of $2.1 for the fourth quarter of fiscal 2020, representing a $3.3 million improvement quarter-over-quarter. This reflected the strength of our business operations as discussed above, exclusive of the $5.4 million increase in stock-based compensation.

Adjusted EBITDA is a non-GAAP financial measure. A disclaimer and reconciliation are provided below.

Financial Results for the Year Ended December 31, 2021 Compared to the Year Ended December 31, 2020

Revenue was $189.1 million for fiscal 2021 as compared to $128.0 million in the prior year, representing an increase of 48% year-over-year. The increase was primarily due to a 49% increase in total digital revenue to $101.0 million for fiscal 2021 driven by an 81% increase in digital advertising revenue. The increase in digital advertising revenue was primarily related to user and audience growth in our Sports vertical, the addition of The Spun and $9.9 million from the continued strength of our Sports Illustrated business. In addition, total print revenue increased 46% to $88.1 million for fiscal 2021 from $60.3 million in the prior year, primarily driven by a 56% increase in print subscription revenue reflecting the successful drive to increase subscribers in the fourth quarter of 2020 and the diminishing effect of acquisition accounting adjustments on the subscribers that existed when we began operating the Sports Illustrated media business.

Gross profit for the year ended December 31, 2021, was $78.2 million, representing a gross profit percentage of 41%, compared to gross profit of $25.0 million, or a gross profit percentage of 19% in the prior year. The improvement in gross profit is a result of a decrease in publisher partner revenue shares from 56% of digital advertising revenue in fiscal 2020 to 34% in fiscal 2021 related to a strategic shift to eliminate most publisher partner guarantees near the end of fiscal 2020 and the high contribution margin of digital advertising.

Total operating expenses were $162.4 million in fiscal 2021, compared to $96.2 million in fiscal 2020. The increase was due to an increase in circulation costs of $31.6 million, stock-based compensation of $15.6 million, and a $7.3 million expense related to the termination and surrender of our New York City office space with the remaining expenses attributable to increased investment in audience development, data analytics and technology personnel.

Net loss remained relatively flat year-over-year at $89.9 million for fiscal 2021, compared to net loss of $89.2 million for fiscal 2020. The Company recorded $68.4 million of non-cash charges, representing 76% of the current year net loss. During fiscal 2020, the Company recorded $57.0 million of non-cash charges.

Adjusted EBITDA for fiscal 2021 was a loss of $12.1 million, compared to a loss of $23.2 for fiscal 2020 primarily related to the $15.6 million increase in stock-based compensation in fiscal 2021.

Adjusted EBITDA is a non-GAAP financial measure. A disclaimer and reconciliation are provided below.

Balance Sheet and Liquidity as of December 31, 2021

Cash and cash equivalents were $9.9 million at December 31, 2021, compared to $ 9.5 million at December 31, 2020. Subsequent to the end of fiscal 2021, the Company raised $31.5 million in net proceeds from a firm commitment underwritten offering of its common stock.

For the year ended December 31, 2021, net cash used in operating activities was $14.7 million, as compared to $32.3 million for the prior year, a $17.6 million improvement. The improvement was primarily a result of the increase in revenue which led to additional cash collections and a general improvement in our working capital efficiency.

Conference Call

Ross Levinsohn, The Arena Group’s Chief Executive Officer, and Doug Smith, Chief Financial Officer, will host a conference call to discuss these results today at 4:30 p.m. ET. To access the call, please dial 888-506-0062 (toll free) or 973-528-0011 and if requested, reference conference ID 818438. The conference call will also be webcast live on the Investor Relations section of The Arena Group’s website at https://investors.thearenagroup.net/news-and-events/events.

Following the conclusion of the live call, a replay of the webcast will be available on the Investor Relations section of the Company’s website for at least 90 days. A telephonic replay of the conference call will also be available from 7 p.m. ET on March 28, 2022 until 11:59 p.m. ET on April 11, 2022 by dialing 877-481-4010 (United States) or 919-882-2331 (international) and using the passcode 44970.

About The Arena Group

The Arena Group creates robust digital destinations that delight consumers with powerful journalism and news about the things they love – their favorite sports teams, advice on investing, the inside scoop on personal finance, and the latest on lifestyle essentials. With powerful technology, editorial expertise, data management, and marketing savvy, the transformative company enables brands like Sports Illustrated and TheStreet to deliver highly relevant content and experiences that consumers love. To learn more, visit www.thearenagroup.net.

Use of Non-GAAP Financial Measures

We report our financial results in accordance with generally accepted accounting principles in the United States of America (“GAAP”); however, management believes that certain non-GAAP financial measures provide users of our financial information with useful supplemental information that enables a better comparison of our performance across periods. This press release includes references to Adjusted EBITDA, which is a non-GAAP financial measure. We believe Adjusted EBITDA provides visibility to the underlying continuing operating performance by excluding the impact of certain items that are noncash in nature or not related to our core business operations. We calculate Adjusted EBITDA as net loss, adjusted for (i) interest expense (net), (ii) income taxes, (iii) depreciation and amortization, (iv) stock-based compensation, (v) change in derivative valuations, (vi) liquidated damages, (vii) loss on disposition of assets, (viii) loss on impairment of lease, (ix) loss on lease termination, (x) gain upon debt extinguishment, (xi) professional and vendor fees, and (xii) employee restructuring payments.

Our non-GAAP Adjusted EBITDA may not be comparable to a similarly titled measure used by other companies, has limitations as an analytical tool, and should not be considered in isolation, or as a substitute for analysis of our operating results as reported under GAAP. Additionally, we do not consider our non-GAAP Adjusted EBITDA as superior to, or a substitute for, the equivalent measures calculated and presented in accordance with GAAP.

Forward-Looking Statements

This press release includes statements that constitute forward-looking statements. Forward-looking statements may be identified by the use of words such as “forecast,” “guidance,” “plan,” “estimate,” “will,” “would,” “project,” “maintain,” “intend,” “expect,” “anticipate,” “prospect,” “strategy,” “future,” “likely,” “may,” “should,” “believe,” “continue,” “opportunity,” “potential,” and other similar expressions that predict or indicate future events or trends or that are not statements of historical matters, and include, for example, statements related to the expected effects on the Company’s business from the COVID-19 pandemic. These forward-looking statements are based on information available at the time the statements are made and/or management’s good faith belief as of that time with respect to future events, and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in or suggested by the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, the duration and scope of the COVID-19 pandemic and impact on the demand for the Company products; the ability of the Company to expand its verticals; the Company’s ability to grow its subscribers; the Company’s ability to grow its advertising revenue; general economic uncertainty in key global markets and a worsening of global economic conditions or low levels of economic growth; the effects of steps that the Company could take to reduce operating costs; the inability of the Company to sustain profitable sales growth; circumstances or developments that may make the Company unable to implement or realize the anticipated benefits, or that may increase the costs, of its current and planned business initiatives; and those factors detailed by The Arena Group Holdings, Inc. in its public filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. Should one or more of these risks, uncertainties, or facts materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those indicated or anticipated by the forward-looking statements contained herein. Accordingly, you are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date they are made. Forward-looking statements should not be read as a guarantee of future performance or results and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Except as required under the federal securities laws and the rules and regulations of the Securities and Exchange Commission, we do not have any intention or obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise.

THE ARENA GROUP HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

 

 

As of December 31,

 

 

2021

 

2020

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

9,349,020

 

 

$

9,033,872

 

Restricted cash

 

 

501,780

 

 

 

500,809

 

Accounts receivable, net

 

 

21,659,847

 

 

 

16,497,626

 

Subscription acquisition costs, current portion

 

 

30,162,524

 

 

 

28,146,895

 

Royalty fees, current portion

 

 

11,250,000

 

 

 

15,000,000

 

Prepayments and other current assets

 

 

4,747,847

 

 

 

4,667,263

 

Total current assets

 

 

77,671,018

 

 

 

73,846,465

 

Property and equipment, net

 

 

635,768

 

 

 

1,129,438

 

Operating lease right-of-use assets

 

 

528,431

 

 

 

18,292,196

 

Platform development, net

 

 

9,298,795

 

 

 

7,355,608

 

Royalty fees, net of current portion

 

 

 

 

 

11,250,000

 

Subscription acquisition costs, net of current portion

 

 

8,234,553

 

 

 

13,358,585

 

Acquired and other intangible assets, net

 

 

57,356,497

 

 

 

71,501,835

 

Other long-term assets

 

 

639,151

 

 

 

1,330,812

 

Goodwill

 

 

19,618,667

 

 

 

16,139,377

 

Total assets

 

$

173,982,880

 

 

$

214,204,316

 

Liabilities, mezzanine equity and stockholders’ deficiency

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

11,981,852

 

 

$

8,228,977

 

Accrued expenses and other

 

 

24,010,569

 

 

 

14,718,193

 

Line of credit

 

 

11,988,194

 

 

 

7,178,791

 

Unearned revenue

 

 

54,029,657

 

 

 

61,625,676

 

Subscription refund liability

 

 

3,086,799

 

 

 

4,035,531

 

Operating lease liabilities

 

 

373,859

 

 

 

1,059,671

 

Liquidated damages payable

 

 

5,197,182

 

 

 

9,568,091

 

Current portion of long-term debt

 

 

5,744,303

 

 

 

 

Embedded derivative liabilities

 

 

 

 

 

1,147,895

 

Total current liabilities

 

 

116,412,415

 

 

 

107,562,825

 

Unearned revenue, net of current portion

 

 

15,275,892

 

 

 

23,498,597

 

Restricted stock liabilities, net of current portion

 

 

 

 

 

1,995,810

 

Operating lease liabilities, net of current portion

 

 

785,320

 

 

 

19,886,083

 

Liquidating damages payable, net of current portion

 

 

7,008,273

 

 

 

 

Other long-term liabilities

 

 

7,556,265

 

 

 

753,365

 

Deferred tax liabilities

 

 

362,118

 

 

 

210,832

 

Long-term debt, net of current portion

 

 

64,372,511

 

 

 

62,194,272

 

Total liabilities

 

 

211,772,794

 

 

 

216,101,784

 

Commitments and contingencies

 

 

 

 

 

 

Mezzanine equity:

 

 

 

 

 

 

Series G redeemable and convertible preferred stock, $0.01 par value, $1,000 per share liquidation value and 1,800 shares designated; aggregate liquidation value: $168,496; Series G shares issued and outstanding: 168.496; common shares issuable upon conversion: 8,582 at December 31, 2021 and 2020

 

 

168,496

 

 

 

168,496

 

Series H convertible preferred stock, $0.01 par value, $1,000 per share liquidation value and 23,100 shares designated; aggregate liquidation value: $15,066,000 and $19,596,000; Series H shares issued and outstanding: 15,066 and 19,596; common shares issuable upon conversion: 2,075,200 and 2,699,312 at December 31, 2021 and 2020, respectively

 

 

13,717,496

 

 

 

18,247,496

 

Total mezzanine equity

 

 

13,885,992

 

 

 

18,415,992

 

Stockholders’ deficiency:

 

 

 

 

 

 

Common stock, $0.01 par value, authorized 1,000,000,000 shares: issued and outstanding; 12,632,939 and 10,412,965 shares December 31, 2021 and 2020, respectively

 

 

126,329

 

 

 

104,129

 

Common stock to be issued

 

 

491

 

 

 

491

 

Additional paid-in capital

 

 

200,410,213

 

 

 

141,855,206

 

Accumulated deficit

 

 

(252,212,939

)

 

 

(162,273,286

)

Total stockholders’ deficiency

 

 

(51,675,906

)

 

 

(20,313,460

)

Total liabilities, mezzanine equity and stockholders’ deficiency

 

$

173,982,880

 

 

$

214,204,316

 

THE ARENA GROUP HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

 

 

 

Three Months Ended December 31,

 

Year Ended December 31,

 

 

2021

2020

 

2021

 

2020

Revenue

 

$

61,204,833

 

 

$

42,438,611

 

 

$

189,140,334

 

 

$

128,032,397

 

Cost of revenue (1)

 

 

26,999,686

 

 

 

26,741,492

 

 

 

110,977,736

 

 

 

103,063,445

 

Gross profit

 

 

34,205,147

 

 

 

15,697,119

 

 

78,162,598

 

 

 

24,968,952

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

Selling and marketing

 

 

27,568,704

 

 

 

15,891,057

 

 

 

82,691,061

 

 

 

43,589,239

 

General and administrative

 

 

18,418,937

 

 

 

11,154,347

 

 

 

54,400,720

 

 

 

36,007,238

 

Depreciation and amortization

 

 

4,365,276

 

 

 

4,003,485

 

 

 

16,347,274

 

 

 

16,280,475

 

Loss on disposition of assets

 

 

288,388

 

 

 

174,010

 

 

 

1,192,310

 

 

 

279,133

 

Loss on impairment of lease

 

 

466,356

 

 

 

 

 

 

466,356

 

 

 

 

Loss on termination of lease

 

 

 

 

 

 

 

 

7,344,655

 

 

 

 

Total operating expenses

 

 

51,107,661

 

 

 

31,222,899

 

 

 

162,442,376

 

 

 

96,156,085

 

Loss from operations

 

 

(16,902,514

)

 

 

(15,525,780

)

 

(84,279,778

)

 

 

(71,187,133

)

Other (expenses) income

 

 

 

 

 

 

 

 

 

 

 

Change in valuation of warrant derivative liabilities

 

 

(462.320

)

 

 

631,215

 

 

 

34,492

 

 

 

496,305

 

Change in valuation of embedded derivative liabilities

 

 

 

 

 

398,004

 

 

 

 

 

 

2,571,004

 

Loss on conversion of convertible debt

 

 

 

 

 

(3,297,539

)

 

 

 

 

 

(3,297,539

)

Interest expense

 

 

(2,759,301

)

 

 

(4,327,902

)

 

 

(10,454,618

)

 

 

(16,497,217

)

Interest income

 

 

6,013

 

 

 

376,527

 

 

 

6,484

 

 

 

381,026

 

Liquidated damages

 

 

(439,749

)

 

 

 

 

 

(2,637,364

)

 

 

(1,487,577

)

Gain upon debt extinguishment

 

 

 

 

 

 

 

 

5,716,697

 

 

 

 

Other expense

 

 

 

 

 

(73,272

)

 

 

 

 

 

 

Total other expenses

 

 

(3,655,357

)

 

 

(6,292,967

)

 

 

(7,334,309

)

 

 

(17,833,998

)

Loss before income taxes

 

 

(20,557,871

)

 

 

(21,818,747

)

 

 

(91,614,087

)

 

 

(89,021,131

)

Income tax benefit (provision)

 

 

1,444,735

 

 

 

(210,832

)

 

 

1,674,434

 

 

 

(210,832

)

Net loss

 

 

(19,113,136

)

 

 

(22,029,579

)

 

 

(89,939,653

)

 

 

(89,231,963

)

Deemed dividend on convertible preferred stock

 

 

 

 

 

(15,509,932

)

 

 

 

 

 

(15,642,595

)

Net loss attributable to common stockholders

 

$

(19,113,136

)

 

$

(37,539,511

)

 

$

(89,939,653

)

 

$

(104,874,558

)

Basic and diluted net loss per common share

 

$

(1.57

)

 

$

(13.62

)

 

$

(7.87

)

 

$

(50.18

)

Weighted average number of shares outstanding – basic and diluted

 

 

12,160,845

 

 

 

2,756,010

 

 

 

11,429,740

 

 

 

2,090,047

 

Contacts

The Arena Group Investor Relations Contact
Rob Fink

FNK IR

Aren@fnkir.com
646.809.4048

The Arena Group Contacts:
Rachel Fink

Communications Manager, The Arena Group

comms@thearenagroup.net

Matthew Traub

Andrew Rhodes

DKC

arena@dkcnews.com

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